<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES ACT OF 1934
----------------
ALEXANDER & ALEXANDER
SERVICES INC.
(NAME OF SUBJECT COMPANY)
SUBSIDIARY CORPORATION, INC.
A WHOLLY OWNED SUBSIDIARY OF
AON CORPORATION
(BIDDERS)
COMMON STOCK, $1.00 PAR VALUE 014476 10 5
(Title of Class of Securities) (CUSIP Number of Class of
Securities)
RAYMOND I. SKILLING
EXECUTIVE VICE PRESIDENT &
CHIEF COUNSEL
AON CORPORATION
123 NORTH WACKER DRIVE
CHICAGO, ILLINOIS 60606
(312) 701-3000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
Copy to
SIDLEY & AUSTIN
ONE FIRST NATIONAL PLAZA
CHICAGO, ILLINOIS 60603
(312) 853-7000
ATTENTION: THOMAS A. COLE
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CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
TRANSACTION AMOUNT OF
VALUATION* FILING FEE
- ---------------------------------------------------------
<S> <C>
$968,050,790 $193,610
</TABLE>
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* For the purpose of calculating the fee only, this amount assumes the
purchase of 55,317,188 shares of Common Stock of the Subject Company
together with associated preferred stock purchase rights at $17.50 per
share. Such number of shares includes all outstanding shares as of December
11, 1996, and assumes the exercise of all stock options to purchase shares
of Common Stock issued under the 1982 Stock Option Plan, the 1988 Long-Term
Incentive Compensation Plan, the 1995 Long-Term Incentive Plan, the
Performance Bonus Plan for Executive Officers, the Non-Employee Director
Deferred Stock Ownership Plan and the 1995 Employee Discount Stock Purchase
Plan and all shares issuable upon conversion of the Class A Common Stock,
par value $.00001 per share, the Class C Common Stock, par value $1.00 per
share, and the $3.625 Series A Convertible Preferred Stock, par value $1.00
per share, which are outstanding as of such date.
[_]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid:_______________________________
Form or Registration No.:_____________________________
Filing Party:_________________________________________
Date Filed:___________________________________________
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<PAGE>
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1.NAME OF REPORTING PERSON
S.S. OR I.R.S IDENTIFICATION NO. OF ABOVE PERSON
AON CORPORATION, TAX ID NO.: 36-3051915
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2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a) [X]
(b) [_]
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3. SEC USE ONLY
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4. SOURCES OF FUNDS (SEE INSTRUCTIONS)
WC; OO
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TOITEMS
2(e) OR 2(f).
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6. CITIZENSHIP OR PLACE OF ORGANIZATIONDELAWARE
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7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
14,247,922*
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8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 7 EXCLUDES CERTAIN SHARES (SEE
INSTRUCTIONS) [_]
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9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 7
25%*
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10. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
HC; CO
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* SEE FOOTNOTE ON FOLLOWING PAGE.
2
<PAGE>
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1.NAME OF REPORTING PERSON
S.S. OR I.R.S IDENTIFICATION NO. OF ABOVE PERSON
SUBSIDIARY CORPORATION, INC., TAX ID NO.: APPLIED FOR
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS)
(a) [X]
(b) [_]
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3. SEC USE ONLY
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4. SOURCES OF FUNDS (SEE INSTRUCTIONS)
AF (FROM PARENT)
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5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(e) OR 2(f).
[_]
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6. CITIZENSHIP OR PLACE OF ORGANIZATIONMARYLAND
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7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
14,247,922*
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8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 7 EXCLUDES CERTAIN SHARES (SEE
INSTRUCTIONS) [_]
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9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 7
25%*
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10. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
CO
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* ON DECEMBER 11, 1996, AON CORPORATION (THE "PARENT") ENTERED INTO A STOCK
PURCHASE AND SALE AGREEMENT (THE "STOCK PURCHASE AND SALE AGREEMENT") WITH
AMERICAN INTERNATIONAL GROUP, INC. ("AIG"). PURSUANT TO THE STOCK PURCHASE
AND SALE AGREEMENT, AND SUBJECT TO THE TERMS AND CONDITIONS THEREOF, THE
PARENT AGREED TO BUY AND AIG AGREED TO SELL 4,846,232 SHARES OF 8% SERIES B
CUMULATIVE CONVERTIBLE PREFERRED STOCK, PAR VALUE $1.00 PER SHARE (THE
"SERIES B PREFERRED STOCK"), OF ALEXANDER & ALEXANDER SERVICES INC. (THE
"COMPANY") OWNED BY AIG OR ITS SUBSIDIARIES. EACH SHARE OF SERIES B PREFERRED
STOCK IS CURRENTLY CONVERTIBLE INTO APPROXIMATELY 2.94 SHARES OF CLASS D
COMMON STOCK OF THE COMPANY. SUBJECT TO CERTAIN LIMITATIONS, THE CLASS D
COMMON STOCK IS EXCHANGEABLE FOR COMMON STOCK OF THE COMPANY ON A SHARE-FOR-
SHARE BASIS.
3
<PAGE>
This Statement relates to a tender offer by Subsidiary Corporation, Inc., a
Maryland corporation (the "Offeror") and a wholly owned subsidiary of Aon
Corporation, a Delaware corporation (the "Parent"), to purchase all outstanding
shares of Common Stock, par value $1.00 per share (the "Common Stock"), of
Alexander & Alexander Services Inc., a Maryland corporation (the "Company"),
including the associated preferred stock purchase rights (the "Rights") issued
pursuant to the 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 (collectively,
the "Shares"), at a purchase price of $17.50 per Share, net to the seller in
cash, without interest, upon the terms and subject to the conditions set forth
in the Offer to Purchase, dated December 16, 1996 (the "Offer to Purchase"),
and in the related Letter of Transmittal (which together constitute the
"Offer"), copies of which are filed as Exhibits (a)(1) and (a)(2) hereof,
respectively, and which are incorporated herein by reference.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Alexander & Alexander Services Inc.
The address of the principal executive offices of the Company is set forth in
Section 8 ("Certain Information Concerning the Company") of the Offer to
Purchase and is incorporated herein by reference.
(b) The exact title of the class of equity securities being sought in the
Offer is the Common Stock, par value $1.00 per share, including associated
Rights, of the Company. The information set forth in the Introduction to the
Offer to Purchase is incorporated herein by reference.
(c) The information set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a) through (d), (g): The information set forth in the Introduction and
Section 9 ("Certain Information Concerning the Parent and the Offeror") of the
Offer to Purchase, and in Annex I thereto, is incorporated herein by reference.
(e) and (f): Neither the Offeror nor the Parent nor, to the best of their
knowledge, any of the persons listed in Annex I of the Offer to Purchase, has
during the last five years (i) been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii) been a party to
a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any
violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) None.
(b) The information set forth in the Introduction and Section 11 ("Background
of the Offer; Past Contacts, Transactions or Negotiations with the Company") of
the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b): The information set forth in Section 10 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a) through (e): The information set forth in the Introduction, Section 11
("Background of the Offer; Past Contacts, Transactions or Negotiations with the
Company"), Section 12 ("Purpose of the Offer and the Merger;
4
<PAGE>
Plans for the Company") and Section 13 ("The Merger Agreement and the Stock
Purchase and Sale Agreement") of the Offer to Purchase is incorporated herein
by reference.
(f) and (g): The information set forth in Section 7 ("Certain Effects of the
Transaction") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b): The information set forth in the Introduction, Section 9
("Certain Information Concerning the Parent and the Offeror") and Section 13
("The Merger Agreement and the Stock Purchase and Sale Agreement") of the Offer
to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction and Section 11 ("Background of
the Offer; Past Contacts, Transactions or Negotiations with the Company") of
the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and in Section 17 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 ("Certain Information Concerning the
Parent and the Offeror") of the Offer to Purchase is incorporated herein by
reference.
The incorporation by reference herein of the above-mentioned financial
information does not constitute an admission that such information is material
to a decision by a security holder of the Company as whether to sell, tender or
hold Shares being sought in the Offer.
ITEM 10. ADDITIONAL INFORMATION.
(a) Not applicable.
(b) and (c) The information set forth in Section 16 ("Certain Legal Matters")
of the Offer to Purchase is incorporated herein by reference.
(d) The information set forth in Section 7 ("Certain Effects of the
Transaction") of the Offer to Purchase is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal is incorporated herein by reference in its entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated December 16, 1996.
(a)(2) Letter of Transmittal.
(a)(3) Letter from Lazard Freres & Co. LLC, as Dealer Manager, to Brokers,
Dealers, Commercial Banks, Trust Companies and Other Nominees.
5
<PAGE>
(a)(4) Letter from Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees to Clients.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Summary Announcement, dated December 16, 1996.
(a)(8) Press Release issued by the Parent and the Company on December 11,
1996.
(a)(9) Press Release issued by the Parent on December 16, 1996.
(c)(1) Agreement and Plan of Merger, dated as of December 11, 1996, among the
Parent, the Offeror and the Company.
(c)(2) Stock Purchase and Sale Agreement, dated as of December 11, 1996,
between American International Group, Inc. and Parent.
(d) None.
(e) Not applicable.
(f) None.
6
<PAGE>
SIGNATURE
AFTER DUE INQUIRY AND TO THE BEST OF MY KNOWLEDGE AND BELIEF, I CERTIFY THAT
THE INFORMATION SET FORTH IN THIS STATEMENT IS TRUE, COMPLETE AND CORRECT.
Dated: December 16, 1996 Aon Corporation
/s/ Raymond I. Skilling
By: _________________________________
Name: Raymond I. Skilling
Title: Executive Vice President
and Chief Counsel
Subsidiary Corporation, Inc.
/s/ Raymond I. Skilling
By: _________________________________
Name: Raymond I. Skilling
Title: Vice President and
Secretary
7
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ALEXANDER & ALEXANDER SERVICES INC.
AT
$17.50 NET PER SHARE
BY
SUBSIDIARY CORPORATION, INC.
A WHOLLY OWNED SUBSIDIARY OF
AON CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, JANUARY 14, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED BY THE EXPIRATION DATE AND NOT WITHDRAWN THAT NUMBER OF SHARES OF
COMMON STOCK, PAR VALUE $1.00 PER SHARE, INCLUDING THE ASSOCIATED PREFERRED
STOCK PURCHASE RIGHTS ("SHARES"), OF ALEXANDER & ALEXANDER SERVICES INC. (THE
"COMPANY") REPRESENTING AT LEAST A MAJORITY OF THE COMBINED VOTING POWER OF
THE SHARES, THE CLASS A COMMON STOCK (AS DEFINED BELOW), AND THE CLASS C
COMMON STOCK (AS DEFINED BELOW) (ASSUMING THE EXERCISE OF ALL OPTIONS TO
PURCHASE, AND THE CONVERSION OR EXCHANGE OF ALL SECURITIES CONVERTIBLE OR
EXCHANGEABLE INTO, SHARES OUTSTANDING AT THE EXPIRATION DATE OF THE OFFER,
OTHER THAN THE CONVERSION OF THE SERIES B PREFERRED STOCK (AS DEFINED BELOW)),
(ii) RECEIPT BY THE OFFEROR (AS DEFINED HEREIN) OF CERTAIN GOVERNMENTAL
APPROVALS AND (iii) SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE
SECTION 15.
NO OFFER IS BEING MADE TO PURCHASE THE COMPANY'S CLASS A COMMON STOCK, PAR
VALUE $.00001 PER SHARE ("CLASS A COMMON STOCK"), CLASS C COMMON STOCK, PAR
VALUE $1.00 PER SHARE ("CLASS C COMMON STOCK"), $3.625 SERIES A CONVERTIBLE
PREFERRED STOCK, PAR VALUE $1.00 PER SHARE, OR 8% SERIES B CUMULATIVE
CONVERTIBLE PREFERRED STOCK, PAR VALUE $1.00 PER SHARE ("SERIES B PREFERRED
STOCK") OR THE CLASS 1 SPECIAL SHARES (THE "RSC SHARES") OF REED STENHOUSE
COMPANIES LIMITED, A SUBSIDIARY OF THE COMPANY ORGANIZED UNDER THE LAWS OF
CANADA, RELATED TO THE CLASS A COMMON STOCK, OR THE DIVIDEND SHARES (THE
"DIVIDEND SHARES") OF ALEXANDER & ALEXANDER SERVICES UK PLC, A SUBSIDIARY OF
THE COMPANY ORGANIZED UNDER THE LAWS OF SCOTLAND, RELATED TO THE CLASS C
COMMON STOCK. TO PARTICIPATE IN THE OFFER, HOLDERS OF THE RSC SHARES MUST
REQUEST RETRACTION OF THE RSC SHARES FOR SHARES AND THEN TENDER THE SHARES
RECEIVED UPON RETRACTION PURSUANT TO THE OFFER. TO PARTICIPATE IN THE OFFER,
HOLDERS OF CLASS C COMMON STOCK MUST REQUEST THE CONVERSION OF THE CLASS C
COMMON STOCK INTO SHARES AND THEN TENDER THE SHARES RECEIVED UPON CONVERSION
PURSUANT TO THE OFFER. SEE INTRODUCTION.
THE OFFER IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF MERGER,
DATED AS OF DECEMBER 11, 1996, AMONG AON CORPORATION, SUBSIDIARY CORPORATION,
INC. AND THE COMPANY. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY
APPROVED THE OFFER, THE MERGER AND THE MERGER AGREEMENT, HAS DETERMINED THAT
THE TERMS OF EACH OF THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST
INTERESTS OF THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT HOLDERS OF THE
SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES IN THE OFFER.
---------------
IMPORTANT
Any stockholder desiring to tender Shares should either (i) complete and
sign the Letter of Transmittal or a facsimile thereof in accordance with the
instructions in the Letter of Transmittal and deliver the Letter of
Transmittal with the Shares and all other required documents to the
Depositary, or follow the procedure for book-entry transfer set forth in
Section 3 or (ii) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for the stockholder.
Stockholders having Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such person if
they desire to tender their Shares.
Any stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
with the procedures for book-entry transfer on a timely basis, may tender such
Shares pursuant to the guaranteed delivery procedure set forth in Section 3.
Questions and requests for assistance or additional copies of this Offer to
Purchase and the Letter of Transmittal may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase.
---------------
The Dealer Manager for the Offer is:
LAZARD FRERES & CO. LLC
December 16, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction.............................................................. 1
1. Terms of the Offer.................................................... 3
2. Acceptance for Payment and Payment for Shares......................... 4
3. Procedure for Tendering Shares........................................ 5
4. Withdrawal Rights..................................................... 8
5. Certain Federal Income Tax Consequences............................... 8
6. Price Range of Shares; Dividends...................................... 9
7. Certain Effects of the Transaction.................................... 10
8. Certain Information Concerning the Company............................ 10
9. Certain Information Concerning Parent and the Offeror................. 12
10. Source and Amount of Funds............................................ 13
11. Background of the Offer; Past Contacts, Transactions or Negotiations
with the Company...................................................... 13
12. Purpose of the Offer and the Merger; Plans for the Company............ 15
13. The Merger Agreement and the Stock Purchase and Sale Agreement........ 17
14. Dividends and Distributions........................................... 24
15. Certain Conditions to the Offeror's Obligations....................... 25
16. Certain Legal Matters................................................. 26
17. Fees and Expenses..................................................... 29
18. Miscellaneous......................................................... 30
Annex I. Certain Information Concerning the Directors and Executive
Officers of Parent and the Offeror....................................... A-1
</TABLE>
i
<PAGE>
TO THE HOLDERS OF COMMON STOCK, PAR VALUE $1.00 PER SHARE, OF ALEXANDER &
ALEXANDER SERVICES INC.
INTRODUCTION
Subsidiary Corporation, Inc., a Maryland corporation (the "Offeror") and a
wholly owned subsidiary of Aon Corporation, a Delaware corporation (the
"Parent"), hereby offers to purchase all outstanding shares of Common Stock,
par value $1.00 per share (the "Common Stock"), of Alexander & Alexander
Services Inc., a Maryland corporation (the "Company"), including the
associated preferred stock purchase rights (the "Rights" and, together with
the Common Stock, the "Shares") issued pursuant to the Rights Agreement, dated
as of June 11, 1987, between the Company and First Chicago Trust Company of
New York, formerly Morgan Shareholder Services Company, as Rights Agent, as
amended (the "Rights Agreement"), at a purchase price of $17.50 per Share, net
to the seller in cash, without interest, upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which together constitute the "Offer"). Tendering holders of
Shares will not be obligated to pay brokerage fees or commissions or, except
as set forth in the Letter of Transmittal, transfer taxes on the purchase of
Shares by the Offeror pursuant to the Offer. The Offeror will pay all charges
and expenses of Lazard Freres & Co. LLC (the "Dealer Manager"), First Chicago
Trust Company of New York (the "Depositary") and Georgeson & Company Inc. (the
"Information Agent") in connection with the Offer.
The following stock of the Company and its subsidiaries is not subject to
the Offer: the Company's Class A Common Stock, par value $.00001 per share
(the "Class A Common Stock"), the Company's Class C Common Stock, par value
$1.00 per share (the "Class C Common Stock" and, together with the Common
Stock and the Class A Common Stock, the "Company Common Capital Stock"), the
Company's $3.625 Series A Convertible Preferred Stock, par value $1.00 per
share (the "Series A Convertible Preferred Stock"), the Company's 8% Series B
Cumulative Convertible Preferred Stock, par value $1.00 per share (the "Series
B Preferred Stock"), the Class 1 special shares (the "RSC Shares") of Reed
Stenhouse Companies Limited, a subsidiary of the Company organized under the
laws of Canada, or the Dividend Shares (the "Dividend Shares") of Alexander &
Alexander Services UK plc, a subsidiary of the Company organized under the
laws of Scotland. To participate in the Offer, holders of the RSC Shares must
request retraction of the RSC Shares for Shares and then tender the Shares
received upon retraction pursuant to the Offer. To participate in the Offer,
holders of Class C Common Stock must request the conversion of the Class C
Common Stock into Shares and then tender the Shares received upon conversion
pursuant to the Offer. Any questions or requests for information or assistance
with retraction or conversion of the RSC Shares or the Class C Common Stock
may be directed to the Information Agent in Canada at 1-800-223-2064 or in the
United Kingdom at 44-171-454-7100.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER,
THE MERGER (AS HEREINAFTER DEFINED) AND THE MERGER AGREEMENT (AS HEREINAFTER
DEFINED), HAS DETERMINED THAT THE TERMS OF EACH OF THE OFFER AND THE MERGER
ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS, AND
RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES IN THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE HAVING BEEN VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES WHICH WILL REPRESENT NOT LESS THAN A MAJORITY OF THE COMBINED VOTING
POWER OF THE SHARES OF THE COMPANY COMMON CAPITAL STOCK (ASSUMING THE EXERCISE
OF ALL OPTIONS TO PURCHASE, AND THE CONVERSION OR EXCHANGE OF ALL SECURITIES
CONVERTIBLE OR EXCHANGEABLE INTO, SHARES OF THE COMPANY COMMON CAPITAL STOCK
OUTSTANDING AT THE EXPIRATION DATE OF THE OFFER, OTHER THAN THE CONVERSION OF
THE SHARES OF THE SERIES B PREFERRED STOCK) (THE "MINIMUM CONDITION"). THE
OFFER IS ALSO CONDITIONED UPON THE OFFEROR OBTAINING CERTAIN GOVERNMENTAL
APPROVALS. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS. SEE
SECTION 15.
<PAGE>
CS First Boston Corporation ("CS First Boston"), the Company's financial
advisor, has delivered to the Company's Board of Directors its written opinion
that the consideration to be received by the common stockholders of the
Company pursuant to the Offer and the Merger is fair to such stockholders from
a financial point of view. A copy of such opinion is contained in the
Company's Statement on Schedule 14D-9 which is being distributed to the
Company's stockholders.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of December 11, 1996 (the "Merger Agreement"), among the Parent, the
Offeror and the Company. The Merger Agreement provides that, among other
things, as soon as practicable after the purchase of Shares pursuant to the
Offer and the satisfaction of the other conditions set forth in the Merger
Agreement and in accordance with the relevant provisions of the Maryland
General Corporation Law, as amended (the "Maryland GCL"), the Offeror will be
merged with and into the Company (the "Merger"). See Section 12. Following
consummation of the Merger, the Company will continue as the surviving
corporation (the "Surviving Corporation") and will be a wholly owned
subsidiary of the Parent. At the effective time of the Merger (the "Effective
Time"), each holder of a share of (i) the Common Stock, together with the
related Right, (ii) the Class A Common Stock, together with the related RSC
Share and related Right, or (iii) the Class C Common Stock, together with the
related Dividend Share and related Right, in each case, that is issued and
outstanding (other than stock of the Company owned by any subsidiary of the
Company, Parent, the Offeror, or any other subsidiary of Parent or stock with
respect to which appraisal rights are available and properly exercised under
Maryland law), will be paid by the Surviving Corporation as consideration for
the conversion of each share $17.50 (or any higher price that may be paid for
each Share pursuant to the Offer) in cash, without interest thereon (the
"Offer Price"). See Section 5 for a description of certain tax consequences of
the Offer and the Merger.
Concurrently with the execution of the Merger Agreement, the Parent entered
into the Stock Purchase and Sale Agreement (the "Stock Purchase and Sale
Agreement") with American International Group, Inc. ("AIG"). Pursuant to the
Stock Purchase and Sale Agreement, and subject to the terms and conditions
thereof, the Parent agreed to buy and AIG agreed to sell for $317.5 million
all shares of Series B Preferred Stock owned by AIG or its subsidiaries. The
Stock Purchase and Sale Agreement provides that the sale of the Series B
Preferred Stock will close on the date which is two business days after Parent
or any affiliate of the Parent first acquires any equity interest in the
Company or any right or security convertible or exercisable into any such
interest. See Section 13.
The Merger Agreement provides that, promptly after the Offeror acquires
Shares pursuant to the Offer, the Offeror will be entitled to designate at its
option up to that number of directors of the Board of Directors of the Company
as will make the percentage of the Company's directors designated by the
Offeror equal to the aggregate voting power of the Shares held by Parent or
any of its subsidiaries (assuming the exercise of all outstanding options to
purchase, and the conversion or exchange of all securities convertible or
exchangeable into, shares of the Company Common Capital Stock, other than the
conversion of the shares of Class B Preferred Stock). The Company has agreed,
at the option of Parent, either to increase the size of the Board of Directors
of the Company and/or obtain the resignation of such number of directors as is
necessary to enable the Offeror's designees to be elected or appointed to the
Board.
The Company has advised the Offeror that as of December 11, 1996, there were
(a) 42,812,129 Shares issued and outstanding, (b) outstanding stock options
and rights to purchase not in excess of 6,700,000 Shares and (c) securities
convertible or exchangeable into an aggregate of 5,805,059 Shares (including
RSC Shares retractable into 1,848,526 Shares, Class C Common Stock convertible
into 348,690 Shares and Series A Convertible Preferred Stock convertible into
3,607,843 Shares, but excluding the Shares issuable upon the conversion of the
Series B Preferred Stock). As of the date hereof, neither the Offeror nor the
Parent beneficially owns any Company Common Capital Stock (other than as a
result of the Preferred Stock Purchase Agreement). If the Offeror acquires at
least 27,658,595 Shares in the Offer, it will control a majority of the
combined voting power of the shares of the Company Common Capital Stock
(assuming the exercise of all options to purchase, and the conversion or
exchange of all securities convertible or exchangeable into, shares of the
Company Common Capital Stock outstanding at the expiration date of the Offer,
other than the conversion of the shares of the Series B Preferred Stock).
Accordingly, after the Parent purchases the Series B Preferred Stock, the
Offeror would have sufficient voting power to approve the Merger without the
affirmative vote of any other stockholder.
2
<PAGE>
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), the Offeror will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4. The term "Expiration Date" means 12:00 Midnight,
New York City time, on Tuesday, January 14, 1997, unless the Offeror shall
have extended the period of time for which the Offer is open, in which event
the term "Expiration Date" shall mean the latest time and date at which the
Offer, as so extended by the Offeror, shall expire.
If the Offeror shall decide, in its sole discretion, to increase the
consideration offered in the Offer to holders of Shares and if, at the time
that notice of such increase is first published, sent or given to holders of
Shares in the manner specified below, the Offer is scheduled to expire at any
time earlier than the expiration of a period ending on the tenth business day
from, and including, the date that such notice is first so published, sent or
given, then the Offer will be extended until the expiration of such period of
ten business days. For purposes of the Offer, a "business day" means any day
other than a Saturday, Sunday or a federal holiday, and consists of the time
period from 12:01 a.m. through 12:00 Midnight, New York City time.
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM CONDITION AND THE
OFFEROR OBTAINING CERTAIN GOVERNMENTAL APPROVALS. THE MERGER AGREEMENT AND THE
OFFER MAY BE TERMINATED BY THE OFFEROR AND THE PARENT IF CERTAIN EVENTS OCCUR.
THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS. SEE SECTION 15. The
Offeror reserves the right (but shall not be obligated), in accordance with
applicable rules and regulations of the United States Securities and Exchange
Commission (the "Commission"), subject to the limitations set forth in the
Merger Agreement and described below, to waive or reduce the Minimum Condition
or to waive any other condition to the Offer. If the Minimum Condition or any
of the other conditions set forth in Section 15, have not been satisfied, by
12:00 Midnight, New York City time, on Tuesday, January 14, 1997 (or any other
time then set as the Expiration Date), the Offeror may, subject to the terms
of the Merger Agreement as described below, elect to (1) extend the Offer and,
subject to applicable withdrawal rights, retain all tendered Shares until the
expiration of the Offer, as extended, (2) subject to complying with applicable
rules and regulations of the Commission, accept for payment all Shares so
tendered and not extend the Offer or (3) terminate the Offer and not accept
for payment any Shares and return all tendered Shares to tendering
stockholders.
Under the terms of the Merger Agreement, the Offeror may not (except as
described in the next sentence), without the consent of the Company, waive the
Minimum Condition, reduce the number of Shares subject to the Offer, reduce
the price per Share to be paid pursuant to the Offer, impose any other
conditions to the Offer other than the conditions set forth in Section 15 or
modify such conditions (other than to waive any such conditions to the extent
permitted by the Merger Agreement), extend the Offer, change the form of
consideration payable in the Offer, or amend, waive or add any other term of
the Offer in any manner adverse to the Company or the holders of Shares.
Notwithstanding the foregoing, the Offeror may, without the consent of the
Company, extend the Offer (i) if at the then scheduled Expiration Date of the
Offer any of the conditions shall not have been satisfied or waived, until
such time as such conditions are satisfied or waived, (ii) for any period
required by any rule, regulation, interpretation or position of the Commission
or the Commission staff applicable to the Offer or (iii) for any reason for
one or more occasions for an aggregate period of not more than 10 business
days beyond the latest expiration date that would be permitted under clause
(i) or (ii) of this sentence.
Subject to the limitations set forth in the Merger Agreement, the Offeror
reserves the right (but will not be obligated), at any time or from time to
time in its sole discretion, to extend the period during which the Offer is
open by giving oral or written notice of such extension to the Depositary and
by making a public announcement of such extension. There can be no assurance
that the Offeror will exercise its right to extend the Offer.
3
<PAGE>
Subject to the applicable rules and regulations of the Commission and
subject to the limitations set forth in the Merger Agreement, the Offeror also
expressly reserves the right, at any time and from time to time, in its sole
discretion, (i) to delay payment for any Shares regardless of whether such
Shares were theretofore accepted for payment, or to terminate the Offer and
not to accept for payment or pay for any Shares not theretofore accepted for
payment or paid for, upon the occurrence of any of the conditions set forth in
Section 15, by giving oral or written notice of such delay or termination to
the Depositary, and (ii) at any time or from time to time, to amend the Offer
in any respect. The Offeror's right to delay payment for any Shares or not to
pay for any Shares theretofore accepted for payment is subject to the
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
relating to the Offeror's obligation to pay for or return tendered Shares
promptly after the termination or withdrawal of the Offer.
Any extension of the period during which the Offer is open, delay in
acceptance for payment or payment, termination or amendment of the Offer will
be followed, as promptly as practicable, by public announcement thereof, such
announcement in the case of an extension to be issued not later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date in accordance with the public announcement
requirements of Rules 14d-4(c) and 14e-1(d) under the Exchange Act. Without
limiting the obligation of the Offeror under such rule or the manner in which
the Offeror may choose to make any public announcement, the Offeror currently
intends to make announcements by issuing a press release to the Dow Jones News
Service and making any appropriate filing with the Commission.
If, subject to the terms of the Merger Agreement, the Offeror makes a
material change in the terms of the Offer or the information concerning the
Offer, or if it waives a material condition of the Offer (including a waiver
of the Minimum Condition), the Offeror will disseminate additional tender
offer materials and extend the Offer if and to the extent required by Rules
14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act or otherwise. The minimum
period during which a tender offer must remain open following material changes
in the terms of the offer or the information concerning the offer, other than
a change in price or a change in percentage of securities sought, will depend
upon the facts and circumstances, including the relative materiality of the
terms or information changes. With respect to a change in price or a change in
percentage of securities sought, a minimum ten business day period is
generally required to allow for adequate dissemination to stockholders and
investor response.
The Company has provided the Offeror with the Company's list of stockholders
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the Letter of Transmittal will
be mailed to record holders of Shares whose names appear on the Company's
stockholder list and will be furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Offeror will accept for payment and will pay for all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4 promptly after the later to occur of (a) the
Expiration Date and (b) subject to compliance with Rule 14e-1(c) under the
Exchange Act, the satisfaction or waiver of the conditions set forth in
Section 15. Subject to compliance with Rule 14e-1(c) under the Exchange Act,
the Offeror expressly reserves the right to delay payment for Shares in order
to comply in whole or in part with any applicable law. See Sections 1 and 16.
In all cases, payment for Shares tendered and accepted for payment pursuant to
the Offer will be made only after timely receipt by the Depositary of (i)
certificates for such Shares or timely confirmation (a "Book-Entry
Confirmation") of a book-entry transfer of such Shares into the Depositary's
account at The Depository Trust Company or the Philadelphia Depository Trust
Company (collectively, the "Book-Entry Transfer Facilities"), pursuant to the
procedures set forth in Section 3, (ii) a properly completed and duly executed
Letter of
4
<PAGE>
Transmittal (or a manually signed facsimile thereof) with all required
signature guarantees or, in the case of a book-entry transfer, an Agent's
Message (as defined below) and (iii) any other documents required by the
Letter of Transmittal.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Offeror may enforce such agreement against the participant.
For purposes of the Offer, the Offeror will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as,
if and when the Offeror gives oral or written notice to the Depositary of the
Offeror's acceptance of such Shares for payment. In all cases, payment for
Shares purchased pursuant to the Offer will be made by deposit of the purchase
price with the Depositary, which will act as agent for tendering stockholders
for the purpose of receiving payment from the Offeror and transmitting such
payment to tendering stockholders. If, for any reason whatsoever, acceptance
for payment of any Shares tendered pursuant to the Offer is delayed, or the
Offeror is unable to accept for payment Shares tendered pursuant to the Offer,
then, without prejudice to the Offeror's rights under Section 1, the
Depositary may, nevertheless, on behalf of the Offeror, retain tendered
Shares, and such Shares may not be withdrawn, except to the extent that the
tendering stockholders are entitled to withdrawal rights as described in
Section 4 below and as otherwise required by Rule 14e-1(c) under the Exchange
Act. Under no circumstances will interest be paid by the Offeror because of
any delay in making such payment.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted
for more Shares than are tendered, certificates for such unpurchased or
untendered Shares will be returned, without expense to the tendering
stockholder (or, in the case of Shares delivered by book-entry transfer to a
Book-Entry Transfer Facility, such Shares will be credited to an account
maintained within such Book-Entry Transfer Facility), as promptly as
practicable after the expiration, termination or withdrawal of the Offer.
If, prior to the Expiration Date, the Offeror increases the price being paid
for Shares accepted for payment pursuant to the Offer, such increased
consideration will be paid to all stockholders whose Shares are purchased
pursuant to the Offer, whether or not such Shares were tendered prior to such
increase in consideration.
The Offeror reserves the right to transfer or assign, in whole or from time
to time in part, to one or more of its affiliates the right to purchase Shares
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve the Offeror of its obligations under the Offer or prejudice the rights
of tendering stockholders to receive payment for Shares validly tendered and
accepted for payment.
3. PROCEDURE FOR TENDERING SHARES.
Valid Tenders. For Shares to be validly tendered pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof), with any required signature guarantees, or, in the
case of a book-entry transfer, an Agent's Message, and any other required
documents, must be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration
Date, or the tendering stockholder must comply with the guaranteed delivery
procedure set forth below. In addition, either (i) certificates representing
such Shares must be received by the Depositary along with the Letter of
Transmittal or such Shares must be tendered pursuant to the procedure for
book-entry transfer set forth below, and a Book-Entry Confirmation must be
received by the Depositary, in each case prior to the Expiration Date, or (ii)
the guaranteed delivery procedures set forth below must be complied with. No
alternative, conditional or contingent tenders will be accepted. DELIVERY OF
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY
TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
5
<PAGE>
Book-Entry Transfer. The Depositary will make a request to establish an
account with respect to the Shares at each Book-Entry Transfer Facility for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in a Book-Entry
Transfer Facility's system may make book-entry delivery of Shares by causing a
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at a Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. Although delivery of Shares may
be effected through book-entry at a Book-Entry Transfer Facility prior to the
Expiration Date, (i) the Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer,
and any other required documents, must, in any case, be transmitted to and
received by the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase or (ii) the guaranteed delivery procedures described
below must be complied with.
Signature Guarantee. Signatures on the Letter of Transmittal must be
guaranteed by a member in good standing of the Securities Transfer Agents
Medallion Program, or by any other bank, broker, dealer, credit union, savings
association or other entity which is an "eligible guarantor institution," as
such term is defined in Rule 17Ad-15 under the Exchange Act (each of the
foregoing being referred to as an "Eligible Institution" and, collectively, as
"Eligible Institutions"), unless the Shares tendered thereby are tendered (i)
by a registered holder of Shares who has not completed either the box labeled
"Special Delivery Instructions" or the box labeled "Special Payment
Instructions" on the Letter of Transmittal or (ii) for the account of any
Eligible Institution. If the certificates evidencing Shares are registered in
the name of a person or persons other than the signer of the Letter of
Transmittal, or if payment is to be made, or delivered to, or certificates for
unpurchased Shares are to be issued or returned to, a person other than the
registered owner or owners, then the tendered certificates must be endorsed or
accompanied by duly executed stock powers, in either case signed exactly as
the name or names of the registered owner or owners appear on the
certificates, with the signatures on the certificates or stock powers
guaranteed by an Eligible Institution as provided in the Letter of
Transmittal. See Instructions 1 and 5 to the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or time will not permit all required documents to reach the
Depositary prior to the Expiration Date or the procedure for book-entry
transfer cannot be completed on a timely basis, such Shares may nevertheless
be tendered if all of the following guaranteed delivery procedures are duly
complied with:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Offeror, is
received by the Depositary, as provided below, prior to the Expiration
Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation), together with a properly completed
and duly executed Letter of Transmittal (or a manually signed facsimile
thereof), and any required signature guarantees, or, in the case of a book-
entry transfer, an Agent's Message, and any other documents required by the
Letter of Transmittal are received by the Depositary within three trading
days after the date of such Notice of Guaranteed Delivery. The term
"trading day" is any day on which the New York Stock Exchange ("NYSE") is
open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmission or mail to the Depositary and must include a guarantee
by an Eligible Institution in the form set forth in the Notice of Guaranteed
Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY
IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED,
IS RECOMMENDED.
6
<PAGE>
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for such Shares or a Book-Entry
Confirmation, (ii) a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof), with all required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and (iii) any other documents required by the Letter of Transmittal.
BACKUP FEDERAL INCOME TAX WITHHOLDING. TO PREVENT "BACKUP" FEDERAL INCOME
TAX WITHHOLDING WITH RESPECT TO PAYMENT OF THE PURCHASE PRICE OF SHARES
PURCHASED PURSUANT TO THE OFFER, EACH STOCKHOLDER MUST PROVIDE THE DEPOSITARY
WITH SUCH STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER ("TIN") AND
CERTIFY THAT SUCH STOCKHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX
WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF
TRANSMITTAL. FOREIGN HOLDERS MUST SUBMIT A COMPLETED FORM W-8 TO AVOID BACKUP
WITHHOLDING. THIS FORM MAY BE OBTAINED FROM THE DEPOSITARY. SEE INSTRUCTIONS 8
AND 9 SET FORTH IN THE LETTER OF TRANSMITTAL.
Determination of Validity. All questions as to the form of documents and the
validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by the Offeror, in its sole
discretion, and its determination will be final and binding on all parties.
The Offeror reserves the absolute right to reject any or all tenders of any
Shares that are determined by it not to be in proper form or the acceptance of
or payment for which may, in the opinion of the Offeror, be unlawful. The
Offeror also reserves the absolute right to waive any of the conditions of the
Offer, subject to the limitations set forth in the Merger Agreement, or any
defect or irregularity in the tender of any Shares. The Offeror's
interpretation of the terms and conditions of the Offer (including the Letter
of Transmittal and the Instructions to the Letter of Transmittal) will be
final and binding on all parties. No tender of Shares will be deemed to have
been validly made until all defects and irregularities have been cured or
waived. None of the Offeror, the Parent, the Dealer Manager, the Depositary,
the Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification.
