As filed with the Securities and Exchange Commission on July 17, 1996
Registration No. 33-333-2057
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ALEXANDER & ALEXANDER SERVICES INC.
(Exact name of registrant as specified in its charter)
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MARYLAND 52-0969822
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1185 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 444-4500
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
ALBERT A. SKWIERTZ, ESQ.
SENIOR VICE PRESIDENT & GENERAL COUNSEL
ALEXANDER & ALEXANDER SERVICES INC.
1185 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 444-4532
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. |X|
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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(SUBJECT TO COMPLETION) ISSUED ___________, 1996
PROSPECTUS
ALEXANDER & ALEXANDER SERVICES INC.
COMMON STOCK, PREFERRED STOCK, DEBT SECURITIES, AND
WARRANTS TO PURCHASE COMMON STOCK AND DEBT SECURITIES
Alexander & Alexander Services Inc. (the "Company") may offer to sell from time
to time under this prospectus, together or separately (i) shares of its common
stock, $1.00 par value (the "Common Stock"), together with preferred share
purchase rights (the "Rights"), (ii) shares of its preferred stock, $1.00 par
value (the "Preferred Stock"), (iii) its unsecured debt securities (the "Debt
Securities"), which may be either senior (the "Senior Debt Securities") or
subordinated (the "Subordinated Debt Securities"), (iv) warrants to purchase
Common Stock (the "Common Warrants"), and (v) warrants to purchase Debt
Securities (the "Debt Warrants") (the Common Warrants and the Debt Warrants,
collectively, "the Warrants"), all on terms to be determined at the time of
offering. The Preferred Stock and the Debt Securities may be convertible into or
exchangeable for Common Stock or other securities as herein described. The
Common Stock, Preferred Stock, Debt Securities and Warrants, or any combination
thereof, proposed to be sold pursuant to this prospectus and the accompanying
prospectus supplement are referred to as the "Offered Securities", and the
Offered Securities, together with any Common Stock and Debt Securities issuable
upon exercise of the Warrants or exchange of other securities, are referred to
as the "Securities". The Securities offered pursuant to this prospectus may be
issued in one or more series or issuances and will be limited to an aggregate
initial offering price of up to $250,000,000 (or the equivalent thereof if any
of the Securities are denominated in a currency ("Currency") other than U.S.
dollars). FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH THE PURCHASE OF THE
SECURITIES, SEE "RISK FACTORS" ON PAGES 6 THROUGH 10.
The prospectus supplement accompanying this prospectus sets forth, with respect
to each series or issue of Securities for which this prospectus and the
prospectus supplement are being delivered: (i) the terms of any Preferred Stock
offered, including the specific designations and dividend, redemption,
liquidation, voting and other rights not described in this prospectus and any
terms for the conversion or exchange thereof; (ii) the terms of any Debt
Securities offered, including where applicable, their title, ranking, aggregate
principal amount, maturity, rate of any interest (or manner of calculation) and
time of payment thereof, any redemption or repayment terms, the Currency or
Currencies in which such Debt Securities will be denominated or payable, any
index, formula or other method pursuant to which
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principal, premium, if any, or interest, if any, may be determined, any terms
for the conversion or exchange thereof and the form of such Debt Securities
(which may be registered, bearer or global form);
(iii) the terms of any Warrants offered, including where applicable, the
exercise price, detachability, expiration date and other terms and (iv) any
initial offering price, the purchase price and net proceeds to the Company and
other specific terms related to the offering of such Securities.
The Company may sell the Offered Securities to or through underwriters, dealers
or agents, and also may sell the Offered Securities directly to other
purchasers, or through a combination of such methods. See "Plan of
Distribution". No Offered Securities may be sold without delivery of a
prospectus supplement describing such Offered Securities and the method and
terms of offering thereof. The prospectus supplement will contain information
concerning certain U.S. federal income tax considerations, if applicable, to the
Offered Securities.
The Company's Common Stock is listed on the New York Stock Exchange under the
trading symbol "AAL" and on the London Stock Exchange Limited under the trading
symbol "ALXA". The Company's Rights are listed on the New York Stock Exchange.
Any Common Stock and accompanying Rights sold pursuant to a prospectus
supplement will be listed on such exchanges, subject to an official notice of
issuance.
Unless otherwise specified in a prospectus supplement, the Senior Debt
Securities, when issued, will be unsecured and will rank equally with all other
unsecured and unsubordinated indebtedness of the Company. The Subordinated Debt
Securities, when issued, will be subordinated in right of payment to all Senior
Debt (as defined herein) of the Company.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is __________, 1996.
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FOR NORTH CAROLINA INVESTORS: THE COMMISSIONER OF INSURANCE OF THE STATE OF
NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THIS OFFERING NOR HAS SUCH
COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITERS, AGENTS OR DEALERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER
TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY AND ITS SUBSIDIARIES
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AT ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The Company has filed
with the Commission a registration statement, of which this prospectus is a
part, (together with all amendments, exhibits and schedules thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Securities offered hereby. This
prospectus does not contain all of the information set forth in the Registration
Statement. Certain portions of the Registration Statement have been omitted as
permitted by the rules and regulations of the Commission. Statements made in
this prospectus as to the contents of any contract, agreement, instrument or
other document are not necessarily complete, and in each instance reference is
made to the copy of such contract, agreement, instrument or document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference and the exhibits and schedules thereto.
The Registration Statement and the reports and other information filed by the
Company with the Commission may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as the following regional offices of the
Commission: New York Regional Office, Seven World Trade Center, 13th Floor, New
York, New York 10048 and the Chicago Regional Office, Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can also be obtained by mail from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 upon payment of
the fees prescribed by the Commission. Such reports, Registration Statement and
exhibits and other information concerning the Company can also be inspected at
the offices of the New York Stock Exchange at 20 Broad Street, New York, New
York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission (File No.
1-8282) are hereby incorporated by reference in this prospectus: (1) The
Company's Annual Report on Form 10-K for the year ended December 31, 1995;
(2) Quarterly Report on Form 10-Q for the quarter ended March 31, 1996;
(3) Current Report on Form 8-K filed with the Commission on July 16, 1996; and
(4) The description of the Company's Common Stock and the Rights associated with
the Common Stock filed pursuant to Section 12 of the Exchange Act and any
amendment or report filed for the purposes of updating those descriptions
contained in its registration statements on Form 8-A, including any subsequent
amendments or reports filed for the purpose of updating such description.
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All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus
and prior to the termination of the offering of the Securities covered by this
prospectus shall be deemed to be incorporated herein by reference into this
prospectus and to be a part hereof from their respective dates of filing. Any
statement contained in this prospectus or in a document incorporated or deemed
incorporated herein by reference shall be deemed to be modified or superseded,
for purposes of this prospectus, to the extent that a statement contained in
this prospectus or in any other subsequently filed document which is or is
deemed to be incorporated herein by reference, modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL
OWNER, TO WHOM THIS PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST OF
SUCH PERSON, A COPY OF ANY AND ALL OF THE DOCUMENTS THAT HAVE BEEN INCORPORATED
BY REFERENCE (OTHER THAN ANY EXHIBITS THERETO). REQUESTS FOR SUCH DOCUMENTS
SHOULD BE DIRECTED TO ALEXANDER & ALEXANDER SERVICES INC. AT 10461 MILL RUN
CIRCLE, OWINGS MILLS, MARYLAND 21117, ATTENTION: ALICE L.
RUSSELL, CORPORATE SECRETARY.
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RISK FACTORS
Prospective purchasers should consider carefully all information set forth or
incorporated by reference in this prospectus in analyzing this offering and, in
particular, prospective purchasers should consider the following risk factors:
PROSPECTS FOR REVENUE STABILITY AND GROWTH. As a result of its restructuring
efforts the Company has made substantial progress since mid-1994 stabilizing its
operations, rebuilding its balance sheet, and improving its cost structure.
Operating initiatives will continue through 1996 as the Company plans, among
other things, to make investments in its operating systems and training programs
and to pursue additional internal consolidation and cost savings. Such actions
may impact the Company's operating profits during 1996 and may impact quarterly
and annual results until the benefits of such efforts have been fully realized
by the Company's operations. The Company will also continue to focus on revenue
growth. The Company's revenues are generally derived from commissions and fees.
Insurance broking commissions and fee growth continue to be constrained,
particularly in the U.S., due to soft pricing and excess market capacity and the
resultant intense competition among insurance carriers and brokers for market
share. These market conditions are becoming increasingly evident in the U.K.,
Continental Europe and in other parts of the world. During 1996, soft market
conditions are expected to continue in most liability coverages. The Company
anticipates modest broking revenue growth for its insurance broking operations
and moderate revenue growth in its human resource management consulting
operations attributable principally to the Company's acquisition activity. In
addition to commissions and fees, the Company derives revenues from investment
income earned on fiduciary funds. Despite a rise in worldwide interest rates in
1995, the trend in recent years has been downward. There is also pressure from
insurance companies to shorten the time that fiduciary funds are held prior to
remittance to carriers. Investment income earned on fiduciary funds during 1996
is anticipated to remain near 1995 levels. The Company's 1996 revenue growth
projections may be adversely affected by lower than estimated renewal and client
retention rates, market and industry conditions, operating margins, and interest
rates. In addition, the Company's future revenue growth will depend increasingly
on the development of new products and services, new business generation and
selective acquisitions, such as the October 1995 purchase of most of the U.S.
insurance broking and consulting operations of Jardine Insurance Brokers Inc.
Efforts will continue during 1996 to identify other areas of additional expense
reductions. Future earnings growth will depend both on revenue expansion and
further cost reduction. There is no guarantee that the Company can maintain its
current level of earnings without revenue growth.
POTENTIAL ACQUISITIONS. The Company will continue to explore geographical market
expansion and further industry specialization as well as consider possible niche
and substantial strategic acquisitions relating to its core business and other
opportunities within the financial services industry. As part of its review of
opportunities, the Company has evaluated and is evaluating such opportunities
and
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prospects and will continue to do so. The Company cannot predict if any
transaction will be consummated, nor the terms or form of consideration
required. Nor can the Company predict, if any such transaction is consummated,
what the financial benefit, if any, will be to the Company or if the transaction
can be successfully integrated into the Company.
ADDITIONAL FINANCING. The Company believes that cash flow from operations, along
with current cash balances, will be sufficient to fund working capital as well
as other obligations on a timely basis. Should the Company expand its operations
through acquisitions, mergers or other combinations, however, additional
financing may be required. No assurance can be given that such additional
financing, if required, will be available to the Company on reasonable terms.
PRICING AND SEASONALITY. The Company's revenues can be affected by pricing and
seasonality. The Company's insurance broking revenues are generally affected by
premium rates charged by insurance companies in the property and casualty
markets and the overall available market capacity. It is management's view that
insurance premium pricing is not likely to improve in the foreseeable future.
The timing and realization of revenues are also affected by the timing of
renewal cycles in different parts of the world and lines of business. This
produces a degree of seasonability in the Company's results. Broking revenues
for risk management and insurance broking services are the strongest in
Continental Europe during the first quarter and the strongest in the U.S. and
Asia-Pacific during the fourth quarter. Specialist and reinsurance broking
revenues are the strongest in the first and second quarters. Revenues for human
resource management consulting are typically strongest in the fourth quarter and
weakest in the first quarter.
LIMITATIONS ON PAYMENT OF COMMON STOCK DIVIDENDS. Dividends on the Series B
Cumulative Convertible Preferred Stock, $1.00 par value (the "Series B
Convertible Preferred Stock"), will reduce the amount of earnings otherwise
available for distribution to holders of the Common Stock by approximately $18.5
million in 1996, and increasing to approximately $23 million in 1999, assuming
dividends on the Series B Convertible Preferred Shares were to be paid in kind
over this period. The holders of the Series B Convertible Preferred Stock also
have the right to require the Company to repurchase their shares at specified
premium prices if a "Special Event" occurs. This right may tend to deter the
Company from engaging in a Special Event, which includes, for example, the
declaration or payment of dividends aggregating in excess of (x) cumulatively
25% of earnings in 1996, and (y) cumulatively 50% of earnings thereafter; the
disposition by the Company of assets representing 35% or more of the Company's
book value or gross revenues; and certain mergers of the Company or any of its
principal subsidiaries with or into any other firm or entity involving more than
20% of the total market value of the Company's equity securities. Other Special
Events include the acquisition by a third party, with the consent or approval of
the Company, of beneficial ownership of securities representing 35% or more of
the Company's total outstanding voting power. In addition, no dividends may be
declared or paid on the Company's Common Stock, unless an equivalent amount per
share is declared and paid on the
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dividend paying shares associated with the Company's Common Stock equivalents.
The Board of Directors will continue to take into consideration the Company's
financial performance and projections, as well as the provisions of the Series B
Convertible Preferred Stock pertaining to declaration of dividends on Common
Stock. These factors, as well as other factors, could affect future decisions of
the Board of Directors with respect to the size and timing of dividends and
other distributions on the Company's Common Stock and other matters generally
affecting the rights of holders of the Common Stock.
DISCONTINUED OPERATIONS. Claims relating to the Company's discontinued
operations are expected to develop and be settled over the next twenty to thirty
years. These claims are primarily asbestosis, environmental pollution, and
latent disease risks in the U.S. which are coupled with substantial litigation
expenses. Liabilities stemming from these claims cannot be estimated using
conventional actuarial reserving techniques because the available historical
experience is not adequate to support the use of such techniques and because
case law, as well as scientific standards for measuring the adequacy of site
cleanup (both of which have had, and will continue to have, a significant
bearing on the ultimate extent of the liabilities) is still evolving. The
Company has certain protection against adverse developments of its insurance
liabilities through two finite risk contracts issued by a reinsurance company.
The amounts recorded for these liabilities represent the Company's best estimate
of the probable liabilities within a range of independent actuarial estimates of
reasonably probable loss amounts. There is no assurance that future adverse
developments may not occur due to variables inherent in the estimation process.
Based on independent actuarial estimates of a range of reasonably possible loss
amounts, liabilities could exceed recorded amounts by approximately $170
million. However, in the event of such adverse development, based on independent
actuarial estimates of payout patterns, up to approximately $130 million of this
excess would be recoverable under the finite risk contracts. The Company
believes that, based on current estimates, the established total net liabilities
of discontinued operations are sufficient to cover its exposures.
CONTINGENT LIABILITIES AND LEGAL PROCEEDINGS. The Company and its subsidiaries
are subject to various claims and lawsuits from both private and governmental
parties, which include claims and lawsuits in the ordinary course of business,
consisting principally of alleged errors and omissions in connection with the
placement of insurance and in rendering consulting services. In some of these
cases, the remedies that may be sought or damages claimed are substantial.
