<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant /x/
Filed by a party other than the registrant / /
Check the appropriate box:
/x/ Preliminary proxy statement
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or
Rule 14a-12
ALEXANDER & ALEXANDER SERVICES INC.
-----------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
ALEXANDER & ALEXANDER SERVICES INC.
-----------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/x/ $125 per Exchange Act Rule 0-11(c)(1)(ii),
14a-6(i)(1), or 14a-6(i)(2).
/ / $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which
transaction applies:
-----------------------------------------------------------
(2) Aggregate number of securities to which
transaction applies:
-----------------------------------------------------------
<PAGE>
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11:
------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------
/ / Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the
filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
-----------------------------------------------------------
(2) Form, schedule or registration statement no.:
-----------------------------------------------------------
(3) Filing party:
-----------------------------------------------------------
(4) Date filed:
-----------------------------------------------------------
2
<PAGE>
PRIVILEGED AND CONFIDENTIAL
---------------------------
Preliminary copy
----------------
Draft -- June 10, 1994
ALEXANDER & ALEXANDER SERVICES INC.
1211 Avenue of the Americas
New York, New York 10036
Dear Fellow Stockholders:
At a special meeting called for [date], 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 care-
fully. 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
approve the proposals relating to that investment.
The AIG investment, in my view, is an essential
ingredient in restoring Alexander & Alexander to its
rightful leadership role in the industry. The investment
helps your Company to achieve three key objectives:
1. Capital. The $200 million to be invested by
-------
AIG gives 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.
Yet 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 its
ultimate holding of voting securities to no more than
9.9% of the Company's voting securities.
<PAGE>
2. 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. 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 support the proposals relating to
the AIG investment.
It is important that your shares be represented 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. It should be recognized
that a failure to return a properly executed and dated proxy
card in a timely fashion or vote in person at the meeting in
effect constitutes a vote against the proposals related to
the AIG investment.
On behalf of the Board of Directors, thank you for
your cooperation and continued support.
Sincerely,
Dr. Robert E. Boni
Chairman of Board and Chairman of the
Executive Committee
2
<PAGE>
ALEXANDER & ALEXANDER SERVICES INC.
1211 Avenue of the Americas
New York, New York 10036
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
_____________, 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
[day], __________ __, 1994 at [9:30 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
---
<PAGE>
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 17, 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 __, 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.
2
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT . . . . . . . . . . . . . . . . . . . . 1
INTRODUCTION . . . . . . . . . 1
VOTING SECURITIES AND PRINCIPAL HOLDERS . . . . . . . . 2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS . . . . 2
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS 4
INVESTMENT PROPOSALS . . . . . . . . . . . . . . . . . 5
Background of and Reasons for the Investment
Proposals . . . . . . . . . . . . . . . . . . 5
Board of Directors' Recommendations . . . . . . . 10
Opinion of Financial Advisor . . . . . . . . . . . 11
Use of Proceeds . . . . . . . . . . . . . . . . . 16
Source of Funds; Information Concerning AIG . . . 17
Certain Considerations . . . . . . . . . . . . . . 17
Certain Unaudited Pro Forma Financial Information 20
PROPOSAL 1 -- THE PURCHASE AGREEMENT . . . . . . . . . 23
Purchase and Sale of Series B Preferred Stock . . 23
Terms of Series B Preferred Stock . . . . . . . . 23
Terms of Class D Stock . . . . . . . . . . . . . . 30
AIG Standstill Provisions . . . . . . . . . . . . 32
Registration Rights . . . . . . . . . . . . . . . 33
Non-Solicitation . . . . . . . . . . . . . . . . . 34
Covenants . . . . . . . . . . . . . . . . . . . . 34
Conditions to Closing . . . . . . . . . . . . . . 37
Termination . . . . . . . . . . . . . . . . . . . 39
Rights Agreement Amendment . . . . . . . . . . . . 39
Required Vote . . . . . . . . . . . . . . . . . . 39
PROPOSAL 2 -- CHARTER AMENDMENT . . . . . . . . . . . . 40
Increase of Authorized Stock . . . . . . . . . . . 40
Existing Anti-Takeover Provisions . . . . . . . . 43
Terms of Series B Preferred Stock and Class D
Common Stock. . . . . . . . . . . . . . . . . 47
Required Vote . . . . . . . . . . . . . . . . . . 47
FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . 48
STOCKHOLDER PROPOSALS FOR 1995 MEETING . . . . . . . . 48
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . 49
i
<PAGE>
INCORPORATION OF DOCUMENTS BY REFERENCE . . . . . . . . 49
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
ii
<PAGE>
ALEXANDER & ALEXANDER SERVICES INC.
