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, 1995
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:
Name of each exchange
Title of each class on which registered
Common Stock New York Stock Exchange
(par value $1.00 per share) Chicago Stock Exchange
Preferred Stock Purchase Rights Pacific Stock Exchange
London Stock Exchange
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 X.
As of February 29, 1996, the aggregate market value of the voting stock
held by non-affiliates of the registrant was approximately $7,007,000,000.
As of February 29, 1996, there were outstanding 72,912,026 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)
Annual Report to Stockholders for the
year ended December 31, 1995...................Parts I, II and IV
Notice of Annual Meeting of Stockholders and
Proxy Statement dated March 29, 1996...........Parts I and III
MARSH & McLENNAN COMPANIES, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1995
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 analysis,
advice and transactional capabilities 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.
Risk management and insurance broking services, carried on throughout
the world principally by Marsh & McLennan, Incorporated and its subsidiaries
and affiliates, 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. Services include insurance broking activities
and professional counseling services on risk management issues, including
risk analysis, coverage requirements, self-insurance, and alternative
insurance and risk financing methods, as well as claims collection, injury
management, loss prevention and other insurance related services. Services
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.
Reinsurance services are provided to insurance and reinsurance risk takers
worldwide, principally by Guy Carpenter & Company, Inc. and its subsidiaries
and affiliates. Such services primarily 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 or other risk-transfer financing 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) primarily on a group
marketing basis to individuals, businesses and their employees, and
organizations and their members in the United States and Canada, and also in
the United Kingdom. It also provides underwriting management services to
insurers in these countries. The Frizzell Group Limited and its
subsidiaries provide motor and household insurances, life insurance 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.
On February 7, 1996, the Company signed an agreement that is expected to
lead to the sale of Frizzell for approximately $289 million. The
transaction, which is subject to various regulatory and other approvals, is
expected to be completed by the end of the second quarter of 1996.
Marsh & McLennan Risk Capital Corp. ("MMRCC") provides services in
connection with originating, structuring and managing investments in both new
and existing insurers. It is an advisor to The Trident Partnership L.P., an
independent private investment partnership formed in 1994 to invest selectively
in the global insurance and reinsurance industry. It is also an advisor to Risk
Capital Reinsurance Company, a U.S. reinsurer formed in 1995 to provide
traditional and other kinds of reinsurance, both on a stand-alone basis and as
part of integrated capital solutions for insurance companies. MMRCC and its
predecessor operations were instrumental in the formation of several substantial
insurance and reinsurance entities, including A.C.E. Insurance Company, Ltd.,
X.L. Insurance Company, Ltd., and Mid Ocean Reinsurance Company Ltd., to
alleviate, in part, capacity shortages in critical segments of the insurance
and reinsurance business. MMRCC also advises Marsh & McLennan Risk Capital
Holdings, Ltd. regarding its ownership holding in certain insurance and
reinsurance entities and funds, primarily ones initiated by MMRCC.
The revenue attributable to the registrant's insurance services
consists primarily of fees paid by clients; commissions and fees paid by
insurance and reinsurance underwriters; interest income on premiums and, in
certain cases, on claims collected and not yet remitted to insurers,
reinsurers or 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 fees, royalties
and dividends as well as gains from sales of holdings in such entities. The
investment of fiduciary funds is governed by the applicable laws or
regulations of insurance supervisory authorities of the states in the United
States and in other jurisdictions in which the registrant's subsidiaries do
business. These laws and regulations typically limit the investments that
may be made with such funds. The general amount of funds invested and
interest rates can vary from time to time.
Commission rates vary in amount depending upon the type of insurance or
reinsurance coverage provided, the particular underwriter, and the capacity
in which the registrant acts, in addition to negotiations with clients.
Commissions may also be received contingent on factors such as the volume
and profitability to the underwriter of the business placed with it by the
registrant during specific periods. Claims services are sometimes performed
for policies placed several years previously.
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. Through Mercer Consulting Group, Inc., subsidiaries and
affiliates of the registrant, separately and in collaboration, provide
consulting services to a predominantly corporate clientele from locations
around the world primarily in the areas of human resources and employee
benefit programs, including retirement, health care and compensation
consulting, and general management consulting.
William M. Mercer Companies, Inc. provides professional advice and
services to corporate, government and institutional clients from offices
worldwide helping organizations design, implement, administer and
communicate retirement, compensation and other human resource programs. In
addition, Mercer advises the managements of health care providers on various
business issues, including operational reengineering, improving clinical
effectiveness and establishing strategic partnerships. Mercer also provides
a facility for clients wishing to outsource certain human resource functions
as well as for the administration of defined contribution plans.
Mercer Management Consulting, Inc. provides advice and assistance on
strategic issues, primarily to large corporations in North America, Europe
and Asia particularly in the areas of strategy, growth, change, operations
and marketing. Mercer Management Consulting helps its clients to develop
and execute business strategies. In addition, under the Lippincott &
Margulies name, Mercer Management Consulting provides 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 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 major component of Mercer Consulting Group's revenue is fees paid
by clients for advice in the areas noted above. In addition, commission
revenue is received from insurance underwriters for the placement of
individual and group insurance contracts.
Revenue in the consulting business is affected by new products and
services, the degree of regulatory change, changes involving its clients'
industries, 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 performed principally 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 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, collective investment vehicles 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, and also
provides trustee services for IRA's, corporate retirement plans and other
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.
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 varies depending 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. 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 vary with the type of
service being provided.
Putnam markets its mutual funds through broker/dealers, financial
planners and financial institutions including banks. 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. Essentially all
Putnam Funds are available with a deferred sales charge in lieu of a front-
end load. The related pre-paid dealer commissions initially paid by Putnam
to broker/dealers for distributing such funds 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 are 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 to 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 $125.7 billion and $95.3 billion as of December 31, 1995 and
1994, respectively. Mutual fund assets aggregated $93.4 billion at December
31, 1995 and $67.2 billion at December 31, 1994. Assets under management at
December 31, 1995 consisted of approximately 51% equity securities and 49%
fixed income products, invested both domestically and globally. Assets
under management and revenue levels are affected by fluctuations in domestic
and international bond and stock market prices, and 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.
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 in the aggregate
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 investment and securities
regulations in various jurisdictions.
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 possibility exists that the registrant may be
precluded or temporarily suspended from carrying on some or all of its
activities or otherwise fined or 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, 1995 (the "1995 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, 1995, the registrant and its
consolidated subsidiaries employed about 27,000 people worldwide, of whom
approximately 14,800 were employed by subsidiaries providing insurance
services, approximately 8,800 were employed by subsidiaries providing
consulting services, approximately 3,100 were employed by subsidiaries
providing investment management services and approximately 300 were employed
by the registrant.
Executive Officers of the Registrant. The executive officers of the
registrant as of December 31, 1995 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 29, 1996 (the "1996
Proxy Statement"), and:
Francis N. Bonsignore, age 49, 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 50, who is Secretary and General Counsel of the
registrant. He joined the registrant in 1974.
Item 2. Properties.
The registrant and four 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 have unused space
and may seek to sublet such 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 contract 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 1995 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.
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 1995 Annual Report is incorporated herein by reference.
Item 6. Selected Financial Data.
The selected financial data on pages 48 and 49 of the 1995 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 1995 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 1995 Annual Report and
Selected Quarterly Financial Data (Unaudited) on page 47 of the 1995 Annual
Report are incorporated herein by reference. Supplemental Notes to
Consolidated Financial Statements are included on pages 17 and 18 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
1996 Proxy Statement. Information as to the executive officers of the
registrant is set forth in Item 1 above.
Item 11. Executive Compensation.
Information under the headings "Executive Compensation", "Compensation
Committee Report" and "Comparison of Cumulative Total Stockholder Return" in
the 1996 Proxy Statement are incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information under the heading "Security Ownership" in the 1996 Proxy
Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
Information under the headings "Employment Agreements" and
"Transactions with Management and Others; Other Information" in the 1996
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 1995 Annual Report):
Consolidated Statements of Income for the three years
ended December 31, 1995
Consolidated Balance Sheets as of
December 31, 1995 and 1994
Consolidated Statements of Cash Flows for the three
years ended December 31, 1995
Consolidated Statements of Stockholders' Equity for the
three years ended December 31, 1995
Notes to Consolidated Financial Statements
Report of Independent Auditors
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, 1995 (incorporated herein by reference to
page 47 of the 1995 Annual Report)
Ten-Year Statistical Summary of Operations (incorporated
herein by reference to pages 48 and 49 of the 1995
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, Inc. 1992 Incentive and
Stock Award Plan
-Marsh & McLennan Companies, Inc. Restricted Shares Voluntary
Deferral Program for U.S. Employees
* 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.
-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
-Marsh & McLennan Companies Senior Management
Incentive Compensation Plan
-Marsh & McLennan Companies, Inc. 1995 U.S.
Employee Cash Bonus Award Voluntary Deferral Plan
-Marsh & McLennan Companies, Inc. 1995 Canadian
Employee Cash Bonus Award Voluntary Deferral Plan
-Marsh & McLennan Companies, Inc. Directors Stock
Compensation Plan
-Amended and Restated Employment Agreement between
Robert Clements and Marsh & McLennan Risk Capital
Corp. and related Guaranty of the registrant
-Amendment to Amended and Restated Employment
Agreement between Robert Clements and Marsh &
McLennan Risk Capital Corp. and related Guaranty
of the registrant
-Employment Agreement between Jeffrey W. Greenberg
and Marsh & McLennan Risk Capital Corp. and
related Guaranty of the registrant
(13) -Annual Report to Stockholders for the year
ended December 31, 1995, 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, 1995.
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 27th day of March, 1996 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 27th day of March, 1996.
/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*
FRANK J. BORELLI RICHARD H. BLUM
Senior Vice President and Director
Chief Financial Officer,
Director
/s/DOUGLAS C. DAVIS ROBERT CLEMENTS*
DOUGLAS C. DAVIS ROBERT CLEMENTS
Vice President and Controller Director
(Chief Accounting Officer)
PETER COSTER* RICHARD M. MORROW*
PETER COSTER RICHARD M. MORROW
Director Director
RAY J. GROVES* GEORGE PUTNAM*
RAY J. GROVES GEORGE PUTNAM
Director Director
RICHARD E. HECKERT* ADELE SMITH SIMMONS*
RICHARD E. HECKERT ADELE SMITH SIMMONS
Director Director
RICHARD S. HICKOK* JOHN T. SINNOTT*
RICHARD S. HICKOK JOHN T. SINNOTT
Director Director
DAVID D. HOLBROOK* FRANK J. TASCO*
DAVID D. HOLBROOK FRANK J. TASCO
Director Director
ROBERT M.G. HUSSON* R. J. VENTRES*
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
REPORT OF INDEPENDENT AUDITORS
Marsh & McLennan Companies, Inc.:
We have audited the consolidated balance sheets of Marsh & McLennan
Companies, Inc. as of December 31, 1995 and 1994, and the related
consolidated statements of income, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1995, and have
issued our report thereon dated February 29, 1996, 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 and
No. 115 in 1993. Such financial statements and report are included in your
1995 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 29, 1996
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, 1995 follows (in millions of dollars):
1995 1994 1993
Balance at beginning of year........... $52.2 $50.9 $50.9
Provision charged to operations........ 12.8 11.6 8.8
Accounts written-off, net of
recoveries........................... (10.5) (11.3) (7.7)
Effect of exchange rate changes........ .1 1.2 (.6)
Other.................................. - (.2) (.5)
----- ----- -----
Balance at end of year (A)............. $54.6 $52.2 $50.9
===== ===== =====
(A) Includes allowance for doubtful accounts related to long-term
consumer finance receivables amounting to $6.3 million in 1995,
$7.3 million in 1994 and $8.0 million in 1993.
An analysis of the valuation allowance for certain foreign deferred tax
assets as of December 31, 1995, 1994 and 1993 follows (in millions of
dollars):
1995 1994 1993
Balance at beginning of year........... $24.7 $23.6 $21.6
Provision.............................. - .5 1.7
Effect of exchange rate changes........ .5 .6 .3
----- ----- -----
Balance at end of year (A)............. $25.2 $24.7 $23.6
===== ===== =====
(A) Included in other liabilities in the Consolidated Balance Sheets.
16. An analysis of intangible assets at December 31, 1995 and 1994 follows
(in millions of dollars):
1995 1994
Goodwill .............................. $787.4 $736.9
Other intangible assets................ 92.3 87.4
------ ------
Subtotal............................. 879.7 824.3
Less - accumulated amortization ....... (150.0) (123.3)
------ ------
Total............................. $729.7 $701.0
====== ======
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, 1995 (in millions of
shares).
1995 1994 1993
Primary .8 .7 1.0
=== === ===
Fully Diluted 1.1 .7 1.0
=== === ===
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
(incorporated by reference to the
registrant's Annual Report on
Form 10-K for the year ended
December 31, 1994)
(10) -Marsh & McLennan Companies, Inc.
1992 Incentive and Stock Award Plan
-Marsh & McLennan Companies, Inc. Restricted
Shares Voluntary Deferral Program for U.S.
Employees
-Marsh & McLennan Companies Stock
Investment Supplemental Plan
(incorporated by reference to the
registrant's Annual Report on
Form 10-K for the year ended
December 31, 1994)
-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
(incorporated by reference to the
registrant's Annual Report on
Form 10-K for the year ended
December 31, 1994)
-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)
EXHIBIT INDEX (cont'd)
Page number in
sequential
numbering system
-Marsh & McLennan Companies, Inc.
U.S. Employee 1995 Cash Bonus
Award Voluntary Deferral Plan
-Marsh & McLennan Companies, Inc.
Canadian Employee 1995 Cash Bonus
Award Voluntary Deferral Plan
-Amended and Restated Employment
Agreement between Robert Clements
and Marsh & McLennan Risk Capital
Corp. and related Guaranty of the
registrant (incorporated by reference
to the registrant's Annual Report
on Form 10-K for the year ended
December 31, 1994)
-Amendment to Amended and Restated
Employment Agreement between Robert
Clements and Marsh & McLennan Risk
Capital Corp. and related Guaranty
of the Registrant
-Employment Agreement by and between
Jeffrey W. Greenberg and Marsh &
McLennan Risk Capital Corp. and
related Guaranty of the registrant
-Marsh & McLennan Companies Senior
Management Incentive Compensation Plan
(incorporated by reference to the
registrant's Annual Report on
Form 10-K for the year ended
December 31, 1994)
-Marsh & McLennan Companies, Inc.
Directors Stock Compensation Plan
(13) -Annual Report to Stockholders for the
year ended December 31, 1995, to be
deemed filed only with respect to
those portions which are expressly
incorporated by reference
(21) -list of subsidiaries of the
registrant
EXHIBIT INDEX (cont'd)
Page number in
sequential
numbering system
(23) -consent of independent auditors
(24) -powers of attorney
(27) -Financial Data Schedule (filed only
with SEC for EDGAR purposes)
MARSH & McLENNAN COMPANIES, INC.
1992 INCENTIVE AND STOCK AWARD PLAN
Amended and
Restated
5/16/95
MARSH & McLENNAN COMPANIES, INC.
1992 INCENTIVE AND STOCK AWARD PLAN
1. Purposes. The purposes of the 1992 Incentive and Stock
Award Plan are to advance the interests of Marsh & McLennan Companies,
Inc. and its stockholders by providing a means to attract, retain, and
motivate employees of the Company and its Subsidiaries and Affiliates, and
to strengthen the mutuality of interest between such employees and the
Company's stockholders.
2. Definitions.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Affiliate" means any entity other than the Company and its
Subsidiaries that is designated by the Board or the Committee as a participating
employer under the Plan, provided that the Company directly or indirectly owns
at least 20% of the combined voting power of all classes of stock of such entity
or at least 20% of the ownership interests in such entity.
(b) "Award" means any Option, SAR (including a Limited SAR), Restricted
Stock, Restricted Stock Unit, Dividend Equivalent, or Other Stock-Based Award
including unrestricted Stock awarded as a bonus or any other right or interest
relating to Stock or cash, granted to a Participant under the Plan.
(c) "Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
(d) "Beneficiary" means the person, persons, trust or trusts which have
been designated by such Participant in his or her most recent written
beneficiary designation filed with the Company to receive the benefits specified
under this Plan upon the death of the Participant, or, if there is no designated
Beneficiary or surviving designated Beneficiary, then the person, persons, trust
or trusts entitled by will or the laws of descent and distribution to receive
such benefits.
(e) "Board" means the Board of Directors of the Company.
(f) "Change in Control" means Change in Control as defined with
related terms in Section 8.
- 1 -
(g) "Code" means the Internal Revenue Code of 1986, as amended from
time to time. References to any provision of the Code shall be deemed to include
successor provisions thereto and regulations thereunder.
(h) "Committee" means the Compensation Committee of the Board, or such
other Board committee as may be designated by the Board to administer the Plan;
provided, however, that the Committee shall consist of two or more directors of
the Company, each of whom is a "disinterested person" within the meaning of Rule
16b-3 under the Exchange Act.
(i) "Company" means Marsh & McLennan Companies, Inc., a corporation
organized under the laws of the State of Delaware, or any successor corporation.
(j) "Dividend Equivalent" means a right, granted to a Participant under
Section 6(g), to receive cash, Stock, or other property equal in value to
dividends paid with respect to a specified number of shares of Stock. Dividend
Equivalents may be awarded on a free-standing basis or in connection with
another Award, and may be paid currently or on a deferred basis.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time. References to any provision of the Exchange Act shall
be deemed to include successor provisions thereto and regulations thereunder.
(l) "Fair Market Value" means, with respect to Stock or other property,
the fair market value of such Stock or other property determined by such methods
or procedures as shall be established from time to time by the Committee. Unless
otherwise determined by the Committee in good faith, the Fair Market Value of
Stock as of any given date shall mean the per share value of Stock as determined
by using the mean between the high and low selling prices of such Stock on the
immediately preceding date (or, if the NYSE was not open that day, the next
preceding day that the NYSE was open for trading and the Stock was traded) as
reported for such date in the table titled "NYSE--Composite Transactions,"
contained in The Wall Street Journal or an equivalent successor table.
(m) "ISO" means any Option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the Code.
(n) "Limited SAR" means a right which shall, in general, be
automatically exercised for cash upon a Change in Control.
(o) "NQSO" means any Option that is not an ISO.
- 2 -
(p) "Option" means a right, granted to a Participant under
Section 6(b), to purchase Stock. An Option may be either an ISO
or an NQSO.
(q) "Other Stock-Based Award" means a right, granted to a Participant
under Section 6(h), that relates to or is valued by reference to Stock.
(r) "Participant" means a person who, as an employee of the
Company, a Subsidiary, or Affiliate, has been granted an Award
under the Plan.
(s) "Plan" means this 1992 Incentive and Stock Award Plan.
(t) "Restricted Stock" means an award of shares of Stock to a
Participant under Section 6(d) that may be subject to certain restrictions and
to a risk of forfeiture.
(u) "Restricted Stock Unit" means a right, granted to a Participant
under Section 6(e), to receive Stock or cash at the end of a specified deferral
period.
(v) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(w) "Stock" means the Common Stock, $1.00 par value per share, of the
Company or such other securities pursuant to Section 5.
(x) "SAR" or "Stock Appreciation Right" means the right, granted to a
Participant under Section 6(c), to be paid an amount measured by the
appreciation in the Fair Market Value of Stock from the date of grant to the
date of exercise of the right, with payment to be made in cash, Stock, or
property as specified in the Award or determined by the Committee.
(y) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
- 3 -
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the
Committee. The Committee shall have full and final authority to take the
following actions, in each case subject to and consistent with the provisions of
the Plan:
(i) to select Participants to whom Awards may be
granted;
(ii) to designate Affiliates;
(iii) to determine the type or types of Awards to be
granted to each Participant;
(iv) to determine the type and number of Awards to be granted,
the number of shares of Stock to which an Award may relate, the terms
and conditions of any Award granted under the Plan (including, but not
limited to, any exercise price, grant price, or purchase price, any
restriction or condition, any schedule for lapse of restrictions or
conditions relating to transferability or forfeiture, exercisability,
or settlement of an Award, and waivers or accelerations thereof, and
waivers of performance conditions relating to an Award, based in each
case on such considerations as the Committee shall determine), and all
other matters to be determined in connection with an Award;
(v) to determine whether, to what extent, and under what
circumstances an Award may be settled, or the exercise price of an
Award may be paid, in cash, Stock, other Awards, or other property, or
an Award may be cancelled, forfeited, exchanged, or surrendered;
(vi) to determine whether, to what extent, and under what
circumstances cash, Stock, other Awards, or other property payable with
respect to an Award will be deferred either automatically, at the
election of the Committee, or at the election of the Participant, and
whether to create trusts and deposit Stock or other property therein;
(vii) to prescribe the form of each Award Agreement,
which need not be identical for each Participant;
(viii) to adopt, amend, suspend, waive, and rescind such rules
and regulations and appoint such agents as the Committee may deem
necessary or advisable to administer the Plan;
- 4 -
(ix) to correct any defect or supply any omission or reconcile
any inconsistency in the Plan and to construe and interpret the Plan
and any Award, rules and regulations, Award Agreement, or other
instrument hereunder; and
(x) to make all other decisions and determinations as may be
required under the terms of the Plan or as the Committee may deem
necessary or advisable for the administration of the Plan.
(b) Manner of Exercise of Committee Authority. Unless authority is
specifically reserved to the Board under the terms of the Plan, the Company's
Certificate of Incorporation or Bylaws or applicable law, the Committee shall
have sole discretion in exercising such authority under the Plan. Any action of
the Committee with respect to the Plan shall be final, conclusive, and binding
on all persons, including the Company, Subsidiaries, Affiliates, Participants,
any person claiming any rights under the Plan from or through any Participant,
and stockholders. The express grant of any specific power to the Committee, and
the taking of any action by the Committee, shall not be construed as limiting
any power or authority of the Committee. The Committee may delegate to officers
or managers of the Company or any Subsidiary or Affiliate the authority, subject
to such terms as the Committee shall determine, to perform administrative
functions and, with respect to Awards granted to persons not subject to Section
16 of the Exchange Act, to perform such other functions as the Committee may
determine, to the extent permitted under Rule 16b-3 and applicable law.
(c) Limitation of Liability. Each member of the Committee shall be
entitled to, in good faith, rely or act upon any report or other information
furnished to him or her by any officer or other employee of the Company or any
Subsidiary or Affiliate, the Company's independent certified public accountants,
or other professional retained by the Company to assist in the administration of
the Plan. No member of the Committee, nor any officer or employee of the Company
acting on behalf of the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Committee and any officer or employee of the
Company acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action,
determination, or interpretation.
- 5 -
4. Eligibility. Officers and other employees of the Company and its
Subsidiaries and Affiliates (including any director who is also an employee but
excluding members of the Committee and directors of the Company who are not
employees) who are responsible for or contribute to the management, growth
and/or profitability of the business of the Company, its Subsidiaries or
Affiliates are eligible to be granted Awards under the Plan.
5. Stock Subject to the Plan.
(a) Subject to adjustment as hereinafter provided, the total number of
shares of Stock reserved for issuance in connection with Awards under the Plan
shall be eight million two hundred thousand (8,200,000), plus such number of
shares that have been authorized and reserved for awards under the Marsh &
McLennan Companies, Inc. 1988 Incentive and Stock Award Plan (the "1988 Plan");
provided, however, that Awards may be granted with respect to any such 1988 Plan
shares (i) to the extent that such shares were available for grants of awards
under the 1988 Plan at the Effective Date (as hereinafter defined) or (ii)
subject to outstanding awards under the 1988 Plan on the Effective Date, to the
extent such shares would again be available for grants of Awards under the Plan
(as determined pursuant to the provisions of this Section 5) upon the
termination, expiration, forfeiture or cancellation of such 1988 Plan awards. No
Award may be granted if the number of shares to which such Award relates, when
added to the number of shares previously issued under the Plan and the number of
shares to which other then-outstanding Awards relate, exceeds the number of
shares reserved under the preceding sentence. If any shares subject to an Award
are forfeited, cancelled, exchanged or surrendered or such Award is settled in
cash or otherwise terminates without a distribution of shares to the
Participant, any shares counted against the number of shares reserved and
available under the Plan with respect to such Award shall, to the extent of any
such forfeiture, settlement, termination, cancellation, exchange or surrender,
again be available for Awards under the Plan; provided, however, that the
Committee may adopt procedures for the counting of shares relating to any Award
to ensure appropriate counting, avoid double counting (in the case of tandem or
substitute awards), and provide for adjustments in any case in which the number
of shares actually distributed differs from the number of shares previously
counted in connection with such Award; and provided further, that in the case of
forfeiture, cancellation, exchange or surrender of shares of Restricted Stock or
Restricted Stock Units with respect to which dividends or Dividend Equivalents
have been paid or
- 6 -
accrued, such number of shares shall not be available for Awards unless, in the
case of shares with respect to which dividends or Dividend Equivalents were
accrued but unpaid, such dividends and Dividend Equivalents are also forfeited,
cancelled, exchanged or surrendered. Upon the exercise of any Award granted in
tandem with any other Awards or awards, such related Awards or awards shall be
cancelled to the extent of the number of shares of Stock as to which the Award
is exercised.
(b) Any shares of Stock distributed pursuant to an Award may consist,
in whole or in part, of authorized and unissued shares or treasury shares
including shares acquired by purchase in the open market or in private
transactions.
(c) In the event that the Committee shall determine that any dividend
or other distribution (whether in the form of cash, Stock, or other property),
recapitalization, Stock split, reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event, affects the Stock such that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of Participants under the Plan, then the Committee shall make such
equitable changes or adjustments as it deems appropriate and, in such manner as
it may deem equitable, adjust any or all of (i) the number and kind of shares of
Stock which may thereafter be issued in connection with Awards, (ii) the number
and kind of shares of Stock issued or issuable in respect of outstanding Awards,
and (iii) the exercise price, grant price, or purchase price relating to any
Award; provided, however, in each case that, with respect to ISOs, such
adjustment shall be made in accordance with Section 424(h) of the Code, unless
the Committee determines otherwise. In addition, the Committee is authorized to
make adjustments in the terms and conditions of, and the criteria and
performance objectives included in, Awards in recognition of unusual or
non-recurring events (including, without limitation, events described in the
preceding sentence) affecting the Company or any Subsidiary or Affiliate or the
financial statements of the Company or any Subsidiary or Affiliate, or in
response to changes in applicable laws, regulations, or accounting principles.
6. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee may impose on any Award or
the exercise thereof, at the date of grant or thereafter (subject to Section
9(e)), such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine, including terms
regarding forfeiture of Awards or continued exercisability of Awards in the
event of termination of employment by the Participant.
- 7 -
(b) Options. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(i) Exercise Price. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee;
provided, however, that, except as provided in Section 7(a), such
exercise price shall be not less than the Fair Market Value of a share
on the date of grant of such Option, and in no event shall the exercise
price for the purchase of shares be less than par value.
(ii) Time and Method of Exercise. The Committee shall
determine at the date of grant or thereafter the time or times at which
an Option may be exercised in whole or in part, the methods by which
such exercise price may be paid or deemed to be paid, the form of such
payment, including, without limitation, cash, Stock, notes or other
property, and the methods by which Stock will be delivered or deemed to
be delivered to Participants.
(iii) ISOs. The terms of any ISO granted under the Plan shall
comply in all respects with the provisions of Section 422 of the Code,
including but not limited to the requirement that no ISO shall be
granted more than ten years after the effective date of the Plan.
(c) SARs and Limited SARs. The Committee is authorized to
grant SARs and Limited SARs to Participants on the following
terms and conditions:
(i) SARs. (A) Right to Payment. An SAR shall confer on the
Participant to whom it is granted a right to receive with respect to
each share subject thereto, upon exercise thereof, the excess of (1)
the Fair Market Value of one share of Stock on the date of exercise
(or, if the Committee shall so determine in the case of any such right,
including, in the Committee's discretion, one related to an ISO, the
Fair Market Value of one share at any time during a specified period
before or after the date of exercise) over (2) the grant price of the
SAR as determined by the Committee as of the date of grant of the SAR,
which shall be not less than the Fair Market Value of one share of
Stock on the date of grant of such SAR (or, in the case of an SAR
granted in tandem with an Option, shall be equal to the exercise price
of the underlying Option).
(B) Other Terms. The Committee shall determine, at
the time of grant or thereafter, the time or times at which an SAR may
be exercised in whole or in part, the method of exercise, method of
settlement, form of consideration payable in settlement, method by
which Stock will be delivered or deemed to be delivered to
Participants,
- 8 -
whether or not an SAR shall be in tandem with any other Award, and any
other terms and conditions of any SAR. Unless the Committee determines
otherwise, an SAR or a Limited SAR (1) granted in tandem with an NQSO
may be granted at the time of grant of the related NQSO or at any time
thereafter or (2) granted in tandem with an ISO may only be granted at
the time of grant of the related ISO.
(ii) Limited SARs. A Limited SAR shall confer on the
Participant to whom it is granted a right to receive with respect to
each share subject thereto, automatically upon the occurrence of a
Change in Control, an amount equal to the excess of the Change in
Control Price (as defined in Section 8(c) hereof) or, in the
Committee's discretion, in the case of a Limited Right related to an
ISO, the Fair Market Value of one share, over the grant price of the
Limited SAR as determined by the Committee as of the date of grant of
the Limited SAR, which shall be not less than the Fair Market Value of
one share of Stock on the date of grant (or, in the case of a Limited
SAR granted in tandem with an Option, shall be equal to the exercise
price of the underlying Option), provided that in the case of a Limited
SAR granted to a Participant who is subject to the reporting
requirements of Section 16(a) of the Exchange Act (a "Section 16
Individual"), such Section 16 Individual shall only be entitled to
receive such amount if such Limited SAR has been outstanding for at
least six (6) months as of the date of the Change in Control.
(d) Restricted Stock. The Committee is authorized to grant
Restricted Stock to Participants on the following terms and
conditions:
(i) Issuance and Restrictions. Restricted Stock shall be
subject to such restrictions on transferability and other restrictions,
if any, as the Committee may impose at the date of grant or thereafter,
which restrictions may lapse separately or in combination at such
times, under such circumstances, in such installments, or otherwise, as
the Committee may determine. Except to the extent restricted under the
Award Agreement relating to the Restricted Stock, a Participant granted
Restricted Stock shall have all of the rights of a stockholder
including, without limitation, the right to vote Restricted Stock and
the right to receive dividends thereon.
(ii) Forfeiture. Except as otherwise determined by the
Committee, at the date of grant or thereafter, upon termination of
employment during the applicable restriction period, Restricted Stock
and any accrued but unpaid dividends or Dividend Equivalents that are
at that time subject to restrictions shall be forfeited; provided,
- 9 -
however, that the Committee may provide, by rule or regulation or in
any Award Agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Restricted Stock will
be waived in whole or in part in the event of terminations resulting
from specified causes, and the Committee may in other cases waive in
whole or in part the forfeiture of Restricted Stock.
(iii) Certificates for Stock. Restricted Stock granted under
the Plan may be evidenced in such manner as the Committee shall
determine. If certificates representing Restricted Stock are registered
in the name of the Participant, such certificates shall bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such Restricted Stock, and the Company shall retain
physical possession of the certificate.
(iv) Dividends. Dividends paid on Restricted Stock shall be
either paid at the dividend payment date, or deferred for payment to
such date as determined by the Committee, in cash or in shares of
unrestricted Stock having a Fair Market Value equal to the amount of
such dividends. Stock distributed in connection with a Stock split or
Stock dividend, and other property distributed as a dividend, shall be
subject to restrictions and a risk of forfeiture to the same extent as
the Restricted Stock with respect to which such Stock or other property
has been distributed.