Other Requirements. By executing the Letter of Transmittal as set forth
above (including through delivery of an Agent's Message), a tendering
stockholder irrevocably appoints designees of the Offeror as such
stockholder's attorneys-in-fact and proxies, each with full power of
substitution, in the manner set forth in the Letter of Transmittal, to the
full extent of such stockholder's right with respect to the Shares tendered by
such stockholder and accepted for payment by the Offeror (and any and all
other Shares or other securities issued or issuable in respect of such Shares
on or after December 11, 1996). All such powers of attorney and proxies shall
be considered coupled with an interest in the tendered Shares. This
appointment is effective when, and only to the extent that, the Offeror
accepts for payment the Shares deposited with the Depositary. Upon acceptance
for payment, all prior powers of attorney and proxies given by the stockholder
with respect to such Shares or other securities or rights will, without
further action, be revoked and no subsequent proxies may be given or written
consent executed (and, if given or executed, will not be deemed effective).
The designees of the Offeror will, with respect to the Shares and other
securities or rights, be empowered to exercise all voting and other rights of
such stockholder as they in their sole judgment deem proper in respect of any
annual or special meeting of the Company's stockholders, or any adjournment or
postponement thereof. The Offeror reserves the right to require that, in order
for Shares to be deemed validly tendered, immediately upon the Offeror's
payment for such Shares, the Offeror must be able to exercise full voting and
other rights with respect to such Shares and the other securities or rights
issued or issuable in respect of such Shares, including voting at any meeting
of stockholders (whether annual or special or whether or not adjourned) in
respect of such Shares.
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer, as well as the tendering stockholder's representation
and warranty that (i) such stockholder has the full power and authority to
tender, sell, assign and transfer the tendered Shares (and any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after December 11, 1996), and (ii) when the same are accepted for payment by
the Offeror, the Offeror will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and
7
<PAGE>
encumbrances and not subject to any adverse claims. The Offeror's acceptance
for payment of Shares tendered pursuant to the Offer will constitute a binding
agreement between the tendering stockholder and the Offeror upon the terms and
subject to the conditions of the Offer.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer
may be withdrawn at any time prior to the Expiration Date and, unless
theretofore accepted for payment pursuant to the Offer, may also be withdrawn
at any time after Thursday, February 13, 1997. If purchase of or payment for
Shares is delayed for any reason or if the Offeror is unable to purchase or
pay for Shares for any reason, then, without prejudice to the Offeror's rights
under the Offer, tendered Shares may be retained by the Depositary on behalf
of the Offeror and may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as set forth in this Section 4,
subject to Rule 14e-1(c) under the Exchange Act, which provides that no person
who makes a tender offer shall fail to pay the consideration offered or return
the securities deposited by or on behalf of security holders promptly after
the termination or withdrawal of the Offer.
For a withdrawal of Shares tendered pursuant to the Offer to be effective, a
written, telegraphic, telex or facsimile transmission notice of withdrawal
must be timely received by the Depositary at one of its addresses set forth on
the back cover of this Offer to Purchase. Any notice of withdrawal must
specify the name of the person who tendered the Shares to be withdrawn, the
number of Shares to be withdrawn and the name in which the certificates
representing such Shares are registered, if different from that of the person
who tendered the Shares. If certificates for Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the
physical release of such certificates, the serial numbers shown on such
certificates must be submitted to the Depositary and, unless such Shares have
been tendered by an Eligible Institution, the signatures on the notice of
withdrawal must be guaranteed by an Eligible Institution. If Shares have been
tendered pursuant to the procedures for book-entry transfer set forth in
Section 3, any notice of withdrawal must also specify the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Shares and must otherwise comply with such Book-Entry Transfer
Facility's procedures. All questions as to the form and validity (including
time of receipt) of notices of withdrawal will be determined by the Offeror,
in its sole discretion, and its determination will be final and binding on all
parties. None of the Offeror, the Parent, the Dealer Manager, the Depositary,
the Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be retendered at any subsequent time prior to
the Expiration Date by following any of the procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of certain United States federal income tax
consequences of the Offer and the Merger to holders whose Shares are purchased
pursuant to the Offer or whose Shares are converted to cash in the Merger
(including pursuant to the exercise of appraisal rights). The discussion is
for general information only and does not purport to consider all aspects of
federal income taxation that may be relevant to holders of Shares. The
discussion is based on current provisions of the Internal Revenue Code of
1986, as amended (the "Code"), existing, proposed and temporary regulations
promulgated thereunder and administrative and judicial interpretations
thereof, all of which are subject to change. The discussion applies only to
holders of Shares in whose hands Shares are capital assets within the meaning
of Section 1221 of the Code, and may not apply to Shares received pursuant to
the exercise of employee stock options or otherwise as compensation, or to
certain types of holders of Shares (such as insurance companies, tax-exempt
organizations and broker-dealers) who may be subject to special rules. This
discussion does not discuss the federal income tax consequences to a holder of
Shares who, for United States federal income tax purposes, is a non-resident
alien individual, a foreign
8
<PAGE>
corporation, a foreign partnership or a foreign estate or trust, nor does it
consider the effect of any foreign, state or local tax laws.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD
CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE
RULES DISCUSSED BELOW TO SUCH HOLDER AND THE PARTICULAR TAX EFFECTS TO SUCH
HOLDER OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF
STATE, LOCAL AND OTHER INCOME TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger will be a
taxable transaction for federal income tax purposes. In general, for federal
income tax purposes, a holder of Shares will recognize gain or loss equal to
the difference between the holder's adjusted tax basis in the Shares sold
pursuant to the Offer or converted to cash in the Merger and the amount of
cash received therefor. Gain or loss must be determined separately for each
block of Shares (i.e., Shares acquired at the same cost in a single
transaction) sold pursuant to the Offer or converted to cash in the Merger.
Such gain or loss will be capital gain or loss and will be long-term gain or
loss if the holder held the Shares for more than one year, on the date of sale
(in the case of the Offer) or the Effective Time of the Merger (in the case of
the Merger). The receipt of cash for Shares pursuant to the exercise of
appraisal rights will generally be taxed in the same manner as described
above. Long-term capital gain of individuals currently is taxed at a maximum
rate of 28%.
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" at a rate of 31%, unless a holder of Shares (a) is a
corporation or comes within certain exempt categories and, when required,
demonstrates this fact or (b) provides a correct TIN to the payor, certifies
as to no loss of exemption from backup withholding and otherwise complies with
applicable requirements of the backup withholding rules. A holder who does not
provide a correct TIN may be subject to penalties imposed by the Internal
Revenue Service. Any amount paid as backup withholding does not constitute an
additional tax and will be creditable against the holder's federal income tax
liability. Each holder of Shares should consult with his or her own tax
advisor as to his or her qualification for exemption from backup withholding
and the procedure for obtaining such exemption. Holders tendering their Shares
in the Offer may prevent backup withholding by completing the Substitute Form
W-9 included in the Letter of Transmittal. See Section 3. Similarly, holders
who convert their Shares into cash in the Merger may prevent backup
withholding by completing a Substitute Form W-9 and submitting it to the
paying agent for the Merger.
6. PRICE RANGE OF SHARES; DIVIDENDS.
According to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995 (the "1995 10-K"), the Shares are principally traded
on the NYSE. The following table sets forth for the periods indicated the high
and low sales prices per Share on NYSE as reported by the Company in the 1995
10-K with respect to the years ended December 31, 1994 and December 31, 1995,
and as reported by published financial sources with respect to periods after
December 31, 1995.
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
-------- ------- ---------
<S> <C> <C> <C>
Year Ended December 31, 1994:
First Quarter................................ $22 3/4 $17 1/4 $.250
Second Quarter............................... 18 1/8 14 .025
Third Quarter................................ 20 7/8 16 .025
Fourth Quarter............................... 21 1/2 18 1/2 .025
Year Ended December 31, 1995:
First Quarter................................ $23 3/4 $18 1/2 $.025
Second Quarter............................... 26 7/16 22 1/8 .025
Third Quarter................................ 25 1/2 22 3/8 .025
Fourth Quarter............................... 24 3/8 18 5/8 .025
Year Ended December 31, 1996:
First Quarter................................ $20 5/8 $18 1/4 $.025
Second Quarter............................... 21 1/2 18 1/2 .025
Third Quarter................................ 20 1/8 15 1/2 .025
Fourth Quarter (through December 13, 1996)... 17 1/4 13 5/8 .025
</TABLE>
9
<PAGE>
On December 10, 1996, the last full day of trading prior to the public
announcement of the execution of the Merger Agreement, the closing price per
Share as reported on NYSE was $14 1/8. On December 13, 1996, the last full day
of trading prior to the commencement of the Offer, the closing price per Share
as reported on NYSE was $17 1/8. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS FOR THE SHARES.
7. CERTAIN EFFECTS OF THE TRANSACTION.
The purchase of the Shares by the Offeror pursuant to the Offer will reduce
the number of Shares that might otherwise trade publicly and will reduce the
number of holders of Shares, which will adversely affect the liquidity and
market value of the remaining Shares held by stockholders other than the
Offeror. The Company has advised the Offeror that, as of December 11, 1996,
there were approximately 3,100 stockholders of record and approximately 9,000
beneficial owners of the Shares.
Market for Shares. Depending upon the number of Shares purchased pursuant to
the Offer, the Shares may no longer meet the standards for continued inclusion
on NYSE. According to the NYSE's published guidelines, the NYSE would consider
delisting the Shares if, among other things, the number of record holders of
at least 100 Shares should fall below 1,200, the number of publicly held
Shares (exclusive of holdings of officers, directors, their immediate families
and other concentrated holdings of 10% or more ("NYSE Excluded Holdings"))
should fall below 600,000 or the aggregate market value of publicly held
Shares (exclusive of NYSE Excluded Holdings) should fall below $5,000,000.
In the event that the Shares should no longer be listed or traded on the
NYSE, it is possible that the Shares would continue to trade in the over-the-
counter market and that price quotations would be reported by other sources.
The extent of the public market for the Shares and the availability of such
quotations would, however, depend upon the number of holders of Shares
remaining at such time, the interests in maintaining a market in Shares on the
part of securities firms, the possible termination of registration of the
Shares under the Exchange Act, as described below, and other factors.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Such registration may be terminated upon application by the
Company to the Commission if there are fewer than 300 record holders of
Shares. It is the intention of the Offeror to seek to cause an application for
such termination to be made as soon after consummation of the Offer as the
requirements for termination of registration of the Shares are met. If such
registration were terminated, the Company would no longer legally be required
to disclose publicly in proxy materials distributed to stockholders the
information which it now must provide under the Exchange Act or to make public
disclosure of financial and other information in annual, quarterly and other
reports required to be filed with the Commission under the Exchange Act; and
the officers, directors and 10% stockholders of the Company would no longer be
subject to the "short-swing" insider trading reporting and profit recovery
provisions of the Exchange Act. Furthermore, if such registration were
terminated, persons holding "restricted securities" of the Company may be
deprived of their ability to dispose of such securities under Rule 144
promulgated under the Securities Act of 1933, as amended (the "Securities
Act").
Margin Regulations. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of
allowing brokers to extend credit on the collateral of the Shares. Depending
upon factors similar to those described above regarding listing and market
quotations, it is possible that, following the Offer, the Shares would no
longer constitute "margin securities" for the purposes of the margin
regulations of the Federal Reserve Board and therefore could no longer be used
as collateral for loans made by brokers. If registration of Shares under the
Exchange Act were terminated, the Shares would no longer be "margin
securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
Except as otherwise set forth herein, the information concerning the Company
contained in this Offer to Purchase, including financial information, has been
furnished by the Company or has been taken from or based
10
<PAGE>
upon publicly available documents and records on file with the Commission and
other public sources. Although neither the Offeror nor the Parent has any
knowledge that would indicate that statements contained herein based upon such
documents are untrue, neither the Offeror, the Parent nor the Dealer Manager
assumes any responsibility for the accuracy or completeness of the information
concerning the Company, furnished by the Company, or contained in such
documents and records or for any failure by the Company to disclose events
which may have occurred or may affect the significance or accuracy any such
information but which are unknown to the Offeror or the Parent.
The Company is a Maryland corporation with its principal executive offices
located at 1185 Avenue of the Americas, New York, New York 10036. The Company
is a holding company which, through its subsidiaries, provides professional
risk management consulting, insurance brokerage and human resource management
consulting services on a global basis.
Set forth below is certain summary consolidated financial data with respect
to the Company excerpted or derived from financial information contained in
the Company's 1995 Form 10-K, and the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996. More comprehensive financial
information is included in such reports and other documents filed by the
Company with the Commission, and the following summary is qualified in its
entirety by reference to such reports and such other documents and all the
financial information (including any related notes) contained therein. Such
reports and other documents should be available for inspection and copies
thereof should be obtainable in the manner set forth below.
ALEXANDER & ALEXANDER SERVICES INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FOR YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- --------------------
1995 1994 1993 1996 1995
--------- --------- -------- ------------- ------
UNAUDITED
<S> <C> <C> <C> <C> <C>
Statement of Operations Data
Total operating revenues.. $ 1,282.4 $ 1,323.9 $1,341.6 $ 967.4 $952.0
Operating income (loss)... 122.7 (82.9) 52.3 88.3 108.5
Net income (loss)......... 89.4 (138.7) 26.9 47.7 81.9
Net earnings (loss) per
share.................... 1.42 (3.51) 0.48 0.62 1.33
<CAPTION>
AS OF
AS OF DECEMBER 31, SEPTEMBER 30,
------------------- -------------
1995 1994 1996
--------- --------- -------------
<S> <C> <C> <C>
Balance Sheet Data
Total current assets...... 2,372.0 2,386.9 2,335.9
Total assets.............. 2,942.4 2,945.7 2,922.0
Total current liabilities. 2,120.5 2,149.3 2,027.5
Long-term debt............ 126.2 132.7 142.4
Total stockholders'
equity................... 402.6 317.5 462.5
</TABLE>
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files periodic reports, proxy statements and other
information with the Commission relating to its business, financial condition
and other matters. The Company is required to disclose in such proxy
statements certain information, as of particular dates, concerning the
Company's directors and officers, their remuneration, stock options granted to
them, the principal holders of the Company's securities and any material
interests of such persons in transactions with the Company. Such reports,
proxy statements and other information may be inspected at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center,
11
<PAGE>
13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison
Street (Suite 400), Chicago, Illinois 60661. Copies of such material may also
be obtained by mail, at prescribed rates, from the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission also
maintains a World Wide Web site on the internet at http://www.sec.gov that
contains reports and other information regarding registrants that file
electronically with the Commission. Such material should also be available for
inspection at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
9. CERTAIN INFORMATION CONCERNING THE PARENT AND THE OFFEROR.
The Offeror is a newly incorporated Maryland corporation. To date, the
Offeror has not conducted any business other than that incident to its
formation, the execution and delivery of the Merger Agreement and the
commencement of the Offer. Accordingly, no meaningful financial information
with respect to the Offeror is available. The Offeror is a wholly owned
subsidiary of the Parent. The principal executive office of the Offeror is
located at Corporation Trust Incorporated, 32 South Street, Baltimore,
Maryland 21202.
The Parent, a Delaware corporation, has its principal executive office at
123 N. Wacker Drive, Chicago, Illinois 60606. Parent is an insurance services
holding company that comprises a family of insurance brokerage, consulting and
consumer insurance companies.
Set forth below is certain summary consolidated financial data with respect
to Parent excerpted or derived from financial information contained in
Parent's Annual Report on Form 10-K for the year ended December 31, 1995, and
the Parent's Quarterly Report on Form 10-Q for the quarter ended September 30,
1996. More comprehensive financial information is included in such reports and
other documents filed by Parent with the Commission, and the following summary
is qualified in its entirety by reference to such reports and such other
documents and all the financial information (including any related notes)
contained therein.
AON CORPORATION
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FOR YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- ----------------------
1995 1994 1993 1996 1995
--------- --------- -------- ------------- --------
UNAUDITED
<S> <C> <C> <C> <C> <C>
Statement of Income Data
Total revenues........... $ 3,465.7 $ 3,041.2 $2,770.8 $ 2,818.8 $2,570.8
Income from continuing
operations.............. 303.7 268.5 227.9 245.6 239.2
Net income............... 402.8 360.0 323.8 289.0 309.9
Net income per share..... 3.48 3.14 2.81 2.50 2.68
<CAPTION>
AS OF
AS OF DECEMBER 31, SEPTEMBER 30,
------------------- -------------
1995 1994 1996
--------- --------- -------------
<S> <C> <C> <C>
Balance Sheet Data
Total assets............. 19,735.8 17,921.9 12,227.0
Total liabilities........ 17,012.1 15,614.5 9,458.9
Redeemable preferred
stock................... 50.0 50.0 50.0
Total stockholders'
equity.................. 2,673.7 2,257.4 2,718.1
</TABLE>
The Parent is subject to the informational requirements of the Exchange Act
and in accordance therewith files periodic reports and other information with
the Commission relating to its business, financial condition and other
matters. Such reports and other information are available for inspection and
copying at the offices of the Commission in the same manner as set forth with
respect to the Company in Section 8.
12
<PAGE>
The name, citizenship, business address, present principal occupation and
material positions held during the past five years of each of the directors
and executive officers of the Parent and the Offeror are set forth in Annex I
to this Offer to Purchase.
Except as described in this Offer to Purchase, none of the Offeror, the
Parent, or to the best knowledge of the Offeror or the Parent, any of the
persons listed in Annex I to this Offer to Purchase owns or has any right to
acquire any Shares and none of them has effected any transaction in the Shares
during the past 60 days.
Except as set forth in this Offer to Purchase, none of the Offeror, the
Parent or, to the best knowledge of the Offeror or the Parent, any of the
persons listed in Annex I hereto, has any contract, arrangement, understanding
or relationship with any other person with respect to any securities of the
Company, including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any
such securities, joint ventures, loan or option arrangements, puts or calls,
guaranties of loans, guaranties against loss or the giving or withholding of
proxies. Except as set forth in this Offer to Purchase, there have been no
contacts, negotiations or transactions between the Offeror or the Parent, or,
to the best of their knowledge, any of the persons listed in Annex I hereto,
on the one hand, and the Company or its affiliates, on the other hand,
concerning a merger, consolidation or acquisition, a tender offer or other
acquisition of securities, an election of directors, or a sale or other
transfer of a material amount of assets. Except as described in this Offer to
Purchase, none of the Offeror, the Parent or, to the best knowledge of the
Parent or the Offeror, any of the persons listed in Annex I hereto, has had
any transaction with the Company or any of its executive officers, directors
or affiliates that would require disclosure under the rules and regulations of
the Commission applicable to the Offer.
10. SOURCE AND AMOUNT OF FUNDS.
This Offer is not conditioned upon any financing arrangements. The total
amount of funds required by the Offeror to consummate the Offer and the Merger
is expected to be approximately $800 million, which amount excludes (i)
related fees and expenses, (ii) funds needed to purchase any shares of Series
A Convertible Preferred Stock converted into Shares prior to the consummation
of the Offer or to pay cash into which the holders of Series A Convertible
Preferred Stock may convert such shares from and after the Merger, and (iii)
funds needed to purchase the Series B Preferred Stock pursuant to the Stock
Purchase and Sale Agreement. The Offeror plans to obtain all funds needed for
the Offer and the Merger through a capital contribution that will be made by
the Parent to the Offeror. The Parent contemplates obtaining the funds
necessary for such capital contribution from cash on hand, the proceeds from
the sale of commercial paper and possibly the proceeds of a preferred equity
financing.
11. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH
THE COMPANY.
During 1994, 1995 and 1996, the Chief Executive Officers of the Company and
of the Parent discussed from time to time the possibility of a business
combination involving the Parent and the Company. Throughout the period, each
Board of Directors was kept informed of the discussions. The Company has
informed the Parent as follows: During the past two years the Company
communicated with five other insurance brokerage companies concerning various
forms of possible business combinations. The most recent of these
communications took place approximately six weeks ago. Three of the five
companies signed confidentiality agreements with the Company; however, none of
the five companies engaged in a detailed due diligence investigation of the
Company or agreed to mutual due diligence, and none of the five companies
provided an indication of interest in merging with, being acquired by or
acquiring the Company. Approximately twelve months ago a special committee of
the Board of Directors of the Company, made up of six outside directors, was
formed and since then has met from time to time to consider possible business
combinations. CS First Boston worked with the Company throughout this two year
period and was formally retained by the Company on December 6, 1996.
The discussions between the Company and the Parent began during the Spring
of 1994, at which time the Company was also engaged in discussions with AIG
regarding the significant investment that AIG ultimately made in the Series B
Preferred Stock of the Company. At that time, the Board of Directors of the
Company
13
<PAGE>
concluded that the investment by AIG and the recruiting of a new chief
executive officer were in the best interests of the Company's stockholders and
should be pursued.
Further discussion of a business combination between the Parent and the
Company resumed in the Spring of 1995. At that time, a confidentiality
agreement between the two companies was executed and confidential information
was shared. The conversations in the Spring of 1995 principally concerned a
possible stock-for-stock transaction. Representatives of the Company and the
Parent met from time to time in connection therewith to explore such a
transaction as well as to discuss the financial and other prospects of the
Company and of the Parent. In addition, because of the right of AIG to require
a repurchase of the Series B Preferred Stock in connection with a change-in-
control of the Company at a substantial premium to its liquidation value, Mr.
Patrick G. Ryan, Chairman, President and Chief Executive Officer of the
Parent, discussed the possibility of such a transaction with Mr. Maurice R.
Greenberg, Chairman of the Board, Chief Executive Officer and President of
AIG. (Subsequent to the Spring of 1995, Messrs. Ryan and Greenberg had
conversations from time to time). The discussions concerning the possible
transaction terminated in May of 1995 when the Company and the Parent
concluded that the two companies were not likely to agree on financial terms.
From January to May of 1996 and again in July and August of 1996, Mr. Ryan
and Mr. Frank G. Zarb, Chairman, President and Chief Executive Officer of the
Company, discussed a possible business combination, including the possibility
of an all-stock merger or an all- or partial-cash acquisition by the Parent of
the outstanding equity securities of the Company. During the Summer of 1996,
the confidentiality agreement between the two companies was reconfirmed and
confidential information was furnished to the Parent by the Company. Each time
the conversations again were terminated when the parties concluded that the
two companies were not likely to agree on financial terms.
In the Fall of 1996, Mr. Ryan and Mr. Zarb discussed from time to time the
possibility of a business combination. On November 24, 1996, Messrs. Zarb and
Ryan met in New York City and discussed the possible business combination. Mr.
Ryan indicated to Mr. Zarb that the Parent would prefer to pursue an all-cash
transaction assuming that a satisfactory arrangement could be made with AIG
and that a reasonably acceptable valuation of the Company could be agreed upon
between the Parent and the Company. Thereafter, Messrs. Ryan, Greenberg and,
for the initial period of the meeting, Mr. Zarb met to discuss a possible
transaction. Messrs. Zarb and Ryan, and Messrs. Ryan and Greenberg, engaged in
repeated conversations during the period of November 27 through December 10,
1996 (the day preceding the date of execution of the Merger Agreement)
relating to the possible transaction.
On November 29, 1996, certain representatives of the Company and its legal
advisors met with certain representatives of the Parent and its legal advisors
to exchange certain information, to discuss the process by which discussions
between the Company and the Parent might proceed and to reexecute a
confidentiality agreement between the Company and the Parent. The Company
continued to make financial and other information available to representatives
of the Parent and its advisors.
On December 4, 1996, representatives of the Parent furnished representatives
of the Company with a draft of the Merger Agreement.
On December 4, 1996, Mr. Zarb met with the special committee of the Board of
Directors of the Company to discuss the progress of discussions between the
Company and the Parent and to request a determination from the special
committee of the Board as to whether the Company should continue discussions
with the Parent and whether a special meeting of the Board should be held to
consider the possible transaction. The special committee of the Board
recommended that discussions with the Parent be continued and that the Board
consider the possible transaction.
Representatives of the two companies and their legal advisors met on
December 5, 1996 in New York City to discuss the draft of the Merger
Agreement.
14
<PAGE>
On December 6, 1996, a special meeting of the Board of Directors of the
Company was held to consider the possible transaction. The Board carefully
considered the possible transaction together with the advice of its legal and
financial advisors. As a result of such review, the Board unanimously
determined that it would be in the best interests of the Company and its
common stockholders for discussions to continue with the Parent and authorized
and instructed Mr. Zarb to continue discussions with the Parent.
Representatives of the Parent and the Company and their legal advisors met
again on December 7, 1996 to discuss a revised draft of the Merger Agreement.
The terms of the Merger Agreement were finalized in telephone conversations on
December 9 and 10, 1996 between the representatives and advisors.
During the period of November 27 through December 10, 1996, Mr. Ryan held
several conversations with Mr. Greenberg regarding a possible purchase by the
Parent of the shares of Series B Preferred Stock held by AIG and its
subsidiaries. Although a business combination involving the Parent and the
Company would, according to the terms of the Series B Preferred Stock, entitle
AIG and its subsidiaries to require the purchase of the Series B Preferred
Stock for approximately $350 million in cash, Mr. Ryan indicated during these
conversations that the Parent would not pursue the business combination if the
repurchase for that amount were required. Ultimately Messrs. Ryan and
Greenberg reached an understanding regarding the purchase by the Parent of the
Series B Preferred Stock from AIG and its subsidiaries for cash in the amount
of $317.5 million, subject to the terms and conditions reflected in the Stock
Purchase and Sale Agreement. A draft of that agreement was provided by AIG's
representatives to the Parent's representatives on December 10, following
which its terms were finalized.
At two meetings of the Board of Directors of the Company held in the morning
and the evening of December 10, 1996, the Board met with management of the
Company, the Company's financial advisor, CS First Boston, and the Company's
legal advisors to review the business, financial condition and prospects of
the Company, the terms and conditions of the Offer and various matters related
thereto, including reports by the Company's financial advisor on the financial
condition and performance, strategic alternatives and potential value of the
Company. Based on the proposed terms of the draft Merger Agreement presented
to the Board on December 10, 1996, at the second December 10 meeting and after
receiving advice from management, CS First Boston and its legal advisors, the
Board of Directors of the Company unanimously determined that the Offer and
Merger Agreement are fair to, and in the best interests of, the common
stockholders of the Company.
During the morning of December 11, 1996, the Company and the Parent executed
the Merger Agreement, and AIG and the Parent executed the Stock Purchase and
Sale Agreement. A joint press release by the Company and the Parent announcing
the execution of such Agreements was then issued.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY.
The purpose of the Offer, the Merger, the Merger Agreement and the Stock
Purchase and Sale Agreement is to enable the Parent to acquire control of, and
the entire equity interest in, the Company.
Under the Maryland GCL and Charter of the Company, the Board of Directors of
the Company is required to approve the Merger and the affirmative vote of the
holders of a majority of the outstanding voting power is required to approve
the Merger. The Board of Directors of the Company has unanimously approved the
Offer, the Merger and the Merger Agreement and the transactions contemplated
thereby, and the only remaining required corporate action of the Company is
the approval of the Merger by the affirmative vote of the holders of stock
representing a majority of the outstanding voting power. If the Minimum
Condition is satisfied and the Parent purchases the Series B Preferred Stock,
the Offeror will have sufficient voting power to cause the approval of the
Merger without the affirmative vote of any other stockholder.
In the Merger Agreement, the Company has agreed to take all action necessary
to convene a meeting of its stockholders as promptly as practicable after the
consummation of the Offer for the purpose of considering and taking action on
the Merger. The Parent has agreed that, subject to applicable law, all Shares
owned by the
15
<PAGE>
Offeror or any other subsidiary of the Parent will be voted in favor of the
Merger. Pursuant to the Merger Agreement, the Company has agreed as soon as
practicable following the expiration of the Offer, to duly call, give notice
of, convene and hold a meeting of stockholders for the purpose of obtaining
the stockholders' approval. The stockholders meeting shall be held as soon as
practicable following the purchase of Shares pursuant to the Offer. If the
Offeror owns a majority of the outstanding shares of Company Common Capital
Stock and the purchase of the Series B Preferred Stock is effected, approval
of the Merger can be obtained without the affirmative vote of any other
stockholder of the Company, subject to the following paragraph.
In certain circumstances, the Merger could be considered to constitute a
"going private transaction" for the purposes of Ontario Securities Commission
Policy 9.1. While the Offeror and the Company believe that the Merger may be
exempt from the requirements of such Policy, if the Policy applied, the
approval of the Merger by a majority of the votes cast by the minority
stockholders of the Company voting at any meeting held to approve the Merger
would be required. For this purpose, shares of Company Common Capital Stock
purchased by the Offeror in this Offer may generally be counted as "minority"
shares, but (i) shares of Series B Preferred Stock acquired by the Offeror
pursuant to the Stock Purchase and Sale Agreement from AIG as described
herein, including any Shares into which such shares may be exchanged, and (ii)
any other shares of Company Common Capital Stock held, beneficially owned or
over which control or direction is exercised, directly or indirectly by
Parent, the Offeror, the Company, any affiliate of the foregoing and any
parties acting jointly or in concert with, or related to, any of the
foregoing, may not be counted as "minority" shares.
Appraisal Rights. No appraisal rights are available in connection with the
Offer. Appraisal rights with respect to the Shares will not be available in
connection with the Merger if, among other things, the Shares are listed on a
national securities exchange or are designated as national market system
securities on an interdealer quotation system by the National Association of
Securities Dealers, Inc. on the record date for determining stockholders
entitled to vote on the Merger. See "Section 7--Certain Effects of the
Transaction." If such appraisal rights become available, a holder of Shares
will have such rights with respect to the Merger if such holder properly
exercises his appraisal rights under the Maryland GCL and the Merger is
consummated (the "Merger Dissenter"). If the right to receive fair value is
applicable and the statutory procedures for exercising or perfecting
dissenters' appraisal rights are complied with in accordance with the Maryland
GCL, then generally a judicial determination will be made of the fair value
required to be paid in cash to the Merger Dissenters for their Shares. Any
such judicial determination of the fair value of Shares may not include any
appreciation or depreciation which directly or indirectly results from the
Merger and could be based upon considerations other than or in addition to the
price paid pursuant to the Offer or the market value of the Shares. Fair value
may be more or less than the price paid pursuant to the Offer.
An objecting stockholder shall cease to have any rights as a stockholder
with respect to the Shares except the right to receive payment of the fair
value thereof. The stockholder's rights may be restored only upon the
withdrawal, with the consent of the Company, of the demand for payment, no
filing of a petition for appraisal within the time required, a determination
of the court that the stockholder is not entitled to an appraisal, or the
abandonment or rescission of the transaction to which the stockholder
objected.
The foregoing summary of the rights of objecting stockholders does not
purport to be a complete statement of the procedures to be followed by
stockholders desiring to exercise their dissenters' appraisal rights. The
preservation and exercise of dissenters' rights are conditioned on strict
adherence to the applicable provisions of the Maryland GCL.
Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may
under certain circumstances be applicable to the Merger or another business
combination following the purchase of Shares pursuant to the Offer or
otherwise in which the Offeror seeks to acquire the remaining Shares not held
by it. The Offeror believes, however, that Rule 13e-3 will not be applicable
to the Merger if the Merger is consummated within one year after the
termination of the Offer at the same per Share price as paid in the Offer. If
applicable, Rule 13e-3 requires, among other things, that certain financial
information concerning the Company and certain information relating to the
fairness of the proposed
16
<PAGE>
transaction and the consideration offered to minority stockholders in such
transaction be filed with the Commission and disclosed to stockholders prior
to consummation of the transaction.
Plans for the Company. The Parent will continue to evaluate the business and
operations of the Company during the pendency of the Offer and after the
consummation of the Offer and the Merger. The Parent intends to seek
additional information about the Company during this period. Thereafter, the
Parent intends to review such information as part of a comprehensive review of
the Company's business, operations, capitalization and management with a view
to optimizing exploitation of the Company's potential in conjunction with the
Parent's business.
Except as indicated in this Offer to Purchase, the Parent does not have any
current plans or proposals which relate to or would result in an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Company or any of its subsidiaries, a sale or transfer of a
material amount of assets of the Company or any of its subsidiaries or any
material change in the Company's capitalization or dividend policy or any
other material changes in the Company's corporate structure or business, or
the composition of the Company's Board of Directors or management.
13. THE MERGER AGREEMENT AND THE STOCK PURCHASE AND SALE AGREEMENT.
The following summary of certain provisions of the Merger Agreement and the
Stock Purchase and Sale Agreement, copies of which are filed as exhibits to
the Schedule 14D-1, is qualified in its entirety by reference to the text of
the Merger Agreement and the Stock Purchase and Sale Agreement.
The Merger Agreement
The Offer. The Offeror commenced the Offer in accordance with the terms of
the Merger Agreement. Pursuant to the terms and conditions of the Merger
Agreement, each of the Company, Parent and Offeror have agreed to use its
reasonable best efforts to cause the purchase of Shares pursuant to the Offer
and the consummation of the Merger to occur as soon as practicable. Without
limiting the foregoing, each of the Company, Parent and Offeror have agreed to
use its reasonable best efforts to take, or cause to be taken, all actions
necessary to comply promptly with all legal requirements that may be imposed
on itself with respect to the Offer and the Merger and shall promptly
cooperate with and furnish information to each other in connection with any
such requirements imposed upon any of them in connection with the Offer and
the Merger.
Company Actions. Pursuant to the Merger Agreement, the Company has agreed
that on the date of the commencement of the Offer, it will file with the Com-
mission and mail to its stockholders, a Solicitation/Recommendation Statement
on Schedule 14D-9 containing the recommendation of the Board of Directors that
the Company's stockholders accept the Offer and approve the Merger.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions of the Merger Agreement, and in accordance with the Maryland
GCL, the Offeror shall be merged with and into the Company at the Effective
Time. Following the Merger, the separate corporate existence of the Offeror
shall cease and the Company shall continue as the Surviving Corporation and
shall succeed to and assume all the rights and obligations of the Offeror in
accordance with the Maryland GCL. At the Effective Time, the Charter and By-
Laws of the Company shall be the Charter and By-Laws of the Surviving
Corporation. The directors of the Offeror shall become the directors of the
Surviving Corporation and the officers of the Company shall become the
officers of the Surviving Corporation.
Conversion of Securities. As of the Effective Time, by virtue of the Merger
and without any action on the part of the holder of any shares of stock of
Offeror or rights to acquire any such stock, each holder of a share of
17
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(i) the Common Stock, together with the related Right, (ii) the Class A Common
Stock, together with the related RSC Share and related Right, or (iii) the
Class C Common Stock, together with the related Dividend Share and related
Right, in each case, that is issued and outstanding (other than stock of the
Company owned by any subsidiary of the Company, Parent, the Offeror, or any
other subsidiary of Parent or stock with respect to which appraisal rights are
available and properly exercised under Maryland law), shall be paid by the
Surviving Corporation as consideration for the conversion of each share in
cash, without interest and without any further action by such holder, the
Offer Price. At the Effective Time, the holder of each share of Series A
Convertible Preferred Stock will have the right to convert such share only
into cash in the amount of $52.54. Each share of stock of the Offeror issued
and outstanding immediately prior to the Effective Time shall, at the
Effective Time, by virtue of the Merger and without any action on the part of
the holder of any shares of stock of the Offeror, be converted into and become
600,000 fully paid and nonassessable shares of Common Stock, par value $1.00
per share, of the Surviving Corporation.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and the Offeror,
including, but not limited to, representations and warranties as to
organization and qualification, subsidiaries, capital structure, authority to
enter into the Merger Agreement and to consummate the transactions
contemplated thereby, required consents and approvals, filings made by the
Company with the Commission under the Securities Act or the Exchange Act
(including financial statements included in the documents filed by the Company
under these acts), absence of material adverse change, compliance with laws,
licenses and permits, tax matters, liabilities and the inapplicability of
certain state takeover statutes and the execution of an amendment to the
Rights Agreement.
The Offeror and the Parent have also made customary representations and
warranties to the Company, including, but not limited to, representations and
warranties as to organization, authority to enter into the Merger Agreement
and to consummate the transactions contemplated thereby, required consents and
approvals and financing.