1211 Avenue of the Americas
New York, New York 10036
-------------------------------
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
___________, 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 9:30 a.m., local time, on
[day], __________ __, 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 __________ __,
1994.
<PAGE>
If a stockholder is the beneficial owner of the Com-
pany's Class A Common Stock, a direction and proxy will be
delivered to Montreal Trust Company, as trustee, in connec-
tion 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 $15,000 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 17, 1994 (the "Record Date") are entitled to vote at
the Special Meeting. As of the Record Date, there were
outstanding _________ shares of Common Stock, ___________
shares of Class A Stock and ___________ shares of Class C
Stock. Such shares are each entitled to one vote.
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>
Percent
Percentage of Total
and Class Number Voting
Name and Address of Stockholder of Stock of Shares 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
</TABLE>
2
<PAGE>
<TABLE><CAPTION>
Percent
Percentage of Total
and Class Number Voting
Name and Address of Stockholder of Stock of Shares Shares
------------------------------- ---------- --------- -------
<S> <C> <C> <C>
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 System(1) . 55.89% 1,346,823 3.1%
One University Avenue Class A
Suite 1100 Stock
Toronto, Canada M5J 2P1
Trustees of the Alexander & Alexander U.K. 65.28% 249,980 .57%
Voluntary Equity Scheme(1) . . . . . . . . . . Class C
145 St. Vincent Street Stock
Glasgow, Scotland G2 5NX
.32% 130,130 .30%
Common
Stock
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.
</TABLE>
3
<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, direc-
tors 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 . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . 8,595 42,440 --
Peter C. Godsoe . . . . . . . . . . . . . . . 500 -- --
Angus M.M. Grossart . . . . . . . . . . . . . -- -- --
Ronald A. Iles . . . . . . . . . . . . . . . 32,195 50,601 --
Vincent R. McLean . . . . . . . . . . . . . . 200 -- --
Michael K. White . . . . . . . . . . . . . . 38,688 98,425 --
William M. Wilson . . . . . . . . . . . . . . 2,346 83,925 26,975
All directors and executive officers as a
group (18 persons)(3)(4)(5)(6)(7) . . . . 288,710 435,686 26,975
</TABLE>
- - --------------------------------
<TABLE>
<S> <C>
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. 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.
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. Does not include Common Stock shares beneficially owned or subject to options that are
held by Messrs. Irvin and Forrest.
6. 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.
7. As of June 7, 1994, Mr. Frank G. Zarb, whose appointment as Chairman, Chief Executive
Officer and President of the Company is expected to become effective prior to July 1,
1994, became the beneficial owner of 315,000 shares of Common Stock which amount is
subject to downward adjustment. As of the date of commencement of Mr. Zarb's employment,
the resignation of Mr. White as an executive officer of the Company will take effect, and
Dr. Boni will step down as Chairman of the Board of Directors but will continue as a
director and as Chairman of the Board's Executive Committee.
</TABLE>
4
<PAGE>
INVESTMENT PROPOSALS
CERTAIN ASPECTS OF THE INVESTMENT PROPOSALS ARE SUM-
MARIZED 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
5
<PAGE>
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 expres-
sions from third parties as to possible business combina-
tions, 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 CEO 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.
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 oppor-
tunities 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
6
<PAGE>
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 subsidiar-
ies 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. ("J.P. 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
7
<PAGE>
stockholders, with AIG acting as standby underwriter. How-
ever, 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 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
Series A 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."
