<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 16, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM F-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------------------
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<S> <C> <C>
WILLIS CORROON GROUP WILLIS CORROON PARTNERS WILLIS CORROON
LIMITED CORPORATION
(Exact Name of Registrant (Exact Name of Registrant (Exact Name of Registrant
Parent Guarantor as Guarantor as Specified in Issuer as Specified in
Specified in its Charter) its Charter) its Charter)
ENGLAND AND WALES DELAWARE DELAWARE
(State or other (State or other (State or other
jurisdiction of jurisdiction of jurisdiction of
incorporation or incorporation or incorporation or
organization) organization) organization)
6411 6411 6411
(Primary Standard (Primary Standard (Primary Standard
Industrial Industrial Industrial
Classification Code Classification Code Classification Code
Number) Number) Number)
NONE 62-1761909 13-5654526
(I.R.S. Employer (I.R.S. Employer (I.R.S. Employer
Identification Number) Identification Number) Identification Number)
</TABLE>
--------------------------
TEN TRINITY SQUARE
LONDON EC3P 3AX
ENGLAND
(011) 44-171-488-8111
(Address, including zip code, and telephone number,
including area code, of registrant parent guarantor's principal executive
offices)
------------------------------
26 CENTURY BOULEVARD
P.O. BOX 305026
NASHVILLE, TN 37214
(615) 872-3000
(Address, including zip code, and telephone number,
including area code, of registrant issuer's principal executive offices)
(Name, address, including zip code,
and telephone number, including area code, of agent for service)
------------------------------
WITH A COPY TO:
EDWARD P. TOLLEY III, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 455-2000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act Registration number of the earlier effective
Registration Statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities
Registration Statement number of the earlier effective Registration Statement
for the same offering. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER NOTE OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
9% Senior Subordinated Notes due 2009 of
Wills Corroon Corporation................. $550,000,000 100% $550,000,000 $152,900.00
Guarantees of 9% Senior Subordinated Notes
due 2009 by Willis Corroon Group Limited
and Willis Corroon Partners............... $550,000,000 100% $550,000,000 --(2)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Pursuant to Rule 457(n) under the Securities Act of 1933, as amended, no
separate fee for the Guarantees is payable.
--------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
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<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 16, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
Prospectus
$550,000,000
[LOGO]
WILLIS CORROON CORPORATION
OFFER TO EXCHANGE ALL OUTSTANDING 9% SENIOR SUBORDINATED
NOTES DUE 2009 FOR 9% SENIOR SUBORDINATED NOTES DUE 2009,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
UNCONDITIONALLY GUARANTEED ON A SENIOR SUBORDINATED BASIS BY WILLIS CORROON
GROUP LIMITED AND WILLIS CORROON PARTNERS
THE EXCHANGE OFFER
- - Willis Corroon Corporation will exchange all outstanding Notes that are
validly tendered and not validly withdrawn for an equal principal amount of
exchange Notes that are freely tradeable.
- - You may withdraw tenders of outstanding Notes at any time prior to the
expiration of the exchange offer.
- - The exchange offer expires at 5:00 p.m., New York City time, on ,
1999, unless extended. We do not currently intend to extend the expiration
date.
- - The exchange of outstanding Notes for exchange Notes in the exchange offer
will not be a taxable event for U.S. federal income tax purposes.
- - We will not receive any proceeds from the exchange offer.
THE EXCHANGE NOTES
- - The exchange Notes are being offered in order to satisfy certain of our
obligations under the exchange and registration rights agreement entered into
in connection with the placement of the outstanding Notes.
- - The terms of the exchange Notes to be issued in the exchange offer are
substantially identical to the outstanding Notes, except that the exchange
Notes will be freely tradeable.
RESALES OF EXCHANGE NOTES
- - The exchange Notes may be sold in the over-the-counter market, in negotiated
transactions or through a combination of such methods. We have applied for
listing of the exchange Notes on the Luxembourg Stock Exchange.
----------------------------------------------
If you are a broker-dealer and you receive exchange Notes for your own
account, you must acknowledge that you will deliver a prospectus in connection
with any resale of such exchange Notes. By making such acknowledgment, you will
not be deemed to admit that you are an "underwriter" under the Securities Act of
1933.
Broker-dealers may use this prospectus in connection with any resale
of exchange Notes received in exchange for outstanding Notes where such
outstanding Notes were acquired by the broker-dealer as a result of market-
making activities or trading activities.
We will make this prospectus available to any broker-dealer for use in
any such resale for a period of up to 90 days after the date of this prospectus.
A broker-dealer may not participate in the exchange offer with respect
to outstanding Notes acquired other than as a result of market-making activities
or trading activities.
If you are an affiliate of Willis Corroon or are engaged in, or intend
to engage in, or have an agreement or understanding to participate in, a
distribution of the exchange Notes, you cannot rely on the applicable
interpretations of the Securities and Exchange Commission and you must comply
with the registration requirements of the Securities Act of 1933 in connection
with any resale transaction.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 16 OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
----------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------------------------------
The date of this prospectus is , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 16
Forward Looking Statements............ 30
Presentation of Currency and Financial
Information; Exchange Rates......... 31
The Tender Offer and Related
Financings.......................... 32
Use of Proceeds....................... 35
Capitalization........................ 36
Unaudited Condensed Pro Forma
Consolidated Financial
Information......................... 37
Selected Historical Consolidated
Financial Data...................... 43
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 44
Supplemental Constant Currency
Financial Data...................... 62
Business.............................. 67
Management............................ 86
Shareholders.......................... 91
<CAPTION>
PAGE
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Certain Relationships and Related
Transactions........................ 95
Description of the Senior Credit
Facilities.......................... 96
Description of Preference Shares...... 99
The Exchange Offer.................... 100
Description of the Notes.............. 111
Registration Rights Agreement......... 169
Certain United States Federal Income
Tax Consequences of the Exchange
Offer............................... 173
Certain United States Federal Income
Tax Consequences to Non-U.S.
Holders............................. 173
Certain United Kingdom Tax
Consequences........................ 175
Book-Entry; Delivery and Form......... 177
Plan of Distribution.................. 181
Legal Matters......................... 182
Experts............................... 182
Where You Can Find More Information... 182
Listing and General Information....... 183
Index to Financial Statements......... F-1
</TABLE>
------------------------
The exchange Notes are not being offered in the United Kingdom to
persons who are not persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their business and neither this prospectus nor any other document
issued in connection with the offering may be passed on to any person in the
United Kingdom unless that person is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
(as amended) or is a person to whom the document may otherwise lawfully be
issued or passed on. All applicable provisions of the Financial Services Act
1986 must be complied with in respect of anything done in relation to the
exchange Notes in, from or otherwise involving the United Kingdom.
i
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS CERTAIN INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. IT IS NOT COMPLETE AND MAY NOT CONTAIN ALL OF THE INFORMATION THAT
IS IMPORTANT TO YOU. WE ENCOURAGE YOU TO READ THIS PROSPECTUS IN ITS ENTIRETY.
IN THIS PROSPECTUS, "WILLIS CORROON," "WE," "US" OR "OUR" REFERS TO WILLIS
CORROON GROUP LIMITED AND ITS CONSOLIDATED SUBSIDIARIES (EXCLUDING OUR
"ASSOCIATES," ENTITIES IN WHICH WILLIS CORROON MAINTAINS AN OWNERSHIP INTEREST
OF AT LEAST 20% BUT NO MORE THAN 50%). UNLESS OTHERWISE SPECIFICALLY INDICATED,
ALL MARKET INFORMATION OR OTHER STATEMENTS PRESENTED IN THIS PROSPECTUS
REGARDING WILLIS CORROON'S POSITION RELATIVE TO ITS COMPETITION ARE BASED UPON
STATISTICAL DATA OR INFORMATION, INCLUDING BROKERAGE REVENUES, PUBLISHED IN
BUSINESS INSURANCE (JULY 20, 1998). FOR PURPOSES OF THE BUSINESS INSURANCE
RANKINGS, BROKERAGE REVENUES ARE DEFINED AS GROSS REVENUES GENERATED BY
INSURANCE BROKERAGE, CONSULTING AND RELATED SERVICES.
THE COMPANY
We are the third largest insurance broker in the world. We provide a
broad range of value-added risk management consulting and insurance brokering
services to some 50,000 clients worldwide. We trace our history to 1828 and we
are a leading insurance broker in the U.K., the U.S. and, directly and through
our associates, in many other countries. We are a recognized leader in providing
specialized risk management advisory and other services on a global basis to
clients in various industries, including the construction, aerospace, marine and
energy industries. In our capacity as an advisor and insurance broker, we act as
an intermediary between our clients and insurance carriers by:
- advising our clients on their risk management requirements (many of
which are highly complex);
- helping clients determine the best means of managing their risks; and
- ultimately negotiating and placing insurance policies with insurance
carriers through our global distribution network.
We also provide other value-added services, including employee benefits
consulting, claims administration, captive insurance company management and
self-insurance consulting. We do not underwrite insurance risks for our own
account.
We and our associates serve a diverse base of clients located in more
than 125 countries. Such clients include major multinational and middle-market
companies in a variety of industries, as well as public institutions. Many of
our client relationships span decades. With approximately 12,000 employees
around the world and a network of more than 250 offices in 69 countries, in each
case including our associates, we believe we are one of only three insurance
brokers in the world possessing the global operating presence, broad product
expertise and extensive distribution network necessary to effectively meet the
global risk management needs of many of our clients. For the twelve months ended
December 31, 1998, our Reported Revenues were L718.2 million ($1,192.2 million)
and our Reported EBITDA was L113.5 million ($188.4 million). For the same
period, our Adjusted Operating Revenues (adjusted for acquisitions and
dispositions) were L735.2 million ($1,220.4 million) and our Adjusted EBITDA
(adjusted for acquisitions, dispositions, and non-recurring expenses) was L142.6
million ($236.7 million), in each case after giving pro forma effect to the
following recent acquisitions:
- the 50% interest in Gruppo Ital Brokers, which was acquired in July
1998 and its merger with our existing Italian operation;
1
<PAGE>
- the 30% interest in Assurandrgruppen A/S, which was acquired in
September 1998; and
- the increased investment in our Spanish associate from 48% to 60% and
the reorganization of the existing Spanish and Portuguese operations in
July 1998
(referred to collectively as the "recent acquisitions"). See "--Summary
Historical Consolidated Financial Information of Willis Corroon" and "--Summary
Unaudited Pro Forma Consolidated Financial Information of Willis Corroon."
INDUSTRY OVERVIEW
Insurance brokers, such as Willis Corroon, provide essential services
to users of insurance and reinsurance products. Such users include corporations,
public institutions and insurance carriers. Brokers distribute insurance
products and provide highly specialized (and often highly technical) value-added
risk management consulting services. Through its knowledge of the insurance
market and risk management techniques, the broker provides value to its clients
and the insurance carriers with whom the broker deals by:
<TABLE>
<CAPTION>
VALUE TO CLIENTS VALUE TO INSURANCE CARRIERS
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
- - assisting clients in their analysis of risk; - assessing a potential insurance user's risk management
- - helping clients formulate appropriate strategies to needs, structuring an appropriate insurance program to
manage those risks; meet those needs and placing risks to be insured with
- - negotiating insurance policy terms and conditions; an insurance carrier;
- - placing risks to be insured with insurance carriers - acting as a principal distribution channel for
through its distribution network and taking advantage insurance products; and
of its ability to place insurance at rates often lower - providing access to insurance buyers that most
than the client could achieve on its own; and insurance companies are not equipped to reach on their
- - providing specialized self-insurance consulting and own.
other risk management consulting services apart from
its traditional intermediary role.
</TABLE>
There are three main subsectors of the brokerage industry:
- retail brokering, which involves business and services transacted
between brokers and commercial or individual customers;
- wholesale brokering, which involves business and services transacted
between two brokers (or agents) when one broker uses the services or
products of another broker; and
- reinsurance brokering, which involves placing reinsurance coverage for
primary insurance and reinsurance carriers.
Industry revenue has been relatively stable in recent years and,
according to BUSINESS INSURANCE, the 192 largest commercial insurance brokers
globally reported brokerage revenues totaling $16.7 billion in 1997. Recent
consolidation among the largest insurance brokers, however, has
2
<PAGE>
significantly altered the industry's competitive dynamics. Significant factors
in broker consolidation include:
- the increased need by clients for products and services with a global
scope; and
- better economies of scale available to larger firms.
As a result, the insurance brokerage industry is now led by its three global
participants: Marsh & McLennan Companies, Inc. (with approximately 35% of the
worldwide market comprised of the 192 brokers in 1997 referred to above, 9% of
which is attributable to Sedgwick Group plc, a company acquired by Marsh &
McLennan in 1998), Aon Corporation (with approximately 24%) and Willis Corroon
(with approximately 7%). The industry is highly fragmented beyond these three
brokers with the next largest broker having less than a 3% share of the $16.7
billion market.
RECENT MANAGEMENT INITIATIVES
In 1996, we developed and launched a series of initiatives referred to
as the "change program." The change program was designed to enhance revenues,
improve efficiency and transition us from a traditional commission-based
insurance broker to a more comprehensive professional advisory services firm. As
part of the change program, we established certain key initiatives to:
- enhance operating efficiencies;
- intensify efforts to develop existing and new accounts;
- increase cross-selling of both existing and new products and services
to our existing clients; and
- maximize leverage in placing insurance with insurance carriers.
In addition, we developed initiatives focused on maximizing the talent and
expertise of our brokers and consultants. Accordingly, we:
- developed improved techniques for recruitment and assessment;
- instituted a new incentive structure for brokers in the U.S.;
- implemented a new and more frequent appraisal process, including peer
review;
- created new training and development programs;
- invested in technology to enhance communication among employees; and
- formed practice groups to share knowledge on specific industry or
product areas.
For a complete discussion of our recent management initiatives, see
"Business--Recent Management Initiatives."
COMPETITIVE STRENGTHS
We believe that the following will enable us to develop our business in
that we have:
- a strong franchise with leading market positions;
- a strong global presence;
- an extensive and diverse client base;
- a broad array of client-oriented services and products;
- experienced and incentivized management; and
- strong sponsorship.
3
<PAGE>
For a complete discussion of our competitive strengths, see
"Business--Competitive Strengths."
BUSINESS STRATEGY
Our strategic objectives are to continue to grow revenues and cash flow
and to enhance our position as a leading global provider of risk management
services. The key elements of this strategy are to:
- capitalize on our strong global franchise;
- emphasize value-added services;
- increase operating efficiencies; and
- pursue strategic growth opportunities.
For a complete discussion of our business strategy, see
"Business--Business Strategy."
THE ISSUER
Willis Corroon Corporation was incorporated in Delaware on December 20,
1928 and is an indirect, wholly-owned subsidiary of Willis Corroon Group
Limited. Willis Corroon Corporation is a holding company for the operations of
Willis Corroon's subsidiaries in North America. Willis Corroon Corporation's
principal executive offices are located at 26 Century Boulevard, P.O. Box
305026, Nashville, TN 37214, and its telephone number is (615) 872-3000.
THE GUARANTORS
Willis Corroon Group Limited is a company with limited liability
organized under the laws of England and Wales. Its principal executive offices
are located at Ten Trinity Square, London EC3P 3AX, England, and its telephone
number is (011) 44-171-488-8111. Willis Corroon Partners is a Delaware general
partnership, the 99.9% general partner of which is Willis Corroon Group Limited
and the 0.1% general partner of which is Willis Faber UK Group Limited, a
wholly-owned subsidiary of Willis Corroon Group Limited. Willis Corroon
Partners, formed on November 11, 1998, has no independent operations, and its
sole activity is to hold the capital stock of Willis Corroon Corporation. Each
of Willis Corroon Group and Willis Corroon Partners have jointly and severally,
fully and unconditionally, guaranteed the outstanding Notes and will jointly and
severally, fully and unconditionally, guarantee the exchange Notes.
THE TENDER OFFER AND RELATED FINANCINGS
The outstanding Notes were offered in connection with the tender offer
on behalf of Trinity Acquisition plc, a public limited company organized under
the laws of England and Wales, for the then-outstanding securities of Willis
Corroon Group in order to refinance certain interim financings. See "The Tender
Offer and Related Financings." Where pro forma financial data is presented after
giving effect to the "Transactions," such reference is a collective reference to
the following:
- the offering of the outstanding Notes and the application of the
proceeds therefrom; and
- the recent acquisitions.
RISK FACTORS
You should carefully consider the information under the caption "Risk
Factors" and all other information in this prospectus before tendering your
outstanding Notes.
4
<PAGE>
SUMMARY OF TERMS OF THE EXCHANGE OFFER
On February 2, 1999, the Issuer completed the private offering of the
outstanding Notes. References to "Notes" in this prospectus are references to
both the outstanding Notes and the exchange Notes.
The Issuer and the Guarantors entered into an exchange and registration
rights agreement with the initial purchasers in the private offering in which
the Issuer and the Guarantors agreed to deliver to you this prospectus and the
Issuer agreed to complete the exchange offer within 270 days after the date of
original issuance of the outstanding Notes. You are entitled to exchange in the
exchange offer your outstanding Notes for exchange Notes which are identical in
all material respects to the outstanding Notes except that:
- the exchange Notes have been registered under the Securities Act;
- the exchange Notes are not entitled to certain registration rights
which are applicable to the outstanding Notes under the exchange and
registration rights agreement; and
- certain contingent interest rate provisions are no longer applicable.
<TABLE>
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The Exchange Offer................ The Issuer is offering to exchange up to $550 million
aggregate principal amount of exchange Notes for up to
$550 million aggregate principal amount of outstanding
Notes. Outstanding Notes may be exchanged only in
integral multiples of $1,000.
Resales........................... Based on an interpretation by the staff of the
Securities and Exchange Commission (the "Commission")
set forth in no-action letters issued to third parties,
we believe that the exchange Notes issued pursuant to
the exchange offer in exchange for outstanding Notes may
be offered for resale, resold and otherwise transferred
by you (unless you are an "affiliate" of Willis Corroon
within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that
you are acquiring the exchange Notes in the ordinary
course of your business and that you have not engaged
in, do not intend to engage in, and have no arrangement
or understanding with any person to participate in, a
distribution of the exchange notes.
Each participating broker-dealer that receives exchange
Notes for its own account pursuant to the exchange offer
in exchange for outstanding Notes that were acquired as
a result of market-making or other trading activity must
acknowledge that it will deliver a prospectus in
connection with any resale of the exchange Notes. See
"Plan of Distribution."
Any holder of outstanding Notes who
- is an affiliate of Willis Corroon,
- does not acquire exchange Notes in the ordinary course
of its business, or
- tenders in the exchange offer with the intention to
participate, or for the purpose of participating, in a
distribution of exchange Notes,
cannot rely on the position of the staff of the
Commission enunciated in Exxon Capital Holdings
Corporation, Morgan
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Stanley & Co. Incorporated or similar no-action letters
and, in the absence of an exemption therefrom, must
comply with the registration and prospectus delivery
requirements of the Securities Act in connection with
the resale of the exchange Notes.
Expiration Date; Withdrawal
of Tenders...................... The exchange offer will expire at 5:00 p.m., New York
City time, on , 1999, or such later date and
time to which the Issuer extends it (the "expiration
date"). The Issuer does not currently intend to extend
the expiration date. A tender of outstanding Notes
pursuant to the exchange offer may be withdrawn at any
time prior to the expiration date. The expiration date
for the exchange offer will not in any event be extended
to a date later than , 1999. Any outstanding
Notes not accepted for exchange for any reason will be
returned without expense to the tendering holder
promptly after the expiration or termination of the
exchange offer.
Certain Conditions to the
Exchange Offer.................. The exchange offer is subject to customary conditions,
which the Issuer may waive. Please read the section
captioned "The Exchange Offer--Certain Conditions to the
Exchange Offer" of this prospectus for more information
regarding the conditions to the exchange offer.
Procedures for Tendering
Outstanding Notes............... If you wish to accept the exchange offer, you must
complete, sign and date the accompanying letter of
transmittal, or a facsimile of the letter of
transmittal, according to the instructions contained in
this prospectus and the letter of transmittal. You must
also mail or otherwise deliver the letter of
transmittal, or a facsimile of the letter of
transmittal, together with the outstanding Notes and any
other required documents, to the exchange agent at the
address set forth on the cover page of the letter of
transmittal. If you hold outstanding Notes through The
Depository Trust Company ("DTC") and wish to participate
in the exchange offer, you must comply with the
Automated Tender Offer Program procedures of DTC, by
which you will agree to be bound by the letter of
transmittal. By signing, or agreeing to be bound by, the
letter of transmittal, you will represent to us that,
among other things:
- any exchange Notes that you receive will be acquired
in the ordinary course of your business;
- you have no arrangement or understanding with any
person or entity to participate in a distribution of the
exchange Notes;
- if you are a broker-dealer that will receive exchange
Notes for your own account in exchange for outstanding
Notes that were acquired as a result of market-making
activities, that you will deliver a prospectus, as
required by law, in connection with any resale of such
exchange Notes;
- you are not an "affiliate," as defined in Rule 405 of
the Securities Act, of Willis Corroon or, if you are an
affiliate, you
</TABLE>
6
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<TABLE>
<S> <C>
will comply with any applicable registration and
prospectus delivery requirements of the Securities
Act; and
- if you are a person in the United Kingdom, that your
ordinary activities involve you in acquiring, holding,
managing or disposing of investments, as principal or
agent, for the purposes of your business.
Special Procedures for
Beneficial Owners............... If you are a beneficial owner of outstanding Notes which
are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee, and you
wish to tender such outstanding Notes in the exchange
offer, you should contact such registered holder
promptly and instruct such registered holder to tender
on your behalf. If you wish to tender on your own
behalf, you must, prior to completing and executing the
letter of transmittal and delivering your outstanding
Notes, either make appropriate arrangements to register
ownership of the outstanding Notes in your name or
obtain a properly completed bond power from the
registered holder. The transfer of registered ownership
may take considerable time and may not be able to be
completed prior to the expiration date.
Guaranteed Delivery
Procedures...................... If you wish to tender your outstanding Notes and your
outstanding Notes are not immediately available or you
cannot deliver your outstanding Notes, the letter of
transmittal or any other documents required by the
letter of transmittal or comply with the applicable
procedures under DTC's Automated Tender Offer Program
prior to the expiration date, you must tender your
outstanding Notes according to the guaranteed delivery
procedures set forth in this prospectus under "The
Exchange Offer--Guaranteed Delivery Procedures."
Effect on Holders of Outstanding
Notes........................... As a result of the making of, and upon acceptance for
exchange of all validly tendered outstanding Notes
pursuant to the terms of the exchange offer, we will
have fulfilled a covenant contained in the registration
rights agreement and, accordingly, there will be no
increase in the interest rate on the outstanding Notes
under the circumstances described in the registration
rights agreement. If you are a holder of outstanding
Notes and you do not tender your outstanding Notes in
the exchange offer, you will continue to hold such
outstanding Notes and you will be entitled to all the
rights and limitations applicable to the outstanding
Notes in the indenture, except for any rights under the
registration rights agreement that by their terms
terminate upon the consummation of the exchange offer.
To the extent that outstanding Notes are tendered and
accepted in the exchange offer, the trading market for
outstanding Notes could be adversely affected.
Consequences of Failure to
Exchange........................ All untendered outstanding Notes will continue to be
subject to the restrictions on transfer provided for in
the outstanding Notes and in the indenture. In general,
the outstanding Notes may not be offered or sold, unless
registered under the Securities Act, except pursuant to
an exemption from, or in a
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7
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<TABLE>
<S> <C>
transaction not subject to, the Securities Act and
applicable state securities laws. Other than in
connection with the exchange offer, the Issuer does not
currently anticipate that it will register the
outstanding Notes under the Securities Act.
Certain U.S. Federal Income
Tax Considerations.............. The exchange of outstanding Notes for exchange Notes in
the exchange offer will not be a taxable event for U.S.
federal income tax purposes. See "Certain United States
Federal Income Tax Consequences of the Exchange Offer."
Use of Proceeds................... We will not receive any cash proceeds from the issuance
of exchange Notes pursuant to the exchange offer.
Exchange Agent.................... The Bank of New York is the exchange agent for the
exchange offer. The address and telephone number of the
exchange agent are set forth in the section captioned
"Exchange Offer-- Exchange Agent" of this prospectus.
<CAPTION>
SUMMARY OF TERMS OF THE EXCHANGE NOTES
<S> <C>
Issuer............................ Willis Corroon Corporation
Securities Offered................ $550,000,000 in principal amount of 9% Senior
Subordinated Notes due 2009.
Maturity Date..................... February 1, 2009.
Interest.......................... Annual rate: 9%
Payment frequency: every six months on February 1 and
August 1.
First payment: August 1, 1999.
Optional Redemption............... On or after February 1, 2004, the Issuer may redeem some
or all of the Notes at the redemption prices listed in
the section entitled "Description of the Notes--Optional
Redemption."
At any time on or prior to February 1, 2002, the Issuer
may redeem up to $192,500,000 of the Notes with the
proceeds of certain public or private offerings of
equity at the price listed in the section entitled
"Description of the Notes--Optional Redemption."
Change of Control................. Upon the occurrence of a change of control, you will
have the right to require the Issuer to repurchase your
Notes at a price equal to 101% of the principal amount
together with accrued and unpaid interest, if any, to
the date of repurchase. See "Description of the
Notes--Repurchase at the Option of Holders--Change of
Control."
Ranking and Guarantees............ The outstanding Notes are, and the exchange Notes when
issued will be, guaranteed by Willis Corroon Group
Limited and Willis Corroon Partners. The Notes and the
guarantees are unsecured senior subordinated debts.
The Notes and the guarantees rank behind all of the
Issuer's and the Guarantors' current and future
indebtedness (other than trade payables), except
indebtedness that expressly provides that it is not
senior to the Notes or the guarantees and certain other
types of indebtedness. See "Description of the
Notes--Subordination."
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Assuming the Issuer had completed the offering of the
Notes on December 31, 1998 and applied the proceeds as
intended, the Issuer:
- would have had $460.1 million (L277.2 million) of
senior secured debt to which the Notes would be
subordinated; and
- would have had no senior subordinated debt with which
the Notes would rank equally.
Certain Covenants................. The Issuer issued the outstanding Notes and will issue
the exchange Notes under an indenture with The Bank of
New York, the trustee. The indenture, among other
things, restricts our ability and the ability of our
subsidiaries to:
- borrow money;
- pay dividends on stock, purchase stock or issue
certain types of stock;
- make investments;
- use assets as security in other transactions;
- sell certain assets or merge with or into other
companies; and
- guarantee other indebtedness.
For more details, see "Description of the Notes--Certain
Covenants."
Absence of a Public Market for the
Exchange Notes.................. The exchange Notes generally will be freely transferable
but will also be new securities for which there will not
initially be a market. Accordingly, there can be no
assurance as to the development or liquidity of any
market for the exchange Notes. We have applied for
listing of the exchange Notes on the Luxembourg Stock
Exchange. The initial purchasers in the private offering
of the outstanding Notes have advised us that they
currently intend to make a market in the exchange Notes.
However, they are not obligated to do so, and any market
making with respect to the exchange Notes may be
discontinued without notice.
</TABLE>
9
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF WILLIS CORROON
The summary consolidated financial data presented below for the three
years ended December 31, 1997 and the periods January 1 to September 1, 1998 and
September 2 to December 31, 1998 and as of the end of the four years in the
period ended December 31, 1998 have been derived from, and should be read in
conjunction with, the audited consolidated financial statements of Willis
Corroon and the notes thereto included elsewhere in this prospectus. Willis
Corroon prepares its consolidated financial statements in accordance with U.K.
GAAP, which differs in certain respects from U.S. GAAP. Under U.K. GAAP, the
acquisition of Willis Corroon by Trinity Acquisition has no impact on the
historical amounts reported subsequently by Willis Corroon and, accordingly,
combined amounts for the year ended December 31, 1998 are presented. Under U.S.
GAAP, the purchase of Willis Corroon by Trinity Acquisition established a new
basis of accounting from September 2, 1998 for the purchased assets and
liabilities. Accordingly, under U.S. GAAP, it is not appropriate to present
combined amounts for the year December 31, 1998. Reconciliations of net income
and shareholders' equity reflecting the significant differences between U.K.
GAAP and U.S. GAAP are set forth in such financial statements.
<TABLE>
<CAPTION>
JANUARY 1 TO SEPTEMBER 2 TO
YEAR ENDED DECEMBER 31, SEPTEMBER 1, DECEMBER 31,
------------------------------- ------------- ---------------
1995 1996 1997 1998 1998
--------- --------- --------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
STATEMENT OF INCOME DATA:
Amounts in accordance with
U.K. GAAP:
Continuing operations
Operating revenues....... L 706.4 L 725.0 L 692.0 L 468.8 L 249.2
Operating income before
exceptional items(b)... 79.4 87.8 92.1 56.8 26.0
Share of profit of
associates............. 6.8 3.5 1.9 7.7 (1.4)
Interest expense......... (7.2) (2.2) (0.7) (2.0) (1.2)
Income / (loss) before
tax.................... 62.4 91.6 95.5 (1.3) 17.1
Total operations
Net income / (loss)...... 29.0 54.2 56.9 (15.6) (25.7)
Amounts in accordance with
U.S. GAAP:
Continuing operations
Operating revenues....... 706.4 725.0 692.0 468.8 249.2
Operating income before
exceptional items(b)... 60.6 70.9 63.1 43.4 14.1
Share of profit of
associates(c).......... 6.8 3.5 1.9 7.7 (1.4)
Interest expense......... (7.2) (2.2) (0.7) (2.0) (1.2)
Income / (loss) before
tax.................... 1.5 74.7 66.5 (5.1) 5.2
Total operations
Net income / (loss)...... (18.0) 37.7 36.2 (19.0) (35.9)
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------
1998 1998
-- ---------
<S> <C>
STATEMENT OF INCOME DATA:
Amounts in accordance with
U.K. GAAP:
Continuing operations
Operating revenues.......L 718.0 $ 1,191.9(a)
Operating income before
exceptional items(b)...82.8 137.4
Share of profit of
associates.............6.3 10.5
Interest expense.........(3.2) (5.3)
Income / (loss) before
tax....................15.8 26.2
Total operations
Net income / (loss)......(41.3) (68.6)
Amounts in accordance with
U.S. GAAP:
Continuing operations
Operating revenues.......
Operating income before
exceptional items(b)...
Share of profit of
associates(c)..........
Interest expense.........
Income / (loss) before
tax....................
Total operations
Net income / (loss)......
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
JANUARY 1 TO SEPTEMBER 2 TO
YEAR ENDED DECEMBER 31, SEPTEMBER 1, DECEMBER 31,
------------------------------- ------------- ---------------
1995 1996 1997 1998 1998
--------- --------- --------- ------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
Amounts in accordance with
U.K. GAAP:
Adjusted operating
revenues(d)............ 640.9 665.0 683.4 468.7 249.2
EBITDA(e)................ 110.6 115.8 116.7 80.0 33.5
Adjusted EBITDA(f)....... 106.2 127.0 130.5 92.0 47.0
Adjusted EBITDA
margin(g).............. 15.5% 18.6% 18.8% 18.0% 19.4%
Depreciation and
amortization........... L 24.4 L 24.5 L 22.7 L 15.5 L 8.9
Capital expenditures..... 21.6 28.9 26.5 20.1 9.8
Ratio of earnings to
fixed charges(h)....... 4.3x 7.6x 10.5x -- 10.9x
Amounts in accordance with
U.S. GAAP:
Adjusted operating
revenues(d)............ L 640.9 L 665.0 L 683.4 L 468.7 L 249.2
EBITDA(e)................ 110.6 115.8 116.7 80.0 33.5
Adjusted EBITDA(f)....... 106.2 127.0 130.5 92.0 47.0
Adjusted EBITDA
margin(g).............. 15.5% 18.6% 18.8% 18.0% 19.4%
Depreciation and
amortization........... L 42.9 L 42.4 L 40.4 L 27.5 L 15.4
Capital expenditures..... 21.6 28.9 26.5 20.1 9.8
Ratio of earnings to
fixed charges(h)....... 1.0x 6.4x 7.6x -- 4.8x
BALANCE SHEET DATA (AT END
OF PERIOD):
Amounts in accordance with
U.K. GAAP:
Total assets(i)............ L3,703.7 L3,377.2 L3,304.3 L4,589.0
Total long-term debt(j).... 61.9 17.9 34.0 276.4
Total shareholders'
equity................... 120.6 151.9 124.6 89.0
Amounts in accordance with
U.S. GAAP:
Total assets(i)............ 4,376.0 3,953.5 3,763.4 5,369.9
Total long-term debt(j).... 61.9 17.9 34.0 276.4
Total shareholders'
equity................... 587.3 560.2 583.6 875.4
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------
1998 1998
-- ---------
<S> <C>
OTHER FINANCIAL DATA:
Amounts in accordance with
U.K. GAAP:
Adjusted operating
revenues(d)............717.9 1,191.7
EBITDA(e)................113.5 188.4
Adjusted EBITDA(f).......139.0 230.7
Adjusted EBITDA
margin(g)..............18.5% 18.5%
Depreciation and
amortization...........L 24.4 $ 40.5
Capital expenditures.....29.9 49.6
Ratio of earnings to
fixed charges(h).......2.9x 2.9x
Amounts in accordance with
U.S. GAAP:
Adjusted operating
revenues(d)............
EBITDA(e)................
Adjusted EBITDA(f).......
Adjusted EBITDA
margin(g)..............
Depreciation and
amortization...........
Capital expenditures.....
Ratio of earnings to
fixed charges(h).......
BALANCE SHEET DATA (AT END
OF PERIOD):
Amounts in accordance with
U.K. GAAP:
Total assets(i)............L4,589.0 $ 7,617.7
Total long-term debt(j)....276.4 458.8
Total shareholders'
equity...................89.0 147.7
Amounts in accordance with
U.S. GAAP:
Total assets(i)............5,369.9 8,914.0
Total long-term debt(j)....276.4 458.8
Total shareholders'
equity...................875.4 1,453.2
</TABLE>
See Notes to Summary Historical and Unaudited Pro Forma Consolidated Financial
Information
11
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF WILLIS CORROON
The following table sets forth summary pro forma statement of income
data, supplemental financial data and balance sheet data for Willis Corroon. The
pro forma consolidated financial information is derived from, and should be read
in conjunction with, the "Unaudited Condensed Pro Forma Consolidated Financial
Information" and the notes thereto included elsewhere in this prospectus. The
pro forma adjustments are based upon available information and certain
assumptions that management believes are reasonable. The pro forma statement of
income data give effect to the Transactions as if they had occurred as of
January 1, 1998. The pro forma balance sheet data give effect to the
Transactions as if they had occurred as of December 31, 1998. The pro forma
financial data do not purport to represent what the financial position or
results of operations of Willis Corroon would actually have been had such
transactions in fact occurred on the assumed dates or to project the financial
position or results of operations of Willis Corroon for any future period or
date.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1998 1998
--------- ---------
<S> <C> <C>
(IN MILLIONS)
STATEMENT OF INCOME DATA:
Amounts in accordance with U.K. GAAP:
Continuing operations
Operating revenues...................................................................... L735.3 $ 1,220.6
Operating income before exceptional items(b)............................................ 86.0 142.8
Share of profit of associates........................................................... 6.7 11.1
Interest expense........................................................................ (53.4) (88.6)
Income / (loss) before tax.............................................................. (30.8) (51.1)
Total operations
Net income / (loss)..................................................................... L(74.9) $ (124.3)
Amounts in accordance with U.S. GAAP:
Continuing operations
Operating revenues...................................................................... L735.3 $ 1,220.6
Operating income before exceptional items(b)............................................ 56.7 94.1
Share of profit of associates(c)........................................................ 6.7 11.1
Interest expense........................................................................ (53.4) (88.6)
Income / (loss) before tax.............................................................. (50.5) (83.8)
Total operations
Net income / (loss)..................................................................... L(91.9) $ (152.5)
OTHER FINANCIAL DATA:
Amounts in accordance with U.K. GAAP:
Adjusted operating revenues(d).......................................................... L735.2 $ 1,220.4
EBITDA(e)............................................................................... 117.1 194.4
Adjusted EBITDA(f)...................................................................... 142.6 236.7
Adjusted EBITDA margin(g)............................................................... 18.5% 18.5%
Depreciation and amortization........................................................... L24.4 $ 40.5
Capital expenditures.................................................................... 29.9 49.6
Ratio of EBITDA to interest expense..................................................... 2.2x 2.2x
Ratio of Adjusted EBITDA to interest expense............................................ 2.7x 2.7x
Ratio of earnings to fixed charges(h)................................................... -- --
Amounts in accordance with U.S. GAAP:
Adjusted operating revenues(d).......................................................... L735.2 $ 1,220.4
EBITDA(e)............................................................................... 117.1 194.4
Adjusted EBITDA(f)...................................................................... 142.6 236.7
Adjusted EBITDA margin(g)............................................................... 18.5% 18.5%
Depreciation and amortization........................................................... L45.2 75.0
Capital expenditures.................................................................... 29.9 49.6
Ratio of EBITDA to interest expense..................................................... 2.2x 2.2x
Ratio of Adjusted EBITDA to interest expense............................................ 2.7x 2.7x
Ratio of earnings to fixed charges(h)................................................... -- --
BALANCE SHEET DATA (AT END OF PERIOD):
Amounts in accordance with U.K. GAAP:
Total assets(i)......................................................................... L4,589.0 $ 7,617.7
Total long-term debt(j)................................................................. 598.3 993.2
Total shareholders' equity.............................................................. 89.0 147.7
Amount in accordance with U.S. GAAP:
Total assets(i)......................................................................... L5,379.3 $ 8,929.6
Total long-term debt(j)................................................................. 607.7 1,008.8
Total shareholders' equity.............................................................. 875.4 1,453.2
</TABLE>
See Notes to Summary Historical and Unaudited Pro Forma Consolidated Financial
Information
12
<PAGE>
NOTES TO SUMMARY HISTORICAL AND UNAUDITED
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(a) U.S. dollar amounts have been translated at the Noon Buying Rate on December
31, 1998 of $1.66 = L1.00 solely for your convenience.
(b) Exceptional items charged against operating income from continuing
operations for the year ended December 31, 1995 consisted of losses of L16.6
million relating to properties that were surplus to operational
requirements. For the period January 1 to September 1, 1998, exceptional
items charged against operating income totalled L35.8 million and consisted
of provisions of L25.0 million for claims and costs associated with the
review of personal pension plans sold between 1988 and 1994 and costs of
L10.8 million incurred in connection with the acquisition of Willis Corroon
by Trinity Acquisition. For the period September 2 to December 31, 1998
exceptional items charged against operating income totalled L5.0 million and
consisted of debt issuance costs incurred in connection with the acquisition
of Willis Corroon by Trinity Acquisition. See Note 4 of the Notes to the
Consolidated Financial Statements. Under U.S. GAAP, such items would not be
described as exceptional items.
(c) Under U.S. GAAP, Willis Corroon's share of profits of associated companies
would normally be presented on an after tax basis. The presentation adopted
conforms to U.K. GAAP where Willis Corroon's share of profits of associated
companies is shown on a before tax basis.
(d) As set forth in the following table, Adjusted Operating Revenues represent
actual operating revenues from continuing operations, adjusted to give
effect to all significant dispositions since January 1, 1995 as if they had
occurred on January 1, 1995. Such dispositions consisted of: (1) Willis
Faber & Dumas (Agencies) Limited, a Lloyd's members' agent that was sold in
October 1997; (2) Professional Liability Underwriting Management, part of
the U.S. Wholesale operation, that was closed in the second quarter of 1998;
(3) IRPC and PPC, two consulting companies part of U.K. Retail that were
sold in 1996; (4) WF Corroon, a wholly-owned employee benefits consulting
operation that was sold in 1996; and (5) Consumer Benefit Life Insurance
Company, a wholly owned subsidiary, and two other U.S. business operations,
that were sold in 1996. The table also presents Adjusted Operating Revenues
on a pro forma basis for the year ended December 31, 1998 after giving
effect to the following acquisitions since January 1, 1998 as if they had
occurred on January 1, 1998: (1) the 50% interest in Gruppo Ital Brokers
which was acquired in July 1998 and (2) the increased investment in our
Spanish associate from 48% to 60% and the reorganization of the existing
Spanish and Portuguese operations in July 1998. See "Unaudited Condensed Pro
Forma Consolidated Financial Information" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------------------------------------------------
YEAR ENDED JANUARY 1 TO SEPTEMBER 2 TO
PRO FORMA
---------------
YEAR ENDED
DECEMBER 31, SEPTEMBER 1, DECEMBER 31, DECEMBER 31,
------------------------------- ----------------- ----------------- --------------------------
1995 1996 1997 1998 1998 1998 1998
--------- --------- --------- ----------------- ----------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
Continuing operations
operating revenues.......... L706.4 L725.0 L692.0 L468.8 L249.2 L718.0 L735.3
Adjustments for
dispositions................ (65.5) (60.0) (8.6) (0.1) 0 (0.1) (0.1)
--------- --------- --------- ------- ------- --------- -------
Adjusted operating revenues... L640.9 L665.0 L683.4 L468.7 L249.2 L717.9 L735.2
--------- --------- --------- ------- ------- --------- -------
--------- --------- --------- ------- ------- --------- -------
</TABLE>
(e) EBITDA is defined as operating income from continuing operations before
exceptional items and depreciation and amortization, plus share of profit of
associates. Willis Corroon's share of profit of associates was L6.8 million,
L3.5 million, L1.9 million and L6.3 million ($10.4 million) for 1995, 1996,
1997 and 1998 respectively. EBITDA is presented because management believes
that it is a useful indicator of a company's ability to incur and service
debt. EBITDA should not be considered by investors as an alternative to
operating income or net income (as determined in accordance with either U.K.
GAAP or U.S. GAAP) as an indicator of Willis Corroon's performance, nor as
an alternative to cash flows from operating activities, investing activities
or financing activities (as
13
<PAGE>
determined in accordance with either U.K. GAAP or U.S. GAAP) as a measure of
liquidity. Because all companies do not calculate EBITDA identically, the
presentation of EBITDA contained herein may not be comparable to other
similarly entitled measures of other companies. For U.S. GAAP purposes,
EBITDA has been defined so as to exclude (1) non-cash adjustments for
pension costs of L1.7 million, L(12.1) million and L(7.6) million ($(12.9)
million) for 1995, 1996 and 1997, respectively, and L(1.6) million and
L(1.7) million for the periods January 1 to September 1, 1998 and September
2 to December 31, 1998 respectively and L(5.0) million for the year ended
December 31, 1998 on a pro forma basis, and (2) non-cash adjustments for
revaluation of forward exchange contracts of L(2.0) million, L10.9 million
and L(5.6) million ($(9.5) million) for 1995, 1996 and 1997, respectively,
and L0.2 million and L(3.7) million for the periods January 1 to September
1, 1998, and September 2 to December 31, 1998 respectively and L(3.5)
million for the year ended December 31, 1998 on a pro forma basis. The
EBITDA data presented is, therefore, the same under U.S. GAAP as under U.K.
GAAP.
(f) As set forth in the following table, Adjusted EBITDA represents actual
EBITDA, adjusted to give effect to (A) the dispositions described in note
(d) above, together with the 50% interest in Heddington Brokers Limited, an
associate based in Bermuda that was sold in December 1995, as if they had
occurred on January 1, 1995, and (B) the following non-recurring items: (1)
pension review claims and costs relating to the review of personal pension
plans sold between 1988 and 1994; (2) costs relating to Willis Corroon's
brokers' contribution to the Lloyd's Reconstruction and Renewal Plan; (3)
severance costs incurred in connection with the change program; (4) other
expenses relating to consulting costs incurred in connection with the change
program, costs relating to acquisitions of broker teams and costs in
connection with Willis Corroon's investment in the World Insurance Network;
and (5) costs relating to the 1998 Projects described under "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Overview." The table also presents Adjusted EBITDA on a pro forma basis for
the year ended December 31, 1998 after giving effect to the following
acquisitions as if they had occurred on January 1, 1998: (1) the 50%
interest in Gruppo Ital Brokers which was acquired in July 1998; (2) the 30%
interest in Assurand /orgruppen which was acquired in September 1998; and
(3) the increased investment in our Spanish associate from 48% to 60% and
the reorganization of the existing Spanish and Portuguese operations in July
1998. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------------------------------------------------
YEAR ENDED JANUARY 1 TO SEPTEMBER 2 TO
PRO FORMA
-------------
YEAR ENDED
DECEMBER 31, SEPTEMBER 1, DECEMBER 31, DECEMBER 31,
------------------------------- ----------------- ----------------- ------------------------
1995 1996 1997 1998 1998 1998 1998
--------- --------- --------- ----------------- ----------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
Operating income from continuing
operations before exceptional
items.......................... L 79.4 L 87.8 L 92.1 L56.8 L26.0 L 82.8 L 86.0
Share of profit of associates.... 6.8 3.5 1.9 7.7 (1.4) 6.3 6.7
Depreciation and amortization.... 24.4 24.5 22.7 15.5 8.9 24.4 24.4
--------- --------- --------- ----- ----- --------- -------------
EBITDA........................... L110.6 L115.8 L116.7 L80.0 L33.5 L113.5 L117.1
Adjustments for dispositions..... (6.1) (9.8) (4.1) 0.6 -- 0.6 0.6
Other adjustments before
exceptional items:
Pension Review................. 1.0 0.2 2.3 -- -- -- --
Lloyd's Reconstruction and
Renewal Plan................. -- 2.6 2.2 1.3 0.7 2.0 2.0
Severance...................... -- 11.3 3.4 4.6 5.0 9.6 9.6
Other expenses................. 0.7 6.9 10.0 4.4 6.1 10.5 10.5
1998 Projects.................. -- -- -- 1.1 1.7 2.8 2.8
--------- --------- --------- ----- ----- --------- -------------
Adjusted EBITDA.................. L106.2 L127.0 L130.5 L92.0 L47.0 L139.0 L142.6
--------- --------- --------- ----- ----- --------- -------------
--------- --------- --------- ----- ----- --------- -------------
Adjusted EBITDA margin........... 15.5% 18.6% 18.8% 18.0% 19.4% 18.5% 18.5%
</TABLE>
14
<PAGE>
Adjusted EBITDA should not be considered by investors as an alternative to
operating income or net income (as determined in accordance with either U.K.
GAAP or U.S. GAAP) as an indicator of Willis Corroon's performance, nor as
an alternative to cash flows from operating activities, investing activities
or financing activities (as determined in accordance with either U.K. GAAP
or U.S. GAAP) as a measure of liquidity. Because all companies do not
calculate EBITDA identically, the presentation of Adjusted EBITDA contained
herein may not be comparable to EBITDA, Adjusted EBITDA or other similarly
entitled measures of other companies. Investors should not conclude from the
presentation of Adjusted EBITDA that additional costs arising from the same
or similar items will not be incurred in the future. The Pension Review,
Lloyd's Reconstruction and Renewal Plan and the change program are on-going
and could result in additional costs being incurred in the future.
(g) Adjusted EBITDA margin represents Adjusted EBITDA (less share of profit of
associates) as a percentage of Adjusted Operating Revenues.
(h) The ratio of earnings to fixed charges is computed by dividing earnings from
continuing operations by fixed charges. For these purposes, "earnings"
consists of income before taxation less the retained equity in share of
profits of associates and fixed charges. "Fixed charges" consists of
interest expense (including amortization of debt issuance costs) and the
interest element of operating lease rentals. After taking an exceptional
charge of L25 million in the period from January 1 to September 1, 1998 for
the estimated cost in connection with the pension review (see "--U.K.
Pension Review"), a L10.8 million exceptional charge for payment of fees and
expenses relating to the Transactions and a non-cash exceptional charge of
L29.6 million on the closure of Professional Liability Underwriting
Management, earnings under U.K. GAAP and U.S. GAAP for the period January 1
to September 1, 1998 and the year ended December 31, 1998 on a pro forma
basis were inadequate to cover fixed charges. The amounts of the
deficiencies were L7.1 million and L35.1 million ($58.3 million),
respectively, on a U.K. GAAP basis and L10.9 million and L54.8 million
($91.0 million), respectively, on a U.S. GAAP basis.
(i) As an intermediary, Willis Corroon holds funds on a fiduciary basis for the
account of third parties, typically as a result of premiums received from
clients that are in transit to insurance carriers and claims due to clients
that are in transit from insurance carriers. These fiduciary amounts are
included in total assets but are not generally available to service Willis
Corroon's indebtedness or for other general corporate purposes. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(j) Under U.K. GAAP, debt issuance costs of L9.4 million ($15.6 million) are
netted from the calculation of total debt and amortized over the life of the
debt. Under U.S. GAAP, such costs are recorded as an asset and amortized
over the life of the debt. Total long term debt does not give effect to
dollar denominated intercompany debt owed to Trinity Acquisition pursuant to
group intercompany notes (as defined), which are subordinated in right of
payment to the Notes, and which are offset by note receivables in the form
of corresponding pound sterling denominated Trinity intercompany notes (as
defined). In addition, total long term debt does not give effect to a L92.9
million interest free convertible loan owed to Trinity Acquisition, which
was converted into equity of Willis Corroon Group Limited on February 3,
1999.
15
<PAGE>
RISK FACTORS
BEFORE YOU PARTICIPATE IN THE EXCHANGE OFFER, YOU SHOULD BE AWARE THAT
THERE ARE VARIOUS RISKS, INCLUDING THOSE DESCRIBED BELOW. YOU SHOULD CAREFULLY
CONSIDER THESE RISK FACTORS, TOGETHER WITH THE OTHER INFORMATION IN THIS
PROSPECTUS, BEFORE DECIDING TO PARTICIPATE IN THE EXCHANGE OFFER.
FAILURE TO EXCHANGE--THERE MAY BE ADVERSE CONSEQUENCES IF YOU DO NOT EXCHANGE
YOUR OUTSTANDING NOTES.
If you do not exchange your outstanding Notes for exchange Notes under
the exchange offer, then you will continue to be subject to the transfer
restrictions on the outstanding Notes as set forth in the offering memorandum
distributed in connection with the offering of the outstanding Notes. In
general, the outstanding Notes may not be offered or sold unless they are
registered or exempt from registration under the Securities Act and applicable
state securities laws. Except as required by the registration rights agreement,
we do not intend to register resales of the outstanding Notes under the
Securities Act. You should refer to "Prospectus Summary--Summary of the Terms of
Exchange Offer" and "The Exchange Offer" for information about how to tender
your outstanding Notes.
The tender of outstanding Notes under the exchange offer will reduce
the principal amount of the outstanding Notes outstanding, which may have an
adverse effect upon, and increase the volatility of, the market price of the
outstanding Notes due to a reduction in liquidity.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE--WE HAVE SUBSTANTIAL INDEBTEDNESS AND HAVE
SIGNIFICANT INTEREST PAYMENT REQUIREMENTS.
As a result of the Transactions, Willis Corroon has a substantial
amount of debt. Assuming that the Transactions had taken place on December 31,
1998, we would have had total long-term debt of L598.3 million (net of L9.4
million of issuance costs and not including unused commitments) and
shareholders' equity of L89.0 million, giving us a total debt to equity ratio of
6.7 to 1.0 calculated on a U.K. GAAP basis and 0.7 to 1.0 calculated on a U.S.
GAAP basis. In addition, subject to restrictions in our senior credit facilities
and in the indenture governing the Notes, we may borrow more money for working
capital, capital expenditures, acquisitions or for other purposes.
Our high level of debt could have important consequences for you,
including the following:
- we may have difficulty borrowing money in the future for working
capital, capital expenditures, acquisitions or other purposes;
- we will need to use a large portion of the money earned by our
subsidiaries to pay principal and interest on the senior credit
facilities, the Notes and on other debt, which will reduce the amount
of money available to us to finance our operations and other business
activities;
- some of our debt has a variable rate of interest, which exposes us to
the risk of increased interest rates;
- debt under the senior credit facilities will be secured and will mature
prior to the Notes;
- we may have a much higher level of debt than our competitors, which may
put us at a competitive disadvantage;
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- our debt level makes us more vulnerable to economic downturns and
adverse developments in our business;
- our debt level reduces our flexibility in responding to changing
business and economic conditions, including increased competition in
the insurance brokerage industry; and
- our debt level limits our ability to pursue other business
opportunities, borrow more money for operations or capital in the
future and implement our business strategies.
After taking an exceptional charge of L25 million in the period from
January 1 to September 1, 1998 for the estimated cost in connection with the
pension review (see "--U.K. Pension Review"), a L10.8 million exceptional charge
for payment of fees and expenses relating to the Transactions and a non-cash
exceptional charge of L29.6 million on the closure of Professional Liability
Underwriting Management, earnings under U.K. GAAP and U.S. GAAP for the period
from January 1 to September 1, 1998 were inadequate to cover fixed charges. The
amounts of the deficiencies were L7.1 million under U.K. GAAP and L10.9 million
under U.S. GAAP. After giving pro forma effect to the Transactions, our interest
expense for the year ended December 31, 1998 would have been L53.4 million. Pro
forma earnings under U.K. GAAP and U.S. GAAP for the year ended December 31,
1998 were inadequate to cover fixed charges. The amounts of the deficiencies
were L35.1 million under U.K. GAAP and L54.8 million under U.S. GAAP.
We expect to obtain the money to pay our expenses and to pay the
principal and interest on the Notes, the senior credit facilities and other debt
(and expect TA II Limited, a company with limited liability, organized under the
laws of England and Wales, and an indirect parent of Willis Corroon, to obtain
the money to pay dividends on its preference shares) from the operations of our
subsidiaries and associates and from additional loans under the senior credit
facilities. Our ability to meet our expenses thus depends on the future
performance of our subsidiaries and associates, which will be affected by
financial, business, economic and other factors. We will not be able to control
many of these factors, such as economic conditions in the markets where our
subsidiaries operate and pressure from competitors. We cannot be certain that
the money earned by our subsidiaries will be sufficient to allow us to pay
principal and interest on our debt (including the Notes) and meet our other
obligations. If we do not have enough money, we may be required to refinance all
or part of our existing debt, including the Notes, sell assets or borrow more
money. We cannot guarantee that we will be able to refinance our debt, sell
assets or borrow more money on terms acceptable to us. In addition, the terms of
existing or future debt agreements, including the senior credit facilities and
the indenture, may restrict us from adopting any of these alternatives.
Under the senior credit facilities, we must also comply with certain
specified financial ratios and tests. If we do not comply with these or other
covenants and restrictions contained in the senior credit facilities, we could
default under the senior credit facilities. Such debt, together with accrued
interest, could then be declared immediately due and payable. Our ability to
comply with such provisions may be affected by events beyond our control.
CONTRACTUAL SUBORDINATION--THE NOTES AND THE GUARANTEES ARE CONTRACTUALLY
SUBORDINATED TO OUR
SENIOR DEBT.
The Notes are contractually subordinated in right of payment to all
senior indebtedness of the Issuer and the Guarantees are contractually
subordinated in right of payment to all senior indebtedness of the Guarantors.
Assuming the Transactions had occurred on December 31, 1998, the Issuer would
have had approximately $460.1 million (L277.2 million) of senior indebtedness
(excluding unused commitments), all of which would have been secured, and the
Guarantors would have had no senior
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indebtedness (excluding their guarantees of the Permanent Facility Agreement).
The indenture permits the Issuer and the Guarantors to borrow certain additional
debt, which may be senior indebtedness.
If the Issuer or the Guarantors are declared bankrupt or insolvent, or
if there is a payment default under any senior indebtedness, we are required to
pay the lenders under the senior credit facilities and any other creditors who
are holders of senior indebtedness in full before we pay you. Accordingly, we
may not have enough assets remaining after payments to holders of such senior
indebtedness to pay you. In addition, under certain circumstances, the Issuer
may not pay any amount on the Notes if certain senior indebtedness (including
debt under the senior credit facilities) is not paid when due or any other
default on such senior indebtedness exists. See "Description of the Notes--
Subordination."
Further, the senior credit facilities prohibit the Issuer from
repurchasing any Notes prior to maturity, even though the indenture requires us
to offer to repurchase Notes in certain circumstances. If the Issuer or the
Guarantors make certain asset sales or if a change of control occurs when the
Issuer is prohibited from repurchasing Notes, the Issuer could ask its lenders
under the senior credit facilities if it may repurchase the Notes or it could
attempt to refinance the borrowings that contain such prohibitions. If the
Issuer does not obtain such a consent or repay such borrowings, the Issuer would
be unable to repurchase the Notes. The Issuer's failure to repurchase tendered
Notes at a time when such repurchase is required by the indenture would
constitute an event of default under the indenture which, in turn, would
constitute a default under the senior credit facilities. In such circumstances,
the subordination provisions in the indenture would restrict payments to you.
See "Description of the Senior Credit Facilities" and "Description of the
Notes--Subordination."
ASSET ENCUMBRANCES--OUR ASSETS ARE PLEDGED TO SECURE PAYMENT OF THE SENIOR
CREDIT FACILITIES.
In addition to being contractually subordinated to all existing and
future senior indebtedness, our obligations under the Notes are unsecured while
our obligations under the senior credit facilities are secured by the pledge of
all of the capital stock of the Issuer, Willis Corroon Group and certain direct
subsidiaries of the Issuer and Willis Corroon Group and a pledge of all the
partnership interests of Willis Corroon Partners; the pledge of stock owned by
Willis Corroon Group is supported by a general lien (known as a floating charge
in the U.K.) filed in the U.K. against Willis Corroon Group's assets. If we
default under the senior credit facilities, the lenders could declare all of the
funds borrowed thereunder,
together with accrued interest, immediately due and payable. If we were unable
to repay such indebtedness, the lenders could foreclose on the pledged stock of
our subsidiaries to your exclusion, even if an event of default exists under the
indenture at such time. Furthermore, under the Guarantees, if all shares of
Willis Corroon Group or partnership interests of Willis Corroon Partners are
sold to persons pursuant to an enforcement of the pledge of shares in Willis
Corroon Group or the pledge of the partnership interests in Willis Corroon
Partners for the benefit of the senior lenders, then the applicable Guarantor
will be released from its Guarantee automatically and immediately upon the sale.
See "Description of the Notes--Guarantee."
STRUCTURAL SUBORDINATION--THE NOTES ARE SUBORDINATED TO THE DEBT OF THE ISSUER'S
SUBSIDIARIES AND THE DEBT OF THE GUARANTORS' SUBSIDIARIES.
The Issuer is a holding company with assets at December 31, 1998 with a
book value of $255 million, excluding the stock of its subsidiaries and
intercompany receivables. In addition, Willis Corroon Group is a holding company
with no significant assets other than (1) its 99.9% general partnership interest
in Willis Corroon Partners and the stock of Willis Corroon Partners'
subsidiaries (including the Issuer and the Issuer's subsidiaries) and (2) the
stock of Willis Corroon Group's U.K. and
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other subsidiaries. Willis Corroon Partners is also a holding company with no
significant assets other than the stock of the Issuer and the Issuer's
subsidiaries. As a holding company, each of the Issuer, Willis Corroon Group and
Willis Corroon Partners is dependent upon dividends or other intercompany
transfers of funds from its respective subsidiaries to meet its debt service and
other obligations. Generally, creditors of a subsidiary will have a superior
claim to the assets and earnings of such subsidiary than the claims of creditors
of its parent company, except to the extent the claims of the parent's creditors
are guaranteed by the subsidiary. The Notes therefore will be effectively
subordinated to creditors of the direct and indirect subsidiaries of the Issuer
and the Guarantees will be effectively subordinated to creditors of all of the
direct and indirect subsidiaries of the Guarantors (other than the Issuer).
As of December 31, 1998:
- the Issuer's subsidiaries had total liabilities (including payables in
respect of insurance broking transactions but excluding their
guarantees under the Permanent Facility Agreement) of L1,103.3 million;
and
- Willis Corroon Group's subsidiaries (other than Willis Corroon
Partners, the Issuer and the Issuer's subsidiaries) had total
liabilities (including payables in respect of insurance broking
transactions but excluding their guarantees under the Permanent
Facility Agreement) of L2,345.0 million.
Although the indenture limits the ability of the Issuer's and
Guarantors' subsidiaries to incur indebtedness and preferred stock, there are
certain significant qualifications and exceptions. The indenture does not limit
such subsidiaries from incurring liabilities that are excluded from the
definitions of indebtedness or preferred stock under the indenture. See
"Description of the Notes--Certain Covenants--Limitations on Incurrence of
Indebtedness and Issuance of Disqualified Stock."
In addition, the ability of the Issuer's and Guarantors' subsidiaries
to pay dividends and make other payments to them may be restricted by, among
other things, applicable corporate and other laws and regulations and agreements
of the subsidiaries. Although the indenture limits the ability of such
subsidiaries to enter into consensual restrictions on their ability to pay
dividends and make other payments, such limitations are subject to a number of
significant qualifications and exceptions. See "Description of the
Notes--Certain Covenants--Dividend and Other Payment Restrictions Affecting
Subsidiaries."
U.K. INSOLVENCY LAW AND FINANCIAL ASSISTANCE--U.K. INSOLVENCY LAW IS FAVORABLE
TO SECURED CREDITORS AND U.K. LAWS PROHIBIT CERTAIN FINANCIAL ASSISTANCE.
The procedural and substantive provisions of U.K. insolvency and
administrative laws generally are more favorable to secured creditors than
comparable provisions of U.S. laws and afford debtors only limited protection
from such creditors. As a result, your ability to realize upon your claims
against Willis Corroon Group may be more limited than with a U.S. guarantor. In
addition, under U.K. insolvency law, the liabilities of Willis Corroon Group
under its Guarantee will be paid in the event of a bankruptcy or similar
proceeding only after repayment of certain debts of Willis Corroon Group which
are entitled to priority under U.K. law. Such debts may include:
- amounts owed to U.K. Inland Revenue;
- amounts owed to U.K. Customs and Excise;
- amounts owed under U.K. Social Security contributions;
- amounts owed in respect of occupational pension schemes;
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- amounts owed to employees; and
- liquidation expenses.
Under U.K. insolvency law, the liquidator or administrator of a company
may apply to the court to rescind or vary a transaction entered into by such
company at less than fair value, if such company was insolvent at the time of,
or as a consequence of, the transaction and enters into a formal insolvency
process within two years of the completion of the transaction. A transaction
might be challenged if it involved a gift by the company or the company received
consideration of significantly less value than the benefit given by such
company. A court generally will not intervene if the company entered the
transaction in good faith for the purposes of carrying on its business and there
were reasonable grounds for believing the transaction would benefit the company.
We believe that the Guarantee by Willis Corroon Group was not issued at less
than fair value and that the Guarantee was issued in good faith for the purposes
of carrying on Willis Corroon Group's business. Furthermore, we believe that
there are reasonable grounds for believing that the Transactions would benefit
Willis Corroon Group. We cannot provide any assurance, however, that the
issuance of the Guarantee by Willis Corroon Group will not be challenged by a
liquidator or administrator or that a court would support our analysis.
The provision of the Guarantee by Willis Corroon Group and certain
provisions of the exchange and registration rights agreement and the purchase
agreement relating to the issuance of the outstanding Notes (the "Other
Prohibited Matters") may have constituted unlawful financial assistance under
U.K. law. However, the Companies Act 1985 of Great Britain provides an exemption
procedure which can be used in certain circumstances to approve actions which
may otherwise constitute unlawful financial assistance. Willis Corroon Group has
complied with this procedure. The procedure requires that each of the directors
of Willis Corroon Group swear certain statutory declarations relating to the
solvency of Willis Corroon Group and that the auditors of Willis Corroon Group
provide a report confirming they are not aware of anything to indicate the
opinion of the directors in such statutory declarations is unreasonable in the
circumstances. Furthermore, in connection with the issuance of the Guarantee and
the Other Prohibited Matters, it is necessary that Willis Corroon Group had net
assets which were not reduced as a result of giving the financial assistance or,
to the extent that they are reduced, the assistance is provided out of
distributable profits only. Willis Corroon Group has implemented the exemption
procedure on the basis that the Guarantee and the Other Prohibited Matters did
not reduce the net assets of Willis Corroon Group. If any of the requirements of
the exemption procedure are not satisfied, and in particular if the giving of
the Guarantee or the Other Prohibited Matters reduced the net assets of Willis
Corroon Group, then such Guarantee or the Other Prohibited Matters, as the case
may be, would be invalid. We have taken steps to ensure that the requirements of
the exemption procedure have been complied with and believe that the issue of
the Guarantee and the Other Prohibited Matters did not result in a reduction of
the net assets of Willis Corroon Group, because we believe that the liabilities
under the Guarantee and the Other Prohibited Matters were not likely to be or
not certain to be incurred. However, we can provide no assurance that a court or
a liquidator would concur with our view.
U.S. FRAUDULENT TRANSFER CONSIDERATIONS--U.S. BANKRUPTCY OR FRAUDULENT
CONVEYANCE LAW MAY INTERFERE WITH THE PAYMENT OF THE NOTES.
The incurrence of indebtedness by the Issuer, such as the outstanding
Notes, may be subject to review under U.S. federal bankruptcy law or relevant
state fraudulent conveyance laws if a bankruptcy case or lawsuit is commenced by
or on behalf of unpaid creditors of the Issuer. Under these laws, if in such a
case or lawsuit a court were to find that, at the time the Issuer incurred
indebtedness (including indebtedness under the Notes),
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(1) the Issuer incurred such indebtedness with the intent of hindering,
delaying or defrauding current or future creditors; or
(2) (a) the Issuer received less than reasonably equivalent value or
fair consideration for incurring such indebtedness; and
(b) the Issuer
- was insolvent or was rendered insolvent by reason of any of
the transactions;
- was engaged, or about to engage, in a business or transaction
for which our assets remaining with the Issuer constituted
unreasonably small capital to carry on our business;
- intended to incur, or believed that it would incur, debts
beyond our ability to pay as such debts matured (as all of the
foregoing terms are defined in or interpreted under the
relevant fraudulent transfer or conveyance statutes); or
- was a defendant in an action for money damages, or had a
judgment for money damages docketed against it (if, in either
case, after final judgment the judgment is unsatisfied),
then such court could avoid or subordinate the amounts owing under the Notes to
presently existing and future indebtedness of the Issuer and take other actions
detrimental to you.
The measure of insolvency for purposes of the foregoing considerations
will vary depending upon the law of the jurisdiction that is being applied in
any such proceeding. Generally, however, the Issuer would be considered
insolvent if, at the time it incurred the indebtedness, either (1) the sum of
its debts (including contingent liabilities) is greater than its assets, at fair
valuation, or (2) the present fair saleable value of its assets is less than the
amount required to pay the probable liability on its total existing debts and
liabilities (including contingent liabilities) as they become absolute and
matured. There can be no assurance as to what standards a court would use to
determine whether the Issuer was solvent at the relevant time, or whether,
whatever standard was used, the Notes would not be avoided or further
subordinated on another of the grounds set forth above. In rendering their
opinions in connection with the Transactions, counsel for the Issuer will not
express any opinion as to the applicability of federal or state fraudulent
transfer and conveyance laws.
We believe that at the time the Issuer initially incurred indebtedness
represented by the outstanding Notes, the Issuer was:
(1) (a) neither insolvent nor rendered insolvent thereby,
(b) in possession of sufficient capital to run its businesses
effectively and
(c) incurring debts within its ability to pay as the same mature or
become due; and
(2) had sufficient assets to satisfy any probable money judgment
against it in any pending action.
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In reaching the foregoing conclusions, we have relied upon our analyses
of internal cash flow projections and estimated values of assets and liabilities
of the Issuer. There can be no assurance, however, that a court passing on such
questions would reach the same conclusions.
In addition, Willis Corroon Partners' Guarantee may be subject to
review under relevant federal and state fraudulent conveyance and similar
statutes in a bankruptcy or reorganization case or a lawsuit by or on behalf of
creditors of Willis Corroon Partners. In such a case, the analysis set forth
above would generally apply, except that Willis Corroon Partners could also be
subject to the claim that, since its Guarantee was incurred for the benefit of
the Issuer, the obligations of Willis Corroon Partners thereunder were incurred
for less than reasonably equivalent value or fair consideration. A court could
avoid Willis Corroon Partners' obligation under its Guarantee, subordinate the
Guarantee to other indebtedness of Willis Corroon Partners or take other action
detrimental to the holders of the Notes.
CONTROL BY KKR--WE ARE CONTROLLED BY KOHLBERG KRAVIS ROBERTS & CO. L.P.
The KKR 1996 Fund (Overseas), Limited Partnership, an Alberta, Canada
limited partnership, the general partner of Profit Sharing (Overseas), Limited
Partnership, an Alberta, Canada limited partnership, beneficially owns
approximately 77% of the share capital of TA I Limited, a company with limited
liability organized under the laws of England and Wales, the ultimate parent of
Willis Corroon Group and the Issuer. The board of directors of TA I Limited
consists of six designees of the KKR 1996 Fund (Overseas), Limited, one member
of the management group and one independent director. As a result, the KKR 1996
Fund (Overseas), Limited controls our policies and operations and has the power
to approve any action requiring stockholder approval (including adopting
amendments to Willis Corroon Group's articles of association and approving
mergers or sales of all or substantially all of our assets). There can be no
assurance that the interests of the KKR 1996 Fund (Overseas), Limited will not
conflict with your interests. See "Management" and "Shareholders."
LACK OF PUBLIC MARKET--YOU MAY NOT BE ABLE TO SELL YOUR EXCHANGE NOTES.
There is no existing market for the exchange Notes, and there can be no
assurance as to the liquidity of any markets that may develop for the exchange
Notes, your ability to sell your exchange Notes or the prices at which you would
be able to sell your exchange Notes. Future trading prices of the exchange Notes
will depend on many factors, including, among other things, prevailing interest
rates, our operating results and the market for similar securities. The initial
purchasers of the outstanding Notes have advised us that they currently intend
to make a market in the exchange Notes. However, they are not obligated to do so
and any market making may be discontinued at any time without notice. The
outstanding Notes are eligible for trading in Nasdaq's PORTAL Market and are
listed on the Luxembourg Stock Exchange. We have applied for listing of the
exchange Notes on the Luxembourg Stock Exchange.
Historically, the market for non-investment grade debt has been subject
to disruptions that have caused volatility in prices. It is possible that the
market for the exchange Notes will be subject to disruptions. Any such
disruptions may have a negative effect on you (as a holder of the exchange
Notes) regardless of our prospects and financial performance.
LIMITATION ON CHANGE OF CONTROL--WE MAY NOT BE ABLE TO FINANCE A CHANGE OF
CONTROL OFFER REQUIRED BY THE INDENTURE.
Upon a change of control under the indenture, the Issuer will be
required to offer to purchase all of the Notes then outstanding at 101% of their
principal amount, plus accrued interest to the date of repurchase. If a change
of control were to occur, we can provide no assurance that the Issuer would
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have sufficient funds to pay the purchase price (as defined in the indenture)
for the Notes then outstanding, and we expect that the Issuer would require
third party financing; however, we can provide no assurance that the Issuer
would be able to obtain such financing on favorable terms, if at all. In
addition, the senior credit facilities restrict the Issuer's ability to
repurchase the Notes, including pursuant to an offer in connection with a change
of control. A change of control under the indenture will result in an event of
default under the senior credit facilities and may cause the acceleration of
other senior indebtedness, if any, in which case the subordination provisions of
the Notes would require payment in full of the senior credit facilities and any
other senior indebtedness before repurchase of the Notes. See "Description of
the Notes--Repurchase at the Option of Holders--Change of Control" and
"Description of the Senior Credit Facilities." The inability to repay senior
indebtedness, if accelerated, and to purchase all of the tendered Notes, would
constitute an event of default under the indenture.
PREMIUMS AND COMMISSIONS--WE DO NOT CONTROL THE PREMIUMS ON WHICH OUR
COMMISSIONS ARE BASED.
Willis Corroon is primarily engaged in insurance brokerage activities,
and derives most of its revenues from commissions and fees for brokering and
consulting services. Willis Corroon does not determine insurance premiums on
which commissions are generally based. Historically, premiums have been cyclical
in nature and have varied widely based on market conditions. Since the late
1980s, general premium levels have been depressed as a result of a number of
factors, including:
- the expanded underwriting capacity of insurance carriers;
- consolidation of both insurance intermediaries and insurance carriers;
and
- increased competition.
In addition, as traditional risk-bearing insurance carriers continue to
outsource the production of premium revenue to non-affiliated agents or brokers
such as Willis Corroon, such insurance carriers may seek to further reduce their
expenses by reducing the commission rates payable to such insurance agents or
brokers. We cannot predict the timing or extent of future changes in commission
rates or premiums and therefore cannot predict the effect, if any, that such
changes would have on our operations. See "Business--Industry Overview."
SOVEREIGN/WFUM--THERE IS UNCERTAINTY ABOUT THE RUN-OFF OF THE BUSINESS OF ONE OF
OUR SUBSIDIARIES (SOVEREIGN/WILLIS FABER (UNDERWRITING MANAGEMENT)).
Sovereign Marine & General Insurance Company Limited (in provisional
liquidation), a wholly owned subsidiary of Willis Corroon Group, operated as an
insurance company in the U.K. and from 1972 Sovereign's underwriting activities
were managed by another wholly owned subsidiary of Willis Corroon Group, Willis
Faber (Underwriting Management) Limited. Willis Faber (Underwriting Management)
also provided underwriting agency and other services to the third-party
insurance companies (the "Stamp Companies"), some of which are long-standing
clients of Willis Corroon. As an underwriting agent, Willis Faber (Underwriting
Management) did not retain any underwriting risks for its own account. As part
of its services as agent, Willis Faber (Underwriting Management) arranged
insurance and reinsurance business on behalf of Sovereign and the Stamp
Companies in the following main classes of insurance: marine, non-marine,
casualty and aviation. Willis Faber (Underwriting Management) also arranged for
reinsurance for Sovereign and the Stamp Companies through third party brokers,
as well as through brokers within Willis Corroon. In 1991, Sovereign ceased
underwriting new business and Willis Faber (Underwriting Management) ceased
arranging new business on behalf of Sovereign and the Stamp Companies. Since
that time, Willis Faber (Underwriting Management) has been administering the
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business it arranged on behalf of Sovereign and the other Stamp Companies
(referred to as handling the "run-off" of the business).
In July 1997, an unexpected adverse arbitration award was rendered
against Sovereign in respect of a dispute between Sovereign and one of its
reinsurers regarding the enforceability of certain reinsurance that Willis Faber
(Underwriting Management) had arranged. The award is confidential and
non-binding as to third parties. As a result of the award, the directors of
Sovereign determined that Sovereign could not continue to trade unless Willis
Corroon Group provided unlimited financial support. The directors of Willis
Corroon Group decided that, in the interests of Willis Corroon Group's
shareholders, such support for Sovereign could not be justified. Accordingly,
Sovereign was placed into Provisional Liquidation on July 11, 1997. It is
expected that the Provisional Liquidators and Sovereign's creditors will
ultimately enter into an arrangement that will resolve Sovereign's liabilities
and its creditors' claims and provide for the orderly winding up of Sovereign's
business, although there can be no assurance that this will be the case. Willis
Corroon and the Provisional Liquidators have agreed to certain arrangements,
including the new structure to replace Willis Faber (Underwriting Management)
described below, for the future run-off of the Sovereign business. Willis
Corroon has similar agreements with certain of the Stamp Companies regarding
arrangements for, and funding the costs of, the ongoing run-off of Sovereign.
Willis Faber (Underwriting Management) made provisions in 1991 and
Willis Corroon made provisions in 1995, in each case to cover the estimated
expenses for administering the run-off by Willis Faber (Underwriting Management)
which, based on the knowledge at that time, was expected to cover the handling
of the run-off to 2025. At December 31, 1998, the remaining provisions for these
costs were L20.8 million. Although the run-off of this business is expected to
be conducted in an orderly manner, it may ultimately prove to be a lengthy and
expensive process. As indicated above, Willis Corroon, the Provisional
Liquidators and certain of the Stamp Companies have entered into arrangements
pursuant to which a new subsidiary of Willis Corroon now provides run-off
services. Those services have in turn been sub-contracted to a third party with
experience in running off pools with an insolvent member. In the case of the
Provisional Liquidators, the services are provided directly by such third party
to Sovereign. The arrangement with the Provisional Liquidators and the
arrangements with certain of the Stamp Companies include the agreement by Willis
Corroon to fund, subject to certain agreed guidelines as to timing and amount,
certain costs of the ongoing run-off. The amounts to be funded under the
arrangements are currently within the aggregate of the provisions as of December
31, 1998. However, there can be no assurance that the provisions will be
adequate to cover the actual run-off costs over time.
Following the publication of the adverse arbitration award, Sovereign
and certain of the Stamp Companies have expressed concern about the
enforceability of other reinsurance put in place by Willis Faber (Underwriting
Management) on behalf of Sovereign and the Stamp Companies. In addition, a
reinsurer which participates on numerous reinsurance contracts has advised
Sovereign, the Stamp Companies and Willis Faber (Underwriting Management) that
it is in the process of adopting a number of legal positions, similar to those
taken in the Sovereign arbitration, with the intended effect of having its
contractual obligations under the reinsurance contracts reassessed with respect
to enforceability and amount. Accordingly, there can be no assurance that there
will be no further arbitration or litigation with respect to reinsurance
arranged by Willis Faber (Underwriting Management). The Provisional Liquidators
and the Stamp Companies have generally reserved their rights in respect of
potential claims, and Willis Faber (Underwriting Management), Willis Corroon
Group and certain broking subsidiaries of Willis Corroon Group are in the
process of negotiating standstill agreements which will preserve the rights of
such potential claimants with respect to their possible claims while
circumstances are being investigated. Although the Sovereign arbitration award
is non-binding as to third parties, other arbitrations may arise in the future.
Further, if the Provisional Liquidators or the Stamp Companies
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determine that they have valid claims against Willis Corroon Group, they may
seek to bring claims directly against Willis Corroon Group and hold it
responsible for the liabilities of its subsidiaries. Although such claims are
generally difficult to successfully maintain under English law, there can be no
assurance that claims will not be made or, if made, that such claims could not
succeed. Claims could also be made against Willis Faber (Underwriting
Management) and broking subsidiaries that arranged reinsurance on behalf of
Sovereign and the Stamp Companies. Those Willis Corroon companies with insurance
protection have notified their insurance providers of certain potential claims.
Willis Corroon Group and its subsidiaries have not made any financial provisions
in respect of possible future claims in respect of reinsurance placed by Willis
Faber (Underwriting Management). Willis Corroon Group does not know whether any
such claims will be made, and the validity and amount of such claims and the
extent, if any, to which they will be covered by insurance (after giving effect
to the applicable deductibles, exclusions and limits) can be assessed only when
and if such claims are made.
Willis Corroon Group and its subsidiaries plan to continue to deal with
the foregoing matters in a manner designed to assist an orderly run-off of the
obligations of Sovereign and of the other Stamp Companies while limiting the
costs of resolution. It is possible that the foregoing matters or other
circumstances may lead Willis Corroon Group to place Willis Faber (Underwriting
Management) in Provisional Liquidation. Willis Corroon Group does not believe
the resolution of these matters, including any possible Provisional Liquidation
of Willis Faber (Underwriting Management), will have a material adverse impact
on its consolidated results of operation or financial condition, although there
can be no assurance this will be the case.
U.K. PENSION REVIEW--WE MUST MAKE CERTAIN PAYMENTS AS THE RESULT OF THE U.K.
PENSION REVIEW.
As is the case for many companies involved in selling personal pension
plans to individuals in the United Kingdom from 1988 to 1994, we face
liabilities as a result of the "pension transfers and opt-outs review" initiated
by the U.K. government. Sellers of personal pension plans have since been
subject to liabilities based on claims that they allegedly "mis-sold" pension
products or gave improper advice. In particular, companies that engaged in this
business, such as our independent financial advisory business, Willis Corroon
Financial Planning Limited, are required to compensate individuals who withdrew
from their previous or existing company pension plans or who were otherwise
advised to set up personal pension plans, to the extent that following
withdrawal, and the consequent loss of the employer contribution, such
individual's personal pension plan did not produce returns equal to those that
would have been achievable with an employer's company-sponsored plan. Whether
compensation is due to a particular individual, and the amount thereof, is
dependent on the subsequent performance of the pension plan sold and the
relative cost to reinstate such individual into his or her prior company pension
plan.
We initially allocated L5.0 million for Phase I "priority" cases
(individuals who were nearing retirement, had retired or died). Following
proposals by the U.K. regulator with respect to Phase II, or non-priority cases,
we reserved a further L25.0 million to cover both the estimated costs of
approximately 8,000 Phase II cases, which are now subject to review, and the
estimated additional cost of completing the Phase I reviews. However, there is
uncertainty as to the number of Phase II cases which may require compensation
and the amount of that compensation, which is dependent upon U.K. interest rates
prevailing at the time it is offered. Although we believe our provisions are
reasonable, with the uncertainties of the Phase II review and the suggestions of
further retrospective reviews of other business transacted by the life assurance
industry and independent financial advisors, there remains a possibility that
the provisions made will be insufficient. We expect to pay out these established
provisions over the next three years.
25
<PAGE>
REGULATION--WE ARE SUBJECT TO INSURANCE INDUSTRY REGULATION WORLDWIDE.
Our operations worldwide are subject to numerous governmental and
quasi-governmental regulations. Although we believe that we are substantially in
compliance with such regulations, changes in legislation or regulations and
actions by regulators, including changes in administration and enforcement
policies, may from time to time require operational improvements or
modifications at various locations or the payment of fines and penalties, or
both. See "Business--Regulation."
The U.K. government's Department of Customs & Excise has issued its
proposals to change the way in which value added tax (VAT) can be received by
partially exempt groups (which includes Willis Corroon and other companies in
the insurance industry). We have made representations against the proposals, in
common with professional advisors and others in the industry. If the proposals
were implemented as drafted, the cost to us could be approximately L4 million
before taxes per year although there would be various steps which could be taken
to mitigate this cost.
PUT AND CALL ARRANGEMENTS--WE HAVE ENTERED INTO SIGNIFICANT PUT AND CALL
ARRANGEMENTS.
In connection with many of our investments in our associates, we retain
rights to increase our ownership percentage of such associates over time and, in
certain cases, the existing owners also have a right to put their shares to us
at prices based on formulae related to earnings and, in certain cases, revenue
at the date of exercise.
Between 2001 and 2012, we are subject to a put arrangement whereby, if
fully exercised, we would have the obligation to buy shares of Gras Savoye
(other than those held by management), possibly bringing our ownership interest
from 33% to 90%. Management shareholders of Gras Savoye (approximately 10%
thereof) do not have general put rights between 2001 and 2012, but have certain
put rights on their death, disability or retirement pursuant to which payments
are not expected to exceed L15 million (if the full 10% is exercised). From 2001
to 2005, the incremental 57% of Gras Savoye may be put to Willis Corroon at a
price equal to the greater of approximately 800 million French francs (L86.1
million at December 31, 1998 exchange rates) (for the full 57%) or a price
determined by a contractual formula based on earnings and revenue. After 2005,
the put price is determined solely by the formula. The shareholders may put
their shares individually at any time during the put period. We can provide no
assurance that such amounts will not be greater. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
COMPETITION--WE OPERATE IN A VERY COMPETITIVE BUSINESS ENVIRONMENT.
Willis Corroon faces competition in all fields in which it operates.
Competition in the insurance brokering and risk management businesses is based
on global capability, product breadth, innovation, quality of service and price.
We compete with the two other providers of global risk management services as
well as with numerous regional and local firms. Insurance companies also compete
with our brokers by directly soliciting insureds without the assistance of an
independent broker or agent. Competition for premiums is intense in all our
business lines and in every insurance market. Competition on premium rates has
also exacerbated the pressures caused by a continuing reduction in demand in
some classes of business. For example, insureds are currently retaining a
greater proportion of their risk portfolios than previously. Industrial and
commercial companies are increasingly relying upon captive insurance companies,
self-insurance pools, risk retention groups, mutual insurance companies and
other mechanisms for funding their risks, rather than buying insurance. Willis
Corroon provides management and similar services for such alternative risk
transfer programs. Additional competitive pressures arise from the entry of new
market participants, such as banks, accounting firms and insurance carriers
themselves, offering risk management or transfer services. We can offer no
assurance
26
<PAGE>
that we can successfully respond to these competitive pressures or that we will
be successful in otherwise realizing or maintaining any of our competitive
advantages. See "Business--Competition."
KEY PERSONNEL--OUR SUCCESS DEPENDS ON OUR PERSONNEL.
Our success depends to a substantial extent not only on the ability and
experience of our senior management, but also on the individual brokers and
teams that service our clients and maintain client relationships. The insurance
brokerage industry has in the past experienced intense competition for the
services of leading individual brokers and brokerage teams, and we have lost key
individuals and teams to competitors in the past. While we maintain
non-competition agreements with substantially all our senior managers and
brokers and have 361 of our key employees invested in the shares of TA I
Limited, we will continue to be subject to the risk that such individuals or
teams may leave Willis Corroon. The loss of the services of one or more such
persons or teams could have a negative impact on our business.
YEAR 2000--WE MAY BE ADVERSELY AFFECTED BY THE YEAR 2000 PROBLEM.
The "year 2000 problem" relates to computer systems that are designed
using two digits, rather than four, to represent a given year. Therefore, such
systems may recognize "00" as the year 1900 rather than 2000, possibly resulting
in major system failures or miscalculations and causing disruptions in our
operations. Also, our operations could be disrupted by reason of any failure by
our clients, insurance carriers or other third parties with whom we conduct
business to achieve their own year 2000 compliance in a timely fashion.
We have conducted a review of our computer systems to identify the
systems that could be affected by the year 2000 problem and are nearing
completion of our plan to be year 2000 compliant prior to December 31, 1999. As
part of the program, we retained outside consultants, who, working with our
information technology staff, have tested computer systems and identified
problem areas. We do not expect to exceed the L4.2 million we budgeted for
expenditures related to our year 2000 compliance program.
While we believe that we will be taking appropriate steps to achieve
our year 2000 compliance in a timely fashion, there can be no assurance that our
computers (or those of third parties with whom we conduct business) will be year
2000 compliant prior to December 31, 1999, or that the costs incurred will not
materially exceed amounts budgeted. We have received inquiries from our clients
regarding our year 2000 compliance efforts and it is likely that our clients
will require us to confirm that we are year 2000 compliant substantially in
advance of December 31, 1999.
INTERNATIONAL OPERATIONS--OUR SIGNIFICANT INTERNATIONAL OPERATIONS EXPOSE US TO
EXCHANGE RATE FLUCTUATIONS.
A significant portion of our operations is conducted outside the United
Kingdom. Accordingly, we are subject to legal, economic and market risks
associated with operating in foreign countries, including:
- devaluations and fluctuations in currency exchange rates;
- imposition of limitations on conversion of foreign currencies into
pounds or dollars or remittance of dividends and other payments by
foreign subsidiaries;
27
<PAGE>
- imposition or increase of withholding and other taxes on remittances
and other payments by subsidiaries;
- hyperinflation in certain foreign countries;
- imposition or increase of investment and other restrictions by foreign
governments;
- longer payment cycles;
- greater difficulties in accounts receivable collection; and
- the requirement of complying with a wide variety of foreign laws.
In particular we transact business in more than 125 countries and in
more than 100 currencies. Historically, we have reported our operating results
in pounds sterling. Outside the U.K., we predominantly generate revenues and
expenses in the local currency. Thus the exchange exposure (excluding economic
exposure) is restricted to translation exposure on the profits of the
operations. In the U.K., however, we earn revenue in a number of different
currencies but expenses are almost entirely incurred in sterling. This mismatch
creates an exchange exposure and arises mainly from Global Specialties and
Global Reinsurance which serve their clients world-wide primarily from a U.K.
base of operations. In 1998, approximately 22% of our total operating revenues
were earned in sterling, 63% in U.S. dollars and 15% in other currencies.
However, in 1998, 44% of Willis Corroon's total operating expenses were incurred
in sterling, 47% in U.S. dollars and 9% in other currencies. As such, when
sterling appreciates, which it has in recent years, the revenue associated with
non-sterling business is translated into fewer pounds, while expenses, incurred
in sterling, are not impacted. As a result, if sterling appreciates, all other
things being equal, revenues, profits and margins decline.
Given these facts, the strength of sterling in recent years has had a
material negative impact on our reported results and we can provide no assurance
that such risks will not have a material adverse effect on Willis Corroon in the
future.
INTRODUCTION OF THE EURO--WE MAY BE ADVERSELY AFFECTED BY THE INTRODUCTION OF
THE EURO.
On January 1, 1999, the euro replaced the currencies of eleven member
states of the European Union, including countries in which we operate. There can
be no assurance that the introduction of the euro will not increase the
volatility of sterling exchange rates or result in the future appreciation of
sterling. The United Kingdom government has stated that it will not participate
in the European Economic and Monetary Union at its commencement, although it is
possible that under certain circumstances it may participate at a later date. If
the United Kingdom were to participate in the single currency, the pound
sterling would be replaced by the euro. It is not clear on what terms the United
Kingdom would participate in the European Economic and Monetary Union.
We have made certain amendments to our systems software necessary for
us to be able to place, settle and account for business in euros, while
retaining the flexibility to continue to transact business in the existing
national currency units if necessary. We have incurred approximately L0.9
million in connection with our efforts to be euro compliant and believe that all
necessary steps have been taken and tested, and staff trained in the changes to
working practices.
While we believe that we have taken appropriate steps to become euro
compliant in a timely fashion, we can provide no assurance that our efforts to
do so have been completed or that the costs we may still incur will not
materially exceed amounts budgeted.
28
<PAGE>
IMPLEMENTATION OF BUSINESS STRATEGY--OUR ABILITY TO MAKE INTEREST PAYMENTS ON
THE NOTES DEPENDS ON OUR IMPLEMENTATION OF OUR BUSINESS STRATEGY.
Willis Corroon's strategic objectives are to grow revenues and cash
flow and enhance its position as a leading provider of risk management services.
To achieve these objectives, we implemented the change program and seek to:
- capitalize on our strong global franchise by cross-selling existing and
new products and services to our existing clients;
- capitalize on our strong global franchise by targeting new clients in
need of Willis Corroon's global reach and specialized services;
- emphasize our value-added, fee-based risk management services;
- increase operating efficiencies through specific cost reduction
measures; and
- strengthen our global franchise through selective acquisitions and
strategic investments.
If the change program and other initiatives do not produce improved
results as and when expected, there will be less cash available to support the
business after paying interest expense on the indebtedness. In addition, there
can be no assurance that further implementation of the change program across our
business units or any other strategies that we have described in this prospectus
will be successful or will improve operating results. Other conditions may
exist, such as unforeseen costs and expenses or an economic downturn, that may
offset any improved operating results that are attributable to such business
strategies. Further, any growth through acquisitions and investments will be
dependent upon identifying suitable acquisition or investment candidates and
successfully consummating such transactions at reasonable costs. See
"--Competition" and "Prospectus Summary--Business Strategy."
29
<PAGE>
FORWARD LOOKING STATEMENTS
This prospectus includes "forward-looking statements" within the
meaning of Section 27a of the Securities Act and Section 21e of the Securities
Exchange Act of 1934. All statements other than statements of historical facts
included in this prospectus, including, without limitation, statements regarding
Willis Corroon's future financial position, strategy, projected costs and plans
and objectives of management for future operations, including the benefits
expected to be derived from the implementation of the change program, may be
deemed to be forward-looking statements. Although Willis Corroon believes that
the expectations reflected in such forward-looking statements are reasonable, it
can give no assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from
Willis Corroon's expectations ("cautionary statements") are disclosed under
"Risk Factors" and elsewhere in this prospectus, including, without limitation,
in conjunction with the forward-looking statements included in this prospectus.
All forward-looking statements attributable to Willis Corroon or persons acting
on its behalf are expressly qualified in their entirety by the cautionary
statements.
30
<PAGE>
PRESENTATION OF CURRENCY AND FINANCIAL INFORMATION; EXCHANGE RATES
In this prospectus, unless otherwise specified or unless the context
otherwise requires, all references to "pounds sterling", "sterling", "pound",
"L" and "pence" are to the lawful currency of the United Kingdom of Great
Britain and Northern Ireland (the "United Kingdom" or the "U.K."). In this
prospectus, unless otherwise specified or unless the context otherwise requires,
all references to "dollars" or "$" are to United States dollars. The
consolidated financial statements of Willis Corroon are prepared in pounds
sterling. Amounts stated in dollars, unless otherwise indicated, have been
translated from pounds sterling at an assumed rate solely for the convenience of
the reader, and should not be construed as representations that amounts in
pounds sterling actually represent such dollar amounts or could be converted
into dollars at the rate indicated. Except as otherwise indicated, such dollar
amounts have been translated from pounds sterling at the rate of L1.00 = $1.66,
the noon buying rate in the City of New York for cable transfers in pounds
sterling as announced by the Federal Reserve Bank of New York for customs
purposes (the "Noon Buying Rate") on December 31, 1998.
The following table sets forth, for the periods and dates indicated,
certain information concerning the Noon Buying Rate for pounds sterling
expressed in dollars per L1.00. No representation is made that the pounds
sterling or dollar amounts referred to herein could have been or could in the
future be converted into dollars or pounds sterling, as the case may be, at any
particular rate or at all. On - 1999, the Noon Buying Rate was L1.00 =
$ - .
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, PERIOD END AVERAGE(A) HIGH LOW
- ------------------------------------------------------------------------- --------------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
1993..................................................................... 1.48 1.50 1.59 1.42
1994..................................................................... 1.57 1.54 1.64 1.46
1995..................................................................... 1.55 1.58 1.62 1.53
1996..................................................................... 1.71 1.56 1.71 1.51
1997..................................................................... 1.64 1.64 1.69 1.60
1998..................................................................... 1.66 1.66 1.72 1.61
1999 (through -, 1999)................................................... - - - -
</TABLE>
- ------------------------
(a) The average of the Noon Buying Rates on the last day of each month during
relevant period.
Unless otherwise indicated, financial information in this prospectus
has been prepared in accordance with accounting principles generally accepted in
the U.K. ("U.K. GAAP"). U.K. GAAP differs in certain respects from U.S.
generally accepted accounting principles ("U.S. GAAP"). For a discussion of the
most significant differences between U.K. GAAP and U.S. GAAP relevant to the
Issuer and Willis Corroon Group, see Note 31 of the Notes to the Consolidated
Financial Statements of Willis Corroon included elsewhere in this prospectus.
Unless otherwise specifically stated in this document, none of the
accounts or financial information in this document constitutes statutory
accounts of Willis Corroon Group within the meaning of section 240(5) of the
Companies Act 1985 of Great Britain. Statutory accounts of Willis Corroon Group
relating to each completed financial period up to December 31, 1997 to which the
financial information in this document relates have been delivered to the
Registrar of Companies in England and Wales. The auditors of Willis Corroon
Group at the relevant time have made a report of the kind required by Section
235 of the Companies Act 1985 with respect to such statutory accounts and each
such report was an unqualified report and contained no statement under section
237(2) or (3) of the Companies Act 1985 (accounting records or returns
inadequate, accounts not agreeing with records or returns or failure to obtain
necessary information or explanations).
Certain amounts and percentages included in this prospectus have been
rounded and accordingly may not total.
Apart from the consolidated financial statements of Willis Corroon
Group, we do not publish separate financial statements for the Issuer or Willis
Corroon Partners.
31
<PAGE>
THE TENDER OFFER AND RELATED FINANCINGS
THE TENDER OFFER
On July 27, 1998, Warburg Dillon Read (a division of UBS AG), Chase
Manhattan plc and HSBC Investment Bank plc commenced an offer on behalf of
Trinity Acquisition (the "Tender Offer"), upon the terms and subject to the
conditions set forth in the offer to purchase dated July 27, 1998 and the
related acceptance forms, for (i) all of the outstanding ordinary shares of 12.5
pence each ("Willis Corroon Ordinary Shares") of Willis Corroon Group for 200
pence per Willis Corroon Ordinary Share in cash without interest and (ii) all of
the American Depositary Shares ("Willis Corroon ADSs"), each representing five
Willis Corroon Ordinary Shares and evidenced by American Depositary Receipts, of
Willis Corroon Group for L10.00 per Willis Corroon ADS in cash without interest.
The directors of Willis Corroon Group who were not connected with the
Tender Offer unanimously recommended that all holders of Willis Corroon Ordinary
Shares and Willis Corroon ADSs accept the Tender Offer.
Under the Tender Offer, certain holders of Willis Corroon Ordinary
Shares who validly accepted the Tender Offer were entitled to elect to receive
loan notes instead of some or all of the cash consideration to which they would
otherwise have been entitled. The loan notes are unsecured, and are guaranteed
as to principal and interest by The Chase Manhattan Bank, and such guarantees
are supported by letters of credit issued under the Permanent Facility
Agreement. As of the completion of the Tender Offer, loan notes in an aggregate
principal amount of L3,176,384 were outstanding.
Prior to the announcement of the Tender Offer, Trinity Acquisition
agreed to purchase 9.9% of Willis Corroon Group's issued share capital from
Philips & Drew Fund Management Limited, conditional on the expiration of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
On September 2, 1998, having received valid acceptances from, or acquired Willis
Corroon Ordinary Shares from, holders of approximately 54% of Willis Corroon
Group's issued share capital, Trinity Acquisition determined that all the other
conditions to the Tender Offer had been satisfied or waived and declared the
Tender Offer "unconditional" as to acceptances. On September 25, 1998, Trinity
Acquisition announced it had received acceptances from holders of more than 90%
of Willis Corroon Group's issued share capital subject to the Tender Offer, and
commenced the compulsory acquisition procedure under the United Kingdom
Companies Act 1985 to acquire the remaining issued and outstanding share capital
of Willis Corroon Group. The compulsory acquisition procedure was completed on
November 10, 1998.
THE OUTSTANDING NOTES AND THE REFINANCINGS
The net proceeds from the issuance and sale of the outstanding Notes,
which were approximately $534.4 million (approximately L321.9 million) after
deduction of underwriting discounts and other expenses, were applied towards the
repayment of amounts outstanding under a $575 million subordinated bridge
facility, entered into on November 19, 1998, and provided by The Chase Manhattan
Bank. The proceeds of borrowings under the subordinated bridge facility and the
Permanent Facility Agreement on November 19, 1998 were applied: (i) to refinance
amounts outstanding under a tender offer facility agreement, (ii) to refinance a
$575 million senior subordinated promissory note loaned by the KKR 1996 Fund
(Overseas), Limited to Trinity Acquisition to finance in part the Tender Offer
and for other corporate purposes, (iii) to refinance other existing indebtedness
and (iv) to pay related fees and expenses.
32
<PAGE>
The subordinated bridge facility had a final maturity on November 19,
2008, with no interim amortization. The loans thereunder accrued interest on the
date repaid at a rate of 9.375% per annum, which rate was due to increase over
time.
The tender offer facility consisted of a $475 million, nine month
delayed draw term loan, which was entered into on July 22, 1998. The term loan
was used by Trinity Acquisition to purchase the shares tendered in the Tender
Offer. In addition, a portion of the revolving credit facility, which is part of
the Permanent Facility Agreement, was available to the Issuer after Trinity had
purchased more than 50% of the shares of Willis Corroon Group and was used to
fund its working capital requirements and to refinance a portion of Willis
Corroon's existing indebtedness. Amounts outstanding under the tender offer
facility agreement were incurred periodically from September to October 1998,
accrued interest on the date repaid at a rate equal to 7.8% per annum and had a
final maturity on April 22, 1999.
Amounts outstanding under the senior subordinated promissory note were
periodically incurred from September to November 1998, accrued interest on the
date repaid at a rate equal to 9.375% per annum and had a final maturity on
September 14, 2009.
The indebtedness that was refinanced in connection with the
Transactions consisted of an estimated L87.6 million under short-term revolving
credit facilities used for working capital, which accrued interest at a rate per
annum equal to, at the borrower's election, the cost of funds for U.S. dollar
deposits at LIBOR for one, two, three or six months, plus a margin ranging from
0.18% to 0.35%, and matured in October and November 1998.
33
<PAGE>
The following chart illustrates the final corporate structure of Willis
Corroon:
[LOGO]
(1) 361 key employees invested an aggregate of L13.1 million directly in the
non-voting equity of TA I Limited. The amounts presented include 1,815,593
TA I ordinary shares that are held in trust on behalf of management, subject
to vesting, but exclude the effect of options issued under the 1998 Share
Purchase and Option Plan for Key Employees of the Company. See
"Shareholders."
(2) Indirect, wholly-owned subsidiary of TA II Limited.
(3) Trinity Acquisition, Willis Corroon Group Limited, Willis Corroon Partners,
the U.S. subsidiaries and certain U.K. subsidiaries are guarantors of the
senior credit facilities.
(4) Guarantor of the Notes.
(5) Willis Corroon Partners is a Delaware general partnership that has no
independent operations and no assets other than the capital stock of Willis
Corroon Corporation.
(6) Upon receipt of the proceeds of a $575 million subordinated bridge facility
and the term loan facilities, Willis Corroon Corporation made intercompany
loans to Trinity Acquisition in an aggregate amount sufficient to repay
amounts outstanding under the tender offer facility agreement and a $575
million senior subordinated promissory note. Willis Corroon Corporation
repaid the subordinated bridge facility with the proceeds from the
outstanding Notes.
34
<PAGE>
USE OF PROCEEDS
Willis Corroon will not receive any cash proceeds from the issuance of
the exchange Notes. In consideration for issuing the exchange Notes as
contemplated in this prospectus, Willis Corroon will receive in exchange a like
principal amount of outstanding Notes, the terms of which are identical in all
material respects to the exchange Notes. The outstanding Notes surrendered in
exchange for the exchange Notes will be retired and canceled and cannot be
reissued. Accordingly, issuance of the exchange Notes will not result in any
change in the capitalization of Willis Corroon.
35
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated
capitalization of Willis Corroon as of December 31, 1998, calculated in
accordance with U.K. GAAP and U.S. GAAP on a historical basis and as of December
31, 1998, calculated in accordance with U.K. GAAP and U.S. GAAP on a pro forma
basis after giving effect to the Transactions as if they had been consummated on
such date. This table should be read in conjunction with "Unaudited Condensed
Pro Forma Consolidated Financial Information," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements of Willis Corroon and the notes thereto included elsewhere
herein.
Other than as a result of the Transactions, there has been no material
change in the capitalization of Willis Corroon since December 31, 1998, other
than as described in note (e) below.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL PRO FORMA
-------------------------------------------- ---------------------
<CAPTION>
U.K. GAAP U.S. GAAP U.K. GAAP
-------------------- ---------------------- ---------------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
DEBT(A):
Revolving credit
facility(c)......... L 6.1 $ 10.1(b) L 6.1 $ 10.1(b) L 6.1 $ 10.1(b)
Term loan
facilities(d)....... 270.3 448.7 270.3 448.7 270.3 448.7
Notes................. -- -- -- -- 321.9 534.4
--------- --------- ---------- ---------- --------- ----------
Total debt(e)......... L276.4 $ 458.8 L276.4 $ 458.8 L598.3 $ 993.2
--------- --------- ---------- ---------- --------- ----------
SHAREHOLDERS' EQUITY:
Share capital......... 53.6 89.0 53.6 89.0 53.6 89.0
Share premium / paid
in capital.......... 28.5 47.3 850.4 1,411.7 28.5 47.3
Revaluation
reserve(f).......... 14.9 24.7 -- -- 14.9 24.7
Retained earnings
(deficit)........... (8.0) (13.3) (28.6) (47.5) (8.0) (13.3)
--------- --------- ---------- ---------- --------- ----------
Total shareholders'
equity.............. 89.0 147.7 875.4 1,453.2 89.0 147.7
--------- --------- ---------- ---------- --------- ----------
TOTAL
CAPITALIZATION...... L365.4 $ 606.5 L1,151.8 $ 1,912.0 L687.3 $ 1,140.9
--------- --------- ---------- ---------- --------- ----------
--------- --------- ---------- ---------- --------- ----------
<CAPTION>
<S> <C>
U.S. GAAP
--------------
<S> <C>
DEBT(A):
Revolving credit
facility(c).........L 6.1 $ 10.1(b)
Term loan
facilities(d).......270.3 448.7
Notes.................331.3 550.0
-- ----------
Total debt(e).........L 607.7 $ 1,008.8
-- ----------
SHAREHOLDERS' EQUITY:
Share capital.........53.6 89.0
Share premium / paid
in capital..........821.8 1,364.2
Revaluation
reserve(f)..........-- --
Retained earnings
(deficit)...........-- --
-- ----------
Total shareholders'
equity..............875.4 1,453.2
-- ----------
TOTAL
CAPITALIZATION......L1,483.1 $ 2,462.0
-- ----------
-- ----------
</TABLE>
- ------------------------
(a) Under U.K. GAAP, debt issuance costs are netted from the calculation of
total debt and amortized over the life of the debt. Under U.S. GAAP, such
costs are recorded as an asset and amortized over the life of the debt. As
of December 31, 1998, there was $575 million outstanding under the
subordinated bridge facility which was accounted for as a current liability.
The proceeds of the issuance of the outstanding Notes were used to repay a
portion of the subordinated bridge facility.
(b) U.S. dollar amounts have been translated at the Noon Buying Rate on December
31, 1998 of $1.66 = L1.00 solely for your convenience.
(c) The revolving credit facility provides for revolving loans of up to $150
million for working capital and general corporate purposes. The balance
outstanding on the revolving credit facility was repaid on February 11,
1999. See "Description of the Senior Credit Facilities."
(d) The term loan facilities were borrowed by the Issuer on November 19, 1998
and consisted of (i) a $50 million tranche A facility, (ii) a $150 million
tranche B facility, (iii) a $150 million tranche C facility and (iv) a $100
million tranche D facility. The Issuer has amended the amounts allocated to
the various tranches. See "Description of the Senior Credit Facilities."
(e) Total debt does not give effect to dollar denominated intercompany debt owed
to Trinity Acquisition pursuant to group intercompany notes, which are
subordinated in right of payment to the Notes, and which are offset by note
receivables in the form of corresponding pound sterling denominated Trinity
Acquisition intercompany notes. In addition, total debt does not give effect
to a L92.9 million interest free convertible loan owed to Trinity
Acquisition, which was converted into equity of Willis Corroon on February
3, 1999. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
(f) Under U.K. GAAP, it is permissible to revalue fixed assets to market value
and to credit the gain to the revaluation reserve. Willis Corroon has
revalued properties in this manner. Revaluations are not permitted under
U.S. GAAP.
36
<PAGE>
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited condensed pro forma consolidated financial
statements of Willis Corroon are based on the consolidated financial statements
of the Company, which are prepared in accordance with U.K. GAAP, included
elsewhere in this prospectus. The Unaudited Condensed Pro Forma Consolidated
Statement of Income for the year ended December 31, 1998 gives pro forma effect
to the Transactions as if they had occurred on January 1, 1998 and the Unaudited
Condensed Pro Forma Consolidated Balance Sheet at December 31, 1998 gives pro
forma effect to the Transactions as if they had occurred on December 31, 1998.
The pro forma adjustments are based upon available information and certain
assumptions that management believes are reasonable. The pro forma consolidated
financial statements do not purport to represent what Willis Corroon's results
of operations or financial condition would actually have been had the
Transactions in fact occurred on such date or to project the results of
operations of Willis Corroon for any future period or the financial condition of
Willis Corroon for any future date.
The Pro Forma Consolidated Financial Statements should be read in
conjunction with Willis Corroon's consolidated financial statements included
elsewhere in this prospectus and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
37
<PAGE>
WILLIS CORROON GROUP LIMITED
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------- ---------------------
<S> <C> <C> <C> <C>
(IN MILLIONS)
AMOUNTS IN ACCORDANCE WITH U.K. GAAP:
ASSETS
CURRENT ASSETS
Cash and short-term deposits............................. L 317.1 L 331.3(b) L 317.1 $ 526.4(a)
(9.4)(b)
(321.9)(c)
Investments.............................................. 281.6 -- 281.6 467.5
Receivables.............................................. 2,559.2 -- 2,559.2 4,248.3
Loan to parent company................................... 1,235.4 -- 1,235.4 2,050.7
---------- ------------- ---------- ---------
Total current assets................................... 4,393.3 -- 4,393.3 7,292.9
FIXED ASSETS
Tangible assets.......................................... 141.6 -- 141.6 235.1
Intangible assets--Goodwill.............................. 19.7 -- 19.7 32.7
Investments.............................................. 34.4 -- 34.4 57.0
---------- ------------- ---------- ---------
Total fixed assets..................................... 195.7 -- 195.7 324.8
---------- ------------- ---------- ---------
TOTAL ASSETS............................................. 4,589.0 -- 4,589.0 7,617.7
---------- ------------- ---------- ---------
---------- ------------- ---------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade payables........................................... 2,860.3 -- 2,860.3 4,748.1
Due to parent company.................................... 714.1 22.1(c) 736.2 1,222.1
Corporate tax............................................ 17.7 -- 17.7 29.4
Accruals and deferred income............................. 67.6 -- 67.6 112.2
Existing bank overdrafts................................. 6.3 -- 6.3 10.5
Subordinated bridge facility............................. 344.0 (344.0)(c) 0.0 0.0
Term loans............................................... 2.4 -- 2.4 4.0
Other.................................................... 103.3 -- 103.3 171.4
---------- ------------- ---------- ---------
Total current liabilities.............................. 4,115.7 (321.9) 3,793.8 6,297.7
NONCURRENT LIABILITIES
Term loans............................................... 270.3 -- 270.3 448.7
Revolving credit facility................................ 6.1 -- 6.1 10.1
Senior subordinated notes................................ -- 321.9(d) 321.9 534.4
---------- ------------- ---------- ---------
Total long-term debt................................... 276.4 321.9 598.3 993.2
Other.................................................... 5.0 -- 5.0 8.3
---------- ------------- ---------- ---------
Total noncurrent liabilities........................... 281.4 321.9 603.3 1,001.5
PROVISIONS FOR LIABILITIES AND CHARGES................... 94.8 -- 94.8 157.4
MINORITY INTERESTS....................................... 8.1 -- 8.1 13.4
---------- ------------- ---------- ---------
Total liabilities and minority interests............... 4,500.0 -- 4,500.0 7,470.0
SHAREHOLDERS' EQUITY
Share capital............................................ 53.6 -- 53.6 89.0
Share premium............................................ 28.5 -- 28.5 47.3
Revaluation reserve...................................... 14.9 -- 14.9 24.7
Retained earnings (deficit).............................. (8.0) -- (8.0) (13.3)
---------- ------------- ---------- ---------
Total shareholders' equity............................. 89.0 -- 89.0 147.7
---------- ------------- ---------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............... L 4,589.0 -- L 4,589.0 $ 7,617.7
---------- ------------- ---------- ---------
---------- ------------- ---------- ---------
AMOUNTS IN ACCORDANCE WITH U.S. GAAP (f):
Total assets............................................. L 5,369.9 L 9.4(g) L 5,379.3 $ 8,929.6
Total long-term debt..................................... 276.4 331.3 607.7 1,008.8
Total shareholders' equity............................... 875.4 -- 875.4 1,453.2
---------- ------------- ---------- ---------
---------- ------------- ---------- ---------
</TABLE>
See Notes to the Unaudited Condensed Pro Forma Consolidated Balance Sheet
38
<PAGE>
NOTES TO UNAUDITED CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
(a) U.S. dollar amounts have been translated at the Noon Buying Rate on December
31, 1998 of $1.66 = L1.00 solely for your convenience.
(b) Represents cash proceeds from the Notes offering made in connection with the
Transactions as described in the table below. Under U.K. GAAP, debt issuance
costs are netted against the related debt and amortized over the life of the
debt.
<TABLE>
<CAPTION>
DEBT COSTS NET DEBT
--------- --------- ------------------------
<S> <C> <C> <C> <C>
(IN MILLIONS)
NEW DEBT:
Notes offering.................................... L331.3 L 9.4 L 321.9 $ 534.4
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>
(c) Represents the net proceeds from the Notes that were used to refinance a
portion of the subordinated bridge facility. See "The Transactions."
<TABLE>
<CAPTION>
AMOUNT
--------------------
<S> <C> <C>
(IN MILLIONS)
USE OF PROCEEDS:
Repayment of subordinated bridge facility.............................. L321.9 $ 534.4
--------- ---------
--------- ---------
</TABLE>
The balance of the total outstanding amount of the subordinated bridge
facility of L344.0 million ($571.0 million) was repaid by borrowing a
further L22.1 million ($36.7 million) from Trinity Acquisition.
(d) Represents the net new debt incurred in connection with the Notes offering.
See note (b) above.
(e) Total long-term debt does not give effect to dollar denominated intercompany
debt owed to Trinity Acquisition pursuant to group intercompany notes, which
are subordinated in right of payment to the Notes, and which are offset by
note receivables in the form of corresponding pound sterling denominated
Trinity intercompany notes. In addition, total long-term debt does not give
effect to a L92.9 million interest free convertible loan owed to Trinity
Acquisition, which was converted into equity of Willis Corroon Group Limited
on February 3, 1999.
(f) U.K. GAAP differs in certain respects from U.S. GAAP. Summaries of the
significant differences as they apply to the historical financial statements
of Willis Corroon are set forth in Note 31 of the Notes to the Consolidated
Financial Statements included elsewhere herein. Following the Transactions,
under U.S. GAAP, the effects of the purchase accounting adjustments made in
the financial statements of Trinity Acquisition are required to be pushed
down into the financial statements of Willis Corroon. These pushed down
adjustments are already included in the historical numbers at December 31,
1998 in the table below.
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ------------ ---------------------
<S> <C> <C> <C> <C>
(IN MILLIONS)
Shareholders' equity under U.K. GAAP................ L 89.0 L -- L 89.0 $ 147.7
U.S. GAAP adjustments:
Fixed assets
Intangible assets-goodwill........................ 793.7 -- 793.7 1,317.5
Current assets
Current asset investments......................... 0.8 -- 0.8 1.3
Revaluation of forward exchange contracts......... 2.7 -- 2.7 4.5
Pension costs..................................... (16.3) -- (16.3) (26.9)
Debt issuance costs............................... -- 9.4 9.4 15.6
Noncurrent liabilities
Senior subordinated notes......................... -- (9.4) (9.4) (15.6)
Provisions for liabilities and charges
Deferred tax on above adjustments................. 5.5 -- 5.5 9.1
----------- ------------ --------- ----------
Shareholders' equity under U.S. GAAP................ L875.4 L -- L875.4 $ 1,453.2
----------- ------------ --------- ----------
----------- ------------ --------- ----------
</TABLE>
(g) The pro forma adjustment to the total assets under U.S. GAAP is the debt
issuance costs (L9.4 million--see note (b)).
39
<PAGE>
WILLIS CORROON GROUP LIMITED
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRO FORMA ACQUISITION
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
----------- ------------- ------------- ----------------------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
AMOUNTS IN ACCORDANCE WITH U.K. GAAP:
CONTINUING OPERATIONS
Commissions and fees......................... L677.7 L -- L17.3(d) L695.0 $1,153.7(a)
Interest and investment income............... 40.3 -- -- 40.3 66.9
----------- ------------- ------ --------- -----------
TOTAL OPERATING REVENUES..................... 718.0 -- 17.3 735.3 1,220.6
Operating expenses........................... (635.2) -- (14.1)(d) (649.3) (1077.8)
----------- ------------- ------ --------- -----------
OPERATING INCOME
Continuing operations before exceptional
items...................................... 82.8 -- 3.2 86.0 142.8
Exceptional items............................ (40.8) -- -- (40.8) (67.8)
----------- ------------- ------ --------- -----------
Continuing operations........................ 42.0 -- 3.2 45.2 75.0
Discontinued operations...................... -- -- -- -- --
Gain on disposal of operations............... (29.3) -- -- (29.3) (48.6)
Share of profit of associates................ 6.3 -- 0.4(e) 6.7 11.1
Interest expense............................. (3.2) (50.2)(b) -- (53.4) (88.6)
----------- ------------- ------ --------- -----------
INCOME/(LOSS) BEFORE TAXATION................ 15.8 (50.2) 3.6 (30.8) (51.1)
Taxation..................................... (54.4) 15.6(c) (1.1)(c) (39.9) (66.3)
----------- ------------- ------ --------- -----------
INCOME/(LOSS) AFTER TAXATION................. (38.6) (34.6) 2.5 (70.7) (117.4)
Minority interests........................... (2.7) -- (1.5) (4.2) (6.9)
----------- ------------- ------ --------- -----------
NET INCOME/(LOSS)............................ L(41.3) L(34.6) L 1.0 L(74.9) $(124.3)
----------- ------------- ------ --------- -----------
----------- ------------- ------ --------- -----------
AMOUNTS IN ACCORDANCE WITH U.S. GAAP (f):
Net income/(loss).......................... L(54.9) L(37.8) L 0.8 L(91.9) $(152.5)
----------- ------------- ------ --------- -----------
----------- ------------- ------ --------- -----------
</TABLE>
See Notes to the Unaudited Condensed Pro Forma Consolidated Statements of Income
40
<PAGE>
NOTES TO UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED STATEMENTS OF INCOME
(a) U.S. dollar amounts have been translated at the Noon Buying Rate on December
31, 1998 of $1.66 = L1.00 solely for your convenience.
(b) The pro forma adjustment for interest expense reflects (i) the elimination
of the historical interest expense and (ii) the interest expense that would
have been incurred on the Notes, the term loans and borrowings under the
revolving credit facility as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
--------------------
<S> <C> <C>
(IN MILLIONS)
Elimination of historical interest expense.......................................... L 3.2 $ 5.3
Interest expense on $1,000 million of new debt using the actual blended interest
rate at December 31, 1998 of 8.6% (including the actual 9% per annum rate on the
Notes)............................................................................ (51.5) (85.5)
Amortization of deferred financing costs on new debt................................ (1.9) (3.2)
--------- ---------
Total interest adjustment........................................................... L(50.2) $ (83.4)
--------- ---------
--------- ---------
</TABLE>
(c) Taxation expense is adjusted to reflect the tax provision effect of the pro
forma interest adjustments at the U.K. statutory rate of corporation tax of
31%.
(d) This adjustment adds the results of (i) the 50% interest in Gruppo Ital
Brokers, which was acquired in July 1998, and (ii) the increased investment
in our Spanish associate from 48% to 60% and the reorganization of the
existing Spanish and Portuguese operations in July 1998 as if the
acquisitions and reorganization had occurred on January 1, 1998.
(e) This adjustment adds the result of the 30% interest in Assurandrgruppen,
which was acquired in September 1998, as if the acquisition had occurred on
January 1, 1998.
41
<PAGE>
NOTES TO UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
(f) U.K. GAAP differs in certain respects from U.S. GAAP. Summaries of the
significant differences as they apply to the historical financial statements
of Willis Corroon are set forth in Note 31 of the Notes to the Consolidated
Financial Statements included elsewhere herein. Following the Transactions,
under U.S. GAAP, the effects of the purchase accounting adjustments made in
the financial statements of Trinity Acquisition are required to be pushed
down into the financial statements of Willis Corroon.
<TABLE>
<CAPTION>
PRO FORMA ACQUISITION
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
----------- ------------- --------------- --------------------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
Net income/(loss) under U.K. GAAP............. L(41.3) L (34.6) L 1.0 L(74.9) $ (124.3)
U.S. GAAP adjustments:
Goodwill amortization....................... (18.5) 18.5(i) (0.2) (20.8) (34.5)
(20.6)(ii)
Goodwill amortization adjustment on
disposal.................................. 9.6 -- -- 9.6 15.9
Revaluation of forward exchange contracts... (3.5) -- -- (3.5) (5.8)
Pension costs............................... (3.3) (1.7)( ii) -- (5.0) (8.3)
Deferred tax on above adjustments........... 2.1 0.6 -- 2.7 4.5
----------- ------ ----- --------- ---------
Net income/(loss) under U.S. GAAP............. L(54.9) L(37.8) L0.8 L(91.9) $ (152.5)
----------- ------ ----- --------- ---------
----------- ------ ----- --------- ---------
</TABLE>
----------------------------
(i) Reversal of historical amortization of goodwill and expirations.
(ii) Full year amortization of pushed down goodwill over 40 years.
(iii) Revised full year pension cost pushed down.
42
<PAGE>
SELECTED HISTORICAL
CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for and as of
the end of the five years in the period ended December 31, 1998 have been
derived from, and should be read in conjunction with, the audited consolidated
financial statements of Willis Corroon and the notes thereto that are included
elsewhere in this prospectus. Willis Corroon prepares its consolidated financial
statements in accordance with U.K. GAAP, which differs in certain respects from
U.S. GAAP. Reconciliations of net income and shareholders' equity reflecting the
significant differences between U.K. GAAP and U.S. GAAP are set forth in those
financial statements. Under U.K. GAAP, the acquisition of Willis Corroon by
Trinity Acquisition has no impact on the historical amounts reported
subsequently by Willis Corroon and, accordingly, combined amounts for the years
ended December 31, 1998 are presented. Under U.S. GAAP, the purchase of Willis
Corroon by Trinity Acquisition established a new basis of accounting for the
purchased assets and liabilities from September 2, 1998. Accordingly, under U.S.
GAAP, it is not appropriate to present combined amounts for the year ended
December 31, 1998.
<TABLE>
<CAPTION>
YEAR
ENDED
JANUARY 1 TO SEPTEMBER 2 TO DECEMBER
YEAR ENDED DECEMBER 31, SEPTEMBER 1, DECEMBER 31, 31,
------------------------------------------ --------------- --------------- ---------
1994 1995 1996 1997 1998 1998 1998
--------- --------- --------- --------- --------------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
STATEMENT OF INCOME DATA:
Amounts in accordance with U.K. GAAP:
Continuing operations
Operating revenues.................... L 709.7 L 706.4 L 725.0 L 692.0 L468.8 L 249.2 L 718.0
Operating income before exceptional
items(b)............................ 57.9 79.4 87.8 92.1 56.8 26.0 82.8
Share of profit of associates......... 5.9 6.8 3.5 1.9 7.7 (1.4) 6.3
Interest expense...................... (6.4) (7.2) (2.2) (0.7) (2.0) (1.2) (3.2)
Income / (loss) before tax............ 8.3 62.4 91.6 95.5 (1.3) 17.1 15.8
Total operations
Net income / (loss)................... 0.1 29.0 54.2 56.9 (15.6) (25.7) (41.3)
Amounts in accordance with U.S. GAAP:
Continuing operations
Operating revenues.................... 709.7 706.4 725.0 692.0 468.8 249.2
Operating income before exceptional
items(b)............................ 49.1 60.6 70.9 63.1 43.4 14.1
Share of profit of associates(c)...... 5.9 6.8 3.5 1.9 7.7 (1.4)
Interest expense...................... (6.4) (7.2) (2.2) (0.7) (2.0) (1.2)
Income / (loss) before tax............ 43.1 1.5 74.7 66.5 (5.1) 5.2
Total operations
Net income / (loss)................... 16.2 (18.0) 37.7 36.2 (19.0) (35.9)
OTHER FINANCIAL DATA:
Amounts in accordance with U.K. GAAP:
Depreciation and amortization......... 28.8 24.4 24.5 22.7 15.5 8.9 24.4
Capital expenditures.................. 35.3 21.6 28.9 26.5 20.1 9.8 29.9
Ratio of earnings to fixed
charges(d).......................... 1.4x 4.3x 7.6x 10.5x -- 10.9x 2.9x
Amounts in accordance with U.S. GAAP:
Depreciation and amortization......... L 47.6 L 42.9 L 42.4 L 40.4 L 27.5 L 15.4
Capital expenditures.................. 35.3 21.6 28.9 26.5 20.1 9.8
Ratio of earnings to fixed
charges(d).......................... 3.4x 1.0x 6.4x 7.6x -- 4.8x
BALANCE SHEET DATA (AT PERIOD END):
Amounts in accordance with U.K. GAAP:
Total assets............................ L2,253.3 L3,703.7 L3,377.2 L3,304.3 L 4,589.0 L4,589.0
Total long-term debt.................... 115.1 61.9 17.9 34.0 276.4 276.4
Total shareholders' equity.............. 150.2 120.6 151.9 124.6 89.0 89.0
Amounts in accordance with U.S. GAAP:
Total assets............................ 2,915.2 4,376.0 3,953.5 3,763.4 5,369.9 5,369.9
Total long-term debt.................... 115.1 61.9 17.9 34.0 276.4 276.4
Total shareholders' equity.............. 629.1 587.3 560.2 583.6 875.4 875.4
<CAPTION>
1998
---------
<S> <C>
STATEMENT OF INCOME DATA:
Amounts in accordance with U.K. GAAP:
Continuing operations
Operating revenues.................... $ 1,191.9(a)
Operating income before exceptional
items(b)............................ 137.4
Share of profit of associates......... 10.5
Interest expense...................... (5.3)
Income / (loss) before tax............ 26.2
Total operations
Net income / (loss)................... (68.6)
Amounts in accordance with U.S. GAAP:
Continuing operations
Operating revenues....................
Operating income before exceptional
items(b)............................
Share of profit of associates(c)......
Interest expense......................
Income / (loss) before tax............
Total operations
Net income / (loss)...................
OTHER FINANCIAL DATA:
Amounts in accordance with U.K. GAAP:
Depreciation and amortization......... 40.5
Capital expenditures.................. 49.6
Ratio of earnings to fixed
charges(d).......................... 2.9x
Amounts in accordance with U.S. GAAP:
Depreciation and amortization.........
Capital expenditures..................
Ratio of earnings to fixed
charges(d)..........................
BALANCE SHEET DATA (AT PERIOD END):
Amounts in accordance with U.K. GAAP:
Total assets............................ $ 7,617.7
Total long-term debt.................... 458.8
Total shareholders' equity.............. 147.7
Amounts in accordance with U.S. GAAP:
Total assets............................ 8,914.0
Total long-term debt.................... 458.8
Total shareholders' equity.............. 1,453.2
</TABLE>
- ----------------------------------
(a) U.S. dollar amounts have been translated at the Noon Buying Rate on December
31, 1998 of $1.66 = L1.00 solely for your convenience.
(b) Exceptional items charged against continuing operations' operating income
for the year ended December 31, 1995 consisted of losses of L16.6 million
relating to properties that were surplus to operational requirements. For
the period January 1 to September 1, 1998, exceptional items charged against
operating income totalled L35.8 million and consisted of provisions of L25.0
million for claims and costs associated with the review of personal pensions
plans sold between 1988 and 1994 and costs of L10.8 million incurred in
connection with the acquisition of Willis Corroon by Trinity Acquisition.
For the period September 2 to December 31, 1998 exceptional items charged
against operating income totalled L5.0 million and consisted of debt
issuance costs incurred in connection with the acquisition of Willis Corroon
by Trinity Acquisition. See Note 4 of the Notes to the Consolidated
Financial Statements.
(c) Under U.S. GAAP, Willis Corroon's share of profits of associates would
normally be presented on an after tax basis. The presentation adopted
conforms to U.K. GAAP where Willis Corroon's share of profits of associates
is shown on a before tax basis.
(d) The ratio of earnings to fixed charges is computed by dividing earnings from
continuing operations by fixed charges. For these purposes, "earnings"
consists of income before taxation less the retained equity in share of
profits of associates and fixed charges. "Fixed charges" consists of
interest expense (including amortization of debt issuance costs) and the
interest element of operating lease rentals. Due to the exceptional charges
referred to in (b) above, the earnings under U.K. GAAP and U.S. GAAP for the
period January 1 to September 1, 1998 were inadequate to cover fixed
charges. The amount of the deficiencies were L7.1 million under U.K. GAAP
and L10.9 million under U.S. GAAP.
43
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION GENERALLY RELATES TO THE HISTORICAL
CONSOLIDATED RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF WILLIS CORROON AND
SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS OF
WILLIS CORROON INCLUDED ELSEWHERE HEREIN. FOR INFORMATION REGARDING THE PRO
FORMA FINANCIAL CONDITION OF WILLIS CORROON, SEE "UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION" AND "--LIQUIDITY AND CAPITAL RESOURCES." THE
FOLLOWING DISCUSSION AND ANALYSIS IS BASED ON THE CONSOLIDATED FINANCIAL
STATEMENTS OF WILLIS CORROON, WHICH ARE PREPARED IN ACCORDANCE WITH U.K. GAAP.
THE PRINCIPAL DIFFERENCES BETWEEN U.K. GAAP AND U.S. GAAP AS THEY RELATE TO
WILLIS CORROON ARE DISCUSSED IN NOTE 31 OF THE NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS OF WILLIS CORROON INCLUDED ELSEWHERE HEREIN.
OVERVIEW
Willis Corroon generates revenue from:
- commissions and fees on insurance placements;
- fees from consulting and other services; and
- interest earned on premiums held prior to remission to the insurer and
on claims held prior to payment to the insured.
Although commissions and interest have traditionally been the greatest sources
of revenues, fee income (from both insurance placements and consulting and other
services) has been increasing as a percentage of total revenues in recent years,
while commission income has been declining largely because of (1) increased
demand by clients for fee-generating risk management consulting services and (2)
pressure on insurance premium rates (and therefore brokerage commissions) due to
competitive factors impacting the insurance industry. Willis Corroon expects
this trend toward increasing fee income to continue. See "Business--Industry
Overview."
Willis Corroon is a holding company, with two groups of subsidiary
companies, one based in North America and one based in the U.K. From an
operating standpoint, Willis Corroon conducts its activities through five
business units:
- North American Operations;
- U.K. Retail;
- Global Specialties;
- Global Reinsurance; and
- International.
See "Business."
During fiscal 1998, 41% of Willis Corroon's total revenues were derived
from North American Operations, 22% were from Global Specialties, 18% were from
U.K. Retail, 10% were from Global Reinsurance and 9% were from International
operations. In terms of 1998 EBITDA (defined as operating income from continuing
operations before exceptional items and depreciation and amortization, plus
share of profit of associates), Global Specialties and U.K. Retail produced a
higher percentage of EBITDA than revenues and North American Operations produced
a lower percentage.
In December 1995, John Reeve became Executive Chairman and the changes
started in 1994 (cost controls and disposals of non-core businesses) were
refocused and expanded with the
44
<PAGE>
development of the change program. The initiatives under the change program were
launched in 1996 and are designed to enhance revenues, improve efficiency and
change Willis Corroon from a traditional commission-based insurance broker to a
more comprehensive professional advisory services firm. As part of the change
program, Willis Corroon has established certain key initiatives to:
- enhance operating efficiencies;
- intensify its efforts to develop existing and new accounts and
- increase cross-selling of both existing and new products and services
to its existing clients, thereby creating direct economic benefits for
clients, carriers and Willis Corroon.
Willis Corroon also intends to streamline administrative processes with a
selected number of insurance carriers and also work closely with certain
insurance carriers to generate new product and service ideas. In addition,
Willis Corroon has developed initiatives focused on maximizing the talent and
expertise of its brokers and consultants in order to more efficiently manage
these resources. Accordingly, Willis Corroon has developed improved techniques
for recruitment and assessment; implemented a new and more frequent appraisal
process, including peer review; created new training and development programs;
implemented a new incentive structure for producers in the U.S.; invested in
technology to enhance communication and knowledge sharing among employees; and
formed practice groups to share knowledge on specific industry or product areas.
Since 1995, Willis Corroon has incurred a number of non-recurring
expenses in its continuing operations, a portion of which relate to the change
program. These expenses include the following:
- PENSION REVIEW PROVISIONS--the provisions made for claims and costs
associated with the review of personal pension plans sold between 1988
and 1994. Willis Corroon recorded provisions of L1.0 million, L0.2
million and L2.3 million for such claims and costs in 1995, 1996 and
1997, respectively and in 1998 recorded, as an exceptional item, a
further L25.0 million provision for such claims. See "Business--Legal
Proceedings."
- LLOYD'S RECONSTRUCTION AND RENEWAL PLAN EXPENSES--the cost of Willis
Corroon's brokers' contribution to the Lloyd's Reconstruction and
Renewal Plan. See "Results of Operations-- Fiscal 1997 compared with
Fiscal 1996" for a discussion of the Lloyd's Reconstruction and Renewal
Plan. Willis Corroon incurred L2.6 million, L2.2 million and L2.0
million of such expenses in 1996, 1997 and 1998, respectively. There
were no such expenses in 1995. Willis Corroon expects to continue to
incur such expenses in 1999 and 2000.
- SEVERANCE PROVISIONS--the provisions recorded for severance costs
incurred as part of the change program. Willis Corroon incurred L11.3
million, L3.4 million and L9.6 million of such severance costs in 1996,
1997 and 1998, respectively. There were no provisions for severance
costs connected with the change program recorded in 1995.
- OTHER EXPENSES--consulting expenses primarily incurred in connection
with the change program and costs incurred in connection with Willis
Corroon's investment in World Insurance Network, a project set up by
the then six largest brokers in the world to establish a secure and
reliable medium for electronic commerce between insurance and
reinsurance carriers, brokers and clients. Additionally, the 1997 and
1998 expenses included costs related to the acquisition of broker
teams. Willis Corroon incurred L0.7 million, L6.9 million, L10.0
million and L10.5 million of such expenses in 1995, 1996, 1997 and
1998,
45
<PAGE>
respectively. Expenses for 1998 also included, as an exceptional item,
L15.8 million in expenses arising out of the acquisition of Willis
Corroon by Trinity Acquisition.
- 1998 PROJECTS--costs incurred in connection with (1) the European
Economic and Monetary Union project to convert Willis Corroon's
operating systems and procedures to be able to handle business
denominated, accounted or settled in the euro, which was introduced as
a trading currency on January 1, 1999; (2) the Peoplesoft project,
which aims to provide replacement year 2000 and European Economic and
Monetary Union compliant computer systems for the finance and human
resources functions; (3) the Strategic Insurer Relations project in
connection with Willis Corroon's efforts to enhance strategic relations
with certain insurers; and (4) the Knowledge Management project, which
provides an Intranet site containing information such as market and
competitor news. Willis Corroon incurred L2.8 million of expenses in
connection with such 1998 Projects in the year ended December 31, 1998.
These non-recurring expenses affected Willis Corroon's actual reported
results, offsetting the benefits in both margin and EBITDA improvement. While
Willis Corroon will continue to incur additional severance and other costs
relating to the change program in the future, these expenses are expected to
decline as the remainder of the change program is implemented.
In addition to these non-recurring expenses, in recent years Willis
Corroon has completed a number of dispositions and acquisitions as part of its
efforts to focus its operations out of non-core or non-profitable businesses and
to expand its global capabilities. The following identifies the operations sold
or closed from 1995 through 1998:
- HEDDINGTON BROKERS LIMITED--an associate based in Bermuda in which
Willis Corroon had a 50% interest, that was sold in 1995;
- IRPC/PPC--two consulting companies, previously part of U.K. Retail,
that were sold in 1996;
- WF CORROON--a benefits consulting operation, previously part of North
American Retail and U.K. Retail, that was sold in 1996;
- CONSUMER BENEFIT LIFE INSURANCE COMPANY/MANAGEMENT SCIENCE ASSOCIATES
--two North American retail business operations that were sold in 1996;
- WILLIS FABER & DUMAS (AGENCIES) LIMITED--a Lloyd's members' agent that
was sold in October 1997; and
- PROFESSIONAL LIABILITY UNDERWRITING MANAGEMENT--part of North American
Operations that was closed in the second quarter of 1998.
In addition, in 1995 Willis Corroon sold its remaining interest in
Gryphon Holdings, Inc., a discontinued operation which had been accounted for as
an associate.
During the same period, Willis Corroon has continued to expand its
global presence through the following acquisitions and strategic investments:
- GRAS SAVOYE--Willis Corroon acquired a 33% interest in Gras Savoye &
Cie, France's leading insurance broker, in December 1997;
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<PAGE>
- JASPERS WUPPESAHL--Willis Corroon's then existing German associate, C.
Wuppesahl & Co. Assekuranzmakler, merged with Jaspers Industrie
Assekuranz GmbH & Co., KG in January 1998 to create the third largest
insurance broker in Germany, in which Willis Corroon now has a 44.6%
interest;
- YORK WILLIS CORROON--Willis Corroon increased its investment in its
Brazilian associate from 30% to 100% in April 1997;
- WILLIS CORROON SCHEUER--Willis Corroon increased its investment in its
Netherlands associate from 40% to 100% in January 1997;
- WILLIS CORROON RICHARD OLIVER PTY LTD--Willis Corroon increased its
investment in its Australian associate from 49.75% to 100% in January
1997;
- WILLIS NATIONAL--in August 1997 Willis Corroon combined the operations
of Willis Corroon Financial Planning Limited, its U.K. financial
advisory business, with the independent financial advisory business of
Abbey National plc to form a joint venture 51% owned by Willis Corroon
within U.K. Retail;
- GRUPPO ITAL BROKERS--Willis Corroon acquired a 50% interest in an
Italian subsidiary in July 1998; and
- ASSURANDRGRUPPEN--Willis Corroon acquired a 30% interest in a Danish
associate in September 1998.
- S&C WILLIS CORROON--Willis Corroon increased its investment in its
Spanish associate from 48% to 60% and reorganized its existing Spanish
and Portuguese operations in July 1998.
In addition, Willis Corroon is in the process of combining all of its
existing Spanish and Portuguese operations. Willis Corroon has also announced
arrangements which are expected to result in Willis Corroon having a 45%
interest in a Venezuelan retail broker and an estimated 75% interest in a
Venezuelan reinsurance broker.
These acquisitions and dispositions also affect the actual trends in
operating revenues and EBITDA on a continuing operations basis. Because the
impact of the dispositions has exceeded the impact of the acquisitions since
1995, the growth rates in the businesses currently operated by Willis Corroon
are not apparent from Willis Corroon's financial statements. For a presentation
of Willis Corroon's results after adjusting for dispositions, acquisitions and
certain non-recurring items, see "Prospectus Summary--Summary Historical and
Unaudited Pro Forma Consolidated Financial Information."
In connection with many of its investments in associates, Willis
Corroon retains rights to increase its ownership percentage of such associates
over time and, in certain cases, the existing owners also have a right to put
their shares to Willis Corroon. See "--Liquidity and Capital Resources." Willis
Corroon typically obtains representation on the boards of directors which allows
it to exercise influence over the associates' businesses. Willis Corroon's
Consolidated Statement of Income includes an item captioned "Share of Profit of
Associates." This item reflects Willis Corroon's share of the pre-tax profits of
its associates (entities in which it owns more than 20% but no more than 50%).
This amount on the income statement, however, does not reflect the cash flow
from the associates. Willis Corroon typically receives a cash dividend
(generally based on a percentage of net income, if positive). Willis Corroon's
Consolidated Statement of Cash Flows includes the line entitled "Dividends from
Associates".
47
<PAGE>
Like many insurance brokers, Willis Corroon earns revenue in an uneven
fashion during the year, primarily due to the timing of insurance policy
renewals. Although the majority of revenue and profit has historically been
earned in the first quarter and substantially all of such revenue and profit has
historically been earned in the first half of the year, in recent years Willis
Corroon's revenues and profits have been spread more equally throughout the
year. For example, in 1994, Willis Corroon earned 72% of its annual operating
income in the first quarter and 95% in the first half, as compared to 45% in the
first quarter and 62% in the first half of 1998. The trend of declining premiums
has contributed to the shifting of revenue into later in the year ("re-phasing")
as clients delay purchasing long-term policies in order to benefit from
declining rates. In addition, contingent commissions, which are generally based
on volume placements or on the profitability of a risk class, have increased in
recent years and are typically paid at the end of the year, further adding to
revenue and profit in the fourth quarter. Expenses are incurred on a relatively
even basis throughout the year. As a result of these re-phasing differences,
period to period comparisons that are based on less than full year periods may
not be valid.
In recent years, operating revenues have not been significantly
influenced by inflation. However, with Willis Corroon's staff and related costs
generally accounting for approximately 65% of Willis Corroon's total operating
expenses, Willis Corroon is affected by general inflationary pressures in each
of the countries in which it operates.
As an intermediary, Willis Corroon holds funds in a fiduciary capacity
for the account of third parties, typically as the result of premiums received
from clients that are in transit to insurance carriers and claims due to clients
that are in transit from insurance carriers. Premiums which are held on account
of or due from policyholders are reported as assets of Willis Corroon with a
corresponding liability due to the insurance carriers. Claims held by or due to
Willis Corroon which are due to clients are also shown as both assets and
liabilities of Willis Corroon. All such balances due or payable are included in
"receivables" and "trade payables" on the balance sheet. Willis Corroon earns
interest on such funds during the time between the receipt of the cash and the
time the cash is paid out. Fiduciary cash must be kept in certain regulated bank
accounts subject to guidelines, which generally emphasize capital preservation
and liquidity, and is not generally available to service Willis Corroon's debt
or for other corporate purposes. Therefore, despite short-term deposits and cash
of L317.1 million and investments of L281.6 million at December 31, 1998, Willis
Corroon had minimal excess cash which it could access at such date. See
"--Liquidity and Capital Resources."
Although Willis Corroon discontinued its U.K. underwriting operations
in 1991, it is still required to handle the administration of claims arising
from insurance business previously written by Willis Faber (Underwriting
Management) on behalf of Sovereign and third party insurance carriers. Sovereign
was placed into provisional liquidation on July 11, 1997. See "Risk
Factors--Sovereign/ WFUM" and "Business--Legal Proceedings."
The strength of sterling in recent years has had a material impact on
Willis Corroon's reported results, both by reducing revenues and reducing
margins due to Willis Corroon's large sterling expense base. The discussion set
forth below under "--Results of Operations" discusses both actual results of
Willis Corroon's operating units and results on a "constant currency" basis,
assuming, for the TWO applicable periods being compared, that the currency
exchange rates used in the later period for (1) recording the non-sterling
transactions of U.K. based subsidiaries at achieved rates of exchange and (2)
translating the results of non-U.K. based subsidiaries at average rates of
exchange, were also in effect in the earlier period. Willis Corroon believes
that when comparing results of two periods, it is relevant to consider changes
on the basis of constant currency exchange rates. See "Supplemental Constant
Currency Financial Data" for an analysis of historical results from 1995 through
1998 adjusted for acquisitions, dispositions and non-recurring items and
assuming constant currency rates in ALL periods presented. Willis Corroon Group
is considering changing its reporting currency from pounds sterling to U.S.
dollars. No decision has been made as to this matter.
48
<PAGE>
RESULTS OF OPERATIONS
FISCAL 1998 COMPARED WITH FISCAL 1997
The consolidated statement of income of Willis Corroon included
elsewhere in this prospectus has been presented separately for the period from
January 1, 1998 to September 1, 1998, the effective date of the acquisition by
Trinity Acquisition of Willis Corroon, and for the period from September 2, 1998
to December 31, 1998 in accordance with the requirements of the U.S. Securities
and Exchange Commission. Management believes that it is more appropriate to
present financial data on a combined basis because, under U.K. GAAP, the
acquisition does not change the basis of accounting for Willis Corroon. The
discussion set forth below of Willis Corroon's performance is based on the
combined period ended December 31, 1998 compared with the year ended December
31, 1997 which management believes is more meaningful for investors.
The following table summarizes the combined results for the year ended
December 31, 1998:
<TABLE>
<CAPTION>
JANUARY 1 TO SEPTEMBER 2 TO YEAR ENDED
SEPTEMBER 1, DECEMBER 31, DECEMBER 31,
1998 1998 1998
----------------- ---------------- --------------
<S> <C> <C> <C>
(IN MILLIONS)
Continuing Operations
Commissions and fees......................................... L441.9 L235.8 L677.7
Interest and investment income............................... 26.9 13.4 40.3
------- ------- -------
468.8 249.2 718.0
Discontinued Operations...................................... -- 0.2 0.2
------- ------- -------
Total operating revenues..................................... 468.8 249.4 718.2
Net operating expenses....................................... (412.0) (223.4) (635.4)
------- ------- -------
Operating income before exceptional items.................... 56.8 26.0 82.8
Exceptional items............................................ (35.8) (5.0) (40.8)
------- ------- -------
Operating income............................................. 21.0 21.0 42.0
Share of profit of associates................................ 7.7 (1.4) 6.3
Loss on closure/disposal of operations....................... (28.0) (1.3) (29.3)
Interest expense............................................. (2.0) (1.2) (3.2)
------- ------- -------
Income/(loss) before taxation................................ (1.3) 17.1 15.8
Taxation..................................................... (13.5) (40.9) (54.4)
------- ------- -------
Income/(loss) after taxation................................. (14.8) (23.8) (38.6)
Minority interests........................................... (0.8) (1.9) (2.7)
------- ------- -------
Net income/(loss)............................................ (15.6) (25.7) (41.3)
------- ------- -------
------- ------- -------
</TABLE>
SUMMARY
Operating revenues increased by L24.2 million (3.5%) from L694.0
million in fiscal 1997 to L718.2 million in fiscal 1998. In constant currency
terms, operating revenues increased by 6%. Excluding the adverse effects of
foreign currency exchange rate movements (L12.8 million), the loss of operating
revenues from businesses sold (L8.5 million) and the operating revenues gained
from acquisitions (L23.8 million), operating revenues were 3.2% higher in fiscal
1998 than in fiscal 1997.
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<PAGE>
Income before taxation and exceptional items decreased by L7.4 million
(8%) from L93.3 million in fiscal 1997 to L85.9 million in fiscal 1998. In
constant currency terms, income before taxation and exceptional items decreased
by 4%. Excluding the adverse effects of foreign currency exchange rate movements
(L4.1 million), the loss of income from businesses sold (L4.7 million), the
income gained from acquisitions (L13.8 million) and also excluding the adverse
effects of higher non-recurring expenses (L7.0 million), income before interest,
taxation and exceptional items decreased by 1%. Three exceptional charges were
made in fiscal 1998. A further provision amounting to L25.0 million was made as
an exceptional item for costs expected to be incurred in connection with the
pension review; L15.8 million was incurred by Willis Corroon in connection with
the offer by Trinity Acquisition for all of the issued share capital of Willis
Corroon Group; and a L29.3 million loss on disposal (which included a goodwill
write-off of L29.6 million) was incurred almost entirely upon the closure of
Professional Liability Underwriting Management, Willis Corroon's professional
liability wholesale operation in the U.S. After these exceptional charges,
income before taxation decreased by L79.7 million (83%) from L95.5 million in
fiscal 1997 to L15.8 million in fiscal 1998.
Net income decreased by L98.2 million (173%) from L56.9 million in
fiscal 1997 to a loss of L41.3 million in fiscal 1998, partly as the result of
the exceptional charges referred to above. In addition, the tax charge for
fiscal 1998 included L33.1 million written off in respect of U.K. advance
corporation tax and deferred tax balances (see "--Taxation.")
COMMISSIONS AND FEES--CONTINUING OPERATIONS
Commissions and fees earned from Willis Corroon's continuing operations
increased by L25.7 million (3.9%) from L652.0 million in fiscal 1997 to L677.7
million in fiscal 1998. In constant currency terms, commissions and fees
increased by 5.9%. Excluding the effects of businesses sold (L8.0 million) and
businesses acquired (L24.3 million), commissions and fees increased by 3.4% in
constant currency terms predominantly from improved results in North American
Retail and Global Broking Services.
NORTH AMERICAN OPERATIONS: Commissions and fees earned by Willis
Corroon's North American Retail operations increased by L13.8 million (5.5%)
from L249.7 million in fiscal 1997 to L263.5 million in fiscal 1998. In constant
currency terms, commissions and fees increased by 7.2%, due in part to various
initiatives implemented as part of the change program, which significantly
enhanced new business gains and improved performance in obtaining renewed
business. Commissions and fees earned by the Willis Corroon's U.S. Wholesale
operations decreased by L2.0 (6.5%) million from L30.6 million in fiscal 1997 to
L28.6 million in fiscal 1998. In constant currency terms, such commissions and
fees decreased by 5.3%. Of this reduction, L1.2 million was attributable to
Professional Liability Underwriting Management, Willis Corroon's professional
liability wholesale operation, which was closed in the second quarter of 1998.
Excluding the effect of this closure, commissions and fees of Willis Corroon's
U.S. Wholesale operations decreased by 1.4% in constant currency terms,
primarily due to a continuing decline in the public entity and schools
businesses.
U.K. RETAIL: Commission and fees earned by Willis Corroon's U.K.
Retail operations increased by L5.0 million (4.4%) from L113.8 million in fiscal
1997 to L118.8 million in fiscal 1998. In constant currency terms, commissions
and fees increased by 4.5%. Of this increase, L7.4 million was attributable to
the Willis National joint venture, which was formed in August 1997. Excluding
the effects of the formation of Willis National, commissions and fees decreased
by 1.9% in constant currency terms due to competition in soft markets and delay
or cancellation of construction contracts.
GLOBAL SPECIALTIES: Commissions and fees earned by the business units
of Global Specialties increased by L5.7 million (4.2%) from L134.5 million in
fiscal 1997 to L140.2 million in fiscal 1998. In constant currency terms,
commissions and fees increased by 4.9%. Premium rate reductions continued to
affect most business areas. Global Broking Services, however, reported a 15.7%
increase
50
<PAGE>
in constant currency terms in commissions and fees as a result of strong new
business gains and improved focus on renewals.
GLOBAL REINSURANCE: Commissions and fees earned by Willis Corroon's
Global Reinsurance business unit decreased by L2.3 million (3.3%) from L68.7
million in fiscal 1997 to L66.4 million in fiscal 1998. In constant currency
terms, commissions and fees decreased by 0.7%. Expansion in the U.S. and Europe
was offset by a disposal of part of the French portfolio to Gras Savoye
following Willis Corroon Group's investment in Gras Savoye.
INTERNATIONAL: Commission and fees earned by Willis Corroon's
International operations increased by L12.4 million (25.9%) from L47.8 million
in fiscal 1997 to L60.2 million in fiscal 1998. In constant currency terms,
commissions and fees increased by 39.4%. Excluding the effect of the acquisition
of Gruppo Ital Brokers, which was acquired in July 1998 and other acquisitions,
commissions and fees increased by 0.3% in constant currency terms.
WILLIS FABER & DUMAS (AGENCIES) LIMITED): Willis Faber & Dumas Agencies
was sold in October 1997 to a company owned by its management. Commissions and
fees earned during fiscal 1997 totalled L6.7 million.
INTEREST AND INVESTMENT INCOME
Interest and investment income from continuing operations was L40.0
million in fiscal 1997 and L40.3 million in fiscal 1998. In constant currency
terms, interest and investment income increased by 4%.
OPERATING EXPENSES
Operating expenses for Willis Corroon's continuing operations before
exceptional items increased by L35.5 million (5.9%) from L599.9 million in
fiscal 1997 to L635.4 million in fiscal 1998, due to the increase in expenses
from businesses acquired (L18.3 million) exceeding the reduction in expenses
from businesses sold (L3.7 million). Excluding favorable foreign exchange rate
movements (L8.9 million), the effects of acquisitions and dispositions and
higher non-recurring costs (L8.2 million), operating expenses increased by 3.9%
in constant currency terms. During fiscal 1998, a further contribution of L2.0
million was made to the Lloyd's Reconstruction and Renewal Plan.
In common with most other U.K. independent financial advisors, Willis
Corroon Financial Planning has been carrying out a review, in accordance with
guidelines issued by its regulator, of pension advice previously given. In this
connection, a further provision of L25.0 million was made as an exceptional item
during fiscal 1998. At December 31, 1998, the remaining balance of such
provision amounted to L20.6 million.
ASSOCIATES
Willis Corroon's share of income before taxation from associates
increased by L4.4 million (232%) from L1.9 million in fiscal 1997 to L6.3
million in fiscal 1998. Adjusting for the increase (L5.1 million) due to
investments in Gras Savoye and Jaspers Wuppesahl, which were acquired in
December 1997 and January 1998, respectively, and, increased investments in some
of the associates creating subsidiaries Willis Corroon's share of income from
associates was in line with 1997.
INTEREST PAYABLE
Interest payable increased by L2.5 million from L0.7 million in fiscal
1997 to L3.2 million in fiscal 1998 as a consequence of new debt incurred to
finance investments made in December 1997 in Gras Savoye and in January 1998 in
Jaspers Wuppesahl.
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<PAGE>
DISPOSALS
During fiscal 1998, the loss on disposals amounted to L29.3 million,
consisting mainly of goodwill written of on the closure of Professional
Liability Underwriting Management.
DISCONTINUED OPERATIONS--UNDERWRITING
Willis Corroon's U.K. underwriting operations, which consisted of
Sovereign, an insurance company, and Willis Faber (Underwriting Management), an
underwriting agent, were discontinued in 1991. Sovereign was placed into
provisional liquidation in July 1997. Following the provisional liquidation of
Sovereign, the net assets of Sovereign and its subsidiaries, amounting to L5.9
million and attributable goodwill of L4.1 million, were written off in fiscal
1997 against provisions previously established.
TAXATION
The tax charge for fiscal 1998 amounted to L54.4 million after writing
off U.K. advance corporation tax of L9.7 million and deferred tax asset balances
of L23.4 million. The timing of the recoverability of these assets was uncertain
and, accordingly, it was judged appropriate under U.K. GAAP to write off the
amounts. Excluding these write-offs and the Professional Liability Underwriting
Management goodwill write-off of L29.6 million and costs of L15.8 million
incurred in connection with the offer by Trinity Acquisition for Willis Corroon
Group, for which no tax relief is available and, the further provisions
amounting to L25.0 million in respect of costs expected to be incurred in
connection with the pension review, the effective tax rate for fiscal 1998 was
36.0% compared with an effective tax rate of 39.9% in fiscal 1997.
FISCAL 1997 COMPARED WITH FISCAL 1996
SUMMARY
Total operating revenues decreased by L36.7 million (5.0%) from L730.7
million in fiscal 1996 to L694.0 million in fiscal 1997. In constant currency
terms, operating revenues decreased by 1%. The decrease in operating revenues
was due to the adverse impact of foreign exchange rate movements (L26.9 million)
and the loss of operating revenue from businesses sold (L39.8 million), which
revenue was not wholly replaced by operating revenue from businesses acquired
and subsidiaries previously accounted for as associates (L21.4 million).
Further, commissions earned by Willis Faber & Dumas Agencies, which was sold in
October 1997, were L10.0 million lower in fiscal 1997 than in fiscal 1996.
Operating revenues of discontinued operations decreased by L3.7 million from
L5.7 million in fiscal 1996 to L2.0 million in fiscal 1997. Adjusting for each
of these factors, operating revenues of continuing operations were 3% higher in
constant currency terms in fiscal 1997 than in fiscal 1996.
Income before taxation increased by L3.9 million (4%) from L91.6
million in fiscal 1996 to L95.5 million in fiscal 1997. In constant currency
terms, income before taxation increased by 14%. Excluding the adverse effects of
foreign currency exchange rate movements (L8.0 million), the loss of income from
businesses sold (L5.7 million), income gained from acquisitions (L1.7 million)
and also excluding the effects of lower non-recurring expenses (L3.1 million),
income before tax increased by 14% in constant currency terms, primarily due to
the impact of the change program. Willis Corroon's share of profit of associates
was L1.6 million lower in fiscal 1997 than in fiscal 1996 mainly because two
associates, Richard Oliver in Australia and Scheuer in the Netherlands, became
subsidiaries on January 1, 1997 whereas they had been accounted for as
associates during all of fiscal 1996. Willis Corroon reported a gain from the
disposal of continuing operations of L2.2 million in fiscal 1997 as the result
of the sale of Willis Corroon's interest in Willis Faber & Dumas Agencies, which
was sold in October 1997, and Willis Corroon France SA, which was sold in
December 1997 to Gras Savoye at the time Willis Corroon acquired its 33%
interest in Gras Savoye. The gain on disposal also gives effect to a
52
<PAGE>
write-off of goodwill of L2.5 million. Net income increased by L2.7 million (5%)
from L54.2 million in fiscal 1996 to L56.9 million in fiscal 1997.
LLOYD'S RECONSTRUCTION AND RENEWAL PLAN
During fiscal 1996, an agreement was reached with the individuals who
comprise the various Lloyd's underwriting syndicates for the reconstruction and
renewal of the Lloyd's insurance market. As part of this plan, Lloyd's members'
agencies and Lloyd's brokers, among others, agreed to contribute financially to
the establishment of Equitas Reinsurance Limited which would reinsure the
outstanding liabilities of such individuals for the 1992 and earlier
underwriting years of account. In return, most of such individuals agreed to
cease litigation against Lloyd's.
Willis Corroon's subsidiary, Willis Faber & Dumas Agencies, a Lloyd's
members agent, agreed to make a one-time contribution to the settlement of L3.4
million and Willis Corroon's broking operations agreed to contribute an annual
levy for five years beginning in 1996 based on the volume of business transacted
with Lloyd's. For fiscal 1996, this levy amounted to L2.6 million. In connection
therewith, L14.5 million of commissions, which were based on the underlying
profits of those individuals managed by Willis Faber & Dumas Agencies and which
was due to Willis Faber & Dumas Agencies but had been delayed pending the
settlement, was released. As a consequence of this settlement, Willis Corroon's
operating revenue in fiscal 1996 benefitted by L14.5 million and Willis
Corroon's income before taxation for fiscal 1996 benefitted by L8.2 million,
after deducting related provisions of L0.3 million.
COMMISSIONS AND FEES--CONTINUING OPERATIONS
Commissions and fees earned by Willis Corroon's continuing operations
decreased by L31.2 million (4.6%) from L683.2 million earned in fiscal 1996 to
L652.0 million in fiscal 1997. In constant currency terms, commissions and fees
decreased by 1.0%. Excluding the effects of businesses sold (L48.5 million) and
businesses acquired (L18.3 million), commissions and fees increased by 4% in
constant currency terms.
NORTH AMERICAN OPERATIONS: Commissions and fees earned by Willis
Corroon's North American Retail operations decreased by L28.9 million (10.4%)
from L278.6 million in fiscal 1996 to L249.7 million in fiscal 1997. In constant
currency terms, commissions and fees decreased by 6%. Excluding the effect of
businesses sold in 1996 (L24.5 million), commissions and fees increased by 3% in
constant currency terms. Competition among brokers for the business of middle
market companies was intense, exacerbating the consequences of progressively
reducing premium rates which have been on a downward trend for well over a
decade. Commissions and fees earned by Willis Corroon's U.S. Wholesale
operations decreased by L6.5 million (17.5%) from L37.1 million in fiscal 1996
to L30.6 million in fiscal 1997. In constant currency terms, U.S. Wholesale
commissions and fees decreased by 14%, principally due to the competitiveness of
the U.S. insurance market place.
U.K. RETAIL: Commissions and fees earned by Willis Corroon's U.K.
Retail operations decreased by L1.9 million (1.6%) from L115.7 million in fiscal
1996 to L113.8 million in fiscal 1997. In constant currency terms, commissions
and fees decreased by 2%. Excluding the effects of disposals (L13.4 million) and
the acquisition of a 51% interest in Willis National in August 1997 (L5.4
million), commissions and fees increased by 6% in constant currency terms,
mainly arising from strong growth achieved by Willis Corroon's principal U.K.
direct brokering company, reflecting the benefit of the change program
initiatives.
GLOBAL SPECIALTIES: Commissions and fees earned by the business units
of Global Specialties increased by L3.0 million (2.3%) from L131.5 million in
fiscal 1996 to L134.5 million in fiscal 1997. In constant currency terms,
commissions and fees increased by 5%. Despite falling insurance premium rates
across most business areas, increased new business gains, particularly from a
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strengthened space risks team in Aerospace, as well as the Energy and Global
Broking Services business units, contributed to this growth.
GLOBAL REINSURANCE: Commissions and fees earned by Willis Corroon's
Global Reinsurance business unit increased by L5.6 million (8.9%) from L63.1
million in fiscal 1996 to L68.7 million in fiscal 1997. In constant currency
terms, commissions and fees increased by 7% against a background of reduced
reinsurance premium rates and increased risk retention by clients, predominantly
from the U.S. portfolio supported by new business in Europe and Australia.
INTERNATIONAL: Commissions and fees earned by Willis Corroon's
International operations increased by L9.2 million (23.8%) from L38.6 million in
fiscal 1996 to L47.8 million in fiscal 1997. In constant currency terms,
commissions and fees increased by 35%. Of this increase, L12.9 million was
attributable to Willis Corroon increasing its holdings in both Richard Oliver
and Scheuer to 100% on January 1, 1997. Excluding this effect, commissions and
fees increased by 18% in constant currency terms, particularly from business
growth in Eastern Europe.
WILLIS FABER & DUMAS (AGENCIES) LIMITED: Willis Faber & Dumas Agencies
was sold in October 1997 to a company owned by its management. Commissions and
fees earned during fiscal 1997 totalled L6.9 million compared with L18.6 million
in fiscal 1996 which included L14.5 million following implementation of the
Lloyd's Reconstruction and Renewal Plan.
INTEREST AND INVESTMENT INCOME
Interest and investment income from continuing operations decreased by
L1.8 million (4.5%) from L41.8 million in fiscal 1996 to L40.0 million in fiscal
1997.
OPERATING EXPENSES
Operating expenses from continuing operations decreased by L37.3
million (5.9%) from L637.2 million in fiscal 1996 to L599.9 million in fiscal
1997, largely due to the favorable impact of currency exchange rate movements
(L18.7 million), the reduction in expenses from businesses sold (L45.7 million)
being greater than the increase in expenses arising from businesses acquired and
associates becoming subsidiaries (a total of L20.0 million). Severance costs in
fiscal 1997 were L7.9 million lower than in fiscal 1996, the total contribution
to the Lloyd's Reconstruction and Renewal Plan was L0.4 million lower and other
non-recurring costs were L3.1 million lower in fiscal 1997 than in fiscal 1996.
Adjusting for each of these factors, operating expenses were 2% higher in
constant currency terms.
In common with most other U.K. independent financial advisors, Willis
Corroon Financial Planning has been carrying out a review, in accordance with
guidelines issued by its regulator, of pension advice previously given and, in
connection therewith, a charge of L2.3 million was taken during fiscal 1997. See
"Business--Legal Proceedings." In October 1997, Willis Corroon Financial
Planning merged with Abbey National Independent Financial Advisers Limited to
form Willis National in which Willis Corroon holds a 51% interest.
ASSOCIATES
Willis Corroon's share of income before taxation from associates
decreased by L1.6 million (45.7%) from L3.5 million in fiscal 1996 to L1.9
million in fiscal 1997. Excluding the reduction (L1.5 million) due to Richard
Oliver and Scheuer, both of which ceased to be accounted for as associates from
the beginning of January 1, 1997 when they became consolidated subsidiaries,
Willis Corroon's share of income before taxation from associates decreased by
L0.1 million.
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<PAGE>
INTEREST PAYABLE
Interest payable decreased by L1.5 million from L2.2 million in fiscal
1996 to L0.7 million in fiscal 1997. Willis Corroon operated throughout most of
fiscal 1997 without any material borrowings until the acquisition of Gras Savoye
on December 30, 1997.
DISPOSALS
During fiscal 1997, the gain on disposals amounted to L2.2 million
after writing off goodwill of L2.5 million. The principal business disposed of
was Willis Faber & Dumas Agencies.
DISCONTINUED OPERATIONS--UNDERWRITING
Willis Corroon's U.K. underwriting operations, consisting of Sovereign,
an insurance company, and Willis Faber (Underwriting Management), an agent, were
discontinued in 1991. On July 11, 1997, Sovereign was placed into provisional
liquidation. Following the provisional liquidation of Sovereign, the net assets
of Sovereign and its subsidiaries, amounting to L5.9 million and attributable
goodwill of L4.1 million, were written off against provisions previously
established.
TAXATION
The tax charge of L38.1 million in fiscal 1997 produced an effective
tax rate of 39.9%, the same as in fiscal 1996. The benefit arising from the
reduction in the rate of U.K. corporation tax from 33% to 31% during fiscal 1997
was more than offset by the related write down of deferred tax assets
established in prior periods. The provisional liquidation of Sovereign resulted
in a write off of a deferred tax asset amounting to L2.7 million which was no
longer considered recoverable. Adjusting for these items, the effective tax rate
in fiscal 1997 would have been 36.5%.
FINANCIAL RISK MANAGEMENT
FOREIGN EXCHANGE RISK MANAGEMENT
Approximately 50% of Willis Corroon's operating revenues earned in the
United Kingdom arise in currencies other than sterling. Willis Corroon manages
this exchange exposure to foreign currency revenues by entering into forward
foreign currency exchange contracts and options, principally in U.S. dollars
with lesser amounts in Japanese, German, French and Italian currencies. In
fiscal 1998, Willis Corroon achieved a rate of $1.59 = L1.00 from the sale of
U.S. dollar-denominated revenues earned in the United Kingdom compared with a
rate of $1.59 achieved in fiscal 1997 and $1.54 in fiscal 1996. Together with
the rates achieved in other hedged currencies, there was an adverse impact of
L2.7 million on total operating revenues in fiscal 1998 and an adverse impact of
L5.6 million in fiscal 1997, when compared with the exchange rates achieved in
the preceding year.
Willis Corroon is also exposed to the exchange effects of translating
the net income of non-U.K.-based subsidiaries into sterling. Willis Corroon does
not hedge this exposure. The average rate of exchange for the U.S. dollar
against sterling moved from $1.56 in fiscal 1996 to $1.64 in fiscal 1997 and to
$1.66 in fiscal 1998. Together with movements in other currencies, the effect of
translating the income before taxation of non-U.K.-based subsidiaries into
pounds sterling reduced Willis Corroon's net income before taxation in fiscal
1998 by L1.4 million and by L2.4 million in fiscal 1997, when compared with the
exchange rates prevailing in the preceding year.
The table below provides information about Willis Corroon's foreign
currency forward exchange contracts which are sensitive to exchange rate risk.
The table summarizes at December 31,
55
<PAGE>
1998 the sterling equivalent amounts of each currency bought and sold forward
and the weighted average contractual exchange rates. All forward exchange
contracts mature within two years.
<TABLE>
<CAPTION>
SETTLEMENT DATE BEFORE DECEMBER 31,
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999 2000
---------------------------------- ------------------------------------
<CAPTION>
AVERAGE AVERAGE
CONTRACT CONTRACTUAL CONTRACT CONTRACTUAL
AMOUNT EXCHANGE RATE AMOUNT EXCHANGE RATE
----------- --------------------- ------------- ---------------------
(L
MILLIONS) (DENOMINATION PER L) (L MILLIONS) (DENOMINATION PER L)
<S> <C> <C> <C> <C>
FOREIGN CURRENCY SOLD
US Dollars............................. 41.5 1.58 21.4 1.59
Japanese Yen........................... 5.6 191.51 4.3 84.37
Deutschemarks.......................... 2.3 2.75 5.1 2.70
French Francs.......................... 1.6 8.33 -- --
Italian Lire........................... 1.4 2,537.25 -- --
FOREIGN CURRENCY BOUGHT
Deutschemarks.......................... (10.4) 2.80 -- --
----------- -----
Total.................................. 42.0 30.8
----------- -----
----------- -----
Fair Value (1)......................... 2.2 0.5
----------- -----
----------- -----
</TABLE>
- ------------------------
(1) Represents the difference between the contract amount and the cash flow in
sterling which would have been receivable had the foreign currency forward
exchange contracts been entered into on December 31, 1998 at the forward
exchange rates prevailing at that date.
INTEREST RATE RISK MANAGEMENT
Willis Corroon manages its exposure to declines in interest rates,
which can have an adverse effect on interest and investment income, through the
use of fixed interest deposits and borrowings, swaps, forward rate agreements
and other financial instruments. The maximum hedging period is normally three
years. Interest rate exposure is managed within parameters agreed by Willis
Corroon Group's directors, which stipulate that at least 25% of the forecast
interest income for each of the next three years is hedged. Average interest
rates of 7.5% on sterling funds and 6.1% on U.S. dollar funds were achieved in
fiscal 1998, compared with 7.0% and 6.2% respectively in fiscal 1997 and 7.3%
and 5.9% respectively in fiscal 1996. When compared with average interest rates
prevailing during the year, Willis Corroon's hedging activities added L2.6
million to Willis Corroon's income before taxation in fiscal 1998 and L2.5
million in fiscal 1997.
The table below provides information about Willis Corroon's derivative
instruments which are sensitive to changes in interest rates, including interest
rate swaps and forward rate agreements. For interest rate swaps, the table
presents notional principal amounts and average interest rates analyzed by
expected maturity dates. Notional principal amounts are used to calculate the
contractual payments to be exchanged under the contracts. The duration of
interest rate swaps varies between one and five years, with an average re-fixing
period of three months. Average variable rates are based on interest rates set
at December 31, 1998 or, in the case of interest rate swaps not yet started, at
the rates prevailing at December 31, 1998. The information is presented in
sterling, which is Willis Corroon's reporting currency; the actual currencies of
the instruments are indicated in parentheses.
56
<PAGE>
<TABLE>
<CAPTION>
EXPECTED TO MATURE BEFORE DECEMBER 31,
-----------------------------------------------------
1999 2000 2001 2002 2006 TOTAL FAIR VALUE(1)
--------- --------- --------- --------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
(L MILLION, EXCEPT PERCENTAGES)
INTEREST RATE SWAPS
Principal ($)................................ 97 170 119 16 -- 402 5.1
Fixed rate receivable.................... 6.45% 6.43% 5.73% 5.78% -- 6.20%
Variable rate payable.................... 5.28% 5.20% 5.06% 5.06% -- 5.17%
Principal ($)................................ -- -- -- -- 273 273 0.8
Fixed rate payable....................... -- -- -- -- 5.10% 5.10%
Variable rate receivable................. -- -- -- -- 5.06% 5.06%
Principal (L)................................ 55 62 35 14 -- 166 4.4
Fixed rate receivable.................... 7.92% 7.22% 6.52% 6.88% -- 7.27%
Variable rate payable.................... 6.75% 6.55% 6.13% 6.13% -- 6.49%
Principal (Deutschemarks).................... 4 7 7 -- -- 18 0.3
Fixed rate receivable.................... 4.55% 4.65% 4.23% -- -- 4.48%
Variable rate payable.................... 3.65% 3.48% 3.36% -- -- 3.48%
Principal (Deutschemarks).................... -- 4 -- -- -- 4 (0.1)
Fixed rate payable....................... -- 4.61% -- -- -- 4.61%
Variable rate receivable................. -- 3.56% -- -- -- 3.56%
Principal (Italian Lire)..................... 2 -- 3 -- -- 5 0.1
Fixed rate receivable.................... 7.11% -- 4.69% -- -- 5.77%
Variable rate payable.................... 4.59% -- 3.25% -- -- 3.85%
Principal (Japanese Yen)..................... 7 -- 4 -- -- 11 0.1
Fixed rate receivable.................... 1.45% -- 1.70 -- -- 1.54%
Variable rate payable.................... 0.40% -- 0.22% -- -- 0.33%
FORWARD RATE AGREEMENTS
Principal (L)................................ 56 -- -- -- -- 56 0.2
Fixed rate receivable.................... 7.02% -- -- -- -- 7.02%
Variable rate payable.................... 6.13% -- -- -- -- 6.13%
</TABLE>
- ------------------------
(1) Represents the net present value of the expected cash flows discounted at
current market rates of interest.
LIQUIDITY AND CAPITAL RESOURCES
Willis Corroon's Statement of Consolidated Cash Flows is presented on
the basis of total funds as opposed to "own funds." As discussed under
"--Overview" above, Willis Corroon holds funds for the account of third parties,
typically premiums received from clients and claims received from insurance
carriers that are in transit to insurance carriers or clients, respectively.
These amounts of fiduciary cash must be kept in certain regulated bank accounts
and are not generally available to service Willis Corroon's debt or for other
corporate purposes. Insurance broking transactions typically generate large cash
flows and the timing of such cash flows can affect significantly the net cash
balances held at the year-end.
Willis Corroon's net cash inflow on a total funds basis before
management of liquid resources and financing was L14.8 million in fiscal 1996
with a net cash outflow of L6.2 million in fiscal 1997 and net cash outflow of
L95.4 million in fiscal 1998. See "Consolidated Financial
Statements--Consolidated Statements of Cash Flows."
Cash and liquid resources, net of overdrafts, decreased from L663.0
million at December 31, 1996 to L616.7 million at December 31, 1997 and
decreased to L596.4 million at December 31, 1998. Of the decrease in fiscal
1996, liquid resources of L25.6 million were transferred with businesses sold
and exchange adjustments, principally relating to the increasing strength of
sterling, accounted for L47.7 million.
In assessing Willis Corroon's "own funds" (as opposed to fiduciary
funds) and working capital, Willis Corroon takes into account differing
regulations in different countries and states. The
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<PAGE>
following table shows net working capital of L30.9 million at December 31, 1997
and L32.2 million at December 31, 1998, in each case on the assumption that
uncollected brokerage (commissions owing to Willis Corroon included within
premiums due from clients) is treated as an element of "own funds" working
capital. On this basis, Willis Corroon's "own funds" working capital has
consistently been between approximately L30 million to L60 million since 1995.
<TABLE>
<CAPTION>
CONSOLIDATED "OWN FUNDS"(A)
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1997 1998
-------------- -------------- -------------- --------------
<CAPTION>
(IN MILLIONS)
<S> <C> <C> <C> <C>
Fixed assets..................................... L154.0 L195.7 L154.0 L195.7
Trade receivables (excluding uncollected
brokerage)..................................... 2,431.6 2453.0 84.7 111.2
Uncollected brokerage............................ 101.6 106.2 101.6 106.2
Investments, deposits and cash (b)............... 617.1 598.7 69.4 71.8
-------------- -------------- ------- -------
Total assets..................................... 3,304.3 3353.6 409.7 484.9
Trade payables................................... (3,050.0) (3053.9) (155.4) (185.2)
Net debt......................................... (34.5) (107.8) (34.5) (107.8)
Provisions (c)................................... (90.0) (94.8) (90.0) (94.8)
-------------- -------------- ------- -------
Net assets....................................... 129.8 97.1 129.8 97.1
-------------- -------------- ------- -------
-------------- -------------- ------- -------
Net working capital (d).......................... L(516.8) L(494.7) L30.9 L32.2
-------------- -------------- ------- -------
-------------- -------------- ------- -------
</TABLE>
- ------------------------
(a) "Own Funds" are based on management's estimates and assumes that uncollected
brokerage is treated as an element of "Own Funds" working capital.
(b) Investments, deposits and cash in own funds is to a large extent matched by
liabilities within Willis Corroon's captive insurance companies. The
remainder was used to service local working capital requirements and
therefore Willis Corroon had minimal excess cash in each of the periods
reflected above.
(c) For an analysis of provisions, see Note 21 of the Notes to the Consolidated
Financial Statements of Willis Corroon included elsewhere herein.
(d) Trade receivables and uncollected brokerage, less trade payables.
During fiscal 1996, Willis Corroon disposed of the following non-core
operations and proceeds from these disposals, less acquisitions, contributed
L16.2 million to Willis Corroon's net cash inflow:
- L20.7 million from the sale of Consumer Benefit Life Insurance Company;
- L6.1 million from the sale of WF Corroon with further consideration and
payments for work in progress due in subsequent years;
- L5.0 million from the sale of Management Science Associates;
- L3.8 million in respect of other businesses sold;
- less L19.4 million of cash held within businesses sold, net of
businesses acquired.
During fiscal 1997, the net cash outflow for acquisitions and disposals
amounted to L63.0 million and consisted of:
- L48.3 million for Willis Corroon's 33% interest in Gras Savoye, of
which L15.2 million was deferred until July 1998;
- L8.2 million, L4.3 million and L2.1 million for the increased
investment in Richard Oliver, Scheuer and York Willis Corroon
respectively;
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<PAGE>
- L4.9 million inflow in respect of further consideration from the sale
in fiscal 1996 of WF Corroon, net of L1.0 million in respect of other
businesses acquired and sold;
- less L5.0 million of cash held within businesses sold.
During fiscal 1998, the net cash outflow for acquisitions less proceeds
from disposals amounted to L32.3 million and consisted of L13.9 million for the
30% interest in Jaspers Wuppesahl, L5.0 million for the 30% interest in
Assurandrgruppen, L12.4 million for the 50% interest in Gruppo Ital Brokers and
L1.0 million for other acquisitions, net of disposal proceeds.
In connection with many of its investments in associates, Willis
Corroon retains rights to increase its ownership percentage of such associates
over time, typically to a majority or 100% ownership position. Willis Corroon
increased its ownership in Jaspers Wuppesahl from 30% to 44.6% on January 4,
1999 for L10.4 million and has additional call rights whereby it may increase
its ownership to over 50% by 2012. In addition, in certain instances, the other
owners of the associates have a right, typically at a price calculated pursuant
to a formula based on revenues or earnings, to put some or all of their shares
in the associates to Willis Corroon.
Willis Corroon has a put obligation in connection with its stake in
Gras Savoye, the largest broker in France and the ninth largest broker in the
world, in which Willis Corroon has a 33% interest. As part of the Gras Savoye
transaction, Willis Corroon entered into a put arrangement, whereby the other
shareholders in Gras Savoye (primarily two families, two insurance companies and
Gras Savoye's executive management team) could put their shares to Willis
Corroon. From 2001 to 2012, Willis Corroon would be obligated to buy the shares
of such shareholders to the extent that such shareholders put their shares
(potentially increasing its ownership from 33% to 90% if all shareholders put
their shares) at a price determined by a contractual formula based on earnings
and revenue. Management shareholders of Gras Savoye (approximately 10% thereof)
do not have general put rights between 2001 and 2012, but have certain put
rights on their death, disability or retirement pursuant to which payments are
not expected to exceed L15 million. From 2001 to 2005, the incremental 57% of
Gras Savoye may be put to Willis Corroon at a price equal to the greater of
approximately 800 million French francs (L86.1 million at December 31, 1998
exchange rates) (for the full 57%) or a price based on the formula. After 2005,
the put price is determined solely by the formula. The shareholders may put
their shares individually at any time during the put period.
While the management of neither Willis Corroon nor Gras Savoye expects
significant exercises of the puts, on a separate or aggregate basis, in the near
to medium term, nevertheless, management believes that, should the aggregate
amount of shares be put to Willis Corroon, sufficient funds would be available
to satisfy this obligation. Also, Willis Corroon believes that the price to be
paid under the put options is reasonable in light of its valuation of Gras
Savoye. The minimum price of approximately 800 million French francs from 2001
to 2005 (for the full 57%) represents a multiple of 1.2 times Gras Savoye's L113
million of 1997 revenues and 8.4 times Gras Savoye's L16.4 million of 1997
operating income. In addition Willis Corroon has a call option to move to
majority ownership under certain circumstances and in any event by 2009. Upon
exercising this call option, the remaining Gras Savoye shareholders have a put.
In connection with the Willis National joint venture, the holder of 49%
of the shares in Willis National Holdings Limited has an option to purchase
Willis Corroon's 51% interest in that company at any time between June and
September 1999 based on a profitability formula as set out in the shareholders'
agreement between the two companies.
During fiscal 1998, cash payments in connection with the renegotiated
arrangements for administering the Sovereign run-off amounted to L12.0 million,
which included pre-funding of estimated administrative costs through 2001.
Accordingly, no significant additional cash payments for administrative costs
are expected in fiscal 1999. Cash payments in connection with Willis Corroon's
on-
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<PAGE>
going pension review amounted to L8.0 million in fiscal 1998 with further
payments expected to total approximately L20.5 million over the next three
fiscal years. There are also a number of legal proceedings against Willis
Corroon, which together are not expected to have a material effect on Willis
Corroon's financial position. See "Business--Legal Proceedings."
Capital expenditures for fiscal years 1996, 1997 and 1998 were L28.9
million, L26.5 million, and L29.9 million, respectively. Willis Corroon has
funded its requirements for capital expenditures by cash generated internally
from operations and from external financing and expects to continue to do so in
the future. Willis Corroon intends to evaluate acquisition opportunities from
time to time.
Willis Corroon has conducted a review of its computer systems to
identify the systems that could be affected by the year 2000 problem and is
nearing completion of its plan to be year 2000 compliant prior to December 31,
1999. The cost of undertaking this work is not expected to exceed L4.2 million,
most of which has already been incurred. The cost of upgrading computer systems
to deal with the single currency requirement of European Economic and Monetary
Union was L0.9 million. Willis Corroon does not expect either the year 2000
issues or European Economic and Monetary Union will have a material adverse
impact on its financial position or results of operations.
Willis Corroon entered into the Permanent Facility Agreement on July
22, 1998. The Permanent Facility Agreement, as amended, is comprised of:
- the $125 million tranche A facility;
- the $125 million tranche B facility;
- the $100 million tranche C facility;
- the $100 million tranche D facility; and
- the $150 million revolving credit facility.
Borrowings under the term loan portions of the Permanent Facility Agreement were
borrowed in full on November 19, 1998
- to refinance outstandings under the tender offer facility agreement,
- to finance the repayment of certain existing indebtedness of Willis
Corroon,
- to make an intercompany loan to Trinity Acquisition, and
- to finance the payment of fees and expenses incurred in connection with
the Tender Offer.
The revolving credit portion is available for working capital requirements and
general corporate purposes, subject to certain limitations. The revolving credit
facility will be available on a revolving basis for loans denominated in U.S.
dollars, pounds sterling and certain other currencies and for letters of credit
(including to support loan note guarantees). For a further description of the
Permanent Facility Agreement, see "Description of the Senior Credit Facilities."
The Issuer has entered into an interest rate swap agreement pursuant to
which its LIBOR-based floating rate interest payment obligations on the full
amount of the term loans under the Permanent Facility Agreement have been
swapped for fixed rate interest payment obligations, resulting in an effective
base rate of 5.099% per annum, plus the applicable margin, until the final
maturity of such term loans. The swap agreement provides for a reduction of the
notional amount of the swap obligation on a semi-annual basis and, to the extent
the actual amount outstanding under the term loans exceeds the notional amount
at any time, the Issuer would then become exposed to the risk of increased
interest rates on such excess.
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<PAGE>
In connection with the refinancing of the tender offer facility and the
senior subordinated promissory note on November 19, 1998, the Issuer made (i) a
loan to Trinity Acquisition of the net proceeds from borrowings under the
subordinated bridge facility (the "intercompany subordinated note") and (ii) a
loan to Trinity Acquisition of the net proceeds from borrowings under the term
loans under the Permanent Facility Agreement (the "intercompany bank note"), the
proceeds of which loans were used by Trinity Acquisition to repay the senior
subordinated promissory note, the tender offer facility and certain existing
debt of Willis Corroon. Such loans to Trinity Acquisition generally mirror the
terms and maturity dates of the applicable underlying loans. The intercompany
subordinated note currently bears interest at a rate equal to the interest rate
on the notes, plus 70 basis points, and the intercompany bank note bears
interest at a rate equal to the interest rate for the Permanent Facility
Agreement, plus 25 basis points. In addition, the indenture permits Willis
Corroon Group and its subsidiaries to (i) make loans to Trinity Acquisition in
exchange for notes issued by Trinity Acquisition ("Trinity intercompany notes"),
so long as the proceeds of such loans are immediately used to make a loan to
Willis Corroon Group or its subsidiaries, and (ii) issue notes in favor of
Trinity Acquisition ("group intercompany notes") in consideration of a loan
from, or the issuance of a note by, Trinity Acquisition. Willis Corroon Group
and its subsidiaries may pay interest on any group intercompany note, and may
make loans or pay dividends to Trinity Acquisition in an amount sufficient to
enable Trinity Acquisition to pay interest and principal then due on any Trinity
intercompany note, intercompany subordinated note or intercompany bank note, in
each case so long as such amounts are immediately repaid to Willis Corroon Group
or its subsidiaries. The aggregate amount of group intercompany notes
outstanding is currently approximately $1,025 million, the aggregate amount of
Trinity intercompany notes outstanding is currently approximately L614 million
($1,043 million).
TA II Limited will be relying wholly on Willis Corroon to provide funds
sufficient for TA II Limited to pay dividends on the Preference Shares. The
Preference Shares (with an aggregate liquidation preference of approximately
$270 million) carry the right to a cumulative dividend of 8.5% per annum
(excluding the amount of any associated tax credits) on a fixed amount of $25
per Preference Share. TA II Limited has the option to satisfy 1% per annum of
this cumulative dividend by the issuance of additional Preference Shares. The
dividend is payable in dollars semi-annually on June 30 and December 31 of each
year with the first dividend being payable on June 30, 1999. If the cash
dividend has not been paid on three or more consecutive dividend payment dates,
the holders of the Preference Shares have the right to appoint two directors to
the board of TA II Limited. The Preference Shares may be redeemed at any time by
TA II Limited by payment of a fixed amount of $25 per share plus any accrued and
unpaid dividends. The Preference Shares are required to be redeemed in full by
payment of a fixed amount of $25 per share plus any accrued and unpaid dividends
on the earlier of (i) the thirteenth anniversary of the first date on which the
Preference Shares were issued and (ii) the date that is six months after the
scheduled maturity date of the Notes, or on the sale of all or substantially all
of the business of Willis Corroon, including, without limitation, whether in a
single transaction or series of transactions and whether by sale of shares, sale
of assets or otherwise. Holders of Preference Shares have a preferential right
to receive out of surplus assets arrears and accruals of dividends and $25 per
share, but do not have any further right to participate in surplus assets. For a
further description of the Preference Shares, see "Description of Preference
Shares."
The Notes will mature on February 1, 2009 and interest will be payable
thereon semiannually on February 1 and August 1 of each year, commencing August
1, 1999.
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<PAGE>
SUPPLEMENTAL CONSTANT CURRENCY FINANCIAL DATA
THIS PRESENTATION AND ANALYSIS IS INTENDED TO DEMONSTRATE THE IMPACT OF
EXCHANGE RATES AND THE CHANGE PROGRAM ON DESIGNATED FINANCIAL LINE ITEMS ON A
HISTORICAL BASIS. THIS PRESENTATION AND ANALYSIS IS INTENDED TO SUPPLEMENT THE
PRESENTATION AND ANALYSIS OF OUR ACTUAL HISTORICAL RESULTS SET FORTH ELSEWHERE
IN THIS PROSPECTUS. SEE "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS." OUR BUSINESS AND OUR ABILITY TO GENERATE
CASH FLOW SUFFICIENT TO MEET OUR FIXED CHARGE OBLIGATIONS WILL CONTINUE TO BE
AFFECTED BY EXCHANGE RATES AND THE FUTURE INCURRENCE OF CERTAIN COSTS WHICH HAVE
BEEN ELIMINATED IN THE PRESENTATION AND ANALYSIS OF ADJUSTED OPERATING REVENUES,
ADJUSTED EBITDA AND ALL ITEMS ON A CONSTANT CURRENCY BASIS.
We and our associates transact business with some 50,000 clients in
more than 125 countries and in over 100 currencies. Historically, we have
reported our operating results in pounds sterling. Sterling, however, accounted
for only approximately 22% of our revenues in 1998 and thus our reported
revenues are directly impacted by movements in world currencies in relation to
the pound. As the pound has appreciated in value relative to most major
currencies in recent years, our revenues have been negatively impacted. In
addition, while only approximately 22% of our revenues in 1998 were in sterling,
approximately 44% of our expenses in 1998 were in pounds sterling. This is due
to the fact that a number of our units, especially Global Specialties and Global
Reinsurance, serve their clients worldwide primarily from their U.K. base of
operations. Accordingly, when the pound appreciates, which it has in recent
years, the revenues associated with non-sterling business are translated into
fewer pounds, while expenses, incurred in sterling, are not impacted. As a
result, as the pound appreciates, both revenues and margins decline on a
reported basis. Accordingly, we have implemented a comprehensive hedging
strategy to manage our exposure to currency movements. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Financial Risk Management." Because we derive a significant portion
of our revenues and cash flow in U.S. dollars and other currencies and a
disproportionate amount of our expenses in sterling, we are financing the
Transactions in U.S. dollars.
All historical reported results, including Operating Revenues and
EBITDA and, accordingly, Adjusted Operating Revenues and Adjusted EBITDA, were
derived by translating the financial statements of our non-U.K.-based
subsidiaries into sterling using the average rates of exchange for the relevant
period. Foreign currency transactions entered into by the U.K.-based
subsidiaries have been translated at the achieved rates of exchange in the
relevant period, which include the effects of our hedging program. The average
rates of exchange and achieved rates of exchange are shown in footnote (a) to
the table below. The "Adjusted Operating Revenues--Constant Currency" and
"Adjusted EBITDA--Constant Currency" set forth in the table below represent
Adjusted Operating Revenues and Adjusted EBITDA for each period re-translated
using the same methodologies in all material respects for deriving reported
results, but applying constant rates of exchange, thus allowing for a comparison
that excludes the impact of exchange rate changes over all the periods
presented. The constant rates of exchange used are set forth below. As indicated
below, two groups of constant rates are assumed, one representing average rates
and one representing achieved rates. The assumed constant rates are those
currently used by us for internal budgeting and reporting purposes. Although
there can be no assurance that if the exchange rates used in this analysis had
actually prevailed over all the periods presented that the results would have
been comparable to those presented, we believe that the trends indicated would
have been comparable. We believe that combining the constant currency analysis
detailed below with the Adjusted Operating Revenues and Adjusted EBITDA
presentation illustrates the improvements in operating results achieved by us in
recent years.
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<TABLE>
<CAPTION>
HISTORICAL
----------------------------------------------------------------------------
YEAR ENDED JANUARY 1- SEPTEMBER 2-
DECEMBER 31, SEPTEMBER 1, DECEMBER 31, TOTAL
------------------------------- --------------- --------------- ---------
1995 1996 1997 1998 1998 1998
--------- --------- --------- --------------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
Reported Operating Revenues.............. L706.4 L725.0 L692.0 L468.8 L249.2 L718.0
Adjusted Operating Revenues.............. 640.9 665.0 683.4 468.7 249.2 717.9
Adjustments to Constant Exchange Rates... (35.3) (37.0) (10.9) 0.3 1.8 2.1
--------- --------- --------- ------- ------- ---------
Adjusted Operating Revenues--Constant
Currency............................... 605.6 628.0 672.5 469.0 251.0 720.0
Reported EBITDA.......................... 110.6 115.8 116.7 79.9 33.4 113.3
Reported EBITDA Margin................... 14.7% 15.5% 16.6% 15.4% 14.0% 14.9%
Adjusted EBITDA.......................... L106.2 L127.0 L130.5 L91.9 L46.9 L138.8
Adjusted EBITDA Margin................... 15.5% 18.6% 18.8% 18.0% 19.4% 18.5%
Adjustments to Constant Exchange Rates... L(14.8) L(12.4) L(3.7) L0.9 L(0.1) L0.8
Adjusted EBITDA--Constant Currency....... 91.4 114.6 126.8 92.8 46.8 139.6
Adjusted EBITDA Margin--Constant
Currency............................... 14.0% 17.7% 18.6% 18.2% 19.2% 18.5%
<CAPTION>
PRO FORMA
---------------
YEAR ENDED
DECEMBER 31,
---------------
1998
---------------
<S> <C>
Reported Operating Revenues.............. L735.3
Adjusted Operating Revenues.............. 735.2
Adjustments to Constant Exchange Rates... 2.5
-------
Adjusted Operating Revenues--Constant
Currency............................... 737.7
Reported EBITDA.......................... 116.9
Reported EBITDA Margin................... 15.0%
Adjusted EBITDA.......................... L142.4
Adjusted EBITDA Margin................... 18.5%
Adjustments to Constant Exchange Rates... L0.9
Adjusted EBITDA--Constant Currency....... 143.3
Adjusted EBITDA Margin--Constant
Currency............................... 18.5%
</TABLE>
- ------------------------
(a) The average rates of exchange and achieved rates of exchange for the five
major currencies are shown in the following table. The constant exchange
rates used in the constant currency analysis are also shown below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------ CONSTANT
1995 1996 1997 1998 RATES
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
(DENOMINATION PER POUND STERLING)
AVERAGE RATES:
Deutschemark................................................ 2.26 2.35 2.84 2.91 2.84
French Franc................................................ 7.87 7.99 9.56 9.77 9.50
Italian Lire................................................ 2,570.80 2,408.64 2,789.09 2,875.71 2,820.72
Japanese Yen................................................ 148.29 170.03 198.38 216.55 197.55
U.S. Dollar................................................. 1.58 1.56 1.64 1.66 1.67
ACHIEVED RATES:
Deutschemark................................................ 2.31 2.44 2.28 2.60 2.66
French Franc................................................ 8.15 7.99 8.38 8.92 8.85
Italian Lire................................................ 2,537.01 2,474.20 2,724.97 2,771.21 2,759.19
Japanese Yen................................................ 156.53 163.83 169.64 190.51 184.50
U.S. Dollar................................................. 1.51 1.54 1.59 1.59 1.60
</TABLE>
- ------------------------
(b) Reported EBITDA margin is defined as Reported EBITDA (less share of profit
of associates) divided by Reported Operating Revenues.
(c) Adjusted EBITDA margin is defined as Adjusted EBITDA (less share of profit
of associates) divided by Adjusted Operating Revenues.
(d) Adjusted EBITDA margin--Constant Currency is defined as Adjusted
EBITDA--Constant Currency (less share of profit of associates) divided by
Adjusted Operating Revenues--Constant Currency.
As detailed above, Adjusted Operating Revenues--Constant Currency have
grown from L605.6 million in 1995 to L720.0 million in 1998, a 5.9% annual
growth rate since 1995 (3.8% excluding the impact of acquisitions completed from
1995 to 1998) (in an environment of significantly declining primary insurance
and reinsurance premium rates), which compares to a 3.9% annual growth rate for
Adjusted Operating Revenues and a 0.5% annual growth rate for Operating Revenues
from continuing operations on a reported basis. Adjusted EBITDA--Constant
Currency has grown from L91.4 million in 1995 to L139.6 million in 1998, a 15.2%
annual growth rate (10.5% excluding the impact of acquisitions completed from
1995 to 1998), which compares to a 9.3% annual growth rate for Adjusted EBITDA
and a 0.8% annual growth rate for EBITDA on a reported basis. We have improved
our Adjusted EBITDA
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margins--Constant Currency by 450 basis points, from 14.0% in 1995 to 18.5% in
1998 (also in an environment of declining premium rates and intense industry
competition), which compares to 20 basis points, from 14.7% in 1995 to 14.9% in
1998, for EBITDA margins on a reported basis.
These improvements in operating results on an adjusted constant
currency basis since 1995 can be seen throughout most of our units, with the
improvements most marked at those units at which the change program and other
earlier initiatives were first implemented, such as U.K. Retail. The following
is a brief discussion of the improvements in operating results by business unit
and the specific initiatives implemented at each of our units, in each case on
the adjusted constant currency basis described above.
U.K. RETAIL--From 1995 to 1998, U.K. Retail has grown its Adjusted
Operating Revenues-- Constant Currency at an annual compounded rate of 7.1% and
has improved its Adjusted EBITDA margins--Constant Currency 580 basis points,
despite significant competitive pressures in the U.K. market and declining
premium rates. In conjunction with the change program, which was commenced in
late 1996, the unit has
- reorganized from a regional to client focus, allowing for better focus
on cross-selling and new client prospecting,
- closed five offices reducing headcount by 250 people (13%) and
- centralized many back-office functions,
significantly reducing costs. For the twelve months ended December 31, 1998,
Adjusted Operating Revenues--Constant Currency grew by 3.9%, largely due to the
formation of Willis National in 1997. Adjusted Operating Revenues--Constant
Currency (after giving pro forma effect to the formation of Willis National as
if it ocurred on January 1, 1997) decreased 2.2%, due to competitive pressures
and account losses due to merger and acquisition activity. However, for the
twelve months ended December 31, 1998, adjusted EBITDA margin--Constant Currency
increased 110 basis points, and the pro forma Adjusted EBITDA margin--Constant
Currency shows an increase of 210 basis points largely due to the effects of the
change program.
NORTH AMERICAN OPERATIONS--North American operations have two primary
divisions: North American Retail and U.S. Wholesale. North American Retail's
financial performance has improved since 1994. After disappointing results were
sustained in the first quarter of 1994, the present management of Willis Corroon
Corporation began re-engineering its operations and imposed stringent cost
controls, embarked on a successful national program to reduce corporate overhead
and real estate costs, and eliminated low value-added functions and redundant
staff. As a result of this initial effort in 1994 and 1995, North American
Retail improved its profitability, rebounding from approximately L2 million in
operating income in 1994 to nearly L26 million in 1995, boosted by only an
approximately L8 million increase in operating revenues over the same period.
Since 1995, operating revenues and expenses both have increased by approximately
3% per annum. However, improvements in expense control have been offset by the
opportunistic hiring of experienced teams and producers who came to us as a
direct result of broker consolidation in the U.S. As a result, costs were
incurred in 1997 to bring this expertise to us that did not translate into
revenue growth until 1998. From 1995 to 1998, North American Retail has grown
its Adjusted Operating Revenues--Constant Currency at an annual compounded rate
of 4.5% and has improved its Adjusted EBITDA--Constant Currency margins by 140
basis points, for the reasons described above. In conjunction with the change
program, which was commenced at the North American operations in 1997, following
the cost reductions of 1994 and 1995, North American operations have
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- eliminated the three divisional groupings in North American Retail and
reduced the number of regional units from 14 to 7 to maximize potential
for efficiencies and focus more intensely on client needs and
cross-selling,
- reduced real estate costs by disciplined use of space and quality
standards,
- reduced travel and entertainment expenses,
- reduced purchasing costs by implementing national vendor programs,
- reduced headcount by 156 people (5%),
- streamlined and consolidated back-office functions and regionalized
accounting centers, significantly reducing costs,
- developed and implemented a new incentivization program for North
American Retail and
- invested in new development and training programs.
These initiatives have begun to translate into improved results, as sales of new
products as well as sales of existing products to new customers increased 17%
($12.6 million) in the year ended December 31, 1998 as compared to the year
ended December 31, 1997, while EBITDA margins increased approximately 100 basis
points. The business at U.S. Wholesale has been more difficult due to
competitive pressures and other outside factors. We have moved out of
unprofitable businesses (such as Professional Liability Underwriting Management)
and have worked to reposition the remaining U.S. Wholesale businesses for
greater future profitability. For the twelve months ended December 31, 1998,
North American Retail's Adjusted Operating Revenues--Constant Currency grew by
7.4% and its Adjusted EBITDA margins--Constant Currency increased by 240 basis
points for the reasons described above.
GLOBAL SPECIALTIES--From 1995 to 1998, Global Specialties has grown its
Adjusted Operating Revenues Constant--Currency at an annual compounded rate of
4.8% and has improved its Adjusted EBITDA margins--Constant Currency 790 basis
points, despite premium rates that have declined at an annual rate of 10% or
more. In conjunction with the implementation of the change program, which has
only focused on the Global Broking Services segment of Global Specialties thus
far, together with other initiatives begun in 1994, the unit has
- undergone a comprehensive staff assessment planned to reduce back
office costs by 20-30% and has already eliminated 113 people (10% of
staff),
- expanded the accounting office operations in Bombay to reduce the cost
of insurance accounting and claims processing and
- re-focused the operation on cross-selling and new client prospecting.
Given the very recent implementation of the change program at Global
Specialties, very limited benefits from the change program are reflected in the
unit's historical results. For the twelve months ended December 31, 1998, Global
Specialties increased its Adjusted Operating Revenues--Constant Currency by 5.0%
and has improved its Adjusted EBITDA margins--Constant Currency by 60 basis
points. The majority of this growth occurred in Global Broking Services due to
strong performance in both revenue and profit in several specialist product
lines.
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GLOBAL REINSURANCE--From 1995 to 1998, Global Reinsurance has grown its
Adjusted Operating Revenues--Constant Currency at an annual compounded rate of
4.0% and has improved its Adjusted EBITDA margins--Constant Currency by 180
basis points, despite significantly (more than 20% annually) declining premium
rates. The unit has
- merged eight business units,
- reduced UK headcount by 113 people (25% of staff), eliminating
redundant tasks and reducing costs,
- created new business units with Cordis Consulting Limited and Willis
Corroon Catastrophe Management Limited (See "Business") and
- established three new key production offices.
The change program has not yet been fully developed for Global Reinsurance, the
implementation of which is expected to bring additional benefits to operating
results. For the twelve months ended December 31, 1998, Global Reinsurance's
Adjusted Operating Revenues--Constant Currency fell by 0.5%. Expansion in the
U.S. and Europe was offset by a disposal of part of the French portfolio to Gras
Savoye following Willis Corroon Group's investment in Gras Savoye. Adjusted
EBITDA margins-- Constant Currency decreased by 10 basis points due to planned
staff cost increases, predominantly in the U.S.
INTERNATIONAL--From 1995 to 1998, International has grown through a
number of acquisitions, the most significant being the increased investment in
Willis Corroon Richard Oliver Pty Ltd in Australia and Willis Corroon Scheuer in
the Netherlands, the acquisition of 33% of Gras Savoye in France, in January
1998, the acquisition of 30% of Jaspers Wuppesahl in Germany, the 50% interest
in Gruppo Ital Brokers in July 1998, the 30% interest in Assurandrgruppen in
September 1998, and the additional investment in Spain. Excluding these
acquisitions, International has grown its Adjusted Operating Revenues--Constant
Currency at an annual compounded rate of 2.3% and has grown its Adjusted EBITDA
from a loss of L(0.8) million in 1995 to a gain of L1.7 million in 1998. The
unit continues to make investments, including its recent strategic investments
in Italy and Denmark and has announced planned transactions in Venezuela. The
unit is now focused on exploiting the efficiencies of scale available by merging
its Spanish operations with those of Gras Savoye. For the twelve months ended
December 31, 1998, International increased its Adjusted Operating
Revenues--Constant Currency by 5.2% and its Adjusted EBITDA--Constant Currency
by 7.6 basis points largely due to growth in Western Europe after giving pro
forma effect to the recent acquisitions.
While significant improvements have been made thus far, we are
implementing the change program in a series of stages and believe that
significant future operating improvement will be generated as a result of change
program initiatives. There can be no assurance, however, that such will be the
case.
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BUSINESS
GENERAL
We are the third largest insurance broker in the world. We provide a
broad range of value-added risk management consulting and insurance brokering
services to some 50,000 clients worldwide. We trace our history to 1828 and we
are a leading insurance broker in the U.K., the U.S. and, directly and through
our associates, in many countries. We are a recognized leader in providing
specialized risk management advisory and other services on a global basis to
clients in various industries, including the construction, aerospace, marine and
energy industries. In our capacity as an advisor and insurance broker, we act as
an intermediary between our clients and insurance carriers by:
- advising our clients on their risk management requirements (many of
which are highly complex);
- helping clients determine the best means of managing their risks; and
- ultimately negotiating and placing insurance risks with insurance
carriers through our global distribution network.
We also provide other value-added services, including employee benefits
consulting, claims administration, captive insurance company management and
self-insurance consulting. We do not underwrite insurance risks for our own
account.
We and our associates serve a diverse base of clients located in more
than 125 countries. Such clients include major multinational and middle-market
companies in a variety of industries, as well as public institutions. Many of
our client relationships span decades. With approximately 12,000 employees
around the world and a network of more than 250 offices in 69 countries, in each
case including our associates, we believe we are one of only three insurance
brokers in the world possessing the global operating presence, broad product
expertise and extensive distribution network necessary to effectively meet the
global risk management needs of many of our clients. For the twelve months ended
December 31, 1998, our Reported Revenues were L718.2 million ($1,192.2 million)
and our Reported EBITDA was L113.5 million ($188.4 million). For the same
period, our Adjusted Operating Revenues were L735.2 million ($1,220.4 million)
and our adjusted EBITDA was L142.6 million ($236.7 million), in each case after
giving pro forma effect to the recent acquisitions. See "Prospectus Summary--
Summary Historical Consolidated Financial Information of Willis Corroon" and
"Prospectus Summary-- Summary Unaudited Pro Forma Consolidated Financial
Information of Willis Corroon."
INDUSTRY OVERVIEW
Insurance brokers, such as Willis Corroon, provide essential services
to users of insurance and reinsurance products. Such users include corporations,
public institutions and insurance carriers. Brokers distribute insurance
products and provide highly specialized (and often highly technical) value-added
risk management consulting services. Through its knowledge of the insurance
market and risk management techniques, the broker provides value to its clients
and the insurance carriers with whom the broker deals by:
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<TABLE>
<CAPTION>
VALUE TO CLIENTS VALUE TO INSURANCE CARRIERS
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
- - assisting clients in their analysis of risk; - assessing a potential insurance user's risk management
- - helping clients formulate appropriate strategies to needs, structuring an appropriate insurance program to
manage those risks; meet those needs and placing the insurance risks to be
- - negotiating insurance policy terms and conditions; insured with an insurance carrier;
- - placing insurance risks to be insured with insurance - acting as a principal distribution channel for
carriers through its distribution network and taking insurance products; and
advantage of its ability to place insurance at rates - providing access to insurance buyers that most
often lower than the client could achieve on its own; insurance companies are not equipped to reach on their
and own.
- - providing specialized self-insurance consulting and
other risk management consulting services apart from
its traditional intermediary role.
</TABLE>
The broker serves an important role in the distribution of insurance
products. Willis Corroon believes that the percentage of insurance policies
underwritten worldwide that are placed through insurance brokers has been
relatively stable in recent years. According to the Independent Insurance Agents
of America, Inc., in 1997 approximately 77% of commercial insurance in the U.S.
was sold through insurance brokers.
There are three main subsectors of the brokerage industry:
- retail brokering, which involves business and services transacted
between brokers and commercial or individual customers,
- wholesale brokering, which involves business and services transacted
between two brokers (or agents) when one broker uses the services or
products of another broker and
- reinsurance brokering, which involves placing reinsurance coverage for
primary insurance and reinsurance carriers.
Insurance brokers generate revenue from
- commissions and fees on insurance placements,
- fees from consulting and other services and
- interest earned on premiums held prior to payment to the insurer and on
claims held prior to payment to the insured.
Commissions and interest have historically been the greatest sources of revenues
for insurance brokers. However, in recent years, fee income (from both insurance
placements and consulting and other services) has been increasing as a
percentage of total revenues while commission income has been declining largely
because of declining insurance premium rates due to competition among insurance
carriers. Willis Corroon expects this trend toward increased fee income to
continue.
Industry revenue has been relatively stable in recent years and,
according to BUSINESS INSURANCE, the 192 largest commercial insurance brokers
globally reported brokerage revenues totalling
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$16.7 billion in 1997. Recent consolidation among the largest insurance brokers,
however, has significantly altered the industry competitive dynamics.
Significant factors in broker consolidation include:
- the increased need by clients for products and services on a global
scope; and
- better economies of scale available to larger firms.
As a result, the insurance brokerage industry is now led by its three global
participants: Marsh & McLennan Companies, Inc. (with approximately 35% of the
worldwide market comprised of the 192 brokers in 1997 referred to above, 9% of
which is attributable to Sedgwick Group plc, a company acquired by Marsh &
McLennan in 1998), Aon Corporation (with approximately 24%), and Willis Corroon
(with approximately 7%). The industry is highly fragmented beyond these three
brokers with the next largest broker having less than a 3% share of the $16.7
billion market.
Another trend in the industry is the increasing diversification of
products and services offered by major insurance brokerage companies. In recent
years, the largest brokers have added a variety of new products and services in
order to meet the increasingly complex risk management needs of its clients.
Some of these new products and services represent the unbundling of the
traditional brokerage package, such as employee benefits consulting, captive
insurance company management, self-insurance consulting and alternative risk
financing solutions. This diversification is in response to
- clients' increasing focus on the complex risks faced in the operation
of their increasingly global businesses and
- clients' desire to retain more of the risks themselves.
As a result, the complexity of the risks managed has increased, while the
proportion insured by traditional underwriters has decreased. This has led to an
increased need for, and the development by brokerage firms of the capability to
provide, services (in addition to their traditional role as an intermediary)
that deliver expert solutions to clients with complex risk problems.
RECENT MANAGEMENT INITIATIVES
In 1996, Willis Corroon developed and launched a series of initiatives
referred to as the "change program." The change program was designed to enhance
revenues, improve efficiency and transition Willis Corroon from a traditional
commission-based insurance broker to a more comprehensive professional advisory
services firm. As part of the change program, Willis Corroon established certain
key initiatives to:
- enhance operating efficiencies;
- intensify efforts to develop existing and new accounts;
- increase cross-selling of both existing and new products and services
to its existing clients; and
- maximize leverage in placing insurance with insurance carriers.
In addition, Willis Corroon developed initiatives focused on maximizing the
talent and expertise of its brokers and consultants. Accordingly, Willis
Corroon:
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- developed improved techniques for recruitment and assessment;
- instituted a new incentive structure for brokers in the U.S.;
- implemented a new and more frequent appraisal process, including peer
review;
- created new training and development programs;
- invested in technology to enhance communication among employees; and
- formed practice groups to share knowledge on specific industry or
product areas.
Willis Corroon believes that the change program is primarily responsible for:
- the 5.9% annual growth in constant currency Adjusted Operating Revenues
from 1995 to 1998 (3.9% including the impact of currency movements;
3.8% on a constant currency basis excluding the impact of the recent
acquisitions and the incremental investment in Willis Corroon Richard
Oliver Pty Ltd and Willis Corroon Scheuer) and
- the improvement in constant currency Adjusted EBITDA margins from 14.0%
in 1995 to 18.5% in 1998, resulting in 15.2% annual growth in constant
currency Adjusted EBITDA over such period (9.4% including the impact of
currency movements; 10.5% on a constant currency basis excluding the
impact of the Recent Acquisitions and the incremental investment in
Willis Corroon Richard Oliver Pty Ltd and Willis Corroon Scheuer)
despite the downward trend of insurance premium rates in recent years. See
"Supplemental Constant Currency Financial Data" for an explanation of the
adjustments and the presentation of constant currency data and EBITDA generally
and for a discussion of trends in Constant Currency--EBITDA margins. Willis
Corroon estimates that in 1997, the change program initiatives increased its
profit before tax by L27 million with more than half of this improvement
generated from revenue enhancements. Willis Corroon has implemented the change
program in varying stages across its business units and expects the change
program to generate significant additional benefits in the future, although
there can be no assurance that this will be the case.
COMPETITIVE STRENGTHS
STRONG FRANCHISE WITH LEADING MARKET POSITIONS. Willis Corroon is the
third largest insurance broker in the world and has leading market positions in
the U.K., the U.S. and, directly and through its associates, in many other
European countries. Willis Corroon is a recognized leader in providing
specialized risk management advisory and other services on a global basis to
clients in a variety of industries. For example, Willis Corroon believes that it
is the leading insurance broker to the construction industry in the United
States, one of the largest surety brokers in North America and a market leader
in providing risk management services to the aerospace, marine and energy
industries. Willis Corroon is also the largest reinsurance broker serving Japan.
Willis Corroon's strong global franchise and leading market positions:
- provide an extensive platform for selling new and existing products and
services to its existing clients;
- allow Willis Corroon to meet better the risk management needs of its
existing clients and help attract new clients;
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- create economies of scale and other efficiencies; and
- attract talented professionals.
STRONG GLOBAL PRESENCE. Willis Corroon believes it is one of only
three insurance brokers in the world with the global operating platform, broad
product expertise and insurance brokering distribution capabilities necessary to
effectively meet the global risk management needs of large multinational and
certain other clients. Willis Corroon has approximately 12,000 employees around
the world and a network of more than 250 offices in 69 countries, in each case
including associates. This strong global franchise enables Willis Corroon and
its associates to serve over 50,000 clients located in more than 125 countries
worldwide. Management estimates that, together with its associates, Willis
Corroon enjoys leading market positions in the U.K., the U.S., France, Denmark,
Greece, Germany, Italy, Poland, Spain and Sweden. In 1997 Willis Corroon placed
insurance with over 4,000 insurance carriers, none of which individually
accounted for more than 7% of the total premiums placed by Willis Corroon on
behalf of its clients. Willis Corroon's worldwide franchise enables it to
provide high quality services on a local basis with the resources of a global
firm.
EXTENSIVE AND DIVERSE CLIENT BASE. Willis Corroon's clients operate in
many businesses and industries throughout the world and generally range in size
from major multinational corporations to middle market companies. Many of Willis
Corroon's client relationships span decades, such as its 20-year relationship
with Allied Signal Inc. and its relationship with The Tokio Marine and Fire
Insurance Co., Limited (the largest non-life insurance company in Japan), which
dates back 100 years. In the United States, Willis Corroon serves approximately
10% of the Fortune 1,000 companies, with an average relationship of more than
ten years. Willis Corroon's largest client accounted for less than 2% of Willis
Corroon's total revenues in 1998, and Willis Corroon's 80 largest clients
accounted for less than 10% of such revenues. This diversified client base
provides a stable source of revenue and also offers significant additional
revenue opportunities as Willis Corroon provides these clients with additional
products and services and cross-sells existing products and services across its
many areas of expertise.
BROAD ARRAY OF CLIENT-ORIENTED SERVICES AND PRODUCTS. In order to
serve its extensive client base, Willis Corroon offers a broad range of services
and products designed to address their specific risk management needs. With its
specialized product and industry teams around the world, Willis Corroon helps
its clients assess the risks they encounter in their operations worldwide, from
employee benefits and healthcare to the specialized risks of the aerospace
industry. If the client desires to insure against these risks, Willis Corroon
negotiates policy terms and places an appropriate insurance policy with an
insurance underwriter using its significant placing power. If the client,
however, wishes to retain some portion of the risk, Willis Corroon can help the
client establish and maintain its own self-insurance or captive insurance
program. As a result of Willis Corroon's ability to meet its clients' risk
management needs, management believes that Willis Corroon enjoys a reputation
for exceptional customer service throughout its product offerings. In an
independent 1998 survey covering 143 U.S. insurance brokers, Willis Corroon's
North American operations received the highest overall customer satisfaction
rating.
EXPERIENCED AND INCENTIVIZED MANAGEMENT. Willis Corroon's Executive
Chairman, John Reeve, joined Willis Corroon in late 1995 and is responsible for
instituting significant strategic and operating changes which have improved
operating results and positioned Willis Corroon for further growth. Willis
Corroon's top seven executives have an average of 27 years of experience in the
insurance brokerage and insurance industries and an average of 20 years of
experience with Willis Corroon itself. 361 key employees invested directly in
the equity of Willis Corroon's ultimate parent company, TA I Limited. The
investment by these employees, together with options granted to them at the time
of investment and options expected to be granted in the future, is expected to
represent between 14% and 20% of TA I Limited's ordinary share capital on a
fully diluted basis. Additional equity-based
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incentive plans, partly tied to performance (including the 1998 Share Purchase
and Option Plan for Key Employees of TA I Limited), are expected to be put in
place in the future. This broad distribution of equity throughout the
organization should help Willis Corroon to retain and attract highly qualified
managers, brokers and consultants.
STRONG SPONSORSHIP. Kohlberg Kravis Roberts & Co. L.P. is a leading
investment firm with significant investment experience in the insurance
industry. In addition to the KKR 1996 Fund (Overseas), Limited, six major
insurance companies, Guardian Royal Exchange, Royal & SunAlliance Insurance
Group, The Chubb Corporation, The Hartford Financial Services Group, Inc.,
Travelers Property Casualty Corp. and The Tokio Marine and Fire Insurance Co.,
Limited, collectively invested approximately L203 million (approximately $346
million) in the common and preferred equity of Willis Corroon's parent
corporations. The investment by these major insurance carriers represents a
significant expression of confidence in Willis Corroon's future business
prospects. In addition, Willis Corroon believes that such investment highlights
(1) the importance of the role played by the global insurance broker to the
insurance industry generally and (2) the importance of Willis Corroon
individually as an independent alternative in a rapidly consolidating industry.
BUSINESS STRATEGY
Willis Corroon's strategic objectives are to continue to grow revenues
and cash flow and to enhance its position as a leading global provider of risk
management services. The key elements of this strategy are:
CAPITALIZE ON STRONG GLOBAL FRANCHISE. As one of only three insurance
brokers providing risk management services on a global basis, Willis Corroon is
well positioned to take advantage of the increased demand for global risk
management expertise. Willis Corroon intends to capitalize on its strong global
franchise by: (1) cross-selling both existing and new products and services to
its existing clients and (2) targeting new clients in need of Willis Corroon's
global reach and specialized expertise and knowledge. To implement these
objectives, Willis Corroon is improving the quality of its risk management
consultants by:
- investing in the training and development of its staff;
- recruiting teams of risk management professionals with particular
geographical or product expertise and client relationships;
- implementing a new incentive structure which has a greater emphasis on
business development and profitability; and
- implementing programs and upgrading information systems to share
product and client knowledge throughout the organization.
Willis Corroon also seeks to work more closely with selected insurance
carriers to develop new products and services for its clients. While these
initiatives continue to be developed and implemented, Willis Corroon has begun
to see improvements. For example, revenues from North American Retail's sale of
new business increased 17% ($12.6 million) in 1998 compared to 1997.
EMPHASIZE VALUE-ADDED SERVICES. Willis Corroon seeks to offer
value-added, fee-based risk management services, such as risk management
consulting advice, including captive insurance company management and
self-insurance consulting, employee benefits consulting, and claims
administration to complement its existing insurance brokerage business. These
fee-based services have
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increased as a percentage of Willis Corroon's total revenues and, unlike typical
insurance brokerage commissions, are not directly tied to insurance premium
rates, which have been declining in recent years. For fiscal 1997, the
percentage of Willis Corroon's total revenues from fees (including from both
insurance placements and consulting and other services) was approximately 26%,
as compared to approximately 13% in 1993. Willis Corroon believes that by
emphasizing these value-added risk management consulting services it can
- increase the quality and scope of services it offers to its clients
worldwide,
- reduce Willis Corroon's exposure to fluctuations in insurance premium
rates and
- continue to enhance revenue growth and operating profit margins despite
recent trends toward decreasing insurance premiums and brokerage
commissions.
INCREASE OPERATING EFFICIENCIES. In addition to its revenue growth and
improved client service initiatives, Willis Corroon's change program includes a
number of cost reduction measures designed to streamline work processes to
increase efficiency without impacting client service. Thus far, these
initiatives have reduced headcount in continuing operations by over 1,100
employees, or more than 10% of the workforce. Also, Willis Corroon reorganized
its U.K. Retail operations from a regional focus to a market segment focus and
reduced the number of U.K. Retail offices from 33 to 28 since January 1, 1996.
Other on-going initiatives include
- reducing real estate, travel, entertainment and other operating
expenses,
- further streamlining back-office functions and consolidating offices
and
- reducing purchasing costs by implementing vendor programs.
Additionally, Willis Corroon intends to reduce the number of insurance carriers
with which it does business in order to create direct economic benefits for
clients, carriers and Willis Corroon. Willis Corroon also intends to streamline
administrative processes with a selected number of insurance carriers and work
closely with certain insurance carriers to generate new product and service
ideas. Willis Corroon reduced expenses from continuing operations by
approximately L10 million in 1997 due to the change program and believes that
the change program is responsible in large part for the 15.2% annual growth in
constant currency Adjusted EBITDA (9.4% including the impact of currency
movements; 10.5% on a constant currency basis excluding the impact of the recent
acquisitions and the additional investments in Willis Corroon Richard Oliver Pty
Ltd and Willis Corroon Scheuer) from 1995 to 1998, despite the downward trend of
insurance premium rates. Willis Corroon seeks to continue to increase operating
efficiencies and reduce operating costs in the future.
PURSUE STRATEGIC GROWTH OPPORTUNITIES. Willis Corroon intends to
strengthen its global franchise through selective acquisitions and strategic
investments. Willis Corroon believes that the consolidation in the brokerage and
risk management consulting industry, coupled with the importance of a global
presence, will provide Willis Corroon opportunities to acquire smaller brokers
that have a strong regional or local market position or possess specialized
product expertise which complements Willis Corroon's existing products. In
addition to acquiring controlling interests in smaller brokers, Willis Corroon
has also expanded internationally through strategic minority investments in, and
developing a close working relationship with, other brokers. For example, in
1997, Willis Corroon acquired a one-third stake in Gras Savoye, the largest
broker in France and the ninth largest broker in the world, and early in 1998 a
30% interest in Jaspers Wuppesahl, which Willis Corroon believes is the third
largest broker in Germany. This interest increased to approximately 45% in
January 1999. Willis Corroon also acquired a
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50% interest in 1998 in a leading Italian broker, Gruppo Ital Brokers, a 30%
interest in Assurandrgruppen, the leading broker in Denmark, a reinsurance
brokering, and consulting operation in Germany, and has announced planned
acquisitions in Venezuela. In 1997 and 1998, Willis Corroon increased its
existing investments in Brazil, Sweden, Spain, Australia and Holland. In
connection with these investments, Willis Corroon assumes an active role in
management and generally retains the right to obtain ownership interests in
excess of 50% over time. These and future strategic investments should
significantly enhance Willis Corroon's global presence and enable it to better
leverage its global platform.
BUSINESS UNITS
Willis Corroon conducts its activities through five units:
- North American operations;
- U.K. Retail;
- Global Specialties;
- Global Reinsurance; and
- International,
the operations of each of which are detailed below.
NORTH AMERICAN OPERATIONS
(41% OF 1998 OPERATING REVENUES)
Willis Corroon's North American operations, which consist of North
American Retail and U.S. Wholesale, provide risk management, insurance brokerage
and related services to a wide variety of clients in the United States and
Canada. Headquartered in Nashville, Tennessee, North American operations operate
through a network of more than 100 offices located in 38 states in the U.S. and
six offices in Canada. In addition, two other U.K.-based units, Global
Specialties and Global Reinsurance also have operations in the U.S.
NORTH AMERICAN RETAIL
(90% OF NORTH AMERICAN OPERATIONS 1998 OPERATING REVENUES)
North American Retail provides risk management, insurance brokerage and
related services directly to corporations through 77 local offices in the U.S.
and six offices in Canada. North American Retail's clients include both
middle-market and major multinational companies. Approximately 45% of North
American Retail's revenues are generated by providing property/casualty
brokerage services to middle-market companies. The balance of the unit's
revenues come from serving the complex risk management needs of multinational
corporations and from its other consulting and brokerage services.
Other consulting brokerage services are supplied to certain clients
through four divisions:
- construction;
- employee benefits;
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- healthcare; and
- advanced risk management services.
North American Retail's construction division specializes in providing risk
management, insurance and surety bonding services to the construction industry.
This division provides services to approximately 20% of the Engineering New
Record Top 400 contractors (a listing of the largest 400 North American
contractors based on revenue). Willis Corroon believes it is the largest
construction insurance and surety broker (obtaining surety bonds, which
guarantee the performance of a contractor's obligations under construction and
other contracts) in North America. North American Retail's employee benefits
division helps clients with the design and implementation of benefits and
compensation plans. Its healthcare division provides insurance and consulting
services to local healthcare professionals. Willis Corroon believes it is the
fourth largest healthcare insurance broker/consultant in the United States.
North American Retail's advanced risk management services division provides
actuarial consulting, captive management services and a wide range of other risk
consulting activities to large clients.
Many of North American Retail's client relationships have existed for
decades, such as its relationships with AT&T, Texaco and GE Capital. In
addition, Willis Corroon serves approximately 10% of the Fortune 1000 companies
in the United States. In an independent 1998 survey covering 143 U.S. insurance
brokers, Willis Corroon received the highest overall customer satisfaction
rating.
During 1997, as part of the change program, North American Retail
introduced a new regional structure, with six regions in the United States and
one region for Canada, designed to streamline the existing management structure,
focus more decision making closer to the customer, and reduce back office costs
by concentrating administrative resources at the national and regional level.
Additionally, North American Retail implemented specific programs designed to
enhance revenues, such as increased cross-selling of products to its existing
clients.
U.S. WHOLESALE
(10% OF NORTH AMERICAN OPERATIONS 1998 OPERATING REVENUES)
The second, and much smaller, component of Willis Corroon's North
American operations is U.S. Wholesale. Wholesale brokering is typically
transacted between two brokers or agents and occurs when a broker has a client
with a risk coverage need that falls outside its area of expertise. In these
cases, a broker may call in a wholesale broker with such specific expertise to
place the business and then receive a fee.
U.S. Wholesale primarily serves its clients through three operating
entities. As a wholesale broker and program manager, Public Entities National
Company provides access to specialized coverage for governmental entities,
schools and other municipality and public entities. Willis Corroon believes that
the Stewart Smith Group is the fourth largest excess and surplus lines broker in
the United States, providing specialist advice and market expertise in property
and casualty insurance placement in a variety of industries, including
manufacturing, real estate/habitational, transportation, financial services,
utilities, entertainment, aerospace and construction. Special Program
Management, a unit of the Stewart Smith Group, is an industry leader for placing
specialty directors & officers coverage and related products to the
high-technology industry. U.S. Wholesale's professional liability wholesale
operation, Professional Liability Underwriting Management, was closed in the
second quarter of 1998.
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U.K. RETAIL
(18% OF 1998 OPERATING REVENUES)
Willis Corroon's U.K. Retail operation provides risk management and
insurance brokerage services to clients in the U.K. through 28 offices located
in the United Kingdom to industrial and individual clients. U.K. Retail arranges
similar risk management and insurance brokerage services for U.K.-based clients
outside the United Kingdom through North American Retail, overseas subsidiaries
and associates. U.K. Retail has numerous long-standing relationships with both
middle-sized and larger companies throughout the U.K., such as BAT Industries,
British Steel and Cadbury Schweppes.
In 1997, U.K. Retail established three new divisions (Willis Corroon
Corporate, Willis Risk Solutions and Willis Corroon Commercial) to provide
differentiated services according to client needs and buying preferences.
Willis Corroon Corporate provides a wide range of integrated risk
transfer and risk and loss management services to larger U.K.-based corporate
clients. The division assists clients in reducing the cost of managing their
risks by providing comprehensive risk management services, elements of which are
available on an "unbundled" basis if required.
Willis Risk Solutions is a professional services business delivering
expert solutions to major, typically multinational, corporate and professional
clients with complex risk problems. Willis Risk Solutions service is tailored to
individual client needs and ranges from strategic risk assessment to
transactional risk transfer and alternative risk financing solutions. The
service includes the development and management of captive insurance companies,
specialist insurance services, due diligence on mergers and acquisitions and
project finance, and evaluating risks associated with new business ventures.
Willis Risk Solutions is increasingly focused on providing more advisory and
consulting services. Through Willis Risk Solutions, Willis Corroon is one of the
largest managers of captive insurance companies in Europe.
Willis Corroon Commercial provides traditional insurance brokerage
services primarily to smaller companies. In a new venture announced in February
1998, Willis Corroon Commercial stated that it would be entering into franchise
partnerships with local U.K. insurance brokers to handle the insurance
requirements of small companies and individuals, utilizing specialized
electronic systems linking the franchised brokers directly to the commercial
panel of insurance carriers. These small companies and individuals represent a
very large market in the U.K. (more than 60% of commercial insurance premiums in
the U.K. are paid by companies with less than L10 million in revenue).
Accordingly, Willis Corroon Commercial believes that the franchise program
provides a significant opportunity for growth, and had ten franchise agreements
in place at December 31, 1998. It expects to have 26 in place by the end of
1999.
In addition to these services, U.K. Retail provides advice and services
to corporate and individual clients on personal finance matters such as pension
planning and investment products through Willis National Limited (a joint
venture in which Willis Corroon has a 51% interest and Abbey National has the
remaining 49%), the second largest independent financial advisor in the United
Kingdom, according to information published in MONEY MARKETING (August 7, 1997).
U.K. Retail also has teams which provide services in numerous specialty
areas, such as construction, freight, credit insurance, transport, hotel and
leisure, and professional indemnity through its other three divisions (Willis
Construction Risk Specialists, Willis Corroon Cargo and Scotland/ Ireland).
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During 1997, U.K. Retail completed the implementation of certain
structural changes initiated towards the end of 1996 under the change program,
and reorganized into seven major divisions from its prior regional focus. In
connection with the reorganization, U.K. Retail centralized most of its
back-office functions, closed five offices and reduced headcount by
approximately 13%. The change program continued in 1998 with rationalization.
GLOBAL SPECIALTIES
(22% OF 1998 OPERATING REVENUES)
The Global Specialties unit provides specialist brokerage and
consulting services to clients throughout the world for the risks of specific
industrial and commercial activities. In these operations, Willis Corroon has
extensive specialized experience handling diverse lines of coverage, including
the complex insurance programs for insurance companies and Lloyd's syndicates,
and acting as an intermediary between retail brokers and insurers. Global
Specialties increasingly provides consulting services on risk management with
the objective of assisting clients to reduce the overall cost of risk. Global
Specialties serves clients in more than 100 countries, primarily from its U.K.
offices, although the unit also serves clients from offices in the U.S.
The Global Specialties unit is organized into three distinct business
areas:
- Global Broking Services;
- Willis Corroon Aerospace; and
- Willis Faber Marine.
Global Broking Services provides solutions to problems in the
industrial, financial and professional sectors for large, complex, unusual and
niche risks around the world. Global Broking Services operates through five
business sub-units. The Global Property and Casualty unit designs and obtains
innovative property coverage solutions for large or unusual exposures in a
variety of industries, including mining and metals, chemicals and
pharmaceuticals, telecommunications, offshore energy and construction, refining,
power stations and other utilities, transport authorities and motor
manufacturers and also handles the design, implementation and servicing of
reinsurance protections for captive insurance companies. The Global Property and
Casualty unit also provides comprehensive liability programs for coverage
against environmental liability, libel and slander, and medical malpractice. The
Global Financial Risks unit obtains directors and officers insurance, as well as
errors and omissions insurance for professional firms and other insurance
brokers. The Global Financial Risks unit is also a leader in designing and
obtaining insurance coverage for political risk (including confiscation and
expropriation). Crime, computer fraud and unauthorized trading risks are also
covered on a worldwide basis. The Fine Art, Jewelry, and Specie unit provides
specialist risk management and insurance services to fine art, diamond and
jewelry businesses and operators of armored cars. Coverage is also obtained for
the physical risks of financial institutions and similar operations, including
vault and bullion risks. The Contingency Risks unit specializes in producing
packages to protect corporations, groups and individuals against special
contingencies such as kidnap and ransom, extortion, detention, political
repatriation and product contamination. The Bloodstock unit services the
insurance needs of the bloodstock and livestock industry and also arranges the
reinsurance of bloodstock and livestock related business of insurance companies
worldwide.
Willis Corroon Aerospace is a market leader in the provision of
insurance brokerage and risk management services to clients in the aerospace
industry, including aircraft manufacturers, air cargo handlers and shippers,
airport managers and other general aviation companies. Advisory services
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provided by Aerospace include claims recovery and collections, contract and
leasing risk management, safety services and markets information. Aerospace is a
leading provider of risk transfer and advisory services for space vehicle
launches and is also a leading reinsurance broker of aerospace risks.
Aerospace's clients are spread throughout the world and include 250 airlines and
more than 45% of the world's 30 leading non-American airports by passenger
movement. Other clients include those introduced from other intermediaries as
well as insurers seeking reinsurance.
Willis Faber Marine provides marine insurance brokerage services,
including hull, cargo and general marine liabilities. Marine's clients include
direct buyers, other insurance intermediaries and insurance and reinsurance
companies. Marine insurance brokerage is Willis Corroon's oldest line of
business. Other services of Marine include claims collection and recoveries.
Global Specialties is diversified from a geographical perspective. The
unit's 1998 revenues were generated in the following geographical regions: 27%
in the U.K.; 22% in North America and the Caribbean; 26% in continental Europe;
12% in Japan and the Far East; 5% in South America; 4% in the Middle East; and
4% in the rest of the world. In addition, this unit is diversified from a
customer perspective, with no client accounting for more than 2% of its revenues
in 1998.
Under the change program, in 1998 Global Specialties has, among other
things, reduced headcount by approximately 9%, merged its energy sub-unit into
Global Broking Services to better focus its sales efforts and focused on
cross-selling with Willis Corroon's other business lines.
GLOBAL REINSURANCE
(10% OF 1998 OPERATING REVENUES)
The Global Reinsurance unit, operating under the trade name Willis
Faber Re, provides international reinsurance brokerage services. These services
are provided to insurance underwriters to reinsure all or a portion of the risks
insured by them and to reinsurance underwriters to further reinsure their risks.
Willis Corroon is one of the world's largest intermediaries for international
reinsurance and has a significant market share in a number of major reinsurance
markets. It is the largest reinsurance broker serving Japan.
Global Reinsurance provides its clients, both insurance and reinsurance
companies, with reinsurance transaction services as well as ancillary services
such as risk analysis, modeling and consulting. The unit also provides
reinsurance brokerage services to healthcare professionals and institutions. The
U.K. operation represents clients in more than 90 countries and has
long-standing relationships with leading insurers in Asia, Middle East, Latin
America and in Western Europe. One such relationship, with The Tokio Marine and
Fire Insurance Co., Limited, has existed for 100 years.
Willis Corroon believes that from 1996 to 1998 premium rates in the
global reinsurance market have decreased annually by approximately 20%. Global
Reinsurance is developing new sources of revenue in addition to its traditional
reinsurance brokerage services, investing in new capabilities and expanding its
global reach. For example, in 1998 Global Reinsurance established Cordis
Consulting Limited to market its capabilities in actuarial and catastrophe
modeling as consulting products rather than as a part of its reinsurance
package, and acquired Mansfeld, Hubener & Partner GmbH to provide a local
presence in Germany (the largest European reinsurance market). In 1997 Willis
Corroon launched Willis Corroon Asset Management Limited which manages funds
invested in a new class of financial instruments linked to insurance and
reinsurance risks.
Additionally, under the change program, Willis Corroon has been
integrating various reinsurance business units globally (eight business units
have merged between 1995 and 1998 to
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culminate in the creation of Willis Faber Re) and has gained more synergy,
teamwork, and sharing of knowledge among top professionals around the world.
Additionally, the headcount in the Global Reinsurance's U.K. operations has been
reduced by approximately 25% since 1995.
INTERNATIONAL
(9% OF 1998 OPERATING REVENUES)
Willis Corroon's International unit consists of a network of
subsidiaries and associates other than those in the U.S. or U.K. controlled by
the other business units. These operations are located in 59 countries
worldwide, consisting of 21 countries in Europe, 13 in the Asia/Pacific region
and 25 elsewhere in the world. The services provided are generally focused
according to the characteristics of each market and are not identical in every
office, but generally include direct risk management and insurance brokerage,
specialist and reinsurance brokerage and employee benefits consulting.
As part of its on-going strategy, Willis Corroon has significantly
strengthened International's market share and operations through a number of
acquisitions and strategic investments in recent years. The most significant of
these was the acquisition of a 33% interest in Gras Savoye, France's leading
insurance broker and the ninth largest broker in the world. In addition, in
January 1998, Willis Corroon's associate in Germany, C. Wuppesahl & Co.
Assekuranzmakler, merged with Jaspers Industries Assekuranz GmbH & Co. KG to
create Jaspers Wuppesahl, the third largest insurance broker in Germany in which
Willis Corroon now has an interest of approximately 45%.
In July 1998, Willis Corroon acquired 50% of Gruppo Ital Brokers, which
will be merged with UTA Willis Corroon SpA (in which Willis Corroon has a 50%
interest), creating the third largest broker in Italy. Willis Corroon also
acquired a 30% interest in Assurandrgruppen the leading broker in Denmark. Also,
Willis Corroon has announced planned acquisitions in Venezuela. In addition, in
1997 and 1998 Willis Corroon entered into a joint venture in Indonesia and
increased its existing investments in Brazil, Sweden, Spain, Australia and
Holland. Finally, Willis Corroon is the first non-Japanese broker to be awarded
a domestic license in Japan. The investments in 1997 and 1998 have improved the
market positions of Willis Corroon and its associates worldwide.
The following is a list of the associate investments currently held by
Willis Corroon:
<TABLE>
<CAPTION>
COMPANY COUNTRY % OWNERSHIP
- ----------------------------------------------------------- ----------- -------------------
<S> <C> <C>
EUROPE
Gras Savoye & Cie France 33%
Jaspers Wuppesahl Industrie
Assekuranz GmbH & Co., KG Germany 45%
Willis Corroon Assurandrgruppen A/S Denmark 30%
ASIA/PACIFIC
Multi-Risk Consultants (Thailand) Limited Thailand 25%
Willis Faber (Malaysia) Sdn Bhd Malaysia 30%
Willis Faber Insurance Brokers (B) Sdn Bhd Brunei 38%
REST OF WORLD
Al-Futtaim Willis Faber (Private) Limited Dubai 49%
Willis Faber EC Bahrain 49%
</TABLE>
In connection with many of its investments in associates, Willis
Corroon retains rights to increase its ownership percentage of such associates
over time, typically to a majority or 100%
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ownership position. In addition, in certain instances, the other owners of the
associates have a right, typically pursuant to some price formula of revenues or
earnings, to put some or all of their shares in the associates to Willis
Corroon. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
In addition to its strategic investments in associates, Willis Corroon
has acquired a controlling interest in a variety of smaller brokers. The
following is a list of International subsidiaries in which Willis Corroon has a
controlling interest:
<TABLE>
<CAPTION>
COMPANY COUNTRY % OWNERSHIP
- ---------------------------------------------------- ------------------ -----------------
<S> <C> <C>
EUROPE
Mansfeld, Hubener & Partner GmbH Germany 100%
Willis Corroon AB Sweden 74%
Willis Corroon Gothia AB Sweden 63%
Willis Corroon Global Financial Risks AB Sweden 72%
OY Willis Corroon AB Finland 74%
Willis Corroon Italia SpA Italy 50%
S&C Willis Corroon Correduria de Seguros y
Reaseguros SA Spain 60%
Surplus Corredores de Reaseguros SA Spain 100%
Willis Corroon Corretores de Seguros Limitada Portugal 100%
Willis Corroon (Management) Luxembourg SA Luxembourg 100%
Willis Corroon Belgium SA Belgium 80%
Willis Corroon Nederlands BV Netherlands 100%
Willis Corroon Hellas (Insurance Brokers) SA Greece 100%
Willis Corroon Kendriki SA Greece 100%
Willis Corroon CIS Russia 100%
Willis Corroon Polska Poland 70%
Willis Corroon sro Czech Republic 100%
Willis Corroon Hungary Kft Hungary 80%
ASIA/PACIFIC
Willis Corroon China (Hong Kong) Ltd. Hong Kong 100%
Willis Corroon (Taiwan) Ltd. Taiwan 100%
Willis Corroon (Pte) Limited Singapore 100%
REST OF THE WORLD
Willis Faber & Dumas (Mexico) Intermediario
de Reaseguro SA de CV Mexico 100%
Willis Faber Corretaje de Reaseguros Venezuela 100%
Willis Faber (Middle East) SAL Lebanon 51%
Willis Faber do Brasil Consultoria e Participacoes Brazil 100%
SA
York Willis Corroon Corretores de Seguros SA Brazil 100%
Willis Faber Chile Limitada Chile 100%
Richard Oliver International Pty Ltd (formerly Australia 100%
Willis Corroon Richard Oliver Pty Ltd)
Willis Corroon Limited New Zealand 99%
</TABLE>
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SIGNIFICANT SUBSIDIARIES
Solely for purposes of compliance with Luxembourg Stock Exchange
listing requirements, the following sets forth certain information pertaining to
the significant subsidiaries (as defined by such exchange) of Willis Corroon
(other than Willis Corroon Partners and the Issuer):
<TABLE>
<CAPTION>
COUNTRY OF
COMPANY REGISTRATION ACTIVITY % OWNERSHIP
- ---------------------------------------------- ----------------------- ------------------------- ---------------
<S> <C> <C> <C>
Willis Corroon Europe B.V. Netherlands Holding Company 100%
Willis Faber & Dumas Limited(1) England and Wales Lloyd's Broker 100%
Willis Corroon Limited(2) England and Wales Lloyd's Broker 100%
Willis Corroon Group Services Limited(3) England and Wales Service Company 100%
Willis National Limited(4) England and Wales Financial Intermediary 51%
Friars Street Insurance Limited Guernsey Captive Insurer 100%
</TABLE>
- ------------------------------
(1) Profit arising out of ordinary activities, after tax, for the financial year
ended December 31, 1997 amounted to L14.9 million and the amount of
dividends received from Willis Faber & Dumas Limited in the course of that
financial year was L14.0 million.
(2) Profit arising out of ordinary activities, after tax, for the financial year
ended December 31, 1997 amounted to L6.0 million and the amount of dividends
received from Willis Corroon Limited in the course of that financial year
was L5.3 million.
(3) Profit arising out of ordinary activities, after tax, for the financial year
ended December 31, 1997 amounted to L1.3 million. No dividends were received
from Willis Corroon Group Services Limited in the course of that financial
year.
(4) Willis National Limited did not trade during the financial year ended
December 31, 1997.
Willis Corroon Europe B.V. and Friars Street Insurance Limited do not
publish separate financial statements.
The Issuer's shareholders' equity at December 31, 1998 consisted of
10,000 authorized shares of common stock, par value $0.01 per share, of which
3,339 shares were issued and outstanding. Other than
- the senior credit facilities,
- the Notes and
- intercompany notes,
all as disclosed in this prospectus, the Issuer has no other long-term debt.
Willis Corroon Partners's capital at December 31, 1998 consisted of
partnership interests of which Willis Corroon Group has a 99.9% interest and
Willis Faber UK Group Limited has a 0.1% interest. Other than
- the guarantee of the senior credit facilities,
- the guarantee of the Notes and
- intercompany notes,
all as disclosed in this prospectus, Willis Corroon Partners has no other
long-term debt.
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SEGMENT INFORMATION
The following tables show total operating revenues of Willis Corroon by
category of activity and geographical location for each of the three years ended
December 31, 1998. The information has been prepared in accordance with U.K.
GAAP.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
TOTAL OPERATING REVENUES 1996 1997 1998
- ----------------------------------------------------------------------------------- --------- --------- ---------
<CAPTION>
(L MILLIONS)
<S> <C> <C> <C>
BY ACTIVITY
Continuing operations -- Insurance brokering and risk management................... L725.0 L692.0 L718.0
Discontinued operations -- Underwriting (Sovereign/Willis Faber (Underwriting
Management))..................................................................... 5.7 2.0 0.2
--------- --------- ---------
730.7 694.0 718.2
--------- --------- ---------
--------- --------- ---------
BY GEOGRAPHICAL AREA(1)
United Kingdom..................................................................... 319.5 305.1 305.3
North America...................................................................... 371.3 336.6 351.4
Rest of the World.................................................................. 39.9 52.3 61.5
--------- --------- ---------
730.7 694.0 718.2
--------- --------- ---------
--------- --------- ---------
</TABLE>
- ------------------------------
(1) The geographical analysis is based on the location of the operating
subsidiaries which does not necessarily reflect the original source of the
business.
CUSTOMERS
Willis Corroon's clients operate on a global and local scale in a
multitude of businesses and industries throughout the world and generally range
in size from major multinational corporations to middle market companies.
Further, many of Willis Corroon's client relationships span decades, such as its
20-year relationship with Allied Signal Inc. and its relationship with The Tokio
Marine and Fire Insurance Co., Limited which dates back 100 years. In the United
States, Willis Corroon serves approximately 10% of the Fortune 1,000 companies,
with an average relationship of more than ten years. No one client accounted for
more than 2% of revenues for fiscal year 1998 and Willis Corroon's 80 largest
clients accounted for less than 10% of 1998 revenues. Additionally, Willis
Corroon places insurance with over 4,000 insurance carriers, none of which
individually accounted for more than 8% of the total premiums placed by Willis
Corroon on behalf of its clients in 1998.
EMPLOYEES
At December 31, 1998, Willis Corroon had approximately 9,400 employees,
including approximately 3,900 in the U.K., 4,400 in the U.S. and 1,100 in the
rest of the world and its associates had approximately 2,600 employees. Willis
Corroon is not involved in any material dispute with employees and management
believes that relations with employees are good.
COMPETITION
Willis Corroon faces competition in all fields in which it operates.
Competition in the insurance brokering and risk management businesses is based
on global capability, product breadth, innovation, quality of service and price.
Willis Corroon competes with the two other providers of global risk management
services as well as with numerous regional and local firms. Insurance companies
also compete with Willis Corroon's brokers by directly soliciting insureds
without the assistance of an independent broker or agent. Competition for
premiums is intense in all Willis Corroon's business lines and in every
insurance market. Competition on premium rates has also exacerbated the
pressures caused by a continuing reduction in demand in some classes of
business. For example, insurers are
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currently retaining a greater proportion of their risk portfolios than
previously. Industrial and commercial companies are increasingly relying upon
captive insurance companies, self-insurance pools, risk retention groups, mutual
insurance companies and other mechanisms for funding their risks, rather than
buying insurance. Willis Corroon provides management and similar services for
such alternative risk transfer programs. Additional competitive pressures arise
from the entry of new market participants, such as banks, accounting firms and
insurance carriers themselves, offering risk management or transfer services.
Willis Corroon believes that it is well-positioned to compete across the breadth
of the products and services Willis Corroon offers.
REGULATION
Many of Willis Corroon's activities are subject to regulatory
supervision in the various countries and jurisdictions in which they are based
or undertaken. In the United Kingdom, many Company entities are subject to
regulatory supervision. For example, Lloyd's brokers are regulated by the
Council of Lloyd's and, together with the insurance broking subsidiaries, are
regulated pursuant to the Insurance Brokers (Registration) Act 1977. In
addition, Willis National and Willis Corroon Asset Management Limited are
regulated by the Financial Services Authority pursuant to the provisions of the
Financial Services Act 1986. Finally, the insurance companies which are in
run-off are regulated by HM Treasury.
The Society of Lloyd's and Financial Services Authority generally
regulate the conduct of business and financial position of their respective
members through the establishment of required levels of net worth and other
financial criteria; Lloyd's by-laws and Financial Services Authority rules
describe the methods by which Lloyd's brokers, independent financial advisors
and investment managers, respectively, shall conduct business. The Insurance
Brokers (Registration) Act requires, among other things, that insurance brokers
be enrolled with a central professional body and comply with its rules in the
conduct of their business. The Insurance Brokers (Registration) Act and Lloyd's
generally requires that Willis Corroon maintain amounts of fiduciary cash in
regulated bank accounts subject to guidelines which generally emphasize capital
preservation and liquidity.
Willis Corroon's activities in connection with insurance brokering
services and third party administration within the United States are subject to
regulation and supervision by state authorities. Although the scope of
regulation and form of supervision may vary from jurisdiction to jurisdiction,
insurance laws in the United States are often complex and generally grant broad
discretion to supervisory authorities in adopting regulations and supervising
regulated activities. Such supervision generally includes the licensing of
insurance brokers and agents and third party administrators and the regulation
of the handling and investment of client funds held in a fiduciary capacity.
Willis Corroon's continuing ability to provide insurance brokering and third
party administration in the jurisdictions in which it currently operates is
dependent upon its compliance with the rules and regulations promulgated from
time to time by the regulatory authorities in each of these jurisdictions.
All companies carrying on similar activities in a given jurisdiction
are subject to such regulation, and Willis Corroon does not consider that such
controls adversely affect its competitive position.
PROPERTIES
Willis Corroon owns and leases a number of properties for use as
offices throughout the world and believes that its properties are generally
suitable and adequate for the purposes for which they are used. The principal
properties are located in the United Kingdom and the United States. Willis
Corroon's headquarters at Ten Trinity Square in London is a landmark building
owned by Willis Corroon . The Issuer's principal office in the United States is
at 26 Century Boulevard, Nashville, Tennessee, a leasehold property.
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LEGAL PROCEEDINGS
GENERAL. Willis Corroon has extensive operations and Willis Corroon
and its subsidiaries are subject to claims and litigation in the ordinary course
of business resulting principally from alleged errors and omissions in
connection with their businesses. Most of the claims are covered by professional
indemnity insurance and many of the defenses to these claims are being conducted
by Willis Corroon's insurers. In respect of any self-insured deductibles
applicable to such claims, Willis Corroon has established provisions which are
believed to be adequate in the light of current information and legal advice.
These provisions may be adjusted from time to time according to developments.
Willis Corroon does not expect the outcome of such claims, either individually
or in the aggregate, to have a material effect on Willis Corroon's operations or
financial position.
SOVEREIGN/WILLIS FABER (UNDERWRITING MANAGEMENT). For a description of
the implications of the provisional liquidation of Sovereign Marine & General
Insurance Company Limited and the associated run-off of Willis Faber
(Underwriting Management) Limited and related matters, see "Risk
Factors--Sovereign/WFUM."
PENSION REVIEW. For a description of the implications of the "pension
transfers and opt-outs review" initiated by the U.K. government, see "Risk
Factors--U.K. Pension Review."
HUGHES LITIGATION. In September 1990, Hughes Aircraft Co. filed suit
in Los Angeles County Superior Court against certain London insurance companies,
seeking coverage for environmental liabilities associated with groundwater
contamination at its Tucson, Arizona facility. Also named as a defendant was
Stewart Smith West, Inc., which is a subsidiary of Willis Corroon Group and the
successor to Haidinger Hayes, Inc., a surplus line broker that assisted in the
acquisition by Hughes Aircraft of various excess liability policies from 1952 to
1965. In addition, Willis Faber Property Holdings Limited, the successor to a
London broker which assisted in the acquisition of the excess policies and which
is an indirect subsidiary of Willis Corroon Group, has been brought into the
suit. The claims against Stewart Smith and Willis Faber alleged that Stewart
Smith and Willis Faber failed to preserve the identity of insurers participating
in excess general liability insurance placed on Hughes Aircraft's behalf during
the period from 1952 to 1965. Hughes Aircraft alleged that Stewart Smith and
Willis Faber should "stand in the shoes" of the insurers whose identity is
unknown due to the alleged breach of duty by the two subsidiaries of Willis
Corroon Group in failing to retain the identity of the insurers. In addition,
Hughes Aircraft has asserted a claim for $6 million, alleging that Stewart Smith
should pay for the costs it has incurred in attempting to reconstruct the
missing policies.
In May 1998, the judge ordered a bifurcation of the case under which
the claim against Willis Faber was tried separately from the claims against
Stewart Smith. On June 4, 1998, a jury found in favor of Hughes Aircraft in its
case against Willis Faber, finding that Willis Faber failed to retain the
identity of the excess general liability insurers. Judgment was entered on this
verdict, subject to appeal. The judgment, while requiring Willis Faber to "stand
in the shoes" of Hughes Aircraft, does not address the issue of causation, i.e.,
whether the conduct of Willis Faber actually caused injury to Hughes Aircraft.
This issue will turn on a number of factors, including, without limitation,
whether Hughes' Aircraft ultimate exposure in relation to underlying claims made
against it implicates the "missing" coverage. While the claim against Stewart
Smith is dependent upon different facts than the claim against Willis Faber,
evidence presented in the Willis Faber case has already established that Stewart
Smith did receive the currently missing information as to the identity of the
excess general liability insurers from Willis Faber. On October 16 and 20, 1998,
the trial judge heard and subsequently granted two motions on behalf of Hughes
Aircraft in relation to the Stewart Smith action. The judge granted Hughes
Aircraft's motion for the summary adjudication that Stewart Smith had breached a
duty to retain in perpetuity the identity and percentages of excess insurance
procured by Stewart Smith for Hughes Aircraft. The judge also granted a motion
in limine to preclude any evidence or argument that Hughes Aircraft is
comparatively negligent.
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On October 30, 1998, a settlement in principle was reached with Hughes
Aircraft, with the involvement and prior approval of Willis Corroon's errors and
omissions insurer. Under the settlement in principle: (a) a final,
non-appealable judgment has been entered against Willis Faber; (b) a declaratory
judgment, which Willis Corroon will explicitly have the right to appeal, has
been entered against Stewart Smith; (c) payment of $3.5 million has been made,
L1 million of which has been funded by the Company in respect of the deductible
applicable under the pertinent errors and omissions insurance policy described
below, and the balance of which has been funded by Willis Corroon's errors and
omissions insurer; and (d) Hughes Aircraft has agreed that it may recover no
more than L13 million against both Willis Faber and Stewart Smith for toxic tort
claims, known or unknown, relating to any of the Hughes Aircraft sites.
Willis Corroon expects a final, definitive settlement agreement to be
executed in the near future. Willis Corroon has an errors and omissions
insurance policy with limits of L20 million (which have been eroded to some
extent by the expenses of defending this litigation to date) and a L1 million
deductible. Willis Corroon believes that its errors and omissions insurer, into
which this risk has been reinsured and which has assumed and controlled the
defense of this litigation, is obligated to pay under this policy in response to
any claims submitted and properly established by Hughes Aircraft, up to the
agreed-upon L13 million cap described above.
BACCALA & SHOOP. Prior to 1984, Baccala and Shoop Insurance Services,
a subsidiary of Willis Corroon Group, acted as managing general agent for
certain insurance issuing companies, including three subsidiaries of The
Hartford Financial Services Group, Inc. Since Baccala and Shoop ceased active
operations in 1983, issuing companies (including Hartford) have notified Baccala
and Shoop of potential errors and omissions claims against Baccala and Shoop. In
August 1987, Baccala and Shoop, the Issuer and Hartford entered into a
Standstill Agreement, amended in 1994, pursuant to which the statutes of
limitations on Hartford's claims against Baccala and Shoop were tolled
indefinitely in exchange for Hartford's agreement to forbear filing complaints
against Baccala and Shoop based on such potential claims. Since 1983, Willis
Corroon has paid approximately $7.9 million in settlement of errors and
omissions claims brought by certain other issuing companies, including issuing
companies that went into liquidation. There has been no notification of
additional potential claims from Hartford or other issuing companies since 1992.
Hartford has not stated what it believes to be its total aggregate losses
potentially attributable to Baccala and Shoop. For accounting purposes, the
Issuer has established provisions in connection with the Baccala and
Shoop-related claims, and believes such provisions to be adequate. However,
there can be no assurance that the provisions will be adequate to cover claims
over time.
ENFORCEABILITY OF CIVIL LIABILITIES
Willis Corroon Group is a company with limited liability organized
under the laws of England and Wales. Certain of the directors and executive
officers of Willis Corroon Group and its subsidiaries (and certain of the
independent auditors named in this prospectus) are non-residents of the United
States and all or a substantial portion of the assets of Willis Corroon Group
and such persons are located outside the United States. As a result, it may not
be possible for investors to effect service of process within the United States
upon Willis Corroon Group or such persons, or to enforce against any of them
judgments of U.S. courts predicated upon civil liabilities under U.S. federal
securities laws. Willis Corroon Group has been advised by its English
solicitors, Clifford Chance, that there is also doubt as to the enforceability
in England in original actions, or in actions for the enforcement of judgments
of U.S. courts, of liabilities that are predicated upon the civil liabilities
provisions of the federal securities laws of the United States.
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MANAGEMENT
DIRECTORS OF TA I LIMITED, TA II LIMITED, TA III PLC AND TRINITY ACQUISITION
The following table sets forth certain information regarding the
directors of TA I Limited, the ultimate parent of Willis Corroon Group, as well
as TA II Limited, TA III plc and Trinity Acquisition (ages as of December 31,
1998).
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------------------ ------------------ ------------------------------------
<S> <C> <C>
Henry R. Kravis 55 Director
George R. Roberts 55 Director
Perry Golkin 45 Director
Todd A. Fisher 33 Director
Scott C. Nuttall 26 Director
John Reeve 54 Director
James R. Fisher 43 Director
Raymond G. Viault 54 Director
</TABLE>
Henry R. Kravis is a founding partner of KKR and, since January 1,
1996, has been a managing member of KKR & Co. L.L.C., the limited liability
company which is the general partner of Kohlberg Kravis Roberts & Co. L.P. Mr.
Kravis is also a general partner of KKR Associates, L.P. and a director of
Accuride Corporation, Amphenol Corporation, Borden, Inc., The Boyds Collection,
Ltd., BRW Acquisition, Inc., Evenflo Company, Inc., The Gillette Company, IDEX
Corporation, KinderCare Learning Centers, Inc., KSL Golf Holdings, Inc., KSL
Land Corporation, KSL Recreation Corporation, MedCath Incorporated, Newsquest
plc, Owens-Illinois Group, Inc., Owens-Illinois, Inc., Neway Anchorlok
International Inc., PRIMEDIA, Inc., Randalls Food Markets, Inc., Regal Cinemas,
Inc., RELTEC Corporation, Safeway Inc., Sotheby's Holdings, Inc., Spalding
Holdings Corporation and U.S. Natural Resources, Inc.
George R. Roberts is a founding partner of Kohlberg Kravis Roberts &
Co. L.P. and, since January 1, 1996, has been a managing member of KKR & Co.
L.L.C. Mr. Roberts is also a general partner of KKR Associates, L.P. and a
director of Accuride Corporation, Amphenol Corporation, Borden, Inc., The Boyds
Collection, Ltd., BRW Acquisition, Inc., Evenflo Company, Inc., IDEX
Corporation, KinderCare Learning Centers, Inc., KSL Land Corporation, KSL
Recreation Corporation, MedCath Incorporated, Neway Anchorlok International
Inc., Owens-Illinois Group, Inc., Owens-Illinois, Inc., PRIMEDIA, Inc., Randalls
Food Markets, Inc., Regal Cinemas, Inc., RELTEC Corporation, Safeway, Inc.,
Spalding Holdings Corporation and U.S. Natural Resources, Inc.
Perry Golkin has been a member of KKR & Co. L.L.C. since January 1,
1996. Mr. Golkin was a general partner of Kohlberg Kravis Roberts & Co. L.P.
from 1995 to January 1996. Prior to 1995, he was an executive of Kohlberg Kravis
Roberts & Co. L.P. He is a general partner of KKR Associates, L.P. He is a
member of the board of directors of BRW Acquisition, Inc., PRIMEDIA, Inc., RR
Holding Company Ltd. and Walter Industries, Inc.
Todd A. Fisher has been an executive of Kohlberg Kravis Roberts & Co.
L.P. since June 1993. Mr. Fisher was an associate at Goldman Sachs & Co. from
July 1992 to June 1993. He is a member of the board of directors of Accuride
Corporation, Layne Christensen Company and BRW Acquisition, Inc.
Scott C. Nuttall has been an executive of Kohlberg Kravis Roberts & Co.
L.P. since November 1996. Mr. Nuttall was an executive at The Blackstone Group
from January 1995 to November 1996. Prior to 1995, he attended the Wharton
School of Business at the University of Pennsylvania.
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<PAGE>
John Reeve joined the board of directors of Willis Corroon Group on
September 19, 1995 and became Executive Chairman of Willis Corroon Group on
December 1, 1995. He was managing director of Sun Life Corporation plc between
April 1989 and October 1995. He is also a non-executive director of Temple Bar
Investment Trust plc and a member of the executive committee and board of
directors of the International Insurance Society, Inc..
James R. Fisher heads Fisher Capital Corp. LLC. From 1986 through March
1997, Mr. Fisher was a senior executive of American Re Corporation and served
most recently as Senior Vice President and Chief Financial Officer of American
Re-Insurance Company and America Re Corporation, President of American Re
Financial Products, and President and Chief Executive Officer of American Re
Asset Management.
Raymond G. Viault joined the board of directors of Willis Corroon Group
on January 1, 1997 and resigned on October 30, 1998. He has been vice chairman
and a director of General Mills, Inc., since January 1996. He was formerly the
president and chief executive officer of Kraft Jacobs Suchard.
TA I Limited, TA II Limited, TA III plc and Trinity Acquisition have no
executive officers. Mr. Kravis and Mr. Roberts are first cousins.
DIRECTORS AND EXECUTIVE OFFICERS OF WILLIS CORROON GROUP
The following table sets forth certain information regarding the
directors and executive officers of Willis Corroon Group (ages as of December
31, 1998).
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- ----------- ----------------------------------------------------------------------
<S> <C> <C>
John Reeve 54 Executive Chairman; Director
Richard J. S. Bucknall 50 Chief Executive of Global Specialties (excluding
Willis Faber Re), also Executive responsible for discontinued U.K.
underwriting activities; Director
Michael P. Chitty 47 Company Secretary
Thomas Colraine 40 Group Finance Director; Director
Brian D. Johnson 56 Executive responsible for North American Retail;
Director
Patrick Lucas 59 Managing Partner of Gras Savoye; Non-executive Director
George F. Nixon 58 Chairman of U.K. Retail and Executive
responsible for Willis Corroon International
Holdings-Europe; Director
John M. Pelly 45 Chairman of Willis Faber Re; Director
Kenneth H. Pinkston 56 Group Executive Director responsible for
North American Retail, U.S. Wholesale, Asia-Pacific
and rest of the world; Director
</TABLE>
Richard J.S. Bucknall joined the board of directors of Willis Corroon
Group on November 1, 1998. He has been chief executive of Willis Corroon's
Global Specialties unit since 1998 and has also been the executive responsible
for discontinued U.K. underwriting since 1998. Mr. Bucknall has 32 years of
experience in the insurance brokerage industry, of which 13 years have been at
Willis Corroon.
Michael P. Chitty has been Company Secretary since January 1, 1995.
From April 1983 to October 1990 he was Secretary and from October 1990 to
December 1994 he was Joint Secretary.
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Mr. Chitty has 22 years of experience in the insurance brokerage industry, all
22 years of which have been at Willis Corroon.
Thomas Colraine has been the Group Finance Director since September
1997 and joined the board of directors of Willis Corroon Group on August 31,
1997. From January 1995 to October 1996, he was chief financial officer of
Willis Corroon's North American Operations and was change program director from
October 1996 to September 1997. Mr. Colraine has 10 years of experience in the
insurance brokerage industry, all 10 years of which have been at Willis Corroon.
Brian D. Johnson joined the board of directors of Willis Corroon Group
on January 1, 1993. He is an actuary and has been the executive responsible for
Willis Corroon's North American retail activities since 1997. Mr. Johnson has 35
years of experience in the insurance brokerage industry, of which 33 years have
been at Willis Corroon.
Patrick Lucas joined the board of directors of Willis Corroon Group on
April 15, 1998 as a non-executive director. He has been Managing Partner of Gras
Savoye since 1991, and Chairman and Chief Executive Officer of Gras Savoye S.A.
and Gras Savoye Reassurance since 1979 and 1976 respectively. He is a former
Chairman of the Federation Francaise des Courtiers en Assurance (the French
professional organization of insurance brokers). Mr. Lucas has 33 years of
experience in the insurance brokerage industry.
George F. Nixon joined the board of directors of Willis Corroon Group
on January 1, 1993. He has been the executive responsible for Willis Corroon's
U.K. retail activities since 1988 and has been chairman of the Company's
European Retail Advisory Board since 1993. He is also a director of World
Insurance Network Limited. Mr. Nixon has 42 years of experience in the insurance
brokerage industry, of which 34 years have been at Willis Corroon.
John M. Pelly joined the board of directors of Willis Corroon Group on
November 1, 1998. He has been chairman and chief executive of Willis Faber Re
since 1997. Mr. Pelly has 26 years of experience in the insurance brokerage
industry, all 26 years of which have been at Willis Corroon.
Kenneth H. Pinkston joined the board of directors of Willis Corroon
Group on January 1, 1993. He has had executive overview responsibility for North
American Retail since 1995, for U.S. Wholesale since 1993 and for Asia-Pacific
and the rest of the world since 1997. He is also a director of SunTrust Bank,
Nashville. Mr. Pinkston has 35 years of experience in the insurance brokerage
industry, of which 27 years have been at Willis Corroon.
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DIRECTORS AND EXECUTIVE OFFICERS OF THE ISSUER
The following table sets forth certain information regarding the
directors and executive officers of the Issuer (ages as of December 31, 1998).
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- ----------- ----------------------------------------------------------------------
<S> <C> <C>
Kenneth H. Pinkston 56 Group Executive Director responsible for North American
Retail, U.S. Wholesale, Asia-Pacific and rest of the world;
Director;
Brian D. Johnson 56 Executive responsible for North American Retail; Director
Charles D. Hamilton 43 Senior Vice President, Director of Finance and
Administration; Director
Bart R. Schwartz 46 Senior Vice President, Corporate Secretary and General
Counsel; Director
Kimberly G. Windrow 41 Senior Vice President, Director of Human Resources,
North America; Director
</TABLE>
Charles D. Hamilton joined the Issuer on October 27, 1986 as a risk
management consultant. On January 1, 1989 he became Vice President and Chief
Financial Officer of Public Entities National Company and the Issuer's US
wholesale operation. He became Vice President and Chief Administrative Officer
of the Issuer in March 1995. He became Senior Vice President and Chief Financial
Officer of the Issuer on October 1, 1996 and on February 2, 1997 he became
Senior Vice President and Chief Financial Officer of Willis Corroon North
America.
Bart R. Schwartz joined the Issuer on July 25, 1994 as Senior Vice
President and Deputy General Counsel. On January 1, 1995 he became Senior Vice
President of the Issuer and Assistant Secretary of Willis Corroon Group. On May
21, 1996 he became Senior Vice President, Secretary and General Counsel of the
Issuer, a position he still holds.
Kimberly G. Windrow joined the Issuer on June 6, 1988 as Human Resource
Manager. On January 1, 1992 she became Employee Relations Manager. On May 21,
1996, she became Human Resource Services Director. On October 1, 1997 she became
Human Resource Director and on January 26, 1999, she became Senior Vice
President for the Issuer. She is also a director of the Issuer.
DIRECTORS AND EXECUTIVE OFFICERS OF WILLIS CORROON PARTNERS
Willis Corroon Partners has no directors or executive officers, and its
operations are managed solely by its general partners.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS OF WILLIS CORROON GROUP AND THE
ISSUER
The aggregate compensation paid to all directors and executive officers
of Willis Corroon Group and the Issuer, who held office during 1998, for
services in such capacities for the year ended December 31, 1998 was L3,078,862,
which included contributions made to the pension plans in respect of such
directors and executive officers of Willis Corroon Group and Issuer of L564,621.
For the year ended December 31, 1998, the highest paid director received
L744,472, including pension plan contributions of approximately L220,000.
Each non-executive director of Willis Corroon Group who is not an
employee of Willis Corroon received an aggregate annual fee of either L21,000 or
$39,000, payable in quarterly installments, for the
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year ended December 31, 1998. Also, such directors receive attendance fees of
L500 or $925 for committee meetings of Willis Corroon Group's board (L1,000 or
$1,600 if they are Chairman of the committee) and a daily travel allowance of
L650 or $1,000 for attending meetings of the board or its committees outside
their country of residence. Directors who are also employees of Willis Corroon
receive no remuneration for serving as directors.
The compensation and other employment terms and conditions of the
directors of Willis Corroon Group was determined in 1998 by the remuneration
committee of Willis Corroon Group's board of directors which during 1998 was
comprised of Messrs. Rodgers, Schreyer and Sykes (all former non-executive
directors). The remuneration committee determined basic salaries and benefits as
well as performance-related incentives. The Executive Chairman of Willis Corroon
Group determines the compensation and benefits for the executive officers of
Willis Corroon Group.
Partners and employees of Kohlberg Kravis Roberts & Co. L.P. who serve
as directors and officers of TA I Limited, TA II Limited, TA III plc or Trinity
Acquisition do not receive additional compensation for service in such
capacities, other than customary directors' fees. See "Certain Relationships and
Related Transactions."
1998 STOCK OPTION PLAN
TA I Limited has adopted the 1998 Share Purchase and Option Plan for
Key Employees of TA I Limited providing for the grant of time-based vesting
options ("Time Options"), performance-based vesting options ("Performance
Options"), and various other share-based grants (collectively, the "Options") to
employees of TA I Limited and its subsidiaries to purchase ordinary shares of TA
I Limited. The 1998 Plan is intended (i) to promote the long term financial
interests and growth of TA I Limited and its subsidiaries by attracting and
retaining management personnel with the training, experience and ability to
enable them to make a substantial contribution to the success of TA I Limited's
business; (ii) to motivate management personnel by means of growth-related
incentives to achieve long range goals; and (iii) to further the alignment of
interests of participants with those of the shareholders of TA I Limited through
opportunities for increased share ownership in TA I Limited.
As of the closing date of the management equity offering, 10,988,483
Time Options have been granted and Willis Corroon expects that a comparable
number of Performance Options will be granted . There are 30 million ordinary
shares of TA I Limited available to be granted under the 1998 Plan. It is
expected that under the 1998 Plan, unless otherwise provided by the Board of
Directors of TA I Limited, Time Options would become exercisable in five equal
annual installments beginning on the second anniversary of the date of grant and
Performance Options would become exercisable to the extent, if any, that
performance goals based on Willis Corroon's cash flow and EBITDA are achieved
and thereafter in four equal annual installments, beginning on the third
anniversary of the date of grant. The exercisability of the Options may
accelerate or terminate based on the circumstances surrounding an optionee's
termination of employment, and Time Options will (and Performance Options may,
in the discretion of the Board of Directors of TA I Limited), fully accelerate
upon a change in control of Willis Corroon. Unless sooner terminated by TA I
Limited's Board of Directors, the 1998 Plan will expire ten years after its
adoption. Such termination will not affect the validity of any grant outstanding
on the date of termination.
The Board of Directors of TA I Limited will administer the 1998 Plan,
including, without limitation, the determination of the employees to whom grants
will be made, the number of shares of ordinary shares of TA I Limited subject to
each grant, and the various terms of such grants. The Board of Directors of TA I
Limited may from time to time amend the terms of any grant, but, except for
adjustments made upon a change in the ordinary shares of TA I Limited by reason
of a stock split, spin-off, stock dividend, stock combination or
reclassification, recapitalization, reorganization, consolidation, change of
control, or similar event, such action shall not adversely affect the rights of
any participant under the 1998 Plan with respect to the Options without such
participant's consent. The Board of Directors of TA I Limited will retain the
right to amend, suspend or terminate the 1998 Plan.
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SHAREHOLDERS
BENEFICIAL OWNERSHIP
TA I Limited owns 100% of the issued and outstanding ordinary shares of
TA II Limited, which owns 100% of the issued and outstanding shares of TA III
plc, which owns 100% of the issued and outstanding shares of Trinity
Acquisition, which owns 100% of the issued and outstanding ordinary shares of
Willis Corroon Group. The following sets forth information with respect to the
beneficial ownership of the voting and non-voting ordinary shares of TA I
Limited as of the date of this prospectus (without giving effect to any options
issued under the 1998 Plan) by (1) each person who is known by Willis Corroon
Group to beneficially own more than 5% of the TA I Limited ordinary shares, as
well as each member of the consortium, consisting of Guardian Royal Exchange,
Royal & SunAlliance Insurance Group, The Chubb Corporation, The Hartford
Financial Services Group, Inc., Travelers Property Casualty Corp. and The Tokio
Marine and Fire Insurance Co., Limited, who are the limited partners of the
direct parent of TA I Limited (referred to in this prospectus as the
"consortium"), (2) each of TA I Limited's directors and each of the directors
and executive officers of Willis Corroon Group and the Issuer and (3) all
directors and executive officers of Willis Corroon Group and the Issuer as a
group. Unless otherwise indicated, the address of each person named in the table
below is Willis Corroon Group Limited, Ten Trinity Square, London EC3P 3AX,
England.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP PERCENTAGE OF TA I
OF TA I ORDINARY ORDINARY
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES(1) SHARES OUTSTANDING
- ------------------------------------------------------------- -------------------------- -------------------------
<S> <C> <C>
KKR 1996 Overseas, Limited(2)................................ 92,002,916 77.3%
Henry R. Kravis(2)........................................... 92,002,916 77.3%
George R. Roberts(2)......................................... 92,002,916 77.3%
Perry Golkin(2).............................................. 92,002,916 77.3%
Todd A. Fisher(2)............................................ 92,002,916 77.3%
Scott C. Nuttall(2).......................................... 92,002,916 77.3%
James R. Fisher(3)........................................... -- --
Raymond G. Viault............................................ -- --
Guardian Royal Exchange(4)................................... 4,000,000 3.4%
Royal & SunAlliance Insurance Group(5)....................... 4,000,000 3.4%
The Chubb Corporation(6)..................................... 4,000,000 3.4%
The Hartford Financial Services Group, Inc.(7)............... 3,333,333 2.8%
Travelers Property Casualty Corp.(8)......................... 4,000,000 3.4%
The Tokio Marine and Fire Insurance Co., Limited(9).......... 1,000,000 0.8%
John Reeve(10)............................................... 140,000 *
Richard J.S. Bucknall........................................ 60,000 *
Michael P. Chitty............................................ 12,000 *
Thomas Colraine.............................................. 52,375 *
Brian D. Johnson............................................. 100,000 *
Patrick Lucas................................................ -- *
George F. Nixon.............................................. 100,000 *
John M. Pelly................................................ 100,000 *
Kenneth H. Pinkston.......................................... 40,000 *
Charles D. Hamilton(11)...................................... 6,000 *
Bart R. Schwartz(11)......................................... 62,409 *
Kimberly G. Windrow(11)...................................... 2,500 *
All directors and executive officers of Willis Corroon Group
and
the Issuer as a group (12 persons)......................... 675,284 *
</TABLE>
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<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP PERCENTAGE OF TA I
OF TA I ORDINARY ORDINARY
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES(1) SHARES OUTSTANDING
- ------------------------------------------------------------- -------------------------- -------------------------
<S> <C> <C>
All directors and executive officers of Willis Corroon Group
and the Issuer together with other employees as a group
(361 persons)(12).......................................... 4,757,062 4.0%
</TABLE>
- ------------------------
* Less than 1%.
(1) The amounts and percentages of TA I ordinary shares beneficially owned are
reported on the basis of regulations of the Securities and Exchange
Commission governing the determination of beneficial ownership of
securities. Under the rules of the Commission, a person is deemed to be a
"beneficial owner" of a security if that person has or shares "voting
power," which includes the power to vote or to direct the voting of such
security, or "investment power," which includes the power to dispose of or
to direct the disposition of such security. A person is also deemed to be a
beneficial owner of any securities of which that person has a right to
acquire beneficial ownership within 60 days. Under these rules, more than
one person may be deemed to be a beneficial owner of the same securities and
a person may be deemed to be a beneficial owner of securities as to which
such person has no economic interest. The percentage of TA I ordinary share
capital outstanding is based on 119,089,975 TA I ordinary shares outstanding
on the date of this prospectus.
(2) TA I ordinary shares shown as owned by KKR 1996 Overseas, Limited are owned
of record by Profit Sharing (Overseas), Limited. Kohlberg Kravis Roberts &
Co. L. P. is the general partner of KKR Associates II (1996), Limited
Partnership, which is the general partner of the KKR 1996 Fund (Overseas),
Limited, which is the general partner of Profit Sharing (Overseas), Limited,
which beneficially owns approximately 77% of the issued and outstanding TA I
ordinary shares. Messrs. Henry R. Kravis, George R. Roberts, James H.
Greene, Jr., Paul E. Raether, Michael W. Michelson, Michael T. Tokarz, Perry
Golkin, Robert I. McDonnell, Clifton S. Robbins, Scott M. Stuart and Edward
A. Gilhuly, as members of KKR Overseas, may be deemed to share beneficial
ownership of any shares beneficially owned by KKR 1996 Overseas, but
disclaim such beneficial ownership. Messrs. Todd A. Fisher and Scott C.
Nuttall are directors of TA I and are executives of Kohlberg Kravis Roberts
& Co. L.P. Messrs. Fisher and Nuttall are also limited partners of KKR
Associates II (1996), Limited Partnership. Messrs. Fisher and Nuttall
disclaim beneficial ownership of any TA I ordinary shares beneficially owned
by Kohlberg Kravis Roberts & Co. & L.P. and KKR Associates II (1996),
Limited Partnership. The address of KKR Overseas and each individual listed
above is c/o Kohlberg Kravis Roberts & Co., L.P., 9 West 57th Street, New
York, New York 10019.
(3) Fisher Capital Corp. LLC, of which Mr. James R. Fisher is an executive, is
the beneficial owner of 181,071 TA I ordinary shares. Mr. Fisher disclaims
beneficial ownership of such TA I ordinary shares. The address of Mr. Fisher
and Fisher Capital Corp. LLC is 8 South River Road, Cranbury, NJ 08512.
(4) TA I ordinary shares shown as owned by Guardian Royal Exchange are owned of
record by its affiliate Guardian Insurance Limited, and its address is Royal
Exchange, London EC2V 3LS.
(5) The address of Royal & SunAlliance Insurance Group is 1 Cornhill, London,
EC3V 3QR.
(6) The address of The Chubb Corporation is 15 Mountain View, Warren, New Jersey
07059.
(7) TA I ordinary shares shown as owned by The Hartford Financial Services
Group, Inc. are owned of record by its affiliate Nutmeg Insurance Company,
and its address is 690 Asylum Avenue, Hartford, Connecticut 06115.
(8) TA I ordinary shares shown as owned by Travelers Property Casualty Corp. are
owned of record by its affiliate Travelers Casualty and Surety Company and
its address is One Tower Square, 10 CR Hartford, Connecticut 06183.
(9) The address of The Tokio Marine and Fire Insurance Co., Limited is West 14th
Floor, Otemachi First Square, 5-1, Otemachi 1-Chome, Chiyoda-ku, Tokyo,
100-0004 Japan.
(10) 120,000 of the 140,000 TA I ordinary shares shown as owned by John Reeve
are held by a family trust of which John Reeve is a beneficiary.
(11) The address for such person is c/o Willis Corroon Corporation, 26 Century
Boulevard, P.O. Box 305026, Nashville, TN 37214.
(12) An additional 1,815,593 TA I ordinary shares are held in trust on behalf of
the directors, executive officers and other employees of the Issuer and
Willis Corroon Group subject to vesting. Such shares were issued in
connection with the cancellation of unvested incentive awards owned by such
employees prior to the Transactions. If all of such TA I ordinary shares
were vested on the date hereof, such directors, executive officers and
employees of the Issuer and Willis Corroon Group would beneficially own
approximately 5.5% of the outstanding TA I ordinary shares in the aggregate.
SHAREHOLDER RIGHTS AGREEMENT AND REGISTRATION RIGHTS AGREEMENT
Pursuant to a shareholder rights agreement dated as of July 22, 1998
among TA I Limited, TA II Limited, Profit Sharing (Overseas), Limited and the
members of the consortium referred to above, the holders of ordinary shares in
TA I ("Trinity Group ordinary shares") and Preference Shares of TA II Limited
are subject to rights of, and restrictions on, transfer, as well as the other
provisions described below.
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Pursuant to the shareholder rights agreement, each member of the
consortium has the right to require a proposed acquirer of any of the Trinity
Group ordinary shares held by Profit Sharing (Overseas), Limited or any of its
affiliates to purchase a specified percentage of such member's holding of
Trinity Group ordinary shares on similar terms. Additionally, if Profit Sharing
(Overseas), Limited or any of its affiliates receives a bona fide offer from a
third party to purchase a majority of the Trinity Group ordinary shares then
owned by them, they may require each of the Insurance Companies to sell a
similar proportion of their Trinity Group ordinary shares to such third party on
similar terms.
If, at any time prior to a public offering in the U.S. or a listing in
the U.K. or on another major stock exchange of the Trinity Group ordinary
shares, a member of the consortium receives a bona fide offer to purchase any of
its Trinity Group ordinary shares from an offeror, the shareholder rights
agreement requires that such member of the consortium first offer such Trinity
Group ordinary shares on equivalent terms to the other members of the
consortium. Any of the Trinity Group ordinary shares of such member of the
consortium which were the subject of any such bona fide offer and which were not
purchased by the other members of the consortium must be reoffered to those
members of the consortium which exercised their right of first refusal and
purchased some of such shares when such shares were initially offered. No member
of the consortium may, however, accept such offer to the extent it would cause
such member (together with its affiliates) beneficially to own more than 9.9% in
aggregate of the Trinity Group ordinary shares. Any remaining Trinity Group
ordinary shares must then be offered to Profit Sharing (Overseas), Limited which
can purchase such Trinity Group ordinary shares or elect to find another
purchaser for such Trinity Group ordinary shares. Any Trinity Group ordinary
shares not purchased by Profit Sharing (Overseas), Limited or its elected
purchaser may be sold to the third party that had initially made the bona fide
offer.
In the event of a transfer from Profit Sharing (Overseas), Limited to a
third party which would result in Profit Sharing (Overseas), Limited and its
affiliates having transferred legal and beneficial ownership of more than 25%
but less than 50% of the Trinity Group ordinary shares subscribed by Profit
Sharing (Overseas), Limited the shareholder rights agreement requires that a pro
rata amount of the Preference Shares held by each member of the consortium but
not such member's transferees (other than affiliates) must first have been
redeemed or transferred, and if a transfer would result in Profit Sharing
(Overseas), Limited and its affiliates having transferred legal and beneficial
ownership of more than 50% of the Trinity Group ordinary shares, all of the
Preference Shares held by each member of the consortium but not such member's
transferees (other than affiliates) must first have been redeemed.
Under the shareholder rights agreement, prior to September 2, 2000,
none of Profit Sharing (Overseas), Limited , its affiliates nor TA I Limited or
any of its subsidiaries may enter into a transaction that would result in a
"Sale of the Business" (as defined in the shareholder rights agreement) nor may
Profit Sharing (Overseas), Limited and its affiliates transfer in excess of 50%
of the Trinity Group Original ordinary shares, unless the Trinity Group is
experiencing financial difficulties of the type described by the shareholder
rights agreement and the holders of 60% or more of the then outstanding
Preference Shares have consented in writing to such transaction. Additionally,
the shareholder rights agreement provides that for three years from September 2,
2000, if Profit Sharing (Overseas), Limited, any of its affiliates or TA I
Limited or any of its subsidiaries receives a written, unsolicited offer from a
third party to enter into a transaction which would result in a Sale of the
Business, then the members of the consortium have the right to match the
unsolicited offer, and such offer may not be accepted if any member of the
consortium makes an offer at the same price and on the same terms in writing
within 35 days of being notified of the unsolicited offer. In addition, if
during such period Profit Sharing (Overseas), Limited or TA I Limited or any of
its subsidiaries proposes to enter into a transaction which would result in a
Sale of the Business other than pursuant to a unsolicited offer, it must first
allow the members of the consortium to make an offer to enter into a similar
transaction within 30 days, but if Profit Sharing (Overseas), Limited or TA I
Limited decides to refuse such offer, or if no member of the consortium makes
any such offer, then Profit
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Sharing (Overseas), Limited or TA I Limited or any of its Subsidiaries, as the
case may be, will be free to enter into a transaction resulting in a Sale of the
Business, provided that a definitive agreement is entered into within specified
time periods at the same or a higher price. These provisions will also apply to
the entering into of a transaction or series of related transactions, whether
pursuant to an unsolicited offer or a proposal by Profit Sharing (Overseas),
Limited or any of its affiliates to enter into such a transaction, whereby
Profit Sharing (Overseas), Limited and its affiliates would transfer at least
30% of the then issued Trinity Group ordinary shares to a single person or a
group of persons acting in concert.
The shareholder rights agreement also provides that Profit Sharing
(Overseas), Limited must use its best efforts to ensure that TA I Limited has an
independent director, and to remove and replace such director if so requested by
the holders of at least 60% of the then outstanding Preference Shares, until (i)
no member of the consortium owns at least 75% of the Preference Shares
originally purchased by it and (ii) the members of the consortium collectively
own in aggregate less than $80 million in redemption value of the Trinity Group
Preference Shares. In the event that the members of the consortium have the
right to appoint directors to the board of TA II Limited pursuant to the
articles of association of TA II Limited and provided that the members of the
consortium still hold at least a majority of the Preference Shares originally
issued to them, and for so long as those conditions prevail, the members of the
consortium are also entitled to nominate two directors for appointment to the
board of TA I Limited. In any such event, Profit Sharing (Overseas), Limited
shall use its best efforts to expand the size of the board of directors of TA I
Limited by two and to cause the newly created directorships to be filled with
such nominees.
Pursuant to a registration rights agreement dated as of July 22, 1998,
as amended, among TA I Limited, TA II Limited and the members of the consortium
named therein, such members, as holders of Trinity Group ordinary shares and
Preference Shares, have certain rights to require the issuer of such securities
to register such securities under the Securities Act.
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CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
As of the issuance of the outstanding Notes, the KKR 1996 Fund
(Overseas), Limited beneficially owned approximately 77% of the share capital of
TA I Limited, which is the parent of TA II Limited, which is the parent of TA
III plc, which is the parent of Trinity Acquisition, which owns all of the
issued and outstanding share capital of Willis Corroon Group. The general
partner of the KKR 1996 Fund (Overseas), Limited is KKR Associates II (1996),
Limited Partnership, a limited partnership of which the general partner is KKR
1996 Overseas, Limited, a company in which Messrs. Kravis, Roberts and Golkin
and other members of the limited liability company which is the general partner
of Kohlberg Kravis Roberts & Co. L.P. own the voting shares, and certain present
partners of Kohlberg Kravis Roberts & Co. L.P. and a former partner of Kohlberg
Kravis Roberts & Co. L.P. own the non-voting shares. KKR 1996 Overseas, Limited
has sole voting and investment power with respect to the share capital owned by
the KKR 1996 Fund (Overseas), Limited.
From time to time, Kohlberg Kravis Roberts & Co. L.P. may receive
customary fees in connection with divestitures, acquisitions and certain other
transactions involving Willis Corroon Group and its subsidiaries. In connection
with the completion of the Tender Offer, Kohlberg Kravis Roberts & Co. L.P. has
received aggregate fees of $7.5 million from Trinity Acquisition and Fisher
Capital Corp. LLC has received aggregate fees of $2.0 million from Trinity
Acquisition. In addition, Kohlberg Kravis Roberts & Co. L.P. and Fisher Capital
Corp. LLC render management, consulting, and certain other services to Willis
Corroon Group and its subsidiaries for annual fees payable quarterly in arrears.
It is expected that such annual fees will initially be in an amount of $1
million, in the case of Kohlberg Kravis Roberts & Co. L.P., and $350,000, in the
case of Fisher Capital Corp. LLC. Partners and employees of Kohlberg Kravis
Roberts & Co. L.P. and Fisher Capital Corp. LLC who also serve as directors and
officers of Willis Corroon Group do not receive additional compensation for
service in such capacity, other than customary directors' fees.
As of the date of this prospectus, the consortium beneficially owned
approximately 17% of the share capital of TA I Limited in the aggregate. Willis
Corroon has, and Willis Corroon will, place premiums with the members of the
consortium in the ordinary course of Willis Corroon's business.
R.J.S. Bucknall, G.F. Nixon and J.M. Pelly (directors of Willis Corroon
Group) and Mrs. E.H. Rendle (an affiliate of M.R. Rendle, a former non-executive
director of Willis Corroon Group) during 1998 were Underwriting Members of
Lloyd's. Insurance brokering subsidiaries of Willis Corroon Group place risks
with the syndicates in which the directors or certain of their affiliates
participate in the normal course of their brokering activities on the same basis
as such subsidiaries do with other Lloyd's syndicates. Willis Corroon Group has
given J. Reeve a guarantee in respect of the performance obligations of Willis
Faber & Dumas Limited, his employing company, in respect of an unfunded pension
scheme established for him and Willis Corroon Group has guaranteed the
performance obligations of Willis Corroon Corporation in respect of the pension
benefits for B.D. Johnson and K.H. Pinkston under the Willis Corroon Executive
Supplemental Plan, an unfunded pension plan.
J. M. Pelly and M. P. Chitty, an executive officer of Willis Corroon
Group, are directors of Sovereign. See "Risk Factors--Sovereign/WFUM."
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DESCRIPTION OF THE SENIOR CREDIT FACILITIES
To provide the senior financing required to complete the Tender Offer,
Trinity Acquisition entered into a Credit Agreement, dated as of July 22, 1998
(as amended, the "tender offer facility agreement"), among Trinity Acquisition,
as borrower, the lenders thereunder and The Chase Manhattan Bank, as
Administrative Agent and Collateral Agent, providing up to $475 million in term
loans and loan notes. In addition, to provide the long-term senior financing
required to refinance the tender offer facility agreement and to provide a
senior revolving credit facility for the general corporate purposes of Trinity
Acquisition and its subsidiaries, Trinity Acquisition entered into a second
Credit Agreement, dated as of July 22, 1998 (as amended, the "Permanent Facility
Agreement"), among Trinity Acquisition, as guarantor, Willis Corroon
Corporation, as borrower, Willis Corroon Group, as guarantor, the lenders
thereunder and The Chase Manhattan Bank, as Administrative Agent and Collateral
Agent, providing up to $450 million in term loans and $150 million in revolving
credit facilities.
GENERAL
The Permanent Facility Agreement, as amended, is comprised of
- a $125 million senior secured term loan facility (the "tranche A
facility"),
- a $125 million senior secured term loan facility (the "tranche B
facility"),
- a $100 million senior secured term loan facility (the "tranche C
facility"),
- a $100 million senior secured term loan facility (the "tranche D
facility") and
- a $150 million senior secured revolving credit facility (the "revolving
credit facility").
Borrowings under the term loan portions of the Permanent Facility Agreement were
borrowed in full on November 19, 1998
- to refinance outstanding indebtedness under the tender offer facility
agreement and certain other outstanding indebtedness of Trinity
Acquisition,
- to finance the repayment of certain existing indebtedness of Willis
Corroon,
- to make an intercompany loan to Trinity Acquisition, and
- to finance the payment of fees and expenses incurred in connection with
the Tender Offer.
The revolving credit facility is available for working capital requirements and
general corporate purposes, subject to certain limitations. The revolving credit
facility is available for loans denominated in U.S. dollars, pounds sterling and
certain other currencies and for letters of credit (including to support loan
note guarantees).
AMORTIZATION; PREPAYMENTS
The final maturity of the loans under the tranche A facility will be
the seventh anniversary of November 19, 1998 (the "Initial Funding Date"), with
interim amortization commencing on the thirtieth month after such Initial
Funding Date. The final maturity of the loans under the tranche B facility will
be the eighth anniversary of the Initial Funding Date, with nominal interim
amortization. The final maturity of the loans under the tranche C facility will
be the ninth anniversary of the Initial Funding Date, with nominal interim
amortization. The final maturity of the loans under the tranche D facility
collectively with the other term loans under the Permanent Facility Agreement
(the "term loans") will be nine years and six months after the Initial Funding
Date, with nominal interim amortization. The revolving credit facility will be
available until the seventh anniversary of the Initial Funding Date, and
extensions of credit outstanding thereunder on such seventh anniversary will
mature on such date.
Certain mandatory prepayments of term loans under the Permanent
Facility Agreement will be required with the proceeds of certain non-ordinary
course asset sales and other dispositions of property, to the extent not
reinvested and subject to other exceptions, and, for each fiscal year in which
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the ratio of consolidated total debt to consolidated adjusted EBITDA (as defined
in the Permanent Facility Agreement) is equal to or greater than 3.0:1.0, 50% of
excess cash flow (as defined in the Permanent Facility Agreement), to the extent
not reinvested and subject to other exceptions. In addition, certain prepayments
of the revolving credit facility will be required in the event that the
aggregate dollar equivalent of all loans and letter of credit outstandings
thereunder exceed 105% of the aggregate available commitments, which are
denominated in dollars.
INTEREST RATES; FEES
Loans under the Permanent Facility Agreement bear interest at a rate
per annum equal to, at the applicable borrower's election, either (i) a base
rate determined by reference to the highest of an announced prime rate, the U.S.
federal funds effective rate plus 1/2% or a rate for certificates of deposit
plus 1% (loans with interest based on the foregoing being referred to herein as
"Base Rate Loans") or (ii) the cost of funds for U.S. dollar deposits at LIBOR
for one, two, three or six months (or certain other periods to the extent
available, subject to certain conditions) as the applicable borrower may elect,
adjusted for certain additional costs (loans with interest based on the
foregoing being referred to herein as "LIBOR Loans"), plus, in each case, a
margin which will be subject to adjustment depending on the ratio of
consolidated total debt to consolidated adjusted EBITDA from time to time. The
applicable margin for LIBOR Loans under the Permanent Facility Agreement will
range, based on such performance pricing adjustments, from 2.25% to 0.875%, in
the case of revolving credit loans and tranche A loans, from 2.50% to 1.75%, in
the case of tranche B loans, from 2.75% to 2.00%, in the case of tranche C
loans, and from 3.00% to 2.25%, in the case of tranche D loans, in each with
applicable margins for Base Rate Loans being 1.25% lower than the margins for
LIBOR Loans at the corresponding performance pricing levels.
A commitment fee calculated based on the available unused commitments
under the Permanent Facility Agreement is payable quarterly in arrears at a per
annum rate of 0.50%, subject, in the case of commitments under the revolving
credit facility, to adjustment in a range from 0.50% to 0.25% depending on the
ratio of consolidated total debt to consolidated adjusted EBITDA from time to
time.
Fees in respect of letters of credit or loan note guarantees are
calculated at a rate per annum equal to (i) in the case of letters of credit,
the applicable margin for LIBOR Loans then applicable to utilizations under the
revolving credit facility, less 0.25%, and (ii) in the case of loan note
guarantees, 2.25%, based on the maximum amount of each letter of credit or loan
note guarantee, payable quarterly in arrears and upon the termination of the
revolving credit facility. In addition, a fronting fee calculated at a rate
equal to 0.25% of the maximum amount of each letter of credit or loan note
guarantee is payable for the account of the issuing bank in respect thereof,
payable quarterly in arrears and upon the termination of the revolving credit
facility.
GUARANTEE; SECURITY
All obligations of the borrower under the Permanent Facility Agreement
are guaranteed by Trinity Acquisition and its U.K. and U.S. subsidiaries
(including Willis Corroon Group), with certain exceptions.
Obligations under the Permanent Facility Agreement are secured by a
pledge of capital stock of certain subsidiaries of Trinity Acquisition
(including capital stock of Willis Corroon Group, its direct subsidiaries (with
certain exceptions), the Issuer and its direct U.S. subsidiaries), the
partnership interests of Willis Corroon Partners, as well as, in some
circumstances, certain intercompany notes and certain non-cash proceeds of asset
sales, in each case subject to exceptions and conditions set forth in the
Permanent Facility Agreement. The pledge of stock owned by Willis Corroon Group
is supported by a general lien (known as a floating charge in the U.K.) filed in
the U.K. against Willis Corroon Group's assets.
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CERTAIN COVENANTS
The Permanent Facility Agreement contains numerous operating and
financial covenants, including, without limitation, requirements in the case of
the Permanent Facility Agreement to maintain minimum ratios of adjusted EBITDA
to interest and maximum levels of indebtedness in relation to adjusted EBITDA.
In addition, the Permanent Facility Agreement includes covenants relating to the
delivery of financial statements, reports and notices, limitations on liens,
limitations on sales and other disposals of assets, limitations on indebtedness
and other liabilities, limitations on capital expenditures, limitations on
investments, mergers, acquisitions, loans and advances, limitations on dividends
and other distributions, limitations on prepayment, redemption or amendment of
the Notes, maintenance of property, environmental matters, employee benefit
matters, maintenance of insurance, nature of business, compliance with
applicable laws, corporate existence and rights, payment of taxes and access to
information and properties.
EVENTS OF DEFAULT
The Permanent Facility Agreement contains events of default after
expiration of applicable grace periods, including failure to make payments under
the Permanent Facility Agreement, breach of covenants, breach of representations
and warranties, certain events relating to employee benefit plans, invalidity of
certain loan documents, default under other agreements or conditions relating to
indebtedness (including the Notes), certain events of liquidation, moratorium,
insolvency, bankruptcy or similar events, certain litigation or other
proceedings, certain events relating to changes in control and certain issuances
by TA II Limited of equity or debt securities.
Upon the occurrence of an event of default, the banks will be able to
terminate the commitments under the Permanent Facility Agreement, and declare
all amounts, including accrued interest, under the Permanent Facility Agreement
to be due and payable and take certain other actions, including enforcement of
rights in respect of the collateral securing the Permanent Facility Agreement.
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DESCRIPTION OF PREFERENCE SHARES
In connection with the Tender Offer, six of the world's leading
insurance companies invested in the preference shares of TA II Limited (the
"Preference Shares"). See "The Tender Offer and Related Financings."
The Preference Shares (with an aggregate liquidation preference of
approximately $270 million) carry the right to a cumulative dividend of 8.5% per
annum (excluding the amount of any associated tax credits) on a fixed amount of
$25 per Preference Share. TA II Limited has the option to satisfy 1% per annum
of this cumulative dividend by the issuance of additional Preference Shares. The
dividend is payable in dollars semi-annually on June 30 and December 31 of each
year with the first dividend being payable on June 30, 1999. If the cash
dividend has not been paid on three or more consecutive dividend payment dates,
the holders of the Preference Shares have the right to appoint two directors to
the board of TA II Limited. The Preference Shares may be redeemed at any time by
TA II Limited by payment of a fixed amount of $25 per share plus any accrued and
unpaid dividends. The Preference Shares are required to be redeemed in full by
payment of a fixed amount of $25 per share plus any accrued and unpaid dividends
on the earlier of (i) the thirteenth anniversary of the first date on which the
Preference Shares were issued and (ii) the date that is six months after the
scheduled maturity date of the Notes, or on the sale of all or substantially all
of the business of Willis Corroon, including, without limitation, whether in a
single transaction or series of transactions and whether by sale of shares, sale
of assets or otherwise. Holders of Preference Shares have a preferential right
to receive out of surplus assets arrears and accruals of dividends and $25 per
share, but do not have any further right to participate in surplus assets.
The following is a brief description of each of the members of the
consortium:
GUARDIAN ROYAL EXCHANGE provides general, health, and life insurance
and related services, including asset management, to its 7.5 million customers
worldwide. Net premium income in 1998 was L4.1 billion. Guardian Royal Exchange
has approximately 17,500 employees. The board of Guardian Royal Exchange has
recommended to shareholders a cash and share offer from Sun Life and Provincial
Holdings plc for the entire company.
ROYAL & SUNALLIANCE INSURANCE GROUP is the U.K.'s largest general
insurer, with 1998 net premium income exceeding L9.7 billion. Royal &
SunAlliance Insurance Group provides general and life insurance products and
services and asset management and administrative services. In addition to the
U.K., Royal & SunAlliance Insurance Group operates in the United States, Canada,
Scandinavia, and more than 100 countries worldwide, including 16 nations in
Europe.
THE CHUBB CORPORATION is a global leader in providing business and
personal property and liability insurance. The company concentrates on specialty
commercial lines and insuring high value homes and their contents. Founded in
1882, Chubb is headquartered in Warren, New Jersey, and has more than 110
offices in 30 countries worldwide. In 1998, Chubb had net written premiums of
$5.5 billion.
THE HARTFORD FINANCIAL SERVICES GROUP, INC. is one of the oldest
insurance and financial services firms in the U.S., with 1998 revenues of $15.0
billion and assets of $150.6 billion. The company is a leading writer of
commercial property and casualty insurance, and is the number one annuity writer
in the U.S. It is also one of the largest writers of personal automobile and
homeowners insurance through independent agents. The company has 25,000
employees worldwide and offices in 15 countries.
TRAVELERS PROPERTY CASUALTY CORP. is one of the oldest and largest
insurance groups in the U.S. The company writes all forms of property casualty
insurance for businesses and individuals, primarily through independent agents.
Its 1998 net written premiums were approximately $8.1 billion. Travelers
Property Casualty Corp. is headquartered in Hartford, Connecticut and has
approximately 20,000 employees.
THE TOKIO MARINE AND FIRE INSURANCE CO., LIMITED is the largest
casualty insurance firm in Japan, with 1997/8 net premiums of Y1,336.0 billion
($10.1 billion). The company writes marine, fire, casualty, automobile and
allied lines of insurance, principally covering risks in Japan, and also offers
life insurance. The company is headquartered in Tokyo, Japan and has
approximately 13,750 employees.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
We have entered into an exchange and registration rights agreement with
the initial purchasers of the outstanding Notes in which we agreed, under
certain circumstances, to file a registration statement relating to an offer to
exchange the outstanding Notes for exchange Notes. We also agreed to use our
reasonable best efforts to cause such offer to be consummated within 270 days
following the original issue of the outstanding Notes. The exchange Notes will
have terms substantially identical to the outstanding Notes; except that the
exchange Notes will not contain terms with respect to transfer restrictions,
registration rights and additional interest for failure to observe certain
obligations in the registration rights agreement. The outstanding Notes were
issued on February 2, 1999.
Under the circumstances set forth below, we will use our reasonable
best efforts to cause the Securities and Exchange Commission to declare
effective a shelf registration statement with respect to the resale of the
outstanding Notes and keep the statement effective for up to two years after the
effective date of the shelf registration statement. These circumstances include:
- if any changes in law, Commission rules or regulations or applicable
interpretations thereof by the staff of the Commission do not permit us
to effect the exchange offer as contemplated by the registration rights
agreement;
- if any oustanding Notes validly tendered in the exchange offer are not
exchanged for exchange Notes within 270 days after the original issue
of the outstanding Notes;
- if any initial purchaser of the outstanding Notes so requests (but only
with respect to any outstanding Notes not eligible to be exchanged for
exchange Notes in the exchange offer); or
- if any holder of the outstanding Notes notifies us that it is not
permitted to participate in the exchange offer or would not receive
fully tradable exchange Notes pursuant to the exchange offer.
If we fail to comply with certain obligations under the registration
rights agreement, we will be required to pay additional interest to holders of
the outstanding Notes. Please read the section captioned "Registration Rights
Agreement" for more details regarding the registration rights agreement.
Each holder of outstanding Notes that wishes to exchange such
outstanding Notes for transferable exchange Notes in the exchange offer will be
required to make the following representations:
- any exchange Notes will be acquired in the ordinary course of its
business;
- such holder has no arrangement with any person to participate in the
distribution of the exchange Notes;
- such holder is not our "affiliate," as defined in Rule 405 of the
Securities Act, or if it is our affiliate, that it will comply with
applicable registration and prospectus delivery requirements of the
Securities Act; and
- if such holder is a person in the United Kingdom, that its ordinary
activities involve it in acquiring, holding, managing or disposing of
investments, as principal or agent, for the purposes of its business.
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RESALE OF EXCHANGE NOTES
Based on interpretations of the Commission staff set forth in no action
letters issued to unrelated third parties, we believe that exchange Notes issued
under the exchange offer in exchange for outstanding Notes may be offered for
resale, resold and otherwise transferred by any exchange Note holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act, if:
- such holder is not an "affiliate" of Willis Corroon within the meaning
of Rule 405 under the Securities Act;
- such exchange Notes are acquired in the ordinary course of the holder's
business; and
- the holder does not intend to participate in the distribution of such
exchange Notes; and
- if such holder is a person in the United Kingdom, that its ordinary
activities involve it in acquiring, holding, managing or disposing of
investments, as principal or agent, for the purposes of its business.
Any holder who tenders in the exchange offer with the intention of
participating in any manner in a distribution of the exchange Notes:
- cannot rely on the position of the staff of the Commission enunciated
in "Exxon Capital Holdings Corporation" or similar interpretive
letters; and
- must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale
transaction.
This prospectus may be used for an offer to resell, resale or other
retransfer of exchange Notes only as specifically set forth in this prospectus.
With regard to broker-dealers, only broker-dealers that acquired the outstanding
Notes as a result of market-making activities or other trading activities may
participate in the exchange offer. Each broker-dealer that receives exchange
Notes for its own account in exchange for outstanding Notes, where such
outstanding Notes were acquired by such broker-dealer as a result of market-
making activities or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of the exchange Notes. Please
read the section captioned "Plan of Distribution" for more details regarding the
transfer of exchange Notes.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this
prospectus and in the letter of transmittal, the Issuer will accept for exchange
any outstanding Notes properly tendered and not withdrawn prior to the
expiration date. The Issuer will issue $1,000 principal amount of exchange Notes
in exchange for each $1,000 principal amount of outstanding Notes surrendered
under the exchange offer. Outstanding Notes may be tendered only in integral
multiples of $1,000.
The form and terms of the exchange Notes will be substantially
identical to the form and terms of the outstanding Notes except the exchange
Notes will be registered under the Securities Act, will not bear legends
restricting their transfer and will not provide for any additional interest upon
failure of Willis Corroon to fulfill its obligations under the registration
rights agreement to file, and cause to be effective, a registration statement.
The exchange Notes will evidence the same debt as the outstanding Notes. The
exchange Notes will be issued under and entitled to the benefits of the same
indenture that authorized the issuance of the outstanding Notes. Consequently,
both series will be treated as a single class of debt securities under that
indenture. For a description of the indenture, see "Description of the Notes"
below.
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The exchange offer is not conditioned upon any minimum aggregate
principal amount of outstanding Notes being tendered for exchange.
As of the date of this prospectus, $550 million aggregate principal
amount of the outstanding Notes are outstanding. This prospectus and the letter
of transmittal are being sent to all registered holders of outstanding Notes.
There will be no fixed record date for determining registered holders of
outstanding Notes entitled to participate in the exchange offer.
The Issuer intends to conduct the exchange offer in accordance with the
provisions of the registration rights agreement, the applicable requirements of
the Securities Act and the Securities Exchange Act of 1934 and the rules and
regulations of the Commission. Outstanding Notes that are not tendered for
exchange in the exchange offer will remain outstanding and continue to accrue
interest and will be entitled to the rights and benefits such holders have under
the indenture relating to the outstanding Notes and the registration rights
agreement.
The Issuer will be deemed to have accepted for exchange properly
tendered outstanding Notes when it has given oral or written notice of the
acceptance to the exchange agent. The exchange agent will act as agent for the
tendering holders for the purposes of receiving the exchange Notes from us and
delivering the exchange Notes to such holders. Subject to the terms of the
registration rights agreement, the Issuer expressly reserves the right to amend
or terminate the exchange offer, and not to accept for exchange any outstanding
Notes not previously accepted for exchange, upon the occurrence of any of the
conditions specified below under the caption "--Certain Conditions to the
Exchange Offer."
Holders who tender outstanding Notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
outstanding Notes. We will pay all charges and expenses, other than certain
applicable taxes described below, in connection with the exchange offer. It is
important that you read the section labeled "--Fees and Expenses" below for more
details regarding fees and expenses incurred in the exchange offer.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The exchange offer will expire at 5:00 p.m., New York City time on
, 1999, unless in its sole discretion, the Issuer extends it.
In order to extend the exchange offer, the Issuer will notify the
exchange agent orally or in writing of any extension. The Issuer will notify the
registered holders of outstanding Notes of the extension no later than 9:00
a.m., New York City time, on the business day after the previously scheduled
expiration date.
The Issuer reserves the right, in its sole discretion:
- to delay accepting for exchange any outstanding Notes;
- to extend the exchange offer or to terminate the exchange offer and to
refuse to accept outstanding Notes not previously accepted if any of
the conditions set forth below under "--Certain Conditions to the
Exchange Offer" have not been satisfied, by giving oral or written
notice of such delay, extension or termination to the exchange agent;
or
- subject to the terms of the registration rights agreement, to amend the
terms of the exchange offer in any manner.
Any such delay in acceptance, extension, termination or amendment will
be followed as promptly as practicable by oral or written notice thereof to the
registered holders of outstanding Notes. If
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the Issuer amends the exchange offer in a manner that it determines to
constitute a material change, the Issuer will promptly disclose such amendment
in a manner reasonably calculated to inform the holders of outstanding Notes of
such amendment.
Without limiting the manner in which the it may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the exchange offer, the Issuer shall have no obligation to publish, advertise,
or otherwise communicate any such public announcement, other than by making a
timely release to a financial news service.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Despite any other term of the exchange offer, the Issuer will not be
required to accept for exchange, or exchange any exchange Notes for, any
outstanding Notes, and the Issuer may terminate the exchange offer as provided
in this prospectus before accepting any outstanding Notes for exchange if in the
Issuer's reasonable judgment:
- the exchange Notes to be received will not be tradeable by the holder,
without restriction under the Securities Act, the Securities Exchange
Act of 1934 and without material restrictions under the blue sky or
securities laws of substantially all of the states of the United
States;
- the exchange offer, or the making of any exchange by a holder of
outstanding Notes, would violate applicable law or any applicable
interpretation of the staff of the Commission; or
- any action or proceeding has been instituted or threatened in any court
or by or before any governmental agency with respect to the exchange
offer that, in the Issuer's judgment, would reasonably be expected to
impair the ability of Willis Corroon to proceed with the exchange
offer.
In addition, the Issuer will not be obligated to accept for exchange
the outstanding Notes of any holder that has not made to the Issuer (i) the
representations described under "--Purpose and Effect of the Exchange Offer,"
"--Procedures for Tendering" and "Plan of Distribution" and (ii) such other
representations as may be reasonably necessary under applicable Commission
rules, regulations or interpretations to make available to the Issuer an
appropriate form for registration of the exchange Notes under the Securities
Act.
The Issuer expressly reserves the right, at any time or at various
times, to extend the period of time during which the exchange offer is open.
Consequently, the Issuer may delay acceptance of any outstanding Notes by giving
oral or written notice of such extension to their holders. During any such
extensions, all outstanding Notes previously tendered will remain subject to the
exchange offer, and the Issuer may accept them for exchange. The Issuer will
return any outstanding Notes that we do not accept for exchange for any reason
without expense to their tendering holder as promptly as practicable after the
expiration or termination of the exchange offer.
The Issuer expressly reserves the right to amend or terminate the
exchange offer, and to reject for exchange any outstanding Notes not previously
accepted for exchange, upon the occurrence of any of the conditions of the
exchange offer specified above. We will give oral or written notice of any
extension, amendment, non-acceptance or termination to the holders of the
outstanding Notes as promptly as practicable. In the case of any extension, such
notice will be issued no later than 9:00 a.m., New York City time, on the
business day after the previously scheduled expiration date.
These conditions are for the sole benefit of the Issuer and the Issuer
may assert them regardless of the circumstances that may give rise to them or
waive them in whole or in part at any or at various times in its sole
discretion. If the Issuer fails at any time to exercise any of the foregoing
rights,
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this failure will not constitute a waiver of such right. Each such right will be
deemed an ongoing right that the Issuer may assert at any time or at various
times.
In addition, the Issuer will not accept for exchange any outstanding
Notes tendered, and will not issue exchange Notes in exchange for any such
outstanding Notes, if at such time any stop order will be threatened or in
effect with respect to the registration statement of which this prospectus
constitutes a part or the qualification of the indenture under the Trust
Indenture Act of 1939.
PROCEDURES FOR TENDERING
Only a holder of outstanding Notes may tender such outstanding Notes in
the exchange offer. To tender in the exchange offer, a holder must:
- complete, sign and date the letter of transmittal, or a facsimile of
the letter of transmittal; have the signature on the letter of
transmittal guaranteed if the letter of transmittal so requires; and
mail or deliver such letter of transmittal or facsimile to the exchange
agent prior to the expiration date; or
- comply with DTC's Automated Tender Offer Program procedures described
below.
In addition, either:
- the exchange agent must receive outstanding Notes along with the letter
of transmittal; or
- the exchange agent must receive, prior to the expiration date, a timely
confirmation of book-entry transfer of such outstanding Notes into the
exchange agent's account at DTC according to the procedure for
book-entry transfer described below or a properly transmitted agent's
message; or
- the holder must comply with the guaranteed delivery procedures
described below.
To be tendered effectively, the exchange agent must receive any
physical delivery of the letter of transmittal and other required documents at
the address set forth below under "--Exchange Agent" prior to the expiration
date.
The tender by a holder that is not withdrawn prior to the expiration
date will constitute an agreement between such holder and the Issuer in
accordance with the terms and subject to the conditions set forth in this
prospectus and in the letter of transmittal.
The method of delivery of outstanding Notes, the letter of transmittal
and all other required documents to the exchange agent is at the holder's
election and risk. Rather than mail these items, the Issuer recommends that
holders use an overnight or hand delivery service. In all cases, holders should
allow sufficient time to assure delivery to the exchange agent before the
expiration date. Holders should not send the letter of transmittal or
outstanding Notes to Willis Corroon. Holders may request their respective
brokers, dealers, commercial banks, trust companies or other nominees to effect
the above transactions for them.
Any beneficial owner whose outstanding Notes are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact the registered holder promptly and instruct it
to tender on the owner's behalf. If such beneficial owner wishes to tender on
its own behalf, it must, prior to completing and executing the letter of
transmittal and delivering its outstanding Notes; either:
- make appropriate arrangements to register ownership of the outstanding
Notes in such owner's name; or
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- obtain a properly completed bond power from the registered holder of
outstanding Notes.
The transfer of registered ownership may take considerable time and may
not be completed prior to the expiration date.
Signatures on a letter of transmittal or a notice of withdrawal
described below must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or another "eligible institution" within the meaning of Rule
17Ad-15 under the Exchange Act, unless the outstanding Notes tendered pursuant
thereto are tendered:
- by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the letter
of transmittal; or
- for the account of an eligible institution.
If the letter of transmittal is signed by a person other than the
registered holder of any outstanding Notes listed on the outstanding Notes, such
outstanding Notes must be endorsed or accompanied by a properly completed bond
power. The bond power must be signed by the registered holder as the registered
holder's name appears on the outstanding Notes and an eligible institution must
guarantee the signature on the bond power.
If the letter of transmittal or any outstanding Notes or bond powers
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing. Unless waived by us,
they should also submit evidence satisfactory to us of their authority to
deliver the letter of transmittal.
The exchange agent and DTC have confirmed that any financial
institution that is a participant in DTC's system may use DTC's Automated Tender
Offer Program to tender. Participants in the program may, instead of physically
completing and signing the letter of transmittal and delivering it to the
exchange agent, transmit their acceptance of the exchange offer electronically.
They may do so by causing DTC to transfer the outstanding Notes to the exchange
agent in accordance with its procedures for transfer. DTC will then send an
agent's message to the exchange agent. The term "agent's message" means a
message transmitted by DTC, received by the exchange agent and forming part of
the book-entry confirmation, to the effect that:
- DTC has received an express acknowledgment from a participant in its
Automated Tender Offer Program that is tendering outstanding Notes that
are the subject of such book-entry confirmation;
- such participant has received and agrees to be bound by the terms of
the letter of transmittal (or, in the case of an agent's message
relating to guaranteed delivery, that such participant has received and
agrees to be bound by the applicable notice of guaranteed delivery);
and
- the agreement may be enforced against such participant.
The Issuer will determine in its sole discretion all questions as to
the validity, form, eligibility (including time of receipt), acceptance of
tendered outstanding Notes and withdrawal of tendered outstanding Notes. The
Issuer's determination will be final and binding. The Issuer reserves the
absolute right to reject any outstanding Notes not properly tendered or any
outstanding Notes the acceptance of which would, in the opinion of the Issuer's
counsel, be unlawful. The Issuer also reserves the right to waive any defects,
irregularities or conditions of tender as to particular outstanding Notes. The
Issuer's interpretation of the terms and conditions of the exchange offer
(including the instructions in the letter of
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transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of outstanding Notes must
be cured within such time as the Issuer shall determine. Although the Issuer
intends to notify holders of defects or irregularities with respect to tenders
of outstanding Notes, neither the Issuer, the exchange agent nor any other
person will incur any liability for failure to give such notification. Tenders
of outstanding Notes will not be deemed made until such defects or
irregularities have been cured or waived. Any outstanding Notes received by the
exchange agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned to the exchange
agent without cost to the tendering holder, unless otherwise provided in the
letter of transmittal, as soon as practicable following the expiration date.
In all cases, the Issuer will issue exchange Notes for outstanding
Notes that it has accepted for exchange under the exchange offer only after the
exchange agent timely receives:
- outstanding Notes or a timely book-entry confirmation of such
outstanding Notes into the exchange agent's account at DTC; and
- a properly completed and duly executed letter of transmittal and all
other required documents or a properly transmitted agent's message.
By signing the letter of transmittal, each tendering holder of
outstanding Notes will represent to the Issuer that, among other things:
- any exchange Notes that the holder receives will be acquired in the
ordinary course of its business;
- the holder has no arrangement or understanding with any person or
entity to participate in the distribution of the exchange Notes;
- if the holder is not a broker-dealer, that it is not engaged in and
does not intend to engage in the distribution of the exchange Notes;
- if the holder is a broker-dealer that will receive exchange Notes for
its own account in exchange for outstanding Notes that were acquired as
a result of market-making activities, that it will deliver a
prospectus, as required by law, in connection with any resale of such
exchange Notes;
- the holder is not an "affiliate," as defined in Rule 405 of the
Securities Act, of Willis Corroon or, if the holder is an affiliate, it
will comply with any applicable registration and prospectus delivery
requirements of the Securities Act; and
- if the holder is a person in the United Kingdom, that its ordinary
activities involve it in acquiring, holding, managing or disposing of
investments, as principal or agent, for the purposes of its business.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with
respect to the outstanding Notes at DTC for purposes of the exchange offer
promptly after the date of this prospectus; and any financial institution
participating in DTC's system may make book-entry delivery of outstanding Notes
by causing DTC to transfer such outstanding Notes into the exchange agent's
account at DTC in accordance with DTC's procedures for transfer. Holders of
outstanding Notes who are unable to deliver confirmation of the book-entry
tender of their outstanding Notes into the exchange agent's account at DTC or
all other documents required by the letter of transmittal to the exchange agent
on or prior to the
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expiration date must tender their outstanding Notes according to the guaranteed
delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders wishing to tender their outstanding Notes but whose outstanding
Notes are not immediately available or who cannot deliver their outstanding
Notes, the letter of transmittal or any other required documents to the exchange
agent or comply with the applicable procedures under DTC's Automated Tender
Offer Program prior to the expiration date may tender if:
- the tender is made through an eligible institution;
- prior to the expiration date, the exchange agent receives from such
eligible institution either a properly completed and duly executed
notice of guaranteed delivery (by facsimile transmission, mail or hand
delivery) or a properly transmitted agent's message and notice of
guaranteed delivery:
- setting forth the name and address of the holder, the
registered number(s) of such outstanding Notes and the
principal amount of outstanding Notes tendered;
- stating that the tender is being made thereby; and
- guaranteeing that, within three (3) New York Stock Exchange
trading days after the expiration date, the letter of
transmittal (or facsimile thereof) together with the
outstanding Notes or a book-entry confirmation, and any
other documents required by the letter of transmittal will
be deposited by the eligible institution with the exchange
agent; and
- the exchange agent receives such properly completed and executed letter
of transmittal (or facsimile thereof), as well as all tendered
outstanding Notes in proper form for transfer or a book-entry
confirmation, and all other documents required by the letter of
transmittal, within three (3) New York State Exchange trading days
after the expiration date.
Upon request to the exchange agent, a notice of guaranteed delivery
will be sent to holders who wish to tender their outstanding Notes according to
the guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, holders of outstanding
Notes may withdraw their tenders at any time prior to the expiration date.
For a withdrawal to be effective:
- the exchange agent must receive a written notice (which may be by
telegram, telex, facsimile transmission or letter) of withdrawal at one
of the addresses set forth below under "--Exchange Agent;" or
- holders must comply with the appropriate procedures of DTC's Automated
Tender Offer Program system.
Any such notice of withdrawal must:
- specify the name of the person who tendered the outstanding Notes to be
withdrawn;
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- identify the outstanding Notes to be withdrawn (including the principal
amount of such
outstanding Notes); and
- where certificates for outstanding Notes have been transmitted, specify
the name in which such outstanding Notes were registered, if different
from that of the withdrawing holder.
If certificates for outstanding Notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of such
certificates, the withdrawing holder must also submit:
- the serial numbers of the particular certificates to be withdrawn; and
- a signed notice of withdrawal with signatures guaranteed by an eligible
institution unless such holder is an eligible institution.
If outstanding Notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn
outstanding Notes and otherwise comply with the procedures of such facility. The
Issuer will determine all questions as to the validity, form and eligibility
(including time of receipt) of such notices, and our determination shall be
final and binding on all parties. The Issuer will deem any outstanding Notes so
withdrawn not to have validity tendered for exchange for purposes of the
exchange offer. Any outstanding Notes that have been tendered for exchange but
that are not exchanged for any reason will be returned to their holder without
cost to the holder (or, in the case of outstanding Notes tendered by book-entry
transfer into the exchange agent's account at DTC according to the procedures
described above, such outstanding Notes will be credited to an account
maintained with DTC for outstanding Notes) as soon as practicable after
withdrawal, rejection of tender or termination of the exchange offer. Properly
withdrawn outstanding Notes may be retendered by following one of the procedures
described under "--Procedures for Tendering" above at any time on or prior to
the expiration date.
EXCHANGE AGENT
The Bank of New York has been appointed as exchange agent for the
exchange offer. You should direct questions and requests for assistance,
requests for additional copies of this prospectus or of the letter of
transmittal and requests for the notice of guaranteed delivery to the exchange
agent addressed as follows:
<TABLE>
<S> <C>
FOR DELIVERY BY REGISTERED OR CERTIFIED FOR OVERNIGHT DELIVERY ONLY OR BY HAND:
MAIL:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street
New York, New York 10286 New York, New York 10286
Attn: Marcia Brown, Attn: Marcia Brown,
Corporate Trust Operations, 7E Corporate Trust Operations, 7E
</TABLE>
BY FACSIMILE TRANSMISSION (FOR ELIGIBLE INSTITUTIONS ONLY):
The Bank of New York
(212) 815-4699
Attn: Marcia Brown,
Corporate Trust Operations, 7E
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
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FEES AND EXPENSES
The Issuer will bear the expenses of soliciting tenders. The principal
solicitation is being made by mail; however, we may make additional solicitation
by telegraph, telephone or in person by our officers and regular employees and
those of our affiliates.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to broker-dealers or others soliciting
acceptances of the exchange offer. The Issuer will, however, pay the exchange
agent reasonable and customary fees for its services and reimburse it for its
related reasonable out-of-pocket expenses.
The Issuer will pay the cash expenses to be incurred in connection with
the exchange offer. The expenses are estimated in the aggregate to be
approximately $ - . They include:
- Commission registration fees;
- fees and expenses of the exchange agent and trustee;
- accounting and legal fees and printing costs; and
- related fees and expenses.
The Issuer will pay all transfer taxes, if any, applicable to the
exchange of outstanding Notes under the exchange offer. The tendering holder,
however, will be required to pay any transfer taxes (whether imposed on the
registered holder or any other person) if:
- certificates representing outstanding Notes for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
issued in the name of, any person other than the registered holder of
outstanding Notes tendered;
- tendered outstanding Notes are registered in the name of any person
other than the person signing the letter of transmittal; or
- a transfer tax is imposed for any reason other than the exchange of
outstanding Notes under the exchange offer.
If satisfactory evidence of payment of such taxes is not submitted with the
letter of transmittal, the amount of such transfer taxes will be billed to that
tendering holder.
TRANSFER TAXES
Holders who tender their outstanding Notes for exchange will not be
required to pay any transfer taxes. However, holders who instruct the Issuer to
register exchange Notes in the name of, or request that outstanding Notes not
tendered or not accepted in the exchange offer be returned to, a person other
than the registered tendering holder will be required to pay any applicable
transfer tax.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of outstanding Notes who do not exchange their outstanding
Notes for exchange Notes under the exchange offer will remain subject to the
restrictions on transfer of such outstanding Notes:
- as set forth in the legend printed on the notes as a consequence of the
issuance of the outstanding Notes pursuant to the exemptions from, or
in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws; and
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- otherwise set forth in the offering memorandum distributed in
connection with the private offering of the outstanding Notes.
In general, you may not offer or sell the outstanding Notes unless they
are registered under the Securities Act or the offer or sale is exempt from
registration under the Securities Act and applicable state securities laws.
Except as required by the registration rights agreement, we do not intend to
register resales of the outstanding Notes under the Securities Act. Based on
interpretations of the Commission staff, exchange Notes issued pursuant to the
exchange offer may be offered for resale, resold or otherwise transferred by
their holders (other than any such holder that is our "affiliate" within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that the holders acquired the exchange Notes in the ordinary course of the
holders' business and the holders have no arrangement or understanding with
respect to the distribution of the exchange Notes to be acquired in the exchange
offer. Any holder who tenders in the exchange offer for the purpose of
participating in a distribution of the exchange Notes:
- cannot rely on the applicable interpretations of the Commission; and
- must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale
transaction.
ACCOUNTING TREATMENT
The Issuer will record the exchange Notes in its accounting records at
the same carrying value as the outstanding Notes, which is the aggregate
principal amount as reflected in the Issuer's accounting records on the date of
exchange. Accordingly, the Issuer will not recognize any gain or loss for
accounting purposes in connection with the exchange offer. The Issuer will
record the expenses of the exchange offer as incurred.
OTHER
Participation in the exchange offer is voluntary, and you should
carefully consider whether to accept. You are urged to consult your financial
and tax advisors in making your own decision on what action to take.
The Issuer may in the future seek to acquire untendered outstanding
Notes in open market or privately negotiated transactions, through subsequent
exchange offers or otherwise. The Issuer has no present plans to acquire any
outstanding Notes that are not tendered in the exchange offer or to file a
registration statement to permit resales of any untendered outstanding Notes.
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DESCRIPTION OF THE NOTES
GENERAL
The outstanding Notes were issued and the exchange Notes will be issued
pursuant to an Indenture, dated as of February 2, 1999, between Willis Corroon
Group, Willis Corroon Partners, the Issuer and The Bank of New York, as trustee,
a copy of the form of which will be made available to holders of outstanding
Notes upon request. The Indenture is limited in aggregate principal amount to
$550.0 million. Upon the issuance of the exchange Notes, or the effectiveness of
the Shelf Registration Statement (as defined), the Indenture will be subject to
and governed by the Trust Indenture Act of 1939. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act. The following summary of the material provisions of
the Indenture does not purport to be complete and is qualified in its entirety
by reference to the provisions of the Indenture, including the definitions
therein of certain terms used below. The definitions of certain terms used in
the following summary are set forth below under "--Certain Definitions." For
purposes of this summary,
- the term "Willis Corroon Group" refers only to Willis Corroon Group
Limited and not to any of its Subsidiaries,
- the term "Issuer" refers only to Willis Corroon Corporation and not to
any of its Subsidiaries and
- the term "Closing Date" refers to November 19, 1998, the date on which
the Subordinated Bridge Agreement was executed.