Covenants Relating to the Conduct of Business. During the period from the
date of the Merger Agreement to such time as Parent's designees shall
constitute a majority of the Board of Directors of the Company, the Company
has agreed that it will, and will cause its subsidiaries to, in all material
respects, carry on its business in the ordinary course of its business as
currently conducted and, to the extent consistent therewith, use reasonable
best efforts to preserve intact its current business organizations, keep
available the services of its current officers and key employees and preserve
its relationships with customers, suppliers and others having business
dealings with it to the end that its goodwill and ongoing business shall not
be materially impaired. The Company has agreed that, except as otherwise
expressly contemplated by the Merger Agreement, during such period, the
Company will not, and will not permit any of its subsidiaries to, without the
prior written consent of Parent (which consent shall not be unreasonably
withheld):
(a) (x) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its stockholders in their
capacity as such (other than regular quarterly dividends of not more than
$.90625 per share on the Series A Convertible Preferred Stock and of not
more than $.025 per share on the Shares, a regular quarterly payment-in-
kind dividend in respect of the Series B Preferred Stock on December 15,
1996 and thereafter cash dividends of not more than $1.00 per share on the
Series B Preferred Stock, in each case declared and paid on dates
consistent with past practice), (y) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock
or (z) except as required under existing employee benefit plans,
agreements, policies, awards or arrangements in effect on the date of the
Merger Agreement, or pursuant to the Company's Employee Stock Option
Exchange Program communicated to participants on November 26, 1996,
purchase, redeem or otherwise acquire any shares of its capital stock or
those of any subsidiary or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(b) except as required under existing employee benefit plans, agreements,
policies, awards or arrangements in effect on the date of the Merger
Agreement, or pursuant to the Company's Employee Stock
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Option Exchange Program communicated to participants on November 26, 1996,
issue, deliver, sell, pledge, dispose of or otherwise encumber any shares
of its capital stock, any other voting securities or equity equivalent or
any securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities, equity equivalent or
convertible securities (other than the issuance of Shares upon the exercise
of stock options of the Company outstanding on the date of the Merger
Agreement in accordance with their current terms, the issuance of Shares
upon the retraction, redemption or conversion of shares of RSC Shares, or
shares of Class C Common Stock, Series A Convertible Preferred Stock or
Series B Preferred Stock, in each case in accordance with the terms
thereof, and the issuance on December 15, 1996 of shares of Series B
Preferred Stock as a regular quarterly payment-in-kind dividend in
accordance with the terms thereof);
(c) amend its Charter or By-laws or other similar organizational
documents;
(d) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of or equity in, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire or
agree to acquire any assets, other than (y) transactions that are in the
ordinary course of business consistent with past practice and not material
to the Company and its subsidiaries taken as a whole and (z) acquisitions
of one or more insurance brokerage businesses with respect to which the
aggregate amount of consideration paid or payable by the Company and its
subsidiaries (valuing any non-cash consideration at its fair market value
and any contingent payments at the maximum amount payable and treating any
liabilities assumed as consideration paid) does not exceed $15,000,000;
(e) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets, other than transactions that are
in the ordinary course of business consistent with past practice and which
involve assets having an aggregate fair market value or book value not in
excess of $10,000,000;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others, except for borrowings or guarantees incurred in the
ordinary course of business consistent with past practice, or make any or
in loans, advances or capital contributions to, or other investments in,
any other person, other than to the Company or any wholly owned subsidiary
of the Company;
(g) with certain specified exceptions, alter (through merger,
liquidation, reorganization, restructuring or in any other fashion) the
corporate structure or ownership of the Company or any subsidiary of the
Company, except as contemplated by the Merger Agreement;
(h) enter into or adopt, or amend any existing severance plan, agreement
or arrangement or enter into or amend any employee benefit plan (including
without limitation the stock option plans of the Company) or employment or
consulting agreement, other than as required by law or as provided for in
the Merger Agreement;
(i) except as otherwise provided in the Merger Agreement, and/or as
required under existing plans, agreements, policies, awards or arrangements
in effect on the date of the Merger Agreement, or pursuant to the Company's
Employee Stock Option Exchange Program communicated to participants on
November 26, 1996, increase the compensation payable or to become payable
to its officers or employees, except, in the case of employees who are not
officers, for increases in the ordinary course of business consistent with
past practice, or grant any severance or termination pay to, or enter into
any employment or severance agreement, or establish, adopt, enter into, or
amend in any material respect or take action to enhance in any material
respect or accelerate any rights or benefits under, any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee, except,
in each case, as may be required to comply with applicable law or
regulation;
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(j) violate or fail to perform any material obligation or duty imposed
upon it by any applicable federal, state or local law, rule, regulation,
guideline or ordinance which would be reasonably expected to have a
material adverse effect on the Company;
(k) redeem the Rights or, other than as contemplated by the Merger
Agreement, amend the Rights Agreement;
(l) amend the Stock Purchase and Sale Agreement dated as of June 6, 1994,
between the Company and AIG;
(m) make any material change in its method of accounting;
(n) modify certain specified contracts; or
(o) authorize, recommend, propose or announce an intention to do any of
the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
No Solicitation. The Company has agreed in the Merger Agreement that, from
and after the date of the Merger Agreement, the Company will not, and will not
permit any of its or its subsidiaries' officers, directors or employees to,
and the Company will use its reasonable best efforts to cause all of its and
its subsidiaries' attorneys, financial advisors, agents and other
representatives not to, directly or indirectly, solicit, initiate or knowingly
encourage (including by way of furnishing information) any Takeover Proposal
(as defined herein), or engage in or continue discussions or negotiations
relating thereto; provided, however, that the Company may engage in
discussions or negotiations with, or furnish information concerning the
Company and its business, properties or assets to, any third party which makes
a Takeover Proposal (as hereinafter defined) if the Board of Directors of the
Company determines, in its good faith judgment, based on the opinion of
independent outside legal counsel to the Company, that failing to take such
action would constitute a breach of such Board's duties under applicable law;
provided further, that the foregoing shall not prevent the Company or the
Board from taking, and disclosing to the Company's stockholders, a position
contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange Act with
regard to any tender offer or from making such disclosure to the Company's
stockholders which, as advised in an opinion of the Company's independent
outside legal counsel, is required under applicable law; provided further,
that the Board shall not recommend that the stockholders of the Company tender
their shares in connection with any such tender offer unless the Board
determines, in its good faith judgment, based on the opinion of independent
outside legal counsel to the Company, that failing to take such action would
constitute a breach of the Board's duties under applicable law. The Company
will promptly notify Parent of any Takeover Proposal, including the material
terms and conditions thereof and the identity of the person or group making
such Takeover Proposal, and will promptly notify Parent of any determination
by the Company's Board of Directors that a Superior Proposal has been made.
For purposes of the Merger Agreement, (i) "Takeover Proposal" shall mean any
proposal or offer, other than a proposal or offer by Parent or any of its
subsidiaries for a tender or exchange offer, a merger, consolidation or other
business combination involving the Company or any of its subsidiaries and (ii)
"Superior Proposal" shall mean a bona fide proposal or offer made by a third
party to acquire the Company pursuant to a tender or exchange offer, a merger,
consolidation or other business combination or a sale of all or substantially
all of the assets of the Company and its subsidiaries on terms which a
majority of the members of the Board of Directors of the Company determines in
their good faith reasonable judgment to be more favorable to the Company's
stockholders than the transactions contemplated by the Merger Agreement and
for which any required financing is committed or which a majority of such
members, having received the advice of an independent financial advisor,
determines in their good faith judgment is reasonably capable of being
financed by such third party.
Options. Prior to the commencement of the Offer, the Company has agreed to
adopt procedures pursuant to which each outstanding stock option of the
Company, stock appreciation right, limited stock appreciation right and other
stock based award may be exercised for a cash payment in an amount equal to
the product of (i) the number of Shares subject or related to such option,
right or award and (ii) the excess of the Offer Price over the exercise or
purchase price per Share subject or related to such option, right or award
(such payment to be net of applicable withholding taxes).
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Restricted Stock. Prior to the commencement of the Offer, the Company has
agreed to cause the restrictions on restricted Shares granted under the
Company's compensation plans and arrangements to lapse effective upon the
consummation of the Offer and to adopt procedures to enable all holders
thereof to tender such Shares pursuant to the terms of the Offer.
Indemnification. From and after the Effective Time, Parent agrees to cause
the Surviving Corporation to exculpate, indemnify and hold harmless all past
and present officers and directors of the Company and its subsidiaries to the
same extent such persons are currently exculpated and indemnified by the
Company pursuant to the Company's Charter and By-Laws for acts or omissions
occurring at or prior to the Effective Time. Parent will cause the Surviving
Corporation to provide, for an aggregate period of not less than six years
from the Effective Time, the Company's current directors and officers an
insurance and indemnification policy that provides coverage for events
occurring prior to the Effective Time (the "D&O Insurance") that is no less
favorable than the Company's existing policy or, if substantially equivalent
insurance coverage is unavailable, the best available coverage; provided,
however, that the Surviving Corporation shall not be required to pay an annual
premium for the D&O Insurance in excess of 175% of the last annual premium
paid prior to the date hereof, but in such case shall purchase as much
coverage as possible for such amount.
Employee Benefits. The Parent has agreed that it will cause the Company, and
each subsidiary of the Company, to honor from and after the Effective Time,
the employee benefits plans of the Company and its subsidiaries ("Company
Plans"); provided, however, that Parent may cause the Company to amend or
terminate any such plan in accordance with its terms and applicable law. To
the extent that after consummation of the Offer Parent shall cause the
amendment, modification or termination of any Company Plan, Parent shall cause
the affected employees, former employees and retirees to receive benefits of
the type affected by such amendment, modification or termination no less
favorable than the comparable type of benefits provided to similarly situated
employees, former employees and retirees of Parent or its affiliates ("Parent-
Provided Plans").
For purposes of eligibility to participate, vesting and eligibility for and
accrual of benefits under the Company Plans and Parent-Provided Plans, all
service of any individual who is an employee of the Company or a subsidiary of
the Company immediately prior to the Effective Time (a "Company Employee")
with the Company and/or any subsidiaries of the Company prior to the Effective
Time shall, after the Effective Time, be treated as service with the Company,
all subsidiaries of the Company, the Parent and/or subsidiaries of the Parent
(as applicable); provided, however, that with respect to a Company Employee's
service prior to the Effective Time the Parent shall not be required to
provide any benefit under any defined benefit pension plan to such Company
Employee in an amount greater than the benefit such Company Employee has
accrued as of the Effective Time, except that in determining the amount of
such accrued benefit, compensation paid to such Company Employee on or after
the Effective Time shall be counted to the extent that the compensation of
such Company Employee after the Effective Time remains a factor used in
determining such accrued benefit under such plan. The Company, the
subsidiaries of the Company, the Parent and the subsidiaries of the Parent
have agreed to cause all Company Plans and Parent-Provided Plans to (x) waive
any pre-existing condition limitations otherwise applicable on and after the
Effective Time to employees of the Company who are not subject to pre-existing
condition limitations immediately prior to the Effective Time, and (y) provide
that any expenses incurred by employees of the Company (and their dependents)
during any plan year within which the Effective Time occurs shall be taken
into account for purposes of satisfying applicable deductible, coinsurance and
maximum out-of-pocket provisions under the Company Plans and Parent-Provided
Plans.
At the Effective Time, the employment of Frank G. Zarb with the Surviving
Corporation will be terminated without cause.
Board Representation. The Merger Agreement provides that promptly after such
time as Offeror acquires Shares pursuant to the Offer, Offeror shall be
entitled to designate at its option up to that number of directors, rounded to
the nearest whole number, of the Company's Board of Directors, subject to
compliance with Section 14(f) of the Exchange Act, as will make the percentage
of the Company's directors designated by Offeror equal to the aggregate voting
power of the Shares (assuming the exercise of all options to purchase, and the
conversion
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or exchange of all securities convertible or exchangeable into, shares of the
Company Common Capital Stock, other than the conversion of the shares of Class
B Preferred Stock); provided, however, that in the event that Offeror's
designees are elected to the Board of Directors of the Company, until the
Effective Time, such Board of Directors shall have at least three directors
who are directors on the date of the Merger Agreement and who are not officers
of the Company (the "Independent Directors"); and provided, further, that in
such event, if the number of Independent Directors shall be reduced below
three for any reason whatsoever, the remaining Independent Directors shall
designate a person to fill such vacancy who shall be deemed to be an
Independent Director for purposes of the Merger Agreement or, if no
Independent Directors then remain, the other directors shall designate three
persons to fill such vacancies who shall not be officers or affiliates of the
Company or any of its subsidiaries, or officers or affiliates of Parent or any
of its subsidiaries, and such persons shall be deemed to be Independent
Directors for purposes of the Merger Agreement. Subject to applicable law, the
Company has agreed to take all action requested by Parent which is reasonably
necessary to effect any such election, including mailing to its stockholders
the information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. In connection with the foregoing, the Company will
promptly, at the option of Parent, either increase the size of the Company's
Board of Directors and/or obtain the resignation of such number of its current
directors as is necessary to enable Offeror's designees to be elected or
appointed to the Company's Board of Directors as provided above.
Conditions Precedent. The respective obligations of each party to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time
of the following conditions: (a) if required by applicable law, the
stockholders of the Company shall have approved the Merger; provided, however,
that Parent and Offeror shall vote all of their shares of capital stock of the
Company entitled to vote thereon in favor of the Merger, (b) no statute, rule,
regulation, executive order, decree, temporary restraining order, preliminary
or permanent injunction or other order issued by any court of competent
jurisdiction or other governmental entity preventing the consummation of the
Merger shall be in effect; provided, however, that each of the parties shall
have used its reasonable best efforts to prevent the entry of any such
temporary restraining order, injunction or other order and to appeal as
promptly as possible any injunction or other order that may be entered, (c)
Offeror shall have previously accepted for payment and paid for Shares
pursuant to the Offer; provided, however, that this condition will be deemed
satisfied with respect to the obligations of Parent or Offeror if Offeror
fails to accept for payment and pay for any Shares pursuant to the Offer in
violation of the terms of the Merger Agreement and (d) any waiting period (and
any extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), applicable to the Merger shall have
expired or been terminated.
Termination. The Merger Agreement provides that it may be terminated at any
time prior to the Effective Time, whether before or after the approval of the
stockholders of the Company: (a) by mutual written consent of Parent and the
Company; (b) by either Parent or the Company: (i) if (x) as a result of the
failure of any of the conditions to the Offer as set forth in this Offer to
Purchase (see Section 15), the Offer shall have terminated or expired in
accordance with its terms without the Offeror having accepted for payment any
Shares pursuant to the Offer or (y) all of the conditions to the Offer set
forth in this Offer to Purchase have not been satisfied prior to April 1,
1997; provided, however, that the right to terminate the Merger Agreement
pursuant to this clause (b)(i) shall not be available to any party whose
failure to perform any of its obligations under the Merger Agreement results
in the failure of any such condition to the Offer or if the failure of such
condition to the Offer results from facts or circumstances that constitute a
breach of representation or warranty under the Merger Agreement by such party;
or (ii) if any governmental entity shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the transactions contemplated by the Merger Agreement
and such order, decree or ruling or other action shall have become final and
nonappealable; provided, however, that Parent shall, if necessary to prevent
any such issuance or the taking of such action, offer to accept an order to
divest such of the Company's or Parent's assets and businesses as may be
necessary to forestall such injunction or order and to hold separate such
assets and business pending such divestiture, but only if the amount of such
assets and businesses is not material to the assets or profitability of the
Company and its subsidiaries taken as a whole or Parent and its subsidiaries
taken as a whole, respectively; (c) by Parent or Offeror prior to the purchase
of Shares pursuant to the Offer in the event of a breach by the Company of any
representation, warranty, covenant or other agreement contained in the Merger
Agreement which (i) would give rise to the
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failure of condition (d) or (e) described below in Section 15 and (ii) cannot
be or has not been cured within 20 days after the giving of written notice to
the Company; (d) by Parent or Offeror if either Parent or Offeror is entitled
to terminate the Offer as a result of the occurrence of any event set forth in
paragraph (c) described below in Section 15; (e) by either Parent or the
Company if the Board of Directors of the Company reasonably determines that a
Takeover Proposal constitutes a Superior Proposal and the Board of Directors
of the Company determines, in its good faith judgment, based on the opinion of
the independent outside legal counsel to the Company, that failing to
terminate the Merger Agreement would constitute a breach of such Board's
duties under applicable law; provided, however, that the Company may not
terminate the Merger Agreement pursuant to this clause (e) unless and until 48
hours have elapsed following delivery to Parent of a written notice of such
determination by the Board of Directors of the Company; provided, further,
that the Company may not terminate the Merger Agreement pursuant to this
clause (e) unless simultaneously with such termination the Company pays to
Parent the Termination Fee (as defined below); and provided, further, that any
termination by Parent pursuant to this clause (e) shall in no way constitute
an admission that the Company complied with the provisions of the Merger
Agreement, or prejudice any claim by Parent that the Company did not comply
with the provisions of the Merger Agreement; (f) by the Company, if (i) any of
the representations or warranties of Parent or Offeror set forth in the Merger
Agreement that are qualified as to materiality shall not be true and correct
in any respect or any such representations or warranties that are not so
qualified shall not be true and correct in any material respect, or (ii)
Parent or Offeror shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or covenant
of Parent or Offeror to be performed or complied with by it under the Merger
Agreement and, in the case of (i) or (ii), such untruth or incorrectness or
failure cannot be or has not been cured within 20 days after the giving of
written notice to Parent or Offeror, as applicable; or (g) by the Company, (i)
if the Offer has not been timely commenced or (ii) Offeror shall not have
accepted for payment any Shares pursuant to the Offer prior to April 1, 1997.
In the event of a termination of the Merger Agreement by either the Company or
Parent, the Merger Agreement shall forthwith become void and there shall be no
liability or obligation on the part of Parent, Offeror or the Company or their
respective officers or directors, except for the provisions pertaining to the
payment of certain expenses and fees and except for certain confidentiality
obligations of the parties.
Fees and Expenses. Except as provided in the Merger Agreement, whether or
not the Merger is consummated, all costs and expenses incurred by a party to
the Merger Agreement in connection with the Merger Agreement and the
transactions contemplated thereby, including, without limitation, the fees and
disbursements of counsel, financial advisors and accountants, shall be paid by
the party incurring such costs and expenses, provided that all printing
expenses and filing fees shall be divided equally between Parent and the
Company.
The Company has agreed in the Merger Agreement that it will pay, or cause to
be paid, in same day funds to Parent $35 million (the "Termination Fee") upon
demand if: (i) Parent or Offeror terminates the Merger Agreement under clause
(d) set forth above under "Termination" following the occurrence of any event
set forth in clause (i) or (ii) of paragraph (c) described below in Section 15
and within six months following such termination a Third Party Acquisition
Event occurs; (ii) the Company terminates the Merger Agreement pursuant to
clause (e) set forth above under "Termination"; or (iii) if the Merger
Agreement is terminated and prior thereto a Third Party Acquisition Event (as
defined herein) occurred.
The Parent has agreed in the Merger Agreement that it will pay, or cause to
be paid, in same day funds to the Company $35 million (the "Parent Minimum
Damages") upon demand if the Company shall have terminated the Merger
Agreement pursuant to clause (f) set forth above under "Termination",
including, without limitation, based upon a breach by Parent or Offeror of its
obligation to use its reasonable best efforts to cause the purchase of Shares
pursuant to the Offer and the consummation of the Merger to occur as soon as
practicable; provided, however, that the Parent Minimum Damages shall be
repaid to Parent if, within six months following such termination, a Third
Party Acquisition Event shall occur having a value per share of Common Stock
of not less than the Offer Price.
For purposes of the Merger Agreement, a "Third Party Acquisition Event"
means any of the following events: (A) any person, other than Parent or its
subsidiaries, acquires or becomes the beneficial owner of 30% or
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more of the outstanding shares of the Company Common Capital Stock; (B) any
new group is formed which, at the time of formation, beneficially owns 30% or
more of the outstanding shares of the Company Common Capital Stock (other than
a group which includes or may reasonably be deemed to include Parent or any of
its subsidiaries); (C) the Company enters into an agreement, including,
without limitation, an agreement in principle, providing for a merger or other
business combination involving the Company or the acquisition of a substantial
interest in, or a substantial portion of the assets, business or operations
of, the Company and its subsidiaries (other than the transactions contemplated
by this Agreement); or (D) any person (other than Parent or its subsidiaries)
is granted any option or right, conditional or otherwise, to acquire or
otherwise become the beneficial owner of shares of the Company Common Capital
Stock that results or would result in such person being the beneficial owner
of 30% or more of the outstanding shares of the Company Common Capital Stock.
Stock Purchase and Sale Agreement
Pursuant to the Stock Purchase and Sale Agreement, and subject to the terms
and conditions thereof, the Parent agreed to buy and AIG agreed to sell for
$317.5 million all shares of Series B Preferred Stock owned by AIG or its
subsidiaries. The Stock Purchase and Sale Agreement provides that the sale of
the Series B Preferred Stock will close on the date which is two business days
after Parent or any affiliate of the Parent first acquires any equity interest
in the Company or any right or security convertible or exercisable into any
such interest.
Pursuant to the terms of the Stock Purchase and Sale Agreement, Parent
agreed that it will not waive or modify its rights under the Merger Agreement
that requires the Company to pay dividends on the Series B Preferred Stock in
cash after December 15, 1996. The Stock Purchase and Sale Agreement provides
that all the rights and preferences of the Series B Preferred Stock shall
remain in full force and effect until the Closing; provided, however, that AIG
agrees to suspend voluntarily its rights under certain sections of the
Articles Supplementary and its right to require the Company to repurchase any
of the Series B Preferred Stock pursuant to the Articles Supplementary related
thereto, in each case until the earlier of the closing or termination of the
Stock Purchase and Sale Agreement. AIG has agreed that it will not transfer,
assign, sell, pledge or otherwise dispose of any of the Series B Preferred
Stock to any third party, other than as contemplated in the Stock Purchase and
Sale Agreement, until the earlier of the closing or the termination of the
Stock Purchase and Sale Agreement.
14. DIVIDENDS AND DISTRIBUTIONS.
The Merger Agreement provides that neither the Company nor any of its
subsidiaries will, among other things, from the date of the Merger Agreement
until the time as Parent's designees shall constitute a majority of the Board
of Directors of the Company (a) (x) declare, set aside or pay any dividends
on, or make any other actual, constructive or deemed distributions in respect
of, any of its capital stock, or otherwise make any payments to its
stockholders in their capacity as such (other than regular quarterly dividends
of not more than $.90625 per share on the Series A Convertible Preferred Stock
and of not more than $.025 per share on the Shares, a regular quarterly
payment-in-kind dividend in respect of the Series B Preferred Stock on
December 15, 1996 and thereafter cash dividends of not more than $1.00 per
share on the Series B Preferred Stock, in each case declared and paid on dates
consistent with past practice), (y) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock or
(z) except as required under existing employee benefit plans, agreements,
policies, awards or arrangements in effect on the date of the Merger
Agreement, or pursuant to the Company's Employee Stock Option Exchange Program
communicated to participants on November 26, 1996, purchase, redeem or
otherwise acquire any shares of its capital stock or those of any subsidiary
or any other securities thereof or any rights, warrants or options to acquire
any such shares or other securities; or (b) except as required under existing
employee benefit plans, agreements, policies, awards or arrangements in effect
on the date of the Merger Agreement, or pursuant to the Company's Employee
Stock Option Exchange Program communicated to participants on November 26,
1996, issue, deliver, sell, pledge, dispose of or otherwise encumber any
shares of its capital stock, any other voting securities or equity equivalent
or any securities convertible into, or any rights,
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warrants or options to acquire, any such shares, voting securities, equity
equivalent or convertible securities (other than the issuance of Shares upon
the exercise of stock options of the Company outstanding on the date of the
Merger Agreement in accordance with their current terms, the issuance of
Shares upon the retraction, redemption or conversion of RSC Shares, or shares
of Class C Common Stock, Series A Convertible Preferred Stock or Series B
Preferred Stock, in each case in accordance with the terms thereof, and the
issuance on December 15, 1996 of shares of Series B Preferred Stock as a
regular quarterly payment-in-kind dividend in accordance with the terms
thereof).
15. CERTAIN CONDITIONS TO THE OFFEROR'S OBLIGATIONS.
Notwithstanding any other term of the Offer or the Merger Agreement, Offeror
shall not be required to accept for payment or, subject to any applicable
rules and regulations of the Commission, including Rule 14e-l(c) under the
Exchange Act (relating to Offeror's obligation to pay for or return tendered
Shares after the termination or withdrawal of the Offer), to pay for any
Shares tendered pursuant to the Offer unless (i) there shall have been validly
tendered and not withdrawn prior to the expiration of the Offer such number of
Shares that would constitute a majority of the combined voting power of the
shares of the Company Common Capital Stock (assuming the exercise of all
options to purchase, and the conversion or exchange of all securities
convertible or exchangeable into, shares of the Company Common Stock
outstanding at the Expiration Date of the Offer, other than the conversion of
the shares of the Series B Preferred Stock), (ii) any waiting period under the
HSR Act or the Competition Act (Canada) applicable to the purchase of Shares
pursuant to the Offer shall have expired or been terminated and (iii) the
approvals of the Department of Insurance of the States of Delaware, New York
and Vermont, shall have been received with respect to the acquisition of
control (or the disclaimer thereof) resulting from the transactions
contemplated by the Merger Agreement of the insurance-underwriting
subsidiaries of the Company organized under the laws of Delaware and New York,
respectively. Furthermore, notwithstanding any other term of the Offer or the
Merger Agreement, Offeror shall not be required to accept for payment or,
subject as aforesaid, to pay for any Shares not theretofore accepted for
payment or paid for, and may terminate the Offer if, at any time on or after
the date of the Merger Agreement and before the acceptance of such Shares for
payment or the payment therefor, any of the following conditions exists (other
than as a result of any action or inaction of Parent or any of its
subsidiaries that constitutes a breach of the Merger Agreement):
(a) there shall be instituted by any governmental entity any suit, action
or proceeding (i) making illegal or prohibiting the acquisition by Parent
or Offeror of any Shares under the Offer, making illegal or prohibiting the
making or consummation of the Offer or the Merger or the performance of any
of the other transactions contemplated by the Merger Agreement, or seeking
to obtain from the Company, Parent or Offeror any damages that are material
in relation to the Company and its subsidiaries taken as a whole, (ii)
prohibiting or materially limiting the ownership or operation by the
Company, Parent or any of their respective subsidiaries of any material
business or assets of the Company and its subsidiaries, or Parent and its
subsidiaries, or compelling the Company or Parent to dispose of or hold
separate any material business or assets of the Company and its
subsidiaries, or Parent and its subsidiaries, as a result of the Offer, the
Merger or any of the other transactions contemplated by the Merger
Agreement, (iii) imposing material limitations on the ability of Parent or
Offeror to acquire or hold, or exercise full rights of ownership of, any
Shares to be accepted for payment pursuant to the Offer, including, without
limitation, the right to vote such Shares on all matters properly presented
to the stockholders of the Company, or (iv) prohibiting Parent or any of
its subsidiaries from effectively controlling any business or operations of
the Company or its subsidiaries, provided, however, that Parent shall, if
necessary to prevent any such consequence, offer to accept an order to
divest such of the Company's or Parent's assets and businesses as may be
necessary to prevent such consequence and to hold separate such assets and
businesses pending such divestiture, but only if the amount of such assets
and businesses is not material to the assets or profitability of the
Company and its subsidiaries taken as a whole or Parent and its
subsidiaries taken as a whole, as the case may be;
(b) there shall be enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger by any governmental entity, any
statute, rule, regulation, judgment, order or injunction, other than the
application to the Offer or the Merger of applicable waiting periods under
the HSR Act or the
25
<PAGE>
Competition Act (Canada), that would reasonably be expected to result,
directly or indirectly, in any of the consequences referred to in clauses
(i) through (iv) of paragraph (a) above;
(c) (i) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent or Offeror
its approval or recommendation of the Offer, the Merger or the Merger
Agreement, or approved or recommended any Takeover Proposal or (ii) the
Board of Directors of the Company or any committee thereof shall have
resolved to take any of the foregoing actions (it being understood that the
taking and disclosing to the Company's stockholders of a position
contemplated by Rule 14d-9(e) promulgated under the Exchange Act shall not
constitute an event referred to in clause (i) or (ii));
(d) any of the representations and warranties of the Company set forth in
the Merger Agreement that are qualified as to materiality shall not be true
and correct in any respect or any such representations and warranties that
are not so qualified shall not be true and correct in any material respect,
in each case as if such representations and warranties were made as of such
time;
(e) the Company shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Merger Agreement;
(f) there shall have occurred and continued to exist for not less than
three business days (i) any general suspension of trading in, or limitation
on prices for, securities on a national securities exchange in the United
States (excluding any coordinated trading halt triggered solely as a result
of a specified decrease in a market index) or (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States; or
(g) the Merger Agreement shall have been terminated in accordance with
its terms.
The foregoing conditions are for the sole benefit of Parent and Offeror and
may, subject to the terms of the Merger Agreement, be waived by Parent and
Offeror in whole or in part at any time and from time to time in their sole
discretion. The failure by Parent or Offeror at any time to exercise any of
the foregoing rights will not be deemed a waiver of any such right, the waiver
of any such right with respect to particular facts and circumstances will not
be deemed a waiver with respect to any other facts and circumstances and each
such right will be deemed an ongoing right that may be asserted at any time
and from time to time.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered Shares not theretofore accepted for payment shall forthwith be
returned by the Depositary to the tendering stockholders.
16. CERTAIN LEGAL MATTERS.
Except as set forth in this Section, the Offeror is not aware of any
approval or other action by any governmental or administrative agency which
would be required for the acquisition or ownership of Shares by the Offeror as
contemplated herein. Should any such approval or other action be required, it
will be sought, but the Offeror has no current intention to delay the purchase
of Shares tendered pursuant to the Offer pending the outcome of any such
matter, subject, however, to the Offeror's right to decline to purchase Shares
if any of the conditions specified in Section 15 shall have occurred. There
can be no assurance that any such approval or other action, if needed, would
be obtained or would be obtained without substantial conditions, or that
adverse consequences might not result to the Company's business or that
certain parts of the Company's business might not have to be disposed of if
any such approvals were not obtained or other action taken.
U. S. Antitrust. Under the provisions of the HSR Act applicable to the
Offer, the acquisition of Shares under the Offer may be consummated following
the expiration of a 15-day waiting period following the filing by the Parent
of a Premerger Notification and Report Form with respect to the Offer, unless
the Parent receives a request for additional information or documentary
material from the Department of Justice, Antitrust Division (the "Antitrust
Division") or the Federal Trade Commission ("FTC") or unless early termination
of the waiting period is granted. The Parent made such a filing on December
13, 1996 and, accordingly, the initial waiting
26
<PAGE>
period will expire on December 28, 1996. If, within the initial 15-day waiting
period, either the Antitrust Division or the FTC request additional
information or documentary material concerning the Offer, the waiting period
will be extended through the tenth day after the date of substantial
compliance by all parties receiving such requests. Complying with a request
for additional information or documentary material can take a significant
amount of time.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Offeror's proposed acquisition
of the Company. At any time before or after the Offeror's acquisition of
Shares pursuant to the Offer, the Antitrust Division or the FTC could take
such action under the antitrust laws as either deems necessary or desirable in
the public interest, including seeking to enjoin the purchase of Shares
pursuant to the Offer or the consummation of the Merger, or seeking the
divestiture of Shares acquired by the Offeror or the divestiture of
substantial assets of the Company or its subsidiaries or the Parent or its
subsidiaries. Private parties may also bring legal action under the antitrust
laws under certain circumstances. There can be no assurance that a challenge
to the Offer or to the consummation of the Merger on antitrust grounds will
not be made, or, if such a challenge is made, of the result thereof.
If any applicable waiting period under the HSR Act has not expired or been
terminated prior to the Expiration Date, the Offeror will not be obligated to
proceed with the Offer or the purchase of any Shares not theretofore purchased
pursuant to the Offer. See Section 15.
Canadian Antitrust. Certain provisions of the Competition Act (Canada)
require pre-merger notification to the Director of Investigation and Research
(the "Canadian Director") of significant transactions, which may include the
acquisition of a large percentage of the stock of a public company which has
Canadian operations, or a merger or amalgamation involving such an entity.
Pre-merger notification is generally required with respect to transactions in
which the parties to the transaction and their affiliates have assets in
Canada, or annual gross revenues from sales in, from or into Canada, in excess
of Cdn. $400 million and which involve the direct or indirect acquisition of
an operating business in Canada of which the value of the Canadian assets, or
the annual gross revenues from sales in or from Canada generated from such
assets, exceed Cdn. $35 million. In the case of an acquisition of shares of a
public company, the transaction must also result in the acquiror holding
voting shares which carry more than 20% of the outstanding votes (or more than
50% if the acquiror already holds 20% or more) attached to all the voting
shares of the public company. If a transaction is subject to the pre-merger
notification requirements, notice must be given either seven days ("Short-Form
Filing") or 21 days ("Long-Form Filing"), at the option of the notifier, prior
to the completion of the transaction. The Canadian Director may waive the
waiting period, or during the seven-day period require submission of the Long-
Form Filing and observance of the 21-day waiting period. The 21-day waiting
period cannot be extended. After the applicable waiting period expires or is
waived, the transaction may be completed.
The Canadian Director may apply to the Competition Tribunal, a specialized
tribunal empowered to deal with certain matters governed by the Competition
Act with respect to a "merger" (as defined in the Competition Act) and, if the
Competition Tribunal finds that the merger prevents or lessens or is likely to
prevent or lessen competition substantially, it may order that the merger not
proceed or, in the event that the merger has been completed, order its
dissolution or the disposition of some or all the assets or shares involved. A
merger may be subjected to an order of the Competition Tribunal whether or not
it is a notifiable transaction and whether or not any applicable waiting
period has expired.
The Offeror intends to file any required notice with respect to the Offer
and the Merger with the Canadian Director and, to the extent necessary,
observe any applicable waiting period.
German Antitrust. The merger is subject to German antitrust law, which
requires the pre-closing approval of any merger or acquisition, where (i) one
party has consolidated worldwide net sales in its most recent financial year
exceeding DM 2 billion or each of at least two parties to such a transaction
has consolidated worldwide net sales exceeding DM 1 billion, and (ii) such
transaction has effects in Germany. Accordingly, a pre-closing notification
must be filed with the German Federal Cartel Office in connection with the
Merger. The German
27
<PAGE>
Federal Cartel Office has an initial one-month review period in which it may
either (i) approve the Merger, or (ii) initiate an investigation to examine
the consequences of the Merger, which investigation cannot last more than a
total of four months from the date of the original notification unless the
parties to the transaction have agreed to an extension of that period. The
German Federal Cartel Office can prohibit the Merger even after expiration of
the four-month period if the transaction is being completed before either the
expiration of the initial one-month period without an earlier clearance notice
from the Federal Cartel Office or, if an investigation of the Merger has been
initiated, after the expiration of the four-month period. The Merger will not
be effective under German law if a notice of prohibition is issued by the
German Federal Cartel Office within the requisite waiting period or until (i)
the one-month waiting period has expired and no additional investigation has
been initiated, (ii) the four-month waiting period has expired or (iii)
clearance notice from the German Federal Cartel Office is received. Breach of
the relevant legislation or closing the transaction without clearance or
before the expiration of the relevant waiting periods may constitute an
administrative offense and subject the Offeror and the Company to fines. On
December 16, 1996, Parent filed a notification with the German Federal Cartel
Office in connection with the Merger. Accordingly, the initial one-month
review period will expire on January 17, 1997, unless the German Federal
Cartel Office commences an investigation of the Merger or approves the Merger
prior thereto.
Maryland State Takeover Laws. Subtitle 6 of Title 3 of the Maryland GCL (the
"Maryland Business Combination Law") prohibits certain "business combinations"
(including certain mergers, consolidations, share exchanges, sales or
dispositions of assets, issuances of stock, liquidations, reclassifications
and benefits from the corporation, including loans or guarantees) between a
Maryland corporation and any interested shareholder (defined generally as any
person who, directly or indirectly, beneficially owns 10 percent or more of
the outstanding voting power of the stock of the corporation or an affiliate
of the corporation that, at any time within the two-year period prior to the
date in question, was the beneficial owner of ten percent or more of the
voting power of the corporation's outstanding voting stock) for five years
after the most recent date on which the interested shareholder became an
interested shareholder. After such five-year period, any such business
combination must be approved by two supermajority shareholder votes, unless,
among other conditions, the corporation's common stockholders receive a
minimum price (as calculated in the Maryland GCL) for their shares in cash or
in the same form as previously paid by the interested shareholder for its
shares. These provisions of the Maryland GCL do not apply to a business
combination with an interested shareholder that is approved or exempted from
the supermajority vote requirements by the board of directors of the
corporation prior to the date on which the interested shareholder became such.
The Company's Board of Directors has approved the Offer, the Merger and the
Stock Purchase and Sale Agreement. Accordingly, the Maryland Business
Combination Law is inapplicable to the Offer and the Merger.
Subtitle 7 of Title 3 of the Maryland GCL (the "Maryland Control Share Act")
generally prohibits an acquiring person from voting control shares (as
described below) of a Maryland corporation acquired pursuant to a control
share acquisition (as described below), unless voting rights for such shares
shall have been approved by the shareholders of the corporation by the
affirmative vote of two-thirds of all votes entitled to be cast (other than
interested shares, as described below) or unless the shares are acquired
pursuant to a merger agreement with the corporation or the corporation's
charter or by-laws contain a provision, adopted prior to the acquisition,
permitting the acquisition of such shares. "Control shares" generally mean
shares of a corporation acquired by a person within any of the following
ranges of voting power: (i) one-fifth or more, but less than one-third of all
voting power; (ii) one-third or more, but less than a majority of all voting
power; or (iii) a majority or more of all voting power. "Control share
acquisition" generally means the acquisition of, ownership of, or the power to
direct the exercise of voting power with respect to, control shares, but does
not include the acquisition of shares in a merger, consolidation or share
exchange to which the corporation is a party. "Interested shares" generally
mean shares of a corporation in respect of which an acquiring person, an
officer of the corporation or an employee of the corporation who is also a
director of the corporation is entitled to exercise voting power in the
election of directors. The Company's By-laws exempt any acquisition of shares
of stock of the Company from the Maryland Control Share Act.
Other State Takeover Laws. A number of other states have adopted laws and
regulations applicable to attempts to acquire securities of corporations which
are incorporated, or have substantial assets, stockholders,
28
<PAGE>
principal executive offices or principal places of business, or whose business
operations otherwise have substantial economic effects in such states. In Edgar
v. MITE Corp., in 1982, the Supreme Court of the United States (the "U.S.
Supreme Court") invalidated on constitutional grounds the Illinois Business
Takeover statute, which, as a matter of state securities law, made takeovers of
corporations meeting certain requirements more difficult. However in 1987, in
CTS Corp. v. Dynamics Corp. of America, the U.S. Supreme Court held that the
State of Indiana may, as a matter of corporate law and, in particular, with
respect to those aspects of corporate law concerning corporate governance,
constitutionally disqualify a potential acquirer from voting on the affairs of
a target corporation without the prior approval of the remaining stockholders.
The state law before the U.S. Supreme Court was by its terms applicable only to
corporations that had a substantial number of stockholders in the state and
were incorporated there.
