JUNE 27, 1994
[Alexander & Alexander Logo]
Dear Fellow Stockholder:
At a special meeting called for July 15, 1994, stockholders will be asked
to consider a proposed investment of $200 million in your Company by American
International Group, Inc. ("AIG"), one of the largest and most successful
insurance groups in the world.
The proposed AIG investment is described in the attached proxy statement,
which I invite you to review carefully. Stockholders are being asked to
authorize the sale of convertible preferred stock to the AIG group, as well as
the issuance of the underlying common stock. Stockholders are also being asked
to amend the Company's charter to authorize the shares to be issued, including a
related increase in the Company's authorized stock.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AIG INVESTMENT, AND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE PROPOSALS RELATING TO THAT
INVESTMENT.
The AIG investment, in my view, is an essential ingredient in restoring
Alexander & Alexander to its leadership role in the industry, and is a key part
of our plan to enhance long-term stock values. The investment helps your Company
to achieve three key objectives:
1. Increased capital. The $200 million to be invested by AIG provides
your Company the capital it needs to invest in its core businesses, as well
as to deal effectively with its contingent liabilities relating to
discontinued or sold insurance underwriting operations. Significantly, the
capital infusion does not involve a transfer of control. AIG is buying
non-voting preferred stock, convertible into non-voting common stock, with
certain exchange and conversion features that would limit AIG's ultimate
holding of voting securities to no more than 9.9% of the Company's voting
securities.
2. Reduced insurance exposure. Your Company, over the past several
years, has been adversely affected by its ongoing exposure to risks
relating to discontinued insurance underwriting operations. Part of the
proceeds from the AIG investment will be used to fund an insurance or
reinsurance arrangement with respect to such discontinued operations, as
described in the proxy statement.
3. Resources for leadership. The additional capital and the
reinsurance program will provide resources that we believe should enable
our new Chairman, Chief Executive Officer and President, Mr. Frank G. Zarb,
and our skilled, dedicated employees to succeed. Mr. Zarb is superbly
qualified to lead in the task of building on Alexander & Alexander's strong
franchise and enhancing earnings and value to stockholders.
I urge you to vote FOR the proposals relating to the AIG investment.
It is important that your shares be represented and voted at the meeting.
Even if you plan to attend the meeting, please sign, date and mail promptly the
enclosed proxy card in the enclosed postage-paid envelope. Please note that a
failure to vote in effect constitutes a vote against the proposals related to
the AIG investment. Accordingly, we urge you to take a moment now to sign, date
and mail your proxy.
On behalf of the Board of Directors, thank you for your cooperation and
continued support.
Sincerely,
/s/ Robert E. Boni
Dr. Robert E. Boni
Chairman of the Executive Committee
<PAGE>
ALEXANDER & ALEXANDER SERVICES INC.
1211 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
JULY 15, 1994
NEW YORK, NEW YORK
To the Stockholders of
ALEXANDER & ALEXANDER SERVICES INC.:
A Special Meeting of Stockholders of Alexander & Alexander Services Inc.
(the "Company") has been called for Friday, July 15, 1994 at 11:00 a.m., local
time, at The Equitable Center Auditorium, 787 Seventh Avenue (between 51st and
52nd Streets), New York, New York, to consider and act on two proposals (the
"Investment Proposals") related to the Stock Purchase and Sale Agreement, dated
as of June 6, 1994, between the Company and American International Group, Inc.
("AIG"), as it may be amended from time to time (the "Purchase Agreement"), a
copy of which as presently in effect is attached as Appendix I to the enclosed
Proxy Statement. The two Investment Proposals are summarized as follows:
1. To approve the Purchase Agreement and the performance by the Company
of all transactions and acts on the part of the Company contemplated
pursuant to the Purchase Agreement, including the issuance and sale
to AIG of shares of Series B Cumulative Convertible Preferred Stock,
par value $1.00 per share ("Series B Preferred Stock"), of the
Company and the issuance of shares of non-voting Class D Common
Stock, par value $1.00 per share ("Class D Stock"), of the Company
upon the conversion of shares of Series B Preferred Stock in
accordance with their terms, and the issuance of shares of Common
Stock in exchange for shares of Class D Stock or, in certain
circumstances, conversion of Series B Preferred Stock (Proposal 1);
2. To approve certain amendments (together, the "Charter Amendment") to
the Company's charter to (i) increase the number of authorized shares
of stock of the Company, (ii) establish the terms of the Class D
Stock and (iii) effect other minor amendments as set forth in the
proposed Articles of Amendment, a copy of which is attached as
Appendix II to the enclosed Proxy Statement (Proposal 2).
THE APPROVAL OF EACH INVESTMENT PROPOSAL IS CONTINGENT ON THE APPROVAL OF
BOTH INVESTMENT PROPOSALS. UNLESS BOTH INVESTMENT PROPOSALS ARE APPROVED BY THE
STOCKHOLDERS AT THE MEETING, NEITHER PROPOSAL WILL BE EFFECTED BY THE COMPANY.
Under the rules of the New York Stock Exchange, approval of Proposal 1 requires
the affirmative vote of a majority of the votes cast on the proposal provided
that the total vote cast on the proposal represents more than 50 percent in
interest of all securities entitled to vote on the matter. Under Maryland law,
approval of Proposal 2 requires the affirmative vote of a majority of all the
votes entitled to be cast on the proposal by the stockholders of the Company.
Holders of record of shares of Common Stock, Class A Common Stock and Class
C Common Stock of the Company at the close of business on June 27, 1994 are
entitled to notice of and to vote at the meeting and any adjournments thereof.
By order of the Board of Directors,
Frank R. Wieczynski
Secretary
June 27, 1994
IF YOU DO NOT EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE SIGN
AND DATE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROXY STATEMENT.............................................................................................. 1
INTRODUCTION................................................................................................. 1
VOTING SECURITIES AND PRINCIPAL HOLDERS...................................................................... 1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.............................................................. 2
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS....................................................... 3
INVESTMENT PROPOSALS......................................................................................... 4
Background of and Reasons for the Investment Proposals..................................................... 4
Board of Directors' Recommendations........................................................................ 7
Opinion of Financial Advisor............................................................................... 8
Use of Proceeds............................................................................................ 10
Source of Funds; Information Concerning AIG................................................................ 11
Certain Considerations..................................................................................... 11
PROPOSAL 1--THE PURCHASE AGREEMENT........................................................................... 13
Purchase and Sale of Series B Preferred Stock.............................................................. 13
Terms of Series B Preferred Stock.......................................................................... 13
Terms of Class D Stock..................................................................................... 17
AIG Standstill Provisions.................................................................................. 18
Registration Rights........................................................................................ 19
Non-Solicitation........................................................................................... 19
Covenants.................................................................................................. 19
Conditions to Closing...................................................................................... 21
Termination................................................................................................ 22
Rights Agreement Amendment................................................................................. 22
Required Vote.............................................................................................. 22
PROPOSAL 2--CHARTER AMENDMENT................................................................................ 23
Increase of Authorized Stock............................................................................... 23
Existing Anti-Takeover Provisions.......................................................................... 24
Terms of Series B Preferred Stock and Class D Common Stock................................................. 27
Required Vote.............................................................................................. 27
MISCELLANEOUS................................................................................................ 27
STOCKHOLDER PROPOSALS FOR 1995 MEETING....................................................................... 27
OTHER MATTERS................................................................................................ 28
</TABLE>
<TABLE>
<S> <C>
APPENDIX I -- Stock Purchase and Sale Agreement, dated as of June 6, 1994, between the Company and
American International Group, Inc.
APPENDIX II -- Form of Articles of Amendment of the Charter of the Company
APPENDIX III-- Form of Articles Supplementary Classifying 6,200,000 Shares of Preferred Stock as 8%
Series B Cumulative Convertible Preferred Stock of the Company
APPENDIX IV-- Opinion of CS First Boston Corporation
</TABLE>
i
<PAGE>
ALEXANDER & ALEXANDER SERVICES INC.
1211 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
------------------------
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
JULY 15, 1994
------------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Alexander & Alexander Services Inc. (the
"Company") to be voted at a Special Meeting of Stockholders which will be held
at The Equitable Center Auditorium, 787 Seventh Avenue, New York, New York at
11:00 a.m., local time, on Friday, July 15, 1994, and at any adjournments
thereof (the "Special Meeting") for the purpose of submitting to a vote of the
stockholders the proposals described in the attached Notice of Special Meeting
(the "Investment Proposals").
Shares represented by properly executed proxies received prior to or at the
meeting, unless such proxies have been revoked, will be voted in accordance with
the instructions indicated in the proxies. If no instructions are indicated on a
properly executed proxy of the Company, the proxy will be voted in accordance
with the recommendations of the Board of Directors.
A stockholder may revoke a proxy at any time before it is exercised by
filing with the Secretary of the Company a written revocation or a duly executed
proxy bearing a later date or by voting in person at the Special Meeting. Any
written notice revoking a proxy should be sent to the attention of Frank R.
Wieczynski, Secretary, Alexander & Alexander Services Inc., 10461 Mill Run
Circle, Owings Mills, Maryland 21117.
This Proxy Statement and the accompanying form of proxy are being mailed to
stockholders on or about June 27, 1994.
If a stockholder is the beneficial owner of the Company's Class A Common
Stock, a direction and proxy will be delivered to Montreal Trust Company, as
trustee, in connection with the shares beneficially owned by said stockholder
and held by the trustee. The trustee will vote the Class A Common Stock in
accordance with the directions received from the beneficial owners.
The cost of soliciting proxies will be borne by the Company. In addition to
the solicitation by mail, proxies may be solicited by officers, directors and
regular employees of the Company in person or by telephone, telegraph or
facsimile. The Company has retained D.F. King & Co., Inc. to assist in the
solicitation for a fee estimated at $20,000 plus reasonable expenses. The
Company may also reimburse brokers, custodians, nominees and other fiduciaries
for their reasonable expenses in forwarding proxy materials to principals.
VOTING SECURITIES AND PRINCIPAL HOLDERS
Only holders of record of the Company's Common Stock, par value $1.00
("Common Stock"), Class A Common Stock, par value $.00001 ("Class A Stock"), and
Class C Common Stock, par value $1.00 ("Class C Stock"), at the close of
business on June 27, 1994 (the "Record Date") are entitled to vote at the
Special Meeting. As of the close of business on June 21, 1994, there were
outstanding 41,037,453 shares of Common Stock, 2,409,600 shares of Class A Stock
and 382,130 shares of Class C Stock. Such shares are each entitled to one vote.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following sets forth information as of June 2, 1994, regarding persons
who, to the best of the Company's knowledge, beneficially own more than five
percent of the outstanding shares of the Common Stock, Class A Stock or Class C
Stock.
<TABLE><CAPTION>
PERCENTAGE PERCENT
AND CLASS NUMBER OF TOTAL
NAME AND ADDRESS OF STOCKHOLDER OF STOCK OF SHARES VOTING SHARES
- - - -------------------------------------------------------------- ------------------ ----------- ---------------
<S> <C> <C> <C>
The Prudential Insurance Company of America(1)................ 9.91% 4,039,500 9.27%
Prudential Plaza Common
Newark, NJ 07102-3777 Stock
13.79% 317,252 0%
Series A
Convertible
Preferred Stock
Southeastern Asset Management, Inc.(1)........................ 9.53% 3,886,470 8.92%
Suite 301 Common
860 Ridgelake Boulevard Stock
Memphis, TN 38120
Delaware Management Company, Inc.(1).......................... 8.19% 3,337,700 7.66%
1818 Market Street Common
Philadelphia, PA 19103 Stock
Norwest Corporation(1)(2)..................................... 7.25% 2,955,950 6.79%
Norwest Center Common
Sixth and Marquette Stock
Minneapolis, MN 55479
Ontario Municipal Employees Retirement 55.89% 1,346,823 3.1%
System(1)................................................... Class A
One University Avenue Stock
Suite 1100
Toronto, Canada M5J 2P1
Trustees of the Alexander & Alexander 65.28% 249,980 .57%
U.K. Voluntary Equity Scheme(1)............................. Class C
145 St. Vincent Street Stock
Glasgow, Scotland G2 5NX
.32% 130,130 .30%
Common
Stock
</TABLE>
- - - ---------------
(1) As reported on the Schedule 13G most recently filed by the stockholder with
the Securities and Exchange Commission.
(2) Together with subsidiaries: Norwest Colorado, Inc. and Norwest Bank
Colorado, National Association.
2
<PAGE>
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of June 2, 1994 regarding the
beneficial ownership of outstanding shares of Common Stock and Class A Stock by
directors and certain officers and all directors and executive officers as a
group.
<TABLE><CAPTION>
COMMON
STOCK COMMON STOCK CLASS A STOCK
BENEFICIALLY SUBJECT TO BENEFICIALLY
NAME OWNED(1) OPTIONS(2) OWNED
- - - -------------------------------------------------------------------- ----------- -------------- --------------
<S> <C> <C> <C>
Tinsley H. Irvin(3)................................................. 39,991 211,946 --
Kenneth Black, Jr................................................... 500 -- --
John A. Bogardus, Jr................................................ 91,700 -- --
Robert E. Boni...................................................... 1,000 -- --
Lawrence E. Burk.................................................... 28,618 25,750 --
Ronald W. Forrest(3)................................................ 8,595 42,440 --
Peter C. Godsoe..................................................... 500 -- --
Angus M.M. Grossart................................................. -- -- --
Ronald A. Iles(4)................................................... 32,195 50,601 --
Vincent R. McLean................................................... 200 -- --
Michael K. White(5)................................................. 38,688 98,425 --
William M. Wilson................................................... 2,346 83,925 26,975
All directors and executive officers as a group
(18 persons)(4)(5)(6)(7)(8)....................................... 288,710 435,686 26,975
</TABLE>
- - - ---------------
(1) Includes the number of shares: (i) that are held directly or indirectly for
the benefit of the individuals listed or directly for the benefit of members
of an individual's family as to which beneficial ownership is disclaimed;
(ii) that represent such individuals' interests in shares vested as of March
31, 1994 in the stock fund under the Company's Thrift Plan or similar plans;
and (iii) that represent restricted stock that may vest in the future.
(2) Represents shares which are subject to options exercisable within 60 days
from June 2, 1994.
(3) Mr. Irvin retired from the Company effective April 1, 1994. Mr. Forrest
retired from the Company effective January 1, 1994. The information as to
beneficial ownership by Messrs. Irvin and Forrest reflects information
available to the Company as of their respective retirement dates.
(4) Does not include 83 shares of Common Stock and 159 shares of Class C Stock
held under the U.K. Voluntary Equity Scheme attributed to Mr. Iles, who does
not have any present voting or dispositive power.
(5) As of June 16, 1994, Mr. White stepped down as President of the Company and
Dr. Boni stepped down as Chairman of the Board of Directors. Dr. Boni
continues as a director and as Chairman of the Executive Committee of the
Board of Directors.
(6) Mr. Wilson beneficially owns 1.1 percent of the Class A Stock. No other
individual director or executive officer beneficially owns more than 1
percent of any class of the Company's voting shares. All officers and
directors as a group own approximately 1.8 percent of the Common Stock,
approximately 1.1 percent of the Class A Stock, none of the Class C Stock
and approximately 1.7 percent of the total outstanding voting shares.
(7) Does not include Common Stock shares beneficially owned or subject to
options that are held by Messrs. Irvin and Forrest.
(8) As of June 17, 1994, Mr. Frank G. Zarb, whose appointment as Chairman, Chief
Executive Officer and President of the Company became effective on June 16,
1994, received a restricted stock grant for 271,307 shares of Common Stock,
which will generally vest on June 16, 1996 and is subject to reduction based
on the amount of the bonus that is paid to Mr. Zarb by his former employer
with respect to 1994.
3
<PAGE>
INVESTMENT PROPOSALS
CERTAIN ASPECTS OF THE INVESTMENT PROPOSALS ARE SUMMARIZED BELOW. THIS
SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE PURCHASE AGREEMENT, ATTACHED AS APPENDIX I, THE CHARTER
AMENDMENT, SUBSTANTIALLY IN THE FORM ATTACHED AS APPENDIX II, AND THE ARTICLES
SUPPLEMENTARY, SUBSTANTIALLY IN THE FORM ATTACHED AS APPENDIX III, EACH OF WHICH
IS HEREBY INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS ARE URGED TO READ THE
APPENDICES TO THIS PROXY STATEMENT IN THEIR ENTIRETY.
THE APPROVAL OF EACH INVESTMENT PROPOSAL IS CONTINGENT ON THE APPROVAL OF
BOTH INVESTMENT PROPOSALS. UNLESS BOTH INVESTMENT PROPOSALS ARE APPROVED BY THE
STOCKHOLDERS AT THE MEETING, BOTH INVESTMENT PROPOSALS WILL BE DEEMED TO HAVE
BEEN REJECTED BY THE STOCKHOLDERS.
BACKGROUND OF AND REASONS FOR THE INVESTMENT PROPOSALS
On January 14, 1994, the Board of Directors of the Company effected the
following significant changes in the management of the Company: (i) the
Executive Committee of the Board of Directors assumed added responsibilities for
oversight of policy and management controls of the Company; (ii) the functions
of chairman of the Board of Directors and chief executive officer of the Company
were separated; (iii) T.H. Irvin resigned as chairman of the Board of Directors
and chairman of its Executive Committee and agreed to continue to serve as chief
executive officer of the Company through March 1994 and complete his term on the
Board of Directors; (iv) Dr. Robert E. Boni, a non-employee member of the
Company's Board of Directors for the past five years, was elected as
non-executive Chairman of the Board of Directors and Chairman of its Executive
Committee; and (v) the Board of Directors authorized the Executive Committee to
establish a committee to conduct an international search for a new chief
executive officer.
On April 25, 1994, the Company announced a net loss of $0.15 per share for
the first quarter of 1994. As reported in the Company's Form 10-Q for the first
quarter of 1994, at March 31, 1994, the Company was not in compliance with one
of the financial covenants in its long-term credit agreement, under which no
borrowings were outstanding. The Company's bank group granted a waiver of this
covenant requirement for the first quarter of 1994. Effective as of March 31,
1994, the long-term credit agreement was amended to reduce the amount available
from $150 million to $75 million and to require the Company, before making any
committed borrowings under the agreement, to be in compliance with all of the
agreement's financial covenants, without giving effect to any waivers of
compliance, for two consecutive quarters. While the Company believed it had
adequate cash resources to meet operating needs through the first quarter of
1995, the Company, based on its financial projections, would not be able to
borrow under its long-term credit agreement until the first quarter of 1995, at
the earliest.
Following the Company's January announcement and the announcement of its
first quarter 1994 results, the Company from time to time received preliminary
unsolicited expressions from third parties as to possible business combinations,
including a possible acquisition by the Company of another business in exchange
for shares of the Company, and possible acquisitions of the Company. The Company
expressed no interest in pursuing these approaches.
A number of the candidates for the chief executive officer position who
were interviewed by the Company's search committee (including Mr. Frank G. Zarb)
indicated their views that the Company needed additional capital to enable it to
build its core businesses. Mr. Zarb indicated that a satisfactory arrangement
for the obtaining of additional capital was a pre-condition to his willingness
to accept an offer to become chief executive officer of the Company.
4
<PAGE>
On April 20, Maurice R. Greenberg, Chairman and Chief Executive Officer of
American International Group, Inc. ("AIG"), and Dr. Robert E. Boni, who had been
appointed non-executive Chairman of the Board of the Company on January 14,
1994, discussed the Company's strategic opportunities and its need for
additional capital to realize those opportunities. On May 4, Mr. Greenberg and
Dr. Boni met again, with other representatives of the two companies. At that
meeting Mr. Greenberg expressed interest in the making by AIG or an AIG
subsidiary of a significant minority investment in the Company, by means of a
purchase of convertible preferred stock of the Company. Mr. Greenberg said that
AIG was not interested in acquiring control of the Company, was not looking for
representation on the Company's Board of Directors and was instead interested in
acquiring equity in the Company. Dr. Boni said that the Company was interested
in an arrangement to assist it with respect to its contingent exposures relating
to its discontinued operations, including the Company's indemnification
obligations to purchasers of Sphere Drake Insurance Group (an insurance business
the Company had acquired in 1982 as part of its acquisition of Alexander
Howden). Mr. Greenberg indicated that AIG, as a company whose insurance
subsidiaries sell insurance through the Company's insurance brokerage
operations, was interested in seeing the Company remain an independent insurance
broker.
Dr. Boni indicated to Mr. Greenberg that the Company might be interested in
exploring an investment in the Company by AIG, but only if it was clear that the
investment did not involve a change of control of the Company (since the
investment was for only a minority of the Company's equity).
In mid-May, the Company retained CS First Boston Corporation ("CS First
Boston") to act as its financial advisor in connection with the Company's review
of strategic and financial planning matters, including the possible sale of
equity or equity-linked securities of the Company to an investor and also
retained J.P. Morgan Securities Inc. ("JP Morgan") as its advisor on strategic
issues.
On May 16, the Board of Directors of the Company considered the Company's
cash needs and sources of capital, and discussed AIG's expression of interest in
a minority investment in the Company. On May 19, the Board of Directors of the
Company considered these matters further, and also reviewed the discussions with
the Company's lenders and the Company's prospects as an independent company. In
addition, the Board, with the assistance of its financial advisors CS First
Boston and JP Morgan, considered whether and on what terms and timetable
alternative sources of capital might be available, including a sale of a
minority interest to a financial investor or to a strategic investor other than
AIG, a public offering or underwritten private placement of convertible or debt
securities, a rights offering to existing shareholders, and a sale of assets.
After considering these alternatives the Board authorized the Chairman, the
Treasurer and the Chief Financial Officer of the Company to conduct discussions
with AIG and to negotiate preliminary terms for such an investment, with the
final terms of the investment to be subject to the Board's approval.
In the weeks that followed, the terms of the proposed Series B Preferred
Stock were intensively negotiated between representatives of the Company and of
AIG. The Company had explored the possibility of a simultaneous rights offering
to stockholders, with AIG acting as standby underwriter. However, AIG declined
to act as standby underwriter, and the $200 million investment by AIG was
perceived as adequate for the Company's capital needs. Negotiations regarding
the structure and terms of the Series B Preferred Stock included discussions for
the inclusion of standstill provisions in the Purchase Agreement; anti-dilution
protection included in the conversion feature; the existence of a class vote for
the Series B Preferred Stock upon the occurrence of certain specified corporate
actions; the terms of certain conditions precedent to the redemption of the
Series B Preferred Stock at the option of the Company; and the events giving
rise to a special redemption right at the option of the holders of Series B
Preferred Stock. After review of various proposals by each of the parties, it
was agreed that the purchase agreement would include standstill provisions; that
anti-dilution protection of the conversion feature would apply if the Company
issued shares below the conversion price then in effect; that the holders of the
Series B Preferred Stock would not have a separate class vote for certain
specified corporate actions; that the Series B Preferred Stock would be
redeemable at the option of the Company only after the Common Stock of the
Company had traded at a price in excess of 150% of the conversion
5
<PAGE>
price then in effect for a period of 30 consecutive trading days; that the
initial conversion price would be set at $17 per share (or approximately 120% of
the opening price of $14 1/4 per share of Common Stock on May 13, the date the
conversion price was set); and that the special redemption at the option of the
holders would be triggered, among other things, if: dividends and other equity
payments on any class or series of stock of the Company, Reed Stenhouse
Companies Limited ("RSC") or Alexander & Alexander Services UK plc ("AAE") or
any of their respective subsidiaries (other than dividends on $3.625 Series A
Convertible Preferred Stock ("Series A Preferred Stock") and Series B Preferred
Stock and certain intercompany dividends) were in excess of $0.075 per share of
Common Stock, RSC Class A Shares and AAE Dividend Shares in the aggregate in the
last seven months of 1994, cumulatively 25% of the Company's earnings in 1995
and 1996, and thereafter cumulatively 50% of earnings in subsequent years; 35%
of the Company's assets were sold; or 35% (or in certain circumstances, 10%) of
the total voting power of the Company's voting stock were purchased by third
parties. For a description of the rights and privileges of the Series B
Preferred Stock, see "THE PURCHASE AGREEMENT--Terms of Series B Preferred
Stock."
During the period prior to the finalization of the Stock Purchase and Sale
Agreement, dated as of June 6, 1994 (as it may be amended from time to time, the
"Purchase Agreement"), between the Company and AIG, the Company also concluded
negotiations with Mr. Frank G. Zarb concerning his appointment as Chairman,
Chief Executive Officer and President of the Company. Dr. Boni informed Mr.
Greenberg of the proposed appointment of Mr. Zarb, and informed Mr. Zarb of
AIG's proposed investment in the Company.
The Company intends to enter into an insurance or reinsurance arrangement
to further protect its financial position with respect to certain of its
discontinued underwriting exposures. An insurance or reinsurance arrangement
reasonably acceptable to AIG with an insurer or reinsurer reasonably acceptable
to AIG is a condition precedent to AIG's obligation to make its investment under
the Purchase Agreement. See "THE PURCHASE AGREEMENT--Conditions to Closing."
On June 6 and 7, the Board of Directors held a special meeting to consider
the Investment Proposals. On June 7, the Board of Directors unanimously approved
the Investment Proposals and the election of Mr. Zarb (effective as of the
commencement of his employment with the Company which began on June 16) as
Chairman, Chief Executive Officer and President of the Company. On June 7, the
Board of Directors reduced the Company's regular quarterly dividend on its
Common Stock from $0.25 to $0.025.
On June 1, Standard & Poor's Ratings Group ("S&P") placed its BB-rating of
the Company's $60 million 11% convertible subordinated debentures due 2007 on
CreditWatch with negative implications, reflecting the ongoing difficult
conditions for the Company's U.S. retail brokerage operations, reduced financial
flexibility relating to the reduction of its long term credit agreement and
uncertainty toward reserves for insurance operations of sold businesses. On June
8, subsequent to the announcement of the proposed AIG investment and the
appointment of Mr. Zarb, S&P announced that the Company's 11% convertible
subordinated debentures due 2007 remained on CreditWatch with negative
implications. S&P also indicated its intent to discuss with the management of
the Company its plans for the business before making a final rating
determination.
On June 7, 1994, Fitch Investors Services Inc. placed the Company's F-2
commercial paper rating on FitchAlert with negative implications. The rating
agency said the action is a result of the Company's continuing poor performance
in its core retail insurance brokerage operations, uncertainty regarding
eventual liabilities stemming from its previously owned Shand Morahan and Sphere
Drake operations and its being out of compliance with one of the financial
covenants in its long-term credit agreement. The Company has no commercial paper
outstanding. On June 14, the Company sent a written request to Fitch Investor
Services Inc. requesting that it withdraw its rating on the Company's commercial
paper.
6
<PAGE>
After the announcement of the AIG Investment, Mr. Zarb's appointment as
Chairman of the Board of Directors, Chief Executive Officer and President of the
Company and the dividend reduction, on June 9, Moody's Investors Service Inc.
("Moody's") placed the ba3 rating on the Series A Preferred Stock of the Company
under review for possible upgrade. The rating agency said that the review will
focus on the possible changes in the Company's strategic direction and on its
long-term financial profile. Moody's also stated that the direct effects of the
proposed preferred stock investment by AIG will also be reviewed.
BOARD OF DIRECTORS' RECOMMENDATIONS
The Board of Directors has reviewed and considered the terms and conditions
of the Investment Proposals and believes that the Investment Proposals are fair
to, and are advisable and in the best interests of, the Company and its
stockholders and has unanimously approved the Investment Proposals and
unanimously recommends that stockholders vote for approval of the Investment
Proposals. The Company's directors and executive officers (who currently hold
Common Stock and Class A Stock representing in the aggregate less than 1% of the
total voting power of the Common Stock, the Class A Stock and the Class C Stock)
have indicated that they intend to vote all shares of voting stock over which
they exercise voting power as of the close of business on the Record Date in
favor of approval of the Investment Proposals.
The Board of Directors, in recommending that the stockholders of the
Company approve the Investment Proposals, considered a number of factors,
including (a) the current business, properties and prospects of the Company and
its subsidiaries, the financial and operational condition of the Company and its
subsidiaries and the long-term strategy of the Company; (b) the substantial
increase in the Company's available cash and access to capital that will occur
as a result of AIG's investment and the resulting increased ability of the
Company to take advantage of strategic opportunities which may be available from
time to time and to generally strengthen its competitive position in the
insurance industry; (c) the terms of the Purchase Agreement, the Charter
Amendment and other documents relating to the Investment Proposals; (d) the
extent of independence that the Company will retain following the consummation
of the transactions contemplated by the Purchase Agreement; (e) the alternatives
to AIG's investment (the "Investment") in the Company, including alternative
public or private financing and seeking an alternative investor; (f) the written
opinion of CS First Boston to the effect that the consideration to be received
by the Company in the Investment is fair to the Company from a financial point
of view (see "--Opinion of Financial Advisor" below); (g) certain consequences
that could result from the transactions contemplated by the Investment Proposals
that are described below under "Certain Considerations"; (h) that the closing of
the transactions contemplated by the Purchase Agreement is conditioned upon
approval by the Company's stockholders of the Investment Proposals; and (i)
certain possible implications of a single large minority shareholding in the
Company, including the conflicts of interest that might arise and the potential
discouraging effect on other transactions that might result from such
shareholding. See "--Certain Considerations--Diminished Ability to Sell the
Company".
THE BOARD OF DIRECTORS BELIEVES THAT THE INVESTMENT PROPOSALS ARE FAIR TO,
AND ARE ADVISABLE AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS
AND HAS UNANIMOUSLY APPROVED THE INVESTMENT PROPOSALS AND UNANIMOUSLY RECOMMENDS
THAT THE STOCKHOLDERS OF THE COMPANY VOTE "FOR" APPROVAL OF THE INVESTMENT
PROPOSALS.
The Board of Directors reserves its right, pursuant to the Purchase
Agreement, to amend or waive the provisions of the Purchase Agreement and the
other documents related thereto in all respects before or after approval of the
Investment Proposals by the Company's stockholders. In addition, the Board of
Directors reserves the right to terminate the Purchase Agreement in accordance
with its terms notwithstanding stockholder approval.
7
<PAGE>
OPINION OF FINANCIAL ADVISOR
As described under "Background of and Reasons for the Investment Proposals"
above, the Company engaged CS First Boston to act as its financial advisor in
connection with the Company's review of strategic and financial planning
matters, including the possible sale of equity or equity-linked securities of
the Company. CS First Boston assisted the Company in the negotiation of AIG's
proposed investment in the Company, through the issuance, pursuant to the
Purchase Agreement, of 4,000,000 shares of Series B Preferred Stock at a cash
purchase price of $50.00 per share. In connection with the engagement, the
Company requested that CS First Boston evaluate the fairness to the Company of
the consideration to be received by the Company in connection with the
Investment. On June 7, 1994, CS First Boston delivered to the Board of Directors
its oral opinion to the effect that, as of such date and based upon and subject
to certain matters described to the Board of Directors, the consideration to be
received by the Company in exchange for the Series B Preferred Stock is fair to
the Company from a financial point of view. No limitations were imposed by the
Board of Directors upon CS First Boston with respect to the investigations made
or procedures followed by CS First Boston in rendering its opinion, except that
CS First Boston was not authorized to seek any other potential investors in the
Company or acquirors for all or any portion of the Company's business or assets.
On June 10, 1994, CS First Boston delivered a written opinion to the Board
of Directors confirming the oral opinion rendered on June 7, 1994. A copy of CS
First Boston's written opinion, which sets forth the assumptions made, matters
considered and limits on the review undertaken, is attached to this Proxy
Statement as Appendix IV and should be read by stockholders carefully in its
entirety.
In connection with its opinion, CS First Boston reviewed, among other
things, the Purchase Agreement, the Registration Rights Agreement, the Articles
Supplementary, the Charter of the Company and the Charter Amendment; the Annual
Reports on Form 10-K of the Company for the three years ended December 31, 1993;
certain interim reports to stockholders and Quarterly Reports on Form 10-Q;
certain other communications from the Company to its stockholders; and certain
internal financial analyses for the Company prepared by its management,
including analyses giving effect to the Investment. CS First Boston also had
discussions with members of the senior management of the Company regarding its
past and current business operations, financial condition and future prospects.
CS First Boston considered the view of senior management of the Company that the
Investment represents a significant business opportunity for the Company and
that certain strategic and operational benefits will be derived from the
transactions contemplated by the Purchase Agreement. In addition, CS First
Boston reviewed the reported price and trading activity for the Common Stock;
compared certain financial and stock market information for the Company with
similar information for certain other companies engaged in businesses similar to
the Company's and the securities of which are publicly traded; reviewed the
financial terms of certain recent strategic investment transactions and
performed such other studies and analyses as CS First Boston considered
appropriate. CS First Boston, in rendering its opinion, took into account the
extent to which certain provisions contained in the Purchase Agreement, the
Company's Charter, the Articles Supplementary and the Charter Amendment could
impede a change of control of the Company. CS First Boston relied without
independent verification upon the accuracy and completeness of all of the
financial and other information reviewed by it for purposes of its opinion. CS
First Boston assumed that the financial analyses for the Company, both with and
without giving effect to the Investment, have been reasonably prepared on a
basis reflecting the best currently available judgments and estimates of the
management of the Company. In addition, CS First Boston made no independent
evaluation or appraisal of the assets and liabilities of the Company or any of
its subsidiaries, and CS First Boston was not furnished with any such evaluation
or appraisal.
The following is a summary of the material financial analyses performed by
CS First Boston in arriving at its oral opinion delivered June 7, 1994 and its
written opinion dated June 10, 1994, but does not purport to be a complete
description of the analyses performed by CS First Boston for such purposes.
8
<PAGE>
Comparable Public Company Analysis. CS First Boston reviewed and compared
certain actual and estimated financial, operating and stock market information
for the Company with similar information for the following publicly traded
insurance brokerage companies: Acordia, Inc.; Aon Corporation; Arthur J.
Gallagher & Co.; E.W. Blanch Holdings, Inc.; Hilb, Rogal and Hamilton Company;
Marsh & McLennan Companies, Inc. and Poe & Brown, Inc. (the "U.S. Comparable
Companies"); C.E. Health plc; Hogg Group plc; JIB Group plc; Lowndes Lambert
Group Holdings plc; Sedgwick Group plc; Steel Burrill Jones Group plc; and
Willis Corroon Group plc (the "U.K. Comparable Companies") (collectively, the
"Comparable Companies"). The Comparable Companies were selected because they are
publicly traded companies that derive a significant portion of their revenues
from insurance brokerage and risk management services. CS First Boston reviewed
the Comparable Companies in terms of various historical financial measures and
in terms of various multiples that certain of this information represents in
comparison to certain other information. In particular, such analysis indicated
that, as of June 3, 1994, the market price of shares of common stock of such
companies (a) as a multiple of latest twelve month ("LTM") earnings, equity
research analysts' consensus 1994 estimated earnings and equity research
analysts' consensus 1995 estimated earnings, ranged from 12.3x to 19.4x, 11.3x
to 17.0x and 10.2x to 14.8x, respectively, for the U.S. Comparable Companies,
and from 14.2x to 18.2x, 10.4x to 17.8x, and 9.2x to 14.0x, respectively, for
the U.K. Comparable Companies, versus multiples of 181.9x, 26.0x and 15.0x,
respectively, for the Company; and (b) as a multiple of stated book value,
ranged from 2.0x to 4.8x for the U.S. Comparable Companies and from 1.5x to
15.6x for the U.K. Comparable Companies, versus a multiple of 4.9x for the
Company. The analysis further indicated that the adjusted market value (defined
as equity market capitalization plus the principal amount of outstanding debt
plus the book value of preferred stock, if any) of the Comparable Companies as a
multiple of revenues and as a multiple of EBITDA (earnings before interest,
taxes, depreciation and amortization), in each case based on the LTM financial
results, ranged from 1.2x to 4.3x and 6.3x to 10.7x for the U.S. Comparable
Companies and 0.8x to 1.6x and 5.6x to 14.8x for the U.K. Comparable Companies,
respectively, as compared to 0.7x and 11.5x for the Company.
Comparison With Other Transactions. CS First Boston examined transactions
involving the purchase of a minority interest in various companies in a variety
of industries that had occurred since 1984, or were pending as of June 3, 1994.
CS First Boston then analyzed the proposed terms of the Investment as compared
to the corresponding terms of such prior transactions, including, without
limitation, the size of the investment, voting power and board representation,
if any, acquired by the investor, dividend or interest rates applicable to the
investment, the relationship between conversion price and market price of the
underlying common stock (in the case of investments in convertible preferred
stock or convertible debentures), and the relationship between purchase price
and market price (in the case of direct common stock investments).
Pro Forma Analysis. CS First Boston analyzed the pro forma effects of the
Investment on the Company's balance sheet at March 31, 1994 and anticipated
operating results for 1994 and 1995, based on management's then current
expectations for 1994 results and certain other assumptions supplied by the
Company and CS First Boston.
Public Offering Analysis. CS First Boston analyzed a hypothetical public
offering by the Company of convertible preferred stock as an alternative
financing method for the Company to raise equity capital. CS First Boston
compared the terms of a hypothetical public offering, including, but not limited
to, dividend rates and payment options, optional redemption provisions, and
conversion features, with those of the AIG Investment. In addition, CS First
Boston analyzed the likelihood of completing a public offering of various sizes
for the Company based on then current market conditions.
Historical Relative Trading and Valuation Comparisons. CS First Boston
examined the history of the trading prices for the Company's common stock, and
the relationship between the movements in the prices of such shares and
movements in certain stock indices. CS First Boston also compared the
9
<PAGE>
consideration to be received by the Company pursuant to the Investment to the
historical public trading prices of the Common Stock.
Other Analysis. CS First Boston reviewed and analyzed selected investment
research reports on the Company and the insurance brokerage industry and
analyzed certain publicly available information regarding the foregoing.
The preparation of a fairness opinion is a complex process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances. In arriving at its opinion, CS First Boston considered each of
the analyses described above, among other things, and did not assign any
particular weight to the results of any particular analysis. The analyses were
prepared for the purpose of enabling CS First Boston to evaluate whether the
consideration to be received by the Company in exchange for the Series B
Preferred Stock is fair to the Company from a financial point of view, and do
not purport to be appraisals or to necessarily reflect the prices at which
businesses or securities of the Company actually may be sold. Analyses based
upon forecasts of future results are not necessarily indicative of actual future
results, which may be significantly more or less favorable than suggested by
such analyses. The foregoing summary is qualified by reference to the written
opinion of CS First Boston which is attached to this Proxy Statement as Appendix
IV.
CS First Boston has advised the Company that, in the ordinary course of
business, it may actively trade the securities of the Company and AIG for its
own account or for the account of its customers and, accordingly, may at any
time hold a long or short position in such securities.
CS First Boston was selected by the Company as its financial advisor based
on its reputation, experience and expertise. CS First Boston is an
internationally recognized investment banking firm that is continually engaged
in the valuation of businesses and their securities in connection with mergers
and acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. CS First Boston is familiar
with the Company, having provided financial advisory and other investment
banking services to the Company over a period of years, including acting as lead
placement agent in the offering of the Company's Series A Preferred Stock in
March 1993.
The Company retained CS First Boston as its financial advisor in connection
with the AIG Investment pursuant to a letter agreement dated May 19, 1994. As
compensation for its services, the Company has paid CS First Boston a financial
advisory fee of $250,000 and CS First Boston will be entitled to receive an
additional $750,000 upon the mailing of this proxy statement to the Company's
stockholders. The Company has also agreed to reimburse CS First Boston for its
out-of-pocket expenses incurred in performing its services, including reasonable
attorney's fees and expenses, and to indemnify CS First Boston and related
persons against certain liabilities, including liabilities under Federal
securities laws, arising out of CS First Boston's engagement.
USE OF PROCEEDS
On the date of the initial purchase of shares of Series B Preferred Stock
under the Purchase Agreement (the "Closing"), the Company will receive
approximately $200 million in cash (the "Transaction Proceeds") from the AIG
Group in consideration for the issuance to AIG of shares of Series B Preferred
Stock. Expenses of the transaction to be borne by the Company, together with the
cost of an option for an insurance arrangement (see "THE PURCHASE
AGREEMENT--Conditions to Closing"), are estimated to be $3,800,000. The Company
anticipates that, pending the application of the Transaction Proceeds as
described below, the Transaction Proceeds will be invested in interest bearing
securities.
The Transaction Proceeds will be available to the Company for general
corporate purposes. The Company anticipates that it will principally utilize the
Transaction Proceeds (i) to invest in its continuing businesses and (ii) to fund
an insurance or reinsurance arrangement with respect to
10
<PAGE>
discontinued operations. Except as described above, the Company does not
currently have any commitments or understandings regarding the use of the
Transaction Proceeds.
There can be no assurance that the Company will be successful in its
efforts to utilize the Transaction Proceeds in a manner that contributes to the
profitable growth of the Company's business or that the Transaction Proceeds
will not be used in such a way as to dilute the per share earnings or equity of
the Company after giving effect to the purchase of shares of Series B Preferred
Stock by AIG. See "THE PURCHASE AGREEMENT--Terms of Series B Preferred
Stock--Repurchase at Holder's Option."
SOURCE OF FUNDS; INFORMATION CONCERNING AIG
AIG has informed the Company that the $200 million to be used to purchase
the Series B Preferred Stock will come from working capital generated in the
ordinary course of its operations.
AIG is the leading U.S.-based international insurance organization and the
largest underwriter of commercial and industrial insurance in the United States.
Its member companies write property, casualty, marine, life and financial
services insurance in approximately 130 countries and jurisdictions, and are
engaged in a range of financial services businesses. AIG's common stock is
listed on the New York Stock Exchange, as well as the stock exchanges in London,
Paris, Switzerland and Tokyo.
CERTAIN CONSIDERATIONS
While the Board of Directors is of the opinion that the Investment
Proposals are fair to, and their approval is advisable and in the best interests
of, the Company and its stockholders, stockholders should consider the following
possible effects in evaluating the Investment Proposals.
Dilution. The Investment Proposals involve the issuance by the Company of
substantial amounts of additional securities. These issuances could have the
effect of diluting the rights of the existing holders of Common Stock. Series B
Preferred Stock will be entitled to cumulative quarterly dividends at the rate
of 8% per annum per share, in preference to payment of dividends on all series
of Preferred Stock of the Company other than the Series A Preferred Stock as to
which it shall rank pari passu. Until December 15, 1996, dividends shall be
payable in kind on the Series B Preferred Stock and thereafter, at the election
of the Board of Directors, in cash or in kind until December 15, 1999, provided
that if the Company at any time pays dividends in cash on or after December 15,
1996, the Company may not thereafter declare or pay dividends in kind. Series B
Preferred Stock is initially convertible into Class D Stock at a conversion
price of $17 per share (the "Conversion Price"). Class D Stock is exchangeable
for Common Stock on a share-for-share basis.