Additionally, the Company and its subsidiaries are subject to the risk of losses
resulting from the potential uncollectibility of insurance and reinsurance
balances, claims advances made on behalf of clients, exceeding policy limits,
and indemnifications connected with the sales of certain businesses. The
Company's contingent liabilities involve significant amounts. While it is not
possible to predict with certainty the outcome of such contingent liabilities,
the applicability of coverage for such matters under the Company's professional
indemnity insurance program or the financial impact of such contingent
liabilities on the Company, management presently believes that such impact will
not be material to the Company's financial condition. However, it is possible
that future developments with respect to these matters could have a material
adverse impact on future interim or annual results of operations.
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SHAND CONTINGENCIES. During 1995, the Company negotiated the settlements of
certain indemnification obligations relating to the 1987 sale of Shand Morahan &
Company, Inc., the Company's U.S. underwriting subsidiary. Notwithstanding the
settlements, certain of the Company's indemnification provisions under the 1987
agreement are still in effect. As a result, there remains the possibility of
substantial exposure under the indemnification provisions of the 1987 agreement
although the Company, based on current facts and circumstances, believes that
the possibility of a material loss resulting from these exposures is remote.
NOTICE OF PROPOSED 1991 TAX ADJUSTMENTS. In 1994, the Company received a Notice
of Proposed Adjustment from the Internal Revenue Service (the "IRS") proposing
an increase in taxable income for the 1991 year which, if sustained, would
result in an additional tax liability estimated by the Company at $50 million.
This proposed adjustment relates to intercompany transactions involving the
stock of a U.K. subsidiary. The Company disagrees with the proposed adjustment
and has requested advice from the IRS National Office on this issue. The
Company currently believes it could receive a response at anytime and, in any
event expects a response by the end of 1996. Although the ultimate outcome of
the matter cannot be predicted with certainty, the Company and its independent
tax counsel, White & Case, believe there are meritorious defenses to the
proposed adjustment and substantial arguments to sustain the Company's position
and that the Company should prevail in the event this issue is litigated.
(White & Case's belief is based upon the Internal Revenue Code, Treasury
regulations, administrative rulings and other applicable authorities as in
effect on July 17, 1996, and is subject to the accuracy of facts represented to
White & Case concerning the 1991 transaction.) A similar set of transactions
occurred in 1993 for which the IRS could propose an increase in taxable income
which would result in an additional tax liability estimated by the Company at
$25 million. The Company believes it should prevail in the event this similar
issue is raised by the IRS. Accordingly, no provision for any liability with
respect to the 1991 and 1993 transactions has been made in the consolidated
financial statements. The Company has received notice that the IRS will commence
its audit of the tax years 1992 through 1994 on July 25, 1996. The Company
believes that its current tax reserves are adequate to cover all of its tax
liabilities. Under the purchase agreement for the Series B Convertible
Preferred Stock, the Company has agreed to make certain payments to the
purchaser pursuant to an indemnification, limited to $10 million, to cover tax
payments and reserves in excess of recorded tax reserves as of March 31, 1994,
including the tax matters described above.
FOREIGN CURRENCY TRANSLATION, DERIVATIVE PRODUCTS AND OTHER RISKS. Changes in
foreign currency exchange rates and interest rates could significantly impact
the Company's interim and annual net consolidated operating income. To reduce
the risk of currency exchange fluctuations, the Company utilizes derivative
products. The Company enters into foreign exchange contracts primarily to cover
exposures that arise at its London-based specialty and reinsurance broking
operations. These exposures arise because a significant portion of the revenues
of these operations are denominated in U.S. dollars, while their expenses are
primarily denominated in U.K. pounds sterling. To hedge this exposure, the
Company generally sells U.S. dollars and purchases U.K. pounds sterling. The
Company also utilizes foreign exchange options to supplement this activity. In
addition, the Company has also entered into interest rate swaps and forward
rate agreements as a means to limit the earnings volatility associated with
changes in short-term interest rates, primarily in the U.S. and the U.K., on
ists existing and anticipated fiduciary investments with maturities of three
months or less. These instruments are contractual agreements between the
Company and financial institutions which exchange fixed and floating interest
rate payments periodically over the life of the agreements without exchanges of
the underlying principal amounts. In addition to interest rate swaps and
forward rate agreements as part of its interest rate management program, the
Company utilizes various types of interest rate options, including caps,
collars, floors and interest rate guarantees. As to fluctuations in interest
rates, a 1 percent change in worldwide interest rates could affect the
Company's annual fiduciary investment income by approximately $8 million;
however, the impact is reduced to approximately $7 million in 1996 when the
financial hedging instruments are included.
Information Concerning Forward-Looking Statements.
This prospectus and the Company's financial statements incorporated herein
by reference contain forward-looking statements. Forward-looking
statements are made based upon management's expectations, assumptions,
judgments and beliefs concerning future global economic, industry and
financial market conditions, and their potential effect upon the Company.
There can be no assurance that these future conditions and developments
will be in accordance with management's expectations or that the effect of
future conditions and developments on the Company will be those anticipated
by management.
The Company wishes to caution readers that the assumptions that form the
basis for forward-looking statements concerning future financial results,
or events or conditions that may affect such results, are based on many
factors that are beyond the Company's ability to control or estimate
precisely, including future market conditions and the behavior of
competitors and other market participants. Among the factors, in addition
to other possible factors not listed, that could affect actual results and
cause such results to differ materially from those anticipated in such
forward-looking statements are the following:
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Economic Conditions
The insurance brokerage industry is affected by changes in national,
international and local economic conditions as well as in client
preferences and spending patterns. Factors such as inflation and changes
in worldwide interest rates and monetary fluctuations may affect the
Company's clients and the markets in which the Company operates and its
ability to finance needed capital expenditures.
Government Regulation and Licensing
The global insurance brokerage industry is affected by the adoption of new,
and by changes in, trade, monetary, accounting and fiscal policies, laws
and regulations such as trade restrictions and prohibitions, as well as
other activities of federal and local governments, agencies and similar
organizations. The Company's ability to conduct business may be precluded,
temporarily suspended or otherwise adversely affected as a result of any
such changes or activities.
In addition, the activities of the Company related to insurance broking and
human resource management consulting services are subject to licensing
requirements and extensive regulation under the laws of the United States
and its states, territories and possessions, as well as the laws of other
countries in which the Company's subsidiaries conduct business. These laws
and regulations vary from jurisdiction to jurisdiction. The appropriate
regulatory authorities generally have wide discretionary authority in
adopting, amending and implementing such regulations. In addition, certain
of the Company's activities are governed by the rules of the Lloyd's of
London insurance market and other similar organizations. Compliance with
such licensing and regulatory requirements and the restructuring and
reorganization of Lloyd's of London may increase the Company's cost of
doing business or change the manner in which the Company is permitted to
operate.
Competition
The insurance brokerage industry is intensely competitive with respect to
broking commissions, fee growth, personnel and the quality of service
provided. There is keen competition within the industry on a local,
national and international level, not only to gain new clients but also to
retain existing clients. In addition, the Company is subject to loss of
business to the growing alternative markets and to loss of personnel to its
competitors.
Market Conditions
The insurance brokerage industry is affected by periods of soft pricing and
excess market capacity which, in recent years has resulted in a downward
pressure on premium rates and intense competition among insurance carriers
and brokers for market share. The occurrence of catastrophic events can
change loss ratios and, subsequently, pricing, thereby affecting a broker's
contingent commissions and overriders. The Company's revenues, expenses
and associated hedging programs are also affected by the general level of
interest rates and the income earned on fiduciary funds as well as changes
in foreign currency exchange rates. The timing of renewal cycles in
different parts of the world and lines of business produces seasonality in
its results.
Contingencies
The Company's financial results are affected by the costs and other effects
of claims and lawsuits from both private and governmental parties, which
may include claims and lawsuits in the ordinary course of business,
consisting principally of alleged errors and omissions in connection with
the placement of insurance and in rendering consulting services, as well as
claims relating to the Company's discontinued operations and tax matters,
which may affect its operations and administrative expenses. The Company is
also subject to the risk of losses from the potential uncollectibility of
insurance and reinsurance claims and advances on behalf of clients and
indemnifications connected with the sales of certain businesses.
Growth Plans
The Company plans to explore geographical market expansion as well as
strategic and niche acquisitions relating to its core business. There can
be no assurance that the Company will be able to achieve its growth
objectives or consummate any acquisition or joint venture opportunities it
may pursue or if a transaction is consummated, what the financial benefit,
if any, will be to the Company. Growth in certain markets or products can
impact the historical quarterly comparisons of earnings based on insurance
renewal cycles.
Restructuring/Cost Saving Efforts
The Company's future earnings will be affected by its ability to effectuate
additional internal consolidation and other cost savings initiatives and
its investment in new technology, products and personnel.
While the Company periodically reassesses material trends and uncertainties
affecting its results of operations and financial condition in connection
with its preparation of management's discussion and analysis of results of
operations and financial condition contained in its quarterly and annual
reports, the Company undertakes no obligation to publicly update or revise
any particular forward-looking statement in light of future events.
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SUMMARY FINANCIAL INFORMATION
<TABLE><CAPTION>
For the years Ended December 31, 1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(dollars in millions, except per share amounts)
OPERATING RESULTS:
Operating Revenues $1,282.4 $1,323.9 $1,341.6 $1,369.5 $1,385.1
Operating Income (Loss)(1) 122.7 (82.9) 52.3 85.5 16.4
Other Income (Expenses)(2) 33.3 (63.9) (20.4) 17.4 (22.8)
Income (Loss) from Continuing Operations 89.4 (107.2) 23.6 57.1 (9.5)
Loss from Discontinued Operations(3) -- (28.9) -- (145.0) --
Cumulative Effect of Change in Acounting -- (2.6) 3.3 -- (2.2)
Net Income (Loss) 89.4 (138.7) 26.9 (87.9) (11.7)
Earnings (Loss) Attributable to
Common Shareholders 64.0 (153.8) 20.7 (87.9) (11.7)
- ------------------------------------------------------------------------------------------------------------
PER SHARE INFORMATION:
Primary Earnings Per Share
Income (Loss) from Continuing Operations $ 1.44 $ (2.79) $ .40 $ 1.32 $ (.22)
Loss from Discontinued Operations -- (.66) -- (3.35) --
Cumulative Effect of Change in Accounting -- (.06) .08 -- (.05)
- ------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) $ 1.44 (3.51) $ .48 $ (2.03) $ (.27)
- ------------------------------------------------------------------------------------------------------------
Fully Diluted Earnings Per Share:
Income (Loss) from Coninuing Operations $ 1.42 $ (2.79) $ .40 -- $ (.22)
Loss from Discontinued Operations -- (.66) -- (3.35) --
Cumulative Effect of Change in Accounting -- (.06) .08 $ -- (.05)
- ------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) $ 1.42 $ (3.51) $ .48 $ (2.03) $ (.27)
- ------------------------------------------------------------------------------------------------------------
Cash Dividends Per Common Share $0.10 $ .325 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION:
Total Assets $2,942.4 $2,945.7 $2,793.8 $2,609.6 $2,737.8
Working Capital 251.5 237.6 186.2 191.7 172.6
Long-Term Debt 126.2 132.7 111.8 125.1 169.9
Stockholders' Equity 402.6 317.5 276.2 185.5 370.1
- ------------------------------------------------------------------------------------------------------------
OTHER DATA:
Average Common and Common
Equivalent Shares Outstanding 44.6 43.8 43.4 43.2 43.1
Average Common and Common Equivalent
Shares Outstanding, Assuming Full Dilution 57.1 43.8 43.4 43.2 43.1
Cash Dividends Paid: (4)
Common Stock $ 4.4 14.3 $ 41.7 40.9 40.6
Series A. Preferred 8.3 8.3 6.2 -- --
</TABLE>
- ---------------------------
(1) Includes restructuring and special charges of $17.6 million in 1995 and $69
million in 1994, and $45.5 million in 1991.
(2) Includes special charges primarily related to contingency settlements and
other indemnity costs of $69.7 million in 1994, $16.5 million in 1992 and
$13 million in 1991. Also includes gains on sales of non-core businesses of
$30.4 million in 1995, $20.2 million in 1994, $3.9 million in 1993 and
$43.8 million in 1992.
(3) Includes $145 million in 1992 relating to an increase in the estimated
liabilities under indemnities provided to the purchasers of discontinued
business.
11
<PAGE>
(4) Dividends on the Series B Cumulative Convertible Preferred Shares are
payable in kind (additional Series B preferred shares) until December 15,
1996 and thereafter, at the Board of Directors' discretion, until December
15, 1999.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE><CAPTION>
For the years ended December 31, 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Earnings
--------
Pre-tax Earnings (Loss) $156.0 $ (146.8) $31.9 $102.9 $(6.4)
Less: Minority Interest (5.7) (3.0) (1.9) (1.8) (2.4)
------- -------- ----- ------ ----
Adjusted Pre-Tax Earnings (Loss) 150.3 (149.8) 30.0 101.1 (8.8)
----- -------- ----- ----- ----
Plus Fixed Charges 46.5 46.2 44.6 49.8 50.5
---- ---- ---- ---- ----
Total Earnings (Loss) $196.8 $ (103.6) $74.6 $150.9 $41.7
Fixed Charges
-------------
Interest Expense $16.8 $15.6 $13.6 $17.3 $21.6
Amortization of debt discount 1.8 0.4 0.8 0.7 0.6
Interest factor in rental expense 27.9 30.2 30.2 31.8 28.3
---- ---- ---- ---- -----
Total Fixed Charges $46.5 $46.2 $44.6 $49.8 $50.5
----- ----- ----- ----- ------
Ratio Earnings(Loss)/Fixed Charges 4.2 (2.2) 1.7 3.0 0.8
Coverage Deficiency N/A $149.8 N/A N/A $ 8.8
</TABLE>
- --------------
(1) Earnings to fixed charges have been determined based on continuing
operations and have been computed by dividing earnings before income taxes
and fixed charges by fixed charges. Fixed charges are considered to be
interest on indebtedness, amortization of debt discount and one-third of
rentals, which the Company believes is representative of the interest
factor of such rentals.
(2) Earnings for 1991 and 1994 were insufficient to cover fixed charges; the
amount of the coverage deficiency was $8.8 million in 1991 and $149.8
million in 1994.