The Company, directly or through subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted takeover
laws. The Offeror does not know whether any of these laws will, by their terms,
apply to the Offer or the Merger and has not complied with any such laws.
Should any person seek to apply any state takeover law, the Offeror will take
such action as then appears desirable, which may include challenging the
validity or applicability of any such statute in appropriate court proceedings.
In the event it is asserted that one or more state takeover laws is applicable
to the Offer or the Merger, and an appropriate court does not determine that it
is inapplicable or invalid as applied to the Offer, the Offeror might be
required to file certain information with, or receive approvals from, the
relevant state authorities. In addition, if enjoined, the Offeror might be
unable to accept for payment any Shares tendered pursuant to the Offer, or be
delayed in continuing or consummating the Offer and the Merger. In such case,
the Offeror may not be obligated to accept for payment any Shares tendered. See
Section 15.
State Insurance Approvals. The Company currently owns domestic insurers
organized under the laws of New York, Delaware and Vermont. The Insurance
Holding Company System Act of those states requires the Parent to file
information with the insurance commissioner in order to obtain approval of the
acquisition of control of a domestic insurer. The Insurance Codes of those
states include a presumption of control arising from the ownership, directly or
indirectly, of 10% or more of the insurer's voting securities. Applications for
acquisition of control (Form A) have been filed by Parent in New York, Delaware
and Vermont. In these states, public hearings are discretionary and there are
no periods within which such decisions must be rendered, although hearings are
not anticipated with respect to the Parent's filings.
If the Parent is unable to receive or is delayed in receiving the approval of
any Insurance Department, the Offeror might be unable to accept for payment or
pay for Shares tendered pursuant to the Offer, or be delayed in continuing or
purchasing Shares pursuant to the Offer. In such case, the Offeror may not be
obligated to accept for payment or pay for Shares. See "Section 15--Certain
Conditions to the Offeror's Obligations."
17. FEES AND EXPENSES.
Neither the Offeror nor the Parent, nor any officer, director, stockholder,
agent or other representative of the Offeror or the Parent, will pay any fees
or commissions to any broker, dealer or other person (other than the Dealer
Manager, the Information Agent and the Depositary) for soliciting tenders of
Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust
companies and other nominees will, upon request, be reimbursed by the Offeror
for customary mailing and handling expenses incurred by them in forwarding
materials to their customers.
Lazard Freres & Co. LLC ("Lazard Freres") is acting as Dealer Manager in
connection with the Offer and has provided certain financial advisory services
to the Parent and the Offeror in connection with the proposed acquisition of
the Shares. Parent paid Lazard Freres a fee of $1,250,000 upon commencement of
the Offer and has agreed to pay Lazard Freres an additional fee of $3,750,000
upon the earlier of the acquisition by Parent of beneficial ownership of more
than 50% of the Shares or the consummation of the Offer or the Merger. In
addition, Parent has agreed to reimburse Lazard Freres for its out-of-pocket
expenses related to its engagement, including the fees and expenses of its
counsel, and has agreed to indemnify Lazard Freres against certain liabilities
and expenses, including under the federal securities laws.
29
<PAGE>
The Offeror has retained Georgeson & Company Inc., as Information Agent, and
First Chicago Trust Company of New York, as Depositary, in connection with the
Offer. The Information Agent and the Depositary will receive reasonable and
customary compensation for their services hereunder and reimbursement for
their reasonable out-of-pocket expenses. The Information Agent and the
Depositary will also be indemnified by the Offeror against certain liabilities
in connection with the Offer. The Information Agent may contact holders of
Shares by mail, telex, telegraph and personal interviews and may request
brokers, dealers and other nominee stockholders to forward materials relating
to the Offer to beneficial owners of Shares.
18. MISCELLANEOUS.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares residing in any jurisdiction in which the making
or acceptance thereof would not be in compliance with the securities, blue sky
or other laws of such jurisdiction. In any jurisdiction where the securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of the Offeror by the
Dealer Manager or one or more registered brokers or dealers licensed under the
laws of such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of the Offeror other than as contained in this Offer
to Purchase or in the Letter of Transmittal and, if any such information or
representation is given or made, it should not be relied upon as having been
authorized by the Offeror or the Parent.
The Offeror and the Parent have filed with the Commission the Schedule 14D-
1, pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-3 promulgated
thereunder, furnishing certain information with respect to the Offer. Such
Schedule 14D-1 and any amendments thereto, including exhibits, may be examined
and copies may be obtained at the same places and in the same manner as set
forth with respect to the Company in Section 8 (except that they will not be
available at the regional offices of the Commission).
Subsidiary Corporation, Inc.
December 16, 1996
30
<PAGE>
ANNEX I
CERTAIN INFORMATION CONCERNING THE DIRECTORS
AND EXECUTIVE OFFICERS OF THE PARENT AND THE OFFEROR
1. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARENT. Set forth below are the
name, current business address, citizenship, present principal occupation or
employment and five-year employment history of each director and executive
officer of the Parent. Years of service as a director of Parent may include
service with Combined Insurance Company of America ("Combined Insurance"), a
subsidiary of Parent, or Ryan Insurance Group, Inc. ("Ryan Group"), which
merged with Parent in 1982. Unless otherwise indicated, each such person's
business address is 123 N. Wacker Drive, Chicago, Illinois 60606. Except as
indicated below, all persons listed below are citizens of the United States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
MATERIAL
NAME AND BUSINESS ADDRESS POSITIONS HELD DURING PAST FIVE YEARS
------------------------- ----------------------------------------------
<S> <C>
Patrick G. Ryan.............. Mr. Ryan has been Chairman of the Board of Parent
since 1990 and President and Chief Executive
Officer of Parent since the merger of Parent and
Ryan Group in 1982. Prior to the merger, Mr. Ryan
served as Chairman of the Board and Chief
Executive Officer of Ryan Group. Mr. Ryan is a
director of First Chicago NBD Corporation,
Chairman of the Board of Trustees of Northwestern
University and a Trustee of Rush-Presbyterian-St.
Luke's Medical Center.
Michael A. Conway............ Mr. Conway has served as Senior Vice President and
Senior Investment Officer of Parent since 1991.
Mr. Conway was Vice President of Combined
Insurance from 1980 to 1984. Following other
employment, Mr. Conway rejoined Parent in 1990 as
Senior Vice President of Combined Insurance. He
also serves as a director or officer of certain of
Parent's subsidiaries.
Daniel T. Cox................ Mr. Cox has served as Executive Vice President of
Parent since 1991 and has headed Parent's benefits
consulting operation since 1987. He also serves as
a director or officer of certain of Parent's
subsidiaries.
Harvey N. Medvin............. Mr. Medvin became Vice President and Chief
Financial Officer of Parent in 1982 and was
elected Executive Vice President, Chief Financial
Officer and Treasurer of Parent in 1987. He also
serves as a director or officer of certain of
Parent's subsidiaries.
Raymond I. Skilling.......... Mr. Skilling is an attorney at law and a Solicitor
of the English Supreme Court. Mr. Skilling has
served as a director of Parent since 1977. He
serves as Executive Vice President and Chief
Counsel of Parent. He has been employed by the
Company since 1976, prior to which he was a
partner in the international law firm now called
Clifford Chance, headquartered in London, England.
Mr. Skilling has been a legal advisor to Parent
since 1967. Mr. Skilling is a citizen of the
United Kingdom.
Daniel T. Carroll............ Mr. Carroll has served as a director of Parent
The Carroll Group, Inc. since 1980. Mr. Carroll is Chairman and President
2355 W. Station Blvd. of The Carroll Group, Inc. From early 1980 until
Suite 2-2 early 1982, he was President and Chief Executive
Ann Arbor, Michigan 48103 Officer and a director of Hoover Universal, Inc.
From 1975 until early 1980, he was President of
Gould Inc. He
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
MATERIAL
NAME AND BUSINESS ADDRESS POSITIONS HELD DURING PAST FIVE YEARS
------------------------- ----------------------------------------------
<S> <C>
is a director of A. M. Castle Co.; American
Woodmark Corporation; Comshare, Inc.; DeSoto,
Inc.; Diebold, Inc.; Oshkosh Truck Corporation;
Wolverine World Wide, Inc.; and Woodhead
Industries, Inc.
Franklin A. Cole............ Mr. Cole has served as a director of Parent since
Croesus Corporation 1984. Mr. Cole, since 1984, has been Chairman of
11 S. LaSalle St. Croesus Corporation, a personal investment
Suite 2710 company. From 1971 to 1984, he was Chairman and
Chicago, Illinois 60603 Chief Executive Officer of Walter E. Heller
International Corporation (renamed Amerifin
Corporation in January 1984), a worldwide
diversified financial services company. Mr. Cole
is also a director of American National
Corporation and its subsidiary, American National
Bank and Trust Company of Chicago; CNA Income
Shares, Inc.; Duff & Phelps Utilities Income Inc.;
GATX Corporation; Local Initiatives Support
Corporation; and Peoples Energy Corporation. He is
Vice Chairman of the Board of Trustees of
Northwestern University and Chairman of The
Chicago Human Relations Foundation.
Edgar D. Jannotta........... Mr. Jannotta has served as a director of Parent
William Blair & Company, since 1995. On January 2, 1996, William Blair &
L.L.C. Company, L.L.C. converted from a partnership at
222 W. Adams St. which time Mr. Jannotta was named Senior
33rd Floor Principal. Prior to this conversion, Mr. Jannotta
Chicago, Illinois 60606 joined William Blair & Company in May 1959 as an
Associate, became a Partner in January 1965,
Assistant Managing Partner in June 1973, Managing
Partner in September 1977, and Senior Partner in
January 1995. He is a director of AAR Corp.;
Bandag Incorporated; Commonwealth Edison Company;
Molex Incorporated; New York Stock Exchange, Inc.;
Oil-Dri Corporation of America; and Safety-Kleen
Corp.
Perry J. Lewis.............. Mr. Lewis has served as a director of Parent since
Morgan Lewis Githens & Ahn, 1972. Mr. Lewis is a Managing Director of Morgan
Inc. Lewis Githens & Ahn, Inc., a New York investment
Two Greenwich Plaza banking firm. Until October 1, 1979, Mr. Lewis was
Greenwich, Connecticut Senior Vice President and a director of Smith
06830 Barney, Harris Upham & Co., Inc. He is a director
of Haynes International, Inc.; Quaker Fabric
Corporation; Tyler Corporation; ITI Technologies,
Inc.; Evergreen Media Corporation; and Stuart
Entertainment, Inc.
Joan D. Manley.............. Mrs. Manley has served as a director of Parent
P.O. Box 1353 since 1984. From 1960 to 1984, Mrs. Manley was
Dillon, Colorado 80435 with Time Incorporated, serving as a Group Vice-
President from 1975 to 1984 and as a director from
1978 to 1984. She is also a director of Big Flower
Press Holdings, Inc.; Sara Lee Corporation;
Scholastic, Inc.; and Viking Office Products, Inc.
She sits on the boards of the Keystone Center and
The Summit Foundation.
Andrew J. McKenna........... Mr. McKenna has served as a director of Parent
Schwarz Paper Company since 1970. He is Chairman, President and Chief
8338 N. Austin Ave. Executive Officer of Schwarz Paper Company, a
Morton Grove, Illinois printer, converter, producer and distributor of
60653 packaging and promotional materials; and a
director of Dean Foods Company; The First National
Bank of Chicago; McDonald's Corporation; Skyline
Corporation; and
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
MATERIAL
NAME AND BUSINESS ADDRESS POSITIONS HELD DURING PAST FIVE YEARS
------------------------- ----------------------------------------------
<S> <C>
Tribune Company. He is Chairman of the Board of
Trustees of the University of Notre Dame and
Chairman of the Board of Trustees of the Museum of
Science and Industry. Mr. McKenna is also a
director of Children's Memorial Hospital and the
Lyric Opera.
Newton N. Minow............. Mr. Minow is Counsel to the Chicago law firm of
Sidley & Austin Sidley & Austin where he served as Partner from
One First National Plaza 1965 to 1991. He served as Chairman of the Federal
Suite 4800 Communications Commission from 1961 to 1963. He is
Chicago, Illinois 60603 a director of True North Communications, Inc.;
Manpower, Inc.; Sara Lee Corporation; and Big
Flower Press Holdings, Inc. Mr. Minow is also
Chairman of the Carnegie Corporation of New York,
a Trustee and former Chairman of the Board of
Trustees of The RAND Corporation, and former
Chairman of the Board of Governors of the Public
Broadcasting Service. He is a Life Trustee of
Northwestern University and a Life Trustee of the
University of Notre Dame.
Peer Pedersen............... Mr. Pedersen has served as a director of Parent
Pedersen & Houpt, P.C. since 1974. Mr. Pedersen is an attorney at law and
161 N. Clark St. is Chairman and Managing Partner of the Chicago
Suite 3100 law firm of Pedersen & Houpt, P.C. He is a
Chicago, Illinois 60601 director of Boston Chicken, Inc.; Chr. Hansen's
Laboratory, Inc.; Extended Stay America, Inc.; H2O
Plus, Inc.; Latin America Gross Fund, Inc.;
Spraying Systems Co.; Tempel Steel Company; Tennis
Corporation of America; WMX Technologies, Inc.;
Western Cities Broadcasting, Inc.; and the Western
Golf Association. He also serves on the Boards of
Children's Memorial Hospital; St. Joseph
Carondelet Child Care; Rehabilitation Institute of
Chicago; and the Boys and Girls Clubs of Chicago
and is President of the Robert R. McCormick Boys
and Girls Club of Chicago.
Donald S. Perkins........... Mr. Perkins has served as a director of Parent
One First National Plaza since 1983. Mr. Perkins retired from Jewel
21 S. Clark St. Companies Inc. in 1983. He had been with Jewel
Suite 2530 since 1953, serving as President from 1965 to
Chicago, Illinois 60603 1970, as Chairman of the Board of Directors from
1970 to 1980, and as Chairman of the Executive
Committee until his retirement. He is a director
of Lucent Technologies; Cummins Engine Company,
Inc.; Current Assets; Illinova Corporation; Inland
Steel Industries, Inc.; LaSalle Street Fund, Inc.;
The Putnam Funds; Springs Industries, Inc.; and
Time Warner, Inc. He is Vice Chairman of the Board
of Trustees of Northwestern University.
John W. Rogers, Jr.......... Mr. Rogers has served as a director of Parent
Ariel Capital Management, since 1993. Mr. Rogers is President and founder of
Inc. Ariel Capital Management, Inc., an institutional
307 N. Michigan Ave. money management firm. Mr. Rogers is a director of
Suite 500 American National Bank and Trust Company of
Chicago, Illinois 60601 Chicago; Burrell Communications, Inc.; and
Morrison Knudsen Corporation. In addition to
serving as President of the Board of the Chicago
Park District, Mr. Rogers serves as a director of
the Chicago Urban League, The Chicago Symphony
Orchestra and is a Trustee of Rush-Presbyterian-
St. Luke's Medical Center.
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
MATERIAL
NAME AND BUSINESS ADDRESS POSITIONS HELD DURING PAST FIVE YEARS
------------------------- ----------------------------------------------
<S> <C>
George A. Schaefer.......... Mr. Schaefer has served as a director of Parent
Caterpillar Inc. since 1991. Mr. Schaefer served as Chairman and
100 N.E. Adams St. Chief Executive Officer of Caterpillar Inc. from
Peoria, Illinois 61629 1985 until his retirement in July 1990. Mr.
Schaefer is a director of Caterpillar Inc.;
Helmerich & Payne, Inc.; McDonnell Douglas
Corporation; and Morton International, Inc. He is
a member of The Business Council.
Fred L. Turner.............. Mr. Turner has served as a director of Parent
McDonald's Corporation since 1991. Mr. Turner is Senior Chairman,
Kroc Drive Chairman of the Executive Committee and a director
Oak Brook, Illinois 60521 of McDonald's Corporation. Mr. Turner joined
McDonald's Corporation in 1956 and assumed his
current position in 1990, after serving that
company as Chairman of the Board and Chief
Executive Officer. Mr. Turner is also a director
of Baxter International, Inc.; W.W. Grainger,
Inc.; and Ronald McDonald Children's Charities.
Arnold R. Weber............. Dr. Weber has served as a director of Parent since
Civic Committee of the 1991. Dr. Weber served as President of
Commercial Northwestern University from 1985 until 1994. On
Club of Chicago January 1, 1995, he became Chancellor of
One First National Plaza Northwestern University. From 1980 to 1985, Dr.
Suite 3115 Weber was President of the University of Colorado.
Chicago, Illinois 60603 Dr. Weber has also held various senior government
positions including Executive Director of the Cost
of Living Council and Associate Director of the
Office of Management and Budget. He is a director
of Burlington Northern Santa Fe Corporation;
Inland Steel Industries, Inc.; PepsiCo, Inc.;
Deere & Company; and Tribune Company.
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE OFFEROR. Unless otherwise
indicated, for each person identified below all information concerning the
current business address, present principal occupation or employment and five-
year employment history for such person is the same as the information given
above. Each person was elected in December 1996. Except for Mr. Skilling, who
is a citizen of the United Kingdom, all persons listed below are citizens of
the United States.
<TABLE>
<S> <C>
DIRECTORS
P.G. Ryan
H.N. Medvin
R.I. Skilling
EXECUTIVE OFFICERS
P.G. Ryan, President
H.N. Medvin, Treasurer
R.I. Skilling, Vice President and Secretary
</TABLE>
A-4
<PAGE>
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal and certificates for Shares and any other required documents
should be sent or delivered by each stockholder of the Company or his broker,
dealer, commercial bank, trust company or other nominee to the Depositary at
one of the addresses set forth below:
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Hand: By Overnight Courier:
Tenders & Exchanges
First Chicago Trust Company of New York
Tenders & Exchanges
P.O. Box 2569--Suite Tenders & Exchanges 14 Wall Street
4660-ALEX c/o The Depository Trust 8th Floor--Suite 4680-
Jersey City, New Jersey Company ALEX
07303-2569 55 Water Street, DTC TAD New York, New York
Vietnam Veterans Memorial 10005
Plaza
New York, New York 10041
Facsimile for Eligible Institutions:
(201) 222-4720
or
(201) 222-4721
Confirm by Telephone:
(201) 222-4707
Any questions or requests for assistance or additional copies of the Offer
to Purchase and the Letter of Transmittal and Notice of Guaranteed Delivery
may be directed to the Information Agent or the Dealer Manager at their
respective telephone numbers and locations listed below. Stockholders may also
contact their broker, dealer, commercial bank, trust company or other nominee
for assistance concerning the Offer.
The Information Agent for the Offer is:
LOGO
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
Banks and Brokers call collect (212) 440-9800
All others call Toll Free: 1-800-223-2064
The Dealer Manager for the Offer is:
LAZARD FRERES & CO. LLC
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
(212) 632-6717 (Call collect)
<PAGE>
[ALTERNATE COVER PAGE FOR HOLDERS OF SHARES RESIDING IN CANADA.]
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ALEXANDER & ALEXANDER SERVICES INC.
AT
$17.50 NET PER SHARE
BY
SUBSIDIARY CORPORATION, INC.
A WHOLLY OWNED SUBSIDIARY OF
AON CORPORATION
- -------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, JANUARY 14, 1997, UNLESS THE OFFER IS EXTENDED.
- -------------------------------------------------------------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED BY THE EXPIRATION DATE AND NOT WITHDRAWN THAT NUMBER OF SHARES OF
COMMON STOCK, PAR VALUE $1.00 PER SHARE, INCLUDING THE ASSOCIATED PREFERRED
STOCK PURCHASE RIGHTS ("SHARES"), OF ALEXANDER & ALEXANDER SERVICES INC. (THE
"COMPANY") REPRESENTING AT LEAST A MAJORITY OF THE COMBINED VOTING POWER OF
THE SHARES, THE CLASS A COMMON STOCK (AS DEFINED BELOW), AND THE CLASS C
COMMON STOCK (AS DEFINED BELOW), (ASSUMING THE EXERCISE OF ALL OPTIONS TO
PURCHASE, AND THE CONVERSION OR EXCHANGE OF ALL SECURITIES CONVERTIBLE OR
EXCHANGEABLE INTO, SHARES OUTSTANDING AT THE EXPIRATION DATE OF THE OFFER,
OTHER THAN THE CONVERSION OF THE SERIES B PREFERRED STOCK (AS DEFINED BELOW)),
(ii) RECEIPT BY THE OFFEROR (AS DEFINED HEREIN) OF CERTAIN GOVERNMENTAL
APPROVALS AND (iii) SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE
SECTION 15.
NO OFFER IS BEING MADE TO PURCHASE THE COMPANY'S CLASS A COMMON STOCK, PAR
VALUE $.00001 PER SHARE ("CLASS A COMMON STOCK"), CLASS C COMMON STOCK, PAR
VALUE $1.00 PER SHARE ("CLASS C COMMON STOCK"), $3.625 SERIES A CONVERTIBLE
PREFERRED STOCK, PAR VALUE $1.00 PER SHARE ("SERIES A PREFERRED STOCK"), OR 8%
SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK, PAR VALUE $1.00 PER SHARE
("SERIES B PREFERRED STOCK") OR THE CLASS 1 SPECIAL SHARES (THE "RSC SHARES")
OF REED STENHOUSE COMPANIES LIMITED, A SUBSIDIARY OF THE COMPANY ORGANIZED
UNDER THE LAWS OF CANADA, RELATED TO THE CLASS A COMMON STOCK, OR THE DIVIDEND
SHARES (THE "DIVIDEND SHARES") OF ALEXANDER & ALEXANDER SERVICES UK PLC, A
SUBSIDIARY OF THE COMPANY ORGANIZED UNDER THE LAWS OF SCOTLAND, RELATED TO THE
CLASS C COMMON STOCK. TO PARTICIPATE IN THE OFFER, HOLDERS OF THE RSC SHARES
MUST REQUEST RETRACTION OF THE RSC SHARES FOR SHARES AND THEN TENDER THE
SHARES RECEIVED UPON RETRACTION PURSUANT TO THE OFFER. TO PARTICIPATE IN THE
OFFER, HOLDERS OF CLASS C COMMON STOCK MUST REQUEST THE CONVERSION OF THE
CLASS C COMMON STOCK INTO SHARES AND THEN TENDER THE SHARES RECEIVED UPON
CONVERSION PURSUANT TO THE OFFER. SEE INTRODUCTION.
THE OFFER IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF MERGER,
DATED AS OF DECEMBER 11, 1996, AMONG AON CORPORATION, SUBSIDIARY CORPORATION,
INC. AND THE COMPANY. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY
APPROVED THE OFFER, THE MERGER AND THE MERGER AGREEMENT, HAS DETERMINED THAT
THE TERMS OF EACH OF THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST
INTERESTS OF THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT HOLDERS OF THE
SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES IN THE OFFER.
---------------
IMPORTANT
Any stockholder desiring to tender Shares should either (i) complete and
sign the Letter of Transmittal or a facsimile thereof in accordance with the
instructions in the Letter of Transmittal and deliver the Letter of
Transmittal with the Shares and all other required documents to the
Depositary, or follow the procedure for book-entry transfer set forth in
Section 3 or (ii) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for the stockholder.
Stockholders having Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such person if
they desire to tender their Shares.
Any stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
with the procedures for book-entry transfer on a timely basis, may tender such
Shares pursuant to the guaranteed delivery procedure set forth in Section 3.
Questions and requests for assistance or additional copies of this Offer to
Purchase and the Letter of Transmittal may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase.
---------------
The Dealer Manager for the Offer is:
LAZARD FRERES & CO. LLC
December 16, 1996
<PAGE>
This bid is made in Canada for securities of a U.S. issuer in accordance
with U.S. securities laws. Security holders should be aware that the U.S.
requirements applicable to the bid may differ from those of the various
provinces and territories of Canada.
All of the directors and officers of the Offeror and all of the experts
named herein reside outside of Canada. All of the assets of these persons and
of the Offeror may be located outside of Canada. The Offeror has appointed
Blake, Cassels & Graydon, Attention: Alan Brown, Box 25, Commerce Court West,
Toronto, Canada M5L 1A9, as its agent for service of process in Canada, but it
may not be possible for security holders to effect service of process within
Canada upon the directors, officers and experts referred to above. It may also
not be possible to enforce against the Offeror, its directors and officers and
the experts named herein judgments obtained in Canadian courts predicated upon
the civil liability provisions of applicable securities laws in Canada.
<PAGE>
[ALTERNATE PAGE 29 FOR HOLDERS OF SHARES RESIDING IN CANADA.]
The Offeror and the Parent have filed with the Commission the Schedule 14D-
1, pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-3 promulgated
thereunder, furnishing certain information with respect to the Offer. Such
Schedule 14D-1 and any amendments thereto, including exhibits, may be examined
and copies may be obtained at the same places and in the same manner as set
forth with respect to the Company in Section 8 (except that they will not be
available at the regional offices of the Commission).
Subsidiary Corporation, Inc.
December 16, 1996
Securities legislation in certain of the provinces and territories of Canada
provides security holders of the offeree issuer with, in addition to any other
rights they may have at law, rights of rescission or to damages, or both, if
there is a misrepresentation in a circular or notice that is required to be
delivered to such security holders. However, such rights must be exercised
within the prescribed time limits. Security holders should refer to the
applicable provisions of the securities legislation of their province or
territory for particulars of those rights or consult with a lawyer. Rights and
remedies also may be available to security holders under U.S. law; security
holders may wish to consult with a U.S. lawyer for particulars of these
rights.
CERTIFICATE
The foregoing contains no untrue statement of a material fact and does not
omit to state a material fact that is required to be stated or that is
necessary to make a statement not misleading in the light of the circumstances
in which it was made.
Patrick G. Ryan Harvey N. Medvin
President Chief Financial Officer
of the Offeror by his of the Offeror by his
duly authorized agent, [ ] duly authorized agent, [ ]
(Signed) (Signed)
On behalf of the Board of Directors
[ ] [ ]
Director Director
of the Offeror by his of the Offeror by his
duly authorized agent, duly authorized agent,
[ ] [ ]
(Signed) (Signed)
- -------------------------------
-------------------------------
29
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
ALEXANDER & ALEXANDER SERVICES INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED DECEMBER 16, 1996
BY
SUBSIDIARY CORPORATION, INC.
A WHOLLY OWNED SUBSIDIARY OF
AON CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME,
ON TUESDAY, JANUARY 14, 1997, UNLESS THE OFFER IS EXTENDED.
The Depositary:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Hand: By Overnight Courier:
Tenders & Exchanges First Chicago Trust Company Tenders & Exchanges
P.O. Box 2569--Suite of New York 14 Wall Street
4660-ALEX Tenders & Exchanges 8th Floor--Suite 4680-
Jersey City, New Jersey c/o The Depository Trust ALEX
07303-2569 Company New York, New York 10005
55 Water Street, DTC TAD
Vietnam Veterans Memorial
Plaza
New York, New York 10041
---------------
NO OFFER IS BEING MADE TO PURCHASE THE COMPANY'S CLASS A COMMON STOCK, PAR
VALUE $.00001 PER SHARE ("CLASS A COMMON STOCK"), CLASS C COMMON STOCK, PAR
VALUE $1.00 PER SHARE ("CLASS C COMMON STOCK"), $3.625 SERIES A CONVERTIBLE
PREFERRED STOCK, PAR VALUE $1.00 PER SHARE, OR 8% SERIES B CUMULATIVE
CONVERTIBLE PREFERRED STOCK, PAR VALUE $1.00 PER SHARE, OR THE CLASS 1 SPECIAL
SHARES (THE "RSC SHARES") OF REED STENHOUSE COMPANIES LIMITED, A SUBSIDIARY OF
THE COMPANY ORGANIZED UNDER THE LAWS OF CANADA, RELATED TO THE CLASS A COMMON
STOCK, OR THE DIVIDEND SHARES (THE "DIVIDEND SHARES") OF ALEXANDER & ALEXANDER
SERVICES UK PLC, A SUBSIDIARY OF THE COMPANY ORGANIZED UNDER THE LAWS OF
SCOTLAND, RELATED TO THE CLASS C COMMON STOCK. TO PARTICIPATE IN THE OFFER,
HOLDERS OF THE RSC SHARES MUST REQUEST RETRACTION OF THE RSC SHARES FOR SHARES
AND THEN TENDER THE SHARES RECEIVED UPON RETRACTION PURSUANT TO THE OFFER. TO
PARTICIPATE IN THE OFFER, HOLDERS OF CLASS C COMMON STOCK MUST REQUEST THE
CONVERSION OF THE CLASS C COMMON STOCK INTO SHARES AND THEN TENDER THE SHARES
RECEIVED UPON CONVERSION PURSUANT TO THE OFFER.
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF
TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED BELOW AND COMPLETE THE
SUBSTITUTE FORM W-9 SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders of Alexander &
Alexander Services Inc. if certificates are to be forwarded herewith or,
unless an Agent's Message (as defined in the Offer to Purchase) is utilized,
if delivery of Shares (as defined below) is to be made by book-entry transfer
to the Depositary's account at The Depository Trust Company or the
Philadelphia Depository Trust Company (hereinafter collectively referred to as
the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in
Section 3 of the Offer to Purchase. Delivery of documents to a Book-Entry
Transfer Facility does not constitute delivery to the Depositary.
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver their Shares and all other documents required hereby to the
Depositary by the Expiration Date (as defined in the Offer to Purchase), or
who cannot comply with the book-entry transfer procedures on a timely basis,
may nevertheless tender their Shares pursuant to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase. See Instruction 2.
<PAGE>
- -------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- -------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED SHARES TENDERED
HOLDER(S) (ATTACH ADDITIONAL LIST, IF NECESSARY)
(PLEASE FILL IN, IF BLANK)
- -------------------------------------------------------------------------------
NUMBER OF
SHARE SHARES NUMBER OF
CERTIFICATE REPRESENTED SHARES
NUMBER(S)* BY TENDERED**
CERTIFICATE(S)*
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Shares
- -------------------------------------------------------------------------------
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares
represented by any certificates delivered to the Depositary are being
tendered. See Instruction 4.
- -------------------------------------------------------------------------------
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
[_]
CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution _______________________________________________
Account No. ______________________________________________________________ at
[_] The Depository Trust Company
[_] Philadelphia Depository Trust Company
Transaction Code No. ________________________________________________________
[_]
CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Tendering Stockholder(s) _________________________________________
Date of Execution of Notice of Guaranteed Delivery __________________________
Window Ticket Number (if any) _______________________________________________
Name of Institution which Guaranteed Delivery _______________________________
If delivery is by book-entry transfer _______________________________________
Name of Tendering Institution _______________________________________________
Account No. ______________________________________________________________ at
[_] The Depository Trust Company
[_] Philadelphia Depository Trust Company
Transaction Code No. ________________________________________________________
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Subsidiary Corporation, Inc. (the
"Offeror"), a Maryland corporation and a wholly owned subsidiary of Aon
Corporation, a Delaware corporation (the "Parent"), the above-described shares
of Common Stock, par value $1.00 per share, of Alexander & Alexander Services
Inc., a Maryland corporation (the "Company"), including the associated
preferred stock purchase rights issued pursuant to the 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 (collectively, the "Shares"), pursuant to the Offeror's offer to
purchase all of the outstanding Shares at a purchase price of $17.50 per
Share, net to the seller in cash, without interest, upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated December 16, 1996
(the "Offer to Purchase"), receipt of which is hereby acknowledged, and in
this Letter of Transmittal (which together with the Offer to Purchase
constitute the "Offer"). The Offer is being made in connection with the
Agreement and Plan of Merger, dated as of December 11, 1996 (the "Merger
Agreement"), among the Parent, the Offeror and the Company.
Subject to and effective upon acceptance for payment of and payment for the
Shares tendered herewith, the undersigned hereby sells, assigns and transfers
to or upon the order of the Offeror all right, title and interest in and to
all the Shares that are being tendered hereby (and any and all other Shares or
other securities issued or issuable in respect thereof on or after December
11, 1996) and appoints the Depositary the true and lawful agent and attorney-
in-fact of the undersigned with respect to such Shares (and all such other
Shares or securities), with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest), to (a)
deliver certificates for such Shares (and all such other Shares or
securities), or transfer ownership of such Shares (and all such other Shares
or securities) on the account books maintained by any of the Book-Entry
Transfer Facilities, together, in any such case, with all accompanying
evidences of transfer and authenticity, to or upon the order of the Offeror,
(b) present such Shares (and all such other Shares or securities) for transfer
on the books of the Company and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of such Shares (and all such other
Shares or securities), all in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints each designee of the Offerer as
the attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to exercise all voting and other rights of the undersigned in
such manner as each such attorney and proxy or his substitute shall in his
sole judgment deem proper, with respect to all of the Shares tendered hereby
which have been accepted for payment by the Offeror prior to the time of any
vote or other action (and any and all other Shares or other securities or
rights issued or issuable in respect of such Shares on or after December 11,
1996) at any meeting of stockholders of the Company (whether annual or special
and whether or not an adjourned meeting) or otherwise. This proxy is
irrevocable, shall be coupled with an interest, and is granted in
consideration of, and is effective upon, the acceptance for payment of such
Shares by the Offeror in accordance with the terms of the Offer. Such
acceptance for payment shall revoke any other proxy or written consent granted
by the undersigned at any time with respect to such Shares (and all such other
Shares or other securities or rights), and no subsequent proxies will be given
or written consents will be executed by the undersigned (and if given or
executed, will not be deemed effective).
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any and all other Shares or other securities or rights issued or
issuable in respect of such Shares on or after December 11, 1996) and that
when the same are accepted for payment by the Offeror, the Offeror will
acquire good and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claims.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Depositary or the Offeror to be necessary or desirable
to complete the sale, assignment and transfer of the Shares tendered hereby
(and all such other Shares or other securities or rights).
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Except as stated in the Offer, this
tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute an agreement between the undersigned and
the Offeror upon the terms and subject to the conditions of the Offer.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the purchase price of any Shares purchased, and return any
Shares not tendered or not purchased, in the name(s) of the undersigned.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price of any Shares purchased and
return any certificates for Shares not tendered or not purchased (and
accompanying documents, as appropriate) to the undersigned at the address
shown below the undersigned's signature(s). In the event that both "Special
Payment Instructions" and "Special Delivery Instructions" are completed,
please issue the check for the purchase price of any Shares purchased and
return any Shares not tendered or not purchased in the name(s) of, and mail
said check and any certificates to, the person(s) so indicated. The
undersigned recognizes that the Offeror has no obligation, pursuant to the
"Special Payment Instructions," to transfer any Shares from the name of the
registered holder(s) thereof if the Offeror does not accept for payment any of
the Shares so tendered.
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check To be completed ONLY if the check
for the purchase price of Shares for the purchase price of Shares
purchased or certificates for purchased or certificates for
Shares not tendered or not Shares not tendered or not
purchased are to be issued in the purchased are to be mailed to
name of someone other than the someone other than the undersigned
undersigned. or to the undersigned at an address
other than that shown below the
undersigned's signature(s).
Issue check and/or certificate(s)
to:
Name _______________________________
Mail check and/or certificate(s)
to:
(Please Print)
------------------------------------ Name _______________________________
Address ____________________________ (Please Print)
------------------------------------
------------------------------------
Address ____________________________
(Zip Code)
------------------------------------ ------------------------------------
(Zip Code)
(Taxpayer Identification No.)
(See Substitute Form W-9)
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. Except as otherwise provided below, signatures
on all Letters of Transmittal must be guaranteed by a firm that is a bank,
broker, dealer, credit union, savings association or other entity which is a
member in good standing of the Securities Transfer Agents Medallion Program or
by any other bank, broker, dealer, credit union, savings association or other
entity which is an "eligible guarantor institution," as such term is defined
in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (each of
the foregoing constituting an "Eligible Institution"), unless the Shares
tendered thereby are tendered (i) by a registered holder of Shares who has not
completed either the box labeled "Special Payment Instructions" or the box
labeled "Special Delivery Instructions" on the Letter of Transmittal or (ii)
for the account of an Eligible Institution. See Instruction 5. If the
certificates are registered in the name of a person or persons other than the
signer of this Letter of Transmittal, or if payment is to be made or delivered
to, or certificates evidencing unpurchased Shares are to be issued or returned
to, a person other than the registered owner or owners, then the tendered
certificates must be endorsed or accompanied by duly executed stock powers, in
either case signed exactly as the name or names of the registered owner or
owners appear on the certificates or stock powers, with the signatures on the
certificates or stock powers guaranteed by an Eligible Institution as provided
herein. See Instruction 5.
2. Delivery of Letter of Transmittal and Shares. This Letter of Transmittal
is to be used either if certificates are to be forwarded herewith or, unless
an Agent's Message is utilized, if the delivery of Shares is to be made by
book-entry transfer pursuant to the procedures set forth in Section 3 of the
Offer to Purchase. Certificates for all physically delivered Shares, or a
confirmation of a book-entry transfer into the Depositary's account at one of
the Book-Entry Transfer Facilities of all Shares delivered electronically, as
well as a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof) and any other documents required by this
Letter of Transmittal or an Agent's Message in the case of a book-entry
delivery, must be received by the Depositary at one of its addresses set forth
on the front page of this Letter of Transmittal by the Expiration Date.
