<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
MARSH & MCLENNAN COMPANIES, INC.
1166 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036-2774
(212) 345-5000
COMMISSION FILE NUMBER 1-5998
STATE OF INCORPORATION: DELAWARE
I.R.S. EMPLOYER IDENTIFICATION NO. 36-2668272
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- -------------------------------------- ----------------------------------
<S> <C>
Common Stock New York Stock Exchange
(par value $1.00 per share) Chicago Stock Exchange
Preferred Stock Purchase Rights Pacific Stock Exchange
The London Stock Exchange
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __X__. No _____.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K ____.
As of February 28, 1995, the aggregate market value of the voting stock held
by non-affiliates of the registrant was approximately $5,962,000,000.
As of February 28, 1995, there were outstanding 73,026,687 shares of common
stock, par value $1.00 per share, of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
(ONLY TO THE EXTENT SET FORTH IN THE PART INDICATED)
<TABLE>
<S> <C>
Parts I, II and
Annual Report to Stockholders for the year ended December 31, 1994....... IV
Notice of Annual Meeting of Stockholders and Proxy Statement
dated March 30, 1995................................................... Parts I and III
</TABLE>
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<PAGE>
MARSH & McLENNAN COMPANIES, INC.
--------------------
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1994
--------------------
PART I
ITEM 1. BUSINESS.
Marsh & McLennan Companies, Inc. (the "registrant"), a professional
services organization with origins dating from 1871 in the United States,
through its subsidiaries and affiliates, provides clients with professional
advice and related services in the fields of insurance and reinsurance broking,
consulting and investment management.
INSURANCE SERVICES. Subsidiaries and affiliates of the registrant provide
insurance (including reinsurance) services on a worldwide basis, as broker,
agent or consultant for insureds, insurance underwriters and other brokers.
They also provide insurance program management services involving a wide range
of insurance and related products for individuals and others through both
sponsored and non-sponsored affinity group programs in the United States, the
United Kingdom and Canada, and other services in connection with originating,
structuring and managing investments in both new and existing insurers.
Insurance broking services, carried on throughout the world primarily under
the "Marsh & McLennan" name, are provided for a predominantly corporate
clientele engaged in a broad range of commercial activities. Clients also
include various government and related agencies, non-profit organizations and
individuals. Such services are provided primarily in connection with the risk
management and the insurance placement processes, and involve various types of
property and liability loss exposures and developing alternatives to deal
effectively with these exposures. Services include traditional insurance
broking activities and, both as part of broking and agency activities and on a
fee basis, professional counseling services on risk management issues, including
risk analysis, coverage requirements, self-insurance, alternative insurance and
funding methods, claims collection, injury management, loss prevention, and
other insurance related matters. They also include organization and
administrative services for special purpose insurance companies and other risk
assumption alternatives. Insurance coverage is placed on behalf of clients with
insurers directly or through wholesale brokers. Correspondent relationships are
maintained with unaffiliated firms in certain countries.
<PAGE>
Reinsurance services are provided to insurance and reinsurance risk takers
worldwide, principally by Guy Carpenter & Company, Inc. and its subsidiaries and
affiliates, including Carpenter Bowring (UK). Essentially such services involve
acting as an intermediary for insurance and reinsurance organizations on all
classes of reinsurance. The intermediary assists the insurance underwriter by
providing advice, placing reinsurance coverage with reinsurance organizations
located around the world, and furnishing related services. The insurance
underwriting organization may seek reinsurance on all or a portion of the risks
it insures. Intermediary services are also provided to reinsurance
underwriters, who may also seek reinsurance on the risks they have underwritten.
Seabury & Smith, Inc. and its subsidiaries provide insurance program
management services (including the design, placement and administration of life,
health, accident, disability, automobile, homeowners, professional liability and
other insurance and related products) on a group marketing basis to individuals,
businesses and their employees, and organizations and their members in the
United States, Canada and the United Kingdom. It also provides underwriting
management services to insurers in these countries. The Frizzell Group Limited,
the holding company of Frizzell Financial Services Ltd. and its subsidiaries,
provides motor and general insurances, life assurance and personal financial
planning, and consumer finance services, including insurance premium financing
programs, personal and secured loans, mortgage loans and credit cards, to
members of affinity groups in the United Kingdom.
Marsh & McLennan Risk Capital Corp. and its predecessor operations have
been instrumental in the formation of several substantial insurance and
reinsurance entities, including ACE Insurance Company Ltd., XL Insurance Company
Ltd., Centre Reinsurance Holdings Ltd. and Mid Ocean Reinsurance Company Ltd.,
to alleviate, in part, capacity shortages in critical segments of the insurance
and reinsurance business. Risk Capital Corp. also advises Marsh & McLennan Risk
Capital Holdings, Ltd. regarding insurance and reinsurance interests, and is an
advisor to The Trident Partnership, L.P., an independent investment partnership
established in 1994 to invest selectively in the global insurance and
reinsurance underwriting industry.
The revenue attributable to the registrant's insurance services consists
primarily of commissions and fees paid by insurance and reinsurance
underwriters; fees paid directly by clients; interest income on premiums
collected and not yet remitted to insurers or reinsurers and, in certain cases,
on claims or refunds collected from underwriters to be remitted to clients, such
funds being held in a fiduciary capacity; and compensation for services provided
in connection with the formation and capitalization of various insurers and
reinsurers, including
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<PAGE>
gains from sales of interests in such entities. The investment of fiduciary
funds is governed by the applicable regulatory laws of the states in the United
States and laws or regulations of insurance supervisory authorities in other
jurisdictions in which the registrant's subsidiaries do business. These
regulations typically limit the investments that may be made with such funds.
Commission rates vary in amount depending upon the type of insurance
coverage provided, the particular underwriter, the capacity in which the
registrant acts and the volume and profitability to the underwriter of the
business placed with it by the registrant during specific periods, in addition
to negotiations with clients. Claims services may be performed for policies
placed in prior years.
The insurance broking industry is affected by premium rate levels in the
property and casualty insurance industry and available insurance capacity, as
compensation is frequently related to the premiums paid by insureds. Revenue is
also affected by fluctuations in retained limits, insured values and interest
rates, the development of new products, markets and services, and the volume of
business from new and existing clients.
CONSULTING. Subsidiaries and affiliates of the registrant provide
consulting services to a predominantly corporate clientele through the Mercer
Consulting Group, Inc. which comprises the following:
The William M. Mercer group of companies provides professional advice and
services to corporate, government and institutional clients worldwide.
Companies in the William M. Mercer group assist clients with the design,
implementation, administration and communication of employee benefit,
compensation and other human resource programs, including retirement, group
life, health and disability. William M. Mercer also advises health care
provider organizations regarding capitation, cost control and quality
improvement.
Mercer Management Consulting, Inc. provides advice and assistance to
clients, primarily in North America and Europe, regarding strategy,
organization, marketing, manufacturing and distribution by combining functional
knowledge with an understanding of the subject industry. Working with client
teams, it seeks to facilitate growth and sustainable profits for such clients,
often using proprietary techniques. In addition, sometimes under the Lippincott
& Margulies name, Mercer Management Consulting, Inc. provides expanded marketing
services relating to brand and corporate identity, as well as image.
National Economic Research Associates, Inc. ("NERA"), a firm of consulting
economists, provides advice to law firms, corporations, trade associations and
governmental agencies, from
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<PAGE>
offices principally in the United States and England. NERA's research and
analysis addresses a broad range of micro-economic issues in areas of business
and public policy.
The revenue attributable to the registrant's consulting services consists
primarily of consulting fees paid by clients, but also includes commissions paid
by insurance underwriters for the placement of individual and group insurance
contracts, and asset planning and plan administration services fees paid by
investment managers for monies invested through defined contribution plans.
Revenue in the consulting business is a function of new products and
services, the impact of technology upon certain consulting services, the degree
of regulatory change and change in the industries of clients, and the demand for
consulting services.
INVESTMENT MANAGEMENT. Investment management and related services are
provided by Putnam Investments, Inc. and its subsidiaries.
Putnam provides individual and institutional investors with a broad range
of equity and fixed income investment products and services designed to meet
varying investment objectives. Putnam's investment management services, which
are provided primarily in the United States, include securities investment
advisory and management services consisting of investment research and
management, accounting and related services for a group of publicly-held
investment companies registered under the Investment Company Act of 1940,
including several closed-end investment companies whose shares are traded on
various stock exchanges (the "Putnam Funds"). Investment management services
are also provided to profit sharing and pension funds, state retirement systems,
university endowment funds, charitable foundations and other domestic and
foreign institutional accounts. A Putnam subsidiary also serves as transfer
agent, dividend disbursing agent, registrar and custodian for the Putnam Funds
and provides one or more of such services to several external clients. A Putnam
subsidiary also acts as principal underwriter of the shares of the open-end
Putnam Funds, selling primarily through independent broker/dealers and financial
institutions, including banks, and also directly to certain large 401(k) plans
and other institutional accounts. A Putnam subsidiary also provides trustee
services for IRA's, corporate retirement plans and other clients.
Revenue attributable to Putnam is derived primarily from investment
management fees. The investment management services provided to the Putnam
Funds and institutional accounts are performed pursuant to advisory contracts
which provide for a fee payable to the Putnam company that manages the account.
The amount of the fee depends on the individual mutual fund or account and the
level of assets under management and, in the case of certain institutional
accounts, is also based on investment performance.
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<PAGE>
Such contracts may not be assigned by the Putnam company managing the account,
generally may be terminated without penalty and, as to contracts with the Putnam
Funds, continue in effect only so long as approved, at least annually, by their
shareholders or by the Putnam Funds' trustees, including a majority who are not
affiliated with Putnam.
A Putnam subsidiary also receives compensation from the Putnam Funds for
providing shareholder services pursuant to written agreements which may be
terminated by either party on 90 days notice, and for providing custody services
pursuant to a written agreement which may be terminated by either party on 30
days notice. These contracts generally provide for compensation on the basis of
several factors which varies with the type of service being provided.
Shares of the open-end funds are generally sold at their respective net
asset value per share plus a sales charge which varies depending on the
individual fund and the amount purchased. Commissions paid to broker/dealers are
typically paid at the time of the purchase as a percentage of the amount
invested. Certain Putnam Funds are available with a deferred sales charge. The
related commissions initially paid by Putnam to broker/dealers are recovered
through charges and fees received over a number of years.
Nearly all of the Putnam Funds have adopted distribution plans pursuant to
Rule 12b-1 under the Investment Company Act of 1940 under which the Putnam Funds
make payments to a Putnam subsidiary to cover costs relating to distribution of
the Putnam Funds and services provided to shareholders. These payments either
are paid by the Putnam subsidiary directly to firms that distribute shares of
the Putnam Funds for the costs of providing services to shareholders, or
retained by the Putnam subsidiary as compensation for the costs of services
provided by Putnam to shareholders and for commissions advanced by Putnam at the
point of sale (and recovered through fees received over time) to firms that
distribute shares of the Putnam Funds. These distribution plans, and payments
made by the Putnam Funds thereunder, are subject to annual renewal by the
trustees of the Putnam Funds and termination by vote of the shareholders of the
Putnam Funds, or by vote of a majority of the Putnam Funds' trustees who are not
affiliated with Putnam.
Assets managed by Putnam, on which management fees are based, were
approximately $95.3 billion and $90.9 billion as of December 31, 1994 and 1993,
respectively. Mutual fund assets aggregated $67.2 billion at December 31, 1994
and $64.3 billion at December 31, 1993. Assets under management at December 31,
1994 consisted of approximately sixty percent fixed income and forty percent
equity securities, invested both domestically and globally. Assets under
management are affected by fluctuations in domestic and international bond and
stock market prices, by the level of investments and withdrawals for current and
new fund shareholders and clients, by the development and marketing of new
investment products, and by investment performance and service to clients.
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<PAGE>
REGULATION. The activities of the registrant are subject to licensing
requirements and extensive regulation under the laws of the United States and
its various states, territories and possessions, as well as laws of other
countries in which the registrant's subsidiaries operate.
While these laws and regulations vary among jurisdictions, every state of
the United States and most foreign jurisdictions require an insurance broker or
agent (and in some cases a reinsurance broker or intermediary) to have a license
from a governmental agency or self-regulatory organization. In addition,
certain of the registrant's insurance activities are governed by the rules of
the Lloyd's insurance market in London and self-regulatory organizations in
other jurisdictions. A few jurisdictions issue licenses only to individual
residents or locally-owned business entities. In some of these jurisdictions,
if the registrant has no licensed subsidiary, the registrant may maintain
arrangements with residents or business entities licensed to act in such
jurisdiction. In some jurisdictions, various insurance related taxes may also
be due either by clients directly or from the broker. In the latter case, the
broker customarily looks to the client for payment.
No licensing or other regulatory requirements material to the consulting
activities of the registrant apply to that activity in general; however, the
subject matter of certain consulting services may result in regulation. For
example, employee benefit plans are subject to various governmental regulations
and services on insurance or investment matters may subject the registrant to
insurance or securities regulations.
Putnam's securities investment management activities are subject to
regulation in the United States by the Securities and Exchange Commission, and
other federal, state and self regulatory authorities, as well as in certain
other countries in which it does business.
The registrant's business depends on the validity of, and its continued
good standing under, the licenses and approvals pursuant to which it operates,
as well as compliance with pertinent regulations. The registrant therefore
devotes significant effort toward maintaining its licenses and to ensuring
compliance with a diverse and complex regulatory structure. However, in all
jurisdictions the applicable laws and regulations are subject to amendment or
interpretation by regulatory authorities. Generally, such authorities are
vested with relatively broad discretion to grant, renew and revoke licenses and
approvals, and to implement regulations, and licenses may be denied or revoked
for various reasons, including the violation of such regulations, conviction of
crimes and the like. In some instances, the registrant follows practices based
on its interpretations, or those generally followed by the industry, of laws or
regulations, which may prove to be different from those of regulatory
authorities. Accordingly, the
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<PAGE>
possibility exists that the registrant may be precluded or temporarily suspended
from carrying on some or all of its activities or otherwise penalized in a given
jurisdiction.
No assurances can be given that the registrant's insurance, consulting or
investment management activities can continue to be conducted in any given
jurisdiction as in the past.
COMPETITIVE CONDITIONS. The insurance and reinsurance broking services
provided by the registrant are believed to be the largest of their type in the
world. Mercer Consulting Group, one of a few large global consulting firms in
the world, is a market leader in human resources, employee benefits,
compensation and general management consulting services. Putnam Investments is
one of the largest investment management firms in the United States.
The registrant encounters strong competition in the insurance and
consulting businesses from other companies which also operate on a nationwide or
worldwide basis and from a large number of regional and local firms. Some
insurance and reinsurance underwriters market and service their insurance
products without the assistance of brokers, agents or program managers.
The investment management business is also highly competitive. In addition
to competition from firms already in the investment management business, there
is competition from other firms offering financial services, such as commercial
banks and insurance companies, as well as other investment alternatives. Many
securities dealers and commercial banks also sponsor competing proprietary
mutual funds.
Principal methods of competition in these businesses include the services
and the quality thereof that a broker, consultant or investment manager provides
its clients and the cost thereof. These businesses also encounter strong
competition from both public corporations and private firms in attracting and
retaining qualified employees.
SEGMENTATION. Financial information relating to the types of services
provided by the registrant and the geographic areas of its operations is
incorporated herein by reference to Note 14 of the Notes to Consolidated
Financial Statements on page 45 of the Annual Report to Stockholders for the
year ended December 31, 1994 (the "1994 Annual Report"). The registrant's
non-U.S. operations are subject to the customary risks involved in doing
business in other countries, such as currency fluctuations and exchange
controls.
EMPLOYEES. As of December 31, 1994, the registrant and its consolidated
subsidiaries employed about 26,000 people worldwide, of whom approximately
14,800 were employed by subsidiaries providing insurance services, approximately
8,200 were employed by subsidiaries providing consulting services,
approximately 2,700 were employed by subsidiaries providing investment
management services and approximately 300 were employed by the registrant.
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<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT. The executive officers of the
registrant as of December 31, 1994 are Messrs. Blum, Borelli, Coster, Holbrook,
Lasser, Sinnott, Smith and Wroughton, with respect to whom information is
incorporated herein by reference to the Notice of Annual Meeting of Stockholders
and Proxy Statement dated March 30, 1995 (the "1995 Proxy Statement"), and:
Francis N. Bonsignore, age 48, who was elected Senior Vice
President-Human Resources & Administration of the registrant in 1990.
Immediately prior thereto, he was partner and National Director-Human
Resources for Price Waterhouse.
Gregory F. Van Gundy, age 49, who is Secretary and General Counsel of
the registrant. He joined the registrant in 1974.
ITEM 2. PROPERTIES.
The registrant and three of its subsidiaries, as tenants in common, own a
56% condominium interest in a 44-story building in New York City which serves as
their worldwide headquarters. The principal offices of the registrant's Bowring
subsidiaries in London are located in two adjoining buildings under a lease
which expires in 2077.
The remaining business activities of the registrant and its subsidiaries
are conducted principally in leased office space in cities throughout the world.
No difficulty is anticipated in negotiating renewals as leases expire or in
finding other satisfactory space if the premises become unavailable. From time
to time, the registrant may seek to sublet unused space to third parties,
depending upon the demands for office space in the locations involved.
ITEM 3. LEGAL PROCEEDINGS.
The registrant and its subsidiaries are subject to claims and lawsuits that
arise in the ordinary course of business, consisting principally of alleged
errors and omissions in connection with the placement of insurance or
reinsurance and in rendering consulting and investment services. Some of these
claims and lawsuits seek damages, including punitive damages, in amounts which
could, if assessed, be significant. Information regarding disputes involving
run-off reinsurance placements primarily in the Lloyd's market and relating to
advice with respect to client purchases of guaranteed investment contracts and
annuities issued by Executive Life Insurance Company are incorporated herein by
reference to Note 13 of the Notes to Consolidated Financial Statements on page
44 of the 1994 Annual Report.
On the basis of present information, available insurance coverage and
advice received from counsel, it is the opinion of the registrant's management
that the disposition or ultimate determination of these claims and lawsuits will
not have a material adverse effect on the registrant's consolidated results of
operations or its consolidated financial position.
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<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Market and dividend information regarding the registrant's common stock on
page 47 of the 1994 Annual Report is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data on pages 48 and 49 of the 1994 Annual Report
are incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Information on pages 23 through 29 of the 1994 Annual Report is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Consolidated Financial Statements and the Report of Independent
Auditors thereto on pages 30 through 46 of the 1994 Annual Report and Selected
Quarterly Financial Data (Unaudited) on page 47 of the 1994 Annual Report are
incorporated herein by reference. Supplemental Notes to Consolidated Financial
Statements are included on pages 16 and 17 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information as to the directors of the registrant is incorporated herein by
reference to the material under the heading
"Directors" in the 1995 Proxy Statement. Information as to the executive
officers of the registrant is set forth in Item 1 above.
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ITEM 11. EXECUTIVE COMPENSATION.
Information under the headings "Executive Compensation", "Compensation
Committee Report" and "Comparison of Cumulative Total Stockholder Return" in the
1995 Proxy Statement are incorporated herein by reference.
Information required pursuant to Item 405 of Regulation S-K is incorporated
herein by reference to the material under the heading "Transactions with
Management and Others; Other Information" in the 1995 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information under the heading "Security Ownership" in the 1995 Proxy
Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information under the heading "Transactions with Management and Others;
Other Information" in the 1995 Proxy Statement is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
1. Consolidated Financial Statements (incorporated herein by
reference to pages 30 through 46 of the 1994 Annual Report):
Consolidated Statements of Income for the three years ended
December 31, 1994
Consolidated Balance Sheets as of
December 31, 1994 and 1993
Consolidated Statements of Cash Flows for the three years
ended December 31, 1994
Consolidated Statements of Stockholders' Equity for the
three years ended
December 31, 1994
Notes to Consolidated Financial Statements
Report of Independent Auditors
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<PAGE>
Supplemental Notes to Consolidated Financial Statements
Report of Independent Auditors
Other:
Selected Quarterly Financial Data and Supplemental
Information (Unaudited) for the three years ended December
31, 1994 (incorporated herein by reference to page 47 of
the 1994 Annual Report)
Ten-Year Statistical Summary of Operations (incorporated
herein by reference to pages 48 and 49 of the 1994 Annual
Report)
2. All required Financial Statement Schedules are included in the
Consolidated Financial Statements, the Notes to Consolidated
Financial Statements or the Supplemental Notes to Consolidated
Financial Statements.
3. The following exhibits are filed as a part of this report:
(3) -the registrant's restated certificate of
incorporation
-the registrant's by-laws
(10)*-Marsh & McLennan Companies 1992 Incentive and
Stock Award Plan
-Marsh & McLennan Companies Stock Investment
Supplemental Plan
-Marsh & McLennan Companies Special Severance Pay
Plan
-Putnam Investments, Inc. Executive Deferred
Compensation Plan
-Marsh & McLennan Companies Supplemental Retirement
Plan
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* All items in this Exhibit 10 are either management contracts or
compensatory plans or arrangements required to be filed pursuant to Item
14(c) of Form 10-K.
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-Marsh & McLennan Companies Senior Management
Incentive Compensation Plan
-Restated Employment Agreement between Robert
Clements and Marsh & McLennan Risk Capital Corp.
and related Guaranty of the registrant.
(13) -Annual Report to Stockholders for the year
ended December 31, 1994, to be deemed filed
only with respect to those portions which
are expressly incorporated by reference
(21) -list of subsidiaries of the registrant
(23) -consent of independent auditors
(24) -powers of attorney
(27) -Financial Data Schedule (filed only with SEC
for EDGAR purposes)
(b) No reports on Form 8-K were filed by the registrant in the fiscal
quarter ended December 31, 1994.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
this 28th day of March, 1995 on its behalf by the undersigned, thereunto duly
authorized.
MARSH & McLENNAN COMPANIES, INC.
By /s/ A.J.C. SMITH
------------------------------
A.J.C. SMITH
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated this 28th day of March, 1995:
/s/A.J.C. SMITH LEWIS W. BERNARD*
- ---------------------------- ------------------------------
A.J.C. SMITH LEWIS W. BERNARD
Director, Chairman of the Board Director
and Chief Executive Officer
/s/FRANK J. BORELLI RICHARD H. BLUM*
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FRANK J. BORELLI RICHARD H. BLUM
Senior Vice President and Director
Chief Financial Officer,
Director
/s/DOUGLAS C. DAVIS ROBERT CLEMENTS*
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DOUGLAS C. DAVIS ROBERT CLEMENTS
Vice President and Controller Director
(Chief Accounting Officer)
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<PAGE>
PETER COSTER* RICHARD M. MORROW*
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PETER COSTER RICHARD M. MORROW
Director Director
RAY J. GROVES* GEORGE PUTNAM*
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RAY J. GROVES GEORGE PUTNAM
Director Director
RICHARD E. HECKERT* ADELE SMITH SIMMONS*
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RICHARD E. HECKERT ADELE SMITH SIMMONS
Director Director
RICHARD S. HICKOK* JOHN T. SINNOTT*
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RICHARD S. HICKOK JOHN T. SINNOTT
Director Director
DAVID D. HOLBROOK* FRANK J. TASCO*
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DAVID D. HOLBROOK FRANK J. TASCO
Director Director
ROBERT M.G. HUSSON* R. J. VENTRES*
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ROBERT M.G. HUSSON R. J. VENTRES
Director Director
LAWRENCE J. LASSER* PHILIP L. WROUGHTON*
- ---------------------------- ------------------------------
LAWRENCE J. LASSER PHILIP L. WROUGHTON
Director Director
- ----------------------------
*Gregory F. Van Gundy, pursuant to Powers of Attorney executed by each of
the individuals whose name is followed by an (*) and filed herewith, by signing
his name hereto does hereby sign and execute this Form l0-K of Marsh & McLennan
Companies, Inc. on behalf of such individual in the capacities in which the
names of each appear above.
/s/GREGORY F. VAN GUNDY
-----------------------------
GREGORY F. VAN GUNDY
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REPORT OF INDEPENDENT AUDITORS
Marsh & McLennan Companies, Inc.:
We have audited the consolidated balance sheets of Marsh & McLennan Companies,
Inc. as of December 31, 1994 and 1993, and the related consolidated statements
of income, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1994, and have issued our report thereon dated
February 28, 1995, which report expresses an unqualified opinion and includes an
explanatory paragraph referring to the adoption of Statements of Financial
Accounting Standards No. 112 in 1994, No. 115 in 1993, and Nos. 109 and 106 in
1992; such financial statements and report are included in your 1994 Annual
Report to Stockholders and are incorporated herein by reference. Our audits
also included the amounts included in the supplemental notes to the consolidated
financial statements (the "Notes") included herein. These Notes are the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such Notes, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
New York, New York
February 28, 1995
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<PAGE>
MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Information concerning the Company's valuation accounts follows.
An analysis of the allowance for doubtful accounts for the three years ended
December 31, 1994 follows (in millions of dollars):
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<CAPTION>
1994 1993 1992
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<S> <C> <C> <C>
Balance at beginning of year........... $50.9 $50.9 $40.4
Provision charged to operations........ 11.6 8.8 8.5
Accounts written-off, net of
recoveries........................... (11.3) (7.7) (6.4)
Effect of exchange rate changes........ 1.2 (.6) (4.7)
Other (A).............................. ( .2) (.5) 13.1
----- ----- -----
Balance at end of year (B)............. $52.2 $50.9 $50.9
----- ----- -----
----- ----- -----
<FN>
(A) Primarily balances of acquired companies in 1992.
(B) Includes allowance for doubtful accounts related to long-term consumer
finance receivables amounting to $7.3 million in 1994, $8.0 million in
1993 and $9.8 million in 1992.
</TABLE>
An analysis of the valuation allowance for certain foreign deferred tax assets
as of December 31, 1994, 1993 and 1992 follows (in millions of dollars):
<TABLE>
<CAPTION>
1994 1993 1992
----- ----- -----
<S> <C> <C> <C>
Balance at beginning of year........... $23.6 $21.6 $ --
Valuation allowance upon adoption of
SFAS No. 109 "Accounting for Income
Taxes" effective January 1, 1992..... -- -- 25.5
Provision.............................. .5 1.7 5.4
Effect of exchange rate changes........ .6 .3 (9.3)
----- ----- -----
Balance at end of year (A)............. $24.7 $23.6 $21.6
----- ----- -----
----- ----- -----
<FN>
(A) Included in other liabilities in the Consolidated Balance Sheets.
</TABLE>
16. An analysis of intangible assets at December 31, 1994 and 1993 follows (in
millions of dollars):
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Goodwill .............................. $736.9 $668.9
Other intangible assets................ 87.4 88.7
------ ------
Subtotal............................. 824.3 757.6
Less - accumulated amortization ....... (123.3) (97.5)
------ ------
Total............................. $701.0 $660.1
------ ------
------ ------
</TABLE>
- 16 -
<PAGE>
MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. Per share data, as presented in the Consolidated Statements of Income, is
computed by using the average number of shares of the Company's common
stock outstanding. Common stock equivalents (relating principally to stock
options), which have been excluded from the calculation because their
dilutive effect is immaterial, are shown below for the three years ended
December 31, 1994 (in millions of shares).
1994 1993 1992
---- ---- ----
Primary .7 1.0 1.1
---- ---- ----
---- ---- ----
Fully Diluted .7 1.0 1.5
---- ---- ----
---- ---- ----
- 17 -
<PAGE>
EXHIBIT INDEX
Page number in
sequential
numbering system
----------------
(3) -the registrant's restated
certificate of incorporation
(incorporated by reference to
the registrant's Annual Report
on Form 10-K for the year ended
December 31, 1987)
-the registrant's by-laws
(10) -Marsh & McLennan Companies 1992
Incentive and Stock Award Plan
(incorporated by reference to
Registration Statement No. 33-48804)
-Marsh & McLennan Companies Stock
Investment Supplemental Plan
-Marsh & McLennan Companies Special
Severance Pay Plan (incorporated by
reference to the registrant's Annual
Report on Form 10-K for the year ended
December 31, 1992)
-Putnam Investments, Inc. Executive
Deferred Compensation Plan
-Marsh & McLennan Companies
Supplemental Retirement Plan
(incorporated by reference to
the registrant's Annual Report on
Form 10-K for the year ended
December 31, 1992)
-Restated Employment Agreement between
Robert Clements and Marsh & McLennan
Risk Capital Corp. and related
Guaranty of the registrant
-Marsh & McLennan Companies Senior
Management Incentive Compensation Plan
- 18 -
<PAGE>
EXHIBIT INDEX (cont'd)
Page number in
sequential
numbering system
----------------
(13) -Annual Report to Stockholders for the
year ended December 31, 1994, to be
deemed filed only with respect to
those portions which are expressly
incorporated by reference
(21) -list of subsidiaries of the
registrant
(23) -consent of independent auditors
(24) -powers of attorney
(27) -Financial Data Schedule (filed only
with SEC for EDGAR purposes)
- 19 -
<PAGE>
EXHIBIT 3
BY-LAWS
OF
MARSH & McLENNAN COMPANIES, INC.
RESTATED AS LAST AMENDED
July 20, 1994
<PAGE>
I N D E X
Page Number
-----------
ARTICLE I
Offices............................................. 1
ARTICLE II
Meetings of the Stockholders........................ 1
ARTICLE III
Directors........................................... 5
ARTICLE IV
Officers............................................ 6
ARTICLE V
Committees.......................................... 8
ARTICLE VI
Indemnification..................................... 11
ARTICLE VII
Checks, Contracts, Other Instruments................ 13
ARTICLE VIII
Capital Stock....................................... 14
ARTICLE IX
Miscellaneous....................................... 15
ARTICLE X
Amendments.......................................... 16
<PAGE>
BY-LAWS
OF
MARSH & McLENNAN COMPANIES, INC.
ARTICLE I
OFFICES
The principal office of the Corporation in Delaware shall be at
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle, in the State of Delaware, and The Corporation Trust Company shall
be the resident agent of the Corporation in charge thereof. The Corporation may
also have such other offices at such other places as the Board of Directors may
from time to time designate or the business of the Corporation may require.
ARTICLE II
MEETINGS OF THE STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. Meetings of the stockholders may be
held at such place as the Board of Directors may determine.
SECTION 2. ANNUAL MEETINGS. The annual meeting of the stockholders
shall be held on the third Tuesday of May in each year, or such other day in May
as may be determined from time to time by the Board of Directors, at such time
and place as the Board of Directors may designate. At said meeting the
stockholders shall elect a Board of Directors and transact any other business
authorized or required to be transacted by the stockholders.
SECTION 3. SPECIAL MEETINGS. Special meetings of the stockholders,
except as otherwise provided by law, shall be called by the Chairman of the
Board, or whenever the Board of Directors shall so direct, the Secretary.
SECTION 4. NOTICE OF MEETINGS. Except as otherwise provided by law,
written or printed notice stating the place, day and hour of the meeting, and in
the case of a special meeting the purpose or purposes for which the meeting is
called, shall be delivered personally or mailed, postage prepaid, at least ten
(10) days but not more than sixty (60) days before such meeting to each
stockholder at such address as appears on the stock books of the Corporation.
SECTION 5. FIXING OF RECORD DATE. In order to determine the
stockholders entitled to notice of or to vote at any meeting of the stockholders
or any adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any
<PAGE>
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date which shall not be more than sixty
(60) nor less than ten (10) days before the date of such meeting, and no more
than sixty (60) days prior to any other action.
If no record date is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice of the meeting is given or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held, and
such date for any other purpose shall be the date on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
SECTION 6. QUORUM. The holders of a majority of the stock issued and
outstanding present in person or represented by proxy shall be requisite and
shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by law, by the Restated
Certificate of Incorporation or by these by-laws. If, however, such majority
shall not be present or represented at any meeting of the stockholders, the
stockholders present in person or by proxy shall have power to adjourn the
meeting from time to time without notice other than announcement at the meeting
until the requisite amount of stock shall be represented. At such adjourned
meeting at which the requisite amount of stock shall be represented, any
business may be transacted which might have been transacted at the meeting as
originally called.
SECTION 7. VOTING. Each stockholder entitled to vote in accordance
with the terms of the Restated Certificate of Incorporation and in accordance
with the provisions of these by-laws shall be entitled to one vote, in person or
by proxy, for each share of stock entitled to vote held by such stockholder, but
no proxy shall be voted after three years from its date unless such proxy
provides for a longer period. The vote for directors and, upon demand of any
stockholder, the vote upon any question before the meeting shall be by ballot.
All elections of directors shall be decided by plurality vote; all other
questions shall be decided by a majority of the shares present in person or
represented by proxy at the meeting of stockholders and entitled to vote on the
subject matter, except as otherwise provided in the Restated Certificate of
Incorporation or by law or regulation.
SECTION 8. INSPECTORS OF ELECTION. All elections of directors and
all votes where a ballot is required shall be
- 2 -
<PAGE>
conducted by two inspectors of election who shall be appointed by the Board of
Directors; but in the absence of such appointment by the Board of Directors, the
Chairman of the meeting shall appoint such inspectors who shall not be directors
or candidates for the office of director.
SECTION 9. VOTING LIST. The Secretary shall prepare and make, at
least ten days before every election of directors, a complete list of the
stockholders entitled to vote, arranged in alphabetical order and showing the
address of each stockholder and the number of shares registered in his name.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
Section 10. STOCKHOLDER NOMINATIONS OF DIRECTORS. Only persons who
are nominated in accordance with the following procedures shall be eligible for
election as directors at a meeting of stockholders. Nominations of persons for
election to the Board of Directors of the Corporation may be made at a meeting
of stockholders by or at the direction of the Board of Directors, by any person
appointed by the Board of Directors or by any stockholder of the Corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this Section 10. Such nominations, other
than those made by or at the direction of the Board of Directors or by any
person appointed by the Board of Directors, shall be made pursuant to timely
notice in writing to the Secretary, Marsh & McLennan Companies, Inc. To be
timely, a stockholder's notice shall be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 60 days nor
more than 90 days prior to the meeting; PROVIDED, HOWEVER, that in the event
that the meeting is not to be held on the date set forth in Article II, Section
2 and less than 75 days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the 15th day
following the day on which such public disclosure was made. Such stockholder's
notice to the Secretary shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or reelection as a director, (i)
the name, age, business address and residence address of the person, (ii) the
principal occupation or employment of the person, (iii) the class and number of
shares of capital stock of the Corporation which are beneficially owned by the
person and (iv) any other information relating to the person that is required to
be disclosed in solicitations for proxies for
- 3 -
<PAGE>
election of directors pursuant to Rule 14a under the Securities Exchange Act of
1934, as amended; and (b) as to the stockholder giving the notice (i) the name
and record address of the stockholder and (ii) the class and number of shares of
capital stock of the Corporation which are beneficially owned by the
stockholder. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee to serve as a director of the
Corporation. No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth herein.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
Section 11. ADVANCE NOTICE OF STOCKHOLDER PROPOSED BUSINESS AT ANNUAL
MEETINGS. At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, otherwise properly brought before the meeting by or at
the direction of the Board of Directors, or otherwise properly brought before
the meeting by a stockholder. In addition to any other applicable requirements,
for business to be properly brought before an annual meeting by a stockholder,
the stockholder must have given timely notice thereof in writing to the
Secretary, Marsh & McLennan Companies, Inc. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation, not less than 60 days nor more than 90 days prior to
the meeting; PROVIDED, HOWEVER, that in the event that the meeting is not to be
held on the date set forth in Article II, Section 2 and less than 75 days'
notice or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 15th day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and record address of the stockholder proposing such business, (iii) the class
and number of shares of capital stock of the Corporation which are beneficially
owned by the stockholder and (iv) any material interest of the stockholder in
such business.
- 4 -
<PAGE>
Notwithstanding anything in these by-laws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 11; PROVIDED, HOWEVER, that nothing in this
Section 11 shall be deemed to preclude discussion by any stockholder of any
business properly brought before the annual meeting in accordance with said
procedure.
The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section, and if he
should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
ARTICLE III
DIRECTORS
SECTION 1. POWERS, NUMBER, TENURE, QUALIFICATIONS AND COMPENSATION.
The business and affairs of the Corporation shall be managed by its Board of
Directors which shall consist of the number of members set forth in Article
FIFTH of the Restated Certificate of Incorporation, none of whom need be
stockholders, but no person shall be eligible to be nominated or elected a
director of the Corporation who has attained the age of 72 years. In addition
to the powers and duties by these by-laws expressly conferred upon them, the
Board of Directors may exercise all such powers of the Corporation and do all
such lawful acts and things as are not by statute or by the Restated Certificate
of Incorporation or by these by-laws directed or required to be exercised or
done by the stockholders. The Board of Directors may provide for compensation
of directors who are not otherwise compensated by the Corporation or any
subsidiary thereof.
SECTION 2. MEETINGS AND NOTICE. The Board shall, for the purposes of
organization, the election and appointment of officers and the transaction of
other business, hold a meeting as soon as convenient after the annual meeting of
stockholders. Regular meetings of the directors may be held without notice at
such places and times as shall be determined from time to time by resolution of
the directors. Special meetings of the Board may be called by the Chairman of
the Board on at least twenty-four (24) hours' notice to each director,
personally or by mail or by telegram or by telephone. Special meetings shall
also be called in like manner on the written request of any three (3) directors.
The attendance of a director at any meeting shall dispense with notice to him of
the meeting. Members of the Board of Directors may participate in a meeting of
the Board by means of conference telephone or similar communications equipment,
by means of which
- 5 -
<PAGE>
all persons participating in the meeting can hear each other, and participation
in a meeting pursuant to this section shall constitute presence in person at
such meeting.
SECTION 3. OFFICES, BOOKS, PLACE OF MEETING. The Board of Directors
may have one or more offices and keep the books of the Corporation outside of
Delaware, and may hold its meetings at such places as it may from time to time
determine.
SECTION 4. QUORUM. At all meetings of the Board of Directors
one-third (1/3) of the total number of directors shall be necessary and
sufficient to constitute a quorum for the transaction of business, and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Restated Certificate of Incorporation
or by these by-laws.
