UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
_____________________
Date of Report (March 15, 1995): March 15, 1995
Alexander & Alexander Services Inc.
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(Exact name of registrant as specified in its charter)
Maryland 1-8282 52-0969822
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
organization)
1185 Avenue of the Americas 10036
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New York, New York (Zip Code)
(Address of principal executive offices)
(212) 840-8500
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(Registrant's telephone number,
including area code:)
Not Applicable
----------------------------
(Former name or former address,
if changed since last report.)
<PAGE>
Item 5. Other Events.
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The following events are hereby reported by Alexander &
Alexander Services Inc. (the "Company"):
Financial Results
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On February 16, 1995 the Company announced its fourth
quarter and full-year 1994 results. A copy of the press
release noticing such results is attached hereto as Exhibit
20.1 and is incorporated herein by reference.
Discontinued Operations
-----------------------
Reference is made to the discussion of the Company's
discontinued operations in Part I, Note 7 of its Unaudited
Notes to Financial Statements to its Report on Form 10-Q for
the quarter ended September 30, 1994, which is incorporated
herein in its entirety, except as amended as follows:
Sphere Drake. In November 1994, the Company announced an
agreement in principle to resolve certain indemnity
obligations arising out of the Company's 1987 sale of Sphere
Drake, its U.K.-based underwriting subsidiary. Effective
December 1, 1994, the Company entered into a definitive
written agreement whereby the Company received a $5 million
payment in settlement of the zero coupon notes held by the
Company and carried at 19.3 million pounds sterling, as well
as related indemnities and certain income tax liabilities.
The Company recorded a $20.9 million loss from discontinued
operations in the third quarter 1994 in connection with this
settlement. A copy of the agreement is attached hereto as
Exhibit 10.1 and a copy of the press release noticing the
transaction is attached as Exhibit 20.2; both of which are
incorporated herein by reference.
Contingent Liabilities and Legal Proceedings.
---------------------------------------------
Shand/Evanston. Effective January 27, 1995, the Company
entered into a settlement agreement with Shand/Evanston
Group, Inc. ("S/E"), resolving certain indemnity obligations
and restructuring the contractual relationship arising out
of the Company's 1987 sale of Shand Morahan & Company Inc.
("Shand"), the Company's domestic underwriting subsidiary,
to S/E's predecessors. Under the settlement, the Company
obtained a release of certain indemnification obligations,
thereby resolving most of the issues raised in a pending
arbitration proceeding. The settlement also restructures
the relationships of the parties under the original purchase
agreement so that the parties' future interests in relation
to certain claims by third parties against Shand are more
closely aligned. Under the terms of the
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<PAGE>
settlement, the Company paid $14 million in cash and issued
a five-year, interest bearing note in the principal amount
of $14 million. Contingent obligations totaling $5.75
million are also payable by the Company if certain events
occur. In addition, a contingent obligation of $1.25
million is payable by S/E to the Company if certain events
occur. The settlement is reflected in a year-end liability
of $32.5 million and a fourth quarter 1994 after-tax charge
of $21.1 million, or $0.48 per share. A copy of the
settlement agreement is attached hereto as Exhibit 10.2 and
a copy of the press release noticing the settlement is
attached hereto as Exhibit 20.3; both of which are
incorporated herein by reference.
Mutual Fire and Shand Contingencies. Reference is made to
the Company's discussion concerning the Mutual Fire and
Shand contingencies in Part I, Note 11 of the Unaudited
Notes to Financial Statement and Part II, Item 1. Legal
Proceedings of the Company's Report on Form 10-Q for the
quarter ended September 30, 1994, which is incorporated
herein in its entirety, except as amended as follows:
On February 16, 1995, the Company announced a $37.2 million
fourth quarter 1994 increase to its pre-existing reserves
relating to lawsuits and other disputes brought against the
Company and others by the rehabilitator of Mutual Fire,
Marine & Inland Insurance Company based upon recent
settlement discussions. A copy of the press release
noticing the increase in reserves is attached hereto as
Exhibit 20.1 and is incorporated herein by reference.
Pinetop. Reference is made to the discussion of the Pinetop
litigation and related contingencies in Part I, Item 3.
Legal Proceedings to the Company's Annual Report on Form 10-
K for the year ended December 31, 1994, and to Part I, Note
11 of the Unaudited Notes to Financial Statements to the
Company's Report on Form 10-Q for the quarter ended
September 30, 1994, which is incorporated in its entirety
herein, except as amended as follows:
Effective January 12, 1995, the Company settled the
previously reported 1985 litigation captioned Pinetop
Insurance Company Ltd. v. Alexander & Alexander Services
Inc., et al. 85 Civ. 95 9860 (RRP)(S.D.N.Y.). Plaintiff in
the case sought compensatory and punitive damages under the
Racketeer Influenced and Corrupt Organizations Act ("RICO")
totaling $87 million dollars. The action was voluntarily
dismissed in February 1995. Amounts paid by the Company
were within previously established reserves. In the
remaining two pending actions, plaintiffs seek compensatory
and punitive damages of $60 million based on treble damages
under RICO.
In Re Insurance Antitrust. Reference is made to the
discussion in Part I, Item 3. Legal Proceedings of the
Company's Report on Form 10-K for the fiscal year ended
December 31, 1994 as to the litigation captioned In Re
Insurance Antitrust
3
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Litigation, C-88-1688-WWS (N.D.Cal.), and which is
incorporated in its entirety herein, except as amended as
follows:
During the fourth quarter of 1994, the plaintiffs and the 31
named defendants entered into an agreement in principle and
certain conditions to settle all allegations and potential
liabilities relating to this litigation. Of the agreed to
aggregate settlement amount of $36 million, of which the
amount of each defendant's contribution is subject to a
confidentiality agreement, the Company's contribution is the
smallest amount to be paid by any of the defendants and such
amount is fully reserved by the Company.
Glickman. Reference is made to the discussion in Part II,
"Item 1. Legal Proceedings" of the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994
ended December 31, 1993 as to the legal proceeding captioned
Harry Glickman v. Alexander & Alexander Services Inc. et al.
(Civil Action No. 93 Civ. 7594) (S.D.N.Y.) which is
incorporated in its entirety herein, except as amended as
follows:
On January 6, 1995, plaintiffs' counsel filed the second
amended complaint. On January 27, 1995, the Company's
counsel filed a motion to dismiss the second amended
complaint. The hearing on this motion is scheduled for
March 27, 1995.
Dispositions and Acquisitions
-----------------------------
Reference is made to the discussion of dispositions and
acquisitions in Part I, Item 1. Business, of the Company's
Report on Form 10-K for the fiscal year ended December 31,
1994 and to Part I, Note 3 to the Unaudited Notes to the
Financial Statements in the Company's Report on Form 10-Q
for the quarter ended September 31, 1994, which is
incorporated herein in its entirety, except as amended as
follows:
Effective January 5, 1995, the Company sold its minority
interest in Noble Grossart Holdings Limited, a privately
held U.K. merchant bank, for $7.2 million. A small gain on
the sale will be reported in the first quarter 1995. A copy
of the press release noticing the transaction is attached
hereto as Exhibit 20.4 and is incorporated herein by
reference.
On February 28, 1995 the Company completed the transaction
to sell Alexsis, Inc. ("Alexsis") its third party
administrator subsidiary, to Continental Casualty, a
subsidiary of CNA Financial Corporation, for approximately
$45 million in cash. This transaction will result in a
first quarter 1995 pre-tax gain of approximately $30
million. Copies of the press releases noticing the
transaction are attached hereto as Exhibits 20.5 and 20.6
and are incorporated herein by reference.
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Other
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New Directors. Effective January 1, 1995, two new directors
were elected to the board of directors, increasing the Board
from 14 to 16 members. The newly elected directors are:
E. Gerald Corrigan, 53, Chairman, International Advisors,
Goldman Sachs & Co., New York and Ronald A. Iles, Senior
Vice President of the Company and Chairman of Alexander
Howden Group, Ltd., the Company's U.K. based specialist and
reinsurance brokerage subsidiary. A copy of the press
release noticing the appointments is attached hereto of
Exhibit 20.7 and is incorporated herein by reference.
Non-Employee Director Compensation. As part of the
Company's 1994 review of its compensation structure and
overall operating strategy, non-employee director
compensation was revised.
During 1994, Dr. Boni served as the non-executive chairman
of the board. In this capacity, he was assigned the task of
identifying and hiring a new chief executive officer for the
Company and taking any and all actions necessary or appropriate
to accomplish that task. Because the scope of such services
could not be predetermined, the Board of Directors initially
fixed his compensation for these services at $100,000, but
expressly reserved the right to award Dr. Boni additional
compensation. In November 1994, in recognition of (i) the fact
that the task presented to Dr. Boni vastly exceeded expectations,
including requiring the attainment of a substantial equity
investment in the Company, (ii) his outstanding achievements, and
(iii) his continued services as a consultant to the Company
through December 31, 1994 to help complete the tasks he had
begun, the board approved a special compensation award for Dr. Boni
Pursuant to the terms of this award, Dr. Boni is entitled to receive
the proceeds from an account (the "Special Account") established to
record his interest in a grantor trust created by the Company which is
subject to the claims of the Company's creditors (the "Company
Trust"). To fund the Special Account, the Company contributed
140,000 shares of the Company's Common Stock to the Special Account.
The independent trustee of the Company Trust (the "Trustee") or an
investment manager appointed by the Company (a "Manager") may
sell the Common Stock credited to the Special Account, except
that (i) 46,667 of such shares may not be sold until October 1,
1995 or until the Company's Common Stock reaches a target price
of $25.00 per share, and (ii) 46,666 of such shares may not be
sold until October 1, 1996 or a target price of $30.00 is
reached. (These restrictions will also earlier lapse upon Dr.
Boni's death or change of control of the Company.) Dr. Boni will
receive a distribution from the Company Trust of any shares of
Common Stock held in the Separate Account six months following
his cessation of services as a member of the board. To the
extent that the Special Account holds assets other than Common
Stock, such assets will generally be distributed immediately
following the date Dr. Boni ceases to be a member of the board
(or earlier at the discretion of the Company's chief executive
officer).
In 1995, each non-employee director will receive a single
fee of $40,000 for all services as a director (the "Annual Fee"),
regardless of the committee services such director provides. The
Annual Fee will generally not be paid currently to any director.
Instead, payment of such Annual Fee will be deferred pursuant to
the terms of the Non-Employee Directors Deferred Compensation
Plan (the "NEDD Plan"), and such deferrals will initially be
valued by reference to shares of the Company's Common Stock.
5
<PAGE>
Under the NEDD Plan, the Company will semi-annually contribute to
the Company Trust shares having a then fair market value of
$20,000, which will be allocated to an account established for
each director (a "Director's Account"), provided that to the
extent a director has an immediate tax liability due to a
contribution to the Company Trust, such director will receive a
cash payment equal to the amount of such liability and the value
of the shares contributed will be reduced by a like amount.
Shares contributed to a Director's Account may be sold by
the Trustee or a Manager after they have been held in the Company
Trust for one year (or earlier, upon the death of the director or
a change of control of the Company). Any shares of the Common
Stock then held in a Director's Account will be distributed six
months' following the cessation of the Eligible Director's
services as a member of the board. To the extent that a
Director's Account holds assets other than Common Stock, such
assets will generally be distributed immediately following the
time at which the Eligible Director ceases to be a member of the
board (or earlier at the discretion of the Company's chief
executive officer). Notwithstanding the foregoing, dividends on
Common Stock held in a Director's Account will be passed through
to each director as soon as practicable following the date
received by the Company Trust.
Since 1989, the Company has maintained the Non-Employee
Directors Retirement Plan (the "Retirement Plan") for the benefit
of non-employee directors. Under the Retirement Plan, a non-
employee director who completed at least ten years of service
would receive an annual retirement benefit equal to the annual
benefit in effect at the time of such director's retirement.
This benefit would be paid for the longer of 10 years or the
lifetime of the director.
In connection with the adoption of the NEDD Plan, the Board
of Directors terminated the Retirement Plan and the Company made
special contributions to the Company Trust in respect of those
non-employee directors who, at December 31, 1994, had completed
at least seven and one-half years of service (the "Minimum
Service"). (The termination of the Retirement Plan had no effect
on the benefits of directors who had already retired with vested
rights.) For each director who had completed ten years of
service, the Company made a contribution equal to the full
present value of the director's accrued retirement benefits. For
each director who had completed at least the Minimum Service but
not ten years of service, the Company made a contribution equal
to two-thirds of such present value. The Company made no special
contribution for any director with less than the Minimum Service.
6
<PAGE>
Based on the length of their service as directors, the Company
made the following contributions to the Company Trust for the
following directors: Dr. Black, 11,065 shares; Mr. McLean,
10,752 shares and Mr. Grossart, 2,468 shares, plus a cash payment
of $6,005 to satisfy Mr. Grossart's U.K. tax liability on the
shares contributed to the Company Trust. Such shares (or the
value derived therefrom) will be distributed to each such
director following the cessation of his membership on the board.
Each director is entitled to direct the Trustee as to how to vote
the shares of Company Stock held in an account for his or her
benefit.
Item 7. Exhibits
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10.1 Supplemental Trust Deed (providing for settlement
(inter alia) of Loan Note Debt and Adjustment
Debt), dated December 8, 1994 among Sphere Drake
Acquisition (U.K.) Limited, Alexander Stenhouse &
Partners Limited and S.D. Securities Limited.
10.2 Agreement and related documents entered into in
connection with the resolution of certain
indemnity obligations arising out of the Company's
sale of Shand Morahan & Co.: (i) Settlement
Agreement No. 3, dated as of January 27th, 1995
(the "Settlement Agreement") among Alexander &
Alexander Inc., ("A&A Inc."), the Company as
guarantor and Shand/Evanston Group, Inc.
("Shand/Evanston Group"), Evanston Insurance
Company ("EIC") and Markel Corporation ("Markel"),
as guarantor; (ii) Promissory Note of A&A Inc.
guaranteed by the Company in the fixed principal
amount of $14 million payable to EIC.;
(iii) Contingent Promissory Note of A&A Inc.
guaranteed by the Company in the fixed principal
amount of $4 million payable to EIC.; (iv)
Contingent Promissory Note of A&A Inc. guaranteed
by the Company in the fixed principal amount of
$1.75 million payable to EIC.; (v) Contingent
Promissory Note of Shand/Evanston Group guaranteed
by Markel in the fixed principal amount of $1.25
million payable to A&A Inc.; (vi) Letter, dated
January 27, 1995 from Shand/Evanston to A&A Inc.
relating to the indemnification provisions
contained in section 8.1 of the Purchase
Agreement; (vii) Letter, dated January 27, 1995
from Debevoise & Plimpton, counsel to the Company
and A&A Inc. to Greg Nevers, counsel for Markel
relating to paragraph 2 of Appendix B to the
Settlement Agreement.
10.3 Non-Employee Director Deferred Compensation
Program, effective as of January 1, 1995 together
with the Trust Agreement, effective as of January
1, 1995 between the Company and Wachovia Bank of
7
<PAGE>
North Carolina, N.A.
20.1 Press Release, dated February 15, 1995, noticing
fourth quarter and full year financial results of
the Company.
20.2 Press Release, dated December 9, 1994, noticing
the completion of the Sphere Drake transaction.
20.3 Press Release, dated January 30, 1995, noticing
settlement with the Shand/Evanston Group, Inc.
20.4 Press Release, dated January 17, 1995, noticing
the sale of the Company's minority interest in
Noble Grossart Holdings Limited.
20.5 Press Release, dated January 16, 1995, noticing
the agreement to sell Alexsis, the Company's third
party administrator subsidiary.
8
<PAGE>
20.6 Press Release, dated February 28, 1995, noticing
completion of the sale of Alexsis.
20.7 Press Release, dated January 4, 1995, noticing the
election of E. Gerald Corrigan and Ronald A. Iles
to the board of directors of the Company.
9
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned
hereunto duly authorized.
ALEXANDER & ALEXANDER SERVICES INC.
By: /s/ Albert A. Skwiertz, Jr.
------------------------------------
Albert A. Skwiertz, Jr.
Vice President &
General Counsel
Dated: March 15, 1995
10
<PAGE>
Exhibit Index
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Exhibit No. Description
----------- -----------
Page
----
10.1 Supplemental Trust Deed (providing
for settlement (inter alia) of Loan
Note Debt and Adjustment Debt),
dated December 8, 1994 among Sphere
Drake Acquisition (U.K.) Limited,
Alexander Stenhouse & Partners
Limited and S.D. Securities
Limited.
10.2 Agreement and related documents
entered into in connection with the
resolution of certain indemnity
obligations arising out of the
Company's sale of Shand Morahan &
Co.: (i) Settlement Agreement No.
3, dated as of January 27th, 1995
(the "Settlement Agreement") among
Alexander & Alexander Inc., ("A&A
Inc."), the Company as guarantor
and the Shand/Evanston Group, Inc.
("Shand/Evanston Group"), Evanston
Insurance Company ("EIC") and
Markel Corporation ("Markel"), as
guarantor; (ii) Promissory Note of
A&A Inc. guaranteed by the Company
in the fixed principal amount of
$14 million payable to EIC.;
(iii) Contingent Promissory Note of
A&A Inc. guaranteed by the Company
in the fixed principal amount of $4
million payable to EIC.; (iv)
Contingent Promissory Note of A&A
Inc. guaranteed by the Company in
the fixed principal amount of $1.75
million payable to EIC.; (v)
Contingent Promissory Note of
Shand/Evanston Group guaranteed by
Markel in the fixed principal
amount of $1.25 million payable to
A&A Inc.; (vi) Letter, dated
January 27, 1995 from
Shand/Evanston to A&A Inc. relating
to the indemnification provisions
contained in section 8.1 of the
Purchase Agreement; (vii) Letter,
dated January 27, 1995 from
Debevoise & Plimpton, counsel to
the
11
<PAGE>
Company and A&A Inc. to Greg Nevers, counsel
for Markel relating to paragraph 2 of
Appendix B to the Settlement Agreement.
10.3 Non-Employee Director Deferred
Compensation Program, effective as
of January 1, 1995 together with
the Trust Agreement, effective as
of January 1, 1995 between the
Company and Wachovia Bank of North
Carolina, N.A.
20.1 Press Release, dated February 15,
1995, noticing fourth quarter and
full year financial results of the
Company.
20.2 Press Release, dated December 9,
1994, noticing the completion of
the Sphere Drake transaction.
20.3 Press Release, dated January 30,
1995, noticing settlement with the
Shand/Evanston Group, Inc.
20.4 Press Release, dated January 17,
1995, noticing the sale of the
Company's minority interest in
Noble Grossart Holdings Limited.
20.5 Press Release, dated January 16,
1995, noticing the agreement to
sell Alexsis, the Company's third
party administrator subsidiary.
20.6 Press Release, dated February 28,
1995, noticing completion of the
sale of Alexsis.
20.7 Press Release, dated January 4,
1995, noticing the election of E.
Gerald Corrigan and Ronald A. Iles
to the board of directors of the
Company.
12
EXHIBIT 10.1
DATED 8 DECEMBER (handwritten) 1994
(1) SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED
(2) ALEXANDER STENHOUSE & PARTNERS LIMITED
(3) S.D. SECURITIES LIMITED
____________________________________________________
SUPPLEMENTAL TRUST DEED
(providing for settlement (inter alia) of
Loan Note Debt
and
Adjustment Debt)
____________________________________________________
<PAGE>
THIS DEED is made the 8 December (handwritten) 1994
BETWEEN:
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(1) SPHERE DRAKE ACQUISITIONS (U.K.) LIMITED incorporated in
----------------------------------------
England (No. 2136565) whose registered office is at 52
Leadenhall Street, London EC3A 2JB
(2) ALEXANDER STENHOUSE & PARTNERS LIMITED incorporated in
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Scotland whose registered office is at 145 St. Vincent
Street, Glasgow, Scotland
(3) S.D. SECURITIES LIMITED incorporated in Guernsey whose
-----------------------
registered office is at 7 New Street, St. Peter's Port,
Guernsey
RECITALS
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A. Expressions defined in or by reference to clause 1
("Definitions and Interpretations") will bear the same
meaning when used in these Recitals.
B. S.D. Securities holds upon the trusts of the Security Trust
Deed:
(a) the Adjustment Rights of SDA under the Share Purchase
Agreement;
(b) the Senior Note and the Junior Note.
C. AS&P is beneficially entitled to the Loan Note Debt subject
to the provisions of Schedule 1 of the Security Trust Deed.
<PAGE>
2
D. SDA is beneficially entitled to the Adjustment Rights
subject to the provisions of Schedule 1 of the Security
Trust Deed.
E. SDA is entitled to prepay the Notes in accordance with their
terms.
F. This Deed provides for (i) determination of the Adjustment
Debt (ii) the Notes and the Adjustment Debt to be discharged
at Completion subject to abatement for early payment and
(iii) the discharge of the obligations of S.D. Securities as
Trustee.
NOW IT IS AGREED as follows:
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I. DEFINITIONS AND INTERPRETATION
------------------------------
1.1 In this Deed unless the context otherwise requires:
(a) "AS&P" means Alexander Stenhouse &
Partners Limited
"Cash Sum" means B.P.7,031,450
"Completion" means the date of this Deed
"SDA" means Sphere Drake
Acquisitions (U.K.) Limited
"SD Securities" means S.D. Securities
Limited
the "Security Trust Deed" means the Deed made in
Guernsey on 30th December
1987 between SDA and SD
Securities
(b) words and expressions defined in the Security Trust
Deed will bear the same meaning including without
limitation:
"the Adjustment Debt"
"the Adjustment Rights"
"Adjustment Schedules"
"the Assigned Rights"
"Final Adjustment Debt"
"Junior Note"
"Loan Note Debt"
"the Greater Debt"
<PAGE>
3
"the Lower Debt"
"the Net Amount"
"the Notes"
"Priority Creditor"
"Priority Debt"
"Senior Note"
"Trustee"
"the Trusts"
(c) the term "Share Purchase Agreement" shall mean that
agreement, as defined in the Security Trust Deed, as
amended and currently in force.