(e) Restricted Stock Units. The Committee is authorized to
grant Restricted Stock Units to Participants, subject to the
following terms and conditions:
(i) Award and Restrictions. Delivery of Stock or cash, as the
case may be, will occur upon expiration of the deferral period
specified for Restricted Stock Units by the Committee (or, if permitted
by the Committee, as elected by the Participant). In addition,
Restricted Stock Units shall be subject to such restrictions as the
Committee may impose, if any, at the date of grant or thereafter, which
restrictions may lapse at the expiration of the deferral period or at
earlier or later specified times, separately or in combination, in
installments or otherwise, as the Committee may determine.
(ii) Forfeiture. Except as otherwise determined by the
Committee at date of grant or thereafter, upon termination of
employment (as determined under criteria established by the Committee)
during the applicable deferral period or portion thereof to which
forfeiture conditions apply (as provided in the Award Agreement
evidencing the Restricted Stock Units), or upon failure to satisfy any
other conditions precedent to the delivery of Stock or cash to
- 10 -
which such Restricted Stock Units relate, all Restricted Stock Units
that are at that time subject to deferral or restriction shall be
forfeited; provided, however, that the Committee may provide, by rule
or regulation or in any Award Agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating to
Restricted Stock Units will be waived in whole or in part in the event
of termination resulting from specified causes, and the Committee may
in other cases waive in whole or in part the forfeiture of Restricted
Stock Units.
(f) Stock Awards in Lieu of Cash Awards. The Committee is authorized to
grant Stock as a bonus, or to grant other Awards, in lieu of Company commitments
to pay cash under other plans or compensatory arrangements. Stock or Awards
granted hereunder shall have such other terms as shall be determined by the
Committee.
(g) Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to Participants. The Committee may provide, at the date of grant or
thereafter, that Dividend Equivalents shall be paid or distributed when accrued
or shall be deemed to have been reinvested in additional Stock, or other
investment vehicles as the Committee may specify, provided that Dividend
Equivalents (other than freestanding Dividend Equivalents) shall be subject to
all conditions and restrictions of the underlying Awards to which they relate.
(h) Other Stock-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other Awards
that may be denominated or payable in, valued in whole or in part by reference
to, or otherwise based on, or related to, Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including, without limitation,
unrestricted Stock awarded purely as a "bonus" and not subject to any
restrictions or conditions, other rights convertible or exchangeable into Stock,
purchase rights for Stock, Awards with value and payment contingent upon
performance of the Company or any other factors designated by the Committee, and
Awards valued by reference to the performance of specified Subsidiaries or
Affiliates. The Committee shall determine the terms and conditions of such
Awards at date of grant or thereafter. Stock delivered pursuant to an Award in
the nature of a purchase right granted under this Section 6(h) shall be
purchased for such consideration, paid for at such times, by such methods, and
in such forms, including, without limitation, cash, Stock, notes or other
property, as the Committee shall determine; provided, however, that, except as
provided in Section 7(a), the value of such consideration, as determined by the
Committee, shall be not less than 100% of the Fair Market Value of such Stock as
of the date such purchase right is granted. Cash awards, as an element of or
supplement to any other Award under the Plan, shall also be authorized pursuant
to this Section 6(h).
- 11 -
7. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in exchange or substitution
for, any other Award granted under the Plan or any award granted under any other
plan of the Company, any Subsidiary or Affiliate, or any business entity to be
acquired by the Company or a Subsidiary or Affiliate, or any other right of a
Participant to receive payment from the Company or any Subsidiary or Affiliate.
Awards may be granted in addition to or in tandem with such other Awards or
awards may be granted either as of the same time as or a different time from the
grant of such other Awards or awards. The per share exercise price of any
Option, grant price of any SAR, or purchase price of any other Award conferring
a right to purchase Stock which is granted, in connection with the substitution
of awards granted under any other plan of the Company or any Subsidiary or
Affiliate or any business entity to be acquired by the Company or any Subsidiary
or Affiliate, shall be determined by the Committee, in its discretion, and may,
to the extent the Committee determines necessary in order to preserve the value
of such other award, be less than the Fair Market Value of a share on the date
of grant of such substitute Award.
(b) Terms of Awards. The term of each Award shall be for such period as
may be determined by the Committee; provided, however, that in no event shall
the term of any ISO or an SAR granted in tandem therewith exceed a period of ten
years from the date of its grant (or such shorter period as may be applicable
under Section 422 of the Code).
(c) Form of Payment Under Awards. Subject to the terms of the Plan and
any applicable Award Agreement, payments to be made by the Company or a
Subsidiary or Affiliate upon the grant, maturation, or exercise of an Award may
be made in such forms as the Committee shall determine at the date of grant or
thereafter, including, without limitation, cash, Stock, or other property, and
may be made in a single payment or transfer, in installments, or on a deferred
basis. The Committe may make rules relating to installment or deferred payments
with respect to Awards, including the rate of interest to be credited with
respect to such payments.
(d) Miscellaneous. Awards shall not be transferable by a Participant
except by will or the laws of descent and distribution or except pursuant to a
designation of a Beneficiary and, awards shall be exercisable during the
lifetime of a Participant only by such Participant or his guardian or legal
representative.
- 12 -
(e) 1988 Plan Awards. Upon effectiveness of the Plan, no further grants
of options or other awards will be made under the 1988 Plan, provided, however,
that the authority to grant further options and awards under the 1988 Plan shall
be reinstated if stockholders do not approve the Plan in accordance with Section
9(k). Options and other awards granted under the 1988 Plan and not terminated
prior to the effective date of the Plan shall be subject to and governed by the
terms and conditions of the Plan; provided, however, that the 1988 Plan shall be
deemed to be a subplan under the Plan, and each option or other award granted
thereunder shall be subject to and governed by the terms and conditions and
agreements under the 1988 Plan as in effect immediately prior to the Plan's
effective date, unless an amendment to an outstanding option or other award is
approved by the Committee and, if required under the terms of the 1988 Plan or
the Plan, by the affected Participant.
8. Change in Control Provisions.
(a) In the event of a "Change in Control," as defined in this Section:
(i) any Award carrying a right to exercise that was
not previously exercisable and vested shall become fully
exercisable and vested; and
(ii) the restrictions, deferral limitations, and forfeiture
conditions applicable to any other Award granted under the Plan shall
lapse and such Awards shall be deemed fully vested, and any performance
conditions imposed with respect to Awards shall be deemed to be fully
achieved.
(b) For purposes of the Plan, 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 Exchange Act (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any corporation 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 voting
securities;
- 13 -
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board, 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 8(b)) whose election by the
Board or nomination for election by the Company'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;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, 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 or parent entity) 50% or more of the
combined voting power of the voting securities of the Company 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 Company (or similar transaction) in which no
"person" (as hereinabove defined) acquired 50% or more of the combined
voting power of the Company's then outstanding securities; or
(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).
(c) For purposes of the Plan, "Change in Control Price" means the
higher of (i) the highest price per share paid in any transaction constituting a
Change in Control or (ii) the highest Fair Market Value per share at any time
during the 60-day period preceding or following a Change in Control.
(d) Additional Payments. If any payment attributable to any Award under
the Plan (the "Payments") will be subject to the tax (the "Excise Tax") imposed
by Section 4999 of the Code (or any similar tax that may hereafter be imposed),
the Company shall pay at the time specified below, an additional amount (the
"Gross-Up Payment") such that the net amount retained by a Participant after
deduction of any Excise Tax on such Payments and any federal, state and local
income tax and Excise Tax upon the payment provided for by this Section, shall
be equal to the Payments. For purposes of determining whether any of the
Payments will be subject to the Excise Tax and the amount of such
- 14 -
Excise Tax, (a) all payments or benefits received or to be received by a
Participant in connection with a Change in Control of the Company (pursuant to
the Plan or any other plan, agreement or arrangement of the Company, its
Subsidiaries or Affiliates) shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of Section 280G(b)(1) shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel selected by the Company's
independent auditors and acceptable to the Participant such payments or benefits
(in whole or in part) do not constitute parachute payments, or such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered within the meaning of Section 280G(b)(4) of the Code
in excess of the base amount within the meaning of Section 280G(b)(3) of the
Code, or are otherwise not subject to the Excise Tax, (b) the amount of the
Payments which shall be treated as subject to the Excise Tax shall be equal to
the lesser of (1) the total amount of the Payments or (2) the amount of excess
parachute payments within the meaning of Section 280G(b)(1) (after applying
clause (a) above), and (c) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Company's independent auditors in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For
purposes of determining the amount of the Gross-Up Payment, the Participant
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Participant's residence on the date
such Gross-Up Payment is made, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local taxes. In
the event that the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder at the time of the Gross-Up Payment, the
Participant shall repay to the Company at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax and federal and state and local income tax
imposed on the Gross-Up Payment being repaid by the Participant if such
repayment results in a reduction in Excise Tax and/or a federal and state and
local income tax deduction) plus interest on the amount of such repayment at the
rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account hereunder at the time
of the Gross-Up Payment (including by reason of any
- 15 -
payment the existence or amount of which cannot be determined at the time of the
Gross-Up Payment), the Company shall make an additional Gross-Up Payment in
respect of such excess (plus any interest payable with respect to such excess)
at the time that the amount of such excess is finally determined. Any Gross-Up
Payment to be made to the Participant under this paragraph shall be payable
within thirty (30) days of the date of the Change in Control.
9. General Provisions.
(a) Compliance with Legal and Exchange Requirements. The
Plan, the granting and exercising of Awards thereunder, and the
other obligations of the Company under the Plan and any Award
Agreement, 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. The
Company, in its discretion, may postpone the issuance or delivery
of Stock under any Award until completion of such stock exchange
listing or registration or qualification of such Stock or other
required action under any state, federal or foreign law, rule or
regulation as the Company may consider appropriate, and may
require any Participant to make such representations and furnish
such information as it may consider appropriate in connection
with the issuance or delivery of Stock in compliance with
applicable laws, rules and regulations.
(b) Nontransferability. In addition to the restrictions on
transferability set forth in Section 7(d)(i) (which apply to all Participants
whether or not otherwise subject to Section 16 under the Exchange Act), a
Participant's rights under the Plan may not be pledged, mortgaged, hypothecated,
or otherwise encumbered, and shall not be subject to claims of the Participant's
creditors.
(c) No Right to Continued Employment. Neither the Plan nor any action
taken thereunder shall be construed as giving any employee the right to be
retained in the employ of the Company or any of its Subsidiaries or Affiliates,
nor shall it interfere in any way with the right of the Company or any of its
Subsidiaries or Affiliates to terminate any employee's employment at any time.
(d) Taxes. The Company or any Subsidiary or Affiliate is authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due in connection with any
transaction involving an Award, and to take such other action as the Committee
may deem advisable to enable the Company and Participants to satisfy obligations
for the
- 16 -
payment of withholding taxes and other tax obligations relating to any Award.
This authority shall include authority to withhold or receive Stock or other
property and to make cash payments in respect thereof in satisfaction of a
Participant's tax obligations.
(e) Changes to the Plan and Awards. The Board may amend, alter,
suspend, discontinue, or terminate the Plan or the Committee's authority to
grant Awards under the Plan without the consent of stockholders or Participants,
except that any such amendment, alteration, suspension, discontinuation, or
termination shall be subject to the approval of the Company's stockholders
within one year after such Board action if such stockholder approval is required
by any federal law or regulation (including Rule 16b-3) or the rules of any
stock exchange or automated quotation system on which the Stock may then be
listed or quoted; provided, however, that, without the consent of an affected
Participant, no amendment, alteration, suspension, discontinuation, or
termination of the Plan may impair the rights or, in any other manner, adversely
affect the rights of such Participant under any Award theretofore granted to him
or her. The Committee may waive any conditions or rights under, or amend, alter,
suspend, discontinue, or terminate any Award theretofore granted and any Award
Agreement relating thereto; provided, however, that, without the consent of an
affected Participant, no such amendment, alteration, suspension,
discontinuation, or termination of any Award may impair or adversely affect the
rights of such Participant under such Award. Following the occurrence of a
Change in Control, the Board may not terminate this Plan or amend this Plan in
any manner adverse to employees.
(f) No Rights to Awards; No Stockholder Rights. No Participant or
employee shall have any claim to be granted any Award under the Plan, and there
is no obligation for uniformity of treatment of Participants and employees. No
Award shall confer on any Participant any of the rights of a stockholder of the
Company unless and until Stock is duly issued or transferred to the Participant
in accordance with the terms of the Award.
(g) Unfunded Status of Awards and Trusts. The 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 the Plan or any Award shall give any such Participant any
rights that are greater than those of a general creditor of the Company;
provided, however, that the Committee may authorize the creation of trusts or
make other arrangements to meet the Company's obligations under the Plan to
deliver cash, Stock, other Awards, or other property pursuant to any Award,
which trusts or other arrangements shall be consistent with the "unfunded"
status of the Plan unless the Committee otherwise determines with the consent of
each affected Participant. If and to the extent
- 17 -
authorized by the Committee, the Company may deposit into such a trust Stock or
other assets for delivery to the Participant in satisfaction of the Company's
obligations under any Award. If so provided by the Committee, upon such a
deposit of Stock or other assets for the benefit of a Participant, there shall
be substituted for the rights of the Participant to receive delivery of Stock
and other payments under this Plan a right to receive the assets of the trust
(to the extent that the deposited Stock or other assets represented the full
amount of the Company's obligation under the Award at the date of deposit). The
trustee of the trust may be authorized to dispose of trust assets and reinvest
the proceeds in alternative investments, subject to such terms and conditions as
the Committee may specify and in accordance with applicable law.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the stockholders of the Company for approval shall
be construed as creating any limitations on the power of the Board to adopt such
other incentive arrangements as it may deem desirable, including, without
limitation, the granting of stock options and other awards otherwise than under
the Plan, and such arrangements may be either applicable generally or only in
specific cases.
(i) No Fractional Shares. No fractional shares of Stock shall be issued
or delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash, other Awards, or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.
(j) Governing Law. The validity, construction, and effect of the Plan,
any rules and regulations relating to the Plan, and any Award Agreement shall be
determined in accordance with the laws of the state of Delaware, without giving
effect to principles of conflicts of laws; and applicable federal law.
(k) Effective Date; Plan Termination. The Plan shall become effective
(the "Effective Date") upon approval by the affirmative votes of the holders of
a majority of voting securities present in person or represented by proxy, and
entitled to vote at a meeting of Company stockholders duly held in accordance
with the Delaware General Corporation Law, or any adjournment thereof in
accordance with applicable provisions of the Delaware General Corporation Law.
Any Awards granted under the Plan prior to such approval of stockholders shall
be subject to such approval and in the absence of such approval, such Awards
shall be null and void. The Plan shall terminate as to future awards on the date
which is five (5) years after the Effective Date, or, if earlier, at such time
as no Stock remains available for issuance pursuant to Section 5 and the Company
has no further obligations with respect to any Award granted under the Plan.
- 18 -
(l) Titles and Headings. The titles and headings of the sections in the
Plan are for convenience of reference only. In the event of any conflict, the
text of the Plan, rather than such titles or headings, shall control.
- 19 -
MARSH & MCLENNAN COMPANIES, INC.
1992 INCENTIVE AND STOCK AWARD PLAN
Section Page
1. Purposes....................................................... 1
2. Definitions.................................................... 1
3. Administration................................................. 4
(a) Authority of the Committee............................ 4
(b) Manner of Exercise of Committee Authority............. 5
(c) Limitation of Liability............................... 5
4. Eligibility.................................................... 6
5. Stock Subject to the Plan...................................... 6
6. Specific Terms of Awards....................................... 7
(a) General............................................... 7
(b) Options............................................... 8
(c) SARs and Limited SARs................................. 8
(d) Restricted Stock.......................................9
(e) Restricted Stock Units............................... 10
(f) Stock Awards in Lieu of Cash Awards.................. 11
(g) Dividend Equivalents................................. 11
(h) Other Stock-Based Awards............................. 11
7. Certain Provisions Applicable to Awards....................... 12
(a) Stand-Alone, Additional, Tandem and
Substitute Awards.................................. 12
(b) Terms of Awards...................................... 12
(c) Form of Payment Under Awards......................... 12
(d) Miscellaneous........................................ 12
(e) 1988 Plan Awards..................................... 13
8. Change in Control Provisions.................................. 13
- i -
MARSH & MCLENNAN COMPANIES, INC.
1992 INCENTIVE AND STOCK AWARD PLAN
Section Page
9. General Provisions............................................ 16
(a) Compliance with Legal and Exchange
Requirements....................................... 16
(b) Nontransferability................................... 16
(c) No Right to Continued Employment..................... 16
(d) Taxes................................................ 16
(e) Changes to the Plan and Awards....................... 17
(f) No Rights to Awards; No Stockholder Rights........... 17
(g) Unfunded Status of Awards and Trusts................. 17
(h) Nonexclusivity of the Plan........................... 18
(i) No Fractional Shares................................. 18
(j) Governing Law........................................ 18
(k) Effective Date; Plan Termination..................... 18
(l) Titles and Headings.................................. 19
- ii -
MARSH & McLENNAN COMPANIES, INC.
RESTRICTED SHARES VOLUNTARY DEFERRAL PROGRAM
FOR U.S. EMPLOYEES
SUMMARY OF KEY PROVISIONS FOR RESTRICTED STOCK/UNIT GRANTS
<TABLE>
<CAPTION>
Original Award of Replacement Award of Supplemental Award of
Restricted Stock/Units Restricted Stock Units Restricted Stock Units
---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Number of Shares Number of restricted Number of restricted 15% of number of
shares originally shares exchanged restricted shares
awarded, less number of exchanged and deferred
restricted shares until January 1, 2000
exchanged or later
Grant Date April 30, 1986 and/or January 1, 1996 January 1, 1996
other dates
Vesting Date January 1, 1997 and/or January 1, 1997 and/or January 1, 2000
other dates in 1997 other dates in 1997 (except as noted below)
(except as noted below) (except as noted below)
Distribution Date(s) January 1997 and/or Based on employee Based on employee
other months in 1997 election election
(except as noted below) (except as noted below) (except as noted below)
IRC Section 162(m)
Distribution Date(s) Not Applicable Compensation Committee Compensation Committee
can further defer can further defer
distribution for distribution for
covered employees to covered employees to
avoid loss of corporate avoid loss of corporate
tax deduction tax deduction
Covered Employees Not Applicable Chief executive officer Chief executive officer
and four highest paid and four highest paid
executive officers executive officers
(other than chief (other than chief
executive officer) of executive officer) of
MMC on last day of year MMC on last day of year
of distribution of distribution
Dividend/Equivalents Payable and fully Payable and fully Payable and fully
taxable taxable taxable
Taxes
Grant Date None None None
Vesting Date Income tax and FICA FICA withholding FICA withholding
withholding
Distribution Dates(s) (Distribution occurs at Income tax withholding Income tax withholding
vesting)
<CAPTION>
Original Award of Replacement Award of Supplemental Award of
Restricted Stock/Units Restricted Stock Units Restricted Stock Units
---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Termination of Employment
Death Immediate vesting and Immediate vesting and Immediate vesting and
lump sum distribution lump sum distribution lump sum distribution
as soon as practicable as soon as practicable as soon as practicable
thereafter thereafter thereafter
Permanent Disability Immediate vesting (but Immediate vesting (but Immediate vesting (but
no sooner than 6 months no sooner than 6 months no sooner than 6 months
from grant date) and from grant date) and from grant date) and
lump sum distribution lump sum distribution lump sum distribution
as soon as practicable in January of year in later of January of
thereafter following termination year following
termination or January
2000
Normal or Deferred Vesting on retirement Vesting on retirement Vesting on retirement
Retirement date (but no sooner date (but no sooner date (but no sooner
than 6 months from than 6 months from than 6 months from
grant date) if prior to grant date) if prior to grant date) if prior to
otherwise scheduled otherwise scheduled January 1, 2000, and
vesting date, and vesting date, and distribution as elected
distribution as soon as distribution as elected (but beginning no later
practicable thereafter (but beginning no later than January of year
than January of year following retirement,
following retirement) provided that such
distribution not begin
sooner than January 2000)
Other Forfeiture of unvested Forfeiture of unvested Forfeiture of unvested
shares shares, or lump sum shares, or lump sum
distribution of any distribution of any
remaining vested shares remaining vested shares
in January of year in January of year
following termination following termination
Change in Control Immediate vesting and Immediate vesting and Immediate vesting and
lump sum distribution lump sum distribution lump sum distribution
as soon as practicable as soon as practicable as soon as practicable
thereafter thereafter thereafter
Special Severance Pay Plan Applicable Applicable Not Applicable
</TABLE>
This Summary of Key Provisions summarizes, but does not set forth, the terms and
conditions of certain restricted stock/unit grants. Please refer to the terms
and conditions for more specific information. In the event of any conflict
between such terms and conditions and the description contained in this summary,
the formal terms and conditions document shall govern.
Marsh & McLennan Companies
1992 Incentive and Stock Award Plan
Terms and Conditions of Restricted Stock Units
Granted To U.S. Employees on January 1, 1996
This award (the "Award") of Restricted Stock Units is being
granted to you under the Marsh & McLennan Companies 1992
Incentive and Stock Award Plan (the "1992 Plan"). The Award
consists of (1) a replacement award (the "Replacement
Award") of Restricted Stock Units equal in number to the
number of shares (the "Covered Shares"), excluding any
granted in connection with a prior deferral under the Re-
stricted Shares Voluntary Deferral Program or a Cash Bonus
Award Voluntary Deferral Plan, of Restricted Stock, Incen-
tive Units or Restricted Stock Units (granted to you under
the Marsh & McLennan Companies Restricted Stock Plan (1985),
the Marsh & McLennan 1988 Incentive and Stock Award Plan or
the 1992 Plan) which were scheduled to vest on a specified
future date (the "Scheduled Vesting Date") and which you
have irrevocably elected to surrender and have cancelled in
exchange for this Award, provided, that such elected number
is in an increment of 100 and cannot be more than 75% or
less than 25% of the number of Covered Shares of Restricted
Stock, Incentive Units or Restricted Stock Units which were
scheduled to vest on the Scheduled Vesting Date, plus, (2)
if you elect to defer distribution of the Award to a date on
or after the vesting date specified in Section I A.2. below,
an additional award (the "Supplemental Award") of Restricted
Stock Units equal in number to 15% of the Replacement Award.
The Award is subject to the following terms and conditions:
I. AWARD VESTING AND DISTRIBUTION
A. Vesting Period
1. Subject to Section IV D. hereof, the Replace-
ment Award shall vest on the earlier of (a)
the Scheduled Vesting Date or (b) such other
date as may be applicable pursuant to the
provisions of Sections IV and V below, but in
no event will the Replacement Award vest
sooner than six months from the date of grant
(except in the event of your death).
2. Subject to Section IV D. hereof, the Supple-
mental Award shall vest on the earlier of (a)
January 1 of the year of the third anniver-
sary of the Scheduled Vesting Date or (b)
such other date as may be applicable pursuant
to the provisions of Sections IV and V below,
but in no event will the Supplemental Award
vest sooner than six months from the date of
grant (except in the event of your death).
B. Stock Distribution
Unless forfeited pursuant to Section IV D. hereof
or unless Section V A.2 applies, and in any event
subject to Section I C. hereof, shares of Common
Stock (the "Shares") of Marsh & McLennan Compa-
nies, Inc. ("MMC") shall be registered in your
name on each distribution date based on your irre-
vocable election. The number of Shares so regis-
tered to you on each distribution date shall be
based upon a distribution in substantially equal
installments over the period during which you have
irrevocably elected to receive such Shares; pro-
vided, however, that in the case of termination of
your employment by reason of your death or perma-
nent disability, or in the case of a payment under
Section V A.1. hereof, the number of Shares so
registered shall equal the number of Restricted
Stock Units with respect to which distribution had
not previously been made. Once the Award vests,
you have an unalienable right to receive the
Shares (or cash or other property, as described in
Section V A.2 hereof) payable in connection there-
with, in accordance with the terms hereof.
C. Special Deferral
Notwithstanding anything to the contrary contained
herein (other than Section V), the Committee (as
hereinafter defined) shall have the discretion to
defer any distribution otherwise scheduled to be
made hereunder to the extent necessary (in the
Committee's judgment) to avoid all or any portion
of such distribution being nondeductible to the
Company by reason of Section 162(m) of the Inter-
nal Revenue Code of 1986, as amended, or any suc-
cessor provision thereto. Employees covered under
Section 162(m), according the proposed regulations
issued by the Internal Revenue Service, include
(i) the chief executive officer of MMC as of the
last day of the year of distribution and (ii) the
four highest paid executive officers of MMC, other
than the chief executive officer, who are employed
on the last day of the year of distribution.
II. RIGHTS OF RESTRICTED STOCK UNITS
You will receive dividend equivalent payments on the
Restricted Stock Units. Unless and until the vesting
conditions of the Award have been satisfied and you
have received the stock certificate in accordance with
the terms and conditions described herein, you have
none of the attributes of ownership to such Shares of
stock (e.g., units cannot be used as payment for stock
option exercises).
III. TAXES
The value of your Award is not includible in gross
income on the date of grant or on the date(s) of vest-
ing, but is subject to FICA on the date(s) of vesting.
When the stock certificate (or, in the event Section V
A.2 is applicable, cash or other property) is delivered
to you free and clear of all restrictions on each dis-
tribution date, the then value of the distribution is
includible in gross income and you will be required to
pay the withholding taxes required by law. At that
time, you will be given detailed information regarding
the tax consequences of your receipt of the Shares (or
cash or other property). The receipt of dividend
equivalents is taxable on a current basis as additional
compensation and is subject to FICA.
IV. TERMINATION OF EMPLOYMENT
If your employment with MMC or any of its subsidiaries
or affiliates (collectively, the "Company") terminates,
your right to the Award and to the distribution of
Shares shall be as follows:
A. Death
If you die during employment, any unvested portion
of the Award will vest immediately. In such
event, or in the event of your death prior to
complete distribution in respect of your Award,
distribution of Shares in respect of your undis-
tributed Award shall be made in the form of a lump
sum payable as soon as practicable thereafter,
with Shares being distributed to the person or
persons to whom your rights shall pass by will or
the law of descent and distribution.
B. Permanent Disability
If you terminate employment as a result of becom-
ing totally and permanently disabled, as deter-
mined under the Company's Long-Term Disability
Plan, any unvested portion of the Award will vest
immediately, except that in no event shall the
Award vest sooner than six months from the date of
grant. Distribution of Shares in respect of the
Replacement Award shall be in the form of a lump
sum payable on January 1 of the year following
such termination. Distribution of Shares in re-
spect of the Supplemental Award shall be in the
form of a lump sum payable on the later of (1)
January 1 of the year following termination or
(2) January 1 of the year of the third anniversary
of the Scheduled Vesting Date.
C. Normal or Deferred Retirement
1. If your normal or deferred retirement (as
such terms are defined in the Company's pri-
mary retirement plan applicable to you) is
prior to the Scheduled Vesting Date, the
Replacement Award shall vest on your retire-
ment date, except that in no event shall the
Award vest sooner than six months from the
date of grant. Distribution of Shares in
respect of the Replacement Award shall be
made at the time and in the form irrevocably
elected by you on your election form, but
shall commence no later than January of the
year following retirement.
2. If your normal or deferred retirement is
prior to January 1 of the year of the third
anniversary of the Scheduled Vesting Date,
the Supplemental Award shall vest on your
retirement date, except that in no event
shall the Supplemental Award vest sooner than
six months from the date of grant. Distribu-
tion of Shares in respect of the Supplemental
Award shall be made at the time and in the
form irrevocably elected by you on your elec-
tion form but, subject to the succeeding
sentence, distribution shall commence no
later than January of the year following
retirement. In no event, however, shall dis-
tribution commence before January 1 of the
year of the third anniversary of the Sched-
uled Vesting Date.
D. All Other Employment Terminations
1. If you cease to be an employee of the Company
before the Scheduled Vesting Date for any
reason other than death, permanent disabili-
ty, or normal or deferred retirement, your
right to any unvested portion of the Replace-
ment Award shall be forfeited.
2. If you cease to be an employee of the Company
before January 1 of the year of the third
anniversary of the Scheduled Vesting Date for
any reason other than death, permanent dis-
ability, or normal or deferred retirement,
your right to any unvested portion of the
Supplemental Award shall be forfeited.
3. If you cease to be an employee of the Company
after the Scheduled Vesting Date but before
all vested Shares have been distributed, any
remaining vested Shares shall be distributed
in a lump sum in January of the year follow-
ing termination.
V. CHANGE IN CONTROL PROVISIONS
A. Change in Control
Upon the occurrence of a Change in Control, as
defined in the 1992 Plan, any outstanding but
unvested portion of the Award will vest on the
date of the Change in Control and payment will be
made thereafter in accordance with paragraph 1 or
2 below, whichever is applicable.
1. Except as provided in paragraph 2 below, a
stock certificate shall be registered in your
name and delivered to you as soon as practi-
cable following the Change in Control. The
number of Shares so registered to you shall
be equal to your undistributed Award.
2. If, in the Change in Control transaction,
shareholders of MMC receive consideration
consisting of cash or other property (includ-
ing securities of a successor or parent cor-
poration), there shall be delivered to you as
soon as practicable thereafter the consider-
ation which you would have received in such
transaction had you been, immediately prior
to such transaction, a holder of that number
of Shares equal to your undistributed Award.
B. Additional Payment
Should you receive Shares (or cash or other prop-
erty) from the vesting of the Award which was ac-
celerated because of a Change in Control, all or
part of the value of those Shares (or the cash or
other property) on the date of vesting (the "Ac-
celerated Award") may be subject to a 20% federal
excise tax. The excise tax is imposed when the
value of the Accelerated Award (plus any other
payments which are determined to be contingent on
a Change in Control) is more than 2.999 times the
average of your last five years W-2 earnings.
If a Change in Control occurs and the vesting of
your Award is accelerated, MMC will determine if
the 20% federal excise tax is payable. If it is
payable, MMC will pay to you, within five days of
making the computation, an amount of money (the
"Additional Payment") equal to the excise tax plus
additional amounts for federal, state and local
taxes so that the excise tax and income and other
federal taxes on the excise tax payment will not
cost you any money. If the Additional Payment is
later determined to be less than the amount of
taxes you owe, a further payment will be made to
you. If the Additional Payment is more than the
amount you owe, you will be required to reimburse
MMC.
VI. ANNUAL STATEMENT
The Company shall provide you with an annual statement
detailing the number and vesting date(s) of your Restricted
Stock Units, as well as the expected date for commencement
of distributions (subject to the provisions herein) and the
distribution schedule for your Award.
VII. OTHER PROVISIONS
A. The Company is not liable for the non-issuance or
non-transfer, nor for any delay in the issuance or
transfer, of any Shares due to you in connection
with the Award which results from the inability of
the Company to obtain, from each regulatory body
having jurisdiction, all requisite authority to
issue or transfer shares of common stock of MMC,
if counsel for MMC deems such authority necessary
for the lawful issuance or transfer of any such
Shares.
B. The Award is subject to all of the terms and con-
ditions of the 1992 Plan and your acceptance here-
of shall constitute your agreement to the terms
and conditions of the 1992 Plan and the adminis-
trative regulations of the Compensation Committee
of the Board of Directors (the "Committee"). In
the event of any inconsistency between these terms
and conditions and the provisions of the 1992
Plan, the provisions of the 1992 Plan shall pre-
vail. Your acceptance of this Award constitutes
your agreement that the Shares subsequently ac-
quired hereunder, if any, will not be sold or
otherwise disposed of by you in violation of any
applicable securities laws or regulations. You
may obtain a copy of the 1992 Plan by making a
request to the Senior Vice President, Human
Resources and Administration of MMC.