SECTION 5. INFORMAL ACTION. The Board of Directors shall, except as
otherwise provided by law, have power to act in the following manner: A
resolution in writing, signed by all of the members of the Board of Directors
shall be deemed to be action by such Board to the effect therein expressed with
the same force and effect as if the same had been duly passed at a duly convened
meeting, and it shall be the duty of the Secretary of the Corporation to record
any such resolution in the minute book of the Corporation, under its proper
date.
ARTICLE IV
OFFICERS
SECTION 1. ELECTION. The Board of Directors shall elect officers of
the Corporation, including a Chairman of the Board, a Vice Chairman of the
Board, one or more Vice Presidents, a Secretary, a Treasurer and a Controller.
Such officers shall be elected at the annual meeting of the Board of Directors
following the annual meeting of stockholders. The Board of
Directors may, as it deems advisable, elect one or more Assistant
Vice Presidents, Assistant Secretaries and Assistant Treasurers and such other
officers as it may deem appropriate. The Board of Directors may at any meeting
fill any vacancy that shall occur, or create new offices and elect incumbents
thereto.
SECTION 2. TERM AND REMOVAL. The officers of the Corporation
designated in SECTION 1 of this Article IV, shall hold office for one year and
until their respective successors are chosen and qualify in their stead. Any
officer may be removed at any time, with or without cause, by the Board of
Directors. An officer appointed by the Executive Committee may also be removed
at any time, with or without cause by said Committee.
- 6 -
<PAGE>
SECTION 3. CHAIRMAN OF THE BOARD. The Chairman of the Board of
Directors shall be the Chief Executive Officer of the Corporation and, subject
to the control of the Board of Directors, and of the committees exercising
functions of the Board of Directors, shall have general supervision over the
business and property of the Corporation. He shall preside at all meetings of
the stockholders and of the Board of Directors. He shall review and recommend
to the Board of Directors both short-term objectives and long-term planning for
the business. He shall also preside at meetings of any committee of which he is
a member which is not attended by the chairman of such committee. He or his
delegate may vote on behalf of the Corporation the shares owned by the
Corporation in other corporations in such manner as they deem advisable unless
otherwise directed by the Board of Directors. He shall have full authority to
take other action on behalf of the Corporation in respect of shares of stock in
other corporations owned by the Corporation, directly or indirectly, including
the obtaining of information and reports.
SECTION 4. VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the
Board of Directors shall, subject to the control of the Board of Directors and
of the committees exercising functions of the Board of Directors, perform such
duties as may from time to time be assigned to him by the Chairman of the Board.
He shall preside at meetings of the stockholders and of the Board of Directors
not attended by the Chairman of the Board.
SECTION 5. VICE PRESIDENTS. The Vice President shall have such
powers, duties, supplementary titles and other designations as the Board of
Directors may from time to time determine.
SECTION 6. SECRETARY. The Secretary shall attend all meetings of the
stockholders and the Board of Directors. He shall, at the invitation of the
chairman thereof, attend meetings of the committees elected by the Board or
established by these by-laws. He shall record all votes and minutes of all
proceedings which he attends and receive and maintain custody of all votes and
minutes of all such proceedings. Votes and minutes of meetings of the
Compensation and Audit Committees shall be recorded and maintained as each such
committee shall determine. The Secretary shall give or cause to be given notice
of meetings of the stockholders, Board of Directors, and, when instructed to do
so by the Chairman thereof, committees of the Board of Directors, and shall have
such other powers and duties as may be prescribed by appropriate authority. The
Secretary shall keep insafe custody the seal of the Corporation and shall affix
the seal to any instrument requiring the same. The Assistant Secretaries shall
have such powers and perform such duties as may be prescribed by appropriate
authority.
SECTION 7. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall deposit all
- 7 -
<PAGE>
monies and other valuable effects in the name and to the credit of the
Corporation in such depositaries as may be designated by, or in accordance with
general policies adopted by, the Board of Directors or Executive Committee. He
shall disburse the funds of the Corporation as may be ordered by the Chairman,
the chief financial officer, the Board of Directors or the Executive Committee,
taking proper vouchers for such disbursements, and shall render to the Chairman,
the chief financial officer and the Board of Directors whenever they may require
it, an account of all his transactions as Treasurer. He shall have such powers
and perform such duties as shall be assigned to him by appropriate authority.
The Assistant Treasurers shall have such powers and perform such duties as may
be prescribed by the chief financial officer or the Treasurer.
SECTION 8. CONTROLLER. The Controller shall be the chief accounting
officer of the Corporation. He shall keep or cause to be kept all books of
account and accounting records of the Corporation and shall render to the
Chairman, the chief financial officer and the Board of Directors whenever they
may require it, a report of the financial condition of the Corporation. He
shall have such other powers and duties as shall be assigned to him by
appropriate authority. The Assistant Controllers shall have such powers and
perform such duties as may be prescribed by the chief financial officer or the
Controller.
SECTION 9. BOND. The Board of Directors may, or the Chairman may,
require any officers, agents or employees of the Corporation to furnish bonds
conditioned on the faithful performance of their respective duties with a surety
company satisfactory to the Board of Directors or the Chairman as surety. The
expenses of such bond shall be paid by the Corporation.
ARTICLE V
COMMITTEES
SECTION 1. EXECUTIVE COMMITTEE. An Executive Committee, composed of
the Chairman and such other directors as the Board of Directors may determine
from time to time shall be elected by the Board of Directors. Except as
provided hereinafter or in resolutions of the Board, the Executive Committee
shall have, and may exercise when the Board is not in session, all the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation and may authorize the seal of the Corporation to be
affixed to all papers which may require it. The Executive Committee shall not,
however, have power or authority in reference to amending the Restated
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the by-laws of the
- 8 -
<PAGE>
Corporation, or declaring a dividend. Unless and to the extent otherwise
provided for by resolutions of the Board of Directors, the Executive Committee
shall not have the power or authority to elect or appoint the Chairman of the
Board of the Corporation, or to authorize the acquisition or entering into of an
agreement for acquiring the stock or assets of any other corporation or business
entity in the event such acquisition involves an expenditure of more than
$10,000,000 or the issuance of more than 200,000 shares of the common stock of
the Corporation or in the event such other corporation or business entity is
engaged in any business other than the insurance, reinsurance, real estate
consulting, investment management or a related business. The Executive
Committee may authorize the issuance not to exceed 200,000 shares of common
stock of the Corporation at any one time for the purpose of acquiring the stock
or assets of another corporation as aforesaid, but may not authorize the
issuance of stock for any other purpose or authorize the issuance of debt
obligations except for short-term borrowings.
SECTION 2. COMPENSATION COMMITTEE. A Compensation Committee,
including a chairman, having such number of directors as the Board of Directors
shall determine from time to time, shall be elected by the Board of Directors.
No member of the Compensation Committee while holding such office and within the
previous year shall, in addition to usual compensation as a director, receive or
be granted or be eligible for any award or any other benefit under any
compensation, stock option or other benefit plans that the committee may
supervise, administer, or review or while holding such office shall be a
full-time employee of the Corporation or any of its subsidiaries. The
Compensation Committee shall fix the compensation of the chief executive officer
of the Corporation and approve the compensation of senior executives of the
Corporation or any of its subsidiaries designated under procedures established
by the Committee from time to time. The Compensation Committee will approve,
disapprove or modify the retention by the Corporation of advisors or consultants
on matters relating to the compensation of the chief executive officer and
senior executives of the Corporation. The Compensation Committee shall also
satisfy itself, if in its opinion circumstances make it desirable to do so, that
the general compensation policies and practices followed by the Corporation and
its subsidiaries are in the Corporation's best interests. The Compensation
Committee shall have such other duties as may be set forth in the Corporation's
compensation, stock option or other benefit plans as they may exist from time to
time, or otherwise as provided by the Board of Directors. The Compensation
Committee shall report to the Board at least annually and whenever the Board may
require respecting the discharge of the committee's duties and responsibilities.
The term "compensation" as used in this Section shall mean salaries, bonuses,
agreements to pay deferred compensation, and discretionary benefits such as
stock options, but shall not include payments to or under any employee pension,
retirement, profit sharing, stock investment, or similar plan.
- 9-
<PAGE>
SECTION 3. AUDIT COMMITTEE. An Audit Committee, including a
chairman, having such number of directors as the Board of Directors may
determine from time to time, shall be elected by the Board of Directors. The
members of the Audit Committee shall be elected by the Board of Directors from
among the members of the Board who are not officers or employees of the
Corporation. The Audit Committee shall meet at least annually with the
Corporation's independent public accountants, and at any time during the year
when considered appropriate by the independent public accountants or the
committee. The committee shall review the annual financial statements of the
Corporation with the independent public accountants and shall review the
practices and procedures adopted by the Corporation in the preparation of such
financial statements. The Audit Committee shall submit recommendations to the
Board of Directors with respect to the selection of independent public
accountants to examine the Corporation's annual financial statements and shall
review the independent public accountant's annual scope of audit. The Audit
Committee shall, as it may deem appropriate from time to time, report and make
recommendations to the Board of Directors.
SECTION 4. REPORTS. The Executive Committee shall report to each
regular meeting and, if directed, to each special meeting of the Board of
Directors all action taken by such committee subsequent to the date of its last
report, and other committees shall report to the Board of Directors at least
annually.
SECTION 5. OTHER COMMITTEES. The Board of Directors may appoint such
other committee or committees as it deems desirable.
SECTION 6. ELECTION AND TERM. The Chairman and each member of every
committee shall be a member of and elected by the Board of Directors and shall
serve until he shall cease to be a member of the Board of Directors or his
membership on the committee shall be terminated by the Board.
SECTION 7. MEETINGS, QUORUM AND NOTICE. The Chairman of any
committee shall be the presiding officer thereof. Any committee may meet at
such time or times on notice to all the members thereof by the Chairman or by a
majority of the members or by the Secretary of the Corporation and at such place
or places as such notice may specify. At least twenty-four (24) hours' notice
of the meeting shall be given but such notice may be waived. Such notice may be
given by mail, telegraph, telephone or personally. Each committee shall cause
minutes to be kept of its meetings which record all actions taken. Such minutes
shall be placed in the custody of the Secretary of the Corporation except that
the Compensation and Audit Committees shall each determine who shall maintain
custody of its minutes or portions thereof. Any committee may, except as
otherwise provided by law, act in its discretion by a resolution or resolutions
in writing signed by all the members of
- 10 -
<PAGE>
such committee with the same force and effect as if duly passed by a duly
convened meeting. Any such resolution or resolutions shall be recorded in the
minute book of the committee under the proper date thereof. Members of any
committee may also participate in a meeting of such committee by means of
conference telephone or similar communications equipment, by means of which all
persons participating in the meeting can hear each other and participation in
the meeting pursuant to this provision shall constitute presence in person at
such meeting. A majority of the members of each committee shall constitute a
quorum.
ARTICLE VI
INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is made
a party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter, a "proceeding"), by reason of the fact that, on or
after May 21, 1987, he or she is serving or had served as a director, officer or
employee of the Corporation or, while serving as such director, officer or
employee, is serving or had served at the request of the Corporation as a
director, officer, employee or agent of, or in any other capacity with respect
to, another corporation or a partnership, joint venture, trust or other entity
or enterprise, including service with respect to employee benefit plans
(hereinafter, an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or agent or in
any other capacity while serving as a director, officer or employee of the
Corporation, shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by Delaware law, as the same exists or may hereafter
be changed or amended (but, in the case of any such change or amendment, only to
the extent that such change or amendment permits the Corporation to provide
broader indemnification rights than permitted prior thereto), against all
expense, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts to be paid in settlement) reasonably
incurred or suffered by an indemnitee in connection therewith and such
indemnification shall continue as to an indemnitee who has ceased to be a
director, officer or employee of the Corporation and shall inure to the benefit
of the indemnitee's heirs, executors and administrators; PROVIDED, HOWEVER, that
except as provided in Section 3 of this Article with respect to proceedings
seeking to enforce rights to indemnification, the Corporation shall indemnify
an indemnitee in connection with a proceeding (or part thereof) initiated by the
indemnitee only if such proceeding (or part thereof) was authorized by the board
of directors of the Corporation. The right to indemnification conferred in this
Article shall be a contract right.
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<PAGE>
SECTION 2. ADVANCEMENT OF EXPENSES. An indemnitee who is a director
or officer of the Corporation, and any other indemnitee to the extent authorized
from time to time by the board of directors of the Corporation, shall have the
right to be paid by the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition (hereinafter, an "advancement of
expenses"); PROVIDED, HOWEVER, that, if the Delaware General Corporation Law
requires, an advancement of expenses incurred by an indemnitee in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such indemnitee, including, without limitation,
service to an employee benefit plan) shall be made only upon delivery to the
Corporation of an undertaking (hereinafter, an "undertaking"), by or on behalf
of such indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal (hereinafter, a "final adjudication") that such indemnitee is not
entitled to be indemnified for such expenses under this Article or otherwise.
SECTION 3. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under
Section 1 or Section 2 of this Article is not paid in full by the Corporation
within sixty days in the case of Section 1 and twenty days in the case of
Section 2 after a written claim has been received by the Corporation, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in
any such suit, or in a suit brought by the Corporation to recover an advancement
of expenses pursuant to terms of an undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (other than a suit brought by the indemnitee to enforce a right to an
advancement of expenses), it shall be a defense that, and (ii) any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking the Corporation shall be entitled to recover such expenses upon a
final adjudication that, the indemnitee has not met the applicable standard of
conduct set forth in the Delaware General Corporation Law. Neither the failure
of the Corporation (including its board of directors, independent legal counsel,
or its stockholders) to have made a determination prior to the commencement of
such suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its board of directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to the action. In any suit brought by the indemnitee
to enforce a right to indemnification or to an advancement of expenses
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hereunder, or by the Corporation to recover an advancement of expenses pursuant
to the terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article or otherwise shall be on the Corporation.
SECTION 4. INDEMNIFICATION OF AGENTS OF THE CORPORATION. The
Corporation may, to the extent authorized from time to time by its board of
directors, grant rights to indemnification, and to be paid by the Corporation
the expenses incurred in defending any proceeding in advance of its final
disposition, to any agent of the Corporation to the fullest extent of the
provisions of this Article with respect to the indemnification of directors,
officers and employees of the Corporation and advancement of expenses of
directors and officers of the Corporation.
SECTION 5. NON-EXCLUSIVITY OF RIGHTS. The right to indemnification
and to the advancement of expenses conferred in this Article shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, the Corporation's Restated Certificate of Incorporation,
these by-laws, any agreement, vote of stockholders or disinterested directors,
or otherwise.
SECTION 6. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or of another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
SECTION 7. SURVIVAL OF PRIOR INDEMNIFICATION PROVISIONS; EFFECT OF
SUBSEQUENT CHANGE ON EXISTING RIGHTS. Nothing contained in this Article shall
be construed as altering or eliminating the rights to indemnification existing,
or based upon service by an indemnitee, prior to May 21, 1987. Any repeal or
modification of this Article shall not adversely affect any right or protection
of a director, officer or employee of the Corporation existing at the time of
such repeal or modification.
ARTICLE VII
CHECKS, CONTRACTS, OTHER INSTRUMENTS
SECTION 1. DOCUMENTS, INSTRUMENTS NOT REQUIRING SEAL. All checks,
notes, drafts, acceptances, bills of exchange, orders for the payment of money,
and all written contracts and instruments of every kind which do not require a
seal shall be signed by such
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officer or officers, or person or persons as these by-laws, or the Board of
Directors or Executive Committee by resolution, may from time to time prescribe.
SECTION 2. DOCUMENTS, INSTRUMENTS REQUIRING SEAL. All bonds, deeds,
mortgages, leases, written contracts and instruments of every kind which require
the corporate seal of the Corporation to be affixed thereto, shall be signed and
attested by such officer or officers as these by-laws, or the Board of Directors
or Executive Committee, by resolution, may from time to time prescribe.
ARTICLE VIII
CAPITAL STOCK
SECTION 1. STOCK CERTIFICATES. The certificates for shares of the
capital stock of the Corporation shall be in such form, not inconsistent with
the Restated Certificate of Incorporation, as shall be approved by the Board of
Directors. Each certificate shall be signed by the Chairman of the Board of
Directors or a Vice President and also by the Secretary, an Assistant Secretary,
the Treasurer or an Assistant Treasurer, provided, however, that any such
signature of an officer of the Corporation or of the Transfer Agent, Assistant
Transfer Agent, Registrar or Assistant Registrar, or any of them, may be a
facsimile. In case any officer or officers who shall have signed, or whose
facsimile signature or signatures shall have been used on any such certificate
or certificates shall cease to be such officer or officers of the Corporation,
whether because of death, resignation or otherwise before such certificate or
certificates shall have been delivered by the Corporation, such certificate or
certificates may nevertheless be adopted by the Corporation and be used and
delivered as though the officer or officers who signed the said certificate or
certificates or whose facsimile signature or signatures shall have been used
thereon had not ceased to be said officer or officers of the Corporation. All
certificates shall be consecutively numbered, shall bear the corporate seal and
the names and addresses of all persons owning shares of capital stock of the
Corporation with the number of shares owned by each; and, the date or dates of
issue of the shares of stock held by each shall be entered in books kept for
that purpose by the proper officers or agents of the Corporation.
SECTION 2. RECOGNITION OF HOLDERS OF RECORD. The Corporation shall
be entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof, and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it has actual or other notice thereof, save as
expressly provided by the laws of the State of Delaware.
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SECTION 3. LOST CERTIFICATES. Except in cases of lost or destroyed
certificates, and in that case only after conforming to the requirements
hereinafter provided, no new certificates shall be issued until the former
certificate for the shares represented thereby shall have been surrendered and
cancelled. The Board of Directors may direct a new certificate or certificates
to be issued in place of any certificate or certificates theretofore issued by
the Corporation alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate or certificates to
be lost or destroyed; and the Board of Directors may, in its discretion and as a
condition precedent to the issuance of any such new certificate or certificates,
require (i) that the owner of such lost or destroyed certificate or
certificates, or his legal representative give the Corporation and its transfer
agent or agents, registrar or registrars a bond in such form and amount as the
Board of Directors may direct as indemnity against any claim that may be made
against the Corporation and its transfer agent or agents, registrar or
registrars, or (ii) that the person requesting such new certificate or
certificates obtain a final order or decree of a court of competent jurisdiction
as to his right to receive such new certificate or certificates.
SECTION 4. TRANSFER OF SHARES. Shares of stock shall be transferred
on the books of the Corporation by the holder thereof or by his attorney
thereunto duly authorized upon the surrender and cancellation of certificates
for a like number of shares.
SECTION 5. REGULATIONS GOVERNING TRANSFER OF SHARES. The Board of
Directors may make such regulations as it may deem expedient concerning the
issue, transfer and registration of stock.
SECTION 6. APPOINTMENT OF TRANSFER AGENT, REGISTRAR. The Board may
appoint a Transfer Agent or Transfer Agents and Registrar or Registrars for
transfers and may require all certificates to bear the signature of either or
both.
ARTICLE IX
MISCELLANEOUS
SECTION 1. INSPECTION OF BOOKS. The Board of Directors or the
Executive Committee shall determine from time to time whether and, if allowed,
when and under what conditions and regulations the accounts and books of the
Corporation (except such as may by statute be specifically open to inspection),
or any of them shall be open to the inspection of the stockholders, and the
stockholders' rights in this respect are and shall be restricted and limited
accordingly.
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SECTION 2. CORPORATE SEAL. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization, and the words
"Corporate Seal, Delaware".
SECTION 3. FISCAL YEAR. The fiscal year shall begin on the first day
of January of each year.
SECTION 4. WAIVER OF NOTICE. Whenever by statute, the provisions of
the Restated Certificate of Incorporation, or these by-laws, the stockholders,
the Board of Directors or any committee established by the Board of Directors in
accordance with these by-laws are authorized to take any action after notice,
such notice may be waived, in writing, before or after the holding of the
meeting at which such action is to be taken, by the person or persons entitled
to such notice or, in the case of a stockholder, by his attorney thereunto
authorized.
ARTICLE X
AMENDMENTS
SECTION 1. BY STOCKHOLDERS. These by-laws, or any of them, may be
amended, altered, changed, added to or repealed at any regular or special
meeting of the stockholders, by the affirmative vote of a majority of the shares
of stock then issued and outstanding.
SECTION 2. BY THE BOARD OF DIRECTORS. The Board of Directors, by
affirmative vote of a majority of its members, may, at any regular or special
meeting, amend, alter, change, add to or repeal these by-laws, or any of them,
but any by-laws made by the Directors may be amended, altered, changed, added to
or repealed by the stockholders.
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EXHIBIT 10
MARSH & MCLENNAN COMPANIES
STOCK INVESTMENT SUPPLEMENTAL PLAN
(Effective July 1, 1992)
As amended and restated to conform to the Stock Investment Plan (amended to
conform to IRS determination letter dated January 25, 1995)
<PAGE>
INDEX TO ARTICLES
ARTICLE Page
- ------- ----
Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 1
2 Eligibility . . . . . . . . . . . . . . . . . . . . . . . . 2
3 Employee Deferrals . . . . . . . . . . . . . . . . . . . . . 3
4 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5 Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6 Beneficiaries. . . . . . . . . . . . . . . . . . . . . . . . 9
7 Administration . . . . . . . . . . . . . . . . . . . . . . . 9
8 Amendment and Termination. . . . . . . . . . . . . . . . . . 11
9 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . 12
10 Effective Date . . . . . . . . . . . . . . . . . . . . . . . 13
<PAGE>
PREAMBLE
Effective July 1, 1992, Marsh & McLennan Companies, Inc. (the
"Company") adopted this Marsh & McLennan Companies Stock Investment Supplemental
Plan (the "Plan"). The Plan provides benefits to certain employees of the
Company and its subsidiaries who would have their benefits and contributions
under the Marsh & McLennan Companies Stock Investment Plan limited by certain
provisions of the Employee Retirement Income Security Act of 1974 ("ERISA") and
other applicable laws. It is intended that, to the maximum extent possible,
benefits paid under the Plan shall be paid under an arrangement that is an
unfunded "excess benefit plan" within the meaning of section 3(36) of ERISA and,
to the extent not so paid, such benefits shall be paid under an arrangement that
is, for purposes of ERISA, unfunded and maintained primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees. This document describes the benefits provided under the
Plan and is intended to represent a binding obligation of Marsh & McLennan
Companies, Inc. and participating subsidiaries to provide those benefits,
subject to the terms and conditions of the Plan as from time to time in effect.
The Plan reads as follows:
ARTICLE 1
DEFINITIONS
The following terms when used in this Plan have the designated
meanings unless a different meaning is clearly required by the context.
1.1 AFTER-TAX CONTRIBUTIONS, CODE, COMPANY, COMPENSATION, EMPLOYEE,
MMC STOCK, MONTHLY EARNINGS, PARTICIPANT, PARTICIPATING COMPANY MATCHING
CONTRIBUTIONS, PLAN YEAR, PRE-TAX CONTRIBUTIONS and TERMINATION OF EMPLOYMENT
have the meanings given them in the Basic Plan.
1.2 BASIC PLAN means the Marsh & McLennan Companies Stock Investment
Plan.
1.3 BENEFICIARY means the person or persons designated pursuant to
Article 6 to receive a benefit in the event of a SISP Participant's death before
his SISP Benefit has been paid in full.
1.4 CHANGE IN CONTROL has the meaning set forth in Section 5.6.
1.5 COMMITTEE means the committee appointed by the Company pursuant
to Section 11.1 of the Basic Plan.
1.6 COMPENSATION LIMIT means, with respect to any Plan
Year, the limit established for such Year pursuant to section 401(a)(17) of the
Code.
<PAGE>
1.7 DEFERRAL LIMIT means, with respect to any calendar year, the
limit on elective deferrals for such year established pursuant to section 402(g)
of the Code.
1.8 FAIR MARKET VALUE of a share of MMC Stock on any date means the
closing price per share reported on the New York Stock Exchange for such date
or, if no trading occurs on such date, for the last preceding day on which
trading occurred.
1.9 PARTICIPATING COMPANY means the Company and any subsidiary
thereof whose Employees are eligible to participate in the Basic Plan.
1.10 PAYMENT DATE means a date determined pursuant to Section 5.3 or
5.4 for commencement of the payment of some portion or all of a SISP Benefit.
1.11 PLAN means this Marsh & McLennan Companies Stock Investment
Supplemental Plan as in effect from time to time.
1.12 PLAN ADMINISTRATOR means an individual appointed from time to
time by the Company to administer the Plan.
1.13 SECTION 415 LIMIT means, with respect to any limitation year
within the meaning of Treas. Reg. section 1.415-2(b), the limit established for
such year pursuant to section 415(c)(1)(A) of the Code.
1.14 SISP ACCOUNT means an account established by the Company pursuant
to Section 4.1.
1.15 SISP BENEFIT means the benefit described in Section 5.1.
1.16 SISP PARTICIPANT means an individual who has a SISP Account that
has not been terminated pursuant to Section 4.1.
1.17 STOCK UNIT means a bookkeeping entry made to a SISP Participant's
SISP Account pursuant to Article 4.
ARTICLE 2
ELIGIBILITY
2.1 ELIGIBILITY. An Employee who is a Participant in the Basic Plan,
whose Contribution Authorization under the Basic Plan is not suspended pursuant
to Section 3.7 of the Basic Plan and whose opportunity to cause contributions to
be made pursuant to Section 3.1 thereof could reasonably be expected to be
limited in any Plan Year by the operation of the Compensation Limit or the
Section 415 Limit may (a) defer Compensation during such Plan Year pursuant to
Section 3.1 of this Plan and (b) have matching amounts
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credited to his SISP Account pursuant to Section 4.3 of this Plan. The Plan
Administrator in his sole discretion may establish specific terms and conditions
for the participation of any Employee.
ARTICLE 3
EMPLOYEE DEFERRALS
3.1 DEFERRAL ELECTION. Subject to Section 3.3, an Employee who is
eligible pursuant to Section 2.1 for a Plan Year may direct the Participating
Company that employs him to reduce his Compensation for such Plan Year by an
amount equal to any whole percentage thereof, provided that such percentage
shall be not less than two percent (2%) and not more than twelve percent (12%),
and to pay such amount to such Employee in the future as deferred compensation.
Any direction pursuant to this Section 3.1 shall be given in writing, at such
time and in such manner as the Plan Administrator shall prescribe, and shall
apply only to Compensation that is remuneration for services rendered after the
date such direction is given. No direction given pursuant to this Section 3.1
shall be changed with retroactive effect.
3.2 EFFECTIVE DATE. An Employee who elects a Compensation reduction
pursuant to Section 3.1 may, at the time such election is made, direct that it
shall be effective for any Plan Year on the earliest date in such Plan Year as
of which the Employee's opportunity to cause Pre-Tax Contributions to be made
under the Basic Plan is limited by the Deferral Limit. If the Employee does not
give such a direction, then, except as may be otherwise permitted by the Plan
Administrator, no Compensation reduction elected pursuant to Section 3.1 shall
be effective in any Plan Year prior to the earliest date in such Plan Year as of
which the Employee's opportunity to cause contributions to be made under the
Basic Plan is limited by the Compensation Limit or the Section 415 Limit. Any
Compensation reduction elected pursuant to Section 3.1 shall be effected by
payroll deductions from each payment of Monthly Earnings that is made to the
Employee subsequent both to the date he directs a Participating Company to make
such reduction and to the effective date determined under this Section 3.2.
3.3 LIMITATIONS. (a) The sum for any Plan Year of an Employee's
Compensation reduction pursuant to Section 3.1 of this Plan and his Pre-Tax and
After-Tax Contributions pursuant to Section 3.1 of the Basic Plan shall not
exceed an amount equal to twelve percent (12%) of the Compensation paid to such
Employee during such Plan Year. The reduction in an Employee's Compensation
under this Plan shall be adjusted to the extent necessary to comply with the
limitation set forth in the preceding sentence.
(b) The sum for any Plan Year of the amount credited to an
Employee's SISP Account pursuant to Section 4.3 of this Plan and the
Participating Company Matching Contributions credited
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to him pursuant to Section 4.1 of the Basic Plan shall not exceed an amount
equal to four percent (4%) of the Compensation paid to such Employee during such
Plan Year. The amount credited pursuant to Section 4.3 of this Plan shall be
adjusted to the extent necessary to comply with the limitation set forth in the
preceding sentence.
3.4 COMPENSATION. For purposes of this Article 3, an Employee's
Compensation shall include any amount deferred pursuant to an election under
this Plan.
ARTICLE 4
ACCOUNTS
4.1 SISP ACCOUNTS. The Company shall establish a SISP Account for
each SISP Participant which shall be credited with Stock Units based upon such
SISP Participant's Compensation reductions and the matching amounts attributable
thereto, and upon reinvestment of dividends, and which shall be debited for SISP
Benefits paid to or in respect of such SISP Participant. A SISP Account shall
be terminated when no more Stock Units stand credited to it.
4.2 CREDITS FOR COMPENSATION REDUCTIONS. The reduction in a SISP
Participant's Compensation for any month shall be converted to Stock Units as of
the last day of such month by dividing the amount of such reduction by the Fair
Market Value of a share of MMC Stock on such day. The number of Stock Units
thus determined, including any fractional unit, shall be credited to such SISP
Participant's SISP Account as of the last day of the month.
4.3 CREDITS FOR EMPLOYER MATCHING. Each SISP Account to which Stock
Units are credited for any month pursuant to this Section 4.3 shall be credited
as of the last day of such month with an additional number of Stock Units
(including any fractional Unit) equal to the quotient of (a) two-thirds (2/3) of
the first six percent (6%) of reduction in the SISP Participant's Monthly
Earnings under this Plan for such month divided by (b) the Fair Market Value of
a share of MMC Stock as of such last day.
4.4 CREDITS FOR DIVIDEND REINVESTMENT. Whenever a cash dividend is
paid on MMC Stock, each SISP Account shall be credited as of the payment date
with a number of Stock Units (including any fractional Unit) equal to the
quotient of (a) an amount equal to the cash dividend payable on shares of MMC
Stock equal in number to the number of Stock Units (excluding any fractional
Unit) standing credited to such SISP Account at the record date divided by (b)
the Fair Market Value of a share of MMC Stock on such payment date. In the
event of a stock dividend or distribution, stock split, recapitalization or the
like, each SISP Account shall be credited as of the payment date with a number
of Stock Units (including any fractional Unit) equal to the number of shares
(including any
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<PAGE>
fractional share) of MMC Stock payable in respect of shares of MMC Stock equal
in number to the number of Stock Units (excluding any fractional Unit) standing
credited to such SISP Account at the record date.
4.5 ACCOUNTS CONFER NO INTEREST IN ASSETS. The crediting of Stock
Units to the SISP Account of a SISP Participant is merely a bookkeeping record
and shall not confer on such SISP Participant any right, title or interest in or
to any specific assets of Participating Companies.
4.6 ACCOUNT STATEMENTS. The Plan Administrator shall furnish written
statements to each SISP Participant setting forth, at least as of the end of
each calendar year, the number of Stock Units (including any fractional Unit)
credited to his SISP Account.
ARTICLE 5
BENEFITS
5.1 SISP BENEFIT. A SISP Participant's SISP Benefit payable as of
any Payment Date shall be a number of shares of MMC Stock equal to the number of
Stock Units that stand credited to his SISP Account as of the end of the month
preceding such Payment Date and to which such Payment Date applies pursuant to
Section 5.3 or 5.4. Except as provided in Section 5.6 hereof, SISP Benefits
shall be paid only in shares of MMC Stock. If actual payment of a SISP Benefit
(or portion thereof) cannot commence on the applicable Payment Date, it shall
commence as soon as practicable thereafter.
5.2 NONFORFEITABILITY. A SISP Participant's right to receive his
SISP Benefit shall be fully vested and nonforfeitable at all times.
5.3 TIME AND METHOD OF PAYMENT. (a) Except to the extent that a SISP
Participant shall have designated the time and/or form of payment of his SISP
Benefit pursuant to Section 5.4, the Payment Date for a SISP Benefit shall be
the date of the SISP Participant's Termination of Employment for any reason and
such Benefit shall be paid in a single distribution. All payments of SISP
Benefits shall be subject to the provisions of Section 5.8.
(b) In the event that a SISP Participant dies before payment of
his SISP Benefit has commenced, his SISP Benefit shall be paid to his
Beneficiary as soon as practicable in a single distribution.
(c) Notwithstanding any other provision of this Article 5, the
Plan Administrator may delay the payment of a SISP Benefit to a date no more
than one year following the Payment Date otherwise selected if the Plan
Admnistrator determines that such delay is necessary or advisable to preserve in
full the right of a
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<PAGE>
Participating Company to a tax deduction pursuant to section 162 of the Code in
respect of such payment.
5.4 DESIGNATIONS BY PARTICIPANTS. (a) Subject to the provisions of
paragraph (b) of this Section 5.4, the Plan Administrator may in his discretion
permit SISP Participants, under uniformly applicable rules, to designate the
time and/or form of payment of their SISP Benefits. Any such designation (i)
shall apply only to such portion of a SISP Benefit as is based on Stock Units
credited to a SISP Account in respect of Compensation reductions effected after
the date of such designation and matching amounts attributable thereto, and (ii)
shall remain in effect until such time as a new designation shall be made. No
such designation shall be changed with retroactive effect.
(b) The Plan Administrator may permit a SISP Participant to
designate as a Payment Date (i) the first day of any month that is at least 24
months after the date of such designation or (ii) the date of his Termination of
Employment, whenever that shall occur. A SISP Participant who thus designates a
Payment Date may at the same time elect to receive the portion of his SISP
Benefit payable on such Payment Date in substantially equal installments paid at
such intervals as the Plan Administrator shall determine over a period certain
not to exceed the lesser of 15 years or his life expectancy at the Payment Date.
(c) In the event that a SISP Participant who is receiving
payment in installments dies before his entire SISP Benefit has been paid, his
Beneficiary shall receive the undistributed SISP Benefit in a single
distribution which shall be made as soon as practicable following the date of
death.
(d) The SISP Account in respect of which a SISP Benefit is paid
in installments shall be debited for the number of Stock Units in each
installment payment when made. The amount of each installment shall be
appropriately increased to reflect Stock Units credited to such Account as a
result of dividend reinvestment pursuant to Section 4.4.
5.5 SOURCE OF PAYMENT. The SISP Benefit of each SISP Participant
shall be the obligation of the Participating Company or Companies by which such
SISP Participant was employed at the time Compensation reductions in respect of
him were made pursuant to Section 3.1, and shall be the general liability of
such Participating Company or Companies. The claim of a SISP Participant or
Beneficiary to a SISP Benefit shall at all times be merely the claim of an
unsecured creditor of the Participating Company or Companies responsible
therefor. No trust, security, escrow, or similar account need be established
for the purpose of paying SISP Benefits. However, the Company may in its
discretion establish a custodial account or "rabbi trust" (or other arrangement
having equivalent taxation characteristics under the Code and applicable
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<PAGE>
regulations or rulings) to hold assets of the Participating Companies, subject
to the claims of such Companies' creditors in the event of insolvency, for the
purpose of paying SISP Benefits. If the Company establishes such an account or
trust, amounts paid therefrom shall discharge the obligations hereunder to the
extent of the payments so made.
5.6 CHANGE IN CONTROL. (a) For purposes of this Section 5.6, a
"Change in Control" shall have occurred if:
(i) any "person", as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any company owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 50%
or more of the combined voting power of the Company's then outstanding
securities;
(ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of
the Company, and any new director (other than a director designated by
a person who has entered into an agreement with the Company to effect
a transaction described in clause (i), (iii) or (iv) of this Section
5.5) whose election by the Board of Directors or nomination for
election by the Company stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for any
reason to constitute at least a majority thereof;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other Company, other than (A) a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) 50% or more of the combined
voting power of voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation or
(B) a merger or consolidation effected to implement a recapitalization
of the Company (or similar transaction) in which no "person" (as
defined above) acquires 50% or more
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<PAGE>
of the combined voting power of the Company's then outstanding
securities);
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets (or
any transaction having a similar effect).
(b) Notwithstanding any contrary provision of the Plan,
immediately upon the occurrence of a Change in Control, the Company shall pay to
each SISP Participant his SISP Benefit (i) in a single distribution of shares of
MMC Stock or (ii) to the extent all of the shares of MMC Stock have been
changed, exchanged or converted into cash, property or other securities of the
Company in connection with such Change in Control, in such cash, property or
other securities to which such SISP Participant would have been entitled if his
SISP Benefit had been paid to him in the manner as set forth in clause (i)
hereof immediately prior to the Change in Control; PROVIDED, HOWEVER, that if it
is determined that the payment provided for in clauses (i) or (ii) above, as
applicable, would cause the SISP to fail to comply with the requirements set
forth in Rule 16b-3(d) under the Exchange Act, the Company instead shall
establish an irrevocable trust for the benefit of SISP Participants and shall
contribute to such trust such cash, property or shares of MMC Stock or other
securities of the Company which would have been paid to each SISP Participant
pursuant to such clause (i) or (ii) with distribution to be made from such trust
as soon as practicable in compliance with Rule 16b-3(d).
5.7 WITHHOLDING. All deferrals and payments under the Plan shall be
subject to any applicable withholding requirements imposed by any tax or other
law. The Participating Company or Companies responsible for payment of a SISP
Benefit shall have the right to require as a condition of deferral and payment
that the payee remit to such Company or Companies an amount sufficient in its or
their opinion to satisfy all applicable withholding requirements. To the extent
permitted by applicable law, the Plan Administrator may from time to time
establish procedures to facilitate the discharge of payees' obligations under
this Section 5.7, which procedures may include the withholding of shares of MMC
Stock otherwise payable under the Plan.
5.8 RESTRICTIONS (a) If the Plan Administrator shall at any time
determine that any Consent (as hereinafter defined) is necessary or desirable as
a condition of, or in connection with, the crediting of stock units under the
Plan, or the issuance of shares thereunder, or the taking of any other action
thereunder (each such action being hereinafter referred to as a "Plan Action"),
then such Plan Action shall not be taken, in whole or in part, unless and until
such Consent shall have been effected or obtained to the full satisfaction of
the Plan Administrator.
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<PAGE>
(b) The term "Consent" as used herein with respect to any Plan
Action means (i) any and all listings, registrations or qualifications in
respect thereof upon any securities exchange or under any federal, state or
local law, rule or regulation, (ii) any and all written agreements and
representations by the grantee with respect to the disposition of shares, or
with respect to any other matter, which the Plan Administrator shall deem
necessary or desirable to comply with the terms of any such listing,
registration or qualification or to obtain an exemption from the requirement
that any such listing, qualification or registration be made and (iii) any and
all consents, clearances and approvals in respect of a Plan Action by any
governmental or other regulatory bodies.
ARTICLE 6
BENEFICIARIES
6.1 BENEFICIARY DESIGNATION. (a) A SISP Participant shall be deemed
to have designated the same Beneficiary or Beneficiaries for his SISP Benefit as
those he has at the time of reference properly designated pursuant to Section
10.1 of the Basic Plan. Any proper change in designation under the Basic Plan
shall be deemed a like change under this Plan.
(b) In the event that there is no properly designated
Beneficiary or contingent Beneficiary living at the time of a SISP Participant's
death, any unpaid amount of his SISP Benefit shall be paid in accordance with
Section 10.2 of the Basic Plan. The person or persons to whom such amount is
paid shall be deemed to be the deceased SISP Participant's Beneficiary for
purposes of Article 5 of this Plan.
6.2 PAYMENT TO INCOMPETENT. If any person entitled to benefits under
this Plan shall be a minor or shall be physically or mentally incompetent in the
judgment of the Plan Administrator, such benefits may be paid to the person to
whom the corresponding benefits under the Basic Plan are paid pursuant to
Section 10.3 thereof.
ARTICLE 7
ADMINISTRATION
7.1 APPOINTMENT OF PLAN ADMINISTRATOR. The Plan shall be
administered by the Committee except as to such duties as have been specifically
delegated to the Plan Administrator in other provisions of this Plan. Without
limiting the generality of the foregoing, the Committee shall have the power and
discretion to:
(a) make and enforce rules and regulations and prescribe the use
of forms he deems appropriate for the administration of the
Plan;
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<PAGE>
(b) construe all terms, provisions, conditions and limitations
of the Plan and resolve ambiguities, inconsistencies and
omissions;
(c) determine all questions arising out of or in connection with
the provisions of the Plan or its administration in any and
all cases in which it deems such a determination advisable,
such determinations to be final and conclusive on all
persons;
(d) delegate authority to agents and other persons to act on its
behalf in carrying out the provisions and administration of
the Plan, and to take or direct any action required or
advisable with respect to the administration of the Plan.
7.2 CLAIMS PROCEDURE. If the Plan Administrator denies any SISP
Participant's or Beneficiary's claim for benefits under the Plan:
(a) the Plan Administrator shall notify such SISP Participant or
Beneficiary of such denial by written notice which shall set
forth the specific reasons for such denial; and
(b) the SISP Participant or Beneficiary shall be afforded a
reasonable opportunity for a full and fair review by the
Committee of the decision to deny his claim for Plan
benefits.
Notwithstanding the foregoing provisions of this Section 7.2, in the event that
the denied claim is for benefits that are deemed not provided under an "excess
benefit plan" within the meaning of section 3(36) of ERISA, the claims procedure
shall be the same as the one provided for under the Basic Plan.
7.3 SERVICE OF PROCESS. The Company or such other person as may from
time to time be designated by the Company shall be the agent for service of
process under the Plan.
7.4 NO BOND REQUIRED. No bond or other security shall be required of
the Plan Administrator or any member of the Committee or any person to whom the
Plan Administrator or the Committee delegates authority except as may be
required by law.
7.5 LIMITATION OF LIABILITY; INDEMNITY. Except to the extent
otherwise provided by law, if any duty or responsibility of the Plan
Administrator or the Committee has been allocated or delegated to any other
person in accordance with any provision of this Plan, then neither the Plan
Administrator nor the Committee (as the case may be) shall be liable for any act
or omission of
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<PAGE>
such person in carrying out such duty or responsibility. The Company shall
indemnify and save the Plan Administrator and each person who is a member of the
Committee, and each employee or director of a Participating Company harmless
against any and all loss, liability, claim, damage, cost and expense which may
arise by reason of, or be based upon, any matter connected with or related to
the Plan or the administration of the Plan (including, but not limited to, any
and all expenses reasonably incurred in investigating, preparing or defending
against any litigation, commenced or threatened, or in settlement of any such
claim) to the fullest extent permitted under applicable law, except when the
same is judicially determined to be due to the gross negligence or willful
misconduct of the Plan Administrator or such Committee member, employee or
director.
7.6 PAYMENT OF EXPENSES. The Plan Administrator and members of the
Committee shall serve without special compensation. Their expenses, and all
other expenses of Plan administration, shall be paid by the Company.
ARTICLE 8
AMENDMENT AND TERMINATION
8.1 RIGHT RESERVED. (a) Subject to Section 8.2, the Company may at
any time amend the Plan, retroactively or otherwise, in any respect or terminate
the Plan. However, no such amendment or termination shall reduce any SISP
Participant's SISP Benefit determined as though the date of such amendment or
termination were the date of his Termination of Employment. No amendment shall
increase Plan benefits, or broaden Plan eligibility, without action by the Board
of Directors of the Company.
(b) Notwithstanding a termination of the Plan, additional Stock
Units shall continue to be credited to each SISP Account as dividend
reinvestments pursuant to Section 4.4 until such time as such Account is
terminated.
(c) In its discretion, the Company may upon Plan
termination or at any time thereafter pay to every SISP Participant (or
Beneficiary) in a single distribution a number of shares of MMC Stock equal to
the number of Stock Units then standing credited to his SISP Account, whereupon
all SISP Accounts shall be terminated.
8.2 ACTION TO BIND COMPANY. Upon the execution of the Plan by the
Company, each Participating Company designates the Company as its agent to
administer the Plan. Any amendment or termination of the Plan by the Company
shall be binding upon each Participating Company.
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<PAGE>
ARTICLE 9
MISCELLANEOUS
9.1 DOUBT AS TO RIGHT TO PAYMENT. If any doubt exists as to the
right of any person to any benefits under this Plan or the amount or time of
payment of such benefits (including, without limitation, any case of doubt as to
identity, or any case in which any notice has been received from any other
person claiming any interest in amounts payable hereunder, or any case in which
a claim from other persons may exist by reason of community property or similar
laws), the Plan Administrator may, in his discretion, direct that payment of
such benefits be deferred until such right or amount or time is determined, or
until a court of competent jurisdiction orders that such benefits be paid into
court in accordance with appropriate rules of law, or the Plan Administrator may
direct that payment be made only upon receipt of a bond or similar
indemnification (in such amount and in such form as is satisfactory to him).
9.2 SPENDTHRIFT CLAUSE. No benefit, distribution or payment under
the Plan may be anticipated, assigned (either at law or in equity), alienated or
subject to attachment, garnishment, levy, execution or other legal or equitable
process whether pursuant to a "qualified domestic relations order" as defined in
section 414(p) of the Code or otherwise.
9.3 USAGE. Whenever applicable, the masculine gender, when used in
the Plan, includes the feminine gender, and the singular includes the plural.
9.4 DATA. Any SISP Participant or Beneficiary claiming a SISP
Benefit under the Plan shall furnish to the Plan Administrator such documents,
evidence or information as the Plan Administrator shall consider necessary or
desirable for the purpose of administering the Plan, or to protect the Plan
Administrator. It is a condition of the Plan that each such SISP Participant or
Beneficiary shall furnish promptly true and complete data, evidence or
information and sign such documents as the Plan Administrator may require before
any benefits become payable under the Plan.
9.5 SEPARABILITY. If any provision of the Plan is held invalid or
unenforceable, its invalidity or unenforceability shall not affect any other
provisions of the Plan, and the Plan shall be construed and enforced as if such
provision had not been included therein. Without limiting the application of
the preceding sentence, a provision shall be considered invalid if its operation
would cause the Basic Plan to fail to qualify under section 401(k) of the Code.
9.6 CAPTIONS. The captions in this document and in the table of
contents prefixed hereto are inserted only as a matter of
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<PAGE>
convenience and for reference and in no way define, limit, enlarge or describe
the scope or intent of the Plan and shall in no way affect the Plan or the
construction of any provision thereof.
9.7 RIGHT OF DISCHARGE RESERVED. The establishment of the Plan shall
not be construed to confer upon any Employee any legal right to be retained in
the employ of a Participating Company or give any Employee or any other person
any right to benefits, except to the extent expressly provided for hereunder.
All employees shall remain subject to discharge to the same extent as if the
Plan had never been adopted, and may be treated without regard to the effect
such treatment may have upon them under the Plan.
9.8 LIMITATIONS ON LIABILITY. Notwithstanding any other provision of
the Plan, no Participating Company nor any employee or agent of a Participating
Company shall be liable to any SISP Participant, Beneficiary or other person for
any claim, loss, liability or expense incurred in connection with the Plan.
9.9 GOVERNING LAW AND LIMITATIONS ON ACTIONS. The Plan is intended
to constitute in part an arrangement that is an unfunded "excess benefit plan"
and in part an arrangement that is unfunded and maintained primarily for the
purpose of providing deferred compensation for a select group of management or
highly compensated employees, all within the meaning of the Employee Retirement
Income Security Act of 1974, as amended. All rights under this Plan shall be
governed by and construed in accordance with rules of Federal law applicable to
such plans. No action (whether at law, in equity or otherwise) shall be brought
by or on behalf of any Participant or Beneficiary for or with respect to
benefits due under this Plan unless the person bringing such action has timely
exhausted the Plan's claim review procedure. Any action (whether at law, in
equity or otherwise) must be commenced within three years. This three year
period shall be computed from the earlier of (a) the date a final determination
denying such benefit, in whole or in part, is issued under the Plan's claim
review procedure and (b) the date such individual's cause of action first
accrued (as determined under the laws of the State of New York without regard to
principles of choice of laws).
ARTICLE 10
EFFECTIVE DATE
10.1 EFFECTIVE DATE. This Plan shall be effective as of July 1, 1992,
provided that it shall have been approved by a vote of the Company's
shareholders prior to that date. No benefits shall be payable under the Plan in
respect of employees who terminated employment for any reason prior to such date
or to their beneficiaries.
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<PAGE>
IN WITNESS WHEREOF, MARSH & MCLENNAN COMPANIES, INC. has caused this
instrument to be executed by its duly authorized officers, and its corporate
seal to be hereunto affixed, this 17th day of February, 1995.
MARSH & MCLENNAN COMPANIES, INC.
By:/S/Francis N. Bonsignore
-----------------------------------
Title: Senior Vice President
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<PAGE>
EXHIBIT 10
PUTNAM INVESTMENTS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
Effective as of January 1, 1994
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III Participation . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV Executive Salary Deferral Account. . . . . . . . . . . . . . . . 5
ARTICLE V Excess Contribution Accounts. . . . . . . . . . . . . . . . . . . 6
ARTICLE VI Investment of Executive Salary Deferrals and
Excess Contributions . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE VII Vesting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VIII Payment of Benefits. . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE IX Administration . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE X Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE XI Claims Procedure . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE XII Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE XIII Amendment, Termination and Effective Date. . . . . . . . . . . 13
<PAGE>
PUTNAM INVESTMENTS, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
ARTICLE I
PURPOSE
The Putnam Investments, Inc. Executive Deferred Compensation Plan has been
established to provide certain executives with deferred compensation equal to
the amounts of (a) employer contributions in excess of amounts permitted to be
contributed to the Putnam Investments, Inc. Profit Sharing Retirement Plan, (the
"Profit Sharing Plan") because of the limitations of section 415 of the Code,
(b) employer contributions with respect to a Participant's Compensation in
excess of the limitations imposed by sections 401(a)(17) of the Code, and (c)
elective deferrals (as described in section 402(e)(3) of the Code) which exceed
the amount that could otherwise be deferred under the Profit Sharing Plan.
The Plan is intended to be "a plan which is unfunded and is maintained by
an employer primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees" within the meaning
of Sections 201(2) and 301(a)(3) of the Employee Retirement Income Security Act
of 1974 ("ERISA"), and shall be interpreted and administered to the extent
possible in a manner consistent with that intent.
ARTICLE II
DEFINITIONS
Wherever used herein, the following terms have the meanings set forth
below, unless a different meaning is clearly required by the context:
1. "Accounts" means the Executive Salary Deferral Account and the Excess
Contribution Account established for the Participant's benefit under Articles IV
and V.
2. "Appendix A" is the appendix attached to the Plan which lists those
individuals who have been designated as Eligible Executives for purposes of
making Executive Salary Deferrals under Article IV.
3. "Appendix B" is the appendix attached to the Plan which lists those
individuals for whom Excess Contributions will be made for a Plan Year under
Article V.
4. "Beneficiary" means the person or persons designated by the Participant
under the Profit Sharing Plan to receive benefits payable at the Participant's
death.
<PAGE>
5. "Board of Directors" means the board of directors of the Company.
6. "Change of Control" means the occurrence of any of the following
events:
(a) any "person" as such term is used in Section 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (other than MMC, the Employer, any trustee or other
fiduciary holding securities under an employee benefit plan of
MMC or the Employer or any company owned, directly or indirectly,
by the stockholders of MMC or the Employer in substantially the
same proportions as their ownership of stock of MMC or the
Employer), is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of MMC or the Employer representing 50% or more of the
combined voting power of MMC's or the Employer's then outstanding
securities;
(b) the stockholders of MMC or the Employer approve a merger or
consolidation of MMC or the Employer with any other company,
other than (i) a merger or consolidation which would result in
the voting securities of MMC or the Employer, outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity) 50% or more of the combined
voting power of voting securities of MMC or the Employer or such
surviving entity outstanding immediately after such merger or
consolidation or (ii) a merger or consolidation effected to
implement a recapitalization of MMC or the Employer (or similar
transaction) in which no "person" (as defined above) acquires 50%
or more of the combined voting power of MMC's or the Employer's
then outstanding securities;
(c) the stockholders of MMC or the Employer approve a plan of
complete liquidation of MMC or the Employer or an agreement for
the sale or disposition by MMC or the Employer of all or
substantially all of MMC's or the Employer's assets (or any
transaction having a similar effect); or
(d) MMC ceases to hold securities of the Company representing 50% or
more of the combined voting power of the Company's outstanding
securities.
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<PAGE>
7. "Code" means the Internal Revenue Code of 1986, as amended from time to
time. Reference to any section or subsection of the Code includes reference to
any comparable or succeeding provisions of any legislation which amends,
supplements or replaces such section or subsection.
8. "Committee" means the persons appointed by the Board with the written
approval of the Chief Executive Officer of MMC, to review decisions of the Plan
Administrator with respect to denied claims in accordance with the claims
procedure described in Article XI.
9. "Company" means Putnam Investments, Inc., a Delaware corporation.
10. "Compensation" means base salary and the cost of employee benefits
elected by the Eligible Executive in lieu of cash compensation, including
elective deferrals under the Profit Sharing Plan.
11. "Compensation Limit" means the amount distributed in section
401(a)(17) of the Code for any Plan Year.
12. "Contribution Limit" means the applicable limitation on contributions
described in section 415 of the Code for any Plan Year.
13. "Eligible Executive" means each employee of the Employer who is
designated on either Appendix A or Appendix B as eligible to participate in the
Plan.
14. "Employer" means the Company, and any corporation affiliated with the
Company which the Board of Directors permits to adopt the Plan for its Eligible
Executives.
15. "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time. Reference to any section or subsection of ERISA
includes reference to any comparable or succeeding provisions of any legislation
which amends, supplements or replaces such section or subsection.
16. "Excess Contribution" means an amount credited to a Participant's
Excess Contribution Account by the Employer in accordance with Article V.
17. "Executive Salary Deferral" means the portion of a Participant's
Compensation which is deferred under Article IV and credited to the
Participant's Executive Salary Deferral Account.
18. "MMC" means Marsh & McLennan Companies, Inc., a Delaware corporation.
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<PAGE>
19. "MMC Stock" means the common stock of MMC.
20. "Participant" means any individual who participates in the Plan in
accordance with Article III.
21. "Plan Administrator" means the individual or individuals currently
serving as Plan Administrator under the Profit Sharing Plan.
22. "Plan" means the Putnam Investments, Inc. Executive Deferred
Compensation Plan as set forth herein and all subsequent amendments hereto.
23. "Plan Year" means the calendar year.
24. "Profit Sharing Plan" means the Putnam Investments, Inc. Profit
Sharing Retirement Plan, as amended from time to time.
25. "Unforeseen Emergency" means an immediate and heavy financial need
resulting from
(a) expenses which are not covered by insurance and which the
Participant, the Beneficiary or the spouse or dependent of such
Participant or Beneficiary has incurred as a result of, or is
required to incur in order to receive, medical care; or
(b) any other unanticipated emergency that is determined by the Plan
Administrator to be caused by an event beyond the control of the
Participant or Beneficiary and that would result in severe
financial hardship to the individual if early withdrawal were not
permitted.
26. "Valuation Date" means each business day.
ARTICLE III
PARTICIPATION
Section 1. The Plan Administrator shall determine prior to each Plan Year
which employees shall be Eligible Executives for purposes of Section IV for such
Plan Year, and shall list such Eligible Executives on Appendix A. At the end of
the Plan Year, the Plan Administrator shall determine which employees will be
Eligible Executives for purposes of Article V only for such Plan Year, and shall
list such Eligible Executives on Appendix B.
Section 2. An Eligible Executive shall become eligible to make Executive
Salary Deferrals under Article IV for the first
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<PAGE>
Plan Year after the December 31st on which his or her annual rate of
Compensation exceeds the Compensation Limit. To become a participant for
purposes of Article V for a Plan Year, an Eligible Employee must be eligible for
an allocation of the Employer's profit sharing contributions under the Profit
Sharing Plan for such Plan Year and (a) must receive Compensation for the Plan
Year in excess of the Compensation Limit or (b) be entitled to an allocation
amount calculated under Section 6.2(d) (without reference to Section 6.3) of the
Profit Sharing Plan which exceeds the amount that may be contributed to the
Profit Sharing Plan on his or her behalf because of the Contribution Limit.
Section 3. Any Eligible Executive who elects to make Executive Salary
Deferrals or for whom Excess Contributions are made shall become a Participant
in the Plan and shall continue to be a Participant as long as any amount remains
credited to his or her Accounts.
Section 4. By participating in the Plan, each Participant acknowledges the
Plan is not subject to certain provisions of ERISA, including the participation,
vesting, funding, spousal benefits and fiduciary responsibility provisions.
ARTICLE IV
EXECUTIVE SALARY DEFERRAL ACCOUNT
Section 1. A Participant may for any Plan Year elect to defer a designated
whole percentage of any Compensation payable to such Participant for services to
be performed subsequent to the election, and have his or her Employer credit an
equivalent amount to an Executive Salary Deferral Account under the Plan. Such
election shall be made on a form delivered to the Plan Administrator prior to
the beginning of the Plan Year. The Plan Administrator may limit the amount of
Executive Salary Deferrals under the Plan by establishing a percentage limit for
any Plan Year.
Section 2. Any amount to be credited to an Executive Salary Deferral
Account under the Plan shall be deemed to be credited to such Account as of the
same date that the Compensation would have been paid to the Participant but for
the election made under Section 1 of this Article IV (or as soon as
administratively practicable thereafter). The value of the Participant's
Executive Salary Deferral Account shall be determined at any time in accordance
with Article VI.
Section 3. A Participant may change his or her deferral election at any
time, but such new deferral election shall become effective no earlier than the
first day of the Plan Year following the making of such election. Any deferral
election
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<PAGE>
made under this Article IV shall continue to be effective until revoked or
changed pursuant to this Article.
Section 4. Except as provided herein, a Participant may revoke his or her
deferral election as of the first day of any Plan Year which follows such
revocation by giving written notice to the Plan Administrator before that day
(or any such earlier date as the Plan Administrator may prescribe). If the
Participant incurs an Unforeseen Emergency, the Plan Administrator may permit
the Participant to revoke a deferral election effective immediately.
Section 5. A Participant shall have no right to receive any portion of his
or her Executive Salary Deferral Account until it becomes distributable under
Article VIII.
ARTICLE V
EXCESS CONTRIBUTION ACCOUNTS
Section 1. For any Plan Year in which the Participant's Compensation
exceeds the Compensation Limit, the Employer shall credit his or her Excess
Contribution Account with an amount equal to the amount of the Participant's
Compensation in excess of the Compensation Limit multiplied by the rate of
contributions the Employer makes to the Profit Sharing Plan for that Plan Year.
For any Plan Year in which the amount called for by Section 6.2(d) (without
reference to Section 6.3) of the Profit Sharing Plan together with contributions
to any other qualified plan of the Employer with respect to any Participant
exceeds the Contribution Limit, such excess amount shall be credited to the
Participant's Excess Contribution Account under the Plan.
Section 2. Any amount to be credited to an Excess Contribution Account
shall be deemed to be credited to such Account as of the same date that the
Employer would have contributed such amount to the Profit Sharing Plan except
for the Contribution Limit or the Compensation Limit. The value of the
Participant's Excess Contribution Account shall be determined at any time in
accordance with Article VI.
Section 3. A Participant shall have no right to receive any portion of the
account balance of his or her Excess Contribution Account until it becomes
distributable under Article VIII.
ARTICLE VI
INVESTMENT OF EXECUTIVE SALARY DEFERRALS AND
EXCESS CONTRIBUTIONS
Section 1. ACCOUNTS. The Plan Administrator shall establish two Accounts
for each Participant reflecting Executive
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<PAGE>
Salary Deferrals (if any) and Excess Contributions made for the Participant's
benefit together with any adjustments hereunder. As of the end of each calendar
quarter or such other interval as the Plan Administrator may from time to time
determine, the Plan Administrator shall provide the Participant with a statement
of his or her Accounts reflecting the income, gains and losses (realized and
unrealized), amounts of deferrals, and distributions of such Accounts since the
prior statement.
Section 2. INVESTMENTS. Each Participant's Accounts shall be credited
with income, gain and loss as if it were invested in shares of one or more
investment companies for which Putnam Investment Management, Inc. serves as
investment advisor or for which Putnam Mutual Funds Corp. is the principal
underwriter, or in MMC Stock. The Plan Administrator may determine from time to
time whether MMC Stock will be an available investment option under the Plan,
and may limit the choice of investment companies in which Accounts may be deemed
to be invested and the percentage of each Account that may be allocated to any
one fund or to MMC Stock. The Plan Administrator may provide Participants and
Beneficiaries the opportunity to determine how their Accounts will be deemed to
be invested from among the available investment options, and may permit changes
in those investment directions at whatever frequency it deems appropriate and
within whatever limitations are applicable to any investment option. If any
Participant or Beneficiary makes an investment selection, the Employer (or in
the event of the establishment of a trust hereunder, the trustee of such trust)
may follow such investment selection but neither shall be legally bound to do
so.
Section 3. PAYMENTS. Each Participant's Accounts shall be reduced by the
amount of any payment made to or on behalf of the Participant under Article VIII
as of the date such payment is made.
ARTICLE VII
VESTING
All Excess Contribution Accounts, Executive Salary Deferral Accounts,
Excess Contributions and Executive Salary Deferrals shall at all times be fully
vested.
ARTICLE VIII
PAYMENT OF BENEFITS
Section 1. RETIREMENT. When a Participant elects to have Executive Salary
Deferrals made on his or her behalf for any Plan Year, the Participant shall
also elect the time at which the Executive Salary Deferrals and any Excess
Contributions for such
- 7 -
<PAGE>
Plan Year (including earnings attributable thereto) will be paid to the
Participant. Payment shall be made within 60 days following:
(a) the Participant's retirement on or after age 50 from the Company
or applicable Employer; or
(b) the fifth anniversary of such retirement date,
whichever the Participant elects.
The Participant shall also at such time select the form of payment of his
or her Accounts, under one of the following options:
(i) a single sum cash payment; or
(ii) annual installments over a period of 10 years, the amount of each
installment to equal the balance of his or her Account
immediately prior to the installment divided by the number of
installments remaining to be paid.
The foregoing elections shall be made on such form and in such manner as
approved or prescribed by the Plan Administrator. Each such election may be
changed prior to the beginning of the Plan Year to which it applies, but not
thereafter. If no new election is made hereunder with respect to any Executive
Salary Deferrals, the existing election as to form and time of payment of such
amounts shall remain effective for all amounts deferred thereafter until a new
election is made hereunder with respect to future deferrals. Except as provided
in Sections 2, 3, or 4 below, payment of a Participant's Accounts shall be made
in accordance with the Participant's elections under this Section 1. If a
Participant has elected no Executive Salary Deferrals under the Plan, his or her
Excess Contribution Account shall be paid to him in a lump sum within 60 days
following the date the Participant ceases to be an employee of the Employer.
Section 2. TERMINATION OF EMPLOYMENT BEFORE AGE 50. If a Participant dies
or his or her employment terminates for any reason before attaining age 50, the
Participant's Accounts shall be paid to the Participant (or in the case of
death, to the Beneficiary) in a single sum cash payment within 60 days after
such termination of employment or death.
Section 3. DEATH AFTER ATTAINING AGE 50. If a Participant dies while
employed and after attaining age 50, the value of his or her Accounts shall be
paid within 60 days after the Participant's death to the Participant's
designated Beneficiary, in the form previously elected by the Participant under
one of the following options:
- 8 -
<PAGE>
(a) a single sum cash payment; or
(b) annual installments over a period of 10 years, the amount of each
installment to equal the balance of his or her Accounts
immediately prior to the installment divided by the number of
installments remaining to be paid.
If a Participant dies after attaining age 50 and after his or her retirement
date, but prior to the complete distribution of his or her Accounts, the balance
of the Accounts shall be paid to the Participant's designated Beneficiary, in
the same manner as it would have been paid to the Participant if the Participant
had lived.
Section 4. ACCELERATION OF PAYMENTS DUE TO UNFORESEEN EMERGENCY. If a
retired Participant or a Beneficiary incurs an Unforeseen Emergency, the Plan
Administrator may, in its sole discretion, accelerate installment payments or
any delayed distribution date to satisfy the individual's emergency need,
including any amounts necessary to pay federal, state or local income taxes
reasonably anticipated to result from the distribution. A Participant or
Beneficiary requesting an emergency payment shall apply for the payment in
writing in a form approved or prescribed by the Plan Administrator and shall
provide such additional information as the Plan Administrator may require.
Section 5. All benefits payable under the Plan shall be subject to any
applicable federal, state or local income tax or employment tax withholding
requirements and any payment made hereunder shall be reduced to reflect such
withheld taxes.
ARTICLE IX
ADMINISTRATION
Section 1. The Plan Administrator shall have the power
(a) to make and enforce rules and regulations and to prescribe the use of
forms necessary or advisable for efficient administration;
(b) to interpret the Plan, to resolve ambiguities, inconsistencies and
omissions and to decide questions concerning the eligibility of any
person to become a Participant, such interpretations, resolutions and
decisions to be final and conclusive on all persons;
(c) to direct payment of amounts due Participants, Beneficiaries and other
persons under the Plan; and
- 9 -
<PAGE>
(d) to delegate authority to agents and other persons to act on its behalf
in carrying out the provisions and administration of the Plan.
Section 2. The Plan Administrator may employ such accountants, counsel,
and other persons as he deems necessary or desirable in connection with the
administration of the Plan and any trust created hereunder. In administrating
the Plan, the Plan Administrator may use the facilities of any corporation or
unincorporated business affiliated with the Company. The Plan Administrator may
delegate any of his responsibilities to such persons as the Plan Administrator
deems appropriate. The Plan Administrator may adopt such rules and procedures
with respect to the administration of the Plan in such manner and to such extent
as he deems necessary and expedient to carry out the Plan. The rules and
decisions of the Plan Administrator made in good faith within the scope of his
authority shall be final and binding upon all parties.
Section 3. The Plan Administrator shall prepare or cause to be prepared
and distributed to each Participant and Beneficiary periodic reports of the
value of the individual's Account under the Plan.
ARTICLE X
FUNDING
Section 1. The Plan constitutes a mere promise by the Employer to make
benefit payments to Participants and Beneficiaries in the future in accordance
with the terms hereof, and such Participants and Beneficiaries shall have only
the status of general unsecured creditors of the Employer. Any amounts payable
under the Plan shall be paid out of the general assets of the Employer and the
Participants shall be deemed to be general unsecured creditors of the Employer.
Section 2. Nothing in the Plan will be construed to create a trust or to
obligate the Employer or any other person to segregate a fund, purchase an
insurance contract, or in any other way currently to fund the future payment of
any benefits hereunder, nor will anything herein be construed to give any
employee or any other person rights to any specific assets of the Employer or of
any other person.
Section 3. Except as provided in Section 4, the Employer may, in its sole
discretion, create a grantor trust to pay its obligations hereunder, but shall
have no obligation to do so. If the Employer decides to establish a separate
account or trust fund for the payment of benefits hereunder, such account or
trust shall be applicable only with respect to the Participants of such Employer
and such account or trust shall be treated for all
- 10 -
<PAGE>
purposes as the assets of such Employer. If such a trust is established by the
Employer, the terms of any such trust will conform to the terms of the model
trust described in Revenue Procedure 92-64. In all events, it is the intent of
the Employer that the Plan be treated as unfunded for tax purposes and for
purposes of Title I of ERISA.
Section 4. In the case of a Change in Control prior to the establishment
of a trust under Section 3 above, the Employer shall pay to each Participant and
Beneficiary the balance of his or her Account in cash in a lump sum.
ARTICLE XI
CLAIMS PROCEDURE
Section 1. A Participant or Beneficiary who asserts a right to any benefit
under the Plan that he or she has not received must file a written claim with
the Plan Administrator. If the Plan Administrator wholly or partially denies
the claim, he shall within 90 days of his receipt of the claim provide a written
notice of denial to the claimant, setting forth:
(a) specific reasons for the denial of the claim;
(b) specific reference to pertinent provisions of the Plan on which
the denial is based;
(c) a description of any additional material or information necessary
to perfect the claim, and an explanation of why such material or
information is necessary; and
(d) an explanation of the Plan's claims review procedure.
Section 2. A claimant whose application for benefits is denied by the Plan
Administrator, or who has received neither an affirmative reply nor a notice of
denial within 90 days after filing his or her claim with the Plan Administrator,
may request a full and fair review of the decision denying the claim. The
request must be made in writing to the Committee within 60 days after receipt of
the notice of denial or, if no notice of denial is issued, within 60 days after
the expiration of 90 days from the filing of the claim. In connection with the
review, the claimant may:
(a) request a hearing by the Committee upon written application to
the Committee,
(b) review pertinent documents in the possession of the Committee, or
- 11 -
<PAGE>
(c) submit issues and comments in writing to the Committee for
review.
Section 3. A decision on review by the Committee shall be made promptly,
and not later than 60 days after the receipt by the Committee of a request for
review, unless special circumstances (such as the need to hold a hearing)
require an extension of time for processing, in which case the claimant will be
so notified of the extension, and a decision shall be rendered as soon as
possible, and not later than 120 days after the receipt of the request for
review. The decision shall be in writing and shall include specific reasons for
the decision, written in a manner calculated to be understood by the claimant,
and specific reference to the pertinent provisions of the Plan on which the
decision is based. The Committee shall have discretionary authority to
interpret and apply the provisions of the Plan with respect to any benefit
claim, and the decision of the Committee shall be final and binding upon all
parties.
ARTICLE XII
MISCELLANEOUS
Section 1. The establishment of the Plan shall not be construed to confer
upon any Participant any legal right to be continued as an Employee and the
Company and the applicable Employer expressly reserve the right to discharge
from employment any Participant or to increase or decrease his or her
compensation whenever the interest of the Employer, in its sole judgment, may so
require.
Section 2. Except as otherwise provided by applicable law, amounts payable
under the Plan may not be assigned or hypothecated and no such amounts shall be
subject to legal process or attachment for the payment of any claim of any
person entitled to receive the same.
Section 3. Except as otherwise provided by applicable law, if any
Participant or Beneficiary becomes a debtor under the bankruptcy code or
attempts to assign, encumber or otherwise transfer any amounts payable under the
Plan, or if any attempt is made to subject any amounts payable under the Plan to
the debts, liabilities or obligations of the Participant or his or her
Beneficiary entitled to such amounts, then the Plan Administrator may, in its
discretion, terminate the obligation of the Employer to pay such amounts and
cause such amounts or any part thereof to be held or applied for the benefit of
such Participant or Beneficiary, in such manner and in such proportion as the
Plan Administrator shall determine.
Section 4. To the extent not preempted by any laws of the United States
now or hereafter enacted, including the Employee
- 12 -
<PAGE>
Retirement Income Security Act of 1974, as may from time to time be amended, the
Plan shall be construed and all provisions hereof shall be enforced and
administered according to the laws of the Commonwealth of Massachusetts.
Section 5. Any provisions of the Plan deemed to be in violation of any law
or regulation shall be void and of no effect, and shall not affect the continued
validity of any other provision hereof which shall remain in full force and
effect.
ARTICLE XIII
AMENDMENT, TERMINATION AND EFFECTIVE DATE
Section 1. The Company reserves the right at any time and from time to
time to modify, amend or terminate the Plan or any of its provisions as to all
Employers, by an officer executing an instrument in writing by authorization of
the Board of Directors, with the written approval of the Chief Executive Officer
of MMC. Notwithstanding the preceding sentence, in no event shall the
modification, amendment or termination of the Plan reduce the value of any
Participant's account balance in his or her Accounts.
Section 2. This document, which sets forth the terms and conditions of the
Plan, shall be effective as of January 1, 1994.
IN WITNESS WHEREOF, Putnam Investments, Inc. has caused the Putnam
Investments, Inc. Executive Deferred Compensation Plan to be executed by its
duly authorized officer the 15th day of December, 1994.
PUTNAM INVESTMENTS, INC.
By:/s/Lawrence J. Lasser
--------------------------------
Title: President
- 13 -
<PAGE>
APPENDIX A
- 14 -
<PAGE>
APPENDIX B
- 15 -
<PAGE>
EXHIBIT 10
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
by and between
MARSH & McLENNAN RISK CAPITAL CORP.
and
ROBERT CLEMENTS
Effective as of December 31, 1993
<PAGE>
TABLE OF CONTENTS
PAGE
----
Section 1. Employment . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Employment Period. . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Position and Duties. . . . . . . . . . . . . . . . . . . . . . 1
Section 4. Place of Performance . . . . . . . . . . . . . . . . . . . . . 2
Section 5. Compensation and Related Matters . . . . . . . . . . . . . . . 2
(a) Base Salary and Stipend . . . . . . . . . . . . . . . . 2
(b) Bonus . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Performance Payment . . . . . . . . . . . . . . . . . . 3
(d) Expenses. . . . . . . . . . . . . . . . . . . . . . . . 9
(e) Vacation. . . . . . . . . . . . . . . . . . . . . . . . 9
(f) Services Furnished. . . . . . . . . . . . . . . . . . . 9
(g) Other Benefits. . . . . . . . . . . . . . . . . . . . . 10
(h) Consulting Arrangement. . . . . . . . . . . . . . . . . 11
(i) Physician Certification Notice. . . . . . . . . . . . . 12
(j) Investment Advisor Relationship . . . . . . . . . . 13
(k) Other Company Activities. . . . . . . . . . . . . . . . 17
Section 6. Personal Investments . . . . . . . . . . . . . . . . . . . . . 17
Section 7. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 18
(a) Death . . . . . . . . . . . . . . . . . . . . . . . . . 18
(b) Disability. . . . . . . . . . . . . . . . . . . . . . . 18
(c) Cause . . . . . . . . . . . . . . . . . . . . . . . . . 19
(d) Good Reason . . . . . . . . . . . . . . . . . . . . . . 19
(e) Other Terminations. . . . . . . . . . . . . . . . . . . 22
(f) Notice of Termination . . . . . . . . . . . . . . . . . 22
i
<PAGE>
PAGE
----
Section 8. Compensation Upon Termination or
During Disability . . . . . . . . . . . . . . . . . . . . . . 23
(a) Disability Period . . . . . . . . . . . . . . . . . . . 23
(b) Death or Disability . . . . . . . . . . . . . . . . . . 23
(c) Cause or By Executive (Other
than for Good Reason or
Pursuant to a Physician
Certification Notice) . . . . . . . . . . . . . . . . . 24
(d) Termination By Company (without
Cause or Disability) or By
Executive for Good Reason . . . . . . . . . . . . . . . 25
(e) Failure to Extend Consulting
Period. . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9. Mitigation . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 10. Confidential Information, Removal
of Documents, Non-Competition . . . . . . . . . . . . . . . . 27
(a) Confidential Information. . . . . . . . . . . . . . . . 27
(b) Removal of Documents. . . . . . . . . . . . . . . . . . 27
(c) Non-Competition . . . . . . . . . . . . . . . . . . . . 28
(d) Injunctive Relief . . . . . . . . . . . . . . . . . . . 29
(e) Continuing Operation. . . . . . . . . . . . . . . . . . 30
Section 11. Successors; Binding Agreement . . . . . . . . . . . . . . . . 30
(a) Company's Successors. . . . . . . . . . . . . . . . . . 30
(b) Executive's Successors. . . . . . . . . . . . . . . . . 30
Section 12. Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 13. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 14. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 15. Validity. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 16. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 32
ii
<PAGE>
PAGE
----
Section 17. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . 32
Exhibit A -- Definition of Certain Terms Used in Section 5(c) and in this
Exhibit A
Exhibit B -- Terms of Trust Referred to in Section 5(c)(4)
Schedules -- Examples of Executive's Performance Payment under Various
Assumptions
iii
<PAGE>
INDEX OF DEFINED TERMS
Term Where Defined
- ---- -------------
Advisor's Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit A
Agreed Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5(c)
Base Performance Payment . . . . . . . . . . . . . . . . . . . . . Section 5(c)
Base Salary. . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5(a)
Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3
Cause. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7(c)
Change in Control of the Company . . . . . . . . . . . . . . . . . Section 7(d)
Change in Control of the Parent. . . . . . . . . . . . . . . . . . Section 7(d)
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
Company's Capital Raising Fee. . . . . . . . . . . . . . . . . . . Exhibit A
Consulting Fee . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5(j)
Consulting Period. . . . . . . . . . . . . . . . . . . . . . . . . Section 5(j)
Date of Termination. . . . . . . . . . . . . . . . . . . . . . . . Section 7
Designated Entities. . . . . . . . . . . . . . . . . . . . . . . . Section 10(c)
Disability . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7(b)
Disability Period. . . . . . . . . . . . . . . . . . . . . . . . . Section 8(a)
Early Termination Election . . . . . . . . . . . . . . . . . . . . Section 7(e)
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2
Employment Period. . . . . . . . . . . . . . . . . . . . . . . . . Section 2
Enhanced Performance Payment . . . . . . . . . . . . . . . . . . . Section 5(c)
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7(d)
Executive. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Introduction
Good Reason. . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7(d)
Investment Advisor . . . . . . . . . . . . . . . . . . . . . . . . Section 5(j)
Investment Advisor Fee . . . . . . . . . . . . . . . . . . . . . . Section 5(j)
Investment Advisory Services . . . . . . . . . . . . . . . . . . . Section 5(j)
Investment Fees. . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit A
Litigation Liabilities . . . . . . . . . . . . . . . . . . . . . . Exhibit A
Marsh & McLennan Entities. . . . . . . . . . . . . . . . . . . . . Section 5(c)
Marsh & McLennan Trident Compensation. . . . . . . . . . . . . . . Exhibit A
Non-Capital Distributions to Partners. . . . . . . . . . . . . . . Exhibit A
Notice of Termination. . . . . . . . . . . . . . . . . . . . . . . Section 7(f)
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1
Performance Payment. . . . . . . . . . . . . . . . . . . . . . . . Section 5(c)
Physician Certification Notice . . . . . . . . . . . . . . . . . . Section 5(i)
SERP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5(g)
Stipend. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5(a)
Trident. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5(c)
Trident Annual Return. . . . . . . . . . . . . . . . . . . . . . . Exhibit A
Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5(c)
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5(c)
20% Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . Exhibit A
iv
<PAGE>
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AGREEMENT, effective as of December 31, 1993, by and between Robert
Clements (the "Executive") and Marsh & McLennan Risk Capital Corp., a Delaware
corporation (the "Company").
WHEREAS, the Executive and Marsh & McLennan Risk Capital Corp., a New
York corporation ("MMRCC"), entered into an Employment Agreement, effective as
of December 31, 1993 (the "Prior Agreement"), setting forth the terms and
conditions of the employment relationship of the Executive with MMRCC; and
WHEREAS, MMRCC has been merged into the Company, which is an indirect
wholly-owned subsidiary of the Parent (as hereinafter defined), and the Company
has succeeded to the rights and obligations of MMRCC under the Prior Agreement;
and
WHEREAS, the parties wish to amend and restate the Prior Agreement in
its entirety;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth below, the parties hereby agree, intending to be legally
bound hereby, as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the Executive,
and the Executive hereby accepts such employment, on the terms and conditions
hereinafter set forth. The Executive hereby resigns from his positions as
President and a member of the Executive Committee of the Board of Directors of
Marsh & McLennan Companies, Inc. (the "Parent") effective as of December 31,
1993.
2. EMPLOYMENT PERIOD. The period of employment of the Executive by
the Company hereunder (the "Employment Period") shall commence on January 1,
1994 (the "Effective Date") and shall end on September 30, 1997, unless sooner
terminated by a termination of Executive's employment as set forth herein.
3. POSITION AND DUTIES. During the Employment Period, the Executive
shall serve as Chief Executive Officer and Chairman of the Company. Subject to
the supervisory powers of the Board of Directors of the Company (the "Board")
(which is expected to have regular quarterly meetings), the Executive shall have
those powers and duties consistent with his position as Chief Executive Officer
as may be prescribed by the Board, and the Executive as Chief Executive Officer
shall cause the
<PAGE>
Company to comply with all general policies and procedures as shall be in effect
from time to time applicable to the Parent's operating subsidiaries and that
have been communicated to the Executive in writing, including the approval by
the Parent of annual budgets and business plans including any material changes
thereto. During the Employment Period, the Executive shall also provide, from
time to time, consulting services to the Parent and its subsidiaries as
requested by the Chief Executive Officer of the Parent with respect to their
businesses, including services relating to the performance and activities of the
Parent's insurance investments, assessing events in the insurance industry and
their implications for the Parent's businesses, and such other projects as the
Executive may be assigned by the Chief Executive Officer of the Parent. It is
expected that the Executive and the Chief Executive Officer of the Parent will
meet at least quarterly or as requested by the Chief Executive Officer of the
Parent. The Executive agrees to devote substantially all his full working time,
attention and energies during normal business hours to the performance of his
duties for the Company and such consulting services, and shall comply with all
general policies of the Parent and the Company relating to conduct by officers
and employees that have been communicated to the Executive in writing. Anything
herein to the contrary notwithstanding, subject to Section 10(c) hereof, nothing
shall preclude the Executive from (i) serving on the boards of directors of a
reasonable number of other corporations (subject to prior approval by the Chief
Executive Officer of the Parent) or the boards of a reasonable number of trade
associations and/or charitable organizations, (ii) engaging in charitable
activities and community affairs, and (iii) managing his personal investments
and affairs, provided that such activities do not interfere with the proper
performance of his duties and responsibilities as the Company's Chairman and
Chief Executive Officer.
4. PLACE OF PERFORMANCE. The principal place of employment of the
Executive shall be at the Company's principal executive offices in New York
State or such other location as may be agreed to by the Board and the Executive.
5. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY AND STIPEND. As compensation for the
performance by the Executive of his obligations hereunder, during the Employment
Period the Company shall pay the Executive a base salary at the rate of Eight
Hundred Thousand Dollars ($800,000) per year
2
<PAGE>
("Base Salary"), payable pursuant to the Company's normal payroll practices.
The Executive shall also receive a stipend at the rate of Four Hundred Fifty
Thousand Dollars ($450,000) per year, payable semi-monthly and subject to
regular payroll withholding, in connection with the consulting services he
provides pursuant to Section 3 hereof during the Employment Period (the
"Stipend").
(b) BONUS. Subject to the provisions of Section 8 hereof, the
Executive shall receive an annual cash bonus during the Employment Period,
payable on or before March 1 following each such year, with a minimum bonus of
Eight Hundred Thousand Dollars ($800,000) to be paid with respect to each of
1994, 1995 and 1996, and Six Hundred Thousand Dollars ($600,000) to be paid with
respect to 1997. The Compensation Committee of the Board of Directors of the
Parent shall, in its sole discretion, after considering the recommendation of
the Chief Executive Officer of the Parent, who shall take into account pertinent
aspects of the Executive's performance, determine the amount of such bonus. In
arriving at such recommendation, the Chief Executive Officer of the Parent shall
consider in particular the performance of the Company against business plans and
budgets for the year, absolute and relative profit performance, the contribution
to the Company of investments and initiatives undertaken by the Executive from
January 1, 1994 forward, and the Executive's contributions to the business of
other Marsh & McLennan Entities (as defined in Section 5(c)(2) hereof).
(c) PERFORMANCE PAYMENT.
(1) As used in this Section 5(c), the terms Advisor's Fees,
Company's Capital Raising Fee, Litigation Liabilities, Marsh & McLennan Trident
Compensation and Trident Annual Return shall have the respective meanings set
forth in Exhibit A annexed hereto, which refers to the offering memorandum dated
July 1993 relating to the private placement of interests in The Trident
Partnership, L.P., a limited partnership registered under the laws of the Cayman
Islands ("Trident").
(2) Subject to the provisions of Sections 5(i) and 8 hereof and
clause (5) below, if Trident has accepted subscriptions from limited partners
while the Executive is an employee of the Company pursuant hereto,
3
<PAGE>
the Executive will be eligible to receive a cash payment (the "Performance
Payment") within forty-five (45) days following the receipt by the Company of
the final liquidating distribution from Trident, and in accordance with the
provisions of clauses (3) and (6) below, may receive advance payments of the
Performance Payment. As promptly as practicable following receipt of such final
liquidating distribution and within 45 days of such receipt, the Company shall
furnish the Executive with a statement setting forth in reasonable detail the
calculation of the Performance Payment. The Performance Payment will be based
upon the Trident Annual Return and certain payments received by the Parent and
any corporation or partnership in which the Parent directly or indirectly
maintains a majority equity interest (the "Marsh & McLennan Entities") from
Trident as described below. In the event the Trident Annual Return is at least
15%, the Executive will be paid a Performance Payment (the "Base Performance
Payment") equal to not less than 5% nor more than 25% of the Company's Capital
Raising Fee, such percentage to depend upon the percentage of the Trident Annual
Return, as follows:
Capital Raising Fee
Trident Annual Return Percentage
- --------------------- -------------------
At least Up to but not including
- -------- -----------------------
15% 16% 5%
16% 17% 10%
17% 18% 15%
18% 19% 20%
19% -- 25%
The Executive will also receive an additional amount as a Performance Payment
(the "Enhanced Performance Payment"), based upon percentages of portions of the
Marsh & McLennan Trident Compensation attributable to increments of the Trident
Annual Return. Such additional payment shall be equal to the sum of: (A) 5% of
the Marsh & McLennan Trident Compensation; (B) 2.5% of that portion, if any, of
the Marsh & McLennan Trident Compensation attributable to the Trident Annual
Return being more than 25%; (C) 2.5% of that portion, if any, of the Marsh &
McLennan Trident Compensation attributable to the Trident Annual Return being
more than 30%; (D) 2.5% of that portion, if any, of the Marsh & McLennan Trident
Compensation attributable to the Trident Annual Return being more than 40%;
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and (E) 2.5% of that portion, if any, of the Marsh & McLennan Trident
Compensation attributable to the Trident Annual Return being more than 50%. For
purposes of this Section 5(c), all amounts due under this clause (2) shall
reflect any applicable reductions or exclusions under clause (5) below or
otherwise under this Section 5(c). (Schedules annexed hereto set forth examples
of the computation of the Executive's Performance Payment under various
assumptions, such computation being illustrative only and not intended to be
binding upon the parties hereto.)
(3) Subject to the provisions of clause (5) below, the Company
shall, within 10 days after receipt of any payment constituting the Company's
Capital Raising Fee, make an advance payment to the Executive of the Base
Performance Payment equal to 25% of the amount received by the Company. Should
it be determined, at the time payment of the Performance Payment would be due
pursuant to clause (2) above, that, whether due to computation of the Trident
Annual Return, the existence of Litigation Liabilities or otherwise, the
Executive has received, by way of advance payments, an amount in excess of the
Base Performance Payment to which he is entitled pursuant to clause (2) above,
the Executive shall, within 10 days of receiving a demand of payment from the
Company (which demand shall include a statement setting forth the basis of such
demand in reasonable detail), pay the Company the amount of such excess,
together with interest thereon at a rate per annum equal to the publicly
announced prime commercial lending rate of Morgan Guaranty Trust Company of New
York, or successor thereto, in effect from time to time (the "Agreed Rate"), on
a compound basis, from the date or dates such excess was paid to the Executive
until the date of payment to the Company. If the Executive fails to make such
payment, the Company, in addition to other available remedies, may offset such
amount due the Company against any other amounts due to the Executive pursuant
to the terms hereof.
(4) As soon as practicable following the execution of this
Agreement, the Company shall establish a grantor trust (the "Trust"), of which
Morgan Guaranty Trust Company of New York or, subject to the consent of the
Executive, another bank of nationally recognized standing with consolidated
shareholders' equity of not less than $500 million shall be trustee (the
"Trustee") and the Executive shall be the beneficiary. The Company
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shall be responsible for the fees of the Trustee and all other expenses related
to the establishment and administration of the Trust and all tax liability in
connection therewith other than taxes payable by the Executive on amounts
received by him from the Trust. The trust agreement shall include, or the Trust
shall otherwise be subject to, the terms set forth in Exhibit B annexed hereto,
the relevant terms of this clause (4) and such other terms as the Company and
the Executive shall, reasonably and in good faith, agree to. The corpus of the
Trust shall be funded by the Company contributing $100 upon the Trust's
establishment and thereafter, during its existence, contributing, within 10 days
of receipt by any Marsh & McLennan Entity of a payment constituting Marsh &
McLennan Trident Compensation (subject to the provisions of clauses (5) and (6)
below), 5% of such payment, and the Company shall promptly notify the Executive
of the amount of such payment and of such contribution.
In addition:
(A) Should the Company determine, prior to the time payment of the Enhanced
Performance Payment would be due pursuant to clause (2) above, that the
Marsh & McLennan Trident Compensation is of an amount less than
previously determined, the Company shall give notice thereof to the
Executive and the Trustee (which notice shall include a statement
setting forth the basis of the determination in reasonable detail) and,
unless the Executive, within 30 days of receipt of such notice, notifies
the Trustee and the Company in writing of his disagreement with the
Company's determination, the Trustee shall pay over to the Company from
the corpus of the Trust an amount equal to 5% of such deficiency in the
Marsh & McLennan Trident Compensation; if the Executive does so notify
the Trustee and the Company of his disagreement, and the parties
thereafter are unable to agree, the disagreement shall be submitted to
arbitration pursuant to the provisions of Section 14 hereof.
(B) If it shall be determined, at the time payment of the Performance
Payment becomes due pursuant to clause (2) above, that the Trust assets
are less
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than the amount of the Enhanced Performance Payment due the Executive
(after subtracting from such amounts due any payments made pursuant to
clause (6) below), the Company shall also pay to the Executive the
additional income that the Executive would have been paid from the Trust
(based on the income actually paid from the Trust) had the Company
(after giving effect to any payments made pursuant to clause (6) below)
contributed to the corpus of the Trust, on the 10th day following the
time the Company received each payment of Marsh & McLennan Trident
Compensation, the actual portion of the Marsh & McLennan Trident
Compensation ultimately determined to be due to the Executive, together
with interest thereon at the Agreed Rate, on a compound basis, from the
date or dates such additional income would have been payable to the
Executive until the date of payment by the Company.
(C) If it shall be determined, at the time payment of the Performance
Payment would be due pursuant to clause (2) above, that, due to
computation of the Trident Annual Return, a repayment by "clawback" or
otherwise to Trident of all or a portion of the Marsh & McLennan Trident
Compensation, the existence of Litigation Liabilities or otherwise, a
greater amount has been contributed to the Trust by the Company than
would have been the case had the payments purporting to be Marsh &
McLennan Trident Compensation not been characterized as Marsh & McLennan
Trident Compensation, the Executive shall, within 10 days of receiving a
demand of payment from the Company, pay to the Company an amount equal
to the income received by him from the Trust earned upon such excess
amount, together with interest on such income at the Agreed Rate, on a
compound basis, from the date or dates of such payments of income to the
Executive until the date of payment to the Company; PROVIDED, HOWEVER,
that if such subsequent determination results from, or is caused by
facts or circumstances that also result in, the Marsh & McLennan
Entities making a repayment to Trident that does not include the payment
of interest, the Executive shall not be required to pay to the Company
any amount (including interest thereon)
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<PAGE>
which so relates to such repayment to Trident. Notwithstanding the
foregoing, if as a result of the resolution of Litigation Liabilities or
otherwise it is subsequently determined that some or all of the payments
characterized as not being Marsh & McLennan Trident Compensation (as
described above) were in fact Marsh & McLennan Trident Compensation,
then the Company shall promptly repay to the Executive the amount of
income and interest paid by him to the Company pursuant to this
subparagraph (C) that would not have been paid if such subsequent
determination had been made at the time of the payment of such income
and interest by the Executive, together with interest on such amount at
the Agreed Rate, on a compound basis, from the date of payment by the
Executive until the date of repayment by the Company.
Upon the payment to the Executive of all payments due him pursuant to the
provisions of clause (2) above and this clause (4), the Trust shall terminate
and all assets of the Trust shall be paid over to the Company. Without limiting
the foregoing, at the time payment of the Performance Payment becomes due
pursuant to clause (2) above, the Executive shall be entitled to receive from
the corpus of the Trust the lesser of (i) the amount then due pursuant to clause
(2) above (reduced by (A) any amounts previously paid to the Executive pursuant
to clause (6) below and (B) the application of the provisions of clause (5)
below if relevant) or (ii) the amount in the Trust, PROVIDED, HOWEVER, that the
Company may choose to make payments from its own funds rather than from the
Trust, in which case all assets in the Trust shall be distributed to the Company
promptly following such payment. Any such amount paid from the Trust (but not
income paid from the Trust) shall reduce the amount otherwise then payable by
the Company.
(5) If, at the time of the final liquidating distribution from
Trident or at the time that an advance payment is due pursuant to the provisions
of clause (3) above or at the time that a payment of 5% of the Marsh & McLennan
Trident Compensation is made to the Trust as provided in clause (4) above, there
are any pending or threatened claims, penalties, damages or liabilities
involving the Marsh & McLennan Entities that
8
<PAGE>
are potentially Litigation Liabilities, an amount equal to the maximum potential
exposure of the Company relating thereto that may reasonably be anticipated in
the opinion of the Company's outside counsel, shall be excluded from the
Company's Capital Raising Fee or from the Marsh & McLennan Trident Compensation,
as the case may be. Upon the resolution of such claims, penalties, damages or
liabilities, the Company's Capital Raising Fee or the Marsh & McLennan Trident
Compensation, as applicable, shall be recomputed and any further payment thereby
due the Executive pursuant to clauses (2) or (3) above or payable to the Trust
pursuant to clause (4) above as a result of such recomputation shall be promptly
paid, PROVIDED, HOWEVER, that in the event such recomputation results in a
further exclusion from the Company's Capital Raising Fee or the Marsh & McLennan
Trident Compensation, the Executive shall promptly pay to the Company any amount
thereby due to the Company.
(6) Prior to the receipt by the Company of the final liquidating
distribution from Trident, the Company and the Executive may agree, each in his
or its complete discretion, to the payment to the Executive of a portion of the
Enhanced Performance Payment. In the event it shall ultimately be determined
that, for whatever reason, the Executive is not entitled to at least the amount
of the Enhanced Performance Payment he has received, then, upon receipt of
written notice from the Company setting forth in reasonable detail the basis of
its claim and the appropriate calculation, the Executive shall promptly pay to
the Company an amount equal to the excess payment made to the Executive.
(d) EXPENSES. During the Employment Period, the Company shall
reimburse the Executive for all reasonable business expenses upon the
presentation of itemized statements of such expenses, subject to the Company's
policies and procedures then in force and upon approval of the Chief Executive
Officer of the Parent.
(e) VACATION. The Executive shall be entitled to vacation
during the Employment Period in accordance with the policies of the Parent
applicable generally to senior executives.
(f) SERVICES FURNISHED. During the Employment Period, the
Company shall furnish the Executive,
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<PAGE>
at the Company's principal executive offices, with appropriate office space and
such other facilities and services as shall be suitable to the Executive's
position and adequate for the performance of his duties as set forth in Section
3 hereof.
(g) OTHER BENEFITS. During the Employment Period, the Executive
shall be eligible to participate in all tax-qualified defined contribution and
defined benefit retirement plans, and supplemental plans relating thereto, and
welfare plans and programs (including group life insurance, medical and dental
insurance, and accident and disability insurance) in which employees of the
Parent and its United States subsidiaries are generally eligible to participate;
PROVIDED, HOWEVER, that, without limitation, such plans and programs shall not
include annual bonuses (other than as contemplated in this Agreement and other
than a bonus with respect to 1993) or stock option, restricted stock or other
Parent stock-related awards or grants after December 31, 1993, and the
Executive's covered compensation for the purposes of any such plans during the
Employment Period shall include only the Base Salary under Section 5(a) hereof
and not the Stipend or any other amounts payable under this Agreement.
Notwithstanding anything to the contrary contained in the Marsh & McLennan
Supplemental Employee Retirement Plan (the "SERP"), in the event of the
Executive's death while in the employ of the Company under this Agreement, the
Executive's spouse shall be entitled to a survivor benefit hereunder equal to
the excess of (i) the benefit to which she would have been entitled under the
SERP assuming the Executive had retired on the date immediately preceding the
date of death and had been receiving retirement payments pursuant to the SERP in
the form of a 100% joint and survivor annuity at the time of his death, over
(ii) the benefit to which she is entitled under the SERP. The stock option,
restricted stock and other Parent stock-related awards and grants held by the
Executive on the date of this Agreement shall continue to be governed by the
terms of their respective plans and award agreements. The Company will provide
the Executive during the Employment Period with an automobile similar to that
currently provided by the Parent. It is also expected that the Company will
maintain a car and driver for use in connection with the Company's business,
including business related local travel by the Executive. The Company will
continue to reimburse the Executive for
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<PAGE>
dues and expenses for The Links Club, Stamford Yacht Club and Toronto Lawn and
Tennis Club on the same basis as he is presently reimbursed by the Parent.
Additional or substitute clubs will be subject to approval by the Chief
Executive Officer of the Parent in the normal manner.
(h) CONSULTING ARRANGEMENT. If the Employment Period has not
been terminated prior to September 30, 1997, the Company shall retain the
Executive, and the Executive agrees to serve, as a consultant with respect to
the Company's business to render advice and services in connection with the
Company's business activities and to work on such special projects utilizing the
Executive's professional skills as may be assigned to the Executive, subject to
the Executive's reasonable convenience, with such services not to require more
than 25% of the Executive's time during normal working hours, and with such
other responsibilities as the Company and the Executive may hereafter agree.
The period during which the Executive shall be retained by the Company as a
consultant pursuant to this Section 5(h) (the "Consulting Period") shall
commence on October 1, 1997 and end on September 30, 1999. By mutual agreement
between the Company and the Executive, the Consulting Period may be extended
annually for successive one-year terms as of each October 1 thereafter. In all
events, the Consulting Period (including if so extended) may be sooner
terminated by a termination of the Executive's consultancy as set forth herein.
During the Consulting Period, the Executive shall receive a consulting fee at
the rate of $300,000 per year (the "Consulting Fee"), payable semi-monthly, and
the Company will reimburse the Executive for any reasonable travel and
entertainment expenses incurred in connection with such consulting services.
While serving as a consultant, the Executive shall be an independent contractor,
not an employee, and all benefits and emoluments he may have received as an
employee shall cease, and the Company will not exercise any control or direction
of the Executive's performance of such consulting services but will require that
the result to be accomplished has been acceptably achieved. In addition,
notwithstanding anything to the contrary in this Section 5(h) or in Section 5(i)
hereof, the Executive may at any time prior to the commencement of the
Consulting Period elect to have the advice and services described in this
Section 5(h) provided to the Company by a corporation all of the stock of which
is owned by the Executive, members
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of his immediate family or trusts for the benefit of the Executive and members
of his immediate family, provided that such corporation shall make the Executive
available to render such advice and services. If the Executive so elects, such
corporation shall be retained as the consultant under this Section 5(h) and the
Consulting Fee and expense reimbursements shall be paid to such corporation. In
such event, Sections 7 and 8 hereof shall be deemed modified to provide for the
termination of such corporation's consultancy upon the occurrence of the various
events specified in such sections with respect to the Executive, and both the
Executive and such corporation shall be subject to all of the obligations of the
Executive hereunder as pertain to his consultancy hereunder, including but not
limited to Section 10 hereof.
(i) PHYSICIAN CERTIFICATION NOTICE. Notwithstanding anything to the
contrary in Section 5(h) hereof, if subsequent to December 31, 1995 and prior to
September 30, 1997, a physician mutually agreed to by the Executive and the
Company certifies that the Executive's continuing to serve as Chief Executive
Officer and Chairman of the Company carries a significant risk of having a
material adverse impact on the Executive's health, the Executive may, upon 30
days prior written notice to the Company (a "Physician Certification Notice"),
terminate his employment hereunder and commence his service as a consultant as
provided in Section 5(h) hereof with such consultancy to continue until
September 30, 1999, unless sooner terminated by a termination of the Executive's
consultancy as set forth herein. In the event that the Executive's consultancy
commences prior to October 1, 1997 as provided in the immediately preceding
sentence, the Executive shall receive a bonus under Section 5(b) hereof for the
year in which the Date of Termination (as defined in Section 7(e) hereof) occurs
on the basis of $1,000,000 (or $750,000 in the event the Date of Termination
occurs during the nine-month period ending on September 30, 1997) prorated based
upon the number of days during such year or period the Executive was employed by
the Company.
If the Executive provides a Physician Certification Notice to the
Company prior to January 1, 1996, the Executive may, upon 30 days prior written
notice to the Company, terminate his employment. In the case of such
termination of employment:
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(i) the Company shall pay the Executive (or the Executive's
estate or designated beneficiary in the event of his death) any amounts due
to the Executive for services prior to the Date of Termination (as defined
in Section 7(e) hereof) pursuant to Sections 5(a) or 8(a) hereof but
unpaid, any bonus due under Section 5(b) hereof with respect to the year
prior to the year in which the Date of Termination occurs but unpaid, and a
bonus under Section 5(b) hereof for the year in which the Date of
Termination occurs on the basis of $1,000,000 prorated based upon the
number of days during such year the Executive was employed by the Company;
(ii) the Executive (or the Executive's estate or designated
beneficiary in the event of his death) shall be paid, as and when payable
pursuant to Section 5(c) hereof, a percentage (up to a maximum of 100%) of
the Performance Payment equal to the greater of (A) 20% or (B) the
percentage of the total capital commitments to Trident that have been
invested prior to the Date of Termination plus 10%;
(iii) the Executive (and, to the extent provided in any
such plan, his spouse) may participate in the retiree medical plan then in
operation for retirees of the Parent under the terms of such plan as if he
had been an eligible retiree of the Parent; and
(iv) the Company shall have no additional obligations to
the Executive under this Agreement except to the extent otherwise provided
in the applicable plans and programs of the Company.
Executive represents that to his knowledge he does not currently have
a medical condition that could lead to a Physician Certification Notice.
(j) INVESTMENT ADVISOR RELATIONSHIP. Notwithstanding anything to the
contrary in this Agreement, at any time during the 120 days preceding October 1,
1995, the Company or the Parent may request, upon at least 30 days written
notice to the Executive, that the Executive retire as an employee of the
Company, effective October
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1, 1995 and become an investment advisor to the Company ("Investment Advisor").
In such event:
(i) the Executive shall retire from the Company and resign as Chief
Executive Officer of the Company (remaining as non-executive
Chairman) and from any officerships and directorships of the
Parent and any other Marsh & McLennan Entities, all effective
as of October 1, 1995;
(ii) in lieu of the duties as Chief Executive Officer set forth in
Section 3 hereof, the Executive shall provide "Investment
Advisory Services" (as defined below) for the Company as an
independent contractor and in lieu of the receipt of Base
Salary under Section 3 hereof shall be paid a fee (the
"Investment Advisor Fee") at the rate of Eight Hundred Thousand
Dollars ($800,000) per year, payable semi-monthly (and the term
Investment Advisor Fee shall be substituted for the term Base
Salary for purposes of Sections 7 and 8 hereof);
(iii) notwithstanding anything else in this Agreement, except as
otherwise provided in this Section 5(j), the Executive shall
for purposes of this Agreement be treated in all respects while
serving as Investment Advisor as if he were still an employee
hereunder and the Employment Period continued until September
30, 1997 (subject to earlier termination pursuant to the terms
of this Agreement);
(iv) while acting as Investment Advisor, the provisions of Section
5(g) hereof with respect to participation in benefit plans and
programs shall no longer apply to the Executive, PROVIDED,
HOWEVER, that:
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(A) the Executive (and, to the extent provided in any such
plan, his spouse) may participate in the retiree medical plan
then in operation for retirees of the Parent under the terms of
such plan as if he had been an eligible retiree of the Parent;
(B) if the Executive converts all or a portion of his group
life insurance coverage that was provided during employment
under the Parent's Basic and Optional Life Insurance Plans to
individual coverage at or upon October 1, 1995, the Company
agrees to pay to the Executive, during the remainder of the
Employment Period (as in effect without regard to the
termination of employment pursuant to this Section 5(j)), the
excess of (1) the cost to the Executive of such converted
coverage, over (2) the amount the group life insurance would
have cost the Executive under such plans had he continued as an
active employee with the same level of coverage during such
period of time; and
(C) while an Investment Advisor, the Executive shall have the
option to pay quarterly amounts to the Parent equal to the
premiums he would be paying if he were an employee
participating in the Parent's then-in-effect disability program
for employees. In the event such premiums are paid, if the
Executive, while an Investment Advisor, becomes disabled (as
defined and administered under such program), and his
Investment Advisor status is terminated for such disability
under paragraph 7(b) of this Agreement, then the Company will
make monthly payments to the Executive equal to: (1) the amount
the Executive (had he remained a Company employee) would have
received under the Parent's then-in-effect disability program,
less (2) the
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amount the Executive is receiving from the Parent's retirement
program.
At the end of the Employment Period, if the Employment Period has not been
terminated prior to September 30, 1997, the consulting arrangement pursuant to
Section 5(h) shall commence.
"Investment Advisory Services" shall mean (i) providing services to be
provided to Trident under the contemplated Investment Advisory Agreement between
the Company and Trident, including identifying potential investee companies and
providing information and analyses regarding potential investee companies,
making investment recommendations, and assisting in structuring and negotiating
the terms of such investments and monitoring their performance, (ii) providing
services similar to the foregoing with respect to non-Trident related activities
of the Company, and (iii) providing from time to time, consulting services to
the Parent and its subsidiaries as requested by the Chief Executive Officer of
the Parent with respect to their businesses, including services relating to the
performance and activities of the Parent's insurance investments, assessing
events in the insurance industry and other implications for the Parent's
businesses, and such other projects as may be assigned by the Chief Executive
Officer of the Parent.
Upon becoming Investment Advisor pursuant to this Section 5(j), the
Executive shall have the same rights and obligations, and be subject to the same
limitations and termination provisions as are applicable during and following
the Employment Period (except to the extent inconsistent with his no longer
being the Chief Executive Officer), including but not limited to Section 10
hereof, PROVIDED, HOWEVER, that Section 7(d)(iv) hereof shall be modified to
read as follows: "during the Employment Period, assignment of duties (including
reduction of duties) which are materially inconsistent with the Executive's
status as Investment Advisor to the Company." For purposes of Section 5(i)
hereof, the Executive's continuing service as Investment Advisor shall be
substituted for his continuing service as Chief Executive Officer for the
purpose of the Physician Certification Notice.
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In lieu of the Executive becoming the Investment Advisor, the
Executive may elect for a corporation, all of the stock of which is owned by the
Executive, members of his immediate family or trusts for the benefit of the
Executive and members of his immediate family, to become the Investment Advisor.
Such corporation shall make the Executive available to render the Investment
Advisory Services, and all payments that would have been owed to the Executive
pursuant to the terms of this Agreement had the Employment Period continued
until September 30, 1997 (subject to earlier termination pursuant to the terms
of this Agreement) shall be paid to such corporation. In the event such
corporation is the Investment Advisor, Sections 7 and 8 hereof shall be deemed
modified to provide for the termination of such corporation's Investment Advisor
relationship upon the occurrence of the various events specified in such
sections with respect to the Executive, and the immediately preceding paragraph
of this Section 5(j) shall apply to both the Executive and such corporation.
(k) OTHER COMPANY ACTIVITIES. If during the Employment Period the
Company organizes a successor or supplemental insurance venture capital
investment fund to Trident with objectives and purposes substantially similar to
those of Trident, the Executive and the Company will discuss in good faith the
Executive's entitlement to receive a performance payment with respect to such
fund(s) based on concepts similar to those applicable to Trident and reflecting
the business conditions at the time of such discussions.
6. PERSONAL INVESTMENTS. During the Employment Period, the Parent,
in its sole discretion, may make available to the Executive and other similarly
situated senior executives of the Parent and its operating subsidiaries the
opportunity for personal investments in insurance risk assumption entities being
organized involving the solicitation of capital.
During the Employment Period, the Executive will refrain from any
personal investments in the insurance industry, other than (i) any investment in
Trident, (ii) investments made available to the Executive in accordance with the
preceding paragraph or (iii) investments in stocks, bonds, or other securities
listed on any national or regional securities exchange or that have
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been registered under Section 12(g) of the Securities Exchange Act of 1934 if
the Executive's investment does not exceed, in the case of any class of the
capital stock of any one issuer, one percent (1%) of the issued and outstanding
shares, or, in the case of other securities, one percent (1%) of the aggregate
principal amount thereof issued and outstanding.
The Executive shall not, during the Employment Period and during the
Consulting Period, make any personal investments which would prevent or hinder,
directly or indirectly, the transaction of business by or the relationship of
any Marsh & McLennan Entity with any governmental or quasi-governmental or
public entity (including pension plans covering governmental or quasi-
governmental employees), including any state, district, territory, or possession
of the United States or any governmental subdivision, agency, or instrumentality
thereof or any insurance market, including Lloyd's, by virtue of any statute,
law, regulation, or administrative practice.
7. TERMINATION. The Executive's employment or consultancy hereunder,
as the case may be, may be terminated under the following circumstances set
forth in Sections 7(a) through 7(e) hereof without breach of this Agreement:
(a) DEATH. The Executive's employment or consultancy
hereunder, as the case may be, shall terminate upon his death, and the date of
his death shall be the Date of Termination.
(b) DISABILITY. If, as a result of the Executive's incapacity
due to physical or mental illness, the Executive shall have been absent from his
duties hereunder on a full-time basis (or as required pursuant to Section 5(h)
hereof) for the entire period of six consecutive months and, within thirty (30)
days after written Notice of Termination (as defined in Section 7(f) hereof) is
given, shall not have returned to the performance of his duties hereunder on a
full-time basis (or as required pursuant to Section 5(h) hereof), the Company
may terminate the Executive's employment or consultancy hereunder
("Disability"). In this event, the Date of Termination shall be thirty (30)
days after Notice of Termination is given (provided that the Executive shall not
have returned to the performance of his duties on a
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full-time basis (or as required by Section 5(h) hereof) during such thirty (30)
day period).
(c) CAUSE. The Company may terminate the Executive's
employment or consultancy hereunder for Cause. For purposes of this Agreement,
the Company shall have "Cause" to terminate the Executive's employment or
consultancy hereunder upon the Executive's:
(i) conviction for the commission of a felony involving
moral turpitude, fraud or a violation of the United States antitrust laws;
or
(ii) willful and continuing substantial failure to perform
his duties hereunder (other than such failure resulting from the
Executive's incapacity due to physical or mental illness or subsequent to
the issuance of a Notice of Termination by the Executive for Good Reason)
after demand for cure of such failure is delivered by the Company in
writing that specifically identifies the manner in which the Company
believes the Executive has substantially failed to perform his duties; or
(iii) willful gross misconduct or willful gross neglect
(including, but not limited to, a material breach of the provisions of
Sections 6 or 10 hereof) that, in either case, is demonstrably and
materially injurious to the Company or its subsidiaries, whether monetarily
or otherwise.
Cause shall not exist unless and until the Company has delivered to the
Executive a copy of a resolution of the Board, adopted (after reasonable notice
to the Executive and an opportunity for the Executive to be heard before the
Board) at a meeting of the Board called and held for such purpose within 60 days
after the Board has knowledge of the occurrence of an event described in this
Section 7(c), finding that in the good faith opinion of the Board the Executive
was guilty of the conduct set forth in this Section 7(c) and specifying the
particulars thereof in detail. In this event, the Date of Termination shall be
the date specified in the Notice of Termination.
(d) GOOD REASON. The Executive may terminate his employment
or consultancy hereunder within sixty (60) days after the occurrence of one or
more of
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the following events, without the written consent of the Executive, that has not
been cured within fifteen (15) business days after written notice thereof has
been given by the Executive to the Company ("Good Reason"):
(i) a reduction in the Executive's then current Base
Salary, Stipend, or Consulting Fee or the termination or material reduction
of any employee benefit set forth in Section 5(g) hereof (other than a
reduction in benefits as part of an across-the-board reduction applicable
to all executive officers of the Company or as otherwise provided in this
Agreement);
(ii) the failure to pay the Executive a Performance Payment
that is due and owed to the Executive;
(iii) during the Employment Period, the failure to elect or
reelect the Executive to either of the positions described in Section 3
hereof (unless the Company has notified the Executive in writing of the
existence of a basis for Cause or as otherwise provided in this Agreement)
or removal of him from any such position;
(iv) during the Employment Period, assignment of duties
(including reduction of duties) which are materially inconsistent with the
Executive's status as the Chairman and Chief Executive Officer of the
Company;
(v) during the Employment Period, the relocation of the
Executive's office location as assigned to him by the Company to a location
more than 50 miles from Manhattan;
(vi) the failure of the Company to obtain the assumption in
writing of its obligation to perform this Agreement by any successor to all
or substantially all of the assets of the Company within 45 days after a
merger, consolidation, sale or similar transaction;
(vii) a "Change in Control of the Parent" (as defined
below); or
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(viii) a "Change in Control of the Company" (as defined
below).
The Executive's continued employment or consultancy shall not constitute consent
to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder. In the event of a termination for Good
Reason, the Date of Termination shall be the date specified in the Notice of
Termination which shall be no more than thirty (30) days after the Notice of
Termination.
For purposes of this Agreement, a "Change in Control of the Parent"
shall have occurred if:
(1) any "person," as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
(other than the Parent, any trustee or other fiduciary holding securities
under an employee benefit plan of the Parent or any corporation owned,
directly or indirectly, by the stockholders of the Parent in substantially
the same proportions as their ownership of stock of the Parent), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Parent representing 50%
or more of the combined voting power of the Parent's then outstanding
voting securities;
(2) during any period of not more than two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Parent, and any new director (other than a director
designated by a person who has entered into an agreement with the Parent to
effect a transaction described in clause (1), (3), or (4) of this Section
7(d)) whose election by the Board of Directors of the Parent or nomination
for election by the Parent's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority thereof;
21
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(3) the stockholders of the Parent approve a merger or consolidation
of the Parent with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the Parent
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving or parent entity) 50% or more of the combined voting power of the
voting securities of the Parent or such surviving or parent entity
outstanding immediately after such merger or consolidation or (B) a merger
or consolidation effected to implement a recapitalization of the Parent (or
similar transaction) in which no "person" (as hereinabove defined) acquired
50% or more of the combined voting power of the Parent's then outstanding
securities; or
(4) the stockholders of the Parent approve a plan of complete
liquidation of the Parent or an agreement for the sale or disposition by
the Parent of all or substantially all of the Parent's assets (or any
transaction having a similar effect).
For purposes of this Agreement, a "Change in Control of the Company" shall have
occurred if the Parent no longer owns at least 50% of the value and voting power
of the Company.
(e) OTHER TERMINATIONS. If the Executive's employment or
consultancy is terminated hereunder for any other reason other than as set forth
in Sections 7(a) through 7(d) hereof, the date on which a Notice of Termination
is given or any later date (within 30 days) set forth in such Notice of
Termination shall be the Date of Termination, PROVIDED, HOWEVER, that upon a
termination of consultancy as a result of a failure to extend the Consulting
Period under Section 5(h) hereof, the Date of Termination shall be the last day
of such Consulting Period and, PROVIDED, FURTHER, that upon a termination of
employment pursuant to a Physician Certification Notice, the Date of Termination
shall be 30 days following the provision of such notice.
(f) NOTICE OF TERMINATION. Any termination of the Executive's
employment or consultancy hereunder by the Company or by the Executive (other
than
22
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termination pursuant to Section 7(a) hereof) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 12
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment or
consultancy under the provision so indicated. A Physician Certification Notice
shall serve as a Notice of Termination for purposes of this Section 7(f).
8. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(a) DISABILITY PERIOD. During any period that the Executive
fails to perform his duties hereunder as a result of incapacity due to physical
or mental illness ("Disability Period"), the Executive shall continue to (i)
receive his full Base Salary and Stipend (or Consulting Fee), (ii) remain
eligible (during the Employment Period) for an annual cash bonus under Section
5(b) hereof until his employment or consultancy is terminated pursuant to
Section 7(b) hereof or, if earlier, until the end of the Employment Period or
Consulting Period, as the case may be and (iii) participate in the programs
described in Section 5(g) hereof (except to the extent such participation is not
permitted under the terms of such programs). Such payments made to the
Executive during the Disability Period shall be reduced by the sum of the
amounts, if any, payable to the Executive at or prior to the time of any such
payment under disability benefit plans of the Company or under the Social
Security disability insurance program, and which amounts were not previously
applied to reduce any such payment.
(b) DEATH OR DISABILITY. If the Executive's employment or
consultancy hereunder is terminated as a result of death or Disability then:
(i) the Company shall pay the Executive (or the Executive's
estate or designated beneficiary in the event of his death) any amounts due
to the Executive for services prior to the Date of Termination pursuant to
Sections 5(a), 5(h) or 8(a)
23
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hereof but unpaid, any bonus due under Section 5(b) hereof with respect to
the year prior to the year in which the Date of Termination occurs but
unpaid, and, if such termination occurs during the Employment Period, a
bonus under Section 5(b) hereof for the year in which the Date of
Termination occurs on the basis of $1,000,000 (or $750,000 in the event the
Date of Termination occurs during the nine-month period ending on September
30, 1997) prorated based upon the number of days during such year or period
the Executive was employed by the Company;
(ii) the Executive (or the Executive's estate or designated
beneficiary in the event of his death) shall be paid, as and when payable
pursuant to Section 5(c) hereof, a percentage (up to a maximum of 100%) of
the Performance Payment equal to the greater of (A) 20% or (B) the
percentage of the total capital commitments to Trident that have been
invested prior to the Date of Termination plus 10%, PROVIDED, HOWEVER, that
such percentage (i) shall be not less than 80% as of a Date of Termination
on or after October 1, 1997, (ii) shall not be less than 90% as of a Date
of Termination on or after October 1, 1998, and (iii) shall be 100% in the
event of a Date of Termination on or after October 1, 1999;
(iii) the Executive (and, to the extent provided in any
such plan, his spouse) may participate in the retiree medical plan then in
operation for retirees of the Parent under the terms of such plan as if he
had been an eligible retiree of the Parent; and
(iv) the Company shall have no additional obligations to the
Executive under this Agreement except to the extent otherwise provided in
the applicable plans and programs of the Company.
(c) CAUSE OR BY EXECUTIVE (OTHER THAN FOR GOOD REASON OR
PURSUANT TO A PHYSICIAN CERTIFICATION NOTICE). If the Executive's employment or
consultancy hereunder is terminated by the Company for Cause or by the Executive
(other than for Good Reason or pursuant to a Physician Certification Notice)
then:
24
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(i) the Company shall pay the Executive any amounts due to
the Executive for services prior to the Date of Termination pursuant to
Sections 5(a), 5(h) or 8(a) hereof but unpaid, and any bonus due under
Section 5(b) hereof with respect to the year prior to the year in which the
Date of Termination occurs but unpaid; and
(ii) the Executive shall receive no further Base Salary,
Stipend, bonus or Consulting Fee and shall have no right to the Performance
Payment, and the Company shall have no additional obligations to the
Executive under this Agreement except to the extent otherwise provided in
the applicable plans and programs of the Company.
(d) TERMINATION BY COMPANY (WITHOUT CAUSE OR DISABILITY) OR
BY EXECUTIVE FOR GOOD REASON. If the Executive's employment or consultancy
hereunder is terminated by the Company (without Cause or Disability) or by the
Executive for Good Reason, then:
(i) the Company shall pay to the Executive any amounts due
to the Executive for services prior to the Date of Termination pursuant to
Sections 5(a), 5(b), 5(h) or 8(a) hereof but unpaid, and the Company shall
pay to the Executive (A) for the remainder of the Employment Period (as in
effect without regard to the termination of employment), the Base Salary
and Stipend (at the rate in effect at the time Notice of Termination is
given) and the bonus pursuant to Section 5(b) hereof (at the rate of
$1,000,000 per year (or $750,000 for the nine-month period ending September
30, 1997)), (B) for the remainder of the Consulting Period (as in effect
without regard to the termination of the consulting arrangement), the
Consulting Fee (at the rate in effect at the time Notice of Termination is
given, or at a rate of $300,000 per year if Notice of Termination is given
during the Employment Period), and (C) the Performance Payment as and when
payable pursuant to Section 5(c) hereof;
(ii) the Executive (and, to the extent provided in any such
plan, his spouse) may participate in the retiree medical plan then in
operation for retirees of the Parent under the terms
25
<PAGE>
of such plan as if he had been an eligible retiree of the Parent;
(iii) if the Executive converts all or a portion of his
group life insurance coverage that was provided during employment under the
Parent's Basic and Optional Life Insurance Plans to individual coverage at
or upon his Date of Termination, the Company agrees to pay to the
Executive, during the remainder of the Employment Period (as in effect
without regard to the termination of employment), the excess of (A) the
cost to the Executive of such converted coverage, over (B) the amount the
group life insurance would have cost the Executive under such plans had he
continued as an active employee with the same level of coverage during such
period of time; and
(iv) the Company shall have no additional obligations to
the Executive under this Agreement except to the extent otherwise provided
in the applicable plans and programs of the Company.
(e) FAILURE TO EXTEND CONSULTING PERIOD. If the Consulting Period is
not extended pursuant to Section 5(h) hereof, then:
(i) the Company shall pay the Executive any amounts due to the
Executive pursuant to Sections 5(h) or 8(a) hereof, but unpaid;
(ii) the Executive shall be paid, as and when payable pursuant
to Section 5(c) hereof, a percentage (not to exceed 100%) of the
Performance Payment equal to the product of (A) 20% and (B) the number of
full or partial years from January 1, 1994 through the Date of Termination;
(iii) the Executive (and, to the extent provided in any such
plan, his spouse) may participate in the retiree medical plan then in
operation for retirees of the Parent under the terms of such plan as if he
had been an eligible retiree of the Parent; and
26
<PAGE>
(iv) the Company shall have no additional obligations to the
Executive under this Agreement except to the extent otherwise provided in
the applicable plans and programs of the Company.
9. MITIGATION. The Executive shall not be required to mitigate
amounts payable pursuant to Section 8 hereof by seeking other employment or
otherwise. However, to the extent that the Executive shall receive from a
subsequent employer benefits substantially similar to those to be provided under
Sections 5(i)(iii), 5(j)(iv)(A), (B) and (C), 8(b)(iii), 8(d)(ii) and (iii), and
8(e)(iii) hereof, the benefits to be provided under such Sections shall be
correspondingly reduced.
10. CONFIDENTIAL INFORMATION, REMOVAL OF DOCUMENTS, NON-COMPETITION.
(a) CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Marsh & McLennan Entities all trade
secrets, confidential information, and knowledge or data relating to the Marsh &
McLennan Entities and the businesses and investments of the Marsh & McLennan
Entities, which shall have been obtained by the Executive during the Executive's
employment or consultancy by the Company or previously as an employee, officer
or director of any Marsh & McLennan Entity and which shall not have been or now
or hereafter have become public knowledge (other than by acts by the Executive
or representatives of the Executive in violation of this Agreement). Except as
may be required or appropriate in connection with his carrying out his duties
under this Agreement, the Executive shall not, without the prior written consent
of the Company or as may otherwise be required by law or legal process,
communicate or divulge any such trade secrets, information, knowledge or data to
anyone other than the Company and those designated by the Company or the Parent.
(b) REMOVAL OF DOCUMENTS. All records, files, drawings,
documents, models, equipment, and the like relating to the business of the Marsh
& McLennan Entities, which the Executive prepares, uses or comes into contact
with shall not be removed by the Executive from the Company's premises without
its written consent during or after the Employment Period or the Consulting
Period unless such removal shall be required or appropri-
27
<PAGE>
ate in connection with his carrying out his duties under this Agreement, and, if
so removed by the Executive, shall be returned to the Company immediately upon
termination of the Executive's employment or consultancy, as the case may be,
hereunder.
(c) NON-COMPETITION. During the Executive's employment and
consultancy with the Company and until two (2) years after the Executive's Date
of Termination (other than a termination as a result of which the Executive
receives payments under Section 8(d) hereof or a termination by the Company
under Section 7(e) hereof, in which case until one (1) year after the
Executive's Date of Termination), the Executive will not (A) engage, anywhere
within the geographical areas in which any of the Company or Marsh & McLennan,
Incorporated and their respective directly or indirectly owned subsidiaries (the
"Designated Entities") have conducted their business operations or provided
services as of the date hereof or at any time prior to the Date of Termination,
directly or indirectly, alone, in association with or as a shareholder,
principal, agent, partner, officer, director, employee or consultant of any
other organization, in any business which is similar to or in competition with
any of the businesses conducted by the Designated Entities during the
Executive's employment and consultancy and at the time the Executive engages in
such business, (B) divert to any competitor of any of the Designated Entities
any customer of any of the Designated Entities, (C) solicit or encourage any
officer, employee or consultant of any of the Designated Entities to leave the
employ of any of the Designated Entities for employment by or with any
competitor of any of the Designated Entities or (D) enter into any relationship
pursuant to Section 3 hereof which would prevent or hinder, directly or
indirectly, the transaction of business by any of the Designated Entities or the
relationship of any of the Designated Entities with any governmental or quasi-
governmental or public entity (including pension plans covering governmental or
quasi-governmental employees), including any state, district, territory, or
possession of the United States or any governmental subdivision, agency, or
instrumentality thereof or any insurance market, including Lloyd's, by virtue of
any statute, law, regulation, or administrative practice; PROVIDED, HOWEVER,
that the Executive may (A) other than during the Employment Period, become an
officer or director of one or
28
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more insurance companies organized or controlled by the Company, Trident or an
entity in which the Company has an interest similar to its interest in Trident
and (B) invest in stock, bonds, or other securities of any competitor of any of
the Designated Entities if (1) such stock, bonds, or other securities are listed
on any national or regional securities exchange or have been registered under
Section 12(g) of the Securities Exchange Act of 1934; (2) his investment does
not exceed, in the case of any class of the capital stock of any one issuer, one
percent (1%) of the issued and outstanding shares, or, in the case of other
securities, one percent (1%) of the aggregate principal amount thereof issued
and outstanding; and (3) such investment would not prevent or hinder, directly
or indirectly, the transaction of business by any of the Designated Entities or
the relationship of any of the Designated Entities with any governmental or
quasi-governmental or public entity (including pension plans covering
governmental or quasi-governmental employees), including any state, district,
territory, or possession of the United States or any governmental subdivision,
agency, or instrumentality thereof or any insurance market, including Lloyd's,
by virtue of any statute, law, regulation, or administrative practice. If, at
any time, the provisions of this Section 10(c) shall be determined to be invalid
or unenforceable, by reason of being vague or unreasonable as to area, duration
or scope of activity, this Section 10(c) shall be considered divisible and shall
become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable and enforceable by the court or
other body having jurisdiction over the matter; and the Executive agrees that
this Section 10(c) as so amended shall be valid and binding as though any
invalid or unenforceable provision had not been included herein.
(d) INJUNCTIVE RELIEF. In the event of a breach or threatened
breach of this Section 10, the Executive agrees that the Company and the Parent
shall be entitled to injunctive relief in a court of appropriate jurisdiction to
remedy any such breach or threatened breach, the Executive acknowledging that
damages would be inadequate and insufficient.
29
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(e) CONTINUING OPERATION. Any termination of the Executive's
employment or consultancy or of this Agreement shall have no effect on the
continuing operation of this Section 10.
11. SUCCESSORS; BINDING AGREEMENT.
(a) COMPANY'S SUCCESSORS. No rights or obligations of the
Company under this Agreement may be assigned or transferred by the Company
except that such rights or obligations may be assigned or transferred pursuant
to a merger or consolidation in which the Company is not the continuing entity,
or the sale or liquidation of all or substantially all of the business and/or
assets of the Company, provided that the assignee or transferee is the successor
to all or substantially all of the business and/or assets of the Company and
such assignee or transferee assumes the liabilities, obligations and duties of
the Company, as contained in this Agreement, either contractually or as a matter
of law. The Company will require any such successor to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this Section
11 or which otherwise becomes bound by all the terms and provisions of this
Agreement or by operation of law.
(b) EXECUTIVE'S SUCCESSORS. This Agreement and all rights of
the Executive hereunder shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees, and all obligations
shall be binding on any of his assigns including the corporation(s) referred to
in Sections 5(h) and (j) hereof. If the Executive should die while any amounts
would still be payable to him hereunder if he had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Executive's devisee, legatee, or other designee
or, if there be no such designee, to the Executive's estate.
30
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12. NOTICE. For the purposes of this Agreement, notices, demands and
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or (unless otherwise
specified) mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
Mr. Robert Clements
Greycliff
104 Wallacks Point Drive
Stamford, CT 06902
with a copy to:
William A. Kass, Esq.
Kantor, Davidoff, Wolfe, Rabbino,
Mandelker & Kass, P.C.
51 E. 42nd Street
New York, New York 10017
If to the Company:
Marsh & McLennan Risk Capital Corp.
1166 Avenue of the Americas
New York, New York 10036
Attn: Treasurer
with a copy to:
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, New York 10036
Attn: General Counsel
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
13. MISCELLANEOUS. No provisions of this Agreement may be modified
unless such modification is agreed to in writing signed by the Executive and
such officer of the Company as may be specifically designated
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for the Company by the Board. Any waiver or discharge must be in writing and
signed by the Executive or such an authorized officer of the Company, as the
case may be. No waiver by either party hereto at any time of any breach by any
of the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of New York without regard to its conflicts of law
principles.
14. ARBITRATION. Except as otherwise provided herein, all
controversies, claims or disputes arising out of or related to this Agreement
shall be settled under the rules of the American Arbitration Association then in
effect in the State of New York, as the sole and exclusive remedy of either
party, and judgment upon such award rendered by the arbitrator(s) may be entered
in any court of competent jurisdiction. In the event the arbitrator(s) find
that the Company's position in an arbitration is frivolous, costs of such
arbitration, including without limitation reasonable attorneys' fees of the
Executive, shall be borne by the Company.
15. VALIDITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
17. ENTIRE AGREEMENT. This Agreement between the Company and the
Executive sets forth the entire agreement of the parties hereto in respect of
the subject matter contained herein and supersedes all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written,
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by the parties hereto in respect of the subject matter contained herein; and any
prior agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and cancelled.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
MARSH & McLENNAN RISK CAPITAL
CORP.
By:/s/A.J.C. Smith
-----------------------------
Name: A.J.C. Smith
Title: Director
/s/Robert Clements
-----------------------------
Robert Clements
33
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EXHIBIT A
DEFINITION OF CERTAIN TERMS USED
IN SECTION 5(C) AND IN THIS EXHIBIT A
The following terms shall have the respective meanings set forth
below, the references to the Offering Memorandum being to The Trident
Partnership, L.P. Offering Memorandum dated July 1993 relating to the private
placement of $1.0 billion of limited partnership interests in Trident and
referring therein to Marsh & McLennan Risk Capital Corp., J.P. Morgan & Co.
Incorporated, Mid Ocean Limited and BYRNE & sons, l.p. as the "Organizers":
"Advisor's Fee" shall have the meaning set forth on pages 16 and 17 of
the Offering Memorandum under the heading "Investment Advisory Agreements".
"Company's Capital Raising Fee" shall mean Investment Fees paid to the
Company by Trident less Litigation Liabilities to the extent not subtracted
in determining the Marsh & McLennan Trident Compensation.
"Investment Fees" shall mean the fees, related to the aggregate amount
of each capital call, which are described on pages 18 and 19 of the
Offering Memorandum under the heading "Investment Fees".
"Litigation Liabilities" shall mean the amount of any unreimbursed
claims, penalties, damages or liabilities to which the Marsh & McLennan
Entities become subject in connection with or arising out of or related to
the organization, financing, business or affairs of Trident.
"Marsh & McLennan Trident Compensation" shall mean the sum of:
(A) Non-Capital Distributions to Partners paid by Trident
to any Marsh & McLennan Entity as a partner of Trident,
(B) any Advisor's Fee paid to any Marsh & McLennan Entity
(after giving effect to any repayment to Trident resulting from a
"clawback" or otherwise), and
A-1
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(C) dividends and other distributions paid to a Marsh &
McLennan Entity by the general partner of Trident in excess of the
capital invested in such general partner by all Marsh & McLennan
Entities,
less the sum of:
(D) payments made by Trident to the Marsh & McLennan
Entities constituting their share of the 20% Return, and
(E) Litigation Liabilities to the extent not subtracted in
determining the Company's Capital Raising Fee.
"Non-Capital Distributions to Partners" shall mean the aggregate
distribution to all Partners of Trident described on pages 19 and 20 of the
Offering Memorandum under the heading "Distributions", other than
distributions constituting return of capital referred to in clause (i) of
said description.
"Trident Annual Return" (which shall be reported on by Deloitte &
Touche or such other accounting firm of comparable national standing as may
be agreed upon by the parties hereto) shall mean the return calculated by
dividing (A) the sum of (i) all of Trident's Non-Capital Distributions to
Partners and (ii) each Advisor's Fee by (B) Trident's aggregate weighted
average capital outstanding, computed on the basis of a 365-day year.
Weighted average capital outstanding shall be determined from the date each
capital contribution is received by Trident to the date Trident makes
distributions thereof to the Partners. An example of the calculation of
Trident Annual Return is set forth in this Exhibit A on page A-5 below.
"20% Return" shall mean that portion of the Non-Capital Distributions
to Partners constituting the cumulative preferential return referred to in
clause (ii) of the description under the heading "Distribution" in the
Offering Memorandum referred above in the definition of Non-Capital
Distributions to Partners.
A-2
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EXHIBIT B
TERMS OF TRUST REFERRED TO IN SECTION 5(C)(4)
GRANTOR -- The Company
BENEFICIARY -- The Executive
TRUSTEE -- Morgan Guaranty Trust Company of New York
(or as otherwise agreed pursuant to Section 5(c)(4))
INVESTMENTS -- To be determined by the Parent, with the Trustee to accept
instructions only from the Parent's Treasurer or his designee,
to be denominated in U.S. dollars, to be due and payable on
demand or with a final maturity not to exceed three years, and
to be limited to the following, except as set forth in a
writing signed by the Executive, the Company and the Parent:
(i) Securities of, or unconditionally and fully guaranteed as to
principal and return by the full faith and credit of, the
United States government.
(ii) Commercial paper or medium term notes (including that issued
by bank holding companies), provided the notes are rated at
least "A-1" or "P-1" and, if applicable, the obligor has a
long-term debt rating of at least "A" or its equivalent.
(iii) Obligations of, or instruments or securities issued or
guaranteed by, banks rated "B/C" or better by a credit
rating agency of recognized standing.
(iv) Debt instruments issued by states of the United States and
their agencies, municipalities or instrumentalities rated at
least "A" and/or "A-1" or "P-1".
INCOME: All interest and other income (exclusive of capital items) to be
distributed monthly to the Executive.
B-1
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EXPENSES/TAXATION: The fees and expenses of the Trustee, as well as other trust
expenses and tax liability with respect to amounts in trust
(other than taxes payable by the Executive on amounts
received by him from the Trust), shall be paid by the
Company.
ACCOUNTING: Annual accounting, and at the termination of the Trust, to the
Company and the Executive. In addition, the Trustee shall
advise the Company and the Executive quarterly of the
investments held in the Trust.
Distribution
of Corpus/
REVERSION: (1) Except as provided in clause (2) below and in Section
5(c)(4)(A) hereof, the Trustee shall make distributions of the
corpus of the Trust to the Executive or to the Company only upon
the written instructions of the Executive and of the Company
(endorsed by the Parent), in the case of the Company and the
Parent signed by an officer of each, which instructions shall
include the amount to be so distributed and, if other than cash,
a description of the securities to be distributed.
(2) Upon written request of the Company accompanied by a
certificate signed by an officer of the Company and an officer
of the Parent, to the effect that the final liquidating
distribution has been paid by or on behalf of Trident and the
Executive is not entitled to any further payment pursuant to the
provisions of Section 5(c) hereof, to which certificate shall be
attached a consent signed by the Executive or a further
certificate by such officers that the Executive has received not
less than 30 days notice of the Company's request, and provided
that if the Executive's consent is not attached to said
certificate and the Executive does not notify the Trustee,
within five business days of the
B-2
<PAGE>
Trustee's receipt of said certificate, of any objection to the
facts or conclusions set forth in said certificate, the Trust
shall terminate and all of its assets shall be paid over to the
Company.
(3) In the event that the Executive and the Company shall fail
to agree on the instructions given or to be given to the Trustee
pursuant to clause (1) above or the Executive notifies the
Trustee in writing of his objections pursuant to clause (2)
above, the Trustee shall make no distribution or payment until
the dispute is resolved, and the Executive and the Company shall
forthwith submit the dispute to arbitration pursuant to the
provisions of Section 14 hereof.
B-3
<PAGE>
SCHEDULES
EXAMPLES OF EXECUTIVE'S PERFORMANCE PAYMENT
UNDER VARIOUS ASSUMPTIONS
Examples consist of five pairs of schedules illustrating "Trident Partnership
Potential Annual Return" and "Marsh & McLennan Risk Capital Corp. Compensation
Structure" at assumed levels of Trident Annual Return of 20%, 25%, 30%, 40% and
50%.
<PAGE>
EXHIBIT 10
December 20, 1994
Mr. Robert Clements
Greycliff
104 Wallacks Point Drive
Stamford, CT 06902
Dear Mr. Clements:
Marsh & McLennan Companies, Inc., a Delaware corporation (the "Parent"), hereby
agrees to perform any and all obligations and duties owed to you by the Parent
pursuant to the terms and conditions of the Amended and Restated Employment
Agreement between Marsh & McLennan Risk Capital Corp. (the "Company") and you,
effective as of December 31, 1993 (the "Restated Employment Agreement"), and you
to agree to perform any and all obligations owed to the Parent by you pursuant
to the terms and conditions of the Restated Employment Agreement. The Parent
further agrees to guarantee to you the performance of any and all of the
Company's obligations and duties under the Restated Employment Agreement.
Agreed to: MARSH & McLENNAN COMPANIES, INC.
/s/Robert Clements By:/s/A.J.C. Smith
- -------------------------- ------------------------------
Robert Clements Name: A.J.C. Smith
Title: Chairman
<PAGE>
EXHIBIT 10
MARSH & MCLENNAN COMPANIES, INC.
SENIOR MANAGEMENT INCENTIVE COMPENSATION PLAN
1. PURPOSES.
The purposes of the Marsh & McLennan Companies, Inc. Senior
Management Incentive Compensation Plan are to foster a partnership orientation
among selected members of senior management; to align the interests of these
employees with those of MMC's shareholders by offering significant variable
compensation opportunities payable in the form of cash or equity awards; to
promote and reinforce achievement of corporate, organizational, financial and
business development goals; and to qualify the compensation paid under this Plan
as "qualified performance-based compensation" within the meaning of Section
162(m) of the Code.
2. DEFINITIONS.
The following terms, as used herein, shall have the following meanings:
(a) "Award" shall mean an annual incentive compensation award granted
pursuant to this Plan with respect to a Performance Period.
(b) "Award Pool" shall mean the aggregate amount available for Awards
under this Plan in respect of a Performance Period, the size of which
shall be based upon the percentage of Pre-Tax NOI determined pursuant
to Section 5(a) hereof.
(c) "Board" shall mean the Board of Directors of MMC.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended,
including the regulations and other guidance issued thereunder.
(e) "Committee" shall mean those members of the Compensation Committee of
the Board who satisfy the requirements of "outside directors" within
the meaning of Section 162(m) of the Code, and who shall not be fewer
than two in number.
(f) "Common Stock" shall mean the common stock, par value $1.00 per share,
of MMC.
(g) "Company" shall mean, collectively, MMC and its subsidiaries.
(h) "Covered Employee" shall have the meaning set forth in Section
162(m)(3) of the Code.
<PAGE>
(i) "Deferral Plan" shall mean the Marsh & McLennan Companies, Inc. Cash
Bonus Award Voluntary Deferral Plan, as amended from time to time, or
any successor plan thereto, or other deferred compensation plans or
arrangements of the Company.
(j) "Extraordinary Adjustments" shall mean unusual or nonrecurring events
affecting MMC or any subsidiary, or any business division or unit or
the financial statements of MMC or any subsidiary, such as major
restructurings, reorganizations, special dividends, consolidations,
spin-offs, combinations or other corporate transactions or events or
in response to changes in applicable laws and regulations (including
interpretations thereof), accounting principles, tax rates and
regulations or business conditions. The foregoing adjustments are
intended to be objectively determinable and nondiscretionary and, as
such, consistent with the qualification of Awards as "qualified
performance-based compensation" under Section 162(m) of the Code,
and shall be construed accordingly. To the extent it shall be
determined that any such adjustment would likely cause compensation
relating to an Award to a Covered Employee to fail to be deductible
under Section 162(m) of the Code, such adjustment shall not be
authorized or made, unless otherwise determined by the Committee.
(k) "Fair Market Value" on any given date shall mean the arithmetic mean
of the high and low prices of the Common Stock on the New York Stock
Exchange on the last trading day preceding such date.
(l) "MMC" shall mean Marsh & McLennan Companies, Inc., a Delaware
corporation.
(m) "1992 Plan" shall mean the Marsh & McLennan Companies, Inc. 1992
Incentive and Stock Award Plan, as amended from time to time, or any
successor plan thereto.
(n) "Participant" shall mean a senior management employee of the Company
who is, pursuant to Section 4 of this Plan, selected to participate
herein.
(o) "Performance Period" shall mean each fiscal year of the Company, or
such other period as may be established by the Committee in a manner
consistent with the requirements of Section 162(m) of the Code.
(p) "Plan" shall mean this Marsh & McLennan Companies, Inc. Senior
Management Incentive Compensation Plan, as amended from time to time.
- 2 -
<PAGE>
(q) "Pre-Tax-Income" for a Performance Period shall mean, except as
otherwise provided herein, the consolidated pre-tax net operating
income of the Company, as determined in accordance with generally
accepted accounting principles and reported in the Company's audited
financial statements for such Performance Period, before any provision
for amounts paid or accrued in respect of annual incentive awards
under this Plan and other bonus plans of the Company and before
provision for any Extraordinary Adjustments.
3. ADMINISTRATION.
This Plan shall be administered by the Committee. The Committee shall have
the authority in its sole discretion, subject to and not inconsistent with the
express provisions of this Plan, to administer this Plan and to exercise all the
powers and authorities either specifically granted to it under this Plan or
necessary or advisable in the administration of this Plan, including, without
limitation, the authority to grant Awards; to determine the persons to whom and
the time or times at which Awards shall be granted; to determine the terms,
conditions and restrictions relating to any Award; to determine whether, to what
extent, and under what circumstances an Award may be settled, cancelled,
forfeited, or surrendered; to determine the form and timing of payment in
settlement of an Award; to construe and interpret this Plan and any Award; to
prescribe, amend and rescind rules and regulations relating to this Plan; and to
make all other determinations deemed necessary or advisable for the
administration of this Plan. All decisions, determinations and interpretations
of the Committee shall be final and binding on all persons, including the
Company, the Participant (or any person claiming any rights under this Plan from
or through any Participant) and any shareholder of MMC.
No member of the Board or the Committee shall be liable for any action
taken or determinations made in good faith with respect to this Plan or any
Award granted hereunder.
4. ELIGIBILITY.
Awards may be granted to senior management employees of the Company in the
sole discretion of the Committee, including for this purpose senior management
employees whose employment with the Company commences or terminates during the
Performance Period. In determining the persons to whom Awards shall be granted,
the Committee shall take into account such factors as the Committee shall deem
appropriate in connection with accomplishing the purposes of this Plan.
- 3 -
<PAGE>
5. AWARD POOL; PAYMENT OF AWARDS.
(a) The size of the Award Pool in respect of a Performance Period shall be
an amount equal to the sum of (a) five percent (5%) of Pre-Tax Income for such
Performance Period plus (b) an additional two-tenths of one percent (.2%) of
Pre-Tax Income for each full percentage increase in Pre-Tax Income over the
preceding Performance Period; PROVIDED, HOWEVER, that in no event shall the
Award Pool in respect of any Performance Period exceed ten percent (10%) of Pre-
Tax Income for such Performance Period. To the extent permitted by Section
162(m) of the Code, if the Committee establishes a Performance Period other than
a fiscal year of the Company, then (1) the Award Pool for such Performance
Period shall be based upon annualized Pre-Tax Income and the annualized increase
in Pre-Tax Income for such Performance Period, and (2) annualized Pre-Tax Income
for such Performance Period shall be utilized for purposes of applying clause
(b) above for the next succeeding Performance Period. Annualized Pre-Tax Income
and the annualized increase in Pre-Tax Income shall be determined in accordance
with the books and records of the Company and in a manner consistent with the
terms of this Plan.
(b) Awards granted to Participants in respect of a Performance Period
shall consist of such portion of the Award Pool as the Committee may determine;
PROVIDED, HOWEVER, that no Participant who is a Covered Employee for the
calendar year with which or in which the Performance Period ends may be
allocated an amount in excess of twenty percent (20%) of such Award Pool.
Unless otherwise determined by the Committee, no payment shall be made to any
such Covered Employee unless the Committee shall have previously certified that
the performance goals necessary to the establishment and size of the Award Pool
had been attained. The Committee shall not be obligated to grant Awards
representing the entire Award Pool.
(c) Except as hereinafter provided, all payments in respect of Awards
granted under this Plan shall be made within a reasonable period after the end
of the Performance Period. Such payment shall be made, in the sole discretion
of the Committee, in the form of (1) cash, (2) an award of shares of restricted
stock, restricted stock units or a similar stock-based award, pursuant to and
subject to the terms and conditions of the 1992 Plan, or (3) a combination of
the foregoing. For purposes of the preceding sentence, the value of shares of
Common Stock represented by the restricted stock, restricted stock units or
other stock-based form of payment shall be determined based on the Fair Market
Value per share of Common Stock on the date of payment. Amounts otherwise
payable in cash under this Plan may be deferred in accordance with the terms
and conditions of the Deferral Plan.
- 4 -
<PAGE>
6. GENERAL PROVISIONS.
(a) COMPLIANCE WITH LEGAL REQUIREMENTS. This Plan and the granting and
payment of Awards and the other obligations of the Company under the Plan shall
be subject to all applicable federal and state laws, rules and regulations, and
to such approvals by any regulatory or governmental agency as may be required.
(b) NONTRANSFERABILITY. Awards shall not be transferable by a
Participant.
(c) NO RIGHT TO CONTINUED EMPLOYMENT. Nothing in this Plan or in any
Award granted under this Plan shall confer upon any Participant the right to
continue in the employ of the Company or to be entitled to any remuneration or
benefits not set forth in this Plan or to interfere with or limit in any way the
right of the Company to terminate such Participant's employment.
(d) WITHHOLDING TAXES. In the event a Participant or other person is
entitled to receive an Award under this Plan, the Company shall withhold from
payment of such Award the amount of any taxes that the Company is required to
withhold with respect to such payment.
(e) AMENDMENT, TERMINATION AND DURATION OF THIS PLAN. The Committee may
at any time and from time to time alter, amend, suspend, or terminate this Plan
in whole or in part; PROVIDED THAT, no amendment that requires shareholder
approval in order for this Plan to continue to comply with Code Section 162(m)
shall be effective unless the same shall be approved by the requisite vote of
the shareholders of MMC. Notwithstanding the foregoing, no amendment shall
affect adversely any of the rights of any Participant, without such
Participant's consent, under any Award theretofore granted under this Plan.
(f) PARTICIPANT RIGHTS. No Participant shall have any claim to be granted
any Award under this Plan, and there is no obligation for uniformity of
treatment among Participants.
(g) UNFUNDED STATUS OF AWARDS. This Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in this Plan or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company.
(h) GOVERNING LAW. This Plan and all determinations made and actions
taken pursuant hereto shall be governed by the laws of the State of Delaware
without giving effect to the conflict of laws principles thereof.
- 5 -
<PAGE>
(i) EFFECTIVE DATE. This Plan shall become effective as of January 1,
1994, subject to the requisite approval of the shareholders of MMC in order to
comply with Section 162(m) of the Code. In the absence of such approval, this
Plan (and any Awards theretofore made pursuant to this Plan) shall be null and
void.
(j) INTERPRETATION. This Plan is designed and intended to comply, to the
extent applicable, with Section 162(m) of the Code, and all provisions hereof
shall be construed in a manner to so comply. If any provision of this Plan
shall be determined by the Internal Revenue Service or a court of competent
jurisdiction to be contrary to said Section 162(m), said provision shall be
limited to the extent necessary so that such provision complies with said
Section 162(m) and such determination shall not affect any other provisions of
this Plan, which provisions shall remain in full force and effect.
- 6 -
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
For the Three Years Ended December 31, 1994
(IN MILLIONS, EXCEPT PER SHARE FIGURES) 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE $3,435.0 $3,163.4 $2,937.0
OPERATING INCOME $ 670.3 $ 592.8 $ 541.0
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGES $ 631.5 $ 558.6 $ 519.3
NET INCOME $ 371.5 $ 332.4 $ 263.7
STOCKHOLDERS' EQUITY $1,460.6 $1,365.3 $1,102.9
INCOME PER SHARE BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGES $5.19 $4.52 $4.21
NET INCOME PER SHARE $5.05 $4.52 $3.65
DIVIDENDS PAID PER SHARE $2.80 $2.70 $2.65
RETURN ON AVERAGE STOCKHOLDERS' EQUITY 26% 27% 25%
YEAR-END STOCK PRICE $79 1/4 $81 1/4 $91 3/8
- ---------------------------------------------------------------------------
</TABLE>
<PAGE>
MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Marsh & McLennan Companies, Inc. and Subsidiaries (the "Company") is a
professional services firm with insurance services, consulting and investment
management businesses. More than 25,000 employees provide analysis, advice and
transactional capabilities to clients worldwide.
The consolidated results of operations follow:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(IN MILLIONS, EXCEPT
PER SHARE FIGURES) 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE:
Insurance Services $1,886.5 $1,790.5 $1,632.8
Consulting 933.1 854.8 908.2
Investment Management 615.4 518.1 396.0
-------- -------- --------
3,435.0 3,163.4 2,937.0
-------- -------- --------
EXPENSE:
Compensation and Benefits 1,740.2 1,635.7 1,557.8
Other Operating Expenses 1,024.5 934.9 838.2
-------- -------- --------
2,764.7 2,570.6 2,396.0
-------- -------- --------
OPERATING INCOME $ 670.3 $ 592.8 $ 541.0
-------- -------- --------
-------- -------- --------
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGES $382.0 $332.4 $303.8
------ ------ ------
------ ------ ------
NET INCOME $371.5 $332.4 $263.7
------ ------ ------
------ ------ ------
PER SHARE DATA:
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGES $5.19 $4.52 $4.21
----- ----- -----
----- ----- -----
NET INCOME $5.05 $4.52 $3.65
----- ----- -----
----- ----- -----
AVERAGE NUMBER OF SHARES OUTSTANDING 73.6 73.5 72.2
---- ---- ----
---- ---- ----
- ---------------------------------------------------------------------------
</TABLE>
Revenue, which is derived mainly from commissions and fees, increased 9% in 1994
reflecting growth in each of the Company's business segments. Insurance
services revenue rose 5% in 1994 as compared with 1993. Marsh & McLennan Risk
Capital ("MMRC") contributed approximately $27 million to the increase in
insurance services resulting from the realization of a portion of its holdings
in insurance entities that the Company was instrumental in originating. The
investment management segment achieved revenue growth of 19% over 1993 due to a
higher volume of business. Revenue for the consulting segment increased 9%
reflecting increased demand for its services worldwide.
In 1993, total revenue increased 8% over 1992 primarily reflecting a
significantly higher volume of business in the Company's investment management
segment and the impact of acquisitions.
<PAGE>
Operating expenses increased 8% in 1994 largely due to ongoing systems
automation initiatives in the insurance services and consulting operations and
additional costs in the investment management and consulting segments
commensurate with the higher volume of business. Operating expenses increased
7% in 1993 compared with 1992 largely due to additional client service costs in
the investment management segment and the effect of acquisitions.
The translated values of revenue and expense from the Company's international
insurance services and consulting operations are subject to fluctuations due to
changes in currency exchange rates. However, the net impact of these
fluctuations on the Company's results of operations has not been material.
Effective January 1, 1994, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 112, "Employers' Accounting for Postemployment Benefits."
A noncash charge reflecting the cumulative effect of this accounting change, net
of income taxes, totaled $10.5 million or $.14 per share.
Effective January 1, 1992, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," and SFAS No. 109,
"Accounting for Income Taxes." The cumulative effect of adopting these
standards reduced 1992 net income by $40.1 million or $.56 per share.
INSURANCE SERVICES
Revenue attributable to the insurance services segment consists primarily of
commissions and fees paid by insurance and reinsurance underwriters; fees paid
directly by clients; and interest income on premiums and claims collected and
not yet remitted to insurers, reinsurers or insureds, such funds being held in a
fiduciary capacity. The insurance services segment is affected by premium rate
levels in the property and casualty insurance industry and available insurance
capacity, as compensation is frequently related to the premiums paid by
insureds. Revenue is also affected by fluctuations in retained limits, insured
values and interest rates, the development of new products, markets and
services, and the volume of business from new and existing clients.
The Company has been instrumental in the formation of several substantial
insurance and reinsurance entities, including ACE Insurance Company Ltd., XL
Insurance Company Ltd., Centre Reinsurance Holdings Ltd. and Mid Ocean
Reinsurance Company Ltd., to alleviate, in part, capacity shortages in critical
segments of the insurance and reinsurance business. Through MMRC, the Company
has recognized compensation in various forms including fees, royalties and
dividends, as well as realized appreciation in the value of the Company's
capital deployed in insurance entities it assisted in organizing. These amounts
are reflected within the insurance services segment in the applicable line of
business to which they apply.
<PAGE>
The results of operations for the Company's insurance services segment are
presented below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(IN MILLIONS OF DOLLARS) 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE:
Insurance Broking $1,209.3 $1,147.0 $1,133.3
Reinsurance Broking 298.5 283.6 267.1
Insurance Program Management 300.0 280.3 138.0
Interest Income on Fiduciary Funds 78.7 79.6 94.4
-------- -------- --------
1,886.5 1,790.5 1,632.8
EXPENSE 1,480.4 1,413.8 1,297.4
-------- -------- --------
OPERATING INCOME $ 406.1 $ 376.7 $ 335.4
-------- -------- --------
-------- -------- --------
OPERATING INCOME MARGIN 21.5% 21.0% 20.5%
----- ----- -----
----- ----- -----
- ---------------------------------------------------------------------------
</TABLE>
Insurance Broking Revenue
Insurance broking services are provided primarily in connection with risk
management and the insurance placement process and involve analyzing various
types of property and liability loss exposures and developing alternatives to
deal effectively with these exposures. Services include traditional insurance
broking activities and professional counseling services on risk management
issues including risk analysis, coverage requirements, self insurance,
alternative insurance and funding methods, claims collection, injury management
and loss prevention.
Insurance broking revenue, which is received from a predominantly corporate
clientele, increased 5% in 1994. MMRC contributed approximately $18 million to
the increase resulting from the realization of a portion of its holdings in
insurers. Client revenue grew in Continental Europe reflecting stable premium
rates and new business, and revenue in the United Kingdom rose as a result of
growth in certain specialty lines, particularly marine, energy and aviation. In
the United States, property premium rates were generally stable, except for
catastrophic coverage such as for earthquakes in California and windstorm
exposures on the East Coast, where rates have increased. The casualty market in
North America continues to experience renewal rates that are flat to down on a
year-over-year basis. The Company does not expect market conditions to change
significantly in the first part of 1995.
In 1993, insurance broking revenue increased 1% over 1992 levels. Excluding the
impact of a generally stronger U.S. dollar that lowered the translated value of
revenue, 1993 insurance broking revenue exceeded 1992 by approximately 5%.
Premium rates for casualty insurance were stable to slightly down in North
America. Property rates for complex risks and catastrophic coverage increased
worldwide, and commercial premium rates continued to rise in the United Kingdom,
Continental Europe and in various specialty lines.
Reinsurance Broking Revenue
Reinsurance broking services involve acting as an intermediary for insurance and
reinsurance organizations on all classes of reinsurance. The intermediary
assists the insurance underwriter by providing advice, placing reinsurance
coverage with reinsurance organizations worldwide and furnishing related
services.
<PAGE>
Reinsurance broking revenue increased 5% in 1994. MMRC contributed
approximately $9 million to the increase resulting from the realization of a
portion of its holdings in reinsurers. Excluding these transactions, revenue
increased 2% in 1994 reflecting the impact of higher volume due to increased
capacity for property catastrophe reinsurance and new business offset, in part,
by lower demand in the London market. Premium rates began to react to the
increased capacity and declined somewhat in the second half of the year.
In 1993, reinsurance broking revenue increased 6% over 1992, or approximately
10% excluding the effect of currency exchange rate fluctuations primarily due to
the impact of continued higher rates for property catastrophe reinsurance and
new business.
Insurance Program Management Revenue
Insurance program management primarily designs, places and administers life,
health, accident, disability, automobile, homeowners and professional liability
insurance programs for individuals, businesses and their employees, and
organizations and their members in North America and the United Kingdom. In
addition, it provides underwriting management services to insurers. In the
United Kingdom, it also provides personal financial planning and consumer
finance services to members of affinity groups.
Insurance program management revenue increased 7% in 1994. Revenue within North
America increased 8% from 1993 reflecting increased services provided to
corporations and institutions and increased insurance placed on behalf of small
businesses, as well as growth in professional liability programs. In the United
Kingdom, revenue grew 6% primarily due to an increase in demand for consumer
finance services. The market for motor and household insurance services in the
United Kingdom has become increasingly competitive.
In 1993, insurance program management revenue doubled compared with 1992
primarily due to the acquisition of The Frizzell Group Limited ("Frizzell"), a
U.K. firm, in December 1992. Within North America, revenue rose 2% in 1993
reflecting increased insurance placed on behalf of associations and their
members and small businesses, and from services provided to corporations and
institutions.
Interest Income on Fiduciary Funds
Interest income on fiduciary funds decreased 1% in 1994 due to lower average
short-term interest rates, particularly in the first half of the year, on funds
held outside North America. The decline outside North America was offset, in
large part, as U.S. and Canadian yields rose steadily during the year, the first
increase experienced since 1990.
In 1993, interest income on fiduciary funds decreased 16% compared with 1992
primarily due to lower average short-term interest rates. In the United States,
short-term interest rates continued to decline, while international rates fell
significantly.
Expense
Insurance services expenses increased 5% in 1994 primarily reflecting the impact
of ongoing spending on technology and systems automation initiatives and
provisions for excess office space on certain leases. The Company is in the
process of developing several major systems aimed at providing advanced
information and service to our clients. The Company expects to continue its
commitment to enhance and develop further its information systems.
<PAGE>
Expenses for insurance services rose 9% in 1993 due to the impact of
acquisitions partially offset by the effect of the stronger U.S. dollar, which
reduced the translated value of expenses from international operations.
Excluding these items, expenses rose approximately 3% in 1993.
The results of operations for the Company's insurance services segment by
geographic area are presented below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(IN MILLIONS OF DOLLARS) 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE:
United States $1,028.1 $ 971.4 $ 944.3
Europe 709.9 685.3 556.5
Canada 86.7 83.6 84.0
Pacific Rim and Other 61.8 50.2 48.0
-------- -------- --------
$1,886.5 $1,790.5 $1,632.8
-------- -------- --------
-------- -------- --------
OPERATING INCOME:
United States $216.0 $208.3 $205.0
Europe 150.3 137.4 104.1
Canada 23.6 19.2 15.9
Pacific Rim and Other 16.2 11.8 10.4
------ ------ ------
$406.1 $376.7 $335.4
------ ------ ------
------ ------ ------
- ---------------------------------------------------------------------------
</TABLE>
CONSULTING
The Company provides advice and services to the management of organizations
throughout the world in the areas of human resources, including retirement,
health care and compensation consulting, and general management, which comprises
strategy, operations, marketing and manufacturing. It also provides
microeconomic research and analysis. One of a few large global consulting
firms, Mercer maintains a network of offices that serves clients in every major
business center of the world.
The results of operations for the Company's consulting segment are presented
below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(IN MILLIONS OF DOLLARS) 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE $933.1 $854.8 $908.2
EXPENSE 836.7 768.6 792.1
------ ------ ------
OPERATING INCOME $ 96.4 $ 86.2 $116.1
------ ------ ------
------ ------ ------
OPERATING INCOME MARGIN 10.3% 10.1% 12.8%
------ ------ ------
------ ------ ------
- ---------------------------------------------------------------------------
</TABLE>
Revenue
Consulting services revenue increased 9% in 1994. After adjusting for the net
impact of several modestly sized acquisitions in Europe, Latin America and
Australia, revenue grew 8% as demand for services in all practices increased
throughout the year. Revenue increased 22% in general management consulting in
1994 and 13% in the global compensation practice. Retirement consulting
revenue, which represented 46% of the consulting segment, grew 2% in 1994 as
higher demand in the United States, Continental Europe, Latin America and
Australia was partially offset by slight declines in the United Kingdom and
Canada. Health care consulting, representing 17% of the segment, grew 5% in
1994.
<PAGE>
Revenue for consulting services decreased 6% in 1993 compared with 1992. This
decrease partially was due to the effect of the stronger U.S. dollar and the
disposition of Clayton Environmental Consultants, a U.S.-based company, during
the second quarter of 1993 offset, in part, by several acquisitions. Excluding
these items, consulting revenue was essentially unchanged from 1992. Benefits,
compensation and related consulting revenue decreased 6% in 1993, or
approximately 1% excluding the effect of currency exchange rate fluctuations.
In North America, revenue for retirement consulting declined as a highly
competitive marketplace combined with reduced discretionary spending by clients
created a difficult operating environment. This decrease was partially offset
by increased demand for consulting in health care, flexible benefits and
compensation-related areas. Revenue for general management consulting, which is
largely project oriented, increased approximately 8% in 1993 over 1992. Demand
for management consulting, especially for re-engineering business processes,
remained strong. Microeconomic consulting was essentially the same in 1993
compared with 1992.
Expense
Consulting services expenses increased 9% in 1994 partly due to the impact of
acquisitions. Excluding the effect of acquisitions, expenses grew approximately
7% reflecting higher staff levels consistent with increased demand in general
management and United States retirement consulting as well as higher systems-
related expenses associated with initiatives to expand and increase the
efficiency of services provided in the United States.
Expenses for the consulting segment decreased 3% in 1993. Excluding the effects
of the stronger U.S. dollar and the net impact of acquisitions and dispositions,
1993 expenses increased approximately 3%. Reflecting demand, staff levels
increased in general management consulting and declined slightly in the North
American retirement practice.
The results of operations for the Company's consulting segment by geographic
area are presented below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(IN MILLIONS OF DOLLARS) 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE:
United States $586.4 $554.1 $582.3
Europe 197.3 173.7 190.8
Canada 78.4 83.3 94.5
Pacific Rim and Other 71.0 43.7 40.6
------ ------ ------
$933.1 $854.8 $908.2
------ ------ ------
------ ------ ------
OPERATING INCOME:
United States $50.2 $48.5 $70.9
Europe 30.1 24.1 27.1
Canada 11.7 11.8 15.5
Pacific Rim and Other 4.4 1.8 2.6
----- ----- ------
$96.4 $86.2 $116.1
----- ----- ------
----- ----- ------
- ---------------------------------------------------------------------------
</TABLE>
The net impact of currency exchange rate fluctuations on the consulting
segment's results of operations was not material in 1994; however, these
fluctuations can affect the results of operations in individual geographic
areas. In Europe and Australia, the translated value of revenue and operating
income in 1994 was higher than 1993 due to a weaker U.S. dollar compared with
the respective currencies in those locations. These increases were essentially
offset by the reduced translated value of revenue and operating income in Canada
resulting from a stronger U.S. dollar compared with the Canadian dollar.
<PAGE>
INVESTMENT MANAGEMENT
The Company's investment management services, which are performed principally in
the United States, are provided primarily under the "Putnam" name. The services
include investment research along with management, accounting and related
services for a group of publicly held registered investment companies (the
"Putnam Funds"). Investment management services are also provided to profit
sharing and pension funds, state retirement systems, university endowment funds,
charitable foundations and other domestic and foreign institutional accounts.
Putnam serves as transfer agent, dividend disbursing agent, registrar and
custodian for the Putnam Funds and provides one or more of such services to
several external clients. Putnam also acts as principal underwriter of the
shares of open-end Putnam Funds, selling primarily through independent
broker/dealers and financial institutions, and directly to certain large 401(k)
plans and other institutional accounts.
Revenue is derived primarily from investment management fees. These fees are
approved annually by the trustees or shareholders of the Putnam Funds and are
charged at various rates depending on the individual mutual fund and the level
of assets under management. Putnam also receives compensation for providing
certain shareholder services.
The results of operations for the Company's investment management segment are
presented below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(IN MILLIONS OF DOLLARS) 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE $615.4 $518.1 $396.0
EXPENSE 407.2 348.8 271.6
------ ------ -----
OPERATING INCOME $208.2 $169.3 $124.4
------ ------ -----
------ ------ -----
OPERATING INCOME MARGIN 33.8% 32.7% 31.4%
------ ------ -----
------ ------ -----
- ---------------------------------------------------------------------------
</TABLE>
<PAGE>
Assets under management are affected by fluctuations in bond and stock market
prices, by investments and withdrawals for current and new fund shareholders and
clients, by the development of new investment products, and by investment
performance and service to clients. Revenue levels are sensitive to all of the
factors above, but in particular, to significant changes in bond and stock
market valuations.
Putnam provides individual and institutional investors with a broad range of
equity and fixed income investment products and services designed to meet
varying investment objectives. As shown in the following table, assets held in
fixed income products declined by 7% in 1994 partially due to a decline in
market values. This decrease was more than offset by a 30% increase in assets
held in equity securities. During 1994, investors were attracted to the
potential for higher returns generated in the equity market and less toward
fixed income instruments. In 1993, both fixed income and equity assets
increased reflecting net additions to assets under management and market
appreciation.
Year-end and average assets under management are presented below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
(IN BILLIONS OF DOLLARS) 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
MUTUAL FUNDS:
Domestic Equity $26.2 $20.8 $12.8
Taxable Bond 22.8 25.0 20.0
Tax-Free Income 15.2 16.9 12.0
International Equity 3.0 1.6 .8
----- ----- -----
67.2 64.3 45.6
----- ----- -----
INSTITUTIONAL ACCOUNTS:
Fixed Income 18.8 19.3 14.8
Domestic Equity 6.7 5.9 3.8
International Equity 2.6 1.4 .5
----- ----- -----
28.1 26.6 19.1
----- ----- -----
YEAR-END ASSETS $95.3 $90.9 $64.7
----- ----- -----
----- ----- -----
AVERAGE ASSETS $93.5 $77.5 $57.5
----- ----- -----
----- ----- -----
- ---------------------------------------------------------------------------
</TABLE>
Revenue
Putnam's revenue increased 19% in 1994 reflecting continued growth in the level
of assets under management on which management fees are earned. The higher
asset level reflects the impact of institutional and mutual fund sales partially
offset by a decline in securities market valuations.
Revenue for Putnam increased 31% in 1993 reflecting strong growth in the level
of assets under management on which management fees are earned. The higher
asset level reflected increased institutional and mutual fund sales along with
higher securities market valuations.
Putnam had historically marketed front-end load funds through broker/dealers
and, more recently, through financial institutions including banks. In 1992,
Putnam commenced a marketing program that made certain mutual funds available
with a deferred sales charge. The related commissions, initially paid by Putnam
to broker/dealers for distributing the funds, are recovered through charges and
fees received over a number of years. This program gained wide acceptance and
has been expanded to essentially all of Putnam's mutual funds.
<PAGE>
Expense
Putnam's expenses rose 17% in 1994 reflecting increased compensation and
benefits expense due to staff level growth consistent with new business, higher
incentive compensation levels commensurate with strong operating performance and
normal salary progressions. The increase in other operating expenses primarily
is due to a higher volume of business and higher client service-related systems
costs.
Expenses for Putnam increased 28% in 1993. Compensation and benefits expense
increased due to normal salary progressions, growth in staff necessary to meet
the demands of new business and incentive compensation levels commensurate with
strong operating performance. Other operating expenses rose in 1993 due to the
increased volume of business and higher client service-related expenses, such as
communications and information system costs.
INTEREST
Interest income earned on corporate funds was $11.8 million in 1994 compared
with $11.9 million in 1993. Yields in North America rose steadily during the
year offset by lower interest rates in Europe. Interest expense increased to
$50.6 million in 1994 from $46.1 million in 1993 due to an increase in
commercial paper borrowings and higher average interest rates on those
borrowings. The higher level of commercial paper borrowings reflected the
funding of Putnam's prepaid dealer commissions and the Company's share
repurchase program.
Interest income earned on corporate funds decreased to $11.9 million in 1993
from $16.6 million in 1992 due to significantly lower short-term interest rates
throughout the world. Interest expense increased to $46.1 million in 1993 from
$38.3 million in 1992 due to an increase in commercial paper borrowings,
partially offset by lower interest rates on those borrowings. The higher level
of commercial paper borrowings related to the funding of acquisitions in 1992
and the funding of Putnam's prepaid dealer commissions.
INCOME TAXES
The Company's consolidated domestic and foreign tax rates were 39.5% of income
before income taxes in 1994, 40.5% in 1993 and 41.5% in 1992. The reduction in
the 1994 tax rate reflects worldwide savings attributable to tax planning
strategies. The reduction in the tax rate in 1993 reflected the resolution of
various tax issues throughout the world. The overall tax rates are higher than
the U.S. statutory rates primarily because of the impact of state and local
income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents aggregated $294.9 million at the end of
1994, a decrease of $37.1 million from the end of 1993.
<PAGE>
Operating Cash Flows
The Company generated $368.5 million of cash from operations in 1994 compared
with $238.1 million in 1993. These amounts reflect the net income earned by the
Company in those years adjusted for non-cash charges and working capital
changes. Included in the cash flow from operations are the net cash
requirements of Putnam's prepaid dealer commissions, which amounted to $111.9
million in 1994 compared with $254.3 million in 1993. The current portion of
these prepaid dealer commissions is included in other current assets and the
long-term portion is included in other assets in the Consolidated Balance
Sheets. The tax benefit associated with these prepaid dealer commissions is
recorded in deferred taxes, the long-term portion of which is included in other
liabilities in the Consolidated Balance Sheets. The Company anticipates that
internally generated funds will be sufficient to meet the Company's foreseeable
recurring cash requirements, including dividends, capital expenditures and
scheduled repayments of long-term debt.
Financing Cash Flows
Financing activities for the Company reduced cash by $189.8 million in 1994 and
by $109.1 million in 1993. Dividends paid by the Company amounted to $206.4
million in 1994 ($2.80 per share) and $198.5 million in 1993 ($2.70 per share).
The Company regularly purchases shares of its common stock to meet the
requirements of the various stock compensation and benefit programs. During
1994, the Company purchased 1.7 million shares, while 535,000 shares of common
stock were purchased in 1993.
The Company maintains credit facilities with several banks primarily to support
its commercial paper borrowings. These facilities, which expire at various
dates through May 1996, provide that the Company may borrow up to $330 million
at varying market rates of interest. The Company also maintains other credit
facilities, related to operations located outside of the United States,
aggregating $70.9 million as of December 31, 1994.
The Company has a fixed rate non-recourse mortgage note agreement due in 2009
amounting to $200 million, bearing an interest rate of 9.8%, in connection with
its 56% interest in its worldwide headquarters building. Also related to the
purchase and renovation of the building, the Company has an interest rate swap
that fixes the interest rate on $100 million of commercial paper borrowings at
approximately 9.5% until February 1999.
Frizzell, the U. K.-based insurance program management firm, has a consumer
finance operation that provides affinity group members with a variety of
services including insurance premium financing programs, personal and secured
loans, mortgage loans and credit cards. These loans are financed by the
acceptance of deposits from the affinity group members and through bank
borrowings. The borrowings are under credit facilities maintained with various
banks aggregating $206 million. Customer deposits have one- to three-year
terms. The current portion of these deposits is included in accounts payable
and accrued liabilities, and the long-term portion is included in other
liabilities in the Consolidated Balance Sheets. The profitability of this
operation is sensitive to interest rate fluctuations as changes in interest
rates can affect the margin between interest earned on assets and interest paid
on liabilities. Risk management instruments such as interest rate swaps and
forward rate agreements are utilized to protect operating margins from the
effect of interest rate fluctuations.
<PAGE>
Investing Cash Flows
The Company's capital expenditures, which amounted to $149.1 million in 1994 and
$98.8 million in 1993, have primarily related to computer equipment purchases
and the refurbishing and modernizing of office facilities.
The Company has been instrumental in developing new sources of insurance
capacity when market capacity has been limited. The Company, through MMRC,
maintains a minority ownership interest in the various entities it assisted in
organizing. These investments have been classified as securities available for
sale and, as discussed more fully in Note 11 to the consolidated financial
statements, the aggregate fair value of these holdings is included in long-term
securities in the Consolidated Balance Sheets. The Company, through Marsh &
McLennan Risk Capital Holdings, expects to continue to make strategic
investments in response to insurance and reinsurance capacity limitations and
related client needs, as appropriate.
Other
The insurance coverage for potential liability resulting from alleged errors and
omissions in the professional services provided by the Company includes elements
of both risk retention and risk transfer. The Company believes it has
adequately reserved for the self-insurance contingencies. Payments related to
the respective self-insured layers are made as legal fees are incurred and
claims are resolved and generally extend over a considerable number of years.
The amounts paid in that regard vary in relation to the severity of the claims
and the number of claims active in any particular year. The long-term portion
of this liability is included in other liabilities in the Consolidated Balance
Sheets.
The Company's policy for funding its tax qualified U.S. defined benefit
retirement plan is to contribute amounts at least sufficient to meet the funding
requirements set forth in U.S. employee benefit and tax laws. As described more
fully in Note 5 to the financial statements, the plan is currently well funded;
consequently, the Company has not been able to make a tax deductible
contribution since 1986. Because this situation is expected to continue, a 1995
cash contribution is currently not anticipated. The related long-term pension
liability is included in other liabilities in the Consolidated Balance Sheets.
The Company contributes to certain health care and life insurance benefits
provided to its retired employees. As described more fully in Note 5 to the
financial statements, the cost of these postretirement benefits for employees in
the United States is accrued during the period up to the date employees are
eligible to retire, but is funded by the Company as incurred. This
postretirement liability is included in other liabilities in the Consolidated
Balance Sheets.
Cumulative translation adjustments, a component of stockholders' equity in the
Consolidated Balance Sheets, represent the cumulative effect of translating the
financial statements of the Company's international operations from functional
currencies to U.S. dollars.
<PAGE>
MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
For the Three Years Ended December 31, 1994
(IN MILLIONS, EXCEPT PER SHARE FIGURES) 1994 l993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE $3,435.0 $3,163.4 $2,937.0
EXPENSE 2,764.7 2,570.6 2,396.0
-------- -------- --------
OPERATING INCOME 670.3 592.8 541.0
INTEREST INCOME 11.8 11.9 16.6
INTEREST EXPENSE (50.6) (46.1) (38.3)
-------- -------- --------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGES 631.5 558.6 519.3
INCOME TAXES 249.5 226.2 215.5
-------- -------- --------
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGES 382.0 332.4 303.8
CUMULATIVE EFFECT OF ACCOUNTING CHANGES
(NET OF INCOME TAX BENEFIT OF $7.2 IN
1994 AND $32.1 IN 1992) (10.5) -- (40.1)
-------- -------- --------
NET INCOME $ 371.5 $ 332.4 $ 263.7
-------- -------- --------
-------- -------- --------
PER SHARE DATA:
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES $5.19 $4.52 $4.21
CUMULATIVE EFFECT OF ACCOUNTING CHANGES (.14) -- (.56)
---- ------ -----
NET INCOME $5.05 $4.52 $3.65
----- ----- -----
----- ----- -----
AVERAGE NUMBER OF SHARES OUTSTANDING 73.6 73.5 72.2
---- ---- ----
---- ---- ----
- ---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
December 31, 1994 and 1993
(IN MILLIONS OF DOLLARS) 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (including interest-bearing
amounts of $265.6 in 1994 and $315.7 in 1993) $ 294.9 $ 332.0
-------- --------
Receivables --
Commissions and fees 692.3 617.0
Advanced premiums and claims 78.0 80.7
Consumer finance and other 229.6 198.2
-------- --------
999.9 895.9
Less - allowance for doubtful accounts (44.9) (42.9)
-------- --------
Net receivables 955.0 853.0
-------- --------
Other current assets 196.1 127.4
-------- --------
TOTAL CURRENT ASSETS 1,446.0 1,312.4
CONSUMER FINANCE RECEIVABLES, NET 150.4 130.8
LONG-TERM SECURITIES 282.8 363.6
FIXED ASSETS, NET 740.3 688.1
INTANGIBLE ASSETS 701.0 660.1
OTHER ASSETS 510.1 391.6
-------- --------
$3,830.6 $3,546.6
-------- --------
-------- --------
- ---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
1994 1993
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $ 403.0 $ 273.8
Accrued compensation and employee benefits 220.8 173.5
Accounts payable and accrued liabilities 496.7 444.4
Accrued income taxes 218.7 237.1
Dividends payable 53.1 49.9
-------- ---------
TOTAL CURRENT LIABILITIES 1,392.3 1,178.7
-------- ---------
FIDUCIARY LIABILITIES 1,652.1 1,623.6
LESS--CASH AND INVESTMENTS HELD IN A
FIDUCIARY CAPACITY (1,652.1) (1,623.6)
-------- ---------
-- --
-------- ---------
LONG-TERM DEBT 409.4 409.8
-------- ---------
OTHER LIABILITIES 568.3 592.8
-------- ---------
COMMITMENTS AND CONTINGENCIES -- --
-------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, $1 par value, authorized
6,000,000 shares, none issued -- --
Common stock, $1 par value, authorized
200,000,000 shares, issued
76,794,531 shares in 1994 and 1993 76.8 76.8
Additional paid-in capital 166.1 173.5
Retained earnings 1,507.7 1,345.7
Unrealized securities holding gains, net of income taxes 91.6 138.6
Cumulative translation adjustments (105.4) (157.5)
-------- ---------
1,736.8 1,577.1
Less - treasury shares, at cost, 3,594,342 shares in 1994
and 2,862,926 shares in 1993 (276.2) (211.8)
-------- ---------
TOTAL STOCKHOLDERS' EQUITY 1,460.6 1,365.3
-------- ---------
$3,830.6 $3,546.6
-------- ---------
-------- ---------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
For the Three Years Ended December 31, 1994
(IN MILLIONS OF DOLLARS) 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING CASH FLOWS:
Net income $371.5 $332.4 $263.7
Depreciation and amortization 120.6 119.9 112.0
Deferred income taxes 48.0 94.2 (11.1)
Other liabilities (31.4) 3.0 27.9
Cumulative effect of accounting changes 10.5 -- 40.1
Prepaid dealer commissions (111.9) (254.3) (77.5)
Other, net (14.2) (11.5) (6.8)
Net changes in operating working capital
other than cash and cash equivalents -
Receivables (77.7) (38.4) 9.8
Other current assets (39.2) (8.4) (5.9)
Accrued compensation and employee benefits 46.9 17.9 (14.8)
Accounts payable and accrued liabilities 53.9 (16.2) 4.4
Accrued income taxes (17.5) 4.3 33.7
Effect of exchange rate changes 9.0 (4.8) (30.4)
------ ------ ------
NET CASH GENERATED FROM OPERATIONS 368.5 238.1 345.1
------ ------ ------
FINANCING CASH FLOWS:
Net change in debt 121.0 63.8 207.0
Purchase of treasury shares (142.8) (49.5) (28.2)
Issuance of common stock 68.6 75.6 96.1
Dividends paid (206.4) (198.5) (191.1)
Other, net (30.2) (.5) --
------ ------ ------
NET CASH PROVIDED BY (USED FOR) FINANCING
ACTIVITIES (189.8) (109.1) 83.8
------ ------ ------
INVESTING CASH FLOWS:
Additions to fixed assets (149.1) (98.8) (82.8)
Acquisitions (18.4) (7.8) (260.4)
Other, net (55.9) (51.7) (48.0)
------ ------ ------
NET CASH USED FOR INVESTING ACTIVITIES (223.4) (158.3) (391.2)
------ ------ ------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS 7.6 (9.8) (15.6)
------ ------ ------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (37.1) (39.1) 22.1
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 332.0 371.1 349.0
------ ------ ------
CASH AND CASH EQUIVALENTS AT END OF YEAR $294.9 $332.0 $371.1
------ ------ ------
------ ------ ------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
For the Three Years Ended December 31, 1994
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE FIGURES) 1994 l993 1992
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
Balance, beginning and end of year $ 76.8 $ 76.8 $ 76.8
- -----------------------------------------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year $ 173.5 $ 170.9 $ 175.8
Issuance of shares for acquisitions -- 1.3 --
Exercise of stock options and related tax benefits (1.9) (1.8) (6.3)
Issuance of shares under compensation plans
and related tax benefits .8 2.6 1.7
Issuance of shares under employee stock purchase
plans and related tax benefits (6.3) .5 (.3)
- -----------------------------------------------------------------------------------------------------------------------------
Balance, end of year $ 166.1 $ 173.5 $ 170.9
- -----------------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance, beginning of year $1,345.7 $1,212.3 $1,142.4
Net income 371.5 332.4 263.7
Cash dividends declared-(per share amounts:
$2.85 in 1994, $2.70 in 1993 and $2.675 in 1992) (209.5) (199.0) (193.8)
- -----------------------------------------------------------------------------------------------------------------------------
Balance, end of year $1,507.7 $1,345.7 $1,212.3
- -----------------------------------------------------------------------------------------------------------------------------
UNREALIZED SECURITIES HOLDING GAINS,
NET OF INCOME TAXES
Balance, beginning of year $ 138.6 $ -- $ --
Realized gains, net of income taxes (27.6) -- --
Unrealized securities holding
gains (losses), net of income taxes (19.4) 138.6 --
- -----------------------------------------------------------------------------------------------------------------------------
Balance, end of year $ 91.6 $ 138.6 $ --
- -----------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance, beginning of year $ (157.5) $ (106.7) $ (18.0)
Translation adjustments 52.1 (50.8) (88.7)
- -----------------------------------------------------------------------------------------------------------------------------
Balance, end of year $ (105.4) $ (157.5) $ (106.7)
- -----------------------------------------------------------------------------------------------------------------------------
TREASURY SHARES
Balance, beginning of year $ (211.8) $ (250.4) $ (342.0)
Purchase of treasury shares (142.8) (49.5) (28.2)
Issuance of shares for acquisitions -- 7.7 --
Exercise of stock options 11.6 30.7 68.9
Issuance of shares under compensation plans 15.8 6.4 6.9
Issuance of shares under employee stock purchase
plans 51.0 43.3 44.0
- -----------------------------------------------------------------------------------------------------------------------------
Balance, end of year $ (276.2) $ (211.8) $ (250.4)
- -----------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity $1,460.6 $1,365.3 $1,102.9
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial statements
include the accounts of Marsh & McLennan Companies, Inc. and all its
subsidiaries (the "Company"). Various subsidiaries and affiliates have
transactions with each other in the ordinary course of business. All
significant intercompany accounts and transactions have been eliminated.
FIDUCIARY ASSETS AND LIABILITIES: In its capacity as an insurance broker or
agent, the Company collects premiums from insureds and, after deducting its
commissions, remits the premiums to the respective insurance underwriters; the
Company also collects claims or refunds from underwriters on behalf of insureds.
Unremitted insurance premiums and claims are held in a fiduciary capacity.
Interest income on these fiduciary funds, included in revenue, amounted to $78.7
million in 1994, $79.6 million in 1993 and $94.4 million in 1992.
Net uncollected premiums and claims and the related payables, amounting to
$2.8 billion at December 31, 1994 and $2.7 billion at December 31, 1993, are not
included in the accompanying Consolidated Balance Sheets.
In certain instances, the Company advances premiums, refunds or claims to
insurance underwriters or insureds prior to collection. These advances are made
from corporate funds and are reflected in the accompanying Consolidated Balance
Sheets as receivables.
REVENUE: Revenue includes insurance commissions, fees for services rendered,
compensation for services provided in connection with the formation and
capitalization of various insurers and reinsurers, including gains from sales of
interests in such entities, commissions on the sale of mutual fund shares and
interest income on fiduciary funds. Insurance commissions generally are
recorded as of the effective date of the applicable policies or, in certain
cases (primarily in the Company's reinsurance and London market operations), as
of the effective date or billing date, whichever is later. Fees for services
rendered are recorded as earned. Sales of mutual fund shares are recorded on a
settlement date basis and commissions thereon are recorded on a trade date
basis, in accordance with industry practice.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents primarily consist of
certificates of deposit and time deposits, generally with original maturities of
three months or less. The Company maintains a policy providing for the
diversification of cash and cash equivalents to limit the concentration of
credit risk exposure.
FIXED ASSETS, DEPRECIATION AND AMORTIZATION: Fixed assets are stated at cost
less accumulated depreciation and amortization. Expenditures for improvements
are capitalized. Upon sale or retirement, the cost and related accumulated
depreciation and amortization are removed from the accounts and the resulting
gain or loss, if any, is reflected in income. Expenditures for maintenance and
repairs are charged to operations as incurred.
Depreciation of buildings, building improvements, furniture and equipment is
provided on a straight-line basis over the estimated useful lives of these
assets. Leasehold improvements are amortized on a straight-line basis over the
periods covered by the applicable leases or the estimated useful life of the
improvement, whichever is less.
<PAGE>
The components of fixed assets at December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
December 31, 1994 and 1993
(IN MILLIONS OF DOLLARS) 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C>
Land and buildings $ 388.7 $ 389.2
Furniture and equipment 640.6 604.1
Leasehold and building improvements 285.5 233.6
-------- --------
1,314.8 1,226.9
Less - accumulated depreciation and amortization (574.5) (538.8)
-------- --------
$ 740.3 $ 688.1
-------- --------
-------- --------
- ---------------------------------------------------------------------------
</TABLE>
INTANGIBLE ASSETS: Acquisition costs in excess of the fair value of net assets
acquired are amortized on a straight-line basis over periods up to 40 years.
Other intangible assets are amortized on a straight-line basis over their
estimated lives.
PREPAID DEALER COMMISSIONS: Certain mutual funds marketed by the Company's
investment management segment are made available with a deferred sales charge.
The related commissions, initially paid by the Company to broker/dealers for
distributing the funds, are recovered through charges and fees received over a
number of years. The current portion of these prepaid dealer commissions,
amounting to $99.8 million and $67.4 million at December 31, 1994 and 1993,
respectively, is included in other current assets in the Consolidated Balance
Sheets. The long-term portion amounting to $356.6 million and $277.1 million at
December 31, 1994 and 1993, respectively, is included in other assets in the
Consolidated Balance Sheets.
INCOME TAXES: Income taxes are provided in the year transactions affect net
income, regardless of when those transactions are reported for tax purposes.
U.S. Federal income taxes are provided on unremitted foreign earnings except
those that are considered permanently reinvested, which at December 31, 1994
amounted to approximately $285 million. However, if these earnings were not
considered permanently reinvested, under current law, foreign tax credits would
effectively offset any incremental tax liability which otherwise might be due
upon distribution.
RISK MANAGEMENT INSTRUMENTS: Net amounts received or paid under interest rate
swaps and forward rate agreements are included in the Consolidated Statements of
Income as incurred.
PER SHARE DATA: Per share data is computed using the average number of shares of
the Company's common stock outstanding. The dilutive effect of common stock
equivalents is not material.
CUMULATIVE EFFECT OF ACCOUNTING CHANGES: As discussed in Note 5, effective
January 1, 1994 the Company changed its method of accounting for postemployment
benefits and, as discussed in Notes 4 and 5, effective January 1, 1992 the
Company changed its method of accounting for income taxes and postretirement
benefits.
RECLASSIFICATIONS: Certain reclassifications have been made to the prior years'
financial statements to conform with the current year presentation.
<PAGE>
2. SUPPLEMENTAL DISCLOSURE TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS
The following schedule provides additional information concerning acquisitions:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
For the Three Years Ended December 31, 1994
(IN MILLIONS OF DOLLARS) 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Purchase acquisitions:
Assets acquired, excluding cash $26.5 $35.7 $578.3
Liabilities assumed (3.8) (10.6) (317.9)
Issuance of debt and other obligations (4.3) (8.3) --
Shares issued -- (9.0) --
----- ----- ------
Net cash outflow for acquisitions $18.4 $ 7.8 $260.4
----- ----- ------
----- ----- ------
- ---------------------------------------------------------------------------
</TABLE>
The following schedule provides details of changes in the Company's short-term
and long-term debt. Although a portion of the Company's commercial paper
borrowings is classified as long-term debt in the Consolidated Balance Sheets,
borrowings and repayments of commercial paper are shown below based on original
maturities.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
For the Three Years Ended December 31, 1994
(IN MILLIONS OF DOLLARS) 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Net change in debt with
maturities of three
months or less $380.4 $(16.0) $ 89.7
Borrowings with maturities
over three months 51.3 535.9 326.1
Repayments of debt with maturities
over three months (310.7) (456.1) (208.8)
------ ------ ------
Net change in debt $121.0 $ 63.8 $207.0
------ ------ ------
------ ------ ------
- ---------------------------------------------------------------------------
</TABLE>
Interest paid during 1994, 1993 and 1992 was $48.1 million, $42.1 million and
$41.3 million, respectively.
Income taxes paid during 1994, 1993 and 1992 were $222.5 million, $122.4 million
and $179.7 million, respectively.