(d) the term "Reinsurance Recoverable" will bear the
meaning ascribed in the Share Purchase Agreement.
1.2 The provisions of clause 1(3) of the Security Trust Deed
will apply mutatis mutandis to this Deed.
2. ADJUSTMENT RIGHTS: SETTLEMENT
-----------------------------
2.1 But for the provisions of this Deed, the monies owed by AS&P
to the Trustee under the Adjustment Rights would fall to be
ascertained by reference to Adjustment Schedules prepared as
of the Final Adjustment Date, namely 31st December 1994, in
accordance with the Share Purchase Agreement and to be
settled at a closing following the date on which such
Adjustment Schedules become final and binding.
2.2 The parties do by this Deed agree by way of compromise and
upon the terms and conditions of this Deed (which are not
severable) that:
(a) the Final Adjustment Debt shall be determined in
accordance with paragraph (b) and discharged at
Completion in accordance with clause 4;
(b) The Adjustment Debt shall be determined in an amount of
B.P.46,945,980 of which amount B.P.12,200,000 is agreed
to be interest accrued pursuant to Section 7 of the Share
Purchase Agreement and now to be paid by AS&P.
2.3 Each of SDA and AS&P acknowledges:
(a) that in agreeing to this compromise it relies on its
own judgment of the amounts which might otherwise be
payable under the Adjustment Rights and that:
<PAGE>
4
(i) it does not rely on any warranty, representation
or undertaking, express or implied, on the part of
the other, whenever made; and
(ii) it waives all duty of disclosure, express or
implied on the part of the other
to the intent that their agreement in this Deed shall
be final and binding on both of them and neither shall
have the right to avoid the same or make any further
claim in respect of the Adjustment Rights on any
grounds whatsoever; and
(b) that the Trustee enters into this Deed at the request
of both SDA and AS&P which each covenant with the
Trustee not to challenge on any ground whatsoever the
foregoing agreement or the fact that settlement at
Completion pursuant to this Deed will fully discharge
the Adjustment Rights and the obligations of the
Trustee for collection of the Final Adjustment Debt.
3. SETTLEMENT: LOAN NOTES
----------------------
3.1 The monies which would be owing by SDA under the Senior
Note and the Junior Note at maturity would respectively
be B.P.27,026,066 and B.P.30,436,289 payable on 30th June
1995 but SDA is entitled to prepay the same.
3.2 The parties do by this Deed agree that the Senior Note
and the Junior Note shall be pre-paid at Completion and
shall in accordance with their terms be discounted for
early payment so that the amounts required to be paid
on that date are respectively B.P.25,534,832 and
B.P.28,442,598 (in aggregates B.P.53,977,430) which payment
will be in full settlement and discharge of the Loan
Notes Debt and all rights of the holder in respect of
the Notes.
4. PROCEDURE
---------
4.1 At Completion and pursuant to the Security Trust Deed:
(a) the Final Adjustment Debt, being the Lower Debt, shall
be treated for all purposes as if it had been paid to
the Trustee and AS&P shall be released and discharged
from such debt in full;
(b) the Loan Note Debt, being the Greater Debt, shall be
treated for all purposes as if it had been paid to the
Trustees to the extent of the Lower Debt;
<PAGE>
5
(c) SDA shall pay the Cash Sum being the Net Amount.
4.2 The Trustee hereby irrevocably directs SDA (and SDA hereby
agrees) to pay the Cash Sum (the amount of which is the Net
Amount) at Completion in readily available funds to, or to
the written order of, AS&P and the Trustee and AS&P hereby
agree that the written receipt of (Mr. John Stanton) as a
director of AS&P shall be a complete discharge to SDA and
the Trustee for the amount stated on that receipt.
4.3 Upon payment being made under clause 4.2 of the full Cash
Sum, the Trustee shall be fully discharged of the Trusts.
SDA will deliver to the Trustee as soon as practicable a
copy of the receipt for the Cash Sum.
4.4 AS&P shall deliver to SDA a certificate under section 352
Income & Corporate Taxes Act 1988 showing the payment of a
gross amount of interest of B.P.12,200,000, an amount of tax
deducted therefrom equal to 25% of that gross amount and an
actual amount of interest paid of B.P.9,150,000.
5. CURRENCY OF SETTLEMENT
----------------------
The Net Amount is calculated in sterling. The parties agree
that settlement of the Cash Sum by SDA to AS&P under this
Deed will be made in the currency of the United States.
6. OTHER TERMS OF COMPROMISE
-------------------------
6.1 AS&P shall at Completion pay SDA the sum of B.P.880,000.
6.2 AS&P hereby waives as a fundamental term of the compromise
effected by this Deed:
(i) all outstanding and further rights under Section 7 of
the Share Purchase Agreement including without
limitation all right to or interest in the Reinsurance
Recoverables;
(ii) all outstanding and further rights under section 8 of
the Share Purchase Agreement.
and agrees that the compromise effected by this Deed is in
full and final settlement of all obligations and liabilities
of SDA and Sphere Drake Holdings Public Limited Company
under the contractual provisions described in Schedule 1.
<PAGE>
6
6.3 SDA agrees that the compromise effected by this Deed is in
full and final settlement of all obligations and liabilities
of AS&P and Alexander & Alexander Services Inc. and
Alexander & Alexander Europe plc (now entitled Alexander &
Alexander Services UK plc) (handwritten) under the
contractual provisions described in Schedule 2.
6.4 The provisions of clause 2.3 which relates to the settlement
by way of compromise of the Adjustment Rights and the
Adjustment Debt will apply mutatis mutandis to the rights
and obligations referred to in this clause 6.
6.5 The provisions of the Share Purchase Agreement which are not
expressly compromised and discharged by this Deed will
continue in force.
7. GENERAL
-------
7.1 SDA and AS&P confirm that there is no Priority Creditor or
Priority Debt.
7.2 SDA and AS&P agree to procure that the Trustee be wound up
following termination of the Trusts.
7.2 AS&P and SDA will pay their own costs in connection with the
preparation and execution of this Deed. Each will pay one-
half the Trustee's costs including those incurred in
connection with this Deed and the winding up of the Trustee.
7.3 This Deed is supplemental both to the Security Trust Deed
and the Share Purchase Agreement and those of their
provisions as are applicable including as to notices will
apply to this Deed (and in the event of conflict the
provisions of the Security Trust Deed will prevail).
7.4 This Deed may be executed in more than one part or
counterparts and it is not necessary that any part be
executed by all the parties provided that each has executed
a part or counterpart.
7.5 This Deed will be governed by the law of England.
IN WITNESS whereof the parties have executed the documents as a
Deed on the above date.
<PAGE>
7
SCHEDULE 1
----------
Section 7 and Section 8 of the Share Purchase Agreement
Section 10.2 of the Share Purchase Agreement other than the
provisions relating Section 4.19 of the Share Purchase Agreement.
(handwritten)
The Deed of Tax Indemnity dated 30th December 1987 and made
between Alexander Stenhouse & Partners Limited, Sphere Drake
Insurance Group PLC and Sphere Drake Acquisitions (U.K.) Limited
SCHEDULE 2
----------
The provisions referred to in Schedule 1 other than Section 10.2
of the Share Purchase Agreement. (handwritten)
Section 10.1 of the Share Purchase Agreement other than the
provisions of paragraph (iii) of Section 10.1.
EXECUTED as a DEED by
Sphere Drake Acquisitions (U.K.) Limited
/s/ N.L. Cook /s/ P.K. Walsh
------------------------------------- -------------------------
Director/Authorized Officer Secretary
SETTLEMENT AGREEMENT NO. 3
--------------------------
Recitals
--------
A. Alexander & Alexander Inc. ("A&A") and Shand/
Evanston Group, Inc., successor to F-M Acquisition Corp.
("S/E"), are parties to an arbitration proceeding before the
American Arbitration Association, Index No. 13-195-609-94
(the "Proceeding").
B. The Proceeding involves certain claims by S/E
for indemnification under Article 8 of the Stock Purchase
Agreement by and between F-M Acquisition Corp. and A&A dated
as of October 7, 1987, as amended as of February 15, 1989
(the "Purchase Agreement").
C. The parties wish to settle certain disputes
between them concerning the matters raised by S/E's Demand
for Arbitration in the Proceeding, as well as the related
matters referred to herein, and desire to restructure cer-
tain of their rights and obligations under the Purchase
Agreement to make their interests more consistent.
D. In executing this Settlement Agreement, S/E is
acting on its own behalf and on behalf of all other Buyer
Affiliates, and is authorized to do so.
E. Alexander & Alexander Services Inc. ("A&A
Services") is a signatory to this Settlement Agreement sole-
<PAGE>
ly for purposes of the guaranty given by it in paragraph 6
hereof.
F. Markel Corporation ("Markel") is a signatory
to this Settlement Agreement solely for purposes of the
guaranty given by it in paragraph 6 hereof.
Agreement
---------
1. Capitalized terms used in this Settlement
Agreement and not otherwise defined shall have the meaning
set forth in the Purchase Agreement, unless the context
clearly requires otherwise.
2. Except as expressly provided herein, this
Settlement Agreement shall not alter or amend the terms or
provisions of the Purchase Agreement. Nothing herein af-
fects in any way (i) the indemnities provided in Sections
-
8.1(b) and 8.1(c)(i) of the Purchase Agreement, or (ii) the
--
Settlement Agreement, dated as of February 11, 1993, or
Settlement Agreement No. 2. dated as of August 1994.
3. The terms and obligations of the "Agreement
Concerning Interim Costs," dated October 31, 1994, between
the parties shall continue in effect until the date of this
Settlement Agreement and thereafter shall terminate except
for obligations that have arisen through the date hereof.
4. Upon execution of this Settlement Agreement
and in consideration for the mutual promises contained here-
2
<PAGE>
in, A&A shall pay to EIC $14 million by wire transfer of
immediately available funds and deliver to EIC its neg-
otiable promissory note in the principal amount of $14 mil-
lion in the form of Appendix A hereto (the "Note").
5. S/E releases A&A from all present and future
obligations and liabilities arising under or relating to
Section 8.1(c)(ii) of the Purchase Agreement as if Sec-
tion 8.1(c)(ii) were deleted in its entirety from the Pur-
chase Agreement except as expressly stated below in this
paragraph 5:
(a) A&A shall be obligated to indemnify and
hold harmless the Buyer Affiliates for any Loss
(as defined below). In the event that a judgment
or award rendered in a Reinsurer Action (as de-
fined below), if final, would result in a Loss,
A&A shall also indemnify and hold harmless the
Buyer Affiliates for any damages, losses, liabili-
ties, fees, costs or expenses (including reason-
able fees and expenses of outside counsel, but
excluding the time of employees of Buyer Af-
filiates), if any, incurred in connection with
appeal, if any, of such judgment or award.
(b) For purposes of this paragraph 5,
3
<PAGE>
(1) "Reinsurer Action" shall mean any ac-
tion, suit, proceeding or arbitration,
by or on behalf of a reinsurer, involv-
ing a reinsurance contract, which
(i) asserts a claim or counterclaim that
-
arises out of or relates to the actual
or alleged occurrence prior to the Clos-
ing Date of any error or omission in
connection with the professional ser-
vices provided by SMCO, ESI, EIC or ICE,
and, in addition, (ii) has resulted in
--
an award or judgment that exceeds the
Recoverables (as defined below). Where
the judgment or award in a Reinsurer
Action is against a ceding company other
than Mutual Fire, General Accident or a
Buyer Affiliate, and that ceding company
then brings an action, suit, proceeding
or arbitration against any Buyer Affil-
iate based on that judgment or award,
the action, suit, proceeding or arbit-
ration by the ceding company against the
Buyer Affiliate shall constitute a Rein-
surer Action for purposes of this Set-
4
<PAGE>
tlement Agreement if the action, suit,
proceeding or arbitration by the ceding
company results in an award or judgment
that exceeds the Recoverables (as de-
fined below). "Reinsurer Action" shall
not include any claims asserted by or on
behalf of the reinsurer involving rein-
surance ceded to the reinsurer by or on
behalf of General Accident or Mutual
Fire; provided, that this sentence shall
--------
not in any way affect the rights and
obligations of the parties with respect
to Mutual Fire and General Accident
under Sections 8.1(b) and 8.1(c)(i) of
the Purchase Agreement or paragraph 5(e)
of this Agreement.
(2) "Loss" shall mean the amount, if any, by
which the payments that a Buyer Af-
filiate becomes obligated to pay pur-
suant to a final judgment or award in a
Reinsurer Action exceeds the Recover-
ables. For purposes of the foregoing
formula, the amount by which a judgment
or award cancels, nullifies, reduces or
5
<PAGE>
otherwise denies a right to collect Re-
coverables, in whole or in part, shall
constitute "payments that a Buyer Af-
filiate becomes obligated to pay."
(3) (i) "Recoverables" with respect to the
reinsurance contract(s) that are the
subject of a Reinsurer Action involving
a Buyer Affiliate as the ceding company
shall mean the sum of (A) paid claims,
-
case reserves, IBNR (excluding unal-
located IBNR), and loss adjustment ex-
penses reported by SMCO to EIC and ICE,
or maintained by EIC or ICE, whichever
is greater, in the ordinary course of
business, and calculated in a manner
consistent with the method of calcul-
ation regularly used by SMCO for unaf-
filiated issuing companies (the recover-
ables enumerated in this clause "A"
being hereinafter referred to as the
"Basic Recoverables"), and (B) a portion
-
of undiscounted "Unallocated IBNR" cal-
culated as follows: "Unallocated IBNR,"
if any, shall be allocated to, and be-
6
<PAGE>
come part of the Recoverables for pur-
poses of this paragraph 5 in the same
proportion to Basic Recoverables due
from such reinsurer as the average pro-
portion of unallocated IBNR was to Basic
Recoverables due from the respective
reinsurers in the three commutations
most recently completed prior to the Re-
coverables Determination Date (as de-
fined in subparagraph (iii) below) for
---
the same or similar types of business.
(ii) "Recoverables" with respect to the
reinsurance contract(s) that are the
subject of a Reinsurer Action involving
a ceding company other than a Buyer
Affiliate shall mean the sum of (A) paid
-
claims, case reserves, IBNR (excluding
unallocated IBNR), and loss adjustment
expenses reported by SMCO to such ceding
company in the ordinary course of bus-
iness, calculated in a manner consistent
with the method of calculation regularly
used by SMCO for unaffiliated issuing
companies (the recoverables enumerated
7
<PAGE>
in this clause "A" being hereinafter
referred to as the "Basic Recover-
ables"), and (B) a portion of undis-
-
counted "Unallocated IBNR" calculated as
follows: "Unallocated IBNR," if any,
shall be allocated to, and become part
of the Recoverables for purposes of this
paragraph 5 in the same proportion to
Basic Recoverables due from such rein-
surer as the average proportion of unal-
located IBNR was to Basic Recoverables
due from the respective reinsurers in
the three commutations most recently
completed by any Buyer Affiliate prior
to the Recoverables Determination Date
(as defined in subparagraph III below)
for the same or similar types of bus-
iness.
(iii) The determination of the amount
of Recoverables shall be made as of the
end of the calendar quarter next preced-
ing the judgment or award in the Rein-
surer Action by or on behalf of the
reinsurer (the "Recoverables Deter-
8
<PAGE>
mination Date"). "Loss" shall not be
affected by changes in Recoverables or
recoverables after the Recoverables
Determination Date.
(c) A&A shall be obligated to indemnify and
hold harmless the Buyer Affiliates for 50% of all
outside counsel fees and other expenses reasonably
incurred by any Buyer Affiliate (but excluding the
time of employees of any Buyer Affiliate) in de-
fending against any Reinsurer Action, such fees
and expenses to be paid by A&A within 20 days
after A&A has received a copy of the judgment or
award; provided, however, that in an E&O Action
--------
(as defined below) A&A shall be required to pay
50% of such fees and expenses on a current, on-
going basis if either (i) the reinsurer asserts a
-
claim or counterclaim for rescission, in whole, of
one or more reinsurance contracts, and $100,000 in
fees and expenses have already been spent by any
of the Buyer Affiliates in defending against or
negotiating the settlement of the action or pro-
ceeding, or (ii) the reinsurer asserts a claim or
--
counterclaim for rescission, in part, of one or
more reinsurance contracts, and $200,000 in fees
9
<PAGE>
and expenses have already been spent by any of the
Buyer Affiliates in defending against or negoti-
ating the settlement of the action or proceeding.
Neither S/E nor A&A shall have any duty to commute
or settle a Reinsurer Action or an E&O Action;
provided, that this sentence shall not in any way
--------
affect the rights and obligations of the parties
with respect to Mutual Fire and General Accident
under Sections 8.1(b) and 8.1(c)(i) of the Pur-
chase Agreement or paragraph 5(e) of this Agree-
ment.
(d) (1) S/E, directly or by one or more
other Buyer Affiliates, shall have the duty to
undertake the defense of any action, suit, pro-
ceeding or arbitration, by or on behalf of a rein-
surer against any Buyer Affiliate, which asserts a
claim or counterclaim that arises out of or re-
lates to the actual or alleged occurrence prior to
the Closing Date of any error or omission in con-
nection with the professional services provided by
SMCO, ESI, EIC or ICE (an "E&O Action").
(2) S/E shall give A&A prompt written notice
of any claim or any assertion of liability, or any
request or demand by a third party, that S/E rea-
10
<PAGE>
sonably believes might give rise to an E&O Action.
Such notice shall comply with the provisions of
Section 13.1 of the Purchase Agreement, as amended
by paragraph 14 of this Settlement Agreement.
(3) A&A shall have the right (i) to be kept
-
fully informed as to any E&O Action, at all stages
thereof, and (ii) to be represented by counsel, at
--
its own expense, and to participate in any E&O
Action; provided, that neither A&A nor its counsel
--------
shall participate in any E&O Action without the
prior written consent of S/E, which consent shall
not be unreasonably withheld or delayed.
(4) A&A shall have no indemnification obli-
gation with respect to any E&O Action that any
Buyer Affiliate settles, or any contract obl-
igations any Buyer Affiliate commutes, in whole or
in part, for itself or on behalf of another party,
unless A&A has expressly consented in writing to
such settlement or commutation and to any inde-
mnification obligation in connection therewith,
which consent shall be in A&A's sole and unlimited
discretion; provided, that this sentence shall not
--------
in any way affect the rights and obligations of
the parties with respect to Mutual Fire and Gen-
11
<PAGE>
eral Accident under Sections 8.1(b) and 8.1(c)(i)
of the Purchase Agreement or paragraph 5(e) of
this Agreement.
(5) The parties agree to render to each
other such assistance as they may reasonably re-
quire of each other in order to facilitate the
proper and adequate defense of any E&O Action.
(6) Sections 8.3(a), -(b), -(c) and -(d) of
the Purchase Agreement shall not apply to the
obligations and liabilities of the parties under
paragraphs 5(a)-(d) of this Settlement Agreement
No. 3.
(e) A&A's indemnification obligations under
Section 8.1(c)(ii) of the Purchase Agreement shall
remain in effect with respect to matters involving
or relating to Mutual Fire and/or General Ac-
cident, except that A&A shall be obligated to
indemnify and hold harmless the Buyer Affiliates
for Litigation Expenses (as defined below) in
connection with matters involving or relating to
General Accident as follows:
1. In any E&O Action in which any of
the Buyer Affiliates incur expenses on behalf
of both General Accident and any Buyer Af-
12
<PAGE>
filiates, 50% of the portion of Litigation
Expenses incurred in the E&O Action on behalf
of General Accident and the Buyer Affiliates,
and
2. During that part of any E&O Action
in which any of the Buyer Affiliates incur
expenses on behalf of General Accident but
not on behalf of any Buyer Affiliate, 100% of
the portion of Litigation Expenses incurred
on behalf of General Accident.
"Litigation Expenses," as used in this paragraph, shall mean
outside counsel fees and other expenses reasonably incurred
by any Buyer Affiliate (but excluding the time of employees
of any Buyer Affiliate) in connection with a Legal Action.
6. (a) A&A Services hereby guarantees the obli-
gations of A&A under this Agreement, the Note defined in
paragraph 4 above, and the two A&A contingent promissory
notes referred to in paragraph 10 below.
(b) Markel hereby guarantees that Buyer Af-
filiates will pay or absorb, and will cause them to pay or
absorb, up to $28 million of (i) Losses on Commutations (as
-
defined below) and/or (ii) damages, losses, liabilities,
--
fees, costs or expenses (including reasonable fees and ex-
penses of outside counsel but excluding the time of employ-
13
<PAGE>
ees of the Buyer Affiliates) which would have been subject
to indemnification by A&A under Section 8.1(c)(ii) of the
Purchase Agreement but for the terms of paragraph 5 of this
Settlement Agreement.
(1) For purposes of this paragraph 6(b), Losses
on Commutations shall mean (i) $7,500,000, representing
-
approximately one half of the commutation shortfall involv-
ing the commutation, dated June 30, 1994, with Philadelphia
Re, plus (ii) one third of all Commutation Shortfalls occur-
--
ring as a result of commutation agreements entered into
subsequent to the date of this Settlement Agreement between
any Buyer Affiliate and any reinsurer regarding insurance
ceded to the reinsurer prior to the Closing Date. The term
"Commutation Shortfall" in the prior sentence shall mean the
difference between (x) the amount of the commutation payment
-
required under the commutation agreement, and (y) the amount
-
of Recoverables for that reinsurers as defined above in
paragraph 5(b)(1).
(2) Notwithstanding anything in this Settlement
Agreement to the contrary, nothing in this paragraph 6(b)
shall affect the calculation of the amount of Loss, as de-
fined in paragraph 5 above, or A&A's responsibility to pay
such Loss.
14
<PAGE>
(3) In the event that (i) A&A pays any portion of
-
the two contingent notes described in paragraphs 1 and 2 of
Appendix B to this Settlement Agreement, and/or (ii) the
--
note described in paragraph 2 is exchanged for a new non-
contingent promissory note, the amount of Markel's guarantee
under this paragraph shall be increased by the amount of the
contingent note(s) so paid or exchanged.