C. The Award is granted in accordance with such addi-
tional administrative regulations as the Committee
may, from time to time, adopt. All decisions of
the Committee upon any questions arising under the
1992 Plan or under these terms and conditions
shall be conclusive and binding.
D. During your lifetime, no right hereunder related
to this Award shall be transferable except by will
or the laws of descent and distribution.
E. The Award does not give you any right to continue
to be employed by the Company, or restrict, in any
way, the right of your employer to terminate your
employment, at any time, for any reason not spe-
cifically prohibited by law.
MARSH & McLENNAN COMPANIES, INC.
U.S. EMPLOYEE
1995 CASH BONUS AWARD VOLUNTARY DEFERRAL PLAN
1. ELIGIBILITY
All active U.S. employees of Marsh & McLennan Companies, Inc. (the "Corpora-
tion") and its subsidiaries who are designated as eligible for participation
in the MMC Partners Bonus Plan or a Local Bonus Plan, and who are presently
in salary grade 15 (or its equivalent) or above, may, at management's
discretion, be considered for participation in the Marsh & McLennan Compa-
nies, Inc. U.S. Employee 1995 Cash Bonus Award Voluntary Deferral Plan (the
"1995 Plan"). Participants in the 1995 Plan may make deferral elections
pursuant to the rules outlined in Section 2 below.
2. PROGRAM RULES
Except as otherwise provided herein, the 1995 Plan shall be administered by
the Compensation Committee of the Board of Directors of the Corporation (the
"Committee"). The Committee shall have authority in its sole discretion to
interpret the 1995 Plan and make all determinations, including the determi-
nation of bonus awards eligible to be deferred, with respect to the 1995
Plan. All determinations made by the Committee shall be final and binding.
The Committee may delegate to any other individual or entity the authority
to perform any or all of the functions of the Committee under the 1995 Plan
and references to the Committee shall be deemed to include any such dele-
gate. Exercise of deferral elections under the 1995 Plan must be made in
accordance with the following rules.
a. Rights to an Award and to a Deferral Election
The right to a deferral election applies only to the annual cash bonus
scheduled to be awarded in early 1996 in respect of 1995 services, the
payment of which bonus would normally be made by the end of the first
quarter of the 1996 calendar year. The granting of such an annual cash
bonus award is discretionary and neither delivery of deferral election
materials nor an election to defer shall affect entitlement to such an
award. The right to a deferral election does not apply to bonuses
(including, but not limited to, bonuses pursuant to an employment
agreement, sign-on or guaranteed bonuses, commissions or non-annual
incentive payments) that are not awarded as part of an annual cash
bonus plan.
b. Election Forms
In order to ensure that elections to defer bonus amounts are effective
under applicable tax laws, please complete and sign the attached
election form(s) and return them (postmarked or delivered) no later
than November 17, 1995. Form(s) should be returned, and any questions
should be directed, to:
Section 16 Insiders
(MMC Executive Officers and
Controller) All Other Participants
Andrew B. Lippman Vincent R. Belluccia
Director, Compensation and Manager, Executive Compensation
HR Systems Marsh & McLennan Companies, Inc.
Marsh & McLennan Companies, Inc. 1166 Avenue of the Americas
1166 Avenue of the Americas New York, New York 10036-2774
New York, New York 10036-2774 (212) 345-5657
(212) 345-5580
c. Deferral Options
(i) Deferral Amount. An eligible employee may elect to defer a
portion of such employee's bonus award until January of a specific
year ("year certain") or until January of the year following retirement
in an amount represented by one of the following two choices:
1. 25%, 50% or 75% of the employee's cash bonus award, subject
to a maximum limit established by the Committee, or
2. the lowest of 25%, 50% or 75% of the employee's cash bonus
award which results in a deferral of at least $10,000.
If the percentage selected times the amount of the cash bonus award is
less than $10,000, no deferral will be made or deducted from the award.
(ii) 1995 Deferred Bonus Accounts. If a deferral election is made,
deferrals may be made into one or both of the two accounts which the
Corporation shall make available to the participating employee. The
relevant portion of the award deferral will be credited to the relevant
account on the first day of the month following the date in which the
bonus payment would have been made had it not been deferred. The
available accounts for deferrals of bonuses (the "1995 Deferred Bonus
Accounts") shall consist of (a) the 1995 Putnam Fund Account and (b)
the 1995 Corporation Stock Account. Amounts may not be transferred
between the 1995 Corporation Stock Account and either the 1995 Putnam
Fund Account or the "Putnam Transfer Fund Account" (as referred to in
Section 2.e. below).
d. 1995 Putnam Fund Account
(i) Account Valuation. The 1995 Putnam Fund Account is a bookkeeping
account the value of which shall be based upon the performance of
selected funds of the Putnam mutual fund group. The Corporation will
determine in its sole discretion the funds of the Putnam mutual fund
group into which deferrals may be made. Deferrals among selected
funds comprising the 1995 Putnam Fund Account must be made in multiples
of 5% of the total amounts deferred into the 1995 Putnam Fund Account.
Deferred amounts will be credited to the 1995 Putnam Fund Account
with units each reflecting one share of the elected fund. Fractional
units will also be credited to such account, if applicable. The
number of such credited units will be determined by dividing the value of
the bonus award deferred into such fund by the net asset value of the
elected fund of the 1995 Putnam Fund Account as of the close of business
on the last trading day on the New York Stock Exchange of the month in
which such bonus payment would have been made had it not been deferred.
All dividends paid with respect to an elected fund of a 1995 Putnam Fund
Account will be deemed to be immediately reinvested in such fund.
(ii) Fund Transfers. Amounts deferred into a 1995 Putnam Fund
Account and the Putnam Transfer Fund Account may be transferred between
eligible funds of these respective accounts (but not between the 1995
Putnam Fund Account and the Putnam Transfer Fund Account) pursuant to
an election which may be made once per calendar quarter (or at such
other intervals as the Committee may prescribe). Such election shall
be effective, and the associated transfer shall be based upon the net
asset values of the applicable funds of the 1995 Putnam Fund Account or
the Putnam Transfer Fund Account, as of the close of business on the
last trading day on the New York Stock Exchange of the quarter (or
other applicable period) in which such election is received by the
Corporation, provided the election is received by the 15th day of the
last month of such calendar quarter (or at least a sufficient number of
days, determined by the Committee, prior to the end of such other
applicable period) and not revoked prior to such date. In the event
the election is not received on a timely basis, such election shall be
effective as of the close of business on the last trading day on the
New York Stock Exchange of the immediately following calendar quarter
(or other applicable period), provided such election is not revoked
prior to the 15th day of the last month of such following calendar
quarter (or prior to the date determined by the Committee for any other
applicable period).
e. Putnam Transfer Fund Account
By November 17, 1995, each individual with respect to whom there is
maintained an "Interest Factor Account" (established for deferrals of
all pre-1993 bonus awards), whether or not any such individual is
eligible for participation under Section 1 above, may make an irrevoca-
ble election to transfer all (but not less than all) of such participa-
nt's Interest Factor Account into a "Putnam Transfer Fund Account",
which election shall be effective, and which transfer shall be based
upon the net asset value of the selected funds of such Putnam Transfer
Fund Account, as of the close of business on the last trading day on
the New York Stock Exchange in 1995. The Putnam Transfer Fund Account
shall be administered in a manner consistent with the administration of
the 1995 Putnam Fund Account pursuant to Section 2.d.(i) above.
Distribution elections (including the form of payment) otherwise in
effect for the Interest Factor Account shall remain in effect for
amounts transferred to the Putnam Transfer Fund Account.
f. 1995 Corporation Stock Account
(i) Account Valuation. The 1995 Corporation Stock Account is a
bookkeeping account the value of which shall be based upon the perfor-
mance of the common stock of the Corporation. Amounts deferred into
the 1995 Corporation Stock Account will be credited to such account
with units each reflecting one share of common stock of the Corpora-
tion. Fractional units will also be credited to such account, if
applicable. The number of such credited units will be determined by
dividing the value of the bonus award deferred into the 1995 Corpora-
tion Stock Account (plus the "supplemental amount" referred to in
clause (ii) below) by the closing price of the common stock of the
Corporation on the New York Stock Exchange on the last trading day on
the New York Stock Exchange of the month in which such bonus payment
would have been made had it not been deferred. Dividends paid on the
common stock of the Corporation shall be reflected in a participant's
1995 Corporation Stock Account by the crediting of additional units in
such account equal to the value of the dividend and based upon the
closing price of the common stock of the Corporation on the New York
Stock Exchange on the date such dividend is paid. Deferrals into the
1995 Corporation Stock Account must be deferred to a date not earlier
than January 1, 1999.
(ii) Supplemental Amount. With respect to that portion of a bonus
award which a participating employee defers into the 1995 Corporation
Stock Account, there shall be credited to such participant's 1995
Corporation Stock Account an amount equal to the amount deferred into
such account plus an additional amount equal to 15% of the amount so
deferred (the "supplemental amount"). The maximum percentage of any
participating employee's annual bonus award permitted to be deferred
into the 1995 Corporation Stock Account (prior to giving effect to the
supplemental amount) is 50% of such award.
g. Statement of Account
The Corporation shall provide periodically to each participant (but not
less frequently than once per calendar year) a statement setting forth
the balance to the credit of such participant in such participant's
1995 Deferred Bonus Accounts and Putnam Transfer Fund Account.
h. Irrevocability and Acceleration
All deferral elections made under this 1995 Plan are irrevocable.
However, the Committee may, in its sole discretion, and upon finding
that a participant has demonstrated severe financial hardship, direct
the acceleration of the payment of any or all deferred amounts then
credited to the participant's 1995 Deferred Bonus Accounts.
i. Payment of Deferred Amounts
(i) Year Certain Deferrals. If the participant remains employed
until the deferral year elected, all amounts relating to "year certain"
deferrals will be paid in a single distribution, less applicable
withholding taxes, in January of the deferral year elected.
(ii) Retirement Deferrals. For participants who retire, amounts
relating to deferrals until the year following retirement will be paid
in a single distribution in January of the year following retirement,
or the participant may elect (at the time of the original deferral
election) to have distributions from the 1995 Putnam Fund Account made
in up to ten (10) annual installments payable each January commencing
with the year following retirement. Annual installments will be paid
in an amount, less applicable withholding taxes, determined by multi-
plying (i) the balance of the 1995 Putnam Fund Account by (ii) a
fraction, the numerator of which is 1 and the denominator of which is a
number equal to the remaining unpaid annual installments.
(iii) Termination of Employment Prior to End of Deferral Period.
Subject to the provisions of paragraph (v) below, in the event of
termination of employment for any reason prior to completion of the
elected deferral period, all amounts then in the participant's 1995
Deferred Bonus Accounts will be paid to the participant (or the partic-
ipant's designated beneficiary in the event of death) in a single
distribution, less applicable withholding taxes, as soon as practicable
after the end of the quarter in which the termination occurred; provid-
ed, however, that, subject to the provisions of paragraph (v) below,
upon a participant's retirement or termination for disability prior to
completion of the elected deferral period all such amounts shall be
paid in January of the year following such retirement or termination
for disability, as the case may be.
(iv) Death During Installment Period. If a participant dies after
the commencement of payments from his or her 1995 Deferred Bonus
Accounts, the designated beneficiary shall receive the remaining
installments over the elected installment period.
(v) Special Rules Applicable to 1995 Corporation Stock Account.
Notwithstanding any provision in this 1995 Plan to the contrary (other
than Section 2.h. above), with respect to a participant's 1995 Corpo-
ration Stock Account, in the event that prior to January 1, 1999, a
participant's employment terminates for disability or retirement, all
amounts in such account will be paid to the participant in a single
distribution, less applicable withholding taxes, in January of 1999.
In the event a participant's employment terminates on account of death
prior to January 1, 1999, the distribution rule in paragraph (iii)
above will apply. If, however, the termination of employment prior to
January 1, 1999 is on account of a reason other than death, disability
or retirement, the participant will receive, as soon as practicable
following the end of the quarter in which the termination occurred, a
single distribution, less applicable withholding taxes, of (a) the
balance of the participant's 1995 Corporation Stock Account less (b)
the portion of such balance attributable to the supplemental amount
(including earnings thereon), which portion shall be forfeited in its
entirety. For purposes of determining the portion of the balance of
the 1995 Corporation Stock Account attributable to the supplemental
amount, the supplemental amount shall be increased or decreased by the
respective gain or loss in the 1995 Corporation Stock Account attribut-
able to such supplemental amount.
(vi) Change in Control. Notwithstanding any other provision in this
1995 Plan to the contrary, in the event of a change in control" of the
Corporation, as defined in the Corporation's 1992 Incentive and Stock
Award Plan (the "1992 Incentive Plan"), all amounts credited to a
participant's 1995 Deferred Bonus Accounts as of the effective date of
such change in control, including any interest accrued thereon, will be
distributed within five days of such change in control as a lump sum
cash payment, less applicable withholding taxes.
(vii) Form of Payment. All payments in respect of the 1995 Putnam
Fund Account shall be made in cash and payments in respect of the 1995
Corporation Stock Account shall be made in shares of common stock of
the Corporation (with cash paid in lieu of any fractional shares);
provided, however, that in the event of a change in control of the
Corporation, payments from the 1995 Corporation Stock Account shall be
made in cash based upon (A) the highest price paid for shares of common
stock of the Corporation in connection with such change in control or
(B) if shares of common stock of the Corporation are not purchased or
exchanged in connection with such change in control, the closing price
of the common stock of the Corporation on the New York Stock Exchange
on the last trading day on the New York Stock Exchange prior to the
date of the change in control. Notwithstanding anything in the
immediately preceding sentence to the contrary, payment from a 1995
Corporation Stock Account to a participant who becomes subject to
Section 16 of the Securities Exchange Act of 1934 (a "Section 16
Insider") with respect to securities of the Corporation subsequent to
his or her deferral into a 1995 Corporation Stock Account, and who is a
Section 16 Insider at the time of payment, shall be made in cash.
j. Tax Treatment
Under present Federal income tax laws, no portion of the balance
credited to a participant's 1995 Deferred Bonus Accounts or Putnam
Transfer Fund Account will be includable in income for Federal income
tax purposes during the period of deferral. However, FICA tax with-
holding is required currently on the cash bonus amount (excluding any
portion subject to a mandatory deferral) awarded to the participant,
and such withholding is required on the supplemental amount in January
of 1999. When any part of the 1995 Deferred Bonus Accounts or Putnam
Transfer Fund Account is actually paid to the participant, such portion
will be includable in income, and Federal, state and local income tax
withholding will apply. The Corporation may make necessary arrange-
ments in order to effectuate any such withholding, including the
mandatory withholding of shares of common stock of the Corporation
which would otherwise be distributed to a participant.
k. Beneficiary Designation
Each participant shall have the right, at any time, to designate any
person or persons as beneficiary or beneficiaries (both principal as
well as contingent) to whom payment under the 1995 Plan shall be made,
in the event of death prior to complete distribution to the participant
of the amounts due under the 1995 Plan. Any beneficiary designation
may be changed by a participant by the filing of such change in writing
on a form prescribed by the Corporation. The filing of a new benefi-
ciary designation form will cancel all beneficiary designations previ-
ously filed and apply to all deferrals in the account. A beneficiary
designation form is attached and when completed should be forwarded by
Section 16 Insiders to Andrew B. Lippman and by all other participants
to Vincent R. Belluccia, at the respective addresses set forth in
Section 2.b. above. If a participant fails to designate a beneficiary
as provided above, or if all designated beneficiaries predecease the
participant, then any amounts payable to the beneficiary shall be paid
to the participant's estate. The payment to the named beneficiary
shall completely discharge the Corporation's obligations under the 1995
Plan.
l. Changes in Capitalization
If there is any change in the number or class of shares of common stock
of the Corporation through the declaration of stock dividend or other
extraordinary dividends, or recapitalization resulting in stock splits,
or combinations or exchanges of such shares or in the event of similar
corporate transactions, each participant's 1995 Corporation Stock
Account shall be equitably adjusted by the Committee to reflect any
such change in the number or class of issued shares of common stock of
the Corporation or to reflect such similar corporate transaction.
3. AMENDMENT AND TERMINATION OF THE 1995 PLAN
The Committee may, at its discretion and at any time, amend the 1995 Plan in
whole or in part. The Committee may also terminate the 1995 Plan in its
entirety at any time and, upon any such termination, each participant shall
be paid in a single distribution, or over such period of time as determined
by the Committee (not to extend beyond the earlier of 5 years or the elected
deferral period), the then remaining balance in such participant's 1995
Deferred Bonus Accounts.
4. MISCELLANEOUS
A participant under the 1995 Plan is merely a general (not secured) creditor
and nothing contained in the 1995 Plan shall create a trust of any kind or a
fiduciary relationship between the Corporation and the participant or the
participant's estate. Nothing contained herein shall be construed as
conferring upon the participant the right to continued employment with the
Corporation or its subsidiaries, or to a cash bonus award. Except as
otherwise provided by applicable law, benefits payable under the 1995 Plan
may not be assigned or hypothecated and no such benefits shall be subject to
legal process or attachment for the payment of any claim of any person
entitled to receive the same. The adoption of the 1995 Plan and any
elections made pursuant to the 1995 Plan are subject to approval of the 1995
Plan by the Committee.
MARSH & McLENNAN COMPANIES, INC.
CANADIAN EMPLOYEE
1995 CASH BONUS AWARD VOLUNTARY DEFERRAL PLAN
1. ELIGIBILITY
All active Canadian employees of Marsh & McLennan Companies, Inc. (the
"Corporation") and its subsidiaries who are designated as eligible for
participation in the MMC Partners Bonus Plan or a Local Bonus Plan, and who
are presently in salary grade 15 (or its equivalent) or above, may, at
management's discretion, be considered for participation in the Marsh &
McLennan Companies, Inc. Canadian Employee 1995 Cash Bonus Award Voluntary
Deferral Plan (the "1995 Plan"). Participants in the 1995 Plan may make
deferral elections pursuant to the rules outlined in Section 2 below.
2. PROGRAM RULES
Except as otherwise provided herein, the 1995 Plan shall be administered by
the Compensation Committee of the Board of Directors of the Corporation (the
"Committee"). The Committee shall have authority in its sole discretion to
interpret the 1995 Plan and make all determinations, including the determi-
nation of bonus awards eligible to be deferred, with respect to the 1995
Plan. All determinations made by the Committee shall be final and binding.
The Committee may delegate to any other individual or entity the authority
to perform any or all of the functions of the Committee under the 1995 Plan
and references to the Committee shall be deemed to include any such dele-
gate. Exercise of deferral elections under the 1995 Plan must be made in
accordance with the following rules.
a. Rights to an Award and to a Deferral Election
The right to a deferral election applies only to the annual cash bonus
scheduled to be awarded in early 1996 in respect of 1995 services, the
payment of which bonus would normally be made by the end of the first
quarter of the 1996 calendar year. The granting of such an annual cash
bonus award is discretionary and neither delivery of deferral election
materials nor an election to defer shall affect entitlement to such an
award. The right to a deferral election does not apply to bonuses
(including, but not limited to, bonuses pursuant to an employment
agreement, sign-on or guaranteed bonuses, commissions or non-annual
incentive payments) that are not awarded as part of an annual cash
bonus plan.
b. Election Forms
In order to ensure that elections to defer bonus amounts are effective
under applicable tax laws, please complete and sign the attached
election form(s) and return them (postmarked or delivered) no later
than November 17, 1995. Form(s) should be returned, and any questions
should be directed, to:
Vincent R. Belluccia
Manager, Executive Compensation
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, New York 10036-2774
U.S.A.
(212-345-5657)
c. Deferral Options
(i) Deferral Amount. An eligible employee may elect to defer a
portion of such employee's bonus award in an amount represented by one
of the following two choices:
1. 25%, 50%, 75% or 100% of the employee's cash bonus award,
subject to a maximum limit established by the Committee, or
2. the lowest of 25%, 50%, 75% or 100% of the employee's cash
bonus award which results in a deferral of at least Canadian
$10,000.
If the percentage selected times the amount of the cash bonus award is
less than Canadian $10,000, no deferral will be made or deducted from
the award.
(ii) Period of Deferral. The payment of a bonus award may be
deferred to January of 1997 or January of 1998, as elected by the
participant.
(iii) 1995 Deferred Bonus Accounts. If a deferral election is made,
deferrals may be made into one or both of the two accounts which the
Corporation shall make available to the participating employee. The
relevant portion of the award deferral will be credited to the relevant
account on the first day of the month following the date in which the
bonus payment would have been made had it not been deferred. The
available accounts for deferrals of bonuses (the "1995 Deferred Bonus
Accounts") shall consist of (a) the 1995 Putnam Fund Account and (b)
the 1995 Interest Equivalent Account. Amounts may not be transferred
between the 1995 Interest Equivalent Account and the 1995 Putnam Fund
Account.
d. 1995 Putnam Fund Account
(i) Account Valuation. The 1995 Putnam Fund Account is a bookkeep-
ing account the value of which shall be based upon the performance of
selected funds of the Putnam mutual fund group. The Corporation will
determine in its sole discretion the funds of the Putnam mutual fund
group into which deferrals may be made. Deferrals among selected
funds comprising the 1995 Putnam Fund Account must be made in multiples
of 5% of the total amounts deferred into the 1995 Putnam Fund Account.
Deferred amounts will be credited to the 1995 Putnam Fund Account with
units each reflecting one share of the elected fund. Fractional units
will also be credited to such account, if applicable. The number of
such credited units will be determined by dividing the value of the
bonus award deferred into such fund by the net asset value of the
elected fund of the 1995 Putnam Fund Account as of the close of busi-
ness on the last trading day on the New York Stock Exchange of the
month in which such bonus payment would have been made had it not been
deferred. All dividends paid with respect to an elected fund of a 1995
Putnam Fund Account will be deemed to be immediately reinvested in such
fund. All amounts credited to the 1995 Putnam Fund Account will be
converted into U.S. dollars at the exchange rate in effect as of the
applicable date.
(ii) Fund Transfers. Amounts deferred into a 1995 Putnam Fund
Account may be transferred between eligible funds pursuant to an
election which may be made once per calendar quarter (or at such other
intervals as the Committee may prescribe). Such election shall be
effective, and the associated transfer shall be based upon the net
asset values of the applicable funds of the 1995 Putnam Fund Account,
as of the close of business on the last trading day on the New York
Stock Exchange of the quarter (or other applicable period) in which
such election is received by the Corporation, provided the election is
received by the 15th day of the last month of such calendar quarter (or
at least a sufficient number of days, determined by the Committee,
prior to the end of such other applicable period) and not revoked prior
to such date. In the event the election is not received on a timely
basis, such election shall be effective as of the close of business on
the last trading day on the New York Stock Exchange of the immediately
following calendar quarter (or other applicable period), provided such
election is not revoked prior to the 15th day of the last month of such
following calendar quarter (or prior to the date determined by the
Committee for any other applicable period).
e. 1995 Interest Equivalent Account
An "Interest Equivalent" shall be calculated and added to each 1995
Interest Equivalent Account as of the last day of each calendar quarter
based on the average principal balance in said account during said
calendar quarter and on the average of the 30-day Banker's Acceptance
rate of interest as published in the Toronto Globe & Mail during such
calendar quarter.
f. Statement of Account
The Corporation shall provide periodically to each participant (but not
less frequently than once per calendar year) a statement setting forth
the balance to the credit of such participant in such participant's
1995 Deferred Bonus Accounts.
g. Irrevocability and Acceleration
All deferral elections made under the 1995 Plan are irrevocable.
However, the Committee may, in its sole discretion, and upon finding
that a participant has demonstrated severe financial hardship, direct
the acceleration of the payment of any or all deferred amounts then
credited to the participant's 1995 Deferred Bonus Accounts.
h. Payment of Deferred Amounts
(i) Deferral Year Distributions. If the participant remains em-
ployed until the deferral year elected, all amounts in the
participant's 1995 Deferred Bonus Accounts will be paid in a single
distribution, less applicable withholding taxes, in January of the
deferral year elected.
(ii) Termination of Employment Prior to End of Deferral Period. In
the event of termination of employment for any reason prior to the
completion of the elected deferral period, all amounts then in the
participant's 1995 Deferred Bonus Accounts will be paid to the
participant (or the participant's designated beneficiary in the event
of death) in a single distribution, less applicable withholding taxes,
as soon as practicable after the end of the quarter in which the
termination occurred; provided, however, that upon a participant's
retirement or termination for disability prior to completion of the
elected deferral period all such amounts shall be paid in a single
distribution during January of the year following such retirement or
termination for disability, as the case may be.
(iii) Change in Control. Notwithstanding any other provision in the
1995 Plan to the contrary, in the event of a "change in control" of the
Corporation, as defined in the Corporation's 1992 Incentive and Stock
Award Plan (the "1992 Incentive Plan"), all amounts credited to a
participant's 1995 Deferred Bonus Accounts as of the effective date
of such change in control, including any interest accrued thereon, will
be distributed within five days of such change in control as a single
distribution, less applicable withholding taxes.
(iv) Form of Payment. All payments under the 1995 Plan shall be
made in cash in Canadian dollars converted, if necessary, at the
exchange rate in effect as of the applicable date.
i. Tax Treatment
Under present Canadian tax law, all amounts of an employee's bonus
deferred for a period not exceeding three years from the year in which
the related service was rendered, as well as any Interest Equivalent
thereon, will be exempt from Canadian taxation during the period of
deferral. When any part of the 1995 Deferred Bonus Accounts are
actually paid to a participant, taxable employment income will be
incurred.
j. Beneficiary Designation
Each participant shall have the right, at any time, to designate any
person or persons as beneficiary or beneficiaries (both principal as
well as contingent) to whom payment under the 1995 Plan shall be made,
in the event of death prior to complete distribution to the participant
of the amounts due under the 1995 Plan. Any beneficiary designation
may be changed by a participant by the filing of such change in writing
on a form prescribed by the Corporation. The filing of a new
beneficiary designation form will cancel all beneficiary designations
previously filed and apply to all deferrals in the account. A
beneficiary designation form is attached and when completed should be
forwarded to Vincent R. Belluccia, at the address set forth in Section
2.b. above. If a participant fails to designate a beneficiary as
provided above, or if all designated beneficiaries predecease the
participant, then any amounts payable to the beneficiary shall be paid
to the participant's estate. The payment to the named beneficiary
shall completely discharge the Corporation's obligations under the 1995
Plan.
3. AMENDMENT AND TERMINATION OF THE 1995 PLAN
The Committee may, at its discretion and at any time, amend the 1995 Plan in
whole or in part. The Committee may also terminate the 1995 Plan in its
entirety at any time and, upon any such termination, each participant shall
be paid in a single distribution, or over such period of time as determined
by the Committee (provided such period of time falls within the restriction
set forth in Section 2.c.(ii) above), the then remaining balance in such
participant's 1995 Deferred Bonus Accounts.
4. MISCELLANEOUS
A participant under the 1995 Plan is merely a general (not secured) creditor
and nothing contained in the 1995 Plan shall create a trust of any kind or a
fiduciary relationship between the Corporation and the participant or the
participant's estate. Nothing contained herein shall be construed as
conferring upon the participant the right to continued employment with the
Corporation or its subsidiaries, or to a cash bonus award. Except as
otherwise provided by applicable law, benefits payable under the 1995 Plan
may not be assigned or hypothecated and no such benefits shall be subject to
legal process or attachment for the payment of any claim of any person
entitled to receive the same. The adoption of the 1995 Plan and any
elections made pursuant to the 1995 Plan are subject to approval of the 1995
Plan by the Committee.
AGREEMENT made as of March 21, 1996 between MARSH & McLENNAN RISK
CAPITAL CORP., a Delaware corporation (the "Company"), and ROBERT CLEMENTS
(the "Executive").
WHEREAS, the Executive is employed by the Company as its Chairman
of the Board and Chief Executive Officer pursuant to the Amended and
Restated Employment Agreement effective as of December 31, 1993 as amended
as of October 1, 1995 (the "Agreement");
WHEREAS, the Executive desires to retire as an employee and resign
as Chairman and Chief Executive Officer of the Company in accordance with
the provisions of Section 5(j) of the Agreement and in accordance with the
agreement set forth below; and
WHEREAS, the Company and the Executive wish to amend the Agreement
in certain respects (such amendment as set forth herein, the "March 21, 1996
Amendment").
NOW, THEREFORE, in consideration of the foregoing, the parties
hereby agree as follows:
1. Capitalized Terms. Capitalized terms used herein shall,
unless otherwise defined herein, have the meanings ascribed to such terms in
the Agreement.
2. Executive's Resignation and Commencement of Investment
Advisory Relationship Described in Section 5(j) of the Agreement. Effective
as of April 1, 1996, the Executive shall retire from the Company and resign
as Chairman and Chief Executive Officer of the Company and from any
positions as an officer or director of the Parent and any other Marsh &
McLennan Entities; provided, however, that the Executive will resign as a
director of both the Parent and the Company as of October 1, 1997 and this
agreement will constitute the tendering of each such resignation as of such
date. The parties further agree that, effective as of April 1, 1996, the
Executive shall become an Investment Advisor to the Company in accordance
with Section 5(j) of the Agreement, as amended hereby.
3. Investment Advisory Fees. Section 5(j)(ii) of the Agreement
is hereby restated to read in its entirety as follows:
(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 all amounts under
Sections 5(a) and (b) hereof, the Executive shall be paid a fee
(the "Investment Advisor Fee") at the rate of Two Million Two
Hundred Fifty Thousand Dollars ($2,250,000) per year, payable
semi-monthly (and the term "Investment Advisor Fee" shall be
substituted for the terms "Base Salary, Stipend" or "Base Salary
and Stipend" or any other use of such terms alone or in
combination for purposes of Sections 7 and 8 hereof; and notwith-
standing any other provisions of this Agreement, including any
provisions of Sections 7 and 8 hereof, the provisions of Section
5(b) hereof shall be in-applicable with respect to any period on
and after April 1, 1996);
4. Consulting Arrangement. Section 5(h) of the Agreement is
hereby amended by deleting in its entirety the sentence reading "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"
and replacing such sentence with the following:
During the period commencing on October 1, 1997 and ending on
September 30, 1998, the Executive shall receive a consulting fee
at the rate of One Million Dollars ($1,000,000) per year, and for
the period commencing on October 1, 1998 and ending on September
30, 1999, the Executive shall receive a consulting fee to be
agreed in good faith based on concepts applicable to the 12-month
period ending September 30, 1998 and reflecting business
conditions at the time of such discussions (each such consulting
fee being payable semi-monthly and hereinafter referred to,
collectively, as the "Consulting Fee"), and the Company will
reimburse the Executive for any reasonable travel and
entertainment expenses incurred in connection with such consulting
services.
Furthermore, the first sentence of Section 5(h) is hereby amended
to read in its entirety as follows:
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 and devote his professional efforts,
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 his reasonable convenience and as reasonably
agreeable to the Company.
5. Certain Stock Options. Notwithstanding anything to the
contrary in the applicable stock option agreements, all stock options
previously granted to the Executive by the Parent shall become fully
exercisable as of April 1, 1996 and all such stock options shall remain
exercisable for the remainder of their respective terms, as set forth in the
applicable stock option agreement, without regard to the termination of the
Executive's employment hereunder.