<PAGE>
3. ACQUISITIONS
During 1994, the Company acquired or increased its interest in several insurance
services and consulting businesses for a total cost of $22.7 million consisting
of cash and future obligations in transactions accounted for as purchases. The
cost of these acquisitions exceeded the fair value of net assets acquired by
$21.1 million.
During 1993, the Company acquired several insurance broking and consulting
businesses for a total cost of $26.7 million in transactions accounted for as
purchases. The purchase price of these acquisitions consisted of $17.7 million
in cash and future obligations and 104,556 shares of the Company's common stock
having a fair market value of $9.0 million. The total cost of these
acquisitions exceeded the fair value of net assets acquired by $24.6 million.
During 1992, the Company acquired or increased its interest in several insurance
services and consulting businesses for a total cost of $305.0 million in
transactions accounted for as purchases. The cost of these acquisitions
exceeded the fair value of net assets acquired by $299.3 million.
The effect of these acquisitions was not material to the Company's results of
operations.
<PAGE>
4. INCOME TAXES
Income before income taxes shown below is based on the geographic location to
which such income is attributable. Although income taxes related to such income
may be assessed in more than one jurisdiction, the income tax provision
corresponds to the geographic location of the income.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
For the Three Years Ended December 31, 1994
(IN MILLIONS OF DOLLARS) 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Income before income taxes and
cumulative effect of accounting changes:
U.S. $377.5 $340.6 $314.9
Other 254.0 218.0 204.4
------ ------ ------
$631.5 $558.6 $519.3
------ ------ ------
------ ------ ------
Income taxes:
Current-
U.S. Federal $ 99.9 $ 29.9 $ 77.7
Other national governments 71.8 74.7 70.0
U.S. state and local 29.8 27.4 40.6
------ ------ ------
201.5 132.0 188.3
------ ------ ------
Deferred-
U.S. Federal 15.5 74.1 21.7
Other national governments 18.9 6.3 7.6
U.S. state and local 13.6 13.8 (2.1)
------ ------ ------
48.0 94.2 27.2
------ ------ ------
Total income taxes $249.5 $226.2 $215.5
------ ------ ------
------ ------ ------
- ---------------------------------------------------------------------------
</TABLE>
<PAGE>
The significant components of deferred income tax assets and liabilities and
their balance sheet classifications are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
December 31, 1994 and 1993
(IN MILLIONS OF DOLLARS) 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C>
DEFERRED TAX ASSETS:
Accrued expenses not currently deductible $171.5 $142.1
Accrued retirement benefits 75.9 76.8
Differences related to non-U.S. operations 52.8 62.6
Other 15.7 18.8
------ ------
315.9 300.3
Valuation allowance (24.7) (23.6)
------ ------
$291.2 $276.7
------ ------
------ ------
DEFERRED TAX LIABILITIES:
Depreciation and amortization $ 33.3 $ 31.3
Prepaid dealer commissions 207.5 157.8
Safe harbor leasing 28.4 33.5
Unbilled revenue 23.0 21.6
Unrealized securities holding gains 49.1 75.2
Differences related to non-U.S. operations 65.7 57.6
Other 20.1 20.9
------ ------
$427.1 $397.9
------ ------
------ ------
BALANCE SHEET CLASSIFICATIONS:
Other current assets $ 5.3 $ 8.4
Accrued income taxes 27.4 26.6
Other liabilities 113.8 103.0
- ---------------------------------------------------------------------------
</TABLE>
The valuation allowance relates to certain foreign deferred income tax assets.
A reconciliation from the U.S. Federal statutory income tax rate to the
Company's effective income tax rate is as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
For the Three Years Ended
December 31, 1994 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Federal statutory rate 35.0% 35.0% 34.0%
U.S. state and local income taxes-net of U.S.
Federal income tax benefit 4.5 4.8 4.9
Differences related to non-U.S. operations (.3) .9 1.8
Other .3 (.2) .8
---- ---- ----
Effective tax rate 39.5% 40.5% 41.5%
---- ---- ----
---- ---- ----
</TABLE>
The impact of the increase in the U.S. Federal statutory rate in 1993 on the
Company's deferred tax balances was not material.
<PAGE>
Effective January 1, 1992, the Company adopted SFAS No. 109, "Accounting for
Income Taxes," which requires deferred income tax balances to be determined
using current tax rates; therefore, the impact of a change in tax rates on
deferred tax balances is recognized in income in the period that the change is
enacted. The cumulative effect of adopting this standard increased net income
in the first quarter of 1992 by $5.0 million ($.07 per share).
Taxing authorities periodically challenge positions taken by the Company on its
tax returns. On the basis of present information and advice received from
counsel, it is the opinion of the Company's management that any assessments
resulting from current tax audits will not have a material adverse effect on the
Company's consolidated results of operations or its consolidated financial
position.
<PAGE>
5. RETIREMENT BENEFITS
The Company maintains pension or profit sharing plans for substantially all
employees.
DEFINED BENEFIT PLANS - U.S.: The Marsh & McLennan Retirement Plan provides
benefits to eligible U.S. employees. The benefits under this plan are based on
the participants' length of service and compensation, subject to the Employee
Retirement Income Security Act of 1974 and Internal Revenue Service (IRS)
limitations. The funding policy for this plan is to contribute amounts at least
sufficient to meet the requirements set forth in U.S. employee benefit and tax
laws. The plan assets are invested primarily in listed stocks, corporate bonds
and U.S. Government Securities.
The Marsh & McLennan Benefit Equalization Plan provides those retirement
benefits to which U.S. employees would otherwise be entitled under the Marsh &
McLennan Retirement Plan if not for IRS limitations.
The Marsh & McLennan Supplemental Retirement Plan provides a minimum level
of retirement benefits to employees based on the participants' length of service
and compensation. The plan provides benefits to participants to the extent
that the minimum benefit exceeds the aggregate retirement benefit provided by
the Marsh & McLennan Retirement Plan, the Marsh & McLennan Benefit Equalization
Plan and Social Security.
The Company has a program of funding the vested benefits under the Benefit
Equalization and Supplemental Retirement Plans by purchasing annuity contracts
periodically.
The components of pension cost for the U.S. defined benefit plans are as
follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
For the Three Years Ended December 31, 1994
(IN MILLIONS OF DOLLARS) 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $25.7 $23.3 $21.8
Interest cost on projected
benefit obligations 50.7 46.9 43.2
Expected return on plan assets (70.1) (59.2) (53.6)
Net amortization (2.0) (4.6) (5.3)
----- ----- -----
$ 4.3 $ 6.4 $ 6.1
----- ----- -----
----- ----- -----
- ---------------------------------------------------------------------------
</TABLE>
The actual returns on plan assets were $4.3 million, $95.1 million and $40.6
million for 1994, 1993 and 1992, respectively. These returns reflect the
general securities market conditions experienced in the respective years.
<PAGE>
The funded status of the U.S. defined benefit plans and the actuarial
assumptions used to measure the projected benefit obligation are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
December 31, 1994 and 1993
(IN MILLIONS OF DOLLARS) 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of accumulated
benefit obligation:
Vested $530.8 $558.9
Nonvested 18.2 22.9
------ ------
$549.0 $581.8
------ ------
------ ------
Projected benefit obligation $655.9 $671.3
Fair value of plan assets 695.2 712.6
------ ------
39.3 41.3
Unrecognized net gain from past
experience different from that assumed (90.0) (93.3)
Unrecognized prior service cost 34.1 38.1
Unrecognized SFAS No. 87 transition amount (46.1) (50.6)
------ ------
Accrued pension liability $(62.7) $(64.5)
------ ------
------ ------
Actuarial assumptions:
Discount rate 8.75% 7.75%
Weighted average rate
of compensation increase 6% 5%
Expected long-term rate of return
on plan assets 10% 10%
- ---------------------------------------------------------------------------
</TABLE>
In 1994, the discount rate used to value the liabilities of the U.S. defined
benefit plans was increased to reflect current interest rates of high quality
fixed income debt securities. Assumptions, including projected compensation
increases and cost of living adjustments for retirees, were also revised to
reflect current levels of inflation. The decrease in the accumulated benefit
obligation and the projected benefit obligation reflects, in part, the net
impact of the change in these assumptions.
<PAGE>
DEFINED BENEFIT PLANS - NON-U.S.: The Company maintains various plans that
provide benefits to eligible non-U.S. employees. The benefits under these plans
are based on the participants' length of service and compensation. The funding
policy for these plans is to contribute amounts at least sufficient to meet the
requirements under foreign government regulations. The plans' assets are
primarily invested in listed stocks, bonds and time deposits.
The components of pension expense (credits) for the significant non-U.S.
defined benefit plans are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
For the Three Years Ended December 31, 1994
(IN MILLIONS OF DOLLARS) 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $32.3 $29.8 $27.9
Interest cost on projected benefit obligations 45.1 46.7 40.4
Expected return on plan assets (68.4) (67.1) (62.0)
Net amortization (6.9) (6.7) (8.9)
----- ----- -----
$ 2.1 $ 2.7 $(2.6)
----- ----- -----
----- ----- -----
- ---------------------------------------------------------------------------
</TABLE>
The actual returns on plan assets were ($31.7) million, $160.4 million and $89.5
million for 1994, 1993 and 1992, respectively. These returns reflect the
general securities market conditions experienced in the respective years and the
impact of currency exchange rate fluctuations.
The funded status of the significant non-U.S. defined benefit plans and the
weighted average actuarial assumptions used to measure the projected benefit
obligation are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
December 31, 1994 and 1993
(IN MILLIONS OF DOLLARS) 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of accumulated
benefit obligation:
Vested $542.4 $424.5
Nonvested 6.3 4.0
------ ------
$548.7 $428.5
------ ------
------ ------
Projected benefit obligation $643.5 $565.6
Fair value of plan assets 763.0 757.8
------ ------
119.5 192.2
Unrecognized net (gain) loss from past experience
different from that assumed 9.7 (74.1)
Unrecognized prior service benefit (4.4) ( 4.8)
Unrecognized SFAS No. 87 transition amount (34.8) (40.0)
------ ------
Prepaid pension cost $ 90.0 $ 73.3
------ ------
------ ------
Actuarial assumptions:
Discount rate 8.9% 8.0%
Weighted average rate of compensation increase 6.9% 6.1%
Expected long-term rate of return
on plan assets 10.3% 9.7%
- ---------------------------------------------------------------------------
</TABLE>
<PAGE>
In 1994, the discount rates used to value the liabilities of the non-U.S. plans
were increased to reflect current worldwide interest rates. Assumptions,
including projected compensation increases and cost of living adjustments for
retirees, were also revised to reflect current levels of inflation. The
increase in the accumulated benefit obligation and the projected benefit
obligation reflect, in part, the impact of the change in these assumptions and
the impact of foreign exchange rate fluctuations.
POSTRETIREMENT BENEFITS: The Company contributes to the cost of certain health
care and life insurance benefits provided to its retired employees. The cost to
the Company of these postretirement benefits is principally associated with
employees in the United States, as retired employees outside the United States
receive these benefits, in large part, from governmental health care programs.
United States employees become eligible for these benefits if they attain
retirement age while working for the Company, subject in certain instances to
minimum service requirements. The amount of the Company's contribution for
active employees who were not eligible to retire at January 1, 1991 is based, in
part, on their length of service with the Company. The cost of these
postretirement benefits is accrued during the period up to the date employees
are eligible to retire, but is funded by the Company as incurred.
The components of the United States postretirement benefits costs are as
follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
For the Three Years Ended December 31, 1994
(IN MILLIONS OF DOLLARS) 1994 1993 1992
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $1.6 $1.7 $1.4
Interest cost on accumulated postretirement benefits 6.2 7.0 6.7
---- ---- ----
$7.8 $8.7 $8.1
---- ---- ----
---- ---- ----
- ---------------------------------------------------------------------------
</TABLE>
<PAGE>
The accumulated postretirement benefit obligation at December 31, 1994 and 1993
is as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
December 31, 1994 and 1993
(IN MILLIONS OF DOLLARS) 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C>
Retirees $51.4 $49.9
Fully eligible active plan participants 12.9 20.8
Other active plan participants 14.4 17.9
----- -----
78.7 88.6
Unrecognized net gain from past experience different
from that assumed 14.9 --
----- -----
Accrued postretirement liability $93.6 $88.6
----- -----
----- -----
- ---------------------------------------------------------------------------
</TABLE>
The discount rates used in determining the accumulated postretirement benefit
obligations were 8 3/4% and 7 3/4% for 1994 and 1993, respectively. The
assumed health care cost trend rate was approximately 12% in 1994, gradually
declining to 4% in the year 2040. A 1% increase in the assumed health care cost
trend rates for each year would increase the accumulated postretirement benefit
obligation as of December 31, 1994 by $8.9 million and the postretirement
benefit expense for the year then ended by $1.3 million.
In 1994, the discount rate used to value the accumulated postretirement benefit
obligation was increased to reflect current interest rates of high quality fixed
income debt securities. The decrease in the accumulated postretirement benefit
obligation reflects the impact of the change in the discount rate.
Effective January 1, 1992, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." The cumulative
effect of the change in accounting recorded in 1992 amounted to $45.1 million
($.63 per share). This noncash charge represents the accumulated postretirement
benefit obligation at January 1, 1992 ($77.2 million), partially reduced by a
deferred income tax benefit ($32.1 million).
DEFINED CONTRIBUTION PLANS: The Company maintains certain defined contribution
plans for its employees, including the Marsh & McLennan Companies Stock
Investment Plan ("SIP") and the Putnam Investments, Inc. Profit Sharing
Retirement Plan (the "Putnam Plan"). Under these plans, eligible employees may
contribute a percentage of their base salary, subject to certain limitations.
For the SIP, the Company matches a portion of the employees' contributions,
while under the Putnam Plan the contributions are at the discretion of the
Company subject to IRS limitations. The cost of these defined contribution
plans was $32.6 million, $31.3 million and $30.9 million for 1994, 1993 and
1992, respectively.
POSTEMPLOYMENT BENEFITS: Effective January 1, 1994, the Company adopted SFAS
No. 112, "Employers' Accounting for Postemployment Benefits." The cumulative
effect of the change in accounting recorded in 1994 amounted to $10.5 million
($.14 per share). This noncash charge represents the accumulated postemployment
benefit obligation at January 1, 1994 ($17.7 million), partially reduced by a
deferred income tax benefit ($7.2 million).
<PAGE>
6. STOCK BENEFIT PLANS
INCENTIVE AND STOCK AWARD PLAN: In 1992, the Company's stockholders approved
the Marsh & McLennan Companies, Inc. 1992 Incentive and Stock Award Plan (the
"1992 Plan") under which awards may be granted to employees of the Company. The
types of awards permitted include stock options, restricted stock, restricted
stock units payable in Company common stock or cash, and other stock-based
awards. The Compensation Committee of the Board of Directors (the "Compensation
Committee") determines, in its discretion, which eligible employees will receive
awards, the types of awards to be received and the terms and conditions thereof.
The plan contains provisions which, in the event of a change in control of the
Company, may accelerate the vesting of the awards. Awards relating to not more
than 8,000,000 shares of common stock, plus such number of shares remaining
unused under the 1988 Incentive and Stock Award Plan (the "1988 Plan"), which
was terminated as to future awards and superseded by the 1992 Plan, may be made
over the five-year life of the 1992 Plan. There were 4,472,855 and 5,076,033
shares available for awards at December 31, 1994 and 1993, respectively.
STOCK OPTIONS: Options granted under the 1992 Plan may be designated as
incentive stock options or as non-qualified stock options. The Compensation
Committee shall determine the terms and conditions of the option, including the
time or times at which an option may be exercised, the methods by which such
exercise price may be paid and the form of such payment. Except under certain
limited circumstances, no stock option may be granted with an exercise price of
less than the fair market value of the stock at the time the stock option is
granted.
<PAGE>
Stock option transactions under the 1992 Plan and prior plans are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Exercise Price
Shares Per Share
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Balance at January 1, 1992
(3,552,821 exercisable) 5,877,471 $22 25/32 - 79 5/16
Granted 556,200 $73 7/8 - 92 1/16
Exercised (1,219,136) $22 25/32 - 79 5/16
Forfeited (189,250) $55 9/16 - 79 5/16
---------
Balance at December 31, 1992
(3,508,485 exercisable) 5,025,285 $22 25/32 - 92 1/16
Granted 3,550,970 $81 3/4 - 93 5/8
Exercised (494,337) $22 25/32 - 79 5/16
Forfeited (159,670) $55 9/16 - 93 5/8
---------
Balance at December 31, 1993
(4,206,018 exercisable) 7,922,248 $22 25/32 - 93 5/8
Granted 609,600 $74 15/16 - 88
Exercised (186,297) $22 25/32 - 79 5/16
Forfeited (224,410) $49 3/8 - 93 5/8
---------
Balance at December 31, 1994
(5,093,481 exercisable) 8,121,141 $33 3/16 - 93 5/8
---------
---------
</TABLE>
RESTRICTED STOCK: Under the 1992 Plan, restricted shares of the Company's
common stock may be awarded and shall be subject to such restrictions on
transferability and other restrictions, if any, as the Compensation Committee
may impose. The Compensation Committee may also determine when and under what
circumstances the restrictions may lapse and whether the participant shall have
the rights of a stockholder, including, without limitation, the right to vote
and receive dividends. Unless the Compensation Committee determines otherwise,
restricted stock that is still subject to restrictions shall be forfeited upon
termination of employment.
There were 59,900 and 68,500 restricted shares granted in 1994 and 1993,
respectively, under the 1992 Plan and 76,300 restricted shares granted in 1992
under the 1988 Plan. The fair market value of these shares at the date of
grant, $4.9 million in 1994, $6.4 million in 1993 and $5.6 million in 1992, was
charged to expense. Shares that have been granted become unrestricted at the
earlier of January 1 of the eleventh year following the grant or the recipient's
normal retirement date or, for shares granted after 1987, the recipient's actual
retirement date if later than the normal retirement date.
RESTRICTED STOCK UNITS: Restricted stock units, payable in stock or cash, may
be awarded under the 1992 Plan. The Compensation Committee shall determine the
restrictions on such units, when the restrictions shall lapse, when the shares
of stock shall vest and be paid, and upon what terms the units shall be
forfeited.
<PAGE>
There were 33,818 and 8,300 restricted stock units awarded during 1994 and 1993,
respectively, under the 1992 Plan and 39,330 incentive units, which have the
same characteristics as restricted stock units under the 1992 Plan, awarded
under the 1988 Plan during 1992.
STOCK PURCHASE PLAN: In May 1994, the Company's stockholders approved an
employee stock purchase plan (the "1994 Plan") to replace the 1990 Employee
Stock Purchase Plan which terminated on September 30, 1994 following its fourth
annual offering. Under these plans, eligible employees may purchase shares of
the Company's common stock, subject to certain limitations, at prices not less
than 85% of the lesser of the fair market value of the stock at the beginning or
end of any offering period. Under the 1994 Plan, no more than 4,000,000 shares
of the Company's common stock plus the remaining unissued shares in the 1990
Plan may be sold. Employees purchased 649,000, 574,000 and 625,000 shares in
1994, 1993 and 1992, respectively. At December 31, 1994, 4,431,000 shares are
available for issuance under the 1994 Plan.
<PAGE>
7. LONG-TERM OBLIGATIONS
The Company leases office facilities, equipment and automobiles under
noncancelable operating leases. These leases expire on varying dates; in some
instances contain renewal and expansion options; do not restrict the payment of
dividends or the incurrence of debt or additional lease obligations; and contain
no significant purchase options. In addition to the base rental costs,
occupancy lease agreements generally provide for rent escalations resulting from
increased assessments for real estate taxes and other charges. Approximately
95% of the Company's lease obligations are for the use of office space.
The accompanying Consolidated Statements of Income include net rental costs
of $206.7 million, $198.2 million and $192.7 million for 1994, 1993 and 1992,
respectively, after deducting rentals from subleases ($8.8 million in 1994, $7.9
million in 1993 and $8.5 million in 1992).
At December 31, 1994, the aggregate future minimum rental commitments under
all noncancelable operating lease agreements are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Gross Rentals Net
For the Years Ending December 31, Rental from Rental
(IN MILLIONS OF DOLLARS) Commitments Subleases Commitments
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
1995 $ 167.3 $ 8.4 $ 158.9
1996 150.5 7.8 142.7
1997 128.7 5.3 123.4
1998 104.1 3.6 100.5
1999 89.5 3.1 86.4
Subsequent years 517.4 15.1 502.3
-------- ----- --------
$1,157.5 $43.3 $1,114.2
-------- ----- --------
-------- ----- --------
- ---------------------------------------------------------------------------
</TABLE>
During 1994, the Company entered into agreements with various service companies
to outsource certain information systems activities and responsibilities which
previously were performed by the Company. Under these agreements, the Company
is required to pay minimum annual service charges. Additional fees may be
payable depending upon the volume of transactions processed with all future
payments subject to increases for inflation. At December 31, 1994, the
aggregate fixed future minimum commitments under these agreements are as
follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
Future
For the Years Ending December 31, Minimum
(IN MILLIONS OF DOLLARS) Commitments
- ---------------------------------------------------------------------------
<S> <C>
1995 $ 32.0
1996 28.6
1997 25.8
1998 24.7
1999 13.5
Subsequent years 38.5
------
$163.1
------
------
- ---------------------------------------------------------------------------
</TABLE>
<PAGE>
8. CONSUMER FINANCE OPERATION
The Company's insurance program management operation in the United Kingdom
includes Frizzell Bank Limited ("FBL"), an authorized institution under the
United Kingdom Banking Act 1987. FBL provides affinity group members with a
variety of financial services including insurance premium financing programs,
unsecured and secured loans and credit cards. These loans are financed by the
acceptance of deposits from the affinity group members and through bank
borrowings.
Consumer finance receivables, which include both fixed and variable rate loans,
bear interest at prevailing market rates. A summary of consumer finance
receivables at December 31, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
December 31, 1994 and 1993
(IN MILLIONS OF DOLLARS) 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C>
Receivable within one year $145.5 $125.4
Receivable after one year 157.6 138.8
------ ------
303.1 264.2
Less - allowance for doubtful accounts (12.0) (12.2)
------ ------
$291.1 $252.0
------ ------
------ ------
- ---------------------------------------------------------------------------
</TABLE>
Customer deposits, which have one to three year terms at fixed interest rates,
amounted to $94.1 million and $124.2 million at December 31, 1994 and 1993,
respectively. The long-term portion of these customer deposits amounted to
$28.6 million and $55.4 million at December 31, 1994 and 1993, respectively, and
are included in other liabilities in the Consolidated Balance Sheets. The
current portion of customer deposits is included in accounts payable and accrued
liabilities.
FBL's results of operations can be affected by interest rate fluctuations as
changes in interest rates could impact the margin between interest earned on
assets (consumer finance receivables) and interest paid on liabilities
(borrowings and customer deposits). Risk management instruments such as
interest rate swaps and forward rate agreements are utilized to protect margins
from the effects of these fluctuations. These risk management instruments help
maintain the balanced relationship between fixed rate assets and fixed rate
liabilities within limits set by Company policy. If fixed rate liabilities are
greater than fixed rate assets, a risk management instrument generally is
utilized to transform the excess fixed rate liability into a variable rate
liability ("variable rate liabilities"). This strategy protects the margin
between interest earned on variable rate assets and interest paid on fixed rate
liabilities. Conversely, when fixed rate assets are greater than fixed rate
liabilities, a risk management instrument generally is utilized to convert
excess variable rate liabilities into fixed rate liabilities ("fixed rate
liabilities"). This strategy protects the margin between interest earned on
fixed rate assets and interest paid on variable rate liabilities. FBL only
enters into risk management instruments to hedge against the effects of changes
in interest rates, and does not hold or issue such instruments for trading
purposes.
FBL and the Company have developed detailed operating policies to provide
control over risk management instruments. Approval of each transaction is
required by an appointed treasury committee and procedures are in place for the
proper execution of each risk management instrument. In addition, periodic
reviews are performed by the Company's auditors to ensure FBL's compliance with
the Company's policies.
All such risk management instruments have a credit risk from the potential non-
performance by the counterparties to these transactions. The Company attempts
to limit its credit risk exposure by dealing with counterparties that satisfy
certain financial standards and by limiting the net notional amount of all
transactions with a particular counterparty. Regular credit reviews of the
<PAGE>
counterparties are performed to ensure compliance with the Company's policies.
The amount of credit risk is restricted to the amount of any hedge gain and is
immaterial to the Company's consolidated financial statements.
The following table illustrates the gross notional amount of off-balance sheet
interest rate swaps and forward rate agreements outstanding and their weighted
average interest rates. Variable rates are based upon the London Interbank
Offered Rate ("LIBOR") on the latest reset date included in the underlying
contracts and are subject to fluctuations. Outstanding contracts at December
31, 1994 expire from 1995 to 1998.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
December 31, 1994 and 1993
(IN MILLIONS OF DOLLARS) 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C>
Variable rate liabilities - notional amount $ 8.6 $24.4
Average fixed rate received 5.6% 8.4%
Average variable rate paid 6.1% 5.9%
Fixed rate liabilities - notional amount $75.7 $48.5
Average fixed rate paid 7.5% 8.3%
Average variable rate received 6.2% 5.5%
</TABLE>
FBL has also entered into forward start swaps and forward start forward rate
agreements having a gross notional amount of $28.1 million at December 31, 1994.
Under the forward start swap agreements, FBL will pay average fixed rates of
6.8%. Under the forward start forward rate agreements FBL will receive average
fixed interest rates of 6.4%. The weighted average variable rates for these
agreements will be based upon LIBOR on the effective date of the contract. At
December 31, 1993, FBL was a party to interest rate floor agreements having a
gross notional amount of $12.6 million. Under these agreements FBL received
fixed interest payments at a rate of 7.7% and made variable interest payments at
a rate of 5.8%. There were no interest rate floors outstanding at December 31,
1994.
The difference between amounts paid to and amounts received from the
counterparties is included in revenue in the Consolidated Statements of Income.
<PAGE>
9. SHORT-TERM DEBT
The Company's outstanding short-term debt is as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
December 31, 1994 and 1993
(IN MILLIONS OF DOLLARS) 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C>
Commercial paper $298.3 $170.6
Consumer finance borrowings 99.6 96.9
Current portion of long-term debt 5.1 6.3
------ ------
$403.0 $273.8
------ ------
------ ------
- ---------------------------------------------------------------------------
</TABLE>
The weighted average interest rate on outstanding borrowings of commercial paper
at December 31, 1994 and 1993 was 6.1% and 3.3%, respectively. The weighted
average interest rate on outstanding consumer finance borrowings at December 31,
1994 and 1993 was 6.4% and 6.0%, respectively.
The Company maintains credit facilities with several banks primarily to support
its commercial paper borrowings. These facilities, which expire at varying
dates through May 1996, provide that the Company may borrow up to $330 million
at varying market rates of interest. Commitment fees ranging between 1/8% and
1/4% per annum are payable on any unused portion. The facilities require the
Company to maintain consolidated tangible net worth of at least $50 million and
contain other restrictions relating to consolidations, mergers and the sale or
pledging of assets.
The Company's consumer finance operation maintains credit facilities with
various banks aggregating $206 million. The Company also maintains other credit
facilities, primarily related to operations located outside of the United
States, aggregating $70.9 million.
<PAGE>
10. LONG-TERM DEBT
The Company's outstanding long-term debt is as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
December 31, 1994 and 1993
(IN MILLIONS OF DOLLARS) 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C>
Commercial paper $200.0 $200.0
Mortgage - 9.8% due 2009 200.0 200.0
Mortgage - 7.25% due 1999 3.9 3.8
Other 10.6 12.3
------ ------
414.5 416.1
Less current portion 5.1 6.3
------ ------
$409.4 $409.8
------ ------
------ ------
- ---------------------------------------------------------------------------
</TABLE>
The Company has a 20-year fixed rate non-recourse mortgage note agreement
amounting to $200 million, bearing an interest rate of 9.8%, in connection with
its 56% interest in its worldwide headquarters building. In the event the
mortgage is foreclosed following a default, the Company would be entitled to
remain in the space and would be obligated to pay rent sufficient to cover
interest on the notes or, starting in 1999, at fair market value if greater. At
December 31, 1994 and 1993, commercial paper borrowings amounting to $200
million have been classified in the Consolidated Balance Sheets as long-term
debt based on the Company's intent and ability to maintain or refinance these
obligations on a long-term basis. The Company has an interest rate swap which
was entered into as part of the acquisition and renovation of the Company's
worldwide headquarters which fixes the interest rate at approximately 9.5% on
$100 million of commercial paper borrowings until February 1999. The weighted
average interest rate on this swap at December 31, 1994, 1993 and 1992 was 4.6%,
3.2% and 3.9%, respectively. The difference between the fixed rate and the
weighted average rate is included in interest expense in the Consolidated
Statements of Income.
Other long-term debt primarily includes loans related to the purchase of
equipment.
Scheduled repayments of long-term debt, excluding the commercial paper described
above, in 1995 and in the four succeeding years are $5.1 million, $2.9 million,
$2.1 million, $.4 million and $4.0 million, respectively.
<PAGE>
11. FINANCIAL INSTRUMENTS
The estimated fair value of the Company's significant financial instruments is
provided below. Certain estimates and judgments were required to develop the
fair value amounts. The fair value amounts shown below are not necessarily
indicative of the amounts that the Company would realize upon disposition nor do
they indicate the Company's intent or ability to dispose of the financial
instrument.
CASH AND CASH EQUIVALENTS: The estimated fair value of the Company's cash and
cash equivalents approximates their carrying value.
LONG-TERM INVESTMENTS: The Company has certain long-term investments, amounting
to $27.8 million and $31.1 million at December 31, 1994 and 1993, respectively,
which are carried on a cost basis. The Company has estimated, using various
accredited valuation techniques, that the fair value of these investments
amounted to approximately $28 million and $48 million at December 31, 1994 and
1993, respectively.
CONSUMER FINANCE RECEIVABLES AND CUSTOMER DEPOSITS: The fair value of consumer
finance receivables and customer deposits approximates their carrying value.
SHORT-TERM AND LONG-TERM DEBT: The fair value of the Company's short-term debt,
which consists primarily of commercial paper borrowings and consumer finance
borrowings, approximates its carrying value. The estimated fair value of the
$200 million mortgage on the Company's worldwide headquarters building is
approximately $213 million and $270 million at December 31, 1994 and 1993,
respectively, based on discounted future cash flows using interest rates
available for debt with similar terms and remaining maturities.
OFF-BALANCE SHEET INSTRUMENTS: The fair value of the Company's $100 million
interest rate swap has been estimated as a liability of approximately $7 million
and $22 million at December 31, 1994 and 1993, respectively. The fair value of
FBL's interest rate swaps and forward rate agreements was estimated as a
receivable of approximately $1 million and a liability of $2 million at December
31, 1994 and 1993, respectively. These calculations are based on discounted
future cash flows taking into account the current interest rate environment.
UNREALIZED SECURITIES HOLDING GAINS: Effective December 31, 1993, the Company
adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities."
The Company has classified as available for sale primarily equity securities
having an aggregate fair value of $255.0 million and $332.5 million at December
31, 1994 and 1993, respectively. Gross unrealized gains, amounting to $140.7
million and $213.8 million at December 31, 1994 and 1993, respectively, have
been excluded from earnings and reported as a separate component of
stockholders' equity, net of deferred income taxes.
Proceeds from the sale of available for sale securities for the year ended
December 31, 1994 was $54.7 million. Gross realized gains on available for sale
securities sold during 1994 amounted to $38.0 million. The cost of securities
sold is determined using the average cost method for equity securities.
A portion of insurance fiduciary funds which the Company holds to satisfy
fiduciary obligations are invested in high quality debt securities which are
generally held to maturity. The difference between cost and fair value of these
investments is not material.
<PAGE>
12. SHAREHOLDER RIGHTS PLAN
Under the Company's Shareholder Rights Plan each common share has one Right
attached to it. Under the plan, the Rights generally become exercisable after a
person or group (i) acquires 15% or more of the Company's outstanding common
stock or (ii) commences a tender offer that would result in such person or group
owning 30% or more of the Company's common stock. When the Rights first become
exercisable, a holder will be entitled to buy from the Company one one-hundredth
of a share of a new series of Series A Junior Participating Preferred Stock of
the Company at a purchase price of $210. Alternatively, if any person acquires
15% or more of the Company's common stock except pursuant to an offer for all
shares at a fair price or if a 15% holder acquires the Company by means of a
reverse merger in which the Company and its stock survive, each Right not owned
by a 15% or more shareholder would become exercisable for common stock of the
Company (or, in certain circumstances, other consideration) having a market
value equal to twice the exercise price of the Right. If the Company is
involved in a merger or other business combination when there is a 15% or more
stockholder of the Company, the Rights will entitle a holder to buy shares of
common stock of the acquiring company having a market value of twice the
exercise price of each Right. The Rights expire on September 28, 1997, unless
redeemed earlier.
<PAGE>
13. CLAIMS, LAWSUITS AND OTHER CONTINGENCIES
The Company and its subsidiaries are subject to claims and lawsuits that arise
in the ordinary course of business, consisting principally of alleged errors and
omissions in connection with the placement of insurance or reinsurance and in
rendering consulting and investment services. Some of these claims and lawsuits
seek damages, including punitive damages, in amounts which could, if assessed,
be significant.
Among these is a group of claims relating to reinsurance contracts placed by
reinsurance broking subsidiaries of the Company that were called into question
by certain reinsurers. In general, these contracts concern so-called run-off
exposures under which reinsurers assumed some or all remaining liability for
claims against Lloyd's syndicates or other London insurers on policies,
typically written in the past over a period of many years and sometimes without
aggregate limits. The initial disputes, primarily between reinsurers and
cedants, concerned these contracts, and have largely been resolved by
negotiation, arbitration or litigation. More recently, related disputes have
arisen, including litigation, between the members of syndicates, their
underwriting and members' names agencies and, in some cases, subsidiaries of the
Company. The syndicate members have experienced significant and continuing
losses on policies, some of which were the subject of run-off reinsurance
contracts that have been voided or compromised. The Company believes that its
subsidiaries performed their reinsurance broking services in conformity with
accepted and customary practices in the London market.
Subsidiaries of the Company in the course of their consulting and insurance
activities advised certain clients in connection with their purchase of
guaranteed investment contracts and annuities issued by Executive Life Insurance
Company, which is currently being rehabilitated under the supervision of the
California Insurance Department. Some of those clients as well as the Company's
subsidiaries have been or may be subject to claims or lawsuits relating to
losses in connection with those investments. In some instances, the
subsidiaries have entered into agreements extending the time in which possible
claims may be asserted against them, or have engaged in negotiating the deferral
or resolution of claims and litigation. The Company believes that its
subsidiaries acted in a proper and professional manner in connection with these
matters.
On the basis of present information, available insurance coverage and advice
received from counsel, it is the opinion of the Company's management that the
disposition or ultimate determination of these claims and lawsuits will not have
a material adverse effect on the Company's consolidated results of operations or
its consolidated financial position.
<PAGE>
14. SEGMENTATION OF ACTIVITY BY TYPE OF SERVICE
AND GEOGRAPHIC AREA OF OPERATION
The Company, a professional services firm, operates in three principal business
segments: insurance services, consulting and investment management. Operating
income for each type of service is after deductions for all directly related
expenses and allocations of common expenses. General corporate expenses
primarily are comprised of employee compensation and benefits and related
occupancy costs for administrative personnel. General corporate assets
primarily consist of cash and cash equivalents, deferred income tax assets and a
portion of the Company's headquarters building.
The following table presents information about the Company's operations by
type of service and geographic area:
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
For the Three Years Ended December 31, 1994
(IN MILLIONS OF DOLLARS)
- -----------------------------------------------------------------------------------------------------------------------------
DEPRECIATION &
OPERATING IDENTIFIABLE AMORTIZATION CAPITAL
REVENUE INCOME ASSETS OF FIXED ASSETS EXPENDITURES
------- --------- ------------ ---------------- -------------
<S> <C> <C> <C> <C> <C>
TYPE OF SERVICE:
1994-
INSURANCE SERVICES $1,886.5 $406.1 $2,021.9 $62.0 $ 70.9
CONSULTING 933.1 96.4 568.4 17.9 32.3
INVESTMENT MANAGEMENT 615.4 208.2 763.5 16.0 44.3
GENERAL CORPORATE -- (40.4) 476.8 3.7 1.6
-------- ------ -------- ----- ------
$3,435.0 $670.3 $3,830.6 $99.6 $149.1
-------- ------ -------- ----- ------
-------- ------ -------- ----- ------
1993-
Insurance Services $1,790.5 $376.7 $1,976.3 $ 63.7 $58.0
Consulting 854.8 86.2 499.1 20.2 15.3
Investment Management 518.1 169.3 586.5 12.5 25.0
General Corporate -- (39.4) 484.7 3.9 .5
-------- ------ -------- ----- ------
$3,163.4 $592.8 $3,546.6 $100.3 $98.8
-------- ------ -------- ----- ------
-------- ------ -------- ----- ------
1992-
Insurance Services $1,632.8 $335.4 $1,796.9 $61.1 $50.1
Consulting 908.2 116.1 475.4 21.6 13.8
Investment Management 396.0 124.4 257.7 10.6 18.4
General Corporate -- (34.9) 558.4 3.9 .5
-------- ------ -------- ----- ------
$2,937.0 $541.0 $3,088.4 $97.2 $82.8
-------- ------ -------- ----- ------
-------- ------ -------- ----- ------
GEOGRAPHIC AREA:
1994-
UNITED STATES $2,227.3 $478.6 $1,824.4
EUROPE 909.6 180.6 1,326.4
CANADA 165.1 35.3 97.3
PACIFIC RIM AND OTHER 133.0 16.2 105.7
GENERAL CORPORATE -- (40.4) 476.8
-------- ------ --------
$3,435.0 $670.3 $3,830.6
-------- ------ --------
-------- ------ --------
1993-
United States $2,040.7 $429.9 $1,763.0
Europe 861.6 161.6 1,131.1
Canada 167.0 31.1 100.0
Pacific Rim and Other 94.1 9.6 67.8
General Corporate -- (39.4) 484.7
-------- ------ --------
$3,163.4 $592.8 $3,546.6
-------- ------ --------
-------- ------ --------
1992-
United States $1,920.5 $402.7 $1,230.0
Europe 749.2 131.6 1,145.7
Canada 178.5 31.4 99.2
Pacific Rim and Other 88.8 10.2 55.1
General Corporate -- (34.9) 558.4
-------- ------ --------
$2,937.0 $541.0 $3,088.4
-------- ------ --------
-------- ------ --------
</TABLE>
<PAGE>
REPORT OF MANAGEMENT
The management of Marsh & McLennan Companies, Inc. has prepared and is
responsible for the accompanying financial statements and other related
financial information contained in this annual report. The Company's financial
statements were prepared in accordance with generally accepted accounting
principles, applying certain estimates and informed judgments as required.