8
<PAGE>
During the period prior to the finalization of the
Purchase Agreement, 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.
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) as Chairman, Chief Executive
Officer and President of the Company. On June 7, 1994 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 sinking fund debentures due 2007 on CreditWatch
with negative implications, reflecting the ongoing difficult
conditions for the Company's U.S. retail brokerage opera-
tions, reduced financial flexibility relating to the reduc-
tion 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 sinking fund
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 Company has no commercial paper
outstanding. 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.
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 placed the ba3 rating
on the Series A convertible 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.
9
<PAGE>
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 and Common 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 transac-
-
tions 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
10
<PAGE>
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.
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 Pre-
ferred 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
11
<PAGE>
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 the 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
12
<PAGE>
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.
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
13
<PAGE>
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 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
14
<PAGE>
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
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.
15
<PAGE>
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 are estimated to be $2,800,000. 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 antici-
pates that it will principally utilize the Transaction Pro-
ceeds (i) to invest in its continuing businesses and (ii) to
- --
fund an insurance or reinsurance arrangement with respect to
discontinued operations. Except as described above, the
16
<PAGE>
Company does not currently have any commitments or under-
standings 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 "PURCHASE AGREEMENT -- Terms of the 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
Convertible Preferred Stock of the Company (the "Series A
Stock"), as to which it shall rank pari passu. Until
---- -----
December 15, 1996,
17
<PAGE>
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 be
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, or 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 Company's voting stock it may acquire, absent certain
events described below under "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
18
<PAGE>
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 "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 "Existing
Anti-Takeover Provisions" below.
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
19
<PAGE>
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.
Certain Unaudited Pro Forma Financial Information
The following table sets forth the pro forma balance
sheet of the Company as of March 31, 1994, reflecting the
receipt of net proceeds from the issuance of the Series B
Preferred Stock and the purchase and financing of an
insurance arrangement with respect to its discontinued
operations. This pro forma balance sheet should be read
in conjunction with the financial statements incorporated
by reference. See "FINANCIAL INFORMATION" and "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE."
<TABLE><CAPTION>
Pro Forma Pro Forma
March 31, 1994 Adjustments Adjustments March 31, 1994
Actual (1) (2) Pro Forma
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 604.3 $ 197.2 ($30.0) $ 771.5
Short-term investments 276.0 276.0
Premiums and fees receivable-net 1,081.9 1,081.9
Prepaid expenses and other
current assets 141.2 141.2
- - --------------------------------------------------------------------------------------------------------------------------
Total current assets 2,103.4 197.2 (30.0) 2,270.6
- - --------------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT-NET 147.2 147.2
INTANGIBLE ASSETS-NET 185.1 185.1
OTHER 217.8 217.8
- - --------------------------------------------------------------------------------------------------------------------------
Total assets $2,653.5 $ 197.2 ($30.0) $2,820.7
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
<TABLE><CAPTION>
Pro Forma Pro Forma
March 31, 1994 Adjustments Adjustments March 31, 1994
Actual (1) (2) Pro Forma
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Premiums payable to insurance
companies $1,714.2 $1,714.2
Short-term debt and current
portion of long-term debt 21.5 21.5
Accounts payable and accrued
expenses 217.0 217.0
- - --------------------------------------------------------------------------------------------------------------------------
Total current liabilities 1,952.7 0.0 0.0 1,952.7
- - --------------------------------------------------------------------------------------------------------------------------
LONG-TERM LIABILITIES
Long-term debt 110.1 50.0 160.1
Deferred income taxes 17.2 17.2
Net liabilities of discontinued
operations 109.5 (80.0) 29.5
Other 202.6 202.6
- - --------------------------------------------------------------------------------------------------------------------------
Total long-term liabilities 439.4 0.0 (30.0) 409.4
- - --------------------------------------------------------------------------------------------------------------------------
CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY:
Preferred stock:
Series A junior participating
preferred stock - -
$3.625 Series A convertible
preferred stock 2.3 2.3
8% Series B convertible
preferred stock 4.0 4.0
Common stock 40.7 40.7
Class A common stock - -
Class C common stock 0.4 0.4
Class D common stock - -
Paid-in capital 424.2 193.2 617.4
Accumulated deficit (136.4) (136.4)
Net unrealized investment
gains-net of deferred income
taxes 1.4 1.4
Accumulated translation
adjustments (71.2) (71.2)
- - --------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 261.4 197.2 0.0 458.6
- - --------------------------------------------------------------------------------------------------------------------------
Total liabilities and
stockholders' equity $2,653.5 $ 197.2 ($30.0) $2,820.7
- - --------------------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
NOTES
(1) Issuance of 4.0 million shares of 8% Series B Cumulative
Convertible Preferred Stock at $50 per share, net of $2.8 million
of estimated expenses.