7. If after the date of this Settlement Agreement
S/E or any Buyer Affiliate commutes or settles, or ne-
gotiates the commutation or settlement of, the reinsurance
contract obligations of any reinsurer with respect to con-
tract years prior to 1988, S/E or the Buyer Affiliate shall
make reasonable best efforts to obtain from the reinsurer a
release running in favor of SMCO, SMCO's present and former
shareholders, and the issuing carrier with respect to claims
arising out of or relating to the reinsurance contract or
any business written under the contract.
8. (a) S/E represents and warrants to A&A that
S/E has made a reasonable inquiry to identify all reinsurers
that (i) have made or threatened to assert claims concerning
-
an actual or alleged error or omission in connection with
the professional services provided by SMCO, ESI, EIC or ICE
prior to the Closing Date, or (ii) have requested audits
--
since January 1, 1992, and has furnished A&A with a letter,
15
<PAGE>
dated December 22, 1994, which, to the best of its know-
ledge, lists all reinsurers so identified other than those
with whom the Buyer Affiliates have heretofore commuted all
reinsurance obligations.
(b) A&A represents and warrants to S/E that A&A
has made a reasonable inquiry to identify any reinsurers
that either (i) have made or threatened to assert claims
-
concerning an actual or alleged error or omission in con-
nection with the professional services provided by SMCO,
ESI, EIC or ICE prior to the Closing Date, or (ii) have
--
requested audits since January 1, 1992, and that to the best
of its knowledge A&A has not identified any such reinsurer
not on S/E's list, dated December 22, 1994.
9. To avoid future uncertainty, the parties ac-
knowledge and agree that A&A's indemnification obligations
continue with respect to any claims of reinsurers of bus-
iness ceded by or on behalf of General Accident and/or Mutu-
al Fire arising out of or relating to the actual or alleged
occurrence prior to the Closing Date of any error or omis-
sion in connection with the professional services provided
by SMCO, ESI, EIC or ICE. It is understood that this para-
graph does not expand or limit any rights provided under the
Purchase Agreement.
16
<PAGE>
10. Upon the execution of this Settlement Agree-
ment, and in order to resolve certain additional issues,
A&A, in addition to the Note in the form of Appendix A)
shall deliver to S/E two promissory notes to S/E, and S/E
shall deliver to A&A one contingent promissory note, the
principal amounts of which are stated in Appendix B.
11. (a) A&A and A&A services, on their own be-
half and on behalf of all of their affiliates, forever dis-
charge and release the Buyer Affiliates from any and all
claims, causes of action and proceedings of whatever nature,
whether now existing or hereafter arising, that A&A or A&A
Services may have relating to Section 11.4 of the Purchase
Agreement and the related letter agreement dated Decem-
ber 29, 1987, including, without limitation, the claim de-
scribed in paragraphs 7-10 of A&A's ANSWER AND COUNTER-
CLAIMS, dated August 5, 1994, in the Proceeding.
(b) A&A and A&A Services, on their own behalf and
on behalf of all of their affiliates, forever discharge and
release the Buyer Affiliates from any and all claims, causes
of action and proceedings of whatever nature, whether now
existing or hereafter arising, that A&A or A&A Services may
have relating to Section 4.13 of the Purchase Agreement and
the Tax Allocation Agreement, including, without limitation,
17
<PAGE>
the claim described in paragraphs 11-13 of A&A's ANSWER AND
COUNTERCLAIMS, dated August 5, 1994, in the Proceeding.
12. This Settlement Agreement shall be construed
under New York law and may not be altered or waived by oral
agreement. Any dispute arising under this Settlement Agree-
ment shall be subject to arbitration pursuant to Sec-
tion 13.9 of the Purchase Agreement.
13. Except insofar as disclosure may be required
by law or by the rules of any stock exchange or quotation
system on which the shares of a party or its affiliate are
listed or quoted, the parties agree to use their reasonable
best efforts to maintain the confidentiality of the terms
and conditions of this Settlement Agreement and shall con-
sult with each other before issuing any press release or
making any public filing with respect to this Settlement
Agreement.
14. Section 13.1 of the Purchase Agreement is de-
leted in its entirety and is replaced with the following:
13.1 Notices. All notices and other com-
-------
munications hereunder shall be in writing and shall be
deemed given if delivered personally or transmitted by
telex, telecopy (if receipt is confirmed) or mailed by
registered or certified mail (return receipt requested)
to the persons at the following addresses (or at such
other address for a party as shall be specified by like
notice):
18
<PAGE>
a. If to Buyer: Markel Corporation
4551 Cox Road
Glen Allen,
Virginia 23060
Att'n: Steven A. Markel
-----
Telecopy: (804) 527-3810
b. If to Seller: Alexander & Alexander Inc.
1185 Avenue of the Americas
New York, New York 10036
Att'n: Albert A. Skwiertz, Jr.
-----
Telecopy: (212) 444-4696
15. Except as expressly stated in this Settlement
Agreement, this Agreement is not intended to and shall not
confer upon any other person any rights or remedies here-
under or otherwise with respect to the subject matter here-
of.
The parties have executed this Settlement Agree-
ment as of this 27th day of January 1995.
ALEXANDER & ALEXANDER INC.
By /s/ Dan R. Osterhout
---------------------
Title Senior Vice President
---------------------
ALEXANDER & ALEXANDER SERVICES
INC. (solely as guarantor of
the obligations of Alexander
Alexander Inc.)
By /s/ Dan R. Osterhout
---------------------
Title Senior Vice President
---------------------
19
<PAGE>
SHAND/EVANSTON GROUP, INC.
(for itself and on behalf of
all Buyer Affiliates other
than EIC)
By /s/ Steven A. Markel
--------------------
Title Chairman
--------------------
EVANSTON INSURANCE COMPANY
By /s/ Steven A. Markel
--------------------
Title Chairman and Chief
--------------------
Executive Officer
--------------------
MARKEL CORPORATION (solely as
a guarantor as provided in
paragraph 6 of this Agreement)
By /s/ Steven A. Markel
--------------------
Title Vice Chairman
--------------------
20
<PAGE>
PROMISSORY NOTE
$14,000,000
New York, New York January 26, 1995
FOR VALUE RECEIVED, the sufficiency of which is
hereby acknowledged, Alexander & Alexander Inc., a Maryland
corporation ("Maker") hereby unconditionally promises to pay
to the order of Evanston Insurance Company, an Illinois
corporation (the "Company"), or its assigns, the principal
sum of Fourteen Million Dollars ($14,000,000) on January 25,
2000. Maker promises to pay interest on the unpaid prin-
cipal amount of this Note, for each day from the date hereof
until paid, on the 1st day of June and December of each year
commencing June 1, 1995, at a rate per annum equal to 10.6%;
provided that any overdue principal of and, to the extent
--------
permitted by law, overdue interest shall bear interest,
payable on demand, for each day until paid at a rate per
annum equal to 15.6%. Interest payable hereunder shall be
computed on the basis of a year of 365 days (or 366 days in
the year 1996) and shall be paid for the actual number of
days elapsed (including the first day but excluding the last
day).
Maker may prepay this Note in whole or from time
to time in part, without premium or penalty.
Payments shall be made in lawful money of the
United States of America to the Company or its assigns at
such address as the Company or its assigns, as the case may
be, may designate in writing.
If one or more of the following events ("Events of
Default") shall have occurred and be continuing:
(i) Maker shall fail to pay when due any
principal of this Note;
(ii) Maker shall fail to pay any interest on
this Note within five days after the same becomes
due and payable;
(iii) Maker shall fail to pay any other amount
due and Payable hereunder within twenty days after
APPENDIX A
----------
1
<PAGE>
written notice of the default shall have been
given by the holder to the Maker;
(iv) Maker or any Guarantor shall commence a
voluntary action or proceeding seeking liquida-
tion, reorganization or other relief with respect
--------------
to itself or its debts under any bankruptcy, in-
solvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar
official of it or any substantial part of its
property, or shall consent to any such relief or
to the appointment of or taking possession by any
such official in an involuntary action or proceed-
ing commenced against it, or shall make a general
assignment for the benefit of creditors, or shall
fail generally to pay its debts as they become
due, or shall take any corporate action to autho-
rize any of the foregoing;
(v) an involuntary action or proceeding
shall be commenced against Maker or Guarantor
seeking liquidation, reorganization or other re-
lief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of
a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial
part of its property, and such involuntary action
or proceeding shall remain undismissed and un-
stayed for a period of 60 days, or an order for
relief shall be entered against Maker or Guarantor
under the federal bankruptcy laws as now or here-
after in effect; or
(vi) one or more judgments or orders for the
payment of money in excess of $20 million in the
aggregate shall be rendered against Maker or Guar-
antor and if, within 60 days after entry thereof,
such judgment or order shall not have been dis-
charged or execution thereof stayed pending ap-
peal, or within 60 days after the expiration of
any such stay, such judgment or order shall not be
discharged;
then, and in every such event, the holder of this Note may
at any time unless such event is not at such time contin-
uing, at its option, by written notice to Maker, declare
this Note (together with accrued interest thereon) to be
2
<PAGE>
immediately due and payable, whereupon all unpaid principal
and accrued interest under this Note shall become im-
mediately due and payable without presentment, demand, pro-
test or further notice of any kind, all of which are hereby
waived by Maker; provided that upon the occurrence of any of
--------
the Events of Default specified in clause (iv) or (v) above,
without any notice to the Maker or any other act by the
holder, this Note (together with accrued interest thereon)
shall immediately become due and payable without present-
ment, demand, protest or other notice of any all of which
are hereby waived by Maker.
If an Event of Default occurs, Maker shall pay all
out-of-pocket expenses incurred by the Company, including
the reasonable fees and disbursements of its counsel, in
connection with enforcement of the obligations of Maker
under this Note and any collection or other proceedings
resulting therefrom.
This Note is binding on maker and Maker hereby
waives presentment, demand, notice and protest and any de-
fense by reason of an extension of time for payment or other
indulgences, except as otherwise provided herein. Failure
of the holder hereof to assert any right herein shall not be
deemed to be a waiver thereof.
This Note may be transferred, assigned or pledged
in its entirety to a single transferee, assignee or pledgee
by the holder without the consent of Maker and without lim-
itation as to the number of successive single transferees.
Except as provided in the next paragraph, this Note may not
be subdivided or transferred, assigned or pledged to more
than one transferee, assignee or pledgee without the prior
written consent of the Maker. The Company and any trans-
feree, assignee or pledgee shall give written notice to
Maker of any transfer, assignment or pledge made pursuant to
the first sentence of this paragraph.
The Company may subdivide its interest in, and
make partial assignments of, this Note to not more than, at
any one time, eight corporations which are, directly or
indirectly, wholly-owned subsidiaries of Market Corporation,
a Virginia corporation; provided that the Company has been
--------
irrevocably appointed the agent by each such assignee for
the purpose of taking any action on behalf of such assignee
that the Company would otherwise be empowered to take on its
own behalf in the absence of any such assignment. In no
event shall Maker be required to deal with any holder of an
interest in this Note other than the Company unless and
3
<PAGE>
until there has been a transfer of this Note in accordance
with the preceding paragraph or following sentence. If the
Company's interest in this Note has been subdivided or a
partial assignment of this Note has been made as permitted
by the first sentence of this paragraph, the assigned in-
terests shall have been restored to the Company prior to any
transfer of this Note to a transferee which is not a wholly-
owned subsidiary of the Company.
Maker or Guarantor may not set off from any
amounts due under this Note any amounts due Maker or Guar-
antor from the Company or its assignees or pledgees.
Any legal action or proceeding with respect to
this Note or any document related hereto may be brought in
the courts of the Commonwealth of Virginia in Richmond,
Virginia or of the United States of America for the Eastern
District of Virginia, and by execution and delivery of this
Note and the related Guaranty Maker and Guarantor hereby
irrevocably accept for themselves and in respect of their
property, generally and unconditionally, the jurisdiction of
the aforesaid courts. Maker and Guarantor hereby irrev-
ocably and unconditionally waive any objection, including
without limitation, any objection to the laying of venue or
based on the grounds of the forum non conveniens which it
----- --- ----------
now or may have to the bringing of any action or proceeding
in such respective jurisdictions. MAKER AND GUARANTOR HERE-
BY IRREVOCABLY AND UNCONDITIONALLY WAIVE ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING
OUT OF OR RELATED TO THIS NOTE OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY.
4
<PAGE>
This Note shall be governed by and construed and
enforced in accordance with the laws of the State of New
York, without giving effect to principles of conflicts of
law thereof.
Alexander & Alexander Inc.
By:_______________________
Address:
1211 Avenue of the Americas
New York, New York 10036
Attention:
GUARANTY
The undersigned, Alexander & Alexander Services
Inc., a Maryland corporation, and the holder of all of the
outstanding capital stock of the Maker of the within Note,
hereby irrevocably and unconditionally guarantees to Evan-
ston Insurance Company, for its benefit and for the benefit
of its successors and its Permitted transferees, assigns and
pledgees, the full and punctual payment when due (whether at
stated maturity, by acceleration or otherwise) of all
amounts now or hereafter payable by Maker under the within
Note ("Obligations"). If Maker shall fail to pay any Obli-
gation when due in accordance with its terms (whether at
stated maturity, by acceleration or otherwise), the under-
signed Guarantor shall forthwith on demand of the holder pay
the holder the amount of such Obligation. Notwithstanding
the foregoing, the obligations of the Guarantor hereunder
shall not exceed those of the Maker of the within Note. The
Guarantor further agrees to pay any and all expenses which
may be paid or incurred by the holder of the within Note in
5
<PAGE>
collecting any or all of the Obligations and/or enforcing
any rights under this Guaranty or under the Obligations.
Alexander & Alexander Services
Inc,
By:___________________________
6
<PAGE>
Description of Contingent Notes
-------------------------------
1. Contingent promissory note of Alexander & Alexander
Inc., guaranteed by Alexander & Alexander services
Inc., in the fixed principal amount of $4,000,000,
payable to Shand/ Evanston Group, Inc. if, within five
years following the date of the note, certain results
are obtained in pending disputes with third parties.
Interest is not payable on this note unless and until
the condition for payment is fulfilled, and then at the
rate of 15.6% per annum.
2. Contingent promissory note of Alexander & Alexander
Inc., guaranteed by Alexander & Alexander Services
Inc., in the fixed principal amount of $1,750,000,
payable to Shand/ Evanston Group, Inc. if, within five
years following the date of the note, certain results
are obtained in pending disputes with third parties.
Interest is not payable on this note unless and until
the condition for payment is fulfilled, and then at the
rate of 15.6% per annum.
3. Contingent promissory note of Shand/Evanston Group,
Inc., guaranteed by Markel Corporation, in the fixed
principal amount of $1,250,000, payable to Alexander &
Alexander Inc. if, within five years following the date
of the note, certain results are obtained in pending
disputes with third parties. Interest is not payable on
this note unless and until the condition for payment is
fulfilled, and then at the rate of 15.6% per annum.
Appendix B
----------
<PAGE>
PROMISSORY NOTE
$14,000,000
New York, New York January 26, 1995
FOR VALUE RECEIVED, the sufficiency of which is
hereby acknowledged, Alexander & Alexander Inc., a Maryland
corporation ("Maker") hereby unconditionally promises to pay
to the order of Evanston Insurance Company, an Illinois
corporation (the "Company"), or its assigns, the principal
sum of Fourteen Million Dollars ($14,000,000) on January
25,2000. Maker promises to pay interest on the unpaid prin-
cipal amount of this Note, for each day from the date hereof
until paid, on the 1 st day of June and December of each
year commencing June 1, 1995, at a rate per annum equal to
10.6%; provided that any overdue principal of and, to the
--------
extent permitted by law, overdue interest shall bear in-
terest, payable on demand, for each day until paid at a rate
per annum equal to 15.6%. Interest payable hereunder shall
be computed on the basis of a year of 365 days (or 366 days
in the year 1996) and shall be paid for the actual number of
days elapsed (including the first day but excluding the last
day).
Maker may prepay this Note in whole or from time
to time in part, without premium or penalty.
Payments shall be made in lawful money of the
United States of America to the Company or its assigns at
such address as the Company or its assigns, as the case may
be, may designate in writing.
If one or more of the following events ("Events of
Default") shall have occurred and be continuing:
(i) Maker shall fail to pay when due any
principal of this Note;
(ii) Maker shall fail to pay any interest on
this Note within five days after the same becomes
due and payable;
(iii) Maker shall fail to pay any other amount
due and payable hereunder within twenty days after
<PAGE>
written notice of the default shall have been
given by the holder to the Maker;
(iv) Maker or any Guarantor shall commence a
voluntary action or proceeding seeking liquid-
ation, reorganization or other relief with respect
to itself or its debts under any bankruptcy, in-
solvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar
official of it or any substantial part of its
property, or shall consent to any such relief or
to the appointment of or taking possession by any
such official in an involuntary action or proceed-
ing commenced against it, or shall make a general
assignment for the benefit of creditors, or shall
fail generally to pay its debts as they become
due, or shall take any corporate action to
authorize any of the foregoing;
(v) an involuntary action or proceeding
shall be commenced against Maker or Guarantor
seeking liquidation, reorganization or other re-
lief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of
a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial
part of its property, and such involuntary action
or proceeding shall remain undismissed and unstay-
ed for a period of 60 days, or an order for relief
shall be entered against Maker or Guarantor under
the federal bankruptcy laws as now or hereafter in
effect; or
(vi) one or more judgments or orders for the
payment of money in excess of $20 million in the
aggregate shall be rendered against Maker or Guar-
antor and if, within 60 days after entry thereof,
such judgment or order shall not have been dis-
charged or execution thereof stayed pending ap-
peal, or within 60 days after the expiration of
any such stay, such judgment or order shall not be
discharged;
then, and in every such event, the holder of this Note may
at any time unless such event is not at such time continu-
ing, at its option, by written notice to Maker, declare this
2
<PAGE>
Note (together with accrued interest thereon) to be im-
mediately due and payable, whereupon all unpaid principal
and accrued interest under this Note shall become im-
mediately due and payable without presentment, demand, pro-
test or further notice of any kind, all of which are hereby
waived by Maker; provided that upon the occurrence of any of
--------
the Events of Default specified in clause (iv) or (v) above,
without any notice to the Maker or any other act by the
holder, this Note (together with accrued interest thereon)
shall immediately become due and payable without present-
ment, demand, protest or other notice of any kind, all of
which are hereby waived by Maker.
If an Event of Default occurs, Maker shall pay all
out-of-pocket expenses incurred by the Company, including
the reasonable fees and disbursements of its counsel, in
connection with enforcement of the obligations of Maker
under this Note and any collection or other enforcement
proceedings resulting therefrom.
This Note is binding on Maker and Maker hereby
waives presentment, demand, notice and protest and any de-
fense by reason of an extension of time for payment or other
indulgences, except as otherwise provided herein. Failure
of the holder hereof to assert any right herein shall not be
deemed to be a waiver thereof.
This Note may be transferred, assigned or pledged
in its entirety to a single transferee, assignee or pledgee
by the holder without the consent of Maker and without lim-
itation as to the number of successive single transferees.
Except as provided in the next paragraph, this Note may not
be subdivided or transferred, assigned or pledged to more
than one transferee, assignee or pledgee without the prior
written consent of the Maker. The Company and any trans-
feree, assignee or pledgee shall give written notice to
Maker of any transfer, assignment or pledge made pursuant to
the first sentence of this paragraph.
The Company may subdivide its interest in, and
make partial assignments of, this Note to not more than, at
any one time, eight corporations which are, directly or
indirectly, wholly-owned subsidiaries of Markel Corporation,
a Virginia corporation; provided that the Company has been
--------
irrevocably appointed the agent by each such assignee for
the purpose of taking any action on behalf of such assignee
that the Company would otherwise be empowered to take on its
own behalf in the absence of any such assignment. In no
3
<PAGE>
event shall Maker be required to deal with any holder of an
interest in this Note other than the Company unless and
until there has been a transfer of this Note in accordance
with the preceding paragraph or following sentence. If the
Company's interest in this Note has been subdivided or a
partial assignment of this Note has been made as permitted
by the first sentence of this paragraph, the assigned in-
terests shall have been restored to the Company prior to any
transfer of this Note to a transferee which is not a wholly-
owned subsidiary of the Company.
Maker or Guarantor may not set off from any
amounts due under this Note any amounts due Maker or Gua-
rantor from the Company or its transferees, assignees or
pledgees.
Any legal action or proceeding with respect to
this Note or any document related hereto may be brought in
the courts of the Commonwealth of Virginia in Richmond,
Virginia or of the United States of America for the Eastern
District of Virginia, and by execution and delivery of this
Note and the related Guaranty Maker and Guarantor hereby
irrevocably accept for themselves and in respect of their
property, generally and unconditionally, the jurisdiction of
the aforesaid courts. Maker and Guarantor hereby irrev-
ocably and unconditionally waive any objection, including
without limitation, any objection to the laying of venue or
based on the grounds of the forum non conveniens which it
----- --- ----------
now or hereafter may have to the bringing of any action or
proceeding in such respective jurisdictions. MAKER AND
GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUN-
TERCLAIM ARISING OUT OF OR RELATED TO THIS
NOTE OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
This Note shall be governed by and construed and
enforced in accordance with the laws of the State of New
4
<PAGE>
York, without giving effect to principles of conflicts of
law thereof.
Alexander & Alexander Inc.