The outstanding Notes are and the exchange Notes will be general
unsecured obligations of the Issuer and will be subordinated in right of payment
to all existing and future Senior Indebtedness of the Issuer. As of December 31,
1998, on a pro forma basis giving effect to the Transactions, the aggregate
amount of the Issuer's outstanding Senior Indebtedness would have been
approximately L277.2 million, all of which would have been secured, and the
Issuer would have had no Senior Subordinated Indebtedness outstanding other than
the Notes. The Indenture will permit the incurrence of additional Senior
Indebtedness in the future. See "Risk Factors--Substantial Leverage and Debt
Service."
Willis Corroon Group and Willis Corroon Partners, as primary obligors
and not merely as sureties, will jointly and severally irrevocably and
unconditionally Guarantee, on a senior subordinated basis, the performance and
full and punctual payment when due, whether at Stated Maturity, by acceleration
or otherwise, of all obligations of the Issuer under the Indenture and the
Notes, whether for payment of principal of or interest on or liquidated damages
in respect of the Notes, expenses, indemnification or otherwise, on the terms
set forth in the Indenture by executing the Indenture.
Sovereign Marine & General Insurance Company Limited, in provisional
liquidation, was an Unrestricted Subsidiary on the date of issuance of the
outstanding Notes. Under certain circumstances, Willis Corroon Group will be
able to designate other current or future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be Guarantors or be subject to
any of the restrictive covenants set forth in the Indenture.
SUBORDINATION
The payment of the Subordinated Note Obligations will be subordinated
in right of payment, as set forth in the Indenture, to the prior payment in full
in cash or cash equivalents of all Senior Indebtedness, whether outstanding on
the date of the Indenture or thereafter incurred. Upon any
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distribution to creditors of the Issuer in a liquidation or dissolution of the
Issuer or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Issuer or its property, an assignment for the benefit
of creditors or any marshalling of the Issuer's assets and liabilities, the
holders of Senior Indebtedness will be entitled to receive payment in full in
cash or cash equivalents of such Senior Indebtedness and all outstanding Letter
of Credit Obligations will be fully cash collateralized before the Holders will
be entitled to receive any payment with respect to the Subordinated Note
Obligations, and until all Senior Indebtedness is paid in full in cash or cash
equivalents, any distribution to which the Holders would be entitled shall be
made to the holders of Senior Indebtedness (except that Holders may receive
(i) shares of stock and any debt securities that are
subordinated at least to the same extent as the Notes to
(a) Senior Indebtedness and
(b) any securities issued in exchange for Senior
Indebtedness and
(ii) payments made from the trusts described under "--Legal
Defeasance and Covenant Defeasance").
The Issuer also may not make any payment upon or in respect of the
Subordinated Note Obligations (except in such subordinated securities or from
the trust described under "--Legal Defeasance and Covenant Defeasance") if
- a default in the payment of the principal of, premium, if any, or
interest on, or of unreimbursed amounts under drawn letters of credit
or in respect of bankers' acceptances or fees relating to letters of
credit or bankers' acceptances constituting, Designated Senior
Indebtedness occurs and is continuing beyond any applicable period of
grace (a "PAYMENT DEFAULT") or
- any other default occurs and is continuing with respect to Designated
Senior Indebtedness that permits holders of the Designated Senior
Indebtedness as to which such default relates to accelerate its
maturity without further notice (except such notice as may be required
to effect such acceleration) or the expiration of any applicable grace
periods (a "NON-PAYMENT DEFAULT") and the Trustee receives a notice of
such default (a "PAYMENT BLOCKAGE NOTICE") from a representative of
holders of such Designated Senior Indebtedness.
Payments on the Notes, including any missed payments, may and shall be resumed:
- in the case of a payment default, upon the date on which such default
is cured or waived or shall have ceased to exist or such Designated
Senior Indebtedness shall have been discharged or paid in full in cash
or cash equivalents and all outstanding Letter of Credit Obligations
shall have been fully cash collateralized; and
- in case of a nonpayment default, the earlier of (x) the date on which
such nonpayment default is cured or waived, (y) 179 days after the date
on which the applicable Payment Blockage Notice is received (each such
period, the "PAYMENT BLOCKAGE PERIOD") or (z) the date such Payment
Blockage Period shall be terminated by written notice to the Trustee
from the requisite holders of such Designated Senior Indebtedness
necessary to terminate such period or from their representative.
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No new Payment Blockage Period may be commenced unless and until 365 days have
elapsed since the effectiveness of the immediately preceding Payment Blockage
Notice. However, if any Payment Blockage Notice within such 365-day period is
given by or on behalf of any holders of Designated Senior Indebtedness (other
than the agent under the Senior Credit Facilities), the agent under the Senior
Credit Facilities may give another Payment Blockage Notice within such period.
In no event, however, may the total number of days during which any Payment
Blockage Period or Periods is in effect exceed 179 days in the aggregate during
any 365 consecutive day period. No nonpayment default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the Trustee
shall be, or be made, the basis for a subsequent Payment Blockage Notice unless
such default shall have been cured or waived for a period of not less than 90
days.
If the Issuer fails to make any payment on the Notes when due or within
any applicable grace period, whether or not on account of the payment blockage
provision referred to above, such failure would constitute an Event of Default
under the Indenture and would enable the Holders to accelerate the maturity
thereof.
The Indenture will further require that the Issuer promptly notify
holders of Senior Indebtedness if payment of the Notes is accelerated because of
an Event of Default.
As a result of the subordination provisions described above, in the
event of insolvency, bankruptcy, administration, reorganization, receivership or
similar proceedings relating to the Issuer, Holders may recover less ratably
than creditors of the Issuer who are holders of Senior Indebtedness. At December
31, 1998, on a pro forma basis after giving effect to the Transactions, the
aggregate amount of the Issuer's outstanding Senior Indebtedness would have been
approximately $460.1 million (L277.2 million) (excluding unused commitments),
all of which would have been secured, the Issuer would have had no Senior
Subordinated Indebtedness outstanding other than the Notes, the Guarantors would
have had no Senior Indebtedness (excluding guarantees in respect of the Senior
Credit Facilities) and no Senior Subordinated Indebtedness (excluding the
Guarantees). As of December 31, 1998, the Issuer's subsidiaries had total
liabilities (including payables in respect of insurance broking transactions but
excluding their guarantees under the Permanent Facility Agreement) of L1,103.3
million and Willis Corroon Group's subsidiaries (other than Willis Corroon
Partners, the Issuer and the Issuer's subsidiaries) had total liabilities
(including payables in respect of insurance broking transactions but excluding
their guarantees under the Permanent Facility Agreement) of L2,345.0 million.
The Indenture permits the Issuer to incur additional indebtedness, including
additional senior Indebtedness under the Senior Credit Facilities, subject to
certain limitations. Although the Indenture contains limitations on the amount
of additional Indebtedness that Willis Corroon Group and its Subsidiaries may
incur, under certain circumstances the amount of such Indebtedness could be
substantial and, in any case, such Indebtedness may be Senior Indebtedness. See
"--Certain Covenants--Limitations on Incurrence of Indebtedness and Issuance of
Disqualified Stock."
"DESIGNATED SENIOR INDEBTEDNESS" means:
- Senior Indebtedness under the Senior Credit Facilities; and
- any other Senior Indebtedness permitted under the Indenture the
principal amount of which is $25.0 million or more and that has been
designated by Willis Corroon Group as Designated Senior Indebtedness.
"SENIOR INDEBTEDNESS" means:
(1) the Obligations under the Senior Credit Facilities; and
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(2) the Obligations under any other Indebtedness permitted to be
incurred by the Issuer under the terms of the Indenture, unless the
instrument under which such Indebtedness is incurred expressly provides
that it is on a parity with or subordinated in right of payment to the
Notes,
including, with respect to clauses (1) and (2), interest accruing subsequent to
the filing of, or which would have accrued but for the filing of, a petition for
bankruptcy, in accordance with and at the rate (including any rate applicable
upon any default or event of default, to the extent lawful) specified in the
documents evidencing or governing such Senior Indebtedness, whether or not such
interest is an allowable claim in such bankruptcy proceeding. Notwithstanding
anything to the contrary in the foregoing, Senior Indebtedness will not include:
- any liability for federal, state, local or other taxes owed or owing by
the Issuer;
- any obligation of the Issuer to its direct or indirect parent
corporations or to any of its Subsidiaries;
- any accounts payable or trade liabilities (including obligations in
respect of funds held for the account of third parties) arising in the
ordinary course of business (including guarantees thereof or
instruments evidencing such liabilities) other than obligations in
respect of letters of credit under the Senior Credit Facilities;
- any Indebtedness that is incurred in violation of the Indenture;
- Indebtedness which, when incurred and without respect to any election
under Section 1111(b) of Title 11, United States Code, is without
recourse to the Issuer;
- any Indebtedness, guarantee or obligation of the Issuer which is
subordinate or junior to any other Indebtedness, guarantee or
obligation of the Issuer;
- Indebtedness evidenced by the Notes;
- Indebtedness evidenced by the Group Intercompany Notes or Convertible
Loans; and
- Capital Stock of the Issuer.
"Senior Indebtedness" of Willis Corroon Group or any Guarantor has a
correlative meaning.
"SUBORDINATED NOTE OBLIGATIONS" means any principal of, premium, if
any, and interest on the Notes payable pursuant to the terms of the Notes or
upon acceleration, together with and including any amounts received upon the
exercise of rights of rescission or other rights of action (including claims for
damages) or otherwise, to the extent relating to the purchase price of the Notes
or amounts corresponding to such principal, premium, if any, or interest on the
Notes.
The Notes will rank senior in right of payment to all Subordinated
Indebtedness of the Issuer. At the issuance of the outstanding Notes, the Issuer
had no Subordinated Indebtedness.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $550,000,000 and
will mature at par on February 1, 2009. Interest on the Notes will accrue at the
rate of 9% per annum and will be payable semi-annually in arrears on February 1
and August 1, commencing on August 1, 1999, to Holders of record on the
immediately preceding January 15 and July 15. Interest on the Notes will accrue
from the
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most recent date to which interest has been paid or, if no interest has been
paid, from the date of issuance of the outstanding Notes. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal of, premium, if any, and interest on the Notes will be payable at the
office or agency of the Issuer maintained for such purpose within the City and
State of New York or, at the option of the Issuer, payment of interest may be
made by check mailed to the Holders at their respective addresses set forth in
the register of Holders; PROVIDED that all payments of principal, premium, if
any, and interest with respect to Notes represented by one or more permanent
global Notes registered in the name of or held by DTC or its nominee will be
made by wire transfer of immediately available funds to the accounts specified
by the Holder or Holders thereof. Until otherwise designated by the Issuer, the
Issuer's office or agency in New York will be the office of the Trustee
maintained for such purpose. The Notes will be issued in denominations of $1,000
and integral multiples thereof. If Certificated Notes are issued, the Issuer
will appoint Kredietbank S.A. Luxembourgeoise, or such other Person located in
Luxembourg and reasonably acceptable to the Trustee, as an additional paying and
transfer agent. Upon the issuance of Certificated Notes, Holders will be able to
receive principal, premium, if any, and interest with respect to the Notes and
will be able to transfer Certificated Notes at the Luxembourg office of such
paying and transfer agent, subject to the right of the Issuer to mail payments
in accordance with the terms of the Indenture.
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of
Holders," the Issuer is not required to make mandatory redemption or sinking
fund payments with respect to the Notes.
OPTIONAL REDEMPTION
Except as described below, the Notes will not be redeemable at the
Issuer's option prior to February 1, 2004. From and after February 1, 2004, the
Notes will be subject to redemption at any time at the option of the Issuer, in
whole or in part, upon not less than 30 nor more than 60 days' prior notice
published in a leading newspaper having a general circulation in New York (which
is expected to be the WALL STREET JOURNAL) (and, so long as the Notes are listed
on the Luxembourg Stock Exchange and the rules of such stock exchange shall so
require, a newspaper having a general circulation in Luxembourg (which is
expected to be the LUXEMBURGER WORT)), or, in the case of Certificated Notes, by
being so published and also mailed by first-class mail to each Holder's
registered address, at the redemption prices (expressed as percentages of
principal amount) set forth below, plus accrued and unpaid interest thereon, if
any, to the applicable redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date), if redeemed during the twelve-month period beginning on
February 1 of each of the years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- -------------------------------------------------------------------------- ------------------
<S> <C>
2004...................................................................... 104.500%
2005...................................................................... 103.000%
2006...................................................................... 101.500%
2007 and thereafter....................................................... 100.000%
</TABLE>
In addition, at any time or from time to time, on or prior to February
1, 2002, the Issuer may, at its option, redeem up to 35% of the aggregate
principal amount of Notes issued under the Indenture at a redemption price equal
to 109% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the redemption date (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date), with the net proceeds of one or more Equity
Offerings of the Issuer or any direct or indirect parent of the Issuer to the
extent such net proceeds are contributed to the Issuer, or used to repay to the
Issuer amounts outstanding in respect of the Trinity Intercompany Notes;
PROVIDED that at least 65% of the aggregate principal amount of Notes
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remains outstanding immediately after the occurrence of each such redemption;
PROVIDED FURTHER that each such redemption occurs within 90 days of the date of
closing of each such Equity Offering. The Trustee shall select the Notes to be
purchased in the manner described under "--Repurchase at the Option of
Holders--Asset Sales--Selection and Notice."
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL.
The Indenture provides that, upon the occurrence of a Change of
Control, the Issuer will make an offer to purchase all of the Notes pursuant to
the offer described below (the "CHANGE OF CONTROL OFFER") at a price in cash
(the "CHANGE OF CONTROL PAYMENT") equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date). The Indenture
provides that within 30 days following any Change of Control, the Issuer will
publish notice of such in a leading newspaper having a general circulation in
New York (which is expected to be the WALL STREET JOURNAL), (and, so long as the
Notes are listed on the Luxembourg Stock Exchange and the rules of such stock
exchange shall so require, a newspaper having a general circulation in
Luxembourg (which is expected to be the LUXEMBURGER WORT)), or, in the case of
Certificated Notes, mail a notice to each Holder (, and so long as the Notes are
listed on the Luxembourg Stock Exchange and the rules of such stock exchange
shall so require, will publish notice in a newspaper having a general
circulation in Luxembourg (which is expected to be the LUXEMBURGER WORT)), with
a copy to the Trustee, with the following information:
(1) a Change of Control Offer is being made pursuant to the
covenant entitled "CHANGE OF CONTROL," and that all Notes properly
tendered pursuant to such Change of Control Offer will be accepted for
payment;
(2) the purchase price and the purchase date, which will be no
earlier than 30 days nor later than 60 days from the date such notice is
mailed, except as may be otherwise required by applicable law (the
"CHANGE OF CONTROL PAYMENT DATE");
(3) any Note not properly tendered will remain outstanding and
continue to accrue interest;
(4) unless the Issuer defaults in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer will cease to accrue interest on the Change of Control
Payment Date;
(5) Holders electing to have any Notes purchased pursuant to a
Change of Control Offer will be required to surrender the Notes, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Notes completed, to the paying agent specified in the notice (which, if
Certificated Notes are issued, will include a paying agent in Luxembourg)
at the address specified in the notice prior to the close of business on
the third Business Day preceding the Change of Control Payment Date;
(6) Holders will be entitled to withdraw their tendered Notes
and their election to require the Issuer to purchase such Notes, PROVIDED
that the paying agent (which, if Certificated Notes are issued, will
include a paying agent in Luxembourg) receives, not later than the close
of business on the last day of the Offer Period (as defined in the
Indenture), a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the
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principal amount of Notes tendered for purchase, and a statement that
such Holder is withdrawing his tendered Notes and his election to have
such Notes purchased; and
(7) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered, which unpurchased portion must be equal
to $1,000 in principal amount or an integral multiple thereof.
While the Notes are in global form and the Issuer makes an offer to
purchase all of the Notes pursuant to the Change of Control Offer, a holder may
exercise its option to elect for the purchase of the Notes through the
facilities of DTC, Euroclear and Cedel, subject to their rules and regulations.
The Indenture provides that, prior to complying with the provisions of
this covenant, but in any event within 30 days following a Change of Control,
the Issuer will either repay all its outstanding Senior Indebtedness that
prohibits the Issuer from repurchasing Notes in a Change of Control Offer or
obtain the requisite consents, if any, under any outstanding Senior Indebtedness
in each case necessary to permit the repurchase of the Notes required by this
covenant.
The Issuer will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws or regulations are applicable in connection with the repurchase
of the Notes pursuant to a Change of Control Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
the Indenture, the Issuer will comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations described
in the Indenture by virtue thereof.
The Indenture provides that on the Change of Control Payment Date, the
Issuer will, to the extent permitted by law,
(1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer,
(2) deposit with the paying agent an amount equal to the
aggregate Change of Control Payment in respect of all Notes or portions
thereof so tendered and
(3) deliver, or cause to be delivered, to the Trustee for
cancellation the Notes so accepted together with an Officers' Certificate
stating that such Notes or portions thereof have been tendered to and
purchased by the Issuer.
The Indenture will provide that the paying agent will promptly mail to each
Holder the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail to each Holder a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered, if any, PROVIDED,
that each such new Note will be in a principal amount of $1,000 or an integral
multiple thereof. The Issuer will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
The Senior Credit Facilities will, and future credit agreements or
other agreements relating to Senior Indebtedness to which Willis Corroon Group
or the Issuer becomes a party may, prohibit the Issuer from purchasing any Notes
as a result of a Change of Control and/or provide that certain change of control
events with respect to the Issuer would constitute a default thereunder. In the
event a Change of Control occurs at a time when the Issuer is prohibited from
purchasing the Notes, Willis Corroon Group or the Issuer could seek the consent
of its lenders to permit the purchase of the Notes or could attempt to refinance
the borrowings that contain such prohibition. If the Company or the Issuer does
not obtain such a consent or repay such borrowings, the Issuer will remain
prohibited from purchasing the
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Notes. In such case, the Issuer's failure to purchase tendered Notes would
constitute an Event of Default under the Indenture. If, as a result thereof, a
default occurs with respect to any Senior Indebtedness, the subordination
provisions in the Indenture would restrict payments to the Holders under certain
circumstances.
The existence of a Holder's right to require the Issuer to repurchase
such Holder's Notes upon the occurrence of a Change of Control may deter a third
party from seeking to acquire the Company or the Issuer in a transaction that
would constitute a Change of Control.
ASSET SALES.
The Indenture provides that Willis Corroon Group will not, and will not
permit any Restricted Subsidiary to, cause, make or suffer to exist an Asset
Sale, unless
(1) Willis Corroon Group or such Restricted Subsidiary, as the
case may be, receives consideration at the time of such Asset Sale at
least equal to the fair market value (as determined in good faith by the
Willis Corroon Group) of the assets sold or otherwise disposed of and
(2) except in the case of Permitted Asset Swap, at least 75% of
the consideration therefor received by Willis Corroon Group or such
Restricted Subsidiary, as the case may be, is in the form of cash or Cash
Equivalents; PROVIDED that the amount of
(a) any liabilities (as shown on Willis Corroon
Group's, or such Restricted Subsidiary's, most recent balance
sheet or in the notes thereto) of Willis Corroon Group or any
Restricted Subsidiary (other than liabilities that are by
their terms subordinated to the Notes) that are assumed by the
transferee of any such assets,
(b) any securities received by Willis Corroon Group
or such Restricted Subsidiary from such transferee that are
converted by Willis Corroon Group or such Restricted
Subsidiary into cash (to the extent of the cash received)
within 180 days following the closing of such Asset Sale and
(c) any Designated Noncash Consideration received by
Willis Corroon Group or any Restricted Subsidiary in such
Asset Sale having an aggregate fair market value, taken
together with all other Designated Noncash Consideration
received pursuant to this clause (c) that is at that time
outstanding, not to exceed the greater of (x) $100.0 million
or (y) 10% of Total Revenues at the time of the receipt of
such Designated Noncash Consideration (with the fair market
value of each item of Designated Noncash Consideration being
measured at the time received and without giving effect to
subsequent changes in value),
shall be deemed to be cash for purposes of this provision and for no other
purpose.
Within 365 days after Willis Corroon Group's or any Restricted
Subsidiary's receipt of the Net Proceeds of any Asset Sale, Willis Corroon Group
or such Restricted Subsidiary, at its option, may
(i) apply the Net Proceeds from such Asset Sale to permanently
reduce
(x) Obligations under the Senior Credit Facilities
(and to correspondingly reduce commitments with respect
thereto),
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(y) other Senior Indebtedness or Senior Subordinated
Indebtedness (and to correspondingly reduce commitments with
respect thereto) (PROVIDED that if the Issuer shall so reduce
Obligations under Senior Subordinated Indebtedness, it will
equally and ratably reduce Obligations under the Notes if the
Notes are then prepayable or, if the Notes may not then be
prepaid, the Issuer shall make an offer (in accordance with
the procedures set forth below for an Asset Sale Offer) to all
Holders to purchase their Notes at 100% of the principal
amount thereof, plus the amount of accrued but unpaid
interest, if any, on the amount of Notes that would otherwise
be prepaid) or
(z) Indebtedness of a Restricted Subsidiary (other
than Indebtedness owed to Willis Corroon Group or another
Restricted Subsidiary),
(ii) apply the Net Proceeds from such Asset Sale to an
investment in any one or more businesses (PROVIDED that such investment
in any business may be in the form of the acquisition of Capital Stock so
long as it results in Willis Corroon Group or a Restricted Subsidiary, as
the case may be, owning all the Capital Stock of such business), capital
expenditures or acquisitions of other assets in each case, used or useful
in a Similar Business and/or
(iii) apply the Net Proceeds from such Asset Sale to an
investment in any one or more businesses (PROVIDED that such investment
in any business may be in the form of the acquisition of Capital Stock so
long as it results in Willis Corroon Group or a Restricted Subsidiary, as
the case may be, owning all the Capital Stock of such business),
properties or assets that replace the businesses, properties and assets
that are the subject of such Asset Sale.
The Indenture provides that any Net Proceeds from the Asset Sale that are not
invested or applied as provided and within the time period set forth in the
first sentence of this paragraph will be deemed to constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds exceeds $15.0 million, the Issuer
shall make an offer to all Holders (an "ASSET SALE OFFER") to purchase the
maximum principal amount of Notes, that is an integral multiple of $1,000, that
may be purchased out of the Excess Proceeds at an offer price in cash in an
amount equal to 100% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date fixed for the closing of such offer, in accordance
with the procedures set forth in the Indenture. The Issuer will commence an
Asset Sale Offer with respect to Excess Proceeds within ten Business Days after
the date that Excess Proceeds exceeds $15.0 million by mailing the notice
required pursuant to the terms of the Indenture, with a copy to the Trustee. To
the extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Issuer may use any remaining Excess
Proceeds for general corporate purposes. If the aggregate principal amount of
Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased in the manner described under "--
Selection and Notice" below. Upon completion of any such Asset Sale Offer, the
amount of Excess Proceeds shall be reset at zero.
Pending the final application of any Net Proceeds pursuant to this
covenant, Willis Corroon Group or the applicable Restricted Subsidiary may apply
such Net Proceeds temporarily to reduce Indebtedness outstanding under a
revolving credit facility or otherwise invest such Net Proceeds in Cash
Equivalents or Investment Grade Securities.
The Issuer will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws or regulations are applicable in connection with the repurchase
of the Notes pursuant to an Asset Sale Offer. To the extent that the
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provisions of any securities laws or regulations conflict with the provisions of
the Indenture, the Issuer will comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations described
in the Indenture by virtue thereof.
The Senior Credit Facilities will, and future credit agreements or
other agreements relating to Senior Indebtedness to which the Issuer becomes a
party may, prohibit the Issuer from purchasing any Notes pursuant to this Asset
Sales covenant. In the event the Issuer is prohibited from purchasing the Notes,
the Issuer could seek the consent of its lenders to the purchase of the Notes or
could attempt to refinance the borrowings that contain such prohibition. If the
Issuer does not obtain such a consent or repay such borrowings, the Issuer will
remain prohibited from purchasing the Notes. In such case, the Issuer's failure
to purchase tendered Notes would constitute an Event of Default under the
Indenture. If, as a result thereof, a default occurs with respect to any Senior
Indebtedness, the subordination provisions in the Indenture would restrict
payments to the Holders under certain circumstances.
SELECTION AND NOTICE. If less than all of the Notes are to be redeemed
at any time or if more Notes are tendered pursuant to an Asset Sale Offer than
the Issuer is required to purchase, selection of such Notes for redemption or
purchase, as the case may be, will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
such Notes are listed, or, if such Notes are not so listed, on a pro rata basis,
by lot or by such other method as the Trustee shall deem fair and appropriate
(and in such manner as complies with applicable legal requirements); PROVIDED
that no Notes of $1,000 or less shall be purchased or redeemed in part.
Notices of purchase or redemption shall be mailed by first class mail,
postage prepaid, at least 30 but not more than 60 days before the purchase or
redemption date to each Holder of Notes to be purchased or redeemed at such
Holder's registered address. If any Note is to be purchased or redeemed in part
only, any notice of purchase or redemption that relates to such Note shall state
the portion of the principal amount thereof that has been or is to be purchased
or redeemed.
A new Note in principal amount equal to the unpurchased or unredeemed
portion of any Note purchased or redeemed in part will be issued in the name of
the Holder thereof upon cancellation of the original Note. On and after the
purchase or redemption date unless the Issuer defaults in payment of the
purchase or redemption price, interest shall cease to accrue on Notes or
portions thereof purchased or called for redemption.
CERTAIN COVENANTS
LIMITATION ON RESTRICTED PAYMENTS. The Indenture provides that Willis
Corroon Group will not, and will not permit any Restricted Subsidiary to,
directly or indirectly:
(i) declare or pay any dividend or make any distribution on
account of Willis Corroon Group's or any Restricted Subsidiary's Equity
Interests, including any dividend or distribution payable in connection
with any merger or consolidation (other than (A) dividends or
distributions by Willis Corroon Group payable in Equity Interests (other
than Disqualified Stock) of Willis Corroon Group or in options, warrants
or other rights to purchase such Equity Interests or (B) dividends or
distributions by a Restricted Subsidiary so long as, in the case of any
dividend or distribution payable on or in respect of any class or series
of securities issued by a Subsidiary other than a Wholly Owned
Subsidiary, Willis Corroon Group or a Restricted Subsidiary receives at
least its pro rata share of such dividend or distribution in accordance
with its Equity Interests in such class or series of securities);
(ii) purchase, redeem, defease or otherwise acquire or retire
for value any Equity Interests of Willis Corroon Group or any direct or
indirect parent of Willis Corroon Group;
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(iii) make any principal payment on, or redeem, repurchase,
defease or otherwise acquire or retire for value in each case, prior to
any scheduled repayment, or maturity, any Subordinated Indebtedness
(other than
(x) Indebtedness permitted under clauses (g), (h) and
(q) of the covenant described under "--Limitations on
Incurrence of Indebtedness and Issuance of Disqualified Stock"
or
(y) the purchase, repurchase or other acquisition of
Subordinated Indebtedness purchased in anticipation of
satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date
of purchase, repurchase or acquisition);
(iv) make any Restricted Investment; or
(v) pay any principal of or interest on any Group Intercompany
Note unless such amount is immediately repaid to Willis Corroon Group or
a Restricted Subsidiary in respect of the principal of, or interest on,
any Trinity Intercompany Note or pay any amount in respect of a
Convertible Loan
(all such payments and other actions set forth in clauses (i) through (v) above
being collectively referred to as "Restricted Payments"), unless, at the time of
such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) immediately after giving effect to such transaction on a pro
forma basis, Willis Corroon Group could incur $1.00 of additional
Indebtedness under the provisions of the first paragraph of
"--Limitations on Incurrence of Indebtedness and Issuance of Disqualified
Stock"; and
(c) such Restricted Payment, together with the aggregate amount
of all other Restricted Payments made by Willis Corroon Group and its
Restricted Subsidiaries after the Closing Date (including Restricted
Payments permitted by clauses (i), (ii) (with respect to the payment of
dividends on Refunding Capital Stock pursuant to clause (b) thereof),
(iv) (only to the extent that amounts paid pursuant to such clause are
greater than amounts that could have been paid pursuant to such clause if
$6 million and $12 million were substituted in such clause for $12.5
million and $25 million, respectively), (vi), (ix), (x) and (xiv) of the
next succeeding paragraph, but excluding all other Restricted Payments
permitted by the next succeeding paragraph), is less than the sum of
(i) 50% of the Consolidated Net Income of Willis
Corroon Group for the period (taken as one accounting period)
from January 1, 1999, to the end of Willis Corroon Group's
most recently ended fiscal quarter for which internal
financial statements are available at the time of such
Restricted Payment (or, in the case such Consolidated Net
Income for such period is a deficit, minus 100% of such
deficit), PLUS
(ii) 100% of the aggregate net cash proceeds and the
fair market value, as determined in good faith by the Board of
Directors, of marketable securities and
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Qualified Proceeds received by Willis Corroon Group or the
Issuer since immediately after the Closing Date from the issue
or sale of
(x) Equity Interests of Willis Corroon Group
or the Issuer (including Retired Capital Stock (as
defined below), but excluding cash proceeds,
marketable securities and Qualified Proceeds received
from the sale of
(A) Equity Interests (1) to members
of management, directors or consultants of
Willis Corroon Group or the Issuer, any
direct or indirect parent corporation of the
Issuer and Willis Corroon Group's
Subsidiaries after the Closing Date to the
extent such amounts have been applied to
Restricted Payments made in accordance with
clause (iv) of the next succeeding paragraph
or (2) pursuant to the Contribution
Agreement and
(B) Designated Preferred Stock)
and, to the extent actually contributed to
Willis Corroon Group or the Issuer, Equity
Interests of Willis Corroon Group's direct
or indirect parent corporations (excluding
contributions of the proceeds from the sale
of Designated Preferred Stock of such
corporations) or
(y) debt securities (other than that portion
of the Convertible Loan made with the proceeds of
Interim Refinancing Indebtedness) of Willis Corroon
Group or the Issuer that have been converted into
such Equity Interests of Willis Corroon Group or the
Issuer; PROVIDED, HOWEVER, that this clause (ii)
shall not include the proceeds from Refunding Capital
Stock (as defined below), Equity Interests or
convertible debt securities of Willis Corroon Group
or the Issuer sold to a Restricted Subsidiary or
Willis Corroon Group, as the case may be,
Disqualified Stock or debt securities that have been
converted into Disqualified Stock, PLUS
(iii) 100% of the aggregate amount of cash,
marketable securities and Qualified Proceeds contributed to
the capital of Willis Corroon Group or the Issuer following
the Closing Date (other than by a Restricted Subsidiary or
Willis Corroon Group), PLUS
(iv) 100% of the aggregate amount received in cash,
the fair market value of marketable securities and Qualified
Proceeds (other than Restricted Investments) received by means
of
(A) the sale or other disposition (other
than to Willis Corroon Group or a Restricted
Subsidiary) of Restricted Investments made by Willis
Corroon Group and its Restricted Subsidiaries and
repurchases and redemptions of such Restricted
Investments from Willis Corroon Group and its
Restricted Subsidiaries and repayments of loans or
advances which constitute Restricted Investments by
Willis Corroon Group and its Restricted Subsidiaries
or
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(B) the sale (other than to Willis Corroon
Group or a Restricted Subsidiary) of the stock of an
Unrestricted Subsidiary or a distribution from an
Unrestricted Subsidiary (other than in each case to
the extent the Investment in such Unrestricted
Subsidiary was made by Willis Corroon Group or a
Restricted Subsidiary pursuant to clauses (vii) or
(xi) below or to the extent such Investment
constituted a Permitted Investment) or a dividend
from an Unrestricted Subsidiary PLUS
(v) in the case of the redesignation of an
Unrestricted Subsidiary as, or an Associate becoming, a
Restricted Subsidiary, the fair market value of the Investment
in such Unrestricted Subsidiary or Associate, as the case may
be, as determined by the Board of Directors in good faith or
if, in the case of an Unrestricted Subsidiary, such fair
market value may exceed $25 million, in writing by an
independent investment banking firm of nationally recognized
standing, at the time of the redesignation of such
Unrestricted Subsidiary as a Restricted Subsidiary (other than
an Unrestricted Subsidiary to the extent the Investment in
such Unrestricted Subsidiary or such Associate was made by
Willis Corroon Group or a Restricted Subsidiary pursuant to
clauses (vii) or (xi) below or to the extent such Investment
constituted a Permitted Investment).
The foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at the date of declaration such payment would
have complied with the provisions of the Indenture;
(ii) (a) the redemption, repurchase, retirement or other
acquisition of any Equity Interests ("RETIRED CAPITAL STOCK") or
Subordinated Indebtedness of Willis Corroon Group, or any Equity
Interests of any direct or indirect parent corporation of Willis
Corroon Group, in exchange for, or out of the proceeds of the
substantially concurrent sale (other than to a Restricted
Subsidiary or Willis Corroon Group) of, Equity Interests of
Willis Corroon Group or the Issuer (in each case, other than any
Disqualified Stock) ("REFUNDING CAPITAL STOCK") and
(b) the declaration and payment of dividends on the
Refunding Capital Stock (other than Refunding Capital Stock
the proceeds of which were used to redeem, repurchase, retire
or otherwise acquire any Equity Interests of any direct or
indirect parent corporation of Willis Corroon Group) in an
aggregate amount per year no greater than the aggregate amount
of dividends per annum that was declarable and payable on such
Retired Capital Stock immediately prior to such retirement;
(iii) the redemption, repurchase or other acquisition or
retirement of Subordinated Indebtedness of Willis Corroon Group or the
Issuer made by exchange for, or out of the proceeds of the substantially
concurrent sale of, new Indebtedness of Willis Corroon Group or the
Issuer, as the case may be, which is incurred in compliance with
"--Limitations on Incurrence of Indebtedness and Issuance of Disqualified
Stock" so long as
(A) the principal amount of such new Indebtedness
does not exceed the principal amount of the Subordinated
Indebtedness being so redeemed, repurchased, acquired or
retired for value (PLUS the amount of any premium
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required to be paid under the terms of the instrument
governing the Subordinated Indebtedness being so redeemed,
repurchased, acquired or retired),
(B) such Indebtedness is subordinated to Senior
Indebtedness and the Notes at least to the same extent as such
Subordinated Indebtedness so purchased, exchanged, redeemed,
repurchased, acquired or retired for value,
(C) such Indebtedness has a final scheduled maturity
date equal to or later than the final scheduled maturity date
of the Subordinated Indebtedness being so redeemed,
repurchased, acquired or retired and
(D) such Indebtedness has a Weighted Average Life to
Maturity equal to or greater than the remaining Weighted
Average Life to Maturity of the Subordinated Indebtedness
being so redeemed, repurchased, acquired or retired;
(iv) a Restricted Payment to pay for the repurchase, retirement
or other acquisition or retirement for value of common Equity Interests
of Willis Corroon Group, any of its direct or indirect parent
corporations or the Issuer held by any future, present or former
employee, director or consultant of Willis Corroon Group, any of its
Subsidiaries or any of its direct or indirect parent corporations
pursuant to any management equity plan or stock option plan or any other
management or employee benefit plan or agreement; PROVIDED, HOWEVER, that
the aggregate Restricted Payments made under this clause (iv) do not
exceed in any calendar year $12.5 million (with unused amounts in any
calendar year being carried over to succeeding calendar years subject to
a maximum (without giving effect to the following proviso) of $25.0
million in any calendar year); PROVIDED FURTHER that such amount in any
calendar year may be increased by an amount not to exceed
(A) the cash proceeds from the sale of Equity
Interests of Willis Corroon Group, the Issuer and, to the
extent contributed to Willis Corroon Group or the Issuer,
Equity Interests of any of Willis Corroon Group's direct or
indirect parent corporations, in each case to members of
management, directors or consultants of Willis Corroon Group,
any of its Subsidiaries or any of its direct or indirect
parent corporations that occurs after the Closing Date (to the
extent the cash proceeds from the sale of such Equity
Interests have not otherwise been applied to the payment of
Restricted Payments by virtue of clause (c) of the preceding
paragraph) plus
(B) the cash proceeds of key man life insurance
policies received by Willis Corroon Group and its Restricted
Subsidiaries after the Closing Date less
(C) the amount of any Restricted Payments previously
made pursuant to clauses (A) and (B) of this clause (iv);
and PROVIDED FURTHER that cancellation of Indebtedness owing to Willis
Corroon Group or the Issuer from members of management of Willis Corroon
Group, any of its direct or indirect parent corporations or any
Restricted Subsidiary in connection with a repurchase of Equity Interests
of Willis Corroon Group, any of its direct or indirect parent
corporations or the Issuer will not be deemed to constitute a Restricted
Payment for purposes of this covenant or any other provision of the
Indenture;
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(v) the declaration and payment of dividends to holders of any
class or series of Disqualified Stock of Willis Corroon Group, the Issuer
or any other Guarantor issued in accordance with the covenant described
under "--Limitations on Incurrence of Indebtedness and Issuance of
Disqualified Stock" to the extent such dividends are included in the
definition of Fixed Charges;
(vi) (A) the declaration and payment of dividends to
holders of any class or series of Designated Preferred Stock
(other than Disqualified Stock) issued by Willis Corroon Group
or the Issuer after the Closing Date,
(B) the declaration and payment of dividends to a
direct or indirect parent corporation of Willis Corroon Group,
the proceeds of which will be used to fund the payment of
dividends to holders of any class or series of Designated
Preferred Stock (other than Disqualified Stock) of such parent
corporation issued after the Closing Date (PROVIDED that the
amount of dividends paid pursuant to this clause (B) shall not
exceed the aggregate amount of cash actually contributed to
Willis Corroon Group from the sale of such Designated
Preferred Stock) or
(C) the declaration and payment of dividends on
Refunding Capital Stock in excess of the dividends declarable
and payable thereon pursuant to clause (ii); PROVIDED,
HOWEVER, in each case, that for the most recently ended four
full fiscal quarters for which internal financial statements
are available immediately preceding the date of issuance of
such Designated Preferred Stock or the declaration of such
dividends on Refunding Capital Stock, after giving effect to
such issuance or declaration on a pro forma basis, Willis
Corroon Group and its Restricted Subsidiaries would have had a
Fixed Charge Coverage Ratio of at least 2.00 to 1.00;
(vii) Investments in Unrestricted Subsidiaries and Associates
(or Persons that become Associates as a result of such Investments)
having an aggregate fair market value, taken together with all other
Investments made pursuant to this clause (vii) that are at that time
outstanding (without giving effect to the sale of an Unrestricted
Subsidiary to the extent the proceeds of such sale do not consist of
cash, marketable securities and/or Qualified Proceeds or do consist of
distributions made pursuant to clause (xiii) below), not to exceed $25.0
million at the time of such Investment (with the fair market value of
each Investment being measured at the time made and without giving effect
to subsequent changes in value);
(viii) repurchases of Equity Interests deemed to occur upon
exercise of stock options if such Equity Interests represent a portion of
the exercise price of such options;
(ix) the payment of dividends on Willis Corroon Group's Common
Stock or the Issuer's Common Stock, following the first public offering
of Willis Corroon Group's Common Stock, the Issuer's Common Stock or the
Common Stock of any of its direct or indirect parent corporations after
the Closing Date, of up to 6% per annum of the net proceeds received by
Willis Corroon Group or the Issuer in such public offering, other than
public offerings with respect to Willis Corroon Group's Common Stock or
the Issuer's Common Stock registered on Form S-8;
(x) a Restricted Payment to pay for the repurchase, retirement
or other acquisition or retirement for value of common Equity Interests
of Willis Corroon Group or any direct or indirect parent corporation of
Willis Corroon Group in existence on the Closing Date and which are not
held by Kohlberg Kravis Roberts & Co. L.P., the Consortium or any of
their
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Affiliates on the Closing Date (including any Equity Interests issued in
respect of such Equity Interests as a result of a stock split,
recapitalization, merger, combination, consolidation or otherwise, but
excluding any management equity plan or stock option plan or similar
agreement), PROVIDED that Willis Corroon Group and its Restricted
Subsidiaries shall be permitted to make Restricted Payments under this
clause only if after giving effect thereto, Willis Corroon Group would be
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first sentence of
the covenant described under "--Limitations on Incurrence of Indebtedness
and Issuance of Disqualified Stock"; PROVIDED FURTHER that
notwithstanding the foregoing, Willis Corroon Group and the Restricted
Subsidiaries shall be permitted to make Restricted Payments in an amount
not to exceed $20.0 million to pay for the repurchase, retirement or
other acquisition or retirement for value of common Equity Interests of
Willis Corroon Group or any direct or indirect parent corporation of
Willis Corroon Group held by the Consortium;
(xi) Investments that are made with Excluded Contributions;
(xii) other Restricted Payments in an aggregate amount not to
exceed $25.0 million;
(xiii) the distribution, as a dividend or otherwise, of shares
of Capital Stock of, or Indebtedness owed to Willis Corroon Group or a
Restricted Subsidiary of Willis Corroon Group by, Unrestricted
Subsidiaries (with the exception of Investments in Unrestricted
Subsidiaries acquired pursuant to clause (x) of the definition of
Permitted Investments);
(xiv) cash dividends or other distributions on Willis Corroon
Group's Capital Stock used to, or loans the proceeds of which will be
used to, (A) fund the payment of dividends (at a rate per annum not to
exceed 8 1/2%) on the Consortium Preferred Stock (whether such dividends
have accrued during the then-current fiscal year or any previous fiscal
year) or (B) repay amounts outstanding under the Guaranteed Loan Notes;
(xv) loans in respect of Interim Refinancing Indebtedness or the
declaration and payment of dividends on the Closing Date to Trinity in an
amount equal to the aggregate outstanding principal amount of and accrued
and unpaid interest on, the Interim Financings and indebtedness of Willis
Corroon Group and its Subsidiaries existing on the Closing Date and
required to be repaid under the Senior Credit Facilities, the proceeds of
which were used by Trinity to repay the Interim Financings and such other
indebtedness;
(xvi) the declaration and payment of dividends to, or the making
of loans to, Trinity in an amount not to exceed the amount of principal
and interest then due and payable on the Interim Refinancing
Indebtedness, PROVIDED that the full amount of such dividend or loan is
immediately repaid in cash to Willis Corroon Group or any Restricted
Subsidiary;
(xvii) the declaration and payment of dividends by Willis
Corroon Group to, or the making of loans to, its parent corporation in
amounts required for Willis Corroon Group's direct or indirect parent
corporations to pay
(A) franchise taxes and other fees, taxes and
expenses required to maintain their corporate existence,
(B) federal, state and local income taxes (and
analogous taxes in the United Kingdom) to the extent such
income taxes are attributable to the income of Willis Corroon
Group and the Restricted Subsidiaries (and, to the extent of
the
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amounts actually received from its Unrestricted Subsidiaries,
in amounts required to pay such taxes to the extent
attributable to the income of such Unrestricted Subsidiaries),
(C) customary salary, bonus and other benefits
payable to officers and employees of any direct or indirect
parent corporation of Willis Corroon Group to the extent such
salaries, bonuses and other benefits are attributable to the
ownership or operation of Willis Corroon Group and its
Subsidiaries and
(D) general corporate overhead expenses of any direct
or indirect parent corporation of the Company to the extent
such expenses are attributable to the ownership or operation
of Willis Corroon Group and its Subsidiaries;
(xviii) cash dividends or other distributions on Willis Corroon
Group's Capital Stock used to, or the making of loans to Trinity the
proceeds of which will be used to, fund the payment of fees and expenses
incurred in connection with the Transactions or owed to Affiliates, in
each case to the extent permitted by the covenant described under "--
Transactions with Affiliates";
(xix) distributions or payments of Receivables Fees;
(xx) the making of loans in respect of Trinity Intercompany
Notes;
(xxi) the declaration and payment of dividends to, or the making
of loans to, Trinity in an amount not to exceed the amount of principal
and interest then due and payable on the Trinity Intercompany Notes,
provided that the full amount of such dividend or loan is immediately
repaid in cash to Willis Corroon Group or any Restricted Subsidiary; or
(xxii) cash dividends or other distributions on Willis Corroon
Group's Capital Stock used to, or loans made to Trinity to, fund the
payment of net amounts required to be paid pursuant to any Trinity
Hedging Obligations.
As of the issuance of the Outstanding Notes, all of Willis Corroon
Group's Subsidiaries (other than Sovereign Marine and General Insurance Company,
in provisional liquidation) will be Restricted Subsidiaries. Willis Corroon
Group will not permit any Unrestricted Subsidiary to become a Restricted
Subsidiary except pursuant to the second to last sentence of the definition of
"Unrestricted Subsidiary". For purposes of designating any Restricted Subsidiary
as an Unrestricted Subsidiary, all outstanding Investments by Willis Corroon
Group and its Restricted Subsidiaries (except to the extent repaid) in the
Subsidiary so designated will be deemed to be Restricted Payments in an amount
determined as set forth in the last sentence of the definition of "Investment".
Such designation will be permitted only if a Restricted Payment in such amount
would be permitted at such time (whether pursuant to the first paragraph of this
covenant or under clauses (vii), (xi) and (xii)) and if such Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary. Unrestricted
Subsidiaries will not be subject to any of the restrictive covenants set forth
in the Indenture.
LIMITATION ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED
STOCK. The Indenture provides that Willis Corroon Group will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create,
incur, issue, assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise, (collectively, "INCUR" and collectively, an
"INCURRENCE") with respect to any Indebtedness (including Acquired Indebtedness)
and that Willis Corroon Group will not issue any shares of Disqualified Stock
and will not permit any of its Restricted Subsidiaries to issue any shares of
preferred stock; PROVIDED, HOWEVER, that Willis Corroon Group may incur
Indebtedness (including
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Acquired Indebtedness) or issue shares of Disqualified Stock, and the Issuer and
any Restricted Subsidiary that is a Guarantor may incur Indebtedness, issue
shares of Disqualified Stock and issue shares of preferred stock, if the Fixed
Charge Coverage Ratio for Willis Corroon Group's and its Restricted
Subsidiaries' most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock or preferred
stock is issued would have been at least 2.00 to 1.00, determined on a pro forma
basis (including a pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred, or the Disqualified Stock or
preferred stock had been issued, as the case may be, and the application of
proceeds therefrom had occurred at the beginning of such four-quarter period.
The foregoing limitations will not apply to:
(a) the existence of Indebtedness under Credit Facilities on the
Closing Date together with the incurrence by Willis Corroon Group, the
Issuer or any other Restricted Subsidiary of Indebtedness under Credit
Facilities and the issuance and creation of letters of credit and
bankers' acceptances thereunder (with letters of credit and bankers'
acceptances being deemed to have a principal amount equal to the face
amount thereof), up to an aggregate principal amount of $675.0 million
outstanding at any one time; PROVIDED, HOWEVER, that the aggregate amount
of Indebtedness incurred by Restricted Subsidiaries (other than the
Issuer or any Guarantor) pursuant to this clause (a) may not exceed
$150.0 million outstanding at any one time;
(b) the incurrence by the Issuer of Indebtedness represented by
the Notes;
(c) Existing Indebtedness (other than Indebtedness described in
clauses (a) and (b));
(d) Indebtedness (including Capitalized Lease Obligations)
incurred by Willis Corroon Group or any of its Restricted Subsidiaries,
to finance the purchase, lease or improvement of property (real or
personal) or equipment (whether through the direct purchase of assets or
the Capital Stock of any Person owning such assets) in an aggregate
principal amount which, when aggregated with the principal amount of all
other Indebtedness then outstanding and incurred pursuant to this clause
(d) and including all Refinancing Indebtedness incurred to refund,
refinance or replace any other Indebtedness incurred pursuant to this
clause (d), does not exceed the greater of (x) $50.0 million and (y) 5%
of Total Revenues.
(e) Indebtedness incurred by Willis Corroon Group or any of its
Restricted Subsidiaries constituting reimbursement obligations with
respect to letters of credit issued in the ordinary course of business,
including without limitation letters of credit in respect of workers'
compensation claims, or other Indebtedness with respect to reimbursement
type obligations regarding workers' compensation claims; PROVIDED,
HOWEVER, that upon the drawing of such letters of credit or the
incurrence of such Indebtedness, such obligations are reimbursed within
30 days following such drawing or incurrence;
(f) Indebtedness arising from agreements of Willis Corroon
Group or a Restricted Subsidiary providing for indemnification,
adjustment of purchase price or similar obligations, in each case,
incurred or assumed in connection with the disposition of any business,
assets or a Subsidiary, other than guarantees of Indebtedness incurred by
any Person acquiring all or any portion of such business, assets or a
Subsidiary for the purpose of financing such acquisition; PROVIDED,
HOWEVER, that
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(i) such Indebtedness is not reflected on the
balance sheet of Willis Corroon Group or any Restricted
Subsidiary (contingent obligations referred to in a footnote
to financial statements and not otherwise reflected on the
balance sheet will not be deemed to be reflected on such
balance sheet for purposes of this clause (i)) and
(ii) the maximum assumable liability in respect of
all such Indebtedness shall at no time exceed the gross
proceeds including noncash proceeds (the fair market value of
such noncash proceeds being measured at the time received and
without giving effect to any subsequent changes in value)
actually received by Willis Corroon Group and its Restricted
Subsidiaries in connection with such disposition;
(g) Indebtedness of Willis Corroon Group to a Restricted
Subsidiary; PROVIDED that any such Indebtedness is subordinated in right
of payment to the Notes; PROVIDED FURTHER that any subsequent issuance or
transfer of any Capital Stock or any other event which results in any
such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any
other subsequent transfer of any such Indebtedness (except to Willis
Corroon Group or another Restricted Subsidiary) shall be deemed, in each
case to be an incurrence of such Indebtedness;
(h) Indebtedness of a Restricted Subsidiary to Willis Corroon
Group or another Restricted Subsidiary; PROVIDED that
(i) any such Indebtedness is made pursuant to an
intercompany note and
(ii) if a Guarantor incurs such Indebtedness to a
Restricted Subsidiary that is not the Issuer or a Guarantor
such Indebtedness is subordinated in right of payment to the
Guarantee of such Guarantor; PROVIDED FURTHER that any
subsequent transfer of any such Indebtedness (except to Willis
Corroon Group or another Restricted Subsidiary) shall be
deemed, in each case to be an incurrence of such Indebtedness;
(i) shares of preferred stock of a Restricted Subsidiary issued
to Willis Corroon Group or another Restricted Subsidiary; PROVIDED that
any subsequent issuance or transfer of any Capital Stock or any other
event which results in any such Restricted Subsidiary ceasing to be a
Restricted Subsidiary or any other subsequent transfer of any such shares
of preferred stock (except to Willis Corroon Group or another Restricted
Subsidiary) shall be deemed in each case to be an issuance of such shares
of preferred stock;
(j) Hedging Obligations (excluding Hedging Obligations entered
into for speculative purposes);
(k) obligations in respect of performance and surety bonds and
completion guarantees provided by Willis Corroon Group or any Restricted
Subsidiary in the ordinary course of business;
(l) Indebtedness of any Guarantor in respect of such
Guarantor's Guarantee;
(m) Indebtedness and Disqualified Stock of Willis Corroon Group
or any of its Restricted Subsidiaries not otherwise permitted hereunder
in an aggregate principal amount or liquidation preference, which when
aggregated with the principal amount and liquidation
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preference of all other Indebtedness and Disqualified Stock then
outstanding and incurred pursuant to this clause (m), does not at any one
time outstanding exceed the sum of (x) $250 million and (y) 100% of the
net cash proceeds received by Willis Corroon Group or the Issuer since
immediately after the Closing Date from the issue or sale of Equity
Interests of Willis Corroon Group, any of its direct or indirect parent
corporations or the Issuer or net cash proceeds contributed to the
capital of Willis Corroon Group or the Issuer (in each case other than
proceeds of Disqualified Stock or sales of Equity Interests to Willis
Corroon Group or any of its Subsidiaries) as determined in accordance
with clauses (c)(ii) and (c)(iii) of the first paragraph of "--Limitation
on Restricted Payments" to the extent such net cash proceeds have not
been applied pursuant to such clauses to make Restricted Payments or to
make other payments or exchanges pursuant to the second paragraph of
"--Limitation on Restricted Payments" or to make Permitted Investments
(other than Permitted Investments specified in clauses (a) and (c) of the
definition thereof) (it being understood that any Indebtedness incurred
under this clause (m) shall cease to be deemed incurred or outstanding
for purposes of this clause (m) but shall be deemed to be incurred for
purposes of the first paragraph of this covenant from and after the first
date on which Willis Corroon Group could have incurred such Indebtedness
under the first paragraph of this covenant without reliance upon this
clause (m));
(n) (i) any guarantee by Willis Corroon Group or the Issuer
of Indebtedness or other obligations of any of its Restricted
Subsidiaries so long as the incurrence of such Indebtedness
incurred by such Restricted Subsidiary is permitted under the
terms of the Indenture,
(ii) any guarantee by a Restricted Subsidiary of
Indebtedness of Willis Corroon Group or the Issuer or of the
Trinity Hedging Obligations or the Facility Hedging
Obligations, PROVIDED that such guarantee is incurred in
accordance with the covenant described below under
"--Limitation on Guarantees of Indebtedness by Restricted
Subsidiaries" or
(iii) any guarantee by the Issuer of the Trinity
Hedging Obligations or the Facility Hedging Obligations;
(o) the incurrence by Willis Corroon Group or any of its
Restricted Subsidiaries of Indebtedness which serves to refund or
refinance any Indebtedness incurred as permitted under the first
paragraph of this covenant and clauses (b), (c) and (d) above, this
clause (o) and clause (p) below or any Indebtedness issued to so refund
or refinance such Indebtedness including additional Indebtedness incurred
to pay premiums and fees in connection therewith (the "REFINANCING
INDEBTEDNESS") prior to its respective maturity; PROVIDED, HOWEVER, that
such Refinancing Indebtedness
(i) has a Weighted Average Life to Maturity at the
time such Refinancing Indebtedness is incurred which is not
less than the remaining Weighted Average Life to Maturity of
Indebtedness being refunded or refinanced,
(ii) to the extent such Refinancing Indebtedness
refinances Indebtedness subordinated or PARI PASSU to the
Notes, such Refinancing Indebtedness is subordinated or PARI
PASSU to the Notes at least to the same extent as the
Indebtedness being refinanced or refunded and
(iii) shall not include
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(x) Indebtedness of a Subsidiary that
refinances Indebtedness of Willis Corroon Group or
(y) Indebtedness of Willis Corroon Group or
a Restricted Subsidiary that refinances Indebtedness
of an Unrestricted Subsidiary;
and PROVIDED FURTHER that subclauses (i) and (ii) of this clause (o)
will not apply to any refunding or refinancing of any Senior
Indebtedness;
(p) Indebtedness or Disqualified Stock of Persons that are
acquired by Willis Corroon Group or any Restricted Subsidiary or merged
into a Restricted Subsidiary in accordance with the terms of the
Indenture; PROVIDED that such Indebtedness or Disqualified Stock is not
incurred in contemplation of such acquisition or merger; and PROVIDED
FURTHER that after giving effect to such acquisition or merger, either
(i) Willis Corroon Group would be permitted to incur
at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first
sentence of this covenant or
(ii) the Fixed Charge Coverage Ratio is greater than
immediately prior to such acquisition or merger.
Notwithstanding the foregoing, the second proviso of the immediately
preceding sentence shall not apply to Indebtedness outstanding on the
Closing Date of associates of Willis Corroon Group on the Closing Date
that are acquired by Willis Corroon Group or any Restricted Subsidiary
or merged into a Restricted Subsidiary;
(q) Indebtedness in respect of the Group Intercompany Notes,
PROVIDED that any subsequent transfer of a Group Intercompany Note by
Trinity to a Person other than Willis Corroon Group or a Restricted
Subsidiary shall be deemed to be an incurrence of such Indebtedness:
(r) Indebtedness in respect of a Convertible Loan, PROVIDED that
any subsequent transfer of a Convertible Loan by Trinity to a Person
other than Willis Corroon Group or a Restricted Subsidiary shall be
deemed to be an incurrence of such Indebtedness;
(s) Indebtedness under any BACS Facility entered into in the
ordinary course of business;
(t) Indebtedness incurred in relation to arrangements made in
the ordinary course of business to facilitate the operation of bank
accounts on a net balance basis for the calculation of interest;
(u) short-term Indebtedness from banks incurred in the ordinary
course of business pursuant to a facility required in order to comply
with, or otherwise falling within, paragraph 25 (2) of the Lloyd's
Brokers By-law (No. 5 of 1988) (or any other by-law or regulation issued
by Lloyd's from time to time with which the relevant company is required
to comply); and
(v) any guarantee facility entered into in the ordinary course
of business and consistent with industry custom provided in relation to
employees of Willis Corroon Group or any Restricted Subsidiary who are
Lloyd's names.
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For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of permitted Indebtedness described in clauses (a) through (v) above
or is entitled to be incurred pursuant to the first paragraph of this covenant,
Willis Corroon Group shall, in its sole discretion, classify such item of
Indebtedness in any manner that complies with this covenant and such item of
Indebtedness will be treated as having been incurred pursuant to only one of
such clauses or pursuant to the first paragraph hereof except as otherwise set
forth in clause (m). Accrual of interest, the accretion of accreted value and
the payment of interest in the form of additional Indebtedness will not be
deemed to be an incurrence of Indebtedness for purposes of this covenant.
For purposes of determining compliance with any U.S. dollar-denominated
restriction on the incurrence of Indebtedness, the U.S. dollar-equivalent
principal amount of indebtedness denominated in a foreign currency shall be
calculated based on the relevant currency exchange rate in effect on the date
such Indebtedness was incurred, in the case of term debt, or first committed, in
the case of revolving credit debt; PROVIDED that (x) the U.S. dollar-equivalent
principal amount of any such Indebtedness outstanding or committed on the
Issuance Date shall be calculated based on the relevant currency exchange rate
in effect on September 30, 1998, and (y) if such Indebtedness is incurred to
refinance other Indebtedness denominated in a foreign currency, and such
refinancing would cause the applicable U.S. dollar-denominated restriction to be
exceeded if calculated at the relevant currency exchange rate in effect on the
date of such Refinancing, such U.S. dollar-denominated restriction shall be
deemed not to have been exceeded so long as the principal amount of such
refinancing Indebtedness does not exceed the principal amount of such
Indebtedness being refinanced. The principal amount of any Indebtedness incurred
to refinance other Indebtedness, if incurred in a different currency from the
Indebtedness being refinanced, shall be calculated based on the currency
exchange rate applicable to the currencies in which such respective Indebtedness
is denominated that is in effect on the date of such refinancing.
LIENS. The Indenture provides that Willis Corroon Group will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly
create, incur, assume or suffer to exist any Lien that secures obligations under
any Senior Subordinated Indebtedness or Subordinated Indebtedness on any asset
or property of Willis Corroon Group or such Restricted Subsidiary, or any income
or profits therefrom, or assign or convey any right to receive income therefrom,
unless the Notes are equally and ratably secured (or senior to, in the event the
Lien relates to Subordinated Indebtedness) with the obligations so secured or
until such time as such obligations are no longer secured by a Lien.
The Indenture provides that no Guarantor will directly or indirectly
create, incur, assume or suffer to exist any Lien that secures obligations under
any Senior Subordinated Indebtedness or Subordinated Indebtedness of such
Guarantor on any asset or property of such Guarantor or any income or profits
therefrom, or assign or convey any right to receive income therefrom, unless the
Guarantee of such Guarantor is equally and ratably secured (or senior to, in the
event the Lien relates to Subordinated Indebtedness) with the obligations so
secured or until such time as such obligations are no longer secured by a Lien.
MERGER, CONSOLIDATION OR SALE OF ALL OR SUBSTANTIALLY ALL ASSETS. The
Indenture provides that neither Willis Corroon Group nor the Issuer may
consolidate or merge with or into or wind up into (whether or not Willis Corroon
Group or the Issuer, as the case may be, is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to any Person
unless
(i) Willis Corroon Group or the Issuer, as the case may be, is
the surviving corporation or the Person formed by or surviving any such
consolidation or merger (if other
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than Willis Corroon Group or the Issuer, as the case may be) or to which
such sale, assignment, transfer, lease, conveyance or other disposition
will have been made is a corporation organized or existing under the laws
of
(A) in the case of Willis Corroon Group, the United
Kingdom or the United States, any state thereof, the District
of Columbia, or any territory thereof or
(B) in the case of the Issuer, the United States, any
state thereof, the District of Columbia, or any territory
thereof (the Company, the Issuer or such Person, as the case
may be, being herein called the "SUCCESSOR COMPANY");
(ii) the Successor Company (if other than Willis Corroon Group
or the Issuer) expressly assumes all the obligations of Willis Corroon
Group or the Issuer, as the case may be, under the Indenture and the
Notes pursuant to a supplemental indenture or other documents or
instruments in form reasonably satisfactory to the Trustee;
(iii) immediately after such transaction no Default or Event of
Default exists;
(iv) immediately after giving pro forma effect to such
transaction, as if such transaction had occurred at the beginning of the
applicable four-quarter period,
(A) the Successor Company would be permitted to incur
at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first
sentence of the covenant described under "--Limitations on
Incurrence of Indebtedness and Issuance of Disqualified Stock"
or
(B) the Fixed Charge Coverage Ratio for the Successor
Company and the Restricted Subsidiaries would be greater than
such Ratio for Willis Corroon Group and the Restricted
Subsidiaries immediately prior to such transaction;
(v) each Guarantor, unless it is the other party to the
transactions described above, in which case clause (ii) of the next
paragraph shall apply, shall have by supplemental indenture confirmed
that its Guarantee shall apply to such Person's obligations under the
Indenture and the Notes; and
(vi) Willis Corroon Group or the Issuer, as the case may be,
shall have delivered to the Trustee an Officers' Certificate and an
opinion of counsel, each stating that such consolidation, merger or
transfer and such supplemental indenture (if any) comply with the
Indenture.
The Successor Company will succeed to, and be substituted for, Willis Corroon
Group or the Issuer, as the case may be, under the Indenture and the Notes.
Notwithstanding the foregoing clause (iv), (a) any Restricted Subsidiary may
consolidate with, merge into or transfer all or part of its properties and
assets to Willis Corroon Group or the Issuer and (b) Willis Corroon Group or the
Issuer may merge with an Affiliate incorporated solely for the purpose of
reincorporating Willis Corroon Group or the Issuer in another State of the
United States so long as the amount of Indebtedness of Willis Corroon Group and
the Restricted Subsidiaries is not increased thereby.
Subject to certain limitations described in the Indenture governing
release of a Guarantee upon the sale or disposition of a Guarantor, each
Guarantor other than Willis Corroon Group will not, and Willis Corroon Group
will not permit any other Guarantor to, consolidate or merge with or into or
wind up
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into (whether or not such Guarantor is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions to, any Person
unless
(i) such Guarantor is the surviving corporation or the Person
formed by or surviving any such consolidation or merger (if other than
such Guarantor) or to which such sale, assignment, transfer, lease,
conveyance or other disposition will have been made is a corporation
organized or existing under the laws of
(A) the United Kingdom or
(B) the United States, any state thereof, the
District of Columbia, or any territory thereof (such Guarantor
or such Person, as the case may be, being herein called the
"SUCCESSOR GUARANTOR");
(ii) the Successor Guarantor (if other than such Guarantor)
expressly assumes all the obligations of such Guarantor under the
Indenture and such Guarantor's Guarantee pursuant to a supplemental
indenture or other documents or instruments in form reasonably
satisfactory to the Trustee;
(iii) immediately after such transaction no Default or Event of
Default exists; and
(iv) Willis Corroon Group shall have delivered to the Trustee an
Officers' Certificate and an opinion of counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if
any) comply with the Indenture.
Subject to certain limitations described in the Indenture, the Successor
Guarantor will succeed to, and be substituted for, such Guarantor under the
Indenture and such Guarantor's Guarantee. Notwithstanding the foregoing, any
Guarantor may merge into or transfer all or part of its properties and assets to
another Guarantor.
TRANSACTIONS WITH AFFILIATES. The Indenture provides that Willis
Corroon Group will not, and will not permit any of its Restricted Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any of
its properties or assets to, or purchase any property or assets from, or enter
into or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate of Willis
Corroon Group (each of the foregoing, an "AFFILIATE TRANSACTION") involving
aggregate payments or consideration in excess of $5.0 million, unless
(a) such Affiliate Transaction is on terms that are not
materially less favorable to Willis Corroon Group or the relevant
Restricted Subsidiary than those that would have been obtained in a
comparable transaction by Willis Corroon Group or such Restricted
Subsidiary with an unrelated Person and
(b) Willis Corroon Group delivers to the Trustee with respect to
any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $10.0 million, a
resolution adopted by the majority of the Board of Directors approving
such Affiliate Transaction and set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (a)
above.
The foregoing provisions will not apply to the following:
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(i) transactions between or among Willis Corroon Group and/or
any of its Restricted Subsidiaries;
(ii) Restricted Payments permitted by the provisions of the
Indenture described above under the covenant "--Limitation on Restricted
Payments";
(iii) the payment of customary annual management, consulting,
monitoring and advisory fees and related expenses to Kohlberg Kravis
Roberts & Co. L.P. and its Affiliates;
(iv) the payment of reasonable and customary fees paid to, and
indemnity provided on behalf of, officers, directors, employees or
consultants of Willis Corroon Group, any of its direct or indirect parent
corporations or any Restricted Subsidiary;
(v) payments by Willis Corroon Group or any of its Restricted
Subsidiaries to KKR and its Affiliates made for any financial advisory,
financing, underwriting or placement services or in respect of other
investment banking activities, including, without limitation, in
connection with acquisitions or divestitures which payments are approved
by a majority of the Board of Directors of Willis Corroon Group in good
faith;
(vi) transactions in which Willis Corroon Group or any of its
Restricted Subsidiaries, as the case may be, delivers to the Trustee a
letter from an Independent Financial Advisor stating that such
transaction is fair to Willis Corroon Group or such Restricted Subsidiary
from a financial point of view or meets the requirements of clause (a) of
the preceding paragraph;
(vii) payments or loans to employees or consultants of Willis
Corroon Group, any of its direct or indirect parent corporations or any
Restricted Subsidiary which are approved by a majority of the Board of
Directors of Willis Corroon Group in good faith;
(viii) any agreement as in effect as of the Closing Date
(including, without limitation, each of the agreements entered into in
connection with the Transactions) or any amendment thereto (so long as
any such amendment is not disadvantageous to the Holders in any material
respect) or any transaction contemplated thereby;
(ix) the existence of, or the performance by Willis Corroon
Group or any of its Restricted Subsidiaries of its obligations under the
terms of, any stockholders agreement (including any registration rights
agreement or purchase agreement related thereto) to which it is a party
as of the Closing Date and any similar agreements which it may enter into
thereafter; PROVIDED, HOWEVER, that the existence of, or the performance
by Willis Corroon Group or any of its Restricted Subsidiaries of
obligations under any future amendment to any such existing agreement or
under any similar agreement entered into after the Closing Date shall
only be permitted by this clause (ix) to the extent that the terms of any
such amendment or new agreement are not otherwise disadvantageous to the
Holders in any material respect;
(x) the Transactions and the payment of all fees and expenses
related to the Transactions;
(xi) transactions with customers, clients, suppliers, or
purchasers or sellers of goods or services, in each case in the ordinary
course of business and otherwise in compliance with the terms of the
Indenture which are fair to Willis Corroon Group or its Restricted
Subsidiaries, in the reasonable determination of the Board of Directors
of Willis
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Corroon Group or the senior management thereof, or are on terms at least
as favorable as might reasonably have been obtained at such time from an
unaffiliated party;
(xii) the issuance of Equity Interests (other than Disqualified
Stock) of Willis Corroon Group or the Issuer to any Permitted Holder;
(xiii) any transaction between Willis Corroon Group or any
Restricted Subsidiary and any Associate, including any transaction
pursuant to which an Associate becomes a Restricted Subsidiary; and
(xiv) sales of accounts receivable, or participations therein,
in connection with any Receivables Facility.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The
Indenture provides that Willis Corroon Group will not, and will not permit any
of its Restricted Subsidiaries (other than the Issuer) to, directly or
indirectly, create or otherwise cause or suffer to exist or become effective any
consensual encumbrance or consensual restriction on the ability of any such
Restricted Subsidiary to:
(a) (i) pay dividends or make any other distributions to Willis
Corroon Group or any of its Restricted Subsidiaries (1) on its Capital
Stock or (2) with respect to any other interest or participation in, or
measured by, its profits or (ii) pay any Indebtedness owed to Willis
Corroon Group or any of its Restricted Subsidiaries;
(b) make loans or advances to Willis Corroon Group or any of its
Restricted Subsidiaries; or
(c) sell, lease or transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries, except (in each case)
for such encumbrances or restrictions existing under or by reason of:
(1) contractual encumbrances or restrictions in
effect on the Closing Date, including, without limitation,
pursuant to Existing Indebtedness or the Senior Credit
Facilities and their related documentation;
(2) the Indenture and the Notes;
(3) purchase money obligations for property acquired
in the ordinary course of business that impose restrictions of
the nature discussed in clause (c) above on the property so
acquired;
(4) applicable law or any applicable rule, regulation
or order;
(5) any agreement or other instrument of a Person
acquired by Willis Corroon Group or any Restricted Subsidiary
in existence at the time of such acquisition (but not created
in contemplation thereof), which encumbrance or restriction is
not applicable to any Person, or the properties or assets of
any Person, other than the Person, or the property or assets
of the Person, so acquired;
(6) contracts for the sale of assets, including,
without limitation customary restrictions with respect to a
Subsidiary pursuant to an agreement that
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has been entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such
Subsidiary;
(7) secured Indebtedness otherwise permitted to be
incurred pursuant to the covenants described under
"--Limitations on Incurrence of Indebtedness and Issuance of
Disqualified Stock" and "--Liens" that limit the right of the
debtor to dispose of the assets securing such Indebtedness;
(8) restrictions on cash or other deposits or net
worth imposed by customers under contracts entered into in the
ordinary course of business;
(9) other Indebtedness or Disqualified Stock of
Restricted Subsidiaries permitted to be incurred subsequent to
the Closing Date pursuant to the provisions of the covenant
described under "--Limitations on Incurrence of Indebtedness
and Issuance of Disqualified Stock";
(10) customary provisions in joint venture agreements
and other similar agreements entered into in the ordinary
course of business;
(11) customary provisions contained in leases and
other agreements entered into in the ordinary course of
business;
(12) customary restrictions on fiduciary cash held by
Willis Corroon Group's Subsidiaries;
(13) any encumbrances or restrictions of the type
referred to in clauses (a), (b) and (c) above imposed by any
amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings of the
contracts, instruments or obligations referred to in clauses
(1) through (12) above, PROVIDED that such amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are, in the good
faith judgment of Willis Corroon Group's Board of Directors,
no more restrictive with respect to such dividend and other
payment restrictions than those contained in the dividend or
other payment restrictions prior to such amendment,
modification, restatement, renewal, increase, supplement,
refunding, replacement or refinancing; or
(14) restrictions created in connection with any
Receivables Facility that, in the good faith determination of
the Board of Directors of Willis Corroon Group or the Issuer,
as the case may be, are necessary or advisable to effect such
Receivables Facility.
LIMITATION ON GUARANTEES OF INDEBTEDNESS BY RESTRICTED
SUBSIDIARIES. (a) The Indenture provides that Willis Corroon Group will not
permit any Domestic Subsidiary or U.K. Subsidiary of Willis Corroon Group that
is not a Subsidiary of the Issuer or any Domestic Subsidiary of the Issuer (in
each case, other than any such Restricted Subsidiary created in connection with
a Receivables Facility) to guarantee the payment of any Indebtedness of Willis
Corroon Group or the Issuer unless
(A) such Restricted Subsidiary simultaneously executes and
delivers a supplemental indenture to the Indenture providing for a
Guarantee of payment of the Notes
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by such Restricted Subsidiary except that with respect to a guarantee of
Indebtedness of Willis Corroon Group or the Issuer
(1) if the Notes are subordinated in right of payment
to such Indebtedness, the Guarantee under the supplemental
indenture shall be subordinated to such Restricted
Subsidiary's guarantee with respect to such Indebtedness
substantially to the same extent as the Notes are subordinated
to such Indebtedness under the Indenture and
(2) if such Indebtedness is by its express terms
subordinated in right of payment to the Notes, any such
guarantee of such Restricted Subsidiary with respect to such
Indebtedness shall be subordinated in right of payment to such
Restricted Subsidiary's Guarantee with respect to the Notes
substantially to the same extent as such Indebtedness is
subordinated to the Notes;
(B) such Restricted Subsidiary waives and will not in any manner
whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against
Willis Corroon Group or any other Restricted Subsidiary as a result of
any payment by such Restricted Subsidiary under its Guarantee; and
(C) such Restricted Subsidiary shall deliver to the Trustee an
opinion of counsel to the effect that
(1) such Guarantee of the Notes has been duly
executed and authorized and
(2) such Guarantee of the Notes constitutes a valid,
binding and enforceable obligation of such Restricted
Subsidiary, except insofar as enforcement thereof may be
limited by bankruptcy, insolvency or similar laws (including,
without limitation, all laws relating to fraudulent transfers)
and except insofar as enforcement thereof is subject to
general principles of equity;
PROVIDED that this paragraph (a) shall not be applicable to any guarantee of any
Restricted Subsidiary
(x) that (1) existed at the time such Person became a Restricted
Subsidiary and (2) was not incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary or
(y) that guarantees the payment of Obligations of Willis Corroon
Group, the Issuer or any Restricted Subsidiary under the Senior Credit
Facilities or any other Senior Indebtedness and any refunding,
refinancing or replacement thereof, in whole or in part, PROVIDED that
such refunding, refinancing or replacement thereof constitutes Senior
Indebtedness and PROVIDED FURTHER that any such Senior Indebtedness and
any refunding, refinancing or replacement thereof is not incurred
pursuant to a registered offering of securities under the Securities Act
or a private placement of securities (including under Rule 144A) pursuant
to an exemption from the registration requirements of the Securities Act,
which private placement provides for registration rights under the
Securities Act.
(b) Notwithstanding the foregoing and the other provisions of the
Indenture, any Guarantee by a Restricted Subsidiary of the Notes shall provide
by its terms that it shall be automatically and unconditionally released and
discharged upon
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(i) any sale, exchange or transfer, to any Person not an
Affiliate of Willis Corroon Group, of all of Willis Corroon Group's or
the Issuer's Capital Stock in, or all or substantially all the assets of,
such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by the Indenture) or
(ii) the release or discharge of the guarantee by such
Restricted Subsidiary that is a Subsidiary of the Issuer which resulted
in the creation of such Guarantee, except a discharge or release by or as
a result of payment under such guarantee.
LIMITATION ON OTHER SENIOR SUBORDINATED INDEBTEDNESS. The Indenture
provides that Willis Corroon Group will not, and will not permit the Issuer or
any other Guarantor to, directly or indirectly, incur any Indebtedness
(including Acquired Indebtedness) that is subordinate in right of payment to any
Indebtedness of Willis Corroon Group, the Issuer or any Guarantor, as the case
may be, unless such Indebtedness is either
(a) equal in right of payment with the Notes or Willis Corroon
Group's or such other Guarantor's Guarantee, as the case may be, or
(b) subordinate in right of payment to the Notes, or Willis
Corroon Group's or such other Guarantor's Guarantee, as the case may be.
REPORTS AND OTHER INFORMATION. Notwithstanding that neither Willis
Corroon Group nor the Issuer may be subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act or otherwise report on an annual and
quarterly basis on forms provided for such annual and quarterly reporting
pursuant to rules and regulations promulgated by the Securities and Exchange
Commission, the Indenture will require Willis Corroon Group to file with the
Commission (and make available to the Trustee and Holders (without exhibits),
without cost to each Holder, within 15 days after it files them with the
Commission),
(a) within 90 days after the end of each fiscal year, annual
reports on Form 20-F (or any successor or comparable form) containing the
information required to be contained therein (or required in such
successor or comparable form);
(b) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year, reports on Form 6-K, which will
contain all quarterly information that would be required to be contained
in Form 10-Q (or any successor or comparable form);
(c) promptly from time to time after the occurrence of an event
required to be therein reported, such other reports on Form 6-K (or any
successor or comparable form); and
(d) any other information, documents and other reports which
Willis Corroon Group would be required to file with the Commission if it
were subject to Section 13 or 15(d) of the Exchange Act;
PROVIDED that all such information may be prepared in accordance with GAAP but
shall contain a reconciliation to United States generally accepted accounting
principles and PROVIDED, FURTHER, that Willis Corroon Group shall not be so
obligated to file such reports with the Commission if the Commission does not
permit such filing, in which event Willis Corroon Group will make available such
information to prospective purchasers of Notes, in addition to providing such
information to the Trustee and the Holders, in each case within 15 days after
the time Willis Corroon Group would be required to file such information with
the Commission, if it were subject to Sections 13 or 15(d) of the Exchange Act.
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Notwithstanding the foregoing, such requirements shall be deemed satisfied prior
to the commencement of the Exchange Offer or the effectiveness of the Shelf
Registration Statement by the filing with the Commission of the Exchange Offer
Registration Statement and/or Shelf Registration Statement, and any amendments
thereto, with such financial information that satisfies Regulation S-X of the
Securities Act, PROVIDED, HOWEVER, that in order for the provisions of clause
(a) above to be deemed satisfied with respect to 1998, such Exchange Offer
Registration Statement or Shelf Registration Statement must include audited
financial statements for the year 1998.
EVENTS OF DEFAULT AND REMEDIES
The following events constitute Events of Default under the Indenture:
(i) default in payment when due and payable, upon redemption,
acceleration or otherwise, of principal of, or premium, if any, on the
Notes whether or not such payment shall be prohibited by the
subordination provisions relating to the Notes;
(ii) default for 30 days or more in the payment when due of
interest on or with respect to the Notes whether or not such payment
shall be prohibited by the subordination provisions relating to the
Notes;
(iii) failure by Willis Corroon Group, the Issuer or any
Guarantor for 30 days after receipt of written notice given by the
Trustee or the holders of at least 30% in principal amount of the Notes
then outstanding to comply with any of its other agreements in the
Indenture or the Notes;
(iv) default under any mortgage, indenture or instrument under
which there is issued or by which there is secured or evidenced any
Indebtedness for money borrowed by Willis Corroon Group or any of its
Restricted Subsidiaries or the payment of which is guaranteed by Willis
Corroon Group or any of its Restricted Subsidiaries (other than
Indebtedness owed to Willis Corroon Group or a Restricted Subsidiary and
other than any Group Intercompany Note, PROVIDED that such Group
Intercompany Note is held by Trinity at such time), whether such
Indebtedness or guarantee now exists or is created after the issuance of
the Outstanding Notes, if both
(A) such default either (1) results from the failure
to pay any such Indebtedness at its stated final maturity
(after giving effect to any applicable grace periods) or (2)
relates to an obligation other than the obligation to pay
principal of any such Indebtedness at its stated final
maturity and results in the holder or holders of such
Indebtedness causing such Indebtedness to become due prior to
its stated maturity and
(B) the principal amount of such Indebtedness,
together with the principal amount of any other such
Indebtedness in default for failure to pay principal at stated
final maturity (after giving effect to any applicable grace
periods), or the maturity of which has been so accelerated,
aggregate $25 million or more at any one time outstanding;
(v) failure by Willis Corroon Group, the Issuer or any of its
Significant Subsidiaries to pay final judgments aggregating in excess of
$25 million, which final judgments remain unpaid, undischarged and
unstayed for a period of more than 60 days after such judgment becomes
final, and in the event such judgment is covered by insurance, an
enforcement
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proceeding has been commenced by any creditor upon such judgment or
decree which is not promptly stayed;
(vi) certain events of bankruptcy or insolvency with respect to
Willis Corroon Group, the Issuer or any of its Significant Subsidiaries;
or
(vii) the Guarantee of any Significant Subsidiary shall for any
reason cease to be in full force and effect or be declared null and void
or any responsible officer of Willis Corroon Group or any Guarantor that
is a Significant Subsidiary denies that it has any further liability
under its Guarantee or gives notice to such effect (other than by reason
of the termination of the Indenture or the release of any such Guarantee
in accordance with the Indenture).
If any Event of Default (other than of a type specified in clause (vi)
above) occurs and is continuing under the Indenture, the Trustee or the Holders
of at least 30% in principal amount of the then outstanding Notes may declare
the principal, premium, if any, interest and any other monetary obligations on
all the then outstanding Notes to be due and payable immediately; PROVIDED,
HOWEVER, that, so long as any Indebtedness permitted to be incurred under the
Indenture as part of the Senior Credit Facilities shall be outstanding, no such
acceleration shall be effective until the earlier of
(1) acceleration of any such Indebtedness under the Senior
Credit Facilities or
(2) five business days after the giving of written notice to the
Issuer and the administrative agent under the Senior Credit Facilities of
such acceleration.
Upon the effectiveness of such declaration, such principal and interest will be
due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising under clause (vi) of the first paragraph of this
section, all outstanding Notes will become due and payable without further
action or notice. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Indenture provides that the Trustee may
withhold from Holders notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal,
premium, if any, or interest) if it determines that withholding notice is in
their interest. In addition, the Trustee shall have no obligation to accelerate
the Notes if in the best judgment of the Trustee acceleration is not in the best
interest of the Holders of such Notes.
The Indenture provides that the Holders of a majority in aggregate
principal amount of the then outstanding Notes issued thereunder by notice to
the Trustee may on behalf of the Holders of all of such Notes waive any existing
Default or Event of Default and its consequences under the Indenture except a
continuing Default or Event of Default in the payment of interest on, premium,
if any, or the principal of any such Note held by a non-consenting Holder. In
the event of any Event of Default specified in clause (iv) above, such Event of
Default and all consequences thereof (including without limitation any
acceleration or resulting payment default) shall be annulled, waived and
rescinded, automatically and without any action by the Trustee or the Holders,
if within 20 days after such Event of Default arose
(x) the Indebtedness or guarantee that is the basis for such
Event of Default has been discharged, or
(y) the holders thereof have rescinded or waived the
acceleration, notice or action (as the case may be) giving rise to such
Event of Default, or
(z) if the default that is the basis for such Event of Default
has been cured.
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The Indenture provides that the Issuer is required to deliver to the
Trustee annually a statement regarding compliance with the Indenture, and the
Issuer is required, within five Business Days, upon becoming aware of any
Default or Event of Default or any default under any document, instrument or
agreement representing Indebtedness of the Issuer or any Guarantor, to deliver
to the Trustee a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the
Issuer or any Guarantor, shall have any liability for any obligations of the
Issuer or the Guarantors under the Notes, the Guarantees or the Indenture or for
any claim based on, in respect of, or by reason of such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a waiver
is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The obligations of the Issuer and the Guarantors under the Indenture
will terminate (other than certain obligations) and will be released upon
payment in full of all of the Notes. The Issuer may, at its option and at any
time, elect to have all of its obligations discharged with respect to the
outstanding Notes and have each Guarantor's obligation discharged with respect
to its Guarantee ("LEGAL DEFEASANCE") and cure all then existing Events of
Default except for
(i) the rights of Holders of outstanding Notes to receive
payments in respect of the principal of, premium, if any, and interest on
such Notes when such payments are due solely out of the trust created
pursuant to the Indenture,
(ii) the Issuer's obligations with respect to Notes concerning
issuing temporary Notes, registration of such Notes, mutilated,
destroyed, lost or stolen Notes and the maintenance of an office or
agency for payment and money for security payments held in trust,
(iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Issuer's obligations in connection therewith and
(iv) the Legal Defeasance provisions of the Indenture.
In addition, the Issuer may, at its option and at any time, elect to have the
obligations of the Issuer and each Guarantor released with respect to certain
covenants that are described in the Indenture ("COVENANT DEFEASANCE") and
thereafter any omission to comply with such obligations shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment on other
indebtedness, bankruptcy, receivership, rehabilitation and insolvency events)
described under "Events of Default" will no longer constitute an Event of
Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance
with respect to the Notes:
(i) the Issuer must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, cash in U.S. dollars, non-callable
Government Securities, or a combination
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thereof, in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest due on the outstanding Notes
on the stated maturity date or on the applicable redemption date, as the
case may be, of such principal, premium, if any, or interest on the
outstanding Notes;
(ii) in the case of Legal Defeasance, the Issuer shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that, subject to
customary assumptions and exclusions,
(A) the Issuer has received from, or there has been
published by, the United States Internal Revenue Service a
ruling or
(B) since the issuance of the outstanding Notes,
there has been a change in the applicable U.S. federal income
tax law,
in either case to the effect that, and based thereon such opinion of counsel in
the United States shall confirm that, subject to customary assumptions and
exclusions, the Holders will not recognize income, gain or loss for U.S. federal
income tax purposes as a result of such Legal Defeasance and will be subject to
U.S. federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Legal Defeasance had not occurred;
(iii) in the case of Covenant Defeasance, the Issuer shall have
delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that, subject to
customary assumptions and exclusions, the Holders will not recognize
income, gain or loss for U.S. federal income tax purposes as a result of
such Covenant Defeasance and will be subject to such tax on the same
amounts, in the same manner and at the same times as would have been the
case if such Covenant Defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or, with respect to certain
bankruptcy or insolvency Events of Default, on the 91st day after such
date of deposit;
(v) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under, the
Senior Credit Facilities or any other material agreement or instrument
(other than the Indenture) to which, the Issuer or any Guarantor is a
party or by which the Issuer or any Guarantor is bound;
(vi) the Issuer shall have delivered to the Trustee an opinion
of counsel to the effect that, as of the date of such opinion and subject
to customary assumptions and exclusions following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally under any applicable U.S. federal or state law, and that the
Trustee has a perfected security interest in such trust funds for the
ratable benefit of the Holders;
(vii) the Issuer shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the Issuer
with the intent of defeating, hindering, delaying or defrauding any
creditors of the Issuer or any Guarantor or others; and
(viii) the Issuer shall have delivered to the Trustee an
Officers' Certificate and an opinion of counsel in the United States
(which opinion of counsel may be subject to
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customary assumptions and exclusions) each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the
Covenant Defeasance, as the case may be, have been complied with.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
as to all Notes issued thereunder, when either
(a) all such Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid
and Notes for whose payment money has theretofore been deposited in
trust) have been delivered to the Trustee for cancellation; or
(b) (i) all such Notes not theretofore delivered to such
Trustee for cancellation have become due and payable by reason
of the making of a notice of redemption or otherwise or will
become due and payable within one year and the Issuer or any
Guarantor has irrevocably deposited or caused to be deposited
with such Trustee as trust funds in trust solely for the benefit
of the Holders, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be
sufficient without consideration of any reinvestment of interest
to pay and discharge the entire indebtedness on such Notes not
theretofore delivered to the Trustee for cancellation for
principal, premium, if any, and accrued interest to the date of
maturity or redemption;
(ii) no Default or Event of Default with respect to
the Indenture or the Notes shall have occurred and be
continuing on the date of such deposit or shall occur as a
result of such deposit and such deposit will not result in a
breach or violation of, or constitute a default under, any
other instrument to which the Issuer or any Guarantor is a
party or by which the Issuer or any Guarantor is bound;
(iii) the Issuer or any Guarantor has paid or caused
to be paid all sums payable by it under such Indenture; and
(iv) the Issuer has delivered irrevocable
instructions to the Trustee under such Indenture to apply the
deposited money toward the payment of such Notes at maturity
or the redemption date, as the case may be.
In addition, the Issuer must deliver an Officers' Certificate and an opinion of
counsel to the Trustee stating that all conditions precedent to satisfaction and
discharge have been satisfied.
WITHHOLDING TAXES
All payments made by Willis Corroon Group with respect to its Guarantee
will be made without withholding or deduction for, or on account of, any present
or future taxes, duties, assessments or governmental charges of whatever nature
(collectively, "Taxes") imposed or levied by or on behalf of the United Kingdom
or any political subdivision thereof or any authority having power to tax
therein (each a "U.K. Tax Authority"), unless the withholding or deduction of
such Taxes is then required by law. If any deduction or withholding for, or on
account of, any Taxes of any U.K. Tax Authority, shall at any time be required
on any payments made by Willis Corroon Group with respect to its Guarantee,
Willis Corroon Group will pay such additional amounts (the "Additional Amounts")
as may be necessary in order that the net amounts received in respect of such
payments by the Holders of the Notes or the
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Trustee, as the case may be, after such withholding or deduction, equal the
respective amounts which would have been received in respect of such payments in
the absence of such withholding or deduction, except that no such Additional
Amounts will be payable with respect to:
(i) any payments on a Note held by or on behalf of a Holder or
beneficial owner who is liable for such Taxes in respect of such Note by
reason of the Holder or beneficial owner having some connection with the
United Kingdom (including being a citizen or resident or national of, or
carrying on a business or maintaining a permanent establishment in, or
being physically present in, the United Kingdom) other than by the mere
holding of such Note or enforcement of rights thereunder or the receipt
of payments in respect thereof;
(ii) any Taxes that are imposed or withheld by reason of the
failure of the Holder or beneficial owner of the Note to comply with any
request by Willis Corroon Group to provide information concerning the
nationality, residence or identity of such Holder or beneficial owner or
to make any declaration or similar claim or satisfy any information or
reporting requirement, which is required or imposed by a statute, treaty,
regulation or administrative practice of the taxing jurisdiction as a
precondition to exemption from all or part of such Taxes; and
(iii) any Note presented for payment (where presentation is
required) more than 30 days after the relevant payment is first made
available for payment to the Holder.
Such Additional Amounts will also not be payable where, had the
beneficial owner of the Note been the Holder of the Note, he would not have been
entitled to payment of Additional Amounts by reason of clauses (i) to (iii)
inclusive, above.
References to principal, interest, premium or other amounts payable in
respect of Willis Corroon Group's Guarantee shall be deemed also to refer to any
Additional Amounts which may be payable.
Willis Corroon Group will also
(i) make such withholding or deduction and
(ii) remit the full amount deducted or withheld to the relevant
authority in accordance with applicable law.
Upon request, Willis Corroon Group will provide the Trustee with documentation
satisfactory to the Trustee evidencing the payment of Additional Amounts. Copies
of such documentation will be made available to the Holders upon request.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Issuer may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Issuer is not required to transfer or exchange
any Note selected for redemption. Also, the Issuer is not required to transfer
or exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
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If Certificated Notes are issued, the Issuer will appoint and maintain
a transfer agent (the "Transfer Agent") in Luxembourg for so long as the Notes
are listed on the Luxembourg Stock Exchange, at which office a holder of a
Certificated Note will be able to surrender its Note for registration of
transfer. The Issuer will be able to at any time terminate the appointment of a
Transfer Agent and appoint additional or other Transfer Agents. Notice of such
termination or appointment and of any change in the specified office of a
Transfer Agent will be provided in the manner described below in "--Notices."
The registered Holder of a Note will be treated as the owner of the
Note for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the
Indenture, any Guarantee and the Notes issued thereunder may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Notes then outstanding (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, Notes), and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a purchase of or tender offer or exchange offer for
Notes).
The Indenture provides that without the consent of each Holder
affected, an amendment or waiver may not (with respect to any Notes held by a
non-consenting Holder):
(i) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver,
(ii) reduce the principal of or change the fixed maturity of any
such Note or alter or waive the provisions with respect to the redemption
of the Notes (other than provisions relating to the covenants described
above under the caption "--Repurchase at the Option of Holders"),
(iii) reduce the rate of or change the time for payment of
interest on any Note,
(iv) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of such Notes and a waiver of the
payment default that resulted from such acceleration), or in respect of a
covenant or provision contained in the Indenture or any Guarantee which
cannot be amended or modified without the consent of all Holders,
(v) make any Note payable in money other than that stated in
such Notes,
(vi) make any change in the provisions of the Indenture relating
to waivers of past Defaults or the rights of Holders to receive payments
of principal of or premium, if any, or interest on the Notes,
(vii) make any change in the foregoing amendment and waiver
provisions,
(viii) impair the right of any Holder to receive payment of
principal of, or interest on such Holder's Notes on or after the due
dates therefor or to institute suit for the enforcement of any payment on
or with respect to such Holder's Notes or
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(ix) make any change in the subordination provisions of the
Indenture that would adversely affect the Holders.
The Indenture provides that, notwithstanding the foregoing, without the
consent of any Holder, the Issuer, any Guarantor (with respect to a Guarantee or
the Indenture to which it is a party) and the Trustee may amend or supplement
the Indenture, any Guarantee or the Notes:
(i) to cure any ambiguity, omission, defect or inconsistency;
(ii) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(iii) to comply with the covenant relating to mergers,
consolidations and sales of assets;
(iv) to provide for the assumption of the Issuer's or any
Guarantor's obligations to Holders;
(v) to make any change that would provide any additional rights
or benefits to the Holders or that does not adversely affect the legal
rights under the Indenture of any such Holder;
(vi) to add covenants for the benefit of the Holders or to
surrender any right or power conferred upon the Issuer;
(vii) to comply with requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust
Indenture Act;
(viii) to evidence and provide for the acceptance and
appointment under the Indenture of a successor Trustee pursuant to the
requirements thereof;
(ix) to provide for the issuance of Exchange Notes or private
exchange notes (which are identical to Exchange Notes except that they
are not freely transferrable;
(x) to add a Guarantor under the Indenture; or
(xi) to provide that Trinity be added as a Guarantor (along with
Willis Corroon Group and Willis Corroon Partners).
The consent of the Holders is not necessary under the Indenture to
approve the particular form of any proposed amendment. It is sufficient if such
consent approves the substance of the proposed amendment.
NOTICES
Notices regarding the Notes will be (i) published in a leading
newspaper having circulation in New York (which is expected to be the WALL
STREET JOURNAL) (and, so long as the Notes, are listed on the Luxembourg Stock
Exchange and the rules of such stock exchange shall so require, a newspaper
having a general circulation in Luxembourg (which is expected to be the
LUXEMBURGER WORT)) or (ii) in the case of Certificated Notes, mailed to Holders
by first-class mail at their respective addresses as they appear on the
registration books of the Registrar (and, so long as the Notes are listed on the
Luxembourg Stock Exchange and the rules of such stock exchange shall so require,
published in a newspaper having a general circulation in Luxembourg (which is
expected to be the LUXEMBURGER WORT)). Notices given by publication will be
deemed given on the first date on which publication is made and notices given by
first-class mail, postage prepaid, will be deemed given five calendar days after
mailing.
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CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Issuer, to obtain payment of claims
in certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The Indenture provides that the Holders of a majority in principal
amount of the outstanding Notes issued thereunder will have the right to direct
the time, method and place of conducting any proceeding for exercising any
remedy available to the Trustee, subject to certain exceptions. The Indenture
provides that in case an Event of Default shall occur (which shall not be
cured), the Trustee will be required, in the exercise of its power, to use the
degree of care of a prudent person in the conduct of his own affairs. Subject to
such provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any Holder of such Notes,
unless such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
GOVERNING LAW
The Indenture, the Notes and the Guarantees will be, subject to certain
exceptions, governed by and construed in accordance with the internal laws of
the State of New York, without regard to the choice of law rules thereof.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided. For purposes of the Indenture, unless otherwise specifically
indicated, the term "consolidated" with respect to any Person refers to such
Person consolidated with its Restricted Subsidiaries, and excludes from such
consolidation any Unrestricted Subsidiary as if such Unrestricted Subsidiary
were not an Affiliate of such Person.
"ACQUIRED INDEBTEDNESS" means, with respect to any specified Person,
(i) Indebtedness of any other Person existing at the time such
other Person is merged with or into or became a Restricted Subsidiary of
such specified Person, including, without limitation, Indebtedness
incurred in connection with, or in contemplation of, such other Person
merging with or into or becoming a Restricted Subsidiary of such
specified Person, and
(ii) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
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"ASSET SALE" means
(i) the sale, conveyance, transfer or other disposition (whether
in a single transaction or a series of related transactions) of property
or assets (including by way of a sale and leaseback) of Willis Corroon
Group or any Restricted Subsidiary (each referred to in this definition
as a "DISPOSITION") or
(ii) the issuance or sale of Equity Interests of any Restricted
Subsidiary (whether in a single transaction or a series of related
transactions),
in each case, other than:
(a) a disposition of Cash Equivalents or Investment Grade
Securities or obsolete or worn out equipment in the ordinary course of
business or inventory or goods held for sale in the ordinary course of
business;
(b) the disposition of all or substantially all of the assets of
Willis Corroon Group in a manner permitted pursuant to the provisions
described above under "--Certain Covenants--Merger, Consolidation or Sale
of All or Substantially All Assets" or any disposition that constitutes a
Change of Control pursuant to the Indenture;
(c) the making of any Restricted Payment or Permitted Investment
that is permitted to be made, and is made, under the covenant described
above under "--Certain Covenants--Limitation on Restricted Payments";
(d) any disposition of assets or issuance or sale of Equity
Interests of any Restricted Subsidiary with an aggregate fair market
value of less than $2.5 million;
(e) any disposition of property or assets or issuance of
securities by a Restricted Subsidiary to Willis Corroon Group or by
Willis Corroon Group or a Restricted Subsidiary to a Restricted
Subsidiary;
(f) any exchange of like property pursuant to Section 1031 of
the Internal Revenue Code of 1986 for use in a Similar Business;
(g) the lease, assignment or sub-lease of any real or personal
property in the ordinary course of business;
(h) any financing transaction with respect to property built or
acquired by Willis Corroon Group or any Restricted Subsidiary after the
Closing Date, including, without limitation, sale-leasebacks and asset
securitizations;
(i) foreclosures on assets;
(j) any sale of Equity Interests in, or Indebtedness or other
securities of, an Unrestricted Subsidiary (with the exception of
Investments in Unrestricted Subsidiaries acquired pursuant to clause
(b)(x) of the definition of Permitted Investments); and
(k) sales of accounts receivable, or participations therein, in
connection with any Receivables Facility.
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"ASSOCIATE" means any Person engaged in a Similar Business of which at
least 20% but not more than 50% of the Voting Stock thereof is owned by Willis
Corroon Group or any Restricted Subsidiary.
"BACS FACILITY" means a facility created to make automated payments
through Banks' Automated Clearance System.
"CAPITAL STOCK" means
(i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents
(however designated) of corporate stock,
(iii) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"CAPITALIZED LEASE OBLIGATION" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized and reflected as a
liability on a balance sheet (excluding the footnotes thereto) in accordance
with GAAP.
"CASH EQUIVALENTS" means
(i) United States dollars,
(ii) pounds sterling,
(iii) Euro,
(iv) Japanese Yen,
(v) Canadian dollars,
(vi) Australian dollars,
(vii) securities issued or directly and fully guaranteed or
insured by the United States or United Kingdom government or any agency
or instrumentality thereof with maturities of 24 months or less from the
date of acquisition,
(viii) certificates of deposit, time deposits and eurodollar
time deposits with maturities of one year or less from the date of
acquisition, bankers' acceptances with maturities not exceeding one year
and overnight bank deposits, in each case with any commercial bank having
capital and surplus in excess of $500.0 million,
(ix) repurchase obligations for underlying securities of the
types described in clauses (vii) and (viii) entered into with any
financial institution meeting the qualifications specified in clause
(viii) above,
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(x) commercial paper rated A-1 or the equivalent thereof by
Moody's or S&P and in each case maturing within one year after the date
of acquisition,
(xi) investment funds investing 95% of their assets in
securities of the types described in clauses (i)-(x) above,
(xii) readily marketable direct obligations issued by any state
of the United States of America or any political subdivision thereof
having one of the two highest rating categories obtainable from either
Moody's or S&P with maturities of 24 months or less from the date of
acquisition and
(xiii) Indebtedness or preferred stock issued by Persons with a
rating of "A" or higher from S&P or "A2" or higher from Moody's with
maturities of 24 months or less from the date of acquisition.
Notwithstanding the foregoing, Cash Equivalents shall include amounts
denominated in currencies other than those set forth in clauses (i) through (vi)
above, PROVIDED that such amounts are converted into any currency listed in
clauses (i) through (vi) as promptly as practicable and in any event within ten
Business Days following the receipt of such amounts.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(i) the sale, lease or transfer, in one or a series of related
transactions, of all or substantially all of the assets of Willis Corroon Group
and its Subsidiaries, taken as a whole, to any Person other than a Permitted
Holder; or
(ii) Willis Corroon Group becomes aware of (by way of a report or any
other filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written
notice or otherwise) the acquisition by any Person or group (within the meaning
of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor
provision), including any group acting for the purpose of acquiring, holding or
disposing of securities (within the meaning of Rule 13d-5(b)(1) under the
Exchange Act), other than the Permitted Holders, in a single transaction or in a
related series of transactions, by way of merger, consolidation or other
business combination or purchase of beneficial ownership (within the meaning of
Rule 13d-3 under the Exchange Act, or any successor provision) of 50% or more of
the total Voting Stock of Willis Corroon Group or any of its direct or indirect
parent corporations.
"CLOSING DATE" means November 19, 1998, the date on which the
Subordinated Bridge Agreement was executed.
"CONSOLIDATED DEPRECIATION AND AMORTIZATION EXPENSE" means with
respect to any Person for any period, the total amount of depreciation and
amortization expense and other noncash charges (excluding any noncash item that
represents an accrual or reserve for a cash expenditure for a future period) of
such Person and its Restricted Subsidiaries for such period on a consolidated
basis and otherwise determined in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for
any period, the sum, without duplication, of:
(a) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, to the extent such expense was
deducted in computing Consolidated Net Income (including amortization of
original issue discount, non-cash interest payments, the
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interest component of Capitalized Lease Obligations and net payments (if
any) pursuant to Hedging Obligations, excluding amortization of deferred
financing fees),
(b) consolidated capitalized interest of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and
(c) the impact of any net payments or receipts related to
Trinity Hedging Obligations, PROVIDED that any reduction of interest
expense related to any net amounts to be received by Trinity are actually
received by Willis Corroon Group within 31 days of the end of the period
during which such reduction of interest expense was recorded; PROVIDED,
HOWEVER, that Receivables Fees shall be deemed not to constitute
Consolidated Interest Expense. Notwithstanding anything to the contrary
stated above, Consolidated Interest Expense shall not include interest
expense in respect of the Group Intercompany Notes; PROVIDED, HOWEVER,
that such interest expense shall be included in Consolidated Interest
Expense to the extent such interest expense is actually paid and not
immediately repaid to Willis Corroon Group or a Restricted Subsidiary in
respect of interest on any Trinity Intercompany Notes or Interim
Refinancing Indebtedness.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any
period, the aggregate of the Net Income, of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, and otherwise determined
in accordance with GAAP; PROVIDED, HOWEVER, that
(i) any net after-tax exceptional items (less all fees and
expenses relating thereto) shall be excluded,
(ii) the Net Income for such period shall not include the
cumulative effect of a change in accounting principles during such
period,
(iii) any net after-tax income (loss) from discontinued
operations and any net after-tax gains or losses on disposal of
discontinued operations shall be excluded,
(iv) any net after-tax gains or losses (less all fees and
expenses relating thereto) attributable to asset dispositions other than
in the ordinary course of business (as determined in good faith by the
Board of Directors of Willis Corroon Group) shall be excluded,
(v) the Net Income for such period of any Person that is not a
Subsidiary, or is an Unrestricted Subsidiary, or that is accounted for by
the equity method of accounting, shall be excluded; PROVIDED that
Consolidated Net Income of Willis Corroon Group shall be increased by the
amount of dividends or distributions or other payments that are actually
paid in cash (or to the extent converted into cash) to the referent
Person or a Restricted Subsidiary thereof in respect of such period,
(vi) the Net Income of any Person acquired in a pooling of
interests transaction shall not be included for any period prior to the
date of such acquisition,
(vii) the Net Income for such period of any Restricted
Subsidiary (other than the Issuer and any Guarantor) shall be excluded if
the declaration or payment of dividends or similar distributions by that
Restricted Subsidiary of its Net Income is not at the date of
determination wholly permitted without any prior governmental approval
(which has not been obtained) or, directly or indirectly, by the
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule, or governmental regulation
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applicable to that Restricted Subsidiary or its stockholders, unless such
restriction with respect to the payment of dividends or in similar
distributions has been legally waived; PROVIDED that Consolidated Net
Income of Willis Corroon Group shall be increased by the amount of
dividends or other distributions or other payments that could have been
paid in cash (or to the extent converted into cash) to the referent
Person or a Restricted Subsidiary thereof in respect of such period and
(viii) the after-tax impact of any net payments or receipts
related to Trinity Hedging Obligations shall be included, PROVIDED that
any reduction of interest expense related to any net amounts to be
received by Trinity are actually received by Willis Corroon Group within
31 days of the end of the period during which such reduction of interest
expense was recorded.
Notwithstanding the foregoing, for the purpose of the covenant described under
"Certain Covenants-- Limitation on Restricted Payments" only (other than clause
(c)(iv) thereof), there shall be excluded from Consolidated Net Income any
income arising from any sale or other disposition of Restricted Investments made
by Willis Corroon Group and its Restricted Subsidiaries, any repurchases and
redemptions of Restricted Investments from Willis Corroon Group and the
Restricted Subsidiaries, any repayments of loans and advances which constitute
Restricted Investments by Willis Corroon Group or any Restricted Subsidiary, any
sale of the stock of an Unrestricted Subsidiary or any distribution or dividend
from an Unrestricted Subsidiary, in each case only to the extent such amounts
increase the amount of Restricted Payments permitted under such covenant
pursuant to clause (c)(iv) thereof. Notwithstanding anything to the contrary
stated above, Consolidated Net Income shall not include
(x) net after-tax income (net of any interest expense in respect
of Group Intercompany Notes) relating to amounts received or accrued in
respect of the Trinity Intercompany Notes and loans made in respect of
Interim Refinancing Indebtedness or
(y) net after-tax income (or losses) relating to payments
received in respect of the Trinity Intercompany Notes or Interim
Refinancing Indebtedness or payments made in respect of the corresponding
Group Intercompany Note that are solely the result of exchange rate
fluctuations or
(z) net after-tax gain or loss relating to the impact of
Facility Hedging Obligations being marked-to-market.
"CONSORTIUM" means Guardian Royal Exchange, Royal & Sun Alliance
Insurance Group, The Chubb Corporation, The Hartford Financial Services Group,
Inc., The Tokio Marine and Fire Insurance Co., Limited and Travelers Property
Casualty Corp. and their respective Affiliates or any replacement insurance
company investors from time to time and their respective Affiliates.
"CONSORTIUM PREFERRED STOCK" means
(a) preferred stock of TA II having a liquidation preference of
approximately $270,000,000 issued to the Consortium in connection with
the Transactions and
(b) any preferred stock that
(i) is issued in exchange for, or to replace or
refinance, all or a portion thereof,
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(ii) is not subject to mandatory redemption or
redemption at the option of the holder thereof prior to the
date that is six months later than the maturity date of the
Notes and
(iii) may include, at the election of TA II,
(A) provisions for required cash dividends
(at a rate per annum not in excess of 7 1/2%, or a
higher rate if the payment of cash dividends in
excess of 7 1/2% is stated in the provisions of such
preferred stock to be subject to the limitations set
forth in the Indenture),
(B) provisions for transferability,
(C) provisions for customary voting rights
and/or board representation upon the occurrence of
non-payment of dividends and
(iv) other terms customary for public issuances of
preferred stock.
"CONTINGENT OBLIGATIONS" means, with respect to any Person, any
obligation of such Person guaranteeing any leases, dividends or other
obligations that do not constitute Indebtedness ("PRIMARY OBLIGATIONS") of any
other Person (the "PRIMARY OBLIGOR") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent,
(i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor,
(ii) to advance or supply funds (A) for the purchase or payment
of any such primary obligation or (B) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net
worth or solvency of the primary obligor, or
(iii) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation
against loss in respect thereof.
"CONTRIBUTION AGREEMENT" means the Contribution Agreement dated as of
November 19, 1998, between Trinity and Willis Corroon Group in a form previously
approved by the Administrative Agent under the Subordinated Bridge Agreement.
"CONVERTIBLE LOAN" means an interest-free loan made by Trinity to
Willis Corroon Group in exchange for a note that is convertible at the option of
Willis Corroon Group into common equity interests in Willis Corroon Group,
PROVIDED that the obligations of Willis Corroon Group under such note are
subordinated in right of payment to the Notes in a form previously approved by
the Administrative Agent under the Subordinated Bridge Agreement including,
without limitation, that no payment may be made in respect of such note prior to
the date that is 91 days after the Maturity Date.
"CREDIT FACILITIES" means, with respect to Willis Corroon Group and
the Issuer, one or more debt facilities (including, without limitation, the
Senior Credit Facilities) or commercial paper facilities with banks or other
institutional lenders or indentures providing for revolving credit loans, term
loans, receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against receivables), letters of credit or other long-term
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indebtedness, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced (including increasing the amount borrowed thereunder) in
whole or in part from time to time.
"DEFAULT" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"DESIGNATED NONCASH CONSIDERATION" means the fair market value of
noncash consideration received by Willis Corroon Group or one of its Restricted
Subsidiaries in connection with an Asset Sale that is so designated as
Designated Noncash Consideration pursuant to an Officers' Certificate, setting
forth the basis of such valuation, executed by an executive vice president and
the principal financial officer of Willis Corroon Group or the Issuer, less the
amount of cash or Cash Equivalents received in connection with a subsequent sale
of such Designated Noncash Consideration.
"DESIGNATED PREFERRED STOCK" means preferred stock of Willis Corroon
Group, any of its direct or indirect parent corporations or the Issuer (in each
case other than Disqualified Stock) that is issued for cash (other than to a
Restricted Subsidiary) and is so designated as Designated Preferred Stock,
pursuant to an Officers' Certificate executed by an executive vice president and
the principal financial officer of Willis Corroon Group or the Issuer, any of
its direct or indirect parent corporations or the Issuer, as the case may be, on
the issuance date thereof, the cash proceeds of which are excluded from the
calculation set forth in clause (c) of the first paragraph of the "--Certain
Covenants--Limitation on Restricted Payments" covenant.
"DISQUALIFIED STOCK" means, with respect to any Person, any Capital
Stock of such Person which, by its terms (or by the terms of any security into
which it is convertible or for which it is putable or exchangeable), or upon the
happening of any event, matures or is mandatorily redeemable (other than as a
result of a change of control or asset sale), pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof
(other than as a result of a change of control or asset sale), in whole or in
part, in each case prior to the date 91 days after the earlier of the maturity
date of the Notes or the date the Notes are no longer outstanding; PROVIDED,
HOWEVER, that if such Capital Stock is issued to any plan for the benefit of
employees of Willis Corroon Group or its Subsidiaries or by any such plan to
such employees, such Capital Stock shall not constitute Disqualified Stock
solely because it may be required to be repurchased by Willis Corroon Group or
its Subsidiaries in order to satisfy applicable statutory or regulatory
obligations.
"DOMESTIC SUBSIDIARY" means, with respect to any Person, any
Restricted Subsidiary of such Person other than a Foreign Subsidiary.
"EBITDA" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period plus
(a) provision for taxes based on income or profits of such
Person for such period deducted in computing Consolidated Net Income,
plus
(b) Consolidated Interest Expense of such Person for such period
paid by such Person or any of its Restricted Subsidiaries during such
period, in each case to the extent the same was deducted in calculating
such Consolidated Net Income, plus
(c) Consolidated Depreciation and Amortization Expense of such
Person for such period to the extent such depreciation and amortization
were deducted in computing Consolidated Net Income, plus
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(d) any expenses or charges related to any Equity Offering,
Permitted Investment, acquisition (including amounts paid in connection
with the acquisition or retention of one or more individuals comprising
teams engaged in a Similar Business, PROVIDED that such payments are made
at the time of such acquisition and are consistent with the customary
practice in the industry at the time of such acquisition),
recapitalization or Indebtedness permitted to be incurred by the
Indenture (whether or not successful) (including such fees, expenses or
charges related to the Transactions) and deducted in such period in
computing Consolidated Net Income, plus
(e) the amount of any restructuring charge deducted in such
period in computing Consolidated Net Income (including any one-time costs
incurred in connection with acquisitions after the Closing Date), plus
(f) without duplication, any non-recurring charges relating to
the Lloyd's Reconstruction and Renewal Plan, plus
(g) without duplication, any other non-cash charges reducing
Consolidated Net Income for such period (excluding any such charge that
represents an accrual or reserve for a cash expenditure for a future
period), plus
(h) the amount of any minority interest expense deducted in
calculating Consolidated Net Income, less, without duplication
(i) non-cash items increasing Consolidated Net Income of such
Person for such period (excluding any items which represent the reversal
of any accrual of, or cash reserve for, anticipated cash charges in any
prior period).
"EMU" means economic and monetary union as contemplated in the Treaty
on European Union.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EQUITY OFFERING" means any public or private sale of common stock or
preferred stock of Willis Corroon Group, any of its direct or indirect parent
corporations or the Issuer (excluding Disqualified Stock), other than (i) public
offerings with respect to Willis Corroon Group's Common Stock registered on Form
S-8 and (ii) any such public or private sale that constitutes an Excluded
Contribution.
"EURO" means the single currency of participating member states of the
EMU.
"EXCHANGE ACT" means the Securities Exchange Act of 1934 and the rules
and regulations of the Commission promulgated thereunder.
"EXCLUDED CONTRIBUTION" means net cash proceeds, marketable securities
or Qualified Proceeds, in each case, received by Willis Corroon Group or the
Issuer from (a) contributions to its common equity capital (other than, in the
case of the Issuer, contributions by Willis Corroon Group) and (b) the sale
(other than to a Subsidiary of Willis Corroon Group or to any Willis Corroon
Group or Subsidiary management equity plan or stock option plan or any other
management or employee benefit plan or agreement) of Capital Stock (other than
Disqualified Stock and Designated Preferred Stock) of Willis Corroon Group or
the Issuer, in each case designated as Excluded Contributions pursuant to an
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Officers' Certificate executed by an executive vice president and the principal
financial officer of Willis Corroon Group or the Issuer on the date such capital
contributions are made or the date such Equity Interests are sold, as the case
may be, which are excluded from the calculation set forth in clause (c) of the
first paragraph under "--Certain Covenants--Limitation on Restricted Payments."
"EXISTING INDEBTEDNESS" means Indebtedness of Willis Corroon Group or
its Restricted Subsidiaries in existence on the Closing Date, plus interest
accruing thereon, after application of the net proceeds of the loans made under
the Subordinated Bridge Agreement.
"FACILITY HEDGING OBLIGATIONS" means Hedging Obligations of Willis
Corroon Group or the Issuer (other than Hedging Obligations entered into for
speculative purposes) having an aggregate notional amount at any time
outstanding not in excess of $1,175,000,000 less the notional amount of any
Trinity Hedging Obligations outstanding at such time.
"FIXED CHARGE COVERAGE RATIO" means, with respect to any Person for
any period, the ratio of EBITDA of such Person for such period to the Fixed
Charges of such Person for such period. In the event that Willis Corroon Group
or any of its Restricted Subsidiaries incurs, assumes, guarantees or redeems any
Indebtedness or issues or redeems Disqualified Stock or preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the event for which the calculation of
the Fixed Charge Coverage Ratio is made (the "CALCULATION DATE"), then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect to such
incurrence, assumption, guarantee or redemption of Indebtedness, or such
issuance or redemption of Disqualified Stock or preferred stock, as if the same
had occurred at the beginning of the applicable four-quarter period.
For purposes of making the computation referred to above, Investments,
acquisitions, dispositions, mergers, consolidations and discontinued operations
(as determined in accordance with GAAP) that have been made by Willis Corroon
Group or any of its Restricted Subsidiaries during the four-quarter reference
period or subsequent to such reference period and on or prior to or
simultaneously with the Calculation Date shall be calculated on a pro forma
basis assuming that all such Investments, acquisitions, dispositions, mergers,
consolidations and discontinued operations (and the change in any associated
fixed charge obligations and the change in EBITDA resulting therefrom) had
occurred on the first day of the four-quarter reference period. If since the
beginning of such period any Person (that subsequently became a Restricted
Subsidiary or was merged with or into Willis Corroon Group or any Restricted
Subsidiary since the beginning of such period) shall have made any Investment,
acquisition, disposition, merger, consolidation or discontinued operation that
would have required adjustment pursuant to this definition, then the Fixed
Charge Coverage Ratio shall be calculated giving pro forma effect thereto for
such period as if such Investment, acquisition, disposition, merger,
consolidation or discontinued operation had occurred at the beginning of the
applicable four-quarter period.
For purposes of this definition, whenever pro forma effect is to be
given to a transaction, the pro forma calculations shall be made in good faith
by a responsible financial or accounting officer of Willis Corroon Group. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest on such Indebtedness shall be calculated as if the rate in
effect on the Calculation Date had been the applicable rate for the entire
period (taking into account any Hedging Obligations applicable to such
Indebtedness). Interest on a Capitalized Lease Obligation shall be deemed to
accrue at an interest rate reasonably determined by a responsible financial or
accounting officer of Willis Corroon Group to be the rate of interest implicit
in such Capitalized Lease Obligation in accordance with GAAP. For purposes of
making the computation referred to above, interest on any Indebtedness under a
revolving credit facility computed on a pro forma basis shall be computed based
upon the average daily balance of such Indebtedness during the applicable
period. Interest on Indebtedness that may
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optionally be determined at an interest rate based upon a factor of a prime or
similar rate, a eurocurrency interbank offered rate, or other rate, shall be
deemed to have been based upon the rate actually chosen, or, if none, then based
upon such optional rate chosen as Willis Corroon Group may designate.
"FIXED CHARGES" means, with respect to any Person for any period, the
sum of
(a) Consolidated Interest Expense of such Person for such
period,
(b) all cash dividend payments (excluding items eliminated in
consolidation) on any series of
(i) Disqualified Stock,
(ii) preferred stock and
(iii) to the extent paid pursuant to clause (vi)(B)
of the covenant described under "--Certain
Covenants--Limitation on Restricted Payments," other Capital
Stock of such Person.
"FOREIGN SUBSIDIARY" means, with respect to any Person, any Restricted
Subsidiary of such Person that is not organized or existing under the laws of
the United States, any state thereof, the District of Columbia, or any territory
thereof.
"GAAP" means generally accepted accounting principles in the United
Kingdom which are in effect on the Closing Date. For the purposes of the
Indenture, the term "consolidated" with respect to any Person means such Person
consolidated with its Restricted Subsidiaries, and shall not include any
Unrestricted Subsidiary.
"GOVERNMENT SECURITIES" means securities that are
(a) direct obligations of the United States of America for the
timely payment of which its full faith and credit is pledged or
(b) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America
the timely payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America,
which, in either case, are not callable or redeemable at the option of the
issuers thereof, and shall also include a depository receipt issued by a bank
(as defined in Section 3(a)(2) of the Securities Act), as custodian with respect
to any such Government Securities or a specific payment of principal of or
interest on any such Government Securities held by such custodian for the
account of the holder of such depository receipt; PROVIDED that (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount received
by the custodian in respect of the Government Securities or the specific payment
of principal of
or interest on the Government Securities evidenced by such depository receipt.
"GROUP INTERCOMPANY NOTE" means a note issued by Willis Corroon Group
or a Restricted Subsidiary in favor of Trinity (a) in consideration of the
issuance of a Trinity Intercompany Note or (b) in connection with a loan made by
Trinity to Willis Corroon Group or such Restricted Subsidiary out of the
proceeds received from the issuance of a Trinity Intercompany Note, PROVIDED, in
each case, that the obligations of Willis Corroon Group or such Restricted
Subsidiary under such note are subordinated in
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right of payment to the Notes in a form previously approved by the
Administrative Agent under the Subordinated Bridge Agreement including, without
limitation, that no payment shall be made in respect of such note if any Default
on the Notes or any default under the Senior Credit Facilities has occurred and
is continuing.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness or other obligations.
"GUARANTEE" means any guarantee of the obligations of Willis Corroon
Group under the Indenture and the Notes by any Person in accordance with the
provisions of the Indenture. When used as a verb, "Guarantee" shall have a
corresponding meaning.
"GUARANTEED LOAN NOTES" means loan notes of Trinity issued pursuant to
the offer at the election of holders of the shares, having the terms contained
in the Guaranteed Loan Notes Instrument and guaranteed by The Chase Manhattan
Bank, acting through its London branch.
"GUARANTEED LOAN NOTES INSTRUMENT" means the Guaranteed Loan Notes
Instrument in the form of Exhibit J to the Senior Bridge Facility.
"GUARANTOR" means any Person that incurs a Guarantee; PROVIDED that
upon the release and discharge of such Person from its Guarantee in accordance
with the Indenture, such Person shall cease to be a Guarantor.
"HEDGING OBLIGATIONS" means, with respect to any Person, the
obligations of such Person under (i) currency exchange, interest rate or
commodity swap agreements, currency exchange, interest rate or commodity cap
agreements and currency exchange, interest rate or commodity collar agreements
and (ii) other agreements or arrangements designed to protect such Person
against fluctuations in currency exchange, interest rates or commodity prices.
"HOLDER" means a holder of the Notes.
"INDEBTEDNESS" means, with respect to any Person,
(a) any indebtedness (including principal and premium) of such
Person, whether or not contingent
(i) in respect of borrowed money,
(ii) evidenced by bonds, notes, debentures or similar
instruments or letters of credit or bankers' acceptances (or,
without double counting, reimbursement agreements in respect
thereof),
(iii) representing the balance deferred and unpaid of
the purchase price of any property (including Capitalized
Lease Obligations), except any such balance that constitutes a
trade payable or similar obligation to a trade creditor, in
each case accrued in the ordinary course of business or
(iv) representing any Hedging Obligations, if and to
the extent that any of the foregoing Indebtedness (other than
letters of credit and Hedging
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Obligations) would appear as a liability upon a balance sheet
(excluding the footnotes thereto) of such Person prepared in
accordance with GAAP,
(b) to the extent not otherwise included, any obligation by such
Person to be liable for, or to pay, as obligor, guarantor or otherwise,
on the Indebtedness of another Person (other than by endorsement of
negotiable instruments for collection in the ordinary course of business)
and
(c) to the extent not otherwise included, Indebtedness of
another Person secured by a Lien on any asset owned by such Person
(whether or not such Indebtedness is assumed by such Person); PROVIDED,
HOWEVER, that Contingent Obligations incurred in the ordinary course of
business shall be deemed not to constitute Indebtedness, and obligations
under or in respect of Receivables Facilities shall not be deemed to
constitute Indebtedness.
In addition, "Indebtedness" of any Person shall include Indebtedness
described in the foregoing paragraph that would not appear as a liability on the
balance sheet of such Person if
(1) such Indebtedness is the obligation of a partnership or a
joint venture that is not a Restricted Subsidiary (a "Joint Venture"),
(2) such Person or a Restricted Subsidiary is a general partner
of the Joint Venture (a "General Partner") and
(3) there is recourse, by contract or operation of law, with
respect to the payment of such Indebtedness to property or assets of such
Person or a Restricted Subsidiary; and such Indebtedness shall be
included in an amount not to exceed
(x) the greater of (A) the net assets of the General
Partner and (B) the amount of such obligations to the extent
that there is recourse by, contract or operation of law, to
the property or assets of such Person or a Restricted
Subsidiary (other than the General Partner) or
(y) if less than the amount determined pursuant to
clause (x) immediately above, the actual amount of such
Indebtedness that is recourse to such Person, if the
Indebtedness is evidenced by a writing and is for a
determinable amount and the related interest expense shall be
included in Consolidated Interest Expense to the extent paid
by Willis Corroon Group or its Restricted Subsidiaries.
"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal,
investment banking firm or consultant to Persons engaged in Similar Businesses
of nationally recognized standing that is, in the good faith judgment of Willis
Corroon Group or the Issuer, qualified to perform the task for which it has been
engaged.
"INTERIM FINANCINGS" means the Sponsor Promissory Note and the Senior
Bridge Facility.
"INTERIM REFINANCING INDEBTEDNESS" means indebtedness in respect of
loans made to Trinity on the Closing Date by the Issuer using the proceeds from
the borrowing under the Subordinated
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Bridge Agreement and the borrowing of term loans under the Senior Credit
Facilities, the proceeds of which were used
(a) directly or indirectly to repay the Interim Financings,
(b) to make a Convertible Loan, substantially all the proceeds
of which were used to repay indebtedness of Willis Corroon Group and its
Subsidiaries existing on the Closing Date and required to be repaid under
the Senior Credit Facilities and
(c) to pay related fees and expenses.
"INVESTMENT GRADE SECURITIES" means
(i) securities issued or directly and fully guaranteed or
insured by the United States government or any agency or instrumentality
thereof (other than Cash Equivalents),
(ii) debt securities or debt instruments with a rating of BBB-or
higher by S&P or Baa3 or higher by Moody's or the equivalent of such
rating by such rating organization, or, if no rating of S&P or Moody's
then exists, the equivalent of such rating by any other nationally
recognized securities rating agency, but excluding any debt securities or
instruments constituting loans or advances among Willis Corroon Group and
its Subsidiaries,
(iii) investments in any fund that invests exclusively in
investments of the type described in clauses (i) and (ii) which fund may
also hold immaterial amounts of cash pending investment and/or
distribution and
(iv) corresponding instruments in countries other than the
United States or the United Kingdom customarily utilized for high-quality
investments.
"INVESTMENTS" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the form of loans
(including guarantees), advances or capital contributions (excluding accounts
receivable, trade credit, advances to customers, commission, travel and similar
advances to officers and employees, in each case made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities issued by any other Person and investments
that are required by GAAP to be classified on the balance sheet (excluding the
footnotes) of Willis Corroon Group in the same manner as the other investments
included in this definition to the extent such transactions involve the transfer
of cash or other property. For purposes of the definition of "Unrestricted
Subsidiary" and the covenant described under "--Certain Covenants--Limitation on
Restricted Payments,"
(i) "Investments" shall include the portion (proportionate to
the Company's equity interest in such Subsidiary) of the fair market
value of the net assets of a Subsidiary of Willis Corroon Group at the
time that such Subsidiary is designated an Unrestricted Subsidiary;
provided, however, that upon a redesignation of such Subsidiary as a
Restricted Subsidiary, Willis Corroon Group shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary in an
amount (if positive) equal to (x) Willis Corroon Group's "Investment" in
such Subsidiary at the time of such redesignation less (y) the portion
(proportionate to Willis Corroon Group's equity interest in such
Subsidiary) of the fair market value of the net assets of such Subsidiary
at the time of such redesignation; and
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(ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by Willis Corroon
Group.
"LETTER OF CREDIT OBLIGATIONS" means all Obligations in respect of
Indebtedness of Willis Corroon Group with respect to letters of credit issued
pursuant to the Senior Credit Facilities which Indebtedness shall be deemed to
consist of (a) the aggregate maximum amount available to be drawn under all such
letters of credit (the determination of such aggregate maximum amount to assume
compliance with all conditions for drawing) and (b) the aggregate amount that
has been paid by, and not reimbursed to, the issuers of such letters of credit.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction);
PROVIDED that in no event shall an operating lease be deemed to constitute a
Lien.
"MANAGEMENT GROUP" means the directors and executive officers of the
Issuer, Willis Corroon Group or its direct or indirect parent corporations.
"MOODY'S" means Moody's Investors Service, Inc.
"NET INCOME" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends.
"NET PROCEEDS" means the aggregate cash proceeds received by Willis
Corroon Group or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any Designated Noncash Consideration received in any Asset Sale),
net of the direct costs relating to such Asset Sale and the sale or disposition
of such Designated Noncash Consideration (including, without limitation, legal,
accounting and investment banking fees, and brokerage and sales commissions),
any relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of principal, premium (if any) and interest on Senior Indebtedness
required (other than required by clause (i) of the second paragraph of
"--Repurchase at the Option of Holders--Asset Sales" to be paid as a result of
such transaction) and any deduction of appropriate amounts to be provided by
Willis Corroon Group as a reserve in accordance with GAAP against any
liabilities associated with the asset disposed of in such transaction and
retained by Willis Corroon Group after such sale or other disposition thereof,
including, without limitation, pension and other post-employment benefit
liabilities and liabilities related to environmental matters or against any
indemnification obligations associated with such transaction.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements (including, without limitation, reimbursement
obligations with respect to letters of credit and banker's acceptances), damages
and other liabilities, and guarantees of payment of such principal, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities, payable under the documentation governing any Indebtedness.
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"OFFICER" means the Chairman of the Board, the President, any
Executive Vice President, Senior Vice President or Vice President, the Treasurer
or the Secretary of Willis Corroon Group, the Issuer or any Guarantor, as
applicable.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of Willis
Corroon Group or the Issuer, as the case may be, by two Officers of Willis
Corroon Group or the Issuer, as applicable, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of Willis Corroon Group or the Issuer, as
applicable, that meets the requirements set forth in the Indenture.
"PERMITTED ASSET SWAP" means any one or more transactions in which
Willis Corroon Group or any Restricted Subsidiary exchanges assets for
consideration consisting of
(i) Equity Interests in or assets of a Person engaged in a
Similar Business and
(ii) any cash or Cash Equivalents, provided that such cash or
Cash Equivalents will be considered Net Proceeds from an Asset Sale.
"PERMITTED HOLDERS" means KKR, its Affiliates and the Management
Group.
"PERMITTED INVESTMENTS" means
(a) with respect to fiduciary cash held by Willis Corroon Group
or its Restricted Subsidiaries, Investments in which it is customary for
Persons that are engaged in a Similar Business and that comply with all
applicable laws and regulations; and
(b) in all other cases
(i) any Investment in Willis Corroon Group or any
Restricted Subsidiary;
(ii) any Investment in cash and Cash Equivalents or
Investment Grade Securities;
(iii) any Investment by Willis Corroon Group or any
Restricted Subsidiary of Willis Corroon Group in a Person that
is engaged in a Similar Business if as a result of such
Investment (A) such Person becomes a Restricted Subsidiary or
(B) such Person, in one transaction or a series of related
transactions, is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets
to, or is liquidated into, Willis Corroon Group or a
Restricted Subsidiary;
(iv) any Investment in securities or other assets not
constituting cash or Cash Equivalents and received in
connection with an Asset Sale made pursuant to the provisions
of "--Repurchase at the Option of Holders--Asset Sales" or any
other disposition of assets not constituting an Asset Sale;
(v) any Investment existing on the Closing Date;
(vi) advances to employees not in excess of $15.0
million outstanding at any one time, in the aggregate;
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(vii) any Investment acquired by Willis Corroon Group
or any of its Restricted Subsidiaries (A) in exchange for any
other Investment or accounts receivable held by Willis Corroon
Group or any such Restricted Subsidiary in connection with or
as a result of a bankruptcy, workout, reorganization or
recapitalization of the issuer of such other Investment or
accounts receivable or (B) as a result of a foreclosure by
Willis Corroon Group or any of its Restricted Subsidiaries
with respect to any secured Investment or other transfer of
title with respect to any secured Investment in default;
(viii) Hedging Obligations permitted under clause (j)
of the covenant described in "--Certain Covenants--Limitation
of Incurrence of Indebtedness and Issuance of Disqualified
Stock" covenant;
(ix) loans and advances to officers, directors and
employees for business-related travel expenses, moving
expenses and other similar expenses, in each case incurred in
the ordinary course of business;
(x) any Investment in a Similar Business having an
aggregate fair market value, taken together with all other
Investments made pursuant to this clause (x) that are at that
time outstanding (without giving effect to the sale of an
Unrestricted Subsidiary to the extent the proceeds of such
sale do not consist of cash, marketable securities and/or
Qualified Proceeds), not to exceed the greater of (A) $125.0
million or (B) 12.5% of Total Revenues at the time of such
Investment (with the fair market value of each Investment
being measured at the time made and without giving effect to
subsequent changes in value);
(xi) Investments the payment for which consists of
Equity Interests of Willis Corroon Group, any of its direct or
indirect parent corporations or the Issuer (exclusive of
Disqualified Stock); PROVIDED, HOWEVER, that such Equity
Interests will not increase the amount available for
Restricted Payments under clause (c) of the first paragraph
under the covenant described in "--Certain
Covenants--Limitation on Restricted Payments;"
(xii) additional Investments having an aggregate fair
market value, taken together with all other Investments made
pursuant to this clause (xii) that are at that time
outstanding (without giving effect to the sale of an
Unrestricted Subsidiary to the extent the proceeds of such
sale do not consist of cash, marketable securities and/or
Qualified Proceeds or do consist of distributions made
pursuant to clause (xiii) of the second paragraph of the
covenant described in "--Certain Covenants--Limitation on
Restricted Payments"), not to exceed $50.0 million at the time
of such Investment (with the fair market value of each
Investment being measured at the time made and without giving
effect to subsequent changes in value);
(xiii) guarantees (including Guarantees) of
Indebtedness permitted under the covenant described in
"--Certain Covenants--Limitation on Incurrence of Indebtedness
and Issuance of Disqualified Stock;"
(xiv) any transaction to the extent it constitutes an
investment that is permitted and made in accordance with the
provisions of the second paragraph of the covenant described
under "--Certain Covenants--Transactions with
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Affiliates" (except transactions described in clauses (ii),
(vi), (vii) and (xi) of such paragraph);
(xv) Investments consisting of the licensing or
contribution of intellectual property pursuant to joint
marketing arrangements with other Persons;
(xvi) any Investment by Willis Corroon Group or any
Restricted Subsidiary in a Person that is an Associate on the
Closing Date; and
(xvii) Investments relating to any special purpose
Wholly Owned Subsidiary of Willis Corroon Group or the Issuer
organized in connection with a Receivables Facility that, in
the good faith determination of the Board of Directors of
Willis Corroon Group, are necessary or advisable to effect
such Receivables Facility.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"PREFERRED STOCK" means any Equity Interest with preferential rights
of payment of dividends or upon liquidation, dissolution, or winding up.
"QUALIFIED PROCEEDS" means assets that are used or useful in, or
Capital Stock of any Person engaged in, a Similar Business; PROVIDED that the
fair market value of any such assets or Capital Stock shall be determined by the
Board of Directors in good faith, except that in the event the value of any such
assets or Capital Stock may exceed $25.0 million or more, the fair value shall
be determined in writing by an independent investment banking firm of nationally
recognized standing.
"RECEIVABLES FACILITY" means one or more receivables financing
facilities, as amended from time to time, pursuant to which the Company and/or
any of its Restricted Subsidiaries sells its accounts receivable to a Person
that is not a Restricted Subsidiary.
"RECEIVABLES FEES" means distributions or payments made directly or by
means of discounts with respect to any participation interest issued or sold in
connection with, and other fees paid to a Person that is not a Restricted
Subsidiary in connection with, any Receivables Facility.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" means, at any time, the Issuer and any direct
or indirect Subsidiary of Willis Corroon Group (including any Foreign
Subsidiary) that is not then an Unrestricted Subsidiary; PROVIDED, HOWEVER, that
upon the occurrence of an Unrestricted Subsidiary ceasing to be an Unrestricted
Subsidiary, such Subsidiary shall be included in the definition of "Restricted
Subsidiary."
"S&P" means Standard and Poor's Ratings Group.
"SECURITIES ACT" means the Securities Act of 1933 and the rules and
regulations of the Commission promulgated thereunder.
"SENIOR BRIDGE FACILITY" means the Credit Agreement dated as of July
22, 1998, as amended and restated as of September 25, 1998, and as amended on
October 30, 1998 and
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November 13, 1998, among Trinity, the lenders party thereto and The Chase
Manhattan Bank, as Administrative Agent.
"SENIOR CREDIT FACILITIES" means the Credit Agreement dated as of July
22, 1998, as amended and restated as of September 1, 1998, September 25, 1998
and February 19, 1999, and as amended on October 28, 1998, among Willis Corroon
Group, the Issuer, Trinity, the Lenders from time to time party thereto and The
Chase Manhattan Bank, as Administrative Agent and Collateral Agent, including
any collateral documents, instruments and agreements executed in connection
therewith, and any amendments, supplements, modifications, extensions, renewals,
restatements or refundings thereof and any indentures or credit facilities or
commercial paper facilities with banks or other institutional lenders that
replace, refund or refinance any part of the loans, notes, other credit
facilities or commitments thereunder, including any such replacement, refunding
or refinancing facility or indenture that increases the amount borrowable
thereunder or alters the maturity thereof, PROVIDED, HOWEVER, that in connection
with any facilities which refund, replace or refinance such Credit Agreement
there shall not be more than one facility at any one time that is identified as
the Senior Credit Facilities and, if at any time there is more than one facility
which would constitute the Senior Credit Facilities, the Issuer will designate
to the Trustee which one of such facilities will be the Senior Credit Facilities
for purposes of the Indenture.
"SENIOR SUBORDINATED INDEBTEDNESS" means (a) with respect to the
Issuer, Indebtedness which ranks equal in right of payment to the Notes and (b)
with respect to any Guarantor, Indebtedness which ranks equal in right of
payment to the Guarantee of such Guarantor.
"SIGNIFICANT SUBSIDIARY" means the Issuer and any other Restricted
Subsidiary that would be a "significant subsidiary" as defined in Article 1,
Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such
regulation is in effect on the date hereof.
"SIMILAR BUSINESS" means insurance brokering, risk management
consulting, insurance agency, employee benefit consulting and any activities or
businesses incidental or directly related or similar thereto, or any line of
business engaged in by Willis Corroon Group or its Subsidiaries on the Issuance
Date or any business activity that is a reasonable extension, development or
expansion thereof or ancillary thereto.
"SPONSOR PROMISSORY NOTE" means the subordinated promissory note dated
as of July 22, 1998, issued by Trinity in favor of an affiliate of KKR in an
amount not to exceed $575,000,000.
"SUBORDINATED BRIDGE AGREEMENT" means the Senior Subordinated Loan
Agreement dated as of November 19, 1998, among Willis Corroon Group, Willis
Corroon Partners, the Issuer, the Lenders from time to time party thereto and
The Chase Manhattan Bank, as Administrative Agent.
"SUBORDINATED INDEBTEDNESS" means
(a) with respect to the Issuer, any Indebtedness of the Issuer
which is by its terms subordinated in right of payment to the Notes and
(b) with respect to any Guarantor, any Indebtedness of such
Guarantor which is by its terms subordinated in right of payment to the
Guarantee of such Guarantor.
"SUBSIDIARY" means, with respect to any Person,
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(i) any corporation, association, or other business entity
(other than a partnership, joint venture, limited liability company or
similar entity) of which more than 50% of the total voting power of
shares of Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time of determination owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of
that Person or a combination thereof and
(ii) any partnership, joint venture, limited liability company
or similar entity of which (x) more than 50% of the capital accounts,
distribution rights, total equity and voting interests or general or
limited partnership interests, as applicable, are owned or controlled,
directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person or a combination thereof whether in the form
of membership, general, special or limited partnership or otherwise and
(y) such Person or any Wholly Owned Restricted Subsidiary of such Person
is a controlling general partner or otherwise controls such entity.
"TA II" means TA II Limited, a company with limited liability
organized under the laws of England and Wales.
"TOTAL REVENUES" means the total operating revenues of Willis Corroon
Group and its Restricted Subsidiaries, as shown on the most recent annual income
statement of Willis Corroon Group.
"TREATY ON EUROPEAN UNION" means the Treaty of Rome of March 25, 1957,
as amended by the Single European Act 1986 and the Maastricht Treaty (which was
signed at Maastricht on February 7, 1992, and came into force on November 1,
1993), as amended from time to time.
"TRINITY" means Trinity Acquisition plc, a public limited company
organized under the laws of England and Wales.
"TRINITY HEDGING OBLIGATIONS" means Hedging Obligations of Trinity
(other than Hedging Obligations entered into for speculative purposes) having an
aggregate notional amount at any time outstanding not in excess of
$1,175,000,000 less the notional amount of any Facility Hedging Obligations
outstanding at such time.
"TRINITY INTERCOMPANY NOTE" means any note issued by Trinity in favor
of Willis Corroon Group or a Restricted Subsidiary (a) in consideration of the
issuance of a Group Intercompany Note or (b) in connection with the making of a
loan to Trinity by Willis Corroon Group or such Restricted Subsidiary (other
than with respect to Interim Refinancing Indebtedness), PROVIDED that all the
proceeds received by Trinity from such loan, if any, are immediately used to
make a loan to Willis Corroon Group or a Restricted Subsidiary pursuant to a
Group Intercompany Note.
"U.K. SUBSIDIARY" means, with respect to any Person, any Restricted
Subsidiary of such Person that is organized under the laws of England and Wales.
"UNRESTRICTED SUBSIDIARY" means
(i) Sovereign Marine & General Insurance Company Limited, in
provisional liquidation,
(ii) any Subsidiary of Willis Corroon Group which at the time of
determination is an Unrestricted Subsidiary (as designated by the Board
of Directors of Willis Corroon Group, as provided below) and
(iii) any Subsidiary of an Unrestricted Subsidiary.
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The Board of Directors of Willis Corroon Group may designate any Subsidiary of
Willis Corroon Group (including any existing Subsidiary and any newly acquired
or newly formed Subsidiary but excluding the Issuer) to be an Unrestricted
Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity
Interests or Indebtedness of, or owns or holds any Lien on, any property of,
Willis Corroon Group or any Subsidiary of Willis Corroon Group (other than any
Subsidiary of the Subsidiary to be so designated), PROVIDED that
(a) any Unrestricted Subsidiary (other than Sovereign) must be
an entity of which shares of the capital stock or other equity interests
(including partnership interests) entitled to cast at least a majority of
the votes that may be cast by all shares or equity interests having
ordinary voting power for the election of directors or other governing
body are owned, directly or indirectly, by Willis Corroon Group,
(b) such designation complies with the covenants described under
"--Certain Covenants--Limitation on Restricted Payments" and
(c) each of (I) the Subsidiary to be so designated and (II) its
Subsidiaries has not at the time of designation, and does not thereafter,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable with respect to any Indebtedness pursuant to which the
lender has recourse to any of the assets of Willis Corroon Group or any
of its Restricted Subsidiaries.
The Board of Directors of Willis Corroon Group may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED that,
immediately after giving effect to such designation no Default or Event of
Default shall have occurred and be continuing and either
(i) Willis Corroon Group could incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test
described under "--Certain Covenants-- Limitations on Incurrence of
Indebtedness and Issuance of Disqualified Stock" or
(ii) the Fixed Charge Coverage Ratio for Willis Corroon Group
and its Restricted Subsidiaries would be greater than such ratio for
Willis Corroon Group and its Restricted Subsidiaries immediately prior to
such designation, in each case on a pro forma basis taking into account
such designation. Any such designation by the Board of Directors of
Willis Corroon Group shall be notified by Willis Corroon Group to the
Trustee by promptly filing with the Trustee a copy of the board
resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"VOTING STOCK" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness or Disqualified Stock, as the case may be, at any date, the
quotient obtained by dividing
(i) the sum of the products of the number of years from the date
of determination to the date of each successive scheduled principal
payment of such Indebtedness or redemption or similar payment with
respect to such Disqualified Stock multiplied by the amount of such
payment, by
(ii) the sum of all such payments.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" is any Wholly Owned Subsidiary
that is a Restricted Subsidiary.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such
Person, 100% of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person and one
or more Wholly Owned Subsidiaries of such Person.
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REGISTRATION RIGHTS AGREEMENT
Willis Corroon Group, the Issuer, Willis Corroon Partners (which are
collectively referred to as the "Willis Corroon" for purposes of this summary)
and the initial purchasers under the issuance of outstanding Notes entered into
an exchange and registration rights agreement on February 2, 1999. Pursuant to
the registration rights agreement, Willis Corroon agreed to:
- file with the Commission on or prior to 100 days after the date of
issuance of the outstanding Notes a registration statement on an
appropriate form under the Securities Act, relating to a registered
exchange offer for the outstanding Notes under the Securities Act; and
- use its reasonable best efforts to cause the exchange offer
registration statement to be declared effective under the Securities
Act within 240 days after the issuance of the outstanding Notes.
As soon as practicable after the effectiveness of the exchange offer
registration statement, the Issuer will offer to the holders of Transfer
Restricted Securities (as defined below) who are not prohibited by any law or
policy of the Commission from participating in the exchange offer the
opportunity to exchange their Transfer Restricted Securities for an issue of a
second series of notes that are identical in all material respects to the
outstanding Notes (except that the exchange Notes will not contain terms with
respect to transfer restrictions) and that would be registered under the
Securities Act. The Issuer will keep the exchange offer open for not less than
20 business days (or longer, if required by applicable law) after the date on
which notice of the exchange offer is mailed to the holders of the outstanding
Notes.
If
- because of any change in law or applicable interpretations thereof by
the staff of the Commission, Willis Corroon is not permitted to effect
the exchange offer as contemplated hereby,
- any outstanding Notes validly tendered pursuant to the exchange offer
are not exchanged for exchange Notes within 270 days after the issuance
of the outstanding Notes,
- the initial purchasers so request with respect to outstanding Notes not
eligible to be exchanged for exchange notes in the exchange offer,
- any applicable law or interpretations do not permit any holder of
outstanding Notes to participate in the exchange offer or
- any holder of outstanding Notes that participates in the exchange offer
does not receive freely transferable exchange Notes in exchange for
tendered outstanding Notes,
then Willis Corroon will file with the Commission a shelf registration statement
to cover resales of Transfer Restricted Securities by such holders who satisfy
certain conditions relating to the provision of information in connection with
the shelf registration statement. For purposes of the foregoing, "Transfer
Restricted Securities" means each outstanding Note until:
- the date on which such outstanding Note has been exchanged for a freely
transferable exchange Note in the exchange offer;
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- the date on which such outstanding Note has been effectively registered
under the Securities Act and disposed of in accordance with the shelf
registration statement; or
- the date on which such outstanding Note is distributed to the public
pursuant to Rule 144 under the Securities Act or is salable pursuant to
Rule 144(k) under the Securities Act.
Willis Corroon will use its reasonable best efforts to have the
exchange offer registration statement or, if applicable, the shelf registration
statement declared effective by the Commission as promptly as practicable after
the filing thereof. Unless the exchange offer would not be permitted by a policy
of the Commission, the Issuer will commence the exchange offer and will use its
reasonable best efforts to consummate the exchange offer as promptly as
practicable, but in any event prior to 270 days after the issuance of the
outstanding Notes. If applicable, Willis Corroon will use its reasonable best
efforts to keep the shelf registration statement effective for a period until
two years after the issuance of the outstanding Notes or such shorter period
when all Notes covered by the shelf registration statement have been sold in the
manner set forth and as contemplated in the shelf registration statement or when
the outstanding Notes became eligible for resale pursuant to Rule 144 under the
Securities Act without volume restrictions, if any.
If
(1) the applicable registration statement is not filed with the
Commission on or prior to 100 days after the issuance of the
outstanding Notes (or, in the case of a shelf registration
statement required to be filed in response to a change in law or
applicable interpretations of the staff of the Commission, if
later, within 60 days after publication of the change in law or
interpretations, but in no event before 100 calendar days after the
issuance of the outstanding Notes);
(2) the exchange offer registration statement or the shelf registration
statement, as the case may be, is not declared effective within 240
days after the issuance of the outstanding Notes (or in the case of
a shelf registration statement required to be filed in response to
a change in law or applicable interpretations of the staff of the
Commission, if later, within 90 days after publication of the
change in law or interpretations, but in no event before 240 days
after the issuance of the outstanding Notes);
(3) the exchange offer is not consummated on or prior to 270 days after
the issuance of the outstanding Notes (other than in the event
Willis Corroon files a shelf registration statement); or
(4) the shelf registration statement is filed and declared effective
within the time periods specified in clause (2) above but shall
thereafter cease to be effective (at any time that Willis Corroon
is obligated to maintain the effectiveness thereof) without being
succeeded within 90 days by an additional registration statement
filed and declared effective
(each such event referred to in clauses (1) through (4) above, a "Registration
Default"), Willis Corroon will be obligated to pay liquidated damages to each
holder of Transfer Restricted Securities, during the period of one or more such
Registration Defaults, with respect to the first 90-day period immediately
following the occurrence of the first Registration Default in an amount equal to
one-quarter of one percent per annum (which rate will be increased by an
additional one-quarter of one percent per annum for each subsequent 90-day
period that any liquidated damages continue to accrue; provided that the rate at
which liquidated damages accrue may in no event exceed 1.0% per annum) in
respect of the
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Notes constituting Transfer Restricted Securities held by such holder until the
applicable registration statement is filed, the exchange offer registration
statement is declared effective and the exchange offer is consummated or the
shelf registration statement is declared effective or again becomes effective,
as the case may be. All accrued liquidated damages shall be paid to holders in
the same manner as interest payments on the Notes on semi-annual payment dates
which correspond to interest payment dates for the Notes. Following the cure of
all Registration Defaults, the accrual of liquidated damages will cease.
Notwithstanding the foregoing, Willis Corroon may issue a notice that the shelf
registration statement is unusable pending the announcement of a material
corporate transaction and may issue any notice suspending use of the shelf
registration statement required under applicable securities laws to be issued
and, in the event that the aggregate number of days in any consecutive
twelve-month period for which all such notices are issued and effective exceeds
60 days in the aggregate, then Willis Corroon will be obligated to pay
liquidated damages to each holder of Transfer Restricted Securities in an amount
equal to one-quarter of one percent per annum (which rate will be increased by
an additional one-quarter of one percent per annum for each subsequent 90-day
period that liquidated damages continue to accrue; provided that the rate at
which liquidated damages accrue may in no event exceed 1.0% per annum) in
respect of the Notes constituting Transfer Restricted Securities. Upon Willis
Corroon declaring that the shelf registration statement is usable after the
period of time described in the preceding sentence, the accrual of liquidated
damages will cease.
The registration rights agreement also provides that Willis Corroon
- shall make available for a period of 90 days after the consummation of
the exchange offer a prospectus meeting the requirements of the
Securities Act to any broker-dealer for use in connection with any
resale of any such exchange Notes and
- shall pay expenses incident to the exchange offer and will indemnify
certain holders of the Notes (including any broker-dealer) against
certain liabilities, including liabilities under the Securities Act.
A broker-dealer that delivers such a prospectus to purchasers in connection with
such resales will be subject to certain of the civil liability provisions under
the Securities Act and will be bound by the provisions of the exchange and
registration rights agreement (including certain indemnification rights and
obligations).
Each holder of the outstanding Notes who wishes to exchange such
outstanding Notes for exchange Notes in the exchange offer will be required to
make certain representations, including representations that:
- any exchange Notes to be received by it will be acquired in the
ordinary course of its business;
- it has no arrangement or understanding with any person to participate
in the distribution of the Exchange Notes;
- it is not an "affiliate" (as defined in Rule 405 under the Securities
Act) of Willis Corroon, or if it is an affiliate, that it will comply
with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable; and
- if it is a person in the United Kingdom, that its ordinary activities
involve it in acquiring, holding, managing or disposing of investments
(as principal or agent) for the purposes of its business.
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If the holder is not a broker-dealer, it will be required to represent
that it is not engaged in, and does not intend to engage in, the distribution of
the exchange Notes. If the holder is a broker-dealer that will receive exchange
Notes for its own account in exchange for outstanding Notes that were acquired
as a result of market-making activities or other trading activities, it will be
required to acknowledge that it will deliver a prospectus in connection with any
resale of such exchange Notes.
Holders of the outstanding Notes will be required to make certain
representations to Willis Corroon (as described above) in order to participate
in the exchange offer and will be required to deliver information to be used in
connection with the shelf registration statement in order to have their
outstanding Notes included in the shelf registration statement and benefit from
the provisions regarding liquidated damages set forth in the preceding
paragraphs. A holder who sells outstanding Notes pursuant to the shelf
registration statement generally will be required to be named as a selling
securityholder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the registration rights agreement which are applicable to such a
holder (including certain indemnification obligations).
For so long as the Notes are outstanding, the Issuer will continue to
provide to holders of the Notes and to prospective purchasers of the Notes the
information required by Rule 144A(d)(4) under the Securities Act.
The foregoing description of the registration rights agreement is a
summary only, does not purport to be complete and is qualified in its entirety
by reference to all provisions of the registration rights agreement. Willis
Corroon will provide a copy of the registration rights agreement to holders of
outstanding Notes identified to Willis Corroon by the initial purchasers under
the offering of outstanding Notes upon request.
Application will be made to list the exchange Notes on the Luxembourg
Stock Exchange. The exchange Notes will be accepted for clearance through the
accounts of the Euroclear Operator and Cedel Bank and they will have a new
common code and a new ISIN number, which will be transmitted to the Luxembourg
Stock Exchange. All documents prepared in connection with the exchange offer
will be available at the office of the special agent in Luxembourg and all
necessary actions and services in respect of the exchange offer may be done at
the office of the special agent in Luxembourg. The special agent appointed for
these purposes is Kredietbank S.A. Luxembourgeoise, 43, Boulevard Royal, L-2955
Luxembourg.
All notices relating to the exchange offer will be published in
accordance with the notice provisions of the indenture. See "Description of the
Notes--Notices." So long as the outstanding Notes are listed on the Luxembourg
Stock Exchange and the rules of such stock exchange shall require, prior to the
commencement of the exchange offer, notice of the exchange offer will be given
to the Luxembourg Stock Exchange and will be published in a newspaper having a
general circulation in Luxembourg (which is expected to be the LUXEMBURGER
WORT). Such notice will, among other things, provide details of the conditions
to the exchange offer and the commencement and expected completion dates of the
exchange offer. So long as the Notes are listed on the Luxembourg Stock Exchange
and the rules of such stock exchange shall require, notice of the results of the
exchange offer will be given to the Luxembourg Stock Exchange and will be
published in a newspaper having a general circulation in Luxembourg (which is
expected to be the LUXEMBURGER WORT), in each case, as promptly as practicable
following the completion of the exchange offer. Similar notice will also be
provided in connection with the payment of liquidated damages and the
declaration of the effective date of interest rates.
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CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES OF THE EXCHANGE OFFER
EXCHANGE OF NOTES
The following summary describes the material United States federal
income tax consequences of the exchange offer. The exchange of outstanding Notes
for exchange Notes in the exchange offer will not constitute a taxable event to
holders. Consequently, no gain or loss will be recognized by a holder upon
receipt of an exchange Note, the holding period of the exchange Note will
include the holding period the outstanding Note and the basis of the exchange
Note will be the same as the basis of the outstanding Note immediately before
the exchange.
IN ANY EVENT, PERSONS CONSIDERING THE EXCHANGE OF OUTSTANDING NOTES FOR
EXCHANGE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS
AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING
JURISDICTION.
CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following summary describes the material United States federal
income tax consequences of the ownership of Notes as of the date hereof by a
Non-U.S. Holder (as defined below). Except where noted it deals only with Notes
held as capital assets by Non-U.S. Holders. As used herein the term "Non-U.S.
Holder" means any person or entity that is not a United States Holder ("U.S.
Holder"). A U.S. Holder is any beneficial owner of a Note that is (i) a citizen
or resident of the United States, (ii) a corporation or partnership created or
organized in or under the laws of the United States or any political subdivision
thereof, (iii) an estate the income of which is subject to U.S. federal income
taxation regardless of its source and (iv) a trust (x) that is subject to the
supervision of a court within the United States and the control of one or more
United States persons as described in section 7701(a)(30) or (y) that has a
valid election in effect under applicable U.S. Treasury regulations to be
treated as a U.S. person.
The discussion below is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), and regulations, rulings and
judicial decisions thereunder as of the date hereof, and such authorities may be
repealed, revoked or modified so as to result in United States federal income
tax consequences different from those discussed below. PERSONS CONSIDERING THE
PURCHASE, OWNERSHIP OR DISPOSITION OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IN LIGHT
OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE
LAWS OF ANY OTHER TAXING JURISDICTION.
Under present United States federal income and estate tax law, and
subject to the discussion below concerning backup withholding:
(a) no withholding of United States federal income tax will be
required with respect to the payment by the Issuer or any paying agent of
principal or interest on a Note owned by a Non-U.S. Holder, provided that
(i) the beneficial owner does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the
Issuer entitled to vote within the meaning of section 871(h)(3) of the
Code and the regulations thereunder, (ii) the beneficial owner is not a
controlled foreign corporation that is related to the Issuer through
stock ownership, (iii) the beneficial owner is not a bank whose receipt
of interest on a Note is described in section 881(c)(3)(A) of the Code
and (iv) the
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beneficial owner satisfies the statement requirement (described generally
below) set forth in section 871(h) and section 881(c) of the Code and the
regulations thereunder;
(b) no withholding of United States federal income tax will be
required with respect to any gain or income realized by a Non-U.S. Holder
upon the sale, exchange, retirement or other disposition of a Note; and
(c) a Note beneficially owned by an individual who at the time
of death is a Non-U.S. Holder will not be subject to United States
federal estate tax as a result of such individual's death, provided that
such individual does not actually or constructively own 10% or more of
the total combined voting power of all classes of stock of the company
entitled to vote within the meaning of section 871(h)(3) of the Code and
provided that the interest payments with respect to such Note would not
have been, if received at the time of such individual's death,
effectively connected with the conduct of a United States trade or
business by such individual.
It is unclear whether the payment of Liquidated Damages to a Non-U.S.
Holder would be subject to withholding of U.S. federal income tax.
To satisfy the requirement referred to in (a)(iv) above, the beneficial
owner of such Note, or a financial institution holding the Note on behalf of
such owner, must provide, in accordance with specified procedures, a paying
agent of the Issuer with a statement to the effect that the beneficial owner is
not a U.S. Holder. Currently, these requirements will be met if (1) the
beneficial owner provides his name and address, and certifies, under penalties
of perjury, that he is not a U.S. Holder (which certification may be made on an
Internal Revenue Service ("IRS") Form W-8 (or successor form)) or (2) a
financial institution holding the Note on behalf of the beneficial owner
certifies, under penalties of perjury, that such statement has been received by
it and furnishes a paying agent with a copy thereof. Under recently finalized
Treasury regulations (the "Final Regulations"), the statement requirement
referred to in (a)(iv) above may also be satisfied with other documentary
evidence for interest paid after December 31, 1999 with respect to an offshore
account or through certain foreign intermediaries.
If a Non-U.S. Holder is engaged in a trade or business in the United
States and interest on the Note is effectively connected with the conduct of
such trade or business, the Non-U.S. Holder, although exempt from the
withholding tax discussed above, will be subject to United States federal income
tax on such interest on a net income basis in the same manner as if it were a
U.S. Holder. In addition, if such holder is a foreign corporation, it may be
subject to a branch profits tax equal to 30% (or lower applicable treaty rate)
of its effectively connected earnings and profits for the taxable year, subject
to adjustments. For this purpose, interest on a Note will be included in such
foreign corporation's earnings and profits.
Any gain or income realized upon the sale, exchange, retirement or
other disposition of a Note generally will not be subject to United States
federal income tax unless (i) such gain or income is effectively connected with
the conduct of a trade or business in the United States by the Non-U.S. Holder,
or (ii) in the case of a Non-U.S. Holder who is an individual, such individual
is present in the United States for 183 days or more in the taxable year of such
sale, exchange, retirement or other disposition, and certain other conditions
are met.
Special rules may apply to certain Non-U.S. Holders, such as
"controlled foreign corporations," "passive foreign investment companies" and
"foreign personal holding companies," that are subject to special treatment
under the Code. Such entities should consult their own tax advisors to determine
the U.S. federal, state, local and other tax consequences that may be relevant
to them.
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INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, no information reporting or backup withholding will be
required with respect to payments made by the Issuer or any paying agent to
Non-U.S. Holders if a statement described in (a)(iv) above has been received
(and the payor does not have actual knowledge that the beneficial owner is a
United States Person).
In addition, backup withholding and information reporting will not
apply if payments of the principal, interest or premium on a Note are paid or
collected by a foreign office of a custodian, nominee or other foreign agent on
behalf of the beneficial owner of such Note, or if a foreign office of a broker
(as defined in applicable Treasury regulations) pays the proceeds of the sale of
a Note to the owner thereof. If, however, such nominee, custodian, agent or
broker is, for United States federal income tax purposes, a United States
person, a controlled foreign corporation or a foreign person that derives 50% or
more of its gross income for certain periods from the conduct of a trade or
business in the United States, or, for taxable years beginning after December
31, 1999, a foreign partnership in which one or more United States persons, in
the aggregate, own more than 50% of the income or capital interests in the
partnership or a foreign partnership which is engaged in a trade or business in
the United States, such payments will not be subject to backup withholding but
will be subject to information reporting, unless (1) such custodian, nominee,
agent or broker has documentary evidence in its records that the beneficial
owner is not a United States person and certain other conditions are met or (2)
the beneficial owner otherwise establishes an exemption.
Payments of principal, interest and premium on a Note paid to the
beneficial owner of a Note by a United States office of a custodian, nominee or
agent, or the payment by the United States office of a broker of the proceeds of
sale of a Note, will be subject to both backup withholding and information
reporting unless the beneficial owner provides the statement referred to in
(a)(iv) above and the payor does not have actual knowledge that the beneficial
owner is a United States person or otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed
as a refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
CERTAIN UNITED KINGDOM TAX CONSEQUENCES
CERTAIN UNITED KINGDOM TAX CONSEQUENCES OF PAYMENTS BY WILLIS CORROON GROUP AS
GUARANTOR
Under current law if Willis Corroon Group, as guarantor, makes any
payments in respect of interest on the Notes (or other amounts due under the
Notes other than repayment of principal) such payments may be subject to United
Kingdom withholding tax at the basic rate (currently 23%). Relief from such
withholding may be available pursuant to the provisions of any applicable double
taxation treaty. In particular, under the terms of the U.S./U.K. double taxation
treaty, Holders entitled to the benefit of that treaty would be able to recover
in full any U.K. tax withheld by making a claim on the appropriate form.
Alternatively, a claim may be made by a holder in advance of a payment in
respect of interest. If the claim is accepted by the U.K. Inland Revenue, it
will authorize subsequent payments to be made without deduction of U.K.
withholding tax. Claims for repayment must be made within six years of the end
of the U.K. year of assessment (generally April 5 in each year) to which the
interest relates and must be accompanied by the original statement provided by
the Company when the interest payment was made showing the amount of U.K. income
tax deducted. Because a claim is not considered until the U.K. Inland Revenue
receives the appropriate form from the Internal Revenue Service, forms should be
sent
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to the Internal Revenue Service, in the case of an advance claim well before the
relevant interest payment date or, in the case of a claim for repayment of the
tax, well before the end of the appropriate limitation period.
As described above, Willis Corroon Group has agreed, subject to
specific exceptions and limitations, to pay to the holders of the Notes
Additional Amounts in respect of any applicable United Kingdom withholding tax
in order that the interest (and other amounts due under the Notes) such holders
receive, net of any applicable United Kingdom withhholding tax, will equal the
amounts which would have been receivable by such holders in the absence of such
United Kingdom withholding tax. See "Description of Notes--Withholding Taxes".
TRANSFER TAXES ON TRANSFER OF NOTES IN THE UNITED KINGDOM
Under current law the sale or transfer in the United Kingdom of the
Notes will not be subject to stamp duty or stamp duty reserve tax or any other
transfer tax in the United Kingdom.
CERTAIN UNITED KINGDOM TAX CONSEQUENCES OF THE EXCHANGE OFFER
The exchange of outstanding Notes for exchange Notes in the exchange
offer may constitute a disposal for the purposes of taxation of capital gains or
a transfer for the purposes of the accrued income scheme for an individual
holder who is resident or ordinarily resident for tax purposes in the United
Kingdom or who carries on a trade, profession or vocation through a branch or
agency to which the Note is attributable. The exchange of outstanding Notes for
exchange Notes will not constitute a taxable disposal for holders which are
companies within the charge to corporation tax or for holders which are exempt
from taxation.
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BOOK-ENTRY; DELIVERY AND FORM
The exchange Notes will initially be represented by one or more
permanent global notes in definitive, fully registered book-entry form, without
interest coupons (the "Global Notes") that will be deposited with, or on behalf
of, DTC and registered in the name of Cede & Co., as nominee of DTC, on behalf
of the acquirors of exchange Notes represented thereby for credit to the
respective accounts of the acquirors (or to such other accounts as they may
direct) at DTC, or Morgan Guaranty Trust Company of New York, Brussels Office,
as operator of the Euroclear System, or Cedel Bank, societe anonyme. See "The
Exchange Offer--Book Entry Transfer."
Except as set forth below, the Global Notes may be transferred, in
whole and not in part, solely to another nominee of DTC or to a successor of DTC
or its nominee. Beneficial interests in the Global Notes may not be exchanged
for Notes in physical, certificated form ("Certificated Notes") except in the
limited circumstances described below.
All interests in the Global Notes, including those held through
Euroclear or Cedel, may be subject to the procedures and requirements of DTC.
Those interests held through Euroclear or Cedel may also be subject to the
procedures and requirements of such systems.
CERTAIN BOOK-ENTRY PROCEDURES FOR THE GLOBAL NOTES
The descriptions of the operations and procedures of DTC, Euroclear and
Cedel set forth below are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to change by them from time to time. The
Issuer takes no responsibility for these operations or procedures, and investors
are urged to contact the relevant system or its participants directly to discuss
these matters.
DTC has advised the Issuer that it is
(i) a limited purpose trust company organized under the laws of
the State of New York,
(ii) a "banking organization" within the meaning of the New York
Banking Law,
(iii) a member of the Federal Reserve System,
(iv) a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended and
(v) a "clearing agency" registered pursuant to Section 17A of
the Exchange Act.
DTC was created to hold securities for its participants (collectively, the
"Participants") and facilitates the clearance and settlement of securities
transactions between Participants through electronic book-entry changes to the
accounts of its Participants, thereby eliminating the need for physical transfer
and delivery of certificates. DTC's Participants include securities brokers and
dealers (including the initial purchaser under the offering of outstanding
Notes), banks and trust companies, clearing corporations and certain other
organizations. Indirect access to DTC's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants") that clear through or maintain a custodial relationship
with a Participant, either directly or indirectly. Investors who are not
Participants may beneficially own securities held by or on behalf of DTC only
through Participants or Indirect Participants.
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The Issuer expects that pursuant to procedures established by DTC
ownership of the Notes will be shown on, and the transfer of ownership thereof
will be effected only through, records maintained by DTC (with respect to the
interests of Participants) and the records of Participants and the Indirect
Participants (with respect to the interests of persons other than Participants).
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form.
Accordingly, the ability to transfer interests in the Notes represented by a
Global Note to such persons may be limited. In addition, because DTC can act
only on behalf of its Participants, who in turn act on behalf of persons who
hold interests through Participants, the ability of a person having an interest
in Notes represented by a Global Note to pledge or transfer such interest to
persons or entities that do not participate in DTC's system, or to otherwise
take actions in respect of such interest, may be affected by the lack of a
physical definitive security in respect of such interest.
So long as DTC or its nominee is the registered owner of a Global Note,
DTC or such nominee, as the case may be, will be considered the sole owner or
holder of the Notes represented by the Global Note for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in a Global
Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of Certificated Notes, and will not be considered the owners or holders
thereof under the Indenture for any purpose, including with respect to the
giving of any direction, instruction or approval to the Trustee thereunder.
Accordingly, each holder owning a beneficial interest in a Global Note must rely
on the procedures of DTC and, if such holder is not a Participant or an Indirect
Participant, on the procedures of the Participant through which such holder owns
its interest, to exercise any rights of a holder of Notes under the Indenture or
such Global Note. The Issuer understands that under existing industry practice,
in the event that the Issuer requests any action of holders of Notes, or a
holder that is an owner of a beneficial interest in a Global Note desires to
take any action that DTC, as the holder of such Global Note, is entitled to
take, DTC would authorize the Participants to take such action and the
Participants would authorize holders owning through such Participants to take
such action or would otherwise act upon the instruction of such holders. Neither
the Issuer nor the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of Notes by DTC,
or for maintaining, supervising or reviewing any records of DTC relating to such
Notes.
Payments with respect to the principal of, premium, if any, Liquidated
Damages, if any, and interest on, any Notes represented by a Global Note
registered in the name of DTC or its nominee on the applicable record date will
be payable by the Trustee to or at the direction of DTC or its nominee in its
capacity as the registered holder of the Global Note representing such Notes
under the Indenture. Under the terms of the Indenture, the Issuer and the
Trustee may treat the persons in whose names the Notes, including the Global
Notes, are registered as the owners thereof for the purpose of receiving payment
thereon and for any and all other purposes whatsoever. Accordingly, neither the
Issuer nor the Trustee has or will have any responsibility or liability for the
payment of such amounts to owners of beneficial interests in a Global Note
(including principal, premium, if any, Liquidated Damages, if any, and
interest). Payments by the Participants and the Indirect Participants to the
owners of beneficial interests in a Global Note will be governed by standing
instructions and customary industry practice and will be the responsibility of
the Participants or the Indirect Participants and DTC.
Transfers between Participants in DTC will be effected in accordance
with DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
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Subject to compliance with the transfer restrictions applicable to the
Notes, cross-market transfers between the Participants in DTC, on the one hand,
and Euroclear or Cedel participants, on the other hand, will be effected through
DTC in accordance with DTC's rules on behalf of Euroclear or Cedel, as the case
may be, by its respective depositary; however, such cross-market transactions
will require delivery of instructions to Euroclear or Cedel, as the case may be,
by the counterparty in such system in accordance with the rules and procedures
and within the established deadlines (Brussels time) of such system. Euroclear
or Cedel, as the case may be, will, if the transaction meets its settlement
requirements, deliver instructions to its respective depositary to take action
to effect final settlement on its behalf by delivering or receiving interests in
the relevant Global Notes in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Euroclear participants and Cedel participants may not deliver instructions
directly to the depositaries for Euroclear or Cedel.
Because of time zone differences, the securities account of a Euroclear
or Cedel participant purchasing an interest in a Global Note from a Participant
in DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or Cedel participant, during the securities settlement processing day
(which must be a business day for Euroclear and Cedel) immediately following the
settlement date of DTC. Cash received in Euroclear or Cedel as a result of sales
of interest in a Global Security by or through a Euroclear or Cedel participant
to a Participant in DTC will be received with value on the settlement date of
DTC but will be available in the relevant Euroclear or Cedel cash account only
as of the business day for Euroclear or Cedel following DTC's settlement date.
Although DTC, Euroclear and Cedel have agreed to the foregoing
procedures to facilitate transfers of interests in the Global Notes among
participants in DTC, Euroclear and Cedel, they are under no obligation to
perform or to continue to perform such procedures, and such procedures may be
discontinued at any time. Neither the Issuer nor the Trustee will have any
responsibility for the performance by DTC, Euroclear or Cedel or their
respective participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
CERTIFICATED NOTES
If
(i) the Issuer notifies the Trustee in writing that DTC is no
longer willing or able to act as a depositary or DTC ceases to be
registered as a clearing agency under the Exchange Act and a successor
depositary is not appointed within 90 days of such notice or cessation,
(ii) Willis Corroon, at its option, notifies the Trustee in
writing that it elects to cause the issuance of Notes in definitive form
under the Indenture or
(iii) upon the occurrence of certain other events as provided in
the Indenture,
then, upon surrender by DTC of the Global Notes, Certificated Notes will be
issued to each person that DTC identifies as the beneficial owner of the Notes
represented by the Global Notes. Upon any such issuance, the Trustee is required
to register such Certificated Notes in the name of such person or persons (or
the nominee of any thereof) and cause the same to be delivered thereto.
Neither the Issuer nor the Trustee shall be liable for any delay by DTC
or any Participant or Indirect Participant in identifying the beneficial owners
of the related Notes and each such person may conclusively rely on, and shall be
protected in relying on, instructions from DTC for all purposes
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(including with respect to the registration and delivery, and the respective
principal amounts, of the Notes to be issued).
If Certificated Notes are issued, Willis Corroon will appoint
Kredietbank S.A. Luxembourgeoise, or such other person located in Luxembourg and
reasonably acceptable to the Trustee, as an additional paying and transfer
agent. Upon the issuance of Certificated Notes, Holders will be able to transfer
and exchange Certificated Notes at the Luxembourg office of such paying and
transfer agent, PROVIDED that all transfers and exchanges must be effected in
accordance with the terms of the Indenture and, among other things, be recorded
in the register maintained by the registrar.
YEAR 2000
DTC management is aware that some computer applications, systems, and
the like for processing data ("Systems") that are dependent upon calendar dates,
including dates before, on, and after January 1, 2000, may encounter "year 2000
problems." DTC has informed its Participants and other members of the financial
community (the "Industry") that it has developed and is implementing a program
so that its Systems, as the same relate to the timely payment of distributions
(including principal and income payments) to securityholders, book-entry
deliveries, and settlement of trades within DTC ("DTC Services"), continue to
function appropriately. This program includes a technical assessment and a
remediation plan, each of which is complete. Additionally, DTC's plan includes a
testing phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also
dependent upon other parties, including but not limited to issuers and their
agents, as well as third party vendors from whom DTC licenses software and
hardware, and third party vendors on whom DTC relies for information or the
provision of services, including telecommunication and electrical utility
service providers, among others. DTC has informed the Industry that it is
contacting (and will continue to contact) third party vendors from whom DTC
acquires services to: (i) impress upon them the importance of such services
being year 2000 compliant; and (ii) determine the extent of their efforts for
year 2000 remediation (and, as appropriate, testing) of their services. In
addition, DTC is in the process of developing such contingency plans as it deems
appropriate.
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PLAN OF DISTRIBUTION
Until , 1999 (90 days after the date of this prospectus),
all dealers effecting transactions in the exchange Notes, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
Each broker-dealer that receives exchange Notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange Notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of exchange Notes received in
exchange for outstanding Notes only where such outstanding Notes were acquired
as a result of market-making activities or other trading activities. Willis
Corroon has agreed that it will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale for a period of 90 days from the date on which the exchange offer is
consummated, or such shorter period as will terminate when all outstanding Notes
acquired by broker-dealers for their own accounts as a result of market-making
activities or other trading activities have been exchanged for exchange Notes
and such exchange Notes have been resold by such broker-dealers.
Willis Corroon will not receive any proceeds from any sale of exchange
Notes by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the exchange offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer or the purchasers of any exchange Notes. Any broker-dealer
that resells exchange Notes that were received by it for its own account
pursuant to the exchange offer and any broker or dealer that participates in a
distribution of such exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of exchange
Notes and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The letter of
transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 90 days from the date on which the exchange offer is
consummated, or such shorter period as will terminate when all outstanding Notes
acquired by broker-dealers for their own accounts as a result of market-making
activities or other trading activities have been exchanged for exchange Notes
and such exchange Notes have been resold by such broker-dealers, Willis Corroon
will promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal. Willis Corroon has agreed to pay all expenses
incident to the exchange offer other than commissions or concessions of any
brokers or dealers and the fees of any counsel or other advisors or experts
retained by the holders of outstanding Notes, except as expressly set forth in
the registration rights agreement, and will indemnify the holders of outstanding
Notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
The exchange of outstanding Notes for exchange Notes will not be
subject to stamp duty or stamp duty reserve tax or any other transfer tax in the
United Kingdom.
181
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the Notes and the Guarantees are
being passed upon on behalf of Willis Corroon by Simpson Thacher & Bartlett, New
York, New York.
EXPERTS
The consolidated financial statements of Willis Corroon as of December
31, 1997 and 1998 and for the years ended December 31, 1996 and 1997 and periods
January 1 to September 1, 1998 and September 2 to December 31, 1998 appearing in
this prospectus and registration statement have been audited by Ernst & Young,
independent auditors, as set forth in their reports appearing elsewhere herein
and in the registration statement and are included in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Commission a registration statement on Form F-4
under the Securities Act with respect to the exchange Notes being offered
hereby. This prospectus, which forms a part of the registration statement, does
not contain all of the information set forth in the registration statement. You
should refer to the registration statement for further information. Statements
contained in this prospectus as to the contents of any contract or other
document are not necessarily complete, and, where such contract or other
document is an exhibit to the registration statement, each such statement is
qualified by the provision in such exhibit to which reference is hereby made.
We are not currently subject to the informational requirements of the
Securities Exchange Act of 1934. As a result of this offering of these
securities, we will become subject to the informational requirements of the
Securities Exchange Act of 1934. Accordingly, we will file reports and such
other information with the Commission unless and until we obtain an exemption
from such requirement. The registration statement, such other reports and other
information can be inspected and copied at the Public Reference Section of the
Securities and Exchange Commission located at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington D.C. 20549 and at the regional public reference
facilities maintained by the Securities and Exchange Commission located at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies of
such material, including copies of all or any portion of the registration
statement, can be obtained from the Public Reference Section of the Securities
and Exchange Commission at prescribed rates. Such material may be accessed
electronically by means of the Commission's home page on the Internet
(http://www.sec.gov).
Furthermore, we agree that, even if we are not required to file
periodic reports and information with the Commission, for so long as any
exchange Note remains outstanding we will furnish to you the information that
would be required to be furnished by us under Section 13 of the Securities
Exchange Act of 1934.
Prior to the consummation of the Tender Offer, Willis Corroon Group was
subject to the periodic reporting and other information requirements of the
Securities Exchange Act of 1934, and, in accordance therewith, filed reports and
other information with the Commission.
So long as the Notes are listed on the Luxembourg Stock Exchange and
the rules of such stock exchange shall so require, copies of such information
will also be available during normal business hours on any weekday at the office
of Kredietbank S.A. Luxembourgeoise.
182
<PAGE>
LISTING AND GENERAL INFORMATION
1. Application has been made to list the exchange Notes on the
Luxembourg Stock Exchange. A legal notice relating to the issue of the
outstanding Notes and the Certificate of Incorporation and Bylaws of the Issuer
was deposited with the GREFFIER EN CHEF DU TRIBUNAL D'ARRONDISSEMENT DE ET A
LUXEMBOURG, where such documents may be examined or copies obtained.
2. So long as the Notes are listed on the Luxembourg Stock Exchange and
the rules of such stock exchange shall so require, copies of the Certificate of
Incorporation and Bylaws of the Issuer, the Memorandum and Articles of
Association of Willis Corroon Group, the Partnership Agreement of Willis Corroon
Partners and the Indenture will be available at the office of Kredietbank S.A.
Luxembourgeoise, 43, Boulevard Royal, L-2955 Luxembourg. So long as the
outstanding Notes or the exchange Notes are listed on the Luxembourg Stock
Exchange and the rules of such stock exchange shall so require, copies of the
consolidated financial statements of Willis Corroon (the Issuer and Willis
Corroon Partners do not publish separate financial statements) for the year
ended December 31, 1998 and subsequent years and any and all annual and
quarterly reports of Willis Corroon will be available during normal business
hours on any weekday at the office of Kredietbank S.A. Luxembourgeoise, 43,
Boulevard Royal, L-2955 Luxembourg. So long as the outstanding Notes or the
exchange Notes are listed on the Luxembourg Stock Exchange and the rules of such
stock exchange shall so require, copies of all other material documents
referenced herein that are entered into in connection with the Transactions will
be available during normal business hours on any weekday at the office of
Kredietbank S.A. Luxembourgeoise, 43, Boulevard Royal, L-2955 Luxembourg.
3. The Issuer was incorporated under the laws of the State of Delaware
on December 20, 1928. Willis Corroon Group was registered as a private limited
company under the laws of England and Wales on November 10, 1998. Willis Corroon
Partners was duly formed as a general partnership under the laws of Delaware on
November 11, 1998. The creation and issuance of the Notes was authorized on
behalf of the Issuer by resolutions adopted by the Board of Directors of the
Issuer on January 26 and 28, 1999. The guarantees of the Notes were authorized
on behalf of Willis Corroon Group by a resolution of the Board of Directors of
Willis Corroon Group on January 25, 1999 and on behalf of Willis Corroon
Partners by a unanimous written consent of the general partners of Willis
Corroon Partners on January 27, 1999.
4. Willis Corroon Group accepts responsibility for the information
contained in this prospectus. To the best knowledge of Willis Corroon Group, the
information contained in this prospectus is in accordance with the facts and
does not omit anything likely to affect the import of this prospectus.
5. There has been no material adverse change in the financial position
of Willis Corroon since December 31, 1998.
6. Willis Corroon is not a party to any litigation that, in the
judgment of Willis Corroon Group, could be material in the context of the issue
of the Notes, except as disclosed herein.
7. The Auditors of Willis Corroon Group are Ernst & Young, London, who
have audited Willis Corroon's financial statements for the years ended December
31, 1996 and 1997 and the periods January 1 to September 1, 1998 and September 2
to December 31, 1998.
8. The Issuer will not appoint a paying and transfer agent in
Luxembourg until such time, if any, as Certificated Notes are issued. The Issuer
has appointed Kredietbank S.A. Luxembourgeoise as its special agent to act as an
intermediary between the Issuer and the holders of the Notes in Luxembourg until
such time as the Issuer is required to appoint a transfer and paying agent
located in
183
<PAGE>
Luxembourg as provided in this prospectus. So long as the outstanding Notes or
the exchange Notes are listed on the Luxembourg Stock Exchange and the rules of
such stock exchange so require, the Issuer shall maintain a special agent so
long as the outstanding Notes or the exchange Notes are in global form and
appoint and maintain a paying and transfer agent upon the issuance of the
Certificated Notes. The Issuer reserves the right to vary such appointment.
9. The exchange Notes have been accepted for clearance through the
Euroclear Operator and Cedel Bank. The Global Notes have been assigned the
following CUSIP number: and; a Euroclear common code number of
; and an ISIN number of .
184
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Auditors............................................................................. F-2
Consolidated Financial Statements
Consolidated Statement of Income......................................................................... F-3
Consolidated Balance Sheet............................................................................... F-4
Consolidated Statement of Movements in Shareholders' Equity.............................................. F-5
Consolidated Statement of Cash Flows..................................................................... F-6
Consolidated Statement of Total Recognized Gains and Losses.............................................. F-7
Notes to the Financial Statements........................................................................ F-8
</TABLE>
F-1
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
REPORT OF INDEPENDENT AUDITORS
TO: THE BOARD OF DIRECTORS
WILLIS CORROON GROUP LIMITED
We have audited the accompanying consolidated balance sheets of Willis
Corroon Group Limited as of December 31, 1997 and 1998, and the related
consolidated statements of income, movements in shareholders' equity, cash flows
and total recognized gains and losses for the years ended December 31, 1996 and
1997 and the periods January 1 to September 1, 1998 and September 2 to December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Willis Corroon Group Limited at December 31, 1997 and 1998, and the consolidated
results of its operations and its consolidated cash flows for the years ended
December 31, 1996 and 1997 and the periods January 1 to September 1, 1998 and
September 2 to December 31, 1998, in conformity with accounting principles
generally accepted in the United Kingdom, which differ in certain respects from
those followed in the United States (see Note 31 of Notes to the Financial
Statements).
Ernst & Young
London, England
March 15, 1999
F-2
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, JANUARY 1 TO SEPTEMBER 2 TO
---------------------- SEPTEMBER 1, DECEMBER 31,
NOTE 1996 1997 1998 1998
--------- ---------- ---------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
(L MILLION)
CONTINUING OPERATIONS
Commissions and fees............................. 683.2 652.0 441.9 235.8
DISCONTINUED OPERATIONS
Underwriting premiums, commissions and fees...... 2.3 0.3 -- 0.2
---------- ---------- ------------- ---------------
3 685.5 652.3 441.9 236.0
Interest and investment income................... 5 45.2 41.7 26.9 13.4
---------- ---------- ------------- ---------------
TOTAL OPERATING REVENUES......................... 730.7 694.0 468.8 249.4
Operating expenses............................... (640.6) (603.7) (418.7) (223.2)
Underwriting claims.............................. (4.1) (1.0) -- --
Utilization of provisions........................ 1.8 2.8 6.7 (0.2)
---------- ---------- ------------- ---------------
OPERATING INCOME
Continuing operations
Before exceptional items......................... 87.8 92.1 56.8 26.0
Exceptional items................................ -- -- (35.8) (5.0)
---------- ---------- ------------- ---------------
87.8 92.1 21.0 21.0
Discontinued operations.......................... -- -- -- --
---------- ---------- ------------- ---------------
TOTAL OPERATING INCOME........................... 5 87.8 92.1 21.0 21.0
(Loss)/gain on closure/disposal of operations.... 2.5 2.2 (28.0) (1.3)
Share of profit of associates.................... 3.5 1.9 7.7 (1.4)
Net interest expense............................. 7 (2.2) (0.7) (2.0) (1.2)
---------- ---------- ------------- ---------------
INCOME/(LOSS) BEFORE TAXATION.................... 8 91.6 95.5 (1.3) 17.1
Taxation......................................... 9 (36.6) (38.1) (13.5) (40.9)
---------- ---------- ------------- ---------------
INCOME/(LOSS) AFTER TAXATION..................... 55.0 57.4 (14.8) (23.8)
Minority interests............................... (0.8) (0.5) (0.8) (1.9)
---------- ---------- ------------- ---------------
NET INCOME/(LOSS) (i)............................ 54.2 56.9 (15.6) (25.7)
Dividends........................................ 10 (27.6) (27.6) (22.2) --
---------- ---------- ------------- ---------------
RETAINED INCOME/(LOSS)........................... 26.6 29.3 (37.8) (25.7)
---------- ---------- ------------- ---------------
---------- ---------- ------------- ---------------
PER ORDINARY SHARE (i)
Net income/(loss)................................ 11 13.0p 13.6p (3.7)p (6.0)p
---------- ---------- ------------- ---------------
---------- ---------- ------------- ---------------
Average number of ordinary shares
outstanding (in millions)...................... 419.7 421.5 424.6 427.1
---------- ---------- ------------- ---------------
---------- ---------- ------------- ---------------
</TABLE>
- ------------------------
(i) A summary of the significant adjustments to net income that would be
required if United States generally accepted accounting principles were to
be applied instead of those generally accepted in the United Kingdom is set
forth in Note 31.
The Notes to the Financial Statements are an integral part of these
Financial Statements.
F-3
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------
NOTE 1997 1998
----- -------------------- --------------------
<S> <C> <C> <C> <C> <C>
(L MILLION)
ASSETS
CURRENT ASSETS
Cash and short-term deposits...................................... 359.4 317.1
Investments....................................................... 12 257.7 281.6
Receivables....................................................... 13 2,533.2 3,794.6
--------- ---------
Total current assets.......................................... 3,150.3 4,393.3
FIXED ASSETS
Intangible assets................................................. 14 -- 19.7
Tangible assets................................................... 15 134.8 141.6
Investments....................................................... 16 19.2 34.4
--------- ---------
Total fixed assets............................................ 154.0 195.7
--------- ---------
TOTAL ASSETS...................................................... 3,304.3 4,589.0
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade payables.................................................... 2,868.6 2,860.3
Corporate tax..................................................... 20.5 17.7
Accruals and deferred income...................................... 60.2 67.6
Bank loans and overdrafts......................................... 18 0.5 352.7
Dividends payable................................................. 7.1 --
Other............................................................. 17 89.9 817.4
--------- ---------
Total current liabilities..................................... 3,046.8 4,115.7
NONCURRENT LIABILITIES
Bank loans........................................................ 18 34.0 276.4
Other............................................................. 19 3.7 5.0
--------- ---------
Total noncurrent liabilities.................................. 37.7 281.4
PROVISIONS FOR LIABILITIES AND CHARGES............................ 21 90.0 94.8
MINORITY INTERESTS................................................ 5.2 8.1
--------- ---------
Total liabilities and minority interests...................... 3,179.7 4,500.0
SHAREHOLDERS' EQUITY (i)
Share capital..................................................... 52.9 53.6
Share premium..................................................... 21.4 28.5
Revaluation reserve............................................... 14.9 14.9
Retained earnings/(deficit)....................................... 35.4 (8.0)
--------- ---------
Total shareholders' equity.................................... 124.6 89.0
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........................ 3,304.3 4,589.0
--------- ---------
--------- ---------
</TABLE>
- ------------------------
(i) A summary of the significant adjustments to shareholders' equity that would
be required if United States generally accepted accounting principles were
to be applied instead of those generally accepted in the United Kingdom is
set forth in Note 31.
The Notes to the Financial Statements are an integral part of these
Financial Statements.
F-4
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF MOVEMENTS IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ORDINARY SHARES
------------------------------
AUTHORIZED SHARE CAPITAL
At January 1, 1996, December 31, 1996, December 31, 1997 NUMBER (000) (L MILLION)
and December 31, 1998.............................................................. 528,000 66.0
ISSUED SHARE CAPITAL --------------- -------------
--------------- -------------
------------------------ SHARE REVALUATION RETAINED
ISSUED SHARE CAPITAL AND RESERVES ORDINARY SHARES PREMIUM(I) RESERVE(I) EARNINGS(II)
------------------------ ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
NUMBER
(000) (L MILLION)
AT JANUARY 1, 1996.......................... 419,299 52.4 17.0 14.9 36.3
Retained income............................. -- -- -- -- 26.6
Issued for acquisitions..................... 38 -- -- -- --
Issued under employee share plans........... 740 0.1 1.0 -- --
Goodwill on acquisitions eliminated (iii)... -- -- -- -- (1.1)
Goodwill reinstated on disposals............ -- -- -- -- 13.7
Exchange adjustments........................ -- -- -- -- (9.0)
----------- --- --- ----- -----
AT DECEMBER 31, 1996........................ 420,077 52.5 18.0 14.9 66.5
Retained income............................. -- -- -- -- 29.3
Issued for acquisitions..................... 1,545 0.2 1.8 -- --
Issued under employee share plans........... 1,352 0.2 1.6 -- --
Goodwill on acquisitions eliminated (iv).... -- -- -- -- (68.9)
Goodwill reinstated on disposals............ -- -- -- -- 6.6
Exchange adjustments........................ -- -- -- -- 1.9
----------- --- --- ----- -----
AT DECEMBER 31, 1997........................ 422,974 52.9 21.4 14.9 35.4
Retained income............................. -- -- -- -- (63.5)
Scrip dividends............................. 1,758 0.2 2.2 -- --
Issued under employee share plans........... 3,683 0.5 4.9 -- --
Goodwill on acquisitions eliminated (v)..... -- -- -- -- 0.2
Goodwill reinstated on disposals............ -- -- -- -- 30.4
Exchange adjustments........................ -- -- -- -- (10.5)
----------- --- --- ----- -----
AT DECEMBER 31, 1998........................ 428,415 53.6 28.5 14.9 (8.0)
----------- --- --- ----- -----
----------- --- --- ----- -----
</TABLE>
- ------------------------
(i) The share premium and revaluation reserve are not distributable.
(ii) Retained earnings at December 31, 1998 included L4.1 million (1997: L2.9
million, 1996: L4.9 million) in respect of associates.
(iii) Goodwill eliminated in 1996 comprised subsidiaries (L1.1 million).
(iv) Goodwill eliminated in 1997 comprised subsidiaries (L20.8 million) and
associates (L48.1 million).
(v) Goodwill eliminated in 1998 comprised adjustments relating to subsidiaries
acquired before December 31, 1997.
(vi) The cumulative amount of goodwill eliminated in 1998 and earlier financial
years, net of goodwill relating to subsidiaries sold, amounts to L542.1
million.
(vii) Trinity Acquisition plc ("Trinity Acquisition") has the right to convert
the preferred shares it holds in a non-U.K. subsidiary into 563,580 ordinary
shares of Willis Corroon Group Limited ("ordinary shares") at any time up to
December 31, 2002.
The Notes to the Financial Statements are an integral part of these
Financial Statements.
F-5
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1 TO SEPTEMBER 2 TO
DECEMBER 31, SEPTEMBER 1, DECEMBER 31,
-------------------- --------------- ---------------
NOTE 1996 1997 1998 1998
----- --------- --------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
(L MILLION)
NET CASH INFLOW FROM OPERATING ACTIVITIES............... 23 63.7 113.4 127.5 (97.7)
--------- --------- ------ -------
DIVIDENDS FROM ASSOCIATES............................... 1.5 0.9 1.9 0.5
--------- --------- ------ -------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid........................................... (2.0) (0.6) (1.8) (1.1)
Bank fees on borrowings................................. -- -- -- (9.6)
Interest element of finance lease rental payments....... (0.2) (0.1) (0.1) --
--------- --------- ------ -------
Net cash outflow for returns on investment and servicing
of finance............................................ (2.2) (0.7) (1.9) (10.7)
--------- --------- ------ -------
TAXATION................................................ (26.8) (23.7) (8.4) (18.5)
--------- --------- ------ -------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets....................... (28.9) (26.5) (20.1) (9.8)
Sale of tangible fixed assets........................... 13.1 4.7 2.4 1.0
Purchase of fixed asset investments..................... (0.9) (5.0) (1.9) --
--------- --------- ------ -------
Net cash (outflow)/inflow for capital expenditure and
financial investment.................................. (16.7) (26.8) (19.6) (8.8)
--------- --------- ------ -------
ACQUISITIONS AND DISPOSALS
Purchase of subsidiaries................................ (1.2) (17.1) (1.5) (16.7)
Purchase of associates.................................. -- (35.6) (14.9) (5.7)
Sale of subsidiaries.................................... 36.4 10.5 5.0 1.6
Net cash transferred on purchase/sale of subsidiaries... (12.6) (0.5) 2.2 (2.3)
--------- --------- ------ -------
Net cash (outflow)/inflow for acquisitions and
disposals............................................. 22.6 (42.7) (9.2) (23.1)
--------- --------- ------ -------
EQUITY DIVIDENDS PAID................................... (27.3) (26.6) (19.8) (7.6)
--------- --------- ------ -------
CASH FLOW BEFORE MANAGEMENT OF LIQUID RESOURCES AND
FINANCING............................................. 14.8 (6.2) 70.5 (165.9)
--------- --------- ------ -------
MANAGEMENT OF LIQUID RESOURCES.......................... 25.2 2.8 (66.8) 122.2
--------- --------- ------ -------
FINANCING
Issue of ordinary shares................................ -- 0.3 0.7 4.0
Amounts due from parent company......................... -- -- -- (858.3)
Amounts due to parent company........................... -- -- -- 332.6
Convertible debentures.................................. -- -- -- (0.2)
Debt due within a year:
increase/(decrease) in short-term borrowings.......... (0.1) -- -- 349.4
Debt due beyond a year:
increase/(decrease) in long-term borrowings........... (42.6) 15.7 32.6 208.7
Capital element of finance lease rental payments........ (0.6) (1.0) (0.6) --
--------- --------- ------ -------
Net cash inflow/(outflow) from financing................ (43.3) 15.0 32.7 36.2
--------- --------- ------ -------
INCREASE/(DECREASE) IN CASH............................. (3.3) 11.6 36.4 (7.5)
--------- --------- ------ -------
--------- --------- ------ -------
</TABLE>
- ------------------------
(i) Acquisitions and disposals and financing activities not involving cash
consideration: The fair value of ordinary shares issued in connection with
acquisitions in 1997 amounted to L2.0 million.
(ii) The significant differences between the consolidated statement of cash
flows presented above and that required under U.S. GAAP are described in
Note 31.
F-6
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER JANUARY 1 TO SEPTEMBER 2 TO
31, SEPTEMBER 1, DECEMBER 31,
-------------------- --------------- -----------------
1996 1997 1998 1998
--------- --------- --------------- -----------------
<S> <C> <C> <C> <C>
(L MILLION)
NET INCOME
Parent and subsidiaries.................................... 51.3 55.4 (23.1) (22.6)
Associates................................................. 2.9 1.5 7.5 (3.1)
--- --- ----- -----
54.2 56.9 (15.6) (25.7)
CURRENCY TRANSLATION DIFFERENCES
Parent and subsidiaries.................................... (9.7) 1.4 (2.2) (7.8)
Associates................................................. 0.7 0.5 -- (0.5)
--- --- ----- -----
TOTAL RECOGNIZED GAINS AND LOSSES FOR THE FINANCIAL YEAR... 45.2 58.8 (17.8) (34.0)
--- --- ----- -----
--- --- ----- -----
</TABLE>
- ------------------------------
(i) A statement of Comprehensive Income under U.S. GAAP is set forth in Note 31
of Notes to the Financial Statements.
The Notes to the Financial Statements are an integral part of these
Financial Statements.
F-7
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1--ACCOUNTING POLICIES
BASIS OF PREPARATION
The consolidated financial statements of Willis Corroon Group Limited (the
"Company") and its subsidiaries (together, the "Group") have been prepared on
the going concern basis under the historical cost convention as modified by the
revaluation of certain land and buildings. The Group's consolidated financial
statements comply with accounting standards applicable in the United Kingdom.
The Company was acquired by Trinity Acquisition effective September 2, 1998.
While this acquisition has no impact on the basis of accounting for the Company,
in accordance with the requirements of the U.S. Securities and Exchange
Commission, financial information for the periods January 1 to September 1,
1998, and September 2 to December 31, 1998 is presented separately. Under U.S.
GAAP, the acquisition establishes a new basis of accounting for the Company from
September 2, 1998 as described in Note 31.
BASIS OF CONSOLIDATION
The Group's consolidated financial statements incorporate those of the
Company and its subsidiaries together with the Group's share of the results and
net assets of associates based on financial statements drawn up to December 31.
The results of subsidiaries and associates acquired or disposed of during the
year are included from or to the relevant dates of acquisition or disposal.
GOODWILL
Goodwill arising on acquisitions occurring after January 1, 1998 is
capitalized and amortized on a systematic basis over its useful economic life.
Goodwill on acquisitions completed before January 1, 1998 has been eliminated
against retained earnings. On disposal of a business acquired before January 1,
1998, any goodwill which had been previously eliminated against retained
earnings is reinstated and charged to the income statement.
REVENUE RECOGNITION
The Group takes credit for commission (including fees in lieu) at the date
when the insured is debited or at the inception date of the policy, whichever is
the later. Commissions on return and additional premiums and adjustments are
brought into account as and when these occur; other fees and commissions are
accounted for on a receivable basis.
INSURANCE BROKING RECEIVABLES AND PAYABLES
Insurance brokers usually act as agents in placing the insurable risks of
their clients with insurers and, as such, generally are not liable as principals
for amounts arising from such transactions. Notwithstanding the legal
relationships with clients and insurers, insurance brokers are entitled to
retain investment income on any cashflows arising from insurance broking
transactions; accounting standards require receivables and payables arising from
such transactions to be shown as assets and liabilities.
Debit and credit balances arising from insurance broking transactions are
reported as separate assets or liabilities unless such balances are due to or
from the same party and the offset would survive the insolvency of that party,
in which case they are aggregated into a single net balance.
CURRENCY TRANSLATION
Transactions in foreign currencies are recorded at the rate of exchange at
the date of the transaction, or, in the case of forward contracts in respect of
the current year's income, at the contracted rate. Assets and liabilities in
foreign currencies are translated into sterling at the rates of exchange ruling
F-8
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--ACCOUNTING POLICIES (CONTINUED)
at the balance sheet date. Exchange differences arising on the translation of
the net assets of overseas subsidiaries and associates, and the exchange
differences arising on foreign currency borrowings taken out to provide a hedge
against the exchange risk associated with those investments, are taken to
retained earnings.
The results of overseas subsidiaries and associates are translated into
sterling at average rates of exchange and the difference between average rates
and year end rates is taken to retained earnings. Other exchange differences are
taken to income.
DEPRECIATION
Depreciation is calculated on a straight line basis at rates estimated to
write down the value of assets over their expected useful lives. Depreciation on
freehold buildings and long leaseholds is provided at 2% per annum. Other
leaseholds are written off over the remaining period of the lease. Depreciation
on fixed plant, furniture, equipment and vehicles is provided at rates between
4% and 33 1/3% per annum. No depreciation is provided on freehold land.
DEFERRED TAX
Provision for deferred tax is made using the liability method for all timing
differences to the extent that it is probable that a liability will crystallize.
No provision is made for tax that would be payable on the disposal of revalued
properties until it is decided in principle to dispose of the asset.
PENSIONS
The regular cost of providing benefits is charged to operating income over
the employees' service lives on the basis of a constant percentage of
pensionable earnings. Variations from regular cost, arising from periodic
actuarial valuations, are allocated to operating income on a systematic basis
over the expected remaining service lives of current employees.
NOTE 2--MAJOR ACQUISITIONS AND DISPOSALS
YEAR ENDED DECEMBER 31, 1996
There were no material acquisitions in 1996.
CONSUMER BENEFIT LIFE INSURANCE COMPANY ("CBL")
During 1996, the Group disposed of its interest in CBL, a wholly owned
subsidiary company. The net proceeds of disposal were L20.7 million and the net
assets disposed of were L19.4 million. There was no gain or loss on disposal
after charging positive goodwill of L1.3 million which had been previously
included within retained earnings.
W F CORROON
During 1996, the Group disposed of its interests in W F Corroon, its
wholly-owned employee benefit consulting operations. The net proceeds of
disposal were L16.1 million and the net assets disposed of were L8.1 million.
There was no gain or loss on disposal after charging positive goodwill of L8.0
million which had been previously included within retained earnings.
YEAR ENDED DECEMBER 31, 1997
There were no material acquisitions of subsidiaries in 1997.
F-9
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--MAJOR ACQUISITIONS AND DISPOSALS (CONTINUED)
WILLIS FABER & DUMAS (AGENCIES) LIMITED ("WF&D AGENCIES")
WF&D Agencies, a Lloyd's members' agent, was disposed of in October 1997.
GRAS SAVOYE & CIE ("GRAS SAVOYE")
On December 30, 1997, the Group acquired a 33% interest in Gras Savoye for a
cash consideration of L47.8 million, of which L15.2 million was paid in July
1998. Goodwill eliminated against retained earnings amounted to L46.0 million.
YEAR ENDED DECEMBER 31, 1998
GRUPPO ITAL BROKERS
The Group acquired a 50% interest in Gruppo Ital Brokers in July 1998 for a
consideration of L13.0 million. Following this acquisition, a merger was
effected with the Group's existing Italian associate to form Willis Corroon
Italia SpA.
S&C WILLIS CORROON CORREDURIA DE SEGUROS Y REASEGUROS SA ("S&C WILLIS CORROON")
The Group increased its investment from 48% to 60% in July 1998 and
reorganized its existing Spanish and Portuguese operations.
PROFESSIONAL LIABILITY UNDERWRITING MANAGEMENT ("PLUM")
The Group's professional liability wholesale operation in the United States
was closed in May 1998. The loss on closure amounted to L30.3 million including
attributable goodwill which had previously been eliminated against retained
earnings.
The effect of acquiring subsidiaries (including major acquisitions), all of
which were accounted for under the purchase method of accounting, was as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
(L MILLION)
NET ASSETS ACQUIRED
Tangible assets.................................................... -- 3.9 4.3
Fixed asset investments............................................ -- 0.3 0.6
Receivables........................................................ 0.1 21.0 33.3
Cash and investments............................................... -- 4.7 3.2
Payables........................................................... -- (19.3) (34.9)
Provisions for liabilities and charges............................. -- (3.9) --
Minority interest.................................................. -- (3.5) (2.7)
Goodwill........................................................... 1.1 20.8 19.7
Net assets previously reported as associates....................... -- (2.6) (2.0)
--- --------- ---------
1.2 21.4 21.5
--- --------- ---------
--- --------- ---------
COST OF ACQUISITIONS
Cash............................................................... 1.2 17.1 17.5
Deferred consideration............................................. -- 2.3 4.0
Shares issued...................................................... -- 2.0 --
--- --------- ---------
1.2 21.4 21.5
--- --------- ---------
--- --------- ---------
</TABLE>
F-10
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--MAJOR ACQUISITIONS AND DISPOSALS (CONTINUED)
Had the acquisitions been consummated at January 1, 1998 and at the
beginning of the preceeding financial year, the unaudited consolidated pro forma
results for those years would have been:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
(L MILLION, EXCEPT
PER SHARE AMOUNTS)
Total operating revenues.......................................... 724.4 735.5
Net income/(loss)................................................. 60.8 (39.1)
Net income/(loss) per ordinary share.............................. 13.6p (9.2)p
</TABLE>
The subsidiaries acquired during 1998 utilized L4.4 million of the Group's
net operating cash flow, paid Lnil in respect of net returns on investments and
servicing of finance, paid Lnil in respect of taxation and utilized L0.2 million
for capital expenditure.
The L18.2 million shown as "Purchase of subsidiaries" in the Consolidated
Statement of Cash Flows includes L0.7 million relating to deferred consideration
paid during 1998 in respect of acquisitions completed in 1997.
These acquisitions would have had no material impact on the results for
1996, 1997 and 1998 had they been consummated at the beginning both of the
respective years of acquisition and of the immediate preceding years.
The effect of the above, and other, disposals (including provisional
liquidation) was as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
DISCONTINUED
CONTINUING OPERATIONS OPERATIONS
------------------------------- ---------------
1996 1997 1998 1997
--------- --------- --------- ---------------
<S> <C> <C> <C> <C>
(L MILLION)
NET ASSETS DISPOSED OF
Tangible assets...................................... 0.9 0.6 0.6 --
Investments.......................................... 25.6 -- -- --
Receivables.......................................... 16.8 8.1 2.8 23.2
Current asset investments............................ -- -- -- 38.3
Deposits and cash.................................... 12.6 5.2 3.3 20.0
Payables............................................. (25.7) (11.0) (5.2) (9.9)
Insurance funds...................................... -- -- -- (73.0)
--------- --------- --------- -----
30.2 2.9 1.5 (1.4)
Minority interest.................................... -- -- (0.3) --
Goodwill written off................................. 13.7 2.5 30.1 4.1
Loss/gain on disposal................................ 2.5 2.2 (27.5) (2.7)
--------- --------- --------- -----
TOTAL PROCEEDS....................................... 46.4 7.6 3.8 --
--------- --------- --------- -----
--------- --------- --------- -----
SATISFIED BY
Cash................................................. 36.4 4.5 3.0 --
Deferred consideration............................... 10.0 3.1 0.8 --
--------- --------- --------- -----
46.4 7.6 3.8 --
--------- --------- --------- -----
--------- --------- --------- -----
</TABLE>
Continuing operations sold during 1997 comprised WF&D Agencies which was
sold on October 20, 1997 and Willis Corroon France SA on December 30, 1997. The
contribution to Group income up to their respective dates of disposal was L5.1
million and L(0.5) million.
F-11
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--MAJOR ACQUISITIONS AND DISPOSALS (CONTINUED)
Discontinued operations disposed of comprise the net assets of Sovereign
Marine & General Insurance Company Limited ("Sovereign") and its subsidiaries.
Sovereign was placed into provisional liquidation on July 11, 1997.
The operations disposed of during 1998 utilized L1.2 million (1997:
contribution L2.7 million) of the Group's net operating cash flow and paid Lnil
in respect of returns on investments and servicing of finance, paid Lnil million
(1997: L3.1 million) in respect of taxation and utilized Lnil million for
capital expenditure.
The L6.6 million shown as "Sale of subsidiaries" in the Consolidated
Statement of Cash Flows includes L3.6 million relating to deferred consideration
received during 1998 in respect of disposals completed in prior years.
NOTE 3--SEGMENTAL ANALYSIS
The Group's continuing operations comprise its insurance broking and risk
management consulting activities, which included employee benefits consulting
operations up to November 1996 and Lloyd's members' agency operations up to
October 1997, the respective dates of disposal. The Group's discontinued
operations comprise its UK underwriting activities, which ceased underwriting in
1991, and include Sovereign up to July 11, 1997, when it was placed into
provisional liquidation, and Willis Faber (Underwriting Management) Limited
("WFUM").
<TABLE>
<CAPTION>
CONTINUING DISCONTINUED
BUSINESS ANALYSIS OPERATIONS OPERATIONS TOTAL
- --------------------------------------------------------------------------- ----------- ----------------- ---------
<S> <C> <C> <C>
(L MILLION)
JANUARY 1 TO SEPTEMBER 1, 1998
COMMISSIONS AND FEES....................................................... 441.9 -- 441.9
Interest and investment income............................................. 26.9 -- 26.9
----------- --- ---------
TOTAL OPERATING REVENUES................................................... 468.8 -- 468.8
Operating expenses......................................................... (412.0) (6.7) (418.7)
Exceptional items.......................................................... (35.8) -- (35.8)
Utilization of provisions.................................................. -- 6.7 6.7
----------- --- ---------
OPERATING INCOME........................................................... 21.0 -- 21.0
----------- --- ---------
----------- --- ---------
SEPTEMBER 2 TO DECEMBER 31, 1998
COMMISSIONS AND FEES....................................................... 235.8 0.2 236.0
Interest and investment income............................................. 13.4 -- 13.4
----------- --- ---------
TOTAL OPERATING REVENUES................................................... 249.2 0.2 249.4
Operating expenses......................................................... (223.2) -- (223.2)
Exceptional items.......................................................... (5.0) -- (5.0)
Utilization of provisions.................................................. -- (0.2) (0.2)
----------- --- ---------
OPERATING INCOME........................................................... 21.0 -- 21.0
----------- --- ---------
----------- --- ---------
</TABLE>
F-12
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--SEGMENTAL ANALYSIS (CONTINUED)
<TABLE>
<CAPTION>
CONTINUING DISCONTINUED
BUSINESS ANALYSIS OPERATIONS OPERATIONS TOTAL
- --------------------------------------------------------------------------- ----------- ----------------- ---------
(L MILLION)
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
COMMISSIONS AND FEES....................................................... 652.0 0.3 652.3
Interest and investment income............................................. 40.0 1.7 41.7
----------- --- ---------
TOTAL OPERATING REVENUES................................................... 692.0 2.0 694.0
Operating expenses......................................................... (599.9) (3.8) (603.7)
Underwriting claims........................................................ -- (1.0) (1.0)
Utilization of provisions.................................................. -- 2.8 2.8
----------- --- ---------
OPERATING INCOME........................................................... 92.1 -- 92.1
----------- --- ---------
----------- --- ---------
YEAR ENDED DECEMBER 31, 1996
COMMISSIONS AND FEES 683.2 2.3 685.5
Interest and investment income............................................. 41.8 3.4 45.2
----------- --- ---------
TOTAL OPERATING REVENUES................................................... 725.0 5.7 730.7
Operating expenses......................................................... (637.2) (3.4) (640.6)
Underwriting claims........................................................ -- (4.1) (4.1)
Utilization of provisions.................................................. -- 1.8 1.8
----------- --- ---------
OPERATING INCOME........................................................... 87.8 -- 87.8
----------- --- ---------
----------- --- ---------
</TABLE>
<TABLE>
<CAPTION>
CONTINUING OPERATIONS
------------------------------------------------------------
YEAR ENDED JANUARY 1 TO SEPTEMBER 2 TO
DECEMBER 31, SEPTEMBER 1 DECEMBER 31,
------------------------ --------------- -----------------
GEOGRAPHICAL ANALYSIS BY LOCATION OF CLIENT 1996 1997 1998 1998
- --------------------------------------------------------- ----------- ----------- --------------- -----------------
<S> <C> <C> <C> <C>
(L MILLION)
COMMISSIONS AND FEES
United Kingdom........................................... 175.0 164.7 110.2 54.9
North America............................................ 361.1 355.8 242.5 125.5
Rest of the World........................................ 147.1 131.5 89.2 55.4
----- ----- ----- -----
683.2 652.0 441.9 235.8
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
The above table analyzes commissions and fees by the address of the client
from whom the business is derived. This does not necessarily reflect the
original source or location of the business.
F-13
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--SEGMENTAL ANALYSIS (CONTINUED)
<TABLE>
<CAPTION>
CONTINUING OPERATIONS
----------------------------------------------------
YEAR ENDED JANUARY 1 TO SEPTEMBER 2 TO
DECEMBER 31, SEPTEMBER 1 DECEMBER 31,
-------------------- ------------- ---------------
GEOGRAPHICAL ANALYSIS BY LOCATION OF COMPANY 1996 1997 1998 1998
- ----------------------------------------------------------- --------- --------- ------------- ---------------
<S> <C> <C> <C> <C>
(L MILLION)
COMMISSIONS AND FEES
United Kingdom............................................. 287.8 276.6 190.9 87.6
North America.............................................. 357.7 325.2 223.6 115.9
Rest of the World.......................................... 37.7 50.2 27.4 32.3
--------- --------- ------------- -------
683.2 652.0 441.9 235.8
--------- --------- ------------- -------
TOTAL OPERATING REVENUES
United Kingdom............................................. 314.9 303.6 209.0 96.2
North America.............................................. 370.2 336.1 231.5 119.8
Rest of the World.......................................... 39.9 52.3 28.3 33.2
--------- --------- ------------- -------
725.0 692.0 468.8 249.2
--------- --------- ------------- -------
OPERATING INCOME
United Kingdom............................................. 49.6 56.5 (4.5) 8.6
North America.............................................. 33.4 27.7 22.1 3.6
Rest of the World.......................................... 4.8 7.9 3.4 8.8
--------- --------- ------------- -------
87.8 92.1 21.0 21.0
--------- --------- ------------- -------
DEPRECIATION AND AMORTIZATION.............................. 24.5 22.7 15.5 8.9
--------- --------- ------------- -------
CAPITAL EXPENDITURE........................................ 28.9 26.5 20.1 9.8
--------- --------- ------------- -------
--------- --------- ------------- -------
</TABLE>
Commissions and fees earned by the Group's discontinued operations arose in the
United Kingdom.
<TABLE>
<CAPTION>
CONTINUING OPERATIONS
DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
(L MILLION)
NET ASSETS
United Kingdom................................................................... 114.0 93.7 0.5
North America.................................................................... 65.3 74.5 84.8
Rest of the World................................................................ 18.9 6.1 40.2
--------- --------- ---------
198.2 174.3 125.5
--------- --------- ---------
TOTAL ASSETS
United Kingdom................................................................... 2,006.4 1,958.0 2,581.7
North America.................................................................... 1,199.6 1,256.6 1,843.3
Rest of the World................................................................ 80.8 83.7 167.9
--------- --------- ---------
3,286.8 3,298.3 4,592.9
--------- --------- ---------
--------- --------- ---------
</TABLE>
Discontinued Operations: Net assets and total assets located in the United
Kingdom at December 31, 1998 amounted to L(28.4) million (1997: L(44.5) million,
1996: L(52.8) million) and L(3.9) million (1997: L6.0 million, 1996: 73.3
million), respectively and in North America at December 31, 1996 amounted to
L8.0 million and L17.1 million, respectively.
F-14
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--EXCEPTIONAL ITEMS
(I) PENSIONS REVIEW
In March 1998, the Financial Services Authority and the Personal Investment
Authority issued a consultation paper on proposals for phase 2 of the pension
transfers and opt outs review. The Group has approximately 8,000 transfer cases
to review and a small number of opt out cases. On the basis of both the Group's
experience of settling phase 1 priority cases and the assumptions set out in the
consultation paper, the Directors consider that, although there is still
uncertainty as to the eventual outcome, a further provision of L25.0 million is
a reasonable estimate to meet the costs of redress and related administration
for both phase 1 and phase 2.
(II) COSTS IN CONNECTION WITH THE OFFER BY TRINITY ACQUISITION
Costs written off by the Group in connection with the acquisition by Trinity
Acquisition of the whole of
the issued share capital of the Company amounted to L15.8 million.
(III) LOSS ON CLOSURE/DISPOSAL OF OPERATIONS
The Group's U.S. professional liability wholesale operation, ("PLUM"), was
closed in May 1998. The loss on closure amounted to L0.7 million before writing
off attributable goodwill. In accordance with FRS 10, goodwill attributable to
PLUM of L29.6 million, which had been previously eliminated directly against
retained earnings, has been reinstated and written off as a component of the
loss on closure. This accounting requirement does not affect the Group's net
assets; the net impact after tax of the closure of PLUM was to reduce net assets
by L0.4 million. The profit on disposal of other operations during 1998 amounted
to L1.0 million.
NOTE 5--OPERATING INCOME
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1 TO SEPTEMBER 2 TO
DECEMBER 31, SEPTEMBER 1, DECEMBER 31,
-------------------- ----------------- -----------------
1996 1997 1998 1998
--------- --------- ----------------- -----------------
<S> <C> <C> <C> <C>
(L MILLION)
OPERATING INCOME WAS ARRIVED AT AFTER (CREDITING)/ CHARGING:
Interest receivable........................................... (35.8) (30.0) (18.4) (8.7)
Investment income............................................. (9.4) (11.7) (8.5) (4.7)
--------- --------- ----- -----
INTEREST AND INVESTMENT INCOME................................ (45.2) (41.7) (26.9) (13.4)
--------- --------- ----- -----
AUDITORS' REMUNERATION
Audit fees.................................................. 1.1 1.1 0.7 0.4
Other services provided by Ernst & Young
(United Kingdom only)..................................... 0.1 0.4 0.2 0.2
DEPRECIATION AND AMORTIZATION ON
Owned assets................................................ 23.8 22.2 15.4 8.9
Finance leased assets....................................... 0.7 0.5 0.1 --
OPERATING LEASE RENTALS
Land and buildings.......................................... 34.1 28.1 19.2 9.3
Equipment................................................... 3.5 2.7 1.9 1.1
--------- --------- ----- -----
--------- --------- ----- -----
</TABLE>
F-15
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--EMPLOYEES
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1 TO SEPTEMBER 2 TO
DECEMBER 31, SEPTEMBER 1, DECEMBER 31,
-------------------- --------------- -----------------
SALARIES AND ASSOCIATED EXPENSES 1996 1997 1998 1998
- -------------------------------------------------------------- --------- --------- --------------- -----------------
<S> <C> <C> <C> <C>
(L MILLION)
Salaries...................................................... 360.9 345.7 240.4 131.5
Social security costs......................................... 24.6 23.7 16.7 7.7
Other pension costs........................................... 20.7 20.2 14.2 6.2
--------- --------- ----- -----
406.2 389.6 271.3 145.4
--------- --------- ----- -----
--------- --------- ----- -----
</TABLE>
<TABLE>
<CAPTION>
AVERAGE FOR
--------------------------------------------------------
YEAR ENDED JANUARY 1 TO SEPTEMBER 2 TO
DECEMBER 31, SEPTEMBER 1, DECEMBER 31,
-------------------- --------------- -----------------
NUMBER OF GROUP EMPLOYEES 1996 1997 1998 1998
- -------------------------------------------------------------- --------- --------- --------------- -----------------
<S> <C> <C> <C> <C>
(NUMBER)
United Kingdom................................................ 4,444 3,938 3,910 3,777
North America................................................. 4,899 4,531 4,363 4,348
Rest of the World............................................. 621 893 942 1,179
--------- --------- ----- -----
9,964 9,362 9,215 9,304
--------- --------- ----- -----
--------- --------- ----- -----
</TABLE>
NOTE 7--NET INTEREST EXPENSE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, JANUARY 1 TO SEPTEMBER 2 TO
SEPTEMBER 1, DECEMBER 31,
------------------------ ----------------- -------------------
1996 1997 1998 1998
----- ----- ----------------- -------------------
<S> <C> <C> <C> <C>
(L MILLION)
Bank loans, overdrafts.......................................... 2.0 0.6 1.8 1.1
Interest payable by associates.................................. -- -- 0.1 0.1
Finance charges payable under finance leases.................... 0.2 0.1 0.1 0.0
-- -- -- --
2.2 0.7 2.0 1.2
-- -- -- --
-- -- -- --
</TABLE>
NOTE 8--INCOME BEFORE TAXATION
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1 TO SEPTEMBER 2 TO
DECEMBER 31, SEPTEMBER 1, DECEMBER 31,
-------------------- --------------- -----------------
1996 1997 1998 1998
--------- --------- --------------- -----------------
<S> <C> <C> <C> <C>
(L MILLION)
United Kingdom................................................... 52.5 53.7 (4.9) 6.4
Other countries.................................................. 39.1 41.8 3.6 10.7
--- --- --- ---
91.6 95.5 (1.3) 17.1
--- --- --- ---
--- --- --- ---
</TABLE>
F-16
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 9--TAXATION
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1 TO SEPTEMBER 2 TO
DECEMBER 31, SEPTEMBER 1, DECEMBER 31,
-------------------- --------------- -----------------
CHARGE FOR THE YEAR 1996 1997 1998 1998
- ---------------------------------------------------------------- --------- --------- --------------- -----------------
<S> <C> <C> <C> <C>
(L MILLION)
UK corporation tax at 31% (1997: 31.5% 1996: 33%)............... 20.9 16.2 11.9 (0.4)
Non-UK tax...................................................... 14.6 11.1 4.9 6.1
Deferred tax.................................................... 0.5 10.5 (3.4) 23.9
Advance corporation tax written off............................. -- -- -- 9.7
--- --- --- ---
36.0 37.8 13.4 39.3
Associates...................................................... 0.6 0.3 0.1 1.6
--- --- --- ---
Charge for the year............................................. 36.6 38.1 13.5 40.9
--- --- --- ---
--- --- --- ---
</TABLE>
The deferred tax charge for 1998 includes the write-off of U.K. deferred tax
assets amounting to L23.4 million. The timing of the recovery of these assets is
uncertain.
The deferred tax charge for 1997 included L1.1 million resulting from the
reduction in U.K. corporation tax rate from 33% to 31% and L2.7 million in
respect of discontinued operations which was no longer considered recoverable
following the provisional liquidation of Sovereign.
The total tax charge for 1998 includes a tax credit of L3.8 million relating
to exceptional items.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1 TO SEPTEMBER 2 TO
DECEMBER 31, SEPTEMBER 1, DECEMBER 31,
------------------------ ------------- -----------------
RECONCILIATION OF UK STATUTORY RATE TO EFFECTIVE RATE 1996 1997 1998 1998
- -------------------------------------------------------------- ----------- ----------- ------------- -----------------
<S> <C> <C> <C> <C>
% % % %
UK statutory rate............................................. 33.0 31.0 31.0 31.0
Adjusted for:
Rate change during the course of the year................... -- 0.5 -- --
Overseas profits taxed at other than UK statutory rate...... (0.7) 0.5 (47.2) 18.8
Capital gains not currently taxable or reduced by other
reliefs................................................... (2.0) (0.8) 50.1 (0.6)
Permanent differences and other items....................... 8.3 8.5 (111.6) 2.1
Prior year adjustments...................................... 1.3 0.2 -- (5.7)
Disallowable costs incurred by the company on the
acquisition............................................... -- -- (257.5) --
Disallowable consolidated goodwill eliminated on disposal... -- -- (703.5) --
--- --- ------------- ---
Effective rate................................................ 39.9 39.9 (1,038.7) 45.6
--- --- ------------- ---
--- --- ------------- ---
</TABLE>
The effective rate excludes the write-off of advance corporation tax and
deferred taxes.
F-17
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--DIVIDENDS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER JANUARY 1 TO SEPTEMBER 2 TO
31, SEPTEMBER 1, DECEMBER 31,
-------------------- --------------- -----------------
1996 1997 1998 1998
--------- --------- --------------- -----------------
<S> <C> <C> <C> <C>
(L MILLION)
First interim................................................... 6.9 6.9 7.4 --
Second interim.................................................. 6.9 6.9 7.4 --
Third interim................................................... 6.9 6.9 7.4 --
Fourth interim.................................................. 6.9 6.9 -- --
--- --- --- ---
27.6 27.6 22.2 --
--- --- --- ---
--- --- --- ---
</TABLE>
NOTE 11--EARNINGS PER ORDINARY SHARE
Earnings per ordinary share have been calculated using net income and the
weighted average number of ordinary shares in issue during the periods January 1
to September 1, 1998 and September 2 to December 31, 1998 respectively of 424.6
million and 427.1 million respectively (1997: 418.4 million, 1996: 418.1
million) after excluding those ordinary shares on which dividends were waived.
The dilution arising from the issue of ordinary shares in accordance with
the Group's employee share plans and Willis Corroon Corporation's 7 1/2%
convertible subordinated debentures would not have been material.
NOTE 12--CURRENT ASSET INVESTMENTS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
(L MILLION)
Listed investments (market value L49.8 million (1997 : L55.9 million)).......................... 55.6 48.7
Unlisted investments............................................................................ 202.1 232.9
--------- ---------
257.7 281.6
--------- ---------
--------- ---------
</TABLE>
Listed investments mainly comprise U.K. and U.S. government securities which
were purchased with the intention of holding to maturity.
F-18
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 13--RECEIVABLES
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
(L MILLION)
DUE WITHIN ONE YEAR
Trade receivables......................................................................... 2,425.6 2,447.6
Less: provision for bad and doubtful debts................................................ 11.6 11.8
--------- ---------
2,414.0 2,435.8
Amounts owed by parent company............................................................ -- 965.1
Amounts owed by associates................................................................ 0.2 0.8
Corporate tax............................................................................. 2.8 2.0
Prepayments and accrued revenue........................................................... 26.0 54.1
Other receivables......................................................................... 38.8 35.0
--------- ---------
2,481.8 3,492.8
DUE AFTER MORE THAN ONE YEAR
Trade receivables......................................................................... 4.0 6.2
Amounts owed by parent company............................................................ -- 270.3
Deferred tax (see Note 22)................................................................ 14.4 --
Advance corporation tax recoverable....................................................... 7.4 --
Other receivables......................................................................... 25.6 25.3
--------- ---------
2,533.2 3,794.6
--------- ---------
--------- ---------
</TABLE>
The level of insurance brokering receivables is no indication of credit
risk, since the status of the insurance broker as agent means that generally the
credit risk is borne by the principals; nor is it an indication of future cash
flows as it is normal practice for insurance brokers to settle accounts with
clients, insurers, other intermediaries and market settlement bureaux on a net
basis. The simultaneous recording of an insurance brokering transaction between
client and insurer results in a high level of correlation between insurance
brokering receivables and payables.
NOTE 14--INTANGIBLE ASSETS
Goodwill arising on acquisition of subsidiaries during the year amounted to
L20 million. Amortization of goodwill amounted to L0.3 million.
F-19
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 15--TANGIBLE ASSETS
<TABLE>
<CAPTION>
FURNITURE
LAND AND EQUIPMENT
BUILDINGS AND VEHICLES TOTAL
----------- ------------- ---------
<S> <C> <C> <C>
(L MILLION)
YEAR ENDED DECEMBER 31, 1996
COST OR VALUATION
January 1, 1996............................................................... 88.3 148.0 236.3
Exchange adjustments.......................................................... (0.5) (5.6) (6.1)
Additions..................................................................... 2.7 26.2 28.9
Disposals..................................................................... (4.8) (25.9) (30.7)
----- ----- ---------
December 31, 1996............................................................. 85.7 142.7 228.4
----- ----- ---------
DEPRECIATION
January 1, 1996............................................................... (5.2) (87.3) (92.5)
Exchange adjustments.......................................................... 0.1 3.2 3.3
Provided in the year.......................................................... (4.4) (20.1) (24.5)
Disposals..................................................................... 2.0 15.4 17.4
----- ----- ---------
December 31, 1996............................................................. (7.5) (88.8) (96.3)
----- ----- ---------
NET BOOK VALUE
December 31, 1996............................................................. 78.2 53.9 132.1
----- ----- ---------
----- ----- ---------
YEAR ENDED DECEMBER 31, 1997
COST OR VALUATION
January 1, 1997............................................................... 85.7 142.7 228.4
Exchange adjustments.......................................................... (0.5) 0.8 0.3
Additions..................................................................... 7.3 19.2 26.5
Disposals..................................................................... (1.5) (30.4) (31.9)
Arising from acquisitions..................................................... 0.7 9.1 9.8
----- ----- ---------
December 31, 1997............................................................. 91.7 141.4 233.1
----- ----- ---------
DEPRECIATION
January 1, 1997............................................................... (7.5) (88.8) (96.3)
Exchange adjustments.......................................................... 0.4 (0.4) 0.0
Provided in the year.......................................................... (4.3) (18.4) (22.7)
Disposals..................................................................... 0.9 25.7 26.6
Arising from acquisitions..................................................... (0.5) (5.4) (5.9)
----- ----- ---------
December 31, 1997............................................................. (11.0) (87.3) (98.3)
----- ----- ---------
NET BOOK VALUE
December 31, 1997............................................................. 80.7 54.1 134.8
----- ----- ---------
----- ----- ---------
</TABLE>
F-20
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 15--TANGIBLE ASSETS (CONTINUED)
<TABLE>
<CAPTION>
FURNITURE
LAND AND EQUIPMENT
BUILDINGS AND VEHICLES TOTAL
----------- ------------- ---------
<S> <C> <C> <C>
(L MILLION)
JANUARY 1 TO DECEMBER 31, 1998
COST OR VALUATION
January 1, 1998............................................................... 91.7 141.4 233.1
Exchange adjustments.......................................................... (0.3) (1.7) (2.0)
Additions..................................................................... 3.4 16.7 20.1
Disposals..................................................................... (1.8) (10.6) (12.4)
Arising from acquisitions..................................................... 1.3 4.7 6.0
----- ----- ---------
September 1, 1998............................................................. 94.3 150.5 244.8
Exchange and other adjustments................................................ 0.1 1.7 1.8
Additions..................................................................... 3.5 6.3 9.8
Disposals..................................................................... (1.8) (7.9) (9.7)
Arising from acquisitions..................................................... 0.0 0.1 0.1
----- ----- ---------
December 31, 1998............................................................. 96.1 150.7 246.8
DEPRECIATION
January 1, 1998............................................................... (11.0) (87.3) (98.3)
Exchange adjustments.......................................................... 0.1 0.9 1.0
Provided in the period........................................................ (3.0) (12.0) (15.0)
Disposals..................................................................... 1.5 8.1 9.6
Arising from acquisitions..................................................... -- (1.7) (1.7)
----- ----- ---------
September 1, 1998............................................................. (12.4) (92.0) (104.4)
Exchange adjustments.......................................................... (0.1) (0.8) (0.9)
Provided in the period........................................................ (1.7) (6.7) (8.4)
Disposals..................................................................... 1.5 7.0 8.5
----- ----- ---------
December 31, 1998............................................................. (12.7) (92.5) (105.2)
----- ----- ---------
NET BOOK VALUE
December 31, 1998............................................................. 83.4 58.2 141.6
----- ----- ---------
----- ----- ---------
</TABLE>
F-21
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 15--TANGIBLE ASSETS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
NET BOOK VALUE OF LAND AND BUILDINGS 1996 1997 1998
- ------------------------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
(L MILLION)
Freehold: Land............................................................................. 17.4 17.3 18.4
Buildings......................................................................... 50.2 49.3 49.6
Leasehold: Long............................................................................ 0.4 0.2 0.1
Short........................................................................... 10.2 13.9 15.3
--- --- ---
78.2 80.7 83.4
--- --- ---
--- --- ---
</TABLE>
The Group's principal freehold properties were valued at December 31, 1995
on the basis of open market value for existing use. The carrying value of these
revalued properties, at December 31, 1998, was L60.5 million (1997: L60.5
million, 1996: L60.5 million), and the accumulated depreciation was L6.1 million
(1997: L4.0 million, 1996: L2.0). The historical cost was L61.6 million (1997:
L61.6 million, 1996: L61.6 million) and the accumulated depreciation was L21.0
million (1997: L18.6 million, 1996: L16.3 million).
No tax would be payable on the realization of revalued properties at their
net book value by virtue of available capital losses.
The net book value of assets held under finance leases included within
furniture, equipment and vehicles was Lnil (1997: L0.7 million, 1996: L1.6
million).
NOTE 16--INVESTMENTS
<TABLE>
<CAPTION>
OWN OTHER
ASSOCIATES SHARES INVESTMENTS TOTAL
------------- ------------- --------------- ---------
<S> <C> <C> <C> <C>
(L MILLION)
YEAR ENDED DECEMBER 31, 1996
COST
January 1, 1996................................................. 6.0 10.7 1.5 18.2
Exchange adjustments............................................ (0.9) (0.7) (0.1) (1.7)
Additions....................................................... -- 0.3 0.9 1.2
Disposals....................................................... -- (1.4) -- (1.4)
Share of retained earnings of associates........................ 1.1 -- -- 1.1
----- ----- --- ---------
December 31, 1996............................................... 6.2 8.9 2.3 17.4
----- ----- --- ---------
PROVISIONS
January 1, 1996................................................. -- (4.2) -- (4.2)
Exchange adjustments............................................ -- 0.3 -- 0.3
Provided in the year............................................ -- -- (0.5) (0.5)
Amortization.................................................... -- (1.8) -- (1.8)
Disposals....................................................... -- 1.4 -- 1.4
----- ----- --- ---------
December 31, 1996............................................... -- (4.3) (0.5) (4.8)
----- ----- --- ---------
NET BOOK VALUE
December 31, 1996............................................... 6.2 4.6 1.8 12.6
----- ----- --- ---------
----- ----- --- ---------
</TABLE>
F-22
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 16--INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
OWN OTHER
ASSOCIATES SHARES INVESTMENTS TOTAL
------------- ------------- --------------- ---------
(L MILLION)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
COST
January 1, 1997................................................. 6.2 8.9 2.3 17.4
Exchange adjustments............................................ (0.4) 0.2 -- (0.2)
Additions....................................................... 3.5 4.9 1.4 9.8
Net assets reclassified on becoming a subsidiary................ (2.6) -- -- (2.6)
Investment reclassified on becoming an associate................ 2.6 -- (2.6) --
Disposals....................................................... -- (0.6) -- (0.6)
Share of retained earnings of associates........................ 0.5 -- -- 0.5
----- ----- --- ---------
December 31, 1997............................................... 9.8 13.4 1.1 24.3
----- ----- --- ---------
PROVISIONS
January 1, 1997................................................. -- (4.3) (0.5) (4.8)
Exchange adjustments............................................ -- (0.1) -- (0.1)
Amortization.................................................... -- (1.3) -- (1.3)
Disposals....................................................... -- 0.6 -- 0.6
Other adjustments............................................... -- -- 0.5 0.5
----- ----- --- ---------
December 31, 1997............................................... -- (5.1) -- (5.1)
----- ----- --- ---------
NET BOOK VALUE
December 31, 1997............................................... 9.8 8.3 1.1 19.2
----- ----- --- ---------
----- ----- --- ---------
</TABLE>
F-23
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 16--INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
OWN OTHER
ASSOCIATES SHARES TA I INVESTMENTS TOTAL
---------- ------ ---- ----------- -----
<S> <C> <C> <C> <C> <C>
(L MILLION)
JANUARY 1 TO DECEMBER 31, 1998
COST
January 1, 1998............................................................ 9.8 13.4 -- 1.1 24.3
Exchange adjustments....................................................... (1.8) (0.2) -- (0.2) (2.2)
Additions.................................................................. 14.7 0.2 -- 2.2 17.1
Transfer to subsidiary..................................................... (2.0) -- -- -- (2.0)
Disposals.................................................................. -- (4.0) -- -- (4.0)
Share of retained earnings of associates................................... 5.6 -- -- -- 5.6
--- ------ ---- --- -----
September 1, 1998.......................................................... 26.3 9.4 -- 3.1 38.8
Exchange adjustments....................................................... 0.5 0.1 -- 0.2 0.8
Additions.................................................................. 5.9 -- 3.6 -- 9.5
Disposals.................................................................. -- (1.3) -- -- (1.3)
Shares exchanged for cash.................................................. -- (8.2) -- -- (8.2)
Share of retained earnings of associates................................... (3.7) -- -- -- (3.7)
--- ------ ---- --- -----
December 31, 1998.......................................................... 29.0 -- 3.6 3.3 35.9
--- ------ ---- --- -----
PROVISIONS
January 1, 1998............................................................ -- (5.1) -- -- (5.1)
Amortization............................................................... (0.4) (1.0) -- -- (1.4)
Disposals.................................................................. -- 4.0 -- -- 4.0
--- ------ ---- --- -----
September 1, 1998.......................................................... (0.4) (2.1) -- -- (2.5)
Amortization............................................................... (0.3) (0.9) -- -- (1.2)
Disposals.................................................................. -- 1.3 -- -- 1.3
Other adjustments.......................................................... -- 1.7 (0.8) -- 0.9
--- ------ ---- --- -----
December 31, 1998.......................................................... (0.7) -- (0.8) -- (1.5)
--- ------ ---- --- -----
NET BOOK VALUE
December 31, 1998.......................................................... 28.3 -- 2.8 3.3 34.4
--- ------ ---- --- -----
--- ------ ---- --- -----
</TABLE>
At December 31, 1998, the Group's employee share ownership plans held
1,815,593 management ordinary shares in TA I Limited. These shares are not
listed on any stock exchange.
F-24
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 17--OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
(L MILLION)
<S> <C> <C>
Amounts owed to parent company.................................................................. -- 714.1
Amounts owed to associates...................................................................... 0.4 --
Income tax and social security.................................................................. 2.4 2.6
Finance lease obligations....................................................................... 0.6 --
Other payables.................................................................................. 86.5 100.7
--- ---------
89.9 817.4
--- ---------
--- ---------
</TABLE>
Included within amounts owed to parent company, is an interest free convertible
loan of L92.9 million. This was converted into 46,464,949 ordinary shares in the
Company on February 3, 1999.
NOTE 18--BANK LOANS AND OVERDRAFTS
Bank loans and overdrafts due in less than one year includes a loan of $575
million (L348.5 million) under a fully drawn Subordinated Bridge Facility. This
short-term loan was repaid on February 2, 1999 and refinanced by the issue of
$550 million of unsecured Senior Subordinated Notes which mature in 2009 and
accrue interest at a rate of 9%.
The weighted average interest rate payable on short-term bank loans and
overdrafts outstanding at December 31, 1998, amounting to L350.3 million (1997:
L0.5 million) was 9.9% (1997: 4.9%).
Included within bank loans and overdrafts are L4.4 million of debt issuance
costs which were refunded after December 31, 1998.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
BANK LOANS REPAYABLE IN MORE THAN ONE YEAR 1997 1998
- ------------------------------------------------------------------------------------------------ ----------- ---------
<S> <C> <C>
(L MILLION)
between one and two years....................................................................... -- 2.4
between two and three years..................................................................... 12.0 5.4
between three and four years.................................................................... -- 6.7
between four and five years..................................................................... 22.0 8.5
thereafter...................................................................................... -- 253.4
--- ---------
34.0 276.4
--- ---------
--- ---------
</TABLE>
The Group entered into a Senior Credit Facility agreement comprising Term Loans
of $450 million and a Revolving Credit Facility of $150 million. See Note 27.
The Term Loans were fully drawn down on November 19, 1998 and are arranged in
four tranches that are repayable between 2005 and 2008. The loans accrue
interest at LIBOR plus a variable margin. With effect from February 19, 1999 the
Group entered into a swap transaction to exchange the applicable LIBOR rate for
a fixed rate. At that date the weighted average interest rate was 7.7%.
The Revolving Credit Facility is available until 2005. At December 31, 1998, the
balance drawn on this facility was L6.1 million ($10.0 million) with interest
accruing at 7.8%.
F-25
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 19--OTHER NONCURRENT LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1998
----------- ---------
<S> <C> <C>
(L MILLION)
Trade payables................................................................................... 3.1 4.3
Accruals and deferred income..................................................................... 0.4 0.7
US dollar 7.5% convertible subordinated debentures............................................... 0.2 --
--- ---
3.7 5.0
--- ---
--- ---
</TABLE>
The US dollar 7.5% convertible subordinated debentures due in June 2005 were
repaid in the year.
NOTE 20--OPERATING LEASE COMMITMENTS
<TABLE>
<CAPTION>
LAND AND BUILDINGS
OTHER
-------------------- --------------------
DECEMBER 31,
------------------------------------------
1997 1998 1997 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
(L MILLION)
Payments committed to be made within one year for leases expiring:
in less than one year.......................................................... 2.2 2.5 0.2 0.6
between one and five years..................................................... 6.3 8.7 1.5 1.3
after five years............................................................... 15.4 13.1 -- --
--------- --------- --------- ---------
23.9 24.3 1.7 1.9
--------- --------- --------- ---------
Payments committed to be made after one year:
within two years............................................................... 22.8 22.4 1.3 1.2
between two and three years.................................................... 21.2 21.5 0.6 0.8
between three and four years................................................... 20.1 20.7 0.3 0.2
between four and five years.................................................... 18.7 16.9 0.1 0.1
thereafter..................................................................... 116.5 109.0 -- --
--------- --------- --------- ---------
199.3 190.5 2.3 2.3
--------- --------- --------- ---------
223.2 214.8 4.0 4.2
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
F-26
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 21--PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
SURPLUS DISCONTINUED
CLAIMS PROPERTY OPERATIONS OTHER DEFERRED
PROVISIONS PROVISIONS(I) PROVISIONS(II) PROVISIONS(III) PROVISIONS TAX TOTAL
- ----------------------------------- --------------- --------------- --------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
(L MILLION)
JANUARY 1, 1996.................... 35.6 32.1 40.5 6.2 -- 114.4
Charged to income.................. 2.9 3.9 -- (2.2) -- 4.6
Utilized in the year............... (5.8) (4.2) (1.8) (0.8) -- (12.6)
Exchange and other adjustments..... (3.2) (7.0) -- (0.3) -- (10.5)
----- ----- ----- --- ----- ---------
DECEMBER 31, 1996.................. 29.5 24.8 38.7 2.9 -- 95.9
Charged to income.................. 2.3 (1.6) (3.1) -- -- (2.4)
Utilized in the year............... (5.0) (3.0) (2.8) (0.1) -- (10.9)
Arising on acquisition............. 3.9 -- -- -- -- (3.9)
Exchange and other adjustments..... 3.4 -- -- 0.1 -- 3.5
----- ----- ----- --- ----- ---------
DECEMBER 31, 1997.................. 34.1 20.2 32.8 2.9 -- 90.0
Charged to income.................. 34.5 -- -- -- (3.4) 31.1
Transferred to payables............ -- -- (5.5) -- -- (5.5)
Transferred from receivables....... -- -- -- -- (14.4) (14.4)
Utilized in the period............. (10.9) (1.9) (6.7) -- -- (19.5)
Exchange and other adjustments..... (0.4) -- -- -- -- (0.4)
----- ----- ----- --- ----- ---------
SEPTEMBER 1, 1998.................. 57.3 18.3 20.6 2.9 (17.8) 81.3
Charged to income.................. (2.8) (0.3) -- -- 23.9 20.8
Utilized in the period............. (6.9) (1.1) 0.2 -- -- (7.8)
Exchange and other adjustments..... 0.6 -- -- -- (0.1) 0.5
----- ----- ----- --- ----- ---------
DECEMBER 31, 1998.................. 48.2 16.9 20.8 2.9 6.0 94.8
----- ----- ----- --- ----- ---------
----- ----- ----- --- ----- ---------
</TABLE>
- ------------------------
(i) The claims provisions include estimates for liabilities that may arise from
potential claims for errors and omissions, including pension advice, which
may not be covered by insurance arrangements.
(ii) Provisions for properties surplus to operational requirements.
(iii) Provisions for discontinued operations include estimates for future
operating costs of administering the run-off of the business previously
placed with Sovereign and certain other insurance companies.
F-27
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 22--DEFERRED TAX
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
(L MILLION)
OPENING BALANCE................................................................................. (27.1) (14.4)
Transfer to/(from) income....................................................................... 10.5 20.5
Other adjustments............................................................................... 2.2 (0.1)
--------- ---------
CLOSING BALANCE................................................................................. (14.4)* 6.0
--------- ---------
--------- ---------
The deferred tax (assets)/liabilities arise from:
Capital allowances.............................................................................. 14.4 11.5
Short-term timing differences................................................................... (5.5) (5.1)
Provisions...................................................................................... (23.3) (0.4)
--------- ---------
(14.4) 6.0
--------- ---------
--------- ---------
</TABLE>
- ------------------------
* Included in receivables (Note 13)
NOTE 23--NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
RECONCILIATION OF OPERATING ACTIVITIES TO NET CASH FLOW YEAR ENDED JANUARY 1 TO SEPTEMBER 2 TO
FROM OPERATING ACTIVITIES DECEMBER 31, SEPTEMBER 1, DECEMBER 31,
- ----------------------------------------------------------- -------------------- --------------- ---------------
<S> <C> <C> <C> <C>
1996 1997 1998 1998
--------- --------- --------------- ---------------
<CAPTION>
(L MILLION)
<S> <C> <C> <C> <C>
Operating income from total operations..................... 87.8 92.1 21.0 21.0
Exceptional items.......................................... -- -- (0.4) (4.0)
Depreciation charges and loss on sale of tangible fixed
assets................................................... 24.7 22.7 15.0 8.7
Amortization of goodwill................................... -- -- 0.5 0.5
Decrease/(increase) in receivables......................... 82.2 34.4 2.0 (24.5)
(Decrease)/increase in payables............................ (106.0) (26.5) 78.4 (93.3)
Net movement on provisions and insurance funds............. (25.0) (9.3) 11.0 (6.1)
--------- --------- ----- ------
NET CASH INFLOW FROM OPERATING ACTIVITIES.................. 63.7 113.4 127.5 (97.7)
--------- --------- ----- ------
--------- --------- ----- ------
</TABLE>
F-28
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 23--NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
BORROWINGS
------------------------
CASH AND OVERDRAFTS DUE DUE AFTER
RECONCILIATION OF NET CASH FLOW TO ----------------------------------- LIQUID WITHIN MORE THAN
MOVEMENT IN NET FUNDS CASH OVERDRAFTS TOTAL RESOURCES ONE YEAR ONE YEAR NET FUNDS
- ------------------------------------------- --------- ------------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(L MILLION)
JANUARY 1, 1996............................ 84.9 (1.4) 83.5 681.3 (0.8) (63.7) 700.3
Cash flow before management of liquid
resources and financing.................. 14.1 0.7 14.8 -- -- -- 14.8
Management of liquid resources............. 25.2 -- 25.2 (25.2) -- -- --
Financing.................................. (43.3) -- (43.3) -- -- 43.3 --
Disposals.................................. -- -- -- (25.6) -- -- (25.6)
Foreign exchange........................... (2.8) -- (2.8) (44.9) -- 1.4 (46.3)
--------- --- --------- ----------- ----------- ----------- -----------
DECEMBER 31, 1996.......................... 78.1 (0.7) 77.4 585.6 (0.8) (19.0) 643.2
Cash flow before management of liquid
resources and financing.................. (6.5) 0.3 (6.2) -- -- -- (6.2)
Management of liquid resources............. 2.8 -- 2.8 (2.8) -- -- --
Financing.................................. 14.7 -- 14.7 -- 0.1 (14.8) --
Issue of share capital..................... 0.3 -- 0.3 -- -- -- 0.3
Provisional liquidation.................... -- -- -- (58.3) -- -- (58.3)
Foreign exchange........................... (0.8) -- (0.8) 4.0 -- (0.4) 2.8
--------- --- --------- ----------- ----------- ----------- -----------
DECEMBER 31, 1997.......................... 88.6 (0.4) 88.2 528.5 (0.7) (34.2) 581.8
Cash flow before management of
liquid resources and financing........... 77.0 (6.5) 70.5 -- -- -- 70.5
Management of liquid resources............. (66.8) -- (66.8) 66.8 -- -- --
Financing.................................. 32.0 -- 32.0 -- 0.6 (32.6) --
Issue of share capital..................... 0.7 -- 0.7 -- -- -- 0.7
Foreign exchange........................... (1.0) -- (1.0) (6.9) -- -- (7.9)
--------- --- --------- ----------- ----------- ----------- -----------
SEPTEMBER 1, 1998.......................... 130.5 (6.9) 123.6 588.4 (0.1) (66.8) 645.1
Cash flow before management of
liquid resources and financing........... (166.8) 0.9 (165.9) -- -- -- (165.9)
Management of liquid resources............. 122.2 -- 122.2 (122.2) -- -- --
Financing.................................. 32.2 -- 32.2 -- (92.9) 60.7 --
Issue of share capital..................... 4.0 -- 4.0 -- -- -- 4.0
Foreign exchange........................... 1.3 (0.2) 1.1 9.1 (6.9) -- 3.3
--------- --- --------- ----------- ----------- ----------- -----------
DECEMBER 31, 1998.......................... 123.4 (6.2) 117.2 475.3 (99.9) (6.1) 486.5
--------- --- --------- ----------- ----------- ----------- -----------
--------- --- --------- ----------- ----------- ----------- -----------
</TABLE>
F-29
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 23--NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
ANALYSIS OF CASH AND SHORT-TERM DEPOSITS AND LIQUID RESOURCES -------------------------------
AS SHOWN IN THE BALANCE SHEET 1996 1997 1998
- ------------------------------------------------------------------------------------ --------- --------- ---------
<S> <C> <C> <C>
(L MILLION)
CASH
Cash and short-term deposits........................................................ 277.9 359.4 317.1
less short-term deposits classified as liquid resources............................. (199.8) (270.8) (193.7)
--------- --------- ---------
78.1 88.6 123.4
--------- --------- ---------
--------- --------- ---------
LIQUID RESOURCES
Current asset investments........................................................... 385.8 257.7 281.6
Short-term deposits................................................................. 199.8 270.8 193.7
--------- --------- ---------
585.6 528.5 475.3
--------- --------- ---------
--------- --------- ---------
</TABLE>
As described in Note 27, deposits and cash totalling L66.3 million are
subject to a floating charge.
NOTE 24--PENSIONS
The Group operates two principal pension plans, one in the United Kingdom
and the other in the United States, covering substantially all employees in
those countries. Both plans are of the defined benefit type and are funded
externally. The pension cost of both plans is assessed in accordance with the
advice of professionally qualified actuaries, using the projected unit credit
method.
The most recent valuation of the U.K. plan, which was undertaken by a Group
employee, was at December 31, 1995 and of the U.S. plan at January 1, 1997. The
major assumption is that the rate of return on investments would exceed salary
inflation by between 2.25% and 4.0% per annum. The market value of the
investments at the respective dates of the latest actuarial valuations was L676
million and the actuarial value of the investments was sufficient to cover
approximately 110% of the benefits that had accrued to members after allowing
for expected future salary increases.
NOTE 25--EMPLOYEE SHARE PLANS
The Executive Option Scheme (1984) (the "1984 Plan") and the International
Executive Option Scheme (the "International Plan") expired in November 1994 from
which date no further options have been granted. Prior to that date, the 1984
Plan and the International Plan were open to those employees and Directors of
the Group who worked for at least 20 hours per week (or, in the case of
Directors, 25 hours per week) except, in the case of the 1984 Plan, those who
were within 18 months of their normal retirement date. The option price per
ordinary share was determined on the date of grant as the greater of (i) the
nominal value of an ordinary share and (ii) the middle market quotation of an
ordinary share derived from the Daily Official List of the London Stock Exchange
on the business day immediately preceding the date of the grant of the option.
No option would have been granted under the 1984 Plan and the International
Plan if immediately thereafter the aggregate number of ordinary shares issued or
issuable in respect of rights granted under the 1984 Plan and the International
Plan would have exceeded either the lower of 30,000,000 ordinary shares or 5% of
the issued share capital at the date of grant.
Options were normally exercisable between three and ten years after the date
of grant.
F-30
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 25--EMPLOYEE SHARE PLANS (CONTINUED)
The Willis Corroon Group plc Savings-Related Share Option Scheme 1995 (the
"1995 Plan") replaced the Savings-Related Share Option Scheme (the "1981 Plan")
which expired in November 1994 in respect of new grants. The 1995 Plan was open
to any U.K. employee with at least 6 months' continuous service with
participating Group companies (an "eligible employee").
An eligible employee was required to enter into a savings contract for a
period of three years to which he would have contributed 36 monthly payments of
between L5 and L250 in aggregate, or for a period of five or seven years to
which he would contribute 60 monthly payments of between L5 and L250 in
aggregate. He would then be entitled to exercise his option, the aggregate
subscription price of which must not have exceeded the total amount contributed
to the savings contract. The exercise price of any particular option was not
less than the higher of (i) 80% of the market value of ordinary shares on the
business day preceding the date an offer was made and (ii) the nominal value of
an ordinary share.
Options granted under the 1995 Plan and 1981 Plan were normally exercisable
only for a period of six months commencing on the expiration of the eligible
employee's savings contract.
The number of ordinary shares which could have been issued under the 1995
Plan did not at any time exceed 10% of the issued share capital of the Company
immediately prior to the date of grant when aggregated with the number of
ordinary shares issued or placed under option to subscribe in the previous ten
years under any other employee share plan adopted by the Company. In determining
the limit, no account was taken of ordinary shares where the right to acquire
such ordinary shares was released or lapsed without being exercised.
Options under the 1984 Plan, International Plan, 1981 Plan and 1995 Plan
lapsed on November 6, 1998.
The following tables show movements under the Company's employee share plans
since January 1996.
<TABLE>
<CAPTION>
EXECUTIVE SHARE OPTION PLANS
--------------------------------------------------------------------------------------
1984 PLAN INTERNATIONAL PLAN
------------------------------------------ ------------------------------------------
NO. OF WEIGHTED NO. OF WEIGHTED
ORDINARY AVERAGE ORDINARY AVERAGE
SHARES OPTION PRICE PRICE RANGE SHARES OPTION PRICE PRICE RANGE
----------- --------------- ------------ ----------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
(000) (P) (P) (000) (P) (P)
Outstanding January 1, 1996................. 10,104 237 149-473 3,421 207 149-296
Exercised................................... -- -- -- -- -- --
Cancelled................................... (1,232) 342 149-473 (208) 214 149-296
----------- -----------
Outstanding December 31, 1996............... 8,872 223 149-473 3,213 207 149-296
Exercised................................... -- -- -- -- -- --
Cancelled................................... (1,715) 257 149-378 (66) 244 152-296
----------- -----------
Outstanding December 31, 1997............... 7,157 215 149-296 3,147 206 149-296
Exercised................................... (1,374) 165 149-198 (13) 149 149
Cancelled................................... (5,783) 226 149-296 (3,134) 206 149-296
----------- --- ------------ ----------- --- ------------
Outstanding December 31, 1998............... -- -- -- -- -- --
----------- --- ------------ ----------- --- ------------
----------- --- ------------ ----------- --- ------------
</TABLE>
F-31
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 25--EMPLOYEE SHARE PLANS (CONTINUED)
<TABLE>
<CAPTION>
SAVINGS-RELATED OPTION PLANS
--------------------------------------------------------------------------------------
1981 PLAN 1995 PLAN
------------------------------------------ ------------------------------------------
NO. OF WEIGHTED NO. OF WEIGHTED
ORDINARY AVERAGE ORDINARY AVERAGE
SHARES OPTION PRICE PRICE RANGE SHARES OPTION PRICE PRICE RANGE
----------- --------------- ------------ ----------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
(000) (P) (P) (000) (P) (P)
Outstanding January 1, 1996................. 7,309 148 116-246 1,477 112 112
Granted..................................... -- -- -- 1,498 112 112
Exercised................................... (21) 117 116-119 (2) 112 112
Cancelled................................... (1,631) 159 116-246 (248) 112 112
----------- -----------
Outstanding December 31, 1996............... 5,657 145 116-246 2,725 112 112
Granted..................................... -- -- -- 1,999 100 100
Exercised................................... (207) 117 116-119 (23) 112 112
Cancelled................................... (1,053) 181 116-246 (363) 109 100-112
----------- -----------
Outstanding December 31, 1997............... 4,397 138 116-246 4,338 106 100-112
Exercised................................... (1,676) 130 116-186 (228) 111 100-112
Cancelled................................... (2,721) 143 116-246 (4,110) 106 100-112
----------- --- ------------ ----------- --- ------------
Outstanding December 31, 1998............... -- -- -- -- -- --
----------- --- ------------ ----------- --- ------------
----------- --- ------------ ----------- --- ------------
</TABLE>
The fair value of options granted during the year ended December 31, 1997
under the 1995 Plan was 30p (1996: 32p).
The weighted average fair value of options granted was estimated using the
Black-Scholes option pricing model with the following assumptions: dividend
yield of 7% (1996: 6%), expected volatility of 30% (1996: 25%), risk-free
interest rate of 7% (1996: 7%) and expected life of 5 years (1996: 5 years).
F-32
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 25--EMPLOYEE SHARE PLANS (CONTINUED)
The following table shows the movements in options over ordinary shares
pursuant to the 1982 Share Option Plan of Stewart Wrightson Holdings plc
("Stewart Wrightson"). The options under that Plan were granted in substitution
for outstanding options over Stewart Wrightson shares, upon the acquisition of
that company in August 1987, from which date no further options were granted.
<TABLE>
<CAPTION>
1982 SHARE OPTION PLAN
--------------------------------------------
NO. OF WEIGHTED
ORDINARY AVERAGE
SHARES OPTION PRICE PRICE RANGE
------------- ------------- --------------
<S> <C> <C> <C>
(000) (P) (P)
Outstanding January 1, 1996.............................................. 38 298 298
Exercised................................................................ -- -- --
Cancelled................................................................ (38) 298 298
--
Outstanding December 31, 1996............................................ -- -- --
Exercised................................................................ -- -- --
Cancelled................................................................ -- -- --
--
Outstanding December 31, 1997............................................ -- -- --
Exercised................................................................ -- -- --
Cancelled................................................................ -- -- --
--
----- --------------
Outstanding December 31, 1998............................................ -- -- --
--
--
----- --------------
----- --------------
</TABLE>
The following table shows the movements in options over American Depositary
Shares ("ADS") of the Company, each ADS representing five ordinary shares,
pursuant to the Willis Corroon Corporation 1986 Long-Term Incentive Plan.
<TABLE>
<CAPTION>
1986 LONG-TERM INCENTIVE PLAN
----------------------------------------------
WEIGHTED
AVERAGE
NO. OF ADSS OPTION PRICE PRICE RANGE
--------------- ------------- --------------
<S> <C> <C> <C>
(000) ($) ($)
Outstanding January 1, 1996.......................................... 685 20.32 18.07-23.28
Exercised............................................................ -- -- --
Cancelled............................................................ (12) 20.73 18.59-22.52
---
Outstanding December 31, 1996........................................ 673 20.32 18.07-23.28
Exercised............................................................ -- -- --
Cancelled............................................................ (150) 19.04 18.59-22.52
---
Outstanding December 31, 1997........................................ 523 20.65 18.07-23.28
Exercised............................................................ -- -- --
Cancelled............................................................ (523) 20.65 18.07-23.28
--- ----- --------------
Outstanding December 31, 1998........................................ -- -- --
--- ----- --------------
--- ----- --------------
</TABLE>
On May 1, 1997, options over 2,217 ADSs were exercised at 62.5p per ADS
under the Herget Scheme and the balance of 2,233 ADSs were cancelled.
F-33
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 26--CAPITAL COMMITMENTS
Capital commitments to acquire fixed assets:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
<S> <C> <C>
1997 1998
----------- -----
<CAPTION>
(L MILLION)
<S> <C> <C>
Expenditure contracted for................................................... 5.9 3.5
-- --
-- --
</TABLE>
The Company and certain of its subsidiaries have call options over shares
not already owned in a number of subsidiary and associated companies which are
exercisable at various dates in the future at prices related to the then current
and historic profits before tax at the date of exercise. There also exist put
options which are exercisable at various dates in the future on a similar basis.
The exact amounts payable depend on the future level of profitability of the
companies concerned and exchange rates at the date of exercise. Based on current
projections of profitability and exchange rates, the potential amounts payable
arising from these options are not expected to exceed L160.1 million (1997:
L108.0 million). Most of this relates to amounts which may be payable under put
options, exercisable between 2001 and 2012, entered into with the shareholders
of Gras Savoye. If, by 2012, the Group has not reached a majority shareholding
in Gras Savoye, it has call options to increase its interest to over 50%.
FINANCIAL COMMITMENTS
The Company has undertaken to provide certain subsidiaries with financial
support to enable them to meet their future operational obligations as they fall
due. This financial support does not extend to providing finance for liabilities
arising from negligence, breach of contract, breach of trust or any other breach
of duty.
NOTE 27--CONTINGENT LIABILITIES
ASSETS SUBJECT TO CHARGE
The Company has entered into a debenture in favor of The Chase Manhattan
Bank in which it has charged by way of a first fixed charge its interests in the
shares of Willis Faber Limited and, by way of a floating charge, all its assets
not otherwise effectively mortgaged, charged or assigned by the first fixed
charge.
The Company has also entered into a Pledge Agreement in favor of The Chase
Manhattan Bank whereby it has assigned and pledged its interest in the shares of
Willis Corroon Corporation.
Those subsidiaries which are Lloyd's brokers have each entered into a deed
as required by the Lloyd's brokers bye-law under which all insurance brokering
assets are subject to a floating charge held on trust by the Society of Lloyd's
for the benefit of those companies' insurance brokering payables. The charge
only becomes enforceable under certain circumstances as defined in the deed. The
assets (including deposits and cash of L66.3 million) subject to this charge at
December 31, 1998 amounted to L1,834 million (1997: L1,822 million) and the
insurance brokering payables at that date amounted to L1,821 million (1997:
L1,805 million).
FINANCING OBLIGATIONS
The Company has guaranteed, on a joint and several basis with other
companies in the Group, the prompt and complete performance of Willis Corroon
Corporation in respect of credit facilities ("facilities") made available to
that company. At December 31, 1998 these facilities amounted to $1,175 million.
F-34
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 27--CONTINGENT LIABILITIES (CONTINUED)
On February 2, 1999, $575 million of the facilities were repaid and Willis
Corroon Corporation issued $550 million 9% Senior Subordinated Notes due 2009
(the "Notes"). The Company together with its affiliate Willis Corroon Partners,
has guaranteed Willis Corroon Corporation's obligations in respect of the Notes.
OTHER
The Company has given guarantees to bankers and other third parties
amounting to L4.4 million (1997: L4.4 million). The Company has also given
guarantees to bankers in respect of commitments entered into by them to provide
security for membership of Lloyd's of certain Group employees who are not
directors of the Company amounting to L0.3 million (1997: L0.3 million).
The Company and certain of its U.K. subsidiaries have given the landlords of
some of the leasehold properties occupied by the Group in the United Kingdom and
the United States guarantees in respect of the performance of the lease
obligations of the Group companies holding the leases. The operating lease
obligations amounted to L104 million at December 31, 1998 (1997: L116 million).
The Group has extensive international operations and the Company or its
subsidiaries are subject to claims and litigation in the ordinary course of
business resulting principally from alleged errors and omissions in connection
with their businesses. Most of the claims are covered by professional indemnity
insurance and many of the defenses to these claims are being conducted by the
Group's insurers. In respect of any self-insured deductibles applicable to such
claims, the Group has established provisions which are believed to be adequate
in the light of current information and legal advice. These provisions may be
adjusted from time to time according to developments. The Company does not
expect the outcome of such claims, either individually or in the aggregate, to
have a material effect on the Group's operations or financial position.
NOTE 28--DIRECTORS' INTERESTS IN CONTRACTS
The undermentioned Directors who held office during each of the three years
in the period ended December 31, 1998 (except as otherwise indicated) and, where
applicable, connected persons (as defined in section 346 of the Companies Act)
were Underwriting Members of Lloyd's through the agency of WF&D Agencies, which
was a subsidiary of the Company until October, 1997 as follows:
<TABLE>
<S> <C>
R J S Bucknall (1998 Mrs E H Rendle
only)
G F Nixon J M P Taylor (in
1996 and 1997 only)
J M Pelly (1998 only)
</TABLE>
For the relevant years, the agreements between the above and WF&D Agencies
were on similar terms to the agreements which govern all other members of the
syndicates in which they participated. WF&D Agencies received a fee in respect
of each of the above relating to his or her membership of Lloyd's.
Fees exceeding L5,000 were paid to WF&D Agencies by:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1997 1998
--------- --------- ---------
J M P Taylor............................................... L21,463 -- --
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-35
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 28--DIRECTORS' INTERESTS IN CONTRACTS (CONTINUED)
Insurance brokering subsidiaries of the Company place risks with the
syndicates in which the Directors or connected persons (as defined above)
participate in the normal course of their brokering activities on the same basis
as such subsidiaries do with other Lloyd's syndicates.
The Company has given J Reeve a guarantee in respect of the performance
obligations of Willis Faber & Dumas Limited, his employing company, in respect
of an unfunded pension scheme established for him. The Company has also
guaranteed the performance obligations of Willis Corroon Corporation in respect
of the pension benefits for B D Johnson and K H Pinkston under the Willis
Corroon Executive Supplemental Plan, an unfunded pension plan.
Save as disclosed above, no Director or connected person (as defined above)
had any interest either during or at the end of the financial years 1996, 1997
and 1998 in any contract which was significant in relation to the Company's
business, or in a contract, transaction or arrangement which required disclosure
under section 232 of the Companies Act.
NOTE 29--OFFICER'S INTERESTS
The Company had guaranteed an amount of L30,000 in respect of a letter of
credit issued to provide the required security for the membership of Lloyd's of
an officer, which was released during 1996.
NOTE 30--COMPANIES ACT 1985
These financial statements do not comprise the Company's statutory accounts
within the meaning of section 240 of the Companies Act. Statutory accounts for
the years ended December 31, 1996 and 1997 have been, and statutory accounts for
the year ended December 31, 1998 will be, delivered to the Registrar of
Companies for England and Wales. The auditors' reports on such accounts were
unqualified.
NOTE 31-- DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE
UNITED
KINGDOM AND THE UNITED STATES
The Group's financial statements are prepared in accordance with U.K. GAAP
which differ in certain respects from U.S. GAAP. Those differences which have a
significant effect on the Group are described below.
PUSHDOWN ACCOUNTING
Under U.S. GAAP, Trinity Acquisition's cost of acquiring the Company should
be "pushed down," i.e., used to establish a new accounting basis in the
Company's separate financial statements. Under U.K. GAAP, there is no such
requirement.
GOODWILL
Goodwill (which includes expirations) arising on acquisitions occurring
after January 1, 1998 is capitalized and amortized on a systematic basis over
its useful economic life. Goodwill arising on acquisitions completed before
January 1, 1998 was eliminated against retained earnings and other reserves.
Under U.S. GAAP, goodwill and expirations are capitalized and amortized over
their respective useful economic lives. For the purposes of the reconciliation
below, periods of 17 1/2 to 40 years have been utilized. The carrying amount of
goodwill, and the amortization period assigned to it, are periodically reviewed
for impairment by reference to expected future cash flows. Under U.K. GAAP, on
the disposition of a business acquired before January 1, 1998, goodwill
previously eliminated against
F-36
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 31-- DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE
UNITED
KINGDOM AND THE UNITED STATES (CONTINUED)
retained earnings is reinstated and charged to income in arriving at the gain or
loss on disposal of an entity; under U.S. GAAP, only unamortized goodwill is
charged.
REVALUATION OF FREEHOLD LAND AND BUILDINGS
Certain of the Group's freehold land and buildings are included in the
financial statements at revalued amounts on which depreciation is calculated.
Under U.S. GAAP such assets must be recorded at their historical cost less
depreciation thereon. The depreciation charged on the revaluation increase is
not significant.
PENSION COSTS
For the purposes of the reconciliation below, the Group has adopted the
provisions of U.S. Statement of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions", ("FAS 87") in respect of the Group's
principal U.K. pension plan. This standard requires that the projected benefit
obligation be matched against the market value of the underlying plan assets and
other unrecognized actuarial gains and losses in determining the pension expense
for the year. As a result, pension expense can be significantly different from
that computed under U.K. GAAP which requires the cost of providing pension
benefits to be expensed over the periods benefiting from the employees' service
on the basis of a constant percentage of current and estimated future earnings.
The additional information required by FAS 87 in respect of the principal
U.K. and U.S. pension plans is given below.
FORWARD EXCHANGE CONTRACTS AND OTHER FINANCIAL INSTRUMENTS
The Group enters into forward exchange contracts and other financial
instruments which, under U.K. GAAP, are treated as hedges of future income.
Under U.S. GAAP such instruments would not be regarded as hedges and,
accordingly, would be revalued at each balance sheet date and the gain or loss
arising would be dealt with in income for the period then ended.
EXCEPTIONAL ITEMS
During 1994, the Group made provisions for job eliminations and for the net
lease expense of properties no longer needed. Under U.S. GAAP, such provisions
would only be recorded when the termination benefit arrangements had been
communicated to the employees and when the leased property had no substantive
use or benefit to the lessee. These provisions were charged under U.S. GAAP in
1995.
INVESTMENTS
Certain of the Group's investments, purchased with the intention of holding
to maturity, have been valued at amortized cost. For U.S. GAAP purposes, all the
Group's investments have been classified as available for sale and are reported
at fair value with unrealized gains and losses reported as a separate component
of shareholders' equity (net of tax effects).
DEFERRED TAX
Under U.K. GAAP, deferred taxes are accounted for using the liability method
to the extent that is is considered probable that a liability or asset will
crystallize in the foreseeable future. Under U.S. GAAP,
F-37
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 31-- DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE
UNITED
KINGDOM AND THE UNITED STATES (CONTINUED)
deferred taxes are accounted for using the liability method on all temporary
differences and deferred tax assets are recognized where it is more likely than
not that they will be realized.
The effect on net income, comprehensive income and shareholders' equity of
applying the significant differences between U.K. GAAP and U.S. GAAP described
above is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1 TO SEPTEMBER 2 TO
DECEMBER 31, SEPTEMBER 1, DECEMBER 31,
---------------------------- ------------- ---------------
NET INCOME 1996 1997 1998 1998
- ------------------------------------------- --------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C>
(L MILLION, EXCEPT PER ORDINARY SHARE)
NET INCOME/LOSS AS REPORTED IN THE
CONSOLIDATED STATEMENT OF INCOME......... 54.2 56.9 (15.6) (25.7)
ADJUSTMENTS
Amortization of goodwill and expirations... (17.9) (17.7) (12.0) (6.5)
Gain on disposal of operations............. 2.2 5.9 9.6 --
Revaluation of forward exchange contracts
and other financial instruments.......... 10.9 (5.6) 0.2 (3.7)
Pension costs.............................. (12.1) (7.6) (1.6) (1.7)
Deferred taxes--effect of above
adjustments.............................. 0.4 4.3 0.4 1.7
--------- ------ ------ ------
NET INCOME/(LOSS) AS ADJUSTED TO ACCORD
WITH U.S. GAAP........................... 37.7 36.2 (19.0) (35.9)
--------- ------ ------ ------
--------- ------ ------ ------
COMPRISING
Income/(loss) from continuing operations... 37.7 36.0 (19.0) (35.9)
Income/(loss) from discontinued
operations............................... -- 0.2 -- --
--------- ------ ------ ------
NET INCOME/(LOSS).......................... 37.7 36.2 (19.0) (35.9)
--------- ------ ------ ------
--------- ------ ------ ------
PER ORDINARY SHARE (BASIC AND DILUTED) AS
SO ADJUSTED
Continuing operations...................... 9.0p 8.6p (4.5)p (8.4)p
Discontinued operations.................... -- 0.1p -- --
--------- ------ ------ ------
NET INCOME/(LOSS).......................... 9.0p 8.7p (4.5)p (8.4)p
--------- ------ ------ ------
--------- ------ ------ ------
</TABLE>
F-38
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 31-- DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE
UNITED
KINGDOM AND THE UNITED STATES (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER JANUARY 1 TO SEPTEMBER 2 TO
31, SEPTEMBER 1, DECEMBER 31,
-------------------- ------------- ---------------
COMPREHENSIVE INCOME 1996 1997 1998 1998
- ---------------------------------------------------------- --------- --------- ------------- ---------------
<S> <C> <C> <C> <C>
(L MILLION)
NET INCOME/(LOSS) AS ADJUSTED TO ACCORD WITH
U.S. GAAP............................................... 37.7 36.2 (19.0) (35.9)
Other comprehensive income, net of tax:
Foreign currency translation adjustments................ (35.5) 11.4 (6.5) 6.5
Unrealized holding gains................................ (0.9) (0.4) (0.1) 0.8
--------- --------- ------ ------
COMPREHENSIVE INCOME...................................... 1.3 47.2 (25.6) (28.6)
--------- --------- ------ ------
--------- --------- ------ ------
Unrealized holding gains
Beginning of period....................................... 1.4 0.5 0.1 --
Arising during the period................................. (0.9) (0.4) (0.1) 0.8
--------- --------- ------ ------
End of period............................................. 0.5 0.1 -- 0.8
--------- --------- ------ ------
--------- --------- ------ ------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
SHAREHOLDERS' EQUITY 1997 1998
- ---------------------------------------------------------------------------------------------- --------- ---------
<CAPTION>
(L MILLION)
<S> <C> <C>
SHAREHOLDERS' EQUITY AS REPORTED IN THE CONSOLIDATED BALANCE SHEET............................ 124.6 89.0
ADJUSTMENTS
Intangible assets
Goodwill--cost.............................................................................. 580.1 800.6
--amortization....................................................................... (129.8) (6.9)
Tangible assets
Revaluation of freehold land and buildings.................................................. (14.9) --
Current assets
Investments................................................................................. 0.1 0.8
Forward exchange contracts.................................................................. 6.1 2.7
Pension costs............................................................................... 16.0 (16.3)
Provisions for liabilities and charges
Deferred taxes--effect of above adjustments................................................. 1.4 5.5
--------- ---------
SHAREHOLDERS' EQUITY AS ADJUSTED TO ACCORD WITH U.S. GAAP..................................... 583.6 875.4
--------- ---------
--------- ---------
</TABLE>
F-39
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 31-- DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE
UNITED
KINGDOM AND THE UNITED STATES (CONTINUED)
ADDITIONAL INFORMATION REQUIRED BY FAS 87
The pension cost for the Group's two principal pension plans computed in
accordance with the requirements of FAS 87 comprises:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1 TO SEPTEMBER 2 TO
DECEMBER 31, SEPTEMBER 1, DECEMBER 31,
-------------------- --------------- ---------------
1996 1997 1998 1998
--------- --------- --------------- ---------------
<S> <C> <C> <C> <C>
(L MILLION)
<CAPTION>
NET PENSION EXPENSE
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Service cost................................................ 30.8 29.7 19.3 9.6
Interest cost............................................... 47.8 51.2 34.5 14.4
Return on plan assets....................................... (70.3) (123.0) (76.0) (17.8)
Net amortization and deferral............................... 19.5 66.4 32.9 --
--------- --------- ------ ------
Net pension expense......................................... 27.8 24.3 10.7 6.2
--------- --------- ------ ------
--------- --------- ------ ------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1 TO SEPTEMBER 2 TO
DECEMBER 31, SEPTEMBER 1, DECEMBER 31,
--------------- --------------- ---------------
1997 1998 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
(L MILLION)
<CAPTION>
CHANGE IN BENEFIT OBLIGATION
- ----------------------------------------------------------------
<S> <C> <C> <C>
Benefit obligation--beginning of period......................... 675.8 810.7 811.9
Service cost.................................................... 29.7 19.3 9.6
Interest cost................................................... 51.2 34.5 14.4
Benefits paid................................................... (29.5) (20.6) (9.8)
Actuarial gains and losses...................................... 83.5 (32.0) 26.8
------ ------ ------
Benefit obligation--end of period............................... 810.7 811.9 852.9
------ ------ ------
------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1 TO SEPTEMBER 2 TO
DECEMBER 31, SEPTEMBER 1, DECEMBER 31,
--------------- --------------- ---------------
1997 1998 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
(L MILLION)
<CAPTION>
CHANGE IN PLAN ASSETS
- ----------------------------------------------------------------
<S> <C> <C> <C>
Plan assets--beginning of period................................ 683.0 798.4 799.9
Actual return on plan assets.................................... 129.9 11.0 111.2
Employer contribution........................................... 15.0 11.1 3.8
Benefits paid................................................... (29.5) (20.6) (9.8)
------ ------ ------
Plan assets--end of period...................................... 798.4 799.9 905.1
------ ------ ------
------ ------ ------
</TABLE>
F-40
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 31-- DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE
UNITED
KINGDOM AND THE UNITED STATES (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 1, DECEMBER 31,
--------------- --------------- ---------------
1997 1998 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
(L MILLION)
FUNDED STATUS
- ----------------------------------------------------------------
Plan assets at fair value....................................... 798.4 799.9 905.1
Projected benefit obligation.................................... (810.7) (811.9) (852.9)
------ ------ ------
Plan assets in excess of projected benefit obligation........... (12.3) (12.0) 52.2
Transition assets............................................... (10.2) (7.6) --
Unrecognized net loss/(gain).................................... 45.3 42.8 (68.5)
Prior service cost.............................................. (0.1) -- --
------ ------ ------
Prepaid/(accrued) pension costs................................. 22.7 23.2 (16.3)
------ ------ ------
------ ------ ------
</TABLE>
The U.K. plan assets are invested mainly in U.K. fixed interest and equity
securities and non-U.K. equity securities. The U.S. plan assets are invested
mainly in U.S. fixed interest and equity securities.
The major assumptions used in computing the funded status were:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 1, DECEMBER 31,
----------------- ----------------- -----------------
<S> <C> <C> <C>
1997 1998 1998
----------------- ----------------- -----------------
<CAPTION>
% % %
<S> <C> <C> <C>
U.K. PLAN
Expected long-term rate of return on plan assets............... 8.5 7.5 7.5
Discount rate.................................................. 7.0 5.75 5.5
Expected long-term rate of earnings increases.................. 5.5 4.5 4.5
U.S. PLAN
Expected long-term rate of return on plan assets............... 8.5 8.5 8.5
Discount rate.................................................. 7.0 6.0 6.0
Expected long-term rate of earnings increases.................. 5.0 5.0 5.0
-- -- --
-- -- --
</TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
The Consolidated Statement of Cash Flows prepared under U.K. GAAP presents
substantially the same information as that required under U.S. GAAP but may
differ with regard to classification of items within the statements and as
regards the definition of cash under U.K. GAAP and cash and cash equivalents
under U.S. GAAP.
Under U.K. GAAP, cash flows are presented separately for operating
activities, returns on investments and servicing of finance, taxation, capital
expenditure and financial investments, acquisitions and disposals, equity
dividends paid, management of liquid resources and financing activities. U.S.
GAAP requires only three categories of cash flow activity to be reported:
operating, investing and financing. Cash flows from taxation and returns on
investments and servicing of finance shown under U.K. GAAP would be included as
operating activities under U.S. GAAP. Cash flows from capital expenditure and
financial investment, acquisitions and disposals, shown separately under U.K.
GAAP, would be included as part of the investing activities under U.S. GAAP. The
payment of dividends would be included as a financing activity under U.S. GAAP.
Cash, as defined by U.S. GAAP, would
F-41
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 31-- DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE
UNITED
KINGDOM AND THE UNITED STATES (CONTINUED)
include cash equivalents with initial maturities of less than three months and
would exclude bank overdrafts.
The categories of cash flow activity under U.S. GAAP can be summarized as
follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 1 TO SEPTEMBER 2 TO
DECEMBER 31, SEPTEMBER 1, DECEMBER 31,
-------------------- --------------- ---------------
1996 1997 1998 1998
--------- --------- --------------- ---------------
<S> <C> <C> <C> <C>
(L MILLION)
Cash inflow from operating activities....................... 36.2 89.9 119.1 (126.4)
Cash (outflow)/inflow on investing activities............... (10.3) (60.4) 36.5 (27.4)
Cash (outflow)/inflow on financing activities............... (71.3) (12.0) 19.4 27.9
--------- --------- ----- ------
Increase/(decrease) in cash and cash equivalents............ (45.4) 17.5 175.0 (125.9)
Effect of foreign exchange rate changes..................... (30.7) (0.7) (9.0) 11.2
Cash and cash equivalents at start of period................ 507.9 431.8 448.6 614.6
--------- --------- ----- ------
Cash and cash equivalents at end of period.................. 431.8 448.6 614.6 499.9
--------- --------- ----- ------
--------- --------- ----- ------
</TABLE>
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
FORWARD FOREIGN EXCHANGE CONTRACTS AND CURRENCY OPTIONS
The Group manages its exposure to foreign currencies by entering into
forward foreign exchange contracts and currency options. At December 31, 1998,
the Group had contracted to exchange foreign currency, principally U.S. dollars,
equivalent to approximately L72.7 million (1997: L81.3 million).
INTEREST RATE AGREEMENTS
In order to manage interest rate risk, the Group enters into interest rate
swap agreements and forward rate agreements effectively to change the interest
receivable or payable on parts of its underlying investments and borrowings from
variable to fixed rates and from fixed to variable rates. Accordingly, while the
Group is exposed to market risk to the extent that receipts and payments under
interest rate agreements are affected by market interest rates, any such
fluctuations will be offset by changes to interest receipts or payments made on
variable rate investments and borrowings. The Group accounts for interest rate
agreements as hedges.
F-42
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 31-- DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE
UNITED
KINGDOM AND THE UNITED STATES (CONTINUED)
Outstanding interest swap agreements and forward rate agreements are
summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST RATES
----------------------------------------------------
<CAPTION>
NOTIONAL
PRINCIPAL TERMINATION FIXED VARIABLE FIXED VARIABLE
BALANCE DATES RECEIVABLE PAYABLE PAYABLE RECEIVABLE
------------- ------------ ----------- ----------- ----------- -------------
(MILLIONS) % % % %
<S> <C> <C> <C> <C> <C> <C>
U.S. dollars................................... 545 1998-2000 5.58-7.75 5.72-5.94 -- --
U.S. dollars................................... 15 1998 -- -- 6.91 5.81
Sterling....................................... 275 1998-2002 6.58-8.41 7.36-7.75 -- --
Deutschemark................................... 27 1998-2001 4.51-5.07 3.44-3.78 -- --
--- ------------ ----------- ----------- --- ---
--- ------------ ----------- ----------- --- ---
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST RATES
----------------------------------------------------
<CAPTION>
NOTIONAL
PRINCIPAL TERMINATION FIXED VARIABLE FIXED VARIABLE
BALANCE DATES RECEIVABLE PAYABLE PAYABLE RECEIVABLE
----------- ------------ ----------- ----------- ----------- -------------
(MILLIONS) % % % %
<S> <C> <C> <C> <C> <C> <C>
U.S. dollars................................... 664 1999-2002 5.15-7.16 5.06-5.41 -- --
U.S. dollars................................... 450 2006 -- -- 5.10 5.06
Sterling....................................... 166 1999-2002 6.43-8.27 6.12-7.31 -- --
Deutschemark................................... 49 1999-2001 3.70-5.07 3.70-5.07 -- --
Deutschemark................................... 10 2000 -- -- 4.61 3.56
Japanese Yen................................... 2,060 1999-2001 1.45-1.70 0.22-0.40 -- --
Italian Lire................................... 14,600 2000-2001 4.54-7.10 3.25-4.59 -- --
----------- ------------ ----------- ----------- --- ---
----------- ------------ ----------- ----------- --- ---
</TABLE>
CONCENTRATION OF CREDIT RISK
Potential concentrations of credit risk to the Group comprise principally
cash and short-term deposits, current asset investments, trade receivables and
foreign exchange contracts.
The Group places cash and short-term deposits and undertakes foreign
exchange contracts with a range of banks and financial institutions and controls
its exposure to any one bank or financial institution. The Group's current asset
investments comprise a broad range of financial instruments issued principally
in the United Kingdom and the United States.
Trade receivables include significant amounts due from clients and
underwriters. The Group's insurance brokering client base is widely dispersed
throughout the world, principally in the United Kingdom and the United States.
The credit risk arising from amounts due from clients and underwriters in
respect of insurance premiums and claims is minimized as such premiums and
claims are not generally paid to the beneficiary until collected.
At December 31, 1998, the Group did not consider there to be any significant
concentration of credit risk.
F-43
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 31-- DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE
UNITED
KINGDOM AND THE UNITED STATES (CONTINUED)
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following information is presented in compliance with the requirements
of FAS 107, "Disclosure about Fair Value of Financial Instruments". The carrying
amounts and fair values of the material financial instruments of the Group are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------
<S> <C> <C> <C> <C>
1997 1998
---------------------- ----------------------
<CAPTION>
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------- --------- ----------- ---------
(L MILLION)
<S> <C> <C> <C> <C>
ASSETS
Cash and short-term deposits............................................ 359.4 359.4 317.1 317.1
Current asset investments:
Listed investments.................................................... 55.6 55.9 48.7 49.8
Unlisted investments.................................................. 202.1 203.5 232.9 236.9
LIABILITIES
Bank loans and overdrafts............................................... (34.5) (34.5) (629.1) (629.1)
OFF-BALANCE SHEET INSTRUMENTS
Interest rate swaps and forward rate agreements....................... -- 3.7 -- 10.9
Forward foreign exchange contracts.................................... -- 6.1 -- 2.7
----------- --------- ----------- ---------
----------- --------- ----------- ---------
</TABLE>
The following methods and assumptions were used by the Group in establishing
its fair value disclosures for financial instruments:
CASH AND SHORT-TERM DEPOSITS: the carrying amount approximates fair
value.
LISTED INVESTMENTS AND UNLISTED INVESTMENTS: the fair value is based on
market prices.
BANK LOANS AND OVERDRAFTS: the carrying amount approximates fair value.
OFF-BALANCE SHEET INSTRUMENTS: fair values of interest rate swap
agreements are based on discounted cash flow analyses. Fair values of
forward foreign exchange contracts are based on contractual and market rates
and represent net unrealized gains and losses.
ACCOUNTING AND DISCLOSURE OF STOCK-BASED COMPENSATION
FAS 123, Accounting for Stock-Based Compensation, established accounting
disclosure standards for stock-based employee compensation plans. The statement
gives companies the option of continuing to account for such costs under APB 25,
Accounting for Stock Issued to Employees, and related interpretations. The Group
has chosen to continue to account for its employee share option plans under APB
25 and, accordingly, there is no compensation cost to the Group arising from
these plans. Had the Group chosen to account for the costs of its employee share
option plans under FAS 123, which requires such costs to be determined on the
basis of the fair value of the options at the date of grant, the Group's net
income for the year ended December 31, 1997 would have been L36.1 million (1996:
L37.7 million) and net income per Ordinary Share would have been 8.6 pence
(1996: 9.0 pence). Details of the fair value of stock awards are given in Note
25. Because options vest over several years and additional options grants may be
made, the effects of these hypothetical calculations are not likely to be
representative of similar future calculations. No options were granted in 1998.
F-44
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 31-- DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE
UNITED
KINGDOM AND THE UNITED STATES (CONTINUED)
DEBT AND EQUITY SECURITIES
U.S. GAAP requires debt and equity investments to be classified into three
categories: held-to-maturity, trading and available-for-sale. All the Group's
investments have been classified as available-for-sale.
The debt securities held at December 31, 1998 comprise:
<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------- --------------- ------------- -----------
<S> <C> <C> <C> <C>
(L MILLION)
U.S. Government securities..................... 18.5 0.2 -- 18.7
U.K. Government securities..................... 2.7 0.1 -- 2.8
Other foreign government securities............ 4.3 0.2 -- 4.5
Corporate debt securities...................... 22.8 0.6 -- 23.4
--
--- --- ---
48.3 1.1 -- 49.4
--
--
--- --- ---
--- --- ---
</TABLE>
During 1998 sales of debt securities totaled L31.1 million (1997: L46.9
million), on which gross realized gains and gross realized losses were L0.3
million and Lnil million (1997: L0.1 million and L0.1 million) respectively.
Maturities of debt securities held at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
(L MILLION)
<S> <C>
within one year................................................................... 10.2
after one year through five years................................................. 36.2
after five years through ten years................................................ 1.9
after more than ten years......................................................... --
---
48.3
---
---
</TABLE>
NOTE 32--NEW ACCOUNTING STANDARDS
Four U.K. accounting standards have recently been issued:
FRS 12, "Provisions, Contingent Liabilities and Contingent Assets", was
issued in September 1998 and is effective for accounting periods ending on
or after March 23, 1999, though earlier adoption is permitted. This standard
sets out rules on the recognition, measurement and disclosure of provisions
and contingencies. The Company does not expect the adoption of this standard
to have any impact on its financial statements for prior years or,
currently, on its financial statements for future periods.
FRS 13, "Derivatives and other Financial Instruments Disclosures", was
also issued in September 1998 and is effective for accounting periods ending
on or after March 23, 1999, though earlier adoption is permitted. This
standard sets out narrative disclosure requirements which require an
explanation of the role that financial instruments play in creating or
changing the risks that the Company faces in its activities and its approach
to the management of those risks, including a description of the objectives,
policies and strategies for holding and issuing financial instruments. It
also sets out numerical disclosure requirements with respect to interest
rate risk, currency risk, liquidity risk, fair values, financial instruments
used for trading, financial instruments used for hedging and certain
commodity contracts. As this standard only relates to disclosures, its
adoption
F-45
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
NOTE 32--NEW ACCOUNTING STANDARDS (CONTINUED)
will not impact the Company's results of operations or financial position
reported under U.K. GAAP. The Company has not yet determined the impact that
its adoption will have on its disclosures.
FRS 14, "Earnings per Share", was issued in October 1998 and is
effective for accounting periods ending after December 23, 1998. The
Company's earnings per share computed under this standard will not differ
from those previously reported.
FRS 15, "Tangible Fixed Assets", was issued in February 1999 and is
effective for accounting periods ending on or after March 23, 2000 though
earlier adoption is permitted. This standard sets out the principles of
accounting for the initial measurement, valuation and depreciation of
tangible fixed assets. Adoption of this standard by the Company would have
no impact on its financial statements.
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities" which has to be adopted for fiscal years
beginning after June 15, 1999. This standard requires all derivatives to be
recognized as either assets or liabilities on the balance sheet at their fair
values. It also prescribes the accounting to be followed for the changes in the
fair values of derivatives depending upon their intended use and resulting
designation. It supersedes or amends the existing standards which deal with
hedge accounting and derivatives. The Company has not yet evaluated the effect
that adopting this standard will have on the U.S. GAAP amounts reported in its
financial statements.
NOTE 33--WILLIS CORROON CORPORATION AND WILLIS CORROON PARTNERS
Summarized financial information under U.K. GAAP relating to Willis Corroon
Corporation is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1997 1998
--------- --------- ---------
<CAPTION>
(L MILLION)
<S> <C> <C> <C>
Total operating revenues............................................................. 356.7 321.4 340.0
Operating income..................................................................... 35.6 28.4 29.0
Net income........................................................................... 14.1 11.4 8.4
--------- --------- ---------
--------- --------- ---------
<CAPTION>
AT DECEMBER 31,
--------------------
1997 1998
--------- ---------
(L MILLION)
<S> <C> <C> <C>
Current assets............................................................................. 1,201.2 1,806.5
Fixed assets............................................................................... 52.3 59.9
--------- ---------
1,253.5 1,866.4
--------- ---------
--------- ---------
Current liabilities........................................................................ 1,152.5 1,756.5
Noncurrent liabilities..................................................................... 35.5 35.8
Stockholders' equity....................................................................... 65.5 74.1
--------- ---------
1,253.5 1,866.4
--------- ---------
--------- ---------
</TABLE>
Willis Corroon Partners, formed on November 11, 1998, has no assets other
than the capital stock of Willis Corroon Corporation and conducts no business
other than the holding of such capital stock.
F-46
<PAGE>
HEAD OFFICE OF WILLIS CORROON GROUP
Ten Trinity Square
London EC3P 3AX
HEAD OFFICE OF THE ISSUER
26 Century Boulevard
P.O. Box 305026
Nashville, TN 37214
AUDITORS TO WILLIS CORROON GROUP
Ernst & Young
Rolls House
7 Rolls Buildings
Fetter Lane
London EC4A 1NH
TRUSTEE AND EXCHANGE AGENT
The Bank of New York
101 Barclay Street
New York, New York 10286
LISTING AGENT
Kredietbank S.A. Luxembourgeoise
43, Boulevard Royal
L-2955 Luxembourg
LEGAL ADVISERS TO WILLIS CORROON GROUP
<TABLE>
<S> <C>
AS TO U.S. LAW AS TO ENGLISH LAW
Simpson Thacher & Bartlett Clifford Chance
200 Aldersgate
425 Lexington Avenue Street
New York, NY 10017 London EC1A 4JJ
</TABLE>
<PAGE>
[LOGO]
$550,000,000
WILLIS CORROON CORPORATION
OFFER TO EXCHANGE ALL OUTSTANDING 9% SENIOR SUBORDINATED
NOTES DUE 2009 FOR 9% SENIOR SUBORDINATED NOTES DUE 2009,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
UNCONDITIONALLY GUARANTEED ON A SENIOR SUBORDINATED BASIS BY WILLIS CORROON
GROUP LIMITED AND WILLIS CORROON PARTNERS
UNTIL , 1999 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
English law does not permit a company to indemnify a director or an
officer of the company against any liability which by virtue of any rule of law
would otherwise attach to him in respect of negligence, default, breach of duty
or breach of trust of which he may be guilty in relation to the company except
liability incurred by such director or officer in defending any legal proceeding
(whether civil or criminal) in which judgement is given in his favor or in which
he is acquitted or in certain instances where, although he is liable, a court
finds that such director or officer acted honestly and reasonably and that
having regard to all the circumstances he ought fairly to be excused and relief
is granted by the court.
The Articles of Association of Willis Corroon Group Limited provide
that, subject to the restrictions referred to in the immediately preceding
paragraph, Willis Corroon Group Limited may indemnify each of its directors and
officers or those of its subsidiaries against all costs, charges, losses,
expenses and liabilities incurred by him in the actual or purported execution
and/or discharge of his duties and/or the exercise or purported exercise of his
powers and/or otherwise in relation to or in connection with his duties, power
or office including (without prejudice to the generality of the foregoing) any
liability incurred by him in defending any proceedings, civil or criminal, which
relate to anything done or omitted or alleged to have been done omitted by him
as an officer of Willis Corroon Group Limited and in which judgement is given in
his favor (or the proceedings are otherwise disposed of without any finding or
admission of any material breach of duty on his part) or in which he is
acquitted or in connection with any application under any statute for relief
from liability in respect of any such act or omission in which relief is granted
to him by the court
Pursuant to the Companies Act of 1985, as amended, companies may
purchase and maintain liability insurance for directors and officers. Willis
Corroon Group Limited currently maintains liability insurance for the directors
and officers of TA I Limited and of its subsidiaries (which includes Willis
Corroon Group Limited) to the extent authorized by English law and their
governing instruments. Such insurance does not cover any dishonest, fraudulent
or criminal act or omission by the directors and officers of Willis Corroon
Group Limited.
Section 145 of the Delaware General Corporation Law (the "DGCL")
provides that a corporation may indemnify directors and officers as well as
other employees and individuals against expenses (including attorneys' fees),
judgments, lines, and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative, or
investigative (other than action by or in the right of the corporation a
"derivative action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceedings, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such actions, and the statute requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to the corporation.
Such 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duties as a director, except for liability (i) for any
transaction from which the director derives an improper personal benefit, (ii)
for acts or omissions not in good faith or that involve international misconduct
or a knowing violation of law, (iii) for improper payment of dividends or
redemptions of shares, or (iv) for any breach of a director's duty of loyalty to
the company or
II-1
<PAGE>
its stockholders. Article Thirteen of Willis Corroon Corporation's Amended
Certificate of Incorporation includes such a provision.
The directors and officers of Willis Corroon Corporation are covered by
the liability insurance for directors' and officers' maintained by Willis
Corroon Group Limited.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
2.1 Master Acquisition Agreement, dated October 13, 1998, among Willis Corroon Group plc, Willis Corroon
Europe B.V., Tolbert Insurance & Finance B.V., UTA Willis Corroon S.p.A., Saint Gallen S.r.l.,
Olimpia S.r.l., Ital Brokers Holding S.p.A., and ARCEF N.V.
2.2 Stock Purchase Agreement, dated September 28, 1998, between Assurandrgruppen A/S and Willis Corroon
Europe B.V.
2.3 WIFA Share Sale Agreement, dated August 4, 1997, between Willis Corroon Limited and Willis National
Holdings Limited, including Side Agreement, dated December 11, 1998
2.4 ANIFA Share Sale Agreement, dated August 4, 1997, between Abbey National Independent Consulting Group
Limited and Willis National Holdings Limited, including Side Agreement, dated December 11, 1998
2.5 Framework Agreement, dated January 28, 1998, for the Merger of the limited partnership Jaspers
Industrie Assekuranz GmbH & Co. KG and the general partnership C. Wuppesahl & Co. Assekuranzmakler
2.6 Purchase and Transfer Agreement, dated January 27, 1998, concerning shares in Industrie-Assekuranz
GmbH and Jaspers Industrie Assekuranz GmbH & Co. KG between Alexander & Alexander International
Inc., Achtundsechzigste Verwaltungsgesellschaft Dammtor mbH, and Willis Corroon Group plc
2.7 Transfer of Shares, dated January 22, 1998, of Industrie-Assekuranz GmbH into Jaspers Industrie
Assekuranz GmbH & Co. KG
2.8 Merger Contract, dated March 17, 1998, between Jaspers Industrie Assekuranz GmbH & Co. KG and C.
Wuppesahl & Co. Assekuranzmakler
2.9 Purchase and Sales Agreement, dated January 27, 1998, on the acquisition of limited partner shares in
Jaspers Wuppesahl Industrie Assekuranz GmbH & Co. KG among Ms. Irene Koenig, Ms. Doris Ballauff,
Mr. Michael Emken, C. Wuppesahl Management GmbH, C. Wuppesahl, 68. Verwaltungsgesellschaft Dammtor
mbH, and Willis Corroon GmbH
2.10 Purchase and Sales Agreement dated January 22, 1998 between Deutsche Bank Aktiengesellschaft, Willis
Corroon GmbH and Willis Corroon Group plc in respect of a limited partnership interest of 14.6% in
Jaspers Wuppesahl Industrie Assekuranz GmbH & Co. KG.
2.11 Agreement, dated July 23, 1997, among Assurances Generales de France IART, UAP Incendie-Accidents,
Athena, Gras Savoye Euro Finance S.A., Mr. Emmanuel Gras, Mr. Patrick Lucas, Mr. Daniel Naftalski,
Willis Corroon Group plc, Willis Corroon Europe B.V., and Gras Savoye & Cie, along with Amendment
No. 1 thereto, dated December 11, 1997, and Addendum thereto dated July 23, 1997
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
2.12 Sale and Purchase Agreement, dated October 20, 1997, among Willis Corroon Group plc, Acegiant
Limited, Willis Corroon Group Services Limited and Willis Faber & Dumas (Agencies) Limited
3.1 Amended Certificate of Incorporation of Willis Corroon Corporation
3.2 By-laws of Willis Corroon Corporation
3.3 Partnership Agreement of Willis Corroon Partners
3.4 Memorandum and Articles of Association of Willis Corroon Group Limited
4.1 Indenture, dated February 2, 1999, among Willis Corroon Corporation, as issuer, Willis Corroon
Partners and Willis Corroon Group Limited, as guarantors, and The Bank of New York, as trustee
4.2 Form of 9% Senior Subordinated Notes due 2009 (the "Exchange Note") (Included as part of Exhibit 4.1
hereto)
4.3 Exchange and Registration Rights Agreement, dated February 2, 1999, among Willis Corroon Corporation,
Willis Corroon Partners, Willis Corroon Group Limited, Chase Securities Inc. and Chase Manhattan
International Limited
5.1 Opinion of Simpson Thacher & Bartlett as to the legality of the securities being registred hereby
10.1 Purchase Agreement, dated January 28, 1999, among Willis Corroon Corporation, Willis Corroon
Partners, Willis Corroon Group Limited, Chase Securities Inc. and Chase Manhattan International
Limited
10.2 Credit Agreement, dated as of July 22, 1998, and amended and restated as of September 1, 1998,
September 25, 1998 and February 19, 1999 and amended as of October 28, 1998, among Willis Corroon
Corporation, as borrower, Willis Corroon Group Limited and Trinity Acquisition plc, as guarantors,
the lenders thereunder and The Chase Manhattan Bank, as administrative agent and collateral agent
10.3 Master Shareholders' Agreement, dated October 13, 1998, among Willis Corroon Group plc, Willis
Corroon Europe B.V., Tolbert Insurance & Finance B.V., Saint Gallen S.r.l., Olimpia S.r.l., Ital
Brokers Holding S.p.A., ARCEF Holding N.V., and the Directors (as defined therein)
10.4 Shareholders' Agreement, dated September 28, 1998, among Willis Corroon Europe B.V. and the Current
Shareholders (as defined therein) (relating to the Assurandrgruppen merger)
10.5 Shareholders' Agreement, dated August 4, 1997, among Abbey National plc, Willis Corroon Group plc,
and Willis National Holdings Limited, as supplemented on December 11, 1998
10.6 Shareholders' Agreement, dated July 15, 1998, between Willis Corroon Europe B.V., Jaime Castellanos
Borrego, Antonio Serrats Iriarte and Pedro Cardelus Munoz-Seca
10.7 Shareholders' Agreement, dated December 17, 1998, among Willis Corroon AB, Mr. Staffan Larsson and
Mr. Tomas Larsson
10.8 1998 Share Purchase and Option Plan for Key Employees of TA I Limited
10.9 Guarantee by Willis Corroon Group Limited of pension scheme of John Reeve
10.10 Guarantee by Willis Corroon Group Limited of pension plan of Kenneth Pinkston
10.11 Guarantee by Willis Corroon Group Limited of pension plan of Brian Johnson
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.12 TA I Limited Zero Cost Share Option Scheme
12.1 Computation of ratio of earnings to fixed charges
21.1 List of subsidiaries of Willis Corroon Group Limited
23.1 Consent of Simpson Thacher & Bartlett (Included as part of Exhibit 5.1 hereto)
23.2 Consent of Ernst & Young
24.1 Powers of Attorney
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as
Trustee
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
</TABLE>
(b) Financial Statement Schedules
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Auditors on Schedule..................................................... S-1
Schedule II--Valuation and Qualifying Accounts................................................. S-2
</TABLE>
ITEM 22. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) The undersigned registrant hereby undertakes: (i) to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means and (ii) to arrange or provide for a facility
in the U.S. for the purpose of responding to such requests. The undertaking in
subparagraph (i) above includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(c) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section
10(a)(3) of the Securities Act
II-4
<PAGE>
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more that a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement; and
(iii) to include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering; and
(4) To file a post-effective amendment to the registration
statement to include any financial statements required by Rule 3-19 at
the start of any delayed offering or throughout a continuous offering.
(d) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant guarantor has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of London, Country of England, on March 15, 1999.
<TABLE>
<S> <C> <C>
WILLIS CORROON GROUP LIMITED
BY: /S/ THOMAS COLRAINE
-----------------------------------------
NAME: THOMAS COLRAINE
TITLE: GROUP FINANCE DIRECTOR
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed on March 15, 1999 by or on behalf of
the following persons in the capacities indicated with the registrant.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ ---------------------------
<C> <S>
Executive Chairman;
* Director
- ------------------------------ (Principal Executive
John Reeve Officer)
Chief Executive of Global
Specialties; Executive
* responsible for
- ------------------------------ discontinued U.K.
Richard J. S. Bucknall underwriting activities;
Director
Group Finance Director;
* Director
- ------------------------------ (Principal Financial and
Thomas Colraine Accounting Officer)
* Executive responsible for
- ------------------------------ North American Retail;
Brian D. Johnson Director
* Managing Partner of Gras
- ------------------------------ Savoye; Director
Patrick Lucas
Chairman of U.K. Retail and
* Executive responsible for
- ------------------------------ Willis Corroon
George F. Nixon International
Holdings-Europe; Director
* Chairman of Willis Faber
- ------------------------------ Re; Director
John M. Pelly
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------ ---------------------------
<C> <S>
Group Executive Director
responsible for North
* American Retail, U.S.
- ------------------------------ Wholesale, Asia-Pacific
Kenneth H. Pinkston and rest of the world;
Director
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ MICHAEL P.
CHITTY
--------------------
Michael P. Chitty
ATTORNEY-IN-FACT
</TABLE>
II-7
<PAGE>
AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below in the City of Nashville,
State of Tennessee on March 15, 1999 by the undersigned as the duly authorized
representative of WILLIS CORROON GROUP LIMITED in the United States.
<TABLE>
<S> <C> <C>
/s/ BART R. SCHWARTZ
-----------------------------------------
BART R. SCHWARTZ
</TABLE>
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant guarantor has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, on March 15,
1999.
<TABLE>
<S> <C> <C>
WILLIS CORROON PARTNERS
BY: WILLIS CORROON GROUP LIMITED, ITS GENERAL
PARTNER
BY: /S/ THOMAS COLRAINE
-----------------------------------------
NAME: THOMAS COLRAINE
TITLE: GROUP FINANCE DIRECTOR
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed on March 15, 1999 by or on behalf of
the following persons in the capacities indicated with the general partner of
registrant.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------- ---------------------------
<C> <S>
Executive Chairman;
* Director
- ----------------------------- (Principal Executive
John Reeve Officer)
Chief Executive of Global
Specialties; Executive
* responsible for
- ----------------------------- discontinued U.K.
Richard J. S. Bucknall underwriting activities;
Director
Group Finance Director;
* Director
- ----------------------------- (Principal Financial and
Thomas Colraine Accounting Officer)
* Executive responsible for
- ----------------------------- North American Retail;
Brian D. Johnson Director
* Managing Partner of Gras
- ----------------------------- Savoye; Director
Patrick Lucas
Chairman of U.K. Retail and
* Executive responsible for
- ----------------------------- Willis Corroon
George F. Nixon International
Holdings-Europe; Director
* Chairman of Willis Faber
- ----------------------------- Re; Director
John M. Pelly
</TABLE>
II-9
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------- ---------------------------
<C> <S>
Group Executive Director
responsible for North
* American Retail, U.S.
- ----------------------------- Wholesale, Asia-Pacific
Kenneth H. Pinkston and rest of the world;
Director
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ MICHAEL P. CHITTY
-------------------------
Michael P. Chitty
ATTORNEY-IN-FACT
</TABLE>
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant issuer has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on March 15, 1999.
<TABLE>
<S> <C> <C>
WILLIS CORROON CORPORATION
BY: /S/ BART R. SCHWARTZ
-----------------------------------------
NAME: BART R. SCHWARTZ
TITLE: SENIOR VICE PRESIDENT & GENERAL
COUNSEL
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed on March , 1999 by or on behalf of
the following persons in the capacities indicated with the registrant.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------- ---------------------------
<C> <S>
Group Executive Director
responsible for North
American Retail, U.S.
* Wholesale, Asia-Pacific
- ----------------------------- and rest of the world;
Kenneth H. Pinkston Director
(Principal Executive
Officer)
* Executive responsible for
- ----------------------------- North American Retail;
Brian D. Johnson Director
Senior Vice President;
* Director of Finance and
- ----------------------------- Administration; Director
Charles D. Hamilton (Principal Financial and
Accounting Officer)
/s/ BART R. SCHWARTZ Senior Vice President;
- ----------------------------- Corporate Secretary and
Bart R. Schwartz General Counsel; Director
Senior Vice President;
* Director of Human
- ----------------------------- Resources, North America;
Kim Windrow Director
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ BART R. SCHWARTZ
-------------------------
Bart R. Schwartz
ATTORNEY-IN-FACT
</TABLE>
II-11
<PAGE>
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
REPORT OF INDEPENDENT AUDITORS ON SCHEDULE
We have audited the consolidated financial statements of Willis Corroon
Group Limited at December 31, 1997 and 1998 and for the years ended December 31,
1996 and 1997, and the periods January 1 to September 1, 1998 and September 2 to
December 31, 1998, and have issued our report thereon dated March 15, 1999. Our
audits also included the financial statement schedule listed in Item 21(b) of
this Registration Statement. This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Ernst & Young
London, England
March 15, 1999
S-1
<PAGE>
SCHEDULE II
WILLIS CORROON GROUP LIMITED AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS ADDITIONS
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- --------------------------------------------- ------------- --------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996
Provision for bad and doubtful debts....... 26.9 0.8 (1.3)(a) (7.8) 18.6
--- --- --- --- ---
Year ended December 31, 1997
Provision for bad and doubtful debts....... 18.6 (4.0) (3.0) 11.6
--- --- --- --- ---
January 1 to September 1, 1998
Provision for bad and doubtful debts....... 11.6 1.5 (0.5) 12.6
--- --- --- --- ---
September 2 to December 31, 1998
Provision for bad and doubtful debts....... 12.6 (0.4) 0.1(a) (0.5) 11.8
</TABLE>
- ------------------------------
(a) Exchange adjustments
S-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ----------- ---------------------------------------------------------------------------------------------------------
<C> <S>
2.1 Master Acquisition Agreement, dated October 13, 1998, among Willis Corroon Group plc, Willis Corroon
Europe B.V., Tolbert Insurance & Finance B.V., UTA Willis Corroon S.p.A., Saint Gallen S.r.l., Olimpia
S.r.l., Ital Brokers Holding S.p.A., and ARCEF N.V.
2.2 Stock Purchase Agreement, dated September 28, 1998, between Assurandrgruppen A/S and Willis Corroon
Europe B.V.
2.3 WIFA Share Sale Agreement, dated August 4, 1997, between Willis Corroon Limited and Willis National
Holdings Limited, including Side Agreement, dated December 11, 1998
2.4 ANIFA Share Sale Agreement, dated August 4, 1997, between Abbey National Independent Consulting Group
Limited and Willis National Holdings Limited, including Side Agreement, dated December 11, 1998
2.5 Framework Agreement dated January 28, 1998 for the Merger of the limited partnership Jaspers Industrie
Assekuranz GmbH & Co. KG and the general partnership C. Wuppesahl & Co. Assekuranzmakler
2.6 Purchase and Transfer Agreement dated January 27, 1998 concerning shares in Industrie-Assekuranz GmbH and
Jaspers Industrie Assekuranz GmbH & Co. KG between Alexander & Alexander International Inc.,
Achtundsechzigste Verwaltungsgesellschaft Dammtor mbH, and Willis Corroon Group plc
2.7 Transfer of Shares dated January 22, 1998 of Industrie-Assekuranz GmbH to the Limited Partnership in the
firm Jaspers Industrie Assekuranz GmbH & Co. KG
2.8 Merger Contract, dated March 17, 1998, between Jaspers Industrie Assekuranz GmbH & Co. KG and C.
Wuppesahl & Co. Assekuranzmakler
2.9 Purchase and Sales Agreement, dated January 27, 1998, on the acquisition of limited partner shares in
Jaspers Wuppesahl Industrie Assekuranz GmbH & Co. KG, among Ms. Irene Koenig, Ms. Doris Ballauff, Mr.
Michael Emken, C. Wuppesahl Management GmbH, C. Wuppesahl, 68. Verwaltungsgesellschaft Dammtor mbH, and
Willis Corroon GmbH
2.10 Purchase and Sales Agreement dated January 22, 1998 between Deutsche Bank Aktiengesellschaft, Willis
Corroon GmbH and Willis Corroon Group plc in respect of a limited partnership interest of 14.6% in
Jaspers Wuppesahl Industrie Assekuranz GmbH & Co. KG
2.11 Agreement, dated July 23, 1997, among Assurances Generales de France IART, UAP Incendie-Accidents,
Athena, Gras Savoye Euro Finance S.A., Mr. Emmanuel Gras, Mr. Patrick Lucas, Mr. Daniel Naftalski, Willis
Corroon Group plc, Willis Corroon Europe B.V., and Gras Savoye & Cie, along with Amendment No. 1 thereto,
dated December 11, 1997, and Addendum thereto dated July 23, 1997
2.12 Sale and Purchase Agreement, dated October 20, 1997, among Willis Corroon Group plc, Acegiant Limited,
Willis Corroon Group Services Limited, and Willis Faber & Dumas (Agencies) Limited
3.1 Amended Certificate of Incorporation of Willis Corroon Corporation
3.2 By-laws of Willis Corroon Corporation
3.3 Partnership Agreement of Willis Corroon Partners
3.4 Memorandum and Articles of Association of Willis Corroon Group Limited
4.1 Indenture, dated February 2, 1999, among Willis Corroon Corporation, as issuer, Willis Corroon Partners
and Willis Corroon Group Limited, as guarantors, and The Bank of New York, as trustee
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- ----------- ---------------------------------------------------------------------------------------------------------
4.2 Form of 9% Senior Subordinated Notes due 2009 (the "Exchange Note") (Included as part of Exhibit 4.1
hereto)
<C> <S>
4.3 Exchange and Registration Rights Agreement, dated February 2, 1999, among Willis Corroon Corporation,
Willis Corroon Partners, Willis Corroon Group Limited, Chase Securities Inc. and Chase Manhattan
International Limited
5.1 Opinion of Simpson Thacher & Bartlett as to the legality of the securities being registered hereby
10.1 Purchase Agreement, dated January 28, 1999, among Willis Corroon Corporation, Willis Corroon Partners,
Willis Corroon Group Limited, Chase Securities Inc. and Chase Manhattan International Limited
10.2 Credit Agreement, dated as of July 22, 1998, and amended and restated as of September 1, 1998, September
25, 1998 and February 19, 1999 and amended as of October 28, 1998, among Willis Corroon Corporation, as
borrower, Willis Corroon Group Limited and Trinity Acquisition plc, as guarantors, the lenders thereunder
and The Chase Manhattan Bank, as administrative agent and collateral agent
10.3 Master Shareholders' Agreement, dated October 13, 1998, among Willis Corroon Group plc, Willis Corroon
Europe B.V., Tolbert Insurance & Finance B.V., Saint Gallen S.r.l., Olimpia S.r.l., Ital Brokers Holding
S.p.A., ARCEF Holding N.V., and the Directors (as defined therein)
10.4 Shareholders' Agreement, dated September 28, 1998, among Willis Corroon Europe B.V. and the Current
Shareholders (as defined therein) (relating to the Assurandrgruppen merger)
10.5 Shareholders' Agreement, dated August 4, 1997, among Abbey National plc, Willis Corroon Group plc, and
Willis National Holdings Limited, as supplemented on December 11, 1998
10.6 Shareholders' Agreement, dated July 15, 1998, between Willis Corroon Europe B.V., Jaime Castellanos
Borrego, Antonio Serrats Iriarte and Pedro Cardelus Munoz-Seca
10.7 Shareholders' Agreement, dated December 17, 1998, among Willis Corroon AB, Mr. Staffan Larsson and Mr.
Tomas Larsson
10.8 1998 Share Purchase and Option Plan for Key Employees of TA I Limited
10.9 Guarantee by Willis Corroon Group Limited of pension scheme of John Reeve
10.10 Guarantee by Willis Corroon Group Limited of pension plan of Kenneth Pinkston
10.11 Guarantee by Willis Corroon Group Limited of pension plan of Brian Johnson
10.12 TA I Limited Zero Cost Share Option Scheme
12.1 Computation of ratio of earnings to fixed charges
21.1 List of subsidiaries of Willis Corroon Group Limited
23.1 Consent of Simpson Thacher & Bartlett (Included as part of Exhibit 5.1 hereto)
23.2 Consent of Ernst & Young
24.1 Powers of Attorney
25.1 Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of New York, as
Trustee
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
</TABLE>
<PAGE>
Exhibit 2.1
page 1 of pages.
Amsterdam, 13 October, 1998
WILLIS CORROON GROUP plc.
WILLIS CORROON EUROPE B.V.
TOLBERT INSURANCE & FINANCE B.V.
UTA WILLIS CORROON S.p.A.
SAINT GALLEN S.r.l.
OLIMPIA S.r.l.
Ital Brokers Holding S.p.A.
ARCEF N.V.
MASTER ACQUISITION AGREEMENT
<PAGE>
page 2 of pages.
Index
MASTER ACQUISITION AGREEMENT...................................................3
PREAMBLE.......................................................................5
THE ACCOMPLISHMENT OF THE FINAL STRUCTURE......................................9
WARRANTIES AND REPRESENTATIONS; INDEMNIFICATION OBLIGATIONS...................16
MISCELLANEOUS.................................................................31
MASTER ACQUISITION AGREEMENT
By this Master Acquisition Agreement (the "MAA" or the "Agreement") executed in
Amsterdam on October 13, 1998 (the "Execution Date").
WILLIS CORROON GROUP plc., a company organised and existing under the laws
of United Kingdom, with registered office at Ten Trinity Square, London EC3P
3AX, authorised corporate capital of (pounds) 66.000.000 issued corporate
capital (pounds) 53.222.386,13, fully paid in, registered no. 621757,
represented by Ms. Sarah Turvill in her capacity as attorney and duly authorised
to execute this Agreement (hereinafter referred to as "WILLIS Group");
WILLIS CORROON EUROPE B.V., a company organised and existing under the
laws of The Netherlands, with registered office at Marten Meesweg 51, 3068 AV
Rotterdam (The Netherlands), authorised share capital NLG 150.000.000, issued
share capital NLG 115.493.000, registered no. 24135.835, represented by Ms..
Sarah Turvill in her capacity as Director and duly authorised to execute this
Agreement (hereinafter referred to as "WILLIS Europe"); WILLIS Group and WILLIS
Europe also being joint and collectively referred to as the "WILLIS";
TOLBERT INSURANCE & FINANCE B.V., a company organised and existing under
the laws of The Netherlands, with registered office at "Olimpic Plaza", Fred.
Roeskestraat 123 - I - 1076 EE Amsterdam - The Netherlands, authorised corporate
capital of NLG 73.400.000, issued NLG 27.525.000, TradeRegister No 33.150.389,
represented by Mr. Thomas J. Eltink in his capacity as attorney and duly
authorised to execute this Agreement (hereinafter referred to as "Tolbert");
UTA WILLIS CORROON S.p.A., a company organised and existing under the laws
of Italy with registered office at Via Padova 55, Turin (Italy), corporate
capital of 1.000.000.000 (one billion) fully paid in, registered with the
Companies Register of the Chamber of Commerce in Turin under no. 118566,
represented by Mr. Enrico Boglione and Ms. Sarah Turvill, in their capacity as
Directors duly authorised to execute this Agreement (hereinafter referred to as
"UTA");
SAINT GALLEN S.r.l., a company organised and existing under the laws of
Italy
<PAGE>
page 3 of pages.
with registered office at Via A. Doria 15, 10123 Turin (Italy), corporate
capital of ITL 20.000.000, fully paid in, registered with the Companies Register
of the Chamber of Commerce in Turin under no. 548343, represented by Mr. Lorenzo
Boglione in his capacity as Chairman and duly authorised to execute this
Agreement (hereinafter referred to as "Saint Gallen");
OLIMPIA S.r.l., a company organised and existing under the laws of Italy
with registered office at Via dei Giardini n. 7, Milan - Italy, corporate
capital of ITL 20.000.000 (twenty billion) fully paid in, registered with the
Companies Register of the Chamber of Commerce in Milan under no. 1420817 (REA),
represented by Mr. Carlo Pasteur in his capacity as Amministratore Unico duly
authorised to execute this Agreement (hereinafter referred to as "OLIMPIA");
Ital Brokers Holding S.p.A., a company organised and existing under the
laws of Italy, with registered office at Via Galassi n. 2, Cagliari, corporate
capital of ITL 5.000.000.000 fully paid in, registered in the Companies Register
of the Chamber of Commerce in Cagliari under no. 151025, represented by Mr.
Sebastiano Romeo or by Franco Lazzarini in their respective capacity as Chairman
and Managing Director and duly authorised to execute this Agreement (hereinafter
referred to as "HBC");
ARCEF N.V., a company organised and existing under the laws of The
Netherlands Antilles , with registered office at Curacao, corporate capital of
US $ 30.000, fully paid in, represented by Mr. Thomas J. Eltink in his capacity
as attorney and duly authorised to execute this Agreement (hereinafter referred
to as "ARCEF").
WHEREAS
A. Willis Europe, Saint Gallen and Olimpia have full title to and directly
own all the shares representing 100% of the authorised and issued capital
of UTA; in particular, Willis Europe has full title to 50% of the
authorised and issued capital of UTA, Saint Gallen to 40% of the
authorised and issued capital of UTA and Olimpia to the remaining 10% of
the authorised and issued capital of UTA.
B. Tolbert has full title to and directly owns 100% of the authorised and
issued capital of Italbroker S.p.A., an Italian corporation with
registered offices at Via Albaro n. 3 - Genova (Italy), corporate capital
of 5.000.000.000 (five billion) fully paid in, registered with the
Registrar of Company of Genova at No. 39063, (hereinafter referred to as
"Italbroker");
C. Furthermore, Tolbert has full title to and directly owns 100% of the
authorised and issued capital of Interconsult Wise S.r.l., an Italian
corporation with registered offices at Via Albaro 3 - Genova, corporate
capital of 1.000.000.000 (one billion) fully paid in, registered with the
Registrar of Company of Genova at No.337585, (hereinafter referred to as
"ICW");
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D. HBC has full title to and directly owns 50% of the authorised and issued
capital of Tolbert, while ARCEF has full title to and directly owns the
further 50% of the authorised and issued capital of Tolbert;
E. The Parties are willing to cause UTA to acquire the whole capital stock of
Gruppo (as below defined), and, as a consequence thereof, to cause Tolbert
to acquire a 50% interest in UTA, as it will result from the Final
Structure (as below defined), throughout the implementation of the various
transactions and corporate actions described hereinbelow.
NOW, THEREFORE, in consideration of the above whereas, which form an integral
part of this Agreement, the Parties hereto hereby agree as follows:-
PREAMBLE
1. DEFINITIONS.
Unless differently provided for in this Agreement, the following terms and
expressions shall have the meaning hereinafter specified:
1.1. "Accounting Principles" shall mean the accounting principles established by
the "Ordine Nazionale dei Dottori Commercialisti" and by the "Collegio dei
Ragionieri", as supplemented by the accounting principles established by the
International Accounting Standards Committee;
1.2. "Accounts Receivable" shall mean all credits (also if discounted with banks
or otherwise factored) notes and accounts receivable of Gruppo, of UTA Group and
of Tolbert, as the case may be, also to include "ricevute bancarie", drafts and
bills (i.e. "cambiali");
1.3. "Business" shall mean any and all the activities carried out by each of the
Company (as below defined);
1.4. "Company(ies)" shall mean each of Gruppo, UTA Group, or Tolbert, as from
time to time indicated in the context of the provisions of this Agreement;
1.5. "Current Tolbert Shareholders" shall mean jointly the current shareholders
of Tolbert, i.e. HBC and ARCEF;
1.6. "Current UTA Shareholders" shall mean jointly the current shareholders of
UTA,
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i.e. Willis Europe, Saint Gallen and Olimpia;
1.7. "Encumbrances" shall mean any claims, interest, option or pre-emption right
or other rights of shareholders or other parties, charges, pledges, mortgages,
security, actions, liens, or encumbrances and the like of whatever nature
(including, as to shares or quotas, inter alia, any "clausole di gradimento");
1.8. "Execution Date" shall mean the date of execution of this Agreement and of
the MSA (as below defined);
1.9. "Final Structure" shall mean the corporate structure resulting from the
full implementation of this Agreement and as described under Exhibit 1 hereto;
1.10. "Financial Statement(s)" shall mean the duly and validly approved
financial statements of each of the Company, as per the following reference
dates: as to UTA, December 31, 1997; as to Tolbert: September 30, 1998; as to
Gruppo: December 31, 1997;
1.11. "Gruppo" shall mean jointly Italbroker, ICW and their subsidiaries, as per
the group chart contained under Exhibit 2 hereto;
1.12. "IASC Accounting Principles" shall mean the accounting principles
established by the International Accounting Standard Committee;
1.13. "ICW Quotas" shall mean all of the outstanding quotas of ICW owned by
Tolbert and representing its entire fully paid up capital stock of ITL
1.000.000.000;
1.14. "Italbroker Shares" shall mean No. 1.250.000 shares of Italbroker owned by
Tolbert and representing its entire fully paid up capital stock of ITL
5.000.000.000;
1.15. "ITL" shall mean Italian Lire and all numerical expressions thereof follow
the continental European convention, whereby the point (.) separates the
thousands and the comma (,) separates the decimals;
1.16. "Liability(ies)" shall mean any and all liability of any nature, payments,
losses, damages, obligations, claims, expenses and other costs, (including
labour, social security, environmental, Taxes - as below defined-), product or
third party liabilities), which (A) are not expressly disclosed in the
Warranties and Representations (as below defined) made by the Seller (as below
defined), or (B) in any way derive, wholly or partly, (i) from any fact not
disclosed in said Warranties and Representations, or (ii) from the fact that one
or more of the Warranties and Representations may not be accurate, complete, or
true, for any reason whatsoever.
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1.17. "MSA" shall mean the Master Shareholders Agreement which shall be entered
into simultaneously to this Agreement, also by and between the Parties and the
Directors (as defined under the MSA);
1.18. "Net Working Capital" shall mean the net working capital calculated in
accordance with Exhibit 2.bis hereto;
1.19. "Net Worth" shall mean the net equity of each of the Company, i.e. issued
capital + reserves and retained earnings + profit of the year (capitale sociale
+ fondi riserve ordinarie e straordinarie + utile di esercizio);
1.20. "NLG" shall mean Dutch Guilders and all numerical expressions thereof
follow the continental European convention, whereby the point (.) separates the
thousands and the comma (,) separates the decimals;
1.21. "Parties" shall mean jointly the parties to this Agreement;
1.22. "Party" shall mean individually each of the Parties to this Agreement;
1.23. "Short Form(s)" shall mean the document(s), whose texts are attached to
this MAA under Exhibit 2ter, to be executed before a Notary Public and then
"apostilled" with the limited scope to implement the transfer and/or acquisition
of title to the relevant shares or quotas;
1.24. "Taxes" shall mean any and all liabilities or obligations of each of the
Company for or in respect of any income, sales, franchise, excise, use, personal
property, real property, payroll (whether imposed directly on the employer or
imposed on the employees and required to be withheld from wages paid by the
employer and including, for the purposes hereof, social contributions and other
amount to be paid to INPS, INAIL, INPDAI, ARPA and other similar bodies or
authorities, whether Italian or foreign, as the case may be, as required by the
applicable law and regulations, by the collective national bargaining agreements
or otherwise due), value added (IVA), leasing, transfer, stamp or other taxes,
levies, duties, charges or withholdings, together with any penalties, fines or
interest thereon;
1.25. "Timetable" shall mean the sequence of the events and corporate actions
which need to be implemented in order to accomplish the Final Structure, which
Timetable (contained under Exhibit 3 hereof) may be amended as required by
applicable laws or in accordance with the common reasonable opinion of the
Parties' Counsels;
1.26. "UTA Group" shall mean jointly UTA and its subsidiaries, as per the group
chart contained under Exhibit 4 hereto;
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page 7 of pages.