12
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE><CAPTION>
For the years ended December 31. 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earnings
- --------
Pre-tax Earnings (Loss) $156.0 $ (146.8) $31.9 $102.9 $ (6.4)
Less: Minority Interest (5.7) (3.0) (1.9) (1.8) (2.4)
----- ----- ----- ----- -----
Adjusted Pre-Tax Earnings (Loss) 150.3 (149.8) 30.0 101.1 (8.8)
------- ------ ----- ----- ----
Plus Fixed Charges 46.5 46.2 44.6 49.8 50.5
---- ---- ---- ---- ----
Total Earnings (Loss) $196.8 $ (103.6) $74.6 $150.9 $ 41.7
------ ------ ------ ----- ----
Fixed Charges + Preferred Stock Dividends
- -----------------------------------------
Fixed Charges
Interest Expense $ 16.8 $15.6 $13.6 $17.3 $ 21.6
Amortization of debt discount 1.8 0.4 0.8 0.7 0.6
Interest factor in rental expense 27.9 30.2 30.2 31.8 28.3
---- ----- ---- ---- -----
Total 46.5 46.2 44.6 49.8 50.5
---- ----- ---- ---- -----
Preferred Dividends 25.4 15.1 6.2 0.0 0.0
Adj, Pref Stock Dividend
(Utilized 35% tax rate) 39.1 23.2 9.5 0.0 0.0
Total Fixed Charges + Adj. Pref
Stock Dividend $ 85.6 $69.4 $54.1 $49.8 $ 50.5
------ ------ ----- ----- ------
Ratio Earnings (Loss)lFixed
Charges + Adjusted
Preferred Stock Dividend 2.3 (1.5) 1.4 3.0 0.8
Coverage Deficiency N/A $173.0 N/A N/A $8.8
</TABLE>
- --------------------
(1) Earnings to fixed charges and adjusted preferred stock dividends have been
determined based on continuing operations and have been computed by
dividing earnings before income taxes and fixed charges by fixed charges
plus adjusted preferred stock dividends. Fixed charges are considered to
be interest on indebtedness, amortization of debt discount and one-third
of rentals, which the Company believes is representative of the interest
factor of such rentals.
(2) Earnings for 1991 and 1994 were insufficient to cover fixed charges; the
amount of the coverage deficiency was $173.0 million in 1994 and $8.8
million in 1991.
13
<PAGE>
THE COMPANY
Alexander & Alexander Services Inc. is a holding company which, through its
subsidiaries, provides risk management, insurance brokerage and human resource
management consulting services on a global basis. It is one of the few
organizations capable of providing such services to clients with multinational
operations. As at December 31, 1995, the Company had approximately 11,900
employees. The Company was incorporated under the laws of the State of Maryland
in 1973 and through predecessor entities has been in business since 1899.
Its clients are primarily commercial enterprises including a broad range of
industrial transportation service, financial and other businesses. The Company
operates from offices located in more than 80 countries and territories through
wholly owned subsidiaries, affiliates and other servicing capabilities. Its
international operations represent 53 percent, 48 percent and 46 percent of the
Company's consolidated operating revenues for the years ended December 31, 1995,
1994 and 1993, respectively. Based on 1994 revenues, the Company believes that
it is the fourth largest insurance broker worldwide and the eighth largest human
resource management consultant worldwide.
During 1994, the Board of Directors effected significant changes in the
Company's management. In the last half of 1994, new management conducted a
thorough worldwide review of the Company's operations, expense structure and
business strategy. As a result of this review, new management restructured, to
varying degrees, each of the Company's core businesses. During 1995, the Company
made certain strategic purchases of businesses, both domestic and international,
to complement existing operations. In addition, new offices were opened in
Bahrain, Greece, India, Indonesia, Norway, South Africa and Switzerland. The
Company will continue to explore geographical market expansion and further
industry specialization as well as consider possible niche and substantial
strategic acquisitions relating to its core business and other opportunities
within the financial services industry.
The Company's principal industry segment is insurance services which includes
risk management and insurance services, specialist and reinsurance broking. For
each of the years ended December 31, 1995, 1994 and 1993, total revenues
contributed by the Company's insurance services segment accounted for 84 percent
of its consolidated operating revenues. The Company's extensive services permit
it to handle diverse lines of coverage. For the years ended December 31, 1995,
1994 and 1993, the Company's risk management and insurance services operations
accounted for approximately 60 percent, 64 percent and 64 percent, respectively,
of the Company's consolidated operating revenues. For the years ended December
31, 1995, 1994 and 1993, the Company's combined specialist and reinsurance
broking operations accounted for approximately 24 percent, 20 percent and 20
percent, respectively, of the Company's consolidated operating revenues.
14
<PAGE>
For each of the years ended December 31, 1995, 1994 and 1993, total revenues
contributed by the Company's human resource management consulting services
segment accounted for 16 percent of the Company's consolidated operating
revenues.
15
<PAGE>
USE OF PROCEEDS
Except as may be described otherwise in the applicable prospectus supplement,
the net proceeds from the sale of the Securities shall be utilized by the
Company for general corporate purposes, including without limitation, working
capital, capital expenditures, investment in subsidiaries, refinancing of equity
and debt securities, possible future business acquisitions and for the
repurchase of the Company's securities.
DESCRIPTION OF COMMON STOCK
The Company may issue (either separately or together with the Offered
Securities) shares of its Common Stock. The Company is authorized to issue up to
200,000,000 shares of Common Stock. As of June 30, 1996 of the 200,000,000
shares of Common Stock authorized for issuance approximately 42,631,983 were
outstanding and 36,815,780 shares were reserved for issuance. Reference is made
to the prospectus supplement relating to the offered Common Stock (the "Offered
Common Stock"), or the Offered Securities convertible or exchangeable for, or
exercisable into Common Stock for the terms relevant thereto, including the
number of shares offered, any initial offering price, and market price and
dividend information, as well as, if applicable, information on
16
<PAGE>
such other Offered Securities. Common Stock may also be issued upon the exercise
of a Common Stock warrant, or issued upon the conversion of other Offered
Securities. For further information concerning Common Stock see "Description of
Outstanding Capital Stock" below.
DESCRIPTION OF PREFERRED STOCK
The Company may issue (either separately or together with other Offered
Securities) shares of its Preferred Stock. The Company is authorized to provide
for the issuance, in one or more series, of up to 15,000,000 shares of its
Preferred Stock, with such powers, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions
thereof as shall be adopted by the Board of Directors or a duly authorized
committee thereof.
As of June 30, 1996, there were 2,300,000 shares of the Company's $3.625 Series
A Convertible Preferred Stock, $1.00 par value (the "Series A Convertible
Preferred Stock") outstanding and 4,658,047 shares of the Company's Series B
Cumulative Convertible Preferred Stock $1.00 par value (the "Series B
Convertible Preferred Stock") outstanding. In addition, as of June 30, 1996
approximately 1,541,953 shares of the Company's Series B Convertible Preferred
Stock, have been reserved for potential issuance of dividend-in-kind payments
and 2,000,000 shares of Series A Junior Participating Preferred Stock, $1.00 par
value (the "Junior Participating Preferred Stock"), have been reserved in
connection with the Company's Rights.
The following summary of certain provisions of the Preferred Stock does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the Articles of Incorporation, the Articles of Amendment and the
Articles Supplementary (collectively, the "Charter") relating to the subject
Preferred Stock.
The specific terms of (i) any Preferred Stock proposed to be sold pursuant to
this prospectus and the accompanying prospectus supplement (the "Offered
Preferred Stock") will be described in such prospectus supplement.
If so indicated in the prospectus supplement, the terms of the Offered Preferred
Stock may differ from the terms set forth below, except those terms required by
the Company's Charter.
Under the Company's Charter, each series of Preferred Stock of the Company will
rank on a parity as to dividends and distributions of assets upon liquidation
with every other series of Preferred Stock of the Company except the Junior
Participating Preferred Stock, when and if issued. The Offered Preferred Stock
will, when issued, be fully paid and non-assessable and holders thereof will
have no preemptive rights.
17
<PAGE>
Reference is made to the prospectus supplement for the terms of the Offered
Preferred Stock, including:
(1) The title and stated value of such Preferred Stock.
(2) The number of shares of such Preferred Stock offered, the
liquidation preference per share and the offering price of such
Preferred Stock.
(3) The dividend rate(s), period(s) and/or payment date(s) or
method(s) of calculation thereof applicable to such Preferred
Stock.
(4) The date from which dividends on such Preferred Stock shall
accumulate, if applicable.
(5) The procedures for any auction and remarketing, if any, of such
Preferred Stock.
(6) The provision for a sinking fund, if any, for such Preferred
Stock.
(7) The provision for redemption, if applicable, of such Preferred
Stock.
(8) Whether such Preferred Stock will be convertible into or
exchangeable for shares of Common Stock or other Securities of
the Company and, if so, the terms and conditions upon which such
Preferred Stock will be so convertible or exchangeable, including
the conversion price or exchange ratio and the conversion or
exchange period (or the method of determining the same).
(9) Whether such Preferred Stock will be listed on any securities
exchange.
(10) Whether such Preferred Stock will be issued with any other
Securities.
(11) Any other specific terms, preferences or rights of, or
limitations or restrictions on, such Preferred Stock.
Subject to the Company's Charter and to any limitations contained in the
outstanding Preferred Stock, the Company may issue additional series of
Preferred Stock, at any time or from time to time, with such powers, preferences
and relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, as the Board of Directors
or any duly authorized committee thereof may determine, all without further
action of the stockholders, including holders of then outstanding Preferred
Stock of the Company.
18
<PAGE>
If applicable, the prospectus supplement will also set forth information
concerning any other Securities offered thereby and a discussion of federal
income tax considerations relevant thereto.
DIVIDENDS
Holders of Preferred Stock will be entitled to receive cash dividends, when, as
and if declared by the Board of Directors, out of assets of the Company legally
available for payment, at such rate and on such dates as will be set forth in
the prospectus supplement. Each dividend will be payable to holders of record as
they appear on the stock books of the Company on the record date fixed by the
Board of Directors. Dividends, if cumulative, will be cumulative from and after
the date set forth in the prospectus supplement.
The Company may not (i) declare or pay dividends other than dividends payable
solely in shares of Common Stock, Class A Common Stock, $.00001 par value (the
"Class A Stock"), Class C Common Stock, $1.00 par value (the "Class C Stock"),
or Class D Common Stock, $1.00 par value (the "Class D Stock"), or other stock
of the Company ranking junior as to dividends and as to liquidation preference
to the Preferred Stock or make any other distributions on any shares of Common
Stock, Class A Stock, Class C Stock or Class D Stock or other stock of the
Company ranking junior as to dividends to the Preferred Stock, including Junior
Participating Preferred Stock, when and if issued (collectively the "Junior
Stock"), or (ii) purchase, redeem or otherwise acquire Junior Stock or set aside
funds for such purpose (except (A) in a reclassification or exchange of Junior
Stock through the issuance of other Junior Stock or (B) with the proceeds of a
reasonably contemporaneous sale of Junior Stock), if there are arrearages in
dividends or failure in the payment of the Company's sinking fund or redemption
obligations on any of its Preferred Stock and, in the case of (i) above, if
dividends in full for the current quarterly dividend period have not been paid
or declared on any of its Preferred Stock.
Dividends in full may not be declared or paid or set apart for payment on any
series of Preferred Stock unless (i) there are no arrearages in dividends for
any past quarterly dividend periods on any series of Preferred Stock and (ii) to
the extent that such dividends are cumulative, dividends in full for the current
quarterly dividend period have been declared or paid on all Preferred Stock. Any
dividends declared or paid when dividends are not so declared, paid or set apart
in full will be shared ratably by the holders of all series of Preferred Stock
in proportion to such respective arrearages and undeclared and unpaid current
quarterly cumulative dividends. No interest, or sum of money in lieu of
interest, will be payable in respect of any dividend payment or payments that
may be in arrears.
19
<PAGE>
CONVERSION AND EXCHANGE
If the Offered Preferred Stock will be convertible into or exchangeable for
Common Stock or other Securities of the Company, the prospectus supplement will
set forth the terms and conditions of such conversion or exchange, including the
conversion price or exchange ratio (or the method of calculating the same), the
conversion or exchange period (or the method of determining the same), whether
conversion or exchange will be mandatory or at the option of the holder or the
Company, the events requiring an adjustment of the conversion price or the
exchange ratio and provisions affecting conversion or exchange in the event of
the redemption of such Preferred Stock. Such terms may also include provisions
under which the number of shares of Common Stock or the number or amount of
other Securities to be received by the holders of such Preferred Stock upon such
conversion or exchange would be calculated according to the market price of the
Common Stockor such other Securities as of a time stated in such prospectus
supplement.
LIQUIDATION RIGHTS
In the event of any voluntary of involuntary liquidation, dissolution or winding
up of the Company, the holders of each series of the Preferred Stock will be
entitled to receive out of assets of the Company available for distribution to
stockholders, before any distribution of assets is made to holders of any Junior
Stock, liquidating distributions in the amount set forth in the prospectus
supplement plus all accrued and unpaid dividends. If, upon any voluntary or
involuntary liquidation, dissolution or winding up of the Company, the amounts
payable with respect to the Preferred Stock are not paid in full, the holders of
Preferred Stock of each series will share ratably in any such distribution of
assets of the Company in proportion to the full respective preferential amounts
to which they are entitled. After payment of the full amount of the liquidating
distribution to which they are entitled, the holders of the Preferred Stock will
not be entitled to any further participation in any distribution of assets by
the Company. A consolidation or merger of the Company with or into any other
corporation or corporations or a sale of all or substantially all of the assets
of the Company will not be deemed to be a liquidation, dissolution or winding up
of the Company.
REDEMPTION
If so provided in the prospectus supplement, the Offered Preferred Stock will be
redeemable in whole or in part at the option of the Company, at the times and at
the redemption prices set forth therein.
If dividends on any series of Preferred Stock are in arrears or the Company has
failed to fulfill its sinking fund or redemption obligations with respect to any
series of Preferred Stock, the Company may not purchase or redeem any shares of
Preferred Stock or any other capital stock ranking on a parity with the
Preferred Stock as to dividends or upon liquidation, nor permit any subsidiary
to do so,
20
<PAGE>
without in either case the consent of the holders of at least two-thirds of all
shares of Preferred Stock then outstanding; provided, however, that (1) to meet
its purchase, retirement or sinking fund obligations with respect to any series
of Preferred Stock, the Company may use shares of such Preferred Stock acquired
prior to such arrearages or failure of payment; and (2) the Company may complete
the purchase or redemption of shares of Preferred Stock for which a contract was
entered into for any purchase, retirement or sinking fund purposes prior to such
arrearages or failure of payment.
VOTING RIGHTS
Except as indicated below or in the prospectus supplement, or except as
expressly required by applicable law, the holders of the Preferred Stock will
not be entitled to vote. As used herein, the term "Applicable Preferred Stock"
means those series of Preferred Stock to which the provisions described herein
are expressly made applicable by resolutions of the Board of Directors of the
Company.
If the equivalent of six quarterly dividends payable on any share of any series
of Applicable Preferred Stock are in arrears (whether or not such dividends have
been declared or such unpaid dividends are consecutive), the number of directors
of the Company will be increased by two and the holders of all outstanding
series of Applicable Preferred Stock (whether or not dividends thereon are
unpaid), voting as a single class without regard to series, will be entitled to
elect the two additional directors until four consecutive quarterly dividends
are paid or declared and set apart for payment, if such share is non-cumulative,
or until all arrearages in dividends and dividends in full for the current
quarterly period are paid or declared and set apart for payment, if such share
is cumulative, whereupon all voting rights described herein shall be divested
from the Applicable Preferred Stock. The holders of Applicable Preferred Stock
may exercise their special class voting rights at meetings of the stockholders
for the election of directors or at special meetings for the purpose of electing
such directors, in either case at which the holders of not less than one-third
of the aggregate number of shares of Applicable Preferred Stock are present in
person or by proxy.