(2) Purchase of insurance arrangement with respect to discontinued
operations. The Company anticipates that such arrangement will
cost approximately $80.0 million, of which $50.0 million is
expected to be financed; however, these terms are subject to final
negotiation.
The following table sets forth the preferred dividend
requirement, earnings (loss) available to common
stockholders and income (loss) per share of the Company for
the year ended December 31, 1993 and for the three months
ended March 31, 1994 after adjusting for the issuance of the
Series B Preferred Stock as if it had occurred at the
beginning of each period presented.
The pro forma information represents the effects of the
additional preferred dividend requirement associated with
the sale of the Series B Preferred Stock and does not
reflect any possible changes to the net income (loss) of the
Company which might have been realized following the
application of the net proceeds of the sale and the
borrowing in connection with the insurance arrangement.
The following table should be read in conjunction with
the financial statements incorporated by reference.
<TABLE><CAPTION>
(In millions, except per share amounts)
Year Ended Three Months Ended
December 31, 1993 March 31, 1994
Actual Pro Forma Actual Pro Forma
------ --------- ------ ---------
<S> <C> <C> <C> <C>
Preferred dividends $ 6.2 $ 22.7 $ 2.1 $ 6.1
------- ------- ------ -------
Earnings (loss) available for
common stockholders $ 20.7 $ 4.2 ($6.5) ($10.5)
------- ------- ------ -------
Per Share of Common Stock: Income
(loss) before cumulative effect
of change in accounting $ 0.40 $ 0.02 ($0.09) ($0.18)
Cumulative effect of change in
accounting 0.08 0.08 (0.06) (0.06)
---- ---- ------ ------
Net income (loss) $ 0.48 $ 0.10 ($0.15) ($0.24)
-------- -------- ------- -------
</TABLE>
22
<PAGE>
The information above does not purport to represent
what the Company's financial position or results of
operations would have been had the sale of such securities
occurred on January 1 of each period, or to project the
Company's financial position or results of operations for
any future date or period.
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 Series B share 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
23
<PAGE>
Stock, Class D Stock and Series A Junior Participating
Preferred Stock (when and if issued) and pari passu with Se-
ries A Stock.
Liquidation Preference. In the event of any liquida-
tion, 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 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.
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
24
<PAGE>
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 Stock
then outstanding, (x) the Company's Charter cannot be
-
amended or modified so as to adversely affect the holders of
the Series B 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 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 Common Stock or Class C
Common 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 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 occurrence of any merger or combination or similar
transaction, the Series B Stock is convertible into the
25
<PAGE>
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 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.
26
<PAGE>
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, RSC or 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, Reed Stenhouse Companies Limited ("RSC"), or
Alexander & Alexander Services U.K. plc ("AAE") or any of
27
<PAGE>
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 the Series A
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 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
busi
28
<PAGE>
ness 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 other-
wise, more than thirty-five
29
<PAGE>
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, 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 "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."
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 sub-
division 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.
30
<PAGE>
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 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
31
<PAGE>
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 Regula-
tion 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 Com-
pany, (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.
32
<PAGE>
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 acquisi-
---
tion 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.