Deloitte & Touche LLP, independent auditors, have audited the financial
statements and have issued their report thereon.
The Company maintains a system of internal accounting controls designed to
provide reasonable assurance that transactions are executed in accordance with
management's authorization, that assets are safeguarded and that proper
financial records are maintained. Key elements of the Company's internal
controls include securing the services of qualified personnel and proper
segregation of duties. Internal auditors monitor the control system by
examining financial reports, by testing the accuracy of transactions, and by
otherwise obtaining assurance that the system is operating in accordance with
the Company's objectives.
The Audit Committee of the Board of Directors is composed entirely of
outside directors and is responsible for recommending to the Board the
independent auditors to be engaged to audit the Company's financial statements,
subject to stockholder ratification. In addition, the Audit Committee meets
periodically with internal auditors and the independent auditors, both with and
without management, to discuss the Company's internal accounting controls,
financial reporting and other related matters. The internal auditors and
independent auditors have full and unrestricted access to the Audit Committee.
/s/ Frank J. Borelli
Frank J. Borelli
Senior Vice President and
Chief Financial Officer
<PAGE>
REPORT OF INDEPENDENT
AUDITORS
The Board of Directors and Stockholders of
Marsh & McLennan Companies, Inc.:
We have audited the accompanying consolidated balance sheets of Marsh & McLennan
Companies, Inc. and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Marsh & McLennan Companies, Inc.
and subsidiaries at December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994 in conformity with generally accepted accounting principles.
As discussed in Note 5 to the consolidated financial statements, during 1994 the
Company changed its method of accounting for postemployment benefits to conform
with Statement of Financial Accounting Standards ("SFAS") No. 112. As discussed
in Note 11 to the consolidated financial statements, at December 31, 1993 the
Company changed its method of accounting for certain investments in securities
to conform with SFAS No. 115. During 1992, as discussed in Notes 4 and 5 to the
consolidated financial statements, the Company changed its method of accounting
for income taxes and postretirement benefits other than pensions to conform with
SFAS No. 109 and 106.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
February 28, 1995
<PAGE>
MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA AND
SUPPLEMENTAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE FIGURES)
Income Before
Cumulative
Effect of
Accounting
Changes Net Income
---------------- ---------------- Dividends Stock
Operating Per Per Paid Per Price Range
Revenue Income Amount Share Amount Share Share High-Low
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1994:
First quarter $ 910.2 $228.4 $130.7 $1.77 $120.2 $1.63 $.675 $86 3/4 - 80 1/4
Second quarter 840.5 163.8 95.7 1.30 95.7 1.30 .675 $88 3/4 - 81 1/4
Third quarter 826.9 148.6 83.4 1.14 83.4 1.14 .725 $88 3/8 - 76
Fourth quarter 857.4 129.5 72.2 .98 72.2 .98 .725 $80 3/8 - 71 1/4
-------- ------ ------ ----- ------ ----- -----
$3,435.0 $670.3 $382.0 $5.19 $371.5 $5.05 $2.80 $88 3/4 - 71 1/4
-------- ------ ------ ----- ------ ----- -----
-------- ------ ------ ----- ------ ----- -----
1993:
First quarter $ 833.9 $187.2 $107.4 $1.46 $107.4 $1.46 $.675 $97 5/8 - 88 1/8
Second quarter 783.3 152.5 86.3 1.18 86.3 1.18 .675 $96 - 84 1/2
Third quarter 766.4 139.7 76.1 1.04 76.1 1.04 .675 $91 7/8 - 84 7/8
Fourth quarter 779.8 113.4 62.6 .84 62.6 .84 .675 $88 7/8 - 77
-------- ------ ------ ----- ------ ----- -----
$3,163.4 $592.8 $332.4 $4.52 $332.4 $4.52 $2.70 $97 5/8 - 77
-------- ------ ------ ----- ------ ----- -----
-------- ------ ------ ----- ------ ----- -----
1992:
First quarter $ 768.8 $179.5 $101.0 $1.40 $ 60.9 $ .84 $ .65 $83 3/4 - 73 1/2
Second quarter 733.0 143.1 79.5 1.11 79.5 1.11 .65 $79 3/4 - 71 1/4
Third quarter 730.0 123.8 69.0 .96 69.0 .96 .675 $90 7/8 - 76 7/8
Fourth quarter 705.2 94.6 54.3 .74 54.3 .74 .675 $94 1/2 - 88 1/4
-------- ------ ------ ----- ------ ----- -----
$2,937.0 $541.0 $303.8 $4.21 $263.7 $3.65 $2.65 $94 1/2 - 71 1/4
-------- ------ ------ ----- ------ ----- -----
-------- ------ ------ ----- ------ ----- -----
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company's common stock (ticker symbol:MMC) is traded on the New York,
Chicago, Pacific and London stock exchanges. As of February 28, 1995, there
were 10,439 stockholders of record.
<PAGE>
MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES
TEN-YEAR STATISTICAL SUMMARY OF OPERATIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
For the Ten Years Ended December 31, 1994
(In millions of dollars, except per share figures) 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE:
Insurance services $1,886.5 $1,790.5 $1,632.8 $1,571.0
Consulting 933.1 854.8 908.2 894.0
Investment management 615.4 518.1 396.0 314.2
-------- --------- --------- ---------
TOTAL REVENUE 3,435.0 3,163.4 2,937.0 2,779.2
-------- --------- --------- ---------
EXPENSES:
Compensation and benefits 1,740.2 1,635.7 1,557.8 1,461.1
Other operating expenses 1,024.5 934.9 838.2 820.0
-------- --------- --------- ---------
TOTAL EXPENSES 2,764.7 2,570.6 2,396.0 2,281.1
-------- --------- --------- ---------
OPERATING INCOME 670.3 592.8 541.0 498.1
INTEREST INCOME 11.8 11.9 16.6 24.8
INTEREST EXPENSE (50.6) (46.1) (38.3) (39.1)
OTHER INCOME (EXPENSE) -- -- -- 43.0
-------- --------- --------- ---------
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGES 631.5 558.6 519.3 526.8
INCOME TAXES 249.5 226.2 215.5 221.3
-------- --------- --------- ---------
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES $ 382.0 $ 332.4 $ 303.8 $ 305.5
-------- --------- --------- ---------
-------- --------- --------- ---------
NET INCOME $ 371.5 (b) $ 332.4 $ 263.7 (a) $ 305.5
-------- --------- --------- ---------
-------- --------- --------- ---------
EARNINGS PER SHARE INFORMATION:
Income Before Cumulative
Effect Of Accounting Changes $5.19 $4.52 $4.21 $4.18
----- ----- ----- -----
----- ----- ----- -----
NET INCOME PER SHARE $5.05 (b) $4.52 $3.65 (a) $4.18
----- ----- ----- -----
----- ----- ----- -----
AVERAGE NUMBER OF SHARES OUTSTANDING 73.6 73.5 72.2 73.1
DIVIDENDS PAID PER SHARE $2.80 $2.70 $2.65 $2.60
RETURN ON AVERAGE STOCKHOLDERS' EQUITY 26% 27% 25% 29%
YEAR-END FINANCIAL POSITION:
Working capital $ 53.7 $ 133.7 $ 198.3 $ 336.2
Total assets $3,830.6 $3,546.6 $3,088.4 $2,382.2
Long-term debt $ 409.4 $ 409.8 $ 411.2 $ 318.0
Stockholders' equity $1,460.6 $1,365.3 $1,102.9 $1,035.0
Total shares outstanding (excluding treasury shares) 73.2 73.9 73.3 71.8
OTHER INFORMATION:
Number of employees 26,100 25,600 25,800 23,400
Stock price ranges-
U.S. exchanges - High $88 3/4 $97 5/8 $94 1/2 $87 1/4
- Low $71 1/4 $77 $71 1/4 $69 1/8
London Stock Exchange - High L58 15/16 L67 7/16 L61 7/8 L49 5/8
- Low L45 5/16 L52 9/16 L39 5/16 L35 9/16
Price/earnings multiple 15.7 18.0 25.0 19.5
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
For the Ten Years Ended December 31, 1994
(In millions of dollars, except per share figures) 1990 1989 1988 1987
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE:
Insurance services $1,536.8 $1,400.3 $1,375.7 $1,380.2
Consulting 910.0 754.3 635.7 482.0
Investment management 276.2 273.1 261.0 284.9
-------- --------- --------- ---------
TOTAL REVENUE 2,723.0 2,427.7 2,272.4 2,147.1
-------- --------- --------- ---------
EXPENSES:
Compensation and benefits 1,400.0 1,223.4 1,108.9 982.6
Other operating expenses 795.7 694.8 648.1 614.3
-------- --------- --------- ---------
TOTAL EXPENSES 2,195.7 1,918.2 1,757.0 1,596.9
-------- --------- --------- ---------
OPERATING INCOME 527.3 509.5 515.4 550.2
INTEREST INCOME 33.5 27.7 22.7 31.0
INTEREST EXPENSE (31.0) (18.9) (23.1) (13.0)
OTHER INCOME (EXPENSE) (1.0) (1.0) 1.4 (.9)
-------- --------- --------- ---------
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGES 528.8 517.3 516.4 567.3
INCOME TAXES 224.7 222.4 220.1 265.2
-------- --------- --------- ---------
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES $ 304.1 $ 294.9 $ 296.3 $ 302.1
-------- --------- --------- ---------
-------- --------- --------- ---------
NET INCOME $ 304.1 $ 294.9 $ 296.3 $ 302.1
-------- --------- --------- ---------
-------- --------- --------- ---------
EARNINGS PER SHARE INFORMATION:
Income Before Cumulative
Effect Of Accounting Changes $4.15 $4.10 $4.09 $4.06
----- ----- ----- -----
----- ----- ----- -----
NET INCOME PER SHARE $4.15 $4.10 $4.09 $4.06
----- ----- ----- -----
----- ----- ----- -----
AVERAGE NUMBER OF SHARES OUTSTANDING 73.3 71.9 72.4 74.4
DIVIDENDS PAID PER SHARE $2.55 $2.50 $2.42 1/2 $2.15
RETURN ON AVERAGE STOCKHOLDERS' EQUITY 31% 36% 38% 42%
YEAR-END FINANCIAL POSITION:
Working capital $ 352.5 $ 312.7 $ 195.7 $ 243.2
Total assets $2,411.2 $2,035.2 $1,830.0 $1,634.4
Long-term debt $ 319.9 $ 319.4 $ 266.2 $ 16.4
Stockholders' equity $1,085.3 $ 873.0 $ 755.1 $ 791.7
Total shares outstanding (excluding treasury shares) 73.5 72.4 71.5 73.9
OTHER INFORMATION:
Number of employees 24,400 23,600 22,800 22,700
Stock price ranges-
U.S. exchanges - High $81 $89 3/4 $59 3/4 $72
- Low $59 3/4 $55 1/8 $45 1/4 $43 3/4
London Stock Exchange - High L49 L55 15/16 L35 L46 1/2
- Low L31 1/2 L30 13/16 L25 L24
Price/earnings multiple 18.8 19.0 13.8 12.2
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Compound
For the Ten Years Ended December 31, 1994 Growth Rate
(In millions of dollars, except per share figures) 1986 1985 1984-1994 (c)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE:
Insurance services $1,273.1 $1,001.6 9%
Consulting 333.3 267.8 16%
Investment management 197.7 98.2 24%
-------- --------
TOTAL REVENUE 1,804.1 1,367.6 12%
-------- --------
EXPENSES:
Compensation and benefits 812.5 646.6 12%
Other operating expenses 511.1 407.6 12%
-------- --------
TOTAL EXPENSES 1,323.6 1,054.2 12%
-------- --------
OPERATING INCOME 480.5 313.4 12%
INTEREST INCOME 25.9 25.1
INTEREST EXPENSE (5.3) (14.1)
OTHER INCOME (EXPENSE) .3 5.3
-------- --------
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGES 501.4 329.7 10%
INCOME TAXES 258.2 166.8 7%
-------- --------
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES $ 243.2 $ 162.9 12%
-------- --------
-------- --------
NET INCOME $ 243.2 $ 162.9 12%
-------- --------
-------- --------
EARNINGS PER SHARE INFORMATION:
Income Before Cumulative
Effect Of Accounting Changes $3.30 $2.23 12%
----- -----
----- -----
NET INCOME PER SHARE $3.30 $2.23 12%
----- -----
----- -----
AVERAGE NUMBER OF SHARES OUTSTANDING 73.8 73.0
DIVIDENDS PAID PER SHARE $1.56 1/4 $1.23 3/4 10%
RETURN ON AVERAGE STOCKHOLDERS' EQUITY 42% 37%
YEAR-END FINANCIAL POSITION:
Working capital $ 187.7 $ 229.6
Total assets $1,476.6 $1,029.9
Long-term debt $ 14.5 $ 9.8
Stockholders' equity $ 638.7 $ 515.2
Total shares outstanding (excluding treasury shares) 73.9 73.4
OTHER INFORMATION:
Number of employees 19,900 17,700
Stock price ranges-
U.S. exchanges - High $76 3/4 $41 3/4
- Low $40 5/8 $28 1/4
London Stock Exchange - High L50 1/8 L32 1/8
- Low L28 1/4 L23 3/8
Price/earnings multiple 18.4 18.3
<FN>
(a) Reflects the adoption, effective January 1, 1992, of SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions,"
and SFAS No. 109, "Accounting For Income Taxes."
(b) Reflects the adoption, effective January 1, 1994, of SFAS No. 112,
"Employers' Accounting for Postemployment Benefits."
(c) Excludes the impact of unusual charge in 1984 related to the investment
loss of $110.0 million pre-tax, $61.0 million after tax.
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF
MARSH & McLENNAN COMPANIES, INC.
Jurisdiction of
Name Incorporation
---- ---------------
Marsh & McLennan Real Estate Advisors, Inc. Delaware
Marsh & McLennan Risk Capital Holdings, Ltd Delaware
Marsh & McLennan Risk Capital Corp. Delaware
Marsh & McLennan Risk Capital Holdings (Bermuda) Ltd. Bermuda
Omega Indemnity (Bermuda) Limited Bermuda
Epsilon Insurance Company, Ltd. Cayman Islands
Marsh et McLennan France SA France
Mercer-Faugere & Jutheau SA France
Faugere & Jutheau, S.A. France
Faugere & Jutheau Bermuda Bermuda
Assureurs Conseils Tchadiens (S.A.R.L.) Chad
Assureur Conseil de Djibouti-
Faugere & Jutheau et Cie SARL Djibouti
Ancien Cabinet Pierre de Kerpezdron (S.A.) France
Boistel S.A. France
Eyssautier Flepp Malatier & Pages S.A. France
Boistel Eyssautier S.A. France
Omnium d'Assurances Maritimes France
Astramar S.A. France
Cires SARL France
Sogescor SARL France
Gatier S.A. Switzerland
Assurances Maritimes Eyssautier Malatier
Inter SARL France
Socodel-Paris S.A. France
Union Francaise de Reassurances (S.A.) France
Agencia General de Reaseguros (S.A.) Spain
William M. Mercer-Faugere & Jutheau (S.A.R.L.) France
Marsh & McLennan, Incorporated Delaware
Marsh & McLennan of Arkansas, Inc. Arkansas
M & M Insurance Management Services, Inc. Delaware
Triad Services, Inc. Delaware
Marsh & McLennan Agency, Incorporated District of Columbia
Marsh & McLennan, Incorporated Illinois
Marsh & McLennan, Incorporated Indiana
Marsh & McLennan, Incorporated Kentucky
Marsh & McLennan of Louisiana, Inc. Louisiana
Marmac Agency, Inc. Louisiana
Marsh & McLennan, Inc. Massachusetts
Marsh & McLennan Michigan
Marsh & McLennan, Inc. of Nevada Nevada
<PAGE>
Bowring North America, Inc. New York
Bowring (Bermuda) Ltd. Bermuda
Bowring North America, Inc. Connecticut
Bowring North America, Inc. Illinois
Bowring North America, Inc. Missouri
Bowring North America, Inc. New Jersey
Marsh & McLennan Intermediaries, Inc. New York
Bowring North America, Inc. Texas
Marsh & McLennan, Incorporated Ohio
Marsh & McLennan, Inc. Oklahoma
Marsh & McLennan of Puerto Rico, Inc. Puerto Rico
Marsh & McLennan, Incorporated Rhode Island
Marsh & McLennan, Inc. Texas
Marsh & McLennan of Texas, Inc. Texas
Marsh & McLennan, Incorporated Virginia
Marsh & McLennan Holdings, Inc. Delaware
Marsh & McLennan (Korea) Ltd. Korea
Marsh & McLennan (Malaysia) SDN BHD Malaysia
Marsh & McLennan Argentina SA Asesores de Seguros Argentina
Marsh & McLennan Argentina SA Corredores de Reaseguros Argentina
Marsh & McLennan Argentina SA Risk Management
Consultants Argentina
Marsh & McLennan Pty. Ltd. Australia
Marsh & McLennan (PNG) Pty. Ltd. Papua New Guinea
Kila Bowring Insurances Pty. Ltd. Papua New Guinea
Fenchurch Insurance Brokers Pty. Limited Australia
Marsh & McLennan (WA) Pty. Ltd. Australia
Marsh & McLennan (WA Division) Pty. Ltd. Australia
Marsh & McLennan (South Australia) Pty. Ltd. Australia
Marsh & McLennan (SA Division) Australia
Marsh & McLennan Captive Management Services
Pty. Ltd. Australia
Asia Pacific Insurance Wholesalers Pty. Ltd. Australia
Marsh & McLennan Versicherungs-Service GmbH Austria
Marsh & McLennan Management Services (Barbados), Ltd. Barbados
Henrijean, S.A. Belgium
Marsh & McLennan Management Services (Bermuda) Limited Bermuda
Transglobe Management (Bermuda) Ltd. Bermuda
Marsh & McLennan (Cayman Islands) Ltd. Cayman Islands
Marsh & McLennan Management Services (L) Ltd. Labuan
Marclen-Corretagem de Seguros Ltda. Brazil
Tudor, Marsh & McLennan Corretores de Seguros S.A. Brazil
Marsh & McLennan, Limited/Limitee' Canada
D.G. Watt & Associates Ltd. Canada
Charbonneau, Dulude & Associes (1985) Limitee/
Charbonneau, Dulude & Associates (1985) Limited Canada
M&M Insurance Management Canada Ltd. British Columbia
Marshcan Insurance Brokers Limited Canada
Irish & Maulson Limited Ontario
Pratte-Morrissette, Inc. Quebec
Schatz Insurance Agencies, Inc. Saskatchewan
Marsh & McLennan (SASK) Ltd. Saskatchewan
- 2 -
<PAGE>
Claro Marsh & McLennan S.A. Corredores De Seguros Chile
Claro Marsh & McLennan Consultores
en Recursos Humanos, Ltda. Chile
Marsh & McLennan Czechoslovakia S.r.o. Czechoslovakia
Marsh & McLennan Denmark A/S Denmark
Marsh & McLennan Sweden AB Sweden
Marsh & McLennan Companies GmbH Germany
Marsh & McLennan Companies
Beteiligungsgesellschaft II GmbH Germany
Gradmann & Holler, K.G. Germany
Erwin Warnecke GmbH Germany
Gradmann & Holler GmbH Germany
RMB-Risk Management Beratungs-GmbH Germany
Wolf & Hasselmann GmbH Germany
Gradmann & Holler-William M. Mercer GmbH Germany
Airport Asserkuranz Vermittlungs GmbH Germany
Gradmann & Holler International GmbH Germany
Gradmann & Holler Kiefhaber GmbH Germany
Gradmann & Holler-Guy Carpenter GmbH Germany
Gradmann & Holler AG Switzerland
Marsh & McLennan-Hellas-L.L.C. Greece
Marsh & McLennan Management Services (Guernsey) Limited Guernsey
Marsh & McLennan Limited Hong Kong
Marsh & McLennan Budapest Insurance Brokers &
Consultants Ltd. Hungary
Bowring (Dublin) Limited Ireland
Marsh & McLennan Management Services (Dublin) Limited Ireland
Marsh & McLennan Italia & Co., S.P.A. Italy
Marsh & McLennan Japan Ltd. Japan
Marsh & McLennan Co. Inc. Liberia
Marsh & McLennan Europe S.A. Luxembourg
Marsh & McLennan Luxembourg, S.A. Luxembourg
Marsh & McLennan Insurance Management Services, S.A. Luxembourg
Marsh & McLennan S.A. de C.V. Mexico
Marsh & McLennan Nederland B.V. Netherlands
Marsh & McLennan Polska Sp.zO.O Poland
Newstead & Porter, Lda. Portugal
Marsh & McLennan Management Services (S) Pte. Ltd. Singapore
Marsh & McLennan Bowring Pte. Ltd. Singapore
Marsh & McLennan Espana, S.A., Correduria de Seguros Spain
Marsh Privat AIE Spain
Marsh & McLennan EWI S.A. Switzerland
Marsh & McLennan Sigorta ve Reasurans Araciligi AS Turkey
C.T. Bowring International Broking Holdings, Ltd. United Kingdom
Marsh & McLennan Bowring Marine & Energy Group Ltd. United Kingdom
Marsh & McLennan Limited United Kingdom
Marsh & McLennan, Incorporated Virgin Islands
Muir Beddall (Zimbabwe) Limited Zimbabwe
- 3 -
<PAGE>
Guy Carpenter & Company, Inc. Delaware
The Carpenter Management Corporation Delaware
Paul Napolitan, Inc. Delaware
Sellon Associates, Inc. New York
Balis & Co., Inc. Pennsylvania
EQECAT, Inc. Delaware
Guy Carpenter & Company, S.A. Belgium
American Overseas Management Corporation (Canada) Canada
Guy Carpenter & Company (Canada) Limited Canada
Guy Carpenter & Company, A/S Denmark
Gradmann & Holler/Guy Carpenter GmbH Germany
Guy Carpenter & Company (Asia) Limited Hong Kong
Guy Carpenter Italia, S.R.L. Italy
Guy Carpenter y Cia (Mexico) S.A. de C.V. Mexico
Guy Carpenter & Cia, S.A. Correduria de Reaseguros Spain
Guy Carpenter & Company (Stockholm) AB Sweden
Bennich Reinsurance Management AB Sweden
Guy Carpenter & Co. Limited United Kingdom
Mercer Consulting Group, Inc. Delaware
National Economic Research Associates, Inc. California
National Economic Research Associates, Inc. Delaware
Hudson Strategy Group, Inc. Delaware
Mercer Management Consulting, Inc. Delaware
Decision Research Corporation Massachusetts
LAR/Decision Research Corporation New York
Lippincott & Margulies, Inc. New York
Mercer Management Consulting GmbH Germany
UBM Unternehmensberatung Munchen GmbH Germany
UBM Marktforschung GmbH International
Industrial Research Germany
UBM Industrial Market Research Iberica S.L. Germany
UBM Consulting France International
Management Consultants France
UBM Consulting Group, Inc. Illinois
Mercer Management Consulting Limited Switzerland
UBM Iberica Consulting, Sociedad Limitada Spain
Mercer Management Consulting SNC France
Marketing/Innovation/Developpement
Pour l'Industrie-MID S.A. France
MID, Inc. Delaware
INPLAN Pte. Ltd. Singapore
Mercer Consulting Services S.A. Switzerland
Strategic Planning Associates, Straplan S.A. Switzerland
Temple, Barker & Sloane, Ltd. United Kingdom
Mercer Service Company, Inc. Delaware
William M. Mercer Companies, Inc. Delaware
William M. Mercer, Incorporated Delaware
National Medical Audit California
Hansen International Limited Delaware
William M. Mercer Plan Participant Services, Inc Delaware
William M. Mercer of Indiana, Incorporated Indiana
Mercer Investment Consulting, Inc. Kentucky
William M. Mercer of Kentucky, Inc. Kentucky
William M. Mercer, Incorporated Louisiana
- 4 -
<PAGE>
William M. Mercer, Incorporated Massachusetts
William M. Mercer of Michigan, Incorporated Michigan
William M. Mercer, Incorporated Nevada
William M. Mercer, Incorporated Ohio
William M. Mercer, Incorporated Oklahoma
William M. Mercer, Incorporated Puerto Rico
William M. Mercer of Texas, Inc. Texas
William M. Mercer of Virginia, Incorporated Virginia
William M. Mercer Pty. Ltd. Australia
Mercer Roach Financial Planning Pty. Ltd. Australia
MPA Superannuation Services Limited Australia
MPA Superfund Nominees Pty. Limited Australia
Mercer R.H. SARL France
William M. Mercer International S.A. Belgium
William M. Mercer Limited/Limitee' Canada
Mercer Management Consulting Limited Canada
Metcalfe Agencies Limited Quebec
Societe Conseil Mercer Limitee Quebec
William M. Mercer GmbH Germany
William M. Mercer-MPA Limited Hong Kong
William M. Mercer Limited Hong Kong
Pension & Investment Consultants Limited Ireland
William M. Mercer Fraser Limited Ireland
William M. Mercer Fraser (Irish Trustees) Limited Ireland
William M. Mercer Limited Japan
William M. Mercer (Malaysia) Sdn. Bhd. Malaysia
William M. Mercer Zainal Fraser Sdn. Bhd. Malaysia
William M. Mercer Ten Pas B.V. Netherlands
William M. Mercer Services B.V. Netherlands
William M. Mercer Limited New Zealand
William M. Mercer Philippines, Incorporated Philippines
William M. Mercer Pte. Ltd. Singapore
William M. Mercer A.G. Switzerland
William M. Mercer-MPA Limited United Kingdom
William M. Mercer Limited United Kingdom
William M. Mercer Fraser (Irish
Pensioneer Trustees) Limited Ireland
William M. Mercer Srl Italy
DCF Consultants PTE Limited Singapore
Bowring (Trustees) Limited United Kingdom
Duncan C. Fraser & Co. United Kingdom
Fraser Financial Planning Limited United Kingdom
William M. Mercer Fraser Computer
Services Limited United Kingdom
Mercer Management Consulting, Limited United Kingdom
Metropolitan Actuarial Services Limited United Kingdom
Metropolitan Computer Services Limited United Kingdom
Metropolitan Pensions Association
(Trustees) Limited United Kingdom
Metropolitan Statistical Services Limited United Kingdom
MPA (Chichester) Limited United Kingdom
MPA Employee Benefit & Compensation
Consultants Limited United Kingdom
- 5 -
<PAGE>
MPA (Holdings) Limited United Kingdom
MPA (International) Limited United Kingdom
Pension Trustees Limited United Kingdom
Pensioneer Trustees Limited United Kingdom
Pensioneer Trustees (London) Limited United Kingdom
Southampton Place Trustee Co. Ltd. United Kingdom
William M. Mercer-Grant Simmons Limited United Kingdom
William M. Mercer S.A. Argentina
William M. Mercer S.A. Aserores de Seguros Argentina
William M. Mercer Comercio e Servicos Ltda. Brazil
de Montigny Woerner Ltda. Brazil
MW Pesquisas Ltda. Brazil
MW Servicos Ltda. Brazil
MW Saude Ltda. Brazil
Vida Network Ltda. Brazil
William M. Mercer, S.A. Belgium
William M. Mercer Schmidt Worzinger A/S Denmark
William M. Mercer (Korea) Co., Ltd. Korea
Mercer C & B Servicios, S.A. de C.V. Mexico
Mercer C & B S.A. de C.V. Mexico
William M. Mercer Broking (Taiwan) Ltd. Taiwan
William M. Mercer Consulting (Taiwan) Ltd. Taiwan
Seabury & Smith, Inc. Delaware
Seabury & Smith of Arkansas, Inc. Arkansas
Trust Consultants, Inc. California
Appleby & Sterling Agency, Inc. Delaware
Marsh & McLennan National Marketing Corporation Delaware
Marsh & McLennan Securities Corporation Delaware
Smith-Sternau Organization, Inc. Delaware
The Schinnerer Group, Inc. Delaware
Victor O. Schinnerer & Company, Inc. Delaware
Victor O. Schinnerer & Co. (Bermuda), Ltd. Bermuda
Potomac Insurance Managers, Inc. Delaware
Victor O. Schinnerer of Illinois, Inc. Illinois
Victor O. Schinnerer & Company, Inc. Ohio
Encon Holdings, Inc. Texas
Panhandle Insurance Agency, Inc. Texas
Encon Underwriting Agency, Inc. Texas
Encon Holdings, Inc. Ontario
Encon Insurance Managers Inc. Canada
National Program Administrator
Investments, Inc. Canada
Encon Management Services, Inc. Canada
Encon Reinsurance Managers Inc. Canada
Encon Title Insurance Managers Inc. Canada
Rockcliffe Investors, Ltd. Canada
- 6 -
<PAGE>
Victor O. Schinnerer & Company Ltd. United Kingdom
Encon Underwriting Limited United Kingdom
Admiral Holdings Limited United Kingdom
Admiral Underwriting Agencies Limited United Kingdom
Admiral Ireland Limited Ireland
Admiral Underwriting Agencies (Ireland) Ltd. Ireland
Seabury & Smith of Georgia, Inc. Georgia
M. A. Gesner of Illinois, Inc. Illinois
Seabury & Smith of Illinois, Inc. Illinois
Seabury & Smith, Inc. Indiana
Seabury & Smith, Inc. Kentucky
Seabury & Smith, Inc. Louisiana
Seabury & Smith, Inc. Massachusetts
Seabury & Smith, Inc. Michigan
Seabury & Smith, Inc. Nevada
Seabury & Smith Agency, Inc. Ohio
Seabury & Smith, Inc. Oklahoma
Seabury & Smith, Inc. Texas
Seabury & Smith, Inc. Virginia
Seabury & Smith Limited Ontario
G. E. Freeman Insurance Agency Limited Ontario
Seabury & Smith Limited United Kingdom
Putnam Investments, Inc. Massachusetts
Putnam Investment Management, Inc. Massachusetts
Putnam Future Advisors, Inc. Massachusetts
Putnam Fiduciary Trust Company Massachusetts
Putnam Investor Services, Inc. Massachusetts
Putnam Mutual Funds Corp. Massachusetts
Putnam Insurance Agency, Inc. Massachusetts
The Putnam Advisory Company, Inc. Massachusetts
Putnam Europe Ltd. United Kingdom
The Putnam Corporation Massachusetts
Putnam Rhumbline Corporation Massachusetts
Primary Funds Service Corp. Delaware
Putnam Overseas Institutional Management Company
Limited Bahamas
Putnam International Distributors Ltd. Cayman Islands
Putnam Advisory Deutschland GmbH Germany
Putnam International Advisory Company, S.A. Luxembourg
NKK-Putnam Management, S.A. Luxembourg
Putnam International Growth Management S.A. Luxembourg
Putnam Luxembourg S.A. Luxembourg
C.T. Bowring & Co. Limited United Kingdom
Importbest Ltd. England
Marsh & McLennan Services Ltd. England
Marsh & McLennan Holdings Ltd. England
The Frizzell Group Ltd. England
Frizzell Financial Services Ltd. England
Frizzell Life & Financial Planning Ltd. England
C.R. Hills Insurance Ltd. England
Frizzell Banking Services Ltd. England
Frizzell Credit Services Ltd. England
Shawlands Leasing Ltd. England
Shawlands Securities Ltd. England
Frizzell Property Loans England
Frizzell Westbourne Developments Ltd. England
Teachers Motoring Associations Ltd. England
Tower Brokers Guernsey
- 7 -
<PAGE>
Frizzell B.V. Holland
Frizzell Foundation England
Marsh & McLennan Nederland B.V. Netherlands
Marsh & McLennan Lda Portugal
Carpenter Bowring (UK) Ltd. England
Carpenter Bowring Ltd. England
Marsh Re Correduria de Reaseguros S.A. Spain
Bowring Reinsurance Brokers Ltd. England
C.T. Bowring & Co. (Insurance) Ltd. England
Bowring Worldwide Services Ltd. England
Marsh & McLennan Global Broking Ltd. England
Bowring Aviation Ltd. England
Bowring Financial & Professional Insurance
Brokers Ltd. England
Aviation Risk Management Services Ltd. England
C.T. Bowring Space Projects Ltd. England
Aviation Insurance Advisory Services Ltd. England
Bowring Aviation Advisory Services Ltd. England
Bowring Marine Ltd. England
Bowring Marsh & McLennan Ltd. England
Bowring Professional Indemnity Scotland Ltd. Scotland
Marsh & McLennan Management Services (Guernsey) Ltd. Guernsey
Ulster Insurance Services Ltd. N. Ireland
RIAS Insurance Services Ltd. N. Ireland
Bowring Financial Services Ltd. England
Bowring Marsh & McLennan (IOM) Ltd. I.O.M.
Marsh & McLennan Management Services (Isle of Man) Ltd. I.O.M.
RIC Management Services Ltd. Eire
Insurance Management Services Ltd. Eire
R.I.C.S. Insurance Services Ltd. England
Bowring Services Ltd. England
C.T. Bowring (Underwriting Agencies) Ltd. England
C.T. Bowring Trading (Holdings) Ltd. England
Baffin Trading Company Ltd. Canada
Bowring In The Community Ltd. England
C.T. Bowring (Insurance) Holdings Ltd. England
Insurance Brokers West Indies Ltd. Trinidad
C.T. Bowring Japan Ltd. Japan
Marsh & McLennan Ireland Ltd. Eire
C.T. Bowring (Ireland) Ltd. Eire
Mathews Mulcahy & Sutherland Ltd. Eire
Carpenter Bowring Australia Pty. Ltd. Australia
Carpenter Bowring New Zealand Ltd. N. Zealand
Australian World Underwriters Pty. Ltd. Australia
Marsh & McLennan Holdings Ltd. N. Zealand
Marsh & McLennan Ltd. N. Zealand
Reinsurances New Zealand Ltd. N. Zealand
Risk Management Ltd. N. Zealand
Marsh & McLennan Ltd. FIJI
Reinsurances (Pacific) Ltd. FIJI
- 8 -
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
Marsh & McLennan Companies, Inc.:
We consent to the incorporation by reference in the previously filed Form S-8
Registration Statements (Registration File Nos. 2-58660, 2-65096, 2-82938,
33-32880, 33-48803, 33-48804, 33-48807 and 33-54349) and in the previously filed
Form S-4 Registration Statement (Registration File No. 33-24124) of our reports
appearing in, and incorporated by reference in, this Annual Report on Form 10-K
of Marsh & McLennan Companies, Inc. for the year ended December 31, 1994.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
March 28, 1995
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1994, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 1995.
/s/Richard H. Blum
-----------------------------------
Richard H. Blum
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1994, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 1995.
/s/Robert Clements
-----------------------------------
Robert Clements
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1994, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 1995.
/s/R. J. Groves
-----------------------------------
R. J. Groves
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1994, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 1995.
/s/Richard S. Hickok
-----------------------------------
Richard S. Hickok
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1994, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 1995.
/s/David D. Holbrook
-----------------------------------
David D. Holbrook
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1994, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 1995.
/s/Robert M. G. Husson
-----------------------------------
Robert M. G. Husson
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1994, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 1995.
/s/Lawrence J. Lasser
-----------------------------------
Lawrence J. Lasser
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1994, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 1995.
/s/George Putnam
-----------------------------------
George Putnam
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1994, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 1995.
/s/Adele Smith Simmons
-----------------------------------
Adele Smith Simmons
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1994, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 1995.
/s/John T. Sinnott
-----------------------------------
John T. Sinnott
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1994, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 1995.
/s/A. J. C. Smith
-----------------------------------
A. J. C. Smith
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1994, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 1995.
/s/Frank J. Tasco
-----------------------------------
Frank J. Tasco
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1994, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 1995.
/s/Romeo J. Ventres
-----------------------------------
Romeo J. Ventres
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1994, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 1995.
/s/Frank J. Borelli
-----------------------------------
Frank J. Borelli
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1994, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 1995.
/s/Peter Coster
-----------------------------------
Peter Coster
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1994, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 1995.
/s/Philip L. Wroughton
-----------------------------------
Philip L. Wroughton
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1994, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 1995.
/s/Richard E. Heckert
-----------------------------------
Richard E. Heckert
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1994, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 1995.
/s/Richard M. Morrow
-----------------------------------
Richard M. Morrow
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1994, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 1995.
/s/Lewis W. Bernard
-----------------------------------
Lewis W. Bernard
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the consolidated Marsh & McLennan Companies, Inc. and subsidiaries
December 31, 1994 financial statements and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 294,900,000
<SECURITIES> 0
<RECEIVABLES> 999,900,000
<ALLOWANCES> 44,900,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,446,000,000
<PP&E> 1,314,800,000
<DEPRECIATION> 574,500,000
<TOTAL-ASSETS> 3,830,600,000
<CURRENT-LIABILITIES> 1,392,300,000
<BONDS> 409,400,000
<COMMON> 76,800,000
0
0
<OTHER-SE> 1,383,800,000
<TOTAL-LIABILITY-AND-EQUITY> 3,830,600,000
<SALES> 0
<TOTAL-REVENUES> 3,435,000,000
<CGS> 0
<TOTAL-COSTS> 2,764,700,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,600,000
<INCOME-PRETAX> 631,500,000
<INCOME-TAX> 249,500,000
<INCOME-CONTINUING> 382,000,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (10,500,000)
<NET-INCOME> 371,500,000
<EPS-PRIMARY> 5.05
<EPS-DILUTED> 5.05
</TABLE>