By /s/ Dan R. Osterhout
--------------------
Address:
1211 Avenue of the Americas
New York, New York 10036
Attention:
GUARANTY
The undersigned, Alexander & Alexander Services
Inc., a Maryland corporation, and the holder of all of the
outstanding capital stock of the Maker of the within Note,
hereby irrevocably and unconditionally guarantees to
Evanston Insurance Company, for its benefit and for the
benefit of its successors and its permitted transferees,
assigns and pledgees, the full and punctual payment when due
(whether at stated maturity, by acceleration or otherwise)
of all amounts now or hereafter payable by Maker under the
within Note ("Obligations"). If Maker shall fail to pay any
Obligation when due in accordance with its terms (whether at
stated maturity, by acceleration or otherwise), the under-
signed Guarantor shall forthwith on demand of the holder pay
the holder the amount of such Obligation. Notwithstanding
the foregoing, the obligations of the Guarantor hereunder
shall not exceed those of the Maker of the within Note. The
Guarantor further agrees to pay any and all expenses which
may be paid or incurred by the holder of the within Note in
collecting any or all of the Obligations and/or enforcing
any rights under this Guaranty or under the Obligations.
Alexander & Alexander Services Inc,
By: /s/ Dan R. Osterhout
--------------------
5
<PAGE>
PROMISSORY NOTE
New York, New York January 26, 1995
FOR VALUE RECEIVED, the sufficiency of which is
hereby acknowledged, in the event that within five years
after the date hereof (i) the claims by or on behalf of each
-
of the Lloyds syndicates (the "Syndicates") and insurance
companies (the "Insurers") against Shand, Morahan and Com-
pany ("SMCO"), Evanston Services, Inc. ("ESI"), Evanston
Insurance Company ("EIC" or the "Company") or Insurance
Company of Evanston ("ICE") identified in Appendix A hereto
are settled and released generally and copies thereof are
provided to Maker (as defined below), and/or (ii) in the
--
event that (x) settlement of the claims referred to in
-
clause (i) are obtained from Syndicates and Insurers from
whom reinsurance recoverables aggregate at least sixty per-
cent (60%) of such recoverables from all of the Syndicates
and Insurers listed in Appendix A and copies thereof are
provided to Maker (as defined below), and (y) Shand/Evanston
Group, Inc., a Virginia corporation (for itself and the
Buyer Affiliates, as such terms are defined in the Stock
Purchase Agreement by and between F-M Acquisition Corp. and
Alexander & Alexander Inc. ("Maker") dated as of October 7,
1987, as amended as of February 15, 1989) shall enter into a
general release in favor of Maker substantially in the form
attached hereto as Appendix B, Maker hereby unconditionally
promises to pay ON DEMAND to the Company, the principal sum
of Four Million Dollars ($4,000,000).
Maker promises to pay interest on the unpaid prin-
cipal amount of this Note for each day from the date which
is five (5) days after Demand for payment is made until the
entire amount owing under this Note is paid at a rate per
annum equal to 15.6%.
Maker may prepay this Note in whole or from time
to time in part, without premium or penalty.
Payments shall be made in lawful money of the
United States of America to the Company at such address as
the Company may designate in writing.
If any obligation under this Note is not paid in
full when due, Maker shall pay all out-of-pocket expenses
incurred by the Company, including the reasonable fees and
<PAGE>
disbursements of its counsel, in connection with such fail-
ure to pay in full and any collection or other enforcement
proceedings resulting therefrom.
This Note is binding on Maker and Maker hereby
waives presentment, demand, notice and protest and any de-
fense by reason of an extension of time for payment or other
indulgences. Failure of the holder hereof to assert any
right herein shall not be deemed to be a waiver thereof.
This Note may not be transferred, assigned or
pledged, in whole or in part, by the holder without the
consent of Maker.
Maker or Guarantor may not set off from any
amounts due under this Note any amounts due Maker or Guar-
antor from Company.
This Note shall be governed by and construed and
enforced in accordance with the laws of the State of New
York, without giving effect to principles of conflicts of
law thereof.
Alexander & Alexander Inc.
By /s/ Dan R. Osterhout
--------------------
Address:
1211 Avenue of the Americas
New York, New York 10036
Attention:
GUARANTY
The undersigned, Alexander & Alexander Services
Inc., a Maryland corporation, and the holder of all of the
outstanding capital stock of the Maker of the within Note,
hereby irrevocably and unconditionally guarantees to the
holder hereof, the full and punctual payment when due
(whether at stated maturity, by acceleration or otherwise)
of all amounts now or hereafter payable by Maker under the
within Note ("Obligations"). If Maker shall fail to pay any
2
<PAGE>
Obligation when due in accordance with its terms (whether at
stated maturity, by acceleration or otherwise), the under-
signed Guarantor shall forthwith on demand of the Company
pay the Company the amount of such Obligation.
Notwithstanding the foregoing, the obligations of the Guar-
antor hereunder shall not exceed those of the Maker of the
within Note. The Guarantor further agrees to pay any and
all expenses which may be paid or incurred by the holder in
collecting any or all of the Obligations and/or enforcing
any rights under this Guaranty or under the Obligations.
Alexander & Alexander Services
Inc.
By: /s/ Dan R. Osterhout
--------------------
3
<PAGE>
APPENDIX A
LIST OF SYNDICATES AND COMPANIES WITH PENDING DISPUTES
Percentages to be applied upon settlement of pending
disputes related to reinsurance for environmental
impairment liability policies shall be
determined as follows:
% of
Total
Total Disputed
Syndicate Company O/S Reinsurers Cumulative
Number Name Losses %
--------- ----------------- -------- ---------- -----------
553 Warrilow - Runoff 5,792,323 20.1% 20.1%
809 Terra Nova 2,983,998 10.3% 30.4%
210 Sturge - Runoff 2,196,764 7.6% 38.0%
918 MDJ Oldsworth - 1,951,236 6.8% 44.8%
Runoff
109 Poland Syndicate - 1,744,664 6.0% 50.9%
Runoff
498 Anthony Phillips - 1,706,937 5.9% 56.8%
Runoff
471 David Graves-Runoff 1,084,223 3.8% 60.5%
826 Folksam Ins. Co. 963,775 3.3% 63.9%
831 Excess Ins. Co. 945,320 3.3% 67.2%
918 AGO Oldsworth - 747,107 2.6% 69.7%
Runoff
190 720,635 2.5% 72.2%
122 607,359 2.1% 74.4%
665 Ongoing 599,085 2.1% 76.4%
91 587,159 2.0% 78.5%
839 Sphere Drake 408,639 1.4% 79.9%
506 388,186 1.3% 81.2%
780 Candle - Ongoing 387,004 1.3% 82.6%
43 Andrew Drysdale - 385,997 1.3% 83.9%
Runoff
546 Spreckly - Runoff 376,748 1.3% 85.2%
582 Cassidy - Ongoing 333,167 1.2% 86.4%
257 KRS 328,532 1.1% 87.5%
231 Ongoing 320,198 1.1% 88.6%
806 Dominion Ins. Co. 260,262 0.9% 89.5%
Ltd.
342 239,043 0.8% 90.4%
205 227,375 0.8% 91.1%
819 Tokio Marine & Fire 211,800 0.7% 91.9%
365 189,559 0.7% 92.5%
661 161,147 0.6% 93.1%
551 153,237 0.5% 93.6%
153 151,401 0.5% 94.1%
818 Taisho Marine & Fire 141,204 0.5% 94.6%
241 140,127 0.5% 95.1%
235 133,205 0.5% 95.6%
362 114,035 0.4% 96.0%
694 104,409 0.4% 96.3%
947 MJH 100,217 0.3% 96.7%
<PAGE>
% of
Total
Total Disputed
Syndicate Company O/S Reinsurers Cumulative
Number Name Losses %
--------- ----------------- -------- ---------- -----------
602 99,202 0.3% 97.0%
12 97,162 0.3% 97.4%
660 94,461 0.3% 97.7%
802 Allianz 84,720 0.3% 98.0%
722 84,714 0.3% 98.3%
947 RGV 72,605 0.3% 98.5%
816 Sovereign Marine 70,598 0.2% 98.8%
518 62,351 0.2% 99.0%
55 56,976 0.2% 99.2%
817 Storebrand Ins. Co. 56,454 0.2% 99.4%
584 38,976 0.1% 99.5%
15 26,281 0.1% 99.6%
423 26,146 0.1% 99.7%
225 25,877 0.1% 99.8%
226 15,492 0.1% 99.9%
212 15,150 0.1% 99.9%
204 FLD 9,769 0.0% 99.9%
836 Heddington Assurance 5,581 0.0% 100.0%
(U.K)
204 CW 5,541 0.0% 100.0%
281 Atlanta International 5,383 0.0% 100.0%
257 JDN 1,138 0.0% 100.0%
612 396 0.0% 100.0%
940 0 0.0% 100.0%
50 Dominion Ins. Co. Ltd. 0 0.0% 100.0%
---------- ------
28,841,050 100.0%
========== ======
* Indicates company. All other numbers refer to syndicates.
2
<PAGE>
APPENDIX B
GENERAL RELEASE
---------------
Pursuant to the attached Promissory Note,
Shand/Evanston Group, Inc. ("S/E"), for itself and the Buyer
Affiliates as defined in the Stock Purchase Agreement, dated
as of October 7, 1987, as amended as of February 15, 1989
(the "Purchase Agreement"), forever discharges and releases
Alexander & Alexander Inc. and Alexander & Alexander Serv-
ices Inc. from all present and future obligations and all
present and future claims, causes of action and proceedings,
of whatever nature, whether now existing or hereafter aris-
ing, that S/E or any Buyer Affiliate has or may have under
Section 8.1(c)(ii) of the Purchase Agreement and/or Settle-
ment Agreement No. 3 arising out of or relating to any con-
tract of reinsurance involving any of the companies and
syndicates listed in Appendix A to the attached Promissory
Note. This General Release shall become effective upon
payment in full of the attached Promissory Note.
SHAND/EVANSTON GROUP, INC.
(for itself and on behalf of
all Buyer Affiliates)
Date: ___________________ By:_________________________
Title:______________________
<PAGE>
PROMISSORY NOTE
New York, New York January 26, 1995
FOR VALUE RECEIVED, the sufficiency of which is
hereby acknowledged, in the event that within five years
after the date hereof either
(i) (A) the claims by or on behalf of each of the
-
Lloyds syndicates (the "Syndicates") and insurance
companies (the "Insurers") against Shand, Morahan and
Company ("SMCO"), Evanston Services, Inc. ("ESI"),
Evanston Insurance Company ("EIC" or the "Company") or
Insurance Company of Evanston ("ICE") identified in
Appendix A hereto are settled and released generally
and copies thereof are provided to Maker (as defined
below), and/or (B) in the event that (x) settlement of
- -
the claims referred to in clause (A) are obtained from
Syndicates and Insurers from whom reinsurance recov-
erables aggregate at least sixty percent (60%) of such
recoverables from all of the Syndicates and Insurers
listed in Appendix A and copies thereof are provided to
Maker (as defined below), and (y) Shand/Evanston Group,
-
Inc., a Virginia corporation (for itself and the Buyer
Affiliates, as such terms are defined in the Stock
Purchase Agreement by and between F-M Acquisition Corp.
and Alexander & Alexander Inc. ("Maker") dated as of
October 7, 1987, as amended as of February 15, 1989
(the "Stock Purchase Agreement")) shall enter into a
general release in favor of Maker substantially in the
form attached hereto as Appendix B, or
(ii) if (X) within five years after the date
-
hereof Maker shall deliver to Shand/Evanston Group,
Inc. a release of insurance policies issued by EIC for
the benefit of The Mutual Fire Marine and Inland Insur-
ance Company which were the subject of the litigation
entitled Constance B. Foster v. The Mutual Fire Marine
---------------------------------------------
and Inland Insurance Company, Pa. Commw. Ct., No. 3483
----------------------------
C.D. 1986; Constance B. Foster, Ronald G. Aller, et al.
--------------------------------------------
v. Evanston Ins. Co., Pa. Commw. Ct., No. 3483 CD 1986
--------------------
(ET), policy numbers CE100278 and CE100641, and (Y) the
Company shall have delivered to Maker One Million Two
Hundred Fifty Thousand Dollars ($1,250,000) as payment
in full of the Promissory Note in such principal amount
and of even date herewith from the Company to Maker,
<PAGE>
Maker hereby unconditionally promises to pay ON DEMAND to
the Company, the principal sum of One Million Seven Hundred
Fifty Thousand Dollars ($1,750,000); provided, that if the
--------
event set forth in clause (ii) above occurs before the event
set forth in clause (i), this Note shall be delivered to
Maker and exchanged for a new promissory note substantially
in the form of Appendix C hereto.
Maker promises to pay interest on the unpaid prin-
cipal amount of this Note for each day from the date which
is five (5) days after Demand for payment is made until the
entire amount owing under this Note is paid at a rate per
annum equal to 15.6%.
2
<PAGE>
APPENDIX A
LIST OF SYNDICATES AND COMPANIES WITH PENDING DISPUTES
Percentages to be applied upon settlement of pending
disputes related to reinsurance for environmental
impairment liability policies shall be
determined as follows:
% of
Total
Total Disputed
Syndicate Company O/S Reinsurers Cumulative
Number Name Losses %
--------- ----------------- -------- ---------- -----------
553 Warrilow - Runoff 5,792,323 20.1% 20.1%
809 Terra Nova 2,983,998 10.3% 30.4%
210 Sturge - Runoff 2,196,764 7.6% 38.0%
918 MDJ Oldsworth - 1,951,236 6.8% 44.8%
Runoff
109 Poland Syndicate - 1,744,664 6.0% 50.9%
Runoff
498 Anthony Phillips - 1,706,937 5.9% 56.8%
Runoff
471 David Graves-Runoff 1,084,223 3.8% 60.5%
826 Folksam Ins. Co. 963,775 3.3% 63.9%
831 Excess Ins. Co. 945,320 3.3% 67.2%
918 AGO Oldsworth - 747,107 2.6% 69.7%
Runoff
190 720,635 2.5% 72.2%
122 607,359 2.1% 74.4%
665 Ongoing 599,085 2.1% 76.4%
91 587,159 2.0% 78.5%
839 Sphere Drake 408,639 1.4% 79.9%
506 388,186 1.3% 81.2%
780 Candle - Ongoing 387,004 1.3% 82.6%
43 Andrew Drysdale - 385,997 1.3% 83.9%
Runoff
546 Spreckly - Runoff 376,748 1.3% 85.2%
582 Cassidy - Ongoing 333,167 1.2% 86.4%
257 KRS 328,532 1.1% 87.5%
231 Ongoing 320,198 1.1% 88.6%
806 Dominion Ins. Co. 260,262 0.9% 89.5%
Ltd.
342 239,043 0.8% 90.4%
205 227,375 0.8% 91.1%
819 Tokio Marine & Fire 211,800 0.7% 91.9%
365 189,559 0.7% 92.5%
661 161,147 0.6% 93.1%
551 153,237 0.5% 93.6%
153 151,401 0.5% 94.1%
818 Taisho Marine & Fire 141,204 0.5% 94.6%
241 140,127 0.5% 95.1%
235 133,205 0.5% 95.6%
362 114,035 0.4% 96.0%
694 104,409 0.4% 96.3%
947 MJH 100,217 0.3% 96.7%
<PAGE>
% of
Total
Total Disputed
Syndicate Company O/S Reinsurers Cumulative
Number Name Losses %
--------- ----------------- -------- ---------- -----------
602 99,202 0.3% 97.0%
12 97,162 0.3% 97.4%
660 94,461 0.3% 97.7%
802 Allianz 84,720 0.3% 98.0%
722 84,714 0.3% 98.3%
947 RGV 72,605 0.3% 98.5%
816 Sovereign Marine 70,598 0.2% 98.8%
518 62,351 0.2% 99.0%
55 56,976 0.2% 99.2%
817 Storebrand Ins. Co. 56,454 0.2% 99.4%
584 38,976 0.1% 99.5%
15 26,281 0.1% 99.6%
423 26,146 0.1% 99.7%
225 25,877 0.1% 99.8%
226 15,492 0.1% 99.9%
212 15,150 0.1% 99.9%
204 FLD 9,769 0.0% 99.9%
836 Heddington Assurance 5,581 0.0% 100.0%
(U.K.)
204 CW 5,541 0.0% 100.0%
281 Atlanta International 5,383 0.0% 100.0%
257 JDN 1,138 0.0% 100.0%
612 396 0.0% 100.0%
940 0 0.0% 100.0%
50 Dominion Ins. Co. Ltd. 0 0.0%
---------- ------
28,841,050 100.0%
========== ======
* Indicates company. All other numbers refer to syndicates.
2
<PAGE>
Maker may prepay this Note in whole or from time
to time in part, without premium or penalty.
Payments shall be made in lawful money of the
United States of America to the Company at such address as
the Company may designate in writing.
If any obligation under this Note is not paid in
full when due, Maker shall pay all out-of-pocket expenses
incurred by the Company, including the reasonable fees and
disbursements of its counsel, in connection with such fail-
ure to pay in full and any collection or other enforcement
proceedings resulting therefrom.
This Note is binding on Maker and Maker hereby
waives presentment, demand, notice and protest and any de-
fense by reason of an extension of time for payment or other
indulgences. Failure of the holder hereof to assert any
right herein shall not be deemed to be a waiver thereof.
This Note may not be transferred, assigned or
pledged, in whole or in part, by the holder without the con-
sent of Maker.
Maker or Guarantor may not set off from any
amounts due under this Note any amounts due Maker or Guar-
antor from Company.
This Note shall be governed by and construed and
enforced in accordance with the laws of the State of New
York, without giving effect to principles of conflicts of
law thereof.
Alexander & Alexander Inc.
By /s/ Dan R. Osterhout
--------------------
Address:
1211 Avenue of the Americas
New York, New York 10036
Attention:
3
<PAGE>
GUARANTY
The undersigned, Alexander & Alexander Services
Inc., a Maryland corporation, and the holder of all of the
outstanding capital stock of the Maker of the within Note,
hereby irrevocably and unconditionally guarantees to the
holder hereof, the full and punctual payment when due
(whether at stated maturity, by acceleration or otherwise)
of all amounts now or hereafter payable by Maker under the
within Note ("Obligations"). If Maker shall fail to pay any
Obligation when due in accordance with its terms (whether at
stated maturity, by acceleration or otherwise), the under-
signed Guarantor shall forthwith on demand of the Company
pay the Company the amount of such Obligation.
Notwithstanding the foregoing, the obligations of the Guar-
antor hereunder shall not exceed those of the Maker of the
within Note. Guarantor further agrees to pay any and all
expenses which may be paid or incurred by the holder in
collecting any or all of the Obligations and/or enforcing
any rights under this Guaranty or under the Obligations.
Alexander & Alexander Services
Inc,
By /s/ Dan R. Osterhout
--------------------
4
<PAGE>
APPENDIX B
GENERAL RELEASE
---------------
Pursuant to the attached Promissory Note,
Shand/Evanston Group, Inc. ("S/E"), for itself and the Buyer
Affiliates as defined in the Stock Purchase Agreement, dated
as of October 7, 1987, as amended as of February 15, 1989
(the "Purchase Agreement"), forever discharges and releases
Alexander & Alexander Inc. and Alexander & Alexander Serv-
ices Inc. from all present and future obligations and all
present and future claims, causes of action and proceedings,
of whatever nature, whether now existing or hereafter aris-
ing, that S/E or any Buyer Affiliate has or may have under
Section 8.1(c)(ii) of the Purchase Agreement and/or Settle-
ment Agreement No. 3 arising out of or relating to any con-
tract of reinsurance involving any of the companies and
syndicates listed in Appendix A to the attached Promissory
Note. This General Release shall become effective upon
payment in full of the attached Promissory Note.
SHAND/EVANSTON GROUP, INC.
(for itself and on behalf of
all Buyer Affiliates)
Date: __________________ By:_________________________
Title:______________________
11099740
<PAGE>
APPENDIX C
PROMISSORY NOTE
$1,750,000
New York, New York ___________ ___, 199_
FOR VALUE RECEIVED, the sufficiency of which is
hereby acknowledged, Alexander & Alexander Inc., a Maryland
corporation ("Maker") hereby unconditionally promises to pay
to the order of Evanston Insurance Company, an Illinois
corporation (the "Company"), or its assigns, the principal
sum of One Million Seven Hundred Fifty Thousand Dollars
($1,750,000) on January _, 2000.
Maker promises to pay interest on the unpaid prin-
cipal amount of this Note, for each day from the date hereof
until paid, on the 1st day of June and December of each year
commencing ___________, ___, 199__, at a rate per annum
equal to 10.6%; provided that any overdue principal of and,
--------
to the extent permitted by law, overdue interest shall bear
interest, payable on demand, for each day until paid at a
rate per annum equal to 15.6%. Interest payable hereunder
shall be computed on the basis of a year of 365 days (or 366
days in the year 1996) and shall be paid for the actual
number of days elapsed (including the first day but exclud-
ing the last day).
Maker may prepay this Note in whole or from time
to time in part, without premium or penalty.
Payments shall be made in lawful money of the
United States of America to the Company or its assigns at
such address as the Company or its assigns, as the case may
be, may designate in writing.
If one or more of the following events ("Events of
Default") shall have occurred and be continuing:
(i) Maker shall fail to pay when due any
principal of this Note;
11099740
<PAGE>
(ii) Maker shall fail to pay any interest on
this Note within five days after the same becomes
due and payable;
(iii) Maker shall fail to pay any other amount
due and payable hereunder within twenty days after
written notice of the default shall have been
given by the holder to the Maker;
(iv) Maker or any Guarantor shall commence a
voluntary action or proceeding seeking liquid-
ation, reorganization or other relief with respect
to itself or its debts under any bankruptcy, in-
solvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar
official of it or any substantial part of its
property, or shall consent to any such relief or
to the appointment of or taking possession by any
such official in an involuntary action or proceed-
ing commenced against it, or shall make a general
assignment for the benefit of creditors, or shall
fail generally to pay its debts as they become
due, or shall take any corporate action to
authorize any of the foregoing;
(v) an involuntary action or proceeding
shall be commenced against Maker or Guarantor
seeking liquidation, reorganization or other re-
lief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of
a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial
part of its property, and such involuntary action
or proceeding shall remain undismissed and unstay-
ed for a period of 60 days, or an order for relief
shall be entered against Maker or Guarantor under
the federal bankruptcy laws as now or hereafter in
effect; or
(vi) one or more judgments or orders for the
payment of money in excess of $20 million in the
aggregate shall be rendered against Maker or Guar-
antor and if, within 60 days after entry thereof,
such judgment or order shall not have been dis-
charged or execution thereof stayed pending ap-
peal, or within 60 days after the expiration of
2
11099740
<PAGE>
any such stay, such judgment or order shall not be
discharged;
then, and in every such event, the holder of this Note may
at any time unless such event is not continuing, at its
option, by written notice to Maker, declare this Note (to-
gether with accrued interest thereon) to be immediately due
and payable, whereupon all unpaid principal and accrued
interest under this Note shall become immediately due and
payable without presentment, demand, protest or further
notice of any kind, all of which are hereby waived by Maker;
provided that upon the occurrence of any of the Events of
--------
Default specified in clause (iv) or (v) above, without any
notice to the Maker or any other act by the holder, this
Note (together with accrued interest thereon) shall im-
mediately become due and payable without presentment, de-
mand, protest or other notice of any kind, all of which are
hereby waived by Maker.