6. Certain Restricted Stock Awards. Notwithstanding anything to
the contrary in the applicable award agreements, the restricted stock awards
previously granted to the Executive by the Parent shall vest with respect to
22,030 shares as of May 1, 1996, and with respect to any remaining shares
subject to such awards as of January 1, 1997.
7. Indemnification. The Company shall defend, indemnify and
hold the Executive harmless from and against all damages, costs and expenses
(including attorneys' fees) as a result of claims made by third parties
arising out of the Executive's performance of Investment Advisory Services
under the Agreement or hereunder; provided, however, that the Company shall
not indemnify and hold the Executive harmless for the Executive's own gross
negligence or willful misconduct. The Company shall advance to the
Executive all fees and expenses incurred by him in connection with any such
claim within twenty days after receipt by the Company of a written request
for such advance.
8. Attorneys' Fees. The Company shall pay (or reimburse the
Executive for) all costs, including without limitation reasonable attorneys'
fees, incurred by the Executive in connection with the negotiation of this
amendment to the Agreement and matters preliminary thereto.
9. Status of Agreement. Except as amended hereby, the terms and
conditions of the Agreement shall remain in full force and effect. The
parties hereby agree to prepare and execute a separate agreement (the "New
Agreement"), setting forth the terms and provisions of the Agreement as
amended hereby that shall be applicable to the period from and after April
1, 1996 between the Company and the Executive as an Investment Advisor (as
contemplated by Section 5(j) of the Agreement as amended hereby) and for
consulting services under Section 5(h) of the Agreement as amended hereby.
The remaining provisions of the Agreement, as amended by this March 21, 1996
Amendment, shall remain in full force and effect and, except to the extent
the parties shall agree that such provisions have no applicability after
March 31, 1996, shall be incorporated into a separate agreement which the
parties agree to prepare and execute. The New Agreement may be assigned by
the Executive to an entity, reasonably acceptable to the Company, which is
wholly owned by the Executive, members of his immediate family or trusts for
the benefit of the Executive or members of his immediate family, and which
employs the Executive, provided that such entity shall make the Executive
available to render such advice and services.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of
the day and year first above written.
MARSH & McLENNAN RISK
CAPITAL CORP.
By: /s/ Jeffrey W. Greenberg
Jeffrey W. Greenberg
Partner
/s/ Robert Clements
Robert Clements
Marsh & McLennan Companies, Inc., a Delaware corporation (the "Parent"),
hereby agrees to perform any and all obligations and duties owed to the
Executive 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 the Executive, as amended hereby (the "Employment
Agreement"), and the Executive agrees to perform any and all obligations
owed to the Parent by the Executive pursuant to the terms and conditions of
the Employment Agreement. The Parent further agrees to guarantee to the
Executive the performance of any and all of the Company's obligations and
duties under the Employment Agreement.
MARSH & McLENNAN COMPANIES, INC.
By: /s/ A.J.C. Smith
A.J.C. Smith
Chairman
EMPLOYMENT AGREEMENT
by and between
MARSH & McLENNAN RISK CAPITAL CORP.
and
JEFFREY W. GREENBERG
Effective as of October 1, 1995
TABLE OF CONTENTS
EMPLOYMENT AGREEMENT
1. Employment . . . . . . . . . . . . . . . . . 1
2. Employment Period. . . . . . . . . . . . . . 1
3. Position and Duties. . . . . . . . . . . . . 1
4. Place of Performance . . . . . . . . . . . . 3
5. Compensation and Related Matters . . . . . . 3
(a) Base Salary. . . . . . . . . . . . . . 3
(b) Incentive Compensation . . . . . . . . 3
(c) Deferred Compensation. . . . . . . . . 3
(d) Initial Equity Grants. . . . . . . . . 4
(e) Ongoing Equity Grants. . . . . . . . . 5
(f) Trident Performance Payments . . . . . 6
(g) Expenses . . . . . . . . . . . . . . . 8
(h) Vacation . . . . . . . . . . . . . . . 8
(i) Services Furnished . . . . . . . . . . 8
(j) Personal Investments . . . . . . . . . 8
(k) Other Benefits . . . . . . . . . . . . 9
(l) Perquisites. . . . . . . . . . . . . . 9
6. Termination. . . . . . . . . . . . . . . . . 9
(a) Death. . . . . . . . . . . . . . . . . 9
(b) Disability . . . . . . . . . . . . . . 10
(c) Cause. . . . . . . . . . . . . . . . . 10
(d) Good Reason. . . . . . . . . . . . . . 11
(e) Other Terminations . . . . . . . . . . 14
(f) Notice of Termination. . . . . . . . . 14
7. Compensation Upon Termination or During
Disability. . . . . . . . . . . . . . . . . 15
(a) Disability Period. . . . . . . . . . . 15
(b) Death. . . . . . . . . . . . . . . . . 15
(c) Disability . . . . . . . . . . . . . . 16
(d) Cause or By Executive other than for
Good Reason. . . . . . . . . . . . . . 18
(e) Termination by Company without Cause
or by the Executive with Good Reason . 18
8. Gross-Up for Excise Tax. . . . . . . . . . . 20
9. Mitigation . . . . . . . . . . . . . . . . . 21
10. Confidential Information, Removal of Docu-
ments, Non-Competition. . . . . . . . . . . 21
(a) Confidential Information . . . . . . . 21
(b) Removal of Documents . . . . . . . . . 21
(c) Non-Competition. . . . . . . . . . . . 22
(d) Remedies . . . . . . . . . . . . . . . 23
(e) Continuing Operation . . . . . . . . . 23
(f) Nondisparagement by the Company. . . . 23
11. Indemnification . . . . . . . . . . . . . . 23
12. Successors; Binding Agreement . . . . . . . 24
(a) Company's Successors . . . . . . . . . 24
(b) Executive's Successors . . . . . . . . 24
13. Notice. . . . . . . . . . . . . . . . . . . 24
14. Miscellaneous . . . . . . . . . . . . . . . 25
15. Withholding . . . . . . . . . . . . . . . . 26
16. Arbitration . . . . . . . . . . . . . . . . 26
17. Transfer of Employment. . . . . . . . . . . 26
18. Attorneys' Fees . . . . . . . . . . . . . . 26
19. Validity. . . . . . . . . . . . . . . . . . 27
20. Counterparts. . . . . . . . . . . . . . . . 27
21. Entire Agreement. . . . . . . . . . . . . . 27
INDEX OF DEFINED TERMS
Term Section
Auditor . . . . . . . . . . . . . . . . . . . . . . . . 8
Award Certificate . . . . . . . . . . . . . . . . 5(d)(1)
Base Salary . . . . . . . . . . . . . . . . . . . . .5(a)
beneficial owner. . . . . . . . . . . . . . . .6(d)(x)(1)
Board . . . . . . . . . . . . . . . . . . . . . .Preamble
Cause . . . . . . . . . . . . . . . . . . . . . . . .6(c)
CEO Employment Period . . . . . . . . . . . . . . . . . 3
Change in Control of the Company. . . . . . . . . 6(d)(x)
Change in Control of the Parent . . . . . . . . . 6(d)(x)
Clements Agreement. . . . . . . . . . . . . . . . 5(f)(1)
Clements Trust Agreement. . . . . . . . . . . . . 5(f)(3)
Code. . . . . . . . . . . . . . . . . . . . . . . . . . 8
Company . . . . . . . . . . . . . . . . . . . . .Preamble
Competitive Business. . . . . . . . . . . . 10(c)(iii)(A)
Deferral Plan . . . . . . . . . . . . . . . . . . . .5(c)
Deferred Award. . . . . . . . . . . . . . . . . . . .5(c)
Disability. . . . . . . . . . . . . . . . . . . . . .6(b)
Disability Period . . . . . . . . . . . . . . . . . .7(a)
Effective Date. . . . . . . . . . . . . . . . . . . . . 2
Employment Period . . . . . . . . . . . . . . . . . . . 2
Enhanced Performance Payment. . . . . . . . . . . 5(f)(1)
Exchange Act. . . . . . . . . . . . . . . . . .6(d)(x)(1)
Excise Tax. . . . . . . . . . . . . . . . . . . . . . . 8
Excluded Investments. . . . . . . . . . . . . . . 5(f)(2)
Execution Date. . . . . . . . . . . . . . . . . . . .5(b)
Executive . . . . . . . . . . . . . . . . . . . .Preamble
Future Option(s). . . . . . . . . . . . . . . . . 5(e)(2)
Future Stock Awards . . . . . . . . . . . .5(e)(1)(B)(ii)
Future 25% Stock Award(s) . . . . . . . . .5(e)(1)(A)(ii)
Future 40% Stock Award(s) . . . . . . . . .5(e)(1)(B)(ii)
Good Reason . . . . . . . . . . . . . . . . . . . . .6(d)
Gross-Up Payments . . . . . . . . . . . . . . . . . . . 8
Incentive Compensation. . . . . . . . . . . . . . . .5(b)
Incentive Plan. . . . . . . . . . . . . . . . . . . .5(b)
Initial Period. . . . . . . . . . . . . . . . . . . . . 3
Initial Restricted Stock Award. . . . . . . . . . 5(d)(1)
Initial Stock Option Award. . . . . . . . . . . . 5(d)(2)
Letter Agreement. . . . . . . . . . . . . . . . . . . .21
Marsh & McLennan Entity . . . . . . . . . . . . . . .5(j)
Notice of Termination . . . . . . . . . . . . . . . .6(f)
Option. . . . . . . . . . . . . . . . . . . . . . 5(d)(2)
Option Certificate. . . . . . . . . . . . . . . . 5(d)(2)
Parent. . . . . . . . . . . . . . . . . . . . . . . . . 3
Parent Board. . . . . . . . . . . . . . . . . . . . . . 3
Parent Stock. . . . . . . . . . . . . . . . . . . 5(d)(2)
person. . . . . . . . . . . . . . . . . . . . .6(d)(x)(1)
Restricted Stock. . . . . . . . . . . . . . . . . 5(d)(1)
Restricted stock units. . . . . . . . . . . . .5(e)(1)(A)
Salary Continuation Period. . . . . . . . . . . 7(e)(iii)
Severance Payments. . . . . . . . . . . . . . . . . . . 8
Signing Payment . . . . . . . . . . . . . . . . . . .5(b)
Stock Award Plan. . . . . . . . . . . . . . . . . 5(d)(1)
Trident . . . . . . . . . . . . . . . . . . . . . 5(f)(2)
Trident Performance Payment . . . . . . . . . . . 5(f)(2)
Trust . . . . . . . . . . . . . . . . . . . . . . 5(f)(3)
Trust Agreement . . . . . . . . . . . . . . . . . 5(f)(3)
Trustee . . . . . . . . . . . . . . . . . . . . . 5(f)(3)
EMPLOYMENT AGREEMENT
AGREEMENT, effective as of October 1, 1995, by
and between Jeffrey W. Greenberg (the "Executive") and
Marsh & McLennan Risk Capital Corp., a Delaware
corporation (the "Company").
WHEREAS, the Board of Directors of the Company
(the "Board") desires to employ the Executive and the
Executive desires to furnish services to the Company on
the terms and conditions hereinafter set forth; and
WHEREAS, the parties desire to enter into this
agreement setting forth the terms and conditions of the
employment relationship of the Executive with the
Company;
NOW, THEREFORE, in consideration of the premis-
es and the mutual agreements set forth below, the parties
hereby agree 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.
2. Employment Period. The period of employ-
ment of the Executive by the Company hereunder (the
"Employment Period") shall commence as of October 1, 1995
(the "Effective Date") and shall end on September 30,
2000 or the Date of Termination (as defined in Section 6
below), if earlier, provided, however, that if the Execu-
tive's employment has not previously terminated, then
commencing on September 30, 2000 and each September 30
thereafter, the Employment Period shall automatically be
extended for one additional year unless, not later than
October 1 of the preceding year, the Company or the
Executive shall have given notice not to extend the
Employment Period.
3. Position and Duties. During the period
from the Effective Date through a date not later than
March 31, 1996 (such period being referred to as the
"Initial Period"), the Executive shall serve as an em-
ployee of the Company with the title of Partner and shall
1
report to the Chairman and Chief Executive Officer of the
Company, and shall have such duties and responsibilities
as may be assigned to him by the Chairman and Chief
Executive Officer of the Company. During the portion of
the Employment Period commencing upon expiration of the
Initial Period (such period being referred to as the "CEO
Employment Period"), the Executive shall serve as Chair-
man and Chief Executive Officer of the Company and shall
report directly to the Chief Executive Officer of Marsh &
McLennan Companies, Inc. (the "Parent"). During the CEO
Employment Period, subject to the supervisory powers of
the Board, 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 Execu-
tive as Chief Executive Officer shall cause the 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 commu-
nicated to the Executive in writing, including the ap-
proval by the Parent of annual budgets and business plans
and any material changes thereto. During the Employment
Period, 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 shall comply with all general poli-
cies 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 in-
vestments and affairs, provided that such activities do
not interfere with the proper performance of his duties
and responsibilities hereunder. The Parent shall use its
best efforts to include the Executive on the management
slate of nominees for directors of the Parent at the
annual meeting of Parent shareholders to be held in 1996
and to have the Executive elected to the Board of Direc-
tors of the Parent (the "Parent Board") at such meeting.
2
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 Connec-
ticut or such other location as may be agreed to by the
Board and the Executive.
5. Compensation and Related Matters.
(a) Base Salary. As compensation for the
performance by the Executive of his duties hereunder,
during the Initial Period the Company shall pay the
Executive a base salary at an annual rate of $1,200,000,
and during the CEO Employment Period the Company shall
pay the Executive a base salary at an annual rate of
$750,000 (the base salary, at the rate in effect from
time to time, is hereinafter referred to as the "Base
Salary"). The Base Salary shall be payable in accordance
with the Company's normal payroll practices, shall be re-
viewed annually (commencing as of January 1997) and may
be increased upon such review.
(b) Incentive Compensation. Upon execu-
tion of this Agreement (as set forth on the signature
page hereof, the "Execution Date"), the Executive shall
receive a cash lump sum payment of $300,000 (the "Signing
Payment"). Commencing with respect to the Parent's 1996
fiscal year, the Executive shall be eligible to partici-
pate in the Parent's Senior Management Incentive Compen-
sation Plan (the "Incentive Plan"); provided, however,
that the amount to which the Executive is otherwise
entitled under the Incentive Plan with respect to 1996
shall be reduced by the amount of the Signing Payment.
Payments made to the Executive pursuant to the Incentive
Plan are hereinafter referred to as "Incentive Compensa-
tion."
(c) Deferred Compensation. Effective as
of the Effective Date, the Executive shall receive an
award of $300,000 (the "Deferred Award"), which shall be
deferred and invested among Putnam funds in the same
manner as if such amount had been deferred in accordance
with the provisions of the Parent's 1995 Cash Bonus Award
Voluntary Deferral Plan (the "Deferral Plan"); provided,
however, that (i) from the Effective Date until the
Execution Date the Deferred Award shall be deemed to have
3
been invested in the Putnam Money Market Fund and (ii)
from the Execution Date until the date the Executive
makes an investment election in accordance with the
provisions of the Deferral Plan the Deferred Award shall
be invested in the Putnam Money Market Fund.
(d) Initial Equity Grants. The Executive
has been granted, as of October 4, 1995:
(1) An award (the "Initial Restricted Stock
Award") of Twenty Thousand (20,000) shares of restricted
stock of the Parent ("Restricted Stock") pursuant to the
terms of the Marsh & McLennan Companies 1992 Incentive
and Stock Award Plan (the "Stock Award Plan"). The
shares of Restricted Stock subject to the Initial Re-
stricted Stock Award shall vest with respect to 20% of
the shares subject to such award on each of the first,
second, third, fourth and fifth anniversaries of the
Effective Date. The Restricted Stock subject to the
Initial Restricted Stock Award shall be subject to all
other terms and conditions of the Stock Award Plan, the
rules and regulations in effect thereunder, the appli-
cable provisions of this Agreement and the document
setting forth the terms and conditions of the restricted
stock award (the "Award Certificate") substantially in
the form of Exhibit A hereto.
(2) A non-qualified stock option (an "Option")
to purchase 50,000 shares of common stock, par value
$1.00 per share, of the Parent ("Parent Stock") pursuant
to the Stock Award Plan (the "Initial Stock Option
Award"). The Initial Stock Option Award is subject to
the following conditions: (i) the exercise price per
share of Parent Stock shall be $86.875, (ii) the Initial
Stock Option Award shall vest and become exercisable with
respect to 25% of the shares of Parent Stock subject to
such award on each of the first, second, third and fourth
anniversaries of the Effective Date, and (iii) the Ini-
tial Stock Option Award shall be subject to the noncompe-
tition provisions set forth in the applicable Option
Certificate (as defined below). The Initial Stock Option
Award shall be subject to all other terms and conditions
of the Stock Award Plan, the rules and regulations there-
under, the applicable provisions of this Agreement and
the document setting forth the terms and conditions of
4
the Option (the "Option Certificate") substantially in
the form of Exhibit B hereto.
(e) Ongoing Equity Grants. During the
Employment Period, the Executive shall be entitled to
receive the following additional equity grants:
(1) Stock Awards. (A) In or about January,
1997 and each January thereafter during the Employment
Period, an award of that number of whole shares of Re-
stricted Stock (or "restricted stock units") equal to (i)
25% of the Executive's total base salary paid or accrued
for the prior twelve months, divided by (ii) the fair
market value of the Parent Stock as of the date of grant
(such awards are referred to individually as a "Future
25% Stock Award" and collectively as the "Future 25%
Stock Awards"). The shares of Restricted Stock (or
restricted stock units) subject to Future 25% Stock
Awards shall vest on the third anniversary of the date of
grant of each such award.
(B) In or about March, 1997 and each March
thereafter during the Employment Period, an award of that
number of whole shares of Restricted Stock (or restricted
stock units) equal to (i) 40% of the Executive's Base
Salary, divided by (ii) the fair market value of the
Parent Stock as of the date of grant (such awards are
referred to individually as a "Future 40% Stock Award"
and collectively as the "Future 40% Stock Awards", and
Future 25% Stock Awards and Future 40% Stock Awards are
referred to collectively as "Future Stock Awards.") The
shares of Restricted Stock (or restricted stock units)
subject to Future 40% Stock Awards shall vest on January
1 next following the tenth anniversary of the date of
grant of each such award.
(C) The Company or the Parent shall determine,
in its discretion, whether a Future Stock Award shall be
made in the form of Restricted Stock or restricted stock
units. Future Stock Awards shall be subject to the
applicable provisions of this Agreement and to such other
terms and conditions as shall be applicable to similar
awards granted at the same time to senior executives of
the Parent and its operating subsidiaries.
5
(2) Options. In or about May, 1996 and each
May thereafter during the Employment Period, an Option to
acquire not less than 20,000 shares of Parent Common
Stock (such options are referred to individually as a
"Future Option" and collectively as "Future Options").
Each Future Option shall (i) have an exercise price per
share not less than the fair market value of Parent Stock
on the date of grant, (ii) vest and become exercisable
with respect to 25% of the shares subject thereto on each
of the first, second, third and fourth anniversaries of
the date of grant and (iii) be subject to the noncompeti-
tion provisions set forth in the applicable Option Cer-
tificate (which shall be substantially similar to those
set forth in Exhibit B hereto).
(f) Trident Performance Payments.
(1) As used in this Section 5(f), the term
"Enhanced Performance Payment" shall have the meaning set
forth in the Amended and Restated Employment Agreement by
and between the Company and Robert Clements, effective as
of December 31, 1993, as amended as of the Execution Date
(the "Clements Agreement"), but without any reduction
resulting from the application of Sections 8(b), (c) or
(e) of the Clements Agreement.
(2) Subject to paragraph (4) below, within
forty-five (45) days following the receipt by the Company
of the final liquidating distribution from The Trident
Partnership, L.P., a limited partnership registered under
the laws of the Cayman Islands ("Trident"), the Company
shall pay to the Executive in a cash lump sum an amount
("Trident Performance Payment") equal to 75% of (a) the
Enhanced Performance Payment multiplied by (b) a frac-
tion, the denominator of which is the aggregate amount of
all investments made by Trident, and the numerator of
which is the aggregate amount of all investments made by
Trident prior to the date the Executive ceases to be the
Chairman and Chief Executive Officer of the Company, ex-
cluding, however, any investments made or committed prior
to the Effective Date with respect to Affinity Group
Plans, Inc., Hiscox Dedicated Insurance Fund PLC, Venton
Holdings Ltd. and Risk Capital Holdings, Inc. ("Excluded
Investments"). For purposes of this Agreement, the
6
aggregate amount of the Excluded Investments shall equal
$117,167,527.
(3) As soon as practicable following the
Execution Date, the Company shall establish a grantor
trust (the "Trust"), of which a bank of nationally recog-
nized standing with consolidated shareholders' equity of
not less than $500 million shall be trustee (the "Trust-
ee") and the Executive shall be the beneficiary. The
Trust shall be established pursuant to a trust agreement
(the "Trust Agreement") to be entered into by the Compa-
ny, the Parent, the Executive and the Trustee, the provi-
sions of which shall be substantially the same as the
provisions of the trust agreement established pursuant to
Section 5(c)(4) of the Clements Agreement (the "Clements
Trust Agreement"), with such changes as the parties
hereto shall, reasonably and in good faith, agree to so
that, to the extent practicable, the Trust Agreement
shall relate to the Executive's right to receive the
Trident Performance Payment to the same extent that the
Clements Trust Agreement relates to Mr. Clements' right
to receive the Enhanced Performance Payment. In any
case, for the purposes of this Section 5(f)(3), the En-
hanced Performance Payment shall be deemed to equal 5% of
the Marsh & McLennan Trident Compensation (as defined in
the Clements Agreement).
(4) The Executive's right to the Trident
Performance Payment shall be forfeited if, prior to the
date such payment otherwise would have been made, the
Executive's employment is terminated by the Company for
Cause or by the Executive without Good Reason.
(5) If, at any time during the Employment
Period prior to the time the Executive ceases to be
Chairman and Chief Executive Officer of the Company, the
Company organizes a successor or supplemental insurance
venture capital investment fund to Trident with objec-
tives 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.
7
(g) 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
applicable policies and procedures then in force.
(h) Vacation. The Executive shall be
entitled to vacation during the Employment Period in
accordance with policies applicable generally to senior
executives of the Parent and its operating subsidiaries.
(i) Services Furnished. During the Em-
ployment Period, the Company shall furnish the Executive,
at the Company's principal executive offices, with appro-
priate office space and such other facilities and servic-
es as shall be suitable to the Executive's position and
adequate for the performance of his duties as set forth
in Section 3 hereof.
(j) Personal Investments. During the Em-
ployment Period, the Parent, in its sole discretion, may
make available to the Executive and other similarly
situated senior executives of the Parent and its operat-
ing subsidiaries the opportunity for personal investments
in investments that the Company recommends to the enti-
ties it advises.
During the Employment Period, the Executive
will refrain from any personal investments in the insur-
ance industry, other than (i) investments made available
to the Executive in accordance with the preceding para-
graph or (ii) investments in stocks, bonds, or other
securities listed on any national or regional securities
exchange or that have 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, five percent (5%) of
the issued and outstanding shares, or, in the case of
other securities, five percent (5%) of the aggregate
principal amount thereof issued and outstanding; provid-
ed, however, that the restriction in this subparagraph
(ii) shall not be violated by an increase in the per-
centage of the Executive's investment in any entity where
such increase is attributable to a reduction in the
number of shares outstanding or to shares of others
8
(other than the Executive's wife or children) that he is
deemed to own under any applicable attribution rules,
provided that in any such case the Executive shall take
such reasonable steps as may be necessary to eliminate
any conflict of interest arising therefrom.
The Executive shall not, during the Employment
Period, make any personal investments which would prevent
or hinder, directly or indirectly, the transaction of
business by or the relationship of the Parent or any
corporation or partnership in which the Parent directly
or indirectly maintains a majority equity interest (a
"Marsh & McLennan Entity") with any governmental or
quasi-governmental or public entity (including pension
plans covering governmental or quasi-governmental employ-
ees), including any state, district, territory, or pos-
session of the United States or any governmental subdivi-
sion, agency, or instrumentality thereof or any insurance
market, including Lloyd's, by virtue of any statute, law,
regulation, or administrative practice.
(k) Other Benefits. During the Employ-
ment Period, the Executive shall be eligible to partici-
pate in all tax-qualified defined contribution and de-
fined benefit retirement plans, and supplemental plans
relating thereto, and welfare plans and programs (includ-
ing 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.
(l) Perquisites. During the Employment
Period, the Company shall make available to the Executive
all perquisites that are made available to comparable
senior executives of the Parent and its operating subsid-
iaries.
6. Termination. The Executive's employment
hereunder, as the case may be, may be terminated as
follows:
(a) Death. The Executive's employment
shall terminate upon his death, and the date of his death
shall be the Date of Termination.
9
(b) Disability. If, as a result of the
Executive's incapacity due to physical or mental illness
(as determined by a medical doctor mutually agreed to),
the Executive shall have been absent from his duties
hereunder on a full-time basis for the entire period of
six consecutive months and, within thirty (30) days after
written Notice of Termination (as defined in Section 6(f)
hereof) is given, shall not have returned to the perfor-
mance of his duties hereunder on a full-time basis ("Dis-
ability"), the Company may terminate the Executive's em-
ployment hereunder. In this event, the Date of Termina-
tion shall be thirty (30) days after Notice of Termina-
tion is given (provided that the Executive shall not have
returned to the performance of his duties on a full-time
basis during such thirty (30) day period).
(c) Cause. The Company may terminate the
Executive's employment hereunder for Cause. For purposes
of this Agreement, the Company shall have "Cause" to
terminate the Executive's employment hereunder:
(i) upon the Executive's conviction
for the commission of a felony involving moral
turpitude; or
(ii) if, in carrying out his duties
hereunder, the Executive engages in conduct that
constitutes willful gross misconduct or willful
gross neglect resulting in material harm to the
Parent or the Company, as the case may be, unless
the Executive believed in good faith that such
action or non-action was in, and not opposed to, the
best interest of the Parent or the Company, as the
case may be, which conduct is not cured within 30
days after the written Notice of Termination de-
scribed below has been delivered by the Parent or
the Company, as the case may be.
Cause shall not exist unless and until the
Parent or the Company has delivered to the Executive a
written Notice of Termination that specifically identi-
fies the events, actions, or non-actions, as applicable,
that the Parent or the Company believes constitute Cause
hereunder and the Executive has been provided with an
opportunity to be heard (which shall include an opportu-
10
nity to address the Compensation Committee of the Parent
Board in writing) within 15 days after the delivery of
such notice. The Date of Termination shall be the date
specified in the Notice of Termination; provided, howev-
er, that, in the case of a termination for Cause under
clause (ii) above, the Date of Termination shall not be
earlier than 30 days after delivery of the Notice of
Termination.
(d) Good Reason. The Executive may
terminate his employment hereunder within sixty (60) days
after the occurrence of one or more of 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 Execu-
tive to the Company and the Parent ("Good Reason"):
(i) a reduction in the Executive's
then current Base Salary, Incentive Compensation
opportunity, or Parent equity opportunity or the
termination or material reduction of any employee
benefit set forth in Section 5(k) hereof (other than
a reduction in benefits as part of an across-the-
board reduction similarly affecting other senior
executive officers of the Parent and its operating
subsidiaries);
(ii) during the Employment Period,
the failure to continue the Executive in any 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;
(iii) the failure to appoint the
Executive to the position of Chairman and Chief
Executive Officer of the Company on or before April
1, 1996;
(iv) the failure of the Executive to
be elected to the Parent Board at the annual meeting
of the shareholders of the Parent to be held in
1996;
11
(v) the failure to employ the Execu-
tive in a position with the Parent or the Company
which is satisfactory to him as of June 1, 1999;
(vi) except as contemplated by the
provisions of Section 3, a material diminution in
the Executive's duties, assignment of duties (in-
cluding reduction of duties) which are materially
inconsistent with the Executive's then current
position or, during the CEO Employment Period, the
appointment of anyone else to an executive position
at the Company senior to that of the Executive or a
change in the reporting relationship of the Execu-
tive so that he no longer reports directly to the
Chief Executive Officer of the Parent;
(vii) 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;
(viii) 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 or a failure of the Parent to
obtain the assumption in writing of its guaranty of
this Agreement by any successor to all or substan-
tially all of the assets of the Parent within 45
days after a merger, consolidation, sale or similar
transaction;
(ix) a "Change in Control of the
Parent" (as defined below) or a "Change in Control
of the Company" (as defined below); or
(x) failure to pay the Executive
Incentive Compensation of at least $637,000 (inclu-
sive of the Signing Payment) with respect to 1996 or
at least $750,000 with respect to any subsequent
year.
The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any
12
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 Sec-
tions 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 owner-
ship 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 secu-
rities of the Parent representing 50% or more of the
combined voting power of the Parent's then outstand-
ing voting securities;
(2) during any period of not more than two
consecutive years, individuals who at the beginning
of such period constitute the Parent Board, 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 6(d)) whose elec-
tion by the Parent Board 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 nomina-
tion for election was previously so approved, cease
for any reason to constitute at least a majority
thereof;
(3) the stockholders of the Parent approve a
merger or consolidation of the Parent with any other
corporation, other than (A) a merger or consolida-
tion which would result in the voting securities of
the Parent outstanding immediately prior thereto
13
continuing to represent (either by remaining out-
standing or by being converted into voting secu-
rities 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 outstand-
ing 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 Executiv-
e's employment is terminated hereunder for any reason
other than as set forth in Sections 6(a) through 6(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 Termina-
tion.
(f) Notice of Termination. Any termina-
tion of the Executive's employment hereunder by the
Company or by the Executive (other than termination
pursuant to Section 6(a) hereof) shall be communicated by
written Notice of Termination to the other party hereto
in accordance with Section 13 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 Execut-
ive's employment under the provision so indicated.
14
7. Compensation Upon Termination or During
Disability.
(a) Disability Period. During any period
during the Employment 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, (ii) remain eligible to receive Incentive Com-
pensation under Section 5(b) hereof and Future Stock
Awards and Future Options under Section 5(e) hereof, and
(iii) participate in the programs described in Section
5(k) 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. If the Executive's employment
hereunder is terminated as a result of death, then:
(i) the Company shall pay the
Executive's estate or designated beneficiary, as
soon as practicable after the Date of Termination,
any amounts earned, accrued or owing the Executive
hereunder for services prior to the Date of Termina-
tion;
(ii) the Company shall pay the
Executive's estate or designated beneficiary, in
accordance with the Company's normal payroll prac-
tice, an amount equal to the Executive's Base Salary
for a period of 90 days following the Date of Termi-
nation;
(iii) the Company shall pay the
Executive's estate or designated beneficiary, at the
time it would otherwise have been payable, Incentive
Compensation for the year in which the Date of
Termination occurs on the basis of an annualized
rate of no less than $750,000, prorated based upon
15
the number of days during such year or period the
Executive was employed by the Company;
(iv) the Company shall pay the
Executive's estate or designated beneficiary, as and
when otherwise payable, the Trident Performance Pay-
ment;
(v) all awards of Options, Restrict-
ed Stock and restricted stock units previously
granted to the Executive (including but not limited
to the Initial Restricted Stock Award, the Initial
Stock Option Award, and the Future Stock Awards and
Future Options previously granted to the Executive)
shall become fully vested and, with respect to the
Options, fully exercisable, as of the Date of Termi-
nation and all such Options shall remain exercisable
for a period of one year following such Date of
Termination; and
(vi) the Company shall have no addi-
tional obligations to the Executive under this
Agreement except to the extent otherwise provided in
the applicable plans and programs of the Company or
the Parent.