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.
33
<PAGE>
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 subsidi-
aries) 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
34
<PAGE>
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 repre-
sentatives 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 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
35
<PAGE>
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
"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 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 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 Balance Sheet or (3) as to
which the full
36
<PAGE>
amount of such liability is not then determinable (specify-
ing, 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:
37
<PAGE>
(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 the Purchasers of the Series B
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 into an insurance or
reinsurance arrangement with respect to discontinued
operations that is reasonably satisfactory to AIG.
(g) The Company shall have furnished to AIG legal
opinions as described in the Purchase Agreement, in
form reasonably satisfactory to AIG.
38
<PAGE>
(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.
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 prior to October 31, 1994,
each of the Company and AIG has the right, subject to the
terms of the Purchase Agreement, to terminate the Purchase
Agreement. 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.
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 "PROPOSAL 2 -- 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
39
<PAGE>
entitled to vote on the proposal. For this purpose, absten-
tions 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.
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 Department of
Assessment 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 the 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
State of (88,500,000) shares of four classes of stock, con-
sisting 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
Corporation has authority to issue is $75,500,130. The
Charter Amendment
40
<PAGE>
would increase the number of authorized and unissued shares
of capital stock of the Company to 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 capital 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, at the Record Date _________ shares of
Common Stock, ______ shares of Class A Common Stock,
_________ 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
such shares presently authorized, to be issued without the
expense and delay of a special meeting of stockholders
unless such
41
<PAGE>
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 issu-
ances 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.
42
<PAGE>
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 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
43
<PAGE>
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 asso-
ciated 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 pay-
ment of $10.00 per share but will be entitled to an aggre-
gate 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.
44
<PAGE>
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 secu-
rities, 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.
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 re-
ceive the Redemption Price.
45
<PAGE>
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 "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 stock-
holder before an annual meeting, written notice must be
delivered to or mailed and received at the principal execu-
tive offices of the Company not less than 60 days nor more
46
<PAGE>
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,
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 shareholders 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.
47
<PAGE>
The Board of Directors unanimously recommends that
stockholders approve Proposal 2.
FINANCIAL INFORMATION
Reference is made to the financial statements and notes
to the financial statements appearing in the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1993. Reference is also made to "Item 7.
Management's Discussion and Analysis of Financial Condition
and Results of Operations" appearing in the Annual Report on
Form 10-K for the year ended December 31, 1993. Such
portions of such Annual Report on Form 10-K, as amended,
"Part I -- Financial Information, Item 2. Management's
Discussion and Analysis of Financial Condition and Results
of Operations," in all subsequent Quarterly Reports on
Form 10-Q and any Current Reports on Form 8-K filed by the
Company before the date of the meeting are incorporated
herein by reference. See "INCORPORATION OF DOCUMENTS BY
REFERENCE."
Reference is also made to the "Certain Unaudited Pro
Forma Financial Information" above.
Representatives of Deloitte & Touche, the Company's
principal accountants for the Company's current year and for
its most recently completed fiscal year, are expected to be
present at the Special Meeting of Stockholders, will have
the opportunity to make a statement if they desire to do so,
and are expected to be available to respond to appropriate
questions.
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 Bylaws 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
48
<PAGE>
meeting and must contain specified information concerning
the matter to be brought before the meeting and must contain
information concerning the matter to be brought before the
meeting and the stockholder proposing the matter. Any
stockholder desiring a copy of the Bylaws of the Company
will be furnished one without charge upon written request to
the Secretary of the Company.
OTHER MATTERS
Under Maryland Law and the by-laws of the Company, no
other business may be transacted at the Special Meeting.
INCORPORATION OF DOCUMENTS BY REFERENCE
This Proxy Statement incorporates by reference the
financial statements, supplementary financial information
and management's discussion and analysis of financial
condition and results of operations regarding the Company
included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993 and all subsequent
Quarterly Reports on Form 10-Q filed before the date of the
meeting.
Any statement contained in a document incorporated by
reference in this Proxy Statement will be deemed to be modi-
fied or superseded for purposes of this Proxy Statement to
the extent that a statement contained in this Proxy
Statement or in any other subsequently filed document which
is also incorporated by reference in this Proxy Statement
modifies or supersedes such statement. Any statements so
modified or superseded will not be deemed, except as
modified or superseded, to constitute a part of this Proxy
Statement.
The Company will provide, without charge, to each
person to whom this Proxy Statement is delivered, upon
written or oral request of such person, by first class mail
or other equally prompt means, within one business day of
receipt of such request, a copy of any and all the
information that has been incorporated by reference in the
Proxy Statement (not including the exhibits to the
information that are incorporated by reference unless such
exhibits are specifically incorporated by reference to the
information that the Proxy Statement incorporates). Written
requests should be addressed to Attention: Corporate
Secretary, Alexander & Alexander Services Inc., 10461 Mill
Run Circle Owings Mills,
49
<PAGE>
Maryland 21117. Oral request may be made by telephone to
the following number: (410) 363-5802.
By order of the Board of Directors,
Frank R. Wieczynski
Secretary
50
<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
Section Heading Page
1. Definitions; Certain References............................. 2
a. Definitions........................................... 2
2. Closing..................................................... 9
a. Time and Place of the Closing......................... 9
b. Transactions at the Closing........................... 9
3. Conditions to the Closing................................... 10
a. Conditions Precedent to the
Obligations of the Purchasers......................... 10
1. Compliance by A&A............................... 10
2. No Legal Action................................. 11
3. Amendment of Charter............................ 11
4. Shareholder Approval............................ 11
5. Stock Exchange Listing.......................... 12
6. Rights Agreement................................ 12
7. Regulatory Matters.............................. 12
8. Insurance Arrangement........................... 13
9. Legal Opinions.................................. 13
10. Registration Rights Agreement................... 30
11. Other........................................... 30
12. Hart-Scott-Rodino............................... 31
13. Articles Supplementary;
Articles of Amendment........................... 31
14. Exemption from Special Voting
Requirements.................................... 31
15. Special Events.................................. 31
b. Conditions Precedent to Obligations
of A&A................................................ 32
1. Compliance by AIG............................... 32
2. No Legal Action................................. 32
3. Amendment of Charter............................ 33
4. Shareholder Approval............................ 33
5. Regulatory Matters.............................. 33
<PAGE>
4. Representations and Warranties of A&A....................... 34
a. Organization, Good Standing, Power,
Authority, Etc........................................ 35
b. Capitalization of A&A................................. 36
c. Registration Rights................................... 38
d. SEC Documents......................................... 38
e. Proxy Statement....................................... 38
f. Authority and Qualification of A&A.................... 39
g. Subsidiaries.......................................... 39
h. Outstanding Securities................................ 41
i. No Contravention, Conflict, Breach,
Etc................................................... 41
j. Consents.............................................. 42
k. No Existing Violation, Default,
Etc................................................... 43
l. Licenses and Permits.................................. 45
m. Title to Properties................................... 46
n. Environmental Matters................................. 46
o. Taxes................................................. 47
p. Litigation............................................ 47
q. Labor Matters......................................... 49
r. Contracts............................................. 49
s. Finder's Fees......................................... 49
t. Financial Statements.................................. 50
u. ERISA................................................. 51
v. Contingent Liabilities................................ 53
w. No Material Adverse Change............................ 54
x. Investment Company.................................... 55
y. Exemption from Registration;
Restrictions on Offer and Sale of
Same or Similar Securities............................ 55
z. Use of Proceeds....................................... 56
5. Representations and Warranties of the
Purchasers.................................................. 57
a. Organization, Good Standing, Power,
Authority, Etc........................................ 57
b. No Conflicts; No Consents............................. 58
c. Investment Intent, Etc................................ 58
6. Covenants of the Parties.................................... 59
a. Restrictive Legends................................... 59
b. Certificates for Shares and
Conversion Shares To Bear Legends..................... 60
c. Removal of Legends.................................... 62
d. Pre-Closing Activities................................ 62
-ii-
<PAGE>
e. Information........................................... 63
f. Restriction on Issuance of Stock...................... 64
g. Restriction on Amendments to
By-Laws............................................... 64
h. Stockholders Meeting.................................. 64
i. Hart-Scott-Rodino..................................... 65
j. Acquisition Proposals................................. 65
k. Access................................................ 67
l. Publicity............................................. 68
m. Certain Special Events................................ 68
n. Reservation of Shares................................. 69
o. Adjustment Payments................................... 70
7. Standstill.................................................. 74
8. Termination................................................. 83
9. Survival of Representations and
Warranties.................................................. 84
10. Performance; Waiver......................................... 84
11. Successors and Assigns...................................... 85
12. Miscellaneous............................................... 85
a. Notices............................................... 85
b. Expenses.............................................. 87
c. Governing Law......................................... 87
d. Severability; Interpretation.......................... 87
e. Headings.............................................. 88
f. Entire Agreement...................................... 88
g. Counterparts.......................................... 88
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
-iii-
<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 Sec-
tion 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,
<PAGE>
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 Sec-
tion 2.a of this Agreement.