Stockholders who cannot deliver their Shares and all other required documents
to the Depositary by the Expiration Date must tender their Shares pursuant to
the guaranteed delivery procedures set forth in Section 3 of the Offer to
Purchase. Pursuant to such procedures: (a) such tender must be made by or
through an Eligible Institution; (b) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form provided by the
Offeror, must be received by the Depositary prior to the Expiration Date; and
(c) the certificates for all tendered Shares, in proper form for transfer (or
a Book-Entry Confirmation), together with a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile thereof), and
any required signature guarantees, or, in the case of a book-entry transfer,
an Agent's Message, and any other documents required by this Letter of
Transmittal must be received by the Depositary within three trading days after
the date of such Notice of Guaranteed Delivery, all as provided in Section 3
of the Offer to Purchase. The term "trading day" is any day on which the New
York Stock Exchange is open for business.
The method of delivery of Shares, the Letter of Transmittal and all other
required documents, including delivery through a Book-Entry Transfer Facility,
is at the option and risk of the tendering stockholder. If delivery is by
mail, registered mail with return receipt requested, properly insured, is
recommended.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. By executing this Letter of Transmittal
(or a manually signed facsimile thereof), the tendering stockholder waives any
right to receive any notice of the acceptance for payment of the Shares.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. Partial Tenders (not applicable to stockholders who tender by book-entry
transfer). If fewer than all the Shares represented by any certificate
delivered to the Depositary are to be tendered, fill in the number of Shares
which are to be tendered in the box entitled "Number of Shares Tendered." In
such case, a new certificate for the remainder of the Shares represented by
the old certificate will be sent to the person(s) signing this Letter of
Transmittal unless otherwise provided in the appropriate box on this Letter of
Transmittal, as promptly as practicable following the expiration or
termination of the Offer. All Shares represented by certificates delivered to
the Depositary will be deemed to have been tendered unless otherwise
indicated.
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written
on the face of the certificates without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are held of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of certificates or separate stock
powers are required unless payment of the purchase price is to be made, or
Shares not tendered
<PAGE>
or not purchased are to be returned, in the name of any person other than the
registered holder(s). Signatures on any such certificates or stock powers must
be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the certificate must be
endorsed or accompanied by, appropriate stock powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear(s) on the
certificates for such Shares. Signature(s) on any such certificates or stock
powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificate or stock power is signed by
a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory
to the Offeror of the authority of such person so to act must be submitted.
6. Stock Transfer Taxes. The Offeror will pay any stock transfer taxes with
respect to the sale and transfer of any Shares to it or its order pursuant to
the Offer. If, however, payment of the purchase price is to be made to, or
Shares not tendered or not purchased are to be returned in the name of, any
person other than the registered holder(s), then the amount of any stock
transfer taxes (whether imposed on the registered holder(s), such other person
or otherwise) payable on account of the transfer to such person will be
deducted from the purchase price unless satisfactory evidence of the payment
of such taxes, or exemption therefrom, is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter of
Transmittal.
7. Special Payment and Delivery Instruction. If the check for the purchase
price of any Shares purchased is to be issued, or any Shares not tendered or
not purchased are to be returned, in the name of a person other than the
person(s) signing this Letter of Transmittal or if the check or any
certificates for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal or to the
person(s) signing this Letter of Transmittal at an address other than that
shown above, the appropriate boxes on this Letter of Transmittal should be
completed. Stockholders tendering Shares by book-entry transfer may request
that Shares not purchased be credited to such account at any of the Book-Entry
Transfer Facilities as such stockholder may designate under "Special Payment
Instructions." If no such instructions are given, any such Shares not
purchased will be returned by crediting the account at the Book-Entry Transfer
Facilities designated above.
8. Substitute Form W-9. The tendering stockholder is required to provide the
Depositary with such stockholder's correct TIN on Substitute Form W-9, which
is provided below, unless an exemption applies. Failure to provide the
information on the Substitute Form W-9 may subject the tendering stockholder
to a $50 penalty and to 31% federal income tax backup withholding on the
payment of the purchase price for the Shares.
9. Foreign Holders. Foreign holders must submit a completed IRS Form W-8 to
avoid 31% backup withholding. IRS Form W-8 may be obtained by contacting the
Depositary at one of the addresses on the face of this Letter of Transmittal.
10. Requests for Assistance or Additional Copies. Requests for assistance or
additional copies of the Offer to Purchase and this Letter of Transmittal may
be obtained from the Information Agent or the Dealer Manager at their
respective addresses or telephone numbers set forth below.
11. Waiver of Conditions. The conditions of the Offer may be waived by
Offeror (subject to certain limitations in the Merger Agreement), in whole or
in part, at any time or from time to time, in Offeror's sole discretion.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE COPY
HEREOF (TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND
ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN
THE OFFER TO PURCHASE).
IMPORTANT TAX INFORMATION
Under federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary with such
stockholder's correct TIN on the Substitute Form W-9. If such stockholder is
an individual, the TIN is such stockholder's social security number. If the
Depositary is not provided with the correct TIN, the stockholder may be
subject to a $50 penalty imposed by the Internal Revenue Service. In addition,
payments that are made to such stockholder with respect to Shares purchased
pursuant to the Offer may be subject to backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Such statements may be
obtained from the Depositary. All exempt recipients (including foreign persons
wishing to qualify as exempt recipients) should see the enclosed Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
<PAGE>
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will
be reduced by the amount of tax withheld. If backup withholding results in an
overpayment of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup federal income tax withholding on payments that are made
to a stockholder with respect to Shares purchased pursuant to the Offer, the
stockholder is required to notify the Depositary of such stockholder's correct
TIN by completing the form certifying that the TIN provided on the Substitute
Form W-9 is correct.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares. If
the Shares are in more than one name or are not in the name of the actual
owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidelines on
which number to report.
<PAGE>
SIGN HERE
(Complete Substitute Form W-9 on reverse)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature(s) of Owner(s)
- --------------------------------------------------------------------------------
Name(s) ________________________________________________________________________
- --------------------------------------------------------------------------------
Capacity (full title) __________________________________________________________
Address ________________________________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
Area Code and Telephone Number _________________________________________________
Taxpayer Identification Number _________________________________________________
Dated: __________________________________________________________________ , 199^
(Must be signed by registered holder(s) exactly as name(s) appear(s) on stock
certificate(s) or on a security position listing or by the person(s) authorized
to become registered holder(s) by certificates and documents transmitted
herewith. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, agent, officer of a corporation or other person acting in a
fiduciary or representative capacity, please set forth full title and see
Instruction 5).
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY, PLACE MEDALLION GUARANTEE IN SPACE
BELOW.
Authorized signature(s) ________________________________________________________
Name ___________________________________________________________________________
Name of Firm ___________________________________________________________________
Address ________________________________________________________________________
- --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number _________________________________________________
Dated: __________________________________________________________________ , 199^
<PAGE>
- -------------------------------------------------------------------------------
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
- -------------------------------------------------------------------------------
PART I--PLEASE PROVIDE TIN: _____________________
YOUR TIN IN THE BOX AT Social Security
THE RIGHT AND CERTIFY
BY SIGNING AND DATING
BELOW.
SUBSTITUTE Number or Employer
Identification Number
---------------------------------------------------------
FORM W-9 PART II--For Payees exempt from backup withholding,
see the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form
W-9 and complete as instructed therein.
---------------------------------------------------------
Certification--Under penalties of perjury, I
certify that:
DEPARTMENT OF THE TREASURY,
(1) The number shown on this form is my correct TIN
(or I am waiting for a number to be issued to
me); and
INTERNAL REVENUE SERVICE
PAYER'S REQUEST FOR TAXPAYER
IDENTIFICATION NUMBER ("TIN")
(2) I am not subject to backup withholding because
(a) I am exempt from backup withholding or (b)
I have not been notified by the Internal
Revenue Service ("IRS") that I am subject to
backup withholding as a result of a failure to
report all interest or dividends, or (c) the
IRS has notified me that I am no longer subject
to backup withholding.
AND CERTIFICATION ---------------------------------------------------------
SIGNATURE: ________________________ DATE: _________
- -------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding, you
received another notification from the IRS that you were no longer subject to
backup withholding, do not cross out item (2). (Also see the instructions in
the enclosed Guidelines.)
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING YOUR TIN.
- -------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a TIN has not been issued to
me, and either (1) I have mailed or delivered an application to receive a
TIN to the appropriate IRS Center or Social Security Administration
Officer or (2) I intend to mail or deliver an application in the near
future. I understand that if I do not provide a TIN by the time of
payment, 31% of all payments pursuant to the Offer made to me thereafter
will be withheld until I provide a number.
Signature: ______________________________________________ Date: __________
- -------------------------------------------------------------------------------
The Information Agent for the Offer is:
[LOGO OF GEORGESON & CO. INC. APPEARS HERE]
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll-Free: (800) 223-2064
The Dealer Manager for the Offer is:
LAZARD FRERES & CO. LLC
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
(212) 632-6717
<PAGE>
EXHIBIT (a)(3)
LAZARD FRERES & CO. LLC
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ALEXANDER & ALEXANDER
SERVICES INC.
AT
$17.50 NET PER SHARE
BY
SUBSIDIARY CORPORATION, INC.
A WHOLLY OWNED SUBSIDIARY OF
AON CORPORATION
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JANUARY 14, 1997,
UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
December 16, 1996
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Subsidiary Corporation, Inc., a Maryland
corporation (the "Offeror") and a wholly owned subsidiary of Aon Corporation,
a Delaware corporation ("Parent"), to act as Dealer Manager in connection with
the Offeror's offer to purchase all outstanding shares of Common Stock, par
value $1.00 per share, of Alexander & Alexander Services Inc., a Maryland
corporation (the "Company"), including the associated preferred stock purchase
rights issued pursuant to the 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
(collectively, the "Shares"), at a purchase price of $17.50 per Share, net to
the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated December 16, 1996 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which together
constitute the "Offer") enclosed herewith. The Offer is being made in
connection with the Agreement and Plan of Merger, dated as of December 11,
1996, among the Parent, the Offeror and the Company (the "Merger Agreement").
Holders of Shares whose certificates for such Shares (the "Certificates") are
not immediately available or who cannot deliver their Certificates and all
other required documents to the Depositary or complete the procedures for
book-entry transfer prior to the Expiration Date (as defined in Section 1 of
the Offer to Purchase) must tender their Shares according to the guaranteed
delivery procedures set forth in Section 3 of the Offer to Purchase.
No offer is being made to purchase the Company's Class A Common Stock, par
value $.00001 per share ("Class A Common Stock"), Class C Common Stock, par
value $1.00 per share ("Class C Common Stock"), $3.625 Series A Convertible
Preferred Stock, par value $1.00 per share, or 8% Series B Cumulative
Convertible Preferred Stock, par value $1.00 per share ("Series B Preferred
Stock"), or the Class 1 Special Shares (the "RSC Shares") of Reed Stenhouse
Companies Limited, a subsidiary of the Company organized under the laws
<PAGE>
of Canada, related to the Class A Common Stock, or the Dividend Shares (the
"Dividend Shares") of Alexander & Alexander Services UK plc, a subsidiary of
the Company organized under the laws of Scotland, related to the Class C
Common Stock. To participate in the Offer, holders of the RSC Shares must
request retraction of the RSC Shares for Shares and then tender the Shares
received upon retraction pursuant to the Offer. To participate in the Offer,
holders of Class C Common Stock must request the conversion of the Class C
Common Stock into Shares and then tender the Shares received upon conversion
pursuant to the Offer.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares in your name or in the name of your nominee.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated December 16, 1996.
2. The Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal
(with manual signatures) may be used to tender Shares.
3. A letter to stockholders of the Company from Frank G. Zarb, the
Chairman, President and Chief Executive Officer of the Company, together
with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with
the Securities and Exchange Commission by the Company and mailed to the
stockholders of the Company.
4. The Notice of Guaranteed Delivery for Shares to be used to accept the
Offer if neither of the two procedures for tendering Shares set forth in
the Offer to Purchase can be completed on a timely basis.
5. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name, with space provided for
obtaining such clients' instructions with regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
7. A return envelope addressed to the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, JANUARY 14, 1997,
UNLESS THE OFFER IS EXTENDED.
Please note the following:
1. The tender price is $17.50 per Share, net to the seller in cash
without interest.
2. The Offer is being made for all of the outstanding Shares.
3. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Tuesday, January 14, 1997, unless the Offer is extended.
4. The Offer is conditioned upon, among other things, there being validly
tendered prior to the expiration of the Offer and not withdrawn a number of
Shares which would constitute at least a majority of the combined voting
power of the Shares, the Class A Common Stock and Class C Common Stock
(assuming the exercise of all options to purchase, and the conversion or
exchange of all securities convertible or exchangeable into, Shares
outstanding at the expiration date of the Offer, other than the conversion
of the Series B Preferred Stock). The Offer is also subject to the other
terms and conditions contained in the Offer to Purchase.
5. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the transfer of Shares pursuant to the
Offer.
In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal (or a manually signed facsimile thereof) and
any required signature guarantees or, in the case of a book-entry
2
<PAGE>
transfer, an Agent's Message (as defined in the Offer to Purchase) or other
required documents should be sent to the Depositary and (ii) Certificates
representing the tendered Shares or a timely Book-Entry Confirmation (as
defined in the Offer to Purchase) should be delivered to the Depositary in
accordance with the instructions set forth in the Offer.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Certificates or other required documents or complete the
procedures for book-entry transfer prior to the Expiration Date, a tender may
be effected by following the guaranteed delivery procedures specified in
Section 3 of the Offer to Purchase.
Neither the Offeror, the Parent nor any officer, director, stockholder,
agent or other representative of the Offeror will pay any fees or commissions
to any broker, dealer or other person (other than the Dealer Manager, the
Depositary and the Information Agent as described in the Offer to Purchase)
for soliciting tenders of Shares pursuant to the Offer. The Offeror will,
however, upon request, reimburse you for customary mailing and handling
expenses incurred by you in forwarding any of the enclosed materials to your
clients. The Offeror will pay or cause to be paid any transfer taxes payable
on the transfer of Shares to it, except as otherwise provided in Instruction 6
of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
Georgeson & Company Inc., the Information Agent for the Offer, at Wall Street
Plaza, New York, New York 10005, (212) 440-9800 or Lazard Freres & Co. LLC,
the Dealer Manager for the Offer, at 30 Rockefeller Plaza, New York, New York
10020, (212) 632-6717.
Requests for copies of the enclosed materials may be directed to the
Information Agent at the above address and telephone number.
Very truly yours,
LAZARD FRERES & CO. LLC
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE PARENT, THE OFFEROR, THE DEPOSITARY, THE
INFORMATION AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THEM, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ALEXANDER & ALEXANDER
SERVICES INC.
AT
$17.50 NET PER SHARE
BY
SUBSIDIARY CORPORATION, INC.
A WHOLLY OWNED SUBSIDIARY OF
AON CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, JANUARY 14, 1997, UNLESS THE OFFER IS EXTENDED.
December 16, 1996
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated December
16, 1996 (the "Offer to Purchase"), and the related Letter of Transmittal
(which together constitute the "Offer"), relating to an offer by Subsidiary
Corporation, Inc., a Maryland corporation (the "Offeror") and a wholly owned
subsidiary of Aon Corporation, a Delaware corporation (the "Parent"), to
purchase all outstanding shares of Common Stock, par value $1.00 per share, of
Alexander & Alexander Services Inc., a Maryland corporation (the "Company"),
including the associated preferred stock purchase rights issued pursuant to
the 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 (collectively, the "Shares"), at a
purchase price of $17.50 per Share, net to the seller in cash, without
interest, upon the terms and subject to the conditions set forth in the Offer.
The Offer is being made in connection with the Agreement and Plan of Merger,
dated as of December 11, 1996, among the Parent, the Offeror and the Company
(the "Merger Agreement"). This material is being forwarded to you as the
beneficial owner of Shares carried by us in your account but not registered in
your name.
No offer is being made to purchase the Company's Class A Common Stock, par
value $.00001 per share ("Class A Common Stock"), Class C Common Stock, par
value $1.00 per share ("Class C Common Stock"), $3.625 Series A Convertible
Preferred Stock, par value $1.00 per share, or 8% Series B Cumulative
Convertible Preferred Stock, par value $1.00 per share ("Series B Preferred
Stock"), or the Class 1 Special Shares (the "RSC Shares") of Reed Stenhouse
Companies Limited, a subsidiary of the Company organized under the laws of
Canada, related to the Class A Common Stock, or the Dividend Shares (the
"Dividend Shares") of Alexander & Alexander Services UK plc, a subsidiary of
the Company organized under the laws of Scotland, related to the Class C
Common Stock. To participate in the Offer, holders of the RSC Shares must
request retraction of the RSC Shares for Shares and then tender the Shares
received upon retraction pursuant to the Offer. To participate in the Offer,
holders of Class C Common Stock must request the conversion of the Class C
Common Stock into Shares and then tender the Shares received upon conversion
pursuant to the Offer.
A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND
PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU
FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY
US FOR YOUR ACCOUNT.
<PAGE>
Accordingly, we request instructions as to whether you wish to tender any or
all of the Shares held by us for your account, upon the terms and conditions
set forth in the Offer.
Please note the following:
1. The tender price is $17.50 per Share, net to you in cash without
interest.
2. The Offer is being made for all of the outstanding Shares.
3. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on January 14, 1997, unless the Offer is extended.
4. The Offer is conditioned upon, among other things, there being validly
tendered prior to the expiration of the Offer and not withdrawn a number of
Shares which would constitute at least a majority of the combined voting
power of the Shares, the Class A Common Stock and Class C Common Stock
(assuming the exercise of all options to purchase, and the conversion or
exchange of all securities convertible or exchangeable into, Shares
outstanding at the expiration date of the Offer, other than the conversion
of the Series B Preferred Stock). The Offer is also subject to the other
terms and conditions contained in the Offer to Purchase.
5. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the transfer of Shares pursuant to the
Offer.
If you wish to have us tender any or all of the Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction
form contained in this letter. An envelope to return your instruction to us is
enclosed. If you authorize tender of your Shares, all such Shares will be
tendered unless otherwise indicated in such instruction form. PLEASE FORWARD
YOUR INSTRUCTIONS TO US AS SOON AS POSSIBLE TO ALLOW US AMPLE TIME TO TENDER
YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and any supplements or amendments thereto. The Offer is not being
made to, nor will tenders be accepted from or on behalf of, holders of Shares
residing in any jurisdiction in which the making of the Offer or acceptance
thereof would not be in compliance with the securities laws of such
jurisdiction. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of the Offeror by Lazard Freres & Co. LLC or by
one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO
THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ALEXANDER & ALEXANDER SERVICES INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated December 16, 1996 (the "Offer to Purchase"), and the related
Letter of Transmittal (which together constitute the "Offer") in connection
with the offer by Subsidiary Corporation, Inc., a Maryland corporation (the
"Offeror") and a wholly owned subsidiary of Aon Corporation, a Delaware
corporation, to purchase all outstanding shares of Common Stock, par value
$1.00 per share, of Alexander & Alexander Services Inc., a Maryland
corporation, including the associated preferred stock purchase rights issued
pursuant to the 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 (collectively,
the "Shares").
This will instruct you to tender to the Offeror the number of Shares
indicated below (or if no number is indicated below, all Shares) which are
held by you for the account of the undersigned, upon the terms and subject to
the conditions set forth in the Offer.
- -----------------------------------------
Number of Shares to be Tendered:*
- -----------------------------------------
SIGN HERE
-------------------------------------
-------------------------------------
Account Number: Signature(s)
-------------------------------------
Date: -------------------------------------
(Print Name(s))
-------------------------------------
-------------------------------------
(Print Address(es))
-------------------------------------
(Area Code and Telephone Number(s))
-------------------------------------
(Taxpayer Identification or
Social Security Number(s))
- --------
*Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
3
<PAGE>
EXHIBIT (a)(5)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
ALEXANDER & ALEXANDER SERVICES INC.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON TUESDAY, JANUARY 14, 1997, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
This form, or one substantially equivalent hereto, must be used to accept
the Offer (as defined below) if certificates for shares of Common Stock, par
value $1.00 per share, of Alexander & Alexander Services Inc., a Maryland
corporation (the "Company"), including the associated preferred stock purchase
rights issued pursuant to the 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
(collectively, the "Shares"), are not immediately available or if the
procedure for book-entry transfer cannot be completed on a timely basis or
time will not permit all required documents to reach the Depositary on or
prior to the Expiration Date (as defined in the Offer to Purchase). Such form
may be delivered by hand, facsimile transmission, or mail to the Depositary.
See Section 3 of the Offer to Purchase, dated December 16, 1996 (the "Offer to
Purchase").
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Hand: By Overnight Courier:
Tenders & Exchanges First Chicago Trust Tenders & Exchanges
P.O. Box 2569--Suite Company of 14 Wall Street
4660-ALEX New York 8th Floor--Suite 4680-
Jersey City, New Jersey Tenders & Exchanges ALEX
07303-2569 c/o The Depository Trust New York, New York 10005
Company
55 Water Street, DTC TAD
Vietnam Veterans Memorial
Plaza
New York, New York 10041
Facsimile for Eligible Institutions only:
(201) 222-4720
or
(201) 222-4721
Confirm by Telephone:
(201) 222-4707
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION OF INSTRUMENTS VIA A FACSIMILE, OTHER THAN AS SET FORTH ABOVE,
DOES NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal or an
Agent's Message and certificates for Shares to the Depositary within the time
period shown herein. Failure to do so could result in a financial loss to such
Eligible Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Subsidiary Corporation, Inc., a Maryland
corporation, upon the terms and subject to the conditions set forth in the
Offer to Purchase, and the related Letter of Transmittal, receipt of which are
hereby acknowledged, Shares of the Company, pursuant to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase.
Number of Shares:____________________
Certificate No(s). (if available): SIGN HERE
- ------------------------------------- Name(s):
- ------------------------------------- -------------------------------------
If Securities will be tendered by -------------------------------------
book-entry transfer:_________________ (Please Print)
Name of Tendering Institution: Address:_____________________________
- ------------------------------------- -------------------------------------
(Zip Code)
Account No.:______________________ at
[_] The Depository Trust Company Area Code and Telephone No.:
[_] Philadelphia Depository Trust Company
-------------------------------------
Signature(s): _______________________
-------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, delver, credit union, savings association
or other entity which is a member in good standing of the Securities Transfer
Agents Medallion Program or a bank, broker, dealer, credit union, savings
association or other entity which is an "eligible guarantor institution," as
such term is defined in Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended, guarantees the delivery to the Depositary of the Shares
tendered hereby, together with a properly completed and duly executed Letter
of Transmittal (or manually signed facsimile(s) thereof) and any other
required documents, or an Agent's Message (as defined in the Offer to
Purchase) in the case of a book-entry delivery of Shares, all within three New
York Stock Exchange trading days of the date hereof.
Name of Firm: _______________________ Title: ______________________________
_____________________________________ Name: _______________________________
(Authorized Signature) (Please Print or Type)
Address: ____________________________ Area Code and Telephone No.: ________
DO NOT SEND CERTIFICATES FOR SHARES WITH THIS FORM--CERTIFICATES SHOULD BE
SENT WITH LETTER OF TRANSMITTAL
Date: _________________________, 199
2
<PAGE>
EXHIBIT (A)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the Payer.
- ----------------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- ----------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first individual on
the account(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint funds,
the first individual on the
account(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult, or if the minor is
account) the only contributor, the
minor(1)
6. Account in the name The ward, minor or
of guardian or committee for incompetent person(3)
a designated ward, minor
or incompetent person
7. a. A revocable savings The grantor-trustee(1)
trust account (in which
grantor is also trustee)
b. Any "trust" account The actual owner(4)
that is not a legal or
valid trust under State law
- ----------------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- ----------------------------------------------------------------
8. Sole proprietorship account The owner(4)
9. A valid trust, estate or The legal entity (Do not
pension trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated in
the account title.)(5)
10. Corporate account The corporation
11. Religious, charitable or The organization
educational organization
account
12. Partnership account held in The partnership
the name of the business
13. Association, club or other The organization
tax-exempt organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a State or
local governmental school
district or prison) that
receives agricultural
program payments
- ----------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Card, or Form SS-
4, Application for Employer Identification Number (for businesses and all
other entities), or Form W-7 for Individual Taxpayer Identification Number
(for alien individuals required to file U.S. tax returns), at an office of the
Social Security Administration or the Internal Revenue Service.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on all payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under Section 403(b)(7).
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any political subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An entity registered at all times during the tax year under the
Investment Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you have
not provided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt payees described above should file a Substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS OR
PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes and to help verify the accuracy of your tax return.
Payers must be given the numbers whether or not recipients are required to
file tax returns. Payers must generally withhold 31% of taxable interest,
dividend and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
EXHIBIT (a)(7)
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell these securities. The Offer is made only by the Offer to Purchase
and the related Letter of Transmittal and is not being made to (nor will tenders
be accepted from) holders of Shares in any jurisdiction in which the Offer or
the acceptance thereof would not be in compliance with the securities laws of
such jurisdiction. In those jurisdictions where securities laws require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be
made on behalf of the Offeror by Lazard Freres & Co. LLC or one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ALEXANDER & ALEXANDER SERVICES INC.
AT $17.50 PER SHARE
BY
SUBSIDIARY CORPORATION, INC.
A WHOLLY OWNED SUBSIDIARY OF
AON CORPORATION
Subsidiary Corporation, Inc., a Maryland corporation (the "Offeror") and a
wholly owned subsidiary of Aon Corporation, a Delaware corporation (the
"Parent"), hereby offers to purchase all of the shares of Common Stock, par
value $1.00 per share, of Alexander & Alexander Services Inc., a Maryland
corporation (the "Company"), including the associated preferred stock purchase
rights issued pursuant to the 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 (collectively,
the "Shares"), for $17.50 per Share, net to the seller in cash without interest,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated December 16, 1996 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which together constitute the "Offer").
- -------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE ON 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, JANUARY 14, 1997, UNLESS THE OFFER IS EXTENDED.
- -------------------------------------------------------------------------------
NO OFFER IS BEING MADE TO PURCHASE THE COMPANY'S CLASS A COMMON STOCK, PAR
VALUE $.00001 PER SHARE ("CLASS A COMMON STOCK"), CLASS C COMMON STOCK, PAR
VALUE $1.00 PER SHARE ("CLASS C COMMON STOCK"), $3.625 SERIES A CONVERTIBLE
PREFERRED STOCK, PAR VALUE $1.00 PER SHARE, OR 8% SERIES B CUMULATIVE
CONVERTIBLE PREFERRED STOCK, PAR VALUE $1.00 PER SHARE ("SERIES B PREFERRED
STOCK"), OR THE CLASS 1 SPECIAL SHARES (THE "RSC SHARES") OF REED STENHOUSE
COMPANIES LIMITED, A SUBSIDIARY OF THE COMPANY ORGANIZED UNDER THE LAWS OF
CANADA, RELATED TO THE CLASS A COMMON STOCK, OR THE DIVIDEND SHARES (THE
"DIVIDEND SHARES") OF ALEXANDER & ALEXANDER SERVICES UK PLC, A SUBSIDIARY OF THE
COMPANY ORGANIZED UNDER THE LAWS OF SCOTLAND, RELATED TO THE CLASS C COMMON
STOCK. TO PARTICIPATE IN THE OFFER, HOLDERS OF THE RSC SHARES MUST REQUEST
RETRACTION OF THE RSC SHARES FOR SHARES AND THEN TENDER THE SHARES RECEIVED UPON
RETRACTION PURSUANT TO THE OFFER. TO PARTICIPATE IN THE OFFER, HOLDERS OF CLASS
C COMMON STOCK MUST REQUEST THE CONVERSION OF THE CLASS C COMMON STOCK INTO
SHARES AND THEN TENDER THE SHARES RECEIVED UPON CONVERSION PURSUANT TO THE
OFFER.
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of December 11, 1996 (the "Merger Agreement") among the Parent, the Offeror
and the Company. The Merger Agreement provides that, among other things, as soon
as practicable after the purchase of Shares pursuant to the Offer and the
satisfaction of the other conditions set forth in the Merger Agreement and in
accordance with relevant provisions of Maryland law, the Offeror will be merged
with and into the Company (the "Merger"). At the effective time of the Merger
(the "Effective Time"), each Share issued and outstanding immediately prior to
the Effective Time
<PAGE>
(other than Shares owned by any subsidiary of the Company, or by the Parent, the
Offeror or any other subsidiary of the Parent, or, if holders of Shares are
entitled to appraisal rights under Maryland law, Shares which are held by
shareholders, if any, who properly exercise their appraisal rights under
Maryland law) will be converted into the right to receive $17.50 in cash, or any
higher price that is paid in the Offer, without interest. Concurrently with the
execution of the Merger Agreement, the Parent entered into the Stock Purchase
and Sale Agreement (the "Stock Purchase Agreement") with American International
Group, Inc. ("AIG"). Pursuant to the Stock Purchase Agreement and subject to the
terms and conditions thereof, the Parent agreed to buy and AIG agreed to sell
for $317.5 million dollars all shares of Series B Preferred Stock owned by AIG
or its subsidiaries. The Stock Purchase Agreement provides that the sale of the
Series B Preferred Stock will close on the date which is two business days after
the the Parent or any affiliate of the Parent first acquires any equity interest
in the Company or any right or security convertible or exercisable into any such
interest.
The Offer is conditioned upon, among other things (i) there being validly
tendered and not withdrawn prior to the expiration of the Offer that number of
Shares representing at least a majority of the combined voting power of the
Shares, the Class A Common Stock and Class C Common Stock (assuming the
exercise of all options to purchase, and the conversion or exchange of all
securities convertible or exchangeable into Shares outstanding at the expiration
date of the Offer, other than the conversion of the Series B Preferred Stock),
(ii) receipt by the Offeror of certain governmental approvals and (iii)
satisfaction of certain other terms and conditions.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY HAS DETERMINED THAT THE
OFFER AND MERGER ARE ADVISABLE AND THAT THE TERMS OF THE OFFER AND THE MERGER
ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS, HAS
APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE OFFER AND MERGER, AND RECOMMENDS THAT THE HOLDERS OF SHARES ACCEPT
THE OFFER AND TENDER ALL THEIR SHARES PURSUANT THERETO.
Subject to the terms of the Merger Agreement and applicable law, the
Offeror expressly reserves the right, at any time or from time to time, to
extend the period of time during which the Offer is open and thereby delay
acceptance for payment of, or payment for, any Shares by giving oral or written
notice of such extension to the Depositary (as defined in the Offer to Purchase)
and by making a public announcement of such extension. The Offeror shall not
have any obligation to pay interest on the purchase price for tendered Shares
whether or not the Offeror exercises its rights to extend the period of time
during which the Offer is open. Any such extension will be followed by a public
announcement thereof by no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. During any such
extension, all Shares previously tendered and not withdrawn will remain subject
to the Offer, subject to the right of a tendering stockholder to withdraw such
stockholder's Shares. Without limiting the manner in which the Offeror may
choose to make any public announcement, Offeror will have no obligation to
publish, advertise or otherwise communicate any such announcement other than by
issuing a release to the Dow Jones News Service or as otherwise may be required
by law.
For purposes of the Offer, the Offeror will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn if and
when the Offeror gives oral or written notice to the Depositary of the Offeror's
acceptance of such Shares for payment. In all cases, payment for Shares
purchased pursuant to the Offer will be made by deposit of the purchase price
with the Depositary, which shall act as agent for tendering stockholders for the
purpose of receiving payment from the Offeror and transmitting payment to the
tendering stockholders. Payment for Shares accepted for payment pursuant to the
Offer will be made only after timely receipt by the Depositary of certificates
for such Shares or timely confirmation of a book-entry transfer of such Shares
into the Depositary's account at the Book-Entry Transfer Facilities (as defined
in the Offer to Purchase) pursuant to the procedures set forth in the Offer to
Purchase and timely receipt by the Depositary of a properly completed and duly
executed Letter of Transmittal (or manually signed facsimile thereof), with any
required signature guarantees, or, in the case of a book-entry transfer, an
Agent's Message (as defined in the Offer to Purchase) and any other documents
required by the Letter of Transmittal.
If any of the conditions set forth in the Offer to Purchase that relate to
the Offeror's obligations to purchase the Shares are not satisfied by 12:00
Midnight, New York City time, on Tuesday, January 14, 1997 (or any other
time then set as the Expiration Date), the Offeror may, subject to the terms of
the Merger Agreement, (i) extend the Offer and, subject to
-2-
<PAGE>
applicable withdrawal rights, retain all tendered Shares until the expiration of
the Offer as so extended, (ii) subject to complying with applicable rules and
regulations of the Securities and Exchange Commission, accept for payment all
Shares so tendered and not extend the Offer, or (iii) terminate the Offer and
not accept for payment any Shares and return all tendered Shares to tendering
stockholders. The term "Expiration Date" shall mean 12:00 Midnight, New York
City time, on Tuesday, January 14, 1997, unless the Offeror shall have
extended the period of time for which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by the Offeror, shall expire. The Offeror expressly reserves the
right, in its sole discretion, at any time or from time to time, subject to
applicable law and to the terms of the Merger Agreement, to extend the period
during which the Offer is open by giving oral or written notice of such
extension to the Depositary followed by, as promptly as practicable, a public
announcement thereof no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
Except as otherwise provided in Section 4 of the Offer to Purchase, tenders
of Shares made pursuant to the Offer are irrevocable, except that Shares
tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date, and, unless theretofore accepted for payment, may also be
withdrawn at any time after February 13, 1997. For a withdrawal to be
effective, a written, telegraphic, telex or facsimile transmission notice of
withdrawal must be timely received by the Depositary at one of its addresses set
forth on the back cover of the Offer to Purchase. Any such notice of withdrawal
must specify the name of the person who tendered the Shares to be withdrawn, the
number of Shares to be withdrawn and the name of the registered holder, if
different from the name of the person who tendered the Shares. If certificates
for Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, then prior to the physical release of such certificates, the serial
numbers shown on such certificates must be submitted to the Depositary and,
unless such Shares have been tendered for the account of an Eligible Institution
(as defined in the Offer to Purchase), the signature on the notice of withdrawal
must be guaranteed by an Eligible Institution. All questions as to the form and
validity (including time of receipt) of a notice of withdrawal will be
determined by the Offeror, in its sole discretion, and its determination shall
be final and binding on all parties.
The information required to be disclosed by Paragraph (e)(1)(vii) of Rule
14d-6 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended, is contained in the Offer to Purchase and is incorporated
herein by reference.
The Company has provided to the Offeror its lists of stockholders and
security position listings for the purpose of disseminating the Offer to holders
of Shares. The Offer to Purchase, the related Letter of Transmittal and other
related materials are being mailed to record holders of Shares and will be
mailed to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the stockholder
lists or, if applicable, who are listed as participants in a clearing agency's
security position listing, for subsequent transmittal to beneficial owners of
Shares.
-3-
<PAGE>
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
Requests for copies of the Offer to Purchase and the related Letter of
Transmittal and other tender offer materials may be directed to the Information
Agent or the Dealer Manager as set forth below, and copies will be furnished
promptly at the Offeror's expense. Questions or requests for assistance may also
be directed to the Information Agent or the Dealer Manager. No fees or
commissions will be payable to brokers, dealers or other persons other than the
Information Agent, the Dealer Manager and the Depositary for soliciting tenders
of Shares pursuant to the Offer.
The Information Agent for the Offer is:
GEORGESON & COMPANY INC.
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
Banks and Brokers call collect (212) 440-9800
All others call Toll Free: 1-800-233-2064
The Dealer Manager for the Offer is:
LAZARD FRERES & CO. LLC
30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10020
(212) 632-6717 (Call collect)
December 16, 1996
-4-
<PAGE>
EXHIBIT (a)(8)
NEWS
[AON LOGO] FOR IMMEDIATE RELEASE
- --------------------------------------------------------------------------------
Aon Corporation FOR FURTHER INFORMATION CONTACT:
123 North Wacker Drive William J. Fasel
Chicago, Illinois 60606 Director, Financial Relations
312.701.3000 312.701.3983
Aon Announces Agreement with Alexander & Alexander
Chicago, IL -- December 11, 1996 -- Aon Corporation (Aon) and Alexander &
Alexander Services Inc. ("A&A") today announced that they have entered into a
definitive agreement providing for the combination of A&A with Aon. In the
transaction, A&A shareholders will receive $17.50 in cash per share of A&A
common stock. The total consideration to holders of A&A's common stock will
be approximately $790 million. The agreement was approved unanimously by both
boards.
A&A currently has outstanding two series of Preferred Stock. The Series A
preferred shares, having an aggregate liquidation preference of $115 million,
will be unaffected by the transaction, except that following the transaction
they shall no longer be convertible into A&A's common shares, but will be
convertible into an aggregate of approximately $120 million in cash. Pursuant to
a separate agreement between Aon and American International Group, Inc. ("AIG"),
A&A's Series B preferred shares held by subsidiaries of AIG will be acquired by
Aon for a cash consideration of $317.5 million.
The combination with A&A will be effected by a cash tender offer for A&A's
common shares, which is expected to commence no later than December 16, 1996.
Immediately upon completion of the tender offer, the purchase of the Series B
preferred shares will be effected. Any A&A common shares not acquired in the
tender offer (including shares to be issued upon conversion of A&A's Class A and
C common shares and related securities held by Canadian and United Kingdom
shareholders) will subsequently be acquired in a cash merger for $17.50 per
share. The tender offer will not extend to the Class A and C common shares of
A&A.
The transaction is valued at approximately $1.23 billion, taking into account
the aggregate consideration to holders of the A&A common stock, the conversion
value of the Series A preferred and the purchase price for the Series B
preferred stock.
<PAGE>
The tender offer is subject to several conditions, including the tender and
non-withdrawal of at least a majority of the voting power of A&A's common shares
(assuming exercise of options and conversion of Series A preferred shares) and
various regulatory approvals.