The affirmative vote of the holders of at least two-thirds of the outstanding
shares of Preferred Stock will be required (i) for any amendment of the
Company's Charter that will adversely affect the powers, preferences or rights
of the holders of the Preferred Stock or the holders of the Class D Common Stock
or the Common Stock or (ii) to create any class of stock (or increase the
authorized number of shares of any class of stock) that will have preference as
to dividends or upon liquidation over the Preferred Stock or create any stock or
other security convertible into or exchangeable for or evidencing the right to
purchase any such stock. The affirmative vote of the holders of at least
two-thirds of the outstanding shares of Preferred Stock or a series will be
required for any amendment of the Company's Charter that will adversely affect
the powers, preferences or rights of Preferred Stock of such series.
21
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions of the
Debt Securities to which any prospectus supplement may relate. The particular
terms of the Debt Securities offered by any prospectus supplement and the
extent, if any, to which such general provisions may not apply to the Debt
Securities so offered will be described in the prospectus supplement relating to
such Debt Securities. The prospectus supplement will also set forth a discussion
of federal income tax considerations relevant to the Debt Securities offered
thereby.
The Senior Debt Securities are to be issued under an Indenture (the "Senior
Indenture"), to be entered into between the Company and PNC Bank, N.A. (the
"Trustee"), as trustee. The Subordinated Debt Securities are to be issued under
a separate Indenture (the "Subordinated Indenture"), to be entered into between
the Company and the Trustee, as trustee. The Senior Indenture and the
Subordinated Indenture are sometimes referred to collectively as the
"Indentures." Copies of the Senior Indenture and the Subordinated Indenture have
been filed as exhibits to the Registration Statement. The following summaries of
certain provisions of the Senior Debt Securities, the Subordinated Debt
Securities and the Indentures do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, all the provisions of the
Indentures applicable to a particular series of Debt Securities, including the
definitions therein of certain terms. Wherever particular Sections, Articles or
defined terms of the Indentures are referred to, it is intended that such
Sections, Articles or defined terms shall be incorporated herein by reference.
Article and Section references used herein are references to the applicable
Indenture. Capitalized terms not otherwise defined herein shall have the meaning
given in the Indentures.
GENERAL
The Indentures do not limit the aggregate principal amount of Debt Securities
which may be issued thereunder and each Indenture provides that Debt Securities
may be issued thereunder from time to time in one or more series. The prospectus
supplement will specify the Currency or Currencies in which the Debt Securities
are denominated and payable. Unless otherwise specified in the prospectus
supplement, the Senior Debt Securities when issued will be unsecured and
unsubordinated obligations of the Company and will rank equally and ratably with
all other unsecured and unsubordinated indebtedness of the Company. The
Subordinated Debt Securities when issued will be subordinated in right of
payment to the prior payment in full of all Senior Debt (as defined below) of
the Company, as described under "Description of Debt Securities -- Subordination
of Subordinated Debt Securities" and in the prospectus supplement applicable to
an offering of Subordinated Debt Securities.
22
<PAGE>
Reference is made to the prospectus supplement relating to the particular Debt
Securities offered thereby (the "Offered Debt Securities") which shall set forth
whether the Offered Debt Securities shall be Senior Debt Securities or
Subordinated Debt Securities, and shall further set forth the following terms of
the Offered Debt Securities:
(1) The title of the Offered Debt Securities;
(2) Any limit on the aggregate principal amount of the Offered Debt
Securities;
(3) The Person to whom any interest on the Offered Debt Securities
will be payable, if other than the Person in whose name such
Offered Debt Securities are registered on any Regular Record
Date;
(4) The date or dates on which the principal of the Offered Debt
Securities will be payable;
(5) The rate or rates per annum (which may be fixed, floating or
adjustable) at which the Offered Debt Securities will bear
interest, if any, or the formula pursuant to which such rate or
rates shall be determined, the date or dates from which such
interest will accrue and the dates on which such interest, if
any, will be payable and the Regular Record Dates for such
interest payment dates;
(6) The Currency or Currencies in which the Debt Securities are
denominated and payable, including all interest thereon.
(7) Whether the Offered Debt Securities will be secured;
(8) The place or places where principal of (and premium, if any) and
interest, if any, on Offered Debt Securities will be payable;
(9) If applicable, the price at which, the periods within which and
the terms and conditions upon which the Offered Debt Securities
may be redeemed in whole or in part at the option of the Company
pursuant to a sinking fund or otherwise;
(10) If applicable, any obligation of the Company to redeem or
purchase Offered Debt Securities pursuant to any sinking fund or
analogous provisions or at the option of a Holder thereof, and
the period or periods within which, the price or prices at which
and the terms and conditions upon which the Offered Debt
Securities will be redeemed or purchased, in whole or in part;
23
<PAGE>
(11) If applicable, the terms of any right to convert or exchange the
Offered Debt Securities into other Securities of the Company;
(12) If other than denominations of $1,000 and any integral multiple
thereof, the denominations in which the Offered Debt Securities
will be issuable;
(13) If the amount of payments of principal of (or premium, if any) or
interest, if any, on the Offered Debt Securities may be
determined with reference to one or more indices, the manner in
which such amounts will be determined;
(14) The portion of the principal amount of the Offered Debt
Securities, if other than the principal amount thereof, payable
upon acceleration of maturity thereof;
(15) Whether all or any part of the Offered Debt Securities will be
issued in the form of a Global Security or Securities and, if so,
the depositary for, and other terms relating to, such Global
Security or Securities;
(16) Any event or events of default applicable with respect to the
Offered Debt Securities in addition to those provided in the
Indentures;
(17) Any other covenant or warranty included for the benefit of the
Offered Debt Securities in addition to (and not inconsistent
with) those included in the Indentures for the benefit of Debt
Securities of all series, or any other covenant or warranty
included for the benefit of the Offered Debt Securities in lieu
of any covenant or warranty included in the Indentures for the
benefit of Debt Securities of all series, or any provision that
any covenant or warranty included in the Indentures for the
benefit of Debt Securities of all series shall not be for the
benefit of the Offered Debt Securities, or any combination of
such covenants, warranties or provisions;
(18) Any restriction or condition on the transferability of the
Offered Debt Securities;
(19) Any authenticating or paying agents, registrars, conversion
agents or any other agents with respect to the Offered Debt
Securities; and
(20) Any other terms of the Offered Debt Securities. (Indentures,
Section 301) Debt Securities may also be issued under the
Indentures upon the exercise of Warrants.
24
<PAGE>
Unless otherwise indicated in the prospectus supplement relating thereto, the
Offered Debt Securities are to be issued as registered securities without
coupons in denominations of $1,000 or any integral multiple of $1,000.
(Indentures, Section 302) No service charge will be made for any transfer or
exchange of such Offered Debt Securities, but the Company or the Trustee may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. (Indentures, Section 305)
Debt Securities may be issued under the Indentures as Original Issue Discount
Securities to be sold at a substantial discount below their stated principal
amount. Federal income tax consequences and other considerations applicable
thereto will be described in the prospectus supplement relating thereto.
Since the Company is a holding company, the rights of the Company, and hence the
rights of creditors of the Company (including the Holders of the Debt
Securities), to participate in any distribution of the assets of any subsidiary
upon its liquidation or reorganization or otherwise is necessarily subject to
the prior claims of creditors of such subsidiary, except to the extent that
claims of the Company itself as a creditor of such subsidiary may be recognized.
Generally, the Debt Securities will be effectively subordinated to all existing
and future indebtedness of the Company's operating subsidiaries.
The Indentures do not contain any provisions that limit the ability of the
Company or any subsidiary to incur indebtedness or that afford Holders of the
Debt Securities protection in the event of a highly leveraged or similar
transaction involving the Company or any subsidiary.
The terms of the Company's presently outstanding Long-Term Credit Facility dated
as of March 27, 1995, as amended, limit the amount and type of prepayments of
existing indebtedness and liens by the Company and require the Company to meet
minimum consolidated tangible net worth, maximum leverage and minimum cash flow
coverage requirements.
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EVENTS OF DEFAULT AND NOTICE THEREOF
Unless otherwise specified in the prospectus supplement, the following events
are defined in the Indentures as "Events of Default" with respect to Debt
Securities of any series: (a) failure to pay principal (including any sinking
fund payment) of, or premium (if any) on, any Debt Security of that series when
due (in the case of the Subordinated Indenture, whether or not payment is
prohibited by the subordination provisions); (b) failure to pay interest, if
any, on any Debt Security of that series when due and such failure continues for
a period of 30 days; (c) failure by the Company to perform in any material
respect any other covenant in the Indentures (other than a covenant included in
the Indentures solely for the benefit of a series of Debt Securities other than
that series) which continues for a period of 90 days after written notice to the
Company; (d) due to acceleration (which acceleration shall not have been
rescinded within 30 days after written notice to the Company) of any
indebtedness for borrowed money in a principal amount in excess of $25,000,000
for which the Company or any Principal Subsidiary (as defined) is liable,
including Debt Securities of another series, or a default by the Company or any
Principal Subsidiary in the payment at final maturity of outstanding
indebtedness for borrowed money in a principal amount in excess of $25,000,000
unless such acceleration or default at maturity shall be remedied or cured by
the Company or such Principal Subsidiary or rescinded, annulled or waived by the
holders of such indebtedness, in which case such acceleration or default at
maturity shall not constitute an Event of Default under this provision and any
acceleration relating thereto shall be rescinded; and (e) certain events of
insolvency, reorganization, receivership or liquidation of the Company.
(Indentures, Section 501)
No Event of Default with respect to Debt Securities of a particular series shall
necessarily constitute an Event of Default with respect to Debt Securities of
any other series. If an Event of Default with respect to Debt Securities of any
series at the time Outstanding shall occur and be continuing, either the Trustee
or the Holders of at least 25% in principal amount of the Outstanding Debt
Securities of that series may declare the principal amount (or, if the Debt
Securities of that series are Original Issue Debt Securities, such portion of
the principal amount as may be specified in the terms of that series) of all
Debt Securities of that series to be due and payable immediately; provided,
however, that under certain circumstances the Holders of a majority in aggregate
principal amount of Outstanding Debt Securities of that series may rescind or
annul such declaration and its consequences.
(Indentures, Section 502)
Reference is made to the prospectus supplement relating to any series of Offered
Debt Securities which are Original Issue Discount Securities for the particular
provisions relating to the principal amount of such Original Issue Discount
Securities due on acceleration upon the occurrence of an Event of Default and
the continuation thereof.
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Subject to Sections 6.01 and 6.02 of the Indenture, the Trustee is not charged
with knowledge of any Event of Default unless written notice thereof shall have
been given to the Trustee by the Company, the Paying Agent, or any Holder of
that series or an agent of any Holder, or as provided with respect to Events of
Default under clause (d) above. (Indentures, Section 501) Each Indenture
provides that the Trustee may withhold notice to the Holders of the Debt
Securities of any default (except in payment of principal (or premium, if any)
or interest, if any) if it considers it in the interest of the Holders of the
Debt Securities to do so. (Indentures, Section 602) The Company will be required
to furnish to the applicable Trustee annually a statement by certain officers of
the Company as to the compliance with all conditions and covenants of the
Indentures. (Indentures, Section 1004)
The Holders of a majority in principal amount of the Outstanding Debt Securities
of any series affected will have the right, subject to certain limitations, to
direct the time, method and place of conducting any proceeding for any remedy
available to the applicable Trustee or exercising any trust or power conferred
on such applicable Trustee with respect to the Debt Securities of such series,
and to waive certain defaults. (Indentures, Sections 512 and 513)
The Indentures provide that, in case an Event of Default shall occur and be
continuing, the applicable Trustee shall exercise such of its rights and powers
under the Indentures, and use the same degree of care and skill in its exercise,
as a prudent person would exercise or use under the circumstances in the conduct
of his or her own affairs. (Indentures, Section 601). Subject to such
provisions, the applicable Trustee will be under no obligation to exercise any
of its rights or powers under the Indentures at the request of any of the
Holders of Debt Securities unless they shall have offered to such Trustee
security or indemnity in form and substance reasonably satisfactory to such
Trustee against the costs, expenses and liabilities which might be incurred by
it in compliance with such request.
(Indentures, Section 603)
No Holder of a Debt Security of any series will have any right to institute any
proceeding with respect to the Indentures or for any remedy thereunder, unless
such Holder shall have previously given to the applicable Trustee written notice
of a continuing event of Default and unless also the Holders of at least 25% in
aggregate principal amount of the Outstanding Debt Securities of the same series
shall have made written request, and offered security or indemnity to such
Trustee in form and substance reasonably satisfactory to such Trustee, to
institute such proceeding as trustee, and such Trustee shall not have received
from the Holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of the same series a direction inconsistent with such request
and shall have failed to institute such proceeding within 60 days. (Indentures,
Section 507). However, such limitations do not apply to a suit instituted by a
Holder of a Debt Security for enforcement of payment of the principal of (or
premium, if any) or interest, if any, on such Debt Security on or after the
respective due dates expressed in such Debt Security, or of the right to convert
such Debt Security in accordance with the Indentures (if applicable).
(Indentures, Section 308)
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MODIFICATION AND WAIVER
Each Indenture provides that from time to time, the Company and the Trustee,
without the consent of the Holders of any series of Debt Securities, may amend
the Indenture or such series of Debt Securities for certain specified purposes,
including curing ambiguities, defects, or inconsistencies and making any such
change that does not adversely affect the rights of any Holder of such series of
Debt Securities. Modifications and amendments of the Indentures may also be made
by the Company and the applicable Trustee, with the consent of the Holders of
not less than a majority of aggregate principal amount of each series of the
Outstanding Debt Securities issued under the Indentures which is affected by the
modification or amendment; provided, however, that no such modification or
amendment may, without the consent of each Holder of such Debt Security affected
thereby: (1) change the Stated Maturity of the principal of (or premium, if any)
or any installment of principal or interest, if any, on any such Debt Security;
(2) reduce the principal amount of (or premium, if any) or the interest rate, if
any, on any such Debt Security or the principal amount due upon acceleration of
any Original Issue Discount Security; (3) change the place or currency of
payment of principal of (or premium, if any) or the interest, if any, on any
such Debt Security; (4) impair the right to institute suit for the enforcement
of any such payment on or with respect to any such Debt Security; (5) adversely
change the right to convert or exchange, including decreasing the conversion
rate or increasing the conversion price of, such Debt Security (if applicable);
(6) reduce the percentage of Holders of Debt Securities necessary to modify or
amend the Indentures; (7) in the case of the Subordinated Indenture, modify the
subordination provisions in a manner adverse to the holders of the Subordinated
Debt Securities; or (8) modify the foregoing requirements or reduce the
percentage of outstanding Debt Securities necessary to waive compliance with
certain provisions of the Indentures or for waiver of certain defaults.