"Common Stock" means the common stock, par value
$1.00 per share, of A&A.
"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.
<PAGE>
"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.
<PAGE>
"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.
"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.
<PAGE>
"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
<PAGE>
force and effect as though such representations and
warranties had been made at and as of 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
<PAGE>
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
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;
<PAGE>
(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;
<PAGE>
(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;
(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
<PAGE>
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
<PAGE>
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 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
<PAGE>
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,
<PAGE>
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;
(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
<PAGE>
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, the
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
<PAGE>
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 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
<PAGE>
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.
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
<PAGE>
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
<PAGE>
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 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
<PAGE>
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,
<PAGE>
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 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.
<PAGE>
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
<PAGE>
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,
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
<PAGE>
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
<PAGE>
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.
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
<PAGE>
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 Sec-
tion 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, 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.
<PAGE>
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
<PAGE>
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.
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
<PAGE>
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
<PAGE>
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 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
<PAGE>
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
<PAGE>
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. 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
<PAGE>
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.
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
<PAGE>
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 subsec-
tion 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
<PAGE>
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).
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 Sub-
section 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
<PAGE>
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 the outstanding number of shares of
Common Stock as of such date, giving effect to the conversion
<PAGE>
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
<PAGE>
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 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
<PAGE>
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
<PAGE>
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.
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.
<PAGE>
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
<PAGE>
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 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
<PAGE>
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
<PAGE>
respective successors and assigns of the parties hereto;
provided, however, that the rights granted to the parties
hereto may not be assigned (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.
<PAGE>
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 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.
<PAGE>
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.
<PAGE>
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. Matthe
Title: Vice Chairman-Finance
<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
Page
SECTION 1. DEFINITIONS........................................ 1
SECTION 2. REGISTRATION RIGHTS................................ 5
2.1 Demand Registration Rights.................. 5
2.2 Incidental Registration..................... 7
2.3 Supplements and Amendments.................. 8
2.4 Restrictions on Public Sale by
the Company and Others..................... 9
2.5 Underwritten Registrations.................. 10
2.6 Registration Procedures..................... 11
2.7 Registration Expenses....................... 18
2.8 Rule 144.................................... 20
SECTION 3. INDEMNIFICATION.................................... 20
3.1 Indemnification by the Company............... 20
3.2 Indemnification by Holder of
Registrable Securities..................... 21
3.3 Conduct of Indemnification
Proceeding................................. 22
3.4 Contribution................................. 23
3.5 Other Indemnities............................ 24
SECTION 4. MISCELLANEOUS...................................... 24
4.1 Remedies.................................... 24
4.2 No Inconsistent Agreements.................. 24
4.3 Amendments and Waivers...................... 24
4.4 Notices..................................... 25
4.5 Successors and Assigns...................... 25
4.6 Counterparts................................ 25
4.7 Headings.................................... 25
4.8 Governing Law............................... 26
4.9 Severability................................ 26
4.10 Entire Agreement............................ 26
4.11 Attorneys' Fees............................. 26
4.12 Securities Held by the Company
or Its Subsidiaries....................... 26
Signature Pages.................................................. S-1
-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
<PAGE>
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.