If an Event of Default occurs, Maker shall pay all
out-of-pocket expenses incurred by the Company, including
the reasonable fees and disbursements of its counsel, in
connection with enforcement of the obligations of Maker
under this Note and any collection or other enforcement
proceedings resulting therefrom.
This Note is binding on Maker and Maker hereby
waives presentment, demand, notice and protest and any de-
fense by reason of an extension of time for payment or other
indulgences, except as otherwise provided herein. Failure
of the holder hereof to assert any right herein shall not be
deemed to be a waiver thereof.
This Note may be transferred, assigned or pledged
in its entirety to a single transferee, assignee or pledgee
by the holder without the consent of Maker and without lim-
itation as to the number of successive single transferees.
Except as provided in the next paragraph, this Note may not
be subdivided or transferred, assigned or pledged to more
than one transferee, assignee or pledgee without the prior
written consent of the Maker. The Company and any trans-
feree, assignee or pledgee shall give written notice to
Maker of any transfer, assignment or pledge made pursuant to
the first sentence of this paragraph.
The Company may subdivide its interest in, and
make partial assignments of, this Note to not more than, at
any one time, eight corporations which are, directly or
3
11099740
<PAGE>
indirectly, wholly-owned subsidiaries of Markel Corporation,
a Virginia corporation; provided that the Company has been
--------
irrevocably appointed the agent by each such assignee for
the purpose of taking any action on behalf of such assignee
that the Company would otherwise be empowered to take on its
own behalf in the absence of any such assignment. In no
event shall Maker be required to deal with any holder of an
interest in this Note other than the Company unless and
until there has been a transfer of this Note in accordance
with the preceding paragraph or following sentence. If the
Company's interest in this Note has been subdivided or a
partial assignment of this Note has been made as permitted
by the first sentence of this paragraph, the assigned in-
terests shall have been restored to the Company prior to any
transfer of this Note to a transferee which is not a wholly-
owned subsidiary of the Company.
Maker or Guarantor may not set off from any
amounts due under this Note any amounts due Maker or Guar-
antor from the Company or its transferees, assignees or
pledgees.
Any legal action or proceeding with respect to
this Note or any document related hereto may be brought in
the courts of the Commonwealth of Virginia in Richmond,
Virginia or of the United States of America for the Eastern
District of Virginia, and by execution and delivery of this
Note and the related Guaranty Maker and Guarantor hereby
irrevocably accept for themselves and in respect of their
property, generally and unconditionally, the jurisdiction of
the aforesaid courts. Maker and Guarantor hereby irrev-
ocably and unconditionally waive any objection, including
without limitation, any objection to the laying of venue or
based on the grounds of the forum non conveniens which it
----- --- ----------
now or hereafter may have to the bringing of any action or
proceeding in such respective jurisdictions. MAKER AND
GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUN-
TERCLAIM ARISING OUT OF OR RELATED TO THIS NOTE OR ANY OF
THE TRANSACTIONS CONTEMPLATED HEREBY.
This Note shall be governed by and construed and
enforced in accordance with the laws of the State of New
4
11099740
<PAGE>
York, without giving effect to principles of conflicts of
law thereof.
Alexander & Alexander Inc.
By:________________________
Address:
1211 Avenue of the Americas
New York, New York 10036
Attention:
GUARANTY
The undersigned, Alexander & Alexander Services
Inc., a Maryland corporation, and the holder of all of the
outstanding capital stock of the Maker of the within Note,
hereby irrevocably and unconditionally guarantees to
Evanston Insurance Company, for its benefit and for the
benefit of its successors and its permitted transferees,
assigns and pledgees, the full and punctual payment when due
(whether at stated maturity, by acceleration or otherwise)
of all amounts now or hereafter payable by Maker under the
within Note ("Obligations"). If Maker shall fail to pay any
Obligation when due in accordance with its terms (whether at
stated maturity, by acceleration or otherwise), the under-
signed Guarantor shall forthwith on demand of the holder pay
the holder the amount of such Obligation. Notwithstanding
the foregoing, the obligations of the Guarantor hereunder
shall not exceed those of the Maker of the within Note. The
Guarantor further agrees to pay any and all expenses which
may be paid or incurred by the holder of the within Note in
collecting any or all of the Obligations and/or enforcing
any rights under this Guaranty or under the Obligations.
Alexander & Alexander Services
Inc,
By:___________________________
5
11099740
<PAGE>
PROMISSORY NOTE
New York, New York January 26, 1995
FOR VALUE RECEIVED, the sufficiency of which is
hereby acknowledged, in the event that within five years
after the date hereof Alexander & Alexander Inc., a Maryland
corporation ("A&A"), shall deliver to Shand/Evanston Group,
Inc., a Virginia corporation (the "Maker") a release of
insurance policies issued by Evanston Insurance Company for
the benefit of The Mutual Fire Marine and Inland Insurance
Company which were the subject of the litigation entitled
Constance B. Foster v. The Mutual Fire Marine and Inland
--------------------------------------------------------
Insurance Company, Pa. Commw. Ct., No. 3483 C.D. 1986; Con-
----------------- ----
stance B. Foster, Ronald G. Aller, et al. v. Evanston Ins.
----------------------------------------------------------
Co., Pa. Commw. Ct., No. 3483 CD 1986 (ET), policy numbers
---
CE100278 and CE100641, Maker hereby unconditionally promises
to pay ON DEMAND to A&A the principal sum of One Million Two
Hundred Fifty Thousand Dollars ($1,250,000).
Maker promises to pay interest on the unpaid prin-
cipal amount of this Note for each day from the date which
is five (5) days after Demand for payment is made until the
entire amount owing under this Note is paid at a rate per
annum equal to 15.6%.
Maker may prepay this Note in whole or from time
to time in part, without premium or penalty.
Payments shall be made in lawful money of the
United States of America to the Company at such address as
the Company may designate in writing.
If any obligation under this Note is not paid in
full when due, Maker shall pay all out-of-pocket expenses
incurred by the Company, including the reasonable fees and
disbursements of its counsel, in connection with such fail-
ure to pay in full and any collection or other enforcement
proceedings resulting therefrom.
This Note is binding on Maker and Maker hereby
waives presentment, demand, notice and protest and any de-
fense by reason of an extension of time for payment or other
indulgences. Failure of the holder hereof to assert any
right herein shall not be deemed to be a waiver thereof.
<PAGE>
This Note may not be transferred, assigned or
pledged, in whole or in part, by the holder without the
consent of Maker.
Maker or Guarantor may not set off from any
amounts due under this Note any amounts due Maker or Guar-
antor from Company.
This Note shall be governed by and construed and
enforced in accordance with the laws of the State of New
York, without giving effect to principles of conflicts of
law thereof.
Shand/Evanston Group, Inc.
By: /s/ Steven A. Markel
--------------------
Chairman
Address:
4551 Cox Road
Richmond, Virginia 23060
Attention: Steven A. Markel
GUARANTY
The undersigned, Markel Corporation, a Virginia corporation,
and the holder of all of the outstanding capital stock of
the Maker of the within Note, hereby irrevocably and uncon-
ditionally guarantees to the holder hereof, the full and
punctual payment when due (whether at stated maturity, by
acceleration or otherwise) of all amounts now or hereafter
payable by Maker under the within Note ("Obligations"). If
Maker shall fail to pay any Obligation when due in accord-
ance with its terms (whether at stated maturity, by acceler-
ation or otherwise), the undersigned Guarantor shall forth-
with on demand of the holder pay the holder the amount of
such Obligation. Notwithstanding the foregoing, the
obligations of the Guarantor hereunder shall not exceed
those of the Maker of the within Note. Guarantor further
agrees to pay any and all expenses which may be paid or
incurred by holder in collecting any or all of the
2
<PAGE>
Obligations and/or enforcing any rights under this Guaranty
or under the Obligations.
Markel Corporation
By: /s/ Steven A. Markel
--------------------
Vice Chairman
3
<PAGE>
[Letterhead of Shand/Evanston Group Inc.]
January 27, 1995
Mr. Dan Osterhout
Alexander & Alexander
1185 Avenue of the Americas
New York, New York 10036
Dear Dan:
In connection with our Settlement Agreement No. 3
executed today between Shand/Evanston Group, Inc. ("S/E")
and Alexander & Alexander Inc. ("A&A"), we have agreed as
follows with respect to one matter still open between us.
One of the issues that has arisen between the
parties is the question of whether A&A must indemnify and
hold harmless the Buyer Affiliates (as defined in the Stock
Purchase Agreement) from any losses, liabilities, fees,
costs or expenses (including reasonable fees and expenses of
outside counsel, but excluding the time of employees of any
Buyer Affiliate) arising out of the possible non-performance
by reinsurers of their obligations with respect to policies
of insurance under which Mutual Fire was the insured and EIC
or ICE was the insurer ("Mutual Fire Policy Insurance
Claims"), including a Mutual Fire Policy Insurance Claim
involving D&O insurance policies that were the subject of
the litigation entitled Foster v. Evanston Ins. Co., Pa.
---------------------------
Commonwealth Ct., No. 3483 CD 1986 (ET) (the "D&O Insurance
Claim"). The parties reserve their rights as to whether
Section 8.1 of the Purchase Agreement does or does not re-
quire such indemnity by A&A with respect to any Mutual Fire
Policy Insurance Claim. The parties further agree, however,
that should the D&O Insurance Claim become the subject of an
arbitration or other proceeding between the parties, A&A
shall pay S/E all outside counsel fees and other expenses
reasonably incurred by S/E (but excluding the time of em-
ployees of any Buyer Affiliate) in connection with any such
arbitration or proceeding, regardless of the outcome there-
of.
11099747
<PAGE>
If you are in agreement with the foregoing, please
so indicate by executing the enclosed copy of this letter in
the space provided and returning a copy to me.
Sincerely,
/s/ Steven A. Markel
Steven A. Markel
Chairman
On behalf of Shand/Evanston
Group Inc.
and Buyer Affiliates
Accepted and agreed to:
Alexander and Alexander
Inc. and Alexander and
Alexander Services Inc.
By: /s/ Dan R. Osterhout
---------------------
Title:Senior Vice President
---------------------
2
11099747
<PAGE>
Letterhead of Debevoise & Plimpton
January 27, 1995
Gregory B. Nevers, Esq.
Corporate Counsel
Markel Corporation
4551 Cox Road
Glen Allen, Virginia 23060-3382
Dear Greg;
At your suggestion, and
to avoid altering the form of note, I wish to confirm with
you the understanding of the parties with respect to the
promissory note (the "Exchange Note") in the principal
amount of $1,750,000 of which Alexander & Alexander Inc.
would be the Maker and Evanston Insurance Company the payee,
the form of which is annexed as Appendix C to the contingent
note (the "Paragraph 2 Note") referred to in paragraph 2 of
Appendix B to Settlement Agreement No. 3 between Alexander &
Alexander Inc. and Shand/Evanston Group, Inc.
It is understood that the
Exchange Note, if issued, will be dated the date of its
issuance in exchange
<PAGE>
Gregory B. Nevers, Esq. 4 January 27, 1995
for the Paragraph 2 Note and that interest will commence to
accrue on such date of issuance.
Sincerely yours,
/s/ Roswell B. Perkins
Roswell B. Perkins
Confirmed and agreed
/s/ Gregory Nevers
------------------
Gregory Nevers
EXHIBIT 10.3
ALEXANDER & ALEXANDER SERVICES INC.
Non-Employee Director
Deferred Compensation Program
1. Purpose.
This Non-Employee Director Deferred Compensation Program (the
"Plan") is intended to attract and retain the services of experienced and
knowledgeable directors of Alexander & Alexander Services Inc. (the "Company")
for the benefit of the Company and its shareholders and to provide additional
incentive for such directors to increase shareholder value.
2. Eligibility.
Each director of the Company who is not otherwise an employee of
the Company or a subsidiary (each, an "Eligible Director") shall be a
beneficiary under a grantor trust established by the Company, the assets of
which shall be subject to the claims of the Company's creditors in the event of
its bankruptcy or insolvency (the "Company Trust"). The interest of an Eligible
Director as a beneficiary of the Company Trust shall be subject to the terms and
conditions set forth in this Plan and the trust agreement governing the Company
Trust (the "Trust Agreement").
3. Administration.
The Plan shall be administered by the Board of Directors of the
Company (the "Board"). Subject to the express provisions of the Plan, the Board
shall have plenary authority to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to it, to determine the terms and
provisions of the independent directors' fees made pursuant to the Plan and to
make all other determinations necessary or advisable for the administration of
the Plan. The Board's determinations of the matters referred to in this
Paragraph 3 shall be conclusive.
<PAGE>
4. Amount of Annual Fee and Expenses
Each Eligible Director who serves as a director for an entire
calendar year shall have credited to his or her account under the Company Trust
an amount equal to the Annual Fee of $40,000 (or such greater or lesser amount
as the Board shall determine from time to time by resolution). To the extent
that an Eligible Director does not serve as a director for the entire period
between two Annual Meetings of Stockholders, the amount credited to his or her
account in the Company Trust shall be adjusted to reflect only the period for
which such Eligible Director was a director. The Annual Fee is intended to
compensate an Eligible Director for attendance at meetings of and other services
to the Board and any committees of the Board. In addition to the Annual Fee,
Eligible Directors will be reimbursed for reasonable out-of-pocket expenses
incurred in the performance of their service in that capacity, in accordance
with the Company's policy on expense reimbursements. Notwithstanding anything
else contained herein to the contrary, in the event an Eligible Director has an
immediate personal tax liability under the Plan, the Eligible Director will
receive a cash payment in an amount equal to the tax liability, and the amount
of Common Stock to be contributed to the Company Trust in respect of such
Eligible Director shall be reduced by a like amount.
5. Contributions in Respect of the Annual Fee.
Except as expressly provided below, no portion of the Annual Fee
shall be paid directly to an Eligible Director. Instead, the Company shall
contribute shares of Common Stock, $1.00 par value per share, to the Company
Trust to be credited to the account of the Eligible Director. Such
contributions shall generally be made in two semi-annual installments, one
determined as of the date of an Annual Meeting of Stockholders and based on the
portion of the Annual Fee payable for services as a director since the last
contributions pursuant to this Section 5 and the second to be made as of the
date which is six months after the date of such Annual Meeting of Stockholders
and based on the portion of the Annual Fee payable for services as a director
since the date of such Annual Meeting of Stockholders; provided that the
contribution to be made as of the Annual Meeting of Stockholders in 1995 shall
be determined by multiplying the Annual Fee by a fraction, the numerator of
which is the number of days in 1995 occurring on or prior to such Annual Meeting
and the denominator of which is 365. Any such contribution to the Company
Trust shall be made as soon as practicable following the date as of which the
contribution amount is determined.
<PAGE>
6. Conversion of Non-Employee Director Retirement Plan.
In connection with the termination of the Non-Employee Director
Retirement Plan (the "Retirement Plan"), the Company shall make an additional
contribution to the Company Trust in respect of certain Eligible Directors, as
determined pursuant to this Section 6. For each Eligible Director in office on
December 31, 1994, who, as of such date, (i) had completed sufficient service to
be entitled to receive the maximum benefit under such Retirement Plan, the
Company shall contribute Company Common Stock having a value as of such date
equal to the present value of such accrued maximum retirement benefit (the
"Present Value") and (ii) had completed 75% of the service required to be fully
vested in such Present Value, the Company shall contribute Company Common Stock
having a value as of such date equal to two-thirds of the Present Value. No
contribution shall be made hereunder for any other Eligible Director by reason
of the termination of the Retirement Plan. Notwithstanding the foregoing, in
the event an Eligible Director has an immediate personal tax liability under
this conversion, the Eligible Director will receive a cash payment in an amount
equal to the tax liability and the amount of Common Stock to be contributed to
the Company Trust in respect of an Eligible Director shall be reduced by a like
amount.
7. Rights as Stockholders.
The rights of Eligible Directors with respect to shares of
Common Stock contributed by the Company to the Trust, including without
limitations the right to vote, dispose of, pledge, assign, transfer, bequeath by
will or receive dividends or other distributions upon such shares, shall be
determined in accordance with the Trust Agreement and the Plan. Nothing in the
Plan shall confer on any individual any right to continue as a director of the
Company or interfere in any way with the right of the Company to terminate the
Plan participant's service as a director at any time.
8. Valuation of Common Stock.
The number of shares of the Common Stock to be credited to an
Eligible Director's account in the Company Trust as of each installment
contribution under Section 5 shall be determined by dividing the portion of the
Annual Fee being satisfied by such installment by the mean of the high and low
sales prices of the Common Stock on the New York Stock Exchange on the date on
which an installment payment is required to be made (or the next preceding date
on which trading occurred if there was no trading on such date). In the event
that the Common Stock is no longer traded on the New York Stock Exchange at the
date of any installment payment, then the Board shall establish the price of the
Common Stock at
<PAGE>
the fair market value determined under Treasury Regulation Section 20.2031-2.
9. Stock Subject to the Plan.
There are reserved for issuance under the Plan 160,000 shares of
the authorized and unissued shares of the Common Stock.
10. Adjustments Upon Changes in Capitalization.
Notwithstanding any other provision of the Plan, the number and
class of shares held pursuant to the Trust Agreement shall be proportionately
adjusted in the event of changes in the outstanding Common Stock by reason of
stock dividends, stock splits, recapitalizations, mergers, consolidations,
combinations or exchanges of shares, split-ups, split-offs, spin-offs,
liquidations or other similar changes in capitalization, or any distribution to
common shareholders other than cash dividends and, in the event of any such
change in the outstanding Common Stock, the aggregate number and class of shares
available under the Plan shall be appropriately adjusted by the Board. The
Board's determination of any adjustment shall be conclusive.
11. Amendment and Termination.
Unless the Plan shall theretofore have been terminated as
hereinafter provided, the Plan shall terminate on the date of the Annual Meeting
of Stockholders in 2005. The Plan may be terminated, modified or amended by the
stockholders of the Company. The Board of Directors of the Company may also
terminate the Plan or modify or amend the Plan in such respects as it shall deem
advisable in order to conform to any change in any law or regulation applicable
thereto, or in other respects.
12. Withholding.
Unless other arrangements satisfactory to the Board are made to
satisfy any such obligation, upon the distribution from the Company Trust to an
Eligible Director the Company shall have the right to retain without notice
sufficient amounts to cover the amount of any tax required by any government to
be withheld or otherwise deducted and paid with respect to such distribution
from the Company Trust.
13. Limitations on Liability.
Neither the establishment of the Plan nor any modification
thereof, nor the creation of any account under the Trust Agreement, nor the
<PAGE>
payment of any benefits, shall be construed as giving to any participant or
other person any legal or equitable right against the Company (or any person
connected therewith), except as provided by law or by any Plan provision.
Nothing contained in the Plan, and no action taken pursuant to its provisions,
shall create or be construed to create a fiduciary relationship between the
Company (or any person connected therewith) and any participant or other person.
In no event shall the Company (or any person connected therewith) be liable to
any person for the failure of any participant or other person to be entitled to
any particular tax consequences with respect to the Plan or any contribution
thereto or distribution therefrom.
14. Construction.
The Plan is intended to be exempt from ERISA and, if any
provision of the Plan is subject to more than one interpretation or
construction, such ambiguity shall be resolved in favor of that interpretation
or construction which is consistent with the Plan being so exempted. In case
any provision of the Plan shall be held to be illegal or void, such illegality
or invalidity shall not affect the remaining provisions of the Plan, but shall
be fully severable, and the Plan shall be construed and enforced as if said
illegal or invalid provisions had never been inserted herein. For all purposes
of the Plan, where the context admits, words in the masculine gender shall
include the feminine and neuter genders, the singular shall include the plural,
and the plural shall include the singular. Headings of Paragraphs are inserted
only for convenience of reference and are not to be considered in the
construction of the Plan. Except to the extent preempted by the laws of the
United States of America, the laws of the State of Maryland shall govern,
control and determine all questions arising with respect to the Plan and the
interpretation and validity of its respective provisions.
15. Spendthrift Provision.
No amount payable under the Plan will, except as otherwise
specifically provided by law, be subject in any manner to anticipation,
alienation, attachment, garnishment, sale, transfer, assignment (either at law
or in equity), levy, execution, pledge, encumbrance, charge or any other legal
or equitable process, and any attempt to do so will be void; nor will any
benefit be in any manner liable for or subject to the debts, contracts,
liabilities, engagements or torts of the person entitled thereto. The foregoing
shall not preclude any arrangement for: (i) the withholding of taxes from Plan
benefit payments, (ii) the recovery by the Plan of overpayments of benefits
previously made to a participant, or (iii) the direct
<PAGE>
deposit of benefit payments to an account in a banking institution (if not part
of an arrangement constituting an assignment or alienation).
In the event that any participant's benefits are
garnished or attached by order of any court, the Company may bring an action for
a declaratory judgment in a court of competent jurisdiction to determine the
proper recipient of the benefits to be paid by Plan. During the pendency of
said action, any benefits that become payable shall be paid into the court as
they become payable, to be distributed by the court to the recipient it deems
proper at the close of said action.
