<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 25, 1997.
REGISTRATION NO. 333-25069
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------
MARSH & MCLENNAN COMPANIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
------------------------
6411
(Primary Standard Industrial
Classification Code Number)
36-2668272
(I.R.S. Employer Identification No.)
------------------------
1166 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036-2774
(212) 345-5000
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
------------------------
GREGORY F. VAN GUNDY
GENERAL COUNSEL AND SECRETARY
MARSH & MCLENNAN COMPANIES, INC.
1166 Avenue of the Americas
New York, New York 10036-2774
(212) 345-5000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agents for Service)
------------------------
COPY TO:
<TABLE>
<S> <C>
DAVID B. HARMS, ESQ. GREGORY A. FERNICOLA, ESQ.
SULLIVAN & CROMWELL SKADDEN, ARPS, SLATE,
125 BROAD STREET MEAGHER & FLOM LLP
NEW YORK, NEW YORK 10004 919 THIRD AVENUE
(212) 558-4000 NEW YORK, NEW YORK 10022
(212) 735-3000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Subject to Completion, Dated April 25, 1997
PROSPECTUS SUPPLEMENT
(To Prospectus dated April , 1997)
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
3,087,134 SHARES
[LOGO]
COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
All of the shares of Common Stock of Marsh & McLennan Companies, Inc., a
Delaware corporation (the "Company"), offered hereby (the "Offering") are being
sold by certain stockholders of the Company (the "Selling Stockholders"). The
Common Stock offered hereby was issued as partial consideration to the Selling
Stockholders in connection with the Company's business combination with Johnson
& Higgins, a New Jersey corporation. See "Prospectus Supplement Summary--The
Business Combination with Johnson & Higgins." The Company will not receive any
proceeds from the sale of the Common Stock offered hereby.
The Common Stock is listed on the New York Stock Exchange (the "NYSE"), the
Chicago Stock Exchange (the "CSE"), the Pacific Stock Exchange (the "PSE") and
the London Stock Exchange (the "LSE") under the trading symbol "MMC." On April
24, 1997, the last reported sale price of the Common Stock on the NYSE Composite
Tape was $115 1/4 per share. See "Price Range of Common Stock and Dividends."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING SELLING
PUBLIC DISCOUNT(1) STOCKHOLDERS(2)
<S> <C> <C> <C>
Per Share $ $ $
Total $ $ $
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Expenses of the Offering, estimated to be $348,000, are payable by the
Company. See "Plan of Distribution" in the accompanying Prospectus.
J.P. Morgan & Co. is acting as book running lead manager for the Offering. J.P.
Morgan & Co. and Morgan Stanley & Co. Incorporated are acting as joint lead
managers. The shares offered hereby are offered severally by the Underwriters,
as specified herein, subject to receipt and acceptance by them, including their
right to reject orders in whole or in part and subject to approval of certain
legal matters by Davis Polk & Wardwell, counsel for the Underwriters. It is
expected that delivery of the shares of Common Stock will be made against
payment therefor on or about May , 1997 at the offices of J.P. Morgan
Securities Inc., 60 Wall Street, New York, New York.
J.P. MORGAN & CO. MORGAN STANLEY & CO.
INCORPORATED
JOINT LEAD MANAGERS
DONALDSON, LUFKIN & JENRETTE MERRILL LYNCH & CO.
SECURITIES
CORPORATION
PAINEWEBBER INCORPORATED SMITH BARNEY INC.
APRIL , 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET.
FOR A DESCRIPTION OF SUCH ACTIVITIES, SEE "UNDERWRITING."
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus Supplement, the
accompanying Prospectus or the documents incorporated or deemed incorporated by
reference herein, and any information or representations not contained herein or
therein may not be relied upon as having been authorized by the Company or by
any underwriter or dealer. This Prospectus Supplement and the accompanying
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy the Common Stock in any circumstances in which such offer or solicitation is
unlawful. The delivery of this Prospectus Supplement or the accompanying
Prospectus at any time does not imply that the information herein or therein is
correct as of any time subsequent to the date of such information.