Repurchase at Option of the Holder. The holders of the Series B Preferred
Stock will have the right to require the Company to repurchase their shares at a
specified premium if a "Special Event" occurs. This right may tend to deter the
Company from engaging in a Special Event, which includes, for example, the
declaration or payment of dividends aggregating in excess of $0.075 per share of
Common Stock during the last seven months of 1994, cumulatively 25% of earnings
in 1995 and 1996, and cumulatively 50% of earnings thereafter; the disposition
by the Company of assets representing 35% or more of the Company's book value or
gross revenues; and certain mergers of the Company or any of its principal
subsidiaries with or into any other firm or entity. Other Special Events include
the acquisition by a third party, with the consent or approval of the Company,
of beneficial ownership of securities representing 35% or more of the Company's
total outstanding voting power. The repurchase price, in the event of a Special
Event, is at a specified premium plus accrued and unpaid dividends on the Series
B Preferred Stock. See "THE PURCHASE AGREEMENT--Terms of Series B Preferred
Stock--Repurchase at the Holder's Option."
Diminished Ability to Sell the Company. As a result of AIG's substantial
ownership interest in the Company's securities, it may be more difficult for a
third party to acquire the Company without the consent of AIG, even though the
Series B Preferred Stock is non-voting and is convertible into Class D Stock,
which also is non-voting, and AIG has agreed to limit to less than 10% the
percentage of the
11
<PAGE>
Company's voting stock it may acquire, absent certain events described below
under "THE PURCHASE AGREEMENT--AIG Standstill Provisions". In addition, as noted
in the previous paragraph, holders of the Series B Preferred Stock would be able
to require the Company to repurchase their shares in the event of a merger or
the acquisition, with the consent or approval of the Company, by a third party
of beneficial ownership of securities representing 35% or more of the Company's
total outstanding voting power. Accordingly, approval of the Investment
Proposals may hinder a change in control of the Company should the Board of
Directors ever choose to seek a buyer, or may tend to require a stated amount of
the proceeds of a sale of the Company to be paid to holders of the Series B
Preferred Stock. It should also be noted, however, that AIG has agreed, with
specified exceptions, to refrain from attempting to increase its interest in or
influence over the Company by tender offer or proxy solicitation for a period of
eight years following the Closing, subject to the occurrence of certain events
that would terminate AIG's standstill covenants. See "THE PURCHASE AGREEMENT--
AIG Standstill Provisions" below. In addition, the Board of Directors believes
consummation of the Investment Proposals will enhance the long-term value of
Common Stock, although there can be no assurance that they will have this
result. In addition to the possible effects of the Investment Proposals in the
context of a sale of the Company, certain existing features of the Company's
Charter and the Rights Agreement, dated as of June 11, 1987, between the Company
and First Chicago Trust Company of New York, as amended and restated as of March
22, 1990 and as further amended as of April 21, 1992 (as amended, the "Rights
Agreement"), in conjunction with Maryland law, may already have the effect of
deterring a sale of the Company, but these other provisions are generally
subject to administration by the Board of Directors. See "CHARTER
AMENDMENT--Existing Anti-Takeover Provisions".
Company Payments in Certain Events. Under the Purchase Agreement, the
Company has agreed to make certain payments to AIG if tax payments and reserves
relating to periods before March 31, 1994 exceed the Company's tax reserves as
of March 31, 1994, or if the Company determines that certain liabilities (as
defined in the Purchase Agreement) as of March 31, 1994 were greater than, or
that certain assets (as defined in the Purchase Agreement) as of March 31, 1994
had an ultimate realizable value less than, the related amounts shown on the
Company's balance sheet as of March 31, 1994. The making of any such payments by
the Company would, in effect, reduce the consideration received by the Company
for the Series B Preferred Stock. See "THE PURCHASE AGREEMENT--
Covenants--Company Payments in Certain Events."
Employment of New Chief Executive Officer. Under the terms of Mr. Zarb's
employment agreement with the Company, in the event that the investment by AIG,
or a substantially comparable equity investment by one or more third party
investors, does not take place on or before October 31, 1994, Mr. Zarb will have
the right voluntarily to terminate his employment with the Company. In such
event, the Company will be obligated to pay Mr. Zarb a cash severance payment in
the amount of $12,000,000, and Mr. Zarb's rights in certain restricted stock
awards and stock options granted to him by the Company will vest, provided that
in no event may the cash severance payment and the value of the portion of the
options and awards vesting as a result of such termination exceed $20,000,000.
There can be no assurance that, if the Investment Proposals are not approved by
the stockholders, the Company will be able to obtain a substantially comparable
equity investment by one or more third party investors prior to October 31,
1994. Accordingly, the failure by the stockholders to approve the Investment
Proposals could result in the termination of Mr. Zarb's employment as President
and Chief Executive Officer of the Company and give rise to a severance payment
obligation of $12,000,000 as well as to the vesting of award rights and stock
options referred to above.
Effect on Capital and on Earnings Available for Common Stockholders. After
giving effect to estimated transaction expenses and the cost of an option for an
insurance arrangement (see "THE PURCHASE AGREEMENT--Conditions to Closing"), the
sale of the Series B Preferred Stock to AIG would increase the Company's capital
by approximately $196 million. However, dividends on the Series B Preferred
Stock would reduce the amount of earnings otherwise available for common
stockholders by approximately $16 million in the first year after issuance, and
by approximately $23 million in the fifth year after issuance, assuming
dividends on the Series B Preferred Stock were to be paid in kind throughout the
first five years after issuance.
12
<PAGE>
PROPOSAL 1--THE PURCHASE AGREEMENT
On June 7, 1994, the Company and AIG executed the Purchase Agreement.
Certain provisions of the Purchase Agreement are discussed in more detail below;
however, stockholders are urged to read the Purchase Agreement, which is
attached as Appendix I, in its entirety.
PURCHASE AND SALE OF SERIES B PREFERRED STOCK
Pursuant to the terms of the Purchase Agreement, the Company has agreed,
subject to the terms and conditions set forth therein, to issue to AIG or any of
its wholly owned subsidiaries at the closing of the transactions contemplated by
the Purchase Agreement (the "Closing") 4,000,000 shares of Series B Preferred
Stock, at a purchase price of $50 per share. Each share of Series B Preferred
Stock will initially be convertible into the number of shares of Class D Common
Stock obtained by dividing $50 by the then current conversion price. The initial
conversion price is $17 per share (the "Conversion Price"). Each share of Class
D Stock will be exchangeable on a share-for-share basis with Common Stock. The
approximately 11,765,000 shares of Common Stock initially issuable upon such
exchange represent approximately 21% of the aggregate number of shares of Common
Stock, Class A Stock and Class C Stock outstanding after giving effect to such
issuance based on shares of Common Stock, Class A Stock and Class C Stock
outstanding as of June 2, 1994. If dividends on the Series B Preferred Stock are
paid in kind for the full five year period permitted, 17,950,245 shares of
Common Stock will be issuable upon such exchange, representing approximately
29.2% of the total number of shares of Common Stock, Class A Stock and Class C
Stock outstanding after giving effect to such issuance, based on shares
outstanding as of June 2, 1994.
TERMS OF SERIES B PREFERRED STOCK
Rank. With respect to dividend rights and rights on liquidation,
dissolution and winding up, Series B Preferred Stock ranks senior to Common
Stock, Class A Stock, Class C Stock, Class D Stock and Series A Junior
Participating Preferred Stock (when and if issued) and pari passu with Series A
Preferred Stock.
Liquidation Preference. In the event of any liquidation, dissolution or
winding up of the Company, holders of Series B Preferred Stock will be entitled
to receive in preference to holders of any stock ranking junior to Series B
Preferred Stock in the event of a liquidation, dissolution or winding up
("Junior Stock") $50 per share plus an amount equal to all accrued but unpaid
dividends thereon on the date of final distribution to such holders.
Dividends. Holders of Series B Preferred Stock are entitled to receive,
when and as declared by the Board of Directors, cumulative dividends at the rate
of 8% per annum per share, payable in equal quarterly payments on the 15th day
of March, June, September and December (each, a "Dividend Payment Date").
Dividends shall be payable in kind in shares of Series B Preferred Stock
("Additional Shares") until December 15, 1996 and, thereafter, at the Board of
Directors' election, in cash, or in kind, until December 15, 1999; provided that
if the Company shall at any time pay dividends in cash, the Company shall not
thereafter be entitled to elect to declare or pay dividends in kind in shares of
Series B Preferred Stock. Beginning December 16, 1999, dividends on Series B
Preferred Stock shall be payable in cash. Quarterly dividends which have not
been paid in full in Additional Shares will cumulate, as if quarterly dividends
had been paid on the relevant Dividend Payment Date in Additional Shares. Each
fractional share of Series B Preferred Stock outstanding shall be entitled to a
ratably proportionate amount of all dividends accruing with respect to each
outstanding share of Series B Preferred Stock, and all such dividends with
respect to such outstanding fractional shares shall be cumulative and shall
accrue (whether or not declared), and shall be payable in the same manner and at
such times as dividends on each outstanding share of Series B Preferred Stock.
13
<PAGE>
Voting Rights. The Series B Preferred Stock shall be non-voting stock,
except that (i) if dividends on the Series B Preferred Stock or any other class
or series of stock ranking pari passu as to dividends with the Series B
Preferred Stock shall be in arrears in an aggregate amount equal to at least six
quarterly dividends, then the holders of Series B Preferred Stock (voting
separately as a class with all other affected classes or series of stock ranking
pari passu as to dividends with the Series B Preferred Stock) will have the
right to vote to elect two additional members of the Board of Directors, (ii)
without the approval of the holders of two-thirds of the shares of Series B
Preferred Stock then outstanding, (x) the Company's Charter cannot be amended or
modified so as to adversely affect the holders of the Series B Preferred Stock,
the Class D Stock or the Common Stock, or (y) the Company cannot create any
class or series of stock that ranks senior to Series B Preferred Stock with
respect to dividend or liquidation rights, and (iii) following the occurrence of
a Specified Corporate Action (as hereinafter defined) of the Company, the
holders of shares of Series B Preferred Stock shall have the right to vote as a
class with the holders of Common Stock and Class D Stock on all matters as to
which the holders of Common Stock are entitled to vote.
Conversion. Each share of Series B Preferred Stock shall be convertible
(subject to the anti-dilution provisions thereof) at any time at the option of
the holder thereof, unless previously redeemed, into a number of shares of Class
D Stock of the Company obtained by dividing $50 by a conversion price of $17 per
share, subject to adjustment (as it may be adjusted, the "Conversion Price").
The Series B Preferred Stock shall have antidilution provisions similar to the
Series A Preferred Stock, except that in addition (w) adjustments shall be made
for Extraordinary Equity Payments (as defined below), (x) adjustments shall be
made for any issuance of Common Stock, Class A Stock or Class C Stock of the
Company at a price per share below the then effective Conversion Price and (y)
adjustments shall be made, at the option of the holder in the event of spin-offs
or other similar circumstances so that the Series B Preferred Stock (and related
conversion rights) shall be fully protected against dilution and the Series B
Preferred Stock shall be the obligation of the spun-off entities as well as the
Company. The Series B Preferred Stock, like the Series A Preferred Stock,
provides for adjustments upon the occurrence of certain events including, but
not limited to, stock dividends, stock subdivisions or reclassification or
combinations, issuance of rights or warrants to holders of Common Stock
generally entitling them to purchase Common Stock at a price less than the
current market price thereof or distributions to holders of Common Stock
generally of evidences of indebtedness or assets (other than dividends paid
exclusively in cash other than Extraordinary Equity Payments) or rights or
warrants to subscribe to securities of the Company (other than those described
in the preceding clause). In addition, upon the occurrence of any merger or
combination or similar transaction, the Series B Preferred Stock is convertible
into the consideration received by the holders of the Common Stock in such
merger, combination or similar transaction.
Redemption Provisions. The Series B Preferred Stock is not redeemable prior
to December 15, 1999 ("Redemption Starting Date"). On and after such date, so
long as the shares of Common Stock of the Company have traded on the New York
Stock Exchange after such date for each business day during a consecutive 30
trading day period at a price in excess of 150% of the then effective Conversion
Price, the Series B Preferred Stock shall be redeemable in cash, at the option
of the Company, in whole at any time or in part from time to time upon no less
than 45 days and no more than 60 days prior written notice to the holders
thereof, unless previously converted (conversions shall be permitted until the
close of business on the business day immediately preceding the redemption
date), at a redemption price of $54.00 per share, plus an amount equal to all
accrued and unpaid dividends thereon to the date fixed for redemption if
redeemed on or prior to December 14, 2000, and at the following redemption
14
<PAGE>
prices per share, plus accrued and unpaid dividends, if redeemed during the
12-month period beginning December 15 of the years set forth below:
YEAR REDEMPTION PRICE
-------------------------------- -----------------
2000 $ 53.50
2001 53.00
2002 52.50
2003 52.00
2004 51.50
2005 51.00
2006 50.50
and thereafter at $50 per share, plus an amount equal to all accrued and unpaid
dividends thereon to the date fixed for redemption.
All redemptions shall be made pro rata. The Company shall not redeem less
than all of the shares of Series B Preferred Stock at any time outstanding until
all dividends accrued and in arrears upon all shares of Series B Preferred Stock
then outstanding shall have been paid for all past dividend periods.
Repurchase at Holder's Option. If a Special Event (as defined below) shall
occur, holders of the Series B Preferred Stock shall have the right, at their
individual option exercisable at any time within 120 days after such occurrence,
to require the Company to purchase all or any part of the shares of Series B
Preferred Stock then held by them as such holders may elect at a redemption
price equal (i) in the event a Special Event occurs on or before six months
after the initial date on which the shares of Series B Preferred Stock are
issued (the "Original Issue Date"), $58.82 per share plus accrued and unpaid
dividends thereon to the date of redemption, (ii) in the event a Special Event
occurs more than six months after the Original Issue Date and on or before
twelve months after the Original Issue Date, $66.18 per share plus accrued and
unpaid dividends thereon to the date of redemption, or (iii) in the event a
Special Event occurs more than twelve months after the Original Issue Date,
$72.06 per share plus accrued and unpaid dividends thereon to the date of
redemption.
As set forth in the Articles Supplementary:
"Special Event" shall mean (a) the declaration or payment on or after the
original issue date for the Series B Preferred Stock by the Company, Reed
Stenhouse Companies Limited ("RSC") or Alexander & Alexander Services U.K. plc
("AAE") of an "Extraordinary Equity Payment" (defined below), (b) the sale or
other disposition, directly or indirectly, by the Company or any of its
subsidiaries in one or a series of related transactions of assets representing
35% or more of the then book value of the Company's assets on a consolidated
basis or 35% or more of the Company's gross revenues on a consolidated basis in
either of the two most recently ended fiscal years, (c) the merger or
consolidation of the Company or any of its principal subsidiaries with or into
any other firm, corporation or other legal entity other than (i) a merger or
consolidation of one subsidiary of the Company into another or the Company and
(ii) a merger or consolidation involving the issuance by the Company of equity
securities having a market value of less than 20% of the total market value of
the Company's equity securities outstanding prior to such issuance, or (d) the
occurrence of a "Specified Corporate Action" on or after the original date of
issuance of the Series B Preferred Stock.
"Extraordinary Equity Payment" shall mean (a) the declaration or payment on
or after June 1, 1994 by the Company, RSC or AAE, or any of their respective
subsidiaries of any dividend or distribution (except for any dividend or
distribution from one subsidiary of the Company to another subsidiary of the
Company or from a subsidiary of the Company to the Company, RSC or AAE or any of
their respective wholly owned subsidiaries; provided that all of such dividend
paid or distribution made, net of applicable withholding taxes, is received by
the Company, RSC or AAE or such recipient subsidiary) on any class or series of
its stock (other than regularly scheduled quarterly cash dividends on
15
<PAGE>
the Series A Preferred Stock and Series B Preferred Stock in accordance with the
terms thereof as in effect on the date of the Closing) other than the
declaration and payment by the Company, RSC and AAE of dividends on the Common
Stock, the RSC Class A Shares and the AAE Dividend Shares, respectively, which
do not exceed (i) on and after June 1, 1994 and on and prior to December 31,
1994, more than $0.075 per share, (ii) on and after January 1, 1995 and on and
prior to December 31, 1996, in the aggregate more than 25% of the Company's net
income available for distribution to common shareholders (after preferred
dividends) through the end of the last fiscal quarter prior to the date of
declaration of such dividend and (iii) on and after January 1, 1997, in the
aggregate more than the sum of (A) 50% of the Company's net income available for
distribution to common shareholders (after preferred dividends) on and after
such date and through the end of the last fiscal quarter prior to the date of
declaration of such dividend and (B) the excess, if any, of (1) 25% of the
Company's net income available for distribution to common shareholders (after
preferred dividends) during the period ending on and after January 1, 1995
through December 31, 1996 over (2) the aggregate amount of dividends declared
during the period from January 1, 1995 through December 31, 1996 and (b) any
repurchases, redemptions, retirements or other acquisitions directly or
indirectly by the Company or any of its subsidiaries on or after June 1, 1994 of
any stock of the Company or any of its subsidiaries (other than a wholly-owned
subsidiary) (other than redemptions or repurchases of the Series B Preferred
Stock in accordance with the Charter at the option of the Company or AIG) in
excess of net proceeds on or after June 1, 1994 to the Company from sales of
stock of the Company (less amounts expended on redemptions or repurchases of
Series A Preferred Stock and Series B Preferred Stock on or after June 1, 1994).
"Specified Corporate Action" shall mean such time as (i) the Company shall
consent or agree to the acquisition of, or the commencement of a tender offer
for, or the Board of Directors of the Company shall recommend or, within ten
business days after the commencement of the tender offer, not recommend that
shareholders reject, a tender offer for, "beneficial ownership" (as defined in
Rule 13d-3 under the Exchange Act) by any "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (other than AIG or its affiliates or any
transferee thereof) of, voting securities of the Company or securities
convertible into voting securities (collectively, "Restricted Securities"),
representing, when added to the Restricted Securities already owned by such
person or groups, thirty-five percent (35%) or more of such Restricted
Securities; (ii) the Company shall amend, modify or supplement, or waive the
benefit of, the Rights Agreement, so as to permit any acquisition of beneficial
ownership of thirty-five percent (35%) or more of the Restricted Securities
without causing such person or group (other than AIG or its affiliates or any
transferee thereof) to become an Acquiring Person (as defined in the Rights
Agreement) or without causing the Distribution Date or the Shares Acquisition
Date (each as defined in the Rights Agreement) to occur or without giving rise
to a Section 11(a)(ii) Event (as defined in the Rights Agreement); (iii) the
Company shall take any action under Section 3-603(c) of the Maryland General
Corporation Law to exempt any transaction between the Company and any of its
subsidiaries, on the one hand, and any person or group (other than AIG or its
affiliates or any transferee thereof), or any affiliates of any such person or
group, on the other hand, who (A) acquire, own or hold beneficial ownership of
Restricted Securities representing thirty-five percent (35%) or more of such
Restricted Securities, on the other hand, from the provisions of Title 3,
Subtitle 6 of the Maryland General Corporation Law or (B) acquire, own or hold
beneficial ownership of Restricted Securities representing ten percent (10%) or
more of such Restricted Securities unless such other person or group, or any
affiliate of such person or group, enters into a standstill agreement with the
Company limiting the acquisition of Restricted Securities by such other person
or group, or any affiliates of such person or group, to less than thirty-five
percent (35%) of the Restricted Securities and such stand-still agreement
remains in full force and effect; (iv) the Company shall issue, sell or
transfer, in one or a series of related transactions, Restricted Securities to
any person or group (other than AIG or its affiliates or any transferee thereof)
if after giving effect thereto said person or group shall have, or shall have
the then contractual right to acquire through conversion, exercise of warrants
or otherwise, more than thirty-five percent (35%) of the
16
<PAGE>
combined voting power to vote generally in the election of directors of the
Company; or (v) the Company shall agree to merge or consolidate with or into any
person, firm, corporation or other legal entity or shall agree to sell all or
substantially all its assets to any person, firm, company or other legal entity
other than (a) a merger or consolidation of one subsidiary of the Company into
another or the Company, or (b) a merger or consolidation in which the securities
of the Company outstanding before the merger or consolidation are not affected
and in which the Company issues equity securities having an aggregate market
value of less than 20% of the total market value of the Company's equity
securities outstanding prior to such merger or consolidation. For a general
description of the Rights Agreement and the defined terms used above, see
"CHARTER AMENDMENT--Existing Anti-Takeover Provisions--Rights Agreement."
Transfer Restrictions. The Series B Preferred Stock will be subject to the
same transfer restrictions applicable to the Class D Stock described below.
There are no other limitations on the transferability of the Series B Preferred
Stock except as provided under the Securities Act of 1933, as amended (the
"Securities Act"). See "--Terms of Class D Stock."
Permissible Distributions. In determining whether a distribution (other
than upon voluntary or involuntary liquidation), by dividend, redemption or
other acquisition of shares or otherwise, is permitted under the Maryland
General Corporation Law, amounts that would be needed, if the Company were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of holders of Series B Preferred Stock whose preferential
rights upon dissolution are superior to those receiving the distribution shall
not be added to the Company's total liabilities.
TERMS OF CLASS D STOCK
Class D Stock shall have a par value of $1.00 per share. The payment of
dividends to holders of the Common Stock will be subject to the right of the
holders of the Class D Stock to have the Company declare a dividend on the Class
D Stock in an amount per share equal to the per share amount of the dividend
paid on the Common Stock. In the event of the voluntary or involuntary
liquidation, dissolution or winding-up of the Company, the holders of Class D
Stock and Common Stock will participate ratably in proportion to the number of
shares held by each such holder in any distribution of assets of the Company to
such stockholders.
In addition, in the event the Company effects a subdivision or combination
or consolidation of the outstanding shares of Class D Stock into a greater or
lesser number of shares of Class D Stock, then in each such case the Company
will effect an equivalent subdivision or combination or consolidation of the
outstanding shares of Common Stock into a greater or lesser number of shares of
Common Stock.
The holders of the Class D Stock shall not be entitled to any vote,
provided that the Charter of the Company cannot be amended or modified so as to
adversely affect the holders of the Class D Stock without the approval of the
holders of two-thirds of such shares then outstanding, for purposes of which
vote the holders of Series B Preferred Stock shall be deemed to be holders of
that number of shares of Class D Stock into which such Series B Preferred stock
would then be convertible. The holders of the Class D Stock shall have the right
to exchange Class D Stock for Common Stock, at any time or from time to time, on
a share-for-share basis, provided, however, that no person shall be entitled to
acquire Common Stock upon such exchange if after giving effect thereto such
person shall have, or shall have the then contractual right to acquire through
conversion, exercise of warrants, or otherwise, more than 9.9% of the combined
voting power of the Common Stock, Class A Stock and Class C Stock then
outstanding.
The Company shall not be required to register any transfer of Class D
Stock, except as follows: (a) to any person which acquired shares of Class D
Stock on the original issuance of Class D Stock by the Company (a "Purchaser");
(b) to the ultimate parent corporation of any Purchaser (an "Approved Parent")
or any wholly-owned direct or indirect subsidiary of any Approved Parent (a
"Controlled Subsidiary"); (c) in a transfer (otherwise than to a Purchaser, an
Approved Parent or a Controlled
17
<PAGE>
Subsidiary) pursuant to Rule 144 under the Securities Act; and (d) in a private
sale (otherwise than to a Purchaser, an Approved Parent or a Controlled
Subsidiary), provided that the transferor shall not sell to any single person or
group of persons acting in concert a number of shares of Class D Stock which, if
exchanged for Common Stock, when added to other securities owned by the person
or group and to securities that the person or group has the right to acquire by
conversion, exercise of warrants, or otherwise, would cause the person or group
to own or to have the right to acquire more than 9.9% of the combined voting
power of the shares of Common Stock, Class A Stock and Class C Stock then
outstanding.
In connection with any sale or transfer of Class D Stock in accordance with
clauses (c) or (d) above, the Company shall issue Common Stock in exchange for
the Class D Stock to be so sold or transferred, provided that in no event shall
the number of shares of Common Stock issued to such purchaser or transferee
cause the combined voting power of the shares of Common Stock, Class A Stock and
Class C Stock held by such purchaser or transferee to exceed 9.9% of the
combined voting power of all such shares then outstanding.
In addition to the foregoing, in the event that shares of Series B
Preferred Stock and/or Common Stock underlying Class D Stock are to be offered
in any bona fide public offering of shares that is registered under the
Securities Act, the Company shall provide: (i) in the event that Series B
Preferred Stock is offered publicly, for the conversion of such Series B
Preferred Stock into Common Stock and (ii) in the event that such Common Stock
is offered publicly, for the exchange of the Class D Stock for Common Stock, in
each case so that such offerings can be made without restriction.
AIG STANDSTILL PROVISIONS
For a period of time not to exceed eight years after the Closing (the
"Standstill Period"), neither AIG nor any of its affiliates will, subject to
certain exceptions, (i) acquire, offer to acquire or agree to acquire by
purchase or by joining a "group" (hereinafter, a "13D Group"), within the
meaning of Section 13(d)(3) of the Exchange Act, any Restricted Securities, (ii)
participate in or encourage the formation of a 13D Group which owns or seeks to
own Restricted Securities, (iii) make or participate in any "solicitation" of
"proxies," within the meaning of Regulation 14A under the Exchange Act, or
become a "participant" in any "election contest," within the meaning of Rule
14a-11 of the Exchange Act, or initiate, propose or solicit the approval of a
stockholder proposal with respect to the Company, (iv) call or seek to have
called a meeting of the Company's stockholders, (v) seek to control the
management, Board of Directors, policies or affairs of the Company, (vi)
solicit, propose or negotiate with respect to any form of business combination,
restructuring, recapitalization or similar transaction involving the Company or
any affiliate of the Company, (vii) solicit, make, propose, negotiate or
announce any tender offer or exchange offer for any Restricted Securities, or
(viii) disclose an intent with respect to the Company or any Restricted
Securities that would require the Company to waive or amend any restrictions
relating to standstill provisions contemplated by the Purchase Agreement.
There shall be an early termination of the Standstill Period upon the
occurrence of certain events, including (i) certain bankruptcy or insolvency
events relating to the Company or any of its subsidiaries, which in the case of
a subsidiary of the Company has had or would have a material adverse effect on
the business of the Company, (ii) the material breach by the Company of any of
its obligations under the Registration Rights Agreement, (iii) the acquisition
of, the commencement of a tender offer for, or the public announcement of an
intention to acquire beneficial ownership of 35% or more of the total voting
power of Restricted Securities by a person or 13D Group with the consent
(whether tacit or explicit) of the Company, (iv) the designation of any date as
the termination of the Standstill Period by the Company's Board of Directors,
(v) default in the payment of principal or interest after the expiration of any
grace periods with respect to indebtedness of the Company and its subsidiaries
for money borrowed in the aggregate amount of $15,000,000 or (vi) the
termination of the Purchase Agreement prior to the Closing.
18
<PAGE>
REGISTRATION RIGHTS
On up to three occasions on or after the first anniversary of the Closing,
AIG will have the right to require the Company to use its best efforts to
register under the Securities Act, at the Company's expense, all or any portion
of the Series B Preferred Stock or the Common Stock into which the Series B
Preferred Stock, directly or indirectly, is convertible ("Registrable
Securities") for sale in an underwritten public offering. The Company will not
be entitled to sell its securities in any such registration for its own account
without the consent of AIG.
In addition, if the Company at any time before the third anniversary of the
Closing seeks to register under the Securities Act for sale to the public any of
its securities, the Company must include, at AIG's request, AIG's Registrable
Securities in the registration statement, subject to underwriter cutbacks and
except, at any time prior to the first anniversary of the Closing, with respect
to a registered secondary offering pursuant to registration rights granted by
the Company prior to the signing of the Purchase Agreement.
NON-SOLICITATION
The Company has agreed in the Purchase Agreement that prior to the Closing
neither the Company nor any of its subsidiaries nor any of the respective
officers and directors of the Company or any of its subsidiaries will, and the
Company will direct and use its best efforts to cause its employees, agents and
representatives (including, without limitation, any investment banker, attorney
or accountant retained by the Company or any of its subsidiaries) not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal or offer with respect to a merger, consolidation or
similar transaction involving, or any sale of all or any substantial portion of
the assets or any equity securities of, the Company and any of its subsidiaries,
taken as a whole (an "Acquisition Proposal") or engage in negotiations, provide
information or discuss an Acquisition Proposal with any person, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal.
Nothing contained in the Purchase Agreement, however, prohibits the Company
and its directors from making to the stockholders any recommendation and related
filing with the SEC, as required by Rules 14e-2 and 14d-9 under the Exchange
Act, with respect to any tender offer, or from informing the stockholders of the
Company in the proxy materials with respect to the meeting of stockholders
called to consider the transactions contemplated by the Purchase Agreement of
information that is material to the vote with respect to such transactions, or
from changing or withdrawing the recommendation of the directors with respect to
such transactions if the directors conclude that such change or withdrawal is
required by their fiduciary duties (as determined in good faith by the Board of
Directors of the Company upon the advice of counsel).
COVENANTS
The Purchase Agreement contains certain covenants including the following:
Hart-Scott-Rodino. To the extent applicable, the Company and AIG shall make
all filings and furnish all information required with respect to the
transactions contemplated by the Purchase Agreement by the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and shall use their best efforts to obtain
the early termination of the waiting period thereunder, provided that neither
the Company nor AIG shall be required to agree to dispose of or hold separate
any portion of its business or assets.
Access. Upon reasonable notice, the Company shall, and shall cause its
subsidiaries to, offer AIG's officers, employees, counsel, accountants and other
authorized representatives reasonable access during normal business hours before
the Closing to its properties, books, contracts and records and personnel and
advisors and the Company shall, and shall cause its subsidiaries to furnish
promptly to AIG all
19
<PAGE>
information concerning its business, properties and personnel as AIG or its
representatives may reasonably request.
Publicity. The Company and AIG will consult with each other before issuing
any press release or otherwise making any public statements with respect to the
transactions contemplated by the Purchase Agreement and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by law or by obligations pursuant to any listing
agreement with any securities exchange.
Pre-Closing Activities. From and after the date of the Purchase Agreement
until the Closing, each of the Company and AIG shall act with good faith
towards, and shall use its best efforts to consummate, the transactions
contemplated by the Purchase Agreement, and neither the Company nor AIG will
take any action that would prohibit or impair its ability to consummate the
transactions contemplated by the Purchase Agreement.
Restriction on Amendments to By-Laws. The Company shall not amend its
by-laws so as to affect the exemption contained therein from Subtitle 7 of Title
3 of the Maryland General Corporation Law (the "Maryland Control Share Act").
The Maryland Control Share Act provides that "control shares" of a Maryland
corporation acquired in a "control share acquisition" have no voting rights
except to the extent approved by a vote of two-thirds of the votes entitled to
be cast on the matter, excluding shares of stock owned by the acquiror, by
officers or by directors who are employees of the corporation. "Control Shares"
are voting shares of stock which, if aggregated with all other such shares of
stock previously acquired by the acquiror, or in respect of which the acquiror
is able to exercise or direct the exercise of voting power (except solely by
virtue of a revocable proxy), would entitle the acquiror to exercise voting
power in electing directors within one of the following ranges of voting power:
(i) one-fifth or more but less than one-third, (ii) one-third or more but less
than a majority, or (iii) a majority or more of all voting power. Control shares
do not include shares the acquiring person is then entitled to vote as a result
of having previously obtained stockholder approval. A "control share
acquisition" means the acquisition of control shares, subject to certain
exceptions. On January 31, 1991 the Board of Directors of the Company amended
the by-laws by adding a new Section 4 to Article IX, opting out of the Maryland
Control Share Act. The Board of Directors concluded that the Maryland Business
Combination Moratorium Act is more effective than the Control Share Act in
enabling the Company to protect the interests of stockholders against the abuses
of hostile takeover strategies and in encouraging a prospective acquiror to
negotiate with the Board of Directors. See "CHARTER AMENDMENT-- Existing
Anti-Takeover Provisions."
Company Payments in Certain Events. In the Purchase Agreement, the Company
has agreed to make certain payments to AIG relating to changes in the Company's
assets and liabilities as at March 31, 1994 as summarized below.
If, at any time or from time to time, the amount of (x) all reserves,
accruals or payments by or on behalf of the Company or any of its Subsidiaries
(without duplication) on account of liabilities, expenses, penalties, fines or
interest with respect to any income or other tax (foreign, federal, state or
local) with respect to any period ending on or prior to March 31, 1994 exceeds
(y) the stated amount of the Company's tax reserve included in its consolidated
balance sheet at March 31, 1994 set forth in its Quarterly Report on Form 10-Q
for the three months ended March 31, 1994 (the "March 31, 1994 Balance Sheet")
(such amount, a "Tax Amount"), the Company shall pay to AIG , as an adjustment
to the purchase price, its pro rata share (based on AIG's fully diluted
ownership percentage of the Common Stock as of the date of determination) of the
Tax Amount.
In addition, the Company has agreed to furnish, within 90 days after the
end of its fiscal year December 31, 1994, to AIG a certification (the "AIG
Certification") signed by each of its chief executive officer, chief financial
officer and principal accounting officer certifying (A) whether there were any
liabilities as of March 31, 1994 (1) which were not set forth on the March 31,
1994 Balance Sheet or, (2) which are in an amount in excess of the amount stated
therefor on the March 31, 1994
20
<PAGE>
Balance Sheet or (3) as to which the full amount of such liability is not then
determinable (specifying, in each case, as to type, determinability and amount);
and (B) whether there were any assets set forth on the March 31, 1994 Balance
Sheet the ultimate realizable value of which is less than that of the carrying
value of such assets at such date (specifying, in each case, as to type and
amount.)
For purposes of this covenant, a liability shall be deemed to be in an
amount in excess of the amount set forth in the March 31, 1994 Balance Sheet or
an asset shall be deemed to have a carrying value below the amount set forth in
such Balance Sheet based upon all facts or circumstances in existence on or
prior to March 31, 1994, whether or not then known by the Company or any of its
subsidiaries and whether or not, under generally accepted accounting principles,
such liabilities or assets were, as of March 31, 1994 or as of the date of such
AIG Certification, correctly stated or a reserve would not have been required.
Assets shall be carried at the lower of stated book value or realizable value,
and liabilities shall be stated without discount.
If an adjustment is made to any balance sheet subsequent to the March 31,
1994 Balance Sheet based upon any of the matters referred to in the AIG
Certification or if a liability set forth in the AIG Certification is paid
("Other Adjustments"), then the Company shall promptly pay to AIG, as an
adjustment to the purchase price, an amount in cash in immediately available
funds equal to AIG's pro rata share of each such Other Adjustment. The Company
will not, however, be required to make payments under this covenant in respect
of (i) liabilities relating to the indemnities contained in the Shand Morahan &
Company, Inc. Sale Agreement, dated October 7, 1987; (ii) assets or liabilities
relating to operations discontinued prior to the date of the Purchase Agreement;
(iii) any reserve for restructuring that is approved by the new Chief Executive
Officer of the Company and that is taken in the year ended December 31, 1994;
and (iv) liabilities that do not individually exceed $2,000,000 or in the
aggregate exceed $10,000,000.
CONDITIONS TO CLOSING
AIG's obligation to effect the Closing is subject to various conditions
which include the following:
(a) Approval of the issuance and sale of the Series B Preferred Stock
as required by the rules of any securities exchange on which securities of
the Company are listed.
(b) Approval and effectiveness of the Charter Amendment.
(c) Compliance by the Company in all material respects with the terms,
covenants and conditions of the Purchase Agreement.
(d) Amendment of the Rights Agreement, in form and substance
reasonably satisfactory to AIG.
(e) AIG shall be satisfied in its sole discretion as to the
non-applicability of insurance holding company and broker controlled
insurer statutes of each of the States of the United States of America and
each other material jurisdiction with respect to its purchase and holding
of the Series B Preferred Stock and related matters (including, as AIG
shall determine, such approvals or advice from such regulatory authorities
in respect thereof). AIG shall be satisfied as to the applicability of
foreign investment and other similar laws or regulations of each
jurisdiction outside the United States of America where AIG or its
subsidiaries or the Company and its subsidiaries conduct business with
respect to the purchase and holding by AIG or its affiliates of the Series
B Preferred Stock, the Class D Stock and the Common Stock issued in
exchange for Class D Stock such that the application of such laws or
regulations would not in its reasonable discretion have, individually or in
the aggregate, a material adverse effect on AIG and its subsidiaries taken
as a whole or the Company and its subsidiaries taken as a whole.
(f) Entry by the Company on or before July 5, 1994 into an insurance
or reinsurance arrangement with respect to discontinued operations that is
reasonably satisfactory to AIG.
21
<PAGE>
(g) The Company shall have furnished to AIG legal opinions as
described in the Purchase Agreement, in form reasonably satisfactory to
AIG.
(h) Other customary conditions precedent for a transaction similar to
the issuance and sale of the Series B Preferred Stock to AIG.
The Company's obligation to effect the Closing is subject to conditions
reciprocal to the conditions contained in (a), (b), (c) and (e) above. The
Company is in advanced stages of negotiation for an arrangement that the Company
believes would satisfy the condition referred to in paragraph (f) above. At the
time the Company entered into the Purchase Agreement with AIG, the Company had
entered into an option to purchase insurance from an affiliate of AIG that would
satisfy the condition, and had paid an affiliate of AIG a non-refundable fee of
$1,000,000 for the option. This fee is in addition to the estimated $2,800,000
of transaction expenses to be borne by the Company.
There can be no assurance that each of the conditions to the Closing will
be satisfied prior to October 31, 1994. If the Closing does not occur on or
prior to October 31, 1994, the Purchase Agreement will terminate without any
action by AIG or the Company. See "Termination" below.
TERMINATION
At any time prior to the Closing, the Purchase Agreement and the
transactions contemplated thereby may be terminated, (i) by a written instrument
executed and delivered by the Company and AIG, (ii) by AIG upon any material
breach or default by the Company under the Purchase Agreement, or (iii) by the
Company upon any material breach or default by AIG under the Purchase Agreement.
If the Closing shall not have occurred on or before October 31, 1994, the
Purchase Agreement will terminate without any action by AIG or the Company.
RIGHTS AGREEMENT AMENDMENT
The Board of Directors has approved an amendment to the Company's Rights
Agreement, pursuant to which the acquisition of Series B Preferred Stock upon
closing of the Purchase Agreement, the acquisition of Class D Stock upon
conversion of Series B Preferred Stock, the acquisition of Common Stock upon
exchange for Class D Stock or the acquisition by AIG or its affiliates or any
transferee thereof of any securities of the Company (if such acquisition is
permitted by the Purchase Agreement) will not (i) cause any person to become an
Acquiring Person, (ii) cause the Distribution Date or the Shares Acquisition
Date to occur, or (iii) give rise to a Section 11(a)(ii) Event (as such
capitalized terms are defined in the Rights Agreement). See "CHARTER
AMENDMENT--Existing Anti-Takeover Provisions."
REQUIRED VOTE
Approval of Proposal 1 requires the affirmative vote of a majority of the
votes cast on the proposal, provided that the total vote cast on the proposal
represents over 50% in interest of all Common Stock, Class A Stock and Class C
Stock entitled to vote on the proposal. For this purpose, abstentions and broker
non-votes will not be counted as votes cast and will have no effect on the vote
on Proposal 1.
Approval of Proposal 1 is conditioned on the approval of the related
Charter Amendment.
The Board of Directors unanimously recommends that stockholders approve
Proposal 1.
22
<PAGE>
PROPOSAL 2--CHARTER AMENDMENT
The Closing is conditioned upon the approval of the Charter Amendment by
the stockholders of the Company and the filing of the Charter Amendment with the
State Department of Assessments and Taxation of Maryland. The following is a
summary of certain provisions of the Charter Amendment, which is attached as
Appendix II to this Proxy Statement and is incorporated herein by reference.
Such summary is qualified in its entirety by reference to the Charter Amendment.
Approval of the Charter Amendment by the stockholders shall be deemed also
to constitute approval of a resolution authorizing the Board of Directors, at
any time prior to the filing of the Charter Amendment with the State Department
of Assessments and Taxation of Maryland, to abandon such proposed amendment
without further action by the stockholders, in connection with the termination
of the Purchase Agreement or otherwise, notwithstanding approval of the Charter
Amendment by the stockholders of the Company. Furthermore, the Company does not
intend to file the Charter Amendment with the State Department of Assessments
and Taxation of Maryland until the time of the Closing under the Purchase
Agreement.
INCREASE OF AUTHORIZED STOCK
General. The Restated Articles currently authorize the Company to issue
eighty-eight million five hundred thousand (88,500,000) shares of four classes
of stock, consisting of sixty million (60,000,000) shares of Common Stock, par
value $1.00; thirteen million (13,000,000) shares of Class A Common Stock, par
value $.00001; five million five hundred thousand (5,500,000) shares of Class C
Common Stock, par value $1.00; and ten million (10,000,000) shares of Preferred
Stock, par value $1.00. The aggregate par value of all shares of all classes of
stock which the Company has authority to issue is $75,500,130. The Charter
Amendment would increase the number of authorized and unissued shares of capital
stock of the Company to two hundred ninety-two million (292,000,000) shares of
five classes consisting of two hundred million (200,000,000) shares of Common
Stock, par value $1.00; twenty-six million (26,000,000) shares of Class A Common
Stock, par value $.00001; eleven million (11,000,000) shares of Class C Common
Stock, par value $1.00; forty million (40,000,000) shares of Class D Common
Stock, par value $1.00; and fifteen million (15,000,000) shares of Preferred
Stock, par value $1.00. The aggregate par value of all shares of all classes of
stock which the Company will, pursuant to the Charter Amendment, have authority
to issue is $266,000,260.
Reasons for and Effects of the Increase of Authorized Capital Stock. In
addition to authorizing the Series B Preferred Stock and the Class D Stock, the
Charter Amendment would increase the number of authorized shares of Common Stock
and Preferred Stock. Of the 88,500,000 shares currently authorized, as of June
21, 1994 41,037,453 shares of Common Stock, 2,409,600 shares of Class A Common
Stock, 382,130 shares of Class C Common Stock and 2,300,000 shares of Preferred
Stock were outstanding. Furthermore, following the Closing, for each share of
Class D Stock issued or reserved for issuance the Company will be required to
reserve one share of Common Stock for issuance upon exchange of the Class D
Stock. The Company does not have sufficient authorized, unissued and unreserved
shares of Common Stock to permit the issuance of the number of shares of Common
Stock that would be required to be issued upon exchange of the Class D stock
into which the Series B Preferred Stock is convertible.