16. Effectiveness of the Plan.
The Plan is effective as of January 1, 1995.
<PAGE>
================================================================================
TRUST AGREEMENT
between
ALEXANDER & ALEXANDER SERVICES INC.
and
WACHOVIA BANK OF NORTH CAROLINA, N.A.
Establishing Alexander & Alexander Services Inc.'s
Directors Deferred Stock Trust
Effective as of January 1, 1995
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
Creation of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
- -----------------
Section 1.1. Establishment of Trust . . . . . . . . . . . . . . . 1
Section 1.2. Purpose . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.3. Definition of Change of Control . . . . . . . . . . 2
Section 1.4. Accounts . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II
General Duties of the Parties . . . . . . . . . . . . . . . . . . . . . 7
- -----------------------------
Section 2.1. General Duties of Company . . . . . . . . . . . . . 7
Section 2.2. General Duties of Trustee . . . . . . . . . . . . . 9
ARTICLE III
Investment, Administration and
Disbursement of Trust Fund . . . . . . . . . . . . . . . . . . . . 10
- ------------------------------
Section 3.1. Investment Powers of Trustee . . . . . . . . . . . . 10
Section 3.2. Valuation of Trust Fund . . . . . . . . . . . . . . 12
Section 3.3. Administrative Powers of Trustee . . . . . . . . . . 13
Section 3.4. Dealings with Trustee . . . . . . . . . . . . . . . 16
Section 3.5. Investment Manager . . . . . . . . . . . . . . . . . 16
Section 3.6. Distributions from Trust Fund . . . . . . . . . . . 20
Section 3.7. Insolvency or Bankruptcy . . . . . . . . . . . . . . 23
Section 3.8. Forfeitures from Separate Accounts . . . . . . . . . 24
ARTICLE IV
Settlement of Accounts,
Enforcement of Trust and Legal Proceedings . . . . . . . . . . . . . . 25
- ------------------------------------------
Section 4.1. Settlement of Accounts of Trustee and
Administrative Committee . . . . . . . . . . . . . . . . . . 25
Section 4.2. Determination of Interests in the Trust Fund,
Enforcement of Trust and Legal Proceedings . . . . . . . . . 27
<PAGE>
ARTICLE V
Taxes, Expenses and Compensation
of Trustee . . . . . . . . . . . . . . . . . . . 28
- --------------------------------
Section 5.1. Taxes . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.2. Expenses and Compensation . . . . . . . . . . . . . 28
ARTICLE VI
For Protection of Trustee . . . . . . . . . . . . . . . . . . . . . . . 29
- -------------------------
Section 6.1. Evidence of Action by Company . . . . . . . . . . . 29
Section 6.2. Advice of Counsel . . . . . . . . . . . . . . . . . 30
Section 6.3. Fiduciary Responsibility . . . . . . . . . . . . . . 30
Section 6.4. No Duty to Advance Funds or to Administer the
Arrangements . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VII
Resignation and Removal of Trustee . . . . . . . . . . . . . . . . . . 32
- ----------------------------------
Section 7.1. Resignation of Trustee . . . . . . . . . . . . . . . 32
Section 7.2. Removal of Trustee . . . . . . . . . . . . . . . . . 33
Section 7.3. Appointment of Successor Trustee . . . . . . . . . . 34
Section 7.4. Transfer of Fund to Successor . . . . . . . . . . . 35
ARTICLE VIII
Duration and Termination
of Trust and Amendment . . . . . . . . . . . . . . . . . . . . . . . 35
- ------------------------
Section 8.1. Duration and Termination . . . . . . . . . . . . . . 35
Section 8.2. Distribution upon Termination . . . . . . . . . . . 36
Section 8.3. Amendment . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE IX
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
- ---------------
Section 9.1. Indemnification . . . . . . . . . . . . . . . . . . 38
ARTICLE X
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
- -------------
Section 10.1. Governing Law . . . . . . . . . . . . . . . . . . . 39
ii
<PAGE>
Section 10.2. Company's Liability Not Limited to Trust Assets . . 39
Section 10.3. Use of Earmarked Assets . . . . . . . . . . . . . . 40
Section 10.4. Rights of Beneficiaries . . . . . . . . . . . . . . 40
Section 10.5. Titles and Headings Not to Control . . . . . . . . 40
Section 10.6. Interpretation of the Trust Agreement . . . . . . . 41
iii
<PAGE>
THIS AGREEMENT effective as of January 1, 1995 by and between
Alexander & Alexander Services, Inc., a Maryland corporation ("Grantor"),
and Wachovia Bank of North Carolina, N.A. (the "Trustee").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Grantor desires to establish an irrevocable trust,
subject to the claims of its creditors, designed to qualify as a "grantor
trust" for federal income tax purposes, to be known as the Directors'
Deferred Stock Trust (the "Trust"), and the Trustee is willing to serve as
trustee thereof;
NOW, THEREFORE, Grantor hereby establishes a trust with the
Trustee, and the Trustee hereby agrees to accept its appointment as trustee
thereof, subject to the following terms and conditions:
ARTICLE I
Creation of Trust
-----------------
Section 1.1. Establishment of Trust. Grantor hereby establishes
----------- ----------------------
with the Trustee and the Trustee hereby accepts an irrevocable trust
initially consisting of shares of Grantor's common stock (the "Initial
Contribution"), which have been transferred at the direction of Grantor to
<PAGE>
the Trustee from a similar trust established by Grantor with the Trustee.
Section 1.2. Purpose. The purpose of the Trust is to assist
----------- -------
Grantor in meeting its obligations under the benefit plans or other
compensatory arrangements for directors listed on Appendix A hereto.
Notwithstanding the foregoing, Grantor may elect to include under the Trust
benefits payable under any other compensatory plan, agreement or
arrangement (which, together with the plans and agreements listed on
Appendix A shall hereafter be collectively referred to as the
"Arrangements").
Section 1.3. Definition of Change of Control. For purposes of
----------- -------------------------------
this Trust, a "Change of Control" shall be deemed to have occurred if (i)
-
any individual, firm, corporation or other entity (other than Grantor, a
subsidiary of Grantor or any employee benefit plan maintained by Grantor or
any of its subsidiaries) or any group (as defined in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended (the "1934 Act")) becomes,
directly or indirectly, the beneficial owner (as defined in the General
Rules and Regulations of the Securities Exchange Commission with respect to
Sections 13(d) and 13(g) of the 1934 Act) of more than 35% of the then
outstanding shares of Grantor's common stock entitled to vote generally in
the election of direc-
2
<PAGE>
tors of Grantor; (ii) the stockholders of Grantor approve a definitive
--
agreement for (A) the merger or other business consolidation of Grantor
-
with or into another corporation pursuant to which the stockholders of
Grantor do not own, immediately after the transaction, more than 50% of the
voting power of the corporation that survives and is a publicly owned
corporation and not a subsidiary of another corporation, or (B) the sale,
-
exchange or other disposition of all or substantially all of the assets of
Grantor; or (iii) during any period of two years or less, individuals who
---
at the beginning of such period constituted the Board of Directors of
Grantor cease for any reason to constitute at least a majority thereof,
except that any individual who was first elected as a director (other than
as a result of any settlement of a proxy contest or any action taken to
avoid a proxy contest) during such period by or upon the recommendation of
a majority of the individuals who (x) were members of the Board of Direc-
-
tors of Grantor immediately prior to the commencement of such period and
(y) constituted a majority of the Board of Directors of Grantor at the time
-
of such election, shall be treated as though he or she was a director at
the beginning of such period. Notwithstanding anything else contained
herein to the contrary, no Change in Control shall be deemed to have
occurred unless and until
3
<PAGE>
the Trustee has actual knowledge thereof from one of the following sources:
a certified statement that a Change in Control has occurred, signed by an
officer of Grantor; a report filed with the Securities and Exchange
Commission; a public statement issued by Grantor; or a periodical of gen-
eral circulation, including but not limited to The New York Times or The
------------------ ---
Wall Street Journal.
- -------------------
Section 1.4. Accounts. The assets of the Trust shall be
----------- --------
maintained in one or more General Accounts (as hereafter defined) and/or
one or more Separate Accounts (as hereafter defined) as directed by the
Grantor (prior to a Change in Control) or as determined by the Trustee
(after a Change in Control). A General Account shall be an account
established either to pay benefits of all directors who are parties to or
beneficiaries under an Arrangement (each, a "Director") or to pay the
benefits of all Directors in a particular Arrangement. A Separate Account
is an account established for the purpose of paying an individual Direc-
tor's benefits (or a particular type of benefit) under any Arrangement.
More than one General Account may be maintained (including two or more
General Accounts established with respect to a single Arrangement), and
more than one Separate Account may be maintained for each Director,
including Separate Accounts which reflect different inter-
4
<PAGE>
ests under the same Arrangement. The establishment of a General Account or
Separate Account hereunder shall be for accounting and bookkeeping purposes
only and shall not require a segregation of any part of the assets of the
Trust, except where segregation is specifically provided under the terms of
an Arrangement or this Trust Agreement, or unless otherwise specifically
directed by the Grantor prior to a Change in Control.
Prior to a Change in Control, Grantor may earmark one or more
assets of the Trust for the benefit of a Separate Account, and such
Separate Account shall be credited with the earnings or proceeds of any
such earmarked assets (the "Earmarked Assets"). Any such Separate Account
or the portion in such Separate Account holding Earmarked Assets shall
hereafter be called an Earmarked Account.
As of each valuation date under Section 3.2, any increase or
decrease in the net worth of the Trust attributable to investment earnings,
gains, losses and unrealized appreciation or depreciation on assets of the
Trust that are not Earmarked Assets shall be allocated among each General
Account and the portion of each Separate Account that is not an Earmarked
Account, in accordance with the ratio which each such Account bears to all
such Accounts. For purposes of this allocation, an Account shall consist
of the balance
5
<PAGE>
of the Account as of the preceding valuation date, as adjusted to reflect
distributions and contributions charged or credited to such Account in the
interim. Investment earnings, gains, losses and unrealized appreciation or
depreciation of an Earmarked Account shall be allocated to such Earmarked
Account.
Except as otherwise expressly provided herein, at any time
directed by Grantor prior to a Change of Control, Earmarked Assets may be
transferred to a General Account or a Separate Account, provided that cash
or property having a readily ascertainable fair market value (including,
without limitation, securities traded on an established securities market),
or any combination of such cash and property, is substituted for such
assets in an amount at least equal to the fair market value of such assets.
The Trustee shall maintain records for any General Account, Separate
Account, or Earmarked Account established under any Arrangement. At the
time of any contribution to the Trust Grantor shall, in its absolute
discretion, direct the Trustee regarding the manner in which such contri-
bution is to be allocated among any General Accounts, any Separate Accounts
and any Earmarked Accounts. If no direction is given with respect to all
or any portion of any contribution to the Trust, such contribution shall be
allocated to a General Account for the
6
<PAGE>
Arrangement with respect to which the contribution is being made. Grantor
shall have sole discretion to determine the amounts (and the manner in
which such amounts are) credited to a Director's Separate Account(s) or
Earmarked Account(s) and may, prior to the occurrence of a Change of
Control, direct the Trustee to reallocate amounts from any General Account
to any Separate Account(s) or Earmarked Account(s).
After a Change in Control has occurred, amounts held under a
General Account may be reallocated to a Separate Account or Earmarked
Account only if (i) such allocation is required under the terms of an
-
Arrangement, or (ii) the assets in a General Account for a particular
--
Arrangement exceed all liabilities for benefits under such Arrangement (in
which case, the Trustee, in its discretion, may reallocate such excess
assets to one or more other General Accounts or Separate Accounts).
ARTICLE II
General Duties of the Parties
-----------------------------
Section 2.1. General Duties of Company. Grantor shall provide
----------- -------------------------
the Trustee with a certified copy of each Arrangement and with copies of
all amendments thereto promptly upon their adoption or execution and shall
from time to time certify to the Trustee the names and specimen
7
<PAGE>
signatures of the persons appointed to act on behalf of Grantor in
connection with the Trust. Grantor shall, upon request of the Trustee,
furnish the Trustee with such reasonable information as is necessary or
appropriate for the Trustee to carry out its responsibilities under this
Agreement, and the Trustee shall be entitled to rely on the information
received from Grantor. Grantor shall be responsible for administration of
the Arrangements, and shall furnish the Trustee with such information as
the Trustee shall reasonably request to carry out the intent and purposes
of the Trust, and the Trustee shall be entitled to rely on the information
received from Grantor prior to a Change of Control.
In addition to the Initial Contribution, Grantor shall make such
other contributions as shall from time to time be authorized by due
corporate action. Any such payments made by Grantor may be in cash, by
letter of credit or, prior to the date as of which a Change of Control
occurs, in such property (including, without limitation, securities issued
by Grantor) as Grantor may determine. Grantor shall keep accurate books
and records with respect to the interest of each Director in any
Arrangement and shall provide copies of such books and records to the
Trustee at any time as the Trustee shall request.
8
<PAGE>
Section 2.2. General Duties of Trustee. The Trustee shall hold
----------- -------------------------
all payments and property received by it hereunder, together with the
income and gains therefrom and additions thereto (the "Trust Fund").
Unless otherwise directed by Grantor or an investment manager appointed
pursuant to Section 3.5 (an "Investment Manager") prior to the date as of
which a Change of Control occurs, the Trustee shall invest any cash at its
discretion in any marketable short and medium term fixed income securities,
United States Treasury Bills, other short and medium term government obli-
gations, commercial paper or money market instruments ("Short-Term
Investments"), or may maintain cash balances consistent with the liquidity
needs of the Trust as determined by the Trustee. The Trustee shall manage,
invest and reinvest the Trust Fund, collect the income thereon, and make
distributions therefrom, all as hereinafter provided. The Trustee shall be
responsible only for the property actually received by it hereunder and not
for any amount which Grantor is required to contribute to the Trust Fund
hereunder. The Trustee shall have no duty or authority to compute any
amount to be contributed to the Trust Fund, to review the computation of
amounts contributed or to bring any action or proceeding to enforce the
collection of any contribution required to be made to the Trust Fund. The
9
<PAGE>
rights, duties and obligations of the Trustee hereunder shall be solely as
set forth herein, without regard to the terms of any of the Arrangements or
any other document which is not part of this Agreement.
ARTICLE III
Investment, Administration and
Disbursement of Trust Fund
------------------------------
Section 3.1. Investment Powers of Trustee. Subject to the
----------- ----------------------------
provisions of Sections 3.5, 3.6 and 8.2 hereof, the Trustee shall have,
with respect to the Trust Fund, the power:
(a) To invest and reinvest the Trust Fund as a single fund or,
to the extent specified in Appendix B or as otherwise directed by
Grantor prior to the date as of which a Change of Control occurs, in
one or more Earmarked Accounts with respect to any Arrangement or any
class of Arrangements or any Director or class of Directors. Except
as otherwise directed by (i) Grantor in writing prior to the
-
occurrence of a Change of Control or (ii) an Investment Manager, the
--
Trustee shall invest the Trust Fund, without distinction between
principal and income, in Short-Term Investments; provided, that, the
Trustee shall hold any securities of Grantor or other property contri-
buted to
10
<PAGE>
the Trust until otherwise directed (i) by Grantor prior to the date as
-
of which a Change of Control occurs, (ii) by an Investment Manager or
--
(iii) otherwise in accordance with the terms of this Agreement;
---
(b) To participate in any plan of reorganization, consolidation,
merger, combination, liquidation or other similar plan or oppose any
such plan or any action thereunder, or any contract, mortgage, pur-
chase, sale or other action by any person or corporation;
(c) To deposit any property with any protective, reorganization
or similar committee, to delegate discretionary power to any such
committee and to pay and agree to pay part of the expenses and compen-
sation of any such committee and any assessments levied with respect
to any property so deposited;
(d) To exercise all conversion and subscription rights
pertaining to any property;
(e) To organize under the laws of any state a corporation for
the purpose of acquiring and holding title to any property which it is
authorized to acquire under this Agreement and to exercise with
respect thereto any or all of the powers set forth in this Agreement;
11
<PAGE>
(f) To manage, operate, repair, improve, develop, preserve,
mortgage or lease for any period any real property or any royalties,
interest or rights held by it directly or through any corporation,
either alone or by joining with others, using other Trust assets for
any of such purposes; to modify, extend, renew, waive or otherwise
adjust any or all of the provisions of any such mortgage or lease; and
to make provision for amortization of the investment in or
depreciation of the value of such property;
(g) To borrow against the cash surrender value of any insurance
contract for the purpose of paying the premiums on such contract; and
(h) Generally to do all acts, whether or not expressly
authorized, not inconsistent with the terms of this Agreement which
the Trustee may deem necessary or desirable for the investment of the
Trust Fund.
Section 3.2. Valuation of Trust Fund. As soon as practicable
----------- -----------------------
after the last bank business day of each calendar quarter and as of such
other dates as may be specified by Grantor or as determined by the Trustee,
the Trustee shall report in writing to Grantor (and to any Director to whom
Grantor shall direct the Trustee in writing to report) the assets held in
the Trust Fund (including the value of
12
<PAGE>
each Separate and/or Earmarked Account, if any, maintained hereunder) as of
such day and shall determine and include in such report the fair market
value as of such day of each such asset. In determining such fair market
values, the Trustee shall use such market quotations and other information
as are available to it and as may in its discretion be appropriate. The
report of any such valuation shall not constitute a representation by the
Trustee that the amounts reported as fair market values would actually be
realized upon the liquidation of the Trust Fund. The Trustee shall not be
accountable to Grantor or to any other person on the basis of any such
valuation, but its accountability shall be in accordance with the pro-
visions of Article VI hereof.
Section 3.3. Administrative Powers of Trustee. Subject to the
----------- --------------------------------
provisions of Section 3.5 hereof, the Trustee shall have the power in its
discretion:
(a) To exercise all voting rights with respect to the shares of
stock held in the Trust Fund and to grant proxies, discretionary or
otherwise, provided that a Director shall direct the Trustee as to the
-------------
vote of any Company securities entitled to vote which are held in a
Separate and/or Earmarked Account for his or her benefit;
13
<PAGE>
(b) To cause any shares of stock to be registered and held in
the name of one or more of its nominees, or one or more nominees of
any system for the central handling of securities, without increase or
decrease of liability;
(c) To collect and receive any and all money and other property
due to the Trust Fund and to give full discharge therefor;
(d) To settle, compromise, or submit to arbitration any claims,
debts or damages due or owing to or from the Trust; to commence or
defend suits or legal proceedings whenever, in its judgment, any
interest of the Trust requires it; and to represent the Trust in all
suits or legal proceedings in any court of law or equity or before any
other body or tribunal, insofar as such suits or proceedings relate to
any property forming part of the Trust Fund or to the administration
of the Trust Fund; and
(e) To hold uninvested for not more than three business days,
without liability for interest thereon, any moneys received by it
until the same shall be invested or disbursed;
(f) To determine how all receipts and disbursements shall be
credited, charged or apportioned as
14
<PAGE>
between income and principal, and the decision of the Trustee shall be
final and not subject to question by any beneficiary of the Trust;
(g) To hold property of the Trust in its own name or in the name
of a nominee or nominees, without disclosure of the Trust, or in
bearer form so that it will pass by delivery, but no such holding
shall relieve the Trustee of its responsibility for the safe custody
and disposition of the Trust in accordance with the provisions of this
Agreement. The Trustee's books and records shall at all times show
that such property is part of the Trust and the Trustee shall be
absolutely liable for any loss occasioned by the acts of its nominee
or nominees with respect to securities registered in the name of the
nominee or nominees;
(h) To employ in the management of the Trust suitable agents,
without liability, subject to subparagraph (g) above, for any loss
occasioned by any such agents selected by the Trustee with the care,
skill, prudence and diligence under the circumstances then prevailing
that a prudent man acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of a like character
and with like aims;
15
<PAGE>
(i) To make, execute and deliver, as Trustee, any deeds,
conveyances, leases, mortgages, contracts, waivers or other
instruments in writing that the Trustee may deem necessary or
desirable in the exercise of its powers under this Agreement; and
(j) Generally to do all acts, whether or not expressly
authorized, which the Trustee may deem necessary or desirable for the
protection of the Trust Fund.
Section 3.4. Dealings with Trustee. Persons dealing with the
----------- ---------------------
Trustee shall be under no obligation to see to the proper application of
any money paid or property delivered to the Trustee or to inquire into the
Trustee's authority as to any transaction.
Section 3.5. Investment Manager. Prior to the date as of which
----------- ------------------
a Change of Control occurs, Grantor, and after such date the Trustee, may
appoint one or more investment managers ("Investment Managers") within the
meaning of Section 3(37) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") to direct the Trustee as to the investment of
all or a portion of the Trust Fund for the exclusive benefit of the
beneficiaries of the Trust Fund, in accordance with the standards set forth
in Section 404(a) of ERISA, provided that, an Investment Manager may only
-------------
be appointed with respect to assets held in an Earmarked
16
<PAGE>
Account only with the consent of the Director for whom such Earmarked
Account is established.
Grantor shall notify the Trustee of the appointment of any
Investment Manager (other than the Trustee) under this Section 3.5 by
delivering to the Trustee an executed copy of an instrument under which
such Investment Manager was appointed to act as such hereunder and setting
forth the investment powers of such Investment Manager and a written
instrument executed by such Investment Manager in which it acknowledges
that it has agreed to act as such. Notwithstanding anything herein
contained to the contrary, during the term of such appointment, the
Investment Manager or Investment Managers so appointed shall have the sole
responsibility for the investment and reinvestment of the portion of the
Trust Fund for which such Investment Manager or Investment Managers were
appointed to act, and shall have full power in its or their discretion to
direct the Trustee with respect to the exercise by it of its investment
powers, including the voting of shares. Pending receipt of instructions
from any Investment Manager with respect thereto, any cash received by the
Trustee from time to time shall be invested by the Trustee in Short-Term
Investments.