(Indentures, Section 902)
The holders of at least a majority of the aggregate principal amount of the
Outstanding Debt Securities of any series may, on behalf of all Holders of that
series, waive compliance by the Company with certain restrictive provisions of
the Indentures and waive any past default under the Indentures, except a default
in the payment of principal (or premium, if any), or interest (if any) or in the
performance of certain covenants. (Indentures, Sections 907 and 513)
DEFEASANCE AND COVENANT DEFEASANCE
The Indentures provide that the Company may elect either (A) to defease and be
discharged from any and all obligations with respect to any series of such Debt
Securities (including, in the case of Subordinated Debt Securities, the
provisions described under "Subordinated Debt Securities" herein and except for
the obligations to exchange or register the transfer of such Debt Securities to
replace temporary or mutilated, destroyed, lost or stolen Debt Securities, to
maintain an
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office or agency in respect of the Debt Securities, and to hold monies for
payments in trust) ("defeasance"), or (B) to be released from its obligations
with respect to such Debt Securities concerning the restrictions described under
"Limitations on Liens on Common Stock of Principal Subsidiaries" and
"Consolidation, Merger and Sale of Assets" and any other covenants applicable to
such Debt Securities (including, in the case of Subordinated Debt Securities,
the provisions described under "Subordination of Subordinated Debt Securities"
herein), which are subject to covenant defeasance ("covenant defeasance"), and
the occurrence of an event described and notice thereof in clauses (c) and (d)
under "Events of Default and Notice Thereof" (with respect to covenants subject
to covenant defeasance) shall no longer be an Event of Default, in each case,
upon the irrevocable deposit with the applicable Trustee (or other qualifying
trustee), in trust for such purpose, of money and U.S. Government Obligations
(as defined) which through the payment of principal and interest in accordance
with their terms will provide money in an amount sufficient to pay the principal
of (and premium, if any) and interest, if any, on such Debt Securities, and any
mandatory sinking fund or analogous payments thereon, on the scheduled due dates
therefor. Such a trust may only be established if, among other things, (i) the
Company has delivered to the applicable Trustee (A) in the case of defeasance,
an Opinion of Counsel (as defined) stating that (1) the Company has received
from, or there has been published by, the Internal Revenue Service a ruling, or
(2) since the date of the Indenture, there has been a change in the applicable
Federal income tax law, in case of either (1) or (2) to the effect that the
Holders of such Securities will not recognize a gain or loss for Federal income
tax purposes as a result of the deposit, Defeasance and discharge to be effected
with respect to such Securities and will be subject to Federal income tax on the
same amount, in the same manner and at the same times as would be the case if
such deposit, Defeasance and discharge were not to occur or (B) in the case of
covenant defeasance, an Opinion of Counsel to the effect that the Holders of
such Debt Securities will not recognize gain or loss for Federal income tax
purposes as a result of such deposit and covenant defeasance and will be subject
to Federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such deposit and covenant defeasance had
not occurred, (ii) no Event of Default or event which with the giving of notice
or lapse of time, or both, would become an Event of Default under the Indenture
shall have occurred and be continuing on the date of such deposit and (iii) in
the case of Subordinated Debt Securities, (x) no default in the payment of
principal of (or premium, if any) or interest, if any, on any Senior Debt beyond
any applicable grace period shall have occurred and be continuing, or (y) no
other default with respect to any Senior Debt shall have occurred and be
continuing and shall have resulted in the acceleration of such Senior Debt.
(Indentures, Article Thirteen) The Company may exercise its defeasance option
with respect to such Debt Securities notwithstanding its prior exercise of its
covenant defeasance option. If the Company exercises its defeasance option,
payment of such Debt Securities may not be accelerated because of an Event of
Default. If the Company exercises its covenant defeasance option, payment of
such Debt Securities may not be accelerated by
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reference to the covenants noted under Clause (B) above. In the event the
Company omits to comply with its remaining obligations with respect to such Debt
Securities under the Indentures after exercising its covenant defeasance option
and such Debt Securities are declared due and payable because of the occurrence
of any Event of Default, the amount of money and U.S. Government Obligations on
deposit with the Trustee may, in certain circumstances, be insufficient to pay
amounts due on the Debt Securities of such series at the time of the
acceleration resulting from such Event of Default; however, the Company will
remain liable in respect of such payments. (Indentures, Article Thirteen)
LIMITATION ON LIENS ON COMMON STOCK OF PRINCIPAL SUBSIDIARIES
Except as set forth below, so long as any of the Senior Securities or the
Subordinated Debt Securities (as the case may be) remains outstanding, the
Company will not, and will not permit any Principal Subsidiary to, issue,
assume, incur or guarantee any indebtedness for borrowed money secured by a
mortgage, pledge, lien or other encumbrance in the nature of a lien ("Lien") on
any shares of the Common Stock of a Principal Subsidiary, which Common Stock is
owned by the Company or by a Principal Subsidiary, without effectively providing
that such Debt Securities, and, if the Company so elects, any other indebtedness
for borrowed money of the Company ranking senior to or on a parity with such
Debt Securities, shall be secured equally and ratably with, or prior to, such
indebtedness so long as such indebtedness shall be so secured unless after
giving effect thereto, the aggregate amount of all such secured indebtedness of
the Company and its Subsidiaries would not exceed 15% of the Consolidated
Tangible Net Worth of the Company and its Subsidiaries as reflected on the
Company's most recently prepared quarterly balance sheet; provided, however,
that this covenant shall not apply to, and there shall be excluded from secured
indebtedness in any computation under this covenant, indebtedness for borrowed
money secured by: (i) Liens existing on the date of the Indenture; (ii) Liens on
any shares of common stock of any corporation existing at the time such
corporation becomes a Principal Subsidiary or merges into or consolidates with
the Company or any Principal Subsidiary; (iii) Liens on shares of common stock
of any Person existing at the time of acquisition thereof by the Company or any
Principal Subsidiary; (iv) Liens to secure the financing of the acquisition,
construction or improvement of property, or the acquisition of shares of stock,
by the Company or any Principal Subsidiary if such Liens are created not later
than one year after such acquisition, or in the case of property, completion of
construction or commencement of commercial operation, whichever is later, (v)
Liens in favor of the Company or any Subsidiary; (vi) Liens required by or in
favor of governments or agencies thereof including those to secure progress,
advance or other payments pursuant to any contract or provision of any statute;
(vii) Liens in the nature of rights of set-off or bankers' liens pursuant to any
contract or statute; and (viii) any extension, renewal or replacement (or
successive extensions, renewals or replacements) as a whole or in part of any
Lien referred to in the foregoing clauses (i) to (vii) inclusive; provided,
further that (a) such extension, renewal or
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replacement Lien shall be limited to all or a part of the same shares of stock
that secured the Lien extended, renewed or replaced and (b) the indebtedness
secured by such Lien at such time is not increased. (Indentures, Section 1005)
See "General" above.
"Principal Subsidiary" means any Subsidiary of the Company which at the time of
determination has, (A) assets which, as of the date of the Company's most
recently prepared quarterly consolidated balance sheet, constituted at least 15%
of the Company's total assets on a consolidated basis as of such date, or (B)
revenues for the 12-month period ending on the date of the Company's most
recently prepared quarterly consolidated statement of income which constituted
at least 15% of the Company's total revenues on a consolidated basis for such
period or (C) net earnings for the 12-month period ending on the date of the
Company's most recently prepared quarterly consolidated statement of income
which constituted at least 15% of the Company's total net earnings on a
consolidated basis for such period.
(Indentures, Section 101)
"Consolidated Tangible Net Worth" means, at any date, the total assets appearing
on the most recently prepared consolidated balance sheet of the Company and its
Subsidiaries as of the end of a fiscal quarter of the Company, prepared in
accordance with generally accepted accounting principles consistently applied
(subject to normal year-end adjustments and except to the extent an
inconsistency results from compliance with new financial accounting standards
with which the Company's independent public accountants concur), less (a) the
total liabilities appearing on such balance sheet and (b) intangible assets. For
this purpose, "intangible assets" means the value (net of any applicable
reserves), as shown on or reflected in such balance sheet, of (i) all trade
names, trademarks, licenses, patents, copyrights and goodwill; (ii)
organizational and development costs; and (iii) unamortized debt discount and
expense, less unamortized premium; but (iv) excludes deferred policy acquisition
costs and deferred income tax assets.
For purposes of the Indentures, "Common Stock" means, with respect to the
Company, its common capital stock, and with respect to any Principal Subsidiary,
stock of any class, however designated, except stock which is non-participating
beyond fixed dividend and liquidation preferences and the holders of which have
either no voting rights or limited voting rights entitling them, only in the
case of certain contingencies, to elect less than a majority of the directors
(or persons performing similar functions) of such Principal Subsidiary, and
shall include securities of any class, however designated, which are convertible
into such Common Stock. (Indentures, Section 101)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not consolidate with or merge into any other Person or sell its
property and assets as, or substantially as, an entirety to any Person and may
not permit any Person to merge into or consolidate with the Company unless (i)
either
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the Company will be the resulting or surviving entity or any successor or
purchaser is a corporation, partnership or trust organized under the law of the
United States of America, any State or the District of Columbia, and any such
successor or purchaser expressly assumes the Company's obligations on the Debt
Securities under a supplemental Indenture, (ii) immediately after giving effect
to the transaction no Event of Default shall have occurred and be continuing,
and (iii) certain other conditions are met. (Indentures, Section 801)
CONVERSION RIGHTS
The terms on which Debt Securities of any series may be convertible or
exchangeable into Common Stock or other Securities of the Company will be set
forth in the prospectus supplement relating thereto. Such terms shall include
provisions as to whether conversion or exchange is mandatory, at the option of
the holder or at the option of the Company, and may include provisions pursuant
to which the number of shares of Common Stock or other securities of the Company
or the securities of another corporation as the case may be, to be received by
the holders of Debt Securities would be calculated according to the market
price of Common Stock or other securities of the Company as of a time stated
in the Prospectus Supplement. (Indentures, Article Twelve)
SUBORDINATION OF DEBT SECURITIES
Unless otherwise indicated in the prospectus supplement, the following
provisions will apply to the Subordinated Debt Securities.
The Subordinated Debt Securities will, to the extent set forth in the
Subordinated Indenture, be subordinate in right of payment to the prior payment
in full of all Senior Debt, including the Senior Debt Securities. Upon any
payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshalling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Company, the holders of Senior Debt will first be
entitled to receive payment in full of principal of (and premium, if any) and
interest, if any, on such Senior Debt before the holders of the Subordinated
Debt Securities will be entitled to receive or retain any payment in respect of
the principal of (and premium, if any) or interest, if any, on the Subordinated
Debt Securities. (Subordinated Indenture, Section 1502)
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are not Holders of Senior Debt may recover less,
ratably, than Holders of Senior Debt and may recover more, ratably, than the
Holders of the Subordinated Debt Securities.
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In the event of the acceleration of the maturity of any Subordinated Debt
Securities, the holders of all Senior Debt outstanding at the time of such
acceleration will first be entitled to receive payment in full of all amounts
due thereon (including any amounts due upon acceleration) before the Holders of
the Subordinated Debt Securities will be entitled to receive any payment upon
the principal of (or premium, if any) or interest, if any, on the Subordinated
Debt Securities. (Subordinated Indenture, Section 1503)
No payments on account of principal (or premium, if any) or interest, if any, in
respect of the Subordinated Debt Securities may be made if there shall have
occurred and be continuing a default in any payment with respect to Senior Debt,
or an event of default with respect to any Senior Debt resulting in the
acceleration of the maturity thereof, or if any judicial proceeding shall be
pending with respect to any such default. (Subordinated Indenture, Section 1504)
For purposes of the subordination provisions, the payment, issuance and delivery
of cash, property or securities (other than stock and certain subordinated
securities of the Company) upon conversion of a Subordinated Debt Security will
be deemed to constitute payment on account of the principal of such Subordinated
Debt Security.
"Debt" means (without duplication and without regard to any portion of principal
amount that has not accrued and to any interest component thereof (whether
accrued or imputed) that is not due and payable) with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (i) every obligation of such Person for money borrowed; (ii)
every obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses; (iii) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person; (iv)
every obligation of such Person issued or assumed as the deferred purchase price
of property or services (but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business); (v) every capital lease
obligation of such Person; (vi) the maximum fixed redemption or repurchase price
of redeemable stock of such Person at the time of mandatory redemption and (vii)
every obligation of the type referred to in clauses (i) through (vi) of another
Person and all dividends of another Person the payment of which, in either case,
such Person has guaranteed or is responsible or liable, directly or indirectly,
as obligor or otherwise.
"Senior Debt" means the principal of (and premium, if any) and interest, if any
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company to the extent that such
claim for post-petition interest is allowed in such proceeding), on Debt,
whether incurred on or prior to the date of the Subordinated Indenture or
thereafter incurred, unless, in the instrument creating or evidencing the same
or pursuant to which the same is outstanding, it is provided that such
obligations are not superior in right of payment to the Subordinated Debt
Securities or to other Debt which is pari passu
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with, or subordinated to, the Subordinated Debt Securities; provided, however,
that Senior Debt shall not be deemed to include (i) the Subordinated Debt
Securities or (ii) the Debt referred to in clause (vi) of the definition of
Debt.
The Subordinated Indenture does not limit or prohibit the incurrence of
additional Senior Debt, which may include indebtedness that is senior to the
Subordinated Debt Securities, but subordinate to other obligations of the
Company. The Senior Debt Securities, when issued, will constitute Senior Debt.
The indebtedness under the Company's presently outstanding Credit Facility
constitutes Senior Debt. At March 15, 1996 Senior Debt outstanding aggregated
approximately $218 million.
The prospectus supplement may further describe the provisions, if any,
applicable to the subordination of the Subordinated Debt Securities of a
particular series.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in the form of one or more Global
Securities that will be deposited with a Depositary or its nominee. In such a
case, one or more Global Securities will be issued in a denomination or
aggregate denominations equal to the portion of the aggregate principal amount
of Outstanding Debt Securities of the series to be represented by such Global
Security or Securities. Unless and until it is exchanged in whole or in part for
Debt Securities in definitive registered form, a Global Security may not be
registered for transfer or exchange except as a whole by the Depositary for such
Global Security to a nominee for such Depositary and except in the circumstances
described in the applicable prospectus supplement. (Indentures, Sections 204 and
305)
The specific terms of the depositary arrangement with respect to any portion of
a series of Debt Securities to be represented by a Global Security and a
description of the Depositary will be contained in the applicable prospectus
supplement.
THE TRUSTEE
Each Indenture contains limitations on the right of the Trustee, as a creditor
of the Company, to obtain payment of claims in certain cases, or to realize on
certain property received in respect of any such claim as security or otherwise.
In addition, the Trustee may be deemed to have a conflicting interest and may be
required to resign as Trustee if at the time of a default under the applicable
Indenture it is a creditor of the Company. The Trustee is a lender under the
Company's Long-Term Credit Facility. See "The Company." At March 15, 1996, the
Trustee's portion of the outstanding indebtedness thereunder was approximately
$3,125,000 and is committed to lending thereunder up to $12,500,000.