No action has been or will be taken in any jurisdiction by the Company or any
Selling Stockholder that would permit a public offering of the Common Stock or
possession or distribution of this Prospectus Supplement or the accompanying
Prospectus in any jurisdiction where action for that purpose is required, other
than in the United States. Persons into whose possession this Prospectus
Supplement or the accompanying Prospectus comes are required by the Company and
the Selling Stockholders to inform themselves about and to observe any
restrictions as to the offering of the Common Stock and the distribution of this
Prospectus Supplement and the accompanying Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PROSPECTUS SUPPLEMENT PAGE
<S> <C>
Prospectus Supplement Summary......... S-3
Cautionary Statement Regarding
Forward-Looking Information......... S-6
Price Range of Common Stock and
Dividends........................... S-7
Capitalization........................ S-8
Unaudited Pro Forma Condensed Combined
Financial Information............... S-9
Selected Historical Consolidated
Financial Data...................... S-13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... S-15
The Company........................... S-26
Selling Stockholders.................. S-33
Underwriting.......................... S-34
Legal Matters......................... S-35
<CAPTION>
PROSPECTUS PAGE
<S> <C>
Available Information................. 3
Incorporation of Certain Documents by
Reference........................... 3
The Company........................... 4
Use of Proceeds....................... 4
Selling Stockholders.................. 4
Plan of Distribution.................. 5
Legal Matters......................... 6
Experts............................... 7
</TABLE>
S-2
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
THE COMPANY
Marsh & McLennan Companies, Inc., a professional services organization with
origins dating from 1871 in the United States, is a holding company which,
through its subsidiaries and affiliates, provides clients with analysis, advice
and transactional capabilities in the fields of insurance and reinsurance
broking, investment management and consulting. Unless the context indicates
otherwise, references in this Prospectus Supplement to the "Company" include
Marsh & McLennan Companies, Inc. and its subsidiaries.
INSURANCE SERVICES
Marsh & McLennan Companies, Inc. provides risk and insurance services primarily
through its wholly-owned subsidiaries, Marsh & McLennan, Incorporated, Johnson &
Higgins, Guy Carpenter & Company, Inc., Seabury & Smith, Inc. and Marsh &
McLennan Risk Capital Corp.
Marsh & McLennan, Incorporated (together with its subsidiaries, "MMI") is a
world leader in providing insurance broking services and professional counseling
on risk management issues, including risk analysis, coverage requirements,
self-insurance, alternative insurance and risk financing methods as well as
other insurance-related issues. MMI provides a single, integrated service to
clients throughout the world.
The business of Johnson & Higgins is described below under "Prospectus
Supplement Summary--The Business Combination with Johnson & Higgins--J&H
Business."
Guy Carpenter & Company, Inc. (together with its subsidiaries, "Guy Carpenter")
is a leading global reinsurance intermediary. It advises insurance and
reinsurance organizations on the complex issue of risk management and provides
an array of support services such as actuarial, financial and regulatory
consulting, portfolio analysis and catastrophe modeling. Guy Carpenter
structures and places reinsurance coverage and other risk-transfer financing
with reinsurance firms worldwide.
Seabury & Smith, Inc. (together with its subsidiaries, "Seabury & Smith") is a
leading provider of insurance program management and underwriting management
services in North America, including the design, placement and administration of
life, health, accident, disability, automobile, homeowners, professional
liability and other insurance, and related products. Seabury & Smith designs and
administers specialized, systems-driven insurance programs primarily for members
of affinity groups.
Marsh & McLennan Risk Capital Corp. originates, structures and manages insurance
industry investments and provides advisory services on a global basis.
INVESTMENT MANAGEMENT
Through its subsidiary, Putnam Investments, Inc. (together with its
subsidiaries, "Putnam"), one of the oldest and largest money management
organizations in the United States, the Company offers a full range of both
equity and fixed income products, invested domestically and globally, for
individual and institutional investors. At December 31, 1996, Putnam managed
more than 95 mutual funds and $173 billion in assets.
CONSULTING
The Company provides consulting services to a predominantly corporate clientele
through its wholly-owned subsidiary, Mercer Consulting Group, Inc. (together
with its subsidiaries, "Mercer"). One of the largest consulting firms in the
world, Mercer is a market leader in human resources, employee benefits and
compensation consulting. Mercer also provides strategic and economic consulting.