Patrick G. Ryan, chairman and chief executive officer of Aon stated, "I have the
highest regard for A&A and its outstanding people. This is a unique opportunity
to bring together our two excellent organizations. The combination of Aon, A&A
and Bain Hogg, the most recent member of our corporate family, provides
unparalleled resources and expertise for clients around the world."
A&A's chairman and chief executive officer, Frank G. Zarb, said, "A&A has chosen
to merge with the premier company in the business. With the combined strengths
of both organizations, the new Aon will shape the future of the industry." He
added, "The need for consolidation has been increasingly evident in recent
years. With ever more challenging market conditions ahead of us, I believe this
decision serves the best interests of A&A shareholders, our clients and our
employees."
Aon Corporation is an insurance services holding company that comprises a family
of insurance brokerage, consulting and consumer insurance companies. Aon's
common stock (Symbol AOC) is listed on the New York, Chicago and London Stock
Exchanges. Lazard Freres & Co. LLC has acted as financial advisor in
connection with the proposed transaction.
Alexander & Alexander Services Inc. is a holding company which, through its
subsidiaries, provides professional risk management consulting, insurance
brokerage and human resource management consulting services on a global basis.
The common stock of Alexander & Alexander (Symbol AAL) is listed on the New York
Stock Exchange. CS First Boston has acted as financial advisor to Alexander &
Alexander in connection with the proposed transaction.
<PAGE>
EXHIBIT (a)(9)
NEWS
[AON LOGO] FOR IMMEDIATE RELEASE
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Aon Corporation FOR FURTHER INFORMATION CONTACT
123 North Wacker Drive William J. Fasel
Chicago, Illinois 60606 Director, Financial Relations
312.701.3000 312.701.3983
Aon Commences Tender Offer for Alexander & Alexander
Chicago, IL--December 16, 1996--Aon Corporation (Aon) announced that a
wholly-owned subsidiary of Aon has commenced its previously announced tender
offer for shares of Common Stock, par value $1.00 per share, of Alexander &
Alexander Services Inc. at $17.50 per share, net to the seller in cash. The
tender offer is being made pursuant to an Agreement and Plan of Merger, dated as
of December 11, 1996. The tender offer is scheduled to expire Tuesday,
January 14, 1997.
First Chicago Trust Company of New York is the depositary for the tender
offer. Georgeson & Company Inc. is the information agent. The dealer manager is
Lazard Freres & Co. LLC.
Aon Corporation is an insurance services holding company that comprises a
family of insurance brokerage, consulting and consumer insurance companies.
Aon's common stock (Symbol AOC) is listed on the New York, Chicago and London
Stock Exchanges.
<PAGE>
EXHIBIT (c)(1)
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
AMONG
AON CORPORATION,
SUBSIDIARY CORPORATION, INC.
AND
ALEXANDER & ALEXANDER SERVICES INC.
Dated as of December 11, 1996
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TABLE OF CONTENTS
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ARTICLE I
THE OFFER
SECTION 1.1 The Offer............................................ 2
SECTION 1.2 Company Actions...................................... 3
SECTION 1.3 Reed Stenhouse Companies Limited..................... 5
SECTION 1.4 Alexander & Alexander Services UK plc................ 6
SECTION 1.5 MJDS................................................. 7
ARTICLE II
THE MERGER
SECTION 2.1 The Merger........................................... 7
SECTION 2.2 Closing.............................................. 7
SECTION 2.3 Effective Time....................................... 8
SECTION 2.4 Effects of the Merger................................ 8
SECTION 2.5 Charter and By-laws; Officers and Directors.......... 8
ARTICLE III
EFFECT OF THE MERGER ON THE STOCK OF THE
CONSTITUENT CORPORATIONS; SURRENDER OF CERTIFICATES
SECTION 3.1 Effect on Stock...................................... 9
SECTION 3.2 Surrender of Certificates............................ 10
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.1 Organization......................................... 13
SECTION 4.2 Subsidiaries......................................... 13
SECTION 4.3 Capital Structure.................................... 14
SECTION 4.4 Authority............................................ 15
SECTION 4.5 Consent and Approvals; No Violations................. 16
SECTION 4.6 SEC Documents and Other Reports...................... 18
SECTION 4.7 Absence of Material Adverse Change................... 18
SECTION 4.8 Information Supplied................................. 18
SECTION 4.9 Compliance with Laws................................. 19
SECTION 4.10 Licenses and Permits................................. 19
SECTION 4.11 Tax Matters.......................................... 19
SECTION 4.12 Liabilities.......................................... 20
SECTION 4.13 Opinion of Financial Advisor......................... 20
SECTION 4.14 State Takeover Statutes; Rights Agreement............ 20
SECTION 4.15 Brokers.............................................. 21
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
SECTION 5.1 Organization......................................... 21
SECTION 5.2 Authority............................................ 21
SECTION 5.3 Consents and Approvals; No Violations................ 22
SECTION 5.4 Information Supplied................................. 23
SECTION 5.5 Interim Operations of Sub............................ 23
SECTION 5.6 Brokers.............................................. 23
SECTION 5.7 Financing............................................ 23
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 6.1 Conduct of Business by the Company Pending
the Merger......................................... 24
SECTION 6.2 No Solicitation...................................... 27
SECTION 6.3 Third Party Standstill Agreements.................... 28
SECTION 6.4 Other Actions........................................ 28
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 Stockholder Approval; Preparation of
Proxy Statement.................................... 29
SECTION 7.2 Access to Information................................ 30
SECTION 7.3 Fees and Expenses.................................... 30
SECTION 7.4 Options.............................................. 31
SECTION 7.5 Public Announcements................................. 33
SECTION 7.6 Real Estate Transfer Tax............................. 33
SECTION 7.7 State Takeover Laws.................................. 33
SECTION 7.8 Indemnification; Directors and Officers
Insurance.......................................... 34
SECTION 7.9 Notification of Certain Matters...................... 35
SECTION 7.10 Board of Directors................................... 35
SECTION 7.11 Reasonable Best Efforts.............................. 36
SECTION 7.12 Certain Litigation................................... 37
SECTION 7.13 Employee Benefits.................................... 37
SECTION 7.14 Stapled Securities................................... 39
ARTICLE VIII
CONDITIONS PRECEDENT
SECTION 8.1 Conditions to Each Party's Obligation to
Effect the Merger.................................. 40
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ARTICLE IX
TERMINATION AND AMENDMENT
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SECTION 9.1 Termination.......................................... 41
SECTION 9.2 Effect of Termination................................ 43
SECTION 9.3 Amendment............................................ 43
SECTION 9.4 Extension; Waiver.................................... 43
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 Non-Survival of Representations and
Warranties......................................... 44
SECTION 10.2 Notices.............................................. 44
SECTION 10.3 Interpretation....................................... 45
SECTION 10.4 Counterparts......................................... 45
SECTION 10.5 Entire Agreement; No Third-Party
Beneficiaries...................................... 46
SECTION 10.6 Governing Law........................................ 46
SECTION 10.7 Assignment........................................... 46
SECTION 10.8 Severability......................................... 46
SECTION 10.9 Enforcement of this Agreement........................ 46
SECTION 10.10 Obligations of Subsidiaries.......................... 47
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AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of December 11, 1996 (this
"Agreement"), among AON CORPORATION, a Delaware corporation ("Parent"),
SUBSIDIARY CORPORATION, INC., a Maryland corporation and a wholly-owned
subsidiary of Parent ("Sub"), and ALEXANDER & ALEXANDER SERVICES INC., a
Maryland corporation (the "Company") (Sub and the Company being hereinafter
collectively referred to as the "Constituent Corporations").
W I T N E S S E T H:
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WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have unanimously approved the acquisition of the Company by Parent
pursuant to a tender offer (as it may be amended from time to time as permitted
under this Agreement, the "Offer") by Sub for all of the outstanding shares of
Common Stock, par value $1.00 per share (the "Common Stock"), together with the
related Rights (as defined in Section 4.3), of the Company, at a price of $17.50
per share (the "Offer Price"), net to the seller in cash, without interest
thereon, followed by a merger (the "Merger") of Sub with and into the Company
upon the terms and subject to the conditions set forth herein (the shares of
Common Stock subject to the Offer are hereinafter referred to as the "Shares");
WHEREAS, the Board of Directors of the Company has (i) determined that
the consideration to be paid for each Share in the Offer is fair to and in the
best interests of the stockholders of the Company, (ii) approved and adopted
this Agreement and the transactions contemplated hereby and (iii) adopted
resolutions unanimously determining that the Offer and the Merger are advisable,
approving such transactions and recommending that the Company's stockholders
accept the Offer and approve the Merger;
WHEREAS, the Company has been advised that Parent and Sub are entering
into on the date hereof a Stock Purchase and Sale Agreement (the "Preferred
Stock Purchase Agreement") with American International Group, Inc., which,
together with certain of its subsidiaries, holds all of the outstanding shares
of the Company's 8% Series B Cumulative Convertible Preferred Stock, par value
$1.00 per share (the "Series B Preferred Stock"); and
WHEREAS, pursuant to the Merger, each issued and outstanding share of
Company Common Capital Stock (as hereinafter defined) not owned directly or
indirectly by Parent or the Company will be converted into the right to receive
the
<PAGE>
consideration paid per share of the Common Stock pursuant to the Offer.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties and agreements herein contained, the parties agree
as follows:
ARTICLE I
THE OFFER
---------
SECTION 1.1 The Offer. (a) Subject to the provisions of this
Agreement, as promptly as practicable but in no event later than five business
days after the date of the public announcement by Parent and the Company of this
Agreement, Sub shall, and Parent shall cause Sub to, commence the Offer. The
obligation of Sub to, and of Parent to cause Sub to, commence the Offer and
accept for payment, and pay for, any Shares tendered pursuant to the Offer shall
be subject only to the conditions set forth in Exhibit A (the "Offer
Conditions") (any of which may be waived in whole or in part by Sub in its sole
discretion, provided that, without the consent of the Company, Sub shall not
waive the Minimum Condition (as defined in Exhibit A)). Sub expressly reserves
the right to modify the terms of the Offer, except that, without the consent of
the Company, Sub shall not (i) reduce the number of Shares subject to the Offer,
(ii) reduce the Offer Price, (iii) impose any other conditions to the Offer
other than the Offer Conditions or modify the Offer Conditions (other than to
waive any Offer Conditions to the extent permitted by this Agreement), (iv)
except as provided in the next sentence, extend the Offer, (v) change the form
of consideration payable in the Offer or (vi) amend, waive or add any other term
of the Offer in any manner adverse to the Company or the holders of Shares.
Notwithstanding the foregoing, Sub may, without the consent of the Company, (i)
extend the Offer, if at the scheduled or extended expiration date of the Offer
any of the Offer Conditions shall not be satisfied or waived, until such time as
such conditions are satisfied or waived, (ii) extend the Offer for any period
required by any rule, regulation, interpretation or position of the Securities
and Exchange Commission (the "SEC") or the staff thereof applicable to the Offer
and (iii) extend the Offer for any reason for one or more occasions for an
aggregate period of not more than 10 business days beyond the latest expiration
date that would otherwise be permitted under clause (i) or (ii) of this
sentence. So long as this Agreement is in effect and the Offer Conditions have
not been satisfied or waived, Sub shall, and Parent shall cause Sub to, cause
the Offer not to expire. Subject to the terms and conditions of the Offer and
this Agreement, Sub shall, and Parent shall cause Sub to, accept for and pay
for, all Shares validly tendered and not
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withdrawn pursuant to the Offer that Sub is permitted to accept for payment
under applicable law, and pay for, pursuant to the Offer as soon as practicable
after the expiration of the Offer.
(b) On the date of commencement of the Offer, Parent and Sub shall
file with the SEC a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-
1") with respect to the Offer, which shall contain an offer to purchase and a
related letter of transmittal and summary advertisement (such Schedule 14D-1 and
the documents included therein pursuant to which the Offer will be made,
together with any supplements or amendments thereto, the "Offer Documents").
Parent, Sub and the Company each agrees promptly to correct any information
provided by it for use in the Offer Documents if and to the extent that such
information shall have become false or misleading in any material respect, and
Parent and Sub further agree to take all steps necessary to cause the Schedule
14D-1 as so corrected to be filed with the SEC and the other Offer Documents as
so corrected to be disseminated to holders of Shares, in each case as and to the
extent required by applicable federal securities laws. The Company and its
counsel shall be given reasonable opportunity to review and comment upon the
Offer Documents prior to their filing with the SEC or dissemination to the
stockholders of the Company. Parent and Sub agree to provide the Company and its
counsel any comments Parent, Sub or their counsel may receive from the SEC or
its staff with respect to the Offer Documents promptly after the receipt of such
comments.
(c) Prior to the expiration of the Offer, Parent shall provide or
cause to be provided to Sub all funds necessary to accept for payment, and pay
for, any Shares that Sub is permitted to accept for payment under applicable law
and pay for, pursuant to the Offer.
SECTION 1.2 Company Actions. (a) The Company hereby approves of and
consents to the Offer and represents that the Board of Directors of the Company,
at a meeting duly called and held, at which all directors were present, duly and
unanimously adopted resolutions approving this Agreement, the Offer and the
Merger, determining that the Offer and the Merger are advisable and that the
terms of the Offer and the Merger are fair to, and in the best interests of, the
Company's stockholders and recommending that holders of Shares accept the Offer
and that the Company's stockholders approve the Merger; provided, however, that
such approval, determination, recommendation or other action may be withdrawn,
modified or amended at any time or from time to time if a majority of the Board
of Directors of the Company determines, in its good faith judgment, based on the
opinion of independent outside legal counsel to the Company, that failing to
take such action would constitute a breach of such Board's duties
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under applicable law. The Company represents that its Board of Directors has
received the opinion of CS First Boston Corporation ("First Boston") that the
proposed consideration to be received by stockholders pursuant to the Offer and
the Merger is fair to the Company's stockholders from a financial point of view.
The Company has been authorized by First Boston to permit, subject to prior
review and consent by First Boston (such consent not to be unreasonably
withheld), the inclusion of such fairness opinion (or a reference thereto) in
the Offer Documents and in the Schedule 14D-9 referred to below. The Company
hereby consents to the inclusion in the Offer Documents of the recommendation of
the Company's Board of Directors described in this Section 1.2(a); provided,
however, that such recommendation may be withdrawn, modified or amended at any
time or from time to time if a majority of the Board of Directors of the Company
determines, in its good faith judgment, based on the opinion of independent
outside legal counsel to the Company, that failing to take such action would
constitute a breach of such Board's duties under applicable law. The Company
has been advised by each of its directors and executive officers that each such
person intends to tender all Shares owned by such person pursuant to the Offer.
(b) On the date the Offer Documents are filed with the SEC, the
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from
time to time, the "Schedule 14D-9") containing the recommendation described in
paragraph (a) (subject to the withdrawal, modification or amendment of such
recommendation at any time or from time to time if the Board of Directors of the
Company determines, in its good faith judgment, based on the opinion of
independent outside legal counsel to the Company, that failing to take such
action would constitute a breach of such Board's duties under applicable law)
and shall mail a copy of the Schedule 14D-9 to the stockholders of the Company.
Each of the Company, Parent and Sub agrees promptly to correct any information
provided by it for use in the Schedule 14D-9 if and to the extent that such
information shall have become false or misleading in any material respect, and
the Company further agrees to take all steps necessary to amend or supplement
the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or supplemented
to be filed with the SEC and disseminated to the Company's stockholders, in each
case as and to the extent required by applicable federal securities laws. Parent
and its counsel shall be given reasonable opportunity to review and comment upon
the Schedule 14D-9 prior to its filing with the SEC or dissemination to
stockholders of the Company. The Company agrees to provide Parent and its
counsel any comments the Company or counsel may receive from the SEC or its
staff with respect to the Schedule 14D-9 promptly after the receipt of such
comments.
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(c) In connection with the Offer and the Merger, the Company shall
cause its transfer agent to furnish Sub promptly with mailing labels containing
the names and addresses of the record holders of Shares as of a recent date and
of those persons becoming record holders subsequent to such date, together with
copies of all lists of stockholders, security position listings and computer
files and all other information in the Company's possession or control regarding
the beneficial owners of Shares, and shall furnish to Sub such information and
assistance (including updated lists of stockholders, security position listings
and computer files) as Parent or Sub may reasonably request in communicating the
Offer to the Company's stockholders. Subject to the requirements of applicable
law, and except for such steps as are necessary to disseminate the Offer
Documents and any other documents necessary to consummate the Merger, Parent and
Sub and their agents shall hold in confidence the information contained in any
such labels, listings and files, will use such information only in connection
with the Offer and the Merger and, if this Agreement shall be terminated, will,
upon request, deliver, and will use their reasonable best efforts to cause their
agents to deliver, to the Company all copies of such information then in their
possession or control.
SECTION 1.3 Reed Stenhouse Companies Limited. The Company shall cause
Reed Stenhouse Companies Limited, a corporation organized under the laws of
Canada and a Subsidiary of the Company ("RSC"), to transmit to each holder of
the Class 1 special shares of RSC (the "RSC Class 1 Shares"), contemporaneously
with the transmission of the Offer Documents to the holders of Common Stock: (i)
the Offer Documents; (ii) a letter stating that holders of RSC Class 1 Shares
who wish to participate in the Offer must request retraction of such RSC Class 1
Shares for shares of Common Stock pursuant to Section 5 of the Restated
Certificate of Incorporation of RSC; and (iii) a form of retraction request,
which retraction request shall provide that a holder of RSC Class 1 Shares
requests retraction thereof on the date Sub first accepts for payment Shares
pursuant to the Offer and contemporaneously therewith, and that the shares of
Common Stock received upon such retraction shall be deemed validly tendered
pursuant to the Offer. RSC shall retract such RSC Class 1 Shares in accordance
with such retraction request (and the Company represents and warrants that such
retraction can be effected in compliance with Section 36 of the Canada Business
Corporations Act) and the Company shall cause to be issued (for tender as so
requested) such number of shares of Common Stock as is necessary to satisfy the
redemption price in accordance with the Restated Articles of Incorporation of
RSC and the related Keepwell Agreement (the "Keepwell Agreement"), between the
Company and RSC. In addition, the Company shall cause (x) RSC to transmit to the
holders of RSC Class 1 Shares a recommendation of
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the Company and RSC that such holders retract such shares and tender the shares
of Common Stock received on such retraction pursuant to the Offer and (y) the
transfer agent for the RSC Class 1 Shares to furnish Sub promptly with mailing
labels containing the names and addresses of the record holders of RSC Class 1
Shares as of a recent date and of those persons becoming record holders
subsequent to such date, together with all copies of all lists of stockholders,
security position listings and computer files and all other information in the
Company's or RSC's possession or control regarding the beneficial owners of RSC
Class 1 Shares, and shall furnish to Sub such information and assistance
(including updated lists of stockholders, security position listings and
computer files) as Parent or Sub may reasonably request in communicating the
documentation referred to in the first sentence of this Section 1.3 to the
holders of RSC Class 1 Shares. Parent and Sub and their agents shall hold in
confidence the information contained in any such labels, listings and files,
will use such information only in connection with the Offer and the Merger and,
if this Agreement shall be terminated, will, upon request, deliver, and will use
their reasonable best efforts to cause their agents to deliver, to the Company
all copies of such information then in their possession or control.
SECTION 1.4 Alexander & Alexander Services UK plc. The Company shall,
and shall cause Alexander & Alexander Services UK plc, a corporation organized
under the laws of Scotland and a Subsidiary of the Company ("AAUK"), to,
transmit to each holder of any share of Class C Common Stock (as defined in
Section 3.1) and any related Dividend Share of AAUK (the "Dividend Shares"),
contemporaneously with the transmission of the Offer Documents to the holders of
Common Stock: (i) the Offer Documents; (ii) a letter stating that holders of
shares of Class C Common Stock and the related Dividend Shares who wish to
participate in the Offer must request the conversion of the shares of Class C
Common Stock into shares of Common Stock pursuant to Subsection E of Article
SIXTH of the Charter of the Company; and (iii) a form of conversion request,
which conversion request shall provide that a holder of shares of Class C Common
Stock requests conversion thereof on the date Sub first accepts for payment
Shares pursuant to the Offer and contemporaneously therewith, and that the
shares of Common Stock received upon such conversion shall be deemed validly
tendered pursuant to the Offer. The Company shall cause the cancellation of such
shares of Class C Common Stock in accordance with such conversion request and
the Company shall issue (for tender as so requested) such number of shares of
Common Stock as is necessary to satisfy such conversion request in accordance
with the Charter of the Company. In addition, the Company shall (x) transmit to
the holders of the shares of Class C Common Stock a recommendation of the
Company and AAUK that such holders convert such shares and tender the shares of
Common Stock
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received on such conversion pursuant to the Offer and (y) the transfer agent for
the Class C Common Stock to furnish Sub promptly with mailing labels containing
the names and addresses of the record holders of shares of Class C Common Stock
as of a recent date and of those persons becoming record holders subsequent to
such date, together with all copies of all lists of stockholders, security
position listings and computer files and all other information in the Company's
or AAUK's possession or control regarding the beneficial owners of shares of
Class C Common Stock, and shall furnish to Sub such information and assistance
(including updated lists of stockholders, security position listings and
computer files) as Parent or Sub may reasonably request in communicating the
documentation referred to in the first sentence of this Section 1.4 to the
holders of shares of Class C Common Stock. Parent and Sub and their agents
shall hold in confidence the information contained in any such labels, listings
and files, will use such information only in connection with the Offer and the
Merger and, if this Agreement shall be terminated, will, upon request, deliver,
and will use their reasonable best efforts to cause their agents to deliver, to
the Company all copies of such information then in their possession or control.
SECTION 1.5 MJDS. Each of the parties shall comply with the provisions
of National Policy No. 45 adopted by the Canadian Securities Administrators in
connection with the making of the Offer to residents of Canada, unless the Offer
is an exempt takeover bid for the purposes of section 93(1)(e) of the Securities
Act (Ontario) and the comparable provisions of the securities legislation of the
other provinces of Canada.
ARTICLE II
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the General Corporation Law of the State of
Maryland (the "MGCL"), Sub shall be merged with and into the Company at the
Effective Time (as defined in Section 2.3). Following the Merger, the separate
corporate existence of Sub shall cease and the Company shall continue as the
surviving corporation (the "Surviving Corporation") and shall succeed to and
assume all the rights and obligations of Sub in accordance with the MGCL.
SECTION 2.2 Closing. The closing of the Merger will take place at
10:00 a.m. on a date to be specified by Parent or Sub, which shall be no later
than the second business day after satisfaction or waiver of the conditions set
forth in
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Article VIII (the "Closing Date"), at the offices of Sidley & Austin, One First
National Plaza, Chicago, Illinois 60603, unless another date, time or place is
agreed to in writing by the parties hereto.
SECTION 2.3 Effective Time. The Merger shall become effective when
Articles of Merger (the "Articles of Merger"), executed in accordance with the
relevant provisions of the MGCL, are accepted for record by the State Department
of Assessments and Taxation of Maryland (the "SDAT"); provided, however, that,
upon mutual consent of the Constituent Corporations, the Articles of Merger may
provide for a later date of effectiveness of the Merger not more than 30 days
after the date the Articles of Merger are accepted for record. When used in
this Agreement, the term "Effective Time" shall mean the later of the date and
time at which the Articles of Merger are accepted for record by the SDAT or such
later time established by the Articles of Merger. The filing of the Articles of
Merger shall be made as soon as practicable after the satisfaction or waiver of
the conditions to the Merger set forth herein.
SECTION 2.4 Effects of the Merger. The Merger shall have the effects
set forth in Section 3-114 of the MGCL.
SECTION 2.5 Charter and By-laws; Officers and Directors. (a) The
Charter (as defined in the MGCL) of the Company, as in effect immediately prior
to the Effective Time, shall be the Charter of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
(b) The By-Laws of the Company, as in effect immediately prior to the
Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by the Charter of the
Surviving Corporation or by applicable law.
(c) The directors of Sub immediately prior to the Effective Time
shall be the directors of the Surviving Corporation, until the next annual
meeting of stockholders (or the earlier of their resignation or removal) and
until their respective successors are duly elected and qualified, as the case
may be.
(d) The officers of the Company immediately prior to the Effective
Time shall be the officers of the Surviving Corporation, for a term of one year
(or until the earlier of their resignation or removal) and until their
respective successors are duly elected and qualified, as the case may be.
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ARTICLE III
EFFECT OF THE MERGER ON THE STOCK OF THE
CONSTITUENT CORPORATIONS; SURRENDER OF CERTIFICATES
SECTION 3.1 Effect on Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
stock of Sub or rights to acquire any such stock:
(a) Capital Stock of Sub. Each issued and outstanding share of stock
of Sub shall be converted into and become 600,000 fully paid and
nonassessable shares of Common Stock, par value $1.00 per share, of the
Surviving Corporation.
(b) Parent Owned Stock. Each share of stock of the Company
(including, without limitation, the Shares purchased pursuant to the Offer
and the shares of the Series B Preferred Stock purchased pursuant to the
Preferred Stock Purchase Agreement) owned by any Subsidiary of the Company,
Parent, Sub or any other Subsidiary of Parent (other than the shares into
which the outstanding shares of stock of Sub were converted pursuant to
Section 3.1(a)) shall automatically be canceled and retired and shall cease
to exist, and no consideration shall be delivered in exchange therefor.
(c) Conversion of Shares. Subject to Section 3.1(d), each holder of a
share of (i) the Common Stock, together with the related Right, (ii) the
Class A Common Stock, par value $.00001 per share, of the Company (the
"Class A Common Stock"), together with the related RSC Class 1 Share and
related Right, or (iii) the Class C Common Stock, par value $1.00 per
share, of the Company (the "Class C Common Stock"), together with the
related Dividend Share and related Right (the Common Stock, Class A Common
Stock and Class C Common Stock are hereinafter collectively referred to as
the "Company Common Capital Stock"), in each case, that is issued and
outstanding (other than shares to be cancelled in accordance with Section
3.1(b)), shall be paid by the Surviving Corporation as consideration for
the conversion of each share in cash, without interest and without any
further action by such holder, the price paid per share of Common Stock in
the Offer (the "Merger Consideration"). The Merger Consideration shall be
allocated, in the case of clause (i), U.S. $.01 to the Right and the
balance of the Merger Consideration to the share of Common Stock, in the
case of clause (ii), the U.S. dollar equivalent of Cdn. $.00001 to the
share of Class A Common
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Stock, U.S. $.01 to the Right and the balance of the Merger Consideration
to the RSC Class 1 Share, and, in the case of clause (iii), the U.S. dollar
equivalent of 2 pence to the Dividend Share, U.S. $.01 to the Right and the
balance of the Merger Consideration to the share of Class C Common Stock.
As of the Effective Time, all such shares shall be converted in accordance
with this paragraph, and when so converted, shall no longer be outstanding
and shall automatically be cancelled and retired and shall cease to exist,
and each holder of a certificate representing any such shares shall cease
to have any rights with respect thereto, except the right to receive the
aforesaid amount, without interest.
(d) Shares of Dissenting Stockholders. Notwithstanding anything in
this Agreement to the contrary, any issued and outstanding shares of Class
A Common Stock, Class C Common Stock or (if the holders of shares of Common
Stock are entitled to dissenters' rights under the MGCL) Common Stock held
by a person (a "Dissenting Stockholder") who objects to the Merger and
complies with all the provisions of the MGCL concerning the right of
holders of shares to dissent from the Merger and require appraisal of their
shares ("Dissenting Shares") shall not be converted as described in Section
3.1(c), but shall become the right to receive such consideration as may be
determined to be due to such Dissenting Stockholder pursuant to the MGCL.
If, after the Effective Time, such Dissenting Stockholder withdraws his
demand for appraisal or fails to perfect or otherwise loses his right of
appraisal, in any case pursuant to the MGCL, his shares of Class A Common
Stock, Class C Common Stock or Common Stock shall be deemed to be converted
as of the Effective Time into the right to receive the Merger Consideration
allocated as provided in Section 3.1(c). The Company shall give Parent (i)
prompt notice of any demands for appraisal of shares received by the
Company and (ii) the opportunity to participate in and direct all
negotiations and proceedings with respect to any such demands. The Company
shall not, without the prior written consent of Parent, make any payment
with respect to, or settle, offer to settle or otherwise negotiate, any
such demands.
(e) Shares of Series A Convertible Preferred Stock. The holder of each
share of Series A Convertible Preferred Stock (as defined in Section 4.3)
shall have the right to convert such share only into cash in the amount of
$52.54.
SECTION 3.2 Surrender of Certificates. (a) Paying Agent. Prior to
the Effective Time, Parent shall designate a bank or trust company to act as
paying agent in the Merger (the
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"Paying Agent"), and prior to the Effective Time, Parent shall make available,
or cause the Surviving Corporation to make available, to the Paying Agent cash
in amounts necessary for the payment of the Merger Consideration as provided in
Section 3.1 upon surrender of certificates representing shares of Company Common
Capital Stock as part of the Merger (it being understood that any and all
interest earned on funds made available to the Paying Agent pursuant to this
Agreement shall be turned over to Parent). If the amount of cash deposited with
the Paying Agent pursuant to this Section 3.2 is insufficient to pay all of the
amounts required to be paid pursuant to Section 3.1, Parent from time to time
after the Effective Time shall take all steps necessary to enable or cause the
Surviving Corporation to deposit with the Paying Agent additional cash in an
amount sufficient to make all such payments.
(b) Payment Procedure. (i) Concurrently with or immediately prior to
the Effective Time, Parent or Sub shall deposit in trust with the Paying Agent
cash in United States dollars in an aggregate amount equal to the product of (A)
the number of shares of Company Common Capital Stock outstanding immediately
prior to the Effective Time (other than shares which are owned by any Subsidiary
of the Company, Parent or any Subsidiary of Parent (including Sub) or a person
known at the time of such deposit to be a Dissenting Stockholder) and (B) the
Merger Consideration (such amount being hereinafter referred to as the "Payment
Fund"). The Payment Fund shall be invested by the Paying Agent as directed by
Parent in direct obligations of the United States, obligations for which the
full faith and credit of the United States is pledged to provide for the payment
of principal and interest, commercial paper rated of the highest quality by
Moody's Investors Services, Inc. or Standard & Poor's Ratings Group or
certificates of deposit, bank repurchase agreements or bankers' acceptance a
commercial bank having at least $100,000,000 in assets (collectively, "Permitted
Investments") or in money market funds which are invested in Permitted
Investments, and any net earnings with respect thereto shall be paid to Parent
as and when requested by Parent. The Paying Agent shall, pursuant to
irrevocable instructions of Parent or Sub, make the payments referred to in this
Section 3.2 out of the Payment Fund. The Payment Fund shall not be used for any
other purpose except as otherwise agreed to by Parent.
(ii) As soon as reasonably practicable after the Effective Time, the
Paying Agent shall mail to each holder of record of a certificate or
certificates that immediately prior to the Effective Time represented shares of
Company Common Capital Stock (the "Certificates"), (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of
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the Certificates to the Paying Agent and shall be in a form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration as provided in Section 3.1. Upon surrender of a Certificate for
cancellation to the Paying Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed,
and such other documents as may reasonably be required by the Paying Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor the
amount of cash into which the shares of Company Common Capital Stock theretofore
represented by such Certificate shall have been converted pursuant to Section
3.1, and the Certificate so surrendered shall forthwith be cancelled. In the
event of a transfer of ownership of shares of Company Common Capital Stock that
is not registered in the transfer records of the Company, payment may be made to
a person other than the person in whose name the Certificate so surrendered is
registered, if such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other than
the registered holder of such Certificate or establish to the satisfaction of
the Surviving Corporation that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 3.2, each Certificate (other
than Certificates representing Dissenting Shares) shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the amount of cash, without interest, into which the shares of stock
theretofore represented by such Certificate shall have been converted pursuant
to Section 3.1. No interest will be paid or will accrue on the cash payable
upon the surrender of any Certificate.
(c) No Further Ownership Rights in Shares. All cash paid upon the
surrender of Certificates in accordance with the terms of this Article III shall
be deemed to have been paid in full satisfaction of all rights pertaining to the
shares of stock theretofore represented by such Certificates. At the Effective
Time, the stock transfer books of the Company shall be closed, and there shall
be no further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of stock that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation or the Paying Agent for any reason, they
shall be cancelled and exchanged as provided in this Article III.
(d) No Liability. None of Parent, Sub, the Company or the Paying
Agent shall be liable to any person in respect of any cash delivered to a public
official pursuant to any applicable
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abandoned property, escheat or similar law. If any Certificates shall not have
been surrendered prior to two years after the Effective Time (or immediately
prior to such earlier date on which any payment pursuant to this Article III
would otherwise escheat to or become the property of any Governmental Entity (as
defined in Section 4.5)), the cash payment in respect of such Certificate shall,
to the extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interests of any person previously
entitled thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to Parent and Sub as follows:
SECTION 4.1 Organization. The Company and each of its Significant
Subsidiaries (as defined in Section 10.3) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on
its business as now being conducted, except where the failure to be so
organized, validly existing or in good standing would not have a Material
Adverse Effect (as defined in Section 10.3) on the Company. The Company has
delivered to Parent complete and correct copies of its Charter and By-laws and
the Charter and By-laws (or similar organizational documents) of its Significant
Subsidiaries.
SECTION 4.2 Subsidiaries. Except as set forth in item 4.2 of the
letter from the Company to Parent dated the date hereof, which letter relates to
this Agreement and is designated therein as the Company Letter (the "Company
Letter"), Exhibit 21 of the Company's Annual Report on Form 10-K for the year
ended December 31, 1995 lists each Subsidiary of the Company existing as of the
date hereof (other than Subsidiaries that are immaterial) and accurately
reflects thereon the ownership interests in such Subsidiaries of the Company and
its Subsidiaries. The authorized capital stock of RSC consists of four classes
of capital stock, each unlimited in amount. As of the date of this Agreement,
1,805,616.112 RSC Class 1 Shares were issued, outstanding and (excluding 42,910
shares owned by a Subsidiary of the Company) owned by persons other than the
Company or any of its Subsidiaries, all of which shares were validly issued,
fully paid and nonassessable and free of preemptive rights, and (ii) all other
shares of capital stock of RSC were owned by the Company. The authorized
capital stock of
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AAUK consists of 46,000,000 Deferred Shares of 25 pence (Type 1), 12,927,195
Dividend Shares of 2 pence (Type 2), 37,960,000 Ordinary Non-Voting Shares 1
pence (Type 3) and 100,000,000 Ordinary Shares of (Pounds)1.00 (Type 4). As of
the date of this Agreement, (i) 372,748 Dividend Shares were issued, outstanding
and owned by persons other than the Company or any of its Subsidiaries, all of
which shares were validly issued, fully paid and nonassessable and free of
preemptive rights, and (ii) and all other shares of capital stock of AAUK were
owned by the Company and its wholly-owned Subsidiaries.
SECTION 4.3 Capital Structure. The authorized capital stock of the
Company consists of 200,000,000 shares of Common Stock, 26,000,000 shares of
Class A Common Stock, 11,000,000 shares of Class C Common Stock, 40,000,000
shares of Class D Common Stock, and 15,000,000 shares of Preferred Stock, par
value $1.00 per share (the "Company Preferred Stock"), of which 2,300,000 shares
have been designated as "Series A Convertible Preferred Stock" (the "Series A
Convertible Preferred Stock"), 500,000 shares have been designated as "Series A
Junior Participating Preferred Stock" (the "Series A Junior Preferred Stock")
and 6,200,000 shares have been designated as "8% Series B Cumulative Convertible
Preferred Stock". At the close of business on December 6, 1996, (i) 42,812,129
shares of Common Stock were issued and outstanding, all of which were validly
issued, fully paid and nonassessable and free of preemptive rights, (ii)
1,848,526.112 shares of Class A Common Stock were issued and outstanding, all of
which were validly issued, fully paid and nonassessable and free of preemptive
rights, (iii) 348,690 shares of Class C Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable and
free of preemptive rights, (iv) no shares of Class D Common Stock were
outstanding, (v) 2,300,000 shares of Series A Convertible Preferred Stock were
outstanding, all of which were validly issued, fully paid and nonassessable and
free of preemptive rights, (vi) no shares of Series A Junior Participating
Preferred Stock of the Company were outstanding and (vii) 4,751,208.9707 shares
of Series B Preferred Stock were outstanding, all of which were validly issued,
fully paid and nonassessable and free of preemptive rights. As of the date of
this Agreement, except as provided in the Company's Charter with respect to
Class A Common Stock, Class C Common Stock, Class D Common Stock, Series A
Convertible Preferred Stock and Series B Preferred Stock, except for the rights
to purchase shares of the Series A Junior Preferred Stock (the "Rights") issued
pursuant to the Rights Agreement dated as of June 11, 1987, as amended and
restated as of March 22, 1990, and as amended as of April 21, 1992, June 6,
1994, July 15, 1994 and November 16, 1995 (as so amended, the "Rights
Agreement"), between the Company and First Chicago Trust Company of New York, as
Rights Agent, and except
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for stock options covering not in excess of 6,100,000 shares of Common Stock and
rights to acquire not in excess of 600,000 shares under the Company's Employee
Discount Stock Purchase Plan, Bonus Equity Plan and Worldwide Savings Related
Stock Purchase Plan (collectively, the "Company Stock Options"), there are no
options, warrants, calls, rights or agreements to which the Company or any of
its Subsidiaries is a party or by which any of them is bound obligating the
Company or any of its Subsidiaries to issue or sell, or cause to be issued,
delivered or sold, additional shares of capital stock of the Company or any
Subsidiary or obligating the Company or any of its Subsidiaries to grant, extend
or enter into any such option, warrant, call, right or agreement. At such time
as the amount of outstanding RSC Class 1 Shares and shares of Class C Common
Stock shall in the aggregate be less than 1,500,000, RSC shall be entitled to
cause the mandatory redemption of all outstanding RSC Class 1 Shares for shares
of Common Stock (on a share-for-share basis) in compliance with the provisions
of Section 36 of the Canada Business Corporations Act and simultaneously
therewith the Company shall be entitled to repurchase at Cdn.$0.00001 per share
all outstanding shares of Class A Common Stock. At such time as the shares of
Class A Common Stock and Class C Common Stock shall in the aggregate be less
than 1,500,000, the Company shall be entitled to cause the mandatory conversion
of all outstanding shares of Class C Common Stock into shares of Common Stock on
a share-for-share basis and simultaneously therewith AAUK shall be entitled to
mandatorily redeem at 2 pence per share all outstanding Dividend Shares.