The applicable Trustee or its affiliates may act as depositary for funds of,
make loans to and perform other services for, or may be a customer of, the
Company in the ordinary course of business.
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GOVERNING LAW
The Indentures are governed by and shall be construed in accordance with the
laws of the State of New York, but without regard to principles of conflicts of
laws.
DESCRIPTION OF COMMON WARRANTS
The Company may issue (either separately or together with other Offered
Securities) Common Warrants to purchase Common Stock (the "Offered Common
Warrants"). The Common Warrants will be issued under warrant agreements (each a
"Common Warrant Agreement") to be entered into between the Company and a bank or
trust company, as warrant agent (the "Common Warrant Agent"). A Copy of the
forms of Common Warrant Agreement have been filed as exhibits to the
registration statement. The following summary of certain provisions of the
Common Warrant Agreement does not purport to be complete and is subject to, and
is qualified in its entirety by reference to the Common Warrant Agreement,
including the definitions of certain topics.
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GENERAL
Reference is made to the prospectus supplement for the terms of the
Offered Common Warrants, including:
(1) The title and aggregate number of such Common Warrants.
(2) The number of shares of Common Stock that may be purchased upon
exercise of each such Common Warrant; the price, or the manner of
determining the price, at which such shares may be purchased upon such
exercise; if other than cash, the property and manner in which the
exercise price may be paid; and any minimum number of such Common
Warrants that are exercisable at any one time.
(3) The time or times at which, or period or periods in which, such Common
Warrants may be exercised and the expiration date of such Common
Warrants.
(4) The terms of any right of the Company to redeem such Common Warrants.
(5) The terms of any right of the Company to accelerate the exercise of
such Common Warrants upon the occurrence of certain events.
(6) Whether such Common Warrants will be sold with any other Offered
Securities.
(7) The date, if any, on and after which such Common Warrants and such
Offered Securities will be separately transferable.
(8) Any other terms of such Common Warrants.
If applicable, the prospectus supplement will also set forth information
concerning any other Securities offered thereby and a discussion of federal
income tax considerations relevant thereto.
Certificates representing Common Warrants (the "Common Warrant Certificates")
will be exchangeable for new Common Warrant Certificates of different
denominations. No service charge will be made for any permitted transfer or
exchange of Common Warrant Certificates, but the Company may require payment of
any tax or other governmental charge payable in connection therewith. Common
Warrants may be exercised at the corporate trust office of the Common Warrant
Agent or any other offices indicated in the prospectus supplement.
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EXERCISE OF COMMON WARRANTS
Each Offered Common Warrant will entitle the holder thereof to purchase such
number of shares of Common Stock at the exercise price set forth in, or
calculable from, the prospectus supplement relating to such Offered Common
Warrants. After the close of business on the applicable expiration date,
unexercised Common Warrants will become void.
Offered Common Warrants may be exercised by payment to the Common Warrant Agent
of the exercise price and by delivery to the Common Warrant Agent of the related
Common Warrant Certificate, with the reverse side thereof properly completed.
Offered Common Warrants will be deemed to have been exercised upon receipt of
the exercise price, subject to the receipt by the Common Warrant Agent, within
five business days thereafter, of the Common Warrant Certificate or Certificates
evidencing such Offered Common Warrants. Upon receipt of such payment and the
properly completed Common Warrant Certificates at the corporate trust office of
the Common Warrant Agent or such other office acceptable to the Common Warrant
Agent, the Company will, as soon as practicable, deliver the shares of Common
Stock purchased upon such exercise. If fewer than all of the Offered Common
Warrants represented by any Common Warrant Certificate are exercised, a new
Common Warrant Certificate will be issued for the unexercised Offered Common
Warrants. The holder of an Offered Common Warrant will be required to pay any
tax or other governmental charge that may be imposed in connection with any
transfer involved in the issuance of Common Stock purchased upon such exercise.
MODIFICATIONS
The Common Warrant Agreement and the terms of the Offered Common Warrants may be
modified or amended by the Company and the Common Warrant Agent, without the
consent of any holder, for the purpose of curing any ambiguity, or of curing,
correcting or supplementing any defective or inconsistent provision contained
therein, or in any other manner that the Company deems necessary or desirable
and that will not materially and adversely affect the interests of the holders
of the Offered Common Warrants.
COMMON WARRANT ADJUSTMENTS
The terms and conditions on which the exercise price of and/or the number of
shares of Common Stock covered by an Offered Common Warrant are subject to
adjustment will be set forth in the Common Warrant Agreement and the prospectus
supplement. Such terms will include provisions for adjusting the exercise price
and/or the number of shares of Common Stock covered by such Offered Common
Warrant; the events requiring such adjustment; the events upon
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which the Company may, in lieu of making such adjustment, make proper provisions
so that the holder of such Offered Common Warrant, upon exercise thereof, would
be treated as if such holder had exercised such Offered Common Warrant prior to
the occurrence of such events; and provisions affecting exercise in the event of
certain events affecting the Common Stock.
NO RIGHTS AS STOCKHOLDERS
Holders of Common Warrants are not entitled, by virtue of being such holders, to
vote, consent or receive notice as stockholders of the Company in respect of any
meeting of stockholders for the election of directors of the Company or any
other matter, or exercise any other rights whatsoever as stockholders of the
Company.
DESCRIPTION OF DEBT WARRANTS
The Company may issue (either separately or together with other Offered
Securities) Debt Warrants to purchase the underlying Debt Securities (the
"Offered Debt Warrants"). Such Debt Warrants will be issued under warrant
agreements (each a "Debt Warrant Agreement") to be entered into between the
Company and a bank or trust company, as warrant agent (the "Debt Warrant
Agent"), all as shall be set forth in the prospectus supplement. A copy of the
forms of Debt Warrant Agreement have been filed as an exhibit to the
registration statement. The following summary of certain provisions of the Debt
Warrant Agreement does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all the provisions of the Debt
Warrant Agreement including the definitions of certain terms.
GENERAL
Reference is made to the prospectus supplement for the terms of the Offered Debt
Warrants, including the following:
(1) The title and aggregate number of such Debt Warrants.
(2) The title, rank, aggregate principal amount and terms of the
underlying Debt Securities purchasable upon exercise of such Debt
Warrants.
(3) The principal amount of the underlying Debt Securities that may
be purchased upon exercise of each such Debt Warrant, and the
price, or the manner of determining the price, at which such
principal amount may be purchased upon such exercise.
(4) The time or times at which, or period or periods in which, such
Debt Warrants may be exercised and the expiration date of such
Debt Warrants.
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(5) The terms of any right of the Company to redeem such Debt
Warrants.
(6) Whether certificates evidencing such Debt Warrants ("Debt Warrant
Certificates") will be issued in registered or bearer form, and,
if registered, where they may be transferred and exchanged.
(7) Whether such Debt Warrants are to be issued with any Debt
Securities or any other Securities.
(8) The date, if any, on and after which such Debt Warrants and such
Debt Securities or other Securities will be separately
transferable.
(9) Any other terms of such Debt Warrants.
If applicable, the prospectus supplement will also set forth information
concerning any other Securities offered thereby and a discussion of federal
income tax considerations relevant thereto.
Debt Warrant Certificates will be exchangeable for new Debt Warrant Certificates
of different denominations. No service charge will be made for any permitted
transfer or exchange of Debt Warrant Certificates, but the Company may require
payment of any tax or other governmental charge payable in connection therewith.
Debt Warrants may be exercised and exchanged, and Debt Warrants in registered
form may be presented for registration or transfer at the corporate trust office
of the Debt Warrant Agent or any other office indicated in the prospectus
supplement.
EXERCISE OF DEBT WARRANTS
Each Offered Debt Warrant will entitle the holder thereof to purchase such
amount of underlying Debt Securities at the exercise price set forth in, or
calculable from, the prospectus supplement relating to such Offered Debt
Warrants. After the close of business on the applicable expiration date,
unexercised Debt Warrants will become void.
Debt Warrants may be exercised by payment to the Debt Warrant Agent of the
applicable exercise price and by delivery to the Debt Warrant Agent of the
related Debt Warrant Certificate, with the reverse side thereof properly
completed. Debt Warrants will be deemed to have been exercised upon receipt of
the exercise price, subject to the receipt by the Debt Warrant Agent, within
five business days thereafter, of the Debt Warrant Certificate or Certificates
evidencing such Debt Warrants. Upon receipt of such payment and the properly
completed Debt Warrant Certificates at the corporate trust office of the Debt
Warrant Agent or any
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other office indicated in the prospectus supplement, the Company will, as soon
as practicable, deliver the amount of the underlying Debt Securities purchased
upon such exercise. If fewer than all of the Debt Warrants represented by any
Debt Warrant Certificate are exercised, a new Debt Warrant Certificate will be
issued for the unexercised Debt Warrants. The holder of a Debt Warrant will be
required to pay any tax or other governmental charge that may be imposed in
connection with any transfer involved in the issuance of Underlying Debt
Securities purchased upon such exercise.
MODIFICATIONS
The Debt Warrant Agreement and the terms of the Offered Debt Warrants may be
modified or amended by the Company and the Debt Warrant Agent, without the
consent of any holder, for the purpose of curing any ambiguity, or of curing,
correcting or supplementing any defective or inconsistent provision contained
therein, or in any other manner that the Company deems necessary or desirable
and that will not materially and adversely affect the interests of the holders
of the Offered Debt Warrants.
NO RIGHTS AS HOLDERS OF UNDERLYING DEBT SECURITIES
Holders of Debt Warrants are not entitled, by virtue of being such holders, to
payments of principal of (or premium, if any) or interest, if any, on the
related Underlying Debt Securities or to exercise any other rights whatsoever as
holders of the Underlying Debt Securities.
DESCRIPTION OF OUTSTANDING CAPITAL STOCK
Pursuant to the Company's Charter, it has authorized capital stock of
292,000,000 shares of five classes consisting of 200,000,000 shares of Common
Stock, par value $1.00 ("Common Stock"); 26,000,000 shares of Class A Common
Stock, par value $.00001 ("Class A Stock"), 11,000,000 shares of Class C Common
Stock, par value $1.00 ("Class C Stock"), 40,000,000 shares of Class D Common
Stock, par value $1.00 ("Class D Stock"); and 15,000,000 shares of Preferred
Stock, par value $1.00 ("Preferred Stock").
On June 30, 1996 there were outstanding (a) 42,631,983 shares of Common Stock,
(b) employee stock options to purchase an aggregate 6,003,122 shares of Common
Stock (of which options to purchase an aggregate 2,584,563 shares of Common
Stock were exercisable), (c) 1,854,030 shares of Class A Stock, (d) 357,151
shares of Class C Stock, (e) no shares of Class D Stock, (f) 2,300,000 shares of
the Series A Convertible Preferred Stock, (g) 4,658,047 shares of Series B
Convertible Preferred Stock and (h) no shares of Junior Participating Preferred
Stock. Rights to purchase Junior Participating Preferred Stock have been
distributed to the holders of the Common Stock, Class A Stock and Class C Stock.
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The following descriptions and the descriptions contained in "Description of
Common Stock" and "Description of Preferred Stock" are summaries, and reference
is herein made to the detailed provisions of the following documents,
instruments and agreements copies of which are filed as exhibits to the
Registration Statement and are incorporated herein by reference:
(1) Amended and Restated Articles of Incorporation of the Company.
(2) Articles of Amendment, dated July 15, 1994, to the Articles of
Incorporation of the Company.
(3) Articles Supplementary of the Company, dated March 18, 1993 relating
to the $3.625 Series A Convertible Preferred Stock.
(4) Articles Supplementary of the Company, dated July 15, 1994 relating to
the 8% Series B Cumulative Convertible Preferred Stock.
(5) Article Supplementary of the Company, dated July 15, 1994 relating to
the Series A Junior Participating Preferred Stock.
(6) Rights Agreement dated as of June 11, 1987 between the Company and
First Chicago Trust Company of New York, formerly Morgan Shareholder
Services Trust Company, as Rights Agent, as amended and restated on
March 28, 1990, as amended by Amendment No. 1 on April 21, 1992,
Amendment No. 2 on June 6, 1994, Amendment No. 3 on July 15, 1994, and
Amendment No. 4 on November 16, 1995, pursuant to which shares of the
Junior Participating Preferred Stock are issuable under certain
circumstances.
(7) Form of Trust Agreement dated as of June 11, 1987, amended and
restated as of March 28, 1990, between the Company and Montreal Trust
Company of Canada, as successor to The Canada Trust Company.
(8) Stock Purchase and Sale Agreement dated as of June 6, 1994, between
the Company and American International Group, Inc. ("AIG").
(9) Amendment No. 1, dated as of November 10, 1994 to the Stock Purchase
and Sale Agreement between the Company and AIG.
(10) Amendment No. 2, dated March 16, 1995, to the Stock Purchase and Sale
Agreement between the Company and AIG.
COMMON STOCK CLASSES. The Company has four classes of common stock --
Common Stock, Class A Stock, Class C Stock and Class D Stock. Each holder of the
Common Stock, Class A Stock and Class C Stock is entitled to one vote for each
share held on all matters voted upon by the stockholders of the Company,
including the election of directors. In certain instances, however, holders of
the
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Class A and Class C Stock vote as a group. Holders of the Class D Stock are not
entitled to vote, except that the Company's Charter cannot be amended so as to
adversely affect the holders of the Class D Stock without the approval of the
holders of two-thirds of such shares then outstanding. The Common Stock, Class A
Stock, Class C Stock and Class D Stock do not have pre-emptive or conversion
rights or cumulative voting rights for the election of directors and there are
no redemption or sinking fund provisions applicable thereto.
Subject to the provisions of Maryland law, dividends on the Common Stock and the
Class D Stock (when and if issued) may be declared and paid by the board of
directors. Neither the Class A Stock nor the Class C Stock have dividend rights;
however, associated with each share of Class A Stock is a dividend paying share
(RSC Class 1 Share) issued by Reed Stenhouse Companies Limited, a Canadian
subsidiary of the Company, and associated with each share of Class C Stock is a
dividend paying (U.K. Dividend Share) issued by Alexander & Alexander Services
UK plc, a U.K. subsidiary of the Company. No dividends may be declared or paid
on the Common Stock, unless an equivalent amount per share is declared and paid
on the RSC Class 1 Shares and the UK Dividend Shares. Accordingly, the Company's
ability to pay dividends is limited by the amounts payable to the Canadian and
U.K. subsidiaries for such purposes. At December 31, 1995 these amounts
approximate Canadian $96.5 million or $70.9 million, assuming certain solvency
tests are met under Canadian law and 127 million pounds sterling or $199.6
million. In the event sufficient earnings are not available in the Canadian or
U.K. subsidiary to pay dividends the Company's legal structure allows it to make
earnings or capital available in those subsidiaries to pay dividends.
Holders of the Common Stock, Class C Stock and Class D Stock are entitled to
receive ratably, upon liquidation of the Company, all remaining assets available
for distribution to stockholders after satisfaction of the Company's liabilities
and the preferential rights of any Preferred Stock which may then be
outstanding. Holders of the Class A Stock are not entitled to receive any
dividends or liquidating or other distributions with respect to such shares from
the Company, but are entitled to receive in respect of their associated RSC
Class 1 Shares an amount in Canadian dollars equivalent to the U.S. dollar
amount to be paid on the Common Stock.