"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
<PAGE>
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
<PAGE>
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 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
<PAGE>
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 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
<PAGE>
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
<PAGE>
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 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.
<PAGE>
(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)
<PAGE>
(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 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.
<PAGE>
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:
(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
<PAGE>
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
<PAGE>
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 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.
<PAGE>
(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
<PAGE>
not then so subject or (C) become subject to taxation in any
jurisdiction where it is not then so subject.
(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.
<PAGE>
(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 "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
<PAGE>
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.
<PAGE>
(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.
(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
<PAGE>
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) 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
<PAGE>
and the subsidiaries of the 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
<PAGE>
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 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
<PAGE>
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
<PAGE>
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 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
<PAGE>
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
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
<PAGE>
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
<PAGE>
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.
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.
<PAGE>
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
<PAGE>
Purchaser:
By:
Name:
Title:
Address:
<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,
<PAGE>
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 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
<PAGE>
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: _______________________
<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
<PAGE>
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 Common Stock, the Class C Common Stock and
the Series B Stock, provided that with respect to
any matter contemplated by subparagraph (ii)
<PAGE>
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
<PAGE>
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 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
<PAGE>
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
<PAGE>
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.
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
<PAGE>
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.
<PAGE>
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 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
<PAGE>
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
<PAGE>
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 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
<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:
<PAGE>
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 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,
<PAGE>
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
<PAGE>
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 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
<PAGE>
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.
<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
<PAGE>
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,
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
<PAGE>
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.
<PAGE>
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
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
<PAGE>
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 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.
<PAGE>
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
<PAGE>
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 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
<PAGE>
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
<PAGE>
(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
(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
<PAGE>
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.
<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
<PAGE>
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 para-
graph, such conversion shall be deemed to have been made as of
the date of such surrender of the shares of Series B Conver-
tible Preferred Stock to be converted, and the person or
persons entitled to receive the Class D Common Stock deliver-
able 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.
(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
<PAGE>
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 expired rights or warrants.
For the purposes of this Section 8(c)(ii), if both a
<PAGE>
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 subpara-
graph (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
<PAGE>
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.
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
<PAGE>
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 subpara-
graph (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 effective-
ness 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.
(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
<PAGE>
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
<PAGE>
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 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
<PAGE>
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 subpara-
graphs (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
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
<PAGE>
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.
<PAGE>
(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 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
<PAGE>
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
<PAGE>
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.
(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
<PAGE>
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 (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
<PAGE>
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
<PAGE>
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.
(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
<PAGE>
(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.
(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
<PAGE>
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
<PAGE>
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 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
<PAGE>
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 distribu-
tion 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
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
<PAGE>
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
<PAGE>
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 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
<PAGE>
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.
<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.
<PAGE>
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.
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.
<PAGE>
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:
<PAGE>
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
<PAGE>
Alexander & Alexander Services Inc.
June 10, 1994
Page 2
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.
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
<PAGE>
MORGAN CHICAGO
ALEXANDER & ALEXANDER SERVICES INC.
Proxy Solicited on Behalf of the Board of Directors
for Special Meeting _____, 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
Shareholders to be held at The Equitable Center Auditorium, 787
Seventh Avenue (between W. 51st and W. 52nd Streets), New York,
New York at [9:30 A.M.] on _______ 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 (the "Investment Proposal").
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.
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, the 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>
THE MORGAN BANK PROXY ACETATE
-----------------------------------------------------------------
/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. APPROVAL OF / / / / / / 2. APPROVAL / / / / / /
INVESTMENT OF CHARTER
PROPOSAL AMENDMENT
-----------------------------------------------------------------------------
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.
----------------------------------------------------------
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SIGNATURE(S) DATE