(c) Disability. If the Executive's
employment hereunder is terminated as a result of Dis-
ability, then:
(i) the Company shall pay the
Executive, as soon as practicable after the Date of
Termination, any amounts earned, accrued or owing
the Executive hereunder for services prior to the
Date of Termination;
(ii) the Executive shall receive,
until the date the Executive reaches age 65 or, if
earlier, until his death, the salary-related dis-
ability benefits provided in accordance with, and
subject to the conditions of, the long-term dis-
ability program then in effect for senior executives
of the Parent and its operating subsidiaries; pro-
vided, however, that so long as the Executive elects
and pays for any voluntary supplemental base salary
16
coverage, the level of such benefits shall not be
less than 65% of his Base Salary as of the Date of
Termination;
(iii) the Company shall pay the
Executive, at the time it would otherwise have been
payable, Incentive Compensation for the year in
which the Date of Termination occurs on the basis of
an annualized rate of no less than $750,000, prorat-
ed based upon the number of days during such year or
period the Executive was employed by the Company;
(iv) the Company shall pay the
Executive, as and when otherwise payable, the Tri-
dent Performance Payment;
(v) all awards of Options, Restrict-
ed Stock and restricted stock units previously
granted to the Executive (including but not limited
to the Initial Restricted Stock Award, the Initial
Stock Option Award, and the Future Stock Awards and
Future Options previously granted to the Executive)
shall become fully vested and, with respect to the
Options, fully exercisable, as of the Date of Termi-
nation, and all such Options shall remain exercis-
able for their original term;
(vi) for the remainder of the Employ-
ment Period set forth in Section 2 hereof (deter-
mined without regard to the Executive's termination
for Disability), the Executive shall continue to
participate in all employee welfare benefit plans
and programs of the Company in which the Executive
was entitled to participate immediately prior to the
Date of Termination in accordance with the terms of
such plans and programs as in effect from time to
time; provided that the Executive's continued par-
ticipation is permitted under the general terms and
provisions of such plans and programs. In the event
that the Executive's participation in any such plan
or program is barred, the Company shall arrange to
provide the Executive and his dependents with bene-
fits substantially similar to those which the Execu-
tive and his dependents would otherwise have been
entitled to receive under such plans and programs
17
from which their continued participation is barred;
and
(vii) the Company shall have no addi-
tional obligations to the Executive under this
Agreement except to the extent otherwise provided in
the applicable plans and programs of the Company or
the Parent.
(d) Cause or By Executive other than for
Good Reason. If the Executive's employment hereunder is
terminated by the Company for Cause or by the Executive
(other than for Good Reason), then:
(i) the Company shall pay the
Executive, as soon as practicable after the Date of
Termination, any amounts earned, accrued or owing
the Executive hereunder for services prior to the
Date of Termination; and
(ii) the Company shall have no addi-
tional obligations to the Executive under this
Agreement except to the extent otherwise provided in
the applicable plans and programs of the Company or
the Parent.
(e) Termination by Company without Cause
or by the Executive with Good Reason. If the Executive's
employment hereunder is terminated by the Company (other
than for Cause or Disability) or by the Executive for
Good Reason, then:
(i) the Company shall pay the Execu-
tive, as soon as practicable after the Date of
Termination, any amounts earned, accrued or owing
the Executive hereunder for services prior to the
Date of Termination;
(ii) the Company shall pay the
Executive, at the time it would otherwise have been
payable, Incentive Compensation for the year in
which the Date of Termination occurs on the basis of
an annualized rate of no less than $750,000, prorat-
ed based upon the number of days during such year or
period the Executive was employed by the Company;
18
(iii) the Company shall pay to the
Executive over a period of twenty-four months fol-
lowing the Date of Termination (the "Salary Con-
tinuation Period"), and in accordance with the
Company's payroll practices, an aggregate amount
equal to two times the sum of (A) the Executive's
Base Salary (at the annualized rate in effect at the
time Notice of Termination is given) and (B) the
higher of (x) the Executive's average annual Incen-
tive Compensation with respect to the two full
calendar years immediately preceding the Date of
Termination and (y) $750,000;
(iv) the Company shall pay the
Executive, as and when otherwise payable, the Tri-
dent Performance Payment;
(v) all awards of Options, Restrict-
ed Stock and restricted stock units previously
granted to the Executive (including but not limited
to the Initial Restricted Stock Award, the Initial
Stock Option Award, and the Future Stock Awards and
Future Options previously granted to the Executive)
shall become fully vested and, with respect to the
Options, fully exercisable, as of the Date of Termi-
nation, with the Initial Stock Option Award remain-
ing exercisable for its original term and all other
Options (including Future Options) remaining exer-
cisable for a period of one year after the Date of
Termination;
(vi) during the Salary Continuation
Period, the Executive shall continue to participate
in all employee welfare benefit plans and programs
in which the Executive was entitled to participate
immediately prior to the Date of Termination in
accordance with the terms of such plans and programs
as in effect from time to time; provided that the
Executive's continued participation is permitted
under the general terms and provisions of such plans
and programs. In the event that the Executive's
participation in any such plan or program is barred,
the Company shall arrange to provide the Executive
and his dependents with benefits substantially simi-
lar to those which the Executive and his dependents
19
would otherwise have been entitled to receive under
such plans and programs from which their continued
participation is barred; and
(vii) 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 or
the Parent.
Notwithstanding the above, (A) if the Executive
terminates employment for Good Reason by reason of the
event described in Section 6(d)(v), then in lieu of the
payments described in Section 7(e)(iii), the Company
shall pay the Executive $500,000 in a single cash lump
sum as soon as practicable following the Date of Termina-
tion, and (B) if, after a Change in Control of the Parent
or a Change in Control of the Company, the Executive's
employment is terminated either by the Company (other
than for Cause or Disability) or by the Executive for
Good Reason, then, subject to (A) above, payment of the
aggregate amount described in Section 7(e)(iii) shall be
made in a single cash lump sum as soon as practicable
following the Date of Termination. In either case, the
Salary Continuation Period shall be twenty-four months.
8. Gross-Up for Excise Tax. In the event that
the Executive becomes entitled to the payments or bene-
fits pursuant to Section 7 of this Agreement (the "Sever-
ance Payments"), if any of the Severance Payments will be
subject to the excise tax (the "Excise Tax") under Sec-
tion 4999 of the Internal Revenue Code of 1986, as amend-
ed (the "Code"), the Company shall pay to the Executive,
within five (5) days following the Date of Termination or
as soon thereafter as practicable, an additional amount
(the "Gross-Up Payment") such that the net amount re-
tained by the Executive, after deduction of any Excise
Tax on the Severance Payments and any federal, state and
local income tax and Excise Tax upon the payment provided
for by this Section 8, shall be equal to the Severance
Payments. The determination of whether an Excise Tax is
due, the amount of the Excise Tax and the amount of the
Gross-Up Payment shall be made by an independent auditor
(the "Auditor") jointly selected by the Company and the
Executive and paid by the Company. If the Executive and
20
the Company cannot agree on the firm to serve as the
Auditor, then the Executive and the Company shall each
select one nationally recognized accounting firm and
those two firms shall jointly select the nationally
recognized accounting firm to serve as the Auditor.
9. Mitigation. The Executive shall not be re-
quired to mitigate amounts payable pursuant to Section 7
hereof by seeking other employment or otherwise, nor
shall there be any offset against such payments on ac-
count of (a) any remuneration attributable to any subse-
quent employment that he may obtain or (b) any claims the
Parent or the Company may have against the Executive.
However, to the extent that the Executive shall receive
from a subsequent employer benefits substantially similar
to those to be provided under Sections 7(c)(vi) and
7(e)(vi) hereof, the benefits to be provided under such
Sections shall be correspondingly reduced.
10. Confidential Information, Removal of Docu-
ments, Non-Competition.
(a) Confidential Information. The Execu-
tive 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 by the Company 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 Execu-
tive 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 Par-
ent.
(b) Removal of Documents. All records,
files, drawings, documents, models, equipment, and the
like relating to the business of the Marsh & McLennan
21
Entities, which the Executive prepares, uses or comes
into contact with shall not be removed by the Executive
from the premises of any Marsh & McLennan Entity (without
the written consent of the Company or the Parent) during
or after the Employment Period unless such removal shall
be required or appropriate in connection with his carry-
ing out his duties under this Agreement, and, if so
removed by the Executive, shall be returned to such Marsh
& McLennan Entity immediately upon termination of the
Executive's employment hereunder.
(c) Non-Competition. During (i) the
Executive's employment with the Company, (ii) in case of
termination by the Company (other than for Cause or
Disability) or by Executive for Good Reason (other than a
termination by the Executive for Good Reason by reason of
the event described in Section 6(d)(v) hereof), the
Salary Continuation Period, and (iii) in case of Termina-
tion by the Company with Cause or by the Executive with-
out Good Reason, the one (1)-year period after the Execu-
tive's Date of Termination, the Executive (A) shall not
engage, anywhere within the geographical areas in which
any Marsh & McLennan Entity has conducted its 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 sharehold-
er, principal, agent, partner, officer, director, employ-
ee or consultant of any other organization, in the insur-
ance brokerage business ("Competitive Business"); provid-
ed, however, that nothing herein shall preclude the
Executive from so engaging in that portion of the busi-
ness of any enterprise which does not constitute a Com-
petitive Business; (B) shall not solicit or encourage any
officer, employee or consultant of any of the Marsh &
McLennan Entities to leave the employ of any of the Marsh
& McLennan Entities for employment by or with any compet-
itor of any of the Marsh & McLennan Entities; (C) shall
not divert to any competitor of any of the Marsh & McLen-
nan Entities any customer of any of the Marsh & McLennan
Entities; and (D) shall not disparage any Marsh & McLenn-
an Entity or any employee, director or officer of any
Marsh & McLennan Entity; provided, however, that nothing
herein shall prohibit the Executive from making invest-
ments permitted by Section 5(j) hereof. If, at any time,
the provisions of this Section 10(c) shall be determined
22
to be invalid or unenforceable, by reason of being vague
or unreasonable as to area, duration or scope of activi-
ty, 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 deter-
mined 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) Remedies. 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 jurisdic-
tion to remedy any such breach or threatened breach, the
Executive acknowledging that damages would be inadequate
and insufficient. In addition, in the event of (i) a
material breach of Section 10(a) by the Executive, (ii) a
material and willful breach of Section 10(b) by the
Executive or (iii) a breach of Section 10(c) by the
Executive, the Company's obligations to the Executive
under Section 7(e) hereof shall immediately cease and the
Company shall have no further obligation to the Executive
under this Agreement.
(e) Continuing Operation. Any termina-
tion of the Executive's employment or of this Agreement
shall have no effect on the continuing operation of this
Section 10.
(f) Nondisparagement by the Company.
During the applicable period under Section 10(c) hereof,
neither the Company nor the Parent shall disparage the
Executive.
11. Indemnification. The Company shall indem-
nify the Executive to the full extent authorized by law
and the Charter and By-laws of the Company or the Parent,
as applicable, for all expenses, costs, liabilities and
legal fees which the Executive may incur in the discharge
of all his duties hereunder. The Executive shall be in-
sured under the Company's and the Parent's Directors' and
Officers' Liability Insurance Policy as in effect from
time to time. Any termination of the Executive's employ-
23
ment or of this Agreement shall have no effect on the
continuing operation of this Section 11.
12. 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 Compa-
ny is not the continuing entity, or the sale or liquida-
tion 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 as-
signee or transferee assumes the liabilities, obligations
and duties of the Company, as contained in this Agree-
ment, 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
12 or which otherwise becomes bound by all the terms and
provisions of this Agreement or by operation of law.
(b) Executive's Successors. This Agree-
ment shall not be assignable by the Executive. This
Agreement and all rights of the Executive hereunder shall
inure to the benefit of and be enforceable by the Execut-
ive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees
and legatees. Upon the Executive's death, all amounts to
which he is entitled hereunder, 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.
13. Notice. For the purposes of this Agree-
ment, notices, demands and all other communications
provided for in this Agreement shall be in writing and
24
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:
Jeffrey W. Greenberg
950 Park Avenue, Apt. 10B
New York, New York 10028
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.
14. 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
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 the other party hereto of, or compliance with,
any condition or provision of this Agreement to be per-
formed 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. The validity,
interpretation, construction and performance of this
25
Agreement shall be governed by the laws of the State of
New York without regard to its conflicts of law princi-
ples.
15. Withholding. Any payments provided for in
this Agreement shall be paid net of any applicable with-
holding required under federal, state or local law.
16. 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 exclu-
sive remedy of either party, and judgment upon such award
rendered by the arbitrator(s) may be entered in any court
of competent jurisdiction.
17. Transfer of Employment. Anything in this
Agreement to the contrary notwithstanding, if, during the
Employment Period, the Company, the Parent and the Execu-
tive agree in writing that the Executive's employment
hereunder shall be transferred to another Marsh & McLenn-
an Entity (the "Transferee") (which may be the Parent),
then the rights and obligations of the Company under this
Agreement (with such appropriate modifications to the
Agreement as the Parent, the Transferee and the Executive
may agree to) may be assigned or transferred by the
Company to the Transferee. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined
and any Transferee that becomes the Company's successor
with respect to the Executive's employment in accordance
with this Section 17.
18. Attorneys' Fees. The Company shall reim-
burse the Executive for all costs, including without
limitation reasonable attorneys' fees of the Executive,
in any dispute, arbitration or proceeding arising under
this Agreement so long as the Executive's position is ad-
vanced in good faith. The Company shall pay (or reim-
burse the Executive for) all costs, including without
limitation reasonable attorneys' fees, incurred by the
Executive in connection with the negotiation of this
Agreement and matters preliminary thereto.
26
19. Validity. The invalidity or unenforce-
ability 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.
20. Counterparts. This Agreement may be exe-
cuted 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.
21. 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 agree-
ments (including, but not limited to, the Letter Agree-
ment between the Executive and the Company dated October
4, 1995 (the "Letter Agreement")), promises, covenants,
arrangements, communications, representations or warran-
ties, whether oral or written, by the parties hereto in
respect of the subject matter contained herein; and any
prior agreement (including the Letter Agreement) of the
parties hereto in respect of the subject matter contained
herein is hereby terminated and cancelled.
27
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement on December 16, 1995 to be effec-
tive as of the date first above written.
MARSH & McLENNAN RISK CAPITAL
CORP.
By:/s/Robert Clements
Name: Robert Clements
Title: Chairman of the Board
/s/Jeffrey W. Greenberg
Jeffrey W. Greenberg
28
December 18, 1995
Mr. Jeffrey W. Greenberg
950 Park Avenue
New York, NY 10028
Dear Mr. Greenberg:
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 Employment Agreement
between Marsh & McLennan Risk Capital Corp. (the "Company") and you,
effective as of October 1, 1995 (the "Employment Agreement"), and you agree
to perform any and all obligations owed to the Parent by you pursuant to the
terms and conditions of the Company's obligations and duties under the
Employment Agreement.
Marsh & McLennan Companies, Inc.
By: /s/A.J.C. Smith
A.J.C. Smith
Chairman of the Board
Agreed to:
/s/Jeffrey W. Greenberg
Jeffrey W. Greenberg
MARSH & MCLENNAN COMPANIES, INC.
DIRECTORS STOCK COMPENSATION PLAN
1. Purpose.
The Marsh & McLennan Companies, Inc. Directors Stock
Compensation Plan (the "Plan") is intended to provide an incentive to
members of the board of directors of Marsh & McLennan Companies, Inc., a
Delaware corporation (the "Company"), who receive fees for their services,
to remain in the service of the Company and to encourage such Directors to
acquire additional stock ownership interests in the Company.
2. Definitions.
(a) "Accounting Date" means June 1st of each Plan Year.
(b) "Basic Fee" means the annual retainer payable to a
Director during each Plan Year (at the annual rate in effect on the
Accounting Date of such Plan Year) for such Director's services on the Board
(exclusive of any amounts payable with respect to service on a committee of
the Board or other committee of Directors or for attendance at Board or
committee meetings).
(c) "Board" means the Board of Directors of the Company.
(d) "Committee" means the Compensation Committee of the
Board.
(e) "Common Stock" means the common stock, par value $1.00
per share, of the Company.
(f) "Compensation" means the aggregate amount payable to a
Director for such Director's services on the Board (including any amounts
payable with respect to service on a committee of the Board or other
committee of Directors or for attendance at Board or committee meetings, but
excluding the portion of the Basic Fee with respect to which shares of
Common Stock are issuable pursuant to Section 5(a) hereof).
(g) "Director" means a member of the Board who receives fees
for his or her services.
(h) "Effective Date" means June 1, 1995.
(i) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(j) "Fair Market Value" on any given date means, except as
otherwise provided in Section 5(f) hereof, the average of the high and low
prices of the Common Stock on the New York Stock Exchange on the last
trading day preceding such date.
(k) "Plan Year" means the twelve-month period commencing
June 1st and ending on the following May 31st.
3. Administration of the Plan.
The Plan shall be administered by the Committee. The
Committee shall adopt such rules as it may deem appropriate in order to
carry out the purpose of the Plan. All questions of interpretation,
administration, and application of the Plan shall be determined by a
majority of the members of the Committee, except that the Committee may
authorize any one or more of its members, or any officer of the Company, to
execute and deliver documents on behalf of the Committee. The determination
of such majority shall be final and binding in all matters relating to the
Plan. No member of the Committee shall be liable for any act done or
omitted to be done by such member or by any other member of the Committee in
connection with the Plan, except for such member's own willful misconduct or
as expressly provided by statute.
4. Common Stock Reserved for the Plan.
The number of shares of Common Stock authorized for issuance
under the Plan is 250,000, including Deferred Shares (as defined in Section
5(c) hereof), whether distributed as such or paid in cash, subject to
adjustment pursuant to Section 6 hereof. Shares of Common Stock delivered
hereunder may be either authorized but unissued shares or previously issued
shares reacquired and held by the Company.
5. Terms and Conditions of Grants.
(a) Mandatory Portion. On each Accounting Date commencing
with the Effective Date, each Director shall automatically receive a number
of shares of Common Stock with a Fair Market Value on such Accounting Date
equal to one-quarter (1/4) of his or her Basic Fee payable during the Plan
Year which commences on such Accounting Date. Such shares of Common
Stock (including fractional shares) shall be received in lieu of the payment
of cash in respect of one-quarter (1/4) of such Basic Fee and shall be
transferred on such Accounting Date in accordance with Section 5(e) hereof,
except to the extent that a Deferral Election (as defined in Section 5(c)
hereof) shall be in effect with respect to such shares or to the extent that
Section 5(f) hereof applies.
(b) Elective Portion. Each Director may elect that a
specified percentage (in increments of 10%) of his or her future
Compensation be paid in shares of Common Stock. Such shares of Common Stock
(including fractional shares) shall be received in lieu of the payment of
cash in respect of the specified percentage of future Compensation payable
for services rendered in the quarters ended August 15th, November 15th,
February 15th and May 15th, as the case may be. Such shares of Common Stock
shall be transferred in accordance with Section 5(e) hereof, except to the
extent that a Deferral Election (as defined in Section 5(c) hereof) shall be
in effect with respect to such shares or to the extent that Section 5(f)
hereof applies. An election hereunder shall be in the form of a document
executed and filed with the Secretary of the Company and shall remain in
effect until the effectiveness of any modification or revocation.
(c) Deferral Election. With respect to (1) the portion of
the Basic Fee payable in Common Stock under Section 5(a) and (2) the
specified percentage of Compensation payable in Common Stock under Section
5(b) hereof, each Director may elect to defer the receipt (a "Deferral
Election") of all or any portion of the shares of Common Stock otherwise
transferable pursuant to Section 5(e). In such event, there shall be
credited to an account maintained on behalf of such Director, as of the date
on which shares would otherwise be transferred hereunder, a number of Shares
("Deferred Shares") equal to the number of shares otherwise transferable. A
Deferral Election or revocation hereunder shall be in the form of a document
executed by the Director and filed with the Secretary of the Company prior
to the time that the Basic Fee or other Compensation to which such election
relates has been earned. Any such election may be modified or revoked at
any time with respect to the Basic Fee or other Compensation not yet earned,
but will remain in effect until modified or revoked.
Effective as of the Effective Date, all units representing
phantom stock which have been credited to an account maintained by the
Company for the benefit of a Director, pursuant to a deferral agreement or
arrangement with such Director, shall be converted into an equal number of
Deferred Shares pursuant to this Plan and shall thereafter be treated in
accordance with the terms hereof.
The Director shall elect (a) that Deferred Shares be
distributed (in whole shares of Common Stock and cash in lieu of any
fractional shares) in a lump sum or in substantially equal annual
installments (not exceeding 10), and (b) that the lump sum or first
installment be distributed on the tenth day of the calendar year immediately
following either (i) the year in which the Director ceases to be a Director
of the Company or (ii) the earlier of the year in which the Director ceases
to be a Director of the Company or a date designated by the Director;
provided, however, that any such election shall be subject to Section 5(f)
hereof. Installments subsequent to the first installment shall be
distributed on the tenth day of each succeeding calendar year until all of
the Director's Deferred Shares shall have been distributed. Notwithstanding
anything else this Plan, the Committee may, in its sole discretion,
accelerate the distribution of Deferred Shares in cases of extreme emergency
or hardship.
In the event the Director should die before all of the
Director's Deferred Shares have been distributed, the balance of the
Deferred Shares shall be distributed in a lump sum to the beneficiary or
beneficiaries designated in writing by the Director, or if no designation
has been made, to the estate of the Director.
(d) Dividend Equivalents. Deferred Shares shall be credited
with an amount equal to the dividends which would have been paid on an equal
number of outstanding shares of Common Stock ("Dividend Equivalents").
Dividend Equivalents shall be credited (i) as of the payment date of such
dividends, and (ii) only with respect to Deferred Shares credited to such
Director prior to the record date of the dividend. Deferred Shares held
pending distribution shall continue to be credited with Dividend
Equivalents.
Dividend Equivalents so credited shall be converted into an
additional number of Deferred Shares as of the payment date of the dividend
(based on the Fair Market Value on such payment date). Such Deferred Shares
shall thereafter be treated in the same manner as any other Deferred Shares
under the Plan.
(e) Transfer of Shares. Shares of Common Stock issuable to
a Director under Section 5(a) hereof shall be transferred to such Director
as of each Accounting Date. The total number of shares of Common Stock to
be so transferred shall be determined by dividing (a) one-quarter (1/4) of
such Director's Basic Fee payable during the Plan Year commencing on such
Accounting Date by (b) the Fair Market Value of a share of Common Stock on
such Accounting Date. Shares of Common Stock issuable to a Director under
Section 5(b) hereof shall be transferred to such Director on August 31st,
November 30th, February 28th and May 31st of each Plan Year. The total
number of shares of Common Stock to be so transferred on each such date
shall be determined by dividing (x) the product of (1) the percentage
specified by the Director pursuant to Section 5(b) hereof and (2) the
Director's Compensation payable for services rendered in the quarter ending
on August 15th, November 15th, February 15th or May 15th of such Plan Year,
as the case may be, by (y) the Fair Market Value of a share of Common Stock
on such date. Notwithstanding the two preceding sentences, no election
under Section 5(b) (and no modification or revocation thereof) shall be
executed prior to six months from the date such election (or modification or
revocation) is properly filed pursuant to Section 5(b) hereof (i.e., the
Fair Market Value of the shares of Common Stock issuable pursuant to an
election or modification shall be determined on the August 15th, November
15th, February 15th or May 15th next following the expiration of six months
from the date such election or modification is filed, and such shares shall
be transferred on the August 31st, November 30th, February 28th, or May 31st
next following the date used for determining Fair Market Value). The
registrar for the Company will make an entry on its books and records
evidencing that such shares (including any fractional shares) have been duly
issued as of such dates; provided, however, that a Director may in the
alternative elect in writing prior thereto to receive a stock certificate
representing the number of whole such shares acquired plus cash in lieu of
any fractional shares.
(f) Change in Control. Upon a Change in Control, all
Deferred Shares, to the extent credited prior to the Change n Control, shall
be paid immediately in cash. For purposes of this Section 5(f), with
respect to determining the cash equivalent value of a Deferred Share, the
Fair Market Value of such a Deferred Share shall be deemed to equal the
greater of (i) the highest Fair Market Value per share at any time during
the 60-day period preceding a Change in Control and (ii) the price of a
share of Common Stock which is paid or offered to be paid, by any person or
entity, in connection with any transaction which constitutes a Change in
Control pursuant to this Section 5(f).
For purposes of the Plan, 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 Exchange Act (other than the
Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company
or any corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same
proportions as their ownership of Common 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 voting securities;
(ii) during any period of two consecutive years,
individuals who at the beginning of such period
institute the Board, 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(f)) whose election by the Board or nomination for
election by the Company'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;
(iii) the stockholders of the Company approve a merger
or consolidation of the Company with any other
corporation, 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) more than 50% of the combined voting power of
the voting securities of the Company or such surviving
entity (or any parent 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 herein
above defined) acquired more than 50% of the combined
voting power of the Company's then outstanding
securities; or
(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).
6. Effect of Certain Changes in Capitalization.
In the event of any recapitalization, stock split, reverse
stock split, stock dividend, reorganization, merger, consolidation,
spin-off, combination, repurchase, or share exchange, or other similar
corporate transaction or event affecting the Common Stock, the maximum
number or class of shares available under the Plan, and the number or class
of shares of Common Stock to be delivered hereunder shall be adjusted by
the Committee to reflect any such change in the number or class of issued
shares of Common Stock.
7. Term of Plan.
This Plan shall become effective as of the Effective Date,
provided that the Plan shall have been approved by the stockholders of the
Company at the 1995 annual meeting of stockholders. This Plan shall remain
in effect until all authorized shares have been issued, unless sooner
terminated by the Board. No transfer of shares of Common Stock may be made
to any Director under the Plan unless stockholder approval of the Plan has
previously been obtained pursuant to this Section 7.
8. Amendment; Termination.
The Board may at any time and from time to time alter, amend,
suspend, or terminate the Plan in whole or in part; provided, however, that
no amendment which requires stockholder approval in order for the exemptions
available under Rule 16b-3 of the Exchange Act, as amended from time to time
("Rule 16b-3"), to be applicable to the Plan and the Directors shall be
effective unless the same shall be approved by the stockholders of the
Company entitled to vote thereon; and, provided further, that the provisions
of Section 5(a) hereof shall not be amended more than once every six months,
other than to conform with changes in the Internal Revenue Code of 1986, as
amended, the Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder.
9. Rights of Directors.
Nothing contained in the Plan or with respect to any grant
shall interfere with or limit in any way the right of the stockholders of
the Company to remove any Director from the Board, nor confer upon any
Director any right to continue in the service of the Company as a Director.
10. General Restrictions.
(a) Investment Representations. The Company may require any
Director to whom Common Stock is issued, as a condition of receiving such
Common Stock, to give written assurances in substance and form satisfactory
to the Company and its counsel to the effect that such person is acquiring
the Common Stock for his own account for investment and not with any present
intention of selling or otherwise distributing the same, and to such other
effects as the Company deems necessary or appropriate in order to comply
with Federal and applicable state securities laws.
(b) Compliance with Securities Laws. Each issuance shall be
subject to the requirement that, if at any time counsel to the Company shall
determine that the listing, registration or qualification of the shares upon
any securities exchange or under any state or Federal law, or the consent or
approval of any governmental or regulatory body, is necessary as a condition
of, or in connection with, the issuance of shares hereunder, such issuance
may not be accepted or exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained on conditions acceptable to the Committee. Nothing herein shall be
deemed to require the Company to apply for or to obtain such listing,
registration or qualification.
(c) Nontransferability. Awards under this Plan shall not be
transferable by a Director other than by the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined
in the Internal Revenue Code of 1986, as amended, or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder.
11. Withholding.
The Company may defer making payments under the Plan until
satisfactory arrangements have been made for the payment of any Federal,
state or local income taxes required to be withheld with respect to such
payment or delivery.
12. Governing Law.
This Plan and all rights hereunder shall be construed in
accordance with and governed by the laws of the State of Delaware.
13. Plan Interpretation.
The Plan is intended to comply with applicable provisions of
Rule 16b-3, as amended from time to time, and shall be construed to so
comply.
14. Headings.
The headings of sections and subsections herein are included
solely for convenience of reference and shall not affect the meaning of any
of the provisions of the Plan.
<PAGE>
MARSH & McLENNAN COMPANIES
ANNUAL REPORT 1995
- --------------------------------------------------------------------------------
Navigational instrument-reflecting circle.
- --------------------------------------------------------------------------------
Navigating Global Markets
<PAGE>
Marsh & McLennan Companies, Inc. is a professional services firm with insurance
and reinsurance broking, consulting and investment management businesses. More
than 25,000 employees worldwide provide analysis, advice and transactional
capabilities to clients in over 80 countries.
<PAGE>
FINANCIAL HIGHLIGHTS
For the Three Years Ended December 31, 1995
(In millions, except per share figures) 1995 1994 1993
---- ---- ----
Revenue $ 3,770.3 $3,435.0 $3,163.4
Operating Income $ 694.9 $ 670.3 $ 592.8
Income Before Income Taxes and
Cumulative Effect of Accounting Change $ 649.8 $ 631.5 $ 558.6
Net Income $ 402.9 $ 371.5 $ 332.4
Stockholders' Equity $ 1,665.5 $1,460.6 $1,365.3
Income Per Share Before Cumulative Effect of
Accounting Change $ 5.53 $ 5.19 $ 4.52
Net Income Per Share $ 5.53 $ 5.05 $ 4.52
Dividends Paid Per Share $2.97-1/2 $ 2.80 $ 2.70
Return on Average Stockholders' Equity 26% 26% 27%
Year-end Stock Price $ 88-3/4 $ 79-1/4 $ 81-1/4
REVENUE
(In billions)
1986 $1.80
1987 2.15
1988 2.27
1989 2.42
1990 2.72
1991 2.78
1992 2.94
1993 3.16
1994 3.44
1995 3.77
EARNINGS PER SHARE
(In dollars)
1986 $3.30
1987 4.06
1988 4.09
1989 4.10
1990 4.15
1991 4.18
1992 4.21
1993 4.52
1994 5.05
1995 5.53
1
<PAGE>
CHAIRMAN'S PERSPECTIVE
In recent years, the diversification of our Company between insurance
services and consulting, and investment management has enabled us to provide our
shareholders with increased earnings and dividends. Even as difficult market
conditions have prevailed in some areas, particularly insurance services, we
have continued to make substantial investments in all our businesses to prepare
us for the changes we foresee.
We are optimistic about the growth prospects for our insurance services
business, which includes risk management, insurance and reinsurance broking and
insurance program management. But to realize these prospects and maintain our
leadership position we have to invest in new technology and in research and
development. We must recruit, train and develop a new cadre of professional
staff. We believe we have made great progress in recent years while continuing
to serve our clients well and deliver profits to our shareholders.
While investing in the development of our business, we have been
emphasizing the need for close association among the operating companies in our
insurance services sector: Marsh & McLennan, Guy Carpenter, Seabury & Smith and
Marsh & McLennan Risk Capital. The closer association already has provided us
with opportunities to expand services to clients, improve productivity and
reduce costs. We have now decided that it is time to complete this development
by uniting these companies under common management. This
2
<PAGE>
final phase of integration is being led by Richard H. Blum who was chief
executive officer of Guy Carpenter, our reinsurance intermediary, from 1984 to
1996.
- --------------------------------------------------------------------------------
Photograph of Marsh & McLennan Companies' chairman, A.J.C. Smith, standing in
front of painting of Cutty Sark clipper ship.