1.27. "UTA Milan" shall mean UTA Willis Corroon Milano S.p.A., a company
organised and existing under the laws of Italy, with a registered offices at
Piazza Luigi di Savoia 24, Milan (Italy), corporate capital of ITL 200 million,
fully paid in, registered with the Registrar of Companies of Milan under No.
146/274695;
1.28. "UTA RS" shall mean UTA Willis Corroon Rischi Speciali S.r.l.
(acknowledging the Parties that the extraordinary shareholders' meeting has
already resolved to amend it in "Willis Corroon Italia S.r.l."),a company
organised and existing under the laws of Italy with registered office at Via dei
Giardini 7, Milan (Italy), corporate capital of 90 million, fully paid in,
registered with the Companies Register of the Chamber of Commerce in Milan under
No. 197638.
2. TERMINATION OF PRIOR AGREEMENT AND PURPOSE OF THIS AGREEMENT.
2.1. The Parties wish to implement the Memorandum of Understanding entered into
on June 5, 1998, as amended and integrated thereafter on July 22, 1998, on July
28,1998, and by means of subsequent letters, whose contents are agreed upon by
the Parties (the "MoU"), where, inter alia, the main terms of this MAA and of
the MSA have been set out, and which will be fully replaced by the present MAA
and by the MSA and, therefore, is terminated.
2.2. Accordingly the MoU entered into by and among Willis Corroon Group plc,
Willis Corroon Europe B.V., Tolbert Insurance & Finance B.V., Ital Broker
Holding S.p.A., Arcef Holding NV, Uta Willis Corroon S.p.A., Saint Gallen
S.r.l., and Olimpia S.r.l., is hereby terminated as of the date of this
Agreement and all the Parties are reciprocally released from any liability
and/or obligation arising therefrom for any reason whatsoever.
2.3. The purpose of this Agreement, to be implemented in good faith through the
completion of the transactions and other operations contemplated and described
herein, or in any event assumed hereunder, relates to the acquisition by UTA of
the whole capital stock of Gruppo, and, as a consequence thereof, to the
acquisition by Tolbert of a 50% interest in UTA, as described in the Final
Structure.
2.4. In the light of the above, the Parties are fully aware and agree that all
the provisions of this Agreement are non severable from each other (including
the warranties and representations and the relevant indemnification obligations)
and each of them is essential to the performance of this Agreement. Therefore,
any default with respect to any provision of this Agreement (as well as of any
action undertaken by any of the Parties in compliance with the Timetable, even
if enforced prior to the execution of this Agreement), as well as any behaviour
or act of one of the Parties (except for any behaviour or act caused by the act
or omission of a third party, being agreed that a director of one of the
involved companies shall not be deemed to be a third party) which
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page 8 of pages.
may result in any unjustified delay, hindering, or default of any of them, shall
be deemed to affect the entire Agreement also for purposes of damages.
2.5. In the event that the transaction envisaged in this MAA is not completed as
a result of a breach by WILLIS, and if WILLIS, or any of its subsidiaries,
within two years from June 5, 1998, uses information gained as a result of the
discussion which have taken place or the due diligence, to acquire any Client of
Gruppo, then the Current Tolbert Shareholders shall be entitled to an indemnity
from WILLIS equal to 250% of the brokerage and fee income earned by Gruppo in
relation to such client in the last 12 months before WILLIS acquires such
Client.
This indemnity will not apply in circumstances where WILLIS can show that it
acquired a client of Gruppo for reasons entirely unconnected with the use by
WILLIS of information gained as a result of the discussion which have taken
place or the due diligence.
3. REFERENCE TO THE MASTER SHAREHOLDERS AGREEMENT. INTERIM PERIOD.
3.1. This MAA and the MSA shall be entered into simultaneously on the same date
and any and all events regulated in these two agreements that shall occur at the
Execution Date shall be deemed as to take place at the same time. If any of the
transactions provided for in these two agreements should not take place, both
this MAA, and the MSA shall remain without effect, unless otherwise agreed by
the Parties, and each Party shall have recourse to all remedies available under
applicable laws against the defaulting Party(ies).
3.2. Throughout the implementation of all actions set forth in this MAA and/or
in the MSA and up and until the appointment of the new boards of directors of
the interested companies as provided for in this MAA and/or MSA, the Parties
agree to cause the boards of directors of all interested companies to conduct
the day-to-day business in an ordinary and prudent manner with an aim to
implementing the various actions provided for in this MAA and/or in the MSA, and
to consult and agree among them should any extraordinary matter arise. Should
the Parties fail to appoint new boards of directors, in any case the provisions
set forth under the MSA shall apply with respect to the interested companies.
3.3. The Parties agree and acknowledge that a provision similar to this Article
3 has been provided for in the MSA.
3.4. In addition, it is agreed by the Parties that, simultaneously to the
execution of this MAA, the Directors of the Company shall resign in writing; the
new boards of directors shall be appointed by the relevant shareholders'
meetings on the first possible date after the adoption of the new by-laws
pursuant to Article 4.1.(d).
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page 9 of pages.
THE ACCOMPLISHMENT OF THE FINAL STRUCTURE
4. UTA GROUP RE-ORGANISATION AND LOAN AGREEMENT.
4.1. In order to accomplish the Final Structure in accordance with the
Timetable, Current UTA Shareholders shall:
(a) take any further step for the implementation of the merger procedure
between UTA and UTA Milan, which has been resolved by the respective
extraordinary shareholders' meetings on July 28, 1998;
(b) cause UTA to ask the competent Court to appoint an advisor in order
to evaluate the current UTA brokerage business in order to
contribute it in UTA RS at a value equal to the net worth of the
contributed business, calculated in accordance with the book value
as emerging by UTA financial statement and, as a consequence
thereof, cause the increase in the capital stock in UTA RS for an
equivalent amount, without premium, change the company scope of UTA
from an operating company to a pure holding company and
simultaneously amend the current corporate name of UTA into "Willis
Corroon Italia Holding S.p.A.";
(c) resolve the Second Capital Increase (as below defined); the Parties
acknowledge that the extraordinary shareholders meeting of UTA,
possibly in the "totalitaria" form, will be held not earlier than
six days after the Contribution in Kind;
(d) finally, adopt new By-laws, in conformity with the text which shall
be agreed in good faith by the Parties within 30 days of the First
Closing Date, in conformity with the MSA.
4.2. Prior to the First Closing Date, and with value date as of the said First
Closing Date, UTA shall enter into a loan agreement in the amount of ITL 30,5
billion (the "Bank Loan") so as to fulfil the payment obligations of the first
instalment of the price relating to the sale and purchase of ITB and ICW, as
provided for under this Agreement.
4.3. The Bank Loan shall be entered into by UTA with Lloyds Bank - Amsterdam.
Willis shall guarantee the full Bank Loan, provided that:
(a) Tolbert will use its bank account at ABN Amro in Amsterdam, into
which UTA will pay any sums in favour of Tolbert;
(b) UTA will open a bank account at Istituto Bancario San Paolo di
Torino, Sede Centrale, Piazza San Carlo, into which the sums
relating to the First Capital Increase and to the Second Capital
Increase shall be paid;
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page 10 of pages.
(c) a Willis appointee will be a mandatory signatory on the UTA accounts
to be used with reference to any payment or transactions provided
for by this Agreement;
(d) irrevocable instructions in relation to the payment of the first
instalment of the price for the Italbroker Shares and for the ICW
Quotas and of the First Capital Increase will be lodged at the banks
on the First Closing Date.
5. SALE AND PURCHASE OF ITALBROKERS AND ICW.
5.1. UTA shall purchase from Tolbert, which shall sell and transfer to UTA at
the First Closing, free of any Encumbrances, the Italbroker Shares by executing
the Short Forms before a Notary Public in Amsterdam.
5.2. Subject to the homologation of the amendments to the current By-laws of
UTA, as per Article 4.1.(b) hereinabove, UTA shall purchase from Tolbert, which
shall sell and transfer to UTA at the Second Closing, free of any Encumbrances,
the ICW Quotas by executing the Short Forms before a Notary Public in Amsterdam.
5.3. Subject to the price adjustment provided for under the following Article 11
hereof, the aggregate price for the transfer of title to the Italbroker Shares
and to the ICW Quotas shall be equal to ITL 71 billion (the "Aggregate Price"),
of which ITL 69,5 billion relating to Italbroker Shares and ITL 1,5 billion to
ICW Quotas, and shall be adjusted in accordance with the Formula contained under
Exhibit 5 hereto.
6. THE FIRST CAPITAL INCREASE.
6.1. The Parties acknowledge and agree that Current UTA Shareholders have
already favourably resolved a capital increase in UTA, (already approved by the
competent Tribunal), to be implemented by the issuance of No. 763.000 shares
with a ITL 763.000.000 par value, for an aggregate amount of ITL 30.500.925.000
billion (of which ITL 763.000.000 as par value and ITL 29.737.925.000 as
premium) (the "First Capital Increase").
6.2. Subject to the previous renunciation by Willis Europe, Saint Gallen and
Olimpia, of their pre-emption rights with reference thereto (being agreed that
the said Willis Europe, Saint Gallen and Olimpia shall renounce their
pre-emption rights on or before the First Closing Date), the First Capital
Increase shall be subscribed and paid by Tolbert at the First Closing Date and
upon completion of the transfer of the Italbroker Shares.
7. THE FIRST CLOSING AND RELATED FURTHER COMMITMENTS.
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page 11 of pages.
7.1. The First Closing shall take place in Amsterdam (The Netherlands), before a
Notary Public of Stibbe, Simont, Monahan - Duhot, Notaries Public in The
Netherlands (the "Notary Public"), on October 13, 1998 at 10,00 a.m. (the "First
Closing Date"), simultaneously to the execution of this MAA.
7.2. At the First Closing:-
(a) Tolbert shall sell, transfer and assign to UTA, which shall acquire,
full title, free of Encumbrances, to the Italbroker Shares, by
executing the Short Forms before the Notary Public and delivering to
UTA the shares certificates No 15, 16, 18, 19;
(b) UTA and Tolbert shall enter into a sale and purchase agreement with
reference to the ICW Quotas, by executing the relevant Short Forms;
this sale and purchase agreement shall be subject to the condition
precedent of the homologation of the amendment in the company scope
(i.e. oggetto sociale) of UTA from an operating company to a pure
holding Company. New by-laws of UTA shall be adopted in conformity
to the provision of Article 4.1(d) hereinabove.
(c) UTA shall pay on Tolbert's bank account No. 403268656 at ABN Amro,
Amsterdam, P.O. BOX 407 - 1000 AK - Amsterdam, a sum equal to ITL
30,5 billion to Tolbert, of which ITL 29,5 billion as a first
instalment on the consideration for the Italbroker Shares and ITL 1
billion in advance and in account as a consideration for the ICW
Quotas;
(d) Tolbert shall subscribe and pay on UTA's bank account No 123396 at
Istituto Bancario San Paolo di Torino, S.p.A. Sede di Torino, Piazza
San Carlo n. 156, the ITL 30.500.925.000 relating to the First
Capital Increase in UTA, with value date on October 13, 1998, save
an express refusal of ABN Amro to comply with this value date, in
which case the value date shall be not later than the first date
available for the bank;
(e) any further documents, guarantees, ancillary contracts and
certificates, as provided for in this Agreement or, in any event, as
necessary or appropriate for the contemplated transaction, shall be
duly executed, prepared, filed, issued and delivered by the Parties.
7.3. On October 14 or 15, 1998, upon completion of the First Closing:
(a) UTA Directors, upon delivery of the payment statement relating to
the First Capital Increase, shall issue the declaration provided for
by Article 2444 of the Italian Civil Code and shall deposit it with
the competent Registry of Companies;
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page 12 of pages.
(b) Thereafter, UTA Directors shall issue the new share certificates in
favour of Tolbert and relating to the First Capital Increase and
shall record Tolbert in the UTA Shareholders Register as a
shareholder of UTA;
(c) UTA shall reimburse to Lloyds Bank, Amsterdam, with value date on
October 15, 1998 (save an express refusal of the banks to comply
with this date, in which case the value date shall be not later than
the first available date for the banks), the Bank Loan and Willis
shall be consequently relieved from the granted relevant guarantee;
(d) Italbroker Directors shall record UTA in the Italbroker Shareholders
Register as the sole shareholder of Italbroker.
7.4. Within 20 days from the First Closing Date (unless the "totalitaria" fails,
in which case the payment should be made immediately after the approval of the
Second Capital Increase by an extraordinary shareholders meeting, which will be
in any event duly convened and held not later than 30 days from the First
Closing Date), Willis Europe shall pay to UTA and UTA shall pay to Tolbert on
the same Tolbert's bank account No. 403268656 at ABN Amro, Amsterdam, P.O. BOX
407 - 1000 AK - Amsterdam, the further amount of ITL 30,5 billion, still due as
the second instalment relating to the price for the transfer of the Italbrokers
Shares and of the ICW Quotas, of which 30 billion representing the second
instalment for the transfer of the Italbroker Shares and ITL 500 million
representing the second instalment of the advanced payment relating to the ICW
Quotas.
7.5. Upon completion of the First Capital Increase, the share capital of UTA
shall be equal to ITL 1.763.000.000 and shall be owned as follows:
(a) as to Tolbert, No 763.000 ordinary shares, representing 43,3 % of
the First Increased UTA Share Capital;
(b) as to Willis Europe, No 500.000 ordinary shares, representing 28,4 %
of the First Increased UTA Share Capital;
(c) as to Saint Gallen, No 400.000 ordinary shares, representing 22,7 %
of the First Increased UTA Share Capital;
(d) as to Olimpia, No 100.000 ordinary shares, representing 5,7 % of the
First Increased UTA Share Capital.
8. THE CONTRIBUTION IN KIND IN TOLBERT
8.1. The Parties acknowledge and agree that the Current Tolbert Shareholders
have resolved a redemption in capital in Tolbert in the amount of NLG 13.762.500
by
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page 13 of pages.
decreasing the par value of the existing shares from NLG 36.700 to NLG 18.350.
In addition, the Parties acknowledge and agree that Current Tolbert Shareholders
have already favourably resolved a capital increase in Tolbert, reserved to the
benefit of Saint Gallen and Olimpia, for an amount of NLG 13.762.500 par value,
to be implemented by the issuance of No. 750 "B" shares (being the existing
shares transformed into "A" shares) , and to be subscribed and paid by means of
the contribution in kind, by the said Saint Gallen and Olimpia, of all of their
shares in UTA, representing in aggregate 28,4% of the First Increased UTA Share
Capital (the "Contribution in Kind").
8.2. The final implementation of the Contribution in Kind shall take place in
Amsterdam (NL), before the Notary Public , on October 20, 1998 (the
"Contribution in Kind Date").
8.3. At the Contribution in Kind Date, Saint Gallen and Olimpia, on the one
side, and Tolbert, on the other side, shall execute the deed of issue relating
to the Contribution in Kind, therefore transferring the property of all of their
shares in UTA in favour of Tolbert, so as to finally accomplish the Contribution
in Kind. Exhibit 6 contains a copy of the Deed of Issue, which shall be executed
before the Notary Public. The Notary Public shall duly certify the relevant
subscriptions of the representatives of Saint Gallen and Olimpia. The deed of
issue shall be duly apostilled.
Promptly after the execution of the issue deed relating to the Contribution in
Kind and after all of the UTA shares have been endorsed or in any event
transferred by Olimpia and Saint Gallen in favour of Tolbert, the relevant share
certificates shall be sent to the registered offices of UTA, so as to permit the
UTA directors to record Tolbert as a UTA shareholder also with reference to the
said share certificates.
Upon completion of the above record, the share capital of UTA, equal to ITL
1.763.000.000, shall be owned as follows:
(a) as to Tolbert, No 1.263.000 ordinary shares, representing 71,6% of
the First Increased UTA Share Capital;
(b) as to Willis Europe, No 500.000 ordinary shares, representing 28,4%
of the First Increased UTA Share Capital.
8.4. Upon completion of the Contribution in Kind, and upon elapse on November 2,
1998, of the two month period related to the redemption in capital mentioned
under Article 8.1 hereinabove, the capital stock of Tolbert shall be equal to
NLG 27.525.000, divided into No. 750 "A" shares and No. 750 "B" shares, with NLG
18.350 par value, and shall be owned as follows:
(a) as to HBC, No. 375 "A" shares, representing 25% of the then
outstanding 27.625.000 NLG Tolbert authorised and issued capital
stock;
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page 14 of pages.
(b) as to Arcef, No. 375 "A" shares, representing 25% of the then
outstanding 27.625.000 NLG Tolbert authorised and issued capital
stock;
(c) as to Saint Gallen, No. 600 "B" shares, representing 40% of the then
outstanding 27.625.000 NLG Tolbert authorised and issued capital
stock;
(d) as to Olimpia, No. 150 "B" Shares, representing 10% of the then
outstanding 27.625.000 NLG Tolbert authorised and issued capital
stock.
8.5. The Current Tolbert Shareholders, Saint Gallen and Olimpia shall take any
appropriate actions so as to ensure that the issuance and existence of classes
"A" and "B" of shares is used with the sole scope to permit the Current Tolbert
Shareholders to obtain the payment of those dividends, reserves and/or retained
earnings in Tolbert, which are or will be directly and strictly connected with
the sale of Gruppo to UTA, (i.e. the Aggregate Price (including the Remaining
Price), interest and indemnities).
No dividends, earnings and available reserves shall be distributed, nor any
different distribution and/or reimbursement shall be made in favour of any of
the Current Tolbert Shareholders, other than in connection with the mentioned
sale of Gruppo, notwithstanding the existence of two (or, in the future, even
more) classes of shares in Tolbert.
9. THE SECOND CAPITAL INCREASE.
9.1. Not earlier than six days from the Contribution in Kind Date, the
extraordinary shareholders meeting of UTA shall resolve (if possible in the
"totalitaria" form, in which case the extraordinary meeting shall be held on
October 28, 1998, 3p.m. at the offices of Notaio Morone in Turin, if not, in
form of extraordinary shareholders' meeting convened in accordance with the
relevant law and by-laws provisions) a second capital increase in cash in UTA,
to be implemented by the issuance of No. 763.000 shares with a ITL 763.000.000
par value, for the aggregate amount of ITL 30.500.925.000 (of which ITL
763.000.000 as par value and ITL 29.737.925.000 as premium), (the "Second
Capital Increase").
9.2. The Second Capital Increase shall be subscribed and paid by Willis Europe,
upon renounce of Tolbert from its pre-emption rights (being agreed that Tolbert
shall renounce its pre-emption right on or before the Second Capital Increase),
the day after the extraordinary shareholders meeting mentioned above has been
validly held and it has validly resolved the Second Capital Increase. The
payment shall be made by Willis Europe on UTA bank account No 123396 at Istituto
Bancario San Paolo di Torino S.p.A., Sede di Torino, Piazza San Carlo n. 156.
9.3. Upon completion of the procedure relating to Second Capital Increase, the
share
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capital of UTA shall be equal to ITL 2.526.000.000 (the "Second UTA Increased
Capital") and shall be owned as follows:
(a) as to Tolbert, No 1.263.000 ordinary shares, representing 50% of the
Second UTA Increased Capital;
(b) as to Willis Europe, No 1.263.000 ordinary shares, representing 50%
of the Second UTA Increased Capital.
10. CONDITION PRECEDENT TO THE TRANSFER OF ICW QUOTAS.
10.1 Subsequent to the homologation of the new version of the By-laws of UTA
(being agreed that the present by-laws shall be amended in good faith between
the Parties within one month of the execution hereof) in accordance with the
provision set forth under Article 5.2 hereof, UTA shall finally acquire from
Tolbert, free of Encumbrances, the ICW Quotas, being agreed that the price
relating thereto - equal to ITL 1,5 billion - shall have already been paid in
advance in two instalment at the First Closing and after 20 days from the said
First Closing.
10.2. Upon fulfilment of the said condition precedent, ICW Directors shall
record UTA in the ICW shareholders register as the sole shareholder of ICW.
11. PRICE ADJUSTMENT.
11.1. Subject to the price adjustment provided for by this Article, the
Aggregate Price for the acquisition by UTA of the Italbroker Shares and of the
ICW Quotas has been in principle determined in the amount of ITL 71 billion. A
part of it (i.e. ITL 61 billion) shall be allowed by UTA in favour of Tolbert at
the First Closing and after the Second Capital Increase.
11.2. The remaining part of the Aggregate Price (the "Remaining Price") shall be
calculated in accordance with Exhibit 5 by Gruppo current auditor (i.e. Deloitte
& Touche Tomatsu S.p.A.) no later than April 30, 1999 at the Current Tolbert
Shareholders' costs and expenses, being in addition understood that the Parties
shall timely and deliver simultaneously to Gruppo current auditor and to Willis'
auditor all the necessary documents, information and data for the said
calculation. The report of Gruppo current auditor containing the calculation of
the Remaining Price shall be then delivered, within the same term of April 30,
1999, to Willis' auditor, which will revise it (at Willis' costs and expenses)
within 20 days of the delivery of Gruppo current auditor report, with the view
of reaching a common determination of the Remaining Price. Failing this common
determination within May 20, 1999, the following Article 11.3 shall
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apply.
11.3. Any dispute with reference to the Remaining Price (to include any dispute
relating to the calculation of the Net Working Capital adjustment), should
Gruppo current auditor and Willis' auditor not agree upon the Remaining Price
within the term provided for above, shall be referred to a third party
International accounting first ranking firm (the "Arbitrator"), to be jointly
appointed by Gruppo current auditor and Willis' current auditor. Failing this
joint appointment, the Arbitrator shall be appointed by the President of ICC
upon request of the most diligent party. The Arbitrator shall determine the
Remaining Price within 30 days from its acceptance of the said task. The
Arbitrator's determination shall be final and binding upon the Parties and it
shall be deemed to be an integral part of this Agreement. All the fees and costs
relating to the determination by the Arbitrator of the Remaining Price shall be
borne on a 50% basis by Willis Europe and by Current Tolbert Shareholders.
11.4. Subject to Article 8.5 hereinabove, the Remaining Price shall be paid by
UTA in favour of Tolbert within 5 banking days of either the common calculation
of the Remaining Price jointly made by Gruppo current auditor and by Willis'
auditor, or the determination made by the Arbitrator. The payment will be made
in accordance with the following procedure:
(a) UTA will call an extraordinary shareholders meeting to resolve a
capital increase in an amount equal to the Remaining Price; this
capital increase will be subscribed 50% each by Willis Europe and
Tolbert; Willis Europe will make, within the 5 day term set forth
above, an advanced payment (i.e. "versamento in conto futuro aumento
di capitale") with reference to its 50% part of the capital
increase; UTA will use the sums of this advanced payment to the sole
aim to paying 50% of the Remaining Price to Tolbert;
(b) Tolbert will subscribe its 50% of the capital increase; in addition,
UTA hereby undertakes not to oppose, in connection with this capital
increase, the possibility for Tolbert to swap the payment of its
part of the increase in capital with its credit vis-a-vis UTA with
reference to the residual 50% of the Remaining Price.
In any event, Willis and Tolbert will have the possibility to determine the best
way to finance UTA with the aim of allowing the UTA to pay the Remaining Price
in a tax efficient way for the UTA itself. Willis hereby guarantees to pay a sum
equal 50% of the Remaining Price to Tolbert, in the event UTA does not comply
with its obligation to pay the Remaining Price.
12. THE CONTRIBUTION IN UTA RS, THE MERGER AND THE FINAL STRUCTURE.
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page 17 of pages.
12.1. Upon completion of all transactions and corporate actions described under
the above provisions, the Parties shall cause UTA to contribute its current
brokerage business (being agreed that the participating interests in
Subsidiaries and other companies shall not be contributed) in UTA RS, as per the
terms set forth under Article 4.1.(b).
12.2. Furthermore, the Parties shall procure UTA to adopt new by-laws, in
accordance with the provision of Article10.1 hereinabove and in accordance with
the provision set forth under Article 4.1.(d) hereof.
12.3. Upon completion of all transactions and corporate actions described under
the above provisions, the Parties shall take any adequate step so as to achieve,
prior to December 31, 1999, the "horizontal merger" between Italbroker and UTA
RS.
12.4. This "horizontal merger" shall take place at book values. The company
resulting therefrom shall be named "Willis Corroon Italia S.p.A.". Any and all
documents relating to this merger procedure shall be prepared in good faith by
the interested parties and approved by the competent corporate bodies.
12.5. With the implementation of the "horizontal merger", the Final Structure
will be accomplished.
WARRANTIES AND REPRESENTATIONS; INDEMNIFICATION OBLIGATIONS
13. IN GENERAL.
13.1. For the purposes of this Agreement the Parties agree that certain
warranties and representations set forth under Articles 14 and 15 hereinbelow
(the "Warranties and Representations") shall be given:
(a) severally by Willis Europe, Saint Gallen and Olimpia, and in
proportion to their shareholding as at the date hereof in UTA
respectively equal to 50%, 40% and 10% thereof, (but jointly between
Saint Gallen and Olimpia with reference to their 40% and 10% of UTA)
(the "Seller") in the ultimate favour of the Current Tolbert
Shareholders, whether directly or indirectly through Tolbert, (the
"Purchaser") in connection with the First Capital Increase (the "UTA
Operation");
(b) jointly by Tolbert, by the Current Tolbert Shareholders (the
"Seller") in
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page 18 of pages.
favour of UTA (the "Purchaser") in connection with the sale and
purchase of Gruppo (the "Gruppo Operation");
(c) jointly by Current Tolbert Shareholders (the "Seller(s)") in favour
of Saint Gallen and Olimpia (the "Purchaser(s)") with respect to
Tolbert and, on the other hand, jointly by Olimpia and Saint Gallen
in favour of Current Tolbert Shareholders with respect to the UTA
shares contributed in Tolbert, in connection with the Contribution
in Kind described under Article 8 hereof (the "Tolbert Operation");
any claim concerning the Gruppo Operation arising from this MAA
shall be exclusively in favour of UTA.
13.2. Therefore, for the avoidance of doubt:
(a) "Seller(s)" shall mean, as the case may be, either: (i) Current UTA
Shareholders with reference to the UTA Operation; or (ii) jointly
Tolbert and Current Tolbert Shareholders with reference to the
Gruppo Operation; or (iii) jointly Current Tolbert Shareholders or
jointly Olimpia and Saint Gallen, with reference to the Tolbert
Operation;
(b) "Purchaser(s)" shall mean, as the case may be, either: (i) UTA with
reference to the Gruppo Operation; or (ii) Tolbert with reference to
the UTA Operation; or (iii) jointly either Saint Gallen and Olimpia,
or Tolbert Current Shareholders, with reference to the Tolbert
Operation;
(c) "Interested Company" shall mean the Company that will be indemnified
by the Seller, i.e.: (i) UTA, or its subsidiary, as the case may be,
with reference to the UTA operation; or (ii) Gruppo with reference
to the Gruppo Operation; and (iii) either Tolbert or UTA with
reference to the Tolbert Operation.
13.3. The Parties undertake that in the event of any resolutions or actions to
be taken by the Board of Directors of either UTA or Tolbert, as the case may be,
by any of the Seller or Purchaser in respect of any of the Seller or the
Purchaser, as the case may be, such resolutions or actions shall be resolved as
follows:
(a) If concerning the Gruppo Operation, by the Current UTA Shareholders'
representatives only;
(b) if concerning the UTA Operation by the Current Tolbert
Shareholders's representatives only,
it being understood that the other representatives of the new shareholders
in UTA or in Tolbert, as the case may be, shall abstain from voting
because in potential conflict of interest, provided that they are
expressly relieved and held harmless
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page 19 of pages.
from any liability deriving from any claim or actions resolved.
14. WARRANTIES AND REPRESENTATIONS.
14.1. Seller represents and warrants to Purchaser that (save as of that
different date expressly indicated hereinbelow under this Article 14), as of the
date of this Agreement, and:
(i) as of the First Closing Date with reference to the UTA Group, to
Italbroker and all its subsidiary and to ICW ;
(ii) as of the implementation of the Contribution in Kind described under
Article 8 as to Tolbert;
(each of the date indicated under Articles 14.1((i)), 14.1. and
14.1.((ii)) hereinafter referred to as the "Relevant Date" as from time to
time indicated in the context of this Agreement),
all the above as made at and as of such Relevant Date:
(b) Title. Seller has directly or indirectly full title to the Company
shares or quotas, as the case may be, free and clear of any
Encumbrances and may freely dispose thereof; no person, firm or
corporate or unincorporated entity has any option or right to
purchase or to be offered to purchase or otherwise acquire, in whole
or in part, the Company quotas or shares.
There is no requirement applicable to the Seller to make any filing
with, or to obtain any permit, authorisation, consent, approval, or
exemption of, any governmental, regulatory of financial authority,
whether national or international, private or public, as a condition
precedent to the lawful consummation of the transactions
contemplated by this Agreement, or to the conduct of the business of
the Company, or to the continuity of the validity of any loan,
financing or other benefit of the Company.
There is not any option or pre-emption right other than the ones set
forth by of the relevant by-laws of each of the Company, which are
in any event hereby waived to all effects .
(c) No Violation. The execution of this Agreement and the consummation
of the transactions contemplated herein have been regularly approved
by the competent corporate authority of the Seller. Neither the
execution and delivery of this Agreement by the Seller, nor the
performance of its obligations pursuant thereto will conflict with
or result in any breach of any agreement between the Seller and
other parties.
(d) Financial Statements. The Financial Statement of the Company is
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page 20 of pages.
prepared in accordance with the Accounting Principles, as
consistently applied over the years, and present fairly and with
accuracy the related financial position of the Company, and the
results of its operations for the relevant periods.
(e) Taxes. The Company has always and duly paid the Taxes and duly filed
within the times and in the manner prescribed by law all reports and
returns of Taxes required to be filed by the applicable legislation;
it has duly paid or made provisions for payment of all Taxes due and
payable. There are no tax liens upon any of the assets of the
Company.
(f) Due Incorporation of the Company. The Articles of Incorporation and
By-laws of the Company in effect on the date hereof are attached as
Exhibits 7 through 10 and shall not be subject to any amendment,
other than in respect of, and to comply with, the provisions of this
Agreement, or, as to Tolbert, to comply with the redemption in
capital resolved on August 21, 1998. The Company is a corporation
duly incorporated and validly existing under either the laws of
Italy, or the law of The Netherlands or other jurisdictions, as the
case may be, and it has the requisite corporate powers or other
capacities to own and lease its properties and to conduct its
business as now conducted.
The Company is not - nor ever has been - insolvent, or in a
situation considered by art. 2446, 2447 or 2448 of the Italian civil
code or by other similar provisions of the Dutch Law or of other
applicable legislation, nor it is, or ever has been, declared
bankrupt or liquidated, and no action or request is or shall be
pending to declare the Company bankrupt or to make it subject to any
insolvency proceedings.
(g) Subsidiaries. The Company does not have any subsidiaries, nor
branches, or offices, or facilities, nor they have participating
interest in any other corporation, partnership, joint venture,
consortium, E.I.E.G., or other person or entity, other than the ones
specified under the Financial Statement.
(h) The Capital of the Company. The authorised and issued capital of the
each of the Company, as of the date hereof amounts, respectively, to
ITL 1.000.000.000 for UTA, to ITL 5.000.000.000for Italbroker, to
ITL 1.000.000.000 for ICW and to NLG 27.525.000 fully paid up for
Tolbert, being the Parties aware of the redemption in capital by
means of the redemption of the par value from NLG 36.700 to NLG
18.350 in progress with reference to Tolbert. The name of, and
number of shares or quotas held by each of its registered
shareholders are the ones specified in this Agreement and are duly
recorded in the respective Company's shareholders book, in
conformity with the applicable legislation and Company's by-laws.
<PAGE>
page 21 of pages.
All shares or quotas have been validly issued, are fully paid up and
entail no further obligation on the part of the shareholders,
whether of payment or of any other action or additional
performances.
(i) Properties. The Company has exclusive, good and undisputed title to
all its respective properties and assets as respectively owned or
possessed by it, free and clear of all Encumbrances.
All properties of the Company are in good operating condition,
maintenance and repair sufficient for use in the ordinary course of
the business and conform in all material respects to all applicable
statutes, ordinances and regulations relating to their construction,
use and operation, including inter alia to the obligations and
requirements set forth under Dlgs. September 19, 1994, No 626 and
relevant regulations, and similar provisions under the Dutch Law as
to Tolbert, or other applicable legislation.
In particular, and without prejudice to the above, as of the date of
signature of this Agreement, the properties of the Company are in
compliance with all the relevant applicable legislation, such as
zoning, building permits, environmental law, etc.
(j) Insurance. The Company and its assets of any insurable nature have
at all relevant times been covered by insurance in adequate amounts
against fire, accidents, third party and other risks (including but
not limited to product liability), customarily covered by insurance
by other companies engaged in similar businesses as the Business,
and nothing has been or will be done or omitted to be done which
would make any policy of insurance void or voidable.
(k) Financial Leasing and Other Rental Agreements. All leases (both
financial or rental agreements - 'locazioni'), pursuant to which the
Company leases real or personal property, are in good standing,
valid and effective in accordance with their respective terms. No
person or entity, other than the Company, has any right to, or does
in fact enjoy, in whole or in part, any of the real or personal
property covered by these leases or utilised by the Company in its
operations.
(l) Intellectual Property. The Company (i) warrants that it will take
all actions reasonably necessary to protect any intellectual
property to which it may have right; and (ii) has not received any
written notice or claim that the conduct of its business infringes
any patent, copyright or trademark of any third party, and Seller,
nor any representative of the Company, are aware of any basis for
any such claim.
Neither the Seller, nor any of the directors or employees of the
Company,
<PAGE>
page 22 of pages.
nor any other person have any rights or claim in any license,
authorisation, approval, franchise, invention, patent, proprietary
right, trademark, or any industrial or commercial property right in
the intellectual property, nor the Seller or such other persons have
any right of any nature whatsoever on invention, patent, proprietary
right, trademark, or any industrial or commercial property right
which is or is going to be used by the Company in the conduct of the
Business.
(m) Stock. All stock used by ICW is owned by it and consists of stock of
the kind, quality, condition and quantity usable and sellable at
current prices in the ordinary course of business. The stock is not
excessive in kind or amount, in the light of the business done or
expected to be done, nor has its book value been overvalued in the
relevant company's account and Financial Statement. Since December
31, 1997, there has not been a material change in the level of the
stock.
(n) Receivables. All Accounts Receivable of the Company have arisen from
bona fide transactions in the ordinary course of business and are
hereby guaranteed to be valid, current and collectible (with the
sole exception of receivables listed under Exhibit 11 , which shall
be collected by the Italbroker not later than 12 month from the date
hereof) and none of them is or shall be subject to any counterclaim
or set-off
(o) Banks. A true and complete list of all the banks with which the
Company has an account, safe deposit box, outstanding loans or
credit facilities, and of the names of all persons who have access
thereto or hold a power of attorney is set forth on Exhibit 12.
(p) Certain Contracts and Arrangements. The Company is not a party to:
(i) any employment agreement - even if regarding personnel
seconded from other undertakings - which grants rights with
respect to termination or penalties, in the event of
termination, in addition to the rights provided by applicable
laws and labour collective bargaining agreements;
(ii) except for what disclosed under Exhibit 13 hereto, any
contract, plan or arrangement, including but not limited to
plans relating to stock-options, pension, retirement, deferred
compensation or incentive compensation, to which any of the
directors or employees of the Company is a party or in which
any of such directors or employee participates - even if
regarding employees seconded from other undertakings;
(iii) any encumbrance, mortgage, note, instalment obligation, loan
agreement or other instrument relating to the borrowing or
raising of money by the Company or the guarantee by the
Company of any
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page 23 of pages.
obligation for the borrowing or raising of money of third
parties, except for what disclosed under Exhibit 14;
(iv) any consultancy agreement providing a liability for the
Company in excess of ITL 100 million, also with reference to
several activities to be rendered or in any event effectively
rendered during the course of the year, except for what
disclosed under Exhibit 15;
(v) any agreement, contract, lease, purchase or sale order, open
bid or other commitment for the sale of products or services
the quoted price and other terms and conditions of which
(being entered without any perspective of margin, profit or
even with the provision of losses) might be prejudicial or
detrimental to the conduct of the business;
(vi) any agreement, contract, lease or other commitment binding on
the Company that restricts the sale of products in any
territory;
(vii) any agreement with townships, municipalities and the Public
Administration in general;
(viii) any agreement whatsoever that may be terminated by the other
party upon a direct or indirect change of control of the
Company;
(ix) except for the agreements listed under Exhibit 15bis, any
other undertaking, which involves a liability (directly or
indirectly due to the Seller itself) for payment or otherwise
by the Company in excess of ITL. 100 million, except for
commissions paid in favour of entities, bodies or persons,
other than directors of the Company, (which are and have been
paid in the ordinary course of business and with reference to
actual revenues cashed by the Company) any undertaking, other
than the above mentioned.
Without limiting the generality on the above, all the
agreements, contracts, leases, purchase or sale orders, open
bids and other commitments of the Company are valid and in
full force and effect, and there is not, under any of such
agreements, contracts, leases, purchase or sale orders, open
bids or other commitments, any breach by the Company or by the
other party or parties thereto nor any event has occurred
which might give rise to a default.
All purchase commitments of the Company to suppliers, and all
goods or services sales or supply commitments of the Company
to its customers, are completely and accurately reflected in
the records of the Company.
(q) Certain Guarantees. Except for the guarantees with reference
to ordinary bank facilities given: (i) by Italbrokers Holding
with reference to Italbroker in
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page 24 of pages.
favour of Banca di Roma in the amount of ITL 2,7 billion, of
Banca Nazionale dell'Agricoltura in the amount of ITL 1,5
billion, Canca Commerciale Italiana in the amount of 1,5 bln;
and (ii) by Italbrokers Holding 150 million Banca Passadore,
150 million Banca Carige S.p.A., 600 millioni Banca Nazionale
dell'Agricoltura (being agreed that any possible termination
or revoke of the said guarantees shall not adversely affect
Italbroker), neither the Seller, nor any other person has as
of the date hereof, entered into any guarantee to any third
party with respect to indebtedness or other obligations of the
Company, including but not limited to indebtedness for
borrowed money and obligations with respect to performance
guarantees and in connection with the issuance of letters of
credit.
(r) Labour Matters.
(i) Exhibit 16 contains the list of all the employees of the
Company, their positions and category, salary and wages;
(ii) The Company is in compliance with all applicable laws
respecting employment and employment practices, and
terms and conditions of employment, including but not
limited to provisions thereof relating to wages,
bonuses, hours of work and social security
contributions, medical care and safety insurance (INPS,
INAIL INPDAI, ARPA, and other similar bodies or
authorities under local regulations, or under Dutch Law
as to Tolbert, or under other applicable law) and
therefore with the Taxes;
(iii) there is no labour strike, dispute, slowdown,
representation campaign or work stoppage pending or
threatened against the Company;
(iv) no grievance or arbitration proceedings arising out of
or under any collective bargaining agreement is pending
and no claim therefor has been asserted against the
Company;
(v) all pension plans and severance funds (TFR included, as
to the Italian legislation, and similar provisions under
Dutch law or other applicable legislation) required to
be funded by the Company are adequately reserved for in
accordance with applicable laws, regulations or
statutes.
(vi) except for the applicable National Collective Labour
Agreement and similar acts in the relevant
jurisdictions, there are no other agreements or
understanding with the Unions or shop committees for any
employee of the Company.
(vii) Except for what disclosed under Exhibit 16bis, there are
no employees on temporary lay-off plans (such as CIG) or
under the so
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page 25 of pages.
called "mobility procedure" (in mobilita) or similar
procedures (including s.c. solidarieta contracts) nor
are there any payments due, outstanding or that will
become due in connection with these procedures;
(s) Environmental Matters. As to all operations conducted by the
Company: (a) the Company and its buildings (whether owned or
rent) are currently in compliance, in all material respects,
with all respective applicable national and EU laws,
regulations and rulings relating to the Environmental
Conditions, as in force at the relevant time; and (b) the
Company is not party to, nor has received notice of or is
aware of, and none of the said buildings is object of, any
actual or threatened litigation or administrative proceedings
concerning environmental claims or liabilities.
There is no liability on the part of the Company arising out
of any activities or operations of it or the state or
condition of any properties now or formerly owned or occupied
by it or facilities now or formerly used by it and in
particular (but without limitation) any such liability in
respect of: injury to persons, including impairment of health
or interference with amenity; damage to land or personal
property; interference with riparian or other proprietary or
possessory rights; public or private nuisance; liability for
waste or other substances; and damage to or impairment of the
environment including living organisms.
All structures, machinery, plant and equipment, whether
movable or fixed, provided in connection with the activities,
operations and premises of the Company for the protection of
human safety, health and amenity, property and the
environment, including (without limitation) for the abatement,
arresting or treatment of polluting substances or emissions,
the containment of substances and the prevention of spillage
and contamination:
(i) are in good repair and condition and satisfactory
working order;
(ii) conform to all statutory and other legal requirements.
(t) Litigation. Except as disclosed under Exhibit 17, there is no claim,
accident, action, proceeding or investigation pending or threatened
against or relating to the Company or any of their properties or
rights before any court, administrative or governmental or
regulatory authority or body, also in relation, but not limited to,
Taxes. The Company is not subject to any outstanding orders, writs,
injunctions or decrees. No adverse consequences shall derive from
the disclosed litigation. Each of the directors of the Company is
not subject to any action or situation which would result in the
cancellation from the Italian Register of Insurance Brokers (i.e.
the so-called "Albo Brokers").
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page 26 of pages.
(u) Compliance with Laws. The Company has complied in all material
respects with all applicable laws and regulations (including but not
limited to laws and regulations relating to environmental standards
and controls, real property and any material improvement thereon,
zoning legislation, the maintenance of books and records, practice
of insurance broker business) and has obtained all governmental
approvals, authorisations, permits or licenses which are required in
connection with its operations, the Business, real estate holdings.
The Company has not received any order, decree, notice or claim of
any violation of any laws, regulations, rules, orders, judgements,
decrees or other requirements imposed by any authority.
All books and records required to be maintained by the Company have
been accurately maintained.
(v) Projects. There is no oral or written plan or project involving the
opening of new or the closing of current operations or the
acquisition of any real property or existing business, in which the
Company has been involved in the two-year period prior to the
Relevant Date, which, if pursued, would require any such
involvement.
(w) Buildings. The Company has full title property of its buildings,
lands and other real estates, free from any Encumbrances and from
any right ("diritto"), or possession ("possesso" or "detenzione") of
third parties, limiting its full title or their full utilization,
and may freely dispose or enjoy thereof.
The buildings and their equipment have been constructed and
maintained in compliance with all the applicable zoning and
construction laws, as well as with the environmental laws and with
any applicable provisions on safety, earth-quake and fire
prevention, and with any regional laws and local regulations, or any
binding provisions coming from any national or local authority; the
buildings are free from any "vizi", "oneri o diritti di godimento di
terzi" and from any risk of "evizione", to be intended as in
articles 1482, 1483, 1484, 1490 of the Italian civil code and in the
relevant similar provisions under Dutch Law or other applicable
legislation; the current actual situation and property of the
buildings has been duly filed with the competent Conservatoria dei
Registri Immobiliari, NCEU and NCT, or similar bodies under the
relevant jurisdiction; the buildings do not need any extraordinary
maintenance or repair.
(x) Restructuring of the Company Group. Any past change of control of
the Company, or transfer of its assets and/or employees, change of
their name, type, capital, participation, or restructuring of the
group to which the Company belongs, has always been executed in
compliance with the applicable laws and cannot cause any future
damage or claim (also relating to Taxes) against the Company, or
their shareholders and owners.
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page 27 of pages.
(y) Other material adverse effects on the Business. Safe all the above
representations, to the best of Seller's knowledge there has been no
other material fact or circumstance in the last three years (other
than currency exchange fluctuations and than what normal in the
ordinary course of business) that can materially and adversely
affect the current and future Business of the Company, its market
and trading position and the value of its assets.
(z) Miscellaneous.
(i) Apart from what disclosed under the following point, Seller
does not have any right or claim against the Company (except
for dividends generated by the incomes for the 1997 period in
UTA, Tolbert and Italbroker, respectively equal to ITL.
680.000.000, NLG 1.200.000 and ITL 1.480.000.000, which have
already been paid), or contractual relationships with the
Company, or have received any payment therefrom during the
last six months.
(ii) Tolbert hereby undertakes that the financing granted in 1997
to Italbroker currently amounts to ITL 310 million
("finanziamento soci non fruttifero") will be converted in
issue premium ("versamento soci in conto capitale") by the end
of 1998.
(iii) The directors leaving indemnity provision in Italbroker (equal
to ITL 300 million) shall not be payable for a period of ten
years as fro the First Closing Date.
(iv) A specific and appropriate fund in Tolbert will be posted with
reference to all costs of all the transactions provided for
under, or in connection with, this MAA and the MSA (with the
sole exception of: (i) costs relating to legal advise by the
Notary Public with reference to taxes, (ii) Notary fees
relating to the Contribution in Kind and (iii) taxes relating
to the Contribution in Kind, which shall be borne also by
Olimpia and Saint Gallen in proportion to their
shareholdership in Tolbert as a consequence of the said
Contribution in Kind), to include inter alia bank advice,
which fund shall therefore reduce the dividends which the
Current Tolbert Shareholders shall perceive in accordance with
Article 8.5 hereinabove.
(v) There are no contracts or undertakings between the Seller, on
one side, and the Company, or other third party that concerns
the Company, on the other side, including, but not limited to,
any security and loan agreement.
(vi) The Company is not subject to anti-trust proceedings or
investigations by the EU Commission or the Autorita Garante
della
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page 28 of pages.
Concorrenza e del Mercato, nor of anti-trust, anti-dumping or
anti-subsidies proceedings or investigations by authorities of
other countries.
(vii) There are no undisclosed facts known to the Seller concerning
the Company that would adversely affect the Company. The
warranties and representations contained in this Agreement are
true and accurate; the disclosures are full and complete and
no material fact or information has been omitted.
14.2. Absence of Certain Changes or Events. With specific reference to the
period from December 31, 1997 through the Relevant Date, the Company, with the
exception of disclosures contained under Exhibits 18 and 19, has no Liabilities
of any nature, other than liabilities relating to the ordinary course of
business, as conducted over the past years; there are not transactions which are
unusual either by reference to the historic activities of the Company, or by
reference to the activity typically engaged in by insurance broking companies
(or, as to Tolbert, by pure holding companies) having a size comparable to the
size of the Company; the Company accounts are in compliance with the Accounting
Principles as consistently applied over the years. Without limiting the
generality of all the above:
(i) Net Worth. The Net Worth of Company as of the Relevant Date shall
not be lower than the one resulting from the Financial Statement,
save for the effects of the distribution of dividends mentioned
under Article 14.1.(z).(i);
(ii) the Company has not purchased or sold a shareholding of any nature
whatsoever in another company or an interest of any nature in any
concern;
(iii) there has not been any investment in, acquisition, sale, exchange,
or disposal of any asset or property of the Company in an amount
exceeding ITL. 100 million;
(iv) the Company has not undertook, pursued, participated in, or promoted
any activity other than the Business;
(v) the Company has not given any guarantee or indemnity or created any
charge, lien or security of whatever nature over its assets;
(vi) the Company and the Seller have not made or agreed any proposal for
consolidation, amalgamation, merger or split up of the Company
and/or of any Subsidiary, with or into any other company, except for
what expressly disclosed under this Agreement;
(vii) there has not been any disposal of or dilution of the Company's
shareholding or interest, directly or indirectly, in any Subsidiary;
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page 29 of pages.
(viii) the Company has not made any loan or advance to any person, firm,
corporate body or any other business other than in the ordinary
course of business, or borrowed any money, except by way of advance
payments of premiums due by indemnification of agreed losses on
behalf of insurance companies due to clients in the ordinary course
of business;
(ix) any shares, or any other securities, or any other option or right to
subscribe, or any convert instrument of any nature whatsoever, have
been created, allotted or issued, except for what expressly
disclosed under this Agreement;
(x) there has not been any termination of any material line of business
operation of the Company;
(xi) there has not been any material change in the Business or in the
"oggetto sociale" (scope) of the Company, except for what expressly
disclosed under this Agreement;
(xii) the Company has not entered into any contract of material nature
outside the normal course of the Business;
(xiii) except for what expressly disclosed under this Agreement, there has
not been any proposal of reduction, or actual reduction, of the
Company's capital, variation of the rights attaching to any class of
shares or quotas, or any redemption, purchase or other acquisition
by the Company of any shares or other securities of the Company;
(xiv) there are no proposal of adoption, or adoption, of any bonus or
profit-sharing scheme or any share option or share incentive scheme
or employee trust or ownership plan;
(xv) there has not been any proposal of any change, or any change, to the
Company's by-laws, except for what disclosed under this Agreement;
(xvi) there has not been any formation of, or entry into, any partnership,
association or joint venture, or the establishment of any new
branches;
(xvii) the Company has not entered into any transaction, arrangement or
agreement outside the ordinary course of Business with or for the
benefit of any director of the Company or any Subsidiary, or persons
connected or associated with any such director;
(xviii) the Company has not entered into any payment obligation by and
between the Company and any of its shareholders, unless at arm's
<PAGE>
page 30 of pages.
length in the ordinary course of business, except for what provided
for with reference to Italbroker under Article 15.1.((b)).((i));
(xix) there has not been the commencement, settlement or defence of any
action, proceedings or other litigation involving the Company;
(xx) there has not been any change in the remuneration or powers of the
Directors of the Company, other than as provided for by the relevant
bodies respectively: on March 20, 1998 in Italbroker, on May 11,
1998 in ICW, and according to the Exhibit 19bis with reference to
UTA Group;
(xxi) there has not been the appointment or removal of any person as
director or chairman of the Company;
(xxii) the Company has not applied for its admittance to any regulated
stock exchange market.
(xxiii) the Company's business organisation has not been adversely
affected, and the Company has not sustained any material loss or
damage to its property, whether or not insured;
(xxiv) the hiring and dismissal of employees and consultants has been
conducted within the boundaries of the ordinary course of business
and anyhow in compliance with applicable law and national collective
agreements; there has not been any increase, out of the ordinary
course of business, in the rate or terms of compensation or benefits
payable or to become payable to any of the Company's directors,
other than for what disclosed hereunder, officers or employees,
other than for what mandatorily provided by law, except for certain
sums (i.e. premi ed incentivi) that may have been corresponded una
tantum in the past to some employees, for which there are no
mandatory provisions to further and new payments. Further, Seller
hereby warrants to Purchaser that no extraordinary benefit or
compensation has been granted to the Company's Directors;
(xxv) no agreements, contracts, leases or other commitments for: (i)
amounts exceeding ITL 100 million; and/or (ii) requiring a
termination notice period exceeding three month; (iii) and/or having
a duration exceeding one year, have been entered into by the
Company;
(xxvi) Seller has and shall have maintained the Company solvent and in
good standing;
(xxvii) no transaction exceeding the ordinary course of business has taken
nor shall take place between any of the Company, on the one side,
and
<PAGE>
page 31 of pages.
Seller, on the other side;
(xxviii) no events which may have a significant impact on either the
financial position, or future profitability of the Company have
occurred.
15. SPECIAL WARRANTIES AND REPRESENTATIONS RELATING TO ITALBROKER.
15.1. In addition to the above and without prejudice to all the above, Tolbert
hereby represents and warrants to UTA:
(a) Warranties:
(i) The special life policy arrangement entered into with INA and
pledged in favour of San Paolo in relation to their financing
is and was the only such arrangement that existed in
Italbroker. This arrangement no longer exists in the
Italbroker;
(ii) No restoration costs in excess of ITL. 250 million will be
incurred in the course of the current lease of Albaro 3 or at
its termination;
(iii) The valuation of the land owned by Fiduciaria performed in
early 1998 was carried out by an independent consultant based
in the area, who was given all material information about the
land;
(iv) All payments by Italbroker in connection with the purchase of
part of the business of Servizi e Consulenze have been made
and Italbroker has no residual liability in this regard;
(v) The list exhibited at Schedule attached under Exhibit 20
hereto is a list of all major clients of Italbroker and the
gross commissions payable by them for the year commencing 1st
January 1997, with the exception resulting from the and
consistent with the 1998 budget attached under Exhibit 21
hereto. No material adverse change has occurred in the
business relationship with any of those clients. No such
client has given written or verbal notice of its intention to
cease purchasing services or, to reduce its purchases by any
substantial amount, from Italbroker.
(b) Indemnities: Without prejudice to the provisions under Articles 14,
16 and, and with specific reference to the special warranties and
representations under Article 15.1), Tolbert undertakes to indemnify
UTA - in accordance with the provisions set forth under the
mentioned Articles 16 and below - against any Liability arising out
of a breach of any of the said warranties and representations and,
in addition, against any loss:-
<PAGE>
page 32 of pages.
(i) in respect of any liability (other than the charge to Ital
Brokers Holding S.p.A to cover interest costs, bank charges
and withholding tax incurred in the normal course of the
arrangement) arising in relation to the INA life policy
arrangement.
(ii) Arising out of a refusal by underwriters on Interconsult Wise
container insurance policy to pay a claim in respect of
container repairs on the grounds of any actual or alleged
negligence or breach of duty of any kind prior to the First
Closing;
(iii) Arising out of any funding of claims monies due from insurers
to clients of Gruppo prior to the date hereof;
(iv) Arising from any claim by the INPS or any tax or regulatory
authority in respect of any assessment it has made of the
character of any agreement which Italbroker might have had
with any employee, consultant, director or agent or any
arrangements made by Italbroker in relation thereto.
16. INDEMNIFICATION OBLIGATIONS.
16.1. The Seller guarantees to the Purchaser and its successors, that the
Warranties and Representations set forth in this Agreement are, and shall be as
of each of the Relevant Date, and thereafter, in all respects true, accurate,
complete and exhaustive.
16.2. The Seller agrees - by indemnifying the Interested Company - to indemnify,
defend and hold the Purchaser and its successors, harmless from and against the
full amount of any and all Liabilities which shall have been incurred by any of
the Interested Company, on or before each of the Relevant Date (or thereinafter,
when expressly provided for in this Agreement), or which arise thereinafter out
of the conduct of any of the Interested Company (including transactions entered
into, or facts, acts or omissions effected) on or before each of the Relevant
Date, or which arise out of the conduct of the Seller (including transactions
entered into, or facts, acts or omissions effected) on or before each of the
Relevant Date, in accordance with the following:-
(a) Seller shall have no obligation to indemnify the Interested Company
with respect to any individual claims under Articles 14 and 15,
unless and until the aggregate of such claims (once reduced by the
net value or surplus value - i.e. sopravvenienza attiva - of any
asset not reflected in the Financial Statements after giving effect
to any specific provisions, allowance or reserve therefor -if any-
made in the Financial Statements in respect thereto, and net of any
tax effects to the Interested Company, as applicable, if any) shall
have exceeded ITL 500 million,.
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page 33 of pages.
(b) Once the aggregate amount of claims will have exceeded said limit of
ITL. 500 million, Seller shall indemnify the Interested Company for
all and any amount claimed (once reduced by the net value or surplus
value - i.e. sopravvenienza attiva - of any asset not reflected in
the Financial Statements after giving effect to any specific
provisions, allowance or reserve therefor -if any- made in the
Financial Statements in respect thereto, and net of any tax effects
to the Interested Company, as applicable, if any), exceeding the
said ITL 500 million deductible, up to the maximum amount of ITL
12,5 billion.
(c) Seller shall only have indemnification obligation if a claim is
made:
(i) on or before the date falling 24 months after the First
Closing Date, in respect of any Liability other than Taxes;
and
(ii) as per Liabilities relating to Taxes, on or before 60 days
after the expiration of each of the applicable statutes of
limitations (including the period of any extensions or waivers
thereof).
It is further agreed by the Parties that any claim for indemnification of
a Liability based on any event or occurrence of which the Purchaser shall
have given the Seller written notice prior to the date of termination of
the indemnification obligations hereinabove provided shall survive such
termination.
16.3. If Purchaser or its successors claims, in connection with any event, to
the Seller the indemnification payment according to this Agreement: (i) the
Purchaser agrees to notify the Seller as soon as possible, according to the
circumstances of the case, in order jointly to review such event with the
Seller, who agrees, if requested, to supply any information in possession of the
Seller or any assistance that might be useful; (ii) the Seller undertakes to pay
to the Interested Company the full amount claimed within 120 calendar days of
the Purchaser notice, or (iii) in the event of disagreement, the Purchaser and
the Seller shall try to amicably settle the dispute within the said 120 calendar
day period; if this were not possible, the Purchaser and/or the Seller shall
resort to the arbitration contemplated by this Agreement under Article 21
hereinbelow and the Seller shall make the relevant payment within 30 calendar
days of the issuance of the arbitration award, notwithstanding any possible
appeal thereto.
16.4. If the payment requested by the Purchaser refers to any third parties'
claim, action or demand (the "Demand"), the Seller shall make the relevant
payment as soon as the Demand becomes enforceable vis-a-vis the Interested
Company, notwithstanding the right of opposing or appealing the deed or decision
that has made the Demand enforceable, but without prejudice to any different
decision which shall be taken in consequence of the opposition or appeal. The
decision concerning the opportunity to oppose or appeal the above mentioned deed
or decision (as well as any settlement of the Demand) shall be taken by the
Seller, who shall therefore have the right to
<PAGE>
page 34 of pages.
participate, at its exclusive costs, in the defence of the Claim with a counsel
of its choice, alone or jointly with the Purchaser's counsel. However, such a
decision by the Seller (as well as the manner to carry out any possible
opposition, appeal or settlement) shall not be prejudicial to the interests of
the each of the Interested Company and/or of the Purchaser.
16.5. In case of possibility to accept a tax amnesty (i.e. "condono fiscale",
"concordato fiscale" or similar), Seller shall be entitled to cause the
Interested Company to take advantage thereof; in this case, Seller shall
reimburse the Interested Company of the costs, tax effects and fees incurred for
applying to such tax amnesty.
16.6. It is in any event agreed that all the indemnification obligations shall
be complied with and fulfilled by the relevant Seller in a tax efficient manner,
to be determined in good faith by the tax counsels of all the Parties, provided
that no adverse consequences may arise either on the Purchaser, or on the
indemnified Company, in connection therewith.
16.7. The Purchaser shall not be entitled to recover more than once in respect
of each single Liability.
16.8. Nothing in this Article shall in any way restrict or limit the general
obligation at law of the Purchaser to mitigate any loss or damage which it may
suffer in consequence of any matter giving rise to any indemnification
obligation of the Seller.
16.9. For the avoidance of doubt, it is acknowledged and agreed that any due
diligence investigation carried out by any Party in respect to any of the
transactions contemplated in this Agreement shall not relief the other Party/ies
from any of its obligations arising from the Warranties and Representations set
out in this Agreement.
MISCELLANEOUS
17. CONFIDENTIALITY.
17.1. The Parties hereby undertake to keep strictly confidential and not to
disclose to any third party in any manner whatsoever without the prior written
consent of the other Parties any information, documents or data of whatsoever
nature contained or deriving from this Agreement.
Each of the Parties undertakes that it shall not make any announcement or issue
any circular or other publicity relating to the existence or subject matter of
this Agreement
<PAGE>
page 35 of pages.
without it being approved in writing by each of the other Parties as to its
content, form and manner of publication (such approval not to be unreasonably
withheld or delayed), save that any announcement or circular required to be made
or issued by any Party by law or pursuant to the rules and regulations of the
London Stock Exchange or other stock exchange on which the securities of that
Party are traded may be made or issued by such Party without such approval. The
Parties shall consult together upon the form of any such announcement or
circular in relation to the subject matter of this agreement and the other
Parties shall promptly provide such information and comment as the Party making
the announcement or sending out the circular may from time to time reasonably
request.
18. FINAL PROVISIONS.
18.1. No waiver of any right, breach or default hereunder shall be considered
valid unless in writing and executed by the Party giving such waiver, and no
waiver shall be deemed a waiver of a subsequent breach or default, whether or
not of the same or of similar nature.
18.2. The Parties acknowledge to each other that there is no firm, corporation,
or other person that is entitled to a finder's fee or any type of brokerage
commission in relation to, or in connection with, the transactions contemplated
in this Agreement as a result of any agreement or understanding with any of the
parties hereto, nor has any party had any dealings relating to this transaction
with any firm, corporation, agency or other person that may claim a brokerage or
other commission.
18.3. This Agreement, including its Exhibits, together with the MSA, constitutes
the entire agreement between the Parties with respect to the transactions
contemplated herein and supersedes any prior understanding, written or oral,
with respect to such transactions. No amendment of or supplement to this
Agreement shall be valid or effective unless in writing and executed by the
Parties hereto or their successors or assignees.
18.4. Article and article headings contained herein are for the purpose of
convenience only and do not constitute part of this Agreement.
18.5. The Short Forms shall be executed, and the endorsements shall be made, as
the case may be, for the sole purposes of effecting the transfer and assignment
of the relevant quotas or shares, in accordance with the provisions of this
Agreement, and complying with the relevant registration and stamp duty tax
requirements and such further requirements as provided for by applicable
legislation. Therefore, notwithstanding the above and notwithstanding any
possible conflicting provisions contained in any Short Forms, the transfer of
the quotas or of the shares are and shall only be governed by the provisions of
this Agreement, which shall not be subject to
<PAGE>
page 36 of pages.
novation (i.e. novazione) by reason of, or as a consequence of, the Short Forms,
of the endorsements and their execution by the Parties. Therefore, the
contractual terms and warranties relating to the transfer of the quotas and/or
shares are and shall be governed by the provisions of this Agreement, which
shall remain in full force and effect also after the said transfer by means of
either the execution of the mentioned Short Forms, or of the endorsement of the
shares.
18.6. This Agreement will be executed in 1 counterpart, and each of the Parties
shall have the right to obtain, at its costs and expenses, from the Notary
Public a copy thereof and of all the Exhibits hereto.
18.7. In the event of invalidity or ineffectiveness of any article of this
Agreement, or portions thereof, the remaining portion of the Agreement shall not
be affected thereby, but the Parties agree to negotiate in good faith to replace
such article, or portions thereof, with other valid and effective agreements
having substantially the same effect, having regard to the subject matters and
purposes of this Agreement.
18.8. Each Party shall bear all costs and expenses for legal, accounting or
other purposes, incurred by it, directly or upon his request, in connection with
the negotiation, preparation and completion of this Agreement. In any event, it
is agreed by the Parties that the so-called "fissati bollati" (or similar
applicable duty) relating to the transfer of Italbroker Shares and to the ICW
shall be borne by UTA.
18.9. The Notary Public fees shall be borne by Tolbert, with the sole exceptions
listed under Article 14.1.(z).(iv).
19. COMMUNICATIONS.
19.1. Notices or communications required or permitted to be given under any
provisions of this Agreement shall be in writing and shall be deemed to have
been given the day of dispatch thereof, if sent by fax (to be confirmed by
registered mail with return receipt), or upon actual receipt if sent by
registered mail, return receipt requested, addressed to the addresses specified
above, to the attention of:
(a) (if to Willis Group, to Michael P. Chitty (fax No.: +44 171 481 7003);
(b) if to Willis Europe, to Analies Majorie (fax No.: +31 20 6610654);
(c) if to Tolbert, to Guido Nieuwehuizen (fax No.: +31 20 5771188);
(d) if to UTA, to Studio Boidi, Dr.ssa Lucia Starola (fax No.: +39 011
8122300);
(e) if to Saint Gallen, to Studio Boidi, Dr.ssa Lucia Starola (fax No.: +39
011 8122300);
<PAGE>
page 37 of pages.
(f) if to Olimpia, to Paolo Fassio (fax No.: +39 02 6551805);
(g) if to HBC, to Sebastiano Romeo (fax No.: +39 011 5619060);
(h) if to Arcef, to Sergio Liberia (fax No.: +59 99 4613577).
19.2. Either Party may from time to time change its address by giving previous
communication to the other Party in the manner aforesaid.
20. LANGUAGE.
20.1. This Agreement is drafted in the English language and the Parties
acknowledge that they have so requested and have duly and fully agreed and
understood any and all the previsions hereof.
21. APPLICABLE LAW AND ARBITRATION.
21.1. This MSA shall be governed by, construed, and enforced in accordance with
Italian law, save for such provisions of Dutch law applicable to the
implementation of any of the transactions above referred to Tolbert.
21.2. All disputes arising out or in connection with this MAA shall be finally
settled under the Rules of Arbitration of the International Chamber of Commerce
by three Arbitrators appointed in accordance with the said rules.
The arbitrators shall decide ex aequo et bono. The place of the arbitration
shall be Amsterdam. The language of the arbitration shall be the English
language.
It is in any event expressly agreed by the Parties that the provision of this
arbitration procedure shall not prevent any party from requesting and enforcing
any of the injunctions and interim orders (i.e. "provvedimenti cautelari")
provided for by article 669-bis and following of the Italian Civil Procedure
Code.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
day first above written.
LIST OF EXHIBITS:
<PAGE>
page 38 of pages.
All the parties hereby irrevocably appoint and delegate Mr. Luca Garella and Mr.
Giovanni Peracino to execute each of the Exhibits attached hereto, acknowledging
the validity and effectiveness of the execution made by the said Messrs Luca
Garella and Giovanni Peracino.
Exhibit 1: Final Structure;
Exhibit 2: Gruppo Chart;
Exhibit 2bis: Net Working Capital;
Exhibit 3: Timetable;
Exhibit 4: UTA Group Chart;
Exhibit 5: Formula;
Exhibit 6: Deed of Issue;
Exhibit 7: UTA By-laws;
Exhibit 8: Tolbert By-laws;
Exhibit 9: ICW By-laws;
Exhibit 10: Italbroker By-laws;
Exhibit 11: Receivables;
Exhibit 12: Banks;
Exhibit 13: Stock Options;
Exhibit 14: Encumbrances;
Exhibit 15: Consultancy Agreement;
Exhibit 15bis: Other Agreements and Undertakings exceeding the amount of ITL 100
billion
Exhibit 16: Employees;
Exhibit 16bis: Mobilita
Exhibit 17: Litigation;
Exhibit 18: Disclosures with reference to UTA;
<PAGE>
page 39 of pages.
Exhibit 19: Disclosures with reference to Italbroker;
Exhibit 19bis: Boards of Directors Fees;
Exhibit 20: Major Clients of Italbrokers;
Exhibit 21: 1998 Budget of Italbroker.
- -------------------------
Willis Corroon Group plc.
Name and Capacity: Sarah Turvill, Attorney
- ---------------------------
Willis Corroon Europe B.V.
Name and Capacity: Sarah Turvill, Director
- -------------------------------
<PAGE>
page 40 of pages.
Tolbert Insurance & Finance B.V.
Name and Capacity: Tomas J. Eltink, Attorney
- --------------------------------
Saint Gallen S.R.L.
Name and Capacity: Lorenzo Boglione, Chairman
- ----------------------------
Olimpia S.R.L.
Name and Capacity: Carlo Pasteur, Sole Director
- -------------------------------- ---------------------
Ital Brokers Holding S.p.A.
<PAGE>
page 41 of pages.
Name and Capacity: Sebastiano Romeo, Chairman, Franco Lazzarini, Managing
DIrectors
- ----------------------------
Arcef Holding N.V.
Name and Capacity: Tomas J. Eltink, Attorney
- ---------------------------- -----------------------
UTA Willis Corroon S.p.A.
Name and Capacity: Enrico Boglione, Chairman Sarah Turvill, Director
<PAGE>
Exhibit 2.2
STOCK PURCHASE AGREEMENT
between
Assurandorgruppen A/S
Willis Corroon Europe B.V.
<PAGE>
As of 28 September 1998 this Stock Purchase Agreement has been entered into
between Assurandorgruppen A/S (Reg.No. A/S 164.725), Rosenornsgade 6, DK-8900
Randers, Denmark (the "Company") and Willis Corroon Europe B.V., Marten Meesweg
51, AV 3068 Rotterdam, the Netherlands (the "Investor") (the Company and the
Investor also individually referred to as a "Party" and collectively as the
"Parties").
RECITALS
WHEREAS at an extraordinary general meeting held on 18 June 1998 the current
shareholders of the Company (the "Current Shareholders") adopted a resolution to
authorize the board of directors of the Company (the "Board of Directors")
during the period until 31 December 1998 and without pre-emption rights for the
Current Shareholders to increase the share capital of the Company by an amount
not exceeding DKK 5,000,000 at market price.
WHEREAS the Board of Directors has decided to exercise this authority by
adopting at Closing (as defined below) a resolution in the form attached hereto
as Exhibit 1 (the "Board Resolution") for an increase of the Company's share
capital from nominal DKK 10,000,000 to nominal DKK 14,285,700 by issuing nominal
DKK 4,285,700 shares to the Investor.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements set forth herein, the Parties hereto agree as follows:
1. Purchase and Sale of Shares
1.1 Subject to the terms and conditions of this Agreement, the Investor agrees
to purchase at Closing and the Company agrees to sell and issue to the
Investor at Closing DKK 4,285,700 nominal value of the Company's shares
(the "Shares") for a purchase price of DKK 54,000,000 (the "Purchase
Price")
2. Closing
2.1 The purchase and sale of the Shares shall take place at the offices of
Kromann & Munter, 14 Radhuspladsen, DK-1550 Copenhagen V on 28 September
1998 or
-2-
<PAGE>
at such other time and place as the Company and the Investor mutually
agree upon orally or in writing (which time and place are designated as
the "Closing"). At the Closing the Company shall deliver to the Investor
an updated share register evidencing that the title of the Shares is
recorded in the name of the Investor against payment of the Purchase Price
by check or wire transfer.
2.2 At Closing the Parties undertake to adopt no later than 30 days from
Closing a resolution in the form attached hereto as Exhibit 2 (the
"Shareholders' Resolution") at an extraordinary general meeting of
shareholders (the "EGM") for election of directors and for the restated
Articles of Association of the Company in the form attached hereto as
Exhibit 3 (the "Restated Articles").
2.3 The Company shall file with the Danish Commerce and Companies Agency
immediately after the Closing the Board Resolution, and immediately after
the EGM the Shareholders' Resolution and the Restated Articles.
3. Shareholders' Agreement
3.1 At Closing the Investor and the Current Shareholders shall enter into a
Shareholders' Agreement in the form attached hereto as Exhibit 4.
4. Partnership Agreement
4.1 At Closing the Company, the Current Shareholders and the Investor shall
enter into a Partnership Agreement in the form attached hereto as Exhibit
5 regarding their interests in Assurandorgruppen I/S (the "Partnership").
Together the Company and the Partnership is referred to as the "AG Group".
4.2 The Company and the Partnership have not in all instances informed third
parties to contracts with Assurandorgruppen ost I/S, Assurandorgruppen
Midt I/S, Assurandorgruppen Syd I/S and Assurandorgruppen Alborg I/S about
the merger as of 1 January 1998. The Current Shareholders covenant to
indemnify and hold harmless the Investor from any damage or losses
resulting from such third parties' refusal to consent to the merger.
5. Transfer of Willis Corroon A/S
-3-
<PAGE>
5.1 At Closing the Partnership and Willis Corroon A/S shall enter into a
Business Transfer Agreement in the form attached hereto as Exhibit 6
regarding the Partnership's acquisition of the business of Willis Corroon
A/S.
6. Warranties
6.1 The Company and the Current Shareholders by their signature hereto hereby
represents and warrants to the Investor in the terms of the warranties
(set out in Schedule 1), and the Company undertakes to indemnify and hold
harmless the Investor for any damage, loss, liability or expense after tax
resulted from a breach hereof provided that
(i) subject to Section 6.2 no claim shall be made against the Company in
respect of a misrepresentation or breach of any of the warranties
unless the Investor's damage, loss, liability or expense after tax
exceed DKK 100,000 for each separate misrepresentation or breach of
warranty and unless the aggregate amount of such damage, loss,
liability or expense after tax exceeds DKK 1,000,000, that
(ii) subject to Section 6.2 no claim shall be made against the Company in
respect of a misrepresentation or breach of any one of the
warranties unless written notice of such claim containing specific
details and documentation regarding the claim has been received by
the Company from the Investor no later than 18 months from Closing,
that
(iii) the Investor's damage, loss, liability or expense shall be
determined in proportion to the Investor's ownership share in the
Company and with due regard to the Investor being held neutral
against the Company's indemnification, and that
(iv) the Current Shareholders by their signatures to this Agreement
undertake to act as guarantors for the Company's obligations
pursuant to this Clause 6.
6.2 The de minimis provision and the time limitation of claims in respect of a
breach of the warranties as set out in Section 6.1 (i) and (ii),
respectively, shall not apply
-4-
<PAGE>
in respect of claims arising out of the warranties in respect of tax as
set out in Section 6 of Schedule 1. Such claims can be made against the
Company six months from the time where the Company received the claim from
the tax authorities.
6.3 All warranties shall apply mutatis mutandis to the Partnership in which
the Company holds a capital stake of 91.2% the remainder being held by 44
individual partners identical to the Current Shareholders. All references
to the Company shall be construed as references also to the Partnership
and by its co-signature to this Agreement the Partnership and the Current
Shareholders confirm the warranties as applicable to the Partnership too.
6.4 The Company and the Current Shareholders acknowledge that the Investor has
entered into this Agreement in reliance upon the warranties.
6.5 Each of the warranties (other than such which are fully performed at
Closing) shall continue in full force and effect notwithstanding Closing,
subject to 6.1-6.2.
6.6 To the extent that any breach of or claim under the warranties is capable
of remedy, the Investor shall afford the Company such opportunity as is
reasonable to remedy or procure the remedy of the breach or the situation
complained of within a reasonable time (and in any event not exceeding 60
days from when the Company became aware of the breach unless the Investor
consents to a longer period, such consent not to be unreasonably
withheld).
7. Assignments
7.1 This Agreement and the benefit of each of the obligations and warranties
undertaken or given by the Company shall be assignable by the Investor to
any group company of the Investor provided the Investor remains fully
liable for the fulfilment of the Agreement. Save for such assignment to a
group company of the Investor, none of the rights or obligations under
this Agreement may be assigned or transferred to any other person or
entity without the prior written consent of both Parties hereto.
8. Notices
-5-
<PAGE>
8.1 All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, sent by telefax (receipt of
which is confirmed by the recipient) or sent and received by registered
post to the respective Parties at the following addresses (or at such
other address for a Party as shall be specified by like notice):
If to the Investor, to:
Willis Corroon Europe B.V.
Marten Messweg 51
AV 3068 Rotterdam
The Netherlands
Telefax: + 31 20 661 0654
for the attention of Colin Longhurst
with copies to
Willis Corroon International Holdings Ltd.
Ten Trinity Square
London EC3P 3AX
England
Telefax: +44 171 488 8882
for the attention of Sarah Turvill and
Kromann & Munter
14 Raadhuspladsen
DK-1550 Copenhagen V
Denmark
Telefax +45 33 11 80 28
for the attention of Vagn Thorup
If to the Company, to:
Assurandorgruppen A/S
Rosenornsgade 6, 1
DK-8900 Randers
Telefax: +45 87 10 07 70
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<PAGE>
for the attention of Karin Holst
with a copy to
Advokatfirmaet Lou & Madsen
Ostergade 4
DK-8900 Randers
Telefax: +45 86 42 23 33
for the attention of Niels Simonsen.
9. Announcements
9.1 Neither the making of this Agreement nor its terms shall be disclosed by
any Party hereto without the prior consent of the other Party, unless
disclosure is required by law or the rules of the London Stock Exchange,
and disclosure shall then only be made
(a) after prior consultation with the other Party as to the terms of
such disclosure;
(b) strictly in accordance with any agreements as to the terms of
disclosure; and
(c) only to the person or persons and in the manner required by law or
the London Stock Exchange or as otherwise agreed between the Parties
hereto.
10. Effects of Closing
10.1 The terms of this Agreement shall insofar as not performed at Closing and
subject as specifically otherwise provided in this Agreement continue in
force after and notwithstanding Closing.
11. Entire Agreement
11.1 Subject to Section 12.3 this Agreement (together with any documents
referred to herein) constitutes the entire agreement between the Parties
hereto in
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<PAGE>
connection with the subject-matter of this Agreement. No Party has relied
upon any representation save for any representation especially set out in
this Agreement (or any document referred to herein).
12. Waiver, Amendment
12.1 No waiver of any term, provision or condition of this Agreement shall be
effective unless such waiver is evidenced in writing and signed by the
waiving Party.
12.2 No omission or delay on the part of either Party hereto in exercising any
right, power or privilege hereunder shall operate as a waiver hereof, nor
shall any single or partial exercise of any such right, power or privilege
preclude any other or further exercise hereof, or of any other right,
power or privilege. The rights and remedies herein provided are cumulative
with and exclusive of any rights or remedies provided by the law.
12.3 No variation of this Agreement shall be effective unless made in writing
and signed by both parties hereto.
13. Invalidity
13.1 If at any time any one or more of the provisions hereof is or becomes
invalid, illegal or unenforceable in any respect under any law, the
validity, legality and enforceability of the remaining provisions hereof
shall not be in any way affected or impaired thereby.
14. Costs
14.1 Each Party to this Agreement shall pay its own costs incidental to this
Agreement, and the sale and purchase hereby agreed to be made. The Current
Shareholders shall reimburse the Company for any costs borne by the
Company in this connection.
15. Governing Law and Arbitration
15.1 This Agreement shall be governed and construed in accordance with the laws
of the Kingdom of Denmark.
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<PAGE>
15.2 Any dispute between the Parties arising out of or in connection with this
Agreement shall, provided the parties can not agree on a settlement
through negotiation, be determined by arbitration with final, binding and
enforceable effect in agreement with the following rules:
15.3 In the event of a dispute, either party shall be entitled to request that
an arbitration tribunal be set up.
15.4 The party seeking resolution of a dispute by arbitration shall appoint an
arbitrator and send a letter by registered mail to the other party (the
"Respondent") requesting the Respondent to appoint its arbitrator within
14 days. The letter shall also contain a short statement of the question
or questions to be determined by the arbitration. Where the Respondent
does not appoint an arbitrator within the time-limit mentioned above, that
arbitrator shall instead be appointed by the Danish Arbitration Institute.
15.5 The two arbitrators appointed for the parties shall jointly appoint an
umpire. Failing agreement on the choice of an umpire, the appointed
arbitrators shall jointly approach the Danish Arbitration Institute and
request that it, following prior discussion with the parties, appoint an
umpire to act as chairman of the arbitration tribunal.
15.6 The arbitration tribunal shall determine the matter according to
applicable law and shall lay down the rules for its hearing of the matter
in agreement with the general principles of the Danish Administration of
Justice Act (Retsplejeloven).
15.7 The arbitration tribunal shall also decide how the costs of the
arbitration are to be borne. The arbitration tribunal shall set a date for
implementation of the award, which date shall normally be no later than 14
days after the award has been made.
15.8 The venue for the arbitration shall be Copenhagen, and the language of the
proceedings shall be English.
In witness whereof, the Parties hereto have caused this Agree-ment to be duly
signed on
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<PAGE>
28/9 1998 28/9 1998
Assurandorgruppen A/S Willis Corroon Europe B.V.
By: By:
------------------------- -----------------------------
Acceded to Acceded to
28/9 1998 28/9 1998
Assurandorgruppen I/S by:
-----------------------------
By:
-------------------------
The Current Shareholders
represented by the Board of
Directors acting through Mr
Niels Simonsen and Mr Kent
Risvad
List of Appendices:
Schedule 1: Warranties
Schedule 2: Disclosed Information
Exhibit 1: Board Resolution
Exhibit 2: Shareholders' Resolution
Exhibit 3: Restated Articles
Exhibit 4: Shareholders' Agreement
Exhibit 5: Deed of Partnership
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<PAGE>
Exhibit 6: Business Transfer Agreement
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<PAGE>
Schedule 1
(Warranties)
1. Interpretation
1.1 Where any of the following paragraphs of this Schedule is qualified by the
expression "to the best of the knowledge, information and belief of the
Company" or "so far as the Company is aware" or any similar expression,
that paragraph shall be deemed to include an additional warranty to the
effect that the statement has been made after due diligent and careful
enquiry and that the Company has used its best endeavours to ensure that
all information given is true and accurate in all respects.
2. Disclosed Information
2.1 The statement of fact and information relating to the Company and/or its
shareholders and/or officers and/or connected persons and associates (or
any of them) and/or the business, finances, assets, liabilities,
contracts, prospects, suppliers and customers of the Company given by or
on behalf of the Company to the Investor or its advisers in the course of
the negotiations leading to this Agreement listed in Schedule 2 to the
Stock Purchase Agreement (the "Disclosed Information") are true complete
and accurate in all respects and not misleading in any respect.
2.2. To the best of the knowledge information and belief of the Company there
is no fact information or other matter which is not fairly and expressly
disclosed which renders or which might render any of the Disclosed
Information untrue, incomplete inaccurate or misleading in any material
respect or which might reasonably be expected adversely to affect the
willingness of a purchaser to purchase shares of the Company on the terms
contemplated by this Agreement.
3. The Company
3.1 The Company is a private company limited by shares duly organized, validly
existing and in good standing under the laws of the Kingdom of Denmark and
has all requisite powers to enter into and perform this Agreement and the
obligations to be assumed or performed by it pursuant thereto and the
execution and delivery and completion of this Agreement:-
<PAGE>
a) does not and will not cause the Company to be in breach of any of
the terms and provisions of any agreement or arrangement or order or
injunction of any Court or competent tribunal;
b) does not and will not relieve any person of or entitle any person to
terminate any contractual or other obligation to the Company; and
c) will not so far as the Company is aware result in any customer,
supplier or other business partner of the Company ceasing to deal or
substantially reducing the existing level of its dealings with the
Company or terminate or result in the termination of any present or
future benefit or privilege enjoyed by the Company.
3.2 The Shares when issued, sold and delivered in accordance with the terms of
this Agreement for the consideration expressed herein will be duly and
validly issued, fully paid and non-assessable and will be free from
restrictions of transfer other than restrictions in the Restated Articles
and the Shareholders' Agreement and free from all claims liens
encumbrances and equities.
3.3 There are not outstanding any options, warrants, rights or agreements for
the purchase or acquisition from the Company of any of its shares.
3.4 The share register of the Company is correct and properly written up to
date and there has been no notice of any proceedings to correct or rectify
any such register.
3.5 Since the Accounting Date (as defined below) neither the Company nor any
class of its members has passed any resolution, except from resolutions
passed at the ordinary general meeting of Shareholders held on 27 May 1998
and at the extraordinary general meeting of shareholders held on 18 June
1998.
4. Accounts
4.1 The Annual Accounts as of 31 December 1997 (the "Accounts") comply with
the provisions of Danish company and accounting laws and all other
applicable legislative requirements and have been prepared in accordance
with generally accepted accountancy practice and principles consistently
applied and give an accurate and true and fair view of all the assets and
liabilities (whether actual or contingent or otherwise) and of the state
of affairs of the Company at the Accounting Date and of its results for
the accounting period ended thereon. An exemption is made, however, as
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<PAGE>
regards the dividend paid to the Current Shareholders in 1998 which is in
contravention of Danish law. Any damage, loss, liability or expense in
this connection will be the responsibility of the Company and the Current
Shareholders, cf. Section 6 of the Stock Purchase Agreement.
4.2 The value of the assets, included in the Accounts and, in respect of the
position at the date hereof, the books and records of the Company is not
materially overstated nor are the liabilities provided for therein
understated and (in accordance with the said accountancy practice and
principles) full provision or reserve has been made in the Accounts or
such books and records for depreciation and all bad or doubtful debtors
and liabilities (including contingent liabilities) and all present or
contingent burdens and commitments as at the Accounting Date or at the
date hereof, save from commitments relating to returned premiums.
4.3 The Accounts have been prepared on bases and policies consistent with
those used in preparing the audited accounts of the Company for the last
three financial periods of the Company ended on the Accounting Date.
4.4 All proper and necessary books of account and records (including records
held in computer form) have been fully and accurately kept and promptly
completed by the Company, and the same contain full and correct
information relating to all transactions to which the Company has been a
party in accordance with the law and generally accepted accounting
practice and principles and all such books and records (including print
outs of such records held in computer form) are in the exclusive
possession of and are readily accessible to the Company.
5. Position since 31 December 1997 (the "Accounting Date")
5.1 Since the Accounting Date (i) there has been no material adverse change in
the financial or trading position or prospects of the Company; (ii) the
business of the Company has been carried on in the normal course; (iii)
the Company has not declared or paid any dividends or effected any
distribution (for tax purposes or otherwise) of or in respect of its
assets or share capital except as disclosed in the Accounts; (iv) the
Company has not acquired or disposed of any business or material assets
other than in the ordinary course of business; and (v) the Company has not
made or agreed to make any loan or payment or entered into any transaction
or assumed or incurred any liabilities (including contingent liabilities)
except in the ordinary course of trading and for full value and in the
case of capital commitments all commitments made have been described in
the Disclosed Information.
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<PAGE>
5.2 No order has been made or position presented or resolution passed for the
winding-up or other dissolution of the Company and no receiver or manager
or administrator or similar officer under the laws of any jurisdiction has
been appointed over any of its assets and there are no grounds on which
any such appointment may be made.
6. Taxation
6.1 The Company has within the requisite time duly made all returns, given all
notices, and supplied all other information required to be supplied to the
Danish authorities with responsibility for taxation, and customs and
excise and/or any other competent fiscal authority and all such
information returns and notices were when given or supplied and are now
accurate in all material respects and made on a proper basis and are not,
so far as the Company is aware, likely to be the subject of any dispute
with any of the relevant authorities concerned.
6.2 The Company has duly deducted, withheld, paid and accounted for all tax
due to have been deducted, withheld, paid or accounted for by it before
the date of this Agreement and is not and has not at any time since the
Accounting Date been liable to pay interest on any unpaid taxation.
6.3 Since the Accounting Date the Company has not made and the Company is not
subject to any present or future liability to make or provide any payments
or consideration which could be disallowed as a deduction in computing the
profits of the Company or as a charge on the Company's income for taxation
purposes other than as described in the Disclosed Information.
6.4 The book value of each of the capital or fixed assets of the Company shown
in the Accounts does not exceed their original cost and is such that on a
disposal or deemed disposal of such assets or any of the same at that
value no balancing charge or chargeable gain will arise accrue or
crystallise.
6.5 The Company is not under any liability to taxation, contingent or
otherwise, in respect of any other company which at any time has been a
member of the same group or consortium as the Company or an associated
company of the Company for taxation purposes or in respect of any
transaction effected with or asset or benefit received from or given by
the Company to any such other company.
6.6 The Company has not entered into or been a party to any scheme or
arrangement
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<PAGE>
designed partly or wholly for the purposes of avoiding or deferring
taxation, and no scheme or transaction of any nature has been carried out
by or proposed in relation to the Company which has given rise or could
give rise to a charge to taxation.
6.7 All of the documents relating to or necessary to prove the title of the
Company to its assets or otherwise relating to the Company's business and
affairs have been properly stamped with applicable stamp or other duty and
such duty has been duly paid.
7. Assets
7.1 The Company was at the Accounting Date and (subject only to sales of
current assets in the ordinary course of its day to day business) now is
the owner of and has good and marketable title to all of the assets
included in the Accounts and all assets now owned or used by it or in its
possession except for leased assets.
8. Mortgages and Charges
8.1 The Company has not created nor has it agreed to create and nor is there
subsisting any mortgage debenture lien charge or other similar encumbrance
or security interest over all or any of its property whether present or
future, save for the Company's treasury shares which are mortgaged in
favour of Unibank A/S.
9. Guarantees
9.1 Except in the ordinary course of business and as disclosed to the Investor
the Company is not and has not agreed to become bound by any guarantee,
bond, warranty or indemnity or suretyship or similar commitment and there
is not now outstanding any such guarantee bond warranty indemnity
suretyship or similar commitment given for the accommodation of or in
respect of any obligation or liability of the Company.
10. Borrowing Arrangements
10.1 The Disclosed Information contains full particulars in relation to all
borrowings of the Company and all arrangements in the nature of borrowing
or loan facilities.
10.2 The Company is not in breach of the terms of any of its borrowing
obligations and in particular of any document governing the terms of or
securing such borrowings and no event has occurred which will or might
give any person the right to call for the immediate or early repayment of
any of its borrowings or to terminate any loan facilities placed at its
disposal or which is likely to cause a demand for the immediate
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<PAGE>
repayment of any of its borrowings which are repayable on demand.
10.3 There is no indebtedness of the Company exceeding DKK 100,000 in aggregate
which is overdue for payment or discharge by more than three months and
the Company has sufficient working capital for the purposes of carrying on
its business in its present form for the period of twelve months after
Closing.
10.4 The Company's credit facility agreement with its bank can continue
unvaried regardless of the transaction.
11. Material Commitments and Agreements
11.1 The Company is not party to nor liable in respect of and none of the
assets of or used by the Company is affected by:-
a) any contract, covenant, commitment or arrangement (i) of an unusual
nature or (ii) made otherwise than in the ordinary and usual course
of the business of the Company as now carried on;
b) any partnership, joint venture or consortium, other than the
partnership agreement of 18 June 1998 regarding the Partnership;
c) any contract, covenant, commitment or arrangement which in any
material way restricts the freedom of the Company to carry on its
business or any part thereof in any part of the world in such a
manner as it thinks fit; save for (i) the Company's agreement with
the Nordania Leasing Group according to which the Company is
prevented from having any other leasing companies as customers
without the prior approval of the Nordania Leasing Group, (ii) the
Company's agreement with Advokaternes Serviceselskab I/S in
principle preventing the Company from acting as broker in respect of
Non-life business for the members of Advokaternes Serviceselskab I/S
and (iii) the Company's agreement with Boligselskabernes
Landsforening preventing the Company from having other housing
associations East of the Great Belt as customers or
d) any contract, covenant, commitment or arrangement which is or is
liable to be terminated or altered by another party as a result of
any change in the management or shareholders of the Company.
e) No person is authorised to act as agent or attorney for the Company
or to bind the Company otherwise than its Directors acting as a
Board and Mr Kent Risvad,
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<PAGE>
Mr Lars Gundorph and Ms Karin Holst acting as Managers and others
using the authority vested in them as employees.
12. Properties
12.1 Copies of all material documents relating to the premises used by the
Company (the "Properties") have been supplied to the Investor prior to the
date hereof.
12.2 The Company is entitled, without restriction and without breaching the
terms of any lease or other rights of occupation or the provisions of any
legislation to use the Properties for the purpose for which it presently
uses the same or any part thereof.
12.3 The Company has fully complied with all its obligations in respect of such
occupation and no notice has been served to terminate the right of the
Company to continue the same and, there are no circumstances which could
result in such right of occupation being determined otherwise than by the
Company except as provided in the Landlord and Tenant Act (lejeloven).
13. Business of the Company
13.1 The Company does not carry on any business other than the business
described in the Disclosed Information and the Company's business has
always been carried out in compliance with all applicable legislation.
13.2 Other than what appears in the Disclosed Information as far as the Company
is aware the Company has not received any process notice or communication
(formal or informal) from any governmental, legislative, regulatory or
consumer authority or other authority of any jurisdiction or competence.
13.3 The Company will incur expenses no greater than DKK 750,000 per year (1998
- figure as increased annually in accordance with the increase in the
Danish Net Consumer Price Index) in relation to administration costs
including without limitation directors' fees, D&O insurance, legal and
audit fees.
14. Litigation
14.1 The Company is not engaged in any litigation arbitration prosecution or
other legal proceedings (whether as plaintiff defendant or third party)
and there are no such proceedings pending or threatened or any proceedings
in respect of which the Company is or might be liable to indemnify or
compensate any other person
-8-
<PAGE>
concerned therein and to the best of the knowledge information and belief
of the Company there are no claims facts event or other circumstances
which are likely to give rise to any such proceedings which are not
covered by the Company's e&o policy, save from claims put forward by Mr
Knud Jakobsen in connection with his retirement from the Partnership, cf.
14.2.
14.2 The claims put forward by Mr Knud Jakobsen in connection with his
retirement from the Partnership are unsubstantiated and unfounded.
Moreover, the Company's refusal to consent to Mr Jakobsen's contemplated
business activities as insurance auditor and/or independent insurance
broker is substantiated in the Deed of Partnership.
15. Insurance
15.1 To the best of the Company's knowledge the Company is and at all material
times has been adequately covered by valid insurances against all normal
risks including, without limitation, professional and all other
liabilities having regard to the type of business carried on and assets
owned or used by it.
15.2 The policies of insurance to which the Company is a party are valid and
enforceable; all premiums due have been paid; there are no outstanding
claims or circumstances likely to give rise to a claim thereunder other
than what is referred to in the Disclosed Information; and nothing has
been done or omitted to be done which has made or could make any such
policy void or voidable or whereby the renewal of any such policy might be
affected or the premiums due in respect thereof are likely to be
increased.
15.3 Claims or incidents reported under the policies of insurance to which the
Company is a party do not give the Company reason to reserve potential
losses in its financial statements.
16. Employees etc.
16.1 The Disclosed Information details the names and material particulars of
all officers, employees, consultants and agents of the Company and their
respective ages, length of service with or engagement by the Company and
their special terms of employment or engagement including (without
limitation) special payments and emoluments, bonuses, profit sharing
arrangements and benefits in kind, commissions, fees, remuneration and
other benefits.
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<PAGE>
16.2 Bonuses paid to personnel in Copenhagen which they may have earned a legal
right to receive in future years amounts to a maximum of DKK 300,000 in
1997.
16.3 No Key Personnel has given or received notice terminating his employment
or engagement or is entitled (without giving proper notice) to terminate
his employment or engagement with the Company.
17. Associates and Connected Persons
17.1 No shareholders of the Company nor any connected person or associate of
any of them has any interest, direct or indirect, in any agreement or
arrangement to which the Company is a party or in any business which has a
close trading relationship with that of the Company or which is or is
likely to become competitive with the business of the Company other than
what follows from the Partnership Agreement as of 18 June 1998 and save
for partners' interest regarding the lease in Aalborg.
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<PAGE>
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Assurandorgruppen I/S
DEED OF PARTNERSHIP
TABLE OF CONTENTS
Name, registered address, object page 2
Partners page 2
Financial matters page 3
The management of the partnership page 5
Various provisions page 8
Termination page 9
Breach page 10
Retirement for other reasons page 10
Financial matters in case of retirement page 11
Non-competition page 13
Arbitration page 14
List of appendices page 16
Signatures page 15
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<PAGE>
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2
ASSURANDORGRUPPEN I/S
The following deed of partnership shall apply to the cooperation of the partners
in Assurandorgruppen I/S and shall replace the deeds of partnership applying so
far.
1.0 NAME, REGISTERED ADDRESS AND OBJECT
1.1 Name: Assurandorgruppen I/S (hereinafter called I/S).
1.2 The registered address of I/S is in the district of Arhus.
For the time being I/S has branch offices at the following addresses:
Strandgade 4, DK-1401 Copenhagen K
Brendstrupgaardsvej 13, DK-8200 Arhus N
Nedergade 35, DK-5000 Odense C
Hasserisvej 134, DK-9000 Aalborg
Rosenornsgade 6, DK-8900 Randers
1.3 The object of I/S is to carry on insurance broking and related business.
2.0 PARTNERS
2.1 The partners in I/S are:
2.1.1 Assurandorgruppen A/S, reg. no. 164725 (hereinafter called A/S) with a 90
percentage share of I/S.
2.1.2 The remaining 10 percent is distributed on 50 shares of 0.2 percent as it
is a condition that - apart from A/S - each partner shall and may only own
a share of 0.2 percent.
2.1.3 For the time being A/S moreover possesses 6 shares of 0.2 percent which
are presumed to be sold to new partners.
2.1.4 For the time being the remaining 44 I/S shares, a total of 8.8 percent,
are distributed on the partners mentioned in appendix 1.
2.1.5 In addition Willis Corroon Europe B.V. ("WCE") has a right to a share of
the profits of I/S as long as WCE remains a shareholder of A/S as further
described in appendix 5.
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<PAGE>
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3
2.2 For the time being the shares of A/S are distributed as stated in the
survey, appendix 2.
2.3 New partners may be taken in by resolution passed by the executive
committee of I/S with a 5/6 majority after prior information to
life/non-life partners respectively, depending on the field of activity of
the new partner.
Only insurance brokers and executives who place their entire working
capacity at the disposal of I/S and who - upon demand by the executive
committee acquire a block of shares in A/S, the size of which to be
decided by the executive committee, can be taken in as partners. Efforts
are being made to ensure that the acquisition of shares can take place in
connection with the entry as a partner but by a simple majority of votes
the executive committee may decide that the acquisition of shares shall be
postponed. The purchase price for shares shall be decided in accordance
with the share price fixed at the closing of the financial statements, cf.
clause 9 below.
A partner shall be entitled to acquire and hold the block of shares
mentioned in a public or private limited company wholly owned by him.
3.0 FINANCIAL MATTERS
3.1 The balance sheet of I/S as at January 1 1998 is enclosed as appendix 3.
The partners invest their respective shares in the existing regional
partnerships and acquire/surrender shares so that subsequently the
individual partners own an 0.2 percent share in I/S, cf. appendix 4.
3.2 The partners are pro rata owners of the assets and liabilities of I/S
according to their I/S shares.
3.3 The partners shall be liable personally, directly and jointly and
severally to third parties for the obligations of I/S; but among
themselves the partners shall be liable pro rata in proportion to their
I/S share.
3.4 A brokers' third party liability insurance policy shall be effected and
maintained for the account of I/S.
In the case of technical errors involving liability for damages where, for
reasons ascribable to the partner, the insurance company does not cover
the loss, the partner shall be liable for the loss suffered by I/S. As
regards technical errors covered by the third party liability insurance
the partner shall be liable for the first DKK 25,000 of the excess,
whereas the
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4
remaining excess shall be the liability of I/S. Where particular
justifying elements speak for it, or where I/S chooses to make an ex
gratia payment, the executive committee can reduce the liability of the
partner or remove it entirely.
3.5 As regards the distribution of profit or loss according to the result for
the year, including the calculation and advance payment of profit and
profit for the year on account to the partners, reference is made to the
enclosed appendix 5, which is an integral part of this deed of
partnership.
3.6 The partners shall jointly obtain the necessary operating credits from A/S
and they are under an obligation to provide security by way of assignment
of existing and future outstanding accounts.
3.7 The financial year of I/S is the calendar year.
3.8 The accounts of I/S shall be prepared in accordance with proper and
prudent accounting policy.
3.9 The accounts of I/S shall be audited by the state-authorized public
accountant appointed as auditor of A/S. The auditor is entitled to
participate in the meetings of I/S.
3.10 As regards guidelines and procedure for the financial statements and
budgets of I/S, reference is made to the enclosed appendix 6 which is an
integral part of this deed of partnership.
4.0 THE MANAGEMENT OF THE PARTNERSHIP
4.1 The meeting of partners
4.1.1 The meeting of partners is the highest authority of I/S.
4.1.2 Ordinary meetings of partners shall be held in April/May and
November/December.
At the April/May meeting the presentation and adoption of the
financial statements for the preceding financial year shall be on
the agenda. At the November/December meeting presentation and
adoption of the budget for the next financial year shall be on the
agenda.
Proposals from the partners or from WCE to be dealt with at the
April/May meeting must be submitted to the executive committee not
later than on April 1 and proposals to be dealt with at the
November/December meeting not later than on November 1. Provided
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<PAGE>
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5
always that the executive committee is entitled to accept proposals
received after these closing dates to the extent it deems possible.
4.1.3 Extraordinary meetings of partners shall be held, when convened by the
executive committee or WCE or the management or at the written request of
at least 5 partners, stating the agenda.
4.1.4 The executive committee shall convene meetings of partners at 14 days'
notice at least by letter or e-mail to each partner and WCE. The agenda
shall accompany the notice convening the meeting.
4.1.5 The executive committee shall decide where the meeting is to be held.
4.1.6 The meeting of partners shall be quorate, when A/S is represented and at
least half of the other partners are present or represented. At the
meetings of partners A/S shall be represented by a member of the
management and/or of the board of directors. A representative of WCE is
entitled to attend the meeting of partners with a right of speech.
Partners who do not attend a meeting of partners can issue an instrument
of proxy authorizing the holder to vote at the meeting of partners on
behalf of the partner issuing the proxy. No person can appear with more
than one proxy. The proxy must be in writing, dated and without
reservations of any kind and it shall not be given for a period exceeding
one year.
4.1.7 Where a meeting of partners held in accordance with the above provisions
is found not to be quorate, another meeting of partners with the same
agenda may be convened by the executive committee at 14 days' notice at
least. This meeting will be quorate, when A/S is represented irrespective
of the number of partners attending.
4.1.8 Meetings of partners shall be presided over by a chairman elected by the
executive committee.
The management shall cause minutes of the meeting to be prepared and sent
to each of the partners.
4.1.9 At the meetings of partners, unless this deed of partnership prescribes
otherwise, resolutions shall be made by a simple majority of votes in
proportion to shares owned.
4.2 The executive committee
4.2.1 The board of directors of A/S elected at the time in question shall also
be the executive
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6
committee of I/S and shall be in charge of the overall management of the
activities of I/S.
4.2.2 The chairman shall convene and preside over the meetings of the executive
committee. Meetings shall be convened when decided by the chairman or when
requested by 2 members of the executive committee. Meetings shall be
convened at 8 days' notice but the chairman may convene meetings at
shorter notice, if he deems it necessary.
4.2.3 The executive committee is quorate when at least half the members are
present. Resolutions are passed by a simple majority of votes unless this
deed of partnership or the Shareholders' Agreement regarding A/S provides
otherwise. Each member of the executive committee has one vote. In case of
equality of votes the chairman shall have the casting vote.
4.2.4 The executive committee shall cause minutes of the meetings of the
committee to be prepared.
4.3 Management
4.3.1 The executive committee shall engage a management to be in charge of the
day-to-day business. Members of the management cannot be members of the
executive committee. The current organization will appear from appendix 7.
Details of the duties and spheres of authority and other terms shall be
laid down in service agreements.
4.3.2 The management shall decide on the engagement and dismissal of employees.
4.4 Power to bind I/S
4.4.1 I/S shall be bound by the chairman of the executive committee signing
jointly with 1 manager or by the joint signatures of 3 members of the
executive committee or by the joint signatures of the entire executive
committee.
5.0 VARIOUS PROVISIONS
5.1 Each partner is under an obligation to use his entire capacity for work to
promote the cooperative enterprise, cf. clause 10 below.
5.2 Each partner is under an obligation continuously to maintain and update
his professional knowledge.
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5.3 With the exceptance of guarantee obligations for children or spouses of
amounts which are not of decisive importance for their financial position,
the partners commit themselves not to undertake any guarantee obligations
or the like for third parties.
5.4 Each partner is under an obligation not to third parties to divulge
internal or business matters which come to his knowledge through his
participation in the activities of I/S and this obligation shall remain in
force also after the partner has retired from I/S.
5.5 Each partner is entitled to holiday in accordance with the rules of the
Holidays Act in force at the time in question.
5.6 In case of temporary loss of working capacity as a consequence of illness
or accident, partners with less than 3 years' seniority shall receive
advance payment of profit for the first 3 months in accordance with the
provisions laid down in appendix 5, provided always that such advance
payments of profit will be reduced by the amounts of benefit, if any, paid
to them by the public authorities by reason of the loss of working
capacity. In case of loss of working capacity for a period exceeding 3
consecutive months, the right to advance payment of profit will be lost
whereas the share of profit/loss remains unchanged.
In case of temporary loss of working capacity, partners with more than 3
years' seniority are entitled to advance payment of profit in accordance
with appendix 5 for a period of 6 months, provided always that there will
be a similar reduction as regards any benefits paid by the public
authorities, cf. the above. Provided always that the advance payment of
profit is reduced by 50 percent in case of loss of working capacity
lasting more than 6 months and until 24 months.
As regards loss of working capacity for a period exceeding 24 months
reference is made to clause 8.4 below.
Similar rules shall apply to administrative partners, provided always that
advance payment of profit is replaced by the agreed consideration.
5.7 When a partner is absent on holiday or by reason of loss of working
capacity, the other partners are under an obligation to attend to the
client portfolio of the absent partner according to lines agreed on and
adapted to the specific situation .
5.8 Spouses, cohabitees and children of partners shall only be engaged by I/S
subject to resolution passed by the executive committee by a 5/6 majority
of votes.
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8
5.9 The deed of partnership is a personal agreement between the partners for
which reason the share shall only be transferred subject to the provisions
concerning retirement, etc. stated below. By transfer in this connection
is understood the sale, charging, succession, other administration of
property and enforcement proceedings. The charging of shares as security
for bank credits of I/S or A/S and bank loans for the purchase of I/S
shares is permitted, however, provided that the lender respects this deed
of partnership.
6. TERMINATION
6.1 Each partner is entitled to terminate his participation in I/S subject to
3 months' notice to the last day of a month (the date of retirement).
6.2 Subject to 3 months' notice and by a 5/6 majority of votes the executive
committee can decide that a partner shall retire from I/S, provided always
that the partner shall be entitled to an interview with the executive
committee before the decision is made by the latter. Where a partner has a
seniority exceeding 3 years, the notice given shall be 6 months, however.
7.0 BREACH
7.1 Where a partner significantly violates his obligations under this deed of
partnership, the executive committee can demand the immediate retirement
of the partner in question. Provided always that such demand shall be made
within 1 month of the executive committee having received notice of the
violation.
8.0 RETIREMENT FOR OTHER REASONS
8.1 Where a partner dies or is declared legally incompetent, he shall retire
from I/S. The date of retirement shall be the death-day or the date of the
declaration of legal incompetence.
At the death of a partner 3 months' advance profit, in accordance with the
provisions laid down in appendix 5, and in the case of administrative
partners 3 months' consideration, shall be paid to a surviving
spouse/cohabitee or children below 21 years of age.
8.2 A partner shall retire from I/S not later than on December 31 in the year
in which he reaches the age of 67.
8.3 A partner against whom bankruptcy proceedings are instituted, or who makes
a compulsory composition with his creditors, or who obtains debt relief,
or against whom other general enforcement proceedings are instituted shall
retire from I/S. The date of
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9
retirement shall be the date of the making of the bankruptcy order or the
date of the making of the decision to institute enforcement proceedings.
8.4 A partner whose incapacity for work on account of illness or accident has
lasted for more than 24 months, and who has no prospects of lasting
restoration to health, shall retire from I/S with the 1st day of the month
following the 24-month period as date of retirement.
8.5 When a partner sells all of his shares in A/S he shall automatically
retire from the I/S.
9.0 FINANCIAL MATTERS IN CASE OF RETIREMENT
9.1 At the retirement of a partner - irrespective of the reason for the
retirement - his share of I/S shall be made up and paid to him according
to the following guidelines. The partner's share of I/S shall be
transferred to A/S unless a new partner is admitted at the same time in
which case the share of I/S may be transferred to the new partner.
9.1.1 Prior to the meeting of partners in April/May the executive committee
shall fix a price for the current financial year of a share of 0.2
percent. At the fixing of the price the assets of I/S, including the
goodwill value and its liabilities shall be fixed at market value and in
consideration of generally applicable accounting principles of
depreciation and provisions.
At the meeting of partners the executive committee shall give an account
of the conditions forming the basis of the price fixing.
In case a partner cannot accept the price fixed by the executive
committee, an objection in writing and stating his reasons shall be
submitted to the chairman of the executive committee not later than 2
weeks after the meeting of partners. The partnership's auditor shall then
decide the price fixing issue and shall fix the price in an account to the
executive committee stating his reasons. Within 1 week of having received
the price fixed by the auditor, the executive committee shall inform the
partners in writing about the price fixed by the auditor. In case a
partner will not accept the price fixed by the auditor, he shall, within 2
weeks of having received information about the price fixed by the auditor,
refer the matter to arbitration, cf. clause 11 below. Reference to
arbitration shall be by complaint in writing forwarded to the executive
committee and stating the reasons. The price fixed by the arbitration
tribunal shall be final and binding on the partners and shall apply in
case of retirement which takes place during the financial year, unless
subsequent changes of applicable law or of the conditions of the trade or
the like, which occur in the financial year, significantly change the
conditions forming the basis of the fixing of the price. Where such
changes occur, a partner shall be entitled to the executive committee to
submit a written request for a change of the price fixed. The executive
committee is
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10
under an obligation within 2 weeks of having received such request to ask
the partnership's auditor for a statement, and if the latter finds that
the condition has been met, he shall change the price fixed. Both the
fixing of a new price by the auditor and his refusal of making the change
can be referred to arbitration.
Where a request made by a partner for a change of the price fixed does not
lead to changes of more than +/- 15 percent, the partner requesting the
change shall pay all expenses in connection with it, including expenses
for auditor and possible arbitration.
9.1.2 At the retirement of a partner A/S is entitled and under an obligation to
the cash payment, as at the date of retirement at the latest, of the price
fixed for the share of the retiring partner according to prior decision.
Where the price fixed is not available until after the date of retirement,
the price shall be paid 1 week at the latest, after the final price has
been fixed.
9.1.3 In addition the retiring partner's capital account shall be paid out in
cash as at the date of retirement together with a payment on account,
according to the estimate of the executive committee, of the expected
share of profits for the current financial year. This amount shall be made
up when the financial statements have been finally adopted by the meeting
of partners.
9.1.4 The executive committee shall be entitled to withhold payments to retiring
partners in connection with possible claims for the repayment of too large
account payments of profit and of any claim which I/S might have against
the retiring partner, including claims for damages for breach.
9.1.5 Where the retirement is due to material breach, a 25 percent reduction
shall be made when the price of the share is fixed.
9.1.6 Where the purchase price or capital account has not been paid, interest
shall be payable on the amounts at the rate corresponding to the official
discount rate + 5 percent as from the due date and until payment is
effected. Interest shall similarly be paid on claims for the repayment of
too large amounts paid out.
9.2 In case a partner gives notice of retirement, I/S is entitled to "lay off"
the retiring partner for immediate retirement. I/S shall pay the usual
share of profits for the period until the time of retirement according to
the notice given.
10.0 NON-COMPETITION
10.1.1 No partner may without the permission of the executive committee be the
owner of or take part
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11
in any other business, whether in the same or another trade.
10.1.2 Investment of capital without any personal performance of any kind is
permitted, provided always that such investment is not made in any firm
or company, except such as are listed on the stock exchange, which
directly or indirectly compete with I/S or are customers of I/S.
10.2 At the retirement of a partner, including at the dissolution of I/S
irrespective of the reason for it, the following non-competition clause
shall apply:
10.2.1 The partner shall not be entitled:
a) for a period of 2 years from the time of the retirement directly
or indirectly to carry on business in competition with the
business carried on by I/S at the time of the retirement - whether
on his own or in corporate form,
b) for a period of 2 years from the time of the retirement to take up
employment in any business which directly or indirectly carries on
business, which competes with the business carried on by I/S at
the time of the retirement.
The provisions mentioned in a) and b) shall not prevent the partner from
taking up employment in an insurance company, provided always that the
partner shall not be entitled for a period of 2 years after the time of
the retirement directly or indirectly to contribute to the acquisition of
business from parties who were customers of I/S at the time of the
retirement.
The executive committee may grant exemption from the above.
10.2.2 The non-competition clause shall apply to competing activities everywhere
in Denmark.
10.2.3 Violation of the non-competition clause may be stopped by a restraining
injunction without security being given.
10.2.4 For each case of violation of the non-competition clause the partner in
question shall pay a penalty corresponding to the purchase price received
by him for his share at his retirement, provided always that the mimimum
amount of such penalty shall be DKK 300,000 and in addition the partner
shall pay damages according to the general rules of Danish law. The
amount mentioned shall be adjusted in accordance with the Net
Consumer-Price Index with effect as from July 1 1998.
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12
11.0 ARBITRATION
11.1 Disputes between the partners concerning the interpretation or violation
of the provisions of this deed of partnership shall be settled by
arbitration if one of the parties so requests. The arbitration tribunal
consists of two persons appointed by the parties and an umpire appointed
by the President of the Maritime and Commercial Court in Copenhagen. In
case of equality of votes the umpire shall have the casting vote. The
arbitration tribunal shall decide its own procedure. Where questions
arise as to whether either of the arbitrators appointed are incompetent
or unqualified for the task, the question shall be decided with binding
effect by the President of the Maritime and Commercial Court and in case
it is decided that the person in question is incompetent or unqualified,
the President of the Maritime and Commercial Court will appoint another
arbitrator instead. In connection with its award, which is final and
conclusive and which cannot be brought before the courts of law, the
arbitration tribunal may make a decision as regards the costs of the case
and which of the parties is to pay the costs of the arbitration.
11.2 A dispute is referred to arbitration by the complainant writing to the
executive committee stating the content of the complaint and the
allegations he intends to raise before the arbitration tribunal. The
complaint shall contain information as to who the complainant appoints
arbitrator.
11.3 Otherwise the provisions of Act no. 181 of May 24 1972 on arbitration
shall apply.
Copenhagen, 28/9 1998
Assurandorgruppen A/S The Individual Partners
By: By:
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Mr Niels Simonsen and
Mr Kent Risvad according
to authority vested in
the Board of Directors
of Assurandorgruppen A/S
Willis Corroon Europe B.V.:
By:
---------------------------
LIST OF APPENDICES
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13
1. List of partners as at January 1 1998, 0.2 percent shares.
2. List of shareholders of Assurandorgruppen A/S as at today.
3. Balance sheet as at January 1 1998.
4. Survey of partners' contribution/sale/acquisition of shares as at
January 1 1998.
5. Distribution of profit/loss.
6. Accounting principles, etc.
7. Organizational chart.
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APPENDIX 5 to the deed of partnership of Assurandorgruppen I/S
I. PROFIT / LOSS DISTRIBUTION
1. THE LIFE AND PENSIONS DIVISION
1.1. The profit made up according to appendix 6, shall be distributed with 30%
to the partners according to ownership shares and with 70% (the "Advance
Profit") among the partners who are insurance brokers, the administrative
partners being paid via the operating costs, provided always, however,
that the aggregate salaries of I/S (including both Life and Non-Life
partners' salaries and normal salaries as defined in schedule A) shall
not exceed 62% (in 1998), 61% (in 1999) and 60% (in 2000-2005),
respectively, of the total income of I/S (excluding investment income).
If the aggregate salaries of I/S exceed those thresholds a reduction of
30% of the excess amount shall be made in the Advance Profit and
distributed to WCE. The reference to 30% above shall be changed to always
correspond to WCE's percentage ownership of the shares of A/S.
The parties agree to use their best endeavours to reach an operating
margin as defined in Schedule B of at least 20%. In any event the parties
agree that AG Group shall have a minimum operating margin of 15% in the
years 2000 - 2005 and that in the event this figure is not reached the
partners' salaries shall be reduced to an amount which enables AG Group
to have a profit margin of 15%.
In 2005 the shareholders and partners shall undertake a review process
which shall determine both whether 60% remains a fair and reasonable
demarcation for "aggregate salaries" and whether 20% remains a fair and
reasonable expected operating margin; after having undertaken bench
marking against other similar companies engaged in the same or similar
businesses; and AG Group's profitability".
1.1.2. The advance profit is divided into a base consideration and a bonus
consideration.
1.1.3. Between 90 and 95 percent of the budgetted advance profit shall be used
as base consideration. The remaining 5-10 percent and advance profit in
excess of the budgeted amount shall be set aside for bonus consideration.
1.1.4. Where the share of advance profit called base consideration is smaller
than the budgeted amount, the deficit shall be distributed among the
partners in proportion to the base consideration fixed for the year for
the individual partner.
1.2. CONSIDERATION COMMITTEE
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1.2.1. A consideration committee shall be set up in which the life division
manager participates as an ex-officio member and in which the other
members shall be one partner (elected by lot or by agreement between the
partners) from each office.
1.2.2. Election of members for next consideration year shall take place each
year in November/December.
1.2.3. The committee shall be set up for one consideration year at a time so
that the committee which has fixed the base consideration for the
financial year shall also fix the bonus consideration for the same
financial year.
1.2.4. Within the framework stated above the consideration committee shall
decide the share of the advance profit to be used for base consideration
and the share to be used for bonus consideration.
1.2.5. Prior to the 3rd payment of consideration in the coming year and not
later than on February 15 the consideration committee shall decide the
distribution of the base consideration for the coming year on the basis
of an evaluation of the individual partner and of the whole and the
committee shall decide the evaluation criteria.
1.2.6. For the first 2 months account payments shall be made corresponding to
the amounts paid the foregoing year. When the base consideration for the
coming year has been decided, the account payments for the first 2
months shall be adjusted.
1.2.7. At the end of the financial year, when the financial result is known the
consideration committee distributes the bonus consideration. The bonus
consideration is granted to the individual partner on the basis of a
careful evaluation of his/her performance for the year and the committee
shall decide the evaluation criteria.
1.2.8. Where the individual partner is not satisfied with the base
consideration fixed by the consideration committee for him/her or with
the distribution of the bonus consideration, he/she may bring the issue
before the management, which shall then decide whether changes of the
distribution should be made.
The issue shall be brought before the management not later than one week
after the partner has received information about his/her base
consideration for the coming year.
The decision of the management may be brought before the executive
committee not later than 4 weeks after a partner has been notified of
it.
1.2.9. When new partners are taken in, the base consideration shall be decided
by the life division manager, who shall obtain the approval of the
consideration committee, prior to the admission of the new partner.
1.2.10. By way of advance profit partners may draw a monthly amount on account
corresponding to 1/12 of the budgeted base consideration.
Where in the course of the year the budgeted base consideration pool
becomes smaller than expected, the monthly amounts on account may be
proportionally reduced.
The monthly amounts on account shall be paid monthly in advance.
The payment of monthly advance profit on account is effected on the
condition that the
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partners place their entire working capacity at the disposal of I/S.
2. THE NON-LIFE DIVISION
2.1.1. The profit made up according to appendix 6, shall be distributed with
30% to the partners according to ownership shares and with 70% (the
"Advance Profit") among the partners who are insurance brokers, the
administrative partners being paid via the operating costs, provided
always, however, that the aggregate salaries of I/S (including both Life
and Non-Life partners' salaries and normal salaries as defined in
schedule A) shall not exceed 62% (in 1998), 61% (in 1999) and 60% (in
2000-2005), respectively, of the total income of I/S (excluding
investment income). If the aggregate salaries of I/S exceed those
thresholds a reduction of 30% of the excess amount shall be made in the
Advance Profit and distributed to WCE. The reference to 30% above shall
be changed to always correspond to WCE's percentage ownership of the
shares of A/S.
The parties agree to use their best endeavours to reach an operating
margin as defined in Schedule B of at least 20%. In any event the
parties agree that AG Group shall have a minimum operating margin of 15%
in the years 2000 - 2005 and that in the event this figure is not
reached the partners' salaries shall be reduced to an amount which
enables AG Group to have a profit margin of 15%.
In 2005 the shareholders and partners shall undertake a review process
which shall determine both whether 60% remains a fair and reasonable
demarcation for "aggregate salaries" and whether 20% remains a fair and
reasonable expected operating margin; after having undertaken bench
marking against other similar companies engaged in the same or similar
businesses; and AG Group's profitability".
2.1.2. The advance profit is divided into a base consideration and a bonus
consideration.
2.1.3. Between 90 and 95 percent of the budgetted advance profit shall be used
as base consideration. The remaining 5-10 percent and advance profit in
excess of the budgeted amount shall be set aside for bonus
consideration.
2.1.4. Where the share of advance profit called base consideration is smaller
than the budgeted amount, the deficit shall be distributed among the
partners in proportion to the base consideration fixed for the year for
the individual partner.
2.2. CONSIDERATION COMMITTEE
2.2.1. A consideration committee shall be set up in which the non-life division
manager and the regional manager participate as ex-officio members and
in which the other members shall be one partner (elected by lot or by
agreement between the partners) from each office.
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2.2.2. Election of members for next consideration year shall take place each
year in November/December. (The election for 1998 has taken place, the
next election will take place in November/December 1998 applying to the
consideration year 1999).
2.2.3. The committee shall be set up for 1 consideration year at a time so that
the committee which has fixed the base consideration for the financial
year shall also fix the bonus consideration for the same financial year.
2.2.4. Within the framework stated above the consideration committee shall
decide the share of the advance profit to be used for base consideration
and the share to be used for bonus consideration.
2.2.5. Prior to the 4th payment of consideration in the coming year and not
later than on March 15 the consideration committee shall decide the
distribution of the base consideration for the coming year on the basis
of an evaluation of the individual partner and of the whole and the
committee shall decide the evaluation criteria.
2.2.6. For the first 3 months payments on account shall be made corresponding
to the amounts paid the foregoing year. When the base consideration for
the coming year has been decided, the payments on account for the first
3 months shall be adjusted.
2.2.7. At the end of the financial year, when the financial result is known the
consideration committee distributes the bonus consideration. The bonus
consideration is granted to the individual partner on the basis of a
careful evaluation of his/her performance for the year and the committee
shall decide the evaluation criteria.
2.2.8. Where the individual partner is not satisfied with the base
consideration fixed by the consideration committee for him/her for the
coming year, he/she may bring the issue before the management, which
shall then decide whether changes of the distribution should be made.
The decision made by the management shall then apply to the coming year.
The issue shall be brought before the management not later than one week
after the partner has received information about his/her base
consideration for the coming year.
2.2.9. Where the individual partner is not satisfied with the base
consideration fixed by the consideration committee for him/her or with
the distribution of the bonus consideration, he/she may bring the issue
before the management, which shall then decide whether changes of the
distribution should be made.
The issue shall be brought before the management not later than one week
after the partner has received information about his/her base
consideration for the coming year.
The decision of the management may be brought before the executive
committee not later than 4 weeks after a partner has been notified of
it.
2.2.10. When new partners are taken in, the base consideration shall be decided
by the non-life division manager, who shall obtain the approval of the
consideration committee, prior to the admission of the new partner.
2.2.11. By way of advance profit partners may draw a monthly amount on account
corresponding
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to 1/12 of the budgeted base consideration.
Where in the course of the year the budgeted base consideration pool
becomes smaller than expected, the monthly amounts on account may be
proportionally reduced.
The monthly amounts on account shall be paid monthly in advance.
The payment of monthly advance profit on account is effected on the
condition that the partners place their entire working capacity at the
disposal of I/S.
3. OTHER PROVISIONS CONCERNING PROFIT
3.1. Payments of profit received/payments of deficit made according to owner
shares shall take place not later than two weeks after the adoption of
the financial statements at the meeting of partners in April/May.
List of Appendices
Schedule A: Defintion of normal salaries and related excl. 70% partner's salary
Schedule B: Profit Allocation model, including operating profit
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<PAGE>
BUSINESS TRANSFER AGREEMENT
between
Willis Corroon A/S
Assurandorgruppen I/S
<PAGE>
This Agreement is made the 28th day of September 1998 between Willis Corroon A/S
(Reg.No. A/S 198.529) Christian IX's Gade 7, 3rd Floor, DK-1111 Copenhagen K
(hereafter referred to as the "Vendor") and Assurandorgruppen I/S,
Brendstrupgaardsvej 13, DK-8200 Arhus N (hereafter referred to as the
"Purchaser").
WHEREAS Willis Corroon Europe B.V. a company incorporated under the laws of the
Netherlands and being affiliated with the Vendor has decided to make an
investment in Purchaser.
WHEREAS Willis Corroon Europe B.V. desires after the investment to concentrate
the activities in Denmark of the Willis Corroon Group which has hitherto been
carried out by the Vendor in the Purchaser's business.
NOW THEREFORE in consideration of the foregoing and the mutual covenants and
agreements set forth herein the Vendor agrees to sell and the Purchaser agrees
to purchase the business hitherto operated by the Vendor as further defined in
this Agreement (the "Business") on the terms and conditions set out below.
1. Transfer Date
1.1 Effective from 28 September 1998 (the "Transfer Date") the Business
shall be transferred from the Vendor to the Purchaser.
1.2 From the Transfer Date the Business shall be held for the account and
risk of the Purchaser. The Vendor is solely responsible for any actions
with regard to the Business made prior to the Transfer Date regardless
of whether the effect of such actions are first seen after the Transfer
Date.
1.3 The Vendor will receive commission in all instances where invoices are
submitted by the Vendor prior to the Transfer Date. For invoices
submitted by the Purchaser after the Transfer Date payment will be in
the favour of the Purchaser.
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<PAGE>
2. Assets Transferred and their Valuation
2.1 Equipment and Furniture
2.1.1 The Purchaser shall acquire all equipment, furniture and moveable
property of any sort belonging to the Business for DKK 275,000.
2.2 Goodwill
2.2.1 The Purchaser shall acquire the goodwill of the Business for DKK
5,550,000.
3. Contracts
3.1 Service Contract
3.1.1 The Service Contract with Mr Jens Boeskov shall be transferred to the
Purchaser.
3.1.2 The Purchaser will permit Mr Jens Boeskov in a reasonable period after
the Transfer Date to use part of his time for the purpose of
facilitating the transfer of the Vendor's business to the Purchaser
including administration of receivables.
3.2 Employees
3.2.1 The employees hitherto employed in the Business, i.e. Jesper Danvad,
Gitte Olsen and Kim Skafte Pedersen shall be transferred to the
Purchaser pursuant to the Transfer Undertakings' Act
(Virksomhedsoverdragelsesloven).
3.2.2 The Vendor and the Purchaser shall inform their own employees of the
transfer no later than 28 September 1998 in accordance with Sections 5
and 6 of the Transfer Undertakings' Act.
3.2.3 Remuneration earned by employees but not due for payment before or on
the Transfer Date including pay for holidays and weekdays contributions
to ATP
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and AUD, bonuses, profit bonuses, exgratia payments and the value of
overtime not yet taken as time off in lieu shall be refunded in the
statement of repayments, cf. Clause 5.3. The same shall apply to
expenses defrayed by employees transferred which have not yet fallen due
for payment. The Purchaser shall assume without indemnity obligations
arising from length of service.
3.3. Commercial Contracts
3.3.1 The Purchaser shall assume the Vendor's rights and obligations in
relation to all of the Vendor's commercial contracts entered into with
insurance companies and clients for the purpose of the Business. The
Purchaser shall not assume any other contracts unless provided for
elsewhere in this Agreement.
3.3.2 Where the consent of a third party is required before the Purchaser may
replace the Vendor in a contract the Purchaser shall be responsible for
obtaining such consent. The Vendor shall render assistance when
necessary but does not warrant the transferability of any contracts.
3.4 Insurance Policies
3.4.1 The Vendor's insurance policies connected with the Business shall not be
assigned to the Purchaser.
4. Liabilities
4.1 The Purchaser shall not assume any of the Vendor's liabilities unless
expressly provided for elsewhere in this Agreement.
5. Purchase Price Value Added Tax and Statement of Repayments
5.1 Purchase Price
5.1.1 The purchase price for the assets detailed in 2.0 shall be as follows:
-4-
<PAGE>
equipment and furniture DKK 275,000
goodwill DKK 5,550,000
total purchase price DKK 5,825,000
5.1.2 The purchase price shall be paid on the Transfer Date in cash by wire
transfer of same day funds to Willis Corroon Europe B.V.'s account no.
3100 3486 (Sort Code 30-94-55) at Lloyds Bank, 13 Cornhill, Ipswich,
England, SWIFT LOYDGB2L.
5.1.3 After the Transfer Date the Purchaser shall maintain separate accounts
for the Business until 31 December 1998. If it can be concluded that the
sustainable income of the Business on the basis of the continued
accounts prepared by the Purchaser does not exceed DKK 3.5m for the year
1998 or does not generate after tax profits after restructuring costs of
a minimum of DKK 1m the parties shall enter into negotiations about a
possible reduction of the purchase price.
5.2 Danish VAT
5.2.1 The transfer shall not be subject to VAT, cf. the Danish Value Added Tax
Act, Section 8(1) as the Purchaser is registered for VAT.
5.3 Statement of Repayments
5.3.1 A usual statement of repayment shall be prepared by the Vendor's
accountant no later than 31 October 1998 with the Transfer Date as the
cut off date. The statement shall cover all current expenses, deposits,
sums paid in advance etc. as well as payments according to 3.2.3 and
returned premiums. The statement of repayments shall be prepared in
accordance with normal accounting concepts for accruals, and shall be
submitted to the Purchaser's accountant for approval. The balance shall
be paid in cash with the addition of interest at the rate of 5% p.a.
from the Transfer Date until payment is made.
6. Administrative Provisions
6.1 Administration of Receivables
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<PAGE>
6.1.1 The transfer shall not include receivables due to the Vendor. The Vendor
shall undertake collection of the receivables itself.
7. Miscellaneous Provisions
7.1 Confidentiality
7.1.1 Information received by the parties concerning each other in connection
with the negotiations for and the implementation of this Agreement shall
be deemed to be confidential information which the parties are without
limit of time not entitled to use or pass on to third parties unless the
information in question is available to the public or can be shown to
have been received by one of the parties from a third party who is in
lawful possession thereof and who may use the information in this way. A
corresponding duty of confidentiality applies to the Vendor in relation
to the information the Vendor has concerning the Business transferred.
7.2 Headings
7.2.1 The headings of the sections on this Agreement are for convenience only
and shall not constitute a part hereof or affect in any way the meaning
or interpretation of this Agreement.
7.3 Severability
7.3.1 If any provisions of this Agreement is invalid, illegal or unenforceable
the remainder of this Agreement shall remain in effect and if any
provision is inapplicable to one of the parties it shall nevertheless
remain applicable to the other party.
7.4 Non-waiver
7.4.1 The waiver expressly or implied by either of the parties hereto of any
rights hereunder for any failure to perform or breach by the other party
hereto shall not constitute or be deemed to be a waiver of any other
right hereunder for any
-6-
<PAGE>
other failure to perform or breach hereof by the other party whether a
similar or a dissimilar nature thereto.
7.5 Modification of Agreement
7.5.1 No oral explanation or oral information by either of the parties hereto
shall alter the meaning or interpretation of this Agreement. No
amendment, change or addition hereto shall be effective or binding on
either of the parties hereto unless drawn up in writing and executed by
the parties hereto. If any part of this Agreement is held unlawful,
invalid or is declared void for any reason whatsoever the remaining
provisions of this Agreement shall nevertheless remain in full force and
effect.
7.6 Expenses
7.6.1 Expenses incurred in connection with stamping this Agreement shall be
borne by the Purchaser.
7.6.2 Each party shall bear the fees and other expenses payable to its own
advisors incurred in connection with entering into this Agreement.
7.7 Disputes
7.7.1 This Agreement shall be governed and construed in accordance with the
laws of the Kingdom of Denmark.
7.7.2 Any dispute between the parties arising out of or in connection with
this Agreement shall, provided the parties can not agree on a settlement
through negotiation, be determined by arbitration with final, binding
and enforceable effect in agreement with the following rules:
7.7.3 In the event of a dispute, either party shall be entitled to request
that an arbitration tribunal be set up.
7.7.4 The party seeking resolution of a dispute by arbitration shall appoint
an arbitrator
-7-
<PAGE>
and send a letter by registered mail to the other party (the
"Respondent") requesting the Respondent to appoint its arbitrator within
14 days. The letter shall also contain a short statement of the question
or questions to be determined by the arbitration. Where the Respondent
does not appoint an arbitrator within the time-limit mentioned above,
that arbitrator shall instead be appointed by the Danish Arbitration
Institute.
7.7.5 The two arbitrators appointed for the parties shall jointly appoint an
umpire. Failing agreement on the choice of an umpire, the appointed
arbitrators shall jointly approach the Danish Arbitration Institute and
request that it, following prior discussion with the parties, appoint an
umpire to act as chairman of the arbitration tribunal.
7.7.6 The arbitration tribunal shall determine the matter according to
applicable law and shall lay down the rules for its hearing of the
matter in agreement with the general principles of the Danish
Administration of Justice Act (Retsplejeloven).
7.7.7 The arbitration tribunal shall also decide how the costs of the
arbitration are to be borne. The arbitration tribunal shall set a date
for implementation of the award, which date shall normally be no later
than 14 days after the award has been made.
7.7.8 The venue for the arbitration shall be Copenhagen, and the language of
the proceedings shall be English.
This Agreement has been executed in two original copies and one copy has been
given to each of the parties.
Copenhagen, 28/9 1998 Copenhagen, 28/9 1998
- ----------------------- -----------------------
-8-
<PAGE>
Willis Corroon A/S Assurandorgruppen I/S
-9-
<PAGE>
Exhibit 1
On 28 September 1998 a meeting of the Board of Directors of Assurandorgruppen
A/S was held at the offices of Kromann & Munter, 14 Radhuspladsen, DK-1550
Copenhagen V. All board members were present.
The only item on the agenda was a proposal to increase the share capital of the
company.
At the extraordinary general meeting of the company held on 18 June 1998 the
Board of Directors were authorized to increase the share capital of the company
by an amount not exceeding DKK 5,000,000, cf. clause 3.5 of the Articles of
Association.
The Board of Directors unanimously decided to exercise this authority by issuing
nominal DKK 4,285,700 shares in the company at a price of DKK 12.60 per DKK 1
share to Willis Corroon Europe B.V. in accordance with the attached draft
subscription list. The Board of Directors further approved the attached report
according to section 29, subsection 2 of the Companies Act.
As a consequence of the resolution passed the Board of Directors decided to
abolish clause 3.5 of the Articles of Association of the Company.
Copenhagen, on 28 September 1998
In the Board of Directors:
Niels Simonsen Bent Roland Jorgen Kjaerulff
- -------------------
Michael Hedeby
<PAGE>
Report from the Board of Directors in accordance with section 29, subsection 2
of the Companies Act
In connection with the proposal to increase the capital of the company by DKK
4,285,700 through cash payment the Board of Directors states that since the end
of the last fiscal period and the submission of the annual report no event of
material importance to the position of the company including the equity capital
of the company have occurred.
Copenhagen, on 18 September 1998
In the Board of Directors:
Niels Simonsen Bent Roland Jorgen Kjaerulff
- -------------------
Michael Hedeby
As the accountant for Assurandorgruppen A/S the undersigned hereby states under
section 29, subsection 2 of the Companies Act that the report of the Board of
Directors does not give any grounds for comments or additions thereto concerning
the financial position of the company.
Arhus, on 18 September 1998
----------------------------
KPMG C. Jespersen
State Authorized Accountants
Subscription list
<PAGE>
In accordance with the above transcript of the minute book of the Board of
Directors and subject to the terms and conditions of the attached Stock Purchase
Agreement of today's date we, the undersigned, hereby subscribe to the following
amount:
Name: Amount: Date and signature:
Willis Corroon Europe B.V. DKK 4,285,700 28/9-98
Sarah Turvill according to proxy
<PAGE>
- --------------------------------------------------------------------------------
CONFORMED COPY
Dated 4th August 1997
WILLIS CORROON LIMITED
and
WILLIS NATIONAL HOLDINGS LIMITED
-----------------------------------
WIFA
Share Sale Agreement
-----------------------------------
Slaughter and May,
35 Basinghall Street,
London EC2V 5DB
Ref: TNC/JCXT
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
Page
1. Interpretation 1
2. Sale and Purchase 3
3. Consideration 3
4. Completion 3
5. Seller's Warranties and Covenants 3
6. Purchaser's Remedies and Seller's Limitations on Liability 3
7. Indemnities 3
8. Provision of Business Information 3
9. Pensions and seconded employees 3
10. Access 3
11. Effect of Completion 3
12. Remedies and Waivers 3
13. Assignment 3
14. Further Assurance 3
15. Entire Agreement 3
16. Notices 3
17. Announcements 3
18. Confidentiality 3
19. Costs and Expenses 3
20. Counterparts 3
21. Time of Essence 3
22. Choice of Governing Law 3
Schedule 1 Completion Arrangements 3
Schedule 2 Warranties 3
Schedule 3 Seller's Limitations on Liability 3
Schedule 4 Tax Covenant 3
Schedule 5 Basic Information about the Company 3
Schedule 6 Intellectual Property 3
Schedule 7 Pensions 3
- --------------------------------------------------------------------------------
<PAGE>
2
SHARE SALE AGREEMENT
THIS AGREEMENT is made 4th August 1997
BETWEEN:-
1. Willis Corroon Limited of Ten Trinity Square, London EC3P 3AX (registered
in England No. 1646647) (the "Seller")
AND
2. Willis National Holdings Limited of Ten Trinity Square, London EC3P 3AX
(registered in England No. 3393377) (the "Purchaser").
WHEREAS:
(A) Particulars of the Company are set out in Schedule 5 (Basic Information
about the Company).
(B) The Seller has agreed to sell and the Purchaser has agreed to purchase the
Shares in each case on the terms and subject to the conditions of this
Agreement.
(C) The Purchaser has also agreed to purchase the whole of the issued share
capital of the Other IFA Company on the terms and conditions of the Other
IFA Company Agreement.
(D) The Purchaser is intending to reorganise the structure of the Purchaser's
Group following Completion. This will involve the disposal by the Company
and the Other IFA Company of the whole or parts of their respective
undertaking or assets by intra-group disposal.
(E) At the date of this Agreement (and prior to Completion), the Purchaser has
an authorised share capital of (pound)1,000 divided into 1,000 shares of
(pound)1 each and two of these shares have been issued.
NOW IT IS HEREBY AGREED as follows:
1. Interpretation
1.1 In this Agreement and the Schedules to it:
<PAGE>
3
"Accounts" means the audited financial statements of the
Company prepared in accordance with the Companies
Acts, for the accounting reference period ended
on the Accounts Date which financial statements
comprise a balance sheet, profit and loss
account, notes, auditors' and directors' reports,
a copy of which has for the purpose of
identification only been signed by the Seller and
delivered to the Purchaser;
"Accounts Date" means 31 December, 1996;
"Books and Records" has its common law meaning and includes, without
limitation, all notices, correspondence, orders,
inquiries, drawings, plans, books of account and
other documents and all computer disks or tapes
or other machine legible programs or other
records;
"Business Day" means a day (other than a Saturday or a Sunday)
on which banks are open for business in London;
"Business Information" means all information, know-how and records
(whether or not confidential and in whatever form
held) including (without limitation) all data,
manuals and instructions and all customer lists,
sales information, business plans and forecasts,
and all technical or other expertise and all
computer software and all accounting and tax
records, correspondence, orders and inquiries;
"CGTA 1979" means the Capital Gains Tax Act 1979;
"Companies Acts" means the Companies Act 1985, the Companies
Consolidation (Consequential Provisions) Act
1985, the Companies Act 1989 and Part V of the
Criminal Justice Act 1993;
"Company" means Willis Corroon Financial Planning Limited,
basic information concerning which is set out in
Schedule 5 (Basic Information about the Company);
"Completion" means completion of the sale and purchase of the
Shares under this Agreement;
"Completion Date" means the date of this Agreement;
<PAGE>
4
"Confidential Business means Business Information which is confidential
Information" or not generally known;
"Consideration Shares" means 509 ordinary shares of (pound)1 each in the
share capital of the Purchaser, credited as fully
paid;
"Disclosure Letter" means the letter dated with the date hereof
written by the Seller to the Purchaser for the
purposes of clause 5 (Sellers Warranties and
Covenants) and delivered to the Purchaser before
the execution of this Agreement;
"Group" means the Company and all the Subsidiaries;
"ICTA 1988" means the Income and Corporation Taxes Act 1988;
"Intellectual Property" means trade marks and service marks, rights in
designs, trade or business names, copyrights and
topography rights (whether or not any of these is
registered and including applications for
registration of any such thing) and rights under
licences and consents in relation to any such
thing and all rights or forms of protection of a
similar nature or having equivalent or similar
effect to any of these which may subsist anywhere
in the world;
"Non-Tax Warranties" means the Warranties other than the Tax
Warranties;
"Other IFA Company" means Abbey National Independent Financial
Advisers Limited (registered in England No.
2055101);
"Other IFA Company means the share sale agreement dated with the
Agreement" date hereof between Abbey National Independent
Consulting Group Limited (1) and the Purchaser
(2) in substantially the same terms as this
Agreement;
"Representative Member" means the representative member referred to in
the definition of VAT Group;
"Required for the has the meaning given in clause 8 (Provision of
Business" Business Information);
"RTPA 1976" means the Restrictive Trade Practices Act 1976;
<PAGE>
5
"Seller's Group" means Willis Corroon Group plc and the subsidiary
undertakings of that company other than the
Company;
"Shares" means all the issued shares in the capital of the
Company (comprising 4,200,000 shares of (pound)1
each);
"Share Purchase has the meaning given to it in clause 15 (Entire
Documents" Agreement);
"Subsidiary" means at any relevant time any then subsidiary
undertaking of the Company;
"Systems" means all computer hardware, software, networks
or other information technology owned or used by
the Company;
"Tax" or "Taxation" means and includes all forms of taxation and
statutory, governmental, supra-governmental,
state, principal, local governmental or municipal
impositions, duties, contributions and levies, in
each case whether of the United Kingdom or
elsewhere and whenever imposed, and all
penalties, charges, costs and interest relating
thereto and without limitation all employment
taxes and any deductions or withholdings of any
sort;
"Tax Covenant" means the tax covenant referred to in Schedule 1
(Completion Arrangements) and Schedule 4 (Tax
Covenant);
"Tax Warranties" means Warranties numbered 28 to 45 in Schedule 2
"TCGA 1992" means the Taxation of Chargeable Gains Act 1992;
"VATA 1994" means the Value Added Tax Act 1994;
"VAT Group" means the group of companies of which the
representative member for the purposes of section
43 VATA 1994 was Willis Faber & Dumas Limited
(Registration number 334 1289 70);
"Warranties" means the warranties set out in Schedule 2
(Warranties) given by the Seller and any other or
warranties made by or on behalf of the Seller in
this Agreement and "Warranty" shall be construed
accordingly; and
<PAGE>
6
"Working Hours" means 9.30 a.m. to 5.30 p.m. on a Business Day.
1.2 In this Agreement, unless otherwise specified:
(A) references to clauses, sub-clauses, paragraphs, sub-paragraphs and
Schedules are to clauses, sub-clauses, paragraphs, sub-paragraphs
of, and Schedules to, this Agreement;
(B) a reference to any statute or statutory provision shall be construed
as a reference to the same as it may have been, or may from time to
time be, amended, modified or re-enacted;
(C) references to a "company" shall be construed so as to include any
company, corporation or other body corporate, wherever and however
incorporated or established;
(D) references to a "person" shall be construed so as to include any
individual, firm, company, government, state or agency of a state or
any joint venture, association or partnership (whether or not having
separate legal personality);
(E) references to "indemnify" and "indemnifying" any person against any
circumstance include indemnifying and keeping him harmless from all
actions, claims and proceedings from time to time made against that
person and all loss or damage and all payments, costs or expenses
made or incurred by that person as a consequence of or which would
not have arisen but for that circumstance;
(F) the expressions "accounting reference date", "accounting reference
period", "allotment", "body corporate", "current assets",
"debentures", "holding company", "paid up", "profit and loss
account", "subsidiary", "subsidiary undertaking" and "wholly-owned
subsidiary" shall have the meaning given in the Companies Acts;
(G) a person shall be deemed to be connected with another if that person
is connected with another within the meaning of section 839 ICTA
1988;
(H) references to writing shall include any modes of reproducing words
in a legible and non-transitory form;
(I) headings to clauses and Schedules are for convenience only and do
not affect the interpretation of this Agreement;
<PAGE>
7
(J) the Schedules form part of this Agreement and shall have the same
force and effect as if expressly set out in the body of this
Agreement, and any reference to this Agreement shall include the
Schedules;
(K) references to the knowledge, information, belief or awareness of any
person shall be treated as including any knowledge, information,
belief or awareness which the person would have if the person made
all usual and reasonable enquiries; and
(L) (i) the rule known as the ejusdem generis rule shall not apply and
accordingly general words introduced by the word "other" shall
not be given a restrictive meaning by reason of the fact that
they are preceded by words indicating a particular class of
acts, matters or things; and
(ii) general words shall not be given a restrictive meaning by
reason of the fact that they are followed by particular
examples intended to be embraced by the general words.
2. Sale and Purchase
2.1 The Seller shall sell or procure the sale of, and the Purchaser shall
purchase, the Shares with all rights attached or accruing to them at the
date of this Agreement.
2.2 The Seller has the right to transfer legal and beneficial title to the
Shares.
2.3 The Shares shall be free from all charges and encumbrances and from all
other rights exercisable by or claims by third parties.
2.4 The Purchaser shall be entitled to exercise all rights attached or
accruing to the Shares including, without limitation, the right to receive
all dividends, distributions or any return of capital declared, paid or
made by the Company on or after the date of this Agreement.
2.5 The Seller waives all rights of pre-emption over any of the Shares
conferred upon him by the articles of association of the Company or in any
other way and undertakes to take all steps necessary to ensure that any
rights of pre-emption over any of the Shares are waived.
2.6 For the avoidance of doubt, Part 1 Law of Property (Miscellaneous
Provisions) Act 1994
<PAGE>
8
shall not apply for the purposes of this clause.
3. Consideration
The total consideration for the sale of the Shares shall be the allotment
to the Seller of the Consideration Shares in accordance with clause 4
(Completion).
4. Completion
4.1 Completion shall take place on the Completion Date at 35 Basinghall
Street, London EC2V 5DB.
4.2 At Completion, the Seller shall do those things listed in Schedule 1
(Completion Arrangements).
4.3 The Purchaser shall not be obliged to complete this Agreement unless the
Seller complies fully with the requirements of Schedule 1 (Completion
Arrangements) so far as they relate to the Seller.
4.4 If the obligations of the Seller under Schedule 1 (Completion
Arrangements) are not complied with on the Completion Date, the Purchaser
may:
(A) defer Completion (so that the provisions of this clause 4 shall
apply to Completion as so deferred); or
(B) proceed to Completion as far as practicable (without limiting its
rights under this Agreement); or
(C) treat this Agreement as terminated for breach of a condition.
4.5 Delivery of a share certificate in respect of the Consideration Shares in
accordance with Schedule 1 paragraph 6 (Completion Arrangements) shall
constitute payment of the consideration for the Shares and shall discharge
the obligations of the Purchaser under clause 2 (Sale and Purchase).
5. Seller's Warranties and Covenants
5.1 The Seller warrants to the Purchaser that each of the Warranties is
accurate in all material respects and not misleading in any material
respect at the date of this Agreement and that if for any reason there is
any interval of time between the date of this Agreement and Completion,
the Warranties will be repeated on the Completion Date.
5.2 If the Warranties are repeated at Completion as referred to in clause 5.1,
the Seller shall use its best endeavours to procure that no act shall be
performed or omission allowed either
<PAGE>
9
by it or by the Company in such interval which would result in any of the
Warranties being materially breached or misleading in any material respect
at any time up to and including the time of Completion.
5.3 The Seller accepts that the Purchaser is entering into this Agreement in
reliance upon each of the Warranties.
5.4 The Seller undertakes to disclose in writing to the Purchaser anything
which is or may constitute a breach of or be inconsistent with any of the
Warranties immediately it comes to its notice both before and after
Completion.
5.5 The Seller undertakes (if any claim is made against it in connection with
the sale of the Shares to the Purchaser) not to make any claim against the
Company or any director or employee of the Company or any other employees
of the Seller's Group who are to be seconded to or employed by the Company
on whom any of them may have relied before agreeing to any terms of this
Agreement or of the Tax Covenant or authorising any statement in the
Disclosure Letter.
5.6 Each of the Warranties shall be construed as a separate and independent
warranty and (except where expressly provided to the contrary) shall not
be limited or restricted by reference to or inference from the terms of
any other Warranty or any other term of this Agreement.
5.7 If in respect of or in connection with any breach of any of the Warranties
or any facts or matters warranted not being true and being misleading any
amount payable to the Purchaser by the Seller is subject to Taxation, such
payable amounts shall be paid to the Purchaser by the Seller so as to
ensure that the net amount received by the Purchaser is equal to the full
amount payable to the Purchaser under this Agreement provided that if the
benefit of this Agreement has been assigned by the Purchaser, the Seller
shall not be obliged to pay any amount in excess of that which would have
been payable had the benefit of this Agreement not been so assigned.
5.8 The Seller undertakes to indemnify the Purchaser against all costs
(including legal costs on an indemnity basis as defined in Order 62 of the
Rules of the Supreme Court), expenses or other liabilities which the
Purchaser may reasonably incur either before or after the commencement of
any action in connection with:
(A) the settlement of any claim that any of the Warranties are untrue or
misleading or have been breached;
(B) any legal proceedings in which the Purchaser claims that any of the
Warranties
<PAGE>
10
are untrue or misleading or have been breached and in which judgment
is given for the Purchaser; or
(C) the enforcement of any such settlement or judgment.
6. Purchaser's Remedies and Seller's Limitations on Liability
6.1 Subject to sub-clause 6.2 and to the limitations set out in Schedule 3
(Sellers Limitations on Liability), the Purchaser shall be entitled to
claim both before and after Completion that any of the Warranties has or
had been breached or is or was misleading and, without limitation, to
claim under any covenant even if the Purchaser could have discovered on or
before Completion that the Warranty in question had been breached or was
misleading. Completion shall not in any way constitute a waiver of any of
the Purchaser's rights.
6.2 The Purchaser shall not be entitled to claim that any fact causes any of
the Warranties to be breached or renders any misleading if it has been
fairly disclosed to the Purchaser in the Disclosure Letter in the absence
of any fraud or dishonesty on the part of the Seller or their agents or
advisers.
6.3 No liability shall attach to the Seller in respect of claims under the
Warranties or the Tax Covenant if and to the extent that the limitations
referred to in clause 6.1 and set out in Schedule 3 (Sellers Limitations
on Liability) apply, in the absence of any fraud or dishonesty on the part
of any of the Seller or their agents or advisers.
6.4 If, following Completion, the Purchaser becomes aware (whether it does so
by reason of any disclosure made pursuant to clause 5 (Sellers Warranties
and Covenants) or not) that there has been any material breach of the
Warranties or any other term of this Agreement, the Purchaser shall not be
entitled to treat this Agreement as terminated but shall be entitled to
claim damages or exercise any other right, power or remedy under this
Agreement or as otherwise provided by law.
6.5 If the Seller defaults in the payment when due of any sum payable under
this Agreement (whether determined by agreement or pursuant to an order of
a court or otherwise), the liability of the Seller shall be increased to
include interest on such sum from the date when such payment is due until
the date of actual payment (as well after as before judgment) at a rate
per annum of one per cent. above the base rate from time to time of Lloyds
Bank PLC. Such interest shall accrue from day to day and shall be
compounded annually.
6.6 The Seller undertakes to indemnify the Purchaser against all costs,
expenses or other liabilities which the Purchaser may reasonably incur
either before or after the commencement of any action in connection with
the Warranties in accordance with
<PAGE>
11
clause 55.8 (Sellers Warranties and Covenants).
6.7 Except as stated expressly in this clause, this clause and Schedule 3
(Sellers Limitations on Liability) shall not limit any other clause of
this Agreement.
7. Indemnities
7.1 The Seller agrees to indemnify and keep indemnified the Purchaser, for
itself and as trustee for the Company from and against all claims, losses,
costs or other liabilities which the Purchaser the Company may suffer or
incur by reason of:
(A) any legal obligation to any affected person; or
(B) any requirement of a regulatory body (whether or not having the
force of law) in relation to an affected person or to that
regulatory body.
7.2 For the purposes of this clause, "affected person" means any person who
directly or indirectly (whether by family relationship or otherwise) is
entitled to receive any form of compensation ("Compensation") from the
Company as a result of the Company (or its employees or agents) having
advised any person prior to Completion either:
(A) to transfer benefits accrued in and/or to direct future
contributions to an occupational pension scheme (as defined in
section 1 of the Pensions Schemes Act 1993) (an "Occupational
Pension Scheme") either to a retirement annuity or to a personal
pension scheme, approved under Chapter III and IV respectively of
Part XIV of the Taxes Act 1988; or
(B) to cease to accrue, or never to accrue, benefits in an Occupational
Pension Scheme and instead to accrue benefits pursuant to a
retirement annuity or a personal pension scheme so approved.
7.3 The liabilities to which this clause applies shall include:
(A) any Compensation to which any affected person is entitled;
(B) all costs and expenses of, and arising out of, any investigation
into the affairs of those persons who may be affected persons, and
the reinstatement of the accrued benefits of any affected person
into an Occupational Pension Scheme, or any other rectification made
to the accrued benefits of any affected person, including, without
limitation, costs and expenses incurred by any member of the
Purchaser's Group;
<PAGE>
12
(C) any administrative costs charged in respect of affected persons by
any Occupational Pension Scheme;
(D) all costs and expenses of, and arising out of, any independent
assessment of, or enquiry into, the circumstances of any affected
person which any regulatory body may require to be carried out; and
(E) any fines or penalties or other amounts levied by any regulatory
body which relate in any way to any one or more affected persons or
to affected persons as a class.
7.4 If at any time after Completion any allowance, provision or reserve made
by the Company in the Accounts or otherwise taken account of or reflected
therein in respect of any claims, losses, costs or other liabilities that
would be recoverable by the Company from the Seller pursuant to this
clause is found to be in excess of the matter for which such allowance,
provision or reserve was made, the amount of such excess shall be repaid
to the Seller.
8. Provision of Business Information
8.1 During the period of six years after Completion and without prejudice to
any of the Warranties:
(A) if any Business Information Required for the Business of the Company
is not in the possession of the Purchaser or readily discoverable by
the Purchaser but is in the possession or under the control of or
available to the Seller, the Seller shall, so far as it is legally
able, procure that such Business Information is provided to the
Purchaser promptly on request; and
(B) if any Books or Records of any Seller contain Business Information
which should be provided to the Purchaser, the Seller shall procure
that copies of such Books or Records are given to the Purchaser
promptly on request.
8.2 For the purposes of this clause and this Agreement generally, "Required
for the Business" means any Intellectual Property or Business Information
of the Company which is or has in the last six years been used in the
business of the Company or will be needed by the Company to carry on the
business of the Company in the same manner as it is presently carried on
or to fulfil any of the present contracts or projects of the Company in
relation to the business of the Company or to comply with any law
applicable in relation to the business of the Company or if it is vested
in any of the Seller and its retention by the Seller after Completion of
this Agreement would be damaging or detrimental to the business of the
Company.
<PAGE>
13
9. Pensions and seconded employees
(A) Each of the parties shall comply with the requirements pertaining to
that party set out in Schedule 7 (Pensions).
(B) The Seller shall indemnify the Purchaser for itself and each member
of the IFA Group in respect of all employment-related claims,
losses, liabilities, costs and expenses suffered or incurred by the
Purchaser or any such member resulting from any claim for unfair,
wrongful or constructive dismissal or redundancy by any employee of
the Seller's Group who at the date of this Agreement is seconded to
the Company not accepting the transfer of his employment to the
Company after execution of this Agreement. For the avoidance of
doubt, this indemnity shall not extend to redundancies or other
dismissals effected by the IFA Group as a consequence of any
rationalisation of the Group.
10. Access
As from the date of this Agreement, the Purchaser and any persons
authorised by it, upon reasonable notice will be given full access to the
premises and all the Books and Records and title deeds of the Company and
the directors and employees of the Company and the Company will be
instructed to give promptly all information and explanations to the
Purchaser or any such persons as they may request.
11. Effect of Completion
Any provision of this Agreement and any other documents referred to in it
which is capable of being performed after but which has not been performed
at or before Completion and all Warranties and covenants and other
undertakings contained in or entered into pursuant to this Agreement shall
remain in full force and effect notwithstanding Completion.
12. Remedies and Waivers
12.1 No delay or omission on the part of any party to this Agreement in
exercising any right, power or remedy provided by law or under this
Agreement or any other documents referred to in it shall:
(A) impair such right, power or remedy; or
(B) operate as a waiver thereof.
<PAGE>
14
12.2 The single or partial exercise of any right, power or remedy provided by
law or under this Agreement shall not preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
12.3 The rights, powers and remedies provided in this Agreement are cumulative
and not exclusive of any rights, powers and remedies provided by law.
13. Assignment
13.1 The rights or benefits of or under this Agreement and any agreements
referred to in clause 15 (Entire Agreement), including without limitation
the Warranties, may be assigned (together with any cause of action arising
in connection with any of them) by the Purchaser to a wholly-owned
subsidiary of the Purchaser.
13.2 Obligations under this Agreement shall not be assignable.
14. Further Assurance
The Seller shall from time to time at its own cost, on being required to
do so by the Purchaser, now or at any time in the future, do or procure
the doing of all such acts and/or execute or procure the execution of all
such documents in a form satisfactory to the Purchaser as the Purchaser
may reasonably consider necessary for giving full effect to this Agreement
and securing to the Purchaser the full benefit of the rights, powers and
remedies conferred upon the Purchaser in this Agreement.
15. Entire Agreement
15.1 For the purpose of this clause, "Pre-contractual Statement" means a draft,
agreement, undertaking, representation, warranty, promise, assurance or
arrangement of any nature whatsoever, whether or not in writing, relating
to the Share Purchase Documents or any of them (as defined in sub-clause
15.2) made or given by a party to any of the Share Purchase Documents or
any other person at any time prior to execution of the Share Purchase
Documents.
15.2 This Agreement, the Tax Covenant, the Disclosure Letter referred to in
clause 6 (Purchasers Remedies and Sellers Limitations on Liability) and
any other documents referred to in this Agreement (the "Share Purchase
Documents") constitute the whole and only agreement between the parties
relating to the sale and purchase of the Shares.
15.3 Except to the extent repeated in any of the Share Purchase Documents, the
Share Purchase Documents supersede and extinguish any prior
Pre-contractual Statement
<PAGE>
15
relating thereto.
15.4 Each party acknowledges that in entering into the Share Purchase Documents
or any of them on the terms set out therein, it is not relying upon any
Pre-contractual Statement which is not expressly set out therein.
15.5 None of the parties shall have any right of action against any other party
to this Agreement arising out of or in connection with any Pre-contractual
Statement (except in the case of fraud).
15.6 This Agreement may only be varied in writing signed by each of the
parties.
16. Notices
16.1 Any notice or other communication given or made under or in connection
with the matters contemplated by this Agreement shall be in writing (other
than writing on the screen of a visual display unit or other similar
device which shall not be treated as writing for the purposes of this
clause).
16.2 Any such notice or other communication shall be addressed as provided in
sub-clause 16.3 and, if so addressed, shall be deemed to have been duly
given or made as follows:
(A) if sent by personal delivery, upon delivery at the address of the
relevant party;
(B) if sent by first class post, two Business Days after the date of
posting; and
(C) if sent by facsimile, when despatched;
PROVIDED that if, in accordance with the above provisions, any such notice
or other communication would otherwise be deemed to be given or made
outside Working Hours, such notice or other communication shall be deemed
to be given or made at the start of Working Hours on the next Business
Day.
16.3 The relevant addressee, address, telex number and facsimile number of each
party for the purposes of this Agreement, subject to sub-clause 16.4, are:
Name of party Address Facsimile No.
------------- ------- -------------
<PAGE>
16
the Seller Ten Trinity Square
F.A.O. Tracy Warren London EC3P 3AX 0171 481 7003
Company Secretary
the Purchaser Ten Trinity Square
F.A.O. Tracy Warren London EC3P 3AX 0171 481 7003
Company Secretary
16.4 A party may notify the other party to this Agreement of a change to its
name, relevant addressee, address or facsimile number for the purposes of
sub-clause 16.3 PROVIDED that such notification shall only be effective
on:
(A) the date specified in the notification as the date on which the
change is to take place; or
(B) if no date is specified or the date specified is less than five
clear Business Days after the date on which notice is given, the
date falling five clear Business Days after notice of any such
change has been given.
17. Announcements
17.1 Subject to clause 17.2, no announcement concerning the sale of the Shares
or any ancillary matter shall be made by either party without the prior
written approval of the other, such approval not to be unreasonably
withheld or delayed.
17.2 Either party may make an announcement concerning the sale of the Shares or
any ancillary matter if required by:
(A) the law of any relevant jurisdiction; or
(B) any securities exchange or regulatory or governmental body to which
either party is subject, wherever situated, including (without
limitation) the London Stock Exchange, whether or not the
requirement has the force of law,
in which case the party concerned shall take all such steps as may be
reasonable and practicable in the circumstances to agree the contents of
such announcement with the party before making such announcement.
17.3 The restrictions contained in this clause shall continue to apply after
Completion without limit in time.
<PAGE>
17
18. Confidentiality
18.1 Subject to clause 18.2, each party shall treat as strictly confidential
all information received or obtained as a result of entering into or
performing this Agreement which relates to:
(A) the provisions of this Agreement;
(B) the negotiations relating to this Agreement;
(C) the subject matter of this Agreement; or
(D) the other party.
18.2 Either party may disclose information which would otherwise be
confidential if and to the extent:
(A) required by the law of any relevant jurisdiction;
(B) required by any securities exchange or regulatory or governmental
body or taxation authority to which either party is subject wherever
situated, including (without limitation) the London Stock Exchange,
whether or not the requirement for information has the force of law;
(C) required to vest the full benefit of this Agreement in either party;
(D) disclosed to the professional advisers, auditors and bankers of each
party;
(E) the information has come into the public domain through no fault of
that party; or
(F) the other party has given prior written approval to the disclosure,
such approval not to be unreasonably withheld or delayed,
PROVIDED that any such information disclosed pursuant to paragraph ((A))
or ((B)) shall be disclosed only after consultation with the other party.
18.3 The restrictions contained in this clause shall continue to apply after
Completion of the sale and purchase of the Shares under this Agreement
without limit in time.
19. Costs and Expenses
19.1 Except as otherwise stated in any other provision of this Agreement, each
party shall pay
<PAGE>
18
its own costs and expenses in relation to the negotiations leading up to
the sale of the Shares and to the preparation, execution and carrying into
effect of this Agreement and all other documents referred to in it and the
Seller confirms that no expense of whatever nature relating to the sale of
the Shares has been or is to be borne by the Company.
20. Counterparts
20.1 This Agreement may be executed in any number of counterparts, and by the
parties on separate counterparts, but shall not be effective until each
party has executed at least one counterpart.
20.2 Each counterpart shall constitute an original of this Agreement, but all
the counterparts shall together constitute but one and the same
instrument.
21. Time of Essence
Except as otherwise expressly provided, time is of the essence of this
Agreement.
22. Choice of Governing Law
This Agreement shall be governed by and construed in accordance with
English law.
<PAGE>
Schedule 1
Completion Arrangements
At Completion:
1. the Seller shall deliver to the Purchaser:
(A) duly executed transfers in respect of the Shares in favour of the
Purchaser and share certificates for the Shares in the name of the
relevant transferors and any power of attorney under which any
transfer is executed on behalf of any Seller or nominee;
(B) such waivers or consents as the Purchaser may require to enable the
Purchaser or its nominees to be registered as holders of the Shares;
and
(C) powers of attorney in agreed terms;
2. the Seller shall execute and deliver to the Purchaser a Tax Covenant in
the form referred to in Schedule 4 (Tax Covenant), the Services Agreement
and the IP Licence Agreement;
3. the Seller shall deliver to the Purchaser such of the following as the
Purchaser may require:
(A) the statutory books (which shall be written up to but not including
the Completion Date), the certificate of incorporation (and any
certificate of incorporation on change of name) and common seal (if
any) of the Company;
(B) a copy of the minutes of a duly held meeting of the directors of the
Seller authorising the execution by the Seller of this Agreement and
the Tax Covenant (such copy minutes being certified as correct by
the secretary of the Seller).
4. the Seller shall procure the present directors of the Company (other than
Robert Guthrie, Allan Daffern, Susan Mortley, Roy Matthews, Sarah
Fairclough, Richard Pearson, Michael Bigham, Clive Berry and David Smith)
to resign their offices as such and to relinquish any rights which they
may have under any contract of employment with the Company or under any
statutory provision including any right to damages for wrongful dismissal,
redundancy payment or compensation for loss of office or unfair dismissal,
such resignations to be
<PAGE>
20
tendered at the board meetings referred to in paragraph 5) or as soon as
practicable thereafter;
5. the Seller shall procure board meetings of the Company to be held at
which:
(A) it shall be resolved that each of the transfers relating to the
Shares shall be approved for registration and (subject only to the
transfer being duly stamped) each transferee registered as the
holder of the Shares concerned in the register of members;
(B) the resignations of the directors referred to in paragraph 4 above
shall be tendered and accepted so as to take effect at the close of
the meeting and each of the persons tendering his resignation shall
deliver to the Company an acknowledgement executed as a deed that he
has no claim against the Company for breach of contract,
compensation for loss of office, redundancy or unfair dismissal or
on any other account whatsoever and that no agreement or arrangement
is outstanding under which the Company has or could have any
obligation to him, save that in the case of any such directors who
have not at the time of the meeting executed such acknowledgement,
the resignations should be tendered and accepted and the
acknowledgements executed as deeds as soon as practicable
thereafter;
The Seller shall procure that minutes of the duly held board meeting,
certified as correct by the secretary of the Company, and the resignations
and acknowledgements referred to, are delivered to the Purchaser on
completion or as soon as practicable thereafter.
6. the Purchaser shall:
(A) deliver to the Seller a share certificate in respect of the
Consideration Shares; and
(B) deliver to the Seller a copy, certified as correct by the secretary
of the Purchaser, of minutes of a duly held board meeting allotting
the Consideration Shares to the Seller.
<PAGE>
Schedule 2
Warranties
1. Ownership of the Shares
The Seller is the sole beneficial owner of the Shares.
2. Group Arrangements and Interests
2.1 No indebtedness (actual or contingent) and no contract or arrangement is
outstanding between the Company and the Seller or any member of the
Seller's Group or any person a director of or connected with any Seller or
with the such member.
2.2 No member of the Seller's Group is engaged in any business which competes
with the business carried on at the date of this Agreement by the Company
or the other IFA Company.
3. Group Structure, etc.
3.1 The Shares comprise the whole of the issued and allotted share capital of
the Company and all of them are fully paid up.
3.2 There is no agreement or commitment outstanding which calls for the
allotment, issue or transfer of, or accords to any person the right to
call for the allotment or issue of, any shares (including the Shares) or
debentures in or securities of the Company.
3.3 The Company has no Subsidiaries at the date of this Agreement nor any
interest in the share capital of any other body corporate or undertaking.
3.4 The Company does not act or carry on business in partnership with any
other person nor is it a member of any corporate or unincorporated body,
undertaking or association.
3.5 The Company does not have any branch, agency, place of business or
permanent establishment outside the United Kingdom.
4. Options, Mortgages and Other Encumbrances
4.1 There is no option, right to acquire, mortgage, charge, pledge, lien or
other form of security or encumbrance or equity on, over or affecting the
Shares or any of them and there is no agreement or commitment to give or
create any and no claim has been made by any person to be entitled to any.
4.2 No option, right to acquire, mortgage, charge, pledge, lien (other than a
lien arising by
<PAGE>
22
operation of law in the ordinary course of trading) or other form of
security or encumbrance or equity on, over or affecting the whole or any
part of the undertaking or assets of the Company) is outstanding and there
is no agreement or commitment to give or create any and no claim has been
made by any person to be entitled to any.
5. Accuracy and Adequacy of Information
5.1 The information given in Schedule 5 is true and accurate in all respects
and is not misleading because of any omission or ambiguity or for any
other reason.
5.2 The statutory books (including all registers and minute books) of the
Company have been properly kept and contain an accurate and complete
record of the matters which should be dealt with in those books and no
notice or allegation that any of them is incorrect or should be rectified
has been received.
6. Accounts
6.1 The Accounts:
(A) were prepared in accordance with accountancy practices generally
accepted in the United Kingdom at the time they were audited and
commonly adopted by companies carrying on businesses similar to
those carried on by the Company;
(B) are complete and accurate in all material respects and in particular
include full provision for bad and doubtful debts and for Taxation
on profits (whether of an income or capital nature) relating to any
period ending on or before the Accounts Date;
(C) show a true and fair view of the state of affairs of the Company at
the Accounts Date; and
(D) except as the Accounts expressly disclose, are not affected by any
unusual or non-recurring items.
6.2 At the Accounts Date, the Company had no liability (whether actual,
contingent, unquantified or disputed) or outstanding capital commitment
which is not adequately disclosed or provided for in the Accounts.
6.3 If a balance sheet of the Company (if relevant, on a consolidated basis)
were drawn up as at the date of this Agreement in the manner in which and
on the basis upon which the Accounts were prepared, the net asset position
of the Company disclosed thereby would
<PAGE>
23
be not less than (pound)4.28 million.
6.4 The accounting records of the Company have been kept on a proper and
consistent basis (no change in the methods or bases of valuation or
accountancy treatment having been made for at least six years prior to the
Accounts Date or since), are up-to-date and contain complete and accurate
details of the business activities of the Company and of all matters
required by the Companies Acts to be entered in them.
7. Events Since the Accounts Date
7.1 Since the Accounts Date:
(A) the business of the Company has been carried on in the ordinary and
usual course and in the same manner (including nature and scope) as
in the past and no unusual or onerous contract differing from the
routine contracts necessitated by the nature of its trade has been
entered into by the Company;
(B) no asset of a value in excess of (pound)10,000 has been acquired or
disposed of on capital account or has been agreed to be acquired or
disposed of and no contract involving expenditure by it on capital
account has been entered into by the Company;
(C) no debts or other receivables and no material plant, machinery or
equipment of the Company have been factored or sold or agreed to be
sold;
(D) no resolution of the Company in general meeting has been passed
(other than resolutions relating to the routine business of annual
general meetings);
(E) no change in the accounting reference period of the Company has been
made; and
(F) there has been no material adverse change in the financial position
or profits of the Company.
7.2 No indication has been received that any debt now owing to the Company is
bad or doubtful save to the extent that provision has been made in the
Company's books therefor.
8. Work in Progress
8.1 All work in progress represented in the Accounts has been valued on a
basis excluding
<PAGE>
24
profit and including adequate provision for losses which are or could
reasonably be anticipated.
9. Contracts and Commitments
9.1 The Company is not under any obligation, nor is it a party to any
contract, which cannot readily be fulfilled or performed by it on time and
without undue or unusual expenditure of money or effort.
9.2 The Company is not a party to or has any liability (present or future)
under any guarantee or indemnity or letter of credit or any leasing,
hiring, hire purchase, credit sale or conditional sale agreement or has
entered into any contract or commitment involving, or likely to involve,
obligations or expenditure of an unusual or exceptional nature or
magnitude.
9.3 The Company is not a party to any contract or arrangement which restricts
its freedom to carry on its business in any part of the world in such
manner as it may think fit, or to any agency, distributorship or
management agreement.
9.4 The Company is not aware of any breach of, or any invalidity, or grounds
for determination, rescission, avoidance or repudiation of, any contract
to which it is a party or of any allegation of such a thing.
9.5 The Company is not a party to any joint venture agreement or arrangement
or any agreement or arrangement under which it is to participate with any
other in any business.
9.6 The Company is not a party to any agreement or arrangement or under any
obligation under which it is or may become liable to make any investment
(as defined in section 1(1) of the Financial Services Act 1986) with, or
to deposit any money with, or to provide any loan or financial
accommodation or credit (other than normal trade credit) to any person, or
to subscribe, convert, acquire, dispose of or underwrite any investment.
9.7 The Company is not a party to any contract which falls within any of the
cases specified below:
(A) the contract is of a value which has material consequences in terms
of expenditure or revenue expectations or it relates to matters not
within the ordinary business of the Company or it constitutes a
commercial transaction or arrangement deviant from the usual pattern
for the Company; or
(B) the contract can be terminated in the event of any change in the
underlying
<PAGE>
25
ownership or control of the Company or would be materially affected by
such change;
and for this purpose "contract" includes any understanding, arrangement or
commitment however described.
10. Insider Contracts
There is not, and there has not at any time during the last six years
been, any contract or arrangement to which the Company is, or was, a party
and in which the Seller, or any member of the Seller's Group or any person
beneficially interested in any part of the share capital of the Company,
or any director of the Company or any person connected with any such
director is, or has been, interested, either directly or indirectly, and
the Company is not a party to, nor have its profits or financial position
during that period been affected by, any contract or arrangement which was
not of an entirely arm's length nature; in particular, without limitation,
the Company has not transferred any assets to another such member except
at market value.
11. Licences
All licences, consents and other permissions and approvals required for or
in connection with the carrying on of the business now being carried on by
the Company have been obtained, are not limited in duration or subject to
onerous conditions and are in full force and effect and all reports,
returns and information required by law or as a condition of any licence,
consent, permit or approval to be made or given to any person or authority
in connection with the business of the Company have been made or given to
the appropriate person or authority and there is no circumstance which
indicates that any licence, consent, permission or approval is likely to
be revoked or which may confer a right of revocation.
12. Financial Facilities
12.1 Full details of all overdraft, loan and other financial facilities
available to the Company and the amounts outstanding under them are set
out in the Disclosure Letter and neither Seller nor the Company has done
anything whereby the continuance of any of those facilities might be
affected or prejudiced.
12.2 Except for the borrowings referred to in paragraph 2.1 and for any loan
capital referred to in Schedule 5 (Basic Information about the Company)
the Company does not have outstanding any loan capital nor has it incurred
or agreed to incur any borrowing which it has not repaid or satisfied, or
has lent or agreed to lend any money which has not been repaid to it or
owns the benefit of any debt present or
<PAGE>
26
future (other than debts due to it in respect of the provision of services
in the normal course of trading) or is a party to or has any obligation
under:
(A) any loan agreement, debenture, acceptance credit facility, bill of
exchange, promissory note, finance lease, debt or inventory
financing, discounting or factoring arrangement or sale and lease
back arrangement; or
(B) any other arrangement the purpose of which is to raise money or
provide finance or credit.
12.3 To the best of the knowledge, information and belief of the Seller, no
event which is or, with the passing of any time or the giving of any
notice, certificate, declaration or demand, would become an event of
default under or any breach of any of the terms of any loan capital,
borrowing, debenture or financial facility of the Company or would entitle
any third party to call for repayment prior to normal maturity has
occurred or been alleged.
12.4 The Company has not borrowed any amount, from whatever source, after the
Accounts Date.
13. Insolvency
13.1 No order has been made and no resolution has been passed for the winding
up of the Company or for a provisional liquidator to be appointed in
respect of the Company and no petition has been presented and no meeting
has been convened for the purpose of winding up the Company.
13.2 No administration order has been made and no petition for such an order
has been presented in respect of the Company.
13.3 No receiver (which expression shall include an administrative receiver)
has been appointed in respect of the Company or all or any of its assets.
13.4 The Company is not insolvent, or unable to pay its debts within the
meaning of section 123 Insolvency Act 1986, or has stopped paying its
debts as they fall due.
13.5 No voluntary arrangement has been proposed under section 1 Insolvency Act
1986 in respect of the Company.
13.6 No unsatisfied judgment is outstanding against the Company.
13.7 No guarantee, loan capital, borrowed money or interest is overdue for
payment, and no
<PAGE>
27
other obligation or indebtedness is outstanding which is substantially
overdue for performance or payment.
14. Product Liability
The Company has not provided any product or service which does not in any
material respect comply with all applicable laws, regulations or standards
or which is or not in accordance with any representation or warranty,
express or implied, given in respect of it.
15. Litigation
The Company is not engaged in any litigation or arbitration,
administrative or criminal proceedings, whether as plaintiff, defendant or
otherwise, and no litigation or arbitration, administrative or criminal
proceedings by or against the Company is pending, threatened or expected
and so far as the Seller is aware, there is no fact or circumstance likely
to give rise to any such litigation or arbitration, administrative or
criminal proceedings or to any proceedings against any director or
employee (past or present) of the Company in respect of any act or default
for which the Company might be vicariously liable.
16. Delinquent and Wrongful Acts
16.1 The Company has not committed or is liable for any criminal, illegal,
unlawful or unauthorised act or breach of any obligation or duty whether
imposed by or pursuant to statute, contract or otherwise, and no claim
that it has or is remains outstanding against the Company.
16.2 The Company has not received notification that any investigation or
inquiry is being or has been conducted by any governmental or other body
in respect of the affairs of the Company and the Seller is not aware of
any circumstances which would give rise to such investigation or inquiry.
17. Ownership and Condition of Assets
17.1 All assets used by the Company in the course of its business or which are
necessary or desirable for the continuation of that business as it is now
carried on are both legally and beneficially owned by the Company from any
third party rights and all such assets are included in the Accounts.
17.2 Each of the assets included in the Accounts or acquired by the Company
since the Accounts Date (other than current assets sold, realised or
applied in the normal course of trading) is owned both legally and
beneficially by the Company free from any third party
<PAGE>
28
rights, and each of those assets capable of possession is in the
possession of the Company.
17.3 All plant and machinery (including fixed plant and machinery), vehicles
and office equipment used by the Company in connection with its business
are in good repair and condition, regularly maintained and fully
serviceable and capable of being efficiently and properly used in
connection with the business of the Company and none is dangerous,
inefficient, obsolete or in need of renewal or replacement.
18. Intellectual Property
18.1 Details of all rights in any Intellectual Property (other than copyright
and unregistered designs) owned by the Company are set out in Part A of
Schedule 6 (Intellectual Property).
18.2 Details of all material licences granted to or by the Company in respect
of any Intellectual Property are set out in Part B of Schedule 6
(Intellectual Property).
18.3 All rights in all Intellectual Property and Confidential Business
Information owned or otherwise Required for the Business of the Company
are vested in or validly granted to the Company and are not subject to any
limit as to time which is due to expire within 12 months of the date of
this Agreement or any other limitation, right of termination (including,
without limitation, on any change in the underlying ownership or control
of the Company) or restriction which will become exerciseable or
applicable to the Company as a result of this Agreement and all renewal
fees and steps reasonably required for their maintenance or protection
have been paid and taken.
18.4 Except as listed in Part B of Schedule 6 (Intellectual Property), the
Company has not granted nor is it obliged to grant any licence,
sub-licence or assignment in respect of any Intellectual Property owned or
otherwise Required for the Business of the Company or has disclosed or is
obliged to disclose any Confidential Business Information Required for the
Business of the Company to any person, other than its employees for the
purpose of carrying on its business.
18.5 To the best of the knowledge, information and belief of the Seller, the
Company is not in breach of any licence, sub-licence or assignment granted
to or by it in respect of any Intellectual Property owned or otherwise
Required for the Business of the Company or of any agreement under which
any Business Information was or is to be made available to it.
18.6 To the best of the knowledge, information and belief of the Seller, the
processes and methods employed, the services provided and the businesses
conducted by the Company within the last six years do not, and/or at the
time of being employed, provided or conducted did not, infringe the rights
of any other person in any Intellectual Property or
<PAGE>
29
Business Information.
18.7 To the best of the knowledge, information and belief of the Seller, there
is no, nor has there been at any time during the past six years any,
unauthorised use or infringement by any person of any of the Intellectual
Property or Confidential Business Information owned or otherwise Required
for the Business of the Company.
18.8 To the best of the knowledge, information and belief of the Seller, the
Company has, if required to do so under the Data Protection Act 1984, duly
registered as a data user and has complied with the Data Protection
Principles as set out in that Act.
19. Computers
91.1 Details of the Systems and all agreements or arrangements relating to the
maintenance and support (including escrow agreements relating to the
deposit of source codes), security, disaster recovery management and
utilisation (including facilities management and computer bureau services
agreements) of the Systems have been disclosed.
19.2 All Systems are either owned by or validly leased or licensed to the
Company.
20. Competition and Trade Regulation Law
20.1 The Company is not nor has it been a party to nor is it or has it been
concerned in any agreement or arrangement or is conducting or has
conducted itself (whether by omission or otherwise) in a manner which:
(A) has been or is required to be registered under RTPA 1976;
(B) contravenes the provisions of any secondary legislation adopted
under the Fair Trading Act 1973;
(C) infringes Article 85 or 86 of the Treaty establishing the European
Economic Community or any other anti-trust or similar legislation in
any jurisdiction in which the Company has assets or carries or
intends to carry on business or where its activities may have an
effect; or
(D) is registrable, unenforceable or void (whether in whole or in part)
or renders it liable to civil, criminal or administrative
proceedings by virtue of any anti-trust or similar legislation in
any jurisdiction in which the Company has assets or carries on or
intends to carry on business or where its activities may have an
effect.
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30
21.2 (A) The Company is not nor has it been a party to nor is it or has it
been concerned in any agreement or arrangement in respect of which
any undertaking has been given by or any order made against the
Company pursuant to RTPA 1976.
(B) The Company has not given an undertaking to, nor is it subject to
any order of or investigation by, nor has it received any request
for information from, any court or governmental authority
(including, without limitation, any national competition authority
and the Commission of the European Economic Community) under any
anti-trust or similar legislation.
(C) The Company is not nor has it been a party to nor is it or has it
been concerned in any agreement or arrangement in respect of which
an application for negative clearance and/or exemption has been made
to the Commission of the European Community.
21. Insurances
21.1 Full details of the insurance policies in respect of which the Company has
an interest have been disclosed in writing to the Purchaser, all such
policies are in full force and effect and are not void or voidable, no
claims are outstanding by the Company and, to the best of the knowledge,
information and belief of the Seller, no event has occurred which might
give rise to any claim.
22. Employment
22.1 A list of the names, jobs and short details of the terms of employment of
every employee of the Company are set out in the Disclosure Letter.
22.2 Particulars of the terms of all consultancy agreements with the Company
are contained in the Disclosure Letter.
22.3 Details of any material benefit received by any employee otherwise than in
cash, and of any benefit received by any employee in cash which is related
to sales, profits or performance, or which is otherwise variable (other
than normal overtime), are set out in the Disclosure Letter.
22.4 Any contract of employment with any employee to which the Company is a
party can be
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31
terminated by the employing company without damages or compensation (other
than that payable by statute) by giving at any time only the minimum
period of notice applicable to that contract which is specified in section
86 of the Employment Rights Act 1996.
22.5 No senior employee of the Company has given notice terminating his
contract of employment or is under notice of dismissal and no amount due
to or in respect of any such employee or former employee of the Company is
in arrear and unpaid.
22.6 Since the Accounts Date, no material change has been made in the
emoluments or other terms of engagement of any employee and no such
change, and no negotiation or request for such a change, is due or
expected within six months from the date of this Agreement.
22.7 There is no dispute between the Company and any trade union or other
organisation formed for a similar purpose existing, pending or threatened
and there is no collective bargaining agreement or other arrangement
(whether binding or not) to which the Company is a party.
22.8 Except in the normal course of business, the Company has outstanding no
undischarged liability to pay to any governmental or regulatory authority
in any jurisdiction any contribution, Taxation or other impost arising in
connection with the employment or engagement of personnel by the Company.
22.9 The Company has at all relevant times complied in all material respects
with all its obligations under statute and otherwise concerning the health
and safety at work of its employees, and there are no claims capable of
arising or threatened or pending by any employee or third party in respect
of any accident or injury which are not fully covered by insurance.
22.10 No person working for the Company is an employee of the Seller's Group.
23. Fiduciary Arrangements
23.1 Where the Company has acted as trustee or fiduciary it has done so in a
proper manner and in accordance with its obligations to its customers and
the instructions of its customers. No right of set-off or contribution can
be exercised by any person with whom assets (including money) held by the
Company as trustee or fiduciary have been deposited, against such assets.
23.2 To the extent that the Company is required by the Pensions Act 1995 to
have in place formal notices of appointment of its professional advisers,
it has such notices in place and
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32
all such notices are in full force and effect.
24. Asset Management and Safe Custody
Where the Company has conducted asset management and safe custody
business, it has conducted such business in a proper manner and in
accordance with the terms of its standard form of asset management and
safe custody agreements, copies of which are annexed to the Disclosure
Letter. All assets (including securities) deposited with the Company as
part of its asset management and safe custody business are in its
possession or under its legal control and the Company has not encumbered
or agreed to encumber or dispose of any such assets except in accordance
with instructions from its customers.
25. Valuation of Managed Securities
The valuation of securities held by the Company and the valuation of its
portfolio managed for and on the account of its customers has been made in
accordance with English law and accounting practices generally accepted in
the United Kingdom at the time when such valuation is carried out.
26. Regulation
26.1 The internal procedures of the Company are in accordance with the
requirements of the Money Laundering Regulations 1993 and its business has
been conducted in accordance with those internal procedures and in
accordance with the Money Laundering Regulations 1993.
26.2 The Company has received no notification or indication that it is in
breach of the Money Laundering Regulations 1993 and, so far as the Seller
is aware, there is no fact or circumstances which may give rise to such
breach.
26.3 The Company has, if required to do so under the Consumer Credit Act 1974,
obtained a licence covering the appropriate categories of credit business
and has complied with the provisions under such Act and other statutory
obligations relevant to its business.
26.4 The Company has at all times complied in all material respects with the
Financial Services Act 1986 (the "FSA") and all applicable rules and
regulations made thereunder and the Company does not engage or permits
others to engage nor has it, at any time since the coming into force of
the FSA, engaged or permitted others to engage in activities the carrying
out of which constitutes carrying out investment business in the United
Kingdom without itself or any relevant third party being authorised or
exempt under the FSA in
<PAGE>
33
respect thereof.
26.5 Full details of all authorisations to carry on investment business in the
United Kingdom (including details of memberships of self-regulatory
organisations ("SROs") as defined in the FSA) for which application has
been made (whether or not the application is pending or was withdrawn,
refused or granted) by or on behalf of the Company have been supplied in
writing to the Purchaser, including, where applicable, full details of the
scope of the Company's permitted business.
26.6 The Company has at all times complied with all rules and other
requirements of the relevant SRO and/or the Securities Investment Board
("SIB") and there are no circumstances which, if known to the relevant SRO
or to SIB, might prejudice its membership or authorisation.
26.7 No special conditions or limitations have been imposed by any relevant SRO
or SIB in respect of the conduct of investment business by the Company, no
waiver of any requirements has been sought by or granted to the Company
and the Company has not engaged in any acts or practices or suffered to
exist any state of affairs (i) which has led to a request (whether or not
the request is pending or was subsequently withdrawn or refused) by the
relevant SRO or SIB to alter or amend the manner in which investment
business is or was being carried on or (ii) which has led to the
imposition of specific conditions in respect of the conduct of investment
business or (iii) which could if known to any relevant SRO or SIB lead to
such a request or to the imposition of such conditions or otherwise
adversely affect the Company's membership of an SRO or authorisation by
SIB.
26.8 Copies of each annual review of the arrangements for compliance with the
conduct of business rules of each relevant SRO and SIB undertaken by or on
behalf of the Company and of each periodic inspection carried out by any
SRO and SIB have been supplied to the Purchaser together with copies of
all correspondence between the Company and the relevant SRO or SIB.
26.9 Any action requested any of the relevant SROs or SIB has been taken within
any time limit specified and any request for action or activities to be
discontinued has been complied with in a timely manner.
26.10 All complaints made to the Company in relation to investment business have
been dealt with in accordance with the rules of the relevant SRO and SIB
and none of such complaints remain outstanding. Copies of all such
complaints have been supplied to the Purchaser including copies of all
records relating thereto required to be kept by the rules of the relevant
SRO or SIB. There are no investigations, disciplinary proceedings or other
circumstances likely to lead to any complaint or claim or legal action,
proceedings or
<PAGE>
34
arbitration or prosecution by the relevant SRO or SIB or any other person.
26.11 The Company has all applicable up to date compliance manuals and is in
compliance therewith.
26.12 Full details of all arrangements, whether or not legally binding, between
the Company and any entity or person who is not an employee but which or
who represents the Company or promotes contracts to which the Company is
to be a party have been disclosed in the Disclosure Letter together with
the name and address of each such entity or person.
26.13 All papers, documents and accounts have been supplied to the relevant SRO
in accordance with its rules, including (without limitation) financial
statements as at the Accounts Date and annual statements together with
auditors' reports in respect of all relevant periods thereafter.
26.14 The Company is not required to comply with the Financial Services (Client
Money) Regulations 1987 as amended.
26.15 To the extent that the Company is required by the rules of the relevant
SRO to be registered, it is so registered and notification has been given
to the relevant SRO of any information that is required to be given in
relation to registration.
26.16 There are no moneys owing to any SRO in respect of registration fees of
the Company.
26.17 There is no investment business carried on in the United Kingdom in
respect of which the Company is exempt; the Company is not nor has it ever
been an appointed representative of another entity pursuant to section 44
of the FSA; nor is it included in the list of institutions maintained by
the Bank of England pursuant to section 43 of the FSA. No application for
exempt status pursuant to section 43 of the FSA has been made and
withdrawn or refused or is still pending.
26.18 To the best of the knowledge, information and belief of the Seller, no
employee or other person who represents or promotes the products of the
Company in connection with investment business has been disqualified under
section 59 of the FSA and none is or has ever been a party to any
disqualification proceedings.
26.19 The Company has not entered into any investment agreement in circumstances
which may result in such agreement being or becoming unenforceable or
cancellable at the option or application of the other party to the
agreement or of any other party.
26.20 There are no penalties, fines or other disciplinary actions which may be
taken against the
<PAGE>
35
Company as a result of incomplete, erroneous or misleading returns made to
the Occupational Pensions Board.
27. The Accounts and Tax
27.1 The Company has no liability in respect of Taxation (whether actual or
contingent) that is not fully provided for in the Accounts and, in
particular, has no outstanding liability for:
(A) Taxation in any part of the world assessable or payable by reference
to profits, gains, income or distributions earned, received or paid
or arising or deemed to arise on or at any time prior to the
Accounts Date or in respect of any period starting before the
Accounts Date; or
(B) for purchase, value added, sales or other similar tax in any part of
the world referable to transactions effected on or before the
Accounts Date
that is not provided for in full in the Accounts.
27.2 The amount of the provision for deferred Taxation in respect of the
Company contained in the Accounts was, at the Accounts Date, adequate and
fully in accordance with accountancy practices generally accepted in the
United Kingdom and commonly adopted by companies carrying on businesses
similar to those carried on by the Company and, in particular, was in
accordance with SSAP 15 (or any replacement of it instituted by the
Accounting Standard Board).
27.3 If all facts and circumstances which are now known to the Company or the
Seller had been known at the time the Accounts were drawn up, the
provision for deferred Taxation that would be contained in the Accounts
would be no greater than the provision which is so contained.
28. Tax Events Since the Accounts Date
Since the Accounts Date:
(A) the Company has not declared, made or paid any distribution within
the meaning of ICTA 1988;
(B) the accounting period of the Company has not ended;
(C) there has been no disposal of any asset (including trading stock) or
supply of any service or business facility of any kind (including a
loan of money or the letting,
<PAGE>
36
hiring or licensing of any property whether tangible or intangible)
in circumstances where the consideration actually received or
receivable for such disposal or supply was less than the
consideration which could be deemed to have been received for tax
purposes;
(D) no event has occurred which will give rise to a tax liability on the
Company calculated by reference to deemed (as opposed to actual)
income, profits or gains or which will result in the Company
becoming liable to pay or bear a tax liability directly or primarily
chargeable against or attributable to another person, firm or
company;
(E) no disposal has taken place or other event occurred which will or
may have the effect of crystallising a liability to Taxation which
should have been included in the provision for deferred Taxation
contained in the Accounts if such disposal or other event had been
planned or predicted at the Accounts Date;
(F) the Company has not made any payment or incurred any obligation to
make a payment which will not be deductible in computing trading
profits for the purposes of corporation tax, or be deductible as a
management expense of an investment company;
(G) the Company has not been a party to any transaction for which any
tax clearance provided for by statute has been or could have been
obtained;
(H) the Company has not paid or become liable to pay any interest or
penalty in connection with any tax, has otherwise paid any tax after
its due date for payment or owes any tax the due date for payment of
which has passed or will arise in the 30 days after the date of this
Agreement.
29. Tax Returns, Disputes, Records and Claims, etc.
29.1 The Company has made or caused to be made all proper returns required to
be made, and has supplied or caused to be supplied all information
required to be supplied, to any revenue authority, including (but without
limitation) the Inland Revenue and the Customs and Excise in each case
within the requisite period.
29.2 There is no dispute or disagreement outstanding at the date of this
Agreement with any revenue authority regarding liability or potential
liability to any tax or duty (including in each case penalties or
interest) recoverable from the Company or regarding the availability of
any relief from tax or duty to the Company and there are no circumstances
which make it likely that any such dispute or disagreement will commence.
<PAGE>
37
29.3 The Company has sufficient records relating to past events, including any
elections made, to calculate the tax liability or relief which would arise
on any disposal or on the realisation of any asset owned at the Accounts
Date by the Company or acquired by it since that date but before
Completion.
29.4 The Company has duly submitted all claims and disclaimers which have been
assumed to have been made for the purposes of the Accounts.
29.5 The amount of tax chargeable on the Company during any accounting period
ending on or within six years before the Accounts Date has not, to any
material extent, depended on any concession, agreement or other formal or
informal arrangement with any revenue authority, including (but without
limitation) the Inland Revenue or the Customs and Excise.
29.6 The Company has not received any notice from any revenue authority,
including the Inland Revenue, which required or will or may require it to
withhold tax from any payment made since the Accounts Date or which will
or may be made after the date of this Agreement.
30. Stamp Duty and Stamp Duty Reserve Tax
30.1 All documents which are required to be stamped and which are in the
possession of the Company or by virtue of which the Company has any right
have been duly stamped.
30.2 Since the last Accounting Date, the Company has not incurred any liability
to stamp duty reserve tax.
31. Value Added Tax
31.1 The Company is registered for the purposes of value added tax and has been
so registered at all times that it has been required to be registered by
the relevant legislation and has, throughout the six years ending on the
Completion Date, been treated for the purposes of section 43 VATA 1994 as
a member of the VAT Group.
31.2 The Company will cease to be a member of the VAT Group on the Completion
Date.
31.3 The Representative Member has made, given, obtained and kept full,
complete, correct and up-to-date returns, records, invoices and other
documents appropriate or required for the purposes of VATA 1994 and is not
in arrears with any payments or returns due and has not been required by
the Commissioners of Customs & Excise to give security under paragraph 4
of Schedule 11 VATA 1994.
<PAGE>
38
31.4 The Representative Member has not, since the date 12 months before the
Accounts Date, been in default in respect of any prescribed accounting
period as mentioned in section 59 or section 59A VATA 1994.
31.5 Within the six years ending on the Accounts Date, the Company has not been
registered for the purposes of VATA 1994 otherwise than as part of the VAT
Group referred to in 32.1 above and it has not, within that six-year
period, been a member of any other group for the purposes of VATA 1994.
31.6 Full details of any claim made by the Company for bad debt relief under
section 36 VATA 1994 have been disclosed in writing to the Purchaser.
31.7 The Company has not made an election to waive exemption in relation to any
land in accordance with paragraph 2 of Schedule 10 VATA 1994.
31.8 The Disclosure Letter contains full details of any assets of the Company
to which the provisions of Part XV Value Added Tax Regulations 1995 (the
capital goods scheme) apply and in particular:
(A) the identity (including, in the case of leasehold property, the term
of years), date of acquisition and cost of the asset; and
(B) the proportion of input tax for which credit has been claimed
(either provisionally or finally in a tax year and stating which).
31.9 No agreement or arrangements have been made or are in place under which
the Company is or could become liable (except as provided for in the
Accounts) to make any payment to the Representative Member (or any other
past or present member of the VAT Group) in respect of some or all of the
Representative Member's liability to account to H.M. Customs & Excise for
VAT.
31.10 The Company has not, at any time within the last six years, acted as agent
of any person not resident in the United Kingdom for the purposes of
section 47 VATA 1994 or been appointed as a VAT representative of any
person for the purposes of section 48 VATA 1994.
32. Duties, etc.
All value added tax, import duty and other taxes or charges payable to
H.M. Customs and Excise upon the importation of goods and all excise
duties payable to H.M. Customs and Excise in respect of any assets
(including trading stock) imported, owned or used by the
<PAGE>
39
Company have been paid in full.
33. Tax on Disposal of Assets
On a disposal of all its assets by the Company for:
(A) in the case of each asset owned by it at the Accounts Date, a
consideration equal to the value attributed to that asset in
preparing the Accounts; or
(B) in the case of each asset acquired since the Accounts Date, a
consideration equal to the consideration given for the acquisition
then either:
(i) in respect of any asset falling within ((A)) above, the
liability to tax (if any) which would be incurred by it in
respect of that asset would not exceed the amount taken into
account in respect of that asset in computing the maximum
liability to deferred Taxation as stated in the Accounts; or
(ii) in respect of any asset within ((A)) above, no tax liability
would be incurred by it in respect of that asset.
34. Replacement of Business Assets
Full particulars of each claim under section 115, 116 or 117 CGTA 1979 or
under sections 152, 153, 154 or 175 TCGA 1992 made prior to the date of
this Agreement applies and which affects any asset which was owned by the
Company on or after the Accounts Date have (except where the held over
gain is treated as having accrued prior to the Accounts Date) been
disclosed in writing to the Purchaser.
35. Distributions
35.1 Since 6 April 1965, the Company has not made any repayment of share
capital to which section 210(1) ICTA 1988 applies or issued any share
capital or other security as paid up otherwise than by the receipt of new
consideration within the meaning of Part VI ICTA 1988.
35.2 No part of the amount payable on redemption of any share capital or
security at par will be a distribution, as defined in ICTA 1988.
36. Rebasing
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40
The Company has not made a disposal to which section 35 TCGA applies.
37. Close Company
37.1 The Company is not nor has it ever been a close company as defined in ICTA
1988.
37.2 The Company has no loan outstanding to which the provisions of section 419
ICTA 1988 would apply (loans to participators etc.).
37.3 The Company is a close investment-holding company as defined in section
13A ICTA 1988.
38. Non-Deductible Revenue Outgoings
The Company is not under any obligation to make any future payment which
will be prevented (whether on the grounds of being a distribution or for
any other reason) from being deductible for corporation tax purposes,
whether as a deduction in computing the profits of a trade or as an
expense of management or as a charge on income or as a non-trading debit
under Chapter II Part IV Finance Act 1996, by reason of any statutory
provision, other than section 74(1)(f) ICTA 1988 (capital).
39. Deductions and Withholdings
The Company has made all deductions in respect, or on account, of any tax
from any payments made by it which it is obliged or entitled to make and
has accounted in full to the appropriate authority for all amounts so
deducted.
40. Intra-Group Transactions
The Company has not, at any time within the six year period prior to the
Accounts Date, acquired any asset from any other company which was, at the
time of the acquisition, a member of the same group of companies as the
Company for the purposes of any tax.
41. Residence
The United Kingdom is the only country whose tax authorities seek to
charge tax on the world-wide profits or gains of the Company and the
Company has never paid tax on income profits or gains to any tax authority
in any other country.
42. Group Arrangements
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41
42.1 The Company has not made any surrender of or claim for (i) group relief or
(ii) any amount of surplus advance corporation tax or (iii) a refund of
tax within section 102 Finance Act 1989 which involves any other company
which is not or was not a Subsidiary.
42.2 The Company has not received any payment in respect of a surrender of
group relief or of surplus advance corporation tax or of a tax refund
which could, in any circumstances, be due to be repaid to any other
company which is not or was not a Subsidiary.
43. Demerger
The Company has not been concerned in an exempt distribution (as defined
in section 214(4) ICTA 1988).
44. Non-Arm's Length Transactions
The Company is not a party to any transaction or arrangement under which
it may be required to pay for any asset or services or facilities of any
kind an amount which is in excess of the market value of that asset or
services or facilities or will receive any payment for any asset or
services or facilities of any kind that it has supplied or provided or is
liable to supply or provide which is less than the market value of that
asset or services or facilities.
<PAGE>
Schedule 3
Seller's Limitations on Liability
A. Agreements to Which This Schedule is Applicable
Notwithstanding anything in this Agreement to the contrary, the provisions
of this schedule shall operate to limit, to the extent specified but not
otherwise, the liability of the Seller in respect of any claim by the
Purchaser for any breach of or inaccuracy in the Warranties, under the Tax
Covenant or in respect of any other undertakings (an "Undertaking") given
by or on behalf of the Seller in or pursuant to this Agreement.
B. Limitations on Liability Under Warranties, Undertakings and the Tax
Covenant
1. Limitation on Amount
1.1 The Purchaser shall not be entitled in any event to damages in respect of
any claim or claims under any of the Warranties or under the Tax Covenant
unless and until:-
(A) the aggregate amount of all such substantiated claims exceeds
(pound)100,000; and
(B) the amount of any individual substantiated claim shall exceed
(pound)10,000
where "substantiated" means a claim for which the Seller may be liable
after taking into account the provisions of paragraph 11.1((B)) and which
is admitted or proved in a court of competent jurisdiction,
PROVIDED that the total aggregate liability of the Seller for breach of
the Warranties or under the Tax Covenant shall not in any event exceed
(pound)7,000,000. There shall be no limit on the liability of the Seller
under the Undertakings including, without limitation, the Undertaking set
out in clause 7 of this Agreement.
1.2 For the purpose of sub-paragraph 11.1((B)):
(A) where a claim relates to more than one event, circumstance, act or
omission which event, circumstance, act or omission would separately
constitute a breach of or give rise to a claim for breach of any of
the Warranties or under the Tax Covenant, such claim shall be
treated as a separate claim in respect of each such event,
circumstance, act or omission.
(B) all claims arising out of or relating to the same or similar events
or circumstances shall be treated as a single claim.
2. Time Limits for Bringing Claims
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43
No claim shall be brought against the Seller in respect of any breach of
the Warranties or under the Tax Covenant unless the Purchaser shall have
given to the Seller written notice of such claim specifying (in reasonable
detail) the matter which gives rise to the breach or claim, the nature of
the breach or claim and the amount claimed in respect thereof (detailing
the Purchaser's calculation of the loss thereby alleged to have been
suffered by it or the Company if relevant):-
(A) on or before the seventh anniversary of Completion in respect of
claims in respect of any breach of the Tax Warranties or under the
Tax Covenant; or
(B) on or before the date falling three months after the completion of
the accounts of the Company in respect of the financial year ending
on 31 December 1998, in respect of any other matters.
PROVIDED that the Purchaser's compliance with sub-clause (A) of clause 7
(Claims Procedure) of the Tax Covenant shall be sufficient notice of a
claim under the Tax Covenant or in respect of any breach of the Tax
Warranties for the purposes of this paragraph.
No time limit shall apply in relation to claims under the Undertaking set
out in clause 7 of this Agreement.
3. Conduct of Litigation
3.1 Upon the Purchaser or the Company becoming aware of any claim, action or
demand against it or matter likely to give rise to any of these in respect
of the Non-Tax Warranties, the Purchaser shall and shall procure that the
Company shall:-
(A) as soon as reasonably practicable notify the Seller by written
notice as soon as it appears to the Purchaser that the Seller is or
may become liable under the Non-Tax Warranties;
(B) subject to the Seller indemnifying the Purchaser and/or the Company
to their reasonable satisfaction against any liability, costs,
damages or expenses which may be incurred thereby, take such action
and give such information and access to personnel, premises,
chattels, documents and records to the Seller and their professional
advisers as the Seller may reasonably request and the Seller shall
be entitled to require the Company to take such action and give such
information and assistance in order to avoid, dispute, resist,
mitigate, settle, compromise, defend or appeal any claim in respect
thereof or adjudication with respect thereto;
<PAGE>
44
(C) at the request of the Seller, allow the Seller to take the sole
conduct of such actions as the Seller may deem appropriate in
connection with any such assessment or claim in the name of the
Purchaser or the Company and in that connection the Purchaser shall
give or cause to be given to the Seller all such assistance as the
Seller may reasonably require in avoiding, disputing, resisting,
settling, compromising, defending or appealing any such claim and
shall instruct such solicitors or other professional advisors as the
Seller may nominate to act on behalf of the Purchaser or the
Company, as appropriate, but to act in accordance with the Seller's
sole instructions;
(D) make no admission of liability, agreement, settlement or compromise
with any third party in relation to any such claim or adjudication
without the prior written consent of the Seller, such consent not to
be unreasonably withheld or delayed; and
(E) take all reasonable action (having regard to the commercial
interests of the Company) to mitigate any loss suffered by it in
respect of which a claim could be made under the Non-Tax Warranties.
4. No Liability if Loss is Otherwise Compensated for
Single claim
4.1 The Seller shall not be liable for breach of any of the Non-Tax Warranties
to the extent that the subject of the claim has been or is made good or is
otherwise compensated for without cost to the Purchaser or to the Company.
Taxation
4.2 In calculating the liability of the Seller for any breach of the Non-Tax
Warranties, there shall be taken into account the amount by which any
taxation for which the Company is now or in the future accountable or
liable to be assessed is reduced or extinguished as a result of the matter
giving rise to such liability.
Insurances
4.3 If, in respect of any matter which would give rise to a breach of the
Non-Tax Warranties or a claim under the Undertakings, the Company is
entitled to claim under any policy of insurance, then no such matter shall
be the subject of a claim under the Warranties or the Undertakings unless
and until the Company shall have made a claim against its insurers and any
such insurance claim (or any claim which could have been made had such
policies or their equivalents been maintained as aforesaid) shall then
reduce by the amount
<PAGE>
45
recovered or extinguish any such claims for breach of the Non-Tax
Warranties or under the Undertakings.
Recovery From Third Parties
4.4 (A) Where the Purchaser and/or the Company are at any time entitled to
recover from some other person any sum in respect of any matter
giving rise to a claim under the Non-Tax Warranties the Purchaser
shall, and shall procure that the Company shall, undertake all
necessary steps to enforce such recovery prior to taking action
against the Seller (other than to notify the Seller of the claim
against the Seller) and, in the event that the Purchaser or the
Company shall recover any amount from such other person, the amount
of the claim against the Seller shall be reduced by the amount
recovered, less all reasonable costs, charges and expenses incurred
by the Purchaser or the Company recovering that sum from such other
person.
(B) If the Seller shall pay at any time to the Purchaser or the Company
an amount pursuant to a claim in respect of the Non-Tax Warranties
and the Purchaser or the Company subsequently become entitled to
recover from some other person any sum in respect of any matter
giving rise to such claim, the Purchaser shall, and shall procure
that the Company shall take all necessary steps to enforce such
recovery, and shall forthwith repay to the Seller so much of the
amount paid by the Seller to the Purchaser or the Company as does
not exceed the sum recovered from such other person less all
reasonable costs, charges and expenses incurred by the Purchaser or
the Company recovering that sum from such other person.
(C) If any amount is repaid to the Seller by the Purchaser or the
Company pursuant to sub-paragraph 4.4(B) above an amount equal to
the amount so repaid shall be deemed never to have been paid by the
Seller to the Purchaser for the purposes of paragraph 1.
5. Acts of the Purchaser
5.1 No claim shall lie against the Seller under the Non-Tax Warranties to the
extent that such claim is wholly or partly attributable to:-
(A) any voluntary act, omission, transaction, or arrangement carried out
at the request of or with the consent of the Purchaser before
Completion;
<PAGE>
46
(B) any voluntary act, omission, transaction, or arrangement carried out
by the Purchaser or on its behalf or by persons deriving title from
the Purchaser on or after Completion; or
(C) any explicit admission of liability made after the date hereof by
the Purchaser or on its behalf or by persons deriving title from the
Purchaser on or after Completion.
5.2 The Seller shall not be liable for any breach of Non-Tax Warranties which
would not have arisen but for any reorganisation or change in ownership of
the Company after Completion or any changes in the accounting basis on
which the Company values its assets or any other change in accounting
policy or practice of the Company after Completion.
6. Allowance, Provision or Reserve in the Accounts
6.1 No matter shall be the subject of a claim for breach of any of the Non-Tax
Warranties or under the Undertakings to the extent that allowance,
provision or reserve in respect of such matter shall have been made in the
Accounts or has been included in calculating creditors or deducted in
calculating debtors in the Accounts and (in the case of creditors or
debtors) is identified in the records of the Company or shall have been
otherwise taken account of or reflected in the Accounts.
6.2 Notwithstanding sub-paragraph 66.1 above, if at any time after Completion
and, in the case of a claim under the Non-Tax Warranties, within the time
limit applicable to the Non-Tax Warranties set out in paragraph 2 above
(or at any time thereafter while any such claim remains not fully
determined) the amount of any allowance, provision or reserve in respect
of any liability of the Seller under the Non-Tax Warranties or the
Undertakings (other than the Undertaking set out in clause 7) made in the
Accounts or otherwise taken account of or reflected therein is found to be
in excess of the matter for which such allowance, provision or reserve was
made, the amount of such excess (the "Excess Amount") shall be applied in
the following manner:-
(A) if the Seller shall, prior to the date on which the Excess Amount is
ascertained, have made any payment or payments in respect of the
Non-Tax Warranties or the Undertakings then the Purchaser shall
forthwith repay to the Seller a sum equal to such part of the Excess
Amount as does not exceed the aggregate of those of such prior
payments by the Seller as shall not have been previously refunded
pursuant to this sub-clause; and
(B) where sub-paragraph 6.2((A)) above does not apply or where such
sub-paragraph does apply but there remains a balance of the Excess
Amount after the application of that sub-paragraph, then the Excess
Amount or the balance remaining, as the case may
<PAGE>
47
be, shall be applied in reducing any liability of the Seller that
may subsequently arise under the Non-Tax Warranties or the
Undertakings.
7. Retrospective Legislation
No liability shall arise in respect of any breach of any of the Non-Tax
Warranties or under the Undertakings if and to the extent that liability
for such breach occurs or is increased wholly or partly as a result of any
legislation not in force at the date hereof which takes effect
retrospectively.
8. Taxation Warranties
8.1 The Seller shall not be liable for a breach of a Tax Warranty relating to
a post-Accounts Date tax liability unless such tax liability Abbey
National as a consequence of or by reference to any of the events listed
in paragraphs (a) to (e) inclusive of sub-clause (ii) of clause 2
(Covenant) of the Tax Covenant.
In this paragraph 8.1, a post-Accounts Date tax liability means a tax
liability of the Company which Abbey National as a consequence of or by
reference to an event occurring or being deemed to occur after the
Accounts Date.
8.2 Clauses 3 (Limits on Clause 2), 4 (Mitigation), 5 (Over-Provisions,
Reliefs, etc), 6 (Recovery from Other Persons), 7 (Claims Procedure), 9
(Due Date of Payment) and 10 (Deductions from Payments, etc) of the Tax
Covenant shall apply mutatis mutandis to claims, liabilities and payments
in respect of the Tax Warranties as they apply to claims, liabilities and
payments under the Tax Covenant.
9. Loss of Goodwill or Business
No claim shall lie against the Seller under the Non-Tax Warranties to the
extent that the subject of the claim relates to the fact that the Company
has lost goodwill or possible business.
10. Payment of Claim to be Additional Consideration for the Consideration
Shares
Any payment made by the Seller in respect of any claim under the
Warranties or the Undertakings shall be deemed to be additional
consideration given by the Seller for the Consideration Shares under
clause 3 (Consideration) of this Agreement.
<PAGE>
48
Schedule 4
Tax Covenant
The Tax Covenant shall be in the form of the deed prepared by Slaughter and May
which has (for the purposes of identification only) already been initialled by
the Seller.
<PAGE>
49
Schedule 5
Basic Information about the Company
<PAGE>
50
1. Registered number : 1877373
2. Date of incorporation : 15th January, 1985
3. Place of incorporation : England
4. Address of registered office : Ten Trinity Square
London EC3P 3AX
5. Class of company : Private limited
6. Authorised share capital : (pound)2,000,000
7. Issued share capital : (pound)2,000,000
8. Loan capital : (pound)3,000,000
9. Directors:
Full name
Douglas Lyall Elliott
Richard James Pearson
Clive Rodney Berry
Michael Angus Halliday Bigham
Allan Lister Daffern
Sarah Ann Fairclough
Roderick Stewart Gray
Robert Brown Guthrie
Maurice Hammond
David Daniel Hawkins
Michael Anthony Johns
Hugh Roy Matthews
Susan Helen Mortley
David Lloyd Smith
Hugh Ammie Warren
<PAGE>
51
10. Secretary:
Full name
Tracy Marina Warren
11. Accounting reference date : 31st December
12. Auditors : Ernst & Young
13. Tax residence : United Kingdom
14. Business activities : independent financial
advisory company
<PAGE>
- --------------------------------------------------------------------------------
Schedule 6
Intellectual Property
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
53
Part A
1. Registered Trade and Service Marks
Country Mark Number Class of goods or Date of next renewal
services for which
registered
None
2. Trade Mark and Service Mark Applications
Country Mark
UK Forces Healthguard
3. Unregistered Trade and Service Marks
Country Mark Date use commenced Class of goods or services
on which used
None
4. Registered Designs
Country Number Subject matter Date of next renewal
None
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
54
5. Registered Design Applications
Country Subject matter Date of application
None
Part B
6. Licences and User Agreements
1. Details (grantor, grantee, country, subject matter and term) of all
licences and user agreements granted to any member of the Group.
None
2. Details (grantor, grantee, country, subject matter and term) of all
licences and user agreements granted from any member of the Group
None
- --------------------------------------------------------------------------------
<PAGE>
Schedule 7
Pensions
1. DEFINITIONS
(A) For the purposes of this Schedule the following expressions shall have the
following meanings:-
the "Company" means Willis IFA
"Completion Date" means the date of this Agreement
"Former Schemes" means all occupational pension schemes (as
defined in section 1 of the Pension Schemes Act
1993) in which the Company has participated at
any time after 30 June 1992 and prior to
Completion and to which the Company may be
required to make a payment pursuant to Section
75 of the Pensions Act 1995 or otherwise as a
result of the liabilities of the scheme
exceeding the value of its assets, excluding any
money purchase schemes (as defined in section
181 of the Pension Schemes Act 1993) and the
Seller's Scheme.
"Participation Period" means the period during which the Purchaser
and/or the Company, as the case may be
participates in the Seller's Scheme and ending
no later than the date on which the Seller or
any associated company ceases to own a
shareholding in excess of 40% of the total
issued share capital of the Purchaser or such
lower figure as may be agreed by the Seller and
Abbey National plc and which does not prejudice
Inland Revenue approval of the continued
participation pursuant to paragraph 2 of this
Schedule.
"Pensionable Age" means, in relation to a Pensionable Employee,
the age specified in the rules of the Seller's
Scheme as Normal Pension Date of such
Pensionable Employee.
<PAGE>
56
"Pensionable Employees" means:
(i) such of the Relevant Employees at
Completion as are then members of the
Seller's Scheme; and
(ii) such of the Relevant Employees who become
members of the Seller's Scheme during
the Participation Period.
"Relevant Employees" means the employees of the Company at the date
of this Agreement.
"Seller's Scheme" means the Willis Faber Pension Scheme
established by an interim trust deed dated 31st
December 1971 and currently governed by a Deed
of Variation dated 13th March, 1990 as amended
by a Deed of Variation dated 8th March 1995 or,
if the context so requires, the trustees of that
scheme.
(B) Save where specifically defined or where the context otherwise requires,
words and expressions used in Chapter I of Part XIV of the Income and
Corporation Taxes Act 1988 or in the Pension Schemes Act 1993 shall have
the same meanings in this Schedule.
(C) References in this Schedule to any statute or statutory provision shall
include any statute or statutory provision which amends, extends,
consolidates or replaces the same.
2. MATTERS RELATING TO THE SELLER'S SCHEME
(A) The Seller's undertakings
(i) The Seller shall procure that:
(a) subject to the consent of the Commissioners of Inland Revenue (which
the Seller shall use its reasonable endeavours to obtain) the
Company is permitted to continue its participation and the Purchaser
is admitted to participation in the Seller's Scheme for such time as
they employ any Relevant Employee;
(b) each of the Relevant Employees who during the Participation Period
would have become a member of the Seller's Scheme but for the
transactions provided for in this Agreement is permitted to become a
member of the Seller's Scheme in respect of the Participation Period
or the applicable part of it.
<PAGE>
57
(ii) The Seller shall use reasonable endeavours to procure that:
(a) the Seller's Scheme will be an exempt approved scheme for a period
of at least one year from the Completion Date; and
(b) the Seller's Scheme or alternative equivalent pension arrangements
will be maintained in relation to the Pensionable Employees in full
force and effect for a period of at least one year from the
Completion Date;
(B) The Purchaser's undertakings
The Purchaser undertakes that it and the Company (for as long as they
participate in the Seller's Scheme) will:
(i) pay to the Seller's Scheme the contributions due and payable in
respect of the Participation Period (but not any period before the
Completion Date) to the Seller's Scheme by and in respect of each
Pensionable Employee (but only for such part of the Participation
Period that the Pensionable Employee is accruing benefits in the
Seller's Scheme), calculated at the rates and otherwise on the basis
applicable to all Employers in the Seller's Scheme;
(ii) comply during the Participation Period in all other respects with
the provisions of the Seller's Scheme;
(iii) not do or omit to do during the Participation Period any act or
thing whereby the approval of the Seller's Scheme as an exempt
approved scheme or as a contracted-out scheme would or might be
prejudiced;
(iv) not exercise any power, right or discretion conferred on it under or
in relation to the Seller's Scheme whether as an employer or
otherwise, including (without limitation) any power, right or
discretion conferred by law, without the prior written consent of
the Seller (such consent not to be unreasonably withheld or delayed)
and on such terms (whether as to payment of additional contributions
to the Seller's Scheme or otherwise) as the Seller may agree; and
(v) appoint such company as the Seller may nominate to act on its behalf
in relation to the Seller's Scheme for the purpose of dealing with
the provisions of the Pensions Act 1995 and the Pension Schemes Act
1993 and do all such acts and execute and/or sign all such documents
as the Seller may reasonably consider necessary or desirable in
connection therewith.
<PAGE>
58
(C) Parties to do everything necessary to comply with contracting-out
requirements
The Seller and the Purchaser shall take, and the Purchaser shall procure
that the Company take, such steps as may be required of them, including
the completion of any notices and elections, to procure that the Purchaser
and the Company:
(i) holds or continues to be named in a contracting-out certificate on a
reference scheme basis or otherwise, as the case may be, in relation
to the Seller's Scheme in respect of the Participation Period; and
(ii) ceases to hold or be named in such certificate with effect from the
end of the Participation Period.
(D) The Seller's covenant in respect of any residual liabilities in relation
to the Former Schemes
The Seller hereby covenants with the Purchaser to pay to the Purchaser (so
far as possible by way of repayment of the consideration payable for the
Shares pursuant to this Agreement) forthwith upon demand and together with
interest at the Agreed Interest Rate from the date of such demand until
the date of payment an amount equal to any payment the Company or any
member of the Purchaser's Group is or becomes liable to make to any Former
Scheme whether before, at or after Completion, whether pursuant to,
Section 75 of the Pensions Act 1995, or otherwise other than payments
pursuant to the other provisions of the Schedule.
3. PENSION WARRANTIES
The Seller represents, warrants and undertakes, and save as disclosed in
the Disclosure Letter, that:
(A) Seller's Scheme is the only funded pension/disability arrangement
Other than the Seller's Scheme and the State scheme there is no
arrangement to which the Company contributes or under which it has any
obligation (whether legally enforceable or not) under which benefits of
any kind are payable to or in respect of any of the Relevant Employees on
retirement, death or disability or on the attainment of a specified age or
on the completion of a specified number of years of service or in relation
to sickness after retirement.
(B) All material Seller's Scheme documents supplied
<PAGE>
59
The trust deeds and rules of the Seller's Scheme, together with all
material announcements (to members of the Seller's Scheme who are Relevant
Employees) which have not been incorporated into the Trust Deed and Rules
of the Seller's Scheme have been supplied to the Purchaser or the
Purchaser's advisers and are attached to the Disclosure Letter.
(C) Exercise of discretion or power
No discretion or power has been exercised under the Seller's Scheme in
respect of members of that Scheme who are Relevant Employees to augment
benefits or to provide a benefit which would not otherwise be provided.
(D) Adherence
The Company adheres to the Seller's Scheme in respect of the Pensionable
Employees.
(E) Exempt Approval
The Seller's Scheme is an exempt approved scheme or capable of exempt
approval.
(F) Contracting-out
The Seller's Scheme is a contracted-out scheme and the Company is named in
a contracting-out certificate in relation to the Seller's Scheme.
(G) Contributions
There are not at the date hereof any contributions from or in respect of
any of the Relevant Employees or other payments which have fallen due but
are unpaid in respect of the Seller's Scheme except for contributions
which may be due in respect of the current or previous four weekly
accounting period.
(H) Claims
So far as the Seller is aware there are no actions, suits or claims (other
than routine claims for benefits) outstanding, pending or threatened
against the Trustees or Administrator of the Seller's Scheme or against
the Seller or the Company in respect of any matter arising out of or in
connection with the Seller's Schemes in respect of any Pensionable
Employees.
(I) Overriding Provisions
(i) The Seller's Scheme does not distinguish between male and female
members
<PAGE>
60
(except in relation to maternity) in the provision of benefits
relating to Pensionable Service after 17th May 1990 (with the
exception of guaranteed minimum pensions) and no adverse alteration
has been made to benefits already accrued at the date of announcing
changes designed to equalise benefits.
(ii) So far as the Seller is aware the Seller's Scheme has been
administered in accordance with the preservation requirements within
the meaning of section 69 Pension Schemes Act 1993.
(iii) The Seller's Scheme has been administered in accordance with the
equal access requirements of section 118 Pension Schemes Act 1993.
(J) Former Scheme Liabilities
(i) The Company has not participated in any Former Scheme immediately
before or at a time when that scheme ceased to admit new members.
(ii) The Company has no liability to make any payment to the Seller's
Scheme or to any Former Scheme pursuant to section 75 of the
Pensions Act 1995.
(iii) The Company has no undischarged liability in respect of any Former
Scheme pursuant to Regulation 3 of the Occupational Pensions Schemes
(Deficiency on Winding up etc.) Regulations 1996.
<PAGE>
61
Signatures
Signed by )
George Nixon ) George Nixon
for and on behalf of )
Willis Corroon Limited )
Signed by
Jeremy Budden )
for and on behalf of ) Jeremy Budden
Willis National )
Holdings Limited )
<PAGE>
- --------------------------------------------------------------------------------
Dated 11th December 1998
WILLIS CORROON LIMITED
and
WILLIS NATIONAL HOLDINGS LIMITED
-----------------------------------
WIFA
Side Agreement to
Share Sale Agreement
-----------------------------------
Slaughter and May,
35 Basinghall Street,
London EC2V 5DB
Ref: JCXT/JMYA
- --------------------------------------------------------------------------------
<PAGE>
SIDE AGREEMENT
THIS AGREEMENT is made 11th December 1998
BETWEEN:-
1. Willis Corroon Limited of Ten Trinity Square, London EC3P 3AX (registered
in England No. 1646647) (the "Seller")
AND
2. Willis National Holdings Limited of Ten Trinity Square, London EC3P 3AX
(registered in England No. 3393377) (the "Purchaser").
WHEREAS:
(A) The parties entered into a Share Sale Agreement on 4th August, 1997
(the "Share Sale Agreement") whereby the Purchaser acquired all the
issued shares in Willis Corroon Financial Planning Limited ("WIFA")
from the Seller.
(B) Under Clause 7 of the Share Sale Agreement the Seller agreed to
indemnify and keep indemnified the Purchaser from all claims,
losses, costs or other liabilities which the Purchaser and/or WIFA
may suffer in respect of pensions missellings.
(C) The parties have decided to enter into this Side Agreement pursuant
to Clause 15.6 with respect to extending the indemnity provided for
under the Share Sale Agreement to include missellings of Free
Standing Additional Voluntary Contributions ("FSAVC") schemes.
IT IS AGREED AS FOLLOWS:
<PAGE>
1. Terms and expressions in the Share Sale Agreement shall, unless the
context otherwise requires, have the same meanings when used in this Side
Agreement.
2. The parties agree that the definition of "affected person" set out in
clause 7.2 of the Share Sale Agreement shall be amended by inserting after
the words "Taxes Act 1988" in sub-paragraph (A) the following;
"or a retirement benefits scheme (as defined in section 611 of ICTA 1988)
established solely to accept contributions from employees to provide
additional benefits to those provided by their employers' pension scheme
(a free standing additional voluntary contribution scheme (including,
without limitation, any such scheme approved by the Board of Inland
Revenue pursuant to section 591(2)(h) of ICTA 1988)); and
by inserting after the words "so approved" in sub-paragraph (B)
the following:
"or such a free standing additional voluntary contribution
scheme".
3. Save as set out in this Side Agreement, the terms and conditions of the
Share Sale Agreement remains and shall continue in full force and effect
and shall apply to the provisions of this Side Agreement.
4. This Side Agreement shall be governed by and shall be construed in
accordance with, English law.
Signatures
Signed by )
)
for and on behalf of )
Willis Corroon Limited )
<PAGE>
Signed by )
)
for and on behalf of )
Willis National )
Holdings Limited
<PAGE>
- --------------------------------------------------------------------------------
CONFORMED COPY
Dated 4th August 1997
ABBEY NATIONAL INDEPENDENT CONSULTING GROUP LIMITED
and
WILLIS NATIONAL HOLDINGS LIMITED
-----------------------------------
ANIFA
Share Sale Agreement
-----------------------------------
Slaughter and May,
35 Basinghall Street,
London EC2V 5DB
(Ref: TNC/JCXT)
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
Page
1. Interpretation 1
2. Sale and Purchase 3
3. Consideration 3
4. Completion 3
5. Seller's Warranties and Covenants 3
6. Purchaser's Remedies and Seller's Limitations on Liability 3
7. Indemnities 3
8. Provision of Business Information 3
9. Pensions 3
10. Access 3
11. Effect of Completion 3
12. Remedies and Waivers 3
13. Assignment 3
14. Further Assurance 3
15. Entire Agreement 3
16. Notices 3
17. Announcements 3
18. Confidentiality 3
19. Costs and Expenses 3
20. Counterparts 3
21. Time of Essence 3
22. Choice of Governing Law 3
Schedule 1 Completion Arrangements 3
Schedule 2 Warranties 3
Schedule 3 Seller's Limitations on Liability 3
Schedule 4 Tax Covenant 3
Schedule 5 Basic Information about the Company 3
Schedule 6 Intellectual Property 3
Schedule 7 Pensions 3
- --------------------------------------------------------------------------------
<PAGE>
2
SHARE SALE AGREEMENT
THIS AGREEMENT is made 4th August 1997
BETWEEN:-
1. Abbey National Independent Consulting Group Limited of Abbey House,
Baker Street, London NW1 6XL (registered in England No. 2506374)
(the "Seller")
AND
2. Willis National Holdings Limited of Ten Trinity Square, London EC3P
3AX (registered in England No. 3393377) (the "Purchaser").
WHEREAS:-
(A) Particulars of the Company are set out in Schedule 5 (Basic
Information about the Company).
(B) The Seller has agreed to sell and the Purchaser has agreed to
purchase the Shares in each case on the terms and subject to the
conditions of this Agreement.
(C) The Purchaser has also agreed to purchase the whole of the issued
share capital of the Other IFA Company on the terms and conditions
of the Other IFA Company Agreement.
(D) The Purchaser is intending to reorganise the structure of the
Purchaser's Group following Completion. This will involve the
disposal by the Company and the Other IFA Company of the whole or
parts of their respective undertaking or assets by intra-group
disposal.
(E) At the date of this Agreement (and prior to Completion), the
Purchaser has an authorised share capital of (pound)1,000 divided
into 1,000 shares of (pound)1 each and two of these shares have been
issued.
NOW IT IS HEREBY AGREED as follows:-
1. Interpretation
1.1 In this Agreement and the Schedules to it:-
<PAGE>
3
"Accounts" means the audited financial statements of
the Company prepared in accordance with
the Companies Acts, for the accounting
reference period ended on the Accounts
Date which financial statements comprise a
balance sheet, profit and loss account,
notes, auditors' and directors' reports, a
copy of which has for the purpose of
identification only been signed by the
Seller and delivered to the Purchaser;
"Accounts Date" means 31 December, 1996;
"Books and Records" has its common law meaning and includes,
without limitation, all notices,
correspondence, orders, inquiries,
drawings, plans, books of account and
other documents and all computer disks or
tapes or other machine legible programs or
other records;
"Business Day" means a day (other than a Saturday or a
Sunday) on which banks are open for
business in London;
"Business Information" means all information, know-how and
records (whether or not confidential and
in whatever form held) including (without
limitation) all data, manuals and
instructions and all customer lists, sales
information, business plans and forecasts,
and all technical or other expertise and
all computer software and all accounting
and tax records, correspondence, orders
and inquiries;
"CGTA 1979" means the Capital Gains Tax Act 1979;
"Companies Acts" means the Companies Act 1985, the
Companies Consolidation (Consequential
Provisions) Act 1985, the Companies Act
1989 and Part V of the Criminal Justice
Act 1993;
"Company" means Abbey National Independent Financial
Advisers Limited, basic information
concerning which is set out in
"Completion" means completion of the sale and purchase
of the Shares under this Agreement;
"Completion Date" means the date of this Agreement;
<PAGE>
4
"Confidential Business means Business Information which is
Information" confidential or not generally known;
"Consideration Shares" means 489 ordinary shares of (pound)1 each
in the share capital of the Purchaser,
credited as fully paid;
"Disclosure Letter" means the letter dated with the date
hereof written by the Seller to the
Purchaser for the purposes of clause ( )
and delivered to the Purchaser before the
execution of this Agreement;
"ICTA 1988" means the Income and Corporation Taxes Act
1988;
"Intellectual Property" means trade marks and service marks,
rights in designs, trade or business
names, copyrights and topography rights
(whether or not any of these is registered
and including applications for
registration of any such thing) and rights
under licences and consents in relation to
any such thing and all rights or forms of
protection of a similar nature or having
equivalent or similar effect to any of
these which may subsist anywhere in the
world;
"Non-Tax Warranties" means the Warranties other than the Tax
Warranties;
"Other IFA Company" means Willis Corroon Financial Planning
Limited (registered in England No.
1877373);
"Other IFA Company means the share sale agreement dated with
Agreement" the date hereof between Willis Group plc
(1) and the Purchaser (2) in substantially
the same terms as this Agreement;
"Purchaser's Group" means the Purchaser and its subsidiary
undertakings;
"Representative Member" means the representative member referred
to in the definition of VAT Group;
"Required for the has the meaning given in clause 8
Business" (Provision of Business Information);
"RTPA 1976" means the Restrictive Trade Practices Act
1976;
<PAGE>
5
"Seller's Group" means Abbey National plc and the
subsidiary undertakings of that company
(other than, for the avoidance of doubt,
the Company);
"Shares" means all the issued shares in the capital
of the Company (comprising 2,500 shares of
(pound)1 each);
"Share Purchase has the meaning given to it in clause has
Documents" the meaning given to it in clause 15
(Entire Agreement);
"Subsidiary" means at any relevant time any then
subsidiary undertaking of the Company;
"Systems" means all computer hardware, software,
networks or other information technology
owned or used by the Company;
"Tax" or "Taxation" means and includes all forms of taxation
and statutory, governmental,
supra-governmental, state, principal,
local governmental or municipal
impositions, duties, contributions and
levies, in each case whether of the United
Kingdom or elsewhere and whenever imposed,
and all penalties, charges, costs and
interest relating thereto and without
limitation all employment taxes and any
deductions or withholdings of any sort;
"Tax Covenant" means the tax covenant referred to in
Schedule 1 (Completion Arrangements) and
Schedule 4 (Tax Covenant);
"Tax Warranties" means Warranties numbered 27 to 45 in
"TCGA 1992" means the Taxation of Chargeable Gains Act
1992;
"VATA 1994" means the Value Added Tax Act 1994;
"VAT Group" means the group of companies of which the
representative member for the purposes of
section 43 VATA 1994 was Abbey National
plc (Registration number 466264724);
"Warranties" means the warranties set out in Schedule 2
(Warranties) given by the Seller and any
other or warranties made by or on behalf
of the Seller in this Agreement and
"Warranty" shall be construed accordingly;
and
<PAGE>
6
"Working Hours" means 9.30 a.m. to 5.30 p.m. on a Business
Day.
1.2 In this Agreement, unless otherwise specified:-
(A) references to clauses, sub-clauses, paragraphs, sub-paragraphs
and Schedules are to clauses, sub-clauses, paragraphs,
sub-paragraphs of, and Schedules to, this Agreement;
(B) a reference to any statute or statutory provision shall be
construed as a reference to the same as it may have been, or
may from time to time be, amended, modified or re-enacted;
(C) references to a "company" shall be construed so as to include
any company, corporation or other body corporate, wherever and
however incorporated or established;
(D) references to a "person" shall be construed so as to include
any individual, firm, company, government, state or agency of
a state or any joint venture, association or partnership
(whether or not having separate legal personality);
(E) references to "indemnify" and "indemnifying" any person
against any circumstance include indemnifying and keeping him
harmless from all actions, claims and proceedings from time to
time made against that person and all loss or damage and all
payments, costs or expenses made or incurred by that person as
a consequence of or which would not have arisen but for that
circumstance;
(F) the expressions "accounting reference date", "accounting
reference period", "allotment", "body corporate", "current
assets", "debentures", "holding company", "paid up", "profit
and loss account", "subsidiary", "subsidiary undertaking" and
"wholly-owned subsidiary" shall have the meaning given in the
Companies Acts;
(G) a person shall be deemed to be connected with another if that
person is connected with another within the meaning of section
839 ICTA 1988;
(H) references to writing shall include any modes of reproducing
words in a legible and non-transitor y form;
(I) headings to clauses and Schedules are for convenience only and
do not affect the interpretation of this Agreement;
<PAGE>
7
(J) the Schedules form part of this Agreement and shall have the
same force and effect as if expressly set out in the body of
this Agreement, and any reference to this Agreement shall
include the Schedules;
(K) references to the knowledge, information, belief or awareness
of any person shall be treated as including any knowledge,
information, belief or awareness which the person would have
if the person made all usual and reasonable enquiries; and
(L) (i) the rule known as the ejusdem generis rule shall not
apply and accordingly general words introduced by the
word "other" shall not be given a restrictive meani ng
by reason of the fact that they are preced ed by words
indicat ing a particular class of acts, matter s or
things; and
(ii) general words shall not be given a restrictive meaning
by reason of the fact that they are followed by
particular examples intended to be embraced by the
general words.
2. Sale and Purchase
2.1 The Seller shall sell or procure the sale of, and the Purchaser
shall purchase, the Shares with all rights attached or accruing to
them at the date of this Agreement.
2.2 The Seller has the right to transfer legal and beneficial title to
the Shares.
2.3 The Shares shall be free from all charges and encumbrances and from
all other rights exercisable by or claims by third parties.
2.4 The Purchaser shall be entitled to exercise all rights attached or
accruing to the Shares including, without limitation, the right to
receive all dividends, distributions or any return of capital
declared, paid or made by the Company on or after the date of this
Agreement.
2.5 The Seller waives all rights of pre-emption over any of the Shares
conferred upon him by the articles of association of the Company or
in any other way and undertakes to take all steps necessary to
ensure that any rights of pre-emption over any of the Shares are
waived.
2.6 For the avoidance of doubt, Part 1 Law of Property (Miscellaneous
Provisions) Act 1994
<PAGE>
8
shall not apply for the purposes of this clause.
3. Consideration
The total consideration for the sale of the Shares shall be the
allotment to the Seller of the Consideration Shares in accordance
with clause 4 (Completion).
4. Completion
4.1 Completion shall take place on the Completion Date at 35 Basinghall
Street, London EC2V 5DB.
4.2 At Completion, the Seller shall do those things listed in Schedule 1
(Completion Arrangements).
4.3 The Purchaser shall not be obliged to complete this Agreement unless
the Seller complies fully with the requirements of Schedule 1
(Completion Arrangements) so far as they relate to the Seller.
4.4 If the obligations of the Seller under Schedule 1 (Completion
Arrangements) are not complied with on the Completion Date, the
Purchaser may:-
(A) defer Completion (so that the provisions of this clause shall
apply to Completion as so deferred); or
(B) proceed to Completion as far as practicable (without limiting
its rights under this Agreement); or
(C) treat this Agreement as terminated for breach of a condition.
4.5 Delivery of a share certificate in respect of the Consideration
Shares in accordance with Schedule 1 paragraph 6 (Completion
Arrangements) shall constitute payment of the consideration for the
Shares and shall discharge the obligations of the Purchaser under
clause 2 (Sale and Purchase).
5. Seller's Warranties and Covenants
5.1 The Seller warrants to the Purchaser that each of the Warranties is
accurate in all material respects and not misleading in any material
respect at the date of this Agreement and that if for any reason
there is any interval of time between the date of this Agreement and
Completion, the Warranties will be repeated on the Completion Date.
5.2 If the Warranties are repeated at Completion as referred to in
clause, the Seller shall use its best endeavours to procure that no
act shall be performed or omission allowed either
<PAGE>
9
by it in such interval which would result in any of the Warranties
being materially breached or misleading in any material respect at
any time up to and including the time of Completion.
5.3 The Seller accepts that the Purchaser is entering into this
Agreement in reliance upon each of the Warranties.
5.4 The Seller undertakes to disclose in writing to the Purchaser
anything which is or may constitute a breach of or be inconsistent
with any of the Warranties immediately it comes to its notice both
before and after Completion.
5.5 The Seller undertakes (if any claim is made against it in connection
with the sale of the Shares to the Purchaser) not to make any claim
against the Company or any director or employee of the Company or
any other employees of the Seller's Group who are to be seconded to
or employed by the Company on whom any of them may have relied
before agreeing to any terms of this Agreement or of the Tax
Covenant or authorising any statement in the Disclosure Letter.
5.6 Each of the Warranties shall be construed as a separate and
independent warranty and (except where expressly provided to the
contrary) shall not be limited or restricted by reference to or
inference from the terms of any other Warranty or any other term of
this Agreement.
5.7 If in respect of or in connection with any breach of any of the
Warranties or any facts or matters warranted not being true and
being misleading any amount payable to the Purchaser by the Seller
is subject to Taxation, such payable amounts shall be paid to the
Purchaser by the Seller so as to ensure that the net amount received
by the Purchaser is equal to the full amount payable to the
Purchaser under this Agreement provided that if the benefit of this
Agreement has been assigned by the Purchaser, the Seller shall not
be obliged to pay any amount in excess of that which would have been
payable had the benefit of this Agreement not been so assigned.
5.8 The Seller undertakes to indemnify the Purchaser against all costs
(including legal costs on an indemnity basis as defined in Order 62
of the Rules of the Supreme Court), expenses or other liabilities
which the Purchaser may reasonably incur either before or after the
commencement of any action in connection with:-
(A) the settlement of any claim that any of the Warranties are
untrue or misleading or have been breached;
(B) any legal proceedings in which the Purchaser claims that any
of the Warranties
<PAGE>
10
are untrue or misleading or have been breached and in which
judgment is given for the Purchaser; or
(C) the enforcement of any such settlement or judgment.
6. Purchaser's Remedies and Seller's Limitations on Liability
6.1 Subject to sub-clause 6.2 and to the limitations set out in Schedule
3 (Sellers Limitations on Liability), the Purchaser shall be
entitled to claim both before and after Completion that any of the
Warranties has or had been breached or is or was misleading and,
without limitation, to claim under any covenant even if the
Purchaser could have discovered on or before Completion that the
Warranty in question had been breached or was misleading. Completion
shall not in any way constitute a waiver of any of the Purchaser's
rights.
6.2 The Purchaser shall not be entitled to claim that any fact causes
any of the Warranties to be breached or renders any misleading if it
has been fairly disclosed to the Purchaser in the Disclosure Letter
in the absence of any fraud or dishonesty on the part of the Seller
or their agents or advisers.
6.3 No liability shall attach to the Seller in respect of claims under
the Warranties or the Tax Covenant if and to the extent that the
limitations referred to in clause 6.1 and set out in Schedule 3
(Sellers Limitations on Liability) apply, in the absence of any
fraud or dishonesty on the part of any of the Seller or their agents
or advisers.
6.4 If, following Completion, the Purchaser becomes aware (whether it
does so by reason of any disclosure made pursuant to clause 5
(Sellers Warranties and Covenants) or not) that there has been any
material breach of the Warranties or any other term of this
Agreement, the Purchaser shall not be entitled to treat this
Agreement as terminated but shall be entitled to claim damages or
exercise any other right, power or remedy under this Agreement or as
otherwise provided by law.
6.5 If the Seller defaults in the payment when due of any sum payable
under this Agreement (whether determined by agreement or pursuant to
an order of a court or otherwise), the liability of the Seller shall
be increased to include interest on such sum from the date when such
payment is due until the date of actual payment (as well after as
before judgment) at a rate per annum of one per cent. above the base
rate from time to time of Lloyds Bank PLC. Such interest shall
accrue from day to day and shall be compounded annually.
6.6 The Seller undertakes to indemnify the Purchaser against all costs,
expenses or other liabilities which the Purchaser may reasonably
incur either before or after the commencement of any action in
connection with
<PAGE>
11
the Warranties in accordance with clause 55.8 (Sellers Warranties
and Covenants).
6.7 Except as stated expressly in this clause, this clause and Schedule
3 (Sellers Limitations on Liability) shall not limit any other
clause of this Agreement.
7. Indemnities
7.1 The Seller agrees to indemnify and keep indemnified the Purchaser,
for itself and as trustee for the Company, from and against all
claims, losses, costs or other liabilities which the Purchaser or
the Company may suffer or incur by reason of:-
(A) any legal obligation to any affected person; or
(B) any requirement of a regulatory body (whether or not having
the force of law) in relation to an affected person or to that
regulatory body.
7.2 For the purposes of this clause, "affected person" means any person
who directly or indirectly (whether by family relationship or
otherwise) is entitled to receive any form of compensation
("Compensation") from the Company as a result of the Company (or its
employees or agents) having advised any person prior to Completion
either:-
(A) to transfer benefits accrued in and/or to direct future
contributions to an occupational pension scheme (as defined in
section 1 of the Pensions Schemes Act 1993) (an "Occupational
Pension Scheme") either to a retirement annuity or to a
personal pension scheme, approved under Chapter III and IV
respectively of Part XIV of the Taxes Act 1988; or
(B) to cease to accrue, or never to accrue, benefits in an
Occupational Pension Scheme and instead to accrue benefits
pursuant to a retirement annuity or a personal pension scheme
so approved.
7.3 The liabilities to which this clause applies shall include:-
(A) any Compensation to which any affected person is entitled;
(B) all costs and expenses of, and arising out of, any
investigation into the affairs of those persons who may be
affected persons, and the reinstatement of the accrued
benefits of any affected person into an Occupational Pension
Scheme, or any other rectification made to the accrued
benefits of any affected person, including, without
limitation, costs and expenses incurred by any member of the
Purchaser's Group;
<PAGE>
12
(C) any administrative costs charged in respect of affected
persons by any Occupational Pension Scheme;
(D) all costs and expenses of, and arising out of, any independent
assessment of, or enquiry into, the circumstances of any
affected person which any regulatory body may require to be
carried out; and
(E) any fines or penalties or other amounts levied by any
regulatory body which relate in any way to any one or more
affected persons or to affected persons as a class.
7.4 If at any time after Completion any allowance, provision or reserve
made by the Company in the Accounts or otherwise taken account of or
reflected therein in respect of any claims, losses, costs or other
liabilities that would be recoverable by the Company from the Seller
pursuant to this clause is found to be in excess of the matter for
which such allowance, provision or reserve was made, the amount of
such excess shall be paid to the Seller.
8. Provision of Business Information
8.1 During the period of six years after Completion and without
prejudice to any of the Warranties:-
(A) if any Business Information Required for the Business of the
Company is not in the possession of the Purchaser or readily
discoverable by the Purchaser but is in the possession or
under the control of or available to the Seller, the Seller
shall, so far as it is legally able, procure that such
Business Information is provided to the Purchaser promptly on
request; and
(B) if any Books or Records of any Seller contain Business
Information which should be provided to the Purchaser, the
Seller shall procure that copies of such Books or Records are
given to the Purchaser promptly on request.
8.2 For the purposes of this clause and this Agreement generally,
"Required for the Business" means any Intellectual Property or
Business Information of the Company which is or has in the last six
years been used in the business of the Company or will be needed by
the Company to carry on the business of the Company in the same
manner as it is presently carried on or to fulfil any of the present
contracts or projects of the Company in relation to the business of
the Company or to comply with any law applicable in relation to the
business of the Company or if it is vested in any of the Seller and
its retention by the Seller after Completion of this Agreement would
be damaging or detrimental to the business of the Company.
<PAGE>
13
9. Pensions
Each of the parties shall comply with the requirements pertaining to
that party set out in Schedule 7 (Pensions).
10. Access
As from the date of this Agreement, the Purchaser and any persons
authorised by it, upon reasonable notice will be given full access
to the premises and all the Books and Records and title deeds of the
Company and the directors and employees of the Company and the
Company will be instructed to give promptly all information and
explanations to the Purchaser or any such persons as they may
request.
11. Effect of Completion
Any provision of this Agreement and any other documents referred to
in it which is capable of being performed after but which has not
been performed at or before Completion and all Warranties and
covenants and other undertakings contained in or entered into
pursuant to this Agreement shall remain in full force and effect
notwithstanding Completion.
12. Remedies and Waivers
12.1 No delay or omission on the part of any party to this Agreement in
exercising any right, power or remedy provided by law or under this
Agreement or any other documents referred to in it shall:-
(A) impair such right, power or remedy; or
(B) operate as a waiver thereof.
12.2 The single or partial exercise of any right, power or remedy
provided by law or under this Agreement shall not preclude any other
or further exercise thereof or the exercise of any other right,
power or remedy.
12.3 The rights, powers and remedies provided in this Agreement are
cumulative and not exclusive of any rights, powers and remedies
provided by law.
13. Assignment
13.1 The rights or benefits of or under this Agreement and any agreements
referred to in
<PAGE>
14
clause ( ), including without limitation the Warranties, may be
assigned (together with any cause of action arising in connection
with any of them) by the Purchaser to a wholly-owned subsidiary of
the Purchaser.
13.2 Obligations under this Agreement shall not be assignable.
14. Further Assurance
The Seller shall from time to time at its own cost, on being
required to do so by the Purchaser, now or at any time in the
future, do or procure the doing of all such acts and/or execute or
procure the execution of all such documents in a form satisfactory
to the Purchaser as the Purchaser may reasonably consider necessary
for giving full effect to this Agreement and securing to the
Purchaser the full benefit of the rights, powers and remedies
conferred upon the Purchaser in this Agreement.
15. Entire Agreement
15.1 For the purpose of this clause, "Pre-contractual Statement" means a
draft, agreement, undertaking, representation, warranty, promise,
assurance or arrangement of any nature whatsoever, whether or not in
writing, relating to the Share Purchase Documents or any of them (as
defined in sub-clause) made or given by a party to any of the Share
Purchase Documents or any other person at any time prior to
execution of the Share Purchase Documents.
15.2 This Agreement, the Tax Covenant, the Disclosure Letter referred to
in clause 6 (Purchasers Remedies and Sellers Limitations on
Liability) and any other documents referred to in this Agreement
(the "Share Purchase Documents") constitute the whole and only
agreement between the parties relating to the sale and purchase of
the Shares.
15.3 Except to the extent repeated in any of the Share Purchase
Documents, the Share Purchase Documents supersede and extinguish any
prior Pre-contractual Statement relating thereto.
15.4 Each party acknowledges that in entering into the Share Purchase
Documents or any of them on the terms set out therein, it is not
relying upon any Pre-contractual Statement which is not expressly
set out therein.
15.5 None of the parties shall have any right of action against any other
party to this Agreement arising out of or in connection with any
Pre-contractual Statement (except in the case of fraud).
<PAGE>
15
15.6 This Agreement may only be varied in writing signed by each of the
parties.
16. Notices
16.1 Any notice or other communication given or made under or in
connection with the matters contemplated by this Agreement shall be
in writing (other than writing on the screen of a visual display
unit or other similar device which shall not be treated as writing
for the purposes of this clause).
16.2 Any such notice or other communication shall be addressed as
provided in sub-clause and, if so addressed, shall be deemed to have
been duly given or made as follows:-
(A) if sent by personal delivery, upon delivery at the address of
the relevant party;
(B) if sent by first class post, two Business Days after the date
of posting; and
(C) if sent by facsimile, when despatched;
PROVIDED that if, in accordance with the above provisions, any such
notice or other communication would otherwise be deemed to be given
or made outside Working Hours, such notice or other communication
shall be deemed to be given or made at the start of Working Hours on
the next Business Day.
16.3 The relevant addressee, address, telex number and facsimile number
of each party for the purposes of this Agreement, subject to
subclause, are:-
Name of party Address Facsimile No.
------------- ------- -------------
the Seller Abbey House 0171 612 4442
F.A.O. Ian Christie Baker Street
Company Secretary London NW1 6XL
the Purchaser
F.A.O. Tracy Warren Ten Trinity Square
Company Secretary London EC3P 3AX 0171 481 7003
16.4 A party may notify the other party to this Agreement of a change to
its name, relevant addressee, address or facsimile number for the
purposes of sub-clause PROVIDED that such notification shall only be
effective on:-
<PAGE>
16
(A) the date specified in the notification as the date on which
the change is to take place; or
(B) if no date is specified or the date specified is less than
five clear Business Days after the date on which notice is
given, the date falling five clear Business Days after notice
of any such change has been given.
17. Announcements
17.1 Subject to clause, no announcement concerning the sale of the Shares
or any ancillary matter shall be made by either party without the
prior written approval of the other, such approval not to be
unreasonably withheld or delayed.
17.2 Either party may make an announcement concerning the sale of the
Shares or any ancillary matter if required by:-
(A) the law of any relevant jurisdiction; or
(B) any securities exchange or regulatory or governmental body to
which either party is subject, wherever situated, including
(without limitation) the London Stock Exchange, whether or not
the requirement has the force of law,
in which case the party concerned shall take all such steps as may
be reasonable and practicable in the circumstances to agree the
contents of such announcement with the party before making such
announcement.
17.3 The restrictions contained in this clause shall continue to apply
after Completion without limit in time.
18. Confidentiality
18.1 Subject to clause, each party shall treat as strictly confidential
all information received or obtained as a result of entering into or
performing this Agreement which relates to:-
(A) the provisions of this Agreement;
(B) the negotiations relating to this Agreement;
(C) the subject matter of this Agreement; or
(D) the other party.
<PAGE>
17
18.2 Either party may disclose information which would otherwise be
confidential if and to the extent:-
(A) required by the law of any relevant jurisdiction;
(B) required by any securities exchange or regulatory or
governmental body or taxation authority to which either party
is subject wherever situated, including (without limitation)
the London Stock Exchange, whether or not the requirement for
information has the force of law;
(C) required to vest the full benefit of this Agreement in either
party;
(D) disclosed to the professional advisers, auditors and bankers
of each party;
(E) the information has come into the public domain through no
fault of that party; or
(F) the other party has given prior written approval to the
disclosure, such approval not to be unreasonably withheld or
delayed,
PROVIDED that any such information disclosed pursuant to paragraph
paragraph ((A)), or ((B)) shall be disclosed only after consultation
with the other party.
18.3 The restrictions contained in this clause shall continue to apply
after Completion of the sale and purchase of the Shares under this
Agreement without limit in time.
19. Costs and Expenses
19.1 Except as otherwise stated in any other provision of this Agreement,
each party shall pay its own costs and expenses in relation to the
negotiations leading up to the sale of the Shares and to the
preparation, execution and carrying into effect of this Agreement
and all other documents referred to in it and the Seller confirms
that no expense of whatever nature relating to the sale of the
Shares has been or is to be borne by the Company.
20. Counterparts
20.1 This Agreement may be executed in any number of counterparts, and by
the parties on separate counterparts, but shall not be effective
until each party has executed at least one counterpart.
20.2 Each counterpart shall constitute an original of this Agreement, but
all the counterparts shall together constitute but one and the same
instrument.
<PAGE>
18
21. Time of Essence
Except as otherwise expressly provided, time is of the essence of
this Agreement.
22. Choice of Governing Law
This Agreement shall be governed by and construed in accordance with
English law.
<PAGE>
Schedule 1
Completion Arrangements
At Completion:-
1. the Seller shall deliver to the Purchaser:-
(A) duly executed transfers in respect of the Shares in favour of the
Purchaser and share certificates for the Shares in the name of the
relevant transferors and any power of attorney under which any
transfer is executed on behalf of any Seller or nominee;
(B) such waivers or consents as the Purchaser may require to enable the
Purchaser or its nominees to be registered as holders of the shares;
and
(C) powers of attorney in agreed terms;
2. the Seller shall execute and deliver to the Purchaser a Tax Covenant in
the form referred to in Schedule 4 (Tax Covenant) and shall procure that
there is executed by Abbey National plc and delivered to the Purchaser the
Services Agreement and the IP Licence Agreement;
3. the Seller shall deliver to the Purchaser such of the following as the
Purchaser may require:-
(A) the statutory books (which shall be written up to but not including
the Completion Date), the certificate of incorporation (and any
certificate of incorporation on change of name) and common seal (if
any) of the Company;
(B) a copy of the minutes of a duly held meeting of the directors of the
Seller authorising the execution by the Seller of this Agreement and
the Tax Covenant (such copy minutes being certified as correct by
the secretary of the Seller).
4. the Seller shall procure the present directors of the Company (other than
Jeremy Budden, Brian Carter and Charles Toner) to resign their offices as
such and to relinquish any rights which they may have under any contract
of employment with the Company or under any statutory provision including
any right to damages for wrongful dismissal, redundancy payment or
compensation for loss of office or unfair dismissal, such resignations to
be
<PAGE>
20
tendered at the board meetings referred to in paragraph;
5. the Seller shall procure a board meeting of the Company to be held at
which:-
(A) it shall be resolved that each of the transfers relating to the
Shares shall be approved for registration and (subject only to the
transfer being duly stamped) the Purchaser be registered as the
holder of the Shares concerned in the register of members; and
(B) the resignations of the directors referred to in paragraph 4 above
shall be tendered and accepted so as to take effect at the close of
the meeting and each of the persons tendering his resignation shall
deliver to the Company an acknowledgement executed as a deed that he
has no claim against the Company for breach of contract,
compensation for loss of office, redundancy or unfair dismissal or
on any other account whatsoever and that no agreement or arrangement
is outstanding under which the Company has or could have any
obligation to him;
The Seller shall procure that minutes of the duly held board meeting,
certified as correct by the secretary of the Company, and the resignations
and acknowledgements referred to, are delivered to the Purchaser.
6. the Purchaser shall:
(A) deliver to the Seller a share certificate in respect of the
Consideration Shares; and
(B) deliver to the Seller a copy, certified as correct by the secretary
of the Purchaser, of minutes of a duly held board meeting allotting
the Consideration Shares to the Seller.
<PAGE>
Schedule 2
Warranties
1. Ownership of the Shares
The Seller is the sole beneficial owner of the Shares.
2. Group Arrangements and Interests
2.1 No indebtedness (actual or contingent) and no contract or arrangement is
outstanding between the Company and the Seller or any member of the
Seller's Group or any person a director of or connected with any Seller or
with the such member.
2.2 No member of the Seller's Group is engaged in any business which competes
with the business carried on at the date of this Agreement by the Company
or the other IFA Company.
3. Group Structure, etc.
3.1 The Shares comprise the whole of the issued and allotted share capital of
the Company and all of them are fully paid up.
3.2 There is no agreement or commitment outstanding which calls for the
allotment, issue or transfer of, or accords to any person the right to
call for the allotment or issue of, any shares (including the Shares) or
debentures in or securities of the Company.
3.3 The Company has no Subsidiaries at the date of this Agreement nor any
interest in the share capital of any other body corporate or undertaking.
3.4 The Company does not act or carry on business in partnership with any
other person nor is it a member of any corporate or unincorporated body,
undertaking or association.
3.5 The Company does not have any branch, agency, place of business or
permanent establishment outside the United Kingdom.
4. Options, Mortgages and Other Encumbrances
4.1 There is no option, right to acquire, mortgage, charge, pledge, lien or
other form of security or encumbrance or equity on, over or affecting the
Shares or any of them and there is no agreement or commitment to give or
create any and no claim has been made by any person to be entitled to any.
4.2 No option, right to acquire, mortgage, charge, pledge, lien (other than a
lien arising by
<PAGE>
22
operation of law in the ordinary course of trading) or other form of
security or encumbrance or equity on, over or affecting the whole or any
part of the undertaking or assets of the Company) is outstanding and there
is no agreement or commitment to give or create any and no claim has been
made by any person to be entitled to any.
5. Accuracy and Adequacy of Information
5.1 The information given in is true and accurate in all respects and is not
misleading because of any omission or ambiguity or for any other reason.
5.2 The statutory books (including all registers and minute books) of the
Company have been properly kept and contain an accurate and complete
record of the matters which should be dealt with in those books and no
notice or allegation that any of them is incorrect or should be rectified
has been received.
6. Accounts
6.1 The Accounts:-
(A) were prepared in accordance with accountancy practices generally
accepted in the United Kingdom at the time they were audited and
commonly adopted by companies carrying on businesses similar to
those carried on by the Company;
(B) are complete and accurate in all material respects and in particular
include full provision for bad and doubtful debts and for Taxation
on profits (whether of an income or capital nature) relating to any
period ending on or before the Accounts Date;
(C) show a true and fair view of the state of affairs of the Company at
the Accounts Date; and
(D) except as the Accounts expressly disclose, are not affected by any
unusual or non-recurring items.
6.2 At the Accounts Date, the Company had no liability (whether actual,
contingent, unquantified or disputed) or outstanding capital commitment
which is not adequately disclosed or provided for in the Accounts.
6.3 If a balance sheet of the Company (if relevant, on a consolidated basis)
were drawn up as at the date of this Agreement in the manner in which and
on the basis upon which the Accounts were prepared, the net asset position
of the Company disclosed thereby would
<PAGE>
23
be not less than (pound)1.72 million.
6.4 The accounting records of the Company have been kept on a proper and
consistent basis (no change in the methods or bases of valuation or
accountancy treatment having been made for at least six years prior to the
Accounts Date or since), are up-to-date and contain complete and accurate
details of the business activities of the Company and of all matters
required by the Companies Acts to be entered in them.
7. Events Since the Accounts Date
7.1 Since the Accounts Date:-
(A) the business of the Company has been carried on in the ordinary and
usual course and in the same manner (including nature and scope) as
in the past and no unusual or onerous contract differing from the
routine contracts necessitated by the nature of its trade has been
entered into by the Company;
(B) no asset of a value in excess of (pound)10,000 has been acquired or
disposed of on capital account or has been agreed to be acquired or
disposed of and no contract involving expenditure by it on capital
account has been entered into by the Company;
(C) no debts or other receivables and no material plant, machinery or
equipment of the Company have been factored or sold or agreed to be
sold;
(D) no resolution of the Company in general meeting has been passed
(other than resolutions relating to the routine business of annual
general meetings);
(E) no change in the accounting reference period of the Company has been
made; and
(F) there has been no material adverse change in the financial position
or profits of the Company.
7.2 No indication has been received that any debt now owing to the Company is
bad or doubtful save to the extent that provision has been made in the
Company's books therefor.
8. Work in Progress
8.1 All work in progress represented in the Accounts has been valued on a
basis excluding
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24
profit and including adequate provision for losses which are or could
reasonably be anticipated.
9. Contracts and Commitments
9.1 The Company is not under any obligation, nor is it a party to any
contract, which cannot readily be fulfilled or performed by it on time and
without undue or unusual expenditure of money or effort.
9.2 The Company is not a party to or has any liability (present or future)
under any guarantee or indemnity or letter of credit or any leasing,
hiring, hire purchase, credit sale or conditional sale agreement or has
entered into any contract or commitment involving, or likely to involve,
obligations or expenditure of an unusual or exceptional nature or
magnitude.
9.3 The Company is not a party to any contract or arrangement which restricts
its freedom to carry on its business in any part of the world in such
manner as it may think fit, or to any agency, distributorship or
management agreement.
9.4 The Company is not aware of any breach of, or any invalidity, or grounds
for determination, rescission, avoidance or repudiation of, any contract
to which it is a party or of any allegation of such a thing.
9.5 The Company is not a party to any joint venture agreement or arrangement
or any agreement or arrangement under which it is to participate with any
other in any business.
9.6 The Company is not a party to any agreement or arrangement or under any
obligation under which it is or may become liable to make any investment
(as defined in section 1(1) of the Financial Services Act 1986) with, or
to deposit any money with, or to provide any loan or financial
accommodation or credit (other than normal trade credit) to any person, or
to subscribe, convert, acquire, dispose of or underwrite any investment.
9.7 The Company is not a party to any contract which falls within any of the
cases specified below:-
(A) the contract is of a value which has material consequences in terms
of expenditure or revenue expectations or it relates to matters not
within the ordinary business of the Company or it constitutes a
commercial transaction or arrangement deviant from the usual pattern
for the Company; or
(B) the contract can be terminated in the event of any change in the
underlying
<PAGE>
25
ownership or control of the Company or would be materially affected
by such change;
and for this purpose "contract" includes any understanding, arrangement or
commitment however described.
10. Insider Contracts
There is not, and there has not at any time during the last six years
been, any contract or arrangement to which the Company is, or was, a party
and in which the Seller, or any member of the Seller's Group or any person
beneficially interested in any part of the share capital of the Company,
or any director of the Company or any person connected with any such
director is, or has been, interested, either directly or indirectly, and
the Company is not a party to, nor have its profits or financial position
during that period been affected by, any contract or arrangement which was
not of an entirely arm's length nature; in particular, without limitation,
the Company has not transferred any assets to another such member except
at market value.
11. Licences
All licences, consents and other permissions and approvals required for or
in connection with the carrying on of the business now being carried on by
the Company have been obtained, are not limited in duration or subject to
onerous conditions and are in full force and effect and all reports,
returns and information required by law or as a condition of any licence,
consent, permit or approval to be made or given to any person or authority
in connection with the business of the Company have been made or given to
the appropriate person or authority and there is no circumstance which
indicates that any licence, consent, permission or approval is likely to
be revoked or which may confer a right of revocation.
12. Financial Facilities
12.1 Full details of all overdraft, loan and other financial facilities
available to the Company and the amounts outstanding under them are set
out in the Disclosure Letter and neither Seller nor the Company has done
anything whereby the continuance of any of those facilities might be
affected or prejudiced.
12.2 Except for the borrowings referred to in paragraph 21.1 and for any loan
capital referred to in Schedule 5 (Basic Information about the Company)
the Company does not have outstanding any loan capital nor has it incurred
or agreed to incur any borrowing which it has not repaid or satisfied, or
has lent or agreed to lend any money which has not been repaid to it or
owns the benefit of any debt present or
<PAGE>
26
future (other than debts due to it in respect of the provision of services
in the normal course of trading) or is a party to or has any obligation
under:-
(A) any loan agreement, debenture, acceptance credit facility, bill of
exchange, promissory note, finance lease, debt or inventory
financing, discounting or factoring arrangement or sale and lease
back arrangement; or
(B) any other arrangement the purpose of which is to raise money or
provide finance or credit.
12.3 To the best of the knowledge, information and belief of the Seller, no
event which is or, with the passing of any time or the giving of any
notice, certificate, declaration or demand, would become an event of
default under or any breach of any of the terms of any loan capital,
borrowing, debenture or financial facility of the Company or would entitle
any third party to call for repayment prior to normal maturity has
occurred or been alleged.
12.4 The Company has not borrowed any amount, from whatever source, after the
Accounts Date.
13. Insolvency
13.1 No order has been made and no resolution has been passed for the winding
up of the Company or for a provisional liquidator to be appointed in
respect of the Company and no petition has been presented and no meeting
has been convened for the purpose of winding up the Company.
13.2 No administration order has been made and no petition for such an order
has been presented in respect of the Company.
13.3 No receiver (which expression shall include an administrative receiver)
has been appointed in respect of the Company or all or any of its assets.
13.4 The Company is not insolvent, or unable to pay its debts within the
meaning of section 123 Insolvency Act 1986, or has stopped paying its
debts as they fall due.
13.5 No voluntary arrangement has been proposed under section 1 Insolvency Act
1986 in respect of the Company.
13.6 No unsatisfied judgment is outstanding against the Company.
13.7 No guarantee, loan capital, borrowed money or interest is overdue for
payment, and no
<PAGE>
27
other obligation or indebtedness is outstanding which is substantially
overdue for performance or payment.
14. Product Liability
The Company has not provided any product or service which does not in any
material respect comply with all applicable laws, regulations or standards
or which is or not in accordance with any representation or warranty,
express or implied, given in respect of it.
15. Litigation
The Company is not engaged in any litigation or arbitration,
administrative or criminal proceedings, whether as plaintiff, defendant or
otherwise, and no litigation or arbitration, administrative or criminal
proceedings by or against the Company is pending, threatened or expected
and so far as the Seller is aware, there is no fact or circumstance likely
to give rise to any such litigation or arbitration, administrative or
criminal proceedings or to any proceedings against any director or
employee (past or present) of the Company in respect of any act or default
for which the Company might be vicariously liable.
16. Delinquent and Wrongful Acts
16.1 The Company has not committed or is liable for any criminal, illegal,
unlawful or unauthorised act or breach of any obligation or duty whether
imposed by or pursuant to statute, contract or otherwise, and no claim
that it has or is remains outstanding against the Company.
16.2 The Company has not received notification that any investigation or
inquiry is being or has been conducted by any governmental or other body
in respect of the affairs of the Company and the Seller is not aware of
any circumstances which would give rise to such investigation or inquiry.
17. Ownership and Condition of Assets
17.1 All assets used by the Company in the course of its business or which are
necessary or desirable for the continuation of that business as it is now
carried on are both legally and beneficially owned by a member of the
Group free from any third party rights and all such assets are included in
the Accounts.
17.2 Each of the assets included in the Accounts or acquired by the Company
since the Accounts Date (other than current assets sold, realised or
applied in the normal course of trading) is owned both legally and
beneficially by the Company free from any third party
<PAGE>
28
rights, and each of those assets capable of possession is in the
possession of the Company.
17.3 All plant and machinery (including fixed plant and machinery), vehicles
and office equipment used by the Company in connection with its business
are in good repair and condition, regularly maintained and fully
serviceable and capable of being efficiently and properly used in
connection with the business of the Company and none is dangerous,
inefficient, obsolete or in need of renewal or replacement.
18. Intellectual Property
18.1 Details of all rights in any Intellectual Property (other than copyright
and unregistered designs) owned by the Company are set out in Part A of
Schedule 6 (Intellectual Property).
18.2 Details of all material licences granted to or by the Company in respect
of any Intellectual Property are set out in Part B of Schedule 6
(Intellectual Property).
18.3 All rights in all Intellectual Property and Confidential Business
Information owned or otherwise Required for the Business of the Company
are vested in or validly granted to the Company and are not subject to any
limit as to time which is due to expire within 12 months of the date of
this Agreement or any other limitation, right of termination (including,
without limitation, on any change in the underlying ownership or control
of the Company) or restriction which will become exerciseable or
applicable to the Company as a result of this Agreement and all renewal
fees and steps reasonably required for their maintenance or protection
have been paid and taken.
18.4 Except as listed in Part B of Schedule 6 (Intellectual Property), the
Company has not granted nor is it obliged to grant any licence,
sub-licence or assignment in respect of any Intellectual Property owned or
otherwise Required for the Business of the Company or has disclosed or is
obliged to disclose any Confidential Business Information Required for the
Business of the Company to any person, other than its employees for the
purpose of carrying on its business.
18.5 To the best of the knowledge, information and belief of the Seller, the
Company is not in breach of any licence, sub-licence or assignment granted
to or by it in respect of any Intellectual Property owned or otherwise
Required for the Business of the Company or of any agreement under which
any Business Information was or is to be made available to it.
18.6 To the best of the knowledge, information and belief of the Seller, the
processes and methods employed, the services provided and the businesses
conducted by the Company within the last six years do not, and/or at the
time of being employed, provided or conducted did not, infringe the rights
of any other person in any Intellectual Property or
<PAGE>
29
Business Information.
18.7 To the best of the knowledge, information and belief of the Seller, there
is no, nor has there been at any time during the past six years any,
unauthorised use or infringement by any person of any of the Intellectual
Property or Confidential Business Information owned or otherwise Required
for the Business of the Company.
18.8 To the best of the knowledge, information and belief of the Seller, the
Company has, if required to do so under the Data Protection Act 1984, duly
registered as a data user and has complied with the Data Protection
Principles as set out in that Act.
19. Computers
19.1 Details of the Systems and all agreements or arrangements relating to the
maintenance and support (including escrow agreements relating to the
deposit of source codes), security, disaster recovery management and
utilisation (including facilities management and computer bureau services
agreements) of the Systems have been disclosed.
19.2 All Systems are either owned by or validly leased or licensed to the
Company.
20. Competition and Trade Regulation Law
20.1 The Company is not nor has it been a party to nor is it or has it been
concerned in any agreement or arrangement or is conducting or has
conducted itself (whether by omission or otherwise) in a manner which:-
(A) has been or is required to be registered under RTPA 1976;
(B) contravenes the provisions of any secondary legislation adopted
under the Fair Trading Act 1973;
(C) infringes Article 85 or 86 of the Treaty establishing the European
Economic Community or any other anti-trust or similar legislation in
any jurisdiction in which the Company has assets or carries or
intends to carry on business or where its activities may have an
effect; or
(D) is registrable, unenforceable or void (whether in whole or in part)
or renders it liable to civil, criminal or administrative
proceedings by virtue of any anti-trust or similar legislation in
any jurisdiction in which the Company has assets or carries on or
intends to carry on business or where its activities may have an
effect.
<PAGE>
30
20.2 (A) The Company is not nor has it been a party to nor is it or has it
been concerned in any agreement or arrangement in respect of which
any undertaking has been given by or any order made against the
Company pursuant to RTPA 1976.
(B) The Company has not given an undertaking to, nor is it subject to
any order of or investigation by, nor has it received any request
for information from, any court or governmental authority
(including, without limitation, any national competition authority
and the Commission of the European Economic Community) under any
anti-trust or similar legislation.
(C) The Company is not nor has it been a party to nor is it or has it
been concerned in any agreement or arrangement in respect of which
an application for negative clearance and/or exemption has been made
to the Commission of the European Community.
21. Insurances
21.1 Full details of the insurance policies in respect of which the Company has
an interest have been disclosed in writing to the Purchaser, all such
policies are in full force and effect and are not void or voidable, no
claims are outstanding by the Company and, to the best of the knowledge,
information and belief of the Seller, no event has occurred which might
give rise to any claim.
22. Employment
22.1 A list of the names, jobs and short details of the terms of employment of
every employee of the Company are set out in the Disclosure Letter.
22.2 Particulars of the terms of all consultancy agreements with the Company
are contained in the Disclosure Letter.
22.3 Details of any material benefit received by any employee otherwise than in
cash, and of any benefit received by any employee in cash which is related
to sales, profits or performance, or which is otherwise variable (other
than normal overtime), are set out in the Disclosure Letter.
22.4 Any contract of employment with any employee to which the Company is a
party can be
<PAGE>
31
terminated by the employing company without damages or compensation (other
than that payable by statute) by giving at any time only the minimum
period of notice applicable to that contract which is specified in section
86 of the Employment Rights Act 1996.
22.5 No senior employee of the Company has given notice terminating his
contract of employment or is under notice of dismissal and no amount due
to or in respect of any such employee or former employee of the Company is
in arrear and unpaid.
22.6 Since the Accounts Date, no material change has been made in the
emoluments or other terms of engagement of any employee and no such
change, and no negotiation or request for such a change, is due or
expected within six months from the date of this Agreement.
22.7 There is no dispute between the Company and any trade union or other
organisation formed for a similar purpose existing, pending or threatened
and there is no collective bargaining agreement or other arrangement
(whether binding or not) to which the Company is a party.
22.8 Except in the normal course of business, the Company has outstanding no
undischarged liability to pay to any governmental or regulatory authority
in any jurisdiction any contribution, Taxation or other impost arising in
connection with the employment or engagement of personnel by the Company.
22.9 The Company has at all relevant times complied in all material respects
with all its obligations under statute and otherwise concerning the health
and safety at work of its employees, and there are no claims capable of
arising or threatened or pending by any employee or third party in respect
of any accident or injury which are not fully covered by insurance.
22.10 No person working for the Company is an employee of the Seller's Group.
23. Fiduciary Arrangements
23.1 Where the Company has acted as trustee or fiduciary it has done so in a
proper manner and in accordance with its obligations to its customers and
the instructions of its customers. No right of set-off or contribution can
be exercised by any person with whom assets (including money) held by the
Company as trustee or fiduciary have been deposited, against such assets.
23.2 To the extent that the Company is required by the Pensions Act 1995 to
have in place formal notices of appointment of its professional advisers,
it has such notices in place and
<PAGE>
32
all such notices are in full force and effect.
24. Asset Management and Safe Custody
Where the Company has conducted asset management and safe custody
business, it has conducted such business in a proper manner and in
accordance with the terms of its standard form of asset management and
safe custody agreements, copies of which are annexed to the Disclosure
Letter. All assets (including securities) deposited with the Company as
part of its asset management and safe custody business are in its
possession or under its legal control and the Company has not encumbered
or agreed to encumber or dispose of any such assets except in accordance
with instructions from its customers.
25. Valuation of Managed Securities
The valuation of securities held by the Company and the valuation of its
portfolio managed for and on the account of its customers has been made in
accordance with English law and accounting practices generally accepted in
the United Kingdom at the time when such valuation is carried out.
26. Regulation
26.1 The internal procedures of the Company are in accordance with the
requirements of the Money Laundering Regulations 1993 and its business has
been conducted in accordance with those internal procedures and in
accordance with the Money Laundering Regulations 1993.
26.2 The Company has received no notification or indication that it is in
breach of the Money Laundering Regulations 1993 and, so far as the Seller
is aware, there is no fact or circumstances which may give rise to such
breach.
26.3 The Company has, if required to do so under the Consumer Credit Act 1974,
obtained a licence covering the appropriate categories of credit business
and has complied with the provisions under such Act and other statutory
obligations relevant to its business.
26.4 The Company has at all times complied in all material respects with the
Financial Services Act 1986 (the "FSA") and all applicable rules and
regulations made thereunder and the Company does not engage or permits
others to engage nor has it, at any time since the coming into force of
the FSA, engaged or permitted others to engage in activities the carrying
out of which constitutes carrying out investment business in the United
Kingdom without itself or any relevant third party being authorised or
exempt under the FSA in
<PAGE>
33
respect thereof.
26.5 Full details of all authorisations to carry on investment business in the
United Kingdom (including details of memberships of self-regulatory
organisations ("SROs") as defined in the FSA) for which application has
been made (whether or not the application is pending or was withdrawn,
refused or granted) by or on behalf of the Company have been supplied in
writing to the Purchaser, including, where applicable, full details of the
scope of the Company's permitted business.
26.6 The Company has at all times complied with all rules and other
requirements of the relevant SRO and/or the Securities Investment Board
("SIB") and there are no circumstances which, if known to the relevant SRO
or to SIB, might prejudice its membership or authorisation.
26.7 No special conditions or limitations have been imposed by any relevant SRO
or SIB in respect of the conduct of investment business by the Company, no
waiver of any requirements has been sought by or granted to the Company
and the Company has not engaged in any acts or practices or suffered to
exist any state of affairs (i) which has led to a request (whether or not
the request is pending or was subsequently withdrawn or refused) by the
relevant SRO or SIB to alter or amend the manner in which investment
business is or was being carried on or (ii) which has led to the
imposition of specific conditions in respect of the conduct of investment
business or (iii) which could if known to any relevant SRO or SIB lead to
such a request or to the imposition of such conditions or otherwise
adversely affect the Company's membership of an SRO or authorisation by
SIB.
26.8 Copies of each annual review of the arrangements for compliance with the
conduct of business rules of each relevant SRO and SIB undertaken by or on
behalf of the Company and of each periodic inspection carried out by any
SRO and SIB have been supplied to the Purchaser together with copies of
all correspondence between the Company and the relevant SRO or SIB.
26.9 Any action requested any of the relevant SROs or SIB has been taken within
any time limit specified and any request for action or activities to be
discontinued has been complied with in a timely manner.
26.10 All complaints made to the Company in relation to investment business have
been dealt with in accordance with the rules of the relevant SRO and SIB
and none of such complaints remain outstanding. Copies of all such
complaints have been supplied to the Purchaser including copies of all
records relating thereto required to be kept by the rules of the relevant
SRO or SIB. There are no investigations, disciplinary proceedings or other
circumstances likely to lead to any complaint or claim or legal action,
proceedings or
<PAGE>
34
arbitration or prosecution by the relevant SRO or SIB or any other person.
26.11 The Company has all applicable up to date compliance manuals and is in
compliance therewith.
26.12 Full details of all arrangements, whether or not legally binding, between
the Company and any entity or person who is not an employee but which or
who represents the Company or promotes contracts to which the Company is
to be a party have been disclosed in the Disclosure Letter together with
the name and address of each such entity or person.
26.13 All papers, documents and accounts have been supplied to the relevant SRO
in accordance with its rules, including (without limitation) financial
statements as at the Accounts Date and annual statements together with
auditors' reports in respect of all relevant periods thereafter.
26.14 The Company is in compliance with the Financial Services (Client Money)
Regulations 1987 as amended.
26.15 To the extent that the Company is required by the rules of the relevant
SRO to be registered, it is so registered and notification has been given
to the relevant SRO of any information that is required to be given in
relation to registration.
26.16 There are no moneys owing to any SRO in respect of registration fees of
the Company.
26.17 There is no investment business carried on in the United Kingdom in
respect of which the Company is exempt; the Company is not nor has it ever
been an appointed representative of another entity pursuant to section 44
of the FSA; nor is it included in the list of institutions maintained by
the Bank of England pursuant to section 43 of the FSA. No application for
exempt status pursuant to section 43 of the FSA has been made and
withdrawn or refused or is still pending.
26.18 To the best of the knowledge, information and belief of the Seller, no
employee or other person who represents or promotes the products of the
Company in connection with investment business has been disqualified under
section 59 of the FSA and none is or has ever been a party to any
disqualification proceedings.
26.19 The Company has not entered into any investment agreement in circumstances
which may result in such agreement being or becoming unenforceable or
cancellable at the option or application of the other party to the
agreement or of any other party.
26.20 There are no penalties, fines or other disciplinary actions which may be
taken against the
<PAGE>
35
Company as a result of incomplete, erroneous or misleading returns made to
the Occupational Pensions Board.
27. The Accounts and Tax
27.1 The Company has no liability in respect of Taxation (whether actual or
contingent) that is not fully provided for in the Accounts and, in
particular, has no outstanding liability for:-
(A) Taxation in any part of the world assessable or payable by reference
to profits, gains, income or distributions earned, received or paid
or arising or deemed to arise on or at any time prior to the
Accounts Date or in respect of any period starting before the
Accounts Date; or
(B) for purchase, value added, sales or other similar tax in any part of
the world referable to transactions effected on or before the
Accounts Date
that is not provided for in full in the Accounts.
27.2 The amount of the provision for deferred Taxation in respect of the
Company contained in the Accounts was, at the Accounts Date, adequate and
fully in accordance with accountancy practices generally accepted in the
United Kingdom and commonly adopted by companies carrying on businesses
similar to those carried on by the Company and, in particular, was in
accordance with SSAP 15 (or any replacement of it instituted by the
Accounting Standard Board).
27.3 If all facts and circumstances which are now known to the Company or the
Seller had been known at the time the Accounts were drawn up, the
provision for deferred Taxation that would be contained in the Accounts
would be no greater than the provision which is so contained.
28. Tax Events Since the Accounts Date
Since the Accounts Date:-
(A) the Company has not declared, made or paid any distribution within
the meaning of ICTA 1988;
(B) the accounting period of the Company has not ended;
(C) there has been no disposal of any asset (including trading stock) or
supply of any service or business facility of any kind (including a
loan of money or the letting,
<PAGE>
36
hiring or licensing of any property whether tangible or intangible)
in circumstances where the consideration actually received or
receivable for such disposal or supply was less than the
consideration which could be deemed to have been received for tax
purposes;
(D) no event has occurred which will give rise to a tax liability on the
Company calculated by reference to deemed (as opposed to actual)
income, profits or gains or which will result in the Company
becoming liable to pay or bear a tax liability directly or primarily
chargeable against or attributable to another person, firm or
company;
(E) no disposal has taken place or other event occurred which will or
may have the effect of crystallising a liability to Taxation which
should have been included in the provision for deferred Taxation
contained in the Accounts if such disposal or other event had been
planned or predicted at the Accounts Date;
(F) the Company has not made any payment or incurred any obligation to
make a payment which will not be deductible in computing trading
profits for the purposes of corporation tax, or be deductible as a
management expense of an investment company;
(G) the Company has not been a party to any transaction for which any
tax clearance provided for by statute has been or could have been
obtained;
(H) the Company has not paid or become liable to pay any interest or
penalty in connection with any tax, has otherwise paid any tax after
its due date for payment or owes any tax the due date for payment of
which has passed or will arise in the 30 days after the date of this
Agreement.
29. Tax Returns, Disputes, Records and Claims, etc.
29.1 The Company has made or caused to be made all proper returns required to
be made, and has supplied or caused to be supplied all information
required to be supplied, to any revenue authority, including (but without
limitation) the Inland Revenue and the Customs and Excise in each case
within the requisite period.
29.2 There is no dispute or disagreement outstanding at the date of this
Agreement with any revenue authority regarding liability or potential
liability to any tax or duty (including in each case penalties or
interest) recoverable from the Company or regarding the availability of
any relief from tax or duty to the Company and there are no circumstances
which make it likely that any such dispute or disagreement will commence.
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37
26.3 The Company has sufficient records relating to past events, including any
elections made, to calculate the tax liability or relief which would arise
on any disposal or on the realisation of any asset owned at the Accounts
Date by the Company or acquired by it since that date but before
Completion.
26.4 The Company has duly submitted all claims and disclaimers which have been
assumed to have been made for the purposes of the Accounts.
29.5 The amount of tax chargeable on the Company during any accounting period
ending on or within six years before the Accounts Date has not, to any
material extent, depended on any concession, agreement or other formal or
informal arrangement with any revenue authority, including (but without
limitation) the Inland Revenue or the Customs and Excise.
29.6 The Company has not received any notice from any revenue authority,
including the Inland Revenue, which required or will or may require it to
withhold tax from any payment made since the Accounts Date or which will
or may be made after the date of this Agreement.
30. Stamp Duty and Stamp Duty Reserve Tax
30.1 All documents which are required to be stamped and which are in the
possession of the Company or by virtue of which the Company has any right
have been duly stamped.
30.2 Since the last Accounting Date, the Company has not incurred any liability
to stamp duty reserve tax.
31. Value Added Tax
31.1 The Company is registered for the purposes of value added tax and has been
so registered at all times that it has been required to be registered by
the relevant legislation and has, throughout the six years ending on the
Completion Date, been treated for the purposes of section 43 VATA 1994 as
a member of the VAT Group.
31.2 The Company will cease to be a member of the VAT Group on the Completion
Date.
31.3 The Representative Member has made, given, obtained and kept full,
complete, correct and up-to-date returns, records, invoices and other
documents appropriate or required for the purposes of VATA 1994 and is not
in arrears with any payments or returns due and has not been required by
the Commissioners of Customs & Excise to give security under paragraph 4
of Schedule 11 VATA 1994.
<PAGE>
38
31.4 The Representative Member has not, since the date 12 months before the
Accounts Date, been in default in respect of any prescribed accounting
period as mentioned in section 59 or section 59A VATA 1994.
31.5 Within the six years ending on the Accounts Date, the Company has not been
registered for the purposes of VATA 1994 otherwise than as part of the VAT
Group referred to in 31.1 above and it has not, within that six-year
period, been a member of any other group for the purposes of VATA 1994.
31.6 Full details of any claim made by the Company for bad debt relief under
section 36 VATA 1994 have been disclosed in writing to the Purchaser.
31.7 The Company has not made an election to waive exemption in relation to any
land in accordance with paragraph 2 of Schedule 10 VATA 1994.
31.8 The Disclosure Letter contains full details of any assets of the Company
to which the provisions of Part XV Value Added Tax Regulations 1995 (the
capital goods scheme) apply and in particular:-
(A) the identity (including, in the case of leasehold property, the term
of years), date of acquisition and cost of the asset; and
(B) the proportion of input tax for which credit has been claimed
(either provisionally or finally in a tax year and stating which).
31.9 No agreement or arrangements have been made or are in place under which
the Company is or could become liable (except as provided for in the
Accounts) to make any payment to the Representative Member (or any other
past or present member of the VAT Group) in respect of some or all of the
Representative Member's liability to account to H.M. Customs & Excise for
VAT.
31.10 The Company has not, at any time within the last six years, acted as agent
of any person not resident in the United Kingdom for the purposes of
section 47 VATA 1994 or been appointed as a VAT representative of any
person for the purposes of section 48 VATA 1994.
32. Duties, etc.
All value added tax, import duty and other taxes or charges payable to
H.M. Customs and Excise upon the importation of goods and all excise
duties payable to H.M. Customs and Excise in respect of any assets
(including trading stock) imported, owned or used by the
<PAGE>
39
Company have been paid in full.
33. Tax on Disposal of Assets
On a disposal of all its assets by the Company for:-
(A) in the case of each asset owned by it at the Accounts Date, a
consideration equal to the value attributed to that asset in
preparing the Accounts; or
(B) in the case of each asset acquired since the Accounts Date, a
consideration equal to the consideration given for the acquisition
then either:-
(i) in respect of any asset falling within ((A)) above, the
liability to tax (if any) which would be incurred by it in
respect of that asset would not exceed the amount taken into
account in respect of that asset in computing the maximum
liability to deferred Taxation as stated in the Accounts; or
(ii) in respect of any asset within ((B)) above, no tax liability
would be incurred by it in respect of that asset.
34. Replacement of Business Assets
Full particulars of each claim under section 115, 116 or 117 CGTA 1979 or
under sections 152, 153, 154 or 175 TCGA 1992 made prior to the date of
this Agreement applies and which affects any asset which was owned by the
Company on or after the Accounts Date have (except where the held over
gain is treated as having accrued prior to the Accounts Date) been
disclosed in writing to the Purchaser.
35. Distributions
35.1 Since 6 April 1965, the Company has not made any repayment of share
capital to which section 210(1) ICTA 1988 applies or issued any share
capital or other security as paid up otherwise than by the receipt of new
consideration within the meaning of Part VI ICTA 1988.
35.2 No part of the amount payable on redemption of any share capital or
security at par will be a distribution, as defined in ICTA 1988.
36. Rebasing
<PAGE>
40
The Company has not made a disposal to which Section 35 TCGA applies.
37. Close Company
37.1 The Company is not nor has it ever been a close company as defined in ICTA
1988.
37.2 The Company has no loan outstanding to which the provisions of section 419
ICTA 1988 would apply (loans to participators etc.).
37.3 The Company is a close investment-holding company as defined in section
13A ICTA 1988.
38. Non-Deductible Revenue Outgoings
The Company is not under any obligation to make any future payment which
will be prevented (whether on the grounds of being a distribution or for
any other reason) from being deductible for corporation tax purposes,
whether as a deduction in computing the profits of a trade or as an
expense of management or as a charge on income or as a non-trading debit
under Chapter II Part IV Finance Act 1996, by reason of any statutory
provision, other than section 74(1)(f) ICTA 1988 (capital).
39. Deductions and Withholdings
The Company has made all deductions in respect, or on account, of any tax
from any payments made by it which it is obliged or entitled to make and
has accounted in full to the appropriate authority for all amounts so
deducted.
40. Intra-Group Transactions
The Company has not, at any time within the six year period prior to the
Accounts Date, acquired any asset from any other company which was, at the
time of the acquisition, a member of the same group of companies as the
Company for the purposes of any tax.
41. Residence
The United Kingdom is the only country whose tax authorities seek to
charge tax on the world-wide profits or gains of the Company and the
Company has never paid tax on income profits or gains to any tax authority
in any other country.
42. Group Arrangements
<PAGE>
41
42.1 The Company has not made any surrender of or claim for (i) group relief or
(ii) any amount of surplus advance corporation tax or (iii) a refund of
tax within section 102 Finance Act 1989 which involves any other company
which was not a Subsidiary.
42.2 The Company has not received any payment in respect of a surrender of
group relief or of surplus advance corporation tax or of a tax refund
which could, in any circumstances, be due to be repaid to any other
company which was not a Subsidiary.
43. Demerger
The Company has not been concerned in an exempt distribution (as defined
in section 214(4) ICTA 1988).
44. Non-Arm's Length Transactions
The Company is not a party to any transaction or arrangement under which
it may be required to pay for any asset or services or facilities of any
kind an amount which is in excess of the market value of that asset or
services or facilities or will receive any payment for any asset or
services or facilities of any kind that it has supplied or provided or is
liable to supply or provide which is less than the market value of that
asset or services or facilities.
<PAGE>
Schedule 3
Seller's Limitations on Liability
A. Agreements to Which This Schedule is Applicable
Notwithstanding anything in this Agreement to the contrary, the provisions
of this schedule shall operate to limit, to the extent specified but not
otherwise, the liability of the Seller both in respect of any claim by the
Purchaser for any breach of or inaccuracy in the Warranties, under the Tax
Covenant or in respect of any other undertakings (an "Undertaking") given
by or on behalf of the Seller in or pursuant to this Agreement.
B. Limitations on Liability Under Warranties, Undertakings and the Tax
Covenant
1. Limitation on Amount
1.1 The Purchaser shall not be entitled in any event to damages in respect of
any claim or claims under any of the Warranties or under the Tax Covenant
unless and until:-
(A) the aggregate amount of all such substantiated claims exceeds
(pound)100,000; and
(B) the amount of any individual substantiated claim shall exceed
(pound)10,000
where "substantiated" means a claim for which the Seller may be liable
after taking into account the provisions of paragraph 1.1((B)) and which
is admitted or proved in a court of competent jurisdiction,
PROVIDED that the total aggregate liability of the Seller for breach of
the Warranties or under the Tax Covenant shall not in any event exceed
(pound)7,000,000. There shall be no limit on the liability of the Seller
under the Undertakings including, without limitation, the Undertaking set
out in clause of this Agreement.
1.2 For the purpose of sub-paragraph 1.1((B)):
(A) where a claim relates to more than one event, circumstance, act or
omission which event, circumstance, act or omission would separately
constitute a breach of or give rise to a claim for breach of any of
the Warranties or under the Tax Covenant, such claim shall be
treated as a separate claim in respect of each such event,
circumstance, act or omission.
(B) all claims arising out of or relating to the same or similar events
or circumstances shall be treated as a single claim.
2. Time Limits for Bringing Claims
<PAGE>
43
No claim shall be brought against the Seller in respect of any breach of
the Warranties or under the Tax Covenant unless the Purchaser shall have
given to the Seller written notice of such claim specifying (in reasonable
detail) the matter which gives rise to the breach or claim, the nature of
the breach or claim and the amount claimed in respect thereof (detailing
the Purchaser's calculation of the loss thereby alleged to have been
suffered by it or the Company if relevant):-
(A) on or before the seventh anniversary of Completion in respect of
claims in respect of any breach of the Tax Warranties or under the
Tax Covenant; or
(B) on or before the date falling three months after the completion of
the accounts of the Company in respect of the financial year ending
on 31 December 1998, in respect of any other matters.
PROVIDED that the Purchaser's compliance with sub-clause (A) of clause 7
(Claims Procedure) of the Tax Covenant shall be sufficient notice of a
claim under the Tax Covenant or in respect of any breach of the Tax
Warranties for the purposes of this paragraph.
No time limit shall apply in relation to claims under the Undertaking set
out in clause of this Agreement.
3. Conduct of Litigation
3.1 Upon the Purchaser or the Company becoming aware of any claim, action or
demand against it or matter likely to give rise to any of these in respect
of the Non-Tax Warranties, the Purchaser shall and shall procure that the
Company shall:-
(A) as soon as reasonably practicable notify the Seller by written
notice as soon as it appears to the Purchaser that the Seller is or
may become liable under the Non-Tax Warranties;
(B) subject to the Seller indemnifying the Purchaser and/or the Company
to their reasonable satisfaction against any liability, costs,
damages or expenses which may be incurred thereby, take such action
and give such information and access to personnel, premises,
chattels, documents and records to the Seller and their professional
advisers as the Seller may reasonably request and the Seller shall
be entitled to require the Company to take such action and give such
information and assistance in order to avoid, dispute, resist,
mitigate, settle, compromise, defend or appeal any claim in respect
thereof or adjudication with respect thereto;
<PAGE>
44
(C) at the request of the Seller, allow the Seller to take the sole
conduct of such actions as the Seller may deem appropriate in
connection with any such assessment or claim in the name of the
Purchaser or the Company and in that connection the Purchaser shall
give or cause to be given to the Seller all such assistance as the
Seller may reasonably require in avoiding, disputing, resisting,
settling, compromising, defending or appealing any such claim and
shall instruct such solicitors or other professional advisors as the
Seller may nominate to act on behalf of the Purchaser or the
Company, as appropriate, but to act in accordance with the Seller's
sole instructions;
(D) make no admission of liability, agreement, settlement or compromise
with any third party in relation to any such claim or adjudication
without the prior written consent of the Seller, such consent not to
be unreasonably withheld or delayed; and
(E) take all reasonable action (having regard to the commercial
interests of the Company) to mitigate any loss suffered by it in
respect of which a claim could be made under the Non-Tax Warranties.
4. No Liability if Loss is Otherwise Compensated for
Single claim
4.1 The Seller shall not be liable for breach of any of the Non-Tax Warranties
to the extent that the subject of the claim has been or is made good or is
otherwise compensated for without cost to the Purchaser or to the Company.
Taxation
4.2 In calculating the liability of the Seller for any breach of the Non-Tax
Warranties, there shall be taken into account the amount by which any
taxation for which the Company is now or in the future accountable or
liable to be assessed is reduced or extinguished as a result of the matter
giving rise to such liability.
Insurances
4.3 If, in respect of any matter which would give rise to a breach of the
Non-Tax Warranties or a claim under the Undertakings, the Company is
entitled to claim under any policy of insurance, then no such matter shall
be the subject of a claim under the Warranties or the Undertakings unless
and until the Company shall have made a claim against its insurers and any
such insurance claim (or any claim which could have been made had such
policies or their equivalents been maintained as aforesaid) shall then
reduce by the amount
<PAGE>
45
recovered or extinguish any such claims for breach of the Non-Tax
Warranties or under the Undertakings.
Recovery From Third Parties
4.4 (A) Where the Purchaser and/or the Company are at any time entitled to
recover from some other person any sum in respect of any matter
giving rise to a claim under the Non-Tax Warranties the Purchaser
shall, and shall procure that the Company shall, undertake all
necessary steps to enforce such recovery prior to taking action
against the Seller (other than to notify the Seller of the claim
against the Seller) and, in the event that the Purchaser or the
Company shall recover any amount from such other person, the amount
of the claim against the Seller shall be reduced by the amount
recovered, less all reasonable costs, charges and expenses incurred
by the Purchaser or the Company recovering that sum from such other
person.
(B) If the Seller shall pay at any time to the Purchaser or the Company
an amount pursuant to a claim in respect of the Non-Tax Warranties
and the Purchaser or the Company subsequently become entitled to
recover from some other person any sum in respect of any matter
giving rise to such claim, the Purchaser shall, and shall procure
that the Company shall take all necessary steps to enforce such
recovery, and shall forthwith repay to the Seller so much of the
amount paid by the Seller to the Purchaser or the Company as does
not exceed the sum recovered from such other person less all
reasonable costs, charges and expenses incurred by the Purchaser or
the Company recovering that sum from such other person.
(C) If any amount is repaid to the Seller by the Purchaser or the
Company pursuant to sub-paragraph 4.4(B) above an amount equal to
the amount so repaid shall be deemed never to have been paid by the
Seller to the Purchaser for the purposes of paragraph 1.
5. Acts of the Purchaser
5.1 No claim shall lie against the Seller under the Non-Tax Warranties to the
extent that such claim is wholly or partly attributable to:-
(A) any voluntary act, omission, transaction, or arrangement carried out
at the request of or with the consent of the Purchaser before
Completion;
<PAGE>
46
(B) any voluntary act, omission, transaction, or arrangement carried out
by the Purchaser or on its behalf or by persons deriving title from
the Purchaser on or after Completion; or
(C) any explicit admission of liability made after the date hereof by
the Purchaser or on its behalf or by persons deriving title from the
Purchaser on or after Completion.
5.2 The Seller shall not be liable for any breach of Non-Tax Warranties which
would not have arisen but for any reorganisation or change in ownership of
the Company after Completion or any changes in the accounting basis on
which the Company values its assets or any other change in accounting
policy or practice of the Company after Completion.
6. Allowance, Provision or Reserve in the Accounts
6.1 No matter shall be the subject of a claim for breach of any of the Non-Tax
Warranties or under the Undertakings to the extent that allowance,
provision or reserve in respect of such matter shall have been made in the
Accounts or has been included in calculating creditors or deducted in
calculating debtors in the Accounts and (in the case of creditors or
debtors) is identified in the records of the Company or shall have been
otherwise taken account of or reflected in the Accounts.
6.2 Notwithstanding sub-paragraph above, if at any time after Completion and,
in the case of a claim under the Non-Tax Warranties, within the time limit
applicable to the Non-Tax Warranties set out in paragraph above (or at any
time thereafter while any such claim remains not fully determined) the
amount of any allowance, provision or reserve in respect of any liability
of the Seller under the Non-Tax Warranties or the Undertakings (other than
the Undertaking set out in clause) made in the Accounts or otherwise taken
account of or reflected therein is found to be in excess of the matter for
which such allowance, provision or reserve was made, the amount of such
excess (the "Excess Amount") shall be applied in the following manner:-
(A) if the Seller shall, prior to the date on which the Excess Amount is
ascertained, have made any payment or payments in respect of the
Non-Tax Warranties or the Undertakings then the Purchaser shall
forthwith repay to the Seller a sum equal to such part of the Excess
Amount as does not exceed the aggregate of those of such prior
payments by the Seller as shall not have been previously refunded
pursuant to this sub-clause; and
(B) where sub-paragraph 6.2((A)) above does not apply or where such
sub-paragraph does apply but there remains a balance of the Excess
Amount after the application of that sub-paragraph, then the Excess
Amount or the balance remaining, as the case may
<PAGE>
47
be, shall be applied in reducing any liability of the Seller that
may subsequently arise under the Non-Tax Warranties or the
Undertakings.
7. Retrospective Legislation
No liability shall arise in respect of any breach of any of the Non-Tax
Warranties or under the Undertakings if and to the extent that liability
for such breach occurs or is increased wholly or partly as a result of any
legislation not in force at the date hereof which takes effect
retrospectively.
8. Taxation Warranties
8.1 The Seller shall not be liable for a breach of a Tax Warranty relating to
a post-Accounts Date tax liability unless such tax liability Abbey
National as a consequence of or by reference to any of the events listed
in paragraphs (a) to (e) inclusive of sub-clause (ii) of clause 2
(Covenant) of the Tax Covenant.
In this paragraph 8.1, a post-Accounts Date tax liability means a tax
liability of the Company which Abbey National as a consequence of or by
reference to an event occurring or being deemed to occur after the
Accounts Date.
8.2 Clauses 3 (Limits on Clause 2), 4 (Mitigation), 5 (Over-Provisions,
Reliefs, etc), 6 (Recovery from Other Persons), 7 (Claims Procedure), 9
(Due Date of Payment) and 10 (Deductions from Payments, etc) of the Tax
Covenant shall apply mutatis mutandis to claims, liabilities and payments
in respect of the Tax Warranties as they apply to claims, liabilities and
payments under the Tax Covenant.
9. Loss of Goodwill or Business
No claim shall lie against the Seller under the Non-Tax Warranties to the
extent that the subject of the claim relates to the fact that the Company
has lost goodwill or possible business.
10. Payment of Claim to be Additional Consideration for the Consideration
Shares
Any payment made by the Seller in respect of any claim under the
Warranties or the Undertakings shall be deemed to be additional
consideration given by the Seller for the Consideration Shares under
clause 3 (Consideration) of this Agreement.
<PAGE>
48
Schedule 4
Tax Covenant
The Tax Covenant shall be in the form of the deed prepared by Slaughter and May
which has (for the purposes of identification only) already been initialled by
the Seller.
<PAGE>
49
Schedule 5
Basic Information about the Company
<PAGE>
50
1. Registered number : 2055101
2. Date of incorporation : 15 September 1986
3. Place of incorporation : England
4. Address of registered office : Abbey House
Baker Street
London NW1 6XL
5. Class of company : Private limited
6. Authorised share capital : (pound)2,500
7. Issued share capital : (pound)2,500
8. Loan capital : None
9. Directors:
Full name
Jeremy Jon Grahame Budden
Brian Carter
Duncan Craig Howorth
Charles Gerard Toner
10. Joint Secretaries:
Full name
Ian Richard Christie/Leena Nagrecha
11. Accounting reference date : 31 December
<PAGE>
51
12. Auditors : Coopers & Lybrand
13. Tax residence : United Kingdom
14. Business activities : independent financial
advisory company
<PAGE>
- --------------------------------------------------------------------------------
Schedule 6
Intellectual Property
Part A
1. Registered Trade and Service Marks
Country Mark Number Class of goods or Date of next renewal
services for which
registered
None
2. Trade Mark and Service Mark Applications
Country Mark Number Date of application Class of goods or
services for which
protection sought
None
3. Unregistered Trade and Service Marks
Country Mark Date use commenced Class of goods or services on which
used
None
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
53
4. Registered Designs
Country Number Subject matter Date of next renewal
None
5. Registered Design Applications
Country Subject matter Date of application
None
Part B
6. Licences and User Agreements
A. Details (grantor, grantee, country, subject matter and term) of all
licences and user agreements granted to the Company.
Grantor Grantee Country Subject Matter Term
------- ------- ------- -------------- ----
None
B. Details (grantor, grantee, country, subject matter and term) of all
licences and user agreements granted from the Company
None
- --------------------------------------------------------------------------------
<PAGE>
Schedule 7
Pensions
1. DEFINITIONS
(A) For the purposes of this Schedule the following expressions shall have the
following meanings:-
the "Company" means Abbey National Independent
Financial Advisers Limited
"Completion Date" means the date of this Agreement
"Former Schemes" means all occupational pension schemes
(as defined in section 1 of the Pension
Schemes Act 1993) in which the Company
has participated at any time after 30
June 1992 and prior to Completion and to
which the Company may be required to make
a payment pursuant to Section 75 of the
Pensions Act 1995 or otherwise as a
result of the liabilities of the scheme
exceeding the value of its assets,
excluding any money purchase schemes (as
defined in section 181 of the Pension
Schemes Act 1993) and the Seller's
Scheme.
"Participation Period" means the period during which the
Purchaser and/or the Company, as the case
may be participates in the Seller's
Scheme and ending no later than the date
on which the Seller or any associated
company ceases to own a shareholding in
excess of 40% of the total issued share
capital of the Purchaser or such lower
figure as may be agreed by the Seller and
Willis Group plc and which does not
prejudice Inland Revenue approval of the
continued participation pursuant to
paragraph 2 of this Schedule.
"Pensionable Age" means, in relation to a Pensionable
Employee, the age specified in the rules
of the Seller's Scheme as the age at
which such Pensionable Employee should
normally retire.
<PAGE>
55
"Pensionable Employees" means:
(i) such of the Relevant Employees at
Completion as are then members
of the Seller's Scheme; and
(ii) such of the Relevant Employees who
become members of the Seller's
Scheme during the Participation
Period.
"Relevant Employees" means the employees of the Company at the
date of this Agreement.
"Seller's Scheme" means:
(i) the Abbey National Group Pension
Scheme constituted and
established by an interim trust
deed dated 5th August 1996 or,
if the context so requires, the
trustees of that scheme; or
(ii) the Abbey National Money Purchase
Pension Scheme constituted and
established by an interim trust
deed dated 24th June, 1991 and
currently governed by a trust
deed dated 3rd December 1996 or,
if the context so requires, the
trustees of that scheme; or
(iii) the Abbey National (Associated
Bodies) Pension Fund constituted
and established by an interim
trust deed dated 17th December
1986 and currently governed by a
trust deed dated 31st May 1994,
or, if the context so requires,
the trustees of that scheme; or
(iv) the Abbey National Amalgamated
Pension Fund constituted and
established by trust deeds dated
10th February 1954, 13th October
1958 and 1st September 1970 or,
if the context so requires, the
trustees of that scheme; or
<PAGE>
56
(v) the National and Provincial
Building Society Pension Fund
constituted and established by a
trust deed dated 1st April 1955,
and currently governed by a
definitive deed dated 25th March
1994 or, if the context so
requires the trustees of that
scheme.
(B) The provisions of this Schedule shall apply separately to each Seller's
Scheme and references to "Seller's Scheme" shall be construed accordingly.
(C) Save where specifically defined or where the context otherwise requires,
words and expressions used in Chapter I of Part XIV of the Income and
Corporation Taxes Act 1988 or in the Pension Schemes Act 1993 shall have
the same meanings in this Schedule.
(D) References in this Schedule to any statute or statutory provision shall
include any statute or statutory provision which amends, extends,
consolidates or replaces the same.
2. MATTERS RELATING TO THE SELLER'S SCHEME
(A) The Seller's undertakings
(i) The Seller shall procure that:
(a) subject to the consent of the Commissioners of Inland Revenue (which
the Seller shall use its reasonable endeavours to obtain) the
Company is permitted to continue its participation and the Purchaser
is admitted to participation in the Seller's Scheme for such time as
they employ any Relevant Employee;
(b) each of the Relevant Employees who during the Participation Period
would have become a member of the Seller's Scheme but for the
transactions provided for in this Agreement is permitted to become a
member of the Seller's Scheme in respect of the Participation Period
or the applicable part of it.
(ii) The Seller shall use reasonable endeavours to procure that:
(a) the Seller's Scheme will be an exempt approved scheme for a period
of at least one year from the Completion Date; and
(b) the Seller's Scheme or alternative equivalent pension arrangements
will be maintained in relation to the Pensionable Employees in full
force and effect for a period of at least one year from the
Completion Date;
<PAGE>
57
(B) The Purchaser's undertakings
The Purchaser undertakes that it and the Company (for as long as they
participate in the Seller's Scheme) will:
(i) pay to the Seller's Scheme the contributions due and payable in
respect of the Participation Period (but not any period before the
Completion Date) to the Seller's Scheme by and in respect of each
Pensionable Employee (but only for such part of the Participation
Period that the Pensionable Employee is accruing benefits in the
Seller's Scheme), calculated at the rates and otherwise on the basis
applicable to all Employers in the Seller's Scheme;
(ii) comply during the Participation Period in all other respects with
the provisions of the Seller's Scheme;
(iii) not do or omit to do during the Participation Period any act or
thing whereby the approval of the Seller's Scheme as an exempt
approved scheme or as a contracted-out scheme would or might be
prejudiced;
(iv) not exercise any power, right or discretion conferred on it under or
in relation to the Seller's Scheme whether as an employer or
otherwise, including (without limitation) any power, right or
discretion conferred by law, without the prior written consent of
the Seller (such consent not to be unreasonably withheld or delayed)
and on such terms (whether as to payment of additional contributions
to the Seller's Scheme or otherwise) as the Seller may agree; and
(v) appoint such company as the Seller may nominate to act on its behalf
in relation to the Seller's Scheme for the purpose of dealing with
the provisions of the Pensions Act 1995 and the Pension Schemes Act
1993 and do all such acts and execute and/or sign all such documents
as the Seller may reasonably consider necessary or desirable in
connection therewith.
(C) Parties to do everything necessary to comply with contracting-out
requirements
The Seller and the Purchaser shall take, and the Purchaser shall procure
that the Company take, such steps as may be required of them, including
the completion of any notices and elections, to procure that the Purchaser
and the Company:
(i) holds or continues to be named in a contracting-out certificate on a
reference
<PAGE>
58
scheme basis or otherwise, as the case may be, in relation to the
Seller's Scheme in respect of the Participation Period; and
(ii) ceases to hold or be named in such certificate with effect from the
end of the Participation Period.
(D) The Seller's covenant in respect of any residual liabilities in relation
to the Former Schemes
The Seller hereby covenants with the Purchaser to pay to the Purchaser (so
far as possible by way of repayment of the consideration payable for the
Shares pursuant to this Agreement) forthwith upon demand and together with
interest at the Agreed Interest Rate from the date of such demand until
the date of payment an amount equal to any payment the Company or any
member of the Purchaser's Group is or becomes liable to make to any Former
Scheme whether before, at or after Completion, whether pursuant to,
Section 75 of the Pensions Act 1995, or otherwise other than payments
pursuant to the other provisions of the Schedule.
3. PENSION WARRANTIES
The Seller represents, warrants and undertakes, and save as disclosed in
the Disclosure Letter, that:
(A) Seller's Scheme is the only funded pension/disability arrangement
Other than the Seller's Scheme and the State scheme there is no
arrangement to which the Company contributes or under which it has any
obligation (whether legally enforceable or not) under which benefits of
any kind are payable to or in respect of any of the Relevant Employees on
retirement, death or disability or on the attainment of a specified age or
on the completion of a specified number of years of service or in relation
to sickness after retirement.
(B) All material Seller's Scheme documents supplied
The trust deeds and rules of the Seller's Scheme, together with all
material announcements (to members of the Seller's Scheme who are Relevant
Employees) which have not been incorporated into the Trust Deed and Rules
of the Seller's Scheme have been supplied to the Purchaser or the
Purchaser's advisers and are attached to the Disclosure Letter.
(C) Exercise of discretion or power
<PAGE>
59
No discretion or power has been exercised under the Seller's Scheme in
respect of members of that Scheme who are Relevant Employees to augment
benefits or to provide a benefit which would not otherwise be provided.
(D) Adherence
The Company adheres to the Seller's Scheme in respect of the Pensionable
Employees.
(E) Exempt Approval
The Seller's Scheme is an exempt approved scheme or capable of exempt
approval.
(F) Contracting-out
The Seller's Scheme is a contracted-out scheme and the Company is named in
a contracting-out certificate in relation to the Seller's Scheme.
(G) Contributions
There are not at the date hereof any contributions from or in respect of
any of the Relevant Employees or other payments which have fallen due but
are unpaid in respect of the Seller's Scheme except for contributions
which may be due in respect of the current or previous four weekly
accounting period.
(H) Claims
So far as the Seller is aware there are no actions, suits or claims (other
than routine claims for benefits) outstanding, pending or threatened
against the Trustees or Administrator of the Seller's Scheme or against
the Seller or the Company in respect of any matter arising out of or in
connection with the Seller's Schemes in respect of any Pensionable
Employees.
(I) Overriding Provisions
(i) The Seller's Scheme does not distinguish between male and female
members (except in relation to maternity) in the provision of
benefits relating to Pensionable Service after 17th May 1990 (with
the exception of guaranteed minimum pensions) and no adverse
alteration has been made to benefits already accrued at the date of
announcing changes designed to equalise benefits.
(ii) So far as the Seller is aware the Seller's Scheme has been
administered in accordance with the preservation requirements within
the meaning of section 69
<PAGE>
60
Pension Schemes Act 1993.
(iii) The Seller's Scheme has been administered in accordance with the
equal access requirements of section 118 Pension Schemes Act 1993.
(J) Former Scheme Liabilities
(i) The Company has not participated in any Former Scheme immediately
before or at a time when that scheme ceased to admit new members.
(ii) The Company has no liability to make any payment to the Seller's
Scheme or to any Former Scheme pursuant to section 75 of the
Pensions Act 1995.
(iii) The Company has no undischarged liability in respect of any Former
Scheme pursuant to Regulation 3 of the Occupational Pensions Schemes
(Deficiency on Winding up etc.) Regulations 1996.
<PAGE>
61
Signatures
Signed by )
Charles Toner ) Charles Toner
for and on behalf of )
Abbey National Independent )
Consulting Group Limited )
Signed by )
Allan Daffern ) Allan Daffern
for and on behalf of )
Willis National Holdings )
Limited )
<PAGE>
- --------------------------------------------------------------------------------
Dated 11th December 1998
ABBEY NATIONAL INDEPENDENT CONSULTING
GROUP LIMITED
and
WILLIS NATIONAL HOLDINGS LIMITED
-----------------------------------
ANIFA
Side Agreement to
Share Sale Agreement
-----------------------------------
Slaughter and May,
35 Basinghall Street,
London EC2V 5DB
Ref: JCXT/JMYA
- --------------------------------------------------------------------------------
<PAGE>
SIDE AGREEMENT
THIS AGREEMENT is made 11th December 1998
BETWEEN:-
1. Abbey National Independent Consulting Group Limited of Abbey House,
Baker Street London NW1 6XL (registered in England No. 2506374) (the
"Seller")
AND
2. Willis National Holdings Limited of Ten Trinity Square, London EC3P
3AX (registered in England No. 3393377) (the "Purchaser").
WHEREAS:
(A) The parties entered into a Share Sale Agreement on 4th August, 1997
(the "Share Sale Agreement") whereby the Purchaser acquired all the
issued shares in Willis Corroon Financial Planning Limited Abbey
National Independent Financial Advisers Limited ("ANIFA")] from the
Seller.
(B) Under Clause 7 of the Share Sale Agreement the Seller agreed to
indemnify and keep indemnified the Purchaser from all claims,
losses, costs or other liabilities which the Purchaser and/or ANIFA
may suffer in respect of pensions missellings.
(C) The parties have decided to enter into this Side Agreement pursuant
to Clause 15.6 with respect to extending the indemnity provided for
under the Share Sale Agreement to include missellings of Free
Standing Additional Voluntary Contributions ("FSAVC") schemes.
IT IS AGREED AS FOLLOWS:
<PAGE>
1. Terms and expressions in the Share Sale Agreement shall, unless the
context otherwise requires, have the same meanings when used in this Side
Agreement.
2. The parties agree that the definition of "affected person" set out in
clause 7.2 of the Share Sale Agreement shall be amended by inserting after
the words "Taxes Act 1988" in sub-paragraph (A) the following;
"or a retirement benefits scheme (as defined in section 611 of ICTA 1988)
established solely to accept contributions from employees to provide
additional benefits to those provided by their employers' pension scheme
(a free standing additional voluntary contribution scheme (including,
without limitation, any such scheme approved by the Board of Inland
Revenue pursuant to section 591(2)(h) of ICTA 1988)); and
by inserting after the words "so approved" in sub-paragraph (B) the
following:
"or such a free standing additional voluntary contribution scheme".
3. Save as set out in this Side Agreement, the terms and conditions of the
Share Sale Agreement remains and shall continue in full force and effect
and shall apply to the provisions of this Side Agreement.
4. This Side Agreement shall be governed by and shall be construed in
accordance with, English law.
Signatures
Signed by )
)
for and on behalf of )
Abbey National )
Independent Consulting )
Group Limited )
<PAGE>
Signed by )
)
for and on behalf of )
Willis National Holdings )
Limited
<PAGE>
Exhibit 2.5
The following exhibit no. 2.5 constitutes a fair and accurate English
translation of the original copy of this document.
/s/ Michael P. Chitty
----------------------------------------
Michael P. Chitty
Company Secretary of Willis Corroon Group Limited
<PAGE>
Translation
No. 56 of Deed Register for 1998
R e c o r d e d
in
Frankfurt am Main on 22 January 1998
Before the undersigned Notary Public
in the district of the Higher Regional Court
Frankfurt am Main
Dr. Gunter Paul
with office in Frankfurt am Main,
Darmstadter Landstrasse 125,
appeared today with the request of notarization
of the
Framework Agreement
---------------------
JASPERS INDUSTRIE ASSEKURANZ GMBH & CO KG
<PAGE>
-2-
WUPPESAHL & CO. ASSEKURANZMAKLER
personally known to the acting notary public or identified by valid Federal
German Identity Card:
1. for Frau Doris Ballauff, Inselstrasse 27, 22297 Hamburg,
the lawyer Dr. Christian von Oertzen, business address: Darmstadter
Landstrasse 125, 60598 Frankfurt am Main,
pursuant to a power of attorney of 22 January 1998 granted to him which
was at hand on notarization and is attached to this record as ANNEX 1.
2. for Herr Michael Emken, Parkallee 65, 20144 Hamburg,
the lawyer Dr. Christian von Oertzen, business address: Darmstadter
Landstrasse 125, 60598 Frankfurt am Main,
pursuant to a power of attorney of 22 January 1998 granted to him which
was at hand on notarization and is attached to this record as ANNEX 2.
3. for Frau Irene Koenig, Fuchshohl 5, 65812 Bad Soden,
the lawyer Dr. Christian von Oertzen, business address: Darmstadter
Landstrasse 125, 60598 Frankfurt am Main,
pursuant to a power of attorney of 22 January 1998 granted to him which
was at hand on notarization and is attached to this record as ANNEX 3.
4. for Deutsche Bank AG, Taunusanlage 12, 60325 Frankfurt am Main,
the lawyer Dr. Christian von Oertzen, business address: Darmstadter
Landstrasse 125, 60598 Frankfurt am Main,
pursuant to a power of attorney of 22 January 1998 granted to him which
was at hand on notarization and is attached to this record as ANNEX 4.
5. for Carl Jaspers Sohn GmbH, Gruneburgweg 102, 60323 Frankfurt am Main,
the lawyer Dr. Christian von Oertzen, business address: Darmstadter
Landstrasse 125, 60598 Frankfurt am Main,
pursuant to a power of attorney of 22 January 1998 granted to him which
was at
<PAGE>
-3-
hand on notarization and is attached to this record as ANNEX 5.
<PAGE>
-4-
6. for Jaspers Industrie Assekuranz GmbH & Co. KG, Gruneburgweg 102, 60323
Frankfurt am Main,
the lawyer Dr. Christian von Oertzen, business address: Darmstadter
Landstrasse 125, 60598 Frankfurt am Main,
pursuant to a power of attorney of 22 January 1998 granted to him which
was at hand on notarization and is attached to this record as ANNEX 6.
7. for Industrie Assekuranz Gesellschaft mit beschrankter Haftung,
Gruneburgweg 102, 60323 Frankfurt am Main,
the lawyer Dr. Christian von Oertzen, business address: Darmstadter
Landstrasse 125, 60598 Frankfurt am Main,
pursuant to a power of attorney of 22 January 1998 granted to him which
was at hand on notarization and is attached to this record as ANNEX 7.
8. for Willis Corroon GmbH, Warburgstrasse 50, 20354 Hamburg,
the lawyer Dr. Holger Iversen, business address: Warburgstrasse 50, 20354
Hamburg,
pursuant to a the power of attorney of 20 January 1998 granted to him
which was at hand on notarization and is attached to this record as ANNEX
8.
9. for C. Wuppesahl & Co. Assekuranzmakler, Herrlichkeit 1, 28199 Bremen,
the lawyer Dr. Christian von Oertzen, business address: Darmstadter
Landstrasse 125, 60598 Frankfurt am Main,
pursuant to a power of attorney of 21 January 1998 granted to him which
was at hand on notarization and is attached to this record as ANNEX 9.
10. for C. Wuppesahl Management GmbH, Herrlichkeit 1, 28199 Bremen,
the lawyer Dr. Christian von Oertzen, business address: Darmstadter
Landstrasse 125, 60598 Frankfurt am Main,
pursuant to a power of attorney of 21 January 1998 granted to him which
was at hand on notarization and is attached to this record as ANNEX 10.
11. for C. Wuppesahl, Herrlichkeit 1, 28199 Bremen,
the lawyer Dr. Christian von Oertzen, business address: Darmstadter
Landstrasse 125, 60598 Frankfurt am Main,
<PAGE>
-5-
pursuant to a power of attorney of 22 January 1998 granted to him which
was at hand on notarization and is attached to this record as ANNEX 11.
12. for Achtundsechzigste Verwaltungsgesellschaft Dammtor mbH, Warburgstrasse
50, 20354 Hamburg,
the lawyer Dr. Holger Iversen, business address: Warburgstrasse 50, 20354
Hamburg,
pursuant to a power of attorney of 20 January 1998 granted to him which
was at hand on notarization and is attached to this record as ANNEX 12.
13. for Willis Corroon Group plc, Ten Trinity Square, London EC3P 3AX,
England,
the lawyer Dr. Holger Iversen, business address: Warburgstrasse 50, 20354
Hamburg,
pursuant to a power of attorney of 20 January 1998 granted to him which
was at hand on notarization and is attached to this record as ANNEX 13.
According to all powers of attorney the persons appeared are exempted from the
restrictions of ss. 181 BGB.
<PAGE>
-6-
The Appeared declared for the record the following
Framework Agreement for the Merger
of the limited partnership
Jaspers Industrie Assekuranz GmbH & Co. KG,
Frankfurt am Main
and the general partnership
C. Wuppesahl & Co. Assekuranzmakler, Bremen
I. Preamble
(1) Shareholders of Jaspers Industrie Assekuranz GmbH & Co. KG - hereinafter
referred to also as "JIA" - are:
a) as general partner:
Industrie-Assekuranz Gesellschaft mit beschrankter Haftung, with
seat in Frankfurt am Main - hereinafter referred to also as "IAG" -
b) as limited partners:
1. Frau Doris Ballauff
2. Herr Michael Emken
3. Frau Irene Koenig
4. Deutsche Bank AG - hereinafter referred to also as "DB" -
5. Alexander & Alexander International Inc. - hereinafter
referred to also as "A & A" -
(2) Shareholders of the C. Wuppesahl & Co. Assekuranzmakler - hereinafter
<PAGE>
-7-
referred to also as "Wuppesahl" - are:
a) Willis Corroon GmbH, with seat in Hamburg, - hereinafter referred to
also as "WCG" -
b) C. Wuppesahl, with seat in Bremen,
c) C. Wuppesahl Management GmbH, with seat in Bremen.
(3) A & A withdraws from JIA and its general partner IAG effective on December
31, 1997. Willis Corroon Group plc - hereinafter referred to as "WC" - is
taking over the shares through 68. Verwaltungsgesellschaft Dammtor mbH
with seat in Hamburg - hereinafter referred to also as "Dammtor" - (see
below section II).
(4) After A & A's withdrawal JIA will be converted into a consolidated unit
company (Einheitsgesellschaft) in such way that all shareholders of JIA
contribute their shares in the general partner IAG to JIA (see section III
below).
(5) With effect of January 01, 1998, JIA and Wuppesahl will merge into a
limited partnership with the corporate name Jaspers Wuppesahl Industrie
Assekuranz GmbH & Co. KG - hereinafter referred to also as "JWIA" - (see
section IV below).
(6) In course of the merger WCG acquires from the limited partners Frau Irene
Koenig, Frau Doris Ballauff and Herr Michael Emken - hereinafter referred
to also as "JIA-Family Shareholders" - supplementary limited partnership
shares to increase its and/or Dammtor's limited partner contribution from
20% in the limited partnership capital in the merged company JWIA by 10%
to 30% (see section IV, below, paras 1 and 2).
(7) As of December 31, 1998/1 January 1999, DB sells and transfers its shares
in the merged company to WCG (see section IV, below, paras 3 and 4).
<PAGE>
-8-
(8) The existing corporation agreement between A & A and JIA is not terminated
because of the withdrawal of A & A from JIA.
II. Repurchase of Shares
(1) WC causes Dammtor to conclude with A & A in a separate document
- pursuant to ANNEX II.1 -
a purchase and transfer agreement concerning shares in IAG and JIA and to
file without delay the change of the limited partners for registration
with the commercial register of the Local Court Frankfurt am Main. All
other partners are obliged to sign the application.
(2) The approvals of IAG and JIA to the share transfer in para. 1 as well as
the waiver of the shareholders of all their possible rights of first
refusal and similar rights are attached to this agreement as
- ANNEX II.2 and II.3 -.
(3) Furthermore, the shareholders of JIA are concluding
- pursuant to ANNEX II.4 -
a special agreement on the distribution of the business profit for 1997.
(4) Dammtor is entitled and obliged to transfer its shares to WCG once the
merger
<PAGE>
-9-
according to section IV has become effective. Until the shares are
transferred Dammtor and WCG will be regarded as one shareholder.
<PAGE>
-10-
III. CONVERSION of JIA into a
CONSOLIDATED UNIT COMPANY
("Einheitsgesellschaft")
(1) The limited partners of JIA, Frau Irene Koenig, Frau Doris Ballauff, Herr
Michael Emken, DB, Carl Jaspers Sohn GmbH - hereinafter referred to also
as "Jaspers" - as well as Dammtor agree in a separate document
- pursuant to ANNEX III.1 -
to transfer all of their shares in IAG (as general partner of JIA) to JIA
immediately after the withdrawal of A & A and the joining of Dammtor as
successor in interest of A & A has been recorded in the commercial
register; Jaspers is thereby acting on behalf of Frau Doris Ballauff.
(2) Together with the transfer of the shares of the general partner to the
limited partnership the articles of association of IAG are in a separate
document
- pursuant to ANNEX III.2 -
completely redrafted and the new version is filed without delay for
registration with the commercial register.
(3) The advisory board approved the conversion of JIA into a consolidated unit
company and the acquisition of the shares in IAG by JIA.
IV. MERGER of JIA and WUPPESAHL
(1) Immediately after the withdrawal of A & A (see II, above), and the
conversion of
<PAGE>
-11-
JIA into a consolidated unit company (see III above), JIA and Wuppesahl
oblige themselves to conclude a merger contract pursuant to the draft in
- ANNEX IV.1 -
and to merge both enterprises into one limited partnership under the
corporate name Jaspers Wuppesahl Industrie Assekuranz GmbH & Co. KG. The
merger shall take place according to the provision of the draft unless
discussions of the draft with the works council require amendments. The
contracting parties will then conclude the contract with the so agreed
amendments.
(2) The registered seat of the merged company shall be Frankfurt am Main and
Bremen. If one of the commercial registers refuses to register the double
seat (Doppelsitz) the only registered seat shall be Frankfurt am Main.
(3) The shareholders of JIA and Wuppesahl will agree to the merger contract in
separate shareholders resolutions
- pursuant to ANNEXES IV.2a and b -
(4) The shareholders of JIA and Wuppesahl undertake to conclude the articles
of association of JWIA pursuant to
- ANNEX IV.3 -
For the business years 1998, 1999 and 2000 the profit of the company shall
be - different from the articles of association - distributed as follows:
1. The shareholders of Wuppesahl (except WCG) receive an advance profit
payment (Vorabgewinn) in the amount of 7.5% of the distributable
profits.
<PAGE>
-12-
2. The shareholder WCG (including Dammtor) receives his shares in the
profit according to the articles of association calculated on the
total distributable profit.
3. The remaining profits after subtraction of the Vorabgewinn as well
as the profit share of WCG (including Dammtor) is distributed among
the shareholders (without WCG and Dammtor) according to their
participation in the company.
(5) The shareholders of JIA and Wuppesahl undertake to conclude the internal
rules of the advisory board of the merged company pursuant to
- ANNEX IV.4 -.
(6) Mr. Georg Abegg, Herrlichkeit 1, 28199 Bremen, is appointed as further
managing director (Geschaftsfuhrer) of IAG. He shall represent the company
together with another Geschaftsfuhrer or Prokurist. A respective
shareholder resolution of IAG is hereby concluded.
(7) Up to the date of the merger of JIA and Wuppesahl is completed their
managements agree as follows:
1. The managing directors shall form a working group with the function
to jointly manage both companies.
2. The joint management shall conduct and also represent the
enterprises up to the completion of the merger, as far as legally
admissible, as one company. Thereby the future provisions of the
articles of association of the limited partnership shall apply
already now analogously inter partes to management powers and
approval requirements.
<PAGE>
-13-
3. The shareholders of JIA shall already appoint the JIA advisory board
in accordance with the future provisions in the articles of
association of the merged company JWIA.
<PAGE>
-14-
V. ADDITIONAL ACQUISITION of SHARES
(1) At the same time of the merger the shareholders Frau Irene Koenig, Frau
Doris Ballauff and Herr Michael Emken shall assign in a separate document
- pursuant to ANNEX V.1 -
in proportion of their limited capital shares to WCG such number of
proportionate shares so that WCG together with Dammtor holds in toto a
limited capital share of 30% in the merged company JWIA.
(2) At the same time of the merger Frau Doris Ballauff, Herr Michael Emken and
C. Wuppesahl Management GmbH shall assign in a separate document
- pursuant to ANNEX V.2 -
in proportion of their limited capital shares to Wuppesahl such number of
proportionate shares respectively C. Wuppesahl Management GmbH all its
shares so that Wuppesahl holds in total a limited capital share of 22% in
the merged company JWIA.
(3) As of December 31, 1998 / January 1, 1999, the shareholder DB sells and
transfers in a separate document
- pursuant to ANNEX V.2 -
its shares in the merged company to WCG.
<PAGE>
-15-
VI. JOINT PROVISIONS
(1) As far as after this Framework Agreement limited partnership shares are
transferred or merged, the shareholders of the company whose shares are
involved in the transfer or merger make warranties and representations to
the other contracting parties
- pursuant to ANNEX VI.1 -;
meaning that
a) to the extent transfers have taken place the contracting parties to
the transfer make the warranties and representations; regarding the
share transfer from A & A to Dammtor according to section II also
the JIA-Family Shareholders and DB, and
b) as far as companies were merged, the shareholders who took part in
the merger make the warranties and representations,
unless it has been agreed expressly otherwise in the present Framework
Agreement or its Annexes.
(2) All warranties and representations are given for the point in time when
this agreement is signed.
(3) Warranties and representations are true only if they are appropriate,
complete and correct in every respect, unless it has been agreed expressly
otherwise in this agreement and its annexes.
<PAGE>
-16-
(4) As far as reference is made to subjective knowledge within the scope of
warranties and representations a written enquiry of the declaring party
must be made with the management concerned.
(5) Each contracting party shall declare the warranties and representations as
his own personal declarations, also in such cases where the declaration is
made jointly with other contracting parties. Knowledge of one contracting
party shall not be attributed to the other party because the parties have
given jointly warranties and representations.
(6) As regards the warranties and representations in connection with the
merger of the companies, facts which were notified to BDO Deutsche
Warentreuhand AG Wirtschaftsprufungsgesellschaft in the course of their
investigations for their expert opinion of 22 May 1997 on the ratio
between the companies, and facts which were notified to the certified
public accountants of one party in the course of their examinations shall
be considered as notified to the other contracting party within the scope
of warranties and representations.
(7) WC guarantees the contracting parties the proper fulfillment of all
commitments under this contract and the exercise of rights as set forth in
this contract through Dammtor and WCG.
(8) If any of the representations and warranties is untrue, incomplete or
misleading in any respect the person liable therefore shall pay to JWIA
such sum as may be sufficient to place JWIA in the position it would have
been if the representations and warranties have been true, complete and
not misleading.
(9) Any claims resulting from any of the representations and warranties being
untrue, inadequate or misleading shall be time-barred by 31 December 1999,
unless
<PAGE>
-17-
a) such claim has been notified to the other party before 31 December
1999 in writing, and
b) within six months after the notification the parties have agreed on
the claim or arbitration proceedings have commenced. For claims
resulting from any of the representations and warranties contained
in ANNEX VI.1 No. 7 (taxes) the period for notification shall not
expire before the expiry of six months after the day on which a tax
assessment giving rise to the claim became final.
(10) All companies and shareholders hereby declare their approval to the
transfer in section II (repurchase of shares), section III (conversion of
JIA into a consolidated unit company) and section V (additional
acquisition of shares) and waive any preemption rights they may have.
(11) As far as under this agreement shareholder resolutions of IAG and/or JIA
are concluded at a time when A & A still is a shareholder Dammtor also
acts as agent without authority of A & A and hereby declares the approval
of such resolutions for the time when it becomes shareholder of the
company.
(12) All declarations in this contract including its annexes are subject to the
condition precedent that the repurchase agreement according to section II
is concluded.
VII. NOTICE TO THE CARTEL OFFICE
The merger according to III to V has to be notified according to ss. 24a GWB.
All respective agreements are therefore subject to the condition precedent that
the German Federal Cartel Office approves the merger according to ss. 24a para.
4 GWG or the time period for an interdiction of the Cartel Office is expired.
The contracting parties will notify the merger without delay to the German
Federal Cartel Office.
<PAGE>
-18-
VIII. POWER OF ATTORNEY
(1) The appeared hereby authorise the employees of the notary
Gisela Schmitt, Andrea Grober and Beatrice Appel, all with business
address at: Darmstadter Landstrasse 125, 60598 Frankfurt am Main
each of them alone and exempted from the restrictions of ss. 181 BGB under
the responsible control of the acting notary
a) to change and amend the merger contract
b) to hold shareholder meetings and to adopt resolutions
c) to change or amend applications to the commercial register.
as far as these measures are necessary to finalise the transaction
according to this agreement.
(2) The parties agree internally that this power of attorney may only be used
after written approval of the parties; the commercial register and all
other public authorities do not have to prove whether the approval was
given.
IX. FINAL PROVISIONS
(1) The contracting parties shall observe secrecy in all matters of the
present contract and its execution and shall abstain from all measures
which could be suited to impair the execution of the contract or the image
of a contracting party in the public at large or among customers.
<PAGE>
-19-
(2) Declarations under this contract shall be addressed by registered letter
or courier to the aforegiven address or to such address last given by the
addressee for such purpose.
(3) In the event of a contracting party not making use of a contractual right
or exercising such right at a later date this shall not be considered as a
disclaimer of any such right. In the same way no party shall be excluded
from exercising rights where such party has exercised any such right only
partially.
<PAGE>
-20-
(4) WC shall have the right to transfer the rights and duties as under the
present contract to another German company as long as it has a dominating
influence on such company (ss.17 AktG). In such case WC guarantees
herewith that such company observes all provisions of this agreement and
its annexes in the protection of rights and in the fulfillment of
commitments. Sellers are entitled to assign purchase price claims as far
as set-offs and rights of retention are not affected; otherwise the
assignment of rights under this contract is excluded.
(5) Each contracting party shall defray its costs of legal and economic
consultancy incurred in connection with this basic agreement and all
annexes, including taxes on income. The costs for this contract and its
execution shall be borne by the company. The costs for the transfer of
shares shall be borne by the purchasers.
(6) Statements in respect of this contract, its conclusion or its execution
require the prior consent of the other contracting parties.
(7) This contract, plus its annexes, contains the entire agreement of the
contracting parties on the subject matter of the contract. All earlier
written or oral declarations during negotiations or other arrangements
related thereto are thus cancelled.
(8) Amendments to this contract require written form.
(9) Should individual provisions of this contract and its annexes be or become
legally ineffective, then the contract shall be so construed or amended
that the economic purpose intended by the ineffective provision is
achieved in the best possible way; this shall apply analogously to the
filling of contractual gaps. The invalidity or ineffectiveness of
individual provisions of this contract and its annexes shall not entail
the invalidity or ineffectiveness of the remaining
<PAGE>
-21-
provisions.
(10) This contract shall be subject to German law.
(11) All disputes between the contracting parties among each other which
concern the contents of this contract or its coming to existence shall be
decided by an arbitral tribunal pursuant toss.1025 German Code of Civil
Procedure (ZPO) ousting jurisdiction of the normal courts subject to the
separately signed arbitration agreement
- pursuant to ANNEX VII.1 -
which provides for further details and which then shall form part of this
contract.
(12) Venue shall be - as far as normal courts have jurisdiction and as far as
legally admissible - Frankfurt am Main.
The above record and it annexes was read aloud by the notary public to the
appeared persons, was approved by them and signed by them in their own hand as
follows:
---------------------------------------
for Doris Ballauff
---------------------------------------
for Michael Emken
---------------------------------------
for Irene Koenig
<PAGE>
-22-
---------------------------------------
for Deutsche Bank AG
---------------------------------------
for Carl Jaspers Sohn GmbH
---------------------------------------
for Jaspers Industrie Assekuranz GmbH & Co. KG
----------------------------------------
for Industrie Assekuranz Gesellschaft mit beschrankter Haftung
---------------------------------------
for Willis Corroon GmbH
---------------------------------------
for C. Wuppesahl & Co. Assekuranzmakler
---------------------------------------
for C. Wuppesahl Management GmbH
---------------------------------------
for C. Wuppesahl
---------------------------------------
for C. Wuppesahl & Co. Assekuranzmakler
---------------------------------------
for 68. Verwaltungsgesellschaft Dammtor mbH
<PAGE>
-23-
---------------------------------------
for Willis Corroon Group plc
---------------------------------------
Dr. Gunter Paul, Notary Public
<PAGE>
-1-
ANNEX VI.1
Translation
WARRANTIES AND REPRESENTATIONS
------------------------------
1. REPRESENTATIONS UNDER COMPANY LAW
(1) JIA is a Kommanditgesellschaf/KG (limited commercial partnership), IAG is
a Gesellschaft mit beschrankter Haftung/GmbH (limited liability company),
and Wuppesahl is an Offene Handelsgesellschaft/OHG (general commercial
partnership). Said partnerships and company have been formally
established and exist under German law. Since their establishment nothing
occurred which would justify to strike off said corporate entities from
the Handelsregister (German Commercial Register). No proceedings have
been commenced or resolutions have been passed for the liquidation of
said corporate entities, or insolvency proceedings have been initiated
against them nor any composition proceedings in or out of court.
(2) THE HANDELSREGISTERAUSZUGE (commercial register excerpts)
- IN ANNEX VI.1.1 -
contain all particulars of the partnerships/companies registered and
requiring or capable of registration.
2. BRANCH ESTABLISHMENTS
JUA, IAG and Wuppesahl hold no interests in the capital of any body
corporate, neither
<PAGE>
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directly nor indirectly, or are a member of a partnership, or of another
company, unless listed otherwise
- IN ANNEX VI.1.2 -
<PAGE>
-3-
3. INTERESTS IN THE COMPANIES
The particulars concerning the partners and shareholders of JIA, IAG and
Wuppesahl
- IN ANNEX VI.1.3 -
are ture and accurate in all respects.
4. CONDUCT OF BUSINESS
To the best of the knowledge of the partners/shareholders the business
transactions of the partnerships/companies have always been conducted in
compliance with all laws and regulations applicable to it in all relevant
jurisdictions.
5. CONSENTS
All consents to the conclusion and performance of the present agreement and
its annexes have been obtained unless consents required have been expressly
waived; in particular the partners and shareholders, the advisory board
members and the managing directors of the companies have consented to the
transfer transactions.
6. ANNUAL ACCOUNTS
(1) All annual accounts (JAHRESABSCHLUSSE) of JIA, IAG and Wuppesahl
required by law to be filed with the administrative or fiscal authorities,
respectively, have been or will be duly filed with said authorities,
together with all legally required documents, within the time limits set
by these authorities.
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(2) The Annual accounts of JIA, IAG and Wuppesahl for the fiscal years 1994
to, including 1996 (independent of whether or not they were filed
pursuant to fig. 6.1, above) comply in all respects with the generally
accepted principles of accounting valid in the Federal Republic of
Germany; this applies equally to form and content of annual accounts of
limited commercial partnerships, companies with limited liability or
general commercial partnerships, respectively, the manner in which assets
and liabilities are dealt with, including provisions and reserves for
future risks or comparable contingent liabilities, and the profit and
loss accounts of the respective bodies corporate concerned. Said
principles and laws have been applied on a consistent basis. All annual
accounts have been audited and testified by either
Wirtschaftsprufungsunternehmen WEDIT Wollert-Elmendorff GmbH,
WeissenburgerstraBe 20, 63739 Aschaffenburg or the auditor Joachim H.
Clostermann, Bremen.
(3) Depreciation for wear and tear on assets of JIA, IAG or Wuppesahl are in
conformity with the fiscal provisions.
(4) Since January 01, 1997
(a) business of JIA, IAG and Wuppesahl has been carried on in
ordinary course;
(b) no payments, business transactions or sales of assets were
effected outside the ordinary course of business. Wuppesahl informs
the other parties that it made at the end of 1997 a sale and lease
back transaction with regard to its car pool;
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(c) nothing has occurred or has been omitted which has adverse
effects on the course of business of JIA, IAG or Wuppesahl, with the
exception of matter disclosed
- IN ANNEX VI. 1.4 -
(5) Since January 01, 1998, no profits have been distributed to the
shareholders of JIA or Wuppesahl and no dividends of IAG have been
declared, with the exception of those listed
- IN ANNEX VI. 1.5 -
7. TAXES ETC.
(1) All taxes, fees, duties, impost, charges and levies, and the like, due
in connection with the business of JIA,IAG and Wuppesahl have been paid
fully and punctually. No fines or penalties are due or imminent. Taxes,
fees, impost, charges and duties, and the like, which are still due from
the past are covered by advance payments to the competent authorities
and/or by provisions in the annual accounts of the year 1996.
(2) All annual accounts, tax declarations, refunds and other documents
related to taxes, fees, duties, impost, charges and levies, etc., which
are to be filed in connection with business of JIA, IAG and Wuppesahl to
any Federal authority, Land (state) authority, regional or other
administrative authority have been filed punctually and their contents
were complete and accurate at the time of their filing. None of the
aforelisted authorities notified JAI, IAG or Wuppesahl that they assume
that there is any incompleteness of omission or rectification as to any
one of the aforelisted documents, or have threatened JIA, IAG or
Wuppesahl to
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start legal or administrative proceedings in relation to.
(3) All legal transactions between JIA, IAG or Wuppesahl and its
shareholders, partners or subsidiaries have at all times been conducted
at arm's length.
(4) The breakdown of the distributable equity capital (GLIEDERUNG DES
VERWENDBAREN EIGENKAPITALS), as listed in the German Corporation Tax
Return 1996 of IAG, is accurate in all respects.
8. LEASING AGREEMENTS
(1) The list
- IN ANNEX VI. 1.6 -
Contains completely and accurately all leasing agreements (including
gratuitous hire agreements (Leihvertrage), tenancy and lease agreements
(MIET- UND PACHTVERTRAGE) and all other forms of contracts permitting the
use of movable or immovable property in connection with the business of
JIA, IAG or Wuppesahl) with an annual expenditure of DM 100,000 or more.
(2) All rent payments and other sums due under the aforelisted agreements
have been paid punctually in full, and all other obligations thereunder
have been complied with punctually.
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9. MOVABLE PROPERTY
JIA and IAG own all movable property employed in connection with their
respective business, excepted such movable property as listed in
-ANNEX VI. 1.6-.
or such movable property for which the lease payment is below DM 100,000.
All of such property is in good repair and operable and has been regularly
maintained and serviced with the exception of the property listed in
-ANNEX VI. 1.7-.
Wuppesahl owns or has the legal right to use all movable property except
such movable property as listed in Annex VI. 1.6. All of such property is
in good repair and operable and has been regularly maintained and serviced.
10. INDUSTRIAL PROPERTY RIGHTS
JIA, IAG and Wuppesahl are the registered owners or licensees of all
industrial property rights (GEWERBLICHE SCHUTZRECHTE) they employ in
connection with their respective business, and no licenses have been
granted to anyone for these industrial property rights, and nobody has
threatened any legal or administrative proceedings in connection with the
use of said industrial property rights by JIA, IAG or Wuppesahl.
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11. LITIGATION
JIA, IAG and Wuppesahl are not a party and have not been threatened to be
made a party to any legal, administrative or arbitral proceedings in any
jurisdiction. Moreover, they are not aware of any circumstances which
reasonably could give cause to any such proceedings with the exception of
those mentioned in
-ANNEX VI. 1.8-.
12. CONTRACTS
(1) With the exception of the contracts set forth in
-ANNEX VI. 1.9-.
JIA, IAG and Wuppesahl are not parties to any contracts which cannot be
terminated without penalty at twelve months' notice or less nor to any
contract (employment contracts excepted) which commit them to pay more
than DM 100,000.
(2) There are no warranties given or representations made by JIA, IAG or
Wuppesahl as to commitments of third parties, and none of them is a
contractual party to an agency, distribution or franchise agreement,
except as disclosed in
-ANNEX VI. 1.10-.
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The corporation agreement between JIA and A & A is not terminated.
(3) All materials contracts signed by JIA, IAG or Wuppesahl are in full
force and effective, and no party to any such contract is in default of
the performance of its obligations thereunder.
13. CUSTOMER RELATIONS
The implementation of any of the matters contemplated by the present
agreement constitute no breach of contract, and avoidance of commitments
on the part of JIA, IAG or Wuppesahl, and entities no third party to
terminate any agreement with JIA, IAG or Wuppesahl.
14. EMPLOYEES AND PENSIONS
(1) The list in
-ANNEX VI. 1.11-.
contains all names of the employees of JIA, IAG and Wuppesahl with an
annual salary of DM 100,000 or more as well as of all managing
directors. In the column with the heading "Bonus" the highest amount is
entered which such persons on the basis of promises, understandings or
actual practices are receiving in addition to their salaries for the
current year or will be receiving in future years.
(2) The terms and conditions upon which the above mentioned persons are
employed are substantially as set out in
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-ANNEX VI.1.12-.
(3) With the exception of pension or social security funds to which they are
obliged by law to contribute and except as listed in
-ANNEX VI.1.13-.
JIA, IAG and Wuppesahl are not contracting parties or contributors to any
funds, pension plans or pension commitments to past, present or future
employees, managing directors or their spouses or offspring. All social
security contributions have been paid punctually and in full.
(4) None of the employees of JIA, IAG or Wuppesahl receiving an annual
remuneration exceeding in the aggregate DM 100,000 has or has been given a
notice of termination, nor have JIA, IAG or Wuppesahl plans to give such
notice of termination. The former managing director Zilkens has been
terminated. The following terminated employment relationships exist at JIA
on January 1998:
Branch Berlin Witte, Werner Termination to 31.03.1998
Branch Frankfurt Fehling, Bernd-Michael Termination to 31.10.1998
Branch Munich Schaffer, Kurt Termination without notice;
termination is subject to
court proceedings;
employee is released from
work until the end of his
employment contract at 31
December 1999.
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Wuppesahl informs the other parties that they have concluded with Mr.
Harald Dux, Dusseldolf, a termination agreement with effect 28 February
1998. Furthermore, the company offered Ms. Anke Jones, Dusseldof, a new
job in the branch office in Cologne. If Ms. Jones does not accept this
reasonable transfer the company intends to terminate her employment
agreement.
(5) -ANNEX VI.1.14-.
contains a complete and accurate list of all collective bargaining
agreements (Tarifvertrage) and all in-house collective labour agreements
(Betriebsvereinbarugen) which are binding on JIA, IAG or Wuppesahl.
15. Capital Expenditure
JIA, IAG and Wuppesahl have not committed themselves to incur more than DM
1,164,000 in the future for the acquisition of capital goods
(INVESTITIONSGUTER).
16. Insurance
At all times all assets and liabilities of JIA, IAG and Wuppesahl were
fully covered by insurance in accordance with the principles of prudent
business policies at such amounts sufficing to cover all risks which can
be reasonably be expected to affect business operations. The third party
liability insurance for property damages of JIA has a limit of DM
60,000,000.
<PAGE>
Exhibit 2.6
The following exhibit no. 2.6 constitutes a fair and accurate English
translation of the original copy of this document.
/s/ Michael P. Chitty
----------------------------------------
Michael P. Chitty
Company Secretary of Willis Corroon Group Limited
<PAGE>
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Unofficial Translation
No. 67 of Deed Register for 1998
R e c o r d e d
in
Frankfurt am Main on 27 January1998
Before the undersigned Notary Public
in the district of the Higher Regional Court
Frankfurt am Main
Dr. Gunter Paul
with office in Darmstadter Landstrasse 125, Frankfurt am Main,
appeared today with the request of notarization
of the
PURCHASE AND TRANSFER AGREEMENT
concerning shares in
Industrie-Assekuranz GmbH and
Jaspers Industrie Assekuranz GmbH & Co. KG
<PAGE>
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personally known to the acting notary public:
1. for Alexander & Alexander International Inc., Maryland
- hereinafter referred to as "Seller" -
Ms. Johanna Geertruida Maria (Carin) Verhagen,
Marconistraat 16
3029 AK Rotterdam
Netherlands
with power of attorney, dated 20 January 1998, the original was at hand on
notarization and a certified copy of which is attached to this record as ANNEX
1;
2. for Achtundsechzigste Verwaltungsgesellschaft Dammtor mbH
Warburgstrasse 50
20354 Hamburg
- hereinafter referred to as "Purchaser" -
the lawyer Christoph von Teichman
business address: Warburgstrasse 50
20354 Hamburg
with power of attorney, dated 20 January 1998, the original was at hand on
notarization and a certified copy of which is attached to this record as ANNEX
2.
<PAGE>
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3. for Willis Corroon Group plc
Ten Trinity Square
London EC3P 3AX
England
the lawyer Christoph von Teichman
business address: Warburgstrasse 50
20354 Hamburg
with power of attorney, dated 20 January 1998, the original was at hand on
notarization and a certified copy of which is attached to this record as ANNEX
3.
<PAGE>
- 4 -
The Appeared declared:
I.
Object of Purchase
(1) Seller holds a share of nominally DM 20,000.00 in Industrie-Assekuranz
Gesellschaft mit beschrankter Haftung with seat in Frankfurt am Main and a
share capital in the total amount of DM 100,000.00.
(2) Seller holds further a limited partnership share in the amount of DM
1,000,000.00 in the firm Jaspers Industrie Assekuranz GmbH & Co. KG with
seat in Frankfurt am Main and a limited liability capital in the total
amount of DM 5,000,000.00.
II.
Sale and Transfer
(1) Seller herewith sells and transfers
a) its aforementioned share in the nominal value of DM 20,000.00
(fig.I, para. 1), as well as
b) its aforementioned limited partnership share of DM 1,000,000.00
(fig. I, para. 2),
to Purchaser.
(2) Sale and transfer shall be effected with all rights and duties and in
particular with
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the right to receive dividends. However, the profit of the limited
partnership Jaspers Industrie Assekuranz GmbH & Co. KG for the business
year 1997 as well as the right to receive dividends for the business year
1997 of Industrie Assekuranz GmbH shall be due to Seller.
(3) Sale and Transfer shall commercially become effective as of December
31,1997/January 01, 1998 (key date). Transfer of the shares (GmbH-Shares
and KG-Shares) shall become effective in rem with the full payment of the
purchase price in the account according to fig. III para (2), however not
before Purchaser is registered as limited partner of Jaspers Industrie
Assekuranz GmbH & Co. KG in the commercial register.
(4) Assignment shall be in the form of singular succession. Seller receives no
benefits of the limited partnership in connection with the assignment of
its limited partnership share and its withdrawal from the partnership.
(5) Purchaser herewith accepts the transfer of the GmbH-Share and of the
KG-Share at the aforewritten conditions (paras 1 to 4).
III.
Purchase Price
(1) Purchaser pays to Seller for the GmbH-Share and KG-Share sold a purchase
price in the total amount of
DM 20,000,000.00
(in words: twentymillion Deutschmark).
plus interest in the amount of 4% for the period beginning 1 January 1998
until signing of this agreement.
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(2) The purchase price plus interest is due on signing of the present
agreement and was to be paid before this agreement was signed on the
account of AON Deutschland GmbH, Hamburg, account no. 03066.05.00 with the
Deutsche Bank AG, Hamburg, sort code 200 700 00.
IV.
Guarantee/Indemnification
(1) Seller guarantees that the original capital contribution on the sold
GmbH-Share as well as the limited partnership capital contribution on the
KG-Share have been fully paid in and that no contributions were paid back.
(2) Moreover, Seller guarantees that it can dispose unrestrictedly about the
sold GmbH-Share and the sold KG-Share, and that both shares are not
encumbered with the rights of third parties.
(3) Above and beyond that any further guarantees on the part of Seller for
material defects or deficencies in title of the Shares sold are excluded.
(4) Purchaser holds Seller free and harmless of all claims from the companies
and third parties arising out of action after the key-date raised after
Seller's withdrawal.
V.
Approvals
(1) The approvals of the companies pursuant to ss. 17.2 of the articles of
association of the Industrie-Assekuranz Gesellschaft mit beschrankter
Haftung and of the
<PAGE>
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articles of association of Jaspers Industrie Assekuranz GmbH & Co. KG are
available and are attached to this record as ANNEXES 4 and 5.
(2) All shareholders have waived their rights of preemption and of first
refusal. The waivers have been attached to this record as ANNEX 6.
<PAGE>
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VI.
Special Agreement for the distribution of profit, tax indemnification
(1) The shareholders of Jaspers Industrie Assekuranz GmbH & Co. KG have
resolved a special resolution on the distribution of profit for the
business year 1997. The resolution is attached to this record as ANNEX 7.
Purchaser declares to assist in the execution of the aforesaid resolution.
(2) Purchaser indemnifies Seller of all possible German additional taxes
following from the participation of Sellers as shareholders of
Industrie-Assekuranz Gesellschaft mit beschrankter Haftung and Jaspers
Industrie Assekuranz GmbH & Co. KG and which concern the time period after
1 January 1998. German tax advantages shall be charged against any tax
disadvantages.
VII.
Guarantee
Willis Corroon plc. hereby guarantees the full perfomance of all liabilities
under this contract of 68. Verwaltungsgesellschaft Dammtor mbH.
VIII.
Instructions
The notary public now instructed the Appeared that
- - with the exclusion of guarantee in fig. IV., para. (1) to (4) Purchaser in
case of a guarantee claim is not entitled to the ordinary legal rights;
- - in relation to Industrie-Assekuranz Gesellschaft mit beschrankter Haftung
only
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such entity is considered as new shareholder whose acquisition has been
notified to the company evidencing the transfer;
- - precondition for today's agreed transfer is that Seller is the lawful
owner of the shares transferred. The law does not provide for a bona fide
acquisition;
- - the notary public does not provide fiscal information. He recommended to
obtain information from a tax office or tax consultant as to the
implications of today's record;
- - pursuant to ss. 54 German Income Tax Regulation (EStDV) (forwarding
documents by notaries public), among other things, original, executed or
certified copy of the original may be handed over to the parties only when
a certified copy has been dispatched to the tax office designated in ss.20
of the German Tax Code.
IX.
Miscellaneous
(1) Should a provision of this agreement be or become ineffective then this
shall not affect the effectiveness of the remaining agreement; instead of
the ineffective provision or a regulation gap such legally admissible
provision shall be considered as agreed which, as far as possible,
corresponds to what the parties intended or, within the meaning and
purpose of the present agreement, would have intended had they recognized
the ineffectiveness of the provision or regulation gap in question.
(2) Changes of and amendments to the present agreement require for their
effectivness written form unless notarial authentication is mandatory.
<PAGE>
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(3) All costs, (including costs of the notary public), incurred in connection
with the signing and performance of the present agreement and all taxes
shall be borne by Purchaser. Each of the contracting parties shall pay its
consultancy fees.
(4) The agreement shall be subject to German law. Venue shall be Frankfurt am
Main, as far as is admissible.
(5) The notary is instructed to notify the company immediately of the transfer
of shares (Section 16 GmbH-Act).
The aforewritten record was read aloud by the notary public to the Appeared,
approved by them and signed by them in their own hand as follows:
-------------------------------------------
for Alexander & Alexander Int. Inc.
-------------------------------------------
for 68. Verwaltungsgesellschaft Dammtor mbH
-------------------------------------------
for Willis Corroon Group plc.
<PAGE>
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------------------------
Notary Public
<PAGE>
Exhibit 2.7
The following exhibit no. 2.7 constitutes a fair and accurate English
translation of the original copy of this document.
/s/ Michael P. Chitty
----------------------------------------
Michael P. Chitty
Company Secretary of Willis Corroon Group Limited
<PAGE>
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Translation
No. 57 of Deed Register for 1998
R e c o r d e d
in
Frankfurt am Main on 22 January1998
Before the undersigned Notary Public
in the district of the Higher Regional Court
Frankfurt am Main
Dr. GUNTER PAUL
-----------------
with office in Frankfurt am Main, Darmstadter Landstrasse 125,
appeared today with the request of notarization
of the
TRANSFER of SHARES
of the general partner GmbH
into the
JASPERS INDUSTRIE ASSEKURANZ GmbH & Co. KG
and amendment of the articles of association of the general partner GmbH
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personally known to the acting notary or identified by valid Federal German
Identity Card:
1. for Frau Doris Ballauff,
the lawyer Dr. Christian von Oertzen,
business address: Darmstadter Landstrasse 125
60598 Frankfurt am Main
with the power of attorney of 22 January 1998 granted to him which was at
hand on notarization and is attached to this record as ANNEX 1.
2. for Herr Michael Emken,
the lawyer Dr. Christian von Oertzen,
business address: Darmstadter Landstrasse 125
60598 Frankfurt am Main
with the power of attorney of 22 January 1998 granted to him which was at
hand on notarization and is attached to this record as ANNEX 2.
3. for Frau Irene Koenig,
the lawyer Dr. Christian von Oertzen,
business address: Darmstadter Landstrasse 125
60598 Frankfurt am Main
with the power of attorney of 22 January 1998 granted to him which was at
hand on notarization and is attached to this record as ANNEX 3.
4. for Deutsche Bank AG
the lawyer Dr. Christian von Oertzen,
business address: Darmstadter Landstrasse 125
60598 Frankfurt am Main
<PAGE>
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with the power of attorney of 22 January 1998 granted to him which was at
hand on notarization and is attached to this record as ANNEX 4.
5. for Carl Jaspers Sohn GmbH,
the lawyer Dr. Christian von Oertzen,
business address: Darmstadter Landstrasse 125
60598 Frankfurt am Main
with the power of attorney of 22 January 1998 granted to him which was at
hand on notarization and is attached to this record as ANNEX 5.
6. for Achtundsechzigste Verwaltungsgesellschaft Dammtor mbH
the lawyer Dr. Holger Iversen,
business address: Warburgstrasse 50,
20354 Hamburg
with the power of attorney of 22 January 1998 granted to him which was at
hand on notarization and is attached to this record as ANNEX 6.
7. for Jaspers Industrie Assekuranz GmbH & Co. KG
Gruneburgweg 102
D-60323 Frankfurt am Main
the lawyer Dr. Christian von Oertzen,
business address: Darmstadter Landstrasse 125
60598 Frankfurt am Main
with the power of attorney of 22 January 1998 granted to him which was at
hand on notarization and is attached to this record as ANNEX 7.
<PAGE>
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The Appeared declared subject of the registration of Achtundsechzigste
Verwaltungsgesellschaft Dammtor as limited partner in the commercial register of
Jaspers Industrie Assekuranz GmbH & Co. KG:
ss. 1 Shareholdings
The represented Appeared 1. to 6. - hereinafter referred to as "Transferors" -
are the sole shareholders of Industrie Assekuranz Gesellschaft mit beschrankter
Haftung, registered in the commercial register of the Local Court Frankfurt am
Main under HRB 8621.
The Transferors hold the following wholly paid shares:
Frau Irene Koenig 25,100.00 DM
Frau Doris Ballauff 16,300.00 DM
Herr Michael Emken 17,400.00 DM
Deutsche Bank AG 20,000.00 DM
Carl Jaspers Sohn GmbH 1,200.00 DM
68. Verwaltungsgesellschaft
Dammtor mbH 20,000.00 DM
ss. 2 Transfer and Assignment
The Tranferors herewith transfer their shares listed under ss. 1, above, to the
Limited Partnership in the firm Jaspers Industrie Assekuranz GmbH & Co. KG with
seat in Frankfurt am Main - hereinafter referred to as "Transferee" - and
herewith assign the transferred shares, including the right to receive
dividends, to the Transferee with effect from January 01, 1998.
<PAGE>
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Transferee accepts the assignment at the conditions set forth in the present
agreement.
Transferors in their capacity as sole shareholders of Industrie Assekuranz
Gesellschaft mit beschrankter Haftung, Frankfurt am Main, herewith consent to
the transfer and assignment of the aforelisted shares.
ss. 3 Representation and Warranties
The Transferors shall be severally liable
a) that the shares are fully paid in,
b) that the assigned shares in each case are their exclusive property
not encumbered by rights of any third parties.
ss. 4 Right to receive dividends
The rights and duties connected with the shares assigned shall transfer to
Transferee with effect from today, in such form as they exist on the date of the
signing of this agreement, especially with all rights to receive dividends, if
any, unless such right to receive dividends belong to the predecessor of 68.
Verwaltungsgesellschaft Dammtor mbH. Thus, the transfer of all rights and duties
to Transferee shall be effected in such manner that Transferors have neither to
perform nor to claim anything from their interests held to this date.
ss. 5 Fiduciary Relationships
With the transfer of the shares of Carl Jaspers Sohn GmbH in the nominal amount
of
<PAGE>
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DM 1,200 shall end the fiduciary relationship to the shareholder Doris Ballauff,
thus Carl Jaspers Sohn GmbH transfers its share to the KG in the course of the
winding up of the above mentioned fiduciary relationship on behalf and on
account for Ms. Doris Ballauff.
ss. 6 Costs
The Transferee shall bear the costs of this agreement and its execution.
ss. 7 Miscellaneous
1. Changes of and amendments to the present agreement shall require for their
effectiveness the written form unless notarial authentication is
mandatory.
2. Should a provision of this agreement be ineffective this shall not affect
the effectiveness of the remaining agreement. Instead of the ineffective
provision such legally admissible provision shall be considered as agreed
which as far as possible corresponds to what the parties commercially
intended.
3. All headings in this agreement are made to increase the legibility and
shall be without legal effect on the content and interpretation of this
contract. Declarations which are made in one provision of this agreement
shall also apply to other provisions of this contract.
ss. 8 Instructions
The notary instructed the Appeared that
- - the Company will only regard that person as shareholder whose acquisition
was
<PAGE>
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notified to the Company; the notary is instructed to notify the Company of
the transfer of shares (Section 16 GmbH-Act);
- - condition for the today agreed transfer is that the Transferors are the
legal owners of the transferred shares. The law does not recognise a good
faith acquisition of shares;
- - the notary does not give any tax advice. He recommended to consult either
the tax authorities or the tax consultant on the tax consequences of this
deed;
- - according to Section 54 EStDV (Forwarding of Documents by Notaries) this
deed or certified copies thereof may only be handed to the parties if a
certified copy was sent to the tax authorities according to Section 20
Abgabenordnung (AO).
The aforewritten record including the annexes was read aloud by the notary to
the Appeared, approved by them and signed by them in their own hand as follows:
----------------------------------------------
for Doris Ballauff
----------------------------------------------
for Michael Emken
----------------------------------------------
for Irene Koenig
----------------------------------------------
for Deutsche Bank AG
----------------------------------------------
for Carl Jaspers Sohn GmbH
----------------------------------------------
for 68. Verwaltungsgesellschaft Dammtor mbH
----------------------------------------------
for Jaspers Industrie Assekuranz GmbH & Co. KG
<PAGE>
-8-
----------------------------------------------
Dr. Gunter Paul, notary
<PAGE>
Exhibit 2.8
The following exhibit no. 2.8 constitutes a fair and accurate English
translation of the original copy of this document.
/s/ Michael P. Chitty
----------------------------------------
Michael P. Chitty
Company Secretary of Willis Corroon Group Limited
<PAGE>
-1-
Translation
No. 179 of Deed Register for 1998
R e c o r d e d
in Frankfurt am Main on 17 March 1998
Before the undersigned notary public in the
District of the High Regional Court Frankfurt am Main
Dr. Gunter Paul
with office in Frankfurt am Main,
Darmstadter Landstrasse 125,
appeared today with the request of notarisation of the
Merger Contract
Jaspers Industrie Assekuranz GmbH & Co. KG
C. Wuppesahl & Co. Assekuranzmakler
<PAGE>
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personally known to the acting notary public:
1. for Jaspers Industrie Assekuranz GmbH & Co. KG
Gruneburgweg 102
60323 Frankfurt am Main
represented by its general partner with the sole power of representation
Industrie-Assekuranz Gesellschaft mit beschrankter Haftung
Gruneburgweg 102
60323 Frankfurt am Main
the latter represented by the lawyer
Dr. Christian von Oertzen,
business address: Darmstadter Landstrasse 125
60598 Frankfurt am Main
pursuant to a power of attorney of 22 January 1998 granted him which was
at hand on notarisation and which is attached to this Deed as ANNEX 1;
2. for C. Wuppesahl & Co. Assekuranzmakler
Herrlichkeit 1
28199 Bremen
represented by its partner with the sole power of representation
C. Wuppesahl Management GmbH
Herrlichkeit 1
28199 Bremen
the latter represented by the lawyer
Dr. Christian von Oertzen,
business address: Darmstadter Landstrasse 125
60598 Frankfurt am Main
pursuant to a power of attorney of 21 January 1998 granted him which was
at hand on notarisation and which is attached to this Deed as ANNEX 2.
<PAGE>
-3-
The appeared declared for the record the following:
MERGER CONTRACT
I. Merger by Consolidation
(1) The limited partnership Jaspers Industrie Assekuranz GmbH & Co. KG and the
partnership C. Wuppesahl & Co. Assekuranzmakler agreed to merge the two
companies by way of a consolidation according to Sections 36 subs. of the
German law regulating the transformation of companies of 28 October 1994
(UmwG). The merger shall be made according to book value in exchange for
shares according to Section 24 of the German Tax Law regulating
transformation of companies (UmwStG).
(2) With effect of 31 December 1997 / 1 January 1998 the companies transfer by
way of merger their entire business with all rights and liabilities to a
hereby newly formed company with the corporate name Jaspers Wuppesahl
Industrie Assekuranz GmbH & Co. KG with registered seat in Frankfurt and
Bremen - hereinafter also referred to as "JWIA".
II. General Partner
Industrie-Assekuranz Gesellschaft mit beschrankter Haftung shall be the general
partner. The company holds a share in the amount of DM 4,000.
III. Limited Partners
<PAGE>
-4-
(1) The limited liability capital of the company shall be DM 6,800,000.
(2) The limited liability capital is divided as follows:
1. Ms. Irene Koenig, nee Mehl, Bad Soden,
holds a limited partnership share of
18.32% for the time being a share in
the amount of DM 1,245,964.00
2. Ms. Doris Ballauff, nee Strohlein,
Hamburg, holds a limited partnership
share of 12.74% for the time being a
share in the amount of DM 866,218.00
3. Mr. Michael Emken, Hamburg, holds a
limited partnership share of 12.74% for
the time being a share in the amount of DM 866,218.00
4. The limited partnership C. Wuppesahl,
Bremen, holds a limited partnership
share of 18.9% for the time being a
share in the amount of DM 1,285,200.00
5. Deutsche Bank AG, Frankfurt am Main,
holds a limited partnership share of
14.6% for the time being a share in the
amount of DM 992,800.00
6. Willis Corroon GmbH, Hamburg, holds a
limited partnership share of 5.4%
<PAGE>
-5-
for the time being a share in the
amount of DM 367,200.00
7. 68. Verwaltungsgesellschaft Dammtor mbH
holds a limited partnership share of
14.6% for the time being a share in the
amount of DM 992,800.00
8. C. Wuppesahl Management GmbH holds a
limited partnership share of 2.7% for
the time being a share in the amount of DM 183,600.00
IV. Articles of Association, By-Laws for the Advisory Board
(1) The Articles of Association of the limited partnership shall be as laid
out in ANNEX 3.
(2) The shareholders have resolved by-laws for the Advisory Board of the
company according to ANNEX 4.
V. Further Declarations
(1) The business transactions of the companies Jaspers Industrie Assekuranz
GmbH & Co. KG and C. Wuppesahl & Co. Assekuranzmakler shall be deemed to
be made for the account of JWIA as of 1 January 1998.
(2) Special rights in the meaning of Section 5 para. 1 no. 7 UmwG and special
benefits in the meaning of Section 5 para. 1 no. 8 UmwG were not granted.
(3) The transferring companies employ together currently 610 employees; these
<PAGE>
-6-
employees shall be taken over by JWIA on the terms of their current
employment agreements.
(4) As far as the transferring companies have works councils, the companies
acted according to the provisions on the notification of this Merger
Contract to the works councils according to Section 5 para. 3 UmwG.
(5) The merger shall be made according to the annual accounts of the
transferring companies as of 31 December 1997.
(6) The shareholders of the transferring companies retain the right to receive
the profits for the time until 31 December 1997 for the respective
company.
VI. Real Estate
The transferring companies own no real estate.
VII. Approvals
(1) This Merger Contract requires for its effectiveness the approval of the
shareholders of the transferring companies.
(2) According to its notification of 24 February 1998 the Federal Cartel
Office has no objections against the merger.
VIII. Costs and Taxes
The costs of this agreement, its execution and of the shareholder meetings of
the
<PAGE>
-7-
respective companies which have to decide on the approval to this contract and
other measures in connection with the merger and all other costs in connection
with the merger shall be borne by the new company.
IX. Power of Attorney
The appeared hereby authorise the employees of the notary
Gisela Schmitt, Andrea Gober and
Beatrix Appel,
all with business address at Darmstadter Landstrasse 125,
60598 Frankfurt am Main
each of them alone and exempted from the restrictions of Section 181 BGB under
the responsible control of the acting notary
a) to change and amend the Merger Contract
b) to hold shareholder meetings and to adopt resolutions
c) to change or amend applications to the commercial register
as far as these measures are necessary to finalise the merger between the two
companies.
X. Arbitration
All disputes between the contracting parties among each other which concern the
content of this Contract or its coming into existence shall be decided by an
arbitration
<PAGE>
-8-
tribunal pursuant to Section 1025 German Code of Civil Procedure (ZPO) ousting
jurisdiction of the normal courts. This shall, however, only apply if all
shareholders have signed a separate arbitration agreement which provides for
further details and which then shall form part of this contract.
XI. Instructions
The acting notary instructed the Appeared that
- - the merger will only become effective if all shareholders have approved
the merger;
- - the merger will also only become effective with the registration of the
new company in the commercial register.
The above record and its Annexes were read aloud by the notary public to the
appeared person, was approved by him and signed by him in his own hands as
follows:
------------------------------------------
for Industrie-Assekuranz GmbH, acting for
Jaspers Industrie Assekuranz GmbH & Co. KG
------------------------------------------
for C. Wuppesahl Management GmbH, acting
for C. Wuppesahl & Co. Assekuranzmakler
<PAGE>
-9-
------------------------------------------
Dr. Gunter Paul, notary
<PAGE>
Exhibit 2.9
The following exhibit no. 2.9 constitutes a fair and accurate English
translation of the original copy of this document.
/s/ Michael P. Chitty
----------------------------------------
Michael P. Chitty
Company Secretary of Willis Corroon Group Limited
<PAGE>
-1-
Translation
PURCHASE AND SALES AGREEMENT
ON THE ACQUISITION OF LIMITED PARTNER SHARES
between
1. Ms. Irene Koenig, nee Mehl
Fuchshohl 5, 65812 Bad Soden
2. Ms. Doris Ballauff, nee Strohlein
Inselstrasse 27, 22297 Hamburg
3. Mr. Michael Emken
Parkallee 65, 20144 Hamburg
4. C. Wuppesahl Management GmbH
Herrlichkeit 1, 28199 Bremen
5. C. Wuppesahl
Herrlichkeit 1, 28199 Bremen
6. 68. Verwaltungsgesellschaft Dammtor mbH, Hamburg
Warburgstrasse 50, 20354 Hamburg
7. Willis Corroon GmbH,
Warburgstrasse 50, 20354 Hamburg
<PAGE>
-2-
I.
Object of Purchase
The contracting parties and Deutsche Bank AG are the limited partners of the
limited partnership in the firm Jaspers Wuppesahl Industrie Assekuranz GmbH &
Co. KG (hereinafter referred to as "Company") with a total limited capital in
the amount of DM 6,800,000.00. They hold the following shares:
1. Ms. Irene Koenig, nee Mehl, Bad Soden,
holds a limited partnership share
in the amount of DM 1,245,964.00
2. Ms. Doris Ballauff, nee Strohlein,
Hamburg, holds a limited partnership
share in the amount of DM 866,218.00
3. Mr. Michael Emken, Hamburg,
holds a limited partnership share
in the amount of DM 866,218.00
4. Limited partnership in the firm
C. Wuppesahl, Bremen,
holds a limited partnership share
in the amount of DM 1,285,200.00
5. Deutsche Bank AG, Frankfurt am Main,
holds a limited partnership share
in the amount of DM 992,800.00
6. 68. Verwaltungsgesellschaft Dammtor
GmbH, Hamburg,
holds a limited partnership share
in the amount of DM 992,800.00
7. Willis Corroon Deutschland GmbH,
Hamburg, holds a limited partnership share
in the amount of DM 367,200.00
8. C. Wuppesahl Management GmbH,
holds a limited partnership share
<PAGE>
-3-
in the amount of DM 183,600.00
II.
Purchase and Transfer
(1) Ms. Irene Koenig - hereinafter referred to also as "Seller" hereby sells
and transfers of her above stated limited partnership share a partial
share in the amount of DM 470,764 to Willis Corroon GmbH, Hamburg -
hereinafter referred to as "Buyer".
(2) Ms. Ballauff - hereinafter referred to also as "Seller" - hereby sells and
transfers of her above stated limited partnership share a partial share in
the amount of DM 104,618 to Willis Corroon GmbH, Hamburg - hereinafter
referred to as "Buyer".
(3) Mr. Emken - hereinafter referred to also as "Seller" - hereby sells and
transfers of his above stated limited partnership share a partial share in
the amount of DM 104,618 to Willis Corroon GmbH, Hamburg - hereinafter
referred to as "Buyer".
(4) 68. Verwaltungsgesellschaft Dammtor mbH - hereinafter referred to also as
"Seller" - hereby transfers - following the winding-up of a fiduciary
relationship - its above stated limited partnership share in the amount of
DM 992,800 to Willis Corroon GmbH, Hamburg - hereinafter referred to as
"Buyer".
(5) Ms. Ballauff - hereinafter referred to also as "Seller" - hereby sells and
transfers of her above stated limited partnership share a partial share in
the amount of DM 13,600 to C. Wuppesahl hereinafter referred to as
"Buyer".
(6) Mr. Emken - hereinafter referred to also as "Seller" - hereby sells and
transfers of his above stated limited partnership share a partial share in
the amount of DM 13,600 to C. Wuppesahl hereinafter referred to as
"Buyer".
<PAGE>
-4-
(7) C. Wuppesahl Management GmbH - hereinafter referred to also as "Seller" -
hereby transfers - following the winding-up of a fiduciary relationship -
its above stated limited partnership share in the amount of DM 183,600 to
C. Wuppesahl - hereinafter referred to as "Buyer".
(8) Purchase and transfer shall take place with all rights and duties
connected with the shares assigned in particular with the right to receive
dividend as of 1 January 1998.
(9) The transfer of the limited partnership shares shall become effective in
rem with the full payment of the purchase price, however, not before the
merger of Jaspers Industrie Assekuranz GmbH & Co. KG and C. Wuppesahl &
Co. Assekuranzmakler is registered in both commercial registers.
(10) The assignments shall be in the form of singular succession. Sellers
received no benefits from the limited partnership in connection with the
assignment of the limited partnership shares.
(11) Buyers herewith accept assignment of the limited partnership shares at the
afore- written conditions (para. 1 to 10).
(12) Following the transfer, the limited partnership capital of the Company is
divided as follows:
1. Ms. Irene Koenig, nee Mehl,
Bad Soden, holds a limited
partnership share of 11.4%, equal DM 775,200.00
2. Ms. Doris Ballauff, nee Strohlein,
Hamburg, holds a limited
partnership share of 11.0%, equal DM 748,000.00
<PAGE>
-5-
3. Mr. Michael Emken, Hamburg,
holds a limited partnership
share of 11.0%, equal DM 748,000.00
<PAGE>
-6-
4. Limited partnership in the firm
C. Wuppesahl, Bremen,
holds a limited partnership
share of 22.0%, equal DM 1,496,000.00
5. Deutsche Bank AG, Frankfurt
am Main, holds a limited
partnership share of 14.6%, equal DM 992,800.00
6. Willis Corroon GmbH,
Hamburg, holds a limited
partnership share of 30.0%, equal DM 2,040.000.00
III.
Purchase Price
(1) Willis Corroon GmbH pays to Seller Ms. Irene Koenig for the sold limited
partnership share a purchase price in the total amount of DM
13,846,000.00.
(2) Willis Corroon GmbH pays to Seller Ms. Ballauff for the sold limited
partnership share a purchase price in the total amount of DM 3,077,000.00.
(3) Willis Corroon GmbH pays to Seller Mr. Emken for the sold limited
partnership share a purchase price in the total amount of DM 3,077,000.00.
(4) C. Wuppesahl pays to Seller Ms. Ballauff for the sold limited partnership
share a purchase price in the total amount of DM 400,000.00.
(5) C. Wuppesahl pays to Seller Mr. Emken for the sold limited partnership
share a purchase price in the total amount of DM 400,000.00.
(6) C. Wuppesahl pays to Seller C. Wuppesahl Management GmbH for the
<PAGE>
-7-
transferred limited partnership share no purchase price.
(7) Each purchase price is due on signing of the present agreement and is to
be paid within three bank working days to a joint blocked account of the
contracting parties at Deutsche Bank AG, account no. 040110906, sort code
200 700 00.
(8) The bank is hereby instructed to pay the amount according to no. III,
para. 1 to 6 to the respective Seller with interest as soon as the bank
receives a certified extract from the commercial register of the Company
showing that the merger of Jaspers Industrie Assekuranz GmbH & Co. KG and
C. Wuppesahl & Co. Assekuranzmakler has been registered.
IV.
Approvals
(1) On 22 January 1998 the Company approved the above mentioned share
transfers.
(2) All shareholders expressly waived their rights of first refusal and
similar rights - if any.
V.
Miscellaneous
(1) Should a provision of this agreement be or become ineffective this shall
not affect the effectiveness of the remaining provisions. Instead of the
ineffective provision or a regulation gap such legally admissible
provision shall be considered as agreed which, as far as possible
corresponds to what the parties intended or, within the meaning and
purpose of the present agreement, would
<PAGE>
-8-
have intended if they had recognised the ineffectiveness of the provision
or regulation gap in question.
(2) Changes of and amendments to the present agreement require for their
effectiveness written form unless notarial authentication is mandatory.
(3) All costs (including the costs of the notary public) incurred in
connection with the signing and performance of this agreement and all
taxes shall be paid by the Buyer. Each of the contracting parties shall
pay its consultancy fees.
Done in Frankfurt on 27 January 1998
-------------------------------------------
for Ms. Irene Koenig, nee Mehl
-------------------------------------------
for Ms. Doris Ballauff, nee Strohlein
-------------------------------------------
for Mr. Michael Emken
-------------------------------------------
for C. Wuppesahl
-------------------------------------------
for C. Wuppesahl Management GmbH
-------------------------------------------
for 68. Verwaltungsgesellschaft Dammtor mbH
-------------------------------------------
for Willis Corroon GmbH
<PAGE>
Exhibit 2.10
The following exhibit no. 2.10 constitutes a fair and accurate English
translation of the original copy of this document.
/s/ Michael P. Chitty
----------------------------------------
Michael P. Chitty
Company Secretary of Willis Corroon Group Limited
<PAGE>
TRANSLATION
PURCHASE AND SALES AGREEMENT
BETWEEN
1. Deutsche Bank Aktiengesellschaft - hereinafter also referred to as "DB" -
with seat in Frankfurt am Main
Taunusanlage 12
60325 Frankfurt am Main
and
2. Willis Corroon GmbH - hereinafter also referred to as "WCG" -
Warburgstrasse 50
20354 Hamburg
and
3. Willis Corroon Group plc -- hereinafter also referred to as "WC" -
Ten Trinity Square
London EC3P 3AX
England
<PAGE>
-2-
I.
OBJECT
DB is a limited partner in the limited partnership Jaspers Wuppesahl
Industrie Assekuranz GmbH & Co. KG - hereinafter also referred to as
"Company" -; the Company has a limited capital in the amount of
DM 6,800,000.00. DB holds a limited partnership share of 14.6% equal to
DM 992,800.00.
II.
PURCHASE AND TRANSFER
(1) DB hereby sells and transfers its limited partnership share to WCG.
(2) The purchase and transfer shall take place with all rights and duties in
particular with the right to receive dividend on 1 January 1999.
(3) Purchase and transfer shall become legally effective 31 December 1998/1
January 1999.
(4) The transfer of the limited partnership share shall become effective in
rem with the full payment of the purchase price.
(5) The assignment shall be in the form of singular succession. DB receives
no benefits from the limited partnership in connection with the assignment
of the limited partnership share.
(6) WCG hereby accepts the assignment of the limited partnership share at
the aforewritten conditions (para. 1 to 5).
<PAGE>
-3-
III.
PURCHASE PRICE
(1) Purchase price for the sold limited partnership share shall be
DM 29,200,000.00 and is to be paid on 4 January 1999 to the account DB,
account no. 0034009 at Deutsche Bank AG, Frankfurt am Main, sort code
500 700 10.
DB is obligated to confirm the receipt of the purchase price in writing
without delay.
(2) WC hereby guarantees the full performance of all obligations of WCG
under this contract.
IV.
REPRESENTATIONS AND WARRANTIES
(1) DB guarantees to WCG that
a) the limited liability capital contribution regarding the sold limited
partnership share has been fully paid in,
and
b) it can dispose unrestrictedly about the sold limited partnership
share and that the share is not encumbered with any rights of third
parties.
(2) Moreover, the parties refer to the contracts concluded in connection
with the merger of Jaspers Industrie Assekuranz GmbH & Co. KG and C.
Wuppesahl & Co. Assekuranzmakler in particular to the framework agreement
and the representations and warranties given therein.
<PAGE>
-4-
V.
APPROVALS
(1) On 22 January 1998 the Company approved the above mentioned share
transfer.
(2) All shareholders expressly waived their rights of first refusal and
similar rights - if any.
VI.
MISCELLANEOUS
(1) Should a provision of this agreement be or become ineffective this shall
not affect the effectiveness of the remaining provisions. Instead of the
ineffective provision or a regulation gap such legally admissable provision
shall be considered as agreed which, as far as possible corresponds to what
the parties intended or, within the meaning and purpose of the present
agreement, would have intended if they had recognized the ineffectiveness
of the provision or regulation gap in question.
(2) Changes of and amendments to the present agreement require for their
effectiveness written form unless notarial authentication is mandatory.
(3) All costs (including the costs of the notary public) incurred in
connection with the signing and performance of this agreement and all taxes
shall be paid by the WCG. Each of the contracting parties shall pay its
consultancy fees.
(4) Place of performance of this agreement shall be Frankfurt am Main.
<PAGE>
-5-
Done in Frankfurt am Main on 22 January 1998
-----------------------------------------
for Deutsche Bank Aktiengesellschaft
-----------------------------------------
for Willis Corroon GmbH
-----------------------------------------
for Willis Corroon Group plc
<PAGE>
Exhibit 2.11
The following exhibit no. 2.11 constitutes a fair and accurate English
translation of the original copy of this document.
/s/ Michael P. Chitty
----------------------------------------
Michael P. Chitty
Company Secretary of Willis Corroon Group Limited
<PAGE>
Agreement
page 1
AGREEMENT
BETWEEN THE UNDERSIGNED:
1. Assurances Generales de France IART, a French law company having its
registered office at 87 rue de Richelieu, 75002 Paris, registered with the
Paris Commercial and Companies Registry under No. B 542 110 291,
represented by Guy Lallour, in his capacity as Directeur DIDRE, fully
empowered for the purposes hereof,
hereinafter "AGF",
2. UAP INCENDIE - ACCIDENTS, a French law company having its registered
office at 9, Place Vendome, 75001 Paris, registered with the Paris
Commercial and Companies Registry under No. B 777 349 192, represented by
Adrien Cadieux, acting pursuant to a special power and fully empowered for
the purposes hereof,
hereinafter "UAP",
3. Athena, a French law company having its registered office at 53/55 rue La
Boetie, 75008 Paris, registered with the Paris Commercial and Companies
Registry under No. B 304 951 833, represented by Daniel Ehrmann, acting
pursuant to a special power and fully empowered for the purposes hereof,
hereinafter "Athena",
4. Gras Savoye Euro Finance S.A., a Belgian law company having its registered
office at 8 avenue Bel-Air, 1180 Uccle, Belgium, registered with the
Brussels Commercial Registry under No. 258.054, represented by Patrick
Lucas in his capacity as President, fully empowered for the purposes
hereof,
hereinafter "GS Euro Finance",
<PAGE>
Agreement
page 2
5. Mr. Emmanuel Gras, residing at 3, rue Parmentier, 59370 Mons-en-Baroeul,
in his capacity as a shareholder and general partner of Gras Savoye & Cie,
acting as guarantor for the shareholders designated as the "Gras
Shareholders" in Exhibit 1,
6. Mr. Patrick Lucas, residing at 3 avenue Emile Acollas, 75007 Paris, in his
capacity as a shareholder and general partner of Gras Savoye & Cie, acting
as guarantor for the shareholders designated as the "Lucas Shareholders"
in Exhibit 1,
7. Mr. Daniel Naftalski, residing at 2, rue des Beaux-Arts, 75006 Paris, in
his capacity as a shareholder and general partner of Gras Savoye & Cie,
acting as guarantor for the shareholders designated as the "Other
Individual Shareholders" in Exhibit 1,
AND:
Willis Corroon Group plc, an English law company whose registered office is at
Ten Trinity Square, London EC3P 3AX, United Kingdom, registered with the England
and Wales Companies Registration Office under No. 621757, represented by John
Reeve in his capacity as Chairman, fully empowered for the purposes hereof,
hereinafter "WCG",
Willis Corroon Europe B.V., a Netherlands law company whose registered office is
at Marten Meesweg 51, 3068 AV Rotterdam, Netherlands, registered with the
Rotterdam Commercial Registry under No. 135.835, represented by Sarah Turvill,
acting as a director and fully empowered for the purposes hereof,
hereinafter "WCE BV",
AND:
Gras Savoye & Cie, a societe en commandite par actions, with a capital of FRF
9,952,000 divided into 49,760 shares of FRF 200 each (hereinafter the "Shares"),
having its registered office at 2, rue Ancelle, 92200 Neuilly-sur-Seine,
registered with the Nanterre Commercial and Companies Registry under number B
457 509 867, represented by Mr. Patrick Lucas, in his capacity as general
partner gerant, fully empowered for the purposes hereof,
hereinafter the "Company",
<PAGE>
Agreement
page 3
WITNESSETH:
On the date hereof, the Company's capital is held as indicated in Exhibit 1.
WCG is considering acquiring, through a company of the WCG Group (as defined
below), a shareholding in the Company's capital with the aim of developing with
it a worldwide network of insurance and reinsurance brokers placed among the
leaders in each region of the world, according to the principles set forth in
the "Framework for Partnership" in Exhibit 7 hereto.
In the context of the acquisition of this shareholding, the parties hereto have
decided to enter into this Agreement in order to determine their respective
rights and obligations in connection with their shareholding in the Company.
NOW, THEREFORE, IT HAS BEEN AGREED AS FOLLOWS:
ARTICLE 1 - ACQUISITION OF A SHAREHOLDING BY THE WCG GROUP
Certain shareholders of the Company and WCG agreed to sign a share purchase
agreement (the "Share Purchase Agreement"), pursuant to which a company of the
WCG Group (as defined below) will purchase, subject to certain conditions, and
such shareholders will sell, approximately 30.22% of the Company's capital,
i.e., 15,105 Shares which, with the 680 GS Shares acquired simultaneously from
GS Euro Finance in exchange for Willis Corroon France shares, corresponds to
approximately 31.72% of the capital and approximately 33.36% of the voting
rights of the Company, (hereinafter the "Initial Shareholding"). The Share
Purchase Agreement and the Share Exchange Agreement are attached to this
Agreement respectively in Exhibits 2 and 9.
The parties represent that the acquisition and maintenance by the WCG Group of
the Initial Shareholding giving it more than 33.35% of the Company's voting
rights is an essential condition of its consent to the transactions provided for
in this Agreement and its Exhibits.
ARTICLE 2 - PROMISES TO BUY AND TO SELL
On condition that the WCG Group has acquired the Initial Shareholding, the
signatories hereto shall be bound by the promises to buy and to sell attached
hereto in Exhibits 3, 3 bis, 3 ter, 4 and 5.
ARTICLE 3 - AMENDMENTS TO THE BY-LAWS
<PAGE>
Agreement
page 4
The parties agree that the societe en commandite par actions structure must
continue for as long as Messrs. Gras or Lucas or Naftalski are general partners,
it being stipulated that by the deadline of December 31, 2009, the Company will
no longer have any general partners and will have to be transformed into a
societe anonyme, without any provisions of the by-laws granting any special
advantage to any one of the shareholders, provided that the WCG Group is the
owner of 50.1% of the Company's capital or voting rights.
The Company's by-laws must have been amended according to the text contained in
Exhibit 6 no later than on the Closing Date and they shall keep such form for as
long as the Company has the form of a societe en commandite par actions.
It is specified that the shareholders who are individuals and members of the
Gras and/or Lucas families are, on the date hereof, those indicated as such in
Exhibit 1 hereto.
ARTICLE 4 - SHAREHOLDERS' AGREEMENT
All the shareholders and general partners of the Company expressly agree as
follows:
(i) The parties agree that the WCG and GS Groups (defined respectively as all
of the companies controlled by WCG on the one hand and the Company on the
other hand, it being understood that the concept of control shall mean
here a direct or indirect holding of more than 50% of the capital or the
actual control of management) shall organize their relations in accordance
with the principles defined in the document entitled "Framework for
Partnership", attached in Exhibit 7.
(ii) An Advisory Committee of the Company shall be created as from the Closing
Date until the transformation of the Company into a societe anonyme. This
Advisory Committee shall be composed:
o of the general partners,
o of 2 representatives of WCG.
This Advisory Committee shall meet from time to time, a minimum of once
per quarter, and its task will be to discuss the following issues:
* operational and financial relations,
* the development of the activity of the Company and the Subsidiaries,
and the situation of the insurance brokerage market,
* the future of the Company and the Subsidiaries,
<PAGE>
Agreement
page 5
* the adoption of any new computer system or any new management
software program having a certain importance,
* the evaluation of the solvency of insurance companies,
* the financial objectives.
(iii) The parties agree that the Company shall distribute every year to the
shareholders, in the form of dividends, a minimum amount representing 40%
of the Company's distributable profits (hereinafter the "Dividend
Distribution"). However, the dividend distribution made within the legal
time limit following the approval of the Company's accounts closed on
December 31, 1997 and December 31, 1998 shall represent for each of the
two years a minimum amount of FRF 10,000,000 for the WCG Group's Initial
Shareholding.
For subsequent years, the parties agree to fix the amount of the dividends
to be paid to the shareholders by the Company at a level which takes into
account the Company's investment budgets and working capital. Upon failure
to agree, the amount of the dividends distributed shall be the Dividend
Distribution. Subject to the rights of the general partners in accordance
with the provisions of Article 18-3(degree) of the Company's by-laws, it
is specified that the dividend distributions shall be identical for all
the Company's shareholders, in proportion to their actual shareholding in
the Company's capital.
Messrs. Gras, Lucas and Naftalski guarantee that the competent corporate
bodies of the Company's current or future Subsidiaries shall distribute an
amount of dividends which is sufficient to allow the application of this
clause.
(iv) Within a period of time compatible with the Company's material
requirements, the Company shall use reasonable efforts to supply financial
and accounting information concerning the GS Group regularly to WCG in
accordance with and in the form of Exhibit 8.
Before this procedure is able to be set up, the Company shall provide WCG
on a quarterly basis with the income statements concerning all its
Subsidiaries (as defined in the Share Purchase Agreement) which are
French, and its important foreign Subsidiaries, and on a six-monthly basis
with a consolidated balance sheet of the Company.
Immediately as from the Closing Date, the Company shall also provide WCG
on a monthly basis with an income statement concerning Gras Savoye S.A.,
in the available form, i.e., without the inventory corrections having a
connection with turnover.
(v) The parties expressly undertake throughout the entire term hereof not to
make any request to the relevant stock market authorities for the
<PAGE>
Agreement
page 6
introduction onto a French or foreign stock market, whether regulated or
not, of any of the securities of the Company or of any one of the
Subsidiaries.
(vi) The parties agree that the provisions referred to in Article 10-3 of the
Company's by-laws requiring the prior authorization of the Supervisory
Board by a three-quarters majority shall be applied to all the Company's
Subsidiaries (as defined in the Share Purchase Agreement), it being
understood that the amounts referred to in Article 10-3 of the Company's
by-laws include all transactions carried out by the Company's
Subsidiaries. In this regard, the Company's general partners shall set up
internal procedures in each company of the GS Group allowing these
provisions to be applied.
(vii) As from the date hereof, and throughout the entire term of this Agreement,
none of the general partners and none of the Class A individual
shareholders of the Company, for as long as they carry on any professional
activity whatsoever within or for the benefit (employment contract or
consultancy agreement) of the Company and/or the Subsidiaries,
(a) shall hold, or have an option to acquire, directly or indirectly, on
any grounds whatsoever, a shareholding in a company or enterprise
carrying on, principally, activities which are the same as or
compete with those of the Company or one of the Subsidiaries,
subject however to the shares or securities held by one of them in
one or more companies meeting the above conditions which are listed
on a regulated or non-regulated market in France or abroad, provided
that such a shareholding does not exceed 5% of the capital or voting
rights of the company concerned;
(b) shall receive any compensation whatsoever from persons supplying
goods or services to the Company or one of the Subsidiaries, or from
persons acquiring goods or services from the Company or one of the
Subsidiaries, insofar as the nature of the connection at the origin
of such compensation constitutes a conflict of interest with the
Company or one of the Subsidiaries.
(viii) As from the time they cease their duties as gerant, or upon expiration
of their capacity as general partner, for any reason whatsoever, Messrs.
Lucas, Gras or Naftalski each undertake not to engage in any activity in
the insurance and reassurance brokerage area resulting, directly or
indirectly, in their personal name, on behalf of third parties and more
generally in any capacity whatsoever, in their dealing with or
soliciting in any manner whatsoever any one of the GS Group's clients
existing as at the date they cease their duties as gerant or their
capacity as general partner expires, or having been a client of the GS
Group within the
<PAGE>
Agreement
page 7
12 months preceding such event.
This non-compete undertaking is made for a 3-year period following
respectively the cessation of their duties as gerant or the expiration of
their capacity as general partner, and shall be limited to French
territory.
(ix) The WCG Group and the Company, both on its own behalf and for any company
of the GS Group, each undertake to make available to the other the
resources necessary to offer a quality international homogeneous service
to their clients immediately upon signature hereof.
This undertaking shall remain in force for at least two years (i) as from
the date hereof, in the event that the share transfer contemplated in the
Share Purchase Agreement is not completed for any reason whatsoever or
(ii) as from the actual completion of the change of control of WCG, if
Promise to Sell No. 2 is exercised by the Beneficiaries of such promise.
(x) The parties have taken note that GS Euro Finance holds as of this day
3,120 shares of the Company, these self-held shares not having voting
rights, and take note that the WCG Group's Initial Shareholding gives it
more than approximately 33.35% of the Company's voting rights due to the
existence of the still remaining self-held shares.
The shareholders and the general partners undertake to ensure that any
transaction concerning the still remaining self-held shares shall be
carried out with WCG's prior agreement, in order to preserve a minimum
percentage holding of 33.35% of the Company's voting rights.
(xi) The parties agree on the principle of setting up, at Company level and
after the Closing Date, a Stock Option Plan for shares of the Company in
favor of certain employees of the GS Group, by means of purchase options
covering the existing shares of the Company, the terms and conditions of
which shall be approved by the Company's corporate structures in
accordance with the by-laws and the law.
In particular, any use of the Company's shares held by the Belgian
company, GS Euro Finance under this Stock Option Plan shall be authorized
in accordance with the terms and conditions described above and must be
carried out so that the WCG Group has the option of maintaining the
minimum percentage holding of 33.35% of the Company's voting rights.
(xii) The parties agree that it is in their interest and in the interest of the
Company that a French institutional or financial group acquire a
significant shareholding in the Company's capital, it being specified that
this shareholding must be less than the WCG Group's Initial Shareholding,
unless WCG otherwise agrees.
<PAGE>
Agreement
page 8
(xiii) The parties undertake that the general meeting of the Company shall not
amend Article 9.II.2(degree).B of the Company's by-laws as long as each
and all of the Corporate Beneficiaries (within the meaning of the
Promises to Buy) have not exercised their option to sell, wholly or
partially, pursuant to such Promises to Buy.
(xiv) For the purposes of the Promises to Buy and to Sell referred to in Article
2 above, the parties undertake that the Company shall not carry out any
transaction involving the capital of the Company which may have an impact
on the Price per Share, such as, in particular, a division of the par
value or a distribution of free shares, without the parties having agreed
to the modifications to be made to the Promises to Buy and to Sell.
ARTICLE 5 - TRANSFER OF THE WILLIS CORROON FRANCE S.A. SHARES
The WCG Group and GS Euro Finance agreed to sign a share exchange agreement,
pursuant to which GS Euro Finance will acquire, on the Closing Date, 100% of the
capital of Willis Corroon France S.A. so that this company is integrated into
the GS Group. This share transfer shall be carried out in exchange for 680
Shares held by GS Euro Finance (hereinafter the "Share Exchange Agreement"). The
Share Exchange Agreement is attached in Exhibit 9 hereto.
The parties agree to use their best efforts so that the management employees and
managers of Willis Corroon France S.A. (it being specified that Mr. Nicholas
Davenport shall not be integrated into the GS Group) are integrated into the GS
Group at positions of responsibility and at conditions of remuneration which are
comparable with those they have at the moment and are compatible with those
currently in force in the GS Group for persons holding equivalent positions at
the time of their integration.
ARTICLE 6 - CONDITION PRECEDENT
The entry into force of this Agreement, with the exception of Article 4 (v),
(vii), (viii) and (ix), Article 7 and Article 12, shall be subject to the
condition precedent of the WCG Group's actually completing the acquisition of
the Initial Shareholding, as provided for in the Share Purchase Agreement
attached in Exhibit 2 and the Share Exchange Agreement attached in Exhibit 9
hereto, which must occur by December 31, 1997 or at a later date in the event of
a contractual extension, as provided for in such Share Purchase Agreement and
Share Exchange Agreement.
<PAGE>
Agreement
page 9
ARTICLE 7 - OTHER UNDERTAKINGS
(i) Until the Closing Date or prior thereto, on the date on which this
Agreement automatically lapses for any reason whatsoever, the shareholders
and general partners undertake (a) not to sell the Shares, except for an
individual's donation to his or her descendants, (b) not to start
negotiations without the prior agreement of WCG with any third party for
the sale of all or part of the Shares and to stop any negotiations already
started for this purpose, (c) not to pledge the Shares to be transferred
under the Share Purchase Agreement or use them as collateral in any manner
whatsoever, particularly by means of a transfer to a financial instruments
account pledged in favor of any person whatsoever, and (d) more generally
not to do anything which is likely to prevent or delay the actual transfer
of the Shares to be transferred to the WCG Group on the Closing Date. All
the undertakings provided for in this paragraph shall also apply to the GS
Shares held by GS Euro Finance to be delivered to the WCG Group in
exchange for 100% of the Willis Corroon France S.A. shares.
(ii) Reciprocally, until the Closing Date or prior thereto, on the date on
which this Agreement automatically lapses for any reason whatsoever, WCG
undertakes not to start negotiations, directly or indirectly, for the
acquisition principally of any French insurance or reinsurance brokerage
company and/or to stop any negotiations already started for this purpose.
(iii) WCG undertakes that, after the Closing Date, Mr. Patrick Lucas shall be
appointed as a member of the Board of Directors of WCG, in accordance with
the provisions of WCG's by-laws. In addition, WCG undertakes, as from the
Closing Date, to appoint, subject to terms and conditions to be
determined, management employees and managers of the GS Group to the
appropriate international and/or regional boards or committees of the WCG
Group.
Reciprocally, as from the Closing Date, the GS Group undertakes to appoint
management employees and managers of the WCG Group to the equivalent or
appropriate boards or committees of the GS Group.
(iv) No later than on the Closing Date, the general partners of the Company and
the Company undertake that the entire capital of GS Euro Finance less one
share shall be held directly or indirectly by the Company.
(v) WCG undertakes that the commission sharing agreements in force on the date
hereof, pursuant to which Willis Corroon France shares:
(i) commissions with Willis Corroon Faber & Dumas Limited on the
<PAGE>
Agreement
page 10
basis of a 50/50 share, with respect to French business covered by
reinsurance agreements (whatever the nationality of the reinsurance
companies);
(ii) with other companies of the WCG Group on bases which are currently
in force with respect to the other types of business not referred to
in (i) above,
shall be maintained. They may be modified with the sole agreement of the
companies of the WCG Group concerned and the Company.
ARTICLE 8 - TERM
This Agreement shall be entered into for a 13-year term.
ARTICLE 9 - MISCELLANEOUS PROVISIONS
(i) This Agreement shall be governed by French law.
(ii) Any disputes which might arise between the parties in connection with the
interpretation and performance of this Agreement shall be submitted to the
exclusive jurisdiction of the Nanterre Commercial Court, the place where
the Company's registered office is located, where all the parties
expressly declare that they elect domicile for the purposes hereof.
(iii) This Agreement and, as applicable, the attached documents, shall be the
subject of a press release which will be issued publicly immediately after
its signature and which must have been approved by all the parties hereto.
With the exception of the information which may be required by law or the
stock market regulations applicable to WCG or by law or the stock market
regulations applicable to the GS Group, any information concerning this
Agreement or the attached documents shall be confidential.
Any information obtained by any one of the parties hereunder shall be
confidential in nature and shall in any event continue to be covered by
the previously signed confidentiality undertaking. This undertaking shall
continue in the event that this Agreement lapses automatically.
(iv) This Agreement cancels and replaces any other agreements which might exist
between the parties relating to its subject matter, including, on the
Closing Date, the shareholders' agreement dated June 26, 1992 entered into
between Mr. Patrick Lucas, Mr. Emmanuel Gras, Athena, AGF and UAP, and
known to such parties only.
<PAGE>
Agreement
page 11
(v) A refusal or a delay by one of the parties in exercising its rights
arising out of this Agreement shall not be deemed to constitute a waiver
of such rights or of other rights for the future.
(vi) The respective obligations of each of the parties under this Agreement
and its Exhibits shall form an indivisible whole. If for any reason
whatsoever one of the clauses of this Agreement or its Exhibits proved
to be invalid or unenforceable or if the fulfillment of any obligation
by one of the parties was prevented or significantly delayed as a result
of the failure to obtain any administrative authorization or as a result
of any regulation, the parties undertake to negotiate in good faith as
promptly as possible any provision intended to replace the invalid or
unenforceable clause, and any other clause which may be affected, as the
case may be, respecting the general equilibrium of their respective
initial undertakings. It is however specified that the invalidity or
unenforceability of any one of the non-essential clauses of this
Agreement or its Exhibits shall not be such as to affect the validity or
enforceability of the other clauses of this Agreement or its Exhibits.
(vii) Each party shall assume the fees and expenses of its own counsel,
accountants, brokers, representatives and attorneys-in-fact in
connection with this Agreement.
(viii) This Agreement shall be binding on the successors, heirs, legal
representatives, assignees and assigns, whether for valuable
consideration or as a gift, of the parties and shall inure to their
benefit.
(ix) The Exhibits to this Agreement form an integral part hereof.
(x) In the event that any one of the provisions hereof contradicts the text
of any one of the Exhibits hereto, the text of such Exhibits shall
prevail.
(xi) Any shareholder of the Company signing this Agreement guarantees that
all of the Company's shareholders, existing now or on the Closing Date,
and any subsequent transferee of the Shares, shall ratify this Agreement
by the Closing Date, directly or on the basis of a power of attorney
according to the model attached in Exhibit 10. In this regard, new
originals of this Agreement shall be signed, directly or on the basis of
a power of attorney, no later than on the Closing Date.
(xii) In the event of the transfer of the Shares to a party outside of this
Agreement, the recording of this new shareholder as the owner of the
Company's securities shall be subordinated to such shareholder's prior
written acceptance, with no restrictions or reservations, of this
Agreement.
(xiii) All the Gras Shareholders, as defined in Exhibit 1, represent that they
<PAGE>
Agreement
page 12
have a common interest and they shall receive a single original of this
Agreement and its Exhibits, delivered to Mr. Emmanuel Gras, to whom the
selling shareholders grant power to receive this original, Mr. Emmanuel
Gras being responsible for delivering certified true copies to them.
(xiv) All the Lucas Shareholders, as defined in Exhibit 1, represent that they
have a common interest and they shall receive a single original of this
Agreement and its Exhibits, delivered to Mr. Patrick Lucas, to whom the
selling shareholders grant power to receive this original, Mr. Patrick
Lucas being responsible for delivering certified true copies to them.
(xv) All the Other Individual Shareholders, as defined in Exhibit 1,
represent that they have a common interest and they shall receive a
single original of this Agreement and its Exhibits, delivered to Mr.
Daniel Naftalski, to whom the selling shareholders grant power to
receive this original, Mr. Daniel Naftalski being responsible for
delivering certified true copies to them.
(xvi) All the other signatories of this Agreement shall each receive an
original of this Agreement and its Exhibits.
(xvii) It is specified that in the event of the failure by any one of the
parties to respect its undertakings under this Agreement and its
Exhibits and independently of any provisions set forth herein, each of
the parties shall be able to use all remedies at law to seek
compensation for the damage suffered.
(xviii) The Company undertakes to provide all the parties at any time at their
request with all information concerning the price and the components
used to calculate it in order to allow the parties to determine the
conditions for the exercise of the Promises to Buy and to Sell provided
for herein.
ARTICLE 10 - INTERVENTION OF GRAS SAVOYE & CIE
The Company has familiarized itself, in addition to its own undertakings, with
the undertakings referred to in this Agreement and undertakes to do what is
necessary for them to be respected.
ARTICLE 11 - REPRESENTATIONS AND WARRANTIES OF WCG
WCG represents and warrants that it has full power and has obtained all
necessary authorizations to enter into and sign this Agreement, that its
undertakings are valid and enforceable in accordance with their terms, subject
<PAGE>
Agreement
page 13
to the condition precedent stipulated in Article 4 (f) of the Share Purchase
Agreement. WCG guarantees the undertakings made by any company of the WCG Group
that it might substitute for itself pursuant hereto.
ARTICLE 12 - ATHENA - UAP - AGF
The parties expressly acknowledge that Athena and UAP, with the exception of
what is stipulated below, shall not be held liable in respect of any one of the
other parties hereto for any reason whatsoever. The only obligations by which
Athena and UAP are bound by this Agreement are:
(i) to respect the Promise to Buy (Exhibit 3 bis for Athena and Exhibit 3 ter
for UAP) and Promise to Sell No. 1, in accordance with Article 2 of this
Agreement;
(ii) to vote at Supervisory Board and general meetings in such a way as to
allow the accomplishment of the provisions of this Agreement; and
(iii) to respect the provisions of Articles 4 (v), 8 and 9, with the exception
of Article 9 (xi).
The parties expressly acknowledge that AGF, with the exception of what is
stipulated below, shall not be held liable in respect of any one of the other
parties hereto for any reason whatsoever. The only obligations by which AGF is
bound by this Agreement are:
(i) to respect the Share Purchase Agreement (Exhibit 2), in accordance with
Article 1 of this Agreement;
(ii) to vote at Supervisory Board and general meetings in such a way as to
allow the accomplishment of the provisions of this Agreement; and
(iii) to respect the provisions of Articles 4 (v), 8 and 9, with the exception
of Article 9 (xi).
Executed in 10 originals,
For all the signatories excluding WCG and WCE BV, in Neuilly-sur-Seine, on July
23, 1997 at 12.00 p.m..
For WCG and WCE BV, in London, on July 23, 1997 at 5.00 p.m.
For the shareholders:
<PAGE>
Agreement
page 14
- ------------------------------------- ------------------------------------
For the Gras Shareholders For the Lucas Shareholders
By Mr. Emmanuel Gras By Mr. Patrick Lucas
- -------------------------------------
For the Other Individual Shareholders
By Mr. Daniel Naftalski
- ------------------------------------- ------------------------------------
Assurances Generales de France IART UAP Incendie - Accidents
By Guy Lallour By Adrien Cadieux
- -------------------------------------
Athena
By Daniel Ehrmann
For the general partner gerants:
- ------------------------------------- ------------------------------------
Mr. Emmanuel Gras Mr. Patrick Lucas
- -------------------------------------
Mr. Daniel Naftalski
<PAGE>
Agreement
page 15
For the Company:
- -------------------------------------
Gras Savoye & Cie
By Mr. Patrick Lucas
For GS Euro Finance:
- -------------------------------------
Gras Savoye Euro Finance
By Mr. Patrick Lucas
For the Willis Corroon Group:
- ------------------------------------- ------------------------------------
Willis Corroon Group Plc Willis Corroon Europe B.V.
By Mr. John Reeve By Mrs. Sarah Turvill
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT 2 TO THE AGREEMENT
SHARE PURCHASE AGREEMENT
BETWEEN THE UNDERSIGNED
1. Assurances Generales de France IART, a French law company with its
registered office at 87 rue de Richelieu, 75002 Paris, registered with the
Paris Commercial and Companies Registry under No. B 542 110 291,
represented by Guy Lallour acting as Directeur DIDRE and fully empowered
for the purposes hereof,
2. The transferring individual shareholders of Gras Savoye & Cie, designated
as such in Exhibit 1 to the Agreement,
hereinafter jointly referred to as the "Transferors";
AND
Gras Savoye Euro Finance S.A., a Belgian law company having its registered
office at 8 avenue Bel-Air, 1180 Uccle, Belgium, registered with the Brussels
Commercial Registry under No. 258.054,
represented by Patrick Lucas acting as President and fully empowered for the
purposes hereof,
hereinafter referred to as "GS Euro Finance";
AND
Willis Corroon Group Plc., an English law company with its registered office at
Ten Trinity Square, London EC3P 3AX, United Kingdom, registered with the England
and Wales Company Registration Office under No. 621757,
represented by John Reeve acting as Chairman and fully empowered for the
purposes hereof,
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 2 to the Agreement
Share Purchase Agreement
page 2
with the option to substitute for itself hereunder any company of the WCG Group
(as defined in the Agreement),
hereinafter the "Transferee".
WHEREAS:
A. Gras Savoye et Cie is a societe en commandite par actions with a capital of
FRF 9,952,000 divided into 49,760 shares of FRF 200 each, with its registered
office at 2 rue Ancelle, 92200 Neuilly sur Seine, registered at the Nanterre
Commercial and Companies Registry under number B 457 509 867 (hereinafter
referred to as the "Company"). At the date hereof, the capital of the Company is
held as described in Exhibit 1 to the Agreement.
The shares of the Company shall hereinafter be referred to as the "GS Shares".
B. The Company has direct or indirect shareholdings in several other companies
or other legal entities, a list of which, indicating the percentage of such
shareholdings, is attached in Exhibit 1 to the Share Purchase Agreement. Those
of such companies or other legal entities in which the Company directly or
indirectly owns more than 50% of the capital or ensures the actual control of
the management shall hereinafter be collectively referred to as the
"Subsidiaries".
C. The Transferee has informed the Transferors that it is interested in
purchasing approximately 30.22% of the GS Shares, i.e. 15,105 GS Shares which,
with the 680 GS Shares acquired simultaneously from Gras Savoye Euro Finance,
corresponds to approximately 31.72% of the capital and approximately 33.36% of
the voting rights of the Company, and the Transferors have also indicated that
they are interested in such transfer.
D. Among the companies of the Gras Savoye Group, the following are of particular
importance, i.e.: (i) Gras Savoye & Cie S.C.A., (ii) Gras Savoye S.A., (iii)
Gras Savoye Reassurance S.A. (iv) SAGERI S.A., (v) AMI, (vi) Gras Savoye Lanvin
Lespiau, (vii) GS Re and (viii) Gras Savoye Euro Finance. These eight companies
are hereinafter collectively referred to as the "Main Companies".
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 2 to the Agreement
Share Purchase Agreement
page 3
NOW, THEREFORE, THE FOLLOWING HAS BEEN AGREED UPON:
1. Acquisition
(a) Subject to ordinary legal guarantees and to the terms and conditions
of this Share Purchase Agreement, the Transferors shall jointly transfer to the
Transferee, and the Transferee shall acquire from the Transferors, 15,105 GS
Shares representing approximately 30.22% of the capital and, with the 680 GS
Shares acquired simultaneously from GS Euro Finance, approximately 31.72% of the
capital and approximately 33.36% of the voting rights of the Company, it being
specified that the Transferee intends to purchase shares of a Transferor only if
it is in a position to purchase shares from the other Transferors at the same
time.
The transferred GS Shares shall hereinafter be referred to as the
"Shares".
(b) The transfer of the Shares shall take effect on the date of the
effective transfer of the Shares (hereinafter referred to as the "Closing Date")
and the Transferee shall acquire the right to the full enjoyment of the Shares
as from such date, with all the rights to dividends attached thereto. The class
A Shares purchased by the Transferee in addition to the class B Shares purchased
just before, shall as a matter of course become class B Shares on the Closing
Date, pursuant to the Company's by-laws in effect as from the Closing Date.
(c) The transfer and acquisition of the Shares shall only take place if
all the conditions precedent set forth in Article 4 below have been fulfilled by
the Closing Date.
2. Price of the Shares
(A) Base Price
The base price of the Shares (hereinafter the "Base Price") is FRF
453,406,785 (four hundred and fifty-three million four hundred and six thousand
seven hundred and eighty-five French francs), i.e. FRF 30,017 (thirty thousand
and seventeen French francs) per Share, (hereinafter referred to as the "Base
Price per Share"). The Base Price has been determined on the basis of a
valuation of the Company of FRF 1,400,000,000 (one billion four hundred million
French francs).
(B) Deciding Elements and Adjustment of the Price
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 2 to the Agreement
Share Purchase Agreement
page 4
If the accounting and legal audit conducted in accordance with Article 4
(d) below (hereinafter the "Audit") reveals one or more quantifiable or
unquantifiable elements or facts, contrary to any of the deciding elements of
the acquisition of the Shares indicated in Exhibits 2A and 2B to the Share
Purchase Agreement (hereinafter the "Quantifiable Deciding Elements", the
"Unquantifiable Deciding Elements" and together the "Deciding Elements"), the
Transferee shall inform the Representative of the Transferors (as defined in
Article 9 below) thereof no later than 8 business days in France (hereinafter
the "Business Days") following the date of the end of the Audit set for October
20, 1997 at the latest, unless extended contractually (hereinafter referred to
as the "Date of the End of the Audit"). The Transferee shall attach all the
necessary information to such notification along with copies of any necessary
documentary proofs. The notification shall also include the value of the
Adjustment of the Price per Share (as defined below) claimed by the Transferee
or its intention not to carry out the acquisition of the Shares, under the
conditions set forth in this Article.
(i) Inaccuracy in respect of any of the Quantifiable Deciding Elements
If the Audit reveals one or more elements or facts in contradiction with
any one of the Quantifiable Deciding Elements, a price reduction shall be
calculated in accordance with the adjustment formula contained in Exhibit 3
(hereinafter the "Adjustment of the Price per Share"), subject, however, to the
application of the Right of Withdrawal mentioned below.
The Transferors, through the Representative of the Transferors, may notify
the Transferee, within 6 Business Days following the notification received from
the Transferee, of any dispute concerning such notification (hereinafter the
"Notification in Response"), failing which they shall be deemed to have agreed
to all the elements and to the Adjustment of the Price per Share notified by the
Transferee, as a result of an inaccuracy in respect of one or more Quantifiable
Deciding Elements. In the event of a dispute, the parties shall negotiate in
good faith in order to reach an agreement on the existence or the amount of the
Adjustment of the Price per Share.
(a) Dispute of the Amount of the Consolidated Equity at June 30, 1997 and
Absence of Dispute of the Estimated Consolidated Net Turnover at December 31,
1997 (excluding acquisitions) and Absence of an Estimate by the Transferee of an
Estimated Group Share Consolidated Net Result at December 31, 1997 of less than
FRF 30,000,000
In the event of the occurrence of the 4 following conditions which are
cumulative:
(x) dispute by the Transferors of the amount of the Consolidated Equity
at June 30, 1997 (as defined in Exhibit 2A) estimated by
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 2 to the Agreement
Share Purchase Agreement
page 5
the Transferee;
(y) absence of dispute by the Transferors of the Estimated Consolidated
Net Turnover at December 31, 1997 (excluding acquisitions) (as
defined in Exhibit 2A) estimated by the Transferee;
(z) absence of an estimate by the Transferee of an Estimated Group Share
Consolidated Net Result at December 31, 1997 (as defined in Exhibit
2A) of less than FRF 30,000,000;
(t) absence of agreement between the parties within 6 Business Days
following the Notification in Response received by the Transferee,
the amount of the Consolidated Equity at June 30, 1997 shall be settled in
accordance with the Expert Assessment Procedure (as defined below).
The Expert shall accordingly determine the Price per Share within the
period defined in Article 2. (B) (ii) below, and in any event prior to the
Closing Date, by applying the formula contained in Exhibit 3.
(b) Dispute of the Amount of the Estimated Consolidated Net Turnover at
December 31, 1997 (excluding acquisitions) without such amount being estimated
by the Transferee at less than FRF 850,000,000 and Absence of Estimate by the
Transferee of an Estimated Group Share Consolidated Net Result at December 31,
1997 of less than FRF 30,000,000
In the event of the occurrence of the 3 following conditions which are
cumulative:
(x) dispute by the Transferors of the amount of the Estimated
Consolidated Net Turnover at December 31, 1997 (excluding
acquisitions) (as defined in Exhibit 2A) estimated by the Transferee
without such amount being estimated by the Transferee at less than
FRF 850,000,000;
(y) absence of an estimate by the Transferee of an Estimated Group Share
Consolidated Net Result at December 31, 1997 (as defined in Exhibit
2A) of less than FRF 30,000,000;
(z) absence of agreement between the parties within 6 Business Days
following the Notification in Response received by the Transferee,
the amount of the Estimated Consolidated Net Turnover at December 31, 1997
(excluding acquisitions) shall be determined pursuant to the Expert Assessment
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 2 to the Agreement
Share Purchase Agreement
page 6
Procedure.
In addition, in the event that the Transferors dispute the amount of the
Consolidated Equity at June 30, 1997 as estimated by the Transferee, and in the
absence of an agreement between the parties within 6 Business Days following the
Notification in Response received by the Transferee, the amount of the
Consolidated Equity at June 30, 1997 shall also be determined in accordance with
the Expert Assessment Procedure.
The Expert shall accordingly determine the Price per Share within the
period of time set forth in Article 2. (B) (ii) below, by applying the formula
contained in Exhibit 3.
However, in the event that the Expert is unable to determine the amount of
the Estimated Consolidated Net Turnover at December 31, 1997 (excluding
acquisitions), it would determine the Price per Share on the basis of the amount
of the Actual Consolidated Net Turnover at December 31, 1997 and the amount of
the Consolidated Equity at December 31, 1997, as the case may be.
(c) Right of Withdrawal
Notwithstanding any provision to the contrary herein, and in addition to
the provisions set forth in Article 2 (B) (iii) below, the Transferee shall be
entitled, at its election, to a right of withdrawal (hereinafter the "Right of
Withdrawal") under the following conditions.
If, at the end of a period of 6 Business Days following the Notification
in Response received by the Transferee, the parties agree that (x) the total
price of the Shares is less than or equal to FRF 388,636,545 (three hundred and
eighty-eight million six hundred and thirty-six thousand five hundred and
forty-five French francs), i.e. FRF 25,729 per Share, following the application
of the adjustment formula contained in Exhibit 3 hereto, or that (y) the
Estimated Group Share Consolidated Net Result at December 31, 1997 is less than
FRF 30,000,000, or that (z) the Estimated Consolidated Net Turnover at December
31, 1997 (excluding acquisitions) is less than FRF 850,000,000, the Transferee
may notify its decision to the Transferors to end all of the transactions
provided for herein within 6 Business Days following the parties' agreement. In
such event, this Share Purchase Agreement shall automatically lapse, as shall
any related and/or inseparable document (with the exception of the provisions of
the Agreement expressly stipulated as surviving the lapsing of this Share
Purchase Agreement), without any indemnity being due by either of the parties.
In the event that, at the end of a period of 6 Business Days following the
Notification in Response received by the Transferee, the parties disagree on any
one of the assertions made in (x), (y) or (z) above, the Closing Date shall be
postponed until the Expert fails to confirm, if such is the case, in the context
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<PAGE>
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Exhibit 2 to the Agreement
Share Purchase Agreement
page 7
of the Expert Assessment Procedure, the reality of the assertion or assertions
made.
Should the Expert determine the reality of at least one of the assertion
or assertions made by the Transferee referred to in (x), (y) or (z) above, the
Transferee may notify the Transferors, within 6 Business Days following the
confirmation by the Expert of the reality of at least one of the assertion or
assertions made by the Transferee referred to in (x), (y) or (z) above, of its
decision to end all of the transactions provided for herein. In such a case,
this Share Purchase Agreement shall automatically lapse, as shall any related
and/or inseparable document (with the exception of the provisions of the
Agreement expressly stipulated as surviving the lapsing of this Share Purchase
Agreement), without any indemnity being due by any one of the parties.
In all cases where the Transferee does not exercise its Right of
Withdrawal recognized by the parties or the Expert, and decides to acquire the
Shares, the Price per Share shall be determined in accordance with the formula
contained in Exhibit 3 on the basis of the Actual Consolidated Net Turnover at
December 31, 1997 and the Consolidated Equity at December 31, 1997, it being
specified that if the Price per Share is unable to be determined on the Closing
Date, the amount of FRF 25,729 per Share shall be paid on such Date.
In all cases where the Transferee decides to exercise its Right of
Withdrawal, recognized by the parties or the Expert, the parties undertake to
meet in order to determine together the optimum terms and conditions for the
public announcement, if any, of the exercise of this Right of Withdrawal.
Should the Expert fail to confirm the reality of all the assertions made
by the Transferee referred to in (x), (y) and (z) above, the Transferee shall be
required to acquire the Shares. The Expert shall determine the amount of the
Estimated Consolidated Net Turnover at December 31, 1997 (excluding
acquisitions) and as required of the Consolidated Equity at June 30, 1997 and
shall deduce from it the Price per Share in accordance with the formula
contained in Exhibit 3 hereto. If the Expert, having failed to confirm the
reality of all of the assertions made by the Transferee referred to in (x), (y)
and (z) above, is however unable to determine the amount of the Estimated
Consolidated Net Turnover at December 31, 1997 (excluding acquisitions) and/or
the amount of the Estimated Group Share Consolidated Net Result at December 31,
1997, the parties agree that a sum corresponding to FRF 25,729 per Share shall
be paid on the Closing Date, the Expert being responsible for determining the
price supplement on the basis of the elements described in the following
paragraph.
In any event, if the Expert was unable to determine the amount of the
Estimated Consolidated Net Turnover at December 31, 1997 (excluding
acquisitions) and/or the amount of the Estimated Group Share Consolidated Net
Result at December 31, 1997, it would determine the Price per Share on
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<PAGE>
- --------------------------------------------------------------------------------
Exhibit 2 to the Agreement
Share Purchase Agreement
page 8
the basis of the Actual Consolidated Net Turnover at December 31, 1997 and, as
the case may be, of the amount of the Consolidated Equity at December 31, 1997.
It shall also determine, as the case may be, the Actual Group Share Consolidated
Net Result at December 31, 1997.
(ii) Expert Assessment Procedure
For the purposes hereof, the procedure described below is called the
"Expert Assessment Procedure".
Failing an agreement within a period of 6 Business Days following the
Notification in Response received by the Transferee, as provided in Article 2.
(B) (i) above, the parties expressly agree that the existence and/or the amount
of the inaccuracy alleged by the Transferee in respect of one or more of the
Quantifiable Deciding Elements or the reality of any one of the assertions
mentioned in Article 2. (B) (i) (c) above, shall be definitively settled,
without recourse of any kind, unless an obvious material error has been made, by
Coopers & Lybrand (hereinafter the "Expert"), within a period of 30 Business
Days following:
(x) the submission of the dispute to the Expert in order to determine
the amount of the Consolidated Equity at June 30, 1997, or
(y) the submission of the dispute to the Expert in order to determine
the amount of the Estimated Consolidated Net Turnover at December
31, 1997 (excluding acquisitions), or
(z) the submission of the dispute to the Expert in order to confirm or
not confirm the reality of the assertions notified by the Transferee
pursuant to paragraphs (x), (y) or (z) of Article 2 (i) (c) above,
or
(t) the submission of the dispute to the Expert, to which shall be
attached a copy of the Company's consolidated accounts for financial
year 1997, certified by the statutory auditor, in order to determine
the amount of the Actual Consolidated Net Turnover at December 31,
1997 or the amount of the Consolidated Equity at December 31, 1997
if the Expert has for any reason whatsoever to take into
consideration the amount of the Actual Consolidated Net Turnover at
December 31, 1997 or the amount of the Consolidated Equity at
December 31, 1997 or the Actual Group Share Consolidated Net Result
at December 31, 1997.
The dispute shall be submitted to the Expert at the request of the most diligent
party in writing with a copy sent to the other parties, and one-half of the
Expert's fees shall be paid by the Transferors and the other half by the
Transferee. The party referring the dispute to the Expert shall provide the
Expert with a copy of
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<PAGE>
- --------------------------------------------------------------------------------
Exhibit 2 to the Agreement
Share Purchase Agreement
page 9
the notifications exchanged between the parties. The Expert declared prior to
the signature hereof that it accepted this appointment. Accordingly, the Expert
shall determine the existence and/or the amount of the inaccuracy alleged by the
Transferee in respect of one or more Quantifiable Deciding Elements, the reality
of the assertions referred to in Article 2. (B) (i) (c) above, which
determination shall be binding on the parties, and the Adjustment of the Price
per Share which shall also be binding on the parties, in accordance with Article
1843-4 of the Civil Code, it being understood that not only the definitions
contained in Exhibit 2A hereto but also the adjustment formula contained in
Exhibit 3 and the accounting rules and methods contained in Exhibit 4 shall be
binding on the Expert. If the Expert was unable to complete its mission for any
reason whatsoever, with the exception of the cases in which it would be unable
to determine the amount of the Estimated Consolidated Net Turnover at December
31, 1997 (excluding acquisitions) or the amount of the Estimated Group Share
Consolidated Net Result at December 31, 1997, a new Expert chosen from the list
of experts of the Court of Appeal of Versailles would be appointed by mutual
agreement between the Transferee and the Representative of the Transferors or,
failing this, by the Presiding Judge of the Commercial Court of Nanterre to
which the matter shall be referred in summary proceedings (referes) upon the
request of the most diligent party. The Transferors and the general partner
gerants of the Company guarantee the Expert's access to the premises of the
Company and/or its Subsidiaries as the case may be and the provision by the
Company and/or its Subsidiaries to the Expert of any information that the Expert
might reasonably request in connection with the accomplishment of its mission.
(iii) Inaccuracy of any one of the Unquantifiable Deciding Elements
If the Audit reveals one or more elements or facts that are contrary to
any one of the Unquantifiable Deciding Elements, insofar as such Unquantifiable
Deciding Elements are not disclosed in Exhibit 5, the Transferee may decide not
to purchase the Shares. In such event, it shall notify the Representative of the
Transferors within 6 Business Days following the Date of the End of the Audit of
its intention not to purchase the Shares.
The elements disclosed by the Transferors in Exhibit 5 hereto (it being
observed that this Exhibit with its own Exhibits has been provided to the
Transferee on the date of signature hereof, the Transferee not having been able
to become familiar with them in a satisfactory manner, as acknowledged by the
parties) which the Transferee has not valued on the date of signature hereof,
shall not constitute the Transferee's waiver of asserting, within 6 Business
Dates following the Date of the End of the Audit, any one of such elements (and
in particular any elements contained in the Exhibits to Exhibit 5) which have or
may have a significant effect on the value or the outlook of the Company and, as
the case may be, of their being taken into consideration with respect to the
Quantifiable Deciding Elements.
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<PAGE>
- --------------------------------------------------------------------------------
Exhibit 2 to the Agreement
Share Purchase Agreement
page 10
In the event of a dispute by the Transferors concerning the inaccuracy in
respect of the Unquantifiable Deciding Element(s) in question, it shall be the
Transferors' responsibility to show within 10 Business Days following the
notification received from the Transferee that the Unquantifiable Deciding
Element(s) in question are in reality accurate or do not have a significant
effect on the value or outlook of the Company. The Transferors shall also have
the possibility within the same period of time of carrying out any relevant
rectification, and presenting proof thereof to the Transferee, with regard to
the Unquantifiable Deciding Element(s) in question. Failing that, this Share
Purchase Agreement shall automatically lapse, as shall any related and/or
inseparable document (with the exception of the provisions of the Agreement
expressly stipulated as surviving the lapsing of this Share Purchase Agreement),
without any indemnity being owed by either of the parties.
(C) Payment terms and conditions
(i) In the event of the determination of the Price per Share without
using the Right of Withdrawal procedure
(x) In the event of the definitive determination of the Price per
Share, as revised, as the case may be, on the Closing Date, two-thirds of the
total price of the Shares shall be paid in cash in French francs on the Closing
Date in the form of a bank check delivered to the Representative of the
Transferors, and the remaining third shall be paid in the form of promissory
notes maturing on July 1, 1998, made out to each Transferor and guaranteed by a
first rank European bank (AA or better rating), the whole to be delivered to the
Representative of the Transferors on the Closing Date.
(y) In the event that the Price per Share is not determined
definitively on the Closing Date, two-thirds of the amount of FRF 388,636,545
(three hundred and eighty-eight million six hundred and thirty-six thousand five
hundred and forty-five French francs), representing FRF 25,729 per Share, shall
be paid in cash in French francs on the Closing Date in the form of a bank check
delivered to the Representative of the Transferors and the remaining third shall
be paid in the form of promissory notes maturing on July 1, 1998, made out to
each Transferor and guaranteed by a first rank European bank (AA or better
rating), the whole to be delivered to the Representative of the Transferors on
the Closing Date.
In such event, two-thirds of the difference between the total price of the
Shares and FRF 388,636,545 (three hundred and eighty-eight million six hundred
and thirty-six thousand five hundred and forty-five French francs), increased by
interest at the rate of 4% as from the Closing Date, shall be payable to the
Representative of the Transferors within 10 Business Days following the
determination of the Price per Share, and the last third of the difference
between the total price of the Shares and FRF 366,741,166 (three
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<PAGE>
- --------------------------------------------------------------------------------
Exhibit 2 to the Agreement
Share Purchase Agreement
page 11
hundred and sixty-six million seven hundred and forty-one thousand one hundred
and sixty-six French francs) shall be paid in the form of promissory notes
maturing on July 1, 1998, made out to each Transferor and guaranteed by a first
rank European bank (AA or better rating), delivered to the Representative of the
Transferors at the same time as the above-mentioned payment.
(ii) In the event of the determination of the Price per Share after using
the Right of Withdrawal procedure
In the event that (a) the Expert fails to confirm the reality of all the
assertions made by the Transferee referred to in (x), (y) and (z) of Article 2.
(B) (i) (c) above, or (b) the Transferee waives exercising its Right of
Withdrawal, recognized by the Expert or by mutual agreement between the parties,
the total price of the Shares, as determined by the Expert or the parties in
accordance with the provisions of Article 2. (A) and (B) above and with the
formula in Exhibit 3, shall be payable as follows:
(x) In the event of the definitive determination of the Price per
Share, as adjusted, as the case may be, on the Closing Date, two-thirds of the
total price of the Shares shall be paid in cash in French francs on the Closing
Date in the form of a bank check delivered to the Representative of the
Transferors, and the remaining third shall be paid in the form of promissory
notes maturing on July 1, 1998, made out to each Transferor and guaranteed by a
first rank European bank (AA or better rating), the whole being delivered to the
Representative of the Transferors on the Closing Date.
(y) If the Price per Share is not definitively determined on the
Closing Date, two-thirds of the amount of FRF 388,636,545 (three hundred and
eighty-eight million six hundred and thirty-six thousand five hundred and
forty-five French francs), representing FRF 25,729 per Share, shall be paid in
cash in French francs on the Closing Date in the form of a bank check delivered
to the Representative of the Transferors, and the remaining third shall be paid
in the form of promissory notes maturing on July 1, 1998, made out to each
Transferor and guaranteed by a first rank European bank (AA or better rating),
the whole being delivered to the Representative of the Transferors on the
Closing Date.
In this case, two-thirds of the difference between the total price of the
Shares and FRF 388,636,545 (three hundred and eighty-eight million six hundred
and thirty-six thousand five hundred and forty-five French francs) shall be
payable, increased by interest at the rate of 6% as from the Closing Date, to
the Representative of the Transferors within 10 Business Days following the
determination of the Price per Share, and the last third of the difference
between the total price of the Shares and FRF 388,636,545 (three hundred and
eighty-eight million six hundred and thirty-six thousand five hundred and
forty-five French francs), shall be paid in the form of promissory notes
maturing on
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<PAGE>
- --------------------------------------------------------------------------------
Exhibit 2 to the Agreement
Share Purchase Agreement
page 12
July 1, 1998, made out to each Transferor and guaranteed by a first rank
European bank (AA or better rating), delivered to the Representative of the
Transferors at the same time as the payment provided for above.
(iii) The Representative of the Transferors shall personally carry out all
the formalities concerning the distribution of all or part of the Price of the
Shares between the Transferors.
3. Closing Date
The Closing Date shall be no later than 10 Business Days after the
fulfillment of the last condition precedent set forth in Article 4, it being
understood that the Closing Date shall not in any event be later than December
31, 1997, unless extended contractually or in the cases provided for in Article
2. (B) (i) (c) above. In these latter cases, all of the conditions precedent
referred to in Article 4 below otherwise being fulfilled, the Closing Date shall
be no later than 10 Business Days following (i) the delivery by the Expert of
its report failing to confirm the assertions referred to in (x), (y) and (z) of
Article 2. (B) (i) (c) above or (ii) the expiration of the period for the
Transferee's exercise of the Right of Withdrawal.
On the Closing Date, the part of the total price of the Shares which is
due and payable shall be paid by the Transferee, as indicated in Article 2
above, in exchange for:
(a) delivery to the Transferee of share transfer orders duly signed by the
Transferors or by their duly authorized representative pursuant to a power of
attorney, a model of which is contained in Exhibit 10 to the Agreement, and of
all other documents required to enable the transfer of the Shares and to render
such transfers enforceable against third parties, as well as the registration in
the Company's shareholders' registers of the transfer of the Shares to the
Transferee;
(b) delivery to the Transferee of a copy of the Agreement and of all the
related documents which are not separable from such Agreement, signed (directly
or pursuant to a power of attorney) by all the prospective authorized
signatories of such Agreement or of such documents;
(c) delivery to the Transferee of a certified true copy of the minutes of
the extraordinary general shareholders' meeting of the Company, with the consent
of the general partners (i) resulting in the approval of the Transferee as
shareholder of the Company and (ii) amending the Company's by-laws in accordance
with Exhibit 6 to the Agreement, without the special benefits auditor
(commissaire aux avantages particuliers) issuing any reserves in such respect;
(d) delivery to the Transferee of a certified true copy of the minutes of
the ordinary general shareholders' meeting of the Company appointing 3 new
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<PAGE>
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Exhibit 2 to the Agreement
Share Purchase Agreement
page 13
members of the supervisory board designated by the Transferee at least three
weeks before the Closing Date.
4. Conditions precedent
The completion of the transfer of the Shares shall be subject to the
following conditions precedent, to the exclusive benefit of the Transferee,
which means that the Transferee alone may, completely freely, waive all or part
of any one of the conditions precedent below:
(a) approval of the Transferee by the extraordinary general shareholders'
meeting of the Company with the consent of the majority of the general partners;
(b) approval by the extraordinary general shareholders' meeting of the
Company, with the unanimous consent of the general partners, of the new by-laws
of the Company in accordance with Exhibit 6 to the Agreement, the special
benefits auditor not issuing any reserves in such respect;
(c) approval by the ordinary general shareholders' meeting of the Company
of the appointment of 3 new members of the supervisory board designated by the
Transferee;
(d) completion of the Audit by the Transferee;
(e) absence of any fact coming to light before the Closing Date likely to
invalidate any one of the Quantifiable Deciding Elements or any one of the
Unquantifiable Deciding Elements;
(f) approval by the general shareholders' meeting of Willis Corroon Group
plc of the completion of the transactions provided for in this Share Purchase
Agreement and its Exhibits. In this respect, the Transferee declares, and the
Transferors acknowledge that they have been informed, that such prior approval,
as a result of British stock market regulations, is an essential condition of
its undertaking.
The conditions precedent referred to in (a), (b), (c), (e) and (f) above
shall be accomplished by December 15, 1997.
The condition precedent referred to in (d) above shall be accomplished by
October 20, 1997.
In the event that at least one of the conditions precedent is not
fulfilled within the time limit indicated above for each condition respectively,
and unless extended contractually, this transfer shall be considered to have
automatically lapsed and shall not give rise to any indemnity on either side.
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<PAGE>
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Exhibit 2 to the Agreement
Share Purchase Agreement
page 14
5. Transfer of ownership
The Transfer to the Transferee of the ownership and the right to the
enjoyment of the Shares shall occur on the Closing Date in exchange for payment
of the price of the Shares.
6. Administration of the companies
(a) Between the date hereof and the Closing Date, the Transferors
undertake to cause the Company and the Subsidiaries to be managed in a careful
and prudent manner. Unless otherwise stipulated herein or consented to in
writing by the Transferee, the Company and the Subsidiaries shall not conclude
any undertaking nor undertake any activity outside the normal course of business
and of prior normal practice, and, in particular, the Transferors shall take all
measures necessary to ensure that (i) the Company does not decide on the
distribution or payment of dividends of the Company (the Transferors, the
Company and the general partners represent in this regard that no decision to
distribute or pay dividends of the Company has been taken since January 1, 1997
outside of the context defined by the Company's general meeting of June 12, 1997
deciding to distribute a dividend to the shareholders of FRF 11,840,000,
increased by the right to the profits due under the by-laws to the general
partners, the whole being paid by the Company prior to June 30, 1997), or (ii)
the Company and/or its Subsidiaries (x) do not amend their by-laws without WCG's
agreement, which may not be unreasonably refused, with the exception of the
amendments provided for herein or in any document attached inseparably hereto,
(y) do not issue any share, option, right or other interest and security, (z) do
not carry out any of the operations mentioned in Article 10 of the draft
resolutions contained in Exhibit 6 to the Agreement, accounted as from the date
hereof, without having previously informed and consulted the Transferee.
(b) Messrs. Lucas, Gras and Naftalski, as general partner gerants of the
Company, undertake to ensure the proper respect of this clause.
7. Representations and warranties
AGF and GS Euro Finance (the "Corporate Transferors") on the one hand and
the Transferee on the other hand have agreed to an indemnification undertaking
which is contained in Exhibit 6 hereto and which forms an integral part hereof.
It is specified that GS Euro Finance shall intervene in this Share Purchase
Agreement only for the purposes of the representations and warranties and the
indemnification undertaking insofar as GS Euro Finance otherwise transfers 680
GS Shares to the WCG Group pursuant to a Share
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<PAGE>
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Exhibit 2 to the Agreement
Share Purchase Agreement
page 15
Exchange Agreement which is inseparable from this Share Purchase Agreement.
The Corporate Transferors acknowledge that the Transferee has relied and
shall rely on the said undertaking to enter into this Share Purchase Agreement
and the purchase of the Shares and the Exchanged GS Shares (as defined in the
Share Exchange Agreement), regardless of the investigations that have been
conducted or shall be conducted concerning the facts described in such
undertaking.
In any event, each Transferor certifies and warrants to the Transferee
that on the Closing Date, the Shares transferred by it shall be freely
transferable and free of all option rights, claims, liens, guarantees, pledges,
sureties, easements, charges or restrictions of any nature whatsoever and that
on that same Date, the Transferee shall acquire full ownership of the Shares,
free of all option rights, claims, liens, guarantees, pledges, sureties,
easements, charges or restrictions of any nature whatsoever. Each Transferor
undertakes to indemnify the Transferee for any adverse consequences and
prejudice suffered by the Transferee as a result of any violation by it of the
undertaking in this paragraph.
8. Other undertakings
(i) The Transferors represent that the fulfillment of the conditions
precedent set forth in Article 4 (a), (b), and (c) is under their control and
undertake to carry out any action necessary for such conditions to be fulfilled
as provided for by the parties.
Reciprocally, the Transferee undertakes to proceed with the Audit provided
for in Article 4 (d) above within a period of time compatible with its being
completed by October 20, 1997. In addition, the Transferee undertakes to use its
best efforts to hold the general meeting of Willis Corroon Group plc provided
for in Article 4 (f) above within the required period of time and to provide its
shareholders with sincere information with a view to voting at this general
meeting.
(ii) The Transferors or the Representative of the Transferors shall sign
all declarations, reports and all other documents that may be necessary or
useful for the final completion of the transactions set forth herein.
(iii) The general partners of the Company guarantee the provision by the
Company and/or its Subsidiaries of all documents and information that may be
reasonably requested in writing by the Transferee and/or its representatives or
counsel in the course of the Audit in order to establish its information.
(iv) Until the Closing Date, the Transferors undertake (a) not to
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<PAGE>
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Exhibit 2 to the Agreement
Share Purchase Agreement
page 16
transfer the Shares, unless they are donated by an individual to his
descendants, (b) not to enter into discussions with any third party with a view
to transferring all or part of the GS Shares and to end any negotiation
previously started for such purpose, (c) not to pledge the Shares or use them as
collateral in any manner whatsoever, in particular by transfer to a financial
instruments account pledged in favor of any person whatsoever, and (d) more
generally, not to do anything that may be likely to prevent or delay the
effective transfer of the Shares to the Transferee on the Closing Date. The
general partners of the Company guarantee this undertaking.
9. Representative of the Transferors
The Transferors hereby expressly and irrevocably authorize Mr. Patrick
Lucas or, in the event of his impediment or death, Mr. Emmanuel Gras or, in the
event of his impediment or death, Mr. Daniel Naftalski (hereinafter referred to
as the "Representative of the Transferors") to act jointly and severally in the
name and on behalf of each of them in connection with the mission defined below:
The mission of the Representative of the Transferors shall be as follows:
(a) to take any decision concerning the price or the abandonment of the
transactions set forth herein in accordance with Article 2 above;
(b) collect any check, receive any promissory note and distribute all or
part of the total price of the Shares between the Transferors;
(c) receive any notification from the Transferee in connection with this
Share Purchase Agreement and immediately inform each of the Transferors thereof
individually;
(d) send all notices in the name and on behalf of the Transferors in
connection herewith;
(e) more generally undertake any action necessary for the performance of
the operations set forth in this Share Purchase Agreement and in any related
and/or inseparable document.
The Representative of the Transferors shall report on his mission to the
Transferors.
In this regard, the Representative of the Transferors undertakes in
particular to keep the Transferors informed of any event likely to give rise to
an indemnification under Exhibit 6 to the Share Purchase Agreement. If the
Transferors required to indemnify contest all or part of the amount of the
indemnification, the Representative of the Transferors must follow this order of
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<PAGE>
- --------------------------------------------------------------------------------
Exhibit 2 to the Agreement
Share Purchase Agreement
page 17
contestation, if reasonable, and keep the Transferors informed of the conduct of
the proceedings.
10. Notices
All notices to a party hereunder shall be sent in writing and shall not be
deemed duly sent as regards the notifying party unless within the required
periods of time they are:
(i) sent by registered mail with return receipt requested, with a copy
sent by fax:
For the Transferee, to:
Willis Corroon Group Plc
10 Trinity Square
London EC3P 3AX
United Kingdom
For the attention of the Company Secretary
Fax 00 44 171 488 88 82
and
Fax 00 44 171 481 71 83
For the Transferors, to the Representative of the Transferors;
Patrick Lucas
Gras Savoye & Cie
2, rue Ancelle
92200 Neuilly sur Seine
Fax 01 41 43 69 85
or, in the event of his impediment or death,
Emmanuel Gras
Gras Savoye & Cie
2, rue Ancelle
92200 Neuilly sur Seine
Fax 03 20 42 43 59
or, in the event of his impediment or death,
Daniel Naftalski
Gras Savoye & Cie
2, rue Ancelle
92200 Neuilly sur Seine
Fax 01 41 43 69 09
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<PAGE>
- --------------------------------------------------------------------------------
Exhibit 2 to the Agreement
Share Purchase Agreement
page 18
with a copy to
the Directeur General Adjoint Administration et Finances
Gras Savoye & Cie
2, rue Ancelle
92200 Neuilly sur Seine
Fax 01 41 43 69 06
or to such other address as the Transferee or the Representative of the
Transferors may designate by notice in accordance with this article, or
(ii) hand delivered to a representative of the Transferee whose name is
indicated above or to the Representative of the Transferors in exchange for a
signed receipt.
All notices made as indicated above shall be effective as regards the
notified party or parties on the date on which they are presented for the first
time for delivery (in the event they are sent by registered mail with return
receipt requested) or on which they are delivered (in the event of hand delivery
in exchange for a signed receipt).
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<PAGE>
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Exhibit 1
to the Share Purchase Agreement
EXHIBIT 1 TO THE SHARE PURCHASE AGREEMENT
LIST OF SUBSIDIARIES
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<PAGE>
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Exhibit 2A
to the Share Purchase Agreement
EXHIBIT 2A TO THE SHARE PURCHASE AGREEMENT
QUANTIFIABLE DECIDING ELEMENTS
A. Quantifiable Deciding Elements to be verified by the Transferee during the
Audit
Quantifiable Deciding Element Reference Value (FRF)
Consolidated Equity at June 30, 1997 234,600,000
Estimated Consolidated Net Turnover at
December 31, 1997 (excluding acquisitions) 950,000,000
Estimated Group Share Consolidated Net Result
at December 31, 1997 59,500,000
B. Quantifiable Deciding Elements intended to be taken into consideration by
the parties or the Expert, as the case may be, in accordance with Article
2 of the Share Purchase Agreement
Quantifiable Deciding Element Reference Value (FRF)
Consolidated Equity at June 30, 1997 234,600,000
Consolidated Equity at December 31, 1997 234,600,000
Estimated Consolidated Net Turnover at
December 31, 1997 (excluding acquisitions) 950,000,000
Actual Consolidated Net Turnover at December 31, 1997 1,000,000,000
Estimated Group Share Consolidated Net Result
at December 31, 1997 59,500,000
Actual Group Share Consolidated Net Result at
December 31, 1997 59,500,000
Definitions of the Quantifiable Deciding Elements (attached below)
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<PAGE>
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Exhibit 2A
to the Share Purchase Agreement
EXHIBIT 2A TO THE SHARE PURCHASE AGREEMENT
ACCOUNTING NOTE - DEFINITIONS
[Translation to be provided by Ernst & Young]
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<PAGE>
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Exhibit 3 to the Agreement
Promise to Buy
page 1
EXHIBIT 3 TO THE AGREEMENT
PROMISE TO BUY
BETWEEN THE UNDERSIGNED
WILLIS CORROON GROUP PLC, an English law company whose registered office is at
10, Trinity Square, London EC3P 3AX, Great Britain, registered with the England
and Wales Company Registration Office under number 621757,
hereinafter referred to as the "Promisor " or "WCG"
ON THE ONE HAND,
THE SHAREHOLDERS OF GRAS SAVOYE & CIE referred to in Exhibit A hereto,
hereinafter collectively referred to as the "Beneficiaries "
ON THE OTHER HAND,
WHEREAS
By virtue of an agreement entered into on this day between the Beneficiaries,
the Corporate Beneficiaries and the Promisor (hereinafter the "Agreement"), it
has notably been agreed that the Promisor shall grant to the Beneficiaries a
promise to buy covering all of their shareholding in the Company (as defined in
Article 1) in accordance with the terms and conditions of the present Contract.
IT IS THEREFORE AGREED AS FOLLOWS
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<PAGE>
- --------------------------------------------------------------------------------
Exhibit 3 to the Agreement
Promise to Buy
page 2
1. DEFINITIONS
The terms and expressions beginning with a capital letter and not defined in the
present Contract shall have the meaning ascribed to them in the Agreement.
For purposes of the present Contract, the words and expressions below shall have
the following meanings:
GS Share Purchase Agreement means the agreement in Exhibit 2 to the Agreement.
Promise to Sell No. 2 means the contract entered into on this day between WCG
and Patrick Lucas, Emmanuel Gras and Daniel Naftalski, attached as Exhibit 5 to
the Agreement.
Closing Date means the date on which the Promisor or any company of the WCG
Group has acquired the Initial Shareholding.
Exceptional Event means any event whose origin was prior to the Closing Date and
whose existence was unknown at the Closing Date and which, between the Closing
Date and the three (3) years following the Closing Date, had the effect of
reducing the Consolidated Equity by FRF 234,600,000.
Business Day means any business day in France with the exception of any public
holiday or day of rest in accordance with the legislation and regulations
applicable in France.
Company means Gras Savoye & Cie, societe en commandite par actions with a
capital of FRF 9,952,000 divided into 49,760 shares of FRF 200 each, whose
registered office is at 2, rue Ancelle (92200) Neuilly sur Seine and which is
registered with the Nanterre Commercial and Companies Registry under number B
457 509 867.
2. UNILATERAL PROMISE TO BUY
The Promisor hereby promises to each of the Beneficiaries, who accept such
promise solely as a promise, to acquire, subject to ordinary legal guarantees
and the prior satisfaction of the preemption right granted to the shareholders
of the Company in accordance with the provisions of Article 9 (II) (2) (B) of
the Company's by-laws, the shares of the Company which are referred to in
Article 3, in accordance with the terms and conditions defined in the present
Contract (hereinafter, the "Option").
The Promisor may substitute any company of the WCG Group for itself provided
that it remains the guarantor thereof and provided that the company which has
been substituted for the Promisor undertakes in writing in favor of the
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<PAGE>
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Exhibit 3 to the Agreement
Promise to Buy
page 3
beneficiaries of Promise to Sell No. 2 to comply with the terms of such Promise.
3. SHARES
The Option shall cover all of the shares of the Company referred to below
(hereinafter the "Shares").
(a) All of the fully paid in, negotiable and non-amortized shares held on this
day by each of the Beneficiaries and referred to in Exhibit A hereto.
(b) In addition, if the shares of the Company referred to in subparagraph (a)
above were to be exchanged as a result of a merger, scission,
transformation of the Company or for any other reason, the Option shall
automatically cover all substituted equity interests deriving from such
shares in the Company. More generally, the Option shall cover all
transferable securities or all equity interests issued by the Company
between the date hereof and the date of exercise of the Option and which
have been acquired by any means by the Beneficiaries between the date
hereof and the date of exercise of the Option.
(c) Notwithstanding the provisions of subparagraphs (a) and (b) above, and for
as long as Patrick Lucas remains a general partner of the Company, the
exercise of this Option by Patrick Lucas may not cause his shareholding in
the Company's capital to fall to below five percent (5%) of the Company's
capital on the day of exercise of the Option, it being understood that
this minimum percentage shareholding of five percent (5%) of the Company's
capital may be held by Patrick Lucas either in full ownership or in
beneficial ownership provided that the ownership without use is kept by
his descendants.
(d) Notwithstanding the provisions of subparagraphs (a) and (b) above, and for
as long as Emmanuel Gras remains a general partner of the Company, the
exercise of this Option by Emmanuel Gras may not cause his shareholding in
the Company's capital to fall to below five percent (5%) of the Company's
capital on the day of exercise of the Option, it being understood that
this minimum percentage shareholding of five percent (5%) in the Company's
capital may be held by Emmanuel Gras either in full ownership or in
beneficial ownership provided that the ownership without use is kept by
his descendants.
(e) Notwithstanding the provisions of subparagraphs (a) and (b) above, and for
as long as Daniel Naftalski remains a general partner of the Company, the
exercise of this Option by Daniel Naftalski may not cause his shareholding
in the Company's capital to fall to below 0.26% of the Company's capital
on the day of exercise of the Option, it being understood that this
minimum percentage shareholding of 0.26% in the
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<PAGE>
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Exhibit 3 to the Agreement
Promise to Buy
page 4
Company's capital may be held by Daniel Naftalski either in full ownership
or in beneficial ownership provided that the ownership without use is kept
by his descendants.
4. TERM OF THE OPTION
The Option is granted for a period of twelve (12) years as from the Closing
Date. It shall terminate in advance, as necessary, as from the earlier of the
two following dates: (i) the date of the declaration of insolvency (cessation de
paiements) made by the legal representative of the Company or of the Main
Companies, with the exception of GS Re, or (ii) the date of the judgment
establishing the insolvency (cessation de paiements) of the Company or of the
Main Companies, with the exception of GS Re (hereinafter, the "Term of the
Option").
5. PERIOD OF EXERCISE OF THE OPTION
The Option may not be exercised for a period of three (3) years as from the
Closing Date (hereinafter the "Exemption Period"). Upon the expiration of the
Exemption Period, the Option may be exercised, in one or more operations, at any
time during the Term of the Option.
However, the occurrence of the death or any circumstance which results in the
total or permanent partial at least fifty percent (50%) invalidity of any one of
the Beneficiaries during the Exemption Period will authorize the Beneficiary
concerned or, depending on the case, his or her spouse, heirs or assigns, to
exercise the Option, wholly or partially, at any time from the occurrence of the
relevant circumstance (hereinafter, the "Period of Exercise of the Option").
6. EXERCISE OF THE OPTION
Each of the Beneficiaries may, in one or more times, exercise the Option by
sending to the attention of the Promisor, with a copy to the Representative (as
defined in Article 9), in accordance with the provisions of Article 11, a
written notification conforming to the model attached hereto as Exhibit B
(hereinafter "Notification No. 1").
In the event of exercise of the Option, the Beneficiary or Beneficiaries
concerned will also inform the Company of the proposed transfer by sending to
the Company, in accordance with the provisions of Article 9 (II) (2) (B) of the
Company's by-laws, a written notification conforming to the model attached
hereto as Exhibit C (hereinafter "Notification No. 2"). In the event of the
exercise of the preemption right by the shareholders of the Company on a portion
of the Shares, the actual transfer of the Shares to the transferee
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<PAGE>
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Exhibit 3 to the Agreement
Promise to Buy
page 5
hereunder shall cover the balance of the Shares on which the Option has been
exercised.
Each Beneficiary certifies and warrants to the Promisor that on the date of
actual transfer of the Shares on which the Option has been exercised, the Shares
transferred by such Beneficiary shall be freely negotiable and free of all
option rights, claims, liens, guarantees, pledges, sureties, easements, charges
or restrictions of any nature and that on that same date, the transferee of such
Shares will acquire full ownership thereof, free of all option rights, liens,
guarantees, pledges, sureties, easements, charges or restrictions of any nature.
Each Beneficiary undertakes to indemnify the transferee of the Shares for any
adverse consequences and prejudice suffered by the transferee of the Shares due
to any violation by such Beneficiary of the undertaking of the present
paragraph.
Furthermore, each Beneficiary undertakes to take all necessary measures so that
the Option for the Shares on which the ownership without use and the beneficial
ownership are not held by the same Beneficiary is exercised simultaneously by
the Beneficiaries holding the ownership without use and the beneficial ownership
of such Shares such that the full ownership pertaining to such Shares is
acquired by WCG or any other company of the WCG Group. In this regard, it is
specified that if the Beneficiaries concerned are not able to propose to the
Promisor Shares whose ownership without use and beneficial ownership can be
immediately grouped together after the transfer by the Promisor, the Promisor
will not in any manner be obligated to acquire the ownership without use or the
beneficial ownership of the corresponding Shares.
The transferee of the Shares hereunder will acquire the right to full enjoyment
of the Shares on which the Option has been exercised with all the attached
rights to dividends on the date of the delivery by the Representative (as
defined in Article 9) of the corresponding share transfer order(s) against
payment of the price.
If the Option is not exercised by the Beneficiaries during the Period of
Exercise of the Option, such Option shall be deemed to have lapsed, without any
right of indemnity for either party.
7. PRICE
The price per Share to be paid under the present Option (hereinafter the
"Transfer Price") shall be:
(a) with regard to any transfer resulting from an exercise of the Option which
is notified before the third anniversary of the Closing Date, the Price
per Share of the Company, as defined in the GS Share Purchase Agreement,
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<PAGE>
- --------------------------------------------------------------------------------
Exhibit 3 to the Agreement
Promise to Buy
page 6
(b) with regard to any transfer resulting from an exercise of the Option which
is notified after the third anniversary and before the sixth anniversary
of the Closing Date, the greater of the two following amounts:
(i) the Price per Share of the Company as defined in the GS Share
Purchase Agreement, reduced, if relevant, in the event of the
occurrence of an Exceptional Event, by an amount of FRF 5,030 per
Share (i.e., 234,600,000/46,640), and
(ii) the price calculated between April 15 and April 30 of each year and,
for the first time, between April 15 and April 30, 2000, according
to the formula provided for in Exhibit D, it being understood that
this price shall be applicable to any transfer of Shares under the
present Option until the establishment of the price which is based
on the accounts of the following year and is calculated according to
the same formula and in the same time period,
(c) with regard to any transfer resulting from an exercise of the Option which
is notified after the sixth anniversary of the Closing Date, the price
calculated between April 15 and April 30 of each year according to the
formula provided for in Exhibit D, it being understood that this price
shall be applicable to any transfer of Shares under the present Option
until the establishment of the price which is based upon the accounts of
the following year and is calculated according to the same formula and in
the same time period.
The Transfer Price of the Shares for which the Option has been exercised will be
payable in cash, within forty-five (45) calendar days of the date of
Notification No. 1, by bank check denominated in French francs, against delivery
by the Representative (as defined in Article 9) to the transferee of the Shares
of the corresponding duly signed share transfer order(s) in favor of the
transferee of the Shares, subject to the Beneficiaries' respecting their
undertakings hereunder and the obtaining of any government or administrative
authorization which may be necessary. However, if, due to the exercise of this
Option or of the Options deriving from Exhibits 3 bis and 3 ter to the
Agreement, the Promisor has to pay over a 12-month period an aggregate amount
which is greater than one hundred and fifty million francs, the transfer price
of the Shares under this Option and the Options deriving from Exhibits 3 bis and
3 ter mentioned above shall be payable in cash within ninety (90) calendar days
of the date of Notification No. 1, according to the same conditions as those
indicated above.
In the event that the transfer of the Shares pursuant hereto is subject to the
obtaining of any government or administrative authorization, the Promisor and
the Beneficiaries shall mutually provide all assistance, exchange all
information,
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<PAGE>
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Exhibit 3 to the Agreement
Promise to Buy
page 7
sign all documents and, more generally, do all that is necessary or useful so
that the competent authority may rapidly decide upon the contemplated
transaction.
8. BENEFIT OF THE OPTION
In the event of the death of a Beneficiary, the Option shall be deemed to be
transferred to his/her spouse, heirs and/or all other assigns, even though they
may be minors or otherwise legally incapable, without any other formality being
necessary aside from the notification to the Promisor of the identity of such
spouse, heirs and/or assigns and the number of Shares allotted to each of them.
In the event of a gift made by a Beneficiary of all or part of his/her Shares,
whether such gift is made in full ownership or in ownership without use, and
subject to the provisions of the Company's by-laws, notably including Article 9
of such by-laws, the Option shall be deemed to be transferred to the donees
without any other formality being necessary aside from the notification to the
Promisor of the identity of such donees and the number of Shares allotted in
full ownership or ownership without use to each of them.
9. POWER OF REPRESENTATION
At the Promisor's request, the Beneficiaries expressly grant an irrevocable
power to Patrick Lucas or, in the case of his impediment or death, to Emmanuel
Gras or, in the case of his impediment or death, to Daniel Naftalski
(hereinafter the "Representative"), to act jointly and severally in the name and
on behalf of each of them within the framework of the mission defined as
follows:
(a) make any decision regarding the Transfer Price,
(b) in the event of the exercise of the Option, deliver to the transferee of
the Shares hereunder the share transfer order(s) corresponding to the
Shares transferred, in return for the check(s) made out to each of the
Beneficiaries concerned.
10. EXPENSES - DUTIES - REGISTRATION
Each party shall bear the fees and expenses of its own counsel with regard to
the performance of the present Contract.
All other expenses, duties and taxes of any nature resulting from the signature
or the performance of the present Contract shall be borne exclusively by the
Promisor which so agrees.
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<PAGE>
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Exhibit 3 to the Agreement
Promise to Buy
page 8
11. NOTICES
Unless specifically provided otherwise, all notifications, requests,
applications, claims or other communications authorized or required under the
present Contract (other than those which must be made in application of the
by-laws of the Company) will as far as the notifying party is concerned be duly
made if, within the required time period, they are delivered by hand in return
for a release or sent by registered mail with return receipt requested to the
addresses appearing above or to any other address notified beforehand in
accordance with the provisions of the present Article.
For purposes of this Contract, the notification date shall, as far as the
notified party is concerned, be deemed to be the date of remittance, in the case
of notification by hand, and the date of first presentation, in the case of
notification by registered mail with return receipt requested.
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<PAGE>
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EXHIBIT A TO EXHIBIT 3 OF THE AGREEMENT
LIST OF BENEFICIARIES AND SHARES OF THE BENEFICIARIES
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT B TO EXHIBIT 3 OF THE AGREEMENT
MODEL OF NOTIFICATION NO 1
At [_____], on [_____]
To: Willis Corroon PLC
Attention: [_____]
10 Trinity Square
London EC3P 3AX
Great Britain
Copy to: Patrick Lucas
Emmanuel Gras
Daniel Naftalski
(hereinafter the "Representative")
Registered letter with return receipt requested
Re: Exercise of the Promise to Buy of [_____], 1997
Gentlemen:
(1) The undersigned (indicate full name of the signatory), acting as holder of
the full ownership/ownership without use/beneficial ownership of the
[_____] shares of Gras Savoye & Cie, hereby declares that it transfers to
Willis Corroon Group PLC or to any other company of the WCG Group, the
full ownership/ownership without use/beneficial ownership of the [_____]
shares of Gras Savoye & Cie which it holds, in accordance with the terms
and conditions of the promise to buy dated [_____], 1997.
(2) In this regard, the undersigned informs Gras Savoye & Cie of the present
transfer in accordance with the provisions of Article 9 (II) (2) (B) of
such company's by-laws by letter dated this day.
(3) Consequently the undersigned:
(i) invites the Representative to take, as necessary, any decision
relating to the purchase price of the [_____] shares hereby
transferred, and
(ii) requires Willis Corroon Group PLC or any company of the WCG Group to
pay the transfer price within forty-five (45) calendar days
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<PAGE>
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Exhibit 3 to the Agreement
Promise to Buy
page 11
of the date of this notification by remittance to the Representative
of a bank check denominated in French francs made out to the
undersigned against the delivery by such Representative of the share
transfer order covering the transfer to Willis Corroon Group PLC or
any other company of the WCG group of the [_____] shares hereby
transferred.
(4) All of the foregoing is conditional upon obtaining any government or
administrative authorization which may be necessary for purposes of this
transfer.
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<PAGE>
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EXHIBIT C TO EXHIBIT 3 TO THE AGREEMENT
MODEL OF NOTIFICATION No 2
At [_____], on [_____]
To: Gras Savoye & Cie
2, rue Ancelle
92200 Neuilly sur Seine
Registered letter with return receipt requested
Re: Proposed transfer of shares
Gentlemen:
The undersigned (indicate full name of the signatory), acting as holder of the
full ownership/ownership without use/beneficial ownership of the [_____] shares
of Gras Savoye & Cie, respectfully informs you, in accordance with the
provisions of Article 9 (II) (2) (B) of the by-laws of Gras Savoye & Cie, of its
intention to transfer to Willis Corroon Group PLC or to any other company of the
WCG Group the full ownership/ownership without use/beneficial ownership of the
[_____] shares of Gras Savoye & Cie which it holds, at the price of FRF
[_______] per share, in accordance with the terms and conditions of the promise
to buy dated [_____], 1997.
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<PAGE>
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EXHIBIT D TO EXHIBIT 3 TO THE AGREEMENT
TRANSFER PRICE DETERMINATION FORMULA
Price per Share =
(60% x 1.4 x (CA n + CA n-1) x 0.5 + 40% x K x (RN n + RN n-1) x 0.5)
---------------------------------------------------------------------
N
where
- - CA is the Consolidated Net Turnover at December 31 of the Gras Savoye
Group, as defined in Exhibit 2A to the Share Purchase Agreement,
- - n and n-1 are the reference financial years, n being the last closed
financial year and n-1 the next before last closed financial year,
- - K = (CB/E(n))
CB = the Willis Corroon Group's average daily end of session stock
market capitalizations quoted on the London Stock Exchange during
the 12 months preceding March 30 of the year during which the option
price is determined.
E = Consolidated Net Result at December 31 of the Willis Corroon Group
being defined as the "earnings for the financial year" of the
financial year being considered as published, adjusted by the
elements included in the definition (given in Exhibit 2 A to the
Share Purchase Agreement) of the Group Share Consolidated Net
Result.
In any event, the value taken for K may never be less than 14 or
more than 18, it being understood that in the event that Willis
Corroon Group is absorbed by another company listed on the London
Stock Exchange, the K calculated will be that of such company. If K
is unable to be determined, it will be determined by the Expert
based on the corresponding data of the five leading insurance
brokers world-wide listed on a regulated market.
- - RN is the Consolidated Net Result of the Gras Savoye Group as defined in
Exhibit 2A to the Share Purchase Agreement
- - N = the number of shares composing the capital of Gras Savoye & Cie
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<PAGE>
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Exhibit 3 to the Agreement
Promise to Buy
Exhibit D
page 14
on the date of the close of financial year n, excluding any self-held
shares.
Between April 15 and April 30 of each year, and for the first time in 2000, the
Representative (as defined in Article 9 of Exhibit 3 to the Agreement) shall
notify WCG (hereinafter "Notification A") of the Transfer Price obtained from
the application of the above formula (hereinafter the "Notified Price") and
shall attach to Notification A all necessary supporting documentation.
Within ten (10) Business Days following the date of Notification A, WCG may
notify the Representative of any dispute concerning the Notified Price
(hereinafter "Notification B"). Failing this, WCG shall be deemed to have
accepted the Notified Price.
In the event that WCG disputes the Notified Price, WCG and the Representative
shall negotiate in good faith to reach an agreement on the Transfer Price.
Upon failure to agree within ten (10) Business Days following the date of
Notification B, the parties expressly agree that the Transfer Price shall be
fixed definitively and without any possible recourse, except for an obvious
material error, by Coopers & Lybrand (hereinafter the "Expert") within thirty
(30) business days of the matter being referred to such Expert.
The matter shall be referred to the Expert by the most diligent party and
one-half of the expenses incurred in this regard shall be borne by the Promisor
and the other half by the Beneficiaries. The party referring the matter to the
Expert shall provide the Expert with a copy of the Notifications exchanged
between the parties. The Expert shall determine the Transfer Price by applying
the above formula and its decision shall be binding on the parties in accordance
with Article 1843-4 of the Civil Code. If the Expert is unable to complete its
mission for any reason whatsoever, a new Expert chosen from the list of experts
of the Court of Appeal of Versailles would be appointed by mutual agreement
between the Representative and the Promisor or, failing this, by the Presiding
Judge of the Commercial Court of Nanterre to which the matter shall be referred
in summary proceedings (referes) upon the request of the most diligent party.
The Representative and the general partners of the Company guarantee the
Expert's access to the premises of the Company and/or of its Subsidiaries and
that the Expert will be provided by the Company and/or the Subsidiaries with any
information which it might reasonably request in the context of the
accomplishment of its mission.
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<PAGE>
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Exhibit 3 bis to the Agreement
Promise to Buy
page 1
EXHIBIT 3 BIS TO THE AGREEMENT
PROMISE TO BUY
BETWEEN THE UNDERSIGNED
WILLIS CORROON GROUP PLC, an English law company whose registered office is at
10, Trinity Square, London EC3P 3AX, Great Britain, registered with the England
and Wales Company Registration Office under number 621757,
hereinafter referred to as the "Promisor " or "WCG"
ON THE ONE HAND,
ATHENA, a French law company whose registered office is at 53-55, rue de la
Boetie, 75008 Paris, registered with the Paris Commercial and Companies Registry
under number B 304 951 833,
hereinafter referred to as "Athena "
ON THE OTHER HAND,
WHEREAS
By virtue of an agreement entered into on this day between the shareholders of
the Company, including Athena, and the Promisor (hereinafter the "Agreement"),
it has notably been agreed that the Promisor shall grant to Athena a promise to
buy covering all of its shareholding in the Company (as defined in Article 1) in
accordance with the terms and conditions of the present Contract.
IT IS THEREFORE AGREED AS FOLLOWS
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<PAGE>
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Exhibit 3 bis to the Agreement
Promise to Buy
page 2
1. DEFINITIONS
The terms and expressions beginning with a capital letter and not defined in the
present Contract shall have the meaning ascribed to them in the Agreement and
its Exhibits.
For purposes of the present Contract, the words and expressions below shall have
the following meanings:
Corporate Beneficiary means (i) any insurance company which conducts an activity
referred to in Article 310-1 of the Insurance Code, any company which is under
the direct or indirect control of such an insurance company and or any company
which directly or indirectly controls one or more insurance companies, and (ii)
holds shares in the Company (including Athena).
GS Share Purchase Agreement means the agreement in Exhibit 2 to the Agreement;
Closing Date means the date on which the Promisor or any company of the WCG
Group has acquired the Initial Shareholding.
Indemnification Undertaking means, by incorporation for purposes of this
promise, the undertaking contained in Exhibit 6 to the GS Share Purchase
Agreement, it being specified that the definition of "Corporate Transferors"
also includes Athena.
Business Day means any business day in France with the exception of any public
holiday or day of rest in accordance with the legislation and regulations
applicable in France.
Promise to Sell No. 1 means the contract entered into on this day between WCG
and the shareholders of the Company including Athena, attached as Exhibit 4 to
the Agreement;
Promise to Sell No. 2 means the contract entered into on this day between WCG
and Patrick Lucas, Emmanuel Gras and Daniel Naftalski, attached as Exhibit 5 to
the Agreement;
Company means Gras Savoye & Cie, societe en commandite par actions with a
capital of FRF 9,952,000 divided into 49,760 shares of FRF 200 each, whose
registered office is at 2, rue Ancelle (92200) Neuilly sur Seine and which is
registered with the Nanterre Commercial and Companies Registry under number B
457 509 867.
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<PAGE>
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Exhibit 3 bis to the Agreement
Promise to Buy
page 3
2. UNILATERAL PROMISE TO BUY
The Promisor hereby promises to Athena, which accepts such promise solely as a
promise, to acquire, subject to ordinary legal guarantees and the prior
satisfaction of the preemption right granted to the shareholders of the Company
in accordance with the provisions of Article 9 (II) (2) (B) of the Company's
by-laws, all of the shares of the Company which Athena will own (hereinafter the
"Shares") on the date on which the rights granted pursuant to this promise are
exercised, in accordance with the terms and conditions defined in the present
Contract (hereinafter, the "Option").
If the shares of the Company referred to above were to be exchanged following a
merger, scission, transformation of the Company or for any other reason, the
Option shall automatically be extended to all the substituted equity interests
deriving from such shares of the Company. More generally, the Option shall be
extended to all the marketable securities or all the equity interests issued by
the Company between the date hereof and the date of exercise of the Option which
may have been acquired by any means by the Beneficiary between the date hereof
and the date of exercise of the Option.
The Promisor may substitute any company of the WCG Group for itself provided
that it remains the guarantor thereof and provided that the company which has
been substituted for the Promisor undertakes in writing in favor of the
beneficiaries of Promise to Sell No. 2 to comply with the terms of such Promise
and in favor of Athena to respect the terms of this Promise.
Athena may substitute for itself, subject to being the guarantor thereof, any
company of the Athena group which shall have become the owner of the Shares on
the date of exercise of the Option. A company shall be deemed to belong to the
Athena group if it is under the control of, is controlled by, or is under common
control with, Athena, control being defined in accordance with Article 355-1 of
the law on commercial companies.
3. TERM OF THE OPTION
The Option is granted for a period of twelve (12) years as from the Closing
Date. It shall terminate in advance, as necessary, as from the earlier of the
two following dates: (i) the date of the declaration of insolvency (cessation de
paiements) made by the legal representative of the Company or of the Main
Companies, with the exception of GS Re, or (ii) the date of the judgment
establishing the insolvency (cessation de paiements) of the Company or of the
Main Companies, with the exception of GS Re (hereinafter, the "Term of the
Option").
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<PAGE>
- --------------------------------------------------------------------------------
Exhibit 3 bis to the Agreement
Promise to Buy
page 4
4. PERIOD OF EXERCISE OF THE OPTION
The Option may not be exercised for a period of three (3) years as from the
Closing Date (hereinafter the "Exemption Period"). Upon the expiration of the
Exemption Period, the Option may be exercised, in one or more operations, at any
time during the Term of the Option. However, the Option may be exercised during
the Exemption Period insofar as the shareholding of Athena (or of the company of
the Athena group substituted for Athena) in the Company's capital has been
reduced, for any reason whatsoever other than due to a transfer (in any manner
whatsoever: contribution, sale, etc.) of shares by Athena (or by the company of
the Athena group substituted for Athena), with the exception of a transfer
resulting from the exercise of Promise to Sell No. 1, to an amount less than 10%
of the Company's capital (hereinafter the "Period of Exercise of the Option").
5. EXERCISE OF THE OPTION
Athena (or the company of the Athena group substituted for Athena) may, in one
or more times, exercise the Option by sending a written notification to the
attention of the Promisor, in accordance with the provisions of Article 8
(hereinafter "Notification No. 1").
In the event of exercise of the Option, Athena will also inform the Company of
the proposed transfer by sending a written notification to the Company, in
accordance with the provisions of Article 9 (II) (2) (B) of the Company's
by-laws, (hereinafter "Notification No. 2"). In the event of the exercise of the
preemption right by the shareholders of the Company on a portion of the Shares,
the actual transfer of the Shares to the transferee hereunder shall cover the
balance of the Shares on which the Option has been exercised.
Athena certifies and warrants to the Promisor that on the date of actual
transfer of the Shares on which the Option has been exercised, such Shares shall
be freely negotiable and free of all option rights, claims, liens, guarantees,
pledges, sureties, easements, charges or restrictions of any nature and that on
that same date, the transferee of such Shares will acquire full ownership, free
of all option rights, claims, liens, guarantees, pledges, sureties, easements,
charges or restrictions of any nature. Athena undertakes to indemnify the
transferee of the Shares for any adverse consequences and prejudice suffered by
the transferee of the Shares due to any violation by it of the undertaking of
the present paragraph.
The transferee of the Shares hereunder will acquire the right to full enjoyment
of the Shares on which the Option has been exercised with all attached rights to
dividends on the date of the delivery by Athena of the corresponding share
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 3 bis to the Agreement
Promise to Buy
page 5
transfer order against payment of the price.
If the Option is not exercised by Athena during the Period of Exercise of the
Option, such Option shall be deemed to have lapsed, without any right of
indemnity for either party.
6. PRICE
The price per Share to be paid under the present Option (hereinafter, the
"Transfer Price") shall be:
(a) with regard to any transfer resulting from an exercise of the Option which
is notified before the third anniversary of the Closing Date, the Price
per Share of the Company, as defined in the GS Share Purchase Agreement
reduced, if necessary, by any amount which should have been paid by Athena
under the Indemnification Undertaking, until each date of exercise of this
Option, if the Shares for which the Option has been exercised had been
transferred by Athena on the Closing Date,
(b) with regard to any transfer resulting from an exercise of the Option which
is notified after the third anniversary and before the sixth anniversary
of the Closing Date, the greater of the two following amounts:
(i) the Price per Share of the Company as defined in the GS Share
Purchase Agreement, reduced, if relevant, by any amount which should
have been paid under the Indemnification Undertaking, until each
date of exercise of this Option, if the Shares for which the Option
has been exercised had been transferred by Athena on the Closing
Date,
(ii) the price calculated between April 15 and April 30 of each year and,
for the first time, between April 15 and April 30, 2000, according
to the formula provided for in Exhibit D, it being understood that
this price shall be applicable to any transfer of Shares under the
present Option until the establishment of the price which is based
on the accounts of the following year and is calculated according to
the same formula and in the same time period,
(c) with regard to any transfer resulting from an exercise of the Option which
is notified after the sixth anniversary of the Closing Date, the price
calculated between April 15 and April 30 of each year according to the
formula provided for in Exhibit D, it being understood that this price
shall be applicable to any transfer of Shares under the present Option
until the establishment of the price which is based upon the accounts of
the
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 3 bis to the Agreement
Promise to Buy
page 6
following year and is calculated according to the same formula and in
the same time period.
The Transfer Price of the Shares for which the Option has been exercised will be
payable in cash, within forty-five (45) calendar days of the date of
Notification No. 1, by bank check denominated in French francs, against delivery
by Athena to the transferee of the Shares of the corresponding duly signed share
transfer order(s) in favor of the transferee of the Shares, subject to Athena's
respecting its undertakings hereunder and the obtaining of any government or
administrative authorization which may be necessary. However, if, due to the
exercise of this Option or of the Options deriving from Exhibits 3 and 3 ter to
the Agreement, the Promisor has to pay over a 12-month period an aggregate
amount which is greater than one hundred and fifty million francs, the transfer
price of the Shares under this Option and the Options deriving from Exhibits 3
and 3 ter mentioned above shall be payable in cash within ninety (90) calendar
days of the date of Notification No. 1, according to the same conditions as
those indicated above.
In the event that the transfer of the Shares pursuant hereto is subject to the
obtaining of any government or administrative authorization, the Promisor and
Athena shall mutually provide all assistance, exchange all information, sign all
documents and, more generally, do all that is necessary or useful so that the
competent authority may rapidly decide upon the contemplated transaction.
7. EXPENSES - DUTIES - REGISTRATION
Each party shall bear the fees and expenses of its own counsel with regard to
the performance of the present Contract.
All other expenses, duties and taxes of any nature resulting from the signature
or the performance of the present Contract shall be borne exclusively by the
Promisor which so agrees.
8. NOTICES
Unless specifically provided otherwise, all notifications, requests,
applications, claims or other communications authorized or required under the
present Contract (other than those which must be made in application of the
by-laws of the Company) will as far as the notifying party is concerned be duly
made if, within the required time period, they are delivered by hand in return
for a release or sent by registered mail with return receipt requested to the
addresses appearing above or to any other address notified beforehand in
accordance with the provisions of the present Article.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 3 bis to the Agreement
Promise to Buy
page 7
For purposes of this Contract, the notification date shall, as far as the
notified party is concerned, be deemed to be the date of remittance, in the case
of notification by hand, and the date of first presentation, in the case of
notification by registered mail with return receipt requested.
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT D TO EXHIBIT 3 TO THE AGREEMENT
TRANSFER PRICE DETERMINATION FORMULA
Price per Share =
(60% x 1.4 x (CA n + CA n-1) x 0.5 + 40% x K x (RN n + RN n-1) x 0.5)
---------------------------------------------------------------------
N
where
- - CA is the Consolidated Net Turnover at December 31 of the Gras Savoye
Group, as defined in Exhibit 2A to the Share Purchase Agreement,
- - n and n-1 are the reference financial years, n being the last closed
financial year and n-1 the next before last closed financial year,
- - K = (CB/E(n))
CB = the Willis Corroon Group's average daily end of session stock
market capitalizations quoted on the London Stock Exchange during
the 12 months preceding March 30 of the year during which the option
price is determined.
E = Consolidated Net Result at December 31 of the Willis Corroon Group
being defined as the "earnings for the financial year" of the
financial year being considered as published, adjusted by the
elements included in the definition (given in Exhibit 2 A to the
Share Purchase Agreement) of the Group Share Consolidated Net
Result.
In any event, the value taken for K may never be less than 14 or
more than 18, it being understood that in the event that Willis
Corroon Group is absorbed by another company listed on the London
Stock Exchange, the K calculated will be that of such company. If K
is unable to be determined, it will be determined by the Expert
based on the corresponding data of the five leading insurance
brokers world-wide listed on a regulated market.
- - RN is the Consolidated Net Result of the Gras Savoye Group as defined in
Exhibit 2A to the Share Purchase Agreement
<PAGE>
Exhibit 3 bis to the Agreement
Promise to Buy
Exhibit D
page 1
- - N = the number of shares composing the capital of Gras Savoye & Cie on the
date of the close of financial year n, excluding any self-held shares.
Between April 15 and April 30 of each year, and for the first time in 2000, the
Representative (as defined in Article 9 of Exhibit 3 to the Agreement) shall
notify WCG (hereinafter "Notification A") of the Transfer Price obtained from
the application of the above formula (hereinafter the "Notified Price") and
shall attach to Notification A all necessary supporting documentation.
Within ten (10) Business Days following the date of Notification A, WCG may
notify the Representative of any dispute concerning the Notified Price
(hereinafter "Notification B"). Failing this, WCG shall be deemed to have
accepted the Notified Price.
In the event that WCG disputes the Notified Price, WCG and the Representative
shall negotiate in good faith to reach an agreement on the Transfer Price.
Upon failure to agree within ten (10) Business Days following the date of
Notification B, the parties expressly agree that the Transfer Price shall be
fixed definitively and without any possible recourse, except for an obvious
material error, by Coopers & Lybrand (hereinafter the "Expert") within thirty
(30) business days of the matter being referred to such Expert.
The matter shall be referred to the Expert by the most diligent party and
one-half of the expenses incurred in this regard shall be borne by the Promisor
and the other half by the Beneficiaries. The party referring the matter to the
Expert shall provide the Expert with a copy of the Notifications exchanged
between the parties. The Expert shall determine the Transfer Price by applying
the above formula and its decision shall be binding on the parties in accordance
with Article 1843-4 of the Civil Code. If the Expert is unable to complete its
mission for any reason whatsoever, a new Expert chosen from the list of experts
of the Court of Appeal of Versailles would be appointed by mutual agreement
between the Representative and the Promisor or, failing this, by the Presiding
Judge of the Commercial Court of Nanterre to which the matter shall be referred
in summary proceedings (referes) upon the request of the most diligent party.
The Representative and the general partners of the Company guarantee the
Expert's access to the premises of the Company and/or of its Subsidiaries and
that the Expert will be provided by the Company and/or the Subsidiaries with any
information which it might reasonably request in the context of the
accomplishment of its mission.
<PAGE>
Exhibit 3 bis to the Agreement
Promise to Buy
Exhibit D
page 10
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 3 ter to the Agreement
Promise to Buy
page 1
EXHIBIT 3 TER TO THE AGREEMENT
PROMISE TO BUY
BETWEEN THE UNDERSIGNED
WILLIS CORROON GROUP PLC, an English law company whose registered office is at
10, Trinity Square, London EC3P 3AX, Great Britain, registered with the England
and Wales Company Registration Office under number 621757,
hereinafter referred to as the "Promisor " or "WCG"
ON THE ONE HAND,
UAP INCENDIE-ACCIDENTS, a French law company whose registered office is at 9
place Vendome, 75001 Paris, registered with the Paris Commercial and Companies
Registry under number B 977 349 192,
hereinafter referred to as "UAP "
ON THE OTHER HAND,
WHEREAS
By virtue of an agreement entered into on this day between the shareholders of
the Company, including UAP, and the Promisor (hereinafter the "Agreement"), it
has notably been agreed that the Promisor shall grant to UAP a promise to buy
covering all of its shareholding in the Company (as defined in Article 1) in
accordance with the terms and conditions of the present Contract.
IT IS THEREFORE AGREED AS FOLLOWS
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 3 ter to the Agreement
Promise to Buy
page 2
1. DEFINITIONS
The terms and expressions beginning with a capital letter and not defined in the
present Contract shall have the meaning ascribed to them in the Agreement and
its Exhibits.
For purposes of the present Contract, the words and expressions below shall have
the following meanings:
Corporate Beneficiary means (i) any insurance company which conducts an activity
referred to in Article 310-1 of the Insurance Code, any company which is under
the direct or indirect control of such an insurance company and or any company
which directly or indirectly controls one or more insurance companies, and (ii)
holds shares in the Company (including UAP).
GS Share Purchase Agreement means the agreement in Exhibit 2 to the Agreement;
Closing Date means the date on which the Promisor or any company of the WCG
Group has acquired the Initial Shareholding.
Indemnification Undertaking means, by incorporation for purposes of this
promise, the undertaking contained in Exhibit 6 to the GS Share Purchase
Agreement, it being specified that the definition of "Corporate Transferors"
also includes UAP.
Business Day means any business day in France with the exception of any public
holiday or day of rest in accordance with the legislation and regulations
applicable in France.
Promise to Sell No. 1 means the contract entered into on this day between WCG
and the shareholders of the Company including UAP, attached as Exhibit 4 to the
Agreement;
Promise to Sell No. 2 means the contract entered into on this day between WCG
and Patrick Lucas, Emmanuel Gras and Daniel Naftalski, attached as Exhibit 5 to
the Agreement;
Company means Gras Savoye & Cie, societe en commandite par actions with a
capital of FRF 9,952,000 divided into 49,760 shares of FRF 200 each, whose
registered office is at 2, rue Ancelle (92200) Neuilly sur Seine and which is
registered with the Nanterre Commercial and Companies Registry under number B
457 509 867.
2. UNILATERAL PROMISE TO BUY
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 3 ter to the Agreement
Promise to Buy
page 3
The Promisor hereby promises to UAP, which accepts such promise solely as a
promise, to acquire, subject to ordinary legal guarantees and the prior
satisfaction of the preemption right granted to the shareholders of the Company
in accordance with the provisions of Article 9 (II) (2) (B) of the Company's
by-laws, all of the shares of the Company which UAP will own (hereinafter the
"Shares") on the date on which the rights granted pursuant to this promise are
exercised, in accordance with the terms and conditions defined in the present
Contract (hereinafter, the "Option").
If the shares of the Company referred to above were to be exchanged following a
merger, scission, transformation of the Company or for any other reason, the
Option shall automatically be extended to all the substituted equity interests
deriving from such shares of the Company. More generally, the Option shall be
extended to all the marketable securities or all the equity interests issued by
the Company between the date hereof and the date of exercise of the Option which
may have been acquired by any means by the Beneficiary between the date hereof
and the date of exercise of the Option.
The Promisor may substitute any company of the WCG Group for itself provided
that it remains the guarantor thereof and provided that the company which has
been substituted for the Promisor undertakes in writing in favor of the
beneficiaries of Promise to Sell No. 2 to comply with the terms of such Promise
and in favor of AXA to respect the terms of this promise.
UAP may substitute for itself, subject to being the guarantor thereof, any
company of the AXA group which shall have become the owner of the Shares on the
date of exercise of the option. A company shall be deemed to belong to the AXA
group if it is under the control of AXA-UAP, is controlled by AXA-UAP, or is
under common control with UAP, control being defined in accordance with Article
355-1 of the law on commercial companies.
3. TERM OF THE OPTION
The Option is granted for a period of twelve (12) years as from the Closing
Date. It shall terminate in advance, as necessary, as from the earlier of the
two following dates: (i) the date of the declaration of insolvency (cessation de
paiements) made by the legal representative of the Company or of the Main
Companies, with the exception of GS Re, or (ii) the date of the judgment
establishing the insolvency (cessation de paiements) of the Company or of the
Main Companies, with the exception of GS Re (hereinafter, the "Term of the
Option").
4. PERIOD OF EXERCISE OF THE OPTION
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 3 ter to the Agreement
Promise to Buy
page 4
The Option may not be exercised for a period of three (3) years as from the
Closing Date (hereinafter the "Exemption Period"). Upon the expiration of the
Exemption Period, the Option may be exercised, in one or more operations, at any
time during the Term of the Option. However, the Option may be exercised during
the Exemption Period insofar as the shareholding of UAP (or of the company of
the AXA group substituted for UAP) in the Company's capital has been reduced,
for any reason whatsoever other than due to a transfer (in any manner
whatsoever: contribution, sale, etc.) of Shares by UAP (or by the company of the
AXA group substituted for UAP), with the exception of a transfer resulting from
the exercise of Promise to Sell No. 1, to an amount less than 10% of the
Company's capital (hereinafter the "Period of Exercise of the Option").
5. EXERCISE OF THE OPTION
UAP (or the company of the AXA group substituted for UAP) may, in one or more
times, exercise the Option by sending a written notification to the attention of
the Promisor, in accordance with the provisions of Article 8 (hereinafter
"Notification No. 1").
In the event of exercise of the Option, UAP will also inform the Company of the
proposed transfer by sending a written notification to the Company, in
accordance with the provisions of Article 9 (II) (2) (B) of the Company's
by-laws, (hereinafter "Notification No. 2"). In the event of the exercise of the
preemption right by the shareholders of the Company on a portion of the Shares,
the actual transfer of the Shares to the transferee hereunder shall cover the
balance of the Shares on which the Option has been exercised.
UAP certifies and warrants to the Promisor that on the date of actual transfer
of the Shares on which the Option has been exercised, such Shares shall be
freely negotiable and free of all option rights, liens, guarantees, pledges,
sureties, easements, charges or restrictions of any nature and that on that same
date, the transferee of such Shares will acquire full ownership, free of all
option rights, liens, guarantees, pledges, sureties, easements, charges or
restrictions of any nature. UAP undertakes to indemnify the transferee of the
Shares for any adverse consequences and prejudice suffered by the transferee of
the Shares due to any violation by it of the undertaking of the present
paragraph.
The transferee of the Shares will hereby acquire the right to full enjoyment of
the Shares on which the Option has been exercised with all the attached rights
to dividends on the date of the delivery by UAP of the corresponding share
transfer order against payment of the price.
If the Option is not exercised by UAP during the Period of Exercise of the
Option, such Option shall be deemed to have lapsed, without any right of
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 3 ter to the Agreement
Promise to Buy
page 5
indemnity for either party.
6. PRICE
The price per Share to be paid under the present Option (hereinafter, the
"Transfer Price") shall be:
(a) with regard to any transfer resulting from an exercise of the Option which
is notified before the third anniversary of the Closing Date, the Price
per Share of the Company, as defined in the GS Share Purchase Agreement
reduced, if necessary, by any amount which should have been paid by UAP
under the Indemnification Undertaking, until each date of exercise of this
Option, if the Shares for which the Option has been exercised had been
transferred by UAP on the Closing Date,
(b) with regard to any transfer resulting from an exercise of the Option which
is notified after the third anniversary and before the sixth anniversary
of the Closing Date, the greater of the two following amounts:
(i) the Price per Share of the Company as defined in the GS Share
Purchase Agreement, reduced, if relevant, by any amount which should
have been paid under the Indemnification Undertaking, until each
date of exercise of this Option, if the Shares for which the Option
has been exercised had been transferred by UAP on the Closing Date,
(ii) the price calculated between April 15 and April 30 of each year and,
for the first time, between April 15 and April 30, 2000, according
to the formula provided for in Exhibit D, it being understood that
this price shall be applicable to any transfer of Shares under the
present Option until the establishment of the price which is based
on the accounts of the following year and is calculated according to
the same formula and in the same time period,
(c) with regard to any transfer resulting from an exercise of the Option which
is notified after the sixth anniversary of the Closing Date, the price
calculated between April 15 and April 30 of each year according to the
formula provided for in Exhibit D, it being understood that this price
shall be applicable to any transfer of Shares under the present Option
until the establishment of the price which is based upon the accounts of
the following year and is calculated according to the same formula and in
the same time period.
The Transfer Price of the Shares for which the Option has been exercised will be
payable in cash, within forty-five (45) calendar days of the date of
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 3 ter to the Agreement
Promise to Buy
page 6
Notification No. 1, by bank check denominated in French francs, against delivery
by UAP to the transferee of the Shares of the corresponding duly signed share
transfer order(s) in favor of the transferee of the Shares, subject to UAP's
respecting its undertakings hereunder and the obtaining of any government or
administrative authorization which may be necessary. However, if, due to the
exercise of this Option or of the Options deriving from Exhibits 3 and 3 bis to
the Agreement, the Promisor has to pay over a 12-month period an aggregate
amount which is greater than one hundred and fifty million francs, the transfer
price of the Shares under this Option and the Options deriving from Exhibits 3
and 3 bis mentioned above shall be payable in cash within ninety (90) calendar
days of the date of Notification No. 1, according to the same conditions as
those indicated above.
In the event that the transfer of the Shares pursuant hereto is subject to the
obtaining of any government or administrative authorization, the Promisor and
UAP shall mutually provide all assistance, exchange all information, sign all
documents and, more generally, do all that is necessary or useful so that the
competent authority may rapidly decide upon the contemplated transaction.
7. EXPENSES - DUTIES - REGISTRATION
Each party shall bear the fees and expenses of its own counsel with regard to
the performance of the present Contract.
All other expenses, duties and taxes of any nature resulting from the signature
or the performance of the present Contract shall be borne exclusively by the
Promisor which so agrees.
8. NOTICES
Unless specifically provided otherwise, all notifications, requests,
applications, claims or other communications authorized or required under the
present Contract (other than those which must be made in application of the
by-laws of the Company) will as far as the notifying party is concerned be duly
made if, within the required time period, they are delivered by hand in return
for a release or sent by registered mail with return receipt requested to the
addresses appearing above or to any other address notified beforehand in
accordance with the provisions of the present Article.
For purposes of this Contract, the notification date shall, as far as the
notified party is concerned, be deemed to be the date of remittance, in the case
of notification by hand, and on the date of first presentation, in the case of
notification by registered mail with return receipt requested.
- --------------------------------------------------------------------------------
<PAGE>
Exhibit 3 ter to the Agreement
Promise to Buy
page 7
EXHIBIT D TO EXHIBIT 3 TO THE AGREEMENT
TRANSFER PRICE DETERMINATION FORMULA
Price per Share =
(60% x 1.4 x (CA n + CA n-1) x 0.5 + 40% x K x (RN n + RN n-1) x 0.5)/N
where
- - CA is the Consolidated Net Turnover at December 31 of the Gras Savoye
Group, as defined in Exhibit 2A to the Share Purchase Agreement,
- - n and n-1 are the reference financial years, n being the last closed
financial year and n-1 the next before last closed financial year,
- - K = (CB/E(n))
CB = the Willis Corroon Group's average daily end of session stock
market capitalizations quoted on the London Stock Exchange during
the 12 months preceding March 30 of the year during which the option
price is determined.
E = Consolidated Net Result at December 31 of the Willis Corroon Group
being defined as the "earnings for the financial year" of the
financial year being considered as published, adjusted by the
elements included in the definition (given in Exhibit 2 A to the
Share Purchase Agreement) of the Group Share Consolidated Net
Result.
In any event, the value taken for K may never be less than 14 or
more than 18, it being understood that in the event that Willis
Corroon Group is absorbed by another company listed on the London
Stock Exchange, the K calculated will be that of such company. If K
is unable to be determined, it will be determined by the Expert
based on the corresponding data of the five leading insurance
brokers world-wide listed on a regulated market.
<PAGE>
Exhibit 3 ter to the Agreement
Promise to Buy
page 8
- - RN is the Consolidated Net Result of the Gras Savoye Group as defined in
Exhibit 2A to the Share Purchase Agreement
- - N = the number of shares composing the capital of Gras Savoye & Cie on the
date of the close of financial year n, excluding any self-held shares.
Between April 15 and April 30 of each year, and for the first time in 2000, the
Representative (as defined in Article 9 of Exhibit 3 to the Agreement) shall
notify WCG (hereinafter "Notification A") of the Transfer Price obtained from
the application of the above formula (hereinafter the "Notified Price") and
shall attach to Notification A all necessary supporting documentation.
Within ten (10) Business Days following the date of Notification A, WCG may
notify the Representative of any dispute concerning the Notified Price
(hereinafter "Notification B"). Failing this, WCG shall be deemed to have
accepted the Notified Price.
In the event that WCG disputes the Notified Price, WCG and the Representative
shall negotiate in good faith to reach an agreement on the Transfer Price.
Upon failure to agree within ten (10) Business Days following the date of
Notification B, the parties expressly agree that the Transfer Price shall be
fixed definitively and without any possible recourse, except for an obvious
material error, by Coopers & Lybrand (hereinafter the "Expert") within thirty
(30) business days of the matter being referred to such Expert.
The matter shall be referred to the Expert by the most diligent party and
one-half of the expenses incurred in this regard shall be borne by the Promisor
and the other half by the Beneficiaries. The party referring the matter to the
Expert shall provide the Expert with a copy of the Notifications exchanged
between the parties. The Expert shall determine the Transfer Price by applying
the above formula and its decision shall be binding on the parties in accordance
with Article 1843-4 of the Civil Code. If the Expert is unable to complete its
mission for any reason whatsoever, a new Expert chosen from the list of experts
of the Court of Appeal of Versailles would be appointed by mutual agreement
between the Representative and the Promisor or, failing this, by the Presiding
Judge of the Commercial Court of Nanterre to which the matter shall be referred
in summary proceedings (referes) upon the request of the most diligent party.
The Representative and the general partners of the Company guarantee the
Expert's access to the premises of the Company and/or of its Subsidiaries and
that the Expert will be provided by the Company and/or the Subsidiaries with any
information which it might reasonably request in the context of the
accomplishment of its mission.
<PAGE>
Exhibit 3 ter to the Agreement
Promise to Buy
page 9
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 4 to the Agreement
Promise to Sell No. 1
page 1
EXHIBIT 4 TO THE AGREEMENT
PROMISE TO SELL No. 1
BETWEEN THE UNDERSIGNED
THE SHAREHOLDERS OF GRAS SAVOYE & CIE referred to in Exhibit A hereto, acting
jointly for the purposes hereof,
Hereinafter collectively referred to as the "Promisors"
ONE THE ONE HAND
WILLIS CORROON GROUP PLC, an English law company whose registered office is at
10, Trinity Square, London EC3P 3AX, Great Britain, registered with the England
and Wales Company Registration Office under number 621757,
hereinafter referred to as the "Beneficiary" or "WCG"
ON THE OTHER HAND
WHEREAS
By virtue of an agreement entered into on this day between the Beneficiary and
the Promisors (hereinafter the "Agreement"), it has notably been agreed that the
Promisors shall grant to the Beneficiary a promise to sell covering all of their
shareholding in the Company (as defined in Article 1) in accordance with the
terms and conditions of the present Contract.
IT IS THEREFORE AGREED AS FOLLOWS
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 4 to the Agreement
Promise to Sell No. 1
page 2
1. DEFINITIONS
The terms and expressions beginning with a capital letter and not defined in the
present Contract shall have the meaning ascribed to them in the Agreement and
its Exhibits.
For purposes of the present Contract, the words and expressions below shall have
the following meanings:
Change of Control means:
(a) with regard to WCG, any operation of any nature (including a merger) which
has the object or effect:
(i) of resulting in the direct or indirect holding by any related entity
or entity belonging to a group directly or indirectly controlling,
within the meaning of Article 355-1 of Law No. 66-537 of July 24,
1996 on commercial companies, an insurance brokerage company ranked
among the 10 leading insurance brokerage companies world-wide in
terms of turnover or (ii) the 10 leading French insurance brokerage
companies in terms of turnover, of at least 30% of the capital of
WCG, or
(ii) of giving any of the above-mentioned entities the power to appoint
the majority of the members of the Board of Directors or any
equivalent corporate organ of WCG, or
(b) with regard to any Affiliated Company, any operation of any nature
(including a merger) which has the object or effect (i) of causing WCG's
direct or indirect control, within the meaning of Article 355-1 of Law No.
66-537 of July 24, 1996 on commercial companies, of any Affiliated Company
to terminate, or (ii) of giving to a third party the power to appoint the
majority of the members of the Board of Directors or any equivalent
corporate organ of any Affiliated Company.
GS Share Purchase Agreement means the agreement in Exhibit 2 to the Agreement.
Closing Date means the date on which the Beneficiary or any company of the WCG
Group has acquired the Initial Shareholding.
Indemnification Undertaking means, by incorporation for purposes of this
promise, the undertaking contained in Exhibit 6 to the GS Share Purchase
Agreement, it being specified that the definition "Corporate Transferors" also
includes Athena and UAP.
Exceptional Event means any event whose origin was prior to the Closing
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<PAGE>
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Exhibit 4 to the Agreement
Promise to Sell No. 1
page 3
Date and whose existence was unknown at the Closing Date and which, between the
Closing Date and the three (3) years following the Closing Date, had the effect
of reducing the Consolidated Equity by FRF 234,600,000.
Subsidiaries means all companies or other legal entities among those referred to
in Exhibit 1 to the GS Share Purchase Agreement in which the Company directly or
indirectly owns more than 50% of the capital or in which the Company maintains
the effective control of the management.
Business Day means any business day in France with the exception of any public
holiday or day of rest in accordance with the legislation and regulations
applicable in France.
Promise to Buy means the contract in Exhibit 3 to the Agreement.
Promise to Sell No. 2 means the contract entered into on this day between the
Beneficiary, Patrick Lucas, Emmanuel Gras and Daniel Naftalski, attached as
Exhibit 5 to the Agreement.
Corporate Promisor means (i) any insurance company which conducts an activity
referred to in Article 310-1 of the Insurance Code, any company which is under
the direct or indirect control of such an insurance company and/or any company
which directly or indirectly controls one or more insurance companies, and (ii)
which holds shares in the Company.
Company means Gras Savoye & Cie, a societe en commandite par actions with a
capital of FRF 9,952,000 divided into 49,760 shares of FRF 200 each, whose
registered office is at 2, rue Ancelle (92200) Neuilly sur Seine and which is
registered with the Nanterre Commercial and Companies Registry under number B
457 509 867.
Affiliated Company means any company (i) which at the relevant time is under the
control of WCG within the meaning of Article 355-1 of Law No. 66-537 of July 24,
1996 on commercial companies, and (ii) which holds shares in the Company.
Main Companies means the Company, Gras Savoye S.A., Gras Savoye Reassurance
S.A., SAGERI S.A., AMI, Gras Savoye Lanvin Lespiau, GS Re and Gras Savoye Euro
Finance.
2. UNILATERAL PROMISE TO SELL
The Promisors hereby promise to the Beneficiary, which accepts such promise
solely as a promise, to sell, pursuant to ordinary legal guarantees, the shares
of the Company referred to in Article 3 below, in accordance with the terms and
conditions defined in the present Contract (hereinafter the "Option").
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<PAGE>
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Exhibit 4 to the Agreement
Promise to Sell No. 1
page 4
The Beneficiary may substitute for itself any company of the WCG Group provided
that it remains the guarantor thereof and provided that the company which is
substituted for it undertakes in writing in favor of the beneficiaries of
Promise to Sell No. 2 to comply with the terms of such Promise.
Athena and UAP may substitute for them respectively any company of the Athena
group and the AXA group; i.e., a company which is under the control, within the
meaning of Article 355-1 of the Law of July 24, 1996 on commercial companies, of
Athena and AXA-UAP respectively, provided they remain the guarantors thereof
respectively.
3. SHARES
Subject to the provisions of Article 4, the Option shall cover all of the shares
of the Company referred to below (hereinafter the "Shares").
(a) All of the fully paid in, negotiable and non-amortized shares held on this
day by each of the Promisors and referred to in Exhibit A hereto.
(b) In addition, if the shares of the Company described in subparagraph (a)
above were to be exchanged as a result of a merger, scission,
transformation of the Company or for any other reason, the Option shall
automatically cover all the substituted equity interests deriving from
such shares in the Company. More generally, the Option shall cover all
transferable securities or all equity interests issued by the Company
between the date hereof and the date of exercise of the Option and which
have been acquired by any means by the Promisors between the date hereof
and the date of exercise of the Option.
(c) In the event of the exercise by the Promisors of their rights under the
Promise to Buy, the Beneficiary's rights hereunder shall be deemed to
cover the number of shares of the Company referred to in paragraphs (a)
and (b) which are still available after the exercise of the Promisors'
rights under the Promise to Buy.
4. OPTION LIMITATIONS
The Option may only be exercised for the number of Shares necessary to allow the
Beneficiary to achieve (taking into account, as the case may be, the shares of
the Company held on whatever grounds by any Affiliated Company) the percentages
of the capital, and in any event, of the voting rights of the Company set forth
below:
(a) either 50.1% of the capital and, in any event, of the voting rights of the
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Exhibit 4 to the Agreement
Promise to Sell No. 1
page 5
Company (hereinafter "Threshold A") in the event of the occurrence of one
of the three following events (hereinafter "Event A"):
(i) the first Business Day of the two (2) month period preceding the
expiration of the Term of the Option (as defined below), or
(ii) none of the three individuals (Patrick Lucas, Emmanuel Gras, Daniel
Naftalski) continues to be a general partner of the Company for
whatever reason, or
(iii) the failure, by any one of the Promisors as general partner or
shareholder of the Company, to comply with any one of the
obligations incumbent upon him pursuant to the obligations not
provided for in the by-laws referred to in Article 4 (v), (vi) and
(x) of the Agreement and the provisions of Article 10-3 (g), (h),
(i), (j) of the Company's by-laws and, as from January 1, 1998,
pursuant to the provisions of Article 10-3 (a) to (f) of the
Company's by-laws. In this regard, it is however expressly agreed
that if the failure to comply with any of the obligations not
provided for in the by-laws referred to in Article 4 (vi) of the
Agreement results from the non-performance of such obligations by
one of the Subsidiaries other than the Main Companies, the exercise
of the Option under this Article 4 (a) would only be deemed to be
permitted hereunder to the extent that the relevant non-performance
was committed with full knowledge by one of the general partners of
the Company and without such general partner having used his best
efforts to ensure the proper performance of the unperformed
obligation.
(b) or 66.7% of the capital and, in any event, of the voting rights of the
Company (hereinafter "Threshold B") in the event of the occurrence of the
two following events (hereinafter "Event B"):
(i) the Beneficiary (taking into account, as the case may be, the shares
of the Company held on whatever grounds by any Affiliated Company)
holds a shareholding in the Company corresponding to Threshold A,
and
(ii) the Company is not transformed into a societe anonyme within the
four (4) months following the occurrence of the event referred to in
(i) or (ii) of (a) of this Article 4, provided however that the
failure to transform does not result from the non-representation or
negative vote or abstention of the Beneficiary (including, as the
case may be, of any Affiliated Company) at the general meeting
called to decide on the transformation of the Company. For purposes
hereof, the Promisors expressly undertake to transform the Company
into a societe anonyme with a board of directors,
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<PAGE>
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Exhibit 4 to the Agreement
Promise to Sell No. 1
page 6
with no statutory provision conferring any particular advantage on
any of the shareholders, within the four (4) months following the
date of the occurrence of the Event referred to in (i) or (ii) of
(a) of this Article 4.
Thresholds A and B shall be calculated on the basis of all the shares and voting
rights of the Company held by the Beneficiary and any Affiliated Company.
5. TERM OF THE OPTION
The Option is granted for a period to end on February 1, 2010. It shall
terminate in advance on the day on which the Beneficiary or any Affiliated
Company is the subject of a Change of Control having given rise to the exercise
of the option by virtue of Promise to Sell No. 2 (hereinafter the "Term of the
Option").
6. PERIOD OF EXERCISE OF THE OPTION
The Option granted to the Beneficiary shall be exercised in the course of any
one of the following periods (hereinafter the "Period of Exercise of the
Option"):
(a) within the thirty (30) Business Days following the date of the occurrence
of Event A, with regard to attaining Threshold A, or
(b) within the thirty (30) Business Days following the date of the occurrence
of Event B, with regard to attaining Threshold B.
7. EXERCISE OF THE OPTION
The Beneficiary may exercise the Option by sending, in accordance with the
provisions of Article 12, a written notification to the attention of the
Promisors (hereinafter the "Notification").
In the event of exercise of the Option other than on the basis of the provisions
of Article 4 (a) (iii), the Shares to be transferred to WCG or to any other
company of the WCG Group shall be divided among the Promisors in proportion to
their respective shareholdings in the Company on the day on which the Option is
exercised compared to the total of such shareholdings. Fractions of shares shall
be divided among the greater of the shareholdings.
In the event that the Option is exercised on the basis of the provisions of
Article 4 (a) (iii), the Shares to be transferred to WCG or to any other company
of the WCG Group shall be divided among the Promisors on the basis of the
following
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<PAGE>
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Exhibit 4 to the Agreement
Promise to Sell No. 1
page 7
priority ranking: Shares held by (i) the general partner of the Company having
the capacity of president of the defaulting Subsidiary, if required, (ii) then
the other general partners of the Company in proportion to their respective
shareholdings in the Company, and (iii) finally, all the other Promisors in
proportion to their respective shareholdings in the Company.
Each Promisor certifies and warrants to the Beneficiary that on the date of
actual transfer of the Shares for which the Option has been exercised, such
Shares shall be freely negotiable and free of all option rights, liens,
guarantees, pledges, sureties, easements, charges or restrictions of any nature
whatsoever and that on that same date, the transferee of such Shares will
receive full ownership thereof, free of all option rights, claims, liens,
guarantees, pledges, sureties, easements, charges or restrictions of any nature.
Each Promisor undertakes to indemnify the transferee of the Shares for any
adverse consequences and prejudice suffered by the transferee of the Shares due
to any violation by such Promisor of the undertaking of the present paragraph.
WCG or any other company of the WCG Group will hereby acquire the full right to
the enjoyment of the Shares for which the Option has been exercised with all the
attached rights to dividends on the date of the delivery of the corresponding
share transfer orders against payment of the price.
If the Beneficiary or any other company of the WCG Group fails to exercise the
Option during the applicable Period of Exercise of the Option, such Option shall
be deemed to have lapsed, without any right of indemnity for either party.
8. PRICE
The price per Share to be paid under the present Option (hereinafter, the
"Transfer Price") shall be:
(a) with regard to any transfer resulting from an exercise of the Option which
is notified before the third anniversary of the Closing Date, the Price
per Share of the Company, as defined in the GS Share Purchase Agreement,
reduced, if relevant, with regard to the Corporate Promisors, by any
amount which should have been paid by each of them under the
Indemnification Undertaking, up until each date on which this option is
exercised, if the Shares for which the Option has been exercised had been
transferred on the Closing Date,
(b) with regard to any transfer resulting from an exercise of the Option which
is notified after the third anniversary and before the sixth anniversary
of the Closing Date, the greater of the two following amounts:
(i) the Price per Share of the Company as defined in the GS Share
Purchase Agreement, reduced, if relevant,
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<PAGE>
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Exhibit 4 to the Agreement
Promise to Sell No. 1
page 8
(x) with regard to all of the Individual Promisors, and in the
event of the occurrence of an Exceptional Event, by an amount
of FRF 5,030 per Share (i.e., 234,600,000/46,640), and
(y) with regard to the Corporate Promisors, by any amount which
should have been paid under the Indemnification Undertaking,
up until each date on which this option is exercised, if the
Shares for which the Option has been exercised had been
transferred on the Closing Date,
(ii) the price calculated between April 15 and April 30 of each year and,
for the first time, between April 15 and April 30, 2000, according
to the formula indicated in Exhibit D to the Promise to Buy, it
being understood that this price shall be applicable to all
transfers of Shares under the present Option until the establishment
of the price which is based upon the accounts of the following year
and is calculated according to the same formula and in the same time
period,
(c) with regard to any transfer resulting from an exercise of the Option which
is notified after the sixth anniversary of the Closing Date, the price
calculated between April 15 and April 30 of each year according to the
formula provided for in Exhibit D to the Promise to Buy, it being
understood that this price shall be applicable to all transfers of Shares
under the present Option until the establishment of the price which is
based upon the accounts of the following year and is calculated according
to the same formula and in the same time period.
The Transfer Price of the Shares for which the Option has been exercised will be
payable in cash, within forty-five (45) calendar days of the date of
Notification, by bank check denominated in French francs, against delivery by
the Representative (as defined in Article 10) to WCG or to any other company of
the WCG Group of the corresponding duly signed share transfer order(s) in favor
of WCG or any other company of the WCG Group, subject to the Beneficiary's
respecting its obligations hereunder and the obtaining of all government or
administrative authorizations which may be necessary.
In the event that the transfer of the Shares provided for herein is subject to
the obtaining of any government or administrative authorization, the Promisors
and the Beneficiary shall mutually provide all assistance, exchange all
information, sign all documents and, more generally, do all that is necessary or
useful so that the competent authority may rapidly decide upon the contemplated
transaction.
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<PAGE>
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Exhibit 4 to the Agreement
Promise to Sell No. 1
page 9
9. BENEFIT OF THE OPTION
In the event of the death of a Promisor, his/her spouse, heirs and/or all other
assigns, even though minors or otherwise legally incapable, shall be bound by
the terms hereof.
Each of the Promisors remains free to donate the full ownership or ownership
without use of all or part of his/her Shares on condition however that the
Promisor intending to make the donation (i) obtains from the concerned donee(s)
the undertaking in favor of the Beneficiary to respect the terms of the present
Contract for the number of Shares allotted to each of the donees, and (ii)
remains the guarantor vis-a-vis the Beneficiary of the donee(s)' respect of the
terms of the present Contract.
Subject to the provisions of the by-laws, each of the Promisors remains free to
transfer the Shares he/she owns to another Promisor. In such case, the Promisor
who made such a transfer will inform the Beneficiary in writing of the identity
of the Promisor to whom the transfer was made as well as the number of Shares
which were the subject of such transfer, and the present promise will apply to
the new number of shares held by the acquiring Promisor.
10. POWER OF REPRESENTATION
At the Beneficiary's request, the Promisors (with the exception of the Corporate
Promisors) expressly grant an irrevocable power to Patrick Lucas or, in the case
of his impediment or death, to Emmanuel Gras or, in the case of his impediment
or death, to Daniel Naftalski (hereinafter the "Representative"), to act jointly
and severally in the name and on behalf of each of them within the framework of
the mission defined as follows:
(a) make any decision regarding the Transfer Price,
(b) distribute the Shares to be transferred pursuant to the present Contract,
(c) sign the corresponding share transfer orders,
(d) receive the Transfer Price, issue a receipt for the same and distribute
the same amongst the Promisors.
11. EXPENSES - DUTIES - REGISTRATION
Each party shall bear the fees and expenses of its own counsel with regard to
the performance of the present Contract.
All other expenses, duties and taxes of any nature resulting from the signature
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<PAGE>
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Exhibit 4 to the Agreement
Promise to Sell No. 1
page 10
or the performance of the present Contract shall be borne exclusively by the
Beneficiary which so agrees.
12. NOTICES
Unless specifically provided otherwise, all notifications, requests,
applications, claims or other communications authorized or required under the
present Contract (other than those which must be made in application of the
by-laws of the Company) will as far as the notifying party is concerned be duly
made if, within the required time period, they are delivered by hand in return
for a release or sent by registered mail with return receipt requested to the
addresses appearing above or to any other address notified beforehand in
accordance with the provisions of the present Article.
For purposes of this Contract, the notification date shall, as far as the
notified party is concerned, be deemed to be the date of remittance, in the case
of notification by hand, and the date of first presentation, in the case of
notification by registered mail with return receipt requested.
13. NO JOINT LIABILITY BETWEEN CORPORATE PROMISORS
No provision may be considered to impose any obligation or liability whatsoever
on a Corporate Promisor, for any reason whatsoever which might not be directly
and totally attributable to it.
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<PAGE>
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Exhibit 5 to the Agreement
Promise to Sell No. 2
page 1
EXHIBIT 5 TO THE AGREEMENT
PROMISE TO SELL No. 2
BETWEEN THE UNDERSIGNED
WILLIS CORROON GROUP PLC, an English law company whose registered office is at
10, Trinity Square, London EC3P 3AX, Great Britain, registered with the England
and Wales Company Registration Office under number 621757,
hereinafter referred to as the "Promisor" or "WCG"
ON THE ONE HAND
EMMANUEL GRAS residing at 3, rue Parmentier (59370) Mons en Baroeul,
PATRICK LUCAS residing at 1, avenue Emile Acollas (75007) Paris,
DANIEL NAFTALSKI residing at 2, rue des Beaux Arts (75006) Paris,
hereinafter collectively referred to as the "Beneficiaries"
ON THE OTHER HAND
WHEREAS
By virtue of an agreement entered into on this day between all the shareholders
of the Company (including the Beneficiaries) and the Promisor (hereinafter the
"Agreement"), it has notably been agreed that the Promisor shall grant to the
Beneficiaries a promise to sell covering all of its shareholding in the Company
(as defined in Article 1) in accordance with the terms and conditions of the
present Contract.
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<PAGE>
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Exhibit 5 to the Agreement
Promise to Sell No. 2
page 2
IT IS THEREFORE AGREED AS FOLLOWS
1. DEFINITIONS
The terms and expressions beginning with a capital letter and not defined in the
present Contract shall have the meaning ascribed to them in the Agreement and
its Exhibits.
For purposes of the present Contract, the words and expressions below shall have
the following meanings:
Change of Control means:
(a) with regard to WCG, any operation of any nature (including a merger) which
has the object or effect:
(i) of resulting in the direct or indirect holding by any related entity
or entity belonging to a group directly or indirectly controlling,
within the meaning of Article 355-1 of Law No. 66-537 of July 24,
1996 on commercial companies, an insurance brokerage company ranked
among the 10 leading insurance brokerage companies world-wide in
terms of turnover or (ii) the 10 leading French insurance brokerage
companies in terms of turnover, of at least 30% of the capital of
WCG, or
(ii) of giving any of the above-mentioned entities the power to appoint
the majority of the members of the Board of Directors or any
equivalent corporate organ of WCG, or
(b) with regard to any Affiliated Company, any operation of any nature
(including a merger) which has the object or effect (i) of causing WCG's
direct or indirect control, within the meaning of Article 355-1 of Law No.
66-537 of July 24, 1996 on commercial companies, of any Affiliated Company
to terminate, or (ii) of giving to a third party the power to appoint the
majority of the members of the Board of Directors or any equivalent
corporate organ of any Affiliated Company.
GS Share Purchase Agreement means the agreement in Exhibit 2 to the Agreement.
Closing Date means the date on which the Promisor or any company of the WCG
Group has acquired the Initial Shareholding.
Indemnification Undertaking means the undertaking contained in Exhibit 6 to the
GS Share Purchase Agreement.
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<PAGE>
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Exhibit 5 to the Agreement
Promise to Sell No. 2
page 3
Business Day means any business day in France with the exception of any public
holiday or day of rest in accordance with the legislation and regulations
applicable in France.
Legal Entities means Gras Savoye Euro Finance, AGF and the beneficiaries of the
Promise to Buy in Exhibits 3 bis and 3 ter to the Agreement.
Promises to Buy means the contracts in Exhibits 3, 3 bis and 3 ter to the
Agreement.
Promise to Sell No. 1 means the contract in Exhibit 4 to the Agreement.
Company means Gras Savoye & Cie, a societe en commandite par actions with a
capital of FRF 9,952,000 divided into 49,760 shares of FRF 200 each, whose
registered office is at 2, rue Ancelle (92200) Neuilly sur Seine and which is
registered with the Nanterre Commercial and Companies Registry under number B
457 509 867.
Affiliated Company means any company (i) which is under the control of WCG
within the meaning of Article 355-1 of Law No. 66-537 of July 24, 1996 on
commercial companies, and (ii) which holds shares in the Company.
2. UNILATERAL PROMISE TO SELL
The Promisor hereby promises to the Beneficiaries, who accept such promise
solely as a promise, and to any person which the Beneficiaries might substitute
for the purposes hereof, to sell pursuant to ordinary legal guarantees, all of
the shares of the Company which the Promisor will own (hereinafter the
"Shares"), on the date on which the rights granted pursuant to this promise are
exercised, in accordance with the terms and conditions defined in the present
Contract (hereinafter, the "Option").
In the event that any Affiliated Company, and/or any company which is no longer
an Affiliated Company, within the meaning hereof, holds shares in the Company on
the date on which the Option is exercised, the compan(ies) concerned shall be
bound by this promise for the shares in the Company that such compan(ies) hold,
WCG guaranteeing the respect of the present promise by any Affiliated Company
and any company which is no longer an Affiliated Company within the meaning
hereof.
In this respect, any transfer of Shares of any nature whatsoever to an
Affiliated Company or any acquisition of Shares by an Affiliated Company shall
not be deemed valid unless (i) WCG has obtained the prior written undertaking
from the Affiliated Company concerned in favor of the Beneficiaries to respect
the terms of the present Contract, and (ii) this written undertaking has been
notified
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<PAGE>
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Exhibit 5 to the Agreement
Promise to Sell No. 2
page 4
to the Representative prior to the effective completion of the transfer in
question.
3. TERM OF THE OPTION
The Option is granted for a period of twelve (12) years as from the Closing Date
(hereinafter the "Term of the Option").
4. EXERCISE OF THE OPTION
(a) The exercise of the Option granted to the Beneficiaries is subject to the
following cumulative conditions (hereinafter the "Cumulative Conditions"):
(i) Change of Control affecting WCG or any Company. In this regard, and as
permitted by law or the applicable regulations, notably stock market
regulations, WCG expressly undertakes to inform each of the Beneficiaries
and the Company in writing of the occurrence and progress of any operation
which is likely to result in a Change of Control of WCG or of any
Affiliated Company.
(ii) holding by WCG and/or any Affiliated Company of a total shareholding less
than or equal to 50% of the capital of the Company, and
(iii) Patrick Lucas or Emmanuel Gras or Daniel Naftalski has the capacity of
general partner of the Company.
(b) When the Cumulative Conditions are satisfied, the Option may be exercised
under the conditions described below.
(i) The Beneficiaries acting jointly must first inform the Promisor of the
possible exercise of the Option by sending to WCG a written notification
conforming to the provisions of Article 8, within two (2) months following
the effective completion of any operation which resulted in a Change of
Control of WCG or of any Affiliated Company (hereinafter "Notification No.
1"), and
(ii) if necessary, they will then inform the Promisor of the effective exercise
of the Option, by sending to WCG a written notification conforming to the
provisions of Article 8, within five (5) months following the effective
completion of any operation which resulted in a Change of Control of WCG
or of any Affiliated Company (hereinafter "Notification No. 2").
In this regard, it is expressly agreed that (i) the time limits indicated
in paragraphs (b) (i) and (ii) above shall only start and run to the
extent that
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Exhibit 5 to the Agreement
Promise to Sell No. 2
page 5
the Beneficiaries and the Company have been informed in writing of the
operation(s) in progress pursuant to paragraphs (a) (i) and (ii) above. In
the event that such information was not furnished until after the date of
the effective completion of the operation(s) resulting in a Change of
Control of WCG or of any Affiliated Company, the date on which such
information was given shall be used for purposes of calculating the time
limits indicated in paragraphs (b) (i) and (ii) above.
In the event that one of the Beneficiaries waives the benefit of the
Option as in the case where one of them has ceased, for any reason
whatsoever, to be a general partner of the Company, then the Option may
only be exercised by the other Beneficiary or Beneficiaries jointly. In
any event, the Option may only be exercised once.
The exercise of the Option shall cover all of the Shares held by the
company or companies in which the control has changed.
(c) The Beneficiaries will acquire the full right to enjoyment of the Shares
for which the Option has been exercised with all the attached rights to
dividends on the date of the remittance of the corresponding share
transfer orders against payment of the price.
The Promisor certifies and warrants to the Beneficiaries that on the date
of actual transfer of the Shares for which the Option has been exercised,
such Shares shall be freely negotiable and free of all option rights,
claims, liens, guarantees, pledges, sureties, easements, charges or
restrictions of any nature whatsoever and that on that same date, the
transferee of such Shares will receive full ownership thereof, free of all
option rights, claims, liens, guarantees, pledges, sureties, easements,
charges or restrictions of any nature. The Promisor undertakes to
indemnify the transferee of the Shares for any adverse consequences and
prejudice suffered by the transferee of the Shares due to any violation by
it of the undertaking of the present paragraph.
(d) If the Beneficiaries fail to exercise the Option during the Period of
Exercise of the Option, such Option shall be deemed to have lapsed,
without any right of indemnity for either party.
5. PRICE
The price per Share to be paid under the present Option (hereinafter, the
"Transfer Price") shall be:
(a) with regard to the transfer resulting from the exercise of the Option
which is notified before the third anniversary of the Closing Date, the
Price per Share of the Company, as defined in the GS Share Purchase
Agreement, it being understood that the aggregate price due by the
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<PAGE>
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Exhibit 5 to the Agreement
Promise to Sell No. 2
page 6
Beneficiaries hereunder shall be reduced, if necessary, by any amount
which has been received by the Promisor under the Indemnification
Undertaking,
(b) with regard to the transfer resulting from the exercise of the Option
which is notified after the third anniversary and before the sixth
anniversary of the Closing Date, the greater of the two following amounts:
(i) the Price per Share of the Company as defined in the GS Share
Purchase Agreement, it being understood that the aggregate price due
by the Beneficiaries hereunder shall be reduced, if necessary, by
any amount which might have been paid by the Legal Entities or been
deducted from the price paid to the Legal Entities, at the time of
exercise of the Promises to Buy and to Sell, under the
Indemnification Undertaking, and also the aggregate amount deducted
from the price paid to the individual beneficiaries of the Promises
to Buy and to Sell in the event that an Exceptional Event (as
defined in the Promises to Buy and to Sell) has occurred,
(ii) the price calculated between April 15 and April 30 of each year and,
for the first time, between April 15 and April 30, 2000, according
to the formula provided for in Exhibit D to the Promise to Buy, it
being understood that this price shall be applicable to the transfer
of the Shares under the present Option until the establishment of
the price which is based upon the accounts of the following year and
is calculated according to the same formula and in the same time
period,
(c) with regard to the transfer resulting from the exercise of the Option
which is notified after the sixth anniversary of the Closing Date, the
price calculated between April 15 and April 30 of each year according to
the formula provided for in Exhibit D of the Promise to Buy, it being
understood that this price shall be applicable to the transfer of the
Shares under the present Option until the establishment of the price which
is based upon the accounts of the following year and is calculated
according to the same formula and in the same time period.
The Transfer Price of the Shares for which the Option has been exercised will be
payable in cash, within six (6) months, at the latest, following the date of the
effective completion of the operation resulting in the Change of Control of WCG
or of any Affiliated Company, by bank check denominated in French francs, in
return for delivery by the Promisor to the Representative (as defined in Article
6) of the corresponding duly signed share transfer order(s) in favor of the
Beneficiaries, subject to the obtaining of all government or administrative
authorizations which may be necessary.
In the event that the transfer of the Shares provided for herein is subject to
the
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Exhibit 5 to the Agreement
Promise to Sell No. 2
page 7
obtaining of any government or administrative authorization, the Promisor and
the Beneficiaries shall mutually provide all assistance, exchange all
information, sign all documents and, more generally, do all that is necessary or
useful so that the competent authority may rapidly decide upon the contemplated
transaction.
6. POWER OF REPRESENTATION
At the Promisor's request, the Beneficiaries expressly grant an irrevocable
power to Patrick Lucas or, in the case of his impediment or death, to Emmanuel
Gras or, in the case of his impediment or death, to Daniel Naftalski
(hereinafter the "Representative"), to act jointly and severally in the name and
on behalf of each of them within the framework of the mission defined as
follows:
(a) make any decision regarding the Transfer Price, and
(c) receive the corresponding share transfer order(s) in return for remittance
of the Transfer Price.
7. EXPENSES - DUTIES - REGISTRATION
Each party shall bear the fees and expenses of its own counsel with regard to
the performance of the present Contract.
All other expenses, duties and taxes of any nature resulting from the signature
or the performance of the present Contract shall be borne exclusively by the
Promisor which so agrees.
8. NOTICES
Unless specifically provided otherwise, all notifications, requests,
applications, claims or other communications authorized or required under the
present Contract (other than those which must be made in application of the
by-laws of the Company) will as far as the notifying party is concerned be duly
made if, within the required time period, they are delivered by hand in return
for a release or sent by registered mail with return receipt requested to the
addresses appearing above or to any other address notified beforehand in
accordance with the provisions of the present Article.
For purposes of this Contract, the notification date shall, as far as the
notified party is concerned, be deemed to be the date of remittance, in the case
of notification by hand, and the date of first presentation, in the case of
notification by registered mail with return receipt requested.
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Exhibit 5 to the Agreement
Promise to Sell No. 2
page 8
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Exhibit 6 to the Agreement
Draft Resolutions
page 1
EXHIBIT 6 TO THE AGREEMENT
DRAFT RESOLUTIONS
FIRST RESOLUTION
The general meeting, taking its decision pursuant to the same conditions of
quorum and majority as the extraordinary general meeting, after becoming
familiar with the proposed transfers notified to the company, pursuant to which
various shareholders are proposing to sell to Willis Corroon Europe BV (a
Netherlands law company whose registered office is in Marten Meerweg 51, 3068 AV
Rotterdam, Netherlands), and to the company (a company of the Willis Corroon
Group whose identity will have been notified to the company one month before the
date of the general meeting), 16,213 shares they hold in the company, decides to
authorize such transfers and to approve Willis Corroon Europe BV and the company
__________ as new shareholders.
SECOND RESOLUTION
The general meeting, taking its decision pursuant to the same conditions of
quorum and majority as the extraordinary general meeting, decides, provided that
on the one hand the general partners unanimously agree to the amendments to the
by-laws referred to below and that on the other hand the Third Resolution is
approved by the shareholders which will hold the A shares and the Fourth
Resolution is approved by the shareholders which will hold the B shares, to
amend Articles 6, 9, 10, 13, 16 and 18 of the by-laws as follows:
ARTICLE 6 - CAPITAL
The capital shall be NINE MILLION NINE HUNDRED AND FIFTY-TWO THOUSAND
(9,952,000) francs.
It shall be divided into 49,760 shares of a par value of 200 francs each.
The shares shall be divided into two classes, A and B.
In the event that shares are transferred by a holder of shares of one class to a
shareholder holding shares of another class, such shares would lose their
qualification and would be deemed, as from the date of the transfer, to be
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Exhibit 6 to the Agreement
Draft Resolutions
page 2
shares of the class to which the other shares held by the transferee belong.
In the event that shares are transferred, for valuable consideration or as a
gift, to a person who is not yet a shareholder, subject as the case may be to
respecting the right of approval referred to in Article 9, they would continue
to belong to the class to which they were deemed to belong before the change of
ownership.
Each share subscribed for in the context of a capital increase by a person who
is already a shareholder shall be deemed to belong to the class to which the
shares already held by such person belong.
In the event that a person who is not yet a shareholder subscribes for shares in
the context of a capital increase, the extraordinary general meeting of the
shareholders, simultaneously with its approval decision concerning the admission
of such person to the company's capital, shall decide on the class to which the
shares subscribed for by such person will belong.
In the event that, insofar as Willis Corroon is a shareholder, the total number
of shares of one of the classes were to be less than one-quarter of the number
of shares composing the company's capital, the breakdown of the company's shares
into two classes of shares would automatically cease to exist. The same shall
apply on the day on which none of the following three individuals: Mr. Patrick
Lucas, Mr. Emmanuel Gras and Mr. Daniel Naftalski, is a general partner. The
various provisions of these by-laws which refer to two classes of shares would
be amended to take account of this situation.
In this event, the management shall immediately convene a general meeting in
order to record this amendment to the by-laws and to decide on the appointment
of new members of the Supervisory Board.
ARTICLE 9
I - Unchanged.
II - Transmission and transfer of shares
1(degree) Unchanged.
2(degree)-A/ Transfers of shares, as a gift or for valuable
consideration, to ascendants, descendants, brothers, sisters
or the spouse of a shareholder or between shareholders who
are individuals, members of the Gras and/or Lucas families,
shall be freely carried out.
The following shall also be free:
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Exhibit 6 to the Agreement
Draft Resolutions
page 3
- the contribution by a shareholder who is an individual
of all or part of his/her shares to a legal entity
controlled by him/her, alone or with his/her spouse,
brothers and sisters, ascendants or descendants,
provided that the contributors first undertake in
respect of the other shareholders, in the event of the
transfer of control of the legal entity receiving the
contribution, that this transfer shall be treated in
light of the provisions set forth in B/ and C/ below
in the same manner as if the transfer concerned the
company's shares directly,
- any transfer, whether by means of a contribution or
otherwise, by a legal entity of all or part of its
shares to a company belonging to the same group as the
legal entity, i.e., to a company which is controlled
by, controls or is under common control with the
transferring company, control being defined within the
meaning of Article 355-1 of the law on commercial
companies, or to the controlling company,
- shares purchased pursuant to the provisions of
Articles 208-1 to 208-8-2 of the law on commercial
companies,
- the allotment of shares to any assign following the
partition of an estate or the liquidation of the
community property between spouses,
- transfers of A shares to owners of B shares, made in
performance of Promise to Sell No. 1 granted by the
owners of A shares pursuant to an Agreement signed in
___________ on ___________, 1997,
- transfers of B shares, regardless of whether they are
to a shareholder or third parties, made in performance
of Promise to Sell No. 2 granted to Messrs. Patrick
Lucas, Emmanuel Gras and Daniel Naftalski by the
owners of B shares pursuant to an Agreement signed in
___________ on ___________, 1997,
- transfers to persons who are members of the
Supervisory Board of the share required for them to
perform such duties, and transfers back of such
shares.
B/ All transmissions of shares between shareholders, other than
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Exhibit 6 to the Agreement
Draft Resolutions
page 4
those made freely pursuant to A above, shall be subordinated
to the exercise of a preemption right by all the A and B
shareholders other than the Transferor according to the
following conditions.
The transferring shareholder shall notify the proposed
transfer or change of ownership to the company by
extra-judicial writ or by registered letter with return
receipt requested, indicating the identity of the proposed
transferee(s), the number of shares whose transfer or change
of ownership is being considered and the price offered, if
it concerns a sale of the shares, or the estimate of the
price of the shares in the other cases (hereinafter referred
to as the "Notification").
Within eight days following the Notification made to the
company, the management shall notify the A and B
shareholders other than the transferor, individually and by
registered letter, of the number of shares transferred and
the price indicated in the Notification.
The shareholders shall have fifteen days in which to
announce their intention of acquiring the shares at the
price indicated in the Notification.
In the event of applications exceeding the number of shares
offered, the management shall divide out the shares between
the applicants (including the proposed transferee(s)) in
proportion to their fraction of the capital and within the
limits of their applications. However, for as long as a same
holder of A shares does not directly or indirectly hold a
number of shares greater than the number of B shares, the
distribution will be made as a priority among the owners of
A shares in proportion to their fraction of the capital,
then among the owners of B shares for the surplus of the
non-preempted shares.
In the event of applications for less than the number of
shares offered, the proposed transfer or change of ownership
may only be carried out for the shares which have not been
preempted.
The price of the preempted shares shall be equal to the
price indicated in the Notification. Except as otherwise
agreed, the price of the preempted shares shall be payable
in cash.
C/ Unchanged.
D/ Unchanged.
E/ Unchanged.
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Exhibit 6 to the Agreement
Draft Resolutions
page 5
F/ Unchanged.
G/ Unchanged.
ARTICLE 10
1/ The company shall be managed by one or more gerants, who shall be
individuals and who may but do not need to be general partners.
Any general partner shall automatically be a gerant.
The appointment of a gerant who is not a general partner shall be made
pursuant to a decision of the ordinary general meeting of the shareholders
with the agreement of the majority of the general partners or, if there
are less than three general partners, with the agreement of the general
partner or partners. The appointment may also be made pursuant to a
decision of the Supervisory Board taken by the majority of the members
present or represented, in the event that the company no longer has any
general partners.
Other than the case referred to in paragraph 3/ of this article, the
removal of a gerant who is not a general partner shall be made pursuant to
the same conditions as for his appointment.
Other than the case referred to in paragraph 3/ of this article, the
removal of a gerant who is a general partner shall be made pursuant to a
decision of the extraordinary general meeting of the shareholders with the
agreement of the other general partners. If there is only one gerant who
is a general partner, his removal may only be made for a legitimate cause
by a court decision at the request of one or more shareholders
representing more than one-half of the capital.
2/ Each of the gerants shall be vested with the broadest powers to act in all
circumstances in the name of the company. The gerant shall exercise such
powers within the limits of the corporate purpose and subject to those
powers expressly conferred by the law on the shareholders' meetings.
3/ Any limitation of the gerant's powers shall not be enforceable against
third parties.
The gerants shall hold separately the same powers as far as third parties
are concerned. However, an internal limitation of the individual powers
shall concern the following decisions, which are decisions to be taken
collectively by the gerants in office in the event of several gerants:
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Exhibit 6 to the Agreement
Draft Resolutions
page 6
- empowering any persons other than the gerant or gerants to bind the
company;
- all sureties, guarantees, mortgages, borrowings, loans and in
general all transfers and all commitments of the company exceeding
an amount fixed by the general partners taking their decision by a
two-thirds majority in numbers, or unanimously if there are only two
of them;
- all operations entailing for the company the acquisition of the
status of partner, in name or as a general partner.
Any violation of the rule of collective decision-making provided for above
shall be a faute lourde (gross misconduct) leading to the possible removal
of the gerant having committed such fault pursuant to a decision of the
majority of the general partners or, if the number of general partners is
less than three, pursuant to a decision of the general partner or
partners. If the gerant having committed the fault is himself a general
partner, he shall not take part in the decision. Moreover, the gerant
having committed the fault may be the subject of a claim for damages
insofar as the violation is prejudicial to the company.
Furthermore, it is agreed that the gerant or gerants, acting jointly or
separately, may not, without first having been authorized by the
Supervisory Board taking its decision by a three-quarters (3/4) majority
of its members, carry out the following operations:
a) Any acquisition not referred to in the investment budget approved by
the Supervisory Board, by any means, directly or indirectly, in
particular by the purchase of securities, any business, element of a
business, client portfolio, enterprise (a) exceeding an exemption of
FRF 50,000,000 excluding tax per calendar year, it being specified
that to calculate this exemption, the only operations taken into
consideration will be operations of more than FRF 2,000,000
excluding tax, or (b) exceeding an amount of FRF 25,000,000
excluding tax per operation;
b) any sale not referred to in the investment budget approved by the
Supervisory Board, by any means, directly or indirectly, in
particular by the sale of securities, any business, element of a
business, client portfolio, enterprise (a) exceeding an exemption of
FRF 50,000,000 excluding tax per calendar year, it being specified
that to calculate this exemption, the only operations taken into
consideration will be operations of more than FRF 2,000,000
excluding tax, or (b) exceeding an amount of FRF 25,000,000
excluding tax per operation;
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Exhibit 6 to the Agreement
Draft Resolutions
page 7
c) Any other acquisition of assets not referred to in the operating
budget approved by the Supervisory Board and not being the subject
matter of one of the above paragraphs, (a) exceeding an exemption of
FRF 30,000,000 excluding tax per calendar year, it being specified
that to calculate this exemption, the only operations taken into
consideration will be operations of more than FRF 1,000,000
excluding tax, or (b) exceeding an amount of FRF 10,000,000
excluding tax per operation;
d) Any other sale of assets not being the subject matter of one of the
above paragraphs, (a) exceeding an exemption of FRF 30,000,000
excluding tax per calendar year, it being specified that to
calculate this exemption, the only operations taken into
consideration will be operations of more than FRF 1,000,000, or (b)
exceeding an amount of FRF 10,000,000 excluding tax per operation;
e) Any subscription of a loan or a long term financial facility (more
than two years), the amount of which, in one or more operations, is
greater than or equal to FRF 25,000,000 per calendar year, intended
to finance an investment, excluding cash operations;
f) Any constitution of a guarantee of any kind for a total amount per
operation greater than or equal to FRF 25,000,000, or exceeding an
exemption of FRF 100,000,000 per calendar year, whatever the amount
of the guarantee;
g) Any conclusion, renewal or termination of any undertaking or
agreement, directly or indirectly, between the company on the one
hand and one of the shareholders or one of the general partners or
members of their family on the other hand, excluding employment
contracts entered into or renewed at normal conditions assessed
compared to the usual practice applicable in the Company;
h) The terms and conditions of any stock option plan;
i) Any entry into the capital of Gras Savoye Euro Finance of a third
party, particularly by any share transfer;
j) Any transfer of shares of Gras Savoye & Cie by Gras Savoye Euro
Finance.
Any investment budget which may be prepared by the company must be
approved by the Supervisory Board by a three-quarters majority of its
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Exhibit 6 to the Agreement
Draft Resolutions
page 8
members.
4/ In the event of several gerants, for all decisions to be taken
collectively by the gerants, they shall form a management board composed
of all the gerants in office.
The board shall be chaired by a gerant who is a general partner.
The chairman of the meeting shall be designated by the members present.
The management board shall meet at the registered office as often as the
interest of the company shall require upon being convened by one of the
gerants.
For the meeting to be validly held, each of the members must have been
convened by any means at least seven days in advance of the meeting,
unless all the members were present or represented at the meeting.
A member may only be represented by another member.
Collective decisions shall be taken by a majority of the gerants in
office. If there are only two gerants in office, the decision must be
unanimous.
The board's decisions shall be recorded in minutes written in a special
register and signed by the chairman of the meeting and another member
present at the meeting.
5/ Subject to the provisions of Article 16.2/, if there is only one general
partner left who is a gerant, he shall automatically cease to hold the
office of gerant either at the close of the ordinary annual general
meeting of the shareholders deciding on the accounts of the financial year
during which the gerant reached the age of seventy or on the day on which
he becomes the sole general partner gerant if on such day he is more than
70 years of age.
ARTICLE 13 - SUPERVISORY BOARD
1/ Composition - Appointment
a) The Supervisory Board shall be composed of eight members chosen
exclusively from among the limited partners.
Depending on the number of shares of each class, the breakdown of
the members of the Supervisory Board shall be made as follows:
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Exhibit 6 to the Agreement
Draft Resolutions
page 9
- if the number of class B shares is between 25% and 50% of the
capital, three members of the Supervisory Board out of eight
must be chosen from among the candidates presented by the
holders of class B shares and five from among the candidates
presented by the holders of class A shares;
- if the number of class B shares is equal to 50% of the
capital, four members of the Supervisory Board out of eight
must be chosen from among the candidates presented by the
holders of class B shares and four from among the candidates
presented by the holders of class A shares;
- if the number of class B shares is above 50% and below 75% of
the capital, five members of the Supervisory Board out of
eight must be chosen from among the candidates presented by
the holders of class B shares and three from among the
candidates presented by the holders of class A shares.
When, after one of the members of the Supervisory Board ceases to carry
out his duties, the holders of shares of one category were no longer
to be sufficiently represented on the Supervisory Board, the
chairman of the Supervisory Board shall be required to convene the
Supervisory Board within a maximum of 15 days in order to take note
of the above situation and to appoint a new member by cooptation.
In the event that one of the above thresholds is exceeded, the management
shall notify all the other members of the Supervisory Board thereof
immediately.
If one of such members should fail to resign within fifteen days following
this notification, the most senior in age of the members of the
Supervisory Board belonging to the class of shares whose number of
seats to be filled has been reduced shall be deemed to have resigned
as a matter of course.
The chairman of the Supervisory Board or the management shall convene the
Supervisory Board within a maximum of fifteen days in order to take
note of such resignation and appoint a new member of the Supervisory
Board by cooptation.
b) The members of the Supervisory Board shall be appointed by the
ordinary general meeting of the shareholders for a maximum of
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Exhibit 6 to the Agreement
Draft Resolutions
page 10
three years.
The duties of a member of the Supervisory Board shall terminate at
the close of the ordinary general meeting of the shareholders
deciding on the accounts of the preceding financial year, held in
the year during which such member's term of office expires.
The members of the Supervisory Board are eligible for re-election.
They may be removed at any time by the general meeting.
The partners who are general partners may not participate in the
appointment or removal of members of the Supervisory Board in
general meetings.
c) Each member of the Supervisory Board shall own at least ONE (1)
share of the company. If a member of the Supervisory Board does not
own ONE (1) share when he is appointed, he must acquire it within
three (3) months of his appointment.
d) In the event of a vacancy due to a death, resignation or for another
reason, the Board may provisionally appoint new members, respecting
the rules fixed above. These appointments shall be ratified by the
following general meeting.
The replacement member shall remain in office only for the remainder
of his predecessor's term of office.
If the provisional appointments are not ratified by the general
meeting, the resolutions adopted by the Supervisory Board shall
nevertheless be valid.
2/ Officers and meetings of the Supervisory Board
The Board shall appoint a chairman from among its members who is required
to be an individual. It shall in addition choose a secretary who may but
does not need to be one of its members.
In the absence of the chairman for any reason whatsoever for a period of
at least six months, the Board shall elect a new chairman. In the absence
of the chairman for a meeting, the Board shall designate one of its
members to chair the meeting.
The Board shall meet, upon being convened by its chairman or by one-half
of its members, as often as the interest of the company shall require, and
at least every six months, either at the registered office, or in any
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Exhibit 6 to the Agreement
Draft Resolutions
page 11
other place indicated in the letter of convocation. It may also be
convened by the gerant of the company, or by one of them if there are
several.
The presence of one-third of the members of the board shall be required
for the validity of its proceedings.
Except for another majority provided for in these by-laws, the decisions
shall be taken by the majority of the members present or represented, one
member present being able to represent a maximum of two absent members
upon presentation of express powers of attorney. In the event of equal
voting, the chairman of the Supervisory Board meeting shall have the
casting vote.
The Board's proceedings shall be recorded in minutes inserted or bound in
a special register and be initialed in accordance with the law. They shall
be signed by the Chairman of the meeting and the Secretary or by the
majority of the members present.
3/ Duties of the Supervisory Board
The Supervisory Board shall supervise permanently the management of the
company, in accordance with the law.
It shall authorize the gerant or gerants to carry out the operations
referred to in paragraph 3/ of Article 10 above.
It shall submit a report to the ordinary annual general meeting in which
it shall point out in particular any irregularities or inaccuracies noted
in the accounts of the financial year.
It shall be informed of the documents made available to the statutory
auditors.
It may convene the general meeting of the shareholders, in which case its
chairman shall chair such meeting.
4/ The Board members' directors' fees
The Supervisory Board may be awarded a fixed annual compensation as
directors' fees, the amount of which, charged to overheads, shall be
determined by the ordinary general meeting of the shareholders and shall
be maintained until otherwise decided by this general meeting.
The Board shall distribute its directors' fees between its members in the
proportions it considers appropriate.
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Exhibit 6 to the Agreement
Draft Resolutions
page 12
5/ Compensation of the chairman of the Supervisory Board
The chairman of the Supervisory Board may be awarded a compensation which
shall be fixed by the Supervisory Board in agreement with the general
partners.
6/ Age limit
The number of members of the Supervisory Board who are more than seventy
years of age may not be more than one-third of the members in office. Any
appointment contrary to this provision would be invalid.
When this legal limit is exceeded, the member who is the most senior in
age shall be deemed to have resigned as a matter of course.
Moreover, as from the age of seventy, the duration of the term of office
shall be one year.
A Supervisory Board member who reaches the age of seventy cannot therefore
remain in office beyond his seventy-first year, unless his term of office
is renewed annually by the general meeting.
ARTICLE 16
1/ There shall be at least one general partner. The general partner or
partners may only be individuals.
2/ The general partners are:
- Mr. Emmanuel Gras
- Mr. Patrick Lucas
- Mr. Daniel Naftalski
Notwithstanding any other provisions of these by-laws, the general
partners shall be appointed no later than until December 31, 2009. In the
four months preceding this date, the general partner or partners still in
office must have convened the extraordinary general meeting of the
shareholders to transform the Company into a societe anonyme with a board
of directors.
3/ The appointment of any new general partner shall be decided by the
extraordinary general meeting of the shareholders following the unanimous
proposal of the general partners, or the general partner if
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Exhibit 6 to the Agreement
Draft Resolutions
page 13
there is only one, it being understood that the new general partner may
only be chosen from among the candidate(s) presented by the general
partner or partners.
If there are no more general partners, the extraordinary general meeting
of the shareholders shall be convened by the Supervisory Board, within
three months following the occurrence of the event, to transform the
company into a societe anonyme with a board of directors.
4/ The general partner who stops being a gerant for any reason whatsoever
shall also no longer be a general partner.
In the event of any legal incapacity, withdrawal of a general partner or a
general partners' losing the status of general partner, the company shall
not be dissolved. The general partner losing such status shall be a simple
shareholder if he owns shares. The heirs of a deceased general partner
shall not inherit the status of general partner.
They shall be entitled to a proportion, prorata temporis, of the profit
provided for in Article 18.
The by-laws shall be amended automatically as a result; the amendment
shall be recorded and published by a gerant.
5/ The decisions shall be subject to the approval of the collective body of
the general partners, which shall decide by the majority of its members,
if there are more than two, or unanimously if there are less than three,
except when the by-laws provide for another majority and when it is a
question of transforming the company into a societe anonyme or a societe a
responsabilite limitee, in which case a simple majority is provided by the
law (Article 262 of the law of July 24, 1966).
However, the general partners may not decide on the appointment or removal
of members of the Supervisory Board and the in-house auditors.
The decisions of the collective body of the general partners may be made
by means of a written consultation (ordinary letter, telegram, telex, fax,
etc.), except for the annual approval of the accounts or when the general
meeting of the shareholders is convened by one or more general partners.
Each general partner shall have fifteen days in which to inform the
management of his decision on each of the resolutions. A partner who does
not reply within this period of time shall be considered to have
abstained.
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Exhibit 6 to the Agreement
Draft Resolutions
page 14
The management shall prepare minutes mentioning the date and the method of
consultation, the text of the resolutions and the answers given, which
must be attached to the minutes.
Copies of or excerpts from minutes shall be validly certified as true by
the gerant or one of the gerants if there are more than one.
ARTICLE 18 - ACCOUNTS OF THE COMPANY
1(degree) Each financial year shall begin on January 1 and end on December 31.
2(degree) The profit or loss of the financial year shall consist of the
difference between the income and expenditure for the year, after
deducting depreciation and allowances, as shown in the income
statement.
3(degree) From the profits of the year, reduced by the prior losses, if any, a
deduction shall first be made:
o of at least five percent allocated to forming a reserve fund
known as the "legal reserve". This deduction shall cease to be
compulsory when the amount of the legal reserve reaches
one-tenth of the capital;
o of any amount allocated to the reserves pursuant to the law.
The balance shall be distributed up to 3% to the general partners.
The surplus must be distributed to the owners of shares, whether
general or limited partners, in proportion to the number of their
shares, up to 40% of its amount. After these distributions, the
balance increased by the retained earnings, if any, may, upon the
decision of the ordinary general meeting and with the agreement of
the general partners, be distributed, or carried forward, or
allocated to one or more general or special reserves. This or these
reserve funds may be distributed solely to owners of shares or
allocated to the total or partial amortization of the shares.
THIRD RESOLUTION
The general meeting, upon the unanimous decision of the shareholders who will
hold B shares, after listening to the report of the special advantages drawn up
by the auditor appointed by order of the Presiding Judge of the Nanterre
Commercial Court, decides that the A shares shall be held, at the close of this
general meeting, by:
- - Mr. [___________]
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Exhibit 6 to the Agreement
Draft Resolutions
page 15
- - Mr. [___________]
- - Mr. [___________]
- - Mr. [___________]
it being observed that all these persons before the general meeting agreed to
hold A shares.
The general meeting approves the special advantages awarded to owners of A
shares, consisting of the right for the latter (i) to have a certain number of
members out of the eight members to compose the Supervisory Board and (ii) to be
able to exercise as a priority the preemption provided for in Article 9-II-2e-B/
of the by-laws.
FOURTH RESOLUTION
The general meeting, upon the unanimous decision of the shareholders who will
hold A shares, after listening to the report of the special advantages drawn up
by the auditor appointed by order of the Presiding Judge of the Nanterre
Commercial Court, decides that the B shares shall be held, at the close of this
general meeting, by:
- - Mr. [___________]
it being observed that this person before the general meeting agreed to hold B
shares.
The general meeting approves the special advantages awarded to owners of B
shares, consisting of the right for the latter (i) to have a certain number of
members out of the eight members to compose the Supervisory Board and (ii) to be
able to acquire shares freely in the context of the performance of Promise to
Sell No. 1 granted by the owners of A shares pursuant to an Agreement signed in
_________ on _________, 1997.
FIFTH RESOLUTION
The general meeting, after listening to the report of the special advantages
drawn up by the auditor designated by order of the Presiding Judge of the
Nanterre Commercial Court, approves the special advantage granted to Messrs.
Patrick Lucas, Emmanuel Gras and Daniel Naftalski to be able to acquire B shares
or to have them acquired freely by a shareholder or by one or more third parties
in performance of Promise to Sell No. 2, which was granted to them pursuant to
an Agreement signed in _________ on _________, 1997.
SIXTH RESOLUTION
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<PAGE>
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Exhibit 6 to the Agreement
Draft Resolutions
page 16
The general meeting grants full powers to the bearer of an original or a copy of
or an excerpt from these minutes in order to accomplish all filing, publication
and other necessary formalities.
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<PAGE>
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Exhibit 9
to the Agreement
page 1
EXHIBIT 9 TO THE AGREEMENT
SHARE EXCHANGE AGREEMENT
BETWEEN THE UNDERSIGNED:
Willis Corroon Europe B.V., a Netherlands law company whose registered office is
at Marten Meesweg 51, 3068 AV Rotterdam, Netherlands, registered with the
Rotterdam Commercial Registry under No. 135.835, represented by Sarah Turvill,
acting as a director, fully empowered for the purposes hereof,
hereinafter "WCE BV",
AND
Gras Savoye Euro Finance S.A., a Belgian law company having its registered
office at 8 avenue Bel-Air, 1180 Uccle, Belgium, registered with the Brussels
Commercial Registry under No. 258.054, represented by Patrick Lucas in his
capacity as President, fully empowered for the purposes hereof,
hereinafter "GS Euro Finance".
IT IS RECALLED THAT:
A. Willis Corroon France S.A. is a societe anonyme with a capital of FRF
8,220,000, divided into 82,200 shares of FRF 100 each, having its registered
office at 18, boulevard Malesherbes, 75008 Paris and which is registered with
the Paris Commercial and Companies Registry under No. B 341 303 089 (hereinafter
"WCF"). As of the Closing Date of the Exchange (as defined below), the capital
of WCF will be held as described in Exhibit 1 hereto.
The WCF shares are referred to hereinafter as the "WCF Shares".
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<PAGE>
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Exhibit 9
to the Agreement
page 2
B. GS Euro Finance has indicated to WCE BV that it is interested in an exchange
of 82,200 WCF Shares representing 100% of the capital of WCF for 680 shares of
Gras Savoye & Cie (hereinafter the "Exchanged GS Shares"), and WCE BV has
indicated that it is interested in this exchange.
C. The exchange contemplated by the parties will occur in the context of an
overall transaction whose aim is (i) the acquisition by the WCG Group (as
defined in the Agreement) of approximately 31.72% of the capital and
approximately 33.36% of the voting rights of Gras Savoye & Cie and (ii) the
integration of Willis Corroon France's activities into the GS Group (as defined
in the Agreement).
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. Exchange
(a) Subject to ordinary legal guarantees and to the terms and conditions
of this Share Exchange Agreement, WCE BV and GS Euro Finance exchange all of the
WCF Shares held by WCE BV representing 100% of WCF's capital for the Exchanged
GS Shares held by GS Euro Finance, in consideration for the Basic Cash
Distribution referred to in Article 2 (B) below.
(b) The exchange of the WCF Shares for the Exchanged GS Shares shall
become effective on the date on which the WCF Shares are actually exchanged for
the Exchanged GS Shares (hereinafter the "Closing Date of the Exchange") and GS
Euro Finance and WCE BV shall acquire the right to the full enjoyment
respectively of the WCF Shares and the Exchanged GS Shares as from such date,
with all the attached rights to dividends.
(c) The exchange of the WCF Shares for the Exchanged GS Shares shall only
be carried out if the condition precedent set forth in Article 4 below has been
fulfilled on the Closing Date of the Exchange.
2. Valuation and Cash Distribution (soulte)
(A) Valuation
The exchange provided for in Article 1 hereof shall be based on the one
hand on a valuation of WCF at an amount of FRF 50,400,000 (fifty million four
hundred thousand French francs), i.e., FRF 613 per WCF Share, and on the other
hand on a valuation of the Company (as defined in the Agreement) of FRF
1,400,000,000 (one billion four hundred million French francs),
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<PAGE>
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Exhibit 9
to the Agreement
page 3
i.e., FRF 30,017 per Exchanged GS Share. This exchange shall take place in
consideration for the Cash Distribution (as defined below), and for the other
provisions set forth below.
(B) Basic Cash Distribution
A cash distribution amounting to FRF 29,988,440 (hereinafter the "Basic
Cash Distribution") shall be paid by GS Euro Finance to WCE BV on the Closing
Date of the Exchange.
(C) WCF Quantifiable Deciding Element and Cash Distribution deriving from
a Lower Valuation of WCF
If the accounting and legal audit conducted by GS Euro Finance or by the
GS Group (hereinafter the "WCF Audit") reveals one or more quantifiable elements
or facts contrary to the quantifiable deciding element of the acquisition of the
WCF Shares contained in Exhibit 2 (hereinafter the "WCF Quantifiable Deciding
Element") to be verified during the WCF Audit, GS Euro Finance shall inform WCE
BV thereof no later than 8 business days in France (hereinafter the "Business
Days") following the date of the end of the WCF Audit set for October 20, 1997
at the latest, unless extended contractually (hereinafter referred to as the
"Date of the End of the WCF Audit"). GS Euro Finance shall attach all the
necessary information to such notification along with copies of any necessary
documentary proofs. The notification shall also include the value of the WCF
Cash Distribution (as defined below) claimed by GS Euro Finance.
(i) Inaccuracy in respect of the WCF Quantifiable Deciding Element to be
verified during the WCF Audit
If the WCF Audit reveals one or more elements or facts in contradiction
with the WCF Quantifiable Deciding Element to be verified during the WCF Audit,
a cash distribution will be calculated according to the formula contained in
Exhibit 3 (hereinafter the "WCF Cash Distribution").
WCE BV may notify GS Euro Finance within 6 Business Days following the
notification received from GS Euro Finance, of any dispute concerning such
notification (hereinafter the "Notification in Response"), failing which it
shall be deemed to have agreed to all the elements and to the WCF Cash
Distribution notified by GS Euro Finance, as a result of an inaccuracy in
respect of the WCF Quantifiable Deciding Element. In the event of a dispute, the
parties shall negotiate in good faith in order to reach an agreement on the
existence or the amount of the WCF Cash Distribution.
In the event of the occurrence of the 2 following conditions which are
cumulative:
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<PAGE>
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Exhibit 9
to the Agreement
page 4
(x) dispute by WCE BV of the amount of the Estimated Net Turnover at
December 31, 1997 (as defined in Exhibit 2) estimated by GS Euro
Finance;
(y) absence of agreement between the parties within 6 Business Days
following the Notification in Response received by GS Euro Finance,
the amount of the Estimated Net Turnover at December 31, 1997 shall be
determined in accordance with the Expert Assessment Procedure.
The Expert shall accordingly determine the WCF Cash Distribution within
the period set forth in Article 2. (C) (ii) below, by applying the formula
contained in Exhibit 3.
However, in the event that the Expert is unable to determine the amount of
the Estimated Net Turnover at December 31, 1997, it would determine the WCF Cash
Distribution on the basis of the amount of the Actual Net Turnover at December
31, 1997.
(ii) Expert Assessment Procedure
For the purposes hereof, the procedure described below is called the
"Expert Assessment Procedure".
Failing an agreement within a period of 6 Business Days following the
Notification in Response received by GS Euro Finance, as provided in Article 2.
(C) (i) above, the parties expressly agree that the existence and/or the amount
of the inaccuracy alleged by GS Euro Finance in respect of the WCF Quantifiable
Deciding Element will be definitively settled, without recourse of any kind,
unless an obvious material error has been made, by Coopers & Lybrand
(hereinafter the "Expert"), within a period of 30 Business Days following:
(x) the submission of the dispute to the Expert in order to determine
the amount of the Estimated Net Turnover at December 31, 1997, or
(y) the submission of the dispute to the Expert, to which shall be
attached a copy of WCF's accounts for financial year 1997, certified
by the statutory auditor, in order to determine the amount of the
Actual Net Turnover at December 31, 1997.
The Expert shall also settle any dispute about either the determination of
the amount of the Recurring Annual Expenditure, in accordance with Article 2 (D)
below, or the certification of the Closing Financial Statements provided for in
Article 2 (D) below, and shall within 30 Business Days of being
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<PAGE>
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Exhibit 9
to the Agreement
page 5
consulted reach a decision to determine the amount of the Recurring Annual
Expenditure and/or to determine and certify the Closing Financial Statements
and/or the net result for the period between the date of the Closing Financial
Statements and December 31, 1997.
The dispute shall be submitted to the Expert at the request of the most
diligent party in writing with a copy sent to the other party, and one-half of
its fees shall be paid by GS Euro Finance and the other half by WCE BV. The
party submitting the dispute to the Expert shall provide the Expert with copies
of the notifications exchanged between the parties. The Expert declared prior to
the signature hereof that it accepted this appointment. Accordingly, the Expert
shall determine the existence and/or the amount of the inaccuracy alleged by GS
Euro Finance in respect of the WCF Quantifiable Deciding Element and the WCF
Cash Distribution which shall be binding on the parties, in accordance with
Article 1843-4 of the Civil Code, and shall fulfill any other mission conferred
upon it hereunder, it being understood in particular that not only the
definitions contained in Exhibit 2 to the Share Purchase Agreement but also the
formula used to determine the WCF Cash Distribution contained in Exhibit 3 and
the accounting rules and methods contained in Exhibit 4 to the Share Purchase
Agreement (which is itself Exhibit 2 to the Agreement) shall be binding on the
Expert. If the Expert was unable to complete its mission for any reason
whatsoever, with the exception of the case in which it would be unable to
determine the amount of the Estimated Net Turnover at December 31, 1997, a new
Expert chosen from the list of experts of the Court of Appeal of Versailles
would be appointed by mutual agreement between GS Euro Finance and WCE BV or,
failing this, by the Presiding Judge of the Commercial Court of Nanterre to
which the dispute shall be referred in summary proceedings (referes) at the
request of the most diligent party. WCE BV guarantees the Expert's access to the
premises of WCF and that WCF shall provide the Expert with any information that
the Expert might reasonably request in connection with the accomplishment of its
mission.
(D) WCF Annual Expenditure
For the purposes of this Share Exchange Agreement, the valuation of WCF
has been established in particular on the basis of an estimated recurrent before
tax result of WCF of FRF 3,000,000.
Within three months as from the Closing Date of the Exchange, a balance
sheet and income statement of WCF as at the last day of the month preceding the
Closing Date of the Exchange (hereinafter the "WCF Closing Financial
Statements") shall be drawn up by mutual agreement between the parties or,
failing this, by the Expert, in the context of the Expert Assessment Procedure,
which shall certify them. The WCF Closing Financial Statements shall in
particular reflect the amount of the Equity on the Closing Date of the Exchange
(as defined in Exhibit 2) and the amount of the Recurrent Annual Expenditure (as
defined below).
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<PAGE>
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Exhibit 9
to the Agreement
page 6
WCE BV undertakes, prior the Closing Date of the Exchange, after informing
and consulting the GS Group, to take all necessary measures so that the amount
of the Recurrent Annual Expenditure (as defined below) is reduced to an amount
corresponding at most to the difference between the Estimated Net Turnover at
December 31, 1997 and FRF 3,000,000. For the purposes hereof, Recurrent Annual
Expenditure is defined as the estimated expenditure of WCF for financial year
1997 reduced by the estimated recurrent savings obtained from all the measures
implemented by WCF before the Closing Date of the Exchange and those that will
be taken by mutual agreement and implemented by WCF after the Closing Date of
the Exchange.
If the WCF Closing Financial Statements reflect an amount of Recurrent
Annual Expenditure higher than the difference between the Estimated Net Turnover
at December 31, 1997 (or as the case may be the Actual Net Turnover at December
31, 1997) and FRF 3,000,000, WCE BV and any company of the GS Group undertake to
collaborate in good faith in order to pursue together the measures to reduce the
Recurrent Annual Expenditure initiated by WCE BV before the Closing Date of the
Exchange and to adopt together and implement all additional necessary measures
with the aim of achieving this level of Recurrent Annual Expenditure as promptly
as possible. It is specified that the amount of the Recurrent Annual Expenditure
taken into consideration after the Closing Date of the Exchange shall be
calculated in constant management, i.e., excluding any expense of WCF related to
a modification of the WCF management by GS Euro Finance or the GS Group, which
resulted in an increase in WCF's management costs and which had not been
approved by WCE BV.
WCE BV undertakes to assume, or to indemnify WCF for (i) as from the date
of the Closing Financial Statements and for a period of five months, the surplus
of the amount of the Recurrent Financial Expenditure shown in the WCF Closing
Financial Statements over the difference between the Estimated Net Turnover at
December 31, 197 and FRF 3,000,000, these annual amounts being converted to a
monthly basis to take into account the seasonal nature, and with the amounts due
being payable at the end of the five months, (ii) all expenses of whatever kind
on which the parties will have agreed, resulting from the implementation of the
measures to reduce the Recurrent Annual Expenditure decided by mutual agreement,
and (iii) the expenses borne while waiting for the effects of these measures if
they have not already been assumed under (i) above.
The parties agree that no later than at the end of a five-month period
after the Closing Date of the Exchange, the amount of the Recurrent Annual
Expenditure shall be determined in good faith by mutual agreement or, failing
this, by the Expert in the context of the Expert Assessment Procedure.
If at the end of this five-month period, the amount of the Recurrent
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<PAGE>
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Exhibit 9
to the Agreement
page 17
Annual Expenditure as determined is less than or equal to the difference between
the Actual Net Turnover at December 31, 1997 and FRF 3,000,000, WCE BV shall be
deemed to have satisfied all its obligations under this Article 2 (D) and shall
be released from any obligation in this regard in the future, subject to the
undertakings made by WCE BV in (ii) and (iii) of the second paragraph above.
Conversely, if, at the end of this same five-month period, the amount of
the Recurrent Annual Expenditure as determined is greater than the difference
between the Actual Net Turnover at December 31, 1997 and FRF 3,000,000, WCE BV
undertakes to pay GS Euro Finance, as a price reduction, an amount corresponding
to 14 times the surplus from the amount of the Recurrent Annual Expenditure over
the difference between the Actual Net Turnover at December 31, 1997 and FRF
3,000,000, reduced by the corporation tax at the applicable rate. WCE BV shall
then be deemed to have satisfied all its obligations under this Article 2 (D)
and shall be released from an obligation in this regard in the future, subject
to the undertakings made by WCE BV in (ii) and (iii) of the third paragraph
above.
(E) Equity
If the Closing Financial Statements, certified as necessary by the Expert
as set forth in Article 2 (D) above, show an amount of Equity less than FRF
4,500,000, WCE BV shall pay GS Euro Finance, as a price reduction, a sum
corresponding to the difference between FRF 4,500,000 and the amount of the
Equity as determined by the Closing Financial Statements. It is specified that
between the date of the Closing Financial Statements and December 31, 1997,
WCF's net result shall be nil, WCE BV undertaking to pay GS Euro Finance any
amount corresponding to a negative result over such period, unless this negative
result is related to a modification in the management of WCF by GS Euro Finance
or the GS Group which resulted in an increase in WCF's management costs and
which had not been approved by WCE BV.
(F) Cash Distribution deriving from a Lower Valuation of Gras Savoye & Cie
In the event that the Price per Share (as defined in the Share Purchase
Agreement in Exhibit 2 to the Agreement) was determined by the parties to such
Share Purchase Agreement or by the Expert (as defined in such Share Purchase
Agreement) at a value less than FRF 30,017, a cash distribution equal to the
difference between FRF 30,017 and the Price per Share, multiplied by the number
of Exchanged GS Shares, shall be payable by GS Euro Finance to WCE BV
(hereinafter the "GS Cash Distribution").
(G) Payment terms and conditions
The amounts due pursuant to the above provisions shall be payable
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<PAGE>
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Exhibit 9
to the Agreement
page 8
within 10 Business Days of their determination by contract or by the Expert by
bank check delivered to the beneficiary.
However, a set off shall be made automatically, in accordance with Article
1289 of the Civil Code, between all or part of such amounts on the day on the
which such amounts are due, certain and liquid at the same date and between the
same parties. Only the outstanding amount of these sums shall, as the case may
be, be payable by the debtor party by bank check delivered to the beneficiary
within 10 Business Days following the occurrence of the set off.
3. Closing Date of the Exchange
The Closing Date of the Exchange shall be identical to the Closing Date
provided for in the Share Purchase Agreement attached in Exhibit 2 to the
Agreement. The actual completion of this exchange shall occur on the Closing
Date (as defined in the Share Purchase Agreement), by the actual exchange of the
Exchanged GS Shares for 82,200 WCF Shares, notwithstanding any provisional
failure to determine the WCF Cash Distribution, the GS Cash Distribution or any
other amount provided for in Article 2 above, as the case may be, on such date.
On the Closing Date of the Exchange, the exchange of the WCF Shares for
the Exchanged GS Shares shall be carried out as indicated in Article 2 above, as
follows:
(a) delivery to WCE BV of a share transfer order duly signed by GS Euro
Finance and of all other documents required to enable the transfer of the
Exchanged GS Shares and to render such transfer enforceable against third
parties, as well as the registration in the shareholders' registers of Gras
Savoye & Cie of the transfer of the Exchanged GS Shares to WCE BV;
(b) delivery to GS Euro Finance of a certified true copy of the minutes of
the board of directors' meeting of WCF approving GS Euro Finance as a new
shareholder of WCF;
(c) delivery to GS Euro Finance of a share transfer order duly signed by
WCE BV and of all other documents required to enable the transfer of the WCF
Shares and to render such transfers enforceable against third parties, as well
as the registration in the shareholders' registers of WCF of the transfer of the
WCF Shares to GS Euro Finance;
(d) delivery to GS Euro Finance of a letter waiving a return to better
fortune clause, substantially in the form of Exhibit 5 hereto;
(e) delivery to WCE BV of a bank check for FRF 29,988,440;
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<PAGE>
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Exhibit 9
to the Agreement
page 9
(e) as the case may be, delivery to WCE BV or GS Euro Finance respectively
of the amounts referred to in Article 2, other than the Basic Cash Distribution,
or the outstanding amount from the set off between these two amounts.
4. Condition precedent
The completion of the exchange of the WCF Shares for Exchanged GS Shares
is subject to the condition precedent of the actual completion of the transfer
of 15,105 shares of Gras Savoye & Cie to WCE BV (as defined in the Agreement)
according to the conditions set forth in the Agreement and in the Share Purchase
Agreement contained in Exhibit 2 to the Agreement.
5. Transfers of ownership
The transfer to GS Euro Finance of the ownership and the right to the
enjoyment of the WCF Shares, and the transfer to WCE BV of the ownership and the
right to the enjoyment of the Exchanged GS Shares, shall occur on the Closing
Date of the Exchange.
6. Administration of the companies
Between the date hereof and the Closing Date of the Exchange, WCE BV
undertakes to ensure that WCF is managed in a careful and prudent manner. Unless
otherwise stipulated herein or consented to in writing by GS Euro Finance, WCF
shall not conclude any undertaking nor engage in any activity outside the normal
course of business and of prior normal practice, and, in particular, WCE BV
shall take all measures necessary to ensure that WCF (i) does not decide to
distribute or pay dividends, (ii) does not amend its by-laws, (iii) does not
issue any share, option, right or other interest and security. However, WCE BV
may until the date of the Closing Financial Statements decide to distribute
and/or pay any WCF dividend provided that it is able to present an amount of
Equity on the date of the Closing Financial Statements that is equal to or
greater than FRF 4,500,000.
7. Representations and warranties
WCE BV and GS Euro have agreed to an indemnification undertaking which is
contained in Exhibit 4 hereto and forms an integral part hereof.
WCE BV acknowledges that GS Euro Finance has relied and will rely on the
said undertaking for the conclusion of this Share Exchange Agreement and the
exchange of the WCF Shares for the Exchanged GS Shares, regardless of
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<PAGE>
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Exhibit 9
to the Agreement
page 10
the investigations that have been conducted or will be conducted concerning the
facts described in such undertaking.
In any event, WCE BV certifies and warrants to GS Euro Finance that on the
Closing Date of the Exchange, the WCF Shares shall be freely negotiable and free
of all option rights, claims, liens, guarantees, pledges, sureties, easements,
charges or restrictions of any nature whatsoever and that on that same Date, GS
Euro Finance shall acquire full ownership of the WCF Shares, free of all option
rights, claims, liens, guarantees, pledges, sureties, easements, charges or
restrictions of any nature whatsoever. WCE BV undertakes to indemnify GS Euro
Finance for any adverse consequences and prejudice suffered by GS Euro Finance
as a result of any violation by it of the undertaking of this paragraph.
Reciprocally, and with regard to the Exchanged GS Shares, GS Euro Finance
makes an undertaking in respect of WCE BV pursuant to the terms and conditions
of the representations and warranties and the indemnification undertaking of the
Share Purchase Agreement, which is attached as Exhibit 2 to the Agreement, and
its Exhibits, as recalled in the Share Purchase Agreement.
8. Other undertakings
(i) WCE BV on the one hand and GS Euro Finance on the other hand shall
sign all declarations, all reports and all other documents that may be necessary
or useful for the final completion of the transactions set forth herein.
(ii) WCE BV guarantees the provision by WCF of all documents and
information that may be reasonably requested in writing by GS Euro Finance
and/or its representatives or counsel in the course of the WCF Audit in order to
establish its information. GS Euro Finance and the GS Group undertake for their
part to conduct the WCF Audit within a period of time compatible with its being
completed by October 20, 1997.
(iii) Until the Closing Date of the Exchange, WCE BV and GS Euro Finance
undertake (a) not to transfer respectively the WCF Shares and the Exchanged GS
Shares, (b) not to enter into discussions with any third party in connection
with the sale of all or part of respectively the WCF Shares and the Exchanged GS
Shares and to end any negotiation previously started for such purpose, (c) not
to pledge respectively the WCF Shares and the Exchanged GS Shares or use them as
collateral in any manner whatsoever, in particular by transfer to a financial
instruments account pledged in favor of any person whatsoever, and (d) more
generally, not to do anything that might be likely to prevent or delay the
effective exchange of the WCF Shares for the Exchanged GS Shares on the Closing
Date of the Exchange.
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<PAGE>
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Exhibit 9
to the Agreement
page 11
(iv) WCE BV undertakes to obtain the resignations of the WCF directors as
of the Closing Date of the Exchange and the convocation of a general
shareholders' meeting of WCF to be held on the Closing Date of the Exchange with
a view to appointing new directors.
(v) WCE BV authorizes GS Euro Finance and the GS Group to use the
corporate name and/or trade name Willis Corroon France until December 31, 1999.
As from such date, WCE BV may notify GS Euro Finance and the GS Group at any
time, upon giving 6 months' prior notice, of its prohibition of the use of the
corporate name and/or trade name Willis Corroon France.
9. Notices
All notices to a party hereunder shall be sent in writing and shall not be
deemed duly sent as regards the notifying party unless within the required
periods of time they are:
(i) sent by registered mail with return receipt requested, with a copy
sent by fax:
For WCE BV:
Willis Corroon Europe B.V.
Marten Meesweg 51
3068 AV Rotterdam
Netherlands
For the attention of the Company Secretary
Fax 00 31 20 661 0654
With a copy to:
Willis Corroon Group Plc
10 Trinity Square
London EC3P 3AX
United Kingdom
For the attention of: the Company Secretary
Fax 00 44 171 488 88 82
and
Fax 00 44 171 481 71 83
For GS Euro Finance:
Gras Savoye Euro Finance
8 avenue Bel-Air
1180 Uccle
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<PAGE>
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Exhibit 9
to the Agreement
page 12
Belgium
For the attention of Patrick Lucas
With a copy to:
Gras Savoye & Cie
2 rue Ancelle
92200 Neuilly sur Seine
For the attention of Patrick Lucas, Emmanuel Gras and Daniel Naftalski
Fax 00 33 1 41 43 69 85
With a copy to:
Directeur General Adjoint Administration et Finances
Gras Savoye & Cie
2 rue Ancelle
92200 Neuilly sur Seine
Fax: 01 41 43 69 06
or to such other address as WCE BV or GS Euro Finance may designate by
notice in accordance with this article, or
(ii) hand delivered to the representative of GS Euro Finance whose name is
indicated above or to the WCE BV Representative or WCE BV in exchange for a
signed receipt.
All notices made as indicated above shall be effective, as far as the
notified party is concerned, on the date on which they are presented for the
first time for delivery (in the event they are sent by registered mail with
return receipt requested) or on which they are delivered (in the event of hand
delivery in exchange for a signed receipt). Any notice may be validly made to or
by Gras Savoye & Cie and/or Gras Savoye S.A. in the place and stead of GS Euro
Finance.
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<PAGE>
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EXHIBIT 1 TO THE SHARE EXCHANGE AGREEMENT
SHAREHOLDERS OF WILLIS CORROON FRANCE S.A.
Willis Corroon Europe B.V.: 82,200 WCF Shares (100% of the capital)
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<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT 2 TO THE SHARE EXCHANGE AGREEMENT
WCF QUANTIFIABLE DECIDING ELEMENTS
A. WCF Quantifiable Deciding Elements to be verified by GS Euro Finance
during the WCF Audit
Quantifiable Deciding Element Reference Value (FRF)
Estimated Net Turnover at December 31, 1997 36,000,000
B. WCF Quantifiable Deciding Elements intended to be taken into consideration
by the parties or the Expert, as the case may be, in accordance with
Article 2 of the Share Exchange Agreement
Quantifiable Deciding Element Reference Value (FRF)
Estimated Net Turnover at December 31, 1997 36,000,000
Actual Net Turnover at December 31, 1997 36,000,000
Definitions of the WCF Quantifiable Deciding Elements (attached in Exhibit 2 to
the Share Purchase Agreement)
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<PAGE>
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EXHIBIT 3 TO THE SHARE EXCHANGE AGREEMENT
DETERMINATION OF THE WCF CASH DISTRIBUTION
The parties have agreed to determine, as the case may be, the WCF Cash
Distribution according to the terms and conditions set forth in Article 2 of the
Share Exchange Agreement and according to the following formula.
(A) Net Turnover for financial year 1997
(i) Estimated Net Turnover for financial year 1997
If subsequent to the Date of the End of the WCF Audit and prior to the
Closing Date of the Exchange, the parties agree, or the Expert determines, that
the Estimated Net Turnover of WCF at December 31, 1997 (as defined in Exhibit 2)
will be less than FRF 34,200,000 (thirty-four million two hundred thousand
French francs), a cash distribution will be equal franc for franc to 1.4 (one
point four) times the difference between FRF 36,000,000 (thirty-six million
French francs) and such Estimated Net Turnover for financial year 1997 on which
the parties have agreed or which has been determined by the Expert (hereinafter
"WCF Cash Distribution No. 1").
For example, if the Estimated Net Turnover of WCF for financial year 1997
on which the parties have agreed or which is determined by the Expert is FRF
34,000,000 (thirty-four million French francs), WCF Cash Distribution No. 1 will
be in an amount equal to 1.4 (one point four) times FRF 2,000,000 (two million
French francs) i.e. FRF 2,800,000 (two million eight hundred thousand French
francs).
Conversely, if the event described above does not take place, WCF Cash
Distribution No. 1 will not be made.
(ii) Actual Net Turnover for financial year 1997
If the parties have not been able to reach an agreement within 6 Business
Days following the Notification in Response received from WCE BV by GS Euro
Finance (as provided for in Article 2 of the Share Exchange Agreement) on the
amount of the Estimated Net Turnover of WCF at December 31, 1997, and if the
Expert for any reason whatsoever was unable to calculate WCF Cash Distribution
No. 1 compared to the Estimated Net Turnover for financial year 1997 (as defined
in Exhibit 2), a cash distribution (hereinafter "WCF Cash Distribution No. 2")
will be determined as follows:
If the Actual Net Turnover of WCF at December 31, 1997 is less than FRF
34,200,000 (thirty-four million two hundred thousand French francs), WCF
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Exhibit 9
to the Agreement
page 16
Cash Distribution No. 2 will be equal franc for franc to 1.4 (one point four)
times the difference between FRF 36,000,000 (thirty-six million French francs)
and the Actual Net Turnover at December 31, 1997.
For example, if the Actual Net Turnover at December 31, 1997 is equal to
FRF 34,000,000 (thirty-four million French francs), WCF Cash Distribution No. 2
will be in an amount of 1.4 (one point four) times FRF 2,000,000 (two million
French francs), i.e. FRF 2,800,000 (two million eight hundred thousand French
francs).
Conversely, if the event described above does not take place, WCF Cash
Distribution No. 2 will not be made.
(B) WCF Cash Distribution
The WCF Cash Distribution shall be equal, as the case may be, to WCF Cash
Distribution No. 1 or WCF Cash Distribution No. 2.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT 4 TO THE SHARE EXCHANGE AGREEMENT
INDEMNIFICATION UNDERTAKING
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
EXHIBIT 5 TO THE SHARE EXCHANGE AGREEMENT
WAIVER OF A RETURN TO BETTER FORTUNE
[On Willis Corroon Europe BV letterhead]
[date]
Willis Corroon France S.A.
18, boulevard Malesherbes
75008 Paris
Gentlemen,
We hereby inform you of our irrevocable waiver of the return to better fortune
clause provided for in the agreement dated December 21, 1996 signed between
Willis Faber Europe BV, henceforth called Willis Corroon Europe B.V., and Willis
Corroon France S.A., providing for a forgiveness of debt in the amount of FRF
24,600,000.
Very truly yours,
- -------------------------------------
Willis Corroon Europe B.V.
- --------------------------------------------------------------------------------
<PAGE>
Amendment No. 1
page 1
Translation from French - 15/12/97 - waf
AMENDMENT NO. 1 TO THE AGREEMENT
DATED JULY 23, 1997
BETWEEN THE UNDERSIGNED:
1. ASSURANCES GENERALES DE FRANCE IART, a French law company having its
registered office at 87 rue de Richelieu, 75002 Paris, registered with the
Paris Commercial and Companies Registry under No. B 542 110 291,
represented by Mrs. Francoise Labbe, specially empowered for the purposes
hereof,
hereinafter "AGF",
2. UAP - INCENDIE - ACCIDENTS, a French law company having its registered
office at 9, Place Vendome, 75001 Paris, registered with the Paris
Commercial and Companies Registry under No. B 777 349 192, represented by
Mr. Adrien Cadieux, specially empowered for the purposes hereof,
hereinafter "UAP",
3. PFA TIARD, a French law company having its registered office at 1 cours
Michelet, La Defense 10, 92800 Puteaux, registered with the Nanterre
Commercial and Companies Registry under No. B 328 597 738, represented by
Mr. Francois Thomazeau specially empowered for the purposes hereof,
substituting itself for Athena,
hereinafter "PFA",
4. GRAS SAVOYE EURO FINANCE S.A., a Belgian law company having its registered
office at 8 avenue Bel-Air, 1180 Uccle, Belgium, registered with the
Brussels Commercial Registry under No. 258.054, represented by Mr. Patrick
Lucas in his capacity as President, fully empowered for the purposes
hereof,
hereinafter "GS Euro Finance",
<PAGE>
Amendment No. 1
page 2
5. Mr. Emmanuel Gras, residing at 3, rue Parmentier, 59370 Mons-en-Baroeul,
in his capacity as a shareholder and general partner of Gras Savoye & Cie,
6. Mr. Patrick Lucas, residing at 1 avenue Emile Acollas, 75007 Paris, in his
capacity as a shareholder and general partner of Gras Savoye & Cie,
7. Mr. Daniel Naftalski, residing at 2, rue des Beaux-Arts, 75006 Paris, in
his capacity as a shareholder and general partner of Gras Savoye & Cie,
8. All of the shareholders of Gras Savoye & Cie listed in Exhibit 1 to this
Amendment No. 1, who will agree to abide by the Initial Agreement and this
Amendment No. 1 by ratification.
AND:
9. WILLIS CORROON GROUP plc, an English law company whose registered office
is at Ten Trinity Square, London EC3P 3AX, United Kingdom, registered with
the England and Wales Companies Registration Office under No. 621757,
represented by Mr. John Percy Maxwell Taylor acting as a director, fully
empowered for the purposes hereof,
hereinafter "WCG",
10. WILLIS CORROON EUROPE B.V., a Netherlands law company whose registered
office is at Marten Meesweg 51, 3068 AV Rotterdam, Netherlands, registered
with the Rotterdam Commercial Registry under No. 135.835, represented by
Mrs. Sarah Turvill, acting as a director, fully empowered for the purposes
hereof,
hereinafter "WCE BV",
11. WILLIS CORROON B.V., a Netherlands law company whose registered office is
at Marten Meesweg 51, 3068 AV Rotterdam, Netherlands, registered with the
Amsterdam Commercial Registry under No. 239.060, represented by Mrs. Sarah
Turvill, acting as a director, fully empowered for the purposes hereof,
<PAGE>
Amendment No. 1
page 3
hereinafter "WC BV",
AND:
12. Gras Savoye & Cie, a societe en commandite par actions, with a capital of
FRF 9,952,000 divided into 49,760 shares of FRF 200 each (hereinafter the
"Shares"), having its registered office at 2, rue Ancelle, 92200
Neuilly-sur-Seine, registered with the Nanterre Commercial and Companies
Registry under number B 457 509 867, represented by Mr. Patrick Lucas, in
his capacity as general partner gerant, fully empowered for the purposes
hereof,
hereinafter the "Company",
WITNESSETH:
The parties agreed on July 23, 1997, in an agreement (the "Agreement"), pursuant
to which WCG undertook amongst others to acquire a minority shareholding in the
Company from certain selling shareholders, in consideration amongst others for
the simultaneous completion of an exchange of Shares held by GS Euro Finance for
the entire capital stock of Willis Corroon France ("WCF") to be held by WCE BV,
and the entry into force on the Closing Date of certain promises to buy and to
sell Shares, which were attached to such Agreement.
The Agreement was completed by an addendum dated, as regards the last signatory,
October 31, 1997 (the "Addendum").
Article 4 (f) of the Share Purchase Agreement attached as Exhibit 2 to the
Agreement provides that the actual completion of the acquisition of the Initial
Shareholding and of all the transactions provided for in the Agreement is
subject to the condition precedent of the approval of such transactions by the
general meeting of WCG's shareholders. This approval is necessary because of the
qualification as "Super Class 1" of all the transactions provided for in the
Agreement which has been made by the London Stock Exchange on the basis of the
stock market regulations applicable to WCG.
Article 4 referred to above provides in addition that the general meeting of
WCG's shareholders approving the Agreement must have been held no later than
December 15, 1997 and that all the conditions precedent stipulated in Article 4
of the Share Purchase Agreement must have been fulfilled at the latest by such
date, failing which the Share Purchase Agreement, and as a consequence the
Agreement, would lapse automatically without any indemnity on either side.
<PAGE>
Amendment No. 1
page 4
Article 6 of the Agreement and Article 3 of the Share Purchase Agreement provide
that the Closing Date may not occur after December 31, 1997, unless
contractually postponed.
The parties have been informed and take note that WCG is not in a position to
prepare all the documentation required by law and by the stock market
regulations applicable to WCG, to be submitted to its shareholders for the
general meeting, within a period of time which is compatible with the holding of
such general meeting by December 15, 1997 at the latest.
The purpose of this Amendment No. 1 is to amend several provisions of the
Agreement and, in particular, to bring about the waiver by WCG of the condition
precedent stipulated in its exclusive favor in Article 4 (f) of the Share
Purchase Agreement, in consideration for an exercise of the promises to buy and
to sell contained respectively in Exhibits 3, 3bis, 3ter, 4 and 5 of the
Agreement, in a manner which is compatible at all times with the respect of the
law and the stock market regulations applicable to WCG.
NOW, THEREFORE, IT HAS BEEN AGREED AS FOLLOWS:
DEFINITIONS
The terms and expressions having an initial capital letter which are not defined
herein shall keep the meaning ascribed to them in the Agreement.
The terms and expressions set out below shall have the meanings set opposite
them:
"Notice of Attainment" shall mean the notice sent by WCG according to the
conditions and in the form of the Article
"Notices" of each of the promises contained in
Exhibits 3, 3bis, 3ter, 4 and 5 of the Agreement
concerning the attainment of the Threshold, as
defined.
"Initial Agreement" shall mean the Agreement to which the parties
expressed their agreement on July 23, 1997,
including the Addendum.
"Amended Agreement" shall mean the Agreement, as amended by this
Amendment No. 1.
"Threshold" shall mean the threshold, such as WCG undertakes
to indicate to the Company in the event of
attainment of the Threshold, defined by the law
and the stock market regulations applicable to WCG
(whatever
<PAGE>
Amendment No. 1
page 5
the exact name of this threshold may be pursuant
to such law and regulations), as such law and
regulations exist on this day (rules applicable to
Super Class 1 transactions referred to in Chapter
10 of the Listing Rules of the London Stock
Exchange) and may exist in the future, above which
any transaction of the acquisition, sale type,
etc., of a certain magnitude requires for its
validity, amongst others, a prior approval of the
general meeting of WCG's shareholders convened for
this purpose.
ARTICLE 1 - AGREEMENT
(i) Article 8 of the Initial Agreement is deleted and replaced by the
following text:
"This Agreement is entered into for a term of 15 (fifteen) years".
(ii) Article 9 (xi) of the Initial Agreement is deleted.
(iii) Article 9 (xii) of the Initial Agreement is deleted and replaced by the
following text:
"In the event of a sale of Shares to a party which is foreign to the
Amended Agreement, the registration of this new shareholder as an owner of
the Company's shares shall be conditional upon such shareholder's prior
unrestricted and unconditional written agreement to abide by the Amended
Agreement, as amended as the case may be".
(iv) Exhibit 1 to the Initial Agreement is replaced by Exhibit 1 hereto.
(v) The parties agree that PFA is substituted for Athena in the exercise of
all the rights and obligations of Athena pursuant to the Amended
Agreement.
PFA ratifies all of the undertakings made by Athena pursuant to the
Initial Agreement.
(vi) In Article 4 (xi) of the Initial Agreement, the following paragraph is
added:
"In the event that, after approval by the extraordinary general meeting of
the shareholders, a stock option plan is set up which calls up a promise
by WCG to repurchase all or part of the shares obtained from the exercise
of the options, the general partner gerants undertake to use their best
efforts so that the Company or any other third party may be
<PAGE>
Amendment No. 1
page 6
substituted for WCG, subject to the provisions of the law and the
regulations, in its obligations under the promise. In any event, WCG's
financial effort as a consequence of this stock option plan shall be
proportional to its holding in the Company's capital. Patrick Lucas and
Emmanuel Gras may not benefit from this stock option plan".
ARTICLE 2 - SHARE PURCHASE AGREEMENT
(i) The Price per Share is fixed at FRF 30,017.
It shall be paid in the amount of FRF 20,011 per Share on the Closing Date
and in the amount of FRF 10,006 per Share by means of promissory notes
with a July 1, 1998 maturity date, without any other amendment to the
terms and conditions of Article 2 (C) of the Share Purchase Agreement.
(ii) The Closing Date shall occur by December 31, 1997 at the latest, unless
contractually postponed. However, if for any reason whatsoever the actual
completion of all of the transactions provided for in the Amended
Agreement does not take place on such date in accordance with its terms,
the parties agree that the Closing Date shall automatically be put back to
January 30, 1998 at the latest.
(iii) Article 3 (b) of the Share Purchase Agreement is replaced by the following
text:
"delivery to the Buyer by each of the Company's shareholders existing on
the Closing Date (not already signatories of Amendment No. 1) of a
document constituting ratification of the Amended Agreement, in the form
of Exhibit 2 to Amendment No. 1, amending Exhibit 10 to the Initial
Agreement".
(iv) By reason of the entry into force of Article 3 below, WCG waives the
conditions precedent stipulated in its exclusive favor contained in
Article 4 (e) and (f) of the Share Purchase Agreement.
The parties acknowledge that the condition precedent contained in Article
4 (d) of the Share Purchase Agreement has been fulfilled.
(v) The conditions precedent contained in Article 4 (a), (b) and (c) of the
Share Purchase Agreement are stipulated in favor of all the parties to the
Amended Agreement.
The paragraph of Article 4 of the Share Purchase Agreement drafted as
follows: "The conditions precedent referred to in (a), (b), (c), (e) and
(f) above shall be accomplished by December 15, 1997", is deleted.
<PAGE>
Amendment No. 1
page 7
A new condition precedent is stipulated in Article 4 of the Share Purchase
Agreement in favor of all the parties, as follows:
"ratification of the Amended Agreement (i.e., both the Initial Agreement
and Amendment No. 1) by all of the Company's shareholders (not already
signatories of this Amended Agreement) existing on the Closing Date".
The last paragraph of Article 4 of the Share Purchase Agreement is
replaced by the following text:
"In the event that at least one of the above conditions precedent
(resulting from the Amended Agreement) is not fulfilled at the latest by
January 30, 1998, unless contractually postponed, this transfer shall be
considered to have automatically lapsed and shall not give rise to any
indemnity on either side".
ARTICLE 3 - PROMISES TO BUY AND TO SELL
(i) The parties agree that the obligation of WCG, or any company of the WCG
Group substituted for it, to buy or sell the Shares pursuant to the
Promises to Buy and to Sell contained respectively in Exhibits 3, 3bis,
3ter, 4 and 5 of the Amended Agreement, is subject to the condition
precedent of the approval of the general meeting of WCG's shareholders in
the case of the attainment of the Threshold, according to the following
conditions.
If the exercise by one or more of their beneficiaries of one or more
Promises to Buy or to Sell contained respectively in Exhibits 3, 3bis,
3ter and 5 of the Amended Agreement results in the attainment of the
Threshold, WCG undertakes to send a Notice of Attainment to the
beneficiary or beneficiaries having exercised their option and to the
Corporate Beneficiaries within 10 Business Days following the date on
which it was notified of the exercise of the option or options in
question, according to the conditions and in the form of the Article
"Notices" of the promise or promises concerned.
If the exercise by WCG, or any company of the WCG Group substituted for
it, of Promise to Sell No. 1 contained in Exhibit 4 to the Amended
Agreement results in the attainment of the Threshold, WCG undertakes to
inform the Company and the Corporate Beneficiaries thereof at the time
when the option is exercised or once WCG becomes aware of the attainment
of the Threshold, if later than the date on which the option is exercised.
<PAGE>
Amendment No. 1
page 8
If the Threshold is attained, WCG undertakes to hold, within 3 months
following (a) the Notice of Attainment (for the exercise of the Promises
to Buy or to Sell contained respectively in Exhibits 3, 3bis, 3ter and 5
of the Amended Agreement), or (b) its becoming aware of the attainment of
the Threshold (for the exercise of Promise to Sell No. 1 contained in
Exhibit 4 to the Amended Agreement), a general meeting of its shareholders
called to approve the obligation of WCG, or any company of the WCG Group
substituted for it, to acquire or sell the Shares under the exercise of
the option or options in question.
In these cases, and as an essential condition of the holding of the
general meeting of WCG's shareholders within the above 3-month period, the
Company and the general partners undertake to collaborate fully with WCG
and its counsel and to provide all information and documents reasonably
necessary for the preparation of the documentation to be submitted to
WCG's shareholders for such general meeting. The Company and the general
partners shall use their best efforts to ensure that WCG and/or its
counsel through any third party, and particularly any statutory auditor,
shall have free access to any documents or information reasonably
requested by WCG and/or its counsel for the preparation of the
documentation mentioned above.
If in the case of the attainment of the Threshold any other formality or
action required by the law or the stock market regulations applicable to
WCG were to prove necessary to achieve the actual completion of the
transactions provided for in the Promises to Buy and to Sell contained in
Exhibits 3, 3bis, 3ter, 4 and 5 of the Amended Agreement, the parties
undertake to collaborate in good faith to accomplish such formalities as
promptly as possible so as to ensure the actual completion of the
transactions provided for in the Promises to Buy and to Sell contained in
Exhibits 3, 3bis, 3ter, 4 and 5 of the Amended Agreement, in compliance
with the law or the regulations mentioned above.
If in the case of the attainment of the Threshold the general meeting of
WCG's shareholders refused the actual completion of the transactions
following the exercise of one or more of the options to buy and to sell
contained in Exhibits 3, 3bis, 3ter, 4 and 5 of the Amended Agreement,
such Promises to Buy or to Sell would nevertheless continue to be valid
and exercisable in accordance with their terms, subject to the Threshold
not being attained.
WCG represents that the transactions provided for in the Promises to Buy
and to Sell, as amended by this Amendment No. 1, contained in Exhibits 3,
3bis, 3ter, 4 and 5 of the Amended Agreement, have been approved by its
Board of Directors which, subject to the respect at all times of its
duties and obligations (both individual and collective) towards WCG and
its shareholders, has undertaken to use its best efforts so that
<PAGE>
Amendment No. 1
page 9
the general meeting of WCG's shareholders approves the purchase or the
sale of Shares resulting from the exercise of one or more options in the
event of the attainment of the Threshold.
(ii) The parties specify that the obligation of WCG, or of any company of the
WCG Group substituted for it, to acquire Shares pursuant to the Promises
to Buy contained respectively in Exhibits 3, 3bis and 3ter of the Amended
Agreement shall terminate in the event of the exercise, even partial, of
the Option resulting from Promise to Sell No. 2 contained in Exhibit 5 to
the Amended Agreement, subject to the Promisor's respecting its
undertakings for the exercise, even partial, of such Option resulting from
such Promise to Sell No. 2.
The Beneficiaries of Promise to Sell No. 2 contained in Exhibit 5 to the
Amended Agreement undertake in respect of the Beneficiaries of the
Promises to Buy contained in Exhibit 3, 3bis and 3ter of the Agreement
(hereinafter the "Promises to Buy") not to exercise such Promise to Sell
No. 2 without having first substituted themselves for WCG in the Promises
to Buy or without having obtained from the one or those substituted for
them pursuant to Promise to Sell No. 2 that it or they shall substitute
themselves for WCG in the Promises to Buy (the Beneficiaries of Promise to
Sell No. 2 and, as the case may be, the one or those substituted for them
are hereinafter referred to as the "Buyer"). In consideration for this
prohibition, the Beneficiaries of the Promises to Buy undertake, at the
first demand of the Beneficiaries of Promise to Sell No. 2, such demand
occurring between January 1, 2001 and December 31, 2005, to exercise the
option to sell available to them pursuant to their Promises to Buy and
accordingly to sell to the Buyer, according to the conditions set forth in
the Promises to Buy, a number of Shares allowing it to attain 50.1% of the
capital of the Company. The number of Shares to be sold to the Buyer shall
be broken down between the Beneficiaries of the Promises to Buy, in
proportion to their respective shareholdings in the Company, unless
another breakdown is agreed between some of such Beneficiaries.
(iii) The second sentence of Article 3 (b) of the Promise to Buy contained in
Exhibit 3 to the Initial Agreement is replaced by the following text:
"More generally, the Option shall be extended to all securities or all
equity interests issued by the Company until the date on which the Option
is exercised and which have been acquired by any and all means by the
Beneficiaries between the date hereof and the date on which the Option is
exercised".
The second sentence of Article 3 (b) of Promise to Sell No. 1 contained in
Exhibit 4 of the Initial Agreement is replaced by the following text:
<PAGE>
Amendment No. 1
page 10
"More generally, the Option shall be extended to all securities or all
equity interests issued by the Company until the date on which the Option
is exercised and which have been acquired by any and all means by the
Promisors between the date hereof and the date on which the Option is
exercised".
(iv) In Article 3 (e) of the Promise to Buy contained in Exhibit 3 of the
Initial Agreement, the figure of "0.26%", as the minimum shareholding of
the Company to be held by Mr. Daniel Naftalski, is replaced by "0.20%".
(v) In Article 4 of the Promise to Buy contained in Exhibit 3 to the Initial
Agreement and in Article 3 of the Promises to Buy contained in Exhibits
3bis and 3ter to the Initial Agreement, the initial term of twelve (12)
years as from the Closing Date is replaced by a term of fourteen (14)
years as from the Closing Date.
(vi) The term "Affiliated Company" replaces the term "Company" in the first
sentence of Article 4 (a) (i) of Promise to Sell No. 2 contained in
Exhibit 5 to the Initial Agreement.
(vii) Article 7 of the Promise to Buy contained in Exhibit 3 to the Initial
Agreement is replaced by the following text:
"The price per Share to be paid under the present Option (hereinafter the
"Transfer Price") shall be:
(a) with regard to any transfer resulting from an exercise of the Option
which is notified before January 1, 2001: FRF 30,017,
(b) with regard to any transfer resulting from an exercise of the Option
which is notified after January 1, 2001 and before January 1, 2006,
the greater of the two following amounts:
(i) FRF 30,017, reduced, if necessary, in the event of the
occurrence of an Exceptional Event, by an amount of FRF 5,030
per Share (i.e., 234,600,000/46,640), and
(ii) the price calculated between April 15 and April 30 of each
year and, for the first time, between April 15 and April 30,
2000, according to the formula provided for in Exhibit D to
Exhibit 3 to the Agreement, it being understood that this
price shall be applicable to any transfer of Shares under the
present Option until the establishment of the price which is
based on the accounts of the following year and is calculated
according to the same formula and in the same time period,
<PAGE>
Amendment No. 1
page 11
(c) with regard to any transfer resulting from an exercise of the Option
which is notified after January 1, 2006, the price calculated
between April 15 and April 30 of each year according to the formula
provided for in Exhibit D to Exhibit 3 to the Agreement, it being
understood that this price shall be applicable to any transfer of
Shares under the present Option until the establishment of the price
which is based upon the accounts of the following year and is
calculated according to the same formula and in the same time
period.
The Transfer Price of the Shares for which the Option has been exercised
will be payable in cash, within forty-five (45) calendar days of the date
of Notification No. 1, by bank check denominated in French francs, against
delivery by the Representative (as defined in Article 9) to the transferee
of the Shares of the corresponding duly signed share transfer order(s) in
favor of the transferee of the Shares, subject to the Beneficiaries'
respecting their undertakings hereunder and the obtaining of any
government or administrative authorization which may be necessary.
However, if, due to the exercise of this Option or of the Options deriving
from Exhibits 3bis and 3ter to the Agreement, the Promisor has to pay over
a 12-month period an aggregate amount which is greater than one hundred
and fifty million francs, the transfer price of the Shares under this
Option and the Options deriving from Exhibits 3bis and 3ter mentioned
above shall be payable in cash within ninety (90) calendar days of the
date of Notification No. 1, according to the same conditions as those
indicated above.
In the event that the transfer of the Shares pursuant hereto is subject to
the obtaining of any government or administrative authorization, the
Promisor and the Beneficiaries shall mutually provide all assistance,
exchange all information, sign all documents and, more generally, do all
that is necessary or useful so that the competent authority may rapidly
decide upon the contemplated transaction".
(viii) The definition of the "Indemnification Undertaking" contained in Article
1 of the Promises to Buy contained in Exhibits 3bis and 3ter of the
Initial Agreement is deleted and replaced by the following definition:
"Exceptional Event shall mean any event whose origin is prior to the
Closing Date and whose existence was unknown on the Closing Date, the
effect of which, between the Closing Date and the three (3) years
following the Closing Date, is to reduce the Consolidated Equity by FRF
234,600,000".
(ix) Article 6 of the Promise to Buy contained in Exhibit 3bis to the Initial
Agreement is replaced by the following text:
<PAGE>
Amendment No. 1
page 12
"The price per Share to be paid under the present Option (hereinafter, the
"Transfer Price") shall be:
(a) with regard to any transfer resulting from an exercise of the Option
which is notified before January 1, 2001: FRF 30,017, reduced, if
necessary, in the event of the occurrence of an Exceptional Event,
by an amount of FRF 5,030 per Share (i.e., 234,600,000/46,640),
(b) with regard to any transfer resulting from an exercise of the Option
which is notified after January 1, 2001 and before January 1, 2006,
the greater of the two following amounts:
(i) FRF 30,017, reduced, if necessary, in the event of the
occurrence of an Exceptional Event, by an amount of FRF 5,030
per Share (i.e., 234,600,000/46,640), and
(ii) the price calculated between April 15 and April 30 of each
year and, for the first time, between April 15 and April 30,
2000, according to the formula provided for in Exhibit D to
Exhibit 3 to the Agreement, it being understood that this
price shall be applicable to any transfer of Shares under the
present Option until the establishment of the price which is
based on the accounts of the following year and is calculated
according to the same formula and in the same time period,
(c) with regard to any transfer resulting from an exercise of the Option
which is notified after January 1, 2006, the price calculated
between April 15 and April 30 of each year according to the formula
provided for in Exhibit D to Exhibit 3 to the Agreement, it being
understood that this price shall be applicable to any transfer of
Shares under the present Option until the establishment of the price
which is based upon the accounts of the following year and is
calculated according to the same formula and in the same time
period.
The Transfer Price of the Shares for which the Option has been exercised
will be payable in cash, within forty-five (45) calendar days of the date
of Notification No. 1, by bank check denominated in French francs, against
delivery by PFA to the transferee of the Shares of the corresponding duly
signed share transfer order(s) in favor of the transferee of the Shares,
subject to PFA's respecting its undertakings hereunder and the obtaining
of any government or administrative authorization which may be necessary.
However, if, due to the exercise of this Option or of the Options deriving
from Exhibits 3 and 3ter to the Agreement, the Promisor has to pay over a
12-month period an
<PAGE>
Amendment No. 1
page 13
aggregate amount which is greater than one hundred and fifty million
francs, the transfer price of the Shares under this Option and the Options
deriving from Exhibits 3 and 3ter mentioned above shall be payable in cash
within ninety (90) calendar days of the date of Notification No. 1,
according to the same conditions as those indicated above.
In the event that the transfer of the Shares pursuant hereto is subject to
the obtaining of any government or administrative authorization, the
Promisor and PFA shall mutually provide all assistance, exchange all
information, sign all documents and, more generally, do all that is
necessary or useful so that the competent authority may rapidly decide
upon the contemplated transaction".
(x) Article 6 of the Promise to Buy contained in Exhibit 3ter to the Initial
Agreement is replaced by the following text:
"The price per Share to be paid under the present Option (hereinafter, the
"Transfer Price") shall be:
(a) with regard to any transfer resulting from an exercise of the Option
which is notified before January 1, 2001: FRF 30,017, reduced, if
necessary, in the event of the occurrence of an Exceptional Event,
by an amount of FRF 5,030 per Share (i.e., 234,600,000/46,640),
(b) with regard to any transfer resulting from an exercise of the Option
which is notified after January 1, 2001 and before January 1, 2006,
the greater of the two following amounts:
(i) FRF 30,017, reduced, if necessary, in the event of the
occurrence of an Exceptional Event, by an amount of FRF 5,030
per Share (i.e., 234,600,000/46,640), and
(ii) the price calculated between April 15 and April 30 of each
year and, for the first time, between April 15 and April 30,
2000, according to the formula provided for in Exhibit D to
Exhibit 3 to the Agreement, it being understood that this
price shall be applicable to any transfer of Shares under the
present Option until the establishment of the price which is
based on the accounts of the following year and is calculated
according to the same formula and in the same time period,
(c) with regard to any transfer resulting from an exercise of the Option
which is notified after January 1, 2006, the price calculated
between April 15 and April 30 of each year according to the
<PAGE>
Amendment No. 1
page 14
formula provided for in Exhibit D to Exhibit 3 to the Agreement, it
being understood that this price shall be applicable to any transfer
of Shares under the present Option until the establishment of the
price which is based upon the accounts of the following year and is
calculated according to the same formula and in the same time
period.
The Transfer Price of the Shares for which the Option has been exercised
will be payable in cash, within forty-five (45) calendar days of the date
of Notification No. 1, by bank check denominated in French francs, against
delivery by UAP to the transferee of the Shares of the corresponding duly
signed share transfer order(s) in favor of the transferee of the Shares,
subject to UAP's respecting its undertakings hereunder and the obtaining
of any government or administrative authorization which may be necessary.
However, if, due to the exercise of this Option or of the Options deriving
from Exhibits 3 and 3bis to the Agreement, the Promisor has to pay over a
12-month period an aggregate amount which is greater than one hundred and
fifty million francs, the transfer price of the Shares under this Option
and the Options deriving from Exhibits 3 and 3bis mentioned above shall be
payable in cash within ninety (90) calendar days of the date of
Notification No. 1, according to the same conditions as those indicated
above.
In the event that the transfer of the Shares pursuant hereto is subject to
the obtaining of any government or administrative authorization, the
Promisor and UAP shall mutually provide all assistance, exchange all
information, sign all documents and, more generally, do all that is
necessary or useful so that the competent authority may rapidly decide
upon the contemplated transaction".
(xi) In the third paragraph of Article 7 of Promise to Sell No. 1 contained in
Exhibit 4 to the Amended Agreement, the priority ranking currently defined
is replaced by the following priority ranking: "Shares held by (i) the
Corporate Promisors which might wish to sell their shares by notifying the
Beneficiary within 10 Business Days following the date on which the Option
is exercised by the Beneficiary, (ii) the general partner of the Company
having the capacity of President of the defaulting Subsidiary, if
required, (iii) then the other general partners of the Company in
proportion to their respective shareholdings in the Company, and (iv)
finally, all the other Promisors in proportion to their respective
shareholdings in the Company".
(xii) Article 8 of Promise to Sell No. 1 contained in Exhibit 4 to the Initial
Agreement is replaced by the following text:
"The price per Share to be paid under the present Option (hereinafter,
<PAGE>
Amendment No. 1
page 15
the "Transfer Price") shall be:
(a) with regard to any transfer resulting from an exercise of the Option
which is notified before January 1, 2001: FRF 30,017, reduced, if
necessary, with regard to the Corporate Promisors, and in the event
of the occurrence of an Exceptional Event, by an amount of FRF 5,030
per Share (i.e., 234,600,000/46,640),
(b) with regard to any transfer resulting from an exercise of the Option
which is notified after January 1, 2001 and before January 1, 2006,
the greater of the two following amounts:
(i) FRF 30,017, reduced, if necessary, with regard to all of the
Individual or Corporate Promisors, and in the event of the
occurrence of an Exceptional Event, by an amount of FRF 5,030
per Share (i.e., 234,600,000/46,640), and
(ii) the price calculated between April 15 and April 30 of each
year and, for the first time, between April 15 and April 30,
2000, according to the formula indicated in Exhibit D to
Exhibit 3 to the Agreement, it being understood that this
price shall be applicable to all transfers of Shares under the
present Option until the establishment of the price which is
based upon the accounts of the following year and is
calculated according to the same formula and in the same time
period,
(c) with regard to any transfer resulting from an exercise of the Option
which is notified after January 1, 2006, the price calculated
between April 15 and April 30 of each year according to the formula
provided for in Exhibit D to Exhibit 3 to the Agreement, it being
understood that this price shall be applicable to all transfers of
Shares under the present Option until the establishment of the price
which is based upon the accounts of the following year and is
calculated according to the same formula and in the same time
period.
The Transfer Price of the Shares for which the Option has been exercised
will be payable in cash, within forty-five (45) calendar days of the date
of Notification No. 1, by bank check denominated in French francs, against
delivery by the Representative (as defined in Article 10) to WCG or to any
other company of the WCG Group of the corresponding duly signed share
transfer order(s) in favor of WCG or any other company of the WCG Group,
subject to the Beneficiary's respecting its obligations hereunder and the
obtaining of all government or administrative authorizations which may be
necessary.
<PAGE>
Amendment No. 1
page 16
In the event that the transfer of the Shares provided for herein is
subject to the obtaining of any government or administrative
authorization, the Promisors and the Beneficiary shall mutually provide
all assistance, exchange all information, sign all documents and, more
generally, do all that is necessary or useful so that the competent
authority may rapidly decide upon the contemplated transaction".
(xiii) Article 5 of Promise to Sell No. 2 contained in Exhibit 5 to the Initial
Agreement is replaced by the following text:
"The price per Share to be paid under the present Option (hereinafter, the
"Transfer Price") shall be:
(a) with regard to the transfer resulting from any exercise of the
Option which is notified before January 1, 2001, determined
according to the following formula:
A - B - C
---------
D
A being the total price paid (in view as the case may be of the
impact of the Exceptional Event) by the Promisor for all the
Shares acquired by it from the Closing Date inclusive until
the date on which the Option is exercised.
B being any amount which might be received by the Promisor from
AGF and GS Euro Finance or those substituted for them under
the Indemnification Undertaking.
C being the price received by the Promisor for all the Shares
sold by it in performance of this Promise to Sell No. 2 prior
to the exercise of the Option concerned (it being specified
that C shall equal 0 in the event of the purchase in a single
transaction of all the Shares held by the Promisor).
D being the number of Shares held by the Promisor on the day on
which the Option is exercised.
(b) with regard to the transfer resulting from any exercise of the
Option which is notified after January 1, 2001 and before January 1,
2006, the greater of the two following amounts:
(i) the Price per Share determined pursuant to the formula
referred to in (a) above;
(ii) the Price per Share calculated between April 15 and April 30
of each year and, for the first time, between April 15 and
<PAGE>
Amendment No. 1
page 17
April 30, 2000, according to the formula provided for in
Exhibit D to the Promise to Buy in Exhibit 3 to the Agreement,
it being understood that this price shall be applicable to the
transfer of the Shares under the present Option until the
establishment of the price which is based upon the accounts of
the following year and is calculated according to the same
formula and in the same time period,
(c) with regard to the transfer resulting from any exercise of the
Option which is notified after January 1, 2006, the price calculated
between April 15 and April 30 of each year according to the formula
provided for in Exhibit D to the Promise to Buy contained in Exhibit
3 to the Agreement, it being understood that this price shall be
applicable to the transfer of the Shares under the present Option
until the establishment of the price which is based upon the
accounts of the following year and is calculated according to the
same formula and in the same time period.
The Transfer Price of the Shares for which the Option has been exercised
will be payable in cash, (a) within six (6) months, at the latest,
following the date of the effective completion of the operation resulting
in the Change of Control of WCG or of any Affiliated Company (following
the first Notification No. 2), or (b) within the four (4) months, at the
latest, following the date of any Notification No. 2 (other than the
first) or Notification No. 3 (as defined in this promise as amended by
Amendment No. 1), by bank check denominated in French francs, in return
for delivery by the Promisor to the Representative (as defined in Article
6) of the corresponding duly signed share transfer order(s) in favor of
the Beneficiaries, subject to the obtaining of all government or
administrative authorizations which may be necessary.
In the event that the transfer of the Shares provided for herein is
subject to the obtaining of any government or administrative
authorization, the Promisor and the Beneficiaries shall mutually provide
all assistance, exchange all information, sign all documents and, more
generally, do all that is necessary or useful so that the competent
authority may rapidly decide upon the contemplated transaction".
(xiv) The first sentence of the Article entitled "Period of exercise of the
Option" of the Promises to Buy contained in Exhibits 3, 3bis and 3ter of
the Initial Agreement is deleted and replaced by the following text:
"The Option may not be exercised before January 1, 2001 (hereinafter the
"Exemption Period")".
(xv) A new paragraph is added to Article 8 of the Promise to Buy contained in
<PAGE>
Amendment No. 1
page 18
Exhibit 3 to the Initial Agreement, drafted as follows:
"The same shall apply in the case of a death or a donation between the
date of the Amended Agreement and the Closing Date".
(xvi) WCE BV, substituted for WCG under the Share Purchase Agreement,
undertakes to comply with the terms of Promise to Sell No. 2 contained
in Exhibit 5 to the Amended Agreement.
(xvii) Exhibit A to the Promise to Buy contained in Exhibit 3 to the Initial
Agreement is replaced by Exhibit 3 to this Amendment No. 1.
(xviii) Exhibit A to Promise to Sell No. 1 contained in Exhibit 4 to the Initial
Agreement is replaced by Exhibit 4 to this Amendment No. 1.
(xix) The last sentence in the second to last paragraph of Article 4 (b) (ii)
of Promise to Sell No. 2 contained in Exhibit 5 to the Agreement,
drafted as follows: " In any event, the Option may only be exercised
once", is deleted.
The last paragraph of Article 4 (b) (ii) of Promise to Sell No. 2,
contained in the Initial Agreement is amended as follows:
"The exercise of the Option, on one or more occasions, shall cover in
fine all of the Shares held by the company or companies in which the
control has changed",
and is completed as follows:
"The Option may be exercised on one or more occasions, within a period
expiring at the earlier of the two following dates: (x) December 31,
2009 or (y) two years and three months after the actual completion of
the transfer of the Shares resulting from the first Notification No. 2.
If the Option is only exercised partially, and notwithstanding any
contrary provision herein, the Option may be deemed exercised at any
time, at WCG's option, for all of the remaining shares, at the end of a
twelve-month period following the actual completion of the transfer of
the Shares resulting from the first Notification No. 2, during a period
of twelve months following the partial exercise of the Option resulting
from the first Notification No. 2 (hereinafter the "WCG Option).
In this case, WCG shall notify the Beneficiaries of Promise to Sell No.
2, according to the conditions and in the form of Article 8 (hereinafter
"Notification No. 3"). The terms and conditions of the actual completion
of the transfer of the Shares following the exercise of the WCG Option
by WCG by reason of a Notification No. 3 shall be identical, mutatis
mutandis, to those resulting from the exercise of the Option following a
<PAGE>
Amendment No. 1
page 19
Notification No. 2.
However, if the actual completion of the transfer of the Shares following
the sending of Notification No. 3 by WCG does not occur within the time
agreed due solely to WCG (hereinafter the "Failure to Close"), the period
of two years and three months provided in (y) above shall be automatically
extended in the sole favor of the Beneficiaries and shall apply as from
the date of the Failure to Close, without the application of the December
31, 2009 deadline provided for in (x) above.
ARTICLE 4 - AMENDMENTS TO THE BY-LAWS
Exhibit 6 to the Initial Agreement is replaced by Exhibit 5 to this Amendment
No. 1.
The Company undertakes to convene an extraordinary general meeting of its
shareholders before the Closing Date in order to approve Exhibit 6, as amended,
to the Amended Agreement, with the agreement of all the general partners, such
amended by-laws to enter into force no later than on the Closing Date.
ARTICLE 5 - SHARE EXCHANGE AGREEMENT
(i) The parties agree that WCE BV shall be substituted for WC BV under the
Share Exchange Agreement and more generally the Initial Agreement as a
whole. The parties therefore make an exception to Article 8 (iii) (a) of
the Share Exchange Agreement.
WC BV ratifies all of the undertakings made by WCE BV under the Initial
Agreement.
WC BV undertakes to respect the terms of Promise to Sell No. 2 contained
in Exhibit 5 to the Amended Agreement.
(ii) The parties agree that, provided that WC BV transfers all of the capital
stock of WCF to GS Euro Finance on the Closing Date of the Exchange, WCE
BV shall be released from any obligation, under both the Initial Agreement
and the Amended Agreement, except for its obligation pursuant to Article 3
(d) of the Share Exchange Agreement and the obligations it may have to
assume as the company substituted for WCG under the Share Purchase
Agreement. WCG shall be the guarantor of WC BV's undertakings under the
Share Exchange Agreement.
(iii) The WCF Cash Distribution amounts to FRF 1,400,000 (one million four
hundred thousand French francs); accordingly, Articles 3 (e) and (f) of
<PAGE>
Amendment No. 1
page 20
the Share Exchange Agreement are deleted and replaced by the following
text:
"(e) delivery to WCE BV of a bank check for FRF 28,588,440 (twenty-eight
million five hundred and eighty-eight thousand four hundred and forty
French francs);
(iv) All the representations and warranties concerning the Exchanged GS Shares
under the Share Exchange Agreement, that are made and given by GS Euro
Finance in favor of WC BV as the company substituted for WCE BV, shall be
exact as at the Closing Date of the Exchange.
(v) For the purposes of Article 9 of the Share Exchange Agreement, all notices
to WC BV shall be made to the following address:
Willis Corroon B.V.
Marten Meesweg 51,
3068 AV Rotterdam,
Netherlands,
For the attention of the Company Secretary
Fax 00 31 20 661 06 54
With a copy to:
Willis Corroon Group plc
10 Trinity Square
London EC3P 3AX
United Kingdom
For the attention of the Company Secretary;
Fax 00 44 171 488 88 82
and
Fax 00 44 171 481 71 83
or by delivery by hand to the representative of WC BV or WCG, as indicated
above, in return for delivery of a signed receipt.
ARTICLE 6 - MISCELLANEOUS PROVISIONS
(i) To the extent that the Initial Agreement is not amended hereby, its
provisions shall remain in force.
However, to the extent that any one of the provisions of the Initial
Agreement which is contrary to this Amendment No. 1 has not been expressly
amended hereby, the provision of the Initial Agreement concerned shall
nevertheless be deemed to have been tacitly amended and shall be
interpreted with a meaning allowing the actual completion of
<PAGE>
Amendment No. 1
page 21
the transactions provided for herein.
(ii) As may be necessary, it is specified that Articles 9 (xiii) to 9 (xvi) of
the Initial Agreement are expressly incorporated herein.
Executed in 11 originals,
For all of the signatories excluding WCG, WCE BV and WC BV, in Neuilly-sur-Seine
on December 10, 1997,
For WCG, WCE BV and WC BV, in London on December 11, 1997
For the shareholders:
- --------------------------- ---------------------------
Mr. Emmanuel Gras Mr. Patrick Lucas
- ---------------------------
Mr. Daniel Naftalski
- --------------------------- ---------------------------
Assurances Generales de France UAP Incendie - Accidents
IART By Mr. Adrien Cadieux
By Mrs. Francoise Labbe
- ---------------------------
PFA TIARD
By Mr. Francois Thomazeau
For the general partner gerants:
- --------------------------- ---------------------------
Mr. Emmanuel Gras Mr. Patrick Lucas
- ---------------------------
Mr. Daniel Naftalski
For the Company:
<PAGE>
Amendment No. 1
page 22
- ---------------------------
Gras Savoye & Cie
By Mr. Patrick Lucas
For GS Euro Finance:
- ---------------------------
Gras Savoye Euro Finance
By Mr. Patrick Lucas
For the Willis Corroon Group:
- --------------------------- ---------------------------
Willis Corroon Group Plc Willis Corroon Europe B.V.
By Mr. John Percy Maxwell Taylor By Mrs. Sarah Turvill
- ---------------------------
Willis Corroon B.V.
By Mrs. Sarah Turvill
<PAGE>
1
TRANSLATION
ADDENDUM TO THE PROTOCOL OF AGREEMENT DATED 23 JULY 1997
BETWEEN THE UNDERSIGNED:
1. ASSURANCES GENERALES DE FRANCE IART, a company incorporated under French
law, domiciled at 87 rue de Richelieu, 75002 Paris, entered in the Paris
Register of Commerce and Companies under no. B 542 110 291, represented by
Mr Guy Lallour, acting in the capacity of DIDRE Manager, specially
authorized for the purposes hereof,
hereinafter called "AGF"
2. UAP - INCENDIE - ACCIDENTS, a company incorporated under French law,
domiciled at 9, Place Vendome, 75001 Paris, entered in the Paris Register
of Commerce and Companies under no. B 777 349 192, represented by Mr
Adrien Cadieux, specially authorized for the purposes hereof,
hereinafter called "UAP"
3. ATHENA, a company incorporated under French law, domiciled at 53/55 rue La
Boetie, 75008 Paris, entered in the Paris Register of Commerce and
Companies under no. B 304 951 833, represented by Mr Daniel Ehrmann,
specially authorized for the purposes hereof,
hereinafter called "ATHENA"
4. GRAS SAVOYE EURO FINANCE S.A., a company incorporated under Belgian law,
domiciled at 8 avenue Bel-Air, 1180 Uccle, Belgium, entered in the
Brussels Register of Commerce under no. 258,054, represented by Mr Patrick
Lucas, acting in the capacity of Chairman and holding all powers for the
purposes hereof,
hereinafter called "GS Euro Finance"
5. Mr Emmanuel Gras, resident at 3, rue Parmentier, 59370 Mons-en-Baroeul, in
the capacity of shareholder and sleeping partner of Gras Savoye & Cie.,
representing the shareholders named as "Gras shareholders" in Appendix 1
to the Protocol of Agreement dated 23 July 1997
6. Mr Patrick Lucas, resident at 3 avenue Emile Acollas, 75007 Paris, in the
capacity of shareholder and sleeping partner of Gras Savoye & Cie.,
representing the shareholders named as "Lucas shareholders" in Appendix 1
to the Protocol of Agreement dated 23 July 1997
7. Mr Daniel Naftalski, resident at 2 rue des Beaux-Arts, 75006 Paris, in the
capacity of shareholder and sleeping partner of Gras Savoye & Cie.,
representing the shareholders named as "Other shareholding natural
persons" in Appendix 1 to the Protocol of Agreement dated 23 July 1997
AND:
8. WILLIS CORROON GROUP, a company incorporated under English law, domiciled
at Ten Trinity Square, London EC3P 3AX, United Kingdom, entered in the
Register of
<PAGE>
2
Companies of England and Wales under no. 621757, represented by Mr John
Reeve, acting in the capacity of Chairman and holding all powers for the
purposes hereof,
hereinafter called "WCG"
9. WILLIS CORROON EUROPE B.V., a company incorporated under Dutch law,
domiciled at Marten Meesweg 51, 3068 AV Rotterdam, Netherlands, entered in
the Rotterdam Register of Commerce under no. 135,835, represented by Mrs
Sarah Turvill, acting in the capacity of director and holding all powers
for the purposes hereof,
hereinafter called "WCE BV"
AND:
10. GRAS SAVOYE & CIE, a partnership limited by shares with a capital of FRF
9,952,000, divided into 49,760 shares of FRF 200 each (hereinafter called
the "Shares"), domiciled at 2 rue Ancelle, 92200 Neuilly sur Seine,
entered in the Nanterre Register of Commerce and Companies under no. B 457
509 867, represented by Mr Patrick Lucas, acting in the capacity of
manager and sleeping partner and holding full powers for the purposes
hereof,
hereinafter called the "Company".
SOLE ARTICLE
The Parties recognize that the following appended and initialled page was
omitted in error on signature of the Protocol of Agreement dated 23 July 1997.
This page forms an integral part of Appendix 3 to the Share Transfer Agreement
attached as Appendix 2 to this Protocol of Agreement. It is inserted between the
two existing pages forming the aforesaid Appendix 3. As the Parties declared
their agreement to the content of this page on 23 July 1997, this Addendum does
not in any way constitute a new agreement between the Parties in relation to its
object, the page appended below having to be interpreted as if it had been
initialled on 23 July 1997.
For the shareholders:
[signed]
- ------------------------------------- ---------------------------------
for the Gras shareholders for the Lucas shareholders
by Mr Emmanuel Gras by Mr Patrick Lucas
- -------------------------------------
for the other shareholding natural persons
by Mr Daniel Naftalski
- ------------------------------------- ---------------------------------
Assurances Generales de France IART UAP Incendie - Accidents
by Mr Guy Lallour by Mr Adrien Cadieux
- -------------------------------------
ATHENA
by Mr Daniel Ehrmann
<PAGE>
3
For the managers and ordinary partners:
- ------------------------------------- ---------------------------------
Mr Emmanuel Gras Mr Patrick Lucas
- -------------------------------------
Mr Daniel Naftalski
For the Company:
- -------------------------------------
Gras Savoye & Cie
by Mr Patrick Lucas
For GS Euro Finance:
- -------------------------------------
Gras Savoye Euro Finance
by Mr Patrick Lucas
For the Willis Corroon Group:
- ------------------------------------- ---------------------------------
Willis Corroon Group plc Willis Corroon Europe B.V.
by Mr John Reeve by Mrs Sarah Turvill
<PAGE>
...which the Parties agree, or determined by the Expert, divided by 46,640
(hereinafter called "Share Adjustment No. 2).
For example, if the Estimated Consolidated Net Turnover for the 1997 financial
year (net of acquisitions) on which the Parties agree amounts to FRF
860,000,000, Share Adjustment No. 2 shall be for an amount of 1.4 times FRF
90,000,000, i.e. FRF 126,000,000, divided by 46,640, i.e. FRF 2,702.
Conversely, if the event described above does not occur, Share Adjustment No. 2
shall not take place.
(ii) Actual Consolidated Net Turnover for the 1997 financial year
If the Parties have not reached an agreement within a period of six Working Days
following the Notification of Reply received by the Transferee from the
Transferor's Representative (as provided for in Article 2 of the Share Transfer
Contract) on the amount of the Estimated Consolidated Net Turnover at 31
December 1997 (net of acquisitions) (as defined in Appendix 2A), and if the
Expert is unable to calculate Share Adjustment No. 2 in relation to that
Estimated Consolidated Net Turnover at 31 December 1997 (net of acquisitions),
the possible price adjustment per Share (hereinafter called "Share Adjustment
No. 3") shall be determined as follows:
If the Actual Consolidated Net Turnover at 31 December 1997 is less than FRF
950,000,000, Share Adjustment No. 3 shall be equal franc for franc to 1.4 times
the difference between FRF 1,000,000,000 and the Actual Consolidated Net
Turnover at 31 December 1997, divided by 46,640.
For example, if the Actual Consolidated Net Turnover at 31 December is equal to
FRF 900,000,000, Share Adjustment No. 3 will be for an amount of 1.4 times FRF
100,000,000, i.e. FRF 140,000,000, divided by 46,640, i.e. FRF 3,002.
Conversely, if the event described above does not occur, Share Adjustment No. 3
will not take place.
(C) Price per Share and Total Adjustments
The price per Share (the "Price per Share") shall be equal to the Basic Price
per Share less, where appropriate, Share Adjustment No. 1 and, where
appropriate, Share Adjustment No. 2 or Share Adjustment No. 3.
<PAGE>
Exhibit 2.12
The following exhibit no. 2.12 constitutes a fair and accurate English
translation of the original copy of this document.
/s/ Michael P. Chitty
----------------------------------------
Michael P. Chitty
Company Secretary of Willis Corroon Group Limited
<PAGE>
Dated 1997
----------------------------
WILLIS CORROON GROUP PLC
- and -
ACEGIANT LIMITED
- and -
WILLIS CORROON GROUP SERVICES LIMITED
- and -
WILLIS FABER & DUMAS (AGENCIES) LIMITED
---------------------------------------
AGREEMENT
for the sale and purchase of
all of the issued shares of Willis
Faber & Dumas (Agencies) Limited
---------------------------------------
ASHURST MORRIS CRISP
Broadwalk House
5 Appold Street
London EC2A 2HA
Tel: 0171-638 1111
Fax: 0171-972 7990
JNS/IDM/W84000029
<PAGE>
DRAFT 6
<PAGE>
CONTENTS
CLAUSE PAGE
1. INTERPRETATION.......................................................... 4
2. SALE AND PURCHASE....................................................... 9
3. COMPLETION..............................................................10
4. POST COMPLETION ADJUSTMENTS.............................................12
5. WARRANTIES..............................................................14
6. INDEMNITY...............................................................18
7. PROTECTION OF GOODWILL..................................................21
8. CONFIDENTIAL INFORMATION................................................23
9. ACCESS TO RECORDS AND SERVICES ARRANGEMENTS.............................24
10. PENSIONS...............................................................24
11. ANNOUNCEMENTS..........................................................24
12. COSTS..................................................................25
13. EFFECT OF COMPLETION...................................................25
14. FURTHER ASSURANCES.....................................................25
15. ENTIRE AGREEMENT.......................................................26
16. VARIATIONS.............................................................26
17. WAIVER.................................................................27
18. INVALIDITY.............................................................27
19. SET-OFF................................................................27
20. NOTICES................................................................28
21. COUNTERPARTS...........................................................28
22. GOVERNING LAW AND JURISDICTION.........................................29
23. ASSIGNMENT.............................................................29
24. GENERAL PROVISIONS.....................................................29
SCHEDULE 1
Particulars relating to the Company........................................31
SCHEDULE 2
Profit Commission Determination............................................32
SCHEDULE 3
The Warranties.............................................................34
SCHEDULE 4
The Property...............................................................47
SCHEDULE 5
Pensions...................................................................51
SCHEDULE 6
Fixed Assets to be Acquired................................................62
SCHEDULE 7
Balance Sheet..............................................................63
SCHEDULE 8
Services...................................................................64
SCHEDULE 9
Relevant Claims............................................................65
SCHEDULE 10
Article 36.................................................................68
SCHEDULE 11
Software Licenses..........................................................69
<PAGE>
THIS AGREEMENT is made on October 1997
BETWEEN:-
(1) WILLIS CORROON GROUP PLC (No. 621757) whose registered office is at Ten
Trinity Square, London, EC3P 3AX (the "Vendor"); and
(2) ACEGIANT LIMITED (No. 3316542) whose registered office is at Lloyd's
Building, 1 Lime Street, London EC3M 7DQ (the "Purchaser"); and
(3) WILLIS CORROON GROUP SERVICES LIMITED (No. 1451456) whose registered
office is at Ten Trinity Square, London, EC3P 3AX ("WCGS")
(4) WILLIS FABER & DUMAS (AGENCIES) LIMITED (No. 867054) whose registered
office is at Ten Trinity Square, London EC3P 3AX, (the "Company").
RECITALS
(A) Details of the Company are set out in Schedule 1.
(B) The Vendor is the beneficial owner and registered holder of all of the
Shares other than one "A" Share of which it is the beneficial owner but
which is registered in the name of Willis Faber Limited.
(C) The Vendor has agreed to sell and the Purchaser has agreed to purchase all
of the Shares on and subject to the terms of this Agreement.
THE PARTIES AGREE AS FOLLOWS:-
1. INTERPRETATION
1.1 In this agreement the following words and expressions and abbreviations
have the following meanings, unless the context otherwise requires:-
"Accounts Date" means 31 December 1996;
"Accounts" means the audited financial statements of the Company, comprising the
balance sheet, profit and loss account and cash flow statement of the Company
together with the notes thereon, directors' report and auditors' certificate as
at and for the period ended on the Accounts Date;
"associated company" has the meaning given to it in sections 416 et seq. TA;
"Business Day" means a day (excluding Saturdays) on which banks generally are
open
- 4 -
<PAGE>
in London for the transaction of normal banking business;
"Claim" means a claim for breach of any of the Warranties and/or a claim under
the Tax Deed and/or a claim under the indemnity in clause 6;
"Completion" means the completion of the sale and purchase of the Shares in
accordance with clause 3;
"Completion Date" means the date hereof;
"Confidential Information" means all information relating to a company's
business, or financial or other affairs (including future plans and targets of a
company) which is not in the public domain;
"Disclosure Letter" means a letter of today's date together with the attachments
thereto addressed by the Vendor to the Purchaser disclosing exceptions to the
Warranties;
"distribution" means a distribution as defined by sections 209 to 211
(inclusive) of the TA and section 418 of the TA;
"Encumbrance" means any mortgage, charge (fixed or floating), pledge, lien,
hypothecation, trust, right of pre-emption, assignment by way of security,
reservation of title or any other security interest of any kind however created
or arising;
"Heath Agreement" means the business acquisition agreement dated 14 November
1994 between the Company and Christopherson Heath Members Agency Limited;
"Intellectual Property" means any and all patents, trade marks, rights in
designs, get-up, trade, business or domain names, copyrights, and topography
rights, (whether registered or not and any applications to register or rights to
apply for registration of any of the foregoing), rights in inventions, know-how,
trade secrets and all other intellectual property rights of a similar or
corresponding character which may now or in the future subsist in any part of
the world;
"ITA" means the Inheritance Tax Act 1984;
"Janson Green Agreement" means the business acquisition agreement dated 25
February 1994 between the Company and Janson Green Limited;
"Lloyds" means the Society of Lloyd's incorporated by Lloyd's Act 1871
"Pre-Sale Dividend" means the dividend of (pound)2,692,055 declared and paid by
the
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Company on 17th October 1997;
"1994 and Prior Year's Profit Commission" means the total amount of profit
commission received by the Company after 30th June 1997 until 31 December 2002
in respect of the 1994 and any prior underwriting year of account less:
(a) any amount of that profit commission contractually due and payable
pursuant to the Janson Green Agreement and/or the Heath Agreement;
and
(b) an amount equal to such percentage thereof (following the deduction
referred to in (a) above) as is arrived at by applying the effective
rate of corporation tax applicable to the relevant financial year of
the Company in respect of which corporation tax is payable in
respect of such profit commission (and for payments made during a
financial year if the amount deducted is different from the
effective rate applicable to that year an appropriate adjustment
will be made);
"1995 Profit Commission" means the total amount of profit commission received by
the Company until 31 December 2003 in respect of the 1995 underwriting year of
account less:
(a) any amount of that profit commission contractually due and payable
pursuant to the Janson Green Agreement and/or the Heath Agreement;
and
(b) an amount equal to such percentage thereof (following the deduction
referred to in (a) above) as is arrived at by applying the effective
rate of corporation tax applicable to the relevant financial year of
the Company in respect of which corporation tax is payable in
respect of such profit commission (and for payments made during a
financial year if the amount deducted is different from the
effective rate applicable to that year an appropriate adjustment
will be made);
"1996 Profit Commission" means the total amount of profit commission received by
the Company until 31 December 2004 in respect of the 1996 underwriting year of
account less:
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(a) any amount of that profit commission contractually due and payable
pursuant to the Janson Green Agreement and/or the Heath Agreement ;
and
(b) an amount equal to such percentage thereof (following the deduction
referred to in (a) above) as is arrived at by applying the effective
rate of corporation tax applicable to the relevant financial year of
the Company in respect of which corporation tax is payable in
respect of such profit commission (and for payments made during a
financial year if the amount deducted is different from the
effective rate applicable to that year an appropriate adjustment
will be made);
"1997 Profit Commission" means the amount of profit commission received by the
Company until 31 December 2005 in respect of the 1997 underwriting year of
account less:
(a) any amount of that profit commission contractually due and payable
pursuant to the Janson Green Agreement and/or the Heath Agreement ;
and
(b) an amount equal to such percentage thereof (following the deduction
referred to in (a) above) as is arrived at by applying the effective
rate of corporation tax applicable to the relevant financial year of
the Company in respect of which corporation tax is payable in
respect of such profit commission (and for payments made during a
financial year if the amount deducted is different from the
effective rate applicable to that year an appropriate adjustment
will be made);
"Property" means the property described in schedule 4 or any part thereof;
"Purchaser's Group" means the Purchaser and its subsidiary undertakings
(including the Company), all of them and each of them as the context admits;
"Purchaser's Solicitors" means Ashurst Morris Crisp of Broadwalk House, 5 Appold
Street, London EC2A 2HA;
"Related Person" means in relation to any party its holding companies and the
subsidiary undertakings from time to time of it and such holding companies, all
of them and each of them as the context admits;
"Shares" means all of the issued shares in the capital of the Company;
"TA" means the Income and Corporation Taxes Act 1988;
"Tax" or "tax" has the meaning described thereto in the Tax Deed.
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"Taxation Authority" has the meaning described thereto in the Tax Deed.
"Tax Deed" means a deed of tax covenant in the agreed terms;
"Taxation Statutes" has the meaning described thereto in the Tax Deed.
"TCGA" means the Taxation of Chargeable Gains Act 1992;
"TMA" means the Taxes Management Act 1970;
"VATA" means the Value Added Tax Act 1994 and "VAT legislation" means VATA and
all regulations and orders made thereunder;
"Vendor's Group" means the Vendor and its subsidiary undertakings (excluding the
Company), all of them and each of them as the context admits;
"Vendor's Solicitors" means Lovell White Durrant of 65 Holborn Viaduct, London
EC1A 2DY;
"Warranties" means the warranties set out in schedule 3.
1.2 In this agreement unless otherwise specified, reference to:-
(a) a "subsidiary undertaking" is to be construed in accordance with
section 258 of the Companies Act 1985 and a "subsidiary" or "holding
company" is to be construed in accordance with section 736 of that
Act;
(b) a document in the "agreed terms" is a reference to that document in
the form approved and for the purposes of identification signed by
or on behalf of each party;
(c) "FA" followed by a stated year means the Finance Act of that year;
(d) "includes" and "including" shall mean including without limitation;
(e) a "party" means a party to this agreement and includes its permitted
assignees (if any) and/or the successors in title to substantially
the whole of its undertaking;
(f) a "person" includes any person, individual, company, firm,
corporation, government, state or agency of a state or any
undertaking (whether or not having separate legal personality and
irrespective of the jurisdiction in or under the law of which it was
incorporated or exists);
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<PAGE>
(g) a "statute" or "statutory instrument" or "accounting standard" or
any of their provisions is to be construed as a reference to that
statute or statutory instrument or accounting standard or such
provision as the same may have been amended or re-enacted before the
date of this agreement;
(h) "clauses", "paragraphs" or "schedules" are to clauses and paragraphs
of and schedules to this agreement;
(i) "writing" includes any methods of representing words in a legible
form other than writing on an electronic or visual display screen or
in other non-transitory form;
(j) words denoting the singular shall include the plural and vice versa
and words denoting any gender shall include all genders.
1.3 The schedules form part of the operative provisions of this agreement and
references to this agreement shall, unless the context otherwise requires,
include references to the schedules.
1.4 The index to and the headings and the descriptive notes in brackets
relating to provisions of taxation statutes in this agreement are for
information only and are to be ignored in construing the same.
1.5 Any question of whether a person is connected with another shall be
determined in accordance with section 839 of the TA (except that in
construing section 839 "control" has the meaning given by section 840 or
section 416 of the TA so that there is control whenever section 840 or 416
requires) which shall apply in relation to this agreement as it applies in
relation to the TA.
2. SALE AND PURCHASE
2.1 Upon the terms and subject to the conditions of this agreement, the Vendor
as legal owner and with full title guarantee shall sell and the Purchaser
shall purchase the Shares with effect from Completion free from any
Encumbrance together with all accrued benefits and rights attached thereto
and all dividends declared after the Accounts Date in respect of the
Shares (other than the Pre-Sale Dividend).
2.2 The Vendor waives or agrees to procure the waiver of any rights or
restrictions conferred upon it or any other person which may exist in
relation to the transfer of the Shares under the articles of association
of the Company or otherwise.
2.3 The Purchaser shall not be obliged to complete the purchase of any of the
Shares unless the Vendor completes the sale of all of the Shares
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simultaneously, but completion of the purchase of some Shares shall not
affect the rights of the Purchaser with respect to its rights to the other
Shares.
2.4 The consideration for the sale and purchase of the Shares shall be as set
out in Part 1 of Schedule 2 which shall be payable in accordance with the
provisions of Part 2 of Schedule 2.
2.5 At Completion WCGS as legal owner and with full title guarantee shall sell
and the Company shall purchase:
(i) all of the assets listed in Schedule 6; and
(ii) all other assets currently used by the Company in the conduct
of its business and which are located at the Property
(irrespective of whether they are specifically referred to in
Schedule 6)
(the "Assets")
with effect from Completion, free from any Encumbrance together with all
accrued benefits and rights attached thereto, for a consideration of
(pound)245,276.68 payable upon Completion.
2.6 The provisions of Schedule 4 Part II shall apply in relation to the
Property.
3. COMPLETION
3.1 Completion shall take place at the offices of the Purchaser's Solicitors
on the Completion Date.
3.2 On Completion the Vendor shall deliver to or, if the Purchaser shall so
agree, make available to the Purchaser:-
(a) stock transfer forms relating to all the Shares duly executed in
favour of the Purchaser (or as it may direct);
(b) share certificates relating to the Shares;
(c) the consent of Lloyds to any transfer of Shares within the Vendor's
Group prior to Completion;
(d) the written resignations of the auditors of the Company containing
an acknowledgement that they have no claim against the Company for
compensation for loss of office, professional fees or otherwise and
a statement under section 394(1) of the Companies Act 1985;
(e) the common seals, certificates of incorporation and statutory books,
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share certificate books and cheque books of the Company;
(f) the Tax Deed duly executed by the Vendor;
(g) to the extent not in the possession of the Company, all books of
account and other records relating exclusively to the Company (other
than those referred to in clause 6) and copies of all insurance
policies in which the Company has an interest after Completion;
(h) a Deed of Termination in the agreed terms between Willis Faber
Limited and the Company terminating the subordinated loan agreement
between them dated 12 June 1996 executed by Willis Faber Limited;
(i) a signed written resolution of all of the members of the Company
changing the name of the company from "Willis Faber & Dumas
(Agencies) Limited" to WFDA Underwriting Limited.
3.3 The Vendor shall procure that on or before Completion:-
(a) there is repaid all sums (if any) owing to the Company by any member
of the Vendor's Group or by the directors of the Company or any of
their connected persons up to 30th September 1997 (whether or not
such sums are due for repayment);
(b) there is repaid all sums (if any) owed by the Company to any member
of the Vendor's Group or to the directors of the Company or any of
their connected persons up to 30th September 1997 (whether or not
such sums are due for repayment)
and following Completion there shall be an adjustment made for amounts
owing up to Completion.
3.4 Upon compliance by the Vendor with the provisions of clauses 3.2 and 3.3
the Purchaser shall:-
(a) pay to the Vendor the sum of (pound)1 in cash;
(b) deliver to the Vendor the written consent of Lloyd's to the transfer
of the Shares to the Purchaser; and
(c) deliver to the Vendor a counterpart of the Tax Deed duly executed by
the Purchaser.
3.5 On Completion the Vendor shall cause a board meeting of the Company to be
held at which the transfers of the Shares shall be approved for
registration (subject only to the transfers being stamped at the cost of
the Purchaser) the
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deed of termination referred to in clause 3.2(i) shall be approved and
signed on behalf of the Company and the resignation of the existing
auditors of the Company shall be accepted and the appointment of Binder
Hamlyn in their place shall be approved.
4. POST COMPLETION ADJUSTMENTS
4.1 In the event that on or before 20th October 1998 either:-
(a) the shareholders of the Purchaser have sold or agreed to sell some
or all of the shares in the Purchaser or the Purchaser has sold or
agreed to sell some or all of the shares in the Company to a party
other than to:-
(i) a person who is a director of the Purchaser or the Company
both at Completion and at the date of sale; or
(ii) a company wholly owned and controlled by any such director or
directors; or
(iii) a wholly owned subsidiary company of the Purchaser or of any
holding company of the Purchaser which is wholly owned by
those who are the shareholders of the Purchaser at Completion;
(and excluding any Permitted Transfer as referred to in Article 36
of the Company's proposed Articles of Association as set out in
Schedule 10 or (with the prior written agreement of the Vendor) any
other transfer effected by any shareholder of the Purchaser for
personal tax planning purposes); or
(b) the Company has sold or agreed to sell all or a material part of its
business and/or assets to a party other than to:-
(i) a person who is a director of the Purchaser or the Company
both at Completion and at the date of sale; or
(ii) a company wholly owned and controlled by any such director or
directors; or
(iii) the Purchaser or a wholly owned subsidiary company of the
Purchaser or of any holding company of the Purchaser which is
wholly owned by those who are the shareholders of the
Purchaser at Completion;
(in each case a "Disposal") then the Purchaser shall pay to the Vendor an
amount equal to the difference between the proceeds of the Disposal and
(pound)1, such payment to the Vendor to be made net of any taxation on the
proceeds of
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<PAGE>
the Disposal in the hands of the recipient and subject, in the case of (b)
above to the Company being in a position to lawfully distribute the
proceeds of any such Disposal to the Purchaser PROVIDED THAT if such
distribution has not occurred on or before the four month anniversary of
the date of completion of the Disposal, such proceeds must be paid to the
Vendor by the Purchaser in any event not more than 15 business days after
the expiry of such four month period.
4.2 For the purposes of clause 4.1 the proceeds of the Disposal shall include
the consideration paid and payable and any extractions or receipts
following Completion and prior to the Disposal from the Purchaser or the
Company for the benefit of the shareholders of the Purchaser where such
extractions or receipts are effected as follows:
(a) any dividend paid prior to the Disposal (other than ordinary
dividends from current year profits, dividends paid to enable the
Purchaser to fulfil its obligations pursuant to this agreement or to
enable it to meet any costs incurred as a result of entering into
this Agreement, or dividends paid to fund obligations of the
Purchaser incurred in the course of trading); and/or
(b) any increases in salary or bonuses or other forms of remuneration
paid to the directors of the Purchaser or the Company in excess of
10% of their current annualised salary, bonuses or other forms of
remuneration up to Completion; and/or
(c) any other action (other than in the normal course of trading) which
has the effect of reducing the net assets of the Company and/or the
Purchaser as at the date of Disposal.
4.3 If there is any dispute between the Vendor and the Purchaser as to the
amount of the proceeds on the Disposal and/or the amount payable to the
Vendor under clause 4.1 then in default of agreement within 28 days from
the date of the Disposal the matter shall be referred to an independent
accountant or firm of accountants agreed between the parties, or in
default of agreement nominated on the application of either the Vendor or
the Purchaser by the President for the time being of the Institute of
Chartered Accountants in England and Wales who shall act as an expert and
not as an arbitrator. The decision of such expert shall in the absence of
fraud or manifest error be final and binding on the Vendor and the
Purchaser. The Vendor and the Purchaser shall each pay one half of such
expert's costs in respect of a reference.
4.4 For the avoidance of doubt, the Vendor and the Purchaser agree that the
provisions set out in clauses 4.1 to 4.3 inclusive have the intention of
ensuring that should all or some of the shares in the Company or all or a
material part of its business and/or assets be sold to a third party, the
Vendor will be reimbursed
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<PAGE>
such that its economic position is not less favourable than it would have
been had it entered into an agreement directly with such third party on
the same terms as the Disposal.
5. WARRANTIES
5.1 The Vendor warrants to the Purchaser in the terms of the Warranties.
5.2 Any information supplied by or on behalf of the Company to or on behalf of
the Vendor in connection with the Warranties, the Disclosure Letter or
otherwise in relation to the business and affairs of the Company shall not
constitute a representation or warranty or guarantee as to the accuracy
thereof by the Company and the Vendor undertakes to the Purchaser (on
behalf of itself and as trustee of the Company and their respective
directors, employees, agents and advisers) that it will not bring any and
all claims which it might otherwise have against the Company or any of its
directors, employees, agents or advisers in respect of any such
information in the absence of fraud, or wilful or dishonest concealment.
5.3 Each of the Warranties shall be construed as a separate warranty, and
(unless expressly provided to the contrary) shall not be limited by the
terms of any of the other Warranties or by any other term of this
agreement.
5.4 The Vendor shall be under no liability in respect of any claim for breach
of the Warranties (a "Warranty Claim") if and to the extent that the
matter or circumstances giving rise thereto are fairly disclosed in the
Disclosure Letter or such matters or circumstances giving rise thereto are
otherwise actually known to the current executive directors of the Company
on or prior to the date hereof and such executive directors knew that such
matter or circumstances would give rise to a claim under the Warranties.
Subject to the foregoing no letter, document or other communication shall
constitute a disclosure for the purposes of the Warranties except and to
the extent that the same is referred to in and a copy attached to the
Disclosure Letter.
5.5 The Vendor shall give to the Purchaser all such information and
documentation relating to the Company as the Purchaser shall reasonably
require to enable it to satisfy itself as to whether there has been any
breach of the Warranties.
5.6 (a) The Vendor shall not be liable in respect of any Warranty Claim
(other than in respect of the Warranties in Section 16 of Schedule
3) unless the Purchaser has served on the Vendor a written notice by
no later than 5.00 pm on the second anniversary of the Completion
Date giving reasonable details of such Warranty Claim and has issued
and served proceedings in respect thereof by the later of six months
from the date of such written notice (or if later the date that any
contingent liability in
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respect of which the notice was served has become an actual
liability) and the second anniversary of the Completion Date.
(b) The Vendor shall not be liable in respect of any Warranty Claim in
respect of the Warranties in Section 16 of Schedule 3 unless the
Purchaser has served on the Vendor a written notice by no later than
5.00 pm on the seventh anniversary of the Completion Date giving
reasonable details of such Warranty Claim and has issued and served
proceedings in respect thereof by the later of six months from the
date of such written notice (or if later the date that any
contingent liability in respect of which the notice was served has
become an actual liability) and the seventh anniversary of the
Completion Date.
5.7 No claim shall be made in respect of any Warranty Claim unless and until
the liability in respect of that Warranty Claim when aggregated with the
liability of the Vendor in respect of all other Warranty Claims exceeds
(pound)50,000 whereupon the full amount of any such Warranty Claim and not
merely the excess above (pound)50,000 shall be recoverable.
5.8 The total amount of the liability of the Vendor in respect of all Claims
(other than any claim or claims pursuant to Clause 12 of the Tax Deed,
which claim or claims shall not be limited and which claim or claims shall
not be counted towards the limits in this clause) shall be limited to and
shall in no event exceed the greater of:
(a) (pound)2 million; and
(b) the aggregate of the total amount of the consideration received by
the Vendor pursuant to clause 2.4 above (or which would have been
received but for any right of set off pursuant to clause 19) and any
payments received by the Vendor pursuant to clause 6.2(b) below
(excluding any amount which the Company is entitled to retain
pursuant to Clause 6.2(b) below in respect of the Relevant Claim
referred to in paragraph c(2) of Schedule 9).
PROVIDED THAT if and to the extent that the aggregate amount of any Claim
or Claims is more than (pound)2 million and exceeds from time to time the
amounts which have by then been received by the Vendor as referred to in
paragraph (b) above, the Vendor shall only become liable to meet such
Claim or Claims if and to the extent that it receives any further sums as
referred to in paragraph (b) above (or would have received such sums but
for any right of set off pursuant to Clause 19) which are sufficient to
meet any such Claim or Claims but shall not otherwise be liable to make
payment in respect thereof.
5.9 The Vendor shall not be liable in respect of any Warranty Claim if and to
the extent that such Warranty Claim arises or is increased due to a
voluntary act
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<PAGE>
transaction or omission carried out after Completion by the Purchaser or
the Company otherwise than in the ordinary course of trading of the
Purchaser or the Company (as the case may be) and which the Purchaser or
the Company (as the case may be) knew or ought reasonably to have known
would give rise to or increase such a Warranty Claim.
5.10 The Vendor shall not be liable in respect of any Warranty Claim if and to
the extent that any such claim arises or is increased as a result of any
change in legislation occurring after Completion.
5.11 The Vendor shall not be liable in respect of any Warranty Claim if and to
the extent that any such claim arises as a result of:
(a) any increase in rates of tax; or
(b) any change in the published practice of the Inland Revenue, HM
Customs and Excise or any other relevant taxation or excise
authorities;
(c) any change of accounting policy or practice of the Purchaser or the
Company (without prejudice to the provisions of paragraph 3 of
Schedule 3)
in each case occurring after Completion.
5.12 If the Vendor pays to the Purchaser or the Company an amount in respect of
any Warranty Claim (a "Damages Payment") and the Purchaser or the Company
(as the case may be) subsequently recovers from a third party (including
any insurer) a sum which is received in respect of the matter giving rise
to the Warranty Claim in respect of which the Damages Payment was made,
the Purchaser shall or shall procure that the Company (as the case may be)
shall within five days following receipt of such sum repay to the Vendor
an amount equal to the lesser of the amount of such sum (net of the
Purchaser's or the Company's reasonable costs relating to such recovery
and any taxation which the Purchaser or the Company incurs in respect of
such recovery) and the Damages Payment.
5.13 The benefit of the Warranties the Tax Deed and the indemnity in Clause 6
shall not be capable of assignment by the Purchaser other than to another
member of the Purchaser's Group to whom the Shares are transferred and
shall be actionable only by the Purchaser or such other member of the
Purchaser's Group and no other party PROVIDED THAT such assignment shall
be on the following terms:-
(a) the Purchaser shall procure that such member of the Purchaser's
Group agrees with the Vendor to be bound by all of the obligations
of the Purchaser under this Agreement; and
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<PAGE>
(b) such member of the Purchaser's Group shall cease to be entitled to
enforce the Warranties, the Tax Deed and the indemnity in Clause 6
so assigned to it upon such member of the Purchaser's Group ceasing
to be a member of the Purchaser's Group provided that such member of
the Purchaser's Group shall be entitled to assign the benefit of the
Warranties, the Tax Deed and the indemnity in Clause 6 to another
member of the Purchaser's Group prior to its so ceasing.
5.14 Nothing contained in this clause 5 shall limit the Purchaser's or the
Company's obligations to mitigate any loss or damage arising out of any
circumstances giving rise to a Warranty Claim.
5.15 The Vendor shall not be liable in respect of any Warranty Claim to the
extent that the matter giving rise to such claim was provided for in the
unaudited balance sheet of the Company for the six months ended 30 June
1997 as set out in Schedule 7.
5.16 The Vendor shall not be liable in respect of any Warranty Claim if and to
the extent that it relates to any loss in respect of which the Purchaser
or the Company is entitled to recover and subsequently does recover under
an insurance policy.
5.17 Where a matter which gives rise to a Warranty Claim involves a payment to
be made by the Purchaser or the Company, the Vendor shall not be required
to make any payment in respect of such amount to be paid by the Purchaser
or the Company unless and until the Purchaser or the Company has itself
made payment in respect thereof.
5.18 Any amount paid by the Vendor in respect of any Warranty Claim shall be
deemed to reduce the amount of the purchase price paid by the Purchaser
for the Shares.
5.19 If any Warranty Claim is made by the Purchaser, then for the purpose of
determining the amount for which the Vendor is liable in respect of that
claim, there shall be taken into account and credit given for the amount
by which the Purchaser or the Company's tax liability has been reduced at
the date of such claim by reason of any saving of tax having been obtained
by the Purchaser and/or the Company by reason of any of the matters giving
rise to such claim.
5.20 The Purchaser agrees that it will give written notice to the Vendor as
soon as reasonably practicable of any claim by a third party against the
Purchaser and/or the Company and any claim by the Purchaser and/or the
Company against a third party in either case in respect of a matter which
has or could reasonably be expected to give rise to a Warranty Claim. In
respect of any such claim:-
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(a) the Purchaser and the Company shall consult with the Vendor in
relation to the claim and keep the Vendor informed of all material
developments relating to the same and shall preserve and deliver to
the Vendor any relevant documents, information, communications and
notices which come into their possession in relation to the same;
(b) the Purchaser and the Company shall take such action to pursue,
litigate, defend, avoid, dispute, resist, appeal, compromise or
contest the liability as may be reasonably requested by the Vendor
who shall be entitled to have the conduct of any action, appeal,
dispute, compromise or defence of the dispute and of any incidental
negotiations but at its expense;
(c) the Purchaser shall (and procure that the Company shall) make
available to the Vendor such persons, documents and such information
as the Vendor may reasonably require (to the extent it is within the
Purchaser's power to do so and subject to the Vendor making every
effort not to disrupt the Company's ongoing business) for pursuing,
avoiding, disputing, resisting, appealing, compromising or
contesting any such liability; and
(d) the Vendor will indemnify the Purchaser and/or the Company (as the
case may be) on an after-Tax basis and keep them indemnified against
all and any actions, proceedings, claims, demands, liabilities,
losses, damages, cost and expenses (in each case of any nature
whatsoever) which may be incurred by the Purchaser and/or the
Company by virtue of their compliance with paragraphs (b) and (c)
above.
6. INDEMNITY
6.1 In this clause 6 the expression "Relevant Claim" means each and any of the
claims listed in Schedule 9.
6.2 In relation to a Relevant Claim the parties agree as follows:-
(a) the Vendor undertakes to pay to the Purchaser such sums as would if
paid to the Company indemnify the Company against all costs, claims,
damages, expenses, liabilities and losses incurred or suffered by
the Company arising out of or in connection with any such Relevant
Claim and any action taken by the Company or the Purchaser in
connection with any such Relevant Claim pursuant to this clause
6.2);
(b) the Purchaser and the Company confirm that the Vendor shall be
entitled to retain the benefit of any such Relevant Claim and that
subject to the Vendor complying with Clause 6.2(a) any award,
judgment, settlement or payment in favour of the Company in respect
of any such Relevant Claim
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<PAGE>
shall be due and payable to the Vendor and the Purchaser and the
Company undertake that if the Purchaser or the Company receives from
or on behalf of a third party any amounts due to the Vendor pursuant
to this clause then such amount shall be paid by the Purchaser to
the Vendor (less any Tax payable by the Company or the Purchaser in
respect of such amount and less any reasonable external costs and
expenses incurred by the Purchaser or the Company in recovering such
amount) and provided that in the case of the Relevant Claim referred
to in paragraph (c) 2 of Schedule 9 the amount recovered (less Tax,
costs and other external expenses as aforesaid) shall belong as to
75% to the Vendor and as to 25% to the Company;
(c) the Vendor will continue to have conduct of each Relevant Claim (but
shall at all times consult with the Purchaser as to its conduct
thereof) and Purchaser and the Company shall co-operate with the
Vendor in respect thereof and inform the Vendor of any matters which
arise in relation thereto which come to its attention;
(d) the Purchaser and the Company shall at the Vendor's option and
expense:-
(i) assign to the Vendor (insofar as legally possible) without the
giving of any further consideration any Relevant Claim or
rights of action in respect thereof; and/or
(ii) take such steps as the Vendor may reasonably require to
litigate, defend, resist, compromise or pursue any Relevant
Claim whether such steps are taken by the Company and/or the
Purchaser, or by the Vendor in the name of the Company;
(e) the Vendor shall be entitled to retain all relevant documents,
information, files and records in relation to a Relevant Claim which
are in the Vendor's possession on the date hereof until the
settlement of the Relevant Claim (whether by way of agreement or as
determined by the courts) whereupon they shall be returned to the
Purchaser and/or the Company provided that prior to any such return
the Vendor shall allow the Purchaser, the Company and their
professional advisers to inspect and take copies of such
documentation, information, files and records;
(f) the Purchaser and the Company shall preserve and deliver to the
Vendor any relevant documents, information, communications and
notices which come into its possession after the date hereof in
respect of a Relevant Claim which the Vendor shall be entitled to
retain until the settlement of the Relevant Claim (whether by way of
agreement or as determined by the courts) whereupon they shall be
returned to the Purchaser and/or the Company and shall allow the
Vendor and its professional advisers
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access to inspect and take copies of any other documents and
information which cannot be delivered to the Vendor;
(g) the Purchaser and the Company shall:
(i) require the personnel of the Company and/or the Purchaser to
provide such statements or proofs of evidence as the Vendor
may reasonably require and to attend to any trial or hearing
to give evidence and provide such assistance as the Vendor may
reasonably require with respect to any Relevant Claim;
(ii) not settle or compromise any Relevant Claim without the prior
written consent of the Vendor; and
(iii) upon the Vendor's request, obtain the execution of all such
consents, authorisations, settlements and agreements necessary
or desirable for the continuation or conclusion of any
Relevant Claim (including, without limitation, agreements to
submit any Relevant Claim to arbitration or alternative
dispute resolution).
(h) The Vendor shall not be liable in respect of any Claim under the
indemnity in Clause 6.2(a) above unless the Purchaser has served on
the Vendor a written notice by no later than 5.00pm on the seventh
anniversary of the Completion Date giving reasonable details of such
Claim and has issued and served proceedings in respect thereof by
the later of six months from the date of such written notice (or if
later the date that any contingent liability in respect of which the
notice was served has become an actual liability) and the seventh
anniversary of the Completion Date.
6.3 All payments by the Vendor under the indemnities in this clause 6 shall be
made gross, free of any right of counterclaim or set off and without
deduction or withholding of any kind, other than any deduction or
withholding required by law. Any such payments shall be deemed a reduction
in the purchase price for the Shares.
6.4 If the Vendor makes a deduction or withholding required by law from any
payment pursuant to the indemnities in this clause 6 the sum due from the
Vendor shall be increased to the extent necessary to ensure that, after
the making of any deduction or withholding, the Purchaser receives a sum
equal to the sum it would have received had no deduction or withholding
been made.
6.5 If a payment under the indemnities in this clause 6 will be or has been
subject to tax, the Vendor shall pay the Purchaser on demand the amount
(after taking into account any tax payable in respect of the amount and
treating for these purposes as payable any tax that would be payable but
for a relief, clearance,
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deduction or credit) that will ensure that the Purchaser receives and
retains a net sum equal to the sum it would have received had the payment
not been subject to tax.
6.6 The Purchaser shall only be entitled to recover once for the same loss,
damage, liability, claim, expense or cost in respect of a claim under this
clause 6, a claim under the Tax Deed and a Warranty Claim for claims
relating to the same subject matter.
7. PROTECTION OF GOODWILL
7.1 The Vendor hereby undertakes to procure that (except as otherwise agreed
in writing with the Purchaser) no member of the Vendor's Group will either
solely or jointly with any other person (either on its own account or as
the agent of any other person):-
(a) for a period of 3 years from Completion carry on or be engaged or
concerned or (except as the holder of shares in a listed company
which confer not more than five per cent. of the votes which can
generally be cast at a general meeting of the company) interested
directly or indirectly in a business which acts as or provides the
services of or carries on the business of a Lloyd's member's agents
or Lloyd's adviser as defined in the Lloyd's Acts and Bye-laws but
excepting any activities currently carried on by any member of the
Vendor's group (other than the Company) which such member shall be
entitled to continue to carry on whether as a Lloyd's adviser (if
required by any regulatory authority to register as such) or
otherwise (a "Competing Business");
(b) for a period of 3 years from Completion solicit or accept (on its
own account or as the agent of any other person) the custom of any
person in respect of services comprised in a Competing Business
where such services were supplied by the Company during the period
of 6 months immediately prior to Completion, such person having been
a customer or client of the Company in respect thereof during such
period;
(c) for a period of 3 years from Completion induce, solicit or endeavour
to entice any person who during the period of 6 months prior to
Completion was an employee of the Company likely (in the reasonable
opinion of the Purchaser) to be:-
(i) in possession of Confidential Information relating to the
Company; or
(ii) liable to influence the customer and client relationships or
connections of the Company
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to leave the service or employment of the Company.
7.2 The restrictions in clause 7.1(a) shall not apply (if it otherwise could
be so construed) to the business activities of any company carrying on a
Competing Business which is either:-
(a) acquired by the Vendor or the Vendor's Group after the Completion
Date where such company was carrying on such business prior to its
acquisition by the Vendor or the Vendor's Group; or
(b) is part of a group of companies which merges with or acquires the
Vendor and the Vendor's Group where such company was carrying on
such business prior to its merger with or acquisition of the Vendor
and the Vendor's Group;
and in the case of sub-clause (a) above where the Competing Business is
not the principal trading activity of the company or business referred to
in sub-clause (a) above PROVIDED THAT if the events contemplated by
sub-clauses (a) or (b) above do occur, the Vendor undertakes to the
Purchaser that it shall not (and shall procure that each member of the
Vendor's Group and each member of such merging or acquiring company's
group shall not) solicit or accept the custom of any person covered by the
restrictions contained in clause 7.1(b) for the period specified in that
clause.
7.3 The Vendor agrees that the undertakings contained in this clause 7 are
reasonable and are entered into for the purpose of protecting the goodwill
of the business of the Company and that accordingly the benefit of the
undertakings may be assigned by the Purchaser and its successors in title
without the consent of the Vendor.
7.4 Each undertaking contained in this clause 7 is and shall be construed as
separate and severable and if one or more of the undertakings is held to
be against the public interest or unlawful or in any way an unreasonable
restraint of trade or unenforceable in whole or in part for any reason the
remaining undertakings or parts thereof, as appropriate, shall continue to
bind the Vendor.
7.5 If any undertaking contained in this clause 7 shall be held to be void but
would be valid if deleted in part or reduced in application, such
undertaking shall apply with such deletion or modification as may be
necessary to make it valid and enforceable. Without prejudice to the
generality of the foregoing, such period (as the same may previously have
been reduced by virtue of this clause 7.4) shall take effect as if reduced
by six months until the resulting period shall be valid and enforceable.
7.6 No provision of this agreement, by virtue of which this agreement is
subject to registration (if such be the case) under the Restrictive Trade
Practices Act 1976
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<PAGE>
(unless this agreement is a non-notifiable agreement pursuant to section
27A of that Act), shall take effect until the day after particulars of
this agreement have been furnished to the Director-General of Fair Trading
pursuant to section 24 of that Act. For this purpose the expression "this
agreement" includes any agreement or arrangement of which this agreement
forms part and which is registrable or by virtue of which this agreement
is registrable.
7.7 The Company undertakes within six months of the date of Completion to
cease using the business name "WFDA" and the corporate name WFDA
Underwriting Limited and from Completion to cease using any other name or
mark currently used by or connected with the Vendor or the Vendor's Group.
8. CONFIDENTIAL INFORMATION
8.1 The Vendor shall:-
(a) not and shall procure that no other member of the Vendor's Group or
any director, officer or employee or adviser of the Vendor's Group
shall after Completion use or disclose to any person Confidential
Information in relation to any company in the Purchaser's Group; and
(b) use all reasonable endeavours to prevent the use or disclosure after
Completion of the Confidential Information referred to in paragraph
(a) above by any person other than by members of the Purchaser's
Group.
8.2 The Purchaser shall:-
(a) not and shall procure that no other member of the Purchaser's Group
or any director, officer or employee or adviser of the Purchaser's
Group shall at any time use or disclose any Confidential Information
in relation to any company in the Vendor's Group; and
(b) use all reasonable endeavours to prevent the use or disclosure of
the Confidential Information referred to in paragraph (a) above by
any person other than by members of the Vendor's Group.
8.3 clauses 8.1 and 8.2 do not apply to:-
(a) disclosure of Confidential Information to or at the written request
of the Purchaser or the Vendor (as the case may be);
(b) use or disclosure of Confidential Information required to be
disclosed by law or the London Stock Exchange;
(c) disclosure of Confidential Information to professional advisers for
the purpose of advising the parties; or
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<PAGE>
(d) Confidential Information which becomes part of the public domain
other than by a party's breach of clauses 8.1 or 8.2.
9. ACCESS TO RECORDS AND SERVICES ARRANGEMENTS
9.1 The Vendor undertakes to the Purchaser to preserve for not less than seven
years from Completion those of the books of account or other records in
any way relating to or concerning the business of the Company which are
not delivered to the Purchaser at Completion pursuant to the provisions of
clause 3.2(g) and to provide the Purchaser and the Company with reasonable
access thereto during normal working hours.
9.2 The Purchaser and the Company hereby undertake that they will afford to
the Vendor and its representatives upon reasonable notice and during
normal working hours reasonable access to such of the books and records of
the Company as are necessary to enable the Vendor to perform its
obligations hereunder.
9.3 The Vendor undertakes to the Purchaser that it will continue to provide
(or shall procure the continued provision of) the services set out in
Schedule 8 (the "Services") for the period set out therein upon the same
basis as they were rendered immediately prior to Completion (including as
to the cost to the Company of such Services), as if the Company was still
part of the Vendor's Group PROVIDED that the Vendor shall not be
considered in breach of its obligations hereunder to the extent that the
performance of any such obligation is prevented or delayed by any matter
beyond its control (other than as a result of its own negligence or wilful
default).
9.4 The Vendor undertakes to use its reasonable endeavours to assist the
Company in securing the grant to the Company in its own name of a licence
to use the software referred to in Schedule 11 without any additional
charge by the licensor (or in the event of any charge being levied to use
its reasonable endeavours to ensure that any additional charges are kept
to a minimum) on the same or similar terms as such software is currently
used by the Company and provided that for the avoidance of doubt, the
Vendor shall not be obliged to pay any such charges itself.
10. PENSIONS
The provisions of schedule 5 shall apply in relation to the Willis Faber
Pension Scheme.
11. ANNOUNCEMENTS
11.1 No party shall without the prior consent of the other party disclose the
making of
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<PAGE>
this agreement nor its terms (except those matters set out in the press
release in the agreed terms) and each party shall procure that each of its
Related Persons shall not make any such disclosure without the prior
consent of the other party unless disclosure is:-
(a) to its professional advisers; or
(b) required by law or the rules of the London Stock Exchange or other
regulatory body and disclosure shall then only be made by that
party:-
(i) after it has taken all such steps as may be reasonable in the
circumstances to agree the contents of such announcement with
the other party before making such announcement and provided
that any such announcement shall be made only after notice to
the other party/parties; and
(ii) only to the person or persons and in the manner required by
law or the London Stock Exchange or as otherwise agreed
between the parties
11.2 The restrictions contained in clause 11.1 shall apply without limit of
time and whether or not this agreement is terminated.
12. COSTS
12.1 Unless expressly otherwise provided in this agreement each of the parties
shall bear its own legal, accountancy and other costs, charges and
expenses connected with the sale and purchase of the Shares.
12.2 The Purchaser shall bear the costs of the stamp duty and any other taxes
payable in respect of the transfer of the Shares and the assets effected
by this agreement.
12.3 The Purchaser hereby warrants that no finders or agents fees are payable
in respect of this agreement and the transactions effected hereunder.
13. EFFECT OF COMPLETION
13.1 The terms of this agreement (insofar as not performed at Completion and
subject as specifically otherwise provided in this agreement) shall
continue in force after and notwithstanding Completion.
13.2 The remedies of the Purchaser in respect of any breach of any of the
Warranties shall continue to subsist notwithstanding Completion.
14. FURTHER ASSURANCES
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<PAGE>
14.1 Following Completion the Vendor shall from time to time forthwith upon
request from the Purchaser at the Vendor's expense do or procure the doing
of all acts and/or execute or procure the execution of all such documents
in a form reasonably satisfactory to the Purchaser for the purpose of
vesting in the Purchaser the full legal and beneficial title to the Shares
and the Assets.
14.2 As soon as practicable following Completion, the Vendor shall procure the
release of the Company from any guarantee or indemnity or other similar
obligation given or incurred by the Company in respect of or in relation
to any obligations of the Vendor or any member of the Vendor's Group and
pending such release shall keep the Company indemnified against any
liability cost claim or expense incurred or suffered by the Company after
Completion in respect of any such guarantee or indemnity or other similar
obligation.
15. ENTIRE AGREEMENT
15.1 Each party on behalf of itself and as agent for each of its Related
Persons acknowledges and agrees with the other party (each such party
acting on behalf of itself and as agent for each of its Related Persons)
that:-
(a) this agreement together with any other documents referred to in this
agreement (together the "Transaction Documents") constitute the
entire and only agreement between the parties and their respective
Related Persons relating to the subject matter of the Transaction
Documents;
(b) neither it nor any of its Related Persons have been induced to enter
into any Transaction Document in reliance upon, nor have they been
given, any warranty, representation, statement, assurance, covenant,
agreement, undertaking, indemnity or commitment of any nature
whatsoever other than as are expressly set out in the Transaction
Documents and, to the extent that any of them have been, it (acting
on behalf of itself and as agent on behalf of each of its Related
Persons) unconditionally and irrevocably waives any claims, rights
or remedies which any of them might otherwise have had in relation
thereto;
PROVIDED THAT the provisions of this clause 15 shall not exclude any
liability which any of the parties or, where appropriate, their Related
Persons would otherwise have to any other party or, where appropriate, to
any other party's Related Persons or any right which any of them may have
to rescind this agreement in respect of any statements made fraudulently
by any of them prior to the execution of this agreement or any rights
which any of them may have in respect of fraudulent concealment by any of
them.
16. VARIATIONS
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<PAGE>
This agreement may be varied only by a document signed by each of the
Vendor and the Purchaser.
17. WAIVER
17.1 A waiver of any term, provision or condition of, or consent granted under,
this agreement shall be effective only if given in writing and signed by
the waiving or consenting party and then only in the instance and for the
purpose for which it is given.
17.2 No failure or delay on the part of any party in exercising any right,
power or privilege under this agreement shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
17.3 No breach of any provision of this agreement shall be waived or discharged
except with the express written consent of the Vendor and the Purchaser.
17.4 The rights and remedies herein provided are cumulative with and not
exclusive of any rights or remedies provided by law.
18. INVALIDITY
18.1 If any provision of this agreement is or becomes invalid, illegal or
unenforceable in any respect under the law of any jurisdiction:-
(a) the validity, legality and enforceability under the law of that
jurisdiction of any other provision; and
(b) the validity, legality and enforceability under the law of any other
jurisdiction of that or any other provision,
shall not be affected or impaired in any way.
19. SET-OFF
The Purchaser shall be entitled to set off against the amounts payable to
the Vendor under this agreement, the amount of any Claim which at the time
the relevant payment is due is then outstanding against the Vendor. For
the purposes of this clause 19, a Claim shall be treated as outstanding
against the Vendor if it has been determined as payable by agreement
between the Vendor and the Purchaser, by way of settlement between the
Vendor and the Purchaser or as determined by a court of competent
jurisdiction from which there is no appeal or from whose judgment the
Vendor does not appeal within any applicable time limit.
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<PAGE>
20. NOTICES
20.1 Any notice, demand or other communication given or made under or in
connection with the matters contemplated by this agreement shall be in
writing and shall be delivered personally or sent by fax or prepaid first
class post (air mail if posted to or from a place outside the United
Kingdom):-
In the case of the Purchaser or the Company to:-
Address Lloyds Building, One Lime Street,
London EC3M 7DQ
Fax: 0171 283 0538
Attention: Company Secretary
In the case of the Vendor to:-
Address Ten Trinity Square, London EC3P 3AX
Fax: 0171 488 8034
Attention: Company Secretary
and shall be deemed to have been duly given or made as follows:-
(a) if personally delivered, upon delivery at the address of the
relevant party;
(b) if sent by first class post, two Business Days after the date of
posting;
(c) if sent by fax, when despatched;
provided that if, in accordance with the above provision, any such notice,
demand or other communication would otherwise be deemed to be given or
made outside 9.00 a.m. - 5.00 p.m. such notice, demand or other
communication shall be deemed to be given or made at 9.00 a.m. on the next
Business Day.
20.2 A party may notify the other party to this agreement of a change to its
name, relevant addressee, address or fax number for the purposes of clause
20.1 provided that such notification shall only be effective on:-
(a) the date specified in the notification as the date on which the
change is to take place; or
(b) if no date is specified or the date specified is less than five
Business Days after the date on which notice is given, the date
falling five Business Days after notice of any such change has been
given.
21. COUNTERPARTS
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<PAGE>
This agreement may be executed in any number of counterparts which
together shall constitute one agreement. Any party may enter into this
agreement by executing a counterpart and this agreement shall not take
effect until it has been executed by all parties.
22. GOVERNING LAW AND JURISDICTION
22.1 This agreement (and any dispute, proceedings or claim of whatever nature
arising out of or in any way relating to this agreement or its formation)
shall be governed by and construed in accordance with English law.
22.2 Each of the parties to this agreement irrevocably agrees that the courts
of England shall have exclusive jurisdiction to hear and decide any suit,
action or proceedings, and/or to settle any disputes, which may arise out
of or in connection with this agreement and, for these purposes, each
party irrevocably submits to the jurisdiction of the courts of England.
23. ASSIGNMENT
The Purchaser shall not be entitled to assign the benefit or burden of
this Agreement in whole or in part without the prior written consent of
the Vendor other than to another member of the Purchaser's Group to whom
the Shares are transferred PROVIDED THAT such assignment shall be on the
following terms:-
(a) the Purchaser shall procure that such member of the Purchaser's
Group agrees with the Vendor to be bound by all of the obligations
of the Purchaser under this Agreement; and
(b) such member of the Purchaser's Group shall cease to be entitled to
enforce the rights assigned to it under this Agreement upon such
member of the Purchaser's Group ceasing to be a member of the
Purchaser's Group provided that such member of the Purchaser's Group
shall be entitled to assign the benefit of the Warranties the Tax
Deed and the indemnity in Clause 6 to another member of the
Purchaser's Group prior to its so ceasing.
24. GENERAL PROVISIONS
24.1 The Purchaser shall have no right to rescind or terminate this Agreement
for any reason whatsoever (other than fraud) and the Purchaser's sole
remedy in respect of any claims under the Warranties and the Indemnity
contained in clause 6.2(a) shall be in damages subject to the limitations
contained in this Agreement.
24.2 If any amount required to be paid under this Agreement is not paid on the
due date, such amount shall bear interest at the rate of 3 per cent per
annum over
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<PAGE>
the base lending rate of Lloyd's Bank PLC from time to time calculated on
a daily basis for the period from the relevant due date for payment up to
and including the date of actual payment, as well after as before any
judgment.
IN WITNESS whereof this agreement has been executed on behalf of the parties on
the date first above written.
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<PAGE>
SCHEDULE 1
Particulars relating to the Company
Authorised share capital: 4,000 "A" Ordinary Shares of (pound)1
496,000 "B" Ordinary Shares of (pound)1
Issued share 4,000 "A" Ordinary Shares of (pound)1
capital: 496,000 "B" Ordinary Shares of (pound)1
Directors: J M Sinclair
A Rayner
A M Davidson
J C Parkinson
C Hulbert-Powell
J N W Wooderson
N de Rivaz
A G Cooper
Sir Stephen Waley-Cohen
Secretary: A. Rayner
Auditors: Ernst & Young
Accounting reference date: 31 December
Registered Office: Ten Trinity Square, London EC3P 3AX
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<PAGE>
SCHEDULE 2
Profit Commission Determination
Part 1
Consideration for the Shares
The consideration for the sale and purchase of the Shares shall be the aggregate
of the following amounts which shall be payable in accordance with the
provisions of part 2 of this Schedule 2:-
(a) (pound)1;
(b) an amount equal to the 1994 and Prior Years Profit Commission to the
extent only that it exceeds the sum of (pound)4,595,000
(c) an amount equal to the 1995 Profit Commission;
(d) an amount equal to the 1996 Profit Commission;
(e) an amount equal to 50% of the 1997 Profit Commission.
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<PAGE>
Part 2
Payment of the Consideration
1. The sum of (pound)1 referred to in paragraph (a) of Part 1 of this
Schedule 2 shall be paid on Completion.
2. In respect of the amounts payable to the Vendor referred to in paragraphs
(c) to (e) (inclusive) of Part 1 of this Schedule 2, the Purchaser shall
provide to the Vendor on 30 June in each year an estimate of the amount
which is expected to be paid to the Vendor in accordance with the terms of
this Agreement, which estimate shall not be binding on the Purchaser.
3. The following provisions shall apply to the payment by the Purchaser to
the Vendor of each of the amounts referred to in paragraphs (b) to (d)
inclusive of Part 1 of this Schedule 2 (each a "Relevant Amount"):-
(a) individual amounts received by the Company which form part of the
Relevant Amounts which in the aggregate from time to time exceed
(pound)50,000 shall be paid by the Purchaser to the Vendor as
follows:-
(i) 75% of the amount received shall be paid within 15 days of the
end of the month in which the aggregate amount was received
and exceeded (pound)50,000; and
(ii) 25% of the amount received shall be paid on the first
anniversary of the date on which 75% of the payment was made
in accordance with paragraph 3(a)(i) above.
(b) individual amounts which in the aggregate from time to time are less
than (pound)50,000 received by the Company which form part of the
Relevant Amount shall be paid by the Purchaser to the Vendor as
follows:-
(i) 75% of the amount received shall be paid within 15 days of the
end of the quarter in which the aggregate amount was received
(the first quarter in each year to be for the three month
period ending on 30th September); and
(ii) 25% of the amount received shall be paid on the first
anniversary of the date on which 75% of the payment was made
in accordance with paragraph 3(b)(i) above.
4. The following provisions shall apply to the payment by the Purchaser to
the Vendor of the amount referred to in paragraph (e) of part 1 of this
Schedule 2:-
(a) individual amounts which in the aggregate from time to time exceed
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<PAGE>
(pound)50,000 received by the Company in respect of such amount
shall be paid within 15 days of the end of the month in which the
aggregate amount was received and exceeded (pound)50,000; and
(b) individual amounts which in the aggregate from time to time are less
than (pound)50,000 received by the Company in respect of such amount
shall be paid within 15 days of the end of the quarter in which the
aggregate amount was received (the first quarter to be for the three
month period ending on 30th September).
5. All payments made by the Purchaser to the Vendor pursuant to paragraph 3
and 4 above shall be accompanied by a written statement giving a breakdown
of the payments and indicating the year to which each payment relates.
6. The Purchaser and the Company hereby undertake that they shall afford to
the Vendor and its representatives and advisers upon reasonable notice
during normal business hours reasonable access to (and the right to take
copies of) such books and records as are necessary to enable the Vendor to
verify the calculation of the profit commission received by the Company
which is payable to the Vendor pursuant to the terms of this Agreement and
the Purchaser and the Company further undertake to preserve all such books
and records until 31 December 2012.
7. If at any time the Vendor and the Purchaser are in disagreement about the
calculation of the profit commission payable to the Vendor pursuant to the
terms of this Agreement, then in default of agreement by them within
fourteen days of a disagreement being notified by one party to the other,
the matter shall be referred to an independent accountant or firm of
accountants agreed between the parties, or in default of agreement
nominated on the application of either the Vendor or the Purchaser by the
President for the time being of the Institute of Chartered Accountants in
England and Wales who shall act as an expert and not as an arbitrator. The
decision of such expert shall, in the absence of fraud or manifest error,
be final and binding on the Vendor and the Purchaser. The Vendor and the
Purchaser shall each pay one half of such expert's costs in respect of a
reference.
8. The Purchaser and the Company hereby undertake to use their respective
reasonable endeavours to collect all amounts comprised in the 1994 and
Prior Years Profit Commission, the 1995 Profit Commission, the 1996 Profit
Commission and the 1997 Profit Commission.
1.
SCHEDULE 3
The Warranties
Any Warranty expressed to be given "to the best of the Vendor's knowledge and
belief"
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<PAGE>
or "so far as the Vendor is aware" or otherwise qualified by reference to the
knowledge of the Vendor shall not be qualified in the manner stated unless the
Vendor establishes that it has made all reasonable enquiries of the executive
directors of the Company and of Heather Thomas, Michael Chitty, Douglas Paul,
Alasdair Forman, David Roberts and Byron Jones to establish the truth and
accuracy of that Warranty.
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<PAGE>
1. VENDOR'S CAPACITY
1.1 Authorisations
The Vendor has obtained all corporate authorisations and all other
applicable governmental, statutory, regulatory or other consents,
licences, waivers or exemptions required to empower it to enter into and
to perform its obligations under this agreement and each document to be
executed by it at or before Completion.
1.2 Proper Execution
The Vendor's obligations under this agreement and each document to be
executed at or before Completion are or when the relevant document is
executed, will be enforceable in accordance with their terms.
2. THE COMPANY, THE SHARES AND THE SUBSIDIARIES
2.1 Incorporation and Existence
The Company is a limited company incorporated under English law and has
been in continuous existence since incorporation.
2.2 The Shares
(a) The Vendor is the only legal and beneficial owner of the Shares.
(b) The Company has not allotted any shares other than the Shares
(details of which are set out in Schedule 1) and the Shares are
fully paid or credited as fully paid.
(c) There is no Encumbrance in relation to any of the Shares or unissued
shares in the capital of the Company. No person has claimed to be
entitled to an Encumbrance in relation to any of the Shares and no
party (other than the Vendor pursuant to this Agreement) is under
any obligation (whether actual or contingent) to sell, charge or
otherwise dispose of any of the Shares or any interest therein to
any person.
(d) Other than this agreement, there is no agreement, arrangement or
obligation requiring the creation, allotment, issue, sale, transfer,
redemption or repayment of, or the grant to a person of the right
(conditional or not) to require the allotment, issue, sale,
transfer, redemption or repayment of, a share in the capital of the
Company (including an option or right of pre-emption or conversion).
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2.3 Subsidiaries
(a) The Company does not have any subsidiary undertakings.
(b) The Company does not own any shares or stock in the capital of nor
does it have any beneficial or other interest in any company or
business organisation, nor does the Company control or take part in
the management of any other company or business organisation.
3. ACCOUNTING MATTERS
3.1 The Accounts
(a) The Accounts comply with the provisions of the Companies Act 1985 as
applicable and have been prepared in accordance with the
requirements of all relevant statutes and with generally accepted
accounting principles and practices and are true and accurate in all
respects so far as they are stated to be facts and not estimates and
accordingly give a true and fair view of all the assets and
liabilities (whether present or future, actual or contingent) and of
the state of affairs, financial position and results of the Company
as at and up to the Accounts Date and, without prejudice to the
generality of the foregoing, the Accounts:-
(i) make full provision or reserve for depreciation, bad or
doubtful debts and other actual liabilities;
(ii) either make full provision or reserve for or make fair
disclosure in notes of all contingent, postponed or deferred
liabilities (including in relation to Tax);
(iii) do not overvalue assets or understate liabilities; and
(iv) have not (save as disclosed in the Accounts) been affected by
any extraordinary, exceptional or non-recurring item or by any
other fact or circumstance rendering the profits or losses for
the relevant period unusually high or low.
(b) The Accounts have been prepared in accordance with the law and
applicable standards, principles and practices generally accepted in
the United Kingdom consistently applied.
(c) The Accounts have been prepared on a basis consistent with the basis
upon which all audited accounts of the Company have been prepared in
respect of the three years before the Accounts Date.
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3.2 Balance Sheet
The balance sheet of the Company as at 30 June 1997 and which is set out
in Schedule 7:
(a) has been prepared in accordance with the law and applicable
standards, principles and practices generally accepted in the United
Kingdom consistently applied;
(b) has been prepared on a basis consistent with the basis upon which
all audited accounts of the Company have been prepared in respect of
the three years before the Accounts Date;
(c) was not (save as disclosed therein) affected by any extraordinary,
exceptional or non-recurring item; and
(d) is true and accurate in providing that the net assets of the Company
as at 30 June 1997, after payment of the Pre-Sale Dividend, were not
less than (pound)2,450,000.
3.3 Records
All deeds and documents (properly stamped where stamping is necessary for
enforcement thereof) belonging to the Company or which ought to be in the
possession of the Company are in the possession of the Company.
4. CHANGES SINCE THE ACCOUNTS DATE
So far as the Vendor is aware since the Accounts Date:-
(a) the Company has not declared, paid or made a dividend or other
distribution (including a distribution within the meaning of the TA)
except to the extent provided in the Accounts and save for the
Pre-Sale Dividend;
(b) no resolution of the shareholders of the Company has been passed;
(c) the Company has not repaid or redeemed share or loan capital, or
made (whether or not subject to conditions) an agreement or
arrangement or undertaken an obligation to do any of those things;
(d) the Company has not (save to the extent required pursuant to this
agreement) repaid any sum in the nature of borrowings in advance of
any due date or made any loan or incurred any indebtedness
(including in each case inter group); and
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(e) the Company has not paid nor is under an obligation to pay any
service, management or similar charges or any interest or amount in
the nature of interest to any member of the Vendor's Group person or
incurred any liability to make such a payment or made any payment to
any member of the Vendor's Group whatsoever (save as disclosed in
the Company's monthly management accounts in the months January to
September 1997).
5. ASSETS
5.1 Title and Condition
(a) There are no Encumbrances, nor has the Company agreed to create any
Encumbrances, over any part of its undertaking or assets (including
the assets listed in Schedule 6).
(b) Save for the benefit of those assets, contracts and rights made by
or with the Vendor's Group (which the Company will cease to enjoy
from Completion) the Company is the absolute owner of the assets
used in its business save for any held under hire purchase or lease
agreements which are disclosed in the Disclosure Letter.
5.2 Confidential Agreements
Other than in respect of the Company's normal duty of confidentiality to
its principals no member of the Vendor's Group has entered into any
confidentiality or other agreement or is subject to any duty which
restricts the free use or disclosure of any information used in the
business of the Company.
6. EFFECT OF SALE
6.1 Neither the execution nor performance of this agreement or any document to
be executed at or before Completion pursuant to it will, so far as the
Vendor is aware:-
(a) result in the termination of any agreement to which the Company is a
party; or
(b) result in the loss of any rights in either case which are material
to the conduct of its business (other than the benefit of agreements
and rights made by or with the Vendor's Group which the Company will
cease to enjoy from Completion and which are disclosed in the
Disclosure Letter); or
(c) entitle a person properly to terminate, or be relieved from an
obligation under, an agreement, arrangement or obligation to which
the Company is
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a party.
7. INSURANCE
7.1 Policies
The Disclosure Letter contains:
(a) a list of each current insurance and indemnity policy in respect of
which the Company has an interest (together the "Policies"). Each of
the Policies is valid and enforceable and is not void or voidable.
There are no circumstances which might make any of the Policies void
or voidable or lead any claim under the Policies to be avoided by
the insurers;
(b) details of outstanding claims by the Company under the Policies.
7.2 The Company has at all material times been and is at the date of this
agreement insured against accident, damage, injury, third party loss
(including product liability), loss of profits and any other risk normally
insured against by a prudent person operating the types of business
operated by the Company and has at all times effected such insurances as
required by law.
8. CONTRACTS WITH CONNECTED PERSONS
There is, and during the three years ending on the date of this agreement there
has been, no agreement or arrangement (legally enforceable or not) to
which the Company is or was a party and in which any member of the
Vendor's Group, a director or former director of any member of the
Vendor's Group or a person connected with any of them is or was interested
in any way (other than underwriting at Lloyd's). The Company does not owe
any sum to the Vendor or any of its connected persons other than in
connection with the supply of services in accordance with and on the basis
that such services have been rendered up to the date of Completion.
9. INFORMATION TECHNOLOGY
9.1 Systems
All computer systems, excluding software, used in the business of the
Company are owned and operated by and are under the control of the Company
and are not wholly or partly dependent on any facilities which are not
under the ownership, operation or control of the Company.
9.2 Software
The Disclosure Letter contains details of the Software used by the Company
in
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its business.
10. LIABILITIES - GUARANTEES AND INDEMNITIES
The Company is not a party to and is not liable (including contingently)
under a guarantee, indemnity or other agreement to secure or incur a
financial or other obligation with respect to another person's obligation.
No part of the loan capital, borrowing or indebtedness in the nature of
borrowing of the Company is dependent on the guarantee or indemnity of, or
security provided by, another person.
11. INSOLVENCY
No order has been made, petition presented or resolution passed for the
winding up of the Company or for the appointment of a provisional
liquidator to the Company.
12. BROKERAGE OR COMMISSIONS
No person is entitled to receive from the Company a finder's fee,
brokerage or commission in connection with this agreement or anything in
it and the Company is not liable to pay to any of its directors,
employees, agents and advisers any sum whatsoever in connection with the
sale of the Shares.
13. DIRECTORS AND EMPLOYEES
The particulars annexed to the Disclosure Letter show the names, job
title, date of commencement of employment, date of birth, period of
continuous employment (calculated in accordance with chapter 1 of part XIV
of the ERA), identity of the employing company, salary and benefits of
every person employed in the business of the company and no-one so
employed has been omitted.
14. PROPERTY
14.1 The Property comprises all the freehold and leasehold land owned, used or
occupied by and all the rights vested in the Company and all agreements
whereby the Company has any financial entitlement relating to any land at
the date hereof.
14.2 No Other Liabilities
The Company has no actual or contingent obligations or liabilities (in any
capacity including as principal contracting party or guarantor) in
relation to any lease, licence or other interest in, or agreement relating
to, land apart from the Property.
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14.3 Accuracy of Information
The information in the replies to enquiries and the letters (together with
the enclosures thereto) set out in Documents 17 and 18 annexed to the
Disclosure Letter is true and accurate and the Vendor is not aware of any
fact, matter or thing which has not been disclosed to the Purchaser or the
Purchaser's Solicitors which makes any such information untrue or
misleading at the date of this agreement.
15. PENSIONS
15.1 Full and accurate details of all superannuation, pension, life assurance,
death benefit, sickness or accident benefit schemes or arrangements in
respect of which the Company has or may have any liability to contribute
or an obligation to any of its past or present officers or employees or
their dependants are contained in the Disclosure Letter and save for the
schemes or arrangements therein disclosed the Company has no such
liabilities or obligations whether legally binding or not.
15.2 The Company is not making or has not regularly made or proposed to make
and will not before Completion make any voluntary ex gratia payments to
any employee or former employee or to any spouse, child or dependant of
any of them.
15.3 As regards each of the retirement benefits schemes (as defined in Section
611 of the Income and Corporation Taxes Act 1988) referred to in the
Disclosure Letter:
(a) full and accurate details of the scheme have been disclosed,
including (without limitation) copies of the current trust deeds and
rules, booklets or announcements to members;
(b) the identities of those of the employees of the Company who are
members of the scheme are included in the Disclosure Letter and no
other employees of the Company are members of the scheme;
(c) the scheme is an exempt approved scheme within the meaning of
Section 592 of the Income and Corporation Taxes Act 1988 and there
is no reason why such approval may be withdrawn;
(d) if the scheme is a contracted-out scheme within the meaning of the
Pension Schemes Act 1993, there is in force a contracting-out
certificate covering the Company and so far as the Vendor is aware
there are no circumstances which might cause such certificate to be
withdrawn or cease to apply;
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(e) all insurance premiums and contributions due to be paid in respect
of the scheme by the Company or the trustees of the scheme have been
duly paid;
(f) where any power under the scheme to provide additional benefits has
been exercised in relation to any employee or officer of the
Company, full and accurate details of those additional benefits have
been disclosed;
(g) so far as the Vendor is aware no legal proceedings, complaints to
the Pensions Ombudsman or complaints under the scheme's Internal
Dispute Resolution Procedure in connection with the scheme are
pending or threatened and, so far as the Vendor is aware (having
made due and careful enquiry), there is no fact or circumstance
likely to give rise to any such proceedings or complaints.
So far as the Vendor is aware:
(h) the scheme has at all times been administered in accordance with the
trusts powers and provisions of its governing documentation and has
been administered in accordance with and complies with all
applicable legislation and the general requirements of trust law;
(i) since the date of the last actuarial valuation of the scheme no
power or discretion has been exercised to augment or improve any
benefit thereunder of or in respect of any employee or former
employee of the Company nor any promise or announcement made to do
so;
(j) every employee or former employee of the Company who is or was
entitled to membership of the scheme has been invited to join as at
the date on which he became so entitled.
15.4 So far as the Vendor is aware no undertaking or assurance has been given
by the Company to any of its employees or former employees as to the
continuance, introduction, increase or improvement of any relevant benefit
(as defined in Section 612 of the Income and Corporation Taxes Act 1988).
16. TAXATION
16.1 Returns
The Company has made all returns and supplied all information and given
all notices to the Inland Revenue or other Taxation Authority as
reasonably requested or required by law within any requisite period and
all such returns and information and notices are correct and accurate in
all material respects and are not the subject of any dispute and, so far
as the Vendor is aware, there are no facts or circumstances likely to give
rise to or be the subject of any such dispute.
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16.2 Payment of Tax
The Company has duly and punctually paid all Tax to the extent that the
same ought to have been paid and is not liable nor has it within three
years prior to the date hereof been liable to pay any penalty or interest
in connection therewith.
16.3 Pay As You Earn
The Company has properly operated the PAYE system deducting Tax as
required by law from all payments to or treated as made to or benefits
provided for employees, ex-employees or independent contractors of the
Company (including any such payments within section 134 of the TA) and
duly accounted to the Inland Revenue for Tax so deducted and has complied
with all its reporting obligations to the Inland Revenue in connection
with any such payments made or benefits provided, and no PAYE audit in
respect of the Company has been made by the Inland Revenue nor has the
Company been notified that any such audit will be made.
16.4 Secondary Liability
No transaction or event has occurred in consequence of which the Company
is or may be held liable for any Tax or deprived of relief or allowances
otherwise available to it in consequence of any Tax or may otherwise be
held liable for or to indemnify any person in respect of any Tax, where
some other company or person is or may become primarily liable for the Tax
in question (whether by reason of any such other company being or having
been a member of the same group of companies or otherwise).
16.5 Withholding of Tax and Agency for Non-Residents
The Company is not and has not been assessable to Tax by virtue of section
78 of the TMA or sections 42A or 43 of the TA, or section 126 of the FA
1995.
16.6 Intra-Group Transfers
The Company has not acquired any asset other than trading stock from any
other company belonging at the time of acquisition to the same group of
companies as the Company within the meaning of section 170 of the TCGA and
no member of any group of companies of which the Company is or has at any
material time been the principal company (as defined in section 170(2)(b)
of the TCGA) has so acquired any asset.
16.7 Group Relief and Consortium Relief
The Disclosure Letter contains particulars of all arrangements relating to
relief under sections 402-413 of the TA ("group relief") to which the
Company is or
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has been a party and:-
(a) all claims by the Company for such relief were when made and are now
valid;
(b) the Company has not made nor is liable to make any payment for group
relief otherwise than in consideration for the surrender of group
relief allowable to the Company by way of relief from corporation
tax;
(c) the Company has received all payments due to it under any
arrangement or agreement for surrender of group relief by it for
periods prior to the Accounts Date;
(d) no such payment exceeds or could exceed the amount permitted by
section 402(6) of the TA;
(e) there exist or existed for any period of account in respect of which
a surrender has been made or purports to have been made no
arrangements such as are specified in section 410(1)-(6) of the TA.
16.8 Advance Corporation Tax
The Disclosure Letter contains particulars of all arrangements for the
surrender under section 240 of the TA of any amount of advance corporation
tax and in respect of receipts and surrenders disclosed:-
(a) the Company has not paid nor is liable to pay for the benefit of any
advance corporation tax which is or may become incapable of set off
against the Company's liability to corporation tax;
(b) the Company has received all payments due to it for all surrenders
or purported surrenders of advance corporation tax made by it;
(c) no such payment exceeds or could exceed the amount permitted by
section 240(8) of the TA; and
(d) there exist or existed for any period in respect of which a claim
under section 240 of the TA has been or is to be made no
arrangements such as are specified in sub-section (11) of that
section whereby any person could obtain control of the Company or of
any subsidiary to which such surrender purports or is purported to
be made
16.9 Value Added Tax
(a) The Company is a registered taxable person for the purpose of the
VATA and all regulations and orders made thereunder (the "VAT
legislation")
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and is included as a member of a group of companies the
representative member of which is Willis Faber & Dumas Limited for
such purpose.
(b) No circumstances exist whereby the Company would or might become
liable for value added tax as an agent or otherwise by virtue of
section 47 of the VATA.
(c) The Company has complied in all respects with the requirements and
provisions of the VAT legislation and has made and maintained and
will pending completion make and maintain accurate and up to date
records invoices accounts and other documents required by or
necessary for the purposes of the VAT legislation and the Company
and/or the representative member has at all times punctually paid
and made all payments and returns required thereunder insofar as
these relate to the Company.
(d) The Company has not made any exempt supplies in consequence of which
it is or will be unable to obtain credit for all input tax paid by
it during any VAT quarter ending after the Accounts Date.
16.10 Stamp Duty
All documents in the enforcement of which the Company is or may be
interested have been duly stamped and since the Accounts Date the Company
has not been a party to any transaction whereby the Company was or is or
could become liable to stamp duty reserve tax.
17. INFORMATION
The information set out in Schedules 1 and 4 Part I is complete accurate
and not misleading.
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SCHEDULE 4
PART I
The Property
Address: Rooms 701-723 and 708-720, forming part of Gallery 7 of
the building known as Lloyd's, 1 Lime Street in the City
of London
Tenure: Leasehold for twenty five years from 29th September 1986
Description: Office accommodation as described above
Mortgages or Charges: None
Leases. The premises are held under a lease made the 15th
October 1987 between Lloyds (1) and Willis Faber PLC
(2). The Property is not subject to any sub-leases or
tenancies.
Use: Offices
SCHEDULE 4
PART II
1. The Vendor shall on Completion or (if later) within five working days
after the Consent referred to in clause 2.1 below has been obtained assign
to the Company its leasehold interest in the Property. Such assignment is
referred to below as "the Assignment".
2.1 Completion of the Assignment is conditional on the consent ("the Consent")
of the Vendor's landlord ("the Landlord") being obtained to the assignment
of the Lease by the Vendor to the Company.
2.2 The Vendor will as soon as practicable apply at its own expense for and
use all
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reasonable endeavours to obtain the Consent.
2.3 The Company shall fully and promptly:
- supply all such references accounts and information as the Landlord
may reasonably require in considering whether to grant the Consent
- comply with the Landlord's lawful and reasonable requirements in
relation to the granting of the Consent including if applicable the
provision of guarantees and
- sign or execute the Consent within three working days of any
engrossment of the same in agreed form being submitted to it or its
solicitors
3. If the Consent has not been obtained by the date twelve months after
Completion either party may (having itself fulfilled its own obligations
under clause 2 above) rescind the provisions of this Schedule by serving
written notice in that behalf on the other
4. If the Consent has not been obtained by Completion the Company is hereby
authorised by the Vendor to take up occupation of the Property from
Completion until completion of the Assignment subject to the following
conditions:
- the Company will occupy the Property only as licensee without any
tenancy or lease being created or security of tenure being obtained;
- the Company shall pay to the Vendor a licence fee at the same annual
rent and on the same dates and in the same manner as the rents
service charges and other costs payable under the Lease of the
Property; and
- the Company shall perform and observe the covenants and conditions
contained in the lease of the Property and will not knowingly do or
permit anything which would be a breach of the said lease and will
indemnify the Vendor against any breach thereof
5. If the Company fails to pay any licence fee in respect of the Property
before completion of the Assignment or materially breaches any of the
covenants agreements and conditions contained in the said lease and/or in
this Agreement and such failure or event has not been remedied within five
working days from receipt by the Company of a notice from the Vendor
pointing out such default then the Vendor may terminate the provisions of
this Schedule and the licence contained in clause 4 above by serving
written notice in that behalf on the Company and such termination shall be
without prejudice to any accrued rights of action of either party up to
that time
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6. The licence to occupy the Property referred to in clause 4 above shall
expire on the earliest of the following:
- completion of the Assignment
- the date these terms and conditions are rescinded or terminated
- twenty working days after the Vendor notifies the Company that the
Landlord has lawfully refused to grant consent to the relevant
Assignment and/or requires the Company to vacate the Property
7. Upon the expiry of the licence set out in clause 4 above the Company shall
vacate the Property forthwith.
8.1 It is the intention of the parties that the Purchaser and/or the Company
will bear all costs relating to the Property with effect from the date
hereof.
8.2 If the licence referred to in paragraph 4 above terminates without the
Assignment being completed simultaneously, the Company will reimburse to
the Vendor within 14 days of demand all sums and expenses properly paid or
incurred by the Vendor in respect of the Property and/or pursuant to the
lease of the Property, including (without prejudice to the generality of
the foregoing) rent, service charge, insurance premiums, rates, the costs
of repairs and decorations, the costs of power, fuel, water and other
services consumed at the Property.
8.3 If the Landlord has refused consent to the lease of the Property being
assigned to the Purchaser or the Company, the Vendor will (unless
requested not to do so by the Company) use its reasonable endeavours to
find an assignee for the Property which will include the employment by the
Vendor of agents to market the Property in such situation.
8.4 The Company's obligations under this paragraph 8 will cease (though
without prejudice to the rights of either party arising before or in
relation to a period before such cesser) when the first of the following
occurs:
- - the lease of the Property determines
- the lease of the Property is assigned to a person, firm or company
which is not a member of the Willis Corroon Group plc group of
companies
8.5 The Purchaser hereby covenants with the Vendor that the Company will
perform its obligations under this paragraph 8, and that the Purchaser
will indemnify the Vendor against all costs, expenses, damage and
liability paid or incurred by the Vendor as a result of any breach or
non-observance by the Company of its
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obligations under this paragraph 8.
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SCHEDULE 5
Pensions
1. DEFINITIONS
1.1 In this Schedule the following expressions shall, unless the context
otherwise requires, have the following meanings:
"Actuary" means a person who is a Fellow of the Institute of Actuaries or
a Fellow of the Faculty of Actuaries in Scotland.
"Actuary's Letter" means the letter from the Vendor's Actuary to the
Purchaser's Actuary relating to this Schedule, a copy of which is annexed
as the Appendix.
"Appendix" means an appendix to this Schedule.
"Consenting Members" means those Member Employees who are in active
pensionable service under the Vendor's Scheme immediately before the
Pension Transfer Date and who join the Purchaser's Scheme on the Pension
Transfer Date and who have consented to the payment of a transfer amount
from the Vendor's Scheme to the Purchaser's Scheme as mentioned in
Paragraph 6.1 and "Consenting Member" shall be construed accordingly.
"Company" means Willis Faber & Dumas (Agencies) Limited.
"contracted-out scheme", "contracting-out certificate", "contracted-out
employment" have the same meanings as in the Pension Schemes Act 1993.
"Employees" means those persons who were employees of the Company at
Completion.
"exempt approved scheme" has the meaning as in Chapter 1 of Part XIV of
the Income and Corporation Taxes Act 1988 and "exempt approved" shall be
construed accordingly.
"Investment Adjustment" means the Investment Adjustment set out in the
Actuary's Letter.
"Life Cover Employees" means such of the Employees who as at Completion
were covered for benefits under Rule 1.4 of the Rules of the Vendor's
Scheme (for such period only as they remain employed by the Purchaser) but
are not Member Employees.
"Member Employees" means such of the Employees who were in active
pensionable service under the Vendor's Scheme at Completion (for such
period only as they
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remain in acive pensionable service).
"Paragraph" means a paragraph of this Schedule.
"Payment Date" means the date which is 30 days after the latest of:
(a) the Pension Transfer Date;
(b) the date on which the Vendor's Actuary and the Purchaser's Actuary
agree the exact amount of the Transfer Amount pursuant to Paragraph
9; and
(c) the date on which the consent of the Inland Revenue is obtained to
the payment of the Transfer Amount.
"Pension Transfer Date" means the date falling six calendar months after
Completion or such other date as is agreed in writing between the
Purchaser and the Vendor.
"Purchaser's Actuary" means such Actuary as is nominated by the Purchaser
for the purpose of this Schedule.
"Purchaser's Scheme" means the retirement benefits scheme or schemes to be
established or nominated in accordance with Paragraph 5.1 and which will
accept an offer of the Transfer Amount. Where the context requires,
"Purchaser's Scheme" includes the trustees thereof.
"Relevant Amount" means such amount as represents the value at Completion
of the benefits under the Vendor's Scheme in respect of the Member
Employees at Completion (other than lump sum benefits in respect of death
in service or which are based on additional voluntary contributions) on
the basis of pensionable service (including all added pensionable service
credited at or accrued to Completion under the Vendor's Scheme) up to and
pensionable earnings at Completion, such liabilities and amount to be
calculated in accordance with the Actuary's Letter.
The Relevant Amount will be adjusted by the addition of an amount by which
the contributions (other than additional voluntary contributions) made to
the Vendor's Scheme in accordance with Paragraph 4 exceeds the cost of
death in service benefits and administration expenses as set out in that
Paragraph. The Relevant Amount will be calculated in accordance with
Paragraph 7.
"Transfer Amount" has the meaning given thereto in Paragraph 9.
"Transitional Period" means the period from and including Completion up to
but excluding the Pension Transfer Date.
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"Vendor's Actuary" means an Actuary of Buck Consultants Limited, Ten
Trinity Square, London EC3P 3AX.
"Vendor's Scheme" means the Vendor's Scheme described in the Actuary's
Letter.
References to the Vendor's Scheme shall where the context requires include
the trustee thereof.
2. THE TRANSITIONAL PERIOD
2.1 Subject to the approval of the Inland Revenue the Vendor shall use its
best endeavours to procure that the Company may continue to participate in
the Vendor's Scheme as an Employer (as defined in the Trust Deed of the
Vendor's Scheme) up to the Pension Transfer Date but on terms that the
Vendor may in its discretion exercise any powers and give any consents on
behalf of the Company where those powers or consents arise under the
Pensions Act 1995.
2.2 The Vendor undertakes:
(a) to procure that no improvement in benefits or change in the
percentage rate of member's contributions or in the type of earnings
on which such contributions are paid which may be made under the
Vendor's Scheme during the Transitional Period will apply to the
Member Employees unless the Purchaser gives its prior written
consent or such action is necessary in order to comply with the law
or to avoid prejudice to Inland Revenue approval or its
contracted-out status;
(b) that it will not take any action which would cause the Vendor's
Scheme to terminate or to be wound up in relation to Member
Employees;
(c) that it will not exercise any power under the Vendor's Scheme in a
manner which could affect the benefits of the Member Employees or
the Transfer Amount or in any manner which could or might impose or
increase any obligation on or liability of the Purchaser without the
written consent of the Purchaser;
(d) that it will provide such information as the Purchaser reasonably
requests so that the provisions of this paragraph 2.2 are observed.
2.3 The Purchaser hereby undertakes to the Vendor (both for itself and for the
trustee of the Vendor's Scheme) that during the Transitional Period it
will procure that the Company will insofar as it is able without
contravening the requirements of the Inland Revenue:
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(a) participate in the Vendor's Scheme in respect of the Member
Employees and the Life Cover Employees and will in respect of such
persons promptly pay its contributions and remit member's
contributions calculated in accordance with Paragraph 4.1 to the
Vendor's Scheme;
(b) comply in all other material respects with the provisions of the
Vendor's Scheme;
(c) not exercise any powers or discretions which may be available to it
as an Employer under the Vendor's Scheme without the written consent
of the Vendor (which consent shall not be unreasonably withheld);
(d) not increase the remuneration of any of the Member Employees or the
Life Cover Employees which counts for benefits under the Vendor's
Scheme by more than 5% or if less the yearly change in the last
published Retail Prices Index;
(e) not promote any Member Employee to Grade 11 or above;
(f) not do or omit to do any act or thing which would or might lead to
the approval of the Vendor's Scheme as an exempt approved scheme, or
as a contracted-out scheme, being prejudiced; and
(g) promptly deliver to the Vendor and the Vendor's Actuary drafts
before they are issued and copies once they are issued of all
notices and announcements relating to the Vendor's Scheme supplied
to the Member Employees before the Pension Transfer Date. No such
documents will be issued without the prior consent of the Vendor
which will not be unreasonably withheld.
3. Contracting-out
3.1 The Purchaser shall make such elections, issue announcements and execute
such documents as may be necessary to procure that the Member Employees
continue to be in contracted-out employment by reference to the Vendor's
Scheme throughout the Transitional Period.
3.2 The Purchaser shall give notice of intention in accordance with the
Occupational Pension Schemes (Contracting-out) Regulations 1996 in good
time to ensure that the Company shall be deleted from the contracting-out
certificate relating to the Vendor's Scheme with effect from the Pension
Transfer Date, and the Vendor will use its best endeavours to procure the
deletion of the Company from the contracting-out certificate with effect
from the same date.
4. Contributions during Transitional Period
- 54 -
<PAGE>
The Purchaser shall during the Transitional Period on a monthly basis
promptly pay or collect and remit (as appropriate) to or to the order of
the Vendor's Scheme the following amounts in respect of each Member
Employee who continues to participate in the Vendor's Scheme:
(a) Members Grade 10 and below pre 1.1.95 joiners
13.5% of basic salaries, of which 3.5% represents the cost of death in
service benefits and administration expenses.
(b) Members Grade 10 and below post 31.12.94 joiners
13.5% of basic salaries (including members' contributions), of which 3.5%
represents the cost of death in service benefits and administration
expenses.
- 55 -
<PAGE>
(c) Members Grade 11 and above
23% of basic salaries, of which 3.5% represents the cost of death in
service benefits and administration expenses.
(d) Life Cover Employees
0.8% of basic salaries, the whole amount of which represents the cost of
death in service benefits and administration expenses.
(e) Additional Voluntary Contributions
The Purchaser will also pay to the Vendor's Scheme any additional
voluntary contributions which relate to a Member.
5. The Purchaser's Undertakings
5.1 The Purchaser undertakes with the Vendor (both for itself and for the
trustee of the Vendor's Scheme) that before the Pension Transfer Date it
will establish or nominate in writing a retirement benefit scheme or
schemes which at both the Pension Transfer Date and the Payment Date will:
(a) be an exempt approved scheme or capable of being exempt approved;
(b) apply that part of the Transfer Amount (and any Investment
Adjustment) which relates to each Consenting Member wholly and
exclusively for the benefit of that Consenting Member and those
claiming under him;
(c) credit any sum in respect of additional voluntary contributions
transferred under Paragraph 11 as such under the terms of the
Purchaser's Scheme to the appropriate Consenting Member.
5.2 The Purchaser hereby undertakes to the Vendor (both for itself and for the
trustee of the Vendor's Scheme) that:
(a) it and the trustees of the Purchaser's Scheme will use all
reasonable endeavours to obtain in relation to the Purchaser's
Scheme the approval of the Inland Revenue under Chapter I of Part
XIV of the Income and Corporation Taxes Act 1988 (if not already
obtained);
(b) subject to payment of the Transfer Amount (adjusted by the
Investment Adjustment if appropriate) in accordance with Paragraph
10 below, the Purchaser will procure that:
(i) if the Purchaser's Scheme provides benefits which are of a
final
- 56 -
<PAGE>
salary type, the Purchaser's Scheme will provide for and in
respect of each Consenting Member benefits in respect of
pensionable service credited or completed in the Vendor's
Scheme before the Pension Transfer Date which are no less
favourable overall than the benefits that would have been
provided for and in respect of him under the Vendor's Scheme
in respect of that pensionable service if he remained in
active pensionable service as a member of the Vendor's Scheme
up to the date on which he ceases to be an employee of the
Company.
(ii) if the Purchaser's Scheme provides money purchase benefits,
the part of the Transfer Amount (and any Investment
Adjustment) which relates to each Consenting Member (as
calculated by the Vendor's Actuary) will be credited to his
individual account;
but so that, if the Purchaser's Scheme is not a contracted-out
scheme (as defined in the Pension Schemes Act 1993) or personal
pension schemes for each Consenting Member which are appropriate
schemes (also as defined in the Pension Schemes Act 1993), the
benefits to be provided for the Consenting Members shall be reduced
so as to allow for the benefit liabilities which the Vendor's Scheme
cannot transfer to the Purchaser's Scheme because it is not a
contracted-out scheme or because it is contracted-out on a different
basis and the Transfer Amount shall be reduced by an amount
calculated by the Vendor's Actuary and agreed by the Purchaser's
Actuary as being the value of those benefit liabilities calculated
using the assumptions in the Actuary's Letter or, at the Vendor's
option, by an amount representing the cost of securing those benefit
liabilities under an insurance policy;
(c) neither it, nor any company directly or indirectly controlled by or
connected with the Purchaser, will encourage or initiate any action
or provide financial assistance for the purpose of requiring the
Vendor or the Vendor's Scheme to pay a larger amount than the
Transfer Amount to the Purchaser's Scheme.
5.3 The Purchaser hereby states that it will keep the Purchaser's Scheme in
full force and effect for a period of at least one year from the Pension
Transfer Date.
6. Notices and Information
6.1 The Purchaser will use its reasonable endeavours to procure that:
(a) within three months after Completion all of the Member Employees
will be invited to become active members of the Purchaser's Scheme
with effect from the Pension Transfer Date; and
- 57 -
<PAGE>
(b) within one month after the date on which the Relevant Amount for the
Member Employees has been agreed all the Member Employees who have
joined the Purchaser's Scheme will be invited to consent (in a form
acceptable to the Vendor, such acceptance not to be unreasonably
withheld) to the transfer of an appropriate sum from the Vendor's
Scheme to the Purchaser's Scheme.
6.2 Within three months after the date on which the Relevant Amount for the
Member Employees has been agreed the Purchaser shall supply to the Vendor
the written consents of the Consenting Members to a transfer of an
appropriate sum from the Vendor's Scheme to the Purchaser's Scheme.
7. Calculation of Relevant Amount
7.1 The Purchaser shall promptly upon request by the Vendor provide the Vendor
with such information in the Purchaser's possession or control (which is
not already within the control or knowledge of the Vendor) as may be
reasonably required to facilitate the calculation of the Relevant Amount
for the Member Employees and the Transfer Amount and to enable any
necessary approvals of the Inland Revenue to a transfer of assets to the
Purchaser's Scheme in respect of the Consenting Members to be obtained.
7.2 The Vendor shall procure that the Vendor's Actuary will within two months
after the Pension Transfer Date calculate the Relevant Amount for the
Member Employees.
8. Purchaser's Actuary to check calculation of Relevant Amount
8.1 The Vendor shall procure that the Vendor's Actuary will supply to the
Purchaser's Actuary his calculations of the Relevant Amount upon
completing the calculations and promptly upon request such information (in
his or the Vendor's possession or control) as the Purchaser's Actuary may
reasonably require in order to agree that those calculations are
mathematically correct and in accordance with the terms of this Schedule.
8.2 The Purchaser shall procure that the Purchaser's Actuary agrees the
Vendor's Actuary's calculations within one month after the date on which
he receives the information referred to in Paragraph 8.1.
9. Calculation of the Transfer Amount
9.1 The Vendor and the Purchaser shall procure that the Vendor's Actuary and
the Purchaser's Actuary agree the Transfer Amount within one month after
the date on which the Vendor receives the written consents referred to in
Paragraph 6.2.
- 58 -
<PAGE>
9.2 The Transfer Amount means that part of the Relevant Amount which relates
to the Consenting Members adjusted between Completion (or in respect of
contributions paid during the Transitional Period the date on which such
contributions were received by the Vendor's Scheme) and the Pension
Transfer Date by the Investment Adjustment.
10. The Payment of the Transfer Amount
10.1 Subject to any deduction made under Paragraph 10.3 below and provided the
Purchaser has established a pension scheme or schemes which satisfy the
provisions of this Schedule the Vendor shall pay or procure that the
Vendor's Scheme pays to the Purchaser's Scheme on the Payment Date in cash
the Transfer Amount adjusted by the Investment Adjustment from the Pension
Transfer Date to the Payment Date.
10.2 The Transfer Amount and the Investment Adjustment under Paragraph 10.1
above shall be adjusted by the Investment Adjustment in respect of any
period during which any part thereof remains unpaid after the Payment
Date.
10.3 The Transfer Amount and the Investment Adjustment under Paragraphs 10.1
and 10.2 above shall be reduced if the Vendor's Scheme remains liable at
the Payment Date to pay guaranteed minimum pensions to and in respect of
the Consenting Members by an amount calculated in accordance with the
Actuary's Letter.
10.4 The Vendor or the Vendor's Scheme shall be entitled on any day after the
Payment Date to offer a payment or payments of amounts then outstanding,
and the Purchaser will use its best endeavours to procure that such offer
is accepted on account of the Transfer Amount on such basis. If any such
offer cannot be accepted for any reason within the control of the
Purchaser or of the trustees of the Purchaser's Scheme, the adjustment
provided for in Paragraph 10.2 above shall not apply to the amount of the
payment offered after the date of the offer.
11. Consenting Members' additional voluntary contributions
Any additional voluntary contributions made to the Vendor's Scheme by any
Member Employee (and the monies, interest and benefits derived from those
contributions) which are used to provide money purchase benefits (as
defined in the Pensions Schemes Act 1993) shall be disregarded for the
purposes of calculating the Transfer Amount. Instead, the Vendor shall
procure that on the Payment Date the Vendor's Scheme shall transfer to the
Purchaser's Scheme either the value in cash of the additional voluntary
contributions paid to the Vendor's Scheme by the Consenting Members and
investment returns thereon or the assets representing the same.
- 59 -
<PAGE>
12. Approvals
12.1 Each of the parties hereto agree that it will use all reasonable
endeavours to obtain any necessary consents of the Inland Revenue or the
Department of Social Security for the purposes of:
(a) maintaining approval of the Vendor's Scheme as an exempt approved
scheme;
(b) obtaining any necessary contracting-out certificates in accordance
with Paragraph 3.1;
(c) maintaining or obtaining (as appropriate) approval of the
Purchaser's Scheme as an exempt approved scheme;
(d) the participation of the Company in the Vendor's Scheme under
Paragraph 2.1; and
(e) the transfer of cash to the Purchaser's Scheme on the date and in
the manner contemplated by Paragraphs 10 and 11;
where under this Schedule it falls to it to obtain or procure the
obtaining of such approval.
- 60 -
<PAGE>
APPENDIX
Actuary's Letter
- 61 -
<PAGE>
SCHEDULE 6
Fixed Assets to be Acquired
- 62 -
<PAGE>
SCHEDULE 7
Balance Sheet
as at 30 June 1997
- 63 -
<PAGE>
SCHEDULE 8
Services
Nature of Service Period to be provided
- ----------------- Post Completion
---------------------
COMPUTERS 6 months
- - Quiet enjoyment and the benefit of
the Software Licences as set out
in Schedule 11
- - Service and support of AS400
computer in Ipswich
- - Support for LAN
- - Disaster Recovery
COMMUNICATIONS 6 months
- - Communication links between Vendor
offices and Company's office
- - Telephone Switchboard
- - E-Mail
SERVICES
- - Archives 12 months
- - Payroll including National Insurance 3 months
- 64 -
<PAGE>
SCHEDULE 9
Relevant Claims
(a) The current Lloyd's action group claims and/or litigation against the
Company which have not yet been discontinued in respect of or in
connection with the following syndicates or managing agents
1 - Feltrim
2 - Lambert 604 (Captain Wheeler only)
3 - King 745
4 - MacKinnon Hayter 134/184
5 - Merrett 418
6 - Wellington 448/406 (A J South only)
7 - Cuthbert Heath 404
(b) Any complaint, claim, arbitration or litigation against the Company by the
following individual Names
1 - B P Dewe-Matthews
2 - Howard V More
3 - G T Lewis
4 - Sir Gerrard & Lady Peat
5 - Richard Harwood
6 - Executors of J R Bergne-Coupland dec'd
7 - A J South re Merrett 799
8 - A A Gillham
(c) Other Open Claims
1 - The errors and omissions notification in respect of
GTE/Wellington
- 65 -
<PAGE>
2 - The Wellington defence costs recovery action
3 - Claims brought by US names who did not accept the Lloyds
Reconstruction and Renewal offer including without limitation the
Proskauer case and any claims brought by any Californian Names.
(d) Other Relevant Claims (whether current or arising at any time in the
future)
1 - any claim arising from the Company's inability to recover
from Names the amount of basic rate tax paid on their
behalf to the Inland Revenue in respect of profits and
surpluses for syndicate years of account reported as at 31
December 1995 despite using reasonable endeavours so to
recover
2 - any claim by a Name or by the Inland Revenue in respect of
the Company's failure to pay during the calendar year 1991
Names' tax liabilities, including any penalty or interest
levied by the Inland Revenue in respect of late payment
3 - any claim arising from discrepancies between manual and
computerised ledgers which were created between 1989 and
1995 as a result of maintaining both a manual and a
computerised ledger for Collection and Distribution
Account
4 - any expenses payable to third parties in the period up to
31st December 1996 in respect of the Lloyd's
Reconstruction and Renewal exercise which (i) have not
been accounted for at Completion and (ii) the Company is
obliged to pay to such third party and (iii) the Company
cannot recover from its Name(s) despite using reasonable
endeavours so to do
5 - any claim made by any Name or Names action group on or in
respect of any syndicate or syndicate year (including
without limitation any syndicate where a syndicate year
has been left open for 36 months or more) up to and
including the 1996 year of account.
6 - any claim made by any Name or Names action group who did
not accept the Lloyds Reconstruction and Renewal offer.
7 - any requirement or demand of the Company to pay any
contribution in respect of the Members Agents Compensation
Scheme where such requirement relates to pre-Completion
events, acts or omissions.
- 66 -
<PAGE>
8 - any requirement of or claim against the Company to repay
any profit commission received in respect of any
underwriting year, or part of any underwriting year prior
to Completion.
9 - any claim by a current or former employee of the Company
arising from his or her employment and/or contract of
employment or its termination where the matters complained
of relate to a period pre-Completion
10 - any claim by a current or former employee of the Company
in respect of any personal injury where the matters
complained of relate to any period of employment
pre-Completion, but only insofar as the injury was found
or agreed to have been occasioned during such period
- 67 -
<PAGE>
SCHEDULE 10
Article 36
- 68 -
<PAGE>
SCHEDULE 11
Software Licences
- 69 -
<PAGE>
Signed by )
for and on behalf of WILLIS )
CORROON GROUP PLC )
in the presence of:- )
Signed by )
for and on behalf of ACEGIANT )
LIMITED in the presence of :- )
Signed by )
for and on behalf of WILLIS FABER )
& DUMAS (AGENCIES) LIMITED )
in the presence of:- )
Signed by )
for and on behalf of WILLIS CORROON )
GROUP SERVICES LIMITED in the )
presence of:- )
- 70 -
<PAGE>
Exhibit 3.1
RESTATED
CERTIFICATE OF INCORPORATION
OF CORROON & BLACK CORPORATION
1. The name of this corporation is CORROON & BLACK CORPORATION and the
name under which this corporation was originally incorporated is Corroon &
Reynolds Corporation. The date of filing its original Certificate of
Incorporation with the Secretary of State was December 27, 1928.
2. This Restated Certificate of Incorporation only restates and integrates
and does not further amend the provisions of the Certificate of Incorporation of
this corporation, as heretofore amended or supplemented, and there is no
discrepancy between those provisions and the provisions of this Restated
Certificate of Incorporation.
3. The text of the Certificate of Incorporation, as amended or
supplemented heretofore, is hereby restated, with no further amendments or
changes, to read as herein set forth in full:
1. The name of this corporation is CORROON & BLACK CORPORATION.
2. Its registered office in the State of Delaware is located at:
229 South State Street
in the City of Dover in the County of
Kent;
The name and address of its registered agent is:
The Prentice Hall-Corporation System, Inc.
229 South State Street
Dover, Delaware 19901
3. The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware, including but not
limited to the following:
To act as agents and or brokers and/or attorneys-in-fact and/or
agency managers for any person, firm, corporation or association, and
particularly for any person, firm, corporation or association engaged in
the business of marine, fire, life, accident, casualty and fidelity
insurance or reinsurance or any other kind of insurance or reinsurance; to
obtain insurance protection of any kind for principals and employers, and
any and all of its branches; to act as agents or representatives of
owners, lessees, charterers or other persons or corporations having or
claiming to have any insurance in merchandise, vessels, cargoes, freight
or other subject of insurance, and to make and carry out any contracts for
or in relation to any of the foregoing businesses; to act as an insurance
adjuster, to adjust for the insured losses under policies or contracts of
any kind and class of insurance in any and all of its branches.
<PAGE>
4. The total number of shares which the corporation shall have authority to
issue is twenty two million (22,000,000) shares of which
(a) two million (2,000,000) shares shall be Preferred Stock, issuable in
series, of the par value of $1.00 per share, and
(b) twenty million (20,000,000) shares shall be Common Stock of the par
value of $.25 per share.
The designations, powers, preferences and rights and the qualifications,
limitations or restrictions of the Preferred Stock and the Common Stock are as
follows:
A. PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more series
and with such designations for each such series as shall be stated and expressed
in the resolution or resolutions providing for the issue of each such series
adopted by the Board of Directors. The Board of Directors in any such resolution
or resolutions is expressly authorized to state and express for each such
series:
(i) Voting rights, if any, including without limitation the authority to
confer multiple votes per share, voting rights as to specified
matters or issues such as mergers, consolidations or sales of
assets, or voting rights to be exercised either together with
holders of common stock as a single class, or independently as a
separate class;
(ii) The rate per annum and the times at and conditions upon which the
holders of stock of such series shall be entitled to receive
dividends, and whether such dividends shall be cumulative or
noncumulative and if cumulative the terms upon which such dividends
shall be cumulative;
(iii) The price or prices and the time or times at and the manner in which
the stock of such series shall be redeemable;
(iv) The rights to which the holders of the shares of stock of such
series shall be entitled upon any voluntary or involuntary
liquidation, dissolution or winding up of the corporation;
(v) The terms, if any, upon which the shares of stock of such series
shall be convertible into, or exchangeable for, shares of stock of
any other class or classes or of any other series of the same or any
other class or classes, including the price or prices or the rate or
rates of conversion or exchange and the terms of adjustment, if any;
and
(vi) Any other designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof so far as they are not inconsistent with the
provisions of the Certificate of Incorporation, as amended, and to
the full extent now or hereafter permitted by the
<PAGE>
laws of Delaware.
All shares of the Preferred Stock of any one series shall be identical to
each other in all respects, except that shares of any one series issued at
different times may differ as to the dates from which dividends thereon, if
cumulative, shall be cumulative.
A. COMMON STOCK
(i) Whenever dividends upon the Preferred Stock at the time outstanding
shall have been paid in full for all past dividend periods or
declared and set apart for payment, such dividends as may be
determined by the Board of Directors may be declared by the Board of
Directors and paid from time to time to the holders of the Common
Stock.
(ii) In the event of any liquidation, dissolution or winding up of the
affairs of the corporation, whether voluntary or involuntary, all
assets remaining after the payment to the holders of the Preferred
Stock at the time outstanding of the full amounts to which they
shall be entitled, shall be divided and distributed among the
holders of the Common Stock according to their respective shares.
(iii) Each holder of the Common Stock shall have one vote in respect of
each share of such stock held by him.
(iv) Holders of the Common Stock shall not have the preemptive right to
subscribe for any new or increases shares of any class of stock of
the corporation.
5. The minimum amount of capital with which the corporation will commence
business is One Thousand Dollars ($1,000.00).
6. This corporation is to have perpetual existence.
7. The private property of the stockholders shall not be subject to the
payment of corporate debts to any extent whatever.
8. No contract or other transaction between the corporation and any other
corporation, association, partnership, firm, trustee, syndicate or individual,
and no act of the corporation shall in any way be affected or invalidated by the
fact that any of the directors of the corporation are pecuniarily or otherwise
interested in or are directors or officers of such other corporation or
association; any director individually, or any firm of which any director may be
a partner or member, may be a party to, or may be pecuniarily or otherwise
interested in, any contract or transaction of the corporation provided that the
fact that he or such firm is so interested shall be disclosed or shall have been
known to the Board of Directors or a majority thereof, and any director of the
corporation who is also a director or officer of such other corporation, or who
is so interested may be counted in determining the existence of a quorum at any
meeting of the
<PAGE>
Board of Directors of the corporation which shall authorize such contract or
transaction and may vote thereat to authorize any such contract or transaction
with like force and effect as if he were not such officer or director of such
other corporation or not so interested.
9. In furtherance, and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized (except as otherwise
expressly provided in Article 4 hereof):
To make and alter the by-laws of this corporation.
To authorize and cause to be executed mortgages and liens upon the
real and personal property of this corporation.
To set apart out of any of the funds of the corporation available
for dividends a reserve or reserves for any proper purpose or to
abolish any such reserve in the manner in which it was created.
By resolution or resolutions, passed by a majority of the whole
Board to designate one or more committees, each committee to consist
of two or more of the directors of the corporation, which, to the
extent provided in said resolution or resolutions or in the by-laws
of the corporation, shall have and may exercise the powers of the
Board of Directors in the management of the business and affairs of
the corporation, and may have power to authorize the seal of the
corporation to be affixed to all papers which may require it. Such
committee or committees shall have such name or names as may be
stated in the by-laws of the corporation or as may be determined
from time to time by resolution adopted by the Board of Directors.
The corporation may in its by-laws confer powers upon its directors
in addition to the foregoing, and in addition to the powers and
authorities expressly conferred upon them by the statute.
Both stockholders and directors shall have power, if the by-laws so
provide, to hold their meetings, and to have one or more offices
within or without the State of Delaware, and to keep the books of
this corporation (subject to the provisions of the statutes) outside
of the State of Delaware at such places as may be from time to time
designated by the Board of Directors.
10. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Sections 3883 of the
<PAGE>
Revised Code of 1915 of said State, or on the application of trustees in
dissolution or of any receiver or receivers appointed for this corporation under
the provisions of Section 43 of the General Corporation Law of the State of
Delaware, order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
this corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the Court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
11. A. In addition to the requirements of law, and the other provisions of
this Certificate of Incorporation, the affirmative vote of the holders of 80% of
the votes of the outstanding Voting Stock shall be required for the adoption or
authorization of a Business Combination unless:
(a) prior to the time any Related Party or any Affiliate of the Related Party
becomes a Related Party, the Board of Directors approves the Business
Combination; or
(b) a majority of the Continuing Directors approves the Business Combination.
B. For purposes of Articles 11, 12 and 13 of this Certificate of
Incorporation the following definitions apply:
(i) Affiliate shall mean a Person who directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is
under common control with another Person and shall include, but not
be limited to (A) any corporation (except the Corporation) or
organization of which a Person is a director, officer or partner or
is, directly or indirectly the Beneficial Owner of five percent or
more of any class of equity securities of such corporation or
partnership, (B) any trust or other estate in which a Person has a
five percent or larger beneficiary interest of any nature or as to
which a Person services as trustee (or co-trustee) or in a similar
fiduciary capacity, (C) any spouse of a Person, and (D) any relative
of a Person or any relative of a spouse of a Person, who has the
same residence as such Person or spouse.
(ii) Beneficial Ownership shall include without limitation (A) all shares
directly or indirectly owned by a Person and the Affiliates of a
Person, (B) all shares which such Person or Affiliate has the
<PAGE>
right to acquire through the exercise of any option, warrant or
right (whether or not currently exercisable, through the conversion
of a security, pursuant to the power to revoke a trust,
discretionary account or similar arrangement), and (C) all shares to
which such Person or Affiliate, directly or indirectly, through any
contract, arrangement, understanding, relationship or otherwise
(including without limitation any written or unwritten agreement to
act in concert) has or shares voting power (which includes the power
to vote or to direct the voting of such shares) or investment power
(which includes the power to dispose or to direct the disposition of
such shares) or both.
(iii) Business Combination shall mean: (A) any merger or consolidation of
the Corporation or a Subsidiary with or into a Related Party or an
Affiliate of a Related Party, (B) any merger into the Corporation,
or into a Subsidiary, of a Related Party or an Affiliate of a
Related Party, (C) any sale, lease, exchange, transfer or other
disposition, including without limitation a mortgage or other
security device, (in one transaction or a series of transactions) of
the assets of the Corporation or a Subsidiary (including the
securities of a Subsidiary), to a Related Party or an Affiliate of a
Related Party if the Fair Value of such assets be equal to or
greater than 10% of thee value of the assets of the Corporation as
shown on the Corporation's consolidated balance sheet for the fiscal
year ending immediately prior to the determination of such Fair
Value, (D) any issuance, sale or transfer by the Corporation or any
subsidiary (in one transaction or a series of transactions) to a
Related Party or an Affiliate of a Related Party of any shares of
any class of Voting Stock of the Corporation or a Subsidiary, which
shares either: (i) when combined with the Voting Stock already
Beneficially Owned by the Related Party and its Affiliates,
represent at least 80% of the voting power of all the outstanding
shares of Voting Stock, or (ii) increase the Voting Stock
Beneficially Owned by the Related Party and its Affiliates by an
amount which constitutes more than 2% of the outstanding Voting
Stock, or (E) any reclassification of securities (including any
reverse stock split) or recapitalization of the Corporation, or any
reorganization, merger or consolidation of the Corporation with any
of its Subsidiaries or any similar transaction (whether or not with
or into or otherwise involving a Related Party) which has the
effect, directly or indirectly, of increasing the proportionate
share of the outstanding securities of any class of equity
securities of the Corporation or any Subsidiary which is directly or
indirectly
<PAGE>
Beneficially Owned by any Related Party.
(iv) Continuing Director shall mean, with respect to any Business
Combination, (A) any director of the Corporation who is unaffiliated
with the Related Party and was a director of the Corporation prior
to the time the Related Party who is, or whose Affiliate is, to be a
party to such Business Combination became a Related Party, and (B)
any director of the Corporation who is unaffiliated with the Related
Party and is chosen by a majority of the Continuing Directors to
become a director of the Corporation.
(v) Control shall mean the possession, directly or indirectly of the
power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
(vi) Fair Value shall mean, with respect to any securities, property,
assets or other consideration, the fair market value thereof at any
time within 90 days prior to the date of the consummation of any
transaction, which value and time shall be determined by a majority
of the Continuing Directors who shall be advised on such value by an
investment banking firm selected by them.
(vii) Related Party shall mean a Person who Beneficially Owns a number of
shares of Voting Stock which represents voting power exceeding ten
percent of the aggregate voting power of all outstanding shares of
Voting Stock.
(viii) Person shall mean an individual, a corporation, a partnership, an
association, a joint-stock company, a trust, any unincorporated
organization, a government or political subdivision thereof and any
other entity.
(ix) Subsidiary shall mean any corporation with respect to which the
Corporation or one or more Subsidiaries have the right to vote more
than 50% of its outstanding securities representing the right to
vote for the election of directors.
(x) Voting Stock shall include the Common Stock and shall also include
all other classes of capital stock of the Corporation, which,
pursuant to the Delaware General Corporation Law, any provision of
this Certificate of Incorporation, or any resolution of the Board of
Directors adopted pursuant to Article 4 of this Certificate of
Incorporation, would be entitled to vote as a single class with
holders of the Common Stock on any Business Combination.
<PAGE>
C. (a) A majority of the Continuing Directors shall have the power to
determine for the purposes of this Article 11, on the basis of information
known to them,
(i) the amount of Voting Stock Beneficially Owned by any Person,
(ii) whether the Person is an Affiliate of another,
(iii) whether a Person has a contract, arrangement or understanding
with another as to any matter referred to in sub-paragraph
B(ii)(C) of this Article 11,
(iv) whether the Fair Value of the assets subject to any Business
Combination constitutes 10% of the consolidated assets of the
Corporation, and/or
(v) any other factual matter relating to the applicability or
effect of this Article 11.
(b) any determination made by the Continuing Directors pursuant to
this Article 11 in good faith and on the basis of such information and
assistance as was then reasonably available for such purpose shall be
conclusive and binding upon the Corporation and its stockholders,
including any Related Person.
D. This Article 11 shall not be altered, amended, changed or repealed without
the affirmative vote of the holders of 80% of the votes of the outstanding
Voting Stock.
12. No action required or permitted to be taken at any annual or special
meeting of the stockholders of the Corporation may be taken without a meeting
and the power of stockholders to consent in writing, without a meeting, to the
taking of any action is specifically denied.
This Article 12 shall not be altered, amended, changed, or repealed
without the affirmative vote of the holders of 80% of the votes of the
outstanding Voting Stock.
13. Except as otherwise expressly provided in this Certificate of
Incorporation, this Corporation reserves the right to amend, alter, change or
repeal any provision contained in this amended Certificate of Incorporation, in
the manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
14. This Restated Certificate of Incorporation was duly adopted by the
Board of Directors in accordance withss.245 of the General Corporation Law of
Delaware.
IN WITNESS WHEREOF, CORROON & BLACK CORPORATION has caused its corporate
seal to be hereunto affixed and this
<PAGE>
Certificate to be signed by ROBERT F. CORROON, its Chairman of the Board, and
attested by JOSEPH V. AMBROSE, JR. its Secretary, this 16th day of December,
1983.
CORROON & BLACK CORPORATION
By: /s/
-------------------------------------
Chairman
ATTEST:
/s/
- -------------------------------------
Secretary
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
BE IT REMEMBERED that on this 16th day of December, 1983, personally came
before me, a Notary Public in and for the County and State of aforesaid, ROBERT
F. CORROON, Chairman of the Board of CORROON & BLACK CORPORATION, a corporation
of the State of Delaware, and he duly executed said Certificate before me and
acknowledged the said Certificate to be his act and deed and the act and deed of
said Corporation and that the facts stated therein are true; and that the seal
affixed to said Certificate and attested by the Secretary of said Corporation is
the common or corporate seal of said Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of office the
day and year aforesaid.
/s/
-------------------------------------
NOTARY PUBLIC
Margaret M. Milne
Notary Public, State of New York
No. 30-7950200
Qualified in Naussau County
Cert. Filed in New York County
Commission Expires 3/30/1984
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
CORROON & BLACK CORPORATION, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, hereby
certifies:
FIRST: That at a meeting of the Board of Directors of Corroon & Black
Corporation resolutions were duly adopted setting forth proposed amendments to
the Certificate of Incorporation of said corporation, declaring said amendments
to be advisable and calling a meeting of the stockholders of said Corporation
for consideration thereof. The resolutions setting forth the proposed amendments
are as follows:
RESOLVED, that the first sentence of paragraph 4 of the Certificate of
Incorporation of this corporation is hereby amends to that it shall read as
follows:
"4. The total number of shares which the corporation shall have
authority to issue is forty-two million (42,000,000) shares of which
(a) two million (2,000,000) shares shall be preferred stock
issuable in series of the par value of $1.00 per share, and
(b) forty million (40,000,000) shares shall be common stock of the
par value of $.125 per share."
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
an annual meeting of the stockholders of said corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware, at which meeting the necessary number of shares as
required by statute were voted in favor of each of the amendments.
THIRD: That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation law of the State of
Delaware.
FOURTH: That the capital of said Corporation will not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, said CORROON & BLACK CORPORATION has caused its
corporate seal to be hereunto affixed and its Certificate to be signed by its
Chairman and attested by its Secretary this 24th day of April 1986.
CORROON & BLACK CORPORATION
By: /s/
-------------------------------------
Robert F. Corroon
Chairman of the Board
<PAGE>
ATTEST:
BY: /s/
---------------------------------
Joseph V. Ambrose, Jr.
Secretary
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the date hereinafter set forth, before me came Robert F. Corroon and
Joseph V. Ambrose, Jr., to me known to be the individuals who are described in,
and who signed the foregoing Certificate of Amendment to Certificate of
Incorporation, and they acknowledged to me that they subscribed and affirmed the
same under penalties of perjury.
Signed on the 24th day of April, 1986.
/s/
-------------------------------------
Notary Public
My Commission Expires: 3/30/87
Juanita Marvuglio
Notary Public , State of
New York
No. 24-4797743
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Corroon & black corporation a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, hereby
certifies:
FIRST: That a meeting of the Board of Directors of CORROON & BLACK
CORPORATION held on March 4, 1987, resolutions were duly adopted setting forth
proposed amendments to the Certificate of Incorporation of said Corporation,
declaring said amendments to be advisable and calling a meeting of the
stockholders of said Corporation for the consideration thereof. The resolutions
setting forth the proposed amendments are as follows:
"RESOLVED, that the Certificate of Incorporation of this Corporation be
amended, subject to stockholder approval, to include a new Article 13 to read as
follows:
'13. A director of this Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.'
and be it further
RESOLVED, that, upon the adoption of the above amendment to the
Certificate of Incorporation, current Article 13 shall be renumbered Article
14."
SECOND: That thereafter, pursuant to a resolution of its Board of
Directors, an annual meeting of the stockholders of said Corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware, at which meeting the necessary number
of shares as required by statute were voted in favor of the amendments.
THIRD: That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation law of the State of
Delaware.
IN WITNESS WHEREOF, said CORROON & BLACK CORPORATION has caused its
corporate seal to be hereunto affixed and this Certificate to be signed by its
Chairman and attested by its Secretary this 29th day of April, 1987.
CORROON & BLACK CORPORATION
<PAGE>
By: /s/
-------------------------------------
Robert F. Corroon
Chairman of the Board
ATTEST
ATTEST:
/s/
- ---------------------------------
Joseph V. Ambrose, Jr.
Secretary
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the date hereinafter set forth, before me came Robert F. Corroon and
Joseph V. Ambrose, Jr., to me known to be the individuals who are described in,
and who signed, the foregoing Certificate of Incorporation and they subscribed
and affirmed the same under penalties of perjury.
Signed on the 27th day of April, 1987.
/s/
-------------------------------------
Notary Public
William S. Youngman
Notary Public State of
New York
No. 31 451 9807
Qualified in New York
County
Commission Expires: March
30, 1988
<PAGE>
CERTIFICATE OF DESIGNATION OF
CORROON & BLACK COPPORATION
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation in accordance with the provisions of the Restated Certificate
of Incorporation and Section 151 of the Delaware General Corporation Law, a
series of Preferred Stock of the Corporation be and it hereby is created, and
that the designation and amount thereof and the voting powers, preferences and
relative, participating, optional and other special rights of the shares of such
series, and the qualifications, limitations or restrictions thereof are as
follows:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock, $1.00 par value
per share" and the number of shares constituting such series shall be 300,000.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Series A Junior Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Junior Participating Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in cash on
the fifteenth day of March, June, September and December in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Series A Junior Participating Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $10.00 or (b) subject to the provision for adjustment hereinafter set
forth, 100 times the aggregate per share amount of all cash dividends, and 100
times the aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared on the Common Stock, $0.125 par value per share, of the
Corporation (the "Common Stock") since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of Series A
Junior Participating Preferred Stock. In the event the Corporation shall at any
time after December 16, 1987 (the "Rights Declaration Date") (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the amount to which holders of
shares of Series A Junior Participating Preferred Stock were entitled
immediately prior to such
<PAGE>
event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series
A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share on
the Series A Junior Participating Preferred Stock shall nevertheless be payable
on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Junior Participating Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares of Series
A Junior Participating Preferred Stock, unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of issue
of such shares, or unless the date of issue is a Quarterly Dividend Payment Date
or is a date after the record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of which
events such dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series A Junior Participating
Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Junior Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be no more
than 30 days prior to the date fixed for the payment thereof.
<PAGE>
Section 3. VOTING RIGHTS. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Junior Participating Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the number of votes per share to which holders of shares of Series A Junior
Participating Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares
of Series A Junior Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on-all matters submitted to a vote
of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Junior Participating
Preferred Stock shall be in arrears in an amount equal to six (6) quarterly
dividends thereon, the occurrence of such contingency shall mark the beginning
of a period (herein called a "default period") which shall extend until such
time when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series A
Junior Participating Preferred Stock then outstanding shall have been declared
and paid or set apart for payment. During each default period, all holders of
Preferred Stock (including holders of the Series A Junior Participating
Preferred Stock) with dividends in arrears in an amount equal to six (6)
quarterly dividends thereon, voting as a class, irrespective of series, shall
have the right to elect two (2) Directors.
(ii) During any default period, such voting right of the holders of Series
A Junior Participating Preferred Stock may be exercised initially at a special
meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any
annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that neither such voting right nor the right of the
holders of any other series of Preferred Stock, if any, to increase, in certain
cases, the
<PAGE>
authorized number of Directors shall be exercised unless the holders of ten
percent (10%) in number of shares of Preferred Stock outstanding shall be
present in person or by proxy. The absence of a quorum of the holders of Common
Stock shall not affect the exercise by the holders of Preferred Stock of such
voting right. At any meeting at which the holders of Preferred Stock shall
exercise such voting right initially during an existing default period, they
shall have the right, voting as a class, to elect Directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two (2)
Directors or, if such right is exercised at an annual meeting, to elect two (2)
Directors. If the number which may be so elected at any special meeting does not
amount to the required number, the holders of the Preferred Stock shall have the
right to make such increase in the number of Directors as shall be necessary to
permit the election by them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in any
default period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or PARI PASSU with the Series A Junior
Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect Directors, the
Board of Directors may order, or any stockholder or stockholders owning in the
aggregate not less than ten percent (10%) of the total number of shares of
Preferred Stock outstanding, irrespective of series, may request, the calling of
a special meeting of the holders of Preferred Stock, which meeting shall
thereupon be called by the Chairman of the Board, the President, a
Vice-President or the Secretary of the Corporation. Notice of such meeting and
of any annual meeting at which holders of Preferred Stock are entitled to vote
pursuant to this paragraph (C) (iii) shall be given to each holder of record of
Preferred Stock by mailing a copy of such notice to him at his last address as
the same appears on the books of the Corporation. Such meeting shall be called
for a time not earlier than 20 days and not later than 60 days after such order
or request or in default of the calling of such meeting within 60 days after
such order or request, such meeting may be called on similar notice by any
stockholder or stockholders owning in the aggregate not less than ten percent
(10%) of the total number of shares of Preferred Stock outstanding.
Notwithstanding the provisions of this paragraph (C)(iii), no such special
meeting shall be called during the period within 60 days immediately preceding
the date fixed for the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common
<PAGE>
Stock, and other classes of stock of the Corporation if applicable, Shall
continue to be entitled to elect the whole number of Directors until the holders
of Preferred Stock shall have exercised their right to elect two (2) Directors
voting as a class, after the exercise of which right (x) the Directors so
elected by the holders of Preferred Stock shall continue in office until their
successors shall have been elected by such holders or until the expiration of
the default period, and (y) any vacancy in the Board of Directors may (except as
provided in paragraph (C)(ii) of this Section 3) be filled by vote of a majority
of the remaining Directors theretofore elected by the holders of the class of
stock which elected the Director whose office shall have become vacant, or if no
such Directors are in office, by the holders of the Preferred Stock. References
in this paragraph (C) to Directors elected by the holders of a particular class
of stock shall include Directors elected by such Directors to fill vacancies as
provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right of
the holders of Preferred Stock as a class to elect Directors shall cease, (y)
the term of any Directors elected by the holders of Preferred Stock as a class
shall terminate, and (z) the number of Directors shall be such number as may be
provided for in the articles of incorporation or by-laws irrespective of any
increase made pursuant to the provisions of paragraph (C)(ii) of this Section 3
(such number being subject, however, to change thereafter in any manner provided
by law or in the articles of incorporation or by-laws). Any vacancies in the
Board of Directors effected by the provisions of clauses (y) and (z) in the
preceding sentence may be filled by a majority of the remaining Directors.
(D) Except as set forth herein or otherwise required by law, holders of
Series A Junior Participating Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for taking
any corporate action.
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise
<PAGE>
acquire for consideration any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any
shares of stock RANKING on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, except dividends paid ratably on the Series
A Junior Participating Preferred - Stock and all such parity stock on
which dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of
any stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Junior Participating
Preferred Stock, provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such parity stock in exchange
for shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the Series A
Junior Participating Preferred Stock;
(iv) purchase or otherwise acquire for consideration any shares of Series
A Junior Participating Preferred Stock, or any shares of stock ranking on
a parity with the Series A Junior Participating Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon
such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences
of the respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of or any partnership
controlled by the Corporation to purchase or otherwise acquire for consideration
any shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such shares at
such time and in such manner.
Section 5. REACQUIRED SHARES. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
<PAGE>
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding
up of the Corporation, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received $100 per share plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series A Liquidation Preference"). Following the payment of
the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series A Liquidation
Preference by (ii) 100 (as appropriately adjusted as set forth in subparagraph C
below to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such number in clause (ii),
the "Adjustment Number"). Following the payment of the full amount of the Series
A Liquidation Preference and the Common Adjustment in respect of all outstanding
shares of Series A Junior Participating Preferred Stock and Common Stock,
respectively, holders of Series A Junior Participating Preferred Stock and
holders of shares of Common Stock shall receive their ratable and proportionate
share of the remaining assets to be distributed in the ratio of the Adjustment
Number to 1 with respect to such Preferred Stock and Common Stock, on a per
share basis, respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of preferred stock, if any, which
rank on a parity with the Series A Junior Participating Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences. In the event,
however, that there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be
<PAGE>
distributed ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Junior Participating Preferred Stock shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. NO REDEMPTION. The shares of Series A Junior Participating
Preferred Stock shall not be redeemable.
Section 9. RANKING. The Series A Junior Participating Preferred Stock
shall rank junior to all other series of the corporation's Preferred Stock as to
the payment of dividends and to the distribution of assets, unless the terms of
any such series shall provide otherwise.
Section 10. AMENDMENT. The Restated Certificate of Incorporation of the
Corporation shall not be further
<PAGE>
amended in any manner which would materially alter or change the powers,
preferences or special rights of the Series A Junior Participating Preferred
Stock so as to affect them adversely without the affirmative vote of the holders
of two-thirds or more of the outstanding shares of Series A Junior Participating
Preferred Stock, voting separately as a class.
Section 11. FRACTIONAL SHARES. Series A Junior Participating Preferred
Stock may be issued in fractions of a share which shall entitled the holder, in
proportion to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and to have the benefit of all
other rights of holders of Series A Junior Participating Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and
do affirm the foregoing as true under the penalties of perjury this 16th day of
December, 1987.
/s/
-------------------------------------
Robert Corroon
Chairman and Chief
Executive Officer
Attest: /s/
-------------------------------------
Joseph P. Ambrose, Jr.
Secretary
<PAGE>
CERTIFICATE OF MERGER
OF
WCFB CORPORATION
INTO
CORROON & BLACK CORPORATION
The undersigned corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
1. That the name and state of incorporation of each of the constituent
corporations of the merger is as follows:
NAME STATE OF INCORPORATION
WCFB Corporation Delaware
Corroon & Black Corporation Delaware
2. An agreement and plan of merger has been approved, adopted, certified,
executed and acknowledged by each of the constituent corporations in accordance
with Section 251 of the General Corporation Law of the State of Delaware.
3. The name of the surviving corporation of the merger is Corroon & Black
Corporation.
4. The Restated Certificate of Incorporation of Corroon & Black
Corporation shall be the certificate of the surviving corporation, except that
paragraph 4 thereof shall be amended by deleting it in its entirety and
inserting in lieu thereof the following new paragraph 4:
"4. The total number of shares of stock of all classes which the
Corporation has authority to issue is 3,000 shares of common stock, par
value $.01 per share."
<PAGE>
5. The executed agreement and plan of merger is on file at the principal
place of business of the surviving corporation, the address of which is as
follows:
Corroon & Black Corporation
Wall Street Plaza
New York, New York 10005
Attention: Joseph V. Ambrose, Jr., Esq.
6. A copy of the agreement and plan of merger will be furnished by the
surviving corporation, on request and without cost, to any stockholder of any
constituent corporation.
7. The merger herein certified shall become effective upon filing with the
Secretary of State of the State of Delaware.
Dated: October 8, 1990
CORROON & BLACK CORPORATION
By /s/ Joseph V. Ambrose, Jr.
--------------------------------------
Senior Vice President
Attest:
By /s/ Robert M. Coffee
--------------------------------------
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
CORROON & BLACK CORPORATION
It is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation") is
CORROON & BLACK CORPORATION.
2. The certificate of incorporation of the corporation is hereby amended
by striking out Article 1 thereof and by substituting in lieu of said Article
the following new Article.
"The name of the corporation is Willis Corroon Corporation."
3. The certificate of incorporation of the corporation is hereby amended
by striking out Article 12 thereof and by renumbering the following articles.
4. The amendments of the certificate of incorporation herein certified
have duly adopted in accordance with the provisions of Sections 228 and 242 of
the General Corporation Law of the State of Delaware.
Signed and attested to on December 20, 1990.
/s/ Robert M. Coffee
----------------------------------------
Vice-President
Attest:
/s/ Jane E. Nutson
- --------------------------------------
Assistant Secretary
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
WILLIS CORROON CORPORATION
It is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation") is
WILLIS CORROON CORPORATION.
2. The certificate of incorporation of the corporation is hereby amended
by striking out Article 4 thereof and by substituting in lieu of said Article
the following new Article.
"The total number of shares of stock of all class which the Corporation
has authority to issue is 10,000 shares of common stock, par value $.01 per
share."
3. The amendment of the certificate of incorporation herein certified has
been duly adopted in accordance with the provisions of Sections 228 and 242 of
the General Corporation Law of the State of Delaware.
Signed and attested to on January 31, 1991.
/s/ Robert M. Coffee
----------------------------------------
Vice-President
Attest:
/s/ Jane E. Nutson
- --------------------------------------
Assistant Secretary
<PAGE>
AGREEMENT OF MERGER
OF
Willis Corroon Corporation of Tennessee
(a Tennessee corporation)
AND
Willis Corroon Corporation
(a Delaware corporation)
AGREEMENT OF MERGER entered into on December 9, 1991 by Willis Corroon
Corporation of Tennessee, a business corporation of the State if Tennessee, and
approved by resolution adopted by its Board of Directors on said date, and
entered into on December 9, 1991 by Willis Corroon Corporation, a business
corporation of the State of Delaware, and approved by resolution adopted by its
Board of Directors on said date.
WHEREAS Willis Corroon Corporation of Tennessee is a business corporation
of the State of Tennessee with its registered office therein located 722
Chestnut Street, City of Chattanooga, County of Hamilton; and
WHEREAS the total number of shares of stock which Willis Corroon
Corporation of Tennessee has authority to issue is 10,000,000, all of which are
of one class and of par value of $1.00 each; and
WHEREAS Willis Corroon Corporation is a business corporation of the State
of Delaware with its registered office therein located at 32 Loockerman Square,
Suite L-100, City of Dover, County of Kent; and
WHEREAS the total number of shares of stock of which Willis Corroon
Corporation has authority to issue is 10,000, all of which are of one class and
of the par value of $.0100 each; and
WHEREAS the Tennessee Business Corporation Act permits a merger of a
business corporation of the State of Tennessee with and into a business
corporation of another jurisdiction; and
WHEREAS the General Corporation Law of the State of Delaware permits the
merger of a business corporation of another jurisdiction with and into a
business corporation of the State of Delaware; and
<PAGE>
WHEREAS Willis Corroon Corporation of Tennessee and Willis Corroon
Corporation and the respective Boards of Directors thereof deem it advisable and
to the advantage, welfare, and best interests of said corporation and their
respective stockholders to merge Willis Corroon Corporation of Tennessee with
and into Willis Corroon Corporation pursuant to the provisions of the Tennessee
business Corporation Act and pursuant to the provisions of the General
Corporation Law of the State of Delaware upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreement of the parties hereto, being thereunto duly entered into by Willis
Corroon Corporation of Tennessee and approved by a resolution adopted by its
board of Directors and being thereunto duly entered into by Willis Corroon
Corporation and approved by a resolution adopted by its Board of Directors, the
(Plan and) Agreement of Merger and the terms and conditions thereof and the mode
of carrying the same into effect, together with any provisions required or
permitted to be set forth therein, are hereby determined and agreed upon as
hereinafter in the (Plan and) Agreement set forth.
1. Willis Corroon Corporation of Tennessee and Willis Corroon Corporation
shall, pursuant to the provisions of the Tennessee Business Corporation Act and
the provisions of the General Corporation Law of the State of Delaware, be
merged with and into a single corporation, to wit, Willis Corroon Corporation,
which shall be the surviving corporation from and after the effective time of
the merger, and which is sometimes hereinafter referred to as the "surviving
corporation", and which shall continue to exist as said surviving corporation
under its present name pursuant to the provisions of the General Corporation Law
of the State of Delaware. The separate existence of Willis Corroon Corporation
of Tennessee, which is sometimes hereinafter referred to as the "terminating
corporation", shall cease at said effective time in accordance with the
provisions of the Tennessee Business Corporation Act.
2. The Certificate of Incorporation of the surviving corporation shall be
in force and effect at the effective time in the State of Delaware of the merger
herein provided for; and said Certificate of Incorporation shall continue to be
the Certificate of Incorporation of said surviving corporation until amended and
changed pursuant to the provisions of the General Corporation Law of the State
of Delaware.
3. The present by-laws of the surviving corporation will be the by-laws of
said surviving corporation and will continue in full force and effect until
changed, altered or amended as therein provided and in the manner prescribed by
the provisions of the General Corporation Law of Delaware.
<PAGE>
4. The effective time of the Agreement of Merger, and the time when the
merger therein agreed upon shall become effective, shall be January 1, 1992.
Dated: December 10, 1991
Willis Corroon Corporation
By: /s/ Robert M. Coffee
-------------------------------------
Vice President
Attest:
/s/ Joseph V. Ambrose, Jr.
- -------------------------------------
Its: Assistant Secretary
<PAGE>
CERTIFICATE OF SECRETARY OF WILLIS CORROON CORPORATION
The undersigned, being Assistant Secretary of Willis Corroon Corporation, does
hereby certify that the foregoing Agreement of Merger has been adopted upon
behalf of said corporation pursuant to the provisions of Subsection (f) of
Section 251 of the General Corporation Law of the State of Delaware, and that,
as of the date of this Certificate, the outstanding shares of said corporation
were such as to render the provisions of said Subsection (f) applicable.
Dated: December 10, 1991
/s/ Joseph V. Ambrose, Jr.
-------------------------------------
Assistant Secretary of
Willis Corroon Corporation
<PAGE>
CERTIFICATE OF ASSISTANT SECRETARY OF WILLIS CORROON
CORPORATION OF TENNESSEE
The undersigned, being the Assistant Secretary of Willis Corroon Corporation of
Tennessee, does hereby certify that the foregoing Agreement of Merger has been
adopted upon behalf of said corporation pursuant to the provisions of Subsection
(f) of Section 251 of the General Corporation Law of the State of Delaware, and
that, as of the date of this Certificate, the outstanding shares of said
corporation were such as to render the provisions of said Subsection (f)
applicable.
Dated: December 10, 1991
/s/ Joseph V. Ambrose, Jr.
-------------------------------------
Assistant Secretary of Willis
Corroon Corporation of Tennessee
<PAGE>
AGREEMENT OF MERGER
OF
RELEX CORP.
(a Delaware corporation)
AND
WILLIS CORROON CORPORATION
(a Delaware corporation)
AGREEMENT OF MERGER approved on December 9, 1991 by Relex Corp., a
business corporation of the State of Delaware, and by resolution adopted by its
Board of Directors on said date, and approved on December 9, 1991, by Willis
Corroon Corporation, a business corporation of the State of Delaware, and by
resolution adopted by its Board of Directors on said date.
WHEREAS, Relex Corp. is a business corporation of the State of Delaware
with its registered office therein located at 32 Loockerman Square, Suite L-100,
City of Dover, County of Kent; and
WHEREAS the total number of shares of stock which Relex Corp. has
authority to issue is 25,000, all of which are of one class and of a par value
of $5.00 each; and
WHEREAS Willis Corroon Corporation is a business corporation of the State
of Delaware with its registered office therein located at 32 Loockerman Square,
Suite L-100, City of Dover, County of Kent; and
WHEREAS the total number of shares of stock which Willis Corroon
Corporation has authority to issue is 10,000, all of which are of one class and
of the par value of $.0100 each; and
WHEREAS Relex Corp. and Willis Corroon Corporation and the respective
Board of Directors thereof deem it advisable and to the advantage, welfare and
best interest of said corporations and their respective stockholders to merge
Relex Corp. with and into Willis Corroon Corporation pursuant to the provisions
of the General Corporation Law of the State of Delaware upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreement of the parties hereto, being thereunto duly approved by a resolution
adopted by the Board of Directors
<PAGE>
of Relex Corp. and duly approved by a resolution adopted by the Board of
Directors of Willis Corroon Corporation, the Agreement of Merger and the terms
and conditions thereof and the mode of carrying the same into effect, together
with any provisions required or permitted to be set forth therein, are hereby
determined and agreed upon as hereinafter in this Agreement set forth.
1. Relex Corp. and Willis Corroon Corporation shall, pursuant to the
provisions of the General Corporation Law of the State of Delaware, be merged
with and into a single corporation, to wit, Willis Corroon Corporation, which
shall be the surviving corporation from and after the effective time of the
merger, and which is sometimes hereinafter referred to as the "surviving
corporation", and which shall continue to exist as said surviving corporation
under its present name pursuant to the provisions of the General Corporation Law
of the State of Delaware.
The separate existence of Relex Corp. which is hereinafter sometimes referred to
as the "terminating corporation", shall cease at said effective time in
accordance with the provisions of the General Corporation Law of the State of
Delaware.
2. The Certificate of Incorporation of the surviving corporation as now in
force and effect, shall continue to be the Certificate of Incorporation of said
surviving corporation and said Certificate of Incorporation shall continue in
full force and effect until amended and changed in the manner prescribed by the
provisions of the General Corporation Law of the State of Delaware.
3. The present by-laws of the surviving corporation will be the by-laws of
said surviving corporation and will continue in full force and effect until
changed, altered or amended as therein provided and in the manner prescribed by
the provisions of the General Corporation Law of Delaware.
4. The directors and officers in office of the surviving corporation at
the effective time of the merger shall be the members of the first Board of
Directors and the first officers of the surviving corporation, all of whom shall
hold their directorships and offices until the election and qualification of
their respective successors or until their tenure is otherwise terminated in
accordance with the by-laws of the surviving corporation.
5. Each issued share of the terminating corporation shall, at the
effective time of the merger, be surrendered and extinguished. The issued shares
of the surviving corporation
<PAGE>
shall not be converted or exchanged in any manner, but each said share which is
issued as of the effective time of the merge shall continue to represent one
issued share of the surviving corporation.
6. In the event that this Agreement of Merger shall have been fully
adopted upon behalf of the terminating corporation and of the surviving
corporation in accordance with the provisions of the General Corporation Law of
the State of Delaware, the said corporations agree that they will cause to be
executed and filed and recorded any document or documents prescribed by the laws
of the State of Delaware, and that they will cause to be performed all necessary
acts within the State of Delaware and elsewhere to effectuate the merger herein
provided for.
7. The Board of Directors and the proper officers of the terminating
corporation and of the surviving corporation are hereby authorized, empowered
and directed to do any and all acts and things, and to make, execute, deliver,
file, and record any and all instruments, papers and documents which shall be or
become necessary, proper or convenient to carry out or put into effect any of
the provisions of this Agreement of Merger or of the merger herein provided for.
8. The effective time of the Agreement of Merger, and the time when the
merger therein agreed upon shall become effective, shall be January 1, 1992.
IN WITNESS WHEREOF, this Agreement of Merger is hereby signed and attested
upon behalf of each of the constituent corporations parties thereto.
Dated: December 10, 1991. Relex Corp.
By /s/ Robert M. Coffee
-----------------------------------
Its: Vice President
Attest:
/s/ Joseph V. Ambrose, Jr.
- -------------------------------------
Its: Assistant Secretary
Dated December 10, 1991.
Willis Corroon Corporation
By /s/ Robert M. Coffee
-----------------------------------
Its: Vice President
Attest:
/s/ Joseph V. Ambrose, Jr.
- -------------------------------------
Its: Assistant Secretary
<PAGE>
CERTIFICATE OF ASSISTANT SECRETARY
The undersigned, being the Assistant Secretary of Willis Corroon Corporation,
does hereby certify that the holders of all of the outstanding stock of said
corporation dispensed with a meeting and vote of stockholders, and all of the
stockholders entitled to vote consented in writing, pursuant to the provisions
of Section 228 of the General Corporation Law of the State of Delaware, to the
adoption of the foregoing Agreement of Merger.
Dated: December 10, 1991
/s/ Joseph V. Ambrose, Jr.
-------------------------------------
Assistant Secretary of
Willis Corroon Corporation
<PAGE>
CERTIFICATE OF ASSISTANT SECRETARY
The undersigned, being the Assistant Secretary Relex Corp., does hereby certify
that the holders of all of the outstanding stock of said corporation dispensed
with a meeting and vote of stockholders, and all of the stockholders entitled to
vote consented in writing, pursuant to the provisions of Section 228 of the
General Corporation Law of the State of Delaware, to the adoption of the
foregoing Agreement of Merger.
Dated: December 10, 1991
/s/ Joseph V. Ambrose, Jr.
-------------------------------------
Assistant Secretary of
Relex Corp.
<PAGE>
CERTIFICATE OF MERGER
OF
Golden Horseshoe Aviation, Inc.
INTO
Willis Corroon Corporation
The undersigned corporation
DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the constituent
corporation of the merger is as follows:
NAME STATE OF INCORPORATION
Golden Horseshoe Aviation, Inc. North Carolina
Willis Corroon Corporation Delaware
SECOND: That an Agreement of Merger between the parties to the merger has
been approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with the requirements of section 252 of
the General Corporation Law of Delaware.
THIRD: That the name of the surviving corporation is Willis Corroon
Corporation, a Delaware Corporation.
FOURTH: That the Restated Certificate of Incorporation of Willis Corroon
Corporation, a Delaware corporation which is surviving the merger, shall be the
certificate of Incorporation of the surviving corporation.
FIFTH: That the executed Agreement of Merger is on file at the principal
place of business of the surviving corporation, the address of which is 26
Century Blvd., Nashville, TN 37214.
SIXTH: That a copy of the Agreement of Merger will be furnished by the
surviving corporation, on request and without cost, to any stockholder of any
constituent corporation.
SEVENTH: The authorized capital stock of the foreign corporation which is
a party to the merger is as follows:
<PAGE>
<TABLE>
<CAPTION>
Par Value per
share or statement
that shares are
Corporation Class Number of Shares Without Par Value.
- ----------- ----- ---------------- ------------------
<S> <C> <C> <C>
Golden Horseshoe
Aviation, Inc. Common 100,000 $1.00
</TABLE>
EIGHTH: That this Certificate of Merger shall be effective at the close of
business on December 31, 1994.
Dated: December 14, 1994
Willis Corroon Corporation
By: /s/ Jane E. Nutson
-----------------------------------
Jane E. Nutson
Vice President & Secretary
<PAGE>
CERTIFICATE OF CHANGE OF REGISTERED AGENT
AND
REGISTERED OFFICE
*****
Willis Corroon Corporation, a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY: The present registered agent of the corporation is The Prentice- Hall
Corporation System, Inc., and the present registered office of the corporation
is in the count of Kent.
The Board of Directors of Willis Corroon Corporation adopted the following
resolution on the 21st day of August, 1995.
Resolved, that the registered office of Willis Corroon Corporation in the
State of Delaware be and it hereby is changed to Corporation Trust Center, 1209
Orange Street, in the City of Wilmington, County of New Castle, and the
authorization of the present registered agent of this corporation be and the
same is hereby withdrawn, and THE CORPORATION TRUST COMPANY, shall be and is
hereby constituted and appointed the registered agent of this corporation at the
address of its registered office.
IN WITNESS WHEREOF, Willis Corroon Corporation has caused this statement
to be signed by Bart R. Schwartz, its Senior Vice President and attested by Jane
E. Nutson, its Secretary this 21st day of August, 1995.
By /s/ Bart R. Schwartz
------------------------------------
Senior Vice President
ATTEST:
By: /s/ Jane E. Nutson
------------------------
Secretary
<PAGE>
Exhibit 3.2
BY-LAWS
OF
CORROON & BLACK CORPORATION
AS AMENDED
DECEMBER 6, 1989
<PAGE>
CORROON & BLACK CORPORATION
BY-LAWS
ARTICLE I.
OFFICES.
The Corporation shall maintain a registered office in the State of Delaware. In
addition, the Corporation may maintain such other offices and places of
business, both within and without the State of Delaware, as the Board of
Directors may determine or as the business and affairs of the Corporation may
require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS.
SECTION 1. PLACE OF MEETING. All meetings of the stockholders of the
Corporation shall be held at such place, within or without the State of
Delaware, as the Board of Directors shall determine.
SECTION 2. ANNUAL MEETINGS. The annual meeting of the stockholders for the
election of directors and for the transaction of such other business as may come
before the meeting shall be held on the last Thursday of April in each year, or
on such other date as may be fixed by resolution of the Board of Directors and
set forth in the notice of such meeting. At any such meeting or any adjournment
thereof, the stockholders shall elect a Board of Directors and transact any
other business authorized or required to be transacted by the stockholders.
SECTION 3. SPECIAL MEETINGS. Special meetings of the stockholders may be
called at any time by the Chairman of the Board, the Chairman of the Executive
Committee, the President or by order of the Board of Directors or of the
Executive Committee.
SECTION 4. NOTICE OF MEETINGS. Except as otherwise provided by statute,
written notice stating the place, day and hour of the meeting, and in the case
of a special meeting the purpose or purposes for which the meeting is called,
shall be given not less than ten (1O) nor more than sixty (60) days before such
meeting to each stockholder of record at such address as may appear on the stock
books of the Corporation.
SECTION 5. RECORD DATE. In order to determine the stockholders entitled to
notice of or to vote at any meeting of the stockholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution or
<PAGE>
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, and no more than sixty (60) days prior to any other action.
If no record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice of the meeting is given or at the close of business on the day
next preceding the day on which the meeting is held, and such date for any other
purpose shall be the date on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 6. LIST OF STOCKHOLDERS. The Secretary shall prepare, at least ten
(10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote, arranged in alphabetical order and showing the
address of each stockholder and the number of shares registered in his name. For
said ten (10) days such list shall be open to the examination of any stockholder
for any purpose germane to the meeting, during normal business hours, either at
a place within the city where said election is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place of
the meeting. The list shall also be produced and kept at the time and place of
any meeting during the whole time thereof, and subject to the inspection of any
stockholder who may be present.
SECTION 7. QUORUM. At all meetings of the stockholders, the holders of a
majority of the issued and outstanding stock of the Corporation entitled to vote
thereat, present either in person or by proxy, shall constitute a quorum for the
transaction of business except where otherwise provided by law, by the
Certificate of Incorporation or by these by-laws. In the absence of a quorum,
the presiding officer of the meeting shall have the power to adjourn the meeting
from time to time without notice other than announcement at the meeting until
the requisite amount of stock shall be represented. At any such adjourned
meeting at which a quorum may be present any business may be transacted which
might have been transacted at the meeting as originally called.
SECTION 8. ORGANIZATION. At every meeting of the stockholders the Chairman
of the Board, or in his absence, the President, or in the absence of both, the
Chairman of the Executive Committee or in the absence of all three, any Vice
President, or in the absence of all of said persons, a chairman
<PAGE>
chosen by the stockholders present in person and by proxy and entitled to vote
thereat, by majority vote, shall act as chairman. To the maximum extent
permitted by law, such chairman shall have the power to set procedural rules
governing all aspects of the meeting, including the order of business.
SECTION 9. VOTING. Except as provided in the Certificate of Incorporation,
each stockholder entitled to vote in accordance with the terms of the
Certificate of Incorporation and in accordance with the provisions of these
by-laws shall be entitled to one vote, in person or by proxy, for each share of
stock entitled to vote held by such stockholder, but no proxy shall be voted
after three years from its date unless such proxy provides for a longer period.
The vote for directors and, upon demand of any stockholder, the vote upon any
questions before the meeting shall be by ballot. All matters shall be decided by
a majority of shares present in person or by proxy and entitled to vote, except
as otherwise provided by law, the Certificate of Incorporation or by these
by-laws.
SECTION 10. INSPECTORS OF ELECTION. All elections of directors and all
votes where a ballot is required shall be conducted by two inspectors of
election who shall be appointed by the Board of Directors; but in the absence of
such appointment by the Board of Directors, the chairman of the meeting shall
appoint such inspectors who shall not be directors or candidates for the office
of director.
ARTICLE III.
BOARD OF DIRECTORS.
SECTION 1. GENERAL POWERS. The property, affairs and business of the
Corporation shall be managed by the Board of Directors.
SECTION 2. NUMBER, QUALIFICATION AND TERM OF OFFICE. The number of
directors shall be not less than nine (9) nor more than seventeen (17), as may
be fixed from time to time by resolution of the Board of Directors. Directors
need not be stockholders. The term of office of each director, subject to the
provisions of the Certificate of Incorporation and except as herein limited,
shall be until the next annual meeting of stockholders following his election
and until his successor shall be duly elected and qualified or until his death,
or until he shall resign or shall have been removed in the manner hereinafter
provided in Section 11 of this Article.
SECTION 3. ELECTION OF DIRECTORS. The directors of the Corporation shall
be elected annually at the annual meeting of stockholders.
SECTION 4. QUORUM AND MANNER OF ACTING. Except as otherwise provided by
statute or by these by-laws, one-third of the number of directors at that time
fixed by resolution of the Board of Directors shall constitute a quorum for the
transaction of
<PAGE>
business at any meeting, and the act of a majority of the directors present at
any meeting at which a quorum is present shall be the act of the Board of
Directors. In the absence of a quorum, a majority of the directors present may
adjourn any meeting from time to time until a quorum be available. Notice of any
adjourned meeting need not be given.
SECTION 5. PLACE OF MEETINGS, OFFICES AND RECORDS. The Board of Directors
may have one or more offices and keep the books and records of the Corporation
within or without the State of Delaware, and may hold its meetings at such
places as the Board may determine from time to time.
SECTION 6. ANNUAL MEETING. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual election of directors on the
same day and at the same place at which regular meetings of the Board are held
and notice of such meeting need not be given; such meeting, however, may be held
at any other time or place which shall be specified in a notice given as
hereinafter provided for special meetings of the Board of Directors or in a
waiver of notice thereof signed by all the directors.
SECTION 7. REgULAR MEETINGS. Regular meetings of the Board of Directors
shall be held at such places and at such times as the Board shall from time to
time by resolution determine. If any day fixed for a regular meeting shall be a
legal holiday at the place where the meeting is to be held, then the meeting
which would otherwise be held on that day shall be held at the same hour on the
next succeeding business day not a legal holiday. Notice of regular meetings
need not be given.
SECTION 8. SPECIAL MEETINGS; NOTICE. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board or by the
Chairman of the Executive Committee or by the President or by order of the
Executive Committee. Notice of each such meeting shall be mailed to each
director addressed to such director at his residence or his usual place of
business at least two days prior to such meeting or shall be sent to each
director by telegram, by telephone, by facsimile transmission, radio or cable,
or personally, at least twenty-four (24) hours before the meeting is to be held.
Every such notice shall state the time and place of the meeting but need not
state the purposes thereof except as otherwise expressly provided in these
by-laws. Notice of any meeting of the Board need not be given to any director,
however, if waived by him in writing or by telegraph or cable, whether before or
after such meeting is to be held, or if he shall be present at the meeting; and
any meeting of the Board shall be a legal meeting without any notice thereof
having been given, if all of the directors shall be present thereat.
SECTION 9. ORGANIZATION. At each meeting of the Board of Directors, the
Chairman of the Board, or in his absence the President, or in the absence of
both, the Chairman of the Executive Committee, or in the absence of all three,
any Vice
<PAGE>
President chosen by a majority of the Directors present, or in the absence of
all of said persons, a director chosen by a majority of the Directors present,
shall act as chairman. To the maximum extent permitted by law, such chairman
shall have the power to set procedural rules governing all aspects of the
meeting, including the order of business.
SECTION 10. RESIGNATIONS. Any director of the Corporation may resign at
any time upon written notice to the Corporation. The resignation of any director
shall take effect at the time specified therein; and unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
SECTION 11. REMOVAL OF DIRECTORS. Subject to the provisions of the
Certificate of Incorporation, any director may be removed, either with or
without cause, at any time by the affirmative vote of a majority in interest of
the holders of record of the stock having voting power at any meeting of the
stockholders called for the purpose; and the vacancy in the Board caused by any
such removal may be filled at such meeting by the stockholders entitled to vote
thereat.
SECTION 12. VACANCIES. Any vacancy in the Board of Directors caused by
death, resignation, removal, disqualification, an increase in the number of
directors, or any other cause, may be filled by the majority vote of the
remaining directors then in office or by the stockholders of the Corporation at
the next annual meeting or any special meeting called for the purpose and each
director so elected, shall, except as otherwise provided, hold office for a term
to expire at the next annual election of directors, and until his successor
shall be duly elected and qualified, or until his death or until he shall resign
or shall have been removed in the manner provided in Section 11 of this Article.
SECTION 13. FEES. Each director shall be paid such fee, if any, as shall
be fixed by the Board of Directors, for each meeting of the Board which he shall
attend and in addition such transportation and other expenses actually and
reasonably incurred by him in going to the meeting and returning therefrom.
SECTION 14. MEETINGS BY CONFERENCE TELEPHONE. The Board of Directors and
any committee designated by the Board may participate in a meeting of the Board
or such committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this subsection shall
constitute presence in person at such meeting.
ARTICLE IV.
COMMITTEES.
SECTION 1. EXECUTIVE COMMITTEE. The Board of Directors, by
<PAGE>
a resolution passed by a majority of the whole Board, may designate such number
of their members, not less that two (2), as it may from time to time determine,
to constitute and Executive Committee, each member of which, unless otherwise
determined by the Board, shall continue to be a member thereof until the
expiration of his term of office as a director. The Chairman of the Executive
Committee or, in his absence, the Chairman of the Board, or in the absence of
both, the President, shall preside at meetings of the Executive Committee and
the Secretary of the Corporation shall act as secretary thereof.
The Board may designate one or more directors as alternate members of the
Executive Committee who may replace any absent or disqualified member at any
meeting of the Committee. In the absence or disqualification of a member of the
Executive Committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member. The Board of
Directors shall have power to change the members of the Executive Committee at
any time, to fill vacancies, and to discharge such committee, either with or
without cause, at any time.
SECTION 2. POWERS. During the intervals between the meetings of the
directors, the Executive Committee shall have, and may exercise, all of the
powers of the Board of Directors in the management of the business and affairs
of the Corporation, including the power to authorize the issuance of stock of
the Corporation to employees of it or its subsidiaries, in such manner as the
Executive Committee shall deem for the proper interest of the Corporation in all
cases in which specific directions shall not have been given by the Board of
Directors, except that the Executive Committee shall not have the power or
authority in reference to amending the Certificate of Incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the by-laws of the Corporation; and,
unless specifically authorized to do so by the Certificate of Incorporation,
these by-laws or by a resolution of the Board of Directors, no such committee
shall have the powers or authority to declare a dividend or to authorize the
issuance of stock.
All actions by the Executive Committee shall be reported to the Board of
Directors at its meeting next succeeding such action, and shall be subject to
revision or alteration by the Board of Directors; provided that no rights or
acts of third parties shall be affected by any such revision or alteration.
SECTION 3. PROCEDURE; MEETINGS; QUORUM. The Executive Committee shall fix
its owns rules of procedure, and shall meet at such times and at such place or
places as may be provided by
<PAGE>
such rules, or by resolution of the Executive Committee or of the Board of
Directors. At every meeting of the Executive Committee the presence of at least
a majority of the members shall be necessary to constitute a quorum and the
affirmative vote of at least a majority of the members present shall be
necessary for the adoption by it of any resolution.
SECTION 4. OTHER COMMITTEES. The Board of Directors, by resolution passed
by a majority of the whole Board, may designate members of the Board to
constitute other committees, which shall in each case consist of such number of
directors and shall have and may exercise such powers as the Board may determine
and specify in the respective resolutions appointing them. A majority of all
members of any such committee may determine its action and fix the time and
place of its meetings, unless the Board of Directors shall otherwise provide.
The Board of Directors shall have power to change the members of any such
committee at any time, to fill vacancies, and to discharge any such committee,
either with or without cause, at any time.
SECTION 5. FEES. Each member of the Executive Committee and any other
committee shall be paid such fee, if any, as shall be fixed by the Board of
Directors or the Executive Committee for each meeting of the Executive Committee
and any other committee which he shall attend and in addition such
transportation and other expenses actually and reasonably incurred by him in
going to the meeting and returning therefrom.
ARTICLE V.
OFFICERS.
SECTION 1. OFFICERS. The officers of the Corporation shall be a Chairman
of the Board, a President, a Chief Executive Officer, a Chief Operating Officer,
one or more Vice Presidents, a Treasurer, a Controller and a Secretary and such
other officers as may be appointed in accordance with Section 4 of this Article.
One person may hold the offices and perform the duties of any two of said
offices, except those of: President and Vice President; Secretary and Assistant
Secretary; Vice President and Assistant Vice President; Controller and Assistant
Controller; or Treasurer and Assistant Treasurer.
SECTION 2. ELECTION, TERM OF OFFICE AND QUALIFICATION. The officers shall
be elected annually by the Board of Directors. Each officer, except such
officers as may be appointed in accordance with provisions of Section 4 of this
Article, shall hold office until his successor shall have been duly elected and
qualified in his stead, or until his death or until he shall gave resigned or
shall gave been removed in the manner hereinafter provided. The Chairman of the
Board and the President shall be chosen from among the Directors.
SECTION 3. DIVISION OFFICERS. The Board of Directors may by resolution
provide that any part of the business of the
<PAGE>
Corporation shall be conducted under the name of a Division, or Divisions, with
such title or titles as shall be adopted by the Board; and provide for Division
officers, whose powers and duties, except as otherwise specifically provided by
resolution of the Board of Directors or the Executive Committee, shall be
limited to that part of the business of the Corporation which is conducted in
the name of the Division of which they are officers.
The officers of each Division so created by the Board shall be a
President, one or more Vice Presidents and a Treasurer. The Board of Directors
may also, at its discretion, elect a chairman of any division and define his
powers. The Board of Directors or the Executive Committee may also elect or
appoint subordinate officers of each Division as provided in Section 4 of this
Article. An officer elected or appointed as an officer of the Corporation
pursuant to this Article may also be elected or appointed an officer of any
Division or Divisions, with the same or a different title.
SECTION 4. SUBORDINATE OFFICERS. The Board of Directors or the Executive
Committee may from time to time elect or appoint such other officers of
committees as it may deem necessary for the conduct of the business of the
Corporation or of any Division thereof, including one or more Assistant Vice
Presidents, one or more Assistant Secretaries, one or more Assistant Controllers
and one or more Assistant Treasurers. Such officers and committees shall hold
office for such period, have such authority and perform such duties as provided
in these by-laws or as may be prescribed by the Board, the Executive Committee
of the officer making the appointment.
SECTION 5. REMOVAL AND RESIGNATION. Any officer may be removed, either
with or without cause, by the vote of a majority of the whole Board of Directors
at any meeting called for the purpose, or, except in the case of an officer
elected by the Board of Directors, by any committee or superior officer upon
whom the power of removal may be conferred by the Board of Directors or by these
by-laws.
Any officer may resign at any time by giving written notice of resignation
to the Corporation. Any such resignation shall take effect at the date of
receipt of such notice by the Corporation or at any later date specified or
provided for therein; and, unless otherwise specified therein, acceptance of
such resignation shall not be necessary to make it effective.
SECTION 6. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or for any other cause may be filled for
the unexpired portion of the term in the manner prescribed in there by-laws for
regular election or appointment to such office.
SECTION 7. CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside
at all meetings of stockholders and of the Board of Directors. He shall be a
member of the Executive
<PAGE>
Committee, unless the Board of Directors shall, by resolution, otherwise
determine. He shall, at each annual meeting and from time to time, report to the
stockholders and to the Board of Directors all matters under his jurisdiction of
which he has knowledge, which the interest of the Corporation may require be
brought to their notice. In general, he shall perform all duties incident to the
office of Chairman of the Board and such of the duties as may be assigned him by
the Board of Directors or Executive Committee or as are prescribed by these
by-laws. In the absence or incapacity of the Chairman of the Board, his duties
as Chairman shall be performed by the President.
SECTION 8. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have
the responsibility for carrying out the policies of the Board of Directors and,
subject to the control of the Board, shall provide general leadership in matters
of policy and planning and have general and active charge, control and
supervision of the property, business and affairs of the Corporation. The Chief
Executive Officer shall be either the Chairman of the Board or the President,
unless the Board of Directors shall, by resolution, otherwise determine.
SECTION 9. PRESIDENT. The President shall perform such duties as may from
time to time be assigned to him by the Board of Directors or the Executive
Committee. He shall be a member of the Executive Committee unless the Board of
Directors, shall, by resolution, otherwise determine. He shall at each annual
meeting and from time to time report to the stockholders and to the Board of
Directors all matters under his jurisdiction of which he has knowledge which the
interest of the Corporation may require to be brought to their notice. He shall,
in the absence of the Chairman of the Board, preside at all meetings of the
stockholders and of the Board of Directors.
SECTION 10. CHIEF OPERATING OFFICER. The Chief Operation Officer shall
assist the Chief Executive Officer in the control and supervision of the
property, business and affairs of the Corporation. The Chief Operating Officer
shall be either the President or a Vice-President unless the Board of Directors
shall, by resolution, otherwise determine.
SECTION 11. VICE PRESIDENTS. During the absence or disability of the
Chairman of the Board and the President to perform their duties or exercise
their powers as set forth in these by-laws or in the law under which the
Corporation exists, their powers shall be performed by a Vice President, and
when so acting, he shall have all the powers and be subject to all the
responsibilities hereby given to or imposed upon the officer for whom he is
acting. Any Vice President shall perform such other duties as may from time to
time be assigned to him by the Board of Directors, the Executive Committee, the
Chief Executive Officer of the Chief Operating Officer.
SECTION 12. ASSISTANT VICE PRESIDENTS. At the request of a Vice President
or in his absence or disability, any Assistant
<PAGE>
Vice President shall have power to perform all the duties or the Vice President
and, when so acting, shall have all the powers of and be subject to all the
restrictions upon the Vice President. The Assistant Vice Presidents shall
perform such other duties as from time to time may be assigned to them by the
Board of Directors, the Executive Committee, the Chief Executive Officer, the
Chief Operating Officer or, in the case of Division officers, by the President
of the Division.
SECTION 13. THE SECRETARY. The Secretary shall keep or cause to be kept in
books provided for the purpose the minutes of the meetings of the stockholders,
of the Board of Directors and of the Executive Committee; shall see that all
notices are duly given in accordance with the provisions of these by-laws and as
required by law; shall be custodian of the records and of the seal of the
Corporation and see that the seal is affixed to all documents the execution of
which on behalf of the Corporation under its seal is duly authorized; shall keep
directly or through a transfer agent a register of the post office address of
each stockholder, and make all proper in such register, retaining and filing his
authority for all such entries; shall see that the books, reports, statements,
certificates and all other documents and records required by law are properly
kept and filed; and in general, the Secretary shall perform duties incident to
the office of Secretary and such other duties as my from time to time be
assigned to him by the Board of Directors or the Executive Committee, or by the
Chief Executive Officer or the Chief Operating Officer.
SECTION 14. ASSISTANT SECRETARIES. At the request of the Secretary or in
his absence or disability, any Assistant Secretary shall have power to perform
all the duties of the secretary and, when so acting, shall have all the powers
of, and be subject to all the restrictions upon, the Secretary. The Assistant
Secretaries shall perform such other duties as from time to time may be assigned
to them by the Board of Directors or the Executive Committee, or by the Chief
Executive Officer or the Chief Operating Officer.
SECTION 15. THE TREASURER. The Treasurer shall give such bond for the
faithful performance of his duties as the Board of Directors shall require. He
shall have charge and custody of, and be responsible for, all funds and
securities of the Corporation, and deposit all such funds in the name of the
Corporation in such banks, trust companies or other depositaries as shall be
selected in accordance with the provisions of these by-laws; at all reasonable
times exhibit his books of account and records of any corporation all of whose
stock except directors' shares is owned by the Corporation, to any of the
directors of the Corporation upon application during business hours at the
office of the Corporation, or such other corporation, where such books and
records are kept; render a statement of the condition of the finances of the
Corporation at all regular meetings of the Board of Directors, and a full
financial report at the annual meeting of the stockholders, if called upon to do
so; receive,
<PAGE>
and give receipts for, moneys due and payable to the Corporation from any source
whatsoever; and in general, perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the Board of Directors or the Executive Committee, or the Chief Executive
Officer or the Chief Operating Officer.
SECTION 16. ASSISTANT TREASURERS. At the request of the Treasurer or in
his absence or disability, any Assistant Treasurer shall have power to perform
all the duties of the Treasurer, and when so acting, shall have all the powers
of, and be subject to all the restriction upon, the Treasurer. The Assistant
Treasurers shall perform such other duties as from time to time may be assigned
to them by the Board of Directors or the Executive Committee, or the Chief
Executive Officer or the Chief Operating Officer.
SECTION 17. CONTROLLER. The Controller shall be the chief accounting
officer of the Corporation. He shall keep or cause to be kept all books of
account and accounting records of the Corporation and shall render to the
Chairman, the President and the Board of Directors whenever they may require it,
a report of the financial condition of the Corporation. He shall have such other
powers and duties as shall be assigned to him by the Board of Directors or the
Executive Committee, or the Chief Executive Officer or the Chief Operating
Officer.
SECTION 18. ASSISTANT CONTROLLER. At the request of the Controller or in
his absence or disability, any Assistant Controller shall have power to perform
all the duties of the Controller, and when so acting, shall have all the powers
of, and be subject to all the restrictions upon, the Controller. The Assistant
Controller shall perform such other duties as from time to time may be assigned
to them by the Board of Directors or the Executive Committee, or the Chief
Executive Officer or the Chief Operating Officer.
SECTION 19. SALARIES. The salaries of the officers, including Division
officers, shall be fixed from time to time by the Board of Directors or a
committee designated by the Board. No officer shall be prevented from receiving
such salary by reason of the fact that he is also a director of the Corporation.
ARTICLE VI.
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 1. CONTRACTS. The Board of Directors, or the Executive Committee,
except as in these by-laws otherwise provided, may authorize any officer or
officers, agent or agents, of the Corporation to enter into any contract or
execute and deliver any instrument in the name of and on behalf of the
Corporation and such authority may be general or confined to specific instances;
and, unless so authorized by the Board of Directors or by the Executive
Committee or by these by-laws, no
<PAGE>
officer, agent of employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable pecuniarily for any purpose or to any amount.
SECTION 2. LOANS. No loan shall be contracted on behalf of the
Corporation, and no negotiable paper shall be issued in its name, unless
authorized by the Board of Directors or by the Executive Committee. When so
authorized, the Chairman of the Board, the President or any Vice President, and
the Secretary or the Treasurer or any Assistant Secretary or any Assistant
Treasurer of the Corporation may effect loans and advances at any time for the
Corporation from any bank, trust company or other institution, or from any firm,
corporation or individual, and for such loans and advances may make, execute and
deliver promissory notes or other evidences of indebtedness of the Corporation
and, when authorized as aforesaid, as security for the payment of any and all
loans, advances, indebtedness and liabilities of the Corporation , may mortgage,
pledge, hypothecate or transfer any real or personal property at any time held
by the Corporation and to that end execute instruments of mortgage or pledge or
otherwise transfer such property. Such authority may be general or confined to
specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the
payment of money, notes, or other evidences of indebtedness issued in the name
of the Corporation, shall be signed by such officer or officers, employee or
employees, of the Corporation as shall from time to time be determined by the
Board of Directors or the Executive Committee.
SECTION 4. DEPOSITS. All funds of the Corporation shall be deposited from
time to time to the credit of the Corporation in such banks, trust companies or
other depositaries as the Board of Directors or the Executive Committee may from
time to time designate, or as may be designated by any officer or officers of
the Corporation to whom such power may be delegated by the Board of Directors,
or by the Executive Committee, and for the purpose of such deposit, the Chairman
of the Board, the President, or any Vice President, or the Treasurer, or any
Assistant Treasurer, or the Secretary, or any Assistant Secretary, may endorse,
assign and deliver checks, drafts, and other orders for the payment of money
which are payable to the order of the Corporation.
SECTION 5. GENERAL AND SPECIAL BANK ACCOUNTS. The Board of Directors or
the Executive Committee may from time to time authorize the opening and keeping
with such bank, trust companies or other depositaries as it may designate of
general and special bank accounts, and may make such special rules and
regulations, with respect thereto, not inconsistent with the provisions of these
by-laws, as it may deem expedient.
SECTION 6. PROXIES. Except as otherwise in these by-laws or in the
Certificate of Incorporation of the Corporation provided, and unless otherwise
provided by resolution of the
<PAGE>
Board of Directors, or of the Executive Committee, the chairman of the Board,
the President or any Vice President may from time to time appoint an attorney or
attorneys or agent or agents, of the Corporation, in the name and on behalf of
the Corporation to cast the votes which the Corporation may be entitled to cast
as a stockholder or otherwise in any other corporation any of whose stock or
other securities may be held by the Corporation, at meetings of the holders of
the stock or other securities of such other corporations, or to consent in
writing to any action by such other corporation, and may instruct the person or
persons so appointed as to the manner of casting such votes or giving such
consent, and may execute or cause to be executed in the name and on behalf of
the Corporation and under its corporate seal, or otherwise, all such written
proxies or other instruments as he may deem necessary or proper in the premises.
<PAGE>
ARTICLE VII.
SHARES AND THEIR TRANSFER.
SECTION 1. CERTIFICATES OF STOCK. Certificates for shares of the capital
stock of the Corporation shall be numbered and shall be entered in the books of
the Corporation as they are issued. They shall exhibit the holder's name and
certify the number of shares owned by him and shall be signed by, or in the name
of the Corporation by the Chairman of the Board, the President or a Vice
President and the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Corporation; provided, however that where any such
certificate is signed by a transfer agent acting on behalf of the Corporation or
by a registrar, any and all other signatures on the certificates may be
facsimiled, printed or engraved.
The stock record books and the blank stock certificate books shall be kept
by the Secretary or by a transfer agent or by any other officer or agent
designated by the Board of Directors or by the Executive Committee.
SECTION 2. TRANSFER OF STOCK. Transfers of shares of the capital stock of
the Corporation shall be make only on the books of the Corporation by the holder
thereof, or by his attorney thereunto authorized by a power of attorney duly
executed and filed with the Secretary of the Corporation, or a transfer agent of
the Corporation, if any, and on surrender of the certificate or certificates for
such shares properly endorsed. A person in whose name shares of stock stand on
the books of the Corporation shall be deemed the owner thereof as regards the
corporation, and upon any transfer of shares of stock the person or persons into
whose name or names such shares shall have been transferred on the books of the
Corporation shall be substituted for the person or persons out of whose name or
names such shares shall have been transferred, with respect to all rights,
privileges and obligations of holders of stock of the Corporation and as against
the Corporation or any other person or persons. The term "person" or "persons"
wherever used therein shall be deemed to include any firm, corporation or
association. Whenever any transfer of shares shall be made for collateral
security, and not absolutely, such fact, if known to the Secretary or to said
transfer agent, shall be so expressed in the entry of transfer.
SECTION 3. ADDRESSES OF STOCKHOLDERS. Each stockholder shall designate to
the Secretary of the Corporation an address at which notices of meetings and all
other corporate notices may be served or mailed to him, and if any stockholder
shall fail to designate such address, corporate notices may be served upon him
by mail directed to him at his last known post office address.
SECTION 4. LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. The holder
of any stock of the Corporation shall immediately notify the Corporation of any
loss, theft, destruction or mutilation of the certificate therefor, and the
<PAGE>
Board of Directors or the Executive Committee may, in its discretion, cause to
be issued to him a new certificate or certificates of stock, upon the surrender
of the mutilated certificate or, in case of loss, theft, or destruction of the
certificate, upon satisfactory proof of such loss, theft, or destruction, and,
the Board of Directors or the Executive Committee may, in its discretion,
require the owner of the lost, stolen or destroyed certificate or his legal
representative to give the Corporation an adequate bond, and with such surety or
sureties, as it may direct, to indemnify the Corporation against any claim that
may be made against it on account of alleged loss, theft or destruction of any
such certificate.
SECTION 5. TRANSFER AGENT AND REGISTRAR; REGULATION. The Corporation
shall, if and whenever the Board of Directors or the Executive Committee shall
so determine, maintain one or more transfer offices or agencies, each in charge
of a transfer agent designated by the Board of Directors of by the Executive
Committee, where the shares of the capital stock of the Corporation shall be
directly transferable, and also one or more registry offices, each in charge of
a Registrar designated by the Board of Directors or by the Executive Committee,
where such shares of stock shall be registered, and no certificate for shares of
the capital stock of the Corporation, in respect of which a Transfer Agent or
Registrar shall have been designated, shall be valid unless countersigned by
such Transfer agent and registered by such Registrar. The Board of Directors or
the Executive Committee may also make such additional rules and regulations as
it may deem expedient concerning the issue, transfer and registration of
certificates for shares of the capital stock of the Corporation.
SECTION 6. EXAMINATION OF BOOKS BY STOCKHOLDERS. The Board of Directors or
the Executive Committee shall, subject to the laws of the State of Delaware,
have power to determine from time to time whether and to what extent and under
what conditions and regulations the accounts and books of the Corporation, or
any of them, shall be open to the inspection of the stockholders; and no
stockholder shall have any right to inspect any book or document of the
Corporation, except as conferred by the laws of the State of Delaware, unless
and until authorized so to do by resolution of the Board of Directors or the
Executive Committee or of the stockholders of the Corporation.
ARTICLE VIII.
DIVIDENDS, SURPLUS, ETC.
Subject to the provisions of the Certificate of Incorporation and any
restrictions imposed by statute, the Board of Directors may declare dividends
from the net assets of the Corporation in excess of its capital, or out of net
profits or out of any funds at the time legally available for the declaration of
dividends, (hereinafter referred to as "surplus or net profits") whenever, and
in such amounts as, in its sole
<PAGE>
discretion, the condition of the affairs of the Corporation shall render
advisable. The Board of Directors in its sole discretion may in accordance with
law from time to time set aside from surplus or net profits such sum or sums as
it, in its absolute discretion, may think proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for the purpose of maintaining or
increasing the property or business of the Corporation, or for any other purpose
it may think conductive to the best interests of the Corporation.
ARTICLE IX.
INDEMNIFICATION.
SECTION 1. RIGHT TO INDEMNIFICATION. The Corporation shall to the fullest
extent permitted by applicable law indemnify any person who is or was a director
or officer of the Corporation (the "Indemnity") and who is or was involved in
any manner (including, without limitation, as a party or a witness) or is
threatened to be made so involved in any threatened, pending or completed
investigation, claim, action, suit or proceeding, whether civil, criminal,
administrative or investigative (including, without limitation, any action, suit
or proceeding by or in the right of the Corporation to procure a judgment in its
favor) (a "Proceeding") by reason of the fact that he is or was a director or
officer of the Corporation or is or was serving, at the request of the
Corporation, as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise (including, without
limitation, any employee benefit plan) against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonable incurred by him in connection with such Proceeding; provided,
however, that except for a Proceeding initiated by a person pursuant to Section
4(d) hereof, seeking to enforce such person's right to indemnification
hereunder, the Corporation shall indemnify a person in connection with a
Proceeding (or part thereof) initiated by such person only if such Proceeding
(or part thereof) has been approved by the Board of Directors of the
Corporation. The indemnification provided for in this Article shall be a
contract right and shall include the right to receive payment in advance of any
expenses incurred by the Indemnity in connection with such Proceeding,
consistent with the provisions of applicable law. The Corporation, by action of
its Board of Directors, may provide indemnification to employees and agents of
the Corporation and to any person serving, at the request of the Corporation, as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise (including, without limitation, any
employee benefit plan) in the same manner and with the same scope and effect as
that provided to any Indemnity pursuant to this Article.
SECTION 2. INSURANCE, CONTRACTS AND FUNDING. The Corporation may purchase
and maintain insurance to protect itself and any Indemnity against any expenses,
judgments, fines and
<PAGE>
amounts paid in settlement as specified in Section 1 of this Article or incurred
by any Indemnity in connection with any Proceeding referred to in Section 1 of
this Article, to the fullest extent permitted by applicable law as then in
effect. The Corporation may enter into contracts with any Indemnity in
furtherance of the provisions of this Article and may create a trust fund, grant
a security interest or use other means (including, without limitation, a letter
of credit) to ensure the payment of such amounts as may be necessary to effect
indemnification as provided by this Article.
SECTION 3. INDEMNIFICATION; NOT EXCLUSIVE RIGHT. The right of
indemnification provided in this Article shall not be exclusive of any other
rights to which those seeking indemnification may otherwise be entitled, and the
provisions of this Article shall inure to the benefit of the heirs and legal
representatives of any person entitled to indemnity under this Article and shall
be applicable to Proceedings commenced or continuing after the adoption of this
Article, whether arising from acts or omissions occurring before or after such
adoption.
SECTION 4. ADVANCEMENT OF EXPENSES; PROCEDURES; PRESUMPTIONS AND EFFECT OF
CERTAIN PROCEEDINGS; REMEDIES. In furtherance, but not in limitation of the
foregoing provisions, the following procedures, presumptions and remedies shall
apply with respect to advancement of expenses and the right to indemnification
under this Articles:
(a) ADVANCEMENT OF EXPENSES. All reasonable expenses incurred by or
on behalf of the Indemnity in connection with any Proceeding shall be advanced
to the Indemnity by the Corporation within 20 days after the receipt by the
Secretary of the Corporation of a written statement or statements from the
Indemnity requesting such advance or advances from time to time, whether prior
to or after final disposition of such Proceeding. Such statement or statements
shall reasonably evidence the expenses incurred by the Indemnity and shall be
accompanied by such documentation and information as is reasonably available to
the Indemnity regarding the Proceeding. If required by law at the time of such
advance, the Corporation shall be entitled, as a condition to such advance, to a
written undertaking by or on behalf of the Indemnity to repay the amounts
advanced if it should ultimately be determined that the Indemnity is not
entitled to be indemnified against such expenses pursuant to this Article.
(b) Procedure for Determination of Entitlement to Indemnification.
(i) To Obtain indemnification under this Article, an Indemnity
shall submit to the Secretary of the Corporation a written request, including
such documentation and information as is reasonable available to the Indemnity
and reasonably necessary to determine whether and to what extent the Indemnity
is entitled to indemnification (the "Supporting Documentation"). The
<PAGE>
determination of the Indemnity's entitlement to the indemnification shall be
made not later than 60 days after receipt by the Corporation of the written
request for indemnification together with the Supporting Documentation. The
Secretary of the Corporation shall, promptly upon receipt of such a request for
indemnification, advise the Board of Directors in writing that the Indemnity has
requested indemnification.
(ii) The Indemnity's entitlement to indemnifi-cation under this
Article shall be determined in one of the following ways: (A) by a majority vote
of the Disinterested Directors (as hereinafter defined), if they constitute a
quorum of the Board of Directors; (B) by a written opinion of Independent
Counsel (as hereinafter defined) if (x) a Change of Control (as hereinafter
defined) shall have occurred and the Indemnity so requests or (y) a quorum of
the Board of Directors consisting of Disinterested Directors is not obtainable
or, even if obtainable, a majority of such Disinterested Directors so directs;
(C) by the stockholders of the Corporation (but only if a majority of the
Disinterested Directors, if they constitute a quorum of the Board of Directors,
presents the issue of entitlement to indemnification to the stockholders for
their determination); or (D) as provided in Section 4(c).
(iii) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section
4(b)(ii), a majority of the Disinterested Directors shall select the Independent
Counsel, but only an Independent Counsel to which the Indemnity does not
reasonably object; provided, however, that if a Change of Control shall have
occurred, the Indemnity shall select such Independent Counsel, but only an
Independent Counsel to which a majority of the Disinterested Directors does not
reasonably object.
(c) PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS. Except as
otherwise expressly provided in this Article, the Indemnity shall be presumed to
be entitled to indemnification under this Article upon submission of a request
for indemnification together with the Supporting Documentation in accordance
with Section 4(b)(i), and thereafter the Corporation shall have the burden of
proof to overcome that presumption in reaching a contrary determination. In any
event, if the person or persons empowered under section 4(b) to determine
entitlement to indemnification shall not have been appointed and shall not have
made a determination within sixty (60) days after receipt by the Corporation of
the request therefor together with the Supporting Documentation, the Indemnity
shall be deemed to be entitled to indemnification and the Indemnity shall be
entitled to such indemnification unless (i) the Indemnity misrepresented or
failed to disclose a material fact in making the request for indemnification or
in the Supporting Documentation or (ii) such indemnification is prohibited by
law. The termination of any Proceeding described in Section 1, or of any claim,
issue or matter therein, by judgment, order, settlement or conviction, or upon a
plea of NOLO CONTERDERE or its equivalent, shall not, of
<PAGE>
itself, adversely affect the right of the Indemnity to indemnification or create
a presumption that the Indemnity did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
Corporation, or with respect to any criminal Proceeding, that the Indemnity had
reasonable cause to believe that his conduct was unlawful.
(d) Remedies of Indemnity.
(i) In the event that a determination is made pursuant to Section
4(b), that the Indemnity is not entitled to indemnification under this Article,
(A) the Indemnity shall be entitled to seek an adjudication of his entitlement
to such indemnification either, at the Indemnity's sole option, in (x) an
appropriate court of the State of Delaware of any other court of competent
jurisdiction or (y) an arbitration to be conducted by a single arbitrator
pursuant to the rules of the American Arbitration Association; (B) any such
judicial proceeding or arbitration shall be DE NOVO and the Indemnity shall not
be prejudiced by reason of such adverse determination; and (c) in any such
judicial proceeding or arbitration the Corporation shall have the burden of
proving that the Indemnity is not entitled to indemnification under this
Article.
(ii) If a determination shall have been made or deemed to have been
made, pursuant to Section 4(b) or (c), that the Indemnity is entitled to
indemnification, the Corporation shall be obligated to pay the amounts
constituting such indemnification within five days after such determination has
been made or deemed to have been made and shall be conclusively bound by such
determination unless (A) the Indemnity misrepresented or failed to disclose a
material fact in making the request for indemnification or in the Supporting
Documentation or (B) such indemnification is prohibited by law. In the event
that (C) advancement of expenses is not timely made pursuant to Section 4(a) or
(D) payment of indemnification is not made within five days after a
determination of entitlement or indemnification has been made or deemed to have
been made pursuant to Section 4(b) or (c), the Indemnity shall be entitled to
seek judicial enforcement of the Corporation's obligation to pay to the
Indemnity such advancement of expenses or indemnification. Notwithstanding the
foregoing, the Corporation may bring an action, in an appropriate court in the
state of Delaware or any other court of competent jurisdiction, contesting the
right of the Indemnity to receive indemnification hereunder due to the
occurrence of an event described in subclause (A) or (B) of this clause (ii) (a
"Disqualifying Event"); provided, however, that in any such action the
Corporation shall have the burden of proving the occurrence of such
Disqualifying Event.
(iii) The Corporation shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Section 4(d) that
the procedures and pre-sumptions of this Article are not valid, binding and
enforceable
<PAGE>
and shall stipulate in any such court or before any such arbitrator that the
Corporation is bound by all the provisions of this Article.
(iv) In the event that the Indemnity, pursuant to this Section
4(d), seeks a judicial adjudication of or an award in arbitration to enforce his
rights under, or to recover damages for breach of, this Article, the Indemnity
shall be entitled to recover from the Corporation, and shall be indemnified by
the Corporation against, any expenses actually and reasonable incurred by him if
the Indemnity prevails in such judicial adjudication or arbitration. If it shall
be determined in such judicial adjudication or arbitration that the Indemnity is
entitled to receive part but not all of the Indemnification or advancement of
expenses sought, the expenses incurred by the Indemnity in connection with such
judicial adjudication or arbitration shall be prorated accordingly.
(e) Definitions. For purposes of this Section 4:
(i) "Change in Control" means a change in control of the
Corporation of a nature that would be required to be reported in response to
item 5(f) of Schedule 14A of the Regulation 14A promulgated under the Securities
Exchange Act of 1934 (the "Act"), whether or not the Corporation is then subject
to such reporting requirement; provided that, without limitation, such a change
in control shall be deemed to have occurred if (A) any "person" (as such term is
used I Section 13(d) and 14 (d) of the Act) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Act), directly or indirectly, of securities
of the Corporation representing 10% or more of the combined voting power of the
Corporation's then outstanding securities without the prior approval of at least
two-thirds of the members of the Board of Directors in office immediately prior
to such acquisition; (B) the Corporation is a party to a merger, consolidation,
sale of assets or other reorganization, or a proxy contest, as a consequence of
which members of the Board of Directors in office immediately prior to such
transaction or event constitute less than a majority of the Board of Directors
thereafter; or (C) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors (including
for this purpose any new director whose election or nomination for election by
the Corporation's stockholders was approved by a vote of at least a majority of
the directors then still in office who were directors at the beginning of such
period) cease for any reason to constitute at least a majority of the Board of
Directors.
(ii) "Disinterested Director" means a director of the Corporation
who is not or was not a party to the Proceeding in respect of which
indemnification is sought by the Indemnity.
(iii) "Independent Counsel" means a law firm or a member of a law
firm that neither presently is, nor in the past five years has been, retained to
represent: (A) the Corporation
<PAGE>
or the Indemnity in any matter material to either such party or (B) any other
party to the Proceeding giving rise to a claim for indemnification under this
Article. Notwithstanding the foregoing, the term "Independent Counsel" shall not
include any person who, under the applicable standards of professional conduct
then prevailing under the law of State of Delaware, would have a conflict of
interest in representing either the Corporation or the Indemnity in an action to
determine the Indemnity's rights under this Article.
SECTION 5. SEVERABILITY. If any provision or provisions of this Article
shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions of
this Article (including, without limitation, all portions of any paragraph of
this Article containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Article (including, without limitation, all
portions of any paragraph of this Article containing any such provision held to
be invalid, illegal or unenforceable, that are not themselves invalid, illegal
or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
ARTICLE X.
SEAL.
The Board of Directors shall provide a corporate seal, which shall be in
the form of a circle and shall have inscribed thereon the name of the
Corporation, the year of its incorporation (1928) and the words "Corporate Seal
Delaware".
ARTICLE XI.
FISCAL YEAR.
The fiscal year of the Corporation shall begin on the first day of January
in each year.
ARTICLE XII.
AMENDMENTS.
All by-laws of the Corporation shall be subject to alteration or repeal,
and new by-laws not inconsistent with any provision of the Certificate of
Incorporation or any provision of law, may be made, either by the affirmative
vote of the holders of record of a majority of the outstanding stock of the
Corporation entitled to vote in respect thereof, given at an annual meeting or
at any special meeting, provided that notice of
<PAGE>
the proposed alteration or repeal or of the proposed new by-laws be included in
the notice of such meeting, or by the Board of Directors at any regular or
special meeting.
<PAGE>
Consent of The Sole Shareholder of
Willis Corroon Corporation
The undersigned, being the sole shareholder of Willis Corroon Corporation,
a Delaware corporation, does hereby consent to the adoption of the following
resolution:
RESOLVED, that, effective January 1, 1992 the first sentence of Article
III, Section 2 of the Corporation's By-laws be amended to read as follows:
"The number of directors shall not be less than one (l) nor more
than five (5), as may be fixed from time to time by resolution of
the Shareholder or the Board of Directors."
and be it
FURTHER RESOLVED, that, effective January 1, 1992 the number of directors
of the Corporation be and it hereby is fixed at five (5); and be it
FURTHER RESOLVED, that, effective January 1, 1992, the following
individuals be, and each hereby is, elected a director of the Corporation,
to serve until the Annual Meeting of Stockholders and until his successor
is elected and qualified:
Richard M. Miller
John R. Lamberson
Donald R. King J.
Bransford Wallace
Joseph V. Ambrose, Jr.
FURTHER RESOLVED, that James R. McMasters be and he hereby is elected,
effective January l,1992, Assistant Vice President and Claims
Administrator of the Corporation and he shall hold such office until the
election of his successor.
DATED: December 31, 1991
Willis Corroon Group plc
By /s/ Joseph V. Ambrose, Jr.
--------------------------
Joint Secretary
<PAGE>
CONSENT OF THE BOARD OF DIRECTORS
OF
WILLIS CORROON CORPORATION
The undersigned, being all of the Directors of Willis Corroon Corporation,
a Delaware corporation, does hereby consent to the adoption of the following
resolutions:
RESOLVED, that effective immediately the Resignation of Frank F. White,
Jr. as a Director of the Corporation be accepted; and further
RESOLVED, that, effective immediately the number of Directors of the
Corporation be and it hereby is Fixed at four (4); and further
RESOLVED, that effective immediately the resignation of Richard M. Miller,
as Chairman of the Board, President and Chief Executive Officer of the
Corporation be accepted; and further
RESOLVED, that effective immediately Kenneth H. Pinkston be and he hereby
is elected Chairman of the Board, President and Chief Executive Officer of
the Corporation.
Dated: June 23, 1994
/s/ Joseph V. Ambrose, Jr.
--------------------------
/s/ Brian D. Johnson
--------------------------
/s/ Richard M. Miller
--------------------------
/s/ Kenneth H. Pinkson
--------------------------
<PAGE>
Consent of The Sole Shareholder Of
Willis Corroon Corporation
The undersigned, being the sole shareholder of Willis Corroon Corporation,
a Delaware corporation, does hereby consent to the adoption of the following
resolution:
RESOLVED, that effective at the close of business on December 31, 1995,
the resignation of Richard M. Miller as a Director of the Corporation be
accepted; and further
RESOLVED, that, effective January 1, 1996 the first sentence of Article
III, Section 2 of the Corporation's By-laws be amended to read as follows:
"The number of directors shall not be less than one (1) nor more
than six (6), as may be fixed from time to time by resolution of the
Shareholder or the Board of Directors."
and further
RESOLVED, that, effective January 1, 1996 the number of directors of the
Corporation be and it hereby is fixed at six (6); and further
RESOLVED, that, effective January 1, 1996 the Board of Directors of the
Corporation shall be comprised of the following individuals, each to serve
until the annual Meeting of Stockholders and until the election of his
successor:
Thomas Colraine
Charles D. Hamilton
Brian D. Johnson
Kenneth H. Pinkston
Bart R. Schwartz
Larry W. Taylor
DATED: November 6, 1995
Willis Corroon Group plc
By /s/ Michael Chitty
-------------------------------------
Secretary
<PAGE>
Exhibit 3.3
EXECUTION COPY
PARTNERSHIP AGREEMENT
OF
WILLIS CORROON PARTNERS
THIS PARTNERSHIP AGREEMENT ("Agreement") of Willis Corroon
Partners (the "Partnership") is made as of November 17, 1998, by and among
Willis Corroon Group Limited, a company with limited liability organized under
the laws of England and Wales ("WCG"), and Willis Faber UK Group Limited, a
company with limited liability organized under the laws of England and Wales
("WF"), each of which is hereinafter sometimes referred to as a "Partner," and
both of which are hereinafter collectively referred to as "Partners."
WITNESSETH:
WHEREAS, the parties hereto desire to establish their
interests as among themselves in the Partnership.
NOW, THEREFORE, in consideration of the mutual promises and
obligations contained herein, the parties hereto hereby agree as follows:
1. FORMATION. The parties hereby form a general partnership
under and pursuant to the provisions of the Delaware Uniform Partnership Law, 6
Del. C. Sections 1501 (as amended from time to time and any successor statute
thereto, the "GP Act"). The name of the Partnership shall be, and the business
of the Partnership shall be conducted under the name of, "Willis Corroon
Partners." The Partnership name shall be duly registered as required by 6 Del.
C. Section 3101.
2. PURPOSES. The purposes of the Partnership are (a) to
acquire, hold and sell investments, including shares of corporate or other
investment securities, to borrow money and issue evidences of indebtedness, to
secure the payment of that indebtedness and to lend money to its affiliates, (b)
to engage in such other activities necessary, appropriate or incidental to any
of the above-mentioned purposes, and (c) to engage in all other activities that
may be conducted by a general partnership under the GP Act as the Partners may
hereafter, from time to time, determine.
3. PARTNERS; PERCENTAGE INTERESTS. The Partners of the
Partnership shall consist of the parties hereto and such additional or
substitute persons as shall be admitted as Partners from time to time by
unanimous consent of all persons who are then Partners or as otherwise provided
in this Agreement. The Partners' interests in the Partnership are hereinafter
referred to as the "Partnership Interests." Schedule I, attached hereto, sets
forth the percentage interest of each Partner (the "Percentage Interest").
Schedule I shall be amended from time to time in accordance with the terms
hereof to reflect changes in Percentage Interests resulting from the admission
of additional or substitute Partners, the withdrawal of Partners or the transfer
of Partnership Interests. The combined Percentage Interest of all Partners shall
at all times equal 100%.
4. TERM. The term of the Partnership shall begin on the date
of this Agreement and shall continue to the fullest extent permitted by the GP
Act until dissolved:
(i) by the unanimous vote of the Partners;
<PAGE>
2
(ii) pursuant to the entry of a decree of judicial
dissolution;
(iii) by the failure of the Partners to come to an
agreement, within seven (7) days of the emergence of
a disagreement between them, in connection with a
matter that concerns the Partnership; or
(iv) by the bankruptcy, dissolution or death of a Partner,
except that the Partnership shall not be dissolved
upon the occurrence of such event if, within ninety
(90) days after such event, the remaining Partners
holding 66% of the remaining Percentage Interests
agree to continue the business of the Partnership and
to the appointment of one or more additional
Partners, effective as of the date of such event;
unless it is dissolved earlier as provided in the GP Act. On the expiration of
its term, the Partnership shall be dissolved and its affairs shall be wound up.
5. CAPITAL CONTRIBUTIONS. The Partnership's initial capital
shall consist of the capital contributions set forth on Schedule I (the "Capital
Contributions"). Each Partner's contribution to the Partnership shall be paid in
full or conveyed within 3 days after the date of this Agreement. Except as
otherwise agreed by all Partners, no Partner shall have the right or obligation
to make any further Capital Contributions to the Partnership. Persons or
entities hereafter admitted as Partners shall make such contributions of cash
(or promissory obligations), property or services to the Partnership as shall be
determined by the Partners, acting unanimously, at the time of each such
admissions. Unless otherwise agreed by all Partners, no interest shall be paid
upon any contributions of capital to the Partnership or upon the balances of the
Capital Account (as defined in Section 6 of this Agreement). Any advance of
money to the Partnership by a Partner hereafter made shall not be deemed to be a
capital contribution unless specifically designated as such with the consent of
all Partners, but shall be deemed a loan made to the Partnership by such
Partner.
6. CAPITAL ACCOUNTS; PROFITS AND LOSSES. (a) A single,
separate capital account (a "Capital Account") shall be maintained for each
Partner. Each Partner's Capital Account shall be credited with the amount of
money and the fair market value of property (net of any liabilities assumed by
the Partnership or to which the contributed property is subject) contributed by
that Partner to the Partnership; the amount of any Partnership liabilities
assumed by such Partners (other than in connection with a distribution of
Partnership property), and such Partner's allocation of Partnership profits.
Each Partner's Capital Account shall be debited with the amount of money and the
fair market value of property (net of any liabilities that such Partner assumes
or takes subject to) distributed to such Partner, the amount of any liabilities
of such Partner assumed by the Partnership (other than in connection with a
contribution), and such Partner's distributive share of Partnership losses.
(b) Any Partner who shall receive a Partnership Interest (or
whose interest shall be increased) by means of a transfer to it of all or a part
of the Partnership Interest of another Partner shall have a Capital Account that
reflects the Capital Account associated with the transferred Partnership
Interest (or the applicable percentage thereof in case of a transfer of a part
of an interest).
(c) Each Partner shall be entitled to such Partner's share of
all Partnership items of profits, losses, deductions, expenses, credit or
allowance, if any, for any period or year pro rata in accordance with the
Partner's respective Percentage Interests.
(d) Each Partner shall, with the agreement of all other
Partners, be entitled to receive within 10 working days of such agreement his
entitlement to his share of the accumulated Partnership profit. In the event
that the Partnership has a net loss, the Partner shall, upon request, be obliged
within
<PAGE>
3
10 working days to make good his share of the accumulated Partnership loss, such
request coming from the Partnership.
(e) No Partner shall be entitled to withdraw any part of its
Capital Contribution or its Capital Account or to receive any distribution from
the Partnership, except as provided in Section 12 of this Agreement.
7. PARTNERSHIP PROPERTY. All property and rights and interests
in property originally brought into the Partnership or acquired, whether by
purchase or otherwise, on account of the Partnership, or for the purposes and in
the cause of the Partnership business, are called "Partnership Property," and
will be held and applied by the Partnership exclusively for the purposes of the
Partnership and in accordance with this Agreement. Each Partner shall be
regarded as owning a proportionate share of the jointly held assets of the
Partnership and, subject to Section 1515(a) of the GP Act, is liable to a
proportionate share of the joint liabilities of the Partnership, based on its
respective Capital Account balances at any time and accordingly in line with its
right to surplus assets on dissolution of the Partnership in accordance with
Section 12 of this Agreement.
8. MANAGEMENT. Except as set forth in this Agreement and
Section 1509 (a) of the GP Act, the Partners shall have full, exclusive and
complete discretion in the management and control of the business of the
Partnership for the purposes herein stated and subject to the terms hereof,
shall make all decisions affecting the business of the Partnership and may take
such actions as they deem necessary or appropriate to accomplish the purposes of
the Partnership as set forth herein. In connection with such management and
control, the Partners shall have the power and authority to do or cause to be
done any and all acts deemed by the Partners to be necessary or appropriate to
carry out the purposes of the Partnership, including, without limitation, the
following:
. (i) to enter into and perform any contract, lease,
arrangement or course of dealing with any Partner or
Partners, or with any person, firm or corporation
controlled by, under common control with, controlling
or otherwise affiliated with any Partner or Partners;
(ii) to borrow funds, lend Partnership funds, obligate the
Partnership as a surety, guarantor or accommodation
party to any obligation, including an obligation of
any Partner, to give security on any Partnership
Property, including real estate and in general, to
enter into all such financial arrangements and pay
all such expenses of the Partnership as the Partners
shall deem appropriate;
(iii) to acquire by purchase, lease, exchange or otherwise,
any real or personal property;
(iv) to dispose of, sell, exchange, lease, mortgage or
otherwise transfer any assets of the Partnership in
the ordinary course of business;
(v) to deposit, withdraw, invest, pay, retain and
distribute the Partnership's funds in any manner
consistent with the provisions of this Agreement;
(vi) to employ agents, employees, managers, accountants,
attorneys, consultants and other persons necessary or
appropriate to carry out the business and operations
of the Partnership and to pay fees, expenses,
salaries, wages and other compensation to such
persons;
<PAGE>
4
(vii) to pay, extend, renew, modify, adjust, submit to
arbitration, prosecute, defend or compromise, upon
such terms as it may determine and upon such evidence
as it may deem sufficient, any obligation, suit,
liability, cause of action or claim, including taxes,
either in favor of or against the Partnership;
(viii) to determine the appropriate accounting method or
methods to be used by the Partnership;
(ix) to maintain or cause to be maintained records of all
rights and interests acquired for or disposed of by
the Partnership, all correspondence relating to the
Partnership business and the original records of all
statements, bills and other instruments furnished to
the Partnership in connection with its business;
(x) to purchase and maintain, at their discretion and at
the expense of the Partnership, liability, casualty
and other insurance sufficient to protect the
Partners, any person or persons employed or engaged
by the Partners, the Partnership and its property
from and against those liabilities and hazards which
may be insured against in the conduct of the
Partnership's business;
(xi) to make, execute, assign, acknowledge and file on
behalf of the Partnership, any and all documents or
instruments of any kind which the Partners may deem
appropriate in carrying out the purposes and
businesses of the Partnership, including, without
limitation, powers of attorney, agreements of
indemnification, sales contracts, deeds, options,
loan agreements, mortgages, deeds of trust, notes,
documents or instruments of any kind or character and
amendments thereto. Any person dealing with the
Partners shall not be required to determine or
inquire into the authority or power of the Partners
to bind the Partnership and to execute, acknowledge
and deliver any and all documents in connection
therewith; and
(xii) to exercise any right or power granted or permitted
under the GP Act and not specifically enumerated in
this Agreement.
Notwithstanding anything in this Agreement to the contrary,
the Partnership, and each Partner on behalf of the Partnership, is hereby
authorized to execute, deliver and perform:
(i) the Assumption Agreement, pursuant to which the
Partnership will assume $400 million of indebtedness
under the Credit Agreement, dated as of July 22,
1998, among Trinity Acquisition plc, Willis Corroon
Group Limited, Willis Corroon Corporation, the
lenders from time to time parties thereto and The
Chase Manhattan Bank (as amended, the "Tender Offer
Facility") from Willis Corroon Group Limited;
(ii) the Senior Subordinated Loan Agreement, to be entered
into by the Partnership, Willis Corroon Corporation,
Willis Corroon Group Limited, the lenders parties
thereto, The Chase Manhattan Bank and Chase
Securities, Inc. (together with the exhibits thereto,
the "Senior Subordinated Loan Agreement");
(iii) the Guarantee to be executed in connection with the
Senior Subordinated Loan Agreement;
<PAGE>
5
(iv) the Guarantee to be executed in connection with the
Credit Agreement, dated as of July 22, 1998, among
Trinity Acquisition plc, Willis Corroon Corporation,
Willis Corroon Group Limited, the several lenders
from time to time parties thereto, and The Chase
Manhattan Bank (as amended, the "Senior Credit
Agreement");
(v) the supplement to the Pledge Agreement executed in
connection with the Senior Credit Agreement;
(vi) the $190 million Promissory Note and the $210 million
Promissory Note in favor of Willis Corroon Group
Limited, in exchange for its obligations under the
Tender Offer Facility;
all without the need for any additional consent or act of any person.
9. PARTNERS. (a) The Partners shall devote such time
and attention to the business of the Partnership as may be reasonably necessary
to the conduct of such business and shall act as mutual agents of each other in
their relationship as Partners.
(b) The Partners may, directly or indirectly (including,
without limitation, through an entity in which the Partners hold a material
ownership interest), deal with the Partnership in connection with the
construction, management, acquisition, operation or disposition of any assets of
the Partnership or otherwise, as an independent contractor or as an agent for
others, and may receive from such others or the Partnership normal profits,
compensation, commissions or other income incident to such dealings without
having to account to the Partnership therefor provided that such profits,
compensation, commissions or other income shall be commensurate with commercial
terms generally prevalent in the industry in question.
(c) The Partners shall be reimbursed by the Partnership
for expenses incurred in connection with the formation of the Partnership and,
from time to time, for expenses incurred in connection with the operation and
management of the Partnership.
10. APPOINTMENT OF A GENERAL MANAGER. (a) The Partners
have the power and authority to delegate their rights and powers as Partners to
perform managerial duties in relation to the business of the Partnership to a
general manager (the "General Manager") who shall have the authority to perform,
subject to any limitations imposed on such authority by the Partners, managerial
duties in relation to the business of the Partnership.
(b) The appointment of a General Manager shall not cause
the Partners to cease to be Partners of the Partnership.
(c) Until such time as the Partners shall otherwise
agree, C. William Mooney is hereby appointed as General Manager of the
Partnership to perform managerial duties in relation to the business of the
Partnership, subject to the limitations set out below.
(d) Subject to the express limitations contained in this
Agreement, the General Manager shall have the right and authority to perform all
the managerial duties in relation to the business of the Partnership provided
for in this Agreement to be performed by the Partners including, without
limitation, maintaining the accounts of the Partnership and providing such
accounts on an annual basis to the Partners.
<PAGE>
6
(e) Notwithstanding the foregoing, the General Manager
shall not, without the consent of the Partners:
(i) sell, assign, transfer or otherwise dispose of all or
any substantial part of the assets of the Partnership
or cause the Partnership to merge, consolidate or
convert with or into any other entity or
organization;
(ii) guarantee the debt of, or cause the Partnership to
incur indebtedness for borrowed funds to,
unaffiliated third parties in an amount in excess of
$10,000 at any time outstanding;
(iii) do any act which would make it impossible to carry on
the ordinary business of the Partnership;
(iv) take any action which, under the other provisions of
this Agreement, or by subsequent agreement of the
Partners, requires the consent of all Partners, or
which is inconsistent with any Partnership action
taken by consent of all Partners;
(v) amend this Agreement;
(vi) admit any new partner to the Partnership;
(vii) permit the transfer by a Partner of its interest in
the Partnership;
(viii) dissolve the Partnership other than pursuant to
Section 12 of this Agreement; or
(ix) commence a voluntary proceeding seeking
reorganization or other relief with respect to the
Partnership under the bankruptcy or similar law.
11. BOOKS, RECORDS AND REPORTS. (a) At all times during
the continuance of the Partnership, the Partnership, acting through the General
Manager, shall keep or cause to be kept full and true books of account, in which
shall be entered fully and accurately each transaction of the Partnership. Such
books of account, together with a copy of this Agreement, and any amendments
hereto, shall at all reasonable times be open to inspection and examination by
each Partner and its duly authorized representatives.
(b) The Partnership books of account shall be closed and
balanced at the end of each fiscal year. Annual statements showing the
Partnership gross receipts and expenses for the fiscal year shall be prepared by
the Partnership's accountants (or by the General Manager, with the consent of
the Partners) and shall be transmitted to each Partner within a reasonable
period of time after the close of each fiscal year. Further, as soon as possible
after the close of each Partnership taxable year, a report shall be transmitted
to each Partner indicating its share of Partnership profit or loss. On the
demand of either Partner, the books of account of the Partnership shall be
audited by a certified public accountant chosen by the Partners. The cost of any
such audit shall be borne solely by the Partner demanding the audit, unless the
other Partner agrees that such cost should be treated as a Partnership expense.
12. DISSOLUTION. (a) In the event of the dissolution of
the Partnership subject to Section 4 of this Agreement, the Partnership shall
immediately commence to wind up its affairs; however, a reasonable time shall be
allowed for the orderly liquidation of the assets of the Partnership and the
discharge of liabilities to creditors so as to enable the Partners to minimize
the normal losses attendant upon a liquidation. The Partners shall continue to
share net profits and net losses during
<PAGE>
7
liquidation in the same proportions as before liquidation. The General Manager
shall furnish to each Partner a statement prepared by the Partnership's
accountants (or prepared by the General Manager, with the consent of the
Partners) that shall set forth the assets and liabilities of the Partnership as
of the date of complete liquidation. The proceeds of liquidation shall be
distributed, as realized, in payment of the liabilities of the Partnership in
the following order:
(i) To satisfy (by payment or reasonable provision for
payment) creditors of the Partnership other than Partners;
(ii) To satisfy (by payment or reasonable provision for
payment) any indebtedness of the Partnership to the Partners; and
(iii) To distribute to the Partners the remaining proceeds
of liquidation in accordance with the Percentage Interests of the Partners.
(b) The Partnership may be liquidated by either:
(i) selling the Partnership assets and distributing the net proceeds therefrom
in the manner provided in paragraph (a) of this Section 12; or (ii) distributing
the Partnership assets to the Partners in kind with each Partner accepting an
undivided interest in the Partnership assets, subject to Partnership
liabilities, in satisfaction of its proportionate interest in the Partnership.
For the purpose of determining the amount distributed to each Partner, any
property distributed in kind in the liquidation shall be valued at fair market
value as of the date of distribution by the General Manager acting reasonably
and such property shall be treated as though the property had been sold by the
Partnership for such value and the cash proceeds distributed to the Partners.
(c) The Partners may establish reserves that the Partners
may deem reasonably necessary for any contingent, conditional or unmatured
liabilities or obligations of the Partnership to creditors of the Partnership
other than the Partners. The funds constituting reserves shall be paid over by
the Partnership to an attorney-in-fact (which may be the General Manager), bank,
trust company or title insurance company, as escrowee, to be held and applied by
him or it during such period as the General Manager deems advisable in payment
of the obligations and liabilities in respect of which such reserves were
created, and at the end of such period the amount of any such reserves then
remaining shall be distributed in the manner provided above.
13. RESTRICTION ON TRANSFER OF PARTNERS' INTERESTS.
Partnership Interests may not be sold, transferred, assigned, mortgaged,
pledged, alienated, disposed of or encumbered, in whole or in part, without the
unanimous consent of the Partners, except for pledges or transfers contemplated
by the Pledge Agreement.
<PAGE>
8
14. NOTICES. All notices or other communications provided
for in this Agreement shall be in writing, duly signed by the party giving such
notice, and shall be delivered, or mailed by registered or certified mail, at
the address set forth below:
(a) if to the Partnership:
Willis Corroon Partners
c/o Willis Corroon Group Limited
Ten Trinity Square
London EC3P 3AX England
Attention: Company Secretary
(b) if to a Partner:
Willis Corroon Group Limited
Ten Trinity Square
London EC3P 3AX England
Attention: Company Secretary
or
Willis Faber UK Group Limited
Ten Trinity Square
London EC3P 3AX England
Attention: Company Secretary
15. BINDING EFFECT. This Agreement shall be binding upon
each Partner and its respective successors and assigns.
16. SEVERABILITY. The invalidity or unenforceability of
any particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision had been omitted.
17. NO THIRD-PARTY BENEFICIARIES. None of the provisions
of this Agreement shall be for the benefit of or enforceable by any third
parties, including, without limitation creditors of the Partnership or of the
Partners.
18. NO WAIVER. No failure by any party to insist upon the
strict performance of any covenant, duty, agreement or condition of this
Agreement or to exercise any right or remedy consequent upon a breach thereof
shall constitute a waiver of any such breach or of any covenant, agreement, term
or condition. Any Partner by an instrument in writing may, but shall be under no
obligations to, waive any of its rights or any conditions to its obligations
hereunder, or any duty, or obligation or covenant of any other Partner, but no
waiver shall be effective unless in writing and signed by the Partner making
such waiver. No waiver shall affect or alter the remainder of the terms of this
Agreement but each and every covenant, agreement, term and condition hereof
shall continue in full force and effect with respect to any other then existing
or subsequent breach.
19. APPLICABLE LAW. ALL MATTERS IN CONNECTION WITH THE
POWER, AUTHORITY AND RIGHTS OF THE PARTNERS AND ALL MATTERS PERTAINING TO THE
OPERATION, CONSTRUCTION, INTERPRETATION OR ENFORCEMENT OF THIS AGREEMENT SHALL
BE GOVERNED AND DETERMINED BY THE INTERNAL LAWS OF THE
<PAGE>
9
STATE OF DELAWARE. THE PARTIES ARE ENTERING INTO THIS AGREEMENT IN EXPRESS
RELIANCE ON 6 DEL. C. Sections 2708 AND ACKNOWLEDGE THAT THIS AGREEMENT
INVOLVES AT LEAST $100,000.
20. JURISDICTION. EACH PARTNER (A) HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY COURT OF THE STATE OF DELAWARE OR THE UNITED
STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE FOR THE PURPOSES OF ANY SUIT,
ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT WHICH IS BROUGHT BY OR
AGAINST THE PARTNERSHIP OR ANY PARTNER, (B) HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND (C) TO THE EXTENT THAT IT HAS ACQUIRED, OR
HEREAFTER MAY ACQUIRE, ANY IMMUNITY FROM JURISDICTION OF ANY SUCH COURT OR FROM
ANY LEGAL PROCESS THEREIN, HEREBY WAIVES SUCH IMMUNITY TO THE FULLEST EXTENT
PERMITTED BY LAW. EACH PARTNER HEREBY WAIVES, AND HEREBY AGREES NOT TO ASSERT,
IN ANY SUCH SUIT, ACTION OR PROCEEDING, IN EACH CASE TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (i) IT IS NOT PERSONALLY SUBJECT TO
THE JURISDICTION OF ANY SUCH COURT, (ii) IT IS IMMUNE FROM ANY LEGAL PROCESS,
(iii) ANY SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM,
(iv) VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER OR (v) THIS
AGREEMENT MAY NOT BE ENFORCED IN OR BY SUCH COURT. EACH PARTNER AGREES THAT
PROCESS AGAINST IT OR THE PARTNERSHIP, IN CONNECTION WITH ANY SUIT, ACTION OR
PROCEEDING FILED IN ANY SUCH REFERENCED COURT ARISING OUT OF OR RELATING TO THIS
AGREEMENT MAY BE SERVED ON IT, OR THE PARTNERSHIP, BY MAILING THE SAME TO SUCH
PARTNER OR THE PARTNERSHIP BY REGISTERED MAIL, RETURN RECEIPT REQUESTED,
ADDRESSED TO SUCH PERSON OR THE PARTNERSHIP AT ITS ADDRESS FOR NOTICES SET FORTH
HEREIN, WITH THE SAME EFFECT IN EITHER CASE AS THOUGH SERVED UPON SUCH PERSON
PERSONALLY. IN ADDITION, EACH PARTY HEREBY APPOINTS RL&F SERVICE CORP. AS ITS
AGENT FOR SERVICE OF PROCESS ON SUCH PARTY FOR ANY SUIT, ACTION OR OTHER
PROCEEDING FILED IN ANY SUCH REFERENCED COURT ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
21. CERTIFICATED INTERESTS. The Partnership interests
shall be represented by a certificate substantially in the form attached hereto
as Exhibit A (each, a "Partnership Certificate," and collectively, the
"Partnership Certificates"). Each Partnership Certificate shall be issued in
fully registered form. The Partnership Certificates shall be executed on behalf
of the Partnership by the manual or facsimile signature of at least one Partner.
Partnership Certificates bearing the manual or facsimile signature of a person
who was, at the time when such signature shall have been affixed, authorized to
sign on behalf of the Partnership, shall be validly issued and entitled to the
benefits of this Agreement, notwithstanding that such person shall have ceased
to be authorized prior to the delivery of such Partnerships Certificates.
22. UNIFORM COMMERCIAL CODE. It is hereby expressly
provided that without further action by the Partnership or any Partner and for
purposes of Article 8 of the Uniform Commercial Code as in effect in the State
of Delaware (the "Delaware UCC"), the Partnership Interests shall be governed by
Article 8 of the Delaware UCC, including, without limitation: (i) for purposes
of the definition of "security" thereunder, the Partnership Interest of each
Partner in the Partnership shall be a "security" governed by Article 8 of the
Delaware UCC; (ii) for purposes of the definition of "security certificate"
under the Delaware UCC, the Partnership Certificate representing the Partnership
Interest of each Partner in the Partnership shall be a "security certificate"
governed by Article 8 of the Delaware UCC; and (iii) for purposes of the
definition of "certificated security" under the Delaware UCC, the
<PAGE>
10
Partnership Interest of each Partner in the Partnership shall be a "certificated
security" governed by Article 8 of the Delaware UCC.
23. COUNTERPARTS. This Agreement may be executed in two
(2) counterpart copies each of which together shall constitute one Agreement
binding on both parties hereto notwithstanding that both parties have not signed
the same counterpart.
<PAGE>
11
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
WILLIS CORROON GROUP LIMITED
By: ------------------------
Name:
Title:
WILLIS FABER UK GROUP LIMITED
By: ------------------------
Name:
Title:
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
CAPITAL PERCENTAGE
PARTNER CONTRIBUTIONS INTEREST
<S> <C> <C>
Willis Corroon Group Limited 3,338 shares of common stock 9.9%
of Willis Corroon Corporation,
subject to $400 million of
indebtedness under the Tender
Offer Facility (net value of
approximately $100 million)
Willis Faber UK Group Limited $100,000 0.1%
</TABLE>
<PAGE>
EXHIBIT A
THIS CERTIFICATE IS NOT TRANSFERABLE
EXCEPT IN ACCORDANCE WITH THE
PARTNERSHIP AGREEMENT (AS DEFINED BELOW)
CERTIFICATE EVIDENCING PARTNERSHIP INTEREST
OF
WILLIS CORROON PARTNERS
Willis Corroon Partners, a general partnership formed under
the laws of the state of Delaware (the "Partnership"), hereby certifies that
_________________________(the "Holder") is the registered owner of ___%
partnership interest in the Partnership (the "Partnership Interest"). Subject to
the terms of the Partnership Agreement (as defined below), the Partnership
Interest is transferable on the books and records of the Partnership, in person
or by a duly authorized attorney, upon surrender of this certificate duly
endorsed and in proper form for transfer. The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Partnership
Interest are set forth in, and this certificate and the Partnership Interest
represented hereby are issued and shall in all respects be subject to the terms
and provisions of, the Partnership Agreement of the Partnership, dated as of
____________, 1998, by and between Willis Corroon Group Limited and Willis Faber
UK Group Limited, as the same may be amended from time to time (the "Partnership
Agreement"). The Partnership will furnish a copy of the Partnership Agreement to
the Holder without charge upon written request to the Partnership by contacting
one of the Partners.
Upon receipt of this certificate, the Holder is bound by the
Partnership Agreement and is entitled to the benefits thereunder.
Terms used but not defined herein have the meanings set forth
in the Partnership Agreement.
IN WITNESS WHEREOF, one of the Partners of the Partnership has
executed this certificate this __ day of _______, 1998.
WILLIS CORROON PARTNERS
By: [PARTNER]
By:_____________________________
Name:
Title:
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Partnership
Interest to:
- ------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints________________________________________________________
- ------------------------------------------------------------------------------
agent to transfer this certificate on the books of the Partnership. The agent
may substitute another to act for him or her.
Date: _________________________
Signature: _____________________________________________________________________
(Sign exactly as your name appears on the other side of this certificate)
<PAGE>
<PAGE>
No. of Company: 621757
The Companies Acts 1985 and 1989
---------------------------------
Private Company Limited by Shares
---------------------------------
Memorandum
and
Articles of Association
of
WILLIS CORROON GROUP LIMITED
(adopted pursuant to a Special Resolution passed on 10th November 1998)
(Memorandum as amended by a Special Resolution passed on 8th March 1999)
================================================================================
Incorporated the 25th day of February 1959.
Re-registered as a private company
the 10th day of November 1998
<PAGE>
[Coat of Arms]
CERTIFICATE OF INCORPORATION
ON RE-REGISTRATION OF A PUBLIC COMPANY
AS A PRIVATE COMPANY
Company No. 621757
The Registrar of Companies for England and Wales hereby certifies that
WILLIS CORROON GROUP LIMITED
formerly registered as a public company has this day been re-registered under
the Companies Act 1985 as a private company, and that the Company is limited.
Given at Companies House, London, the 10th November 1998.
[Signature]
Miss S Bashar
For The Registrar of Companies
[Logo]
COMPANIES HOUSE
<PAGE>
No. 621757
THE COMPANIES ACTS 1985 AND 1989
-------------------------------------------------
PRIVATE COMPANY LIMITED BY SHARES
-------------------------------------------------
MEMORANDUM OF ASSOCIATION
of
WILLIS CORROON GROUP LIMITED
(as amended by a Special Resolution passed on 8th March 1999)
1. The Company's name is "Willis Corroon Group Limited"
2. The Company's registered office is to be situated in England.
3. The objects for which the Company is established are:
(1) (a) To act as an investment holding company and to co-ordinate the
businesses and administration of any companies in which the Company
is for the time being interested.
(b) To acquire (whether by original subscription, tender, purchase,
exchange, underwriting or otherwise and whether conditionally or
otherwise) shares or stocks, debentures, debenture stock, bonds,
obligations or any other securities issued or guaranteed by any
other corporation constituted or carrying on business in any part of
the world and whether or not engaged or concerned in the same or
similar trades or occupations as those carried on by the Company or
its subsidiary companies and the debentures, debenture stocks,
bonds, obligations or any other security issued or guaranteed by any
government, sovereign, ruler, commissioner, public body or
authority, whether supreme, local or otherwise in any part of the
world and whether such shares, stocks, debentures, debenture stocks,
bonds, obligations or other securities are
4
<PAGE>
or are not fully paid up and to make payments thereon as called up
or in advance of calls or otherwise and to hold the same with a view
to investment or to sell, exchange or otherwise dispose of same.
(2) To carry on the business of Insurance Brokers, Insurance Agents and
Underwriting Agents in all its branches.
(3) To act as Agents or Managers for any Insurance Company, club, syndicate,
association or for any individual underwriter in connection with its or
his insurance or underwriting business wherever the same may be carried on
or any branch of the same and to enter into any agreement for such purpose
with any such insurance company, club, association or underwriter.
(4) To carry on the business of an Insurance and Guarantee Company in all its
branches, insure against risks of all kinds which are insured against by
insurance or underwriting business wherever the same may be carried on or
any branch of the same and to enter into any agreement for such purpose
with any such insurance company, club, association or underwriter.
(5) To reinsure or counter-insure all or any of the risks undertaken by or on
behalf or on account of the Company, and to undertake any authorised risks
either direct or by way of reinsurance or counter-insurance.
(6) To undertake and to carry on and execute all kinds of financial,
commercial, trading and other operations, and to carry on any other
business which may seem to be capable of being conveniently carried on in
connection with any of these objects or calculated directly or indirectly
to enhance the value or facilitate the realisation of or render profitable
any of the Company's property or rights and to transact any or every
description of agency, commission, commercial, manufacturing, mercantile
and financial business.
(7) To purchase, take on lease or tenancy or otherwise acquire for any estate
or interest and to take options over any property, real or personal or
rights of any kind which may appear to be necessary or convenient for any
business of the Company (in any part of the world) and to develop, turn to
account and deal with the same in such manner as may be thought expedient.
(8) To obtain or acquire by application, purchase, licence or otherwise, and
to exercise and use and grant licences to others to exercise and use
patent rights, brevets d'invention, concessions or protection in any part
of the world for any invention, mechanism or process, secret or otherwise,
and to disclaim, alter or modify such patent rights or protection, and
also to acquire, use and register trade marks, trade names, registered or
other designs, right of copyright other
5
<PAGE>
rights or privileges in relation to any business for the time being
carried on by the Company.
(9) To purchase or otherwise acquire and undertake, wholly or in part for cash
or shares or otherwise howsoever, all or any part of the business or
property and liabilities of any person or company carrying on any business
which this Company is authorised to carry on or possessed of property
suitable for the purposes of this Company.
(10) To establish or promote or concur in establishing or promoting any company
whose objects shall include the acquisition of all or any of the assets or
liabilities of this Company or the promotion of which shall be considered
likely to advance directly or indirectly the objects of this Company or
the interests of its members.
(11) To amalgamate with or enter into partnership or any joint purse or
profit-sharing arrangement with or co-operate in any way with any company,
firm or person carrying on or proposing to carry on any business within
the objects of this Company.
(12) To advance, lend or deposit money, securities and property to or with such
persons and on such terms as may seem expedient.
(13) To draw, make, accept, endorse, negotiate, execute and issue and to
discount, buy, sell and deal in promissory notes, bills of exchange, bills
of lading, warrants, debentures and other negotiable or transferable
instruments.
(14) To receive from any person or persons, whether a Member or Members,
Director or Directors, employee or employees of the Company or otherwise,
or from any corporate body, money or securities on deposit at interest or
for safe custody or otherwise.
(15) To subscribe for, underwrite, purchase or otherwise acquire, and to hold,
dispose of and deal in shares, stocks and securities of any other company,
whether British or foreign, or of any country, state, dominion, colony or
government.
(16) To invest any moneys of the Company not for the time being required for
the general purposes of the Company in such investments (other than shares
or stock of the Company) as may be thought proper, and to hold, sell or
otherwise deal with such investments.
(17) To enter into any guarantee or contract of indemnity or suretyship, and to
provide security, including, without limitation, the guarantee and
provision of security for the performance of the obligations of and the
payment of any money (including, without limitation, capital, principal,
premiums, dividends, interest, commissions,
6
<PAGE>
charges, discount and any related costs or expenses whether on shares or
other securities) by any person including, without limitation, any body
corporate which is for the time being the Company's holding company, the
Company's subsidiary, a subsidiary of the Company's holding company or any
person which is for the time being a member or otherwise has an interest
in the Company or is associated with the Company in any business or
venture, with or without the Company receiving any consideration or
advantage (whether direct or indirect), and whether by personal covenant
or mortgage, charge or lien over all or part of the Company's undertaking,
property, assets or uncalled capital (present and future) or by other
means. For the purposes of paragraph (17) "guarantee" includes any
obligation, however described, to pay, satisfy, provide funds for the
payment or satisfaction of (including, without limitation, by advance of
money, purchase of or subscription for shares or other securities and
purchase of assets or services), indemnify against the consequences of
default in the payment of, or otherwise be responsible for, any
indebtedness of any other person.
(18) To borrow or raise or secure the payment of money for the purposes of or
in connection with the Company's business.
(19) To sell, exchange, let on rent, share of profit, royalty or otherwise,
grant licences, easements, options, servitudes, and other rights over and
in any manner deal with or dispose of the undertaking, property assets,
rights and effects of the Company or any part thereof for such
consideration as may be though fit, and in particular for stocks, shares,
whether fully or partly paid up, debentures, debenture stock or other
obligations, or securities of any other company.
(20) To distribute among the Members of the Company in specie any property of
the Company.
(21) To remunerate the Directors, officials and servants of the Company and
others out of or in proportion to the returns or profits of the Company or
otherwise as the Company may think proper, and to formulate and carry into
effect any scheme for sharing the profits of the Company with employees of
the Company or any of them.
(22) To take all necessary or proper steps in Parliament, or with the
authorities, national, local, municipal or otherwise, of any place in
which the Company may have interests, and to carry on any negotiations or
operations for the purpose of directly or indirectly carrying out the
objects of the Company, or effecting any modification in the constitution
of the Company, or furthering the interests of its members, and to oppose
any such steps taken by any other company, firm or person which may be
considered likely, directly or indirectly, to prejudice the
7
<PAGE>
interests of the Company or its Members.
(23) To procure the registration or incorporation of the Company, in or under
the laws of any place outside England.
(24) To establish and maintain or procure the establishment and maintenance of
any non-contributory or contributory pension or superannuation funds for
the benefit of, and to give or procure the giving of donations,
gratuities, pensions, allowances or emoluments to any persons who are or
were at any time in the employment or service of the Company, or of any
company whose undertaking or any part thereof the Company shall acquire or
of any company which is a subsidiary of the Company or is allied to or
associated with the Company or with any such subsidiary Company, or other
company as aforesaid, or who are or were at any time Directors or officers
of the Company or of any such other company as aforesaid, and the wives,
widows, families and dependants of any such persons, and also to establish
and subsidise or subscribe to any institutions, associations, clubs or
funds considered to be for the benefit of or to advance the interests and
well-being of the Company or of any such other company as aforesaid, and
to make payments for or towards the insurance of any such person as
aforesaid, and to subscribe or guarantee money for any charitable or
benevolent objects or for any exhibition, or for any public, general or
useful object, and to do any of the matters aforesaid, either alone or in
conjunction with any such other company as aforesaid.
(25) To purchase and maintain insurance for or for the benefit of any persons
who are or were at any time Directors, officers or employees of the
Company, or of any other company in which the Company or any of the
predecessors of the Company has any interest whether direct or indirect or
which is in any way allied to or associated with the Company, or of any
subsidiary undertaking of the Company or of any such other company, or who
are or were at any time trustees of any pension fund or employees' share
schemes in which any employees of the Company or of any such other company
or subsidiary undertaking are interested, including (without prejudice to
the generality of the foregoing) insurance against any liability incurred
by such persons in respect of any act or omission in the actual or
purported execution and/or discharge of their duties and/or in the
exercise or purported exercise of their powers and/or otherwise in
relation to their duties, powers or officers in relation to the Company or
any such other company, subsidiary undertaking or pension fund or
employees' share scheme and to such extent as may be permitted by law
otherwise to indemnify or to exempt any such person against or from any
such liability, for the purposes of this clause "subsidiary undertaking"
shall have the same meaning as in the Companies Act 1985 (as modified or
re-enacted from time to time).
8
<PAGE>
(26) Subject to the provisions of Section 151 of the Companies Act 1985, to
provide, in accordance with any scheme for the time being in force, money
for the purchase of, or subscription for, fully paid shares or stock in
the Company's holding company or in the Company, being a purchase or
subscription by Trustees of or for shares or stock to be held by or for
the benefit of employees of the Company, the Company's subsidiaries or, a
subsidiary of the Company's holding company, including any director
holding a salaried employment in the Company.
(27) To do all such other things as may be considered to be incidental or
conducive to the above objects or any of them.
(28) To do all or any of the things and matters aforesaid in any part of the
world and either as principals, agents, contractors, trustees or otherwise
and by or through trustees, agents or otherwise and either alone or in
conjunction with others.
(29) To subscribe or guarantee money for or organise or assist any national,
local, charitable, benevolent, public, general or useful object, or for
any exhibition or for any purpose which may be considered likely directly
or indirectly to further the objects of the Company or the interests of
its members.
AND it is hereby declared that the word "company" in this clause, except where
used in reference to this Company, shall be deemed to include any partnership or
other body of persons, whether corporate or unincorporate, and whether domiciled
in the United Kingdom or elsewhere and further the intention is that the objects
specified in each paragraph of this clause shall, except where otherwise
expressed in such paragraphs, be in no wise limited by reference to any other
paragraph or the name of the Company, but may be carried out in as full and
ample a manner and shall be construed in as wide a sense as if each of the said
paragraphs defined the objects of a separate, distinct and independent company.
(a) The liability of the Members is limited.
(b) The share capital of the Company is (pound)66,000,000 divided into
528,000,000 Ordinary Shares of 12 1/2 pence each, with power to divide the
shares in the original or any increased capital into several classes and
to attach thereto any preferential, deferred, qualified or other special
rights, privileges and conditions.
Minute approved by the Court
The Capital of Willis Corroon Group plc was by virtue of a Special Resolution
and with the sanction of an Order of the High Court of Justice dated 5 September
1984 reduced from (pound)13,900,000 divided into 1,400,000 7 per cent.
Cumulative Preference Shares of
9
<PAGE>
(pound)1 each and 50,000,000 Ordinary Shares of 25p each to (pound)12,500,000
divided into 50,000,000 Ordinary Shares of 25p each. At the date of this Minute
41,675,515 Ordinary Shares have been issued and are deemed to be fully paid up
and the remainder are unissued.
We, the several persons whose names, addresses and descriptions are subscribed,
are desirous of being formed into a Company, in pursuance of this Memorandum of
Association and we respectively agree to take the number of shares in the
Capital of the Company set opposite our respective names.
- --------------------------------------------------------------------------------
NAMES, ADDRESSES AND Number of Shares taken by each
DESCRIPTIONS OF SUBSCRIBERS Subscriber
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DENYS DONALD ORCHARD One
71 Wavendon Avenue
Chiswick, London W4
Chartered Secretary
- --------------------------------------------------------------------------------
JOHN DAVEY ECCLES One
7 Cheltenham Terrace
London SW3
Solicitor
- --------------------------------------------------------------------------------
DATED this 18th day of February, 1959
WITNESS to the above signatures:
Richard Millett
85 London Wall EC2
Solicitor
10
<PAGE>
Company No. 621757
THE COMPANIES ACTS 1985 AND 1989
------------------------------------------------
PRIVATE COMPANY LIMITED BY SHARES
------------------------------------------------
ARTICLES OF ASSOCIATION
of
WILLIS CORROON GROUP LIMITED *(1)
Incorporated 25th February 1959
(Adopted by special resolution passed on 10th November 1998)
<PAGE>
CLIFFORD CHANCE
12
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Company No. 621757
THE COMPANIES ACT 1985 (AS AMENDED)
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PRIVATE COMPANY LIMITED BY SHARES
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ARTICLES OF ASSOCIATION
of
WILLIS CORROON GROUP
LIMITED
Incorporated 25th February 1959
(New Articles adopted by Special Resolution passed on 10th November 1998)
ADOPTION OF TABLE A
1. The regulations contained in Table A in the Schedule to the Companies
(Tables A to F) Regulations 1985 as amended at the date thereof ("Table
A") shall apply to the Company, except where they are excluded or modified
by these Articles. No other regulations contained in any statute or
subordinate legislation apply as the regulations of articles of
association of the Company. References herein to Regulations are to
Regulations in Table A unless otherwise stated.
2. Regulations 2, 3, 24, 53, 54, 57, 60-62 inclusive, 64, 72-83 inclusive,
the last sentence of regulation 84, 85-87, 93, 94, 112, 115 and 118 shall
not apply to the Company.
INTERPRETATION
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3. Words and expressions which bear particular meanings in Table A shall bear
the same meanings in these articles. References in these articles to
writing include references to any method of representing or reproducing
words in a legible and not-transitory form. Headings are for convenience
only and shall not affect construction.
4. In these Articles and in Table A, so far as it applies to the Company,
unless the context otherwise requires, the following expressions shall
have the meanings hereby assigned to them:-
"The Act" The Companies Act 1985 (as amended).
"The Statutes" The Act and every other statute for the
time being in force concerning companies
and affecting the Company.
"These Articles" These Articles of Association as from
time to time altered.
Words denoting the singular shall include the plural and vice versa. Words
denoting the masculine shall include the feminine. Words denoting persons
shall include bodies corporate and unincorporated associations.
References to any statute or statutory provision shall be construed as
relating to any statutory modification or re-enactment thereof for the
time being in force (whether coming into force before or after the
adoption of these Articles).
References to "committees" shall, unless the context otherwise requires,
include "sub-committees".
PRIVATE COMPANY
5. The Company is a private company limited by shares and accordingly any
invitation to the public to subscribe for any shares or debentures of the
Company is prohibited.
SHARE CAPITAL
6. The authorised share capital of the Company at the date of the adoption of
these Articles is (pound)66 million divided into 528,000,000 Ordinary
Shares of 12.5p each.
7. The Company shall not have power to issue share warrants to bearer.
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RIGHTS ATTACHED TO SHARES
8. Subject to the provisions of the Act and to any rights conferred on the
holders of existing shares or class of shares, any share may be issued
with or have attached to it such rights and restrictions as the Company
may be ordinary resolution decide or, if no such resolution has been
passed, or so far as the resolution does not make specific provision, as
the Directors may decide.
UNISSUED SHARES
9. Subject to the provisions of the Act and to these Articles, all unissued
shares of the Company (whether or not forming part of the original or any
increased capital) shall be at the disposal of the Directors who may
offer, allot, grant options over or otherwise dispose of them to such
persons at such times and for such consideration and upon such terms and
conditions as they may determine.
INITIAL AUTHORITY TO ISSUE RELEVANT SECURITIES
10. Subject to any direction to the contrary which may be given by the Company
in general meeting, the Directors shall be generally and unconditionally
authorised pursuant to and in accordance with Section 80 of the Act to
exercise all powers of the Company to allot relevant securities for a
period expiring on the fifth anniversary of the date of adoption of this
article. The maximum nominal amount of relevant securities that may be
allotted under this authority shall be the nominal amount of the unissued
share capital at the date of adoption of this article or such other amount
as may from time to time be authorised by the Company in general meeting.
The authority conferred on the Directors by this Article may be revoked
varied or reviewed from time to time by the Company in general meeting in
accordance with the Act.
EXCLUSION OF PRE-EMPTIVE RIGHTS
11. Section 89(1) of the Act and the provisions of sub-sections (1) to (6)
inclusive of section 90 of the Act shall not apply to the allotment by the
Company of any equity security.
ISSUE OF REDEEMABLE SHARES
12. Subject to the provisions of and so far as may be permitted by the act,
the Company may issue shares which are to be redeemed or are liable to be
redeemed at the option of the Company or the holder on such terms as may
be provided by the articles.
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LIEN ON SHARES
13. Regulation 8 shall be modified by omitting therefrom the words "(not being
a fully paid share)".
TRANSFER OF SHARES
14. The Directors may, in their absolute discretion and without giving any
reason for so doing, decline to register any transfer of any share other
than the shares referred to in Article 15, whether or not it is a fully
paid share unless the transfer is pursuant to a share charge, share pledge
or similar agreement or arrangement and the directors will register any
such transfer.
TRANSFER OF CERTAIN SHARES
15(1)(i) Any persons who becomes (whether by issue or otherwise) a holder of
Ordinary Shares in the Company after the time of passing of the
special resolution of the Company adopting this Article 15 (the
"Vendor") may on any date give to Trinity whilst it is a shareholder
in the Company (the "Purchaser") a notice requiring the Purchaser to
purchase all the Ordinary Shares so acquired by the Vendor (the
"Disposal Shares") for a cash consideration consisting of two
hundred pence for each Ordinary Share and the Vendor shall be bound
to transfer and the Purchase shall be bound to purchase the Disposal
Shares for such consideration.
(ii) The Purchaser may on any date give a notice to the Vendor requiring
the Vendor to sell to the Purchaser the Disposal Shares for the
consideration stated in Article 15(1)(i) and the Vendor shall be
bound to transfer and the Purchaser shall be bound to purchase the
Disposal Shares for such consideration.
(iii) A notice given under this Article 15(1) shall be irrevocable.
(2) To give effect to any transfer required by Article 15(1), the
Company may appoint any person to receive notice on behalf of any
Vendor under Article 15(1)(ii) and to execute as transferor, on
behalf of the Vendor, a form of transfer in favour of the Purchaser
or its nominee. Any such transfer will be made at such time and
place as the Company determines. Any such transfer will constitute a
transfer of the entire legal and beneficial interest in the Disposal
Shares concerned. The amount of cash consideration to be paid to the
Vendor will be despatched to him at this registered address at his
risk by the Purchaser within 7 days of the date of transfer of the
Disposal Shares concerned.
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(3) Any notice given under Article 15(1)(i) after a notice given
with respect to the same Disposal Shares under Article 15(1)(ii)
will not be a valid notice and vice versa.
NOTICE OF GENERAL MEETINGS
16. Notice of every General Meeting shall be given to all members (other than
any who, under the provisions of these Articles or the terms of issue of
the shares they hold, are not entitled to receive such notices from the
Company). The last sentence of Regulation 38 shall not apply.
PROCEEDINGS AT GENERAL MEETINGS
17. A poll may be demanded at any General Meeting of the Company by the
Chairman or by any member present in person or by proxy, and entitled to
vote. Regulation 46 shall be modified accordingly.
VOTES OF MEMBERS
17.1 Every member present in person or by proxy shall on a show of hands have
one vote, and upon a poll have one vote for every share held by him.
17.2 Subject to the provisions of the Act, a resolution in writing signed by
all members for the time being entitled to attend and vote at general
meetings (or being corporations by their duly authorised representatives)
shall be as valid and effective as if the same had been passed at a
general meeting of the Company duly convened and held. Any such resolution
may consist of several documents in the like form each signed by one or
more of the members (or being corporations by their duly authorised
representatives).
DELIVERY OF PROXIES
18. Any instrument appointing a proxy may be in any usual or common form or in
the form of a facsimile or other machine made copy of the instrument
appointing a proxy or in any other form which the Directors may approve.
Such instruments (and, where it is signed on behalf of the appointor by an
attorney, the letter or power of attorney or a duly certified copy
thereof) must either be delivered at such place or one of such places (if
any) as may be specified for that purpose in or by way of note to the
notice convening the meeting (or, if no place is so specified, at the
registered office) before the time appointed for holding the meeting or
adjourned meeting or (in the case of a poll taken otherwise than at or on
the same day as the meeting or adjourned meeting) for the taking of the
poll at which it is to be used, or be delivered to the Secretary (or the
Chairman of the meeting)
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on the day and at the place of the meeting or adjourned meeting or poll
but in any event before the time appointed for holding the meeting or
adjourned meeting or for the taking of the poll. An instrument of proxy
shall not be treated as valid until such delivery shall have been
effected.
DIRECTORS
19. The minimum number of Directors shall be two and there shall be no maximum
number.
20. A Director shall not be required to hold any shares of the Company by way
of qualification.
21. The aggregate fees of the Directors shall from time to time be determined
by the Directors except that such remuneration shall not
exceed(pound)100,000 per annum in aggregate or such higher amount as may
from time to time be determined by Ordinary Resolution of the Company and
shall (unless such resolution otherwise provides) be divisible among the
Directors as they may agree, or, failing agreement, equally, except that
any Director who shall hold office for part only of the period in respect
of which such remuneration is payable shall be entitled only to rank in
such division for a proportion of remuneration related to the period
during which he has held office.
22. The Directors shall also be entitled to be repaid all reasonable
travelling, hotel and other expenses incurred by them respectively in or
about the performance of their duties as Directors, including their
expenses of travelling to and from Board Meetings. In the event of there
being any dispute as to a reasonableness of any such expenses the same
shall be referred to the Directors who shall determine the question and
whose determination shall be final and binding upon both the Company and
the Director in question.
23. The Directors may grant special remuneration to any Director who, being
called upon, shall be willing to render any special or extra service to
the Company or to go to or reside in any place other than where he usually
resides, in connection with the conduct of the affairs of the Company.
Such special remuneration shall be paid to such Director in addition to
his ordinary remuneration as a Director and may be payable by a lump sum
or by way of salary, or by a percentage of profits, or by any or all those
modes.
APPOINTMENT OF DIRECTORS BY BOARD
24. Without prejudice to the powers conferred by any other article, any person
may
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be appointed a Director by the Directors, either to fill a vacancy or as
an additional Director.
25. Any provision of the Statutes which, subject to the provisions of these
Articles, would have the effect of rendering any person ineligible for
appointment or election as a Director or liable to vacate office as a
Director on account of his having reached any specified age or of
requiring special notice or any other special formality in connection with
the appointment or election of any Director over a specified age, shall
not apply to the Company.
DISQUALIFICATION AND REMOVAL OF DIRECTOS
26. The office of a director is vacated if:
(a) he ceases to be a director by virtue of any provision of the Act or
he becomes prohibited by law from being a director; or
(b) he becomes bankrupt or makes any arrangement or composition with his
creditors generally; or
(c) he becomes, in the opinion of all his co-directors, incapable by
reason of mental disorder of discharging his duties as director; or
(d) he resigns his office by notice to the Company; or
(e) he is for more than six consecutive months absent without permission
of the directors from meetings of directors held during that period
and his alternate director (if any) has not during that period
attended any such meetings instead of him, and directors resolve
that his office be vacated; or
(f) he is removed from office by notice addressed to him at his
last-known address and signed by his co-directors.
POWERS AND DUTIES OF DIRECTORS
27.1 The business and affairs of the Company shall be managed by the Directors,
who may exercise all such powers of the Company as are not by the Statutes
or by these Articles required to be exercised by the Company in a general
meeting subject nevertheless to any regulations made by the Company under
Article 27.2.
27.2 The Company in a General Meeting may by Ordinary Resolution at any time
and
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from time to time, give directions to the Directors concerning the
management of the Company (including, without limitation, procedural and
administrative matters) or the policy to be adopted by the Directors in
relation to such management. The Directors shall use all reasonable
endeavours to exercise their powers so as to manage the business of the
Company in a manner consistent with such direction or directions, provided
that no person dealing with the Company shall be concerned to see or
enquire as to whether the powers of the Directors have been in any way
restricted hereunder, and no obligation incurred or security given or
transaction effected by the Company to or with any third party shall be
invalid or ineffectual unless the third party had at the time express
notice that the incurring of such obligation or the giving of such
security or the effecting of such transaction was in excess of the powers
of the Directors. No regulation so made by the Company shall invalidate
any prior act of the Directors which would have been valid if such
regulation had not been made. Regulation 70 shall be modified accordingly.
28. A Director may be a party to or in any way interested in any contact or
transaction or arrangement to which the Company is a party or in which the
Company is in any way interested. A Director may hold and be remunerated
in respect of any office or place of profit (other than the office of
Auditor of the Company or any subsidiary company thereof) under the
Company or any other company in which the Company is in any way
interested, and he or any firm of which he is a member may act in a
professional capacity of the Company or any such other company and be
remunerated therefore. On any matter in which a Director is any way
interested, he may nevertheless vote and be taken into account for the
purposes of a quorum and, (save as otherwise agreed), may retain for his
own absolute use and benefit from all profits, benefits and advantages
directly or indirectly accruing to him thereunder or in consequence
thereof.
29. A Director who is in any way whether directly or indirectly interested in
a contract, transaction or arrangement or a proposed contract, transaction
or arrangement or a proposed contract, transaction or arrangement with the
Company shall declare the nature of his interest at a meeting of the
Directors in accordance with Section 317 of the Act. A general notice
given to the Directors by any Director, to the effect that he is a member
of any specified company or firm, and is to be regarded as interested in
any contract, transaction or arrangement which may thereafter be made with
that company or firm, or to the effect that he is to be regarded as
interested in any contract, transaction or arrangement which may
thereafter be made with a specified person who is connected with him
(within the meaning of Section 346 of the Act), shall be deemed a
sufficient declaration of
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interest in relation to any such contract, transaction or arrangement,
provided that no such notice shall be of effect, unless either it is given
at a meeting of the Directors, or the Director takes reasonable steps to
secure that it is brought up and read at the next meeting of the
Directors, or the Director takes reasonable steps to secure that it is
brought up and read at the next meeting of the Directors after it is
given.
30. The Directors shall have power to pay and agree to pay gratuities,
pensions or other retirement, superannuity, death or disability benefits
to (or to any person in respect of) any Director or ex Director and for
the purpose of providing any such gratuities, pensions or other benefits
to contribute to any scheme or fund or to any premiums.
31. Without prejudice to the provisions of Article 45 the Directors shall have
power to purchase and maintain insurance for or for the benefit of any
persons who are or were at any time Directors, officers, employees of the
Company, or for any other company which is its holding company or in which
the Company or of such holding company or any of the predecessors of the
Company or of such holding company has any interest whether directly or
indirectly or which is in any way allied to or associated with the
Company, or of any subsidiary undertaking of the Company or of any such
other company, or who are or were at any time trustees of any pension fund
or employees' share scheme in which employees of the Company or of any
other such company or subsidiary undertaking are interested, including
(without prejudice to the generality of the foregoing) insurance against
any liability incurred by such persons in respect of any act or omission
in the actual or purported execution and/or discharge of their duties
and/or in the exercise or purported exercise of their powers and/or
otherwise in relation to their duties, powers or offices in relation to
the Company or any other such company, subsidiary undertaking, pension
fund or employees' share scheme.
NOTICE OF BOARD MEETINGS
32. Notice of a meeting of the Directors shall be deemed to be properly given
to a Director if it is given to him personally, or by word of mouth, or
sent in writing to him at his last known address in the United Kingdom or
the United States, or any other address given by him to the Company for
this purpose, or by any other means authorised in writing by the Director
concerned. A Director absent or intending to be absent from the United
Kingdom or the United States may request the Directors that notices of
meetings of the Directors shall during his absence be sent in writing to
him at an address or to a facsimile or telex number given by him to the
Company for this purpose, but if no request is made to the Directors, it
shall
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not be necessary to give notice of a meeting of the Directors to any
Director who is for the time being absent from the United Kingdom or the
United States. A Director may waive notice of any meeting either
prospectively or retrospectively. Regulation 88 shall be modified
accordingly.
PROCEEDINGS OF DIRECTORS
33. Without prejudice to the obligations of any director to disclose his
interest in accordance with Section 317 of the Act, or Article 28 a
director may vote at a meeting of directors or of a committee of directors
on any resolution concerning a matter in respect of which he has, directly
or indirectly, an interest or duty. The director must be counted in a
quorum present at a meeting when any such resolution is under
consideration and if he votes his vote must be counted.
34. Subject to the provisions of these Articles the Directors may meet
together for the despatch of business, adjourn and otherwise regulate
their meetings as they think fit. Any one or more (including, without
limitation, all) of the Directors or members of any committee of the
Directors, may participate in a meeting of the Directors or of such
committee, (i) by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting
to hear each at the same time or (ii) by a succession of telephone calls
to Directors from the chairman of the meeting following disclosure to them
of all material points. Participating by such means shall constitute
presence in person at a meeting. Such meeting shall be deemed to have
occurred in (i) at the place where most of the Directors participating are
present or, if there is no such place, where the chairman of the meeting
is present and in (ii) where the chairman of the meeting is present. At
any time any Director may, and the Secretary at the request of the
Director shall, summon a meeting of the Directors. It shall not be
necessary to give notice of a meeting of Directors to any Director for the
time being absent from the United Kingdom and the United States provided
that if any Director who is for the time being absent from the United
Kingdom and the United States shall have left with the Secretary a
memorandum specifying an address outside the United Kingdom or the United
States, as the case may be, to which such notices should be sent by
telegraphic or facsimile transmission during any period, then during that
period such Director shall be given notice of Directors' meetings by
telegraphic or facsimile transmission sent to such address. Any Director
may waive notice of any meeting and any such waiver may be retroactive.
35. The quorum necessary for the transaction of business of the Directors
shall be two or such other number as may be fixed from time to time by the
Directors and
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may include any Director represented by an alternate Director. A meeting
of the Directors at which a quorum is present shall be competent to
exercise all powers and discretions for the time being exercisable by the
Directors.
36. The Directors may delegate any of their powers or discretions (including
without prejudice to the generality of the foregoing all powers and
discretions whose exercise involves or may involve the payment of
remuneration to or the conferring of any other benefit on all or any of
the Directors) to committees. Any such committee shall, unless the
Directors otherwise resolve, have power to sub-delegate to sub-committees
any of the powers or discretions delegated to it. Any such committee shall
consist of one or more Directors and (if thought fit) one or more other
named person or persons to be co-opted as hereinafter provided. Insofar as
any such power or discretion is delegated to a committee or sub-committee
any reference in these Articles to the exercise by the Directors of such
power or discretion shall be read and construed as if it were a reference
to the exercise thereof by such committee or sub-committee. Any committee
or sub-committee so formed shall in the exercise of the powers so
delegated conform to any regulations which may from time to time be
imposed by the Directors. Any such regulations may provide for or
authorise the co-option to the committee of persons other than Directors
and may provide for members who are not Director to have voting rights as
members of the committee or sub-committee.
37. The meetings and proceedings of any such committee or sub-committee
consisting of two or more members shall be governed mutatis mutandis by
the provisions of these Articles regulating the meetings and proceedings
of the Directors, so far as the same are not superseded by any regulations
made by the Directors under the last preceding Article.
38. A resolution in writing signed by all the Directors, for the time being in
the United Kingdom or the United States and by an alternate Director for
the time being in the United Kingdom or the United States of a Director
not for the time being in the United Kingdom or the United States (in each
case entitled to vote thereon) shall be as valid and effectual as a
resolution duly passed and may consist of several documents in the like
form each signed by one or more of the Directors.
39. The Directors may dispense with the keeping of attendance books for the
meetings of the Directors or committees of the Board.
CASTING VOTE
40. Questions arising at any meeting of the Directors shall be determined by a
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majority of votes. In case of an equality of votes the Chairman of the
meeting shall have a second or casting vote.
BORROWING POWERS
41. Subject to the provision of the Statutes, the Directors may exercise all
the powers of the Company to borrow money, to enter into any guarantee or
contract of indemnity or suretyship, and to provide security, including
without limitation, the guarantee and provision of security for the
performance of the obligations of and the payment of any money by any
person including, without limitation, any body corporate which includes
for the time being the Company's holding company, the Company's ultimate
parent company, the Company's subsidiary, a subsidiary of the Company's
holding, or ultimate parent company, or any person which is for the time
being a member or otherwise has an interest in the Company or is
associated with the Company in any business or venture, with or without
the Company receiving any consideration or advantage.
SECRETARY
42. If at any time the office of Secretary shall be vacant or if there is for
any reason no Secretary capable of acting, the Directors may appoint any
other officer of the Company to perform the duties of the Secretary for
the duration of such vacancy or incapacity as the case may be.
NOTICES
43. Any notice or other document (including a share certificate) may be served
on or delivered to any member of the Company either personally, or by
sending it by post addressed to the member at his registered address or by
facsimile or telex to a number provided by the member for this purpose or
by leaving it at his registered address addressed to the member, or by any
other means authorised in writing by the member concerned. In the case of
joint holders of a share, service or delivery of any notice or other
document on or to one of the joint holders shall for all purposes be
deemed a sufficient service on or delivery to all the joint holders.
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TIME OF SERVICE
44. Any notice or other documents, if sent by post, shall be deemed to have
been served or delivered twenty four hours (or, where second class mail is
employed, forty-eight hours) after posting and, in proving such service or
delivery, it shall be sufficient to prove that the notice or document was
properly addressed, stamped and put in the post. Any notice or other
document left at a registered address otherwise than by post, or sent by
facsimile or telex or other instantaneous means of transmission, shall be
deemed to have been served or delivered when it was so left or sent.
INDEMNITY
45. Subject to the provisions of and so far as may be consistent with the
Statutes, every Director, Secretary or other officer of the Company or its
subsidiary undertakings shall be entitled to be indemnified by the Company
out of its own funds against all costs, charges, losses, expenses and
liabilities incurred by him in the actual or purported execution and/or
discharge of his duties and/or the exercise or purported exercise of his
powers and/or otherwise in relation to or in connection with his duties,
powers or office including (without prejudice to the generality of the
foregoing) any liability incurred by him in defending any proceedings,
civil or criminal, which relate to anything done or omitted or alleged to
have been done or omitted by him as an officer or employee of the Company
and in which judgement is given in his favour (or the proceedings are
otherwise disposed of without any finding or admission of any material
breach of duty on his part) or in which he is acquitted or in connection
with any application under any statue for relief from liability in respect
of any such act or omission in which relief is granted to him by the
Court.
OVERRIDING PROVISIONS
46. Where Trinity Acquisition plc is the immediate parent company of the
Company (the "Parent Company"), the following provisions shall apply and
to the extent of any inconsistency shall have overriding effect over all
other provisions of these Articles:-
(a) the Parent Company may at any time and from time to time appoint any
person to be a Director or remove from office any Director howsoever
appointed or remove any Director from the office of Managing
Director;
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(b) the Parent Company may at any time by notice in writing to all the
members of the Company entitled under these articles to receive
notice of General Meetings convene any Extraordinary General Meeting
of the Company, provided that such notice shall not be effective to
convene such meeting unless it would have been effective for such
purposes had it been given by the Company.
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SOLE MEMBER
47. And for so long as the Company has only one member:
(a) in relation to a general meeting, the sole member or a proxy for
that member or (if the member is a corporation) a duly authorised
representative of that member is a quorum and Regulation 40 of Table
A is modified accordingly;
(b) a proxy for the sole member may vote on a show of hands and
regulation 54 of Table A is modified accordingly;
(c) the sole member may agree that any general meeting, other than a
meeting called for the passing of an elective resolution, be called
by shorter notice than that provided for by the articles; and
(d) all other provisions of the articles apply with any necessary
modification (unless the provision expressly provides otherwise).
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(1)* The Special Resolution dated 10th November 1998 was passed to change the
name of the Company from Willis Corroon Group plc to Willis Corroon Group
Limited.
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Exhibit 4.1
EXECUTION COPY
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WILLIS CORROON CORPORATION
9% Senior Subordinated Notes due 2009
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INDENTURE
Dated as of February 2, 1999
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The Bank of New York,
Trustee
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TABLE OF CONTENTS
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Page
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ARTICLE 1
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DEFINITIONS AND INCORPORATION BY REFERENCE...............................................................1
SECTION 1.01. DEFINITIONS......................................................................1
SECTION 1.02. OTHER DEFINITIONS...............................................................20
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT...............................21
SECTION 1.04. RULES OF CONSTRUCTION...........................................................22
ARTICLE 2
THE NOTES...............................................................................................22
SECTION 2.01. PRINCIPAL AMOUNT AND MATURITY...................................................22
SECTION 2.02. FORM AND DATING.................................................................22
SECTION 2.03. EXECUTION AND AUTHENTICATION....................................................23
SECTION 2.04. REGISTRAR AND PAYING AGENT......................................................23
SECTION 2.05. PAYING AGENT TO HOLD MONEY IN TRUST.............................................24
SECTION 2.06. NOTEHOLDER LISTS................................................................24
SECTION 2.07. TRANSFER AND EXCHANGE...........................................................24
SECTION 2.08. REPLACEMENT NOTES...............................................................25
SECTION 2.09. OUTSTANDING NOTES...............................................................26
SECTION 2.10. TEMPORARY NOTES.................................................................26
SECTION 2.11. CANCELATION.....................................................................26
SECTION 2.12. DEFAULTED INTEREST..............................................................26
SECTION 2.13. "CUSIP" OR "ISIN" NUMBERS.......................................................26
ARTICLE 3
REDEMPTION..............................................................................................27
SECTION 3.01. NOTICES TO TRUSTEE..............................................................27
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED...............................................27
SECTION 3.03. NOTICE OF REDEMPTION............................................................27
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION..................................................28
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.....................................................28
SECTION 3.06. NOTES REDEEMED IN PART..........................................................28
ARTICLE 4
COVENANTS...............................................................................................29
SECTION 4.01. PAYMENT OF NOTES................................................................29
SECTION 4.02. SEC REPORTS.....................................................................29
SECTION 4.03. LIMITATION ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF
DISQUALIFIED STOCK....................................................................30
SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS...............................................34
SECTION 4.05. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES........................................................41
SECTION 4.06. ASSET SALES.....................................................................42
SECTION 4.07. TRANSACTIONS WITH AFFILIATES....................................................45
SECTION 4.08. CHANGE OF CONTROL...............................................................46
SECTION 4.09. COMPLIANCE CERTIFICATE..........................................................47
SECTION 4.10. FURTHER INSTRUMENTS AND ACTS....................................................48
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SECTION 4.11. LIMITATION ON GUARANTEES OF INDEBTEDNESS BY RESTRICTED
SUBSIDIARIES........................................................48
SECTION 4.12. LIENS...........................................................................49
SECTION 4.13. LIMITATION ON OTHER SENIOR SUBORDINATED INDEBTEDNESS............................49
SECTION 4.14. ADDITIONAL AMOUNTS..............................................................49
ARTICLE 5
SUCCESSOR COMPANY.......................................................................................50
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ALL OR SUBSTANTIALLY
ALL ASSETS.........................................................50
ARTICLE 6
DEFAULTS AND REMEDIES...................................................................................52
SECTION 6.01. EVENTS OF DEFAULT...............................................................52
SECTION 6.02. ACCELERATION....................................................................54
SECTION 6.03. OTHER REMEDIES..................................................................54
SECTION 6.04. WAIVER OF PAST DEFAULTS.........................................................54
SECTION 6.05. CONTROL BY MAJORITY.............................................................55
SECTION 6.06. LIMITATION ON SUITS.............................................................55
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT............................................55
SECTION 6.08. COLLECTION SUIT BY TRUSTEE......................................................55
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM................................................56
SECTION 6.10. PRIORITIES......................................................................56
SECTION 6.11. UNDERTAKING FOR COSTS...........................................................56
SECTION 6.12. WAIVER OF STAY OR EXTENSION LAWS................................................56
ARTICLE 7
TRUSTEE.................................................................................................57
SECTION 7.01. DUTIES OF TRUSTEE...............................................................57
SECTION 7.02. RIGHTS OF TRUSTEE...............................................................58
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE....................................................59
SECTION 7.04. TRUSTEE'S DISCLAIMER............................................................59
SECTION 7.05. NOTICE OF DEFAULTS..............................................................59
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS...................................................59
SECTION 7.07. COMPENSATION AND INDEMNITY......................................................59
SECTION 7.08. REPLACEMENT OF TRUSTEE..........................................................60
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER.....................................................61
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION...................................................61
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER................................61
ARTICLE 8
DISCHARGE OF INDENTURE; DEFEASANCE......................................................................61
SECTION 8.01. DISCHARGE OF LIABILITY ON NOTES; DEFEASANCE.....................................61
SECTION 8.02. CONDITIONS TO DEFEASANCE........................................................63
SECTION 8.03. APPLICATION OF TRUST MONEY......................................................64
SECTION 8.04. REPAYMENT TO ISSUER.............................................................64
SECTION 8.05. INDEMNITY FOR GOVERNMENT OBLIGATIONS............................................64
SECTION 8.06. REINSTATEMENT...................................................................64
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ARTICLE 9
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AMENDMENTS..............................................................................................65
SECTION 9.01. WITHOUT CONSENT OF HOLDERS......................................................65
SECTION 9.02. WITH CONSENT OF HOLDERS.........................................................66
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.............................................67
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS...................................67
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES................................................67
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS......................................................67
SECTION 9.07. PAYMENT FOR CONSENT.............................................................68
ARTICLE 10
SUBORDINATION...........................................................................................68
SECTION 10.01. AGREEMENT TO SUBORDINATE.......................................................68
SECTION 10.02. LIQUIDATION, DISSOLUTION, BANKRUPTCY...........................................68
SECTION 10.03. DEFAULT ON SENIOR INDEBTEDNESS.................................................68
SECTION 10.04. ACCELERATION OF PAYMENT OF NOTES...............................................69
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER............................................69
SECTION 10.06. SUBROGATION....................................................................69
SECTION 10.07. RELATIVE RIGHTS................................................................70
SECTION 10.08. SUBORDINATION MAY NOT BE IMPAIRED BY ISSUER....................................70
SECTION 10.09. RIGHTS OF TRUSTEE AND PAYING AGENT.............................................70
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.......................................70
SECTION 10.11. ARTICLE 10 NOT TO PREVENT EVENTS OF DEFAULT OR
LIMIT RIGHT TO ACCELERATE..........................................70
SECTION 10.12. TRUST MONEYS NOT SUBORDINATED..................................................71
SECTION 10.13. TRUSTEE ENTITLED TO RELY.......................................................71
SECTION 10.14. TRUSTEE TO EFFECTUATE SUBORDINATION............................................71
SECTION 10.15. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR
INDEBTEDNESS.......................................................71
SECTION 10.16. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS
ON SUBORDINATION PROVISIONS........................................71
SECTION 10.17. TRUSTEE'S COMPENSATION NOT PREJUDICED..........................................72
SECTION 10.18. DEFEASANCE.....................................................................72
ARTICLE 11
GUARANTEES..............................................................................................72
SECTION 11.01. GUARANTEES.....................................................................72
SECTION 11.02. LIMITATION ON LIABILITY........................................................74
SECTION 11.03. SUCCESSORS AND ASSIGNS.........................................................74
SECTION 11.04. NO WAIVER......................................................................74
SECTION 11.05. MODIFICATION...................................................................75
SECTION 11.06. EXECUTION OF SUPPLEMENTAL INDENTURE FOR
FUTURE GUARANTORS..................................................75
ARTICLE 12
SUBORDINATION OF THE GUARANTEES.........................................................................75
SECTION 12.01. AGREEMENT TO SUBORDINATE.......................................................75
SECTION 12.02. LIQUIDATION, DISSOLUTION, BANKRUPTCY...........................................75
SECTION 12.03. DEFAULT ON SENIOR INDEBTEDNESS OF A GUARANTOR..................................76
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SECTION 12.04. DEMAND FOR PAYMENT.............................................................76
SECTION 12.05. WHEN DISTRIBUTION MUST BE PAID OVER............................................77
SECTION 12.06. SUBROGATION....................................................................77
SECTION 12.07. RELATIVE RIGHTS................................................................77
SECTION 12.08. SUBORDINATION MAY NOT BE IMPAIRED BY A SUBSIDIARY
GUARANTOR...........................................................77
SECTION 12.09. RIGHTS OF TRUSTEE AND PAYING AGENT.............................................77
SECTION 12.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.......................................78
SECTION 12.11. ARTICLE 12 NOT TO PREVENT EVENTS OF DEFAULT OR LIMIT
RIGHT TO ACCELERATE................................................78
SECTION 12.12. TRUSTEE ENTITLED TO RELY.......................................................78
SECTION 12.13. TRUSTEE TO EFFECTUATE SUBORDINATION............................................78
SECTION 12.14. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR
INDEBTEDNESS OF A GUARANTOR........................................79
SECTION 12.15. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS OF
A GUARANTOR ON SUBORDINATION PROVISIONS.............................79
SECTION 12.16. DEFEASANCE.....................................................................79
ARTICLE 13
MISCELLANEOUS...........................................................................................79
SECTION 13.01. TRUST INDENTURE ACT CONTROLS...................................................79
SECTION 13.02. NOTICES........................................................................79
SECTION 13.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS....................................80
SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.............................81
SECTION 13.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION..................................81
SECTION 13.06. WHEN NOTES DISREGARDED.........................................................81
SECTION 13.07. RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR...................................81
SECTION 13.08. LEGAL HOLIDAYS.................................................................81
SECTION 13.09. GOVERNING LAW..................................................................82
SECTION 13.10. NO RECOURSE AGAINST OTHERS.....................................................82
SECTION 13.11. SUCCESSORS.....................................................................82
SECTION 13.12. MULTIPLE ORIGINALS.............................................................82
SECTION 13.13. TABLE OF CONTENTS; HEADINGS....................................................82
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Appendix A - Provisions Relating to Initial Notes, Exchange Notes and Private
Exchange Notes
Exhibit A - Form of Initial Note
Exhibit B - Form of Exchange Note
Exhibit C - Form of Certificate to be Delivered in Connection with Transfers of
Regulation S Global Note
Exhibit D - Form of Transferee Letter of Representation
Exhibit E - Form of Supplemental Indenture
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INDENTURE dated as of February 2, 1999,
between WILLIS CORROON CORPORATION, a Delaware
corporation (the "Issuer"), WILLIS CORROON GROUP
LIMITED, a company with limited liability organized
under the laws of England and Wales (the "Company"),
WILLIS CORROON PARTNERS, a Delaware general
partnership ("USGP" and together with the Company,
the "Guarantors") and THE BANK OF NEW YORK, a New
York banking corporation, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of (i) the Issuer's 9% Senior
Subordinated Notes due 2009 issued on the date hereof (the "Initial Notes"),
(ii) if and when issued as provided in the Registration Agreement (as defined in
Appendix A hereto (the "Appendix")), the Issuer's 9% Senior Subordinated Notes
due 2009 issued in the Registered Exchange Offer in exchange for any Initial
Notes (the "Exchange Notes"), and (iii) if and when issued as provided in the
Registration Agreement, the Private Exchange Notes issued in the Private
Exchange (as defined in the Appendix) in exchange for any Initial Notes (the
"Private Exchange Notes" and together with the Initial Notes and any Exchange
Notes issued hereunder, the "Notes"). Except as otherwise provided herein, the
Notes shall be limited to $550,000,000 in aggregate principal amount
outstanding.
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACQUIRED INDEBTEDNESS" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by
a Lien encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"ASSET SALE" means (i) the sale, conveyance, transfer or other disposition
(whether in a single transaction or a series of related transactions) of
property or assets (including by way of a sale and leaseback) of the Company or
any Restricted Subsidiary (each referred to in this definition as a
"DISPOSITION") or (ii) the issuance or sale of Equity Interests of any
Restricted Subsidiary (whether in a single transaction or a series of related
transactions), in each case, other than:
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2
(a) a disposition of Cash Equivalents or Investment Grade Securities
or obsolete or worn out equipment in the ordinary course of business or
inventory or goods held for sale in the ordinary course of business;
(b) the disposition of all or substantially all of the assets of the
Company in a manner permitted pursuant to Section 5.01 or any disposition
that constitutes a Change of Control pursuant to this Indenture;
(c) the making of any Restricted Payment or Permitted Investment that
is permitted to be made, and is made, pursuant to Section 4.04;
(d) any disposition of assets or issuance or sale of Equity Interests
of any Restricted Subsidiary with an aggregate fair market value of less
than $2.5 million;
(e) any disposition of property or assets or issuance of securities by
a Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Restricted Subsidiary;
(f) any exchange of like property pursuant to Section 1031 of the Code
for use in a Similar Business;
(g) the lease, assignment or sub-lease of any real or personal
property in the ordinary course of business;
(h) any financing transaction with respect to property built or
acquired by the Company or any Restricted Subsidiary after the Closing
Date, including, without limitation, sale-leasebacks and asset
securitizations;
(i) foreclosures on assets;
(j) any sale of Equity Interests in, or Indebtedness or other
securities of, an Unrestricted Subsidiary (with the exception of
Investments in Unrestricted Subsidiaries acquired pursuant to clause (b)(x)
of the definition of Permitted Investments); and
(k) sales of accounts receivable, or participations therein, in
connection with any Receivables Facility.
"ASSOCIATE" means any Person engaged in a Similar Business of which at
least 20% but not more than 50% of the Voting Stock thereof is owned by the
Company or any Restricted Subsidiary.
"BACS FACILITY" means a facility created to make automated payments through
Banks' Automated Clearance System.
"BOARD OF DIRECTORS" means the Board of Directors of the Issuer, the
Company or any committee thereof duly authorized to act on behalf of such Board.
"BUSINESS DAY" means each day which is not a Legal Holiday.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a
<PAGE>
3
partnership or limited liability company, partnership or membership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"CAPITALIZED LEASE OBLIGATION" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized and reflected as a liability on
a balance sheet (excluding the footnotes thereto) in accordance with GAAP.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) pounds sterling,
(iii) Euro, (iv) Japanese Yen, (v) Canadian dollars, (vi) Australian dollars,
(vii) securities issued or directly and fully guaranteed or insured by the
United States or United Kingdom government or any agency or instrumentality
thereof with maturities of 24 months or less from the date of acquisition,
(viii) certificates of deposit, time deposits and eurodollar time deposits with
maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding one year and overnight bank deposits,
in each case with any commercial bank having capital and surplus in excess of
$500.0 million, (ix) repurchase obligations for underlying securities of the
types described in clauses (vii) and (viii) entered into with any financial
institution meeting the qualifications specified in clause (viii) above, (x)
commercial paper rated A-1 or the equivalent thereof by Moody's or S&P and in
each case maturing within one year after the date of acquisition, (xi)
investment funds investing 95% of their assets in securities of the types
described in clauses (i)-(x) above, (xii) readily marketable direct obligations
issued by any state of the United States of America or any political subdivision
thereof having one of the two highest rating categories obtainable from either
Moody's or S&P with maturities of 24 months or less from the date of acquisition
and (xiii) Indebtedness or preferred stock issued by Persons with a rating of
"A" or higher from S&P or "A2" or higher from Moody's with maturities of 24
months or less from the date of acquisition. Notwithstanding the foregoing, Cash
Equivalents shall include amounts denominated in currencies other than those set
forth in clauses (i) through (vi) above, PROVIDED that such amounts are
converted into any currency listed in clauses (i) through (vi) as promptly as
practicable and in any event within ten Business Days following the receipt of
such amounts.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(i) the sale, lease or transfer, in one or a series of related
transactions, of all or substantially all of the assets of the Company and
its Subsidiaries, taken as a whole, to any Person other than a Permitted
Holder; or
(ii) the Company becomes aware of (by way of a report or any other
filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written
notice or otherwise) the acquisition by any Person or group (within the
meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any
successor provision), including any group acting for the purpose of
acquiring, holding or disposing of securities (within the meaning of Rule
13d-5(b)(1) under the Exchange Act), other than the Permitted Holders, in a
single transaction or in a related series of transactions, by way of
merger, consolidation or other business combination or purchase of
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange
Act, or any successor provision) of 50% or more of the total Voting Stock
of the Company or any of its direct or indirect parent corporations.
<PAGE>
4
"CLOSING DATE" means November 19, 1998, the date on which the Subordinated
Bridge Agreement was executed.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" means, with respect to any Person, shares of common stock.
"CONSOLIDATED" with respect to any Person refers to such Person
consolidated with its Restricted Subsidiaries, and excludes from such
consolidation any Unrestricted Subsidiary as if such Unrestricted Subsidiary
were not an Affiliate of such Person.
"CONSOLIDATED DEPRECIATION AND AMORTIZATION EXPENSE" means with respect to
any Person for any period, the total amount of depreciation and amortization
expense and other noncash charges (excluding any noncash item that represents an
accrual or reserve for a cash expenditure for a future period) of such Person
and its Restricted Subsidiaries for such period on a consolidated basis and
otherwise determined in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, the sum, without duplication, of: (a) consolidated interest expense of
such Person and its Restricted Subsidiaries for such period, to the extent such
expense was deducted in computing Consolidated Net Income (including
amortization of original issue discount, non-cash interest payments, the
interest component of Capitalized Lease Obligations and net payments (if any)
pursuant to Hedging Obligations, excluding amortization of deferred financing
fees), (b) consolidated capitalized interest of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and (c) the impact of any
net payments or receipts related to Trinity Hedging Obligations, PROVIDED that
any reduction of interest expense related to any net amounts to be received by
Trinity are actually received by the Company within 31 days of the end of the
period during which such reduction of interest expense was recorded; PROVIDED,
HOWEVER, that Receivables Fees shall be deemed not to constitute Consolidated
Interest Expense. Notwithstanding anything to the contrary stated above,
Consolidated Interest Expense shall not include interest expense in respect of
the Group Intercompany Notes; PROVIDED, HOWEVER, that such interest expense
shall be included in Consolidated Interest Expense to the extent such interest
expense is actually paid and not immediately repaid to the Company or a
Restricted Subsidiary in respect of interest on any Trinity Intercompany Notes
or Interim Refinancing Indebtedness.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income, of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, and otherwise determined in accordance
with GAAP; PROVIDED, HOWEVER, that (i) any net after-tax exceptional items (less
all fees and expenses relating thereto) shall be excluded, (ii) the Net Income
for such period shall not include the cumulative effect of a change in
accounting principles during such period, (iii) any net after-tax income (loss)
from discontinued operations and any net after-tax gains or losses on disposal
of discontinued operations shall be excluded, (iv) any net after-tax gains or
losses (less all fees and expenses relating thereto) attributable to asset
dispositions other than in the ordinary course of business (as determined in
good faith by the Board of Directors of the Company) shall be excluded, (v) the
Net Income for such period of any Person that is not a Subsidiary, or is an
Unrestricted Subsidiary, or that is accounted for by the equity method of
accounting, shall be excluded; PROVIDED that Consolidated Net Income of the
Company shall be increased by the amount of dividends or distributions or other
payments that are actually paid in cash (or to the extent converted into cash)
to the referent Person or a Restricted Subsidiary thereof in respect of such
period, (vi) the Net
<PAGE>
5
Income of any Person acquired in a pooling of interests transaction shall not be
included for any period prior to the date of such acquisition, (vii) the Net
Income for such period of any Restricted Subsidiary (other than the Issuer and
any Guarantor) shall be excluded if the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of its Net Income is not at
the date of determination wholly permitted without any prior governmental
approval (which has not been obtained) or, directly or indirectly, by the
operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule, or governmental regulation applicable to that
Restricted Subsidiary or its stockholders, unless such restriction with respect
to the payment of dividends or in similar distributions has been legally waived;
PROVIDED that Consolidated Net Income of the Company shall be increased by the
amount of dividends or other distributions or other payments that could have
been paid in cash (or to the extent converted into cash) to the referent Person
or a Restricted Subsidiary thereof in respect of such period and (viii) the
after-tax impact of any net payments or receipts related to Trinity Hedging
Obligations shall be included, PROVIDED that any reduction of interest expense
related to any net amounts to be received by Trinity are actually received by
the Company within 31 days of the end of the period during which such reduction
of interest expense was recorded. Notwithstanding the foregoing, for the purpose
of Section 4.04 only (other than clause (a)(3)(iv) thereof), there shall be
excluded from Consolidated Net Income any income arising from any sale or other
disposition of Restricted Investments made by the Company and its Restricted
Subsidiaries, any repurchases and redemptions of Restricted Investments from the
Company and the Restricted Subsidiaries, any repayments of loans and advances
which constitute Restricted Investments by the Company or any Restricted
Subsidiary, any sale of the stock of an Unrestricted Subsidiary or any
distribution or dividend from an Unrestricted Subsidiary, in each case only to
the extent such amounts increase the amount of Restricted Payments permitted
under Section 4.04(a)(3)(iv). Notwithstanding anything to the contrary stated
above, Consolidated Net Income shall not include (x) net after-tax income (net
of any interest expense in respect of Group Intercompany Notes) relating to
amounts received or accrued in respect of the Trinity Intercompany Notes and
loans made in respect of Interim Refinancing Indebtedness or (y) net after-tax
income (or losses) relating to payments received in respect of the Trinity
Intercompany Notes or Interim Refinancing Indebtedness or payments made in
respect of the corresponding Group Intercompany Note that are solely the result
of exchange rate fluctuations or (z) net after-tax gain or loss relating to the
impact of Facility Hedging Obligations being marked-to-market.
"CONSORTIUM" means Guardian Royal Exchange, Royal & Sun Alliance Insurance
Group, The Chubb Corporation, The Hartford Financial Services Group, Inc., The
Tokio Marine and Fire Insurance Co., Limited and Travelers Property Casualty
Corp. and their respective Affiliates or any replacement insurance company
investors from time to time and their respective Affiliates.
"CONSORTIUM PREFERRED STOCK" means (a) preferred stock of TA II having a
liquidation preference of approximately $270,000,000 issued to the Consortium in
connection with the Transactions and (b) any preferred stock that (i) is issued
in exchange for, or to replace or refinance, all or a portion thereof, (ii) is
not subject to mandatory redemption or redemption at the option of the holder
thereof prior to the date that is six months later than the maturity date of the
Notes and (iii) may include, at the election of TA II, (A) provisions for
required cash dividends (at a rate per annum not in excess of 7 1/2%, or a
higher rate if the payment of cash dividends in excess of 7 1/2% is stated in
the provisions of such preferred stock to be subject to the limitations set
forth in this Indenture), (B) provisions for transferability, (C) provisions for
customary voting rights and/or board representation upon the occurrence of
non-payment of dividends and (iv) other terms customary for public issuances of
preferred stock.
<PAGE>
6
"CONTINGENT OBLIGATIONS" means, with respect to any Person, any obligation
of such Person guaranteeing any leases, dividends or other obligations that do
not constitute Indebtedness ("PRIMARY OBLIGATIONS") of any other Person (the
"PRIMARY OBLIGOR") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(i) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (ii) to advance or supply funds (A) for the
purchase or payment of any such primary obligation or (B) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, or (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation against loss in respect thereof.
"CONTRIBUTION AGREEMENT" means the Contribution Agreement dated as of
November 19, 1998, between Trinity and the Company in a form previously approved
by the Administrative Agent under the Subordinated Bridge Agreement.
"CONVERTIBLE LOAN" means an interest-free loan made by Trinity to the
Company in exchange for a note that is convertible at the option of the Company
into common equity interests in the Company, PROVIDED that the obligations of
the Company under such note are subordinated in right of payment to the Notes in
a form previously approved by the Administrative Agent under the Subordinated
Bridge Agreement including, without limitation, that no payment may be made in
respect of such note prior to the date that is 91 days after the Maturity Date.
"CREDIT FACILITIES" means, with respect to the Company and the Issuer, one
or more debt facilities (including, without limitation, the Senior Credit
Facilities) or commercial paper facilities with banks or other institutional
lenders or indentures providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against
receivables), letters of credit or other long-term indebtedness, in each case,
as amended, restated, modified, renewed, refunded, replaced or refinanced
(including increasing the amount borrowed thereunder) in whole or in part from
time to time.
"DEFAULT" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"DESIGNATED NONCASH CONSIDERATION" means the fair market value of noncash
consideration received by the Company or one of its Restricted Subsidiaries in
connection with an Asset Sale that is so designated as Designated Noncash
Consideration pursuant to an Officers' Certificate, setting forth the basis of
such valuation, executed by an executive vice president and the principal
financial officer of the Company or the Issuer, less the amount of cash or Cash
Equivalents received in connection with a subsequent sale of such Designated
Noncash Consideration.
"DESIGNATED PREFERRED STOCK" means preferred stock of the Company, any of
its direct or indirect parent corporations or the Issuer (in each case other
than Disqualified Stock) that is issued for cash (other than to a Restricted
Subsidiary) and is so designated as Designated Preferred Stock, pursuant to an
Officers' Certificate executed by an executive vice president and the principal
financial officer of the Company, any of its direct or indirect parent
corporations or the Issuer, as the case may be, on the issuance date thereof,
the cash proceeds of which are excluded from the calculation set forth in
Section 4.04(a)(3).
<PAGE>
7
"DESIGNATED SENIOR INDEBTEDNESS" means (i) Senior Indebtedness under the
Senior Credit Facilities and (ii) any other Senior Indebtedness permitted under
this Indenture the principal amount of which is $25.0 million or more and that
has been designated by the Company as Designated Senior Indebtedness.
"DISQUALIFIED STOCK" means, with respect to any Person, any Capital Stock
of such Person which, by its terms (or by the terms of any security into which
it is convertible or for which it is putable or exchangeable), or upon the
happening of any event, matures or is mandatorily redeemable (other than as a
result of a change of control or asset sale), pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof
(other than as a result of a change of control or asset sale), in whole or in
part, in each case prior to the date 91 days after the earlier of the maturity
date of the Notes or the date the Notes are no longer outstanding; PROVIDED,
HOWEVER, that if such Capital Stock is issued to any plan for the benefit of
employees of the Company or its Subsidiaries or by any such plan to such
employees, such Capital Stock shall not constitute Disqualified Stock solely
because it may be required to be repurchased by the Company or its Subsidiaries
in order to satisfy applicable statutory or regulatory obligations.
"DOMESTIC SUBSIDIARY" means, with respect to any Person, any Restricted
Subsidiary of such Person other than a Foreign Subsidiary.
"EBITDA" means, with respect to any Person for any period, the Consolidated
Net Income of such Person for such period plus (a) provision for taxes based on
income or profits of such Person for such period deducted in computing
Consolidated Net Income, PLUS (b) Consolidated Interest Expense of such Person
for such period paid by such Person or any of its Restricted Subsidiaries during
such period, in each case to the extent the same was deducted in calculating
such Consolidated Net Income, PLUS (c) Consolidated Depreciation and
Amortization Expense of such Person for such period to the extent such
depreciation and amortization were deducted in computing Consolidated Net
Income, PLUS (d) any expenses or charges related to any Equity Offering,
Permitted Investment, acquisition (including amounts paid in connection with the
acquisition or retention of one or more individuals comprising teams engaged in
a Similar Business, PROVIDED that such payments are made at the time of such
acquisition and are consistent with the customary practice in the industry at
the time of such acquisition), recapitalization or Indebtedness permitted to be
incurred by this Indenture (whether or not successful) (including such fees,
expenses or charges related to the Transactions) and deducted in such period in
computing Consolidated Net Income, PLUS (e) the amount of any restructuring
charge deducted in such period in computing Consolidated Net Income (including
any one-time costs incurred in connection with acquisitions after the Closing
Date), PLUS (f) without duplication, any non-recurring charges relating to the
Lloyd's Reconstruction and Renewal Plan, PLUS (g) without duplication, any other
non-cash charges reducing Consolidated Net Income for such period (excluding any
such charge that represents an accrual or reserve for a cash expenditure for a
future period), PLUS (h) the amount of any minority interest expense deducted in
calculating Consolidated Net Income, less, without duplication (i) non-cash
items increasing Consolidated Net Income of such Person for such period
(excluding any items which represent the reversal of any accrual of, or cash
reserve for, anticipated cash charges in any prior period).
"EMU" means economic and monetary union as contemplated in the Treaty on
European Union.
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8
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EQUITY OFFERING" means any public or private sale of common stock or
preferred stock of the Company, any of its direct or indirect parent
corporations or the Issuer (excluding Disqualified Stock), other than (i) public
offerings with respect to the Company's Common Stock registered on Form S-8 and
(ii) any such public or private sale that constitutes an Excluded Contribution.
"EURO" means the single currency of participating member states of the EMU.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"EXCLUDED CONTRIBUTION" means net cash proceeds, marketable securities or
Qualified Proceeds, in each case, received by the Company or the Issuer from (a)
contributions to its common equity capital (other than, in the case of the
Issuer, contributions by the Company) and (b) the sale (other than to a
Subsidiary of the Company or to any Company or Subsidiary management equity plan
or stock option plan or any other management or employee benefit plan or
agreement) of Capital Stock (other than Disqualified Stock and Designated
Preferred Stock) of the Company or the Issuer, in each case designated as
Excluded Contributions pursuant to an Officers' Certificate executed by an
executive vice president and the principal financial officer of the Company or
the Issuer, as the case may be, on the date such capital contributions are made
or the date such Equity Interests are sold, as the case may be, which are
excluded from the calculation set forth in Section 4.04(a)(3).
"EXISTING INDEBTEDNESS" means Indebtedness of the Company or of any
Restricted Subsidiary in existence on the Closing Date, PLUS interest accruing
thereon, after application of the net proceeds of the loans made under the
Subordinated Bridge Agreement.
"FACILITY HEDGING OBLIGATIONS" means Hedging Obligations of the Company or
the Issuer (other than Hedging Obligations entered into for speculative
purposes) having an aggregate notional amount at any time outstanding not in
excess of $1,175,000,000 less the notional amount of any Trinity Hedging
Obligations outstanding at such time.
"FIXED CHARGE COVERAGE RATIO" means, with respect to any Person for any
period, the ratio of EBITDA of such Person for such period to the Fixed Charges
of such Person for such period. In the event that the Company or any of its
Restricted Subsidiaries incurs, assumes, guarantees or redeems any Indebtedness
or issues or redeems Disqualified Stock or preferred stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the event for which the calculation of the Fixed Charge
Coverage Ratio is made (the "CALCULATION DATE"), then the Fixed Charge Coverage
Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, guarantee or redemption of Indebtedness, or such issuance or
redemption of Disqualified Stock or preferred stock, as if the same had occurred
at the beginning of the applicable four-quarter period. For purposes of making
the computation referred to above, Investments, acquisitions, dispositions,
mergers, consolidations and discontinued operations (as determined in accordance
with GAAP) that have been made by the Company or any of its Restricted
Subsidiaries during the four-quarter reference period or subsequent to such
reference period and on or prior to or simultaneously with the Calculation Date
shall be calculated on a pro forma basis assuming that all such
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9
Investments, acquisitions, dispositions, mergers, consolidations and
discontinued operations (and the change in any associated fixed charge
obligations and the change in EBITDA resulting therefrom) had occurred on the
first day of the four-quarter reference period. If since the beginning of such
period any Person (that subsequently became a Restricted Subsidiary or was
merged with or into the Company or any Restricted Subsidiary since the beginning
of such period) shall have made any Investment, acquisition, disposition,
merger, consolidation or discontinued operation that would have required
adjustment pursuant to this definition, then the Fixed Charge Coverage Ratio
shall be calculated giving pro forma effect thereto for such period as if such
Investment, acquisition, disposition, merger, consolidation or discontinued
operation had occurred at the beginning of the applicable four-quarter period.
For purposes of this definition, whenever pro forma effect is to be given to a
transaction, the pro forma calculations shall be made in good faith by a
responsible financial or accounting officer of the Company. If any Indebtedness
bears a floating rate of interest and is being given pro forma effect, the
interest on such Indebtedness shall be calculated as if the rate in effect on
the Calculation Date had been the applicable rate for the entire period (taking
into account any Hedging Obligations applicable to such Indebtedness). Interest
on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate
reasonably determined by a responsible financial or accounting officer of the
Company to be the rate of interest implicit in such Capitalized Lease Obligation
in accordance with GAAP. For purposes of making the computation referred to
above, interest on any Indebtedness under a revolving credit facility computed
on a pro forma basis shall be computed based upon the average daily balance of
such Indebtedness during the applicable period. Interest on Indebtedness that
may optionally be determined at an interest rate based upon a factor of a prime
or similar rate, a eurocurrency interbank offered rate, or other rate, shall be
deemed to have been based upon the rate actually chosen, or, if none, then based
upon such optional rate chosen as the Company may designate.
"FIXED CHARGES" means, with respect to any Person for any period, the sum
of (a) Consolidated Interest Expense of such Person for such period and (b) all
cash dividend payments (excluding items eliminated in consolidation) on any
series of (i) Disqualified Stock, (ii) preferred stock and (iii) to the extent
paid pursuant to Section 4.04(b)(vi)(B), other Capital Stock of such Person.
"FOREIGN SUBSIDIARY" means, with respect to any Person, any Restricted
Subsidiary of such Person that is not organized or existing under the laws of
the United States, any state thereof, the District of Columbia, or any territory
thereof.
"GAAP" means generally accepted accounting principles in the United Kingdom
which are in effect on the Closing Date. For the purposes of this Indenture, the
term "consolidated" with respect to any Person means such Person consolidated
with its Restricted Subsidiaries, and shall not include any Unrestricted
Subsidiary.
"GOVERNMENT SECURITIES" means securities that are (a) direct obligations of
the United States of America for the timely payment of which its full faith and
credit is pledged or (b) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America the
timely payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the issuers thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act), as custodian with respect to any such Government Securities
or a specific payment of principal of or interest on any such Government
Securities held by such custodian for the account of the holder of such
depository receipt; PROVIDED that (except as required by law) such custodian is
not authorized to make any
<PAGE>
10
deduction from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the Government Securities or
the specific payment of principal of or interest on the Government Securities
evidenced by such depository receipt.
"GROUP INTERCOMPANY NOTE" means a note issued by the Company or a
Restricted Subsidiary in favor of Trinity (a) in consideration of the issuance
of a Trinity Intercompany Note or (b) in connection with a loan made by Trinity
to the Company or such Restricted Subsidiary out of the proceeds received from
the issuance of a Trinity Intercompany Note, PROVIDED, in each case, that the
obligations of the Company or such Restricted Subsidiary under such note are
subordinated in right of payment to the Notes in a form previously approved by
the Administrative Agent under the Subordinated Bridge Agreement including,
without limitation, that no payment shall be made in respect of such note if any
Default on the Notes or any default under the Senior Credit Facilities has
occurred and is continuing.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness or other obligations.
"GUARANTEE" means any guarantee of the obligations of the Company under
this Indenture and the Notes by any Person in accordance with the provisions of
this Indenture. When used as a verb, "Guarantee" shall have a corresponding
meaning.
"GUARANTEED LOAN NOTES" means loan notes of Trinity issued pursuant to the
offer at the election of holders of the shares, having the terms contained in
the Guaranteed Loan Notes Instrument and guaranteed by The Chase Manhattan Bank,
acting through its London branch.
"GUARANTEED LOAN NOTES INSTRUMENT" means the Guaranteed Loan Notes
Instrument in the form of Exhibit J to the Senior Bridge Facility.
"GUARANTOR" means any Person that incurs a Guarantee; PROVIDED that upon
the release and discharge of such Person from its Guarantee in accordance with
this Indenture, such Person shall cease to be a Guarantor.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) currency exchange, interest rate or commodity swap
agreements, currency exchange, interest rate or commodity cap agreements and
currency exchange, interest rate or commodity collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in currency exchange, interest rates or commodity prices.
"HOLDER" or "NOTEHOLDER" means a holder of the Notes.
"INDEBTEDNESS" means, with respect to any Person, (a) any indebtedness
(including principal and premium) of such Person, whether or not contingent (i)
in respect of borrowed money, (ii) evidenced by bonds, notes, debentures or
similar instruments or letters of credit or bankers' acceptances (or, without
double counting, reimbursement agreements in respect thereof), (iii)
representing the balance deferred and unpaid of the purchase price of any
property (including Capitalized Lease Obligations), except any such balance that
constitutes a trade payable or similar obligation to a trade creditor, in each
case accrued in the ordinary course of business or (iv) representing any Hedging
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11
Obligations, if and to the extent that any of the foregoing Indebtedness (other
than letters of credit and Hedging Obligations) would appear as a liability upon
a balance sheet (excluding the footnotes thereto) of such Person prepared in
accordance with GAAP, (b) to the extent not otherwise included, any obligation
by such Person to be liable for, or to pay, as obligor, guarantor or otherwise,
on the Indebtedness of another Person (other than by endorsement of negotiable
instruments for collection in the ordinary course of business) and (c) to the
extent not otherwise included, Indebtedness of another Person secured by a Lien
on any asset owned by such Person (whether or not such Indebtedness is assumed
by such Person); PROVIDED, HOWEVER, that Contingent Obligations incurred in the
ordinary course of business shall be deemed not to constitute Indebtedness, and
obligations under or in respect of Receivables Facilities shall not be deemed to
constitute Indebtedness.
In addition, "Indebtedness" of any Person shall include Indebtedness
described in the foregoing paragraph that would not appear as a liability on the
balance sheet of such Person if (i) such Indebtedness is the obligation of a
partnership or a joint venture that is not a Restricted Subsidiary (a "Joint
Venture"), (2) such Person or a Restricted Subsidiary is a general partner of
the Joint Venture (a "General Partner") and (3) there is recourse, by contract
or operation of law, with respect to the payment of such Indebtedness to
property or assets of such Person or a Restricted Subsidiary; and such
Indebtedness shall be included in an amount not to exceed (x) the greater of (A)
the net assets of the General Partner and (B) the amount of such obligations to
the extent that there is recourse by, contract or operation of law, to the
property or assets of such Person or a Restricted Subsidiary (other than the
General Partner) or (y) if less than the amount determined pursuant to clause
(x) immediately above, the actual amount of such Indebtedness that is recourse
to such Person, if the Indebtedness is evidenced by a writing and is for a
determinable amount and the related interest expense shall be included in
Consolidated Interest Expense to the extent paid by the Company or its
Restricted Subsidiaries.
"INDENTURE" means this Indenture as amended or supplemented from time to
time.
"INDEPENDENT FINANCIAL ADVISOR" means an accounting, appraisal, investment
banking firm or consultant to Persons engaged in Similar Businesses of
nationally recognized standing that is, in the good faith judgment of the
Company or the Issuer, qualified to perform the task for which it has been
engaged.
"INTERIM FINANCINGS" means the Sponsor Promissory Note and the Senior
Bridge Facility.
"INTERIM REFINANCING INDEBTEDNESS" means indebtedness in respect of loans
made to Trinity on the Closing Date by the Issuer using the proceeds from the
borrowing under the Subordinated Bridge Agreement and the borrowing of term
loans under the Senior Credit Facilities, the proceeds of which were used (a)
directly or indirectly to repay the Interim Financings, (b) to make a
Convertible Loan, substantially all the proceeds of which were used to repay
indebtedness of the Company and its Subsidiaries existing on the Closing Date
and required to be repaid under the Senior Credit Facilities and (c) to pay
related fees and expenses.
"INVESTMENT GRADE SECURITIES" means (i) securities issued or directly and
fully guaranteed or insured by the United States government or any agency or
instrumentality thereof (other than Cash Equivalents), (ii) debt securities or
debt instruments with a rating of BBB- or higher by S&P or Baa3 or higher by
Moody's or the equivalent of such rating by such rating organization, or, if no
rating of S&P or Moody's then exists, the equivalent of such rating by any other
nationally recognized securities rating agency, but excluding
<PAGE>
12
any debt securities or instruments constituting loans or advances among the
Company and its Subsidiaries, (iii) investments in any fund that invests
exclusively in investments of the type described in clauses (i) and (ii) which
fund may also hold immaterial amounts of cash pending investment and/or
distribution and (iv) corresponding instruments in countries other than the
United States or the United Kingdom customarily utilized for high-quality
investments.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the form of loans (including
guarantees), advances or capital contributions (excluding accounts receivable,
trade credit, advances to customers, commission, travel and similar advances to
officers and employees, in each case made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities issued by any other Person and investments that
are required by GAAP to be classified on the balance sheet (excluding the
footnotes) of the Company in the same manner as the other investments included
in this definition to the extent such transactions involve the transfer of cash
or other property. For purposes of the definition of "Unrestricted Subsidiary"
and Section 4.04, (i) "Investments" shall include the portion (proportionate to
the Company's equity interest in such Subsidiary) of the fair market value of
the net assets of a Subsidiary of the Company at the time that such Subsidiary
is designated an Unrestricted Subsidiary; PROVIDED, HOWEVER, that upon a
redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall
be deemed to continue to have a permanent "Investment" in an Unrestricted
Subsidiary in an amount (if positive) equal to (x) the Company's "Investment" in
such Subsidiary at the time of such redesignation less (y) the portion
(proportionate to the Company's equity interest in such Subsidiary) of the fair
market value of the net assets of such Subsidiary at the time of such
redesignation; and (ii) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time of such
transfer, in each case as determined in good faith by the Company.
"ISSUANCE DATE" means February 2, 1999.
"KKR" means Kohlberg Kravis Roberts & Co., L.P.
"LETTER OF CREDIT OBLIGATIONS" means all Obligations in respect of
Indebtedness of the Company with respect to letters of credit issued pursuant to
the Senior Credit Facilities which Indebtedness shall be deemed to consist of
(a) the aggregate maximum amount available to be drawn under all such letters of
credit (the determination of such aggregate maximum amount to assume compliance
with all conditions for drawing) and (b) the aggregate amount that has been paid
by, and not reimbursed to, the issuers of such letters of credit.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction);
PROVIDED that in no event shall an operating lease be deemed to constitute a
Lien.
"MANAGEMENT GROUP" means the directors and executive officers of the
Issuer, the Company or its direct or indirect parent corporations.
<PAGE>
13
"MATURITY DATE" is the maturity date for the Notes, February 1, 2009.
"MOODY'S" means Moody's Investors Service, Inc.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends.
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
Designated Noncash Consideration received in any Asset Sale), net of the direct
costs relating to such Asset Sale and the sale or disposition of such Designated
Noncash Consideration (including, without limitation, legal, accounting and
investment banking fees, and brokerage and sales commissions), any relocation
expenses incurred as a result thereof, taxes paid or payable as a result thereof
(after taking into account any available tax credits or deductions and any tax
sharing arrangements), amounts required to be applied to the repayment of
principal, premium (if any) and interest on Senior Indebtedness required (other
than required by clause (i) of Section 4.06(b) to be paid as a result of such
transaction) and any deduction of appropriate amounts to be provided by the
Company as a reserve in accordance with GAAP against any liabilities associated
with the asset disposed of in such transaction and retained by the Company after
such sale or other disposition thereof, including, without limitation, pension
and other post-employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated with
such transaction.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements (including, without limitation, reimbursement
obligations with respect to letters of credit and banker's acceptances), damages
and other liabilities, and guarantees of payment of such principal, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities, payable under the documentation governing any Indebtedness.
"OFFER PERIOD" means the period from the date of a Change of Control until
and including the Change of Control Payment Date.
"OFFERING MEMORANDUM" means the Offering Memorandum dated January 28, 1999,
relating to the Issuer's 9% Senior Subordinated Notes due 2009.
"OFFICER" means the Chairman of the Board, the President, any Executive
Vice President, Senior Vice President or Vice President, the Treasurer or the
Secretary of the Company, the Issuer or any Guarantor, as applicable.
"OFFICERS' CERTIFICATE" means a certificate signed on behalf of the Company
or the Issuer, as the case may be, by two Officers of the Company or the Issuer,
as applicable, one of whom must be the principal executive officer, the
principal financial officer, the treasurer or the principal accounting officer
of the Company or the Issuer, as applicable, that meets the requirements set
forth in this Indenture.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Issuer, the Company or the Trustee.
<PAGE>
14
"PERMITTED ASSET SWAP" means any one or more transactions in which the
Company or any Restricted Subsidiary exchanges assets for consideration
consisting of (i) Equity Interests in or assets of a Person engaged in a Similar
Business and (ii) any cash or Cash Equivalents, PROVIDED that such cash or Cash
Equivalents will be considered Net Proceeds from an Asset Sale.
"PERMITTED HOLDERS" means KKR, its Affiliates and the Management Group.
"PERMITTED INVESTMENTS" means (a) with respect to fiduciary cash held by
the Company or its Restricted Subsidiaries, Investments in which it is customary
for Persons that are engaged in a Similar Business and that comply with all
applicable laws and regulations; and (b) in all other cases (i) any Investment
in the Company or any Restricted Subsidiary; (ii) any Investment in cash and
Cash Equivalents or Investment Grade Securities; (iii) any Investment by the
Company or any Restricted Subsidiary of the Company in a Person that is engaged
in a Similar Business if as a result of such Investment (A) such Person becomes
a Restricted Subsidiary or (B) such Person, in one transaction or a series of
related transactions, is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Restricted Subsidiary; (iv) any Investment in securities or
other assets not constituting cash or Cash Equivalents and received in
connection with an Asset Sale made pursuant to Section 4.06 or any other
disposition of assets not constituting an Asset Sale; (v) any Investment
existing on the Closing Date; (vi) advances to employees not in excess of $15.0
million outstanding at any one time, in the aggregate; (vii) any Investment
acquired by the Company or any of its Restricted Subsidiaries (A) in exchange
for any other Investment or accounts receivable held by the Company or any such
Restricted Subsidiary in connection with or as a result of a bankruptcy,
workout, reorganization or recapitalization of the issuer of such other
Investment or accounts receivable or (B) as a result of a foreclosure by the
Company or any of its Restricted Subsidiaries with respect to any secured
Investment or other transfer of title with respect to any secured Investment in
default; (viii) Hedging Obligations permitted under Section 4.03(b)(x); (ix)
loans and advances to officers, directors and employees for business-related
travel expenses, moving expenses and other similar expenses, in each case
incurred in the ordinary course of business; (x) any Investment in a Similar
Business having an aggregate fair market value, taken together with all other
Investments made pursuant to this clause (x) that are at that time outstanding
(without giving effect to the sale of an Unrestricted Subsidiary to the extent
the proceeds of such sale do not consist of cash, marketable securities and/or
Qualified Proceeds), not to exceed the greater of (A) $125.0 million or (B)
12.5% of Total Revenues at the time of such Investment (with the fair market
value of each Investment being measured at the time made and without giving
effect to subsequent changes in value); (xi) Investments the payment for which
consists of Equity Interests of the Company, any of its direct or indirect
parent corporations or the Issuer (exclusive of Disqualified Stock); PROVIDED,
HOWEVER, that such Equity Interests will not increase the amount available for
Restricted Payments under Section 4.04(a)(3); (xii) additional Investments
having an aggregate fair market value, taken together with all other Investments
made pursuant to this clause (xii) that are at that time outstanding (without
giving effect to the sale of an Unrestricted Subsidiary to the extent the
proceeds of such sale do not consist of cash, marketable securities and/or
Qualified Proceeds or do consist of distributions made pursuant to Section
4.04(b)(xiii), not to exceed $50.0 million at the time of such Investment (with
the fair market value of each Investment being measured at the time made and
without giving effect to subsequent changes in value); (xiii) guarantees
(including Guarantees) of Indebtedness permitted under Section 4.03; (xiv) any
transaction to the extent it constitutes an Investment that is permitted and
made in accordance with Section 4.07(b) (except transactions described in
clauses (ii), (vi), (vii) and (xi) of such paragraph); (xv) Investments
consisting of the
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15
licensing or contribution of intellectual property pursuant to joint marketing
arrangements with other Persons; (xvi) any Investment by the Company or any
Restricted Subsidiary in a Person that is an Associate on the Closing Date; and
(xvii) Investments relating to any special purpose Wholly Owned Subsidiary of
the Company or the Issuer organized in connection with a Receivables Facility
that, in the good faith determination of the Board of Directors of the Company,
are necessary or advisable to effect such Receivables Facility.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"PREFERRED STOCK" means any Equity Interest with preferential rights of
payment of dividends or upon liquidation, dissolution, or winding up.
"PRINCIPAL" of a Note means the principal of the Note plus the premium, if
any, payable on the Note that is due or overdue or is to become due at the
relevant time.
"QUALIFIED PROCEEDS" means assets that are used or useful in, or Capital
Stock of any Person engaged in, a Similar Business; PROVIDED that the fair
market value of any such assets or Capital Stock shall be determined by the
Board of Directors in good faith, except that in the event the value of any such
assets or Capital Stock may exceed $25.0 million or more, the fair value shall
be determined in writing by an independent investment banking firm of nationally
recognized standing.
"RECEIVABLES FACILITY" means one or more receivables financing facilities,
as amended from time to time, pursuant to which the Company and/or any of its
Restricted Subsidiaries sells its accounts receivable to a Person that is not a
Restricted Subsidiary.
"RECEIVABLES FEES" means distributions or payments made directly or by
means of discounts with respect to any participation interest issued or sold in
connection with, and other fees paid to a Person that is not a Restricted
Subsidiary in connection with, any Receivables Facility.
"REDEMPTION DATE" means with respect to any redemption of Notes, the date
of redemption with respect thereto.
"REPRESENTATIVE" means the trustee, agent or representative (if any) for an
issue of Senior Indebtedness of the Company.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" means, at any time, the Issuer and any direct or
indirect Subsidiary of the Company (including any Foreign Subsidiary) that is
not then an Unrestricted Subsidiary; PROVIDED, HOWEVER, that upon the occurrence
of an Unrestricted Subsidiary ceasing to be an Unrestricted Subsidiary, such
Subsidiary shall be included in the definition of "Restricted Subsidiary."
"S&P" means Standard and Poor's Ratings Group.
"SEC" means the Securities and Exchange Commission.
<PAGE>
16
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"SENIOR BRIDGE FACILITY" means the Credit Agreement dated as of July 22,
1998, as amended and restated as of September 25, 1998, and as amended on
October 30, 1998 and November 13, 1998, among Trinity, the Company, the Issuer,
the Lenders party thereto and The Chase Manhattan Bank, as Administrative Agent.
"SENIOR CREDIT FACILITIES" means the Credit Agreement dated as of July 22,
1998, as amended and restated as of September 25, 1998, and as amended on
October 30, 1998 and November 13, 1998, among the Company, the Issuer, Trinity,
the Lenders from time to time party thereto and The Chase Manhattan Bank, as
Administrative Agent and Collateral Agent, including any collateral documents,
instruments and agreements executed in connection therewith, and any amendments,
supplements, modifications, extensions, renewals, restatements or refundings
thereof and any indentures or credit facilities or commercial paper facilities
with banks or other institutional lenders that replace, refund or refinance any
part of the loans, notes, other credit facilities or commitments thereunder,
including any such replacement, refunding or refinancing facility or indenture
that increases the amount borrowable thereunder or alters the maturity thereof,
PROVIDED, HOWEVER, that in connection with any facilities which refund, replace
or refinance such Credit Agreement there shall not be more than one facility at
any one time that is identified as the Senior Credit Facilities and, if at any
time there is more than one facility which would constitute the Senior Credit
Facilities, the Issuer shall designate to the Trustee which one of such
facilities shall be the Senior Credit Facilities for purposes of this Indenture.
"SENIOR INDEBTEDNESS" means (i) the Obligations under the Senior Credit
Facilities and (ii) the Obligations under any other Indebtedness permitted to be
incurred by the Issuer under the terms of this Indenture, unless the instrument
under which such Indebtedness is incurred expressly provides that it is on a
parity with or subordinated in right of payment to the Notes, including, with
respect to clauses (i) and (ii), interest accruing subsequent to the filing of,
or which would have accrued but for the filing of, a petition for bankruptcy, in
accordance with and at the rate (including any rate applicable upon any default
or event of default, to the extent lawful) specified in the documents evidencing
or governing such Senior Indebtedness, whether or not such interest is an
allowable claim in such bankruptcy proceeding. Notwithstanding anything to the
contrary in the foregoing, Senior Indebtedness shall not include (1) any
liability for federal, state, local or other taxes owed or owing by the Issuer,
(2) any obligation of the Issuer to its direct or indirect parent corporations
or any of its Subsidiaries, (3) any accounts payable or trade liabilities
(including obligations in respect of funds held for the account of third
parties) arising in the ordinary course of business (including guarantees
thereof or instruments evidencing such liabilities) other than obligations in
respect of letters of credit under the Senior Credit Facilities, (4) any
Indebtedness that is incurred in violation of this Indenture, (5) Indebtedness
which, when incurred and without respect to any election under Section 1111(b)
of Title 11, United States Code, is without recourse to the Issuer, (6) any
Indebtedness, guarantee or obligation of the Issuer which is subordinate or
junior to any other Indebtedness, guarantee or obligation of the Issuer, (7)
Indebtedness evidenced by the Notes, (8) Indebtedness evidenced by the Group
Intercompany Notes or the Convertible Loans and (9) Capital Stock of the Issuer.
"Senior Indebtedness" of the Company or any Guarantor has a correlative meaning.
"SENIOR SUBORDINATED INDEBTEDNESS" means (a) with respect to the Issuer,
Indebtedness which ranks PARI PASSU in right of payment to the Notes and (b)
with respect
<PAGE>
17
to any Guarantor, Indebtedness which ranks PARI PASSU in right of payment to the
Guarantee of such Guarantor.
"SIGNIFICANT SUBSIDIARY" means the Issuer and any other Restricted
Subsidiary that would be a "significant subsidiary" as defined in Article 1,
Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such
regulation is in effect on the date hereof.
"SIMILAR BUSINESS" means insurance brokering, risk management consulting,
insurance agency, employee benefit consulting and any activities or businesses
incidental or directly related or similar thereto, or any line of business
engaged in by the Company or its Subsidiaries on the Issuance Date or any
business activity that is a reasonable extension, development or expansion
thereof or ancillary thereto.
"SPONSOR PROMISSORY NOTE" means the subordinated promissory note dated as
of July 22, 1998, issued by Trinity in favor of an affiliate of KKR in an amount
not to exceed $575,000,000.
"SUBORDINATED BRIDGE AGREEMENT" means the Senior Subordinated Loan
Agreement dated as of November 19, 1998, among the Company, USGP, the Issuer,
the Lenders from time to time party thereto and The Chase Manhattan Bank, as
Administrative Agent.
"SUBORDINATED INDEBTEDNESS" means (a) with respect to the Issuer, any
Indebtedness of the Issuer which is by its terms subordinated in right of
payment to the Notes and (b) with respect to any Guarantor, any Indebtedness of
such Guarantor which is by its terms subordinated in right of payment to the
Guarantee of such Guarantor.
"SUBORDINATED NOTE OBLIGATIONS" means any principal of, premium, if any,
and interest on the Notes payable pursuant to the terms of the Notes or upon
acceleration, together with and including any amounts received upon the exercise
of rights of rescission or other rights of action (including claims for damages)
or otherwise, to the extent relating to the purchase price of the Notes or
amounts corresponding to such principal, premium, if any, or interest on the
Notes.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association, or other business entity (other than a partnership, joint venture,
limited liability company or similar entity) of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time of determination owned or controlled, directly
or indirectly, by such Person or one or more of the other Subsidiaries of that
Person or a combination thereof and (ii) any partnership, joint venture, limited
liability company or similar entity of which (x) more than 50% of the capital
accounts, distribution rights, total equity and voting interests or general or
limited partnership interests, as applicable, are owned or controlled, directly
or indirectly, by such Person or one or more of the other Subsidiaries of that
Person or a combination thereof whether in the form of membership, general,
special or limited partnership or otherwise and (y) such Person or any Wholly
Owned Restricted Subsidiary of such Person is a controlling general partner or
otherwise controls such entity.
"TA II" means TA II Limited, a company with limited liability organized
under the laws of England and Wales.
<PAGE>
18
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
77aaa-77bbbb) as in effect on the date of this Indenture.
"TOTAL REVENUES" means the total operating revenues of the Company and its
Restricted Subsidiaries, as shown on the most recent annual income statement of
the Company.
"TRANSACTIONS" has the meaning given to it in the Offering Memorandum.
"TREATY ON EUROPEAN UNION" means the Treaty of Rome of March 25, 1957, as
amended by the Single European Act 1986 and the Maastricht Treaty (which was
signed at Maastricht on February 7, 1992, and came into force on November 1,
1993), as amended from time to time.
"TRINITY" means Trinity Acquisition plc, a public limited company organized
under the laws of England and Wales.
"TRINITY HEDGING OBLIGATIONS" means Hedging Obligations of Trinity (other
than Hedging Obligations entered into for speculative purposes) having an
aggregate notional amount at any time outstanding not in excess of
$1,175,000,000 less the notional amount of any Facility Hedging Obligations
outstanding at such time.
"TRINITY INTERCOMPANY NOTE" means any note issued by Trinity in favor of
the Company or a Restricted Subsidiary (a) in consideration of the issuance of a
Group Intercompany Note or (b) in connection with the making of a loan to
Trinity by the Company or such Restricted Subsidiary (other than with respect to
Interim Refinancing Indebtedness), PROVIDED that all the proceeds received by
Trinity from such loan, if any, are immediately used to make a loan to the
Company or a Restricted Subsidiary pursuant to a Group Intercompany Note.
"TRUSTEE" means the party named as such in this Indenture until a successor
replaces it and, thereafter, means the successor.
"TRUST OFFICER" means any officer within the corporate trust department of
the Trustee, including any vice president, assistant vice president, assistant
secretary, assistant treasurer, trust officer or any other officer of the
Trustee who customarily performs functions similar to those performed by the
persons who at the time shall be such officers, respectively, or to whom any
corporate trust matter is referred because of such person's knowledge of and
familiarity with the particular subject and who shall have direct responsibility
for the administration of this Indenture.
"UNIFORM COMMERCIAL CODE" means the New York Uniform Commercial Code as in
effect from time to time.
"U.K. SUBSIDIARY" means, with respect to any Person, any Restricted
Subsidiary of such Person that is organized under the laws of England and Wales.
"UNRESTRICTED SUBSIDIARY" means (i) Sovereign Marine & General Insurance
Company Limited, in provisional liquidation ("Sovereign"), (ii) any Subsidiary
of the Company which at the time of determination is an Unrestricted Subsidiary
(as designated by the Board of Directors of the Company, as provided below) and
(iii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors of
the Company may designate any Subsidiary of the Company (including any existing
Subsidiary and any newly acquired or newly formed Subsidiary but excluding the
Issuer) to be an Unrestricted Subsidiary
<PAGE>
19
unless such Subsidiary or any of its Subsidiaries owns any Equity Interests or
Indebtedness of, or owns or holds any Lien on, any property of, the Company or
any Subsidiary of the Company (other than any Subsidiary of the Subsidiary to be
so designated), PROVIDED that (a) any Unrestricted Subsidiary (other than
Sovereign) must be an entity of which shares of the capital stock or other
equity interests (including partnership interests) entitled to cast at least a
majority of the votes that may be cast by all shares or equity interests having
ordinary voting power for the election of directors or other governing body are
owned, directly or indirectly, by the Company, (b) such designation complies
with Section 4.04 and (c) each of (I) the Subsidiary to be so designated and
(II) its Subsidiaries has not at the time of designation, and does not
thereafter, create, incur, issue, assume, guarantee or otherwise become directly
or indirectly liable with respect to any Indebtedness pursuant to which the
lender has recourse to any of the assets of the Company or any of its Restricted
Subsidiaries. The Board of Directors of the Company may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED that,
immediately after giving effect to such designation no Default or Event of
Default shall have occurred and be continuing and either (i) the Company could
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test described in Section 4.03(a) or (ii) the Fixed Charge
Coverage Ratio for the Company and its Restricted Subsidiaries would be greater
than such ratio for the Company and its Restricted Subsidiaries immediately
prior to such designation, in each case on a pro forma basis taking into account
such designation. Any such designation by the Board of Directors of the Company
shall be notified by the Company to the Trustee by promptly filing with the
Trustee a copy of the board resolution giving effect to such designation and an
Officers' Certificate of the Company certifying that such designation complied
with the foregoing provisions.
"USGP" means Willis Corroon Partners, a Delaware general partnership.
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
or Disqualified Stock, as the case may be, at any date, the quotient obtained by
dividing (i) the sum of the products of the number of years from the date of
determination to the date of each successive scheduled principal payment of such
Indebtedness or redemption or similar payment with respect to such Disqualified
Stock multiplied by the amount of such payment, by (ii) the sum of all such
payments.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any person means any Wholly Owned
Subsidiary that is a Restricted Subsidiary.
"WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person,
100% of the outstanding Capital Stock or other ownership interests of which
(other than directors' qualifying shares) shall at the time be owned by such
Person or by one or more Wholly Owned Subsidiaries of such Person and one or
more Wholly Owned Subsidiaries of such Person.
<TABLE>
<CAPTION>
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
---- ----------
<S> <C>
"Affiliate Transaction".......................................................... 4.07
"Asset Sale Offer"............................................................... 4.06(b)
</TABLE>
<PAGE>
20
<TABLE>
<S> <C>
"Asset Sale Purchase Date"....................................................... 4.06(b)(ii)
"Bankruptcy Law"................................................................. 6.01
"Change of Control Offer"........................................................ 4.08(a)
"Change of Control Payment"...................................................... 4.08(a)
"Change of Control Payment Date"................................................. 4.08(b)
"covenant defeasance option"..................................................... 8.01(b)
"CUSIP"......................................................................... 2.13
"Custodian"...................................................................... 6.01
"Event of Default"............................................................... 6.01
"Excess Proceeds"................................................................ 4.06(b)
"incur".......................................................................... 4.03(a)
"Guaranteed Obligations"......................................................... 11.01
"legal defeasance option"........................................................ 8.01(b)
"Legal Holiday".................................................................. 13.08
"non-payment default"............................................................ 10.03
"Offered Price".................................................................. 4.06(b)
"Paying Agent"................................................................... 2.04
"Payment Blockage Notice"........................................................ 10.03
"Payment Blockage Period"........................................................ 10.03
"payment default"................................................................ 10.03
"protected purchaser"............................................................ 2.08
"Refinancing Indebtedness"....................................................... 4.03(b)(xv)
"Refunding Capital Stock"........................................................ 4.04(b)(ii)
"Registrar"...................................................................... 2.04
"Restricted Payments"............................................................ 4.04(a)
"Retired Capital Stock".......................................................... 4.04(b)(ii)
"Successor Company".............................................................. 5.01(a)(i)
"Successor Guarantor"............................................................ 5.01(b)(i)
"Transfer Agent"................................................................. 2.07
</TABLE>
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. This
Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture security holder" means a Holder or Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Issuer, any Guarantor
and any other obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
<PAGE>
21
SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(7) the principal amount of any noninterest bearing or other discount
security at any date shall be the principal amount thereof that would be
shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP; and
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater.
ARTICLE 2
THE NOTES
SECTION 2.01. PRINCIPAL AMOUNT AND MATURITY. (a) The aggregate
principal amount of Notes which may be authenticated and delivered under this
Indenture is $550,000,000.
(b) All Notes shall mature on the Maturity Date.
SECTION 2.02. FORM AND DATING. Certain provisions relating to the
Initial Notes, Exchange Notes and the Private Exchange Notes are set forth in
the Appendix, which is hereby incorporated in and expressly made a part of this
Indenture. The (i) Initial Notes and the Trustee's certificate of authentication
and (ii) Private Exchange Notes and the Trustee's certificate of authentication
shall each be substantially in the form of Exhibit A hereto, which is hereby
incorporated in and expressly made a part of this Indenture. The Exchange Notes
and any other Notes issued other than as Transfer Restricted Notes (as defined
in the Appendix) and the Trustee's certificate of authentication shall each be
substantially in the form of Exhibit B hereto, which is hereby incorporated and
expressly made a part of this Indenture. The Notes may have notations, legends
or endorsements required by law, stock exchange rule, agreements to which the
Issuer is subject, if any, or usage (PROVIDED that any such notation, legend or
endorsement is in a form acceptable to the Issuer). Each Note shall be dated the
date of its authentication.
<PAGE>
22
SECTION 2.03. EXECUTION AND AUTHENTICATION. One or more Officers shall
sign the Notes for the Issuer by manual or facsimile signature.
If an Officer whose signature is on a Note no longer holds that office
at the time the Trustee authenticates the Note, the Note shall be valid
nevertheless.
A Note shall not be valid until an authorized signatory of the Trustee
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
The Trustee shall authenticate and make available for delivery Notes
as set forth in the Appendix.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Issuer to authenticate the Notes. Any such appointment shall be evidenced
by an instrument signed by a Trust Officer, a copy of which shall be furnished
to the Issuer. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Notes whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as any
Registrar, Paying Agent or agent for service of notices and demands.
SECTION 2.04. REGISTRAR AND PAYING AGENT. The Issuer shall maintain an
office or agency where Notes may be presented for registration of transfer or
for exchange (the "REGISTRAR") and an office or agency where Notes may be
presented for payment (the "PAYING AGENT"). The Registrar shall keep a register
of the Notes and of their transfer and exchange. The Issuer may have one or more
co-registrars and one or more additional paying agents. The term "Paying Agent"
includes any additional paying agent, and the term "Registrar" includes any
co-registrars. The Issuer initially appoints the Trustee as (i) Registrar and
Paying Agent in connection with the Notes and (ii) the Notes Custodian (as
defined in the Appendix) with respect to the Global Notes. In the event that
Definitive Notes (as defined in the Appendix) are issued, the Issuer shall also
appoint Kredietbank S.A. Luxembourgeoise, or such other Person located in
Luxembourg and reasonably acceptable to the Trustee, as an additional Paying
Agent. Upon the issuance of Definitive Notes, Holders will be able to receive
principal, premium, if any, and interest with respect to the Notes and will be
able to transfer Definitive Notes at the Luxembourg office of such Paying Agent,
subject to the right of the Issuer to mail payments in accordance with the terms
of this Indenture.
The Issuer shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture, which shall incorporate
the terms of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such agent. The Issuer shall notify the Trustee of the
name and address of any such agent. If the Issuer fails to maintain a Registrar
or Paying Agent, the Trustee shall act as such and shall be entitled to
appropriate compensation therefor pursuant to Section 7.07. The Issuer or any of
its Wholly Owned Subsidiaries that is a Domestic Subsidiary may act as Paying
Agent or Registrar.
The Issuer may remove any Registrar or Paying Agent upon written
notice to such Registrar or Paying Agent and to the Trustee; PROVIDED, HOWEVER,
that no such removal shall become effective until (1) acceptance of an
appointment by a successor as evidenced by an appropriate agreement entered into
by the Issuer and such successor Registrar or Paying Agent, as the case may be,
and delivered to the Trustee or
<PAGE>
23
(2) notification to the Trustee that the Trustee shall serve as Registrar or
Paying Agent until the appointment of a successor in accordance with clause (1)
above. The Registrar or Paying Agent may resign at any time upon written notice;
PROVIDED, HOWEVER, that the Trustee may resign as Paying Agent or Registrar only
if the Trustee also resigns as Trustee in accordance with Section 7.08.
SECTION 2.05. PAYING AGENT TO HOLD MONEY IN TRUST. Prior to each due
date of the principal and interest on any Note, the Issuer shall deposit with
the Paying Agent (or if the Issuer or a Subsidiary is acting as Paying Agent,
segregate and hold in trust for the benefit of the Persons entitled thereto) a
sum sufficient to pay such principal and interest when so becoming due. The
Issuer shall require each Paying Agent (other than the Trustee) to agree in
writing that the Paying Agent shall hold in trust for the benefit of Noteholders
or the Trustee all money held by the Paying Agent for the payment of principal
of or interest on the Notes and shall notify the Trustee of any default by the
Issuer in making any such payment. If the Issuer or a Subsidiary of the Issuer
acts as Paying Agent, it shall segregate the money held by it as Paying Agent
and hold it as a separate trust fund. The Issuer at any time may require a
Paying Agent to pay all money held by it to the Trustee and to account for any
funds disbursed by the Paying Agent. Upon complying with this Section, the
Paying Agent shall have no further liability for the money delivered to the
Trustee.
SECTION 2.06. NOTEHOLDER LISTS. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Noteholders. If the Trustee is not the Registrar,
the Issuer shall furnish, or cause the Registrar to furnish, to the Trustee, in
writing at least five Business Days before each interest payment date and at
such other times as the Trustee may request in writing, a list in such form and
as of such date as the Trustee may reasonably require of the names and addresses
of Noteholders.
SECTION 2.07. TRANSFER AND EXCHANGE. The Notes shall be issued in
registered form and shall be transferable only upon the surrender of a Note for
registration of transfer. When a Note is presented to the Registrar with a
request to register a transfer, the Registrar shall register the transfer as
requested if the requirements of Section 8- 401(a)(l) of the Uniform Commercial
Code are met. When Notes are presented to the Registrar with a request to
exchange them for an equal principal amount of Notes of other denominations, the
Registrar shall make the exchange as requested if the same requirements are met.
To permit registration of transfers and exchanges, the Issuer shall execute and
the Trustee shall authenticate Notes at the Registrar's request. The Issuer may
require payment of a sum sufficient to pay all taxes, assessments or other
governmental charges in connection with any transfer or exchange pursuant to
this Section. The Issuer shall not be required to make and the Registrar need
not register transfers or exchanges of Notes selected for redemption (except, in
the case of Notes to be redeemed in part, the portion thereof not to be
redeemed) or any Notes for a period of 15 days before a selection of Notes to be
redeemed.
If Definitive notes are issued, the Issuer will appoint and maintain a
transfer agent (the "Transfer Agent") in Luxembourg for so long as the Notes are
listed on the Luxembourg Stock Exchange, at which office a Holder of a
Definitive Note will be able to surrender its note for registration of transfer.
The Issuer will be able to terminate at any time the appointment of Transfer
Agent and appoint additional or other Transfer Agents. Notice of such
termination or appointment and of any change in the specified office of a
Transfer Agent will be provided in the manner described in Section 13.02 of this
Indenture.
<PAGE>
24
Prior to the due presentation for registration of transfer of any
Note, the Issuer, the Trustee, the Paying Agent and the Registrar may deem and
treat the Person in whose name a Note is registered as the absolute owner of
such Note for the purpose of receiving payment of principal of and interest, if
any, on such Note and for all other purposes whatsoever, whether or not such
Note is overdue, and none of the Issuer, the Trustee, the Paying Agent or the
Registrar shall be affected by notice to the contrary.
Any Holder of a Global Note shall, by acceptance of such Global Note,
agree that transfers of beneficial interest in such Global Note may be effected
only through a book-entry system maintained by (i) the Holder of such Global
Note (or its agent) or (ii) any Holder of a beneficial interest in such Global
Note, and that ownership of a beneficial interest in such Global Note shall be
required to be reflected in a book entry.
All Notes issued upon any transfer or exchange pursuant to the terms
of this Indenture shall evidence the same debt and shall be entitled to the same
benefits under this Indenture as the Notes surrendered upon such transfer or
exchange.
SECTION 2.08. REPLACEMENT NOTES. If a mutilated Note is surrendered to
the Registrar or if the Holder of a Note claims that the Note has been lost,
destroyed or wrongfully taken, the Issuer shall issue and the Trustee shall
authenticate a replacement Note if the requirements of Section 8-405 of the
Uniform Commercial Code are met, such that the Holder (i) satisfies the Issuer
or the Trustee within a reasonable time after he has notice of such loss,
destruction or wrongful taking and the Registrar does not register a transfer
prior to receiving such notification, (ii) makes such request to the Issuer or
the Trustee prior to the Note being acquired by a protected purchaser as defined
in Section 8- 303 of the Uniform Commercial Code (a "PROTECTED PURCHASER") and
(iii) satisfies any other reasonable requirements of the Trustee. If required by
the Trustee or the Issuer, such Holder shall furnish an indemnity bond
sufficient in the judgment of the Trustee to protect the Issuer, the Trustee,
the Paying Agent and the Registrar from any loss that any of them may suffer if
a Note is replaced. The Issuer and the Trustee may charge the Holder for their
expenses in replacing a Note. In the event any such mutilated, lost, destroyed
or wrongfully taken Note has become or is about to become due and payable, the
Issuer in its discretion may pay such Note instead of issuing a new Note in
replacement thereof.
Every replacement Note is an additional obligation of the Issuer.
The provisions of this Section 2.08 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, lost, destroyed or wrongfully taken Notes.
SECTION 2.09. OUTSTANDING NOTES. Notes outstanding at any time are all
Notes authenticated by the Trustee except for those canceled by it, those
delivered to it for cancelation and those described in this Section as not
outstanding. A Note does not cease to be outstanding because the Issuer or an
Affiliate of the Issuer holds the Note.
If a Note is replaced pursuant to Section 2.08, it ceases to be
outstanding unless the Trustee and the Issuer receive proof satisfactory to them
that the replaced Note is held by a protected purchaser.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a Redemption Date or maturity date money sufficient to pay
all principal and interest payable on that date with respect to the Notes (or
portions thereof) to be redeemed or maturing, as the case may be, and the Paying
Agent is not prohibited from
<PAGE>
25
paying such money to the Noteholders on that date pursuant to the terms of this
Indenture, then on and after that date such Notes (or portions thereof) shall
cease to be outstanding and interest on them shall cease to accrue.
SECTION 2.10. TEMPORARY NOTES. In the event that Definitive Notes (as
defined in the Appendix) are to be issued under the terms of this Indenture,
until such Definitive Notes are ready for delivery, the Issuer may prepare and
the Trustee shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of Definitive Notes but may have variations that the
Issuer considers appropriate for temporary Notes. Without unreasonable delay,
the Issuer shall prepare and the Trustee shall authenticate Definitive Notes and
deliver them in exchange for temporary Notes upon surrender of such temporary
Notes at the office or agency of the Issuer, without charge to the Holder. In
addition, the Temporary Regulation S Global Note (as defined in the Appendix)
may also be issued in temporary form.
SECTION 2.11. CANCELATION. The Issuer at any time may deliver Notes to
the Trustee for cancelation. The Registrar and the Paying Agent shall forward to
the Trustee any Notes surrendered to them for registration of transfer, exchange
or payment. The Trustee and no one else shall cancel all Notes surrendered for
registration of transfer, exchange, payment or cancelation and deliver canceled
Notes to the Issuer pursuant to written direction by an Officer. The Issuer may
not issue new Notes to replace Notes it has redeemed, paid or delivered to the
Trustee for cancelation. The Trustee shall not authenticate Notes in place of
canceled Notes other than pursuant to the terms of this Indenture.
SECTION 2.12. DEFAULTED INTEREST. If the Issuer defaults in a payment
of interest on the Notes, the Issuer shall pay the defaulted interest (plus
interest on such defaulted interest to the extent lawful) in any lawful manner.
The Issuer may pay the defaulted interest to the Persons who are Noteholders on
a subsequent special record date. The Issuer shall fix or cause to be fixed any
such special record date and payment date and shall promptly mail or cause to be
mailed to each Noteholder a notice that states the special record date, the
payment date and the amount of defaulted interest to be paid.
SECTION 2.13. "CUSIP" OR "ISIN" NUMBERS. The Issuer in issuing the
Notes may use "CUSIP" or "ISIN" numbers (if then generally in use) and, if so,
the Trustee shall use "CUSIP" or "ISIN" numbers in notices of redemption as a
convenience to Holders; PROVIDED, HOWEVER, that any such notice may state that
no representation is made as to the correctness of such numbers either as
printed on the Notes or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Notes, and any such redemption shall not be affected by any defect in or
omission of such "CUSIP" or "ISIN" numbers. The Issuer shall promptly notify the
Trustee after the Issuer becomes aware, through written notice, of a change in
the "CUSIP" or "ISIN" numbers.
ARTICLE 3
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE. If the Issuer elects to redeem Notes
pursuant to paragraph 5 of the Notes, it shall notify the Trustee in writing of
the Redemption Date and the principal amount of Notes to be redeemed.
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26
The Issuer shall give each notice to the Trustee provided for in this
Section at least 30 but not more than 60 days before the Redemption Date unless
the Trustee consents to a shorter period. Such notice shall be accompanied by an
Officers' Certificate from the Issuer to the effect that such redemption shall
comply with the conditions herein. If fewer than all the Notes are to be
redeemed, the record date relating to such redemption shall be selected by the
Issuer and given to the Trustee, which record date shall be not fewer than 15
days after the date of notice to the Trustee. Any such notice may be canceled at
any time prior to notice of such redemption being mailed to any Holder and shall
thereby be void and of no effect.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED. If fewer than all the
Notes are to be redeemed, the Trustee shall select the Notes to be redeemed in
compliance with the requirements of the principal national securities exchange,
if any, on which such Notes are listed, or, if such Notes are not so listed, on
a pro rata basis, by lot or by such other method as the Trustee shall deem fair
and appropriate (and in such manner as complies with applicable legal
requirements); PROVIDED that no Notes of $1,000 or less shall be purchased or
redeemed in part. Provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption. The Trustee
shall notify the Issuer promptly of the Notes or portions of Notes to be
redeemed.
SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not more than
60 days before the Redemption Date, the Issuer, or the Trustee at the Issuer's
direction, shall (a) publish a notice of redemption in a leading newspaper
having a general circulation in New York (which is expected to be the WALL
STREET JOURNAL) (and, so long as the Notes are listed on the Luxembourg Stock
Exchange and the rules of such stock exchange shall so require, a newspaper
having a general circulation in Luxembourg (which is expected to be the
LUXEMBURGER WORT)) and (b) in the case of Definitive Notes, shall also mail a
notice of redemption by first-class mail, postage prepaid, to each Holder of
Notes to be redeemed at such Holder's registered address; PROVIDED that in the
event the Trustee is to mail such notice, the Issuer shall deliver to the
Trustee, at least 45 days prior to the Redemption Date, an Officers' Certificate
(which may be the same Officers' Certificate required by Section 3.01)
requesting that the Trustee give such notice and setting forth the information
to be stated in such notice as provided in the following items.
The notice shall identify the Notes to be redeemed and shall state:
(1) the Redemption Date;
(2) the redemption price and the amount of accrued interest to the
Redemption Date;
(3) the name and address of the Paying Agent;
(4) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(5) if fewer than all the outstanding Notes are to be redeemed, the
certificate numbers and principal amounts of the particular Notes to be
redeemed (or the portion thereof);
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27
(6) that, unless the Issuer defaults in making such redemption
payment, interest on Notes (or portion thereof) called for redemption
ceases to accrue on and after the Redemption Date;
(7) the CUSIP or ISIN number, if any, printed on the Notes being
redeemed; and
(8) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Issuer's request, the Trustee shall give the notice of
redemption in the Issuer's name and at the Issuer's expense. In such event, the
Issuer shall provide the Trustee with the information required by this Section.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of
redemption is mailed, Notes called for redemption become due and payable on the
Redemption Date and at the redemption price stated in the notice. Upon surrender
to the Paying Agent, such Notes shall be paid at the redemption price stated in
the notice, plus accrued interest, if any, to the Redemption Date; PROVIDED,
HOWEVER, that if the Redemption Date is after a regular record date or a special
record date and on or prior to the interest payment date, the accrued interest
shall be payable to the Noteholder of the redeemed Notes registered on the
relevant record date. Failure to give notice or any defect in the notice to any
Holder shall not affect the validity of the notice to any other Holder.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. Prior to 10:00 a.m. on the
Redemption Date, the Issuer shall deposit with the Paying Agent (or, if the
Issuer or a Subsidiary is the Paying Agent, shall segregate and hold in trust)
money sufficient to pay the redemption price of and accrued interest on all
Notes to be redeemed on that date other than Notes or portions of Notes called
for redemption that have been delivered by the Issuer to the Trustee for
cancelation.
SECTION 3.06. NOTES REDEEMED IN PART. A new Note in principal amount
equal to the unredeemed portion of any Note redeemed in part shall be issued in
the name of the Holder thereof upon cancelation of the original Note. On and
after the Redemption Date unless the Issuer defaults in payment of the
redemption price, interest shall cease to accrue on Notes or portions thereof
called for redemption.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES. The Issuer shall promptly pay the
principal of and interest on the Notes on the dates and in the manner provided
in the Notes and in this Indenture. Principal and interest shall be considered
paid on the date due if on such date the Trustee or the Paying Agent holds in
accordance with this Indenture money sufficient to pay all principal and
interest then due and the Trustee or the Paying Agent, as the case may be, is
not prohibited from paying such money to the Noteholders on that date pursuant
to the terms of this Indenture.
The Issuer shall pay interest on overdue principal at the rate
specified therefor in the Notes, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
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28
SECTION 4.02. SEC REPORTS. Notwithstanding that neither the Company
nor the Issuer may be subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act or otherwise report on an annual and quarterly basis
on forms provided for such annual and quarterly reporting pursuant to rules and
regulations promulgated by the Commission, the Company shall file with the
Commission (and make available to the Trustee and Holders (without exhibits),
without cost to each Holder, within 15 days after it files them with the
Commission), (a) within 90 days after the end of each fiscal year, annual
reports on Form 20-F (or any successor or comparable form) containing the
information required to be contained therein (or required in such successor or
comparable form); (b) within 45 days after the end of each of the first three
fiscal quarters of each fiscal year, reports on Form 6-K, which shall contain
all quarterly information that would be required to be contained in Form 10-Q
(or any successor or comparable form); (c) promptly from time to time after the
occurrence of an event required to be therein reported, such other reports on
Form 6-K (or any successor or comparable form); and (d) any other information,
documents and other reports which the Company would be required to file with the
Commission if it were subject to Section 13 or 15(d) of the Exchange Act;
PROVIDED that all such information may be prepared in accordance with GAAP but
shall contain a reconciliation to United States generally accepted accounting
principles and PROVIDED, FURTHER, that the Company shall not be so obligated to
file such reports with the Commission if the Commission does not permit such
filing, in which event the Company shall make available such information to
prospective purchasers of Notes, in addition to providing such information to
the Trustee and the Holders, in each case within 15 days after the time the
Company would be required to file such information with the Commission, if it
were subject to Sections 13 or 15(d) of the Exchange Act. Notwithstanding the
foregoing, such requirements shall be deemed satisfied prior to the commencement
of the Exchange Offer or the effectiveness of the Shelf Registration Statement
by the filing with the Commission of the Exchange Offer Registration Statement
and/or Shelf Registration Statement, and any amendments thereto, with such
financial information that satisfies Regulation S-X of the Securities Act,
PROVIDED, HOWEVER, that in order for the provisions of clause (a) above to be
deemed satisfied with respect to 1998, such Exchange Offer Registration
Statement or Shelf Registration Statement must include audited financial
statements for the year 1998.
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including both the Company's
and the Issuer's compliance with any of its covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officers' Certificates).
SECTION 4.03. LIMITATION ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF
DISQUALIFIED STOCK. (a) The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise (collectively, "INCUR" and collectively, an "INCURRENCE") with respect
to any Indebtedness (including Acquired Indebtedness) and the Company shall not
issue any shares of Disqualified Stock and shall not permit any of its
Restricted Subsidiaries to issue any shares of preferred stock; PROVIDED,
HOWEVER, that the Company may incur Indebtedness (including Acquired
Indebtedness) or issue shares of Disqualified Stock, and the Issuer and any
Restricted Subsidiary that is a Guarantor may incur Indebtedness, issue shares
of Disqualified Stock and issue shares of preferred stock, if the Fixed Charge
Coverage Ratio for the Company's and its Restricted Subsidiaries' most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional Indebtedness
is incurred or such Disqualified Stock or preferred
<PAGE>
29
stock is issued would have been at least 2.00 to 1.00, determined on a pro forma
basis (including a pro forma application of the net proceeds therefrom), as if
the additional Indebtedness had been incurred, or the Disqualified Stock or
preferred stock had been issued, as the case may be, and the application of
proceeds therefrom had occurred at the beginning of such four-quarter period.
(b) The foregoing limitations shall not apply to:
(i) the existence of Indebtedness under Credit Facilities on the
Closing Date together with the incurrence by the Company, the Issuer
or any other Restricted Subsidiary of Indebtedness under Credit
Facilities and the issuance and creation of letters of credit and
bankers' acceptances thereunder (with letters of credit and bankers'
acceptances being deemed to have a principal amount equal to the face
amount thereof), up to an aggregate principal amount of $675.0 million
outstanding at any one time; PROVIDED, HOWEVER, that the aggregate
amount of Indebtedness incurred by Restricted Subsidiaries (other than
the Issuer or any Guarantor) pursuant to this clause (b)(i) may not
exceed $150.0 million outstanding at any one time;
(ii) the incurrence by the Issuer of Indebtedness represented by
the Notes;
(iii) Existing Indebtedness (other than Indebtedness described in
clauses (b)(i) and (b)(ii));
(iv) Indebtedness (including Capitalized Lease Obligations)
incurred by the Company or any of its Restricted Subsidiaries, to
finance the purchase, lease or improvement of property (real or
personal) or equipment (whether through the direct purchase of assets
or the Capital Stock of any Person owning such assets) in an aggregate
principal amount which, when aggregated with the principal amount of
all other Indebtedness then outstanding and incurred pursuant to this
clause (b)(iv) and including all Refinancing Indebtedness incurred to
refund, refinance or replace any other Indebtedness incurred pursuant
to this clause (b)(iv), does not exceed the greater of (A) $50.0
million and (B) 5% of Total Revenues.
(v) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries constituting reimbursement obligations with respect to
letters of credit issued in the ordinary course of business, including
without limitation letters of credit in respect of workers'
compensation claims, or other Indebtedness with respect to
reimbursement type obligations regarding workers' compensation claims;
PROVIDED, HOWEVER, that upon the drawing of such letters of credit or
the incurrence of such Indebtedness, such obligations are reimbursed
within 30 days following such drawing or incurrence;
(vi) Indebtedness arising from agreements of the Company or a
Restricted Subsidiary providing for indemnification, adjustment of
purchase price or similar obligations, in each case, incurred or
assumed in connection with the disposition of any business, assets or
a Subsidiary, other than guarantees of Indebtedness incurred by any
Person acquiring all or any portion of such business, assets or a
Subsidiary for the purpose of financing such acquisition; PROVIDED,
HOWEVER, that (A) such Indebtedness is not reflected on the balance
sheet of the Company or any Restricted Subsidiary (contingent
obligations referred to in a footnote to financial statements and not
otherwise reflected on the balance sheet shall not be deemed to be
reflected on such balance sheet for purposes of this
<PAGE>
30
clause (A)) and (B) the maximum assumable liability in respect of all
such Indebtedness shall at no time exceed the gross proceeds including
noncash proceeds (the fair market value of such noncash proceeds being
measured at the time received and without giving effect to any
subsequent changes in value) actually received by the Company and its
Restricted Subsidiaries in connection with such disposition;
(vii) Indebtedness of the Company to a Restricted Subsidiary;
PROVIDED that any such Indebtedness is subordinated in right of
payment to the Notes; PROVIDED FURTHER that any subsequent issuance or
transfer of any Capital Stock or any other event which results in any
such Restricted Subsidiary ceasing to be a Restricted Subsidiary or
any other subsequent transfer of any such Indebtedness (except to the
Company or another Restricted Subsidiary) shall be deemed, in each
case to be an incurrence of such Indebtedness;
(viii) Indebtedness of a Restricted Subsidiary to the Company or
another Restricted Subsidiary; PROVIDED that (A) any such Indebtedness
is made pursuant to an intercompany note and (B) if a Guarantor incurs
such Indebtedness to a Restricted Subsidiary that is not the Issuer or
a Guarantor, such Indebtedness is subordinated in right of payment to
the Guarantee of such Guarantor; PROVIDED FURTHER that any subsequent
transfer of any such Indebtedness (except to the Company or another
Restricted Subsidiary) shall be deemed, in each case to be an
incurrence of such Indebtedness;
(ix) shares of preferred stock of a Restricted Subsidiary issued
to the Company or another Restricted Subsidiary; PROVIDED that any
subsequent issuance or transfer of any Capital Stock or any other
event which results in any such Restricted Subsidiary ceasing to be a
Restricted Subsidiary or any other subsequent transfer of any such
shares of preferred stock (except to the Company or another Restricted
Subsidiary) shall be deemed in each case to be an issuance of such
shares of preferred stock;
(x) Hedging Obligations (excluding Hedging Obligations entered
into for speculative purposes);
(xi) obligations in respect of performance and surety bonds and
completion guarantees provided by the Company or any Restricted
Subsidiary in the ordinary course of business;
(xii) Indebtedness of any Guarantor in respect of such
Guarantor's Guarantee;
(xiii) Indebtedness and Disqualified Stock of the Company or any
Restricted Subsidiary not otherwise permitted under this Section 4.03
in an aggregate principal amount or liquidation preference, which when
aggregated with the principal amount and liquidation preference of all
other Indebtedness and Disqualified Stock then outstanding and
incurred pursuant to this clause (b)(xiii), does not at any one time
outstanding exceed the sum of (a) $250 million and (b) 100% of the net
cash proceeds received by the Company or the Issuer since immediately
after the Closing Date from the issue or sale of Equity Interests of
the Company, any of its direct or indirect parent corporations or the
Issuer or net cash proceeds contributed to the capital of the Company
or the Issuer (in each case other than proceeds of Disqualified Stock
or sales of Equity Interests to the Company or any of its
Subsidiaries) as determined in accordance with clauses
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(3)(ii) and (3)(iii) of Section 4.04(a) to the extent such net cash
proceeds have not been applied pursuant to such clauses to make
Restricted Payments or to make other payments or exchanges pursuant to
Section 4.04(b) or to make Permitted Investments (other than Permitted
Investments specified in clauses (b)(i) and (b)(iii) of the definition
thereof) (it being understood that any Indebtedness incurred under
this clause (xiii) shall cease to be deemed incurred or outstanding
for purposes of this clause (xiii) but shall be deemed to be incurred
for purposes of Section 4.03(a) from and after the first date on which
the Company could have incurred such Indebtedness under Section
4.03(a) without reliance upon this clause (xiii));
(xiv) (i) any guarantee by the Company or the Issuer of
Indebtedness or other obligations of any of its Restricted
Subsidiaries so long as the incurrence of such Indebtedness incurred
by such Restricted Subsidiary is permitted under the terms of this
Indenture, (ii) any guarantee by a Restricted Subsidiary of
Indebtedness of the Company or the Issuer or of the Trinity Hedging
Obligations or the Facility Hedging Obligations, PROVIDED that such
guarantee is incurred in accordance with Section 4.11 or (iii) any
guarantee by the Issuer of the Trinity Hedging Obligations or the
Facility Hedging Obligations;
(xv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness which serves to refund or refinance any
Indebtedness incurred as permitted under Section 4.03(a) and clauses
(ii), (iii) and (iv) of this Section 4.03(b), this clause (xv) and
clause (xvi) below or any Indebtedness issued to so refund or
refinance such Indebtedness including additional Indebtedness incurred
to pay premiums and fees in connection therewith (the "REFINANCING
INDEBTEDNESS") prior to its respective maturity; PROVIDED, HOWEVER,
that such Refinancing Indebtedness (A) has a Weighted Average Life to
Maturity at the time such Refinancing Indebtedness is incurred which
is not less than the remaining Weighted Average Life to Maturity of
Indebtedness being refunded or refinanced, (B) to the extent such
Refinancing Indebtedness refinances Indebtedness subordinated or PARI
PASSU to the Notes, such Refinancing Indebtedness is subordinated or
PARI PASSU to the Notes at least to the same extent as the
Indebtedness being refinanced or refunded and (C) shall not include
(x) Indebtedness of a Subsidiary that refinances Indebtedness of the
Company or (y) Indebtedness of the Company or a Restricted Subsidiary
that refinances Indebtedness of an Unrestricted Subsidiary; and
PROVIDED FURTHER that subclauses (A) and (B) of this clause (xv) shall
not apply to any refunding or refinancing of any Senior Indebtedness;
(xvi) Indebtedness or Disqualified Stock of Persons that are
acquired by the Company or any Restricted Subsidiary or merged into a
Restricted Subsidiary in accordance with the terms of this Indenture;
PROVIDED that such Indebtedness or Disqualified Stock is not incurred
in contemplation of such acquisition or merger; and PROVIDED FURTHER
that after giving effect to such acquisition or merger, either (A) the
Company would be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in Section 4.03(a) or (B) the Fixed Charge Coverage Ratio is
greater than immediately prior to such acquisition or merger.
Notwithstanding the foregoing, the second proviso of the immediately
preceding sentence shall not apply to Indebtedness outstanding on the
Closing Date of Associates of the Company on the Closing Date that are
acquired by the Company or any Restricted Subsidiary or merged into a
Restricted Subsidiary;
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(xvii) Indebtedness in respect of the Group Intercompany Notes,
PROVIDED that any subsequent transfer of a Group Intercompany Note by
Trinity to a Person other than the Company or a Restricted Subsidiary
shall be deemed to be an incurrence of such Indebtedness:
(xviii) Indebtedness in respect of a Convertible Loan, PROVIDED
that any subsequent transfer of a Convertible Loan by Trinity to a
Person other than the Company or a Restricted Subsidiary shall be
deemed to be an incurrence of such Indebtedness;
(xix) Indebtedness under any BACS Facility entered into in the
ordinary course of business;
(xx) Indebtedness incurred in relation to arrangements made in
the ordinary course of business to facilitate the operation of bank
accounts on a net balance basis for the calculation of interest;
(xxi) short-term Indebtedness from banks incurred in the ordinary
course of business pursuant to a facility required in order to comply
with, or otherwise falling within, paragraph 25 (2) of the Lloyds
Brokers By-law (No. 5 of 1988) (or any other by-law or regulation
issued by Lloyds from time to time with which the relevant company is
required to comply); and
(xxii) any guarantee facility entered into in the ordinary course
of business and consistent with industry custom provided in relation
to employees of the Company or any Restricted Subsidiary who are
Lloyds names.
(c) For purposes of determining compliance with Section 4.03, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of permitted Indebtedness described in clauses (i) through (xxii) of
this Section 4.03(b) or is entitled to be incurred pursuant to Section 4.03(a),
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.03 and such item of Indebtedness
shall be treated as having been incurred pursuant to only one of such clauses or
pursuant to Section 4.03(a) except as otherwise set forth in clause (xiii).
Accrual of interest, the accretion of accreted value and the payment of interest
in the form of additional Indebtedness shall not be deemed to be an incurrence
of Indebtedness for purposes of this Section 4.03.
(d) For purposes of determining compliance with any U.S.
dollar-denominated restriction on the incurrence of Indebtedness, the U.S.
dollar-equivalent principal amount of indebtedness denominated in a foreign
currency shall be calculated based on the relevant currency exchange rate in
effect on the date such Indebtedness was incurred, in the case of term debt, or
first committed, in the case of revolving credit debt; PROVIDED that (1) the
U.S. dollar-equivalent principal amount of any such Indebtedness outstanding or
committed on the Issuance Date shall be calculated based on the relevant
currency exchange rate in effect on September 30, 1998, and (2) if such
Indebtedness is incurred to refinance other Indebtedness denominated in a
foreign currency, and such refinancing would cause the applicable U.S.
dollar-denominated restriction to be exceeded if calculated at the relevant
currency exchange rate in effect on the date of such refinancing, such U.S.
dollar-denominated restriction shall be deemed not to have been exceeded so long
as the principal amount of such Refinancing Indebtedness does not exceed the
principal amount of such Indebtedness being refinanced. The principal amount of
any Indebtedness incurred to refinance other Indebtedness, if incurred in a
different currency from the Indebtedness being refinanced, shall be calculated
based on the currency
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33
exchange rate applicable to the currencies in which such respective Indebtedness
is denominated that is in effect on the date of such refinancing.
SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS. (a) The Company shall
not, and shall not permit any Restricted Subsidiary to, directly or indirectly:
(i) declare or pay any dividend or make any distribution on account of the
Company's or any Restricted Subsidiary's Equity Interests, including any
dividend or distribution payable in connection with any merger or consolidation
(other than (A) dividends or distributions by the Company payable in Equity
Interests (other than Disqualified Stock) of the Company or in options, warrants
or other rights to purchase such Equity Interests or (B) dividends or
distributions by a Restricted Subsidiary so long as, in the case of any dividend
or distribution payable on or in respect of any class or series of securities
issued by a Subsidiary other than a Wholly Owned Subsidiary, the Company or a
Restricted Subsidiary receives at least its pro rata share of such dividend or
distribution in accordance with its Equity Interests in such class or series of
securities); (ii) purchase, redeem, defease or otherwise acquire or retire for
value any Equity Interests of the Company or any direct or indirect parent of
the Company; (iii) make any principal payment on, or redeem, repurchase, defease
or otherwise acquire or retire for value in each case, prior to any scheduled
repayment, or maturity, any Subordinated Indebtedness (other than (x)
Indebtedness permitted under clauses (vii), (viii) and (xvii) of Section 4.03(b)
or (y) the purchase, repurchase or other acquisition of Subordinated
Indebtedness purchased in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year of the
date of purchase, repurchase or acquisition); (iv) make any Restricted
Investment; or (v) pay any principal of or interest on any Group Intercompany
Note unless such amount is immediately repaid to the Company or a Restricted
Subsidiary in respect of the principal of, or interest on, any Trinity
Intercompany Note or pay any amount in respect of a Convertible Loan (all such
payments and other actions set forth in clauses (i) through (v) above being
collectively referred to as "Restricted Payments"), unless, at the time of such
Restricted Payment:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(2) immediately after giving effect to such transaction on a pro forma
basis, the Company could incur $1.00 of additional Indebtedness pursuant to
Section 4.03(a); and
(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Closing Date (including Restricted Payments
permitted by clauses (i), (ii) (with respect to the payment of dividends on
Refunding Capital Stock pursuant to clause (b) thereof), (iv) (only to the
extent that amounts paid pursuant to such clause are greater than amounts
that could have been paid pursuant to such clause if $6 million and $12
million were substituted in such clause for $12.5 million and $25 million,
respectively), (vi), (ix), (x) and (xiv) of Section 4.04(b), but excluding
all other Restricted Payments permitted by Section 4.04(b), is less than
the sum of (i) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from January 1, 1999, to the end of
the Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted Payment
(or, in the case such Consolidated Net Income for such period is a deficit,
minus 100% of such deficit), PLUS (ii) 100% of the aggregate net cash
proceeds and the fair market value, as determined in good faith by the
Board of Directors, of marketable
<PAGE>
34
securities and Qualified Proceeds received by the Company or the Issuer
since immediately after the Closing Date from the issue or sale of (x)
Equity Interests of the Company or the Issuer (including Retired Capital
Stock (as defined below), but excluding cash proceeds, marketable
securities and Qualified Proceeds received from the sale of (A) Equity
Interests (1) to members of management, directors or consultants of the
Company or the Issuer, any direct or indirect parent corporation of the
Issuer and the Company's Subsidiaries after the Closing Date to the extent
such amounts have been applied to Restricted Payments made in accordance
with Section 4.04(b)(iv) or (2) pursuant to the Contribution Agreement and
(B) Designated Preferred Stock) and, to the extent actually contributed to
the Company or the Issuer, Equity Interests of the Company's direct or
indirect parent corporations (excluding contributions of the proceeds from
the sale of Designated Preferred Stock of such corporations) or (y) debt
securities (other than that portion of the Convertible Loan made with the
proceeds of Interim Refinancing Indebtedness) of the Company or the Issuer
that have been converted into such Equity Interests of the Company or the
Issuer; PROVIDED, HOWEVER, that this clause (ii) shall not include the
proceeds from Refunding Capital Stock (as defined below), Equity Interests
or convertible debt securities of the Company or the Issuer sold to a
Restricted Subsidiary or the Company, as the case may be, Disqualified
Stock or debt securities that have been converted into Disqualified Stock),
PLUS (iii) 100% of the aggregate amount of cash, marketable securities and
Qualified Proceeds contributed to the capital of the Company or the Issuer
following the Closing Date (other than by a Restricted Subsidiary or the
Company), PLUS (iv) 100% of the aggregate amount received in cash, the fair
market value of marketable securities and Qualified Proceeds (other than
Restricted Investments) received by means of (A) the sale or other
disposition (other than to the Company or a Restricted Subsidiary) of
Restricted Investments made by the Company and its Restricted Subsidiaries
and repurchases and redemptions of such Restricted Investments from the
Company and its Restricted Subsidiaries and repayments of loans or advances
which constitute Restricted Investments by the Company and its Restricted
Subsidiaries or (B) the sale (other than to the Company or a Restricted
Subsidiary) of the stock of an Unrestricted Subsidiary or a distribution
from an Unrestricted Subsidiary (other than in each case to the extent the
Investment in such Unrestricted Subsidiary was made by the Company or a
Restricted Subsidiary pursuant to clauses (vii) or (xi) of Section 4.04(b)
or to the extent such Investment constituted a Permitted Investment) or a
dividend from an Unrestricted Subsidiary PLUS (v) in the case of the
redesignation of an Unrestricted Subsidiary as, or an Associate becoming, a
Restricted Subsidiary, the fair market value of the Investment in such
Unrestricted Subsidiary or Associate, as the case may be, as determined by
the Board of Directors in good faith or if, in the case of an Unrestricted
Subsidiary, such fair market value may exceed $25 million, in writing by an
independent investment banking firm of nationally recognized standing, at
the time of the redesignation of such Unrestricted Subsidiary as a
Restricted Subsidiary (other than an Unrestricted Subsidiary to the extent
the Investment in such Unrestricted Subsidiary or such Associate was made
by the Company or a Restricted Subsidiary pursuant to clauses (vii) or (xi)
of Section 4.04(b) or to the extent such Investment constituted a Permitted
Investment).
(b) The foregoing provisions shall not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at the date of declaration such payment would have
complied with the provisions of this Indenture;
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35
(ii) (a) the redemption, repurchase, retirement or other acquisition
of any Equity Interests ("RETIRED CAPITAL STOCK") or Subordinated
Indebtedness of the Company, or any Equity Interests of any direct or
indirect parent corporation of the Company, in exchange for, or out of the
proceeds of the substantially concurrent sale (other than to a Restricted
Subsidiary or the Company) of, Equity Interests of the Company or the
Issuer (in each case, other than any Disqualified Stock) ("REFUNDING
CAPITAL STOCK") and (b) the declaration and payment of dividends on the
Refunding Capital Stock (other than Refunding Capital Stock the proceeds of
which were used to redeem, repurchase, retire or otherwise acquire any
Equity Interests of any direct or indirect parent corporation of the
Company) in an aggregate amount per year no greater than the aggregate
amount of dividends per annum that was declarable and payable on such
Retired Capital Stock immediately prior to such retirement;
(iii) the redemption, repurchase or other acquisition or retirement of
Subordinated Indebtedness of the Company or the Issuer made by exchange
for, or out of the proceeds of the substantially concurrent sale of, new
Indebtedness of the Company or the Issuer, as the case may be, which is
incurred in compliance with Section 4.03 so long as (A) the principal
amount of such new Indebtedness does not exceed the principal amount of the
Subordinated Indebtedness being so redeemed, repurchased, acquired or
retired for value (PLUS the amount of any premium required to be paid under
the terms of the instrument governing the Subordinated Indebtedness being
so redeemed, repurchased, acquired or retired), (B) such Indebtedness is
subordinated to Senior Indebtedness and the Notes at least to the same
extent as such Subordinated Indebtedness so purchased, exchanged, redeemed,
repurchased, acquired or retired for value, (C) such Indebtedness has a
final scheduled maturity date equal to or later than the final scheduled
maturity date of the Subordinated Indebtedness being so redeemed,
repurchased, acquired or retired and (D) such Indebtedness has a Weighted
Average Life to Maturity equal to or greater than the remaining Weighted
Average Life to Maturity of the Subordinated Indebtedness being so
redeemed, repurchased, acquired or retired;
(iv) a Restricted Payment to pay for the repurchase, retirement or
other acquisition or retirement for value of common Equity Interests of the
Company, any of its direct or indirect parent corporations or the Issuer
held by any future, present or former employee, director or consultant of
the Company, any of its Subsidiaries or any of its direct or indirect
parent corporations pursuant to any management equity plan or stock option
plan or any other management or employee benefit plan or agreement;
PROVIDED, HOWEVER, that the aggregate Restricted Payments made under this
Section 4.04(b)(iv) do not exceed in any calendar year $12.5 million (with
unused amounts in any calendar year being carried over to succeeding
calendar years subject to a maximum (without giving effect to the following
proviso) of $25.0 million in any calendar year); PROVIDED FURTHER that such
amount in any calendar year may be increased by an amount not to exceed (A)
the cash proceeds from the sale of Equity Interests of the Company, the
Issuer and, to the extent contributed to the Company or the Issuer, Equity
Interests of any of the Company's direct or indirect parent corporations,
in each case to members of management, directors or consultants of the
Company, any of its Subsidiaries or any of its direct or indirect parent
corporations that occurs after the Closing Date (to the extent the cash
proceeds from the sale of such Equity Interests have not otherwise been
applied to the payment of Restricted Payments by virtue of Section
4.04(a)(3) PLUS (B) the cash proceeds of key man life insurance policies
received by the Company and its Restricted Subsidiaries after
<PAGE>
36
the Closing Date less (C) the amount of any Restricted Payments previously
made pursuant to clauses (A) and (B) of this Section 4.04(b)(iv); and
PROVIDED FURTHER that cancelation of Indebtedness owing to the Company or
the Issuer from members of management of the Company, any of its direct or
indirect parent corporations or any Restricted Subsidiary in connection
with a repurchase of Equity Interests of the Company, any of its direct or
indirect parent corporations or the Issuer shall not be deemed to
constitute a Restricted Payment for purposes of this Section 4.04 or any
other provision of this Indenture;
(v) the declaration and payment of dividends to holders of any class
or series of Disqualified Stock of the Company, the Issuer or any other
Guarantor issued in accordance with Section 4.03 to the extent such
dividends are included in the definition of Fixed Charges;
(vi) (A) the declaration and payment of dividends to holders of any
class or series of Designated Preferred Stock (other than Disqualified
Stock) issued by the Company or the Issuer after the Closing Date, (B) the
declaration and payment of dividends to a direct or indirect parent
corporation of the Company, the proceeds of which shall be used to fund the
payment of dividends to holders of any class or series of Designated
Preferred Stock (other than Disqualified Stock) of such parent corporation
issued after the Closing Date (PROVIDED that the amount of dividends paid
pursuant to this clause (B) shall not exceed the aggregate amount of cash
actually contributed to the Company from the sale of such Designated
Preferred Stock) or (C) the declaration and payment of dividends on
Refunding Capital Stock in excess of the dividends declarable and payable
thereon pursuant to Section 4.04(b)(ii); PROVIDED, HOWEVER, in each case,
that for the most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date
of issuance of such Designated Preferred Stock or the declaration of such
dividends on Refunding Capital Stock, after giving effect to such issuance
or declaration on a pro forma basis, the Company and its Restricted
Subsidiaries would have had a Fixed Charge Coverage Ratio of at least 2.00
to 1.00;
(vii) Investments in Unrestricted Subsidiaries and Associates (or
Persons that become Associates as a result of such Investments) having an
aggregate fair market value, taken together with all other Investments made
pursuant to this clause (vii) that are at that time outstanding (without
giving effect to the sale of an Unrestricted Subsidiary to the extent the
proceeds of such sale do not consist of cash, marketable securities and/or
Qualified Proceeds or do consist of distributions made pursuant to Section
4.04(b)(xiii) below), not to exceed $25.0 million at the time of such
Investment (with the fair market value of each Investment being measured at
the time made and without giving effect to subsequent changes in value);
(viii) repurchases of Equity Interests deemed to occur upon exercise
of stock options if such Equity Interests represent a portion of the
exercise price of such options;
(ix) the payment of dividends on the Company's Common Stock or the
Issuer's Common Stock, following the first public offering of the Company's
Common Stock, the Issuer's Common Stock or the Common Stock of any of its
direct or indirect parent corporations after the Closing Date, of up to 6%
per annum of the net proceeds received by the Company or the Issuer in such
public
<PAGE>
37
offering, other than public offerings with respect to the Company's Common
Stock or the Issuer's Common Stock registered on Form S-8;
(x) a Restricted Payment to pay for the repurchase, retirement or
other acquisition or retirement for value of common Equity Interests of the
Company or any direct or indirect parent corporation of the Company in
existence on the Closing Date and which are not held by KKR, the Consortium
or any of their Affiliates on the Closing Date (including any Equity
Interests issued in respect of such Equity Interests as a result of a stock
split, recapitalization, merger, combination, consolidation or otherwise,
but excluding any management equity plan or stock option plan or similar
agreement), PROVIDED that the Company and its Restricted Subsidiaries shall
be permitted to make Restricted Payments under this Section 4.04(b)(x) only
if after giving effect thereto, the Company would be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in Section 4.03(a); PROVIDED FURTHER that
notwithstanding the foregoing, the Company and the Restricted Subsidiaries
shall be permitted to make Restricted Payments in an amount not to exceed
$20.0 million to pay for the repurchase, retirement or other acquisition or
retirement for value of common Equity Interests of the Company or any
direct or indirect parent corporation of the Company held by the
Consortium;
(xi) Investments that are made with Excluded Contributions;
(xii) other Restricted Payments in an aggregate amount not to exceed
$25.0 million;
(xiii) the distribution, as a dividend or otherwise, of shares of
Capital Stock of, or Indebtedness owed to the Company or a Restricted
Subsidiary of the Company by, Unrestricted Subsidiaries (with the exception
of Investments in Unrestricted Subsidiaries acquired pursuant to clause (x)
of the definition of Permitted Investments);
(xiv) cash dividends or other distributions on the Company's Capital
Stock used to, or loans the proceeds of which will be used to, (A) fund the
payment of dividends (at a rate per annum not to exceed 8-1/2%) on the
Consortium Preferred Stock (whether such dividends have accrued during the
then-current fiscal year or any previous fiscal year) or (B) repay amounts
outstanding under the Guaranteed Loan Notes;
(xv) loans in respect of Interim Refinancing Indebtedness or the
declaration and payment of dividends on the Closing Date to Trinity in an
amount equal to the aggregate outstanding principal amount of and accrued
and unpaid interest on, the Interim Financings and indebtedness of the
Company and its Subsidiaries existing on the Closing Date and required to
be repaid under the Senior Credit Facilities, the proceeds of which were
used by Trinity to repay the Interim Financings and such other
indebtedness;
(xvi) the declaration and payment of dividends to, or the making of
loans to, Trinity in an amount not to exceed the amount of principal and
interest then due and payable on the Interim Refinancing Indebtedness,
PROVIDED that the full amount of such dividend or loan is immediately
repaid in cash to the Company or any Restricted Subsidiary;
<PAGE>
38
(xvii) the declaration and payment of dividends by the Company to, or
the making of loans to, its parent corporation in amounts required for the
Company's direct or indirect parent corporations to pay (A) franchise taxes
and other fees, taxes and expenses required to maintain their corporate
existence, (B) federal, state and local income taxes (and analogous taxes
in the United Kingdom) to the extent such income taxes are attributable to
the income of the Company and the Restricted Subsidiaries (and, to the
extent of the amounts actually received from its Unrestricted Subsidiaries,
in amounts required to pay such taxes to the extent attributable to the
income of such Unrestricted Subsidiaries), (C) customary salary, bonus and
other benefits payable to officers and employees of any direct or indirect
parent corporation of the Company to the extent such salaries, bonuses and
other benefits are attributable to the ownership or operation of the
Company and its Subsidiaries and (D) general corporate overhead expenses of
any direct or indirect parent corporation of the Company to the extent such
expenses are attributable to the ownership or operation of the Company and
its Subsidiaries;
(xviii) cash dividends or other distributions on the Company's Capital
Stock used to, or the making of loans to Trinity the proceeds of which will
be used to, fund the payment of fees and expenses incurred in connection
with the Transactions or owed to Affiliates, in each case to the extent
permitted by Section 4.07;
(xix) distributions or payments of Receivables Fees;
(xx) the making of loans in respect of Trinity Intercompany Notes;
(xxi) the declaration and payment of dividends to, or the making of
loans to, Trinity in an amount not to exceed the amount of principal and
interest then due and payable on the Trinity Intercompany Notes, PROVIDED
that the full amount of such dividend or loan is immediately repaid in cash
to the Company or any Restricted Subsidiary; or
(xxii) cash dividends or other distributions on the Company's Capital
Stock used to, or loans made to Trinity to, fund the payment of net amounts
required to be paid pursuant to any Trinity Hedging Obligations.
As of the Issuance Date, all of the Company's Subsidiaries (other than
Sovereign Marine and General Insurance Company, in provisional liquidation)
shall be Restricted Subsidiaries. The Company shall not permit any Unrestricted
Subsidiary to become a Restricted Subsidiary except pursuant to the second to
last sentence of the definition of "Unrestricted Subsidiary". For purposes of
designating any Restricted Subsidiary as an Unrestricted Subsidiary, all
outstanding Investments by the Company and its Restricted Subsidiaries (except
to the extent repaid) in the Subsidiary so designated shall be deemed to be
Restricted Payments in an amount determined as set forth in the last sentence of
the definition of "Investments." Such designation shall be permitted only if a
Restricted Payment in such amount would be permitted at such time (whether
pursuant to Section 4.04(a) or under clauses (vii), (xi) and (xii) of Section
4.04(b)) and if such Subsidiary otherwise meets the definition of an
Unrestricted Subsidiary. Unrestricted Subsidiaries shall not be subject to any
of the restrictive covenants set forth in this Indenture.
SECTION 4.05. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. The Company shall not, and shall not permit any of its Restricted
Subsidiaries (other than the Issuer) to, directly or indirectly, create or
otherwise cause or
<PAGE>
39
suffer to exist or become effective any consensual encumbrance or consensual
restriction on the ability of any Restricted Subsidiary to:
(a) (i) pay dividends or make any other distributions to the Company
or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with
respect to any other interest or participation in, or measured by, its
profits or (ii) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries;
(b) make loans or advances to the Company or any of its Restricted
Subsidiaries; or
(c) sell, lease or transfer any of its properties or assets to the
Company or any of its Restricted Subsidiaries, except (in each case) for
such encumbrances or restrictions existing under or by reason of:
(1) contractual encumbrances or restrictions in effect on the
Closing Date, including, without limitation, pursuant to Existing
Indebtedness or the Senior Credit Facilities and their related
documentation;
(2) this Indenture and the Notes;
(3) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature
discussed in clause (c) above on the property so acquired;
(4) applicable law or any applicable rule, regulation or order;
(5) any agreement or other instrument of a Person acquired by the
Company or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired;
(6) contracts for the sale of assets, including, without
limitation customary restrictions with respect to a Subsidiary
pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock or assets
of such Subsidiary;
(7) secured Indebtedness otherwise permitted to be incurred
pursuant to Sections 4.03 and 4.12 that limit the right of the debtor
to dispose of the assets securing such Indebtedness;
(8) restrictions on cash or other deposits or net worth imposed
by customers under contracts entered into in the ordinary course of
business;
(9) other Indebtedness or Disqualified Stock of Restricted
Subsidiaries permitted to be incurred subsequent to the Closing Date
pursuant to Section 4.03;
(10) customary provisions in joint venture agreements and other
similar agreements entered into in the ordinary course of business;
<PAGE>
40
(11) customary provisions contained in leases and other
agreements entered into in the ordinary course of business;
(12) customary restrictions on fiduciary cash held by the
Company's Subsidiaries;
(13) any encumbrances or restrictions of the type referred to in
clauses (a), (b) and (c) of this Section 4.05 above imposed by any
amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings of the
contracts, instruments or obligations referred to in clauses (1)
through (12) above, PROVIDED that such amendments, modifications,
restatements, renewals, increases, supplements, refundings,
replacements or refinancings are, in the good faith judgment of the
Company's Board of Directors, no more restrictive with respect to such
dividend and other payment restrictions than those contained in the
dividend or other payment restrictions prior to such amendment,
modification, restatement, renewal, increase, supplement, refunding,
replacement or refinancing; or
(14) restrictions created in connection with any Receivables
Facility that, in the good faith determination of the Board of
Directors of the Company or the Issuer, as the case may be, are
necessary or advisable to effect such Receivables Facility.
SECTION 4.06. ASSET SALES. (a) The Company shall not, and shall not
permit any of its Restricted Subsidiaries to, cause, make or suffer to exist an
Asset Sale, unless (x) the Company, or such Restricted Subsidiary, as the case
may be, receives consideration at the time of such Asset Sale at least equal to
the fair market value (as determined in good faith by the Company) of the assets
sold or otherwise disposed of and (y) except in the case of Permitted Asset
Swap, at least 75% of the consideration therefor received by the Company or such
Restricted Subsidiary, as the case may be, is in the form of cash or Cash
Equivalents; PROVIDED that the amount of (i) any liabilities (as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet or in the
notes thereto) of the Company or any Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the Notes) that are assumed
by the transferee of any such assets, (ii) any securities received by the
Company or such Restricted Subsidiary from such transferee that are converted by
the Company or such Restricted Subsidiary into cash (to the extent of the cash
received) within 180 days following the closing of such Asset Sale and (iii) any
Designated Noncash Consideration received by the Company or any Restricted
Subsidiary in such Asset Sale having an aggregate fair market value, taken
together with all other Designated Noncash Consideration received pursuant to
this clause (iii) that is at that time outstanding, not to exceed the greater of
(x) $100.0 million or (y) 10% of Total Revenues at the time of the receipt of
such Designated Noncash Consideration (with the fair market value of each item
of Designated Noncash Consideration being measured at the time received and
without giving effect to subsequent changes in value), shall be deemed to be
cash for purposes of this provision and for no other purpose.
(b) Within 365 days after the Company's or any Restricted Subsidiary's
receipt of the Net Proceeds of any Asset Sale, the Company or such Restricted
Subsidiary, at its option, may (i) apply the Net Proceeds from such Asset Sale
to permanently reduce (x) Obligations under the Senior Credit Facilities (and to
correspondingly reduce commitments with respect thereto), (y) other Senior
Indebtedness or Senior Subordinated Indebtedness (and to correspondingly reduce
commitments with respect thereto)
<PAGE>
41
(PROVIDED that if the Issuer shall so reduce Obligations under Senior
Subordinated Indebtedness, it shall equally and ratably reduce Obligations under
the Notes if the Notes are then prepayable or, if the Notes may not then be
prepaid, the Issuer shall make an offer (in accordance with the procedures set
forth below for an Asset Sale Offer) to all Holders to purchase their Notes at
100% of the principal amount thereof, plus the amount of accrued but unpaid
interest, if any, on the amount of Notes that would otherwise be prepaid) or (z)
Indebtedness of a Restricted Subsidiary (other than Indebtedness owed to the
Company or another Restricted Subsidiary), (ii) apply the Net Proceeds from such
Asset Sale to an investment in any one or more businesses (PROVIDED that such
investment in any business may be in the form of the acquisition of Capital
Stock so long as it results in the Company or a Restricted Subsidiary, as the
case may be, owning all the Capital Stock of such business), capital
expenditures or acquisitions of other assets in each case, used or useful in a
Similar Business and/or (iii) apply the Net Proceeds from such Asset Sale to an
investment in any one or more businesses (PROVIDED that such investment in any
business may be in the form of the acquisition of Capital Stock so long as it
results in the Company or a Restricted Subsidiary, as the case may be, owning
all the Capital Stock of such business), properties or assets that replace the
businesses, properties and assets that are the subject of such Asset Sale. Any
Net Proceeds from the Asset Sale that are not invested or applied as provided
and within the time period set forth in the first sentence of this paragraph
shall be deemed to constitute "EXCESS PROCEEDS." When the aggregate amount of
Excess Proceeds exceeds $15.0 million, the Issuer shall make an offer to all
Holders (an "ASSET SALE OFFER") to purchase the maximum principal amount of
Notes, that is an integral multiple of $1,000, that may be purchased out of the
Excess Proceeds at an offer price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
fixed for the closing of such offer (the "OFFERED PRICE"). The Issuer shall
commence an Asset Sale Offer with respect to the Excess Proceeds within ten
Business Days after the date on which Excess Proceeds exceeds $15.0 million, by
mailing a notice to each Holder, with a copy to the Trustee, stating:
(i) that the Holder has the right to require the Issuer to repurchase
such Holder's Notes at the Offered Price, subject to proration in the event the
Excess Proceeds are less than the aggregate Offered Price of all Notes tendered;
(ii) the date of purchase of Notes pursuant to the Asset Sale Offer
(the "ASSET SALE PURCHASE DATE"), which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed;
(iii) that the Offered Price shall be paid to Holders electing to have
Notes purchased on the Asset Sale Purchase Date, PROVIDED that a Holder must
surrender its Note to the Paying Agent at the address specified in the notice
prior to the close of business at least five Business Days prior to the Asset
Sale Purchase Date;
(iv) any Note not tendered shall continue to accrue interest pursuant
to its terms;
(v) that unless the Company defaults in the payment of the Offered
Price, any Note accepted for payment pursuant to the Asset Sale Offer shall
cease to accrue interest on and after the Asset Sale Purchase Date;
(vi) that Holders shall be entitled to withdraw their tendered Notes
and their election to require the Company to purchase such Notes, PROVIDED that
the Company receives, not later than the close of business on the third Business
Day preceding the Asset Sale Purchase Date, a telegram, telex, facsimile
transmission or letter setting forth
<PAGE>
42
the name of the Holder, the principal amount of the Notes tendered for purchase,
and a statement that such Holder is withdrawing its election to have such Notes
purchased;
(vii) that the Holders whose Notes are being purchased only in part
shall be issued new Notes equal in principal amount to the unpurchased portion
of the Notes surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof; and
(viii) the instructions a Holder must follow in order to have his
Notes purchased in accordance with this Section 4.06.
(c) To the extent that the aggregate amount of Notes tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds, the Issuer may use any
remaining Excess Proceeds for general corporate purposes. If the aggregate
principal amount of Notes surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes to be purchased in the
manner described in Section 4.06(d). Upon completion of any such Asset Sale
Offer, the amount of Excess Proceeds shall be reset at zero.
(d) If less than all of the Notes are to be redeemed at any time or if more
Notes are tendered pursuant to an Asset Sale Offer than the Issuer is required
to purchase, selection of such Notes for redemption or purchase, as the case may
be, shall be made by the Trustee in compliance with the requirements of the
principal national securities exchange, if any, on which such Notes are listed,
or, if such Notes are not so listed, on a pro rata basis, by lot or by such
other method as the Trustee shall deem fair and appropriate (and in such manner
as complies with applicable legal requirements); PROVIDED that no Notes of
$1,000 or less shall be purchased in part.
(e) Notices of purchase or redemption shall be mailed by first class mail,
postage prepaid, at least 30 but not more than 60 days before the Asset Sale
Purchase Date or redemption date to each Holder of Notes to be purchased or
redeemed at such Holder's registered address. If any Note is to be purchased or
redeemed in part only, any notice of purchase or redemption that relates to such
Note shall state the portion of the principal amount thereof that has been or is
to be purchased or redeemed. A new Note in principal amount equal to the
unpurchased or unredeemed portion of any Note purchased or redeemed in part
shall be issued in the name of the Holder thereof upon cancelation of the
original Note. On and after the purchase or redemption date, unless the Issuer
defaults in payment of the purchase or redemption price, interest shall cease to
accrue on Notes or portions thereof purchased or called for redemption.
(f) Pending the final application of any Net Proceeds pursuant to this
Section 4.06, the Company or the applicable Restricted Subsidiary may apply such
Net Proceeds temporarily to reduce Indebtedness outstanding under a revolving
credit facility or otherwise invest such Net Proceeds in Cash Equivalents or
Investment Grade Securities.
(g) The Issuer shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws or regulations are applicable in connection with the repurchase
of the Notes pursuant to an Asset Sale Offer. To the extent that the provisions
of any securities laws or regulations conflict with the provisions of this
Indenture, the Issuer shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations described
in this Indenture by virtue thereof.
<PAGE>
43
SECTION 4.07. TRANSACTIONS WITH AFFILIATES. (a) The Company shall not,
and shall not permit any of its Restricted Subsidiaries to, make any payment to,
or sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate of the Company (each of the
foregoing, an "AFFILIATE TRANSACTION") involving aggregate payments or
consideration in excess of $5.0 million, unless (i) such Affiliate Transaction
is on terms that are not materially less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (ii) the Company delivers to the Trustee with respect to
any Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $10.0 million, a resolution adopted by the
majority of the Board of Directors approving such Affiliate Transaction and set
forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with Section 4.07(a)(i).
(b) The foregoing provisions shall not apply to the following: (i)
transactions between or among the Company and/or any of its Restricted
Subsidiaries; (ii) Restricted Payments permitted by Section 4.04; (iii) the
payment of customary annual management, consulting, monitoring and advisory fees
and related expenses to KKR and its Affiliates; (iv) the payment of reasonable
and customary fees paid to, and indemnity provided on behalf of, officers,
directors, employees or consultants of the Company, any of its direct or
indirect parent corporations or any Restricted Subsidiary; (v) payments by the
Company or any of its Restricted Subsidiaries to KKR and its Affiliates made for
any financial advisory, financing, underwriting or placement services or in
respect of other investment banking activities, including, without limitation,
in connection with acquisitions or divestitures which payments are approved by a
majority of the Board of Directors of the Company in good faith; (vi)
transactions in which the Company or any of its Restricted Subsidiaries, as the
case may be, delivers to the Trustee a letter from an Independent Financial
Advisor stating that such transaction is fair to the Company or such Restricted
Subsidiary from a financial point of view or meets the requirements of Section
4.07(a)(i); (vii) payments or loans to employees or consultants of the Company,
any of its direct or indirect parent corporations or any Restricted Subsidiary
which are approved by a majority of the Board of Directors of the Company in
good faith; (viii) any agreement as in effect as of the Closing Date (including,
without limitation, each of the agreements entered into in connection with the
Transactions) or any amendment thereto (so long as any such amendment is not
disadvantageous to the Holders in any material respect) or any transaction
contemplated thereby; (ix) the existence of, or the performance by the Company
or any of its Restricted Subsidiaries of its obligations under the terms of, any
stockholders agreement (including any registration rights agreement or purchase
agreement related thereto) to which it is a party as of the Closing Date and any
similar agreements which it may enter into thereafter; PROVIDED, HOWEVER, that
the existence of, or the performance by the Company or any of its Restricted
Subsidiaries of obligations under any future amendment to any such existing
agreement or under any similar agreement entered into after the Closing Date
shall only be permitted by this clause (ix) to the extent that the terms of any
such amendment or new agreement are not otherwise disadvantageous to the Holders
in any material respect; (x) the Transactions and the payment of all fees and
expenses related to the Transactions; (xi) transactions with customers, clients,
suppliers, or purchasers or sellers of goods or services, in each case in the
ordinary course of business and otherwise in compliance with the terms of this
Indenture which are fair to the Company or its Restricted Subsidiaries, in the
reasonable determination of the Board of Directors of the Company or the senior
management thereof, or are on terms at least as favorable as might reasonably
have been obtained at such time from an unaffiliated party; (xii) the issuance
of Equity Interests (other than
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Disqualified Stock) of the Company or the Issuer to any Permitted Holder; (xiii)
any transaction between the Company or any Restricted Subsidiary and any
Associate, including any transaction pursuant to which an Associate becomes a
Restricted Subsidiary; and (xiv) sales of accounts receivable, or participations
therein, in connection with any Receivables Facility.
SECTION 4.08. CHANGE OF CONTROL. (a) Upon the occurrence of a Change
of Control the Issuer shall make an offer to purchase all of the Notes pursuant
to the offer described below (the "CHANGE OF CONTROL OFFER") at a price in cash
(the "CHANGE OF CONTROL PAYMENT") equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date).
(b) Within 30 days following any Change of Control, the Issuer shall (i)
publish notice of such in a leading newspaper having a general circulation in
New York (which is expected to be the WALL STREET JOURNAL) (and, so long as the
Notes are listed on the Luxembourg Stock Exchange and the rules of such stock
exchange shall so require, a newspaper having a general circulation in
Luxembourg (which is expected to be the LUXEMBURGER WORT)) and in the case of
Definitive Notes, shall also mail a notice to each Holder, with a copy to the
Trustee, with the following information: (1) a Change of Control Offer is being
made pursuant to this Section 4.08 and all Notes properly tendered pursuant to
such Change of Control Offer shall be accepted for payment; (2) the purchase
price and the purchase date, which shall be no earlier than 30 days nor later
than 60 days from the date such notice is mailed, except as may be otherwise
required by applicable law (the "CHANGE OF CONTROL PAYMENT DATE"); (3) any Note
not properly tendered shall remain outstanding and continue to accrue interest;
(4) unless the Issuer defaults in the payment of the Change of Control Payment,
all Notes accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest on the Change of Control Payment Date; (5) Holders
electing to have any Notes purchased pursuant to a Change of Control Offer shall
be required to surrender the Notes, with the form entitled "OPTION OF HOLDER TO
ELECT PURCHASE" on the reverse of the Notes completed, to the paying agent
(which, if Definitive Notes are issued, will include a Paying Agent in
Luxembourg) specified in the notice at the address specified in the notice prior
to the close of business on the third Business Day preceding the Change of
Control Payment Date; (6) Holders shall be entitled to withdraw their tendered
Notes and their election to require the Issuer to purchase such Notes, PROVIDED
that the Paying Agent (which, if Definitive Notes are issued, will include a
Paying Agent in Luxembourg) receives, not later than the close of business on
the last day of the Offer Period, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of Notes
tendered for purchase, and a statement that such Holder is withdrawing his
tendered Notes and his election to have such Notes purchased; and (7) that
Holders whose Notes are being purchased only in part shall be issued new Notes
equal in principal amount to the unpurchased portion of the Notes surrendered,
which unpurchased portion must be equal to $1,000 in principal amount or an
integral multiple thereof.
(c) On the Change of Control Payment Date, the Issuer shall, to the extent
permitted by law, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the paying
agent an amount equal to the aggregate Change of Control Payment in respect of
all Notes or portions thereof so tendered and (3) deliver, or cause to be
delivered, to the Trustee for cancelation the Notes so accepted together with an
Officers' Certificate stating that such Notes or portions thereof have been
tendered to and purchased by the Issuer. The Paying Agent shall promptly mail to
each Holder the Change of Control Payment for such Notes, and
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45
the Trustee shall promptly authenticate and mail to each Holder a new Note equal
in principal amount to any unpurchased portion of the Notes surrendered, if any,
PROVIDED, that each such new Note shall be in a principal amount of $1,000 or an
integral multiple thereof. The Issuer shall publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
(d) Prior to complying with the provisions of this Section 4.08, but in any
event within 30 days following a Change of Control, the Issuer shall either
repay all its outstanding Senior Indebtedness that prohibits the Issuer from
repurchasing Notes in a Change of Control Offer or obtain the requisite
consents, if any, under any outstanding Senior Indebtedness in each case
necessary to permit the repurchase of the Notes required by this Section 4.08.
(e) The Issuer shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws or regulations are applicable in connection with the repurchase
of the Notes pursuant to a Change of Control Offer. To the extent that the
provisions of any securities laws or regulations conflict with the provisions of
this Indenture, the Issuer shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations described
in this Indenture by virtue thereof.
SECTION 4.09. COMPLIANCE CERTIFICATE. The Company shall (i) deliver to
the Trustee within 120 days after the end of each fiscal year of the Company,
commencing with the fiscal year ending on December 31, 1999, an Officers'
Certificate stating that in the course of the performance by the signers of
their duties as Officers of the Company they would normally have knowledge of
any Default and whether or not the signers know of any Default that occurred
during such period and (ii) within five Business Days, upon becoming aware of
any Default or Event of Default or any default under any document, instrument or
agreement representing Indebtedness of the Company or any Guarantor, deliver to
the Trustee a statement specifying such Default or Event of Default. The
certificate or statement shall describe the Default, if any, its status and what
action the Company is taking or proposes to take with respect thereto. The
Company also shall comply with Section 314(a)(4) of the TIA.
SECTION 4.10. FURTHER INSTRUMENTS AND ACTS. Upon request of the
Trustee, the Company or the Issuer shall execute and deliver such further
instruments and do such further acts as may be reasonably necessary or proper to
carry out more effectively the purpose of this Indenture.
SECTION 4.11. LIMITATION ON GUARANTEES OF INDEBTEDNESS BY RESTRICTED
SUBSIDIARIES. (a) The Company shall not permit any Domestic Subsidiary or U.K.
Subsidiary of the Company that is not a Subsidiary of the Issuer or any Domestic
Subsidiary of the Issuer (in each case, other than any such Restricted
Subsidiary created in connection with a Receivables Facility) to guarantee the
payment of any Indebtedness of the Company or the Issuer unless (A) such
Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture to this Indenture providing for a Guarantee of payment of the Notes by
such Restricted Subsidiary except that with respect to a guarantee of
Indebtedness of the Company or the Issuer (1) if the Notes are subordinated in
right of payment to such Indebtedness, the Guarantee under the supplemental
indenture shall be subordinated to such Restricted Subsidiary's guarantee with
respect to such Indebtedness substantially to the same extent as the Notes are
subordinated to such Indebtedness under this Indenture and (2) if such
Indebtedness is by its express terms subordinated in right of payment to the
Notes, any such guarantee of such Restricted Subsidiary with respect to such
Indebtedness shall be subordinated in
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46
right of payment to such Restricted Subsidiary's Guarantee with respect to the
Notes substantially to the same extent as such Indebtedness is subordinated to
the Notes; (B) such Restricted Subsidiary waives and shall not in any manner
whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Guarantee; and (C) such Restricted Subsidiary shall deliver
to the Trustee an opinion of counsel to the effect that (1) such Guarantee of
the Notes has been duly executed and authorized and (2) such Guarantee of the
Notes constitutes a valid, binding and enforceable obligation of such Restricted
Subsidiary, except insofar as enforcement thereof may be limited by bankruptcy,
insolvency or similar laws (including, without limitation, all laws relating to
fraudulent transfers) and except insofar as enforcement thereof is subject to
general principles of equity; PROVIDED that this paragraph (a) shall not be
applicable to any guarantee of any Restricted Subsidiary (x) that (1) existed at
the time such Person became a Restricted Subsidiary and (2) was not incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary or (y) that guarantees the payment of Obligations of the Company, the
Issuer or any Restricted Subsidiary under the Senior Credit Facilities or any
other Senior Indebtedness and any refunding, refinancing or replacement thereof,
in whole or in part, PROVIDED that such refunding, refinancing or replacement
thereof constitutes Senior Indebtedness and PROVIDED FURTHER that any such
Senior Indebtedness and any refunding, refinancing or replacement thereof is not
incurred pursuant to a registered offering of securities under the Securities
Act or a private placement of securities (including under Rule 144A) pursuant to
an exemption from the registration requirements of the Securities Act, which
private placement provides for registration rights under the Securities Act.
(b) Notwithstanding the provisions of Section 4.11(a) and the other
provisions of this Indenture, any Guarantee by a Restricted Subsidiary of the
Notes shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the Company's or the
Issuer's Capital Stock in, or all or substantially all the assets of, such
Restricted Subsidiary (which sale, exchange or transfer is not prohibited by
this Indenture) or (ii) the release or discharge of the guarantee by such
Restricted Subsidiary that is a Subsidiary of the Issuer which resulted in the
creation of such Guarantee, except a discharge or release by or as a result of
payment under such guarantee.
SECTION 4.12. LIENS. (a) The Company shall not, and shall not permit
any of its Restricted Subsidiaries to, directly or indirectly create, incur,
assume or suffer to exist any Lien that secures obligations under any Senior
Subordinated Indebtedness or Subordinated Indebtedness on any asset or property
of the Company or such Restricted Subsidiary, or any income or profits
therefrom, or assign or convey any right to receive income therefrom, unless the
Notes are equally and ratably secured (or senior to, in the event the Lien
relates to Subordinated Indebtedness) with the obligations so secured or until
such time as such obligations are no longer secured by a Lien.
(b) No Guarantor shall directly or indirectly create, incur, assume or
suffer to exist any Lien that secures obligations under any Senior Subordinated
Indebtedness or Subordinated Indebtedness of such Guarantor on any asset or
property of such Guarantor or any income or profits therefrom, or assign or
convey any right to receive income therefrom, unless the Guarantee of such
Guarantor is equally and ratably secured (or senior to, in the event the Lien
relates to Subordinated Indebtedness) with the obligations so secured or until
such time as such obligations are no longer secured by a Lien.
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47
SECTION 4.13. LIMITATION ON OTHER SENIOR SUBORDINATED INDEBTEDNESS.
The Company shall not, and shall not permit any Issuer or any other Guarantor
to, directly or indirectly, incur any Indebtedness (including Acquired
Indebtedness) that is subordinate in right of payment to any Indebtedness of the
Company, the Issuer or any Guarantor, as the case may be, unless such
Indebtedness is either (a) PARI PASSU in right of payment with the Notes or the
Company's or such other Guarantor's Guarantee, as the case may be, or (b)
subordinate in right of payment to the Notes, or the Company's or such other
Guarantor's Guarantee, as the case may be.
SECTION 4.14. ADDITIONAL AMOUNTS. At least 10 days prior to the first
date on which a payment of principal, redemption price, interest, liquidated
damages or premium is to be made by the Company with respect to a Guarantee, and
at least 10 days prior to any subsequent such date if there has been any change
with respect to the matters set forth in the Officers' Certificate described in
this Section 4.14, the Company will furnish the Trustee and all Paying Agents,
if other than the Trustee, with an Officers' Certificate instructing the Trustee
and any Paying Agent whether such payment with respect to a Guarantee shall be
made to the Holders without withholding or deduction for, or on account of, any
present or future taxes, duties, assessments or other governmental charges of
whatever nature (collectively "Taxes") imposed or levied by or on behalf of the
United Kingdom or any political subdivision thereof or any authority having
power to tax therein (each a "U.K. Tax Authority"), unless the withholding or
deduction of such Taxes is then required by law. If any such withholding or
deduction shall be required, then such Officer's Certificate shall specify the
amount, if any, required to be withheld on such payments to such Holders and
certify that the Company has remitted or will remit any required withholding
payments to the appropriate governmental authority or authorities, as the case
may be, and the Company shall pay to the Trustee or the Paying Agent the
Additional Amounts pursuant to Paragraph 2 of the Initial Notes, the Exchange
Notes or the Private Exchange Notes, as applicable.
ARTICLE 5
SUCCESSOR COMPANY
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ALL OR SUBSTANTIALLY
ALL ASSETS. (a) Neither the Company nor the Issuer may consolidate or merge with
or into or wind up into (whether or not the Company or the Issuer, as the case
may be, is the surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its properties or assets in
one or more related transactions, to any Person unless:
(i) the Company or the Issuer, as the case may be, is the surviving
corporation or the Person formed by or surviving any such consolidation or
merger (if other than the Company or the Issuer, as the case may be), or to
which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing
under the laws of (A) in the case of the Company, the United Kingdom or the
United States, any state thereof, the District of Columbia, or any
territory thereof or (B) in the case of the Issuer, the United States, any
state thereof, the District of Columbia, or any territory thereof (the
Company, the Issuer or such Person, as the case may be, being herein called
the "SUCCESSOR COMPANY");
(ii) the Successor Company (if other than the Company or the Issuer)
expressly assumes all the obligations of the Company or the Issuer, as the
case
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48
may be, under this Indenture and the Notes pursuant to a supplemental
indenture or other documents or instruments in form reasonably satisfactory
to the Trustee;
(iii) immediately after such transaction no Default or Event of
Default exists;
(iv) immediately after giving pro forma effect to such transaction, as
if such transaction had occurred at the beginning of the applicable
four-quarter period, (A) the Successor Company would be permitted to incur
at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in Section 4.03(a) or (B) the Fixed Charge
Coverage Ratio for the Successor Company and the Restricted Subsidiaries
would be greater than such Ratio for the Company and the Restricted
Subsidiaries immediately prior to such transaction;
(v) each Guarantor, unless it is the other party to the transactions
described above, in which case Section 5.01(a)(ii) shall apply, shall have
by supplemental indenture confirmed that its Guarantee shall apply to such
Person's obligations under this Indenture and the Notes; and
(vi) the Company or the Issuer, as the case may be, shall have
delivered to the Trustee an Officers' Certificate and an opinion of
counsel, each stating that such consolidation, merger or transfer and such
supplemental indenture (if any) comply with this Indenture.
The Successor Company shall succeed to, and be substituted for, the
Company or the Issuer, as the case may be, under this Indenture and the Notes.
Notwithstanding Section 5.01(a) (iv), (a) any Restricted Subsidiary may
consolidate with, merge into or transfer all or part of its properties and
assets to the Company or the Issuer and (b) the Company or the Issuer may merge
with an Affiliate incorporated solely for the purpose of reincorporating the
Company or the Issuer in another State of the United States so long as the
amount of Indebtedness of the Company and the Restricted Subsidiaries is not
increased thereby.
(b) Subject to the provisions of Section 11.02(b), each Guarantor
other than the Company shall not, and the Company shall not permit any other
Guarantor to, consolidate or merge with or into or wind up into (whether or not
such Guarantor is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions to, any Person unless:
(i) such Guarantor is the surviving corporation or the Person formed
by or surviving any such consolidation or merger (if other than such
Guarantor) or to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made is a corporation organized or
existing under the laws of (A) England and Wales or (B) the United States,
any state thereof, the District of Columbia, or any territory thereof (such
Guarantor or such Person, as the case may be, being herein called the
"SUCCESSOR GUARANTOR");
(ii) the Successor Guarantor (if other than such Guarantor) expressly
assumes all the obligations of such Guarantor under this Indenture and such
Guarantor's Guarantee pursuant to a supplemental indenture or other
documents or instruments in form reasonably satisfactory to the Trustee;
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49
(iii) immediately after such transaction no Default or Event of
Default exists; and
(iv) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture.
Subject to the provisions of Section 11.02(b), the Successor Guarantor
shall succeed to, and be substituted for, such Guarantor under this Indenture
and such Guarantor's Guarantee.
Notwithstanding the foregoing, any Guarantor may merge into or
transfer all or part of its properties and assets to another Guarantor.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT. An "EVENT OF DEFAULT" occurs if:
(1) the Issuer defaults in payment when due and payable, upon
redemption, acceleration or otherwise, of principal of, or premium, if any,
on the Notes whether or not such payment shall be prohibited by Article 10;
(2) the Issuer defaults in the payment when due of interest on or with
respect to the Notes whether or not such payment shall be prohibited by
Article 10 and such default continues for a period of 30 days;
(3) the Company, the Issuer or any Guarantor defaults in the
performance, or breaches any covenant, warranty or other agreement
contained in this Indenture or any Guarantee (other than a default in the
performance, or breach of a covenant, warranty or agreement which is
specifically dealt with in clauses (1) or (2) of this Section 6.01) and
such default or breach continues for a period of 30 days after the notice
specified below;
(4) the Company or any of its Restricted Subsidiaries defaults under
any mortgage, indenture or instrument under which there is issued or by
which there is secured or evidenced any Indebtedness for money borrowed by
the Company or any of its Restricted Subsidiaries or the payment of which
is guaranteed by the Company or any of its Restricted Subsidiaries (other
than Indebtedness owed to the Company or a Restricted Subsidiary and other
than any Group Intercompany Note, PROVIDED that such Group Intercompany
Note is held by Trinity at such time), whether such Indebtedness or
guarantee now exists or is created after the Closing Date, if both (A) such
default either (1) results from the failure to pay any such Indebtedness at
its stated final maturity (after giving effect to any applicable grace
periods) or (2) relates to an obligation other than the obligation to pay
principal of any such Indebtedness at its stated final maturity and results
in the holder or holders of such Indebtedness causing such Indebtedness to
become due prior to its stated maturity and (B) the principal amount of
such Indebtedness, together with the principal amount of any other such
Indebtedness in default for failure to pay principal at stated final
maturity (after giving effect to any
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50
applicable grace periods), or the maturity of which has been so
accelerated, aggregate $25 million or more at any one time outstanding;
(5) the Company, the Issuer or any of its Significant Subsidiaries
pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an
involuntary case;
(C) consents to the appointment of a Custodian of it or for all
or substantially all of its property; or
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(6) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that remains unstayed and in effect for 60 days and:
(A) is for relief against the Company or any of its Significant
Subsidiaries in an involuntary case;
(B) appoints a Custodian of the Company or any of its Significant
Subsidiaries or for all or substantially all of the property of the
Company or any of its Significant Subsidiaries; or
(C) orders the winding up or liquidation of the Company or any of
its Significant Subsidiaries,
PROVIDED that clauses (A), (B) and (C) shall not apply to an Unrestricted
Subsidiary, unless such action or proceeding has a material adverse effect
on the interests of the Company or any of its Significant Subsidiaries;
(7) The failure by the Company, the Issuer or any of its Significant
Subsidiaries to pay final judgments aggregating in excess of $25.0 million,
which final judgments remain unpaid, undischarged and unstayed for a period
of more than 60 days after such judgment becomes final, and in the event
such judgment is covered by insurance, an enforcement proceeding has been
commenced by any creditor upon such judgment or decree which is not
promptly stayed; or
(8) The Guarantee of any Significant Subsidiary shall for any reason
cease to be in full force and effect or be declared null and void or any
Officer of the Company or any Guarantor that is a Significant Subsidiary
denies that it has any further liability under its Guarantee or gives
notice to such effect (other than by reason of the termination of this
Indenture or the release of any such Guarantee in accordance with this
Indenture).
The foregoing shall constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
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The term "BANKRUPTCY LAW" means (i) the U.K. Insolvency Act 1986 as
supplemented or amended together with all rules, regulations and instruments
made thereunder and applicable United Kingdom law relating to bankruptcy,
insolvency, winding up, administration, receivership and other similar matters
and (ii) Title 11, UNITED STATES CODE, or any similar federal or state law for
the relief of debtors. The term "CUSTODIAN" means any receiver, trustee,
assignee, liquidator, administrator, administrative receiver, custodian or
similar official under any Bankruptcy Law.
A Default under clause (3) above is not an Event of Default until the
Trustee or the Holders of at least 30% in principal amount of the outstanding
Notes notify the Issuer of the Default and the Issuer does not cure such Default
within the time specified in clause (3) after receipt of such notice. Such
notice must specify the Default, demand that it be remedied and state that such
notice is a "NOTICE OF DEFAULT".
The Issuer shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (4) or (8) and any event which with the giving
of notice or the lapse of time would become an Event of Default under clause (3)
or (7), its status and what action the Issuer is taking or proposes to take with
respect thereto.
SECTION 6.02. ACCELERATION. If any Event of Default (other than of a
type specified in clause Section 6.01(5) or (6)) occurs and is continuing under
this Indenture, the Trustee or the Holders of at least 30% in principal amount
of the then outstanding Notes may declare the principal, premium, if any,
interest and any other monetary obligations on all the then outstanding Notes to
be due and payable immediately; PROVIDED, HOWEVER, that, so long as any
Indebtedness permitted to be incurred under this Indenture as part of the Senior
Credit Facilities shall be outstanding, no such acceleration shall be effective
until the earlier of (i) acceleration of any such Indebtedness under the Senior
Credit Facilities as communicated to the Trustee by the Representative or (ii)
five Business Days after the giving of written notice to the Issuer and the
administrative agent under the Senior Credit Facilities of such acceleration.
Upon the effectiveness of such declaration, such principal and interest shall be
due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising under Section 6.01(5) or (6), all outstanding Notes
shall IPSO FACTO become due and payable without further action or notice.
SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy to collect the payment
of principal of or interest on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. WAIVER OF PAST DEFAULTS. The Holders of a majority in
aggregate principal amount of the then outstanding Notes issued thereunder by
notice to the Trustee may on behalf of the Holders of all of such Notes waive
any existing Default or Event of Default and its consequences except (i) a
continuing Default or Event of Default in the payment of interest on, premium,
if any, or the principal of any such Note held by a non-consenting Holder, (ii)
a Default arising from the failure to redeem or
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52
purchase any Note when required pursuant to the terms of this Indenture or (iii)
a Default in respect of a provision that under Section 9.02 cannot be amended
without the consent of each Noteholder affected. In the event of any Event of
Default specified in Section 6.01(4), such Event of Default and all consequences
thereof (including without limitation any acceleration or resulting payment
default) shall be annulled, waived and rescinded, automatically and without any
action by the Trustee or the Holders, if within 20 days after such Event of
Default arose (x) the Indebtedness or guarantee that is the basis for such Event
of Default has been discharged, or (y) the holders thereof have rescinded or
waived the acceleration, notice or action (as the case may be) giving rise to
such Event of Default, or (z) if the default that is the basis for such Event of
Default has been cured. When a Default is waived, it is deemed cured, but no
such waiver shall extend to any subsequent or other Default.
SECTION 6.05. CONTROL BY MAJORITY. The Holders of a majority in
principal amount of the Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Noteholders or would involve the Trustee in personal
liability; PROVIDED, HOWEVER, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory to it in its sole discretion against all losses and expenses caused
by taking or not taking such action.
SECTION 6.06. LIMITATION ON SUITS. Except to enforce the right to
receive payment of principal, premium (if any) or interest when due, no Holder
may pursue any remedy with respect to this Indenture or the Notes unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 30% in principal amount of the Notes make
a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Trustee reasonable security or
indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the Notes do not
give the Trustee a direction inconsistent with the request during such
60-day period.
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over another
Noteholder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and liquidated damages and interest on the Notes held
by such Holder, on or after the respective due dates expressed in the Notes, or
to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Holder.
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SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default
specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against
the Issuer for the whole amount then due and owing (together with interest on
any unpaid interest to the extent lawful) and the amounts provided for in
Section 7.07.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Noteholders allowed
in any judicial proceedings relative to the Company, any Subsidiary or any
Guarantor, their creditors or their property and, unless prohibited by law or
applicable regulations, may vote on behalf of the Holders in any election of a
trustee in bankruptcy or other Person performing similar functions and may
participate as a member, voting or otherwise, of any official committee of
creditors appointed in such matter, and any Custodian in any such judicial
proceeding is hereby authorized by each Holder to make payments to the Trustee
and, in the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and its counsel, and any other amounts due the Trustee under Section
7.07.
SECTION 6.10. PRIORITIES. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to Noteholders for amounts due and unpaid on the Notes for
principal and interest, ratably, and any liquidated damages without
preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, any liquidated damages and interest,
respectively, except that payment shall first be made to the holders of
Senior Indebtedness to the extent required by Article 10; and
THIRD: to the Issuer or any other obligor on the Notes.
The Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section 6.10. At least 15 days before such record
date, the Trustee shall mail to each Noteholder and the Issuer a notice that
states the record date, the payment date and amount to be paid.
SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of
more than 10% in principal amount of the Notes.
SECTION 6.12. WAIVER OF STAY OR EXTENSION LAWS. None of the Company,
the Issuer or the Guarantors (to the extent it may lawfully do so) shall at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, which may affect the covenants or the performance
of this Indenture; and the
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54
Company and each Guarantor (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and shall not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
shall suffer and permit the execution of every such power as though no such law
had been enacted.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent Person would exercise or use under the circumstances
in the conduct of such Person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture against the Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture, but
shall not be obligated to recalculate or verify the contents thereof.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of Section 7.01(b);
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Issuer.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
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(g) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur financial liability in the performance
of any of its duties hereunder or in the exercise of any of its rights or
powers.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 7.01 and to the provisions of the TIA.
SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated in
the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents, attorneys, custodians or
nominees and shall not be responsible for the misconduct or negligence of any
agent, attorney, custodian or nominee appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers; PROVIDED, HOWEVER, that the Trustee's conduct does not constitute wilful
misconduct or negligence.
(e) The Trustee may consult with counsel of its selection, and the
advice or Opinion of Counsel with respect to legal matters relating to this
Indenture and the Notes shall be full and complete authorization and protection
from liability in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of such
counsel.
(f) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond, debenture,
note or other paper or document unless requested in writing to do so by the
Holders of not less than a majority in principal amount of the Notes at the time
outstanding, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it shall
be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney.
(g) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might reasonably be incurred by it in compliance
with such request or direction.
(h) The Trustee shall not be deemed to have notice of any Default or
Event of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof or unless written notice of any event which is in fact such a
default is received by the Trustee at the Corporate Trust Officer of the
Trustee, and such notice references the Securities and this Indenture.
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(i) The rights, privileges, protections, immunities and benefits given
to the Trustee, including, without limitation, its right to be indemnified, are
extended to, and shall be enforceable by, the Trustee in each of its capacities
hereunder, and to each agent, custodian and other Person employed to act
hereunder.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Company or its Affiliates with the same rights it
would have if it were not Trustee. Any Paying Agent, Registrar or co-paying
agent may do the same with like rights. However, the Trustee must comply with
Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Notes, it shall not be accountable for the Issuer's use of
the proceeds from the Notes, and it shall not be responsible for any statement
of the Company or the Issuer in this Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Trustee's
certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS. If a Default occurs and is
continuing and if it is known to the Trustee, the Trustee shall mail to each
Holder notice of the Default within the earlier of 90 days after it occurs or 30
days after it is known to a Trust Officer. Except in the case of a Default in
payment of principal of or interest on any Note (including payments pursuant to
the mandatory redemption provisions of such Note, if any), the Trustee may
withhold the notice if and so long as a committee of its Trust Officers in good
faith determines that withholding the notice is in the interests of Holders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. As promptly as
practicable after each May 15 beginning with the May 15 following the first
anniversary of this Indenture, and in any event prior to May 15 in each
subsequent year, the Trustee shall mail to each Noteholder a brief report dated
as of May 15 that complies with Section 313(a) of the TIA. The Trustee shall
also comply with Section 313(b) of the TIA.
A copy of each report at the time of its mailing to Noteholders shall
be filed with the SEC and each stock exchange (if any) on which the Notes are
listed. The Issuer agrees to notify promptly the Trustee whenever the Notes
become listed on any stock exchange and of any delisting thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY. The Issuer shall pay to the
Trustee from time to time such compensation for its services as shall be agreed
upon from time to time between the Issuer and the Trustee. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Issuer shall reimburse the Trustee upon request for all
reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Trustee's agents, counsel, accountants and experts. The Issuer
and each Guarantor, if any, jointly and severally shall indemnify the Trustee
against any and all loss, liability or expense (including reasonable attorneys'
fees) incurred by or in connection with the administration of this trust and the
performance of its duties hereunder. The Trustee shall notify the Issuer of any
claim for which it may seek indemnity promptly upon obtaining actual knowledge
thereof; PROVIDED, HOWEVER, that any failure so to notify the Issuer shall not
relieve the Issuer or any Guarantor of its indemnity obligations hereunder. The
Issuer need not reimburse any expense or
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57
indemnify against any loss, liability or expense incurred by an indemnified
party through such party's own wilful misconduct, negligence or bad faith.
The Trustee's right to receive payment of any amounts due under this
Section 7.07 shall not be subordinated to any other liability or indebtedness of
the Issuer (even though the Notes may be so subordinated).
To secure the Issuer's payment obligations in this Section, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee other than money or property held in trust to pay
principal of and interest and any liquidated damages on particular Notes.
The Issuer's payment obligations pursuant to this Section 7.07 shall
survive the satisfaction or discharge of this Indenture, any rejection or
termination of this Indenture under any bankruptcy law or the resignation or
removal of the Trustee. When the Trustee incurs expenses after the occurrence of
a Default specified in Section 6.01(5) or (6) with respect to the Company, the
expenses are intended to constitute expenses of administration under the
Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE. The Trustee may resign at any
time by so notifying the Issuer. The Holders of a majority in principal amount
of the Notes may remove the Trustee by so notifying the Trustee and may appoint
a successor Trustee. The Issuer shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Issuer or by the Holders of
a majority in principal amount of the Notes and such Holders do not reasonably
promptly appoint a successor Trustee, or if a vacancy exists in the office of
Trustee for any reason (the Trustee in such event being referred to herein as
the retiring Trustee), the Issuer shall promptly appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Thereupon the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Noteholders. The retiring Trustee shall promptly transfer all property held by
it as Trustee to the successor Trustee, subject to the lien provided for in
Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the Notes may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
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If the Trustee fails to comply with Section 7.10, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Issuer and each Guarantor's obligations under Section 7.07 shall
continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Notes shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Notes so authenticated; and in case at
that time any of the Notes shall not have been authenticated, any successor to
the Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor to the Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. The Trustee shall at all
times satisfy the requirements of TIA ss. 310(a). The Trustee shall have a
combined capital and surplus of at least $100,000,000 as set forth in its most
recent published annual report of condition. The Trustee shall comply with TIA
ss. 310(b); PROVIDed, HOWEVer, that there shall be excluded from the operation
of TIA ss. 310(b)(1) any indenture or indentures under which other securities or
certificates of interest or participation in other securities of the Issuer are
outstanding if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER. The
Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship
listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be
subject to TIA ss. 311(a) to the extent indicated.
ARTICLE 8
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. DISCHARGE OF LIABILITY ON NOTES; DEFEASANCE. (a) Subject
to Section 8.01(c), this Indenture shall be discharged and shall cease to be of
further effect as to all Notes issued hereunder, when either (a) all such Notes
theretofore authenticated and delivered (except lost, stolen or destroyed Notes
which have been replaced or paid and Notes for whose payment money has
theretofore been deposited in trust) have been delivered to the Trustee for
cancelation; or (b) (i) all such Notes not theretofore delivered to such Trustee
for cancelation have become due and payable by reason of the making of a notice
of redemption or otherwise or shall become due and payable within one year or
are to be called for redemption within one year under arrangements satisfactory
to the Trustee for the giving of notice of redemption by the Trustee in the name
and at the expense of the Issuer and the Issuer or any Guarantor has irrevocably
deposited or caused to be deposited with such Trustee as trust funds in trust
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solely for the benefit of the Holders, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as shall be
sufficient without consideration of any reinvestment of interest to pay and
discharge the entire indebtedness on such Notes not theretofore delivered to the
Trustee for cancelation for principal, premium, if any, and accrued interest to
the date of maturity or redemption; (ii) no Default or Event of Default shall
have occurred and be continuing on the date of such deposit or shall occur as a
result of such deposit and such deposit shall not result in a breach or
violation of, or constitute a default under, any other instrument to which the
Issuer or any Guarantor is a party or by which the Issuer or any Guarantor is
bound; (iii) the Issuer or any Guarantor has paid or caused to be paid all sums
payable by it under this Indenture and the Notes; and (iv) the Issuer has
delivered irrevocable instructions to the Trustee under this Indenture to apply
the deposited money toward the payment of such Notes at maturity or the
Redemption Date, as the case may be. In addition, the Issuer must deliver an
Officers' Certificate and an Opinion of Counsel to the Trustee stating that all
conditions precedent to satisfaction and discharge have been satisfied. The
Trustee, at the expense of the Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture upon the occurrence
of the foregoing.
(b) Subject to Sections 8.01(c) and 8.02, the Company or the Issuer at
any time may terminate (i) all of its obligations under the Notes, the
Guarantees and this Indenture ("LEGAL DEFEASANCE OPTION") or (ii) its
obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10,
4.11, 4.12 and 4.13 and the operation of Sections 5.01, 6.01(3), 6.01(4),
6.01(5) (with respect to Significant Subsidiaries of the Company only), 6.01(6)
(with respect to Significant Subsidiaries of the Company only), 6.01(7) and
6.01(8) and Articles 11 and 12 ("COVENANT DEFEASANCE OPTION"). The Company or
the Issuer may exercise its legal defeasance option notwithstanding its prior
exercise of its covenant defeasance option. In the event that the Company or the
Issuer terminates all of its obligations under the Notes and this Indenture by
exercising either its legal defeasance option or its covenant defeasance option,
the obligations under any Guarantee under Articles 11 and 12 shall each be
terminated simultaneously with the termination of such obligations.
If the Company or the Issuer exercises its legal defeasance option,
payment of the Notes may not be accelerated because of an Event of Default. If
the Issuer exercises its covenant defeasance option, payment of the Notes may
not be accelerated because of an Event of Default specified in Section 6.01(3)
(as such Section relates to Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08,
4.09, 4.10, 4.11, 4.12 and 4.13), 6.01(4), 6.01(5) (with respect to Significant
Subsidiaries of the Company only), 6.01(6) (with respect to Significant
Subsidiaries of the Company only), 6.01(7) and 6.01(8) or because of the failure
of the Company or the Issuer to comply with Section 5.01.
Upon satisfaction of the conditions set forth herein and upon request
of the Company or the Issuer, the Trustee shall acknowledge in writing the
discharge of those obligations that the Company or the Issuer terminates.
(c) Notwithstanding clauses (a) and (b) above, the Issuer's
obligations in Sections 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 2.10, 6.07, 7.07,
7.08 and in this Article 8 shall survive until the Notes have been paid in full.
Thereafter, the Company's and the Issuer's obligations in Sections 7.07, 8.04
and 8.05 shall survive.
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SECTION 8.02. CONDITIONS TO DEFEASANCE. In order to exercise either
legal defeasance or covenant defeasance with respect to the Notes:
(i) the Issuer must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in U.S. dollars, non-callable
Government Notes, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of, premium, if any, and interest
due on the outstanding Notes on the stated maturity date or on the
applicable Redemption Date, as the case may be, of such principal, premium,
if any, or interest on the outstanding Notes;
(ii) in the case of legal defeasance, the Issuer shall have delivered
to the Trustee an Opinion of Counsel in the United States confirming that,
subject to customary assumptions and exclusions, (A) the Issuer has
received from, or there has been published by, the United States Internal
Revenue Service a ruling or (B) since the Issuance Date, there has been a
change in the applicable U.S. federal income tax law, in either case to the
effect that, and based thereon such Opinion of Counsel in the United States
shall confirm that, subject to customary assumptions and exclusions, the
Holders shall not recognize income, gain or loss for U.S. federal income
tax purposes as a result of such legal defeasance and shall be subject to
U.S. federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such legal defeasance had not
occurred;
(iii) in the case of covenant defeasance, the Issuer shall have
delivered to the Trustee an Opinion of Counsel in the United States
confirming that, subject to customary assumptions and exclusions, the
Holders shall not recognize income, gain or loss for U.S. federal income
tax purposes as a result of such covenant defeasance and shall be subject
to such tax on the same amounts, in the same manner and at the same times
as would have been the case if such covenant defeasance had not occurred;
(iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or, with respect to certain
bankruptcy or insolvency Events of Default, on the 91st day after such date
of deposit;
(v) such legal defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, the Senior Credit
Facilities or any other material agreement or instrument (other than this
Indenture) to which, the Issuer or any Guarantor is a party or by which the
Issuer or any Guarantor is bound;
(vi) the Issuer shall have delivered to the Trustee an Opinion of
Counsel to the effect that, as of the date of such opinion and subject to
customary assumptions and exclusions following the deposit, the trust funds
shall not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally under any applicable U.S. federal or state law, and that the
Trustee has a perfected security interest in such trust funds for the
ratable benefit of the Holders;
(vii) the Issuer shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Issuer with the
intent of defeating, hindering, delaying or defrauding any creditors of the
Issuer or any Guarantor or others; and
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(viii) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States (which Opinion
of Counsel may be subject to customary assumptions and exclusions) each
stating that all conditions precedent provided for or relating to the legal
defeasance or the covenant defeasance, as the case may be, have been
complied with.
Before or after a deposit, the Issuer may make arrangements
satisfactory to the Trustee for the redemption of Notes at a future date in
accordance with Article 3.
SECTION 8.03. APPLICATION OF TRUST MONEY. The Trustee shall hold in
trust money or Government Securities deposited with it pursuant to this Article
8. It shall apply the deposited money and the money from Government Securities
through the Paying Agent and in accordance with this Indenture to the payment of
principal of and interest on the Notes. Money and securities so held in trust
are not subject to Article 10.
SECTION 8.04. REPAYMENT TO ISSUER. The Trustee and the Paying Agent
shall promptly turn over to the Issuer upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Issuer upon written request any money held by them
for the payment of principal or interest that remains unclaimed for two years,
and, thereafter, Noteholders entitled to the money must look to the Issuer for
payment as general creditors.
SECTION 8.05. INDEMNITY FOR GOVERNMENT OBLIGATIONS. The Issuer shall
pay and shall indemnify the Trustee against any tax, fee or other charge imposed
on or assessed against deposited Government Securities or the principal and
interest received on such Government Securities.
SECTION 8.06. REINSTATEMENT. If the Trustee or Paying Agent is unable
to apply any money or Government Securities in accordance with this Article 8 by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Issuer's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article 8 until such time as the Trustee or Paying Agent is permitted to
apply all such money or Government Securities in accordance with this Article 8;
PROVIDED, HOWEVER, that, if the Issuer has made any payment of interest on or
principal of any Notes because of the reinstatement of its obligations, the
Issuer shall be subrogated to the rights of the Holders of such Notes to receive
such payment from the money or Government Securities held by the Trustee or
Paying Agent.
ARTICLE 9
AMENDMENTS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Issuer, any Guarantor
(with respect to a Guarantee or the supplemental indenture to which it is a
party) and the Trustee may amend this Indenture, the Notes or the Guarantees
without notice to or consent of any Holder:
(1) to cure any ambiguity, omission, defect or inconsistency;
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(2) to comply with Article 5;
(3) to provide for uncertificated Notes in addition to or in place of
certificated Notes; PROVIDED, HOWEVER, that the uncertificated Notes are
issued in registered form for purposes of Section 163(f) of the Code or in
a manner such that the uncertificated Notes are described in Section
163(f)(2)(B) of the Code;
(4) to provide for the assumption of the Issuer's or any Guarantor's
obligations to Holders;
(5) to add Guarantees with respect to the Notes or to secure the
Notes;
(6) to make any change that would provide any additional rights or
benefits to the Holders or that does not adversely affect the legal rights
under this Indenture of any such Holder;
(7) to add covenants for the benefit of the Holders or to surrender
any right or power herein conferred upon the Company;
(8) to comply with any requirements of the SEC in connection with
qualifying, or maintaining the qualification of, this Indenture under the
TIA;
(9) to evidence and provide for the acceptance and appointment under
this Indenture of a successor Trustee pursuant to Article 7; or
(10) to provide for the issuance of the Exchange Notes and the Private
Exchange Notes, which shall have terms substantially identical in all
material respects to the Initial Notes (except that the transfer
restrictions contained in the Initial Notes shall be modified or
eliminated, as appropriate), and which shall be treated, together with any
outstanding Initial Notes, as a single issue of securities; and
(11) to provide that Trinity become a Guarantor and that all
references herein to the Company shall be deemed to be references to
Trinity and to effect such other modifications to this Indenture necessary
to give effect to the foregoing; PROVIDED that at the time Trinity is added
as a Guarantor (and the Company remains a Guarantor), Trinity is a holding
company that conducts no operations other than ownership of its
subsidiaries (including the Company) and activities incidental thereto.
After an amendment under this Section becomes effective, the Issuer
shall mail to Holders a notice briefly describing such amendment. The failure to
give such notice to all Holders, or any defect therein, shall not impair or
affect the validity of an amendment under this Section.
SECTION 9.02. WITH CONSENT OF HOLDERS. The Issuer, any Guarantor and
the Trustee may amend this Indenture, the Notes or the Guarantees without notice
to any Noteholder but with the written consent of the Holders of at least a
majority in principal amount of the Notes then outstanding (including consents
obtained in connection with a tender offer or exchange for the Notes) and,
subject to Article 6, any existing default or compliance with any provision of
this Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a purchase of or tender offer or exchange
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63
offer for Notes). However, without the consent of each Noteholder affected, an
amendment may not (with respect to any Notes held by a non-consenting Holder):
(i) reduce the principal amount of Notes whose Holders must consent to
an amendment, supplement or waiver;
(ii) reduce the principal of or change the fixed maturity of any Note
or alter or waive the provisions with respect to the redemption of the Notes
(other than provisions relating to Sections 4.06 or 4.08);
(iii) reduce the rate of or change the time for payment of interest on
any Note;
(iv) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of such Notes and a waiver of the payment default that resulted
from such acceleration), or in respect of a covenant or provision contained in
this Indenture, any Guarantee or the Notes which cannot be amended or modified
without the consent of all Holders;
(v) make any Note payable in money other than that stated in such
Notes;
(vi) make any change to Section 6.04 or 6.07;
(vii) make any change to the second sentence of this Section 9.02;
(viii) impair the right of any Holder to receive payment of principal
of, or interest on, such Holder's Notes on or after the due dates therefor or to
institute suit for the enforcement of any payment on or with respect to such
Holder's Notes; or
(ix) make any change to Article 10 that would adversely affect the
Holders.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
After an amendment under this Section 9.02 becomes effective, the
Issuer shall mail to Noteholders a notice briefly describing such amendment. The
failure to give such notice to all Noteholders, or any defect therein, shall not
impair or affect the validity of an amendment under this Section 9.02.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment to
this Indenture or the Notes shall comply with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS AND WAIVERS. A consent
to an amendment or a waiver by a Holder of a Note shall bind the Holder and
every subsequent Holder of that Note or portion of the Note that evidences the
same debt as the consenting Holder's Note, even if notation of the consent or
waiver is not made on the Note. However, any such Holder or subsequent Holder
may revoke the consent or waiver as to such Holder's Note or portion of the Note
if the Trustee receives the notice of revocation before the date the amendment
or waiver becomes effective. After an amendment or waiver becomes effective, it
shall bind every Noteholder. An amendment or waiver becomes effective once both
(i) the requisite number of consents have been
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received by the Issuer or the Trustee and (ii) such amendment or waiver has been
executed by the Issuer and the Trustee.
The Issuer may, but shall not be obligated to, fix a record date for
the purpose of determining the Noteholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Noteholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES. If an amendment
changes the terms of a Note, the Trustee may require the Holder of the Note to
deliver it to the Trustee. The Trustee may place an appropriate notation on the
Note regarding the changed terms and return it to the Holder. Alternatively, if
the Company or the Trustee so determines, the Issuer in exchange for the Note
shall issue and the Trustee shall authenticate a new Note that reflects the
changed terms. Failure to make the appropriate notation or to issue a new Note
shall not affect the validity of such amendment.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS. The Trustee shall sign any
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
(subject to Section 7.01) shall be fully protected in relying upon an Officers'
Certificate and an Opinion of Counsel stating that such amendment is authorized
or permitted by this Indenture and that such amendment is the legal, valid and
binding obligation of the Issuer and any Guarantors, enforceable against them in
accordance with its terms, subject to customary exceptions, and complies with
the provisions hereof (including Section 9.03).
SECTION 9.07. PAYMENT FOR CONSENT. Neither the Issuer nor any
Affiliate of the Issuer shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Notes unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 10
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE. The Issuer agrees, and each
Noteholder by accepting a Note agrees, that the Indebtedness evidenced by the
Notes is subordinated in right of payment, to the extent and in the manner
provided in this Article 10, to the prior payment in full in cash or Cash
Equivalents of all Senior Indebtedness of the Issuer and that the subordination
is for the benefit of and enforceable by the holders of such Senior
Indebtedness. The Notes shall in all respects rank PARI PASSU with all other
Senior Subordinated Indebtedness of the Issuer and shall rank senior to all
existing and future Subordinated Indebtedness of the Issuer; and only
Indebtedness of the Issuer that is Senior Indebtedness of the Issuer shall rank
senior to the Notes in
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accordance with the provisions set forth herein. For purposes of this Article
10, the Indebtedness evidenced by the Notes shall be deemed to include the
liquidated damages payable pursuant to the provisions set forth in the Notes and
the Registration Agreement (as defined in the Appendix). All provisions of this
Article 10 shall be subject to Section 10.12.
SECTION 10.02. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any
distribution to creditors of the Issuer in a liquidation or dissolution of the
Issuer or in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Issuer or its property, an assignment for the benefit
of creditors or any marshaling of the Issuer's assets and liabilities, the
holders of Senior Indebtedness shall be entitled to receive payment in full in
cash or Cash Equivalents of such Senior Indebtedness and all outstanding Letter
of Credit Obligations shall be fully cash collateralized before the Holders
shall be entitled to receive any payment with respect to the Subordinated Note
Obligations, and until all Senior Indebtedness is paid in full in cash or Cash
Equivalents, any distribution to which the Holders would be entitled shall be
made to the holders of Senior Indebtedness (except that Holders may receive (i)
shares of stock and any debt securities that are subordinated at least to the
same extent as the Notes to (a) Senior Indebtedness and (b) any securities
issued in exchange for Senior Indebtedness and (ii) payments and other
distributions made from the trusts described in Section 8.01).
SECTION 10.03. DEFAULT ON SENIOR INDEBTEDNESS. The Issuer shall not
make any payment upon or in respect of the Subordinated Note Obligations (except
that Holders may receive (i) shares of stock and any debt securities that are
subordinated at least to the same extent as the Notes to (a) Senior Indebtedness
and (b) any securities issued in exchange for Senior Indebtedness and (ii)
payments and other distributions made from the trusts described in Section 8.01)
until all Senior Indebtedness has been paid in full in cash or Cash Equivalents
if (i) a default in the payment of the principal of, premium, if any, or
interest on, or of unreimbursed amounts under drawn letters of credit or in
respect of bankers' acceptances or fees relating to letters of credit or
bankers' acceptances constituting, Designated Senior Indebtedness occurs and is
continuing beyond any applicable period of grace in the indenture, agreement or
other document governing such Designated Senior Indebtedness (a "PAYMENT
DEFAULT") or (ii) any other default occurs and is continuing with respect to
Designated Senior Indebtedness that permits holders of the Designated Senior
Indebtedness as to which such default relates to accelerate its maturity without
further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace periods (a "NON-PAYMENT
DEFAULT") and the Trustee receives a notice of such default (a "PAYMENT BLOCKAGE
NOTICE") from a representative of holders of such Designated Senior
Indebtedness. Payments on the Notes, including any missed payments, may and
shall be resumed (a) in the case of a payment default, upon the date on which
such default is cured or waived or shall have ceased to exist or such Designated
Senior Indebtedness shall have been discharged or paid in full in cash or Cash
Equivalents and all outstanding Letter of Credit Obligations shall have been
fully cash collateralized and (b) in case of a nonpayment default, the earlier
of (x) the date on which such nonpayment default is cured or waived, (y) 179
days after the date on which the applicable Payment Blockage Notice is received
(each such period, the "PAYMENT BLOCKAGE PERIOD") or (z) the date such Payment
Blockage Period shall be terminated by written notice to the Trustee from the
requisite holders of such Designated Senior Indebtedness necessary to terminate
such period or from their representative. No new Payment Blockage Period may be
commenced unless and until 365 days have elapsed since the effectiveness of the
immediately preceding Payment Blockage Notice. However, if any Payment Blockage
Notice within such 365-day period is given by or on behalf of any holders of
Designated Senior Indebtedness (other than the agent under the Senior Credit
Facilities), the agent
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under the Senior Credit Facilities may give another Payment Blockage Notice
within such period. In no event, however, shall the total number of days during
which any Payment Blockage Period or Periods is in effect exceed 179 days in the
aggregate during any 365 consecutive day period. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage Notice
to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice unless such default shall have been cured or waived for a period of not
less than 90 days.
SECTION 10.04. ACCELERATION OF PAYMENT OF NOTES. If payment of the
Notes is accelerated because of an Event of Default, the Company or the Trustee
shall promptly notify the holders of the Designated Senior Indebtedness (or
their Representative) of the acceleration. If any Designated Senior Indebtedness
is outstanding, the Issuer shall not pay the Notes until five Business Days
after such holders or the Representative of the Designated Senior Indebtedness
receive notice of such acceleration and, thereafter, shall pay the Notes only if
this Article 10 otherwise permits payment at that time.
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER. If a distribution
is made to Noteholders that because of this Article 10 should not have been made
to them, the Noteholders who receive the distribution shall hold it in trust for
holders of Senior Indebtedness of the Issuer and pay it over to them as their
interests may appear.
SECTION 10.06. SUBROGATION. After all Senior Indebtedness of the
Issuer is paid in full and until the Notes are paid in full, Noteholders shall
be subrogated to the rights of holders of such Senior Indebtedness to receive
distributions applicable to Senior Indebtedness. A distribution made under this
Article 10 to holders of such Senior Indebtedness which otherwise would have
been made to Noteholders is not, as between the Issuer and Noteholders, a
payment by the Issuer on such Senior Indebtedness.
SECTION 10.07. RELATIVE RIGHTS. This Article 10 defines the relative
rights of Noteholders and holders of Senior Indebtedness of the Issuer. Nothing
in this Indenture shall:
(1) impair, as between the Issuer and Noteholders, the obligation of
the Issuer, which is absolute and unconditional, to pay principal of and
interest on and liquidated damages in respect of, the Notes in accordance
with their terms; or
(2) prevent the Trustee or any Noteholder from exercising its
available remedies upon a Default, subject to the rights of holders of
Senior Indebtedness of the Issuer to receive distributions otherwise
payable to Noteholders.
SECTION 10.08. SUBORDINATION MAY NOT BE IMPAIRED BY ISSUER. No right
of any holder of Senior Indebtedness of the Issuer to enforce the subordination
of the Indebtedness evidenced by the Notes shall be impaired by any act or
failure to act by the Issuer or by its failure to comply with this Indenture.
SECTION 10.09. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding
Section 10.03, the Trustee or Paying Agent may continue to make payments on the
Notes and shall not be charged with knowledge of the existence of facts that
would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives notice satisfactory to it that payments may not be made under this
Article 10. The Issuer, the Registrar, the Paying Agent, a Representative or a
holder of Senior Indebtedness of the Issuer may give the
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notice; PROVIDED, HOWEVER, that, if an issue of Senior Indebtedness of the
Issuer has a Representative, only the Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness of the Issuer with the same rights it would have if it were not
Trustee. The Registrar and the Paying Agent may do the same with like rights.
The Trustee shall be entitled to all the rights set forth in this Article 10
with respect to any Senior Indebtedness of the Issuer which may at any time be
held by it, to the same extent as any other holder of such Senior Indebtedness;
and nothing in Article 7 shall deprive the Trustee of any of its rights as such
holder. Nothing in this Article 10 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 7.07.
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness
of the Issuer, the distribution may be made and the notice given to their
Representative (if any).
SECTION 10.11. ARTICLE 10 NOT TO PREVENT EVENTS OF DEFAULT OR LIMIT
RIGHT TO ACCELERATE. The failure to make a payment pursuant to the Notes by
reason of any provision in this Article 10 shall not be construed as preventing
the occurrence of a Default. Nothing in this Article 10 shall have any effect on
the right of the Noteholders or the Trustee to accelerate the maturity of the
Notes.
SECTION 10.12. TRUST MONEYS NOT SUBORDINATED. Notwithstanding anything
contained herein to the contrary, payments from money or the proceeds of
Government Securities held in trust under Article 8 by the Trustee for the
payment of principal of and interest on the Notes shall not be subordinated to
the prior payment of any Senior Indebtedness of the Issuer or subject to the
restrictions set forth in this Article 10, and none of the Noteholders shall be
obligated to pay over any such amount to the Issuer or any holder of Senior
Indebtedness of the Issuer or any other creditor of the Issuer.
SECTION 10.13. TRUSTEE ENTITLED TO RELY. Upon any payment or
distribution pursuant to this Article 10, the Trustee and the Noteholders shall
be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Noteholders or (iii) upon the Representatives for the holders of Senior
Indebtedness of the Issuer for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of such Senior
Indebtedness and other Indebtedness of the Issuer, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article 10. In the event that the Trustee
determines, in good faith, that evidence is required with respect to the right
of any Person as a holder of Senior Indebtedness of the Issuer to participate in
any payment or distribution pursuant to this Article 10, the Trustee may request
such Person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of such Senior Indebtedness held by such Person, the extent to
which such Person is entitled to participate in such payment or distribution and
other facts pertinent to the rights of such Person under this Article 10, and,
if such evidence is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to receive
such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to
all actions or omissions of actions by the Trustee pursuant to this Article 10.
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SECTION 10.14. TRUSTEE TO EFFECTUATE SUBORDINATION. Each Noteholder by
accepting a Note authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to acknowledge or effectuate the
subordination between the Noteholders and the holders of Senior Indebtedness of
the Issuer as provided in this Article 10 and appoints the Trustee as
attorney-in-fact for any and all such purposes.
SECTION 10.15. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR
INDEBTEDNESS. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness of the Issuer and shall not be liable to any such
holders if it shall mistakenly pay over or distribute to Noteholders or the
Issuer or any other Person, money or assets to which any holders of Senior
Indebtedness of the Issuer shall be entitled by virtue of this Article 10 or
otherwise.
SECTION 10.16. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS ON
SUBORDINATION PROVISIONS. Each Noteholder by accepting a Note acknowledges and
agrees that the foregoing subordination provisions are, and are intended to be,
an inducement and a consideration to each holder of any Senior Indebtedness of
the Issuer, whether such Senior Indebtedness was created or acquired before or
after the issuance of the Notes, to acquire and continue to hold, or to continue
to hold, such Senior Indebtedness and such holder of such Senior Indebtedness
shall be deemed conclusively to have relied on such subordination provisions in
acquiring and continuing to hold, or in continuing to hold, such Senior
Indebtedness.
SECTION 10.17. TRUSTEE'S COMPENSATION NOT PREJUDICED. Nothing in this
Article 10 shall apply to amounts due to the Trustee pursuant to other sections
of this Indenture.
SECTION 10.18. DEFEASANCE. The terms of this Article 10 shall not
apply to payments from money or the proceeds of Government Securities held in
trust by the Trustee for the payment of principal of and interest on the Notes
pursuant to the provisions described in Section 8.03.
ARTICLE 11
GUARANTEES
SECTION 11.01. GUARANTEES. Each Guarantor hereby jointly and severally
unconditionally and irrevocably guarantees, as a primary obligor and not merely
as a surety, to each Holder and to the Trustee and its successors and assigns
(a) the full and punctual payment of principal of and interest on and liquidated
damages in respect of the Notes when due, whether on the Maturity Date, by
acceleration, by redemption or otherwise, and all other monetary obligations of
the Issuer under this Indenture (including obligations to the Trustee) and the
Notes and (b) the full and punctual performance within applicable grace periods
of all other obligations of the Issuer whether for expenses, indemnification or
otherwise under this Indenture and the Notes (all the foregoing being
hereinafter collectively called the "GUARANTEED OBLIGATIONS"). Each Guarantor
further agrees that the Guaranteed Obligations may be extended or renewed, in
whole or in part, without notice or further assent from each such Guarantor, and
that each such Guarantor shall remain bound under this Article 11
notwithstanding any extension or renewal of any Guaranteed Obligation.
Each Guarantor waives presentation to, demand of, payment from and
protest to the Issuer of any of the Guaranteed Obligations and also waives
notice of
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protest for nonpayment. Each Guarantor waives notice of any default under the
Notes or the Guaranteed Obligations. The obligations of each Guarantor hereunder
shall not be affected by (a) the failure of any Holder or the Trustee to assert
any claim or demand or to enforce any right or remedy against the Issuer or any
other Person under this Indenture, the Notes or any other agreement or
otherwise; (b) any extension or renewal of any thereof; (c) any rescission,
waiver, amendment or modification of any of the terms or provisions of this
Indenture, the Notes or any other agreement relating to this Indenture or the
Notes; (d) the release of any security held by any Holder or the Trustee for the
Guaranteed Obligations or any of them; (e) the failure of any Holder or the
Trustee to exercise any right or remedy against any other guarantor of the
Guaranteed Obligations; or (f) any change in the ownership of such Guarantor,
except as provided in Section 11.02(b).
Each Guarantor hereby waives any right to which it may be entitled to
have its obligations hereunder divided among the Guarantors, such that such
Guarantor's obligations would be less than the full amount claimed. Each
Guarantor hereby waives any right to which it may be entitled to have the assets
of the Issuer first be used and depleted as payment of the Issuer's or such
Guarantor's obligations hereunder prior to any amounts being claimed from or
paid by such Guarantor hereunder. Each Guarantor hereby waives any right to
which it may be entitled to require that the Issuer be sued prior to an action
being initiated against such Guarantor.
Each Guarantor further agrees that its Guarantee herein constitutes a
guarantee of payment, performance and compliance when due (and not a guarantee
of collection) and waives any right to require that any resort be had by any
Holder or the Trustee to any security held for payment of the Guaranteed
Obligations.
The Guarantee of each Guarantor is, to the extent and in the manner
set forth in Article 12, subordinated and subject in right of payment to the
prior payment in full of the principal of and premium, if any, and interest on
all Senior Indebtedness of the relevant Guarantor and is made subject to such
provisions of this Indenture.
Except as expressly set forth in Sections 8.01(b) and 11.02, the
obligations of each Guarantor hereunder shall not be subject to any reduction,
limitation, impairment or termination for any reason, including any claim of
waiver, release, surrender, alteration or compromise, and shall not be subject
to any defense of setoff, counterclaim, recoupment or termination whatsoever or
by reason of the invalidity, illegality or unenforceability of the Guaranteed
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of each Guarantor herein shall not be discharged or impaired or
otherwise affected by the failure of any Holder or the Trustee to assert any
claim or demand or to enforce any remedy under this Indenture, the Notes or any
other agreement relating to this Indenture or the Notes, by any waiver or
modification of any thereof, by any default, failure or delay, wilful or
otherwise, in the performance of the obligations, or by any other act or thing
or omission or delay to do any other act or thing which may or might in any
manner or to any extent vary the risk of any Guarantor or would otherwise
operate as a discharge of any Guarantor as a matter of law or equity.
Each Guarantor agrees that its Guarantee shall remain in full force
and effect until payment in full of all the Guaranteed Obligations. Each
Guarantor further agrees that its Guarantee herein shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal of or interest on any Guaranteed Obligation is
rescinded or must otherwise be restored by any Holder or the Trustee upon the
bankruptcy or reorganization of the Issuer or otherwise.
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In furtherance of the foregoing and not in limitation of any other
right which any Holder or the Trustee has at law or in equity against any
Guarantor by virtue hereof, upon the failure of the Issuer to pay the principal
of or interest on any Guaranteed Obligation when and as the same shall become
due, whether at maturity, by acceleration, by redemption or otherwise, or to
perform or comply with any other Guaranteed Obligation, each Guarantor hereby
promises to and shall, upon receipt of written demand by the Trustee, forthwith
pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal
to the sum of (i) the unpaid principal amount of such Guaranteed Obligations,
(ii) accrued and unpaid interest on such Guaranteed Obligations (but only to the
extent not prohibited by law) and (iii) all other monetary obligations of the
Issuer to the Holders and the Trustee.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any Guaranteed Obligations
guaranteed hereby until payment in full of all Guaranteed Obligations and all
obligations to which the Guaranteed Obligations are subordinated as provided in
Article 12. Each Guarantor further agrees that, as between it, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity of the
Guaranteed Obligations guaranteed hereby may be accelerated as provided in
Article 6 for the purposes of any Guarantee herein, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
Guaranteed Obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such Guaranteed Obligations as provided in
Article 6, such Guaranteed Obligations (whether or not due and payable) shall
forthwith become due and payable by such Guarantor for the purposes of this
Section 11.01.
Each Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees and expenses) incurred by the Trustee or
any Holder in enforcing any rights under this Section 11.01.
SECTION 11.02. LIMITATION ON LIABILITY. (a) Any term or provision of
this Indenture to the contrary notwithstanding, the maximum, aggregate amount of
the Guaranteed Obligations guaranteed hereunder by any Guarantor shall not
exceed the maximum amount that can be hereby guaranteed without rendering this
Indenture, as it relates to such Guarantor, voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer or similar laws
affecting the rights of creditors generally.
(b) This Guarantee as to any Guarantor shall terminate and be of no
further force or effect and such Guarantor shall be deemed to be released from
all obligations under this Article 11 and Section 5.01(b) upon (i) the merger or
consolidation of such Guarantor with or into any Person other than the Issuer or
a Subsidiary or Affiliate of the Issuer where such Guarantor is not the
surviving entity of such consolidation or merger or (ii) the sale, exchange or
transfer to any Person not an Affiliate of the Company of all the Capital Stock
in, or all or substantially all the assets of, such Guarantor; PROVIDED,
HOWEVER, that each such merger, consolidation or sale (or, in the case of a sale
by such a pledgee, the disposition of the proceeds of such sale) shall comply
with Section 4.06. This Guarantee also shall be automatically released upon the
release or discharge of (i) the guarantee of the Senior Credit Facilities,
except a discharge or release by or as a result of payment under such guarantee
or (ii) the Indebtedness that results in the creation of such Guarantee, as the
case may be. At the request of the Issuer, the Trustee shall execute and deliver
an appropriate instrument evidencing such release.
SECTION 11.03. SUCCESSORS AND ASSIGNS. This Article 11 shall be
binding upon each Guarantor and its successors and assigns and shall inure to
the benefit
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of the successors and assigns of the Trustee and the Holders and, in the event
of any transfer or assignment of rights by any Holder or the Trustee, the rights
and privileges conferred upon that party in this Indenture and in the Notes
shall automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions of this Indenture.
SECTION 11.04. NO WAIVER. Neither a failure nor a delay on the part of
either the Trustee or the Holders in exercising any right, power or privilege
under this Article 11 shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Trustee and the
Holders herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article 11 at law,
in equity, by statute or otherwise.
SECTION 11.05. MODIFICATION. No modification, amendment or waiver of
any provision of this Article 11, nor the consent to any departure by any
Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Trustee, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on any Guarantor in any case shall entitle such Guarantor to
any other or further notice or demand in the same, similar or other
circumstances.
SECTION 11.06. EXECUTION OF SUPPLEMENTAL INDENTURE FOR FUTURE
GUARANTORS. Each Subsidiary which is required to become a Guarantor pursuant to
Section 4.11 shall promptly execute and deliver to the Trustee a supplemental
indenture in the form of Exhibit E hereto pursuant to which such Subsidiary
shall become a Guarantor under this Article 11 and shall guarantee the
Guaranteed Obligations. Concurrently with the execution and delivery of such
supplemental indenture, the Issuer shall deliver to the Trustee an Opinion of
Counsel and an Officers' Certificate to the effect that such supplemental
indenture has been duly authorized, executed and delivered by such Subsidiary
and that, subject to the application of bankruptcy, insolvency, moratorium,
fraudulent conveyance or transfer and other similar laws relating to creditors'
rights generally and to the principles of equity, whether considered in a
proceeding at law or in equity, the Guarantee of such Guarantor is a legal,
valid and binding obligation of such Guarantor, enforceable against such
Guarantor in accordance with its terms.
ARTICLE 12
SUBORDINATION OF THE GUARANTEES
SECTION 12.01. AGREEMENT TO SUBORDINATE. Each Guarantor agrees, and
each Noteholder by accepting a Note agrees, that the obligations of a Guarantor
hereunder are subordinated in right of payment, to the extent and in the manner
provided in this Article 12, to the prior payment in full in cash or Cash
Equivalents of all Senior Indebtedness of such Guarantor and that the
subordination is for the benefit of and enforceable by the holders of such
Senior Indebtedness of such Guarantor. The obligations hereunder with respect to
a Guarantor shall in all respects rank PARI PASSU with all other Senior
Subordinated Indebtedness of such Guarantor and shall rank senior to all
existing and future Subordinated Indebtedness of such Guarantor; and only
Indebtedness of such Guarantor that is Senior Indebtedness of such Guarantor
shall rank senior to the obligations of such Guarantor in accordance with the
provisions set forth herein.
<PAGE>
72
SECTION 12.02. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any payment
or distribution of the assets of a Guarantor to creditors upon a total or
partial liquidation or a total or partial dissolution of such Guarantor or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to such Guarantor and its properties, an assignment for the benefit of
creditors or any marshalling of such Guarantor's assets:
(1) holders of Senior Indebtedness of such Guarantor shall be entitled
to receive payment in full in cash or Cash Equivalents of such Senior
Indebtedness before Noteholders shall be entitled to receive any payment
pursuant to any Guaranteed Obligations from such Guarantor; and
(2) until the Senior Indebtedness of such Guarantor is paid in full,
any payment or distribution to which Noteholders would be entitled but for
this Article 12 shall be made to holders of such Senior Indebtedness as
their respective interests may appear.
SECTION 12.03. DEFAULT ON SENIOR INDEBTEDNESS OF A GUARANTOR. The
Guarantor shall not make any payment upon or in respect of the Subordinated Note
Obligations (except that Holders may receive (i) shares of stock and any debt
securities that are subordinated at least to the same extent as the Notes to (a)
Senior Indebtedness and (b) any securities issued in exchange for Senior
Indebtedness) until all Senior Indebtedness of such Guarantor has been paid in
full in cash or Cash Equivalents if (i) a default in the payment of the
principal of, premium, if any, or interest on, or of unreimbursed amounts under
drawn letters of credit or in respect of bankers' acceptances or fees relating
to letters of credit or bankers' acceptances constituting, Designated Senior
Indebtedness occurs and is continuing beyond any applicable period of grace in
the indenture, agreement or other document governing such Designated Senior
Indebtedness (a "PAYMENT DEFAULT") or (ii) any other default occurs and is
continuing with respect to Designated Senior Indebtedness that permits holders
of the Designated Senior Indebtedness as to which such default relates to
accelerate its maturity without further notice (except such notice as may be
required to effect such acceleration) or the expiration of any applicable grace
periods (a "NON-PAYMENT DEFAULT") and the Trustee receives a notice of such
default (a "PAYMENT BLOCKAGE NOTICE") from a representative of holders of such
Designated Senior Indebtedness. Payments on the Notes, including any missed
payments, may and shall be resumed (a) in the case of a payment default, upon
the date on which such default is cured or waived or shall have ceased to exist
or such Designated Senior Indebtedness shall have been discharged or paid in
full in cash or Cash Equivalents and all outstanding Letter of Credit
Obligations shall have been fully cash collateralized and (b) in case of a
nonpayment default, the earlier of (x) the date on which such nonpayment default
is cured or waived, (y) 179 days after the date on which the applicable Payment
Blockage Notice is received (each such period, the "PAYMENT BLOCKAGE PERIOD") or
(z) the date such Payment Blockage Period shall be terminated by written notice
to the Trustee from the requisite holders of such Designated Senior Indebtedness
necessary to terminate such period or from their representative. No new Payment
Blockage Period may be commenced unless and until 365 days have elapsed since
the effectiveness of the immediately preceding Payment Blockage Notice. However,
if any Payment Blockage Notice within such 365-day period is given by or on
behalf of any holders of Designated Senior Indebtedness (other than the agent
under the Senior Credit Facilities), the agent under the Senior Credit
Facilities may give another Payment Blockage Notice within such period. In no
event, however, shall the total number of days during which any Payment Blockage
Period or Periods is in effect exceed 179 days in the aggregate during any 365
consecutive day period. No nonpayment default that existed or was continuing on
the date of delivery of any Payment Blockage Notice to the Trustee
<PAGE>
73
shall be, or be made, the basis for a subsequent Payment Blockage Notice unless
such default shall have been cured or waived for a period of not less than 90
days.
SECTION 12.04. DEMAND FOR PAYMENT. If payment of the Notes is
accelerated because of an Event of Default and a demand for payment is made on a
Guarantor pursuant to Article 11, each such Guarantor or the Trustee shall
promptly notify the holders of the Designated Senior Indebtedness of such
Guarantor (or the Representative of such holders) of such demand. If any
Designated Senior Indebtedness of such Guarantor is outstanding, such Guarantor
shall not pay its Guarantee until five Business Days after such holders or the
Representative of the holders of the Designated Senior Indebtedness of such
Guarantor receive notice of such demand and, thereafter, may pay its Guarantee
only if this Article 12 otherwise permits payment at that time.
SECTION 12.05. WHEN DISTRIBUTION MUST BE PAID OVER. If a payment or
distribution is made to Noteholders that because of this Article 12 should not
have been made to them, the Noteholders who receive the payment or distribution
shall hold such payment or distribution in trust for holders of the Senior
Indebtedness of the relevant Guarantor and pay it over to them as their
respective interests may appear.
SECTION 12.06. SUBROGATION. After all Designated Senior Indebtedness
of a Guarantor is paid in full and until the Notes are paid in full, Noteholders
shall be subrogated to the rights of holders of Designated Senior Indebtedness
of such Guarantor to receive distributions applicable to Designated Senior
Indebtedness of such Guarantor. A distribution made under this Article 12 to
holders of Designated Senior Indebtedness of such Guarantor which otherwise
would have been made to Noteholders is not, as between such Guarantor and
Noteholders, a payment by such Guarantor on Designated Senior Indebtedness of
such Guarantor.
SECTION 12.07. RELATIVE RIGHTS. This Article 12 defines the relative
rights of Noteholders and holders of Designated Senior Indebtedness of a
Guarantor. Nothing in this Indenture shall:
(1) impair, as between a Guarantor and Noteholders, the obligation of
a Guarantor, which is absolute and unconditional, to make payments with
respect to the Guaranteed Obligations to the extent set forth in Article
11; or
(2) prevent the Trustee or any Noteholder from exercising its
available remedies upon a default by a Guarantor under its obligations with
respect to the Guaranteed Obligations, subject to the rights of holders of
Designated Senior Indebtedness of such Guarantor to receive distributions
otherwise payable to Noteholders.
SECTION 12.08. SUBORDINATION MAY NOT BE IMPAIRED BY A SUBSIDIARY
GUARANTOR. No right of any holder of Designated Senior Indebtedness of a
Guarantor to enforce the subordination of the obligations of such Guarantor
hereunder shall be impaired by any act or failure to act by such Guarantor or by
its failure to comply with this Indenture.
SECTION 12.09. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding
Section 12.03, the Trustee or the Paying Agent may continue to make payments on
the Notes and shall not be charged with knowledge of the existence of facts that
would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives notice satisfactory to it that payments may not be made under this
Article 12. A Guarantor, the Registrar, the
<PAGE>
74
Paying Agent, a Representative or a holder of Designated Senior Indebtedness of
a Guarantor may give the notice; PROVIDED, HOWEVER, that if an issue of
Designated Senior Indebtedness of a Guarantor has a Representative, only the
Representative may give the notice.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness of a Guarantor with the same rights it would have if it were not
Trustee. The Registrar and the Paying Agent may do the same with like rights.
The Trustee shall be entitled to all the rights set forth in this Article 12
with respect to any Senior Indebtedness of a Guarantor which may at any time be
held by it, to the same extent as any other holder of Senior Indebtedness of
such Guarantor; and nothing in Article 7 shall deprive the Trustee of any of its
rights as such holder. Nothing in this Article 12 shall apply to claims of, or
payments to, the Trustee under or pursuant to Section 7.07.
SECTION 12.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness
of a Guarantor, the distribution may be made and the notice given to their
Representative (if any).
SECTION 12.11. ARTICLE 12 NOT TO PREVENT EVENTS OF DEFAULT OR LIMIT
RIGHT TO ACCELERATE. The failure of a Guarantor to make a payment on any of its
obligations by reason of any provision in this Article 12 shall not be construed
as preventing the occurrence of a default by such Guarantor under such
obligations. Nothing in this Article 12 shall have any effect on the right of
the Noteholders or the Trustee to make a demand for payment on a Guarantor
pursuant to Article 11.
SECTION 12.12. TRUSTEE ENTITLED TO RELY. Upon any payment or
distribution pursuant to this Article 12, the Trustee and the Noteholders shall
be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 12.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Noteholders or (iii) upon the Representatives for the holders of Designated
Senior Indebtedness of a Guarantor for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of the
Designated Senior Indebtedness of such Guarantor and other Indebtedness of a
Guarantor, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 12.
In the event that the Trustee determines, in good faith, that evidence is
required with respect to the right of any Person as a holder of Designated
Senior Indebtedness of a Guarantor to participate in any payment or distribution
pursuant to this Article 12, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Designated Senior Indebtedness of such Guarantor held by such Person, the extent
to which such Person is entitled to participate in such payment or distribution
and other facts pertinent to the rights of such Person under this Article 12,
and, if such evidence is not furnished, the Trustee may defer any payment to
such Person pending judicial determination as to the right of such Person to
receive such payment. The provisions of Sections 7.01 and 7.02 shall be
applicable to all actions or omissions of actions by the Trustee pursuant to
this Article 12.
SECTION 12.13. TRUSTEE TO EFFECTUATE SUBORDINATION. Each Noteholder by
accepting a Note authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination between the Noteholders and the holders of Designated Senior
Indebtedness of each of
<PAGE>
75
the Guarantors as provided in this Article 12 and appoints the Trustee as
attorney-in-fact for any and all such purposes.
SECTION 12.14. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR
INDEBTEDNESS OF A GUARANTOR. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Indebtedness of a Guarantor and shall
not be liable to any such holders if it shall mistakenly pay over or distribute
to Noteholders or the relevant Guarantor or any other Person, money or assets to
which any holders of Senior Indebtedness of such Guarantor shall be entitled by
virtue of this Article 12 or otherwise.
SECTION 12.15. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS OF A
GUARANTOR ON SUBORDINATION PROVISIONS. Each Noteholder by accepting a Note
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness of a Guarantor, whether such Senior Indebtedness was created or
acquired before or after the issuance of the Notes, to acquire and continue to
hold, or to continue to hold, such Senior Indebtedness and such holder of Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.
SECTION 12.16. DEFEASANCE. The terms of this Article 12 shall not
apply to payments from money or the proceeds of U.S. Government Obligations held
in trust by the Trustee for the payment of principal of and interest on the
Notes pursuant to the provisions described in Section 8.03.
ARTICLE 13
MISCELLANEOUS
SECTION 13.01. TRUST INDENTURE ACT CONTROLS. If any provision of this
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the required provision
shall control.
SECTION 13.02. NOTICES. Any notice or communication shall be in
writing and delivered in person, mailed by first-class mail addressed or by
facsimile as follows:
if to the Issuer:
Willis Corroon Corporation
26 Century Boulevard
Nashville, TN 37214
Facsimile: (615) 872-3037
Attention of: Bart Schwartz, Esq.
<PAGE>
76
if to the Company or USGP:
Willis Corroon Group Limited
10 Trinity Square
London EC3P 3AX
Facsimile: 44-171-488-8034
Attention of: Michael Chitty
if to the Trustee:
The Bank of New York
101 Barclay Street
New York, New York 10286
Facsimile: (212) 815-5915
Attention of: Corporate Trust Administration
International Finance Unit
The Issuer or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Notices regarding the Notes (i) shall be published in a leading
newspaper having a general circulation in New York (which is expected to be the
WALL STREET JOURNAL) (and, so long as the Notes are listed on the Luxembourg
Stock Exchange and the rules of such stock exchange shall so require, a
newspaper having a general circulation in Luxembourg (which is expected to be
the LUXEMBOURGER WORT)) or (ii) in the case of Definitive Notes, shall be mailed
to the Noteholders at their respective addresses as they appear on the
registration books of the Registrar (and, so long as the Notes are listed on the
Luxemburg Stock Exchange and the rules of such stock exchange shall so require,
a newspaper having a general circulation in Luxembourg (which is expected to be
the LUXEMBURGER WORT)). Notices given by publication shall be deemed given on
the first date on which its publication is made, and notices given by
first-class mail, postage prepaid, will be deemed given five calendar days after
mailing.
Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other Noteholders.
If a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Notices to the Trustee shall be deemed effective only upon actual
receipt.
SECTION 13.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Noteholders may communicate pursuant to TIA ss. 312(b) with other Noteholders
with respect to their rights under this Indenture or the Notes. The Issuer, the
Trustee, the Registrar and anyone else shall have the protection of TIA ss.
312(c).
<PAGE>
77
SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Issuer to the Trustee to take or refrain
from taking any action under this Indenture, the Issuer shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 13.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with.
SECTION 13.06. WHEN NOTES DISREGARDED. In determining whether the
Holders of the required principal amount of Notes have concurred in any
direction, waiver or consent, Notes owned by the Issuer, any Guarantor or by any
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Issuer or any Guarantor shall be disregarded
and deemed not to be outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Notes which the Trustee knows are so owned shall be so
disregarded. Subject to the foregoing, only Notes outstanding at the time shall
be considered in any such determination.
SECTION 13.07. RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR. The
Trustee may make reasonable rules for action by or a meeting of Noteholders. The
Registrar and the Paying Agent may make reasonable rules for their functions.
SECTION 13.08. LEGAL HOLIDAYS. A "LEGAL HOLIDAY" is a Saturday, a
Sunday or a day on which banking institutions are not required to be open in the
State of New York. If a payment date is a Legal Holiday, payment shall be made
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period. If a regular record date is a Legal Holiday,
the record date shall not be affected.
SECTION 13.09. GOVERNING LAW. THIS INDENTURE AND THE SECURITIES SHALL
BE GOVERNED BY, AND CONSTRUED IN
<PAGE>
78
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 13.10. NO RECOURSE AGAINST OTHERS. No director, officer,
employee, incorporator or stockholder of the Issuer or any Guarantor, shall have
any liability for any obligations of the Issuer or the Guarantors under the
Notes, the Guarantees or this Indenture or for any claim based on, in respect
of, or by reason of such obligations or their creation. Each Holder by accepting
a Note waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes. Such waiver may not be effective
to waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
SECTION 13.11. SUCCESSORS. All agreements of the Issuer and each
Guarantor in this Indenture and the Notes shall bind its successors. All
agreements of the Trustee in this Indenture shall bind its successors.
SECTION 13.12. MULTIPLE ORIGINALS. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement. One signed copy is enough to prove this
Indenture.
SECTION 13.13. TABLE OF CONTENTS; HEADINGS. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
<PAGE>
79
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
WILLIS CORROON CORPORATION,
by
-----------------------------------------
Name:
Title:
WILLIS CORROON GROUP LIMITED,
by
-----------------------------------------
Name:
Title:
WILLIS CORROON PARTNERS,
by Willis Corroon Group Limited, its General
Partner,
by
-----------------------------------------
Name:
Title:
THE BANK OF NEW YORK, as Trustee,
by
-----------------------------------------
Name:
Title:
<PAGE>
APPENDIX A
PROVISIONS RELATING TO INITIAL NOTES,
EXCHANGE NOTES AND PRIVATE EXCHANGE NOTES
1. DEFINITIONS
1.1 DEFINITIONS
For the purposes of this Appendix A the following terms shall have the
meanings indicated below:
"APPLICABLE PROCEDURES" means, with respect to any transfer or
transaction involving a Temporary or Permanent Regulation S Global Note or
beneficial interest therein, the rules and procedures of the Depositary for such
Global Note, Euroclear and Cedel, in each case to the extent applicable to such
transaction and as in effect from time to time.
"CEDEL" means Cedel Bank, S.A., or any successor securities clearing
agency.
"DEFINITIVE NOTE" means a certificated Initial Note, Exchange Note or
Private Exchange Note (bearing the Restricted Notes Legend if the transfer of
such Note is restricted by applicable law) that does not include the Global
Notes Legend.
"DEPOSITARY" means The Depository Trust Company, its nominees and
their respective successors.
"EUROCLEAR" means the Euroclear Clearance System or any successor
securities clearing agency.
"EXCHANGE NOTES" means the Notes of the Issuer issued in exchange for
the Initial Notes pursuant to this Indenture in connection with the Registered
Exchange Offer pursuant to the Registration Agreement.
"GLOBAL NOTES LEGEND" means the legend set forth under that caption in
Exhibit A to this Indenture.
"IAI" means an institutional "accredited investor" as described in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"INITIAL PURCHASERS" means Chase Securities Inc. and Chase Manhattan
International Limited.
"NOTES CUSTODIAN" means the custodian with respect to a Global Note
(as appointed by the Depositary) or any successor person thereto, who shall
initially be the Trustee.
"PRIVATE EXCHANGE" means an offer by the Issuer, pursuant to the
Registration Agreement, to issue and deliver to certain purchasers, in exchange
for the Initial Notes held by such purchasers as part of their initial
distribution, a like aggregate principal amount of Private Exchange Notes.
<PAGE>
2
"PRIVATE EXCHANGE NOTES" means the Notes of the Issuer issued in
exchange for the Initial Notes pursuant to this Indenture in connection with the
Private Exchange pursuant to the Registration Agreement.
"PURCHASE AGREEMENT" means the Purchase Agreement dated January 28,
1999, among the Issuer, the Company, USGP and the Initial Purchasers.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"REGISTERED EXCHANGE OFFER" means the offer by the Issuer, pursuant to
the Registration Agreement, to certain Holders of Initial Notes, to issue and
deliver to such Holders, in exchange for their Initial Notes, a like aggregate
principal amount of Exchange Notes registered under the Securities Act.
"REGISTRATION AGREEMENT" means the Exchange and Registration Rights
Agreement dated February 2, 1999, among the Issuer, the Company, USGP and the
Initial Purchasers named therein.
"REGULATION S" means Regulation S under the Securities Act, as
amended.
"REGULATION S NOTES" means all Initial Notes offered and sold outside
the United States in reliance on Regulation S.
"RESTRICTED PERIOD", with respect to any Notes, means the period of 40
consecutive days beginning on and including the later of (i) the day on which
such Notes are first offered to persons other than distributors (as defined in
Regulation S under the Securities Act) in reliance on Regulation S and (ii) the
Issuance Date with respect to such Notes.
"RESTRICTED NOTES LEGEND" means the legend set forth in Section
2.3(e)(i) herein.
"RULE 501" means Rule 501(a)(1), (2), (3) or (7) under the Securities
Act.
"RULE 144A" means Rule 144A under the Securities Act, as amended.
"RULE 144A NOTES" means all Initial Notes offered and sold to QIBs in
reliance on Rule 144A.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHELF REGISTRATION STATEMENT" means a registration statement filed by
the Issuer in connection with the offer and sale of Initial Notes pursuant to
the Registration Agreement.
"TRANSFER RESTRICTED NOTES" means Definitive Notes and any other Notes
that bear or are required to bear the Restricted Notes Legend.
<PAGE>
3
1.2 OTHER DEFINITIONS
<TABLE>
<CAPTION>
Term: Defined in Section:
----- -------------------
<S> <C>
"Agent Members"...........................................................2.1(b)
"IAI Global Note".........................................................2.1(a)
"Global Notes"............................................................2.1(a)
"Permanent Regulation S Global Note"......................................2.3(d)
"Regulation S Global Notes"...............................................2.1(a)
"Rule 144A Global Note"...................................................2.1(a)
"Temporary Regulation S Global Note"......................................2.1(a)
</TABLE>
2. THE NOTES
2.1 FORM AND DATING
The Initial Notes issued on the date hereof shall be (i) offered and
sold by the Issuer pursuant to the Purchase Agreement and (ii) resold, initially
only to (A) QIBs in reliance on Rule 144A and (B) Persons other than U.S.
Persons (as defined in Regulation S) in reliance on Regulation S. Such Initial
Notes may thereafter be transferred to, among others, QIBs, purchasers in
reliance on Regulation S and, except as set forth below, IAIs in accordance with
Rule 501.
(a) GLOBAL NOTES. Rule 144A Notes shall be issued initially in the
form of one or more permanent global Notes in definitive, fully registered form
(collectively, the "RULE 144A GLOBAL NOTE") and Regulation S Notes shall be
issued initially in the form of one or more temporary global Notes
(collectively, the "TEMPORARY REGULATION S GLOBAL NOTE"), in each case without
interest coupons and bearing the Global Notes Legend and Restricted Notes
Legend, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Notes Custodian, and registered in the name of the
Depositary or a nominee of the Depositary, duly executed by the Issuer and
authenticated by the Trustee as provided in this Indenture. One or more global
securities in definitive, fully registered form without interest coupons and
bearing the Global Notes Legend and the Restricted Notes Legend (collectively,
the "IAI GLOBAL NOTE") shall also be issued on the Issuance Date, deposited with
the Notes Custodian, and registered in the name of the Depositary or a nominee
of the Depositary, duly executed by the Issuer and authenticated by the Trustee
as provided in this Indenture to accommodate transfers of beneficial interests
in the Notes to IAIs subsequent to the initial distribution. Except as set forth
in Section 2.3, beneficial ownership interests in the Temporary Regulation S
Global Note shall not be exchangeable for interests in the Rule 144A Global
Note, the IAI Global Note, a Permanent Regulation S Global Note (as defined
below) or any other Note without a Restricted Notes Legend until the expiration
of the Restricted Period. Upon the expiration of the Restricted Period,
beneficial interests in the Notes represented by the Temporary Regulation S
Global Note may be exchanged for interests in the Permanent Regulation S Global
Note as described below in Section 2.3(d). The Rule 144A Global Note, the IAI
Global Note, the Temporary Regulation S Global Note and the Permanent Regulation
S Global Note are each referred to herein as a Global Note and are collectively
referred to herein as "GLOBAL NOTES." The Temporary Regulation S Global Note and
the Permanent Regulation S Global Note are referred to herein as "REGULATION S
GLOBAL NOTES." The aggregate principal amount of the Global Notes may from time
to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee as hereinafter provided.
<PAGE>
4
(b) BOOK-ENTRY PROVISIONS. This Section 2.1(b) shall apply only to a
Global Note deposited with or on behalf of the Depositary.
The Issuer shall execute and the Trustee shall, in accordance with
Section 2.2 and pursuant to an order of the Issuer, authenticate and deliver
initially one or more Global Notes that (a) shall be registered in the name of
the Depositary for such Global Note or Global Notes or the nominee of such
Depositary and (b) shall be delivered by the Trustee to such Depositary or
pursuant to such Depositary's instructions or held by the Trustee as Notes
Custodian.
Members of, or participants in, the Depositary ("AGENT MEMBERS") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depositary or by the Trustee as Notes Custodian or under
such Global Note, and the Depositary may be treated by the Issuer, the Trustee
and any agent of the Issuer or the Trustee as the absolute owner of such Global
Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Issuer, the Trustee or any agent of the Issuer or the Trustee
from giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices of such Depositary governing the
exercise of the rights of a holder of a beneficial interest in any Global Note.
(c) DEFINITIVE NOTES. Except as provided in Section 2.3 or 2.4, owners
of beneficial interests in Global Notes will not be entitled to receive physical
delivery of certificated Notes.
2.2 AUTHENTICATION. The Trustee shall authenticate and make available for
delivery upon a written order of the Issuer signed by one Officer (1) Initial
Notes for original issue on the date hereof in an aggregate principal amount of
$550,000,000 and (2) the (A) Exchange Notes, for issue only in a Registered
Exchange Offer and (B) Private Exchange Notes for issue only in the Private
Exchange, in the case of each (A) and (B) pursuant to the Registration Agreement
and for a like principal amount of Initial Notes exchanged pursuant thereto.
Such order shall specify the amount of the Notes to be authenticated, the date
on which the original issue of Notes is to be authenticated and whether the
Notes are to be Initial Notes, Exchange Notes or Private Exchange Notes. The
aggregate principal amount of Notes outstanding at any time may not exceed
$550,000,000 except as provided in Section 2.08 of this Indenture.
2.3 TRANSFER AND EXCHANGE. (a) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES.
When Definitive Notes are presented to the Registrar with a request:
(x) to register the transfer of such Definitive Notes; or
(y) to exchange such Definitive Notes for an equal principal amount of
Definitive Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its reasonable requirements for such transaction are met; PROVIDED, HOWEVER,
that the Definitive Notes surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Issuer and the Registrar,
duly executed by the Holder thereof or his attorney duly authorized in
writing; and
<PAGE>
5
(ii) are accompanied by the following additional information and
documents, as applicable:
(A) if such Definitive Notes are being delivered to the Registrar
by a Holder for registration in the name of such Holder, without
transfer, a certification from such Holder to that effect (in the form
set forth on the reverse side of the Initial Note); or
(B) if such Definitive Notes are being transferred to the Issuer,
a certification to that effect (in the form set forth on the reverse
side of the Initial Note); or
(C) if such Definitive Notes are being transferred pursuant to an
exemption from registration in accordance with Rule 144 under the
Securities Act or in reliance upon another exemption from the
registration requirements of the Securities Act, (i) a certification
to that effect (in the form set forth on the reverse side of the
Initial Note) and (ii) if the Issuer so requests, an Opinion of
Counsel or other evidence reasonably satisfactory to it as to the
compliance with the restrictions set forth in the legend set forth in
Section 2.3(e)(i).
(b) RESTRICTIONS ON TRANSFER OF A DEFINITIVE NOTE FOR A BENEFICIAL
INTEREST IN A GLOBAL NOTE. A Definitive Note may not be exchanged for a
beneficial interest in a Global Note except upon satisfaction of the
requirements set forth below. Upon receipt by the Trustee of a Definitive Note,
duly endorsed or accompanied by a written instrument of transfer in form
reasonably satisfactory to the Issuer and the Registrar, together with:
(i) certification (in the form set forth on the reverse side of the
Initial Note) that such Definitive Note is being transferred (A) to a QIB
in accordance with Rule 144A, (B) to an IAI that has furnished to the
Trustee a signed letter substantially in the form of Exhibit D or (C)
outside the United States in an offshore transaction within the meaning of
Regulation S and in compliance with Rule 904 under the Securities Act,
together with a letter substantially in the form of Exhibit C; and
(ii) written instructions directing the Trustee to make, or to direct
the Notes Custodian to make, an adjustment on its books and records with
respect to such Global Note to reflect an increase in the aggregate
principal amount of the Notes represented by the Global Note, such
instructions to contain information regarding the Depositary account to be
credited with such increase,
then the Trustee shall cancel such Definitive Note and cause, or direct the
Notes Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Notes Custodian, the
aggregate principal amount of Notes represented by the Global Note to be
increased by the aggregate principal amount of the Definitive Note to be
exchanged and shall credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the Global Note equal to
the principal amount of the Definitive Note so canceled. If no Global Notes are
then outstanding and the Global Note has not been previously exchanged for
certificated securities pursuant to Section 2.4, the Issuer shall issue and the
Trustee shall authenticate, upon written order of the Issuer in the form of an
Officers' Certificate, a new Global Note in the appropriate principal amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL NOTES. (i) The transfer and
exchange of Global Notes or beneficial interests therein shall be effected
through the Depositary, in accordance with this Indenture (including applicable
restrictions on transfer set forth herein,
<PAGE>
6
if any) and the procedures of the Depositary therefor. A transferor of a
beneficial interest in a Global Note shall deliver a written order given in
accordance with the Depositary's procedures containing information regarding the
participant account of the Depositary to be credited with a beneficial interest
in such Global Note or another Global Note and such account shall be credited in
accordance with such order with a beneficial interest in the applicable Global
Note and the account of the Person making the transfer shall be debited by an
amount equal to the beneficial interest in the Global Note being transferred.
Transfers by an owner of a beneficial interest in the Rule 144A Global Note or
the IAI Global Note to a transferee who takes delivery of such interest through
the Regulation S Global Note, whether before or after the expiration of the
Restricted Period, will be made only upon receipt by the Trustee of a
certification from the transferor to the effect that such transfer is being made
in accordance with Regulation S or (if available) Rule 144 under the Securities
Act and that, if such transfer is being made prior to the expiration of the
Restricted Period, the interest transferred will be held immediately thereafter
through Euroclear or Cedel. In the case of a transfer of a beneficial interest
in either the Temporary Regulation S Global Note or the Rule 144A Global Note
for an interest in the IAI Global Note, the transferee must furnish a signed
letter substantially in the form of Exhibit D to the Trustee. In the case of a
transfer of an interest in either the Temporary Regulation S Global Note or the
Permanent Regulation S Global Note to an interest in a Rule 144A Global Note or
IAI Global Note, the transferor must furnish a letter substantially in the form
of Exhibit C to the Trustee.
(ii) If the proposed transfer is a transfer of a beneficial interest
in one Global Note to a beneficial interest in another Global Note, the
Registrar shall reflect on its books and records the date and an increase
in the principal amount of the Global Note to which such interest is being
transferred in an amount equal to the principal amount of the interest to
be so transferred, and the Registrar shall reflect on its books and records
the date and a corresponding decrease in the principal amount of Global
Note from which such interest is being transferred.
(iii) Notwithstanding any other provisions of this Appendix (other
than the provisions set forth in Section 2.4), a Global Note may not be
transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(iv) In the event that a Global Note is exchanged for Definitive Notes
pursuant to Section 2.4 prior to the consummation of the Registered
Exchange Offer or the effectiveness of the Shelf Registration Statement
with respect to such Notes, such Notes may be exchanged only in accordance
with such procedures as are substantially consistent with the provisions of
this Section 2.3 (including the certification requirements set forth on the
reverse of the Initial Notes intended to ensure that such transfers comply
with Rule 144A, Regulation S or such other applicable exemption from
registration under the Securities Act, as the case may be) and such other
procedures as may from time to time be adopted by the Issuer.
(d) RESTRICTIONS ON TRANSFER OF TEMPORARY REGULATION S GLOBAL NOTE.
(i) Prior to the expiration of the Restricted Period, interests in the Temporary
Regulation S Global Note may only be held through Euroclear or Cedel. During the
Restricted Period, beneficial ownership interests in the Temporary Regulation S
Global Note may only be sold, pledged or transferred through Euroclear or Cedel
in accordance with the Applicable Procedures and only (A) to the Issuer, (B) so
long as such security is eligible for resale pursuant to Rule 144A, to a person
whom the selling holder reasonably believes is a QIB that purchases for its own
account or for the account of a QIB to whom notice is given that the
<PAGE>
7
resale, pledge or transfer is being made in reliance on Rule 144A, (C) in an
offshore transaction in accordance with Regulation S, (D) pursuant to an
exemption from registration under the Securities Act provided by Rule 144 (if
applicable) under the Securities Act, (E) to an IAI purchasing for its own
account, or for the account of such an IAI, in a minimum principal amount of
Notes of $250,000 or (F) pursuant to an effective registration statement under
the Securities Act, in each case in accordance with any applicable securities
laws of any state of the United States. Prior to the expiration of the
Restricted Period, transfers by an owner of a beneficial interest in the
Temporary Regulation S Global Note to a transferee who takes delivery of such
interest through the Rule 144A Global Note or the IAI Global Note will be made
only in accordance with Applicable Procedures and upon receipt by the Trustee of
a written certification from the transferor of the beneficial interest in the
form provided on the reverse of the Initial Note to the effect that such
transfer is being made to (i) a person whom the transferor reasonably believes
is a QIB within the meaning of Rule 144A in a transaction meeting the
requirements of Rule 144A or (ii) an IAI purchasing for its own account, or for
the account of such an IAI, in a minimum principal amount of the Notes of
$250,000. Such written certification will no longer be required after the
expiration of the Restricted Period. In the case of a transfer of a beneficial
interest in the Regulation S Global Note for an interest in the IAI Global Note,
the transferee must furnish a signed letter substantially in the form of Exhibit
D to the Trustee.
(ii) Upon the expiration of the Restricted Period, beneficial
ownership interests in the Temporary Regulation S Global Note may be
exchanged for interests in a permanent global security in definitive, fully
registered form without the Restricted Note Legend (the "PERMANENT
REGULATION S GLOBAL NOTE") upon certification to the Trustee that such
interests are owned either by non-U.S. persons or U.S. persons who
purchased such interests pursuant to an exemption from, or transfer not
subject to, the registration requirements of the Securities Act. Upon the
expiration of the Restricted Period, the Issuer shall prepare and execute
the Permanent Regulation S Global Note in accordance with the terms of this
Indenture and deliver it to the Trustee for authentication. The Trustee
shall retain the Permanent Regulation S Global Note as Notes Custodian. Any
transfers of beneficial ownership interests in the Temporary Regulation S
Global Note made in reliance on Regulation S shall thenceforth be recorded
by the Trustee by making an appropriate increase in the principal amount of
the Permanent Regulation S Global Note and a corresponding decrease in the
principal amount of the Temporary Regulation S Global Note. At such time as
the principal amount of the Temporary Regulation S Global Note has been
reduced to zero, the Trustee shall cancel the Temporary Regulation S Global
Note and deliver it to the Issuer.
(e) LEGEND.
(i) Except as permitted by the following paragraphs (ii), (iii) or
(iv), each Note certificate evidencing the Global Notes and the Definitive
Notes (and all Notes issued in exchange therefor or in substitution
thereof) shall bear a legend in substantially the following form (each
defined term in the legend being defined as such for purposes of the legend
only):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
<PAGE>
8
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR
OF SUCH SECURITY), ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER
TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL
AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH
A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT
TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE.
Each Definitive Note will also bear the following additional legend:
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE
REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS
SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER
COMPLIES WITH THE FOREGOING RESTRICTIONS.
(ii) Upon any sale or transfer of a Transfer Restricted Security that
is a Definitive Note, the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a Definitive Note that does
not bear the legends set forth above and rescind any restriction on the
transfer of such Transfer Restricted Security if the Holder certifies in
writing to the Registrar that its request for such exchange was made in
reliance on Rule 144 (such certification to be in the form set forth on the
reverse of the Initial Note).
<PAGE>
9
(iii) After a transfer of any Initial Notes or Private Exchange Notes
during the period of the effectiveness of a Shelf Registration Statement
with respect to such Initial Notes or Private Exchange Notes, as the case
may be, all requirements pertaining to the Restricted Notes Legend on such
Initial Notes or such Private Exchange Notes will cease to apply and any
requirements that any such Initial Notes or such Private Exchange Notes be
issued in global form will continue to apply.
(iv) Upon the consummation of a Registered Exchange Offer with respect
to the Initial Notes pursuant to which Holders of such Initial Notes are
offered Exchange Notes in exchange for their Initial Notes, all
requirements pertaining to Initial Notes that Initial Notes be issued in
global form will continue to apply, and Exchange Notes in global form
without the Restricted Notes Legend will be available to Holders that
exchange such Initial Notes in such Registered Exchange Offer.
(v) Upon the consummation of a Private Exchange with respect to the
Initial Notes pursuant to which Holders of such Initial Notes are offered
Private Exchange Notes in exchange for their Initial Notes, all
requirements pertaining to such Initial Notes that Initial Notes be issued
in global form will continue to apply, and Private Exchange Notes in global
form with the Restricted Notes Legend will be available to Holders that
exchange such Initial Notes in such Private Exchange.
(vi) Upon a sale or transfer after the expiration of the Restricted
Period of any Initial Note acquired pursuant to Regulation S, all
requirements that such Initial Note bear the Restricted Notes Legend will
cease to apply and the requirements requiring any such Initial Note be
issued in global form will continue to apply.
(f) CANCELATION OR ADJUSTMENT OF GLOBAL NOTE. At such time as all
beneficial interests in a Global Note have either been exchanged for Definitive
Notes, transferred, redeemed, repurchased or canceled, such Global Note shall be
returned by the Depositary to the Trustee for cancelation or retained and
canceled by the Trustee. At any time prior to such cancelation, if any
beneficial interest in a Global Note is exchanged for Definitive Notes,
transferred in exchange for an interest in another Global Note, redeemed,
repurchased or canceled, the principal amount of Notes represented by such
Global Note shall be reduced and an adjustment shall be made on the books and
records of the Trustee (if it is then the Notes Custodian for such Global Note)
with respect to such Global Note, by the Trustee or the Notes Custodian, to
reflect such reduction.
(g) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF NOTES.
(i) To permit registrations of transfers and exchanges, the Issuer
shall execute and the Trustee shall authenticate, Definitive Notes and
Global Notes at the Registrar's request.
(ii) No service charge shall be made for any registration of transfer
or exchange, but the Issuer may require payment of a sum sufficient to
cover any transfer tax, assessments, or similar governmental charge payable
in connection therewith (other than any such transfer taxes, assessments or
similar governmental charge payable upon exchange or transfer pursuant to
Section 3.06, 4.06, 4.08 and 9.05).
(iii) Prior to the due presentation for registration of transfer of
any Note, the Issuer, the Trustee, the Paying Agent or the Registrar may
deem and treat the person in whose name a Note is registered as the
absolute owner of such Note for the purpose of receiving payment of
principal of and interest on such Note and for all other purposes
whatsoever,
<PAGE>
10
whether or not such Note is overdue, and none of the Issuer, the Trustee,
the Paying Agent or the Registrar shall be affected by notice to the
contrary.
(iv) All Notes issued upon any transfer or exchange pursuant to the
terms of this Indenture shall evidence the same debt and shall be entitled
to the same benefits under this Indenture as the Notes surrendered upon
such transfer or exchange.
(h) NO OBLIGATION OF THE TRUSTEE.
(i) The Trustee shall have no responsibility or obligation to any
beneficial owner of a Global Note, a member of, or a participant in the
Depositary or any other Person with respect to the accuracy of the records
of the Depositary or its nominee or of any participant or member thereof,
with respect to any ownership interest in the Notes or with respect to the
delivery to any participant, member, beneficial owner or other Person
(other than the Depositary) of any notice (including any notice of
redemption or repurchase) or the payment of any amount, under or with
respect to such Notes. All notices and communications to be given to the
Holders and all payments to be made to Holders under the Notes shall be
given or made only to the registered Holders (which shall be the Depositary
or its nominee in the case of a Global Note). The rights of beneficial
owners in any Global Note shall be exercised only through the Depositary
subject to the applicable rules and procedures of the Depositary. The
Trustee may rely and shall be fully protected in relying upon information
furnished by the Depositary with respect to its members, participants and
any beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer
imposed under this Indenture or under applicable law with respect to any
transfer of any interest in any Note (including any transfers between or
among Depositary participants, members or beneficial owners in any Global
Note) other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if and
when expressly required by, the terms of this Indenture, and to examine the
same to determine substantial compliance as to form with the express
requirements hereof.
2.4 DEFINITIVE NOTES
(a) A Global Note deposited with the Depositary or with the Trustee as
Notes Custodian pursuant to Section 2.1 shall be transferred to the beneficial
owners thereof in the form of Definitive Notes in an aggregate principal amount
equal to the principal amount of such Global Note, in exchange for such Global
Note, only if such transfer complies with Section 2.3 and (i) the Depositary
notifies the Issuer that it is unwilling or unable to continue as a Depositary
for such Global Note or if at any time the Depositary ceases to be a "clearing
agency" registered under the Exchange Act, and a successor depositary is not
appointed by the Issuer within 90 days of such notice, or (ii) an Event of
Default has occurred and is continuing or (iii) the Issuer, in its sole
discretion, notifies the Trustee in writing that it elects to cause the issuance
of certificated Notes under this Indenture.
(b) Any Global Note that is transferable to the beneficial owners
thereof pursuant to this Section 2.4 shall be surrendered by the Depositary to
the Trustee, to be so transferred, in whole or from time to time in part,
without charge, and the Trustee shall authenticate and deliver, upon such
transfer of each portion of such Global Note, an equal aggregate principal
amount of Definitive Notes of authorized denominations. Any portion of a Global
Note transferred pursuant to this Section shall be executed, authenticated and
delivered only in denominations of $1,000 and any integral multiple thereof and
registered in such names as the Depositary shall direct. Any certificated
Initial Note in the form of a Definitive Note delivered in exchange for an
interest in
<PAGE>
11
the Global Note shall, except as otherwise provided by Section 2.3(e), bear the
Restricted Notes Legend.
(c) Subject to the provisions of Section 2.4(b), the registered Holder
of a Global Note may grant proxies and otherwise authorize any Person, including
Agent Members and Persons that may hold interests through Agent Members, to take
any action which a Holder is entitled to take under this Indenture or the Notes.
(d) In the event of the occurrence of any of the events specified in
Section 2.4(a)(i), (ii) or (iii), the Issuer will promptly make available to the
Trustee a reasonable supply of Definitive Notes in fully registered form without
interest coupons.
<PAGE>
EXHIBIT A
FORM OF FACE OF INITIAL NOTE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW
YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY), ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT
THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION
S UNDER THE SECURITIES ACT, (E) TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING
OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN
INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A
MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION
IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION
<PAGE>
2
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER'S AND THE TRUSTEE'S
RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR
(F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
<PAGE>
No.
9% Senior Subordinated Note due 2009
CUSIP No. ______
WILLIS CORROON CORPORATION, a Delaware corporation, promises to pay to
Cede & Co., or registered assigns, the principal sum listed on the Schedule of
Increases or Decreases in Global Note attached hereto on February 1, 2009.
Interest Payment Dates: February 1 and August 1.
Record Dates: January 15 and July 15.
<PAGE>
2
Additional provisions of this Note are set forth on the following
pages of this Note.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
WILLIS CORROON CORPORATION,
by
---------------------------------
Name:
Title:
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK,
as Trustee, certifies
that this is one of
the Notes referred
to in the Indenture.
By:
--------------------------------
Authorized Signatory
<PAGE>
3
FORM OF REVERSE SIDE OF INITIAL NOTE
9% Senior Subordinated Note due 2009
1. INTEREST
(a) WILLIS CORROON CORPORATION, a Delaware corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Issuer"), promises to pay interest on the
principal amount of this Note at the rate per annum shown above. The Issuer will
pay interest semiannually on February 1 and August 1 of each year, commencing
August 1, 1999. Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from August 1,
1999. Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Issuer shall pay interest on overdue principal and Additional
Amounts, if any, at the rate borne by the Notes, and it shall pay interest on
overdue installments of interest at the same rate to the extent lawful.
(b) LIQUIDATED DAMAGES. The holder of this Note is entitled to the
benefits of an Exchange and Registration Rights Agreement, dated as of February
2, 1999, among the Issuer, Willis Corroon Group Limited, Willis Corroon Partners
(collectively, the "Guarantors") and the Initial Purchasers named therein (the
"Registration Agreement"). Capitalized terms used in this paragraph (b) but not
defined herein have the meanings assigned to them in the Registration Agreement.
If (i) the applicable Registration Statement is not filed with the Commission on
or prior to 100 days after the Issuance Date (or, in the case of a Shelf
Registration Statement required to be filed in response to a change in law or
applicable interpretations of the Commission's staff, if later, within 60 days
after publication of the change in law or interpretations, but in no event
before 100 calendar days after the Issuance Date), (ii) the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
is not declared effective within 240 days after the Issuance Date (or, in the
case of a Shelf Registration Statement required to be filed in response to a
change in law or applicable interpretations of the Commission's staff, if later,
within 90 days after publication of the change in law or interpretations, but in
no event before 240 days after the Issuance Date), (iii) the Registered Exchange
Offer is not consummated on or prior to 270 days after the Issuance Date (other
than in the event the Issuer files a Shelf Registration Statement), or (iv) the
Shelf Registration Statement is filed and declared effective within 240 days
after the Issuance Date but shall thereafter cease to be effective (at any time
that the Issuer is obligated to maintain the effectiveness thereof) without
being succeeded within 90 days by an additional Registration Statement filed and
declared effective (each such event referred to in clauses (i) through (iv), a
"REGISTRATION DEFAULT"), the Issuer and the Guarantors will be jointly and
severally obligated to pay liquidated damages to each Holder of Transfer
Restricted Notes, during the period of one or more such Registration Defaults,
with respect to the first 90-day period immediately following the occurrence of
the first Registration Default in an amount equal to .25% per annum (which rate
shall be increased by an additional .25% per annum for each subsequent 90-day
period that any liquidated damages continue to accrue; PROVIDED that the rate at
which liquidated damages accrue may in no event exceed 1.00% per annum) in
respect of the Notes constituting Transfer Restricted Notes held by such Holder
until (i) the applicable Registration Statement is filed, (ii) the Exchange
Offer Registration Statement is declared effective and the Registered Exchange
Offer is consummated, (iii) the Shelf Registration Statement is declared
effective or (iv) the Shelf Registration Statement again becomes effective, as
the case may be. Following the cure of all Registration Defaults, the accrual of
liquidated damages shall cease. Notwithstanding the foregoing provisions, the
Issuer and the Guarantors may issue a notice that the Shelf Registration
Statement is unusable pending the announcement of a material corporate
transaction and may issue any notice suspending use of the Shelf Registration
Statement required under applicable securities laws
<PAGE>
4
to be issued and, in the event that the aggregate number of days in any
consecutive twelve-month period for which all such notices are issued and
effective exceeds 60 days in the aggregate, then the Issuer shall be obligated
to pay liquidated damages to each Holder of Transfer Restricted Notes in an
amount equal to 0.25% per annum (which rate shall be increased by an additional
0.25% per annum for each subsequent 90-day period that liquidated damages
continue to accrue; PROVIDED that the rate at which liquidated damages accrue
may in no event exceed 1.00% per annum) in respect of the Notes constituting
Transfer Restricted Notes. Upon the Issuer declaring that the Shelf Registration
Statement is usable after the period of time described in the preceding sentence
the accrual of liquidated damages shall cease; PROVIDED, HOWEVER, that if after
any such cessation of the accrual of liquidated damages the Shelf Registration
Statement again ceases to be usable beyond the period permitted above,
liquidated damages shall again accrue pursuant to the foregoing provisions. The
Trustee shall have no responsibility with respect to the determination of the
amount of any such liquidated damages. For purposes of the foregoing, "Transfer
Restricted Notes" means (i) each Initial Note until the date on which such
Initial Note has been exchanged for a freely transferable Exchange Note in the
Registered Exchange Offer, (ii) each Initial Note or Private Exchange Note until
the date on which such Initial Note or Private Exchange Note has been
effectively registered under the Securities Act and disposed of in accordance
with a Shelf Registration Statement or (iii) each Initial Note or Private
Exchange Note until the date on which such Initial Note or Private Exchange Note
is distributed to the public pursuant to Rule 144 under the Securities Act or is
saleable pursuant to Rule 144(k) under the Securities Act. The liquidated
damages due shall be payable on each interest payment date to the record holder
entitled to receive the interest payment to be made on such date.
2. ADDITIONAL AMOUNTS
All payments made by the Company with respect to the guarantees will
be made without withholding or deduction for, or on account of, any present or
future taxes, duties, assessments or governmental charges of whatever nature
(collectively, "Taxes") imposed or levied by or on behalf of the United Kingdom
or any political subdivision thereof or any authority having power to tax
therein (each a "U.K. Tax Authority"), unless the withholding or deduction of
such Taxes is then required by law. If any deduction or withholding for, or on
account of, any Taxes of any U.K. Tax Authority, shall at any time be required
on any payments made by the Company with respect to the guarantees, the Company
will pay such additional amounts (the "Additional Amounts") as may be necessary
in order that the net amounts received in respect of such payments by the
Holders of the Notes or the Trustee, as the case may be, after such withholding
or deduction, equal the respective amounts which would have been received in
respect of such payments in the absence of such withholding or deduction; except
that no such Additional Amounts will be payable with respect to:
(i) any payments on a Note held by or on behalf of a Holder or
beneficial owner who is liable for such Taxes in respect of such Note by
reason of the Holder or beneficial owner having some connection with the
United Kingdom (including being a citizen or resident or national of, or
carrying on a business or maintaining a permanent establishment in, or
being physically present in, the United Kingdom) other than by the mere
holding of such Note or enforcement of rights thereunder or the receipt of
payments in respect thereof;
(ii) any Taxes that are imposed or withheld by reason of the failure
of the Holder or beneficial owner of the Note to comply with any request by
the Company to provide information concerning the nationality, residence or
identity of such Holder or beneficial owner to make any declaration or
similar claim or satisfy any
<PAGE>
5
information or reporting requirement, which is required or imposed by a
statue, treaty, regulation or administrative practice of the taxing
jurisdiction as a precondition to exemption from all or part of such Taxes;
or
(iii) any Note presented for payment (where presentation is required)
more than 30 days after the relevant payment is first made available for
payment to the Holder.
Such Additional Amounts will also not be payable where, had the
beneficial owner of the Note been the Holder of the Note, he would not have been
entitled to payment of Additional Amounts by reason of clauses (i) to (iii)
inclusive above.
References to principal, interest, premium or other amounts payable in
respect of the guarantee shall be deemed also to refer to any Additional Amounts
which may be payable.
The Company will also (i) make such withholding or deduction and (ii)
remit the full amount deducted or withheld to the relevant authority in
accordance with applicable law. Upon request, the Company will provide the
Trustee with documentation satisfactory to the Trustee evidencing the payment of
Additional Amounts. Copies of such documentation will be made available to the
Holders upon request.
3. METHOD OF PAYMENT
The Issuer will pay interest on the Notes (except defaulted interest)
and Additional Amounts, if any, to the Persons who are registered holders of
Notes at the close of business on the January 15 or July 15 next preceding the
interest payment date even if Notes are canceled after the record date and on or
before the interest payment date. Holders must surrender Notes to a Paying Agent
to collect principal payments. The Issuer will pay principal and interest in
money of the United States of America that at the time of payment is legal
tender for payment of public and private debts. Payments in respect of the Notes
represented by a Global Note (including principal, premium and interest) will be
made by wire transfer of immediately available funds to the accounts specified
by the Depositary. The Issuer will make all payments in respect of a
certificated Note (including principal, premium and interest), by mailing a
check to the registered address of each Holder thereof; PROVIDED, HOWEVER, that
payments on the Notes may also be made, in the case of a Holder of at least
$1,000,000 aggregate principal amount of Notes, by wire transfer to a U.S.
dollar account maintained by the payee with a bank in the United States if such
Holder elects payment by wire transfer by giving written notice to the Trustee
or the Paying Agent to such effect designating such account no later than 15
days immediately preceding the relevant due date for payment (or such other date
as the Trustee may accept in its discretion).
4. PAYING AGENT AND REGISTRAR
Initially, The Bank of New York, a New York banking association (the
"Trustee"), will act as Paying Agent and Registrar. The Issuer may appoint and
change any Paying Agent, Registrar or co-registrar without notice. The Issuer or
any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying
Agent, Registrar or co-registrar. In the event that Definitive Notes are issued,
the Issuer will appoint Kredietbank S.A. Luxembourgeoise, or such other Person
located in Luxembourg and reasonably acceptable to the Trustee, as an additional
Paying Agent and Transfer Agent. Upon the issuance of Definitive Notes, Holders
will be able to receive principal, premium, if any, and interest with respect to
the Notes and will be able to transfer Definitive Notes at the Luxembourg office
of
<PAGE>
6
such Person, subject to the right of the Issuer to mail payments in accordance
with the terms of this Indenture.
5. INDENTURE
The Issuer issued the Notes under an Indenture dated as of February 2,
1999, (the "Indenture"), between the Issuer, the Guarantors and the Trustee. The
terms of the Notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA").
Terms defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Notes are subject to all such terms, and
Noteholders are referred to the Indenture and the TIA for a statement of those
terms.
The Notes are senior subordinated unsecured obligations of the Issuer
limited to $550,000,000 aggregate principal amount at any one time outstanding
(subject to Sections 2.01 and 2.08 of the Indenture). This Note is one of the
Initial Notes referred to in the Indenture issued in an aggregate principal
amount of $550,000,000. The Notes include the Initial Notes and any Exchange
Notes issued in exchange for Initial Notes. The Initial Notes and the Exchange
Notes are treated as a single class of securities under the Indenture. The
Indenture imposes certain limitations on the ability of the Issuer and its
Restricted Subsidiaries to, among other things, make certain Investments and
other Restricted Payments, incur Indebtedness and issue Disqualified Stock,
enter into consensual restrictions upon the payment of certain dividends and
distributions by such Restricted Subsidiaries, enter into or permit certain
transactions with Affiliates, create or incur Liens, make asset sales, guarantee
Indebtedness, or incur Indebtedness that is senior to Senior Subordinated
Indebtedness but junior to Senior Indebtedness. The Indenture also imposes
limitations on the ability of the Issuer to consolidate or merge with or into
any other Person or convey, transfer or lease all or substantially all of the
property of the Issuer.
6. OPTIONAL REDEMPTION
Except as described below, the Notes will not be redeemable at the
Issuer's option prior to February 1, 2004. From and after February 1, 2004, the
Notes shall be subject to redemption at any time at the option of the Issuer, in
whole or in part, upon not less than 30 nor more than 60 days' notice (as
provided under paragraph 8 below), at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid
interest thereon, if any and Additional Amounts, if any, to the applicable
Redemption Date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date and
Additional Amounts, if any, in respect thereof), if redeemed during the
twelve-month period beginning on February 1 of each of the years indicated
below:
<TABLE>
<CAPTION>
Year Redemption Price
- ---- ----------------
<S> <C>
2004.......................................................... 104.500%
2005.......................................................... 103.000%
2006.......................................................... 101.500%
2007 and thereafter........................................... 100.000%
</TABLE>
In addition, at any time or from time to time, on or prior to February
1, 2002, the Issuer may, at its option, redeem up to 35% of the aggregate
principal amount of Notes originally issued under the Indenture on the Issuance
Date at a redemption price equal to
<PAGE>
7
109% of the aggregate principal amount thereof, plus accrued and unpaid interest
thereon, if any, and Additional Amounts, if any, to the Redemption Date (subject
to the right of holders of record on the relevant record date to receive
interest due on the relevant interest payment date and Additional Amounts, if
any, with the net proceeds of one or more Equity Offerings of the Issuer or any
direct or indirect parent of the Issuer to the extent such net proceeds are
contributed to the Issuer or used to repay to the Issuer amounts outstanding in
respect of the Trinity Intercompany Notes; PROVIDED that at least 65% of the
aggregate principal amount of Notes originally issued under the Indenture on the
Issuance Date remains outstanding immediately after the occurrence of each such
redemption; PROVIDED FURTHER that each such redemption occurs within 90 days of
the date of closing of each such Equity Offering.
7. SINKING FUND
The Notes are not subject to any sinking fund.
8. NOTICE OF REDEMPTION
Notice of redemption shall be given at least 30 days but not more than
60 days before the Redemption Date by publishing in a leading newspaper having a
general circulation in New York (which is expected to be the WALL STREET
JOURNAL) (and, so long as the Notes are listed on the Luxembourg Stock Exchange
and the rules of such stock exchange shall so require, a newspaper having a
general circulation in Luxembourg (which is expected to be the LUXEMBURGER
WORT)) and, in the case of Definitive Notes, by also mailing by first-class mail
to each Holder of Notes to be redeemed at his or her registered address. Notes
in denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of, accrued
interest and Additional Amounts, if any, on all Notes (or portions thereof) to
be redeemed on the Redemption Date is deposited with the Paying Agent on or
before the Redemption Date and certain other conditions are satisfied, on and
after such date interest and Additional Amounts, if any, shall cease to accrue
on such Notes (or such portions thereof) called for redemption.
9. CHANGE OF CONTROL
Upon a Change of Control, the Issuer shall, subject to certain
conditions specified in the Indenture, make an offer to repurchase all of the
Notes then outstanding at a purchase price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest, if any, and
Additional Amounts, if any, to the date of purchase (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date and Additional Amounts, if any, that is on or
prior to the date of purchase) as provided in, and subject to the terms of, the
Indenture.
10. SUBORDINATION
The Notes are subordinated to Senior Indebtedness, as defined in the
Indenture. To the extent provided in the Indenture, Senior Indebtedness must be
paid before the Notes may be paid. The Issuer and each Guarantor agree, and each
Noteholder by accepting a Note agrees, to the subordination provisions contained
in the Indenture and any supplemental indenture and authorizes the Trustee to
give them effect and appoints the Trustee as attorney-in-fact for such purpose.
11. DENOMINATIONS; TRANSFER; EXCHANGE
The Notes are in registered form without coupons in denominations of
$1,000 and whole multiples of $1,000. A Holder may transfer or exchange Notes in
accordance with
<PAGE>
8
the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements or
transfer documents and to pay any taxes required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any Notes
selected for redemption (except, in the case of a Note to be redeemed in part,
the portion of the Note not to be redeemed) or to transfer or exchange any Notes
for a period of 15 days prior to a selection of Notes to be redeemed.
12. PERSONS DEEMED OWNERS
The registered Holder of this Note may be treated as the owner of it
for all purposes.
13. UNCLAIMED MONEY
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Issuer at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Issuer and not to the Trustee for payment.
14. DISCHARGE AND DEFEASANCE
Subject to certain conditions, the Issuer at any time may terminate
some of or all its obligations under the Notes and the Indenture if the Issuer
deposits with the Trustee money or Government Securities for the payment of
principal and interest on the Notes to redemption or maturity, as the case may
be.
15. AMENDMENT, WAIVER
Subject to certain exceptions, the Issuer, any Guarantor and the
Trustee may amend the Indenture, the Notes or the Guarantees with the written
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding (including consents obtained in connection with a tender offer
or exchange for the Notes) and, subject to Article 6 of the Indenture, any
existing default or compliance with any provision of the Indenture or the Notes
may be waived with the consent of the Holders of a majority in principal amount
of the then outstanding Notes (including consents obtained in connection with a
purchase of or tender offer or exchange offer for the Notes). Subject to certain
exceptions set forth in the Indenture, without the consent of any Holder of the
Notes, the Issuer and the Trustee may amend the Indenture or the Notes to cure
any ambiguity, omission, defect or inconsistency; to comply with Article 5 of
the Indenture; to provide for uncertificated Notes in addition to or in place of
certificated Notes; PROVIDED, HOWEVER, that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code or in a manner
such that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code; to provide for the assumption of the Issuer's or any Guarantor's
obligations to Holders; to add Guarantees with respect to the Notes or to secure
the Notes; to make any change that would provide any additional rights or
benefits to the Holders or that does not adversely affect the legal rights under
the Indenture of any such Holder; to add to the covenants for the benefit of the
Holders or to surrender any right or power herein conferred upon the Issuer; to
comply with any requirements of the SEC in connection with qualifying, or
maintaining the qualification of, the Indenture under the TIA; to evidence and
provide for the acceptance and appointment under the Indenture of a successor
Trustee pursuant to Article 7 of the Indenture; or to provide for the issuance
of the Exchange Notes or the Private Exchange Notes, which shall have terms
substantially identical in all material respects to the Initial Notes (except
that the transfer restrictions contained in the Initial Notes shall be modified
or eliminated, as
<PAGE>
9
appropriate), and which shall be treated, together with any outstanding Initial
Notes, as a single issue of securities.
16. DEFAULTS AND REMEDIES
If an Event of Default occurs (other than an Event of Default relating
to certain events of bankruptcy, insolvency or reorganization of the Issuer) and
is continuing, the Trustee or the Holders of at least 30% in principal amount of
the outstanding Notes may declare the principal of and accrued but unpaid
interest on all the Notes to be due and payable; PROVIDED, HOWEVER, that, so
long as any Indebtedness permitted to be incurred under the Indenture as part of
the Senior Credit Facilities shall be outstanding, no such acceleration shall be
effective until the earlier of (i) acceleration of any such Indebtedness under
the Senior Credit Facilities or (ii) five Business Days after the giving of
written notice to the Issuer and the administrative agent under the Senior
Credit Facilities of such acceleration. If an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of the Issuer occurs,
the principal of and interest on all the Notes shall become immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holders. Under certain circumstances, the Holders of a majority in principal
amount of the outstanding Notes may rescind any such acceleration with respect
to the Notes and its consequences.
If an Event of Default occurs and is continuing, the Trustee will be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the Holders unless such Holders have
offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Notes unless (i) such Holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
Holders of at least 30% in principal amount of the outstanding Notes have
requested the Trustee in writing to pursue the remedy, (iii) such Holders have
offered the Trustee reasonable security or indemnity against any loss, liability
or expense, (iv) the Trustee has not complied with such request within 60 days
after the receipt of the request and the offer of security or indemnity and (v)
the Holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction inconsistent with such request within such 60-day
period. Subject to certain restrictions, the Holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture or that the Trustee determines is unduly prejudicial to the rights of
any other Holder or that would involve the Trustee in personal liability. Prior
to taking any action under the Indenture, the Trustee will be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
17. TRUSTEE DEALINGS WITH THE ISSUER
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by the Issuer or its Affiliates and may otherwise deal with the Issuer or its
Affiliates with the same rights it would have if it were not Trustee.
18. NO RECOURSE AGAINST OTHERS
No director, officer, employee, incorporator or stockholder of the
Issuer or of any Guarantor, shall have any liability for any obligations of the
Issuer or the Guarantors
<PAGE>
10
under the Notes, the Guarantees or the Indenture or for any claim based on, in
respect of, or by reason of such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
19. AUTHENTICATION
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Note.
20. ABBREVIATIONS
Customary abbreviations may be used in the name of a Noteholder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act).
21. GOVERNING LAW
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
22. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform
Note Identification Procedures, the Issuer has caused CUSIP numbers to be
printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Noteholders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
THE ISSUER WILL FURNISH TO ANY HOLDER OF NOTES UPON WRITTEN REQUEST
AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE
TEXT OF THIS NOTE.
<PAGE>
11
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Note on
the books of the Issuer. The agent may substitute another to act for him.
- ------------------------------------------------------------
Date: Your Signature:
-------------------- ------------------
- ------------------------------------------------------------
Sign exactly as your name appears on the other side of this Note.
<PAGE>
12
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
TRANSFER RESTRICTED NOTES
This certificate relates to $_________ principal amount of Notes held in (check
applicable space) ____ book-entry or _____ definitive form by the undersigned.
The undersigned (check one box below):
/ / has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Note held by the Depositary a Note or
Notes in definitive, registered form of authorized denominations and an
aggregate principal amount equal to its beneficial interest in such Global
Note (or the portion thereof indicated above);
/ / has requested the Trustee by written order to exchange or register the
transfer of a Note or Notes.
In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the expiration of the period referred to in Rule
144(k) under the Securities Act, the undersigned confirms that such Notes are
being transferred in accordance with its terms:
CHECK ONE BOX BELOW
(1) / / to the Issuer; or
(2) / / pursuant to an effective registration statement under the
Securities Act of 1933; or
(3) / / inside the United States to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of
1933) that purchases for its own account or for the account
of a qualified institutional buyer to whom notice is given
that such transfer is being made in reliance on Rule 144A,
in each case pursuant to and in compliance with Rule 144A
under the Securities Act of 1933; or
(4) / / outside the United States in an offshore transaction within
the meaning of Regulation S under the Securities Act in
compliance with Rule 904 under the Securities Act of 1933;
or
(5) / / to an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act of
1933) that has furnished to the Trustee a signed letter
containing certain representations and agreements; or
(6) / / pursuant to another available exemption from registration
provided by Rule 144 under the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to
register any of the Notes evidenced by this certificate in the name of
any Person other than the registered holder thereof; PROVIDED,
HOWEVER, that if box (4), (5) or (6) is checked, the Trustee may
require, prior to registering any such transfer of the Notes, such
legal opinions, certifications and other information as the Issuer has
reasonably requested to confirm
<PAGE>
13
that such transfer is being made pursuant to an exemption from, or in
a transaction not subject to, the registration requirements of the
Securities Act of 1933.
-------------------------------------
Your Signature
Signature Guarantee:
Date:
------------------------------- -------------------------------------
Signature must be guaranteed Signature of Signature
by a participant in a Guarantee
recognized signature guaranty
medallion program or other
signature guarantor acceptable
to the Trustee
- ------------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Issuer as
the undersigned has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
Dated:
------------------------------- -------------------------------------
NOTICE: To be executed by
an executive officer
<PAGE>
14
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE
The initial principal amount of this Global Note is $[ ]. The
following increases or decreases in this Global Note have been made:
<TABLE>
<CAPTION>
Date of Amount of decrease in Amount of increase in Principal amount of this Signature of authorized
Exchange Principal Amount of this Principal Amount of this Global Note following such signatory of Trustee or
Global Note Global Note decrease or increase Notes Custodian
<S> <C> <C> <C> <C>
</TABLE>
<PAGE>
15
OPTION OF HOLDER TO ELECT PURCHASE
IF YOU WANT TO ELECT TO HAVE THIS NOTE PURCHASED BY THE ISSUER
PURSUANT TO SECTION 4.06 (ASSET SALE) OR 4.08 (CHANGE OF CONTROL) OF THE
INDENTURE, CHECK THE BOX:
ASSET SALE / / CHANGE OF CONTROL / /
IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS NOTE PURCHASED BY THE
ISSUER PURSUANT TO SECTION 4.06 OR 4.08 OF THE INDENTURE, STATE THE AMOUNT:
$
DATE: YOUR SIGNATURE:
------------------ ---------------------------------------
(SIGN EXACTLY AS YOUR NAME APPEARS ON
THE OTHER SIDE OF THIS NOTE)
SIGNATURE GUARANTEE:
------------------------------------------------------------
SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A
RECOGNIZED SIGNATURE GUARANTY MEDALLION PROGRAM OR OTHER
SIGNATURE GUARANTOR ACCEPTABLE TO THE TRUSTEE
<PAGE>
EXHIBIT B
FORM OF FACE OF EXCHANGE NOTE
No. $__________
9% Senior Subordinated Note due 2009
CUSIP No. ______
WILLIS CORROON CORPORATION, a Delaware corporation, promises to pay to
Cede & Co., or registered assigns, the principal sum [of Dollars] [listed on the
Schedule of Increases or Decreases in Global Note attached hereto](1) on
February 1, 2009.
Interest Payment Dates: February 1 and August 1.
Record Dates: January 15 and July 15.
- --------
(1) Use the Schedule of Increases and Decreases language if Note is in
Global Form.
<PAGE>
2
Additional provisions of this Note are set forth on the following
pages of this Note.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly
executed.
WILLIS CORROON CORPORATION,
by
---------------------------------
Name:
Title:
Dated:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK,
as Trustee, certifies
that this is one of
the Notes referred
to in the Indenture.
By:
--------------------------------
Authorized Signatory
- -----------------
*/ If the Note is to be issued in global form, add the Global Notes Legend and
the attachment from Exhibit A captioned "TO BE ATTACHED TO GLOBAL NOTES -
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTE".
<PAGE>
3
FORM OF REVERSE SIDE OF EXCHANGE NOTE
9% Senior Subordinated Note due 2009
1. INTEREST
WILLIS CORROON CORPORATION, a Delaware corporation (such corporation,
and its successors and assigns under the Indenture hereinafter referred to,
being herein called the "Issuer"), promises to pay interest on the principal
amount of this Note at the rate per annum shown above. The Issuer will pay
interest semiannually on February 1 and August 1 of each year, commencing August
1, 1999. Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from August 1, 1999.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Issuer shall pay interest on overdue principal and Additional
Amounts, if any, at the rate borne by the Notes, and it shall pay interest on
overdue installments of interest at the same rate to the extent lawful.
2. ADDITIONAL AMOUNTS
All payments made by the Company with respect to the guarantees will
be made without withholding or deduction for, or on account of, any present or
future taxes, duties, assessments or governmental charges of whatever nature
(collectively, "Taxes") imposed or levied by or on behalf of the United Kingdom
or any political subdivision thereof or any authority having power to tax
therein (each a "U.K. Tax Authority"), unless the withholding or deduction of
such Taxes is then required by law. If any deduction or withholding for, or on
account of, any Taxes of any U.K. Tax Authority, shall at made by the Company
with respect to the guarantees, the Company will pay such additional amounts
(the "Additional Amounts") as may be necessary in order that the net amounts
received in respect of such payments by the Holders of the Notes or the Trustee,
as the case may be, after such withholding or deduction, equal the respective
amounts which would have been received in respect of such payments in the
absence of such withholding or deduction; except that no such Additional Amounts
will be payable with respect to:
(i) any payments on a Note held by or on behalf of a Holder or
beneficial owner who is liable for such Taxes in respect of such Note by
reason of the Holder or beneficial owner having some connection with the
United Kingdom (including being a citizen or resident or national of, or
carrying on a business or maintaining a permanent establishment in, or
being physically present in, the United Kingdom) other than by the mere
holding of such Note or enforcement of rights thereunder or the receipt of
payments in respect thereof;
(ii) any Taxes that are imposed or withheld by reason of the failure
of the Holder or beneficial owner of the Note to comply with any request by
the Company to provide information concerning the nationality, residence or
identity of such Holder or beneficial owner to make any declaration or
similar claim or satisfy any information or reporting requirement, which is
required or imposed by a statue, treaty, regulation or administrative
practice of the taxing jurisdiction as a precondition to exemption from all
or part of such Taxes; or
(iii) any Note presented for payment (where presentation is required)
more than 30 days after the relevant payment is first made available for
payment to the Holder.
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4
Such Additional Amounts will also not be payable where, had the
beneficial owner of the Note been the Holder of the Note, he would not have been
entitled to payment of Additional Amounts by reason of clauses (i) to (iii)
inclusive above.
References to principal, interest, premium or other amounts payable in
respect of the guarantee shall be deemed also to refer to any Additional Amounts
which may be payable.
The Company will also (i) make such withholding or deduction and (ii)
remit the full amount deducted or withheld to the relevant authority in
accordance with applicable law. Upon request, The Company will provide the
Trustee with documentation satisfactory to the Trustee evidencing the payment of
Additional Amounts. Copies of such documentation will be made available to the
Holders upon request.
3. METHOD OF PAYMENT
The Issuer shall pay interest on the Notes (except defaulted interest)
and Additional Amounts, if, any, to the Persons who are registered holders of
Notes at the close of business on the January 15 or July 15 next preceding the
interest payment date even if Notes are canceled after the record date and on or
before the interest payment date. Holders must surrender Notes to a Paying Agent
to collect principal payments. The Issuer will pay principal and interest in
money of the United States of America that at the time of payment is legal
tender for payment of public and private debts. Payments in respect of the Notes
represented by a Global Note (including principal, premium and interest) will be
made by wire transfer of immediately available funds to the accounts specified
by The Depository Trust Company. The Issuer will make all payments in respect of
a certificated Note (including principal, premium and interest), by mailing a
check to the registered address of each Holder thereof; PROVIDED, HOWEVER, that
payments on the Notes may also be made, in the case of a Holder of at least
$1,000,000 aggregate principal amount of Notes, by wire transfer to a U.S.
dollar account maintained by the payee with a bank in the United States if such
Holder elects payment by wire transfer by giving written notice to the Trustee
or the Paying Agent to such effect designating such account no later than 15
days immediately preceding the relevant due date for payment (or such other date
as the Trustee may accept in its discretion).
4. PAYING AGENT AND REGISTRAR
Initially, The Bank of New York, a New York banking association (the
"Trustee"), will act as Paying Agent and Registrar. The Issuer may appoint and
change any Paying Agent, Registrar or co-registrar without notice. The Issuer or
any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying
Agent, Registrar or co-registrar. In the event that Definitive Notes are issued,
the Issuer will appoint Kredietbank S.A. Luxembourgeoise, or such other Person
located in Luxembourg and reasonably acceptable to the Trustee, as an additional
Paying Agent and Transfer Agent. Upon the issuance of Definitive Notes, Holders
will be able to receive principal, premium, if any, and interest with respect to
the Notes and will be able to transfer Definitive Notes at the Luxembourg office
of such Person, subject to the right of the Issuer to mail payments in
accordance with the terms of this Indenture.
5. INDENTURE
The Issuer issued the Notes under an Indenture dated as of February 2,
1999 (the "Indenture"), between the Issuer and the Trustee. The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture
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5
Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of the
Indenture (the "TIA"). Terms defined in the Indenture and not defined herein
have the meanings ascribed thereto in the Indenture. The Notes are subject to
all such terms, and Noteholders are referred to the Indenture and the TIA for a
statement of those terms.
The Notes are senior subordinated unsecured obligations of the Issuer
limited to $550,000,000 million aggregate principal amount at any one time
outstanding, of which the entire $550,000,000 in aggregate principal amount were
issued on the Issuance Date. This Note is one of the Exchange Notes referred to
in the Indenture. The Notes include the Initial Notes and any Exchange Notes and
Private Exchange Notes issued in exchange for the Initial Notes pursuant to the
Indenture. The Initial Notes, the Exchange Notes and the Private Exchange Notes
are treated as a single class of securities under the Indenture. The Indenture
imposes certain limitations on the ability of the Issuer and its Restricted
Subsidiaries to, among other things, make certain Investments and other
Restricted Payments, incur Indebtedness and issue Disqualified Stock, enter into
consensual restrictions upon the payment of certain dividends and distributions
by such Restricted Subsidiaries, enter into or permit certain transactions with
Affiliates, create or incur Liens, make asset sales, guarantee Indebtedness, or
incur Indebtedness that is senior to Senior Subordinated Indebtedness but junior
to Senior Indebtedness. The Indenture also imposes limitations on the ability of
the Issuer to consolidate or merge with or into any other Person or convey,
transfer or lease all or substantially all of the property of the Issuer.
6. OPTIONAL REDEMPTION
Except as described below, the Notes will not be redeemable at the
Issuer's option prior to February 1, 2004. From and after February 1, 2004, the
Notes shall be subject to redemption at any time at the option of the Issuer, in
whole or in part, upon not less than 30 nor more than 60 days' notice (as
provided under paragraph 8 below), at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid
interest thereon, if any, and Additional Amounts, if any, to the applicable
Redemption Date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date and
Additional Amounts, if any, in respect thereof), if redeemed during the
twelve-month period beginning on February 1 of each of the years indicated
below:
<TABLE>
<CAPTION>
Year Redemption Price
- ---- ----------------
<S> <C>
2004...................................................... 104.500%
2005...................................................... 103.000%
2006...................................................... 101.500%
2007 and thereafter...................................... 100.000%
</TABLE>
In addition, at any time or from time to time, on or prior to February
1, 2002, the Issuer may, at its option, redeem up to 35% of the aggregate
principal amount of Notes originally issued under the Indenture on the Issuance
Date at a redemption price equal to 109% of the aggregate principal amount
thereof, plus accrued and unpaid interest thereon, if any, and Additional
Amounts, if any, to the Redemption Date (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date and Additional Amounts, if any ), with the net proceeds of
one or more Equity Offerings of the Issuer or any direct or indirect parent of
the Issuer to the extent such net proceeds are contributed to the Issuer or used
to repay to the Issuer amounts outstanding in respect of the Trinity
Intercompany Notes; PROVIDED that at least 65% of the aggregate principal amount
of
<PAGE>
6
Notes originally issued under the Indenture on the Issuance Date remains
outstanding immediately after the occurrence of each such redemption; PROVIDED
FURTHER that each such redemption occurs within 90 days of the date of closing
of each such Equity Offering.
7. SINKING FUND
The Notes are not subject to any sinking fund.
8. NOTICE OF REDEMPTION
Notice of redemption shall be given at least 30 days but not more than
60 days before the Redemption Date by publishing in a leading newspaper having a
general circulation in New York (which is expected to be the WALL STREET
JOURNAL) (and, so long as the Notes are listed on the Luxembourg Stock Exchange
and the rules of such stock exchange shall so require, a newspaper having a
general circulation in Luxembourg (which is expected to be the LUXEMBURGER
WORT)) and, in the case of Definitive Notes, by also mailing by first-class mail
to each Holder of Notes to be redeemed at his or her registered address. Notes
in denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. If money sufficient to pay the redemption price of, accrued
interest and Additional Amounts, if any, on all Notes (or portions thereof) to
be redeemed on the Redemption Date is deposited with the Paying Agent on or
before the Redemption Date and certain other conditions are satisfied, on and
after such date interest and Additional Amounts, if any, shall cease to accrue
on such Notes (or such portions thereof) called for redemption.
9. CHANGE OF CONTROL
Upon a Change of Control, the Issuer shall, subject to certain
conditions specified in the Indenture, make an offer to repurchase all of the
Notes then outstanding at a purchase price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest, if any, and
Additional Amounts, if any, to the date of purchase (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date and Additional Amounts, if any, that is on or
prior to the date of purchase) as provided in, and subject to the terms of, the
Indenture.
10. SUBORDINATION
The Notes are subordinated to Senior Indebtedness, as defined in the
Indenture. To the extent provided in the Indenture, Senior Indebtedness must be
paid before the Notes may be paid. The Issuer and each Guarantor agree, and each
Noteholder by accepting a Note agrees, to the subordination provisions contained
in the Indenture and any supplemental indenture and authorizes the Trustee to
give them effect and appoints the Trustee as attorney-in-fact for such purpose.
11. DENOMINATIONS; TRANSFER; EXCHANGE
The Notes are in registered form without coupons in denominations of
$1,000 and whole multiples of $1,000. A Holder may transfer or exchange Notes in
accordance with the Indenture. Upon any transfer or exchange, the Registrar and
the Trustee may require a Holder, among other things, to furnish appropriate
endorsements or transfer documents and to pay any taxes required by law or
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Notes selected for redemption (except, in the case of a Note to be
redeemed in part, the portion of the Note not to be redeemed) or to transfer or
exchange any Notes for a period of 15 days prior to a selection of Notes to be
redeemed.
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12. PERSONS DEEMED OWNERS
The registered Holder of this Note may be treated as the owner of it
for all purposes.
13. UNCLAIMED MONEY
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Issuer at its written request unless an abandoned property law designates
another Person. After any such payment, Holders entitled to the money must look
only to the Issuer and not to the Trustee for payment.
14. DISCHARGE AND DEFEASANCE
Subject to certain conditions, the Issuer at any time may terminate
some of or all its obligations under the Notes and the Indenture if the Issuer
deposits with the Trustee money or Government Securities for the payment of
principal and interest on the Notes to redemption or maturity, as the case may
be.
15. AMENDMENT, WAIVER
Subject to certain exceptions, the Issuer, any Guarantor and the
Trustee may amend the Indenture, the Notes or the Guarantees with the written
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding (including consents obtained in connection with a tender offer
or exchange for the Notes) and, subject to Article 6 of the Indenture, any
existing default or compliance with any provision of the Indenture or the Notes
may be waived with the consent of the Holders of a majority in principal amount
of the then outstanding Notes (including consents obtained in connection with a
purchase of or tender offer or exchange offer for the Notes). Subject to certain
exceptions set forth in the Indenture, without the consent of any Holder of the
Notes, the Issuer and the Trustee may amend the Indenture or the Notes to cure
any ambiguity, omission, defect or inconsistency; to comply with Article 5 of
the Indenture; to provide for uncertificated Notes in addition to or in place of
certificated Notes; PROVIDED, HOWEVER, that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code or in a manner
such that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code; to provide for the assumption of the Issuer's or any Guarantor's
obligations to Holders; to add Guarantees with respect to the Notes or to secure
the Notes; to make any change that would provide any additional rights or
benefits to the Holders or that does not adversely affect the legal rights under
the Indenture of any such Holder; to add to the covenants for the benefit of the
Holders or to surrender any right or power herein conferred upon the Issuer; to
comply with any requirements of the SEC in connection with qualifying, or
maintaining the qualification of, the Indenture under the TIA; to evidence and
provide for the acceptance and appointment under the Indenture of a successor
Trustee pursuant to Article 7 of the Indenture; or to provide for the issuance
of the Exchange Notes and the Private Exchange Notes, which shall have terms
substantially identical in all material respects to the Initial Notes (except
that the transfer restrictions contained in the Initial Notes shall be modified
or eliminated, as appropriate), and which shall be treated, together with any
outstanding Initial Notes, as a single issue of securities.
16. DEFAULTS AND REMEDIES
If an Event of Default occurs (other than an Event of Default relating
to certain events of bankruptcy, insolvency or reorganization of the Issuer) and
is continuing,
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8
the Trustee or the Holders of at least 30% in principal amount of the
outstanding Notes may declare the principal of and accrued but unpaid interest
on all the Notes to be due and payable; PROVIDED, HOWEVER, that, so long as any
Indebtedness permitted to be incurred under the Indenture as part of the Senior
Credit Facilities shall be outstanding, no such acceleration shall be effective
until the earlier of (i) acceleration of any such Indebtedness under the Senior
Credit Facilities or (ii) five Business Days after the giving of written notice
to the Issuer and the administrative agent under the Senior Credit Facilities of
such acceleration. If an Event of Default relating to certain events of
bankruptcy, insolvency or reorganization of the Issuer occurs, the principal of
and interest on all the Notes shall become immediately due and payable without
any declaration or other act on the part of the Trustee or any Holders. Under
certain circumstances, the Holders of a majority in principal amount of the
outstanding Notes may rescind any such acceleration with respect to the Notes
and its consequences.
If an Event of Default occurs and is continuing, the Trustee will be
under no obligation to exercise any of the rights or powers under the Indenture
at the request or direction of any of the Holders unless such Holders have
offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Notes unless (i) such Holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
Holders of at least 30% in principal amount of the outstanding Notes have
requested the Trustee in writing to pursue the remedy, (iii) such Holders have
offered the Trustee reasonable security or indemnity against any loss, liability
or expense, (iv) the Trustee has not complied with such request within 60 days
after the receipt of the request and the offer of security or indemnity and (v)
the Holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction inconsistent with such request within such 60-day
period. Subject to certain restrictions, the Holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture or that the Trustee determines is unduly prejudicial to the rights of
any other Holder or that would involve the Trustee in personal liability. Prior
to taking any action under the Indenture, the Trustee will be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
17. TRUSTEE DEALINGS WITH THE ISSUER
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by the Issuer or its Affiliates and may otherwise deal with the Issuer or its
Affiliates with the same rights it would have if it were not Trustee.
18. NO RECOURSE AGAINST OTHERS
No director, officer, employee, incorporator or stockholder of the
Issuer or of any Guarantor, shall have any liability for any obligations of the
Issuer or the Guarantors under the Notes, the Guarantees or the Indenture or for
any claim based on, in respect of, or by reason of such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes. Such waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Commission that such a waiver
is against public policy.
<PAGE>
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19. AUTHENTICATION
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Note.
20. ABBREVIATIONS
Customary abbreviations may be used in the name of a Noteholder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entirety), JT TEN (=joint tenants with rights of survivorship and not as tenants
in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act).
21. GOVERNING LAW
THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
22. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform
Note Identification Procedures, the Issuer has caused CUSIP numbers to be
printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Noteholders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
THE ISSUER WILL FURNISH TO ANY HOLDER OF NOTES UPON WRITTEN REQUEST
AND WITHOUT CHARGE TO THE HOLDER A COPY OF THE INDENTURE WHICH HAS IN IT THE
TEXT OF THIS NOTE.
<PAGE>
10
ASSIGNMENT FORM
To assign this Note, fill in the form below:
I or we assign and transfer this Note to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Note on
the books of the Issuer. The agent may substitute another to act for him.
- ------------------------------------------------------------
Date: Your Signature:
---------------- ---------------------
- ------------------------------------------------------------
Sign exactly as your name appears on the other side of this Note. Signature must
be guaranteed by a participant in a recognized signature guaranty medallion
program or other signature guarantor acceptable to the Trustee.
<PAGE>
11
OPTION OF HOLDER TO ELECT PURCHASE
IF YOU WANT TO ELECT TO HAVE THIS NOTE PURCHASED BY THE ISSUER
PURSUANT TO SECTION 4.06 (ASSET SALE) OR 4.08 (CHANGE OF CONTROL) OF THE
INDENTURE, CHECK THE BOX:
ASSET SALE / / CHANGE OF CONTROL / /
IF YOU WANT TO ELECT TO HAVE ONLY PART OF THIS NOTE PURCHASED BY THE
ISSUER PURSUANT TO SECTION 4.06 OR 4.08 OF THE INDENTURE, STATE THE AMOUNT:
$
DATE: YOUR SIGNATURE:
------------------ ------------------
(SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF
THIS NOTE)
SIGNATURE GUARANTEE:
---------------------------------------
SIGNATURE MUST BE GUARANTEED BY A PARTICIPANT IN A
RECOGNIZED SIGNATURE GUARANTY MEDALLION PROGRAM OR OTHER
SIGNATURE GUARANTOR ACCEPTABLE TO THE TRUSTEE.
<PAGE>
EXHIBIT C
Form of Certificate to be Delivered in Connection
with Transfers of Regulation S Global Note
The Bank of New York
101 Barclay Street
New York, NY 10286
Attention of: Ming Shiang
Re: WILLIS CORROON CORPORATION
(the "Issuer") 9% Senior Subordinated
Notes due 2009 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $[________] aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the United States
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we
represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United States or
(b) the transaction was executed in, on or through the facilities of a
designated off-shore securities market and neither we nor any person acting on
our behalf knows that the transaction has been pre-arranged with a buyer in the
United States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S,
as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable
thereto, we confirm that such sale has been made in accordance with the
applicable provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be.
<PAGE>
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You and the Issuer are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
-----------------------
Authorized Signature
<PAGE>
EXHIBIT D
Form of
Transferee Letter of Representation
Willis Corroon Corporation
c/o The Bank of New York
101 Barclay Street
New York, NY 10286
Ladies and Gentlemen:
This certificate is delivered to request a transfer of [ ] principal amount
of the 9% Senior Subordinated Notes due 2009 (the "Notes") of Willis Corroon
Corporation (the "Issuer").
Upon transfer, the Notes would be registered in the name of the new
beneficial owner as follows:
Name:
------------------------
Address:
---------------------
Taxpayer ID Number:
----------
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the
"Securities Act")) purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount of the
Notes, and we are acquiring the Notes not with a view to, or for offer or sale
in connection with, any distribution in violation of the Securities Act. We have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we invest
in or purchase securities similar to the Notes in the normal course of our
business. We, and any accounts for which we are acting, are each able to bear
the economic risk of our or its investment.
2. We understand that the Notes have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any investor
account for which we are purchasing Notes to offer, sell or otherwise transfer
such Notes prior to the date that is two years after the later of the date of
original issue and the last date on which the Issuer or any affiliate of the
Issuer was the owner of such Notes (or any predecessor thereto) (the "Resale
Restriction Termination Date") only (a) to the Issuer, (b) pursuant to a
registration statement that has been declared effective under the Securities
Act, (c) in a transaction complying with the requirements of Rule 144A under the
Securities Act ("Rule 144A"), to a person we reasonably believe is a qualified
institutional investor under Rule 144A (a "QIB") that purchases for its own
account or for the account of a QIB and to whom notice is given that the
transfer is being made in reliance on Rule 144A, (d) pursuant to offers and
sales that occur outside the United States within the meaning of Regulation S
under the Securities Act, (e) to an institutional "accredited investor" within
<PAGE>
2
the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is
purchasing for its own account or for the account of such an institutional
"accredited investor," in each case in a minimum principal amount of Notes of
$250,000, or (f) pursuant to any other available exemption from the registration
requirements of the Securities Act, subject in each of the foregoing cases to
any requirement of law that the disposition of our property or the property of
such investor account or accounts be at all times within our or their control
and in compliance with any applicable state securities laws. The foregoing
restrictions on resale will not apply subsequent to the Resale Restriction
Termination Date. If any resale or other transfer of the Notes is proposed to be
made pursuant to clause (e) above prior to the Resale Restriction Termination
Date, the transferor shall deliver a letter from the transferee substantially in
the form of this letter to the Issuer and the Trustee, which shall provide,
among other things, that the transferee is an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act and that it is acquiring such Notes for investment purposes and
not for distribution in violation of the Securities Act. Each purchaser
acknowledges that the Issuer and the Trustee reserve the right prior to the
offer, sale or other transfer prior to the Resale Termination Date of the Notes
pursuant to clause (d), (e) or (f) above to require the delivery of an Opinion
of Counsel, certifications or other information satisfactory to the Issuer and
the Trustee.
TRANSFEREE: ,
-----------------
by:
-----------------------
<PAGE>
EXHIBIT E
FORM OF SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture")
dated as of [ ], among [GUARANTOR] (the "New Guarantor"),
WILLIS CORROON CORPORATION, a Delaware corporation, WILLIS
CORROON GROUP LIMITED, a company with limited liability
organized under the laws of England and Wales (the "Company"),
WILLIS CORROON PARTNERS, a Delaware general partnership ("USGP"
and together with the Company, the "Existing Guarantors") and
The Bank of New York, a New York banking association, as trustee
under the indenture referred to below (the "Trustee").
W I T N E S S E T H :
WHEREAS the Issuer, and the Existing Guarantors have heretofore
executed and delivered to the Trustee an Indenture (the "Indenture") dated as of
February 2, 1999, providing for the issuance of an aggregate principal amount of
up to $550,000,000 of 9% Senior Notes due 2009 (the "Securities");
WHEREAS Section 4.11 of the Indenture provides that under certain
circumstances the Company is required to cause the New Guarantor to execute and
deliver to the Trustee a supplemental indenture pursuant to which the New
Guarantor shall unconditionally guarantee all the Company's obligations under
the Securities pursuant to a Guarantee on the terms and conditions set forth
herein; and
WHEREAS pursuant to Section 11.06 of the Indenture, the Trustee, the
Issuer and the Existing Guarantors are authorized to execute and deliver this
Supplemental Indenture;
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Guarantor, the Issuer, the Existing Guarantors and the Trustee mutually covenant
and agree for the equal and ratable benefit of the holders of the Securities as
follows:
1. AGREEMENT TO GUARANTEE. The New Guarantor hereby agrees, jointly
and severally with all the Existing Guarantors, to unconditionally guarantee the
Issuer's obligations under the Securities on the terms and subject to the
conditions set forth in Article 10 of the Indenture and to be bound by all other
applicable provisions of the Indenture and the Securities.
2. RATIFICATION OF INDENTURE; SUPPLEMENTAL INDENTURES PART OF
INDENTURE. Except as expressly amended hereby, the Indenture is in all respects
ratified and confirmed and all the terms, conditions and provisions thereof
shall remain in full force and effect. This Supplemental Indenture shall form a
part of the Indenture for all purposes, and every holder of Securities
heretofore or hereafter authenticated and delivered shall be bound hereby.
3. GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
<PAGE>
2
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
4. TRUSTEE MAKES NO REPRESENTATION. The Trustee makes no
representation as to the validity or sufficiency of this Supplemental Indenture.
5. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
6. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not effect the construction thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
[NEW GUARANTOR],
by
---------------------------------------
Name:
Title:
WILLIS CORROON CORPORATION,
by
---------------------------------------
Name:
Title:
WILLIS CORROON GROUP LIMITED,
by
---------------------------------------
Name:
Title:
WILLIS CORROON PARTNERS,
by
---------------------------------------
Name:
Title:
THE BANK OF NEW YORK, as Trustee,
by
---------------------------------------
Name:
Title:
<PAGE>
Exhibit 4.3
EXECUTION COPY
WILLIS CORROON CORPORATION
$550,000,000
9% Senior Subordinated Notes due 2009
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
February 2, 1999
CHASE SECURITIES INC.
270 Park Avenue, 4th Floor
New York, New York 10017
CHASE MANHATTAN INTERNATIONAL LIMITED
125 London Wall, 9th Floor
London, EC2Y 5AJ
England
Ladies and Gentlemen:
Willis Corroon Corporation, a Delaware corporation (the
"COMPANY"), proposes to issue and sell to Chase Securities Inc. ("CSI") and
Chase Manhattan International Limited (together with CSI, the "INITIAL
PURCHASERS"), upon the terms and subject to the conditions set forth in a
purchase agreement dated January 28, 1999 (the "PURCHASE AGREEMENT"),
$550,000,000 aggregate principal amount of its 9% Senior Subordinated Notes due
2009 (the "SECURITIES") to be jointly and severally guaranteed on a senior
subordinated basis by Willis Corroon Group Limited ("WCG") and Willis Corroon
Partners ("USGP," and together with WCG, the "GUARANTORS"). Capitalized terms
used but not defined herein shall have the meanings given to such terms in the
Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the
Purchase Agreement and in satisfaction of a condition to the obligations of the
Initial Purchasers thereunder, the Company and the Guarantors agree with the
Initial Purchasers, for the benefit of the holders (including the Initial
Purchasers) of the Securities, the Exchange Securities (as defined herein) and
the Private Exchange Securities (as defined herein) (collectively, the
"HOLDERS"), as follows:
1. REGISTERED EXCHANGE OFFER. The Company and the Guarantors
shall (i) prepare and, not later than 100 days following the date of original
issuance of the Securities (the "ISSUE DATE"), file with the Commission a
registration statement (the "EXCHANGE OFFER REGISTRATION STATEMENT") on an
appropriate form under the Securities Act with respect to a proposed offer to
the Holders of the Securities (the "REGISTERED EXCHANGE OFFER") to issue and
deliver to such Holders, in exchange for the Securities, a like aggregate
principal amount of debt securities of the Company (the "EXCHANGE SECURITIES")
that are identical in all material respects to the Securities, except for the
transfer restrictions relating to the Securities, (ii) use its reasonable best
efforts to cause the Exchange Offer Registration Statement to become effective
under the Securities Act no later than 240 days after the Issue Date and the
Registered Exchange Offer to be consummated no later than 270 days after the
Issue Date and (iii) keep the Exchange Offer Registration Statement effective
for not less than 20 business days (or longer, if required by applicable law)
after the date on which notice of the Registered Exchange Offer is mailed to the
Holders (such period being called the "EXCHANGE OFFER REGISTRATION PERIOD"). The
Exchange Securities will be issued under the Indenture or an indenture (the
"EXCHANGE SECURITIES INDENTURE") between the Company, the Guarantors and the
Trustee or such other bank or trust company that is reasonably satisfactory to
the Initial Purchasers, as trustee (the "EXCHANGE
<PAGE>
2
SECURITIES TRUSTEE"), such indenture to be identical in all material respects to
the Indenture, except for the transfer restrictions relating to the Securities.
Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Registered Exchange Offer, it
being the objective of such Registered Exchange Offer to enable each Holder
electing to exchange Securities for Exchange Securities (assuming that such
Holder (a) is not an affiliate (as defined in Rule 405 under the Securities Act)
of the Company or an Exchanging Dealer (as defined herein) not complying with
the requirements of the next sentence, (b) is not an Initial Purchaser holding
Securities that have, or that are reasonably likely to have, the status of an
unsold allotment in an initial distribution, (c) acquires the Exchange
Securities in the ordinary course of such Holder's business, (d) has no
arrangements or understandings with any person to participate in the
distribution of the Exchange Securities and (e) if it is a person in the United
Kingdom, that its ordinary activities involve it in acquiring, holding, managing
or disposing of investments (as principal or agent) for the purposes of its
business) and to trade such Exchange Securities from and after their receipt
without any limitations or restrictions under the Securities Act and without
material restrictions under the securities laws of the several states of the
United States. The Company, the Guarantors, the Initial Purchasers and each
Exchanging Dealer acknowledge that, pursuant to current interpretations by the
Commission's staff of Section 5 of the Securities Act, each Holder that is a
broker-dealer electing to exchange Securities, acquired for its own account as a
result of market-making activities or other trading activities, for Exchange
Securities (an "EXCHANGING DEALER"), is required to deliver a prospectus
containing substantially the information set forth in Annex A hereto on the
cover, in Annex B hereto in the "Exchange Offer Procedures" section and the
"Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of
Distribution" section of such prospectus (or any comparable section thereof) in
connection with a sale of any such Exchange Securities received by such
Exchanging Dealer pursuant to the Registered Exchange Offer.
If, prior to the consummation of the Registered Exchange
Offer, any Holder holds any Securities acquired by it that have, or that are
reasonably likely to be determined to have, the status of an unsold allotment in
an initial distribution, or any Holder is not entitled to participate in the
Registered Exchange Offer, the Company shall, upon the request of any such
Holder, simultaneously with the delivery of the Exchange Securities in the
Registered Exchange Offer, issue and deliver to any such Holder, in exchange for
the Securities held by such Holder (the "PRIVATE EXCHANGE"), a like aggregate
principal amount of debt securities of the Company (the "PRIVATE EXCHANGE
SECURITIES") that are identical in all material respects to the Exchange
Securities, except for the transfer restrictions relating to such Private
Exchange Securities. The Private Exchange Securities will be issued under the
same indenture as the Exchange Securities, and the Company shall use its
reasonable best efforts to cause the Private Exchange Securities to bear the
same CUSIP number as the Exchange Securities.
In connection with the Registered Exchange Offer, the Company
shall:
(a) mail to each Holder a copy of the prospectus forming part
of the Exchange Offer Registration Statement, together with an
appropriate letter of transmittal (which letter of transmittal shall
also contain a representation that such Holder, if it is a person in
the United Kingdom, that its ordinary activities involve it in
acquiring, holding, managing or disposing of investments (as principal
or agent) for the purposes of its business) and related documents;
(b) keep the Registered Exchange Offer open for not less than
20 business days (or longer, if required by applicable law) after the
date on which notice of the Registered Exchange Offer is mailed to the
Holders;
(c) utilize the services of a depositary for the Registered
Exchange Offer with an address in the Borough of Manhattan, The City of
New York;
<PAGE>
3
(d) permit Holders to withdraw tendered Securities at any time
prior to the close of business, New York City time, on the last
business day on which the Registered Exchange Offer shall remain open;
and
(e) otherwise comply in all respects with all laws that are
applicable to the Registered Exchange Offer.
As soon as practicable after the close of the Registered
Exchange Offer and any Private Exchange, as the case may be, the Company shall:
(a) accept for exchange all Securities tendered and not
validly withdrawn pursuant to the Registered Exchange Offer and the
Private Exchange;
(b) deliver to the Trustee for cancelation all Securities so
accepted for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as
the case may be, promptly to authenticate and deliver to each Holder,
Exchange Securities or Private Exchange Securities, as the case may be,
equal in principal amount to the Securities of such Holder so accepted
for exchange.
The Company shall use its reasonable best efforts to keep the
Exchange Offer Registration Statement effective and to amend and supplement the
prospectus contained therein in order to permit such prospectus to be used by
all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities; PROVIDED that (i) in the case where
such prospectus and any amendment or supplement thereto must be delivered by an
Exchanging Dealer, such period shall be the lesser of 90 days and the date on
which all Exchanging Dealers have sold all Exchange Securities held by them and
(ii) the Company shall make such prospectus and any amendment or supplement
thereto available to any broker-dealer for use in connection with any resale of
any Exchange Securities for a period of not less than 90 days after the
consummation of the Registered Exchange Offer.
The Indenture or the Exchange Securities Indenture, as the
case may be, shall provide that the Securities, the Exchange Securities and the
Private Exchange Securities shall vote and consent together on all matters as
one class and that none of the Securities, the Exchange Securities or the
Private Exchange Securities will have the right to vote or consent as a separate
class on any matter.
Interest on each Exchange Security and Private Exchange
Security issued pursuant to the Registered Exchange Offer and in the Private
Exchange will accrue from the last interest payment date on which interest was
paid on the Securities surrendered in exchange therefor or, if no interest has
been paid on the Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer
shall be required to represent to the Company that at the time of the
consummation of the Registered Exchange Offer (i) any Exchange Securities
received by such Holder will be acquired in the ordinary course of business,
(ii) such Holder has no arrangements or understanding with any person to
participate in the distribution of the Securities or the Exchange Securities
within the meaning of the Securities Act and (iii) such Holder is not an
affiliate of the Company or, if it is such an affiliate, such Holder will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable.
Notwithstanding any other provisions hereof, the Company and
the Guarantors will ensure that (i) any Exchange Offer Registration Statement
and any amendment thereto and any prospectus forming part thereof and any
supplement thereto complies in all material respects with the Securities Act and
the rules and regulations of the Commission thereunder, (ii) any Exchange Offer
Registration Statement and any amendment thereto does not, when it becomes
effective, contain an untrue statement of a material fact or omit to state a
material fact required to
<PAGE>
4
be stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Exchange Offer Registration Statement,
and any supplement to such prospectus, does not, as of the consummation of the
Registered Exchange Offer, include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
2. SHELF REGISTRATION. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff the Company is not
permitted to effect the Registered Exchange Offer as contemplated by Section 1
hereof, or (ii) any Securities validly tendered pursuant to the Registered
Exchange Offer are not exchanged for Exchange Securities within 270 days after
the Issue Date, or (iii) any Initial Purchaser so requests with respect to
Securities or Private Exchange Securities not eligible to be exchanged for
Exchange Securities in the Registered Exchange Offer and held by it following
the consummation of the Registered Exchange Offer, or (iv) any applicable law or
interpretations do not permit any Holder to participate in the Registered
Exchange Offer, or (v) any Holder that participates in the Registered Exchange
Offer does not receive freely transferable Exchange Securities in exchange for
tendered Securities, then the following provisions shall apply:
(a) The Company and the Guarantors shall use their reasonable
best efforts to file as promptly as practicable with the Commission,
and thereafter shall use its reasonable best efforts to cause to be
declared effective, a shelf registration statement on an appropriate
form under the Securities Act relating to the offer and sale of the
Transfer Restricted Securities (as defined below) by the Holders
thereof from time to time in accordance with the methods of
distribution set forth in such registration statement (hereafter, a
"SHELF REGISTRATION STATEMENT" and, together with any Exchange Offer
Registration Statement, a "REGISTRATION STATEMENT").
(b) The Company and the Guarantors shall use their reasonable
best efforts to keep the Shelf Registration Statement continuously
effective in order to permit the prospectus forming part thereof to be
used by Holders of Transfer Restricted Securities for a period ending
on the earlier of (i) two years from the Issue Date or such shorter
period that will terminate when all the Transfer Restricted Securities
covered by the Shelf Registration Statement have been sold pursuant
thereto and (ii) the date on which the Securities become eligible for
resale without volume restrictions pursuant to Rule 144 under the
Securities Act (in any such case, such period being called the "SHELF
REGISTRATION PERIOD"). The Company and the Guarantors shall be deemed
not to have used their reasonable best efforts to keep the Shelf
Registration Statement effective during the requisite period if any of
them voluntarily take any action that would result in Holders of
Transfer Restricted Securities covered thereby not being able to offer
and sell such Transfer Restricted Securities during that period, unless
(A) such action is required by applicable law or (B) such action was
permitted by Section 2(c).
(c) Notwithstanding the provisions of Section 2(b) (but
subject to the provisions of Section 3(b)), the Company and the
Guarantors may issue a notice that the Shelf Registration Statement is
unusable pending the announcement of a material corporate transaction
and may issue any notice suspending use of the Shelf Registration
Statement required under applicable securities laws to be issued.
(d) Notwithstanding any other provisions hereof, the Company
and the Guarantors will ensure that (i) any Shelf Registration
Statement and any amendment thereto and any prospectus forming part
thereof and any supplement thereto complies in all material respects
with the Securities Act and the rules and regulations of the Commission
thereunder, (ii) any Shelf Registration Statement and any amendment
thereto (in either case, other than with respect to information
included therein in reliance upon or in conformity with written
information furnished to the Company by or on behalf of any Holder
specifically for use therein (the "HOLDERS' INFORMATION")) does not,
when it becomes effective, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (iii) any
prospectus forming part of any Shelf Registration Statement,
<PAGE>
5
and any supplement to such prospectus (in either case, other than with
respect to Holders' Information), does not include an untrue statement
of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
3. LIQUIDATED DAMAGES. (a) The parties hereto agree that the
Holders of Transfer Restricted Securities will suffer damages if the Company and
the Guarantors fail to fulfill their obligations under Section 1 or Section 2,
as applicable, and that it would not be feasible to ascertain the extent of such
damages. Accordingly, if (i) the applicable Registration Statement is not filed
with the Commission on or prior to 100 days after the Issue Date (or, in the
case of a Shelf Registration Statement required to be filed in response to a
change in law or applicable interpretations of the Commission's staff, if later,
within 60 days after publication of the change in law or interpretations, but in
no event before 100 calender days after the Issue Date), (ii) the Exchange Offer
Registration Statement or the Shelf Registration Statement, as the case may be,
is not declared effective within 240 days after the Issue Date (or, in the case
of a Shelf Registration Statement required to be filed in response to a change
in law or applicable interpretations of the Commission's staff, if later, within
90 days after publication of the change in law or interpretations, but in no
event before 240 days after the Issue Date), (iii) the Registered Exchange Offer
is not consummated on or prior to 270 days after the Issue Date (other than in
the event the Company files a Shelf Registration Statement), or (iv) the Shelf
Registration Statement is filed and declared effective within the applicable
time period specified in clause (ii) above but shall thereafter cease to be
effective (other than for any period that the Company is not obligated to
maintain the effectiveness thereof, including as set forth in Section 2(e) and
3(b)) without being succeeded within 90 days by an additional Registration
Statement filed and declared effective (each such event referred to in clauses
(i) through (iv), a "REGISTRATION DEFAULT"), the Company and the Guarantors will
be jointly and severally obligated to pay liquidated damages to each Holder of
Transfer Restricted Securities, during the period of one or more such
Registration Defaults, with respect to the first 90-day period immediately
following the occurrence of the first Registration Default in an amount equal to
.25% per annum (which rate will be increased by an additional .25% per annum for
each subsequent 90-day period that any liquidated damages continue to accrue;
PROVIDED that the rate at which liquidated damages accrue may in no event exceed
1.00% per annum) in respect of the Securities constituting Transfer Restricted
Securities held by such Holder until (i) the applicable Registration Statement
is filed, (ii) the Exchange Offer Registration Statement is declared effective
and the Registered Exchange Offer is consummated, (iii) the Shelf Registration
Statement is declared effective or (iv) the Shelf Registration Statement again
becomes effective, as the case may be. Following the cure of all Registration
Defaults, the accrual of liquidated damages will cease.
(b) Notwithstanding the foregoing provisions of Section 3(a),
the Company and the Guarantors may issue a notice that the Shelf Registration
Statement is unusable pending the announcement of a material corporate
transaction and may issue any notice suspending use of the Shelf Registration
Statement required under applicable securities laws to be issued and, in the
event that the aggregate number of days in any consecutive twelve-month period
for which all such notices are issued and effective exceeds 60 days in the
aggregate, then the Company will be obligated to pay liquidated damages to each
Holder of Transfer Restricted Securities in an amount equal to 0.25% per annum
(which rate will be increased by an additional 0.25% per annum for each
subsequent 90-day period that liquidated damages continue to accrue; PROVIDED
that the rate at which liquidated damages accrue may in no event exceed 1.00%
per annum) in respect of the Securities constituting Transfer Restricted
Securities. Upon the Company declaring that the Shelf Registration Statement is
usable after the period of time described in the preceding sentence the accrual
of liquidated damages shall cease; PROVIDED, HOWEVER, that if after any such
cessation of the accrual of liquidated damages the Shelf Registration Statement
again ceases to be usable beyond the period permitted above, liquidated damages
will again accrue pursuant to the foregoing provisions.
(c) The Company shall notify the Trustee and the Paying Agent
under the Indenture immediately upon the happening of each and every
Registration Default or any event described in Section 3(b). The Company and the
Guarantors shall pay the liquidated damages
<PAGE>
6
due on the Transfer Restricted Securities by depositing with the Paying Agent
(which may not be the Company for these purposes), in trust, for the benefit of
the Holders thereof, prior to 10:00 a.m., New York City time, on the next
interest payment date specified by the Indenture and the Securities, sums
sufficient to pay the liquidated damages then due. The liquidated damages due
shall be payable on each interest payment date specified by the Indenture and
the Securities to the record holder entitled to receive the interest payment to
be made on such date. Each obligation to pay liquidated damages shall be deemed
to accrue from and including the date of the applicable Registration Default.
(d) The parties hereto agree that the liquidated damages
provided for in this Section 3 constitute a reasonable estimate of and are
intended to constitute the sole damages that will be suffered by Holders of
Transfer Restricted Securities by reason of the failure of (i) the Shelf
Registration Statement or the Exchange Offer Registration Statement to be filed,
(ii) the Shelf Registration Statement to remain effective or (iii) the Exchange
Offer Registration Statement to be declared effective and the Registered
Exchange Offer to be consummated, in each case to the extent required by this
Agreement.
(e) As used herein, the term "TRANSFER RESTRICTED SECURITIES"
means (i) each Security until the date on which such Security has been exchanged
for a freely transferable Exchange Security in the Registered Exchange Offer,
(ii) each Security or Private Exchange Security until the date on which it has
been effectively registered under the Securities Act and disposed of in
accordance with the Shelf Registration Statement or (iii) each Security or
Private Exchange Security until the date on which it is distributed to the
public pursuant to Rule 144 under the Securities Act or is saleable pursuant to
Rule 144(k) under the Securities Act. Notwithstanding anything to the contrary
in Sections 3(a) and 3(b), the Company and the Guarantors shall not be required
to pay liquidated damages to a Holder of Transfer Restricted Securities if such
Holder failed to comply with its obligations to make the representations set
forth in the second to last paragraph of Section 1 or failed to provide the
information required to be provided by it, if any, pursuant to Section 4(n).
4. REGISTRATION PROCEDURES. In connection with any
Registration Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to each Initial Purchaser,
prior to the filing thereof with the Commission, a copy of the
Registration Statement and each amendment thereof and each supplement,
if any, to the prospectus included therein; (ii) include substantially
the information set forth in Annex A hereto on the cover, in Annex B
hereto in the "Exchange Offer Procedures" section and the "Purpose of
the Exchange Offer" section and in Annex C hereto in the "Plan of
Distribution" section (or in similarly titled sections) of the
prospectus forming a part of the Exchange Offer Registration Statement,
and include the information set forth in Annex D hereto in the Letter
of Transmittal delivered pursuant to the Registered Exchange Offer; and
(iii) if requested by any Initial Purchaser, include the information
required by Items 507 or 508 of Regulation S-K, as applicable, in the
prospectus forming a part of the Exchange Offer Registration Statement.
(b) The Company shall advise each Initial Purchaser, and, in
the cases of clauses (ii), (iii), (iv) or (v) below, each Exchanging
Dealer and the Holders (if applicable) and, if requested by any such
person, confirm such advice in writing (which advice pursuant to
clauses (ii)-(v) hereof shall be accompanied by an instruction to
suspend the use of the prospectus until the requisite changes have been
made):
(i) when any Registration Statement and any
amendment thereto has been filed with the Commission and when
such Registration Statement or any post-effective amendment
thereto has become effective;
(ii) of any request by the Commission after the
effective date for amendments or supplements to any
Registration Statement or the prospectus included therein or
for additional information;
<PAGE>
7
(iii) of the issuance by the Commission of any stop
order suspending the effectiveness of any Registration
Statement or the initiation of any proceedings for that
purpose;
(iv) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of the Securities, the Exchange Securities or
the Private Exchange Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such
purpose; and
(v) of the happening of any event that requires the
making of any changes in any Registration Statement or the
prospectus included therein in order that the statements
therein are not misleading and do not omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading.
(c) The Company and the Guarantors will make every reasonable
effort to obtain the withdrawal at the earliest possible time of any
order suspending the effectiveness of any Registration Statement.
(d) The Company will furnish to each Holder of Transfer
Restricted Securities included within the coverage of any Shelf
Registration Statement, without charge, at least one conformed copy of
such Shelf Registration Statement and any post-effective amendment
thereto, including financial statements and schedules and, if any such
Holder so requests in writing, all exhibits thereto (including those,
if any, incorporated by reference).
(e) The Company will, during the Shelf Registration Period,
promptly deliver to each Holder of Transfer Restricted Securities
included within the coverage of any Shelf Registration Statement,
without charge, as many copies of the prospectus (including each
preliminary prospectus) included in such Shelf Registration Statement
and any amendment or supplement thereto as such Holder may reasonably
request; and the Company consents to the use of such prospectus or any
amendment or supplement thereto by each of the selling Holders of
Transfer Restricted Securities in connection with the offer and sale of
the Transfer Restricted Securities covered by such prospectus or any
amendment or supplement thereto.
(f) The Company will furnish to each Initial Purchaser and each
Exchanging Dealer, and to any other Holder who so requests, without
charge, at least one conformed copy of the Exchange Offer Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules and, if any Initial Purchaser or Exchanging
Dealer or any such Holder so requests in writing, all exhibits thereto
(including those, if any, incorporated by reference).
(g) The Company will, during the Exchange Offer Registration
Period or the Shelf Registration Period, as applicable, promptly
deliver to each Initial Purchaser, each Exchanging Dealer and such
other persons that are required to deliver a prospectus following the
Registered Exchange Offer, without charge, as many copies of the final
prospectus included in the Exchange Offer Registration Statement or the
Shelf Registration Statement and any amendment or supplement thereto as
such Initial Purchaser, Exchanging Dealer or other persons may
reasonably request; and the Company and the Guarantors consent to the
use of such prospectus or any amendment or supplement thereto by any
such Initial Purchaser, Exchanging Dealer or other persons, as
applicable, as aforesaid.
(h) Prior to the effective date of any Registration Statement,
the Company and the Guarantors will use their reasonable best efforts
to register or qualify, or cooperate with the Holders of Securities,
Exchange Securities or Private Exchange Securities included therein and
their respective counsel in connection with the registration or
qualification of, such Securities, Exchange Securities or Private
Exchange Securities for
<PAGE>
8
offer and sale under the securities or blue sky laws of such
jurisdictions as any such Holder reasonably requests in writing and do
any and all other acts or things necessary or advisable to enable the
offer and sale in such jurisdictions of the Securities, Exchange
Securities or Private Exchange Securities covered by such Registration
Statement; PROVIDED that the Company and the Guarantors will not be
required to qualify generally to do business in any jurisdiction where
they are not then so qualified or to take any action which would
subject them to general service of process or to taxation in any such
jurisdiction where they are not then so subject.
(i) The Company and the Guarantors will cooperate with the
Holders of Securities, Exchange Securities or Private Exchange
Securities to facilitate the timely preparation and delivery of
certificates representing Securities, Exchange Securities or Private
Exchange Securities to be sold pursuant to any Registration Statement
free of any restrictive legends and in such denominations and
registered in such names as the Holders thereof may request in writing
at least three business days prior to the closing date of any sale of
Securities, Exchange Securities or Private Exchange Securities pursuant
to such Registration Statement.
(j) If any event contemplated by Section 4(b)(ii) through (v)
occurs during the period for which the Company and the Guarantors are
required to maintain an effective Registration Statement, the Company
and the Guarantors will promptly prepare and file with the Commission a
post-effective amendment to the Registration Statement or a supplement
to the related prospectus or file any other required document so that,
as thereafter delivered to purchasers of the Securities, Exchange
Securities or Private Exchange Securities from a Holder, the prospectus
will not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(k) Not later than the effective date of the applicable
Registration Statement, the Company will provide a CUSIP number for the
Securities, the Exchange Securities and the Private Exchange
Securities, as the case may be, and provide the applicable trustee with
printed certificates for the Securities, the Exchange Securities or the
Private Exchange Securities, as the case may be, in a form eligible for
deposit with The Depository Trust Company.
(l) The Company and the Guarantors will comply with all
applicable rules and regulations of the Commission and the Company will
make generally available to its security holders as soon as reasonably
practicable after the effective date of the applicable Registration
Statement an earning statement covering at least 12 months which shall
satisfy the provisions of Section 11(a) of the Securities Act.
(m) The Company and the Guarantors will cause the Indenture or
the Exchange Securities Indenture, as the case may be, to be qualified
under the Trust Indenture Act as required by applicable law in a timely
manner.
(n) The Company may require each Holder of Transfer Restricted
Securities to be registered pursuant to any Shelf Registration
Statement to furnish to the Company such information concerning the
Holder and the distribution of such Transfer Restricted Securities as
the Company may from time to time reasonably require for inclusion in
such Shelf Registration Statement, and the Company may exclude from
such registration the Transfer Restricted Securities of any Holder that
fails to furnish such information within a reasonable time after
receiving such request.
(o) In the case of a Shelf Registration Statement, each Holder
of Transfer Restricted Securities to be registered pursuant thereto
agrees by acquisition of such Transfer Restricted Securities that, upon
receipt of any notice from the Company pursuant to Section 2(c), 3(b)
or 4(b)(ii) through (v), such Holder will discontinue disposition of
such Transfer Restricted Securities until such Holder's receipt of
copies of
<PAGE>
9
the supplemental or amended prospectus contemplated by Section 4(j) or
until advised in writing (the "ADVICE") by the Company that the use of
the applicable prospectus may be resumed. If the Company shall give any
notice under Section 2(c), 3(b) or 4(b)(ii) through (v) during the
period that the Company is required to maintain an effective
Registration Statement (the "EFFECTIVENESS PERIOD"), such Effectiveness
Period shall be extended by the number of days during such period from
and including the date of the giving of such notice to and including
the date when each seller of Transfer Restricted Securities covered by
such Registration Statement shall have received (x) the copies of the
supplemental or amended prospectus contemplated by Section 4(j) (if an
amended or supplemental prospectus is required) or (y) the Advice (if
no amended or supplemental prospectus is required).
(p) In the case of a Shelf Registration Statement, the Company
and the Guarantors shall enter into such customary agreements
(including, if requested by the Holders of a majority in aggregate
principal amount of the Exchange Securities, an underwriting agreement
in customary form) and take all such other action, if any, as Holders
of a majority in aggregate principal amount of the Securities, Exchange
Securities and Private Exchange Securities being sold or the managing
underwriters (if any) shall reasonably request in order to facilitate
any disposition of Securities, Exchange Securities or Private Exchange
Securities pursuant to such Shelf Registration Statement.
(q) In the case of a Shelf Registration Statement, the Company
shall (i) make reasonably available for inspection by a representative
of, and Special Counsel (as defined below) acting for, Holders of a
majority in aggregate principal amount of the Securities, Exchange
Securities and Private Exchange Securities being sold and any
underwriter participating in any disposition of Securities, Exchange
Securities or Private Exchange Securities pursuant to such Shelf
Registration Statement, all relevant financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries and (ii) use its reasonable best efforts to have its
officers, directors, employees, accountants and counsel supply all
relevant information reasonably requested by such representative,
Special Counsel or any such underwriter (an "INSPECTOR") in connection
with such Shelf Registration Statement PROVIDED, HOWEVER, that such
Inspector shall first agree in writing with the Company that any
information that is reasonably and in good faith designated by the
Company in writing as confidential at the time of delivery of such
information shall be kept confidential by such Inspector, unless (i)
disclosure of such information is required by court or administrative
order or is necessary to respond to inquiries of regulatory
authorities, (ii) disclosure of such information is required by law
(including any disclosure requirements pursuant to Federal securities
laws in connection with the filing of such Registration Statement or
the use of any prospectus), (iii) such information becomes generally
available to the public other than as a result of a disclosure or
failure to safeguard such information by such Inspector or (iv) such
information becomes available to such Inspector from a source other
than the Company and its subsidiaries and such source is not known,
after due inquiry, by the relevant Holder to be bound by a
confidentiality agreement; PROVIDED FURTHER, that the foregoing
investigation shall be coordinated on behalf of the Holders by one
representative designated by and on behalf of such Holders and any such
confidential information shall be available from such representative to
such Holders so long as any Holder agrees to be bound by such
confidentiality agreement.
(r) In the case of a Shelf Registration Statement, the Company
shall, if requested by Holders of a majority in aggregate principal
amount of the Securities, Exchange Securities and Private Exchange
Securities being sold, their Special Counsel or the managing
underwriters (if any) in connection with such Shelf Registration
Statement, use its reasonable best efforts to cause (i) its counsel to
deliver an opinion relating to the Shelf Registration Statement and the
Securities, Exchange Securities or Private Exchange Securities, as
applicable, in customary form, (ii) its officers to execute and deliver
all customary documents and certificates requested by Holders of a
majority in aggregate principal amount of the Securities, Exchange
Securities and Private
<PAGE>
10
Exchange Securities being sold, their Special Counsel or the managing
underwriters (if any) and (iii) its independent public accountants to
provide a comfort letter or letters in customary form, subject to
receipt of appropriate documentation as contemplated, and only if
permitted, by Statement of Auditing Standards No. 72.
5. REGISTRATION EXPENSES. The Company and the Guarantors will
jointly and severally bear all expenses incurred in connection with the
performance of its obligations under Sections 1, 2, 3 and 4 and, other than in
connection with the Exchange Offer Registration Statement, the Company will
reimburse the Initial Purchasers and the Holders for the reasonable fees and
disbursements of one firm of attorneys (in addition to any local counsel) chosen
by the Holders of a majority in aggregate principal amount of the Securities,
the Exchange Securities and the Private Exchange Securities to be sold pursuant
to each Registration Statement (the "SPECIAL COUNSEL") acting for the Initial
Purchasers or Holders in connection therewith, which counsel shall be approved
by the Company (such approval to not be unreasonably withheld). Each Initial
Purchaser and Holder shall pay all expenses of its counsel other than as set
forth in the preceding sentence, underwriting discounts and commissions (prior
to the reduction thereof with respect to selling concessions, if any) and
transfer taxes, if any, relating to the sale or disposition of such Initial
Purchaser's or Holder's Securities pursuant to the Shelf Registration Statement.
6. INDEMNIFICATION. (a) In the event of a Shelf Registration
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by an Initial Purchaser or Exchanging Dealer, as
applicable, the Company and the Guarantors shall jointly and severally indemnify
and hold harmless each Holder (including, without limitation, any such Initial
Purchaser or Exchanging Dealer), its affiliates, their respective officers,
directors, employees, representatives and agents, and each person, if any, who
controls such Holder within the meaning of the Securities Act or the Exchange
Act (collectively referred to for purposes of this Section 6 and Section 7 as a
Holder) from and against any loss, claim, damage or liability, joint or several,
or any action in respect thereof (including, without limitation, any loss,
claim, damage, liability or action relating to purchases and sales of
Securities, Exchange Securities or Private Exchange Securities), to which that
Holder may become subject, whether commenced or threatened, under the Securities
Act, the Exchange Act, any other federal or state statutory law or regulation,
at common law or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any such Registration Statement
or any prospectus forming part thereof or in any amendment or supplement thereto
or (ii) the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and shall reimburse each Holder promptly upon demand for any legal
or other expenses reasonably incurred by that Holder in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; PROVIDED, HOWEVER, that the Company and
the Guarantors shall not be liable in any such case to the extent that any such
loss, claim, damage, liability or action arises out of, or is based upon, an
untrue statement or alleged untrue statement in or omission or alleged omission
from any of such documents in reliance upon and in conformity with any Holders'
Information; and PROVIDED, FURTHER, that with respect to any such untrue
statement in or omission from any related preliminary prospectus, the indemnity
agreement contained in this Section 6(a) shall not inure to the benefit of any
Holder from whom the person asserting any such loss, claim, damage, liability or
action received Securities, Exchange Securities or Private Exchange Securities
to the extent that such loss, claim, damage, liability or action of or with
respect to such Holder results from the fact that both (A) a copy of the final
prospectus was not sent or given to such person at or prior to the written
confirmation of the sale of such Securities, Exchange Securities or Private
Exchange Securities to such person and (B) the untrue statement in or omission
from the related preliminary prospectus was corrected in the final prospectus
unless, in either case, such failure to deliver the final prospectus was a
result of non-compliance by the Company with Section 4(d), 4(e), 4(f) or 4(g).
<PAGE>
11
(b) In the event of a Shelf Registration Statement, each Holder
shall indemnify and hold harmless the Company, its affiliates, their respective
officers, directors, employees, representatives and agents, and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 6(b) and
Section 7 as the Company), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with any Holders' Information furnished to
the Company by such Holder, and shall reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; PROVIDED, HOWEVER, that no such Holder
shall be liable for any indemnity claims hereunder in excess of the amount of
net proceeds received by such Holder from the sale of Securities, Exchange
Securities or Private Exchange Securities pursuant to such Shelf Registration
Statement.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that action; PROVIDED,
HOWEVER, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 6 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and PROVIDED, FURTHER, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 6. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than the reasonable costs of investigation; PROVIDED, HOWEVER,
that an indemnified party shall have the right to employ its own counsel in any
such action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
<PAGE>
12
contained in Sections 6(a) and 6(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party (which
consent shall not be unreasonably withheld), effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
7. CONTRIBUTION. If the indemnification provided for in
Section 6 is unavailable or insufficient to hold harmless an indemnified party
under Section 6(a) or 6(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company from the offering and sale
of the Securities, on the one hand, and a Holder with respect to the sale by
such Holder of Securities, Exchange Securities or Private Exchange Securities,
on the other, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company and the Guarantors, on the one hand, and such Holder, on
the other, with respect to the statements or omissions that resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Guarantors, on the one hand, and a Holder, on the other, with
respect to such offering and such sale shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Securities (before
deducting expenses) received by or on behalf of the Company as set forth in the
table on the cover of the Offering Memorandum, on the one hand, bear to the
total proceeds received by such Holder with respect to its sale of Securities,
Exchange Securities or Private Exchange Securities, on the other. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to the Company and the Guarantors or
information supplied by the Company and the Guarantors, on the one hand, or to
any Holders' Information supplied by such Holder, on the other, the intent of
the parties and their relative knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The parties hereto
agree that it would not be just and equitable if contributions pursuant to this
Section 7 were to be determined by PRO RATA allocation or by any other method of
allocation that does not take into account the equitable considerations referred
to herein. The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof, referred to
above in this Section 7 shall be deemed to include, for purposes of this Section
7, any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending or preparing to defend any such
action or claim. Notwithstanding the provisions of this Section 7, an
indemnifying party that is a Holder of Securities, Exchange Securities or
Private Exchange Securities shall not be required to contribute any amount in
excess of the amount by which the total price at which the Securities, Exchange
Securities or Private Exchange Securities sold by such indemnifying party to any
purchaser exceeds the amount of any damages which such indemnifying party has
otherwise paid or become liable to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
8. RULES 144 AND 144A. The Company and the Guarantors
covenants that they will take such further action as any Holder of Transfer
Restricted Securities may reasonably request, all to the extent required from
time to time to enable such Holder to sell Transfer Restricted Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rules 144 and 144A (including, without limitation, the
requirements of
<PAGE>
13
Rule 144A(d)(4)). Upon the written request of any Holder of Transfer Restricted
Securities, the Company and the Guarantors shall deliver to such Holder a
written statement as to whether they have complied with such requirements.
Notwithstanding the foregoing, nothing in this Section 8 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
9. UNDERWRITTEN REGISTRATIONS. If any of the Transfer
Restricted Securities covered by any Shelf Registration Statement are to be sold
in an underwritten offering, the investment banker or investment bankers and
manager or managers that will administer the offering will be selected by the
Holders of a majority in aggregate principal amount of such Transfer Restricted
Securities included in such offering, subject to the consent of the Company
(which shall not be unreasonably withheld or delayed), and such Holders shall be
responsible for all underwriting commissions and discounts in connection
therewith.
No person may participate in any underwritten registration
hereunder unless such person (i) agrees to sell such person's Transfer
Restricted Securities on the basis reasonably provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
10. MISCELLANEOUS. (a) AMENDMENTS AND WAIVERS. The provisions
of this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
Company has obtained the written consent of Holders of a majority in aggregate
principal amount of the Securities, the Exchange Securities and the Private
Exchange Securities, taken as a single class. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders whose Securities, Exchange
Securities or Private Exchange Securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of a majority in aggregate
principal amount of the Securities, the Exchange Securities and the Private
Exchange Securities being sold by such Holders pursuant to such Registration
Statement.
(b) NOTICES. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telecopier or air courier guaranteeing next-day delivery:
(1) if to a Holder, at the most current address given by
such Holder to the Company in accordance with the provisions of this
Section 10(b), which address initially is, with respect to each Holder,
the address of such Holder maintained by the Registrar under the
Indenture, with a copy in like manner to Chase Securities Inc. and
Chase Manhattan International Limited;
(2) if to an Initial Purchaser, initially at its address
set forth in the Purchase Agreement; and
(3) if to the Company, initially at the address of the
Company set forth in the Purchase Agreement.
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; one business
day after being delivered to a next-day air courier; five business days after
being deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the Company and its successors and assigns.
(d) COUNTERPARTS. This Agreement may be executed in any number
of counterparts (which may be delivered in original form or by telecopier) and
by the parties hereto
<PAGE>
14
in separate counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same
agreement.
(e) DEFINITION OF TERMS. For purposes of this Agreement, (a)
the term "business day" means any day on which the New York Stock Exchange, Inc.
is open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
(f) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
(h) NO INCONSISTENT AGREEMENTS. The Company and each Guarantor
represents, warrants and agrees that (i) it has not entered into, shall not, on
or after the date of this Agreement, enter into any agreement that is
inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof, (ii) it has not previously
entered into any agreement which remains in effect granting any registration
rights with respect to any of its debt securities to any person and (iii) (with
respect to the Company) without limiting the generality of the foregoing,
without the written consent of the Holders of a majority in aggregate principal
amount of the then outstanding Transfer Restricted Securities, it shall not
grant to any person the right to request the Company to register any debt
securities of the Company under the Securities Act unless the rights so granted
are not in conflict or inconsistent with the provisions of this Agreement.
(i) NO PIGGYBACK ON REGISTRATIONS. Neither the Company nor any
of its security holders (other than the Holders of Transfer Restricted
Securities in such capacity) shall have the right to include any securities of
the Company in any Shelf Registration or Registered Exchange Offer other than
Transfer Restricted Securities.
(j) SEVERABILITY. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or invalidated,
and the parties hereto shall use their reasonable best efforts to find and
employ an alternative means to achieve the same or substantially the same result
as that contemplated by such term, provision, covenant or restriction. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and restrictions
without including any of such that may be hereafter declared invalid, illegal,
void or unenforceable.
<PAGE>
15
Please confirm that the foregoing correctly sets forth the
agreement among the Company, the Guarantors and the Initial Purchasers.
Very truly yours,
WILLIS CORROON CORPORATION,
by
---------------------------------------
Name:
Title:
WILLIS CORROON GROUP LIMITED,
by
---------------------------------------
Name:
Title:
WILLIS CORROON PARTNERS,
By Willis Corroon Group Limited,
Its General Partner
by
---------------------------------------
Name:
Title:
<PAGE>
16
Accepted:
CHASE SECURITIES INC.,
by
------------------------------
Authorized Signatory
CHASE MANHATTAN
INTERNATIONAL LIMITED,
by
-------------------------------
Authorized Signatory
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its
own account pursuant to the Registered Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange
Securities. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Securities received in
exchange for Securities where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 90 days after
consummation of the Registered Exchange Offer (the "Expiration Date"), it will
make this Prospectus available to any broker-dealer for use in connection with
any such resale. See "Plan of Distribution".
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its
own account in exchange for Securities, where such Securities were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution".
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its
own account pursuant to the Registered Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange
Securities. This Prospectus, as it may be amended or supplemented from time to
time, may be used by a broker-dealer in connection with resales of Exchange
Securities received in exchange for Securities where such Securities were
acquired as a result of market-making activities or other trading activities.
The Company has agreed that, for a period of 90 days after the Expiration Date,
it will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale. In addition, until
[ ], 199[ ], all dealers effecting transactions in the Exchange
Securities may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of
Exchange Securities by broker-dealers. Exchange Securities received by
broker-dealers for their own account pursuant to the Registered Exchange Offer
may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Securities or a combination of such methods of resale,
at market prices prevailing at the time of resale, at prices related to such
prevailing market prices or at negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Securities. Any
broker-dealer that resells Exchange Securities that were received by it for its
own account pursuant to the Registered Exchange Offer and any broker or dealer
that participates in a distribution of such Exchange Securities may be deemed to
be an "underwriter" within the meaning of the Securities Act and any profit on
any such resale of Exchange Securities and any commission or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
For a period of 90 days after the Expiration Date the Company
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company will indemnify the Holders of the
Securities (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
<PAGE>
ANNEX D
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE
10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE>
Exhibit 5.1
[LETTERHEAD OF SIMPSON THACHER & BARTLETT]
, 1999
WILLIS CORROON CORPORATION
WILLIS CORROON GROUP LIMITED
WILLIS CORROON PARTNERS
c/o Willis Corroon Group Limited
Ten Trinity Square
London EC3P 3AX
Ladies and Gentlemen:
We have acted as special U.S. counsel to Willis Corroon Corporation, a
Delaware corporation (the "Issuer"), and to Willis Corroon Group Limited, a
company with limited liability organized under the laws of England and Wales
("WCG"), and Willis Corroon Partners, a Delaware general partnership ("USGP",
and together with WCG, the "Guarantors"), in connection with the Registration
Statement on Form F-4 (the "Registration Statement") filed by the Issuer and the
Guarantors with the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended, relating to the issuance by the Issuer
of $550,000,000 aggregate principal amount of its 9% Senior Subordinated Notes
due 2009 (the "Exchange Notes") and the issuance by the Guarantors of guarantees
(the "Guarantees") with respect to the Exchange Notes. The Exchange Notes and
the Guarantees thereof will be issued under an Indenture, dated as of February
2, 1999 (the
<PAGE>
WILLIS CORROON CORPORATION
WILLIS CORROON GROUP LIMITED
WILLIS CORROON PARTNERS -2- , 1999
"Indenture"), among the Issuer, the Guarantors and The Bank of New York, as
Trustee. The Exchange Notes will be offered by the Issuer in exchange (the
"Exchange Offer") for $550,000,000 aggregate principal amount of its outstanding
9% Senior Subordinated Notes due 2009 (the "Notes").
We have examined the Registration Statement and the Indenture, which
has been filed with the Commission as an exhibit to the Registration Statement.
In addition, we have examined, and have relied as to matters of fact upon, the
originals, duplicates or certified or conformed copies of such corporate
records, agreements, instruments and other documents and have made such other
and further investigations as we have deemed relevant and necessary in
connection with the opinions hereinafter set forth. As to questions of fact
material to this opinion we have relied upon certificates of public officials
and officers and representatives of the Issuer and the Guarantors.
In rendering the opinions set forth below, we have assumed the
genuineness of all signatures, the legal capacity of natural persons, the due
organization and valid existence of USGP, the due authorization, execution and
delivery of the Indenture by USGP, that all necessary partnership action has
been taken by USGP to approve the terms of the Indenture and its Guarantee, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as duplicates or certified
or conformed copies, and the authenticity of the originals of such latter
documents.
<PAGE>
WILLIS CORROON CORPORATION
WILLIS CORROON GROUP LIMITED
WILLIS CORROON PARTNERS -3- , 1999
In rendering the opinions set forth below, we have also assumed that
(1) WCG is validly existing under the laws of England and Wales and has duly
authorized, executed and delivered the Indenture in accordance with its
Memorandum and Articles of Association and the laws of England and Wales, (2)
all necessary corporate action has been taken by WCG to approve the terms of the
Indenture and its Guarantee, (3) the execution, delivery and performance by WCG
of the Indenture do not violate the laws of England and Wales or any other
applicable laws (excepting the laws of the State of New York and the federal
laws of the Untied States) and (4) the execution, delivery and performance by
WCG of the Indenture do not constitute a breach or violation of any agreement or
instrument which is binding upon WCG.
Based upon the foregoing, and subject to the qualifications and
limitations stated herein, we are of the opinion that:
1. When the Exchange Notes have been duly executed, authenticated,
issued and delivered in accordance with the provisions of the Indenture upon the
exchange for Notes pursuant to the Exchange Offer, the Exchange Notes will
constitute valid and legally binding obligations of the Issuer, enforceable
against the Issuer in accordance with their terms.
2. When the Exchange Notes have been duly executed, authenticated,
issued and delivered in accordance with the provisions of the Indenture upon the
exchange for Notes pursuant to the Exchange Offer, the Guarantees will
constitute valid and legally binding obligations of the Guarantors, enforceable
against the Guarantors in accordance with their terms.
Our opinions set forth above are subject to the effects of (i)
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws
<PAGE>
WILLIS CORROON CORPORATION
WILLIS CORROON GROUP LIMITED
WILLIS CORROON PARTNERS -4- , 1999
relating to or affecting creditors' rights generally, (ii) general equitable
principles (whether considered in a proceeding in equity or at law), (iii) an
implied covenant of good faith and fair dealing and (iv) the possible judicial
application of foreign laws or foreign governmental or judicial action affecting
creditors' rights.
We are members of the Bar of the State of New York, and we do not
express any opinion herein concerning any law other than the law of the State of
New York, the federal law of the United States and the Delaware General
Corporation Law.
We hereby consent to the filing of this opinion letter as Exhibit 5.1
to the Registration Statement and to the use of our name under the caption
"Legal Matters" in the Prospectus included in the Registration Statement.
Very truly yours,
-----------------------------------
SIMPSON THACHER & BARTLETT
<PAGE>
Exhibit 10.1
EXECUTION COPY
WILLIS CORROON CORPORATION
$550,000,000
9% Senior Subordinated Notes due 2009
PURCHASE AGREEMENT
January 28, 1999
CHASE SECURITIES INC.
270 Park Avenue, 4th floor
New York, New York 10017
CHASE MANHATTAN INTERNATIONAL LIMITED
125 London Wall, 9th Floor
London, EC2Y 5AJ
England
Ladies and Gentlemen:
Willis Corroon Corporation, a Delaware corporation (the
"ISSUER"), proposes to issue and sell $550,000,000 aggregate principal amount of
9% Senior Subordinated Notes due 2009 (the "SECURITIES"). The Securities will be
issued pursuant to an Indenture to be dated as of February 2, 1999 (the
"INDENTURE"), among the Issuer, Willis Corroon Group Limited (the "COMPANY"),
Willis Corroon Partners ("USGP", and together with the Company, the
"GUARANTORS") and The Bank of New York, as trustee (the "TRUSTEE"). The
Securities will be guaranteed on an unsecured, senior subordinated basis by each
Guarantor and, following the Closing Date (as defined in Section 3), by certain
subsidiaries under the circumstances set forth in the Indenture (the "ADDITIONAL
GUARANTORS"). The Issuer and the Guarantors hereby confirm their agreement with
Chase Securities Inc. ("CSI") and Chase Manhattan International Limited
(collectively the "INITIAL PURCHASERS") concerning the purchase of the
Securities from the Issuer by the Initial Purchasers.
The Securities will be offered and sold to the Initial
Purchasers without being registered under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), in reliance upon an exemption therefrom. The Company has
prepared a preliminary offering memorandum dated December 23, 1998 (the
"PRELIMINARY OFFERING MEMORANDUM") and will prepare an offering memorandum dated
the date hereof (the "OFFERING MEMORANDUM") setting forth information concerning
the Company, its Subsidiaries, its Associates and the Securities. Copies of the
Preliminary Offering Memorandum have been, and copies of the Offering Memorandum
will be, delivered by the Company to the Initial Purchasers pursuant to the
terms of this Agreement. Any references herein to the Preliminary Offering
Memorandum and the Offering Memorandum shall be deemed to include all amendments
and supplements thereto, unless otherwise noted. The Company hereby confirms
that it has authorized the use of the Preliminary Offering Memorandum and the
Offering Memorandum
<PAGE>
2
in connection with the offering and resale of the Securities by the Initial
Purchasers in accordance with Section 2.
Holders of the Securities (including the Initial Purchasers
and their direct and indirect transferees) will be entitled to the benefits of
an Exchange and Registration Rights Agreement, substantially in the form
attached hereto as Annex A (the "REGISTRATION RIGHTS AGREEMENT"), pursuant to
which the Company, the Issuer and USGP will agree to file with the Securities
and Exchange Commission (the "COMMISSION") (i) a registration statement under
the Securities Act (the "EXCHANGE OFFER REGISTRATION STATEMENT") registering an
issue of senior subordinated notes of the Issuer (the "EXCHANGE SECURITIES")
that are identical in all material respects to the Securities (except that the
Exchange Securities will not contain terms with respect to transfer
restrictions) and (ii) under certain circumstances, a shelf registration
statement pursuant to Rule 415 under the Securities Act (the "SHELF REGISTRATION
STATEMENT").
The proceeds from the sale of the Securities will be used
solely to refinance the loans outstanding under the Senior Subordinated Loan
Agreement dated as of November 19, 1998, among the Company, USGP, the Issuer,
the Lenders from time to time party thereto, The Chase Manhattan Bank, as
Administrative Agent and Chase Securities Inc., as Lead Arranger, and to pay
related fees and expenses, all as described in the Offering Memorandum.
Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Offering Memorandum.
1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The Company,
USGP and the Issuer jointly and severally represent and warrant to, and agree
with, the several Initial Purchasers on and as of the date hereof and the
Closing Date that:
(a) As of its date and as of the Closing Date, the Offering
Memorandum did not and will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; PROVIDED that the Company, USGP and the
Issuer make no representation or warranty as to information contained in or
omitted from the Offering Memorandum in reliance upon and in conformity with
written information relating to the Initial Purchasers furnished to the Company
by or on behalf of any Initial Purchaser specifically for use therein (the
"INITIAL PURCHASERS' INFORMATION").
(b) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its respective date, contains all the information
that, if requested by a prospective purchaser, would be required to be provided
pursuant to Rule 144A(d)(4) under the Securities Act.
(c) Each of the Company and each of its Restricted
Subsidiaries is (i) duly organized, validly existing and in good standing under
the laws of the jurisdiction of its formation, (ii) has all requisite
organizational power and authority to own, lease and operate its properties, and
to conduct its business as described in the Offering Memorandum and (iii) is
duly qualified to do business in each jurisdiction in which it owns or leases
real property or in which the conduct of its business requires such
qualification except where the failure to be so qualified would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the condition (financial or otherwise), business or results
<PAGE>
3
of operations of the Company and its Subsidiaries taken as a whole (a "MATERIAL
ADVERSE EFFECT").
(d) As of September 30, 1998, all of the issued and
outstanding equity interests in the Company and each of its Restricted
Subsidiaries have been duly authorized and validly issued, were not issued in
violation of any preemptive or similar rights, and all equity interests in the
Company and each of its Restricted Subsidiaries are fully paid and
nonassessable; and the capital stock of the Company and its parent corporations
conform in all material respects to the description thereof contained in the
Offering Memorandum; except as described in the Offering Memorandum or as set
forth on Schedule 1, all of the outstanding equity interests in each of the
Company's Subsidiaries are owned, directly or indirectly, by the Company; all of
the outstanding equity interests in the Company and each of its Subsidiaries
owned by the Company are free and clear of all liens, encumbrances, equities and
claims or restrictions on transferability (other than those imposed by the
Securities Act and the securities or "Blue Sky" laws of certain jurisdictions)
or voting, other than those contained in the Senior Credit Facilities; except as
described in the Offering Memorandum, neither the Company nor any of its
Subsidiaries has outstanding any options to purchase or any preemptive rights or
other rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
its capital stock or partnership interests, as the case may be, or any such
options, rights, convertible securities or obligations.
(e) The Issuer has all requisite corporate power and authority
to execute, deliver and perform each of its obligations under the Securities and
the Exchange Securities. The Securities, when issued, will be substantially in
the form contemplated by the Indenture. The Securities and the Exchange
Securities have been duly and validly authorized by the Issuer and, when issued,
authenticated and delivered in accordance with the provisions of the Indenture
(assuming due authorization, execution and delivery of the Indenture by the
Trustee) and, in the case of the Securities, when delivered to and paid for by
the Initial Purchasers in accordance with the terms of this Agreement and the
Indenture, and, in the case of the Exchange Securities, when issued and
delivered upon exchange for the Securities in accordance with the terms of the
Registration Rights Agreement and the Indenture and will constitute valid and
legally binding obligations of the Issuer, entitled to the benefits of the
Indenture, enforceable against the Issuer in accordance with their terms, except
to the extent that the enforcement of the Securities and the Exchange Securities
may be subject to (i) bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally and (ii) general principles
of equity (regardless of whether enforcement is in a proceeding at law or in
equity) and the discretion of the court before which any proceeding therefor may
be brought.
(f) The Company, the Issuer and USGP each have all requisite
power and authority to execute, deliver and perform their obligations under the
Indenture. The Indenture meets the requirements for qualification under the
Trust Indenture Act of 1939, as amended (the "TIA"). The Indenture has been duly
and validly authorized by the Company, the Issuer and USGP. Assuming the due
authorization, execution and delivery of the Indenture by the Trustee, the
Indenture, when executed and delivered by the Company, the Issuer and USGP, will
constitute a valid and legally binding agreement of the Company, the Issuer and
USGP, enforceable against the Company, the Issuer and USGP in accordance with
its terms, except to the extent that (A) the enforcement thereof may be subject
to (i) bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and
<PAGE>
4
(ii) general principles of equity (regardless of whether enforcement is in a
proceeding at law or in equity) and the discretion of the court before which any
proceeding therefor may be brought and (B) any rights to indemnity or
contribution thereunder may be limited by federal or state securities laws or
public policy considerations. With respect to the foregoing, the Company, the
Issuer and USGP make no representation or warranty with respect to the
indemnification provisions contained in the Indenture to the extent they are
deemed by a court of law to be contrary to public policy.
(g) The Company, the Issuer and USGP each have all requisite
power and authority to execute, deliver and perform their obligations under the
Registration Rights Agreement. The Registration Rights Agreement has been duly
and validly authorized by the Company, the Issuer and USGP. Assuming the due
authorization, execution and delivery of the Registration Rights Agreement by
the Initial Purchasers, the Registration Rights Agreement, when executed and
delivered by the Company, the Issuer and USGP, will constitute a valid and
legally binding agreement of the Company, the Issuer and USGP, enforceable
against the Company, the Issuer and USGP in accordance with its terms, except to
the extent that (A) the enforcement thereof may be subject to (i) bankruptcy,
fraudulent conveyance, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to or affecting creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforcement is in a proceeding at law or in equity) and the discretion of the
court before which any proceeding therefor may be brought and (B) any rights to
indemnity or contribution thereunder may be limited by federal or state
securities laws or public policy considerations.
(h) The Company, the Issuer and USGP each have all requisite
corporate power and authority to execute, deliver and perform their obligations
under this Agreement and to consummate the transactions contemplated hereby.
This Agreement and the consummation by the Company, the Issuer and USGP of the
transactions contemplated hereby have been duly authorized by the Company, the
Issuer and USGP and this Agreement has been duly executed and delivered by the
Company, the Issuer and USGP. The execution, delivery and performance by the
Company, the Issuer and USGP of this Agreement, the Indenture, the Registration
Rights Agreement and the Securities (collectively, the "TRANSACTION DOCUMENTS"),
the compliance by the Company, the Issuer and USGP with the terms thereof and
the consummation of the transactions contemplated by the Transaction Documents
will not result in a breach or violation of any of the terms and provisions of,
or constitute a default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any of
its Restricted Subsidiaries pursuant to, (i) any of the terms or provisions of
any indenture, mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate, contract, partnership, joint venture
agreement or other agreement or instrument to which the Company or any of its
Restricted Subsidiaries is a party or to which any of them or their respective
properties or assets is subject (collectively, "CONTRACTS"), (ii) the charter or
by-laws (or similar organizational document) of the Company or any of its
Restricted Subsidiaries or (iii) (assuming compliance with all applicable state
securities laws or "Blue Sky" laws) any statute, judgment, decree, order, rule
or regulation of any court or arbitrator or governmental agency or body having
jurisdiction over the Company or any of its Restricted Subsidiaries or any of
their respective properties or assets, except in the case of (i) or (iii) for
such breaches, violations or defaults which would not, either individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect; no
consent, approval, authorization or order of, or filing with, any court or
arbitrator or governmental agency or body is required for the execution,
delivery and performance by the Company, the Issuer or USGP of each of the
Transaction Documents or the consummation of the transactions
<PAGE>
5
contemplated by the Transaction Documents, except such as (i) have been obtained
or made, (ii) may be required to comply with the provisions of the Registration
Rights Agreement or the Senior Credit Facilities or (iii) may be required under
state securities laws or "Blue Sky" laws.
(i) Each Transaction Document conforms in all material
respects to the description thereof contained in the Offering Memorandum.
(j) The audited consolidated financial statements of the
Company and its consolidated Subsidiaries, and the related notes thereto,
included in the Offering Memorandum present fairly in all material respects the
consolidated financial position of the Company and its consolidated
Subsidiaries, as of the respective dates of such financial statements, and the
results of operations and changes in financial position of the Company for the
respective periods covered thereby. Such financial statements comply in all
material respects with the requirements applicable to a registration statement
on Form F-1 under the Securities Act (except that certain supporting schedules
are omitted) and have been prepared in accordance with United Kingdom generally
accepted accounting principles applied on a consistent basis, except as
otherwise stated therein. The summary and selected financial data set forth in
the Offering Memorandum under the captions "Summary--Summary Historical
Consolidated Financial Information of the Company", "Summary--Summary Unaudited
Pro Forma Consolidated Financial Information of the Company", "Capitalization",
"Unaudited Condensed Pro Forma Consolidated Financial Information", "Selected
Historical Consolidated Financial Data", "Summary Supplemental Financial Data"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" fairly present in all material respects (subject to year-end audit
adjustments with respect to interim financial information) the information set
forth therein on the basis stated in the Offering Memorandum. The other
financial and statistical information and data set forth in the Preliminary
Offering Memorandum and the Offering Memorandum are based on or derived from
sources which the Company and the Subsidiaries believe to be reliable and
materially accurate. Ernst & Young, LLP are independent certified public
accountants with respect to the Company and its Subsidiaries within the meaning
of Rule 101 of the Code of Professional Conduct of the American Institute of
Certified Public Accountants ("AICPA") and its interpretations and rulings
thereunder.
(k) The pro forma consolidated condensed financial statements
and other pro forma financial information (including, without limitation, the
notes thereto) included in the Offering Memorandum (A) present fairly in all
material respects the information shown therein and (B) have been prepared in
accordance with applicable requirements of Regulation S-X promulgated under the
Exchange Act. The pro forma capitalization of the Company presented in the
Offering Memorandum under the heading "Capitalization" presents fairly in all
material respects the information shown therein. The assumptions used in the
preparation of the pro forma financial statements and other pro forma financial
information included in the Offering Memorandum (including, without limitation,
the information under the heading "Capitalization") are reasonable and the
adjustments used therein are appropriate to give effect to the transactions or
circumstances referred to therein. The constant currency financial data included
in the Offering Memorandum (including, without limitation, the constant currency
financial data set forth in the section entitled "Summary Supplemental Financial
Data") have been prepared on the basis described in the Offering Memorandum and
present fairly in all material respects the information shown therein. The
assumptions used in the preparation of the constant currency information are
reasonable and appropriate for the purposes described therein.
<PAGE>
6
(l) Neither the Company nor any of its Restricted Subsidiaries
is (i) in violation of its charter or by-laws (or similar organizational
document), (ii) in breach or violation of any statute, judgment, decree, order,
rule or regulation applicable to the Company or its Restricted Subsidiaries or
any of their properties or assets or (iii) in breach or default in the
performance of any Contract, except for any such violation, breach or default
that would not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect.
(m) Except as disclosed in the Offering Memorandum, there is
(i) no action, suit or proceeding before or by any court, arbitrator or
governmental agency, body or official, domestic or foreign, now pending, or to
the knowledge of the Company or any of its Restricted Subsidiaries threatened or
contemplated to which the Company or any of its Restricted Subsidiaries is or
may be a party or to which the business, property or assets of the Company or
any of its Restricted Subsidiaries is or may be subject, (ii) to the knowledge
of the Company and its Restricted Subsidiaries, no statute, rule, regulation or
order that has been enacted, adopted or issued by any governmental agency or
that has been proposed by any governmental body (other than "Blue Sky" laws,
regulations or orders), or (iii) no injunction, restraining order or order of
any nature by a federal or state court of competent jurisdiction to which the
Company or any of its Restricted Subsidiaries is or may be subject, issued and
outstanding that, in the case of clauses (i), (ii) or (iii) above, could
reasonably be expected to (x) have a Material Adverse Effect or (y) seek to
restrain, enjoin, interfere with or adversely affect the transactions
contemplated by the Transaction Documents in any material respect; and the
Company, the Issuer and USGP have each complied with any and all requests by any
securities authority in any jurisdiction for additional information to be
included in the Preliminary Offering Memorandum and the Offering Memorandum.
(n) The descriptions in the Offering Memorandum of statutes,
legal and governmental proceedings and contracts and other documents are
accurate and fairly present in all material respects the information that would
be required to be described in a registration statement under the Securities Act
or in a document incorporated by reference therein.
(o) The Company and each of its Subsidiaries have good and
marketable title, free and clear of all liens, claims, encumbrances and
restrictions, to all property and assets described in the Offering Memorandum as
being owned by it and good title to all leasehold estates in the real property
described in the Offering Memorandum as being leased by it except for (i) liens
for taxes not yet due and payable, (ii) such liens and encumbrances as are
contemplated by the Senior Credit Facilities, (iii) such liens, claims,
encumbrances and restrictions as do not materially interfere with the use made
and proposed to be made of such properties (including, without limitation,
purchase money mortgages), and (iv) to the extent the failure to have such title
or the existence of such liens, claims, encumbrances and restrictions would not
have a Material Adverse Effect.
(p) Since the respective dates as of which information is
given in the Offering Memorandum and, in the case of clauses (i) and (ii) below,
other than intercompany loans and dividends that would have been permitted by
the Indenture if it had been in effect at the time that such intercompany loans
were made and such dividends were paid: (i) the Company and its Restricted
Subsidiaries have not incurred any material liabilities or obligations, direct
or contingent, or entered into any material agreement or other material
transaction, which is not in the ordinary course of business; (ii) the Company
has not paid or declared any dividends or other distributions with respect to
its capital stock and the Company and its Restricted Subsidiaries are not in
default in the payment of principal or
<PAGE>
7
interest on any outstanding debt obligations; and (iii) there has not been any
change in the condition (financial or otherwise), business or results of
operations of the Company and its Restricted Subsidiaries, taken as a whole,
which could have a Material Adverse Effect.
(q) Each of the Company and its Subsidiaries possesses all
licenses, permits, certificates, consents, orders, approvals and other
authorizations from, and have made all declarations and filings with, all
appropriate federal, state, local, foreign and other governmental authorities,
all self-regulatory organizations and all courts and other tribunals, presently
required or necessary to own or lease, as the case may be, and to operate their
respective properties and to carry on the business of the Company and its
Subsidiaries as now conducted as set forth in the Offering Memorandum, the lack
of which would have a Material Adverse Effect ("PERMITS"); each of the Company
and its Subsidiaries has fulfilled and performed all of its respective material
obligations with respect to such Permits and, to the best knowledge of the
Company, no event has occurred which allows, or after notice or lapse of time
would allow, revocation or termination thereof or results in any other
impairment of the rights of the holder of any such Permit, except where the
failure to fulfill or perform such obligations or such impairment, would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; and neither of the Company nor any of its Subsidiaries has
received any notice of any proceeding relating to revocation or modification of
any such Permit except where such revocation or modification would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(r) The Company and each of its Subsidiaries own or possess
adequate licenses or other rights to use all patents, patent applications,
trademarks, service marks, trade names, trademark registrations, service mark
registrations, copyrights, licenses and know-how (including, without limitation,
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and copyrights necessary to
conduct the business described in the Offering Memorandum, except where the
failure to own or possess or have the ability to acquire any of the foregoing
would not have a Material Adverse Effect, and neither the Company nor any of its
Subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to any patents, trademarks, service
marks, trade names or copyrights which, if such assertion of infringement or
conflict were sustained, would have a Material Adverse Effect.
(s) Neither the Company nor any Restricted Subsidiary has any
material liability for any prohibited transaction or funding deficiency or any
complete or partial withdrawal liability with respect to any pension, profit
sharing or other plan which is subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), to which it makes or ever has made a
contribution and in which any employee of it is or has ever been a participant.
With respect to such plans, the Company and each Restricted Subsidiary is in
compliance in all material respects with all applicable provisions of ERISA. In
addition, the Company has caused (i) all pension schemes maintained by or for
the benefit of any of its Subsidiaries organized under the laws of England and
Wales and/or any of its employees to be maintained and operated in all material
respects in accordance with all applicable laws from time to time and (ii) all
such pension schemes to be funded in accordance with the governing provisions of
such schemes, except to the extent failure to do so could not reasonably be
expected to have a Material Adverse Effect.
(t) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, to the best knowledge
of the Company, the Company and its Restricted Subsidiaries are in material
compliance with all applicable existing federal, state, local and foreign laws
and regulations relating to the protection of
<PAGE>
8
human health or the environment or imposing liability or requiring standards of
conduct concerning any Hazardous Materials ("ENVIRONMENTAL LAWS"). The term
"HAZARDOUS MATERIAL" means (a) any "hazardous substance" as defined by the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, (b) any "hazardous waste" as defined by the Resource Conservation and
Recovery Act, as amended, (c) any petroleum or petroleum product, (d) any
polychlorinated biphenyl and (e) any pollutant or contaminant or hazardous,
dangerous or toxic chemical, material, waste or substance regulated under or
within the meaning of any other Environmental Law. Neither the Company nor any
of its Subsidiaries has received any written notice and there is no pending or,
to the best knowledge of the Company and its Restricted Subsidiaries, threatened
action, suit or proceeding before or by any court or governmental agency or body
alleging liability (including, without limitation, alleged or potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries, or penalties) of
the Company or any of its Restricted Subsidiaries arising out of, based on or
resulting from (i) the presence or release into the environment of any Hazardous
Material at any location owned by the Company or any Restricted Subsidiary, or
(ii) any violation or alleged violation of any Environmental Law, in either case
(x) which alleged or potential liability would be required to be described in a
registration statement under the Securities Act, or (y) which alleged or
potential liability, singly or in the aggregate, would reasonably be expected to
have a Material Adverse Effect.
(u) Each of the Company and its Subsidiaries has filed all
necessary federal, state and foreign (including, without limitation, United
Kingdom) income and franchise tax returns required to be filed to the date
hereof, except where the failure to so file such returns would not, individually
or in the aggregate, have a Material Adverse Effect, and has paid all material
taxes shown as due thereon; and other than tax deficiencies which the Company or
any Subsidiary is contesting in good faith and for which the Company or such
Subsidiary has provided adequate reserves, there is no tax deficiency that has
been asserted against the Company or any of the Subsidiaries that would have,
individually or in the aggregate, a Material Adverse Effect.
(v) None of the Company or any of its Subsidiaries or any of
their respective Affiliates (as defined in Rule 501(b) of Regulation D under the
Securities Act) has directly, or through any agent, (i) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any "security"
(as defined in the Securities Act) which is or reasonably could be integrated
with the sale of the Securities in a manner that would require the registration
under the Securities Act of the Securities or (ii) engaged in any form of
general solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) in connection with the offering of the
Securities or in any manner involving a public offering within the meaning of
Section 4(2) of the Securities Act. Assuming (i) the accuracy of the Initial
Purchasers' representations in Section 2 hereof and their compliance with the
agreements set forth therein, (ii) compliance by the Initial Purchasers with the
offering and transfer restrictions described in the Offering Memorandum and
(iii) the accuracy of the representations, warranties and agreements of each of
the purchasers to whom the Initial Purchasers initially resells the Securities
in compliance with Section 2 hereof, it is not necessary in connection with the
offer, sale and delivery of the Securities to the Initial Purchasers in the
manner contemplated by this Agreement to register any of the Securities under
the Securities Act or to qualify the Indenture under the TIA.
(w) No securities of the Company, the Issuer or USGP are of
the same class (within the meaning of Rule 144A under the Securities Act) as the
Securities or are listed or
<PAGE>
9
are on a national securities exchange registered under Section 6 of the Exchange
Act, or quoted in a U.S. automated inter-dealer quotation system.
(x) None of the Company, the Issuer or USGP is an "investment
company" or "promoter" or "principal underwriter" for an "investment company"
under the Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
(y) The Company and each of its Restricted Subsidiaries
maintain insurance insuring against such losses and risks as the Company
reasonably believes is adequate to protect the Company and each of its
Restricted Subsidiaries and their respective businesses, except where the
failure to maintain such insurance would not reasonably be expected to have a
Material Adverse Effect.
(z) Neither the Company nor any of its Subsidiaries has taken
nor will it take, directly or indirectly, any action designed to or that might
be reasonably expected to cause or result in stabilization or manipulation of
the price of the Securities or to facilitate the sale or resale of the
Securities.
(aa) None of the Company, any of its affiliates or any person
acting on its or their behalf has engaged or will engage in any directed selling
efforts (as such term is defined in Regulation S under the Securities Act
("REGULATION S")), and all such persons have complied and will comply with the
offering restrictions requirement of Regulation S to the extent applicable.
(bb) Other than as contemplated by this Agreement there is no
broker, finder or other party that is entitled to receive from the Company or
the Initial Purchasers any brokerage or finder's fee or other fee or commission
as a result of any of the transactions contemplated hereby or thereby.
(cc) Neither the issuance, sale and delivery of the
Securities, nor the application of the proceeds thereof by the Issuer as set
forth in the Offering Memorandum, will violate Regulations T, U or X promulgated
by the Board of Governors of the Federal Reserve System.
(dd) Other than the Registration Rights Agreement, there are
no contracts, agreements or understandings between the Company, the Issuer or
USGP and any person granting such person the right to require the Company, the
Issuer or USGP to file a registration statement under the Securities Act with
respect to any debt securities of the Company, the Issuer or USGP owned or to be
owned by such person or to require the Company, the Issuer or USGP to include
such debt securities in the securities registered pursuant to an Exchange Offer
Registration Statement or Shelf Registration Statement, or with any other
securities being registered pursuant to any other registration statement filed
by the Company under the Securities Act.
(ee) None of the Company, the Issuer or USGP has distributed,
nor will the Company, the Issuer or USGP distribute, any offering material in
connection with the offering and sale of the Securities other than the Offering
Memorandum and the other materials permitted by the Securities Act.
(ff) Neither the Company nor any of its Restricted
Subsidiaries is involved in any material labor dispute nor, to the best of the
knowledge of the Company and its
<PAGE>
10
Subsidiaries, is any material labor dispute threatened which, if such dispute
were to occur, would reasonably be expected to have a Material Adverse Effect.
(gg) The Securities satisfy the eligibility requirements of
Rule 144A(d)(3) under the Securities Act.
(hh) No stamp duty, stock exchange tax, value-added tax,
withholding or any other similar duty or tax is payable in the United States,
the United Kingdom or any other jurisdiction in which either the Company or any
of its Subsidiaries is organized or engaged in business for tax purposes or, in
each case, any political subdivision thereof or any authority having power to
tax, in connection with the authorization, issuance, sale and delivery of the
Securities by the Issuer to the Initial Purchasers and resales thereof by the
Initial Purchasers in the manner contemplated by this Agreement and the Offering
Memorandum.
(ii) Under current laws and regulations (and interpretations
thereof) of the United Kingdom and any political subdivision thereof (or of any
other jurisdiction from or through which payment is to be made), all payments of
principal made on the Securities and the Exchange Securities by the Company
pursuant to its guarantee to Holders thereof who are non-residents of the United
Kingdom (or such other jurisdiction) and do not have a branch, agency or
permanent establishment nor carry on a trade in the United Kingdom (or such
other jurisdiction) to which the holding of the Securities or Exchange
Securities is attributable, will not be subject to income, withholding or other
taxes under laws and regulations of the United Kingdom or any political
subdivision or taxing authority thereof or therein (or of such other
jurisdiction) and will otherwise be free and clear of any other tax, duty,
withholding or deduction in the United Kingdom or any political subdivision or
taxing authority thereof or therein (or such other jurisdiction) and without the
necessity of obtaining any governmental authorization in the United Kingdom (or
of such other jurisdiction) or any political subdivision or taxing authority
thereof or herein.
(jj) Neither the Company nor any of its Restricted
Subsidiaries, and none of their respective properties or assets, has any
immunity from the jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, executing or otherwise) under the laws of the United States or the
United Kingdom.
(kk) To ensure the legality, validity, enforceability and
admissibility into evidence of each of this Agreement, the Exchange and
Registration Rights Agreement, the Indenture, the Securities and any other
document to be furnished hereunder or thereunder in the United Kingdom, it is
not necessary that this Agreement, the Exchange and Registration Rights
Agreement, the Indenture, the Securities or such other document be filed or
recorded with any court or other authority in the United Kingdom or that any
stamp of similar tax be paid in the United Kingdom on or in respect of this
Agreement, the Exchange and Registration Rights Agreement, the Indenture, the
Securities or any such other document.
(ll) On and immediately after the Closing Date, the Company,
the Issuer and USGP (after giving effect to the issuance of the Securities and
the Transactions) will not be insolvent or unable to pay their debts as they
fall due and could not be deemed to be unable to pay their debts for the purpose
of (i) the Uniform Fraudulent Transfer Act; (ii) the Uniform Fraudulent
Conveyance Act or (iii) Section 123(1) or (2) of the U.K. Insolvency Act 1986
(for this purpose omitting the words "proved to the satisfaction of the court"
from Section 123(1)(e)).
<PAGE>
11
(mm) The Company has complied in all material respects with
the Financial Services Act 1986 and the Companies Act 1985 and all other
applicable laws and regulations relevant in the context of the Transactions and
has complied in all material respects with the City Code on Takeovers and
Mergers.
(nn) Application has been made to list the Securities on the
Luxembourg Stock Exchange and, in connection therewith, the Company has caused
to be prepared and submitted to the Luxembourg Stock Exchange an initial listing
application with respect to the Securities (the "LISTING APPLICATION"). The
Company will use its commercially reasonable efforts to (i) cause the Listing
Application to comply in all material respects with the requirements of the
Luxembourg Stock Exchange, (ii) submit the final Listing Application to the
Luxembourg Stock Exchange and (iii) cause the final Listing Application to be
approved by the Luxembourg Stock Exchange as promptly as practicable following
the Closing Date (and in no event later than 30 days following the Closing Date,
PROVIDED that the Company shall not be required to disclose any confidential
information not otherwise disclosed in the Offering Memorandum). To the
Company's knowledge, there is no requirement of the Luxembourg Stock Exchange to
deliver the Listing Application or any document other than the Offering
Memorandum to prospective purchasers or purchasers of Securities from the
Initial Purchasers in connection with the offer and sale by the Initial
Purchasers of the Securities in the manner contemplated by this Agreement and
the Offering Memorandum.
2. PURCHASE AND RESALE OF THE SECURITIES. (a) On the basis of
the representations, warranties and agreements contained herein, and subject to
the terms and conditions set forth herein, the Issuer agrees to issue and sell
to each of the Initial Purchasers, severally and not jointly, and each of the
Initial Purchasers, severally and not jointly, agrees to purchase from the
Issuer, the aggregate principal amount of Securities set forth opposite the name
of such Initial Purchaser on Schedule 2 hereto at a purchase price equal to
97.25% of the principal amount thereof (subject to the partial credit set forth
in the fee letter (the "FEE LETTER") dated September 1, 1998, among Trinity
Acquisition plc, The Chase Manhattan Bank and Chase Securities Inc.). The Issuer
shall not be obligated to deliver any of the Securities except upon payment for
all of the Securities to be purchased as provided herein. If Chase Manhattan
International Limited shall default in its obligation hereunder to purchase from
the Issuer the aggregate principal amount of Securities set forth opposite its
name on Schedule 2 hereto, CSI shall purchase such Securities.
(b) Each of the Initial Purchasers represents and warrants (as
to itself only) that it is a qualified institutional buyer ("QUALIFIED
INSTITUTIONAL BUYER") as defined in Rule 144A under the Securities Act ("RULE
144A"). The Initial Purchasers have advised the Issuer that they propose to
offer the Securities for resale upon the terms and subject to the conditions set
forth herein and in the Offering Memorandum. Each Initial Purchaser, severally
and not jointly, represents, warrants and agrees that (i) it is purchasing the
Securities pursuant to a private sale exempt from registration under the
Securities Act and the Securities may not be offered or sold within the United
States unless the Securities are registered under the Securities Act or an
exemption from the registration requirements of the Securities Act is available,
(ii) it has not solicited offers for, or offered or sold, and will not solicit
offers for, or offer or sell, the Securities by means of any form of general
solicitation or general advertising within the meaning of Rule 502(c) of
Regulation D under the Securities Act ("REGULATION D") or in any manner
involving a public offering within the meaning of Section 4(2) of the Securities
Act and (iii) it has solicited and will solicit offers for the Securities only
from, and has offered or sold and will offer, sell or deliver the Securities, as
part of their initial offering, only (A) within the United States to persons
whom
<PAGE>
12
it reasonably believes to be Qualified Institutional Buyers, or if any such
person is buying for one or more institutional accounts for which such person is
acting as fiduciary or agent, only when such person has represented to it that
each such account is a Qualified Institutional Buyer to whom notice has been
given that such sale or delivery is being made in reliance on Rule 144A and in
each case, in transactions in accordance with Rule 144A and (B) outside the
United States to persons other than U.S. persons in reliance on Regulation S
under the Securities Act ("REGULATION S").
(c) In connection with the offer and sale of Securities in
reliance on Regulation S, each Initial Purchaser, severally and not jointly,
represents, warrants and agrees that:
(i) it has and will comply with all applicable laws and
regulations in each jurisdiction in which it acquires, offers, sells or
delivers Securities or has in its possession or distributed the
Preliminary Offering Memorandum or Offering Memorandum at its own
expense;
(ii) the Securities have not been registered under the
Securities Act and may not be offered or sold within the United States
or to, or for the account or benefit of, U.S. persons except pursuant
to an exemption from, or in transactions not subject to, the
registration requirements of the Securities Act;
(iii)it has offered and sold the Securities, and will offer
and sell the Securities, (A) as part of their distribution at any time
and (B) otherwise until 40 days after the later of the commencement of
the offering of the Securities and the Closing Date, only in accordance
with Regulation S or Rule 144A or any other available exemption from
registration under the Securities Act;
(iv) neither the Initial Purchaser nor any of its affiliates
or any other person acting on its or their behalf has engaged or will
engage in any directed selling efforts with respect to the Securities,
and all such persons have complied and will comply with the offering
restriction requirements of Regulation S;
(v) at or prior to the confirmation of sale of any Securities
sold in reliance on Regulation S, it will have sent to each
distributor, dealer or other person receiving a selling concession, fee
or other remuneration that purchases Securities from it during the
restricted period a confirmation or notice to substantially the
following effect:
"The Securities covered hereby have not been registered under
the U.S. Securities Act of 1933, as amended (the "Securities
Act"), and may not be offered or sold within the United States
or to, or for the account or benefit of, U.S. persons (i) as
part of their distribution at any time or (ii) otherwise until
40 days after the later of the commencement of the offering of
the Securities and the date of original issuance of the
Securities, except in accordance with Regulation S or Rule
144A or any other available exemption from registration under
the Securities Act. Terms used above have the meanings given
to them by Regulation S."
(vi) it has not and will not enter into any contractual
arrangement with any distributor with respect to the distribution of
the Securities, except with its affiliates or with the prior written
consent of the Company or the Issuer.
<PAGE>
13
Terms used in this Section 2(c) have the meanings given to them by Regulation S.
(d) Each Initial Purchaser, severally and not jointly,
represents, warrants and agrees that (i) it has not offered or sold and prior to
the date six months after the Closing Date will not offer or sell any Securities
to persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 and the Public Offers
of Securities Regulations 1995 with respect to anything done by it in relation
to the Securities in, from or otherwise involving the United Kingdom; and (iii)
it has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issue of the
Securities to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
or is a person to whom such document may otherwise lawfully be issued or passed
on.
(e) Each Initial Purchaser, severally and not jointly, agrees
that, prior to or simultaneously with the confirmation of sale by such Initial
Purchaser to any purchaser of any of the Securities purchased by such Initial
Purchaser from the Issuer pursuant hereto, such Initial Purchaser shall furnish
to that purchaser a copy of the Offering Memorandum (and any amendment or
supplement thereto that the Company shall have furnished to such Initial
Purchaser prior to the date of such confirmation of sale). In addition to the
foregoing, each Initial Purchaser acknowledges and agrees that the Company and,
for purposes of the opinions to be delivered to the Initial Purchasers pursuant
to Sections 5(a) and (b), counsel for the Company and for the Initial
Purchasers, respectively, may rely upon the accuracy of the representations and
warranties of the Initial Purchasers and their compliance with their agreements
contained in this Section 2, and each Initial Purchaser hereby consents to such
reliance.
(f) The Issuer acknowledges and agrees that the Initial
Purchasers may sell Securities to any of its affiliates and that any such
affiliate may sell Securities purchased by it to the Initial Purchasers.
(g) The Initial Purchasers agree to notify the Issuer of the
completion of the initial distribution of the Securities.
3. DELIVERY OF AND PAYMENT FOR THE SECURITIES. (a) Delivery of
and payment for the Securities shall be made at the offices of Cravath, Swaine &
Moore, New York, New York, or at such other place as shall be agreed upon by the
Initial Purchasers and the Issuer, at 10:00 A.M., New York City time, on
February 2, 1999, or at such other time or date, not later than seven full
business days thereafter, as shall be agreed upon by the Initial Purchasers and
the Issuer (such date and time of payment and delivery being referred to herein
as the "CLOSING DATE").
(b) On the Closing Date, payment of the purchase price for the
Securities shall be made to the Issuer by wire or book-entry transfer of
same-day funds to such account or accounts as the Issuer shall specify prior to
the Closing Date or by such other means as the parties hereto shall agree prior
to the Closing Date against delivery to the Initial Purchasers of the
certificates evidencing the Securities. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a further
condition of the obligations
<PAGE>
14
of the Initial Purchasers hereunder. Upon delivery, the Securities shall be in
global form, registered in such names and in such denominations as CSI on behalf
of the Initial Purchasers shall have requested in writing not less than two full
business days prior to the Closing Date. The Issuer agrees to make one or more
global certificates evidencing the Securities available for inspection by CSI on
behalf of the Initial Purchasers in New York, New York at least 24 hours prior
to the Closing Date.
4. FURTHER AGREEMENTS OF THE COMPANY. The Company, the
Issuer and USGP each agree with the several Initial Purchasers:
(a) at any time prior to being advised by the Initial
Purchasers of the completion of the initial distribution of Securities, to
advise the Initial Purchasers promptly and, if requested, confirm such advice in
writing, of the happening of any event which makes any statement of a material
fact made in the Offering Memorandum untrue or which requires the making of any
additions to or changes in the Offering Memorandum (as amended or supplemented
from time to time) in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; to advise the Initial
Purchasers promptly of any order preventing or suspending the use of the
Preliminary Offering Memorandum or the Offering Memorandum, of any suspension of
the qualification of the Securities for offering or sale in any jurisdiction and
of the initiation or threatening of any proceeding for any such purpose; and to
use its reasonable best efforts to prevent the issuance of any such order
preventing or suspending the use of the Preliminary Offering Memorandum or the
Offering Memorandum or suspending any such qualification and, if any such
suspension is issued, to obtain the lifting thereof at the earliest possible
time;
(b) to cooperate with the Initial Purchasers in arranging for
the qualification of the Securities for offering and sale under the securities
or "Blue Sky" laws of such jurisdictions as the Initial Purchasers may designate
and will continue such qualifications in effect for as long as may be necessary
to complete the resale of the Securities; PROVIDED, HOWEVER, that in connection
therewith, none of the Company, the Issuer or USGP shall be required to qualify
as a foreign corporation or to execute a general consent to service of process
in any jurisdiction or subject itself to taxation in excess of a nominal dollar
amount in any such jurisdiction where it is not then so subject;
(c) if, at any time prior to completion of the resale of the
Securities by the Initial Purchasers, any event shall occur or condition exist
as a result of which it is necessary, in the opinion of counsel for the Initial
Purchasers or counsel for the Company, to amend or supplement the Offering
Memorandum in order that the Offering Memorandum will not include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances existing at
the time it is delivered to a purchaser, not misleading, or if it is necessary
to amend or supplement the Offering Memorandum to comply with applicable law, to
promptly prepare such amendment or supplement as may be necessary to correct
such untrue statement or omission or so that the Offering Memorandum, as so
amended or supplemented, will comply with applicable law;
(d) prior to making any amendment or supplement to the
Offering Memorandum, to furnish a copy thereof each of the Initial Purchasers
and counsel for the Initial Purchasers and not to effect any such amendment or
supplement to which the Initial Purchasers shall reasonably object by notice to
the Company after a reasonable period to review;
<PAGE>
15
(e) at any time prior to being advised by the Initial
Purchasers of the completion of the initial distribution of Securities, furnish,
without charge, to the Initial Purchasers and their counsel as many copies of
the Preliminary Offering Memorandum and the Offering Memorandum or any amendment
or supplement thereto as the Initial Purchasers may from time to time reasonably
request. The Company consents to the use, in accordance with the provisions of
the Securities Act and with the securities or "Blue Sky" laws of the
jurisdictions in which the Securities are offered by the several Initial
Purchasers and by dealers, of each Preliminary Offering Memorandum and Offering
Memorandum furnished by the Company;
(f) to apply the net proceeds from the sale of the Securities
as set forth in the Offering Memorandum under the heading "Use of Proceeds";
(g) for so long as any of the Securities remain outstanding,
the Company will furnish to the Initial Purchasers, upon request, copies of all
reports and other communications (financial or otherwise) furnished by the
Company, the Issuer or USGP to the Trustee or to the holders of the Securities
and, as soon as available, copies of any reports or financial statements
furnished to or filed by the Company, the Issuer or USGP with the Commission or
any national securities exchange on which any class of securities of the
Company, the Issuer or USGP may be listed;
(h) not to and to cause its affiliates not to sell, offer for
sale or solicit offers to buy or otherwise negotiate in any respect of any
"security" (as defined in the Securities Act) which could be integrated with the
sale of the Securities in a manner which would require the registration under
the Securities Act of the Securities;
(i) except following the effectiveness of the Exchange Offer
Registration Statement and any Shelf Registration Statement, not to, and not to
permit any of its affiliates to, engage in any form of general solicitation or
general advertising (as those terms are used in Regulation D under the
Securities Act) in connection with the offering of the Securities or in any
manner involving a public offering within the meaning of Section 4(2) of the
Securities Act; and not to offer, sell, contract to sell or otherwise dispose
of, directly or indirectly, any securities under circumstances where such offer,
sale, contract or disposition would cause the exemption afforded by Section 4(2)
of the Securities Act to cease to be applicable to the offering and sale of the
Securities as contemplated by this Agreement and the Offering Memorandum;
(j) to assist the Initial Purchasers in arranging for the
Securities to be designated Private Offerings, Resales and Trading through
Automated Linkages ("PORTAL") Market securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers, Inc.
("NASD") relating to trading in the PORTAL Market and for the Securities to be
eligible for clearance and settlement through
The Depository Trust Company ("DTC");
(k) for a period of 90 days from the date of the Offering
Memorandum, without the prior consent of the Initial Purchasers (which consent
shall not be unreasonably withheld), not to, directly or indirectly, sell, offer
to sell, contract to sell, or announce or file a registration statement for the
offering of any debt securities of the Company, the Issuer or USGP designed to
be traded or distributed in the public or private securities markets (other than
the Securities and the Exchange Securities and other than in respect of
borrowings under the Senior Credit Facilities);
<PAGE>
16
(l) during the period from the Closing Date until two years
after the Closing Date, without the prior written consent of the Initial
Purchasers, not to, and not permit any of its affiliates (as defined in Rule 144
under the Securities Act) to, resell any of the Securities that have been
reacquired by them, except for Securities purchased by the Company, the Issuer
or any of their affiliates and resold in a transaction registered under the
Securities Act;
(m) in connection with the offering of the Securities, until
CSI on behalf of the Initial Purchasers shall have notified the Company or the
Issuer of the completion of the resale of the Securities, not to, and to cause
its affiliated purchasers (as defined in Regulation M under the Exchange Act)
not to, either alone or with one or more other persons, bid for or purchase, for
any account in which it or any of its affiliated purchasers has a beneficial
interest, any Securities, or attempt to induce any person to purchase any
Securities; and not to, and to cause its affiliated purchasers not to, make bids
or purchase for the purpose of creating actual, or apparent, active trading in
or of raising the price of the Securities;
(n) in connection with the offering of the Securities, to make
its officers, employees, independent accountants and legal counsel reasonably
available upon request by the Initial Purchasers;
(o) at any time prior to being advised by the Initial
Purchasers of the completion of the initial distribution of Securities, upon
request of any holder of the Securities, to furnish to such holder, and to any
prospective purchaser or purchasers of the Securities designated by such holder,
information satisfying the requirements of subsection (d)(4) of Rule 144A under
the Securities Act. This covenant, except for the indemnification provisions of
Section 9, is intended to be for the benefit of the holders from time to time of
the Securities, and prospective purchasers of the Securities designated by such
holders.
5. CONDITIONS OF INITIAL PURCHASERS' OBLIGATIONS. The
respective obligations of the several Initial Purchasers hereunder are subject
to the accuracy, on and as of the date hereof and the Closing Date, of the
representations and warranties of the Company, the Issuer and USGP contained
herein, to the accuracy of the statements of the Company, the Issuer and USGP
and its officers made in any certificates delivered pursuant hereto, to the
performance by the Company, the Issuer and USGP of their respective obligations
hereunder, and to each of the following additional terms and conditions:
(a) Each of Simpson Thacher & Bartlett, Clifford Chance and
Richards, Layton & Finger shall have furnished to the Initial Purchasers their
written opinion, as counsel to the Issuer, the Company and USGP, respectively,
addressed to the Initial Purchasers and dated the Closing Date, in form and
substance reasonably satisfactory to the Initial Purchasers.
(b) Bart Schwartz, General Counsel to the Company, and Heather
Hunter, head of the Company's U.K. legal department, shall have furnished to the
Initial Purchasers written opinions addressed to the Initial Purchasers and
dated the Closing Date, in form and substance reasonably satisfactory to the
Initial Purchasers.
(c) The Initial Purchasers shall have received from Cravath,
Swaine & Moore, counsel for the Initial Purchasers, such opinion or opinions,
dated the Closing Date, with respect to such matters as the Initial Purchasers
may reasonably require, and the
<PAGE>
17
Company shall have furnished to such counsel such documents and information as
they request for the purpose of enabling them to pass upon such matters.
(d) The Company shall have furnished to the Initial Purchasers
a letter (the "INITIAL LETTER") of Ernst & Young LLP, addressed to the Initial
Purchasers and dated the date hereof, in form and substance reasonably
satisfactory to the Initial Purchasers.
(e) The Company shall have furnished to the Initial Purchasers
a letter (the "Bring-Down Letter") of Ernst & Young LLP, addressed to the
Initial Purchasers and dated the Closing Date (i) confirming that they are
independent public accountants with respect to the Company and its Subsidiaries
within the meaning of Rule 101 of the Code of Professional Conduct of the AICPA
and its interpretations and rulings thereunder, (ii) stating, as of the date of
the Bring-Down Letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Offering Memorandum, as of a date not more than
three business days prior to the date of the Bring-Down Letter), that the
conclusions and findings of such accountants with respect to the financial
information and other matters covered by the Initial Letter are accurate and
(iii) confirming in all material respects the conclusions and findings set forth
in the Initial Letter.
(f) Each of the Company, the Issuer and USGP shall have
furnished to the Initial Purchasers a certificate or certificates, dated the
Closing Date, of Michael Chitty, Company Secretary of the Company, Thomas
Colraine, Group Finance Director of the Company and Bart Schwartz, Senior Vice
President, Secretary and General Counsel of the Issuer, stating that (A) such
officers have carefully examined the Offering Memorandum and to the extent
deemed advisable by such officers, have discussed portions of the Offering
Memorandum with officers of the Company or the Issuer having responsibility for
the matters in question, including, when appropriate, John Reeve, the Executive
Chairman of the Company, (B) in their opinion, the Offering Memorandum, as of
its date, did not include any untrue statement of a material fact and did not
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, and since the date of the Offering
Memorandum, no event has occurred which should have been set forth in a
supplement or amendment to the Offering Memorandum so that the Offering
Memorandum (as so amended or supplemented) would not include any untrue
statement of a material fact and would not omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading and (C) as of the Closing Date, the representations and warranties of
the Company, the Issuer and USGP in this Agreement are true and correct in all
material respects, each of the Company, the Issuer and USGP, as the case may be,
has complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder on or prior to the Closing Date, and subsequent
to the date of the most recent financial statements contained in the Offering
Memorandum, there has been no event or development that can reasonably be
expected to result in a Material Adverse Effect.
(g) On the Closing Date, the Initial Purchasers shall have
received the Registration Rights Agreement executed by the Company, the Issuer
and USGP and, assuming due execution and delivery by the Initial Purchasers,
such agreement shall be in full force and effect.
(h) The Indenture shall have been duly executed and delivered
by the Company, the Issuer and USGP and duly authorized, executed and delivered
by the Trustee,
<PAGE>
18
and the Securities shall have been duly executed and delivered by the Issuer and
duly authenticated by the Trustee.
(i) If any event shall have occurred that requires the Company
under Section 4(c) to prepare an amendment or supplement to the Offering
Memorandum, such amendment or supplement shall have been prepared, the Initial
Purchasers shall have been given a reasonable opportunity to comment thereon,
and copies thereof shall have been delivered to the Initial Purchasers
reasonably in advance of the Closing Date.
(j) There shall not have occurred any invalidation of Rule
144A under the Securities Act by any court or any withdrawal or proposed
withdrawal of any rule or regulation under the Securities Act or the Exchange
Act by the Commission or any amendment or proposed amendment thereof by the
Commission which in the judgment of the Initial Purchasers would materially
impair the ability of the Initial Purchasers to purchase, hold or effect resales
of the Securities as contemplated hereby.
(k) Subsequent to the execution and delivery of this Agreement
or, if earlier, the dates as of which information is given in the Offering
Memorandum (exclusive of any amendment or supplement thereto), there shall not
have been any event or development that can reasonably be expected to result in
a Material Adverse Effect or any change specified in the letters referred to in
paragraphs (d) and (e) of this section, the effect of which, in any such case
described above, is, in the judgment of the Initial Purchasers, so material and
adverse as to make it impracticable or inadvisable to proceed with the sale or
delivery of the Securities on the terms and in the manner contemplated by this
Agreement and the Offering Memorandum (exclusive of any amendment or supplement
thereto).
(l) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency or body which would, as of the Closing Date, prevent the
issuance or sale of the Securities; and no injunction, restraining order or
order of any other nature by any federal or state court of competent
jurisdiction shall have been issued as of the Closing Date which would prevent
the issuance or sale of the Securities.
(m) Subsequent to the execution and delivery of this Agreement
(i) no downgrading shall have occurred in the rating accorded the Securities or
any of the Issuer's or the Company's other debt securities or preferred stock by
any "nationally recognized statistical rating organization", as such term is
defined by the Commission for purposes of Rule 436(g)(2) of the rules and
regulations of the Commission under the Securities Act and (ii) no such
organization shall have publicly announced that it has under surveillance or
review (other than an announcement with positive implications of a possible
upgrading), its rating of the Securities or any of the Issuer's, the Company's
or USGP's other debt securities or preferred stock.
(n) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in securities
generally on the London Stock Exchange, the New York Stock Exchange, the
American Stock Exchange or the over-the-counter market shall have been suspended
or limited, or minimum prices shall have been established on any such exchange
or market by the Commission, by any such exchange or by any other regulatory
body or governmental authority having jurisdiction, or trading in any securities
of the Issuer, the Company or USGP on any exchange or in the over-the-counter
market shall have been suspended or (ii) any moratorium on commercial banking
activities shall have been declared by United Kingdom or United States federal
or New York state
<PAGE>
19
authorities or (iii) an outbreak or escalation of hostilities in the United
States or the United Kingdom or a declaration by the United States or the United
Kingdom of a national emergency or war or (iv) a material adverse change in
general economic, political or financial conditions in the United States or the
United Kingdom (or the effect of international conditions on the financial
markets in the United States or the United Kingdom shall be such) the effect of
which, in the case of this clause (iv), is, in the reasonable judgment of the
Initial Purchasers, so material and adverse as to make it impracticable or
inadvisable to proceed with the sale or the delivery of the Securities on the
terms and in the manner contemplated by this Agreement and in the Offering
Memorandum (exclusive of any amendment or supplement thereto).
(o) The Offering Memorandum (and any amendments or supplements
thereto) shall have been printed and copies distributed to the Initial
Purchasers as promptly as practicable on or following the date of this Agreement
or at such other date and time as to which the Initial Purchasers may agree; and
no stop order suspending the sale of the Securities in any jurisdiction shall
have been issued and no proceeding for that purpose shall have been commenced or
shall be pending or threatened.
(p) None of the Initial Purchasers shall have discovered and
disclosed to the Company on or prior to the Closing Date that the Offering
Memorandum or any amendment or supplement thereto contains an untrue statement
of a fact which, in the opinion of counsel for the Initial Purchasers, is
material or omits to state any fact which, in the opinion of such counsel, is
material and is required to be stated therein or is necessary to make the
statements therein not misleading.
(q) All corporate proceedings and other legal matters incident
to the authorization, form and validity of each of the Transaction Documents and
the Offering Memorandum, and all other legal matters relating to the Transaction
Documents and the transactions contemplated thereby, shall be satisfactory in
all material respects to the Initial Purchasers, and the Company, the Issuer and
USGP shall have furnished to the Initial Purchasers all documents and
information that they or their counsel may reasonably request to enable them to
pass upon such matters.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Initial Purchasers.
6. TERMINATION. The obligations of the Initial Purchasers
hereunder may be terminated by the Initial Purchasers, in their absolute
discretion, by notice given to and received by the Company or the Issuer prior
to delivery of and payment for the Securities if, prior to that time, any of the
events described in Section 5(k), (l), (m) or (n) shall have occurred and be
continuing.
7. REIMBURSEMENT OF INITIAL PURCHASERS' EXPENSES. If this
Agreement is terminated pursuant to Section 6 or if for any reason the purchase
of the Securities by the Initial Purchasers is not consummated, each of the
Company, the Issuer and USGP shall remain responsible (except to a defaulting
Initial Purchaser) for the expenses to be paid or reimbursed by it pursuant to
Section 12 and the respective obligations of the Company and the Initial
Purchasers pursuant to Sections 9 and 10 shall remain in effect. In addition, if
the purchase of the Securities by the Initial Purchasers is not consummated
because any condition to the obligations of the Initial Purchasers set forth in
Section 5 hereof (other than Section 5(n)) is not satisfied or because of any
refusal, inability or failure on the part of the
<PAGE>
20
Company, the Issuer or USGP to perform any agreement herein or comply with any
provision hereof other than by reason of a default by the Initial Purchasers,
the Company, the Issuer or USGP shall reimburse the Initial Purchasers upon
demand accompanied by reasonable supporting documentation for all reasonable
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been incurred by them in connection with this Agreement and the
proposed purchase and sale of the Securities.
8. INDEMNIFICATION. (a) The Company, the Issuer and USGP
shall, jointly and severally, indemnify and hold harmless each Initial
Purchaser, its affiliates, officers, directors, employees, representatives and
agents, and each person, if any, who controls any Initial Purchaser within the
meaning of the Securities Act or the Exchange Act (collectively referred to for
purposes of this Section 8(a) and Section 9 as an Initial Purchaser), from and
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, without limitation, any loss, claim, damage,
liability or action relating to purchases and sales of the Securities), to which
that Initial Purchaser may become subject, whether commenced or threatened,
under the Securities Act, the Exchange Act, any other federal or state statutory
law or regulation, at common law or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Preliminary Offering Memorandum or the Offering Memorandum or in any amendment
or supplement thereto or in any information provided by the Company, the Issuer
or USGP pursuant to Section 4(o) or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, and shall reimburse each Initial Purchaser
promptly upon demand for any legal or other expenses reasonably incurred by that
Initial Purchaser in connection with investigating or defending or preparing to
defend against or appearing as a third party witness in connection with any such
loss, claim, damage, liability or action as such expenses are incurred;
PROVIDED, HOWEVER, that none of the Company, the Issuer or USGP shall be liable
in any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with any Initial Purchasers' Information; and
PROVIDED, FURTHER, that with respect to any such untrue statement in or omission
from the Preliminary Offering Memorandum, the indemnity agreement contained in
this Section 8(a) shall not inure to the benefit of any such Initial Purchaser
to the extent that the sale to the person asserting any such loss, claim,
damage, liability or action was an initial resale by such Initial Purchaser and
any such loss, claim, damage, liability or action of or with respect to such
Initial Purchaser results from the fact that both (A) a copy of the Offering
Memorandum was not sent or given to such person at or prior to the written
confirmation of the sale of such Securities to such person and (B) the untrue
statement in or omission from the Preliminary Offering Memorandum was corrected
in the Offering Memorandum unless, in either case, such failure to deliver the
Offering Memorandum was a result of non-compliance by the Company with Section
4(e).
(b) Each Initial Purchaser, severally and not jointly, shall
indemnify and hold harmless the Company, its affiliates, their respective
officers, directors, employees, representatives and agents, and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 8(b) and
Section 9 as the Company), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other federal or state statutory law or
regulation, at common law or otherwise,
<PAGE>
21
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained in the Preliminary Offering Memorandum or the Offering Memorandum
or in any amendment or supplement thereto or (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, but in each case only
to the extent that the untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with any Initial
Purchasers' Information, and shall reimburse the Company for any legal or other
expenses reasonably incurred by the Company in connection with investigating or
defending or preparing to defend against or appearing as a third party witness
in connection with any such loss, claim, damage, liability or action as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 8(a) or 8(b), notify the indemnifying
party in writing of the claim or the commencement of that action; PROVIDED,
HOWEVER, that the failure to notify the indemnifying party shall not relieve it
from any liability which it may have under this Section 8 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and, PROVIDED, FURTHER, that the failure to
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 8. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; PROVIDED, HOWEVER, that an
indemnified party shall have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 8(a) and 8(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected
<PAGE>
22
without its written consent (which consent shall not be unreasonably withheld),
but if settled with its written consent or if there be a final judgment for the
plaintiff in any such action, the indemnifying party agrees to indemnify and
hold harmless any indemnified party from and against any loss or liability by
reason of such settlement or judgment. No indemnifying party shall, without the
prior written consent of the indemnified party (which consent shall not be
unreasonably withheld), effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.
The obligations of the Company, the Issuer, USGP and the
Initial Purchasers in this Section 8 and in Section 9 are in addition to any
other liability that the Company, the Issuer, USGP or the Initial Purchasers, as
the case may be, may otherwise have, including, without limitation, in respect
of any breaches of representations, warranties and agreements made herein by any
such party.
9. CONTRIBUTION. If the indemnification provided for in
Section 8 is unavailable or insufficient to hold harmless an indemnified party
under Section 8(a) or 8(b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by the Company on the one hand and the
Initial Purchasers on the other from the offering of the Securities or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and the Initial Purchasers on the other with respect to the
statements or omissions that resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Initial Purchasers on the other with respect to such offering shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Securities purchased under this Agreement (before deducting expenses)
received by or on behalf of the Company, on the one hand, and the total
discounts and commissions received by the Initial Purchasers with respect to the
Securities purchased under this Agreement, on the other, bear to the total gross
proceeds from the sale of the Securities under this Agreement, in each case as
set forth in the table on the cover page of the Offering Memorandum. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to the Company or information
supplied by the Company on the one hand or to any Initial Purchasers'
Information on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The Company and the Initial Purchasers agree that
it would not be just and equitable if contributions pursuant to this Section 9
were to be determined by PRO RATA allocation or by any other method of
allocation that does not take into account the equitable considerations referred
to herein. The amount paid or payable by an indemnified party as a result of the
loss, claim, damage or liability, or action in respect thereof, referred to
above in this Section 8 shall be deemed to include, for purposes of this Section
9, any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending or preparing to defend any such
action or claim. Notwithstanding the provisions of this Section 9, no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total discounts and commissions received by such Initial Purchaser
with respect to the Securities
<PAGE>
23
purchased by it under this Agreement exceeds the amount of any damages which
such Initial Purchaser has otherwise paid or become liable to pay by reason of
any untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
10(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
10. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement
shall inure to the benefit of and be binding upon the Initial Purchasers, the
Company, the Issuer and USGP and their respective successors. This Agreement and
the terms and provisions hereof are for the sole benefit of only those persons,
except as provided in Sections 8 and 9 with respect to affiliates, officers,
directors, employees, representatives, agents and controlling persons of the
Company and the Initial Purchasers and in Section 4(o) with respect to holders
and prospective purchasers of the Securities. Nothing in this Agreement is
intended or shall be construed to give any person, other than the persons
referred to in this Section 10, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision contained herein.
11. EXPENSES. The Company, the Issuer and USGP, jointly and
severally agree with the Initial Purchasers to pay (a) the costs incident to the
authorization, issuance, sale, preparation and delivery of the Securities; (b)
the costs incident to the preparation, printing and distribution of the
Preliminary Offering Memorandum, the Offering Memorandum and any amendments or
supplements thereto; (c) the costs of reproducing and distributing each of the
Transaction Documents; (d) the costs incident to the preparation, printing and
delivery of the certificates evidencing the Securities, including, without
limitation, stamp duties and transfer taxes, if any, payable upon issuance of
the Securities; (e) the fees and expenses of the Company's independent
accountant; (f) the fees and expenses of qualifying the Securities under the
securities laws of the several jurisdictions as provided in Section 4(b) and of
preparing, printing and distributing Blue Sky Memoranda (including, without
limitation, related fees and expenses of counsel for the Initial Purchasers);
(g) any fees charged by rating agencies for rating the Securities; (h) the fees
and expenses of the Trustee and any paying agent (including, without limitation,
related fees and expenses of any counsel to such parties); (i) all expenses and
application fees incurred in connection with the application for the inclusion
of the Securities on the PORTAL Market and the approval of the Securities for
book-entry transfer by DTC; and (j) all other costs and expenses incident to the
performance of the obligations of the Company, the Issuer and USGP under this
Agreement which are not otherwise specifically provided for in this Section 11;
PROVIDED, HOWEVER, that except as provided in this Section 11 and Section 7, the
Initial Purchasers shall pay their own costs and expenses.
12. SURVIVAL. The respective indemnities, rights of
contribution, representations, warranties and agreements of the Company, the
Issuer, USGP and the Initial Purchasers contained in this Agreement or made by
or on behalf of the Company, the Issuer, USGP or the Initial Purchasers pursuant
to this Agreement or any certificate delivered pursuant hereto shall survive the
delivery of and payment for the Securities and shall remain in full force and
effect, regardless of any termination or cancelation of this Agreement or any
investigation made by or on behalf of any of them or any of their respective
affiliates, officers, directors, employees, representatives, agents or
controlling persons.
13. NOTICES, ETC.. All statements, requests, notices and
agreements hereunder shall be in writing, and:
<PAGE>
24
(a) if to the Initial Purchasers, shall be delivered or sent
by mail or telecopy transmission to Chase Securities Inc., 270 Park Avenue, New
York, New York 10017, Attention: Legal Department; or
(b) if to the Company, the Issuer or USGP, shall be delivered
or sent by mail or telecopy transmission to the address of the Company set forth
in the Offering Memorandum, Attention: Company Secretary;
Any such statements, requests, notices or agreements shall take effect at the
time of receipt thereof.
14. DEFINITION OF TERMS. For purposes of this Agreement, (a)
the term "business day" means any day on which the New York Stock Exchange, Inc.
is open for trading, (b) the term "Subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
15. INITIAL PURCHASERS' INFORMATION. The parties hereto
acknowledge and agree that, for all purposes of this Agreement, the Initial
Purchasers' Information consists solely of the following information in the
Preliminary Offering Memorandum and the Offering Memorandum: (i) the last two
bullet points on the front cover page concerning the terms of the offering by
the Initial Purchasers; and (ii) the statements concerning the Initial
Purchasers contained in the first, second, third, fifth, sixth, ninth, tenth,
eleventh, twelfth and thirteenth paragraphs under the heading "Plan of
Distribution".
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
17. COUNTERPARTS. This Agreement may be executed in one or
more counterparts (which may include counterparts delivered by telecopier) and,
if executed in more than one counterpart, the executed counterparts shall each
be deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
18. AMENDMENTS. No amendment or waiver of any provision of
this Agreement, nor any consent or approval to any departure therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
parties hereto.
19. HEADINGS. The headings herein are inserted for convenience
of reference only and are not intended to be part of, or to affect the meaning
or interpretation of, this Agreement.
<PAGE>
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement among the Company, the Issuer, USGP
and the several Initial Purchasers in accordance with its terms.
Very truly yours,
WILLIS CORROON CORPORATION,
By______________________________
Name:
Title:
WILLIS CORROON GROUP LIMITED,
By______________________________
Name:
Title:
WILLIS CORROON PARTNERS,
By Willis Corroon Group Limited,
Its General Partner
By______________________________
Name:
Title:
Accepted:
CHASE SECURITIES INC.,
By____________________________
Authorized Signatory
CHASE MANHATTAN
INTERNATIONAL LIMITED,
By____________________________
Authorized Signatory
<PAGE>
SCHEDULE 1
EQUITY INTERESTS OF CERTAIN SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
Company Name Owned
- ------------ -----
<S> <C>
Willis National Holdings Limited 51%
ANIFA Limited 100%
Willis Corroon Financial Planning Limited 100%
Willis National Limited 100%
Gibraltar Insurance (Barbados) Limited 90%
Willis Corroon Polska 70%
S&C Willis Corroon Correduria de Seguros y Reaseguros SA 60%
S&C e IC Willis Corroon Correduria de Seguros SA 100%
Willis Corroon Assurand0rgruppen 85%
KSA Vof 50%
Willis Corroon Belgium S.A. 80%
Willis Corroon Holdings (New Zealand) Limited 99%
Willis Corroon Limited 100%
Willis Corroon McNicoll Limited 100%
Willis Corroon Hungary Kft 80%
Willis Corroon AB 75%
OY Willis Corroon AB 100%
Willis Corroon Professional & Financial Risks AB 85%
Willis Corroon Gothia AB 78%
Willis Corroon I Orebro AB 51%
Willis Faber (Middle East) S.A.L. 51%
Willis Corroon Hellas (Insurance Brokers) SA 80%
Willis Corroon Italia S.p.A. 50%
UTA Willis Corroon Rischi Speciali S.R.L. 100%
UTA Willis Corroon Milan S.R.L. 100%
</TABLE>
<PAGE>
SCHEDULE 2
<TABLE>
<CAPTION>
Initial Purchasers Principal Amount of Securities
------------------ ------------------------------
<S> <C>
Chase Securities Inc. $225,000,000
Chase Manhattan International Limited $225,000,000
------------
Total $550,000,000
</TABLE>
<PAGE>
ANNEX A
[Form of Exchange and Registration Rights Agreement]
<PAGE>
Exhibit 10.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
AMONG
WILLIS CORROON CORPORATION,
AS BORROWER,
WILLIS CORROON GROUP LIMITED,
AS A GUARANTOR,
TRINITY ACQUISITION PLC,
AS A GUARANTOR,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTIES HERETO
AND
THE CHASE MANHATTAN BANK,
AS ADMINISTRATIVE AGENT
AND COLLATERAL AGENT
DATED AS OF JULY 22, 1998,
AS AMENDED AND RESTATED
AS OF FEBRUARY 19, 1999
CHASE SECURITIES INC.,
AS LEAD ARRANGER
AND BOOK MANAGER,
MORGAN STANLEY DEAN WITTER,
AS SYNDICATION AGENT,
AND
BANK OF AMERICA,
AS DOCUMENTATION AGENT
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. Definitions.................................................................................2
1.1 Defined Terms...............................................................................2
1.2 Exchange Rates.............................................................................40
SECTION 2. Amount and Terms of Credit.................................................................40
2.1 Commitments................................................................................40
2.2 Minimum Amount of Each Borrowing; Maximum Number of Borrowings.............................44
2.3 Notice of Borrowing........................................................................44
2.4 Disbursement of Funds......................................................................45
2.5 Repayment of Loans; Evidence of Debt.......................................................46
2.6 Conversions and Continuations..............................................................49
2.7 Pro Rata Borrowings........................................................................51
2.8 Interest...................................................................................51
2.9 Interest Periods...........................................................................52
2.10 Increased Costs, Illegality, etc...........................................................53
2.11 Compensation...............................................................................55
2.12 Change of Lending Office...................................................................55
2.13 Notice of Certain Costs....................................................................55
2.14 Redesignation of $75,000,000 of Tranche B Term Loans and
Tranche C Term Loans..................................................................55
SECTION 3. Letters of Credit..........................................................................56
3.1 Letters of Credit..........................................................................56
3.2 Letter of Credit Requests..................................................................56
3.3 Letter of Credit Participations............................................................56
3.4 Agreement to Repay Letter of Credit Drawings...............................................58
3.5 Increased Costs............................................................................59
3.6 Successor Letter of Credit Issuer..........................................................60
3.7 Sterling-Denominated Letters of Credit.....................................................61
SECTION 4. Fees; Commitments..........................................................................61
4.1 Fees.......................................................................................61
4.2 Voluntary Reduction of Revolving Credit Commitments........................................62
4.3 Mandatory Termination of Commitments.......................................................63
SECTION 5. Payments...................................................................................63
5.1 Voluntary Prepayments......................................................................63
5.2 Mandatory Prepayments......................................................................64
5.3 Method and Place of Payment................................................................67
5.4 Net Payments...............................................................................68
5.5 Computations of Interest and Fees..........................................................70
SECTION 6. [Intentionally Omitted]....................................................................70
SECTION 7A. [Intentionally Omitted]....................................................................70
SECTION 7B. [Intentionally Omitted]....................................................................70
</TABLE>
<PAGE>
ii
<TABLE>
<S> <C> <C>
SECTION 7C. Conditions Precedent to All Credit Events..................................................70
7C.1 No Default; Representations and Warranties.................................................71
7C.2 Notice of Borrowing; Letter of Credit Request..............................................71
SECTION 8. Representations, Warranties and Agreements.................................................71
8.1 Corporate Status...........................................................................71
8.2 Corporate Power and Authority..............................................................71
8.3 No Violation...............................................................................72
8.4 Litigation.................................................................................72
8.5 Margin Regulations.........................................................................72
8.6 Governmental Approvals.....................................................................72
8.7 Investment Company Act.....................................................................72
8.8 True and Complete Disclosure...............................................................72
8.9 Financial Condition; Financial Statements..................................................73
8.10 Tax Returns and Payments...................................................................73
8.11 Compliance with ERISA......................................................................73
8.12 Subsidiaries...............................................................................74
8.13 Patents, etc...............................................................................74
8.14 Environmental Laws.........................................................................74
8.15 Properties.................................................................................74
8.16 Year 2000..................................................................................74
SECTION 9. Affirmative Covenants......................................................................75
9.1 Information Covenants......................................................................75
9.2 Books, Record and Inspections..............................................................77
9.3 Maintenance of Insurance...................................................................77
9.4 Payment of Taxes...........................................................................77
9.5 Consolidated Corporate Franchises..........................................................78
9.6 Compliance with Statutes, Obligations, etc.................................................78
9.7 ERISA......................................................................................78
9.8 Good Repair................................................................................78
9.9 Transactions with Affiliates...............................................................79
9.10 End of Fiscal Years; Fiscal Quarters.......................................................79
9.11 Additional Guarantors......................................................................79
9.12 Pledges of Additional Stock and Evidence of Indebtedness...................................80
9.13 Use of Proceeds............................................................................80
9.14 Changes in Business........................................................................80
9.15 Ownership of Assets........................................................................80
SECTION 10. Negative Covenants.........................................................................81
10.1 Limitation on Indebtedness.................................................................81
10.2 Limitation on Liens........................................................................84
10.3 Limitation on Fundamental Changes..........................................................85
10.4 Limitation on Sale of Assets...............................................................86
10.5 Limitation on Investments..................................................................87
10.6 Limitation on Dividends....................................................................88
10.7 Limitations on Debt Payments and Amendments................................................90
10.8 Limitations on Sale Leasebacks.............................................................90
10.9 Consolidated Total Debt to Consolidated EBITDA Ratio.......................................91
10.10 Consolidated EBITDA to Consolidated Interest Expense Ratio.................................91
10.11 Capital Expenditures.......................................................................91
</TABLE>
<PAGE>
iii
<TABLE>
<S> <C> <C>
SECTION 11. Events of Default..........................................................................92
11.1 Payments...................................................................................92
11.2 Representations, etc.......................................................................92
11.3 Covenants..................................................................................92
11.4 Default Under Other Agreements.............................................................93
11.5 Bankruptcy, etc............................................................................93
11.6 ERISA......................................................................................94
11.7 Guarantee..................................................................................94
11.8 U.S. Pledge Agreement; U.K. Security Agreement.............................................94
11.9 Judgments..................................................................................94
11.10 Change of Control..........................................................................94
11.11 Newco 2 Securities.........................................................................94
SECTION 12. The Administrative Agent...................................................................95
12.1 Appointment................................................................................95
12.2 Delegation of Duties.......................................................................95
12.3 Exculpatory Provisions.....................................................................95
12.4 Reliance by Administrative Agent...........................................................96
12.5 Notice of Default..........................................................................96
12.6 Non-Reliance on Administrative Agent and Other Lenders.....................................96
12.7 Indemnification............................................................................97
12.8 Administrative Agent in Its Individual Capacity............................................97
12.9 Successor Agent............................................................................97
SECTION 13. Miscellaneous..............................................................................98
13.1 Amendments and Waivers.....................................................................98
13.2 Notices....................................................................................99
13.3 No Waiver; Cumulative Remedies............................................................100
13.4 Survival of Representations and Warranties................................................100
13.5 Payment of Expenses and Taxes.............................................................101
13.6 Successors and Assigns; Participations and Assignments....................................101
13.7 Replacements of Lenders under Certain Circumstances.......................................104
13.8 Adjustments; Set-off......................................................................104
13.9 Counterparts..............................................................................105
13.10 Severability..............................................................................105
13.11 Integration...............................................................................105
13.12 GOVERNING LAW.............................................................................105
13.13 Submission to Jurisdiction; Waivers.......................................................105
13.14 Acknowledgments...........................................................................106
13.15 WAIVERS OF JURY TRIAL.....................................................................106
13.16 Confidentiality...........................................................................106
13.17 Conversion of Currencies..................................................................106
13.18 European Economic and Monetary Union......................................................107
13.19 Margin Regulations........................................................................107
</TABLE>
<PAGE>
SCHEDULES
Schedule 1.1 Commitments and Addresses of Lenders
Schedule 1.1(a) Calculation of Additional Cost
Schedule 2.1(a) Euro Revolving Credit Commitments
Schedule 2.1(b) Yen Revolving Credit Commitments
Schedule 8.12(a) Subsidiaries
Schedule 8.12(b) Closing Date Excused Subsidiaries
Schedule 10.1(a) Guarantee Obligations
Schedule 10.1(b) Other Indebtedness
Schedule 10.5 Investments
EXHIBITS
Exhibit A Form of Guarantee
Exhibit B Form of U.S. Pledge Agreement
Exhibit C-1 Form of Promissory Note (Term Loans)
Exhibit C-2 Form of Promissory Note (Revolving Credit and
Swingline Loans)
Exhibit D Form of Letter of Credit Request
Exhibit F Form of Assignment and Acceptance
Exhibit H Form of Confidentiality Agreement
Exhibit I Form of U.K. Security Agreement
Exhibit J-1 Form of Tranche B Prepayment Option Notice
Exhibit J-2 Form of Tranche C Prepayment Option Notice
Exhibit J-3 Form of Tranche D Prepayment Option Notice
<PAGE>
CREDIT AGREEMENT dated as of July 22, 1998, as amended and
restated as of February 19, 1999, among WILLIS CORROON CORPORATION, a Delaware
corporation (the "BORROWER"), WILLIS CORROON GROUP LIMITED, a private limited
company organized under the laws of England and Wales, as a guarantor
("PARENT"), TRINITY ACQUISITION plc, a public limited company organized under
the laws of England and Wales, as a guarantor ("NEWCO 4"), the lending
institutions from time to time parties hereto (each a "LENDER" and,
collectively, the "LENDERS") and THE CHASE MANHATTAN BANK, as Administrative
Agent (such term and each other capitalized term used but not defined in this
introductory statement having the meaning provided in Section 1) and as
Collateral Agent.
Pursuant to an offer (the "OFFER") made by Warburg Dillon
Read, Chase Manhattan plc and HSBC Investment Bank plc on behalf of Newco 4
on the terms and subject to the conditions referred to in the Press Release,
Newco 4 acquired (the "ACQUISITION") all the outstanding ordinary shares
(including ordinary shares represented by American Depositary Shares) (the
"SHARES") of Parent. In connection with the financing of the Acquisition, (a)
affiliates of Kohlberg Kravis Roberts & Co., L.P. ("SPONSOR") invested in
newly issued ordinary shares of a newly formed private limited company
organized under the laws of England and Wales ("NEWCO 1") that owns directly
100% of the issued share capital (other than the Preferred Stock) of a second
newly formed private limited company organized under the laws of England and
Wales ("NEWCO 2"), for consideration paid to Newco 1 of approximately
(pound)183,600,000 (or the Dollar Equivalent amount) in cash (THE "SPONSOR
EQUITY CONTRIBUTION"), (b) certain insurance carriers or their affiliates
subscribed for and purchased newly issued ordinary shares of Newco 1, for
consideration paid to Newco 1 of approximately (pound)40,700,000 in cash (the
"CARRIER COMMON EQUITY CONTRIBUTION"), (c) members of the existing management
of Parent and certain of its Subsidiaries and certain other investors
contributed, directly or indirectly, approximately an additional
(pound)13,500,000 (or the Dollar Equivalent amount) to Newco 1 as equity (the
"Management Equity Contribution"), (d) Newco 2 issued preferred stock (the
"PREFERRED STOCK") with an aggregate liquidation preference of approximately
$267,300,000, for aggregate consideration paid to Newco 2 of approximately
(pound)162,700,000 in cash (collectively with the Sponsor Equity
Contribution, the Carrier Common Equity Contribution and the Management
Equity Contribution, the "Equity Financings"), (e) Newco 1 and Newco 2
contributed the net cash proceeds of the Equity Financings indirectly to
Newco 4 as common equity, (f) Newco 4 borrowed (i) an aggregate principal
amount of $475,000,000 under the Senior Bridge Facility (including by way of
issuing Guaranteed Loan Notes) and (ii) an aggregate principal amount of
$426,000,000 under the Subordinated Bridge Facility (together with the Senior
Bridge Facility, the "BRIDGE FACILITIES") and (g) fees and expenses incurred
in connection with the Transactions (as defined below) were paid. The Offer,
the Acquisition and the other transactions described in this introductory
statement are referred to collectively as the "TRANSACTIONS".
Following the consummation of the Acquisition, the proceeds of
(a) Tranche A Term Loans in an aggregate principal amount of $50,000,000,
(b) Tranche B Term Loans in an aggregate principal amount of $150,000,000,
(c) Tranche C Term Loans in an aggregate principal amount of $150,000,000 and
(d) Tranche D Term Loans in an aggregate principal amount of $100,000,000 made
under this Agreement were used by the Borrower, together with the proceeds of
the borrowing by the Borrower of the Subordinated Loans, (i) to make the
Intercompany Loan, (ii) to prepay certain amounts of Revolving Credit Loans that
were outstanding on the Term Loan Funding Date and (iii) to refinance all of the
Newco 4 Indebtedness. Revolving Credit Loans made under this Agreement and
Swingline Loans made under this Agreement will be used by the Borrower for
general corporate purposes. Letters of Credit issued under this Agreement will
be used by the Borrower for general corporate purposes.
<PAGE>
2
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS. As used herein, the following terms
shall have the meanings specified in this Section 1 unless the context otherwise
requires (it being understood that defined terms in this Agreement shall include
in the singular number the plural and in the plural the singular):
1.1 DEFINED TERMS.
"ABR" shall mean, for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of
(a) the Prime Rate in effect on such day, (b) the Base CD Rate in
effect on such day plus 1% and (c) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. Any change in the ABR due to a
change in the Prime Rate, the Three-Month Secondary CD Rate or the
Federal Funds Effective Rate shall be effective as of the opening of
business on the effective day of such change in the Prime Rate, the
Three-Month Secondary CD Rate or the Federal Funds Effective Rate,
respectively.
"ABR LOAN" shall mean each Loan bearing interest at the rate
provided in Section 2.8(a) and, in any event, shall include all
Swingline Loans.
"ABR REVOLVING CREDIT LOAN" shall mean any Revolving Credit
Loan bearing interest at a rate determined by reference to the ABR.
"ACQUIRED EBITDA" shall mean, with respect to any Acquired
Entity or Business, any Converted Restricted Subsidiary, any Sold
Entity or Business or any Converted Unrestricted Subsidiary (any of the
foregoing, a "PRO FORMA ENTITY") for any period, the sum of the amounts
for such period of (a) Consolidated Earnings, (b) Consolidated Interest
Expense, (c) depreciation expense, (d) amortization expense, including
amortization of deferred financing fees, (e) exceptional losses and
non-recurring charges, (f) non-cash charges (including the non-cash
portion of pension expense), (g) losses on asset sales and (h)
restructuring charges or provisions LESS the sum of the amounts for
such period of (i) non-recurring profits, (j) non-cash profits and (k)
profits on asset sales, all as determined on a consolidated basis for
such Pro Forma Entity in accordance with GAAP.
"ACQUIRED ENTITY OR BUSINESS" shall have the meaning provided
in the definition of the term "Consolidated EBITDA".
"ACQUISITION" shall have the meaning provided in the preamble
to this Agreement.
"ACQUISITION SUBSIDIARY" shall mean (a) any Subsidiary of
Newco 4 that is formed or acquired after the Closing Date in connection
with Permitted Acquisitions, PROVIDED that at such time (or promptly
thereafter) the Borrower designates such Subsidiary an Acquisition
Subsidiary in a written notice to the Administrative Agent, (b) any
Restricted Subsidiary on the Closing Date subsequently re-designated as
an Acquisition Subsidiary by the Borrower in a written notice to the
Administrative Agent, PROVIDED that such re-designation shall be deemed
to be an investment on the date of such re-designation in an
Acquisition Subsidiary in an amount equal to the sum of (i) the net
worth of such re-designated Restricted Subsidiary immediately prior to
such re-designation (such net worth to be calculated without regard to
any Guarantee provided by such re-designated Restricted Subsidiary) and
(ii) the aggregate principal amount of any Indebtedness owed by such
re-designated Restricted Subsidiary to Newco 4 or any other Restricted
Subsidiary immediately prior to such re-designation (to the extent not
repaid on the date
<PAGE>
3
of such re-designation), all calculated, except as set forth in the
parenthetical to clause (i), on a consolidated basis in accordance with
GAAP, and (c) each Subsidiary of an Acquisition Subsidiary; PROVIDED,
HOWEVER, that (i) at the time of any written re-designation by the
Borrower to the Administrative Agent of any Acquisition Subsidiary as a
Restricted Subsidiary, the Acquisition Subsidiary so re-designated
shall no longer constitute an Acquisition Subsidiary, (ii) no
Acquisition Subsidiary may be re-designated as a Restricted Subsidiary
if a Default or Event of Default would result from such re-designation,
(iii) the Borrower shall not be re-designated as an Acquisition
Subsidiary and (iv) no Restricted Subsidiary may be re-designated as an
Acquisition Subsidiary if a Default or Event of Default would result
from such re-designation. On or promptly after the date of its
formation, acquisition or re-designation, as applicable, each
Acquisition Subsidiary (other than an Acquisition Subsidiary that is a
Foreign Subsidiary) shall have entered into a tax sharing agreement
containing terms that, in the reasonable judgment of the Administrative
Agent, provide for an appropriate allocation of tax liabilities and
benefits.
"ADDITIONAL COST" shall mean, in relation to any Sterling
Borrowing for any Interest Period, the cost as calculated by the
Administrative Agent in accordance with Schedule 1.1(a) imputed to each
Lender participating in such Sterling Borrowing of compliance with the
mandatory liquid assets requirements of the Bank of England during that
Interest Period, expressed as a percentage.
"ADJUSTED TOTAL REVOLVING CREDIT COMMITMENT" shall mean at any
time the Total Revolving Credit Commitment less the aggregate Revolving
Credit Commitments of all Defaulting Lenders.
"ADJUSTED TOTAL TERM LOAN COMMITMENT" shall mean at any time
the Total Term Loan Commitment less the Term Loan Commitments of all
Defaulting Lenders.
"ADMINISTRATIVE AGENT" shall mean Chase, together with its
affiliates, as the arranger of the Commitments and as the
administrative agent for the Lenders under this Agreement and the other
Credit Documents.
"ADMINISTRATIVE AGENT'S OFFICE" shall mean the office of the
Administrative Agent located at 270 Park Avenue, New York, New York
10017, or such other office in New York City as the Administrative
Agent may hereafter designate in writing as such to the other parties
hereto.
"AFFILIATE" shall mean, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under
direct or indirect common control with such Person. A Person shall be
deemed to control a corporation if such Person possesses, directly or
indirectly, the power (a) to vote 10% or more of the securities having
ordinary voting power for the election of directors of such corporation
or (b) to direct or cause the direction of the management and policies
of such corporation, whether through the ownership of voting
securities, by contract or otherwise.
"AGGREGATE REVOLVING CREDIT OUTSTANDINGS" shall have the
meaning provided in Section 5.2(b).
"AGREEMENT" shall mean this Credit Agreement, as the same may
be amended, supplemented or otherwise modified from time to time.
"APPLICABLE ABR MARGIN" shall mean, with respect to each ABR
Loan at any date, the applicable percentage per annum set forth below
based upon (a) whether such
<PAGE>
4
loan is a Revolving Credit Loan, a Swingline Loan, a Tranche A Term
Loan, a Tranche B Term Loan, a Tranche C Term Loan or a Tranche D Term
Loan and (b) the Status in effect on such date:
<TABLE>
<CAPTION>
Applicable ABR
Loan Status Margin
---- ------ --------------
<S> <C> <C>
Revolving Credit Loans, Level I Status 1.000%
Swingline Loans and Tranche A Terms Level II Status 0.750%
Loans Level III Status 0.375%
Level IV Status 0.125%
Level V Status 0.000%
Level VI Status 0.000%
Tranche B Term Loans Level I Status 1.250%
Level II Status 1.000%
Level III Status 0.750%
Level IV Status 0.500%
Level V Status 0.500%
Level VI Status 0.500%
Tranche C Term Loans Level I Status 1.500%
Level II Status 1.250%
Level III Status 1.000%
Level IV Status 0.750%
Level V Status 0.750%
Level VI Status 0.750%
Tranche D Term Loans Level I Status 1.750%
Level II Status 1.500%
Level III Status 1.250%
Level IV Status 1.000%
Level V Status 1.000%
Level VI Status 1.000%
</TABLE>
"APPLICABLE EURODOLLAR MARGIN" shall mean, with respect to
each Eurodollar Term Loan and Eurodollar Revolving Credit Loan at any
date, the applicable percentage per annum set forth below based upon
(a) whether such loan is a Revolving Credit Loan, a Tranche A Term
Loan, a Tranche B Term Loan, a Tranche C Term Loan or a Tranche D Term
Loan and (b) the Status in effect on such date:
<TABLE>
<CAPTION>
Applicable Eurodollar
Loan Status Margin
---- ------ ----------------------
<S> <C> <C>
Revolving Credit Loans and Tranche A Level I Status 2.250%
Term Loans Level II Status 2.000%
Level III Status 1.625%
Level IV Status 1.375%
Level V Status 1.125%
Level VI Status 0.875%
</TABLE>
<PAGE>
5
<TABLE>
Applicable Eurodollar
Loan Status Margin
---- ------ ---------------------
<S> <C> <C>
Tranche B Term Loans Level I Status 2.500%
Level II Status 2.250%
Level III Status 2.000%
Level IV Status 1.750%
Level V Status 1.750%
Level VI Status 1.750%
Tranche C Terms Loans Level I Status 2.750%
Level II Status 2.500%
Level III Status 2.250%
Level IV Status 2.000%
Level V Status 2.000%
Level VI Status 2.000%
Tranche D Terms Loans Level I Status 3.000%
Level II Status 2.750%
Level III Status 2.500%
Level IV Status 2.250%
Level V Status 2.250%
Level VI Status 2.250%
</TABLE>
"APPROVED FUND" shall mean, with respect to any Lender that is
an investment fund that invests in bank loans, any other investment
fund that invests in bank loans and is managed by the same investment
advisor as such Lender or by an Affiliate of such investment advisor.
"ASSET SALE PREPAYMENT EVENT" shall mean any sale, transfer or
other disposition of any business units, assets or other properties of
Newco 4 or any of the Restricted Subsidiaries not in the ordinary
course of business. Notwithstanding the foregoing, the term "Asset Sale
Prepayment Event" shall not include any transaction permitted by
Section 10.3, 10.4 (other than Section 10.4(b)) or 10.5.
"ASSOCIATED UNDERTAKING" shall mean an associated undertaking
(as such term is used in the audited financial statements referred to
in Section 9.1(a)) in respect of Newco 4 or a Restricted Subsidiary
that is not a Subsidiary thereof.
"ASSOCIATED UNDERTAKING NOTE" shall mean, with respect to any
Associated Undertaking, any promissory note required to be issued by
such Associated Undertaking pursuant to Section 10.5(n) and pledged to
the Collateral Agent pursuant to Section 9.12.
"AUTHORIZED OFFICER" shall mean the Chairman of the Board, the
President, the Chief Financial Officer, the Treasurer or any other
senior officer of Parent and the Borrower, respectively, designated as
such in writing to the Administrative Agent by Parent or the Borrower,
as applicable.
"AVAILABLE AMOUNT" shall mean, on any date (the "REFERENCE
DATE"), an amount equal to (a) the sum of (i) for the purposes of
Sections 10.5(i) and 10.5(k), $100,000,000, (ii) the aggregate amount
of Net Cash Proceeds from Prepayment Events refused by Term Loan
Lenders and retained by the Borrower in accordance with Section
5.2(c)(ii) on or prior to the Reference Date, (iii) an amount equal to
(x) the cumulative amount of Excess Cash Flow for all fiscal years
completed prior to the Reference Date MINUS (y) the portion
<PAGE>
6
of such Excess Cash Flow that has been on or prior to the Reference
Date (or will be) applied to the prepayment of Loans in accordance with
Section 5.2(a)(ii), (iv) the amount of any capital contributions (other
than any equity contribution made on or prior to the Closing Date or
made in accordance with Section 10.5(c)(i)) made in cash to Newco 4
from and including the Business Day immediately following the Closing
Date through and including the Reference Date, (v) an amount equal to
the Net Cash Proceeds received by Newco 4 on or prior to the Reference
Date from any issuance of equity securities by Newco 4, (vi) the
aggregate amount of all cash dividends and other cash distributions
received by Newco 4, Parent, the Borrower or any other Guarantor from
any Acquisition Subsidiaries, Minority Investments or Unrestricted
Subsidiaries on or prior to the Reference Date (other than the portion
of any such dividends and other distributions that is used by Newco 4,
Parent, the Borrower or any other Guarantor to pay taxes), (vii) the
aggregate amount of all cash repayments of principal received by Newco
4, Parent, the Borrower or any other Guarantor from any Acquisition
Subsidiaries, Minority Investments or Unrestricted Subsidiaries on or
prior to the Reference Date in respect of loans made by Newco 4,
Parent, the Borrower or any other Guarantor to such Acquisition
Subsidiaries, Minority Investments or Unrestricted Subsidiaries, (viii)
the aggregate amount of all net cash proceeds received by Newco 4,
Parent, the Borrower or any other Guarantor in connection with the
sale, transfer or other disposition of its ownership interest in any
Acquisition Subsidiary, Minority Investment or Unrestricted Subsidiary
on or prior to the Reference Date and (ix) the amount, in respect of
any Unrestricted Subsidiary redesignated on or prior to the Reference
Date, of the investment therein determined as of such date of
redesignation as set forth in the second proviso to the definition of
the term "Unrestricted Subsidiary" MINUS (b) the sum of (i) the
aggregate amount of any investments (including loans) made by Newco 4,
Parent or any Restricted Subsidiary (other than any Acquisition
Subsidiary) in or to Acquisition Subsidiaries pursuant to Section
10.5(i) on or prior to the Reference Date, (ii) the aggregate amount of
any investments (including loans) made by Newco 4, Parent or any
Restricted Subsidiary (other than any Acquisition Subsidiary) pursuant
to Section 10.5(k) on or prior to the Reference Date, (iii) the
aggregate price paid by the Borrower in connection with (x) any
prepayment of the Subordinated Loans (other than with the Net Cash
Proceeds of the Loans or the Subordinated Notes) or (y) any prepayment,
repurchase or redemption of Subordinated Notes, in each case pursuant
to Section 10.7(a) on or prior to the Reference Date and (iv) the
aggregate price paid by Newco 2 in connection with any prepayment,
repurchase or redemption of the Preferred Stock or the Replacement
Preferred Stock, in each case pursuant to Section 10.6 on or prior to
the Reference Date.
"AVAILABLE COMMITMENT" shall mean at any time an amount equal
to the excess, if any, of (a) the amount of the Total Revolving Credit
Commitment over (b) the sum of (i) the aggregate principal amount
(calculated by using the Dollar Equivalent at such time of the
principal amount of any Foreign Currency Revolving Credit Loan) of all
Revolving Credit Loans (but not Swingline Loans) then outstanding and
(ii) the aggregate Letter of Credit Outstanding at such time.
"AVAILABLE NON-CREDIT-PARTY INVESTMENT AMOUNT" shall mean, on
any date (the "INVESTMENT DATE"), an amount equal to (a) the sum of (i)
$100,000,000, (ii) the aggregate amount of all cash dividends and other
cash distributions received by Newco 4, Parent, the Borrower or any
other Guarantor from any Restricted Non-Credit-Party Subsidiaries on or
prior to the Investment Date (other than the portion of any such
dividends and other distributions that is used by Newco 4, Parent, the
Borrower or any other Guarantor to pay taxes), (iii) the aggregate
amount of all cash repayments of principal received by Newco 4, Parent,
the Borrower or any other Guarantor from any Restricted
Non-Credit-Party Subsidiaries on or prior to the Investment Date in
respect of loans made by Newco 4, Parent, the Borrower or any other
Guarantor to such Restricted Non-Credit-
<PAGE>
7
Party Subsidiaries and (iv) the aggregate amount of all net cash
proceeds received by Newco 4, Parent, the Borrower or any other
Guarantor in connection with the sale, transfer or other disposition of
its ownership interest in any Restricted Non-Credit-Party Subsidiary on
or prior to the Investment Date MINUS (b) the aggregate amount of any
investments (including loans) made by Newco 4, Parent or any Restricted
Subsidiary (other than any Restricted Non-Credit-Party Subsidiary) in
or to Restricted Non-Credit-Party Subsidiaries pursuant to Section
10.5(j) or 10.5(k) on or prior to the Investment Date.
"AVAILABLE REVOLVING CREDIT COMMITMENT" shall mean, with
respect to any Lender, an amount equal to the excess, if any, of
(a) the amount of such Lender's Revolving Credit Commitment over
(b) the sum of (i) the aggregate principal amount of all Dollar
Revolving Credit Loans (but not Swingline Loans) of such Lender then
outstanding, (ii) the aggregate amount of the Dollar Equivalents of
the principal amounts of all Foreign Currency Revolving Credit Loans
(but not Swingline Loans) of such Lender then outstanding, (iii) that
portion of such Lender's LC Exposure attributable to Unpaid Drawings
in respect of which such Lender has made (or is required to have made)
payments to the Letter of Credit Issuer pursuant to Section 3.4(a) and
(iv) that portion of such Lender's Swingline Exposure attributable to
Swingline Loans in respect of which such Lender has made (or is
required to have made) payments to Chase pursuant to Section 2.1(f).
"BANKRUPTCY CODE" shall have the meaning provided in Section
11.5.
"BASE CD RATE" shall mean the sum of (a) the product of
(i) the Three-Month Secondary CD Rate and (ii) a fraction, the
numerator of which is one and the denominator of which is one minus
the C/D Reserve Percentage and (b) the C/D Assessment Rate.
"BOARD" shall mean the Board of Governors of the Federal
Reserve System of the United States (or any successor).
"BORROWER" shall have the meaning provided in the preamble to
this Agreement.
"BORROWING" shall mean and include (a) the incurrence of
Swingline Loans from Chase on a given date, (b) the incurrence of one
Type of Term Loan on the Term Loan Funding Date (or resulting from
conversions on a given date after the Term Loan Funding Date) having,
in the case of Eurodollar Term Loans, the same Interest Period
(PROVIDED that ABR Loans incurred pursuant to Section 2.10(b) shall be
considered part of any related Borrowing of Eurodollar Term Loans) and
(c) the incurrence of one Type of Revolving Credit Loan on a given date
(or resulting from conversions on a given date) denominated in the same
currency and having, in the case of Eurodollar Revolving Credit Loans,
the same Interest Period (PROVIDED that ABR Loans incurred pursuant to
Section 2.10(b) shall be considered part of any related Borrowing of
Eurodollar Revolving Credit Loans).
"BRIDGE FACILITIES" shall have the meaning provided in the
preamble to this Agreement.
"BUSINESS DAY" shall mean (a) for all purposes other than as
covered by clause (b) below, any day excluding Saturday, Sunday and any
day that shall be in The City of New York or London (or, with respect
to any Yen Revolving Credit Loan, Tokyo) a legal holiday or a day on
which banking institutions are authorized by law or other governmental
actions to close, and (b) with respect to all notices and
determinations in
<PAGE>
8
connection with, and payments of principal and interest on, Eurodollar
Loans, any day that is a Business Day described in clause (a) and which
is also a day on which (i) in relation to any Eurodollar Loans
denominated in a currency other than euro, banks are generally open for
the types of business contemplated by this Agreement in the principal
financial center of the country of such currency or (ii) in relation to
any Eurodollar Loans denominated in the euro, the TARGET payment system
is open for the settlement of payments in euro.
"CALCULATION DATE" shall mean (a) the last Business Day of
each calendar month, (b) if at any time the Aggregate Revolving Credit
Outstandings exceed 75% of the Total Revolving Credit Commitment, the
last Business Day of each week and (c) if a Default or an Event of
Default shall have occurred and be continuing, such additional dates as
the Administrative Agent or the Required Lenders shall specify.
"CAPITAL EXPENDITURES" shall mean, for any period, the
aggregate of all expenditures (whether paid in cash or accrued as
liabilities and including in all events all amounts expended or
capitalized under Capital Leases, but excluding any amount representing
capitalized interest) by Newco 4 and the Restricted Subsidiaries during
such period that, in conformity with GAAP, are or are required to be
included as additions during such period to tangible fixed assets and
other capital expenditures reflected in the consolidated balance sheet
of Newco 4 and its Subsidiaries, PROVIDED that the term "Capital
Expenditures" shall not include (a) expenditures made in connection
with the replacement, substitution or restoration of assets (i) to the
extent financed from insurance proceeds paid on account of the loss of
or damage to the assets being replaced or restored or (ii) with awards
of compensation arising from the taking by eminent domain or
condemnation of the assets being replaced, (b) the purchase price of
equipment that is purchased simultaneously with the trade-in of
existing equipment to the extent that the gross amount of such purchase
price is reduced by the credit granted by the seller of such equipment
for the equipment being traded in at such time, (c) the purchase of
tangible fixed assets and other capital expenditures made within one
year of the sale of any asset to the extent purchased with the proceeds
of such sale or (d) expenditures that constitute any part of rental
expenses under operating leases for real or personal property.
"CAPITAL LEASE", as applied to any Person, shall mean any
lease of any property (whether real, personal or mixed) by that Person
as lessee that, in conformity with GAAP, is, or is required to be,
accounted for as a finance lease obligation on the balance sheet of
that Person.
"CAPITALIZED LEASE OBLIGATIONS" shall mean, as applied to any
Person, all obligations under Capital Leases of such Person or any of
its Subsidiaries, in each case taken at the amount thereof accounted
for as liabilities in accordance with GAAP.
"CARRIER COMMON EQUITY CONTRIBUTION" shall have the meaning
provided in the preamble to this Agreement.
"C/D ASSESSMENT RATE" shall mean for any day as applied to any
ABR Loan, the annual assessment rate in effect on such day that is
payable by a member of the Bank Insurance Fund maintained by the United
States Federal Deposit Insurance Corporation or any successor thereto
(the "FDIC") classified as well-capitalized and within supervisory
subgroup "B" (or a comparable successor assessment risk classification)
within the meaning of 12 C.F.R. ss. 327.4(a) (or any successor
provision) to the FDIC for the FDIC's insuring time deposits at offices
of such institution in the United States.
<PAGE>
9
"C/D RESERVE PERCENTAGE" shall mean for any day as applied to
any ABR Loan, the percentage (expressed as a decimal) that is in effect
on such day, as prescribed by the Board, for determining the reserve
requirement for a Depositary Institution (as defined in Regulation D of
the Board) in respect of new non-personal time deposits in Dollars
having a maturity that is 30 days or more.
"CHANGE OF CONTROL" shall mean and be deemed to have occurred
if (a) (i) Sponsor, its Affiliates and the Management Group shall at
any time not own, in the aggregate, directly or indirectly,
beneficially and of record, at least 35% of the outstanding Voting
Stock of Newco 4 (other than as the result of one or more widely
distributed offerings of Newco 4 Common Stock, in each case whether by
Newco 4 or by Sponsor, its Affiliates or the Management Group) and/or
(ii) any person, entity or "group" (within the meaning of Section 13(d)
or 14(d) of the Securities Exchange Act of 1934, as amended) or group
of Persons "acting in concert" (as defined in the Takeover Code) shall
at any time have acquired direct or indirect beneficial ownership of a
percentage of the issued Voting Stock of Newco 4 that exceeds the
percentage of such Voting Stock then beneficially owned, in the
aggregate, by Sponsor, its Affiliates and the Management Group, unless,
in the case of either clause (i) or (ii) above, Sponsor, its Affiliates
and the Management Group have, at such time, the right or the ability
by voting power, contract or otherwise to elect or designate for
election a majority of the Board of Directors of Newco 4; (b) Newco 4
shall at any time cease to own, beneficially and of record, all the
issued capital stock of Parent; and/or (c) at any time Continuing
Directors shall not constitute a majority of the Board of Directors of
Newco 4.
"CHASE" shall mean The Chase Manhattan Bank, a New York
banking corporation, and any successor thereto by merger, consolidation
or otherwise.
"CLOSING DATE" shall mean October 30, 1998.
"CLOSING DATE EXCUSED SUBSIDIARIES" shall mean any Required
Guarantor Subsidiaries that would not be required to become Guarantors
by virtue of the proviso to Section 9.11 or that are dormant or
otherwise have immaterial assets or revenues.
"CODE" shall mean the United States Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated and
rulings issued thereunder. Section references to the Code are to the
Code, as in effect at the date of this Agreement, and any subsequent
provisions of the Code, amendatory thereof, supplemental thereto or
substituted therefor.
"COLLATERAL" shall have the meaning provided in the U.S.
Pledge Agreement and the U.K. Security Agreement.
"COLLATERAL AGENT" shall mean Chase, together with its
affiliates, as the collateral agent for the Lenders under this
Agreement and the other Credit Documents.
"COMMITMENT FEE RATE" shall mean, for any Lender for any day,
the rate per annum equal to (a) in the case of such Lender's Tranche A
Commitment, Tranche B Commitment, Tranche C Commitment and Tranche D
Commitment, 0.500% and (b) in
<PAGE>
10
the case of such Lender's Revolving Credit Commitment, the rate per
annum set forth below opposite the Status in effect on such day:
<TABLE>
<CAPTION>
Commitment
Status Fee Rate
------ ----------
<S> <C>
Level I Status 0.500%
Level II Status 0.425%
Level III Status 0.375%
Level IV Status 0.300%
Level V Status 0.300%
Level VI Status 0.250%
</TABLE>
"COMMITMENTS" shall mean, with respect to each Lender, such
Lender's Term Loan Commitments, Revolving Credit Commitment, Euro
Revolving Credit Commitment, if any, and Yen Revolving Credit
Commitment, if any.
"COMPANIES ACT 1985" shall mean the Companies Act 1985, as
amended.
"CONFIDENTIAL INFORMATION" shall have the meaning provided in
Section 13.16.
"CONFIDENTIAL INFORMATION MEMORANDUM" shall mean the
Confidential Information Memorandum of the Borrower and the Addendum
thereto delivered to the Lenders in connection with this Agreement
(including all supplements thereto).
"CONSOLIDATED CASH AVAILABLE FOR FIXED CHARGES" shall mean,
for any period, Consolidated EBITDA for such period MINUS Capital
Expenditures for such period, each such component determined on a
consolidated basis for Newco 4 and the Restricted Subsidiaries in
accordance with GAAP.
"CONSOLIDATED CASH AVAILABLE FOR FIXED CHARGES TO CONSOLIDATED
FIXED CHARGES RATIO" shall mean, as of any date of determination, the
ratio of (a) Consolidated Cash Available for Fixed Charges for the
relevant Test Period to (b) Consolidated Fixed Charges for such Test
Period.
"CONSOLIDATED EARNINGS" shall mean, for any period, profit on
ordinary activities before taxation of Newco 4 and the Restricted
Subsidiaries, excluding any currency translation gains and losses, for
such period, determined in a manner consistent with the manner in which
such amount was determined in accordance with the audited financial
statements referred to in Section 9.1(a).
"CONSOLIDATED EBITDA" shall mean, for any period, the sum,
without duplication, of the amounts for such period of (a) Consolidated
Earnings, (b) Consolidated Interest Expense, (c) depreciation expense,
(d) amortization expense, including amortization of deferred financing
fees, (e) exceptional losses and non-recurring charges, (f) non-cash
charges (including the non-cash portion of pension expense), (g) losses
on asset sales, (h) restructuring charges or provisions, (i) in the
case of any period that includes a period ending during the fiscal year
ending December 31, 1998, Transaction Expenses, (j) any expenses or
charges incurred in connection with any issuance of debt or equity
securities, (k) any fees and expenses related to Permitted Acquisitions
and, to the extent otherwise deducted in arriving at Consolidated
Earnings, other amounts paid at the time of consummation of any
Permitted Broker Acquisition and consistent with customary practice in
the industry to consummate such Permitted Broker Acquisition and (l)
any deduction for minority interest expense LESS the sum of the amounts
for such period of
<PAGE>
11
(m) exceptional gains and non-recurring gains, (n) non-cash gains and
(o) gains on asset sales, all as determined on a consolidated basis for
Newco 4 (or Parent, for periods prior to the first full fiscal quarter
for which financial results of Parent are consolidated with those of
Newco 4 in the financial statements delivered hereunder, to the extent
applicable) and the Restricted Subsidiaries in accordance with GAAP,
PROVIDED that (i) except as provided in clause (ii) below, there shall
be excluded from Consolidated Earnings for any period the income from
continuing operations before corporate taxes and exceptional items of
all Unrestricted Subsidiaries for such period to the extent otherwise
included in Consolidated Earnings, except to the extent actually
received in cash by Newco 4 or its Restricted Subsidiaries during such
period through dividends or other distributions, and (ii)(x) there
shall be included in determining Consolidated EBITDA for any period
(A) the Acquired EBITDA of any Person, property, business or asset
(other than an Unrestricted Subsidiary) acquired to the extent not
subsequently sold, transferred or otherwise disposed of (but not
including the Acquired EBITDA of any related Person, property, business
or assets to the extent not so acquired) by Newco 4 or any Restricted
Subsidiary during such period (each such Person, property, business or
asset acquired and not subsequently so disposed of, an "ACQUIRED ENTITY
OR BUSINESS"), and the Acquired EBITDA of any Unrestricted Subsidiary
that is converted into a Restricted Subsidiary during such period
(each, a "CONVERTED RESTRICTED SUBSIDIARY"), in each case based on the
actual Acquired EBITDA of such Acquired Entity or Business or Converted
Restricted Subsidiary for such period (including the portion thereof
occurring prior to such acquisition or conversion) and (B) for purposes
of the definition of the term "Permitted Acquisition" and Sections
10.3, 10.9 and 10.10, an adjustment in respect of each Acquired Entity
or Business equal to the amount of the Pro Forma Adjustment with
respect to such Acquired Entity or Business for such period (including
the portion thereof occurring prior to such acquisition or conversion)
as specified in the Pro Forma Adjustment Certificate delivered to the
Lenders and the Administrative Agent and (y) for purposes of
determining the Consolidated Total Debt to Consolidated EBITDA Ratio
only, there shall be excluded in determining Consolidated EBITDA for
any period the Acquired EBITDA of any Person, property, business or
asset (other than an Unrestricted Subsidiary) sold, transferred or
otherwise disposed of by Newco 4 or any Restricted Subsidiary during
such period (each such Person, property, business or asset so sold or
disposed of, a "SOLD ENTITY OR BUSINESS"), and the Acquired EBITDA of
any Restricted Subsidiary that is converted into an Unrestricted
Subsidiary during such period (each, a "CONVERTED UNRESTRICTED
SUBSIDIARY"), in each case based on the actual Acquired EBITDA of such
Sold Entity or Business or Converted Unrestricted Subsidiary for such
period (including the portion thereof occurring prior to such sale,
transfer, disposition or conversion).
"CONSOLIDATED EBITDA TO CONSOLIDATED INTEREST EXPENSE RATIO"
shall mean, as of any date of determination, the ratio of (a)
Consolidated EBITDA for the relevant Test Period to (b) Consolidated
Interest Expense for such Test Period.
"CONSOLIDATED FIXED CHARGES" shall mean, for any period, the
sum of (a) Consolidated Interest Expense for such period, (b) scheduled
principal payments (other than in respect of final maturities and
mandatory prepayments and giving effect, in any Test Period, to
prepayments of such scheduled principal payments made prior to such
Test Period) of Indebtedness made by Newco 4 or any Restricted
Subsidiary to any person other than Newco 4 or any wholly owned
Restricted Subsidiary of Newco 4 during such period and (c) Dividends
made as permitted by Section 10.6(e); PROVIDED, HOWEVER, that
Consolidated Fixed Charges for the Test Periods ending on the last day
of the first, second and third full fiscal quarters of Newco 4
following the Statutory Declaration Date shall be determined by (i) in
the case of the Test Period ending on the last day of the first full
fiscal quarter of Newco 4 following the Statutory Declaration Date,
multiplying
<PAGE>
12
Consolidated Fixed Charges for such quarter by 4, (ii) in the case of
the Test Period ending on the last day of the second full fiscal
quarter of Newco 4 following the Statutory Declaration Date,
multiplying Consolidated Fixed Charges for the two-fiscal-quarter
period ending on such day by 2, and (iii) in the case of the Test
Period ending on the last day of the third full fiscal quarter of Newco
4 following the Statutory Declaration Date, multiplying Consolidated
Fixed Charges for the three-fiscal-quarter period ending on such day by
4/3.
"CONSOLIDATED GROSS REVENUES" shall mean, for any fiscal year,
the amount for such fiscal year of gross revenues from ordinary
activities (including interest income earned on fiduciary balances)
determined on a consolidated basis for Newco 4 and the Restricted
Subsidiaries in accordance with GAAP, PROVIDED that for purposes of
calculating such gross revenues, (i) the gross revenues of any business
acquired during such fiscal year or in the succeeding fiscal year in a
Permitted Acquisition shall be determined on a pro forma basis (based
on assumptions believed by Parent in good faith to be reasonable) as if
such Permitted Acquisition had been consummated on the first day of
such first fiscal year and (ii) the gross revenues of any business sold
or otherwise disposed of by Parent or any of its Subsidiaries during
such fiscal year or in the succeeding fiscal year shall be excluded in
their entirety.
"CONSOLIDATED INTEREST EXPENSE" shall mean, for any period,
cash interest expense (including that attributable to Capital Leases in
accordance with GAAP), net of cash interest income (excluding any
investment income related to Insurance Broking Account Assets), of
Newco 4 and the Restricted Subsidiaries on a consolidated basis with
respect to all outstanding Indebtedness of Newco 4 and the Restricted
Subsidiaries, including, without limitation, all commissions, discounts
and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing and net costs under Hedge Agreements
(other than currency swap agreements, currency future or option
contracts and other similar agreements), but excluding, however,
amortization of deferred financing costs and any other amounts of
non-cash interest, all as calculated on a consolidated basis in
accordance with GAAP, PROVIDED that (a) except as provided in clause
(b) below, there shall be excluded from Consolidated Interest Expense
for any period the cash interest expense (or income) of all
Unrestricted Subsidiaries for such period to the extent otherwise
included in Consolidated Interest Expense and (b) for purposes of the
definition of the term "Permitted Acquisition" and Sections 10.3, 10.10
and 10.11, there shall be included in determining Consolidated Interest
Expense for any period the cash interest expense (or income) of any
Acquired Entity or Business acquired during such period and of any
Converted Restricted Subsidiary converted during such period, in each
case based on the cash interest expense (or income) of such Acquired
Entity or Business or Converted Restricted Subsidiary for such period
(including the portion thereof occurring prior to such acquisition or
conversion) assuming any Indebtedness incurred or repaid in connection
with any such acquisition or conversion had been incurred or prepaid on
the first day of such period; PROVIDED FURTHER, HOWEVER, that
Consolidated Interest Expense for the Test Periods ending on the last
day of the first, second and third full fiscal quarters of Newco 4
following the Statutory Declaration Date shall be determined by (i) in
the case of the Test Period ending on the last day of the first full
fiscal quarter of Newco 4 following the Statutory Declaration Date,
multiplying Consolidated Interest Expense for such quarter by 4, (ii)
in the case of the Test Period ending on the last day of the second
full fiscal quarter of Newco 4 following the Statutory Declaration
Date, multiplying Consolidated Interest Expense for the
two-fiscal-quarter period ending on such day by 2, and (iii) in the
case of the Test Period ending on the last day of the third full fiscal
quarter of Newco 4 following the Statutory Declaration Date,
multiplying Consolidated Interest Expense for the three-fiscal-quarter
period ending on such day by 4/3.
<PAGE>
13
"CONSOLIDATED NET INCOME" shall mean, for any period, the
consolidated profit (or loss) on ordinary activities after taxation of
Newco 4 and the Restricted Subsidiaries, determined on a consolidated
basis in accordance with GAAP.
"CONSOLIDATED TOTAL DEBT" shall mean, as of any date of
determination, (a) the sum of (i) all Indebtedness of Newco 4 and the
Restricted Subsidiaries for borrowed money outstanding on such date and
(ii) all Capitalized Lease Obligations of Newco 4 and the Restricted
Subsidiaries outstanding on such date, all calculated on a consolidated
basis in accordance with GAAP, MINUS (b) the aggregate amount of cash
(excluding cash related to Insurance Broking Account Assets) included
in the cash accounts listed on the consolidated balance sheet of Newco
4 and the Restricted Subsidiaries and deposited with the Administrative
Agent or Lenders domiciled in the United States or the United Kingdom
as at such date to the extent the use thereof for application to
payment of Indebtedness of Newco 4 and the Restricted Subsidiaries is
not prohibited by law or any contract to which Newco 4 or any of the
Restricted Subsidiaries is a party.
"CONSOLIDATED TOTAL DEBT TO CONSOLIDATED EBITDA RATIO" shall
mean, as of any date of determination, the ratio of (a) Consolidated
Total Debt as of the last day of the relevant Test Period to (b)
Consolidated EBITDA for such Test Period.
"CONSOLIDATED WORKING CAPITAL" shall mean, at any date, the
excess of (a) the sum of all amounts (other than cash, cash equivalents
and bank overdrafts and Insurance Broking Account Assets) that would,
in conformity with GAAP, be included in total current assets (or any
like caption) on a consolidated balance sheet of Newco 4 and the
Restricted Subsidiaries at such date over (b) the sum of all amounts
that would, in conformity with GAAP, be included in total current
liabilities (or any like caption) (other than Insurance Broking Account
Liabilities) on a consolidated balance sheet of Newco 4 and the
Restricted Subsidiaries on such date, but excluding (i) the current
portion of any Funded Debt, and (ii) without duplication of clause (i)
above, all Indebtedness consisting of Loans and Letter of Credit
Exposure to the extent otherwise included therein.
"CONTINUING DIRECTOR" shall mean, at any date, an individual
(a) who is a member of the Board of Directors of Newco 4 on the date
hereof, (b) who, as at such date, has been a member of such Board of
Directors for at least the 12 preceding months, (c) who has been
nominated to be a member of such Board of Directors, directly or
indirectly, by Sponsor or one of its Affiliates or Persons nominated by
Sponsor or one of its Affiliates or (d) who has been nominated to be a
member of such Board of Directors by a majority of the other Continuing
Directors then in office.
"CONTROL DATE" shall mean the date on which Newco 4 acquired
more than 50% of the Shares.
"CONVERTED RESTRICTED SUBSIDIARY" shall have the meaning
provided in the definition of the term "Consolidated EBITDA".
"CONVERTED UNRESTRICTED SUBSIDIARY" shall have the meaning
provided in the definition of the term "Consolidated EBITDA".
"CREDIT DOCUMENTS" shall mean this Agreement, the Guarantee,
the U.S. Pledge Agreement, the U.K. Security Agreement and any
promissory notes issued by the Borrower hereunder.
"CREDIT EVENT" shall mean and include the making (but not the
conversion or continuation) of a Loan and the issuance of a Letter of
Credit.
<PAGE>
14
"CREDIT PARTY" shall mean each of Newco 4, Parent, the
Borrower and the other Guarantors.
"CUMULATIVE CONSOLIDATED NET INCOME AVAILABLE TO STOCKHOLDERS"
shall mean, as of any date of determination, Consolidated Net Income
less cash dividends paid with respect to capital stock for the period
(taken as one accounting period) commencing on the Closing Date and
ending on the last day of the most recent fiscal quarter for which
Section 9.1 Financials have been delivered to the Lenders under Section
9.1.
"DEBT INCURRENCE PREPAYMENT EVENT" shall mean any issuance or
incurrence by Newco 4 or any of the Restricted Subsidiaries of any
Indebtedness (excluding (a) the Subordinated Notes to the extent that
the Net Cash Proceeds therefrom are applied to repay the principal of,
and accrued interest on, the Subordinated Loans or the loans under the
Subordinated Bridge Facility and (b) any other Indebtedness permitted
to be issued or incurred under Section 10.1).
"DEFAULT" shall mean any event, act or condition that with
notice or lapse of time, or both, would constitute an Event of Default.
"DEFAULTING LENDER" shall mean any Lender with respect to
which a Lender Default is in effect.
"DENOMINATION DATE" shall mean, in relation to any Foreign
Currency Borrowing, the date that is three Business Days before the
date of such Borrowing.
"DEPOSITARY SHARES" shall mean each of the American Depositary
Shares, evidenced by American Depositary Receipts, representing five
Shares.
"DIVIDENDS" shall have the meaning provided in Section 10.6.
"DOCUMENTATION AGENT" shall mean Bank of America, as the
documentation agent for the Lenders under this Agreement and the other
Credit Documents.
"DOLLAR BORROWING" shall mean a Borrowing comprised of Dollar
Loans.
"DOLLAR EQUIVALENT" shall mean, on any date of determination,
with respect to any amount denominated in any currency other than
Dollars, the equivalent in Dollars of such amount, determined by the
Administrative Agent pursuant to Section 1.2(a) using the applicable
Exchange Rate with respect to such currency at the time in effect.
"DOLLAR LOANS" shall mean Loans denominated in Dollars.
"DOLLAR REVOLVING CREDIT LOAN" shall mean a Revolving Credit
Loan denominated in Dollars and made pursuant to Section 2.1(b).
"DOLLARS" and "$" shall mean lawful currency of the United
States.
"DOLLAR SWINGLINE LOAN" shall have the meaning provided in
Section 2.1(e).
"DOMESTIC BORROWER SUBSIDIARY" shall mean each Subsidiary of
the Borrower that is organized under the laws of the United States, any
state or territory thereof, or the District of Columbia.
<PAGE>
15
"DOMESTIC NEWCO 4 SUBSIDIARY" shall mean each Subsidiary of
Newco 4 that is organized under the laws of England and Wales.
"DRAWING" shall have the meaning provided in Section 3.4(b).
"EMU" shall mean the Economic and Monetary Union as
contemplated in the Treaty on European Union.
"EMU LEGISLATION" shall mean the legislative measures of the
European Union for the introduction of, changeover to or operation of
the euro in one or more member states of the European Union.
"ENVIRONMENTAL CLAIMS" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims,
liens, notices of noncompliance or violation, investigations (other
than internal reports prepared by Parent or any of its Subsidiaries (a)
in the ordinary course of such Person's business or (b) as required in
connection with a financing transaction or an acquisition or
disposition of real estate) or proceedings relating in any way to any
Environmental Law or any permit issued, or any approval given, under
any such Environmental Law (hereinafter, "CLAIMS"), including, without
limitation, (i) any and all Claims by governmental or regulatory
authorities for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law
and (ii) any and all Claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the
environment.
"ENVIRONMENTAL LAW" shall mean any applicable United States
Federal, state, foreign or local statute, law, rule, regulation,
ordinance, code and rule of common law now or hereafter in effect and
in each case as amended, and any binding judicial or administrative
interpretation thereof, including any binding judicial or
administrative order, consent decree or judgment, relating to the
environment, human health or safety or Hazardous Materials.
"ERISA" shall mean the United States Employee Retirement
Income Security Act of 1974, as amended from time to time. Section
references to ERISA are to ERISA as in effect at the date of this
Agreement and any subsequent provisions of ERISA amendatory thereof,
supplemental thereto or substituted therefor.
"ERISA AFFILIATE" shall mean each person (as defined in
Section 3(9) of ERISA) that together with Newco 4 or a Subsidiary of
Newco 4 would be deemed to be a "single employer" within the meaning of
Section 414(b) or (c) of the Code or, solely for purposes of Section
302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.
"EURO" or "EURO" shall mean the single currency of the
European Union as constituted by the Treaty on European Union and as
referred to in EMU Legislation.
"EURO BORROWING" shall mean a Borrowing comprised of Euro
Revolving Credit Loans.
"EURO EQUIVALENT" shall mean, on any date of determination,
with respect to any amount denominated in any currency other than Euro,
the equivalent in Euro of such amount, determined by the Administrative
Agent pursuant to Section 1.2(a) using the applicable Exchange Rate
then in effect.
<PAGE>
16
"EURO LENDERS" shall mean the Persons listed on Schedule
2.1(a) as Euro Lenders and any other Person that shall accept an
assignment of a Euro Revolving Credit Commitment pursuant to an
Assignment and Acceptance, other than any such Person that ceases to
have a Euro Revolving Credit Commitment pursuant to an Assignment and
Acceptance.
"EURO REVOLVING CREDIT COMMITMENT" shall mean, (a) with
respect to each Euro Lender that is a Euro Lender on the Restatement
Date, the amount set forth opposite such Euro Lender's name on Schedule
2.1(a) as such Euro Lender's "Euro Revolving Credit Commitment" and (b)
in the case of any Euro Lender that becomes a Euro Lender after the
Restatement Date, the amount specified as such Euro Lender's "Euro
Revolving Credit Commitment" in the Assignment and Acceptance pursuant
to which such Euro Lender assumed its Euro Revolving Credit Commitment,
in each case as the same may be changed from time to time pursuant to
the terms hereof.
"EURO REVOLVING CREDIT LOAN" shall mean a Revolving Credit
Loan denominated in Euro and made pursuant to Section 2.1(c).
"EURODOLLAR LOAN" shall mean any Eurodollar Term Loan or
Eurodollar Revolving Credit Loan.
"EURODOLLAR RATE" shall mean, in the case of any Eurodollar
Term Loan or Eurodollar Revolving Credit Loan (other than a Foreign
Currency Revolving Credit Loan), with respect to each day during each
Interest Period pertaining to such Eurodollar Loan, the rate of
interest determined on the basis of the rate for deposits in Dollars
for a period equal to such Interest Period commencing on the first day
of such Interest Period appearing on Page 3750 of the Telerate screen
as of 11:00 A.M., London time, two Business Days prior to the beginning
of such Interest Period. In the event that such rate does not appear on
Page 3750 of the Telerate screen (or otherwise on such service), and
with respect to any Foreign Currency Revolving Credit Loan, the
"Eurodollar Rate" for the purposes of this paragraph shall be
determined by reference to such other publicly available service for
displaying eurodollar rates as may be agreed upon by the Administrative
Agent and the Borrower or, in the absence of such agreement, the
"Eurodollar Rate" for the purposes of this paragraph shall instead be
the rate per annum notified to the Administrative Agent by the
Reference Lender as the rate at which the Reference Lender is offered
Dollar, Euro, Yen or Sterling, as applicable, deposits at or about
10:00 A.M., New York time, or 11:00 A.M., London time, as applicable,
two Business Days prior to the beginning of such Interest Period, in
the interbank eurodollar market where the eurodollar and foreign
currency and exchange operations in respect of its Eurodollar Loans are
then being conducted for delivery on the first day of such Interest
Period for the number of days comprised therein and in an amount
comparable to the amount of its Eurodollar Term Loan or Eurodollar
Revolving Credit Loan, as the case may be, to be outstanding during
such Interest Period. If, in relation to the currency of any Subsequent
Participant, the basis of accrual of interest or commitment commission
expressed in this Agreement in respect of that currency shall be
inconsistent with any convention or practice in the London interbank
market for the basis of accrual of interest or commitment commission in
respect of the euro, such expressed basis shall be replaced by such
convention or practice with effect from the date on which such
Subsequent Participant becomes a Participating Member State, PROVIDED
that, if any Eurodollar Loan in the currency of such Subsequent
Participant is outstanding immediately prior to such date, such
replacement convention or practice shall take effect, with respect to
such Eurodollar Loan, at the end of the then current Interest Period
for such Eurodollar Loan.
<PAGE>
17
"EURODOLLAR REVOLVING CREDIT LOAN" shall mean any Revolving
Credit Loan bearing interest at a rate determined by reference to the
Eurodollar Rate.
"EURODOLLAR TERM LOAN" shall mean any Term Loan bearing
interest at a rate determined by reference to the Eurodollar Rate.
"EURO UNIT" shall mean the currency unit of the euro as
defined in EMU Legislation.
"EVENT OF DEFAULT" shall have the meaning provided in
Section 11.
"EXCESS CASH FLOW" shall mean, for any period, an amount equal
to the excess of (a) the sum, without duplication, of (i) Consolidated
Net Income for such period, (ii) an amount equal to the amount of all
non-cash charges (including share of loss of associated undertakings)
to the extent deducted in arriving at such Consolidated Net Income,
(iii) decreases in Consolidated Working Capital for such period,
(iv) an amount equal to the aggregate net non-cash loss on the sale,
lease, transfer or other disposition of assets by Newco 4 and the
Restricted Subsidiaries during such period (other than sales in the
ordinary course of business) to the extent deducted in arriving at such
Consolidated Net Income, and (v) the aggregate amount of dividends
received from associated undertakings during such period OVER (b) the
sum, without duplication, of (i) an amount equal to the amount of all
non-cash credits included in arriving at such Consolidated Net Income
(including share of profit of associated undertakings), (ii) the
aggregate amount actually paid by Newco 4 and the Restricted
Subsidiaries in cash during such period on account of Capital
Expenditures (excluding the principal amount of Indebtedness incurred
in connection with such Capital Expenditures, whether incurred in such
period or in a subsequent period), (iii) the aggregate amount of all
scheduled or mandatory prepayments of Revolving Credit Loans and
Swingline Loans made during such period to the extent accompanying
reductions of the Total Revolving Credit Commitment, (iv) the aggregate
amount of all principal payments of Indebtedness of Newco 4 or the
Restricted Subsidiaries (including, without limitation, any scheduled
prepayments of Term Loans and the principal component of payments in
respect of Capitalized Lease Obligations but excluding Revolving Credit
Loans, Swingline Loans and mandatory (other than scheduled) and
voluntary prepayments of Term Loans) made during such period (other
than in respect of any revolving credit facility to the extent there is
not an equivalent permanent reduction in commitments thereunder),
(v) the aggregate amount of all mandatory prepayments made during such
period with respect to any Asset Sale Prepayment Events (other than any
portion of such prepayments that was not included in Consolidated Net
Income, (vi) an amount equal to the aggregate net non-cash gain on the
sale, lease, transfer or other disposition of assets by Newco 4 and the
Restricted Subsidiaries during such period (other than sales in the
ordinary course of business) to the extent included in arriving at such
Consolidated Net Income, (vii) increases in Consolidated Working
Capital for such period, (viii) payments by Newco 4 and the Restricted
Subsidiaries during such period in respect of provisions for
liabilities and charges and other long-term liabilities of Newco 4 and
the Restricted Subsidiaries other than Indebtedness, (ix) the amount of
investments made during such period pursuant to Section 10.5 to the
extent that such investments were financed with internally generated
cash flow of Newco 4 and the Restricted Subsidiaries, (x) the amount of
dividends paid during such period pursuant to clause (b), (c), (d), (e)
or (g) of the proviso to Section 10.6, (xi) the aggregate amount of
expenditures actually made by Newco 4 and the Restricted Subsidiaries
in cash during such period (including, without limitation, expenditures
for the payment of financing fees) to the extent that such expenditures
are not expensed during such period and (xii) the aggregate amount of
any premium, make-whole or penalty payments actually paid in cash by
Newco 4 and the Restricted
<PAGE>
18
Subsidiaries during such period that are required to be made in
connection with any prepayment of Indebtedness and that are accounted
for as extraordinary items.
"EXCHANGE RATE" shall mean, on any day, with respect to any
currency other than Dollars (for purposes of determining the Dollar
Equivalent), Sterling (for purposes of determining the Sterling
Equivalent), Euro (for purposes of determining the Euro Equivalent) or
Yen (for purposes of determining the Yen Equivalent), the rate at which
such currency may be exchanged into Dollars, Sterling, Euro or Yen, as
the case may be, as set forth at approximately 11:00 a.m., London time,
on such date on the applicable Reuters World Currency Page. In the
event that any such rate does not appear on any Reuters World Currency
Page, the Exchange Rate shall be determined by reference to such other
publicly available service for displaying exchange rates as may be
agreed upon by the Administrative Agent and the Borrower, or, in the
absence of such agreement, such Exchange Rate shall instead be the
arithmetic average of the spot rates of exchange of the Administrative
Agent in the market where its foreign currency exchange operations in
respect of such currency are then being conducted, at or about 10:00
A.M., local time, on such date for the purchase of Dollars, Sterling,
Euro or Yen, as the case may be, for delivery two Business Days later,
PROVIDED that, if at the time of any such determination, for any
reason, no such spot rate is being quoted, the Administrative Agent may
use any reasonable method it deems appropriate to determine such rate,
and such determination shall be presumed correct absent manifest error.
"EXCHANGE RATE PROTECTION AGREEMENT" shall mean any Hedging
Agreement that is designed to protect the Borrower against fluctuations
in currency exchange rates and not for speculation.
"EXISTING PARENT INDEBTEDNESS" shall mean all accrued interest
with respect to and principal and any other amounts owing under the
existing indebtedness for borrowed money of Parent and its Subsidiaries
on the Closing Date (other than a portion thereof in an aggregate
amount not to exceed $5,000,000).
"FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the
weighted average of the per annum rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published on the next succeeding Business Day
by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average of the
quotations for the day of such transactions received by the
Administrative Agent from three federal funds brokers of recognized
standing selected by it.
"FEES" shall mean all amounts payable pursuant to, or referred
to in, Section 4.1.
"FINAL DATE" shall mean the date on which the Revolving Credit
Commitments, Euro Revolving Credit Commitments and Yen Revolving Credit
Commitments shall have terminated, no Revolving Credit Loans shall be
outstanding and the Letter of Credit Outstandings shall have been
reduced to zero.
"FOREIGN CURRENCY" shall mean a currency other than Dollars.
"FOREIGN CURRENCY BORROWING" shall mean a Borrowing comprised
of Foreign Currency Revolving Credit Loans.
"FOREIGN CURRENCY REVOLVING CREDIT LOAN" shall mean a
Revolving Credit Loan denominated in a Foreign Currency.
<PAGE>
19
"FOREIGN BORROWER SUBSIDIARY" shall mean each Subsidiary of
the Borrower that is not a Domestic Borrower Subsidiary.
"FOREIGN NEWCO 4 SUBSIDIARY" shall mean each Subsidiary of
Newco 4 that is not a Domestic Newco 4 Subsidiary.
"FOREIGN SUBSIDIARY" shall mean any Foreign Newco 4 Subsidiary
or any Foreign Borrower Subsidiary.
"FRONTING FEE" shall have the meaning provided in
Section 4.1 (c).
"FUNDED DEBT" shall mean all Indebtedness of Newco 4 and the
Restricted Subsidiaries for borrowed money that matures more than one
year from the date of its creation or matures within one year from such
date that is renewable or extendable, at the option of Newco 4 or one
of the Restricted Subsidiaries, to a date more than one year from such
date or arises under a revolving credit or similar agreement that
obligates the lender or lenders to extend credit during a period of
more than one year from such date, including, without limitation, all
amounts of Funded Debt required to be paid or prepaid within one year
from the date of its creation and, in the case of the Borrower,
Indebtedness in respect of the Loans.
"GAAP" shall mean generally accepted accounting principles in
the United Kingdom as in effect from time to time; PROVIDED, HOWEVER,
that if there occurs after the date hereof any change in GAAP that
affects in any respect the calculation of any covenant contained in
Section 10, the Lenders, Newco 4 and the Borrower shall negotiate in
good faith amendments to the provisions of this Agreement that relate
to the calculation of such covenant with the intent of having the
respective positions of the Lenders, Newco 4 and the Borrower after
such change in GAAP conform as nearly as possible to their respective
positions as of the date of this Agreement and, until any such
amendments have been agreed upon, the covenants in Section 10 shall be
calculated as if no such change in GAAP has occurred.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government,
any state or other political subdivision thereof, and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"GUARANTEE" shall mean and include the Guarantee, made by the
Required Guarantor Subsidiaries and any other Guarantors in favor of
the Administrative Agent for the benefit of the Lenders, substantially
in the form of Exhibit A, as the same may be amended, supplemented or
otherwise modified from time to time.
"GUARANTEE OBLIGATIONS" shall mean, as to any Person, any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness of any other Person (the "PRIMARY OBLIGOR") in any manner,
whether directly or indirectly, including, without limitation, any
obligation of such Person, whether or not contingent, (a) to purchase
any such Indebtedness or any property constituting direct or indirect
security therefor, (b) to advance or supply funds (i) for the purchase
or payment of any such Indebtedness or (ii) to maintain working capital
or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner
of any such Indebtedness of the ability of the primary obligor to make
payment of such Indebtedness or (d) otherwise to assure or hold
harmless the owner of such Indebtedness against loss in respect
thereof; PROVIDED, HOWEVER, that the term "Guarantee Obligations" shall
not include endorsements of instruments for deposit or collection in
the ordinary course of
<PAGE>
20
business. The amount of any Guarantee Obligation shall be deemed to be
an amount equal to the stated or determinable amount of the
Indebtedness in respect of which such Guarantee Obligation is made or,
if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof (assuming such Person is required to
perform thereunder) as determined by such Person in good faith.
"GUARANTEED LOAN NOTES" shall mean loan notes of Newco 4
issued pursuant to the Offer at the election of holders of the Shares,
having the terms contained in the Guaranteed Loan Notes Instrument and
guaranteed by The Chase Manhattan Bank, acting through its London
branch.
"GUARANTEED LOAN NOTES INSTRUMENT" shall mean the Guaranteed
Loan Notes Instrument in the form of Exhibit J to the Credit Agreement
dated as of July 22, 1998, among Newco 4, the lenders party thereto and
Chase as Administrative Agent, as the same may be amended, supplemented
or otherwise modified from time to time in accordance with its terms.
"GUARANTOR" shall mean Newco 4, Parent and each other
Subsidiary of Newco 4 that is a Restricted Subsidiary (other than the
Borrower and any Foreign Borrower Subsidiary) and is or has become a
party to the Guarantee.
"HAZARDOUS MATERIALS" shall mean (a) any petroleum or
petroleum products, radioactive materials, friable asbestos, urea
formaldehyde foam insulation, transformers or other equipment that
contain dielectric fluid containing regulated levels of polychlorinated
biphenyls, and radon gas; (b) any chemicals, materials or substances
defined as or included in the definition of "hazardous substances",
"hazardous waste", "hazardous materials", "extremely hazardous waste",
"restricted hazardous waste", "toxic substances", "toxic pollutants",
"contaminants", or "pollutants", or words of similar import, under any
applicable Environmental Law; and (c) any other chemical, material or
substance, exposure to which is prohibited, limited or regulated by any
Governmental Authority.
"HEDGE AGREEMENTS" shall mean interest rate swap, cap or
collar agreements, interest rate future or option contracts, currency
swap agreements, currency future or option contracts and other similar
agreements entered into by Parent or the Borrower in order to protect
Parent or any of the Restricted Subsidiaries against fluctuations in
interest rates or currency exchange rates.
"INDEBTEDNESS" of any Person shall mean (a) all indebtedness
of such Person for borrowed money, (b) the deferred purchase price of
assets or services that in accordance with GAAP would be shown on the
liability side of the balance sheet of such Person, (c) the face amount
of all letters of credit issued for the account of such Person and,
without duplication, all drafts drawn thereunder, (d) all Indebtedness
of a second Person secured by any Lien on any property owned by such
first Person, whether or not such Indebtedness has been assumed, (e)
all Capitalized Lease Obligations of such Person, (f) all obligations
of such Person under interest rate swap, cap or collar agreements,
interest rate future or option contracts, currency swap agreements,
currency future or option contracts and other similar agreements and
(g) without duplication, all Guarantee Obligations of such Person,
PROVIDED that Indebtedness shall not include trade payables and accrued
expenses, in each case arising in the ordinary course of business.
"INSURANCE BROKING ACCOUNT ASSETS" shall mean the sum of
amounts owing from insurance broking transaction debtors, bank balances
designated "insurance broking
<PAGE>
21
accounts" and approved assets designated "insurance broking assets" at
their net realization value.
"INSURANCE BROKING ACCOUNT LIABILITIES" shall mean the sum of
amounts owing to insurance broking transaction creditors and bank
advances designated "insurance broking advances".
"INTERCOMPANY LOAN" shall mean the loans made by the Borrower
to Newco 4 on November 19, 1998, in the principal amounts of
$450,000,000 and $575,000,000, respectively.
"INTERCOMPANY NOTE" shall mean a promissory note evidencing
the Intercompany Loan, as the same may be amended, restated or
otherwise modified from time to time.
"INTEREST PERIOD" shall mean, with respect to any Term Loan or
Revolving Credit Loan, the interest period applicable thereto, as
determined pursuant to Section 2.9.
"L/C MATURITY DATE" shall mean the date that is five Business
Days prior to the Revolving Credit Maturity Date.
"L/C PARTICIPANT" shall have the meaning provided in Section
3.3(a).
"L/C PARTICIPATION" shall have the meaning provided in Section
3.3(a).
"LENDER" shall have the meaning provided in the preamble to
this Agreement.
"LENDER DEFAULT" shall mean (a) the failure (which has not
been cured) of a Lender to make available its portion of any Borrowing
or to fund its portion of any unreimbursed payment under Section 3.3 or
(b) a Lender having notified the Administrative Agent and/or the
Borrower that it does not intend to comply with the obligations under
Section 2.1(b), 2.1(c), 2.1(d), 2.1(f) or 3.3, in the case of either
clause (a) or clause (b) above, as a result of the appointment of a
receiver or conservator with respect to such Lender at the direction or
request of any regulatory agency or authority.
"LETTER OF CREDIT" shall mean each standby letter of credit
issued pursuant to Section 3.1.
"LETTER OF CREDIT COMMITMENT" shall mean $50,000,000, as the
same may be reduced from time to time pursuant to Section 3.1.
"LETTER OF CREDIT EXPOSURE" shall mean, with respect to any
Lender, the sum of (a) the amount of any Unpaid Drawings in respect of
which such Lender has made (or is required to have made) payments to
the Letter of Credit Issuer pursuant to Section 3.4(a), PROVIDED that
the amount of any Unpaid Drawing denominated in Sterling shall be
deemed to be, as of such date, the Dollar Equivalent thereof at such
date and (b) such Lender's Revolving Credit Commitment Percentage of
the Letter of Credit Outstanding (excluding the portion thereof
consisting of Unpaid Drawings in respect of which the Lenders have made
(or are required to have made) payments to the Letter of Credit Issuer
pursuant to Section 3.4(a)).
"LETTER OF CREDIT FEE" shall have the meaning provided in
Section 4.1(b).
"LETTER OF CREDIT ISSUER" shall mean Chase, any of its
Affiliates or any successor pursuant to Section 3.6.
<PAGE>
22
"LETTER OF CREDIT OUTSTANDING" shall mean, at any time, the
sum of, without duplication, (a) the aggregate Stated Amount of all
outstanding Letters of Credit and (b) the aggregate amount of all
Unpaid Drawings in respect of all Letters of Credit, PROVIDED that the
amount of any Stated Amount or Unpaid Drawing denominated in Sterling
shall be deemed to be, as of such date, the Dollar Equivalent thereof
at such date.
"LETTER OF CREDIT REQUEST" shall have the meaning provided in
Section 3.2.
"LEVEL I STATUS" shall mean, on any date, the Consolidated
Total Debt to Consolidated EBITDA Ratio is greater than or equal to
4.75:1.00 as of such date.
"LEVEL II STATUS" shall mean, on any date, the circumstance
that Level I Status does not exist and the Consolidated Total Debt to
Consolidated EBITDA Ratio is greater than or equal to 4.25:1.00 as of
such date.
"LEVEL III STATUS" shall mean, on any date, the circumstance
that neither Level I Status nor Level II Status exists and the
Consolidated Total Debt to Consolidated EBITDA Ratio is greater than or
equal to 3.75:1.00 as of such date.
"LEVEL IV STATUS" shall mean, on any date, the circumstance
that none of Level I Status, Level II Status or Level III Status exists
and the Consolidated Total Debt to Consolidated EBITDA Ratio is greater
than or equal to 3.25:1.00 as of such date.
"LEVEL V STATUS" shall mean, on any date, the circumstance
that none of Level I Status, Level II Status, Level III Status or Level
IV Status exists and the Consolidated Total Debt to Consolidated EBITDA
Ratio is greater than or equal to 2.75:1.00 as of such date.
"LEVEL VI STATUS" shall mean, on any date, the circumstance
that none of Level I Status, Level II Status, Level III Status, Level
IV or Level V Status exists and the Consolidated Total Debt to
Consolidated EBITDA Ratio is less than 2.75:1.00 as of such date.
"LIEN" shall mean any mortgage, pledge, security interest,
hypothecation, assignment, lien (statutory or other) or similar
encumbrance (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement or any lease in the
nature thereof).
"LIMITED GUARANTOR" shall mean any Restricted Foreign
Subsidiary of Newco 4 that is or has become a party to a Guarantee but
the liability of which under such Guarantee is limited in amount.
"LOAN" shall mean any Revolving Credit Loan, Swingline Loan or
Term Loan made by any Lender hereunder.
"MANAGEMENT EQUITY CONTRIBUTION" shall have the meaning
provided in the preamble to this Agreement.
"MANAGEMENT GROUP" shall mean, at any time, the General
Executive Committee, the Chairman of the Board, the President, any
Executive Vice President or Vice President, the Treasurer and the
Secretary of Parent at such time.
"MANDATORY BORROWING" shall have the meaning provided in
Section 2.1(f).
<PAGE>
23
"MARGIN STOCK" shall have the meaning provided in
Regulation U.
"MATERIAL ADVERSE CHANGE" shall mean any change in the
business, assets, operations, properties or financial condition of
Newco 4 and its Subsidiaries taken as a whole that would materially
adversely affect the ability of the Borrower and the other Credit
Parties taken as a whole to perform their obligations under this
Agreement and the other Credit Documents taken as a whole.
"MATERIAL ADVERSE EFFECT" shall mean a circumstance or
condition affecting the business, assets, operations, properties or
financial condition of Newco 4 and its Subsidiaries taken as a whole
that would materially adversely affect (a) the ability of the Borrower
and the other Credit Parties taken as a whole to perform their
obligations under this Agreement and the other Credit Documents taken
as a whole or (b) the rights and remedies of the Administrative Agent
and the Lenders under this Agreement and the other Credit Documents
taken as a whole.
"MATERIAL SUBSIDIARY" shall mean, at any date of
determination, (a) the Borrower and (b) any Restricted Subsidiary
(other than the Borrower) (i) whose total assets at the last day of the
Test Period ending on the last day of the most recent fiscal period for
which Section 9.1 Financials have been delivered were equal to or
greater than 5% of the consolidated total assets of Newco 4 and the
Restricted Subsidiaries at such date or (ii) whose gross revenues for
such Test Period were equal to or greater than 5% of the consolidated
gross revenues of Newco 4 and the Restricted Subsidiaries for such
period, in each case determined in accordance with GAAP.
"MATURITY DATE" shall mean the Tranche A Maturity Date, the
Tranche B Maturity Date, the Tranche C Maturity Date, the Tranche D
Maturity Date or the Revolving Credit Maturity Date.
"MINIMUM BORROWING AMOUNT" shall mean (a) with respect to a
Borrowing of Term Loans or Revolving Credit Loans, $1,000,000 (or the
Sterling Equivalent, Euro Equivalent or Yen Equivalent thereof, as
applicable) and (b) with respect to a Borrowing of Swingline Loans,
$100,000 (or the Sterling Equivalent thereof).
"MINORITY INVESTMENT" shall mean any Person (other than a
Subsidiary) in which Newco 4 or any Restricted Subsidiary owns capital
stock or other equity interests.
"MOODY'S" shall mean Moody's Investors Service, Inc. or any
successor by merger or consolidation to its business.
"NET CASH PROCEEDS" shall mean, with respect to any Prepayment
Event or any issuance by Newco 4 of equity securities, (a) the gross
cash proceeds (including payments from time to time in respect of
installment obligations, if applicable) received by or on behalf of
Newco 4 or any of the Restricted Subsidiaries in respect of such
Prepayment Event or issuance, as the case may be, less (b) the sum of:
(i) in the case of any Prepayment Event, the amount, if any,
of all taxes paid or estimated to be payable by Newco 4 or any of the
Restricted Subsidiaries in connection with such Prepayment Event,
(ii) in the case of any Prepayment Event, the amount of any
reasonable reserve established in accordance with GAAP against any
liabilities (other than any taxes deducted pursuant to clause (i)
above) (A) associated with the assets that are the subject of such
Prepayment Event and (B) retained by Newco 4 or any of the Restricted
<PAGE>
24
Subsidiaries, PROVIDED that the amount of any subsequent reduction of
such reserve (other than in connection with a payment in respect of any
such liability) shall be deemed to be Net Cash Proceeds of such a
Prepayment Event occurring on the date of such reduction,
(iii) in the case of any Prepayment Event, the amount of any
Indebtedness secured by a Lien on the assets that are the subject of
such Prepayment Event to the extent that the instrument creating or
evidencing such Indebtedness requires that such Indebtedness be repaid
upon consummation of such Prepayment Event,
(iv) in the case of any Asset Sale Prepayment Event, the
amount of any proceeds of such Asset Sale Prepayment Event that the
Borrower has reinvested (or intends to reinvest within one year of the
date of such Asset Sale Prepayment Event) in the business of Newco 4 or
any of the Restricted Subsidiaries (subject to Section 9.14), PROVIDED
that any portion of such proceeds that has not been so reinvested
within such one-year period shall (x) be deemed to be Net Cash Proceeds
of an Asset Sale Prepayment Event occurring on the last day of such
one-year period and (y) be applied to the repayment of Term Loans in
accordance with Section 5.2(a)(i), and PROVIDED FURTHER that, for
purposes of the preceding proviso, such one-year period shall be
extended by up to twelve months from the last day of such one-year
period so long as (A) such proceeds are to be reinvested within such
additional twelve-month period under Newco 4's business plan as most
recently adopted in good faith by its Board of Directors and (B) Newco
4 believes in good faith that such proceeds will be so reinvested
within such additional twelve-month period, and
(v) in the case of any Prepayment Event or any issuance by
Newco 4 of equity securities, reasonable and customary fees,
commissions, expenses, issuance costs, discounts and other costs paid
by Newco 4 or any of the Restricted Subsidiaries in connection with
such Prepayment Event or issuance, as the case may be (other than those
payable to Newco 4 or any Subsidiary of Newco 4), in each case only to
the extent not already deducted in arriving at the amount referred to
in clause (a) above.
"NEWCO 1" shall have the meaning provided in the preamble to
this Agreement.
"NEWCO 2" shall have the meaning provided in the preamble to
this Agreement.
"NEWCO 3" shall mean a newly formed private limited company
organized under the laws of England and Wales all the issued share
capital of which is owned on the date hereof by Newco 2 and that owns
all the issued share capital of Newco 4.
"NEWCO 4" shall have the meaning provided in the preamble to
this Agreement.
"NEWCO 4 COMMON STOCK" shall mean any class of outstanding
ordinary share capital of Newco 4 after giving effect to the
Transactions.
"NEWCO 4 INDEBTEDNESS" shall mean all accrued interest with
respect to and principal and any other amounts owing under the Bridge
Facilities on the Term Loan Funding Date.
"NON-DEFAULTING LENDER" shall mean and include each Lender
other than a Defaulting Lender.
"NON-EXCLUDED TAXES" shall have the meaning provided in
Section 5.4(a).
"NOTICE OF BORROWING" shall have the meaning provided in
Section 2.3.
<PAGE>
25
"NOTICE OF CONVERSION OR CONTINUATION" shall have the meaning
provided in Section 2.6.
"OBLIGATIONS" shall mean all monetary amounts of every type or
description at any time owing to the Administrative Agent, any Lender
or, in the case of Hedge Agreements, any affiliate of a Lender pursuant
to the terms of this Agreement, any other Credit Document or any Hedge
Agreement.
"OFFER" shall have the meaning provided in the preamble to
this Agreement.
"PARENT" shall have the meaning provided in the preamble to
this Agreement.
"PARTICIPANT" shall have the meaning provided in Section
13.6(a)(ii).
"PARTICIPATING MEMBER STATE" shall mean any member state of
the European Union that has the euro as its lawful currency.
"PBGC" shall mean the United States Pension Benefit Guaranty
Corporation established pursuant to Section 4002 of ERISA, or any
successor thereto.
"PERMITTED ACQUISITION" shall mean the acquisition, by merger
or otherwise, by Newco 4 or any of the Restricted Subsidiaries of
assets or capital stock or other equity interests, or the acquisition
or retention (a "PERMITTED BROKER ACQUISITION") of one or more
individuals comprising teams engaged in a business described in Section
9.14, so long as (a) such acquisition and all transactions related
thereto shall be consummated in accordance with applicable law; (b)
such acquisition shall, in the case of the acquisition of capital stock
or other equity interests by Newco 4 or any Restricted Domestic Newco 4
Subsidiary, result in the issuer of such capital stock or other equity
interests becoming a Guarantor and a direct Restricted Newco 4
Subsidiary in the case of such an acquisition by Newco 4; (c) such
acquisition shall, in the case of the acquisition of capital stock or
other equity interests by the Borrower or any Restricted Domestic
Borrower Subsidiary, result in the issuer of such capital stock or
other equity interests becoming a Restricted Domestic Borrower
Subsidiary and a direct Restricted Domestic Borrower Subsidiary in the
case of such an acquisition by the Borrower; (d) after giving effect to
such acquisition, no Default or Event of Default shall have occurred
and be continuing; and (e) Newco 4 shall be in compliance, on a pro
forma basis after giving effect to such acquisition (including any
Indebtedness assumed or permitted to exist or incurred pursuant to
Sections 10.1(j) and 10.1(k), respectively, and any related Pro Forma
Adjustment), with the covenants set forth in Sections 10.9, 10.10 and
10.11, as such covenants are recomputed as at the last day of the most
recently ended Test Period under such Sections as if such acquisition
had occurred on the first day of such Test Period.
"PERMITTED BROKER ACQUISITION" shall have the meaning provided
in the definition of the term "Permitted Acquisition".
"PERMITTED INVESTMENTS" shall mean (a) with respect to
Insurance Broking Account Assets, investments in which it is customary
for Persons that are engaged in businesses similar to those of Parent
and its Subsidiaries and subject to all applicable laws and regulations
to invest, PROVIDED that it is consistent with the past practices of
Parent and its Subsidiaries and all applicable laws and regulations to
invest in such investments, and (b) in all other cases (i) securities
issued or unconditionally guaranteed by the United States or United
Kingdom government or any agency or instrumentality thereof, in each
case having maturities of not more than 24 months from the date of
acquisition thereof; (ii) securities issued by any state of the United
States or any political
<PAGE>
26
subdivision of any such state or any public instrumentality thereof or
any political subdivision of any such state or any public
instrumentality thereof having maturities of not more than 24 months
from the date of acquisition thereof and, at the time of acquisition,
having an investment grade rating generally obtainable from either S&P
or Moody's (or, if at any time neither S&P nor Moody's shall be rating
such obligations, then from another nationally recognized rating
service); (iii) commercial paper issued by any Lender or any bank
holding company owning any Lender; (iv) commercial paper maturing no
more than 12 months after the date of creation thereof and, at the time
of acquisition, having a rating of at least A-2 or P-2 from either S&P
or Moody's (or, if at any time neither S&P nor Moody's shall be rating
such obligations, an equivalent rating from another nationally
recognized rating service); (v) domestic and eurodollar certificates of
deposit or bankers' acceptances maturing no more than two years after
the date of acquisition thereof issued by any Lender or any other bank
having combined capital and surplus of not less than $250,000,000 in
the case of domestic banks and $100,000,000 in the case of foreign
banks; (vi) repurchase agreements with a term of not more than 30 days
for underlying securities of the type described in clauses (i), (ii)
and (iv) above entered into with any bank meeting the qualifications
specified in clause (iv) above or securities dealers of recognized
national standing; (vii) shares of investment companies that are
registered under the United States Investment Company Act of 1940 and
invest solely in one or more of the types of securities described in
clauses (i) through (vi) above; and (viii) corresponding instruments in
countries other than the United States or the United Kingdom
customarily utilized for high-quality investments.
"PERMITTED LIENS" shall mean (a) Liens for taxes, assessments
or governmental charges or claims not yet due or which are being
contested in good faith and by appropriate proceedings for which
appropriate provisions have been established in accordance with GAAP;
(b) Liens in respect of property or assets of Newco 4 or any of its
Subsidiaries imposed by law, such as carriers', warehousemen's and
mechanics' Liens and other similar Liens arising in the ordinary course
of business, in each case so long as such Liens arise in the ordinary
course of business and do not individually or in the aggregate have a
Material Adverse Effect; (c) Liens arising from judgments or decrees in
circumstances not constituting an Event of Default under Section 11.9;
(d) Liens incurred or deposits made in connection with workers'
compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds and other similar
obligations incurred in the ordinary course of business; (e) ground
leases in respect of real property on which facilities owned or leased
by Newco 4 or any of its Subsidiaries are located; (f) easements,
rights-of-way, restrictions, minor defects or irregularities in title
and other similar charges or encumbrances not interfering in any
material respect with the business of Newco 4 and its Subsidiaries
taken as a whole; (g) any interest or title of a lessor or secured by a
lessor's interest under any lease permitted by this Agreement; (h)
Liens in favor of customs and revenue authorities arising as a matter
of law to secure payment of customs duties in connection with the
importation of goods; (i) Liens on goods the purchase price of which is
financed by a documentary letter of credit issued for the account of
Newco 4 or any of its Subsidiaries, PROVIDED that such Lien secures
only the obligations of Newco 4 or such Subsidiaries in respect of such
letter of credit to the extent permitted under Section 10.1; and (j)
leases or subleases granted to others not interfering in any material
respect with the business of Newco 4 and its Subsidiaries, taken as a
whole.
"PERMITTED SALE LEASEBACK" shall mean any Sale Leaseback
consummated by Newco 4 or any of the Restricted Subsidiaries after the
Closing Date, PROVIDED that such Sale Leaseback is consummated for fair
value as determined at the time of consummation in good faith by Newco
4 and, in the case of any Permitted Sale Leaseback (or series of
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27
related Permitted Sales Leasebacks) the aggregate proceeds of which
exceed $15,000,000, the Board of Directors of Newco 4 (which such
determination may take into account any retained interest or other
investment of Newco 4 or such Restricted Subsidiary in connection with,
and any other material economic terms of, such Sale Leaseback).
"PERSON" shall mean any individual, partnership, joint
venture, firm, corporation, limited liability company, association,
trust or other enterprise or any Governmental Authority.
"PLAN" shall mean any multiemployer or single-employer plan,
as defined in Section 4001 of ERISA and subject to Title IV of ERISA,
that is or was within any of the preceding five plan years maintained
or contributed to by (or to which there is or was an obligation to
contribute or to make payments of) Newco 4, a Subsidiary of Newco 4 or
an ERISA Affiliate.
"PLEDGED SUBSIDIARY" shall mean, at any date of determination,
Parent and any Subsidiary of Newco 4 all the capital stock of which has
been pledged to the Administrative Agent, for the benefit of the
Lenders, on such date in accordance with Section 9.12.
"PREFERRED STOCK" shall have the meaning provided in the
preamble to this Agreement.
"PREPAYMENT EVENT" shall mean any Asset Sale Prepayment Event
and any Debt Incurrence Prepayment Event or any Permitted Sale
Leaseback.
"PRESS RELEASE" shall mean the press release made by or on
behalf of Newco 4 on or about 22nd July, 1998, announcing an intention
to make the Offer.
"PRIME RATE" shall mean the rate of interest per annum
publicly announced from time to time by the Administrative Agent as its
reference rate in effect at its principal office in New York City (the
Prime Rate not being intended to be the lowest rate of interest charged
by Chase in connection with extensions of credit to debtors).
"PRO FORMA ADJUSTMENT" shall mean, for any test period that
includes any of the six fiscal quarters first following any Permitted
Acquisition, with respect to the Acquired EBITDA of the applicable
Acquired Entity or Business, the pro forma increase or decrease in such
Acquired EBITDA projected by Newco 4 in good faith as a result of
reasonably identifiable and supportable net cost savings or additional
net costs, as the case may be, realizable during such period by
combining the operations of such Acquired Entity or Business with the
operations of Newco 4 and its Subsidiaries, PROVIDED that so long as
such net cost savings or additional net costs will be realizable at any
time during such period, it may be assumed, for purposes of projecting
such pro forma increase or decrease to such Acquired EBITDA, that such
net cost savings or additional net costs will be realizable during the
entire such period, and PROVIDED FURTHER that any such pro forma
increase or decrease to such Acquired EBITDA shall be without
duplication for net cost savings or additional net costs actually
realized during such period and already included in such Acquired
EBITDA.
"PRO FORMA ADJUSTMENT CERTIFICATE" shall mean any certificate
of an Authorized Officer of Newco 4 delivered pursuant to Section
9.1(h) or setting forth the information described in clause (iv) to
Section 9.1(d).
"REFERENCE LENDER" shall mean Chase.
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28
"REGISTER" shall have the meaning provided in Section 13.6(c).
"REGULATION D" shall mean Regulation D of the Board as from
time to time in effect and any successor to all or a portion thereof
establishing reserve requirements.
"REGULATION T" shall mean Regulation T of the Board as from
time to time in effect and any successor to all or a portion thereof
establishing margin requirements.
"REGULATION U" shall mean Regulation U of the Board as from
time to time in effect and any successor to all or a portion thereof
establishing margin requirements.
"REGULATION X" shall mean Regulation X of the Board as from
time to time in effect and any successor to all or a portion thereof
establishing margin requirements.
"REPAYMENT AMOUNT" shall mean Tranche A Repayment Amount,
Tranche B Repayment Amount, Tranche C Repayment Amount or Tranche D
Repayment Amount.
"REPAYMENT DATE" shall mean Tranche A Repayment Date, Tranche
B Repayment Date, Tranche C Repayment Date or Tranche D Repayment Date.
"REPLACEMENT PREFERRED STOCK" shall mean preferred stock of
Newco 2 that (a) is issued in exchange for, or to replace or refinance,
all or a portion of the Preferred Stock, (b) is not subject to
mandatory redemption or redemption at the option of the holder thereof
prior to the date that is six months later than the maturity date of
the Subordinated Notes and (c) may include, at the election of Newco 2,
(i) provisions for required cash dividends (at a rate per annum not in
excess of 7 1/2%, or a higher rate if the payment of cash dividends in
excess of 7 1/2% is stated in the provisions of such preferred stock to
be subject to the limitations set forth in this Agreement), (ii)
provisions for transferability, (iii) provisions for voting rights
and/or board representation upon the occurrence of non-payment of
dividends and (iv) other terms customary for public issuances of
preferred stock and other terms, in each case so long as the
Administrative Agent shall be reasonably satisfied that such customary
or other terms, taken as a whole, do not adversely affect the interests
of the Lenders in any material respect.
"REPORTABLE EVENT" shall mean an event described in Section
4043 of ERISA and the regulations thereunder.
"REQUIRED GUARANTOR SUBSIDIARY" shall mean each Subsidiary of
Newco 4 other than (a) any Foreign Borrower Subsidiary and (b) any
other Subsidiary of Newco 4 that is not organized under the laws of the
United Kingdom, the United States, any state or territory of the United
States or the District of Columbia.
"REQUIRED LENDERS" shall mean, at any date, (a) Non-Defaulting
Lenders having or holding a majority of the sum of (i) the Adjusted
Total Revolving Credit Commitment at such date, (ii) the Adjusted Total
Term Loan Commitment at such date and (iii) the outstanding principal
amount of the Term Loans (excluding the Term Loans held by Defaulting
Lenders) at such date or (b) if the Total Revolving Credit Commitment
and the Total Term Loan Commitment have been terminated or for the
purposes of acceleration pursuant to Section 11, the holders (excluding
Defaulting Lenders) of a majority of the outstanding principal amount
of the Loans and Letter of Credit Exposures (excluding the Loans and
Letter of Credit Exposures of Defaulting Lenders) in the aggregate at
such date, PROVIDED that the principal amount of any Loan or Letter of
Credit Exposure denominated in a Foreign Currency shall be deemed to
be, as of such date, the Dollar Equivalent thereof at such date.
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29
"REQUIRED TRANCHE A LENDERS" shall mean, at any date, (a)
Non-Defaulting Lenders having or holding a majority of the sum of (i)
the Adjusted Total Revolving Credit Commitment at such date, (ii) the
Adjusted Total Tranche A Commitment at such date and (iii) the
outstanding principal amount of the Tranche A Term Loans (excluding the
Tranche A Term Loans held by Defaulting Lenders) in the aggregate at
such date or (b) if the Total Revolving Credit Commitment and the Total
Tranche A Commitment have been terminated or for the purposes of
acceleration pursuant to Section 11, the holders (excluding Defaulting
Lenders) of a majority of Revolving Credit Loans, Tranche A Term Loans
and Letter of Credit Exposures (excluding the Loans and Letters of
Credit Exposures of Defaulting Lenders) in the aggregate at such date,
PROVIDED that the principal amount of any Loan or Letter of Credit
Exposure denominated in a Foreign Currency shall be deemed to be, as of
such date, the Dollar Equivalent thereof at such date.
"REQUIRED TRANCHE B, C AND D LENDERS" shall mean, at any date,
Non-Defaulting Lenders having or holding a majority of the outstanding
principal amount of Tranche B Term Loans, Tranche C Term Loans and
Tranche D Term Loans (excluding the Tranche B Term Loans, Tranche C
Term Loans and Tranche D Term Loans held by Defaulting Lenders) in the
aggregate at such date.
"REQUIREMENT OF LAW" shall mean, as to any Person, the
Certificate of Incorporation and By-Laws or other organizational or
governing documents of such Person, and any law, treaty, rule or
regulation or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or assets or to which such Person or any
of its property or assets is subject.
"RESET DATE" shall have the meaning set forth in Section
1.2(a).
"RESTATEMENT DATE" shall mean the Restatement Closing Date as
defined in the Amendment Agreement dated as of February 19, 1999, among
the Borrower, Parent, Newco 4, the Administrative Agent, the Collateral
Agent, the Continuing Lenders (as defined therein) and the Additional
Lenders (as defined therein).
"RESTRICTED DOMESTIC BORROWER SUBSIDIARY" shall mean each
Restricted Subsidiary that is also a Domestic Borrower Subsidiary.
"RESTRICTED DOMESTIC NEWCO 4 SUBSIDIARY" shall mean each
Restricted Subsidiary that is also a Domestic Newco 4 Subsidiary.
"RESTRICTED FOREIGN BORROWER SUBSIDIARY" shall mean each
Restricted Subsidiary that is also a Foreign Borrower Subsidiary.
"RESTRICTED FOREIGN NEWCO 4 SUBSIDIARY" shall mean each
Restricted Subsidiary that is also a Foreign Newco 4 Subsidiary.
"RESTRICTED FOREIGN SUBSIDIARY" shall mean any Restricted
Foreign Newco 4 Subsidiary or any Restricted Foreign Borrower
Subsidiary.
"RESTRICTED NON-CREDIT-PARTY SUBSIDIARY" shall mean any
Restricted Subsidiary that is not a Credit Party.
"RESTRICTED SUBSIDIARY" shall mean any Subsidiary of Newco 4
other than an Unrestricted Subsidiary.
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30
"REVOLVING CREDIT COMMITMENT" shall mean, (a) with respect to
each Lender that is a Lender on the date hereof, the amount set forth
opposite such Lender's name on Schedule 1.1 as such Lender's "Revolving
Credit Commitment" and (b) in the case of any Lender that becomes a
Lender after the date hereof, the amount specified as such Lender's
"Revolving Credit Commitment" in the Assignment and Acceptance pursuant
to which such Lender assumed a portion of the Total Revolving Credit
Commitment, in each case (i) subject to the proviso set forth in
Section 2.1(b) and (ii) as the same may be changed from time to time
pursuant to the terms hereof. Notwithstanding anything herein to the
contrary, at all times the Revolving Credit Commitment of each Lender
having a Euro Revolving Credit Commitment or Yen Revolving Credit
Commitment shall be equal to or greater than such Lender's Euro
Revolving Credit Commitment, if any, and Yen Revolving Credit
Commitment, if any.
"REVOLVING CREDIT COMMITMENT PERCENTAGE" shall mean at any
time, for each Lender, the percentage obtained by dividing (a) such
Lender's Available Revolving Credit Commitment by (b) the aggregate
amount of the Available Revolving Credit Commitments, PROVIDED that at
any time when the Total Revolving Credit Commitment shall have been
terminated, each Lender's Revolving Credit Commitment Percentage shall
be its Revolving Credit Commitment Percentage as in effect immediately
prior to such termination.
"REVOLVING CREDIT EXPOSURE" shall mean, with respect to any
Lender at any time, the sum of (a) the aggregate principal amount of
the Revolving Credit Loans (calculated by using the Dollar Equivalent
at such time of the principal amount of any Foreign Currency Revolving
Credit Loans) of such Lender then outstanding, (b) such Lender's Letter
of Credit Exposure at such time and (c) such Lender's Swingline
Exposure at such time.
"REVOLVING CREDIT LOAN" shall have the meaning provided in
Section 2.1.
"REVOLVING CREDIT MATURITY DATE" shall mean the date that is
nine months after the date hereof or, if such date is not a Business
Day, the next preceding Business Day; PROVIDED HOWEVER, that if the
Term Loans are funded on or before such date, the term "Revolving
Credit Maturity Date" shall mean the date that is seven years after the
Term Loan Funding Date, or, if such date is not a Business Day, the
next preceding Business Day.
"SALE LEASEBACK" shall mean any transaction or series of
related transactions pursuant to which Newco 4 or any of the Restricted
Subsidiaries (a) sells, transfers or otherwise disposes of any
property, real or personal, whether now owned or hereafter acquired,
and (b) as part of such transaction, thereafter rents or leases such
property or other property that it intends to use for substantially the
same purpose or purposes as the property being sold, transferred or
disposed.
"S&P" shall mean Standard & Poor's Ratings Service or any
successor by merger or consolidation to its business.
"SEC" shall mean the United States Securities and Exchange
Commission or any successor thereto.
"SECTION 9.1 FINANCIALS" shall mean the financial statements
delivered, or required to be delivered, pursuant to Section 9.1(a) or
(b) together with the accompanying officer's certificate delivered, or
required to be delivered, pursuant to Section 9.1(d).
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31
"SENIOR BRIDGE FACILITY" shall mean the senior secured term
loan facility outstanding under the Credit Agreement dated as of July
22, 1998, as amended and restated as of September 25, 1998, as amended
as of October 28, 1998, and as further amended as of November 13, 1998,
among Newco 4, Chase and the other lenders parties thereto.
"SENIOR BRIDGE FACILITY FINAL DATE" shall mean the Final Date
(as defined in the Credit Agreement relating to the Senior Bridge
Facility).
"SOLD ENTITY OR BUSINESS" shall have the meaning provided in
the definition of the term "Consolidated EBITDA".
"SPECIFIED SUBSIDIARY" shall mean, at any date of
determination, (a) any Material Subsidiary or (b) any Unrestricted
Subsidiary (i) whose total assets at the last day of the Test Period
ending on the last day of the most recent fiscal period for which
Section 9.1 Financials have been delivered were equal to or greater
than 15% of the consolidated total assets of Newco 4 and its
Subsidiaries at such date or (ii) whose gross revenues for such Test
Period were equal to or greater than 15% of the consolidated gross
revenues of Newco 4 and its Subsidiaries for such period, in each case
determined in accordance with GAAP.
"SPONSOR" shall have the meaning provided in the preamble to
this Agreement.
"SPONSOR EQUITY CONTRIBUTION" shall have the meaning provided
in the preamble to this Agreement.
"STATED AMOUNT" of any Letter of Credit shall mean the maximum
amount from time to time available to be drawn thereunder, determined
without regard to whether any conditions to drawing could then be met.
"STATUS" shall mean, as of any date, the existence of Level I
Status, Level II Status, Level III Status, Level IV Status, Level V
Status or Level VI Status, as the case may be, on such date. Changes in
Status resulting from changes in the Consolidated Total Debt to
Consolidated EBITDA Ratio shall become effective (the date of such
effectiveness, the "EFFECTIVE DATE") as of the first day following the
last day of the most recent fiscal year or period for which (a) Section
9.1 Financials are delivered to the Lenders under Section 9.1 and (b)
an officer's certificate is delivered by Newco 4 to the Lenders setting
forth, with respect to such Section 9.1 Financials, the then-applicable
Status, and shall remain in effect until the next change to be effected
pursuant to this definition, PROVIDED that (i) if the Borrower shall
have made any payments in respect of interest or commitment fees during
the period (the "INTERIM PERIOD") from and including the Effective Date
to but excluding the day any change in Status is determined as provided
above, then the amount of the next such payment due on or after such
day shall be increased or decreased by an amount equal to any
underpayment or overpayment so made by the Borrower during such Interim
Period, (ii) notwithstanding the foregoing, for the period from and
including the Closing Date to but excluding the date on which the
Borrower shall deliver the Section 9.1 Financials for the second full
fiscal quarter after the Statutory Declaration Date, the Status for
purposes of this Agreement shall be Level I Status, and (iii) each
determination of the Consolidated Total Debt to Consolidated EBITDA
Ratio pursuant to this definition shall be made with respect to the
Test Period ending at the end of the fiscal period covered by the
relevant financial statements.
"STATUTORY DECLARATION DATE" shall mean November 10, 1998.
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32
"STERLING", "(L)" OR "pence" shall mean the lawful
currency of the United Kingdom.
"STERLING BORROWING" shall mean a Borrowing comprised of
Sterling Loans.
"STERLING EQUIVALENT" shall mean, on any date of
determination, with respect to any amount denominated in any currency
other than Sterling, the equivalent in Sterling of such amount,
determined by the Administrative Agent pursuant to Section 1.2(a) using
the applicable Exchange Rate then in effect.
"STERLING LOANS" shall mean Loans denominated in Sterling.
"STERLING REVOLVING CREDIT LOAN" shall mean a Revolving Credit
Loan denominated in Sterling and made pursuant to Section 2.1(b).
"STERLING SWINGLINE LOAN" shall have the meaning provided in
Section 2.1(e).
"STERLING SWINGLINE RATE" shall mean, at any time, the rate
charged by The Chase Manhattan Bank in London for Sterling overdrafts
at such time, plus the Applicable Eurodollar Margin for Sterling
Revolving Credit Loans.
"SUB-AGENT'S OFFICE" shall mean The Chase Manhattan Bank,
Trinity Tower, Nine Thomas Moore Street, London E1 9TY, England, or
such other office as the Administrative Agent may hereafter designate
in writing as such to the other parties hereto.
"SUBORDINATED BRIDGE FACILITY" shall mean (a) the borrowing
facility made available pursuant to the Subordinated Promissory Note
dated July 22, 1998, between the Borrower and an Affiliate of the
Sponsor, the material terms of which shall be in the form previously
approved by the Administrative Agent, and (b) any amendment,
replacement or refinancing thereof having terms not materially less
advantageous to the interests of the Lenders than the terms
contemplated by the definition of the term "Subordinated Notes",
PROVIDED that any such amendment, replacement or refinancing shall bear
a rate of interest determined by the Board of Directors of the Borrower
to be a market rate of interest at the date of such amendment,
replacement or refinancing and have other terms customary for similar
issuances under similar market conditions or otherwise be on terms
reasonably acceptable to the Administrative Agent.
"SUBORDINATED LOANS" shall mean subordinated loans made
pursuant to the Subordinated Bridge Facility and having a final
maturity not earlier than the date that is ten years after the Term
Loan Funding Date.
"SUBORDINATED NOTE INDENTURE" shall mean the Indenture between
the Borrower and a trustee to be determined, pursuant to which the
Subordinated Notes will be issued, as the same may be amended,
supplemented or otherwise modified from time to time.
"SUBORDINATED NOTES" shall mean (a) Senior Subordinated Notes
of the Borrower or Newco 4 (i) issued pursuant to the Subordinated Note
Indenture, (ii) bearing a rate of interest determined by the Board of
Directors of the Borrower to be a market rate of interest at the date
of issuance thereof, (iii) having a final maturity not earlier than the
date that is ten years after the Term Loan Funding Date (or, if
earlier, ten years after the initial issuance thereof so long as such
maturity date is at least 91 days after the Final Tranche D Repayment
Date) and (iv) having other terms customary for similar issuances under
similar market conditions or otherwise on terms reasonably acceptable
to the Administrative Agent and (b) any amendment, replacement or
refinancing thereof having
<PAGE>
33
terms not materially less advantageous to the interests of the Lenders
than the terms thereof, PROVIDED that any such amendment, replacement
or refinancing shall bear a rate of interest determined by the Board of
Directors of the Borrower to be a market rate of interest at the date
of such amendment, replacement or refinancing and have other terms
customary for similar issuances under similar market conditions or
otherwise be on terms reasonably acceptable to the Administrative
Agent.
"SUBSEQUENT PARTICIPANT" shall mean a member state of the
European Union that adopts the euro as its lawful currency after
January 1, 1999.
"SUBSIDIARY" of any Person shall mean and include (a) any
corporation more than 50% of whose stock of any class or classes having
by the terms thereof ordinary voting power to elect a majority of the
directors of such corporation (irrespective of whether or not at the
time stock or issued share capital of any class or classes of such
corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person
directly or indirectly through Subsidiaries and (b) any partnership,
association, joint venture or other entity in which such Person
directly or indirectly through Subsidiaries has more than a 50% equity
interest at the time. Unless otherwise expressly provided, all
references herein to a "Subsidiary" shall mean a Subsidiary of Parent
and (c) any other corporation, partnership, joint venture or other
entity (i) the accounts of which would be consolidated with those of
such Person in such Person's consolidated financial statements if such
statements were prepared in accordance with GAAP and (ii) that is
controlled (as defined in clause (b) of the definition of such term in
the definition of the term "Affiliate") by such Person.
"SUPERMAJORITY TRANCHE A LENDERS" shall mean, at any date, (a)
Non-Defaulting Lenders having or holding at least 66-2/3% of the sum of
(i) the Adjusted Total Revolving Credit Commitment at such date and
(ii) the outstanding principal amount of the Tranche A Term Loans
(excluding the Tranche A Term Loans held by Defaulting Lenders) at such
date or (b) if the Total Revolving Credit Commitment has been
terminated or for the purposes of acceleration pursuant to Section 11,
the holders (excluding Defaulting Lenders) of at least 66-2/3% of the
outstanding principal amount of the Revolving Credit Loans, Tranche A
Term Loans and Letter of Credit Exposures (excluding the Loans and
Letter of Credit Exposures of Defaulting Lenders) in the aggregate at
such date, PROVIDED that the principal amount of any Loan or Letter of
Credit Exposure denominated in a Foreign Currency shall be deemed to
be, as of such date, the Dollar Equivalent thereof at such date.
"SUPERMAJORITY TRANCHE B, C AND D LENDERS" shall mean, at any
date, Non-Defaulting Lenders having or holding at least 66-2/3% of the
outstanding principal amount of the Tranche B Term Loans, Tranche C
Term Loans and Tranche D Term Loans (excluding the Tranche B Term
Loans, Tranche C Term Loans and Tranche D Term Loans held by Defaulting
Lenders) in the aggregate at such date.
"SWINGLINE COMMITMENT" shall mean $10,000,000.
"SWINGLINE EXPOSURE" shall mean, at any time, the aggregate
principal amount (calculated by using the Dollar Equivalent at such
time of the principal amount of any Sterling Swingline Loans) of all
Swingline Loans then outstanding. The Swingline Exposure of any Lender
at any time shall mean the sum of (a) the amount (calculated by using
the Dollar Equivalent at such time of the principal amount of any
Sterling Swingline Loans) of Swingline Loans then outstanding in
respect of which such Lender has made (or is required to have made)
payments to Chase pursuant to Section 2.1(f) and (b) such Lender's
Revolving Credit Commitment Percentage of the aggregate Swingline
<PAGE>
34
Exposure (excluding the portion thereof consisting of Swingline Loans
in respect of which the Lenders have made (or are required to have
made) payments to Chase pursuant to Section 2.1(f)).
"SWINGLINE LOANS" shall have the meaning provided in Section
2.1(e).
"SWINGLINE MATURITY DATE" shall mean, with respect to any
Swingline Loan, the date that is five Business Days prior to the
Revolving Credit Maturity Date.
"SYNDICATION AGENT" shall mean Morgan Stanley Dean Witter, as
the syndication agent for the Lenders under this Agreement and the
other Credit Documents.
"TAKEOVER CODE" shall mean the City Code on Takeovers and
Mergers.
"TERM LOAN" shall mean any Tranche A Term Loan, Tranche B Term
Loan, Tranche C Term Loan or Tranche D Term Loan.
"TERM LOAN COMMITMENT" shall mean, with respect to each
Lender, the sum of such Lender's Tranche A Commitment, Tranche B
Commitment, Tranche C Commitment and Tranche D Commitment.
"TERM LOAN FUNDING DATE" shall mean November 19, 1998.
"TEST PERIOD" shall mean, for any determination under this
Agreement, the four consecutive fiscal quarters of Newco 4 then last
ended.
"THREE-MONTH SECONDARY CD RATE" shall mean, for any day, the
secondary market rate, expressed as a per annum rate, for three-month
certificates of deposit reported as being in effect on such day (or, if
such day shall not be a Business Day, the next preceding Business Day)
by the Board through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under the current
practices of the Board, be published in Federal Reserve Statistical
Release H.15(519) during the week following such day), or, if such rate
shall not be so reported on such day or such next preceding Business
Day, the average of the secondary market quotations for three-month
certificates of deposit of major money center banks in New York City
received at approximately 10:00 A.M., New York time, on such day (or,
if such day shall not be a Business Day, on the next preceding Business
Day) by the Administrative Agent from three New York City negotiable
certificate of deposit dealers of recognized standing selected by it.
"TOTAL COMMITMENT" shall mean the sum of the Total Term Loan
Commitment and the Total Revolving Credit Commitment.
"TOTAL CREDIT EXPOSURE" shall mean, at any date, the sum of
(a) the Total Revolving Credit Commitment at such date, (b) the Total
Term Loan Commitment at such date and (c) the outstanding principal
amount of all Term Loans at such date.
"TOTAL REVOLVING CREDIT COMMITMENT" shall mean the sum of the
Revolving Credit Commitments of all the Lenders.
"TOTAL TERM LOAN COMMITMENT" shall mean the sum of the Term
Loan Commitments of all the Lenders.
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35
"TRANCHE A COMMITMENT" shall mean, (a) in the case of each
Lender that is a Lender on the date hereof, the amount set forth
opposite such Lender's name on Schedule 1.1 as such Lender's "Tranche A
Commitment" and (b) in the case of any Lender that becomes a Lender
after the date hereof, the amount specified as such Lender's "Tranche A
Commitment" in the Assignment and Acceptance pursuant to which such
Lender assumed a portion of the Total Term Loan Commitment, in each
case as the same may be changed from time to time pursuant to the terms
hereof.
"TRANCHE A MATURITY DATE" shall mean the date that is seven
years after the Term Loan Funding Date, or, if such date is not a
Business Day, the next preceding Business Day.
"TRANCHE A REPAYMENT AMOUNT" shall have the meaning provided
in Section 2.5(b).
"TRANCHE A REPAYMENT DATE" shall have the meaning provided in
Section 2.5(b).
"TRANCHE A TERM LOAN" shall have the meaning provided in
Section 2.1.
"TRANCHE B COMMITMENT" shall mean, (a) in the case of each
Lender that is a Lender on the date hereof, the amount set forth
opposite such Lender's name on Schedule 1.1 as such Lender's "Tranche B
Commitment" and (b) in the case of any Lender that becomes a Lender
after the date hereof, the amount specified as such Lender's "Tranche B
Commitment" in the Assignment and Acceptance pursuant to which such
Lender assumed a portion of the Total Term Loan Commitment, in each
case as the same may be changed from time to time pursuant to the terms
hereof.
"TRANCHE B MATURITY DATE" shall mean the date that is eight
years after the Term Loan Funding Date, or, if such date is not a
Business Day, the next preceding Business Day.
"TRANCHE B REPAYMENT AMOUNT" shall have the meaning provided
in Section 2.5(c).
"TRANCHE B REPAYMENT DATE" shall have the meaning provided in
Section 2.5(c).
"TRANCHE B TERM LOAN shall have the meaning provided in
Section 2.1.
"TRANCHE C COMMITMENT" shall mean, (a) in the case of each
Lender that is a Lender on the date hereof, the amount set forth
opposite such Lender's name on Schedule 1.1 as such Lender's "Tranche C
Commitment" and (b) in the case of any Lender that becomes a Lender
after the date hereof, the amount specified as such Lender's "Tranche C
Commitment" in the Assignment and Acceptance pursuant to which such
Lender assumed a portion of the Total Term Loan Commitment, in each
case as the same may be changed from time to time pursuant to the terms
hereof.
"TRANCHE C MATURITY DATE" shall mean the date that is nine
years after the Term Loan Funding Date, or, if such date is not a
Business Day, the next preceding Business Day.
"TRANCHE C REPAYMENT AMOUNT" shall have the meaning provided
in Section 2.5(d).
"TRANCHE C REPAYMENT DATE" shall have the meaning provided in
Section 2.5(d).
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36
"TRANCHE C TERM LOAN" shall have the meaning provided in
Section 2.1.
"TRANCHE D COMMITMENT" shall mean, (a) in the case of each
Lender that is a Lender on the date hereof, the amount set forth
opposite such Lender's name on Schedule 1.1 as such Lender's "Tranche D
Commitment" and (b) in the case of any Lender that becomes a Lender
after the date hereof, the amount specified as such Lender's "Tranche D
Commitment" in the Assignment and Acceptance pursuant to which such
Lender assumed a portion of the Total Term Loan Commitment, in each
case as the same may be changed from time to time pursuant to the terms
hereof.
"TRANCHE D MATURITY DATE" shall mean the date that is nine
years and six months after the Term Loan Funding Date, or, if such date
is not a Business Day, the next preceding Business Day.
"TRANCHE D REPAYMENT AMOUNT" shall have the meaning provided
in Section 2.5(e).
"TRANCHE D REPAYMENT DATE" shall have the meaning provided in
Section 2.5(e).
"TRANCHE D TERM LOAN" shall have the meaning provided in
Section 2.1.
"TRANSACTION EXPENSES" shall mean any fees or expenses
incurred or paid by Newco 4 or any of its Subsidiaries in connection
with the Transactions, the financing therefor and the other
transactions contemplated hereby and thereby.
"TRANSACTIONS" shall have the meaning provided in the preamble
to this Agreement.
"TRANSFEREE" shall have the meaning provided in Section
13.6(e).
"TREATY ON EUROPEAN UNION" shall mean the Treaty of Rome of
March 25, 1957, as amended by the Single European Act 1986 and the
Maastricht Treaty (which was signed at Maastricht on February 7, 1992,
and came into force on November 1, 1993), as amended from time to time.
"TYPE" shall mean (a) as to any Term Loan, its nature as an
ABR Loan or a Eurodollar Term Loan and (b) as to any Revolving Credit
Loan, its nature as an ABR Loan or a Eurodollar Revolving Credit Loan.
"U.K. SECURITY AGREEMENT" shall mean and include the Debenture
entered into by Newco 4, Parent, the other grantors party thereto and
the Administrative Agent for the benefit of the Lenders, substantially
in the form of Exhibit I, as the same may be amended, supplemented or
otherwise modified from time to time.
"UNFUNDED CURRENT LIABILITY" of any Plan shall mean the
amount, if any, by which the present value of the accrued benefits
under the Plan as of the close of its most recent plan year, determined
in accordance with Statement of Financial Accounting Standards No. 87
as in effect on the date hereof, based upon the actuarial assumptions
that would be used by the Plan's actuary in a termination of the Plan,
exceeds the fair market value of the assets allocable thereto.
"UNITED STATES" shall mean the United States of America.
"UNPAID DRAWING" shall have the meaning provided in Section
3.4(a).
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37
"UNRESTRICTED SUBSIDIARY" shall mean (a) any Subsidiary of
Newco 4 that is formed or acquired after the Closing Date, PROVIDED
that at such time (or promptly thereafter) the Borrower designates such
Subsidiary an Unrestricted Subsidiary in a written notice to the
Administrative Agent, (b) any Restricted Subsidiary on the Closing Date
subsequently re-designated as an Unrestricted Subsidiary by the
Borrower in a written notice to the Administrative Agent, PROVIDED that
such re-designation shall be deemed to be an investment on the date of
such re-designation in an Unrestricted Subsidiary in an amount equal to
the sum of (i) the net worth of such re-designated Restricted
Subsidiary immediately prior to such re-designation (such net worth to
be calculated without regard to any Guarantee provided by such
re-designated Restricted Subsidiary) and (ii) the aggregate principal
amount of any Indebtedness owed by such re-designated Restricted
Subsidiary to Newco 4 or any other Restricted Subsidiary immediately
prior to such re- designation, all calculated, except as set forth in
the parenthetical to clause (i), on a consolidated basis in accordance
with GAAP, (c) each Subsidiary of an Unrestricted Subsidiary; PROVIDED,
HOWEVER, that (i) at the time of any written re-designation by the
Borrower to the Administrative Agent of any Unrestricted Subsidiary as
a Restricted Subsidiary, the Unrestricted Subsidiary so re-designated
shall no longer constitute an Unrestricted Subsidiary, (ii) no
Unrestricted Subsidiary may be re-designated as a Restricted Subsidiary
if a Default or Event of Default would result from such re-designation,
(iii) neither Parent nor the Borrower shall be re-designated as an
Unrestricted Subsidiary and (iv) no Restricted Subsidiary may be
re-designated as an Unrestricted Subsidiary if a Default or Event of
Default would result from such re-designation. On or promptly after the
date of its formation, acquisition or re-designation, as applicable,
each Unrestricted Subsidiary (other than an Unrestricted Subsidiary
that is a Foreign Subsidiary) shall have entered into a tax sharing
agreement containing terms that, in the reasonable judgment of the
Administrative Agent, provide for an appropriate allocation of tax
liabilities and benefits and (d) Sovereign Marine & General Insurance
Company Limited.
"U.S. PLEDGE AGREEMENT" shall mean and include the U.S. Pledge
Agreement entered into by the Borrower, the other pledgors party
thereto and the Administrative Agent for the benefit of the Lenders,
substantially in the form of Exhibit B, as the same may be amended,
supplemented or otherwise modified from time to time.
"VOTING STOCK" shall mean, with respect to any Person, shares
of such Person's capital stock having the right to vote for the
election of directors of such Person under ordinary circumstances.
"YEN" shall mean the lawful currency of Japan.
"YEN BORROWING" shall mean a Borrowing comprised of Yen
Revolving Credit Loans.
"YEN EQUIVALENT" shall mean, on any date of determination,
with respect to any amount denominated in any currency other than Yen,
the equivalent in Yen of such amount, determined by the Administrative
Agent pursuant to Section 1.2(a) using the applicable Exchange Rate
then in effect.
"YEN LENDERS" shall mean the Persons listed on Schedule 2.1(b)
as Yen Lenders and any other Person that shall accept an assignment of
a Yen Revolving Credit Commitment pursuant to an Assignment and
Acceptance, other than any such Person that ceases to have a Yen
Revolving Credit Commitment pursuant to an Assignment and Acceptance.
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38
"YEN REVOLVING CREDIT COMMITMENT" shall mean, (a) with respect
to each Yen Lender that is a Yen Lender on the Restatement Date, the
amount set forth opposite such Yen Lender's name on Schedule 2.1(b) as
such Yen Lender's "Yen Revolving Credit Commitment" and (b) in the case
of any Yen Lender that becomes a Yen Lender after the Restatement Date,
the amount specified as such Yen Lender's "Yen Revolving Credit
Commitment" in the Assignment and Acceptance pursuant to which such Yen
Lender assumed its Yen Revolving Credit Commitment, in each case as the
same may be changed from time to time pursuant to the terms hereof.
"YEN REVOLVING CREDIT LOAN" shall mean a Revolving Credit Loan
denominated in Yen and made pursuant to Section 2.1(d).
1.2 EXCHANGE RATES. (a) Not later than 1:00 p.m., New York
City time, on each Calculation Date, the Administrative Agent shall (i)
determine the Exchange Rate as of such Calculation Date to be used for
calculating relevant Dollar Equivalent, Euro Equivalent, Yen Equivalent and
Sterling Equivalent amounts and (ii) give notice thereof to the Lenders and the
Borrower. The Exchange Rates so determined shall become effective on the first
Business Day immediately following the relevant Calculation Date (a "RESET
DATE"), shall remain effective until the next succeeding Reset Date and shall
for all purposes of this Agreement (other than any provision expressly requiring
the use of a current Exchange Rate and except to the extent exchange rates are
otherwise utilized in connection with determining compliance with financial
covenant levels in accordance with GAAP) be the Exchange Rates employed in
converting any amounts between the applicable currencies.
(b) Not later than 5:00 p.m., New York City time, on each
Reset Date and the date of any Borrowing of Foreign Currency Revolving Credit
Loans, the Administrative Agent shall (i) determine the Dollar Equivalent of the
aggregate principal amount of the Foreign Currency Revolving Credit Loans then
outstanding (after giving effect to any Foreign Currency Revolving Credit Loans
made or repaid on such date) and (ii) notify the Lenders and the Borrower of the
results of such determination and of the Aggregate Revolving Credit
Outstandings.
(c) For purposes of determining compliance under Sections
10.1, 10.2, 10.4, 10.5, 10.6, 10.9, 10.10, 10.11 and 10.12 with respect to any
amount in a currency other than Dollars, such amount shall be deemed to equal
the Dollar Equivalent thereof at the time such amount was incurred or expended,
as the case may be, or based on the average exchange rate for the relevant
period, as determined by the Borrower in accordance with GAAP or as otherwise
reflected in the Section 9.1 Financials in accordance with GAAP.
SECTION 2. AMOUNT AND TERMS OF CREDIT.
2.1 COMMITMENTS. (a) Subject to and upon the terms and
conditions herein set forth:
(i) each Lender having a Tranche A Commitment severally agrees
to make a loan or loans in Dollars (each a "TRANCHE A TERM LOAN" and,
collectively, the "TRANCHE A TERM LOANS") to the Borrower, which
Tranche A Term Loans (x) shall not exceed for any such Lender the
Tranche A Commitment of such Lender and (y) shall be repaid in full on
the Tranche A Maturity Date;
(ii) each Lender having a Tranche B Commitment severally
agrees to make a loan or loans in Dollars (each a "TRANCHE B TERM LOAN"
and, collectively, the "TRANCHE B TERM LOANS") to the Borrower, which
Tranche B Term Loans (x) shall not exceed for any
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39
such Lender the Tranche B Commitment of such Lender and (y) shall be
repaid in full on the Tranche B Maturity Date;
(iii) each Lender having a Tranche C Commitment severally
agrees to make a loan or loans in Dollars (each a "TRANCHE C TERM LOAN"
and, collectively, the "TRANCHE C TERM LOANS") to the Borrower, which
Tranche C Term Loans (x) shall not exceed for any such Lender the
Tranche C Commitment of such Lender and (y) shall be repaid in full on
the Tranche C Maturity Date; and
(iv) each Lender having a Tranche D Commitment severally
agrees to make a loan or loans in Dollars (each a "TRANCHE D TERM LOAN"
and, collectively, the "TRANCHE D TERM LOANS") to the Borrower, which
Tranche D Term Loans (x) shall not exceed for any such Lender the
Tranche D Commitment of such Lender and (y) shall be repaid in full on
the Tranche D Maturity Date.
Such Term Loans (x) shall be made on the Term Loan Funding Date, (y) may, at the
option of the Borrower, be incurred and maintained as, and/or converted into,
ABR Loans or Eurodollar Term Loans, PROVIDED that all Term Loans made by each of
the Lenders pursuant to the same Borrowing shall, unless otherwise specifically
provided herein, consist entirely of Term Loans of the same Type, and (z) may be
repaid in accordance with the provisions hereof. Once repaid, Term Loans may not
be reborrowed.
(b) Subject to and upon the terms and conditions herein set
forth, each Lender having a Revolving Credit Commitment severally agrees to make
a loan or loans denominated, at the option of the Borrower, in Dollars (each a
"DOLLAR REVOLVING CREDIT LOAN" and, collectively, the "DOLLAR REVOLVING CREDIT
LOANS") or Sterling (each a "STERLING REVOLVING CREDIT LOAN" and, collectively,
the "STERLING REVOLVING CREDIT LOANS" and, together with the Dollar Revolving
Credit Loans, Euro Revolving Credit Loans and Yen Revolving Credit Loans, the
"REVOLVING CREDIT LOANS") to the Borrower, which Dollar Revolving Credit Loans
and Sterling Revolving Credit Loans (i) shall be made at any time and from time
to time on and after the Closing Date and prior to the Revolving Credit Maturity
Date, (ii) in the case of Dollar Revolving Credit Loans, may, at the option of
the Borrower, be incurred and maintained as, and/or converted into, ABR Loans or
Eurodollar Revolving Credit Loans, PROVIDED that all Dollar Revolving Credit
Loans made by each of the Lenders pursuant to the same Borrowing shall, unless
otherwise specifically provided herein, consist entirely of Dollar Revolving
Credit Loans of the same Type, (iii) in the case of Sterling Revolving Credit
Loans, shall be incurred and maintained entirely as Eurodollar Revolving Credit
Loans, (iv) may be repaid and reborrowed in accordance with the provisions
hereof, (v) for any such Lender at any time, shall not result in such Lender's
Revolving Credit Exposure at such time exceeding such Lender's Revolving Credit
Commitment at such time and (vi) after giving effect thereto and to the
application of the proceeds thereof, shall not result at any time in the
aggregate amount of the Lenders' Revolving Credit Exposures at such time
exceeding the Total Revolving Credit Commitment then in effect. Each Lender may
at its option make any Eurodollar Loan by causing any domestic or foreign branch
or Affiliate of such Lender to make such Loan; PROVIDED that (i) any exercise of
such option shall not affect the obligation of the Borrower to repay such Loan
and (ii) in exercising such option, the Lender shall use its reasonable efforts
to minimize any increased costs to the Borrower resulting therefrom (which
obligation of the Lender shall not require it to take, or refrain from taking,
actions that it determines would result in increased costs for which it will not
be compensated hereunder or that it determines would be otherwise
disadvantageous to it and in the event of such request for costs for which
compensation is provided under this Agreement, the provisions of Section 3.5
shall apply). On the Revolving Credit Maturity Date, all Revolving Credit Loans
shall be repaid in full.
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40
(c) Subject to and upon the terms and conditions herein set
forth, each Lender having a Euro Revolving Credit Commitment severally agrees to
make a loan or loans denominated in Euro (each a "EURO REVOLVING CREDIT LOAN"
and, collectively, the "EURO REVOLVING CREDIT LOANS") to the Borrower, which
Euro Revolving Credit Loans (i) shall be made at any time and from time to time
on and after the Restatement Date and prior to the Revolving Credit Maturity
Date, (ii) shall be incurred and maintained entirely as Eurodollar Revolving
Credit Loans, (iii) may be repaid and reborrowed in accordance with the
provisions hereof, (iv) shall not exceed for any such Euro Lender at any time
outstanding such Euro Lender's Euro Revolving Credit Commitment, (v) shall not,
after giving effect thereto and to the application of the proceeds thereof,
exceed for all Euro Lenders at any time outstanding that aggregate principal
amount that has a Dollar Equivalent that, when added to the Dollar Equivalent of
the aggregate principal amount of all outstanding Yen Revolving Credit Loans,
equals $75,000,000, (vi) for any such Euro Lender at any time, shall not result
in such Euro Lender's Revolving Credit Exposure at such time exceeding such Euro
Lender's Revolving Credit Commitment at such time and (vii) after giving effect
thereto and to the application of the proceeds thereof, shall not result at any
time in the aggregate amount of the Lenders' Revolving Credit Exposures at such
time exceeding the Total Revolving Credit Commitment then in effect.
(d) Subject to and upon the terms and conditions herein set
forth, each Lender having a Yen Revolving Credit Commitment severally agrees to
make a loan or loans denominated in Yen (each a "YEN REVOLVING CREDIT LOAN" and,
collectively, the "YEN REVOLVING CREDIT LOANS") to the Borrower, which Yen
Revolving Credit Loans (i) shall be made at any time and from time to time on
and after the Restatement Date and prior to the Revolving Credit Maturity Date,
(ii) shall be incurred and maintained entirely as Eurodollar Revolving Credit
Loans, (iii) may be repaid and reborrowed in accordance with the provisions
hereof, (iv) shall not exceed for any such Yen Lender at any time outstanding
such Yen Lender's Yen Revolving Credit Commitment, (v) shall not, after giving
effect thereto and to the application of the proceeds thereof, exceed for all
Yen Lenders at any time outstanding that aggregate principal amount that has a
Dollar Equivalent that, when added to the Dollar Equivalent of the aggregate
principal amount of all outstanding Euro Revolving Credit Loans, equals
$75,000,000, (vi) for any such Yen Lender at any time, shall not result in such
Yen Lender's Revolving Credit Exposure at such time exceeding such Yen Lender's
Revolving Credit Commitment at such time and (vii) after giving effect thereto
and to the application of the proceeds thereof, shall not result at any time in
the aggregate amount of the Lenders' Revolving Credit Exposures at such time
exceeding the Total Revolving Credit Commitment then in effect.
(e) Subject to and upon the terms and conditions herein set
forth, Chase in its individual capacity agrees, at any time and from time to
time on and after the Closing Date and prior to the Swingline Maturity Date, to
make a loan or loans (each a "SWINGLINE LOAN" and, collectively, the "SWINGLINE
LOANS") to the Borrower, which Swingline Loans (i) may, at the option of the
Borrower, be denominated in Dollars (each a "DOLLAR SWINGLINE LOAN" and,
collectively, the "DOLLAR SWINGLINE LOANS") or Sterling (each a "STERLING
SWINGLINE LOAN" and, collectively, the "STERLING SWINGLINE LOANS"), (ii) shall,
in the case of Dollar Swingline Loans, be ABR Loans, (iii) shall, in the case of
Sterling Swingline Loans, bear interest at the Sterling Swingline Rate, (iv)
shall have the benefit of the provisions of Section 2.1(f), (v) shall not exceed
at any time outstanding the Swingline Commitment, (vi) shall not, after giving
effect thereto and to the application of the proceeds thereof, exceed in the
aggregate at any time outstanding the principal amount that, when added to the
aggregate principal amount (calculated by using the Dollar Equivalent at such
time of the principal amount of any Foreign Currency Revolving Credit Loans) of
all Revolving Credit Loans then outstanding and all Letter of Credit Outstanding
at such time, equals the Total Revolving Credit Commitment then in effect and
(vii) may be repaid and reborrowed in accordance with the provisions hereof. On
the Swingline Maturity Date, each outstanding Swingline Loan shall be repaid in
full. Chase shall not make any Swingline Loan after receiving a written notice
from the Borrower or any Lender stating that a Default or Event
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41
of Default exists and is continuing until such time as Chase shall have received
written notice of (i) rescission of all such notices from the party or parties
originally delivering such notice or (ii) the waiver of such Default or Event of
Default in accordance with the provisions of Section 13.1.
(f) On any Business Day, Chase may, in its sole discretion,
give notice to the Lenders that all then-outstanding Swingline Loans shall be
funded with a Borrowing of Revolving Credit Loans, in which case (i) in the case
of then-outstanding Dollar Swingline Loans, a Borrowing of Dollar Revolving
Credit Loans constituting ABR Loans and (ii) in the case of then-outstanding
Sterling Swingline Loans, a Borrowing of Sterling Revolving Credit Loans (each
such Borrowing, a "MANDATORY BORROWING") shall be made (x) in the case of Dollar
Swingline Loans, on the immediately succeeding Business Day and (y) in the case
of Sterling Swingline Loans, on the third succeeding Business Day, by all
Lenders PRO RATA based on each Lender's Revolving Credit Commitment Percentage
(determined as of the date of the notice referred to above), and the proceeds
thereof shall be applied directly to Chase to repay Chase for such outstanding
Swingline Loans. Each Lender hereby irrevocably agrees to make such Dollar
Revolving Credit Loans upon one Business Day's notice and such Sterling
Revolving Credit Loans upon three Business Days' notice pursuant to each
Mandatory Borrowing in the amount and in the manner specified in the preceding
sentence and on the date specified to it in writing by Chase notwithstanding (i)
that the amount of the Mandatory Borrowing may not comply with the minimum
amount for each Borrowing specified in Section 2.2, (ii) whether any conditions
specified in Section 7 are then satisfied, (iii) whether a Default or an Event
of Default has occurred and is continuing, (iv) the date of such Mandatory
Borrowing or (v) any reduction in the Total Commitment after any such Swingline
Loans were made. In the event that, in the sole judgment of Chase, any Mandatory
Borrowing cannot for any reason be made on the date otherwise required above
(including, without limitation, as a result of the commencement of a proceeding
under the Bankruptcy Code in respect of the Borrower), each Lender hereby agrees
that it shall forthwith purchase from Chase (without recourse or warranty) such
participation of the outstanding Swingline Loans as shall be necessary to cause
the Lenders to share in such Swingline Loans ratably based upon their respective
Revolving Credit Commitment Percentages on such date, PROVIDED that all
principal and interest payable on such Swingline Loans shall be for the account
of Chase until the date the respective participation is purchased and, to the
extent attributable to the purchased participation, shall be payable to the
Lender purchasing same from and after such date of purchase.
2.2 MINIMUM AMOUNT OF EACH BORROWING; MAXIMUM NUMBER OF
BORROWINGS. The aggregate principal amount of each Borrowing of Term Loans,
Revolving Credit Loans or Swingline Loans shall be in a multiple of $100,000 (or
the Sterling Equivalent, Euro Equivalent or Yen Equivalent, as applicable,
thereof) and shall not be less than the Minimum Borrowing Amount with respect
thereto (except that Mandatory Borrowings shall be made in the amounts required
by Section 2.1(f)). More than one Borrowing may be incurred on any date,
PROVIDED that at no time shall there be outstanding more than 20 Borrowings of
Eurodollar Loans under this Agreement. Without prejudice and in addition to any
method of conversion or rounding prescribed by any EMU Legislation, without
prejudice to the obligations of the Borrower to the Lenders under or pursuant to
this Agreement and without increasing the Commitments of any Lender, all
references in this Agreement to a minimum amount (or an integral multiple
thereof) in a national currency denomination of a Subsequent Participant to be
paid to or by the Administrative Agent shall, immediately upon such Subsequent
Participant becoming a Participating Member State, be replaced by a reference to
such reasonably comparable and convenient amount (or an integral multiple
thereof) in the euro unit as the Administrative Agent may specify.
2.3 NOTICE OF BORROWING. (a) The Borrower shall give the
Administrative Agent at the locations set forth in Section 13.2 (i) prior to
12:00 Noon (London time) at least three
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42
Business Days' prior written notice (or telephonic notice promptly confirmed in
writing) of the Borrowing of Term Loans if all or any of such Term Loans are to
be initially Eurodollar Loans and (ii) prior written notice (or telephonic
notice promptly confirmed in writing) prior to 10:00 A.M. (London time) on the
date of the Borrowing of Term Loans if all such Term Loans are to be ABR Loans.
Such notice (together with each notice of a Borrowing of Revolving Credit Loans
pursuant to Section 2.3(b) and each notice of a Borrowing of Swingline Loans
pursuant to Section 2.3(c), a "NOTICE OF BORROWING") shall be irrevocable and
shall specify (i) the aggregate principal amount of the Term Loans to be made on
the Term Loan Funding Date, (ii) the Term Loan Funding Date (which shall be a
Business Day) and (iii) whether the Term Loans shall consist of ABR Loans and/or
Eurodollar Term Loans and, if the Term Loans are to include Eurodollar Term
Loans, the Interest Period to be initially applicable thereto. The
Administrative Agent shall promptly give each Lender written notice (or
telephonic notice promptly confirmed in writing) of any Borrowing of Term Loans,
of such Lender's proportionate share thereof and of the other matters covered by
the related Notice of Borrowing.
(b) Whenever the Borrower desires to incur Revolving Credit
Loans hereunder (other than Mandatory Borrowings or borrowings to repay Unpaid
Drawings), it shall give the Administrative Agent at the locations set forth in
Section 13.2, (i) prior to (A) 12:00 Noon (London time) in the case of Dollar
Revolving Credit Loans, (B) 11:00 A.M. (London time) in the case of Sterling
Revolving Credit Loans and Euro Revolving Credit Loans or (C) 11:00 A.M. (Tokyo
time) in the case of Yen Revolving Credit Loans, at least three Business Days'
prior written notice (or telephonic notice promptly confirmed in writing) of
each Borrowing of Eurodollar Revolving Credit Loans and (ii) prior to 12:00 Noon
(London time) at least one Business Day's prior written notice (or telephonic
notice promptly confirmed in writing) of each Borrowing of ABR Loans. Each such
Notice of Borrowing, except as otherwise expressly provided in Section 2.10,
shall be irrevocable and shall specify (i) whether such Borrowing is to be a
Dollar Borrowing, a Yen Borrowing, a Euro Borrowing or a Sterling Borrowing,
(ii) the aggregate principal amount of the Revolving Credit Loans to be made
pursuant to such Borrowing (which, in the case of a Foreign Currency Borrowing,
shall be stated in Dollars), (iii) the date of Borrowing (which shall be a
Business Day), (iv) if such Borrowing is to be denominated in Dollars, whether
the respective Borrowing shall consist of ABR Loans or Eurodollar Revolving
Credit Loans, (v) if such Borrowing shall consist of Eurodollar Revolving Credit
Loans, the Interest Period to be initially applicable thereto and (vi) the
number and location of the account to which funds are to be disbursed. The
Administrative Agent shall promptly give each Lender written notice (or
telephonic notice promptly confirmed in writing) of each proposed Borrowing of
Revolving Credit Loans, of such Lender's proportionate share thereof and of the
other matters covered by the related Notice of Borrowing.
(c) Whenever the Borrower desires to incur Swingline Loans
hereunder, it shall give the Administrative Agent at the locations set forth in
Section 13.2 written notice (or telephonic notice promptly confirmed in writing)
of each Borrowing of Swingline Loans no later than 9:00 A.M. (London time) on
the date of such Borrowing. Each such notice shall be irrevocable and shall
specify (i) the aggregate principal amount and currency of the Swingline Loans
to be made pursuant to such Borrowing and (ii) the date of Borrowing (which
shall be a Business Day). The Administrative Agent shall promptly give Chase
written notice (or telephonic notice promptly confirmed in writing) of each
proposed Borrowing of Swingline Loans and of the other matters covered by the
related Notice of Borrowing.
(d) Mandatory Borrowings shall be made upon the notice
specified in Section 2.1(f), with the Borrower irrevocably agreeing, by its
incurrence of any Swingline Loan, to the making of Mandatory Borrowings as set
forth in such Section.
(e) Borrowings to reimburse Unpaid Drawings shall be made upon
the notice specified in Section 3.4(c).
<PAGE>
43
(f) Without in any way limiting the obligation of the Borrower
to confirm in writing any notice it may give hereunder by telephone, the
Administrative Agent may act prior to receipt of written confirmation without
liability upon the basis of such telephonic notice believed by the
Administrative Agent in good faith to be from an Authorized Officer of the
Borrower. In each such case the Borrower hereby waives the right to dispute the
Administrative Agent's record of the terms of any such telephonic notice.
2.4 DISBURSEMENT OF FUNDS. (a) No later than (i) 12:00 Noon
(New York time) in the case of Dollar Borrowings, (ii) 12:00 Noon (London time)
in the case of Euro Borrowings and Sterling Borrowings or (iii) 12:00 Noon
(Tokyo time) in the case of Yen Borrowings, on the date specified in each Notice
of Borrowing (including Mandatory Borrowings), each Lender will make available
its PRO RATA portion, if any, of each Borrowing requested to be made on such
date in the manner provided below, PROVIDED that all (i) Dollar Swingline Loans
shall be made available in the full amount thereof by Chase no later than 3:00
P.M. (London time) on the date requested and (ii) Sterling Swingline Loans shall
be made available in the full amount thereof by Chase no later than 2:00 P.M.
(London time).
(b) Each Lender shall make available all amounts it is to fund
under any Borrowing in Dollars, Euro, Yen or Sterling (as specified in the
applicable Notice of Borrowing) and immediately available funds to the
Administrative Agent at the Administrative Agent's Office and the Administrative
Agent will (except in the case of Mandatory Borrowings and Borrowings to repay
Unpaid Drawings) make available to the Borrower by depositing to the Borrower's
account at (i) the Administrative Agent's Office or (ii) the Sub-Agent's Office,
as specified by the Borrower, the aggregate of the amounts so made available in
Dollars, Euro, Yen or Sterling and the type of funds received. Unless the
Administrative Agent shall have been notified by any Lender prior to the date of
any such Borrowing that such Lender does not intend to make available to the
Administrative Agent its portion of the Borrowing or Borrowings to be made on
such date, the Administrative Agent may assume that such Lender has made such
amount available to the Administrative Agent on such date of Borrowing, and the
Administrative Agent, in reliance upon such assumption, may (in its sole
discretion and without any obligation to do so) make available to the Borrower a
corresponding amount. If such corresponding amount is not in fact made available
to the Administrative Agent by such Lender and the Administrative Agent has made
available same to the Borrower, the Administrative Agent shall be entitled to
recover such corresponding amount from such Lender. If such Lender does not pay
such corresponding amount forthwith upon the Administrative Agent's demand
therefor, the Administrative Agent shall promptly notify the Borrower, and the
Borrower shall immediately pay such corresponding amount to the Administrative
Agent. The Administrative Agent shall also be entitled to recover from such
Lender or the Borrower, as the case may be, interest on such corresponding
amount in respect of each day from the date such corresponding amount was made
available by the Administrative Agent to the Borrower to the date such
corresponding amount is recovered by the Administrative Agent, at a rate per
annum equal to (i) if paid by such Lender, the Federal Funds Effective Rate (or,
in the case of a Euro Borrowing or Yen Borrowing, the rate reasonably determined
by the Administrative Agent to be the cost to it of funding such amount) or (ii)
if paid by the Borrower, the then-applicable rate of interest, calculated in
accordance with Section 2.8, for the respective Loans.
(c) Nothing in this Section 2.4 shall be deemed to relieve
any Lender from its obligation to fulfill its commitments hereunder or to
prejudice any rights that the Borrower may have against any Lender as a
result of any default by such Lender hereunder (it being understood, however,
that no Lender shall be responsible for the failure of any other Lender to
fulfill its commitments hereunder).
<PAGE>
44
2.5 REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) The Borrower
shall repay to the Administrative Agent, for the benefit of the Lenders, (i) on
the Tranche A Maturity Date, the then-unpaid Tranche A Term Loans and Revolving
Credit Loans, (ii) on the Tranche B Maturity Date, the then-unpaid Tranche B
Term Loans, (iii) on the Tranche C Maturity Date, the then-unpaid Tranche C Term
Loans, and (iv) on the Tranche D Maturity Date, the then-unpaid Tranche D Term
Loans. The Borrower shall repay to the Administrative Agent, for the account of
Chase, on the Swingline Maturity Date, the then-unpaid Swingline Loans.
(b) The Borrower shall repay to the Administrative Agent, for
the benefit of the Lenders of Tranche A Term Loans, on each date set forth below
(each a "TRANCHE A REPAYMENT DATE"), the principal amount of the Tranche A Term
Loans set forth below opposite such Repayment Date (each a "TRANCHE A REPAYMENT
AMOUNT"):
<TABLE>
<CAPTION>
Number of Months From Term Loan
Funding Date Repayment Amount
- ------------------------------- ----------------
<S> <C>
6 $ 0
12 0
18 0
24 0
30 2,500,000
36 2,500,000
42 3,500,000
48 3,500,000
54 5,000,000
60 5,000,000
66 6,000,000
72 6,000,000
78 8,000,000
84 83,000,000
</TABLE>
(c) The Borrower shall repay to the Administrative Agent, for
the benefit of the Lenders of Tranche B Term Loans, on each date set forth below
(each a "TRANCHE B REPAYMENT DATE"), the principal amount of the Tranche B Term
Loans set forth below opposite such Repayment Date (each a "TRANCHE B REPAYMENT
AMOUNT"):
<TABLE>
<CAPTION>
Number of Months From
Term Loan Funding Date Repayment Amount
---------------------- ----------------
<S> <C>
6 $ 0
12 1,250,000
18 625,000
24 625,000
30 625,000
36 625,000
42 625,000
48 625,000
54 625,000
60 625,000
66 625,000
72 625,000
78 625,000
84 625,000
90 625,000
</TABLE>
<PAGE>
45
<TABLE>
<S> <C>
96 115,625,000
</TABLE>
(d) The Borrower shall repay to the Administrative Agent, for
the benefit of the Lenders of Tranche C Term Loans, on each date set forth below
(each a "TRANCHE C REPAYMENT DATE"), the principal amount of the Tranche C Term
Loans set forth below opposite such Repayment Date (each a "TRANCHE C REPAYMENT
AMOUNT"):
<TABLE>
<CAPTION>
Number of Months From
Term Loan Funding Date Repayment Amount
---------------------- ----------------
<S> <C>
6 $ 0
12 1,000,000
18 500,000
24 500,000
30 500,000
36 500,000
42 500,000
48 500,000
54 500,000
60 500,000
66 500,000
72 500,000
78 500,000
84 500,000
90 500,000
96 500,000
102 500,000
108 91,500,000
</TABLE>
(e) The Borrower shall repay to the Administrative Agent, for
the benefit of the Lenders of Tranche D Term Loans, on each date set forth below
(each a "TRANCHE D REPAYMENT
<PAGE>
46
DATE"), the principal amount of the Tranche D Term Loans set forth below
opposite such Repayment Date (each a "TRANCHE D REPAYMENT AMOUNT"):
<TABLE>
<CAPTION>
Number of Months From
Term Loan Funding Date Repayment Amount
---------------------- ----------------
<S> <C>
6 $ 0
12 1,000,000
18 500,000
24 500,000
30 500,000
36 500,000
42 500,000
48 500,000
54 500,000
60 500,000
66 500,000
72 500,000
78 500,000
84 500,000
90 500,000
96 500,000
102 500,000
108 500,000
114 91,000,000
</TABLE>
(f) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the Borrower to
the appropriate lending office of such Lender resulting from each Loan made by
such lending office of such Lender from time to time, including the amounts and
currency of principal and interest payable and paid to such lending office of
such Lender from time to time under this Agreement.
(g) The Administrative Agent shall maintain the Register
pursuant to Section 13.6, and a subaccount for each Lender, in which Register
and subaccounts (taken together) shall be recorded (i) the amount and currency
of each Loan made hereunder, whether such Loan is a Term Loan, a Revolving
Credit Loan or a Swingline Loan, the Type of each Loan made and the Interest
Period applicable thereto, (ii) the amount and currency of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender or Chase hereunder and (iii) the amount and currency of any sum received
by the Administrative Agent hereunder from the Borrower and each Lender's share
thereof.
(h) The entries made in the Register and accounts and
subaccounts maintained pursuant to paragraphs (f) and (g) of this Section 2.5
shall, to the extent permitted by applicable law, be prima facie evidence of the
existence and amounts of the obligations of the Borrower therein recorded;
PROVIDED, HOWEVER, that the failure of any Lender or the Administrative Agent to
maintain such account, such Register or such subaccount, as applicable, or any
error therein, shall not in any manner affect the obligation of the Borrower to
repay (with applicable interest) the Loans made to the Borrower by such Lender
in accordance with the terms of this Agreement.
2.6 CONVERSIONS AND CONTINUATIONS. (a) The Borrower shall have
the option on any Business Day to convert all or a portion equal to at least the
Minimum Borrowing Amount of the out standing principal amount of Term Loans or
Dollar Revolving Credit Loans of one Type into a Borrowing or Borrowings of
another Type or to continue the outstanding principal amount of any Eurodollar
Term Loans or Eurodollar Revolving Credit Loans as Eurodollar Term Loans
<PAGE>
47
or Eurodollar Revolving Credit Loans, as the case may be, for an additional
Interest Period, PROVIDED that (i) no partial conversion of Eurodollar Term
Loans or Eurodollar Revolving Credit Loans shall reduce the outstanding
principal amount of Eurodollar Term Loans or Eurodollar Revolving Credit Loans
made pursuant to a single Borrowing to less than the Minimum Borrowing Amount,
(ii) ABR Loans may not be converted into Eurodollar Term Loans or Eurodollar
Revolving Credit Loans if a Default or Event of Default is in existence on the
date of the conversion and the Administrative Agent has or the Required Lenders
have determined in its or their sole discretion not to permit such conversion,
(iii) Eurodollar Loans (other than Foreign Currency Revolving Credit Loans) may
not be continued as Eurodollar Term Loans or Eurodollar Revolving Credit Loans
for an additional Interest Period if a Default or Event of Default is in
existence on the date of the proposed continuation and the Administrative Agent
has or the Required Lenders have determined in its or their sole discretion not
to permit such continuation, (iv) no Interest Period in excess of one month may
be selected for any Foreign Currency Borrowing if a Default or Event of Default
is in existence on the date of the proposed continuation and the Administrative
Agent has or the Required Lenders have determined in its or their sole
discretion not to permit such longer interest period and (v) Borrowings
resulting from conversions pursuant to this Section 2.6 shall be limited in
number as provided in Section 2.2. Notwithstanding clause (i) above, if the
Dollar Equivalent of any Foreign Currency Revolving Credit Loan at the end of
the Interest Period applicable thereto does not exceed by more than 5%, and is
not less than 95% of, the Dollar Equivalent of such Foreign Currency Revolving
Credit Loan on the relevant Denomination Date, then the Borrower may refinance
such Foreign Currency Revolving Credit Loan with a new Foreign Currency
Revolving Credit Loan with the same principal amount and in the same currency at
the end of such Interest Period, notwithstanding that the Dollar Equivalent of
the new Foreign Currency Revolving Credit Loan is not an integral multiple of
$100,000. For purposes of this Section, any Foreign Currency Borrowing shall be
deemed to be in an amount equal to the Dollar Equivalent of such Foreign
Currency Borrowing determined as of its Denomination Date. Each such conversion
or continuation shall be effected by the Borrower by giving the Administrative
Agent at the locations set forth in Section 13.2 prior to (a) 12:00 Noon (London
time) in the case of Term Loans and Dollar Revolving Credit Loans, (b) 11:00
A.M. (London time) in the case of Sterling Revolving Credit Loans and Euro
Revolving Credit Loans and (c) 11:00 A.M. (Tokyo time) in the case of Yen
Revolving Credit Loans, at least three Business Days' (or one Business Day's
notice in the case of a conversion into ABR Loans) prior written notice (or
telephonic notice promptly confirmed in writing) (each a "NOTICE OF CONVERSION
OR CONTINUATION") specifying the Term Loans or Revolving Credit Loans to be so
converted or continued, the Type of Term Loans or Revolving Credit Loans to be
converted or continued into and, if such Term Loans or Revolving Credit Loans
are to be converted into or continued as Eurodollar Term Loans or Eurodollar
Revolving Credit Loans, the Interest Period to be initially applicable thereto.
The Administrative Agent shall give each Lender notice as promptly as
practicable of any such proposed conversion or continuation affecting any of its
Term Loans or Revolving Credit Loans. This Section shall not be construed to
permit the Borrower to (i) change the currency of any Borrowing or (ii) convert
a Foreign Currency Borrowing to an ABR Borrowing.
(b) If any Default or Event of Default is in existence at the
time of any proposed continuation of any Eurodollar Term Loans or Eurodollar
Revolving Credit Loans and the Administrative Agent has or the Required Lenders
have determined in its or their sole discretion not to permit such continuation,
such Eurodollar Term Loans or Eurodollar Revolving Credit Loans (other than
Foreign Currency Revolving Credit Loans) shall be automatically converted on the
last day of the current Interest Period into ABR Loans. If upon the expiration
of any Interest Period in respect of Eurodollar Term Loans or Eurodollar
Revolving Credit Loans, the Borrower has failed to elect a new Interest Period
to be applicable thereto as provided in paragraph (a) above, the Borrower shall
be deemed to have elected to convert such Borrowing (other than any Foreign
Currency Borrowing) of Eurodollar Term Loans or Eurodollar Revolving Credit
Loans, as the case may be, into a Borrowing of ABR Loans effective as of the
expiration date of such
<PAGE>
48
current Interest Period, or in the case of any Foreign Currency Borrowing, to
have elected a new Interest Period of one month.
2.7 PRO RATA BORROWINGS. Each Borrowing of Term Loans under
this Agreement shall be granted by the Lenders PRO RATA on the basis of their
then-applicable Term Loan Commitments. Each Borrowing of Dollar Revolving Credit
Loans and Sterling Revolving Credit Loans under this Agreement shall be granted
by the Lenders PRO RATA on the basis of their then-applicable Available
Revolving Credit Commitments. Each Borrowing of Euro Revolving Credit Loans
under this Agreement shall be granted by the Euro Lenders PRO RATA on the basis
of their then-applicable Euro Revolving Credit Commitments. Each Borrowing of
Yen Revolving Credit Loans under this Agreement shall be granted by the Yen
Lenders PRO RATA on the basis of their then-applicable Yen Revolving Credit
Commitments. It is understood that no Lender shall be responsible for any
default by any other Lender in its obligation to make Loans hereunder and that
each Lender shall be obligated to make the Loans provided to be made by it
hereunder, regardless of the failure of any other Lender to fulfill its
commitments hereunder.
2.8 INTEREST. (a) The unpaid principal amount of each ABR Loan
shall bear interest from the date of the Borrowing thereof until maturity
(whether by acceleration or otherwise) at a rate per annum that shall at all
times be the Applicable ABR Margin plus the ABR in effect from time to time.
(b) The unpaid principal amount of each Eurodollar Term Loan
or Eurodollar Revolving Credit Loan shall bear interest from the date of the
Borrowing thereof until maturity thereof (whether by acceleration or otherwise)
at a rate per annum that shall at all times be the Applicable Eurodollar Margin
in effect from time to time plus the relevant Eurodollar Rate.
(c) If all or a portion of (i) the principal amount of any
Loan or (ii) any interest payable thereon shall not be paid when due (whether at
the stated maturity, by acceleration or otherwise), such overdue amount shall
bear interest at a rate per annum that is (x) in the case of overdue principal,
the rate that would otherwise be applicable thereto PLUS 2% or (y) in the case
of any overdue interest, to the extent permitted by applicable law, the rate
described in Section 2.8(a) PLUS 2% from and including the date of such
non-payment to but excluding the date on which such amount is paid in full
(after as well as before judgment).
(d) Interest on each Loan shall accrue from and including the
date of any Borrowing to but excluding the date of any repayment thereof and
shall be payable (i) in respect of each ABR Loan, quarterly in arrears on the
last day of each March, June, September and December, (ii) in respect of each
Eurodollar Term Loan or Eurodollar Revolving Credit Loan, on the last day of
each Interest Period applicable thereto and, in the case of an Interest Period
in excess of three months, on each date occurring at three-month intervals after
the first day of such Interest Period, (iii) in respect of each Loan (except, in
the case of prepayments, any ABR Loan), on any prepayment (on the amount
prepaid), at maturity (whether by acceleration or otherwise) and, after such
maturity, on demand.
(e) All computations of interest hereunder shall be made in
accordance with Section 5.5.
(f) The Administrative Agent, upon determining the interest
rate for any Borrowing of Eurodollar Loans, shall promptly notify the Borrower
and the relevant Lenders thereof. Each such determination shall, absent clearly
demonstrable error, be final and conclusive and binding on all parties hereto.
2.9 INTEREST PERIODS. At the time the Borrower gives a Notice
of Borrowing or Notice of Conversion or Continuation in respect of the making
of, or conversion into or
<PAGE>
49
continuation as, a Borrowing of Eurodollar Term Loans or Eurodollar Revolving
Credit Loans (in the case of the initial Interest Period applicable thereto) or
prior to (a) 10:00 A.M. (London time) in the case of Term Loans and Dollar
Revolving Credit Loans, (b) 11:00 A.M. (London time) in the case of Sterling
Revolving Credit Loans and Euro Revolving Credit Loans and (c) 11:00 A.M. (Tokyo
time) in the case of Yen Revolving Credit Loans, on the third Business Day prior
to the expiration of an Interest Period applicable to a Borrowing of Eurodollar
Term Loans or Eurodollar Revolving Credit Loans, the Borrower shall have the
right to elect by giving the Administrative Agent written notice (or telephonic
notice promptly confirmed in writing) the Interest Period applicable to such
Borrowing, which Interest Period shall, at the option of the Borrower, be a one,
two, three, six or (in the case of Revolving Credit Loans, if available to all
the Lenders making such loans as determined by such Lenders in good faith based
on prevailing market conditions) a nine or twelve month period, PROVIDED that
the initial Interest Period may be for a period less than one month if agreed
upon by the Borrower and the Administrative Agent. Notwithstanding anything to
the contrary contained above:
(a) the initial Interest Period for any Borrowing of
Eurodollar Term Loans or Eurodollar Revolving Credit Loans shall commence on the
date of such Borrowing (including the date of any conversion from a Borrowing of
ABR Loans) and each Interest Period occurring thereafter in respect of such
Borrowing shall commence on the day on which the next preceding Interest Period
expires;
(b) if any Interest Period relating to a Borrowing of
Eurodollar Term Loans or Eurodollar Revolving Credit Loans begins on the last
Business Day of a calendar month or begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period, such Interest Period shall end on the last Business Day of the calendar
month at the end of such Interest Period;
(c) if any Interest Period would otherwise expire on a day
that is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, PROVIDED that if any Interest Period in respect of a
Eurodollar Term Loan or Eurodollar Revolving Credit Loan would otherwise expire
on a day that is not a Business Day but is a day of the month after which no
further Business Day occurs in such month, such Interest Period shall expire on
the next preceding Business Day; and
(d) the Borrower shall not be entitled to elect any Interest
Period in respect of any Eurodollar Term Loan or Eurodollar Revolving Credit
Loan if such Interest Period would extend beyond the applicable Maturity Date of
such Loan.
2.10 INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that
(x) in the case of clause (i) below, the Administrative Agent or (y) in the case
of clauses (ii) and (iii) below, any Lender shall have reasonably determined
(which determination shall, absent clearly demonstrable error, be final and
conclusive and binding upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for a
Eurodollar Borrowing for any Interest Period that (x) deposits in the
principal amounts of the Loans comprising such Eurodollar Borrowing and
in the currency in which such Loan is to be denominated are not
generally available in the relevant market or (y) by reason of any
changes arising on or after the date hereof affecting the interbank
eurodollar market, adequate and fair means do not exist for
ascertaining the applicable interest rate on the basis provided for in
the definition of Eurodollar Rate; or
(ii) at any time, that such Lender shall incur increased costs
or reductions in the amounts received or receivable hereunder with
respect to any Eurodollar Loans (other than any such increase or
reduction attributable to taxes) because of (x) any change since
<PAGE>
50
the date hereof in any applicable law, governmental rule, regulation,
guideline or order (or in the interpretation or administration thereof
and including the introduction of any new law or governmental rule,
regulation, guideline or order), such as, for example, but not limited
to, a change in official reserve requirements, and/or (y) other
circumstances affecting the interbank eurodollar market or the position
of such Lender in such market; or
(iii) at any time, that the making or continuance of any
Eurodollar Loan has become unlawful by compliance by such Lender in
good faith with any law, governmental rule, regulation, guideline or
order (or would conflict with any such governmental rule, regulation,
guideline or order not having the force of law even though the failure
to comply therewith would not be unlawful), or has become impracticable
as a result of a contingency occurring after the date hereof that
materially and adversely affects the interbank eurodollar market;
then, and in any such event, such Lender (or the Administrative Agent, in the
case of clause (i) above) shall within a reasonable time thereafter give notice
(if by telephone confirmed in writing) to the Borrower and to the Administrative
Agent of such determination (which notice the Administrative Agent shall
promptly transmit to each of the other Lenders). Thereafter (x) in the case of
clause (i) above, Eurodollar Term Loans and Eurodollar Revolving Credit Loans
shall no longer be available until such time as the Administrative Agent
notifies the Borrower and the Lenders that the circumstances giving rise to such
notice by the Administrative Agent no longer exist (which notice the
Administrative Agent agrees to give at such time when such circumstances no
longer exist), and any Notice of Borrowing or Notice of Conversion given by the
Borrower with respect to Eurodollar Term Loans or Eurodollar Revolving Credit
Loans that have not yet been incurred shall be deemed rescinded by the Borrower,
(y) in the case of clause (ii) above, the Borrower shall pay to such Lender,
promptly after receipt of written demand therefor, such additional amounts (in
the form of an increased rate of, or a different method of calculating, interest
or otherwise as such Lender in its reasonable discretion shall determine) as
shall be required to compensate such Lender for such increased costs or
reductions in amounts receivable hereunder (it being agreed that a written
notice as to the additional amounts owed to such Lender, showing in reasonable
detail the basis for the calculation thereof, submitted to the Borrower by such
Lender shall, absent clearly demonstrable error, be final and conclusive and
binding upon all parties hereto) and (z) in the case of clause (iii) above, the
Borrower shall take one of the actions specified in Section 2.10(b) as promptly
as possible and, in any event, within the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 2.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected pursuant to Section 2.10(a)(iii)
shall) either (i) if the affected Eurodollar Loan is then being made pursuant to
a Borrowing, cancel said Borrowing by giving the Administrative Agent telephonic
notice (confirmed promptly in writing) thereof on the same date that the
Borrower was notified by a Lender pursuant to Section 2.10(a)(ii) or (iii) or
(ii) if the affected Eurodollar Loan is then outstanding, upon at least three
Business Days' notice to the Administrative Agent, require the affected Lender
to convert each such Eurodollar Revolving Credit Loan and Eurodollar Term Loan
into an ABR Loan (such conversion to be made, in the case of a Foreign Currency
Revolving Credit Loan, into Dollars at the applicable Exchange Rate), PROVIDED
that if more than one Lender is affected at any time, then all affected Lenders
must be treated in the same manner pursuant to this Section 2.10(b).
(c) If, after the date hereof, the adoption of any applicable
law, rule or regulation regarding capital adequacy, or any change therein, or
any change in the interpretation or administration thereof by any governmental
authority, the National Association of Insurance Commissioners, central bank or
comparable agency charged with the interpretation or
<PAGE>
51
administration thereof, or compliance by a Lender or its parent with any request
or directive made or adopted after the date hereof regarding capital adequacy
(whether or not having the force of law) of any such authority, association,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on such Lender's or its parent's capital or assets as a
consequence of such Lender's commitments or obligations hereunder to a level
below that which such Lender or its parent could have achieved but for such
adoption, effectiveness, change or compliance (taking into consideration such
Lender's or its parent's policies with respect to capital adequacy), then from
time to time, promptly after demand by such Lender (with a copy to the
Administrative Agent), the Borrower shall pay to such Lender such additional
amount or amounts as will compensate such Lender or its parent for such
reduction, it being understood and agreed, however, that a Lender shall not be
entitled to such compensation as a result of such Lender's compliance with, or
pursuant to any request or directive to comply with, any such law, rule or
regulation as in effect on the date hereof. Each Lender, upon determining in
good faith that any additional amounts will be payable pursuant to this Section
2.10(c), will give prompt written notice thereof to the Borrower, which notice
shall set forth in reasonable detail the basis of the calculation of such
additional amounts, although the failure to give any such notice shall not,
subject to Section 2.13, release or diminish any of the Borrower's obligations
to pay additional amounts pursuant to this Section 2.10(c) upon receipt of such
notice.
(d) Notwithstanding the foregoing, in the case of Sterling
Loans, Euro Revolving Credit Loans and Yen Revolving Credit Loans affected by
the circumstances described in Section 2.10(a)(i), as promptly as practicable
but in no event later than three Business Days after the giving of the required
notice by the Administrative Agent with respect to such circumstances, the
Administrative Agent (in consultation with the Lenders) shall negotiate with the
Borrower in good faith in order to ascertain whether a substitute interest rate
(a "Substitute Rate") may be agreed upon for the maintaining of existing
Sterling Loans, Euro Revolving Credit Loans or Yen Revolving Credit Loans, as
applicable. If a Substitute Rate is agreed upon by the Borrower and all the
Lenders, such Substitute Rate shall apply. If a Substitute Rate is not so agreed
upon by the Borrower and all the Lenders within such time, each Lender's
Sterling Loans, Euro Revolving Credit Loans or Yen Revolving Credit Loans, as
applicable, shall thereafter bear interest at a rate equal to the sum of (i) the
rate certified by such Lender to be its costs of funds (from such sources as it
may reasonably select out of those sources then available to it) for such
Sterling Loans, Euro Revolving Credit Loans or Yen Revolving Credit Loans, as
applicable, PLUS (ii) the Applicable Eurodollar Margin PLUS (iii), in the case
of Sterling Loans only, any Additional Cost incurred by such Lender in respect
of such Sterling Loans from time to time.
2.11 COMPENSATION. If (a) any payment of principal of any
Eurodollar Term Loan or Eurodollar Revolving Credit Loan is made by the Borrower
to or for the account of a Lender other than on the last day of the Interest
Period for such Eurodollar Loan as a result of a payment or conversion pursuant
to Section 2.5, 2.6, 2.10, 5.1, 5.2 or 13.7, as a result of acceleration of the
maturity of the Loans pursuant to Section 11 or for any other reason, (b) any
Borrowing of Eurodollar Term Loans or Eurodollar Revolving Credit Loans is not
made as a result of a withdrawn Notice of Borrowing, (c) any ABR Loan is not
converted into a Eurodollar Term Loan or Eurodollar Revolving Credit Loan as a
result of a withdrawn Notice of Conversion or Continuation, (d) any Eurodollar
Loan is not continued as a Eurodollar Term Loan or Eurodollar Revolving Credit
Loan as a result of a withdrawn Notice of Conversion or Continuation or (e) any
prepayment of principal of any Eurodollar Term Loan or Eurodollar Revolving
Credit Loan is not made as a result of a withdrawn notice of prepayment pursuant
to Section 5.1 or 5.2, the Borrower shall, after receipt of a written request by
such Lender (which request shall set forth in reasonable detail the basis for
requesting such amount), pay to the Administrative Agent for the account of such
Lender any amounts required to compensate such Lender for any additional losses,
costs or expenses that such Lender may reasonably incur as a result of such
payment, failure to convert, failure to continue or failure to prepay,
including, without limitation, any loss sustained in converting between any
Foreign Currency and Dollars and any loss, cost or expense
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(excluding loss of anticipated profits) actually incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by any Lender to
fund or maintain such Eurodollar Loan.
2.12 CHANGE OF LENDING OFFICE. Each Lender agrees that, upon
the occurrence of any event giving rise to the operation of Section 2.10(a)(ii),
2.10(a)(iii), 2.10(b), 3.5 or 5.4 with respect to such Lender, it will, if
requested by the Borrower, use reasonable efforts (subject to overall policy
considerations of such Lender) to designate another lending office for any Loans
affected by such event, PROVIDED that such designation is made on such terms
that such Lender and its lending office suffer no economic, legal or regulatory
disadvantage, with the object of avoiding the consequence of the event giving
rise to the operation of any such Section. Nothing in this Section 2.12 shall
affect or postpone any of the obligations of the Borrower or the right of any
Lender provided in Section 2.10, 3.5 or 5.4.
2.13 NOTICE OF CERTAIN COSTS. Notwithstanding anything in this
Agreement to the contrary, to the extent any notice required by Section 2.10,
2.11, 3.5 or 5.4 is given by any Lender more than 180 days after such Lender has
knowledge (or should have had knowledge) of the occurrence of the event giving
rise to the additional cost, reduction in amounts, loss, tax or other additional
amounts described in such Sections, such Lender shall not be entitled to
compensation under Section 2.10, 2.11, 3.5 or 5.4, as the case may be, for any
such amounts incurred or accruing prior to the giving of such notice to the
Borrower.
2.14. REDESIGNATION OF $75,000,000 OF TRANCHE B TERM LOANS AND
TRANCHE C TERM LOANS. (a) On the Restatement Date, $25,000,000 of the Tranche B
Term Loans and $50,000,000 of the Tranche C Term Loans, in each case outstanding
immediately prior to the Restatement Date, shall be redesignated as Tranche A
Term Loans such that, after giving effect to such redesignation of Tranche B
Term Loans and Tranche C Term Loans, the outstanding Tranche A Term Loans,
Tranche B Term Loans and Tranche C Term Loans for each Lender shall be as
described on Schedule 1.1.
(b) No Lender shall have an obligation to make any additional
Term Loans, other than Term Loans made pursuant to continuations or conversions
of Term Loans outstanding on the Restatement Date.
SECTION 3. LETTERS OF CREDIT.
3.1 LETTERS OF CREDIT. (a) Subject to and upon the terms and
conditions herein set forth, the Borrower, at any time and from time to time on
or after the Closing Date and prior to the L/C Maturity Date, may request that
the Letter of Credit Issuer issue, for the account of the Borrower, a standby
letter of credit or letters of credit in such form as may be approved by the
Letter of Credit Issuer in its reasonable discretion. Each Letter of Credit
shall provide for drawings thereunder to be made in Dollars or, subject to
Section 3.7, Sterling.
(b) Notwithstanding the foregoing, (i) no Letter of Credit
shall be issued the Stated Amount of which, when added to the Letter of Credit
Outstanding at such time, would exceed the Letter of Credit Commitment then in
effect; (ii) no Letter of Credit shall be issued the Stated Amount of which,
when added to the sum of (x) the Letter of Credit Outstanding at such time and
(y) the aggregate principal of all Revolving Credit Loans and Swingline Loans
then outstanding, would exceed the Total Revolving Credit Commitment then in
effect; (iii) each Letter of Credit shall have an expiry date occurring no later
than one year after the date of issuance thereof, unless otherwise agreed upon
by the Administrative Agent and the Letter of Credit Issuer, PROVIDED that in no
event shall such expiry date occur later than the L/C Maturity Date; (iv) each
Letter of Credit shall be denominated in Dollars; and (v) no Letter of Credit
shall
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53
be issued by the Letter of Credit Issuer after it has received a written notice
from the Borrower or any Lender stating that a Default or Event of Default has
occurred and is continuing until such time as the Letter of Credit Issuer shall
have received a written notice of (x) rescission of such notice from the party
or parties originally delivering such notice or (y) the waiver of such Default
or Event of Default in accordance with the provisions of Section 13.1.
(c) Upon at least one Business Day's prior written notice (or
telephonic notice promptly confirmed in writing) to the Administrative Agent and
the Letter of Credit Issuer (which notice the Administrative Agent shall
promptly transmit to each of the Lenders), the Borrower shall have the right, on
any day, permanently to terminate or reduce the Letter of Credit Commitment in
whole or in part, PROVIDED that, after giving effect to such termination or
reduction, the Letter of Credit Outstanding shall not exceed the Letter of
Credit Commitment.
3.2 LETTER OF CREDIT REQUESTS. (a) Whenever the Borrower
desires that a Letter of Credit be issued for its account, it shall give the
Administrative Agent and the Letter of Credit Issuer at least five (or such
lesser number as may be agreed upon by the Administrative Agent and the Letter
of Credit Issuer) Business Days' written notice thereof. Each notice shall be
executed by the Borrower and shall be in the form of Exhibit D (each a "LETTER
OF CREDIT REQUEST"). The Administrative Agent shall promptly transmit copies of
each Letter of Credit Request to each Lender.
(b) The making of each Letter of Credit Request shall be
deemed to be a representation and warranty by the Borrower that the Letter of
Credit may be issued in accordance with, and will not violate the requirements
of, Section 3.1(b).
3.3 LETTER OF CREDIT PARTICIPATIONS. (a) Immediately upon the
issuance by the Letter of Credit Issuer of any Letter of Credit, the Letter of
Credit Issuer shall be deemed to have sold and transferred to each other Lender
that has a Revolving Credit Commitment (each such other Lender, in its capacity
under this Section 3.3, an "L/C PARTICIPANT"), and each such L/C Participant
shall be deemed irrevocably and unconditionally to have purchased and received
from the Letter of Credit Issuer, without recourse or warranty, an undivided
interest and participation (each an "L/C PARTICIPATION"), to the extent of such
L/C Participant's Revolving Credit Commitment Percentage from time to time, in
such Letter of Credit, each substitute letter of credit, each drawing made
thereunder and the obligations of the Borrower under this Agreement with respect
thereto, and any security therefor or guaranty pertaining thereto (although
Letter of Credit Fees will be paid directly to the Administrative Agent for the
ratable account of the L/C Participants as provided in Section 4.1(b) and the
L/C Participants shall have no right to receive any portion of any Fronting
Fees).
(b) In determining whether to pay under any Letter of Credit,
the Letter of Credit Issuer shall have no obligation relative to the L/C
Participants other than to confirm that any documents required to be delivered
under such Letter of Credit have been delivered and that they appear to comply
on their face with the requirements of such Letter of Credit. Any action taken
or omitted to be taken by the Letter of Credit Issuer under or in connection
with any Letter of Credit issued by it, if taken or omitted in the absence of
gross negligence or willful misconduct, shall not create for the Letter of
Credit Issuer any resulting liability.
(c) In the event that the Letter of Credit Issuer makes any
payment under any Letter of Credit issued by it and the Borrower shall not have
repaid such amount in full to the Letter of Credit Issuer pursuant to Section
3.4(a), the Letter of Credit Issuer shall promptly notify the Administrative
Agent and each L/C Participant of such failure, and each L/C Participant shall
promptly and unconditionally pay to the Administrative Agent, for the account of
the Letter of Credit Issuer, the amount of such L/C Participant's Revolving
Credit Commitment Percentage (determined as of the date of the notice referred
to above) of such unreimbursed payment in
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54
Dollars and in same day funds; PROVIDED, HOWEVER, that no L/C Participant shall
be obligated to pay to the Administrative Agent for the account of the Letter of
Credit Issuer its Revolving Credit Commitment Percentage of such unreimbursed
amount arising from any wrongful payment made by the Letter of Credit Issuer
under a Letter of Credit as a result of acts or omissions constituting willful
misconduct or gross negligence on the part of the Letter of Credit Issuer. If
the Letter of Credit Issuer so notifies, prior to 11:00 A.M. (New York time) on
any Business Day, any L/C Participant required to fund a payment under a Letter
of Credit, such L/C Participant shall make available to the Administrative Agent
for the account of the Letter of Credit Issuer such L/C Participant's Revolving
Credit Commitment Percentage of the amount of such payment on such Business Day
in same day funds. If and to the extent such L/C Participant shall not have so
made its Revolving Credit Commitment Percentage of the amount of such payment
available to the Administrative Agent for the account of the Letter of Credit
Issuer, such L/C Participant agrees to pay to the Administrative Agent for the
account of the Letter of Credit Issuer, forthwith on demand, such amount,
together with interest thereon for each day from such date until the date such
amount is paid to the Administrative Agent for the account of the Letter of
Credit Issuer at the Federal Funds Effective Rate. The failure of any L/C
Participant to make available to the Administrative Agent for the account of the
Letter of Credit Issuer its Revolving Credit Commitment Percentage of any
payment under any Letter of Credit shall not relieve any other L/C Participant
of its obligation hereunder to make available to the Administrative Agent for
the account of the Letter of Credit Issuer its Revolving Credit Commitment
Percentage of any payment under such Letter of Credit on the date required, as
specified above, but no L/C Participant shall be responsible for the failure of
any other L/C Participant to make available to the Administrative Agent such
other L/C Participant's Revolving Credit Commitment Percentage of any such
payment.
(d) Whenever the Letter of Credit Issuer receives a payment in
respect of an unpaid reimbursement obligation as to which the Administrative
Agent has received for the account of the Letter of Credit Issuer any payments
from the L/C Participants pursuant to paragraph (c) above, the Letter of Credit
Issuer shall pay to the Administrative Agent and the Administrative Agent shall
promptly pay to each L/C Participant that has paid its Revolving Credit
Commitment Percentage of such reimbursement obligation, in Dollars and in same
day funds, an amount equal to such L/C Participant's share (based upon the
proportionate aggregate amount originally funded by such L/C Participant to the
aggregate amount funded by all L/C Participants) of the principal amount of such
reimbursement obligation and interest thereon accruing after the purchase of the
respective L/C Participations.
(e) The obligations of the L/C Participants to make payments
to the Administrative Agent for the account of the Letter of Credit Issuer with
respect to Letters of Credit shall be irrevocable and not subject to
counterclaim, set-off or other defense or any other qualification or exception
whatsoever and shall be made in accordance with the terms and conditions of this
Agreement under all circumstances, including, without limitation, any of the
following circumstances:
(i) any lack of validity or enforceability of this Agreement
or any of the other Credit Documents;
(ii) the existence of any claim, set-off, defense or other
right that the Borrower may have at any time against a beneficiary
named in a Letter of Credit, any transferee of any Letter of Credit (or
any Person for whom any such transferee may be acting), the
Administrative Agent, the Letter of Credit Issuer, any Lender or other
Person, whether in connection with this Agreement, any Letter of
Credit, the transactions contemplated herein or any unrelated
transactions (including any underlying transaction between the Borrower
and the beneficiary named in any such Letter of Credit);
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(iii) any draft, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents; or
(v) the occurrence of any Default or Event of Default;
PROVIDED, HOWEVER, that no L/C Participant shall be obligated to pay to the
Administrative Agent for the account of the Letter of Credit Issuer its
Revolving Credit Commitment Percentage of any unreimbursed amount arising from
any wrongful payment made by the Letter of Credit Issuer under a Letter of
Credit as a result of acts or omissions constituting willful misconduct or gross
negligence on the part of the Letter of Credit Issuer.
3.4 AGREEMENT TO REPAY LETTER OF CREDIT DRAWINGS. (a) The
Borrower hereby agrees to reimburse the Letter of Credit Issuer, by making
payment to the Administrative Agent in Dollars in immediately available funds at
the Administrative Agent's Office, for any payment or disbursement made by the
Letter of Credit Issuer under any Letter of Credit (each such amount so paid
until reimbursed, an "UNPAID DRAWING") immediately after, and in any event on
the date of, such payment, with interest on the amount so paid or disbursed by
the Letter of Credit Issuer, to the extent not reimbursed prior to 5:00 P.M.
(New York time) on the date of such payment or disbursement, from and including
the date paid or disbursed to but excluding the date the Letter of Credit Issuer
is reimbursed therefor, at a rate per annum that shall at all times be the
Applicable ABR Margin plus the ABR as in effect from time to time, PROVIDED
that, notwithstanding anything contained in this Agreement to the contrary, (i)
unless the Borrower shall have notified the Administrative Agent and the Letter
of Credit Issuer prior to (A) 10:00 A.M. on the date of such drawing or (B) in
the case of drawings on and after the Term Loan Funding Date under Letters of
Credit issued to the Issuing Lender (as defined in the Credit Agreement relating
to the Senior Bridge Facility) in respect of such Issuing Lender's guarantees of
the Guaranteed Loan Notes, 10:00 A.M. on the day after the date of such drawing
that the Borrower intends to reimburse the Letter of Credit Issuer for the
amount of such drawing with funds other than the proceeds of Loans, the Borrower
shall be deemed to have given a Notice of Borrowing to the Administrative Agent
requesting that the Lenders make Revolving Credit Loans (which shall initially
be ABR Loans) on the date on which such drawing is honored in an amount equal to
the amount of such drawing and (ii) each Lender shall, on such date, make
Revolving Credit Loans in an amount equal to such Lender's pro rata portion of
such Borrowing in accordance with the provisions of Section 2.4.
(b) The Borrower's obligations under this Section 3.4 to
reimburse the Letter of Credit Issuer with respect to Unpaid Drawings
(including, in each case, interest thereon) shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment that the Borrower or any other Person may have or have had
against the Letter of Credit Issuer, the Administrative Agent or any Lender
(including in its capacity as an L/C Participant), including, without
limitation, any defense based upon the failure of any drawing under a Letter of
Credit (each a "DRAWING") to conform to the terms of the Letter of Credit or any
non-application or misapplication by the beneficiary of the proceeds of such
Drawing, PROVIDED that the Borrower shall not be obligated to reimburse the
Letter of Credit Issuer for any wrongful payment made by the Letter of Credit
Issuer under the Letter of Credit issued by it as a result of acts or omissions
constituting willful misconduct or gross negligence on the part of the Letter of
Credit Issuer.
(c) Each payment by the Letter of Credit Issuer under any
Letter of Credit shall constitute a request by the Borrower for an ABR Revolving
Credit Loan in the amount of the
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Unpaid Drawing in respect of such Letter of Credit. The Letter of Credit Issuer
shall notify the Borrower and the Administrative Agent, by 10:00 A.M. (New York
time) on any Business Day on which the Letter of Credit Issuer intends to honor
a drawing under a Letter of Credit, of (i) the Letter of Credit Issuer's
intention to honor such drawing and (ii) the amount of such drawing. Unless
otherwise instructed by the Borrower by 10:30 A.M. (New York time) on such
Business Day, the Administrative Agent shall promptly notify each Lender of such
drawing and the amount of its Revolving Credit Loan to be made in respect
thereof, and each Lender shall be irrevocably obligated to make an ABR Revolving
Credit Loan to the Borrower in the amount of its Revolving Credit Commitment
Percentage of the applicable Unpaid Drawing by 12:00 Noon (New York time) on
such Business Day by making the amount of such Revolving Credit Loan available
to the Administrative Agent at the Administrative Agent's Office. Such Revolving
Credit Loans shall be made without regard to the Minimum Borrowing Amount. The
Administrative Agent shall use the proceeds of such Revolving Credit Loans
solely for purpose of reimbursing the Letter of Credit Issuer for the related
Unpaid Drawing.
3.5 INCREASED COSTS. If after the date hereof, the adoption of
any applicable law, rule or regulation, or any change therein, or any change in
the interpretation or administration thereof by any Governmental Authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or actual compliance by the Letter of Credit Issuer or
any L/C Participant with any request or directive made or adopted after the date
hereof (whether or not having the force of law), by any such authority, central
bank or comparable agency shall either (a) impose, modify or make applicable any
reserve, deposit, capital adequacy or similar requirement against letters of
credit issued by the Letter of Credit Issuer, or any L/C Participant's L/C
Participation therein, or (b) impose on the Letter of Credit Issuer or any L/C
Participant any other conditions affecting its obligations under this Agreement
in respect of Letters of Credit or L/C Participations therein or any Letter of
Credit or such L/C Participant's L/C Participation therein; and the result of
any of the foregoing is to increase the cost to the Letter of Credit Issuer or
such L/C Participant of issuing, maintaining or participating in any Letter of
Credit, or to reduce the amount of any sum received or receivable by the Letter
of Credit Issuer or such L/C Participant hereunder (other than any such increase
or reduction attributable to taxes) in respect of Letters of Credit or L/C
Participations therein, then, promptly after receipt of written demand to the
Borrower by the Letter of Credit Issuer or such L/C Participant, as the case may
be (a copy of which notice shall be sent by the Letter of Credit Issuer or such
L/C Participant to the Administrative Agent), the Borrower shall pay to the
Letter of Credit Issuer or such L/C Participant such additional amount or
amounts as will compensate the Letter of Credit Issuer or such L/C Participant
for such increased cost or reduction, it being understood and agreed, however,
that the Letter of Credit Issuer or a L/C Participant shall not be entitled to
such compensation as a result of such Person's compliance with, or pursuant to
any request or directive to comply with, any such law, rule or regulation as in
effect on the date hereof. A certificate submitted to the Borrower by the Letter
of Credit Issuer or a L/C Participant, as the case may be (a copy of which
certificate shall be sent by the Letter of Credit Issuer or such L/C Participant
to the Administrative Agent), setting forth in reasonable detail the basis for
the determination of such additional amount or amounts necessary to compensate
the Letter of Credit Issuer or such L/C Participant as aforesaid shall be
conclusive and binding on the Borrower absent clearly demonstrable error.
3.6 SUCCESSOR LETTER OF CREDIT ISSUER. The Letter of Credit
Issuer may resign as Letter of Credit Issuer upon 60 days' prior written notice
to the Administrative Agent, the Lenders and the Borrower. If the Letter of
Credit Issuer shall resign as Letter of Credit Issuer under this Agreement, then
the Borrower shall appoint from among the Lenders with Revolving Credit
Commitments a successor issuer of Letters of Credit, whereupon such successor
issuer shall succeed to the rights, powers and duties of the Letter of Credit
Issuer, and the term "Letter of Credit Issuer" shall mean such successor issuer
effective upon such appointment. At the time such resignation shall become
effective, the Borrower shall pay to the resigning Letter of Credit
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57
Issuer all accrued and unpaid fees pursuant to Sections 4.1(c) and (d). The
acceptance of any appointment as the Letter of Credit Issuer hereunder by a
successor Lender shall be evidenced by an agreement entered into by such
successor, in a form satisfactory to the Borrower and the Administrative Agent
and, from and after the effective date of such agreement, such successor Lender
shall have all the rights and obligations of the previous Letter of Credit
Issuer under this Agreement and the other Credit Documents. After the
resignation of the Letter of Credit Issuer hereunder, the resigning Letter of
Credit Issuer shall remain a party hereto and shall continue to have all the
rights and obligations of a Letter of Credit Issuer under this Agreement and the
other Loan Documents with respect to Letters of Credit issued by it prior to
such resignation, but shall not be required to issue additional Letters of
Credit. After any retiring Letter of Credit Issuer's resignation as Letter of
Credit Issuer, the provisions of this Agreement relating to the Letter of Credit
Issuer shall inure to its benefit as to any actions taken or omitted to be taken
by it (a) while it was Letter of Credit Issuer under this Agreement or (b) at
any time with respect to Letters of Credit issued by such Letter of Credit
Issuer.
3.7 STERLING-DENOMINATED LETTERS OF CREDIT. (a) The Borrower
may request the issuance of a Letter of Credit providing for the payment of
drawings in Sterling subject to the terms and conditions of this Section 3.7, in
addition to the other conditions applicable to the issuance of Letters of Credit
hereunder.
(b) For purposes of determining the Letter of Credit Exposure
and for purposes of calculating fees payable under Section 4.1(b), the amount of
such Letter of Credit and of any unreimbursed payment in respect thereof shall
be deemed to be, as of any date of determination, the Dollar Equivalent thereof
at such date. The initial Dollar Equivalent of any such Letter of Credit shall
be determined by the Issuing Bank on the date of issuance thereof and adjusted
from time to time thereafter as provided below. The Dollar Equivalent of each
such Letter of Credit outstanding shall be adjusted by the Issuing Bank on each
Calculation Date. If a payment is made by the Issuing Bank under any such Letter
of Credit, the Dollar Equivalent of such payment shall be determined by the
Issuing Bank on the date that such payment is made. The Issuing Bank shall make
each such determination to be made by it based upon the applicable Exchange
Rate, except that the Dollar Equivalent of such payment may, at the option of
the Issuing Bank, be made by the Issuing Bank by calculating the amount in
Dollars that is actually required in order for the Issuing Bank to purchase an
amount of Sterling equal to the amount of the relevant payment in order to make
such payment, taking into account all foreign exchange costs actually incurred
by the Issuing Bank. The Issuing Bank shall notify the Administrative Agent and
the Borrower promptly of each such Dollar Equivalent determined by it, on the
date that such determination is required to be made.
(c) The obligation of the Borrower to reimburse the Issuing
Bank for any payment made by the Issuing Bank under any Letter of Credit
denominated in Sterling, and to pay interest thereon, shall be payable only in
Sterling, and shall not be discharged by paying an amount in Dollars or any
other currency.
(d) The obligations of each Lender under Section 3.3(c) to pay
its Revolving Credit Commitment Percentage of any unreimbursed payment made by
the Issuing Bank under any Letter of Credit denominated in Sterling shall be
payable in Sterling.
SECTION 4. FEES; COMMITMENTS.
4.1 FEES. (a) The Borrower agrees to pay to the Administrative
Agent in Dollars, for the account of each Lender (in each case pro rata
according to the respective Available Revolving Credit Commitments of all such
Lenders), a commitment fee for each day from and including the Restatement Date
to but excluding the Final Date on the average daily unused
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Revolving Credit Commitment. Such commitment fee shall be payable in arrears (i)
on the last day of each March, June, September and December (for the three-month
period (or portion thereof) ended on such day and (ii) on the Final Date (for
the period ended on such date for which no payment has been received pursuant to
clause (i) above), and shall be computed for each day during such period at a
rate per annum equal to the Commitment Fee Rate in effect on such day on the
Available Commitments in effect on such day. Notwithstanding the foregoing, the
Borrower shall not be obligated to pay any amounts to any Defaulting Lender
pursuant to this Section 4.1.
(b) The Borrower agrees to pay to the Administrative Agent in
Dollars for the account of the Lenders PRO RATA on the basis of their respective
Letter of Credit Exposure, a fee in respect of each Letter of Credit (the
"LETTER OF CREDIT FEE"), for the period from and including the date of issuance
of such Letter of Credit to but not including the termination date of such
Letter of Credit computed at the per annum rate for each day equal to the
Applicable Eurodollar Margin for Revolving Credit Loans minus 0.25% per annum on
the average daily Stated Amount of such Letter of Credit. Such Letter of Credit
Fees shall be due and payable quarterly in arrears on the last day of each
March, June, September and December and on the date upon which the Total
Revolving Credit Commitment terminates and the Letter of Credit Outstandings
shall have been reduced to zero.
(c) The Borrower agrees to pay to the Administrative Agent in
Dollars for the account of the Letter of Credit Issuer a fee in respect of each
Letter of Credit issued by it (the "FRONTING FEE"), for the period from and
including the date of issuance of such Letter of Credit to but not including the
termination date of such Letter of Credit, computed at the rate for each day
equal to 0.25% per annum on the average daily Stated Amount of such Letter of
Credit. Such Fronting Fees shall be due and payable quarterly in arrears on the
last day of each March, June, September and December and on the date upon which
the Total Revolving Credit Commitment terminates and the Letter of Credit
Outstandings shall have been reduced to zero.
(d) The Borrower agrees to pay directly to the Letter of
Credit Issuer in Dollars upon each issuance of, drawing under, and/or amendment
of, a Letter of Credit issued by it such amount as the Letter of Credit Issuer
and the Borrower shall have agreed upon for issuances of, drawings under or
amendments of, letters of credit issued by it.
(e) The Borrower agrees to pay to the Administrative Agent in
Dollars, for the benefit of the Administrative Agent, the fees in the amounts
and on the dates previously agreed to in writing by Newco 4 and the
Administrative Agent. The Administrative Agent agrees to pay to each Lender, on
behalf of the Administrative Agent, for each Lender's own account, the fees in
the amounts and on the dates previously agreed to in writing by the
Administrative Agent and such Lender.
4.2 VOLUNTARY REDUCTION OF REVOLVING CREDIT COMMITMENTS. Upon
at least one Business Day's prior written notice (or telephonic notice promptly
confirmed in writing) to the Administrative Agent at the Administrative Agent's
Office (which notice the Administrative Agent shall promptly transmit to each of
the Lenders), the Borrower shall have the right, without premium or penalty, on
any day, permanently to terminate or reduce the Revolving Credit Commitments in
whole or in part, PROVIDED that (a) any such reduction shall apply
proportionately and permanently to reduce the Revolving Credit Commitment of
each of the Lenders, (b) any partial reduction pursuant to this Section 4.2
shall be in the amount of at least $1,000,000, (c) after giving effect to such
termination or reduction and to any prepayments of the Loans made on the date
thereof in accordance with this Agreement, the sum of (i) the aggregate
outstanding principal amount of the Revolving Credit Loans and the Swingline
Loans and (ii) the Letter of Credit Outstandings shall not exceed the Total
Revolving Credit Commitment, PROVIDED that the principal amount of any Loan and
the amount of any Letter of Credit Outstandings
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denominated in a Foreign Currency shall be deemed to be, as of such date, the
Dollar Equivalent thereof at such date and (d) if, after giving effect to such
reduction, the Total Revolving Credit Commitment is less than the aggregate
amount of (i) all the Euro Revolving Credit Commitments or (ii) all the Yen
Revolving Credit Commitments (such difference, the "EXCESS AMOUNT"), then the
Euro Revolving Credit Commitments or Yen Revolving Credit Commitments, as
applicable, shall automatically be reduced by the Excess Amount, PROVIDED that
any such reduction pursuant to this clause (d) shall apply proportionately and
permanently to reduce the Euro Revolving Credit Commitment or Yen Revolving
Commitment, as applicable, of each of the Euro Lenders or Yen Lenders, as
applicable.
4.3 MANDATORY TERMINATION OF COMMITMENTS. (a) The Total Term
Loan Commitment shall terminate at 5:00 P.M. (New York time) on the date that is
nine months after the date hereof.
(b) The Total Revolving Credit Commitment, the Euro Revolving
Credit Commitments and the Yen Revolving Credit Commitments shall terminate at
5:00 P.M. (New York time) on the Revolving Credit Maturity Date.
(c) The Swingline Commitment shall terminate at 5:00 P.M. (New
York time) on the Swingline Maturity Date.
SECTION 5. PAYMENTS.
5.1 VOLUNTARY PREPAYMENTS. The Borrower shall have the right
to prepay Term Loans, Revolving Credit Loans and Swingline Loans, without
premium or penalty, in whole or in part from time to time on the following terms
and conditions: (a) the Borrower shall give the Administrative Agent at the
Administrative Agent's Office written notice (or telephonic notice promptly
confirmed in writing) of its intent to make such prepayment, the amount of such
prepayment and (in the case of Eurodollar Term Loans and Eurodollar Revolving
Credit Loans) the specific Borrowing(s) pursuant to which made, which notice
shall be given by the Borrower no later than (i) in the case of Term Loans or
Dollar Revolving Credit Loans, 10:00 A.M. (New York time) one Business Day prior
to, (ii) in the case of Sterling Revolving Credit Loans and Euro Revolving
Credit Loans, 10:00 A.M. (London time), three Business Days prior to, (iii) in
the case of Yen Revolving Credit Loans, 10:00 A.M. (Tokyo time), three Business
Days prior to, or (iv) in the case of Swingline Loans, 10:00 A.M. (New York
time) on, the date of such prepayment and shall promptly be transmitted by the
Administrative Agent to each of the Lenders or Chase, as the case may be; (b)
each partial prepayment of any Borrowing of Term Loans or Revolving Credit Loans
shall be in an amount that is (or, in the case of any Foreign Currency Revolving
Credit Loan, the Dollar Equivalent of which, determined as of the Denomination
Date for the relevant Loan or Loans, is) a multiple of $100,000 and in an
aggregate principal amount (calculated by using the Dollar Equivalent at such
time of the principal amount of any Foreign Currency Revolving Loan) of at least
$1,000,000 and each partial prepayment of Swingline Loans shall be in an amount
that is (or, in the case of any Sterling Swingline Loan, the Dollar Equivalent
of which, determined as of the Denomination Date for the relevant Loan or Loans,
is) a multiple of $100,000 and in an aggregate principal amount (calculated by
using the Dollar Equivalent at such time of the principal amount of any Sterling
Swingline Loan) of at least $100,000, PROVIDED that no partial prepayment of
Eurodollar Term Loans or Eurodollar Revolving Credit Loans made pursuant to a
single Borrowing shall reduce the outstanding Eurodollar Term Loans or
Eurodollar Revolving Credit Loans made pursuant to such Borrowing to an amount
less than the Minimum Borrowing Amount for Eurodollar Term Loans or Eurodollar
Revolving Credit Loans; (c) any prepayment of Eurodollar Term Loans or
Eurodollar Revolving Credit Loans pursuant to this Section 5.1 on any day other
than the last day of an Interest Period applicable thereto shall be subject to
compliance by the
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Borrower with the applicable provisions of Section 2.11; and (d) each prepayment
in respect of any one or more tranches of Term Loans or Revolving Credit Loans
made pursuant to a Borrowing shall be applied PRO RATA among such tranches of
Term Loans or Revolving Credit Loans made pursuant to such Borrowing, PROVIDED
that at the Borrower's election in connection with any prepayment pursuant to
this Section 5.1, such prepayment shall not be applied to any Term Loan or
Revolving Credit Loan of a Defaulting Lender. Each prepayment of Term Loans
pursuant to this Section 5.1 shall be (a) applied to Tranche A Term Loans,
Tranche B Term Loans, Tranche C Term Loans, Tranche D Term Loans or Revolving
Credit Loans in such manner as the Borrower may determine and (b) applied to
reduce the Repayment Amounts with respect to any such Term Loans in such order
as the Borrower may determine.
5.2 MANDATORY PREPAYMENTS. (a) TERM LOAN PREPAYMENTS. (i) On
each occasion that a Prepayment Event occurs, the Borrower shall, within five
Business Days after the occurrence of such Prepayment Event, offer to prepay, in
accordance with paragraph (c) below, the principal amount of Term Loans in an
amount equal to 100% of the Net Cash Proceeds from such Prepayment Event.
(ii) Not later than the date that is six months after the last
day of any fiscal year commencing with the fiscal year 1999, if the Consolidated
Total Debt to Consolidated EBITDA Ratio as of such day is equal to or greater
than 3.00 to 1.00, the Borrower shall offer to prepay, in accordance with
paragraph (c) below, the principal of Term Loans in an amount equal to (x) 50%
of Excess Cash Flow for such fiscal year MINUS (y) the sum of (A) the amount of
any such Excess Cash Flow that the Borrower has, prior to such date, reinvested
in the business of Parent or any of its Subsidiaries (subject to Section 9.14)
and (B) the amount of any prepayment of the Term Loans pursuant to Section 5.1
or prepayments of Revolving Credit Loans to the extent accompanied by reductions
of the Revolving Credit Commitments.
(b) AGGREGATE REVOLVING CREDIT OUTSTANDINGS. If on any date
the sum of the outstanding principal amount of the Dollar Revolving Credit Loans
and Swingline Loans, the aggregate amount of Letter of Credit Outstandings and
the aggregate Dollar Equivalent of the outstanding principal amount of the
Foreign Currency Revolving Credit Loans (all the foregoing, collectively, the
"AGGREGATE REVOLVING CREDIT OUTSTANDINGS") exceeds 105% of the Total Revolving
Credit Commitment as then in effect, the Borrower shall forthwith repay on such
date the principal amount of Swingline Loans and, after all Swingline Loans have
been paid in full, Revolving Credit Loans, in an amount equal to such excess.
If, after giving effect to the prepayment of all outstanding Swingline Loans and
Revolving Credit Loans, the Aggregate Revolving Credit Outstandings exceed the
Total Revolving Credit Commitment then in effect, the Borrower shall pay to the
Administrative Agent an amount in cash equal to such excess and the
Administrative Agent shall hold such payment for the benefit of the Lenders as
security for the obligations of the Borrower hereunder (including, without
limitation, obligations in respect of Letter of Credit Outstandings) pursuant to
a cash collateral agreement to be entered into in form and substance
satisfactory to the Administrative Agent (which shall permit certain investments
in Permitted Investments satisfactory to the Administrative Agent, until the
proceeds are applied to the secured obligations). If on any date the aggregate
amount of the Dollar Equivalents of the principal amounts of all outstanding
Euro Revolving Credit Loans and Yen Revolving Credit Loans exceeds $78,750,000,
the Borrower shall, on such day, prepay Euro Revolving Credit Loans or Yen
Revolving Credit Loans in an amount equal to such excess (after giving effect to
any other prepayment of Loans on such day). If on any date the aggregate amount
of the Dollar Equivalents of the principal amounts of all Euro Revolving Credit
Loans then outstanding exceeds 105% of the aggregate amount of all Euro
Revolving Credit Commitments on such date, the Borrower shall, on such day,
prepay Euro Revolving Credit Loans in an amount equal to such excess (after
giving effect to any other prepayment of Euro Revolving Credit Loans on such
day). If on any date the aggregate amount of the Dollar Equivalents of the
principal amounts of all Yen Revolving Credit Loans then outstanding exceeds
105% of the aggregate amount of all Yen
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Revolving Credit Commitments on such date, the Borrower shall, on such day,
prepay Yen Revolving Credit Loans in an amount equal to such excess (after
giving effect to any other prepayment of Yen Revolving Credit Loans on such
day).
(c) APPLICATION TO REPAYMENT AMOUNTS. An amount equal to each
prepayment of Term Loans required by Section 5.2(a)(i) shall be (i) allocated
PRO RATA among the Tranche A Term Loans, the Tranche B Term Loans, the Tranche C
Term Loans and the Tranche D Term Loans and (ii) applied (A) in the case of the
Tranche A Term Loans, to reduce the Tranche A Repayment Amounts in the manner
described in paragraph (iii) below and (B) in the case of each of the Tranche B
Term Loans, the Tranche C Term Loans and the Tranche D Term Loans, to reduce the
Repayment Amounts with respect to such Loans in the manner described in
paragraph (ii) below. Each prepayment of Term Loans pursuant to Section
5.2(a)(ii) shall be (a) allocated among the Tranche A Term Loans, the Tranche B
Term Loans, the Tranche C Term Loans and the Tranche D Term Loans in such manner
as the Borrower may determine and (b) applied (i) in the case of the Tranche A
Term Loans, to reduce the Tranche A Repayment Amounts in the manner described in
paragraph (iii) below and (ii) in the case of each of the Tranche B Term Loans,
the Tranche C Term Loans and the Tranche D Term Loans, to reduce the Repayment
Amounts with respect to such Loans in the manner described in paragraph (ii)
below.
(ii) Notwithstanding paragraph (i) above, with respect to the
amount of any mandatory prepayment described in Section 5.2(a) that is allocated
to the then-outstanding Tranche B Term Loans, Tranche C Term Loans or Tranche D
Term Loans (such amounts, the "TRANCHE B PREPAYMENT AMOUNT", the "TRANCHE C
PREPAYMENT AMOUNT" and the "TRANCHE D PREPAYMENT AMOUNT" , respectively), the
Borrower will, in lieu of applying such amount to the prepayment of Tranche B
Term Loans, Tranche C Term Loans and Tranche D Term Loans, respectively, as
provided in paragraph (i) above, on the date specified in Section 5.2(a) for
such prepayment, give the Administrative Agent telephonic notice (promptly
confirmed in writing) requesting that the Administrative Agent prepare and
provide to each Tranche B Lender, Tranche C Lender and Tranche D Lender a notice
(each, a "PREPAYMENT OPTION NOTICE") as described below. As promptly as
practicable after such notice, the Administrative Agent will send to each
Tranche B Lender, Tranche C Lender and Tranche D Lender a Prepayment Option
Notice, which shall be in the form of Exhibit J-1, J-2 or J-3, as applicable,
and shall include an offer by the Borrower to prepay on a specified date (each a
"MANDATORY PREPAYMENT DATE"), which shall not be less than 20 days or more than
25 days after the date of the Prepayment Option Notice, the Term Loans of such
Lender by an amount equal to the portion of the Prepayment Amount indicated in
such Lender's Prepayment Option Notice as being applicable to such Lender and
such Lender's Tranche B Term Loans, Tranche C Term Loans and Tranche D Term
Loans, respectively. On the Mandatory Prepayment Date, (A) the Borrower shall
pay to the Administrative Agent the aggregate amount necessary to prepay that
portion of the outstanding Term Loans in respect of which Tranche B Lenders,
Tranche C Lenders and Tranche D Lenders have accepted prepayment as described
above (such Lender, the "ACCEPTING LENDER"), and such amount shall be applied
(x) with respect to prepayments pursuant to Section 5.2(a)(i), (I) first,
sequentially, in the order of maturity, to the next four remaining unpaid
Tranche B Repayment Amounts, Tranche C Repayment Amounts and Tranche D Repayment
Amounts, as applicable, with respect to each Accepting Lender, and (II)
thereafter, PRO RATA to the remaining Tranche B Repayment Amounts, Tranche C
Repayment Amounts and Tranche D Repayment Amounts, as applicable, with respect
to each Accepting Lender and (y) with respect to prepayments pursuant to Section
5.2(a)(ii), PRO RATA with respect to each Accepting Lender in such manner as the
Borrower may determine, (B) the Borrower shall pay to the Administrative Agent
an amount equal to 50% of the portion of the Tranche B Prepayment Amount,
Tranche C Prepayment Amount and Tranche D Prepayment Amount not accepted by the
Accepting Lenders, and such amount shall be applied to reduce the Tranche A
Repayment Amounts in the manner described in paragraph (iii) below, and (C) the
Borrower shall be entitled to retain the remaining 50% of the
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portion of the Tranche B Prepayment Amount, Tranche C Prepayment Amount and
Tranche D Prepayment Amount not accepted by the Accepting Lenders.
(iii) An amount equal to each prepayment of Tranche A Term
Loans required by this Section 5.2 (including any such prepayment required by
the provisions of paragraph (ii) above) shall be applied (A) with respect to
prepayments pursuant to Section 5.2(a)(i), (x) first, sequentially, in the order
of maturity, to the next four remaining unpaid Tranche A Repayment Amounts, and
(y) thereafter, PRO RATA to the remaining Tranche A Repayment Amounts and (B)
with respect to prepayments pursuant to Section 5.2(a)(ii), in such manner as
the Borrower may determine to the remaining Tranche A Repayment Amounts.
(d) APPLICATION TO TERM LOANS. With respect to each prepayment
of Term Loans required by Section 5.2(a), the Borrower may designate the Types
of Loans that are to be prepaid and the specific Borrowing(s) pursuant to which
made, PROVIDED that (i) Eurodollar Term Loans may be designated for prepayment
pursuant to this Section 5.2 only on the last day of an Interest Period
applicable thereto unless all Eurodollar Term Loans with Interest Periods ending
on such date of required prepayment and all ABR Term Loans have been paid in
full; and (ii) if any prepayment of Eurodollar Term Loans made pursuant to a
single Borrowing shall reduce the outstanding Term Loans made pursuant to such
Borrowing to an amount less than the Minimum Borrowing Amount for Eurodollar
Term Loans, such Borrowing shall immediately be converted into ABR Loans. In the
absence of a designation by the Borrower as described in the preceding sentence,
the Administrative Agent shall, subject to the above, make such designation in
its reasonable discretion with a view, but no obligation, to minimize breakage
costs owing under Section 2.11.
(e) APPLICATION TO REVOLVING CREDIT LOANS. With respect to
each prepayment of Revolving Credit Loans required by Section 5.2(b), the
Borrower may designate the Types of Loans that are to be prepaid and the
specific Borrowing(s) pursuant to which made, PROVIDED that (i) Eurodollar
Revolving Credit Loans may be designated for prepayment pursuant to this Section
5.2 only on the last day of an Interest Period applicable thereto unless all
Eurodollar Revolving Credit Loans with Interest Periods ending on such date of
required prepayment and all ABR Loans have been paid in full; (ii) if any
prepayment of Eurodollar Revolving Credit Loans made pursuant to a single
Borrowing shall reduce the outstanding Revolving Credit Loans made pursuant to
such Borrowing to an amount less than the Minimum Borrowing Amount for
Eurodollar Revolving Credit Loans, such Borrowing shall immediately be converted
into ABR Loans (such conversion to be made, in the case of a Foreign Currency
Revolving Credit Loan, into Dollars at the applicable Exchange Rate); (iii) each
prepayment of any Loans made pursuant to a Borrowing shall be applied PRO RATA
among such Loans; and (iv) notwithstanding the provisions of the preceding
clause (iii), no prepayment made pursuant to Section 5.2(b) of Revolving Credit
Loans shall be applied to the Revolving Credit Loans of any Defaulting Lender.
In the absence of a designation by the Borrower as described in the preceding
sentence, the Administrative Agent shall, subject to the above, make such
designation in its reasonable discretion with a view, but no obligation, to
minimize breakage costs owing under Section 2.11.
(f) EURODOLLAR INTEREST PERIODS. In lieu of making any payment
pursuant to this Section 5.2 in respect of any Eurodollar Loan other than on the
last day of the Interest Period therefor, so long as no Default or Event of
Default shall have occurred and be continuing, the Borrower at its option may
deposit with the Administrative Agent an amount equal to the amount of the
Eurodollar Loan to be prepaid and such Eurodollar Loan shall be repaid on the
last day of the Interest Period therefor in the required amount. Such deposit
shall be held by the Administrative Agent in a corporate time deposit account
established on terms reasonably satisfactory to the Administrative Agent,
earning interest at the then-customary rate for accounts of such type. Such
deposit shall constitute cash collateral for the Obligations, PROVIDED that the
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Borrower may at any time direct that such deposit be applied to make the
applicable payment required pursuant to this Section 5.2.
(g) MINIMUM AMOUNT. No prepayment shall be required pursuant
to Section 5.2(a)(i) unless and until the amount at any time of Net Cash
Proceeds from Prepayment Events required to be applied at or prior to such time
pursuant to such Section and not yet applied at or prior to such time to prepay
Term Loans pursuant to such Section exceeds $15,000,000 in the aggregate.
(h) FOREIGN ASSET SALES. Notwithstanding any other provisions
of this Section 5.2, (i) to the extent that any of or all the Net Cash Proceeds
of any asset sale by a Restricted Foreign Subsidiary giving rise to an Asset
Sale Prepayment Event (a "FOREIGN ASSET SALE") are prohibited or delayed by
applicable local law from being repatriated to the United Kingdom or the United
States, as applicable, the portion of such Net Cash Proceeds so affected will
not be required to be applied to repay Term Loans at the times provided in this
Section 5.2 but may be retained by the applicable Restricted Foreign Subsidiary
so long, but only so long, as the applicable local law will not permit
repatriation to the United Kingdom or the United States, as applicable, Parent
hereby agreeing to cause the applicable Restricted Foreign Subsidiary to
promptly take all actions required by the applicable local law to permit such
repatriation), and once such repatriation of any of such affected Net Cash
Proceeds is permitted under the applicable local law, such repatriation will be
immediately effected and such repatriated Net Cash Proceeds will be promptly
(and in any event not later than two Business Days after such repatriation)
applied (net of additional taxes payable or reserved against as a result
thereof) to the repayment of the Term Loans pursuant to this Section 5.2 and
(ii) to the extent that Parent has determined in good faith that repatriation of
any of or all the Net Cash Proceeds of any Foreign Asset Sale would have a
material adverse tax cost consequence with respect to such Net Cash Proceeds,
the Net Cash Proceeds so affected may be retained by the applicable Restricted
Foreign Subsidiary, PROVIDED that, in the case of this clause (ii), on or before
the date on which any Net Cash Proceeds so retained would otherwise have been
required to be applied to reinvestments or prepayments pursuant to Section
5.2(a), (x) the Borrower applies an amount equal to such Net Cash Proceeds to
such reinvestments or prepayments as if such Net Cash Proceeds had been received
by the Borrower rather than such Restricted Foreign Subsidiary, less the amount
of additional taxes that would have been payable or reserved against if such Net
Cash Proceeds had been repatriated (or, if less, the Net Cash Proceeds that
would be calculated if received by such Foreign Subsidiary) or (y) such Net Cash
Proceeds are applied to the repayment of Indebtedness of a Restricted Foreign
Subsidiary.
5.3 METHOD AND PLACE OF PAYMENT. (a) Except as otherwise
specifically provided herein, all payments to be made by the Borrower under this
Agreement shall be made, without set-off, counterclaim or deduction of any kind,
to the Administrative Agent for the ratable account of the Lenders entitled
thereto, the Letter of Credit Issuer or Chase, as the case may be, not later
than 12:00 Noon (New York time), or, in the case of amounts payable in Sterling,
Euro or Yen, prior to 12:00 Noon (local time at the place of payment) on the
date when due and shall be made (i) in the case of amounts payable in Dollars,
in immediately available funds at the Administrative Agent's Office, (ii) in the
case of amounts payable in Euro, in immediately available, freely transferable,
cleared funds at such account with such bank in Frankfurt am Main, Germany as
the Administrative Agent shall from time to time specify for this purpose (or to
such account with such bank in such other financial center or centers specified
by the Administrative Agent at the relevant time for this purpose), or (iii) in
the case of amounts payable in Sterling or Yen, in immediately available funds
at such other office as the Administrative Agent shall specify for such purpose
by notice to the Borrower, it being understood that written or facsimile notice
by the Borrower to the Administrative Agent to make a payment from the funds in
the Borrower's account at the Administrative Agent's Office shall constitute the
making of such payment to the extent of such funds held in such account. All
payments under each Credit
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Document (whether of principal, interest or otherwise) shall be made (i) in the
case of the principal of and interest on each Loan, in the currency in which
such Loan is denominated, (ii) in the case of any indemnification or expense
reimbursement payment, in Dollars or Sterling, as requested by the Person
entitled to receive such payment, or (iii) in all other cases, in Dollars,
except as otherwise expressly provided herein. Each obligation under this
Agreement to make payment in the national currency denomination of a Subsequent
Participant shall be redenominated into the euro unit immediately upon such
Subsequent Participant becoming a Participating Member State (but otherwise in
accordance with EMU legislation). The Administrative Agent will thereafter cause
to be distributed on the same day (if payment was actually received by the
Administrative Agent prior to 2:00 P.M. (New York time) on such day) like funds
relating to the payment of principal or interest or Fees ratably to the Lenders
entitled thereto. Any amount payable by the Administrative Agent to the Lenders
under this Agreement in the currency of a Participating Member State shall be
paid in the euro unit. A payment shall be deemed to have been made by the
Administrative Agent on the date on which it is required to be made under this
Agreement if the Administrative Agent has, on or before such date, taken steps
to make such payment in accordance with the regulations or operating procedures
of the clearing or settlement system used by the Administrative Agent in order
to make such payment.
(b) Any payments under this Agreement that are made later than
2:00 P.M. (New York time), or, in the case of amounts payable in Sterling, Euro
or Yen, 12:00 Noon (local time at the place of payment) shall be deemed to have
been made on the next succeeding Business Day. Whenever any payment to be made
hereunder shall be stated to be due on a day that is not a Business Day, the due
date thereof shall be extended to the next succeeding Business Day and, with
respect to payments of principal, interest shall be payable during such
extension at the applicable rate in effect immediately prior to such extension.
5.4 NET PAYMENTS. (a) All payments made by the Borrower under
this Agreement shall be made free and clear of, and without deduction or
withholding for or on account of, any current or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding (i) net income taxes and franchise taxes
(imposed in lieu of net income taxes) imposed on the Administrative Agent or any
Lender and (ii) any taxes imposed on the Administrative Agent or any Lender as a
result of a current or former connection between the Administrative Agent or
such Lender and the jurisdiction of the Governmental Authority imposing such tax
or any political subdivision or taxing authority thereof or therein (other than
any such connection arising solely from the Administrative Agent or such Lender
having executed, delivered or performed its obligations or received a payment
under, or enforced, this Agreement). If any such non-excluded taxes, levies,
imposts, duties, charges, fees, deductions or withholdings ("NON-EXCLUDED
TAXES") are required to be withheld from any amounts payable to the
Administrative Agent or any Lender hereunder, the amounts so payable to the
Administrative Agent or such Lender shall be increased to the extent necessary
to yield to the Administrative Agent or such Lender (after payment of all
Non-Excluded Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in this Agreement; PROVIDED, HOWEVER, that the
Borrower shall not be required to increase any such amounts payable to any
Lender that is not organized under the laws of the United States or a state
thereof if such Lender fails to comply with the requirements of paragraph (b) of
this Section 5.4. Whenever any Non- Excluded Taxes are payable by the Borrower,
as promptly as possible thereafter the Borrower shall send to the Administrative
Agent for its own account or for the account of such Lender, as the case may be,
a certified copy of an original official receipt received by the Borrower
showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes
when due to the appropriate taxing authority or fails to remit to the
Administrative Agent the required receipts or other required documentary
evidence, the Borrower shall indemnify the Administrative Agent and the Lenders
for any incremental taxes, interest, costs or penalties that may become payable
by the Administrative Agent or any Lender
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as a result of any such failure. The agreements in this Section 5.4(a) shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.
(b) Each Lender that is not incorporated or organized under
the laws of the United States or a state thereof shall:
(i) deliver to the Borrower and the Administrative Agent two
copies of either United States Internal Revenue Service Form 1001 or
Form 4224 or, in the case of Non-U.S. Lender claiming exemption from
U.S. Federal withholding tax under Section 871(h) or 881(c) of the Code
with respect to payments of "portfolio interest", a Form W-8, or any
subsequent versions thereof or successors thereto (and, if such
Non-U.S. Lender delivers a Form W-8, a certificate representing that
such Non-U.S. Lender is not a bank for purposes of Section 881(c) of
the Code, is not a 10-percent shareholder (within the meaning of
Section 871(h)(3)(B) of the Code) of the Borrower and is not a
controlled foreign corporation related to the Borrower (within the
meaning of Section 864(d)(4) of the Code)), properly completed and duly
executed by such Non-U.S. Lender claiming complete exemption from, or
reduced rate of, U.S. Federal withholding tax on payments by the
Borrower under this Agreement;
(ii) deliver to the Borrower and the Administrative Agent two
further copies of any such form or certification on or before the date
that any such form or certification expires or becomes obsolete and
after the occurrence of any event requiring a change in the most recent
form previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete
such forms or certifications as may reasonably be requested by the
Borrower or the Administrative Agent;
unless in any such case any change in treaty, law or regulation has occurred
prior to the date on which any such delivery would otherwise be required that
renders any such form inapplicable or would prevent such Lender from duly
completing and delivering any such form with respect to it and such Lender so
advises the Borrower and the Administrative Agent. Each Person that shall become
a Participant pursuant to Section 13.6 or a Lender pursuant to Section 13.6
shall, upon the effectiveness of the related transfer, be required to provide
all the forms and statements required pursuant to this Section 5.4(b), provided
that in the case of a Participant such Participant shall furnish all such
required forms and statements to the Lender from which the related participation
shall have been purchased.
(c) The Borrower shall not be required to indemnify any
Non-U.S. Lender, or to pay any additional amounts to any Non-U.S. Lender, in
respect of U.S. Federal withholding tax pursuant to paragraph (a) above to the
extent that (i) the obligation to withhold amounts with respect to U.S. Federal
withholding tax existed on the date such Non-U.S. Lender became a party to this
Agreement (or, in the case of a Non-U.S. Participant, on the date such
Participant became a Participant hereunder); PROVIDED, HOWEVER, that this clause
(i) shall not apply to the extent that (x) the indemnity payments or additional
amounts any Lender (or Participant) would be entitled to receive (without regard
to this clause (i)) do not exceed the indemnity payment or additional amounts
that the person making the assignment, participation or transfer to such Lender
(or Participant) would have been entitled to receive in the absence of such
assignment, participation or transfer, or (y) such assignment, participation or
transfer had been requested by the Borrower, (ii) the obligation to pay such
additional amounts would not have arisen but for a failure by such Non-U.S.
Lender or Non-U.S. Participant to comply with the provisions of paragraph (b)
above or (iii) any of the representations or certifications made by a Non-U.S.
Lender or Non-U.S. Participant pursuant to paragraph (b) above are incorrect at
the time a payment hereunder is
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made, other than by reason of any change in treaty, law or regulation having
effect after the date such representations or certifications were made.
(d) If the Borrower determines in good faith that a reasonable
basis exists for contesting any taxes for which indemnification has been
demanded hereunder, the relevant Lender or the Administrative Agent, as
applicable, shall cooperate with the Borrower in challenging such taxes at the
Borrower's expense if so requested by the Borrower. If any Lender or the
Administrative Agent, as applicable, receives a refund of a tax for which a
payment has been made by the Borrower pursuant to this Agreement, which refund
in the good faith judgment of such Lender or Administrative Agent, as the case
may be, is attributable to such payment made by the Borrower, then the Lender or
the Administrative Agent, as the case may be, shall reimburse the Borrower for
such amount as the Lender or Administrative Agent, as the case may be,
determines to be the proportion of the refund as will leave it, after such
reimbursement, in no better or worse position than it would have been in if the
payment had not been required. A Lender or Administrative Agent shall claim any
refund that it determines is available to it, unless it concludes in its
reasonable discretion that it would be adversely affected by making such a
claim. Neither the Lender nor the Administrative Agent shall be obliged to
disclose any information regarding its tax affairs or computations to the
Borrower in connection with this paragraph (d) or any other provision of this
Section 5.4.
(e) Each Lender represents and agrees that, on the date hereof
and at all times during the term of this Agreement, it is not and will not be a
conduit entity participating in a conduit financing arrangement (as defined in
Section 7701(1) of the Code and the regulations thereunder) with respect to the
Borrowings hereunder unless the Borrower has consented to such arrangement prior
thereto.
5.5 COMPUTATIONS OF INTEREST AND FEES. (a) Except as provided
in the next succeeding sentence, interest on Eurodollar Loans and ABR Loans
shall be calculated on the basis of a 360-day year for the actual days elapsed.
Interest on (i) Sterling Revolving Credit Loans, (ii) ABR Loans in respect of
which the rate of interest is calculated on the basis of the Prime Rate and
(iii) interest on overdue interest shall be calculated on the basis of a 365-
(or 366-, as the case may be) day year for the actual days elapsed.
(b) Fees and Letter of Credit Outstanding shall be calculated
on the basis of a 365- (or 366-, as the case may be) day year for the actual
days elapsed.
SECTION 6. [Intentionally Omitted]
SECTION 7A. [Intentionally Omitted]
SECTION 7B. [Intentionally Omitted]
SECTION 7C. CONDITIONS PRECEDENT TO ALL CREDIT EVENTS. The
agreement of each Lender to make any Loan requested to be made by it on any date
on or after the Restatement Date (excluding in the case of Section 7C.1
Mandatory Borrowings) and the obligation of the Letter of Credit Issuer to issue
Letters of Credit on any date is subject to the satisfaction of the following
conditions precedent:
7C.1 NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time
of each Credit Event (other than the initial Credit Event) and also after giving
effect thereto (a) there shall exist no Default or Event of Default and (b) all
representations and warranties made by any Credit Party contained herein or in
the other Credit Documents shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on
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and as of the date of such Credit Event, except where such representations
and warranties expressly relate to an earlier date, in which case such
representations and warranties shall have been true and correct in all material
respects as of such earlier date (it being understood that, for purposes of the
foregoing, the truth and correctness of the representations and warranties set
forth in Section 8.8 shall be determined without reference to the knowledge of
the Borrower).
7C.2 NOTICE OF BORROWING; LETTER OF CREDIT REQUEST. (a) Prior
to the making of each Revolving Credit Loan (other than any Revolving Credit
Loan made pursuant to Section 3.4(a)) and each Swingline Loan, the
Administrative Agent shall have received a Notice of Borrowing (whether in
writing or by telephone) meeting the requirements of Section 2.3.
(b) Prior to the issuance of each Letter of Credit, the
Administrative Agent and the Letter of Credit Issuer shall have received a
Letter of Credit Request meeting the requirements of Section 3.2(a).
The acceptance of the benefits of each Credit Event shall constitute a
representation and warranty by each Credit Party to each of the Lenders that all
the applicable conditions specified above exist as of that time.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In
order to induce the Lenders to enter into this Agreement, to make the Loans and
issue or participate in Letters of Credit as provided for herein, Newco 4,
Parent and the Borrower make the following representations and warranties to,
and agreements with, the Lenders, all of which shall survive the execution and
delivery of this Agreement and the making of the Loans and the issuance of the
Letters of Credit:
8.1 CORPORATE STATUS. Newco 4 and each Material Subsidiary (a)
is a duly organized and validly existing corporation or other entity in good
standing under the laws of the jurisdiction of its organization and has the
corporate or other organizational power and authority to own its property and
assets and to transact the business in which it is engaged and (b) has duly
qualified and is authorized to do business and is in good standing in all
jurisdictions where it is required to be so qualified, except
where the failure to be so qualified could not reasonably be expected to result
in a Material Adverse Effect.
8.2 CORPORATE POWER AND AUTHORITY. Each Credit Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Credit Documents to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and performance
of the Credit Documents to which it is a party. Each Credit Party has duly
executed and delivered each Credit Document to which it is a party and each such
Credit Document constitutes the legal, valid and binding obligation of such
Credit Party enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and subject to general principles of
equity.
8.3 NO VIOLATION. Neither the execution, delivery and
performance by any Credit Party of the Credit Documents to which it is a party
nor compliance with the terms and provisions thereof nor the consummation of the
Transactions and the other transactions contemplated therein will (a) contravene
any applicable provision of any material law, statute, rule, regulation, order,
writ, injunction or decree of any court or governmental instrumentality, (b)
result in any breach of any of the terms, covenants, conditions or provisions
of, or constitute a default under, or result in the creation or imposition of
(or the obligation to create or impose) any Lien upon any of the property or
assets of Newco 4 or any of its Subsidiaries pursuant to, the terms of any
material indenture (including the Subordinated Note Indenture), loan agreement,
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lease agreement, mortgage, deed of trust, agreement or other material instrument
to which Newco 4 or any of its Subsidiaries is a party or by which it or any of
its property or assets is bound or (c) violate any provision of the certificate
of incorporation or By-Laws of Newco 4 or any of its Subsidiaries.
8.4 LITIGATION. Except as set forth in Parent's audited
financial statements for the fiscal year ended December 31, 1997, there are no
actions, suits or proceedings (including, without limitation, Environmental
Claims) pending or, to the knowledge of Newco 4 or Parent, threatened with
respect to Newco 4 or any of its Subsidiaries that could reasonably be expected
to result in a Material Adverse Effect.
8.5 MARGIN REGULATIONS. Neither the making of any Loan
hereunder nor the use of the proceeds thereof will violate the provisions of
Regulation T, U or X of the Board.
8.6 GOVERNMENTAL APPROVALS. No order, consent, approval,
license, authorization, or validation of, or filing, recording or registration
with, or exemption by, any Governmental Authority is required to authorize or is
required in connection with (a) the execution, delivery and performance of any
Credit Document or (b) the legality, validity, binding effect or enforceability
of any Credit Document, except any of the foregoing the failure to obtain or
make could not reasonably be expected to have a Material Adverse Effect.
8.7 INVESTMENT COMPANY ACT. Neither Newco 4, Parent nor the
Borrower is an "investment company" within the meaning of the United States
Investment Company Act of 1940, as amended.
8.8 TRUE AND COMPLETE DISCLOSURE. To the knowledge of the
Borrower, (a) all factual information and data (taken as a whole) heretofore or
contemporaneously furnished, by Newco 4, Parent, any of its Subsidiaries or any
of their respective authorized representatives in writing to the Administrative
Agent and/or any Lender on or before the Restatement Date (including, without
limitation, (i) the Confidential Information Memorandum (whether furnished
before, at or at any time after the Restatement Date) and (ii) all information
contained in the Credit Documents) for purposes of or in connection with this
Agreement or any transaction contemplated herein was (or, in the case of the
Confidential Information Memorandum, will be) true and complete in all material
respects on the date as of which such information or data is (or, in the case of
the Confidential Information Memorandum, will be) dated or certified and was not
(or, in the case of the Confidential Information Memorandum, will not be)
incomplete by omitting to state any material fact necessary to make such
information and data (taken as a whole) not misleading at such time in light of
the circumstances under which such information or data was (or, in the case of
the Confidential Information Memorandum, will be) furnished, it being understood
and agreed that for purposes of this Section 8.8(a), such factual information
and data shall not include projections and pro forma financial information.
(b) The projections and pro forma financial information
contained in the information and data referred to in paragraph (a) above were
(or, in the case of the Confidential Information Memorandum, will be) based on
good faith estimates and assumptions believed by such Persons to be reasonable
at the time made, it being recognized by the Lenders that such projections as to
future events are not to be viewed as facts and that actual results during the
period or periods covered by any such projections may differ from the projected
results.
8.9 FINANCIAL CONDITION; FINANCIAL STATEMENTS. The
consolidated balance sheet of Parent and its Subsidiaries at December 31, 1997,
and the related consolidated statements of operations and cash flows for the
fiscal year ended as of such date, which statements have been audited by Ernst &
Young, independent certified public accountants, who delivered an unqualified
opinion with respect thereto, in each case present fairly in all material
respects the
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69
consolidated financial position of Parent and its Subsidiaries at
the respective dates of said statements and the results of operations for the
respective periods covered thereby. All such financial statements have been
prepared in accordance with GAAP consistently applied except to the extent
provided in the notes to said financial statements. There has been no Material
Adverse Change since December 31, 1997, other than solely as a result of changes
in general economic conditions.
8.10 TAX RETURNS AND PAYMENTS. Each of Parent and its
Subsidiaries has filed all material tax returns, domestic and foreign, required
to be filed by it and has paid all material taxes and assessments payable by it
that have become due, other than those not yet delinquent or contested in good
faith. Parent and each of its Subsidiaries have paid, or have provided adequate
reserves (in the good faith judgment of the management of the Borrower) in
accordance with GAAP for the payment of, all material income taxes applicable
for all prior fiscal years and for the current fiscal year to the Restatement
Date.
8.11 COMPLIANCE WITH ERISA. Each Plan is in compliance with
ERISA, the Code and any applicable Requirement of Law; no Reportable Event has
occurred (or is reasonably likely to occur) with respect to any Plan; no Plan is
insolvent or in reorganization (or is reasonably likely to be insolvent or in
reorganization), and no written notice of any such insolvency or reorganization
has been given to Parent, any Subsidiary or any ERISA Affiliate; no Plan (other
than a multiemployer plan) has an accumulated or waived funding deficiency (or
is reasonably likely to have such a deficiency); neither Parent nor any
Subsidiary nor any ERISA Affiliate has incurred (or is reasonably likely
expected to incur) any liability to or on account of a Plan pursuant to Section
409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or
Section 4971 or 4975 of the Code or has been notified in writing that it will
incur any liability under any of the foregoing Sections with respect to any
Plan; no proceedings have been instituted (or are reasonably likely to be
instituted) to terminate or to reorganize any Plan or to appoint a trustee to
administer any Plan, and no written notice of any such proceedings has been
given to Parent, any Subsidiary or any ERISA Affiliate; and no lien imposed
under the Code or ERISA on the assets of Parent, any Subsidiary or any ERISA
Affiliate exists (or is reasonably likely to exist) nor has Parent, any
Subsidiary or any ERISA Affiliate been notified in writing that such a lien will
be imposed on the assets of Parent, any Subsidiary or any ERISA Affiliate on
account of any Plan, EXCEPT to the extent that a breach of any of the foregoing
representations, warranties or agreements in this Section 8.11 would not result,
individually or in the aggregate, in an amount of liability that would be
reasonably likely to have a Material Adverse Effect or relates to any matter
disclosed in the financial statements of Parent contained in the Confidential
Information Memorandum. No Plan (other than a multiemployer plan) has an
Unfunded Current Liability that would, individually or when taken together with
any other liabilities referenced in this Section 8.11, be reasonably likely to
have a Material Adverse Effect. With respect to Plans that are multiemployer
plans (as defined in Section 3(37) of ERISA), the representations and warranties
in this Section 8.11, other than any made with respect to (a) liability under
Section 4201 or 4204 of ERISA or (b) liability for termination or reorganization
of such Plans under ERISA, are made to the best knowledge of Parent. The
Borrower shall cause (a) all pension schemes maintained by or for the benefit of
any Material Subsidiary organized under the laws of the United Kingdom and/or
any of its employees to be maintained and operated in all material respects in
accordance with all applicable laws from time to time and (b) all such pension
schemes to be funded substantially in accordance with the governing provisions
of such schemes, except to the extent failure to do so could not reasonably be
expected to have a Material Adverse Effect.
8.12 SUBSIDIARIES. Schedule 8.12(a) lists each Subsidiary of
Parent (and the direct and indirect ownership interest of Parent therein), in
each case existing on the date hereof. To the knowledge of Parent, each Material
Subsidiary as of the date hereof has been so designated on Schedule 8.12(a).
Schedule 8.12(b) lists each Closing Date Excused Subsidiary. No Closing
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Date Excused Subsidiary has, on the date hereof, total assets in excess of the
amount set forth opposite the name of such Subsidiary on Schedule 8.12(b).
8.13 PATENTS, ETC. Newco 4 and each of the Restricted
Subsidiaries have obtained all patents, trademarks, servicemarks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions, that
are necessary for the operation of their respective businesses as currently
conducted and as proposed to be conducted, except where the failure to obtain
any such rights could not reasonably be expected to have a Material Adverse
Effect.
8.14 ENVIRONMENTAL LAWS. (a) Other than instances of
noncompliance that could not reasonably be expected to have a Material Adverse
Effect: (i) Newco 4 and each of its Subsidiaries are in compliance with all
Environmental Laws in all jurisdictions in which Parent and each of its
Subsidiaries are currently doing business (including, without limitation, having
obtained all material permits required under Environmental Laws) and (ii) Newco
4 will comply and cause each of its Subsidiaries to comply with all such
Environmental Laws (including, without limitation, all permits required under
Environmental Laws).
(b) Neither Newco 4 nor any of its Subsidiaries has treated,
stored, transported or disposed of Hazardous Materials at or from any currently
or formerly owned Real Estate (as defined in Section 9.1(f)) or facility
relating to its business in a manner that could reasonably be expected to have a
Material Adverse Effect.
8.15 PROPERTIES. Newco 4 and each of the Restricted
Subsidiaries have good title to or leasehold interest in all properties that are
necessary for the operation of their respective businesses as currently
conducted and as proposed to be conducted, free and clear of all Liens (other
than any Liens permitted by this Agreement) and except where the failure to have
such good title could not reasonably be expected to have a Material Adverse
Effect.
8.16 YEAR 2000. Any reprogramming required to permit the
proper functioning, in and following the year 2000, of (a) Newco 4 and its
Subsidiaries' computer systems and (b) equipment containing embedded microchips
(including systems and equipment supplied by others) and the testing of all such
systems and equipment, as so reprogrammed, will be completed by July 1, 1999,
except to the extent that the failure to complete such reprogramming and testing
by such date could not reasonably be expected to have a Material Adverse Effect.
The cost to Newco 4 and its Subsidiaries of such reprogramming and testing and
of the reasonably foreseeable consequences of year 2000 to Newco 4 and its
Subsidiaries (including, without limitation, reprogramming errors and the
failure of others' systems or equipment) is not reasonably likely to have a
Material Adverse Effect.
SECTION 9. AFFIRMATIVE COVENANTS. Newco 4, Parent and the
Borrower hereby covenant and agree that on the Closing Date and thereafter, for
so long as this Agreement is in effect and until the Commitments, the Swingline
Commitment and each Letter of Credit have terminated and the Loans and Unpaid
Drawings, together with interest, Fees and all other Obligations incurred
hereunder, are paid in full:
9.1 INFORMATION COVENANTS. Newco 4 and Parent will furnish to
each Lender and the Administrative Agent:
(a) ANNUAL FINANCIAL STATEMENTS. As soon as available and in
any event on or before the date that is 120 days after the end of each fiscal
year of Newco 4 (PROVIDED that, for purposes of this Section 9.1(a) only, fiscal
year 1998 shall be deemed to end on December 31, 1998), the consolidated balance
sheet of (i) Newco 4 and the Restricted Subsidiaries and (ii) Newco 4 and its
Subsidiaries, in each case as at the end of such fiscal year and the related
consolidated statement of operations and cash flows for such fiscal year and
including a
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reconciliation of such balance sheet and statements of operations and cash flows
to financial statements prepared in accordance with United States generally
accepted accounting principles, prepared in accordance with the requirements
applicable to financial statements included in filings on SEC Form 20-F, setting
forth comparative consolidated figures for the preceding fiscal year, and
certified by independent certified public accountants of recognized national
standing whose opinion shall not be qualified as to the scope of audit or as to
the status of Newco 4 or any of the Material Subsidiaries as a going concern,
together in any event with a certificate of such accounting firm stating that in
the course of its regular audit of the business of Newco 4 and the Material
Subsidiaries, which audit was conducted in accordance with generally accepted
auditing standards, such accounting firm has obtained no knowledge of any
Default or Event of Default relating to Section 10.9, 10.10 and 10.11 that has
occurred and is continuing or, if in the opinion of such accounting firm such a
Default or Event of Default has occurred and is continuing, a statement as to
the nature thereof.
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as available and
in any event on or before the date that is 60 days after the end of such
quarterly accounting period with respect to each of the first three quarterly
accounting periods in each fiscal year of Newco 4 (including the quarterly
accounting period ended on September 30, 1998), the consolidated balance sheet
of (i) Newco 4 and the Restricted Subsidiaries and (ii) Newco 4 and its
Subsidiaries, in each case as at the end of such quarterly period and the
related consolidated statement of operations for such quarterly accounting
period and for the elapsed portion of the fiscal year ended with the last day of
such quarterly period (PROVIDED that, with respect to the quarterly accounting
period ended on September 30, 1998, such elapsed portion shall include the
previous twelve months), and the related consolidated statement of cash flows
for the elapsed portion of the fiscal year ended with the last day of such
quarterly period (PROVIDED that, with respect to the quarterly accounting period
ended on September 30, 1998, such elapsed portion shall include the previous
twelve months), and setting forth comparative consolidated figures for the
related periods in the prior fiscal year or, in the case of such consolidated
balance sheet, for the last day of the prior fiscal year, and including a
reconciliation of such balance sheet and statements of operations and cash flows
to financial statements prepared in accordance with United States generally
accepted accounting principles, prepared in the same manner as the
reconciliation referred to in Section 9.1(a), all of which shall be certified by
an Authorized Officer of Newco 4, subject to changes resulting from audit and
normal year-end audit adjustments.
(c) BUDGETS. Within 60 days after the commencement of each
fiscal year of the Borrower, budgets of Newco 4 in reasonable detail for the
fiscal year as customarily prepared by management of Newco 4 for its internal
use, setting forth the principal assumptions upon which such budgets are based.
(d) OFFICER'S CERTIFICATES. At the time of the delivery of the
financial statements provided for in Sections 9.1(a) and (b), a certificate of
an Authorized Officer of Parent to the effect that no Default or Event of
Default exists or, if any Default or Event of Default does exist, specifying the
nature and extent thereof, which certificate shall set forth (i) the
calculations required to establish whether the Borrower and its Subsidiaries
were in compliance with the provisions of Sections 10.9, 10.10 and 10.11 as at
the end of such fiscal year or period, as the case may be, (ii) a specification
of any change in the identity of the Restricted Subsidiaries, Unrestricted
Subsidiaries, Acquisition Subsidiaries, Foreign Subsidiaries and Restricted
Non-Credit Party Subsidiaries as at the end of such fiscal year or period, as
the case may be, from the Restricted Subsidiaries, Unrestricted Subsidiaries,
Acquisition Subsidiaries, Foreign Subsidiaries and Restricted Non-Credit Party
Subsidiaries, respectively, provided to the Lenders on the date hereof or the
most recent fiscal year or period, as the case may be, (iii) the then applicable
Status and (iv) the amount of any Pro Forma Adjustment not previously set forth
in a Pro Forma Adjustment Certificate or any change in the amount of a Pro Forma
Adjustment set forth in any Pro Forma Adjustment Certificate previously provided
and, in either case, in reasonable detail,
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the calculations and basis therefor; and at the time of the delivery of the
financial statements provided for in Section 9.1(a), a certificate of an
Authorized Officer of Parent setting forth in reasonable detail the Available
Amount as at the end of the fiscal year to which such financial statements
relate.
(e) NOTICE OF DEFAULT OR LITIGATION. Promptly after an
Authorized Officer of Newco 4 or any of its Subsidiaries obtains knowledge
thereof, notice of (i) the occurrence of any event that constitutes a Default or
Event of Default, which notice shall specify the nature thereof, the period of
existence thereof and what action Newco 4 proposes to take with respect thereto,
and (ii) any litigation or governmental proceeding pending against Newco 4 or
any of its Subsidiaries that could reasonably be expected to result in a
Material Adverse Effect.
(f) ENVIRONMENTAL MATTERS. Parent will promptly advise the
Lenders in writing after obtaining knowledge of any one or more of the following
environmental matters, unless such environmental matters would not, individually
or when aggregated with all other such matters, be reasonably expected to result
in a Material Adverse Effect:
(i) Any pending or threatened Environmental Claim against
Newco 4 or any of its Subsidiaries or any Real Estate (as defined
below);
(ii) Any condition or occurrence on any Real Estate that (x)
results in noncompliance by Newco 4 or any of its Subsidiaries with any
applicable Environmental Law or (y) could reasonably be anticipated to
form the basis of an Environmental Claim against Newco 4 or any of its
Subsidiaries or any Real Estate;
(iii) Any condition or occurrence on any Real Estate that
could reasonably be anticipated to cause such Real Estate to be subject
to any restrictions on the ownership, occupancy, use or transferability
of such Real Estate under any Environmental Law; and
(iv) The taking of any removal or remedial action in response
to the actual or alleged presence of any Hazardous Material on any Real
Estate.
All such notices shall describe in reasonable detail the nature of the
claim, investigation, condition, occurrence or removal or remedial
action and Parent's response thereto. The term "REAL ESTATE" shall
mean land, buildings and improvements owned or leased by Newco 4 or
any of its Subsidiaries, but excluding all operating fixtures and
equipment, whether or not incorporated into improvements.
(g) OTHER INFORMATION. Promptly upon filing thereof, copies of
any filings on Form 20-F, 6-K, 10-K, 10-Q or 8-K or registration statements
with, and reports to, any Governmental Authority by Newco 4 or any of its
Subsidiaries (other than amendments to any registration statement (to the extent
such registration statement, in the form it becomes effective, is delivered to
the Lenders), exhibits to any registration statement and any registration
statements on Form S-8) and copies of all financial statements, proxy
statements, notices and reports that Newco 4 or any of its Subsidiaries shall
send to the holders of any publicly issued debt of Newco 4 and/or any of its
Subsidiaries (including the Subordinated Notes) in their capacity as such
holders (in each case to the extent not theretofore delivered to the Lenders
pursuant to this Agreement) and, with reasonable promptness, such other
information (financial or otherwise) as the Administrative Agent on its own
behalf or on behalf of any Lender may reasonably request in writing from time to
time.
(h) PRO FORMA ADJUSTMENT CERTIFICATE. Not later than the
consummation of the acquisition of any Acquired Entity or Business by Newco 4 or
any Restricted Subsidiary for which there shall be a Pro Forma Adjustment, a
certificate of an Authorized Officer of Parent
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setting forth the amount of such Pro Forma Adjustment and, in reasonable detail,
the calculations and basis therefor.
9.2 BOOKS, RECORD AND INSPECTIONS. Newco 4 and Parent will,
and will cause each of the Specified Subsidiaries to, permit officers and
designated representatives of the Administrative Agent or the Required Lenders
to visit and inspect any of the properties or assets of Newco 4, the Borrower
and any such Specified Subsidiary in whomsoever's possession to the extent that
it is within Newco 4's, Parent's or such Specified Subsidiary's control to
permit such inspection, and to examine the books of account of Newco 4, Parent
and any such Specified Subsidiary and discuss the affairs, finances and accounts
of Newco 4, of Parent and of any such Specified Subsidiary with, and be advised
as to the same by, its and their officers and independent accountants, all at
such reasonable times and intervals and to such reasonable extent as the
Administrative Agent or the Required Lenders may desire.
9.3 MAINTENANCE OF INSURANCE. Newco 4 and Parent will, and
will cause each of the Material Subsidiaries to, at all times maintain in full
force and effect, with insurance companies that Parent believes (in the good
faith judgment of the management of Parent) are financially sound and
responsible at the time the relevant coverage is placed or renewed, insurance in
at least such amounts and against at least such risks (and with such risk
retentions) as are usually insured against in the same general area by companies
engaged in the same or a similar business; and will furnish to the Lenders, upon
written request from the Administrative Agent, information presented in
reasonable detail as to the insurance so carried.
9.4 PAYMENT OF TAXES. Newco 4 and Parent will pay and
discharge, and will cause each of their Subsidiaries to pay and discharge, all
material taxes, assessments and governmental charges or levies imposed upon it
or upon its income or profits, or upon any properties belonging to it, prior to
the date on which material penalties attach thereto, and all lawful material
claims that, if unpaid, could reasonably be expected to become a material Lien
upon any properties of Newco 4 or any of the Restricted Subsidiaries, PROVIDED
that neither Newco 4 nor any of its Subsidiaries shall be required to pay any
such tax, assessment, charge, levy or claim that is being contested in good
faith and by proper proceedings if it has maintained adequate reserves (in the
good faith judgment of the management of Parent) with respect thereto in
accordance with GAAP.
9.5 CONSOLIDATED CORPORATE FRANCHISES. Newco 4 and Parent will
do, and will cause each Material Subsidiary to do, or cause to be done, all
things necessary to preserve and keep in full force and effect its existence,
corporate rights and authority, except to the extent that the failure to do so
could not reasonably be expected to have a Material Adverse Effect; PROVIDED,
HOWEVER, that Newco 4 and its Subsidiaries may consummate any transaction
permitted under Section 10.3, 10.4 or 10.5.
9.6 COMPLIANCE WITH STATUTES, OBLIGATIONS, ETC. Newco 4 and
Parent will, and will cause each Subsidiary to, comply with all applicable laws,
rules, regulations and orders, except to the extent the failure to do so could
not reasonably be expected to have a Material Adverse Effect.
9.7 ERISA. Promptly after Parent or any of its Subsidiaries or
any ERISA Affiliate knows or has reason to know of the occurrence of any of the
following events that, individually or in the aggregate (including in the
aggregate such events previously disclosed or exempt from disclosure hereunder,
to the extent the liability therefor remains outstanding), would be reasonably
likely to have a Material Adverse Effect, Parent will deliver to each of the
Lenders a certificate of an Authorized Officer or any other senior officer of
Parent setting forth details as to such occurrence and the action, if any, that
the Parent, such Subsidiary or such ERISA Affiliate is required or proposes to
take, together with any notices (required, proposed or
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otherwise) given to or filed with or by Parent, such Subsidiary, such ERISA
Affiliate, the PBGC, a Plan participant (other than notices relating to an
individual participant's benefits) or the Plan administrator with respect
thereto: that a Reportable Event has occurred; that an accumulated funding
deficiency has been incurred or an application is to be made to the Secretary of
the Treasury for a waiver or modification of the minimum funding standard
(including any required installment payments) or an extension of any
amortization period under Section 412 of the Code with respect to a Plan; that a
Plan having an Unfunded Current Liability has been or is to be terminated,
reorganized, partitioned or declared insolvent under Title IV of ERISA
(including the giving of written notice thereof); that a Plan has an Unfunded
Current Liability that has or will result in a lien under ERISA or the Code;
that proceedings will be or have been instituted to terminate a Plan having an
Unfunded Current Liability (including the giving of written notice thereof);
that a proceeding has been instituted against the Borrower, any of its
Subsidiaries or an ERISA Affiliate pursuant to Section 515 of ERISA to collect a
delinquent contribution to a Plan; that the PBGC has notified the Borrower, any
of its Subsidiaries or any ERISA Affiliate of its intention to appoint a trustee
to administer any Plan; that the Borrower, any of its Subsidiaries or any ERISA
Affiliate has failed to make a required installment or other payment pursuant to
Section 412 of the Code with respect to a Plan; or that the Borrower, any of its
Subsidiaries or any ERISA Affiliate has incurred or will incur (or has been
notified in writing that it will incur) any liability (including any contingent
or secondary liability) to or on account of a Plan pursuant to Section 409,
502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or Section
4971 or 4975 of the Code.
9.8 GOOD REPAIR. Newco 4 and Parent will, and will cause each
of the Restricted Subsidiaries to, ensure that its properties and equipment used
or useful in its business in whomsoever's possession they may be to the extent
that it is within Newco 4's, Parent's or such Restricted Subsidiary's control to
cause same, are kept in good repair, working order and condition, normal wear
and tear excepted, and that from time to time there are made in such properties
and equipment all needful and proper repairs, renewals, replacements,
extensions, additions, betterments and improvements thereto, to the extent and
in the manner customary for companies in similar businesses and consistent with
third party leases, except in each case to the extent the failure to do so could
not be reasonably expected to have a Material Adverse Effect.
9.9 TRANSACTIONS WITH AFFILIATES. Newco 4 and Parent will
conduct, and cause each of the Restricted Subsidiaries to conduct, all
transactions with any of its Affiliates (other than Newco 4, Parent or any
Restricted Subsidiary) on terms that are substantially as favorable to Newco 4,
Parent or such Restricted Subsidiary as it would obtain in a comparable
arm's-length transaction with a Person that is not an Affiliate, PROVIDED that
the foregoing restrictions shall not apply to (a) the payment of customary
annual fees to Sponsor and/or its Affiliates for management, consulting and
financial services rendered to Newco 4, Parent and their Subsidiaries and
investment banking fees paid to Sponsor and its Affiliates for services rendered
to Newco 4, Parent and their Subsidiaries in connection with divestitures,
acquisitions, financings and other transactions, (b) customary fees paid to
members of the Board of Directors of Newco 4, Parent and their Subsidiaries, (c)
transactions between and among Newco 4, Parent and the Restricted Subsidiaries
that do not involve any other Affiliate and (d) transactions permitted by
Section 10.6.
9.10 END OF FISCAL YEARS; FISCAL QUARTERS. Newco 4 will, for
financial reporting purposes, cause (a) each of its, and each of its
Subsidiaries', fiscal years to end on December 31 of each year and (b) each of
its, and each of its Subsidiaries', fiscal quarters to end on dates consistent
with such fiscal year-end and Newco 4's past practice; PROVIDED, HOWEVER, that
Newco 4 may, upon written notice to the Administrative Agent, change the
financial reporting convention specified above (i) in the case of a change prior
to December 31, 1998, to a fiscal year ending at a month-end prior thereto (in
which case Test Periods beginning prior to such new year-end will be calculated
on a PRO FORMA basis reasonably acceptable to the Administrative
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75
Agent to give effect to a 12-month Test Period ending on the last day of such
Test Period (which the Borrower may determine utilizing an annualization method
in accordance with customary PRO FORMA accounting conventions)), or (ii)
otherwise to any other financial reporting convention reasonably acceptable to
the Administrative Agent, in which case Newco 4, Parent, the Borrower and the
Administrative Agent will, and are hereby authorized by the Lenders to, make any
adjustments to this Agreement that are necessary in order to reflect such change
in financial reporting.
9.11 ADDITIONAL GUARANTORS. Except as provided in Section
10.1(j) or (k), Newco 4 will cause any Required Guarantor Subsidiary (other than
any Unrestricted Subsidiary or Acquisition Subsidiary) formed or otherwise
purchased or acquired after the date hereof and (b) any Subsidiary of Newco 4
(other than any Unrestricted Subsidiary or Acquisition Subsidiary) that is not a
Required Guarantor Subsidiary on the date hereof but subsequently becomes a
Required Guarantor Subsidiary (other than any Unrestricted Subsidiary or
Acquisition Subsidiary), in each case to execute a supplement to the Guarantee
(in the form provided as an appendix thereto or otherwise in form and substance
reasonably satisfactory to the Administrative Agent), in order to become a
Guarantor, provided that nothing in this Section 9.11 (or any other provision of
any Credit Document) shall require any Subsidiary of Newco 4 to incur
obligations under any Guarantee that would (i) cause such Subsidiary to violate
any applicable law, rule or regulation or any requirement of any relevant
regulatory authority; (ii) result in a reduction in such Subsidiary's capital or
financial resources position for applicable regulatory purposes; or (iii) result
in a breach of any existing joint venture or other shareholder agreement
relating to such Subsidiary between Parent or any of its Subsidiaries and a
third-party shareholder in the relevant Subsidiary.
9.12 PLEDGES OF ADDITIONAL STOCK AND EVIDENCE OF INDEBTEDNESS.
(a) Except as provided in Section 10.1(j) or (k), Newco 4 and, after the date
this document has been executed by Parent, Parent will pledge, and, in the case
of clause (ii), will cause each direct subsidiary of Newco 4 or Parent to
pledge, to the Administrative Agent, for the benefit of the Lenders, (i) all the
capital stock of each direct subsidiary of Newco 4 or Parent (other than, prior
to the Term Loan Funding Date, the Shares and other than capital stock of any
Unrestricted Subsidiary, any Acquisition Subsidiary or any Subsidiary that is
not a Guarantor) formed or otherwise purchased or acquired after the date
hereof, in each case pursuant to a supplement to the U.K. Security Agreement (in
the form provided as an appendix thereto or otherwise in form and substance
reasonably satisfactory to the Administrative Agent), (ii) all evidences of
Indebtedness in excess of $5,000,000 received by Newco 4, Parent or any of their
direct Subsidiaries (other than any Unrestricted Subsidiary or Acquisition
Subsidiary) in connection with any disposition of assets pursuant to Section
10.4(b), and (iii) all Associated Undertaking Notes, in each case pursuant to a
supplement to the U.K. Security Agreement (in the form provided as an appendix
thereto or otherwise in form and substance reasonably satisfactory to the
Administrative Agent).
(b) Except as provided in Section 10.1(j) or (k), the Borrower
will pledge, and, in the case of clause (iii), will cause each direct Domestic
Borrower Subsidiary to pledge, to the Administrative Agent, for the benefit of
the Lenders, (i) all the capital stock of each direct Domestic Borrower
Subsidiary (other than any Unrestricted Subsidiary, Acquisition Subsidiary or
any Domestic Borrower Subsidiary the assets of which consist primarily of
capital stock of Foreign Subsidiaries) and 65% of all the capital stock of each
direct Material Subsidiary that is a Foreign Borrower Subsidiary (other than any
Unrestricted Subsidiary or Acquisition Subsidiary), in each case, formed or
otherwise purchased or acquired after the date hereof, in each case pursuant to
a supplement to the U.S. Pledge Agreement in form and substance reasonably
satisfactory to the Administrative Agent, (ii) all the capital stock of any
direct Domestic Borrower Subsidiary (other than any Unrestricted Subsidiary or
Acquisition Subsidiary) and 65% of all the capital stock of each direct Material
Subsidiary that is a Foreign Borrower Subsidiary (other than any Unrestricted
Subsidiary or Acquisition Subsidiary), in each case that is not a
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76
direct Subsidiary on the date hereof but subsequently becomes a direct
Subsidiary (other than an Unrestricted Subsidiary or Acquisition Subsidiary), in
each case pursuant to a supplement to the U.S. Pledge Agreement in form and
substance reasonably satisfactory to the Administrative Agent, (iii) all
evidences of Indebtedness in excess of $5,000,000 received by the Borrower or
any of the direct Domestic Borrower Subsidiaries (other than any Unrestricted
Subsidiary or Acquisition Subsidiary) in connection with any disposition of
assets pursuant to Section 10.4(b), and (iv) all Associated Undertaking Notes,
in each case pursuant to a supplement to the U.S. Pledge Agreement in form and
substance reasonably satisfactory to the Administrative Agent.
9.13 USE OF PROCEEDS. The Borrower will use the Letters of
Credit and the proceeds of all Loans for the purposes set forth in the
introductory statement to this Agreement.
9.14 CHANGES IN BUSINESS. From the Control Date, Newco 4 and
its Subsidiaries taken as a whole will not fundamentally and substantively alter
the character of their business taken as a whole from the business conducted by
Parent and its Subsidiaries taken as a whole on the date hereof and other
business activities incidental or related to any of the foregoing.
9.15 OWNERSHIP OF ASSETS. Newco 4 and Parent will, from and
after the date of this Agreement, refrain from engaging in or permitting to
occur any transaction or other event that results, after giving effect to such
transaction or event, in the Pledged Subsidiaries (and their Restricted
Subsidiaries) holding assets representing less than the lesser of (i) a
substantial majority of the aggregate fair value of the assets of Newco 4 and
its Subsidiaries (determined by the Borrower in good faith on a consolidated
basis) at such time and (ii) an aggregate fair value at such time substantially
equal to the fair value (determined by the Borrower in good faith on a
consolidated basis) at such time of the assets held by Pledged Subsidiaries (and
their Restricted Subsidiaries) on the date hereof.
SECTION 10. NEGATIVE COVENANTS. Newco 4, Parent and the
Borrower hereby covenant and agree that on the Closing Date and thereafter, for
so long as this Agreement is in effect and until the Commitments, the Swingline
Commitment and each Letter of Credit have terminated and the Loans and Unpaid
Drawings, together with interest, Fees and all other Obligations incurred
hereunder, are paid in full:
10.1 LIMITATION ON INDEBTEDNESS. Newco 4 and Parent will not,
and will not permit any of the other Restricted Subsidiaries to, create, incur,
assume or suffer to exist any Indebtedness, except:
(a) Indebtedness arising under the Credit Documents;
(b) Indebtedness of (i) Newco 4 to any Subsidiary of Newco 4,
(ii) Parent to Newco 4 or any Subsidiary of Newco 4, (iii) the Borrower to Newco
4 or any Subsidiary of Newco 4 and (iv) any Restricted Subsidiary to Newco 4 or
any other Subsidiary of Newco 4;
(c) Indebtedness in respect of any bankers' acceptance, letter
of credit, warehouse receipt or similar facilities entered into in the ordinary
course of business;
(d) except as provided in clauses (j) and (k) below, Guarantee
Obligations incurred by (i) Restricted Subsidiaries in respect of Indebtedness
of Newco 4 or other Restricted Subsidiaries that is permitted to be incurred
under this Agreement and (ii) Newco 4 in respect of Indebtedness of the
Restricted Subsidiaries that is permitted to be incurred under this Agreement,
PROVIDED that no Restricted Subsidiary shall guarantee the Subordinated Bridge
Facility or the Subordinated Notes unless (A) it has also guaranteed the
Obligations pursuant to the Guarantee and (B) such guarantee of the Subordinated
Bridge Facility or the Subordinated Notes is
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77
subordinated to such Guarantee of the Obligations on terms no less favorable to
the Lenders than the subordination provisions of the Subordinated Notes;
(e) Guarantee Obligations incurred in the ordinary course of
business consistent with those described in Schedule 10.1(a);
(f) (i) Indebtedness (including Indebtedness arising under
Capital Leases) incurred within 270 days of the acquisition, construction or
improvement of fixed or capital assets to finance the acquisition, construction
or improvement of such fixed or capital assets or otherwise incurred in respect
of Capital Expenditures permitted by Section 10.11, (ii) Indebtedness arising
under Capital Leases entered into in connection with Permitted Sale Leasebacks
and (iii) Indebtedness arising under Capital Leases, other than Capital Leases
in effect on the date hereof and Capital Leases entered into pursuant to
subclauses (i) and (ii) above, PROVIDED that the aggregate amount of
Indebtedness incurred pursuant to this subclause (iii) shall not exceed
$25,000,000 at any time outstanding, and (iv) any refinancing, refunding,
renewal or extension of any Indebtedness specified in subclause (i), (ii) or
(iii) above, PROVIDED that the principal amount thereof is not increased above
the principal amount thereof outstanding immediately prior to such refinancing,
refunding, renewal or extension;
(g) Indebtedness outstanding on the date hereof or incurred
pursuant to facilities in place on the date hereof and in each case listed on
Schedule 10.1 (b) and any refinancing, refunding, renewal or extension thereof,
PROVIDED that (i) the principal amount thereof is not increased above the
principal amount thereof outstanding or available immediately prior to such
refinancing, refunding, renewal or extension, except to the extent otherwise
permitted hereunder, and (ii) the direct and contingent obligors with respect to
such Indebtedness are not changed;
(h) Indebtedness in respect of Hedge Agreements;
(i) Indebtedness in respect of (i) (A) the Subordinated Bridge
Facility and (B) the Subordinated Notes, PROVIDED that the aggregate principal
amount of such Indebtedness at any one time outstanding shall not exceed
$575,000,000 and (ii) prior to the Term Loan Funding Date, the Senior Bridge
Facility;
(j) (i) Indebtedness of a Person or Indebtedness attaching to
assets of a Person that, in either case, becomes a Restricted Subsidiary
(including a Restricted Subsidiary that is also an Acquisi tion Subsidiary) or
Indebtedness attaching to assets that are acquired by Newco 4 or any Restricted
Subsidiary (including any Acquisition Subsidiary), in each case after the
Closing Date as the result of a Permitted Acquisition, PROVIDED that (w) such
Indebtedness existed at the time such Person became a Restricted Subsidiary or
at the time such assets were acquired and, in each case, was not created in
anticipation thereof, (x) such Indebtedness is not guaranteed in any respect by
Newco 4 or any Restricted Subsidiary (other than any such person that so becomes
a Restricted Subsidiary), (y)(A) Newco 4 or the Borrower pledges the capital
stock of such Person to the Administrative Agent to the extent required under
Section 9.12, (B) such Person executes a supplement to the Guarantee to the
extent required under Section 9.11 and (C) if any such Indebtedness is secured,
(1) the Guarantee referred to in the preceding subclause (B) is equally and
ratably secured or (2) in the case of assets acquired by Newco 4, Parent or the
Borrower or any other Restricted Subsidiary (other than any Acquisition
Subsidiary), the Borrower's obligations hereunder or Newco 4's, Parent's or such
Restricted Subsidiary's Guarantee, as the case may be, are equally and ratably
secured, PROVIDED that the requirements of this subclause (y) shall not apply to
an aggregate amount at any time outstanding of up to (and including)
$100,000,000 of the aggregate of (1) such Indebtedness and (2) all Indebtedness
as to which the proviso to clause (k)(i)(y) below then applies, and (z) the
aggregate amount of such Indebtedness and all Indebtedness incurred under clause
(k) below, when taken together, does not exceed $200,000,000 in the aggregate at
any time outstanding, PROVIDED that,
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when calculating the outstanding amount of Indebtedness for purposes of this
subclause (z), Indebtedness of any Acquisition Subsidiary, Indebtedness
attaching to assets of any Acquisition Subsidiary and Indebtedness attaching to
assets acquired by any Acquisition Subsidiary shall be excluded, and (ii) any
refinancing, refunding, renewal or extension of any Indebtedness specified in
subclause (i) above, PROVIDED that, except to the extent otherwise permitted
hereunder, (x) the principal amount of any such Indebtedness is not increased
above the principal amount thereof outstanding immediately prior to such
refinancing, refunding, renewal or extension and (y) the direct and contingent
obligors with respect to such Indebtedness are not changed;
(k) (i) Indebtedness of Newco 4 or any Restricted Subsidiary
(including any Acquisition Subsidiary) incurred to finance a Permitted
Acquisition, PROVIDED that (x) such Indebtedness is not guaranteed in any
respect by any Restricted Subsidiary (other than any Person acquired (the
"ACQUIRED PERSON") as a result of such Permitted Acquisition or the Restricted
Subsidiary so incurring such Indebtedness) or, in the case of Indebtedness of
any Restricted Subsidiary, by Newco 4, (y)(A) Newco 4, Parent or the Borrower
pledges the capital stock of such acquired Person to the Administrative Agent to
the extent required under Section 9.12, (B) such acquired Person executes a
supplement to the Guarantee to the extent required under Section 9.11 and (C) if
a guarantee by such acquired Person of any such Indebtedness is secured by
assets of such acquired Person, the Guarantee referred to in the preceding
subclause (B) is equally and ratably secured, PROVIDED that the requirements of
this subclause (y) shall not apply to an aggregate amount at any time
outstanding of up to (and including) $100,000,000 of the aggregate of (1) such
Indebtedness and (2) all Indebtedness as to which the proviso to clause
(j)(i)(y) above then applies, and (z) the aggregate amount of such Indebtedness
and all Indebtedness assumed or permitted to exist under clause (j) above, when
taken together, does not exceed $200,000,000 in the aggregate at any time
outstanding, PROVIDED that, when calculating the outstanding amount of
Indebtedness for purposes of this subclause (z), Indebtedness of any Acquisition
Subsidiary shall be excluded, and (ii) any refinancing, refunding, renewal or
extension of any Indebtedness specified in subclause (i) above, PROVIDED that
(x) the principal amount of any such Indebtedness is not increased above the
principal amount thereof outstanding immediately prior to such refinancing,
refunding, renewal or extension and (y) the direct and contingent obligors with
respect to such Indebtedness are not changed, except to the extent otherwise
permitted hereunder;
(l) Indebtedness of Restricted Non-Credit Party Subsidiaries
in an aggregate amount at any time outstanding not to exceed (i) $75,000,000
MINUS (ii) the amount, if any, by which the aggregate amount of Indebtedness
incurred and outstanding at such time pursuant to clause (o) below exceeds
$125,000,000;
(m) (i) Indebtedness incurred in connection with any Permitted
Sale Leaseback and (ii) any refinancing, refunding, renewal or extension of any
Indebtedness specified in subclause (i) above, PROVIDED that, except to the
extent otherwise permitted hereunder, (x) the principal amount of any such
Indebtedness is not increased above the principal amount thereof outstanding
immediately prior to such refinancing, refunding, renewal or extension and (y)
the direct and contingent obligors with respect to such Indebtedness are not
changed;
(n) the Guaranteed Loan Notes;
(o) (i) additional Indebtedness, PROVIDED that the aggregate
amount of Indebtedness incurred and remaining outstanding pursuant to this
clause (o) shall not at any time exceed the sum of (x) $125,000,000 and (y) the
amount, if any, by which $75,000,000 exceeds the aggregate amount of
Indebtedness then outstanding under clause (l) above, and (ii) any refinancing,
refunding, renewal or extension of any Indebtedness specified in subclause (i)
above;
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79
(p) Indebtedness under any BACS Facility used in the ordinary
course of business;
(q) Indebtedness incurred in relation to arrangements made in
the ordinary course of business to facilitate the operation of bank accounts on
a net balance basis for the calculation of interest;
(r) Indebtedness that is subject to a Letter of Credit
provided pursuant to the Revolving Credit Facility;
(s) short-term Indebtedness from banks incurred in the
ordinary course of business pursuant to a facility required in order to comply
with, or otherwise falling within, paragraph 25(2) of the Lloyds Brokers By-law
(No. 5 of 1988) (or any other by-law or regulation issued by Lloyds from time to
time with which the relevant company is required to comply); and
(t) any guarantee facility entered into in the ordinary course
of business consistent with industry custom provided in relation to employees
who are Lloyds names.
10.2 LIMITATION ON LIENS. Newco 4 and Parent will not, and
will not permit any of the Restricted Subsidiaries to, create, incur, assume or
suffer to exist any Lien upon any property or assets of any kind (real or
personal, tangible or intangible) of Newco 4, Parent or any Restricted
Subsidiary, whether now owned or hereafter acquired, except:
(a) Liens arising under the Credit Documents and, on and after
the Statutory Declaration Date and prior to the Term Loan Funding Date, Liens
securing Indebtedness in respect of the Senior Bridge Facility;
(b) Permitted Liens;
(c) Liens securing Indebtedness permitted pursuant to Section
10.1(f), PROVIDED that such Liens attach at all times only to the assets so
financed;
(d) Liens existing on the date hereof;
(e) Liens existing on the assets of any Person that becomes a
Restricted Subsidiary, or existing on assets acquired, pursuant to a Permitted
Acquisition to the extent the Liens on such assets secure Indebtedness permitted
by Section 10.1(j), PROVIDED that such Liens attach at all times only to the
same assets that such Liens attached to, and secure only the same Indebtedness
that such Liens secured, immediately prior to such Permitted Acquisition;
(f) (i) Liens placed upon the capital stock of any Restricted
Subsidiary acquired pursuant to a Permitted Acquisition to secure Indebtedness
of Newco 4 or any Restricted Subsidiary incurred pursuant to Section 10.1(k) in
connection with such Permitted Acquisition, (ii) Liens placed upon the assets of
such Restricted Subsidiary to secure a guarantee by such Restricted Subsidiary
of any such Indebtedness of Newco 4 or any Restricted Subsidiary and (iii) Liens
placed upon the capital stock or assets of any Acquisition Subsidiary to secure
Indebtedness of such Acquisition Subsidiary incurred pursuant to Section 10.1(k)
in connection with any Permitted Acquisition;
(g) the replacement, extension or renewal of any Lien
permitted by clauses (a) through (f) above upon or in the same assets
theretofore subject to such Lien or the replacement, extension or renewal
(without increase in the amount or change in any direct or contingent obligor
except to the extent otherwise permitted hereunder) of the Indebtedness secured
thereby;
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80
(h) Liens incurred by Restricted Non-Credit-Party Subsidiaries
so long as the aggregate principal amount of the obligations so secured does not
exceed $50,000,000 at any time outstanding;
(i) additional Liens so long as the aggregate principal amount
of the obligations so secured does not exceed $25,000,000 at any time
outstanding;
(j) charges in favor of Lloyds over IBA accounts to the extent
required to be created under the Lloyds Brokers By-law (No. 5 of 1988) (or any
other by-law or regulation issued by Lloyds from time to time with which the
relevant company is required to comply);
(k) Liens existing over IBA assets as contemplated by the
Lloyds Brokers By-law (No. 5 of 1988) (or any other by-law or regulation issued
by Lloyds from time to time with which the relevant company is required to
comply);
(l) Liens over credit balances created in favor of any bank in
order to facilitate the operation of bank accounts on a net balance basis for
the calculation of interest or in connection with any BACS facility used in the
ordinary course of business;
(m) Liens comprised by escrow arrangements entered into in
connection with asset sales, transfers or other dispositions permitted pursuant
to Section 10.4; and
(n) Liens on escrowed amounts of up to (pound)5,500,000 in
connection with run-off arrangements relating to Willis Faber Underwriting
Management Limited.
10.3 LIMITATION ON FUNDAMENTAL CHANGES. Except as expressly
permitted by Section 10.4 or 10.5, Newco 4 and Parent will not, and will not
permit any of the Restricted Subsidiaries to, enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all its business units, assets or
other properties, except that:
(i) any Subsidiary of the Borrower or any other
Person may be merged or consolidated with or into the
Borrower, PROVIDED that (i) the Borrower shall be the
continuing or surviving corporation or the Person formed by
or surviving any such merger or consolidation (if other than
the Borrower) shall be a corporation organized or existing
under the laws of the United States, any state thereof, the
District of Columbia or any territory thereof (the Borrower
or such Person, as the case may be, being herein referred to
as the "SUCCESSOR BORROWER"), (ii) the Successor Borrower
(if other than the Borrower) shall expressly assume all the
obligations of the Borrower under this Agreement and the
other Credit Documents pursuant to a supplement hereto or
thereto in form reasonably satisfactory to the
Administrative Agent, (iii) no Default or Event of Default
would result from the consummation of such merger or
consolidation, (iv) the Successor Borrower shall be in
compliance, on a pro forma basis after giving effect to such
merger or consolidation, with the covenants set forth in
Sections 10.9, 10.10 and 10.11, as such covenants are
recomputed as at the last day of the most recently ended
Test Period under such Section as if such merger or
consolidation had occurred on the first day of such Test
Period, (v) each Guarantor, unless it is the other party to
such merger or consolidation, shall have by a supplement to
the Guarantee confirmed that its Guarantee shall apply to
the Successor Borrower's obligations under this Agreement
and (vi) the Borrower shall have delivered to the
Administrative Agent an officer's certificate and an opinion
of counsel, each stating that such merger or consolidation
and such supplement to this Agreement
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81
or any Guarantee comply with this Agreement, PROVIDED
FURTHER that if the foregoing are satisfied, the Successor
Borrower (if other than the Borrower) will succeed to, and
be substituted for, the Borrower under this Agreement;
(ii) any Subsidiary of Newco 4 or Parent (other than
Parent and the Borrower) or any other Person may be merged or
consolidated with or into any one or more Subsidiaries of
Newco 4, PROVIDED that (i) in the case of any merger or
consolidation involving one or more Restricted Subsidiaries,
(A) a Restricted Subsidiary shall be the continuing or
surviving corporation or (B) Newco 4 and Parent shall take all
steps necessary to cause the Person formed by or surviving any
such merger or consolidation (if other than a Restricted
Subsidiary) to become a Restricted Subsidiary, (ii) in the
case of any merger or consolidation involving one or more
Guarantors, a Guarantor shall be the continuing or surviving
corporation or the Person formed by or surviving any such
merger or consolidation (if other than a Guarantor) shall
execute a supplement to the Guarantee in form and substance
reasonably satisfactory to the Administrative Agent in order
to become a Guarantor, (iii) no Default or Event of Default
would result from the consummation of such merger or
consolidation, (iv) in the case of any such merger or
consolidation involving a Person other than Newco 4 or any
Restricted Subsidiary, Newco 4 shall be in compliance, on a
pro forma basis after giving effect to such merger or
consolidation, with the covenants set forth in Sections 10.9,
10.10 and 10.11, as such covenants are recomputed as at the
last day of the most recently ended Test Period under such
Section as if such merger or consolidation had occurred on the
first day of such Test Period, and (v) in the case of any such
merger or consolidation involving a Person other than Newco 4
or any Restricted Subsidiary, the Borrower shall have
delivered to the Administrative Agent an Officers' Certificate
stating that such merger or consolidation and such supplement
to any Guarantee comply with this Agreement;
(iii) any Restricted Subsidiary that is not the
Borrower or a Guarantor may, subject to Section 9.15, sell,
lease, transfer or otherwise dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to Newco 4, a
Guarantor or any other Restricted Subsidiary, and
(iv) any Guarantor may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to the Borrower or any other
Guarantor.
10.4 LIMITATION ON SALE OF ASSETS. Newco 4 and Parent will
not, and will not permit any of the Restricted Subsidiaries to, (i) convey,
sell, lease, assign, transfer or otherwise dispose of any of its property,
business or assets (including, without limitation, receivables and leasehold
interests), whether now owned or hereafter acquired (other than any such sale,
transfer, assignment or other disposition resulting from any casualty or
condemnation of any assets of Parent or the Restricted Subsidiaries) or (ii)
sell any shares owned by it of any Restricted Subsidiary's capital stock to any
Person other than Newco 4, another Guarantor or a Restricted Foreign Subsidiary,
except that:
(a) Newco 4 and the Restricted Subsidiaries may sell, transfer
or otherwise dispose of used or surplus equipment, vehicles, inventory and other
assets in the ordinary course of business;
(b) Newco 4 and the Restricted Subsidiaries may sell, transfer
or otherwise dispose of other assets for fair value, PROVIDED that (i) the
aggregate amount of such sales, transfers and disposals by Newco 4 and the
Restricted Subsidiaries taken as a whole pursuant to
<PAGE>
82
this clause (b) shall not exceed in the aggregate $300,000,000 during the
term of this Agreement, (ii) any consideration in excess of $5,000,000
received by the Borrower or any Guarantor in connection with such sales,
transfers and other dispositions of assets pursuant to
this clause (b) that is in the form of Indebtedness shall be pledged to the
Administrative Agent pursuant to Section 9.12, (iii) with respect to any such
sale, transfer or disposition (or series of related sales, transfers or
dispositions) in an aggregate amount in excess of $10,000,000, Parent shall be
in compliance, on a pro forma basis after giving effect to such sale, transfer
or disposition, with the covenants set forth in Sections 10.9, 10.10 and 10.11,
as such covenants are recomputed as at the last day of the most recently ended
Test Period under such Sections as if such sale, transfer or disposition had
occurred on the first day of such Test Period, and (iv) after giving effect to
any such sale, transfer or disposition, no Default or Event of Default shall
have occurred and be continuing;
(c) Newco 4 and the Restricted Subsidiaries may make sales of
assets to Newco 4 or to any Restricted Subsidiary, PROVIDED that any such sales
to Restricted Non-Credit Party Subsidiaries shall be for fair value;
(d) any Restricted Subsidiary may effect any transaction
permitted by Section 10.3; and
(e) in addition to selling or transferring accounts receivable
pursuant to the other provisions hereof, Newco 4 and the Restricted Subsidiaries
may sell or discount without recourse accounts receivable arising in the
ordinary course of business in connection with the compromise or collection
thereof.
10.5 LIMITATION ON INVESTMENTS. Newco 4 and Parent will not,
and will not permit any of the Restricted Subsidiaries to, make any advance,
loan, extensions of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets of, or make any
other investment in, any Person, except:
(a) extensions of trade credit and asset purchases in the
ordinary course of business;
(b) Permitted Investments;
(c) loans and advances to officers, directors and employees of
Newco 4 or any of its Subsidiaries (i) to finance the purchase of capital stock
of Newco 4 and (ii) for additional purposes not contemplated by subclause (i)
above in an aggregate principal amount at any time outstanding with respect to
this clause (ii) not exceeding $10,000,000;
(d) investments existing on the date hereof and any
extensions, renewals or reinvestments thereof, so long as the aggregate amount
of all investments pursuant to this clause (d) is not increased at any time
above the amount of such investments existing on the date hereof;
(e) investments in Hedge Agreements permitted by Section
10.1(h);
(f) investments received in connection with the bankruptcy or
reorganization of suppliers or customers and in settlement of delinquent
obligations of, and other disputes with, customers arising in the ordinary
course of business;
(g) investments constituting non-cash proceeds of sales,
transfers and other dispositions of assets to the extent permitted by Section
10.4;
<PAGE>
83
(h) investments in any Guarantor or Limited Guarantor;
PROVIDED, HOWEVER, that in the case of investments in any Limited Guarantor, the
aggregate amount of such investments at any time outstanding shall not exceed
the amount of such Limited Guarantor's Guarantee at such time;
(i) investments constituting Permitted Acquisitions, PROVIDED
that the aggregate amount of any such investment made by Newco 4 or any
Restricted Subsidiary (other than any Acquisition Subsidiary) in any Acquisition
Subsidiary shall not exceed the Available Amount at the time of such investment,
and PROVIDED FURTHER that the aggregate amount of any such investment made by
Newco 4 or any Restricted Subsidiary (other than any Restricted Non-Credit-Party
Subsidiary) in any Restricted Non-Credit-Party Subsidiary shall not exceed (i)
the Available Non-Credit-Party Investment Amount at the time of such investment
MINUS (ii) the portion of the Available Non-Credit-Party Investment Amount being
used at such time for investments made pursuant to clause (k) below;
(j) investments in any Restricted Non-Credit-Party Subsidiary,
PROVIDED that the aggregate amount of any such investment made by Newco 4 or any
Restricted Subsidiary (other than any Restricted Non-Credit-Party Subsidiary)
shall not exceed (i) the Available Non-Credit-Party Investment Amount at the
time of such investment MINUS (ii) the portion of the Available Non-Credit-
Party Investment Amount being used at such time for investments made pursuant to
clause (k) below;
(k) additional investments (including investments in Minority
Investments, Unrestricted Subsidiaries and Acquisition Subsidiaries) in an
aggregate amount at the time of such investment not in excess of the sum of (i)
the Available Amount at such time and (ii) the amount equal to one-half of the
Available Non-Credit-Party Investment Amount at such time;
(l) investments permitted under Section 10.6.;
(m) investments listed on Schedule 10.5;
(n) loans to any Associated Undertaking, PROVIDED that (i) the
aggregate principal amount of all such loans shall not exceed $50,000,000 at any
one time outstanding and (ii) if the aggregate principal amount of all loans
made to any Associated Undertaking pursuant to this Section 10.5 exceeds
$25,000,000, all such loans made to such Associated Undertaking shall be
evidenced by an Associated Undertaking Note; and
(o) investments to the extent that payment for such
investments is made solely with capital stock of Newco 4.
10.6 LIMITATION ON DIVIDENDS. Newco 4 will not and, after the Control Date and
prior to the consummation of the Acquisition, Parent will not declare or pay any
dividends (other than dividends payable solely in its capital stock to Newco 3)
or return any capital to its stockholders or make any other distribution,
payment or delivery of property or cash to its stockholders as such, or redeem,
retire, purchase or otherwise acquire, directly or indirectly, for
consideration, any shares of any class of its capital stock or the capital stock
of any direct or indirect parent of Newco 4 now or hereafter outstanding (or any
warrants for or options or stock appreciation rights in respect of any of such
shares), or set aside any funds for any of the foregoing purposes, or permit any
of the Restricted Subsidiaries to purchase or otherwise acquire for
consideration (other than in connection with an investment permitted by Section
10.5) any shares of any class of the capital stock of Newco 4, now or hereafter
outstanding (or any options or warrants or stock appreciation rights issued by
such Person with respect to its capital stock) (all of the foregoing
"DIVIDENDS"), PROVIDED that, so long as no Default or Event of Default exists or
would exist after giving effect thereto, (a) Newco 4 may redeem in whole or in
part any capital
<PAGE>
84
stock of Newco 4 (i) for another class of capital stock or rights to acquire
capital stock of Newco 4 or (ii) with proceeds from substantially concurrent
equity contributions or issuances of new shares of capital stock, PROVIDED that
such other class of capital stock contains terms and provisions at least as
advantageous to the Lenders in all respects material to their interests as those
contained in the capital stock redeemed thereby, (b) Newco 4 may, or may pay
Dividends to Newco 3 to enable Newco 3 to, repurchase (or pay Dividends to
enable its parent company to repurchase, in the case of Newco 3 and Newco 2)
shares of capital stock of Newco 4, Newco 3, Newco 2 or Newco 1 (and/or options
or warrants in respect thereof) held by its officers, directors and employees so
long as such repurchase is pursuant to, and in accordance with the terms of,
management and/or employee stock plans, stock subscription agreements or
shareholder agreements, (c) Newco 4 and Parent may make investments permitted by
Section 10.5, (d) Newco 4 may declare and pay dividends on its capital stock,
PROVIDED that (i) the aggregate amount of dividends paid pursuant to this clause
(d) and clause (e) shall not at any time exceed 50% of Cumulative Consolidated
Net Income Available to Stockholders at such time less the amount of dividends
previously paid pursuant to this clause (d) and clause (e) following the last
day of the most recent fiscal quarter for which Section 9.1 Financials have been
delivered to the Lenders under Section 9.1 and (ii) at the time of the payment
of any such dividends and after giving effect thereto, the Consolidated Total
Debt to Consolidated EBITDA Ratio on the date of such payment of such dividends
shall be less than 3.00:1.00, (e) Newco 4 may declare and pay cash dividends
and/or make distributions on its capital stock to Newco 3 (i) to fund the
payment of dividends (at a rate per annum not in excess of 7 1/2%) on the
Preferred Stock outstanding on the Term Loan Funding Date, on any Replacement
Preferred Stock and on any thereof accreting in lieu of dividends (whether such
dividends have accrued during the then-current fiscal year or any previous
fiscal year), (A) to the extent that the Consolidated Cash Available for Fixed
Charges to Consolidated Fixed Charges Ratio for the Test Period most recently
ended prior to the date on which such dividends would be paid, calculated on a
pro forma basis to give effect to the payment of such dividends (assuming, for
this purpose, that if there were two dividend payments on such Preferred Stock
or Replacement Preferred Stock during such Test Period, the payment of the
proposed dividends is made in lieu of the first such dividend payment during
such Test Period), would be equal to or greater than the ratio (the "Target
Ratio") set forth in the table below opposite the period during which such Test
Period ends or (B) if the Consolidated Cash Available for Fixed Charges to
Consolidated Fixed Charges Ratio for such Test Period (calculated on such pro
forma basis) would be less than the Target Ratio, in an additional amount to the
extent that, after giving effect to the payment of such additional dividends,
the aggregate amount of dividends paid pursuant to this clause (B) during the
term of this Agreement would not exceed $20,000,000, and (ii) so long as no
Default or Event of Default has occurred and is continuing, to fund (A) the
repurchase of outstanding shares of the Preferred Stock or the Replacement
Preferred Stock for an aggregate purchase price not in excess of the Available
Amount at the time of such repurchase and (B) the payment of accrued but unpaid
dividends on the Preferred Stock or the Replacement Preferred Stock in an amount
not in excess of the Available Amount at the time of such dividend payment, (f)
Newco 4 may declare and pay dividends and/or make distributions on its capital
stock, the proceeds of which will be used by Newco 3 solely to pay taxes of
Newco 3 and its Subsidiaries as part of a consolidated tax filing group, along
with franchise taxes, administrative and similar expenses related to its
existence and ownership of Newco 4, PROVIDED that the amount of such dividends
does not exceed in any fiscal year the amount of such taxes and expenses payable
for such fiscal year, (g) Parent may declare and pay a dividend to be paid to
holders of the Shares pro rata during the fiscal quarter ending December 31,
1998, if such dividend is declared prior to the Control Date in accordance with
<PAGE>
85
past practice and (h) Parent may pay dividends to Newco 4 for use by Newco 4 for
any of the purposes permitted in clauses (a) through (g) above.
<TABLE>
<CAPTION>
Fiscal Year Ratio
----------- -----
<S> <C>
1999 1.25:1.00
2000 1.45:1.00
2001 1.60:1.00
2002 1.70:1.00
2003 1.80:1.00
2004 1.85:1.00
2005 1.95:1.00
2006 2.25:1.00
2007 3.00:1.00
2008 3.75:1.00
</TABLE>
10.7 LIMITATIONS ON DEBT PAYMENTS AND AMENDMENTS. (a) Neither
the Borrower nor Newco 4 will (i) prepay, repurchase or redeem or otherwise
defease any portion of the Subordinated Bridge Facility or (ii) prepay,
repurchase or redeem or otherwise defease any Subordinated Notes; PROVIDED,
HOWEVER, that (A) Newco 4 may prepay the principal of, and accrued interest on,
the Subordinated Bridge Facility with the Net Cash Proceeds of the Subordinated
Notes or any refinancing or replacement of the Subordinated Bridge Facility that
has terms material to the interests of the Lenders not materially less
advantageous to the Lenders than the terms contemplated by the definition of the
term "Subordinated Bridge Facility" and (B) so long as no Default or Event of
Default has occurred and is continuing, the Borrower may prepay, repurchase or
redeem Subordinated Notes (x) for an aggregate price not in excess of the
Available Amount at the time of such prepayment, repurchase or redemption or (y)
with the proceeds of subordinated Indebtedness that (1) is permitted by Section
10.1 and (2) has terms material to the interests of the Lenders not materially
less advantageous to the Lenders than those of the Subordinated Notes.
(b) Neither the Borrower nor Newco 4 will waive, amend,
modify, terminate or release the documentation pursuant to which the
Subordinated Loans were made or the Subordinated Note Indenture to the extent
that any such waiver, amendment, modification, termination or release would be
adverse to the Lenders in any material respect.
10.8 LIMITATIONS ON SALE LEASEBACKS. Newco 4 will not, and
will not permit any of the Restricted Subsidiaries to, enter into or effect any
Sale Leasebacks, other than Permitted Sale Leasebacks.
10.9 CONSOLIDATED TOTAL DEBT TO CONSOLIDATED EBITDA RATIO.
Newco 4 and Parent will not permit the Consolidated Total Debt to Consolidated
EBITDA Ratio for any Test
<PAGE>
86
Period ending during any period set forth below to be greater than the ratio set
forth below opposite such period:
<TABLE>
<CAPTION>
Period Ratio
------ -------
<S> <C>
First two fiscal quarters of 1999 6.00:1.00
Second two fiscal quarters of 1999 5.75:1.00
First two fiscal quarters of 2000 5.50:1.00
Second two fiscal quarters of 2000 5.25:1.00
First two fiscal quarters of 2001 5.00:1.00
Second two fiscal quarters of 2001 4.75:1.00
First two fiscal quarters of 2002 4.50:1.00
Second two fiscal quarters of 2002 4.25:1.00
Fiscal year 2003 through Tranche D
Maturity Date 4.00:1.00
</TABLE>
10.10 CONSOLIDATED EBITDA TO CONSOLIDATED INTEREST EXPENSE
RATIO.Newco 4 and Parent will not permit the Consolidated EBITDA to Consolidated
Interest Expense Ratio for any Test Period ending during any period set forth
below to be less than the ratio set forth below opposite such period:
<TABLE>
<CAPTION>
Period Ratio
------ -------
<S> <C>
First two fiscal quarters of 1999 1.70:1.00
Second two fiscal quarters of 1999 1.80:1.00
First two fiscal quarters of 2000 1.90:1.00
Second two fiscal quarters of 2000 2.00:1.00
First two fiscal quarters of 2001 2.10:1.00
Second two fiscal quarters of 2001 2.20:1.00
First two fiscal quarters of 2002 2.30:1.00
Second two fiscal quarters of 2002 2.40:1.00
Fiscal year 2003 through Tranche D
Maturity Date 2.50:1.00
</TABLE>
10.11 CAPITAL EXPENDITURES. (a) Newco 4 and Parent will not,
and will not permit any of the Restricted Subsidiaries to, make any Capital
Expenditures (other than Permitted Acquisitions that constitute Capital
Expenditures), that would cause the aggregate amount of such Capital
Expenditures made by Newco 4 and the Restricted Subsidiaries in any fiscal year
of Newco 4 to exceed the greater of (i) $55,000,000 and (ii) an amount equal to
4.75% of Consolidated Gross Revenues for the immediately preceding fiscal year.
<PAGE>
87
(b) To the extent that Capital Expenditures (other than
Permitted Acquisitions that constitute Capital Expenditures) made by Newco 4 and
the Restricted Subsidiaries during any fiscal year are less than the maximum
amount permitted to be made for such fiscal year, 50% of such unused amount
(each such amount, a "CARRY-FORWARD AMOUNT") may be carried forward to the
immediately succeeding fiscal year and utilized to make such Capital
Expenditures in such succeeding fiscal year in the event the amount set forth
above for such succeeding fiscal year has been used (it being understood and
agreed that (i) no carry-forward amount may be carried forward beyond the first
two fiscal years immediately succeeding the fiscal year in which it arose and,
(ii) no portion of the carry-forward amount available for any fiscal year may be
used until the entire amount of such Capital Expenditures permitted to be made
in such fiscal year (without giving effect to such carry-forward amount) shall
be made and (iii) if the carry forward amount available for any fiscal year is
the sum of amounts carried forward from each of the two immediately preceding
fiscal years, no portion of such carry-forward amount from the earlier of the
two immediately preceding fiscal years may be used until the entire portion of
such carryforward amount from the more recent immediately preceding fiscal year
shall have been used for such Capital Expenditures made in such fiscal year).
(c) Newco 4 and the Restricted Subsidiaries may also make
Capital Expenditures in any fiscal year, in addition to the maximum amount
permitted to be made for such fiscal year in accordance with the foregoing, in
an amount equal to $25,000,000 (each such amount, a "CARRY-BACK AMOUNT") carried
back from the immediately succeeding fiscal year (it being understood and agreed
that (i) the maximum amount of Capital Expenditures permitted to be made in such
next succeeding fiscal year shall be reduced by the carry-back amount used in
such prior fiscal year and (ii) no carry-back amount may be carried back beyond
the immediately preceding fiscal year).
SECTION 11. EVENTS OF DEFAULT. Upon the occurrence of any of
the following specified events (each an "EVENT OF DEFAULT"):
11.1 PAYMENTS. The Borrower shall (a) default in the payment
when due of any principal of the Loans or (b) default, and such default shall
continue for five or more days, in the payment when due of any interest on the
Loans or any Fees or any Unpaid Drawings or of any other amounts owing hereunder
or under any other Credit Document; or
11.2 REPRESENTATIONS, ETC. Any representation, warranty or
statement made or deemed made by any Credit Party herein or in the Guarantee,
the U.S. Pledge Agreement, the U.K. Security Agreement or any certificate
delivered or required to be delivered pursuant hereto or thereto shall prove to
be untrue in any material respect on the date as of which made or deemed made
(it being understood that, for purposes of the foregoing, the truth of the
representations and warranties set forth in Section 8.8 shall be determined
without reference to the knowledge of the Borrower); or
11.3 COVENANTS. Any Credit Party shall (a) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 9.1(e), 9.15 or Section 10 or (b) default in the due performance or
observance by it of any term, covenant or agreement (other than those referred
to in Section 11.1 or 11.2 or clause (a) of this Section 11.3) contained in this
Agreement, the Guarantee, the U.S. Pledge Agreement or the U.K. Security
Agreement and such default shall continue unremedied for a period of at least 30
days after receipt of written notice by the Borrower from the Administrative
Agent or the Required Lenders; or
11.4 DEFAULT UNDER OTHER AGREEMENTS. (a) Newco 4 or any of the
Restricted Subsidiaries shall (i) default in any payment with respect to any
Indebtedness (other than the
<PAGE>
88
Obligations) in excess of $20,000,000 in the aggregate, for Newco 4 and such
Subsidiaries, beyond the period of grace, if any, provided in the instrument or
agreement under which such Indebtedness was created or (ii) default in the
observance or performance of any agreement or condition relating to any
such Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness was created, or (except in
the case of Indebtedness consisting of any Hedge Agreement) any other event
shall occur or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such Indebtedness
(or a trustee or agent on behalf of such holder or holders) to cause, any such
Indebtedness to become due prior to its stated maturity; or (b) without limiting
the provisions of clause (a) above, any such Indebtedness (other than
Indebtedness consisting of any Hedge Agreement) shall be declared to be due and
payable, or required to be prepaid other than by a regularly scheduled required
prepayment or as a mandatory prepayment, prior to the stated maturity thereof;
or
11.5 BANKRUPTCY, ETC.. The Borrower or any other Specified
Subsidiary that is organized under the laws of the United States, any state or
territory thereof or the District of Columbia shall commence a voluntary case
concerning itself under Title 11 of the United States Code entitled
"Bankruptcy," as now or hereafter in effect, or any successor thereto (the
"BANKRUPTCY CODE"); or an involuntary case is commenced against the Borrower or
any such Specified Subsidiary and the petition is not controverted within 10
days after commencement of the case; or an involuntary case is commenced against
the Borrower or any such Specified Subsidiary and the petition is not dismissed
within 60 days after commencement of the case; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or substantially all
of the property of the Borrower or any such Specified Subsidiary; or Newco 4 or
any Specified Subsidiary commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to Newco 4 or any Specified Subsidiary; or there is
commenced against Newco 4 or any Specified Subsidiary any such proceeding that
remains undismissed for a period of 60 days; or Newco 4 or any Specified
Subsidiary is adjudicated insolvent or bankrupt; or any order of relief or other
order approving any such case or proceeding is entered; or Newco 4 or any
Specified Subsidiary suffers any appointment of any custodian or the like for it
or any substantial part of its property to continue undischarged or unstayed for
a period of 60 days; or Newco 4 or any Specified Subsidiary makes a general
assignment for the benefit of creditors; or any corporate action is taken by
Newco 4 or any Specified Subsidiary for the purpose of effecting any of the
foregoing; or Newco 4 or any Specified Subsidiary organized under the laws of
the United Kingdom is unable to pay its debts as they fall due, or makes a
general assignment for the benefit of or a composition with its creditors
generally; or Newco 4 or any Specified Subsidiary organized under the laws of
the United Kingdom takes any corporate action or other steps are taken or legal
proceedings are started for its winding-up, dissolution, administration or
insolvent re-organization or for the appointment of a liquidator, administrator
or administrative receiver of it.
11.6 ERISA. (a) Any Plan shall fail to satisfy the minimum
funding standard required for any plan year or part thereof or a waiver of such
standard or extension of any amortization period is sought or granted under
Section 412 of the Code; any Plan is or shall have been terminated or is the
subject of termination proceedings under ERISA (including the giving of written
notice thereof); an event shall have occurred or a condition shall exist in
either case entitling the PBGC to terminate any Plan or to appoint a trustee to
administer any Plan (including the giving of written notice thereof); any Plan
shall have an accumulated funding deficiency (whether or not waived); Parent,
any of its Subsidiaries or any ERISA Affiliate has incurred or is likely to
incur a liability to or on account of a Plan under Section 409, 502(i), 502(l),
515, 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or Section 4971 or 4975 of
the Code (including the giving of written notice thereof); (b) there could
result from any event or events set forth in
<PAGE>
89
clause (a) of this Section 11.6 the imposition of a lien, the granting of a
security interest, or a liability, or the reasonable likelihood of incurring a
lien, security interest or liability; and (c) such lien, security interest or
liability will or would be reasonably likely to have a Material Adverse Effect;
or
11.7 GUARANTEE. The Guarantee or any material provision
thereof shall cease to be in full force or effect or any Guarantor thereunder or
any Credit Party shall deny or disaffirm in writing such Guarantor's obligations
under such Guarantee; or
11.8 U.S. PLEDGE AGREEMENT; U.K. SECURITY AGREEMENT. The U.S.
Pledge Agreement, the U.K. Security Agreement or any material provision thereof
shall cease to be in full force or effect (other than pursuant to the terms
hereof or thereof or as a result of acts or omissions of the Administrative
Agent or any Lender) or any Pledgor or grantor thereunder or any Credit Party
shall deny or disaffirm in writing such Pledgor's or grantor's obligations under
the U.S. Pledge Agreement or the U.K. Security Agreement, as applicable; or
11.9 JUDGMENTS. One or more judgments or decrees shall be
entered against Newco 4 or any of the Restricted Subsidiaries involving a
liability of $20,000,000 or more in the aggregate for all such judgments and
decrees for Newco 4 and the Restricted Subsidiaries (to the extent not paid or
fully covered by insurance provided by a carrier not disputing coverage) and any
such judgments or decrees shall not have been satisfied, vacated, discharged or
stayed or bonded pending appeal within 60 days from the entry thereof;
11.10 CHANGE OF CONTROL. A Change of Control shall occur; or
11.11. NEWCO 2 SECURITIES. Newco 2 shall issue any equity or
debt security in exchange for the redemption or cancelation of the Preferred
Stock other than Replacement Preferred Stock;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Administrative Agent shall, upon the written
request of the Required Lenders, by written notice to the Borrower, take any or
all of the following actions, without prejudice to the rights of the
Administrative Agent or any Lender to enforce its claims against the Borrower,
except as otherwise specifically provided for in this Agreement (PROVIDED that,
if an Event of Default specified in Section 11.5 shall occur with respect to
Newco 4 or any Specified Subsidiary, the result that would occur upon the giving
of written notice by the Administrative Agent as specified in clauses (i), (ii)
and (iv) below shall occur automatically without the giving of any such notice):
(i) declare the Total Term Loan Commitment and the Total Revolving Commitment
terminated, whereupon the Commitments and Swingline Commitment, if any, of each
Lender or Chase, as the case may be, shall forthwith terminate immediately and
any Fees theretofore accrued shall forthwith become due and payable without any
other notice of any kind; (ii) declare the principal of and any accrued interest
in respect of all Loans and all Obligations owing hereunder and thereunder to
be, whereupon the same shall become, forthwith due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower; (iii) terminate any Letter of Credit that may be
terminated in accordance with its terms; and/or (iv) direct the Borrower to pay
(and the Borrower agrees that upon receipt of such notice, or upon the
occurrence of an Event of Default specified in Section 11.5 with respect to
Newco 4 or any Specified Subsidiary, it will pay) to the Administrative Agent at
the Administrative Agent's Office such additional amounts of cash, to be held as
security for the Borrower's reimbursement obligations for Drawings that may
subsequently occur thereunder, equal to the aggregate Stated Amount of all
Letters of Credit issued and then outstanding.
<PAGE>
90
SECTION 12. THE ADMINISTRATIVE AGENT.
12.1 APPOINTMENT. Each Lender hereby irrevocably designates
and appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Credit Documents, and each such Lender irrevocably
authorizes the Administrative Agent, in such capacity, to take such action on
its behalf under the provisions of this Agreement and the other Credit Documents
and to exercise such powers and perform such duties as are expressly delegated
to the Administrative Agent by the terms of this Agreement and the other Credit
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Credit Document or
otherwise exist against the Administrative Agent. Neither the Syndication Agent
nor the Documentation Agent, in their respective capacities as such, shall have
any obligations, duties or responsibilities under this Agreement.
12.2 DELEGATION OF DUTIES. The Administrative Agent may
execute any of its duties under this Agreement and the other Credit Documents by
or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys in-fact selected by it with reasonable care.
12.3 EXCULPATORY PROVISIONS. Neither the Administrative Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (a) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Credit Document (except for its or such Person's own gross negligence or
willful misconduct) or (b) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by the Borrower or
any Guarantor or any officer thereof contained in this Agreement or any other
Credit Document or in any certificate, report, statement or other document
referred to or provided for in, or received by the Administrative Agent under or
in connection with, this Agreement or any other Credit Document or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or any other Credit Document or for any failure of the Borrower
or any Guarantor to perform its obligations hereunder or thereunder. The
Administrative Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Credit
Document, or to inspect the properties, books or records of the Borrower.
12.4 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Borrower),
independent accountants and other experts selected by the Administrative Agent.
The Administrative Agent may deem and treat the Lender specified in the Register
with respect to any amount owing hereunder as the owner thereof for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with the Administrative Agent. The Administrative Agent shall be
fully justified in failing or refusing to take any action under this Agreement
or any other Credit Document unless it shall first receive such advice or
concurrence of the Required Lenders as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense that may be incurred by it by reason of taking or continuing to take any
such action. The Administrative Agent shall in all cases be fully protected in
acting, or in refraining
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from acting, under this Agreement and the other Credit Documents in accordance
with a request of the Required Lenders, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Loans.
12.5 NOTICE OF DEFAULT. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from a
Lender or the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall give notice thereof to the Lenders. The Administrative Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders, PROVIDED that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders (except to the extent that
this Agreement requires that such action be taken only with the approval of the
Required Lenders or each of the Lenders, as applicable).
12.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS.
Each Lender expressly acknowledges that neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates
has made any representations or warranties to it and that no act by the
Administrative Agent hereinafter taken, including any review of the affairs of
the Borrower or any Guarantor, shall be deemed to constitute any representation
or warranty by the Administrative Agent to any Lender. Each Lender represents to
the Administrative Agent that it has, independently and without reliance upon
the Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrower and any Guarantor and made its
own decision to make its Loans hereunder and enter into this Agreement. Each
Lender also represents that it will, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Credit Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of the Borrower and any
Guarantor. Except for notices, reports and other documents expressly required to
be furnished to the Lenders by the Administrative Agent hereunder, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, assets,
operations, properties, financial condition, prospects or creditworthiness of
the Borrower or any Guarantor that may come into the possession of the
Administrative Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
12.7 INDEMNIFICATION. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective portions of the Total Credit Exposure in
effect on the date on which indemnification is sought (or, if indemnification is
sought after the date upon which the Commitments shall have terminated and the
Loans shall have been paid in full, ratably in accordance with their respective
portions of the Total Credit Exposure in effect immediately prior to such date),
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever that may at any time (including, without limitation, at any time
following the payment of the Loans) be imposed on, incurred by or asserted
against the Administrative Agent in any way relating to or arising out of, the
Commitments, this Agreement, any of the other Credit Documents or any documents
contemplated by or referred to herein or
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therein or the transactions contemplated hereby or thereby or any action taken
or omitted by the Administrative Agent under or in connection with any of the
foregoing, PROVIDED that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the
Administrative Agent's gross negligence or willful misconduct. The agreements in
this Section 12.7 shall survive the payment of the Loans and all other amounts
payable hereunder.
12.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower and any Guarantor
as though the Administrative Agent were not the Administrative Agent
hereunder and under the other Credit Documents. With respect to the Loans made
by it, the Administrative Agent shall have the same rights and powers under this
Agreement and the other Credit Documents as any Lender and may exercise the same
as though it were not the Administrative Agent, and the terms "Lender" and
"Lenders" shall include the Administrative Agent in its individual capacity.
12.9 SUCCESSOR AGENT. The Administrative Agent may resign as
Administrative Agent upon 20 days' prior written notice to the Lenders and the
Borrower. If the Administrative Agent shall resign as Administrative Agent under
this Agreement and the other Credit Documents, then the Required Lenders shall
appoint from among the Lenders a successor agent for the Lenders, which
successor agent shall be approved by the Borrower (which approval shall not be
unreasonably withheld), whereupon such successor agent shall succeed to the
rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Loans. After any retiring
Administrative Agent's resignation as Administrative Agent, the provisions of
this Section 12 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Administrative Agent under this Agreement and the
other Credit Documents.
SECTION 13. MISCELLANEOUS.
13.1 AMENDMENTS AND WAIVERS. Neither this Agreement nor any
other Credit Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
Section 13.1. The Required Lenders may, or, with the written consent of the
Required Lenders, the Administrative Agent may, from time to time, (a) enter
into with the relevant Credit Party or Credit Parties written amendments,
supplements or modifications hereto and to the other Credit Documents for the
purpose of adding any provisions to this Agreement or the other Credit Documents
or changing in any manner the rights of the Lenders or of the Borrower hereunder
or thereunder or (b) waive, on such terms and conditions as the Required Lenders
or the Administrative Agent, as the case may be, may specify in such instrument,
any of the requirements of this Agreement or the other Credit Documents or any
Default or Event of Default and its consequences; PROVIDED, HOWEVER, that no
such waiver and no such amendment, supplement or modification shall directly (i)
forgive any portion of any Loan or extend the final scheduled maturity date of
any Loan or reduce the stated rate, or forgive any portion, or extend the date
for the payment, of any interest or fee payable hereunder (other than as a
result of waiving the applicability of any post-default increase in interest
rates) or extend the final expiration date of any Lender's Commitment or extend
the final expiration date of any Letter of Credit beyond the L/C Maturity Date
or increase the aggregate amount of the Commitments of any Lender, in each case
without the written consent of each Lender directly and adversely affected
thereby, or (ii) amend, modify or waive any provision of this Section 13.1 or
reduce the percentages specified in the definitions of the terms "Required
Lenders", "Required
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Tranche A Lenders", "Required Tranche B, C and D Lenders", "Supermajority
Tranche A Lenders" and "Supermajority Tranche B, C and D Lenders" or consent to
the assignment or transfer by the Borrower of its rights and obligations under
any Credit Document to which it is a party (except as permitted pursuant to
Section 10.3), in each case without the written consent of each Lender directly
and adversely affected thereby, or (iii) amend, modify or waive any provision of
Section 12 without the written consent of the then-current Administrative Agent,
or (iv) amend, modify or waive any provision of Section 3 without the written
consent of the Letter of Credit Issuer, or (v) amend, modify or waive any
provisions hereof relating to Swingline Loans without the written consent of
Chase, or (vi) change any Revolving Credit Commitment to any other Commitment
(other than a Tranche A Commitment), change any Euro Revolving Credit Commitment
or Yen Revolving Credit Commitment to any other Commitment, change any Tranche A
Commitment to any other Commitment (other than a Revolving Credit Commitment) or
change any Tranche B Commitment, Tranche C Commitment or Tranche D
Commitment to any other Commitment, in each case without the prior written
consent of each Lender directly and adversely affected thereby, or (vii)
decrease any Tranche A Repayment Amount, extend any scheduled Tranche A
Repayment Date or decrease the amount of any mandatory prepayment to be received
by any Lender holding any Tranche A Loans, in each case without the written
consent of the Required Tranche A Lenders, or (viii) decrease any scheduled
Tranche B Repayment Amount, Tranche C Repayment Amount or Tranche D Repayment
Amount, extend any Tranche B Repayment Date, Tranche C Repayment Date or Tranche
D Repayment Date or decrease the amount of any mandatory prepayment to be
received by any Lender holding any Tranche B Loans, Tranche C Loans or Tranche D
Loans, in each case without the written consent of the Required Tranche B, C,
and D Lenders, or (ix) release all or substantially all the Collateral or
release all or substantially all the Guarantors under the Guarantee, in each
case without the written consent of (A) the Supermajority Tranche A Lenders and
(B) the Supermajority Tranche B, C and D Lenders, and PROVIDED FURTHER that at
any time that no Default or Event of Default has occurred and is continuing, the
Revolving Credit Commitment of any Lender may be increased to finance a
Permitted Acquisition, with the consent of such Lender, the Borrower and the
Administrative Agent (which consent, in the case of the Administrative Agent,
shall not be unreasonably withheld) and without the consent of the Required
Lenders, so long as (i) the Increased Commitment Amount (as defined below) at
such time, when added to the amount of Indebtedness incurred pursuant to Section
10.1(k) and outstanding at such time, does not exceed the limits set forth
therein, (ii) the Borrower shall pledge the Capital Stock of any person acquired
pursuant thereto to the Administrative Agent for the benefit of the Lenders to
the extent required under Section 9.12 and (iii) to the extent determined by the
Administrative Agent to be necessary to ensure pro rata borrowings commencing
with the initial borrowing after giving effect to such increase, the Borrower
shall prepay any Eurodollar Loans outstanding immediately prior to such initial
borrowing; as used herein, the "Increased Commitment Amount" means, at any time,
aggregate amount of all increases pursuant to this proviso made at or prior to
such time less the aggregate amount of all voluntary reductions of the Revolving
Credit Commitments made prior to such time. Any such waiver and any such
amendment, supplement or modification shall apply equally to each of the
affected Lenders and shall be binding upon the Borrower, such Lenders, the
Administrative Agent and all future holders of the affected Loans. In the case
of any waiver, the Borrower, the Lenders and the Administrative Agent shall be
restored to their former positions and rights hereunder and under the other
Credit Documents, and any Default or Event of Default waived shall be deemed to
be cured and not continuing, it being understood that no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereon.
13.2 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when delivered, or three days after
being deposited in the mail, postage prepaid, or, in the case of
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telecopy notice, when received, addressed as follows in the case of the Borrower
and the Administrative Agent, and as set forth on Schedule 1.1 in the case of
the other parties hereto, or to such other address as may be hereafter notified
by the respective parties hereto:
The Borrower: Willis Corroon Corporation
26 Century Blvd.
P.O. Box 305026
Nashville, TN 37214
Attention: Bart Schwartz, Esq.
Fax: (615) 872-3037
with a copy to:
Willis Corroon Group Limited
10 Trinity Square
London EC3P 3AX
Attention: Thomas Colraine
Fax: 011-44-171-481-7154
and to:
Trinity Acquisition plc
In care of Kohlberg Kravis Roberts & Co., L.P.
9 West 57th Street
New York, NY 10019
Attention: Scott Nuttall
Fax: (212) 750-0003
The Administrative Agent: The Chase Manhattan Bank
c/o The Loan and Agency Services Group
One Chase Manhattan Plaza, Eighth Floor
New York, NY 10081
Attention: Janet Belden
Fax: (212) 552-5658
with a copy to:
The Chase Manhattan Bank
270 Park Avenue
New York, NY 10017
Attention: Helen Newcomb
Fax: (212) 270-1001
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and a copy to:
The Chase Manhattan Bank
Trinity Tower
Nine Thomas Moore Street
London E1 9TY, England
Attention: Steven Clarke
Fax: 011-44-171-777-2360
PROVIDED that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to Sections 2.3, 2.6, 2.9, 4.2 and 5.1 shall not be
effective until received.
13.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise
and no delay in exercising, on the part of the Administrative Agent or any
Lender, any right, remedy, power or privilege hereunder or under the other
Credit Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
13.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made hereunder, in the other Credit Documents and
in any document, certificate or statement delivered pursuant hereto or in
connection herewith shall survive the execution and delivery of this Agreement
and the making of the Loans hereunder.
13.5 PAYMENT OF EXPENSES AND TAXES. The Borrower agrees (a) to
pay or reimburse the Agents for all their reasonable out-of-pocket costs and
expenses incurred in connection with the development, preparation and execution
of, and any amendment, supplement or modification to, this Agreement and the
other Credit Documents and any other documents prepared in connection herewith
or therewith, and the consummation and administration of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees, disbursements and other charges of counsel to the Agents, (b) to pay or
reimburse each Lender and the Administrative Agent for all its reasonable and
documented costs and expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the other Credit Documents and
any such other documents, including, without limitation, the reasonable fees,
disbursements and other charges of counsel to each Lender and of counsel to the
Administrative Agent, (c) to pay, indemnify, and hold harmless each Lender and
the Administrative Agent from, any and all recording and filing fees and any and
all liabilities with respect to, or resulting from any delay in paying, stamp,
excise and other similar taxes, if any, that may be payable or determined to be
payable in connection with the execution and delivery of, or consummation or
administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the other Credit Documents and any such other documents, and (d)
to pay, indemnify, and hold harmless each Lender and the Administrative Agent
and their respective directors, officers, employees, trustees and agents from
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever, including, without limitation, reasonable and
documented fees, disbursements and other charges of counsel, with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement, the other Credit Documents and any such other documents, including,
without limitation, any of the foregoing relating to the violation of,
noncompliance with or liability under, any Environmental Law applicable to the
operations of the Borrower, any of its Subsidiaries or any of the Properties
(all the foregoing in this clause (d), collectively, the "INDEMNIFIED
LIABILITIES"), PROVIDED that the Borrower shall have no obligation hereunder to
the Administrative Agent or any Lender nor any
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of their respective directors, officers, employees and agents with respect to
indemnified liabilities arising from (i) the gross negligence or willful
misconduct of the party to be indemnified or (ii) disputes among the
Administrative Agent, the Lenders and/or their transferees. The agreements in
this Section 13.5 shall survive repayment of the Loans and all other amounts
payable hereunder.
13.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS.
(a)(i) This Agreement shall be binding upon and inure to the benefit of Newco 4,
Parent, the Borrower, the Lenders, the Administrative Agent and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of each Lender.
(ii) Any Lender may, in the ordinary course of its business
and in accordance with applicable law, at any time sell to one or more
banks or other entities ("PARTICIPANTS") participating interests in any
Loan owing to such Lender, any Commitment of such Lender or any other
interest of such Lender hereunder and under the other Credit Documents
(including to loan derivative counterparties in respect of swaps or
similar arrangements having the practical or economic effect thereof).
In the event of any such sale by a Lender of a participating interest
to a Participant, such Lender's obligations under this Agreement to the
other parties to this Agreement shall remain unchanged, such Lender
shall remain solely responsible for the performance thereof, such
Lender shall remain the holder of any such Loan for all purposes under
this Agreement and the other Credit Documents, and the Borrower and the
Administrative Agent shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations
under this Agreement and the other Credit Documents. In no event shall
any Participant under any such participation have any right to approve
any amendment or waiver of any provision of any Credit Document, or any
consent to any departure by any Credit Party therefrom, except to the
extent that such amendment, waiver or consent would directly forgive
any principal of any Loan or reduce the stated rate, or forgive any
portion, or postpone the date for the payment, of any interest or fee
payable hereunder (other than as a result of waiving the applicability
of any post-default increase in interest rates), or increase the
aggregate amount of the Commitments of any Lender or postpone the date
of the final scheduled maturity of any Loan, in each case to the extent
subject to such participation. The Borrower agrees that if amounts
outstanding under this Agreement are due or unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an
Event of Default, each Participant shall, to the maximum extent
permitted by applicable law, be deemed to have the right of setoff in
respect of its participating interest in amounts owing under this
Agreement to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under this Agreement,
PROVIDED that, in purchasing such participating interest, such
Participant shall be deemed to have agreed to share with the Lenders
the proceeds thereof as provided in Section 13.7 as fully as if it were
a Lender hereunder. The Borrower also agrees that each Participant
shall be entitled to the benefits of Sections 2.10 and 2.11 with
respect to its participation in the Commitments and the Loans
outstanding from time to time as if it were a Lender, PROVIDED that no
Participant shall be entitled to receive any greater amount pursuant to
any such Section than the transferor Lender would have been entitled to
receive in respect of the amount of the participation transferred by
such transferor Lender to such Participant had no such transfer
occurred.
(iii) Any Lender may, in the ordinary course of its business
and in accordance with applicable law, at any time and from time to
time assign to any Lender or any Affiliate thereof or Approved Fund
with respect thereto (with the consent of the Borrower if any increased
costs would result therefrom) or, with the consent of the Borrower and
the Administrative Agent (which in each case shall not be unreasonably
withheld, it being
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understood that, without limitation, the Borrower shall have the right
to withhold its consent to any assignment if, in order for such
assignment to comply with applicable law, the Borrower would be
required to obtain the consent of, or make any filing or registration
with, any Governmental Authority), to an additional bank or fund that
is regularly engaged in making, purchasing or investing in loans or
securities or financial institution (an "ASSIGNEE") all or any part of
its rights and obligations under this Agreement and the other Credit
Documents pursuant to an Assignment and Acceptance, substantially in
the form of Exhibit F, executed by such Assignee, such assigning Lender
(and, in the case of an Assignee that is not then a Lender, an
Affiliate thereof or an Approved Fund with respect thereto, by the
Borrower and the Administrative Agent) and delivered to the
Administrative Agent for its acceptance and recording in the Register,
PROVIDED that, (a) except in the case of an assignment of all of a
Lender's interests under this Agreement, unless otherwise agreed to by
the Borrower and the Administrative Agent, no such assignment to an
Assignee (other than any Lender, any Affiliate thereof or any Approved
Fund with respect thereto) shall be in an aggregate principal amount of
less than $5,000,000 and (b) after giving effect to each such
assignment, the Revolving Credit Commitment of each Lender having a
Euro Revolving Credit Commitment or Yen Revolving Credit Commitment
shall be equal to or greater than such Lender's Euro Revolving Credit
Commitment, if any, and Yen Revolving Credit Commitment, if any. Upon
such execution, delivery, acceptance and recording, from and after the
effective date determined pursuant to such Assignment and Acceptance,
(x) the Assignee thereunder shall be a party hereto and, to the extent
provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder with a Commitment as set forth
therein and (y) the assigning Lender thereunder shall, to the extent
provided in such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such assigning
Lender shall cease to be a party hereto). Notwithstanding any provision
of this Agreement to the contrary, the consent of the Borrower shall
not be required for any assignment that occurs at any time when any of
the events described in Section 11.5 shall have occurred and be
continuing with respect to the Borrower.
(b) (b) Nothing herein shall prohibit any Lender from pledging
or assigning all or any portion of its Loans to any Federal Reserve Bank in
accordance with applicable law, and any Lender that is an investment fund that
invests in bank loans may, without the consent of the Borrower or the
Administrative Agent, pledge or assign all or any portion of its Loans and
promissory notes evidencing such Loans to any trustee or any other
representative of holders of obligations owed or securities issued by such
investment fund as security for such obligations or securities, PROVIDED that no
such pledge or assignment shall release a Lender from any of its obligations
hereunder, substitute any such pledgee or assignee for such Lender as party
hereto or increase the obligations of the Borrower hereunder. In order to
facilitate such pledge or assignment, the Borrower hereby agrees that, upon
request of any Lender at any time and from time to time after the Borrower has
made its initial borrowing hereunder, the Borrower shall provide to such Lender,
at the Borrower's own expense, a promissory note, substantially in the form of
Exhibit C-1 or C-2, as the case may be, evidencing the Term Loans and Revolving
Credit Loans, respectively, owing to such Lender.
(c) The Administrative Agent, on behalf of the Borrower, shall
maintain at the address of the Administrative Agent referred to in Section 13.2
a copy of each Assignment and Acceptance delivered to it and a register (the
"REGISTER") for the recordation of the names and addresses of the Lenders and
the Commitment of, and principal amount of the Loans (whether or not evidenced
by a promissory note) owing to, each Lender from time to time. The entries in
the Register shall be conclusive, in the absence of manifest error, and the
Borrower, the Administrative Agent and the Lenders shall treat each Person whose
name is recorded in the
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Register as the owner of a Loan or other obligation hereunder as the owner
thereof for all purposes of this Agreement and the other Credit Documents,
notwithstanding any notice to the contrary. Any assignment of any Loan or other
obligation hereunder (whether or not evidenced by a promissory note) shall be
effective only upon appropriate entries with respect thereto being made in the
Register. Any assignment of all or part of a Loan evidenced by a promissory note
shall be registered on the Register only upon surrender for registration of
assignment or transfer of such promissory note evidencing such Loan, accompanied
by a duly executed Assignment and Acceptance, and thereupon one or more new
promissory notes in the same aggregate principal amount shall be issued to the
designated Assignee and the old promissory notes shall be returned by the
Administrative Agent to the Borrower marked "canceled". The Register shall be
available for inspection by the Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(d) The Administrative Agent shall (i) upon its receipt of an
Assignment and Acceptance executed by an assigning Lender and an Assignee (and,
in the case of an Assignee that is not then a Lender, an Affiliate thereof or an
Approved Fund with respect thereto, by the Borrower and the Administrative
Agent) together with payment to the Administrative Agent of a registration and
processing fee of $3,500, promptly accept such Assignment and Acceptance and
(ii) on the effective date determined pursuant thereto record the information
contained therein in the Register and give notice of such acceptance and
recordation to the Lenders and the Borrower.
(e) Subject to Section 13.16, the Borrower authorizes each
Lender to disclose to any Participant or Assignee (each, a "TRANSFEREE") and any
prospective Transferee any and all financial information in such Lender's
possession concerning the Borrower and its Affiliates that has been delivered to
such Lender by or on behalf of the Borrower pursuant to this Agreement or which
has been delivered to such Lender by or on behalf of the Borrower in connection
with such Lender's credit evaluation of the Borrower and its Affiliates prior to
becoming a party to this Agreement, PROVIDED that neither the Administrative
Agent nor any Lender shall provide to any Transferee or prospective Transferee
any of the Confidential Information unless such person shall have previously
executed a Confidentiality Agreement in the form of Exhibit H.
13.7 REPLACEMENTS OF LENDERS UNDER CERTAIN CIRCUMSTANCES. The
Borrower shall be permitted to replace any Lender that (a) requests
reimbursement for amounts owing pursuant to Section 2.10, 2.12, 3.5 or 5.4, (b)
is affected in the manner described in Section 2.10(a)(iii) and as a result
thereof any of the actions described in such Section is required to be taken or
(c) becomes a Defaulting Lender, with a replacement bank or other financial
institution, PROVIDED that (i) such replacement does not conflict with any
Requirement of Law, (ii) no Event of Default shall have occurred and be
continuing at the time of such replacement, (iii) the Borrower shall repay (or
the replacement bank or institution shall purchase, at par) all Loans and other
amounts (other than any disputed amounts), pursuant to Section 2.10, 2.11, 2.12,
3.5 or 5.4, as the case may be) owing to such replaced Lender prior to the date
of replacement, (iv) the replacement bank or institution, if not already a
Lender, and the terms and conditions of such replacement, shall be reasonably
satisfactory to the Administrative Agent, (v) the replaced Lender shall be
obligated to make such replacement in accordance with the provisions of Section
13.6 (provided that the Borrower shall be obligated to pay the registration and
processing fee referred to therein) and (vi) any such replacement shall not be
deemed to be a waiver of any rights that the Borrower, the Administrative Agent
or any other Lender shall have against the replaced Lender.
13.8 ADJUSTMENTS; SET-OFF. (a) If any Lender (a "BENEFITTED
LENDER") shall at any time receive any payment of all or part of its Loans, or
interest thereon, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or proceedings of
the nature referred to in Section 11.5, or otherwise), in a greater proportion
than any such payment to or collateral received by any other Lender, if any, in
respect of such other
<PAGE>
99
Lender's Loans, or interest thereon, such benefitted Lender shall purchase for
cash from the other Lenders a participating interest in such portion of each
such other Lender's Loan, or shall provide such other Lenders with the benefits
of any such collateral, or the proceeds thereof, as shall be necessary to cause
such benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; PROVIDED, HOWEVER, that
if all or any portion of such excess payment or benefits is thereafter recovered
from such benefitted Lender, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest.
(b) After the occurrence and during the continuance of an
Event of Default, in addition to any rights and remedies of the Lenders provided
by law, each Lender shall have the right, without prior notice to the Borrower,
any such notice being expressly waived by the Borrower to the extent permitted
by applicable law, upon any amount becoming due and payable by the Borrower
hereunder (whether at the stated maturity, by acceleration or otherwise) to
set-off and appropriate and apply against such amount any and all deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Lender or any branch or agency thereof to or for the
credit or the account of the Borrower. Each Lender agrees promptly to notify the
Borrower and the Administrative Agent after any such set-off and application
made by such Lender, PROVIDED that the failure to give such notice shall not
affect the validity of such set-off and application.
13.9 COUNTERPARTS. This Agreement may be executed by one or
more of the parties to this Agreement on any number of separate counterparts
(including by facsimile transmission), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. A set of the
copies of this Agreement signed by all the parties shall be lodged with the
Borrower and the Administrative Agent.
13.10 SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
13.11 INTEGRATION. This Agreement and the other Credit
Documents represent the agreement of the Borrower, the Administrative Agent and
the Lenders with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof not expressly set forth or
referred to herein or in the other Credit Documents.
13.12 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
13.13 SUBMISSION TO JURISDICTION; WAIVERS. Each of Newco 4,
Parent and the Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Credit Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the courts of the State of
New York, the courts of the United States of America for the Southern District
of New York and appellate courts from any thereof;
<PAGE>
100
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in Section 13.2 or at such other address of
which the Administrative Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding referred
to in this Section 13.13 any special, exemplary, punitive or consequential
damages.
13.14 ACKNOWLEDGMENTS. Each of Newco 4, Parent and the
Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Credit Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrower arising out of or in
connection with this Agreement or any of the other Credit Documents, and the
relationship between Administrative Agent and Lenders, on one hand, and the
Borrower, on the other hand, in connection herewith or therewith is solely that
of debtor and creditor; and
(c) no joint venture is created hereby or by the other Credit
Documents or otherwise exists by virtue of the transactions contemplated hereby
among the Lenders or among the Borrower and the Lenders.
13.15 WAIVERS OF JURY TRIAL. NEWCO 4, PARENT, THE BORROWER,
THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
13.16 CONFIDENTIALITY. The Administrative Agent and each
Lender shall hold all non-public information furnished by or on behalf of the
Borrower in connection with such Lender's evaluation of whether to become a
Lender hereunder or obtained by such Lender or the Administrative Agent pursuant
to the requirements of this Agreement ("CONFIDENTIAL INFORMATION"), in
accordance with its customary procedure for handling confidential information of
this nature and (in the case of a Lender that is a bank) in accordance with safe
and sound banking practices and in any event may make disclosure as required or
requested by any governmental agency or representative thereof or pursuant to
legal process or to such Lender's or the Administrative Agent's attorneys,
professional advisors or independent auditors or Affiliates, PROVIDED that
unless specifically prohibited by applicable law or court order, each Lender and
the Administrative Agent shall notify the Borrower of any request by any
governmental agency or representative thereof (other than any such request in
connection with an examination of the financial condition of such Lender by such
governmental agency) for disclosure of any such non-public information prior to
disclosure of such information, and PROVIDED FURTHER that in no event
<PAGE>
101
shall any Lender or the Administrative Agent be obligated or required to return
any materials furnished by the Borrower or any Subsidiary of the Borrower. Each
Lender and the Administrative Agent agrees that it will not provide to
prospective Transferees or to prospective direct or indirect contractual
counterparties in swap agreements to be entered into in connection with Loans
made hereunder any of the Confidential Information unless such Person shall have
previously executed a Confidentiality Agreement in the form of Exhibit H.
13.17 CONVERSION OF CURRENCIES. (a) If, for the purpose of
obtaining judgment in any court, it is necessary to convert a sum owing
hereunder in one currency into another currency, each party hereto agrees, to
the fullest extent that it may effectively do so, that the rate of exchange used
shall be that at which in accordance with normal banking procedures in the
relevant jurisdiction the first currency could be purchased with such other
currency on the Business Day immediately preceding the day on which final
judgment is given.
(b) The obligations of the Borrower in respect of any sum due
to any party hereto or any holder of the obligations owing hereunder (the
"APPLICABLE CREDITOR") shall, notwithstanding any judgment in a currency (the
"JUDGMENT CURRENCY") other than the currency in which such sum is stated to be
due hereunder (the "AGREEMENT CURRENCY"), be discharged only to the extent that,
on the Business Day following receipt by the Applicable Creditor of any sum
adjudged to be so due in the Judgment Currency, the Applicable Creditor may in
accordance with normal banking procedures in the relevant jurisdiction purchase
the Agreement Currency with the Judgment Currency; if the amount of the
Agreement Currency so purchased is less than the sum originally due to the
Applicable Creditor in the Agreement Currency, the Borrower agrees, as a
separate obligation and notwithstanding any such judgment, to indemnify the
Applicable Creditor against such loss. The obligations of the Borrower contained
in this Section 13.17 shall survive the termination of this Agreement and the
payment of all other amounts owing hereunder.
13.18 EUROPEAN ECONOMIC AND MONETARY UNION. Except as
expressly provided herein, each provision of this Agreement shall be subject to
such reasonable changes of construction as the Administrative Agent may from
time to time reasonably specify to be appropriate to reflect the adoption of the
euro in any Participating Member State and any relevant market conventions or
practices relating to the euro.
13.19 MARGIN REGULATIONS. (a) Notwithstanding anything in this
Agreement or any other Credit Document to the contrary, prior to the Term Loan
Funding Date, the Borrowings hereunder are not, and are not intended to be,
secured by the Shares.
(b) Notwithstanding anything in this Agreement or any other
Credit Document to the contrary, prior to the Term Loan Funding Date, no
covenant set forth in this Agreement or any other Credit Document shall be
deemed to have been breached, and no Default or Event of Default shall be deemed
to have occurred, as the result of (a) the granting of any Lien on any of the
Shares, (b) any sale or disposition of the Shares for fair value received by the
Borrower in cash (PROVIDED that the Borrower (i) holds the proceeds of such sale
as cash or (ii) invests the proceeds of such sale in certificates of deposit,
U.S. or U.K. government securities, commercial paper or other money market
instruments that are exempted securities under the United States Federal
securities laws or are of similar investment quality to the foregoing or (c) any
change in the market value of the Shares.
<PAGE>
102
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
WILLIS CORROON CORPORATION, as
Borrower,
by
-------------------------------
Name:
Title:
WILLIS CORROON GROUP LIMITED, as
a Guarantor,
by
-------------------------------
Name:
Title:
TRINITY ACQUISITION plc, as a
Guarantor,
by
-------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as
Administrative Agent and as a Lender,
by
-------------------------------
Name:
Title:
<PAGE>
Exhibit 10.3
page 1 of pages.
\Amsterdam, October 13, 1998
WILLIS CORROON GROUP plc
WILLIS CORROON EUROPE B.V.
TOLBERT INSURANCE & FINANCE B.V.
SAINT GALLEN S.r.l.
OLIMPIA S.r.l.
ITAL BROKERS Holding S.p.A.
ARCEF Holding N.V.
and
the Directors (as defined)
MASTER SHAREHOLDERS' AGREEMENT
<PAGE>
INDEX
MASTER SHAREHOLDERS' AGREEMENT........................................2
WHEREAS.............................................................2
PREAMBLE............................................................2
1. RECITALS AND EXHIBITS........................................2
2. TERMINATION OF PRIOR AGREEMENTS..............................2
3. DEFINITIONS..................................................2
4. REFERENCE TO THE MASTER ACQUISITION AGREEMENT AND INTERIM
PERIOD.......................................................2
5. PURPOSE AND EFFECTS OF THIS MASTER SHAREHOLDERS' AGREEMENT...2
SHAREHOLDERS' PROVISIONS CONCERNING THE COMPANY.....................2
6. LIMITATIONS TO THE TRANSFER OF SHARES IN THE COMPANY.........2
7. COMPOSITION OF THE BOARD OF DIRECTORS AND OF THE COMMITTEE
OF STATUTORY AUDITORS........................................2
8. MANAGEMENT OF THE COMPANY....................................2
9. CONDUCT OF BUSINESS..........................................2
10. AMENDMENT OF THE BY-LAWS....................................2
11. RECIPROCAL UNDERTAKINGS ON BUSINESS.........................2
SHAREHOLDER'S PROVISIONS CONCERNING TOLBERT.........................2
12. LIMITATIONS TO THE TRANSFER OF SHARES.......................2
13. RIGHT OF PREEMPTION AND CONSOLIDATION OF CERTAIN
SHAREHOLDERS................................................2
14. COMPOSITION OF THE BOARD....................................2
15. CONDUCT OF BUSINESS.........................................2
16. AMENDMENT OF THE BY-LAWS....................................2
PUT AND CALL OPTIONS PROVISIONS.....................................2
17. PUT OPTIONS BY TOLBERT......................................2
18. CALL OPTIONS BY WILLIS......................................2
19. SPECIAL TOLBERT PUT AND CALL OPTION.........................2
20. PUT AND CALL OPTIONS DEFINITIONS............................2
21. GENERAL CONDITIONS CONCERNING PUT AND CALL OPTIONS..........2
22. RESTRICTIVE COVENANTS.......................................2
GENERAL PROVISIONS..................................................2
23. RIGHT OF INFORMATION........................................2
24. WARRANTIES..................................................2
25. COMMUNICATIONS..............................................2
26. DURATION....................................................2
27. MISCELLANEOUS...............................................2
28. GOVERNING LAW AND ARBITRATION...............................2
ANNEX 3 - COMPANY BY-LAWS..........................................2
ANNEX 16.1 - TOLBERT BY-LAWS.......................................2
<PAGE>
page 2 of pages.
MASTER SHAREHOLDERS' AGREEMENT
By this Master Shareholders' Agreement (the "MSA" or the "Agreement") executed
in Amsterdam on 13 October 1998 (the "Execution Date"),
by and between
WILLIS CORROON GROUP plc., a company organised and existing under the laws of
United Kingdom, with registered office at Ten Trinity Square, London EC3P
3AX, authorised corporate capital of (pound) 66.000.000 issued corporate
capital (pound) 53.222.386,13, fully paid in, registered no. 621757,
represented by Ms. Sarah Turvill in her capacity as attorney and duly
authorised to execute this Agreement (hereinafter referred to as "WILLIS
Group");
- - WILLIS CORROON EUROPE B.V., a company organised and existing under the
laws of The Netherlands, with registered office at Marten Meesweg 51, 3068
AV Rotterdam (The Netherlands), authorised share capital NLG 150.000.000,
issued share capital NLG 115.493.000, registered no. 24135.835,
represented by Ms.. Sarah Turvill in her capacity as Director and duly
authorised to execute this Agreement (hereinafter referred to as "WILLIS
Europe"); WILLIS Group and WILLIS Europe also being joint and collectively
referred to as the "WILLIS";
- - TOLBERT INSURANCE & FINANCE B.V., a company organised and existing under
the laws of The Netherlands, with registered office at "Olimpic Plaza",
Fred. Roeskestraat 123 - I - 1076 EE Amsterdam - The Netherlands,
corporate capital of NLG 73.400.000
(seventy-three-million-fourhundred-thousand) fully paid in, Trade Register
No 33.150.389, represented by Mr. Eltink and by Mr. _____________in their
capacity as attorney duly empowered to execute this Agreement (hereinafter
referred to as "Tolbert");
- - SAINT GALLEN S.r.l., a company organised and existing under the laws of
Italy with registered office at Via A. Doria 15, 10123 Turin (Italy),
corporate capital of ITL
<PAGE>
page 3 of pages.
20.000.000, fully paid in, registered with the Companies Register of the
Chamber of Commerce in Turin under no. 548343, represented by Mr. Lorenzo
Boglione in his capacity as Chairman and duly authorised to execute this
Agreement (hereinafter referred to as "Saint Gallen");
- - OLIMPIA S.r.l., a company organised and existing under the laws of Italy
with registered office at Via dei Giardini n. 7, Milan - Italy, corporate
capital of ITL 20.000.000 (twenty billion) fully paid in, registered with
the Companies Register of the Chamber of Commerce in Milan under no.
1420817 (REA), represented by Mr. Carlo Pasteur in his capacity as
Amministratore Unico duly authorised to execute this Agreement
(hereinafter referred to as "OLIMPIA");
- - ITAL BROKERS Holding S.p.A., a company organised and existing under the
laws of Italy, with registered office at Via Galassi n. 2, Cagliari,
corporate capital of ITL 5.000.000.000 fully paid in, registered in the
Companies Register of the Chamber of Commerce in Cagliari under no.
151025, represented by Mr. Sebastiano Romeo or Mr. Franco Lazzarini in
their respective capacity as Chairman and Managing Director and duly
authorised to execute this Agreement (hereinafter referred to as "HBC");
- - ARCEF Holding N.V., a company organised and existing under the laws of
Netherlans Antilles, with registered office at Chuchubiweg 17, Curacao,
corporate capital of USD 30,000 (thirty-thousand) fully paid in,
represented by Mr. T.J. Eltink in his capacity as attorney duly empowered
to execute this Agreement (hereinafter referred to as "NP"); and,
- - Mr. Lorenzo Boglione, an Italian citizen, resident in Italy and domiciled
at Via Padova, 55, 10152 Turin, Italy, (hereinafter "Mr. L. Boglione");
Mr. Enrico Boglione, an Italian citizen, resident in Italy and domiciled
at Via Padova, 55, 10152 Turin, Italy, (hereinafter "Mr. E. Boglione");
and, Mr. Francesco Boglione, an Italian citizen, resident in the United
Kingdom and domiciled at Via Padova, 55, 10152 Turin, Italy, (hereinafter
"Mr. F. Boglione"); Mr. Marco Gallotti, an Italian citizen, resident in
Italy and domiciled at Via Padova, 55, 10152 Turin, Italy, (hereinafter
"Mr. Gallotti"); and, Mr. Giovanni Peracino, an Italian citizen, resident
in Italy and domiciled at Via Padova, 55, 10152 Turin, Italy, (hereinafter
"Mr. Peracino"); Messrs. Lorenzo Boglione, Enrico Boglione, Francesco
Boglione, Marco Gallotti e Giovanni Peracino, also being jointly and
collectively referred to as the "SG Directors"; and,
- - Mr. Carlo Pasteur, an Italian citizen, resident in Italy and domiciled at
Via Stampa 8, 20123 Milan (hereinafter "Mr. C. Pasteur"); and, Mr. Edoardo
Pasteur, an Italian citizen, resident in Italy and domiciled at Via Santa
Maria Valle 5, 20123 Milan, (hereinafter "Mr. E. Pasteur"); Messrs. Carlo
Pasteur and Edoardo Pasteur, being jointly and collectively referred to as
the "OLIMPIA Directors"; and,
- - Mr. Franco Lazzarini, an Italian citizen, resident in Italy and domiciled
at Via Albaro 3, Genova (hereinafter "Mr. Lazzarini"); Mr. Sebastiano
Romeo, an Italian citizen, resident in Italy and domiciled at Via Albaro
3, Genova (hereinafter "Mr.
<PAGE>
page 4 of pages.
Romeo"); and, Mr. Gian Carlo Gardella, an Italian citizen, resident in
Italy and domiciled at Via Albaro 3, Genova (hereinafter "Mr. Gardella");
Messrs. Franco Lazzarini, Sebastiano Romeo and Gian Carlo Gardella, also
being jointly and collectively referred to as the "HBC Directors";
WHEREAS
A. All the parties to this MSA (the "Parties") will become, by effect of a
Master Acquisition Agreement (as defined below), the direct and indirect
shareholders owning 100% of the shares of the Company (as defined below).
B. The Parties wish to implement the Memorandum of Understanding entered into
on June 5, 1998, as amended and integrated thereafter on July 22, 1998, on
July 28,1998, and by means of subsequent letters, whose contents are
agreed upon by the Parties (the "MoU"), where, inter alia, the main terms
of this MAA and of the MSA have been set out, and which will be fully
replaced by the present MAA and by the MSA and, therefore, is terminated.
C. Certain of the parties hereto have entered into a shareholders' agreement
dated July 22, 1997, which will be fully replaced by the present MSA and
therefore has to be terminated.
Therefore, the Parties hereto undertake and agree as follows:-
PREAMBLE
1. RECITALS AND EXHIBITS.
The preambles hereto are to be construed as a material and integral part
of this Master Shareholders' Agreement as well as the Exhibits and Annexes
hereto.
2. TERMINATION OF PRIOR AGREEMENTS.
The Shareholders' Agreement dated 22 July 1997, entered into by and among
WILLIS, SG, Olimpia, SG Stockholders and Messrs. Pasteur, as they are
defined in such shareholders' agreement, and the MoU entered into by and
among Willis Corroon Group plc, Willis Corroon Europe B.V., Tolbert
Insurance & Finance B.V., Ital Broker Holding
<PAGE>
page 5 of pages.
S.p.A., Arcef Holding N.V, Uta Willis Corroon S.p.A., Saint Gallen S.r.l.,
and Olimpia S.r.l., are hereby terminated as of the date of this Agreement
and all the parties are reciprocally released from any liability and/or
obligation arising therefrom for any reason whatsoever.
3. DEFINITIONS.
In this MSA, the following expressions shall have the following meanings
unless the context otherwise requires:
(a) "Business" means the business currently conducted by the Company as
defined below, Ital Brokers S.p.A. and Interconsultwise S.r.l;
(b) "Company" means Uta Willis Corroon S.p.A., a company organised and
existing under the laws of Italy with registered office at Via
Padova 55, Turin (Italy), registered with the Companies Register of
the Chamber of Commerce in Turin under no. 118566, whose corporate
capital is equal to ITL 1.000.000.000 (one billion) fully paid in
and shall be held 50% by Willis Europe and 50% by Tolbert, as
resulting from the homologation of certain capital increases and of
the new version of the by-laws, which - inter alia - will also
modify the name of the Company into "Willis Corroon Italia Holding"
and its business scope from an operating company to a holding
company;
(c) "Company's By-laws" means the current by-laws of the Company,
attached hereto under Annex 3, and their new version to be adopted
in accordance with the provisions of this MSA and to be attached
under the same annex once homologated.
(d) "Director(s)" means any of Messrs. Lorenzo Boglione, Enrico
Boglione, Francesco Boglione, Marco Gallotti, Giovanni Peracino,
Carlo Pasteur, Edoardo Pasteur, Franco Lazzarini, Sebastiano Romeo,
Gian Carlo Gardella, who owns (or will own as of First Closing) a
direct or indirect interest as shareholders in Tolbert; furthermore
any of Messrs. Enrico Boglione, Carlo Pasteur, Edoardo Pasteur,
Marco Gallotti, Giovanni Peracino, Franco Lazzarini, Sebastiano
Romeo and Gian Carlo Gardella, also defined as "Strategic
Director(s)" with respect to certain rights and obligations provided
hereunder.
(e) "Execution Date" means the date of signature of this MSA and of the
MAA as defined below;
(f) "Fiduciary Funds" means all premiums and claims monies paid to or
received by the Company from any source which relates to the
insurance transactions of any
<PAGE>
page 6 of pages.
kind relating to clients in connection with the business of the
Company.
(g) "First Closing" has the same meaning of the term First Closing as
defined in the MAA;
(h) "First Option" means the put option set forth under paagraph 17.2
letter (a) or the call option set forth under paragraph 18.2 letter
(a).
(i) "Master Acquisition Agreement" or "MAA" means the agreement entered
into on Execution Date by and among Willis, Tolbert, SG, Olimpia,
HBC, NP, which, inter alia, provides for the acquisition by the
Company of 100% of Italbrokers S.p.A. and Interconsultwise SRL, and
the acquisition by Tolbert of a 50% interest in the Company
following certain transactions and corporate action.
(j) "Put and/or Call Options" means an irrevocable obligation of WILLIS
to purchase all or part of the Shares from Tolbert (the "Put
Options") and an irrevocable obligation of Tolbert to sell to WILLIS
Europe all or part of the Shares in accordance with the terms and
conditions provided hereunder (the "Call Options"), in accordance
with the terms and conditions provided under the Put and/or Call
Options Provisions of this MSA;
(k) "Shareholder(s)" means jointly or severally a shareholder or the
shareholders of the Company;
(l) "Share(s)" means (i) the shares or the quotas in a company, (ii) any
shares issued in exchange therefor by way of conversion or
reclassification, (iii) any shares or quotas representing or
deriving from such shares or quotas in case of any consolidation,
merger or split up of such company with or into another legal
entity, or in case of any sale or conveyance to another legal entity
of any property of such company as a whole, (iv) any shares or
quotas representing or deriving from such property as a result of
any increase in, reorganisation of, or variation of the capital of
such company, (v) any warrants, subscription or stock option rights,
or any other form of security or instrument that would create rights
to hold an equity interest in such company, which may be created or
authorised from time to time and (vi) any respective interest in a
legal entity deriving from such shares or quotas by way of change to
such company's legal form;
(m) "Subsidiary" means any subsidiary of the Company, in relation to
which at least one of the conditions referred to in the first
paragraph of article 2359 of the Italian Civil Code is met;
(n) "Tolbert Shareholder(s)" means jointly or severally a shareholder or
the shareholders of Tolbert; and,
(o) "Transfer" means to sell, assign, contribute into another company,
swap, exchange, assign in usufruct, assign the sole ownership ("nuda
proprieta"),
<PAGE>
page 7 of pages.
dispose of, or otherwise transfer (whether by way of pledge,
encumbrance or otherwise) any of the Shares, be it for a
consideration or on a nil consideration basis (also by deed of
gift), directly or indirectly owned, or enter into a commitment to
do any of the foregoing.
(p) "Willis Corroon Italia" means UTA Willis Corroon Rischi Speciali
S.R.L. - which is and shall be controlled by the Company and the
name of which shall be changed to "Willis Corroon Italia".
4. REFERENCE TO THE MASTER ACQUISITION AGREEMENT AND INTERIM PERIOD
4.1. This MSA and the MAA shall be entered into simultaneously on the same date
and any and all events regulated in these two agreements that shall occur
at Execution Date shall be deemed as to take place at the same time. If
any of the transactions provided for in these two agreements should not
take place, both this MSA, and the MAA shall remain without effect, unless
otherwise agreed by the Parties, and each Party shall have recourse to all
remedies available under applicable laws against the defaulting
Party(ies).
4.2. Throughout the implementation of all actions set forth in this MAA and/or
in the MSA and up and until the appointment of the new boards of directors
of the interested companies as provided for in this MAA and/or MSA, the
Parties agree to cause the boards of directors of all interested companies
to conduct the day-to-day business in an ordinary and prudent manner with
an aim to implementing the various actions provided for in this MAA and/or
in the MSA, and to consult and agree among them should any extraordinary
matter arise. Should the Parties fail to appoint new boards of directors,
in any case the provisions set forth under the MSA shall apply with
respect to the interested companies.
4.3. The Parties agree and acknowledge that a provision similar to this Article
4 has been provided for in the MAA.
4.4. The Directors hereby declare that even though they are not party to the
MAA they fully acknowledge and agree all of the provisions set forth
therein.
5. PURPOSE AND EFFECTS OF THIS MASTER SHAREHOLDERS' AGREEMENT.
5.1. The Parties hereto acknowledge and agree that the aim of this MSA is to
regulate their respective direct or indirect interests in the Company and
in Tolbert as from the date of First Closing and to ensure that all rights
and obligations of each of the Parties hereto are satisfied. However the
provisions of this MSA set forth under paragraphs 6.1, 13.1 and 13.2 shall
be valid and binding among the Parties from Execution Date.
<PAGE>
page 8 of pages.
5.2. In particular, the Parties are fully aware that all the provisions of this
MSA are non severable from each other (including the Put and/or Call
Options and the related obligations to ensure their enforcement) and each
of them is essential to the performance of the whole MSA.
5.3. Therefore, any default with respect to any provision of this MSA
whatsoever, as well as any behaviour or act which may result in any
unjustified delay, hindering, or default of any of them, shall be deemed
to affect the entire MSA also for purposes of damages.
SHAREHOLDERS' PROVISIONS CONCERNING THE COMPANY
6. LIMITATIONS TO THE TRANSFER OF SHARES IN THE COMPANY.
6.1. In view of the Put and/or Call Options provided hereunder, the
Shareholders undertake not to Transfer any of the Shares of the Company up
until 31st December 2007, unless prior written consent is obtained from
the other Parties and, where the proposed transferee is not already a
party to this Agreement, subject to this latter entering and being bound
by all of the provisions set forth under this MSA.
6.2. The Parties expressly undertake not to abrogate the pre-emption right
provided for under the current Company's by-laws and to amend it, and keep
it so amended, in order to appropriately reflect (i) the definition of
Shares and Transfer provided for under Article 3 above; and (ii) the
Formula Price as defined under paragraph 20.1 below.
6.3. However, such pre-emption right shall not prejudice the exercise of the
Put and/or Call Options and, to such effect, all of the Parties hereby
waive any and all pre-emption rights they may be entitled to in respect of
any Transfer of the Shares of the Company in accordance with the Put
and/or Call Options.
7. COMPOSITION OF THE BOARD OF DIRECTORS AND OF THE COMMITTEE OF STATUTORY
AUDITORS.
7.1. Upon the homologation of the new by-laws of the Company, its board of
directors shall consist of 17 directors.
7.2. WILLIS will have the right to appoint 9 directors and Tolbert will have
the right to appoint 8 directors. Should one of the directors need to be
replaced or removed the new director shall be designated by the same
Shareholder who has designated the replaced
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page 9 of pages.
director and the other Shareholders shall vote at the general meeting of
the Company in accordance with the instruction received by such
Shareholder.
7.3. The Shareholders agree that, up until the exercise date of the First
Option, the following appointments shall remain in place in the Company
and in any of its subsidiaries:
Director Office company
Enrico Boglione Chairman & Managing Director the Company and Willis
Corroon Italia
Franco Lazzarini Deputy Chairman & Managing the Company and Willis
Director Corroon Italia
Sebastiano Romeo Deputy Chairman & Managing the Company and Willis
Director Corroon Italia
Giancarlo Gardella Managing Director the Company and Willis
Corroon Italia
Carlo Pasteur Managing Director the Company and Willis
Corroon Italia
Lorenzo Boglione Board Member the Company and Willis
Corroon Italia
Edoardo Pasteur Board Member the Company and Willis
Corroon Italia
NP designee Board Member the Company
Marco Gallotti Board member Willis Corroon Italia
Giovanni Peracino Board member Willis Corroon Italia
Notwithstanding the partial exercise of the Put and/or Call Options, each
of the Directors listed above shall be confirmed in his office(s) while he
owns an indirect stake in the Company.
