-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wyjy+x/7QsptO5ZFc8XfWPHUMu+IQHxWwfz2jk7XfpmGM+4392V0V2upzjmb1dmN kSgGNuS0SWDuITnOtpwWMw== 0000950131-96-006365.txt : 19961218 0000950131-96-006365.hdr.sgml : 19961218 ACCESSION NUMBER: 0000950131-96-006365 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 19961217 SROS: CSX SROS: NYSE GROUP MEMBERS: AON CORP GROUP MEMBERS: AON CORPORATION, SUBSIDIARY CORPORATION INC. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ALEXANDER & ALEXANDER SERVICES INC CENTRAL INDEX KEY: 0000003449 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 520969822 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-11552 FILM NUMBER: 96682140 BUSINESS ADDRESS: STREET 1: 1185 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2128408500 FORMER COMPANY: FORMER CONFORMED NAME: ALEXANDER & ALEXANDER INC DATE OF NAME CHANGE: 19751029 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: AON CORP CENTRAL INDEX KEY: 0000315293 STANDARD INDUSTRIAL CLASSIFICATION: ACCIDENT & HEALTH INSURANCE [6321] IRS NUMBER: 363051915 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 123 N WACKER DR CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3127013000 FORMER COMPANY: FORMER CONFORMED NAME: COMBINED INTERNATIONAL CORP DATE OF NAME CHANGE: 19870504 SC 13D 1 SCHEDULE 13D - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 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 ---------------- CALCULATION OF FILING FEE - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
TRANSACTION AMOUNT OF VALUATION* FILING FEE - --------------------------------------------------------- $968,050,790 $193,610
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- * 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:___________________________________________ - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1.NAME OF REPORTING PERSON S.S. OR I.R.S IDENTIFICATION NO. OF ABOVE PERSON AON CORPORATION, TAX ID NO.: 36-3051915 - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) [X] (b) [_] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCES OF FUNDS (SEE INSTRUCTIONS) WC; OO - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TOITEMS 2(e) OR 2(f). - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATIONDELAWARE - -------------------------------------------------------------------------------- 7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 14,247,922* - -------------------------------------------------------------------------------- 8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 7 EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) [_] - -------------------------------------------------------------------------------- 9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 7 25%* - -------------------------------------------------------------------------------- 10. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) HC; CO - -------------------------------------------------------------------------------- * SEE FOOTNOTE ON FOLLOWING PAGE. 2 - -------------------------------------------------------------------------------- 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) [_] - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCES OF FUNDS (SEE INSTRUCTIONS) AF (FROM PARENT) - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(e) OR 2(f). [_] - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATIONMARYLAND - -------------------------------------------------------------------------------- 7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 14,247,922* - -------------------------------------------------------------------------------- 8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 7 EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) [_] - -------------------------------------------------------------------------------- 9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 7 25%* - -------------------------------------------------------------------------------- 10. TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) CO - -------------------------------------------------------------------------------- * 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 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 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 (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 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 EX-99.(A)(1) 2 OFFER TO PURCHASE 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 TABLE OF CONTENTS
PAGE ---- 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
i 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. 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 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 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 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 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 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 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 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.
HIGH LOW DIVIDENDS -------- ------- --------- 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
9 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 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)
NINE MONTHS ENDED FOR YEARS ENDED DECEMBER 31, SEPTEMBER 30, ----------------------------- -------------------- 1995 1994 1993 1996 1995 --------- --------- -------- ------------- ------ UNAUDITED 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 AS OF AS OF DECEMBER 31, SEPTEMBER 30, ------------------- ------------- 1995 1994 1996 --------- --------- ------------- 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
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 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)
NINE MONTHS ENDED FOR YEARS ENDED DECEMBER 31, SEPTEMBER 30, ---------------------------- ---------------------- 1995 1994 1993 1996 1995 --------- --------- -------- ------------- -------- UNAUDITED 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 AS OF AS OF DECEMBER 31, SEPTEMBER 30, ------------------- ------------- 1995 1994 1996 --------- --------- ------------- 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
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 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 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 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 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 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 (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 18 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; 19 (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). 20 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 21 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 22 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 23 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, 24 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 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 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 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 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 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 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.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL NAME AND BUSINESS ADDRESS POSITIONS HELD DURING PAST FIVE YEARS ------------------------- ---------------------------------------------- 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
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL NAME AND BUSINESS ADDRESS POSITIONS HELD DURING PAST FIVE YEARS ------------------------- ---------------------------------------------- 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
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL NAME AND BUSINESS ADDRESS POSITIONS HELD DURING PAST FIVE YEARS ------------------------- ---------------------------------------------- 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.
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND MATERIAL NAME AND BUSINESS ADDRESS POSITIONS HELD DURING PAST FIVE YEARS ------------------------- ---------------------------------------------- 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.
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. 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
A-4 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) [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 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. [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 EX-99.(A)(2) 3 LETTER OF TRANSMITTAL 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. - ------------------------------------------------------------------------------- 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. ________________________________________________________ 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. 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) 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 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. 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. 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^ - ------------------------------------------------------------------------------- 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 EX-99.(A)(3) 4 LETTER TO BROKER, DEALERS 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 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 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 EX-99.(A)(4) 5 LETTER TO CLIENTS 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. 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 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 EX-99.(A)(5) 6 NOTICE OF GUARRANTEED DELIVERY 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. 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 EX-99.(A)(6) 7 GUIDELINES FOR SUBSITUTE FORM W-9 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. 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. EX-99.(A)(7) 8 SUMMARY ANNOUNCEMENT 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 (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- 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- 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- EX-99.(A)(8) 9 AON CORP. PRESS RELEASE DEC. 11, 1996 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. 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. EX-99.(A)(9) 10 PRESS RELEASE ISSUED BY THE PARENT EXHIBIT (a)(9) 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 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. EX-99.(C)(1) 11 AGREEMENT AND PLAN OF MERGER 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 TABLE OF CONTENTS -----------------
Page ---- 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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Page ---- 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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Page ---- ARTICLE IX TERMINATION AND AMENDMENT 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
-iii- 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: -------------------- 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 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 -2- 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 -3- 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. -4- (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 -5- 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 -6- 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 -7- 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. -8- 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 -9- 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 -10- "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 -11- 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 -12- 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 -13- 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 -14- 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 -15- 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, -16- 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 -17- 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 -18- (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. -19- 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 -20- 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. -21- 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) -22- 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. -23- 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 -24- 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, -25- 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.; -26- (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 -27- 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). -28- 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 -29- 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 -30- 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 -31- 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 -32- 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 -33- 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 -34- 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 -35- 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 -36- 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 -37- 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 -38- 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 -39- 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. -40- 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; -41- (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 -42- 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) -43- 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. -44- (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 -45- 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 -46- 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. -47- 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 -48- ALEXANDER & ALEXANDER SERVICES INC. By: ------------------------------ Name: Frank G. Zarb Title: Chairman of the Board, President & Chief Executive Officer Attest: - -------------------------- Name: Alice Russell Title: Secretary -49- 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 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)); -2- (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. -3- EX-99.(C)(2) 12 PREFERRED STOCK EXCHANGE AGREEMENT 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 -2- 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. -3- (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 -4- 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 -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 -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 -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. -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: -----END PRIVACY-ENHANCED MESSAGE-----