These areas of expertise are offered by professionals located in major business
centers around the world.
S-3
<PAGE>
THE BUSINESS COMBINATION WITH JOHNSON & HIGGINS
On March 27, 1997, the Company consummated a strategic business combination (the
"Transaction") with Johnson & Higgins (together with its subsidiaries, "J&H")
whereby J&H became a subsidiary of the Company. Established in New York in 1845,
J&H provides insurance broking, risk management and employee benefit consulting
services to clients worldwide. It had revenues of approximately $1.2 billion for
the year ended December 31, 1996.
J&H BUSINESS
INSURANCE SERVICES
J&H provides retail insurance brokerage services on a worldwide basis. J&H's
clients for retail insurance brokerage services are predominantly corporations,
government and related agencies, non-profit organizations and individuals.
Insurance coverage is placed on behalf of such clients with insurers directly or
through wholesale brokers.
J&H provides wholesale insurance brokerage services through three business
units: Henry Ward Johnson provides general wholesale brokerage and specialty
wholesale marketing and consulting services primarily to J&H's retail branches
in the United States; J&H's London wholesale unit acts as a traditional
wholesaler into the London and continental European markets for J&H offices
worldwide; and J&H's Global Captive Management group includes the J&H
Intermediaries unit, which assists mostly U.S.-based clients needing access to
insurers and reinsurers located in Bermuda.
J&H offers a full range of treaty reinsurance brokerage services through Willcox
Incorporated Reinsurance Intermediaries. J&H also offers reinsurance brokerage
services into the London market through London-based Willcox Johnson & Higgins.
In addition, J&H owns a minority interest (approximately 49%) in Reinmex, the
largest reinsurance broker in Mexico.
J&H provides, through its Global Captive Management group, services in
establishing and managing captive insurance companies, primarily in Bermuda. J&H
also provides, through J&H/KVI, a joint venture between J&H and Kirke-Van
Orsdel, Inc., administrative services for group universal life programs,
outsourcing services for employers seeking assistance with employee benefit
program design, administration and customer service and "invisible branch
office" insurance services for financial services companies wishing to outsource
such functions.
EMPLOYEE BENEFIT CONSULTING
J&H, through A. Foster Higgins, provides employee benefit consulting services to
medium-sized and large corporations in the U.S. and Canada. Lines of business
include retirement plans (e.g., pensions, defined contribution plans, investment
services and retiree health care), communications (e.g., organizational research
and personalized communication), process reengineering and outsourcing,
information consulting and international consulting. A. Foster Higgins also
works with health care providers to help them tailor services to the employer
market. A. Foster Higgins employs a consulting staff including actuaries,
lawyers, health care professionals, system specialists and writers, as well as
benefit professionals with a broad range of experience.
INTEGRATION OF THE COMPANY AND J&H
A newly-formed subsidiary of the Company, known as J&H Marsh & McLennan, Inc.
("J&H/M&M"), will be used to facilitate the integration and management of the
respective insurance services operations of the Company and J&H.
A management committee of four Vice Chairmen will be responsible for integrating
and operating these businesses. The four Vice Chairmen are expected to include
Richard H. Blum, a director of the Company and former Chairman and Chief
Executive Officer of Guy Carpenter, John T. Sinnott, President and Chief
Executive Officer of MMI, Richard A. Nielsen, Vice Chairman and Chief Operating
Officer of J&H, and Norman Barham, President of
S-4
<PAGE>
J&H. Mr. A. J. C. Smith, who is Chairman of the Company, is expected to be the
Chairman of the Board and Chief Executive Officer of J&H/M&M.
A. Foster Higgins, a subsidiary of J&H engaged in the employee benefits
consulting business, operationally will be combined with the similar business
conducted by Mercer.
As part of the Transaction, David A. Olsen, Chairman of J&H, Richard A. Nielsen,
Norman Barham and a person to be designated who is not affiliated with J&H are
expected to join the Board of Directors of the Company. In addition, at the time
of his appointment as director, Mr. Olsen is expected to be appointed Vice
Chairman of the Company.