- --------------------------------------------------------------------------------
Mercer Consulting Group also has been making important investments in
recent years to respond to and prepare for changes in the needs of its clients.
Technology investments will enable clients to outsource their human resource
functions to William M. Mercer. Investment in new methodologies will facilitate
the growth of our consulting practice for health care providers and users.
Substantial research projects in both human resource and strategy consulting
have increased our capacity to advise clients for whom revenue growth is the
primary factor in their plans for increasing shareholder value.
3
<PAGE>
Concurrently, our investment management business has been performing
superbly. In 1995, Putnam's assets under management rose 32 percent to $126
billion, reflecting strong, competitive performance in a historically strong
year for American securities markets. Outstanding investment results and
unsurpassed service to mutual fund shareholders and corporate clients supported
successful marketing and sales efforts. Putnam, too, has been investing in and
planning for the future while achieving these results. Significant additional
resources have been committed to building a defined contribution retirement plan
business to provide new capacity and still higher levels of service to employer
clients and their employees. Putnam also is investing in an expansion of its
international capabilities to widen the range of its skills in managing
non-American securities and its business outside North America. We expect both
of these initiatives to contribute to even stronger returns in the future.
I am pleased to report that Marsh & McLennan Companies achieved double-
digit growth in earnings in 1995. Revenue increased 10 percent to $3.8 billion
from $3.4 billion in 1994. Income was $403 million compared with $372 million
in 1994 and earnings per share rose to $5.53 from $5.05.
Insurance services revenue reached $2 billion, an increase of 4 percent
from 1994. Insurance broking recorded excellent growth in specialty areas and
in many of our operations around the world. Consulting revenue increased 13
percent, with strong performance in our global compensation, management
consulting and health care practices. Investment management revenue rose 22
percent, reflecting new investments in mutual funds, favorable investment
performance and equity market conditions, and new defined contribution plan
business.
In September 1995, we approved a major share repurchase program of up to
three million shares of Marsh & McLennan Companies' stock and a 10 percent
increase in our quarterly dividend to shareholders.
4
<PAGE>
We recently entered into an agreement that is expected to lead to the
sale of the Frizzell Group. As the business of the Frizzell Group has
developed, it may fit better with an insurance company which concentrates on
personal lines insurance. We expect that proceeds from the sale of Frizzell
will contribute to the Company's share repurchase program.
As Richard H. Blum has moved from Guy Carpenter to the parent company to
lead our insurance services integration process, Brandon W. Sweitzer has become
chief executive of our reinsurance intermediary and G.H.C. Wakefield its
chairman.
Philip L. Wroughton will retire as vice chairman of Marsh & McLennan
Companies and will not stand for reelection as a director of the board. I would
like to acknowledge his success in his most recent assignment to prepare our
insurance services businesses for further integration. This is only the latest
of his many contributions as a long-term member of the management team.
Richard E. Heckert will retire after serving as a director since 1989. We
are pleased that he will continue as an advisory director. Robert M.G. Husson
will also retire, but will continue his association with the Company as a member
of Faugere & Jutheau's supervisory board.
Looking to the future, I am confident that Marsh & McLennan Companies will
gain market share in all its businesses, where our size, depth and reputation
are competitive advantages. The commitment of our employees is key to achieving
our goals for the future. We greatly appreciate their continuing efforts.
/s/ A.J.C. Smith
A.J.C. Smith
March 8, 1996
5
<PAGE>
MARSH & McLENNAN COMPANIES WORLDWIDE
Insurance Services
MARSH & McLENNAN, INCORPORATED, the world's leader in providing risk
management and insurance broking services, advises clients on risk assessment
and develops programs utilizing risk retention, risk transfer, alternative risk
financing methods and consulting services. The company provides a single,
integrated service to clients throughout the world.
GUY CARPENTER & COMPANY, INC. is the leading global reinsurance
intermediary. Guy Carpenter advises insurance and reinsurance companies on the
complex issue of risk management and provides a comprehensive array of support
services. The company structures and places reinsurance coverage and other
risk-transfer financing with reinsurance firms and capital markets worldwide.
- --------------------------------------------------------------------------------
Navigational instrument--quadrant.
- --------------------------------------------------------------------------------
SEABURY & SMITH, INC. is the leading provider of insurance program
management and underwriting management services in North America. Seabury &
Smith designs and administers specialized, systems-driven insurance programs
primarily for members of affinity groups. The company is also the largest
insurance underwriting manager of professional indemnity and directors' and
officers' liability insurance in the United Kingdom.
MARSH & McLENNAN RISK CAPITAL CORP. originates, structures and manages
insurance industry investments and provides advisory services on a global basis.
6
<PAGE>
Consulting
MERCER CONSULTING GROUP, INC. provides advice and services to the
managements of organizations. Mercer, one of the largest consulting firms in
the world, is a market leader in employee benefits and compensation consulting,
and provides services for outsourcing certain human resource functions. It is
also widely recognized for the results-oriented assistance it renders in
strategy, growth, change, operations and marketing, as well as for its
micro-economic analysis and expert testimony. These areas of expertise are
offered by professionals located in major business centers around the world.
- --------------------------------------------------------------------------------
Navigational instrument--quadrant.
- --------------------------------------------------------------------------------
Investment Management
PUTNAM INVESTMENTS, INC., one of the oldest and largest money management
organizations in the United States, offers a full range of both equity and fixed
income products, invested domestically and globally, for individual and
institutional investors. Putnam, which manages more than 90 mutual funds, has
over 450 institutional clients and 4.8 million individual shareholders. It had
more than $125 billion in assets under management at year-end 1995.
7
<PAGE>
NEW RISK HORIZONS
Larger and more complex risks confront clients. Technologies are speeding
the delivery of new products and services to the marketplace. Businesses are
establishing new enterprises in emerging economies. The possibility of
catastrophic losses is forcing companies to examine risk strategies more
closely. Corporations are focusing on the overall effect of risk on their
financial results--how it affects earnings, cash flow, operations and balance
sheets.
- --------------------------------------------------------------------------------
Navigational instrument--theodolite.
Theodolite, dated 1840. Surveying instrument sometimes used for navigation.
- --------------------------------------------------------------------------------
Marsh & McLennan's integrated risk management resources address these
changing risk exposures. The depth of our worldwide services is particularly
important in a competitive global economy where organizations are concerned with
controlling costs as well as risks.
Often, risk management must be viewed differently to arrive at a more
cost-effective and efficient insurance solution. A risk structuring technique
Marsh & McLennan has pioneered is concentric risk integration. This multiple-
8
<PAGE>
Insurance Services
year approach responds more directly to losses incurred by a corporation by
offering insurance capacity for a number of risks combined. Instead of a
risk-by-risk approach, these programs use a single risk retention--an aggregate
figure that cuts across all lines of insurable risk.
- --------------------------------------------------------------------------------
Navigational instrument--theodolite.
- --------------------------------------------------------------------------------
Our risk management professionals help clients arrive at an appropriate
balance between risk retention and risk transfer. Specialists design, implement
and manage efficient captive programs. A risk evaluation team helps identify
the risk characteristics of potential acquisitions. Loss control experts
identify hazards and help implement safety systems. Injury management
professionals develop occupational rehabilitation programs that can reduce
workers' compensation costs. This array of risk management resources, combined
with new risk solutions, is applied to the complex exposures and potential
liabilities that our clients face.
9
<PAGE>
Marsh & McLennan's professionals use new risk financing techniques, in
addition to the contractual transfer of risk, to achieve cost-effective risk
management solutions.
Guy Carpenter, our reinsurance intermediary, has introduced the concept
that an insurance risk, particularly for property catastrophe exposures, can be
transformed into a financial security in the capital markets, potentially
opening the door to enormous pools of new capital. By using insurance as a new
asset class, not only would investors receive better returns on their
investments with lower portfolio volatility, but the cost of catastrophe
insurance is reduced by spreading the risk more widely.
- --------------------------------------------------------------------------------
Navigational instrument--combined nocturnal and horary quadrant.
Combined nocturnal and horary quadrant, dated 1565. The nocturnal used the stars
to tell time at night; the quadrant (reverse) measured latitude while at sea.
- --------------------------------------------------------------------------------
Large companies whose risks do not lend themselves to standard insurance
solutions may tap the capital markets to finance risk. For example, a Brazilian
client unable to secure political risk insurance for the sale of hydroelectric
plant equipment to China turned to Marsh & McLennan's financial markets
experts. They were able to structure a solution that transferred the risk to
institutional investors.
Marsh & McLennan Risk Capital continues to explore the combination of
insurance with investment, acting on new opportunities arising in the insurance
industry. Last year it sponsored Risk Capital Reinsurance Company and acts as
its investment advisor. This new reinsurer serves as a creative capital source,
integrating reinsurance with equity investments in the insurance industry.
10
<PAGE>
Insurance Services
INNOVATIVE RISK TRANSFER
- --------------------------------------------------------------------------------
Navigational instrument--combined nocturnal and horary quadrant.
- --------------------------------------------------------------------------------
11
<PAGE>
Insurance Services
Marsh & McLennan currently derives half its insurance broking revenue
outside the United States. Our integrated, worldwide network, firmly rooted in
North America and Europe, is being extended principally in Asia, Eastern Europe
and Latin America.
- --------------------------------------------------------------------------------
Miniature planetarium--orrery.
- --------------------------------------------------------------------------------
Cross-border trade opportunities, privatization of state-owned entities and
deregulation of many state-controlled markets are contributing to rapid business
growth in these emerging economies. Participating in development plans for the
energy, utility, transportation, financial and telecommunications sectors
requires sound insurance and risk management programs to deal with risks
inherent in entering new, often untested markets. For example, spending for
massive infrastructure projects in Asia Pacific is expected to exceed $1
trillion by the year 2000; China plans to build 75 power stations in one
province alone.
12
<PAGE>
GLOBAL OPPORTUNITIES
- --------------------------------------------------------------------------------
Miniature planetarium--orrery.
Orrery, late 18th century. A miniature planetarium showing relative motions of
the sun, moon and planets.
- --------------------------------------------------------------------------------
New information technology systems connect Marsh & McLennan's global
insurance services organization, making resources more accessible to our
professionals, clients and insurance markets. These systems improve client
service, increase productivity, reduce insurance transaction costs and
facilitate insurance placements in worldwide markets. Mpower, our proprietary
system, links the computers of employees, clients and underwriters, and allows
them to collaborate and efficiently exchange and access information. Marsh &
McLennan also has taken leadership in the development of the World Insurance
Network, which is owned by six major insurance brokers. It represents the first
global electronic highway for connecting insurance brokers to insurance
companies and will lead to increased productivity and better service for
clients.
13
<PAGE>
Investment Management
TARGETING INVESTMENT GROWTH
Putnam is an industry leader in investment management. Assets under
management for mutual fund investors and institutional clients exceeded $125
billion at the end of 1995, almost triple the level of assets in 1990. While
this growth coincides with favorable market conditions, it represents the
unfolding of a well-defined strategic plan, which also has led to superior
investment performance.
- --------------------------------------------------------------------------------
Navigational instrument--chronometer.
- --------------------------------------------------------------------------------
To accomplish twin goals of improving investment performance and growth,
Putnam set on a course to develop and deliver investment management in a broad,
definable product line for mutual fund investors and institutional clients.
Over time, it increased the range of its equity and fixed income funds to
provide a selection to fit virtually every investment objective. Long-term
differentiators for Putnam have been its emphasis on service and marketing as
key contributors to growth.
Today, Putnam manages over 90 mutual funds for 4.8 million individual
investors, and insti-
14
<PAGE>
tutional portfolios for more than 450 global clients, including major
corporations, public pension funds, endowments and foundations.
By combining its institutional and mutual fund capabilities, complemented
by superior service to plan sponsors and participants, Putnam is emerging as a
leader in the exploding 401(k) defined contribution plan market, which is
expected to grow to $1.2 trillion by the year 2000. Again, Putnam has the
breadth of quality products, service resources and marketing capabilities to
package, administer and deliver the demanding services 401(k) plans require.
- --------------------------------------------------------------------------------
Navigational instrument--chronometer.
Harrison Chronometer H1, made in 1735.
The first marine timekeeper for finding longitude.
- --------------------------------------------------------------------------------
Putnam also delivers innovative educational programs tailored to diverse
groups of plan participants, including retirees and younger investors beginning
to consider long-term investment goals.
15
<PAGE>
ADVANCING SERVICE PERFORMANCE
Putnam uses technology to meet its objective of improving continuously the
quality of its shareholder and client services and to support its global
investment activities. New systems help Putnam deliver service with speed,
accuracy and efficiency, in ways that simplify transactions and enhance the
value of its relationships with clients.
- --------------------------------------------------------------------------------
Surveying instrument--graphometer.
Graphometer, 18th century. Determined direction more accurately
than other surveying instruments.
- --------------------------------------------------------------------------------
Putnam led the mutual fund industry in the introduction of optical image-
processing systems that automate the reading and routing of approximately
120,000 customer documents each week. All correspondence and documents from
mutual fund and defined contribution plan investors are scanned for instant
retrieval on computer screens by customer service representatives. A new
optical character recognition capability, which scans and identifies the
contents of shareholder forms automatically, can route these documents
electronically to 250 departments at Putnam's Boston office and its two nearby
service facilities.
Efficient technology systems enable Putnam
16
<PAGE>
Investment Management
to customize defined contribution plans for both large and small organizations,
and to offer a range of investment options and recordkeeping services and direct
communication links with clients and individual investors.
Most of Putnam's investor services capabilities, including its fully
automated mailing and printing facilities, are located at a new, state-of-the-
art service center at Franklin, Massachusetts. The facility contains six acres
of work space under one roof, where high-speed laser printers produce 11 million
customer statements each month.
- --------------------------------------------------------------------------------
Surveying instrument--graphometer.
- --------------------------------------------------------------------------------
Putnam's consistent delivery of quality investor services has been
acknowledged in the industry. For six consecutive years, it has received the
DALBAR award, the only nationally recognized award given to mutual fund
companies for service excellence.
17
<PAGE>
Consulting
Organizations rethink continuously the ways they conduct business to
strengthen their competitive positions and increase profits. Two current
initiatives reflect Mercer Consulting Group's strategy for becoming the
preeminent global consulting organization by providing valued services that
boost clients' overall performance.
- --------------------------------------------------------------------------------
Navigational instrument--ship's log.
Massey's ship's log, 1802. The first commercially successful instrument
to record distance traveled at sea.
- --------------------------------------------------------------------------------
Over the past two years, Mercer has conducted research into the factors
that affect organizational performance. These range from supervision structure
and reward mechanisms to information flow and decision-making processes. The
findings indicate that the interrelationship between these factors is of far
greater significance than any single factor. Based on this research, Mercer has
developed a diagnostic tool that characterizes a company's human resource system
and determines how well it serves the company's business strategy. The result
is a framework for decision making that can help executives
18
<PAGE>
INCREASING PRODUCTIVITY
move their organizations to higher levels of productivity.
- --------------------------------------------------------------------------------
Navigational instrument--ship's log.
Massey's ship's log, 1802. The first commercially successful instrument
to record distance traveled at sea.
- --------------------------------------------------------------------------------
Mercer has begun to use this tool for solving the problems of clients.
For instance, it analyzed productivity problems in the engineering group of a
high-technology company. Soaring turnover among engineers was threatening
disruption and delay in the design and production process, unwelcome
developments for a company whose strategy depends more on speed and quality of
execution than on technological innovation. But the turnover problem was not
responding to the company's efforts to solve it--efforts including above-market
compensation, generous stock options, coaching and more selective recruitment.
Mercer demonstrated that these interventions, while individually logical, were
creating major misalignments in the company's supervision, incentive and hiring
practices. By identifying the systemic sources of the problem, Mercer realigned
the human resource system and adapted it to the company's business needs and
market realities.
19
<PAGE>
Consulting
THE GROWTH
After a decade of downsizing and restructuring, chief executives are
experiencing diminishing returns from continually shrinking their businesses.
Mercer is helping them make the change to strategies of growth.
- --------------------------------------------------------------------------------
Lighthouse lens.
- --------------------------------------------------------------------------------
Through three years of research into business growth, including analyses of
the growth strategies of leading companies around the world, Mercer has
confirmed that the stock market places a much higher value on companies that
increase their profits through revenue growth rather than through cost cutting.
Mercer's findings have debunked a number of myths. For one, real growth is
not as common as businesspeople may think. Despite the fact that most corporate
plans anticipate double-digit increases in annual sales, few companies actually
hit this target. Between 1984 and 1994, the annual growth rate for the
20
<PAGE>
IMPERATIVE
Standard & Poor's 500 companies averaged only 1.4 percent after inflation,
lagging behind the economy's overall growth rate of 2.6 percent.
Another myth is that companies cannot grow in slow-growth industries. In
every industry Mercer studied, even those with negative growth rates, it found
examples of companies that consistently posted double-digit revenue gains. In
fact, greater variations in growth rates exist between companies within an
industry than among the industries themselves.
- --------------------------------------------------------------------------------
Lighthouse lens.
Fifth-order lighthouse lens, 1858.
- --------------------------------------------------------------------------------
Mercer has developed a framework to help clients assess their opportunities
for growth, analyze their own capability to grow and make the changes necessary
to achieve and sustain profitable growth over the long term. Mercer documented
its findings in the book "Grow to Be Great: Breaking the Downsizing Cycle,"
published in the fall of 1995.
21
<PAGE>
FINANCIAL CONTENTS
- --------------------------------------------------------------------------------
Instrument used for calculation--Gunter Scales.
- --------------------------------------------------------------------------------
Management's
Discussion and Analysis
of Financial Condition
and Results of Operations 23
Consolidated Statements of Income 30
Consolidated Balance Sheets 31
Consolidated Statements of Cash Flows 32
Consolidated Statements
of Stockholders' Equity 33
Notes to Consolidated Financial Statements 34
Report of Management 46
Report of Independent Auditors 46
Selected Quarterly Financial Data
and Supplemental Information (Unaudited) 47
Ten-Year Statistical Summary of Operations 48
22
<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:
(In millions, except per share figures) 1995 1994 1993
---- ---- ----
Revenue:
Insurance Services $1,963.9 $1,886.5 $1,790.5
Consulting 1,056.4 933.1 854.8
Investment Management 750.0 615.4 518.1
-------- -------- --------
3,770.3 3,435.0 3,163.4
-------- -------- --------
Expense:
Compensation and Benefits 1,948.8 1,740.2 1,635.7
Other Operating Expenses 1,126.6 1,024.5 934.9
-------- -------- --------
3,075.4 2,764.7 2,570.6
-------- -------- --------
Operating Income $ 694.9 $ 670.3 $ 592.8
======== ======== ========
Income Before Cumulative
Effect of Accounting Change $ 402.9 $ 382.0 $ 332.4
======== ======== ========
Net Income $ 402.9 $ 371.5 $ 332.4
======== ======== ========
Per Share Data:
Income Before Cumulative
Effect of Accounting Change $ 5.53 $ 5.19 $ 4.52
======== ======== ========
Net Income $ 5.53 $ 5.05 $ 4.52
======== ======== ========
Average Number of Shares Outstanding 72.9 73.6 73.5
======== ======== ========
Revenue, derived mainly from commissions and fees, increased 10% in 1995
driven principally by 22% growth in the investment management segment,
largely attributable to growth in the level of assets under management,
and a 13% increase in the consulting segment reflecting strong demand
for the Company's consulting services. Insurance services revenue rose
4% in 1995 reflecting a $24 million increase in interest income on
fiduciary funds and strong growth in insurance broking in Canada and
Continental Europe offset, in part, by a $25 million decrease in revenue
received from the activities of Marsh & McLennan Risk Capital ("MMRC").
In 1994, total revenue increased 9% over 1993 reflecting growth in each
of the Company's business segments. Insurance services revenue rose 5%
in 1994 compared with 1993. 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.
Operating expenses increased 11% in 1995 compared with 1994 primarily
due to the impact of staff growth and incentive compensation programs in
the investment management and consulting segments commensurate with the
higher volume of business, and ongoing systems automation initiatives in
all operating segments. These initiatives are part of the Company's
long-term commitment to enhance service through technology. 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
reflecting the higher volume of business.
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 non-cash charge reflecting the cumulative
effect of this accounting change, net of income taxes, totaled $10.5
million or $.14 per share.
23
<PAGE>
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets To Be Disposed Of," which must be adopted no later
than 1996. The standard will require the Company to analyze its
long-lived assets, including recorded goodwill, to determine if the sum
of the expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of such assets. Management is
currently in the process of analyzing the impact that adoption of this
standard will have on the Company's financial statements.
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-Based Compensation," which is effective
for fiscal years beginning after December 15, 1995. In accordance with
the statement, the Company will provide footnote disclosures presenting
pro forma net income and earnings per share amounts as if employee stock
options had been expensed based on their fair value on the grant date,
determined using certain option pricing models. The Company will adopt
SFAS No. 123 and provide the required disclosures in 1996.
Insurance Services
Revenue attributable to the insurance services segment consists
primarily of fees paid directly by clients; commissions and fees paid by
insurance and reinsurance underwriters; 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 to alleviate, in part,
capacity shortages in critical segments of the insurance and reinsurance
business. MMRC also sponsored and is investment advisor to the Trident
Partnership L.P., a dedicated insurance industry private equity fund
formed in 1994, and Risk Capital Reinsurance Company, a reinsurer formed
in 1995. Through MMRC, the Company receives 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.
The results of operations for the Company's insurance services segment
are presented below:
(In millions of dollars) 1995 1994 1993
---- ---- ----
Revenue:
Insurance Broking $1,260.0 $1,209.3 $1,147.0
Reinsurance Broking 295.1 298.5 283.6
Insurance Program Management 306.1 300.0 280.3
Interest Income on Fiduciary Funds 102.7 78.7 79.6
-------- -------- --------
1,963.9 1,886.5 1,790.5
Expense 1,574.7 1,480.4 1,413.8
-------- -------- --------
Operating Income $ 389.2 $ 406.1 $ 376.7
======== ======== ========
Operating Income Margin 19.8% 21.5% 21.0%
======== ======== ========
Insurance Broking Revenue
Insurance broking services are provided to clients primarily in
connection with risk management and the insurance placement process and
involve various types of property and liability loss exposures. Services
include 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 4% in 1995. Revenue from MMRC declined
$15 million compared with 1994 primarily due to a lower level of
realized appreciation on capital deployed in the various insurance
entities the Company has helped organize. Client revenue increased
primarily due to new business growth in Canada, Continental Europe,
Australia and Latin America, along with an increase in certain global
specialty lines. In the United States, property premium rates, with the
exception of catastrophe coverages, were generally stable while the
casualty market experienced renewal rates that were generally down on a
year-over-year basis. The Company anticipates that these market
conditions will continue in the near term.
In 1994, insurance broking revenue increased 5% over 1993 levels. 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 catastrophe coverages such as for earthquakes in California and
coastal windstorm exposures, where rates increased. The casualty market
in North America remained flat to down on a year-over-year basis.
24
<PAGE>
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. Often reinsurance is used to spread the
risk of primary insurance or the reinsurance thereof to lessen the
concentration of risk with any one insurance or reinsurance company.
Reinsurance broking revenue in 1995 declined slightly from 1994. The
effect of lower premium rates for property catastrophe and liability
reinsurance, along with reduced demand in the London market and a $10
million decrease in MMRC related revenue, was offset in large part by
new business. The Company expects premium rates for property catastrophe
reinsurance to continue to decline in the first part of 1996.
In 1994, reinsurance broking revenue increased 5% over 1993. 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.
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 2% in 1995. Revenue for
Seabury & Smith, which operates primarily in North America, reached $162
million, an increase of 7% from 1994. This growth was the result of
increased services provided to corporations and institutions and their
employees, increased insurance placed on behalf of small businesses,
higher revenue from professional liability products in the United States
and the acquisition of a U.K.-based company that specializes in
providing professional liability insurance products. Revenue for the
Frizzell Group, which operates in the United Kingdom, decreased 3% in
1995 to $144 million as the market for motor and household insurance
services was extremely competitive during the year.
On February 7, 1996, the Company signed an agreement that is expected to
lead to the sale of the Frizzell Group for approximately $289 million.
The transaction, which is subject to various regulatory and other approvals,
is expected to be completed by the end of the second quarter of 1996.
In 1994, insurance program management revenue increased 7% over 1993.
Within North America, revenue rose 8% in 1994 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 became increasingly competitive in 1994.
Interest Income on Fiduciary Funds
Interest income on fiduciary funds increased 31% in 1995 due to
generally higher average short-term interest rates throughout the world.
In 1994, interest income on fiduciary funds decreased 1% due to lower
average short-term interest rates, particularly in the first half of the
year, on funds held outside North America. During 1994, the decline
outside North America was offset, in large part, as U.S. and Canadian
yields rose steadily during the year.
Expense
Insurance services expenses increased 6% in 1995 primarily reflecting
normal salary progressions and ongoing spending for technology and
systems automation initiatives. The Company is in the process of
developing several major systems aimed at interfacing with clients and
insurance markets electronically.
Expenses for insurance services rose 5% in 1994 primarily due to the
impact of ongoing spending on technology and systems automation
initiatives and provisions for excess office space on certain leases.
The results of operations for the Company's insurance services segment
by geographic area are presented below:
(In millions of dollars) 1995 1994 1993
---- ---- ----
Revenue:
United States $1,006.9 $1,028.1 $ 971.4
Europe 784.0 709.9 685.3
Canada 93.9 86.7 83.6
Pacific Rim and Other 79.1 61.8 50.2
-------- -------- --------
$1,963.9 $1,886.5 $1,790.5
======== ======== ========
Operating Income:
United States $ 186.9 $ 216.0 $ 208.3
Europe 155.5 150.3 137.4
Canada 25.9 23.6 19.2
Pacific Rim and Other 20.9 16.2 11.8
-------- -------- --------
$ 389.2 $ 406.1 $ 376.7
======== ======== ========
25
<PAGE>
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 the major business
centers around the world.
The results of operations for the Company's consulting segment are presented
below:
(In millions of dollars) 1995 1994 1993
---- ---- ----
Revenue $1,056.4 $933.1 $854.8
Expense 947.7 836.7 768.6
-------- ------ ------
Operating Income $ 108.7 $ 96.4 $ 86.2
======== ====== ======
Operating Income Margin 10.3% 10.3% 10.1%
======== ====== ======
Revenue
Consulting services revenue increased 13% in 1995 as demand for services
in all major practices increased. After adjusting for the impact of
several small acquisitions, revenue grew approximately 11%. Retirement
consulting revenue, which represented 44% of the consulting segment,
grew 7% in 1995 reflecting higher demand in the United States,
Continental Europe, and Latin America. Revenue rose 17% in the global
compensation practice, 16% in general management consulting and 10% in
health care consulting in 1995.
Revenue for consulting services increased 9% in 1994 compared with 1993.
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.
Compared with 1993, revenue increased 22% in general management
consulting and 13% in the global compensation practice. Retirement
consulting revenue, which represented 46% of the consulting segment,
grew 2% in 1994 over 1993 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
revenue representing 17% of the segment increased 5% in 1994.
Expense
Consulting services expenses increased 13% in 1995 as compared with
1994. Excluding the effect of acquisitions, expenses grew approximately
11% reflecting staff growth 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. In
1996, the Company expects a moderate increase in spending on these
systems initiatives.
Expenses for the consulting segment increased 9% in 1994. Excluding the
effect of acquisitions, 1994 expenses increased approximately 7% over
1993 reflecting higher staff levels consistent with increased demand in
general management and United States retirement consulting as well as
higher expenses associated with systems-related initiatives.
The results of operations for the Company's consulting segment by
geographic area are presented below:
(In millions of dollars) 1995 1994 1993
---- ---- ----
Revenue:
United States $ 645.0 $586.4 $554.1
Europe 240.6 197.3 173.7
Canada 90.4 78.4 83.3
Pacific Rim and Other 80.4 71.0 43.7
-------- ------ ------
$1,056.4 $933.1 $854.8
======== ====== ======
Operating Income:
United States $ 60.4 $ 50.2 $ 48.5
Europe 33.9 30.1 24.1
Canada 11.5 11.7 11.8
Pacific Rim and Other 2.9 4.4 1.8
-------- ------ ------
$ 108.7 $ 96.4 $ 86.2
======== ====== ======
Investment Management
The Company's investment management and related services, which are
performed principally in the United States, are provided primarily under
the "Putnam" name. The services include securities investment advisory
and management services consisting of investment research and
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, collective investment vehicles 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, including banks, and also directly to certain
large 401(k) plans and other institutional accounts.
26
<PAGE>
Revenue is derived primarily from investment management fees received
from the Putnam Funds and institutional accounts. Fees paid by the Funds
are approved annually by the trustees or shareholders of the Funds and
are charged at various rates depending on the individual mutual fund and
the level of assets under management and, in the case of certain
institutional accounts, is also based on investment performance. Putnam
also receives compensation for providing certain shareholder and custody
services.
The results of operations for the Company's investment management
segment are presented below:
(In millions of dollars) 1995 1994 1993
---- ---- ----
Revenue $750.0 $615.4 $518.1
Expense 506.5 407.2 348.8
------ ------ ------
Operating Income $243.5 $208.2 $169.3
====== ====== ======
Operating Income Margin 32.5% 33.8% 32.7%
====== ====== ======
Revenue
Putnam's revenue increased 22% in 1995 reflecting continued growth in
the level of assets under management on which management fees are
earned. The higher asset level reflects significantly higher equity
market valuations, mutual fund sales and new 401(k) business.
Revenue for Putnam increased 19% in 1994 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 offset by a decline in securities market valuations.
Putnam markets its mutual funds through broker/dealers, financial
planners and financial institutions including banks. Essentially all of
Putnam's mutual funds are available with a deferred sales charge in lieu
of a front-end load. Commissions, initially paid by Putnam to
broker/dealers for distributing funds with a deferred sales charge, are
recovered through charges and fees received over a number of years.
Expense
Putnam's expenses rose 24% in 1995 reflecting the effect of staff growth
and incentive compensation levels consistent with strong operating
performance, costs to develop new systems which are considered necessary
to manage the growth of Putnam's client base, and service-related costs
including those for a new client service center that became operational
in the fourth quarter of 1994.
Expenses for Putnam increased 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 was due to a higher
volume of business and higher client service-related systems costs.
Year-end and average assets under management are presented below:
(In billions of dollars) 1995 1994 1993
---- ---- ----
Mutual Funds:
Domestic Equity $ 46.8 $26.2 $20.8
Taxable Bond 26.0 22.8 25.0
Tax-Free Income 16.9 15.2 16.9
International Equity 3.7 3.0 1.6
------ ----- -----
93.4 67.2 64.3
------ ----- -----
Institutional Accounts:
Fixed Income 19.0 18.8 19.3
Domestic Equity 8.9 6.7 5.9
International Equity 4.4 2.6 1.4
------ ----- -----
32.3 28.1 26.6
------ ----- -----
Year-end Assets $125.7 $95.3 $90.9
====== ===== =====
Average Assets $109.2 $93.5 $77.5
====== ===== =====
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. 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. At the end of 1995,
assets held in equity securities represented 51% of assets under
management, compared with 40% in 1994, while investments in fixed income
products represented 49%, down from 60% last year.
Interest
Interest income earned on corporate funds rose to $17.7 million in 1995
compared with $11.8 million in 1994, primarily due to the higher yields
in North America and the United Kingdom. Interest expense increased to
$62.8 million in 1995 from $50.6 million in 1994 due to an increase in
commercial paper borrowings and higher average interest rates on those
borrowings. The higher level of commercial paper borrowings primarily
reflected the Company's share repurchase program and the Company's $40
million investment in Risk Capital Reinsurance Company.