The shares on the Class C Stock are convertible at any time into, and shares of
RSC Class 1 Shares are exchangeable at any time (and the Class A Stock is
concurrently redeemable), for fully paid, non-assessable shares of Common Stock
on the basis of one share of Common Stock for each share of Class C Stock or RSC
Class 1 Share (subject to adjustment). In addition, upon the happening of
certain events, the Company can require such conversion. Shares of the Series B
Convertible Preferred Stock are convertible into Class D Stock, at a conversion
price of $17 per share (subject to adjustment). The Class D Stock (when and if
issued) may be exchanged for Common Stock, at anytime on a share-for-share
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basis, provided, however, that no person is entitled to acquire Common Stock
upon such exchange if after giving effect thereto such person has more than 9.9
percent of the combined voting power of the common stock voting shares then
outstanding, absent certain events. The Common Stock, Class A Stock, Class C
Stock and Class D Stock have customary anti-dilution provisions.
The Common Stock is listed on the New York and London stock exchanges. In the
United States, the Company's transfer agent and registrar is First Chicago Trust
Company of New York. In London, the Company's transfer agent and registrar is
The R-M Trust Company. In Canada the Company's transfer agent and registrar is
Montreal Trust Company of Canada. The RSC Class 1 Shares are traded on the
Toronto and Montreal stock exchanges and the Class C Stock is traded on the
London Stock exchange.
PREFERRED STOCK SERIES. The Company has one class of Preferred Stock which can
be issued in one or more series with full or limited voting rights, with the
rights of each series to be determined by the Board of Directors before each
issuance. The Company currently has authorized three series of Preferred Stock,
Series A Convertible Preferred Stock, Series B Convertible Preferred Stock and
Junior Participating Preferred Stock.
SERIES A CONVERTIBLE PREFERRED STOCK. Holders of the Series A Convertible
Preferred Stock are entitled to receive cumulative cash dividends at an annual
rate of $3.625 per share, payable quarterly in arrears. The Series A Convertible
Preferred Stock has priority as to dividends over the Company's common capital
stock. The shares are convertible into Common Stock at a conversion price of
$31.875 per share (subject to adjustments). The Series A Convertible Preferred
Stock may be redeemed by the Company on or after March 22, 1997, at $52.18 per
share until March 14, 1998 and declining ratably annually to $50 per share on or
after March 15, 2003, plus accrued and unpaid dividends. The Series A
Convertible Preferred Stock is non-voting, except as provided by law, and except
that, among other things, holders will be entitled to vote as a separate class
with other series of outstanding Preferred Stock to elect a maximum of two
directors if the equivalent of six or more quarterly dividends of the Series A
Convertible Stock is in arrears. With respect to dividend rights and rights of
liquidation, dissolution and winding up, the Series A Convertible Preferred
Stock ranks senior to all classes of common capital stock and to the Junior
Participating Preferred Stock (when and if issued) and pari passu to the Series
B Convertible Preferred Stock. The liquidation preference for the Series A
Convertible Preferred Stock is $50 per share.
SERIES B CONVERTIBLE PREFERRED STOCK. Holders of the Series B Convertible
Preferred Stock are entitled to receive dividends at a rate of 8% per annum
payable quarterly in arrears. Until December 15, 1996, dividends on the Series B
Convertible Preferred Stock are payable in kind and thereafter, at the election
of the Company's board of directors either in cash or in kind until December 15,
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1999. The Series B Convertible Preferred Stock has the same dividend rights,
voting rights and rights of liquidation, dissolution and winding up as the
Series A Convertible Preferred Stock. In addition, however, following the
occurrence of a Specified Corporate Action (as defined in the Company's Charter)
holders of the Series B Convertible Preferred Stock also have the right to vote
as a class with the holders of the Common Stock and the Class D Stock on all
matters as to which the holders of Common Stock are entitled to vote. A
Specified Corporate Action is defined generally as an action by the Company that
would permit a change in control and certain related events. For the purposes of
such vote, the holders of the Series B Convertible Preferred Shares will be
deemed holders of that number of shares of Class D Stock into which such shares
would then be convertible.
The Series B Convertible Preferred Stock may be redeemed in whole or in part by
the Company after December 15, 1999, so long as after that date the Common Stock
has traded 30 consecutive trading days on the New York Stock Exchange at a price
in excess of 150 percent of the then effective conversion price. The redemption
price is $54 per share until December 14, 2000, declining ratably annually to
$50 per share on or after December 14, 2006, plus accrued and unpaid dividends.
All redemptions are to be made pro-rata.
Holders of Series B Convertible Preferred Stock have the right to require the
Company to purchase all or any part of the Series B Convertible Preferred Stock
then held by such holders upon the occurrence of a Special Event. A Special
Event consists of actions solely within the control of the Company and includes
the declaration or payments of dividends aggregating in excess of cumulatively
25 percent of earnings in 1996, and cumulatively 50 percent of earnings
thereafter; the disposition by the Company of assets representing 35 percent or
more of the Company's book value or gross revenues; certain mergers or
consolidations of the Company or any of its principal subsidiaries with or into
any other firm or entity involving 20 percent or more of the total market value
of the Company's equity securities; and repurchases and redemptions of the
Company's securities (other than the Company's Series B Convertible Preferred
Stock) in excess of net proceeds to the Company from the sale of stock (less
amounts expended for repurchases and redemptions of the Company's preferred
shares). Other Special Events include the acquisition by a third party, with the
consent or approval of the Company, of beneficial ownership of securities
representing 35 percent or more of the Company's total outstanding voting power.
The repurchase price in the event of a Special Event is $72.06 per share, plus
in each case accrued and unpaid dividends. The approximately 13,431,000 shares
of Common Stock issuable upon the ultimate conversion of the Series B
Convertible Preferred Shares represent approximately 23 percent of the aggregate
number of voting shares outstanding after giving effect to such issuance. If
dividends on the Series B Convertible Preferred Stock are paid in kind for the
full five year period permitted, approximately 18,077,000 shares of Common Stock
will be issuable upon such exchange, representing approximately 29 percent of
the total number of voting shares outstanding after giving effect to such
issuance.
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JUNIOR PARTICIPATING PREFERRED STOCK. Each share of Junior Participating
Preferred Stock (when and if issued) will be entitled to a minimum preferential
quarterly dividend payment of $10 per share but will be entitled to an aggregate
dividend of 100 times the dividend declared per share of Common Stock. In the
event of liquidation, the holders of the Junior Participating Preferred Stock
will be entitled to a minimum preferential liquidation payment of $100 per share
but will be entitled to an aggregate payment of 100 times the payment made per
share of Common Stock. Each share of Junior Participating Preferred Stock will
have 100 votes, voting together with the Company's common voting shares. In the
event of any merger, consolidation or other transaction in which voting shares
are exchanged, each share of Junior Participating Preferred Stock will be
entitled to receive 100 times the amount received per share of Common Stock. The
Junior Participating Preferred Stock shares have customary anti-dilution
provisions. Because of the nature of the dividend, liquidation and voting rights
of the Junior Participating Preferred Stock, the value of the one one-hundredth
interest in a share of Junior Participating Preferred Stock purchasable upon
exercise of each Right should approximate the value of one share of Common
Stock. Shares of Junior Participating Preferred Stock purchasable upon exercise
of the Rights will not be redeemable.
ANTITAKEOVER RESTRICTIONS
PREFERRED SHARE PURCHASE RIGHTS. The Company has a Shareholder Rights Plan (the
"Rights Plan") designed to deter coercive takeover tactics and to prevent an
acquirer from gaining control of the Company without offering a fair price to
all stockholders.
Under the terms of the Rights Plan, adopted in July 1987 and as amended, one
preferred share purchase right (a "Right") accompanies each share of outstanding
Common Stock, Class A Stock, Class C Stock and Class D Stock. Each Right
entitles the holder thereof to purchase one one-hundredth of a share of Junior
Participating Preferred Stock.
The Rights become exercisable only following the public announcement by the
Company that a person or group (i) has acquired beneficial ownership of 20
percent or more of the Company's voting shares or (ii) has commenced a tender or
exchange offer that if consummated would result in the ownership of 20 percent
or more of such voting shares. Under such circumstances, if the Rights become
exercisable, each holder will be entitled to purchase at the then-current
exercise price, that number of Junior Participating Preferred Stock equal to
twice the exercise price of the Right. If the Company is subsequently acquired,
each right will entitle the holder to purchase at the then-current exercise
price, stock of the surviving company having a market value of twice the
exercise price of one right. In addition, if a person or group acquires more
than 20 percent, but less than 50 percent, of the Company's common voting
shares, the Board of Directors may
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exchange each Right for one one-hundredth of a share of Junior Participating
Preferred Stock. Rights beneficially owned by a holder of 20 percent or more of
the voting shares become void once such holder passes the 20 percent threshold.
The Rights, which expire on July 6, 1997, are redeemable by the Board of
Directors prior to becoming exercisable at a redemption price of $.01 per Right.
In June 1994, the Board of Directors amended the Rights Plan so that the initial
acquisition of the Series B Convertible Preferred Stock, the acquisition of the
Class D Stock upon conversion of the Series B Convertible Preferred Stock, the
acquisition of Common Stock upon exchange of the Class D Stock, or permitted
acquisitions by the purchaser, its affiliates or any transferee thereof of the
Company's securities will not cause the Rights to become exercisable. In
addition, on November 16, 1995, the Rights Plan was amended to provide for
modifications of the definitions of Acquiring Person and Distribution Date to
raise from 15 percent to 20 percent the percentage of stock ownership needed to
cause a person to become an Acquiring Person or to cause a Distribution Date to
occur (as such capitalized terms are defined in the Rights Agreement).
MARYLAND BUSINESS COMBINATION LAW. The Maryland Business Combination Law
prohibits any "Business Combination" (as defined generally to include a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer or
issuance or reclassification of equity securities) between a Maryland
corporation (such as the Company) and any "Interested Stockholder" (defined
generally as any person that, directly or indirectly, beneficially owns 10
percent or more of the outstanding voting stock of the corporation) for a period
of five years after the date the person becomes an Interested Stockholder. After
such five year period, a Business Combination between a Maryland corporation and
such Interested Stockholder is prohibited unless either certain "fair price"
provisions are complied with or the Business Combination Law restrictions do not
apply to a Business Combination with an Interested Stockholder if such Business
Combination is approved by a resolution of the board of directors of the
corporation adopted prior to the date on which the Interested Stockholder became
such.
GENERAL DIVIDEND RESTRICTIONS ON OUTSTANDING CAPITAL STOCK
All dividends of a Maryland Corporation are authorized by its board of
directors, without stockholder approval, unless otherwise specified in its
charter. Pursuant to the Company's Charter, no dividends may be issued on the
Common Stock, unless concurrent dividends are declared on shares of Class A
Stock, Class C Stock and Class D Stock outstanding. In addition, under Maryland
General Corporation Law Section 2-311, the Board of Directors of the Company may
not declare or pay dividends to holders of any class of the Company's Capital
Stock if, after giving effect to such distribution, (1) the Company would be
unable to pay its debts as they become due in the usual course; or (2) the
Company's total assets
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would be less than the sum of its liabilities plus the dissolution preference of
the holders of any class or series of preferred stock issued and outstanding.
The Company currently has issued and outstanding Series A Convertible Preferred
Stock and Series B Convertible Preferred Stock. Pursuant to the Company's
Charter, however, the aggregate liquidation preference on the Series B
Convertible Preferred Stock will not be counted as a liability. In addition, the
Company's Long-Term Credit Facility contains provisions requiring the
maintenance of a minimum consolidated tangible net worth.
PLAN OF DISTRIBUTION
The Company may sell the Offered Securities to or through underwriters or
dealers, and also may sell the Offered Securities directly to one or more other
purchasers or through agents.
The prospectus supplement sets forth the terms of the offering of the particular
series of Offered Securities to which such prospectus supplement relates,
including (i) the name or names of any underwriters or agents with whom the
Company has entered into arrangements with respect to the sale of such series of
Offered Securities, (ii) the initial public offering or purchase price of such
series of Offered Securities, (iii) any underwriting discounts, commissions and
other items constituting underwriters' compensation from the Company and any
other discounts, concessions or commissions allowed or reallowed or paid by any
underwriters to other dealers, (iv) any commissions paid to any agents, (v) the
net proceeds to the Company and (vi) the securities exchanges, if any, on which
such series of Offered Securities will be listed.
Unless otherwise set forth in the prospectus supplement relating to a particular
series of Offered Securities, the obligations of the underwriters to purchase
such series of Offered Securities will be subject to certain conditions
precedent and each of the underwriters with respect to such series of Offered
Securities will be obligated to purchase all of the Offered Securities of such
series allocated to it if any such Offered Securities are purchased. Any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers may be changed from time to time.
The Offered Securities may be offered and sold by the Company directly or
through agents designated by the Company from time to time. Unless otherwise
indicated in the applicable prospectus supplement, each such agent will be
acting on a best efforts basis for the period of its appointment. Any agent
participating in the distribution of Offered Securities may be deemed to be an
"underwriter," as that term is defined in the Securities Act of 1933, as amended
(the "Securities Act"), of the Offered Securities so offered and sold. The
Offered Securities also may be sold to dealers at the applicable price to the
public set forth in the prospectus supplement relating to a particular series of
Offered Securities who later resell to investors. Such dealers may be deemed to
be "underwriters" within the meaning of the Securities Act.
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Underwriters, dealers and agents may be entitled, under agreement entered into
with the Company, to indemnification by the Company against certain civil
liabilities under the Securities Act.
If so indicated in the prospectus supplement relating to a particular series of
Offered Securities, the Company will authorize underwriters, dealers or agents
to solicit offers by certain institutions to purchase Offered Securities of such
series from the Company pursuant to delayed delivery contracts providing for
payment and delivery at a future date. Such contracts will be subject only to
those conditions set forth in the prospectus supplement and the prospectus
supplement will set forth the commission payable for solicitation of such
contracts.
Such delayed delivery contracts will generally provide that delayed delivery and
payment are for the sole convenience of the purchaser; that the purchase
thereunder of securities is to be regarded in all respects as a purchase as of
the date of the delayed delivery contract; that the obligation of the Company to
make delivery of and accept payment for, and the obligation of the purchaser to
take delivery of and make payment for, securities on the delivery date(s) shall
be subject only to the conditions that (1) investment in the securities shall
not at Delivery Date(s) be prohibited under the laws of any jurisdiction in the
United States to which the purchaser is subject and (2) the Company shall have
sold to the underwriters the total -- principal amount -- number of shares -- of
the securities less the -- principal amount -- number of shares -- thereof
covered by this and other similar delayed delivery contracts. The purchaser
will be required to represent that its investment in the securities is not, as
of the date thereof, prohibited under the laws of any jurisdiction to which the
purchaser is subject and which governs such investment.