17
<PAGE>
Grantor (prior to a Change in Control) or the Trustee (after a
Change in Control) may terminate its appointment of an Investment Manager
at any time and may thereafter appoint a successor Investment Manager in
the same manner as provided above in this Section 3.5, provided that, the
-------------
appointment of (and the appointment of a successor to) an Investment
Manager with respect to assets held in an Earmarked Account may only be
made only with the consent of the Director for whom such Earmarked Account
is established in the event Grantor terminates the appointment of an
Investment Manager, Grantor shall notify the Trustee in writing of such
termination. Such successor Investment Manager shall thereafter, until its
appointment shall be terminated, be deemed to be an "Investment Manager"
for all purposes of this Agreement. If there shall be more than one
Investment Manager, the portion of the Trust Fund to be invested by each
such Investment Manager shall be held in a Separate Account and the powers
and authority of each such Investment Manager shall be divided as set forth
in the instruments appointing such Investment Managers.
So long as an Investment Manager (other than the Trustee or one
of its affiliates) is serving as such, the Trustee shall be under no duty
or obligation to review the assets comprising any portion of the Trust Fund
managed by
18
<PAGE>
the Investment Manager, to make any recommendations with respect to the
investment or reinvestment thereof, or to determine whether any direction
received from any Investment Manager is proper or within the terms of this
Trust Agreement or to monitor the activities of any Investment Manager.
The Trustee shall have no liability or responsibility to Grantor or any
persons claiming any interest in the Trust Fund for acting without question
on the direction of, or for failing to act in the absence of any direction
from, Grantor or any Investment Manager unless the Trustee participated
knowingly in, or knowingly undertook to conceal, an act or omission of
Grantor or of any Investment Manager constituting a breach of its duties
hereunder, knowing such act or omission was a breach of such duties,
provided, however, that the Trustee shall not be deemed to have "partici-
pated" in a breach (i) by Grantor or to have "knowledge" of any such breach
-
as a result of accepting any property contributed to the Trust in Grantor's
discretion or retaining such property as an investment for the Trust Fund
at Grantor's direction, and (ii) by Grantor or any Investment Manager for
--
the purposes of this undertaking solely as a result of the performance by
the Trustee or its officers, employees or agents of any custodial,
reporting, recording, and bookkeeping functions with respect to any assets
of the Trust Fund
19
<PAGE>
managed by any Investment Manager or with respect to which the Trustee has
received directions from Grantor or solely as a result of settling purchase
and sale transactions entered into or directed by any Investment Manager or
Grantor, or to have "knowledge" of any such breach solely as a result of
the information received by the Trustee or its officers, employees or
agents in the normal course in performing such functions or settling such
transactions. If the Trustee has actual knowledge of a breach committed by
any Investment Manager, it shall promptly notify Grantor in writing
thereof, and the Trustee, except as required by applicable law, shall
thereafter have no responsibility to remedy such breach.
Section 3.6. Distributions from Trust Fund. The Grantor shall
----------- -----------------------------
include the following information with respect to each Arrangement on
Appendix C or shall deliver a schedule (a "Payment Schedule") to the
Trustee containing such information: the name, current address, and social
security number of each Director, the amount of the benefit currently
accrued by each such Director under an Arrangement, and the date on which
benefits to each such director are payable (or a description of the event
triggering the payment of benefits). Such Payment Schedule or Appendix
shall be updated by Grantor as soon as practical (but not
20
<PAGE>
more than 30 days) following the addition, replacement, resignation or
removal of a Director.
Within 20 days following the date on which a Director ceases to
be a member of the Board of Directors, the Grantor shall furnish the
Trustee with the name of such Director and shall direct the Trustee as to
the date on which the payment of the Director's benefits is scheduled to be
made or commence, the form and amount of payment, and the address of the
Director. If the Grantor does not furnish such directions within such 20-
day period, the Trustee shall distribute the benefit due the Director from
his Separate Account (or, if there is no Separate Account for the Director
or the amount in the Separate Account does not reflect the total benefit
due the Director, from the General Account) in accordance with Appendix C
or the latest Payment Schedule delivered to the Trustee; provided, however,
that any shares of Grantor's common stock that are held in a Separate
Account for any Director at such time may not be distributed until the day
after the six month anniversary of the date such Director ceases to be a
member of the Board of Directors. The Trustee shall be entitled to rely on
the written statement of a Director that all conditions or events required
to be satisfied or to have occurred prior to the commencement or payment of
benefits have been satisfied
21
<PAGE>
or have occurred and to assume that any condition with respect to the
payment of any benefit shall have been satisfied by the intended recipient
thereof. The Trustee shall have no obligation to notify Grantor of its
receipt of any written statement from an intended recipient. The Trustee
shall also make distributions in accordance with any order of a court of
competent jurisdiction issued in conjunction with a successful challenge by
a person having an interest in the Trust Fund made in accordance with the
applicable provisions of any Arrangement.
Notwithstanding any provision of this Agreement other than
Section 3.7, if any Director is determined to be subject to federal income
tax on any amount held in the Trust prior to the time of distribution
thereof, the entire amount determined to be so taxable shall be distributed
by the Trustee to such Director. An amount shall be determined to be
subject to federal income tax upon the earliest of: (i) the receipt by a
-
Director of a notice of deficiency from the Internal Revenue Service with
respect to an amount held under the Trust which is not contested by the
Director; (ii) the execution of a closing agreement between a Director and
--
the Internal Revenue Service which provides that an amount held under the
Trust is includible in the Director's gross income; (iii) a final
---
determination by the United States Tax
22
<PAGE>
Court or any other Federal Court which holds that an amount held under the
Trust in includible in a Director's gross income; or (iv) the delivery to
--
the Trustee of an opinion of independent tax counsel, selected by Grantor
but acceptable to the affected Director, that it is more likely than not
that an amount held under the Trust in includible in such Director's gross
income.
Section 3.7. Insolvency or Bankruptcy. The assets of the Trust
----------- ------------------------
shall be subject to the claims of Grantor's creditors only in the event
that Grantor is a debtor in proceedings under the U.S. Bankruptcy Code
("Bankruptcy") or is unable to pay its debts as they become due
("Insolvency"). The chief executive officer or other person serving as the
principal executive officer of Grantor (the "Chief Executive Officer") of
Grantor and the chief financial officer or other person serving as the
principal financial officer of Grantor (the "Chief Financial Officer")
shall be obligated to notify the Trustee promptly upon the occurrence of
the Insolvency or Bankruptcy of Grantor, and, upon receipt of such notice,
the Trustee shall thereupon immediately suspend all payments hereunder for
the duration of such Insolvency or Bankruptcy. If the Trustee receives
written allegations of Grantor's Insolvency, it shall suspend payments
hereunder immediately and shall demand that
23
<PAGE>
Grantor's Board of Directors, Chief Executive Officer or the Chief
Financial Officer certify whether Grantor is Insolvent. The Trustee may
accept a certified resolution of the Board of Directors or a certificate of
the Chief Executive Officer or the Chief Financial Officer of Grantor
attesting that Grantor is not in a state of Insolvency as determinative of
the solvency of Grantor and, if such resolution or certificate is
delivered, may recommence making payments hereunder. Until such a
resolution or certificate is delivered, the Trustee shall continue to
suspend payments. While payments from the Trust Fund are suspended under
this Section 3.7, whether due to notice from Grantor or pending certifica-
tion of Grantor's solvency, the Trustee shall hold the Trust Fund as set
forth in this Agreement, unless and until otherwise specifically directed
by a court having jurisdiction over the Trust Fund.
Section 3.8. Forfeitures from Separate Accounts. In the event a
----------- ----------------------------------
Director's rights under the terms of any Arrangement are forfeited or such
Director's benefits under the terms of any Arrangement are fully satisfied,
the balance, if any, remaining in any Separate Account established with
respect to such Director shall be reallocated to a General Account or such
other Separate Account as shall be directed by Grantor prior to a Change of
Control. After a
24
<PAGE>
Change of Control, or if Grantor fails to give the Trustee directions prior
to a Change of Control, such remaining balance shall be allocated to the
General Account having the lowest ratio of assets to liabilities.
ARTICLE IV
Settlement of Accounts,
Enforcement of Trust and Legal Proceedings
------------------------------------------
Section 4.1. Settlement of Accounts of Trustee and
----------- -------------------------------------
Administrative Committee. The Trustee shall keep full accounts of all
- ------------------------
investments, receipts and disbursements and other transactions hereunder.
Its financial statements, books and records with respect to the Trust Fund
shall be open to inspection by Grantor or its representatives upon
reasonable notice at all reasonable times during business hours of the
Trustee.
The Trustee shall render to Grantor monthly statements of its
receipts and disbursements as Trustee hereunder. Within 30 days after the
close of each year or any termination of the duties of the Trustee, the
Trustee shall prepare, sign and mail in duplicate to Grantor an account of
its acts and transactions as Trustee hereunder. If within ninety (90) days
after receipt of the account or any amended account Grantor has not filed
with the Trustee notice of any
25
<PAGE>
objection to any act or transaction of the Trustee, the account or amended
account shall become an account stated as between the Trustee and Grantor.
If an objection has been filed, and if Grantor is satisfied that it should
be withdrawn or if the account is adjusted to its satisfaction, Grantor
shall in writing filed with the Trustee signify its approval of the
account, and it shall become an account stated as between the Trustee and
Grantor.
When an account becomes an account stated, such account shall be
finally settled, and the Trustee shall be completely discharged and
released, as if such account had been settled and allowed by a judgment or
decree of a court of competent jurisdiction in an action or proceeding in
which the Trustee, Grantor, and all persons having or claiming to have any
interest in the Trust Fund or under the Arrangement were parties.
Following a Change in Control, a Director may request a statement
from the Trustee (not more frequently than monthly) as to the amount of the
benefit due the Director (as reflected on the books and records of the
Trustee), the amount allocated to any Separate Account for the Director, a
description of any asset held in an Earmarked Account for the Director, and
the transactions relating to any Earmarked Account. Notwithstanding
anything
26
<PAGE>
herein to the contrary, the delivery of such statement to a Director in
accordance with this paragraph shall not give the Director any beneficial
interest in any assets of the Trust or obligate the Trustee to provide any
accounting to a Director (other than furnishing the statement contemplated
herein). The furnishing of a statement shall not give a Director the right
to direct the Trustee to adjust or amend any General Account, Separate
Account, or Earmarked Account.
The Trustee or Grantor shall have the right to apply at any time
to a court of competent jurisdiction for judicial settlement of any account
of the Trustee not previously settled as hereinabove provided. In any such
action or proceeding it shall be necessary to join as parties only the
Trustee and Grantor (although the Trustee may also join other parties as it
deems appropriate), and any judgment or decree entered therein shall be
conclusive.
Section 4.2. Determination of Interests in the Trust Fund,
----------- --------------------------------- -----------
Enforcement of Trust and Legal Proceedings. The interests of each person
- ------------------------------------------
in the Trust Fund shall be determined in accordance with the terms of the
Arrangement between each such person and Grantor. Prior to a Change in
Control the Trustee shall have no duty to question any direction given to
the Trustee by Grantor including any direction advising the Trustee as to
the interests of any
27
<PAGE>
person under any Arrangement. Grantor shall have authority to enforce this
Agreement on behalf of all persons claiming any interest in the Trust Fund,
provided that if, a written request is received by the Board of Directors
from the beneficiary under an Arrangement to enforce this Agreement and
Grantor declines to enforce this Agreement, the beneficiary who made such
request may enforce this Agreement individually or as part of a class, in
which case Grantor shall be obligated to reimburse such beneficiary for all
expenses incurred in pursuing such action. Except as otherwise provided in
this Section 4.2, in any action or proceeding affecting the Trust Fund the
only necessary parties shall be Grantor and the Trustee, and no other
person shall be entitled to any notice or process.
ARTICLE V
Taxes, Expenses and Compensation
of Trustee
--------------------------------
Section 5.1. Taxes. Any taxes on the Trust Fund or the income
----------- -----
thereof shall be paid by Grantor.
Section 5.2. Expenses and Compensation. The Trustee shall be
----------- -------------------------
paid such compensation for its services as Trustee as shall be agreed on
between Grantor and Trustee (the "Fees") and Grantor shall reimburse the
Trustee for its expenses of management and administration of the Trust,
28
<PAGE>
including, but not limited to, compensation of counsel, record-keeping
expenses, investment management fees, computer time charges, data retrieval
and input costs, and charges for time expended by personnel of the Trustee
in fulfilling the Trustee's duties. If Grantor does not fulfill its
obligation to pay any such compensation and expenses within 90 days after
it receives notice of such obligation, they may be paid from the Trust Fund
and shall have priority over any other payments to be made under this
Agreement; provided, however, that the Trustee shall take all reasonable
actions to seek reimbursement of such fees and expenses from Grantor unless
the remaining assets of the Trust Fund, immediately after payment to the
Trustee, exceed the potential liabilities of Grantor arising under the
Arrangements.
ARTICLE VI
For Protection of Trustee
-------------------------
Section 6.1. Evidence of Action by Company. Pursuant to Section
----------- -----------------------------
2.1 Grantor shall certify to the Trustee the name or names of any persons
or persons authorized to act for Grantor. Until Grantor notifies the
Trustee that any such person is no longer authorized to act for it, the
29
<PAGE>
Trustee may continue to rely on the authority of such person.
The Trustee may rely upon any certificate, notice or direction
purporting to have been signed on behalf of Grantor which the Trustee
believes to have been signed by any person or persons authorized to act for
Grantor.
Communications to the Trustee shall be sent to the Trustee's
principal office or to such other address as the Trustee may specify. No
communication shall be binding upon the Trust Fund or the Trustee until it
is received by the Trustee.
Communications to Grantor shall be sent to Grantor's principal
office or to such other address as Grantor may specify.
Section 6.2. Advice of Counsel. The Trustee may consult with
----------- -----------------
any legal counsel, including, prior to the occurrence of a Change of
Control, counsel to Grantor, with respect to the construction of this
Agreement as it pertains to its duties hereunder, or any act which it pro-
poses to take or omit, and shall not be liable for any action taken or
omitted in good faith pursuant to such advice.
Section 6.3. Fiduciary Responsibility. The Trustee shall carry
----------- ------------------------
out its duties hereunder solely in the best interests of the Directors and
their beneficiaries, and
30
<PAGE>
shall use the care, skill, prudence and diligence under the circumstances
then prevailing that a prudent man acting in a like capacity and familiar
with such matters would use in the conduct of an enterprise of like charac-
ter and with like aims. The Trustee shall not be liable for any act or
failure to act under this Agreement, if any such action were taken or
omitted, as the case may be, in good faith or in accordance with the
express provisions of this Agreement.
The Trustee's duties and obligations shall be limited to those
expressly imposed upon it by this Agreement, notwithstanding any reference
to the Arrangements.
Grantor at any time may employ as agent (to perform any act, keep
any records or accounts, or make any computations required of Grantor by
this Agreement or the Arrangement) the corporation serving as Trustee here-
under. Nothing done by said corporation as such agent shall affect its
responsibility or liability as Trustee hereunder.
Section 6.4. No Duty to Advance Funds or to Administer the
----------- ---------------------------------------------
Arrangements. The Trustee shall have no obligation to advance its own
- ------------
funds for the purposes of fulfilling its responsibilities under this
Agreement, and its obligation to incur expenses shall at all times be
limited to amounts in the Trust available to be applied toward such
31
<PAGE>
expenses. The Trustee shall not be responsible in any respect for admini-
stering the Arrangements.
ARTICLE VII
Resignation and Removal of Trustee
----------------------------------
Section 7.1. Resignation of Trustee. Prior to the date as of
----------- ----------------------
which a Change of Control occurs, the Trustee may resign upon 30 days'
written notice to Grantor. Notwithstanding the preceding sentence, if
within thirty (30) days after having received a notice of resignation from
the Trustee, Grantor notifies the Trustee in writing that actions have
commenced that, if completed, would cause a Change of Control to occur,
such notice of resignation shall be without effect and the Trustee shall
continue to serve hereunder (except as provided below). After the date as
of which a Change of Control occurs, the Trustee may resign only under one
of the following circumstances:
(i) The Trustee is no longer in the business, or has resigned a
substantial number of its trust relationships as part of its efforts
to remove itself from the business, of acting as trustee (whether
directed or discretionary) for employee benefit plans.
(ii) The Trustee determines that a conflict of interest exists
which would prevent it from properly
32
<PAGE>
fulfilling its duties under this Agreement. The Trustee shall use its
best efforts to avoid the creation of such a conflict.
(iii) The assets of the Trust have been exhausted or are
insufficient to pay accrued and reasonably anticipated fees and
expenses of the Trustee hereunder and the Trustee has been
unsuccessful in obtaining a court order or in otherwise requiring
Grantor to make such payments or has been unable to collect on a judg-
ment against Grantor.
Notwithstanding the above, the Trustee may resign for reasons set
forth in (i) or (ii) only if it has obtained the agreement of a bank (as
- --
defined in the investment Advisers Act of 1940) or other entity, with
corporate trust powers under applicable state law, that is not an affiliate
of Grantor, and that has assets which exceed liabilities by at least 6%
with at least $1 billion in total assets, to replace it as Trustee under
the terms of this Agreement. In any event, the Trustee shall continue to
hold the Trust assets in Trust until the new trustee is in place.
Section 7.2. Removal of Trustee. Grantor, by action of its
----------- ------------------
Board of Directors, may remove the Trustee prior to the date as of which a
Change of Control occurs, upon 50 days' valid written notice to the
Trustee, or upon
33
<PAGE>
shorter notice if acceptable to the Trustee. Grantor may not remove the
Trustee after the date as of which a Change of Control occurs. In order to
constitute valid written notice of removal, the notice shall certify to the
Trustee that a Change of Control has not occurred.
In the event the Trustee resigns or is removed, the Trustee shall
have a right to have its accounts settled as provided in Section 4.1
hereof.
Section 7.3. Appointment of Successor Trustee. In no event
----------- --------------------------------
shall the resignation or removal of the Trustee terminate this Trust
Agreement. Upon the resignation or removal of the Trustee prior to a
Change in Control, the Grantor shall have the duty of appointing a
successor trustee to carry out the terms of this Agreement. Any such
successor must meet the same standards prescribed for a successor trustee
under Section 7.1. The appointment of a successor to the Trustee shall
take effect upon delivery to the Trustee of (a) a duly executed instrument
-
in writing appointing such successor, and (b) an acceptance in writing,
-
executed by such successor, both acknowledged in the same form as this
Agreement.
All of the provisions set forth herein with respect to the
Trustee shall relate to each successor with
34
<PAGE>
the same force and effect as if such successor had been originally named as
a Trustee hereunder.
If a successor is not appointed within 45 days after the Trustee
gives notice of its resignation pursuant to Section 7.1, the Trustee may
apply to any court of competent jurisdiction for appointment of a
successor.
Section 7.4. Transfer of Fund to Successor. Upon the
----------- -----------------------------
resignation or removal of the Trustee and appointment of a successor and
after the final account of the Trustee has been settled as provided in
Article IV, the Trustee shall transfer and deliver the Trust Fund to such
successor.
ARTICLE VIII
Duration and Termination
of Trust and Amendment
------------------------
Section 8.1. Duration and Termination. The Trust shall termi-
----------- ------------------------
nate upon the earliest of (a) full payment of all amounts due under the
-
Arrangements, (b) the expiration of twenty years and six months after the
-
death of the last surviving individual who is living and is a Director on
the date this Trust is established, (c) any change in law requires it to be
-
amended in a way that could make any part of the Trust Fund taxable to the
Directors, for federal income tax purposes, prior to the date or dates upon
which payments were made from the Trust Fund to the Directors.
35
<PAGE>
Section 8.2. Distribution upon Termination. Upon termination of
----------- -----------------------------
this Trust, the Trustee shall liquidate the Trust Fund and, after its final
account has been settled as provided in Article IV, shall distribute the
net balance thereof to the person or persons having an interest therein.
The Trustee shall make such distribution (i) as Grantor shall direct
-
(whether expressly as to any Director or pursuant to a payment schedule
delivered to the Trustee by Grantor) prior to the date as of which a Change
of Control occurs or (ii) as is expressly provided in Appendix C or
--
elsewhere in this Agreement. (In the event that a distribution is to be
made from a Separate Account, any such payment directions or payment
schedule shall indicate from which Separate Account such distribution is to
be made.) Distributions pursuant to this Section 8.2 shall be made in
shares of stock, cash or any other property, or combination thereof as the
Trustee shall determine in its discretion. Notwithstanding anything herein
to the contrary, no assets of the Trust may be returned to the Grantor
until all liabilities for benefits to Directors have been satisfied, except
that: (i) nothing in this Section 8.2 shall be deemed to limit or otherwise
-
prevent the payment from the Trust of fees and expenses in accordance with
the terms of the Trust; and (ii) the Trust shall, at all times, be subject
--
to the
36
<PAGE>
claims of the general creditors of the Grantor, as set forth in Section
3.7. Any assets of the Trust remaining after the payment of all
liabilities to the Directors and all of the Trustee's fees and expenses
shall promptly be turned over to Grantor. Upon making such distributions,
the Trustee shall be relieved from all further liability. The powers of
the Trustee hereunder shall continue so long as any assets of the Trust
Fund remain in its hands.
Section 8.3. Amendment. By a duly executed, written instrument
----------- ---------
delivered to the Trustee and acknowledged in the same form as this
Agreement, Grantor shall have the right at any time and from time to time
to amend this Agreement in whole or in part, except that (i) the duties and
-
responsibilities of the Trustee shall not be increased without the
Trustee's written consent, and (ii) no amendment hereto shall be made after
--
the time as of which a Change of Control occurs unless consented to in
writing by a majority of the Directors. Any such amendment shall become
effective upon (a) delivery to the Trustee of the written instrument of
-
amendment, together with a certified copy of the resolution of the Board or
the committee thereof authorizing such amendment, and (b) endorsement by
-
the Trustee on such instrument upon receipt thereof, together with any
required consent thereto. No such amendment shall adversely affect
37
<PAGE>
any benefits accrued under the Arrangements in respect of any Director or
the amount of assets of the Trust Fund allocable thereto.