The Board of Directors believes that it is in the best interests of the
Company and its stockholders to increase the number of authorized shares of
Common Stock and Preferred Stock so that a sufficient number of additional
shares of Common Stock and Preferred Stock will be available to effect the
transactions contemplated by the Purchase Agreement and for issuance from time
to time in connection with possible future financing programs, stock dividends,
acquisitions, stock option and other employee benefit plans and other general
corporate purposes. Having such additional authorized shares of Common Stock and
Preferred Stock available for issuance in the future will give the Company
greater flexibility and allow additional shares of Common Stock and Preferred
Stock, in excess of the number of
23
<PAGE>
such shares presently authorized, to be issued without the expense and delay of
a special meeting of stockholders unless such meeting is required for the
particular transaction by applicable law or regulations or the rules of any
stock exchange on which the shares of Common Stock may then be listed or quoted.
Stockholders will have no preemptive rights with respect to any issuance of
the newly authorized shares of Common Stock or Preferred Stock. The issuance of
additional shares of Common Stock or Preferred Stock could have the effect of
diluting the economic and voting rights of the existing holders of Common Stock.
Finally, although generally the newly authorized Common Stock and Preferred
Stock could be issued at the discretion of the Board of Directors, in certain
circumstances (involving certain issuances of stock (i) to related parties or
under employee benefit plans, (ii) equal to or more than 20% of the shares of
Common Stock then outstanding or (iii) resulting in a change of control of the
Company), the rules of the New York Stock Exchange may require specific
stockholder authorization of a proposed issuance of the newly authorized Common
Stock and Preferred Stock.
In addition, although the Company does not have any present intention to
issue the additional shares of Common Stock and Preferred Stock to oppose a
takeover bid, and the Company does not view the proposed amendment as an
anti-takeover measure, the authorization of additional shares of Common Stock
and Preferred Stock could possibly deter, or the issuance of such shares could
be utilized to frustrate, a takeover attempt which is not approved by incumbent
management, but which stockholders may deem to be in their best interests or in
which stockholders might receive a premium for their shares over the present
market value of such shares. To the extent that it impedes any such attempts,
the proposal may serve to perpetuate management. The proposal is not the result
of any knowledge of the Company of any specific effort to accumulate the
Company's securities or to obtain control of the Company by means of a merger,
tender offer, proxy solicitation or otherwise. The Company has no plans at the
present time to submit to the stockholders for approval, or take any other
action with respect to, any other proposal that might be deemed to have an
anti-takeover effect. Cumulative voting in the election of directors is not
provided for under the Restated Articles of the Company. See "Existing
Anti-Takeover Provisions" below.
EXISTING ANTI-TAKEOVER PROVISIONS
The consummation of the Investment may diminish the ability of current
stockholders to sell the Company without the concurrence of AIG. See "Certain
Considerations--Diminished Ability to Sell the Company". The Charter of the
Company and the Maryland General Corporation Law contain certain other
provisions that could have the effect of delaying, deferring or preventing a
change in control of the Company.
Maryland Business Combination Law. The Maryland Business Combination Law
prohibits any "Business Combination" (as defined generally to include a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer or
issuance or reclassification of equity securities) between a Maryland
corporation (such as the Company) and any "Interested Stockholder" (defined
generally as any person that, directly or indirectly, beneficially owns 10
percent or more of the outstanding voting stock of the corporation) for a period
of five years after the date the person becomes an Interested Stockholder. After
such five year period, a Business Combination between a Maryland corporation and
such Interested Stockholder is prohibited unless either certain "fair price"
provisions are complied with or the Business Combination is approved by certain
supermajority stockholder votes. The Maryland Business Combination Law
restrictions do not apply to a Business Combination with an Interested
Stockholder if such Business Combination is approved by a resolution of the
board of directors of the corporation adopted prior to the date on which the
Interested Stockholder became such.
In connection with the execution of the Purchase Agreement, the Board of
Directors of the Company adopted a resolution to exempt further transactions
between the Company and its subsidiaries and AIG and its subsidiaries from the
provisions of the Maryland Business Combination Law but only if
24
<PAGE>
AIG or its subsidiaries shall have become an Interested Stockholder as a result
of the acquisition of securities of the Company in a manner and to the extent
permitted under the Purchase Agreement.
Rights Agreement. On June 11, 1987, at the time of the execution of the
Company's Rights Agreement, the Company's Board of Directors declared a dividend
of one Right, as defined in the Rights Agreement (a "Right"), for each
outstanding share of Common Stock, Class A Stock and Class C Stock. The Common
Stock, Class C Stock and Class A Stock are collectively referred to herein as
the "Voting Stock." The Rights Agreement was amended and restated as of March
22, 1990 and further amended as of April 21, 1992. The following description
summarizes the Rights Agreement, as amended.
The Rights are currently traded with the Voting Stock and detach and become
exercisable only upon the earlier to occur of (i) ten (10) days following a
public announcement by the Company that a person or group of affiliated or
associated persons (a "Person") has acquired, or obtained the right to acquire,
"beneficial ownership" (as defined in the Rights Agreement) of 10% or more of
the outstanding Voting Stock (such Person, an "Acquiring Person") (the date of
such announcement, the "Shares Acquisition Date") or (ii) ten (10) business days
(or such later date as may be determined by action of the Board of Directors
prior to such time as any Person becomes an Acquiring Person) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in any Person becoming an
Acquiring Person (the earlier of such dates being called the "Distribution
Date").
Each Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of Series A Junior Participating Preferred Stock, $1.00
par value per share (the "Preferred Shares"), of the Company, at a price of $85
per one one-hundredth of a Preferred Share.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $10.00 per share but will be entitled to an
aggregate dividend of 100 times the dividend declared per share of Common Stock.
In the event of liquidation, the holders of the Preferred Shares will be
entitled to a minimum preferential liquidation payment of $100 per share but
will be entitled to an aggregate payment of 100 times the payment made per share
of Common Stock. Each Preferred Share will have 100 votes, voting together with
the Common Stock. Finally, in the event of any merger, consolidation or other
transaction in which shares of Common Stock are exchanged, each Preferred Share
will be entitled to receive 100 times the amount received per share of Common
Stock. These rights are protected by customary antidilution provisions.
Because of the nature of the Preferred Shares' dividend, liquidation and
voting rights, the value of the one one-hundredth interest in a Preferred Share
purchasable upon exercise of each right should approximate the value of one
share of Common Stock.
In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets, earning
power, or cash flow are sold, proper provision will be made so that each holder
of a Right will thereafter have the right to receive, upon the exercise thereof
at the then-current exercise price of the Right, that number of shares of common
stock of the acquiring company (or the Company, as the case may be) which at the
time of such transaction will have a market value of two times the exercise
price of the Right.
In the event that any Person becomes an Acquiring Person, proper provision
shall be made so that each holder of a Right, other than Rights beneficially
owned by the Acquiring Person (which will thereafter be void), will thereafter
have the right to receive upon exercise that number of one-hundredths of a
Preferred Share (or, under certain circumstances, other equity securities, debt
securities, cash, a reduction in the exercise price of the Right, and/or other
property, or a combination of the foregoing) having a value of two times the
exercise price of the Right.
25
<PAGE>
At any time after any Person becomes an Acquiring Person and prior to the
acquisition by such Person of 50% or more of the outstanding Voting Stock, the
Board of Directors of the Company may exchange the Rights (other than Rights
beneficially owned by such Person which have become void), in whole or in part,
at an exchange ratio of one one-hundredth of a Preferred Share per Right
(subject to adjustment).
The Rights will expire on July 6, 1997 (the "Final Expiration Date"),
unless the Final Expiration Date is extended or unless the Rights are earlier
redeemed by the Company. At any time prior to any Person becoming an Acquiring
Person, the Board of Directors of the Company may redeem the Rights in whole,
but not in part, at a price of $.01 per Right (the "Redemption Price").
Immediately upon the action of the Board of Directors ordering redemption of the
Rights, the right to exercise the Rights will terminate and the only right of
the holders of Rights will be to receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of the
Company in any respect without the consent of the holders of the Rights prior to
there being an Acquiring Person. Thereafter, the Board of Directors of the
Company may amend the terms of the Rights without the consent of the holders of
the Rights, including an amendment to extend the Final Expiration Date, except
that no such amendment may adversely affect the interests of the holders of the
Rights.
In connection with the sale of the Series B Preferred Stock, the Company
has agreed to amend the Rights Agreement to the extent necessary to ensure that
the transactions contemplated by the Purchase Agreement do not cause any person
to become an Acquiring Person, cause the Distribution Date or the Shares
Acquisition Date to occur or give rise to a "Section 11(a) Event" (that is, an
event giving holders of Rights, other than the Acquiring Person, the right to
buy shares of Common Stock at half-price). See "THE PURCHASE AGREEMENT--Rights
Agreement Amendment."
The Rights Agreement was not intended to deter all takeover bids for the
Company and will not do so. For example, the Rights Agreement does not foreclose
an attractive offer to acquire all the Voting Stock at the same price or a
transaction approved by the Board of Directors. To the extent an acquiror is
discouraged by the Rights Agreement from acquiring an equity position in the
Company, stockholders may be deprived of receiving a premium for their shares.
The issuance of additional shares of Common Stock prior to the Distribution Date
will result in an increase in the number of Rights outstanding.
Other Maryland Law Provisions. Under the Maryland General Corporation Law,
an action required to be taken at a meeting of stockholders may be taken without
a meeting only if a written consent is signed by each stockholder entitled to
vote on the matter. The written request of one or more stockholders entitled to
cast at least 25% of all votes entitled to be cast at a meeting of stockholders
is required to initiate a call of a special meeting by the stockholders.
Other By-Law Provisions. Article I, Section 12, of the Company's by-laws
provides that for any proposal (other than election of directors) to be properly
brought by a stockholder before an annual meeting, written notice must be
delivered to or mailed and received at the principal executive offices of the
Company not less than 60 days nor more than 90 days prior to the meeting. If
less than 70 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, to be timely, notice from a stockholder
proposing business must be received by the Company by the 10th day following the
date notice of the meeting date was mailed or public disclosure of the meeting
date was made, whichever occurs first. The stockholder's written notice must
contain a brief description of the proposal and reasons for conducting such
business at the annual meeting, the stockholder's name and address (as they
appear on the Company's books), the class and number of shares beneficially
owned by the stockholder, and any material interest of the stockholder in such
business.
The Company's by-laws further provide that (i) in the event the presiding
officer of the meeting determines that the timely written notice requirements
have not been complied with, such presiding officer shall disregard the
defective business proposal or disregard the defective nomination, and (ii)
notwithstanding the provisions of the by-laws with respect to the matters set
forth in Article I,
26
<PAGE>
Section 12, a stockholder shall also comply with all applicable requirements of
the Securities and Exchange Act of 1934 and the rules and regulations
thereunder.
The provisions of the by-laws of the Company described above do not affect
the rights and obligations of stockholders under the Securities and Exchange
Commission Rule 14a-8, which relates to the inclusion of stockholder proposals
in proxy materials.
TERMS OF SERIES B PREFERRED STOCK AND CLASS D COMMON STOCK
The terms of the proposed Series B Preferred Stock and Class D Stock are
summarized above under "THE PURCHASE AGREEMENT--Terms of Series B Preferred
Stock" and "--Terms of Class D Stock."
REQUIRED VOTE
Approval of Proposal 2 requires the concurrence of a majority of the
aggregate of the votes entitled to be cast on the proposal by stockholders of
the Company. For this purpose, abstentions and broker non-votes will have the
effect of votes against Proposal 2.
Approval of Proposal 2 is conditioned on approval of Proposal 1.
The Board of Directors unanimously recommends that stockholders approve
Proposal 2.
MISCELLANEOUS
In the event that sufficient votes in favor of the Investment Proposals are
not received by July 15, the persons named in the enclosed proxy card may
propose one or more adjournments of the meeting to permit further solicitation
of proxies. Any such adjournment will require the affirmative vote of a majority
of the votes cast on the matter at the meeting. The persons named in the
enclosed proxy card will vote in favor of such adjournment those proxies which
they are entitled to vote in favor of the Investment Proposal for which further
solicitation of proxies is to be made. They will vote against any such
adjournment those proxies required to be voted against such Investment Proposal.
The costs of any such additional solicitation and of any adjourned session will
be borne by the Company.
STOCKHOLDER PROPOSALS FOR 1995 MEETING
Stockholders are advised that any proposals of stockholders intended to be
presented at the 1995 Annual Meeting of Stockholders must be received by the
Company on or before December 15, 1994 for inclusion in the Company's proxy
statement and form of proxy relating to that meeting. In addition, the by-laws
of the Company establish an advance notice requirement for any proposal of
business to be considered at an annual meeting of stockholders that is not made
by or at the recommendation of a majority of the directors then in office. In
general, written notice must be delivered to the Secretary of the Company at its
principal executive office, 1211 Avenue of the Americas, New York, New York
10036, within certain time periods in advance of the meeting and must contain
specified information concerning the matter to be brought before the meeting and
the stockholder proposing the matter. Any stockholder desiring a copy of the
by-laws of the Company will be furnished one without charge upon written request
to the Secretary of the Company.
27
<PAGE>
OTHER MATTERS
Under Maryland law and the by-laws of the Company, no other business may be
transacted at the Special Meeting.
By order of the Board of Directors,
Frank R. Wieczynski
Secretary
28
<PAGE>
APPENDIX I
----------------------------------------------------------------------------
STOCK PURCHASE AND SALE AGREEMENT
----------------------------------------------------------------------------
BETWEEN
ALEXANDER & ALEXANDER SERVICES INC.
AND
AMERICAN INTERNATIONAL GROUP, INC.
------------------------
Dated as of June 6, 1994
<PAGE>
TABLE OF CONTENTS
<TABLE><CAPTION>
SECTION HEADING PAGE
- - - --------- ------------------------------------------------------------------------------------------- -----------
<S> <C> <C>
1. Definitions; Certain References....................................................................... 1
a. Definitions................................................................................ 1
2. Closing............................................................................................... 3
a. Time and Place of the Closing.............................................................. 3
b. Transactions at the Closing................................................................ 3
3. Conditions to the Closing............................................................................. 3
a. Conditions Precedent to the Obligations of the Purchasers.................................. 3
1. Compliance by A&A...................................................................... 3
2. No Legal Action........................................................................ 4
3. Amendment of Charter................................................................... 4
4. Shareholder Approval................................................................... 4
5. Stock Exchange Listing................................................................. 4
6. Rights Agreement....................................................................... 4
7. Regulatory Matters..................................................................... 4
8. Insurance Arrangement.................................................................. 4
9. Legal Opinions......................................................................... 4
10. Registration Rights Agreement......................................................... 9
11. Other................................................................................. 9
12. Hart-Scott-Rodino..................................................................... 9
13. Articles Supplementary; Articles of Amendment......................................... 9
14. Exemption from Special Voting Requirements............................................ 9
15. Special Events........................................................................ 9
b. Conditions Precedent to Obligations of A&A................................................. 9
1. Compliance by AIG...................................................................... 9
2. No Legal Action........................................................................ 9
3. Amendment of Charter................................................................... 10
4. Shareholder Approval................................................................... 10
5. Regulatory Matters..................................................................... 10
4. Representations and Warranties of A&A................................................................. 10
a. Organization, Good Standing, Power, Authority, Etc......................................... 10
b. Capitalization of A&A...................................................................... 10
c. Registration Rights........................................................................ 11
d. SEC Documents.............................................................................. 11
e. Proxy Statement............................................................................ 11
f. Authority and Qualification of A&A......................................................... 11
g. Subsidiaries............................................................................... 11
h. Outstanding Securities..................................................................... 12
i. No Contravention, Conflict, Breach, Etc.................................................... 12
j. Consents................................................................................... 12
k. No Existing Violation, Default, Etc........................................................ 12
l. Licenses and Permits....................................................................... 13
m. Title to Properties........................................................................ 13
n. Environmental Matters...................................................................... 13
o. Taxes...................................................................................... 13
p. Litigation................................................................................. 14
q. Labor Matters.............................................................................. 14
r. Contracts.................................................................................. 14
s. Finder's Fees.............................................................................. 14
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
t. Financial Statements....................................................................... 14
u. ERISA...................................................................................... 14
v. Contingent Liabilities..................................................................... 15
w. No Material Adverse Change................................................................. 15
x. Investment Company......................................................................... 15
y. Exemption from Registration; Restrictions on Offer and 16
Sale of Same or Similar Securities.........................................................
z. Use of Proceeds............................................................................ 16
5. Representations and Warranties of the Purchasers...................................................... 16
a. Organization, Good Standing, Power, Authority, Etc......................................... 16
b. No Conflicts; No Consents.................................................................. 16
c. Investment Intent, Etc..................................................................... 16
6. Covenants of the Parties.............................................................................. 17
a. Restrictive Legends........................................................................ 17
b. Certificates for Shares and Conversion Shares To Bear Legends.............................. 17
c. Removal of Legends......................................................................... 18
d. Pre-Closing Activities..................................................................... 18
e. Information................................................................................ 18
f. Restriction on Issuance of Stock........................................................... 19
g. Restriction on Amendments to By-Laws....................................................... 19
h. Stockholders Meeting....................................................................... 19
i. Hart-Scott-Rodino.......................................................................... 19
j. Acquisition Proposals...................................................................... 19
k. Access..................................................................................... 20
l. Publicity.................................................................................. 20
m. Certain Special Events..................................................................... 20
n. Reservation of Shares...................................................................... 20
o. Adjustment Payments........................................................................ 20
7. Standstill............................................................................................ 21
8. Termination........................................................................................... 24
9. Survival of Representations and Warranties............................................................ 24
10. Performance; Waiver................................................................................... 24
11. Successors and Assigns................................................................................ 24
12. Miscellaneous......................................................................................... 25
a. Notices.................................................................................... 25
b. Expenses................................................................................... 25
c. Governing Law.............................................................................. 25
d. Severability; Interpretation............................................................... 25
e. Headings................................................................................... 26
f. Entire Agreement........................................................................... 26
g. Counterparts............................................................................... 26
</TABLE>
Exhibits
Exhibit 1--Articles of Amendment
Exhibit 2--Articles Supplementary
Exhibit 3--Registration Rights Agreement
Exhibit 4--Rights Agreement Amendment
Exhibit 5--Charter of A&A
Exhibit 6--By-laws of A&A
ii
<PAGE>
STOCK PURCHASE AND SALE AGREEMENT
STOCK PURCHASE AND SALE AGREEMENT ("AGREEMENT") dated as of June 6, 1994,
between ALEXANDER & ALEXANDER SERVICES INC., a Maryland corporation ("A&A"), and
AMERICAN INTERNATIONAL GROUP, INC., a Delaware corporation ("AIG").
WHEREAS, A&A desires to sell to one or more of AIG and its wholly-owned
subsidiaries as designated by AIG (the "Purchasers" and each a "Purchaser"), and
the Purchaser or Purchasers desire to purchase, an aggregate of 4,000,000 shares
(the "Shares") of 8% Series B Cumulative Convertible Preferred Stock, par value
$1.00 per share, of A&A (the "Series B Stock") for the consideration and upon
the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants, agreements and conditions contained
herein, each of A&A and AIG agree as follows:
1. DEFINITIONS; CERTAIN REFERENCES.
a. Definitions. The terms defined in this Section 1, whenever used in this
Agreement, shall have the following meanings for all purposes of this Agreement:
"A&A" has the meaning set forth in the first paragraph of this
Agreement.
"Act" means the Securities Act of 1933, as amended.
"Affiliate" has the meaning set forth in Rule 12b-2 under the Exchange
Act.
"AIG" has the meaning set forth in the first paragraph of this
Agreement.
"AIG Group" has the meaning set forth in Section 7.a.
"Annual Report" has the meaning set forth in Section 3.a.9(A)(i).
"Articles of Amendment" means the Articles of Amendment of the Charter
of A&A, to be filed for record by A&A, subject to the approval thereof by
the stockholders of A&A as contemplated by Section 3.a.3, with the State
Department of Assessments and Taxation of Maryland on or prior to the date
and time of the Closing, a true and correct copy of which is attached as
Exhibit 1 hereto.
"Articles Supplementary" means the Articles Supplementary classifying
6,200,000 shares of A&A's preferred stock as Series B Stock, to be filed
for record by A&A with the State Department of Assessments and Taxation of
Maryland on or prior to the date and time of the Closing, a true and
correct copy of which is attached as Exhibit 2 hereto.
"Charter" means the Articles of Restatement of the charter of A&A as
filed for record with the State Department of Assessments and Taxation of
Maryland, as amended to date and as it is to be amended by the Articles of
Amendment.
"Class A Common Stock" means the Class A Common Stock, par value
$.00001 per share, of A&A.
"Class C Common Stock" means the Class C Common Stock, par value $1.00
per share, of A&A.
"Class D Common Stock" means the Class D Common Stock, par value $1.00
per share, of A&A, to be created by A&A as described in the Articles of
Amendment.
"Closing" has the meaning set forth in Section 2.a of this Agreement.
"Closing Date" has the meaning set forth in Section 2.a of this
Agreement.
"Common Stock" means the common stock, par value $1.00 per share, of
A&A.
<PAGE>
"Conversion Shares" means the shares of Class D Common Stock issuable
or issued upon conversion of the Shares pursuant to the terms of this
Agreement and the Articles Supplementary.
"Encumbrances" has the meaning set forth in Section 4.g of this
Agreement.
"Environmental Laws" has the meaning set forth in Section 4.k of this
Agreement.
"ERISA" has the meaning set forth in Section 4.u of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Shares" means the shares of Common Stock issuable or issued
in exchange for the Conversion Shares (or, in the case of a registered
public offering of Series B Stock, upon conversion of Series B Stock)
pursuant to the terms of this Agreement and the Charter.
"Incorporated Document" has the meaning set forth in Section
3.a.9(A)(v) of this Agreement.
"Licenses" has the meaning set forth in Section 4.l of this Agreement.
"Material Adverse Effect" has the meaning set forth in Section 4.f of
this Agreement.
"Proxy Statement" means the proxy statement with respect to the
transactions contemplated by this Agreement sent to the holders of Common
Stock, Class A Common Stock and Class C Common Stock in compliance with the
Exchange Act, as the same may be amended or supplemented.
"Purchase Price" means, in the case of each Purchaser, $50 multiplied
by the number of Shares to be purchased by such Purchaser and $200,000,000
in the aggregate.
"Purchaser" has the meaning set forth in the first recital of this
Agreement.
"Purchasers" has the meaning set forth in the first recital of this
Agreement.
"Registrable Securities" means the Series B Stock, the Conversion
Shares, the Exchange Shares and any other securities issued or issuable
with respect to the Series B Stock, the Conversion Shares or the Exchange
Shares by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization; provided, however, that a security ceases to be a
Registrable Security when it is no longer a Transfer Restricted Security.
"Registration Rights Agreement" means the Registration Rights
Agreement to be dated as of the date of the Closing among A&A and the
Purchasers party thereto, in the form attached as Exhibit 3 hereto, as
amended, supplemented and modified from time to time in accordance with the
terms thereof.
"Restricted Securities" has the meaning set forth in Section 7.a(i) of
this Agreement.
"Rights Agreement" means the Rights Agreement between A&A and First
Chicago Trust Company of New York, dated as of June 11, 1987, as amended
and restated on March 22, 1990, as amended on April 21, 1992 and as it is
to be amended pursuant to Section 3.a.6 hereof.
"Rights Agreement Amendment" has the meaning set forth in Section
3.a.6 of this Agreement.
"SEC" means the Securities and Exchange Commission.
"SEC Documents" means all documents filed by A&A with the SEC since
January 1, 1993.
"Series B Stock" has the meaning set forth in the first recital of
this Agreement.
"Shares" has the meaning set forth in the first recital of this
Agreement.
2
<PAGE>
"Significant Subsidiary" means each of Alexander & Alexander Services
UK plc, Reed Stenhouse Companies Limited and each other Subsidiary of A&A
that had consolidated assets at December 31, 1993 with a book value, net of
intercompany accounts, in excess of 10% of the consolidated assets of A&A
at such date or that, net of intercompany items, contributed more than 10%
to the consolidated revenues or consolidated operating income of A&A for
the year ended December 31, 1993.
"Special Event" has the meaning specified in the Articles
Supplementary.
"Standstill Period" has the meaning set forth in Section 7.c of this
Agreement.
"Subsidiary" means, with respect to any person, any corporation,
limited or general partnership, joint venture, association, joint stock
company, trust, unincorporated organization, or other entity analogous to
any of the foregoing of which a majority of the equity ownership (whether
voting stock or comparable interest) is, at the time, owned, directly or
indirectly by such person.
"Transaction Documents" means the Articles of Amendment, the Articles
Supplementary, the Rights Agreement Amendment and the Registration Rights
Agreement.
"Transfer Restricted Security" means a share of Series B Stock, a
Conversion Share, an Exchange Share and any other security which is a
Registrable Security until such share of Series B Stock, Conversion Share,
Exchange Share or other security (i) has been effectively registered under
the Act and disposed of in accordance with a registration statement filed
under the Act covering it or (ii) is distributed to the public pursuant to
Rule 144 under the Act.
2. CLOSING.
a. Time and Place of the Closing. The Closing (the "Closing") shall take
place at the offices of Cahill Gordon & Reindel, 80 Pine Street, New York, New
York, at 10:00 A.M., New York time, on the third business day following the
first date on which the conditions to Closing set forth in Section 3 hereof have
first been satisfied or waived. A&A shall give AIG two business days prior
written notice of the date the Closing is scheduled to occur. The "Closing Date"
shall be the date the Closing occurs.
b. Transactions at the Closing. At the Closing, subject to the terms and
conditions of this Agreement, A&A shall issue and sell to AIG and the other
Purchasers and AIG shall purchase, or shall cause the other Purchasers to
purchase, the Shares. At the Closing, A&A shall deliver to each Purchaser a
certificate or certificates representing the number of Shares to be purchased by
such Purchaser as reflected in a schedule delivered to A&A one business day
prior to the Closing registered in the name of such Purchaser or its nominee
against payment of the Purchase Price with respect thereto by wire transfer of
immediately available funds to an account or accounts previously designated by
A&A.
3. CONDITIONS TO THE CLOSING.
a. Conditions Precedent to the Obligations of the Purchasers. The
obligations of the Purchasers to be discharged under this Agreement on or prior
to the Closing are subject to satisfaction of the following conditions at or
prior to the Closing (unless expressly waived in writing by AIG at or prior to
the Closing):
1. Compliance by A&A. All of the terms, covenants and conditions of
this Agreement to be complied with and performed by A&A at or prior to the
Closing shall have been complied with and performed by it in all material
respects, and the representations and warranties made by A&A in this
Agreement shall be true and correct in all material respects at and as of
the Closing, with the same force and effect as though such representations
and warranties had been made at and as of
3
<PAGE>
the Closing, except for changes expressly contemplated by this Agreement
and except for representations and warranties that are made as of a
specific time which shall be true and correct in all material respects only
as of such time.
2. No Legal Action. No action, suit, investigation or other proceeding
relating to the transactions contemplated hereby shall have been instituted
or threatened before any court or by any governmental body which presents a
substantial risk of the restraint or prohibition of the transactions
contemplated hereby or the obtaining of material damages or other material
relief in connection therewith.
3. Amendment of Charter. The Articles of Amendment shall have been
duly approved by the required holders of A&A's stock, shall have been filed
with the State Department of Assessments and Taxation of Maryland and shall
have become effective.
4. Shareholder Approval. The transactions contemplated by this
Agreement, including the issuance of the Series B Stock, the Conversion
Shares and the Exchange Shares, shall have been duly approved by the
holders of A&A's stock as required by the rules of the New York Stock
Exchange, Inc. and any other securities exchange on which the Common Stock
is listed.
5. Stock Exchange Listing. The Exchange Shares shall have been
approved for listing, subject to notice of issuance, by the New York Stock
Exchange, Inc. and any other securities exchange on which the Common Stock
is listed.
6. Rights Agreement. The Rights Agreement shall have been amended by
an amendment in the form of Exhibit 4 hereto (the "Rights Agreement
Amendment") and shall otherwise be in full force and effect and not have
been otherwise amended, modified or supplemented on or after the date of
this Agreement.
7. Regulatory Matters. AIG shall be satisfied in its sole discretion
as to the non-applicability of the insurance holding company and
broker-controlled insurer statutes of each jurisdiction (x) in the United
States of America or any state, territory or possession thereof and (y)
each other jurisdiction wherever located which is material to the conduct
of the business conducted by it and its Subsidiaries, in each case with
respect to the purchase and holding by the Purchasers of the Series B
Stock, the Conversion Shares and the Exchange Shares (including the receipt
of such approvals or advice from regulatory authorities with respect
thereto as AIG may determine). AIG shall be satisfied as to the
applicability of foreign investment and other similar laws or regulations
of each jurisdiction outside the United States of America where AIG or its
subsidiaries or A&A or its Subsidiaries conduct business with respect to
the purchase and holding by the Purchasers of the Series B Stock, the
Conversion Shares and the Exchange Shares such that the application of such
laws or regulations would not in its reasonable discretion have,
individually or in the aggregate, a material adverse effect on AIG and its
subsidiaries taken as a whole or A&A and its Subsidiaries taken as a whole.
8. Insurance Arrangement. On or before July 5, 1994, A&A shall have
entered into an insurance or reinsurance arrangement with respect to its
discontinued operations that is reasonably satisfactory to AIG with an
insurer reasonably satisfactory to AIG.
9. Legal Opinions.
(A) A&A shall have furnished to the Purchasers on the Closing Date
the opinion of Ronald J. Roessler, Senior Vice President and General
Counsel of A&A, dated the Closing Date, in form reasonably satisfactory
to the Purchasers, to the effect that:
(i) each of A&A and the Significant Subsidiaries has been duly
incorporated and, where applicable, is validly existing as a
corporation in good standing under the laws of
4
<PAGE>
the jurisdiction in which it is chartered or organized, with full
corporate power and authority to own its properties and conduct its
business as described in A&A's Annual Report on Form 10-K for the
year ended December 31, 1993 as filed with the SEC ("Annual Report");
A&A is duly qualified to do business as a foreign corporation and is
in good standing under the laws of New York; Alexander Reinsurance
Intermediaries Inc. is duly qualified to do business as a foreign
corporation and is in good standing under the laws of Connecticut;
(ii) all the outstanding shares of stock of each Significant
Subsidiary have been duly and validly authorized and issued and are
full paid and nonassessable (or, with respect to foreign
subsidiaries, have similar status), and all outstanding shares
(except for directors' qualifying shares) of stock of the Significant
Subsidiaries are owned by A&A either directly or through wholly-owned
subsidiaries (except as set forth in Exhibit 21 to A&A's Annual
Report and as disclosed in a single writing from A&A to AIG
specifically identified as such and dated the date hereof) free and
clear of any perfected security interest and, to the best knowledge
of such counsel, any other security interests, claims, liens or
encumbrances, except where the failure to so own the stock of a
Significant Subsidiary would not have a Material Adverse Effect;
(iii) to the actual knowledge of such counsel, neither A&A nor
any of the Significant Subsidiaries incorporated under the laws of
New York or Maryland is in violation of any term or provision of (A)
its charter or bylaws or (B) any judgment, decree or order
specifically applicable to A&A or such Significant Subsidiary, or any
applicable United States federal, New York or Maryland statute, rule
or regulation, except with respect to clause (B) of this paragraph
(iii) such violations which would not individually or in the
aggregate have a Material Adverse Effect;
(iv)] except as set forth in the Annual Report or in A&A's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1994
(the "Quarterly Report"), to the actual knowledge of such counsel no
default exists, and no event has occurred which with notice, lapse of
time, or both, would constitute a default, in the due performance and
observance of any term, covenant or condition of any debt agreement
to which A&A or any of the Significant Subsidiaries is a party or by
which it or any of them is bound, except such defaults which would
not individually or in the aggregate have a Material Adverse Effect;
(v) to the actual knowledge of such counsel, there is no pending
or threatened action or suit or proceeding before any court or
governmental agency or body or any arbitrator involving A&A or any of
the Subsidiaries which is reasonably likely to have a Material
Adverse Effect and which is not adequately disclosed in the Annual
Report, the Quarterly Report, another SEC Document filed after the
date of this Agreement or a document filed with the SEC and
incorporated by reference therein ("Incorporated Document") after the
date of this Agreement;
(vi) to the actual knowledge of such counsel, there is no
pending or threatened action, suit or proceeding before any court or
governmental agency or body or any arbitrator to which A&A is a party
that questions the validity of this Agreement or the Registration
Rights Agreement or any action to be taken pursuant hereto or
thereto, with only such exceptions as shall have been disclosed in
reasonable detail to AIG;
(vii) A&A's authorized equity capitalization is as set forth in
Section 4.b of this Agreement; the outstanding shares of stock of A&A
have been duly and validly authorized and issued and are full paid
and nonassessable; and the holders of outstanding shares of stock of
A&A are not entitled pursuant to A&A's Charter or bylaws or any
agreement known to such counsel to preemptive or other rights to
subscribe for the Shares, the Conversion Shares or the Exchange
Shares;
5
<PAGE>
(viii) A&A has all requisite corporate power and authority, and
has taken all requisite corporate action, necessary to enter into
this Agreement, the Rights Agreement Amendment and the Registration
Rights Agreement, to carry out the provisions and conditions of this
Agreement, the Rights Agreement Amendment and the Registration Rights
Agreement and the transactions contemplated in this Agreement, the
Rights Agreement Amendment and the Registration Rights Agreement, to
issue and sell the Shares in the manner contemplated by this
Agreement, to issue shares of Series B Stock as dividends on the
Shares (subject only to declaration by the Board of Directors of
A&A), to issue the Conversion Shares issuable upon conversion of the
Series B Stock, to issue Exchange Shares upon the exchange of shares
of Class D Common Stock or (in the case of a registered public
offering of the Series B Stock) conversion of the shares of Series B
Stock as provided for in the Charter and Articles Supplementary and
to otherwise perform its obligations hereunder;
(ix) the issuance and sale of the Shares in the manner
contemplated herein, the issuance of the Conversion Shares issuable
upon conversion of shares of the Series B Stock in accordance with
the terms of the Charter and the Articles Supplementary, the issuance
of the Exchange Shares upon exchange of the Class D Common Stock or
(in the case of a registered public offering of the Series B Stock)
conversion of shares of the Series B Stock in accordance with the
terms of the Charter and the Articles Supplementary, the execution,
delivery and performance by A&A of this Agreement, the Rights
Agreement Amendment and the Registration Rights Agreement and the
consummation of any other transaction contemplated in this Agreement,
the Rights Agreement Amendment and the Registration Rights Agreement,
and the performance, as of the Closing Date if performed on such
date, by A&A of the obligations under the Charter and the Articles
Supplementary will not conflict with, result in a breach or violation
of, or constitute a default under (A) the charter or bylaws of A&A or
any of its Subsidiaries or (B) the terms of any indenture or other
agreement or instrument known to such counsel and to which A&A or any
of its Subsidiaries is a party or by which it or any of them is
bound, or (C) any judgment, order or decree known to such counsel to
be specifically applicable to A&A or any of its Subsidiaries of any
court, regulatory body, administrative agency, governmental body or
arbitrator, except with respect to clauses (B) and (C) of this
paragraph (ix), such conflicts, breaches, violations or defaults
which would not, individually or in the aggregate, have a Material
Adverse Effect; and
(x) those provisions of any contract or agreement that are
described in the Annual Report conform in all material respects to
the description thereof contained in the Annual Report.
Such counsel shall state that, without independent check or
verification of the factual accuracy or completeness of the Annual Report
or the Quarterly Report (except to the limited extent set forth in
paragraphs (iv), (v), (vii) and (x) above) or the Proxy Statement, no facts
have come to the attention of such counsel which causes such counsel to
believe that the statements in the Annual Report and the Quarterly Report
at their respective filing dates with the SEC or the Proxy Statement at its
mailing date and the date of the meeting of shareholders to which it
relates (other than the financial statements and other financial and
statistical information contained therein, as to which such counsel need
express no belief) contained an untrue statement of a material fact or
omitted 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.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the States of
Maryland and New York or the federal laws of the United States, to the
extent such counsel deems proper and specifies in such opinion, upon the
opinion of other counsel of good standing believed by such counsel to be
reliable and which opinion and
6
<PAGE>
counsel are satisfactory to the Purchasers (provided that such counsel
states that the Purchasers are justified in relying on such specified
opinion or opinions), and (B) as to matters of fact, to the extent such
counsel deems proper, on certificates of responsible officers of A&A and
public officials.
(B) A&A shall have furnished to the Purchasers on the Closing Date
the opinion of Debevoise & Plimpton, special counsel for A&A, dated the
Closing Date, in form reasonably satisfactory to the Purchasers, to the
effect that:
(i) to the actual knowledge of such counsel, there is no pending
or threatened action, suit or proceeding before any court, or
governmental agency or body or any arbitrator to which A&A is or is
threatened to be made a party that questions the validity of this
Agreement, the Rights Agreement Amendment or the Registration Rights
Agreement or any action to be taken pursuant hereto or thereto;
(ii) the certificates representing the Shares are in valid and
sufficient form; and the holders of outstanding shares of stock of
A&A are not entitled pursuant to A&A's Charter or the Articles
Supplementary or bylaws to preemptive or other rights as shareholders
to subscribe for the Series B Stock or the Conversion Shares issuable
upon conversion of the Series B Stock or the shares of Common Stock
issuable upon exchange for Class D Stock or (in the case of a
registered public offering of Series B Stock) conversion of Series B
Stock;
(iii) the Series B Stock and the Articles of Amendment and the
Articles Supplementary have been duly authorized, and, when issued
and delivered in accordance with the terms of this Agreement and as a
dividend on shares of Series B Stock, the Series B Stock will be
validly issued, full paid and nonassessable;
(iv) upon due execution, issuance and delivery in accordance
with this Agreement, the Charter and the Articles Supplementary, the
Shares will be convertible into the Conversion Shares or (in the case
of a registered public offering of the Series B Stock) into the
Exchange Shares in accordance with the terms of the Charter and the
Articles Supplementary; the Conversion Shares issuable upon such
conversion have been duly authorized and validly reserved for
issuance upon conversion and, when so issued upon conversion in
accordance with the terms of the Charter and the Articles
Supplementary, will be validly issued, full paid, and nonassessable;
the shares of Common Stock issuable upon exchange of the Class D
Common Stock or (in the case of a registered public offering of the
Shares) upon conversion of the Series B Stock have been duly
authorized and validly reserved for issuance upon exchange of the
Class D Common Stock or conversion of the Series B Stock, and when so
issued upon exchange or conversion in accordance with the terms of
the Charter and the Articles Supplementary will be validly issued,
full paid and nonassessable; the holders of shares of the Series B
Stock, Conversion Shares, or Exchange Shares of A&A will not be
subject to personal liability for obligations of A&A by reason of
being such holders; all consents, approvals, authorizations, orders,
registration and qualifications of or with any New York, Maryland or
Federal court or governmental agency or body, if any, and all
corporate approvals and authorizations, required to be obtained or
taken by A&A for or in connection with the authorization, issuance
and delivery of the Series B Stock and for the consummation of the
transactions contemplated hereby have been validly and sufficiently
obtained or taken (other than the declaration of dividends on Series
B Stock in Series B Stock) and are in full force and effect, except
such as may be required under the securities or blue sky laws of any
jurisdiction in connection with the purchase and distribution of the
Series B Stock by the Purchasers and such other approvals (specified
in such opinion) as have been obtained;
7
<PAGE>
(v) each of this Agreement, the Rights Agreement Amendment and
the Registration Rights Agreement has been duly authorized, executed
and delivered by A&A and, assuming due authorization, execution and
delivery thereof by the other parties hereto and thereto, is the
valid and binding obligation of A&A, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights
generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding
in equity or at law);
(vi) the issuance and sale of the Series B Stock in the manner
contemplated herein, the issuance of the Conversion Shares issuable
upon conversion of shares of the Series B Stock in accordance with
the terms of the Charter and the Articles Supplementary, the issuance
of the Exchange Shares upon exchange of the Class D Common Stock or
(in the case of a registered public offering of Series B Stock) upon
conversion of the Series B Stock in accordance with the terms of the
Charter and the Articles Supplementary, the execution, delivery and
performance by A&A of this Agreement, the Rights Agreement Amendment
and the Registration Rights Agreement and the consummation of any
other of the transactions contemplated in this Agreement, the Rights
Agreement Amendment and the Registration Rights Agreement, and the
performance, as of the Closing Date if performed on such date, by A&A
of the obligations under the Charter and the Articles Supplementary
will not conflict with, result in a violation or breach of, or
constitute a default under (A) the charter or bylaws of A&A or (B)
any United States federal, Maryland or New York statute, rule or
regulation applicable to A&A or any of the Significant Subsidiaries,
except with respect to clause (B) of this paragraph (vi), such
conflicts, breaches, violations or defaults which would not have a
Material Adverse Effect;
(vii) A&A is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended; and
(viii) in connection with the offer and sale of the Shares and
the delivery of the certificates representing the Shares delivered on
such Closing Date by A&A to the Purchasers pursuant to this
Agreement, and assuming the correctness of all representations and
warranties made by the Purchasers in Section 5.c and by A&A in
Section 4.y, it is not necessary to register such Shares under the
Act.
Such counsel shall state that (x) such counsel have not themselves
checked the accuracy and completeness of, or otherwise verified, and are
not passing upon and assume no responsibility for the accuracy or
completeness of, he statements contained in the Proxy Statement, and (y) in
the course of such counsel's review and discussion of the contents of the
Proxy Statement with certain officers and employees of A&A, including its
general counsel and his staff, the Purchasers and their counsel and A&A's
independent accountants, but without independent check or verification, no
facts have come to the attention of such counsel which causes such counsel
to believe that the statements in the Proxy Statement at its mailing date
and the date of the meeting of shareholders to which it relates contained
an untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that such counsel need
not express any view with respect to the adequacy or accuracy of, or the
application of generally accepted accounting principles to, the financial
statements or other financial or numerical data included in the Proxy
Statement.
In rendering such opinion, such counsel may (A) rely as to matters
involving the application of laws other than the State of New York or the
federal laws of the United States, to the extent such counsel deems proper
and specifies in such opinion, upon the opinion of other counsel of good
standing believed by such counsel to be reliable and which counsel and
opinion are satisfactory to the Purchasers (provided that such counsel
states that the Purchasers are justified in relying upon
8
<PAGE>
such specified opinion or opinions), and (B) rely as to matters of fact, to
the extent such counsel deems proper, on certificates of responsible
officers of A&A and public officials.
(C) The Purchasers shall have received from Cahill Gordon &
Reindel, counsel for the Purchasers, such opinion or opinions, dated
such Closing Date, with respect to the exemption from registration under
the Act for the offer and sale of such Shares and delivery of the Shares
by A&A to the Purchasers pursuant to this Agreement, and other related
matters as they may reasonably require, and A&A shall have furnished to
such counsel such documents as they reasonably request for the purpose
of enabling them to pass upon such matters.