LEGAL MATTERS
The legality of the Shares is being passed upon by Albert A. Skwiertz, Jr.,
Esq., Senior Vice President and General Counsel of the Company. Mr. Skwiertz
owns 1,666 shares directly of the Company's Common Stock, and holds options for
43,500 shares of Common Stock. In addition, 1,646 shares of Common Stock are
attributed to Mr. Skwiertz's account under the Company's Thrift Plan.
EXPERTS
The financial statements and financial statement schedules incorporated in this
prospectus by reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports, which are incorporated herein by
reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with the issuance and
distribution of the securities being registered, other than underwriting
discounts and commissions. All of the amounts shown are estimates, except the
registration fee.
SEC registration fee------------------------------$86,207
Printing and engraving expenses-------------------$15,000
Legal fees and expenses--------------------------$125,000
Fees of accountants-------------------------------$40,000
Fees of trustee-----------------------------------$14,000
Rating agency fees--------------------------------$70,000
Miscellaneous-------------------------------------$20,000
Total-------------------------------------$370,207
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 2-418 of the Maryland General Corporation Law establishes provisions
whereby a Maryland corporation may indemnify any director or officer, made party
to an action or proceeding by reason of service in that capacity, against
judgments, penalties, fines, settlements and reasonable expenses incurred in
connection with such action or proceeding unless it is proved that the director
or officer (i) acted in bad faith or with active and deliberate dishonesty, (ii)
actually received an improper personal benefit in money, property or services or
(iii) in the case of a criminal proceeding had reasonable cause to believe that
his act was unlawful. However, if the proceeding is a derivative suit in favor
of the corporation, indemnification may not be made if the individual is
adjudged to be liable to the corporation. In no case may indemnification be made
until a determination has been reached that the director or officer has met the
applicable standard of conduct. Indemnification for reasonable expenses is
mandatory if the director or officer has been successful on the merits or
otherwise in the defense of any action or proceeding covered by the
indemnification statute. The statute also provides for indemnification of
directors and officers by court order. The indemnification provided or
authorized in the indemnification statute does not preclude a corporation from
extending other rights (indemnification or otherwise) to directors and officers.
The Company's Bylaws provide for indemnification of any person who is serving or
has served as a director or officer of the Company, against all liabilities and
expenses incurred in connection with any action, suit or proceeding arising out
of such service to the full extent permitted under Maryland law.
49
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The Company currently maintains policies of insurance under which the Company
and the directors and officers of the Company are insured, within the limits of
the policies, against certain expenses in connection with the defense of
actions, suits or proceedings, and certain liabilities which might be imposed as
a result of such actions, suits or proceedings, to which directors and officers
of the Company are parties by reason of being or having been such directors or
officers.
ITEM 16. LIST OF EXHIBITS.
The following exhibits are filed with this Registration Statement:
EXHIBIT INDEX**
EXHIBIT
- -------
1.1 Proposed form of underwriting agreement.
2 Not applicable.
4.1 Proposed form of Senior Indenture between the Company and PNC Bank,
N.A.
4.2 Proposed form of Subordinated Indenture between the Company and PNC
Bank, N.A.
4.3 Proposed form of Common Stock Warrant Agreement.
4.4 Proposed form of Common Stock Warrant Agreement (for warrants sold
alone).
4.5 Proposed form of Debt Warrant Agreement.
4.6 Proposed form of Debt Securities Warrant Agreement (for warrants sold
alone).
*4.7 Rights Agreement dated as of June 11, 1987, amended and restated as of
March 27, 1990, between the Company and First Chicago Trust Company of
New York, formerly Morgan Shareholder Services Trust Company, as
Rights Agent (incorporated herein by reference to the Company's
Registration Statement on Form 8-A filed with the Commission on June
19, 1987, as amended by Amendment No. 1 dated April 21, 1992,
Amendment No. 2 dated June 6, 1995, Amendment No. 3 dated July 15,
1994, and Amendment No. 4 dated November 16, 1995.
*4.8 Form of Trust Agreement dated as of June 11, 1987, amended and
restated as of March 28, 1990, between the Company and Montreal Trust
Company of Canada, as successor to The Canada Trust Company.
(incorporated herein by reference to Registration Statement on Form
8-A filed with the Commission on June 19, 1987, as amended)
***5.1 Opinion of Counsel of Albert A. Skwiertz, Jr., Esq., Senior Vice
President and General Counsel of the Company.
8.1 Not applicable.
50
<PAGE>
12.1 The Company and consolidated subsidiaries computation of ratio of
earnings before fixed charges.
12.2 The Company and consolidated subsidiaries computation of ratio of
earnings to fixed charges and preferred stock dividends
15.1 Not applicable.
***23.1 Consent of Deloitte & Touche LLP.
***23.2 Consent of Albert A. Skwiertz, Jr., Esq., Senior Vice President and
General Counsel of the Company included in Exhibit 5.1.
***23.3 Consent of White & Case
24.1 Power of Attorney is included in the Signature Page contained in Part
II of the Registration Statement dated March 29, 1996.
25.1 Statement of eligibility of PNC Bank, N.A. under the Trust Indenture
Act of 1939 on Form T-1.
26 Not applicable.
27 Financial Data Schedule.
28 None. 99 None. ----------
* Incorporated by reference
** Except as noted, all exhibits are previously filed.
*** Filed herewith
ITEM 17. UNDERTAKINGS
The undersigned Registrant undertakes: (1) To file, during any period in which
offers or sales are being made, a post-effective amendment to this Registration
Statement: (i) To include any prospectus required by section 10(a)(3) of the
Securities Act; (ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement; (iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement; provided,
however, that paragraphs (1)(i) and (1)(ii) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated in the Registration
Statement. (2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof. (3) To remove from registration by means of a
post-effective amendment any of the Shares being registered which remain unsold
at the termination of the offering.
The undersigned Registrant hereby further undertakes that for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act
51
<PAGE>
(and, where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby further undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act, and, where
interim financial information to be presented by Article 3 of Regulation S-X are
not set forth in the prospectus, to deliver, or cause to be delivered to each
person to whom the prospectus is sent or given, the latest quarterly report that
is specifically incorporated by reference in the prospectus to provide such
interim financial information.
The undersigned Registrant hereby further undertakes to supplement the
prospectus, after the expiration of the subscription period, to set forth the
results of the subscription offer, the transactions by the underwriters during
the subscription period, the amount of unsubscribed securities to be purchased
by the underwriters, and the terms of any subsequent reoffering thereof. If any
public offering by the underwriters is to be made on terms differing from those
set forth on the cover page of the prospectus, a post-effective amendment will
be filed to set forth the terms of such offering.
The undersigned Registrant hereby further undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of section 310 of the Trust Indenture Act ("Act") in accordance
with the rules and regulations prescribed by the Commission under section
305(b)(2) of the Act.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the questions whether such indemnification by itself is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
52
<PAGE>
The undersigned Registrant hereby further undertakes that: (1) for the purposes
of determining any liability under the Securities Act, the information omitted
from the form of prospectus filed as part of this Registration Statement in
reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of the Registration Statement as of the time it was
declared effective; (2) for the purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to the initial bona fide offering thereof.
53
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on the 17th day of
July, 1996.
ALEXANDER & ALEXANDER SERVICES INC.
By:
/s/ Frank G. Zarb
------------------
Frank G. Zarb Chairman of the Board,
Chief Executive Officer, President and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the officers and directors
whose signature appears below constitutes and appoints Frank G. Zarb and Edward
F. Kosnik, and each of them, their true and lawful attorneys and agents, with
full power of substitution each with power to act alone, to sign and execute on
behalf of the undersigned any and all amendments (including pre-effective and
post-effective amendments) to this registration statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them acting singly, full power and authority to do and
perform each and every act and thing necessary and requisite to be done, as
fully and to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys and agents or their or his
substitutes, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on July 17, 1996 by the following
persons in the capacities indicated.
54
<PAGE>
Name Title
- ---- -----
/s/ Frank G. Zarb Chairman of the Board, Chief Executive Officer,
Frank G. Zarb President and Director
/s/ Edward F. Kosnik Senior Executive Vice President,
Edward F. Kosnik Chief Financial Officer and Director
/s/ Richard P. Sneeder, Jr. Vice President and Controller
Richard P. Sneeder, Jr.
By Power of Attorney
/s/ Robert E. Boni Director
Robert E. Boni
By Power of Attorney
/s/ W. Peter Cooke Director
W. Peter Cooke
By Power of Attorney
/s/ E. Gerald Corrigan Director
E. Gerald Corrigan
By Power of Attorney
/s/ Joseph L. Dionne Director
Joseph L. Dionne
By Power of Attorney
/s/ Gerald R. Ford Director
Gerald R. Ford
By Power of Attorney
<PAGE>
/s/ Peter C. Godsoe Director
Peter C. Godsoe
By Power of Attorney
/s/ Angus M.M. Grossart Director
Angus M.M. Grossart
By Power of Attorney
/s/ Maurice H. Hartigan, II Director
Maurice H. Hartigan, II
By Power of Attorney
/s/ James B. Hurlock Director
James B. Hurlock
By Power of Attorney
/s/ Ronald A. Iles Deputy Chairman of the Board
Ronald A. Iles and Director
By Power of Attorney
/s/ Vincent R. McLean Director
Vincent R. McLean
By Power of Attorney
/s/ James D. Robinson III Director
James D. Robinson III
By Power of Attorney
/s/ H. Furlong Baldwin, II Director
H. Furlong Baldwin, II
By Power of Attorney
/s/ Frank G. Zarb Attorney-in-Fact for the
Frank G. Zarb signing Officers and Directors
/s/ Edward F. Kosnik Attorney-in-Fact for the
Edward F. Kosnik signing Officers and Directors
<PAGE>
EXHIBIT INDEX**
EXHIBIT DESCRIPTION
- ------- -----------
1.1 Proposed form of underwriting agreement.
2 Not applicable.
4.1 Proposed form of Senior Indenture between the Company and PNC
Bank, N.A.
4.2 Proposed form of Subordinated Indenture between the Company
and PNC Bank, N.A.
4.3 Proposed form of Common Stock Warrant Agreement.
4.4 Proposed form of Common Stock Warrant Agreement (for warrants
sold alone).
4.5 Proposed form of Debt Warrant Agreement.
4.6 Proposed form of Debt Securities Warrant Agreement (for
warrants sold alone).
*4.7 Rights Agreement dated as of June 11, 1987, amended and
restated as of March 27, 1990, between the Company and First
Chicago Trust Company of New York, formerly Morgan Shareholder
Services Trust Company, as Rights Agent (incorporated herein
by reference to the Company's Registration Statement on Form
8-A filed with the Commission on June 19, 1987, as amended by
Amendment No. 1 dated April 21, 1992, Amendment No. 2 dated
June 6, 1995, Amendment No. 3 dated July 15, 1994, and
Amendment No. 4 dated November 16, 1995.
*4.8 Form of Trust Agreement dated as of June 11, 1987, amended and
restated as of March 28, 1990, between the Company and
Montreal Trust Company of Canada, as successor to The Canada
Trust Company. (incorporated herein by reference to
Registration Statement on Form 8-A filed with the Commission on
June 19, 1987, as amended)
***5.1 Opinion of Counsel of Albert A. Skwiertz, Jr., Esq., Senior
Vice President and General Counsel of the Company.
8.1 Not applicable.
12.1 The Company and consolidated subsidiaries computation of ratio
of earnings before fixed charges.
12.2 The Company and consolidated subsidiaries computation of ratio
of earnings to fixed charges and preferred stock dividends
15.1 Not applicable.
***23.1 Consent of Deloitte & Touche LLP.
***23.2 Consent of Albert A. Skwiertz, Jr., Esq., Senior Vice President
and General Counsel of the Company included in Exhibit 5.1.
***23.3 Consent of White & Case
24.1 Power of Attorney is included in the Signature Page contained
in Part II of the Registration Statement dated March 29, 1996.
25.1 Statement of eligibility of PNC Bank, N.A. under the Trust
Indenture Act of 1939 on Form T-1.
26 Not applicable.
27 Financial Data Schedule.
28 None.
99 None.
- ----------
* Incorporated by reference
** Except as noted, all exhibits are previously filed
*** Filed herewith
Exhibit 5.1
Alexander & Alexander Services Inc.
1185 Avenue of the Americas
New York, New York 10036
Telephone 212-444-4532
Facsimile 212-444-4696
Albert A. Skwiertz, Jr.
Senior Vice President & General Counsel
July 17, 1996
Board of Directors
Alexander & Alexander Services Inc.
1185 Avenue of the Americas
New York, NY 10036
Re: Alexander & Alexander Services Inc.
Registration Statement on Form S-3
Gentlemen:
I am General Counsel of Alexander & Alexander Services Inc., a Maryland
corporation (the "Company"), and have acted as counsel for the Company in
connection with the Registration Statement on Form S-3 ("Registration
Statement") filed as of March 29, 1996 under the Securities Act of 1933, as
amended, in connection with the proposed offering and sale, from time to
time, of up to $250,000,000 of the Company's securities (the "Securities").
In connection with the foregoing, I have examined the originals or copies of
such corporate records, documents, certificates and other instruments as I have
deemed necessary or appropriate for the purposes of rendering this opinion.
Based on the foregoing, it is my opinion that the Securities when and if issued
and delivered as contemplated by the Registration Statement, will be validly
issued, fully paid and non-assessable and, in the case of any debt securities
offered thereunder, will be binding obligations of the Company.
The foregoing opinions are limited to the laws of the state of Maryland and I do
not express any opinion herein concerning any other law. I hereby consent to the
filing of this opinion as an exhibit to the Registration Statement. In giving
this consent, I do not thereby admit that I am within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
Albert A. Skwiertz, Jr.
Senior Vice President
and General Counsel
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Pre-Effective Amendment
No. 1 to Registration Statement of Alexander & Alexander Services Inc. on Form
S-3 of our reports dated February 14, 1996, appearing in and incorporated by
reference in the Annual Report on Form 10-K of Alexander & Alexander & Alexander
Services Inc. for the year ended December 31, 1995 and to the reference to us
under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.
DELOITTE & TOUCHE LLP
Baltimore, Maryland
July 17, 1996
Exhibit 23.3
LETTERHEAD OF
WHITE & CASE
July 17, 1996
Peter K. Lathrop, Esq.
Vice President and Director of Tax
Alexander & Alexander Services Inc.
1185 Avenue of the Americas
New York, New York 10036
Re: Pre-effective Amendment No. 1 to
Form S-3 Registration Statement
Dear Mr. Lathrop:
We hereby consent to the reference to our Firm under the heading "Risk Factors"
in Alexander & Alexander Services Inc.'s Pre-Effective Amendment No. 1 to be
filed on July 17, 1996 (Registration Number not yet assigned) in connection
with its Form S-3 Registration Statement relating to the registration of
securities up to an aggregate amount of $250,000,000.
Very truly yours
WHITE & CASE