ARTICLE IX
Indemnification
---------------
Section 9.1. Indemnification. Grantor hereby agrees to
----------- ---------------
indemnify and hold harmless the Trustee from and against any and all
losses, claims, damages, liabilities, costs and expenses, including but not
limited to, liability for any judgments or settlements consented to in
writing by the Trustee, which consents will not be unreasonably withheld,
and reasonable attorneys' fees arising out of or in connection with or as a
direct or indirect result of its serving as Trustee of the Trust
established under the Trust Agreement (including but not limited to the
Trustee's acts or omissions with respect to (a) the voting of any shares of
-
stock held as part of the assets of the Trust, or (b) establishing or
-
maintaining investment funds or effecting investments therein in accordance
with the terms and provisions of the Trust, or (c) the Trustee's
-
determination of Insolvency or a Change in Control and the Trustee's acts
or omissions in accordance with the terms and provisions of the Trust
following any determination of Insolvency or Change in
38
<PAGE>
Control), except only those losses, claims, damages, liabilities, costs and
expenses arising out of or in connection with or as a direct or indirect
result of the Trustee's bad faith, negligence or willful neglect or breach
of trust. The Trustee shall promptly notify Grantor of any claim, action
or proceeding for which it may seek indemnity. Such indemnity is a
continuing obligation and shall be binding on Grantor and its successors,
whether by merger or otherwise, and assigns. In addition, such indemnity
shall survive the resignation or removal of the Trustee and/or the
liquidation of the Trust.
ARTICLE X
Miscellaneous
-------------
Section 10.1. Governing Law. This Agreement and the Trust
------------ -------------
hereby created shall be construed and regulated by the laws of the State of
North Carolina, except as otherwise provided by federal law.
Section 10.2. Company's Liability Not Limited to Trust Assets.
------------ -----------------------------------------------
Nothing provided in this Agreement shall relieve Grantor of its liabilities
to pay benefits or other amounts due under any Arrangement except to the
extent such liabilities are met by application of Trust assets.
39
<PAGE>
Section 10.3. Use of Earmarked Assets. Notwithstanding anything
------------ -----------------------
else in this Agreement to the contrary, prior to the time at which a
forfeiture thereof occurs under Section 3.8, any Earmarked Assets held in a
Director's Earmarked Account shall be used exclusively to satisfy Grantor's
obligation to such Director with respect to the Arrangement or to pay the
benefit or benefits for which the Earmarked Account was established.
Section 10.4. Rights of Beneficiaries. Neither the Directors
------------ -----------------------
nor any other beneficiary hereunder shall have any right, title or interest
in the Trust Fund other than as a general, unsecured creditor of Grantor.
Neither the Director nor any other beneficiary shall be able to alienate,
assign, or otherwise encumber any interest such person has under any
Arrangement and no such interest shall be subject to lien, levy, attachment
or other encumbrance. Nothing in this Agreement shall alter, limit or
otherwise restrict Grantor's obligations under any Arrangement, except to
the extent that distributions hereunder satisfy such underlying
obligations.
Section 10.5. Titles and Headings Not to Control. The titles to
------------ ----------------------------------
Articles and headings of Sections in this Agreement are placed herein for
convenience of reference
40
<PAGE>
only and in case of any conflict the text of this Agreement, rather than
such titles or headings, shall control.
Section 10.6. Interpretation of the Trust Agreement. This Trust
------------ -------------------------------------
is intended to be (a) classified as a grantor trust as defined in section
-
671 et seq. of the Internal Revenue Code of 1986, as amended and (b)
-- --- -
classified as a component of a "plan which is unfunded and is maintained by
an employer primarily for the purpose of providing deferred compensation
for a select group of management or highly compensated employees" under
sections 201(2), 301(a)(3), 401(a)(1), and 402(1)(b)(6) of ERISA. Accord-
ingly, all provisions of this Agreement shall be interpreted in a manner
that satisfies the requirements that must be met in order that the Trust be
so classified.
41
<PAGE>
IN WITNESS WHEREOF, ALEXANDER & ALEXANDER SERVICES, INC. and
WACHOVIA BANK OF NORTH CAROLINA, N.A. have caused this Agreement to be
executed by their duly authorized officers and their respective seals to be
hereunto affixed as of the day and year first above written.
ALEXANDER & ALEXANDER SERVICES, INC.
By__________________________
Title:
Attest:
________________________
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By_________________________
Title:
Attest:
________________________
42
<PAGE>
Appendix A
1. Special compensation arrangement for Dr. Robert E. Boni ("Dr. Boni"),
as approved by the Board of Directors of Grantor (the "Boni
Arrangement").
2. Directors' Deferred Stock Arrangement (the "Directors Fee
Arrangement") for members of the Board of Directors of Grantor
(individually, a "Director").
43
<PAGE>
Appendix B
1. The shares of Grantor's common stock or other property or cash amounts
contributed in respect of the Boni Arrangement shall be held in a
Separate Account for the benefit of Dr. Boni, and such Account shall
be treated as an Earmarked Account, provided that, any shares of
-------------
Grantor's common stock contributed to such Separate Account shall be
held by the Trustee and not disposed of by the Trustee unless and
until directed to do so by an Investment Manager. An Investment
Manager may direct the sale of the number of shares determined in
accordance with the following schedule, following the dates set forth
next to such number of shares:
Number of Shares
Date Available for Sale
---- ------------------
December 31, 1994 1/3
December 31, 1995 1/3
December 31, 1996 1/3
2. The shares of Grantor's common stock or other property or cash amounts
contributed in respect of any director under the terms of the
Directors Fee Arrangement shall be held in a Separate Account for the
benefit of such director, and such Account shall be treated as an
Earmarked Account, provided that, any shares of Grantor's common stock
-------------
contributed to such Separate Account shall be held by the Trustee and
not disposed of by the Trustee unless and until directed to do so by
an Investment Manager. An Investment Manager may direct the sale of
the number of shares determined in accordance with the following
schedule, following the dates set forth next to such number of shares:
Number of Shares
Date Available for Sale
---- ------------------
First Anniversary of Date 100% of Shares
of Contribution of Shares Contributed
44
<PAGE>
Appendix C
1. The shares of Grantor's common stock held in the Separate Account for
Dr. Boni under the Boni Arrangement shall be distributed to him on the
day after the six month anniversary of the date he ceases to be a mem-
ber of the Board of Directors of Grantor, provided that if, to the
-------------
extent permitted under Appendix B, an Investment Manager appointed in
accordance with the terms of the Trust directs the Trustee to sell any
shares of Grantor's common stock held in the Separate Account for Dr.
Boni under the Boni Arrangement, the proceeds of any such sale shall
be distributed to Dr. Boni in cash as soon as practicable after Dr.
Boni ceases to be a member of the Board of Directors of Grantor,
except that all or a portion of such proceeds may be distributed to
Dr. Boni in cash at such earlier date as may be directed by the Chief
Executive Officer of Grantor, in his sole discretion.
2. The shares of Grantor's common stock held in the Separate Account for
any Director under the Directors Fee Arrangement shall be distributed
to such Director on the day after the six month anniversary of the
date he or she ceases to be a Director, provided that if an Investment
-------------
Manager appointed in accordance with the terms of the Trust directs
the Trustees to sell any shares of Grantor's common stock held in the
Separate Account for such Director in accordance with the terms of the
agreement appointing such Investment Manager, the proceeds of any such
sale (as the same shall have been reinvested in accordance with the
terms of the Trust) shall be distributed to such Director in cash as
soon as practicable after such Director ceases to be a Director,
except that all or a portion of such proceeds may be distributed to
the eligible Director at such earlier date as may be directed by the
Chief Executive Officer of Grantor, in his sole discretion.
45
<PAGE>
STATE OF )
: s.:
COUNTY OF )
On this day of __________________________, 19__, before me
came , to me known, who, being by me duly sworn,
did depose and say that he resides at
; and that he is of ALEXANDER &
ALEXANDER SERVICES, INC., the corporation described in and which executed
the foregoing instrument; that he knows the seal of said corporation; that
the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the board of directors of said corporation, and that he
signed his name thereto by like order.
____________________________
Notary Public
STATE OF )
: s.:
COUNTY OF )
On this day of ______________________, 19__, before me came
, to me known, who, being by me duly sworn, did
depose and say that he resides at
; and that he is of
____________________________________________, the corporation described in
and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by order of the board of directors of said
corporation, and that he signed his name thereto by like order.
____________________________
Notary Public
1
<PAGE>
STATE OF )
: s.:
COUNTY OF )
On this day of ______________________, 19__, before me came
, to me known, who, being by me duly sworn, did
depose and say that he resides at
; and that he did personally sign his name to the foregoing
instrument.
____________________________
Notary Public
2
EXHIBIT 20.1
A&A FOURTH QUARTER AND FULL-YEAR 1994 RESULTS
REFLECT RESTRUCTURING, CONTINGENCY RESOLUTION
AND OTHER INITIATIVES TO IMPROVE PROFITABILITY
NEW YORK, Feb. 16 -- Alexander & Alexander Services Inc.
(A&A) today reported a fourth quarter 1994 net loss of
$111.3 million, or $2.66 per share, which included charges
of $163.6 million before taxes for restructuring,
contingency settlements and other reserves. The charges
stem from A&A's previously announced plans to reduce
expenses, improve profitability and resolve longstanding
contingencies.
For the full year, A&A had a net loss of $138.7
million, or $3.51 per share, compared to net income of $26.9
million, or $0.48 per share, in 1993. Consolidated
operating revenues in 1994 were $1,323.9 million compared to
$1,341.6 million in 1993.
A&A Chairman & CEO Frank G. Zarb said, "During the
second half of 1994, we did what we set out to do: lay the
foundation for improved performance. Now we are going to
concentrate on growing our business."
Fourth quarter operating results include:
- A $69 million restructuring charge, including $25.2
million to consolidate real estate space requirements
at 48 offices worldwide, and $43.8 million for early
retirement programs and workforce reductions involving
approximately 1,100 positions, of which 650 were in the
United States.
<PAGE>
A net reduction of an additional 380 positions took
place during the first nine months of 1994.
These initiatives will be largely completed by the end
of the second quarter of 1995. The charges flow from
an extensive review of operations that identified more
than $100 million in annualized expense savings, a
portion of which A&A intends to reinvest in new
technology, product development and other service
enhancements.
- $24.9 million to settle litigation and to strengthen
reserves related to the Company's professional
indemnity program.
Non-operating results in the fourth quarter include
charges totaling $69.7 million for the previously announced
settlement with Shand/Evanston Group, Inc., and for
increased reserves based on an estimated settlement amount
relating to lawsuits and other disputes brought against A&A
and Shand/Evanston affiliates by the rehabilitator of Mutual
Fire, Marine & Inland Insurance Co.
Other initiatives included the sale of certain non-core
businesses and investments. Fourth quarter non-operating
results include the sale of A&A's U.S. personal lines
business for $30 million, resulting in a $20 million pre-tax
gain, or $0.28 per share after taxes.
2
<PAGE>
As reported last month, A&A also has signed a
definitive agreement to sell its Alexsis third party
administration unit for $45 million in cash, which will
result in a first quarter 1995 pre-tax gain of approximately
$30 million. Also, a small gain from the $7.2 million sale
of A&A's stake in Noble Grossart Holdings Limited, a
privately held U.K. merchant bank, will be reported in the
first quarter.
Cash proceeds from the sales of these non-core assets
will be used to fund current cash requirements of
litigation, contingency and other settlements without
materially affecting the Company's operating cash position.
In July 1994, the Company received the proceeds of a
$200 million investment by American International Group,
Inc. At the end of 1994, A&A had approximately $300 million
operating cash and investments on hand, its strongest
position in years.
1994 OPERATING RESULTS
----------------------
Consolidated operating revenues for the year ending
December 31, 1994, were $1,323.9 million compared to
$1,341.6 million in 1993. The operating loss in 1994 was
$82.9 million compared to operating income of $52.3 million
in 1993.
On a comparable basis, operating income from worldwide
risk management and insurance services operations declined
from 1993 levels as improvement in Canada and Europe and
other regions partially offset weaker
3
<PAGE>
results in the U.S. The U.S. operation has been a focal
point of the restructuring program, and A&A expects the
unit's operating performance to improve in 1995. Continued
strong operating results were reported by the Alexander
Howden Group, A&A's London-based specialty and reinsurance
broking company.
Operating results improved over 1993 at the Alexander
Consulting Group, A&A's human resource management consulting
operation. Stronger U.S. results offset a decline in the
United Kingdom.
The 1994 fourth quarter operating loss was $106.9
million compared with $7.6 million operating income during
the 1993 quarter. Consolidated operating revenues were
$333.2 million compared to $347.8 million during the same
1993 quarter.
Alexander & Alexander Services Inc. [NYSE: AAL]
provides professional risk management consulting, insurance
brokerage and human resource management consulting services
from offices in 80 countries.
4
<PAGE>
(UNAUDITED)
Alexander & Alexander Services Inc.
Operating Results
Quarter and Twelve Months Ended December 31, 1994 and 1993
(millions except per share amounts)
Quarter Ended Twelve Months Ended
December 31, December 31,
------------------ -------------------
1994 1993 1994 1993
---- ---- ---- ----
Operating Revenues $ 333.2 $347.8 $1,323.9 $1,341.6
Operating Expenses 371.1 340.2 1,337.8 1,289.3
Restructure charges 69.0 -- 69.0 --
------- ------ -------- --------
Operating Income (loss) (106.9) 7.6 (82.9) 52.3
Other - Net 19.7 (8.8) 5.8 (20.4)
Special charges (69.7) -- (69.7) --
------- ------ -------- --------
Income (loss) Before
Income Taxes and
Minority Interest (156.9) (1.2) (146.8) 31.9
Income Tax Expense
(Benefit) (46.6) (4.4) (42.6) 6.4
------- ------ -------- --------
Income (loss) Before
Minority Interest (110.3) 3.2 (104.2) 25.5
Minority Interest 1.0 -- (3.0) (1.9)
------- ------ -------- --------
Income (loss) from
Continuing Operations (109.3) 3.2 (107.2) 23.6
Discontinued Operations (2.0) -- (28.9) --
Cumulative Effect of
Accounting Change -- -- (2.6) 3.3
------- ------ -------- --------
Net Income (loss) (111.3) 3.2 (138.7) 26.9
Preferred Stock
Dividend (6.1) (2.1) (15.1) (6.2)
------- ------ -------- --------
Earnings (loss) Available
for Common & Equivalent
Shares $(117.4) $ 1.1 $ (153.8) $ 20.7
======= ====== ======== ========
Per Share of Common Stock:
Income (loss) from
Continuing Operations $ (2.61) $ .03 $ (2.79) $ .40
Discontinued Operations (0.05) -- (0.66) --
Cumulative Effect of
Accounting Change -- -- (0.06) .08
------- ------ -------- --------
Earnings (loss) Per Share $ (2.66) $ .03 $ (3.51) $ .48
======= ====== ======== ========
Weighted Average Shares 44.2 43.5 43.8 43.4
======= ====== ======== ========
5
EXHIBIT 20.2
A&A COMPLETES SPHERE DRAKE TRANSACTION
NEW YORK, Dec. 9, 1994 -- Alexander & Alexander Services Inc.
(A&A) has completed a previously announced transaction to resolve
certain indemnity obligations to the Sphere Drake Insurance
Group.
The transaction, announced in November, is part of A&A's
program to address contingencies and reflects the Company's
current restructuring process.
Alexander & Alexander Services Inc. [NYSE: AAL] is a global
organization of professional advisers providing risk management,
insurance brokerage and human resource consulting services from
offices in more than 80 countries.
6
EXHIBIT 20.3
A&A REACHES SETTLEMENT WITH SHAND/EVANSTON GROUP, INC.
RELEASING A&A FROM CERTAIN INDEMNIFICATION OBLIGATIONS
NEW YORK, January 30 -- Alexander & Alexander Services Inc. (A&A)
today announced a settlement with Shand/Evanston Group, Inc.
(S/E) that will release A&A from a major segment of its open-
ended, long-term indemnification obligations.
The settlement resolves certain disputes and restructures
the contractual relationship arising out of a 1987 agreement
under which A&A sold Shand Morahan & Company, Inc. to S/E's
predecessor.
As part of A&A's restructuring program, the settlement will
be reflected in a fourth quarter 1994 after-tax charge of $21.9
million, or $0.50 per share. Under terms of the settlement, A&A
will pay $14 million in cash and issue a five-year, interest-
bearing note in the principal amount of $14 million and a
contingent obligation totaling $5.75 million payable if certain
events occur.
Under the settlement, A&A obtained release of certain
indemnification obligations. The settlement also terminates
pending binding arbitration proceedings that created significant
potential exposure for A&A. The settlement restructures certain
other contractual relationships under the original purchase
agreement between A&A and S/E, so that the parties' future
interests and obligations are more closely aligned.
7
<PAGE>
A&A previously reported that its combined restructuring and
other charges will result in a significant loss for the fourth
quarter of 1994 and the full year.
Alexander & Alexander Services Inc. [NYSE: AAL] is a global
organization of professional advisers providing risk management,
insurance brokerage and human resource consulting services in
more than 80 countries.
8
EXHIBIT 20.4
A&A ANNOUNCES SALE OF SHARES IN U.K. MERCHANT BANK
NEW YORK, Jan. 17 -- Alexander & Alexander Services Inc. (A&A)
today announced that it has sold its minority interest in Noble
Grossart Holdings Limited, a privately held U.K. merchant bank,
for $7.2 million.
The cash transaction is expected to result in a small gain
that will be reflected in A&A's first quarter 1995 financial
results.
A&A had previously indicated its intent to sell certain non-
core assets as part of the Company's restructuring program.
A&A's combined restructuring and other charges will result in a
significant loss for the fourth quarter of 1994 and the full
year.
Alexander & Alexander Services Inc. [NYSE: AAL] is a global
organization of professional advisers providing risk management,
insurance brokerage and human resource management consulting
services from offices in more than 80 countries.
9
EXHIBIT 20.5
A&A TO SELL ALEXSIS SUBSIDIARY
AS PART OF RESTRUCTURING PROGRAM
NEW YORK, January 16 -- Alexander & Alexander Services Inc. (A&A)
has entered into a definitive agreement to sell Alexsis, its
third party administrator subsidiary, to CNA Financial
Corporation's Continental Casualty subsidiary for approximately
$45 million in cash.
The transaction, subject to regulatory approval, is expected
to close in March. When completed, A&A expects to record a pre-
tax gain of approximately $30 million.
Alexsis is one of the three largest U.S. property-casualty
third party administrators, with 1,300 employees and 60 offices.
It had 1994 revenues of more than $100 million. Alexsis
specializes in claims services, self-insurance administration,
loss control services, and workers' compensation excess insurance
broking.
A&A had previously indicated its intent to sell certain non-
core businesses as part of the Company's restructuring program.
Proceeds will be used for general
corporate purposes, including other restructuring initiatives.
As announced in October, A&A's combined restructuring and other
charges will result in a significant loss for the fourth quarter
of 1994 and the full year.
10
<PAGE>
Alexander & Alexander Services Inc. [NYSE: AAL] is a global
organization of professional advisers providing risk management,
insurance brokerage and human resource management consulting
services from offices in more than 80 countries.
11
EXHIBIT 20.6
A&A COMPLETES SALE OF ALEXSIS SUBSIDIARY
NEW YORK, Feb. 28, 1995 -- Alexander & Alexander Services
Inc. (A&A) has completed the previously announced sale of
Alexsis, its third party administrator subsidiary, to CNA
Financial Corporation's Continental Casualty subsidiary.
The transaction will result in an approximate $30
million pre-tax gain that will be included in A&A's first
quarter results.
12
EXHIBIT 20.7
A&A ADDS TWO NEW MEMBERS
TO BOARD OF DIRECTORS
NEW YORK, Jan. 4 -- Frank G. Zarb, CEO and Chairman of the Board
of Directors, Alexander & Alexander Services Inc. (A&A), today
announced the election of two new directors:
- E. Gerald Corrigan, 53, Chairman, International
Advisors, Goldman, Sachs & Co., New York.
- Ronald A. Iles, 59, Chairman, Alexander Howden Group
Ltd., London, and Senior Vice President of A&A.
Since joining Goldman, Sachs & Co. in January 1994, Mr.
Corrigan has been involved in a wide range of strategic and
transactional projects around the world for the firm and its
clients.
Mr. Corrigan previously served as President and CEO of the
Federal Reserve Bank of New York, ending a 25-year career with
the Federal Reserve System when he stepped down from this
position in July 1993.
He also is non-executive Chairman of the Board of Directors
of the Russian-American Enterprise Fund, a position to which he
was appointed by President Clinton. He is the U.S. co-chairman
of the Russian American Bankers Forum, a group involved in the
development of a modern banking and financial system in the
Russian Federation.
13
<PAGE>
Mr. Iles, who joined Alexander Howden in 1957, was appointed
Director of the A&A subsidiary in 1972, Managing Director in
1977, and Chairman in 1981.
In 1985, he was elected Senior Vice President at A&A and
joined the company's Operations Board. He subsequently was named
Chairman of Alexander & Alexander Services UK plc, London, the
parent of A&A's European operations.
Mr. Iles is a Fellow of the Chartered Insurance Institute
(London), an Associate of the Corporation of Insurance Brokers,
and a Member of Lloyd's.
Mr. Zarb noted, "Mr. Corrigan brings substantial banking and
financial experience that will help us identify new areas of
opportunity for A&A."
He added, "Mr. Iles' election broadens the Board's
international representation. It also recognizes his substantial
contributions to the success of our European operations in recent
years."
Alexander & Alexander Services Inc. [NYSE: AAL] is a global
organization of professional advisers providing risk management,
insurance brokerage and human resource management consulting
services in more than 80 countries.
14