THE TRANSACTION
The Company agreed to pay total consideration of approximately $1.8 billion in
connection with the Transaction (the "Consideration"), of which approximately
$1.3 billion has been paid and approximately $500 million will be paid in equal
annual installments on each of the next three or four anniversaries of the
closing of the Transaction (the "Closing"). The Consideration consists of
approximately $600 million in cash and approximately 9.8 million shares of
Common Stock (valued at $121 7/8 per share). The cash portion of the
Consideration that has been paid was financed with bank borrowings and
commercial paper.
Subject to certain limited exceptions, approximately 3.6 million shares of the
Common Stock portion of the Consideration may not be sold during the first year
following the Closing and during the two years following the Closing
approximately 1.8 million shares of the Common Stock portion of the
Consideration may not be sold. In addition, approximately 800,000 shares of the
Common Stock portion of the Consideration (of which approximately 600,000 shares
are subject to the foregoing sale restriction) were placed in escrow for a
period of up to two years in order to secure certain indemnification obligations
with respect to certain representations and warranties.
The Consideration is divided among: (i) the stockholders of J&H, who were active
directors or managing principals of J&H (the "Former J&H Stockholders"), (ii)
certain retired directors of J&H (or their estates) (the "Retirees"), some of
whom were entitled to dividend-equivalent payments for a period of up to 10
years following their retirement in return for having surrendered their J&H
stock upon retirement, and (iii) approximately 600 key employees of J&H (the
"Key Employees").
The stock purchase agreement for the Transaction commits J&H to distribute to
the Former J&H Stockholders, Retirees, Key Employees and others up to $175
million in excess cash of J&H plus a portion of pre-Closing earnings, promptly
upon finalization of certain financial information about J&H, to the extent that
such distributions will not reduce the working capital of J&H below certain
minimal levels (such distributions of excess cash (which do not include any
distributions designated as a portion of pre-Closing earnings) are referred to
herein as the "Specified Permitted Distributions"). The Specified Permitted
Distributions are generally reflected in the unaudited pro forma condensed
combined financial statements of the Company contained in "Unaudited Pro Forma
Condensed Combined Financial Information."
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Selling 3,087,134 shares
Stockholders...............................
Use of Proceeds.............................. The Company will not receive any of the
proceeds from the sale of shares of Common
Stock offered hereby.
NYSE, CSE, PSE & LSE Symbol.................. "MMC"
</TABLE>
S-5
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 (the "1995 Act") provides a
"safe harbor" for forward-looking statements to encourage companies to provide
prospective information so long as those statements are identified as
forward-looking and are accompanied by meaningful cautionary statements
identifying important factors that could cause actual results to differ
materially from those discussed in the statement. The Company desires to take
advantage of the "safe-harbor" provisions of the 1995 Act. Certain information,
particularly information contained herein under "Unaudited Pro Forma Condensed
Combined Financial Information" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and information regarding future
economic performance and finances, and plans and objectives of management
contained, or incorporated by reference, in this Prospectus Supplement and the
accompanying Prospectus, is forward-looking. In some cases, information
regarding certain important factors that could cause actual results to differ
materially from any such forward-looking statement appear together with such
statement. The following factors could also cause actual results to differ
materially from any such forward-looking statement: (i) unanticipated events and
circumstances may occur rendering the Transaction less beneficial to the Company
than projected; (ii) the Company faces intense competition in its markets, and
there is, accordingly, no guarantee that after consummation of the Transaction
the Company will achieve the expected financial and operating results and
synergies; and (iii) such results and synergies depend on the ability of the
Company and J&H to integrate successfully their operations and thereby achieve
the anticipated cost savings and be in a position to take advantage of potential
opportunities for growth. In addition, the regulatory and competitive factors
discussed below under "The Company--Regulation" and "The Company--Competitive
Conditions" in addition to other possible factors not listed, could affect the
Company's actual results and cause such results to differ from those expressed
in the forward-looking statements.