Following the actions contemplated in Section 7.14(c), there shall be
outstanding no shares of Class A Stock, shares of Class C Stock, RSC Class 1
Shares or Dividend Shares. Following the consummation of the Merger, each share
of Series A Convertible Preferred Stock shall cease to be convertible at the
option of a holder into shares of Common Stock but will, at the option of a
holder, be convertible solely into cash of $52.54 per share of Series A
Convertible Preferred Stock (assuming the purchase of Shares pursuant to the
Offer prior to March 22, 1997).
Except as set forth in the Company Filed SEC Documents (as defined in
Section 4.7), as of the date of this Agreement, there are no outstanding
contractual obligations of the Company or any of its Subsidiaries (i) to
repurchase, redeem or otherwise acquire any shares of capital stock of the
Company or (ii) to vote or to dispose of any shares of the capital stock of any
of the Company's Subsidiaries.
SECTION 4.4 Authority. The Board of Directors of the Company has
declared the Merger advisable, and the Company has all requisite power and
authority to enter into this Agreement and, subject to approval by the
stockholders of the Company of
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the Merger (if required), to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company,
subject to approval by the stockholders of the Company of the Merger (if
required). This Agreement has been duly executed and delivered by the Company
and (assuming the valid authorization, execution and delivery of this Agreement
by Parent and Sub) constitutes the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity. The only
stockholder action required in order to effect the Merger under the MGCL is
approval of the Merger by the holders of a majority of the shares of the Company
Common Capital Stock outstanding as of the record date for the Stockholders
Meeting (as defined in Section 7.1(a)(i)), all holders of the Company Common
Capital Stock voting together as a single class; provided, however, that if
Parent purchases an amount of Shares pursuant to the Offer sufficient to permit
the Merger to be effected in accordance with Section 3-106 of the MGCL, no
stockholder approval will be required.
SECTION 4.5 Consent and Approvals; No Violations. Except as set forth
in item 4.5 of the Company Letter, the execution and delivery by the Company of
this Agreement do not, and the consummation by the Company of the transactions
contemplated hereby and thereby and compliance by the Company with the
provisions hereof will not, result in any (a) material violation of, or material
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
the loss of a material benefit under, or result in the creation of any pledge,
claim, lien, charge, encumbrance or security interest of any kind or nature
whatsoever (collectively, "Liens") upon any of the material properties or
material assets of the Company or any of its Subsidiaries under, any provision
of the Charter or Bylaws of the Company or (b) violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit under, or result in the creation of any Lien upon any of the
material properties or material assets of the Company or any of its Subsidiaries
under, (i) any provision of the Charter, Bylaws or comparable organization
documents of any of the Significant Subsidiaries of the Company, (ii) any loan
or credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument,
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permit, concession, franchise or license applicable to the Company or any of its
Significant Subsidiaries or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Significant Subsidiaries or any of their respective properties or assets, other
than, in the case of clause (i), (ii) or (iii), any such violations, defaults,
rights, losses or Liens, that, individually or in the aggregate, would not have
a Material Adverse Effect on the Company. No filing or registration with, or
authorization, consent or approval of, any domestic (federal and state), foreign
or supranational court, commission, governmental body, regulatory agency,
authority or tribunal (a "Governmental Entity") is required by or with respect
to the Company or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by the Company or is necessary for the consummation
of the Offer, the Merger and the other transactions contemplated by this
Agreement, except for (i) in connection, or in compliance, with the provisions
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and the Securities Exchange Act of 1934, as amended (together with
the rules and regulations promulgated thereunder, the "Exchange Act"), (ii) the
filing of Articles of Merger with the SDAT and appropriate documents with the
relevant authorities of other states in which the Company or any of its
Subsidiaries is qualified to do business, (iii) such filings and consents as may
be required under any environmental, health or safety law or regulation
pertaining to any notification, disclosure or required approval triggered by the
Offer, the Merger or the other transactions contemplated by this Agreement, (iv)
such filings, authorizations, orders and approvals as may be required by state
takeover laws (the "State Takeover Approvals"), (v) such filings as may be
required in connection with the taxes described in Section 7.6, (vi) such
filings and consents as may be required by insurance or insurance brokerage laws
or regulations, (vii) in connection, or in compliance, with the provisions of
the Competition Act (Canada) (the "Competition Act"), (viii) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under the laws of any foreign country in which the
Company or any of its Subsidiaries conducts any business or owns any property or
assets and (ix) such other consents, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
Item 4.5 of the Company Letter sets forth the estimated amount which would be
payable to each of the top twenty highest paid officers of the Company in the
United States under (i) any employment, severance, continuity or similar
agreement or (ii) any cancellation and cash-out of Company Stock Options, in
each case assuming the purchase of Shares pursuant to
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the Offer, the consummation of the Merger and the termination without cause of
such person's employment.
SECTION 4.6 SEC Documents and Other Reports. The Company has filed all
required documents with the SEC since January 1, 1993 (the "Company SEC
Documents"). As of their respective dates, the Company SEC Documents complied in
all material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, as the case may be, and as
of their respective dates none of the Company SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the Company SEC Documents comply as of
their respective dates as to form in all material respects with the then
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of the unaudited statements,
as permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly present the consolidated financial position of the Company and its
consolidated Subsidiaries as at the dates thereof and the consolidated results
of their operations and their consolidated cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein). The Company has
not, since December 31, 1995, made any change in the accounting policies applied
in the preparation of financial statements other than as described in the
Company Filed SEC Documents (as hereinafter defined).
SECTION 4.7 Absence of Material Adverse Change. Except as disclosed in
the Company SEC Documents filed and publicly available prior to the date of this
Agreement (the "Company Filed SEC Documents"), since September 30, 1996, there
has been no event other than ordinary business operating results and general
insurance brokerage industry conditions and contingencies disclosed to Parent
prior to the date hereof causing a Material Adverse Change (as defined in
Section 10.3) with respect to the Company.
SECTION 4.8 Information Supplied. None of the information supplied or
to be supplied by the Company specifically for inclusion or incorporation by
reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
information to be filed by the Company in connection with the Offer pursuant to
Rule 14f-1 promulgated under the Exchange Act
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(the "Information Statement") or (iv) the proxy statement (together with any
amendments or supplements thereto, the "Proxy Statement") relating to the
Stockholders Meeting, will, in the case of the Offer Documents, the Schedule
14D-9 and the Information Statement, at the respective times the Offer
Documents, the Schedule 14D-9 and the Information Statement are filed with the
SEC or first published, sent or given to the Company's stockholders, or, in the
case of the Proxy Statement, at the time the Proxy Statement is first mailed to
the Company's stockholders or at the time of the Stockholders Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Schedule 14D-9, the Information Statement and the Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by
Parent or Sub specifically for inclusion or incorporation by reference therein.
SECTION 4.9 Compliance with Laws. Except as disclosed in the Company
Filed SEC Documents, the Company and its Subsidiaries are in compliance with all
applicable laws, regulations, orders, judgments and decrees except where the
failure to so comply would not have a Material Adverse Effect on the Company.
SECTION 4.10 Licenses and Permits. The Company and its Significant
Subsidiaries have such certificates, permits, licenses, franchises, consents,
approvals, orders, authorizations and clearances from appropriate Governmental
Entities (the "Company Licenses") as are necessary to conduct their businesses
in the manner described in the Company SEC Documents and as currently conducted,
and all such Company Licenses are valid and in full force and effect, except
such licenses which the failure to have or to be in full force and effect,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company. The Company and its Significant Subsidiaries are in compliance in
all material respects with their respective obligations under the Company
Licenses, with such exceptions as, individually or in the aggregate, would not
have a Material Adverse Effect on the Company.
SECTION 4.11 Tax Matters. The Company has filed all material tax
returns and has paid all taxes shown to be due on such tax returns except for
those taxes being contested by the Company in good faith.
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SECTION 4.12 Liabilities. Except as reflected or reserved against in
the financial statements included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, or disclosed in the footnotes thereto, as
of December 31, 1995, the Company and its Subsidiaries had no liabilities
(including, without limitation, tax liabilities), absolute or contingent, that
were material, either individually or in the aggregate, to the Company and its
Subsidiaries taken as a whole or not incurred in the ordinary course of
business. Except as so reflected, reserved or disclosed, as of such date, the
Company and its Subsidiaries had no commitments which were materially adverse,
either individually or in the aggregate, to the Company and its Subsidiaries
taken as a whole.
SECTION 4.13 Opinion of Financial Advisor. The Company has received
the opinion of First Boston, dated the date hereof, to the effect that, as of
the date hereof, the consideration to be received in the Offer and the Merger
by the Company's stockholders is fair to the Company's stockholders from a
financial point of view.
SECTION 4.14 State Takeover Statutes; Rights Agreement. The Board of
Directors of the Company has duly adopted a resolution that is a valid action of
such Board, is binding on the Company and constitutes a valid and irrevocable
exemption from Section 3-602 of the MGCL as to the transactions contemplated by
this Agreement and the Preferred Stock Purchase Agreement. By reason of Section
4 of Article IX of the Company's By-Laws, the transactions contemplated by this
Agreement and the Preferred Stock Purchase Agreement are approved for purposes
of, and exempt from the provisions of, Subtitle 7 of Title 3 of the MGCL. The
Company has heretofore provided Parent with a complete and correct copy of the
Rights Agreement, including all amendments (including the amendment referred to
in the immediately following sentence) and exhibits thereto. The Board of
Directors of the Company has amended the Rights Agreement to provide that a
Distribution Date, a Section 11(a)(ii) Event or a Section 13 Transaction (as
such terms are defined in the Rights Agreement) shall not occur or be deemed to
occur, the Rights shall not separate (to the extent the Rights Agreement
otherwise provides for such separation) or become exercisable, and neither
Parent nor Sub shall become an Acquiring Person (as defined in the Rights
Agreement) as a result of the execution, delivery or performance of this
Agreement or the Preferred Stock Purchase Agreement, the announcement, making or
consummation of the Offer, the acquisition of shares of capital stock pursuant
to the Offer, the Merger or the Preferred Stock Purchase Agreement, the
consummation of the Merger or any other transactions contemplated by this
Agreement or the Preferred Stock Purchase Agreement. No other action is required
to prevent the holders of Rights from
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having any right under the Rights Agreement as a result of the Offer, the Merger
or any other transaction contemplated by this Agreement or the Preferred Stock
Purchase Agreement.
SECTION 4.15 Brokers. No broker, investment banker, financial advisor
or other person, other than First Boston, the fees and expenses of which will be
paid by the Company (and are reflected in an agreement between First Boston and
the Company, a copy of which has been furnished to Parent), is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
OF PARENT AND SUB
-----------------
Parent and Sub represent and warrant to the Company as follows:
SECTION 5.1 Organization. Each of Parent and Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now being conducted, except where the
failure to be so organized, validly existing or in good standing would not have
a Material Adverse Effect on Parent or Sub or prevent or materially delay the
consummation of the Offer or the Merger.
SECTION 5.2 Authority. Parent and Sub have requisite corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Parent and Sub and the consummation by Parent and Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and Sub. This Agreement has been duly
executed and delivered by Parent and Sub, as the case may be, and (assuming the
valid authorization, execution and delivery of this Agreement by the Company)
constitutes a valid and binding obligation of each of Parent and Sub enforceable
against them in accordance with its terms, except that such enforceability (i)
may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to the enforcement of creditors' rights generally and (ii)
is subject to general principles of equity.
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SECTION 5.3 Consents and Approvals; No Violations. The execution and
delivery by Parent and Sub of this Agreement do not, and the consummation by
Parent and Sub of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any (a) material violation of, or material
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
the loss of a material benefit under, or result in the creation of any Lien upon
any of the material properties or material assets of Parent or any of its
Subsidiaries under, any provision of the Certificate of Incorporation or Bylaws
of Parent or Sub or (b) violation of, or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or the loss of a material benefit
under, or result in the creation of any Lien upon any of the material properties
or material assets of Parent or any of its Subsidiaries under, (i) any provision
of the Certificate of Incorporation, Bylaws or comparable organization documents
of any of Significant Subsidiaries of Parent, (ii) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to Parent or any of its Significant
Subsidiaries or (iii) any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Parent or any of its Significant Subsidiaries or any
of their respective properties or assets, other than, in the case of clause (i),
(ii) or (iii), any such violations, defaults, rights, losses or Liens, that,
individually or in the aggregate, would not have a Material Adverse Effect on
Parent. No filing or registration with, or authorization, consent or approval
of, any Governmental Entity is required by or with respect to Parent or any of
its Subsidiaries in connection with the execution and delivery of this Agreement
by Parent or Sub or is necessary for the consummation of the Offer, the Merger
and the other transactions contemplated by this Agreement, except for (i) in
connection, or in compliance, with the provisions of the HSR Act and the
Exchange Act, (ii) the filing of Articles of Merger and appropriate documents
with the relevant authorities of other states in which Parent or any of its
Subsidiaries is qualified to do business, (iii) such filings and consents as may
be required under any environmental, health or safety law or regulation
pertaining to any notification, disclosure or required approval triggered by the
Offer, the Merger or the other transactions contemplated by this Agreement, (iv)
such filings, authorizations, orders and approvals as may be required to obtain
the State Takeover Approvals, (v) such filings as may be required in connection
with the taxes described in Section 7.6, (vi) such filings and consents as may
be required by insurance or insurance brokerage laws or regulations, (vii) in
connection, or in compliance, with the provisions of the Competition Act, (viii)
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such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under the laws of any foreign country in which
Parent or any of its Subsidiaries conducts any business or owns any property or
assets and (ix) such other consents, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
SECTION 5.4 Information Supplied. None of the information supplied or
to be supplied by Parent or Sub specifically for inclusion or incorporation by
reference in (i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the
Information Statement or (iv) the Proxy Statement will, in the case of the Offer
Documents, the Schedule 14D-9 and the Information Statement, at the respective
times the Offer Documents, the Schedule 14D-9 and the Information Statement are
filed with the SEC or first published, sent or given to the Company's
stockholders, or, in the case of the Proxy Statement, at the time the Proxy
Statement is first mailed to the Company's stockholders or at the time of the
Stockholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Offer Documents will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made by Parent or Sub
with respect to statements made or incorporated by reference therein based on
information supplied by the Company specifically for inclusion or incorporation
by reference therein.
SECTION 5.5 Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as contemplated
hereby.
SECTION 5.6 Brokers. No broker, investment banker, financial advisor
or other person, other than Lazard Freres & Co., LLC, the fees and expenses of
which will be paid by Parent, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent or Sub.
SECTION 5.7 Financing. Parent will have, and shall provide Sub with,
the funds necessary to consummate the Offer and the Merger and the transactions
contemplated hereby in accordance with the terms hereof.
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ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
-----------------------------------------
SECTION 6.1 Conduct of Business by the Company Pending the Merger.
During the period from the date of this Agreement until such time as Parent's
designees shall constitute a majority of the Board of Directors of the Company,
the Company shall, and shall cause each of its Subsidiaries to, in all material
respects carry on its business in the ordinary course of its business as
currently conducted and, to the extent consistent therewith, use reasonable best
efforts to preserve intact its current business organizations, keep available
the services of its current officers and key employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that its goodwill and ongoing business shall not be materially
impaired. Without limiting the generality of the foregoing, and except as
otherwise expressly contemplated by this Agreement, during such period, the
Company shall not, and shall not permit any of its Subsidiaries to, without the
prior written consent of Parent (which consent shall not be unreasonably
withheld):
(a) (w) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its capital
stock, or otherwise make any payments to its stockholders in their capacity as
such (other than regular quarterly dividends of not more than $.90625 per share
on the Series A Convertible Preferred Stock and of not more than $.025 per share
on the Common Stock, a regular quarterly payment-in-kind dividend in respect of
the Series B Preferred Stock on December 15, 1996 and thereafter cash dividends
of not more than $1.00 per share on the Series B Preferred Stock, in each case
declared and paid in on dates consistent with past practice), (x) split, combine
or reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock or (y) except as required under existing employee benefit plans,
agreements, policies, awards or arrangements in effect on the date of this
Agreement, or pursuant to the Company's Employee Stock Option Exchange Program
communicated to the Company Options Recipients on November 26, 1996, purchase,
redeem or otherwise acquire any shares of its capital stock or those of any
Subsidiary or any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities;
(b) except as required under existing employee benefit plans,
agreements, policies, awards or arrangements in effect on
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the date of this Agreement, or pursuant to the Company's Employee Stock Option
Exchange Program communicated to the Company Options Recipients on November 26,
1996, issue, deliver, sell, pledge, dispose of or otherwise encumber any shares
of its capital stock, any other voting securities or equity equivalent or any
securities convertible into, or any rights, warrants or options to acquire any
such shares, voting securities, equity equivalent or convertible securities
(other than the issuance of shares of Common Stock upon the exercise of Company
Stock Options outstanding on the date of this Agreement in accordance with their
current terms, the issuance of shares of Common Stock upon the retraction,
redemption or conversion of RSC Class 1 Shares, or shares of Class C Common
Stock, Series A Convertible Preferred Stock or Series B Preferred Stock, in each
case in accordance with the terms thereof, and the issuance on December 15, 1996
of shares of Series B Preferred Stock as a regular quarterly payment-in-kind
dividend in accordance with the terms thereof);
(c) amend its Charter or Bylaws or other similar organizational
documents;
(d) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of or equity in, or by any
other manner, any business or any corporation, partnership, association or other
business organization or division thereof or otherwise acquire or agree to
acquire any assets, other than (A) transactions that are in the ordinary course
of business consistent with past practice and not material to the Company and
its Subsidiaries taken as a whole and (B) acquisitions of one or more insurance
brokerage businesses with respect to which the aggregate amount of consideration
paid or payable by the Company and its Subsidiaries (valuing any non-cash
consideration at its fair market value and any contingent payments at the
maximum amount payable and treating any liabilities assumed as consideration
paid) does not exceed $15,000,000;
(e) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets, other than transactions that are in the
ordinary course of business consistent with past practice and which involve
assets having an aggregate fair market value or book value not in excess of
$10,000,000;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others, except for borrowings or guarantees incurred in the
ordinary course of business consistent with past practice, or make any loans,
advances or capital contributions to, or other investments in,
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any other person, other than to or in the Company or any wholly-owned Subsidiary
of the Company;
(g) alter (through merger, liquidation, reorganization, restructuring
or in any other fashion) the corporate structure or ownership of the Company or
any Subsidiary, except as contemplated by this Agreement or as set forth in item
6.1(g) of the Company Letter;
(h) enter into or adopt, or amend any existing, severance plan,
agreement or arrangement or enter into or amend any Company Plan (as defined in
Section 7.13) or employment or consulting agreement, other than as required by
law or as contemplated by Sections 7.4 and 7.13;
(i) except as otherwise provided in Section 7.4 or as required under
existing plans, agreements, policies, awards or arrangements in effect on the
date of this Agreement, or pursuant to the Company's Employee Stock Option
Exchange Program communicated to the Company Options Recipients on November 26,
1996, increase the compensation payable or to become payable to its officers or
employees, except, in the case of employees who are not officers, for increases
in the ordinary course of business consistent with past practice, or grant any
severance or termination pay to, or enter into any employment or severance
agreement, or establish, adopt, enter into, or amend in any material respect or
take action to enhance in any material respect or accelerate any rights or
benefits under, any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer or
employee, except, in each case, as may be required to comply with applicable law
or regulation;
(j) violate or fail to perform any material obligation or duty
imposed upon it by any applicable federal, state or local law, rule, regulation,
guideline or ordinance which would be reasonably expected to have a Material
Adverse Effect on the Company;
(k) redeem the Rights or, other than as contemplated by Section 4.14,
amend the Rights Agreement;
(l) amend the Stock Purchase and Sale Agreement, dated as of June 6,
1994, between the Company and American International Group, Inc.;
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(m) make any material change in its method of accounting;
(n) take any of the actions prohibited in item 6.1(n) of the Company
Letter; or
(o) authorize, recommend, propose or announce an intention to do any
of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
The Company shall promptly advise Parent orally and in writing of any
change or event having, or which could reasonably be expected to have, a
Material Adverse Effect on the Company or which could prevent or materially
delay the consummation of the Offer or the Merger.
SECTION 6.2 No Solicitation. From and after the date hereof, the
Company will not, and will not permit any of its or its Subsidiaries' officers,
directors or employees to, and the Company will use its reasonable best efforts
to cause all of its and its Subsidiaries' attorneys, financial advisors, agents
and other representatives not to, directly or indirectly, solicit, initiate or
knowingly encourage (including by way of furnishing information) any Takeover
Proposal, or engage in or continue discussions or negotiations relating thereto;
provided, however, that the Company may engage in discussions or negotiations
with, or furnish information concerning the Company and its business, properties
or assets to, any third party which makes a Takeover Proposal (as hereinafter
defined) if the Board of Directors of the Company determines, in its good faith
judgement, based on the opinion of independent outside legal counsel to the
Company, that failing to take such action would constitute a breach of such
Board's duties under applicable law; provided, further, that nothing in this
Section 6.2 shall prevent the Company or the Board from taking, and disclosing
to the Company's stockholders, a position contemplated by Rules 14d-9 and 14e-2
promulgated under the Exchange Act with regard to any tender offer or from
making such disclosure to the Company's stockholders which, as advised in an
opinion of the Company's independent outside legal counsel, is required under
applicable law; provided, further, that the Board shall not recommend that the
stockholders of the Company tender their shares in connection with any such
tender offer unless the Board determines, in its good faith judgment, based on
the opinion of independent outside legal counsel to the Company, that failing to
take such action would constitute a breach of the Board's duties under
applicable law. The Company will promptly notify Parent of any Takeover
Proposal, including the material terms and conditions thereof and the identity
of the person or group making such Takeover Proposal, and will promptly notify
Parent of any determination by the Company's Board of
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Directors that a Superior Proposal has been made. As used in this Agreement,
(i) "Takeover Proposal" shall mean any proposal or offer, other than a proposal
or offer by Parent or any of its Subsidiaries for a tender or exchange offer, a
merger, consolidation or other business combination involving the Company or any
of its Subsidiaries or any proposal to acquire in any manner a substantial
equity interest in, or a substantial portion of the assets of, the Company or
any of its Subsidiaries and (ii) "Superior Proposal" shall mean a bona fide
proposal or offer made by a third party to acquire the Company pursuant to a
tender or exchange offer, a merger, consolidation or other business combination
or a sale of all or substantially all of the assets of the Company and its
Subsidiaries on terms which a majority of the members of the Board of Directors
of the Company, having received the advice of an independent financial advisor,
determines in their good faith reasonable judgment to be more favorable to the
Company's stockholders than the transactions contemplated hereby and for which
any required financing is committed or which a majority of such members, having
received the advice of an independent financial advisor, determines in their
good faith reasonable judgment is reasonably capable of being obtained by such
third party.
SECTION 6.3 Third Party Standstill Agreements. During the period
from the date of this Agreement through the Effective Time, the Company shall
not terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which the Company or any of its Subsidiaries is a party
(other than any involving Parent).
SECTION 6.4 Other Actions. Except as expressly contemplated or
permitted by this Agreement or except as set forth in the Company Letter, the
Company shall not, and shall not permit any of its Subsidiaries to, take any
action that would, or that could reasonably be expected to, result in (i) any of
the representations and warranties of the Company set forth in this Agreement
that are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect, or (iii) any of the Offer Conditions not being satisfied
(subject to the Company's right to take actions specifically permitted by
Section 6.2).
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ARTICLE VII
ADDITIONAL AGREEMENTS
---------------------
SECTION 7.1 Stockholder Approval; Preparation of Proxy Statement.
(a) If approval of the Merger by stockholders of the Company (the "Company
Stockholder Approval") is required by law, the Company shall, at Parent's
request, as soon as practicable following the expiration of the Offer, duly
call, give notice of, convene and hold a meeting of its stockholders (the
"Stockholders Meeting") for the purpose of obtaining the Company Stockholder
Approval. The Stockholders Meeting shall be held as soon as practicable
following the purchase of Shares pursuant to the Offer. The Company shall,
through its Board of Directors, but subject to the duties of its Board of
Directors under applicable law as determined by the Board of Directors in good
faith on the basis of the opinion of the Company's outside independent legal
counsel, recommend to its stockholders that the Company Stockholder Approval be
given. Notwithstanding the foregoing, if Sub or any other Subsidiary of Parent
shall acquire shares entitled to cast 90% or more of all the votes entitled to
be cast on the Merger, the parties shall, at the request of Parent, take all
necessary and appropriate action to cause the Merger to become effective as soon
as reasonably practicable after the expiration of the Offer without a
Stockholders Meeting in accordance with Section 3-106 of the MGCL.
(b) If the Company Stockholder Approval is required by law, the
Company shall, at Parent's request, as soon as practicable following the
expiration of the Offer, prepare and file a preliminary Proxy Statement with the
SEC and shall use its reasonable best efforts to respond to any comments of the
SEC or its staff and to cause the Proxy Statement to be mailed to the Company's
stockholders as promptly as practicable after responding to all such comments to
the satisfaction of the staff. The Company shall notify Parent promptly of the
receipt of any comments from the SEC or its staff and of any request by the SEC
or its staff for amendments or supplements to the Proxy Statement or for
additional information and will supply Parent with copies of all correspondence
between the Company or any of its representatives, on the one hand, and the SEC
or its staff, on the other hand, with respect to the Proxy Statement or the
Merger. If at any time prior to the Stockholders Meeting there shall occur any
event that should be set forth in an amendment or supplement to the Proxy
Statement, the Company shall promptly prepare and mail to its stockholders such
an amendment or supplement. The Company shall not mail any Proxy Statement, or
any amendment or supplement thereto, to which Parent reasonably objects. Parent
shall cooperate with the Company in the
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preparation of the Proxy Statement or any amendment or supplement thereto.
(c) Parent agrees to cause all shares of the Common Stock purchased
pursuant to the Offer and all other shares of capital stock of the Company
entitled to vote on the Merger owned by Parent or any Subsidiary of Parent to be
voted in favor of the Company Stockholder Approval.
SECTION 7.2 Access to Information. Subject to currently existing
contractual and legal restrictions applicable to the Company, the Company shall,
and shall cause each of its Subsidiaries to, upon reasonable notice, afford to
Parent and to the officers, employees, accountants, counsel, actuaries,
financial advisors and other representatives of Parent reasonable access to, and
permit them to make such inspections as they may reasonably require of, during
normal business hours (to the extent feasible without undue interference with or
disruption to the operation of the Company, or any of its business units) during
the period from the date of this Agreement through the Effective Time, all their
respective properties, books, contracts, commitments and records (including,
without limitation, the work papers of independent accountants and actuaries)
and, during such period, the Company shall, and shall cause each of its
Subsidiaries to, furnish promptly to Parent (i) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of federal or state securities laws and (ii) all
other information concerning its business, properties and personnel as Parent
may reasonably request. All information obtained by Parent pursuant to this
Section 7.2 shall be kept confidential in accordance with the Confidentiality
Agreement dated November 29, 1996, between Parent and the Company.
SECTION 7.3 Fees and Expenses. (a) Except as provided in this
Section 7.3 and Section 7.6, whether or not the Merger is consummated, all costs
and expenses incurred by a party hereto in connection with this Agreement and
the transactions contemplated hereby, including, without limitation, the fees
and disbursements of counsel, financial advisors and accountants, shall be paid
by the party incurring such costs and expenses, provided that all printing
expenses and filing fees shall be divided equally between Parent and the
Company.
(b) The Company shall pay, or cause to be paid, in same day funds to
Parent $35 million (the "Termination Fee") upon demand if: (i) Parent or Sub
terminates this Agreement under Section 9.1(d) following the occurrence of any
event set forth in clause (i) or (ii) of paragraph (c) of Exhibit A and within
six months following such termination a Third Party Acquisition Event
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occurs; (ii) the Company terminates this Agreement pursuant to Section 9.1(e);
or (iii) this Agreement is terminated and prior thereto a Third Party
Acquisition Event (as defined below) occurred.
(c) Parent shall pay, or cause to be paid, in same day funds to the
Company $35 million (the "Parent Minimum Damages") upon demand if the Company
shall have terminated this Agreement pursuant to Section 9.1(f), including,
without limitation, based upon a breach by Parent or Sub or its obligations
under Section 7.11; provided, however, that the Parent Minimum Damages shall be
repaid to Parent if, within six months following such termination, a Third Party
Acquisition Event shall occur having a value per share of Common Stock of not
less than the Offer Price.
A "Third Party Acquisition Event" means any of the following events:
(A) any person, corporation, partnership or other entity or group (such person,
corporation, partnership or other entity or group being referred to hereinafter,
singularly or collectively, as a "Person"), other than Parent or its
Subsidiaries, acquires or becomes the beneficial owner of 30% or more of the
outstanding shares of the Company Common Capital Stock; (B) any new group is
formed which, at the time of formation, beneficially owns 30% or more of the
outstanding shares of the Company Common Capital Stock (other than a group which
includes or may reasonably be deemed to include Parent or any of its
Subsidiaries); (C) the Company enters into an agreement providing for a merger
or other business combination involving the Company or the acquisition of a
substantial interest in, or a substantial portion of the assets, business or
operations of, the Company and its subsidiaries (other than the transactions
contemplated by this Agreement); or (D) any Person (other than Parent or its
Subsidiaries) is granted any option or right, conditional or otherwise, to
acquire or otherwise become the beneficial owner of shares of the Company Common
Capital Stock that results or would result in such Person being the beneficial
owner of 30% or more of the outstanding shares of the Company Common Capital
Stock. For purposes of this Section 7.3(b), the terms "group" and "beneficial
owner" shall be defined by reference to Section 13(d) of the Exchange Act.
SECTION 7.4 Options. (a) Prior to the commencement of the Offer, the
Board of Directors of the Company or the Compensation Committee of the Board of
Directors of the Company (the "Committee") shall adopt procedures pursuant to
which each outstanding Company Stock Option, stock appreciation right, limited
stock appreciation right and other stock based award (an "Option") which is
exercisable immediately prior to the consummation of the Offer in accordance
with the terms of the applicable plan (collectively, the "Stock Option Plans"),
may be
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exercised by the holder thereof by the delivery to the Company of a notice of
exercise prior to the consummation of the Offer. Upon the consummation of the
Offer, each Option so exercised shall be canceled and promptly thereafter the
Company shall deliver to the holder thereof cash in an amount equal to (i) the
product of (x) the number of shares of Common Stock subject or related to such
Option and (y) the excess, if any, of the Merger Consideration over the exercise
or purchase price per share of Common Stock subject or related to such Option,
minus (ii) all applicable federal, state and local taxes required to be withheld
by the Company.
(b) Prior to the commencement of the Offer, the Board of Directors of
the Company or the Committee shall take action in accordance with the terms of
the Stock Option Plans to cause each Option outstanding immediately following
the consummation of the Offer, whether or not then exercisable, to become fully
exercisable. The Board of Directors of the Company or the Committee shall also
adopt procedures pursuant to which each such Option may be exercised by the
holder thereof by the delivery to the Company of a notice of exercise prior to
the Effective Time. At the Effective Time, each such Option so exercised shall
be canceled and promptly thereafter the Company shall deliver to the holder
thereof cash in an amount equal to (i) the product of (x) the number of shares
of Common Stock subject or related to such Option and (y) the excess, if any, of
the Merger Consideration over the exercise or purchase price per share of Common
Stock subject or related to such Option minus (ii) all applicable federal, state
and local taxes required to be withheld by the Company.
(c) The Company will use its reasonable best efforts to ensure that
immediately following the Effective Time, each outstanding Option which has not
theretofore been exercised by the holder thereof shall be canceled (whether or
not such holder has delivered the acknowledgment referred to in the proviso to
this sentence), and promptly thereafter Parent shall deliver to the holder
thereof cash in an amount equal to (i) the product of (x) the number of shares
of Common Stock subject or related to such Option and (y) the excess, if any, of
the Merger Consideration over the exercise or purchase price per share of Common
Stock subject or related to such Option, minus (ii) all applicable federal,
state and local taxes required to be withheld by the Company; provided, however,
that any such payment to a holder of an Option so canceled shall be conditioned
upon the delivery to Parent by such holder of a receipt in writing acknowledging
the receipt by such holder of such payment in exchange for the cancellation of
all Options held by such holder. For purposes of this subsection (c), options
offered under the Company's Employee Discount Stock Purchase Plan shall be
deemed
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outstanding only to the extent of employees' elections to participate therein as
in effect on the date of purchase of Shares pursuant to the Offer. No further
options shall be granted under any Stock Option Plan after the date of this
Agreement except pursuant to the normal operation of the Company's Employee
Discount Stock Purchase Plan, and no further Options shall be granted thereunder
after the purchase of Shares pursuant to the Offer.
(d) Prior to the commencement of the Offer, the Board of Directors of
the Company or the Committee shall take action in accordance with the terms of
the Stock Option Plans and pursuant to all other plans and agreements providing
for the award of restricted Common Stock to cause the restrictions on the shares
of restricted Common Stock granted under such plans and agreements to lapse
effective upon the consummation of the Offer and to adopt procedures to enable
all holders thereof to tender such shares of Common Stock pursuant to the terms
of the Offer.
SECTION 7.5 Public Announcements. Parent and the Company will consult
with each other before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by applicable law or by
obligations pursuant to any listing agreement with any national securities
exchange.
SECTION 7.6 Real Estate Transfer Tax. Parent and the Company agree
that either the Surviving Corporation or Parent will pay any state or local tax
which is attributable to the transfer of the beneficial ownership of the
Company's or its Subsidiaries' real property, if any (collectively, the
"Transfer Taxes"), and any penalties or interest with respect to the Transfer
Taxes, payable in connection with the consummation of the Offer and the Merger.
The Company agrees to cooperate with Parent in the filing of any returns with
respect to the Transfer Taxes, including supplying in a timely manner a complete
list of all real property interests held by the Company and its Subsidiaries and
any information with respect to such property that is reasonably necessary to
complete such returns. The portion of the consideration allocable to the real
property of the Company and its Subsidiaries shall be determined by Parent in
its reasonable discretion. The stockholders of the Company shall be deemed to
have agreed to be bound by the allocation established pursuant to this Section
7.6 in the preparation of any return with respect to the Transfer Taxes.
SECTION 7.7 State Takeover Laws. If any "fair price" or "control share
acquisition" statute or other similar statute
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or regulation shall become applicable to the transactions contemplated hereby,
Parent and the Company and their respective Boards of Directors shall use their
reasonable best efforts to grant such approvals and take such actions as are
necessary so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
minimize the effects of any such statute or regulation on the transactions
contemplated hereby.
SECTION 7.8 Indemnification; Directors and Officers Insurance. (a)
From and after the Effective Time, Parent agrees to cause the Surviving
Corporation to exculpate, indemnify and hold harmless all past and present
officers and directors of the Company and its Subsidiaries (the "Indemnified
Parties") to the same extent such persons are currently exculpated and
indemnified by the Company pursuant to the Company's Charter and By-Laws for
acts or omissions occurring at or prior to the Effective Time. Parent shall
cause the Surviving Corporation to provide, for an aggregate period of not less
than six years from the Effective Time, the Company's current directors and
officers an insurance and indemnification policy that provides coverage for
events occurring prior to the Effective Time (the "D&O Insurance") that is no
less favorable than the Company's existing policy or, if substantially
equivalent insurance coverage is unavailable, the best available coverage;
provided, however, that the Surviving Corporation shall not be required to pay
an annual premium for the D&O Insurance in excess of 175 percent of the last
annual premium paid prior to the date hereof, but in such case shall purchase as
much coverage as possible for such amount.