10. Registration Rights Agreement. A&A shall have executed and
delivered at the Closing for the benefit of the Purchasers and their
successors and assigns the Registration Rights Agreement.
11. Other. A&A shall have furnished to the Purchasers such executed
and conformed copies of such other opinions and such certificates, letters
and documents as the Purchasers may reasonably request and as are customary
for transactions such as those contemplated by this Agreement.
12. Hart-Scott-Rodino. The waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 shall have expired or been terminated,
to the extent applicable.
13. Articles Supplementary; Articles of Amendment. The Articles
Supplementary and the Articles of Amendment shall each have been filed for
record with the State Department of Assessments and Taxation of Maryland
and shall have become effective.
14. Exemption from Special Voting Requirements. The Board of Directors
of A&A shall have irrevocably taken all action necessary under Section
3-603(c) of the Maryland General Corporation Law to exempt future
transactions between A&A and its Subsidiaries, on the one hand, and AIG and
its subsidiaries, on the other hand, from the provisions of Subtitle 6 of
the Maryland General Corporation Law, provided that such exemption shall be
applicable only if AIG or its Subsidiaries shall have become "interested
stockholders" as a result of the acquisition of securities of A&A in a
manner and to an extent permitted by this Agreement.
15. Special Events. No Special Event shall have occurred on or after
the date of this Agreement and on or prior to the Closing, other than the
execution and delivery of the Rights Agreement Amendment.
b. Conditions Precedent to Obligations of A&A. The obligations of A&A to be
discharged under this Agreement on or prior to the Closing are subject to
satisfaction of the following conditions at or prior to the Closing (unless
waived by A&A at or prior to the Closing):
1. Compliance by AIG. All of the terms, covenants and conditions of
this Agreement to be complied with and performed by AIG at or prior to the
Closing shall have been complied with and performed by AIG in all material
respects, and the representations and warranties made by the Purchasers in
this Agreement shall be true and correct in all material respects at and as
of the Closing, with the same force and effect as though such
representations and warranties had been made at and as of the Closing,
except for changes contemplated by this Agreement.
2. No Legal Action. No action, suit, investigation or other proceeding
relating to the transactions contemplated hereby shall have been instituted
before any court or instituted or threatened by any governmental body which
presents a substantial risk of the restraint or prohibition of the
transactions contemplated hereby or the obtaining of material damages or
other material relief in connection therewith.
9
<PAGE>
3. Amendment of Charter. The Articles of Amendment shall have been
approved by the required holders of A&A's stock, shall have been filed with
the State Department of Assessments and Taxation of the State of Maryland
and shall have become effective.
4. Shareholder Approval. The transactions contemplated by this
Agreement, including the issuance of the Series B Stock, the Conversion
Shares and the Exchange Shares, shall have been approved by the holders of
A&A's capital stock as required by the rules of the New York Stock
Exchange, Inc. and any other securities exchange on which the Common Stock
is listed.
5. Regulatory Matters. A&A shall be satisfied in its sole discretion
as to the non-applicability of the insurance holding company and
broker-controlled insurer statutes of each jurisdiction (x) in the United
States of America or any state, territory or possession thereof and (y)
each other jurisdiction wherever located which is material to the conduct
of the business conducted by it and its Subsidiaries, in each case with
respect to the purchase and holding by the Purchasers of the Series B
Stock, the Conversion Shares and the Exchange Shares (including the receipt
of such approvals or advice from regulatory authorities with respect
thereto as A&A may determine). A&A shall be satisfied as to the
applicability of foreign investment and other similar laws or regulations
of each jurisdiction outside the United States of America where A&A or its
Subsidiaries or AIG or its Subsidiaries conduct business with respect to
the purchase and holding by the Purchasers of the Series B Stock, the
Conversion Shares and the Exchange Shares such that the application of such
laws or regulations would not in its reasonable discretion have,
individually or in the aggregate, a material adverse effect on A&A and its
Subsidiaries taken as a whole.
4. REPRESENTATIONS AND WARRANTIES OF A&A.
A&A hereby represents and warrants to each of the Purchasers that, except
as specifically disclosed in a single writing from A&A to AIG specifically
identified as such and dated the date hereof:
a. Organization, Good Standing, Power, Authority, Etc. A&A is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Maryland. A&A has the full corporate power and authority to execute and
deliver this Agreement and each Transaction Document and to perform its
obligations under this Agreement and each Transaction Document. A&A has taken
all action required by law, its Charter, its by-laws or otherwise required to be
taken by it to authorize the execution, delivery and performance by it of this
Agreement and each Transaction Document. This Agreement is, and after the
Closing each Transaction Document will be, a valid and binding obligation of
A&A, enforceable in accordance with their respective terms, except that such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
and general principles of equity and except that rights to indemnity and
contribution may be limited by federal or state securities laws or policies
underlying such laws. True and complete copies of the Charter and bylaws of A&A
as in effect on the date hereof are attached as Exhibits 5 and 6 hereto.
b. Capitalization of A&A. After giving effect to the Articles of Amendment
and the Articles Supplementary the authorized stock of A&A will at the Closing
consist of: 200,000,000 shares of Common Stock, of which at May 1, 1994,
40,766,215 shares were outstanding; 26,000,000 shares of Class A Common Stock,
of which at May 1, 1994, 2,366,690 shares were outstanding; 11,000,000 shares of
Class C Common Stock, of which at June 2, 1994, 385,594 shares were outstanding;
40,000,000 shares of Class D Common Stock, none of which will be issued and
outstanding at the Closing; and 15,000,000 shares of preferred stock, of which
(w) 2,300,000 shares have been designated as $3.625 Series A Convertible
Preferred Stock and at June 2, 1994, 2,300,000 shares were outstanding, (x)
600,000 shares have been designated as Series A Junior Participating Preferred
Stock, and at June 2, 1994 none of which were outstanding, and (y) 6,200,000
shares will be designated as Series B Stock, of which 4,000,000 shares will be
issued and outstanding at the Closing and 2,200,000 shares will be reserved for
issuance to holders of Series B Stock as dividends pursuant to the Charter and
the
10
<PAGE>
Articles Supplementary. Since May 1, 1994, the Company has only issued shares of
Common Stock and Class A Common Stock in accordance with the terms of its
employee benefit plans as in existence on May 1, 1994, in all cases in the
ordinary course of business and in a manner and in amounts consistent with past
practice. All of the shares of Series B Stock issued at the Closing or issued as
dividends pursuant to the Charter and the Articles Supplementary will be duly
authorized, validly issued, full paid and nonassessable and entitled to the
benefits of, and have the terms and conditions set forth in, the Charter and the
Articles Supplementary. The Conversion Shares will be duly authorized and will
be reserved for such issuance and, when issued in accordance with the Charter
and the Articles Supplementary, will be duly and validly issued, full paid and
nonassessable. The Exchange Shares are duly authorized and, when issued in
accordance with the Charter and the Articles Supplementary, will be duly and
validly issued, full paid and nonassessable. All outstanding shares of stock of
A&A have been duly authorized, are validly issued, full paid and nonassessable
and have been issued in compliance with applicable federal and state securities
laws. The shareholders of A&A have no preemptive or similar rights with respect
to the securities of A&A. No further approval or authority of the shareholders
or of the Board of Directors of A&A will be required for the consummation by A&A
of the transactions contemplated by this Agreement and each of the Transaction
Documents, except for the declaration of dividends on Series B Stock in Series B
Stock and such as have been obtained or made and are in full force and effect.
c. Registration Rights. Each Purchaser shall, by virtue of its purchase of
Shares hereunder, be a holder of Registrable Securities, as defined in the
Registration Rights Agreement, and be entitled to the rights of such a holder
under the Registration Rights Agreement.
d. SEC Documents. Each of the SEC Documents, as of the date of its filing
with the SEC, did not include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
e. Proxy Statement. The Proxy Statement will not include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
f. Authority and Qualification of A&A. A&A has the corporate power and
authority to own, lease and operate its properties and to conduct its business
as described in the SEC Documents and as currently owned or leased and
conducted. A&A is duly qualified to transact business as a foreign corporation
and is in good standing in each jurisdiction in which the conduct of its
business or its ownership, leasing or operation of property requires such
qualification, other than any failure to be so qualified or in good standing as
would not singly or in the aggregate with all such other failures reasonably be
expected to have a material adverse effect on the assets, liabilities, results
of operations, prospects or condition (financial or otherwise) of A&A and the
Subsidiaries taken as a whole (each a "Material Adverse Effect").
g. Subsidiaries. Exhibit 21 to the Annual Report is a true, accurate and
correct statement of all of the information required to be set forth therein by
the regulations of the SEC. Each Subsidiary has been duly incorporated or
organized and is validly existing as a corporation or other legal entity in good
standing under the laws of the jurisdiction of its incorporation or formation,
has the corporate or other power and authority to own, lease and operate its
properties and to conduct its business as described in the SEC Documents and as
currently owned or leased and conducted and is duly qualified to transact
business as a foreign corporation or other legal entity and is in good standing
(if applicable) in each jurisdiction in which the conduct of its business or its
ownership, leasing or operation of property requires such qualification, other
than any failure to be so qualified or in good standing as would not singly or
in the aggregate with all such other failures reasonably be expected to have a
Material Adverse Effect. Except as disclosed in the SEC Documents filed with the
SEC prior to the date of this Agreement, all of the outstanding capital stock of
each Subsidiary has been duly authorized and validly
11
<PAGE>
issued, is fully paid and nonassessable and is owned by A&A, directly or through
Subsidiaries (other than directors' qualifying shares), free and clear of any
mortgage, pledge, lien, security interest, restriction upon voting or transfer,
claim or encumbrance of any kind ("Encumbrance") (other than such transfer
restrictions as may exist under federal and state securities laws), and there
are no rights granted to or in favor of any third party (whether acting in an
individual, fiduciary or other capacity) other than A&A to acquire any such
capital stock, any additional capital stock or any other securities of any
Subsidiary.
h. Outstanding Securities. Except as set forth in the SEC Documents filed
with the SEC prior to the date of this Agreement and except as contemplated by
this Agreement, there are no outstanding (A) securities or obligations of A&A
convertible into or exchangeable for any capital stock of A&A, (B) warrants,
rights or options to subscribe for or purchase from A&A any such capital stock
or any such convertible or exchangeable securities or obligations or (C)
obligations of A&A to issue such shares, any such convertible or exchangeable
securities or obligations, or any such warrants, rights or options.
i. No Contravention, Conflict, Breach, Etc. The execution, delivery and
performance of each of this Agreement and each of the Transaction Documents by
A&A and the consummation of the transactions herein and therein contemplated
will not (A) contravene any provision of the charter, by-laws or other
organization documents of it or of any of the Subsidiaries, or (B) conflict with
or 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 assets or properties of it or of any of the
Subsidiaries under, any statute, rule, regulation, order or decree of any
governmental agency or body or any court having jurisdiction over it or the
Subsidiaries or any of its or their respective properties, assets or operations,
or any indenture, mortgage, loan agreement, note or other agreement or
instrument for borrowed money, any guarantee of any agreement or instrument for
borrowed money or any lease, permit, license or other agreement or instrument to
which it or any of the Subsidiaries is a party or by which it or any such
Subsidiary is bound or to which any of the properties, assets or operations of
it or any such Subsidiary is subject which conflict, breach, violation, default,
creation or imposition has, or will have, individually or in the aggregate, a
Material Adverse Effect.
j. Consents. No consent, approval, authorization, order, registration,
filing or qualification of or with any (A) court or (B) government agency or
body or (C) other third party (whether acting in an individual, fiduciary or
other capacity) is required for the consummation of the transactions
contemplated by this Agreement or by any of the Transaction Documents to be
performed by A&A, except (1) such as will have been obtained and made and will
be in full force and effect as of the Closing and (2) such as may be required
under the Act and state securities laws in connection with the performance by
A&A of its obligations under the Registration Rights Agreement.
k. No Existing Violation, Default, Etc. Neither A&A nor any of the
Subsidiaries is in violation of (A) its charter, by-laws or other organization
documents or (B) any applicable law, ordinance, administrative or governmental
rule or regulation or (C) any order, decree or judgment of any court of
governmental agency or body having jurisdiction over A&A or any Subsidiary. The
properties, assets and operations of A&A and the Subsidiaries are in compliance
in all material respects with all applicable federal, state, local and foreign
laws, rules and regulations, orders, decrees, judgments, permits and licenses
relating to public and worker health and safety and to the protection and
clean-up of the natural environment and activities or conditions related
thereto, including, without limitation, those relating to the generation,
handling, disposal, transportation or release of hazardous materials
(collectively, "Environmental Laws"), other than any such failure to be in
compliance as would not singly or in the aggregate with all such other failures
reasonably be expected to have a Material Adverse Effect. With respect to such
properties, assets and operations, including any previously owned, leased or
operated properties, assets or operations, to the best knowledge of A&A, after
due inquiry, there are no past, present or reasonably anticipated future events,
conditions, circumstances, activities, practices,
12
<PAGE>
incidents, actions or plans of A&A or any of the Subsidiaries that may interfere
with or prevent compliance or continued compliance in all material respects with
applicable Environmental Laws, other than any such interference or prevention as
would not singly or in the aggregate with any such other interference or
prevention reasonably be expected to have a Material Adverse Effect. The term
"hazardous materials" shall mean those substances that are regulated by or form
the basis for liability under any applicable Environmental Laws.
Except as set forth in SEC Documents filed with the SEC prior to the date
of this Agreement, no event of default or event that, but for the giving of
notice or the lapse of time or both, would constitute an event of default exists
or, upon the consummation by A&A of the transactions contemplated by this
Agreement or any of the Transaction Documents, will exist under any indenture,
mortgage, loan agreement, note or other agreement or instrument for borrowed
money, any guarantee of any agreement or instrument for borrowed money or any
lease, permit, license or other agreement or instrument to which A&A or any of
the Subsidiaries is a party or by which A&A or any such Subsidiary is bound or
to which any of the properties, assets or operations of A&A or any such
Subsidiary is subject.
l. Licenses and Permits. A&A and the Subsidiaries have such certificates,
permits, licenses, franchises, consents, approvals, orders, authorizations and
clearances from appropriate governmental agencies and bodies ("Licenses") as are
necessary to own, lease or operate their properties and to conduct their
businesses in the manner described in the SEC Documents and as currently owned
or leased and conducted and all such Licenses are valid and in full force and
effect except such licenses which the failure to have or to be in full force and
effect individually or in the aggregate do not have a Material Adverse Effect.
To the best of A&A's knowledge, after due inquiry, A&A and the Subsidiaries are
in compliance in all material respects with their respective obligations under
such Licenses, with such exceptions as individually or in the aggregate do not
have a Material Adverse Effect, and no event has occurred that allows, or after
notice or lapse of time would allow, revocation or termination of such Licenses.
m. Title to Properties. A&A and the Subsidiaries have sufficient title to
all material properties (real and personal) owned by A&A and the Subsidiaries
which are necessary for the conduct of the business of A&A and the Subsidiaries
as described in the SEC Documents and as currently conducted, free and clear of
any Encumbrance that may materially interfere with the conduct of the business
of A&A and the Subsidiaries, taken as a whole, and to the best of A&A's
knowledge, after due inquiry, all material properties held under lease by A&A or
the Subsidiaries are held under valid, subsisting and enforceable leases.
n. Environmental Matters. Neither A&A nor any of the Subsidiaries is the
subject of any federal, state, local or foreign investigation, and neither A&A
nor any of the Subsidiaries has received any notice or claim (or is aware of any
facts that would form a reasonable basis for any claim), nor entered into any
negotiations or agreements with any third party, relating to any material
liability or remedial action or potential material liability or remedial action
under Environmental Laws, nor are there any pending, reasonably anticipated or,
to the best knowledge of A&A, threatened actions, suits or proceedings against
or affecting A&A, any of the Subsidiaries or their properties, assets or
operations in connection with any such Environmental Laws.
o. Taxes. A&A and the Subsidiaries have filed all federal, and all material
state, local and foreign, tax returns which, to the best knowledge of A&A's
officers, are required to be filed, and each has paid all taxes as shown on such
returns and on assessments received by it to the extent that such taxes and
assessments have become due. United States Federal income tax returns of A&A and
its Subsidiaries have been examined and closed through the fiscal year ended
December 31, 1978. The charges, accruals and reserves on the books of A&A and
its Subsidiaries in respect of taxes or other governmental charges are, in the
opinion of A&A, adequate.
13
<PAGE>
p. Litigation. Except as set forth in SEC Documents filed with the SEC
prior to the date of this Agreement, there are no pending actions, suits,
proceedings, arbitrations or investigations against or affecting A&A or any of
the Subsidiaries or any of their respective properties, assets or operations, or
with respect to which A&A or any of the Subsidiaries is responsible by way of
indemnity or otherwise, that are required under the Exchange Act to be described
in such SEC Documents, that questions the validity of this Agreement or any of
the Transaction Documents or any action to be taken pursuant to this Agreement
or any of the Transaction Documents, or that would singly or in the aggregate,
with all such other actions, suits, investigations or proceedings, reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect,
or could reasonably be expected to have a material adverse effect on the ability
of A&A to perform its obligations under this Agreement or any of the Transaction
Documents; and, to the best knowledge of A&A, after due inquiry, except as set
forth in SEC Documents filed with the SEC prior to the date of this Agreement,
no such actions, suits, proceedings or investigations are threatened or
contemplated and there is no basis for any such action, suit, proceeding or
investigation.
q. Labor Matters. No labor disturbance by the employees of A&A or any of
the Subsidiaries that has had or that is reasonably likely to have a Material
Adverse Effect exists or, to the best knowledge of A&A, after due inquiry, is
threatened.
r. Contracts. All of A&A's material contracts that are required to be
described in the SEC Documents or to be filed as exhibits thereto are described
in the SEC Documents or filed as exhibits thereto and are in full force and
effect. Neither A&A nor any of the Subsidiaries nor, to the best knowledge of
A&A, any other party is in breach of or default under any such contracts except
for such breaches and defaults as in the aggregate have not had and would not
have a Material Adverse Effect.
s. Finder's Fees. No broker, finder or other party is entitled to receive
from A&A, any of the Subsidiaries or any other person any brokerage or finder's
fee or any other fee, commission or payment as a result of the transactions
contemplated by this Agreement for which any Purchaser would have any liability
or responsibility.
t. Financial Statements. The audited consolidated financial statements and
related schedules and notes included in the SEC Documents comply in all material
respects with the requirements of the Exchange Act and the Act and the rules and
regulations of the SEC thereunder, were prepared in accordance with generally
accepted accounting principles consistently applied throughout the period
involved and fairly present the financial condition, results of operations, cash
flows and changes in stockholders' equity of the A&A and the Subsidiaries at the
dates and for the periods presented. The unaudited quarterly consolidated
financial statements and the related notes included in the SEC Documents present
fairly the financial condition, results of operations and cash flows of A&A and
the Subsidiaries at the dates and for the periods to which they relate, subject
to year-end audit adjustments (consisting only of normal recurring accruals),
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis except as otherwise stated therein and have been
prepared on a basis substantially consistent with that of the audited financial
statements referred to above except as otherwise stated therein.
u. ERISA. Each Plan complies in all material respects with the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), the Internal
Revenue Code of 1986, as amended (the "Code") and all other applicable statutes
and governmental rules and regulations, and (i) no "reportable event" (within
the meaning of Section 4043 of ERISA) has occurred with respect to any Plan,
(ii) neither A&A nor any of its ERISA Affiliates has withdrawn from any Plan or
Multiemployer Plan or instituted steps to do so, and (iii) no steps have been
instituted to terminate any Plan. No condition exists or event or transaction
has occurred in connection with any Plan which could result in the incurrence by
A&A or any of its ERISA Affiliates of a material liability. No Plan, or any
trust created thereunder, has incurred any "accumulated funding deficiency" as
defined in Section 302 of ERISA,
14
<PAGE>
whether or not waived. To the best knowledge of A&A, there are no actions, suits
or claims pending or threatened (other than routine claims for benefits) with
respect to any Plan. Neither A&A nor any of its ERISA Affiliates has incurred or
reasonably expects to incur any material liability under or pursuant to Title IV
of ERISA. No prohibited transactions described in Section 406 of ERISA or
Section 4975 of the Code have occurred which could result in material liability
to A&A or its Subsidiaries. Neither A&A nor any of its ERISA Affiliates has
incurred or expects to incur any "withdrawal liability" (within the meaning of
Part 1 of Subtitle E of Title IV of ERISA). Neither A&A nor any of its ERISA
Affiliates has been notified by any Multiemployer Plan that such Multiemployer
Plan is currently in reorganization or insolvency under and within the meaning
of Section 4241 or 4245 of ERISA or that such Multiemployer Plan intends to
terminate or has been terminated under Section 4041A of ERISA. As used herein
the term "Plan" means a "pension plan", as such term is defined in Section 3(2)
of ERISA (other than a Multiemployer Plan) established or maintained by A&A or
any of its ERISA Affiliates or as to which A&A or any of its ERISA Affiliates
has contributed or otherwise may have any liability. "Multiemployer Plan" shall
mean a "multiemployer plan", as such term is defined in Section 4001(a)(3) of
ERISA, to which A&A or any of its ERISA Affiliates is obligated to contribute or
otherwise may have any liability. "ERISA Affiliate" means any trade or business
(whether or not incorporated) which is under common control or would be
considered a single employer with A&A within the meaning of Section 414(b), (c),
(m) or (o) of the Code and the regulations promulgated under those sections or
within the meaning of Section 4001(b) of ERISA and the regulations promulgated
thereunder.
v. Contingent Liabilities. Except as fully reflected or reserved against in
the financial statements included in the Annual Report or the Quarterly Report,
or disclosed in the footnotes contained in such financial statements, A&A and
its Subsidiaries had no liabilities (including tax liabilities) at the date of
such financial statements, absolute or contingent, that were material either
individually or in the aggregate to A&A and its Subsidiaries taken as a whole.
Except as so reflected, reserved, or disclosed, A&A and its Subsidiaries have no
commitments which are materially adverse either individually or in the aggregate
to A&A and its Subsidiaries taken as a whole. Contingent liabilities arising
from the Share Purchase Agreement dated as of October 9, 1987 between Sphere
Drake Acquisition (U.K.) Limited and Alexander Stenhouse & Partners Ltd., other
than (a) such liabilities arising out of sections 10.4, 10.5, or 10.6(b) of said
Agreement or (b) such liabilities as to which recourse under said Agreement is
directly or indirectly limited to a purchase price adjustment, are not material
relative to the total amount of contingent liabilities arising from said
Agreement.
w. No Material Adverse Change. Since the latest date as of which
information is given in the SEC Documents filed prior to June 5, 1994, (A) A&A
and the Subsidiaries have not incurred any material liability or obligation
(indirect, direct or contingent), or entered into any material oral or written
agreement or other transaction, that is not in the ordinary course of business
or that could reasonably be expected to result in a Material Adverse Effect; (B)
A&A and the Subsidiaries have not sustained any loss or interference with its
business or properties from fire, flood, windstorm, accident or other calamity
(whether or not covered by insurance) that has had or that could reasonably be
expected to have a Material Adverse Effect; (C) there has been no material
change in the indebtedness of A&A and the Subsidiaries, no change in the stock
of A&A except for the issuance of shares of Common Stock pursuant to options or
conversion rights in existence at the date of this Agreement, and no dividend or
distribution of any kind declared, paid or made by A&A on any class of its
stock, except for regular quarterly dividends of not more than $0.90625 per
share of $3.625 Series A Convertible Preferred Stock and of not more than $0.025
per share of Common Stock, Class A Common Stock and Class C Common Stock (or the
equivalent in foreign currency); and (D) there has been no event causing a
Material Adverse Effect, nor any development that could, singly or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.
x. Investment Company. A&A is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
15
<PAGE>
y. Exemption from Registration; Restrictions on Offer and Sale of Same or
Similar Securities. Assuming the representations and warranties of the
Purchasers set forth in Section 5.c hereof are true and correct in all material
respects, the offer and sale of the Shares made pursuant to this Agreement will
be exempt from the registration requirements of the Act. Neither A&A nor any
person acting on its behalf has, in connection with the offering of the Shares,
engaged in (A) any form of general solicitation or general advertising (as those
terms are used within the meaning of Rule 502(c) under the Act), (B) any action
involving a public offering within the meaning of Section 4(2) of the Act, or
(C) any action which would require the registration of the offering and sale of
the Shares pursuant to this Agreement under the Act or which would violate
applicable state securities or "blue sky" laws. A&A has not made and will not
make, directly or indirectly, any offer or sale of Shares or of securities of
the same or a similar class as the Shares if as a result the offer and sale of
Shares contemplated hereby could fail to be entitled to exemption from the
registration requirements of the Act. As used herein, the terms "offer" and
"sale" have the meanings specified in Section 2(3) of the Act.
z. Use of Proceeds. The net proceeds of the sale of the Shares will be used
by A&A and its Subsidiaries for general corporate purposes. A&A intends that
such net proceeds will be used for investment in the continuing businesses of
A&A and the Subsidiaries and to fund the insurance or reinsurance arrangement
referred to in Section 3.a.8.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser hereby represents and warrants to A&A that:
a. Organization, Good Standing, Power, Authority, Etc. Such Purchaser has
the full power and authority to execute and deliver this Agreement and the
Registration Rights Agreement (to the extent that it is a party thereto), and to
perform its obligations under this Agreement and the Registration Rights
Agreement. Such Purchaser has taken all action required by law, its charter, its
by-laws or otherwise required to be taken by it to authorize the execution and
delivery of this Agreement and the Registration Rights Agreement (to the extent
that it is a party thereto) and the consummation of the transactions
contemplated to be performed by it hereby and thereby. Each of this Agreement
and the Registration Rights Agreement (to the extent that it is a party thereto)
is a valid and binding agreement of such Purchaser, enforceable in accordance
with their respective terms, except that such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights and general principles of
equity and except to the extent that rights to indemnity and contribution may be
limited by federal or state securities laws or policies underlying such laws.
b. No Conflicts; No Consents. Neither the execution and delivery of this
Agreement and the Registration Rights Agreement (to the extent that it is a
party thereto) nor the consummation by such Purchaser of the purchase
contemplated hereby will (i) conflict with, or result in a breach of, any
provision of its charter or by-laws or (ii) violate any statute or law or any
judgment, order, writ, injunction, decree, rule or regulation applicable to the
Purchaser and/or any of its subsidiaries. No consent, authorization or approval
of, or declaration, filing or registration with, or exemption by, any
governmental or regulatory authority is required in connection with the
execution and delivery of, and the performance by such Purchaser of its
obligations under, this Agreement or the Registration Rights Agreement or the
consummation by such Purchaser of the transactions to be performed by it as
contemplated hereby and thereby.
c. Investment Intent, Etc. Such Purchaser (i) has such knowledge,
sophistication and experience in business and financial matters that it is
capable of evaluating the merits and risks of an investment in the Shares, (ii)
fully understands the nature, scope and duration of the limitations on transfer
contained in this Agreement, (iii) can bear the economic risk of an investment
in the Shares and can afford a complete loss of such investment, and (iv) is
purchasing the Shares for investment and not with a view to, or for a sale in
connection with, any public distribution in violation of the Act. Such Purchaser
16
<PAGE>
acknowledges (x) receipt of the SEC Documents filed with the SEC prior to the
date of this Agreement and (y) that such Purchaser has been afforded the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of A&A concerning the merits and risks of
investing in the Shares, and to obtain such additional information that A&A
possesses or can acquire without unreasonable effort or expense that is
necessary to verify the accuracy and completeness of the information contained
in such SEC Documents.
6. COVENANTS OF THE PARTIES.
a. Restrictive Legends. Each Purchaser represents and warrants to and
agrees with A&A that such Purchaser will not dispose of any of such Purchaser's
shares of Series B Stock, Conversion Shares or Exchange Shares (unless, with
respect to such Conversion Shares or Exchange Shares, such Conversion Shares or
Exchange Shares were previously issued pursuant to an effective registration
statement under the Act) except pursuant to (i) an effective registration
statement under the Act or (ii) an applicable exemption from registration under
the Act. In connection with any sale by a Purchaser pursuant to clause (ii) of
the preceding sentence, such Purchaser shall furnish to A&A an opinion of
counsel reasonably satisfactory to A&A to the effect that such exemption from
registration is available in connection with such sale.
b. Certificates for Shares and Conversion Shares To Bear Legends. (A) So
long as the Series B Stock is Registrable Securities, they shall be subject to a
stop-transfer order and the certificate or certificates therefor shall bear the
following legend by which each holder thereof shall be bound:
"THE SHARES REPRESENTED BY THIS CERTIFICATE AND ANY SECURITIES
ISSUABLE UPON CONVERSION OR EXCHANGE HEREOF MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, OR (ii) AN APPLICABLE EXEMPTION FROM REGISTRATION
THEREUNDER. ANY SALE PURSUANT TO CLAUSE (ii) OF THE PRECEDING SENTENCE MUST
BE ACCOMPANIED BY AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
ALEXANDER & ALEXANDER SERVICES INC. TO THE EFFECT THAT SUCH EXEMPTION FROM
REGISTRATION IS AVAILABLE IN CONNECTION WITH SUCH SALE. IN ADDITION, THE
VOTING, SALE, ASSIGNMENT, TRANSFER, PLEDGE OR HYPOTHECATION OF THE SHARES
REPRESENTED BY THIS CERTIFICATE IS FURTHER SUBJECT TO RESTRICTIONS WHICH
ARE CONTAINED IN THE CHARTER, AS AMENDED, OF ALEXANDER & ALEXANDER SERVICES
INC., IN THE ARTICLES SUPPLEMENTARY GOVERNING THESE SHARES AND IN A STOCK
PURCHASE AND SALE AGREEMENT DATED AS OF JUNE 6, 1994, A COPY OF EACH OF
WHICH IS ON FILE WITH ALEXANDER & ALEXANDER SERVICES INC. AND WILL BE
FURNISHED BY THE CORPORATION TO THE STOCKHOLDER ON REQUEST AND WITHOUT
CHARGE."
(B) So long as the Conversion Shares are Registrable Securities, they
shall, unless previously issued pursuant to an effective registration statement
under the Act, be subject to a stop-transfer order and the certificate or
certificates representing any such Conversion Shares shall bear the following
legend by which each holder thereof shall be bound:
"THE SHARES REPRESENTED BY THIS CERTIFICATE AND ANY SHARES OR OTHER
SECURITIES ISSUABLE UPON EXCHANGE HEREOF MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, OR (ii) AN APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER.
ANY SALE PURSUANT TO CLAUSE (ii) OF THE PRECEDING SENTENCE MUST BE
ACCOMPANIED BY AN
17
<PAGE>
OPINION OF COUNSEL REASONABLY SATISFACTORY TO ALEXANDER & ALEXANDER
SERVICES INC. TO THE EFFECT THAT SUCH EXEMPTION FROM REGISTRATION IS
AVAILABLE IN CONNECTION WITH SUCH SALE. IN ADDITION, THE VOTING, SALE,
ASSIGNMENT, TRANSFER, PLEDGE OR HYPOTHECATION OF THE SHARES REPRESENTED BY
THIS CERTIFICATE IS FURTHER SUBJECT TO RESTRICTIONS WHICH ARE CONTAINED IN
THE CHARTER, AS AMENDED, OF ALEXANDER & ALEXANDER SERVICES INC. AND IN A
STOCK PURCHASE AND SALE AGREEMENT DATED AS OF JUNE 6, 1994, A COPY OF EACH
OF WHICH IS ON FILE WITH ALEXANDER & ALEXANDER SERVICES INC. AND WILL BE
FURNISHED BY THE CORPORATION TO THE STOCKHOLDER ON REQUEST AND WITHOUT
CHARGE."
(C) So long as the Exchange Shares are Registrable Securities, they shall,
unless previously issued pursuant to an effective registration statement under
the Act, be subject to a stop-transfer order and the certificate or certificates
representing any such Exchange Shares shall bear the following legend by which
each holder thereof shall be bound:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, OR (ii) AN APPLICABLE EXEMPTION FROM REGISTRATION
THEREUNDER. ANY SALE PURSUANT TO CLAUSE (ii) OF THE PRECEDING SENTENCE MUST
BE ACCOMPANIED BY AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
ALEXANDER & ALEXANDER SERVICES INC. TO THE EFFECT THAT SUCH EXEMPTION FROM
REGISTRATION IS AVAILABLE IN CONNECTION WITH SUCH SALE. IN ADDITION, THE
VOTING, SALE, ASSIGNMENT, TRANSFER, PLEDGE OR HYPOTHECATION OF THE SHARES
REPRESENTED BY THIS CERTIFICATE IS FURTHER SUBJECT TO RESTRICTIONS WHICH
ARE CONTAINED IN A STOCK PURCHASE AND SALE AGREEMENT DATED AS OF JUNE 6,
1994, A COPY OF EACH OF WHICH IS ON FILE WITH ALEXANDER & ALEXANDER
SERVICES INC. AND WILL BE FURNISHED BY THE CORPORATION TO THE STOCKHOLDER
ON REQUEST AND WITHOUT CHARGE."
c. Removal of Legends. After termination of the requirement that all or
part of such legend be placed upon a certificate, A&A shall, upon receipt by A&A
of evidence reasonably satisfactory to it that such requirement has terminated
and upon the written request of the holders of Series B Stock, Conversion Shares
or Exchange Shares, issue certificates for the Shares, Conversion Shares or
Exchange Shares, as the case may be, that do not bear such legend.
d. Pre-Closing Activities. From and after the date of this Agreement until
the Closing, each of A&A and AIG shall act with good faith towards, and shall
use its best efforts to consummate, the transactions contemplated by this
Agreement, and neither A&A nor AIG will take any action that would prohibit or
impair its ability to consummate the transactions contemplated by this
Agreement.
e. Information. So long as any of the Series B Stock, the Exchange Shares
or the Conversion Shares are outstanding, A&A shall file with the SEC the annual
reports and quarterly reports and the information, documents and other reports
that are required to be filed with the SEC pursuant to Sections 13 and 15 of the
Exchange Act, whether or not A&A has or is required to have a class of
securities registered under the Exchange Act and whether or not A&A is then
subject to the reporting requirements of the Exchange Act, at the time A&A is or
would be required to file the same with the SEC and, promptly after A&A is or
would be required to file such reports, information or documents with the SEC,
to mail copies of such reports, information and documents to the holders of the
Series B Stock, the Exchange Shares and the Conversion Shares at their addresses
set forth in the register of Shares and Conversion Shares maintained by the
transfer agent therefor.
18
<PAGE>
f. Restriction on Issuance of Stock. So long as any shares of Series B
Stock or any Conversion Shares are outstanding, A&A shall not issue, except upon
conversion of Series B Stock or in connection with a stock split, stock
combination or dividend with respect to Class D Common Stock, shares of Class D
Common Stock.
g. Restriction on Amendments to By-Laws. A&A shall not amend its by-laws so
as to affect the exemption contained therein from Subtitle 7 of Title 3 of the
Maryland General Corporation Law.
h. Stockholders Meeting. A&A shall, as promptly as practical, call a
meeting of the holders of its voting stock, shall recommend, and shall use its
best efforts (including the preparation and circulation of the Proxy Statement)
to obtain, the approval of such holders for the transactions contemplated by
this Agreement. The Proxy Statement shall not be filed, and no amendment or
supplement to the Proxy Statement shall be made, without consultation with AIG.
A&A shall notify AIG promptly of the receipt by it of any comments from the SEC
or its staff and of any request by the SEC for amendments or supplements to the
Proxy Statement and shall supply AIG with copies of all correspondence between
it and its representatives, on the one hand, and the SEC or the members of its
staff, on the other hand, with respect to the Proxy Statement.
i. Hart-Scott-Rodino. To the extent applicable, A&A and AIG shall make all
filings and furnish all information required with respect to the transactions
contemplated by this Agreement by the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 and shall use their best efforts to obtain the early termination of
the waiting period thereunder, provided that neither A&A nor AIG shall be
required to agree to dispose of or hold separate any portion of its business or
assets.
j. Acquisition Proposals. Prior to the Closing, A&A agrees that neither A&A
nor any of the Subsidiaries nor any of the respective officers and directors of
A&A or any of the Subsidiaries shall, and A&A shall direct and use its best
efforts to cause its employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by A&A or any
of the Subsidiaries) not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal or offer (including,
without limitation, any proposal or offer to stockholders of A&A) with respect
to a merger, consolidation or similar transaction involving, or any purchase of
all or any substantial portion of the assets or any equity securities of, A&A or
any of the Subsidiaries (any such proposal or offer being hereinafter referred
to as an "Acquisition Proposal") or engage in any negotiations concerning, or
provide any confidential information or data to, or have any discussions with,
any person relating to an Acquisition Proposal, or otherwise facilitate directly
or indirectly any effort or attempt to make or implement an Acquisition
Proposal. Notwithstanding the foregoing, A&A shall be entitled to sell or
otherwise dispose of assets to the extent previously disclosed to the Purchaser
in writing. A&A will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. A&A will take the necessary steps to
inform the individuals or entities referred to in the first sentence hereof of
the obligations undertaken in this subsection j. A&A will notify AIG immediately
if any such inquiries or proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with AIG. Nothing contained in this Agreement shall
prohibit A&A and its directors from making to the stockholders any
recommendation and related filing with the SEC, as required by Rules 14e-2 and
14d-9 under the Exchange Act, with respect to any tender offer, or from
informing the stockholders of A&A in the proxy materials with respect to the
meeting of stockholders called to consider the transactions contemplated by this
Agreement of information that is material to the vote with respect to such
transactions, or from changing or withdrawing the recommendation of the
directors with respect to such transactions if the directors conclude that such
change or withdrawal is required by their fiduciary duties (as determined in
good faith by the Board of Directors of A&A upon the advice of counsel).
19
<PAGE>
k. Access. Upon reasonable notice, A&A shall (and shall cause each of the
Subsidiaries to) afford AIG's officers, employees, counsel, accountants and
other authorized representatives ("Representatives") reasonable access during
normal business hours before the Closing to its properties, books, contracts and
records and personnel and advisers (who will be instructed by A&A to cooperate)
and A&A shall (and shall cause each of the Subsidiaries to) furnish promptly to
AIG all information concerning its business, properties and personnel as AIG or
its Representatives may reasonably request, provided that any review will be
conducted in a way that will not interfere unreasonably with the conduct of
A&A's business, and provided, further, that no review pursuant to this
Subsection k shall affect or be deemed to modify any representation or warranty
made by A&A. AIG will keep all information and documents obtained pursuant to
this Subsection k on a confidential basis subject to the confidentiality
provisions contained in paragraphs 1, 2, 3, 4 and 9 of the Confidentiality
Agreement dated May 6, 1994 between A&A and AIG.
l. Publicity. A&A and the Purchaser will consult with each other before
issuing any press release or otherwise making any public statements with respect
to the transactions contemplated hereby and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law or by obligations pursuant to any listing agreement with
any securities exchange.
m. Certain Special Events. Notwithstanding anything in the Articles
Supplementary to the contrary, so long as any Series B Stock is outstanding
neither A&A nor any of its Subsidiaries shall declare, pay or make any dividend
or distribution or commence a tender or exchange offer for A&A securities that
are subordinate to or pari passu with the Series B Stock as to liquidation
preference or dividends or be a party to any transaction (including without
limitation any recapitalization or reclassification of stock), any consolidation
of A&A or any such Subsidiary with, or merger of A&A or any such Subsidiary
into, or share exchange with, any other person, any merger of any other person
into A&A or any such Subsidiary or any sale or transfer of assets which, in any
such case, would constitute a Special Event (as such term is defined in the
Articles Supplementary) unless after giving effect thereto A&A would have the
ability and the right (and the Board of Directors of A&A, including a majority
of the Directors of A&A who are not officers or employees of A&A or any of its
subsidiaries, shall have adopted a resolution confirming such ability and right)
to purchase at the then applicable price specified in Section 7 of the Articles
Supplementary all of the then issued and outstanding Series B Stock, assuming
all such stock is tendered to it for purchase pursuant to such Section 7.
n. Reservation of Shares. A&A shall at all times reserve and keep
available, out of its authorized and unissued stock, solely for the purpose of
effecting the exchange of Class D Common Stock or conversion of Series B Stock,
such number of shares of its Common Stock or Class D Common Stock, as the case
may be, free of preemptive rights as shall from time to time be sufficient to
effect the exchange of all shares of Class D Common Stock or conversion of
Series B Stock from time to time.
o. Adjustment Payments. (i) If, at any time or from time to time, there is
a Tax Amount, then A&A shall pay, as an adjustment to the purchase price, to AIG
in cash in immediately available funds an amount equal to AIG's Pro Rata Share
of such Tax Amount.
"Tax Amount" shall mean the excess, if any, of (x) all reserves, accruals
or payments by or on behalf of A&A or any of its Subsidiaries (without
duplication) on account of liabilities, expenses, penalties, fines or interest
with respect to any income or other tax (foreign, federal, state or local) with
respect to any period ending on or prior to March 31, 1994 over (y) the stated
amount of A&A's tax reserve as specifically set forth on its consolidated
balance sheet at March 31, 1994 set forth in its Quarterly Report on Form 10-Q
for the three months ended March 31, 1994 filed by A&A with the Securities and
Exchange Commission in May, 1994 (the "March 31, 1994 Balance Sheet").
"AIG Pro Rata Share" shall mean, as of any date of determination, a
fraction equal to the number of shares of Common Stock then owned, on a fully
diluted basis, as of such date, by the AIG Group over
20
<PAGE>
the outstanding number of shares of Common Stock as of such date, giving effect
to the conversion or exchange of all securities held by the AIG Group into
Common Stock.
(ii) A&A shall within 90 days after the end of its fiscal year December 31,
1994 furnish to AIG a certification (the "AIG Certification") signed by each of
its chief executive officer, chief financial officer and principal accounting
officer certifying (A) whether there were any liabilities as of March 31, 1994
(1) which were not set forth on the March 31, 1994 Balance Sheet or, (2) which
are in an amount in excess of the amount stated therefor on the March 31, 1994
Balance Sheet or (3) as to which the full amount of such liability is not then
determinable (specifying, in each case, as to type, determinability and amount);
and (B) whether there were any assets set forth on the March 31, 1994 Balance
Sheet the ultimate realizable value of which is less than the of the carrying
value of such assets at such date (specifying, in each case, as to type and
amount.)
A&A shall cause to be delivered with the AIG Certification a report of its
certified public accountants as to A&A's compliance with the immediately
preceding paragraph.
A liability shall be deemed to be in an amount in excess of the amount set
forth in the March 31, 1994 Balance Sheet or an asset shall be deemed to have a
carrying value below the amount set forth in such Balance Sheet based upon all
facts or circumstances in existence on or prior to March 31, 1994, whether or
not then known by A&A or any of its Subsidiaries and whether or not, under
generally accepted accounting principles, such liabilities or assets were, as of
March 31, 1994 or as of the date of such AIG Certification, correctly stated or
a reserve would have been required. Assets shall be carried at the lower of
stated book value or realizable value, and liabilities shall be stated without
discount.
If an adjustment is made to any balance sheet subsequent to the March 31,
1994 Balance Sheet based upon any of the matters referred to in the AIG
Certification or if a liability set forth in the AIG Certification is paid
("Other Adjustments"), then A&A shall within five business days of the making of
each such Other Adjustment pay to AIG, as an adjustment to the purchase price,
an amount in cash in immediately available funds equal to AIG's Pro Rata Share
of each such Other Adjustment.
This section (ii) shall not apply (x) to the matters covered by clause (i)
and (y) to the matters set forth in a single letter agreement between us
identified as relating to this provision:
(iii) A&A shall not be required to make duplicate payments to the extent
that a payment is made as a result of a reserve, accrual or balance sheet
adjustment and the related liability is latter paid, or with respect to the same
Tax Amount.
AIG's rights under this Section 6.o. are not assignable and shall not limit
in any way any of AIG's other rights or remedies under this Agreement or
otherwise.
As long as any member of the AIG Group owns any shares of Common Stock, on
a fully diluted basis, then within 30 days of the end of each fiscal quarter
(other than the final fiscal quarters of each year), and within 90 days of the
final fiscal quarter of each fiscal year and with respect to the period from
March 31, 1994 to December 31, 1994 (the "First Period"), A&A shall deliver to
AIG a certificate signed by its chief financial officer and principal accounting
officer as to any Tax Amounts and Other Adjustments in such fiscal quarter (or
the First Period).
7. STANDSTILL.
a. AIG hereby agrees that during the Standstill Period (hereinafter
defined) it will not, nor will it permit any of its Affiliates (AIG together
with its Affiliates being hereinafter referred to as the "AIG Group") to,
directly or indirectly, unless in any such case specifically requested in
advance to do so by the Board of Directors of A&A:
(i) acquire, offer to acquire, or agree to acquire by purchase, by
joining a partnership, limited partnership, syndicate or other "group" (as
such term is used in Section 13(d)(3) of the Exchange Act, hereinafter
referred to as "13D Group"), any securities of A&A entitled to vote
generally in
21
<PAGE>
the election of directors, or securities convertible into or exercisable or
exchangeable for such securities (collectively, "Restricted Securities") or
any material portion of the assets or businesses of A&A and its
Subsidiaries; provided, however, that nothing contained herein shall
prohibit any member of the AIG Group from acquiring any Restricted
Securities (w) upon conversion of convertible securities of A&A currently
owned by the AIG Group or acquired pursuant to this Agreement or upon the
exchange of Conversion Shares for Common Stock of A&A as contemplated and
permitted by the Charter and Articles Supplementary, (x) as a result of a
stock split, stock dividend or similar recapitalization by A&A, (y) upon
the execution of unsolicited buy orders by any member of the AIG Group
which is a registered broker-dealer for the bona fide accounts of its
brokerage customers unaffiliated and not acting in concert with any member
of the AIG Group, or (z) pursuant to the exercise of any warrant, option or
other right to acquire Restricted Securities ("Rights"), which it receives
directly from A&A pursuant to a distribution to stockholders or from
acquiring such Rights directly from A&A; and provided, further, that if
during the Standstill Period, as a result of a business combination
transaction between A&A or an affiliate of A&A and any other entity which
is not an affiliate of any member of the AIG Group (an "Other Entity"), any
one or more members of the AIG Group shall acquire beneficial ownership
(within the meaning of Rule 13d-3 of the Exchange Act) of Restricted
Securities in such business combination, such members may continue to own
beneficially such Restricted Securities so acquired by such members and
such Restricted Securities shall continue to be subject to the provisions
of this Section;
(ii) participate in, or encourage, the formation of any 13D Group
which owns or seeks to acquire beneficial ownership of, or otherwise acts
in respect of, Restricted Securities;
(iii) make, or in any way participate in, directly or indirectly, any
"solicitation" of "proxies" (as such terms are defined or used in
Regulation 14A under the Exchange Act) or become a "participant" in any
"election contest" (as such terms are defined or used in Rule 14a-11 under
the Exchange Act) with respect to A&A, or initiate, propose or otherwise
solicit stockholders for the approval of one or more stockholder proposals
with respect to A&A or induce or attempt to induce any other person to
initiate any stockholder proposal, provided, however, that the limitation
contained in this clause (iii) shall not apply to any matter to be voted on
by A&A's stockholders that is not initiated or proposed by any member of
the AIG Group or any affiliate thereof;
(iv) call or seek to have called any meeting of the stockholders of
A&A; or
(v) otherwise act, directly or indirectly, alone or in concert with
others, to seek to control the management, Board of Directors, policies or
affairs of A&A, or solicit, propose, seek to effect or negotiate with A&A
or any other person with respect to any form of business combination
transaction with A&A or any affiliate thereof (other than an Other Entity
with respect to which any member of the AIG Group or any affiliate thereof
shall have filed a Schedule 13D with the SEC with respect to any class of
equity securities of such Other Entity prior to the public announcement of
A&A's intent to consummate a business transaction with such Other Entity),
or any restructuring, recapitalization or similar transaction with respect
to A&A or any affiliate thereof (except as aforesaid), or solicit, make or
propose or encourage or negotiate with any other person with respect to, or
announce an intent to make, any tender offer or exchange offer for any
Restricted Securities (other than an exchange of Conversion Shares for
Common Stock of A&A as contemplated by the Charter and Articles
Supplementary) or disclose an intent, purpose, plan or proposal with
respect to A&A or any Restricted Securities inconsistent with the
provisions of this Section, including an intent, purpose, plan or proposal
that is conditioned on or would require A&A to waive the benefit of, or
amend, any provisions of this Section, or assist, participate in,
facilitate, encourage or solicit any effort or attempt by any person to do
or seek to do any of the foregoing.
22
<PAGE>
b. Nothing in this Section 7 shall preclude members of the AIG Group, (i)
from exercising the voting and other rights granted to the Purchasers pursuant
to this Agreement, the Registration Rights Agreement, the Rights Agreement, the
Charter and the Articles Supplementary or (ii) in the case of any proposed
merger, sale of assets or similar transaction which under the Charter and
Articles Supplementary requires a vote of the holders of Restricted Securities
and has been approved or recommended by the Board of Directors of A&A, or in the
case of a tender or exchange offer made without encouragement by or the
participation of AIG or any of its affiliates (if the Board of Directors of A&A
shall have (A) recommended approval of such tender or exchange offer, (B) not
recommended, within 10 business days after the commencement of such tender or
exchange offer, that shareholders reject such tender or exchange offer, or (C)
amended the Rights Agreement or otherwise acted to permit or in any way
facilitate acquisition of shares under such tender or exchange offer), from
making an offer to the Board of Directors of A&A, in respect of such
transaction, upon terms more favorable to A&A or its stockholders than those of
the other transaction, as proposed.
c. As used herein, the term "Standstill Period" shall mean the period from
the date of this Agreement until the earlier to occur of:
(i) the date which is the eighth anniversary of the Closing Date; or
(ii) the designation of any date as the termination date of the
Standstill Period by a majority of the directors of A&A at a duly convened
meeting thereof or by all of the directors of A&A by written consent; or
(iii) A&A's material breach of any of its obligations contained in the
Registration Rights Agreement; or
(iv) default in the payment of principal or interest after the
expiration of any grace periods applicable thereto with respect to
indebtedness of A&A and its Subsidiaries for money borrowed in the
aggregate amount of $15,000,000 or more; or
(v) A&A or any of its Subsidiaries 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"), which, in the case of a Subsidiary of A&A, has had or
would have a Material Adverse Effect; or an involuntary case is commenced
against A&A or any of its Subsidiaries and the petition not controverted
within 10 days, or is not dismissed within 60 days after commencement of
the case, which, in the case of a Subsidiary of A&A, has had or would have
a Material Adverse Effect; or a custodian (as defined in the Bankruptcy
Code) is appointed for, or takes charge of, all or any substantial part of
the property of A&A or any of its Subsidiaries, which, in the case of a
Subsidiary of A&A, has had or would have a Material Adverse Effect; or A&A
or any of its Subsidiaries commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors,
rehabilitation, dissolution, insolvency or liquidation or similar law of
any jurisdiction, whether now or hereafter in effect, relating to A&A or
such Subsidiary, or there is commenced against A&A or any of its
Subsidiaries any such proceeding which remains undismissed for a period of
60 days, which, in the case of a Subsidiary of A&A, has had or would have a
Material Adverse Effect; or A&A or any of its Subsidiaries is adjudicated
insolvent or bankrupt, which, in the case of a Subsidiary of A&A, has had
or would have a Material Adverse Effect; or any order of relief or other
order approving any such case or proceeding is entered, which, in the case
of a Subsidiary of A&A, has had or would have a Material Adverse Effect; or
A&A or any of the Subsidiaries 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, which, in the case of a
Subsidiary of A&A, has had or would have a Material Adverse Effect; or A&A
or any of its Subsidiaries makes a general assignment for the benefit of
creditors, which, in the case of a Subsidiary of A&A, has had or would have
a Material Adverse Effect; or A&A shall fail to pay, or shall state that it
is unable to pay, or shall be unable to pay, its debts, generally as they
become due, which, in the case of a Subsidiary of A&A, has had or
23
<PAGE>
would have a Material Adverse Effect; or A&A or any of its Subsidiaries
shall call a meeting of its creditors with a view to arranging a
composition or adjustment of its debts, which, in the case of a Subsidiary
of A&A, has had or would have a Material Adverse Effect; or A&A or any of
its Subsidiaries shall by any act or failure to act indicate its consent
to, approval of or acquiescence in any of the foregoing, which, in the case
of a Subsidiary of A&A, has had or would have a Material Adverse Effect; or
any corporate action is taken by A&A or any of its Subsidiaries for the
purpose of effecting any of the foregoing, which, in the case of a
Subsidiary of A&A, has had or would have a Material Adverse Effect; or
(vi) without encouragement by or the participation of AIG or any of
its Affiliates, the acquisition by any person or 13D Group (other than
members of the AIG Group or Affiliates thereof) of, the commencement of a
tender offer by such person or 13D Group for, or the public announcement of
an intention to acquire, Restricted Securities which, if added to the
Restricted Securities (if any) already owned by such person or 13D Group,
would represent thirty-five percent (35%) or more of the total voting power
(including rights to acquire voting power) of A&A's Restricted Securities,
or the receipt by such person or 13D Group of A&A's agreement or consent to
make such acquisition; provided that such a public announcement or
commencement of a tender offer shall end the Standstill Period only if such
person or 13D Group shall have received A&A's agreement or consent to make
such intended acquisition, and such a tender offer shall terminate the
Standstill Period only if and when the Board of Directors of A&A shall have
(A) recommended approval of such tender offer, (B) not recommended, within
10 business days after the commencement of such tender offer, that
shareholders reject such tender offer, or (C) amended the Rights Agreement
to permit acquisition of shares under such tender offer; or
(vii) the date this Agreement is terminated in accordance with Section
8 hereof.
8. Termination. Except for the obligations in Section 12.b, this Agreement
and the transactions contemplated hereby shall terminate without any action by
the parties hereto if the Closing shall not have occurred on or before October
31, 1994 and may be terminated at any time prior to the Closing (i) by a written
instrument executed and delivered by A&A and AIG; (ii) by AIG upon any material
breach or default by A&A under this Agreement; or (iii) by A&A upon any material
breach or default by AIG under this Agreement.
9. Survival of Representations and Warranties. All representations and
warranties contained in this Agreement shall survive the execution and delivery
of this Agreement and the delivery of the Shares for a period of three years
from the date of such delivery and any examination or investigation made by any
party to this Agreement or any of their successors and assigns.
10. Performance; Waiver. The provisions of this Agreement (including this
Section 10) may be modified or amended, and waivers and consents to the
performance and observance of the terms hereof may be given by written
instrument executed and delivered by A&A and(1) prior to the Closing, by AIG and
(2) after the Closing by the holder or holders of a majority of the Conversion
Shares, with the holders of the Series B Stock for this purpose being deemed to
be the holders of that number of Conversion Shares into which the Series B Stock
of each holder are convertible. The failure at any time to require performance
of any provision hereof shall in no way affect the full right to require such
performance at any time thereafter (unless performance thereof has been waived
in accordance with the terms hereof for all purposes and at all times by the
parties to whom the benefit of such performance is to be rendered). The waiver
by any party to this Agreement of a breach of any provision hereof shall not be
taken or held to be a waiver of any succeeding breach of such provision or any
other provision or as a waiver of the provision itself.
11. Successors and Assigns. All covenants and agreements contained in this
Agreement by or on behalf of the parties hereto shall bind, and inure the
benefit of, the respective successors and assigns of the parties hereto;
provided, however, that the rights granted to the parties hereto may not be
assigned
24
<PAGE>
(except to wholly-owned subsidiaries of such parties) without the prior written
consent of the other parties. AIG may assign to one or more of its wholly-owned
subsidiaries its obligations as Purchaser hereunder in whole or in part, but
shall not be relieved of such obligations.
12. Miscellaneous.
a. Notices. All notices or other communications given or made hereunder
shall be validly given or made if in writing and delivered by facsimile
transmission or in person at, or mailed by registered or certified mail, return
receipt requested, postage prepaid, to, the following addresses (and shall be
deemed effective at the time of receipt thereof).
If to A&A:
Alexander & Alexander Services Inc.
1211 Avenue of the Americas
New York, New York 10036
Attention: Ronald J. Roessler, Esq.
Senior Vice President and
General Counsel
with a copy to:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attention: Meredith M. Brown, Esq.
If to AIG or any other Purchaser in care of AIG:
American International Group, Inc.
70 Pine Street
New York, New York 10270
Attention: Wayland M. Mead, Esq.
Acting General Counsel
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attention: Immanuel Kohn, Esq.
or to such other address as the party to whom notice is to be given may have
previously furnished notice in writing to the other in the manner set forth
above.
b. Expenses. Whether or not the Shares are sold or this Agreement is
terminated, A&A agrees to pay all reasonable expenses (including reasonable
attorneys fees and expenses) incurred by the Purchasers in connection with the
transactions contemplated by this Agreement.
c. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE STATE AND FEDERAL COURTS IN THE STATE OF NEW YORK IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
d. Severability; Interpretation. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, each of A&A and AIG directs that such court
interpret and apply the remainder of this Agreement in the manner which it
25
<PAGE>
determines most closely effectuates their intent in entering into this
Agreement, and in doing so particularly take into account the relative
importance of the term, provision, covenant or restriction being held invalid,
void or unenforceable.
e. Headings. The index and section headings herein are for convenience only
and shall not affect the construction hereof.
f. Entire Agreement. This Agreement embodies the entire agreement between
the parties relating to the subject matter hereof and any and all prior oral or
written agreements, representations or warranties, contracts, understandings,
correspondence, conversations, and memoranda, whether written or oral, between
A&A and AIG, or between or among any agents, representatives, parents,
subsidiaries, affiliates, predecessors in interest or successors in interest,
with respect to the subject matter hereof (including without limitation the
Confidentiality Agreement between A&A and AIG dated May 6, 1994), are merged
herein and replaced hereby, except that paragraphs 1, 2, 3, 4, 8 and 9 of such
Confidentiality Agreement shall survive to the extent provided in Section 6.k
hereof and paragraph 5 of such Confidentiality Agreement shall survive until the
Closing Date.
g. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
ALEXANDER & ALEXANDER SERVICES INC.
By: /s/ ROBERT E. BONI
..................................
Name: Robert E. Boni
Title: Chairman
AMERICAN INTERNATIONAL GROUP, INC.
By: /s/ EDWARD E. MATTHEWS
..................................
Name: Edward E. Matthews
Title: Vice Chairman--Finance
26
<PAGE>
EXHIBIT 1 TO
STOCK PURCHASE
AND SALE AGREEMENT
[See Appendix II to Proxy Statement]
<PAGE>
EXHIBIT 2 TO
STOCK PURCHASE
AND SALE AGREEMENT
[See Appendix III to Proxy Statement]
<PAGE>
EXHIBIT 3 TO
STOCK PURCHASE
AND SALE AGREEMENT
-----------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
-----------------------------------------------------------------
DATED AS OF , 1994
BY AND AMONG
ALEXANDER & ALEXANDER SERVICES INC.
AND
THE PURCHASERS WHO ARE SIGNATORIES HERETO
<PAGE>
TABLE OF CONTENTS
<TABLE><CAPTION>
PAGE
-----------
<S> <C> <C> <C>
SECTION 1. DEFINITIONS.................................................................................... 1
SECTION 2. REGISTRATION RIGHTS............................................................................ 3
2.1 Demand Registration Rights.......................................................... 3
2.2 Incidental Registration............................................................. 4
2.3 Supplements and Amendments.......................................................... 5
2.4 Restrictions on Public Sale by the Company and Others............................... 5
2.5 Underwritten Registrations.......................................................... 6
2.6 Registration Procedures............................................................. 6
2.7 Registration Expenses............................................................... 11
2.8 Rule 144............................................................................ 12
SECTION 3. INDEMNIFICATION................................................................................ 12
3.1 Indemnification by the Company...................................................... 12
3.2 Indemnification by Holder of Registrable Securities................................. 13
3.3 Conduct of Indemnification Proceeding............................................... 13
3.4 Contribution........................................................................ 13
3.5 Other Indemnities................................................................... 14
SECTION 4. MISCELLANEOUS.................................................................................. 14
4.1 Remedies............................................................................ 14
4.2 No Inconsistent Agreements.......................................................... 14
4.3 Amendments and Waivers.............................................................. 14
4.4 Notices............................................................................. 15
4.5 Successors and Assigns.............................................................. 15
4.6 Counterparts........................................................................ 15
4.7 Headings............................................................................ 15
4.8 Governing Law....................................................................... 15
4.9 Severability........................................................................ 15
4.10 Entire Agreement.................................................................... 16
4.11 Attorneys' Fees..................................................................... 16
4.12 Securities Held by the Company or Its Subsidiaries.................................. 16
Signature Pages.................................................................................................. S-1
</TABLE>
i
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement"), dated as of
, 1994, by and among ALEXANDER & ALEXANDER SERVICES INC., a
Maryland corporation (or any successor, the "Company"), and the purchasers whose
signatures appear on the execution pages of this Agreement (each a "Purchaser"
and collectively, the "Purchasers").
This Agreement is entered into in connection with the Stock Purchase and
Sale Agreement, dated as of June 6, 1994, among the Company and American
International Group, Inc. (the "Purchase Agreement"), relating to the issuance
and sale by the Company of an aggregate of 4,000,000 shares of the Company's 8%
Series B Cumulative Convertible Preferred Stock, par value $1.00 per share
(together with additional shares of such Preferred Stock issued as dividends
thereon, the "Preferred Stock"). In order to induce the purchaser party thereto
to enter into the Purchase Agreement, the Company has agreed to provide the
registration rights set forth in this Agreement for the equal benefit of each of
the Purchasers and their direct and indirect transferees. The execution and
delivery of this Agreement is a condition to each Purchaser's obligation to
purchase the Preferred Stock under the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
Capitalized terms used herein without definition shall have their
respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:
"Advice" has the meaning set forth in the last paragraph of Section
2.6.
"Affiliate" means, when used with reference to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct
or indirect common control with, the referent Person or such other Person,
as the case may be, or any Person who beneficially owns, directly or
indirectly, 5% or more of the equity interests of such Person or warrants,
options or other rights to acquire or hold more than 5% of any class of
equity interests of such Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct or cause the direction of management or policies of such Person,
directly or indirectly, whether through the ownership of voting securities,
by contract or otherwise; and the terms "affiliated", "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement" has the meaning set forth in the first paragraph of this
Agreement.
"Articles Supplementary" means the Articles Supplementary of the
Company classifying the Preferred Stock filed by the Company with the State
Department of Assessments and Taxation of the State of Maryland on
, 1994, which Articles Supplementary is substantially in the
form of Exhibit 2 to the Purchase Agreement.
"Charter" means the Articles of Restatement of the Company as filed
with the State Department of Assessments and Taxation of the State of
Maryland as amended through the date hereof.
"Class D Common Stock" means the Class D Common Stock, par value $1.00
per share, of the Company.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Conversion Shares" means the shares of Class D Common Stock issuable
or issued upon conversion of the Preferred Stock pursuant to the terms of
the Purchase Agreement and the Articles Supplementary.
<PAGE>
"DTC" has the meaning set forth in Section 2.6(i) of this Agreement.
"Effectiveness Date" has the meaning set forth in Section 2.1(a) of
this Agreement.
"Effectiveness Period" has the meaning set forth in Section 2.1(a) of
this Agreement.
"Exchange Act" has the meaning set forth in Section 2.6(a) of this
Agreement.
"Exchange Shares" means the shares of Common Stock, par value $1.00
per share, of the Company issuable or issued (x) in exchange for the Class
D Common Stock pursuant to the terms of the Purchase Agreement and the
Charter or (y) upon conversion of the Preferred Stock pursuant to the terms
of the Purchase Agreement and the Articles Supplementary.
"Filing Date" has the meaning set forth in Section 2.1(a) of this
Agreement.
"Holder" means any holder of a Registrable Security.
"Incidental Registration" has the meaning set forth in Section 2.2(a)
of this Agreement.
"Inspectors" has the meaning set forth in Section 2.6(n) of this
Agreement.
"NASD" has the meaning set forth in Section 2.7 of this Agreement.
"Person" means any individual, trustee, corporation, partnership,
joint stock company, trust, unincorporated association, union, business
association, firm or other legal entity.
"Preferred Stock" has the meaning set forth in the second paragraph of
this Agreement.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by such Registration Statement, and all
other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference or
deemed to be incorporated by reference in such Prospectus.
"Purchase Agreement" has the meaning set forth in the second paragraph
of this Agreement.
"Purchaser" has the meaning set forth in the first paragraph of this
Agreement.
"Purchasers" has the meaning set forth in the first paragraph of this
Agreement.
"Registrable Securities" means the Preferred Stock, the Exchange
Shares and any other securities issued or issuable with respect to the
Preferred Stock or the Exchange Shares by way of a stock dividend or stock
split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization; provided, however, that a
security ceases to be a Registrable Security when it is no longer a
Transfer Restricted Security. In determining the number of Registrable
Securities outstanding at any time or whether the holders of the requisite
number of Registrable Securities have taken any action hereunder and in
calculating the number of Registrable Securities for all other purposes
under this Agreement, each share of Preferred Stock shall be deemed to be
equal to the number of Exchange Shares then deliverable upon (i) the
conversion of such share of Preferred Stock into Conversion Shares in
accordance with the Articles Supplementary and (ii) the exchange of such
Conversion Shares in accordance with the Charter.
"Registration Statement" means any registration statement of the
Company that covers any of the Registrable Securities pursuant to the
provisions of Section 2.1 of this Agreement, including
2
<PAGE>
the Prospectus, amendments and supplements to such registration statement,
including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
"Rule 144" means Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Transfer Restricted Security" means a share of Preferred Stock or an
Exchange Share until such share of Preferred Stock or Exchange Share, as
the case may be, (i) has been effectively registered under the Securities
Act and disposed of in accordance with a registration statement filed under
the Securities Act covering it or (ii) is distributed to the public
pursuant to Rule 144.
"underwritten registration" or "underwritten offering" means a
registration in which securities of the Company (including Registrable
Securities) are sold to an underwriter for reoffering to the public.
SECTION 2. REGISTRATION RIGHTS
2.1 DEMAND REGISTRATION RIGHTS.
(a) The Company covenants and agrees with each Holder of Registrable
Securities that if on or after , 1995, the Company receives a
written request from Holders of not less than 33 1/3% of the then
outstanding Registrable Securities, then within thirty (30) days after
receipt of such notice (the 30th day after such notice, the "Filing Date")
the Company shall use its best efforts to file a Registration Statement and
cause such Registration Statement to become effective under the Securities
Act at the earliest possible date after such notice (such date, the
"Effectiveness Date") with respect to the offering and sale or other
disposition of such Registrable Securities as such Holders desire to have
covered by such Registration Statement; provided, however, that the Company
shall not be obligated to file any other Registration Statement or cause
any such other Registration Statement to become effective, pursuant to this
Section 2.1(a), (i) for a period of 360 days following the Filing Date of a
Registration Statement filed pursuant to this Section 2.1(a), (ii) for a
period of 180 days following the effective date of a registration statement
covering not less than 25% of the then outstanding Registrable Securities,
which Registrable Securities have been included in such registration
pursuant to Section 2.2 hereof, (iii) for a period of 90 days following the
filing of a public offering of common stock by the Company, (iv) for a
period of up to 90 days if such filing would require disclosure of bona
fide confidential information relating to an acquisition or disposition of
material assets then in progress or (v) which would cover less than
1,000,000 Registrable Securities (or if the number of Registrable
Securities then outstanding is less than 1,000,000, which would cover less
than the aggregate amount of Registrable Securities then outstanding). The
Company shall use its best efforts to continuously maintain the
effectiveness of such Registration Statement until the earlier of (i) 270
days after the effective date of the Registration Statement or (ii) the
consummation of the distribution by the Holders of all of the Registrable
Securities covered by such Registration Statement (the "Effectiveness
Period"). The Company shall not include any securities other than the
Registrable Securities in any such Registration Statement pursuant to any
"piggyback" or similar registration rights granted by the
3
<PAGE>
Company without the consent of the Holders of a majority of the Registrable
Securities to be covered by such Registration Statement, other than
"piggyback" registration rights provided for in the Registration Rights
Agreement between the Company and the Selling Shareholders as defined
therein dated November 30, 1993 (the "1993 Registration Rights Agreement")
as in effect on June 5, 1994. Notwithstanding anything in this Agreement to
the contrary, the Company shall not be required to comply with more than
three requests for registration pursuant to this Section 2.1. Each notice
to the Company requesting registration to be effected shall set forth (1)
the number of shares of Preferred Stock and the number of Exchange Shares
to be included; (2) the name of the Holders of the Registrable Securities
and the amount to be sold; and (3) the proposed manner of sale. Within 10
(ten) days after receipt of such notice, the Company shall notify each
Holder of Registrable Securities who is not a party to the written notice
served on the Company (or the transferee(s) of such Holder) and offer to
them the opportunity to include their Registrable Securities in such
registration. A Registration Statement will not count as complying with the
terms hereof unless it is declared effective by the SEC and remains
continuously effective for the Effectiveness Period, provided that a
registration statement which does not become effective after the Company
has filed it solely by reason of the refusal to proceed of the Holders of
Registrable Securities requesting the registration shall not be deemed to
have been effected by the Company at the request of such Holders but the
Holders of Registrable Securities covered by such Registration Statement
shall reimburse the Company for 50% of the out-of-pocket costs paid by the
Company in the performance of its obligations hereunder in respect of such
registration statement.
(b) Each Holder of Registrable Securities agrees, if requested by the
managing underwriter or underwriters in an underwritten offering, not to
effect any public sale or distribution of Registrable Securities or of
securities of the Company of the same class as any securities included in
such Registration Statement, including a sale pursuant to Rule 144 under
the Securities Act (except as part of such underwritten registration),
during the 10-day period prior to, and during the 180-day period beginning
on, the closing date of each underwritten offering made pursuant to such
Registration Statement, to the extent timely notified in writing by the
Company or the managing underwriter or underwriters.
(c) The foregoing provisions of Section 2.1(b) shall not apply to any
Holder of Registrable Securities if such Holder is prevented by applicable
statute or regulation from entering into any such agreement; provided,
however, that any such Holder shall undertake, in its request to
participate in any such underwritten offering, not to effect any public
sale or distribution of any applicable class of Registrable Securities
commencing on the date of sale of such applicable class of Registrable
Securities unless it has provided 45 days prior written notice of such sale
or distribution to the underwriter or underwriters.
2.2 INCIDENTAL REGISTRATION.
(a) If the Company at any time before the third anniversary of this
Agreement proposes to register any of its securities, under the Act (other
than a registration on Form S-4 or S-8 or any successor form thereto),
whether or not for sale for its own account, and the registration form to
be used therefor may be used for the registration of Registrable
Securities, it will each such time give prompt written notice to all
Holders of Registrable Securities of the Company's intention to do so and,
upon the written request of any such holder to the Company made within 10
days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such Holder and the
intended method of disposition thereof), the Company will use its best
efforts to effect the registration (an "Incidental Registration") under the
Act of all Registrable Securities which the Company has been so requested
to register by the Holders thereof; provided, however, that at any time
prior to the first anniversary of this Agreement the Company will not be
obligated under this Section 2.2(a) to include Registrable Securities in
any registration
4
<PAGE>
of securities of the Company which is solely on behalf of the holders of
such securities and which is being conducted pursuant to registration
rights agreements with such holders in existence on the date of the
Purchase Agreement.
(b) Subject to Section 2.2(c), if an Incidental Registration is an
underwritten registration, and the managing underwriters thereof advise the
Company in writing that in their opinion the number of securities requested
to be included in such registration exceeds the number which can be sold in
such offering without adversely affecting the marketability of the
offering, the Company will include in such registration (i) first, the
securities the Company proposes to sell for its own account in such
registration, (ii) second, the Registrable Securities requested to be
included in such registration and the securities entitled to participate in
such registration pursuant to the terms of the 1993 Registration Rights
Agreement as in effect on June 5, 1994, pro rata among the Holders of such
Registrable Securities and the beneficiaries of the "piggyback"
registration rights contained in the 1993 Registration Rights Agreement as
in effect on June 5, 1994 on the basis of the number of shares owned by
each such Holder and such beneficiaries and (iii) third, other securities
requested to be included in such registration.
(c) Notwithstanding Section 2.2(b), if an Incidental Registration is
an underwritten secondary registration solely on behalf of holders of the
Company's securities, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be
included in such registration exceeds the number which can be sold in such
offering without adversely affecting the marketability of the offering, the
Company will include in such registration (i) first, the securities
requested to be included therein by the holders requesting such
registration, (ii) second, the Registrable Securities requested to be
included in such registration, pro rata among the Holders of such
Registrable Securities on the basis of the number of shares owned by each
such Holder, and (iii) third, other securities requested to be included in
such registration.
2.3 SUPPLEMENTS AND AMENDMENTS. If a Registration Statement ceases to be
effective for any reason at any time during the period for which it is required
to be effective under this Agreement, the Company shall use its best efforts to
obtain the prompt withdrawal of any order suspending the effectiveness thereof
and shall in connection therewith promptly supplement and amend any such
Registration Statement in a manner reasonably and in good faith expected to
obtain the withdrawal of the order suspending the effectiveness thereof, and the
Company shall use its best efforts to cause any such Registration Statement to
be declared effective as soon as practicable after such amendment or supplement
and to keep such Registration Statement continuously effective for a period
equal to the period for which it is required to be effective under this
Agreement less the aggregate number of days during which any predecessor
Registration Statement was previously effective.
The Company shall supplement and amend a Registration Statement if required
by the rules, regulations or instructions applicable to the applicable
registration form for such Registration Statement, if required by the Securities
Act or the SEC, or if reasonably requested by the Holders of a majority of the
Registrable Securities covered by such Registration Statement or by any
underwriter of the Registrable Securities.
2.4 RESTRICTIONS ON PUBLIC SALE BY THE COMPANY AND OTHERS. The Company
agrees (i) that it shall not, and that it shall not cause or permit any of its
subsidiaries to, effect any public sale or distribution of any securities of the
same class as any of the Registrable Securities or any securities convertible
into or exchangeable or exercisable for such securities (or any option or other
right for such securities) (except for any securities that may be issued to the
holders of the Preferred Stock pursuant to the Articles Supplementary, the
holders of Class D Common Stock pursuant to the Charter and the holders of the
Company's Series A Preferred Stock, and except for securities issued to
officers, directors and/or employees of the Company or its subsidiaries pursuant
to options or agreements entered into with such
5
<PAGE>
officers, directors and/or employees in connection with their employment or
pursuant to the Company's stock option, stock bonus and other stock plans and
arrangements for officers, directors and employees) during the 15-day period
prior to, and during the 180-day period beginning on, the commencement of any
underwritten offering of Registrable Securities which has been scheduled prior
to the Company or any of its subsidiaries publicly announcing its intention to
effect any such public sale or distribution; (ii) that any agreement entered
into after the date of this Agreement pursuant to which the Company (or, if
applicable, any subsidiary of the Company) issues or agrees to issue any
securities which have registration rights shall contain (x) a provision under
which the holders of such securities agree, in the event of an underwritten
offering of Registrable Securities, not to effect any public sale or
distribution of any securities of the same class as any of the Registrable
Securities (or any securities convertible into or exchangeable or exercisable
for any such securities), or any option or other right for such securities,
during the periods described in clause (i) of this Section 2.4, in each case
including a sale pursuant to Rule 144 under the Securities Act (or any similar
provision then in effect) and (y) a provision that effects, upon notice given
pursuant to Section 2.1 hereof to the Company that an underwritten offering of
Registrable Securities is to be undertaken, the lapse of any demand registration
rights with respect to any securities of the Company (or, if applicable, of any
subsidiary of the Company) until the expiration of 180 days after the date of
the completion of any such underwritten offering; (iii) that the Company (and,
if applicable, each subsidiary of the Company) will not after the date hereof
enter into any agreement or contract wherein the holders of any securities of
the Company or of any subsidiary of the Company issued or to be issued are
granted any "piggyback" registration rights with respect to any registration
effected pursuant to Section 2.1 hereof, and (iv) that the Company (and, if
applicable, each subsidiary of the Company) will not after the date hereof enter
into any agreement or contract wherein the exercise by any Holder of its right
to an Incidental Registration hereunder would result in a breach thereof or a
default thereunder or would otherwise conflict with any provision thereof.
2.5 UNDERWRITTEN REGISTRATIONS. If any of the Registrable Securities
covered by a Registration Statement filed pursuant to Section 2.1 are to be sold
in an underwritten offering, the investment banker or investment bankers and
manager or managers that will manage the offering will be selected by the
Holders of not less than a majority of the Registrable Securities covered by
such Registration Statement and will be reasonably acceptable to the Company. If
the managing underwriter or underwriters advise the Company and the Holders in
writing that in the opinion of such underwriter or underwriters the amount of
Registrable Securities proposed to be sold in such offering exceeds the amount
of securities that can be sold in such offering, there shall be included in such
underwritten offering the amount of Registrable Securities which in the opinion
of such underwriter or underwriters can be sold, and such amount shall be
allocated pro rata among the Holders of Registrable Securities on the basis of
the number of Registrable Securities requested to be included by each such
Holder and all Holders. The Holders of Registrable Securities sold in any such
offering shall pay all underwriting discounts and commissions of the underwriter
or underwriters pro rata; provided, however, that this Section 2.5 shall not
relieve the Company of its obligations under Section 2.7 hereof.
No Holder of Registrable Securities may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Securities on the basis provided in any underwriting arrangements
approved by the Holders of not less than a majority of the Registrable
Securities and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
2.6 REGISTRATION PROCEDURES. In connection with any Registration Statement,
the Company shall effect such registrations to permit the offering and sale of
the Registrable Securities in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company shall as expeditiously as
possible:
6
<PAGE>
(a) Prepare and file with the SEC as soon as practicable each such
Registration Statement and cause such Registration Statement to become
effective and remain effective as provided herein; provided, however, that
before filing any such Registration Statement or any Prospectus or any
amendments or supplements thereto (including documents that would be
incorporated or deemed to be incorporated therein by reference, including
such documents filed under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") that would be incorporated therein by reference), the
Company shall afford promptly to the Holders of the Registrable Securities
covered by such Registration Statement, their counsel and the managing
underwriter or underwriters, if any, an opportunity to review copies of all
such documents proposed to be filed a reasonable time prior to the proposed
filing thereof and the Company shall give reasonable consideration in good
faith to any comments of such Holders, counsel and underwriters; provided
that the Company may discontinue any registration of its securities giving
rise to registration rights pursuant to Section 2.2 hereof at any time
prior to the effective date of the registration statement relating thereto.
The Company shall not file any Registration Statement or Prospectus or any
amendments or supplements thereto if the Holders of a majority of the
Registrable Securities covered by such Registration Statement, their
counsel, or the managing underwriter or underwriters, if any, shall
reasonably object in writing.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the time periods
prescribed hereby; cause the related Prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 (or any similar provisions then in force) under the Securities
Act; and comply with the provisions of the Securities Act, the Exchange Act
and the rules and regulations of the SEC promulgated thereunder applicable
to it with respect to the disposition of all securities covered by such
Registration Statement as so amended or in such prospectus as so
supplemented.
(c) Notify the Holders of Registrable Securities, their counsel and
the managing underwriter or underwriters, if any, promptly, and confirm
such notice in writing, (i) when a Prospectus or any prospectus supplement
or post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has
become effective (including in such notice a written statement that any
Holder may, upon request, obtain, without charge, one conformed copy of
such Registration Statement or post-effective amendment including financial
statements and schedules and exhibits), (ii) of the issuance by the SEC of
any stop order suspending the effectiveness of such Registration Statement
or of any order preventing or suspending the use of any preliminary
prospectus or the initiation or threatening of any proceedings for that
purpose, (iii) if at any time when a prospectus is required by the
Securities Act to be delivered in connection with sales of the Registrable
Securities the representations and warranties of the Company contained in
any agreement (including any underwriting agreement) contemplated by
Section 2.6(m) below, to the knowledge of the Company, cease to be true and
correct in any material respect, (iv) of the receipt by the Company of any
notification with respect to (A) the suspension of the qualification or
exemption from qualification of the Registration Statement or any of the
Registrable Securities covered thereby for offer or sale in any
jurisdiction, or (B) the initiation or threatening of any proceeding for
such purpose, (v) of the happening of any event, the existence of any
condition or information becoming known to the Company that requires the
making of any changes in such Registration Statement, Prospectus or
documents so that, in the case of such Registration Statement, it will
conform in all material respects with the requirements of the Securities
Act and it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein, not misleading, and that in the case of the
Prospectus, it will conform in all material respects with the requirements
of the Securities Act and it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements
7
<PAGE>
therein, in light of the circumstances under which they were made, not
misleading, and (vi) of the Company's reasonable determination that a
post-effective amendment to such Registration Statement would be
appropriate.
(d) Use every reasonable effort to prevent the issuance of any order
suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable
Securities covered thereby for sale in any jurisdiction, and, if any such
order is issued, to obtain the withdrawal of any such order at the earliest
possible moment.
(e) If requested by the managing underwriter or underwriters, if any,
or the Holders of a majority of the Registrable Securities being sold in
connection with an underwriting offering, (i) promptly incorporate in a
prospectus supplement or post-effective amendment such information as the
managing underwriter or underwriters, if any, or such Holders reasonably
request to be included therein to comply with applicable law and (ii) make
all required filings of such prospectus supplement or such post-effective
amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment.
(f) Furnish to each Holder of Registrable Securities who so requests
and to counsel for the Holders of Registrable Securities and each managing
underwriter, if any, without charge, upon request, one conformed copy of
the Registration Statement and each post-effective amendment thereto,
including financial statements and schedules, and of all documents
incorporated or deemed to be incorporated therein by reference and all
exhibits (including exhibits incorporated by reference).
(g) Deliver to each Holder of Registrable Securities, their counsel
and each underwriter, if any, without charge, as many copies of each
Prospectus (including each form of prospectus) and each amendment or
supplement thereto as such persons may reasonably request but only for so
long as the Company is required to keep such registration statement
effective; and, subject to the last paragraph of this Section 2.6, the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the Holders of Registrable Securities and the
underwriter or underwriters or agents, if any, in connection with the
offering and sale of the Registrable Securities covered by such Prospectus
and any amendment or supplement thereto.
(h) Prior to any offering of Registrable Securities, to use its best
efforts to register or qualify, and cooperate with the Holders of
Registrable Securities, the underwriter or underwriters, if any, and their
respective counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of, such Registrable
Securities for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as may be required to permit the
resale thereof by the Holders of Registrable Securities, or as the managing
underwriter or underwriters reasonably request in writing; provided,
however, that where Registrable Securities are offered other than through
an underwritten offering, the Company agrees to cause its counsel to
perform Blue Sky investigations and file registrations and qualifications
required to be filed pursuant to this Section 2.6(h); keep each such
registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be effective hereunder
and do any and all other acts or things reasonably necessary or advisable
to enable the disposition in such jurisdictions of the securities covered
thereby; provided, however, that the Company will not be required to (A)
qualify generally to do business in any jurisdiction where it is not then
so qualified, (B) take any action that would subject it to general service
of process in any such jurisdiction where it is not then so subject or (C)
become subject to taxation in any jurisdiction where it is not then so
subject.
8
<PAGE>
(i) Cooperate with the Holders of Registrable Securities and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold, which certificates shall not bear any restrictive
legends whatsoever and shall be in a form eligible for deposit with The
Depository Trust Company ("DTC"); and enable such Registrable Securities to
be in such denominations and registered in such names as the managing
underwriter or underwriters, if any, or Holders may reasonably request at
least two business days prior to any sale of Registrable Securities in a
firm commitment underwritten public offering.
(j) Use its best efforts to cause the Registrable Securities covered
by a Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be reasonably necessary to
enable the seller or sellers thereof or the underwriter or underwriters, if
any, to consummate the disposition of such Registrable Securities, except
as may be required solely as a consequence of the nature of such selling
Holder's business, in which case the Company will cooperate in all
reasonable respects with the filing of the Registration Statement and the
granting of such approvals.
(k) Upon the occurrence of any event contemplated by Section 2.6(c)(v)
or 2.6(c)(vi) above, as promptly as practicable prepare a supplement or
post-effective amendment to the Registration Statement or a supplement to
the related Prospectus or any document incorporated or deemed to be
incorporated therein by reference, and, subject to Section 2.6(a) hereof,
file such with the SEC so that, as thereafter delivered to the purchasers
of Registrable Securities being sold thereunder, such Prospectus will not
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, in light of the circumstances under which they were made, not
misleading and will otherwise comply with law.
(l) Prior to the effective date of a Registration Statement, (i)
provide the registrar for the Preferred Stock and the Exchange Shares or
such other Registrable Securities with printed certificates for such
securities in a form eligible for deposit with DTC and (ii) provide a CUSIP
number for such securities.
(m) Enter into an underwriting agreement in form, scope and substance
as is customary in underwritten offerings and take all such other actions
as are reasonably requested by the managing underwriter or underwriters in
order to expedite or facilitate the registration or disposition of such
Registrable Securities in any underwritten offering to be made of the
Registrable Securities in accordance with this Agreement, and in such
connection, (i) make such representations and warranties to the underwriter
or underwriters, with respect to the business of the Company and the
subsidiaries of the Company, and the Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by reference
therein, in each case, in form, substance and scope as are customarily made
by issuers to underwriters in underwritten offerings, and confirm the same
if and when requested; (ii) obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriter or
underwriters), addressed to the underwriter or underwriters covering the
matters customarily covered in opinions requested in underwritten offerings
with respect to secondary distributions and such other matters as may be
reasonably requested by underwriters; (iii) use its best efforts to obtain
"cold comfort" letters and updates thereof (which letters and updates shall
be reasonably satisfactory in form, scope and substance to the managing
underwriter or underwriters) from the independent certified public
accountants of the Company (and, if applicable, the subsidiaries of the
Company) and, to the extent reasonably practicable, any other independent
certified public accountants of any subsidiary of the Company or of any
business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Registration
Statement, addressed to each of the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in
9
<PAGE>
"cold comfort" letters in connection with underwritten offerings; and (iv)
if an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable than those set
forth in Section 3 hereof (or such other provisions and procedures
acceptable to Holders of a majority of Registrable Securities covered by
such Registration Statement and the managing underwriter or underwriters or
agents) with respect to all parties to be indemnified pursuant to said
Section. The above shall be done at each closing under such underwriting
agreement, or as and to the extent required thereunder.
(n) Make available for inspection by a representative of the Holders
of Registrable Securities being sold, any underwriter participating in any
such disposition of Registrable Securities, if any, and any attorney or
accountant retained by such representative of the Holders or underwriter
(collectively, the "Inspectors"), at the offices where normally kept,
during reasonable business hours, all pertinent financial and other
records, pertinent corporate documents and properties of the Company and
the subsidiaries of the Company, and cause the officers, directors and
employees of the Company and the subsidiaries of the Company to supply all
information in each case reasonably requested by any such Inspector in
connection with such Registration Statement; provided, however, that any
information that is designated in writing by the Company, in good faith, as
confidential at the time of delivery of such information, shall be kept
confidential by such Inspector and not used by such Inspector for any
purpose other than in connection with such Inspector's review of the
Registration Statement for such registration except to the extent (i)
disclosure of such information is required by court or administrative
order, (ii) disclosure of such information, in the written opinion of
counsel to such Inspector (a copy of which is furnished to the Company), is
necessary to avoid or correct a misstatement or omission of a material fact
in the Registration Statement, Prospectus or any supplement or
post-effective amendment thereto or disclosure is otherwise required by
law, (iii) disclosure of such information is in the written opinion of
counsel for any such Inspector (a copy of which is furnished to the
Company), necessary or advisable in connection with any action, claim, suit
or proceeding, directly or indirectly, involving or potentially involving
such Inspector and arising out of, based upon, relating to or involving
this Agreement or any of the transactions contemplated hereby or arising
hereunder, or (iv) such information becomes generally available to the
public other than as a result of a disclosure or failure to safeguard by
such Inspector; without limiting the foregoing, no such information shall
be used by such Inspector as the basis for any market transactions in
securities of the Company or the subsidiaries of the Company in violation
of applicable law. Each selling Holder of such Registrable Securities
agrees that information obtained by it as a result of such inspections
shall be deemed confidential and shall not be used by it as the basis for
any market transactions in the securities of the Company or of any of its
Affiliates unless and until such is made generally available to the public.
Each selling Holder of such Registrable Securities further agrees that it
will, upon learning that disclosure of such information is sought in a
court of competent jurisdiction, give prompt notice to the Company and
allow the Company, at the Company's expense, to undertake appropriate
action to prevent disclosure of the information deemed confidential.
(o) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act)
no later than forty-five (45) days after the end of any 12-month period (or
ninety (90) days after the end of any 12-month period if such period is a
fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to an underwriter or to underwriters in a
firm commitment or best efforts underwritten offering and (ii) if not sold
to an underwriter or to underwriters in such an offering, commencing on the
first day of the first fiscal quarter of the Company after the effective
date of the relevant Registration Statement, which statements shall cover
said 12-month periods.
10
<PAGE>
(p) Use its best efforts to cause all Registrable Securities relating
to such Registration Statement to be listed on each securities exchange, if
any, on which similar securities issued by the Company are then listed.
Each seller of Registrable Securities as to which any registration is being
effected agrees, as a condition to the registration obligations with respect to
such Holder provided herein, to furnish promptly to the Company such information
regarding such seller and the distribution of such Registrable Securities as the
Company may, from time to time, reasonably request in writing to comply with the
Securities Act and other applicable law. The Company may exclude from such
registration the Registrable Securities of any seller who unreasonably fails to
furnish such information within a reasonable time after receiving such request.
If the identity of a seller of Registrable Securities is to be disclosed in the
Registration Statement, such seller shall be permitted to include all
information regarding such seller as it shall reasonably request.
Each Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 2.6(c)(ii), 2.6(c)(iv),
2.6(c)(v), or 2.6(c)(vi), such Holder will forthwith discontinue disposition of
such Registrable Securities covered by the Registration Statement or Prospectus
until such Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 2.6(k), or until it is advised in writing
(the "Advice") by the Company that the use of the applicable prospectus may be
resumed, and has received copies of any amendments or supplements thereto, and,
if so directed by the Company, such Holder will deliver to the Company all
copies, other than permanent file copies, then in such Holder's possession, of
the Prospectus covering such Registrable Securities current at the time of
receipt of such notice. In the event the Company shall give any such notice, the
period of time for which a Registration Statement is required hereunder to be
effective shall be extended by the number of days during such periods from and
including the date of the giving of such notice to and including the date when
each seller of Registrable Securities covered by such Registration Statement
shall have received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 2.6(k) or (y) the Advice.
2.7 REGISTRATION EXPENSES. All fees and expenses incident to the
performance of or compliance with the provisions of Section 2 of this Agreement
by the Company shall be borne by the Company whether or not any Registration
Statement is filed or becomes effective, including, without limitation, (i) all
registration and filing fees (including, without limitation, (A) fees with
respect to filings required to be made with the National Association of
Securities Dealers Inc. (the "NASD") in connection with an underwritten offering
and (B) k fees and expenses of compliance with state securities or Blue Sky laws
(including, without limitation, fees and disbursements of counsel for the
underwriter or underwriters in connection with Blue Sky qualifications of the
Registrable Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdictions as provided in
Section 2.6(h)), (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities in a form eligible for
deposit with DTC and of printing prospectuses if the printing of prospectuses is
requested by the managing underwriter or underwriters, if any, or, in respect of
Registrable Securities, by the Holders of a majority of Registrable Securities
included in any Registration Statement), (iii) reasonable fees and disbursements
of all independent certified public accountants referred to in Section
2.6(m)(iii) (including, without limitation, the reasonable expenses of any
special audit and "cold comfort" letters required by or incident to such
performance), (iv) the fees and expenses of any "qualified independent
underwriter" or other independent appraiser participating in an offering
pursuant to Schedule E to the By-laws of the NASD, (v) liability insurance under
the Securities Act, if the Company so desires such insurance, (vi) fees and
expenses of all attorneys, advisors, appraisers and other persons retained by
the Company or any subsidiary of the Company, (vii) internal expenses of the
Company and the subsidiaries of the Company (including, without limitation, all
salaries and expenses of officers and employees of the Company and the
subsidiaries of the
11
<PAGE>
Company performing legal or accounting duties), (viii) the expense of any annual
audit, (ix) the fees and expenses incurred in connection with the listing of the
securities to be registered on any securities exchange and (x) the expenses
relating to printing, word processing and distributing all Registration
Statements, underwriting agreements, securities sales agreements, indentures and
any other documents necessary in order to comply with this Agreement.
In connection with any Registration Statement hereunder or any amendment
thereto, the Company shall reimburse the Holders of the Registrable Securities
being registered in such registration for the reasonable out-of-pocket expenses
of such Holders incurred in connection therewith including, without limitation,
the reasonable fees and disbursements of not more than one counsel (together
with appropriate local counsel) chosen by the Holders of a majority of the
Registrable Securities to be included in such Registration Statement.
2.8 RULE 144. The Company covenants that it will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the SEC thereunder in a timely manner and, if at any
time the Company is not required to file such reports, it will, upon the
reasonable request of any Holder of Registrable Securities, make publicly
available other information so long as necessary to permit sales pursuant to
Rule 144 and Rule 144A under the Securities Act. The Company further covenants
that it will take such further action as any Holder of Registrable Securities
may reasonably request, all to the extent required from time to time to enable
such Holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule 144
and Rule 144A under the Securities Act, as such Rules may be amended from time
to time, or (b) any similar rule or regulation hereafter adopted by the SEC.
Upon the request of any Holder of Registrable Securities, the Company will
deliver to such Holder a written statement as to whether it has complied with
such information requirements.
SECTION 3. INDEMNIFICATION
3.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless each Holder and each Person, if any, who controls any Holder
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act from and against any and all losses, claims, damages and
liabilities, joint or several, to which such Holder or controlling Person may
become subject, under the Securities Act or otherwise, caused by any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement or any Prospectus or any amendment or supplement thereto
or any preliminary prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each Holder for any
legal or other expenses reasonably incurred by such Holder in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company will not be
liable insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or omission or alleged untrue statement or omission based
upon information furnished in writing to the Company by any Holder expressly for
use therein; and provided further, that the Company shall not be liable in any
such case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission in the Prospectus, if such untrue statement or
alleged untrue statement or omission or alleged omission is completely corrected
in an amendment or supplement to the Prospectus and the seller of Registrable
Securities thereafter fails to deliver such Prospectus as so amended or
supplemented prior to or concurrently with the sale of Registrable Securities to
the person asserting such loss, claim, damage, or liability after the Company
had furnished such seller with a sufficient number of copies of the same or if
the seller received written notice from the Company of the existence of such
untrue statement or alleged untrue statement or omission or alleged omission and
the seller continued to dispose of Registrable Securities
12
<PAGE>
prior to the time of the receipt of either (A) an amended or supplemented
Prospectus which completely corrected such untrue statement or omission or (B) a
notice from the Company that the use of the existing Prospectus may be resumed.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of any Holder or any Person controlling such
Holder within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act.
3.2 INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES. Each Holder
agrees, severally and not jointly, to indemnify and hold harmless the Company,
the Company's directors, the Company's officers who sign the Registration
Statement and any person controlling the Company to the same extent as the
foregoing indemnity from the Company to each Holder set forth in Section 3.1,
but only with reference to, and in conformity with, information relating to such
Holder furnished in writing by such Holder expressly for use in a Registration
Statement, the Prospectus or any preliminary prospectus, or any amendment or
supplement thereto and will reimburse any legal or other expenses reasonably
incurred by the Company in connection with investigating or defending any such
loss, claim, damage, liability or action as such expenses are incurred. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any such director, officer or Person
controlling the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act and shall survive the transfer
of such securities by such Holder.
3.3 CONDUCT OF INDEMNIFICATION PROCEEDING. In case any proceeding
(including any governmental investigation) shall be instituted involving any
Person in respect of which indemnity may be sought pursuant to either Section
3.1 or Section 3.2, such Person (the "indemnified party") shall promptly notify
the Person against whom such indemnity may be sought (the "indemnifying party")
in writing; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party
otherwise than as provided above. In case any such proceeding is instituted
against any indemnified party and it notifies the indemnifying party of the
commencement thereof, the indemnifying party shall have the right to retain
counsel satisfactory to such indemnified party to defend against such proceeding
and shall pay the reasonable fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the indemnifying party
and the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them or (iii) the
indemnifying party has not retained counsel to defend such proceeding. It is
understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm for all such
indemnified parties. Such firm shall be designated in writing by the Holders of
a majority of the Registrable Securities included in such Registration Statement
in the case of parties indemnified pursuant to Section 3.1 and by the Company in
the case of parties indemnified pursuant to Section 3.2. All fees and expenses
which an indemnified party is entitled to receive from an indemnifying party
under this Section 3 shall be reimbursed as they are incurred. No indemnifying
party shall, without prior written consent of the indemnified party (which shall
not be unreasonably withheld or delayed), effect any settlement of any pending
or threatened action 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 any claims that are the subject matter
of such action.
3.4 CONTRIBUTION. If the indemnification provided for in Section 3.1 or
Section 3.2 is unavailable as a matter of law to an indemnified party in respect
of any losses, claims, damages or liabilities referred to therein, then each
indemnifying party under either such Section, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party
13
<PAGE>
as a result of such losses, claims, damages or liabilities in such proportion as
is appropriate to reflect the relative fault of the Company on the one hand and
of the Holders of Registrable Securities covered by the Registration Statement
in question on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. 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 to state a material fact relates to
information supplied by the Company, or by the Holders of Registrable Securities
covered by the Registration Statement in question and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company and the Holders agree that it would not be just and equitable
if contribution pursuant to this Section 3 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph of this Section 3.4 shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 3, no Holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities sold by such Holder and
distributed to the public were offered to the public exceeds the amount of any
damages which such Holder has otherwise been required to pay by reason of such
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.
3.5 OTHER INDEMNITIES. The obligations of the Company and of each of the
Holders under this Section 3 shall be in addition to any liability which the
Company or which any of the Holders may otherwise have.
SECTION 4. MISCELLANEOUS
4.1 REMEDIES. In the event of a breach by the Company of any of its
obligations under this Agreement, each Holder of Registrable Securities, in
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, will be entitled to specific performance of
its rights under this Agreement. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of any of the provisions of this Agreement.
4.2 NO INCONSISTENT AGREEMENTS. The Company shall not, after the date of
this Agreement, enter into any agreement with respect to any of its securities
that is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The Company will not enter into any agreement with respect to any of its
securities which will grant to any Person "piggyback" rights with respect to any
Registration Statement filed pursuant to Section 2.1 of this Agreement.
4.3 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
prior written consent of Holders of at least a majority of the then outstanding
Registrable Securities. 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 of Registrable Securities whose securities
are being sold pursuant to a Registration Statement and that
14
<PAGE>
does not directly or indirectly affect, impair, limit or compromise the rights
of other Holders of Registrable Securities may be given by Holders of at least a
majority of the Registrable Securities being sold by such Holders pursuant to
such Registration Statement; provided, however, that the provisions of this
sentence may not be amended, modified or supplemented except in accordance with
the provisions of the immediately preceding sentence. The last sentence of the
definition of Registrable Securities and this Section 4.3 may not be amended,
modified or supplemented, and waivers or consents to departures therefrom may
not be given at any time.
4.4 NOTICES. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, registered first-class
mail, next-day air courier or telecopier:
(i) if to a Holder of Registrable Securities, at the most current
address given by such Holder to the Company in accordance with the
provisions of this Section 4.4, which address initially is, with respect to
each Holder, the address set forth on the signature page attached hereto;
and
(ii) if to the Company, 1211 Avenue of the Americas, New York, New
York 10036, Attention: Corporate Secretary, Telecopier No. (212) 444-4696
with a copy to Debevoise & Plimpton, 875 Third Avenue, New York, New York
10022, Attention: Meredith M. Brown, Esq., Telecopier No. (212) 909-6836.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if telecopied.
4.5 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Registrable Securities.
4.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto 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.
4.7 HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
4.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
4.9 SEVERABILITY. 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 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.
15
<PAGE>
4.10 ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement, is intended by the parties as a final expression of their agreement,
and is intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein. This Agreement and the Purchase Agreement supersede all
prior agreements and understandings between the parties with respect to such
subject matter.
4.11 ATTORNEYS' FEES. As between the parties to this Agreement, in any
action or proceeding brought to enforce any provision of this Agreement, or
where any provision hereof is validly asserted as a defense, the successful
party shall be entitled to recover reasonable attorneys' fees in addition to its
costs and expenses and any other available remedy.
4.12 SECURITIES HELD BY THE COMPANY OR ITS SUBSIDIARIES. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities is required hereunder, Registrable Securities held by the Company or
by any of its Subsidiaries shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
ALEXANDER & ALEXANDER SERVICES INC.
By: ..................................
Name:
Title:
Address:
1211 Avenue of the Americas
44th Floor
New York, New York 10036
Telecopy No. (212) 444-4696
Attention: Corporate Secretary
Purchaser:
By: ..................................
Name:
Title:
Address:
16
<PAGE>
EXHIBIT 4 TO
STOCK PURCHASE
AND SALE AGREEMENT
AMENDMENT NUMBER 2 TO RIGHTS AGREEMENT
The Rights Agreement dated as of June 11, 1987, between Alexander &
Alexander Services Inc. (the "Company") and First Chicago Trust Company of New
York, as amended and restated as of March 22, 1990, as amended April 21, 1992
(the "Rights Agreement"), is hereby amended, effective as of June 6, 1994, as
follows. All capitalized terms used herein without definition shall have the
meanings assigned to such terms in the Rights Agreement.
A. Notwithstanding anything to the contrary in the Rights Agreement,
none of the following events shall (a) cause any person to become an
Acquiring Person, (b) cause the Distribution Date or the Shares Acquisition
Date to occur, or (c) give rise to a Section 11(a)(ii) Event:
1. The acquisition of 8% Series B Cumulative Convertible Preferred
Stock ("Series B Preferred Stock") pursuant to the terms of a Stock
Purchase and Sale Agreement dated June 6, 1994 between the Company and
American International Group, Inc. ("AIG") (the "Purchase Agreement").
2. The acquisition of Class D Common Stock ("Class D Stock") of the
Company upon conversion of the Series B Preferred Stock in accordance
with the terms of the Series B Preferred Stock.
3. The acquisition of Common Stock in exchange for Class D Stock in
accordance with the terms of the Class D Stock.
4. The acquisition of Common Stock upon conversion of the Series B
Preferred Stock in accordance with the terms of the Series B Preferred
Stock.
5. The acquisition by AIG or its Affiliates of any securities of
the Company and the acquisition of any such securities by any transferee
thereof, to the extent that such acquisition occurs at or after the time
that (i) the Company shall consent or agree to the acquisition of, or
the commencement of a tender offer for, or the Board of Directors of the
Company shall recommend or, within 10 business days after the
commencement of the tender offer, not recommend that shareholders
reject, a tender offer for, "beneficial ownership" (as defined in Rule
13d-3 under the Exchange Act) by any "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended ("the Exchange Act")), of securities of the Company
entitled to vote generally in the election of directors, or securities
convertible into or exchangeable for such securities (collectively,
"Designated Securities"), representing, when added to the Designated
Securities already owned by such person or group, thirty-five percent
(35%) or more of such Designated Securities; (ii) the Company shall
amend, modify or supplement, or waive the benefit of, this Agreement, as
amended to date, so as to permit any acquisition of beneficial ownership
of thirty-five percent (35%) or more of the Designated Securities
without causing such person or group to become an Acquiring Person or
without causing the Distribution Date or the Shares Acquisition Date to
occur or without giving rise to a Section 11(a)(ii) Event; (iii) the
Company shall take any action under Section 3-603(c) of the Maryland
General Corporation Law to exempt any transaction between the Company
and any of its subsidiaries, on the one hand, and any such person or
group, or any affiliates of any person or group, on the other hand, who
(A) acquire, own or hold beneficial ownership of Designated Securities
representing thirty-five percent (35%) or more of such Designated
Securities from the provisions of Title 3, Subtitle 6 of the Maryland
General Corporation Law or (B) acquire, own or hold beneficial ownership
of designated Securities representing ten percent (10%) or more of such
Designated Securities unless such other person or group, or any
affiliate of such person or group, enters
<PAGE>
into a standstill agreement with the Company limiting the acquisition of
Designated Securities by such other person or group, or any affiliates
of such person or group, to less than 35% of the Designated Securities
and such standstill agreement remains in full force and effect; (iv) the
Company shall issue, sell or transfer, in one or a series of related
transactions, Designated Securities to any person or group if after
giving effect thereto said person or group shall have, or shall have the
then contractual right to acquire through conversion, exercise of
warrants or otherwise, more than thirty-five percent (35%) of the
combined voting power to vote generally in the election of directors of
the Company; or (v) the Company shall agree to merge or consolidate with
or into any person, firm, corporation or other legal entity or shall
agree to sell all or substantially all its assets to any person, firm,
corporation or other legal entity other than (i) a merger or
consolidation of one subsidiary of the Company into another or the
Company, or (ii) a merger or consolidation in which the securities of
the Company outstanding before the merger or consolidation are not
affected and in which the Company issues equity securities having an
aggregate market value of less than 20% of the total market value of the
Company's equity securities outstanding prior to such merger or
consolidation.
B. Shares of Class D Stock will be treated under the Rights Agreement
as if they were Class C Shares. Without limiting the generality of the
foregoing, Rights shall be issued in respect of all shares of Class D Stock
that are issuable upon conversion of the Series B Preferred Stock, prior to
the earliest of the Distribution Date, the Redemption Date or the Final
Expiration Date, as contemplated by Section 3 of the Rights Agreement,
provided that, at the option of any holder of Class D Stock, any securities
issued upon exercise of such Rights shall be voting only to the extent that
the Class D Stock is voting.
This Amendment may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. In all respects not inconsistent with the terms and
provisions of this amendment, the Rights Agreement is hereby ratified, adopted,
approved and confirmed.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and their respective corporate seals to be hereunto affixed and
attested.
ATTEST: ALEXANDER & ALEXANDER SERVICES INC.
By:
...................................
Title:
ATTEST: FIRST CHICAGO TRUST COMPANY OF NEW YORK
By:
...................................
2
<PAGE>
APPENDIX II
ARTICLES OF AMENDMENT
OF THE CHARTER OF
ALEXANDER & ALEXANDER SERVICES INC.
ALEXANDER & ALEXANDER SERVICES INC., a Maryland corporation (the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST, the charter of the Corporation (the "Charter") is hereby amended as
follows:
1. The first paragraph of Article SIXTH of the Charter is hereby
amended to read in its entirety as follows:
SIXTH: The total number of shares of stock which the Corporation
has authority to issue is two hundred ninety-two million (292,000,000)
shares of five classes, consisting of two hundred million (200,000,000)
shares of Common Stock, $1.00 par value per share; twenty-six million
(26,000,000) shares of Class A Common Stock, $.00001 par value per
share; eleven million (11,000,000) shares of Class C Common Stock, $1.00
par value per share; forty million (40,000,000) shares of Class D Common
Stock, $1.00 par value per share; and fifteen million (15,000,000)
shares of Preferred Stock, $1.00 par value per share. The aggregate par
value of all shares of all classes of stock which the Corporation has
authority to issue is $266,000,260.
2. Section A.(e) of Article SIXTH of the Charter is hereby amended to
read in its entirety as follows:
(e) redeemable, in whole or in part, at the option of the
Corporation or of the holder or both, in cash, bonds or other property,
at such price or prices, within such period or periods, and under such
conditions as the Board of Directors shall so provide, including
provision for the creation of a sinking fund for the redemption thereof;
and/or
3. A new Section J of Article SIXTH of the Charter is hereby added to
the Charter to read in its entirety as follows:
J. Class D Common Stock. Except as expressly provided by law or as
set forth in this Section J, shares of Class D Common Stock shall be
identical in all respects to the Common Stock, including with respect to
stock splits, stock combinations, the right to receive dividends, or
with respect to distributions upon liquidation, dissolution, winding up
of the Corporation or otherwise, without preference or distinction,
except that if any dividends in additional shares of Common Stock are
declared on the Common Stock a like dividend in shares of Class D Common
Stock shall be authorized and declared on the Class D Common Stock and
if any such dividend or distribution with respect to the Common Stock
includes securities that vote together with the Common Stock ("Other
Securities"), such securities distributed with respect to shares of
Class D Common Stock shall be identical in all respects to the Other
Securities, except they shall not have voting rights.
The holders of shares of Class D Common Stock shall not have any
voting rights except (i) to the extent required by applicable law; (ii)
an amendment to or modification of, the Charter that would adversely
affect the holders of shares of Class D Common Stock may only be adopted
if such amendment or modification has been approved by the affirmative
vote of the holders of at least two-thirds of the outstanding shares of
Class D Common Stock, for purpose of which vote the holders of 8% Series
B Cumulative Convertible Preferred Stock ("Series B Stock") shall be
deemed to be holders of that number of shares of Class D Common Stock
into which such Series B Stock would then be convertible; and (iii) upon
and after a "change of control" of the Corporation, in which event the
holders of shares of Class D Common Stock shall have the right to vote
on all matters submitted to a vote to the stockholders of the
Corporation as a single class together with the Common Stock, the Class
A
<PAGE>
Common Stock, the Class C Common Stock and the Series B Stock, provided
that with respect to any matter contemplated by subparagraph (ii) above,
such vote shall be a class vote as specified by such subparagraph.
For purposes of the foregoing provision, "change of control" means
such time as (i) the Corporation shall consent or agree to the
acquisition of, or the commencement of a tender offer for, or the Board
of Directors shall recommend or, within 10 business days after the
commencement of the tender offer, not recommend that shareholders
reject, a tender offer for, "beneficial ownership" (as defined in Rule
13d-3 under the Exchange Act) by any "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended ("the Exchange Act")) other than American International
Group, Inc. ("AIG") and its affiliates or any transferee thereof, of
securities of the Corporation entitled to vote generally in the election
of directors, or securities convertible into or exchangeable for such
securities (collectively, "Designated Securities"), representing, when
added to the Designated Securities already owned by such person or
group, thirty-five percent (35%) or more of such Designated Securities;
(ii) the Corporation shall amend, modify or supplement, or waive the
benefit of, the Rights Agreement between Alexander & Alexander Services
Inc. and First Chicago Trust Company of New York, dated as of June 11,
1987, as amended and restated on March 22, 1990, as amended on August
21, 1992 and June 6, 1994 (the "Rights Agreement"), so as to permit any
acquisition of beneficial ownership of thirty-five percent (35%) or more
of the Designated Securities without causing a person or group (other
than AIG and its affiliates or any transferee thereof) to become an
Acquiring Person (as defined in the Rights Agreement) or without causing
the Distribution Date or the Shares Acquisition Date (each as defined in
the Rights Agreement) to occur or without giving rise to a Section
11(a)(ii) Event (as defined in the Rights Agreement); (iii) the
Corporation shall take any action under Section 3-603(c) of the Maryland
General Corporation Law to exempt any transaction between the
Corporation and any of its subsidiaries, on the one hand, and any person
or group (other than AIG and its affiliates or any transferee thereof),
or any affiliates of any such person or group, on the other hand, who
(A) acquire, own or hold beneficial ownership of Designated Securities
representing thirty-five percent (35%) or more of such Designated
Securities from the provisions of Title 3, Subtitle 6 of the Maryland
General Corporation Law or (B) acquire, own or hold beneficial ownership
of Designated Securities representing ten percent (10%) or more of such
Designated Securities unless such other person or group, or any
affiliate of such person or group, enters into a standstill agreement
with the Corporation limiting the acquisition of Designated Securities
by such other person or group, or any affiliates of such person or
group, to less than 35% of the Designated Securities and such standstill
agreement remains in full force and effect; (iv) the Corporation shall
issue, sell or transfer, in one or a series of related transactions,
Designated Securities to any person or group (other than AIG and its
affiliates or any transferee thereof) if after giving effect thereto
said person or group shall have, or shall have the then contractual
right to acquire through conversion, exercise of warrants or otherwise,
more than thirty-five percent (35%) of the combined voting power to vote
generally in the election of directors of the Corporation; or (v) the
Corporation shall agree to merge or consolidate with or into any person,
firm, corporation or other legal entity (other than AIG and its
affiliates or any transferee thereof) or shall agree to sell all or
substantially all its assets to any such person, firm, corporation or
other legal entity other than (i) a merger or consolidation of one
subsidiary of the Corporation into another or the Corporation, or (ii) a
merger or consolidation in which the securities of the Corporation
outstanding before the merger or consolidation are not affected and in
which the Corporation issues equity securities having an aggregate
market value of less than 20% of the total market value of the
Corporation's equity securities outstanding prior to such merger or
consolidation. "Affiliate" means, when used with reference to any
person, any other person directly or indirectly controlling, controlled
by, or under direct or indirect common control
2
<PAGE>
with, the referent person or such other person, as the case may be, or
any person who beneficially owns, directly or indirectly, 10% or more of
the voting equity interests of such person or warrants, options or other
rights to acquire or hold more than 10% of any class of voting equity
interests of such person. For the purposes of this definition, "control"
when used with respect to any specified person means the power to direct
or cause the direction of management or policies of such person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "affiliated,"
"controlling" and "controlled" have meanings correlative to the
foregoing.
The holders of Class D Common Stock shall have the right to
exchange each share of Class D Common Stock for one share of Common
Stock, at any time, provided that, other than upon and after a change of
control, no person shall be entitled to acquire shares of Common Stock
upon such exchange if after giving effect thereto such person shall
have, or shall have the then contractual right to acquire through
conversion, exercise of warrants, or otherwise, more than 9.9% of the
combined voting power of the Common Stock, Class A Common Stock and
Class C Common Stock then outstanding.
The Corporation shall not be required to register any transfer of
shares of Class D Common Stock, except as follows:
(a) to any person which acquired shares of Class D Common Stock
on the original issuance of Class D Common Stock by the Corporation
(a "Purchaser");
(b) to the ultimate parent corporation of any Purchaser (an
"Approved Parent") or any wholly-owned direct or indirect subsidiary
of any Approved Parent (a "Controlled Subsidiary");
(c) in a transfer (otherwise than to a Purchaser, an Approved
Parent or a Controlled Subsidiary) pursuant to Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), or a
successor provision;
(d) in a private sale (otherwise than to a Purchaser, an
Approved Parent or a Controlled Subsidiary), provided that, other
than upon and after a change of control, the transferor shall not
knowingly sell to any single person or group of persons acting in
concert a number of shares of Class D Common Stock which, if
exchanged for Common Stock, when added to other securities owned by
such person or group and to securities that such person or group has
the right to acquire by conversion, exercise of warrants, or
otherwise, would cause such person or group to own or to have the
right to acquire more than 9.9% of the combined voting power of the
shares of Common Stock, Class A Common Stock and Class C Common Stock
then outstanding (for purposes of this clause (d) "not knowingly"
shall mean the absence of actual knowledge and of knowledge that
would have then been available from a review of filings as to the
Corporation under section 13 of the Securities Exchange Act of 1934,
as amended, plus the receipt of a representation from the buyer(s) to
the foregoing effect); and
(e) in the event that shares of Series B Stock and/or Common
Stock exchangeable for shares of Class D Common Stock are to be
offered in any bona fide public offering registered under the
Securities Act, the Corporation shall provide: (i) in the event that
shares of Series B Stock are offered publicly, for the conversion of
such shares of Series B Stock into Common Stock at the election of
the holders of shares of Series B Stock; and (ii) in the event that
shares of Common Stock are offered publicly, for the exchange of the
shares of Class D Common Stock for shares of Common Stock at the
election of the holders of shares of Class D Common Stock; in each
case so that such offerings can be made without restriction.
3
<PAGE>
In connection with any sale or transfer of shares of Class D Common
Stock in accordance with clauses (c) or (d) above, the Corporation shall
issue one share of Common Stock in exchange for each share of Class D
Common Stock to be so sold or transferred, provided that in no event,
other than upon and after a change of control, shall the number of
shares of Common Stock issued to such purchaser or transferee cause the
combined voting power of the shares of Common Stock, Class A Common
Stock and Class C Common Stock held by such purchaser or transferee to
exceed 9.9% of the combined voting power of all such shares then
outstanding.
Any holder of shares of Class D Common Stock desiring to exchange
such shares for Common Stock shall surrender the certificate or
certificates representing such shares of Class D Common Stock at the
office of the transfer agent for the Class D Common Stock, which
certificate or certificates, if the Corporation shall so require, shall
be duly endorsed to the Corporation or in blank, or accompanied by
proper instruments of transfer to the Corporation or in blank,
accompanied by irrevocable written notice to the Corporation that the
holder elects so to exchange such shares of Class D Common Stock and
specifying the name or names (with address or addresses) in which a
certificate or certificates representing shares of Common Stock are to
be issued.
The Corporation shall, as soon as practicable after such deposit of
certificates representing shares of Class D Common Stock accompanied by
the written notice and compliance with any other conditions herein
contained, deliver at such office of such transfer agent to the person
for whose account such shares of Class D Common Stock were so
surrendered or to the nominee or nominees of such person, certificates
representing the number of full shares of Common Stock to which such
person shall be entitled as aforesaid. Such exchange shall be deemed to
have been made as of the date of such surrender of the shares of Class D
Common Stock to be exchanged, and the person or persons entitled to
receive the shares of Common Stock deliverable upon exchange of such
shares of Class D Common Stock shall be treated for all purposes as the
record holder or holders of such Common Stock on such date.
The transfer agent for the Class D Common Stock and the transfer
agent and registrar for the Common Stock shall not be required to accept
for registration of transfer a certificate representing any shares of
Class D Common Stock or Common Stock bearing a restrictive legend
affecting transfer, except upon presentation of satisfactory evidence
that the restrictions on transfer of the Class D Common Stock and Common
Stock referred to in such legend have been complied with, all in
accordance with such reasonable regulations as the Corporation may from
time to time agree with the transfer agent for the Class D Common Stock
and the transfer agent and registrar for the Common Stock.
The Corporation shall at all times reserve and keep available, out
of its authorized and unissued stock, such number of shares of its
Common Stock, free of preemptive rights, as shall from time to time be
sufficient to effect the exchange of all shares of Class D Common Stock.
The Corporation shall from time to time, in accordance with the laws of
the State of Maryland, increase the number of authorized shares of
Common Stock if at any time the number of authorized and unissued shares
of Common Stock shall not be sufficient to permit the exchange of all
the then outstanding shares of Class D Common Stock.
If any shares of Common Stock required to be reserved for purposes
of exchange of the Class D Common Stock hereunder require registration
with or approval of any governmental authority under any Federal or
State law before such shares may be issued upon conversion, the
Corporation will in good faith and as expeditiously as possible endeavor
to cause such shares to be duly registered or approved, as the case may
be. If the Common Stock is listed on the New York Stock Exchange or any
other national securities exchange, the Corporation will, if permitted
by the rules of such exchange, list and keep listed on such exchange,
upon official
4
<PAGE>
notice of issuance, all shares of Common Stock issuable upon exchange of
the Class D Common Stock.
The Corporation shall pay any and all issue or other taxes that may
be payable in respect of any issue or delivery of shares of Common Stock
on exchange of shares of Class D Common Stock. The Corporation shall
not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue or delivery of Common Stock (or
other securities or assets) in a name other than that in which the
shares of Class D Common Stock so exchanged were registered, and no such
issue or delivery shall be made unless and until the person requesting
such issue has paid to the Corporation the amount of such tax or has
established, to the satisfaction of the Corporation, that such tax has
been paid.
Whenever possible, each provision hereof shall be interpreted in a
manner as to be effective and valid under applicable law, but if any
provision hereof is held to be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating or otherwise adversely
affecting the remaining provisions hereof. If a court of competent
jurisdiction should determine that a provision hereof would be valid or
enforceable if a period of time were extended or shortened or a
particular percentage were increased or decreased, then such court may
make such change as shall be necessary to render the provision in
question effective and valid under applicable law.
4. Section (b) of Article SEVENTH of the Charter is hereby deleted in
its entirety and Sections (c) and (d) thereof are relettered (b) and (c),
respectively.
SECOND, the Board of Directors of the Corporation duly adopted resolutions
which set forth the foregoing amendments of the Charter, declaring that the said
amendments to the Charter as proposed were advisable and directed that they be
submitted for action thereon by the stockholders of the Corporation at a meeting
to be held on , 1994.
THIRD, notice setting forth the said amendments of the Charter and stating
that a purpose of the meeting of the stockholders would be to take action
thereon, was given, as required by law, to all stockholders entitled to vote
thereon. The amendments of the Charter as hereinabove set forth were approved by
the stockholders of the Corporation at said meeting by the affirmative vote of a
majority of all of the votes entitled to be cast thereon.
FOURTH, the information required to be provided under subsection (b)(2)(i)
of Section 2-607 of the Maryland General Corporation Law with respect to the
Common Stock, the Class A Common Stock, the Class C Common Stock and the
Preferred Stock of the Corporation has not, except as to the number of
authorized shares of Common Stock and Preferred Stock (which have been increased
pursuant to Article FIRST of these Articles of Amendment), been changed by these
Articles of Amendment and remains as set forth in Article SIXTH of the Charter,
which Article SIXTH, as amended, is incorporated herein in its entirety.
FIFTH, the total number of shares of stock which the Corporation had
authority to issue immediately prior to this amendment was eighty-eight million
five hundred thousand (88,500,000) shares of four classes, consisting of sixty
million (60,000,000) shares of Common Stock, $1.00 par value per share; thirteen
million (13,000,000) shares of Class A Common Stock, $.00001 par value per
share; five million five hundred thousand (5,500,000) shares of Class C Common
Stock, $1.00 par value per share; and ten million (10,000,000) shares of
Preferred Stock, $1.00 par value per share. The aggregate par value of all
shares of all classes of capital stock which the Corporation had authority to
issue was $75,500,130.
SIXTH, the total number of shares of stock which the Corporation has
authority to issue, pursuant to the Charter of the Corporation as hereby
amended, is two hundred ninety-two million (292,000,000) shares of five classes,
consisting of two hundred million (200,000,000) shares of Common Stock, $1.00
par value per share; twenty-six million (26,000,000) shares of Class A Common
Stock, $.00001 par
5
<PAGE>
value per share; eleven million (11,000,000) shares of Class C Common Stock,
$1.00 par value per share; forty million (40,000,000) shares of Class D Common
Stock, $1.00 par value per share; and fifteen million (15,000,000) shares of
Preferred Stock, $1.00 par value per share. The aggregate par value of all
shares of all classes of stock which the Corporation has the authority to issue
is $266,000,260.
SEVENTH, the undersigned President of the Corporation acknowledges these
Articles of Amendment to be the corporate act of the Corporation and as to all
matters and facts required to be verified under oath, the undersigned President
acknowledges that to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this statement is
made under the penalties for perjury.
IN WITNESS WHEREOF, ALEXANDER & ALEXANDER SERVICES INC. has caused these
presents to be signed in its name and on its behalf by its President and its
corporate seal to be hereunto affixed and attested by its Secretary on this
day of , 1994.
ALEXANDER & ALEXANDER SERVICES INC.
By: ..................................
President
6
<PAGE>
APPENDIX III
ARTICLES SUPPLEMENTARY
CLASSIFYING
6,200,000 SHARES OF PREFERRED STOCK
AS
8% SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
ALEXANDER & ALEXANDER SERVICES INC.
(PURSUANT TO SECTION 2-208 OF THE
MARYLAND GENERAL CORPORATION LAW)
------------------------
Alexander & Alexander Services Inc., a corporation organized and existing
under the laws of the State of Maryland (hereinafter called the "Corporation"),
and having its principal office in this State at 10461 Mill Run Circle, Owings
Mills, Maryland 21117, hereby certifies to the State Department of Assessments
and Taxation of Maryland that:
FIRST: Pursuant to the authority granted to and vested in the Board of
Directors of the Corporation (hereinafter called the "Board of Directors" or the
"Board") in accordance with the provisions of Article SIXTH of the Charter of
the Corporation (the "Charter"), the Board of Directors, at a meeting duly
convened and held on June 6, 1994, regarding the sale and issuance by the
Corporation of cumulative convertible preferred stock (the "Securities"),
adopted resolutions (the "Resolutions") classifying 6,200,000 shares of
Preferred Stock of the Corporation into a single series to be designated as "8%
Series B Cumulative Convertible Preferred Stock" and setting the preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption of such shares
as follows:
8% Series B Cumulative Convertible Preferred Stock
1. Designation and Amount. There shall be a series of Preferred Stock
designated as "8% Series B Cumulative Convertible Preferred Stock" and the
number of shares constituting such series shall be 6,200,000, of which
4,000,000 shall be issued initially (the date of such issuance, the
"Original Issue Date") and the remainder shall be reserved for issuance as
dividends pursuant to Section 3 below. Such series is referred to herein as
the "Series B Convertible Preferred Stock." The number of shares designated
as shares of Series B Convertible Preferred Stock may be decreased (but not
increased) by the Board of Directors without a vote of stockholders;
provided, however, that such number may not be decreased below the number
of then currently outstanding shares of Series B Convertible Preferred
Stock plus the then maximum number of such shares which could be issued
pursuant to Section 3 below assuming all dividends payable on or prior to
December 15, 1999 are paid in shares of Series B Convertible Preferred
Stock.
2. Defined Terms. All capitalized terms used herein without definition
shall have the respective meanings assigned thereto in the Charter.
3. Dividends. The holders of shares of Series B Convertible Preferred
Stock shall be entitled to receive, when, as and if authorized and declared
by the Board of Directors out of funds at the time legally available
therefor, dividends at the rate of 8% per annum per share, and no more,
which shall be fully cumulative, shall accrue without interest and shall be
payable quarterly in arrears on March 15, June 15, September 15 and
December 15 of each year, commencing September 15, 1994 (except that if any
such date is a Saturday, Sunday or legal holiday, then such dividend shall
be payable on the next day that is not a Saturday, Sunday or legal holiday)
to holders of record as they appear upon the stock transfer books of the
Corporation on each March 1, June 1, September 1 and December 1 immediately
preceding the payment dates, or such other
<PAGE>
dates as shall be fixed at the time of the authorization and declaration by
the Board of Directors (or, to the extent permitted by applicable law, a
duly authorized committee thereof), which date shall not be less than ten
(10) nor more than sixty (60) days preceding the relevant dividend payment
date. For purposes hereof, the term "legal holiday" shall mean any day on
which banking institutions are authorized to close in New York, New York.
Subject to the sixth succeeding paragraph of this Section 3, dividends on
account of arrears for any past dividend period may be declared and paid at
any time, without reference to any regular dividend payment date; provided,
however, that dividends on account of arrears for any past dividends which
were required to be made in shares of Series B Convertible Preferred Stock
shall be declared and paid in shares of Series B Convertible Preferred
Stock and shall include such number of shares of Series B Convertible
Preferred Stock as any holder would have been entitled to receive had all
such dividends been declared and paid on a timely basis. The amount of
dividends payable per share of Series B Convertible Preferred Stock for
each quarterly dividend period shall be computed by dividing the annual
dividend amount by four and shall include fractional shares. The amount of
dividends payable for the initial dividend period and any period shorter
than a full quarterly period shall be computed on the basis of a 360-day
year of twelve 30-day months and the actual number of days elapsed in the
period in which payable. No interest shall be payable in respect of any
dividend payment on the Series B Convertible Preferred Stock or any other
Parity Dividend Stock (as hereinafter defined) or any Senior Dividend Stock
(as hereinafter defined) which may be in arrears.
Any dividend payments made on or prior to December 15, 1996 shall be
made in additional shares of Series B Convertible Preferred Stock valued at
the liquidation preference of the Series B Convertible Preferred Stock. Any
dividend payments made after December 15, 1996 and on or prior to December
15, 1999 may be made, in the sole discretion of the Board of Directors,
either in (i) cash or (ii) additional shares of Series B Convertible
Preferred Stock valued at the liquidation preference of the Series B
Convertible Preferred Stock but not in any combination of cash and
additional shares of Series B Convertible Preferred Stock. On and after the
earlier of (i) December 16, 1999 or (ii) the first date the Corporation
pays any dividend in cash, dividends on the Series B Convertible Preferred
Stock shall be made only in cash. All shares of Series B Convertible
Preferred Stock issued as a dividend with respect to the Series B
Convertible Preferred Stock shall thereupon be duly authorized, validly
issued, fully paid and nonassessable.
In the case of shares of Series B Convertible Preferred Stock issued
on the Original Issue Date, dividends shall accrue and be cumulative from
such date. In the case of shares of Series B Convertible Preferred Stock
issued as a dividend on shares of Series B Convertible Preferred Stock,
dividends shall accrue and be cumulative from the dividend payment date in
respect of which such shares were issued as a dividend.
Each fractional share of Series B Convertible Preferred Stock
outstanding shall be entitled to a ratably proportionate amount of all
dividends accruing with respect to each outstanding share of Series B
Convertible Preferred Stock, and all such dividends with respect to such
outstanding fractional shares shall be cumulative and shall accrue (whether
or not declared), and shall be payable in the same manner and at such times
as provided for above with respect to dividends on each outstanding share
of Series B Convertible Preferred Stock. Each fractional share of Series B
Convertible Preferred Stock outstanding shall also be entitled to a ratably
proportionate amount of any other distributions made with respect to each
outstanding share of Series B Convertible Preferred Stock, and all such
distributions shall be payable in the same manner and at the same time as
distributions on each outstanding share of Series B Convertible Preferred
Stock.
No dividends or other distributions, other than dividends payable
solely in shares of Common Stock, Class A Common Stock, Class C Common
Stock or Class D Common Stock or other stock of the Corporation ranking
junior as to dividends and as to liquidation rights to the Series B
Convertible Preferred Stock, shall be authorized, declared, paid or set
apart for payment on any
2
<PAGE>
shares of Common Stock, Class A Common Stock, Class C Common Stock or Class
D Common Stock or other stock of the Corporation ranking junior as to
dividends to the Series B Convertible Preferred Stock, including the Series
A Junior Participating Preferred Stock, when and if issued (collectively,
the "Junior Dividend Stock"), unless and until all accrued and unpaid
dividends on the Series B Convertible Preferred Stock for all dividend
payment periods ending on or prior to the date of payment of such dividends
or other distributions on Junior Dividend Stock shall have been authorized,
declared and paid or set apart in trust for payment and all obligations of
the Corporation to purchase shares of Series B Convertible Preferred Stock
tendered to it pursuant to Section 7 and to make Extra Payments have been
fully satisfied.
The Corporation shall not permit Reed Stenhouse Companies Limited
("RSC") (in respect of RSC Class A Shares) or Alexander & Alexander
Services UK plc ("AAE") (in respect of AAE Dividend Shares) to authorize,
declare, pay or set apart any dividends or other distributions, other than
dividends payable solely in Junior Dividend Stock, RSC Class A Shares or
AAE Dividend Shares or other stock of the Corporation, RSC or AAE ranking
junior as to dividends to the Series B Convertible Preferred Stock, unless
and until all accrued and unpaid dividends on the Series B Convertible
Preferred Stock for all dividend payment periods ending on or prior to the
date of payment of such dividends or other distributions on RSC Class A
Shares or AAE Dividend Shares shall have been authorized, declared and paid
or set apart in trust for payment and all obligations of the Corporation to
purchase shares of Series B Convertible Preferred Stock tendered to it
pursuant to Section 7 and to make Extra Payments have been fully satisfied.
If at any time any dividend on any stock of the Corporation hereafter
issued ranking senior as to dividends to the Series B Convertible Preferred
Stock (the "Senior Dividend Stock") shall be in arrears, in whole or in
part, then (except to the extent allowed by the terms of such Senior
Dividend Stock) no dividend shall be authorized, declared, paid or set
apart for payment on the Series B Convertible Preferred Stock (other than
dividends payable in additional shares of Series B Convertible Preferred
Stock) unless and until all accrued and unpaid dividends with respect to
the Senior Dividend Stock for all payment periods ending on or prior to the
date of payment of the current dividend on the Series B Convertible
Preferred Stock shall have been authorized, declared and paid or set apart
for payment. No full dividends shall be authorized, declared, paid or set
apart for payment on any class or series of the Corporation's stock
heretofore or hereafter issued ranking, as to dividends, on a parity with
the Series B Convertible Preferred Stock (including the Series A
Convertible Preferred Stock) (collectively, the "Parity Dividend Stock")
for any period unless full cumulative dividends have been, or
contemporaneously are, authorized, declared and paid or set apart in trust
for such payment on the Series B Convertible Preferred Stock for all
dividend payment periods terminating on or prior to the date of payment of
such full cumulative dividends. No full dividends (other than dividends
payable in additional shares of Series B Convertible Preferred Stock) shall
be authorized, declared, paid or set apart for payment on the Series B
Convertible Preferred Stock for any period unless full cumulative dividends
have been, or contemporaneously are, authorized, declared and paid or set
apart for payment on the Parity Dividend Stock for all dividend periods
terminating on or prior to the date of payment of such full cumulative
dividends. When accrued dividends are not paid in full on the Series B
Convertible Preferred Stock and the Parity Dividend Stock, all cash
dividends authorized, declared and paid or set apart for payment on the
Series B Convertible Preferred Stock and the Parity Dividend Stock shall be
authorized, declared, paid or set apart for payment pro rata so that the
amount of dividends authorized, declared, paid or set apart for payment per
share on the Series B Convertible Preferred Stock and the Parity Dividend
Stock shall in all cases bear to each other the same ratio that accrued and
unpaid dividends per share on the Series B Convertible Preferred Stock and
the Parity Dividend Stock bear to each other.
3
<PAGE>
Any reference to "distribution" contained in this Section 3 shall not
be deemed to include any distribution made in connection with any
liquidation, dissolution or winding up of the Corporation, RSC or AAE,
whether voluntary or involuntary.
4. Liquidation Preference. Subject to the full payment of the
liquidation preferences of shares of stock of the Corporation hereafter
issued ranking senior as to liquidation rights to the Series B Convertible
Preferred Stock (the "Senior Liquidation Stock"), in the event of a
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the holders of shares of Series B Convertible
Preferred Stock shall be entitled to receive out of the assets of the
Corporation, whether such assets are stated capital or surplus of any
nature, an amount equal to the dividends accrued and unpaid on such shares
on the date of final distribution to such holders, whether or not declared,
without interest, plus a sum equal to $50.00 per share, and no more, before
any payment shall be made or any assets distributed to the holders of
shares of Common Stock, Class A Common Stock, Class C Common Stock, Class D
Common Stock or any other class or series of the Corporation's stock
hereafter issued ranking junior as to liquidation rights to the Series B
Convertible Preferred Stock, including the Series A Junior Participating
Preferred Stock (collectively, the "Junior Liquidation Stock").
Further, in the event of the liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, (i) the Board of
Directors shall determine (which determination shall be conclusive) whether
(1) there is some likelihood that the holders of Series B Convertible
Preferred Stock will not receive, on such liquidation, dissolution or
winding up of the Corporation, the full amounts to which they are entitled
pursuant to this Section 4, and (2) there is some likelihood that the
holders of RSC Class A Shares will receive out of the assets of RSC a
distribution as the result of any liquidation, dissolution or winding up,
or other action taken or to be taken by RSC in connection or concurrently
with the liquidation, dissolution or winding up of the Corporation, in an
amount greater than the holders of Common Stock are likely to receive on
the liquidation, dissolution or winding up of the Corporation, and (ii) if
the Board determines that both likelihoods exist, then, provided that
paragraph 2 of the Keepwell Agreement between the Corporation and RSC dated
July 31, 1985 does not apply, the Corporation shall take such action as may
be reasonably necessary to cause the transfer of shares of Common Stock of
the Corporation to the holders of RSC Class A Shares in satisfaction of the
obligations of RSC to the holders of such shares; provided, however, that
no director of RSC shall be required to take any action which would cause
such director to breach any duties under applicable law as advised by
independent counsel.
The entire assets of the Corporation available for distribution after
the liquidation preferences of the Senior Liquidation Stock are fully met
shall be distributed ratably among the holders of the Series A Convertible
Preferred Stock, the Series B Convertible Preferred Stock and any other
class or series of the Corporation's stock hereafter issued ranking on a
parity as to liquidation rights with the Series B Convertible Preferred
Stock in proportion to the respective preferential amounts to which each is
entitled (but only to the extent of such preferential amounts). After
payment in full of the liquidation preferences of the shares of the Series
B Convertible Preferred Stock, the holders of such shares shall not be
entitled to any further participation in any distribution of assets by the
Corporation. Neither a consolidation or merger of the Corporation with or
into another corporation nor a merger of any other corporation with or into
the Corporation, nor a sale or transfer of all or any part of the
Corporation's assets for cash, securities or other property, will be
considered a liquidation, dissolution or winding up of the Corporation.
5. Limitation on Share Repurchase. If at any time any dividends on the
Series B Convertible Preferred Stock shall be in arrears or the Corporation
shall have failed to make any purchase of shares of Series B Convertible
Preferred Stock tendered to it pursuant to Section 7, the Corporation shall
not, and the Corporation shall not permit RSC, AAE or any other corporation
or legal entity directly or indirectly controlled by the Corporation
(collectively, the "subsidiaries") to,
4
<PAGE>
repurchase, redeem, retire or otherwise acquire any shares of Junior
Dividend Stock, Junior Liquidation Stock, RSC Class A Shares, AAE Dividend
Shares or any warrants, rights, calls or options exercisable for or
convertible into any shares of Junior Dividend Stock, Junior Liquidation
Stock, RSC Class A Shares or AAE Dividend Shares, except by conversion into
or exchange for shares of Junior Dividend Stock or Junior Liquidation Stock
and other than purchases, redemptions, retirements or acquisitions made
pursuant to and as required by the terms of any employee incentive or
benefit plan of the Corporation or any subsidiary of the Corporation in
effect on June 1, 1994, or for consideration aggregating not more than
$100,000 in any calendar year.
If at any time any dividends on the Series B Convertible Preferred
Stock shall be in arrears or the Corporation shall have failed to make any
purchase of shares of Series B Convertible Preferred Stock tendered to it
pursuant to Section 7, the Corporation shall not, and shall not permit any
subsidiary to, repurchase, redeem, retire or otherwise acquire any shares
of the Corporation's or any such subsidiary's stock except (i) as permitted
by the immediately preceding paragraph and (ii) any subsidiary which is
wholly owned by the Corporation may repurchase, redeem, retire or otherwise
acquire shares of its stock.
6. Redemption at Option of the Corporation. The Series B Convertible
Preferred Stock may not be redeemed by the Corporation prior to December
15, 1999. Thereafter, so long as shares of Common Stock shall have traded
on the New York Stock Exchange on each trading day during a 30 consecutive
trading day period (each of which trading days shall be after December 15,
1999) and had a Closing Price (as hereinafter defined) on each such day in
excess of 150% of the conversion price then in effect for the Series B
Convertible Preferred Stock for each such trading day, the Series B
Convertible Preferred Stock may thereafter be redeemed by the Corporation,
at its option on any date set by the Board of Directors, in whole or in
part at any time, at a redemption price of $54.00 per share, plus an amount
in cash equal to accrued and unpaid dividends thereon, whether or not
authorized or declared, to but excluding the date fixed for redemption, if
redeemed on or prior to December 14, 2000, and at the following redemption
prices per share, if redeemed during the 12-month period beginning December
15:
YEAR REDEMPTION PRICE
--------- -----------------
2000 $ 53.50
2001 53.00
2002 52.50
2003 52.00
2004 51.50
2005 51.00
2006 50.50
and thereafter at $50.00 per share, plus, in each case, an amount in cash equal
to all dividends on the Series B Convertible Preferred Stock accrued and unpaid
thereon, whether or not authorized or declared, to but excluding the date
fixed for redemption, such sum being hereinafter referred to as the
"Redemption Price."
In case of the redemption of less than all of the then outstanding
shares of Series B Convertible Preferred Stock, the Corporation shall
effect such redemption pro rata. Notwithstanding the foregoing, the
Corporation shall not redeem less than all of the shares of Series B
Convertible Preferred Stock at any time outstanding until all dividends
accrued and in arrears upon all shares of Series B Convertible Preferred
Stock then outstanding shall have been paid for all past dividend periods.
Not more than sixty nor less than forty-five days prior to the
redemption date fixed by the Board of Directors, notice by first class
mail, postage prepaid, shall be given to the holders of record of shares of
the Series B Convertible Preferred Stock to be redeemed, addressed to such
holders at
5
<PAGE>
their last addresses as shown upon the stock transfer books of the
Corporation. Each such notice of redemption shall specify the date fixed
for redemption, the Redemption Price, the place or places of payment, that
payment will be made upon presentation and surrender of the shares of
Series B Convertible Preferred Stock, that on and after the redemption date
dividends will cease to accrue on such shares, the then effective
conversion price pursuant to Section 8 and that the right of holders to
convert shares of Series B Convertible Preferred Stock shall terminate at
the close of business on the business day prior to the redemption date
(unless the Corporation defaults in the payment of the Redemption Price).
Any notice that is mailed as herein provided shall be conclusively
presumed to have been duly given, whether or not the holder of shares of
Series B Convertible Preferred Stock receives such notice; and failure to
give such notice by mail, or any defect in such notice, to the holders of
any shares designated for redemption shall not affect the validity of the
proceedings for the redemption of any other shares of Series B Convertible
Preferred Stock. On or after the date fixed for redemption as stated in
such notice, each holder of the shares called for redemption, subject to
such holder's right to convert shares of Series B Convertible Preferred
Stock as provided above, shall surrender the certificate representing such
shares to the Corporation at the place designated in such notice and shall
thereupon be entitled to receive payment of the Redemption Price. If less
than all the shares evidenced by any such surrendered certificate are
redeemed, a new certificate shall be issued representing the unredeemed
shares. Notice having been given as aforesaid, if, on the date fixed for
redemption, funds necessary for the redemption shall be available therefor
and shall have been irrevocably deposited or set aside in trust for the
holders of the shares of Series B Convertible Preferred Stock, then,
notwithstanding that the certificates representing any shares so called for
redemption shall not have been surrendered, dividends with respect to the
shares so called shall cease to accrue after the date fixed for redemption,
such shares shall no longer be deemed outstanding, the holders thereof
shall cease to be stockholders of the Corporation and all rights whatsoever
with respect to the shares so called for redemption (except the right of
the holders to receive the Redemption Price without interest upon surrender
of their certificates therefor) shall terminate. If funds legally available
for such purpose are not sufficient for redemption of the shares of Series
B Convertible Preferred Stock to be redeemed, then the certificates
representing such shares shall be deemed not to be surrendered, such shares
shall remain outstanding and the rights of holders of shares of Series B
Convertible Preferred Stock thereafter shall continue to be only those of a
holder of shares of the Series B Convertible Preferred Stock.
Except as provided in Section 7, the shares of Series B Convertible
Preferred Stock shall not be subject to the operation of any mandatory
purchase, retirement or sinking fund.
7. Repurchase at Option of the Holder. If one or more Special Events
shall occur at any time or from time to time on or after the Original Issue
Date, each holder of shares of the Series B Convertible Preferred Stock
shall have the right, at such holder's option exercisable at any time
within 120 days after the happening of each such Special Event, to require
the Corporation to purchase all or any part of the shares of Series B
Convertible Preferred Stock then held by such holder as such holder may
elect at $58.82 per share if the Special Event occurs on or before six
months after the Original Issue Date, $66.18 per share if the Special Event
occurs more than six months after the Original Issue Date and on or before
twelve months after the Original Issue Date and $72.06 per share if the
Special Event occurs more than twelve months after the Original Issue Date
plus, in each case, an amount in cash equal to the accrued and unpaid
dividends thereon, whether or not authorized or declared, to but excluding
the date fixed for redemption. Any shares of Series B Convertible Preferred
Stock which would have accrued but have not been paid on any shares
tendered for purchase shall be deemed to be tendered for purchase. The
Corporation shall, immediately upon becoming aware of any facts or events
that could reasonably be expected to result in the occurrence of a Special
Event, give a written notice thereof by first class mail, postage
6
<PAGE>
prepaid, to the holders of record of shares of the Series B Convertible
Preferred Stock, addressed to such holders at their last address as shown
upon the stock transfer books of the Corporation.
A "Special Event" shall mean (v) the declaration or payment on or
after the Original Issue Date by the Corporation, RSC or AAE of an
Extraordinary Equity Payment (as hereinafter defined), (w) the sale or
other disposition, directly or indirectly, by the Corporation or any of its
subsidiaries in one or a series of related transactions of assets
representing 35% or more of the then book value of the Corporation's assets
on a consolidated basis or 35% or more of the Corporation's gross revenues
on a consolidated basis in either of the two most recently ended fiscal
years, (x) the merger or consolidation of the Corporation or any of its
Principal Subsidiaries (as hereinafter defined) with or into any other
firm, corporation or other legal entity other than (i) a merger or
consolidation of one subsidiary of the Corporation into another or the
Corporation, or (ii) a merger or consolidation in which the securities of
the Corporation outstanding before the merger or consolidation are not
affected and in which the Corporation issues equity securities having an
aggregate market value of less than 20% of the total market value of the
Corporation's equity securities outstanding prior to such merger or
consolidation, or (y) the occurrence of a Specified Corporate Action on or
after the Original Issue Date.
"Extraordinary Equity Payment" shall mean (a) the declaration or
payment on or after June 1, 1994 by the Corporation, RSC, AAE or any of
their respective subsidiaries of any dividend or distribution (except for
any dividend or distribution from one subsidiary of the Corporation to
another subsidiary of the Corporation or from a subsidiary of the
Corporation to the Corporation, RSC or AAE or any of their respective
wholly owned subsidiaries; provided that all of such dividend paid or
distribution made, net of applicable withholding taxes, is received by the
Corporation, RSC or AAE or such recipient subsidiary) on any class or
series of its stock (other than regularly scheduled quarterly cash
dividends on the Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock in accordance with the terms thereof as in
effect on the Original Issue Date) other than the declaration and payment
by the Corporation, RSC and AAE of dividends on the Common Stock, the RSC
Class A Shares and the AAE Dividend Shares, respectively, which do not
exceed (i) on and after June 1, 1994 and on and prior to December 31, 1994,
more than $0.075 per share, (ii) on and after January 1, 1995 and on and
prior to December 31, 1996, in the aggregate more than 25% of the
Corporation's net income available for distribution to common shareholders
(after preferred dividends) through the end of the last fiscal quarter
prior to the date of declaration of such dividend and (iii) on and after
January 1, 1997, in the aggregate more than the sum of (A) 50% of the
Corporation's net income available for distribution to common shareholders
(after preferred dividends) on and after such date and through the end of
the last fiscal quarter prior to the date of declaration of such dividend
and (B) the excess, if any, of(1) 25% of the Corporation's net income
available for distribution to common shareholders (after preferred
dividends) during the period ending on and after January 1, 1995 through
December 31, 1996 over (2) the aggregate amount of dividends declared
during the period from January 1, 1995 through December 31, 1996 and (b)
any repurchases, redemptions, retirements or other acquisitions directly or
indirectly by the Corporation or any of its subsidiaries on or after June
1, 1994 of any stock of the Corporation or any of its subsidiaries (other
than a wholly-owned subsidiary) (other than redemptions or repurchases of
the Series B Convertible Preferred Stock in accordance with Sections 6 and
7) in excess of net proceeds on or after June 1, 1994 to the Corporation
from sales of stock of the Corporation (less amounts expended on
redemptions or repurchases of Series A Convertible Preferred Stock and
Series B Convertible Preferred Stock on or after June 1, 1994). For
purposes of Section 8 below, all amounts treated as an Extraordinary Equity
Payment shall be treated as having been made by the Corporation.
"Specified Corporate Action" shall mean such time as (i) the
Corporation shall consent or agree to the acquisition of, or the
commencement of a tender offer for, or the Board of Directors of the
Corporation shall recommend or, within 10 business days after the
commencement of the
7
<PAGE>
tender offer, not recommend that shareholders reject, a tender offer for,
"beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act) by
any "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended ("the Exchange Act"))
other than American International Group, Inc. ("AIG") and its affiliates or
any transferee thereof, of securities of the Corporation entitled to vote
generally in the election of directors, or securities convertible into or
exchangeable for such securities (collectively, "Designated Securities"),
representing, when added to the Designated Securities already owned by any
such person or group, thirty-five percent (35%) or more of such Designated
Securities; (ii) the Corporation shall amend, modify or supplement, or
waive the benefit of, the Rights Agreement between Alexander & Alexander
Services Inc. and First Chicago Trust Company of New York, dated as of June
11, 1987, as amended and restated on March 22, 1990, as amended on August
21, 1992 and June 6, 1994 (the "Rights Agreement"), so as to permit any
acquisition of beneficial ownership of thirty-five percent (35%) or more of
the Designated Securities without causing a person or group (other than AIG
and its affiliates or any transferee thereof) to become an Acquiring Person
(as defined in the Rights Agreement) or without causing the Distribution
Date or the Shares Acquisition Date (each as defined in the Rights
Agreement) to occur or without giving rise to a Section 11(a)(ii) Event (as
defined in the Rights Agreement); (iii) the Corporation shall take any
action under Section 3-603(c) of the Maryland General Corporation Law to
exempt any transaction between the Corporation and any of its subsidiaries,
on the one hand, and any person or group (other than AIG and its affiliates
or any transferee thereof), or any affiliates of any such person or group,
on the other hand, who (A) acquire, own or hold beneficial ownership of
Designated Securities representing thirty-five percent (35%) or more of
such Designated Securities from the provisions of Title 3, Subtitle 6 of
the Maryland General Corporation Law or (B) acquire, own or hold beneficial
ownership of Designated Securities representing ten percent (10%) or more
of such Designated Securities unless such other person or group, or any
affiliate of such person or group, enters into a standstill agreement with
the Corporation limiting the acquisition of Designated Securities by such
other person or group, or any affiliates of such person or group, to less
than 35% of the Designated Securities and such standstill agreement remains
in full force and effect; (iv) the Corporation shall issue, sell or
transfer, in one or a series of related transactions, Designated Securities
to any person or group (other than AIG and its affiliates or any transferee
thereof) if after giving effect thereto said person or group shall have, or
shall have the then contractual right to acquire through conversion,
exercise of warrants or otherwise, more than thirty-five percent (35%) of
the combined voting power to vote generally in the election of directors of
the Corporation; or (v) the Corporation shall agree to merge or consolidate
with or into any person, firm, corporation or other legal entity (other
than AIG and its affiliates or any transferee thereof) or shall agree to
sell all or substantially all its assets to any such person, firm,
corporation or other legal entity other than (i) a merger or consolidation
of one subsidiary of the Corporation into another or the Corporation, or
(ii) a merger or consolidation in which the securities of the Corporation
outstanding before the merger or consolidation are not affected and in
which the Corporation issues equity securities having an aggregate market
value of less than 20% of the total market value of the Corporation's
equity securities outstanding prior to such merger or consolidation.
"Principal Subsidiary" means a subsidiary, including its subsidiaries,
which meets any of the following conditions:
(i) The Corporation's and its other subsidiaries' investments in
and advances to the subsidiary exceed ten percent (10%) of the total
assets of the Corporation and its subsidiaries consolidated as of the
end of the most recently completed fiscal year of the Corporation; or
(ii) The Corporation's and its other subsidiaries' proportionate
share of the total assets (after intercompany eliminations) of the
subsidiary exceed ten percent (10%) of the total assets of the
Corporation and its subsidiaries consolidated as of the end of the most
recently completed fiscal year of the Corporation; or
8
<PAGE>
(iii) The Corporation's and its other subsidiaries' equity in the
income from continuing operations before income taxes, extraordinary
items and cumulative effect of a change in accounting principles of the
subsidiary exceeds ten percent (10%) of such income of the Corporation
and its subsidiaries consolidated for the most recently completed fiscal
year of the Corporation.
"Affiliate" means, when used with reference to any person, any other
person directly or indirectly controlling, controlled by, or under direct
or indirect common control with, the referent person or such other person,
as the case may be, or any person who beneficially owns, directly or
indirectly, 10% or more of the voting equity interests of such person or
warrants, options or other rights to acquire or hold more than 10% of any
class of voting equity interests of such person. For the purposes of this
definition, "control" when used with respect to any specified person means
the power to direct or cause the direction of management or policies of
such person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise; and the terms "affiliated,"
"controlling" and "controlled" have meanings correlative to the foregoing.
The date fixed for each such repurchase shall be the 121st day
following the occurrence of the Special Event giving rise thereto. The
place of payment shall be at an office or agency in the City of New York,
New York fixed therefor by the Corporation or, if not fixed, at the
principal executive office of the Corporation.
The Corporation shall, within 20 days of the occurrence of a Special
Event, give a written notice thereof by first class mail, postage prepaid,
to the holders of record of shares of the Series B Convertible Preferred
Stock, addressed to such holders at their last addresses as shown upon the
stock transfer books of the Corporation. Each such notice shall specify the
Special Event which has occurred and the date of such occurrence, the place
or places of payment, the then effective conversion price pursuant to
Section 8, the then effective repurchase price and the date the right of
such holder to require such repurchase shall terminate. Any notice that is
mailed as herein provided shall be conclusively presumed to have been duly
given, whether or not the holder of shares of Series B Convertible
Preferred Stock receives such notice; and failure to give such notice by
mail, or any defect in such notice, to the holders of any shares shall not
affect the validity of the proceedings for the repurchase of any other
shares of Series B Convertible Preferred Stock.
On the date fixed for any such repurchase, each holder of shares of
Series B Convertible Preferred Stock who elects to have shares of Series B
Convertible Preferred Stock held by it purchased shall surrender the
certificate representing such shares to the Corporation at the place
designated in such notice together with an election to have such purchase
made and shall thereupon be entitled to receive payment therefor provided
in this Section 7. If less than all the shares represented by any such
surrendered certificate are repurchased, a new certificate shall be issued
representing the unpurchased shares. Dividends with respect to the shares
of Series B Convertible Preferred Stock so purchased shall cease to accrue
after the date so purchased, such shares shall no longer be deemed
outstanding and the holders thereof shall cease to be stockholders of the
Corporation and all rights whatsoever with respect to the shares so
purchased shall terminate. If the funds legally available for such purchase
are not sufficient to purchase all the shares of Series B Convertible
Preferred Stock tendered to the Corporation for purchase, the Corporation
shall purchase the greatest number of whole shares for which such funds are
so available on a pro rata basis among all tendering holders based on the
ratio of the number of shares tendered by each of them to the aggregate
amount of all shares so tendered, and the certificates representing the
unpurchased shares shall be deemed not to be surrendered for repurchase,
such unpurchased shares shall remain outstanding and the rights of the
holders of shares of Series B Convertible Preferred Stock thereafter shall
continue to be those of a holder of shares of the Series B Convertible
Preferred Stock; provided, however, the Corporation shall thereafter be
required to repurchase all such remaining shares at the first date it has
sufficient funds legally available for such purpose at the price it would
have paid at the date such shares were actually tendered and the
Corporation shall give notice as aforesaid to each holder whose shares were
not repurchased for such reason and such holder shall thereafter have the
right to elect to have such shares repurchased, such election to be made
within 30 days of receipt of such notice.
9
<PAGE>
8. Conversion.
(a) Right of Conversion. Each share of Series B Convertible
Preferred Stock shall be convertible at the option of the holder
thereof, at any time prior to the close of business on the business day
prior to the date fixed for redemption of such share as herein provided,
into fully paid and nonassessable shares of Class D Common Stock and
such other securities and property as hereinafter provided, at the rate
of that number of shares of Class D Common Stock for each full share of
Series B Convertible Preferred Stock that is equal to $50.00 divided by
the conversion price applicable per share of Class D Common Stock. For
purposes of this resolution, the "conversion price" applicable per share
of Class D Common Stock shall initially be equal to $17.00, and shall be
adjusted from time to time in accordance with the provisions of this
Section 8.
For the purpose of this Section 8, the term "Common Stock" shall
mean the class designated as Common Stock, par value $1.00 per share, of
the Corporation as of June 1, 1994 and any other shares into which such
shares may hereafter be changed from time to time. For purposes of this
Section 8, the term "Class D Common Stock" shall mean the class
designated as Class D Common Stock, par value $1.00 per share, of the
Corporation as of the Original Issue Date and any other shares into
which such shares may hereafter be changed from time to time.
(b) Conversion Procedures. Any holder of shares of Series B
Convertible Preferred Stock desiring to convert such shares into Class D
Common Stock shall surrender the certificate or certificates
representing such shares of Series B Convertible Preferred Stock at the
office of the transfer agent for the Series B Convertible Preferred
Stock, which certificate or certificates, if the Corporation shall so
require, shall be duly endorsed to the Corporation or in blank, or
accompanied by proper instruments of transfer to the Corporation or in
blank, accompanied by irrevocable written notice to the Corporation that
the holder elects so to convert such shares of Series B Convertible
Preferred Stock and specifying the name or names (with address or
addresses) in which a certificate or certificates evidencing shares of
Class D Common Stock are to be issued.
Subject to Section 8(1) hereof, no payments or adjustments in
respect of dividends on shares of Series B Convertible Preferred Stock
surrendered for conversion or on account of any dividend on the Class D
Common Stock issued upon conversion shall be made upon the conversion of
any shares of Series B Convertible Preferred Stock.
The Corporation shall, as soon as practicable after such deposit of
certificates representing shares of Series B Convertible Preferred Stock
accompanied by the written notice and compliance with any other
conditions herein contained, deliver at such office of the transfer
agent to the person for whose account such shares of Series B
Convertible Preferred Stock were so surrendered or to the nominee or
nominees of such person certificates representing the number of full
shares of Class D Common Stock to which such person shall be entitled as
aforesaid, together with a cash adjustment in respect of any fraction of
a share of Class D Common Stock as hereinafter provided. Subject to the
following provisions of this paragraph, such conversion shall be deemed
to have been made as of the date of such surrender of the shares of
Series B Convertible Preferred Stock to be converted, and the person or
persons entitled to receive the Class D Common Stock deliverable upon
conversion of such Series B Convertible Preferred Stock shall be treated
for all purposes as the record holder or holders of such Class D Common
Stock on such date.
10
<PAGE>
(c) Adjustment of Conversion Price. The conversion price at which a
share of Series B Convertible Preferred Stock is convertible into Class
D Common Stock shall be subject to adjustment from time to time as
follows:
(i) In case the Corporation shall pay or make a dividend or
other distribution on its Common Stock exclusively in Common Stock or
shall pay or make a dividend or other distribution on any other class
of stock of the Corporation which dividend or distribution includes
Common Stock or shall exchange outstanding Rights (as defined in
Section 8(k) hereof) for shares of Common Stock, the conversion price
in effect at the opening of business on the day following the date
fixed for the determination of stockholders entitled to receive such
dividend or other distribution or to exchange such Rights shall be
reduced by multiplying such conversion price by a fraction of which
the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or
other distribution or exchange, such reduction to become effective
immediately after the opening of business on the day following the
date fixed for such determination.
In case the Corporation shall issue or otherwise sell or
distribute shares of Common Stock for a consideration per share in
cash or property less than the conversion price in effect at the time
of such issuance, the conversion price then in effect shall be
reduced by multiplying such conversion price by a fraction of which
the numerator shall be the number of shares of Common Stock
outstanding immediately prior to such issuance, sale or distribution
plus the number of shares of Common Stock which the aggregate
consideration received by the Corporation for such issuance, sale or
distribution (such consideration, if other than cash, as determined
by the Board of Directors including a majority of the Directors who
are not officers or employees of the Corporation or any of its
subsidiaries, whose determination shall be conclusive and described
in a resolution of the Board of Directors) would purchase at the
conversion price per share and the denominator shall be the number of
shares of Common Stock outstanding immediately after giving effecting
to such issuance, sale or distribution.
(ii) In case the Corporation shall pay or make a dividend or
other distribution on its Common Stock consisting exclusively of, or
shall otherwise issue to all or substantially all holders of its
Common Stock, rights or warrants entitling the holders thereof to
subscribe for or purchase shares of Common Stock at a price per share
less than the then current market price per share (determined as
provided in subparagraph (vii) of this Section 8(c)) of the Common
Stock on the date fixed for the determination of stockholders
entitled to receive such rights or warrants, the conversion price in
effect at the opening of business on the day following the date fixed
for such determination shall be reduced by multiplying such
conversion price by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding at the close of business
on the date fixed for such determination plus the number of shares of
Common Stock which the aggregate of the offering price of the total
number of shares of Common Stock so offered for subscription or
purchase would purchase at such current market price and the
denominator shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination
plus the number of shares of Common Stock so offered for subscription
or purchase, such reduction to become effective immediately after the
opening of business on the day following the date fixed for such
determination. In case any rights or warrants referred to in this
subparagraph (ii) in respect of which an adjustment shall have been
made shall expire unexercised, the conversion price shall be
readjusted at the time of such expiration to the conversion price
that would have been in effect if no adjustment had been made on
account of the distribution or issuance of such
11
<PAGE>
expired rights or warrants. For the purposes of this Section
8(c)(ii), if both a Distribution Date and a Section 11(a)(ii) Event
(as such terms are defined in the Rights Agreement) shall have
occurred, then the later to occur of such events shall be deemed to
constitute an issuance of rights to purchase shares of Common Stock.
(iii) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
conversion price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall
be proportionately reduced, and conversely, in case outstanding
shares of Common Stock shall each be combined into a smaller number
of shares of Common Stock, the conversion price in effect at the
opening of business on the day following the day upon which such
combination becomes effective shall be proportionately increased,
such reduction or increase, as the case may be, to become effective
immediately after the opening of business on the day following the
day upon which such subdivision or combination becomes effective.
(iv) Subject to the last sentence of this subparagraph (iv), in
case the Corporation shall, by dividend or otherwise, distribute to
all or substantially all holders of its Common Stock evidences of its
indebtedness, shares of any class of stock, cash or assets (including
securities, but excluding any rights or warrants referred to in
subparagraph (ii) of this Section 8(c), excluding any dividend or
distribution paid exclusively in cash (other than an Extraordinary
Equity Payment) and excluding any dividend or distribution referred
to in subparagraph (i) of this Section 8(c)) (for the purposes of
this subparagraph (iv), such evidence of indebtedness, shares of
stock, cash and assets are herein called "Securities"), the
conversion price shall be reduced so that the same shall equal the
price determined by multiplying the conversion price in effect
immediately following the close of business on the Determination Date
(as defined in Section 8(i)) by a fraction of which the numerator
shall be the current market price per share (determined as provided
in subparagraph (vii) of this Section 8(c)) of the Common Stock on
the Determination Date less the fair market value (as determined by
the Board of Directors including a majority of the Directors who are
not officers or employees of the Corporation or any of its
subsidiaries, whose determination shall be conclusive and described
in a resolution of the Board of Directors), on the date of such
effectiveness, of the portion of the Securities so distributed
applicable to one share of Common Stock and the denominator shall be
such current market price per share of the Common Stock, such
reduction to become effective immediately prior to the opening of
business on the day following the Determination Date. If the Board of
Directors so determines as aforesaid the fair market value of any
distribution for purposes of this subparagraph (iv) by reference to
the actual or when issued trading market for any Securities
comprising such distribution, it must in doing so consider the prices
in such market over the same period used in computing the current
market price per share of Common Stock pursuant to subparagraph (vii)
of this Section 8(c). Notwithstanding the foregoing, if the holders
of the Series B Convertible Preferred Stock elect to cause the
Corporation to reserve the Securities to be distributed for
distribution to the holders of the Series B Convertible Preferred
Stock upon the conversion of the shares of Series B Convertible
Preferred Stock so that any such holder converting shares of Series B
Convertible Preferred Stock will receive upon such conversion, in
addition to the shares of the Class D Common Stock to which such
holder is entitled, the amount and kind of such Securities which such
holder would have received if such holder had, immediately prior to
the Determination Date for such distribution of Securities, converted
its shares of Series B Convertible Preferred Stock into Class D
Common Stock, the fair market value of the Securities shall, for
purposes of this subparagraph (iv), be deemed to be zero.
12
<PAGE>
For purposes of this subparagraph (iv), any dividend or
distribution that includes shares of Common Stock, rights or warrants
to subscribe for or purchase shares of Common Stock or other
securities convertible into or exchangeable for shares of Common
Stock shall be deemed instead to be (1) a dividend or distribution of
the evidences of indebtedness, cash, assets or shares of stock other
than such shares of Common Stock, such rights or warrants or such
other convertible or exchangeable securities (making any conversion
price reduction required by this subparagraph (iv)) immediately
followed by (2) in the case of such shares of Common Stock or such
rights or warrants, a dividend or distribution thereof (making any
further conversion price reduction required by subparagraph (i) or
(ii) of this Section 8(c), except (A) the Determination Date of such
dividend or distribution shall be substituted as "the date fixed for
the determination of stockholders entitled to receive such dividend
or other distribution or to exchange such Rights" and "the date fixed
for such determination" within the meaning of subparagraphs (i) and
(ii) of this Section 8(c) and (B) any shares of Common Stock included
in such dividend or distribution shall not be deemed "outstanding at
the close of business on the date fixed for such determination"
within the meaning of subparagraph (i) of this Section 8(c)) or (3)
in the case of such other convertible or exchangeable securities, a
dividend or distribution of such number of shares of Common Stock as
would then be issuable upon the conversion or exchange thereof,
whether or not the conversion or exchange of such securities is
subject to any conditions (making any further conversion price
reduction required by subparagraph (i) of this Section 8(c), except
(A) the Determination Date of such dividend or distribution shall be
substituted as "the date fixed for the determination of stockholders
entitled to receive such dividend or other distribution or to
exchange such Rights" and "the date fixed for such determination" and
(B) the shares deemed to constitute such dividend or distribution
shall not be deemed "outstanding at the close of business on the date
fixed for such determination," each within the meaning of
subparagraph (i) of this Section 8(c)).
(v) Subject to the last sentence of this subparagraph (v), in
case the Corporation shall, by dividend or otherwise, at any time
distribute to all holders of its Common Stock cash (excluding (1) any
cash that is distributed as part of a distribution referred to in
subparagraph (iv) of this Section 8(c) and constitutes an
Extraordinary Equity Payment and (2) any cash representing an amount
per share of Common Stock of any quarterly cash dividend on the
Common Stock to the extent such cash does not constitute an
Extraordinary Equity Payment), the conversion price shall be reduced
so that the same shall equal the price determined by multiplying the
conversion price in effect immediately prior to the effectiveness of
the conversion price reduction contemplated by this subparagraph (v)
by a fraction of which the numerator shall be the current market
price per share (determined as provided in subparagraph (vii) of this
Section 8(c)) of the Common Stock on the Determination Date less the
amount of cash so distributed and not excluded as above provided
applicable to one share of Common Stock and the denominator shall be
such current market price per share of the Common Stock, such
reduction to become effective immediately prior to the opening of
business on the day following the Determination Date. Notwithstanding
the foregoing, if the Corporation elects to reserve the cash to be
distributed for distribution to the holders of the Series B
Convertible Preferred Stock upon the conversion of the shares of
Series B Convertible Preferred Stock so that any such holder
converting shares of Series B Convertible Preferred Stock will
receive upon such conversion, in addition to the shares of the Class
D Common Stock to which such holder is entitled, the amount of cash
which such holder would have received if such holder had, immediately
prior to the Determination Date for such distribution of cash,
converted its shares of Series B Convertible Preferred Stock into
Class D Common Stock, then the conversion price shall not be so
reduced.
13
<PAGE>
(vi) In case a tender or exchange offer made by the Corporation
or any subsidiary of the Corporation for all or any portion of the
Corporation's Common Stock shall expire and such tender or exchange
offer shall involve the payment by the Corporation or such subsidiary
of consideration per share of Common Stock having a fair market value
(as determined by the Board of Directors, including a majority of the
Directors who are not officers or employees of the Corporation or any
of its subsidiaries, whose determination shall be conclusive and
described in a resolution of the Board of Directors) at the last time
(the "Expiration Time") tenders or exchanges may be made pursuant to
such tender or exchange offer (as it shall have been amended) that
exceeds the current market price per share (determined as provided in
subparagraph (vii) of this Section 8(c)) of the Common Stock on the
Trading Day next succeeding the Expiration Time, the conversion price
shall be reduced so that the same shall equal the price determined by
multiplying the conversion price in effect immediately prior to the
Expiration Time by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding (including any tendered
or exchanged shares) on the Expiration Time multiplied by the current
market price per share (determined as provided in subparagraph (vii)
of this Section 8(c)) of the Common Stock on the Trading Day next
succeeding the Expiration Time and the denominator shall be the sum
of (x) the fair market value (determined as aforesaid) of the
aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the tender or
exchange offer) of all shares validly tendered or exchanged and not
withdrawn as of the Expiration Time (the shares deemed so accepted,
up to any such maximum, being referred to as the "Purchased Shares")
and (y) the product of the number of shares of Common Stock
outstanding (less any Purchased Shares) on the Expiration Time and
the current market price per share (determined as provided in
subparagraph (vii) of this Section 8(c)) of the Common Stock on the
Trading Day next succeeding the Expiration Time, such reduction to
become effective immediately prior to the opening of business on the
day following the Expiration Time.
(vii) For the purpose of any computation under this subparagraph
and subparagraphs (ii), (iv) and (v) of this Section 8(c), the
current market price per share of Common Stock on any date shall be
deemed to be the average of the daily Closing Prices (as defined in
Section 8(i)) on the five consecutive Trading Days prior to and
including the date in question; provided, however, that (1) if the
"ex" date (as hereinafter defined) for any event (other than the
issuance or distribution requiring such computation) that requires an
adjustment to the conversion price pursuant to subparagraph (i),
(ii), (iii), (iv), (v) or (vi) above occurs on or after the twentieth
Trading Day prior to the day in question and prior to the "ex" date
for the issuance or distribution requiring such computation, the
Closing Price for each Trading Day prior to the "ex" date for such
other event shall be adjusted by multiplying such Closing Price by
the same fraction by which the conversion price is so required to be
adjusted as a result of such other event, (2) if the "ex" date for
any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the conversion price
pursuant to subparagraph (i), (ii), (iii), (iv), (v) or (vi) above
occurs on or after the "ex" date for the issuance or distribution
requiring such computation and on or prior to the day in question,
the Closing Price for each Trading Day on and after the "ex" date for
such other event shall be adjusted by multiplying such Closing Price
by the reciprocal of the fraction by which the conversion price is so
required to be adjusted as a result of such other event, and (3) if
the "ex" date for the issuance or distribution requiring such
computation is on or prior to the date in question, after taking into
account any adjustment required pursuant to clause (2) of this
proviso, the Closing Price for each Trading Day on or after such "ex"
date shall be adjusted by adding thereto the amount of any cash and
the fair market value
14
<PAGE>
on the day in question (as determined by the Board of Directors,
including a majority of the Directors who are not officers or
employees of the Corporation, in a manner consistent with any
determination of such value for purposes of paragraph (iv) or (v) of
this Section 8(c), whose determination shall be conclusive and
described in a resolution of the Board of Directors) of the evidences
of indebtedness, shares of stock or assets being distributed
applicable to one share of Common Stock as of the close of business
on the day before such "ex" date. For the purpose of any computation
under subparagraph (vi) of this Section 8(c), the current market
price per share of Common Stock on any date shall be deemed to be the
average of the daily Closing Prices for such day and the next two
succeeding Trading Days; provided that, if the "ex" date for any
event (other than the tender or exchange offer requiring such
computation) that requires an adjustment to the conversion price
pursuant to subparagraph (i), (ii), (iii), (iv), (v) or (vi) above
occurs on or after the Expiration Time for the tender or exchange
offer requiring such computation and on or prior to the day in
question, the Closing Price for each Trading Day on and after the
"ex" date or such other event shall be adjusted by multiplying such
Closing Price by the reciprocal of the fraction by which the
conversion price is so required to be adjusted as a result of such
other event. For purposes of this subparagraph (vii), the term "ex"
date, (1) when used with respect to any issuance or distribution,
means the first date on which the Common Stock trades regular way on
the relevant exchange or in the relevant market from which the
Closing Price was obtained without the right to receive such issuance
or distribution, (2) when used with respect to any subdivision or
combination of shares of Common Stock, means the first date on which
the Common Stock trades regular way on such exchange or in such
market after the time at which such subdivision or combination
becomes effective, and (3) when used with respect to any tender or
exchange offer, means the first date on which the Common Stock trades
regular way on such exchange or in such market after the Expiration
Time of such offer.
(viii) The Corporation may make such reductions in the
conversion price, in addition to those required by subparagraphs (i),
(ii), (iii), (iv), (v) and (vi) of this Section 8(c), as it considers
to be advisable to avoid or diminish any income tax to holders of
Class D Common Stock or rights to purchase Class D Common Stock
resulting from any dividend or distribution of stock (or rights to
acquire stock) or from any event treated as such for income tax
purposes. The Corporation from time to time may reduce the conversion
price by any amount for any period of time if the period is at least
thirty days, the reduction is irrevocable during the period and the
Board of Directors shall have made a determination that such
reduction would be in the best interest of the Corporation, which
determination shall be conclusive. Whenever the conversion price is
reduced pursuant to the preceding sentence, the Corporation shall
mail to holders of record of the Series B Convertible Preferred Stock
a notice of the reduction at least fifteen days prior to the date the
reduced conversion price takes effect, and such notice shall state
the reduced conversion price and the period it will be in effect.
(ix) No adjustment in the conversion price shall be required
unless such adjustment would require an increase or decrease of at
least 1% in the conversion price; provided, however, that any
adjustments which by reason of this subparagraph (ix) are not
required to be made shall be carried forward and taken into account
in any subsequent adjustment.
(x) Notwithstanding any other provision of this Section 8 and
without implication that the contrary would otherwise be true, no
issuance, dividend or distribution requiring adjustment of the
conversion price pursuant to Section 8(c) hereof shall be deemed to
have occurred in the event that, upon, following or in connection
with the redemption or expiration of the Rights or the termination of
the Rights Agreement or otherwise, the Corporation enters into a new
agreement that is comparable in purpose and effect to the
15
<PAGE>
Rights Agreement (as determined by the Board of Directors, whose
determination shall be conclusive) and distributes to the holders of
Common Stock and Class D Common Stock Preferred Stock, Common Stock
or other similar stock purchase rights under such agreement that are
attached to the Common Stock.
(xi) Whenever the conversion price is adjusted as herein
provided:
(1) the Corporation shall compute the adjusted conversion
price and shall prepare a certificate signed by the Treasurer of
the Corporation setting forth the adjusted conversion price and
showing in reasonable detail the acts upon which such adjustment
is based, and such certificate shall forthwith be filed with the
transfer agent for the Series B Convertible Preferred Stock; and
(2) a notice stating the conversion price has been adjusted
and setting forth the adjusted conversion price shall forthwith
be required, and as soon as practicable after it is required,
such notice shall be mailed by the Corporation to all record
holders of shares of Series B Convertible Preferred Stock at
their last addresses as they shall appear upon the stock
transfer books of the Corporation.
(xii) The occurrence of any correlative event with respect to
the Class A Common Stock or the Class C Common Stock shall result in
adjustments to the conversion price congruent with those made with
respect to the Common Stock.
(d) No Fractional Shares. No fractional shares or scrip
representing fractional shares of Class D Common Stock shall be issued
upon conversion of Series B Convertible Preferred Stock. If more than
one certificate representing shares of Series B Convertible Preferred
Stock shall be surrendered for conversion at one time by the same
holder, the number of full shares issuable upon conversion thereof shall
be computed on the basis of the aggregate number of shares of Series B
Convertible Preferred Stock so surrendered. Instead of any fractional
share of Class D Common Stock that would otherwise be issuable upon
conversion of any shares of Series B Convertible Preferred Stock, the
Corporation shall pay a cash adjustment in respect of such fractional
interest in an amount equal to the same fraction of the market price per
share of Common Stock (as determined by the Board of Directors or in any
manner prescribed by the Board of Directors, which, so long as the
Common Stock is listed on the New York Stock Exchange, shall be the
reported last sale price regular way on the New York Stock Exchange) at
the close of business on the day of conversion.
(e) Reclassification, Consolidation, Merger or Sale of Assets. In
the event that the Corporation shall be a party to any transaction
(including without limitation any recapitalization or reclassification
of the Common Stock (other than a change in par value, or from par value
to no par value, or from no par value to par value, or as a result of a
subdivision or combination of the Common Stock), any consolidation of
the Corporation with, or merger of the Corporation into, any other
person, any merger of any other person into the Corporation (other than
a merger which does not result in a reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock of the
Corporation), any sale or transfer of all or substantially all of the
assets of the Corporation or any compulsory share exchange pursuant to
which the Common Stock is converted into the right to receive other
securities, cash or other property, then lawful provision shall be made
as part of the terms of such transaction whereby the holder of each
share of Series B Convertible Preferred Stock then outstanding shall
have the right thereafter to convert such share only into (i) in the
case of any such transaction other than a Common Stock Fundamental
Change (as defined in Section 8(i)) and subject to assets being legally
available for such purpose under applicable law at the time of such
conversion, the kind and amount of securities, cash and other property
16
<PAGE>
receivable upon such recapitalization, reclassification, consolidation,
merger, sale, transfer or share exchange by a holder of the number of
shares of Common Stock of the Corporation into which such share of
Series B Convertible Preferred Stock might have been converted
immediately prior to such recapitalization, reclassification,
consolidation, merger, sale, transfer or share exchange, after giving
effect, in the case of any Non-Stock Fundamental Change (as defined in
Section 8(i)), to any adjustment in the conversion price required by the
provisions of Section 8(h), and (ii) in the case of a Common Stock
Fundamental Change, into Common Stock of the kind received by holders of
Common Stock as a result of such Common Stock Fundamental Change in an
amount determined pursuant to the provisions of Section 8(h). The
Corporation or the person formed by such consolidation or resulting from
such merger or which acquires such assets or which acquires the
Corporation's shares, as the case may be, shall make provisions in its
certificate or articles of incorporation or other constituent document
to establish such right. Such certificate or articles of incorporation
or other constituent document shall provide for adjustments which, for
events subsequent to the effective date of such certificate or articles
of incorporation or other constituent document, shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 8. The above provisions shall similarly apply to successive
recapitalizations, reclassifications, consolidations, mergers, sales,
transfers or share exchanges.
(f) Reservation of Shares; Transfer Taxes; Etc. The Corporation
shall at all times reserve and keep available, out of its authorized and
unissued stock, solely for the purpose of effecting the conversion of
the Series B Convertible Preferred Stock, such number of shares of its
Class D Common Stock or Common Stock free of preemptive rights as shall
from time to time be sufficient to effect the conversion of all shares
of Series B Convertible Preferred Stock from time to time outstanding.
The Corporation shall from time to time, in accordance with the laws of
the State of Maryland, increase the number of authorized shares of Class
D Common Stock if at any time the number of shares of authorized and
unissued Class D Common Stock shall not be sufficient to permit the
conversion of all the then outstanding shares of Series B Convertible
Preferred Stock. The Corporation shall at all times reserve and keep
available, out of its authorized and unissued stock, solely for the
purpose of effecting the exchange of shares of Class D Common Stock or
conversion of Series B Convertible Preferred Stock, such number of
shares of its Common Stock or Class D Common Stock, as the case may be,
free of preemptive rights as shall from time to time be sufficient to
effect the exchange of all shares of Class D Common Stock or conversion
of Series B Convertible Preferred Stock from time to time.
If any shares of Class D Common Stock required to be reserved for
purposes of conversion of the Series B Convertible Preferred Stock
hereunder require registration with or approval of any governmental
authority under any Federal or State law before such shares may be
issued upon conversion, the Corporation will in good faith and as
expeditiously as possible endeavor to cause such shares to be duly
registered or approved, as the case may be. If the Class D Common Stock
is listed on the New York Stock Exchange or any other national
securities exchange, the Corporation will, if permitted by the rules of
such exchange, list and keep listed on such exchange, upon official
notice of issuance, all shares of Class D Common Stock issuable upon
conversion of the shares of Series B Convertible Preferred Stock.
The Corporation shall pay any and all issue or other taxes that may
be payable in respect of any issue or delivery of shares of Class D
Common Stock on conversion of the Series B Convertible Preferred Stock.
The Corporation shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue or delivery
of Class D Common Stock (or other securities or assets) in a name other
than that in which the shares of Series B Convertible Preferred Stock so
converted were registered, and no such issue or delivery shall be made
unless and until the person requesting such issue has paid to the
Corporation the amount of such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
17
<PAGE>
(g) Prior Notice of Certain Events. In case:
(i) the Corporation shall (1) authorize and declare any dividend
(or any other distribution) on its Common Stock, other than (A) a
dividend payable in shares of Common Stock or (B) a dividend payable
in cash, other than any regularly scheduled quarterly cash dividend
which does not constitute an Extraordinary Equity Payment, or (2)
declare or authorize a redemption or repurchase of in excess of 10%
of the then outstanding shares of Common Stock; or
(ii) the Corporation shall authorize the granting to all holders
of Common Stock of rights or warrants to subscribe for or purchase
any shares of stock of any class or of any other rights or warrants;
or
(iii) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a
change in par value, or from par value to no par value, or from no
par value to par value), or of any consolidation or merger to which
the Corporation is a party and for which approval of any stockholders
of the Corporation shall be required, or of the sale or transfer of
all or substantially all of the assets of the Corporation or of any
compulsory share exchange whereby the Common Stock is converted into
other securities, cash or other property; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation;
then the Corporation shall cause to be filed with the transfer
agent for the Series B Convertible Preferred Stock, and shall cause to
be mailed to the holders of record of the Series B Convertible Preferred
Stock, at their last addresses as they shall appear upon the stock
transfer books of the Corporation, at least fifteen days prior to the
applicable record date hereinafter specified, a notice stating, as the
case may be, (x) the record date (if any) for the purpose of such
dividend, distribution, redemption, repurchase or granting of rights or
warrants or, if no record date is to be set, the date as of which the
holders of Common Stock of record to be entitled to such dividend,
distribution, redemption, rights or warrants are to be determined or (y)
the date on which such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected
that holders of shares of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger, sale,
transfer, share exchange, dissolution, liquidation or winding up (but no
failure to mail such notice or any defect therein or in the mailing
thereof shall affect the validity of the corporate action required to be
specified in such notice).
(h) Adjustments in Case of Fundamental Changes. Notwithstanding any
other provision in this Section 8 to the contrary, if any Fundamental
Change (as defined in Section 8(i)) occurs, then the conversion price in
effect will be adjusted immediately after such Fundamental Change as
described below. In addition, in the event of a Common Stock Fundamental
Change (as defined in Section 8(i)), each share of Series B Convertible
Preferred Stock shall be convertible solely into shares of common stock
of the kind received by holders of Common Stock as the result of such
shares of Common Stock Fundamental Change.
For purposes of calculating any adjustment to be made pursuant to
this Section 8(h) in the event of a Fundamental Change, immediately
after such Fundamental Change:
(i) in the case of a Non-Stock Fundamental Change (as defined in
Section 8(i)), the conversion price of the Series B Convertible
Preferred Stock shall become the lower of (A) the conversion price
immediately prior to such Non-Stock Fundamental Change, but after
giving effect to any other prior adjustments effected pursuant to
this Section 8, and
18
<PAGE>
(B) the result obtained by multiplying the greater of the Applicable
Price (as defined in Section 8(i)) or the then applicable Reference
Market Price (as defined in Section 8(i)) by a fraction the numerator
of which shall be $50.00 and the denominator of which shall be $54.00
prior to September 15, 1999 and thereafter the then current
Redemption Price per share of Series B Convertible Preferred Stock
plus an amount equal to all dividends accrued and unpaid thereon,
whether or not declared, to but excluding the date of such Non-Stock
Fundamental Change; and
(ii) in the case of a Common Stock Fundamental Change, the
conversion price shall be the conversion price in effect immediately
prior to such Common Stock Fundamental Change, but after giving
effect to any other prior adjustments effected pursuant to this
Section 8, multiplied by a fraction, the numerator of which is the
Purchaser Stock Price (as defined in Section 8(i)) and the
denominator of which is the Applicable Price; provided, however, that
in the event of a Common Stock Fundamental Change in which (A) 100%
by value of the consideration received by a holder of Common Stock is
common stock of the successor, acquiror or other third party (and
cash, if any, is paid with respect to any fractional interests in
such common stock resulting from such Common Stock Fundamental
Change) and (B) all of the Common Stock shall have been exchanged
for, converted into or acquired for common stock (and cash with
respect to fractional interests) of the successor, acquiror or other
third party, the conversion price of the shares of Series B
Convertible Preferred Stock immediately following such Common Stock
Fundamental Change shall be the conversion price in effect
immediately prior to such Common Stock Fundamental Change multiplied
by a fraction, the numerator of which is one (1) and the denominator
of which is the number of shares of common stock of the successor,
acquiror or other third party received by a holder of one share of
Common Stock as a result of such Common Stock Fundamental Change.
(i) Definitions. The following definitions shall apply to terms
used in this Section 8:
(1) "Applicable Price" shall mean (i) in the event of a
Non-Stock Fundamental Change in which the holders of shares of
Common Stock receive only cash, the amount of cash received by
the holder of one share of Common Stock and (ii) in the event of
any other Non-Stock Fundamental Change or any Common Stock
Fundamental Change, the average of the last reported sale price
for the Common Stock during the ten Trading Days immediately
prior to the record date for the determination of the holders of
Common Stock entitled to receive cash, securities, property or
other assets in connection with such Non-Stock Fundamental
Change or Common Stock Fundamental Change, or, if there is no
such record date, the date upon which the holders of the Common
Stock shall have the right to receive such cash, securities,
property or other assets.
(2) "Closing Price" on any day shall mean the closing sale
price regular way on such day or, in case no such sale takes
place on such day, the average of the reported closing bid and
asked prices regular way, in each case on the New York Stock
Exchange, or, if the Common Stock is not listed or admitted to
trading on such Exchange, on the principal national securities
exchange or quotation system on which the Common Stock is quoted
or listed or admitted to trading, or, if not quoted or listed or
admitted to trading on any national securities exchange or
quotation system, the average of the closing bid and asked
prices of the Common Stock on the over-the-counter market on the
day in question as reported by the National Quotation Bureau
Incorporated, or a similarly generally accepted reporting
service, or if not so available in such manner, as furnished by
any New York Stock Exchange member firm selected from time to
time by the Board of Directors of the Corporation for that
purpose.
19
<PAGE>
(3) "Common Stock Fundamental Change" shall mean any
Fundamental Change in which more than 50% by value (as
determined in good faith by the Board of Directors) of the
consideration received by holders of Common Stock consists of
common stock that for the consecutive ten Trading Days
immediately prior to such Fundamental Change has been admitted
for listing or admitted for listing subject to notice of
issuance on a national securities exchange or quoted on the
National Association of Securities Dealers, Inc. ("NASDAQ")
National Market System; provided, however, that a Fundamental
Change shall not be a Common Stock Fundamental Change unless
either (i) the Corporation continues to exist after the
occurrence of such Fundamental Change and the outstanding shares
of Series B Convertible Preferred Stock continue to exist as
outstanding shares of Series B Convertible Preferred Stock, or
(ii) not later than the occurrence of such Fundamental Change,
the outstanding shares of Series B Convertible Preferred Stock
are converted into or exchanged for shares of convertible
preferred stock of a corporation succeeding to the business of
the Corporation, which convertible preferred stock has powers,
preferences and relative, participating, optional or other
rights, and qualifications, limitations and restrictions,
substantially similar to those of the Series B Convertible
Preferred Stock.
(4) "Determination Date" shall mean, with respect to any
dividend, distribution or other transaction or event in which
the holders of Common Stock have the right to receive any cash,
securities or other property or assets or in which the Common
Stock (or other applicable security) is exchanged for or
converted into any combination of cash, securities or other
property, the date fixed for determination of stockholders
entitled to receive such cash, securities or other property or
assets (whether such date is fixed by the Board of Directors or
by statute, contract or otherwise).
(5) "Fundamental Change" shall mean the occurrence of any
transaction or event in connection with a plan pursuant to which
all or substantially all of the shares of Common Stock shall be
exchanged for, converted into, acquired for or constitute solely
the right to receive cash, securities, property or other assets
(whether by means of an exchange offer, liquidation, tender
offer, consolidation, merger, combination, reclassification,
recapitalization or otherwise); provided, however, in the case
of a plan involving more than one such transaction or event, for
purposes of adjustment of the conversion price, such Fundamental
Change shall be deemed to have occurred when substantially all
of the shares of Common Stock of the Corporation shall be
exchanged for, converted into or acquired for or constitute
solely the right to receive cash, securities, property or other
assets, but the adjustment shall be based upon the consideration
which the holders of Common Stock received in such transaction
or event as a result of which more than 50% of the shares of
Common Stock of the Corporation shall have been exchanged for,
converted into, or acquired for or constitute solely the right
to receive cash, securities, property or other assets; provided,
further, that such term does not include (i) any such
transaction or event in which the Corporation and/or any of its
subsidiaries are the issuers of all the cash, securities,
property or other assets exchanged, acquired or otherwise issued
in such transaction or event, or (ii) any such transaction or
event in which the holders of Common Stock receive securities of
an issuer other than the Corporation if, immediately following
such transaction or event, such holders hold a majority of the
securities having the power to vote normally in the election of
directors of such other issuer outstanding immediately following
such transaction or other event.
20
<PAGE>
(6) "Non-Stock Fundamental Change" shall mean any
Fundamental Change other than a Common Stock Fundamental Change.
(7) "Purchaser Stock Price" shall mean, with respect to any
Common Stock Fundamental Change, the average of the last
reported sales price for the common stock, on the principal
national securities exchange or the NASDAQ National Market
System on which such common stock is listed, received in such
Common Stock Fundamental Change during the ten Trading Days
immediately prior to the record date for the determination of
the holders of Common Stock entitled to receive such common
stock or, if there is no such record date, the date upon which
the holders of the Common Stock shall have the right to receive
such common stock; provided, however, if no such last reported
sales price for the common stock during the last ten Trading
Days prior to the record date exists, then the Purchaser Stock
Price shall be set at a price determined in good faith by the
Board of Directors.
(8) "Reference Market Price" shall initially mean $11.33
and in the event of any adjustment to the conversion price other
than as a result of a Fundamental Change, the Reference Market
Price shall also be adjusted so that the ratio of the Reference
Market Price to the conversion price after giving effect to any
such adjustment shall always be the same as the ratio of $11.33
to the initial conversion price set forth above.
(9) "Trading Day" shall mean a day on which the national
securities exchange or the NASDAQ National Market System used to
determine the Closing Price is open for the transaction of
business or the reporting of trades.
(j) Dividend or Interest Reinvestment Plans. Notwithstanding the
foregoing provisions, the issuance of any shares of Common Stock
pursuant to any plan providing for the reinvestment of dividends or
interest payable on securities of the Corporation and the investment
of additional optional amounts in shares of Common Stock under any
such plan, and the issuance of any shares of Common Stock or options
or rights to purchase such shares pursuant to any employee benefit
plan or program of the Corporation or pursuant to any option,
warrant, right or exercisable, exchangeable or convertible security
outstanding as of the date the Series B Convertible Preferred Stock
was first designated (except as expressly provided in Section 8(c)(i)
or 8(c)(ii) with respect to certain events under the Rights
Agreement), and any issuance of Rights (as hereinafter defined),
shall not be deemed to constitute an issuance of Common Stock or
exercisable, exchangeable or convertible securities by the
Corporation or any of its subsidiaries to which any of the adjustment
provisions described above applies. There shall also be no adjustment
of the conversion price in case of the issuance of any stock (or
securities convertible into or exchangeable for stock) of the
Corporation except as specifically described in this Section 8. If
any action would require adjustment of the conversion price pursuant
to more than one of the provisions described above, only one
adjustment shall be made and such adjustment shall be the amount of
adjustment which has the highest absolute value to the holders of
Series B Convertible Preferred Stock.
(k) Preferred Share Purchase Rights. So long as Preferred Share
Purchase Rights, of the kind authorized and declared on June 11, 1987
and distributed by the Corporation in June 1987 as the same have been
and may hereafter be amended ("Rights"), are attached to the
outstanding shares of Class D Common Stock of the Corporation, each
share of Class D Common Stock issued upon conversion of the shares of
Series B Convertible Preferred Stock prior to the earliest of any
Distribution Date (as defined in the Rights Agreement), the date of
redemption of the Rights or the date of expiration of the Rights
shall be issued with Rights in an amount equal to the amount of
21
<PAGE>
Rights then attached to each such outstanding share of Class D Common
Stock, provided that, at the option of any holder of shares of Class
D Common Stock, any securities issued upon exercise of such Rights
shall be voting only to the extent that the Class D Common Stock is
voting.
(l) Certain Additional Rights. In case the Corporation shall, by
dividend or otherwise, authorize, declare or make a distribution on
its Common Stock referred to in Section 8(c)(iv) or Section 8(c)(v),
the holder of each share of Series B Convertible Preferred Stock,
upon the conversion thereof subsequent to the close of business on
the date fixed for the determination of stockholders entitled to
receive such distribution and prior to the effectiveness of the
conversion price adjustment in respect of such distribution pursuant
to Section 8(c)(iv) or Section 8(c)(v), shall also be entitled to
receive for each share of Class D Common Stock into which such share
of Series B Convertible Preferred Stock is converted, the portion of
the evidences of indebtedness, shares of stock, cash and assets so
distributed applicable to one share of Class D Common Stock;
provided, however, that, at the election of the Corporation (whose
election shall be evidenced by a resolution of the Board of
Directors) with respect to all holders so converting, the Corporation
may, in lieu of distributing to such holder any portion of such
distribution not consisting of cash or securities of the Corporation,
pay such holder an amount in cash equal to the fair market value
thereof (as determined by the Board of Directors, including a
majority of the Directors who are not officers or employees of the
Corporation or any of its subsidiaries, whose determination shall be
conclusive and described in a resolution of the Board of Directors).
If any conversion of a share of Series B Convertible Preferred Stock
described in the immediately preceding sentence occurs prior to the
payment date for a distribution to holders of Class D Common Stock
which the holder of the share of Series B Convertible Preferred Stock
so converted is entitled to receive in accordance with the
immediately preceding sentence, the Corporation may elect (such
election to be evidenced by a resolution of the Board of Directors)
to distribute to such holder a due bill for the evidences of
indebtedness, shares of stock, cash or assets to which such holder is
so entitled; provided that such due bill (i) meets any applicable
requirements of the principal national securities exchange or other
market on which the Class D Common Stock is then traded and (ii)
requires payment or delivery of such evidences of indebtedness,
shares of stock, cash or assets no later than the date of payment or
delivery thereof to holders of Class D Common Stock receiving such
distribution.
(m) Other. Notwithstanding any other provision in this Section 8
to the contrary, if the Corporation shall, by dividend or otherwise,
authorize, declare or make a distribution on its Common Stock
referred to in Section 8(c)(iv) and such distribution shall include
shares of stock of one or more corporations that immediately prior to
such distribution was or would have been a subsidiary (a "Spin-Off"),
the holder of each share of Series B Convertible Preferred Stock
shall be entitled, if it so elects, in addition to any other
adjustment provided in respect thereof in this Section 8, to receive
share for share convertible preferred stock of each such corporation
which has powers, preferences and relative, participating, optional
and other rights, and qualifications, limitations and restrictions
with respect to such corporation, as are substantially identical to
those of the Series B Convertible Preferred Stock (the "Additional
Preferred Stock" and collectively with the Series B Preferred Stock,
the "Total Preferred Stock"). The then effective conversion price of
the Additional Preferred Stock shall be such as shall preserve fully
the conversion rights of the Series B Convertible Preferred Stock in
such corporation. The shares of Series B Convertible Stock and the
Additional Preferred Stock shall each thereafter remain outstanding;
provided, however, that any payment, redemption or retirement in
respect of either the Series B Convertible Preferred Stock or the
Additional
22
<PAGE>
Preferred Stock shall operate to reduce the remaining payment,
redemption or retirement rights in respect of both, so that the
holder shall be entitled to receive in the aggregate the full
benefits with respect to payments, redemption and retirement rights
of holding one half of the number of shares of Total Preferred Stock
held by such holder and the full benefits with respect to all other
rights of holding the total number of shares of Total Preferred Stock
held by such holder.
(n) Certain Special Events. Notwithstanding anything in this
Section 8 to the contrary, neither the Corporation nor any of its
subsidiaries shall declare, pay or make any dividend or distribution
or commence a tender or exchange offer for any of the Corporation's
securities that are subordinate to or pari passu with the Series B
Convertible Preferred Stock as to liquidation preference or dividends
or be a party to any transaction (including without limitation any
recapitalization or reclassification of stock), any consolidation of
the Corporation or any such subsidiary with, or merger of the
Corporation or any such subsidiary into, or share exchange with, any
other person, any merger of any other person into the Corporation or
any such subsidiary or any sale or transfer of assets which, in any
such case, would constitute a Special Event unless after giving
effect thereto the Corporation would have the ability and the right
(and the Board of Directors, including a majority of the Directors
who are not officers or employees of the Corporation or any of its
subsidiaries, shall have adopted a resolution confirming such ability
and right) to purchase at the then applicable price specified in
Section 7 all of the then issued and outstanding shares of Series B
Convertible Preferred Stock, assuming all such stock is tendered to
it for purchase pursuant to Section 7.
9. Voting Rights.
(a) General. The holders of shares of Series B Convertible
Preferred Stock will not have any voting rights except as set forth
below. In connection with such rights to vote pursuant to Sections 9(b)
and 9(c), each holder of Series B Convertible Preferred Stock will have
one vote for each share held. Any shares of Series B Convertible
Preferred Stock held by the Corporation or any entity controlled by the
Corporation shall not have voting rights hereunder and shall not be
counted in determining the presence of a quorum.
(b) Default Voting Rights. Whenever dividends on the Series B
Convertible Preferred Stock or any other class or series of Parity
Dividend Stock shall be in arrears in an aggregate amount equal to at
least six quarterly dividends (whether or not consecutive), (i) the
number of members of the Board of Directors shall be increased by two,
effective as of the time of election of such directors as hereinafter
provided and (ii) the holders of the Series B Convertible Preferred
Stock (voting separately as a class with all other affected classes or
series of the Parity Dividend Stock upon which like voting rights have
been conferred and are exercisable) will have the exclusive right to
vote for and elect such two additional directors of the Corporation at
each meeting of stockholders of the Corporation at which directors are
to be elected held during the period such dividends remain in arrears.
The right of the holders of the Series B Convertible Preferred Stock to
vote for such two additional directors shall terminate when all accrued
and unpaid dividends on the Series B Convertible Preferred Stock have
been authorized, declared, paid or set apart for payment. The term of
office of all directors so elected shall terminate immediately upon the
termination of the right of the holders of the Series B Convertible
Preferred Stock and such Parity Dividend Stock to vote for such two
additional directors, and the number of directors of the Board of
Directors shall immediately thereafter be reduced by two.
The foregoing right of the holders of the Series B Convertible
Preferred Stock with respect to the election of two directors may be
exercised at each annual meeting of stockholders or at any special
meeting of stockholders held for such purpose. If the right to elect
23
<PAGE>
directors shall have accrued to the holders of the Series B Convertible
Preferred Stock more than ninety days preceding the date established for
the next annual meeting of stockholders, the President of the
Corporation shall, within twenty days after the delivery to the
Corporation at its principal office of a written request for a special
meeting signed by the holders of at least 10% of all outstanding shares
of the Series B Convertible Preferred Stock, call a special meeting of
the holders of the Series B Convertible Preferred Stock to be held
within sixty days after the delivery of such request for the purpose of
electing such additional directors.
The holders of the Series B Convertible Preferred Stock and any
Parity Dividend Stock referred to above voting as a class shall have the
right to remove with or without cause at any time and replace any
directors such holders shall have elected pursuant to this Section 9 and
the holders of each other class of stock of the Corporation shall not
have the right to remove any such directors.
(c) Class Voting Rights. So long as any shares of the Series B
Convertible Preferred Stock is outstanding, the Corporation shall not,
directly or indirectly, without the affirmative vote or consent of the
holders of at least 66 2/3% (unless a higher percentage shall then be
required by applicable law or the Corporation's charter) of all
outstanding shares of the Series B Convertible Preferred Stock voting
separately as a class (i) amend, alter or repeal any provision of the
charter or by the bylaws of the Corporation, if such amendment,
alteration or repeal would alter the contract rights, as expressly set
forth herein, of the Series B Convertible Preferred Stock so as to
adversely affect the rights of the holders thereof or the holders of the
Class D Common Stock or the Common Stock or (ii) create, authorize or
issue, or reclassify shares of any authorized stock of the Corporation
into, or increase the authorized amount of, any Senior Dividend Stock or
Senior Liquidation Stock, or any security convertible into such Senior
Dividend Stock or Senior Liquidation Stock. A class vote on the part of
the Series B Convertible Preferred Stock shall, without limitation,
specifically not be deemed to be required (except as otherwise required
by law or resolution of the Board of Directors) in connection with (a)
the authorization, issuance or increase in the authorized amount of any
shares of any other class or series of stock which ranks junior to, or
on a parity with, the Series B Convertible Preferred Stock in respect of
the payment of dividends and distributions upon liquidation, dissolution
or winding up of the Corporation or (b) the authorization, issuance or
increase in the amount of any bonds, mortgages, debentures or other
obligations of the Corporation.
(d) Voting Rights after Occurrence of a Specified Corporate
Action. Following the occurrence of a Specified Corporate Action, the
holders of shares of Series B Convertible Preferred Stock shall have the
right to vote as a class with the holders of Common Stock and Class D
Common Stock on all matters as to which the holders of Common Stock are
entitled to vote, whether by law or otherwise. In connection with such
rights to vote, each holder of Series B Convertible Preferred Stock
shall have the number of votes for each share held equal to the number
of shares of Common Stock then exchangeable for the shares of Class D
Common Stock into which such share is then convertible.
10. Outstanding Shares. For purposes of these Articles Supplementary,
all shares of Series B Convertible Preferred Stock issued by the
Corporation shall be deemed outstanding except (i) from the date fixed for
redemption pursuant to Section 6 hereof, all shares of Series B Convertible
Preferred Stock that have been so called for redemption under Section 6, to
the extent provided thereunder; (ii) from the date of surrender of
certificates representing shares of Series B Convertible Preferred Stock,
all shares of Series B Convertible Preferred Stock converted into Class D
Common Stock or repurchased pursuant to Section 7 hereof; and (iii) from
the date of registration of transfer, all shares of Series B Convertible
Preferred Stock held of record by the Corporation or any majority-owned
subsidiary of the Corporation.
24
<PAGE>
11. Transfer Restrictions.
(a) Legends on Series B Convertible Preferred Stock and Common
Stock. The certificates representing shares of Series B Convertible
Preferred Stock shall, unless otherwise agreed by the Corporation and
the holders of any such certificates, bear a legend substantially to the
following effect:
"THE SHARES REPRESENTED BY THIS CERTIFICATE AND ANY SECURITIES
ISSUABLE UPON CONVERSION OR EXCHANGE HEREOF MAY NOT BE OFFERED OR
SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, OR (ii) AN APPLICABLE EXEMPTION FROM
REGISTRATION THEREUNDER. ANY SALE PURSUANT TO CLAUSE (ii) OF THE
PRECEDING SENTENCE MUST BE ACCOMPANIED BY AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO ALEXANDER & ALEXANDER SERVICES INC. TO THE
EFFECT THAT SUCH EXEMPTION FROM REGISTRATION IS AVAILABLE IN
CONNECTION WITH SUCH SALE. IN ADDITION, THE VOTING, SALE, ASSIGNMENT,
TRANSFER, PLEDGE OR HYPOTHECATION OF THE SHARES REPRESENTED BY THIS
CERTIFICATE IS FURTHER SUBJECT TO RESTRICTIONS WHICH ARE CONTAINED IN
THE CHARTER OF ALEXANDER & ALEXANDER SERVICES INC., IN THE ARTICLES
SUPPLEMENTARY GOVERNING THESE SHARES AND IN A STOCK PURCHASE AND SALE
AGREEMENT DATED AS OF JUNE 6, 1994, A COPY OF EACH OF WHICH IS ON
FILE WITH ALEXANDER & ALEXANDER SERVICES INC. AND WILL BE FURNISHED
BY THE CORPORATION TO THE STOCKHOLDER ON REQUEST AND WITHOUT CHARGE."
(b) Transfer Agent Requirements. The transfer agent for the Series
B Convertible Preferred Stock shall not be required to accept for
registration of transfer any shares of Series B Convertible Preferred
Stock bearing the legend contained in paragraph (a) above, except upon
presentation of satisfactory evidence that the restrictions on transfer
of shares of the Series B Convertible Preferred Stock referred to in the
legend in paragraph (a) have been complied with, all in accordance with
such reasonable regulations as the Corporation may from time to time
agree with the transfer agent for shares of the Series B Convertible
Preferred Stock.
12. Status of Acquired Shares. Shares of Series B Convertible
Preferred Stock redeemed or repurchased by the Corporation, received upon
conversion pursuant to Section 8 or otherwise acquired by the Corporation
will be restored to the status of authorized but unissued shares of
Preferred Stock, without designation as to class, and may thereafter be
issued, but not as shares of Series B Convertible Preferred Stock.
13. Special Covenants. The Corporation shall not on or after June 1,
1994 issue or sell any shares of any Senior Dividend Stock or Senior
Liquidation Stock.
14. Permissible Distributions. In determining whether a distribution
(other than upon voluntary or involuntary liquidation), by dividend,
redemption or other acquisition of shares or otherwise, is permitted under
the Maryland General Corporation Law, amounts that would be needed, if the
Corporation were to be dissolved at the time of the distribution, to
satisfy the preferential rights upon dissolution of holders of Series B
Convertible Preferred Stock whose preferential rights upon dissolution are
superior to those receiving the distribution shall not be added to the
Corporation's total liabilities.
25
<PAGE>
15. Preemptive Rights. Holders of shares of Series B Convertible
Preferred Stock are not entitled to any preemptive or subscription rights
in respect of any securities of the Corporation.
16. Severability of Provisions. Whenever possible, each provision
hereof shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating or
otherwise adversely affecting the remaining provisions hereof. If a court
of competent jurisdiction should determine that a provision hereof would be
valid or enforceable if a period of time were extended or shortened or a
particular percentage were increased or decreased, then such court may make
such change as shall be necessary to render the provision in question
effective and valid under applicable law.
SECOND: The Series B Convertible Preferred Stock has been classified by the
Board of Directors under a power contained in the Charter.
THIRD: These Articles Supplementary have been approved by the Board of
Directors in the manner and by the vote required by law.
FOURTH: The undersigned acknowledges these Articles Supplementary to be the
act of the Corporation and states as to all matters and facts required to be
verified under oath that, to the best of his knowledge, information and belief,
these matters and facts are true in all material respects and such statement is
made under penalties for perjury.
IN WITNESS WHEREOF, these Articles Supplementary are executed on behalf of
the Corporation by its President and attested by its Secretary this day
of , 1994.
ALEXANDER & ALEXANDER SERVICES INC.
BY: ..................................
Name:
Title:
ATTEST:...............................
Name:
Title:
26
<PAGE>
[CS FIRST BOSTON LOGO] APPENDIX IV
CS FIRST BOSTON CORPORATION
55 EAST 52ND STREET
PARK AVENUE PLAZA
NEW YORK, NY 10055
June 10, 1994
Board of Directors
ALEXANDER & ALEXANDER SERVICES INC.
1211 Avenue of the Americas
New York, NY 10036
Gentlemen:
This will confirm the oral opinion we rendered on June 7, 1994 with respect
to the fairness to Alexander & Alexander Services Inc. ("A&A" or "you") from a
financial point of view of the consideration to be received by A&A pursuant to
the terms of a Stock Purchase and Sale Agreement, dated as of June 6, 1994 (the
"Purchase Agreement"), providing for the sale of preferred stock of A&A to
American International Group, Inc. ("AIG"). As more fully described in and
subject to the terms and conditions of the Purchase Agreement, it is proposed
that AIG acquire an aggregate of 4,000,000 shares of newly authorized 8% Series
B Cumulative Convertible Preferred Stock, $1.00 par value per share, of A&A for
$50.00 per share, representing an aggregate purchase price of $200 million. The
proposed transaction is referred to herein as the "Financing".
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to A&A. We have also reviewed
certain other information, including financial forecasts for 1994, provided to
us by A&A, and met with A&A's management to discuss the business and prospects
of A&A. We have considered in our analysis certain factors currently affecting
A&A and the potential impact of such factors on A&A as described by management,
including the amount and timing of A&A's need for additional equity capital. We
have also considered certain financial and stock market data for A&A, and we
have compared that data with similar data for other publicly traded companies in
businesses similar to those of A&A. We have also considered the financial terms
of certain other significant equity investments in other publicly traded
companies. We have also considered such other information, financial studies,
analyses, and investigations and financial, economic and market criteria which
we deem relevant.
In connection with our review, we have not independently verified any of
the foregoing information and have relied on its being complete and accurate in
all material respects. With respect to the financial forecast furnished by
management, we have assumed that it has been reasonably prepared on bases
reflecting the best currently available estimates and judgments of A&A's
management as to the future financial performance of A&A. With your consent, we
have assumed that A&A will not be required to make any payments to AIG pursuant
to Section 6.o of the Purchase Agreement. We have further assumed that A&A will
be able to obtain the reinsurance or insurance arrangement required to satisfy
the condition set forth in Section 3.a.8. of the Purchase Agreement on
commercially reasonable terms or that another such commercially reasonable
arrangement will be in place by the closing of the Financing and that fees of
$1.5 million will be paid to AIG.
In addition, we have not made an independent evaluation or appraisal of the
assets or liabilities of A&A, nor have we been furnished with any such
appraisals. In accordance with your instructions, we did not solicit third-party
indications of interest in alternatives to the Financing, including alternative
purchasers of A&A's securities or potential acquirors for all or any part of the
business or assets of A&A. Our opinion is necessarily based solely on
information available to us and financial conditions and other circumstances
existing on the date hereof.
<PAGE>
ALEXANDER & ALEXANDER SERVICES INC.
June 10, 1994
Page 2
We are acting as financial advisor to A&A in connection with the Financing
and will receive a fee for our services. We will also receive a fee for
rendering this opinion. In the ordinary course of business we actively trade the
debt and equity securities of both A&A and AIG for our own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the consideration to be received by A&A pursuant to the Financing
is fair to A&A from a financial point of view.
Very truly yours,
CS FIRST BOSTON CORPORATION
By: /s/ DAVID A. DENUNZIO
..................................
Name: David A. DeNunzio
Title: Managing Director
2
<PAGE>
ALEXANDER & ALEXANDER SERVICES INC.
Proxy Solicited on Behalf of the Board of Directors
for Special Meeting July 15, 1994
PROXY
The undersigned hereby constitutes and appoints ROBERT E. BONI
and VINCENT R. McLEAN, and each of them, each with full power to
appoint his substitute to vote at the Special Meeting of
Stockholders to be held at The Equitable Center Auditorium, 787
Seventh Avenue (between W. 51st and W. 52nd Streets), New York,
New York at 11:00 A.M. on July 15, 1994 or any adjournment
thereof (1) on the matters listed below and more fully described
in the Proxy Statement accompanying this Form of Proxy and (2) in
their discretion on such other matters as may properly come
before the meeting.
A Vote FOR is recommended by the Board of Directors:
1. Proposal to approve the Stock Purchase and Sale Agreement,
dated as of June 6, 1994, between the Company and American
International Group, Inc. and the performance by the Company
of all transactions and acts on the part of the Company
contemplated thereby ("Proposal 1").
2. Proposal to approve certain amendments (together, the
"Charter Amendment") to the Company's charter to (i) increase
the number of authorized shares of stock of the Company,
(ii) establish the terms of the Class D Stock and (iii)
effect other minor amendments ("Proposal 2").
You are encouraged to specify your choice by marking the
appropriate boxes, SEE REVERSE SIDE--but you need not mark any
boxes if you wish to vote in accordance with the Board of
Directors' recommendations. If the boxes are not marked as to a
proposal, this proxy will be voted for the proposal. Your shares
cannot be voted by proxy unless you sign and return this card.
SEE REVERSE SIDE
<PAGE>
-----------------------------------------------------------------
/X/ Please mark your votes as in this example.
This proxy when properly executed will be voted in the manner
directed herein by the undersigned stockholder.
If no direction is made, this proxy will be voted FOR Proposal 1
and FOR Proposal 2.
-----------------------------------------------------------------
The Board of Directors recommends a vote FOR Proposals 1 and 2.
-----------------------------------------------------------------
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
1. Proposal 1 / / / / / / 2. Proposal 2 / / / / / /
-----------------------------------------------------------------------------
Please sign exactly as name appears at left. Joint owners
should each sign. When signing as attorney, administrator,
trustee or guardian, please give full title as such.
----------------------------------------------------------
----------------------------------------------------------
SIGNATURE(S) DATE