7.4. The Parties expressly agree that, up until the date of exercise of the
First Option, each of the Directors shall be granted a directors' fee
which shall not be lower than the fee currently received by each of them
in relation to their respective office for the year commencing on January
1st, 1998. However, with effect as from January 1, 1999, Mr. Enrico
Boglione shall be granted a directors' fee equal to the fee currently
received by Mr. Franco Lazzarini and Mr. Sebastiano Romeo.
7.5. The Committee of Statutory Auditors of the Company shall consist of 3
effective members and 2 substitute members. WILLIS shall have the right to
appoint two effective members and one substitute member of the Committee
of Statutory Auditors, and Tolbert shall have the right to appoint one
effective member, who shall be the President of the Committee, and one
substitute member.
8. MANAGEMENT OF THE COMPANY.
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page 10 of pages.
8.1. Criteria for the management of the Company. Each party agrees to exercise
all his/its respective rights, powers and faculties, as Shareholder and/or
Director of the Company, to procure that:
(a) the Company performs and complies with all its obligations under
this MSA and the Company's by-laws;
(b) all matters reserved by law or by the By-laws to the decision of the
ordinary Shareholders' meeting of the Company shall be resolved upon
with the favourable vote of Shareholders representing at least the
majority of the entire issued share capital of the Company.
Notwithstanding the provisions set forth under this letter (b), the
Parties agree that in respect of the approval of the yearly accounts
of the Company, a 91% majority of the entire issued share capital of
the Company shall be reached;
(c) all matters reserved by law or by the By-laws to the decision of the
extraordinary Shareholders' meeting of the Company shall be resolved
upon with the favourable vote of Shareholders representing at least
the 91% of the entire issued share capital of the Company;
(d) the Business is conducted in accordance with sound and good business
practice, the highest ethical standards and the applicable
provisions of laws and regulations;
(e) the Fiduciary Funds shall not be used for the purpose of paying any
of the Company's expenditures of whatsoever nature to which purpose
the Shareholders and the Directors shall procure that such funds
shall be always held in a separate designated interest bearing
account. (This account may be at the same bank as the Company's
other bank accounts).
In any case the Shareholders and the Directors agree to manage the Company in
the most careful and diligent manner. In particular, the Shareholders and
the Directors undertake that the Company shall not carry out any activity
which may be outside the normal course of Business and inconsistent with
the past practice, except as expressly provided for under this
Shareholders' Agreement or with the prior written consent of all the
Shareholders.
8.2. Duty of previous consultation. In order to achieve the Company's object
the Shareholders and the Directors undertake to consult each other prior
to any material resolution to be adopted by the Shareholders' Meeting or
the Board of the Company, or prior to any material act to be performed by
or involving the Company, for the purpose of taking a common position in
accordance with the Company's interest.
8.3. Day to Day Management. The Shareholders agree that the day to day
management of the ordinary activity of the Company shall be entrusted to
the Chairman
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page 11 of pages.
and to all of the Managing Director(s).
8.4. List of items requiring approval of the Board. Notwithstanding the
foregoing, the Shareholders agree that the following decisions and actions
may not be made or taken by the Board unless they have been approved with
the affirmative vote of a simple majority of the directors in office, such
majority being obtained by the affirmative vote of at least two directors
appointed by WILLIS and two appointed by Tolbert (of which one among the
directors designated by SG and OLIMPIA, and one among the directors
designated by HBC and NP):
(a) the purchase or sale by the Company of a shareholding of any nature
whatsoever in another company or an interest of any nature in any
concern;
(b) the investment in, acquisition, sale, exchange, or disposal by the
Company of any asset or property in an amount exceeding ITL.
500,000,000- to be adjusted each year for inflation on the basis of
the ISTAT index;
(c) the undertaking, pursuing, participating in, or promoting by the
Company any activity other than the Business;
(d) the giving by the Company of any guarantee or indemnity or the
creation of any charge, lien or security of whatever nature over the
assets of the Company;
(e) the proposal for consolidation, amalgamation, merger or split up of
the Company and/or of any Subsidiary, with or into any other
company;
(f) the disposal of or dilution of the Company's shareholding or
interest, directly or indirectly, in any Subsidiary;
(g) the making of any loan or advance to any person, firm, corporate
body or any other business other than in the ordinary course of
business in excess of ITL. 150,000,000 - to be adjusted each year
for inflation on the basis of the ISTAT index or the borrowing of
any money except by way of advance payments of premiums due by
clients or indemnification of agreed losses on behalf of insurance
companies due to clients in the ordinary course of business;
(h) the creation, allotment or issue of any Shares or any other
securities or the grant of any option or right to subscribe in
respect thereof or convert any instrument into Shares;
(i) the termination of any material line of business operation of the
Company;
(j) the making any material change in the Business (or its proposal to
the Shareholders if such amendment requires a change in the "oggetto
sociale" (scope) of the Company);
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page 12 of pages.
(k) the making by the Company of any contract of material nature outside
the normal course of the Business;
(l) the proposal of reduction of the Company's capital, variation of the
rights attaching to any class of Shares or any redemption, purchase
or other acquisition by the Company of any Shares or other
securities of the Company;
(m) the proposal of adoption of any bonus or profit-sharing scheme or
any share option or share incentive scheme or employee trust or
ownership plan;
(n) the proposal of any change to the Company's by-laws;
(o) the presentation of any position for the winding up of the Company,
the suspension of payments or voluntary bankruptcy;
(p) the approval of annual capital and revenue budgets and any
modification thereto;
(q) the formation of, or entry into, any partnership, association or
joint venture, or the establishment of any new branches;
(r) the entry into any transaction, arrangement or agreement outside the
ordinary course of Business with or for the benefit of any director
of the Company or any Subsidiary, or persons connected or associated
with any such director;
(s) the entry into any payment obligation by and between the Company and
any of the Shareholders, unless at arm's length in the ordinary
course of business;
(t) the commencement, settlement or defence of any action, proceedings
or other litigation involving the Company, outside the ordinary
course of business;
(u) the change in the remuneration or powers of the Chairman and the
Managing Directors appointed upon designation of Tolbert;
(v) subject to paragraph 7.3 above the appointment or removal of any
person as managing director or chairman of the Company;
(w) to vote the shares held by the Company in the Subsidiaries and in
any other legal entity;
(x) to apply for the admittance of the Company to any regulated stock
exchange market.
In determining whether any of the matters described above require the
approval of the Board, a series of related transactions in any financial
year which when aggregated exceed the figures specified in the relevant
paragraph shall be construed as a single transaction requiring such
approval.
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page 13 of pages.
WILLIS acknowledges that the board resolutions under letter (u) above
require the affirmative vote of at least two Directors appointed by
Tolbert and consequently, the vote cast by the Directors appointed by
Tolbert with respect to such board resolutions shall not be deemed to be
in conflict with the interests of the Company.
The Shareholders further agree (i) that with respect to the matters listed
above in this paragraph 8.4, they will not vote in ordinary shareholders'
meetings in a manner contrary to the determination already expressed in
the resolution of the Board; and (ii) to not approve any resolution unless
a resolution on the same matter has been duly resolved by the Board.
9. CONDUCT OF BUSINESS.
9.1. Security of Markets. In light of the fact that WILLIS has been engaged for
a long time in, and has acquired a significant international experience
on, the Business and in order to have the Company benefit from such
experience, the Parties hereby agree and undertake that the Company will
use for the placing of the Business on behalf of its clients such
insurance companies and markets as shall have been approved by the Willis
Market Security Committee from time to time if applicable in relation to
the Italian market.
9.2. Insurance. The Directors and the Shareholders shall procure that the
Company take out "Errors and Omissions" insurance cover considered
adequate by WILLIS.
9.2.1. Subject to Article 9.2 above, WILLIS shall use reasonable
endeavours to procure that the Company shall be included in the
Willis Group Errors and Omissions Insurance Policy (the "Policy")
in respect of amounts in excess of any underlying policies which
the Company may take out.
9.2.2. Subject to the Company being included in the Policy in accordance
with Article 9.2.1 above the Company shall participate fully in the
Policy and shall pay to WILLIS a reasonable share of premium, on
the basis of an equitable allocation across all companies covered
by such policies and taking account of the total premium handled by
the Company, its retained brokerage and number of employees.
9.3. Budgets and financial information. The Directors and the Shareholders
agree that the Board shall:
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page 14 of pages.
(a) supply WILLIS on or before 1st October of each year with detailed
revenue and capital budgets for the Company and its Subsidiaries
(including estimated major items of revenue and capital expenditure)
for the following calendar year, broken down on a monthly basis, and
accompanying cash flow forecast, together with a balance sheet
showing the projected position of the following calendar year and
such additional statements and documents as deemed appropriate by
WILLIS;
(b) supply WILLIS within 4 (four) days after the end of each calendar
month, with monthly non-audited management accounts, such accounts
to include a detailed profit and loss account, balance sheet and
cash flow statement in a format prescribed by WILLIS and a review of
the budget together with a reconciliation of results with revenue
and capital budgets for the corresponding month;
(c) supply WILLIS with all the monthly and other periodical or
occasional accounting reports and documents that are produced by the
Company at the time when such reports and documents are drawn by or
delivered to the management of the Company;
(d) supply WILLIS with such documents, information or data on the
financial or economic situation of the Company and of the
Subsidiaries which are available and which WILLIS may reasonably
request within a reasonable period of time from the request of
WILLIS; and
(e) immediately inform WILLIS of any technical, legal or administrative
event which has already occurred or is threatened or likely to occur
and which may materially prejudice the financial or economic
situation of the Company and/or the Subsidiaries.
9.4. Dividend policy. To the extent that the legal reserves and other necessary
provisions have been duly allocated in compliance with the applicable
provisions of law and the by-laws, the Shareholders hereby undertake and
agree to procure that the Company and all its subsidiaries shall
distribute the maximum dividends possible in accordance with sound and
good business practice, and diligent and careful management. It being
understood that the intention is that dividends should be as near 100% of
the annual distributable profits as is possible.
10. AMENDMENT OF THE BY-LAWS.
All Shareholders undertake to fully co-operate so as to incorporate, to
the extent permitted by applicable laws, any of the provisions of this MSA
in the new Company's By-laws.
11. RECIPROCAL UNDERTAKINGS ON BUSINESS.
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page 15 of pages.
11.1. WILLIS expressly undertakes not to vote capital increases aimed at
diluting Tolbert's shareholding in the Company, always provided that any
capital increase in the Company shall be justified by Company's business
expansion and take place at terms and conditions based on a fair
evaluation of the liquidity required to finance such Company's business
expansion.
11.2. WILLIS undertakes: (i) to channel all its Italian business through the
Company; and, (ii) not to provide the WILLIS Retail Network to other
brokers operating in Italy.
11.3. The Shareholders and Tolbert Shareholders undertake: (i) to cause the
Company to channel all its business outside Italy to WILLIS and its retail
network, making their best efforts to pursue the said purpose. Such
obligation will not be applicable to the countries where WILLIS does not
have any established presence (i.e. where WILLIS does not have any
interest in any local company, firm or entity); and, (ii) to use their
best endeavours to direct all wholesale business (including reinsurance,
both facultative and treaty) generated directly or indirectly by the
Business to WILLIS Faber & Dumas Limited or such other WILLIS company as
appropriate. In the event that WILLIS does not offer competitive rates and
remuneration or does not have the specialist expertise to handle such
business it will be discussed constructively among and agreed by the
Parties with a view to reaching a mutually acceptable solution, including,
if appropriate, the use of a third party broker.
11.4. Notwithstanding the above, the Directors, Tolbert and Tolbert Shareholders
recognise that WILLIS has a considerable reinsurance and wholesale
activity in Italy connected to other Italian insurers and Italian brokers,
and hereby agree that WILLIS is and will be free to carry on and expand
the above activities provided that such expansion will not conflict with
the activity of the Company. Consequently, the Directors, Tolbert and
Tolbert Shareholders hereby undertake and warrant to exercise their best
endeavours to cause the Company not to conduct itself in a way which will
conflict with or be detrimental to WILLIS' existing wholesale
relationships. However, WILLIS expressly undertakes not to give insurance
or reinsurance assistance or risk management consultancy in any manner
whatsoever to other brokers or insurers operating in Italy who are
competing with the Company as regards the same clients or prospective
customers in connection with the Company's activities, and always provided
that the Company has previously informed WILLIS that it is negotiating
with such clients or prospective customers. WILLIS agrees and undertakes
to inform the Company on a regular basis of any major wholesale initiative
to be carried out in Italy with other brokers and/or insurers.
11.5. The Parties hereby undertake not to acquire other than through the
Company, any participation, directly or indirectly, in any other insurance
broker operating in Italy, unless a previous negotiation has been carried
out and an agreement reached thereon among themselves.
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page 16 of pages.
11.6. The Directors, Tolbert and Tolbert Shareholders acknowledge however, that
WILLIS may acquire an indirect shareholding or other participation in an
insurance broker operating in Italy as a result of an acquisition of a
company outside Italy. In such an event, it shall be expressly agreed that
WILLIS shall not be in default hereunder provided that WILLIS will either
put the new company under the control of the Company or resell or dispose
of its interest.
SHAREHOLDER'S PROVISIONS CONCERNING TOLBERT
12. LIMITATIONS TO THE TRANSFER OF SHARES.
In view of the Put and/or Call Options provided hereunder, the Tolbert
Shareholders undertake not to Transfer any of the Shares of Tolbert, or
any Share of SG, OLIMPIA or HBC, up until 31st December 2007.
13. RIGHT OF PREEMPTION AND CONSOLIDATION OF CERTAIN SHAREHOLDERS.
13.1. The Parties expressly undertake not to abrogate the pre-emption right
provided for under the current Tolbert' s by-laws and to amend it in order
to (i) appropriately reflect the definition of Shares and Transfer
provided for under Article 3 above, and (ii) set as the purchase price of
the Shares of Tolbert, to be so offered in pre-emption, the Formula Price
(as defined below), as proportionate to the Shares of the Company
corresponding to such offered Shares, net of any cost or tax effect.
13.2. However, such pre-emption right shall not prejudice the exercise of the
Put and/or Call Options provided hereunder and, to such effect, all of the
Parties hereby waive any and all pre-emption rights they may be entitled
to in respect of any Transfer of the Shares of Tolbert in accordance with
the Put and/or Call Options provided for hereunder.
13.3. The Parties hereto acknowledge and all Tolbert Shareholders undertake and
agree not to oppose any act or resolution of SG and OLIMPIA aimed at
merging or otherwise consolidating or contractually bound together their
interest in Tolbert.
14. COMPOSITION OF THE BOARD.
14.1. The Board shall consist of up to 4 directors.
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page 17 of pages.
14.2. SG, HBC and NP will have the right to appoint 1 director each. SG and
OLIMPIA will have the right to jointly appoint 1 director. Should one of
the Directors need to be replaced or removed the new director shall be
designated by the same Tolbert Shareholder who has designated the replaced
director and the other Tolbert Shareholders shall vote at the general
meeting of Tolbert in accordance with the instruction received by such
Tolbert Shareholder.
14.3. In the event of a change in the ownership of Tolbert the composition of
the Board shall be adjusted accordingly, and each shareholder should have
the right to designate a director(s) in proportion to its holdings.
14.4. To the extent permitted by applicable law, the Board of Directors of
Tolbert shall be vested with all powers of ordinary and extraordinary
management and the meetings shall be validly constituted only if a
majority of the directors in office are attending.
14.5. To the extent permitted by applicable law the Board of Directors of
Tolbert shall in particular be vested with the power to exercise the Put
Options provided hereunder upon specific written instructions of any of
its shareholders and to sell any of the Shares as a consequence of a Call
Options (as provided for hereunder).
14.6. All decisions of the Board of Directors shall be resolved upon with the
favourable vote of the majority of the directors (without casting vote) in
attendance.
15. CONDUCT OF BUSINESS.
15.1. Scope of Tolbert. Tolbert Shareholders undertake to keep Tolbert as a pure
holding company for the sole purposes of holding an equity interest in the
Company, with the sole exception of the 50% participation in Medsea
International Insurance Broker Ltd. ("Medsea")
The Shareholders and Tolbert Shareholders expressly agree that (i) Medsea
shall not book, and consequently shall refrain from booking, any brokerage
service in relation to NESCO; and that Medsea shall not compete with the
Company and in particular with the business previously carried out by
Italbroker S.p.A.. Any of such activities may be carried out by Medsea
only upon previous and express consent to be released by the Board of the
Company.
15.2. Dividend Policy. To the extent that the legal reserves and other necessary
provisions have been duly allocated in compliance with the applicable
provisions of law and the By-laws, the Tolbert Shareholders hereby
undertake and agree to procure that Tolbert shall distribute the maximum
dividends possible in accordance with sound and good business practice,
and diligent and careful management. It being understood that
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page 18 of pages.
the intention is that dividends should be as near 100% of the annual
distributable profits as is possible.
16. AMENDMENT OF THE BY-LAWS.
16.1. All Tolbert Shareholders agree that, unless as otherwise specified
hereunder, Tolbert shall be governed by Tolbert's By-laws as attached
hereto as Annex 16.1.
16.2. Tolbert's By-laws shall, to the extent permitted by applicable law and
advised by the respective counsels, incorporate any relevant provision of
this MSA and in particular be drafted so as to permit the timely and duly
exercise of the Put and/or Call Options (as defined below) to the benefit
of WILLIS or to the indirect benefit of any of the Tolbert Shareholders as
provided hereunder; and to allow the timely and duly compliance with the
provisions set forth under Article 8.5 of the MAA.
16.3. All matters reserved by law or by the By-laws to the decision of the
shareholders' meeting of Tolbert shall be resolved upon with the
favourable vote of Tolbert Shareholders representing at least the majority
of the entire issued share capital of Tolbert.
16.4. Tolbert Shareholders undertake to negotiate in good faith appropriate
deadlock provisions to prevent the dissolution of Tolbert in the event
that Tolbert's corporate bodies do not reach the majority required to pass
their resolutions.
PUT AND CALL OPTIONS PROVISIONS
17. PUT OPTIONS BY TOLBERT.
17.1. The Put Options to be exercised by Tolbert relate to the Shares of the
Company owned by Tolbert and may be exercised only if the interested
shareholder(s) of Tolbert give written instructions to that effect to the
Board. If, under applicable law, the exercise of the Put Option shall be
authorised by a shareholders meeting of Tolbert, all other shareholder(s)
of Tolbert shall attend such meeting and undertake to vote in favour of
the exercise of the Put Option by Tolbert. Tolbert shall exercise the Put
Option only in respect of such number of Shares of the Company as
proportionate to the shares of Tolbert owned by the shareholder of Tolbert
who made the request. All proceeds arising from the exercise of the Put
Option shall be distributed to the shareholder of Tolbert, who made the
request, in accordance with applicable corporate and tax laws and
regulations, through appropriate legal structures (inter alia by making
use of different classes of
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page 19 of pages.
shares in Tolbert, and/or deposit of the Shares of the Company with a
Trustee), net of any cost or tax impact for Tolbert.
17.2. The Put Options shall be exercised, under penalty of forfeiture, as
follows:-
(a) Not earlier than August 1, 2003 and not later than September 30,
2003, each of the Tolbert Shareholders will have the right to cause
Tolbert to exercise the Put Option, in whole or in part, over 60% of
its holding - as after the Second Capital Increase has been
completed - at the Formula Price (as defined below). Any
non-exercised Put Option may be exercised at the next Put Option
exercise date.
(b) Not earlier than August 1, 2005 and not later than September 30,
2005, each of the Tolbert Shareholders will have the right to cause
Tolbert to exercise the Put Option, in whole or in part, over 20% of
its holding - as after the Second Capital Increase has been
completed - at the Formula Price. Any non-exercised Put Option may
be exercised at the next Put Option exercise date.
(c) Not earlier than August 1, 2007 and not later than September 30,
2007, each of the Tolbert Shareholders will have the right to cause
Tolbert to exercise the Put Option over the remaining Shares at the
Formula Price.
(d) In the event that WILLIS is taken over - in any way which results in
a change of control - by one of the top five global insurance
broking groups (measured by revenue), any of the Tolbert
Shareholders will have the right to cause Tolbert to exercise the
Put Option, in whole or in part, at the Formula Price with a
Minimum, as defined below in paragraph 17.3, up until the third
anniversary of First Closing and at the Formula Price at any time
thereafter. This Put Option shall be exercised, under penalty of
forfeiture, within 2 months from the notice of the event, to be
communicated in writing by Willis to Tolbert.
17.3. The following Put Options are to be exercised by Tolbert only if requested
by such Tolbert Shareholder(s) of which the Director referred in the
events listed in this Article 17.3 is a shareholder and only in respect of
such number of Shares as proportionate to the shares of Tolbert indirectly
owned by the Director who made the request through a shareholder of
Tolbert
The following Put Options shall be exercised, under penalty of forfeiture,
within and not later than 4 months from the event:
(a) if a Director:
(i) at any time, is removed from office as a Director or manager
of the Company without Cause - as defined in paragraph 20.3
below - or if he voluntarily leaves the Company, or in the
event of death or permanent disablement, at the Formula Price;
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page 20 of pages.
(ii) at any time, is removed for Cause, at 50% of the Formula Price
if he is removed within 5 years from First Closing, or at the
75% of the Formula Price if he is removed after 5 years from
First Closing;
(b) if a Strategic Director:
(i) at any time, prior to 31st December 2003, voluntarily leaves
the Company, or is removed for Cause, at 50% of the Formula
Price;
(ii) at any time, after 31st December 2003, voluntarily leaves the
Company, or is removed for Cause, at 75% of the Formula Price;
(iii) at any time, in the event of death or permanent disablement,
at the Formula Price;
(iv) at any time, ceases to be a shareholder in any of SG, OLIMPIA
and HBC or if any of such companies ceases to be controlled by
Directors, at the 50% of the Formula Price if the event occur
within 5 years from First Closing, or at 75% of the Formula
Price if the event occur after 5 years from First Closing;
(v) at any time, is removed from office as a Director or manager
of the Company without Cause, at the Formula Price with a
Minimum as defined below;
(c) if a Director listed under paragraph 7.3 above, is not re-appointed
in his office as a Director of the Company, in accordance with the
provisions set forth under the same paragraph, provided that he owns
an indirect holding in the Company, at the Formula Price with a
Minimum as defined below;
(d) at any time, if WILLIS is in breach of this Agreement, which breach
has not been remedied within a 90 day period from a notice in
writing from Tolbert to WILLIS to such effect (copy of such notice
shall be communicated by Tolbert its shareholders and to the
Directors), at the Formula Price, subject to a Formula Price with a
Minimum equal to a value of ITL. 110 billion for the Company,
increased from the date of the First Closing by the Italian Consumer
Price Index (hereinafter "CPI") multiplied by the percentage of the
shareholding to be sold (the "Formula Price with a Minimum").
Should the event provided for hereinabove take place, also NP will
have the right to exercise a put option to be exercised, under
penalty of forfeiture, within 4 months from the expiry of the notice
in writing to WILLIS above mentioned, in respect of such number of
Shares of the Company as proportionate to the shares of Tolbert
owned by NP, at the Formula Price with a Minimum (as above defined).
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page 21 of pages.
17.4. Upon receipt of the Put Option notice WILLIS acknowledges and agrees to
give to the Director's co-shareholders in SG, OLIMPIA or HBC, as the case
may be, the right to acquire its shares at the same price (net of any cost
or tax effect for Tolbert and/or SG, OLIMPIA, HBC or NP, as the case may
be) that the Director would have received from WILLIS through Tolbert via
SG, OLIMPIA, or HBC, as the case may be, in case of exercise of such Put
Option. The Director's co-shareholders shall be requested to exercise such
right of pre-emption within 30 days from receipt of the notice from WILLIS
to such effect, under penalty of forfeiture.
17.5. Should any of the co-shareholders in any of SG, Olimpia or HBC, not wish
to exercise the pre-emption right provided for under Article 17.4 above ,
the same will be offered to any of SG, Olimpia, HBC, or NP, as the case
may be, that will be entitled to exercise pro-rata the pre-emption rights.
Such pre-emption right should be exercised within 20 days from receipt of
the notice from WILLIS to such effect, under penalty of forfeiture.
18. CALL OPTIONS BY WILLIS.
18.1. The Parties expressly agree that any of the Call Options to be exercised
by Willis are in relation to the Shares of the Company owned by Tolbert.
All proceeds arising from the exercise of the Call Options shall be to the
benefit of the Tolbert, except as provided for under Article 18.4 below.
18.2. The Call Options shall be exercised under penalty of forfeiture, as
follows:-
(a) not earlier than July 1, 2003 and not later than July 31, 2003, over
a 20% share of the total holding of Tolbert - as after the Second
Capital Increase has been completed - at the Formula Price subject
to a Formula Price with a Minimum (as above defined);
(b) not earlier than July 1, 2005 and not later than July 31, 2005, if
the option set out in Article 18.2 letter (a) above has not been
exercised, over a 20% share of the total holding of Tolbert - as
after the Second Capital Increase has been completed -at the Formula
Price;
(c) not earlier than July 1, 2007 and not later than July 31, 2007, over
all the outstanding Shares owned by Tolbert, at the Formula Price.
18.3. Furthermore, with respect to the exercise of the Call Options provided for
under Article below the Parties hereby agree that, through appropriate
legal structures - inter alia by making use of different classes of shares
in Tolbert, and/or deposit of the Shares with a Trustee, and/or certain
Put and/or Call Options between the shareholders of
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page 22 of pages.
Tolbert and/or the Directors:
(a) the number of Shares subject to such Call Options shall be
proportionate to the shares of Tolbert indirectly owned by the
Director referred to hereinbelow through SG, OLIMPIA or HBC, as the
case may be; and
(b) the proceeds (net of any tax effect for Tolbert and/or SG, OLIMPIA
or HBC, as the case may be and without any additional cost for
WILLIS) of any sale subsequent to such Call Options shall be
distributed by appropriate legal structures to the benefit of the
interested Director, so as to obtain the same effects as if the
exercise of the Call Option were exercised by Willis directly
vis-a-vis the said shareholder of Tolbert of which the Director is a
Shareholder.
18.4. Such Call Options shall be exercised, under penalty of forfeiture, within
and not later than 6 months from the event:
(a) if a Director:
(i) at any time, is removed from office as a Director or manager
of the Company without Cause, or if he voluntarily leaves the
Company, or in the event of death or permanent disablement, at
the Formula Price;
(ii) at any time, is removed for Cause, at the 50% of the Formula
Price if he is removed within 5 years from First Closing, or
at the 75% of the Formula Price if he is removed after 5 years
from First Closing;
(b) if a Strategic Director:
(i) at any time prior to 31st December 2003, voluntarily leaves
the Company, or is removed for Cause, at 50% of the Formula
Price;
(ii) at any time after 31st December 2003, voluntarily leaves the
Company, or is removed for Cause, at 75% of the Formula Price;
(iii) at any time, in the event of death or permanent disablement,
at the Formula Price;
(iv) at any time, ceases to be a shareholder in any of SG, OLIMPIA
and HBC or if any of such companies ceases to be controlled by
Directors, at the 50% of the Formula Price if the event occur
within 5 years from First Closing, or at 75% of the Formula
Price if the event occur after 5 years from First Closing;
(v) at any time, is removed from office as a Director or manager
of the Company without Cause, at the Formula Price with a
Minimum.
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page 23 of pages.
18.5. In case of any event that may determine the exercise of a Call Option
under Article 18.4 above, WILLIS acknowledges and agrees to give to the
Director's co-shareholders in SG, OLIMPIA or HBC, as the case may be, the
right to acquire its shares at the same price (net of any cost or tax
effect for Tolbert and/or SG, OLIMPIA, HBC or NP, as the case may be) that
the Director would have received from WILLIS through Tolbert via SG,
OLIMPIA, or HBC, as the case may be, in case of exercise of such Call
Option. The Director's co-shareholders shall be requested to exercise such
right of pre-emption within 30 days from receipt of the notice from WILLIS
to such effect, under penalty of forfeiture.
18.6. Should any of the co-shareholders in any of SG, Olimpia or HBC, not wish
to exercise the pre-emption right provided for under Article 18.5 above ,
the same will be offered to any of SG, Olimpia, HBC, or NP, as the case
may be, that will be entitled to exercise pro-rata the pre-emption rights.
Such pre-emption right should be exercised within 20 days from receipt of
the notice from WILLIS to such effect, under penalty of forfeiture.
19. SPECIAL TOLBERT PUT AND CALL OPTION.
Should WILLIS purchase another insurance broker operating in Italy in
breach of the arrangements to be entered into in accordance with Article
11, or appoint another broker as the WILLIS Retail Network partner in
Italy: (i) Tolbert will have an option to buy from WILLIS and WILLIS shall
be bound accordingly to sell to Tolbert, upon the exercise of such option,
all (but not part of) the shares held in the Company by WILLIS, at 75% of
the Formula Price; or (ii) Tolbert will have an option to sell to WILLIS
and WILLIS shall be bound accordingly to buy from Tolbert, upon the
exercise of such option, all (but not part of) the capital holdings held
by Tolbert at 125% of the Formula Price. In the event that Tolbert
exercises an option pursuant to the terms of this Article 19 then
restrictive covenants will apply to the selling Shareholder(s). The terms
of such restrictive covenants will be identical to those set out in
Article 22 below with the exception that they will apply for one year from
the date on which the selling Shareholders cease to be Shareholders.
20. PUT AND CALL OPTIONS DEFINITIONS.
20.1. "Formula Price":-
(a) Means the price obtained by applying the p/e of WILLIS Group
diminished by 2 to the average Normalised Consolidated After Tax
Earnings of the Company for the last two completed and audited
financial years subject to the applied p/e being a minimum of 10 and
a maximum of 17. The p/e of WILLIS Group will be calculated as the
average share price for the preceding twelve months to the
<PAGE>
page 24 of pages.
date of the exercise of the option divided by the average normalised
earnings of the latest two financial years. The normalised earnings
of WILLIS Group will be calculated using accounting policies and
principles consistent with and on the same basis as the basis used
in the preparation of the WILLIS Group's 1997 accounts.
(b) For the purposes of calculating the average Normalised Consolidated
After Tax Earnings (as defined below) of the Company, such earnings
of the Company for the first of the two years only will be increased
by the ltalian CPI percentage increase during the second of the two
years.
(c) Should WILLIS Group at any time during the life of this Agreement no
longer be listed, the p/e of WILLIS Group will be the average share
price over the twelve month period beginning with a date fifteen
months prior to the date of any announcement concerning the possible
de-listing and ending three months before that date, divided by the
normalised earnings of the latest financial year subject to the
maximum and minimum p/e's set out above.
(d) In the event that an option is exercised other than those set out in
Article 17.2 letter (d) in 1998 or 1999, the formula will apply to
the Normalised Consolidated After Tax Earnings (as defined below) of
1998 only.
20.2. "Normalised Consolidated After Tax Earnings":-
(a) Means the earnings after tax net of any actual after-tax effect of
all Exceptional, Extraordinary and Prior Year Items which by their
nature are not recurring items and before the actual after tax
effects of the amortisation of goodwill.
For the purposes of the above, Extraordinary, Exceptional and Prior
Year items will be identified by the auditors as those exceptional,
extraordinary and prior year items requiring disclosure in the
accounts of the Company in accordance with the applicable accounting
policies (International Accounting Standards and the accounting
principles established by the "Ordine Nazionale dei Dottori
Commercialisti" and by the "Collegio dei Ragionieri"). In the event
of conflicting accounting guidelines, the International Accounting
Standards are to take priority.
(b) Normal tax rate will be defined as the effective tax rate (being the
standard rates of tax applicable to the Company at the relevant time
on a consolidated basis) to include the effect of normal
disallowable items but adjusted to exclude the tax effect of any
goodwill, brought forward losses or other exceptional items. It is
agreed that none of the parties will take any action, or omit to
take any action, as part of its tax planning, that will have an
impact on the effective tax rate.
20.3. "Cause" means :-
<PAGE>
page 25 of pages.
(i) serious and persistent breach of contract; and,
(ii) any action or situation which would result in a Director's or
Strategic Director's registration with the ltalian Association
of lnsurance Brokers being cancelled.
21. GENERAL CONDITIONS CONCERNING PUT AND CALL OPTIONS.
21.1. Formula Price Determination. For the purposes of exercising the Put and/or
Call Options, the Parties agree that the Company shall give mandate to its
external auditors to calculate the Formula Price simultaneously to the
approval of the yearly accounts respectively ending on December 31, 2002,
December 31, 2004, and December 31, 2006, to be resolved by the Company
shareholders' meeting.
21.2. Option's (s') Exercise.
It is expressly agreed among the Parties, that each of the Parties
undertakes to waive his/its pre-emption right as granted to him/it under
the By-laws of respectively the Company, and/or Tolbert, as the case may
be, on the Shares/stock of the other which shall be submitted to a Put or
a Call Option as the case may be. It is further agreed and understood
among the Parties hereto that no consideration shall be owed to any Party
or to any third party by any other Party for waiver of their respective
pre-emption rights.
21.2.1. The Put and/or Call Options shall be exercised by written notice,
to be given, via registered mail, return receipt, or via fax (to
be confirmed by registered mail, return receipt), within and not
later than the respective deadlines (as above indicated) (the
"Option Notice") to the from time to time addressee Party (the
"Interested Party"). In the Option Notice the Option price shall
be set by the party addressing the Option Notice (the "Exercising
Party").
21.2.2. In the event of disagreement on the Put and/or Call Option price
or should the Put and/or Call Option price not be indicated in the
Option Notice, the Interested Party and the Exercising Party shall
jointly defer the determination of the Formula Price to an
independent accounting firm of international standing ( the
"Arbitrator") within 20 days from the receipt of the Option
Notice.
21.2.3. In case of impossibility or refusal of the Arbitrator or should
the Exercising Party and the Interested Party fail to jointly
appoint the Arbitrator within the term of 20 days from receipt of
the Option Notice, the determination of the Put and/or Call Option
price shall be deferred to an independent arbitrator to be
appointed by the President of the Tribunal of Turin upon
application of the most diligent party, for the final
determination of the Put and/or Call Option price.
21.2.4. The Arbitrator shall determine the Put and/or Call Option price
(and interests if applicable) within 60 days from its acceptance
of the said task.
<PAGE>
page 26 of pages.
The Arbitrator's determination shall be final and binding upon the
Parties and it shall be deemed to be a part of the provisions of
this Agreement and communicated by written notice, to be given,
via registered mail, return receipt, or via fax (to be confirmed
by registered mail, return receipt) (the "Arbitrator's Notice).
All the fees and costs relating to the determination by the
Arbitrator of the Put and/or Call Option price shall be borne :
(i) by the Interested Party, should the Arbitrator substantially
confirm the amount of the Put and/or Call Option price as
indicated in the Option Notice; or
(ii) by the Exercising Party, should the Put and/or Call Option
price determined by the Arbitrator be substantially different
from the amount indicated in the Option Notice.
21.3. Subject to the authorisations and procedures required by the London
Exchange if any or applicable, any stockholdings sale pursuant to the
exercise of any of the Put and/or Call Options shall be duly perfected by
the relevant Parties within 15 days after the receipt of the Option Notice
or after the receipt of the Arbitrator's Notice:
(i) by transferring the stockholdings in the Company or in SG,
Olimpia, HBC or NP as applicable, from the relevant selling
Party to the relevant purchasing Party, pursuant to the
requirements of applicable law; and
(ii) by simultaneously paying the relevant price.
21.4. The transfer of the stockholdings pursuant to Article 21.3 above shall be
carried out at the time and in the place which shall be agreed in writing
by the relevant Parties.
21.5. No representations and warranties shall be given by the selling Party in
relation to the transfer of any stockholding pursuant to the Put and/or
Call Options, other than representations and warranties regarding the
freedom of the shares transferred from pledges, encumbrances and third
party rights of any nature.
21.6. The dividend on the shareholding in the Company or in SG, Olimpia, HBC or
NP as applicable, as the case may be, subject to the Put and/or Call
Options shall pro rata accrue on the relevant selling Party up until the
date of their exercise and accordingly such dividends shall pro rata
accrue on the relevant purchasing Party from the day after date of
Option's(s') exercise.
22. RESTRICTIVE COVENANTS.
<PAGE>
page 27 of pages.
In view of the above rights indirectly granted to the Directors under the
Put Options provided above each Director shall undertake during the
currency of this Agreement and for a period of two years from the date
upon which he shall have ceased to be a Director, or a director, employee,
or advisor of the Company and/or a Subsidiary (the "Period"), not to,
directly or indirectly in his own name and behalf or on behalf of third
parties:
(a) solicit or handle the business of any client of the Company or of a
Subsidiary which the Company or a Subsidiary handled at any time in
the two years prior to the commencement of the Period;
(b) not to employ any of the employees of the Company or of a
Subsidiary;
(c) not to make use of or disclose to any third party any information
concerning customers of the Company or of a Subsidiary.
GENERAL PROVISIONS
23. RIGHT OF INFORMATION.
The Parties agree and undertake to use their best efforts to ensure that
any significant proposal, scheme or project to be entered into by the
Company shall be submitted to Willis and all the Directors a reasonable
period in advance of any approval which may be required thereof by the
board of the Company. In addition, the Parties agree that in any case
Willis shall be given ample opportunity to review anew any such proposed
deal prior to any decision of the board of the Company.
24. WARRANTIES.
Each Party warrants that:
(a) it/he has the power to execute this MSA and perform the transactions
contemplated hereby and that such execution and transactions have
been authorised by all necessary corporate or other action or body
and do not and will not violate any applicable law or regulation or,
in the case of a corporate party, any provision of its incorporation
documents;
(b) this MSA constitutes its/his legal, valid and binding obligations in
accordance with its terms; and
(c) all consents and authorisations necessary for it/him in relation to
the execution of this MSA have been obtained and all consents and
authorisations necessary for
<PAGE>
page 28 of pages.
it/him in relation to the transactions contemplated hereby have been
or will, prior to such transaction, be obtained.
25. COMMUNICATIONS.
25.1. Notices or communications required or permitted to be given under any
provisions of this MSA shall be in writing and shall be deemed to have
been given the day of dispatch thereof, if sent by fax (to be confirmed by
registered mail with return receipt), or upon actual receipt if sent by
registered mail, return receipt requested, addressed to the addresses
specified above, to the attention of:
(a) if to Willis Group, to Michael P. Chitty (fax + 44 171 481 70 03);
(b) if to Willis Europe, to Analies Majorie (fax + 31 20 661 06 54);
(c) if to Tolbert, to Guido Nieuwehuizen (fax + 31 20 577 11 88);
(d) if to UTA, to Studio Boidi, Dr.ssa Lucia Starola (fax + 39 011 812
23 00);
(e) if to saint Gallen, to Studio Boidi, Dr.ssa Lucia Starola (fax + 39
011 812 23 00)
(f) if to Olimpia, to Paolo Fassio (fax + 39 02 655 18 05);
(g) if to HBC, to Sebastiano Romeo (fax + 39 011 561 90 60);
(h) if to Arcef, to Sergio Liberia (fax + 59 994 61 35 77).
25.2. Either Party may from time to time change its address by giving previous
communication to the other Party in the manner aforesaid.
26. DURATION.
26.1. This MSA, shall be in force from the date hereof, up until the day of
completion of the last of the Put or Call Option provided above.
<PAGE>
page 29 of pages.
27. MISCELLANEOUS.
27.1. Undertaking. Each of the Parties hereby undertakes to perform all such
actions necessary to obtain that the provisions of this MSA be fully
implemented in accordance with its terms and conditions hereunder.
27.2. Obligations of the Parties. Any obligation imposed by this MSA on any
Party, to procure a particular event or thing, shall be construed as an
obligation on such Party to exercise all its votes and other legal rights
and powers, and to use all other reasonable endeavours, to bring about
such event or thing.
27.3. Amendments. No amendment of or supplement to this MSA shall be valid or
effective unless in writing and executed by the Parties hereto or their
successors or assignees.
27.4. Waiver. No waiver of any right, breach or default hereunder shall be
considered valid unless in writing and executed by the Party giving such
waiver, and no waiver shall be deemed a waiver of a subsequent breach or
default, whether or not of the same or of similar nature.
27.5. Severability. Should any provision of this MSA or part thereof be held
null, void or unenforceable in any respect, such holding shall not
invalidate the remainder of this MSA, which shall continue in full force
and effect. In the event of invalidity or ineffectiveness of any provision
of this MSA, or portions thereof, the remaining part of this MSA shall not
be affected thereby but the parties agree to negotiate in good faith to
replace such provision, or parts thereof, with other valid and effective
agreements having substantially the same effect, having regard to the
subject matter and purposes of such provision and of this MSA.
27.6. Binding effect. This MSA shall be binding upon and inure to the benefit of
the Parties and their respective successors and assignees which shall be
bound by its terms, as appropriate. In the event of any inconsistency
between the provisions of this MSA, the Tolbert By-laws, the Company
By-laws or such other documents which would have been adopted afterwards,
the provisions of this MSA shall prevail.
27.7. Confidentiality. All the Parties undertake to keep strictly confidential
any information concerning this MSA, and no Party shall divulge any
information or make any announcement relating to the subject matter of
this MSA, without the prior written consent of the other Parties, save
that any announcement or circular required to be made or issued by any
Party either by law or regulations, or pursuant to the rules and
regulations of any stock exchange or other regulated markets on which the
securities of that Party are traded may be made or issued by such Party
without such approval.
<PAGE>
page 30 of pages.
27.8. Entire Agreement. This MSA, together with its Annexes, and together with
the MAA constitutes the entire agreement among the Parties as to its
subject matter and supersedes any prior agreement between and among any
and all the Parties hereto, in particular the MoU, and together with the
MAA constitutes the entire agreement between them.
27.9. Language. This Agreement is drafted in the English language and the
Parties acknowledge that they have so requested and have duly and fully
agreed and understood any and all the previsions hereof.
28. GOVERNING LAW AND ARBITRATION.
28.1. This MSA shall be governed by, construed, and enforced in accordance with
Italian law, save for such provisions of Dutch law applicable to the
implementation of any of the transactions above referred to Tolbert.
28.2. All disputes arising out or in connection with this MAA shall be finally
settled under the Rules of Arbitration of the International Chamber of
Commerce by three Arbitrators appointed in accordance with the said rules.
The arbitrators shall decide ex aequo et bono. The place of the
arbitration shall be Amsterdam.
28.3. It is in any event expressly agreed by the Parties that the provision of
this arbitration procedure shall not prevent any party from requesting and
enforcing any of the injunctions and interim orders (i.e. "provvedimenti
cautelari") provided for by article 669-bis and following of the Italian
Civil Procedure Code.
o o
IN WITNESS WHEREOF each Party hereto, by its respective representative
duly authorised, has caused this Master Shareholders' Agreement to be
signed as of the day and year first written above.
--------------------------
Willis Corroon Group plc.
Name and Capacity: Ms. Sarah Turvill, attorney.
--------------------------
<PAGE>
page 31 of pages.
Willis Corroon Europe B.V.
Name and Capacity: Ms. Sarah Turvill, attorney.
--------------------------
Tolbert Insurance & Finance B.V.
Name and Capacity: Mr. T.J. Eltink, attorney.
--------------------------
Tolbert Insurance & Finance B.V.
Name and Capacity:
--------------------------
Saint Gallen S.R.L.
Name and Capacity: Lorenzo Boglione, Chairman.
--------------------------
Olimpia S.R.L.
Name and Capacity: Carlo Pasteur, sole Managing Director.
--------------------------
Ital Brokers Holding S.p.A.
Name and Capacity: Franco Lazzarini, Managing Director
--------------------------
Arcef Holding N.V.
Name and Capacity: Mr. T.J. Eltink Attorney.
<PAGE>
page 32 of pages.
Lorenzo Boglione
----------------------------
Enrico Boglione
----------------------------
Francesco Boglione
----------------------------
Marco Gallotti
----------------------------
Giovanni Peracino
----------------------------
Carlo Pasteur
----------------------------
Edoardo Pasteur
----------------------------
Franco Lazzarini
----------------------------
For Sebastiano Romeo
----------------------------
Luca Garella, Attorney
Gian Carlo Gardella
----------------------------
LIST OF EXHIBITS AND ANNEXES:
Annex 3 - Company by-laws
Annex 16.1 - Tolbert by-laws
All the parties hereby irrevocably appoint and delegate Mr. Luca Garella and Mr.
Mr. Carlo Pasteur to execute each of the Exhibits and Annexes attached hereto,
acknowledging the validity and effectiveness of the execution made by the said
Messrs Mr. Luca Garella and Mr. Mr. Carlo Pasteur.
<PAGE>
page 33 of pages.
ANNEX 3 - COMPANY BY-LAWS
ANNEX 16.1 - TOLBERT BY-LAWS
<PAGE>
Exhibit 10.4
VAGN THORUP
SHAREHOLDERS' AGREEMENT
Assurandorgruppen A/S
<PAGE>
As of 28 September 1998 this Shareholders' Agreement has been entered into
between on the one hand Willis Corroon Europe B.V., Marten Meesweg 51, AV 3068
Rotterdam, the Netherlands (hereinafter referred to as "WCE") and on the other
hand Bent Roland, Per Kaersgaard, Lars Gundorph, Kent Risvad, Carsten
Sehested-Blad, Kjeld N0rhave, Per Beck Andersen, Johannes Dahl, Svend-Erik
Knudsen, J0rgen Kjaerulff Nielsen, Peter Theilgaard, Willy Berg, Jens Hatting,
Lars Bach Nielsen, Kjeld Mogens Ranum, Ole S0rensen, Jess Folke Andersen, Helge
Flou-Jensen, Michael Hedeby, Henrik Nielsen, Clinton B. Perry, Benny Petersen,
Kim Sejer, Steen Skaarup, Peter Svare-Andersen, Karin Holst, Erling Hornebo,
Arne Erikslev, Steen Krogh, Per Sehested-Blad, Jan Linde, Erik Qvist, Kai
Jensen, Kim G. Madsen, Erik M0ller, Johan Ellemann, Kim S0ndergard, Svend
Larsen, Jim Alkirk, Niels Christian H0jberg, Helle Guldager, Henrik Boysen, Lars
Christensen, Krogenberg ApS and Poul 0rum (hereinafter referred to collectively
as the "Current Shareholders" and individually a "Partner") (WCE and the Current
Shareholders collectively referred to as the "Parties") concerning the Parties'
shareholdings in Assurand0rgruppen A/S (reg.no. 164.725) of 6 Rosen0rnsgade,
DK-8900 Randers, Denmark (the "Company").
RECITALS
WHEREAS the Company holds a 91.2% share of Assurand0rgruppen I/S (the
"Partnership") a partnership established under the laws of the Kingdom of
Denmark carrying on insurance broking and related business. The Company and the
Partnership collectively referred to as the "AG Group".
WHEREAS 1.2% of shares of the Partnership held by the Company is intended for
distribution in shares of 0.2% to new partners admitted in the future.
WHEREAS the remainder of the shares of the Partnership are held by the Current
Shareholders in equal shares of 0.2% each.
WHEREAS the Company has invited WCE to obtain a minority capital stake in the
Company by issuing to WCE DKK 4,285,700 nominal shares (the "Shares") at a price
of DKK 54,000,000.
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<PAGE>
WHEREAS the Company and WCE have agreed to the terms of this investment and on
28 September 1998 WCE will subscribe to the Shares on the terms of the Stock
Purchase Agreement in the form of Annex 1.
WHEREAS the Shares will be issued by the Company at a board meeting to be held
on 28 September 1998 in accordance with the authority granted by the Current
Shareholders to the Board of Directors as stipulated in Clause 3.5 of the
Company's Articles of Association by adopting a resolution in the form of Annex
2.
WHEREAS the Current Shareholders and the Company agree that as a consequence of
WCE's investment in the Company the Partnership's Deed of Partnership on 28
September 1998 will be amended to the form of Annex 3.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements set forth herein, the Parties agree as follows:
1. The share capital of the Company
1.1 The share capital of the Company is DKK 14,285,700 divided into shares of
DKK 1 or multiples hereof.
1.2 The Parties' shareholdings are distributed as detailed in Schedule 1.
2. Articles of Association
To the extent the Articles of Association of the Company are inconsistent
with this Agreement, the provisions of this Agreement shall prevail and
any one of the Parties is obliged to vote in favour of any amendment of
the Articles of Association which is permissible under Danish law and
which is required to give the fullest possible effect to this Agreement.
3. Board of Directors
3.1 The board of directors of the Company (the "Board of Directors") shall
consist of four (4) to seven (7) members elected by the shareholders for
two years at a
-3-
<PAGE>
time. Two alternative members shall be elected. Reelection may take place
and the Parties agree that continuity of the work of the board of
directors shall be endeavoured. The Board of Directors shall form the
Executive Committee of the Partnership.
3.2 WCE shall have a right to appoint two (2) directors. When WCE's
shareholding in the Company reaches 50% WCE, cf. 8.7, shall have the right
to appoint a majority of directors.
3.3 The rest of the directors are elected by the Current Shareholders at the
annual general meeting and WCE refrains from exercising its voting right
in this election.
3.4 At the first meeting after the annual general meeting of shareholders the
Board of Directors shall elect its Chairman amongst themselves.
3.5 The Board of Directors shall form a quorum when more than half of the
directors are present or represented. A director may be represented by
proxy in writing to another director granted for the individual board
meeting. However, to the extent possible, no resolutions may be made
without all directors having had an opportunity to participate in the
transactions of the business concerned.
3.6 Decisions amongst the Board of Directors shall, save from such matters
referred to in 3.7 below, be made with a simple majority of votes. In case
of equality of votes the Chairman has the casting vote.
3.7 The below resolutions or proposals whether in the Board of Directors of
the Company or in the Executive Committee of the Partnership may be made
only subject to a simple majority of votes amongst directors appointed by
the Current Shareholders and the acceptance of all directors appointed by
WCE unless they have already been accounted for in a budget approved by
the Board of Directors of the Company or in the Executive Committee of the
Partnership with such majority:
(1) The acquisition by the AG Group of any one asset or any number of
assets closely connected to each other at a total cost of more than
DKK 500,000,
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<PAGE>
(2) The sale or disposition of any one asset or any number of assets
closely connected to each other of the AG Group for a total price of
more than DKK 500,000,
(3) The creation of any charge or other security over any assets of the
AG Group,
(4) The giving by the AG Group of any guarantee or indemnity or the
creation of any security of whatever nature over the assets of the
Company or the Partnership,
(5) The consolidation or amalgamation of the AG Group with any other
company,
(6) The disposal of or dilution of the Company's shareholding or
interest, directly or indirectly, in the Partnership, save for
instances as described in 11.1,
(7) The acquisition by the AG Group of any share capital or other
securities of any body corporate,
(8) The making of any loan or advance to any person, firm, body
corporate or other business in excess of DKK 300,000 or the
borrowing of any money except by way of overdraft in the ordinary
course of business, save in cases of distribution of advance profit,
(9) The creation, allotment or issue of any shares in the capital of the
AG Group or of any other security or the grant of any option or
rights to subscribe in respect thereof or convert any instrument
into such shares,
(10) The making of any significant change in the business of the AG
Group,
(11) The making by the AG Group of any contract of a significant nature
outside the normal course of the business,
-5-
<PAGE>
(12) The reduction of its capital, variation of the rights attaching to
any class of shares in the capital of the AG Group,
(13) The adoption of any bonus or profit-sharing scheme or any share
option or share incentive scheme or employee share trust or share
ownership plan,
(14) The presentation of any position for the winding-up of the Company
or the Partnership, the suspension of payments or voluntary
bankruptcy,
(15) The approval of annual capital and revenue budgets and any
modification thereto,
(16) The approval of the Annual Report and Accounts,
(17) Change in the Company's accounting principles,
(18) The commitment of any funds for specified or unspecified capital
expenditure in excess of DKK 500,000,
(19) The formation of or entry into any partnership, association or joint
venture or the establishment of any new branches,
(20) The payment of any money or the giving of any benefit to any person
engaged in the management of the AG Group (including any member of
the Board of Directors) by way of remuneration or reimbursements of
costs or expenses or otherwise where that payment or benefit has
been calculated on a basis different from that currently applied
ignoring for these purposes alternative methods of payment made or
benefit given to ensure compliance with Danish law, unless such
payment or benefit has been provided for in a budget previously
approved in accordance with this sub-clause,
(21) The entry into any transaction, arrangement or agreement outside of
the ordinary course of business with or for the benefit of any
director
-6-
<PAGE>
of the AG Group or person connected or associated with any such
director,
(22) The appointment as bankers of any bank otherwise than in accordance
with the Willis Corroon Group Plc list of approved banks (Unibank
A/S is pre-approved),
(23) The commencement, settlement or defence of any action, or
proceedings or other litigation brought by and against the AG Group
other than what is required in order not to jeopardise the AG
Group's legal position,
(24) The appointment or dismissal or change in the remuneration or terms
of employment of any employee or officer of the AG Group in senior
management,
(25) Any other proposed event, act or omission which would have a
significant effect on the AG Group.
4. The Management of the Company
4.1 Until WCE becomes owner of 50% of the share capital of the Company the
Board members appointed by the Current Shareholders shall be solely
responsible for appointing a management consisting of one or more members
to be in charge of the day-to-day operation of the Company.
5. Audit and Accounts
5.1 The accounts of the Company shall be audited by a stateauthorized public
accountant elected by the ordinary general meeting for one year at a time.
5.2 The accounts of the Company shall be rendered in accordance with generally
recognised international accounting principles.
6. General Meetings
6.1 All resolutions at general meetings shall be made by a simple majority of
votes
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<PAGE>
unless a different majority is required according to 6.2, the Articles of
Association or legislation.
6.2 The Parties agree that resolutions of an essential or far-reaching nature
as defined below may be adopted only by the general meeting if both (i) a
simple majority of votes amongst the Current Shareholders and (ii) WCE
vote in favour of the resolution:
(i) Proposals to amend the Articles of Association of the Company.
(ii) Proposals to merge, demerge or liquidate the Company.
(iii) Proposals to increase or decrease the share capital of the Company.
(iv) Appointment of the auditor of the Company.
(v) Allocation and payment of dividend.
7. Dividend and Capital Redemption
7.1 The Parties shall take such action as may be necessary to procure that the
Company distributes to and among its shareholders 100% of its profits
available for distribution in each financial year subject to the
appropriation of such reasonable and proper reserves for working capital
or otherwise as the Board of Directors may think appropriate and subject
to what is established by legislation.
7.2 Save as stipulated in 7.3 dividends shall be distributed to the
shareholders of the Company in proportion to their ownership shares.
7.3 In 1999 WCE shall be entitled to receive 25% of the ordinary dividend
payable in respect of the 1998 accounting year to WCE in proportion to its
ownership shares.
7.4 No later than 30 November 1998 an extraordinary general meeting shall be
held in the Company at which the Company's share capital shall be
increased with DKK 40,000,000 through a transfer from the Company's share
premium
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<PAGE>
account following which the Company will have an issued, fully paid up and
registered share capital of DKK 54,285,700. The new shares shall be issued
to the Company's shareholders in proportion to their respective ownership
shares.
7.5 No later than 31 January 1999 an extraordinary general meeting shall be
held in the Company at which the Company's share capital shall be
decreased with DKK 40,000,000 through distribution to the Parties in
proportion to their respective shareholdings and reduction of their
nominal shareholdings in the same proportion. Distribution shall be
effected after expiry of the 3 months' notice period pursuant to Section
46 of the Danish Companies Act.
8. WCE's Options to Increase Shareholding
8.1 Subject to 8.2 the Current Shareholders are obliged to sell 10% of the
shares of the Company to WCE on 31 December 2003 resulting in WCE becoming
owner of 40% of the Company's share capital. Such sale shall be effected
by each shareholder disposing of a proportionate amount of shares in the
Company pursuant to the ratio with which they hold shares in the Company.
8.2 The Current Shareholders' obligation under 8.1 shall be conditional upon
WCE forwarding to the Chairman of the Board of Directors a letter by
telefax and registered mail in the period from 1 January - 30 October 2003
stating that WCE wishes to exercise its option to acquire shares in the
Company as stipulated in 8.1.
8.3 In case WCE exercises the option under 8.1 the shares acquired shall be
transferred by the Current Shareholders on 31 December 2003 against cash
payment from WCE within 30 days at a P/E of 11,5 x the Formula Profit of
the AG Group as defined in 8.10.
8.4 Subject to 8.5 the Current Shareholders are obliged to sell 10% of the
shares of the Company to WCE on 31 December 2008 or at any 31 December
thereafter resulting in WCE becoming owner of 50% of the Company's share
capital. Such sale shall be effected by each shareholder disposing of a
proportionate amount of shares in the Company pursuant to the ratio with
which they hold shares in the Company.
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<PAGE>
8.5 The Current Shareholders' obligation under 8.4 shall be conditional upon
WCE forwarding to the Chairman of the Board of Directors a letter by
telefax and registered mail in the period from 1 January - 30 October in
the exercise year stating that WCE wishes to exercise its option to
acquire shares in the Company as stipulated in 8.4.
8.6 In case WCE exercises the option under 8.4 the shares acquired shall be
transferred by the Current Shareholders on 31 December 2008 or at any 31
December thereafter as the case may be against cash payment from WCE
within 30 days at a P/E of 10 x the Formula Profit of the AG Group as
defined in 8.10.
8.7 Subject to 8.8 the Current Shareholders are obliged to sell a portion of
the shares of the Company to WCE on 31 December 2013 or at any 31 December
thereafter in an amount resulting in WCE becoming owner of 51% or more of
the Company's share capital. Such sale shall be effected by each
shareholder disposing of a proportionate amount of shares in the Company
pursuant to the ratio with which they hold shares in the Company.
8.8 The Current Shareholders' obligation under 8.7 shall be conditional upon
WCE forwarding to the Chairman of the Board of Directors a letter by
telefax and registered mail in the period from 1 January - 30 October in
the exercise year stating that WCE wishes to exercise its option to
acquire new shares in the Company as stipulated in 8.7.
8.9 In case WCE exercises the option under 8.7 the shares acquired shall be
transferred by the Current Shareholders on 31 December 2013 or at any 31
December thereafter, as the case may be, against cash payment from WCE
within 30 days at a P/E of 10 x the Formula Profit of the AG Group as
defined in 8.10.
8.10 The "Formula Profit" referred to in this Agreement shall mean the
normalised average after tax earnings of the AG Group for the previous
three years calculated by multiplying the normalised after tax earnings
(cf. Schedule B to Annex 3):
in the case of the eldest year by 1;
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<PAGE>
in the case of the second eldest year by 2, and
in the case of the youngest year by 3 and
then dividing the aggregate amount by 6, subject to a minimum price per
share of the shares acquired by WCE equal to a proportionate share of the
original valuation (DKK 140 million) of the Company increased annually by
the percentage increase in the Danish Consumer Price Index, from 31
December 1998 depending on the percentage of shares being sold.
9. WCE's Obligation to acquire Shares from Current Shareholders
9.1 Upon WCE holding 50% of the share capital of the Company, cf. 8.4, each
Partner may demand that WCE acquires his shares in the Company at a P/E of
10 x the Formula Profit with the exception, however, that the minimum
price per share as described in the definition of Formula Profit in 8.10
shall not apply in this case.
9.2 If a Partner wishes to exercise this right he shall forward to the
Chairman of the Board of Directors by telefax and registered mail his
offer. The Chairman shall forthwith without undue delay reforward the
offer to WCE with a copy to the other shareholders. The offer must
comprise all shares owned by the Partner.
9.3 The purchase price for the shares offered pursuant to 9.1 shall be paid in
cash by WCE within 60 days of receipt of the offer against the Partner's
delivery of the shares free of any charges, liens or encumbrances. Any
share transfer tax shall be paid by the Partner.
10. Transfer of Shares
10.1 Save in transfers comprised by 8, if a Partner (the "Offeror") wishes to
sell his shares in the Company other than to a public or private limited
company which is 100% owned by the Partner the other Current Shareholders
have a pre-emptive right to acquire those shares in proportion to the
ratio with which they hold shares in the Company.
10.2 The offer in writing shall be forwarded to the Chairman of the Board of
Directors by the Offeror by telefax and registered mail. The Chairman of
the Board of
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Directors shall forthwith without undue delay re-forward the offer to the
other Parties. The offer must comprise all shares owned by the Offeror.
10.3 If a Partner intends to exercise his pre-emptive rights this shall be done
by telefax and registered mail to the Chairman of the Board of Directors
within 30 days of receipt of the offer to exercise the pre-emptive right.
Acceptance of the offer shall comprise all shares offered to a Partner by
the Offeror.
10.4 If one or more of the Current Shareholders do not exercise their
pre-emptive right with regard to the offered shares the Current
Shareholders are allowed within 14 days from the expiry date of the offer
to agree to a whole or partly allocation amongst themselves of the shares
not taken up.
10.5 If a portion of shares is still not taken up after exhaustion of the
procedure pursuant to 10.2 - 10.4 the pre-emptive right shall transfer to
WCE subject to a renewal of the procedure pursuant to 10.2 - 10.3.
10.6 If WCE does not wish to exercise its pre-emptive right pursuant to 10.5
the Board of Directors may within 30 days decide to allow the Company to
buy back any remaining portion of shares.
10.7 Subject always first to the order of pre-emption rights described in 10.2
- 10.6 and the exhaustion of this order if a portion of the shares offered
is still not taken up the Offeror shall within 3 months from the decision
of the Board of Directors be entitled to find a buyer himself. When the
Offeror has found a buyer, he shall inform the Board of Directors hereof.
The Board of Directors shall then have 7 days to try again to find a buyer
of the shares at the price, which has now been obtained by the Offeror.
Where the Board of Directors does not want to avail itself of this right,
the Offeror may complete the sale, subject however to 11.
10.8 If WCE wishes to sell its shares in the Company, other than to a company
which is affiliated with WCE the Current Shareholders have a pre-emptive
right to acquire the shares. 10.1 - 10.4 above shall apply mutatis
mutantis to the Current Shareholders' pre-emptive right.
10.9 Subject always first to the order of pre-emption rights and the exhaustion
of this order if the shares offered by WCE has not been taken up by the
Current
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<PAGE>
Shareholders, WCE shall within expiry of a term of 12 weeks from expiry of
the acceptance deadline mentioned in 10.3 be entitled to sell the shares
to a third party on terms which are not more favourable for the third
party than the terms on which they were offered to be taken up by the
Current Shareholders.
10.10 When WCE becomes owner of 50% of the shares of the Company, cf. 8.4, the
pre-emptive right for the Current Shareholders described in 10.1 shall
transfer to WCE. 10.2 - 10.6 shall apply mutatis mutandis.
10.11 If WCE does not wish to exercise its pre-emptive right, the Offeror shall
offer his shares to the other Partners in proportion to the ratio with
which they hold shares in the Company and subject to a renewal of the
procedure pursuant to section 10.2 - 10.6 and subsequent renewal of the
procedure which shall be mandatory in case one of the other shareholders
decides not to take up his proportion of the shares offered.
10.12 If a portion of shares offered is still not taken up 10.7 shall apply
mutatis mutandis.
10.13 The purchase price for shares in all transfers under 10.1 - 10.10 shall be
paid in cash not later than 30 days after the term and price have become
final, cf. 13, against the Offeror's delivery of the shares free of any
charges, liens or encumbrances.
11. Admission of new Partners
11.1 Where it is decided to admit a new partner in the Partnership and that
such new partner shall acquire shares in the Company the Current
Shareholders and WCE shall waive their respective pre-emptive rights
pursuant to 10.
11.2 Sale of shares in the Company to a new partner shall take place either
from the Current Shareholders' portion of shares or from the Company's
holding of own shares, if any. Sale can be effected also to a public or
private limited company which is 100% owned by the new partner.
11.3 Transfer of shares to a new partner shall moreover be subject to the
consent of the Board of Directors and provided always that such consent
shall only be given if the transferee at the transfer becomes the owner of
an interest in the
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<PAGE>
Partnership or is an executive officer of the Partnership or the Company.
11.4 Finally transfer of shares to a new partner shall be subject to his
covenant with the other parties to this agreement to observe this
agreement and be treated as a Partner and Current Shareholder for the
purpose of this agreement.
12. Mandatory transfer of shares
12.1 A Partner shall be considered as having made an offer for sale of his
shares pursuant to 10.1 in the following instances:
a) a Partner's death,
b) a Partner is no longer a partner or employee of the Partnership or
employed by the Company,
c) a Partner becomes subject to bankruptcy proceedings, suspends his
payments, enters into voluntary or compulsory arrangement of debt,
is liquidated or dissolved or materially breaches its obligations
according to this Agreement and does not within 14 days of written
demand correct the breach and remedy its effects.
12.2 If, while WCE owns less than 50% of the shares of the Company the control
of WCE is taken over by one of the four largest insurance broking groups
(by revenue) or by an insurance company (other than an insurance company
providing finance to secure WCE's continuing independence) the Current
Shareholders may demand that WCE transfer its shares to the Current
Shareholders or as they direct at a purchase price calculated in
accordance with 8.3.
12.3 Payment of the purchase price under 12.2 shall take place within 60 days
from the letter of demand against WCE's delivery of its shares free of any
charges, liens or encumbrances.
13. Share Price
13.1 In any transfer of shares under this agreement other than as set forth in
Section 8
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<PAGE>
and 9 herein the price for the shares transferred shall be fixed as
stipulated below.
13.2 Prior to the annual general meeting the Board of Directors fixes a price
which shall apply throughout the current financial year. At the fixing of
the price the Company's assets and liabilities shall be assessed at the
market value and considering the general accounting principles applying to
depreciation and provisions.
13.3 The Board of Directors shall explain the basis of the fixing of the price
at the general meeting.
13.4 In case a shareholder cannot accept the price fixed by the Board of
Directors, an objection in writing and stating his reasons shall be
submitted to the Chairman of the Board of Directors not later than 2 weeks
after the general meeting. The Company's auditor shall then decide the
price fixing issue and shall fix the price in an account to the Board of
Directors stating his reasons. Within one week of having received the
price fixed by the auditor, the Board of Directors shall inform the
shareholders in writing about the price fixed by the auditor.
13.5 In case a shareholder will not accept the price fixed by the auditor he
shall, within 2 weeks of having received information about the price fixed
by the auditor, refer the matter to arbitration, in accordance with
Section 29. The price fixed by the arbitration tribunal shall be final and
binding on the shareholders.
13.6 Where a request made by a shareholder for a change of the price fixed does
not lead to changes of more than +/- 15%, the shareholder requesting the
change shall pay all expenses in connection with it, including expenses
for auditor and possible arbitration.
13.7 The purchase price for the shares shall be paid in cash not later than one
week after the fixing of price have been finally decided.
14. Reciprocal Undertakings
14.1 The AG Group will be the member of the Willis Corroon Retail Network for
Denmark in accordance with the network procedures and rules existing from
time to time.
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<PAGE>
14.2 Willis undertakes to channel all its Danish retail business through the AG
Group using its best efforts to achieve the said procedure.
14.3 The Current Shareholders undertake
(i) to cause the AG Group to channel all its retail business outside
Denmark to members of the Willis Corroon group of companies
("Willis") and its retail network making their best efforts to
pursue the said purpose and
(ii) to use their best endeavours to direct all wholesale business
(including reinsurance, both facultative and treaty) generated
directly or indirectly by the AG Group to Willis Faber & Dumas
Limited or such other Willis company as appropriate. In the event
that Willis does not offer competitive rates and remuneration or
does not have the specialist expertise to handle such business it
will be discussed constructively among and agreed by the parties
with a view to reaching a mutually acceptable solution, including,
if appropriate, the use of a third party broker.
14.4 Notwithstanding the above, the parties recognise that Willis has existing
wholesale activity in Denmark connected to other Danish brokers, and
hereby agree that Willis is and will be free to carry on and expand this
wholesale activity provided that such expansion will not conflict with the
activity of the AG Group. However, Willis expressly undertakes not to give
insurance or reinsurance assistance or risk management consultancy in any
manner whatsoever to other brokers or insurers operating in Denmark who
are competing with the AG Group as regards the same clients or prospective
customers in connection with the AG Group's activities, and always
provided that the AG Group has previously informed Willis that it is
negotiating with such clients or prospective customers. Willis agrees and
undertakes to inform the AG Group on a regular basis of any major
wholesale initiative to be carried out in Denmark with other brokers or
insurers.
14.5 The Current Shareholders hereby undertake and warrant to procure that the
AG Group will not conduct itself in a way which will conflict with or
affect
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<PAGE>
detrimentally Willis' existing wholesale relationships.
15. Market Security
15.1 The AG Group will use for the placing of business on behalf of its clients
such insurance companies and markets as shall have been approved by the
Willis Corroon Markets Security Committee from time to time if applicable
in relation to the Danish market.
16. Systems Development
16.1 The Parties agree that they will involve and work closely with the WCE
Systems Division in relation to any proposed developments in the AG
Group's Corporate Systems.
17. Errors and Omissions
17.1 The Parties shall procure that the AG Group maintains at all times Errors
and Omissions insurance cover considered adequate by WCE and the Current
Shareholders.
17.2 Subject to 17.1 WCE shall use reasonable endeavours to procure that the
Company shall be involved within the Willis Corroon Group's Errors and
Omissions insurance policy ("Policy") in respect of amounts in excess of
underlying policies which the AG Group may take out.
17.3 Subject to the AG Group being included within the Policy in accordance
with 17.2 the AG Group shall comply with Willis policies and procedures in
respect of Errors and Omissions and shall pay to Willis a reasonable share
of premium on the basis of an equitable allocation across all companies
covered by the Policy and taking account of the total premium of the AG
Group, retained brokerage and the number of employees.
18. Name
18.1 The Company shall have the right and obligation to use the words "Willis
Corroon Group" or similar indication to show its connection with the
Willis Corroon
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<PAGE>
Group on notepaper, letterhead and material intended to come to the
attention of third parties.
19. Rights to Information
19.1 The Company shall permit any person designated by WCE to discuss the
affairs, finances and accounts of the AG Group with their officers and
other principal executives all at such time as may reasonably be
requested, and all books, records, accounts, documents and vouchers
relating to the business and the affairs of the AG Group shall at such
time be open to the inspection of WCE who may make such copies thereof or
extracts therefrom as WCE may deem appropriate. Any information secured as
a consequence of such discussions and examinations shall be kept strictly
confidential by WCE.
20. Confidentiality
20.1 All communications between the parties, the Company, the Partnership,
Willis Corroon, and/or any of them and all information and other material
supplied to or received by any of them from the others which is either
marked "confidential" or is by its nature intended to be for the knowledge
of the recipient alone, and all information concerning the business
transactions and the financial arrangements of the Parties or the AG Group
with any person with whom any of them is in a confidential relationship
with regard to the matter in question to the knowledge of the recipient
shall be kept confidential by the recipient unless or until the recipient
party can reasonably demonstrate that any such communication, information
and material is, or part of it is, in the public domain through no fault
of its own, whereupon to the extent that it is in the public domain or is
required to be disclosed by law or in pursuance of employment duties, this
obligation shall cease.
20.2 The shareholders shall use all reasonable endeavours to procure the
observance of the above-mentioned restrictions by the Company and shall
take all reasonable steps to minimise the risk of disclosure of
confidential information, by ensuring that only they themselves and such
of their employees and directors whose duties will require them to possess
any of such information shall have access thereto, and will be instructed
to treat the same as confidential.
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<PAGE>
20.3 The obligation contained in this Clause 20 shall endure, even after the
termination of this Agreement, without limit in point of time except and
until such confidential information enters the public domain as set out
above.
20.4 Notwithstanding Clauses 20.1 to 20.3 WCE may at any time disclose any such
information and communications to its Associated Companies and as required
by applicable Stock Exchange Regulation.
20.5 A shareholder on ceasing to be a shareholder will hand over to the Company
all correspondence, budgets, schedules, documents and records belonging to
or relating to the business of the Company and will not keep any copies
thereof.
21. Restrictive Covenants
21.1 The Current Shareholders are comprised by the restrictive covenants in the
Partnership Agreement.
22. Notices
22.1 Notices, demands or other communications required or permitted to be given
or made hereunder shall be in writing in English and delivered personally
or sent by prepaid first class post with recorded delivery, or by telex,
or legible telefax addressed to the intended recipient at its address set
out in this Agreement or to such other address or telex or telefax numbers
as any party may from time to time duly notify to the others. Any such
notice, demand or communication to a Partner may be sent to the Chairman
of the Board of Directors. Any such notice, demand or communication shall,
unless the contrary is proven, be deemed to have been duly served (if
given or made by telefax or telex) on the next following business day in
the place of receipt of (if given or made by first class letter) 48 hours
after posting and in proving the same it shall be sufficient to show in
the case of a letter that it was duly addressed, correctly stamped and
posted and, in the case of a telex or telefax, that such telex or telefax
was duly despatched to a current telex or telefax number of the addressee.
23. Remedies
23.1 No remedy conferred by any of the provisions of this Agreement is intended
to be
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exclusive of any other remedy which is otherwise available at law, in
equity by statute or otherwise, and each and every other remedy shall be
cumulative and shall be in addition to every other remedy given hereunder
or now or hereafter existing at law, in equity, by statute or otherwise,
the election of any one or more of such remedies by any of the parties
hereto shall not constitute a waiver by such party of the right to pursue
any other available remedy.
24. Severance
24.1 If any provision of this Agreement or part thereof is rendered void,
illegal or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions shall not in any
way be affected or impaired thereby.
25. Survival of Rights, Duties and Obligations
25.1 Termination of this Agreement for any cause shall not release a party from
any liability which at the time of termination has already accrued to
another party of which thereafter may accrue in respect of any act or
omission prior to such termination.
26. Entire Agreement
26.1 This Agreement (together with the Schedules hereto and agreements and
documents referred to herein) constitutes the entire agreement between the
parties and save as otherwise expressly provided no modification,
amendment or waiver of any of the provisions of this Agreement shall be
effective unless made in writing specifically referring to this Agreement
and duly signed by the Parties hereto.
27. Assignment
27.1 This Agreement shall be binding on the Parties hereto and their respective
successors and assigns.
27.2 None of the Parties hereto shall be entitled to assign this Agreement or
any of its rights and obligations hereunder.
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28. Governing Law
28.1 This Agreement shall be governed by and construed in accordance with the
laws of Denmark.
29. Disputes
29.1 Any dispute between the Parties arising out of or in connection with this
Agreement shall, provided the parties can not agree on a settlement
through negotiation, be determined by arbitration with final, binding and
enforceable effect in agreement with the following rules:
29.2 In the event of a dispute, either party shall be entitled to request that
an arbitration tribunal be set up.
29.3 The party seeking resolution of a dispute by arbitration shall appoint an
arbitrator and send a letter by registered mail to the other party (the
"Respondent") requesting the Respondent to appoint its arbitrator within
14 days. The letter shall also contain a short statement of the question
or questions to be determined by the arbitration. Where the Respondent
does not appoint an arbitrator within the time-limit mentioned above, that
arbitrator shall instead be appointed by the Danish Arbitration Institute.
29.4 The two arbitrators appointed for the parties shall jointly appoint an
umpire. Failing agreement on the choice of an umpire, the appointed
arbitrators shall jointly approach the Danish Arbitration Institute and
request that it, following prior discussion with the parties, appoint an
umpire to act as chairman of the arbitration tribunal.
29.5 The arbitration tribunal shall determine the matter according to
applicable law and shall lay down the rules for its hearing of the matter
in agreement with the general principles of the Danish Administration of
Justice Act (Retsplejeloven).
29.6 The arbitration tribunal shall also decide how the costs of the
arbitration are to be borne. The arbitration tribunal shall set a date for
implementation of the award, which date shall normally be no later than 14
days after the award has been
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made.
29.7 The venue for the arbitration shall be Copenhagen, and the language of the
proceedings shall be English.
28/9 1998 28/9 1998
Willis Cooroon Europe B.V. The Current Shareholders
By: By:
-------------------------- -----------------------------
Mr Niels Simonsen
and Mr Kent Risvad acting for
the Board of Directors of the
Company autho- rized to execute
this Agreement by the Current
Shareholders
Acceded to
28/9 1998
Assurand0rgruppen I/S
By:
-------------------------
Mr Niels Simonsen and Mr
Kent Risvad acting for the
Board of Directors of the
Company authorized to exe-
cute this Agreement by the
Current Shareholders
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<PAGE>
List of Appendices:
Schedule 1: List of Shareholdings
Annex 1: Stock Purchase Agreement
Annex 2: Board Resolution
Annex 3: Deed of Partnership
Acceded to
28/9 1998
Assurand0rgruppen A/S
By:
-------------------------
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<PAGE>
CONFORMED COPY
Dated 4th August 1997
ABBEY NATIONAL plc
and
WILLIS CORROON GROUP PLC
and
WILLIS NATIONAL HOLDINGS LIMITED
------------------------------------
SHAREHOLDERS' AGREEMENT
relating to
WILLIS NATIONAL HOLDINGS LIMITED
------------------------------------
Slaughter and May
35 Basinghall Street,
London EC2V 5DB
TNC/PJAB
<PAGE>
CONTENTS
Page
----
1. Definitions 1
2. Business 6
3. Structure and employees 6
4. Conduct of business 8
5. Financing 8
6. Directors and officers 8
7. Management 8
8. Reserved Matters 8
9. Operational matters 8
10. Issue of shares 8
11. Transfer of shares 8
12. Distributions 8
13. Performance of agreement 8
14. Access to information 8
15. Non-competition 8
16. Term 8
17. Termination 8
18. Breach 8
19. Confidentiality 8
20. Costs and expenses 8
21. Variation 8
22. Waiver 8
23. Restrictive Trade Practices Act 1976 8
24. Partnership 8
25. Assignment 8
26. Entire agreement 8
27. Announcements 8
28. Notices 8
29. Governing law 8
Schedule 1 Reserved Matters 8
Schedule 2 Disputes Resolution Procedure 8
Schedule 3 Roulette Procedure 8
Schedule 4 Insurance 8
Schedule 5 Basis of Valuation of Shares 8
<PAGE>
SHAREHOLDERS' AGREEMENT
THIS AGREEMENT is dated 4th August, 1997
BETWEEN:
(1) ABBEY NATIONAL plc (Registered in England No. 2294747) whose registered
office is at Abbey House, Baker Street, London NW1 6XL ("Abbey National");
(2) WILLIS CORROON GROUP PLC (Registered in England No. 621757) whose
registered office is at Ten Trinity Square, London EC3P 3AX ("Willis");
and
(3) WILLIS NATIONAL HOLDINGS LIMITED (Registered in England No. 3393377) whose
registered office is at Ten Trinity Square, London EC3P 3AX (the
"Company").
WHEREAS:
(A) At the date of this Agreement, the issued and paid up share capital of the
Company is beneficially owned as follows:
Name Number of Shares Percentage of issued share capital
- ---- ---------------- ----------------------------------
Abbey National 490 49%
Independent
Consultancy Group
Limited
Willis Corroon
Limited 510 51%
(B) The Company is the beneficial owner of the whole of the issued share
capital of ANIFA, W-IFA and Willis National.
(C) Abbey National and Willis have agreed to enter into certain arrangements
for the purpose of regulating their relationship with each other and
certain other aspects of the affairs of, and their dealings with, the IFA
Group.
NOW IT IS HEREBY AGREED as follows:
1. Definitions
1.1 In this Agreement and the recitals and Schedules, the following
expressions shall (save where the context otherwise requires) have the
following meanings:
<PAGE>
2
"Abbey National Loan" means the subordinated loan of (pound)4,000,000
in principal amount made available by Abbey
National to ANIFA pursuant to a loan agreement
dated 1 August 1997 made between Abbey National,
ANIFA and PIA;
"Accounting Period" means the period commencing on the accounting
reference date of the Company in any year and
ending on the date preceding the accounting
reference date in the next following year;
"ANIFA" means Abbey National Independent Financial
Advisers Limited, registered in England and
Wales with number 2055101;
"Approval" means the approval of shareholders as required
by the rules of the London Stock Exchange
Limited or any necessary regulatory approval;
"Articles of Association" means, in relation to the Company, the Articles
of Association of the Company (a copy of which
has, for the purpose of identification only,
been initialled by, or on behalf of, Abbey
National and Willis) as the same may, from time
to time, be amended in accordance with the
provisions of this Agreement;
"Auditors" means Ernst & Young or such other firm of
accountants as may be appointed in accordance
with the provisions of this Agreement;
"Board" means the Board of Directors of the Company from
time to time;
"Business" means the business carried on by the IFA Group
from time to time in accordance with clause 2;
<PAGE>
3
"Business Day" means any day (other than a Saturday or Sunday)
on which banks generally are open in the City of
London for the transaction of normal banking
business;
"Business Plan" means the three year rolling business plan for
the IFA Group for the time being as agreed by
the Shareholders in accordance with this
Agreement, the business plan relating to the
first period having been initialled for the
purpose of identification only by or on behalf
of the Shareholders;
"Chief Executive Officer" the individual occupying the most senior
executive position within the Company;
"Compliance Employees" means employees of companies within the Abbey
National Group or the Willis Group, as the case
may be, who, prior to the execution of this
Agreement, have been significantly involved in
the investigation of the affairs of affected
persons (as defined in Clause 8 of the Share
Sale Agreements);
"Directors" means, in relation to the Company, the directors
for the time being and from time to time
appointed in accordance with the provisions of
this Agreement;
"Group" means, in relation to any Shareholder, that
Shareholder together with any wholly-owned
subsidiary or holding company of such
Shareholder, and any wholly-owned subsidiary of
such holding company;
"Group Relief" means relief for trading losses and other
amounts eligible for relief from corporation tax
pursuant to Chapter IV Part X of the Income and
Corporation Taxes Act 1988;
<PAGE>
4
"Human Resources Working means the agreed principles applicable to the
Paper" terms of employment of employees involved in the
Business, a copy of which has, for the purpose
of identification only, been initialled by, or
on behalf of, Abbey National and Willis;
"IFA Group" means the Company and its subsidiaries and,
where the context so admits, includes any one or
more of such companies;
"Independent Valuers" means such merchant bank, based in London, of
international repute (not being financial
advisers to the Abbey National Group or the
Willis Group) as Abbey National and Willis may
agree or, in default of agreement, as
determined upon the application of either
Shareholder by the President for the time
being of the London Investment Bankers'
Association;
"Initial Fixed Term" means the period commencing on the date of this
Agreement and ending on 31 December 2002
(inclusive);
"IP Licences" means the agreements of today's date between the
Company and each of Abbey National and Willis
whereby the Company and the IFA Group are
granted a licence to use certain intellectual
property rights of Abbey National and Willis;
"Joint Committee" means the committee referred to in Schedule 2
(Disputes Resolution Procedure) comprising the
Chief Executive Officers of Abbey National and
Willis from time to time appointed or such
alternates as the respective Chief Executive
Officers in their absolute discretion shall
appoint;
<PAGE>
5
"Management Committee" shall mean a committee of the Board to Comprise
the Chief Executive Officer and such other
persons as shall be determined by the Board;
"PIA" means the Personal Investment Authority Limited;
shall have the meaning more particularly set
"Roulette Notice" out in paragraph 1 of Schedule 3;
"Services Agreement" means the agreement of today's date between the
Company, Abbey National and Willis whereby Abbey
National and Willis, as the case may be, agrees
to provide certain services to the Company;
means, in relation to the Company, a holder of
Shares in accordance with the provisions of
"Shareholder" this Agreement;
"Shares" means, in relation to the Company, any shares in
the Company and any interest in such shares;
"Share Sale Agreements" means the two share sale agreements dated today
and made between Abbey National Independent
Consulting Group Limited and the Company and
Willis Corroon Limited and the Company;
"Subordinated Loan" means the (pound)3,000,000 loan made by Willis
Limited to W-IFA pursuant to an agreement dated
11 January 1996 between W-IFA, Willis Corroon
Limited and the Personal Investment Authority
Limited;
"Termination Event" shall have the meaning more particularly set out
in Clause 17 (Termination);
<PAGE>
6
"W-IFA" means Willis Corroon Financial Planning Limited,
registered in England and Wales with number
1877373;
"Willis National" means Willis National Limited, registered in
England and Wales with number 3379907.
1.2 References to clauses and schedules are to clauses of, and schedules to,
this Agreement.
1.3 The schedules form part of this Agreement and shall have the same force
and effect as if expressly set out in the body of this Agreement and
reference to this Agreement shall include the schedules.
1.4 Unless the context otherwise requires, in this Agreement, reference to a
statute or any statutory provisions shall include any statute or any
statutory provision which amends or replaces, or has amended or replaced,
it and shall include any subordinate legislation made under the relevant
statute.
1.5 References to the singular include references to the plural and vice versa
and references to any gender include references to every gender.
1.6 Words and expressions defined in the Companies Act 1985 (as amended)
shall, unless the context otherwise requires, have the same meanings when
used in this Agreement.
1.7 Headings are for convenience only and shall not effect the construction of
this Agreement.
1.8 To the extent that this Agreement is in conflict with the provisions of
the articles of association of any member of the IFA Group or any term of
the IP Licence Agreements or the Services Agreement, such provisions
and/or term shall, to the extent permitted by law, be deemed to be varied
hereby to the intent that the provisions of this Agreement shall prevail.
2. Business
2.1 The business of the IFA Group shall be to carry on such business (and only
such business) as is set out in the Business Plan.
2.2 The business of the IFA Group shall be carried on from such places in the
United Kingdom and such other places as the Board may from time to time
decide in accordance with the Business Plan.
<PAGE>
7
2.3 Each of Abbey National and Willis will use its reasonable endeavours to
procure that all of the customers for the time being of the Abbey National
Group and the Willis Group respectively who express a desire for services
of a kind for the time being offered by the IFA Group are introduced to
the IFA Group with a view to the IFA Group providing such services to
those customers.
3. Structure and employees
3.1 Each of Abbey National and Willis agree that:
(A) on or prior to 1 January 1998 the businesses of ANIFA and W-IFA and
its subsidiaries will be transferred to Willis National on mutually
agreed terms; and
(B) with effect from 1 January 1998, and subject to the approval of the
PIA, the Business will be carried on exclusively by Willis National.
3.2 Following execution of this Agreement, and provided that an offer is made
on terms, taken as a whole, no less favourable than his existing terms of
employment, Abbey National shall use its best endeavours to transfer the
employment of Jeremy Budden, and Willis shall use its best endeavours to
transfer the employment of Allan Daffern, to Willis National or the
Company, on terms to be agreed between Jeremy Budden and Willis National
or the Company and between Allan Daffern and Willis National or the
Company, as the case may be, to take effect on or prior to 1 January 1998.
Such terms shall include restrictive covenants, and "garden leave"
arrangements, appropriate in the circumstances, having regard to the
seniority of those employees and the need to protect the Business. The
terms for Jeremy Budden shall also provide that in the event of the
Company becoming a subsidiary of the Sedgwick Group PLC the Company shall
be deemed to be in repudiatory breach of the contract of employment or the
terms of the secondment, as the case may be.
3.3 Following execution of this Agreement, Gillian Salt shall be seconded to
ANIFA or another IFA Group Company for an initial term of two years and
thereafter until such secondment is terminated by Abbey National giving to
ANIFA or that company not less than three months' written notice. During
such period, the provisions of clause 3.9 (A), (B) and (C) shall apply to
the secondment, mutatis mutandis.
3.4 As soon as practicable following the execution of this Agreement, Willis
shall procure that Willis Compliance Employees will be offered new
contracts of employment with W-IFA.
3.5 The Company will procure that the Compliance Employees will continue to
devote such proportion of their working time as shall be requested by
Abbey National or Willis, as the
<PAGE>
8
case may be, to the investigation of the affairs of affected persons (as
defined in Clause 8 of the Share Sale Agreements) relating to Abbey
National or Willis, as the case may be.
3.6 The Company will ensure that no Compliance Employee is dismissed without
the prior written consent of the party with whose affairs that Compliance
Employee has been primarily involved. The Company shall also ensure that
no other person shall be employed or engaged by any member of the IFA
Group in order to devote the substantial majority of their time to the
investigation of the affairs of affected persons ("Future Compliance
Employees") without prior consultation with the party with whose affairs
that Future Compliance Employee is to be primarily involved.
3.7 The parties acknowledge that, from the date hereof until such time as
their employment is transferred to W-IFA or Willis National, those
individuals who work in W-IFA (other than the Willis Compliance Employees
or the Willis Future Compliance Employees) will remain employed by Willis
Corroon Limited (the "Relevant Willis Employees"). Willis shall use its
best endeavours to transfer the employment of the Relevant Willis
Employees to W-IFA or Willis National as soon as reasonably practicable
following the date of this Agreement and in any event by 30 September
1997.
3.8 The following provisions will apply to the Relevant Willis Employees:
(A) prior to the transfer of the Relevant Willis Employees' employment
to W-IFA, he or she will be seconded to W-IFA and will devote the
whole of his or her working time to the Business;
(B) Willis will procure that Willis Limited will not, without the prior
written consent of Abbey National, second any of the Relevant Willis
Employees to any company, other than a member of the IFA Group;
(C) Willis will procure that Willis Limited will not, without the prior
written consent of Abbey National, dismiss any of the Relevant
Willis Employees;
(D) Willis will not offer and will procure that no company within the
Willis Group offers employment to any Relevant Willis Employee
without the prior written consent of Abbey National;
(E) W-IFA and Willis National will be free to offer employment to any
Relevant Willis Employee at any time following the execution of this
Agreement;
(F) Willis will procure that Willis Limited will not, without the prior
written consent of Abbey National, amend the terms and conditions of
employment of the Relevant
<PAGE>
9
Willis Employees; and
(G) individuals may be recruited after the date of this Agreement but
any such individual will be employed by W-IFA or ANIFA or Willis
National.
3.9 The following provisions will apply to Jeremy Budden and Allan Daffern
(each the "Seconded Employee") as the case may be until such time as they
enter a new service agreement pursuant to clause 3.2:
(A) prior to the transfer of the Seconded Employee's employment to
Willis National or the Company, he will be seconded to ANIFA or
W-IFA, as the case may be and will devote the whole of his working
time to the management and affairs of the IFA Group;
(B) Abbey National or Willis, as the case may be (the "Employer"), will
not without the prior written consent of the other, second the
Seconded Employee to any company other than a member of the IFA
Group;
(C) the Employer will not without the prior written consent of the other
dismiss the Seconded Employee;
(D) the Employer will not offer and will procure that no company within
its Group offers employment to the Seconded Employee without the
prior written consent of the other;
(E) subject to clause 3.2 above, any member of the IFA Group will be
free to offer employment to the Seconded Employee at any time
following the execution of this Agreement; and
(F) the Employer will not amend the terms and conditions of employment
of the Seconded Employee without the prior written consent of the
other.
3.10 For the period during which the Relevant Willis Employees, the Seconded
Employees or Gillian Salt (as the case may be) remain employed by their
employer, the relevant employer will continue to pay (but the Company will
procure that a member of the IFA Group shall indemnify that employer
against) all costs and expenses associated with the secondment save in
respect of any amount paid pursuant to the last sentence of clause 3.2.
4. Conduct of business
<PAGE>
10
4.1 The Business will be carried on in accordance with the Business Plan and
the rules and regulations for the time being applicable to the IFA Group
and the Business.
4.2 The IFA Group will carry on the Business in accordance with sound and good
business practice and the highest professional and ethical standards
generally and, additionally, in accordance with all applicable laws,
regulatory requirements and best practices of the jurisdictions and
markets in which the Business is conducted from time to time.
4.3 The Business will, as of 1 January 1998, operate under the name "Willis
National". Between the date of this Agreement and 1 January 1998, ANIFA
and W-IFA shall continue to operate under their existing names. As soon as
practicable and in any event by 1 January 1998, the corporate name of
ANIFA shall be changed so as not to include the word "Abbey".
4.4 Abbey National and Willis will offer such support services to the IFA
Group as are more particularly set out in the Services Agreement.
4.5 Any services provided by Abbey National or Willis pursuant to clause 4.4
will be provided on an arm's length basis unless otherwise agreed by Abbey
National and Willis.
4.6 It is hereby agreed that Coopers & Lybrand shall remain auditors of ANIFA
until the accounts for ANIFA for the year ending 31 December 1997 have
been issued with an audit opinion included. Abbey National shall procure
their resignation as soon as practicable thereafter.
4.7 Abbey National and Willis agree to procure, as far as each is able, that
the appointment of James Hay Pension Trustees Limited as the appointed
representative of ANIFA will continue until at least 31 December 1997.
5. Financing
5.1 Abbey National and Willis acknowledge that, in addition to the share
capital subscribed or paid up at the date hereof, the IFA Group may
require further funds in order to fund its projected cash requirements
under the Business Plan. If such further finance is required, it is the
intention of Abbey National and Willis that, unless otherwise agreed, it
should be provided:
(A) firstly, by way of additional equity to be subscribed by the
Shareholders in proportion to their respective holdings of Shares;
(B) secondly, by way of loans or loan capital from the Shareholders in
proportion to
<PAGE>
11
their respective holdings of Shares and on such commercial terms
(identical as between the Shareholders) as they may agree with the
Company; and
(C) thirdly, by third party finance on such terms as may be obtained by
the Company.
5.2 If the Company requires third party finance, it shall endeavour to obtain
such finance on the basis that there shall be no recourse to the
Shareholders and otherwise on the best terms which could reasonably be
expected to be obtained by the Company in the open market provided always
that nothing shall oblige any Shareholder to provide any guarantee or
security in respect thereof or to put up the finance concerned.
5.3 If in the reasonable judgment of the Board there is at any time a
likelihood that within a period of six months there will arise a
requirement to increase the share capital of the Company as a result of
any requirement or request of any regulatory authority (whether that
requirement or request relates to the Company or any other member of the
IFA Group), new Shares in the Company shall be offered to the Shareholders
in accordance with clause 10.
5.4 As soon as practicable after the date of this Agreement and in any event
by no later than 1 January 1998, the Shareholders shall procure, so far as
each is able, that the Subordinated Loan shall be capitalised or converted
or waived at the expense of Willis into share capital in W-IFA on terms to
be agreed between Abbey National and Willis and on the basis that any
share capital arising on capitalisation or conversion shall either carry
no effective right to income or capital or to vote or, if it does carry
any such rights, on the basis that the share capital arising on
capitalisation or conversion of the Subordinated Loan shall be transferred
immediately to a member of the IFA Group (other than W-IFA) for no
consideration. Willis shall use all reasonable endeavours to obtain the
agreement of any other party to the Subordinated Loan to such
capitalisation, conversion or waiver and shall, pending capitalisation,
conversion or waiver, not seek to charge any interest on or repayment of
the amounts outstanding under the Subordinated Loan. Willis shall
indemnify and keep indemnified W-IFA and each member of the IFA Group in
respect of all costs, expenses, liabilities or losses resulting, directly
or indirectly, from the continuation of the Subordinated Loan beyond the
date of this Agreement or from its capitalisation, conversion or waiver
pursuant to this clause.
5.5 (A) Following execution of this Agreement the Shareholders shall procure
so far as each is able that:
<PAGE>
12
(i) as soon as practicable after the date of this Agreement and by
no later than 31 August 1997, the Company makes available to
ANIFA (pound)2,200,000 cash and that the Company procures
ANIFA to repay an equivalent amount of the Abbey National
Loan.
(ii) by no later than 31 December 1997, either the Abbey National
Loan (as reduced pursuant to sub-clause (i)) is assigned to
Willis National or the Company for cash consideration equal to
the outstanding principal amount plus accrued and unpaid
interest thereon or that the Abbey National Loan (as reduced
pursuant to sub-clause (i)) is repaid; and
(iii) the Company, Willis National and ANIFA use all reasonable
endeavours to obtain the consent of PIA to such assignment or
repayments;
(B) For the purposes of achieving the assignment or repayment of the
Abbey National Loan as described in sub-clause (A)((ii)), Abbey
National and Willis will provide to the Company sufficient finance
in the form of short term loans (or otherwise in such manner as
shall be agreed between them), pro-rata to their respective holdings
of Shares, to enable the Company to make available to ANIFA a
subordinated loan on the same terms mutatis mutandis as the Abbey
National Loan.
(C) To the extent that the financial resource requirement of ANIFA as
calculated in accordance with Chapter 13 of the Rule Book of PIA is
reduced at any time, the Company shall use all reasonable endeavours
to obtain the consent of PIA to the repayment by ANIFA of the
subordinated loan provided to ANIFA pursuant to sub-clause ((B))
and, upon any such repayment, the Company shall repay any short term
loans made to it by Abbey National or Willis for the purposes
thereof on a pro-rata basis.
(D) To the extent that any amount remains outstanding on the Abbey
National Loan beyond 31 August 1997, the Shareholders shall procure,
so far as each is able, that the Company pays and the Company
undertakes that it will pay, interest on the amount outstanding from
time to time at a rate equal to five month sterling LIBOR plus one
half of one per cent per annum.
6. Directors and officers
6.1 Unless otherwise agreed between the Shareholders, the number of Directors
of the Company shall be not less than two and not more than six.
<PAGE>
13
6.2 Each Shareholder shall appoint an equal number of persons to become
directors of the Company.
6.3 The Chairman of the Company shall be appointed, following consultation
with the other Shareholder, by the owner for the time being of the
majority of the issued share capital of the Company.
6.4 The parties hereto agree and acknowledge that any Director appointed under
this Agreement and Articles of Association shall be entitled to pass to
the Shareholder appointing him full details of any information which may
come into his possession as such Director may, in his absolute discretion,
decide provided any such Shareholder shall be bound by clause 19
(Confidentiality).
6.5 Whenever any person ceases to be a Director of the Company his replacement
shall be appointed by the party who had the original rights of nomination
subject always to the provisions of clause 6.2.
6.6 Any Director may at any time be removed from office by the Shareholder who
nominated him as a Director. Any nomination or removal of a Director shall
be in writing delivered to the Company concerned and signed by or on
behalf of the Shareholder having the right to nominate such Director.
6.7 Unless otherwise agreed in writing by the parties hereto in respect of a
particular meeting:
(A) meetings of the Board shall take place at least four times each year
and additionally within seven days of receipt by the Company of a
written request to this effect from any Shareholder;
(B) every notice of such meeting shall be accompanied by an agenda and
no material business shall be conducted at such meeting unless
included in such agenda; and
(C) every such meeting shall be held at the head office for the time
being of the Company (or in such other place the Shareholders may
agree) on not less than seven clear days' written notice (except in
the case of emergency, when such notice as is reasonably practicable
shall suffice).
6.8 Any decisions made at any meeting of the Board shall be made by resolution
and no such resolution shall, subject to clause 8, be effective unless a
majority of the Directors (including any alternate for any Director)
present at the meeting of the Board vote in favour of it and any Director
who is acting as an alternate shall be entitled to vote in his
<PAGE>
14
capacity as an alternate in addition to exercising his own right to vote.
The Chairman shall have a casting vote.
6.9 Subject to clause 8, a resolution in writing signed by or on behalf of all
the Directors (or their alternates) entitled to receive notice of a
meeting of Directors, or any committee of Directors, shall be as valid and
effectual as if it had been passed at a meeting of Directors, or (as the
case may be) a committee of Directors, duly convened and held and may
consist of several documents in the like form each signed by one or more
of the Directors.
6.10 The quorum necessary for the transaction of the business of the Board may
be fixed by unanimous decision of the Board and, unless so fixed at any
number, shall be two, such two to include one director appointed by Abbey
National pursuant to clause 6.2 (or any alternate director) and one
director so appointed by Willis (or any alternate director).
6.11 If, at any time at or before any meeting of the Directors, any Director or
any alternate appointed by any Director shall request that the meeting be
adjourned or reconvened to another time being not more than seven days
following the date of the adjourned meeting (whether to enable further
consideration to be given to any matter or for other Directors to be
present or for any other reason, which he need not state) then such
meeting shall be adjourned or reconvened accordingly, and no business
shall be conducted or proceeded with at that meeting after such request
has been made. No such request shall be made at a meeting which has been
reconvened following an adjournment.
6.12 All or any of the members of the Board may participate in a meeting of the
Board by means of a conference telephone or any communication equipment
which allows all persons participating in the meeting to speak to and hear
each other. A person so participating shall be deemed to be present in
person at the meeting and shall be entitled to vote or be counted in the
quorum accordingly, for the purposes of clause 6.10. Such a meeting shall
be deemed to take place where the largest group of those participating
have assembled, or, if there is no such group, where the Chairman of the
meeting then is.
6.13 Each of the Shareholders hereby undertakes that it will procure that none
of the Directors nominated by it shall wilfully and/or persistently absent
themselves from any meeting of the Board so as to prevent the
establishment of a quorum at that meeting and that any such Director will
exercise or refrain from exercising any voting rights so as to ensure that
the passing of any and every resolution necessary or desirable to procure
that the affairs of the IFA Group are conducted in accordance with the
provisions of this Agreement and otherwise to give full effect to the
provisions of this Agreement, and likewise, to ensure that no resolution
is passed which does not accord with such provisions.
<PAGE>
15
7. Management
7.1 On one occasion and at such time in each Accounting Period as Abbey
National shall reasonably require (or, in the absence of a request by
Abbey National to the contrary by not later than three months before the
commencement of the subsequent Accounting Period, at such time), the
Company shall prepare a Business Plan covering the three-year period
commencing at the beginning of the subsequent Accounting Period. No
Business Plan shall take effect without the unanimous approval of the
Board in accordance with Part 1 of Schedule 1. The Shareholders shall
procure that the Business Plan is considered by the Board no later than
the last meeting of the Board prior to commencement of the subsequent
Accounting Period.
7.2 Without prejudice to clause 7.1, not less than 10 Business Days prior to
the date of the Board meeting at which it is proposed that the Board will
consider a resolution to approve a Business Plan, the Company shall
provide the Shareholders (either directly or through their respective
representatives nominated by them to the Board) with a copy of the
proposed Business Plan and shall consult with them as to the contents of
such plan and the appropriate means of implementing it, to the extent
reasonably required by them, and shall have due regard to their views
insofar as they are consistent with the commercial interests of the IFA
Group.
7.3 A copy of each Business Plan in the form approved by the Board shall be
supplied to the Shareholders (either directly or through their respective
representatives nominated by them to the Board) not more than 10 Business
Days after the date on which it is so approved.
7.4 The parties shall procure that the Company shall prepare and deliver to
the Shareholders (either directly or through their respective
representatives nominated by them to the Board) in each Accounting Period
a draft annual budget for the IFA Group relating to the subsequent
Accounting Period.
7.5 The draft budget to be prepared pursuant to clause 7.4 shall contain in
reasonable detail in respect of the Accounting Period to which it shall
relate:
(A) the forecast capital expenditure to be incurred by the IFA Group
during the relevant Accounting Period;
(B) an estimate of the revenues and operating expenditure of the IFA
Group for the relevant Accounting Period;
(C) details of any major or unusual items of capital or operating
expenditure forecast
<PAGE>
16
to be incurred;
(D) details of any proposed amendments to the Business Plan for the
forthcoming year which are known at the date on which the draft
budget is prepared;
(E) details of any matters which would, if the draft budget were to take
effect, require unanimous Board or Shareholder approval in
accordance with Schedule 1.
7.6 The Board shall approve any draft budget not later than 10 Business Days
after delivery of the draft budget pursuant to clause 7.4. The Board shall
not approve any such budget if such budget contains anything which would,
if the budget were to take effect, require unanimous Board or Shareholder
approval in accordance with Schedule 1, without the Board having prior to
such approval by it obtained such approval in respect of such thing.
During the period from the date on which the draft budget is delivered to
the Shareholders pursuant to clause 7.4 to the date of approval of such
draft budget, to the extent reasonably required by the Shareholders (or by
their respective representatives nominated by them to the Board), the IFA
Group shall take due account of the views of the Shareholders (or by their
respective representatives on the Board) insofar as they are consistent
with the commercial interests of the IFA Group.
7.7 The Board will review the Business Plan and the budget at least once in
any calendar quarter. If the IFA Group proposes to make any significant
variation to or departure from any budget or Business Plan, it shall first
notify the Shareholders in writing of its intention to do so and shall
consult with the Shareholders (or with their respective representatives
nominated by them to the Board) as to the proposed changes and the
appropriate means of implementing them, to the extent reasonably required
by the Shareholders (or by their respective representatives nominated by
them to the Board), and shall take due account of the views of the
Shareholders (or their respective representatives nominated by them to the
Board) insofar as they are consistent with the commercial interests of the
Company.
7.8 The Board shall not approve any significant variation to or departure from
any budget or Business Plan until 10 Business Days have elapsed since the
date of the notice referred to in clause 7.7 unless, the Company having
served notice pursuant to clause 7.7 at the earliest reasonably
practicable opportunity, the Board resolves that circumstances require
amendment to the budget within a shorter period.
7.9 The accounting policies of the Company shall be decided by the Board from
time to time, subject to clause 8.
7.10 Each of the parties agrees to exercise its rights as a Shareholder to
procure that:
<PAGE>
17
(A) the annual statements of account of the Company will be maintained
and audited in accordance with all applicable statutory and
regulatory requirements, all statements of standard accounting
practice and all other generally accepted accounting principles and
practices appropriate for the place of incorporation or residence of
the Company; and
(B) consolidated management and audited accounts shall be prepared in
respect of the IFA Group and will be reviewed and approved by the
Board on a regular basis.
7.11 The Shareholders shall not approve any variation or departure from the
budget or Business Plan unless such variation or departure has been
unanimously approved by the Board.
7.12 The Management Committee shall be responsible for:
(A) preparing the Business Plan to be submitted to the Board for
approval, as more particularly set out in clause 7.1;
(B) preparing the draft budget for submission to the Board on the basis
more particularly set out clause 7.5; and
(C) fulfilling such other functions as the Board shall determine from
time to time.
7.13 The Chief Executive Officer will, subject to clause 8, be appointed by the
Board. The first Chief Executive Officer shall be Jeremy Budden who shall,
pending his transfer to the Company or Willis National pursuant to clause
3.2, be seconded to the Company.
7.14 Subject to clause 7.13 the Chief Executive Officer shall be employed by
the Company on such terms and conditions as are more particularly set out
in his service contract.
8. Reserved Matters
8.1 Notwithstanding any provisions in clauses 6 or 7 but subject to clause
8.2, the Shareholders shall procure, so far as they are able, that:
(A) no action shall be taken or resolution passed by the board of
directors of any member of the IFA Group or any such member in
respect of the matters set out in Part 1 of Schedule 1 except with
the unanimous approval of the Board and
(B) no action shall be taken or resolution passed by the board of
directors of any
<PAGE>
18
member of the IFA Group or any such member in respect of the matters
set out in Part 2 of Schedule 1 except with the unanimous consent of
the holders of each class of shares in the Company.
8.2 If any matter under this Agreement (including but not limited to those set
out in Schedule 1) shall give rise to a dispute between Abbey National and
Willis or if the Shareholders fail to reach an agreement with respect to
any matter set out in Schedule 1, in the absence of any agreement between
the parties to the contrary such a dispute shall be resolved in accordance
with Schedule 2.
8.3 If the procedure set out in Schedule 2 fails to resolve any dispute or
disagreement between the parties in respect of any matter (including but
not limited to those set out in Schedule 1), then either Shareholder may
serve a Roulette Notice on the other, in accordance with the provisions
set out in Schedule 3.
8.4 Abbey National and Willis each covenant to the other for the benefit of
each member of the other's Group and the IFA Group to perform or procure
performance of its obligations and the obligations of each member of its
Group as set out or implied in any agreement or arrangement (including,
without limitation, the Share Sale Agreements and the Tax Covenants
entered into pursuant thereto) made or entered into between it or any
member of its Group and any member of the IFA Group.
8.5 If any member of the IFA Group is proposing to amend or enforce any
agreement or arrangement with any Shareholder or member of a Shareholder's
Group (the "Affected Shareholder") or to exercise or waive any rights
under such agreement or arrangement, the decision whether or not to
approve such amendment, enforcement, exercise or waiver shall only be
effective if it is approved by the Board. The Directors appointed by the
Affected Shareholder may participate in discussions concerning the
decision and shall count as part of the quorum but shall not be entitled
to vote in relation to it. The Directors appointed by the other
Shareholder (the "Non-Affected Shareholder") shall act reasonably, having
regard to the interests of the IFA Group, at all times in relation to any
such decision.
8.6 If the Board decides pursuant to clause 8.5 to enforce any agreement or
arrangement against the Affected Shareholder, then:
(A) (i) the Shareholders shall procure, so far as each is able, that
no steps are taken by the Company to enforce the agreement or
arrangement unless both Shareholders consent;
(ii) the Non-Affected Shareholder shall enforce the relevant
agreement or arrangement against the Affected Shareholder
itself on behalf of the
<PAGE>
19
relevant member of the IFA Group and in such circumstances the
Non-Affected Shareholder shall have all necessary access to
information, premises and personnel for these purposes; and
(B) if breach by either Abbey National or Willis of its covenant in
clause 8.4 amounts to a Termination Event in respect of that party,
the Independent Valuers appointed for the purpose of valuing the
Shares shall be instructed to deduct in arriving at the Termination
Price such reasonable amount as they consider to be necessary to
compensate the IFA Group in respect of, or to remedy, the breach.
8.7 Where it is proposed that any aspect of the consolidated financial
statements of the Company required to be included therein by the Companies
Act 1985 or the Financial Reporting Statements of the Accounting Standards
Board or any other statutory or stock exchange requirement is to be
approved by the Board notwithstanding an objection by one Shareholder, the
Shareholders and the Company shall, at the request of the objecting
Shareholder (and so far as each is able) acting reasonably at all times,
use their respective reasonable endeavours to make the Auditors discuss
that aspect with the auditors or other advisers of the objecting
Shareholder in good faith. If, notwithstanding such discussions, the Board
proposes to approve the aspect which is the subject of the objection:
(a) the Directors appointed by the objecting Shareholder may require the
Board to record the subject of the objection in the Board minutes of
the Company and to bring the matter to the notice of the Auditors
who shall, after consultation with the auditors and other advisers
of the objecting Shareholder, decide whether and if so, what form,
the matter should be disclosed in the Company's relevant financial
statements; and
(b) the objecting Shareholder may either serve a Roulette Notice on the
other in accordance with the provisions set out in Schedule 3 or
treat the inclusion of the matter to which it objects in the
relevant financial statements as a material breach of this Agreement
constituting a Termination Event for the purposes of clause 17
(disregarding for these purposes any discount to the value
determined for the Shares implied by clause 17.13 ((B))).
9. Operational matters
9.1 Willis shall ensure that, with effect from the transfer of ANIFA and W-IFA
to the Company, adequate insurance cover for the types of risk (including,
without limitation, professional indemnity insurance) and at the levels
agreed between Abbey National and Willis is in place for the benefit of
ANIFA and W-IFA with respect to matters arising in the period
<PAGE>
20
after Completion (as defined in the Share Sale Agreements). For the
avoidance of doubt, Willis shall not be obliged to nor shall it provide
cover to ANIFA in respect of any claim whenever arising which relates to
ANIFA or its activities prior to Completion. Willis confirms that the
insurance that will be so available shall be on terms no less favourable
than as set out in Schedule 4. Following the date of this Agreement:
(i) the types of risk and levels of cover available shall be reviewed by
the Management Committee, and, if so determined by them, new cover
shall be obtained; and
(ii) Willis shall use its best endeavours to procure that, within 10
Business Days after the date of this Agreement, a quotation is
provided for the "buydown" facility referred to in column 4 of
Schedule 4 to be made available to each member of the IFA Group.
9.2 The Company, Abbey National and Willis shall, following signature of this
Agreement by the parties hereto, enter into the Services Agreement and the
IP License Agreements.
9.3 As soon as practicable following the date of this Agreement, the Company
shall adopt the following incentive schemes for the benefit of all or some
of the employees of the IFA Group:
(A) a retention incentive scheme, in which all employees of the IFA
Group (including for these purposes the Relevant Willis Employees,
the Seconded Employees and Gillian Salt) who are in employment with
such member of the IFA Group as at the date of Completion of this
Agreement (or become an employee of a member of the IFA Group by no
later than 1st January 1998) shall be entitled to participate, and
under which such employees shall receive a cash payment equivalent
to 10 per cent. of their then base salary if they remain an employee
of a member of the IFA Group for the period of one year immediately
following the date of this Agreement and at the end of that year
have not either given or been given notice and are not the subject
of any disciplinary notice or improvement notice for poor
performance;
(B) a long term incentive plan, in which all such employees shall be
entitled to participate, with effect from 1 January 1998 which shall
be substantially in the following form (including, without
limitation on the same financial terms):
(i) The plan will be a cash based profit sharing plan;
(ii) Each year the following amounts will be set aside into the
profit sharing
<PAGE>
21
pool:
- Year 1: 40% of any pre-tax profits in excess of budget
- Year 2 and successive years
- 10% of pre-tax profits, and
- 30% of any pre-tax profits in excess of budget.
However, no funds will be allocated to the profit sharing pool
if the JV's pre-tax profit is less than 80% of budgeted
pre-tax profit.
(iii) The pool will be allocated between participants pro rata to
their base salaries as at the end of the year;
(iv) At the end of each year, participants will be advised what
their share of the pool for that year will be. However, their
share of the pool will not be paid out to them for a further
two years;
(v) For selected senior individuals, 30% of their annual share of
the pool is put at risk and will be forfeited if a three year
budgeted profit target is not met. If the three year profit
target is met, the 30% of their share of the pool will be paid
and will also be matched with a further 30% payment;
(vi) The intention is that the incentive plan should cover all
employees of the JV;
(vii) Employees joining the company before 1 July will be eligible
for a share in the profit pool relating to the current year.
Their share will be prorated for their length of service
during the year. Employees joining from 1 July onwards will be
eligible to participate from 1 January following their date of
joining; and
(viii) "Good" leavers e.g. those leaving due to retirement or
ill-health, will be eligible to receive awards, pro rated for
their length of service. Other leavers will forfeit their
awards.
The Shareholders shall use all reasonable endeavours to agree the detailed
terms of these schemes as soon as practicable after the date of this
Agreement, it being recognised that the retention and successful
incentivisation of employees of the IFA
<PAGE>
22
Group is of fundamental importance to the success of the Business. In
other respects, the terms of employment of persons employed in the
Business shall be harmonised to the extent practicable, and shall
otherwise be in accordance with the principles set out in the Human
Resources Working Paper.
10. Issue of shares
10.1 The issue of new Shares shall be regulated in accordance with the
provisions set out herein and in the Articles of Association.
10.2 Unless otherwise agreed by the parties hereto, any Shares to be issued by
the Company shall before issue be offered for subscription in the first
instance to such persons as, at the date of the offer, are registered as
holders of that class of Shares in proportion to the number of such Shares
then held by them.
10.3 Any such offer as aforesaid shall be made by notice in writing specifying
the number of Shares offered and the price at which the same are offered
(the "Offer Price") which shall be a number and price unanimously approved
by the Board and shall remain open for acceptance for a period of not less
than 28 days. Any such offer not accepted within the period specified will
be deemed to be declined.
10.4 If any Shares offered by the Company in accordance with clause 10.2 are
not taken up, such Shares shall not be issued save that, if such Shares
are being offered as a result of any requirement or request of the kind
referred to in clause 5.3, such Shares may be subscribed by any
Shareholder who offered to subscribe for Shares under clause 10.3 as a
result of such offer on the terms set out in clauses 10.2 and 10.3.
11. Transfer of shares
11.1 Subject to clause 11.2, no Shareholder shall transfer any holding or
interest in its Shares during the Initial Fixed Term other than with the
consent of the other Shareholder. In the event that such consent to
transfer is forthcoming, the provisions set out in clause 11.3 shall
apply.
11.2 Notwithstanding clause 11.1, any Shareholder may effect a transfer of all
(but not some only) of its Shares to a company which is in the same Group
in circumstances where the entire legal and beneficial interest in all of
the share capital (together with all the rights attached and accruing to
such share capital) in each of:
(A) the transferee; and
<PAGE>
23
(B) any company in the Group through which the Shareholder and the
transferee trace their Group relationship,
is held, in each case, by the Shareholder or a parent undertaking of that
Shareholder or where such transferee is the ultimate parent undertaking of
such Shareholder (a "Permitted Transferee"). Any transfer made pursuant to
this clause shall be made on terms that prior to any transferee ceasing to
be a Permitted Transferee the Shares held by it must be transferred back
to a company that satisfies the requirements of being a Permitted
Transferee by reference to the parties to this Agreement.
11.3 (A) Prior to making or agreeing to make any transfer of any Shares
(other than a transfer pursuant to and in accordance with sub-clause
11.2), the Shareholder whose Shares are to be transferred (the
"Offeror") shall give a notice in writing (the "Transfer Notice") to
the other Shareholder (the "Non-Transferring Shareholder") informing
it of the proposed transfer, setting out the identity of the third
party and the price and terms offered by the third party for the
Shares (the "Third Party Purchase Price").
(B) The Non-Transferring Shareholder shall have the option (the
"Option"), to acquire, at the Purchase Price (as defined below), all
(but not some only) of the Shares referred to in the Transfer
Notice, such option being exercisable by giving notice (an "Exercise
Notice") in writing to the Offeror within 10 Business Days of the
receipt by the Non-Transferring Shareholder of the Transfer Notice
or, where an Approval is required, such longer period not exceeding
30 Business Days as is reasonably required in order to obtain that
Approval.
(C) The "Purchase Price" shall be:
(i) the Third Party Purchase Price; or
(ii) if the Third Party Purchase Price is not entirely for cash,
then the value in cash of the Third Party Purchase Price as
agreed between the Non-Transferring Shareholder and the
Offeror or, in the absence of agreement, as determined by the
Independent Valuers on such basis as they in their discretion
consider appropriate acting on the instructions of the
Non-Transferring Shareholder. Where the Independent Valuers
are instructed for the purposes of this clause, clauses 17.6,
17.7 and 17.8
<PAGE>
24
shall apply.
(D) Following the issue of an Exercise Notice by the Non-Transferring
Shareholder within the period stipulated in clause 11.3((B)), the
Offeror shall be obliged to sell, and the Non-Transferring
Shareholder shall be obliged to purchase the Shares on the date
falling 10 Business Days after the later of the date of the Exercise
Notice and the date upon which the Purchase Price is agreed or
determined as the case may be at such time and place as shall be
specified in the Exercise Notice (or such date, time and place as
may be agreed by the Offeror and the Non-Transferring Shareholder or
such other reasonable date, time and place as may be specified by
the Non-Transferring Shareholder).
(E) If the Non-Transferring Shareholder does not exercise the Option
within the period stipulated in clause 11.3((B)), the Offeror may
transfer the Shares to the third party named in the Transfer Notice
provided that:
(i) the Offeror shall procure that the third party named in the
Transfer Notice makes an offer to the Non-Transferring
Shareholder for all (but not some only) of its Shares on the
same terms (including, without limitation, as to price) per
Share as apply to the sale of Shares by the Offeror;
(ii) the price to be paid by the third party for the Shares is not
less than the Purchase Price without any rebate, allowance or
deduction whatever;
(iii) there are no collateral agreements which make the arrangement
more favourable to the third party; and
(iv) the transfer takes place within 30 Business Days of the date
of the Transfer Notice.
11.4 The Shares may not be offered in part to the other Shareholder or a third
party. Each Shareholder may only transfer Shares under this Agreement if
such transfer is to a single acquirer, purchasing all of the Shares owned
by the Shareholder.
11.5 The Shareholders will not cause any charge, lien, mortgage, security or
other third party interest to arise in respect of the Shares or allow any
such interest to subsist.
11.6 Save in circumstances where a transferee purchases the Shares of the
Non-Transferring Shareholder pursuant to clause 11.3((E)), no transfer of
Shares to a person who is not a Shareholder shall be effective unless and
until such transferee has signed an agreement, in a form reasonably
acceptable to the other Shareholder, under which the transferee
<PAGE>
25
agrees to be bound by the provisions of this Agreement.
12. Distributions
12.1 Unless otherwise agreed by the parties, all the profits of the Company
available for distribution shall be distributed amongst the Shareholders
in accordance with the rights attached to the Shares. Any amendment to the
rights attached to the Shares which changes the nature or form of such
distribution in any respect will require the unanimous consent of the
Shareholders. Neither Shareholder will enter into any agreement with any
other person (other than this Agreement and any amendments hereto) with
respect to the voting rights attaching to the Shares held by it.
12.2 The Shareholders shall procure that, as far as possible, elections are
made and will remain in force pursuant to sections 247 and 248 of the
Income and Corporation Taxes Act 1988 to enable:
(A) dividends to be paid by the Company without giving rise to a
liability to account for advance corporation tax; and
(B) payments which are deductible payments in relation to the Company
for the purposes of corporation tax to be made by the Company
without deduction of income tax.
13. Performance of agreement
13.1 Abbey National and Willis shall, and shall use all reasonable endeavours
to procure that any necessary third party shall do, execute or perform all
such further deeds, documents, assurances, acts and things as may
reasonably be required to give effect to the terms of this Agreement, the
IP Licences, the Services Agreement and the Articles of Association.
13.2 Each Shareholder confirms and undertakes that it will at all times:
(A) use and exercise (or refrain from using or exercising) the votes
attaching to the Shares held or controlled by it to ensure the
maintenance and observance of the terms of this Agreement, the IP
Licences, the Services Agreements and the Articles of Association;
(B) exercise all rights and powers vested in it in its capacity as a
Shareholder and as a party to this Agreement in an expeditious and
efficient manner; and
(C) do all things reasonably within its power which are necessary or
desirable to give
<PAGE>
26
effect to the spirit and intent of this Agreement, the IP Licences,
the Services Agreement and the Articles of Association.
13.3 No delay or omission on the part of any party in exercising any right,
power or remedy provided by law or under this Agreement, nor any
indulgence granted by any party, shall:
(A) impair such right, power or remedy; or
(B) be construed as a waiver thereof.
13.4 The single or partial exercise of any right, power or remedy provided by
law or under this Agreement shall not preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
13.5 The rights, powers and remedies provided in this Agreement are cumulative
and not exclusive of any rights, powers and remedies provided by law.
14. Access to information
14.1 Without prejudice to any other provision of this Agreement, the Company
shall provide the Shareholders with reasonable access to and (upon
reasonable request) copies of such financial, accounting and management
information and records relating to the Company (whether specifically or
generally) from time to time and which is available to the IFA Group under
its own management and financial systems.
14.2 Without prejudice to clause 14.1, the Company shall provide to the
Shareholders (either directly or through their respective representatives
nominated by them to the Board) in normal circumstances within ten
Business Days after the end of the period to which they relate:
(i) monthly management accounts of the Company and the IFA Group;
(ii) quarterly and half-yearly accounts and financial information of the
Company and IFA Group.
14.3 Without prejudice to clause 14.1, the Company shall provide to the
Shareholders (either directly or through their respective representatives
nominated by them to the Board):
(i) draft annual accounts of the Company as soon as they are available;
(ii) audited annual accounts of the Company promptly following their
approval by the
<PAGE>
27
Board;
(iii) copies of any material correspondence with or notification from any
tax or regulatory authority, wherever situate (including, without
limitation, any which relates to any issue of substantive
disagreement) as soon as available;
(iv) draft public announcements and press releases of the Company as soon
as they are available; and
(v) any and all draft business plans, budgets and other financial data
as agreed between the Shareholders from time to time to be used in
the running of the Business.
14.4 Each of Abbey National and Willis reserve the right, at their sole
discretion to commission at their own cost, and at any time on giving not
less than 48 hours prior notice, a report on the Business or any aspect
thereof or on the IFA Group or any part of it. Such report may be produced
by Abbey National or Willis (or its employees) or by a third party and the
Company will make available such records and explanations as are, in the
reasonable opinion of the party commissioning the report, necessary. The
Company shall procure that its Directors and employees will co-operate
fully in the production of any such report.
14.5 Without prejudice to clause 14.1, the Company shall, on request, provide
to the Shareholders (either directly or through their respective
representatives nominated by them to the Board) all reports prepared by
the Company in respect of their obligations to any regulatory authority or
body under the Financial Services Act 1986 and also to provide copies of
all correspondence between such regulatory body and the Company.
14.6 The Company shall maintain, and shall at all times keep fully up-to-date,
a schedule showing any delegations of power or authority by it or by the
Board to any person. The schedule shall distinguish between the delegated
powers and authority reserved for the Board and the delegated powers and
authority below Board level. The Company shall provide the Shareholders
with access to and, upon reasonable request (but at the cost of the
requesting Shareholder), copies of such schedule.
14.7 The Company shall immediately notify the Shareholders if at any time it is
subject to any penalty, fine, sanction, disciplinary action or criticism
by any regulatory or judicial authority in any jurisdiction whatsoever or
if it receives notice or any suggestion that it may be so subject or that
any investigation by any such authority is pending or threatened.
15. Non-competition
<PAGE>
28
15.1 Subject to clause 15.2, Abbey National and Willis will not operate any
business or engage in any form of commercial activity which competes with
the Business as carried on at the date of this Agreement other than in
their capacity as Shareholders.
15.2 Each of Abbey National and Willis agrees, while it or any member of its
Group is a party to this Agreement, that:
(A) it shall not (either on its own account or in conjunction with or on
behalf of any person, firm or company) directly or indirectly
acquire any interest in any business (an "acquired business") which
also includes a business which materially competes with the Business
of the IFA Group (a "competing business"). However, Abbey National
or Willis may, directly or indirectly, acquire an interest in any
acquired business which includes a competing business if (1) the
gross turnover of the competing business is less than one-third of
the gross turnover of the IFA Group or (2) (if the proportion in (1)
is greater than one-third) such competing business is (subject to
paragraph ((B)) below) disposed of by Abbey National or Willis, as
the case may be, within 18 months of its acquisition; and
(B) in any case where a Shareholder is obliged to dispose of a competing
business in accordance with sub-paragraph ((A)) above, each of the
Shareholders and the Company will enter into bona fide discussions
with a view to agreeing a sale to any member of the IFA Group of the
competing business.
15.3 For the purpose of clause 15.2((A)) the gross turnover of the competing
business and the IFA Group shall be extracted from the latest published
accounts of (or including) such business and the IFA Group respectively
available at the date of acquisition of the acquired business.
15.4 The provisions of this clause:
(A) will not subsist beyond the termination of this Agreement and
accordingly Abbey National and Willis may own or operate a business
competing with the Business from the moment it (and any member of
its Group) ceases to be a Shareholder;
(B) shall not prohibit or restrict Abbey National Independent Consulting
Group Limited or its subsidiaries for the time being from providing
as an ancillary activity products and services (in the areas of
group personal pensions, corporate financial planning, group
healthcare and insured company pension schemes (provided that any
such insured company pension scheme business or group personal
pension scheme administration business shall not, in either case,
constitute more than five per cent of the consolidated turnover of
such companies
<PAGE>
29
in any financial period)) to its clients of a type similar to those
provided by the IFA Group as part of the Business; and
(C) shall not prevent or restrict any member of the Abbey National Group
or the Willis Group from being interested, for investment purposes,
in up to five per cent of the equity share capital of any company
whose shares are listed on a recognised stock exchange.
16. Term
16.1 Subject to clauses 16.2 and 17, this Agreement will continue for the
Initial Fixed Term.
16.2 This Agreement may be terminated by either party giving not less than
twelve months' notice of termination (the "Notice Period"), such notice to
expire on, or at any time after, the expiry of the Initial Fixed Term.
17. Termination
17.1 As between the Shareholders, this Agreement shall continue in full force
and effect notwithstanding the occurrence of a Termination Event or the
expiry of notice given pursuant to clause 16.2 and 17 until such time as
one Shareholder has transferred its Shares to the other Shareholder
pursuant to this clause or Schedule 3 or to a third party pursuant to
clause 11 (Transfer of shares).
17.2 A Termination Event in relation to a Shareholder will occur if:
(A) such Shareholder is in material breach of any terms of this
Agreement and fails to remedy such breach within 15 Business Days
from the service of a written notice from the other Shareholder
requiring such breach to be remedied;
(B) such Shareholder enters into a composition with its creditors, is
unable to pay its debts within the meaning of section 123(1)
Insolvency Act 1986, issues a notice convening a meeting for its
winding-up, is the subject of any winding-up petition which is not
dismissed within 14 days, has a provisional liquidator or
administrator appointed or an administrative receiver is appointed
over the whole or any part of its undertaking, property or the
assets;
(C) more than 50 per cent. of the issued share capital of such
Shareholder or any direct or indirect parent undertaking of such
Shareholder shall become beneficially owned by a third party which
is not a party to this Agreement as at the date of execution; or
<PAGE>
30
17.3 (A) If a Termination Event occurs in relation to a Shareholder (the
"Defaulting Shareholder"), the other Shareholder shall be entitled,
by serving written notice (the "Termination Notice") on the
Defaulting Shareholder within 10 Business Days of the Termination
Event, to purchase (or procure the purchase of) all (but not some
only) of the Shares of the Defaulting Shareholder.
(B) These Shares may be acquired at the price agreed by the Shareholders
or, in the absence of agreement, at a price equal to the value
attributed to the Shares, as at the date of service of the
Termination Notice, by the Independent Valuers pursuant to Schedule
5 in a case where the Termination Event is that set out in clause
17.2((C)) or at a price equal to 80 per cent. of such value in a
case where the Termination Event is that set out in clause 17.2((A))
or ((B)).
17.4 If notice to terminate this Agreement is given by a Shareholder (the
"First Shareholder") pursuant to clause 16.1, the other Shareholder (the
"Other Shareholder") shall be entitled, by serving written notice on the
First Shareholder no later than one month prior to the expiry of the
Notice Period, to purchase (or procure the purchase of) all (but not some
only) of the Shares of the First Shareholder. These Shares may be acquired
at the price agreed by the Shareholders or, in the absence of agreement,
at a price equal to the value attributed to the Shares at the date of
expiry of the Notice Period by the Independent Valuers pursuant to
Schedule 5 (the "Termination Price"). If the Shares of the First
Shareholder are not so acquired by the Other Shareholder, the First
Shareholder shall be entitled to sell the Shares to any third party
without the consent of the Other Shareholder at the Termination Price at
any time within three months after the date upon which the Independent
Valuers notify to the Shareholders such price. The provisions of clauses
11.3((E)) and 11.6 shall apply to any such transfer to a third party (as
if references to the "Non-Transferring Shareholder" were references to the
"Other Shareholder").
17.5 If:
(a) within 20 Business Days of service of notice by one Shareholder to
the other pursuant to clause 17.3(A); or
(b) at the expiry of the Notice Period (for the purposes of clause
17.4),
as the case may be, the Shareholders have not agreed the price at which
the Shares held by the Defaulting Shareholder (in the case of clause 17.3)
or the First Shareholder (in the
<PAGE>
31
case of clause 17.4) are to be acquired by the other Shareholder, such
other Shareholder may refer the matter to the Independent Valuers for
determination in accordance with Schedule 9. Where an Approval is
required, the transfer of Shares pursuant to clause 17.3(A) or 17.4 shall
take place within such period, as is reasonably required to obtain such an
Approval (not exceeding 30 Business Days), from the date the price is
agreed between the parties or, if later, is determined by the Independent
Valuers in accordance with Schedule 9. For the avoidance of doubt, any
such Approval shall not be a condition to any obligation to transfer
Shares under this clause and failure to obtain such an Approval shall
therefore constitute a breach of this Agreement.
17.6 The Independent Valuers shall act as experts and not as arbitrators and
their determination of any matter for the purposes of this Agreement
shall, in the absence of manifest error, be final and binding on the
Shareholders.
17.7 The Independent Valuers shall be instructed to prepare their valuation and
to determine the price payable for the relevant Shares pursuant to the
provisions of this Agreement as soon as practicable following their
appointment and, in any event, within 25 Business Days thereof. For these
purposes Abbey National and Willis shall, shall procure that any of their
respective subsidiary companies which is a Shareholder shall, and shall
use their respective reasonable endeavours to procure that the Company and
each other member of the IFA Group shall, make available to the
Independent Valuers all information that they may reasonably request
(including, without limitation, the Auditors' working papers in respect of
the financial statements of the IFA Group) and, upon being given
reasonable notice, procure access to all relevant personnel.
17.8 The costs of the Independent Valuers shall be borne by the Shareholders in
equal proportion unless the Independent Valuers determine otherwise.
17.9 If either (i) the Shares of the First Shareholder are not transferred to
the Other Shareholder or to a third party (as the case may be) within 85
Business Days after the date upon which the Independent Valuers notify the
Shareholders of the Termination Price pursuant to clause 17.4 or (ii) the
Shares of the Defaulting Shareholder are not purchased pursuant to clause
17.3 within 85 Business Days of the occurrence of the Termination Event
(or, if later, within one month after the date upon which the Independent
Valuers notify the Shareholders of the price determined pursuant to this
Agreement), either Shareholder in the case of (i) or the other Shareholder
in the case of (ii) may, by notice in writing to the Company, require the
convening of a general meeting of the Company for the purpose of
considering a resolution to wind up the Company and, at such meeting, only
the Shareholder making the request shall be entitled to vote
(notwithstanding any other provision of this Agreement).
<PAGE>
32
17.10 In the event of termination of this Agreement pursuant to this clause, all
the rights and obligations of the parties shall forthwith cease, save that
the obligation on the parties under clause 19 (Confidentiality) shall
remain in full force and effect notwithstanding termination. Termination
of this Agreement shall not effect any rights or liabilities arising under
this Agreement prior to such termination nor the parties' respective
rights and obligations under this clause.
18. Breach
In the event of breach of any term of this Agreement the parties may
voluntarily submit themselves to the non-binding judgment of an arbitrator
under any recognised Alternative Disputes Resolution Procedure.
19. Confidentiality
19.1 The parties hereto acknowledge that each may provide to each other
information relating to their respective businesses prior to or after
signature of this Agreement. Any such information is supplied and/or
revealed solely for the purposes of the Business and/or this Agreement and
shall not be used by a receiving party otherwise than in connection with
the Business and/or this Agreement. Each party shall keep secret all
knowledge or information of a confidential nature including (but without
limitation) commercial and financial data, know-how, processes and other
trade secrets in each case relating to the Business and the businesses of
Abbey National and Willis and their respective subsidiaries ("Confidential
Information") provided that this clause shall not extend to Confidential
Information which:
(A) has entered the public domain other than by breach of this Agreement
by the party in question; or
(B) the party can show was lawfully obtained by it or its employees or
agents from a third party otherwise than as a result of a breach or
an obligation of confidentiality to a party hereto and in such event
the party in receipt of such information shall notify the other
party within 10 Business Days of receipt thereof; or
(C) is required to be disclosed by the law of any relevant jurisdiction
or any securities exchange or regulatory or governmental body to
which any party is subject or submits, wherever situated, whether or
not the requirement for information has the force of law; or
(D) is disclosed to members of the relevant Shareholder's Group and such
disclosure is considered necessary for the promotion of the Business
and such recipient
<PAGE>
33
agrees to keep such information confidential.
19.2 A Shareholder on ceasing to be a Shareholder will hand over to the Company
all correspondence, budgets, Business Plans, reports, schedules, documents
and records belonging to or relating to the Business. However, a
Shareholder may retain such copies of such documentation as it is required
to retain in order to comply with applicable law and regulation.
20. Costs and expenses
Save as otherwise expressly agreed between the parties hereto, each party
shall bear its own costs and expenses of, and incidental to, the carrying
into effect this Agreement and any other agreement referred to in it.
21. Variation
The terms and conditions of this Agreement shall only be capable of being
varied by a supplemental agreement in writing or memorandum endorsed
hereon executed by all parties hereto.
22. Waiver
No waiver (whether express or implied) by one of the parties hereto of any
of the provisions of this Agreement or any breach of or default by the
other parties hereto in performing any of those provisions shall
constitute a continuing waiver or any other waiver of this Agreement and
no such waiver shall prevent the waiving party from enforcing any of the
other provisions of this Agreement or from acting upon any subsequent
breach of or default by the other parties hereto under any of the
provisions of this Agreement.
23. Restrictive Trade Practices Act 1976
If this Agreement (which for the purposes of this clause includes any
other agreement or arrangement of which it forms part or which is referred
to herein) contains any provision which causes or would cause it to be
subject to registration under the Restrictive Trade Practices Act 1976 and
if it is not a non-notifiable agreement under that Act, that provision
will not take effect until the day after particulars of this Agreement
have been furnished to the Director General of Fair Trading in accordance
with section 24 of that Act.
24. Partnership
Nothing in this Agreement shall be deemed at law to constitute a
partnership between the
<PAGE>
34
parties and neither of them shall have any authority to bind to buying the
other in any other way.
25. Assignment
This Agreement and all rights and obligations hereunder are personal as to
the parties hereto and none of the parties shall assign or attempt to
assign any such rights or obligations except in connection with a transfer
of Shares in accordance with and subject to the provisions of this
Agreement.
26. Entire agreement
26.1 This Agreement and all documents referred to herein (the "Transaction
Documents") constitute the whole and only agreement between the parties
relating to the rights and obligations of the parties between themselves
with respect to the Company, the Business and the Shares and supersedes
and extinguishes any previous drafts, agreements, undertakings,
representations, warranties, promises, assurances and arrangements of any
nature whatsoever, whether or not in writing, relating thereto.
26.2 Each party acknowledges that in entering into this Agreement it is not
relying upon any agreement, undertaking, representation, warranty,
promise, assurance or arrangement made or given by any other party or any
other person, whether or not in writing, at any time prior to the
execution of this Agreement (or the other documents referred to herein)
which is not expressly set out herein.
26.3 None of the parties to this Agreement shall have any right of action
against the other arising out of or in connection with any agreement,
undertaking, representation, warranty, promise, assurance or arrangement
referred to in clauses 26.1 or 26.2 except in the case of fraud.
27. Announcements
27.1 Subject to clause 27.2, no announcement concerning any matter contemplated
by this Agreement or any ancillary matter shall be made by any party
without the prior written approval of the other, such approval not to be
unreasonably withheld or delayed.
27.2 A party may make an announcement concerning any transaction contemplated
by this Agreement or any ancillary matter if required by:
(A) law; or
(B) any securities exchange or regulatory or governmental body to which
that party is
<PAGE>
35
subject, wherever situated.
provided that any such announcement shall be made only after consultation
with the other parties hereto.
28. Notices
Any notice required or permitted to be given by or under this Agreement
maybe given by facsimile or by delivering the same to the registered
office for the time being or such other address as the party concerned may
have notified to the other, the notice being marked for the attention of
the Company Secretary. Any such notice shall be deemed to be served in a
case of service by facsimile, 24 hours after it shall have been properly
despatched and in the case of personal service at the time of delivery to
the party concerned.
29. Governing law
This Agreement shall be governed by an construed in accordance with the
laws of the England.
AS WITNESS hand to the parties or their duly authorised representatives
the day and year first before written.
<PAGE>
36
Schedule 1
Reserved Matters
Part 1
Reserved matters requiring unanimous approval of the Board
No action shall be taken or resolution passed by the board of directors of
any member of the IFA Group, except with the unanimous approval of the Board, in
respect of the following matters:
(A) the appointment, removal and conditions of employment of the Chief
Executive Officer, the chief financial officer and the compliance officer
of the IFA Group;
(B) the constitution of any committee of the Board;
(C) a change in the accounting reference date to a date other than the date
used by the ultimate parent undertaking of the Shareholder for the time
being holding a majority of the Shares for the purposes of its
consolidated financial statements;
(D) the acquisition of any assets or property (other than in the ordinary
course of business) at a total cost to the IFA Group (per transaction) of
more than (pound)500,000;
(E) without prejudice to clause 7.11, the approval or variation of any budget
or Business Plan or the incurring of expenditure in any material area
significantly in excess of the amount budgeted for that area in the
relevant budget;
(F) the borrowing by the IFA Group of amounts which when aggregated with all
other borrowings (or indebtedness in the nature of borrowing) of the IFA
Group would exceed (pound)500,000 or the creation of any charge or other
security over any assets or property of the IFA Group except for the
purposes of securing borrowings from bankers in the ordinary course of
business of amounts not exceeding in aggregate (pound)500,000;
(G) the disposal of or dilution of its interests, directly or indirectly, in
any of its subsidiaries;
(H) the acquisition of any share capital or other securities of any body
corporate;
(I) the creation, allotment, or issue of any shares or of any other security
or grant of any option or rights to subscribe in respect thereof or
convert any instrument into such shares;
<PAGE>
37
(J) the payment or declaration of any dividend or other distribution on
account of shares;
(K) the cessation of any material business operation;
(L) the making of any material change in the nature or geographical area of
Business;
(M) the entering into, variation or amendment of any contract with a
Shareholder or a member of its Group or of any contract of a material
nature outside the normal course of the Business;
(N) the reduction of its capital, variation of the rights attaching to any
class of shares in its capital or any redemption, purchase or other
acquisition of any of its shares or other securities;
(O) the adoption of any bonus or profit-sharing scheme or any share option or
share incentive scheme or employee share trust or share ownership plan;
(P) the making of any change to the Memorandum of Association or Articles of
Association;
(Q) the presentation of any petition for winding-up;
(R) the approval of the provisions (general or specific) against liabilities
(actual, contingent or otherwise) to be included in, the application of
the Company's provisioning policies to and any decisions whether to make
provisions in, the consolidated financial statements of the Company;
(S) without prejudice to item (U), any amendment to accounting policies save
where the policies following such amendment are (i) consistent with the
accounting policies of the Shareholder holding for the time being the
majority of the Shares and (ii) appropriate for the business carried on by
the IFA Group;
(T) the approval of the consolidated financial statements of the Company other
than those aspects of such statements required to be included by the
Companies Act 1985, the Financial Reporting Standards of the Accounting
Standards Board or any other applicable statutory or stock exchange
requirements;
(U) the approval of any other matters to be included within the consolidated
financial statements of the Company that the Shareholders agree should
require unanimous approval;
(V) the entering into of material discussions, arrangements or agreements with
any regulatory authority;
<PAGE>
38
(W) the making of a claim in respect of an accounting period of an IFA Group
member commencing on or after the date of this Agreement for Group Relief
surrendered by any Shareholder or member of a Shareholder's Group for
Group Relief purposes; and
(X) the surrender of Group Relief arising in an accounting period of an IFA
Group member commencing on or after the date of this Agreement to any
Shareholder or member of a Shareholder's Group for Group Relief purposes.
Part 2
Reserved matters requiring unanimous approval of the Shareholders
The Shareholders shall procure so far as they are able, that no action shall be
taken or resolution passed by any member of the IFA Group except with the
consent of the holders of each class of shares in the Company in respect of the
following matters:
(Y) the removal or appointment of the auditors except where the new firm to be
appointed auditors are a major firm of international standing;
(Z) the consolidation or amalgamation of the Company with any other company;
(AA) the creation, allotment, or issue of any shares or of any other security
or the grant of any option or right to subscribe in respect thereof or to
convert any instrument into such shares;
(BB) the reduction of the Company's capital, variation of the rights attaching
to any class of shares in its capital or any redemption, purchase or other
acquisition of any of its shares or other securities;
(CC) the making of any change to the Memorandum of Association or Articles of
Association; and
(DD) the passing of any resolution for winding-up.
Part 3
General
In determining whether any of the matters described above require the approval
in accordance with Part 1 or Part 2 of this Schedule, a series of transactions
which when aggregated exceed the figure specified in the relevant paragraph
shall be construed as a single transaction requiring such approval. The approval
of any budget or Business Plan does not imply the approval of any matter
referred to therein which would require unanimous approval under this Schedule.
<PAGE>
39
Schedule 2
Disputes Resolution Procedure
1. If any matter under this Agreement (other than a matter alleged by either
Abbey National or Willis to give rise to a Termination Event pursuant to
clause 17) shall give rise to a dispute between Abbey National or Willis
then, in the absence of any agreement between the parties to the contrary,
such dispute shall be resolved in accordance with paragraph 2.
2. If any dispute or difference arises as described in paragraph 1 (a
"dispute") the parties shall first enter into negotiations in good faith.
Either party may commence this negotiation process by giving to the other
written notice of the existence of a dispute with a request to meet within
ten Business Days in London, England at a mutually agreed time and place
to resolve the matters in dispute through negotiation between senior
executives of the parties, to include at least one Director of each of
Abbey National and Willis. If such negotiations fail to reach agreement
within 10 Business Days the dispute may be referred to the Joint Committee
which shall be required to meet promptly, and in any event within 15 days
of such referral, to resolve the dispute within 4 weeks. In the absence of
resolution following such negotiation or referral, and subject to the
parties not agreeing to submit to arbitration or conciliation of the
dispute or to any other form of dispute resolution and subject to any
other agreement to the contrary agreed at the time in question by the
parties to the dispute any party shall be entitled to invoke the
provisions set out in Schedule 3.
<PAGE>
40
Schedule 3
Roulette Procedure
1. In the event of the Shareholders failing to reach agreement in respect of
a dispute referred under the provisions set out in Schedule 2 either
Shareholder (in either case, the "Offeror") may serve on the other
Shareholder (the "Recipient") a written notice signed by or on behalf of
the Offeror (a "Roulette Notice") offering to sell the entire legal and
beneficial interest in all (but not some only) of its Shares to the
Recipient, free from all claims, liens, charges, encumbrances and equities
and together with all rights attached or accruing to those shares, at the
price per Share specified in the Roulette Notice.
2. The offer in the Roulette Notice shall be deemed to be open for 10
Business Days from the date of service of the Roulette Notice and shall be
irrevocable without the consent of the Recipient.
3. The Recipient may, within 10 Business Days (or, where an Approval is
required, such longer period not exceeding 30 Business Days as is
reasonably required in order to obtain that Approval) after service of the
Roulette Notice, serve a written notice (the "Response") on the Offeror
signed by or on behalf of the Recipient:
(A) accepting the offer, in which case the Offeror shall be bound to
sell its Shares and the Recipient to purchase them in accordance
with the Roulette Notice; or
(B) notifying the Offeror that the Recipient will sell its Shares to the
Offeror, in which case the Recipient shall be deemed to have offered
to sell to the Offeror the entire legal and beneficial interest in
all (but not some only) of the Recipient's Shares, free from all
claims, liens, charges, encumbrances and equities and together with
all rights attached or accruing to those Shares, but otherwise
subject to no other condition whatsoever, at the price per Share
specified in the Roulette Notice, and the Offeror shall be deemed to
have accepted that offer, so that the Recipient shall be bound to
sell its Shares and the Offeror to purchase them on those terms,
provided that if a valid written notice under this paragraph is not
received by the Offeror within the specified time limit, the Recipient
will be deemed to have served a notice under sub-paragraph ((A)).
4. Copies of both the Roulette Notice and the Response shall be delivered to
the Company as soon as practicable after service.
5. The Shareholders shall be obliged to complete the sale and purchase of
Shares within 10 Business Days after the expiry of the time limit under
paragraph 3, at such reasonable time and place as shall be specified by
written notice from the Shareholder who is bound to sell
<PAGE>
41
its Shares pursuant to these provisions (the "Seller") to the Shareholder
who is bound to purchase Shares pursuant to these provisions (the
"Purchaser") served on the Purchaser not less than 2 Business Days before
completion, provided that neither Shareholder shall be obliged to complete
unless the sale and purchase of all Shares to be sold in accordance with
these provisions is completed simultaneously (although completion of the
sale and purchase of some Shares will not affect the rights of any party
with respect to the other Shares).
6. Upon completion of the sale from the Seller to the Purchaser in accordance
with paragraph 5:
(A) the Seller shall deliver to the Purchaser a duly executed transfer
in favour of the Purchaser, or such other person as it may nominate
by written notice served on the Seller not less than one clear
Business Day before completion, together with the relevant share
certificates and, if requested by the Purchaser, a power of attorney
in a form and in favour of a person nominated by the Purchaser not
less than one clear Business Day before completion, so as to enable
the Purchaser to exercise all rights of ownership in relation to the
Shares including, without limitation, the voting rights;
(B) against delivery in accordance with sub-paragraph ((A)), the
Purchaser shall pay the aggregate transfer price to the Seller by
bankers' draft for value on the date of completion or in such other
manner as shall be agreed by the Seller and the Purchaser before
completion;
(C) the parties shall procure (so far as they are able) that the
transfer of Shares is registered;
(D) the Seller shall do all such acts and/or execute all such documents
in a form satisfactory to the Purchaser as the Purchaser may
reasonably require to give effect to the transfer of Shares pursuant
to these provisions; and
(E) unless otherwise notified by the Purchaser by notice received not
less than one clear Business Day before completion, the Seller shall
procure the removal, with effect from completion, of all Directors
appointed by the Seller.
7. If any sum payable under these provisions is not paid (otherwise than as a
result of default by any party entitled to payment), the unpaid sum will
carry interest calculated on a daily basis which may, without limiting the
rights of any party entitled to payment, be claimed as a debt or
liquidated demand, for the period from and including the due date up to
the date of actual payment (after as well as before judgment) at a rate of
1 per cent. over the base rate from time to time of Lloyds Bank PLC.
<PAGE>
42
8. If the Seller fails or refuses to transfer its Shares as required under
these provisions:
(A) the Company shall by written notice authorise some person to execute
and deliver on the Seller's behalf the necessary instrument of
transfer and to do any other acts and/or execute any other documents
on the Seller's behalf required in connection with the Transfer of
Shares under this Schedule;
(B) the Company may receive the aggregate transfer price in trust for
the Seller and receipt of the Company for the aggregate transfer
price shall be a good discharge for the Purchaser, who shall not be
bound to see to its application;
(C) the Company shall, subject to the instrument of transfer being duly
stamped, cause the transferee to be registered as holder of the
relevant shares; and
(D) once the transferee has been registered in exercise of this power,
the validity of the proceedings shall not be questioned by any
person.
<PAGE>
43
Schedule 4
Insurance
The insurances detailed below have been effected by Willis Corroon Group plc on
behalf of W-IFA for the Policy Period 1 July 1997 to 30 June 1998
------------------------------------------------------------------------
<TABLE>
<CAPTION>
Programme Type of Cover Limit of Indemnity Policy Excess
<S> <C> <C> <C>
Global 'All Risks' Property Full Reinstatement Basis UK/ROW - (pound)10,000 each and every
Damage/Business claim; USA - US$10,000 each and
Interruption every claim
Global Public Liability (pound)100M. Nil
Global Crime Bond (Fidelity (pound)50M. (pound)100,000 each and every claim.
Guarantee)
Global Professional Indemnity In excess of Lloyd's UK/ROW - (pound)150,000 each and every
(Errors & Omissions) Regulatory Authority claim; USA - US$250,000 each and
Requirements relevant to every claim. A `buydown'
Lloyd's Professional facility may be effected to
Brokers of (pound)30M. reduce the excess to a minimum of
(pound)50,000 each and every claim.
Global Directors' & Officers' In excess of (pound)25M. See Note 1 below.
Liability Insurance
UK Domestic Terrorism Full Reinstatement Basis (pound)10,000 each and every claim.
UK Domestic Employers' Liability (pound)100M. Nil.
UK Domestic Offshore Employers' (pound)2M. Nil.
Liability
</TABLE>
<PAGE>
44
<TABLE>
<S> <C> <C> <C>
UK Domestic Personal Accident As per the policy Nil.
wording for personal
accident, medical
travel, cancellation
expenses, and
repatriation costs.
UK Domestic Personal Effects & (pound)5,000 any one person. (pound)150 each and every claim.
Baggage (pound)25,000 any one loss in
all.
UK Domestic Engineering Combined Damage to plant caused (pound)50 each and every claim.
by Explosion or Collapse;
(pound)250,000;
Sudden and unforeseen (pound)25 each and every claim.
loss of or damage to
Plant, other than above;
(pound)5,000;
Reasonable additional (pound)100 each and every claim.
expenses as per the
policy wording:(pound)500,000
UK Domestic Motor Unlimited Nil.
UK Domestic Marine Excess Third (pound)10M. Nil.
Party and Excess
Charterers Liability
UK Domestic Airside Liability (pound)50M any one occurrence. (pound)1,000 each and every loss in
respect of property damage only.
</TABLE>
Note:
1. Nil each of the Directors & Officers each claim and in the aggregate for
claims first made during the Policy Period for a Wrongful Act; but
(pound)100,000 each Claim which the Company can pay as indemnification to
any of the Directors & Officers resulting from any Claim first made during
the Policy Period for a Wrongful Act. In respect of the USA US$1,000,000
Corporate Reimbursement each Claim.
<PAGE>
45
Schedule 5
Basis of Valuation of Shares
1. The Company shall be valued in accordance with the principles set out in
this Schedule and a number of Shares shall have a value equal to the value
of the Company as so determined multiplied by the fraction A/B where A is
the number of Shares in question and B is the total number of Shares in
issue.
2. Subject to paragraph 7, the value of the Company shall be equal to the
weighted average of the consolidated profits after tax of the Company
("PAT") for the Calculation Period (as defined below), as adjusted
pursuant to paragraph 7, as shown by the audited consolidated financial
statements of the Company for the Accounting Periods included in the
Calculation Period, multiplied by such multiple as the Independent Valuers
shall consider appropriate in the circumstances (having regard inter alia
to the factors referred to in paragraph 8) and discounted as follows:
(a) where the valuation takes place as at a date on or prior to 31
December 1998 - 25 per cent.;
(b) where the valuation takes place as at a date after 31 December 1998
and on or before 31 December 1999 - 20 per cent.;
(c) where the valuation takes place as at a date after 31 December 1999
and on or before 31 December 2000 - 15 per cent.;
(d) where the valuation takes place as at a date after 31 December 2000
and on or before 31 December 2001 - 10 per cent.;
(e) where the valuation takes place as at a date after 31 December 2001
and on or before 31 December 2002 - 5 per cent.;
(f) where the valuation takes place as at a date after 31 December 2002
- no discount.
3. For the purposes of this Schedule, the Calculation Period shall mean:
(a) where there have been three completed Accounting Periods of the
Company after the date of this Agreement, the three completed
Accounting Periods preceding the date of the valuation ("AP-1",
"AP-2" and "AP-3" respectively, where AP-1 is the Accounting Period
immediately preceding the then current Accounting Period);
(b) where there have been only two completed Accounting Periods of the
Company
<PAGE>
46
after the date of this Agreement, the two completed Accounting
Periods ("AP-4" and "AP-5" respectively, where AP-4 is the
Accounting Period immediately preceding the then current Accounting
Period);
(c) where there has been only one completed Accounting Period of the
Company after the date of this Agreement, that Accounting Period
("AP-6"); and
(d) where no Accounting Period has completed after the date of this
Agreement, such period as shall have passed after the date of this
Agreement, which period shall be deemed to be an Accounting Period
for the purposes of sub-paragraph (c) and paragraph 4.
4. Where any Accounting Period referred to in this Schedule is less than 12
months, PAT for that period shall, for the purposes of paragraph 2, be
multiplied by the fraction C/D where C is 365 and D is the number of days
included in that Accounting Period.
5. The weighted average PAT for the Calculation Period ("WAPAT") shall be
calculated as follows:
(a) PAT for AP-1 shall be multiplied by 3;
(b) PAT for AP-2 or for AP-4, as the case may be, shall be multiplied by
2;
(c) PAT for AP-3 or for AP-5 or for AP-6, as the case may be, shall be
multiplied by 1;
(d) where the Calculation Period is as set out in paragraph 3(a), WAPAT
shall be equal to the sum of the products of the relevant
calculations in sub-paragraphs (a), (b) and (c) divided by 6
i.e. WAPAT = 3 (PAT for AP-1) + 2 (PAT for AP-2) +1 (PAT for AP-3)
---------------------------------------------------
6
(e) where the Calculation Period is as set out in paragraph 3(b), WAPAT
shall be equal to the sum of the products of the relevant
calculations in sub-paragraphs (b) and (c) divided by 3
i.e. WAPAT = 2 (PAT for AP-4) + 1 (PAT for AP-5)
--------------------------------
3
(f) where the Calculation Period is as set out in paragraph 3(c), WAPAT
shall equal PAT for AP-6.
<PAGE>
47
6. For the purposes of paragraph 2, the Independent Valuers shall be entitled
to make adjustments to PAT in order to take account, to the extent they
consider appropriate, of any objections raised by Abbey National pursuant
to clause 8.7 concerning the effect of the application of accounting
policies used for the purposes of preparing the relevant audited
consolidated financial statements of the Company or any items reflected
therein.
7. In determining the appropriate multiple to be used for the purposes of
paragraph 2, the Independent Valuers shall have regard to:
(a) the price/earnings multiples implied by the trading prices of any
listed companies whose businesses are similar to the Business
("comparable companies");
(b) the price/earnings multiples implied by any recent transactions
involving comparable companies; and
(c) the fact that Abbey National and Willis have agreed that a
price/earnings multiple of 10 is, at the date of this Agreement, the
appropriate multiple and the Independent Valuers shall give a
written application to the Shareholders of the reasons behind any
deviation from that multiple.
8. For the purposes of this Schedule, the Independent Valuers may have regard
to any other factors that they consider relevant in determining the value
of the Shares including, without limitation, any other events or
circumstances affecting the Company or the Business which are the result
of or are reasonably likely to result from termination of this Agreement
but excluding:
(a) any effect on commission income that will or may result from
business no longer being referred to the IFA Group by the
Shareholder whose Shares are being valued or by any member of that
Shareholder's Group; and
(b) any diminution in the value of the Company attributable to the
termination of any licence to use any name, brand or mark then used
by any member of the IFA Group granted by the Shareholder whose
Shares are being valued or the costs of rebranding the Business and
its products and services as a result thereof.
<PAGE>
48
Signatures
- ----------
Signed by )
Charles Toner ) Charles Toner
for and on behalf of )
Abbey National plc )
Signed by )
George Nixon ) George Nixon
for and on behalf of )
Willis Corroon Group plc )
Signed by )
Allan Daffern )
for and on behalf of )
Willis National Holdings Limited ) Allan Daffern
<PAGE>
Dated December 1998
ABBEY NATIONAL plc
and
WILLIS CORROON GROUP LIMITED
(previously WILLIS CORROON GROUP PLC)
and
WILLIS NATIONAL HOLDINGS LIMITED
----------------------------------------------
SUPPLEMENTAL AGREEMENT TO
SHAREHOLDERS' AGREEMENT
relating to
WILLIS NATIONAL HOLDINGS LIMITED
----------------------------------------------
Slaughter and May
35 Basinghall Street,
London EC2V 5DB
<PAGE>
SUPPLEMENTAL SHAREHOLDERS' AGREEMENT
THIS AGREEMENT is dated 11th December, 1998
BETWEEN:
(1) ABBEY NATIONAL plc (Registered in England No. 2294747) whose registered
office is at Abbey House, Baker Street, London NW1 6XL ("Abbey National");
(2) WILLIS CORROON GROUP LIMITED (previously named Willis Corroon Group PLC)
(Registered in England No. 621757) whose registered office is at Ten
Trinity Square, London EC3P 3AX ("Willis"); and
(3) WILLIS NATIONAL HOLDINGS LIMITED (Registered in England No. 3393377) whose
registered office is at Ten Trinity Square, London EC3P 3AX (the
"Company").
WHEREAS:
(A) The parties have entered into a Shareholders' Agreement (the
"Shareholders' Agreement") on the 4th August, 1997 for the purpose of
regulating their relationship with each other.
(B) On 2nd September, 1998, a Termination Event as described in clause 17.2(C)
of the Shareholders' Agreement occurred in respect of Willis.
(C) Willis has prior to the date of this Agreement agreed to an extension to
14th December 1998 of the notice period referred to in clause 17.3 of the
Shareholders' Agreement for the exercise by Abbey National of its rights
thereunder.
(D) The parties have now decided to enter into this Agreement in order to
extend and amend the notice period allowed under clause 17.3 of the
Shareholders' Agreement for Abbey National to exercise its rights
thereunder and to grant to Abbey National an option on the terms and
subject to the conditions of this Agreement.
NOW THEREFORE in consideration of Abbey National not serving notice on Willis
under clause 17.3 of the Shareholders' Agreement by reason of the Termination
Event referred to in the recitals, the parties agree as follows:
<PAGE>
1. Terms and expressions in the Shareholders Agreement shall, unless the
context otherwise requires, have the same meanings when used in this
Agreement.
2. The parties agree that Abbey National shall have an option (the "Call
Option") to acquire all (but not some only) of the Shares held directly or
indirectly by any member of the Willis Group exerciseable by notice in
writing to Willis at any time during the period from and including 2nd
June, 1999 to and including 2nd September, 1999.
3. Clauses 17.3 and 17.5 to 17.10 of the Shareholders' Agreement shall apply
to the Call Option as if Willis were the Defaulting Shareholder referred
to therein, the date of service of notice of exercise of the Call Option
were the date of the Termination Event referred to therein and in other
respects mutatis mutandis provided that the value attributed to the shares
by the Independent Valuers shall be subject to a 25 per cent. discount
notwithstanding the provisions of Schedule 5 (Valuation) of the
Shareholders' Agreement.
4. For the avoidance of doubt, clause 17.2(C) shall continue to apply to any
change in the ownership of the issued share capital of Willis or any
direct or indirect parent undertaking of Willis subsequent to the
Termination Event referred to in the recitals.
5. Save as set out in this Agreement, the terms and conditions of the
Shareholders' Agreement remain and shall continue in full force and effect
and shall apply to the provisions of this Agreement.
6. This Agreement shall be governed by and shall be construed in accordance
with English law.
Signatures
Signed by )
)
for and on behalf of )
Abbey National plc )
Signed by )
)
for and on behalf of )
Willis Corroon Group Limited )
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3
Signed by )
)
for and on behalf of )
Willis National Holdings Limited )
<PAGE>
Exhibit 10.6
A G R E E M E N T
This Agreement is dated the 15th day of July 1998
BETWEEN:
1. WILLIS CORROON EUROPE BV with registered address at Marten Meesweg 51,
3068 Rotterdam (hereinafter "Willis Corroon") represented by Sarah Joan
Turvill, holder of British Passport No. 3362379.
2. JAIME CASTELLANOS BORREGO for these purposes domiciled at Paseo de la
Castellana 36-38, Madrid and holder of Identity Card No. 14.899.002
(hereinafter "JCB").
3. ANTONIO SERRATS IRIARTE for these purposes domiciled at Paseo de la
Castellana 36-38, Madrid and holder of Identity Card no. 15.882.313
(hereinafter "ASI")
4. PEDRO CARDELUS MUNOZ-SECA for these purposes domiciled at Paseo de la
Castellana 36-38, Madrid and holder of Identity Card no. 50012296
(hereinafter "PC")
Parties 2, 3 and 4 are hereinafter together described as the "Other
Shareholders"
WHEREAS:
FIRST - Willis Corroon is a 60% shareholder in the Company " " (hereinafter "the
Company") and the Other Shareholders hold 40% in the Company, which company owns
100% of the capital of S&C Willis Corroon, S.A., S.A.
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SECOND - This Agreement cancels and replaces the Shareholders Agreement dated
28th September 1990 and addendum thereto entered into between the shareholders
of S&C Willis Corroon, S.A., S.A. and the subsequent agreement amending the
aforesaid agreement dated 21st March 1996.
THIRD - The parties wish to regulate their relationship as shareholders in the
Company and the management responsibilities within S&C Willis Corroon, S.A.,
S.A.
Now therefore, the parties having acknowledged each other's legal capacity to
bind therefore by this contract, they hereby agree as follows:
1. DEFINITIONS
In this Agreement (including the Recitals) the following words and expressions
shall have the following meanings:
"Associated Company" means a subsidiary or holding company of a Shareholder, and
a subsidiary of such holding company;
"Audited Accounts" means the report and audited accounts or consolidated
accounts of the Company or, as the case may be, the Group for the financial year
ending on the relevant balance sheet date;
"Board" means the board of directors of the Company;
"Business" means the business of the Company of insurance and reinsurance
broking and consultancy;
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"Executive Committee" means in relation to a Group Company an Executive
Committee established pursuant to Clause. 4.4
"Group" means the Company and its subsidiaries (if any) from time to time and
"Group Company" means any one of them;
"IPC" means the "Indice de Precios de Consumo" in Spain or any such index
substituted therefore;
"Shares" means the existing [13,000] registered shares in the capital of the
Company and any shares issued in exchange therefore by way of conversion or
reclassification and any shares representing or deriving from such shares as a
result of any increase in or reorganisation or variation of the capital of the
Company and any other shares held by the Shareholders in the capital of the
company from time to time;
"Shareholders" means (subject to Clause 9) the Other Shareholders and Willis
Corroon;
"Statutes" means the new Statutes of the Company set out in Schedule 2 and to be
adopted pursuant to Clause -------
2. OPTIONS TO SELL/PURCHASE FURTHER SHARES
2.1 In consideration of the sum of one pound Sterling paid to Willis Corroon
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by each of the Other Shareholders, receipt of which is hereby
acknowledged, it is hereby agreed that each of the Other Shareholders may
sell and Willis Corroon shall acquire at the option of each of the Other
Shareholders some or all of the Shares held by them at the price set out
in paragraph 3 headed Exercise Price at the following times and in the
following circumstances:
(i) at 31.12.2002 over a 50% holding of each of his Shares;
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(ii) at 31.12.2008 or at any time thereafter over all his remaining
Shares;
(iii) at any time between 1.1.2003 and 31.12.2008 over all his remaining
Shares in the event of their retirement from the business;
(iv) at any time in the event of a third party which is or is the owner
of a major world wide competitor of the Willis Corroon Group and
which has a subsidiary in Spain which is a major competitor of S&C
Willis Corroon, S.A., S.A. acquiring a significant percentage
holding in Willis Corroon Group p.l.c with a controlling interest
(other than as a result of a reconstruction, amalgamation or other
reorganisation of the Willis Corroon Group);
(v) at any time in the event of permanent disablement of the Shareholder
concerned.
(vi) In the event of death of any of the Other Shareholders, the Option
shall be transferred to his heirs or assignees and shall be
exercisable by them at any time.
(vii) at any time in the event that Willis Corroon is in breach of the
terms of this Agreement which breach is not remedied within a
reasonable time, or terminates the employment agreement with S&C
Willis Corroon, S.A., S.A. of this of the Other Shareholder
concerned without cause or with cause attributed to S&C Willis
Corroon, S.A., S.A..
2.2 In such circumstances the option to sell only applies to the Other
Shareholders concerned.
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2.3 In consideration of the sum of one pound Sterling paid to each of the
Other Shareholders, receipt of which is hereby acknowledged, each of the
Other
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Shareholders hereby grants to Willis Corroon an option to purchase all the
shares held by him at the price set out in Paragraph 3 headed Exercise
Price in the following circumstances:
(i) On the Other Shareholder ceasing to be employed by S&C Willis
Corroon, S.A., S.A. for any reason;
(ii) in the event of a breach of the Shareholders Agreement by the
Shareholder concerned, which breach has not been remedied within a
reasonable time;
2.4 Completion of any purchase resulting from the exercise of any option
hereunder by Willis Corroon or the Other Shareholders shall be subject to
compliance by Willis Corroon Group plc with all the requirements of the
London Stock Exchange. Willis Corroon will take all necessary steps to
comply with the requirements of the London Stock Exchange.
3. EXERCISE PRICE
3.1.1 Subject to the provisions contained in this paragraph the Exercise
Price at which the options set out in paragraph 2 above will be
exercised shall be the price in Spanish Pesetas per share payable by
Willis Corroon calculated as follows:
EP = EPS x PE
Where-
EP = the Exercise Price
EPS = E
---
S
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Where:
E = average yearly net profit after tax but before the after tax
effect of exceptional, extraordinary or prior year items and the
after tax effect of the amortisation of goodwill of the Company for
the following years-
(a) The previous two financial years ending 31 December or such other
date at which audited accounts are drawn up, increased for both
years to take account of increases in the IPC from the date of the
accounting year end of the applicable year until the date of
exercise hereunder- and
(b) the budgeted net profit after tax but before the after tax effect of
exceptional, extraordinary or prior year items and the after tax
effect of the amortisation of goodwill for the year in which the
option is exercised.
S = the number of shares then in issue- and
PE = the prevailing price earnings multiple (price per share divided by
earnings per share) for Willis Corroon Group plc at the date of the
exercise less 2 points provided that the PE shall never be less than
13.
Where:
The earnings per share shall be the after tax earnings per share of
the last four published quarters before the after tax effect of
exceptional, extraordinary or prior year items and before the after
tax effect of the amortisation of goodwill- and the price shall be
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average share price over the four week period prior to the date of
exercising the option- and adjusted for any change in the issue
share capital occurring after the publication of earnings per share
above and not reflected therein.
3.1.2 On the date of the publication of the Audited Accounts for the year
within which any of the options is exercised the Exercise Price
shall be recalculated adjusting E by substituting the budgeted net
profit after tax as referred to in part (b) of the definition of E
in clause 3.1 with the actual net profit after tax but before the
after tax effect of excepcional, extraordinary or prior year items
and the after tax effect of the amortisation of goodwill of the
Company for the relevant year. Within 14 days of the calculation of
the Exercise Price so adjusted, an adjusting payment shall be made
by or to the Minority Shareholders by Willis Corroon.
3.2 In relation to options exerciseable under paragraphs 2.1(i), 2.1(iii)
2.1.(iv), 2.1(v) or 2.1.(vi) hereof the Exercise Price will be subject to
a minimum figure per share equal to ESP 1,56Om divided the number of
shares held by the Other Shareholders at the date hereof. In the event
that the shares are divided or amalgamated the price per share will be
adjusted accordingly. This minimum price will be increased to take account
of increases in the IPC from 31.12.1998 to the date of exercise of the
relevant options.
3.3 In relation to options exerciseable under paragraph 2.2 in the
circumstances set out below the Exercise Price will be subject to the
provisions set out below.
(i) In the event that the Other Shareholder ceases to be an employee of
S&C Willis Corroon, S.A., S.A. prior to 31.12.99 for any of the
following reasons:
a) he resigns
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b) he is dismissed for cause the Exercise Price will be reduced
by 25%
(ii) In the event that the one of Other Shareholders ceases to be
an employee because of death, permanent disability or because
his employment has been terminated without cause up to and
including 31.12.2008 the Exercise Price will be subject to the
minimum figure per share as set out in paragraph 3.2 above.
4. THE BUSINESS OF S&C WILLIS CORROON, S.A. AND ITS MANAGEMENT
4.1 Conduct of the Business
Each of the Shareholders agrees to exercise his or its respective rights
hereunder and as a shareholder in the Company and (insofar as it lawfully
can) to procure that each representative Director, if any, exercises his
rights as such so as to ensure that-
4.1.1 S&C Willis Corroon, S.A., S.A. performs and complies with all
obligations on its part under this Agreement and complies with the
restrictions imposed upon it under its Bye-laws;
4.1.2 the Business is conducted in accordance with sound and good business
practices and the highest ethical standards and in particular that
S&C Willis Corroon, S.A., S.A. and its directors do not give any
discount, rebate or commission in order to procure, or in connection
with, any business transacted by or on behalf S&C Willis Corroon,
S.A., S.A., which discount, rebate or commission is not in
accordance with the law and good Spanish business practice; and
4.1.3 Insurers' Funds shall not be used for the purpose of financing any
of S&C Willis Corroon, S.A., S.A.'s expenditure of whatever nature
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4.2 Insurance
4.2.1 The Shareholders shall procure that S&C Willis Corroon, S.A. take
out "Errors and Omissions" insurance cover considered adequate by
Willis Corroon and S&C Willis Corroon, S.A.;
4.2.2 Willis Corroon shall use reasonable endeavours to procure that S&C
Willis Corroon, S.A. shall be included in the Group Errors and
Omissions Insurance Policy (the "Policy") held by Willis Corroon in
respect of amounts in excess of those considered adequate by Willis
Corroon and S&C Willis Corroon, S.A. under Clause 4.2.1;
4.2.3 Subject to S&C Willis Corroon, S.A. being included in the Policy in
accordance with sub-clause 4.2.2 S&C Willis Corroon, S.A. shall
participate fully in the Policy and shall pay to Willis Corroon a
reasonable share of premium, as determined by Willis Corroon, on the
basis of an equitable allocation across all companies covered by
such policies and taking account of the total premium handled by S&C
Willis Corroon, S.A., its retained brokerage and number of
employees.
4.3 Board of Directors
4.3.1 Subject to and in accordance with the following provisions of this
paragraph, Willis Corroon shall be entitled to appoint a majority of
the Directors of the Company. The Shareholders agree that for so
long as the Other Shareholders hold at least 10% of the Company all
such directors will be appointed after consultation with and by
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agreement between the Shareholders.
4.3.2 The Directors of the Company shall be responsible for appointing
Directors to the Board of S&C Willis Corroon, S.A..
4.3.3 Notwithstanding the provisions of the Statutes, no Shareholder will
appoint a Director without reasonable prior consultation with the
other Shareholders with a view to reaching agreement as the person
to be appointed.
4.4 Executive Committee
The parties agree that there shall be established an Executive Committee
of S&C Willis Corroon, S.A..
The Executive Committee shall consist of JCB, ASI, PC and such others as
may be agreed from time to time.
The Executive Committee shall be responsible for the day to day management
of S&C Willis Corroon, S.A. and the operation of the business.
4.5 Limitations on the Board's Powers of management
The Shareholders shall procure that the Board of Directors of the Company
and of S&C Willis Corroon, S.A. and of each Group Company shall conduct
the affairs of the Company concerned and shall exercise all voting and
other rights or powers of control exerciseable by the Company concerned in
relation to the subsidiaries of that Company for the time
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being so as to secure that no action shall be taken or resolution passed
by that Group Company or any such subsidiary in relation to the following
matters unless with the sanctions of the affirmative vote of not less than
a majority of the directors of that Company for the time being, such vote
having the support of one Director who is an employee of Willis Corroon
Group in London and one Director who is an Other Shareholder.
4.5.1 The appointment and removal of the Secretary or any director of any
subsidiary;
4.5.2 The acquisition by a Group Company or any assets of property at a
total cost to the Group Company (per transaction) of more that
(pound)125,000;
4.5.3 The sale or disposition of any assets or property of a Group Company
for a total price per transaction of more than (pound)125,000
4.5.4 The creation of any charge or other security over any assets or
property of a Group Company;
4.5.5 The giving by any Group Company of any guarantee or indemnity or the
creation of any security of whatever nature over the assets of a
Group Company;
4.5.6 The consolidation or amalgamation of any Group Company with any
other company;
4.5.7 The disposal of or dilution of the Company's shareholding or
interest, directly or indirectly, in any of its subsidiaries;
4.5.8 The acquisition by any Group Company of any share capital or
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other securities of any body corporate;
4.5.9 The making of any loan or advance to any person, firm, body
corporate or other business in excess of (pound)125,000 or the
borrowing of any money except by way of overdraft in the ordinary
course of business;
4.5.10 The creation, allotment or issue of any shares in the capital of a
Group Company or of any other security or the grant of any option
or rights to subscribe in respect thereof or convert any instrument
into such shares;
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4.5.11 The payment or declaration by the Company of any dividend or other
distribution on account of shares in its capital;
4.5.12 The making of any significant change in the business of a Group
Company;
4.5.13 The making by any Group Company of any contract of a significant
nature outside the normal course of the business of such Group
Company;
4.5.14 The reduction of its capital, variation of the rights attaching to
any class of shares in the capital of the Company or any
redemption, purchase or other acquisition by the Company of any
shares or other securities of the Company;
4.5.15 The adoption of any bonus or profit-sharing scheme or any share
option or share incentivo scheme or employee share trust or share
ownership plan;
4.5.16 The making of any change to a Group Company's documents;
4.5.17 The presentation of any position for the winding-up of a Group
Company, the suspension of payments or voluntary bankruptcy;
4.5.18 The approval of annual capital and revenue budgets and any
modification thereto;
4.5.19 The approval of the Annual Report and Accounts.
4.5.20 The commitment of any funds for specified or unspecified capital
expenditure not provided for in the approval capital and revenue
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budgets in excess of the equivalent of (pound)125,000.
4.5.21 The formation of or entry into any partnership, association or
joint venture or the establishment of any new branches;
4.5.22 The payment of any money or the giving of any benefit to any person
engaged in the management of a Group Company (including any member
of the Board of Directors) by way of remuneration or reimbursement
of costs or expenses or otherwise where that payment or benefit has
been calculated on a basis different from that currently applied
ignoring for these purposes alternative methods of payment made or
benefit given to ensure compliance with Spanish law, unless such
payment or benefit has been provided for in a budget previously
approved in accordance with this sub-clause;
4.5.23 The entry into any transaction, arrangement or agreement outside of
the ordinary course of business with or for the benefit of any
director of the Company or person connected or associated with any
such director;
4.5.24 The appointment as bankers of any bank otherwise than in accordance
with the Willis Corroon Group plc list of approved banks".
4.5.25 The commencement, settlement or defence of any action, or
proceedings or other litigation brought by a Group Company;
4.5.26 The appointment or dismissal or change in the remuneration or terms
of employment of any employee or officer of a Group Company in
senior management;
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4.5.27 The appointment or removal of any person as a Managing Director or
Chairman of the Company;
4.5.28 Any other proposed event, act or omission which would have a
significant effect on the Company.
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In determining whether any of the matters described above require the
approval of the Directors as aforesaid a series of related transactions in
any financial year which when aggregated exceed the figure specified in
the relevant paragraph shall be construed as a single transaction
requiring such approval.
4.7 Budgets & Financial Information
The Company and S&C Willis Corroon, S.A. and Group Companies shall prepare
and submit to the Directors and Shareholders such monthly profit and loss
account and balance sheet management and financial information, budgets,
forecasts and business plans in accordance with the Willis Corroon Group
plc timetable from time to time.
4.8 Auditors
The auditors of the Company and S&C Willis Corroon, S.A. shall be Ernst &
Young. In the event that another firm is appointed by Willis Corroon Group
plc as its worldwide auditors, such firm will be appointed as auditors to
the Company and S&C Willis Corroon, S.A. unless such firm is not entered
in the Official Register and/or the Other Shareholders object to such
appointment and have reasonable grounds for such objection.
4.9 Market Security
S&C Willis Corroon, S.A. and Group Companies will only use as security
those insurance companies as shall have been approved for use by the
Willis Corroon Group Security Committee.
5. DIVIDENDS
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The shareholders shall take such action as may be necessary to procure that the
Company distributes to and among its shareholders 100 per cent of its profits
available for distribution in each financial year subject to the appropriation
of such reasonable and proper reserves for working capital or otherwise as the
Board may think appropriate and subject to what is stablished by the Law or by
the Company's By-laws
6. TRANSFER OF SHARES
6.1 Before any transfer by one of the an Other Shareholder of any Shares to a
third party, the person proposing to transfer them (the "Proposing
Transferor") shall give a notice in writing (a "Transfer Notice") to
Willis Corroon that he desires to transfer them and specify the price at
which he is offering to transfer them (the "Prescribed Price").
6.2 On receipt of a Transfer Notice Willis Corroon shall have a right of first
refusal to acquire the Shares the subject of the Transfer Notice at a
price equal to the Exercise Price as calculable for the exercise of the
options granted pursuant to Clause 2 (adjustable in the manner set out in
Clause 3.2 and 3.3), mutatis mutandis, or the Prescribed Price, whichever
is lower.
6.3 If Willis Corroon declines to exercise its right of first refusal within
45 days of the Transfer Notice, the Proposing Transferor shall be at
liberty to transfer those Shares to any person on a bona fide sale at the
Prescribed price (after deducting, where appropriate, any dividend or
other distribution declared or made after the date of the Transfer Notice
and to be retained by the Proposing Transferor).
6.4 Before any transfer by Willis Corroon of any Shares to a third party each
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of the Other Shareholders shall have a right of first refusal to acquire
the Shares to be transferred on the same terms, mutatis mutandis, as for
transfers by Other Shareholders pursuant to Clauses 6.1, 6.2 and 6.3,
provided that, and it is expressly agreed, Willis Corroon
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shall be able to transfer any Shares held by it to an Associated Company
in which case the Other Shareholders agree to waive any rights of
pre-emption in favour of them.
In the event that two or more of the Other Shareholders exsercise the
right of first refusal to acquire the shares to be transferred by Willis
Corroon , each of them shall have the right acquire a number of the Shares
to be transferred equivalent pro rata the number of Shares held by each of
them at the date of the Transfer Notice.
6.5 The Shareholders shall procure compliance with any formalities necessary
or conducive to the implementation of any transfers of Shares pursuant to
this Clause 6.
7. DURATION AND TERMINATION
7.1 Except as otherwise provided herein, this Agreement shall continue in full
force and effect without limit in point of time until the earlier of the
following events:
7.1.1 When the holders of 100 per cent of the Shares in issue agree in
writing to terminate this Agreement; and
7.1.2 When an effective resolution is passed or a binding order is made
for the winding-up of the Company;
Provided, however, that this Agreement shall cease to have effect as
regards any Shareholder who ceases to hold any Shares save for any
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provisions hereof which are expressed to continue in force thereafter.
8. NEW SHAREHOLDERS
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The parties shall procure that no person other than a Shareholder acquires
Shares in the Company (whether by transfer or allotment) unless he covenants
with the other parties to this Agreement (in a form reasonably acceptable to
each of them) to observe this Agreement and, in the case of a transferee, to
perform all the obligations of the transferor under this Agreement and thereupon
each such transferee or allottee shall be treated as a Shareholder for the
purposes of this Agreement.
9. RIGHTS TO INFORMATION; CONFIDENTIALITY
9.1 Rights of inspection and information
The Company shall permit any person designated by Willis Corroon or the
Other Shareholders in Writing to discuss the affairs, finances and
accounts of the Company and its subsidiaries with their offices and other
principal executives all at such time as may reasonably be requested, and
all books, records, accounts, documents and vouchers relating to the
business and the affairs of the Company and its subsidiaries shall at such
time be open to the inspection of Willis Corroon or the other
Shareholders, as applicable, who may make such copies thereof or extracts
therefrom as Willis Corroon or the Other Shareholders, as applicable, may
deem appropriate. Any information secured as a consequence of such
discussions and examinations shall be kept strictly confidential by Willis
Corroon or the Other Shareholders, as applicable.
9.2 Confidentiality
9.2.1 All communications between the parties, the Company, S&C Willis
Corroon, S.A. and/or any of them and all information and other
materias supplied to or received by any of them from the others
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which is either market "confidencial" or is by its nature intended
to be for the knowledge of the recipient alone, and all information
concerning the business transactions and the financial
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arrangements of the parties or the Company with any person with whom
any of them is in a confidential relationship with regard to the
matter in question to the knowledge of the recipient shall be kept
confidencial by the recipient unless or until the recipient party
can reasonably demonstrate that any such communication, information
and material is, or part of it is, in the public domain through no
fault of its own, whereupon to the extent that it is in the public
domain or is required to be disclosed by law or in pursuance of
employment duties, this obligation shall cease.
9.2.2 the Shareholders shall use all reasonable endeavours to procure the
observance of the above-mentioned restrictions by the Company and
shall take all reasonable steps to minimise the risk of disclosure
of confidencial information, by ensuring that only they themselves
and such of their employees and directors whose duties will require
them to possess any of such information shall have access thereto,
and will be instructed to treat the same as confidential.
9.2.3 The obligation container in this Clause 9 shall endure, even after
the termination of this Agreement, without limit in point of time
except and until such confidencial information enters the public
domain as set out above.
9.2.4 Notwithstanding Clauses 9.2.1 to 9.2.3, the Shareholders may at any
time disclose any such information and communications to their
Associated Companies.
9.2.5 A Shareholder on ceasing to be a Shareholder will hand over to the
Company all correspondence, budgets, schedules, documents and
records belonging to or relating to the business of the Company and
will not keep any copies thereof.
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10. RESTRICTIVE COVENANTS
Each of the Other Shareholders who is also an employee of S&C Willis Corroon,
S.A. agrees with Willis Corroon and the Company and S&C Willis Corroon, S.A. in
the following terms:
10.1 In consideration of the option arrangements in Clause 2 hereof, he will
not whilst he continues to be a Shareholder or employee of the Company or
S&C Willis Corroon, S.A., nor will he for a period of 2 years from the
date upon which he ceases to be a Shareholder of the Company be employed
or otherwise be interested in any way in any business in Spain which is in
competition with the Business.
10.2 In consideration of the option arrangements in Clause 2 hereof, he will
not for a period of two years after he ceases to be an employee of the
Company Company or S&C Willis Corroon, S.A., canvass or solicit in
competition with the company or any other Group Company the custom of or
in any way act for any firm, person or company who at any time during the
last two years of his service with the Company was a client of the Company
or, as the case may be, any Group Company.
10.3 He will not for a period of two years after he ceases to be an employee of
the Company or S&C Willis Corroon, S.A., either or on his own behalf or
for any other person, firm or organisation, employ any person who was at
any time during the last two years of his service with the Company an
employee, director or agent of the company or any Group Company.
11. NOTICES AND GENERAL
11.1 Notices, demands or other communications required or permitted to be
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given or made hereunder shall be in writing in English and Spanish and
delivered personally or sent by prepaid first class post with recorded
delivery, or by telex, or legible telefax addressed to the intended
recipient at its address set out in this Agreement or to such other
address or telex or telefax number as any party may from time to time duly
notify to the others. Any such notice, demand or communication shall,
unless the contrary is proved, be deemed to have been duly served (if
given or made by telefax or telex) on the next following business day in
the place of receipt or (if given or made by first class letter) 48 hours
after posting and in proving the same it shall be sufficient to show in
the case was duly addressed, correctly stamped and posted and, in the case
of a telex or telefax, that such telex or telefax was duly despatched to a
current telex or telefax number of the addressee.
11.2 Remedies
No remedy conferred by any of the provisions of this Agreement is intended
to be exclusivef of any other remedy which is otherwise available at law,
in equity by statute or otherwise, and each and every other remedy shall
be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law, in equity, by statute or
otherwise. the election of any one or more of such remedies by any of the
parties hereto shall not constitute a waiver by such party of the right to
pursue any other available remedy.
11.3 Severance
If any provision of this Agreement or part thereof is rendered void,
illegal or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions shall not in any
way be affected or impaired thereby.
11.4 Survival of Rights, Duties and Obligations
27
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Termination of this Agreement for any cause shall not release a party from
any liability which at the time of termination has already accrued to
another party of which thereafter may accrue in respect of any act or
omission prior to such termination.
11.5 Costs
S&C Willis Corroon, S.A. shall bear the costs and expenses incurred by it
in connection with this agreement.
11.6 Entire Agreement
This Agreement (together with the Schedules hereto) constitutes the entire
agreement between the parties and save as otherwise expressly provided no
modification, amendment or waiver of any of the provisions of this
Agreement shall be effective unless made in writing specifically referring
to this Agreement and duly signed by the parties hereto.
11.7 Assignment
11.7.1 This Agreement shall be binding on the parties hereto and their
respective successors and assigns.
11.7.2 None of the parties hereto shall be entitled to assign this
Agreement or any of its rights and obligations hereunder except as
envisaged by Clause [ ] or to a permitted transferee of that
party's Shares which has complied with Clause
11.8 Conflict with the Statutes
In the event of any ambiguity or discrepancy between the provisions of
28
<PAGE>
this Agreement and the Statutes, then it is the intention that to extend
this Agreement governs the rights of the parties inter se the provisions
of this Agreement shall prevail and accordingly the parties shall exercise
all voting and other rights and powers available to them so as to give
effect to the provisions of this Agreement and shall further if necessary
procure any required amendment to the Statutes.
Willis Corroon Europe BV p.p. Sarah Turvill
D. Jaime Castellanos Borrego
Anton Serrats Iriarte
Pedro Cardelus Munoz-Seca
29
<PAGE>
Exhibit 10.7
1
SHAREHOLDERS AGREEMENT
THIS AGREEMENT is made the 17th day of December, 1998, between Willis Corroon
AB, ("WCAB"), Mr Staffan Larsson and Mr Tomas Larsson ("SL and "TL" or jointly
the "Directors"). WCAB and the Directors are together called the Parties.
WHEREAS:
A. WCAB is a company in the Willis Corroon Group (the "Group"). For the
purpose of this Agreement, the Group shall be deemed to consist of all
companies in which Willis Corroon Group Ltd directly or indirectly holds
more than 50 % of the shares or the votes.
B. WCAB is the owner of all 510 A shares in Willis Corroon i Orebro AB (the
Company).
C. The Parties have found it to be in their mutual interest that the
Directors become shareholders in the Company.
D. The Directors, who have been in the insurance broking and risk management
business for many years, will be employed by the Company according to
separate employment agreements.
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2
NOW, THEREFORE, the parties hereto agree as follows:
ss. 1 Subscription for shares
1.1 The Company will resolve upon a new issue of 490 B shares, each share with
a nominal value of SEK 100, directed at the Directors, of which shares SL
will subscribe for 294 shares and TL for 196 shares. The 490 B shares will
not carry any entitlement for dividends.
ss. 2 Object of the Company and Articles of Association
2.1 The object of the Company is to carry on business as consultant and broker
in regard to insurance activities, to render assistance in the management
of business and to conduct activities compatible therewith.
2.2 The Articles of Association of the Company shall be as set out in Exhibit
A attached hereto.
ss. 3 Board of directors, managing director and auditor
3.1 The Company's board of directors shall consist of up to five directors,
unless the Parties agree otherwise.
3.2 Three directors may be nominated by WCAB and two directors by the
Directors. The Directors shall have the right to nominate
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3
directors for so long as they collectively own at least 33 % of the
Company's shares.
3.3 WCAB undertakes to consult with the Directors before nominating directors.
3.4 The Parties agree that the annual general meeting of shareholders of the
Company shall appoint the thus nominated directors.
3.5 The board of directors shall appoint a managing director. SL shall be
appointed the first managing director. The board of directors may at any
time appoint a new managing director.
If as a result of a decision by the board, SL ceases to be managing
director he will still be employed by the Company as per his employment
agreement, which may only be amended or terminated in accordance with its
terms.
3.6 The board of directors shall be responsible for the organisation of the
Company and the over all management of its affairs. The managing director
shall be in charge of the day-to-day management of the Company according
to guidelines and instructions laid down by the board.
3.7 The auditor of the Company shall be nominated by the board of directors.
The Parties agree that the annual general meeting of shareholders shall
appoint the thus nominated auditor.
<PAGE>
4
ss. 4 Business of the Company
4.1 The business of the Company shall be direct insurance broking business and
the provision of technical services in relation to Swedish and foreign
enterprises in Sweden as well as to foreign subsidiaries and branch
offices of Swedish enterprises, provided that such business is operated in
accordance with the Willis Corroon Retail Network Rules and in accordance
with the agreement signed between WCAB and the Company.
4.2 WCAB and the Company will at all times work in close co-operation. While
it is inappropriate to lay down strict rules, the following principles
will apply:
(i) WCAB and the Company will meet to discuss and agree the targets of
each year on a regular basis.
(ii) The central point for all incoming international business will be
WCAB. Outgoing business will be handled as agreed between WCAB and
the Company.
4.3 The Company will be operated at all times so that it complies with the
Group's operational and financial standards.
4.4 As a subsidiary of WCAB the Company is subject to WCAB's operating
procedures and commission sharing agreements and will have access to the
Willis Corroon Retail Network.
4.5 Management and administration charges will be charged by
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5
WCAB to the Company in accordance with a formulae used from time to time
to apportion charges between all the Willis Corroon Group offices in
Sweden.
4.6 The Company will only use for the placing of business on behalf of its
clients such insurance companies and markets as shall have been approved
by the Willis Corroon Group Ltd market security committee from time to
time.
4.7 If the Company wishes to place any insurance or reinsurance business
outside Sweden, it shall first offer to place such business with or
through Willis Faber & Dumas Ltd or such other company in the Group that
shall operate in the country in which such business is to be placed,
provided that the terms offered are competitive, unless a client
specifically requests to the contrary.
4.8 Where business is placed with Willis Faber & Dumas Ltd in London,
commission arising thereon will be shared 50% to the Company, 50 % to
Willis Faber & Dumas Ltd.
ss. 5 Limitation on the powers of management of the board
5.1 A change of managing director or general manager will require a decision
by a majority of four directors.
5.2 No resolution, recommendation, direction, or proposal relating to the
matters specified below shall be passed, approved, made, considered by or
proposed by the board of directors, unless such
<PAGE>
6
resolution, recommendation, direction or proposal has been approved by a
majority of the board of directors including one director nominated by
WCAB who is an employee of the Group in the United Kingdom and no such
resolution, recommendation, direction or proposal shall be considered by
the board of directors at a meeting unless reasonable notice of the
resolution has been given to such director.
(1) The approval of annual capital, revenue and cash budgets.
(2) The commitment by the Company or any of its subsidiaries of unbudgeted
funds in excess of SEK 100,000.
(3) The commitment of budgeted funds as follows:
a) specified capital investments or revenue expense with individual
costs in excess of SEK 1,000,000;
b) capital investments not specified in the budget with individual
costs in excess of SEK 500,000.
(4) Any transaction involving the mortgage, sale, lease, license, encumbrance
or other disposal of one or more assets of the Company, or its
subsidiaries, having an original book value in excess of SEK 500,000.
(5) a) The acceptance by the Company of any overdraft facilities;
b) The contracting of any loan, excluding short term funding in the
normal course of business within the Company's
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7
overdraft facilities, by the Company or its subsidiaries whether as
a borrower or a lender exceeding in any one transaction, the sum of
SEK 50,000;
c) The giving of any guarantee, suretyship or indemnity;
d) The contracting of short-term investments/deposits to banks outside
the Willis Corroon authorised bank list.
(6) The exercise by the Company of any powers as shareholder in any other
company.
(7) The approval of the appointment, including the terms of reference, or the
removal of Directors having remuneration per annum in excess of 75 % of
the salary of the managing director of the Company and the approval of any
change in the emoluments of any such employee.
(8) The nomination of auditor of the Company.
(9) The approval of the making of any payment calculated to provide or assist
in the provision of any pension superannuation allowance, super annuation
gratuity or any other employee benefit package for any employee or past
employee of the Company or any subsidiary outside the terms of such
employee's employment contract.
(10) The grant by the Company or any of its subsidiaries of any power of
attorney.
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8
(11) The commencement or defence of any litigation, arbitration or other
proceedings other than debt collections in the normal course of business.
(12) The formation of any branch, agency or subsidiary, the entry into any
partnership, association or joint venture or the acquisition of any share
or loan capital, debentures or other securities in a body corporate.
(13) The entry by the Company into any business other than that of direct
insurance brooking and risk management services.
(14) The proposal for declaration of any dividends or other distributions out
of the assets of the Company or its subsidiaries.
(15) The issue of any authorised but unissued shares of the Company.
(16) The increase of the authorised share capital of any of the Company's
subsidiaries.
(17) The entry by the Company or any of its subsidiaries into any long term or
unusual contract arrangements or commitments.
(18) Any transaction in relation to real property.
(19) Any other proposed event, act or omission which would have a significant
effect upon the Company.
<PAGE>
9
ss. 6 Resolutions by the general meeting of shareholders requiring a qualified
majority
6.1 A change of the Articles of Association shall require a majority of 75 %
of the votes, unless a higher majority is required by the Companies Act.
6.2 WCAB agrees that it will not cause the Company to issue further shares to
it or any third party, or share options or convertible bonds without the
agreement of the Directors.
ss. 7 Cover of loss and provision of working capital
7.1 Provided that the Company's business is conducted in accordance with this
Agreement, WCAB shall cause all reasonable loss in the Company to be
covered during the first two fiscal years of its existence.
7.2 If WCAB covers losses in the form of shareholders contributions or group
contributions (Sw. koncernbidrag), such contributions shall be repayable
with accrued interest to WCAB from future profits in the Company. Such
repayment shall be decided by a Shareholders meeting and have priority
over dividend to the shareholders.
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10
7.3 Subject to claause 7.1 above and provided that the Company's business is
conducted in accordance with this Agreement, WCAB will provide working
capital to the Company as required in accordance with the cash flow
projections for fiscal years 1999 and 2000 set out in Exhibit B attached
hereto. WCAB shall not be obliged to provide any further funds to the
Company for any reason.
ss. 8 Dividend policy
8.1 The Parties hereto agree that the shareholders meeting shall declare a
dividend equal to the profit available for distribution each year subject
to clause 7.2 and after the appropriation of such reasonable and proper
reserves for working capital as the Company's board of directors may think
appropriate. No dividend shall be declared until any loans made to the
Company from WCAB or the Group shall have been repaid.
ss. 9 Budgets and financial information
9.1 The Company will prepare and submit to the Parties hereto
1. on or before the first of October each year detailed revenue and
capital budgets for the Company and any subsidiaries (including
estimated major items or revenue and capital expenditure) for the
following calendar year, broken down on
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11
a monthly basis, and an accompanying cash flow fore- cast together
with a balance sheet showing the projected position of the Company
(and its subsidiaries) as at the end of the following calendar year
and such additional statements and documents as deemed appropriate
by WCAB;
2. within four days after the end of each calendar month unaudited
management accounts, such accounts to include a detailed profit and
loss account, balance sheet and cash flow statement in a format
prescribed by WCAB and a review of the budget together with a
reconciliation of the results with revenue and capital budgets for
the corresponding months; and
3. such additional financial information as may be reasonably requested
from time to time by the Group.
ss. 10 Errors and omissions
10.1 The Company shall have an errors and omissions insurance cover considered
adequate by WCAB.
10.2 WCAB shall use reasonable endeavours to procure that the Company shall be
included in the Group errors and omissions insurance policy held by Willis
Corroon Group Ltd and, subject to its being included, the Company shall
participate fully in the policy and pay to Willis Corroon Group Ltd a
reasonable share of
<PAGE>
12
premium as determined by Willis Corroon Group Ltd on the basis of an
equitable allocation across all companies covered by such policies and
taking account of the total premium handled by the Company, its retained
brokerage and number of Directors.
ss. 11 Restrictive covenants
11.1 The Directors undertake that they will not whilst they continue to be
shareholders or Directors of the Company, either on their own behalf or on
behalf of any other person, firm or organisation, canvass or solicit
clients in competition with any company in the Group.
The Directors further undertake that they will not for a period of two
years from the date upon which they cease to be shareholders and/or
employees in the Company, either on their own behalf or on behalf of any
other person, firm or organisation, canvass, solicit or handle the
business of any client whose business any of them handled while working
for the Company. This does not mean that the Directors are prevented from
taking up employment with such a client. This clause 11.1 shall not apply
in the event that the Company terminates the employment of the Director
without cause and the Director ceases to be a shareholder.
11.2 The Directors undertake for a period of two years after they
<PAGE>
13
cease to be shareholders or Directors of the Company, that they will not,
either on their own behalf or on behalf of any other person, firm or
organisation, employ any person who was at any time during the last two
years of their involvement with the Company, an employee, director or
agent of any company in the Group. This clause 11.2 shall not apply in the
event that the Company terminates the employment of the Director without
cause and the Director ceases to be a shareholder.
11.3 If any of the Directors fails to comply with this non-competition clause,
he shall be obliged to pay to WCAB a penalty of SEK 400,000 for each
violation of this clause and also to compensate WCAB fully for any loss
(including i.e. loss of profit) resulting therefrom.
ss. 12 Restrictions on the transfer of shares
12.1 The Directors undertake not to sell any of their shares in the Company
without WCAB's consent in writing.
12.2 Should either of the Directors die, his shares in the Company shall be
offered to the other Director and if the shares are not purchased by him,
to WCAB.
The price to be paid for the shares by the other Director and WCAB shall
be the equal to the proportion of the B shares held by the Director in
relation to the total number of shares in the
<PAGE>
14
Company times the Revenue of the Company in the last completed financial
year as set out in the audited annual accounts or if the death occurs
after 31 August in a year, that financial year will be the year to be
considered under this sub-paragraph. If the death occurs in 1999, the
audited annual accounts for 1999 will be considered.
If the death occurs after 31 August, WCAB will make a preliminary payment
equalling the Revenue for the period ending on 31 August for the next
preceding financial year of the Company according to the audited annual
accounts. If the death occurs in 1999, WCAB will make a preliminary
payment based on the Revenue according to the management accounts for the
period ending on the month when the death occurred.
The purchase price shall be finally established once the annual accounts
for the financial year have been audited. Any further payment of price or
repayment, as the case may be, shall be made within 30 days after the
price has been finally established.
If the other Director buys the shares in accordance with this clause 12.2.
the shares shall be held in accordance with this Agreement and thereby
inter alia be subject to the option rights of WCAB set out in this
Agreement.
12.3 WCAB may sell or otherwise transfer all or some of its shares in the
Company to another company in the Group. The clause of first refusal in
the Articles of Association of the Company shall not apply to such
transfer if the purchaser assumes WCAB's
<PAGE>
15
obligations according to this Agreement by signing it.
The transfer shall be reported in writing to the Directors.
12.4 Should WCAB want to sell all or some of its shares in the Company to
somebody outside the Group, WCAB shall give the Directors an offer to buy
the shares. The offer shall be in writing. The Directors shall have the
right to purchase the shares in relation to their share holding and at the
price equal to the fair value (verkliga vardet) of the shares.
If the fair value cannot be agreed, the auditor of the Company shall be
instructed to make an appraisal of the value of the shares and submit it
to the Parties in writing within 60 days. The auditor's determination of
the fair value shall be binding on the parties, unless
(i) it is proven that a third party at arm's length is willing and able,
within the actual period, to pay a higher price than determined by
the auditor; or
(ii) an essential event in the actual period, unknown to the auditor,
will strongly affect the value of the shares; or
(iii) the auditor's determination is very unclear and ambiguous.
If, within two weeks of the offer being made, the Directors have not
declared that they want to buy the shares offered to them, WCAB has the
right to sell the shares to somebody else,
<PAGE>
16
provided that the price paid by the purchaser is at least equal to the
price at which the shares were offered to the Directors. If WCAB has not
sold the shares initially offered to the Directors within a period of six
months from the time of the offer, this clause of first refusal will once
again be applicable.
ss. 13 Option to purchase/sell shares
13.1 Put and call options shall be exercisable on the shares in the Company
owned by the Directors at the following times:
1. WCAB shall have the right to purchase (call option) 50 % of the B
shares ( ie 147 shares from SL and 98 shares from TL) within two
weeks of the auditors of the Company delivering to the board of the
Company the audited annual accounts for fiscal year 2000.
In case this option is not exercised, the Directors shall have the
right to sell (put option) to WCAB 50 % of the B shares (ie 147
shares of SL and 98 shares of TL) earliest four weeks and latest six
weeks of the auditors of the Company delivering to the board of the
Company the audited annual accounts for fiscal year 2000.
The options under this clause 13.1.1 are referred to as the First
Options.
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17
2. WCAB shall have the right to purchase 50% of the B shares (ie 147
shares from SL and 98 shares from TL) within two weeks of the
auditors of the Company delivering to the board of the Company the
audited annual accounts for fiscal year 2000.
In case this option is not exercised, the Directors shall have the right
to sell to WCAB 50% of the B shares (i.e. 147 shares of SL and 98 shares
of TL) earliest four weeks and latest six weeks of the auditors of the
Company delivering to the board of the Company the audited annual accounts
for fiscal year 2000.
The options under this clause 13.1.2 are referred to as the Second
Options.
The Directors rights to sell under the First Options and the Second
Options are subject to the following:
(a) the Directors continuing to be employed by the Company;
(b) the Company continuing to trade; and
(c) in the case of the Second Options,
(i) the First Option being exercised;
(ii) the Directors having fulfilled their obligations according to
this Agreement; and
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18
(iii) the Directors fulfilling their obligations under clause 14.1
below.
13.2 The price at which the First Options shall be exercised shall be equal to
50% of the Revenue of the Company for the financial year 2000 provided
that the price is equal to a P/E of 6 or less based upon the audited
Normalised After Tax Earnings, as defined in clause 15.1 below, of the
Company for the fiscal year 2000. If the Normalised After Tax Earning of
the Company for fiscal year 2000 gives a P/E of more than 6, the price
payable for the B shares under the First Options shall be an amount equal
to 50 % of the sum derived from the following formula:
Price = R multiplied by X divided by Y, where;
Price is the aggregate price payable under the First Options;
R is the Revenue of the Company for the fiscal year 2000:
X is a P/E of 6; and
Y is the Actual P/E.
In the case of the Second Options, the payment shall be settled in shares
in WCAB. The number of shares in WCAB to be subscribed and received shall
be determined by a comparative valuation of WCAB and the Company based
upon the average Revenues of WCAB (excluding the Company) and the Company
for fiscal years 1999 and 2000 according to their respective
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19
audited annual accounts and apportioning 50 percent of the value
attributable to the Company to the B shares which are subject to the
Second Options.
13.3 Irrespective of whether or not the options under clauses 13.1 above have
been exercised and consequently, irrespective of how many shares SL and TL
will own in the Company January 2006 the following will apply.
WCAB will have the right to purchase the remainder of SL's shares and TL's
shares during the month of February 2006.
In case this option is not exercised, SL and TL shall have the right to
sell to WCAB the remainder of their shares during the month of March 2006.
The price at which the options pursuant to this clause 13.3 shall be
exercised shall be ten (10) times the average Normalised After Tax
Earnings of the Company for the three financial years prior to the
exercise of the option divided by the total number of shares in the
Company at that time.
13.4 Put and call options shall further be exercisable on the shares in the
Company owned by the Directors at the following times/on the occurrence of
the following events:
1. If, for any reason, any of the Directors ceases to be employed by
the Company (except where paragraph 2 below is applicable), he shall
have the right to sell his shares
<PAGE>
20
to WCAB and WCAB shall have the right to purchase his shares.
2. If either of the Directors resign or is dismissed by the Company for
cause, his shares in the Company shall be offered to the other
Director and, if not purchased by him, to WCAB.
3. If any of the Directors becomes bankrupt whilst being employed by
the Company, WCAB shall have the right to purchase his shares.
13.5 The following prices per share are to be paid if and when an option
pursuant to clause 13.4 above is exercised:
1. In all circumstances other than if the employment ends because the
Directors resign or are dismissed for cause: the price shall be
established according to clause 12.2 and for the purpose thereof the
date of cessation or bankruptcy shall be the relevant date.
2. If any of the Directors leaves his employment or his employment is
terminated for cause before having become a shareholder in WCAB
according to clause 13.1.2 above, the price for the shares will be
equal to 50% of the price according to clause 12.2.
13.6 Options granted pursuant to this Agreement shall be exercised in writing.
Subject to clause 13.1 third paragraph (c) (i)
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21
above, as regards the First Options and the Second Options, it shall be
stated if either or both of the options are exercised.
13.7 The purchase price under the options granted pursuant to this Agreement
(save for the Second Option) shall be paid by WCAB within two months from
the date of exercise of the respective options.
ss. 14 Shareholding in WCAB and Third Options
14.1 As a condition precedent to the Directors acquiring shares in WCAB, they
shall become parties to the then existing shareholders agreement between
the shareholders in WCAB and be bound in all respects of the terms and
conditions of such agreement.
14.2 The Directors will have a right to sell their shares in WCAB to Willis
Corroon Europe B.V. ("WCBV") and WCBV will have the right to buy the
shares in WCAB from the Directors as set out below.
WCBV shall have the right to purchase (call option) the shares in WCAB
within two weeks of the auditors of WCAB delivering to the board of WCAB
the audited annual accounts for fiscal year 2005.
In case this option is not exercised, the Directors shall have
<PAGE>
22
the right to sell (put option) to WCBV the shares in WCAB earliest four
weeks and latest six weeks of the auditors of WCAB delivering to the board
of WCAB the audited annual accounts for fiscal year 2005.
The options under this Clause 14.2 are referred to as the Third Options.
14.3 The price at which the Third Options shall be exercised shall be ten (10)
times the average Normalised After Tax Earnings of WCAB for the three
financial years prior to the exercise of the option divided by the total
number of shares in WCAB at that time (the "Formula Price").
14.4 Put and call options shall further be exercisable on the shares in WCAB
owned by the Directors at the following times/on the occurrence of the
following events:
1. If, for any reason, any of the Directors ceases to be employed by
the Company (except where paragraph 2 below is applicable), he shall
have the right to sell his shares to WCBV and WCBV shall have the
right to purchase his shares.
2. If either of the Directors resign or is dismissed by the Company for
cause, his shares in WCAB shall be offered to WCBV.
3. If any of the Directors becomes bankrupt whilst being
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23
employed by the Company, WCBV shall have the right to purchase his
shares in WCAB.
14.5 The following prices are to be paid for the shares if and when an option
under clause 14.4 above is exercised:
1. In the case of clause 14.4.2 the price will be 0,5 x the Formula
Price.
2. In all circumstances other than under clause 14.4.2 above, the price
will be the Formula Price.
ss. 15 Normalised After Tax Earnings etc
15.1 For the purpose of this Agreement
(i) Normalised After Tax Earnings means the earnings after tax but
excluding the actual after tax effects of all exceptional,
extraordinary and prior year items, which by their very nature are
not recurring items. The normal tax rate will be defined as the
effective tax rate (being the standard rates of tax applicable to
the Company) to include the effect of normal disallowable items but
adjusted to exclude the tax effect of brought forward losses or
other exceptional items.
(ii) Normalised After Tax Earnings shall be adjusted to exclude
exceptional/extraordinary and non recurring income and
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24
expenditure.
(iii) Revenue means revenues determined in accordance with the revenue
recognition policy of WCAB. This will be subject to the following:
- The income from a policy year and its subsequent renewal should not
both be recognised in the same financial year.
- Income from policies covering more than a twelve month period should
be phased over the relevant periods (i.e. only twelve months of
income should be recognised in any one financial year).
(iv) Subject to (i) - (iii) above, Revenue and Normalised After Tax
Earnings shall be established in accordance with Swedish generally
accepted accounting principles as applied by the Company or WCAB, as
the case may be.
15.2 If the Parties fail to agree on the Revenue or Normalised After Tax
Earnings figure or on any adjustments to the After Tax Earnings, the
matter shall be finally decided by the auditor of the Company or WCAB, as
the case may be.
ss. 16 Pledge
16.1 The Directors may not pledge their shares in the Company as a
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25
security to a third party without WCAB's consent in writing.
16.2 The B shares shall be pledged by the Directors as security for the
fulfilment of their obligations pursuant to this Agreement. The share
certificates of all shares held by the Directors shall be deposited,
endorsed in blank with Handelsbanken in Stockholm or such other bank as
the parties may agree upon. The cost for this deposit is to be borne by
WCAB.
ss. 17 Period of the Agreement
17.1 This Agreement shall remain in force until the end of the year 2006. If
neither party has given written notice of termination one year before the
expiration of the agreed term, the Agreement shall be extended for a new
period of two years at a time with the same period of notice.
Notwithstanding the foregoing, this Agreement shall expire on the earlier
date when the Directors no longer hold any shares in the Company.
ss. 18 Breach of agreement
18.1 Should a party hereto commit a material breach of this Agreement and
thereby cause a loss to another party hereto, he shall compensate said
other party in full for its loss, unless the breach is remedied in all
material respects within one month upon receipt of a written notice to
remedy the breach.
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26
18.2 If such a breach is committed by any of the Directors and not remedied, he
shall further, at the request of WCAB, be obliged to sell all his shares
in the Company to WCAB. The purchase price to be paid by WCAB shall be
determined in accordance with Clause 13.5.2.
ss. 19 Closure of business and winding up of the Company
19.1 The business of the Company may be closed, if so requested by WCAB, and
the Company be winded up, if all or any of the following events occur.
(a) if the Company makes a loss in the fiscal year 1999 according to the
audited annual accounts for 1999,
(b) if WCAB and the Directors so agree.
If a winding up is requested by WCAB, the Directors will take such actions
as may be required by them in order to wind up the Company.
ss. 20 Amendments
20.1 Any amendments to this Agreement shall be valid only if made in writing by
the Parties hereto.
<PAGE>
27
ss. 21 Choice of law; arbitration
21.1 The validity, construction and performance of this Agreement shall be
governed by Swedish law.
21.2 A dispute on the interpretation or application of this Agreement may not
be brought before a public court but shall be finally settled by
arbitration in accordance with the provisions of the Swedish act on
arbitration. The proceedings shall take place in Stockholm and be
conducted in English, if requested by either of the Parties. The
arbitration panel shall apply the rules of the Swedish code of procedure
relative to cumulation of cases, judgement in part, casting of votes and
allocation of cost of litigation, except that WCAB, if it is party to the
dispute, will pay all reasonable costs for the arbitrators irrespective of
the outcome of the dispute, unless the other party or the other parties
thereto has started the arbitration proceedings without reasonable reason.
---------------------------
THIS AGREEMENT has been executed in three originals on the day first above
written.
Stockholm, 17 December, 1998
WILLIS CORROON AB
- ------------------------------------ -------------------------------------
STAFFAN LARSSON
<PAGE>
28
-------------------------------------
THOMAS LARSSON
Accepted and agreed for the purpose of clauses 14, 15 and 21 above.
Stockholm, 17 December, 1998
WILLIS CORROON EUROPE B.V.
- ------------------------------------
<PAGE>
Exhibit 10.8
1998 SHARE PURCHASE AND OPTION PLAN
FOR KEY EMPLOYEES OF
TA I LIMITED
1. Purpose of Plan
The 1998 Share Purchase and Option Plan for Key Employees of TA I Limited
(the "Plan") is designed:
(a) to promote the long term financial interests and growth of TA I
Limited (the "Company") and its subsidiaries by attracting and retaining
management personnel with the training, experience and ability to enable them to
make a substantial contribution to the success of the Company's business;
(b) to motivate management personnel by means of growth-related incentives
to achieve long range goals; and
(c) to further the alignment of interests of participants with those of
the shareholders of the Company through opportunities for increased share
ownership in the Company.
2. Definitions
As used in the Plan, the following words shall have the following
meanings:
(a) "Affiliate" shall mean with respect to any Person, any entity directly
or indirectly controlling, controlled by or under common control with such
Person.
(b) "Board of Directors" means the Board of Directors of the Company.
(c) "Change of Control" means (i) a sale of all or substantially all of
the assets of the Company to a Person who is not Kohlberg Kravis Roberts & Co.,
L.P. ("KKR") or an Affiliate of KKR, (ii) a sale by KKR or any of its Affiliates
resulting in more than 50% of the voting shares of the Company being held by a
Person or Group (other than a Person or Group in which KKR or any of its
respective Affiliates has a material interest) or (iii) a takeover,
reconstruction or winding-up involving the Company or KKR or any of its
respective Affiliates resulting in a Person or Group (other than a Person or
Group in which KKR or any of its respective Affiliates has a material interest)
holding more than 50% of the voting ordinary shares of the Company (or the
resulting controlling entity) immediately after any such business combinations;
if and only if any such event results in the inability of the KKR Partnership
(as defined herein) to elect a majority of the Board of Directors of the Company
(or the resulting entity).
(d) "Committee" means the Compensation Committee of the Board of
Directors.
(e) "Employee" means a person, including an officer, in the regular
employment of the Company or one of its Subsidiaries who, in the opinion of the
Committee, is, or is expected to be, primarily responsible for the management,
growth or protection of some part or all of the business of the Company.
<PAGE>
2
(f) "Exchange Act" means the U.S. Securities Exchange Act of 1934, as
amended.
(g) "Fair Market Value" means such value of a Share as determined no less
than annually (or more frequently if the Board of Directors so determines is
required), in good faith by the Board of Directors, after it has taken into
consideration certain factors (including, without limitation, the general
condition of the Company's industry, the historical performance of the Company,
and the Company's financial prospects) and after it has consulted with an
independent investment banking firm selected with the consent of the Group
Executive Committee. In addition, after determining the Fair Market Value, the
value of an individual Participant's shares, on a per share basis, shall not be
reduced to reflect the illiquidity or minority nature associated with such
Participant's shares.
(h) "Grant" means an award made to a Participant pursuant to the Plan and
described in Paragraph 5, including, without limitation, an award of an U.S.
Incentive Stock Option U.S. Non-Qualified Stock Option, Share Appreciation
Right, Dividend Equivalent Right, Restricted Share, Purchase Share, Performance
Unit, Performance Share or any Other Share-Based Grant or any combination of the
foregoing.
(i) "Grant Agreement" means an agreement between the Company and a
Participant that sets forth the terms, conditions and limitations applicable to
a Grant.
(j) "Group" means two or more Persons acting together as a partnership,
limited partnership, syndicate or other group for the purpose of acquiring,
holding or disposing of securities of the Company.
(k) "KKR Partnership" means Profit-Sharing (Overseas) Limited Partnership,
an affiliate of KKR.
(1) "Options" means the collective reference to "U.S. Incentive Stock
Options" and "U.S. Non-Qualified Stock Options".
(m) "Option Agreement" means an agreement between the Company and a
Participant that sets forth the terms, conditions and limitations applicable to
a Option.
(n) "Ordinary Shares" or "Share" means ordinary shares in the Company.
(o) "Participant" means an Employee to whom one or more Options have been
granted and such Options have not all been forfeited or terminated under the
Plan.
(p) "Person" means an individual, partnership, corporation, limited
liability company business trust, joint share company, trust, unincorporated
association, joint venture, governmental authority or other entity of whatever
nature.
(q) "Share-Based Grants" means the collective reference to the grant of
Share Appreciation Rights, Dividend Equivalent Rights, Restricted Shares,
Performance Units, Performance Shares, and Other Share-Based Grants.
<PAGE>
3
(r) "Subsidiary" shall mean a body corporate which is a subsidiary of the
Company (within the meaning of Section 736 of the Companies Act 1985).
3. Administration of Plan
(a) The Plan shall be administered by the Committee. None of the members
of the Committee shall be eligible to be selected for Grants under the Plan, or
have been so eligible for selection within one year prior thereto; provided,
however, that the members of the Committee shall qualify to administer the Plan
for purposes of Rule 16b-3 (and any other applicable rule) promulgated under
Section 16(b) of the Exchange Act to the extent that the Company is subject to
such rule. The Committee may adopt its own rules of procedure, and action of a
majority of the members of the Committee taken at a meeting, or action taken
without a meeting by unanimous written consent, shall constitute action by the
Committee. The Committee shall have the power and authority to administer,
construe and interpret the Plan, to make rules for carrying it out and to make
changes in such rules. Any such interpretations, rules, and administration shall
be consistent with the basic purposes of the Plan.
(b) The Committee may delegate to the Chief Executive Officer and to other
senior officers of the Company its duties under the Plan subject to such
conditions and limitations as the Committee shall prescribe except that only the
Committee may designate and make Grants to Participants who are subject to
Section 16 of the Exchange Act.
(c) The Committee may employ lawyers, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company, and the
officers and directors of the Company shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee in good faith shall be
final and binding upon all Participants, the Company and all other interested
persons. No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan or
the Grants, and all members of the Committee shall be fully protected by the
Company with respect to any such action, determination or interpretation.
4. Eligibility
The Committee may from time to time make Grants under the Plan to such
Employees and in such form and having such terms, conditions and limitations as
the Committee may determine. No Grants may be made under this Plan to
non-employee directors of Company or any of its Subsidiaries. The terms,
conditions and limitations of each Grant under the Plan shall be set forth in a
Grant Agreement, in a form approved by the Committee, consistent, however, with
the terms of the Plan; provided, however, that such Grant Agreement shall
contain provisions dealing with the treatment of Grants in the event of the
termination, death or disability of a Participant, and may also include
provisions concerning the treatment of Grants in the event of a change of
control of the Company.
5. Grants
<PAGE>
4
From time to time, the Committee will determine the forms and amounts of
Grants for Participants. Such Grants may take the following forms in the
Committee's sole discretion:
(a) U.S. Incentive Stock Options - These are stock options within the
meaning of Section 422 of the U.S. Internal Revenue Code of 1986, as amended
("Code"), to purchase Ordinary Shares. In addition to other restrictions
contained in the Plan, an option granted under this Paragraph 5(a), (i) may not
be exercised more than 10 years after the date it is granted, (ii) may not have
an option price less than the Fair Market Value of Ordinary Shares on the date
the option is granted, (iii) must otherwise comply with Code Section 422, and
(iv) must be designated as an "Incentive Stock Option" by the Committee. The
maximum aggregate Fair Market Value of Ordinary Shares (determined at the time
of grant) with respect to which Incentive Stock Options are first exercisable
with respect to any participant under this Plan and any Incentive Stock Options
granted to the Participant for such year under any plans of the Company or any
Subsidiary in any calendar year is $100,000. Payment of the option price shall
be made in cash in accordance with the terms of the Plan, the Option Agreement,
and of any applicable guidelines of the Committee in effect at the time.
(b) U.S. Non-Qualified Stock Options - These are options to purchase
Ordinary Shares which are not designated by the Committee as "U.S. Incentive
Stock Options". At the time of grant the Committee shall determine, and shall
include in the Option Agreement or other Plan rules, the option exercise period,
the option price, and such other conditions or restrictions on the grant or
exercise of the option as the Committee deems appropriate. In addition to other
restrictions contained in the Plan, an option granted under this Paragraph 5(b)
may not be exercised more than 10 years after the date it is granted. Payment of
the option price shall be made in cash in accordance with the terms of the Plan,
the Option Agreement and of any applicable guidelines of the Committee in effect
at the time.
(c) Share Appreciation Rights - These are rights that on exercise entitle
the holder to receive the excess of (i) the Fair Market Value of a share of
Ordinary Shares on the date of exercise over (ii) the Fair Market Value on the
date of Grant (the "base value") multiplied by (iii) the number of rights
exercised as determined by the Committee. Share Appreciation Rights granted
under the Plan may, but need not be, granted in conjunction with an Option under
Paragraph 5(a) or 5(b). The Committee, in the Grant Agreement or by other Plan
rules, may impose such conditions or restrictions on the exercise of Share
Appreciation Rights as it deems appropriate, and may terminate, amend, or
suspend such Share Appreciation Rights at any time. No Share Appreciation Right
granted under this Plan may be exercised less than 6 months or more than 10
years after the date it is granted except in the event of death or disability of
a Participant. To the extent that any Share Appreciation Right that shall have
become exercisable but shall not have been exercised or cancelled or by reason
of any termination of employment, shall have become non-exercisable, it shall be
deemed to have been exercised automatically, without any notice of exercise, on
the last day of which it is exercisable, provided that any conditions or
limitations on its exercise are satisfied (other than (i) notice of exercise and
(ii) exercise or election to exercise during the period prescribed) and the
Share Appreciation Right shall then have value. Such exercise shall be deemed to
specify that the holder elects to receive cash and that such exercise of a Share
Appreciation Right shall be effective as of the time of automatic exercise.
<PAGE>
5
(d) Restricted Shares - Restricted Shares are Ordinary Shares delivered to
a Participant with or without payment of consideration with restrictions or
conditions on the Participant's right to transfer or sell such shares. If a
Participant irrevocably elects in writing in the calendar year preceding a Grant
of Restricted Shares, dividends paid on the Restricted Shares granted may be
paid in Shares of Restricted Shares equal to the cash dividend paid on Ordinary
Shares. The number of Shares of Restricted Shares and the restrictions or
conditions on such Shares shall be as the Committee determines, in the Grant
Agreement or by other Plan rules, and the certificate for the Restricted Shares
shall bear evidence of the restrictions or conditions. No Restricted Shares may
have a restriction period of less than 6 months, other than in the case of death
or disability.
(e) Purchase Shares - Purchase Shares are shares of Ordinary Shares
offered to a Participant at such price as determined by the Committee, the
acquisition of which will make him eligible to receive under the Plan,
including, but not limited to, U.S. Non-Qualified Stock Options.
(f) Dividend Equivalent Rights - These are rights to receive cash payments
from the Company at the same time and in the same amount as any cash dividends
paid on an equal number of Ordinary Shares to shareholders of record during the
period such rights are effective. The Committee, in the Grant Agreement or by
other Plan rules, may impose such restrictions and conditions on the Dividend
Equivalent Rights, including the date such rights will terminate, as it deems
appropriate, and may terminate, amend, or suspend such Dividend Equivalent
Rights at any time.
(g) Performance Units - These are rights to receive at a specified future
date, payment in cash of an amount equal to all or a portion of the value of a
unit granted by the Committee. At the time of the Grant, in the Grant Agreement
or by other Plan rules, the Committee must determine the base value of the unit,
the performance factors applicable to the determination of the ultimate payment
value of the unit and the period over which Company performance will be
measured. These factors must include a minimum performance standard for the
Company below which no payment will be made and a maximum performance level
above which no increased payment will be made. The term over which Company
performance will be measured shall be not less than six months.
(h) Performance Shares - These are rights to receive at a specified future
date, payment in cash or Ordinary Shares, as determined by the Committee, of an
amount equal to all or a portion of the Fair Market Value for all days that the
Ordinary Shares are traded during the last forty-five (45) days of the specified
period of performance of a specified number of shares of Ordinary Shares at the
end of a specified period based on Company performance during the period. At the
time of the Grant, the Committee, in the Grant Agreement or by Plan rules, will
determine the factors which will govern the portion of the rights so payable and
the period over which Company performance will be measured. The factors will be
based on Company performance and must include a minimum performance standard for
the Company below which no payment will be made and a maximum performance level
above which no increased payment will be made. The term over which Company
performance will be measured shall be not less than six months. Performance
Shares will be granted for no consideration.
<PAGE>
6
(i) Other Share-Based Grants - The Committee may make other Grants under
the Plan pursuant to which Ordinary Shares (which may, but need not, be
Restricted Shares pursuant to Paragraph 5(d)), are or may in the future be
acquired, or Grants denominated in Share units, including ones valued using
measures other than market value. Other Share-Based Grants may be granted with
or without consideration. Such Other Share-Based Grants may be made alone, in
addition to or in tandem with any Grant of any type made under the Plan and must
be consistent with the purposes of the Plan.
6. Limitations and Conditions
(a) The number of Shares available for Grants under this Plan shall be
30,000,000 Shares; provided, however, that in no event shall the total number of
Shares subject to options and other equity for current and future Participants
exceed 25% of the equity of the Company on a fully diluted basis. Shares subject
to Grants that are forfeited, terminated, cancelled or expire unexercised, shall
immediately become available for other Grants.
(b) No Grants shall be made under the Plan beyond ten years after the
effective date of the Plan, but the terms of Grants made on or before the
expiration of the Plan may extend beyond such expiration. At the time a Grant is
made or amended or the terms or conditions of a Grant are changed, the Committee
may provide for limitations or conditions on such Grant.
(c) Nothing contained herein shall affect the right of the Company to
terminate any Participant's employment at any time or for any reason. The rights
and obligations of any individual under the terms of his office or employment
with the Company or any Subsidiary shall not be affected by his participation in
this Plan or any right which he may have to participate in it, and an individual
who participates in it shall waive any and all rights to compensation or damages
in consequence of the termination of his office or employment for any reason
whatsoever insofar as those rights arise or may arise from his ceasing to have
rights under or be entitled to exercise any Grant as a result of such
termination.
(d) Other than as specifically provided in the Management and Employee
Shareholders' and Subscription Agreement attached hereto as Exhibit A with
regard to the death of a Participant, no benefit under the Plan shall be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to do so shall be void. No such benefit
shall, prior to receipt thereof by the Participant, be in any manner liable for
or subject to the debts, contracts, liabilities, engagements, or torts of the
Participant.
(e) Participants shall not be, and shall not have any of the rights or
privileges of, shareholders of the Company in respect of any Shares purchasable
in connection with any Grant unless and until certificates representing any such
Shares have been issued by the Company to such Participants.
(f) No Grant may be exercised during a Participant's lifetime by anyone
other than the Participant except by a legal representative appointed for or by
the Participant.
<PAGE>
7
(g) Absent express provisions to the contrary, any Grant made under this
Plan shall not be deemed compensation for purposes of computing benefits or
contributions under any retirement plan of the Company or its Subsidiaries and
shall not affect any benefits under any other benefit plan of any kind now or
subsequently in effect under which the availability or amount of benefits is
related to level of compensation. This Plan is not a "Retirement Plan" or
"Welfare Plan" under the U.S. Employee Retirement Income Security Act of 1974,
as amended.
(h) Unless the Committee determines otherwise, no benefit or promise under
the Plan shall be secured by any specific assets of the Company or any of its
Subsidiaries, nor shall any assets of the Company or any of its Subsidiaries be
designated as attributable or allocated to the satisfaction of the Company's
obligations under the Plan.
7. Transfers and Leaves of Absence
For purposes of the Plan, unless the Committee determines otherwise: (a) a
transfer of a Participant's employment without an intervening period of
separation among the Company and any Subsidiary shall not be deemed a
termination of employment, and (b) a Participant who is granted in writing a
leave of absence shall be deemed to have remained in the employ of the Company
during such leave of absence.
8. Adjustments
(a) In the event of any increase or variation of the share capital of the
Company, the Committee may make such adjustments as it considers appropriate
under Paragraph 8(b) below.
(b) An adjustment made under this Paragraph 8(b) shall be to one or more
of the following:
(i) the number of Shares in respect of which any Option or Other
Share-Based Grant may be exercised;
(ii) the price at which Shares may be acquired by the exercise of
any Option or Other Share-Based Grant;
(iii) where any Option or Other Share-Based Grant has been exercised
but no Shares have been allotted or transferred pursuant to
the exercise, the number of Shares which may be so allotted or
transferred and the price at which they may be acquired.
(c) An adjustment under Paragraph 8(b) above may have the effect of
reducing the price at which Shares may be acquired by the exercise of an Option
or Other Share-Based Grant to less than their nominal value, but only if and to
the extent that the Board of Directors shall be authorized to capitalise from
the reserves of the Company a sum equal to the amount by which the nominal value
of the Shares in respect of which the Option or Other Share-Based Grant is
exercised and which are to be allotted pursuant to such exercise exceeds the
price at which the same may be subscribed for and to apply that sum in paying up
that amount on the Shares; and so
<PAGE>
8
that on exercise of any Option or Other Share-based Grant in respect of which
such a reduction shall have been made the Board shall capitalise such sum (if
any) and apply it in paying up such amount as aforesaid.
9. Exchange, Acquisition, Liquidation or Dissolution
(a) In its absolute discretion, and on such terms and conditions as it
deems appropriate, coincident with or after the grant of any Option or Other
Share-Based Grant, the Committee may provide that such Option or Other
Share-Based Grant cannot be exercised after the exchange of all or substantially
all of the assets of the Company for the securities of another corporation, the
acquisition by another corporation of 80% or more of the Company's then
outstanding voting Shares, liquidation or dissolution of the Company, any
variation of the share capital of the Company, and if the Committee so provides,
it may, in its absolute discretion and on such terms and conditions as it deems
appropriate, also provide, either by the terms of such Option or Other
Share-Based Grant or by a resolution adopted prior to the occurrence of such
exchange, acquisition, any variation of the share capital of the Company,
liquidation or dissolution, that, for some period of time prior to such event,
such Option or Other Share-Based Grant shall be exercisable as to all Shares
subject thereto, notwithstanding anything to the contrary herein (but subject to
the provisions of Paragraph 6(b)) and that, upon the occurrence of such event,
such Option or Other Share-Based Grant shall terminate and be of no further
force or effect; provided, however, that the Committee may also provide, in its
absolute discretion, that even if the Option or Other Share-Based Grant shall
remain exercisable after any such event, from and after such event, any such
Option or Other Share-Based Grant shall be exercisable only for the kind and
amount of securities and/or other property, or the cash equivalent thereof
receivable as a result of such event by the holder of a number of Shares for
which such Option or Other Share-Based Grant could have been exercised
immediately prior to such event.
(b) If any person becomes bound or entitled to acquire shares in the
Company under sections 428 of 430F of the Companies Act 1985, or if under
section 425 of that Act the Court sanctions a compromise or arrangement proposed
for the purposes of or in connection with a scheme for the reconstruction of the
Company or its amalgamation with any other company or companies, or if the
Company passes a resolution for voluntary winding up, or if an order is made for
the compulsory winding up of the Company, the Committee shall forthwith notify
every Participant thereof and any Option or Other Share-Based Grant may be
exercised within one month of such notification, but to the extent that it is
not exercised within that period shall (notwithstanding any other provision of
this Plan) lapse on the expiration thereof
10. Amendment and Termination
The Committee shall have the authority to make such amendments to any
terms and conditions applicable to outstanding Grants as are consistent with
this Plan provided that, except for adjustments under Paragraph 8 or 9 hereof,
no amendment to the disadvantage of any Participant shall be made unless:
(a) the Committee shall have invited every such Participant to give an
indication as to whether or not he approves the amendment, and
<PAGE>
9
(b) the amendment is approved by a majority of those Participants who have
given such an indication.
The Board of Directors may amend, suspend or terminate the Plan except
that no such action, other than an action under Paragraph 8 or 9 hereof, may be
taken which would, without shareholder approval, increase the aggregate number
of Shares available for Grants under the Plan, decrease the price of outstanding
Grants, change the requirements relating to the Committee or extend the term of
the Plan.
11. International Options and Rights
The Committee may make Grants to Employees who are subject to the laws of
countries other than the United States or the United Kingdom, which Grants may
have terms and conditions that differ from the terms thereof as provided
elsewhere in the Plan for the purpose of complying with foreign laws.
12. Withholding Taxes, Allotment and Transfer
(a) The Company shall have the right to deduct from any cash payment made
under the Plan any federal, state or local income or other taxes required by law
to be withheld with respect to such payment.
(b) Within 30 days after an Option has been exercised by any person,
before delivery of Restricted Shares or payment of Performance Shares (if paid
in Ordinary Shares) or before exercise, settlement or payment (if paid in
Ordinary Shares) of any Other Share-Based Grant, the Board of Directors shall
allot to such person (or a nominee for him) or, as appropriate, procure the
transfer to him (or a nominee for him) of the number of Shares in respect of
which the option has been exercised, provided that:
(i) the Board of Directors considers that the issue or transfer
thereof would be lawful in all relevant jurisdictions; and
(ii) in a case where the Company or any Subsidiary ("Group Member")
is obliged to (or would suffer a disadvantage if it were not
to) account for any tax (in any jurisdiction) for which the
person in question is liable by virtue of the exercise of the
option and/or for any social security, contributions
recoverable from the person in question (together, the "Tax
Liability"), that person has either:
(A) made a payment to the Group Member of an amount equal to
the Tax Liability; or
(B) entered into arrangements acceptable to that or another
Group Member to secure that such a payment is made
(whether by authorizing the sale of some or all of the
Shares on his behalf and
<PAGE>
10
the payment to the Group Member of the relevant amount
out of the proceeds of sale or otherwise).
(c) All Shares allotted under this Plan shall rank equally in all respects
with Shares of the same class then in issue except for any rights attaching to
such Shares by reference to a record date prior to the date of the allotment.
13. Effective Date and Termination Dates
The Plan shall be effective on and as of the date of its approval by the
shareholders of the Company and shall terminate ten years later, subject to
earlier termination by the Board of Directors pursuant to Paragraph 10.
14. Financial Assistance
The Company and any Subsidiary may provide money to the trustees of any
trust or any other person to enable them or him to acquire Shares to be held for
the purposes of the Plan, or enter into any guarantee or indemnity for these
purposes or provide financial assistance of any other kind, to the extent
permitted by section 153 of the Companies Act 1985.
15. Miscellaneous
The masculine pronoun shall include the feminine and neuter, and the
singular the plural, where the context so indicates.
<PAGE>
Exhibit 10.9
Conformed Copy
GUARANTEE
1. In consideration of Willis Faber & Dumas Limited ("WFD") entering into a
contract of employment with John Reeve (the "Director") dated 19 September
1995 ("the Contract") and a Deed in respect of an unfunded pension scheme
dated 19 September 1995 ("the Deed"), Willis Corroon Group plc ("the
Guarantor") hereby conditionally and irrevocably guarantees to the
Director (and his successors) the due and punctual performance by WFD of
its obligations under the Contract and the Deed.
2. If the Guarantor is unable to procure that WFD duly and punctually
performs its obligations, then it shall indemnify the Director in respect
of all costs, damages, charges and expenses incurred or suffered by the
Director as a result of the failure by WFD to perform its obligations duly
and punctually.
3. Subject to clause 1 above, this guarantee shall continue and remain in
full force and effect until all the obligations of WFD under the Contract
and the Deed shall have been duly performed and discharged to the
satisfaction of the Director.
4. The guarantee shall not be affected in any way by any time or indulgence
or release of any obligation under the Contract and the Deed nor by the
liquidation or dissolution of WFD nor by the appointment of a receiver or
administrator nor by any circumstances affecting the obligations of WFD to
meet its liabilities under the Contract and the Deed. In the event of any
matters as aforesaid, the Guarantor shall become liable for the
obligations of WFD arising under the Contract and the Deed as if it were a
primary obligor.
5. The Guarantor shall not be entitled to prove in the liquidation of WFD in
competition with the Director until the Director shall have been paid in
full all monies owed to the Director pursuant to the terms of the Contract
and the Deed.
The Common Seal of Willis Corroon Group plc was hereunto affixed in the presence
of:-
- ---------------------------------- ---------------------------------------
Director Secretary
Dated: 18 September 1995
<PAGE>
Exhibit 10.10
Conformed Copy
GUARANTEE
1. Effective as of January 1, 1991, Willis Corroon Corporation ('WCC')
adopted a supplemental retirement plan known as the Willis Corroon
Executive Supplemental Retirement Plan ('the Plan') for the benefit of a
select group of management or highly compensated employees who WCC wishes
to retain.
2. K H Pinkston is a member of the Plan ('WCC employee') and in consideration
for continuing to remain an employee and observing the terms and
conditions of the Plan Willis Corroon Group plc ('the Guarantor') hereby
conditionally and irrevocably guarantees to theWCC employee (and his
successors) the due and punctual performance by WCC of its obligations
regarding the vesting to the WCC employee of his Accrued Benefits under
the Plan ('the obligation').
3. If the Guarantor is unable to procure that WCC duly and punctually
performs its obligation, then it shall indemnify the WCC employee in
respect of all costs, damages, charges and expenses incurred or suffered
by the WCC employee as a result of the failure by WCC to perform its
obligations duly and punctually.
4. This guarantee shall continue and remain in full force and effect until
the obligation of WCC under the Plan towards the WCC employee shall have
been duly performed and discharged.
5. The guarantee shall not be affected in any way by any time or indulgence
or release of any obligation under the Plan nor by the liquidation or
dissolution of WCC nor by the appointment of a receiver or administrator
nor by any circumstances affecting the obligations of WCC to meet its
liabilities under the Plan. In the event of any matters as aforesaid, the
Guarantor shall become liable for the obligation of WCC arising under the
Plan as if it were a primary obligor.
6. The Guarantor shall not be entitled to prove in the liquidation of WCC in
competition with the WCC employee until the WCC employee shall have been
paid in full all monies owed to the WCC employee pursuant to the terms of
the Plan.
The Common Seal of Willis Corroon Group plc was hereunto affixed in the presence
of:-
- ---------------------------------- ---------------------------------------
Director Secretary
Dated: 17 July 1998
<PAGE>
Exhibit 10.11
Conformed Copy
GUARANTEE
1. Effective as of January 1, 1991, Willis Corroon Corporation ('WCC')
adopted a supplemental retirement plan known as the Willis Corroon
Executive Supplemental Retirement Plan ('the Plan') for the benefit of a
select group of management or highly compensated employees who WCC wishes
to retain.
2. B D Johnson is a member of the Plan ('WCC employee') and in consideration
for continuing to remain an employee and observing the terms and
conditions of the Plan Willis Corroon Group plc ('the Guarantor') hereby
conditionally and irrevocably guarantees to the WCC employee (and his
successors) the due and punctual performance by WCC of its obligations
regarding the vesting to the WCC employee of his Accrued Benefits under
the Plan ('the obligation').
3. If the Guarantor is unable to procure that WCC duly and punctually
performs its obligation, then it shall indemnify the WCC employee in
respect of all costs, damages, charges and expenses incurred or suffered
by the WCC employee as a result of the failure by WCC to perform its
obligations duly and punctually.
4 This guarantee shall continue and remain in full force and effect until
the obligation of WCC under the Plan towards the WCC employee shall have
been duly performed and discharged.
5. The guarantee shall not be affected in any way by any time or indulgence
or release of any obligation under the Plan nor by the liquidation or
dissolution of WCC nor by the appointment of a receiver or administrator
nor by any circumstances affecting the obligations of WCC to meet its
liabilities under the Plan. In the event of any matters as aforesaid, the
Guarantor shall become liable for the obligation of WCC arising under the
Plan as if it were a primary obligor.
6. The Guarantor shall not be entitled to prove in the liquidation of WCC in
competition with the WCC employee until the WCC employee shall have been
paid in full all monies owed to the WCC employee pursuant to the terms of
the Plan.
The Common Seal of Willis Corroon Group plc was hereunto affixed in the presence
of:-
- ---------------------------------- ---------------------------------------
Director Secretary
Dated: 17 July 1998
<PAGE>
Exhibit 10.12
THE TA 1 LIMITED ZERO COST SHARE OPTION SCHEME
CLIFFORD CHANCE
200 Aldersgate Street
London EC1A 4JJ
Ref: RTT/K0556/00620
<PAGE>
TABLE OF CONTENTS
Page
----
1 DEFINITIONS AND INTERPRETATION..............................................1
2 GRANT OF OPTIONS............................................................2
3 EXERCISE OF OPTIONS.........................................................3
4 CASH PAYMENT................................................................4
5 TAKEOVER, RECONSTRUCTION AND WINDING-UP.....................................4
6 VARIATION OF CAPITAL........................................................5
7 ALTERATIONS.................................................................5
8 MISCELLANEOUS...............................................................6
i
<PAGE>
1 DEFINITIONS AND INTERPRETATION
1.1 In this Scheme, unless the context otherwise requires:
"THE BOARD" means the board of directors of the Company or a committee
appointed by them;
"THE COMPANY" means TA 1 Limited (registered in England and Wales No.
3588080);
"EDIP" means the Willis Corroon Group Executive Deferred Incentive Plan;
"THE GRANT DATE" in relation to an option means the date on which the
option was granted;
"GROUP MEMBER" means:
1.1.1 a Participating Company or a body corporate which is (within
the meaning of section 736 of the Companies Act 1985) the Company's
holding company or a subsidiary of the Company's holding company, or
1.1.2 a body corporate which is (within the meaning of section 258
of that Act) a subsidiary undertaking of a body corporate within paragraph
1.1.1 above and has been designated by the Board for this purpose;
"PARTICIPANT" means a person who holds an option granted under this
Scheme;
"PARTICIPATING COMPANY" means the Company or any Subsidiary;
"PERMANENT DISABILITY" means the definition in the Group Member's long
term disability plan applicable to the Participant or, if no such plan is
applicable, in the event the Participant is unable by reason of physical or
mental illness or other similar disability, to perform the material duties and
responsibilities of his job for a period of 180 consecutive business days out of
270 business days;
"REGISTERED HOLDER" means Willis Corroon ESOP Management Limited;
"RETIREMENT" means the Participant's termination of employment at age 65
or over (or such other age as applies in the applicable jurisdiction, pursuant
to an existing written policy of a Group Member or the age provided in the
Participant's contract of employment as normal retirement age or as may be
approved by the Board) with any Group Member after the Participant has been
employed by any Group Member for at least three years;
<PAGE>
2
"SALE PARTICIPATION AGREEMENT" means the agreement of such name which the
Registered Holder enters into at the same time as the Trustee Subscription
Agreement;
"THE SCHEME" means the TA l Limited Zero Cost Share Option Scheme as
herein set out but subject to any alterations or additions made under Rule 7
below;
"SHARE" means a Management Ordinary Share in the capital of the Company
having the rights and restrictions described in Articles [122] to [131] of the
Company's Articles;
"TRUSTEE SUBSCRIPTION AGREEMENT" means the agreement whereby the
Registered Holder subscribes for Shares in return for the Participant giving up
an award under the EDIP or UK RSP;
"SUBSIDIARY" means a body corporate which is a subsidiary of the Company
(within the meaning of section 736 of the Companies Act 1985);
"UK RSP" means the Willis Corroon Group Restricted Share Plan.
1.2 Any reference in this Scheme to any enactment includes a reference to
that enactment as from time to time modified extended or re-enacted. Where the
context so admits the singular shall include the plural and vice versa and the
masculine shall include the feminine.
2 GRANT OF OPTIONS
2.1 The Board may grant to any director or employee of a Participating
Company an option to purchase Shares, upon the terms set out in this Scheme in
return for that director or employee giving up an award he or she held under the
EDIP or UK RSP.
2.2 The price at which all the Shares may be purchased by the exercise of
an option granted under this Scheme shall be a total of L1.
2.3 The number of Shares for which a person may be granted an option shall
be such number as the Registered Holder subscribes with an aggregate
subscription price equal to the cash which is the subject of the surrendered
award under the EDIP and/or the UK RSP.
2.4 An option granted under this Scheme to any person:
2.4.1 shall not be capable of being transferred or assigned by him;
and
2.4.2 shall lapse forthwith if he is adjudged bankrupt.
<PAGE>
3
3 EXERCISE OF OPTIONS
3.1 The exercise of an option shall be effected in the form and manner
prescribed by the Board.
3.2 Subject to sub-rules 3.3 and 3.4 below and to Rule 5 below, an option
may not be exercised before the date on which the cash which was the subject of
the surrendered award under the EDIP and/or the UK RSP would have been
transferred to the participant (the "Original Vesting Date").
3.3 If any Participant ceases to be a director or employee of a
Participating Company before the Original Vesting Date, any option granted to
him may be exercised only if the Participant would in those circumstances have
received the cash which was the subject of the surrendered award under the EDIP
and/or the UK RSP (and subject to Rule 3.5 below).
3.4 If any Participant ceases to be a director or employee of a
Participating Company on or after the Original Vesting Date, the following
provisions apply in relation to any option granted to him (subject to Rule 3.5
below):
3.4.1 if he so ceases by reason of death, Permanent Disability or
Retirement, the option may (and must if at all) be exercised within the
period which shall expire 12 months after his so ceasing;
3.4.2 if he so ceases for any other reason, the option may (and must
if at all) be exercised within the period which shall expire 15 days after
his so ceasing.
3.5 Notwithstanding any other provision of this Scheme, an option granted
under this Scheme may not be exercised more than 15 days after the exercise of
any put or call right to purchase the Participant's Shares pursuant to the
Management and Employee Stockholders' and Subscription Agreement.
3.6 Notwithstanding any other provision of this Scheme, an option granted
under this Scheme may not be exercised after the expiration of the period of 10
years beginning with the Grant Date.
3.7 Within 30 days after an option has been exercised by any person, the
Board shall procure the transfer to him (or a nominee for him) of the number of
Shares in respect of which the option has been exercised, provided that:
3.7.1 the Board considers that the issue or transfer thereof would
be lawful in all relevant jurisdictions; and
<PAGE>
4
3.7.2 in a case where a Group Member is obliged to (or would suffer
a disadvantage if it were not to) account for any tax (in any
jurisdiction) for which the person in question is liable by virtue of the
exercise of the option and/or for any social security contributions
recoverable from the person in question (together, the "Tax Liability"),
that person has either:
(a) made a payment to the Group Member of an amount equal to
the Tax Liability; or
(b) entered into arrangements acceptable to that or another
Group Member to secure that such a payment is made (whether by
authorising the sale of some or all of the Shares on his behalf and
the payment to the Group Member of the relevant amount out of the
proceeds of sale or otherwise).
4 CASH PAYMENT
4.1 If a Participant has not exercised his option granted under this
Scheme, and the Registered Holder is required to sell the Shares which are the
subject of the option pursuant to the exercise of any put and call right to
purchase the Registered Holder's Shares in the event that the Participant ceases
employment or sells the Shares under the "drag-along" or "tag-along" rights and
obligations under the Sale Participation Agreement or in any other circumstances
envisaged by the Trustee Subscription Agreement, the Participant shall thereupon
immediately cease to be able to exercise the option granted under the Scheme but
shall be entitled to receive a cash payment which shall equal the amount which
the Registered Holder receives for the sale of the relevant Shares PROVIDED THAT
the Participant would in those circumstances have been entitled to have received
the cash which was the subject of the surrendered award under the EDIP and/or
the UK RSP.
4.2 There shall be made from any payment under this Rule such deductions
(on account of tax or similar liabilities) as may be required by law or as the
Board may reasonably consider to be necessary or desirable.
5 TAKEOVER, RECONSTRUCTION AND WINDING-UP
5.1 If any person obtains control of the Company (within the meaning of
section 840 of the Income and Corporation Taxes Act 1988) as a result of making
a general offer to acquire shares in the Company, or having obtained such
control makes such an offer, the Board shall within 7 days of becoming aware
thereof notify every Participant thereof and, subject to sub-rules 3.4, 3.5 and
3.6 above, any option may be exercised within one month (or such longer period
as the Board may permit) of such notification.
5.2 For the purposes of sub-rule 5.1 above, a person shall be deemed to
have obtained control of the Company if he and others acting in concert with him
have together obtained control of it.
<PAGE>
5
5.3 If any person becomes bound or entitled to acquire shares in the
Company under sections 428 to 430F of the Companies Act 1985, or if under
section 425 of that Act the Court sanctions a compromise or arrangement proposed
for the purposes of or in connection with a scheme for the reconstruction of the
Company or its amalgamation with any other company or companies, or if the
Company passes a resolution for voluntary winding up, or if an order is made for
the compulsory winding up of the Company, the Board shall forthwith notify every
Participant thereof and subject to sub-rules 3.4, 3.5 and 3.6 above, any option
may be exercised within one month of such notification, but to the extent that
it is not exercised within that period shall (notwithstanding any other
provision of this Scheme) lapse on the expiration thereof.
6 VARIATION OF CAPITAL
6.1 In the event of any increase or variation of the share capital of the
Company, the Board may make such adjustments as it considers appropriate under
sub-rule 6.2 below.
6.2 An adjustment made under this sub-rule shall be to one or both of the
following:
6.2.1 the number of Shares in respect of which any option may be
exercised;
6.2.2 where any option has been exercised but no Shares have been
transferred pursuant to the exercise, the number of Shares which may be so
transferred.
7 ALTERATIONS
7.1 Subject to sub-rule 7.2 below, the Board may at any time alter this
Scheme, or the terms of any option granted under it, in any respect.
7.2 No alteration to the disadvantage of any subsisting rights of a
Participant shall be made under sub-rule 7.1 above unless:
7.2.1 the Board shall have invited every relevant Participant to
give an indication as to whether or not he approves the alteration; and
7.2.2 the alteration is approved by a majority of those Participants
who have given such an indication.
7.3 As soon as reasonably practicable after making any alteration under
sub-rule 7.1 above, the Board shall give notice in writing thereof to any
Participant affected thereby.
8 MISCELLANEOUS
8.1 The rights and obligations of any individual under the terms of his
office or employment with any Participating Company shall not be affected by his
participation in this Scheme or any right which he may have to participate in
it, and an individual who participates in it shall waive any and all rights to
compensation or damages in consequence of the termination of
<PAGE>
6
his office or employment for any reason whatsoever insofar as those rights arise
or may arise from his ceasing to have rights under or be entitled to exercise
any option as a result of such termination.
8.2 Any notice or other communication under or in connection with this
Scheme may be given by personal delivery or by sending the same by post, in the
case of a company to its registered office, and in the case of an individual to
his last known address, or, where he is a director or employee of a
Participating Company, either to his last known address or to the address of the
place of business at which he performs the whole or substantially the whole of
the duties of his office or employment.
8.3 This Scheme shall be governed by, and construed in accordance with,
English law.
CLIFFORD CHANCE
200 Aldersgate Street
London EClA 4JJ
<PAGE>
<TABLE>
<CAPTION>
Exhibit 12.1
WILLIS CORROON GROUP LIMITED
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
HISTORICAL
------------------------------------------------------------------------
JANUARY 1 TO
YEAR ENDED DECEMBER 31 SEPTEMBER 1
-------------------------------------------------------- --------------
1994 1995 1996 1997 1998
-------------------------------------------------------- --------------
(L MILLION EXCEPT RATIOS)
UK GAAP
<S> <C> <C> <C> <C> <C>
Income/(loss) before tax........................... 8.3 62.4 91.6 95.5 (1.3)
Less: Profit of associates......................... (5.9) (6.8) (3.5) (1.9) (7.7)
Add: Dividends from associates..................... 5.1 5.9 1.5 0.9 1.9
---- ---- ----- ----- -----
Adjusted income/(loss) before tax (A).............. 7.5 61.5 89.6 94.5 (7.1)
---- ---- ----- ----- -----
Interest expense................................... 6.4 7.2 2.2 0.7 (2.0)
Amortisation of debt expense....................... -- -- -- -- --
Interest element of operating lease rental expense. 11.3 11.5 11.3 9.2 6.3
---- ---- ----- ----- -----
Fixed Charges (B).................................. 17.7 18.7 13.5 9.9 4.3
---- ---- ----- ----- -----
---- ---- ----- ----- -----
Earnings (A)+(B)................................... 25.2 80.2 103.1 104.4 (2.8)
==== ==== ===== ===== =====
Ratio of Earnings to Fixed Charges................. 1.4 4.3 7.6 10.5 --
Deficiency of earnings to fixed charges............ 7.1
US GAAP
Income/(loss) before tax........................... 43.1 1.5 74.7 66.5 (5.1)
Less: Profit of associates......................... (5.9) (6.8) (3.5) (1.9) (7.7)
Add: Dividends from associates..................... 5.1 5.9 1.5 0.9 1.9
---- ---- ----- ----- -----
Adjusted income/(loss) before tax (A).............. 42.3 0.6 72.7 65.5 (10.9)
---- ---- ----- ----- -----
Interest expense................................... 6.4 7.2 2.2 0.7 (2.0)
Amortisation of debt expense....................... -- -- -- -- --
Interest element of operating lease rental expense. 11.3 11.5 11.3 9.2 6.3
---- ---- ----- ----- -----
Fixed Charges (B).................................. 17.7 18.7 13.5 9.9 4.3
---- ---- ----- ----- -----
---- ---- ----- ----- -----
Earnings (A)+(B)................................... 60.0 19.3 86.2 75.4 (6.6)
==== ==== ===== ===== =====
Ratio of Earnings to Fixed Charges................. 3.4 1.0 6.4 7.6 --
Deficiency of earnings to fixed charges............ 10.9
<CAPTION>
HISTORICAL PRO FORMA
------------------------------- -------------
SEPTEMBER 2 TO YEAR ENDED YEAR ENDED
DECEMBER 31 DECEMBER 31 DECEMBER 31
------------------------------- -------------
1998 1998 1998
------------------------------- -------------
(L MILLION EXCEPT RATIOS)
UK GAAP
<S> <C> <C> <C>
Income/(loss) before tax........................... 17.1 15.8 (30.8)
Less: Profit of associates......................... 1.4 (6.3) (6.7)
Add: Dividends from associates..................... 0.5 2.4 2.4
---- ---- -----
Adjusted income/(loss) before tax (A).............. 19.0 11.9 (35.1)
---- ---- -----
Interest expense................................... (1.2) (3.2) 51.5
Amortisation of debt expense....................... -- -- 1.9
Interest element of operating lease rental expense. 3.1 9.5 9.5
---- ---- -----
Fixed Charges (B).................................. 1.9 6.3 62.9
---- ---- -----
---- ---- -----
Earnings (A)+(B)................................... 20.9 18.2 27.8
==== ==== =====
Ratio of Earnings to Fixed Charges................. 10.9 2.9 --
Deficiency of earnings to fixed charges............ 35.1
US GAAP
Income/(loss) before tax........................... 5.2 (50.5)
Less: Profit of associates......................... 1.4 (6.7)
Add: Dividends from associates..................... 0.5 2.4
---- -----
Adjusted income/(loss) before tax (A).............. 7.1 (54.8)
---- -----
Interest expense................................... (1.2) 51.5
Amortisation of debt expense....................... -- 1.9
Interest element of operating lease rental expense. 3.1 9.5
---- -----
Fixed Charges (B).................................. 1.9 62.9
---- -----
---- -----
Earnings (A)+(B)................................... 9.0 8.1
==== =====
Ratio of Earnings to Fixed Charges................. 4.7 --
Deficiency of earnings to fixed charges............ 54.8
</TABLE>
<PAGE>
Exhibit 21.1
<TABLE>
<CAPTION>
SUBSIDIARIES OF WILLIS CORROON GROUP LIMITED
Country of
Company Name Registration
- ------------ ------------
<S> <C>
WILLIS CORROON CORPORATION U.S.A.
WF Corroon Corporation - Great Lakes U.S.A.
WF Corroon Corporation - Nevada U.S.A.
Willis Corroon Constructions Services Corporation of New U.S.A.
Jersey
Willis Corroon Corporation of Birmingham U.S.A.
Willis Corroon Corporation of Michigan U.S.A.
Baccala & Shoop Insurance Services U.S.A.
CBL Equities Inc U.S.A.
Corroon & Black Financial Corporation of U.S.A.
California
Guy Benefits Consulting Inc. U.S.A.
McAlear Associates Inc. (Michigan) U.S.A.
McAlear Associates Inc (Ohio) U.S.A.
MedTrac Inc U.S.A.
Municipal Insurance Marketing Services U.S.A.
Corporation
Pacific International Brokers Limited U.S.A.
Professional Liability Underwriting Managers Inc U.S.A.
Public Entities National Company - Midwest U.S.A.
Public Entities National Company of Idaho U.S.A.
Queenswood Properties Inc U.S.A.
Stewart Smith East Inc U.S.A.
Stewart Smith Southeast Inc U.S.A.
Stewart Smith Southwest Inc. U.S.A.
</TABLE>
-1-
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES OF WILLIS CORROON GROUP LIMITED
Country of
Company Name Registration
- ------------ ------------
<S> <C>
Wrightson & Co Inc U.S.A.
Stewart Smith West of Arizona Inc U.S.A.
WF Corroon Corporation - California U.S.A.
WF Corroon Corporation - Greater New York U.S.A.
WF Corroon Corporation - Tennessee U.S.A.
WF Corroon Corporation - Texas U.S.A.
Willis Corroon Administrative Services U.S.A.
Corporation
Public Entities National Company of U.S.A.
Indiana
Public Entities National Company of U.S.A.
Louisiana
Public Entities National Company of U.S.A.
Nevada
Public Entities National Company of U.S.A.
Wyoming
PENCO - Insurance Agency Inc U.S.A.
Public Entities National Company of U.S.A.
Arizona
Public Entities National Company of U.S.A.
Colorado
Public Entities National Company of U.S.A.
Kentucky
Public Entities National Company of U.S.A.
Mississippi
Public Entities National Company of U.S.A.
Oklahoma
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES OF WILLIS CORROON GROUP LIMITED
Country of
Company Name Registration
- ------------ ------------
<S> <C>
Public Entities National Company of U.S.A.
Utah
Public Entities National Company of U.S.A.
Virginia
Willis Corroon Corporation of Louisville U.S.A.
Willis Corroon & Associates Inc U.S.A.
Willis Corroon Risk Management U.S.A.
Corporation
Willis Corroon CID Americas, Inc. U.S.A.
Willis Corroon Corporation of Anchorage U.S.A.
Willis Corroon Corporation of Arizona U.S.A.
Willis Corroon Corporation of California U.S.A.
Willis Corroon Corporation of Georgia U.S.A.
Willis Corroon Corporation of Greater New York U.S.A.
Willis Corroon Corporation of Illinois U.S.A.
Commercial Excess Marketing Corp U.S.A.
Willis Corroon Corporation of Kansas U.S.A.
Willis Corroon Corporation of Los Angeles U.S.A.
Willis Corroon Corporation of Louisiana U.S.A.
Willis Corroon Corporation of Maryland U.S.A.
Willis Corroon Corporation of Massachusetts U.S.A.
Willis Corroon Corporation of Minnesota U.S.A.
Willis Corroon Corporation of Mississippi U.S.A.
Willis Corroon Corporation of Missouri U.S.A.
Willis Corroon Corporation of Mobile U.S.A.
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES OF WILLIS CORROON GROUP LIMITED
Country of
Company Name Registration
- ------------ ------------
<S> <C>
Willis Corroon Corporation of Nevada U.S.A.
Willis Corroon Corporation of New Hampshire U.S.A.
Willis Corroon Corporation of New Jersey U.S.A.
Willis Corroon Corporation of New York U.S.A.
Willis Corroon Construction Services U.S.A.
Corporation of Connecticut
Willis Corroon Corporation of North Carolina U.S.A.
Willis Corroon Corporation of Orange County U.S.A.
Willis Corroon Corporation of Pennsylvania U.S.A.
Willis Corroon Corporation of Oregon U.S.A.
Willis Corroon Corporation of Sacramento U.S.A.
Willis Corroon Corporation of San Diego U.S.A.
Willis Corroon Corporation of San Jose U.S.A.
Willis Corroon Corporation of Seattle U.S.A.
Willis Corroon Corporation of Fairbanks U.S.A.
Willis Corroon Corporation of Tennessee U.S.A.
Willis Corroon Corporation of Wisconsin U.S.A.
CRRUX Inc U.S.A.
Willis Corroon Energy, Inc U.S.A.
Willis Faber North America Inc U.S.A.
Cordis Consulting, Inc. U.S.A.
Reinsurance Alternatives Inc. U.S.A.
RAI Marketing, Inc U.S.A.
Willis Corroon Corporation of Ohio U.S.A.
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES OF WILLIS CORROON GROUP LIMITED
Country of
Company Name Registration
- ------------ ------------
<S> <C>
Willis Corroon Corporation of Utah U.S.A.
Willis Corroon Inc U.S.A.
SOVEREIGN MARINE & GENERAL INSURANCE COMPANY LIMITED (in England & Wales
provisional liquidation)
Greyfriars Insurance Company Limited England & Wales
Associated International Insurance (Bermuda) Bermuda
Limited
Sovereign Insurance (UK) Limited England & Wales
EASTERN INSURANCE & REINSURANCE LIMITED England & Wales
HARRAP BROTHERS LIFE & PENSIONS LIMITED England & Wales
STEWART WRIGHTSON NORTH AMERICA HOLDINGS LIMITED England & Wales
WILLIS FABER MANAGEMENT SERVICES (GUERNSEY) LIMITED (in Guernsey
liquidation)
WILLIS FABER (GUERNSEY) LIMITED (in liquidation) Guernsey
WILLIS FABER PENSION TRUSTEES LIMITED England & Wales
WILLIS FABER & DUMAS LIMITED England & Wales
Bloodstock & General Insurance Services Limited England & Wales
Claims and Recovery Services Limited England & Wales
Claims & Recovery Services (Moscow) Russia
Hughes-Gibb & Company Limited England & Wales
Special Contingency Risks Limited England & Wales
Willis Faber Corretaje de Reaseguros S.A. Venezuela
Willis Faber (Aegean) Limited England & Wales
Willis Corroon CIS Russia
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES OF WILLIS CORROON GROUP LIMITED
Country of
Company Name Registration
- ------------ ------------
<S> <C>
WILLIS CORROON LIMITED England & Wales
E.J. Welton & Co. Limited England & Wales
QRM Healthcare Limited England & Wales
Robinson, Clemmit, Chisem & Marshall Limited England & Wales
VEAGIS Limited England & Wales
Willis Corroon Cargo Limited England & Wales
Willis Corroon Construction Risks Limited England & Wales
Willis Corroon Credit Limited England & Wales
Willis Corroon (FR) Limited England & Wales
Willis Corroon Harris Marrian Limited Northern Ireland
Willis Corroon Hinton Limited England & Wales
Willis Corroon Transportation Risks Limited England & Wales
Willis Corroon Scotland Limited Scotland
Willis Corroon Services Limited England & Wales
Willis First Response Limited England & Wales
Willis National Holdings Limited England & Wales
ANIFA Limited England & Wales
Willis Corroon Financial Planning Limited England & Wales
Willis National Limited England & Wales
WILLIS CORROON INTERNATIONAL HOLDINGS LIMITED England & Wales
Friars Street Insurance Limited Guernsey
Gibraltar Insurance (Barbados) Limited Barbados
Meridian Insurance Company Limited Bermuda
Willis Corroon (Bermuda) Limited Bermuda
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES OF WILLIS CORROON GROUP LIMITED
Country of
Company Name Registration
- ------------ ------------
<S> <C>
Willis Corroon Dublin Limited Eire
Willis Corroon Management (Cayman) Limited Grand Cayman
Willis Corroon Douglas Limited Isle of Man
Willis Corroon Investments Limited England & Wales
Willis Corroon Jersey Limited Jersey
Willis Corroon Management (Bermuda) Limited Bermuda
Willis Corroon Management (Dublin) Limited Eire
Willis Corroon Management (Gibraltar) Limited Gibraltar
Willis Corroon Management (Luxembourg) S.A. Luxembourg
Willis Corroon Europe B.V. Netherlands
Willis Corroon Polska Poland
Global Special Risks Holdings Inc Hong Kong
Global Special Risks Inc U.S.A.
Global Special Risks Inc of New York U.S.A.
Global Special Risks Insurance Services Inc U.S.A.
Global Special Risks Insurance Services U.S.A.
California
Global Special Risks Inc of Texas U.S.A.
Global Special Risks Inc of Houston U.S.A.
Johnson & Higgins Willis Faber Holdings Inc U.S.A.
S & C Willis Corroon Correduria de Seguros y Spain
Reaseguros SA
S & C - Willis Corroon Correduria de Spain
Seguros SA (CATALUNA)
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES OF WILLIS CORROON GROUP LIMITED
Country of
Company Name Registration
- ------------ ------------
<S> <C>
S & C e IC Willis Corroon Correduria de Spain
Seguros SA (SEVILLE)
S & C Med Correduria de Seguros SA Spain
(VALENCIA)
Surplus Corredores de Reaseguros SA Spain
Trinity Computer Processing (India) Limited India
Willis Corroon Italia S.p.A. Italy
UTA Willis Corroon Rischi Speciali S.R.L. Italy
UTA Willis Corroon Firenze S.R.L. Italy
UTA Willis Corroon Liguria S.R.L. Italy
UTA Willis Corroon Milan S.R.L. Italy
UTA Willis Corroon Vicenza S.R.L. Italy
WFB Limitada Brazil
Willis Corroon Nederlands BV Netherlands
Willis Corroon BV Netherlands
Scheuer Verzekeringen BV Netherlands
Prospero Underwriting Management Netherlands
BV
Prospero Underwriting Services BV Netherlands
KSA Vof Netherlands
Willis Corroon Beligium S.A. Belgium
Willis Corroon Canada Inc. Canada
MHR International Inc Canada
Willis Corroon Canada (1999) Inc Canada
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES OF WILLIS CORROON GROUP LIMITED
Country of
Company Name Registration
- ------------ ------------
<S> <C>
177225 Canada Inc Canada
9019-2386 Quebec Inc Canada
(formerly Lajoie Meunier
Lemieux Inc)
Richards, Melling (Quebec) Canada
Inc
Willis Corroon Aerospace of Canada Canada
Limited
Willis Corroon Kendriki SA Greece
Willis Corroon sro (shares held on trust by WC Czech Republic
Europe Ltd)
Willis Corroon GmbH (shares held on trust by Germany
WCG Ltd)
Mansfeld, Hubener & Partner GmbH Germany
Mansfeld Cordis Consulting GmbH & Co. Germany
KG (limited partnership)
Willis Corroon Management (Guernsey) Limited Guernsey
Willis Corroon Management (Jersey) Jersey
Limited
Willis Corroon Secretarial Services Limited Guernsey
Willis Corroon Management (Isle of Man) Limited Jersey
Willis Corroon Australia Limited Australia
Willlis Corroon Richard Oliver Professional Australia
Services Limited
Willis Corroon Holdings (New Zealand) New Zealand
Limited
Willis Corroon Limited New Zealand
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES OF WILLIS CORROON GROUP LIMITED
Country of
Company Name Registration
- ------------ ------------
<S> <C>
Willis Faber & Dumas Limited Australia
Richard Oliver International Pty Limited Australia
Willis Corroon Richard Oliver Australia
Nominees Pty Limited
Industrial Mutual Insurance Pty Australia
Limited
Richard Oliver Australia Pty Australia
Limited
Richard Oliver Pty Limited Australia
Richard Oliver U.S.A.
International Inc
Richard Oliver Singapore
International Pte
Limited
Richard Oliver USA U.S.A.
Inc
Richard Oliver International Limited England & Wales
Richard Oliver (NZ) Limited New Zealand
Richard Oliver International PTY Hong Kong
Limited
Richard Oliver Underwriting Australia
Managers Pty Limited
Rocap Pty Limited Australia
Willis Corroon Hungary Kft Hungary
Willis Corroon Ireland Limited Eire
Kindlon Ryan Insurances Limited Eire
Willis Corroon (Taiwan) Limited Taiwan
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES OF WILLIS CORROON GROUP LIMITED
Country of
Company Name Registration
- ------------ ------------
<S> <C>
Willis Corroon AB Sweden
OY Willis Corroon AB Finland
Willis Corroon Global Financial Risks AB Sweden
(34% held by WCE BV)
Willis Corroon Gothia AB Sweden
Willis Corroon i Orebro AB Sweden
Willis Faber Advisory Services Limited Zambia
Willis Faber AG Switzerland
Willis Faber & Dumas (Mexico) Intermediario de Mexico
Reaseguro S.A. de C.V.
Willis Faber Anclamar S.A. Spain
Willis Faber Chile Limitada Chile
Willis Faber Chile Corredores de Reaseguro Chile
Limitada
Willis Corroon Hellas (Insurance Brokers) SA Greece
Willis Faber Do Brasil Consultoria e Participacoes Brazil
S.A.
Willis Faber GmbH Germany
Willis Faber Insurance Services Limitada Chile
Willis Corroon Corretores de Seguros Limitada Portugal
Willis Faber Correduria de Reaseguros S.A. Spain
Willis Corroon China (Hong Kong) Limited Hong Kong
Willis Faber Consulting (Far East) Limited Hong Kong
Willis Faber (Middle East) S.A.L. Lebanon
Willis Corroon (Pte) Limited Singapore
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES OF WILLIS CORROON GROUP LIMITED
Country of
Company Name Registration
- ------------ ------------
<S> <C>
Willis Faber Services Limited Bermuda
WILLIS FABER LIMITED England & Wales
Cordis Consulting Limited England & Wales
Friars Street Trustees Limited England & Wales
Run-Off 1997 Limited England & Wales
United African Insurance Brokers Limited England & Wales
Willis Consulting Group Limited England & Wales
W F C Trustees (C.I.) Limited Guernsey
Willis Corroon Asia Pacific Limited England & Wales
Willis Corroon Asset Management Limited England & Wales
Willis Corroon ESOP Management limited Guernsey
Willis Corroon Japan Limited England & Wales
Willis Corroon Licensing Limited England & Wales
Willis Faber Kirke-Van Orsdel Limited (in liquidation) England & Wales
WILLIS CORROON GROUP SERVICES LIMITED England & Wales
Stewart Wrightson Management Services Limited England & Wales
Willis Corroon Nominees Limited England & Wales
WILLIS FABER UNDERWRITING AGENCIES LIMITED England & Wales
Devonport Underwriting Agency Limited England & Wales
Willis Faber (Underwriting Management) Limited England & Wales
Willis Faber Underwriting Services Limited England & Wales
WILLIS FABER UK GROUP LIMITED England & Wales
Arbuthnot Insurance Services Limited England & Wales
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES OF WILLIS CORROON GROUP LIMITED
Country of
Company Name Registration
- ------------ ------------
<S> <C>
Stewart Wrightson International Group Limited England & Wales
Armed Forces Financial Advisory Services Limited England & Wales
C D D Gilmour (Underwriting Agencies) Limited England & Wales
Durant, Wood Limited England & Wales
Galbraith Pembroke (Insurance) Limited England & Wales
Hinton & Higgs Limited England & Wales
Hinton & Holt Limited England & Wales
Hinton Safety Limited (in liquidation) England & Wales
International Claims Bureau Limited England & Wales
Invest for School Fees Limited England & Wales
J.C. Armstrong & Company Limited (in liquidation) England & Wales
Lloyd Armstrong & Ramsey Limited Eire
Martin Boag & Co Limited England & Wales
Mathews Wrightson & Co Limited England & Wales
Mercantile U.K. Limited England & Wales
Rattray Daffern & Partners Limited England & Wales
Stewart Wrightson Group Limited England & Wales
Willis Faber Property Holdings Limited England & Wales
Stewart Wrightson (Regional Offices) England & Wales
Limited
Stewart Wrightson Marine Hull Limited England & Wales
Stewart Wrightson Marine (Hellas) Limited Greece
Stewart Wrightson Members' Agency Limited England & Wales
Stewart Wrightson Surety & Specie Limited England & Wales
</TABLE>
-13-
<PAGE>
<TABLE>
<CAPTION>
SUBSIDIARIES OF WILLIS CORROON GROUP LIMITED
Country of
Company Name Registration
- ------------ ------------
<S> <C>
Stewart Wrightson (Overseas Holdings) Limited England & Wales
Stewart Wrightson (Private) Limited Zimbabwe
Ten Trinity Brokers Limited England & Wales
W F Corroon International Limited England & Wales
Willis Corroon China Limited England & Wales
Willis Corroon Europe Limited England & Wales
Willis Corroon Hinton (Ireland) Limited Eire
Willis Corroon North Limited England & Wales
Willis Corroon Risk Management Holdings Limited England & Wales
CARTER, WILKES & FANE (HOLDING) LIMITED England & Wales
Bevis Marks (Group) Limited England & Wales
Johnson Puddifoot and Last Limited England & Wales
Stephenson's Campus (Berwick) Limited England & Wales
Carter, Wilkes & Fane Limited England & Wales
Fane Stevenson & Co Limited England & Wales
</TABLE>
-14-
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated March 15, 1999 in the Registration Statement (Form
F-4) and related Prospectus of Willis Corroon Group Limited, Willis Corroon
Partners and Willis Corroon Corporation for the registration of $550,000,000 of
Willis Corroon Corporation's 9% Senior Subordinated Notes Due 2009.
ERNST & YOUNG
London, England
March 15, 1999
<PAGE>
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I the undersigned, being a director of
WILLIS CORROON GROUP LIMITED (the "Guarantor"), hereby constitute and appoint
MICHAEL P. CHITTY, THOMAS COLRAINE, and BART R. SCHWARTZ and each of them, my
true and lawful attorney and agent, to do any and all acts and all things and to
execute any and all instruments which said attorney and agent may deem necessary
or desirable to enable the Guarantor to comply with the Securities Act of 1933,
as amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission thereunder, in connection with the
registration under the Act of the Exchange Notes (the "Securities"), including,
without limitation, the power and authority to sign my name in my capacity as a
director to the Registration Statement on Form F-4 to be filed with the
Securities and Exchange Commission with respect to such Securities, to any and
all amendments or supplements to such Registration Statement, whether such
amendments or supplements are filed before or after the effective date of such
Registration Statement, to any related Registration Statement filed pursuant to
Rule 462 under the Act, and to any and all instruments or documents filed as
part of or in connection with such Registration Statement or any and all
amendments thereto, whether such amendments are filed before or after the
effective date of such Registration Statement; and I hereby ratify and confirm
all that such attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF this Power of Attorney has been executed as a deed this 8th
day of March 1999.
Signed and DELIVERED as a }
DEED by Richard J.S. Bucknall } /s/ Richard J.S. Bucknall
-----------------------------------------
in the presence of:
(witness - please sign and print name and address)
/s/ V. Cunliffe
- -------------------------
V. Cunliffe
- -------------------------
J. Constable Gardens
- -------------------------
Edgware Middlesex HA8 5SF
- -------------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I the undersigned, being a director and
officer of WILLIS CORROON GROUP LIMITED (the "Guarantor"), hereby constitute
and appoint MICHAEL P. CHITTY, THOMAS COLRAINE, and BART R. SCHWARTZ and each
of them, my true and lawful attorney and agent, to do any and all acts and
all things and to execute any and all instruments which said attorney and
agent may deem necessary or desirable to enable the Guarantor to comply with
the Securities Act of 1933, as amended (the "Act"), and any rules,
regulations and requirements of the Securities and Exchange Commission
thereunder, in connection with the registration under the Act of the Exchange
Notes (the "Securities"), including, without limitation, the power and
authority to sign my name in my capacity as a director and officer to the
Registration Statement on Form F-4 to be filed with the Securities and
Exchange Commission with respect to such Securities, to any and all
amendments or supplements to such Registration Statement, whether such
amendments or supplements are filed before or after the effective date of
such Registration Statement, to any related Registration Statement filed
pursuant to Rule 462 under the Act, and to any and all instruments or
documents filed as part of or in connection with such Registration Statement
or any and all amendments thereto, whether such amendments are filed before
or after the effective date of such Registration Statement; and I hereby
ratify and confirm all that such attorney and agent shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF this Power of Attorney has been executed as a deed this 10th
day of March 1999.
Signed and DELIVERED as a }
DEED by Thomas Colraine } /s/ Thomas Colraine
-----------------------------------------
in the presence of:
(witness - please sign and print name and address)
/s/ Julian MacKenzie
- -------------------------
Julian MacKenzie
- -------------------------
Ten Trinity Square
- -------------------------
London ECP 3AX
- -------------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I the undersigned, being a director of
WILLIS CORROON GROUP LIMITED (the "Guarantor"), hereby constitute and appoint
MICHAEL P. CHITTY, THOMAS COLRAINE, and BART R. SCHWARTZ and each of them, my
true and lawful attorney and agent, to do any and all acts and all things and to
execute any and all instruments which said attorney and agent may deem necessary
or desirable to enable the Guarantor to comply with the Securities Act of 1933,
as amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission thereunder, in connection with the
registration under the Act of the Exchange Notes (the "Securities"), including,
without limitation, the power and authority to sign my name in my capacity as a
director to the Registration Statement on Form F-4 to be filed with the
Securities and Exchange Commission with respect to such Securities, to any and
all amendments or supplements to such Registration Statement, whether such
amendments or supplements are filed before or after the effective date of such
Registration Statement, to any related Registration Statement filed pursuant to
Rule 462 under the Act, and to any and all instruments or documents filed as
part of or in connection with such Registration Statement or any and all
amendments thereto, whether such amendments are filed before or after the
effective date of such Registration Statement; and I hereby ratify and confirm
all that such attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF this Power of Attorney has been executed as a deed this 3rd
day of March 1999.
Signed and DELIVERED as a }
DEED by Brian D. Johnson } /s/ Brian D. Johnson
-----------------------------------------
in the presence of:
(witness - please sign and print name and address)
/s/ Marcia Hillenbrand
- -------------------------
Marcia Hillenbrand
- -------------------------
26 Century Boulevard
- -------------------------
Nashville TN 37214
- -------------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I the undersigned, being a director of
WILLIS CORROON GROUP LIMITED (the "Guarantor"), hereby constitute and appoint
MICHAEL P. CHITTY, THOMAS COLRAINE, and BART R. SCHWARTZ and each of them, my
true and lawful attorney and agent, to do any and all acts and all things and to
execute any and all instruments which said attorney and agent may deem necessary
or desirable to enable the Guarantor to comply with the Securities Act of 1933,
as amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission thereunder, in connection with the
registration under the Act of the Exchange Notes (the "Securities"), including,
without limitation, the power and authority to sign my name in my capacity as a
director to the Registration Statement on Form F-4 to be filed with the
Securities and Exchange Commission with respect to such Securities, to any and
all amendments or supplements to such Registration Statement, whether such
amendments or supplements are filed before or after the effective date of such
Registration Statement, to any related Registration Statement filed pursuant to
Rule 462 under the Act, and to any and all instruments or documents filed as
part of or in connection with such Registration Statement or any and all
amendments thereto, whether such amendments are filed before or after the
effective date of such Registration Statement; and I hereby ratify and confirm
all that such attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF this Power of Attorney has been executed as a deed this 8th
day of March 1999.
Signed and DELIVERED as a }
DEED by Patrick Lucas } /s/ Patrick Lucas
-----------------------------------------
in the presence of:
(witness - please sign and print name and address)
/s/ Hilt Valerie
- -------------------------
5 rue Gilbert Degreront
- -------------------------
92500 Rueil Mal Maison
- -------------------------
- -------------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I the undersigned, being a director of
WILLIS CORROON GROUP LIMITED (the "Guarantor"), hereby constitute and appoint
MICHAEL P. CHITTY, THOMAS COLRAINE, and BART R. SCHWARTZ and each of them, my
true and lawful attorney and agent, to do any and all acts and all things and to
execute any and all instruments which said attorney and agent may deem necessary
or desirable to enable the Guarantor to comply with the Securities Act of 1933,
as amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission thereunder, in connection with the
registration under the Act of the Exchange Notes (the "Securities"), including,
without limitation, the power and authority to sign my name in my capacity as a
director to the Registration Statement on Form F-4 to be filed with the
Securities and Exchange Commission with respect to such Securities, to any and
all amendments or supplements to such Registration Statement, whether such
amendments or supplements are filed before or after the effective date of such
Registration Statement, to any related Registration Statement filed pursuant to
Rule 462 under the Act, and to any and all instruments or documents filed as
part of or in connection with such Registration Statement or any and all
amendments thereto, whether such amendments are filed before or after the
effective date of such Registration Statement; and I hereby ratify and confirm
all that such attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF this Power of Attorney has been executed as a deed this 3rd
day of March 1999.
Signed and DELIVERED as a }
DEED by George Frederick Nixon } /s/ George Frederick Nixon
-----------------------------------------
in the presence of:
(witness - please sign and print name and address)
/s/ T.M. Warren
- -------------------------
Miss T.M. Warren
- -------------------------
Ten Trinity Square
- -------------------------
London EC3P 3AX
- -------------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I the undersigned, being a director of
WILLIS CORROON GROUP LIMITED (the "Guarantor"), hereby constitute and appoint
MICHAEL P. CHITTY, THOMAS COLRAINE, and BART R. SCHWARTZ and each of them, my
true and lawful attorney and agent, to do any and all acts and all things and to
execute any and all instruments which said attorney and agent may deem necessary
or desirable to enable the Guarantor to comply with the Securities Act of 1933,
as amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission thereunder, in connection with the
registration under the Act of the Exchange Notes (the "Securities"), including,
without limitation, the power and authority to sign my name in my capacity as a
director to the Registration Statement on Form F-4 to be filed with the
Securities and Exchange Commission with respect to such Securities, to any and
all amendments or supplements to such Registration Statement, whether such
amendments or supplements are filed before or after the effective date of such
Registration Statement, to any related Registration Statement filed pursuant to
Rule 462 under the Act, and to any and all instruments or documents filed as
part of or in connection with such Registration Statement or any and all
amendments thereto, whether such amendments are filed before or after the
effective date of such Registration Statement; and I hereby ratify and confirm
all that such attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF this Power of Attorney has been executed as a deed this 10th
day of March 1999.
Signed and DELIVERED as a }
DEED by John Marriot Pelly } /s/ John Marriot Pelly
-----------------------------------------
in the presence of:
(witness - please sign and print name and address)
/s/ Sandra L. Preston
- -------------------------
Sandra Preston
- -------------------------
40 Waterbank Road
- -------------------------
London SE6 3DU
- -------------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I the undersigned, being a director of
WILLIS CORROON GROUP LIMITED (the "Guarantor"), hereby constitute and appoint
MICHAEL P. CHITTY, THOMAS COLRAINE, and BART R. SCHWARTZ and each of them, my
true and lawful attorney and agent, to do any and all acts and all things and to
execute any and all instruments which said attorney and agent may deem necessary
or desirable to enable the Guarantor to comply with the Securities Act of 1933,
as amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission thereunder, in connection with the
registration under the Act of the Exchange Notes (the "Securities"), including,
without limitation, the power and authority to sign my name in my capacity as a
director to the Registration Statement on Form F-4 to be filed with the
Securities and Exchange Commission with respect to such Securities, to any and
all amendments or supplements to such Registration Statement, whether such
amendments or supplements are filed before or after the effective date of such
Registration Statement, to any related Registration Statement filed pursuant to
Rule 462 under the Act, and to any and all instruments or documents filed as
part of or in connection with such Registration Statement or any and all
amendments thereto, whether such amendments are filed before or after the
effective date of such Registration Statement; and I hereby ratify and confirm
all that such attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF this Power of Attorney has been executed as a deed this 4th
day of March 1999.
Signed and DELIVERED as a }
DEED by Kenneth Pinkston } /s/ K.H. Pinkston
-----------------------------------------
in the presence of:
(witness - please sign and print name and address)
/s/ Janet M. Wilkins
- -------------------------
Janet M. Wilkins
- -------------------------
26 Century Boulevard
- -------------------------
Nashville TN 37214
- -------------------------
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I the undersigned, being a director and
officer of WILLIS CORROON GROUP LIMITED (the "Guarantor"), hereby constitute
and appoint MICHAEL P. CHITTY, THOMAS COLRAINE, and BART R. SCHWARTZ and each
of them, my true and lawful attorney and agent, to do any and all acts and
all things and to execute any and all instruments which said attorney and
agent may deem necessary or desirable to enable the Guarantor to comply with
the Securities Act of 1933, as amended (the "Act"), and any rules,
regulations and requirements of the Securities and Exchange Commission
thereunder, in connection with the registration under the Act of the Exchange
Notes (the "Securities"), including, without limitation, the power and
authority to sign my name in my capacity as a director and officer to the
Registration Statement on Form F-4 to be filed with the Securities and
Exchange Commission with respect to such Securities, to any and all
amendments or supplements to such Registration Statement, whether such
amendments or supplements are filed before or after the effective date of
such Registration Statement, to any related Registration Statement filed
pursuant to Rule 462 under the Act, and to any and all instruments or
documents filed as part of or in connection with such Registration Statement
or any and all amendments thereto, whether such amendments are filed before
or after the effective date of such Registration Statement; and I hereby
ratify and confirm all that such attorney and agent shall do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF this Power of Attorney has been executed as a deed this 9th
day of March 1999.
Signed and DELIVERED as a }
DEED by John Reeve } /s/ J. Reeve
-----------------------------------------
in the presence of:
(witness - please sign and print name and address)
/s/ S.R. Cadman
- -------------------------
S. R. Cadman
- -------------------------
48 More Close
- -------------------------
St. Paul's Court
- -------------------------
West Kensington WI4 9BN
- -------------------------
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being an
officer or director, or both, of WILLIS CORROON CORPORATION (the "Issuer"), in
his capacity as set forth below, hereby constitutes and appoints MICHAEL P.
CHITTY, THOMAS COLRAINE, and BART R. SCHWARTZ and each of them, his true and
lawful attorney and agent, to do any and all acts and all things and to execute
any and all instruments which said attorney and agent may deem necessary or
desirable to enable the Issuer to comply with the Securities Act of 1933, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission thereunder, in connection with the
registration under the Act of the Exchange Notes (the "Securities"), including,
without limitation, the power and authority to sign the name of each of the
undersigned in the capacities indicated below to the Registration Statement on
Form F-4 to be filed with the Securities and Exchange Commission with respect to
such Securities, to any and all amendments or supplements to such Registration
Statement, whether such amendments or supplements are filed before or after the
effective date of such Registration Statement, to any related Registration
Statement filed pursuant to Rule 462 under the Act, and to any and all
instruments or documents filed as part of or in connection with such
Registration Statement or any and all amendments thereto, whether such
amendments are filed before or after the effective date of such Registration
Statement; and each of the undersigned hereby ratifies and confirms all that
such attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF this Power of Attorney has been signed below on the dates
indicated by the following persons in the capacities indicated with the
registrant.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
Group Executive Director
responsible for North
/s/ KENNETH H. PINKSTON American Retail, U.S.
- ------------------------------ Wholesale, Asia-Pacific March 8, 1999
Kenneth H. Pinkston and rest of world;
Director
/s/ BRIAN D. JOHNSON Executive responsible for
- ------------------------------ North American Retail; March 9, 1999
Brian D. Johnson Director
/s/ CHARLES D. HAMILTON Senior Vice President,
- ------------------------------ Director of Finance and March 8, 1999
Charles D. Hamilton Administration; Director
/s/ BART R. SCHWARTZ Senior Vice President;
- ------------------------------ Corporate Secretary and March 8, 1999
Bart R. Schwartz General Counsel; Director
Senior Vice President;
/s/ KIM WINDROW Director of Human
- ------------------------------ Resources; North America; March 8, 1999
Kim Windrow Director
</TABLE>
<PAGE>
Exhibit 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
------------
WILLIS CORROON CORPORATION
(Exact name of obligor as specified in its charter)
Delaware 13-5654526
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
WILLIS CORROON PARTNERS
(Exact name of obligor as specified in its charter)
Delaware 62-1761909
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
26 Century Boulevard
P.O. Box 305026
Nashville, TN 37214
(Address of principal executive offices) (Zip code)
<PAGE>
WILLIS CORROON GROUP LIMITED
(Exact name of obligor as specified in its charter)
England and Wales None
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Ten Trinity Square
London EC3P 3AX England
(Address of principal executive offices) (Zip code)
-------------
9% Senior Subordinated Notes due 2009
(Title of the indenture securities)
================================================================================
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE
TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
WHICH IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the 2 Rector Street, New York,
State of New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Washington, D.C. 20429
Corporation
New York Clearing House New York, New York 10005
Association
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION,
ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO
RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17
C.F.R. 229.10(D).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains
the authority to commence business and a grant of powers to
exercise corporate trust powers. (Exhibit 1 to Amendment No. 1
to Form T-1 filed with Registration Statement No. 33-6215,
Exhibits 1a and 1b to Form T-1 filed with Registration Statement
No.
33-21672 and Exhibit 1 to Form T-1 filed with Registration
Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to
Form T-1 filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the
Act. (Exhibit 6 to Form T-1 filed with Registration Statement
No. 33-44051.)
7. A copy of the latest report of condition of the Trustee
published pursuant to law or to the requirements of its
supervising or examining authority.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New
York, a corporation organized and existing under the laws of the State of New
York, has duly caused this statement of eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in The City of New York, and
State of New York, on the 12th day of March, 1999.
THE BANK OF NEW YORK
By: /s/ REMO J. REALE
---------------------------
Name: REMO J. REALE
Title: ASSISTANT VICE PRESIDENT
<PAGE>
EXHIBIT 7
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1998, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin.. $3,951,273
Interest-bearing balances........................... 4,134,162
Securities:
Held-to-maturity securities......................... 932,468
Available-for-sale securities....................... 4,279,246
Federal funds sold and Securities purchased under
agreements to resell................................ 3,161,626
Loans and lease financing receivables:
Loans and leases, net of unearned
income..................................37,861,802
LESS: Allowance for loan and
lease losses...............................619,791
LESS: Allocated transfer risk
reserve......................................3,572
Loans and leases, net of unearned income,
allowance, and reserve............................ 37,238,439
Trading Assets......................................... 1,551,556
Premises and fixed assets (including capitalized
leases)............................................. 684,181
Other real estate owned................................ 10,404
Investments in unconsolidated subsidiaries and
associated companies................................ 196,032
Customers' liability to this bank on acceptances
outstanding......................................... 895,160
Intangible assets...................................... 1,127,375
Other assets........................................... 1,915,742
-----------
Total assets........................................... $60,077,664
===========
LIABILITIES
Deposits:
In domestic offices................................. $27,020,578
Noninterest-bearing.......................11,271,304
Interest-bearing..........................15,749,274
In foreign offices, Edge and Agreement
subsidiaries, and IBFs............................ 17,197,743
Noninterest-bearing..........................103,007
Interest-bearing..........................17,094,736
Federal funds purchased and Securities sold under
agreements to repurchase............................ 1,761,170
Demand notes issued to the U.S.Treasury................ 125,423
Trading liabilities.................................... 1,625,632
Other borrowed money:
With remaining maturity of one year or less......... 1,903,700
With remaining maturity of more than one year
through three years............................... 0
With remaining maturity of more than three years.... 31,639
Bank's liability on acceptances executed and
outstanding......................................... 900,390
Subordinated notes and debentures...................... 1,308,000
Other liabilities...................................... 2,708,852
-----------
Total liabilities...................................... 54,583,127
-----------
EQUITY CAPITAL
Common stock........................................... 1,135,284
Surplus................................................ 764,443
Undivided profits and capital reserves................. 3,542,168
Net unrealized holding gains (losses) on
available-for-sale securities....................... 82,367
Cumulative foreign currency translation adjustments....
(29,725)
-----------
Total equity capital................................... 5,494,537
-----------
Total liabilities and equity capital................... $60,077,664
===========
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report
of Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Reyni |
Gerald L. Hassell |- Directors
Alan R. Griffith |
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR
9% SENIOR SUBORDINATED NOTES DUE 2009
OF
WILLIS CORROON CORPORATION
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00P.M.,
NEW YORK CITY TIME, ON (THE "EXPIRATION DATE")
UNLESS EXTENDED BY WILLIS CORROON CORPORATION.
THE EXCHANGE AGENT IS:
THE BANK OF NEW YORK
<TABLE>
<CAPTION>
BY REGISTERED OR CERTIFIED MAIL: BY HAND DELIVERY:
<S> <C>
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street
New York, New York 10286 New York, New York 10286
Attn: Marcia Brown, Corporate Trust Operations, 7E Attn: Marcia Brown, Corporate Trust Operations, 7E
<CAPTION>
BY OVERNIGHT DELIVERY: BY FACSIMILE:
<S> <C>
The Bank of New York The Bank of New York
101 Barclay Street Facsimile No. (212) 815-4699
New York, New York 10286 Attn: Marcia Brown, Corporate Trust Operations, 7E
Attn: Marcia Brown, Corporate Trust Operations, 7E
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated , 1999
(the "Prospectus") of Willis Corroon Corporation (the "Company"), and this
Letter of Transmittal (the "Letter of Transmittal"), which together describe the
Company's offer (the "Exchange Offer") to exchange its 9% Senior Subordinated
Notes due 2009, which have been registered under the Securities Act of 1933, as
amended (the "Securities Act") (the "Exchange Notes") for each of its
outstanding 9% Senior Subordinated Notes due 2009 (the "Outstanding Notes" and,
together with the Exchange Notes, the "Notes") from the holders thereof.
The terms of the Exchange Notes are identical in all material respects
(including principal amount, interest rate and maturity) to the terms of the
Outstanding Notes for which they may be exchanged pursuant to the Exchange
Offer, except that the Exchange Notes are freely transferable by holders thereof
(except as provided herein or in the Prospectus).
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus.
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS
INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND
REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS
LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
<PAGE>
PLEASE READ THE ENTIRE
LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
List below the Outstanding Notes to which this Letter of Transmittal
relates. If the space provided below is inadequate, the certificate numbers and
aggregate principal amounts should be listed on a separate signed schedule
affixed hereto.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
DESCRIPTION OF OUTSTANDING NOTES TENDERED HEREWITH
----------------------------------------------------------------------------------------------------
AGGREGATE
PRINCIPAL
AMOUNT
REPRESENTED BY PRINCIPAL
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE OUTSTANDING AMOUNT
(PLEASE FILL IN) NUMBER(S)* NOTES* TENDERED**
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
TOTAL
- ------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by such Outstanding Notes. See
instruction 2.
Holders of Outstanding Notes whose Outstanding Notes are not immediately
available or who cannot deliver all other required documents to the Exchange
Agent on or prior to the Expiration Date or who cannot complete the procedures
for book-entry transfer on a timely basis, must tender their Outstanding Notes
according to the guaranteed delivery procedures set forth in the Prospectus.
Unless the context otherwise requires, the term "holder" for purposes of
this Letter of Transmittal means any person in whose name Outstanding Notes are
registered or any other person who has obtained a properly completed bond power
from the registered holder or any person whose Outstanding Notes are held of
record by The Depository Trust Company ("DTC").
/ / CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s) _______________________________________________
Name of Eligible Institution that Guaranteed Delivery ______________________
Date of Execution of Notice of Guaranteed Delivery _________________________
If Delivered by Book-Entry Transfer:
Name of Tendering Institution ______________________________________________
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
2
<PAGE>
/ / CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO PERSON OTHER THAN
PERSON SIGNING THIS LETTER OF TRANSMITTAL:
Name _______________________________________________________________________
Address ____________________________________________________________________
/ / CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO ADDRESS DIFFERENT FROM
THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL:
Name _______________________________________________________________________
Address ____________________________________________________________________
/ / CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED OUTSTANDING NOTES FOR
ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES AND
WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
Name: ______________________________________________________________________
Address: ___________________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Outstanding Notes that were acquired
as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. A broker-dealer may not
participate in the Exchange Offer with respect to Outstanding Notes acquired
other than as a result of market-making activities or other trading activities.
Any holder who is an "affiliate" of the Company or who has an arrangement or
understanding with respect to the distribution of the Exchange Notes to be
acquired pursuant to the Exchange Offer, or any broker-dealer who purchased
Outstanding Notes from the Company to resell pursuant to Rule 144A under the
Securities Act or any other available exemption under the Securities Act must
comply with the registration and prospectus delivery requirements under the
Securities Act.
3
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of the
Outstanding Notes indicated above. Subject to, and effective upon, the
acceptance for exchange of all or any portion of the Outstanding Notes tendered
herewith in accordance with the terms and conditions of the Exchange Offer
(including, if the Exchange Offer is extended or amended, the terms and
conditions of any such extension or amendment), the undersigned hereby
exchanges, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to such Outstanding Notes as are being tendered
herewith. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as its true and lawful agent and attorney-in-fact of the
undersigned (with full knowledge that the Exchange Agent also acts as the agent
of the Company, in connection with the Exchange Offer) to cause the Outstanding
Notes to be assigned, transferred and exchanged.
The undersigned represents and warrants that it has full power and authority
to tender, exchange, assign and transfer the Outstanding Notes and to acquire
Exchange Notes issuable upon the exchange of such tendered Outstanding Notes,
and that, when the same are accepted for exchange, the Company will acquire good
and unencumbered title to the tendered Outstanding Notes, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claim. The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete the exchange, assignment and transfer of
the tendered Outstanding Notes or transfer ownership of such Outstanding Notes
on the account books maintained by the book-entry transfer facility. The
undersigned further agrees that acceptance of any and all validly tendered
Outstanding Notes by the Company and the issuance of Exchange Notes in exchange
therefor shall constitute performance in full by the Company of its obligations
under the Exchange and Registration Rights Agreement dated February 2, 1999,
among the Company, Willis Corroon Partners, Willis Corroon Group Limited, Chase
Securities Inc., and Chase Manhattan International Limited (the "Registration
Rights Agreement"), and that the Company shall have no further obligations or
liabilities thereunder except as provided in the first paragraph of Section 2 of
such agreement. The undersigned will comply with its obligations under the
Registration Rights Agreement. The undersigned has read and agrees to all terms
of the Exchange Offer.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer--Certain Conditions to the
Exchange Offer." The undersigned recognizes that as a result of these conditions
(which may be waived, in whole or in part, by the Company), as more particularly
set forth in the Prospectus, the Company may not be required to exchange any of
the Outstanding Notes tendered hereby and, in such event, the Outstanding Notes
not exchanged will be returned to the undersigned at the address shown above,
promptly following the expiration or termination of the Exchange Offer. In
addition, the Company may amend the Exchange Offer at any time prior to the
Expiration Date if any of the conditions set forth under "The Exchange
Offer--Certain Conditions to the Exchange Offer" occur.
The undersigned understands that tenders of Outstanding Notes pursuant to
any one of the procedures described in the Prospectus and in the instructions
attached hereto will, upon the Company's acceptance for exchange of such
tendered Outstanding Notes, constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of the
Exchange Offer. The undersigned recognizes that, under circumstances set forth
in the Prospectus, the Company may not be required to accept for exchange any of
the Outstanding Notes.
By tendering shares of Outstanding Notes and executing this Letter of
Transmittal, the undersigned represents that Exchange Notes acquired in the
exchange will be obtained in the ordinary course of business of the undersigned,
that the undersigned has no arrangement or understanding with any person to
participate in a distribution (within the meaning of the Securities Act) of such
Exchange Notes, that the undersigned is not an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act and that if the undersigned or
the person receiving such Exchange Notes, whether or not such person is the
undersigned, is not a broker-dealer, the undersigned represents that it is not
engaged in, and does not intend to engage in, a distribution of Exchange Notes.
If the undersigned or the person receiving such Exchange Notes, whether or not
such person is the undersigned, is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Outstanding Notes that were acquired
as a result of
4
<PAGE>
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. If the undersigned is a person in the United Kingdom, the
undersigned represents that its ordinary activities involve it in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of its business.
Any holder of Outstanding Notes using the Exchange Offer to participate in a
distribution of the Exchange Notes (i) cannot rely on the position of the staff
of the Securities and Exchange Commission enunciated in its interpretive letter
with respect to Exxon Capital Holdings Corporation (available April 13, 1989) or
similar interpretive letters and (ii) must comply with the registration and
prospectus requirements of the Securities Act in connection with a secondary
resale transaction.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Tendered Outstanding Notes may be withdrawn at
any time prior to the Expiration Date in accordance with the terms of this
Letter of Transmittal. Except as stated in the Prospectus, this tender is
irrevocable.
Certificates for all Exchange Notes delivered in exchange for tendered
Outstanding Notes and any Outstanding Notes delivered herewith but not
exchanged, and registered in the name of the undersigned, shall be delivered to
the undersigned at the address shown below the signature of the undersigned.
The undersigned, by completing the box entitled "Description of Outstanding
Notes Tendered Herewith" above and signing this letter, will be deemed to have
tendered the Outstanding Notes as set forth in such box.
5
<PAGE>
TENDERING HOLDER(S) SIGN HERE
(Complete accompanying substitute Form W-9)
MUST BE SIGNED BY REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON
CERTIFICATE(S) FOR OUTSTANDING NOTES HEREBY TENDERED OR IN WHOSE NAME
OUTSTANDING NOTES ARE REGISTERED ON THE BOOKS OF DTC OR ONE OF ITS PARTICIPANTS,
OR BY ANY PERSON(S) AUTHORIZED TO BECOME THE REGISTERED HOLDER(S) BY
ENDORSEMENTS AND DOCUMENTS TRANSMITTED HEREWITH. IF SIGNATURE IS BY A TRUSTEE,
EXECUTOR, ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, OFFICER OF A CORPORATION OR
OTHER PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE SET FORTH
THE FULL TITLE OF SUCH PERSON. SEE INSTRUCTION 3.
________________________________________________________________________________
________________________________________________________________________________
(SIGNATURE(S) OF HOLDER(S))
Date ___________________________________________________________________________
Name(s) ________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT)
Capacity (full title) __________________________________________________________
Address ________________________________________________________________________
________________________________________________________________________________
(INCLUDING ZIP CODE)
Daytime Area Code and Telephone No. ____________________________________________
Taxpayer Identification No. ____________________________________________________
6
<PAGE>
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTION 3)
Authorized Signature ___________________________________________________________
Dated _____________________________________
Name ___________________________________________________________________________
Title __________________________________________________________________________
Name of Firm ___________________________________________________________________
Address ________________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No. ____________________________________________________
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if Exchange Notes or Outstanding Notes not tendered are to
be issued in the name of someone other than the registered holder of the
Outstanding Notes whose name(s) appear(s) above.
Issue
/ / Outstanding Notes not tendered to:
/ / Exchange Notes to:
Name(s) ________________________________________________________________________
Address ________________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
Daytime Area Code and Telephone No. ____________________________________________
Tax Identification No. _________________________________________________________
7
<PAGE>
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if Exchange Notes or Outstanding Notes not tendered
are to be sent to someone other than the registered holder of the
Outstanding Notes whose name(s) appear(s) above, or such registered
holder(s) at an address other than that shown above.
Mail
/ / Outstanding Notes not tendered to:
/ / Exchange Notes to:
Name(s) ____________________________________________________________________
Address ____________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No. ________________________________________________
8
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES.
A holder of Outstanding Notes may tender the same by (i) properly completing
and signing this Letter of Transmittal or a facsimile hereof (all references in
the Prospectus to the Letter of Transmittal shall be deemed to include a
facsimile thereof) and delivering the same, together with the certificate or
certificates, if applicable, representing the Outstanding Notes being tendered
and any required signature guarantees and any other documents required by this
Letter of Transmittal, to the Exchange Agent at its address set forth above on
or prior to the Expiration Date, or (ii) complying with the procedure for
book-entry transfer described below, or (iii) complying with the guaranteed
delivery procedures described below.
Holders of Outstanding Notes may tender Outstanding Notes by book-entry
transfer by crediting the Outstanding Notes to the Exchange Agent's account at
DTC in accordance with DTC's Automated Tender Offer Program ("ATOP") and by
complying with applicable ATOP procedures with respect to the Exchange Offer.
DTC participants that are accepting the Exchange Offer should transmit their
acceptance to DTC, which will edit and verify the acceptance and execute a
book-entry delivery to the Exchange Agent's account at DTC. DTC will then send a
computer-generated message (an "Agent's Message") to the Exchange Agent for its
acceptance in which the holder of the Outstanding Notes acknowledges and agrees
to be bound by the terms of, and makes the representations and warranties
contained in, this Letter of Transmittal, the DTC participant confirms on behalf
of itself and the beneficial owners of such Outstanding Notes all provisions of
this Letter of Transmittal (including any representations and warranties)
applicable to it and such beneficial owner as fully as if it had completed the
information required herein and executed and transmitted this Letter of
Transmittal to the Exchange Agent. Delivery of the Agent's Message by DTC will
satisfy the terms of the Exchange Offer as to execution and delivery of a Letter
of Transmittal by the participant identified in the Agent's Message. DTC
participants may also accept the Exchange Offer by submitting a Notice of
Guaranteed Delivery through ATOP.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OUTSTANDING NOTES
AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND
EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY
MAIL, IT IS SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, BE USED. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO
PERMIT TIMELY DELIVERY. NO OUTSTANDING NOTES OR LETTERS OF TRANSMITTAL SHOULD BE
SENT TO THE COMPANY.
Holders whose Outstanding Notes are not immediately available or who cannot
deliver their Outstanding Notes and all other required documents to the Exchange
Agent on or prior to the Expiration Date or comply with book-entry transfer
procedures on a timely basis must tender their Outstanding Notes pursuant to the
guaranteed delivery procedure set forth in the Prospectus. Pursuant to such
procedure: (i) such tender must be made by or through an Eligible Institution
(as defined below); (ii) on or prior to the Expiration Date, the Exchange Agent
must have received from such Eligible Institution a letter, telegram or
facsimile transmission (receipt confirmed by telephone and an original delivered
by guaranteed overnight courier) setting forth the name and address of the
tendering holder, the names in which such Outstanding Notes are registered, and,
if applicable, the certificate numbers of the Outstanding Notes to be tendered;
and (iii) all tendered Outstanding Notes (or a confirmation of any book-entry
transfer of such Outstanding Notes into the Exchange Agent's account at a
book-entry transfer facility) as well as this Letter of Transmittal and all
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent within three New York Stock Exchange trading days after the date
of execution of such letter, telegram or facsimile transmission, all as provided
in the Prospectus.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Outstanding Notes for exchange.
2. PARTIAL TENDERS; WITHDRAWALS.
If less than the entire principal amount of Outstanding Notes evidenced by a
submitted certificate is tendered, the tendering holder must fill in the
aggregate principal amount of Outstanding Notes tendered in the box entitled
9
<PAGE>
"Description of Outstanding Notes Tendered Herewith." A newly issued certificate
for the Outstanding Notes submitted but not tendered will be sent to such holder
as soon as practicable after the Expiration Date. All Outstanding Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise clearly indicated.
If not yet accepted, a tender pursuant to the Exchange Offer may be
withdrawn prior to the Expiration Date.
To be effective with respect to the tender of Outstanding Notes, a written
notice of withdrawal must: (i) be received by the Exchange Agent at one of the
addresses for the Exchange Agent set forth above before the Company notifies the
Exchange Agent that it has accepted the tender of Outstanding Notes pursuant to
the Exchange Offer; (ii) specify the name of the person who tendered the
Outstanding Notes to be withdrawn; (iii) identify the Outstanding Notes to be
withdrawn (including the principal amount of such Outstanding Notes, or, if
applicable, the certificate numbers shown on the particular certificates
evidencing such Outstanding Notes and the principal amount of Outstanding Notes
represented by such certificates); (iv) include a statement that such holder is
withdrawing its election to have such Outstanding Notes exchanged; and (v) be
signed by the holder in the same manner as the original signature on this Letter
of Transmittal (including any required signature guarantee). The Exchange Agent
will return the properly withdrawn Outstanding Notes promptly following receipt
of notice of withdrawal. If Outstanding Notes have been tendered pursuant to the
procedure for book-entry transfer, any notice of withdrawal must specify the
name and number of the account at the book-entry transfer facility to be
credited with the withdrawn Outstanding Notes or otherwise comply with the
book-entry transfer facility's procedures. All questions as to the validity of
notices of withdrawals, including time of receipt, will be determined by the
Company, and such determination will be final and binding on all parties.
Any Outstanding Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Outstanding Notes
which have been tendered for exchange but which are not exchanged for any reason
will be returned to the holder thereof without cost to such holder (or, in the
case of Outstanding Notes tendered by book-entry transfer into the Exchange
Agent's account at the book entry transfer facility pursuant to the book-entry
transfer procedures described above, such Outstanding Notes will be credited to
an account with such book-entry transfer facility specified by the holder) as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Outstanding Notes may be retendered by
following one of the procedures described under the caption "The Exchange
Offer--Procedures for Tendering" in the Prospectus at any time prior to the
Expiration Date.
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered holder(s) of the
Outstanding Notes tendered hereby, the signature must correspond with the
name(s) as written on the face of the certificates without alteration,
enlargement or any change whatsoever.
If any of the Outstanding Notes tendered hereby are owned of record by two
or more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Outstanding Notes registered in different names are tendered,
it will be necessary to complete, sign and submit as many separate copies of
this Letter of Transmittal as there are different registrations of Outstanding
Notes.
When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described herein, shall include the
book-entry transfer facility whose name appears on a security listing as the
owner of the Outstanding Notes) of Outstanding Notes listed and tendered hereby,
no endorsements of certificates or separate written instruments of transfer or
exchange are required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of the Outstanding Notes listed, such Outstanding
Notes must be endorsed or accompanied by separate written instruments of
transfer or exchange in form satisfactory to the Company and duly executed by
the registered holder, in either case signed exactly as the name or names of the
registered holder or holders appear(s) on the Outstanding Notes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary
10
<PAGE>
or representative capacity, such persons should so indicate when signing, and,
unless waived by the Company, proper evidence satisfactory to the Company of
their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written instruments
of transfer or exchange required by this Instruction 3 must be guaranteed by an
Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution, unless Outstanding Notes are tendered: (i) by a holder who has not
completed the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on this Letter of Transmittal; or (ii) for the account of an
Eligible Institution (as defined below). In the event that the signatures in
this Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by an eligible guarantor
institution which is a member of a firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another "eligible institution" within the meaning of Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended (an "Eligible
Institution"). If Outstanding Notes are registered in the name of a person other
than the signer of this Letter of Transmittal, the Outstanding Notes surrendered
for exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Company, in its sole discretion, duly executed by the registered holder with the
signature thereon guaranteed by an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders should indicate, as applicable, the name and address to
which the Exchange Notes or certificates for Outstanding Notes not exchanged are
to be issued or sent, if different from the name and address of the person
signing this Letter of Transmittal. In the case of issuance in a different name,
the tax identification number of the person named must also be indicated.
Holders tendering Outstanding Notes by book-entry transfer may request that
Outstanding Notes not exchanged be credited to such account maintained at the
book-entry transfer facility as such holder may designate.
5. TRANSFER TAXES.
The Company shall pay all transfer taxes, if any, applicable to the transfer
and exchange of Outstanding Notes to it or its order pursuant to the Exchange
Offer. If a transfer tax is imposed for any reason other than the transfer and
exchange of Outstanding Notes to the Company or its order pursuant to the
Exchange Offer, the amount of any such transfer taxes (whether imposed on the
registered holder or any other person) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exception therefrom is not
submitted herewith the amount of such transfer taxes will be billed directly to
such tendering holder.
6. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive, in whole or in part, any
of the conditions to the Exchange Offer set forth in the Prospectus.
7. MUTILATED, LOST, STOLEN OR DESTROYED SECURITIES.
Any holder whose Outstanding Notes have been mutilated, lost, stolen or
destroyed, should contact the Exchange Agent at the address indicated below for
further instructions.
8. SUBSTITUTE FORM W-9
Each holder of Outstanding Notes whose Outstanding Notes are accepted for
exchange (or other payee) is required to provide a correct taxpayer
identification number ("TIN"), generally the holder's Social Security or federal
employer identification number, and certain other information, on Substitute
Form W-9, which is provided under "Important Tax Information" below, and to
certify that the holder (or other payee) is not subject to backup withholding.
Failure to provide the information on the Substitute Form W-9 may subject the
holder (or other payee) to a $50 penalty imposed by the Internal Revenue Service
and 31% federal income tax backup withholding on payments made in connection
with the Outstanding Notes. The box in Part 3 of the Substitute Form W-9 may be
checked if the holder (or other payee) has not been issued a TIN and has applied
for a TIN or intends to apply for a TIN in the near future. If the box in Part 3
is checked and a TIN is not provided by the time any payment is made in
connection with the Outstanding Notes, 31% of all such payments will be withheld
until a TIN is provided.
11
<PAGE>
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to the Exchange Agent at the address and
telephone number indicated above.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE OR COPY THEREOF
(TOGETHER WITH CERTIFICATES OF OUTSTANDING NOTES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY
MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under U.S. Federal income tax law, a holder of Outstanding Notes whose
Outstanding Notes are accepted for exchange may be subject to backup withholding
unless the holder provides The Bank of New York, as Paying Agent (the "Paying
Agent"), through the Exchange Agent, with either (i) such holder's correct
taxpayer identification number ("TIN") on Substitute Form W-9 attached hereto,
certifying that the TIN provided on Substitute Form W-9 is correct (or that such
holder of Outstanding Notes is awaiting a TIN) and that (A) the holder of
Outstanding Notes has not been notified by the Internal Revenue Service that he
or she is subject to backup withholding as a result of a failure to report all
interest or dividends or (B) the Internal Revenue Service has notified the
holder of Outstanding Notes that he or she is no longer subject to backup
withholding; or (ii) an adequate basis for exemption from backup withholding. If
such holder of Outstanding Notes is an individual, the TIN is such holder's
social security number. If the Paying Agent is not provided with the correct
TIN, the holder of Outstanding Notes may be subject to certain penalties imposed
by the Internal Revenue Service.
Certain holders of Outstanding Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. However, exempt holders of Outstanding
Notes should indicate their exempt status on Substitute Form W-9. For example, a
corporation must complete the Substitute Form W-9, providing its TIN and
indicating that it is exempt from backup withholding. In order for a foreign
individual to qualify as an exempt recipient, the holder must submit a Form W-8,
signed under penalties of perjury, attesting to that individual's exempt status.
A Form W-8 can be obtained from the Paying Agent. See the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9" for
more instructions.
If backup withholding applies, the Paying Agent is required to withhold 31%
of any such payments made to the holder of Outstanding Notes or other payee.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
surrendering holder of Outstanding Notes has not been issued a TIN and has
applied for a TIN or intends to apply for a TIN in the near future. If the box
in Part 3 is checked, the holder of Outstanding Notes or other payee must also
complete the Certificate of Awaiting Taxpayer Identification Number below in
order to avoid backup withholding. Notwithstanding that the box in Part 3 is
checked and the Certificate of Awaiting Taxpayer Identification Number is
completed, the Paying Agent will withhold 31% of all payments made prior to the
time a properly certified TIN is provided to the Paying Agent.
The holder of Outstanding Notes is required to give the Paying Agent the TIN
(e.g., social security number or employer identification number) of the record
owner of the Outstanding Notes. If the Outstanding Notes are in more than one
name or are not in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.
12
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER FOR THE PAYEE
(YOU) TO GIVE THE PAYER.--Social security numbers have nine digits separated by
two hyphens: i.e., 000-00-0000. Employee identification numbers have nine digits
separated by only one hyphen: i.e., 00-0000000. The table below will help
determine the number to give the payer. All "Section" references are to the
Internal Revenue Code of 1986, as amended. "IRS" is the Internal Revenue
Service.
<TABLE>
<CAPTION>
- -----------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- -----------------------------------------------------
<S> <C> <C>
1. Individual The individual
2. Two or more The actual owner of
individuals (joint the account or, if
account) combined funds, the
first individual on
the account(1)
3. Custodian account of The minor(2)
a minor (Uniform
Gift to Minors Act)
4. a. The usual The
revocable savings grantor-trustee(1)
trust account
(grantor is also
trustee)
b. So-called trust The actual owner(1)
account that is
not a legal or
valid trust under
state law
5. Sole proprietorship The owner(3)
- -----------------------------------------------------
<CAPTION>
GIVE THE
EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
<S> <C> <C>
- -----------------------------------------------------
6. Sole proprietorship The owner(3)
7. A valid trust, The legal entity(4)
estate, or pension
trust
8. Corporate The corporation
9. Association, club, The organization
religious,
charitable,
educational, or
other tax-exempt
organization account
10. Partnership The partnership
11. A broker or The broker or
registered nominee nominee
12. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
state or local
government, school
district, or prison)
that receives
agricultural program
payments
</TABLE>
- ---------------------------------------------
- ---------------------------------------------
1 List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a social security number, that
person's number must be furnished.
2 Circle the minor's name and furnish the minor's social security number.
3 You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your social security number or
your employer identification number (if you have one).
4 List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the taxpayer identification number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.)
NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL BE
CONSIDERED TO BE THAT OF THE FIRST NAME LISTED.
13
<PAGE>
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5. Application for a Social Security Card, at the local
Social Administration office, or Form SS-4, Application for Employer
Identification Number, by calling 1 (800) TAX-FORM, and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
PAYEES SPECIFICALLY EXEMPTED FROM WITHHOLDING INCLUDE:
- - An organization exempt from tax under Section 501(a), an individual
retirement account (IRA), or a custodial account under Section 403(b)(7), if
the account satisfies the requirements of Section 401(f)(2).
- - The United States or a state thereof, the District of Columbia, a possession
of the United States, or a political subdivision or wholly-owned agency or
instrumentality of any one or more of the foregoing.
- - An international organization or any agency or instrumentality thereof.
- - A foreign government and any political subdivision, agency or instrumentality
thereof.
- - Payees that may be exempt from backup withholding include:
- - A corporation.
- - A financial institution.
- - A dealer in securities or commodities required to register in the United
States, the District of Columbia, or a possession of the United States.
- - A real estate investment trust.
- - A common trust fund operated by a bank under Section 584(a).
- - An entity registered at all times during the tax year under the Investment
Company Act of 1940.
- - A middleman known in the investment community as a nominee or who is listed
in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
- - A futures commission merchant registered with the Commodity Futures Trading
Commission.
- - A foreign central bank of issue.
PAYMENTS OF DIVIDENDS AND PATRONAGE DIVIDENDS GENERALLY EXEMPT FROM BACKUP
WITHHOLDING INCLUDE:
- - Payments to nonresident aliens subject to withholding under Section 1441.
- - Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident alien partner.
- - Payments of patronage dividends not paid in money.
- - Payments made by certain foreign organizations.
- - Section 404(k) payments made by an ESOP.
PAYMENTS OF INTEREST GENERALLY EXEMPT FROM BACKUP WITHHOLDING INCLUDE:
- - Payments of interest on obligations issued by individuals. NOTE: You may be
subject to backup withholding if this interest is $600 or more and you have
not provided your correct taxpayer identification number to the payer.
- - Payments of tax-exempt interest (including exempt-interest dividends under
Section 852).
- - Payments described in Section 6049(b)(5) to nonresident aliens.
- - Payments on tax-free covenant bonds under Section 1451.
- - Payments made by certain foreign organizations.
- - Mortgage interest paid to you.
Certain payments, other than payments of interest, dividends, and patronage
dividends, that are exempt from information reporting are also exempt from
backup withholding. For details, see the regulations under sections 6041, 6041A,
6042, 6044, 6045, 6049, 6050A and 6050N.
EXEMPT PAYEES DESCRIBED ABOVE MUST FILE FORM W-9 OR A SUBSTITUTE FORM W-9 TO
AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER,
FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" IN PART II OF THE
FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE OF INTEREST, DIVIDENDS, OR
PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
PRIVACY ACT NOTICE.--Section 6109 requires you to provide your correct taxpayer
identification number to payers, who must report the payments to the IRS. The
IRS uses the number for identification purposes and may also provide this
information to various government agencies for tax enforcement or litigation
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to payer. Certain penalties may also apply.
PENALTIES
(1) FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish
your taxpayer identification number to a payer, you are subject to a penalty of
$50 for each such failure unless your failure is due to reasonable cause and not
to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT
YOUR TAX
14
<PAGE>
CONSULTANT OR THE INTERNAL REVENUE SERVICE.
<TABLE>
<S> <C> <C>
PAYER'S NAME:
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN --------------------
FORM W-9 THE BOX AT RIGHT AND CERTIFY BY Social Security Number
DEPARTMENT OF THE TREASURY SIGNING AND DATING BELOW. OR
INTERNAL REVENUE SERVICE -------------------------
Employer Identification
Number
Payer's Request for PART 2 PART 3--
Taxpayer CERTIFICATION--Under the penalties / / Awaiting TIN
Identification of perjury, I certify that:
Number (TIN) (1) The number shown on this form
is my correct Taxpayer
Identification Number (or I am
waiting for a number to be
issued to me), and
(2) I am not subject to backup
withholding because (a) I am exempt
from backup withholding, or
(b) I have not been notified
by the Internal Revenue
Service (the "IRS") that I am
subject to backup withholding
as a result of a failure to
report all interest or
dividends, or (c) the IRS has
notified me that I am no
longer subject to backup
withholding.
CERTIFICATE INSTRUCTIONS--You must cross out item (2) above
if you have been notified by the IRS that you are currently
subject to backup withholding because of under-reporting
interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup
withholding you received another notification from the IRS
that you are no longer subject to backup withholding, do not
cross out such item (2).
SIGNATURE
>
SIGN HERE DATE
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER,
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED
THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (1) I have mailed or delivered
an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security
Administration Office, or (2) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a taxpayer
identification number by the time of payment, 31% of all reportable payments
made to me will be withheld.
<TABLE>
<S> <C>
Signature ------------------------------------- Date ------------------------, 1998
</TABLE>
15
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING
9% SENIOR SUBORDINATED NOTES DUE 2009
IN EXCHANGE FOR
NEW 9% SENIOR SUBORDINATED NOTES DUE 2009
OF
WILLIS CORROON CORPORATION
Registered holders of outstanding 9% Senior Subordinated Notes due 2009 (the
"Outstanding Notes") who wish to tender their Outstanding Notes in exchange for
a like principal amount of new 9% Senior Subordinated Notes due 2009 (the
"Exchange Notes") and whose Outstanding Notes are not immediately available or
who cannot deliver their Outstanding Notes and Letter of Transmittal (and any
other documents required by the Letter of Transmittal) to The Bank of New York
(the "Exchange Agent") prior to the Expiration Date, may use this Notice of
Guaranteed Delivery or one substantially equivalent hereto. This Notice of
Guaranteed Delivery may be delivered by hand or sent by facsimile transmission
(receipt confirmed by telephone and an original delivered by guaranteed
overnight courier) or mail to the Exchange Agent. See "The Exchange
Offer--Procedures for Tendering" in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
<TABLE>
<CAPTION>
BY HAND DELIVERY: BY MAIL:
<S> <C>
The Bank of New York (INSURED OR REGISTERED RECOMMENDED)
101 Barclay Street The Bank of New York
New York, New York 10286 101 Barclay Street
Attn: Marcia Brown, New York, New York 10286
Corporate Trust Operations, 7E Attn: Marcia Brown,
Corporate Trust Operations, 7E
<CAPTION>
BY OVERNIGHT COURIER: BY FACSIMILE:
<S> <C>
The Bank of New York (212) 815-4699 Attn: Marcia Brown,
101 Barclay Street Corporate Trust Operations, 7E
New York, New York 10286
Attn: Marcia Brown,
Corporate Trust Operations, 7E
CONFIRM BY TELEPHONE:
(212) 815-3428
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an eligible institution (as defined in the Prospectus), such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal for Guarantee of Signatures.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount of Outstanding Notes
indicated below, upon the terms and subject to the conditions contained in the
Prospectus dated , 1999 of Willis Corroon Corporation (the "Prospectus"),
receipt of which is hereby acknowledged.
DESCRIPTION OF OUTSTANDING NOTES TENDERED
<TABLE>
<CAPTION>
NAME AND ADDRESS OF CERTIFICATE NUMBER(S)
REGISTERED HOLDER AS IT OF OUTSTANDING NOTES
APPEARS ON THE TENDERED (OR ACCOUNT PRINCIPAL AMOUNT OF
NAME OF TENDERING OUTSTANDING NOTES NUMBER AT BOOK- OUTSTANDING NOTES
HOLDER (PLEASE PRINT) ENTRY FACILITY) TENDERED
- --------------------------- --------------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
</TABLE>
SIGN HERE
NAME OF REGISTERED OR ACTING HOLDER: ___________________________________________
SIGNATURE(S): __________________________________________________________________
NAME(S) (PLEASE PRINT): ________________________________________________________
ADDRESS: _______________________________________________________________________
________________________________________________________________________________
TELEPHONE NUMBER: ______________________________________________________________
DATE: __________________________________________________________________________
IF SHARES OF OUTSTANDING NOTES WILL BE TENDERED BY BOOK-ENTRY TRANSFER, PROVIDE
THE FOLLOWING INFORMATION:
DTC ACCOUNT NUMBER: ________________________________________________________
DATE: ______________________________________________________________________
<PAGE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended, hereby guarantees to deliver to the Exchange Agent at one of
its addresses set forth on the reverse hereof, the certificates representing the
Outstanding Notes (or a confirmation of book-entry transfer of such Outstanding
Notes into the Exchange Agent's account at the book-entry transfer facility),
together with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees, and any other
documents required by the Letter of Transmittal within three New York Stock
Exchange trading days after the Expiration Date (as defined in the Letter of
Transmittal).
<TABLE>
<S> <C>
Name of Firm: (Authorized Signature)
Address: Title:
Name:
(Zip Code)
(Please type or print)
Area Code and Telephone No.:
Date:
</TABLE>
NOTE: DO NOT SEND OUTSTANDING NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY.
OUTSTANDING NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