27
<PAGE>
Interest income earned on corporate funds was $11.8 million in 1994
compared with $11.9 million in 1993 as increased yields in North America
were 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 in 1994 primarily related to the funding of the Company's
share repurchase program.
Income Taxes
The Company's consolidated domestic and foreign tax rates were 38.0% of
income before income taxes in 1995, 39.5% in 1994, and 40.5% in 1993.
The reduction in the 1995 tax rate reflects the implementation of tax
minimization strategies, primarily relating to the Company's non-U.S.
operations. The reduction in the tax rate in 1994 reflected worldwide
savings attributable to tax planning strategies. 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 $328.1 million at the
end of 1995, an increase of $33.2 million from the end of 1994.
Operating Cash Flows
The Company generated $318.1 million of cash from operations in 1995
compared with $368.5 million in 1994. 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 $104.3 million in 1995 compared with
$111.9 million in 1994. 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 increase in receivables in 1995 principally was caused by revenue
growth in the investment management and consulting segments. 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 $92.8 million in
1995 and by $189.8 million in 1994. Dividends paid by the Company
amounted to $217.0 million in 1995 ($2.97-1/2 per share) and $206.4
million in 1994 ($2.80 per share). The Company regularly purchases
shares of its common stock to meet the requirements of the various stock
compensation and benefit programs. The Company purchased 1.7 million
shares in each of the years ended December 31, 1995 and 1994.
The Company maintains a credit facility with several banks primarily to
support its commercial paper borrowings. This facility, which expires
April 2000, provides that the Company may borrow up to $500 million at
varying market rates of interest. The Company also maintains other
credit facilities, primarily related to operations located outside of
the United States, aggregating $258.6 million as of December 31, 1995.
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. Many of
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 $201.8
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 limit the effect of
interest rate fluctuations on operating margins.
28
<PAGE>
Investing Cash Flows
The Company's capital expenditures, which amounted to $136.9 million in
1995 and $149.1 million in 1994, 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. The Company, through MMRC, maintains a minority ownership
interest in the various entities it assisted in organizing. Many of
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
manage and develop further the Company's insurance market making
activities.
As previously mentioned, the Company has signed an agreement that is
expected to lead to the sale of the Frizzell Group for approximately
$289 million. Completion of the transaction is expected by the end of
the second quarter of 1996.
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 1996 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.
29
<PAGE>
Marsh & McLennan Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
For the Three Years Ended December 31, 1995
(In millions, except per share figures) 1995 1994 1993
---- ---- ----
Revenue $3,770.3 $3,435.0 $3,163.4
Expense 3,075.4 2,764.7 2,570.6
-------- -------- --------
Operating income 694.9 670.3 592.8
Interest income 17.7 11.8 11.9
Interest expense (62.8) (50.6) (46.1)
-------- -------- --------
Income before income taxes and cumulative
effect of accounting change 649.8 631.5 558.6
Income taxes 246.9 249.5 226.2
-------- -------- --------
Income before cumulative effect of
accounting change 402.9 382.0 332.4
Cumulative effect of accounting change
(net of income tax benefit of $7.2) -- (10.5) --
-------- -------- --------
Net income $ 402.9 $ 371.5 $ 332.4
======== ======== ========
Per share data:
Income before cumulative effect of
accounting change $ 5.53 $ 5.19 $ 4.52
Cumulative effect of accounting change -- (.14) --
-------- -------- --------
Net income $ 5.53 $ 5.05 $ 4.52
======== ======== ========
Average number of shares outstanding 72.9 73.6 73.5
======== ======== ========
The accompanying notes are an integral part of these consolidated statements.
30
<PAGE>
Marsh & McLennan Companies, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
(In millions of dollars) 1995 1994
---- ----
ASSETS
Current assets:
Cash and cash equivalents (including interest-bearing
amounts of $290.4 in 1995 and $265.6 in 1994) $ 328.1 $ 294.9
------- -------
Receivables--
Commissions and fees 830.5 692.3
Advanced premiums and claims 78.8 78.0
Consumer finance and other 271.5 229.6
------- -------
1,180.8 999.9
Less--allowance for doubtful accounts (48.3) (44.9)
------- -------
Net receivables 1,132.5 955.0
------- -------
Other current assets 218.5 196.1
------- -------
Total current assets 1,679.1 1,446.0
Consumer finance receivables, net 151.3 150.4
Long-term securities 411.8 282.8
Fixed assets, net 757.5 740.3
Intangible assets 729.7 701.0
Other assets 600.1 510.1
------- -------
$4,329.5 $3,830.6
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 571.1 $ 403.0
Accrued compensation and employee benefits 257.4 220.8
Accounts payable and accrued liabilities 485.4 496.7
Accrued income taxes 197.4 218.7
Dividends payable 58.2 53.1
------- --------
Total current liabilities 1,569.5 1,392.3
------- --------
Fiduciary liabilities 1,672.6 1,652.1
Less--cash and investments held in a fiduciary capacity (1,672.6) (1,652.1)
-------- --------
-- --
-------- --------
Long-term debt 410.6 409.4
-------- --------
Other liabilities 683.9 568.3
-------- --------
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 1995 and 1994 76.8 76.8
Additional paid-in capital 155.5 166.1
Retained earnings 1,688.4 1,507.7
Unrealized securities holding gains,
net of income taxes 149.2 91.6
Cumulative translation adjustments (86.7) (105.4)
-------- --------
1,983.2 1,736.8
Less--treasury shares, at cost, 4,020,742 shares
in 1995 and 3,594,342 shares in 1994 (317.7) (276.2)
-------- --------
Total stockholders' equity 1,665.5 1,460.6
-------- --------
$4,329.5 $3,830.6
======== ========
The accompanying notes are an integral part of these consolidated statements.
31
<PAGE>
Marsh & McLennan Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Years Ended December 31, 1995
(In millions of dollars ) 1995 1994 1993
---- ---- ----
Operating cash flows:
Net income $ 402.9 $ 371.5 $ 332.4
Depreciation and amortization 135.1 120.6 119.9
Deferred income taxes 34.7 48.0 94.2
Other liabilities (2.4) (31.4) 3.0
Cumulative effect of accounting change -- 10.5 --
Prepaid dealer commissions (104.3) (111.9) (254.3)
Other, net (12.4) (14.2) (11.5)
Net changes in operating working capital
other than cash and cash equivalents--
Receivables (177.0) (77.7) (38.4)
Other current assets 14.0 (39.2) (8.4)
Accrued compensation and
employee benefits 35.6 46.9 17.9
Accounts payable and accrued liabilities 13.0 53.9 (16.2)
Accrued income taxes (9.6) (17.5) 4.3
Effect of exchange rate changes (11.5) 9.0 (4.8)
-------- -------- -------
Net cash generated from operations 318.1 368.5 238.1
-------- -------- -------
Financing cash flows:
Net change in debt 174.5 121.0 63.8
Purchase of treasury shares (137.7) (142.8) (49.5)
Issuance of common stock 82.6 68.6 75.6
Dividends paid (217.0) (206.4) (198.5)
Other, net 4.8 (30.2) (.5)
-------- -------- -------
Net cash used for financing activities (92.8) (189.8) (109.1)
-------- -------- -------
Investing cash flows:
Additions to fixed assets (136.9) (149.1) (98.8)
Acquisitions (6.8) (18.4) (7.8)
Other, net (54.4) (55.9) (51.7)
-------- -------- -------
Net cash used for investing activities (198.1) (223.4) (158.3)
-------- -------- -------
Effect of exchange rate changes on cash
and cash equivalents 6.0 7.6 (9.8)
-------- -------- -------
Increase (decrease) in cash
and cash equivalents 33.2 (37.1) (39.1)
Cash and cash equivalents
at beginning of year 294.9 332.0 371.1
-------- -------- -------
Cash and cash equivalents at end of year $ 328.1 $ 294.9 $ 332.0
======== ======== =======
The accompanying notes are an integral part of these consolidated statements.
32
<PAGE>
Marsh & McLennan Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
============================================================================
For the Three Years Ended December 31, 1995
(In millions of dollars,
except per share figures) 1995 1994 1993
---- ---- ----
COMMON STOCK
Balance, beginning and end of year $ 76.8 $ 76.8 $ 76.8
-------- -------- --------
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year $ 166.1 $ 173.5 $ 170.9
Issuance of shares for acquisitions -- -- 1.3
Exercise of stock options and
related tax benefits (7.5) (1.9) (1.8)
Issuance of shares under compensation
plans and related tax benefits 3.4 .8 2.6
Issuance of shares under employee
stock purchase plans and related
tax benefits (6.5) (6.3) .5
-------- -------- --------
Balance, end of year $ 155.5 $ 166.1 $ 173.5
-------- -------- --------
RETAINED EARNINGS
Balance, beginning of year $1,507.7 $1,345.7 $1,212.3
Net income 402.9 371.5 332.4
Cash dividends declared--(per share
amounts: $3.05 in 1995, $2.85 in
1994 and $2.70 in 1993) (222.2) (209.5) (199.0)
-------- -------- --------
Balance, end of year $1,688.4 $1,507.7 $1,345.7
-------- -------- --------
UNREALIZED SECURITIES HOLDING
GAINS, NET OF INCOME TAXES
Balance, beginning of year $ 91.6 $ 138.6 $ --
Realized gains, net of income taxes (11.4) (27.6) --
Unrealized gains (losses),
net of income taxes 69.0 (19.4) 138.6
-------- -------- --------
Balance, end of year $ 149.2 $ 91.6 $ 138.6
-------- -------- --------
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance, beginning of year $ (105.4) $ (157.5) $ (106.7)
Translation adjustments 18.7 52.1 (50.8)
-------- -------- --------
Balance, end of year $ (86.7) $ (105.4) $ (157.5)
-------- -------- --------
TREASURY SHARES
Balance, beginning of year $ (276.2) $ (211.8) $ (250.4)
Purchase of treasury shares (137.7) (142.8) (49.5)
Issuance of shares for acquisitions -- -- 7.7
Exercise of stock options 27.4 11.6 30.7
Issuance of shares under
compensation plans 14.0 15.8 6.4
Issuance of shares under employee
stock purchase plans 54.8 51.0 43.3
-------- -------- --------
Balance, end of year $ (317.7) $ (276.2) $ (211.8)
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY $1,665.5 $1,460.6 $1,365.3
======== ======== ========
The accompanying notes are an integral part of these consolidated statements.
33
<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
$102.7 million in 1995, $78.7 million in 1994 and $79.6 million in 1993.
Net uncollected premiums and claims and the related payables, amounting
to $3.1 billion at December 31, 1995 and $2.8 billion at December 31,
1994, 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.
The components of fixed assets at December 31, 1995 and 1994 are as follows:
December 31, 1995 and 1994
(In millions of dollars) 1995 1994
---- ----
Land and buildings $ 404.6 $ 388.7
Furniture and equipment 697.6 640.6
Leasehold and building improvements 293.8 285.5
-------- --------
1,396.0 1,314.8
Less--accumulated depreciation and
amortization (638.5) (574.5)
-------- --------
$ 757.5 $ 740.3
======== ========
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: Essentially all of the 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
34
<PAGE>
charges and fees received over a number of years. The current portion of these
prepaid dealer commissions, amounting to $136.4 million and $99.8 million at
December 31, 1995 and 1994, respectively, is included in other current assets in
the Consolidated Balance Sheets. The long-term portion amounting to $424.3
million and $356.6 million at December 31, 1995 and 1994, respectively, is
included in other assets in the Consolidated Balance Sheets.
Capitalized Software Costs: The Company capitalizes certain computer software
costs which are amortized on a straight-line basis not to exceed five years.
Unamortized computer software costs amounting to $9.3 million at December 31,
1995 are included in other assets in the Consolidated Balance Sheet.
Income Taxes: Income taxes provided reflect the current and deferred tax
consequences of events that have been recognized in the Company's financial
statements or tax returns. U.S. Federal income taxes are provided on unremitted
foreign earnings except those that are considered permanently reinvested, which
at December 31, 1995 amounted to approximately $315 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.
Estimates: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cumulative Effect of Accounting Change: As discussed in Note 5, effective
January 1, 1994 the Company changed its method of accounting for postemployment
benefits.
Impairment of Long-Lived Assets: In March 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets To Be Disposed Of," which must be adopted no later than 1996. The
standard will require the Company to analyze its long-lived assets, including
goodwill, for potential impairment. Management is currently in the process of
analyzing the impact that adoption of this standard will have on the Company's
financial statements.
2 Supplemental Disclosure to the Consolidated Statements of Cash Flows
- -------------------------------------------------------------------------------
The following schedule provides additional information concerning acquisitions:
For the Three Years Ended December 31, 1995
(In millions of dollars) 1995 1994 1993
---- ---- ----
Purchase acquisitions:
Assets acquired, excluding cash $21.9 $26.5 $ 35.7
Liabilities assumed (8.6) (3.8) (10.6)
Issuance of debt and other obligations (6.5) (4.3) (8.3)
Shares issued -- -- (9.0)
----- ----- ------
Net cash outflow for acquisitions $ 6.8 $18.4 $ 7.8
===== ===== ======
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.
For the Three Years Ended December 31, 1995
(In millions of dollars) 1995 1994 1993
---- ---- ----
Net change in debt with maturities
of three months or less $ (35.2) $ 380.4 $ (16.0)
Borrowings with maturities over
three months 604.1 51.3 535.9
Repayments of debt with maturities
over three months (394.4) (310.7) (456.1)
------- ------- -------
Net change in debt $ 174.5 $ 121.0 $ 63.8
======= ======= =======
Interest paid during 1995, 1994 and 1993 was $66.0 million, $48.1
million and $42.1 million, respectively.
Income taxes paid during 1995, 1994 and 1993 were $231.0 million, $222.5
million and $122.4 million, respectively.
35
<PAGE>
3 Acquisitions and Dispositions
- -----------------------------------------------------------------------------
During 1995, the Company acquired a portion of an insurance broking
business and several consulting businesses for a total cost of $15.2
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 $16.0 million.
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.
The effect of these acquisitions was not material to the Company's
results of operations.
On February 7, 1996, the Company signed an agreement that is expected to
lead to the sale of the Frizzell Group for approximately $289 million.
The transaction, which is subject to various regulatory and other
approvals, is expected to be completed by the end of the second quarter
of 1996.
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.
For the Three Years Ended December 31, 1995
(In millions of dollars) 1995 1994 1993
---- ---- ----
Income before income taxes and cumulative
effect of accounting change:
U.S. $381.2 $377.5 $340.6
Other 268.6 254.0 218.0
------ ------ ------
$649.8 $631.5 $558.6
====== ====== ======
Income taxes:
Current--
U.S. Federal $ 88.9 $ 99.9 $ 29.9
Other national governments 82.0 71.8 74.7
U.S. state and local 41.3 29.8 27.4
------ ------ ------
212.2 201.5 132.0
------ ------ ------
Deferred--
U.S. Federal 24.7 15.5 74.1
Other national governments 9.2 18.9 6.3
U.S. state and local .8 13.6 13.8
------ ------ ------
34.7 48.0 94.2
------ ------ ------
Total income taxes $246.9 $249.5 $226.2
====== ====== ======
The significant components of deferred income tax assets and liabilities
and their balance sheet classifications are as follows:
December 31, 1995 and 1994
(In millions of dollars) 1995 1994
---- ----
Deferred tax assets:
Accrued expenses not currently deductible $179.1 $171.5
Accrued retirement benefits 78.4 75.9
Differences related to non-U.S. operations 46.7 52.8
Other 17.5 15.7
------ ------
321.7 315.9
Valuation allowance (25.2) (24.7)
------ ------
$296.5 $291.2
====== ======
Deferred tax liabilities:
Depreciation and amortization $33.9 $33.3
Prepaid dealer commissions 254.4 207.5
Safe harbor leasing 22.4 28.4
Unbilled revenue 27.0 23.0
Unrealized securities holding gains 81.4 49.1
Differences related to non-U.S. operations 68.2 65.7
Other 12.1 20.1
------ ------
$499.4 $427.1
====== ======
Balance sheet classifications:
Other current assets $5.0 $5.3
Accrued income taxes 19.0 27.4
Other liabilities 188.9 113.8
====== ======
The valuation allowance relates to certain foreign deferred income tax assets.
36
<PAGE>
A reconciliation from the U.S. Federal statutory income tax rate to the
Company's effective income tax rate is as follows:
For the Three Years Ended
December 31, 1995 1995 1994 1993
---- ---- ----
U.S. Federal statutory rate 35.0% 35.0% 35.0%
U.S. state and local income taxes--net of
U.S. Federal income tax benefit 4.2 4.5 4.8
Differences related to non-U.S. operations (.9) (.3) .9
Other (.3) .3 (.2)
---- ---- ----
Effective tax rate 38.0% 39.5% 40.5%
==== ==== ====
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.
5 Retirement Benefits
- -------------------------------------------------------------------------------
The Company maintains pension or profit sharing plans for substantially
all employees.
Defined Benefit Plans--U.S.: The Marsh & McLennan Companies 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 Companies Benefit Equalization Program provides
those retirement benefits to which U.S. employees would otherwise be
entitled under the Marsh & McLennan Companies Retirement Plan if not for
IRS limitations.
The Marsh & McLennan Companies Supplemental Retirement Program provides
a minimum level of retirement benefits to employees based on the
participants' length of service and compensation. The program provides
benefits to participants to the extent that the minimum benefit exceeds
the aggregate retirement benefit provided by the Marsh & McLennan
Companies Retirement Plan, the Marsh & McLennan Companies Benefit
Equalization Program and Social Security.
The Company has a plan of funding the vested benefits under the Benefit
Equalization and Supplemental Retirement Programs by purchasing annuity
contracts periodically.
The components of pension cost for the U.S. defined benefit plans are as
follows:
For the Three Years Ended December 31, 1995
(In millions of dollars) 1995 1994 1993
---- ---- ----
Service cost $ 24.5 $ 25.7 $ 23.3
Interest cost on projected benefit obligations 56.0 50.7 46.9
Expected return on plan assets (73.0) (70.1) (59.2)
Net amortization (6.9) (2.0) (4.6)
------ ------ ------
$ .6 $ 4.3 $ 6.4
====== ====== ======
The actual returns on plan assets were $167.2 million, $4.3 million and $95.1
million for 1995, 1994 and 1993, respectively. These returns reflect the general
securities market conditions experienced in the respective years.
The funded status of the U.S. defined benefit plans and the actuarial
assumptions used to measure the projected benefit obligation are as follows:
December 31, 1995 and 1994
(In millions of dollars) 1995 1994
---- ----
Actuarial present value of accumulated
benefit obligation:
Vested $663.4 $530.8
Nonvested 19.9 18.2
------ ------
$683.3 $549.0
====== ======
Projected benefit obligation $783.8 $655.9
Fair value of plan assets 841.1 695.2
------ ------
57.3 39.3
====== ======
Unrecognized net gain from past
experience different from that assumed (91.2) (90.0)
Unrecognized prior service cost 27.7 34.1
Unrecognized SFAS No. 87 transition amount (41.5) (46.1)
------ ------
Accrued pension liability $(47.7) $(62.7)
====== ======
Actuarial assumptions:
Discount rate 7.5% 8.75%
Weighted average rate of compensation
increase 4.25% 6%
Expected long-term rate of return on
plan assets 10% 10%
====== ======
37
<PAGE>
In 1995, the discount rate used to value the liabilities of the U.S.
defined benefit plans was decreased to reflect current interest rates of
high quality fixed income debt securities. Assumptions, including
projected compensation increases and potential cost of living
adjustments for retirees, were also revised to reflect current
expectations as to future levels of inflation. The increase in the
accumulated benefit obligation and the projected benefit obligation
reflects, in part, the net impact of the change in these assumptions.
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 for the significant non-U.S. defined
benefit plans are as follows:
For the Three Years Ended December 31, 1995
(In millions of dollars) 1995 1994 1993
---- ---- ----
Service cost $ 34.7 $ 32.3 $ 29.8
Interest cost on projected benefit obligations 57.2 45.1 46.7
Expected return on plan assets (82.1) (68.4) (67.1)
Net amortization (6.4) (6.9) (6.7)
------ ------ ------
$ 3.4 $ 2.1 $ 2.7
====== ====== ======
The actual returns on plan assets were $139.6 million, ($31.7) million
and $160.4 million for 1995, 1994 and 1993, 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:
December 31, 1995 and 1994
(In millions of dollars) 1995 1994
---- ----
Actuarial present value of accumulated
benefit obligation:
Vested $614.4 $542.4
Nonvested 6.4 6.3
------ ------
$620.8 $548.7
====== ======
Projected benefit obligation $720.1 $643.5
Fair value of plan assets 908.4 763.0
------ ------
188.3 119.5
Unrecognized net (gain) loss from past
experience different from that
assumed (56.1) 9.7
Unrecognized prior service benefit (4.0) (4.4)
Unrecognized SFAS No. 87 transition amount (28.7) (34.8)
------ ------
Prepaid pension cost $99.5 $90.0
====== ======
Actuarial assumptions:
Discount rate 8.4% 8.9%
Weighted average rate of compensation
increase 6.3% 6.9%
Expected long-term rate of return on
plan assets 9.8% 10.3%
====== ======
In 1995, the discount rates used to value the liabilities of the
non-U.S. plans were decreased to reflect current worldwide interest
rates. Assumptions, including projected compensation increases and
potential cost of living adjustments for retirees, were also revised to
reflect current expectations as to future 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.
38
<PAGE>
The components of the United States postretirement benefits costs are as
follows:
For the Three Years Ended December 31, 1995
(In millions of dollars) 1995 1994 1993
---- ---- ----
Service cost $1.4 $1.6 $1.7
Interest cost on accumulated postretirement benefits 6.6 6.2 7.0
Net amortization (.6) -- --
---- ---- ----
$7.4 $7.8 $8.7
==== ==== ====
The accumulated postretirement benefit obligation at December 31, 1995
and 1994 is as follows:
December 31, 1995 and 1994
(In millions of dollars) 1995 1994
---- ----
Retirees $59.5 $51.4
Fully eligible active plan participants 14.3 12.9
Other active plan participants 18.9 14.4
----- -----
92.7 78.7
Unrecognized net gain from past experience
different from that assumed 5.5 14.9
----- -----
Accrued postretirement liability $98.2 $93.6
===== =====
The discount rates used in determining the accumulated postretirement
benefit obligations were 7-1/2% and 8-3/4% for 1995 and 1994,
respectively. The assumed health care cost trend rate was approximately
9% in 1995, 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,
1995 by $11.4 million and the postretirement benefit expense for the
year then ended by $1.0 million.
In 1995, the discount rate used to value the accumulated postretirement
benefit obligation was decreased to reflect current interest rates of
high quality fixed income debt securities. The increase in the
accumulated postretirement benefit obligation primarily reflects the
impact of the change in the discount rate.
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 $35.3
million, $32.6 million and $31.3 million for 1995, 1994 and 1993,
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).
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 8,200,000 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 3,533,216 and 4,472,855 shares available for
awards at December 31, 1995 and 1994, 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.
39
<PAGE>
Stock option transactions under the 1992 Plan and prior plans are as follows:
Exercise Price
Shares Per Share
------ --------------
Balance at January 1, 1993
(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
Granted 1,132,790 $76-3/4-86-7/8
Exercised (359,616) $33-3/16-81-7/8
Forfeited (173,520) $49-3/8-93-5/8
- -------------------------------------------
Balance at December 31, 1995
(5,662,022 exercisable) 8,720,795 $41-1/2-93-5/8
=========
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 95,900, 59,900 and 68,500 restricted shares granted in 1995,
1994 and 1993, respectively, under the 1992 Plan. The Company recorded
compensation expense of $5.7 million, $4.9 million and $6.4 million in
1995, 1994 and 1993, respectively, related to these shares. 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.
There were 67,564, 33,818 and 8,300 restricted stock units awarded during 1995,
1994 and 1993, respectively, under the 1992 Plan. The Company recorded
compensation expense of $2.9 million, $2.5 million and $2.3 million in 1995,
1994 and 1993, respectively, related to restricted stock units.
Stock Purchase Plans: 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 682,000, 649,000 and 574,000
shares in 1995, 1994 and 1993, respectively. At December 31, 1995,
3,749,000 shares were available for issuance under the 1994 Plan. During
1995, the Company's Board of Directors approved the Marsh & McLennan
Companies Stock Purchase Plan for International Employees (the
"International Plan") which is similar to the 1994 Plan. Under the
International Plan, no more than 500,000 shares of the Company's common
stock may be sold. At December 31, 1995, 500,000 shares were available
for issuance under the International Plan.
Stock-Based Compensation: In October 1995, the Financial Accounting
Standards Board issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which must be adopted no later than 1996. This standard
will require the Company to elect either the fair value method of
accounting for stock-based compensation or the intrinsic value method
contained in Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees" with additional pro forma
disclosures. Accordingly, the Company plans to continue accounting for
stock-based compensation in accordance with APB Opinion No. 25 and will
provide the additional disclosures required by SFAS No. 123. The
adoption of this standard will not have an impact on the Company's
financial position or results of operations.
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 93% of the Company's lease
obligations are for the use of office space.
40
<PAGE>
The accompanying Consolidated Statements of Income include net rental
costs of $218.1 million, $206.7 million and $198.2 million for 1995,
1994 and 1993, respectively, after deducting rentals from subleases
($9.1 million in 1995, $8.8 million in 1994 and $7.9 million in 1993).
At December 31, 1995, the aggregate future minimum rental commitments
under all noncancelable operating lease agreements are as follows:
For the Years Ending Gross Rentals Net
December 31, Rental from Rental
(In millions of dollars) Commitments Subleases Commitments
- ------------------------ ----------- --------- -----------
1996 $ 178.1 $ 9.3 $ 168.8
1997 158.2 6.5 151.7
1998 123.3 4.3 119.0
1999 102.1 3.7 98.4
2000 85.5 2.5 83.0
Subsequent years 476.6 14.7 461.9
-------- ----- --------
$1,123.8 $41.0 $1,082.8
======== ===== ========
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, 1995, the aggregate fixed future minimum
commitments under these agreements are as follows:
Future
For the Years Ending December 31, Minimum
(In millions of dollars) Commitments
- ------------------------ -----------
1996 $ 28.9
1997 25.9
1998 24.7
1999 13.6
2000 9.4
Subsequent years 30.5
------
$133.0
======
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, 1995 and 1994
is as follows:
December 31, 1995 and 1994
(In millions of dollars) 1995 1994
---- ----
Receivable within one year $142.2 $145.5
Receivable after one year 157.6 157.6
------ ------
299.8 303.1
Less--allowance for doubtful accounts (10.9) (12.0)
------ ------
$288.9 $291.1
====== ======
Customer deposits, which have one to three year terms at fixed interest
rates, amounted to $98.9 million and $94.1 million at December 31, 1995
and 1994, respectively. The long-term portion of these customer deposits
amounted to $60.9 million and $28.6 million at December 31, 1995 and
1994, 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
41
<PAGE>
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 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 Inter-bank Offered Rate ("LIBOR") on the latest reset date
included in the underlying contracts and are subject to fluctuations.
Outstanding contracts at December 31, 1995 expire from 1996 to 1999.
December 31, 1995 and 1994
(In millions of dollars) 1995 1994
---- ----
Variable rate liabilities--notional amount $18.6 $8.6
Average fixed rate received 6.7% 5.6%
Average variable rate paid 6.7% 6.1%
Fixed rate liabilities--notional amount $88.4 $75.7
Average fixed rate paid 7.3% 7.5%
Average variable rate received 6.8% 6.2%
FBL has also entered into forward start swaps and forward start forward
rate agreements having a gross notional amount of $21.3 million at
December 31, 1995. Under these agreements, FBL will pay average fixed
rates of 9% on fixed rate liabilities of $7.8 million, and receive
average fixed interest rates of 6.6% on variable rate liabilities of
$13.5 million. The weighted average variable rates for these agreements
will be based upon LIBOR on the effective date of the contract.
The difference between amounts paid to and amounts received from the
counterparties is included in revenue in the Consolidated Statements of
Income.
9 Short-term Debt
- --------------------------------------------------------------------------------
The Company's outstanding short-term debt is as follows:
December 31, 1995 and 1994
(In millions of dollars) 1995 1994
---- ----
Commercial paper $352.0 $298.3
Consumer finance borrowings 135.6 99.6
Bank loans 79.7 --
Current portion of long-term debt 3.8 5.1
------ ------
$571.1 $403.0
====== ======
The weighted average interest rate on outstanding borrowings at December
31, 1995 and 1994 is as follows:
December 31, 1995 and 1994
(In millions of dollars) 1995 1994
---- ----
Commercial paper 5.8% 6.1%
Consumer finance borrowings 7.3% 6.4%
Bank loans 4.3% --
====== ======
The Company maintains a credit facility with several banks primarily to
support its commercial paper borrowings. This facility, which expires
April 2000, provides that the Company may borrow up to $500 million at
varying market rates of interest. Commitment fees ranging between 1/10%
and 1/5% per annum are payable on any unused portion. The facility
requires the Company to maintain consolidated tangible net worth of at
least $300 million and contains 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 $201.8 million. The Company also
maintains other credit facilities, primarily related to operations
located outside of the United States, aggregating $258.6 million, which
includes a new facility entered into during 1995 with two German banks.
As of December 31, 1995, $79.7 million of this new facility, which
totalled $131.9 million, was utilized and expires on March 29, 1996.
42
<PAGE>
10 Long-term Debt
- -------------------------------------------------------------------------------
The Company's outstanding long-term debt is as follows:
December 31, 1995 and 1994
(In millions of dollars) 1995 1994
---- ----
Commercial paper $200.0 $200.0
Mortgage--9.8% due 2009 200.0 200.0
Mortgage--7.25% due 1999 3.9 3.9
Other 10.5 10.6
------ ------
414.4 414.5
Less current portion 3.8 5.1
------ ------
$410.6 $409.4
====== ======
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, 1995
and 1994, 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, 1995, 1994 and 1993 was 6.1%, 4.6% and 3.2%, 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 1996 and in the three succeeding years are $3.8
million, $2.9 million, $1.7 million, and $4.0 million, respectively. No
repayments are scheduled for the year 2000.
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 $77.5 million and $27.8 million at December 31, 1995 and
1994, respectively, which are carried on a cost basis. The Company has
estimated, using various accredited valuation techniques, that the fair
value of these investments approximates their carrying value.
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 $250 million and $213
million at December 31, 1995 and 1994, 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 $13 million and $7 million at December 31, 1995 and 1994,
respectively. The fair value of FBL's interest rate swaps and forward
rate agreements was estimated as a payable of approximately $1 million
at December 31, 1995 and 1994, 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 $334.3 million and $255.0
million at December 31, 1995 and 1994, respectively. Gross unrealized
gains, amounting to $230.6 million and $140.7 million at December 31,
1995 and 1994, respectively, have been excluded from earnings and
reported as a separate component of stockholders' equity, net of
deferred income taxes.
43
<PAGE>
Proceeds from the sale of available for sale securities for the years
ended December 31, 1995 and 1994 were $53.7 million and $54.7 million,
respectively. Gross realized gains on available for sale securities sold
during 1995 and 1994 amounted to $23.2 million and $38.0 million,
respectively. 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 is 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.
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.
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, including litigation, have
arisen or been deferred by agreement 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 in prior years advised certain clients in
connection with their purchase of guaranteed investment contracts and
annuities issued by Executive Life Insurance Company, which is in
rehabilitation under the supervision of the California Insurance
Department. Some of those clients as well as the Company's subsidiaries
have been or may be involved in 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.