(b) Any Indemnified Party wishing to claim indemnification under
Section 7.8(a), upon learning of any claim, action, suit, proceeding or
investigation subject to indemnification thereunder, shall promptly notify the
Surviving Corporation thereof. An Indemnified Party may select counsel to
represent him or her in connection with any of the foregoing, which counsel
shall be reasonably acceptable to the Surviving Corporation, and the Surviving
Corporation will cooperate in the defense of any such matter; provided, however,
that the Surviving Corporation shall not be liable for any settlement effected
without its written consent; and provided, further, that the Surviving
Corporation shall not be obligated to pay the fees and disbursements of more
than one counsel for all Indemnified Parties in any single matter except to the
extent that, in the opinion of counsel for the Indemnified Parties, two or more
of such Indemnified Parties have conflicting interests in the outcome of such
matter. The Surviving Corporation shall not have any obligation hereunder to an
Indemnified Party if and when a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final, that the
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indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
SECTION 7.9 Notification of Certain Matters. Parent shall give prompt
notice to the Company, and the Company shall give prompt notice to Parent, of:
(i) the occurrence, or non-occurrence, of any event the occurrence, or non-
occurrence, of which would be likely to cause (x) any representation or warranty
contained in this Agreement that is not qualified as to materiality to be untrue
or inaccurate in any material respect, (y) any representation or warranty
contained in this Agreement that is qualified as to materiality to be untrue or
inaccurate in any respect, or (z) any covenant, condition or agreement contained
in this Agreement not to be complied with or satisfied; and (ii) any failure of
Parent or the Company, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 7.9 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
SECTION 7.10 Board of Directors. Promptly after such time as Sub
acquires Shares pursuant to the Offer, Sub shall be entitled to designate at its
option up to that number of directors, rounded to the nearest whole number, of
the Company's Board of Directors, subject to compliance with Section 14(f) of
the Exchange Act, as will make the percentage of the Company's directors
designated by Sub equal to the aggregate voting power of the Shares of Common
Stock held by Parent or any of its Subsidiaries (assuming the exercise of all
outstanding options to purchase, and the conversion or exchange of all
securities convertible or exchangeable into shares of the Company Common Capital
Stock, other than the conversion of the shares of Class B Preferred Stock);
provided, however, that in the event that Sub's designees are elected to the
Board of Directors of the Company, until the Effective Time, such Board of
Directors shall have at least three directors who are directors on the date of
this Agreement and who are not officers of the Company (the "Independent
Directors"); and provided, further that, in such event, if the number of
Independent Directors shall be reduced below three for any reason whatsoever,
the remaining Independent Directors shall designate a person to fill such
vacancy who shall be deemed to be an Independent Director for purposes of this
Agreement or, if no Independent Directors then remain, the other directors shall
designate three persons to fill such vacancies who shall not be officers or
affiliates of the Company or any of its Subsidiaries, or officers or affiliates
of Parent or any of its Subsidiaries, and such persons shall be deemed to be
Independent Directors for purposes of this Agreement. Subject to applicable law,
the Company shall take all action requested by
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Parent which is reasonably necessary to effect any such election, including
mailing to its stockholders the Information Statement containing the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder, and the Company agrees to make such mailing with the mailing of the
Schedule 14D-9 (provided that Sub shall have provided to the Company on a timely
basis all information required to be included in the Information Statement with
respect to Sub's designees). In connection with the foregoing, the Company will
promptly, at the option of Parent, either increase the size of the Company's
Board of Directors and/or obtain the resignation of such number of its current
directors as is necessary to enable Sub's designees to be elected or appointed
to the Company's Board of Directors as provided above.
SECTION 7.11 Reasonable Best Efforts. Each of the Company, Parent
and Sub agrees to use its reasonable best efforts to cause the purchase of
Shares pursuant to the Offer and the consummation of the Merger to occur as soon
as practicable. Without limiting the foregoing, (a) each of the Company, Parent
and Sub agree to use its reasonable best efforts to take, or cause to be taken,
all actions necessary to comply promptly with all legal requirements that may be
imposed on itself with respect to the Offer and the Merger (which actions shall
include furnishing all information required under the HSR Act, including,
without limitation, with respect to the transactions contemplated by the
Preferred Stock Purchase Agreement, and in connection with approvals of or
filings with any other Governmental Entity) and shall promptly cooperate with
and furnish information to each other in connection with any such requirements
imposed upon any of them or any of their Subsidiaries in connection with the
Offer and the Merger and (b) each of the Company, Parent and Sub shall, and
shall cause its Subsidiaries to, use its reasonable best efforts to obtain (and
shall cooperate with each other in obtaining) any consent, authorization, order
or approval of, or any exemption by, any Governmental Entity or other public or
private third party required to be obtained or made by Parent, Sub, the Company
or any of their Subsidiaries in connection with the Offer and the Merger or the
taking of any action contemplated thereby or by this Agreement. Notwithstanding
anything to the contrary contained in this Agreement, (i) the Company shall not
be obligated to use its reasonable best efforts or to take any action pursuant
to this Section 7.11 if the Board of Directors of the Company shall determine,
in its good faith judgment, based on the opinion of independent outside legal
counsel to the Company, that such action would constitute a breach of such
Board's duties under applicable law, and (ii) in connection with any filing or
submission required or action to be taken by Parent, the Company or any of its
respective Subsidiaries to consummate the Offer, the Merger or the other
transactions contemplated in this
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Agreement, the Company shall not, without Parent's prior written consent, commit
to any divestiture of assets or businesses of the Company and its Subsidiaries
if such divested assets and/or businesses are material to the assets or
profitability of the Company and its Subsidiaries taken as a whole; and neither
Parent nor any of its Subsidiaries shall be required to divest any assets or
business of Parent or its Subsidiaries or the Company or its Subsidiaries if
such divested assets and/or businesses are material to the assets or
profitability of Parent or its Subsidiaries taken as a whole or the Company and
its Subsidiaries taken as a whole, respectively, or hold separate or otherwise
take or commit to take any action that materially limits its freedom of action
with respect to the Company or any such assets or businesses.
SECTION 7.12 Certain Litigation. The Company agrees that it shall not
settle any litigation commenced after the date hereof against the Company or any
of its directors by any stockholder of the Company relating to the Offer, the
Merger, this Agreement or the Preferred Stock Purchase Agreement without the
prior written consent of Parent (which shall not be unreasonably withheld).
SECTION 7.13 Employee Benefits. The Company shall take, or shall cause
to be taken, any and all action as shall be necessary or appropriate so that
effective upon the purchase of Shares pursuant to the Offer, neither the Company
nor any of its Subsidiaries shall be obligated to issue or sell to any Company
Plan (as defined in clause (i) of the definition of "Company Plan" set forth
below) any shares of or rights to acquire capital stock of the Company or any of
its Subsidiaries. Parent agrees that it will cause the Company, and each
Subsidiary of the Company, to honor from and after the Effective Time, all
Company Plans (as hereinafter defined); provided, however, that Parent may cause
the Company to amend or terminate any Company Plan in accordance with its terms
and applicable law. Except as otherwise provided by Section 7.4 or this Section
7.13, to the extent that after the purchase of Shares pursuant to the Offer,
Parent shall cause the amendment, modification or termination of any Company
Plan, Parent shall cause the affected employees, former employees and retirees
to receive benefits of the type affected by such amendment, modification or
termination no less favorable than the comparable type of benefits provided to
similarly situated employees, former employees and retirees of Parent or its
affiliates ("Parent-Provided Plans").
For purposes of eligibility to participate, vesting and eligibility
for and accrual of benefits under all Company Plans and Parent-Provided Plans,
all service of any individual who is an employee of the Company or any
Subsidiary of the Company
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immediately prior to the Effective Time (a "Company Employee") with the Company
and/or any Subsidiary of the Company prior to the Effective Time shall, on and
after the Effective Time, be treated as service with the Company, all
Subsidiaries of the Company, the Parent and/or Subsidiaries of the Parent (as
applicable); provided, however, that, with respect to a Company Employee's
service prior the Effective Time, the Parent shall not be required to provide
any benefit under any defined benefit pension plan to such Company Employee in
an amount greater than the benefit such Company Employee has accrued as of the
Effective Time, except that in determining the amount of such accrued benefit,
compensation paid to such Company Employee on or after the Effective Time shall
be counted to the extent that the compensation of such Company Employee after
the Effective Time remains a factor used in determining such accrued benefit
under such plan. The Company, the Subsidiaries of the Company, the Parent and
the Subsidiaries of the Parent shall cause all Company Plans and Parent-Provided
Plans to (x) waive any pre-existing condition limitations otherwise applicable
on and after the Effective Time to Company Employees who are not subject to pre-
existing condition limitations immediately prior to the Effective Time, and (y)
provide that any expenses incurred by Company Employees (and their dependents)
during any plan year within which the Effective Time occurs shall be taken into
account for purposes of satisfying applicable deductible, coinsurance and
maximum out-of-pocket provisions (and like adjustments or limitations on
coverage) under the Company Plans and Parent-Provided Plans. As used in this
Agreement, except as otherwise provided above, "Company Plan" shall include any
United States or non-United States (i) "employee benefit plan," within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), (ii) bonus, stock option, stock purchase, restricted
stock, incentive, equity participation, profit-sharing, savings, pension,
retirement, deferred compensation, medical, health, life insurance, disability,
accident, accrued leave, vacation, sick pay, sick leave, supplemental retirement
and unemployment benefit plan, program, arrangement, commitment and/or practice,
and (iii) employment, consulting, termination, change in control, severance and
salary continuation agreement, contract, plan, policy, program and/or
arrangement, that, in the case of (i), (ii) and (iii), the Company and/or any
Subsidiary of the Company currently maintains or contributes to (or with respect
to which the Company or any Subsidiary of the Company has any obligation) for
active, retired or former employees or directors of the Company or any
Subsidiary of the Company, whether or not any such plan, program, arrangement,
commitment, contract, agreement and/or practice (referred to in (i), (ii) or
(iii)) is in writing, is insured or is exempt from the provisions of ERISA. Any
Company Employee whose employment is terminated by the Company, any Subsidiary
of
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the Company, the Parent or any Subsidiary of the Parent, or any successor of any
thereof, on or before one (1) year following the Effective Time (except for any
Company Employee whose employment is terminated for engaging in criminal conduct
or malfeasance in connection with his or her employment) shall be provided, in
addition to all other applicable non-severance benefits, severance benefits no
less favorable than those such Company Employee would have received upon such
termination of his or her employment with the Company or a Subsidiary of the
Company (as applicable) occurring immediately prior to the Effective Time.
At the Effective Time, the employment of Frank G. Zarb with the
Surviving Corporation shall be terminated without cause.
SECTION 7.14 Stapled Securities. (a) Simultaneously with any
retraction at the option of a holder of RSC Class 1 Shares for shares of Common
Stock, whether as contemplated by Section 1.3 or otherwise, the Company shall
repurchase from the Trustee (as hereinafter defined), pursuant to the relevant
Exchange and Trust Agreement, among the Company, RSC and The Montreal Trust
Company, as trustee (the "Trustee"), an amount of shares of Class A Common Stock
equal to the amount of RSC Class 1 Shares so retracted and at a repurchase price
of Cdn. $0.00001 per share of Class A Common Stock.
(b) Simultaneously with any conversion at the option of a holder of
Class C Common Stock into Common Stock, whether as contemplated by Section 1.4
or otherwise, the Company shall cause AAUK to mandatorily redeem at par (2 pence
per share) each Dividend Share associated with a share of Class C Common Stock
so converted.
(c) Immediately following the purchase of Shares pursuant to the Offer
and in any event prior to the Effective Time, the Company shall (i) take such
actions as Parent may reasonably request to cause all of the RSC Class 1 Shares
then outstanding to be redeemed or retracted for shares of Common Stock (on a
share-for-share basis), pursuant to Section 4 or 5 of the Restated Certificate
of Incorporation of RSC (which shares of Common Stock the Company shall then
issue) (ii) repurchase from the Trustee, pursuant to the Trust Agreement, an
amount of shares of Class A Common Stock equal to the amount of RSC Class 1
Shares redeemed or retracted in accordance with the preceding clause (i) and at
a repurchase price of Cdn. $0.00001 per share of Class A Common Stock, (iii)
take such actions as Parent may reasonably request to cause all of the shares of
Class C Common Stock then outstanding to be converted into an identical amount
of shares of Common Stock, pursuant to subsection E, F or G of Article SIXTH of
the Charter of the Company (which shares of Common Stock the Company shall then
issue) and (iv) cause AAUK to mandatorily
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redeem at par (2 pence per share) each Dividend Share related to a share of
Class C Common Stock so converted.
ARTICLE VIII
CONDITIONS PRECEDENT
--------------------
SECTION 8.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) Company Stockholder Approval. If required by applicable law, the
Company Stockholder Approval shall have been obtained; provided, however,
that Parent and Sub shall vote all of their shares of capital stock of the
Company entitled to vote thereon in favor of the Merger.
(b) No Injunction or Restraint. No statute, rule, regulation,
executive order, decree, temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other Governmental Entity preventing the consummation of
the Merger shall be in effect; provided, however, that each of the parties
shall have used its reasonable best efforts to prevent the entry of any
such temporary restraining order, injunction or other order and to appeal
as promptly as possible any injunction or other order that may be entered.
(c) Purchase of Shares. Sub shall have previously accepted for payment
and paid for Shares pursuant to the Offer; provided, however, that this
condition will be deemed satisfied with respect to the obligations of
Parent or Sub if Sub fails to accept for payment and pay for any Shares
pursuant to the Offer in violation of the terms of this Agreement.
(d) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the Merger shall have expired or been terminated.
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ARTICLE IX
TERMINATION AND AMENDMENT
-------------------------
SECTION 9.1 Termination. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after the Company
Stockholder Approval (if required by applicable law):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if (x) as a result of the failure of any of the Offer
Conditions set forth in Exhibit A the Offer shall have terminated or
expired in accordance with its terms without Sub having accepted for
payment any Shares pursuant to the Offer or (y) all of the Offer
Conditions have not been satisfied prior to April 1, 1997; provided,
however, that the right to terminate this Agreement pursuant to this
Section 9.1(b)(i) shall not be available to any party whose failure to
perform any of its obligations under this Agreement results in the
failure of any such Offer Condition or if the failure of such Offer
Condition results from facts or circumstances that constitute a breach
of representation or warranty under this Agreement by such party; or
(ii) if any Governmental Entity shall have issued an order,
decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree or ruling or other action shall
have become final and nonappealable; provided, however, that Parent
shall, if necessary to prevent any such issuance or the taking of such
action, offer to accept an order to divest such of the Company's or
Parent's assets and businesses as may be necessary to forestall such
injunction or order and to hold separate such assets and business
pending such divestiture, but only if the amount of such assets and
businesses is not material to the assets or profitability of the
Company and its Subsidiaries taken as a whole or Parent and its
Subsidiaries taken as a whole, respectively;
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<PAGE>
(c) by Parent or Sub prior to the purchase of Shares pursuant to the
Offer in the event of a breach by the Company of any representation,
warranty, covenant or other agreement contained in this Agreement which (i)
would give rise to the failure of a condition set forth in paragraph (d) or
(e) of Exhibit A and (ii) cannot be or has not been cured within 20 days
after the giving of written notice to the Company;
(d) by Parent or Sub if either Parent or Sub is entitled to terminate
the Offer as a result of the occurrence of any event set forth in paragraph
(c) of Exhibit A to this Agreement;
(e) by either Parent or the Company if the Board of Directors of the
Company reasonably determines that a Takeover Proposal constitutes a
Superior Proposal and the Board of Directors of the Company determines, in
its good faith judgment, based on the opinion of independent outside legal
counsel to the Company, that failing to terminate this Agreement would
constitute a breach of such Board's duties under applicable law; provided,
however, that the Company may not terminate this Agreement pursuant to this
Section 9.1(e) unless and until 48 hours have elapsed following delivery to
Parent of a written notice of such determination by the Board of Directors
of the Company; provided, further, that the Company may not terminate this
Agreement pursuant to this Section 9.1(e) unless simultaneously with such
termination the Company pays to Parent the amount specified under Section
7.3(b); and provided, further, that any termination by Parent pursuant to
this Section 9.1(e) shall in no way constitute an admission that the
Company complied with the provisions of Section 6.2 or any other provision
hereof, or prejudice any claim by Parent that the Company did not comply
with the provisions of Section 6.2 or any other provisions hereof.
(f) by the Company, if (i) any of the representations or warranties
of Parent or Sub set forth in this Agreement that are qualified as to
materiality shall not be true and correct in any respect or any such
representations or warranties that are not so qualified shall not be true
and correct in any material respect, or (ii) Parent or Sub shall have
failed to perform in any material respect any obligation or to comply in
any material respect with any agreement or covenant of Parent or Sub to be
performed or complied with by it under this Agreement
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and, in the case of (i) or (ii), such untruth or incorrectness or failure
cannot be or has not been cured within 20 days after the giving of written
notice to Parent or Sub, as applicable; or
(g) by the Company, (i) if the Offer has not been timely commenced in
accordance with Section 1.1 or (ii) Sub shall not have accepted for payment
any Shares pursuant to the Offer prior to April 1, 1997;
SECTION 9.2 Effect of Termination. In the event of a termination of
this Agreement by either the Company or Parent as provided in Section 9.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Sub or the Company or their respective
officers or directors, except with respect to the last sentences of each of
Section 1.2(c), 1.3 and 1.4, Section 4.15, Section 5.6, the last sentence of
Section 7.2, Section 7.3, this Section 9.2 and Section 10.7; provided, however,
that nothing herein shall relieve any party for liability for any breach hereof.
SECTION 9.3 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors at
any time before or after obtaining the Company Stockholder Approval (if required
by law), but, after the purchase of Shares pursuant to the Offer no amendment
shall be made which decreases the Merger Consideration and after the Company
Stockholder Approval no amendment shall be made which by law requires further
approval by the stockholders of the Company without obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto. Following the election or
appointment of the Sub's designees pursuant to Section 7.10 and prior to the
Effective Time, the affirmative vote of a majority of the Independent Directors
then in office shall be required by the Company to (i) amend or terminate this
Agreement by the Company, (ii) exercise or waive any of the Company's rights or
remedies under this Agreement or (iii) extend the time for performance of Parent
and Sub's respective obligations under this Agreement.
SECTION 9.4 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Board of Directors, may, to the extent legally allowed, (i) subject to the
provisions of Section 9.3, extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) subject to the
provisions of Section 9.3, waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto or
(iii)
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<PAGE>
subject to the provisions of Section 9.3, waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party. The failure of any party to
this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of those rights.
ARTICLE X
GENERAL PROVISIONS
------------------
SECTION 10.1 Non-Survival of Representations and Warranties. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time.
SECTION 10.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given when delivered personally, one day
after being delivered to an overnight courier or when telecopied (with a
confirmatory copy sent by overnight courier) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Sub, to
Aon Corporation
123 North Wacker Drive
Chicago, IL 60606
Attention: Raymond I. Skilling, Esq.
Executive Vice President
& Chief Counsel
with a copy to:
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attn: Thomas A. Cole, Esq.
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<PAGE>
(b) if to the Company, to
Alexander & Alexander Services Inc.
1185 Avenue of the Americas
21st Floor
New York, New York 10036
Attention: Albert A. Skwiertz, Jr.
Senior Vice President
& General Counsel
with a copy to:
White & Case
1155 Avenue of the Americas
New York, New York 10036
Attention: Kevin Keogh
SECTION 10.3 Interpretation. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." As used in this Agreement, the term
"subsidiary" or "Subsidiary" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person. As used in this Agreement, the term "Significant Subsidiary" of any
person means a Subsidiary of such person that would constitute a "significant
subsidiary" of such person within the meaning of Rule 1.02(v) of Regulation S-X
as promulgated by the SEC. As used in this Agreement, "Material Adverse Change"
or "Material Adverse Effect" means, when used in connection with the Company or
Parent, as the case may be, any change or effect (or any development that,
insofar as can reasonably be foreseen, is likely to result in any change or
effect) that is materially adverse to the business, financial condition or
results of operations of the Company and its Subsidiaries taken as a whole or
Parent and its Subsidiaries taken as a whole, as the case may be. As used in
this Agreement, "consummation of the Offer" means the purchase of Shares
pursuant to the Offer.
SECTION 10.4 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one
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and the same agreement, and shall become effective when one or more counterparts
have been signed by each of the parties and delivered to the other parties.
SECTION 10.5 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, except as provided in the last sentence of Section 7.2, constitute
the entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof.
This Agreement, except for the provisions of Section 7.8, is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
SECTION 10.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Maryland, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 10.7 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties, except
that Sub may assign, in its sole discretion, any of or all its rights, interests
and obligations under this Agreement to Parent or to any direct or indirect
wholly owned Subsidiary of Parent, but no such assignment shall relieve Sub of
any of its obligations hereunder. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
SECTION 10.8 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
SECTION 10.9 Enforcement of this Agreement. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties
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shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, such remedy being
in addition to any other remedy to which any party is entitled at law or in
equity.
SECTION 10.10 Obligations of Subsidiaries. Whenever this Agreement
requires any Subsidiary of Parent (including Sub) or of the Company to take any
action, such requirement shall be deemed to include an undertaking on the part
of Parent or the Company, as the case may be, to cause such Subsidiary to take
such action.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
AON CORPORATION
By:
-------------------------
Name: Patrick G. Ryan
Title: Chairman, President
& Chief Executive
Officer
Attest:
- --------------------------
Name: William J. Fasel
Title: Corporate Secretary
SUBSIDIARY CORPORATION, INC.
By:
-------------------------
Name: Patrick G. Ryan
Title: President
Attest:
- --------------------------
Name: Raymond I. Skilling
Title: Secretary
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ALEXANDER & ALEXANDER SERVICES INC.
By:
------------------------------
Name: Frank G. Zarb
Title: Chairman of the Board,
President & Chief
Executive Officer
Attest:
- --------------------------
Name: Alice Russell
Title: Secretary
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EXHIBIT A
---------
CONDITIONS OF THE OFFER
-----------------------
Notwithstanding any other term of the Offer or this Agreement, Sub
shall not be required to accept for payment or, subject to any applicable rules
and regulations of the SEC, including Rule 14e-l(c) under the Exchange Act
(relating to Sub's obligation to pay for or return tendered Shares after the
termination or withdrawal of the Offer), to pay for any Shares tendered pursuant
to the Offer unless (i) there shall have been validly tendered and not withdrawn
prior to the expiration of the Offer such number of Shares that would constitute
a majority of the combined voting power of the shares of the Company Common
Capital Stock (assuming the exercise of all options to purchase, and the
conversion or exchange of all securities convertible or exchangeable into,
shares of the Company Common Stock outstanding at the expiration date of the
Offer, other than the conversion of the shares of the Series B Preferred Stock)
(the "Minimum Condition"), (ii) any waiting period under the HSR Act or the
Competition Act (Canada) applicable to the purchase of Shares pursuant to the
Offer shall have expired or been terminated and (iii) the approvals of the
Department of Insurance of the States of Delaware, New York and Vermont, shall
have been received with respect to the acquisition of control (or the disclaimer
thereof) resulting from the transactions contemplated by this Agreement of the
insurance-underwriting Subsidiaries of the Company organized under the laws of
Delaware and New York, respectively. Furthermore, notwithstanding any other term
of the Offer or this Agreement, Sub shall not be required to accept for payment
or, subject as aforesaid, to pay for any Shares not theretofore accepted for
payment or paid for, and may terminate the Offer if, at any time on or after the
date of this Agreement and before the acceptance of such Shares for payment or
the payment therefor, any of the following conditions exists (other than as a
result of any action or inaction of Parent or any of its Subsidiaries that
constitutes a breach of this Agreement):
(a) there shall be instituted by any Governmental Entity any suit,
action or proceeding (i) making illegal or prohibiting the acquisition by
Parent or Sub of any Shares under the Offer, making illegal or prohibiting
the making or consummation of the Offer or the Merger or the performance of
any of the other transactions contemplated by this Agreement, or seeking to
obtain from the Company, Parent or Sub any damages that are material in
relation to the Company and its Subsidiaries taken as a whole, (ii)
prohibiting or materially limiting the ownership or operation by the
Company, Parent or any of their respective Subsidiaries
<PAGE>
of any material business or assets of the Company and its Subsidiaries, or
Parent and its Subsidiaries, or compelling the Company or Parent to dispose
of or hold separate any material business or assets of the Company and its
Subsidiaries or Parent and its Subsidiaries, as a result of the Offer, the
Merger or any of the other transactions contemplated by this Agreement,
(iii) imposing material limitations on the ability of Parent or Sub to
acquire or hold, or exercise full rights of ownership of, any Shares to be
accepted for payment pursuant to the Offer, including, without limitation,
the right to vote such Shares or shares on all matters properly presented
to the stockholders of the Company, or (iv) prohibiting Parent or any of
its Subsidiaries from effectively controlling any business or operations of
the Company or its Subsidiaries, provided, however, that Parent shall, if
necessary to prevent any such consequence, offer to accept an order to
divest such of the Company's or Parent's assets and businesses as may be
necessary to prevent such consequence and to hold separate such assets and
businesses pending such divestiture, but only if the amount of such assets
and businesses is not material to the assets or profitability of the
Company and its Subsidiaries taken as a whole or Parent and its
Subsidiaries taken as a whole, as the case may be;
(b) there shall be enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger by any Governmental Entity, any
statute, rule, regulation, judgment, order or injunction, other than the
application to the Offer or the Merger of applicable waiting periods under
the HSR Act or the Competition Act (Canada), that would reasonably be
expected to result, directly or indirectly, in any of the consequences
referred to in clauses (i) through (iv) of paragraph (a) above;
(c) (i) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Parent or Sub its
approval or recommendation of the Offer, the Merger or this Agreement, or
approved or recommended any Takeover Proposal or (ii) the Board of
Directors of the Company or any committee thereof shall have resolved to
take any of the foregoing actions (it being understood that the taking and
disclosing to the Company's stockholders of a position contemplated by Rule
14d-9(e) promulgated under the Exchange Act shall not constitute an event
referred to in clause (i) or (ii));
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<PAGE>
(d) any of the representations and warranties of the Company set
forth in this Agreement that are qualified as to materiality shall not be
true and correct in any respect or any such representations and warranties
that are not so qualified shall not be true and correct in any material
respect, in each case as if such representations and warranties were made
as of such time;
(e) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under this
Agreement;
(f) there shall have occurred and continued to exist for not less
than three business days (i) any general suspension of trading in, or
limitation on prices for, securities on a national securities exchange in
the United States (excluding any coordinated trading halt triggered solely
as a result of a specified decrease in a market index) or (ii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States; or
(g) this Agreement shall have been terminated in accordance with its
terms.
The foregoing conditions are for the sole benefit of Parent and Sub
and may, subject to the terms of this Agreement, be waived by Parent and Sub in
whole or in part at any time and from time to time in their sole discretion.
The failure by Parent or Sub at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right, the waiver of any such right
with respect to particular facts and circumstances shall not be deemed a waiver
with respect to any other facts and circumstances and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
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<PAGE>
EXHIBIT (c)(2)
STOCK PURCHASE AND SALE AGREEMENT
---------------------------------
Stock Purchase and Sale Agreement (the "Agreement") dated as of December
11, 1996 between AMERICAN INTERNATIONAL GROUP, INC., a Delaware corporation and
including its wholly-owned subsidiaries ("AIG"), and AON CORPORATION, a Delaware
corporation ("Aon").
WHEREAS, AIG desires to sell to Aon or a designated wholly owned subsidiary
thereof (the "Purchaser"), and the Purchaser desires to purchase, an aggregate
of 4,846,232 shares (the "Shares") (including 95,024 shares to be issued as a
regular quarterly dividend on December 15, 1996) of 8% Series B Cumulative
Convertible Preferred Stock, par value $1.00 per share, of A&A (the "Series B
Stock") for the consideration and upon the terms and subject to the conditions
set forth herein.
NOW, THEREFORE, in consideration of the premises and of the respective
covenants, agreements and conditions contained herein, each of the parties agree
as follows:
1. Closing.
a. Time and Place of the Closing. The Closing (the "Closing") shall take
place at the offices of Cahill Gordon & Reindel, 80 Pine Street, New York, New
York on the date which is two Business Days after Aon or any affiliate of Aon
first acquires on or after the date hereof in any manner any equity interest in
Alexander & Alexander Services Inc. ("A&A"), or any right or security
convertible or exercisable into any such interest, or any right to acquire any
thereof, by purchase or tender offer or otherwise (an "Aon Equity Acquisition").
Aon shall give AIG two business days prior written notice of the date the
Closing is scheduled to occur. The "Closing Date" shall be the date the Closing
occurs.
b. Transactions at the Closing. At the Closing, subject to the terms and
conditions of this Agreement, AIG shall sell to Aon, and Aon shall purchase from
AIG, the Shares. At the Closing, AIG shall deliver to Aon a certificate or
certificates representing the Shares, with stock powers duly endorsed in blank
for transfer, against receipt of the Purchase Price with respect thereto by wire
transfer of immediately available funds to an account or accounts previously
designated by AIG.
c. Purchase Price. The Purchase Price for the Shares shall be
$317,500,000 in cash plus a cash amount equal to all accrued and unpaid
dividends on the Series B Stock to and including the Closing
<PAGE>
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Date (as well as cash equal to the liquidation preference of any additional
shares of Series B Stock issued as a pay-in-kind dividend on the Series B Stock
after December 15, 1996, if any, which shares shall be included in the
definition of "Shares" herein). In the event that the Closing Date occurs after
the record date for any dividend payment date after December 15, 1996 and before
the dividend payment date, AIG will assign to Aon its right to receive any
dividend so declared by A&A.
2. Conditions to the Closing.
a. Conditions Precedent to the Obligations of Aon. The obligations of Aon
to be discharged under this Agreement on the Closing Date are subject to
satisfaction of the following conditions at the Closing (unless expressly waived
in writing by Aon at or prior to the Closing);
(i) Compliance by AIG. All of the terms, covenants and conditions of
this Agreement to be complied with and performed by AIG at or prior to the
Closing shall have been complied with and performed by AIG in all material
respects, and the representations and warranties made by AIG in this Agreement
shall be true and correct in all material respects at and as of the Closing,
with the same force and effect as though such representations and warranties had
been made at and as of the Closing.
(ii) No Injunction. No statute, rule, regulation, executive order,
decree, temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other governmental
entity preventing the consummation of the purchase of the Shares shall be in
effect.
b. Conditions Precedent to Obligations of AIG. The obligations of AIG to
be discharged under this agreement on the Closing Date are subject to
satisfaction of the following conditions at the Closing (unless waived by AIG at
or prior to the Closing):
(i) Compliance by Aon. All of the terms, covenants and conditions of
this Agreement to be complied with and performed by Aon at or prior to the
Closing shall have been complied with and performed by it in all material
respects, and the representations and warranties made by Aon in this Agreement
shall be true and correct in all material respects at and as of the Closing,
with the same force and effect as though such representations and warranties had
been made at and as of the Closing.
<PAGE>
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(ii) No Injunction. No statute, rule, regulation, executive order,
decree, temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other governmental
entity preventing the consummation of the purchase of the Shares shall be in
effect.
3. Representations and Warranties of Aon.
Aon hereby represents and warrants to AIG:
a. Organization, Good Standing, Power, Authority, Etc. Aon is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Aon has the full corporate power and authority to
execute and deliver this Agreement and to perform its obligations under this
Agreement. Aon has taken all action required by law, its Certificate of
Incorporation, its by-laws or otherwise required to be taken by it to authorize
the execution, delivery and performance by it of this Agreement. This Agreement
is a valid and binding obligation of Aon, enforceable in accordance with its
terms, except that such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights and general principles of equity.
b. No Conflicts. Neither the execution and delivery of this Agreement nor
the consummation by Aon of the transactions contemplated hereby will (i)
conflict with, or result in a breach of, any provision of its charter or by-
laws, (ii) violate any statute or law or any judgment, order, writ, injunction,
decree, rule or regulation applicable to Aon and/or any of its subsidiaries or
(iii) cause a breach of any material contract of Aon, which breach would prevent
consummation of the transactions contemplated hereby.
c. No Consents. No consent, authorization or approval of, or declaration,
filing or registration with, or exemption by, any governmental or regulatory
authority is required in connection with the execution and delivery of, and the
performance by Aon of its obligations under, this Agreement or the consummation
by Aon of the transactions to be performed by it as contemplated hereby, other
than the approvals of the Department of Insurance of the States of Delaware, New
York, and Vermont with respect to the transactions contemplated hereby and
filings under the Hart-Scott-Rodino Antitrust Improvements Act ("HSR") and the
Competition Act (Canada).
d. Investment Intent, Etc. Aon (i) has such knowledge, sophistication and
experience in business and financial matters
<PAGE>
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that it is capable of evaluating the merits and risks of an investment in the
Shares, (ii) can bear the economic risk of an investment in the Shares and can
afford a complete loss of such investment, and (iii) is purchasing the Shares
for investment and not with a view to, or for a sale in connection with, any
public distribution in violation of the Securities Act of 1933 (the "Act").
4. Representations and Warranties of AIG.
AIG hereby represents and warrants to Aon:
a. Organization, Good Standing, Power, Authority, Etc. AIG is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. AIG has the full power and authority to execute and
deliver this Agreement. AIG has taken all action required by law, its charter,
its by-laws or otherwise required to be taken by it to authorize the execution
and delivery of this Agreement and the consummation of the transactions
contemplated to be performed by it hereby. This Agreement is a valid and binding
agreement of AIG, enforceable in accordance with terms, except that such
enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights
and general principles of equity.
b. No Conflicts. Neither the execution and delivery of this Agreement nor
the consummation by AIG of the transactions contemplated hereby will (i)
conflict with, or result in a breach of, any provision of its charter or by-
laws, (ii) violate any statute or law or any judgment, order, writ, injunction,
decree, rule or regulation applicable to AIG and/or any of its subsidiaries or
(iii) cause a breach of any material contract of AIG, which breach would prevent
consummation of the transactions contemplated hereby.
c. No Consents. No consent, authorization or approval of, or declaration,
filing or registration with, or exemption by, any governmental or regulatory
authority is required in connection with the execution and delivery of, and the
performance by AIG of its obligations under, this Agreement or the consummation
by AIG of the transactions to be performed by it as contemplated hereby, other
than such filings under HSR as may be required.
d. Title to Shares. AIG, indirectly through its wholly owned
subsidiaries, owns the Shares. Each wholly owned subsidiary of AIG which owns
Shares has legal and valid title to such Shares, free and clear of all
restrictions on transfer (other than those
<PAGE>
-5-
imposed by the Act, securities or Blue Sky laws of certain jurisdictions, the
A&A charter and restrictions under Section 6 of the Stock Purchase Agreement
(the "Stock Purchase Agreement") by and between AIG and A&A dated as of June 6,
1994), liens, encumbrances, security interests and claims whatsoever.
5. Covenants.
a. Pre-Closing Activities. From and after the date of this Agreement
until the Closing, each of AIG and Aon shall act with good faith towards, and
shall use its reasonable best efforts to consummate, the transactions
contemplated by this Agreement.
b. Publicity. Each of AIG and Aon will consult with each other before
issuing any press release or otherwise making any public statements with respect
to the transactions contemplated hereby and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law.
c. Dividends. Aon will not waive or modify its rights under the Merger
Agreement that require A&A to pay dividends on the Series B Stock in cash after
December 15, 1996.
d. Series B Stock. All the rights and preferences of the Series B Stock
shall remain in full force and effect until the Closing; provided, however, that
AIG agrees to suspend voluntarily its rights under Section 9(d) of the Articles
Supplementary and its right to require A&A to repurchase any of the Series B
Stock pursuant to Section 7 of the Articles Supplementary related thereto, in
each case until the earlier of the Closing or termination of this Agreement.
AIG will not transfer, assign, sell, pledge or otherwise dispose of any of the
Shares to any third party, other than as contemplated in this Agreement, until
the earlier of the Closing or the termination of this Agreement.
e. Waiver of Rights and Acknowledgment. Effective as of the date hereof,
AIG waives its rights, if any, under Section 6.o of the Stock Purchase
Agreement. AIG acknowledges that the consent of AIG referred to in paragraph
(1) of the letter between A&A and AIG dated June 30, 1994, or any other consent
related to the same subject matter, cannot be withheld or delayed with respect
to commercially reasonable actions proposed to be taken by A&A.
6. Termination. This Agreement (A) shall terminate without any action by
the parties hereto on the earliest of (i) if the Closing shall not have
occurred, April 15, 1997, (ii) if the Closing has not occurred, four Business
Days after an Aon Equity
<PAGE>
-6-
Acquisition and (iii) the effective date of termination of the Merger Agreement
between Aon, A&A and the other parties thereto, dated the date hereof and as
amended from time to time, and (B) may be terminated at any time prior to the
Closing by a written instrument executed and delivered by the parties hereto.
7. Miscellaneous.
a. Notices. All notices or other communications given or made hereunder
shall be validly given or made if in writing and delivered by facsimile
transmission or in person at, or mailed by registered or certified mail, return
receipt requested, postage prepaid, to, the following addressees (and shall be
deemed effective at the time of receipt thereof).
If to Aon: Aon Corporation
123 North Wacker Drive
Chicago, IL 60606
Attention: Raymond I. Skilling, Esq.
Executive Vice President &
Chief Counsel
If to AIG: American International Group, Inc.
70 Pine Street
New York, New York 10270
Attention: Vice Chairman - Investments
and Financial Services
Or to such other addresses the party to whom notice is to be given may have
previously furnished in writing to the others in the manner set forth above.
b. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE STATE AND FEDERAL COURTS IN THE STATE OF NEW YORK IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
c. Severability; Interpretation. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, each of Aon and AIG directs that such court
interpret and apply the remainder of this Agreement in the manner which it
determines most closely effectuates their intent in entering into this
Agreement, and in doing so particularly take into account the relative
<PAGE>
-7-
importance of the term, provision, covenant or restriction being held invalid,
void or unenforceable.
d. Headings. The section headings herein are for convenience only and
shall not affect the construction hereof.
e. Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any party without the prior written
consent of the other party, except that Aon may assign the right to acquire the
Shares in accordance with the terms hereof to one or more wholly owned
subsidiaries of Aon.
f. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument.
g. Survival of Representations and Warranties. The representations and
warranties in this Agreement shall survive the Closing Date.
h. Entire Agreement; No Third Party Beneficiaries. This Agreement,
including the documents and instruments referred to herein, constitutes the
entire agreement, and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof
and is not intended to confer upon any person other than the parties any rights
or remedies hereunder.
i. Enforcement of this Agreement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
j. Amendment. This Agreement may be amended, modified or supplemented;
provided that the same shall be in writing and be signed by each of the parties
hereto.
<PAGE>
-8-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
AMERICAN INTERNATIONAL
GROUP, INC., for and on behalf
of itself and its wholly
owned subsidiaries
By:_______________________________
Name:
Title:
AON CORPORATION
By:_______________________________
Name:
Title:
