REGISTRATION NO. 33-55081
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
PRE-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
ALEXANDER & ALEXANDER SERVICES INC.
(Exact name of registrant as specified in its charter)
-------------------
<TABLE>
<S> <C>
MARYLAND 52-0969822
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
1211 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 840-8500
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
ALBERT A. SKWIERTZ, JR., ESQ.
VICE PRESIDENT & GENERAL COUNSEL
ALEXANDER & ALEXANDER SERVICES INC.
1211 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 444-4535
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. X
-------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
(SUBJECT TO COMPLETION) ISSUED NOVEMBER 28, 1994
PROSPECTUS
ALEXANDER & ALEXANDER SERVICES INC.
1,136,900 SHARES OF COMMON STOCK, $1.00 PAR VALUE
This Prospectus relates to the offering of up to an aggregate of 1,136,900
shares (the "Shares") of Common Stock, $1.00 par value per share (the "Common
Stock"), of Alexander & Alexander Services Inc. (the "Company") by certain
stockholders named herein (the "Selling Stockholders"). See "Selling
Stockholders." The Company will not receive any proceeds from the sale of the
Shares. The Company has agreed to indemnify the Selling Stockholders for certain
liabilities, including civil liabilities under the Securities Act of 1933, as
amended (the "Securities Act"), in certain circumstances. See "Plan of
Distribution." FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH THE PURCHASE OF
THE SHARES, SEE "RISK FACTORS."
The Selling Stockholders acquired the Shares from the Company in a
transaction related to the Company's acquisition of all the interests in the
assets and the business of Clay & Partners, a U.K. partnership. Except for the
fees and disbursements of counsel and other advisors to the Selling
Stockholders, any underwriters' fees and expenses and underwriting discounts and
commissions and transfer taxes in respect of the Shares being sold, which will
be borne by the Selling Stockholders, the Company has agreed to pay all other
expenses related to this registration.
The Selling Stockholders, directly or through agents or through
broker-dealers or underwriters from time to time designated, may effect sales of
Shares from time to time on the New York Stock Exchange or The International
Stock Exchange of the United Kingdom and The Republic of Ireland, Ltd. (the
"Exchanges") or otherwise pursuant to and in accordance with the applicable
rules of the Exchanges, in block transactions, in negotiated transactions, in an
underwritten public offering or in a combination of any such methods of sale, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. To the extent required, the
number of Shares to be sold, purchase price, public offering price, the name of
any such agent or broker-dealer and any applicable commission or discount with
respect to a particular offering will be set forth in an accompanying Prospectus
Supplement. The aggregate proceeds to the Selling Stockholders from the sale of
the Shares so offered will be the purchase price of the Shares sold less the
aggregate agents' commissions and underwriters' discounts, if any, and other
expenses of issuance and distribution not borne by the Company. See "Plan of
Distribution."
On November 25, 1994, the last reported sale price of the Company's Common
Stock on the NYSE was $18.625.
The Selling Stockholders and any broker-dealers, agents or underwriters that
participate in the distribution of any of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act and any commission
received by them and any profit on the Shares purchased by them may be deemed to
be underwriting commissions or discounts under the Securities Act. See "Plan of
Distribution."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS NOVEMBER , 1994
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
<PAGE>
No person has been authorized to give any information or to make any
representation other than those contained or incorporated by reference in this
Prospectus in connection with the offer contained herein and, if given or made,
such other information or representation must not be relied upon as having been
authorized by the Company or by any other person. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the information about the
Company since the date hereof, or that the information herein is correct as of
any time subsequent to their respective dates. This Prospectus shall not
constitute an offer to sell, or the solicitation of an offer to buy, any
security other than the Shares, nor shall this Prospectus constitute an offer or
solicitation by anyone in any jurisdiction in which such offer or solicitation
is not authorized, or in which the person making such offer or solicitation is
not qualified to do so, or to any person to whom it is unlawful to make such
offer or solicitation.
-------------------
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy
statements, and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as the following
regional offices of the Commission: New York Regional Office, Seven World Trade
Center, 13th Floor, New York, New York 10048 and the Chicago Regional Office,
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can also be obtained by mail from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 upon payment of the fees prescribed by the Commission.
Reports, proxy statements and other information concerning the Company can also
be inspected at the offices of the New York Stock Exchange at 20 Broad Street,
New York, New York 10005.
The Company has also filed with the Commission a Registration Statement
(together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act. This Prospectus does not contain all of
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. For
further information, reference is made to the Registration Statement, copies of
which may be obtained from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549 upon payment of the fees prescribed
by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
1-8282) are hereby incorporated by reference in this Prospectus:
(1) Annual Report on Form 10-K for the year ended December 31, 1993;
(2) Current Report on Form 8-K, dated January 18, 1994;
(3) Current Report on Form 8-K, dated February 25, 1994;
(4) Quarterly Report on Form 10-Q for the quarter ended March 31, 1994;
(5) Current Report on Form 8-K, dated April 21, 1994;
(6) Current Report on Form 8-K, dated June 14, 1994;
(7) Proxy Statement, dated June 27, 1994, for the Special Meeting of
Stockholders held on July 15, 1994;
(8) Quarterly Report on Form 10-Q for the quarter ended June 30, 1994;
(9) Current Report on Form 8-K, dated July 19, 1994;
(10) Quarterly Report on Form 10-Q for the quarter ended September 30,
1994.
(11) Current Report on Form 8-K, dated October 3, 1994.
(12) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A, including any subsequent
amendments or reports filed for the purpose of updating such
description; and
(13) The description of the Company's preferred share purchase rights
contained in the Company's Registration Statement on Form 8-A,
including any subsequent amendments or reports filed for the purpose
of updating such description.
3
<PAGE>
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of the offering of the Shares covered by this
Prospectus shall be deemed to be incorporated herein by reference into this
Prospectus and to be a part hereof from their respective dates of filing. Any
statement contained in this Prospectus or in a document incorporated or deemed
incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained in this
Prospectus or in any other subsequently filed document which is or is deemed to
be incorporated herein by reference modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any and all of the documents that have been incorporated by reference (other
than any exhibits thereto). Requests for such documents should be directed to
Alexander & Alexander Services Inc. at 10461 Mill Run Circle, Owings Mills,
Maryland 21117, Attention: Alice L. Russell, Secretary.
4
<PAGE>
THE COMPANY
Alexander & Alexander Services Inc., a holding company incorporated under
the laws of Maryland in 1973, together with its subsidiaries, is a global
insurance brokerage, risk management and human resource management consulting
company. It is one of the leading insurance brokerage and risk management
companies worldwide. Through predecessor entities the Company has been in
business since 1899. The Company has approximately 14,000 employees and operates
from offices located in more than 80 countries and territories through wholly
owned subsidiaries, affiliates and other servicing capabilities. Its clients are
primarily commercial enterprises, including a broad range of industrial,
transportation, services, financial and other businesses. Clients also include
government and governmental agencies, non-profit organizations and individuals.
The Company's four core businesses include risk management and insurance
services, specialist broking, reinsurance broking and human resource management
consulting.
RISK MANAGEMENT AND INSURANCE SERVICES. The Company develops risk management
programs and places coverage on behalf of its clients directly with an insurance
company or indirectly through a specialist broker. Since January 1991, the
Company's worldwide risk management and insurance services have operated under a
single coordinated management structure. In 1993, the Company introduced the
common trading name of "Alexander & Alexander" throughout its global insurance
services network in the U.S., the U.K., Canada and Japan and in most of its
markets in continental Europe, Asia-Pacific and the Middle East. The Company's
risk analysis and management capabilities include a broad range of services such
as risk surveys and analyses, loss control and cost studies, formulation of
safety procedures and insurance programs. In addition, other divisions of the
Company provide complementary services.
SPECIALIST BROKING. The Company acts as an intermediary between retail
brokers and insurance companies and Lloyd's of London syndicates. London-based
Alexander Howden Limited places large and complex risks that require access to
the London and world markets. U.S.-based Alexander Howden North America, Inc.
offers excess, surplus and specialty lines placements. From Australia and
Singapore, Alexander Howden Asia Pacific specializes in wholesale insurance
broking and facultative reinsurance.
REINSURANCE BROKING. The Company places coverage on behalf of its insurance
or reinsurance company clients to reinsure all or a portion of the risk
underwritten by that insurance or reinsurance company. The Company's worldwide
reinsurance brokerage services, led by its U.K. subsidiary, Alexander Howden
Reinsurance Brokers Limited, arrange reinsurance programs for Lloyd's of London
syndicates and other insurance and reinsurance companies worldwide. Alexander
Reinsurance Intermediaries, Inc. provides a full range of reinsurance services
in the United States. Effective January 1, 1995 the Company's London-based
reinsurance and specialist brokering operations will be combined.
HUMAN RESOURCE MANAGEMENT CONSULTING. The Company offers global human
resource management consulting services and benefits brokerage through The
Alexander Consulting Group Inc. ("ACG"). ACG provides advisory and support
services in human resource management, organizational effectiveness, integrated
information technologies, strategic health care and flexible compensation,
retirement planning and actuarial services, benefit plan design and
implementation, international benefits/compensation, and benefit plan investment
consulting through Alexander & Alexander Consulting Group Inc. in the U.S.,
Alexander Clay & Partners in Europe and Alexander Consulting Group Limited in
Canada and the Asia-Pacific region. ACG provides brokerage services for group
health and welfare, special risk, and association/mass marketing insurance
coverage through Alexander & Alexander Benefits Services Inc. in the U.S. and as
a division of the Alexander Consulting Group Limited in Canada. ACG operates in
18 countries.
5
<PAGE>
RECENT DEVELOPMENTS
The factors that have negatively influenced the Company's insurance services
revenues in the past years continued through the first nine months of 1994.
These factors include soft pricing due to the intense competition among
insurance underwriters. Consulting revenues have also been constrained during
this period due to the competitive environment and uncertainty over health care
reform in the U.S. The Company does not anticipate significant changes in such
conditions for the remainder of 1994. For the first nine months of 1994, the
Company reported a net loss of $27.4 million, or $0.83 per share. Included in
the results were a $26.9 million after-tax charge, or $0.61 per share, relating
to the Company's discontinued operations and a $2.6 million after-tax charge, or
$0.06 per share, for the cumulative effect of a change in an accounting
principle.
Since mid-June 1994, the Company's Board of Directors and management team
have completed a number of initiatives to implement its restructuring process
and to improve the Company's financial condition and future profitability. These
actions include the following:
- In June, Frank G. Zarb was appointed Chairman of the Board, President
and Chief Executive Officer of the Company.
- In June, the quarterly dividend on the Company's Common Stock and Common
Stock equivalents was reduced by 90 percent from $0.25 to $0.025 per
share. The estimated annual cash flow savings based upon the current
number of shares outstanding is approximately $39 million.
- In July, American International Group, Inc. ("AIG") invested $200
million in the Company (the "AIG Investment") and received 4 million
shares of the Company's non-voting 8% Series B Cumulative Convertible
Preferred Stock, $1.00 par value (the "Series B Convertible Preferred
Shares"). Net proceeds to the Company were approximately $196 million.
Proceeds from this capital infusion have been and will be used for
general corporate purposes, including significant investments to
improve its U.S. operations and other core businesses.
- In July, the Company entered into an insurance-based financing contract
with a reinsurance company that affords certain protection for the
Company for exposures included in its discontinued operations. This
contract provided for a payment by the Company of $80 million to the
reinsurance company. Of the $80 million payment, $30 million was paid
from the proceeds of the AIG Investment.
- In July, the Company borrowed $50 million from the reinsurance company
that executed the contract described above. The note is payable in five
equal annual installments, commencing July 1997.
- In July, the Company's long-term credit agreement with various banks was
amended to restore the Company's ability to borrow up to $150 million.
The Company has no borrowings outstanding under this agreement, and does
not anticipate a need to borrow under the agreement for the remainder of
its term which expires in July 1995.
- In July and September, a total of six new directors were elected,
increasing the size of the Company's Board of Directors to 14 members.
- In August, Edward F. Kosnik was appointed Executive Vice President and
Chief Financial Officer of the Company.
- In October, the Company announced the offering of a voluntary retirement
incentive program to more than 200 employees in three U.S. business
units, and a reduction in force of approximately 220 employees in the
U.S. insurance brokerage operation. These actions will result in an
estimated $12 million pre-tax charge in the fourth quarter.
6
<PAGE>
- In November, the Company announced an agreement in principle to resolve
certain indemnity obligations to the Sphere Drake Insurance Group
("Sphere Drake"). The Company will receive a cash payment of
approximately $5 million from Sphere Drake in settlement of the zero
coupon notes receivable and related indemnities as well as certain
income tax liabilities. The Company recorded a $20.9 million loss from
discontinued operations in the third quarter relating to this agreement.
- In November, the Company completed the sale of its U.S.-based personal
lines insurance broking business. The total proceeds from the sale will
approximate $30 million with a resulting pre-tax gain of approximately
$20 million.
In addition to these actions already taken, a number of initiatives are
underway to further strengthen the Company's balance sheet and increase
operating margins. The Company is conducting an analysis of its core business
activities and is currently reviewing its options with respect to selling
certain other non-core businesses and other assets. The Company is also actively
reviewing its options with respect to other indemnity exposures relating to
operations previously sold, as well as other contingencies relating to its
continuing and discontinued operations. The Company is continuing its
comprehensive worldwide reviews of its operations to identify and implement ways
of expanding new business efforts and reducing overall costs. These reviews are
expected to be completed by year-end 1994 and will result in a significant
charge for restructuring and other matters in addition to the $12 million fourth
quarter charge announced in October. The combined charges will result in a loss
for the fourth quarter and for the year.
Other recent developments include:
PROPOSED 1991 TAX ADJUSTMENT. On August 26, 1994, the Company received a
Notice of Proposed Adjustment from the IRS in connection with an examination of
its 1990 and 1991 U.S. federal income tax returns, proposing an increase in
taxable income for the 1991 taxable year which would , if sustained, result in
an additional tax liability estimated by the Company at $50 million. This
proposed adjustment relates to an intercompany transaction involving the stock
of a United Kingdom subsidiary.
The Company disagrees with the IRS position on this issue. Although the
ultimate outcome of the matter cannot be predicted with certainty, the Company
and its independent tax counsel believe there are meritorious defenses to the
proposed adjustment and substantial arguments to sustain the Company's position
and that the Company should prevail in the event this issue is litigated. A
similar transaction occurred in 1993, which year is not currently under
examination, for which the IRS could propose an increase in taxable income which
would result in an additional tax liability estimated by the Company at $25
million. The Company believes it should prevail in the event this similar issue
is raised by the IRS. Accordingly, no provision for any liability with respect
to the 1991 and 1993 transactions has been made in the Company's consolidated
financial statements. The Company believes that its current tax reserves are
adequate to cover its tax liabilities.
Under the AIG Agreement, the Company has agreed to make certain payments to
AIG, including certain tax matters described above, 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 were
greater than, or that certain assets 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 Convertible Preferred
Shares. Payments to AIG would be of its pro rata share (based on AIG's fully
diluted ownership percentage of the Common Stock) of the amount in question.
Pursuant to an amendment to the AIG Agreement, dated as of November 10, 1994,
the Company's potential exposures under the indemnifications, individually or in
the aggregate, are limited to $10 million. As a result of this indemnification,
the Company has classified $10 million of the proceeds from the issuance of the
Series B Convertible Preferred Shares outside of stockholders' equity until such
time as the indemnifications, if any, are satisfied or otherwise terminated.
7
<PAGE>
For further information concerning this matter, see Managements Discussion
and Analysis ("MD&A") and Notes 5 and 13 to the Unaudited Notes to the
Financial Statements included in the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1994 (the "September 30, 1994 Form 10-Q")
and sections entitled "Investment Proposal" and "Proposal 1--The Purchase
Agreement" in the Proxy Statement, dated June 27, 1994, for the Special
Meeting of Stockholders held on July 15, 1994.
SHAND INDEMNITIES. In connection with the 1987 sale of the Shand, Morahan &
Company, Inc., the Company's domestic underwriting management subsidiary
("Shand"), the Company provided certain indemnities to the purchasers of Shand.
The indemnities provided include a provision for claims based on alleged errors
and omissions of Shand in placing reinsurance prior to the sale of Shand in
1987. To date, five reinsurers have alleged that Shand committed such errors and
omissions, and the purchasers of Shand have advised the Company that other
reinsurers may make similar allegations in the future. To date, there has been
no finding that Shand in fact committed any error or omission. Shand is actively
disputing these allegations in arbitrations against three of these reinsurers.
Of the five indemnification claims asserted by the purchasers of Shand against
the Company, two have been settled. The remaining three indemnification claims
are the subject of an arbitration proceeding brought by the purchasers against
the Company in August 1994 in which the purchasers seek payment of reinsurance
recoverables or the posting of collateral for such recoverables. The amounts in
question approximate $17.2 million.
On September 20, 1994 and as supplemented on November 23, 1994, the
purchasers of Shand notified the Company that four additional reinsurers have
made similar allegations and that these claims may be included in the
arbitration proceedings. The amounts in question approximate $31.5 million.
Additional indemnity claims may be made by the purchasers of Shand if other
reinsurers stop paying based on pre-sale errors and omissions. If those claims
were upheld, the Company's resulting indemnification obligation could be
significant. The Company believes that, until the merits of the alleged errors
and omissions have been adjudicated, the Company's exposure under this
indemnity is limited to the costs and related expenses incurred by Shand in
adjudicating the merits of the allegations. The Company is vigorously disputing
the indemnification claims for reinsurance recoverables asserted by the
purchasers of Shand in the arbitration proceedings. For further information
concerning this matter, see Note 11 to the Unaudited Notes to Financial
Statements included in the September 30, 1994 Form 10-Q.
SPHERE DRAKE INDEMNITIES. In connection with the 1987 sale of Sphere Drake,
the Company's U.K.-based insurance underwriting subsidiary, the Company provided
indemnities for various potential liabilities including provisions covering
future losses on the insurance pooling arrangements from 1953 to 1967 between
Sphere Drake and Orion Insurance Company (Orion), a U.K.-based insurance
company, and future losses pursuant to a stop loss reinsurance contract between
Sphere Drake and Lloyd's Syndicate 701 (Syndicate 701). In addition, the sales
agreement requires the Company to assume any losses in respect of actions or
omissions by Swann & Everett Underwriting Agency (Swann & Everett), an
underwriting management company previously managed by a subsidiary of the
Company. The types of claims being reported on the Orion insurance pooling
arrangement are primarily asbestosis, environmental pollution and latent
disease claims in the U.S. and are coupled with substantial litigation
expenses. Liabilities for these claims cannot be estimated by conventional
actuarial reserving techniques because the available historical experience is
not sufficient to apply such techniques for these types of claims and case
law, which will ultimately determine the extent of these liabilities, is still
evolving. To date, U.S. case law has already altered the intent and scope of
these policies to some extent. Therefore, the Company has obtained
advice from an independent actuarial firm which used available exposure
information and various projection techniques in estimating the Company's
ultimate exposure.
On October 21, 1994, Orion was placed in provisional liquidation pursuant to
an order of the English Courts. The Company cannot currently determine what
effect, if any, the provisional liquidation will have on the Orion exposures.
The Company is actively monitoring and assessing the situation.
8
<PAGE>
In November 1994, the Company announced an agreement in principle to resolve
certain indemnity obligations to Sphere Drake. Under terms of the agreement,
which is subject to a definitive written contract, the Company will receive a
cash payment of approximately $5 million from Sphere Drake in settlement of the
zero coupon notes receivable and related indemnities as well as certain income
tax liabilities. The Company recorded a $20.9 million loss from discontinued
operations in the third quarter in connection with this agreement. Other
indemnity arrangements with Sphere Drake remain in place. For further
information concerning this matter, see Note 7 to the Unaudited Notes to the
Financial Statements included in the September 30, 1994 Form 10-Q.
RISK FACTORS
Prospective purchasers should consider carefully all information set forth
or incorporated in this Prospectus in deciding whether to purchase the Shares,
and, in particular, should consider the following:
FINANCIAL AND ORGANIZATIONAL INITIATIVES, FOURTH QUARTER CHARGE. During
1994, the Company implemented significant management and financial initiatives,
including the AIG Investment, the insurance-based financing contract, and the
reduction in work force and early retirement program. The Company is also
undertaking worldwide reviews of its operations and organizational structure
with the objective of increasing revenues, reducing costs and positioning the
Company for future growth. There is no assurance that these objectives will be
achieved. The reviews, expected to be completed by year-end, will result in a
significant charge for restructuring and other matters in addition to the $12
million fourth quarter charge announced in October 1994. The combined charges
will result in a significant loss for the fourth quarter and for the year.
Pending completion of the reviews and restructuring, the Company's ability to
retain and to attract qualified employees may be adversely affected. For further
information concerning this matter, see Management's Discussion and Analysis
("MD&A") and Notes 7 and 12 to the Unaudited Financial Statements included in
the September 30, 1994 Form 10-Q.
LIMITATIONS ON PAYMENT OF DIVIDENDS. Dividends on the Series B Convertible
Preferred Shares will reduce the amount of earnings otherwise available for
distribution to holders of the Common Stock by approximately $16 million in the
first year after issuance, and by approximately $23 million by the fifth year
after issuance, assuming dividends on the Series B Convertible Preferred Shares
were to be paid in kind over this period. The holders of the Series B Preferred
Shares also have the right to require the Company to repurchase their shares at
specified premium prices 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 (x) $0.075 per
share of Common Stock during the last seven months of 1994, (y) cumulatively 25%
of earnings in 1995 and 1996, and (z) cumulatively 50% of earnings thereafter;
the disposition by the Company of assets representing 35% or more of the
Company's book value or gross revenues; and certain mergers of the Company or
any of its principal subsidiaries with or into any other firm or entity. Other
Special Events include the acquisition by a third party, with the consent or
approval of the Company, of beneficial ownership of securities representing 35%
or more of the Company's total outstanding voting power. In addition, no
dividends may be declared or paid on the Company's Common Stock unless an
equivalent amount per share is declared and paid on the dividend paying shares
associated with the Class A and Class C Common Stock. In May 1994, the Board of
Directors reduced the Company's quarterly dividend from $0.25 to $0.025 per
share. The Board of Directors will continue to take into consideration the
Company's financial performance and projections, as well as the provisions of
the AIG Agreement pertaining to declaration of dividends on Common Stock. These
factors, together with cash flow, operating results, possible changes in near-
and long-term corporate strategies resulting from management changes, as well as
general market and economic conditions, could affect future decisions of the
Board of Directors with respect to the size and timing of dividends and other
distributions on the Company's Common Stock, as well as other matters generally
affecting the rights of holders of the Common Stock. For further information
concerning this matter, see MD&A and Note 12 to the Unaudited Notes to the
Financial Statements and Part II, Item 2--Changes in Securities in the September
30, 1994 Form 10-Q and sections entitled "Investment Proposal," "Proposal 1--The
9
<PAGE>
Purchase Agreement" and "Proposal 2--Charter Amendment" included in the Proxy
Statement, dated June 27, 1994, for the Special Meeting of Stockholders held on
July 15, 1994.
CONTINGENT LIABILITIES AND LEGAL PROCEEDINGS. The Company and its
subsidiaries are subject to various claims and lawsuits from both private and
governmental parties, which includes claims and lawsuits in the ordinary course
of business, consisting principally of alleged errors and omissions in
connection with the placement of insurance and in rendering consulting services.
In some of these cases, the remedies that may be sought or damages claimed are
substantial. Additionally, the Company and its subsidiaries are subject to the
risk of losses resulting from the potential uncollectibility of insurance and
reinsurance balances, claims advances made on behalf of clients, exceeding
policy limits, and indemnifications connected with the sales of certain
businesses. The Company's contingent liabilities involve significant amounts.
While it is not possible to predict with certainty the outcome of such
contingent liabilities, the applicability of coverage for such matters under the
Company's professional indemnity insurance program or the financial impact of
such contingent liabilities on the Company, management presently believes that
such impact will not be material to the Company's financial condition. However,
it is possible that future developments with respect to these matters could have
a material effect on future interim or annual results of operations. For further
information concerning these matters, see the "Recent Developments" section of
this Prospectus and Note 11 to the Unaudited Notes to Financial Statements and
Part II, Item I--Legal Proceedings to the September 30, 1994 Form 10-Q.
DISCONTINUED OPERATIONS AND INSURANCE-BASED FINANCING CONTRACT. In March
1985, the Company discontinued the insurance underwriting operations acquired in
1982 as part of the Alexander Howden acquisition. The Company sold Sphere Drake
Insurance Group ("Sphere Drake") in 1987, and is currently running off the
Atlanta and Bermuda insurance companies that were part of the Alexander Howden
Group Limited ("Alexander Howden") acquisition. In addition to the Sphere
Drake indemnities which are subject to resolution in the agreement in
principle discussed in "Recent Developments," the Sphere Drake sales agreement
also provides indemnities by the Company for the various potential liabilities
including provisions covering future losses on the insurance pooling
arrangements from 1953 to 1967 between Sphere Drake and Orion Insurance Company
("Orion"), a U.K.-based insurance company and future losses pursuant to a stop
loss reinsurance contract between Sphere Drake and Lloyd's Syndicate 701. In
addition, the sales agreement requires the Company to assume any losses in
respect of actions or omissions by Swann & Everett.
As discussed in "Recent Developments," the Company entered into an
insurance-based financing contract (the "Contract") as of July 1, 1994. The
Contract affords certain protection to the Company for the Orion, Syndicate
701, Swann & Everett, and certain other exposures included in discontinued
operations. The established reserve for these exposures was $148.5 million at
July 1, 1994. The Contract provides for a payment by the Company of $80
million ($50 million of which was borrowed from the reinsurance company) to
the reinsurance company and for payment by the Company of the first $73
million of the established reserve. In accordance with the Contract, which
will be accounted for under the deposit method of accounting, the remaining
established reserve of $75.5 million is recoverable from the reinsurance
company. The Contract also provides protection for paid losses in excess of
the established reserve through recoveries of such paid losses from the
reinsurance company. Such recoveries are initially limited to $25 million and,
depending on the timing and amount of loss payment recoveries, could increase
to a maximum of $120 million. At September 30, 1994, the recovery of losses
from the reinsurance company, beyond the $75.5 million related to the
established reserve, is limited to $26.6 million. The Contract obligates the
Company to pay additional amounts to the reinsurance company for losses in
excess of $26.6 million. Commencing December 31, 1996, depending on the timing
and amount of loss payment recoveries under the Contract, the Company may be
entitled to receive payments from the reinsurance company in excess of amounts
recovered for paid losses if the Contract is terminated. The Contract may be
terminated starting December 31, 1996 at the Company's option
10
<PAGE>
and may be terminated at the reinsurance company's option if the Atlanta and
Bermuda reinsurance agreements are terminated prior to January 1, 2006. If it
becomes probable that the ultimate exposures covered by the Contract will exceed
recorded liabilities, the Company would increase the recorded liabilities to the
required amount. To the extent that the recorded increase in those liabilities
is recoverable under the Contract, that amount would be recorded as an asset of
discontinued operations. To the extent that the recorded increase would not be
recoverable under the Contract, that amount would be recorded as a loss from
discontinued operations. The Contract provides for an aggregate limit on the
amount of payments to be made to the Company. If it becomes probable that the
ultimate amount of the exposures covered by the Contract will exceed the
aggregate contract limits, the total amount of such excess would be recorded as
a loss from discontinued operations in the period that such determination is
made. The Company may be liable for certain additional premiums if loss
experience deteriorates significantly beyond what is currently actuarially
projected. For further information concerning this matter, see MD&A and Note 7
to the Unaudited Notes to Financial Statements to the September 30, 1994 Form
10-Q, and the "Recent Developments" section to this Prospectus.
FOREIGN CURRENCY TRANSLATION AND DERIVATIVE PRODUCTS. Changes in foreign
currency exchange rates could significantly impact the Company's interim and
annual net consolidated operating income. To reduce the risk of currency
exchange fluctuations, the Company utilizes derivative products to reduce the
risk of currency exchange fluctuations. The Company enters into foreign exchange
contracts primarily to cover exposures that arise at its London-based specialty
and reinsurance broking operations. These exposures arise because a significant
portion of the revenues of these operations are denominated in U.S. dollars,
while their expenses are primarily denominated in U.K. pounds sterling. To hedge
this exposure, the Company generally sells U.S. dollars and purchases U.K.
pounds sterling. The Company also utilizes foreign exchange options to
supplement this activity. These contracts are generally purchased from large
institutions with strong credit ratings. The Company's use of derivative
products is limited to foreign exchange hedging (forward contracts and covered
options) and interest rate hedging (interest rate swaps, forward rate
agreements, options, caps and collars). For further information concerning this
matter, see MD&A and Note 14 to the Unaudited Financial Statements included in
the September 30, 1994 Form 10-Q.
11
<PAGE>
ACQUISITION OF CLAY & PARTNERS AND RELATED AGREEMENTS
The Selling Stockholders acquired 2,274,410 shares of the Common Stock,
$1.00 par value per share (the "Consideration Shares") of the Company in
connection with the Company's November 30, 1993 acquisition from each of the
Selling Stockholders of his or her respective interests in the assets and
business of Clay & Partners, a U.K. partnership ("Clay"). At the time of the
acquisition, Clay was the third largest U.K. partnership of consulting
actuaries and pension fund administrators, providing employee benefits and
related consulting services to corporate clients, primarily in the United
Kingdom. Through the acquisition of Clay, the Company plans to expand the
European operations of ACG, its human resource management consulting
subsidiary.
The Consideration Shares were the total consideration paid for the purchase
of Clay. For the purpose of the transaction, the Consideration Shares were given
a value of $20.00 per share, valued at an exchange rate expressed in dollars per
B.P.1.00 of $1.479.
The acquisition was effected pursuant to a Sale and Purchase Agreement (the
"Purchase Agreement"), dated as of November 30, 1993, among the Company and the
Selling Stockholders. Pursuant to the Purchase Agreement, the parties entered
into certain other agreements, including a Registration Rights Agreement (the
"Registration Rights Agreement"), dated as of November 30, 1993, among the
Company and the Selling Stockholders. The sale and purchase of Clay and the
issuance of the Consideration Shares were consummated on November 30, 1993.
The Shares offered hereunder represent that portion of the Consideration
Shares the Selling Stockholders have elected to sell at the present time
pursuant to this registration.
The following description of the Purchase Agreement and the Registration
Rights Agreement are summaries of certain of the material terms contained
therein and are qualified in their entirety by reference to the full text of
such agreements which have been filed as Exhibits to the Registration Statement
of which the Prospectus is a part.
PURCHASE AGREEMENT
Pursuant to the Purchase Agreement, on the Transfer Date, the Company issued
to each of the Selling Stockholders that portion of the Consideration Shares
allocable to each of the respective Selling Stockholder's interest in Clay.
Under the Purchase Agreement, each of the Selling Stockholders agreed not to
sell or otherwise dispose of his or her Consideration Shares prior to the public
announcement by the Company of its financial results for the year ended December
31, 1993 which occurred on February 25, 1994 (the "Announcement Date"). Further,
10% of the Consideration Shares are being held in escrow and will be released
upon the occurrence of certain events and accordingly, such escrowed
Consideration Shares are not in any event included in the Shares.
REGISTRATION RIGHTS AGREEMENT
Under the Registration Rights Agreement, the Company has agreed to register
the Consideration Shares under the Securities Act and to use its best efforts to
register the Consideration Shares on Form S-3 pursuant to Rule 415 under the
Securities Act as soon as practicable (but in any event not earlier than the
Announcement Date) and to maintain the effectiveness of such registration for 90
days (subject to extension, in the event the Company exercises its rights to
prevent sales of the Shares during a transaction blackout or information
blackout, as such terms are described below). Notwithstanding the foregoing, the
Company has agreed to maintain the effectiveness of such registration statement
for 120 days (subject to extension, in the event the Company exercises its
rights to prevent sales of the Shares during a transaction blackout or
information blackout, as such terms are described below). Consideration Shares
so registered may be sold in "block" sales to institutional investors or through
broker-dealers in privately negotiated transactions with institutional or
corporate investors, through customary brokerage channels or in an underwritten
public offering. The Selling Stockholders are not entitled to sell their
Consideration Shares in more than one underwritten public offering or in a
public offering unless the number of Consideration Shares sold exceeds 400,000.
12
<PAGE>
The Registration Rights Agreement contains additional agreements among the
parties, including, among other things, agreements relating to indemnification
and contribution and the Company's agreement to comply with applicable rules in
order to permit resales of the Consideration Shares without registration
pursuant to Rule 144 under the Securities Act. The parties have agreed that
except for the fees and expenses of counsel and other advisors to the Selling
Stockholders, underwriters' fees and expenses, underwriting discounts and
commissions and transfer taxes in respect of the Consideration Shares
registered, which will be borne by the Selling Stockholders, the Company will
pay all other expenses of the registration.
The Selling Stockholders have agreed not to sell any of the Shares after
receipt of notice from the Company that, in its reasonable judgment, it would
not be in the best interests of the Company and its stockholders generally for
such Shares to be sold (for customary reasons, including but not limited to,
such matters as the Company being engaged in active negotiations or planning for
a merger or acquisition or disposition transaction or a private or public
offering of debt securities or having recently completed such an offering) (a
"transaction blackout") or that it is in possession of material non-public
information that, in the reasonable opinion of the Company's counsel, would
expose the Company to securities laws liabilities if Shares continued to be sold
(an "information blackout"). Any information blackout will expire on the date
which is two business days after the information is disclosed. Any transaction
blackout will expire on the date which is two business days after the date the
transaction is abandoned, publicly disclosed or completed (whichever occurs
first). The Company has agreed that, if there is any blackout, it will maintain
the effectiveness of the Registration Statement of which this Prospectus is a
part for an additional period equal to the greater of 15 days and the duration
of such blackout.
13
<PAGE>
SELLING STOCKHOLDERS
The following table identifies each of the Selling Stockholders and
indicates (i) the nature of any position, office or other material relationship
that each such Selling Stockholder has had within the past three years with the
Company (or any of its predecessors or affiliates) and (ii) the number of shares
of Common Stock owned by each such Selling Stockholder prior to the offering,
the number of shares to be offered for the account of such Selling Stockholder
and the number of shares and percentage of outstanding shares to be owned by
such Selling Stockholder after completion of the offering.
The Purchase Agreement contemplated that Clay would be integrated with the
Company's human resource consulting division in the United Kingdom. The combined
operation was named Alexander Clay & Partners Consulting ("AC&P"). Each of the
Selling Stockholders (other than Simon Stoye) was offered employment with AC&P
and those who were offered employment have accepted such employment.
<TABLE>
<CAPTION>
SHARES AND
SHARES SHARES PERCENTAGE**
OWNED OFFERED OF CLASS
POSITION WITH OR RELATIONSHIP BEFORE THE IN THE OWNED AFTER
NAME TO THE COMPANY OFFERING OFFERING THE OFFERING
- ---------------------------- ----------------------------- ---------- -------- -------------
<S> <C> <C> <C> <C>
Ian S. Aitken............... Principal Consultant--AC&P 87,337 30,000 57,337
Nigel R. Bankhead........... Principal Consultant--AC&P 64,844 21,000 43,844
Geoffrey Booth*............. Principal Consultant--AC&P 109,195 0 109,195
Jonathan R.P. Checkley...... Principal Consultant--AC&P 136,487 0 136,487
Lynne Davis................. Principal Consultant--AC&P 87,337 69,337 18,000
Maurice Dyson............... Director of Pension 136,487 86,487 50,000
Administration/Principal
Consultant--AC&P
Jeremy D. Fisher............ Principal Consultant--AC&P 109,195 98,275 10,920
Alan S. Fishman............. Deputy Chairman--AC&P 187,525 87,525 100,000
Stephen L. Gooch............ Principal Consultant--AC&P 170,626 125,000 45,626
Helen James................. Director of Professional and 109,195 98,275 10,920
Technical
Services/Principal
Consultant--AC&P
Peter R. Lockyer............ Director of Investment 87,337 42,337 45,000
Services/Principal
Consultant--AC&P
Stephen M. Riley............ Business Develoment 109,195 50,000 59,195
Director--AC&P
Thomas M. Ross.............. Executive Director--AC&P 170,626 80,000 90,626
John E. Shepley............. Principal Consultant--AC&P 136,487 100,000 36,487
Simon C. Stoye.............. None 87,337 35,000 52,337
Richard C.W. Strattan....... Principal Consultant--AC&P 136,487 65,000 71,487
Nigel Taylor................ Principal Consultant--AC&P 64,844 34,800 30,044
Robert S. Thomson........... Principal Consultant--AC&P 87,337 43,669 43,668
John P. Woodhouse........... Principal Consultant--AC&P 87,337 40,000 47,337
Stephen F. Yeo.............. Principal Consultant--AC&P 109,195 30,195 79,000
</TABLE>
- ------------
* Mr. Booth transferred all his Consideration Shares to his spouse after the
Announcement Date.
** No Selling Stockholder acquired or, following the sale of his or her Shares,
will own more than 0.50% of the outstanding shares of the Company's Common
Stock.
The Selling Stockholders have filed a Statement on Schedule 13D pursuant to
Regulation 13D under the Exchange Act with respect to their acquisition of the
Consideration Shares. According to such Statement, the Selling Stockholders made
such filing because there may be deemed to have been the formation of a "group"
(as contemplated by Rule 13d-5(b) under the Exchange Act) consisting of the
Selling Stockholders. However, each Selling Stockholder expressly declared that
such Statement may not be construed as an admission that any such "group" has
been formed or that such Selling Stockholder is, for purposes of Section 13(d)
or 13(g) of the Exchange Act, the beneficial owner of any Consideration Shares
owned by other Selling Stockholders.
The Consideration Shares represent approximately 5.5% of the shares of the
Company's Common Stock outstanding as of November 1, 1994. Following the
Offering, assuming all of the Shares are sold, the Consideration Shares held in
the aggregate by the Selling Stockholders (or in the case of Mr. Booth, his
spouse) will represent approximately 2.7% of the shares of the Company's Common
Stock outstanding as of November 1, 1994.
14
<PAGE>
PLAN OF DISTRIBUTION
The Company has been advised by the Selling Stockholders that they intend to
sell either directly or through broker-dealers, acting either as principal or as
agent, or underwriters, all or a portion of the Shares from time to time in one
or more transactions on the New York Stock Exchange ("NYSE"), The International
Stock Exchange of the United Kingdom and the Republic of Ireland, Ltd. (the
"London Stock Exchange"), in block transactions, in privately negotiated
transactions or through customary brokerage channels, in a public offering or in
a combination of any such methods of sale, at prices and at terms prevailing at
the time of sale or at prices related to the then current market price, or at
negotiated prices. The Selling Stockholders may effect transactions by selling
the Shares to or through broker-dealers acting either as principal or as agent,
and such broker-dealers may receive compensation in the form of usual and
customary or specifically negotiated underwriting discounts, concessions or
commissions from the Selling Stockholders. Such broker-dealers, as agent or
principal, may sell or resell the Shares on the Exchanges at market prices
prevailing at the time of such sales or otherwise. The Company's Common Stock is
listed on the NYSE (symbol: AAL) and the London Stock Exchange (symbol: ALXA).
On November 25, 1994, the last reported sale price of the Company's Common Stock
on the NYSE was $18.625. Pursuant to the Registration Rights Agreement, the
shares registered pursuant to a Registration Statement may be sold by the
Selling Stockholders in the manner selected by the Selling Stockholders in their
sole discretion.
The aggregate proceeds to the Selling Stockholders from the sale of the
Shares so offered will be the purchase price of the Shares sold less the
aggregate agents' commissions and underwriters discounts, if any, and other
expenses of issuance and distribution not borne by the Company. The Company will
not receive any of the proceeds from the sale by the Selling Stockholders of the
Shares offered hereby. Any broker-dealers that participate with the Selling
Stockholders in the distribution of Shares may be deemed to be underwriters, and
any commissions received by them and any profit on the resale of the Shares
purchased by them might be deemed to be underwriting discounts and commissions
under the Securities Act.
Sales to institutional investors in privately negotiated transactions may be
at market prices prevailing at the time of sales, at prices related to such
prevailing prices or at negotiated prices. Institutional investors who may
acquire Shares from the Selling Stockholders, or, if applicable, a broker-dealer
or underwriter acting for the Selling Stockholders, include commercial and
savings banks, pension funds, investment companies, educational and charitable
institutions and other institutional investors.
If Shares are sold in an underwritten offering, the Shares may be acquired
by the underwriters for their own account and may be further resold from time to
time in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale. The
names of the underwriters with respect to any such offering and the terms of the
transactions, including any underwriting discounts, concessions or commissions
and other items constituting compensation of the underwriters and
broker-dealers, if any, will be set forth in a Prospectus Supplement relating to
such offering. Any public offering price and any discounts, concessions or
commissions allowed or reallowed or paid to broker-dealers may be changed from
time to time. Unless otherwise set forth in a Prospectus Supplement, the
obligations of the underwriters to purchase the Shares will be subject to
certain conditions precedent and the underwriters will be obligated to purchase
all of the Shares specified in such Prospectus Supplement if any are purchased.
The Registration Rights Agreement provides that, in certain circumstances,
the Company will indemnify the Selling Stockholders and certain other persons,
including any person who participates as an underwriter (and its controlling
persons) in the offering or sale of the Shares against certain liabilities,
including civil liabilities under the Securities Act. In addition, the
Registration Rights Agreement provides that to the extent such indemnification
is not available in such circumstances, the
15
<PAGE>
Company will under certain circumstances, contribute to payments any such
Selling Stockholder, underwriter or other person may be required to make in
respect of such liabilities.
See "Acquisition of Clay & Partners and Related Agreements-Registration
Rights Agreement" for a further description of certain terms of the Registration
Rights Agreement.
The Selling Stockholders (other than Messrs. Booth and Checkley) have
engaged CS First Boston Corporation ("CS First Boston") to provide advice
concerning the appropriate method of selling the Shares. In that regard, CS
First Boston has indicated that it may, on terms and conditions to be
negotiated, further act on behalf of the Selling Stockholders in connection with
a placement of the Shares in a block transaction, act as a broker-dealer in
selling Shares through customary brokerage channels and/or act as an underwriter
in a public offering of the Shares. CS First Boston has in the past provided,
and continues to provide, investment banking services to the Company.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by the
Selling Stockholders. All the proceeds will be received by the Selling
Stockholders.
LEGAL MATTERS
The legality of the Shares is being passed upon by Albert A. Skwiertz, Jr.,
Esq., Vice President and General Counsel of the Company. As of September 30,
1994, Mr. Skwiertz owned no shares directly or indirectly of the Company's
Common Stock, but holds options exercisable for 28,500 shares of Common Stock.
In addition, 1,316 shares of Common Stock are attributed to Mr. Skwiertz's
account under the Company's Thrift Plan.
EXPERTS
The consolidated financial statements and the related financial statement
schedules incorporated in this Prospectus by reference from the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and has been so incorporated
in reliance on the report of such firm given their authority as experts in
accounting and auditing.
16
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following sets forth the costs and expenses in connection with the
distribution of the shares being registered, other than any underwriting
discounts and commissions. All of the amounts shown, except the Securities and
Exchange Commission registration fees and stock exchange filing fees, are
estimates. Except for the fees and disbursements of counsel and other advisors
to the Selling Stockholders, any underwriters' fees and expenses and
underwriting discounts and commissions and transfer taxes in respect of the
Shares being sold, which will be borne by the Selling Stockholders, the Company
has agreed to pay all other expenses related to this registration.
<TABLE>
<CAPTION>
TO BE PAID BY
REGISTRANT
-------------
<S> <C>
SEC registration fee................................................... $ 7,694
NYSE filing fee........................................................ 7,960
London Stock Exchange filing fee....................................... 9,995
Blue Sky fees and expenses............................................. 1,000
Accounting fees and expenses of the Company's auditors................. 20,000
Printing expenses...................................................... 20,000
Legal fees and expenses of the Company's counsel....................... 23,000
Miscellaneous expenses................................................. 2,000
----------
Total............................................................ $91,649
----------
----------
</TABLE>
Any other expenses in connection with the Shares being registered will be
borne by the Selling Stockholders.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 2-418 of the Maryland General Corporation Law establishes provisions
whereby a Maryland corporation may indemnify any director or officer made party
to an action or proceeding by reason of service in that capacity, against
judgments, penalties, fines, settlements and reasonable expenses incurred in
connection with such action or proceeding unless it is proved that the director
or officer (i) acted in bad faith or with active and deliberate dishonesty, (ii)
actually received an improper personal benefit in money, property or services or
(iii) in the case of a criminal proceeding had reasonable cause to believe that
his act was unlawful. However, if the proceeding is a derivative suit in favor
of the corporation, indemnification may not be made if the individual is
adjudged to be liable to the corporation. In no case may indemnification be made
until a determination has been reached that the director or officer has met the
applicable standard of conduct. Indemnification for reasonable expenses is
mandatory if the director or officer has been successful on the merits or
otherwise in the defense of any action or proceeding covered by the
indemnification statute. The statute also provides for indemnification of
directors and officers by court order. The indemnification provided or
authorized in the indemnification statute does not preclude a corporation from
extending other rights (indemnification or otherwise) to directors and officers.
The Company's Bylaws provide for indemnification of any person who is
serving or has served as a director or officer of the Company, against all
liabilities and expenses incurred in connection with any action, suit or
proceeding arising out of such service to the full extent permitted under
Maryland law.
The Company currently maintains policies of insurance under which the
Company and the directors and officers of the Company are insured, within the
limits of the policies, against certain expenses in connection with the defense
of actions, suits or proceedings, and certain liabilities which might be imposed
as a result of such actions, suits or proceedings, to which directors and
officers of the Company are parties by reason of being or having been such
directors or officers.
II-1
<PAGE>
EXHIBITS*
The following exhibits are filed with this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- ---------------------------------------------------------------------------------
<C> <S>
**5.1 Opinion of Counsel of Albert A Skwiertz, Jr, Esq., Vice President and General
Counsel of the Company
10.1 Purchase Agreement, dated November 30, 1993, among the Company and the Selling
Stockholders (including certain parts of the Schedule thereto)
10.2 Registration Rights Agreement, dated November 30, 1993, among the Company and the
Selling Stockholders
10.3 Letter Agreement, dated June 28, 1994, between CS First Boston Corporation, the
Selling Stockholders (other than Messrs. Booth and Checkley) and the Company
respecting the offering and sale of the Shares.
**23.1 Consent of Deloitte & Touche LLP., independent public accountants
**23.2 Consent of Albert A. Skwiertz, Jr, Esq., Vice President and General Counsel of
the Company, included in Exhibit 5.1
24.1 Power of Attorney is included in the Signature Page contained in Part II of the
Registration Statement
**24.2 Power of Attorney for Edward F. Kosnik
**24.3 Power of Attorney for Richard P. Sneeder, Jr.
</TABLE>
- ------------
* Except as noted, all exhibits are previously filed.
** Filed herewith.
UNDERTAKINGS
The undersigned Registrant undertakes: (1) To file, during any period in
which offers or sales are being made, a post-effective amendment to this
Registration Statement: (i) To include any prospectus required by section
10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts or
events arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement; (iii) To include any material information with respect
to the plan of distribution not previously disclosed in the Registration
Statement; provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated in the
Registration Statement. (2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof. (3) To remove from registration by means of a
post-effective amendment any of the Shares being registered which remain unsold
at the termination of the offering.
The undersigned Registrant hereby further undertakes that for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification
II-2
<PAGE>
is against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the questions whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby further undertakes that: (1) for the
purposes of determining any liability under the Securities Act, the information
omitted from the form of Prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in a form of Prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of the Registration Statement as of the time it was
declared effective. (2) for the purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of Prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on the
28th day of November, 1994.
ALEXANDER & ALEXANDER SERVICES INC.
By: /s/ FRANK G. ZARB
.................................
Frank G. Zarb
Chairman of the Board, Chief
Executive Officer,
President and Director
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed on November 28, 1994 by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
NAME TITLE
---------------------------------------- ---------------------------------------------
<S> <C>
/s/ FRANK G. ZARB Chairman of the Board, Chief Executive
........................................ Officer, President and Director
Frank G. Zarb
/s/ EDWARD F. KOSNIK Executive Vice President and Chief Financial
........................................ Officer
Edward F. Kosnik
By Power of Attorney
/s/ RICHARD P. SNEEDER, JR. Controller
........................................
Richard P. Sneeder, Jr.
By Power of Attorney
/s/ KENNETH BLACK, JR. Director
........................................
Kenneth Black, Jr.
By Power of Attorney
/s/ JOHN A. BOGARDUS, JR. Director
........................................
John A. Bogardus, Jr.
By Power of Attorney
/s/ ROBERT E. BONI Director
........................................
Robert E. Boni
Director
........................................
W. Peter Cooke
Director
........................................
Joseph L. Dionne
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE
---------------------------------------- ---------------------------------------------
<S> <C>
Director
........................................
Gerald R. Ford
/s/ PETER C. GODSOE Director
........................................
Peter C. Godsoe
By Power of Attorney
/s/ ANGUS M.M. GROSSART Director
........................................
Angus M.M. Grossart
By Power of Attorney
Director
........................................
Maurice H. Hartigan
Director
........................................
James Bickford Hurlock
/s/ VINCENT R. MCLEAN Director
........................................
Vincent R. McLean
By Power of Attorney
Director
........................................
James D. Robinson III
/s/ WILLIAM M. WILSON Director
........................................
William M. Wilson
By Power of Attorney
/s/ FRANK G. ZARB Attorney-in-Fact for
........................................ the Signing Officers
Frank G. Zarb and Directors
/s/ ROBERT E. BONI Attorney-in-Fact for
........................................ the Signing Officers
Robert E. Boni and Directors
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT TITLE NO.
- ------ ------------------------------------------------------------------------ --------
<C> <S> <C>
5.1 Opinion of Counsel of Albert A. Skwiertz, Jr, Esq., Vice President and III-1
General Counsel of the Company..........................................
23.1 Consent of Deloitte & Touche LLP, independent public accountants........ III-3
23.2 Consent of Albert A. Skwiertz, Jr., Esq., Vice President and General III-1
Counsel of the Company, included in Exhibit 5.1.........................
24.2 Power of Attorney for Edward F. Kosnik.................................. III-4
24.3 Power of Attorney for Richard P. Sneeder, Jr............................ III-5
</TABLE>
[LOGO OF LETTERHEAD]
Exhibit 5.1
Alexander & Alexander Services Inc.
1211 Avenue of the Americas
New York, N.Y. 10036
Telephone 212-840-8500
FAX 212-869-7535
November 28, 1994
Board of Directors
Alexander & Alexander Services Inc.
1211 Avenue of the Americas
New York, NY 10036
Re: Alexander & Alexander Services Inc.
Registration Statement on Form S-3
-----------------------------------
Gentlemen:
I am General Counsel of Alexander & Alexander Services Inc., a Maryland
corporation (the "Company"), and have acted as counsel for the Company in
connection with the Registration Statement on Form S-3 (the "Registration
Statement") filed as of August 16, 1994 under the Securities Act of 1933, as
amended, in connection with the proposed offering and sale, from time to time,
of up to 1,136,900 shares of the Company's Common Stock, $1.00 par value per
share (the "Shares"), by certain selling stockholders who are identified in the
Registration Statement.
In connection with the foregoing, I have examined the originals or copies of
such corporate records, documents, certificates and other instruments as I have
deemed necessary or appropriate for the purposes of rendering this opinion.
Based on the foregoing, it is my opinion that the Shares are legally issued,
fully paid and non-assessable.
<PAGE>
Board of Directors
November 28, 1994
Page 2
The foregoing opinions are limited to the laws of the state of Maryland and I do
not express any opinion herein concerning any other law. I hereby consent to
the filing of this opinion as an exhibit to the Registration Statement. In
giving this consent, I do not thereby admit that I am within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
/s/ Albert A. Skwiertz, Jr.
Albert A. Skwiertz, Jr.
Vice President
and General Counsel
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Pre-effective Amendment
No. 1 to a Registration Statement of Alexander & Alexander Services Inc. on
Form S-3 of the report of Deloitte & Touche dated February 25, 1994, appearing
in and incorporated by reference in the Annual Report on Form 10-K of Alexander
& Alexander Services Inc. for the year ended December 31, 1993 and to the
reference to Deloitte & Touche LLP under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Baltimore, Maryland
November 28, 1994
Exhibit 24.2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, Edward F. Kosnik,
Executive Vice President and Chief Financial Officer of Alexander & Alexander
Services Inc. (the "Company"), hereby constitutes and appoints Frank G. Zarb and
Robert E. Boni, and each of them, their true and lawful attorneys and agents,
with full power of substitution each with power to act alone, to sign and
execute on behalf of the undersigned any and all amendments (including pre-
effective and post-effective amendments) to the Registration Statement on Form
S-3 ("Registration Statement") in connection with the proposed offering and sale
from time to time, of up to 1,136,900 shares of the Company's Common Stock,
$1.00 par value per share, by certain selling stockholders who are identified in
the Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them
acting singly, full power and authority to do and perform each and every act and
thing necessary and requisite to be done, as fully and to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys and agents or their or his substitutes, shall do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of
this 23rd day of November 1994.
/s/ Edward F. Kosnik
----------------------------------------
Edward F. Kosnik
Exhibit 24.3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, Richard P. Sneeder,
Jr., Controller of Alexander & Alexander Services Inc. (the "Company"), hereby
constitutes and appoints Frank G. Zarb and Robert E. Boni, and each of them,
their true and lawful attorneys and agents, with full power of substitution each
with power to act alone, to sign and execute on behalf of the undersigned any
and all amendments (including pre-effective and post-effective amendments) to
the Registration Statement on Form S-3 ("Registration Statement") in connection
with the proposed offering and sale from time to time, of up to 1,136,900 shares
of the Company's Common Stock, $1.00 par value per share, by certain selling
stockholders who are identified in the Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, and each of them acting singly, full power and authority to do
and perform each and every act and thing necessary and requisite to be done, as
fully and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys and agents or their or his
substitutes, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney as of
this 23rd day of November 1994.
/s/ Richard P. Sneeder, Jr.
---------------------------------------
Richard P. Sneeder, Jr.