44
<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:
For the Three Years Ended December 31, 1995
<TABLE>
<CAPTION>
Depreciation &
Operating Identifiable Amortization Capital
(In millions of dollars) Revenue Income Assets of Fixed Assets Expenditures
------- -------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Type of Service:
1995--
Insurance Services $1,963.9 $389.2 $2,193.6 $ 65.6 $ 77.2
Consulting 1,056.4 108.7 638.4 20.4 25.7
Investment Management 750.0 243.5 997.9 21.5 29.4
General Corporate -- (46.5) 499.6 3.9 4.6
-------- ------ -------- ------ ------
$3,770.3 $694.9 $4,329.5 $111.4 $136.9
======== ====== ======== ====== ======
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
======== ====== ======== ====== ======
Geographic Area:
1995--
United States $2,398.4 $494.1 $2,195.9
Europe 1,028.2 189.7 1,413.6
Canada 184.3 37.4 107.1
Pacific Rim and Other 159.4 20.2 113.3
General Corporate -- (46.5) 499.6
-------- ------ --------
$3,770.3 $694.9 $4,329.5
======== ====== ========
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
======== ====== ========
</TABLE>
45
<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
February 29, 1996
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, 1995 and
1994, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended
December 31, 1995. 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, 1995 and 1994, and the
results of their operations and their cash flows for each of the three
years in the period ended December 31, 1995 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.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
New York, New York
February 29, 1996
46
<PAGE>
Marsh & McLennan Companies, Inc. and Subsidiaries
SELECTED QUARTERLY FINANCIAL DATA AND
SUPPLEMENTAL INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income Before
Cumulative
Effect of
Accounting
Change Net Income
---------------- ---------------- Dividends Stock
(In millions of dollars, Operating Per Per Paid Per Price Range
except per share figures) Revenue Income Amount Share Amount Share Share High-Low
- ------------------------- ------- ------ ------ ----- ------ ----- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1995:
First quarter $ 955.2 $213.6 $124.8 $1.71 $124.8 $1.71 $ .72-1/2 $85 -76-1/4
Second quarter 935.2 174.9 101.8 1.40 101.8 1.40 .72-1/2 $84 -76-1/8
Third quarter 921.6 158.4 91.3 1.26 91.3 1.26 .72-1/2 $89-3/8-76-5/8
Fourth quarter 958.3 148.0 85.0 1.16 85.0 1.16 .80 $90-1/8-80-1/2
-------- ------ ------ ----- ------ ----- ---------
$3,770.3 $694.9 $402.9 $5.53 $402.9 $5.53 $2.97-1/2 $90-1/8-76-1/8
======== ====== ====== ===== ====== ===== =========
1994:
First quarter $910.2 $228.4 $130.7 $1.77 $120.2 $1.63 $ .67-1/2 $86-3/4-80-1/4
Second quarter 840.5 163.8 95.7 1.30 95.7 1.30 .67-1/2 $88-3/4-81-1/4
Third quarter 826.9 148.6 83.4 1.14 83.4 1.14 .72-1/2 $88-3/8-76
Fourth quarter 857.4 129.5 72.2 .98 72.2 .98 .72-1/2 $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 $ .67-1/2 $97-5/8-88-1/8
Second quarter 783.3 152.5 86.3 1.18 86.3 1.18 .67-1/2 $96 -84-1/2
Third quarter 766.4 139.7 76.1 1.04 76.1 1.04 .67-1/2 $91-7/8-84-7/8
Fourth quarter 779.8 113.4 62.6 .84 62.6 .84 .67-1/2 $88-7/8-77
-------- ------ ------ ----- ------ ----- ---------
$3,163.4 $592.8 $332.4 $4.52 $332.4 $4.52 $2.70 $97-5/8-77
======== ====== ====== ===== ====== ===== =========
</TABLE>
The Company's common stock (ticker symbol: MMC) is traded on the New York,
Chicago, Pacific and London stock exchanges. As of February 29, 1996, there were
9,679 stockholders of record.
47
<PAGE>
Marsh & McLennan Companies, Inc. and Subsidiaries
TEN-YEAR STATISTICAL SUMMARY OF OPERATIONS
<TABLE>
<CAPTION>
For the Ten Years Ended December 31, 1995
(In millions of dollars, except per share figures) 1995 1994 1993 1992
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Insurance services $1,963.9 $1,886.5 $1,790.5 $1,632.8
Consulting 1,056.4 933.1 854.8 908.2
Investment management 750.0 615.4 518.1 396.0
--------- -------- -------- --------
Total Revenue 3,770.3 3,435.0 3,163.4 2,937.0
--------- -------- -------- --------
Expenses:
Compensation and benefits 1,948.8 1,740.2 1,635.7 1,557.8
Other operating expenses 1,126.6 1,024.5 934.9 838.2
--------- -------- -------- --------
Total Expenses 3,075.4 2,764.7 2,570.6 2,396.0
--------- -------- -------- --------
Operating Income 694.9 670.3 592.8 541.0
Interest Income 17.7 11.8 11.9 16.6
Interest Expense (62.8) (50.6) (46.1) (38.3)
Other Income (Expense) -- -- -- --
--------- -------- -------- --------
Income Before Income Taxes and Cumulative Effect
of Accounting Changes 649.8 631.5 558.6 519.3
Income Taxes 246.9 249.5 226.2 215.5
--------- -------- -------- --------
Income Before Cumulative Effect of Accounting Changes $ 402.9 $ 382.0 $ 332.4 $ 303.8
========= ======== ======== ========
Net Income $ 402.9 $ 371.5(b) $ 332.4 $ 263.7(a)
========= ======== ======== ========
Earnings Per Share Information:
Income Before Cumulative Effect of Accounting Changes $ 5.53 $ 5.19 $ 4.52 $ 4.21
========= ======== ======== ========
Net Income Per Share $ 5.53 $ 5.05(b) $ 4.52 $ 3.65(a)
========= ======== ======== ========
Average Number of Shares Outstanding 72.9 73.6 73.5 72.2
Dividends Paid Per Share $2.97-1/2 $ 2.80 $ 2.70 $ 2.65
Return on Average Stockholders' Equity 26% 26% 27% 25%
Year-end Financial Position:
Working capital $ 109.6 $ 53.7 $ 133.7 $ 198.3
Total assets $ 4,329.5 $3,830.6 $3,546.6 $3,088.4
Long-term debt $ 410.6 $ 409.4 $ 409.8 $ 411.2
Stockholders' equity $ 1,665.5 $1,460.6 $1,365.3 $1,102.9
Total shares outstanding (excluding treasury shares) 72.8 73.2 73.9 73.3
Other Information:
Number of employees 27,200 26,100 25,600 25,800
Stock price ranges--
U.S. exchanges--High $ 90-1/8 $ 88-3/4 $ 97-5/8 $ 94-1/2
--Low $ 76-1/8 $ 71-1/4 $ 77 $ 71-1/4
London Stock Exchange--High 58-1/2 58-15/16 67-7/16 61-7/8
pounds pounds pounds pounds
--Low 47-7/8 45-5/16 52-9/16 39-5/16
pounds pounds pounds pounds
Price/earnings multiple 16.0 15.7 18.0 25.0
======== ======== ======== ========
</TABLE>
(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."
48
<PAGE>
Marsh & McLennan Companies, Inc. and Subsidiaries
TEN-YEAR STATISTICAL SUMMARY OF OPERATIONS
<TABLE>
<CAPTION>
For the Ten Years Ended December 31, 1995 Compound
(In millions of dollars, Growth Rate
except per share figures) 1991 1990 1989 1988 1987 1986 1985-1995
---- ---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Insurance services $1,571.0 $1,536.8 $1,400.3 $ 1,375.7 $1,380.2 $ 1,273.1 7%
Consulting 894.0 910.0 754.3 635.7 482.0 333.3 15%
Investment management 314.2 276.2 273.1 261.0 284.9 197.7 23%
-------- -------- -------- --------- -------- ---------
Total Revenue 2,779.2 2,723.0 2,427.7 2,272.4 2,147.1 1,804.1 11%
-------- -------- -------- --------- -------- ---------
Expenses:
Compensation and benefits 1,461.1 1,400.0 1,223.4 1,108.9 982.6 812.5 12%
Compensation and benefits 820.0 795.7 694.8 648.1 614.3 511.1 11%
-------- -------- -------- --------- -------- ---------
Total Expenses 2,281.1 2,195.7 1,918.2 1,757.0 1,596.9 1,323.6 11%
-------- -------- -------- --------- -------- ---------
Operating Income 498.1 527.3 509.5 515.4 550.2 480.5 8%
Interest Income 24.8 33.5 27.7 22.7 31.0 25.9
Interest Expense (39.1) (31.0) (18.9) (23.1) (13.0) (5.3)
Other Income (Expense) 43.0 (1.0) (1.0) 1.4 (.9) .3
-------- -------- -------- --------- -------- ---------
Income Before Income Taxes
and Cumulative Effect
of Accounting Changes 526.8 528.8 517.3 516.4 567.3 501.4 7%
Income Taxes 221.3 224.7 222.4 220.1 265.2 258.2 4%
-------- -------- -------- --------- -------- ---------
Income Before Cumulative
Effect of Accounting Changes $ 305.5 $ 304.1 $ 294.9 $ 296.3 $ 302.1 $ 243.2 9%
======== ======== ======== ========= ======== =========
Net Income $ 305.5 $ 304.1 $ 294.9 $ 296.3 $ 302.1 $ 243.2 9%
======== ======== ======== ========= ======== =========
Earnings Per Share Information:
Income Before Cumulative Effect
of Accounting Changes $ 4.18 $ 4.15 $ 4.10 $ 4.09 $ 4.06 $ 3.30 10%
======== ======== ======== ========= ======== =========
Net Income Per Share $ 4.18 $ 4.15 $ 4.10 $ 4.09 $ 4.06 $ 3.30 10%
======== ======== ======== ========= ======== =========
Average Number of Shares
Outstanding 73.1 73.3 71.9 72.4 74.4 73.8
Dividends Paid Per Share $ 2.60 $ 2.55 $ 2.50 $2.42-1/2 $ 2.15 $1.56-1/4 9%
Return on Average Stockholders'
Equity 29% 31% 36% 38% 42% 42%
Year-end Financial Position:
Working capital $ 336.2 $ 352.5 $ 312.7 $ 195.7 $ 243.2 $ 187.7
Total assets $2,382.2 $2,411.2 $2,035.2 $ 1,830.0 $1,634.4 $1,476.6
Long-term debt $ 318.0 $ 319.9 $ 319.4 $ 266.2 $ 16.4 $ 14.5
Stockholders' equity $1,035.0 $1,085.3 $ 873.0 $ 755.1 $ 791.7 $ 638.7
Total shares outstanding
(excluding treasury shares) 71.8 73.5 72.4 71.5 73.9 73.9
Other Information:
Number of employees 23,400 24,400 23,600 22,800 22,700 19,900
Stock price ranges--
U.S. exchanges--High $ 87-1/4 $ 81 $ 89-3/4 $ 59-3/4 $ 72 $ 76-3/4
--Low $ 69-1/8 $ 59-3/4 $ 55-1/8 $ 45-1/4 $ 43-3/4 $ 40-5/8
London Stock Exchange--High 49-5/8 49 55-15/16 35 46-1/2 50-1/8
pounds pounds pounds pounds pounds pounds
--Low 35-9/16 31-1/2 30-13/16 25 24 28-1/4
pounds pounds pounds pounds pounds pounds
Price/earnings multiple 19.5 18.8 19.0 13.8 12.2 18.4
======== ======== ======== ========= ======== =========
</TABLE>
(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."
49
<PAGE>
BOARD OF DIRECTORS AND CORPORATE OFFICERS
BOARD OF DIRECTORS
A.J.C. Smith
Chairman
Philip L. Wroughton
Vice Chairman
Lewis W. Bernard
Chairman
Classroom, Inc.
Former Chief Administrative and Financial Officer
Morgan Stanley & Co., Inc.
Richard H. Blum
Marsh & McLennan
Companies, Inc.
Frank J. Borelli
Senior Vice President and Chief Financial Officer
Robert Clements
Chairman
Marsh & McLennan Risk Capital Corp.
Peter Coster
President
Mercer Consulting Group, Inc.
Ray J. Groves
Chairman
Legg Mason Merchant Banking, Inc.
Former Chairman
Ernst & Young
Richard E. Heckert
Former Chairman
E.I. du Pont de Nemours and Company
Richard S. Hickok
Former Chairman
KMG Main Hurdman
David D. Holbrook
Chairman
Marsh & McLennan, Incorporated
Robert M.G. Husson
Chairman
Faugere & Jutheau S.A.
Lawrence J. Lasser
President
Putnam Investments, Inc.
Richard M. Morrow
Former Chairman
Amoco Corporation
George Putnam
Chairman
The Putnam Funds
Adele Smith Simmons
President
John D. and Catherine T. MacArthur Foundation
John T. Sinnott
President and Chief Executive Officer
Marsh & McLennan, Incorporated
Frank J. Tasco
Former Chairman
Marsh & McLennan Companies, Inc.
R.J. Ventres
Former Chairman
Borden, Inc.
ADVISORY DIRECTORS
Dean R. McKay
Former Senior Vice President
IBM Corporation
Arthur C. Nielsen, Jr.
Former Chairman
A.C. Nielsen Company
John M. Regan, Jr.
Former Chairman
Marsh & McLennan Companies, Inc.
COMMITTEES OF THE BOARD
Audit
Richard S. Hickok, Chairman
Ray J. Groves
Richard M. Morrow
Adele Smith Simmons
Frank J. Tasco
Compensation
Richard E. Heckert, Chairman
Lewis W. Bernard
R.J. Ventres
Executive
A.J.C. Smith, Chairman
Richard E. Heckert
Frank J. Tasco
OTHER CORPORATE OFFICERS
Francis N. Bonsignore
Senior Vice President
Human Resources and Administration
Gregory F. Van Gundy
General Counsel and Secretary
INTERNATIONAL ADVISORY BOARD
Abdlatif Y. Al-Hamad
(Middle East)
Chairman
Arab Fund for Economic and Social Development
Raymond Barre
(France)
Deputy, National Assembly
Former Prime Minister
Mathis Cabiallavetta
(Switzerland)
President
Union Bank of Switzerland
John R. Evans
(Canada)
Chairman
Torstar Corporation
Oscar Fanjul
(Spain)
Chairman and Chief Executive Officer
Repsol
Toyoo Gyohten
(Japan)
Chairman of the Board of Directors
The Bank of Tokyo
Lord Jenkin of Roding
(United Kingdom)
Chairman
Friends' Provident Life Office
Erno Kemenes
(Eastern Europe)
Former Minister of Economics
Government of Hungary
Walther Leisler Kiep
(Germany)
(IAB Chairman)
General Managing Partner
Gradmann & Holler
Paul F. Oreffice
(United States)
Former Chairman and Chief Executive Officer
The Dow Chemical Company
Jesus Silva-Herzog
(Mexico)
Ambassador of Mexico to the United States
50
<PAGE>
SHAREHOLDER INFORMATION
Annual Meeting
The 1996 annual meeting of shareholders will be held at 10 a.m., Tuesday, May
21, in the 2nd floor auditorium of the McGraw-Hill Building, 1221 Avenue of the
Americas, New York City. At the time of the mailing of this annual report, the
notice of the annual meeting and proxy statement, together with a proxy card, is
scheduled to be sent to each shareholder.
Anticipated 1996 Dividend Payment Dates
February 14 (paid), May 14, August 14, November 14
Financial and Investor Information
Shareholders and prospective investors inquiring about reinvestment and payment
of dividends, consolidation of accounts, address corrections, changes of
registration and stock certificate holdings should contact:
Harris Trust Company of New York
c/o Harris Trust and Savings Bank
Shareholder Services Division
311 West Monroe Street
P.O. Box 755
Chicago, Illinois 60690-0755
Telephone: (800) 457-8968
(312) 461-3597
Harris Trust Company of New York
c/o The Royal Bank of Scotland
Registrar's Department
P.O. Box 82, Caxton House
Redcliffe Way, Bristol BS99 7NH
England
Telephone: 0272-306636
Copies of our annual and quarterly reports, and Forms 10-K and 10-Q, may be
obtained without charge by contacting:
Corporate Development
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, New York 10036
Telephone: (212) 345-5475
Stock Listings
Marsh & McLennan Companies' common stock (ticker symbol: MMC) is listed on the
New York, Chicago, Pacific and London stock exchanges.
- --------------------------------------------------------------------------------
Credits
Cover and pages 8-9, 14-15, 18-19, 22: National Maritime Museum London.
Page 3 (painting) and pages 10-11, 12-13, 16-17, 20-21: Courtesy of The
Mariners' Museum, Newport News, Virginia.
Pages 6-7: Courtesy of Peabody Essex Museum, Salem, Massachusetts.
Selected Descriptions of Images
Cover: Reflecting circle, circa 1800. Calculated longitude using the "lunar
distance theory"--by measuring the distance between the moon and certain
stars.
Page 3: Frank Vining Smith, "Cutty Sark, Clipper Ship," 1869.
Pages 6-7: Hadley quadrant, circa 1786. Determined location through
astronomical observation.
Page 22: Gunter scales, circa 1700. The forerunner of today's slide rule.
Designed and Produced by Taylor & Ives, NYC Printed on recycled paper
<PAGE>
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, NY 10036
(212) 345-5000
EXHIBIT 21
SUBSIDIARIES OF
MARSH & McLENNAN COMPANIES, INC.
Where
Name Incorporated
Marsh & McLennan Real Estate Advisors, Inc. Delaware
Omega Indemnity (Bermuda) Limited Bermuda
Epsilon Insurance Company, Ltd. Cayman Islands
Marsh & McLennan, Incorporated Delaware
Marsh & McLennan of Arkansas, Inc. Arkansas
M & M Insurance Management Services, Inc. Delaware
Marsh & McLennan Financial Markets, Inc. Delaware
Marsh & McLennan GbR Holdings, Inc. Delaware
Marsh & McLennan Pallas Holdings, 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, Incorporated Maine
Marsh & McLennan, Inc. Massachusetts
Marsh & McLennan Michigan
Marsh & McLennan, Inc. of Nevada Nevada
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 Global Broking, Inc. New York
Marsh & McLennan Global Broking (Bermuda) Ltd. Bermuda
Bowring (Bermuda) Investments Ltd. Bermuda
Marsh & McLennan Global Broking, Inc. Connecticut
Marsh & McLennan Global Broking, Inc. Illinois
Marsh & McLennan Global Broking, Inc. Missouri
Marsh & McLennan Global Broking, Inc. New Jersey
Marsh & McLennan Intermediaries, Inc. New York
Marsh & McLennan Global Broking, Inc. Texas
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
Icarai S/A Administracao E Comercio Brazil
Les Assureurs Conseils Camerounais Faugere & Jutheau & Cie Cameroon
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
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
Les Assureurs Conseils Gabonais Faugere & Jutheau & Cie Gabon
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
VW-Versicherungsvermittlungs-GmbH Germany
VVG Gradmann & Holler
Versicherungs-Vermittlungs-GmbH Germany
Airport Asserkuranz Vermittlungs GmbH Germany
GMFS Versicherungs-Vermittlungs GmbH Germany
Sudzucker Versicherungsvermittlungs GmbH Germany
Senator Assercuranz Contor GmbH Germany
Bau Asserkuranz Vermittlungs GmbH Germany
Westfalia Asserkuranz
Versicherungsvermittlungs GmbH Germany
Gradmann & Holler International GmbH Germany
Gradmann & Holler Kiefhaber 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
Africaine De Courtage d'Assurances Faugere & Jutheau, S.A. Ivory Coast
Les Assureurs Conseils de Cote d'Ivoire Faugere &
Jutheau & Cie Ivory Coast
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
S.P.K. Bowring Marsh & McLennan Sdn. Bhd. Malaysia
Corredores Internacionales de Reaseguros S.A. Mexico
Marsh & McLennan Agente de Seguros y de Fianzas, S.A.
de C.V. Mexico
Marsh & McLennan Nederland B.V. Netherlands
Marsh & McLennan Polska Sp.zO.O Poland
Marsh & McLennan, Lda. Portugal
Marsh & McLennan Romania SRL Romania
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 (Thai) Company Ltd. Thailand
Marsh & McLennan Sigorta ve Reasurans Brokerligi AS Turkey
C.T. Bowring International Broking Holdings, Ltd. United Kingdom
Insurance Brokers of Nigeria Nigeria
Marsh & McLennan Bowring Marine & Energy Group Ltd. United Kingdom
Marsh & McLennan Limited United Kingdom
Marsh & McLennan, Incorporated Virgin Islands
Muir Beddall (Zimbabwe) Limited Zimbabwe
C.T. Bowring and Associates (Private) Limited Zimbabwe
Guy Carpenter & Company, Inc. Delaware
The Carpenter Management Corporation Delaware
Paul Napolitan, Inc. Delaware
Sellon Associates, Inc. New York
Balis & Co., Inc. Pennsylvania
Philadelphia Insurance Management Company Delaware
EQECAT, Inc. Delaware
Guy Carpenter Advisors, Inc. Delaware
Normandy Reinsurance Company Limited Bermuda
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 & Company (Stockholm) AB Sweden
Bennich Reinsurance Management AB Sweden
Guy Carpenter & Co. Limited United Kingdom
Marsh & McLennan Risk Capital Holdings, Ltd. Delaware
Marsh & McLennan Risk Capital Corp. Delaware
MMRCH (Bermuda) Partnership Bermuda
Terra Nova (Bermuda) Holdings, Ltd. Bermuda
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
SNC P. Deleplanque France
Boistel S.A. France
Bureau Gogioso Eyssautier 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
Ivoiriennes Assurances Conseil Ivory Coast
Societe Internationale de Courtage d'Assurances
et de Reassurances-F&J (SARL) Burkina Faso
Socodel-Paris S.A. France
Union Francaise de Reassurances (S.A.) France
Guy Carpenter & Cia, S.A. Spain
William M. Mercer-Faugere & Jutheau (S.A.R.L.) France
Societe d'Etude et de Gestion et de Conseil en
Assurance SA Senegal
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, Ltd. Bermuda
Mercer Management Consulting GmbH Germany
UBM Unternehmensberatung Mnchen GmbH Germany
UBM Marktforschung GmbH International
Industrial Research Germany
UBM Industrial Market Research Iberica S.L. Germany
UBM Consultoria Internacional S/C Ltda. Brazil
UBM Consulting France International Management
Consultants France
Mercer Management Consulting Limited Switzerland
Mercer Management Consulting S.L. Spain
Mercer Management Consulting SNC France
MID, Inc. Delaware
INPLAN Pte. Ltd. Singapore
Mercer Consulting Services S.A. Switzerland
Strategic Planning Associates, Straplan S.A. Switzerland
Mercer Service Company, Inc. Delaware
William M. Mercer Companies, Inc. Delaware
William M. Mercer Holdings, Inc. Delaware
William M. Mercer Pty. Ltd. Australia
Superfund Nominees Pty. Ltd. Australia
William M. Mercer International S.A. Belgium
William M. Mercer Limited Canada
Hickling -Johnston Ltd. Canada
Mercer Management Consulting Limited Canada
Metcalfe Agencies Limited Quebec
Societe Conseil Mercer Limitee Quebec
Mercer Limited Ireland
P.I.C. Advisory Services Limited Ireland
P.I.C. Management Services Limited Ireland
Mercer Fraser P.I.C. Trustees Limited Ireland
William M. Mercer Limited of Japan Japan
William M. Mercer Limited Hong Kong
William M. Mercer (Malaysia) Sdn. Bhd. Malaysia
William M. Mercer Zainal Fraser Sdn. Bhd. Malaysia
William M. Mercer Ten Pas B.V. Netherlands
Germas B.V. Netherlands
Reitmulders & Partners B.V. Netherlands
William M. Mercer Services B.V. Netherlands
William M. Mercer Limited New Zealand
William M. Mercer, Incorporated Puerto Rico
William M. Mercer, S.A. Switzerland
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
William M. Mercer Fraser Pension Fund
Trustees Limited United Kingdom
Duncan C. Fraser & Co. United Kingdom
William M. Mercer Fraser Computer
Services Limited United Kingdom
Mercer Management Consulting, Limited United Kingdom
MF Trustees Limited United Kingdom
William M. Mercer Fraser Pension Fund
Trustees Limited United Kingdom
William M. Mercer (Isle of Man) Limited Isle of Man
Pensioneer Trustees (Leeds) Limited England
William M. Mercer Lda. Portugal
William M. Mercer Fraser 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, 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
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 of Texas, Inc. Texas
William M. Mercer of Virginia, Incorporated Virginia
MPA Superannuation Services Limited Australia
MPA Superfund Nominees Pty. Limited Australia
Mercer R.H. SARL France
William M. Mercer-MPA Limited Hong Kong
William M. Mercer Philippines, Incorporated Philippines
William M. Mercer Pte. Ltd. Singapore
William M. Mercer S.A. Argentina
William M. Mercer S.A. Asesores de Seguros Argentina
William M. Mercer Comercio Consultoria e Servicos
Ltda. Brazil
William M. Mercer Consultoria Ltda. Brazil
Grupo Assistencial De Economia E Financas
Tudor S/C Ltda. Brazil
Mercer MW Ltda. Brazil
Mercer MW Pesquisas Ltda. Brazil
Mercer MW Servicos Ltda. Brazil
Mercer MW Saude Ltda. Brazil
Vida Network Ltda. Brazil
William M. Mercer, S.A. Belgium
William M. Mercer Limitada Chile
William M. Mercer Claro Corredores de Seguros Chile
William M. Mercer A/S Denmark
William M. Mercer A.B. Sweden
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
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, Ltd. Bahamas
Putnam International Distributors, Ltd. Cayman Islands
Putnam 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
The Bowring Group Limited England
C.T.B. Services Ltd. England
C.T. Bowring & Co. Ltd. England
Importbest Ltd. England
Bowring Financial Services Ltd. England
The Frizzell Group Ltd. England
Frizzell Financial Services Ltd. England
Frizzell Life & Financial Planning Ltd. England
Central Resources Ltd. England
Frizzell Bank 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
Frizzell B.V. Holland
Frizzell Foundation England
Marsh & McLennan Management Services (Guernsey) Ltd. Guernsy
Bowring Marsh & McLennan (IOM) Ltd. I.O.M.
Marsh & McLennan Management Services (Isle of Man) Ltd. I.O.M.
Carpenter Bowring (UK) Ltd. England
Carpenter Bowring Ltd. England
Marsh Re Correduria de Reaseguros S.A. Spain
Bowring Reinsurance Brokers Ltd. England
Winchester Bowring Ltd. England
White Kennett 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
Marsh & McLennan Services Ltd. England
Marsh & McLennan Holdings Ltd. England
Marsh & McLennan Nederland B.V. Netherlands
Marsh & McLennan Lda. Portugal
Marsh & McLennan Bowring Ltd. England
Bowring Gauntlet Ltd. England
Bowring Risk Management Ltd. England
Bowring Professional Indemnity Scotland Ltd. Scotland
Microsafe Ltd. England
Ulster Insurance Services Ltd. N. Ireland
RIAS Insurance Services Ltd. Scotland
Bowring Camper & Nicholsons Ltd. England
RIC Management Services Ltd. Eire
Insurance Management Services Ltd. Eire
Marsh & McLennan Ireland Ltd. Eire
C.T. Bowring Ireland Ltd. Eire
Mathews Mulcahy & Sutherland Ltd. Eire
R.I.C.S. Insurance Services Ltd. England
Bowring Information & Communications Systems Ltd. England
Marsh & McLennan Holdings Ltd. New Zealand
Marsh & McLennan Ltd. New Zealand
Reinsurances New Zealand Ltd. New Zealand
Risk Management Ltd. New Zealand
Marsh & McLennan Ltd. Fiji
Reinsurances (Pacific) Ltd. Fiji
Bowring Services Ltd. England
C. T. Bowring (Underwriting Agencies) Ltd. England
C. T. Bowring Trading (Holdings) Ltd. England
Baffin Trading Company Ltd. Canada
C.T.B. Ltd. England
Tower Hill Property Company Ltd. England
Bowring In The Community Ltd. England
C. T. Bowring (Insurance) Holdings Ltd. England
C. T. Bowring Japan Ltd. Japan
Carpenter Bowring Australia Pty. Ltd. Australia
Carpenter Bowring New Zealand Ltd. New Zealand
Australian World Underwriters Pty. Ltd. Australia
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, 33-54349, 33-59603 and 33-
63389) 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, 1995.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
New York, New York
March 28, 1996
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, 1995, 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 21st day of March, 1996.
/s/Lewis W. Bernard
Lewis W. Bernard
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, 1995, 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 21st day of March, 1996.
/s/Richard H. Blum
Richard H. Blum
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, 1995, 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 21st day of March, 1996.
/s/Frank J. Borelli
Frank J. Borelli
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, 1995, 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 21st day of March, 1996.
/s/Robert Clements
Robert Clements
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, 1995, 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 21st day of March, 1996.
/s/Peter Coster
Peter Coster
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, 1995, 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 21st day of March, 1996.
/s/R. J. Groves
R. J. Groves
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, 1995, 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 21st day of March, 1996.
/s/Richard E. Heckert
Richard E. Heckert
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, 1995, 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 21st day of March, 1996.
/s/Richard S. Hickok
Richard S. Hickok
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, 1995, 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 21st day of March, 1996.
/s/David D. Holbrook
David D. Holbrook
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, 1995, 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 21st day of March, 1996.
/s/Robert M. G. Husson
Robert M. G. Husson
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, 1995, 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 21st day of March, 1996.
/s/Lawrence J. Lasser
Lawrence J. Lasse
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, 1995, 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 21st day of March, 1996.
/s/Richard M. Morrow
Richard M. Morrow
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, 1995, 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 21st day of March, 1996.
/s/George Putnam
George Putnam
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, 1995, 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 21st day of March, 1996.
/s/Adele Smith Simmons
Adele Smith Simmons
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, 1995, 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 21st day of March, 1996.
/s/John T. Sinnott
John T. Sinnott
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, 1995, 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 21st day of March, 1996.
/s/A. J. C. Smith
A. J. C. Smith
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, 1995, 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 21st day of March, 1996.
/s/Frank J. Tasco
Frank J. Tasco
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, 1995, 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 21st day of March, 1996.
/s/Romeo J. Ventres
Romeo J. Ventres
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, 1995, 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 21st day of March, 1996.
/s/Philip L. Wroughton
Philip L. Wroughton
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated Marsh & McLennan Companies, Inc. and subsidiaries December 31,
1995 financial statements and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 328,100,000
<SECURITIES> 0
<RECEIVABLES> 1,180,800,000
<ALLOWANCES> 48,300,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,679,100,000
<PP&E> 1,396,000,000
<DEPRECIATION> 638,500,000
<TOTAL-ASSETS> 4,329,500,000
<CURRENT-LIABILITIES> 1,569,500,000
<BONDS> 410,600,000
<COMMON> 76,800,000
0
0
<OTHER-SE> 1,588,700,000
<TOTAL-LIABILITY-AND-EQUITY> 4,329,500,000
<SALES> 0
<TOTAL-REVENUES> 3,770,300,000
<CGS> 0
<TOTAL-COSTS> 3,075,400,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62,800,000
<INCOME-PRETAX> 649,800,000
<INCOME-TAX> 246,900,000
<INCOME-CONTINUING> 402,900,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 402,900,000
<EPS-PRIMARY> 5.53
<EPS-DILUTED> 5.53
</TABLE>