S-6
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is listed on the NYSE, the CSE, the PSE and the LSE under the
trading symbol "MMC." The following table sets forth, for the indicated calendar
periods, the reported high and low sales prices of the Common Stock on the NYSE
Composite Tape and the cash dividends per share of Common Stock. As of February
28, 1997, there were 17,764 stockholders of record of the Common Stock.
<TABLE>
<CAPTION>
-------------------------------
<S> <C> <C> <C>
PRICE RANGE DIVIDENDS
-------------------- PAID PER
HIGH LOW SHARE
--------- --------- ---------
Years Ended December 31,
1997:
First quarter $129 5/8 $102 5/8 $.90
Second quarter (through April 24, 1997) 121 5/8 113 1/8 --
1996:
First quarter 101 5/8 84 1/4 .80
Second quarter 97 5/8 89 .80
Third quarter 99 88 .80
Fourth quarter 114 7/8 95 1/2 .90
1995:
First quarter 85 76 1/4 .725
Second quarter 84 76 1/8 .725
Third quarter 89 3/8 76 5/8 .725
Fourth quarter 90 1/8 80 1/2 .80
1994:
First quarter 86 3/4 80 1/4 .675
Second quarter 88 3/4 81 1/4 .675
Third quarter 88 3/8 76 .725
Fourth quarter 80 3/8 71 1/4 .725
</TABLE>
The timing and amount of future dividends will be (i) dependent upon the
Company's results of operations, financial condition, cash requirements and
other relevant factors, (ii) subject to the discretion of the Board of Directors
of the Company and (iii) payable only out of the Company's surplus or current
net profits in accordance with the General Corporation Law of the State of
Delaware.
S-7
<PAGE>
CAPITALIZATION
The following table sets forth, as of December 31, 1996, the short-term debt and
capitalization of the Company on an historical basis and on a pro forma basis
giving effect to the Transaction. The following information should be read in
conjunction with "Unaudited Pro Forma Condensed Combined Financial Information,"
and the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996,
incorporated by reference herein.
<TABLE>
<CAPTION>
----------------------
<S> <C> <C>
AS OF DECEMBER 31,
1996
<CAPTION>
DOLLARS IN MILLIONS, EXCEPT SHARE FIGURES AND RATIOS HISTORICAL PRO FORMA
--------- -----------
<S> <C> <C>
Short-term debt:
Commercial paper $ 387.6 $ 531.6
Current portion of long-term debt 4.8 8.7
--------- -----------
Total short-term debt $ 392.4 $ 540.3
--------- -----------
--------- -----------
Long-term debt:
Revolving credit facility $ 250.0 $ 250.0
Bank borrowings -- 289.0
Mortgage--9.8% due 2009 200.0 200.0
Mortgage--7.87% due 2012 -- 130.8
Other 8.2 8.2
--------- -----------
Total long-term debt $ 458.2 $ 878.0
--------- -----------
--------- -----------
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 historical shares; issued 86,594,531 pro forma shares $ 76.8 $ 86.6
Additional paid-in capital 148.1 1,146.3
Retained earnings 1,901.6 1,901.6
Unrealized securities holding gains, net of income taxes 221.2 221.2
Cumulative translation adjustments (75.7) (75.7)
Treasury shares, at cost, 4,475,571 shares (383.4) (383.4)
--------- -----------
Stockholders' equity $ 1,888.6 $ 2,896.6
--------- -----------
--------- -----------
Total capitalization $ 2,739.2 $ 4,314.9
--------- -----------
--------- -----------
Long-term debt to total capitalization 16.7% 20.3%
--------- -----------
--------- -----------
Total debt to total capitalization 31.1% 32.9%
--------- -----------
--------- -----------
</TABLE>
S-8
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined statement of income for the
year ended December 31, 1996 and the unaudited pro forma condensed combined
balance sheet as of December 31, 1996 give effect to the Transaction with J&H.
The purchase method of accounting has been applied to the Transaction.
Accordingly, assets acquired and liabilities assumed have been reflected at
their current estimated fair values which, ultimately, will be subject to
further refinement. The pro forma statement of income assumes the Transaction
occurred on January 1, 1996 and the pro forma balance sheet assumes the
Transaction occurred on December 31, 1996.
The unaudited pro forma condensed combined statement of income does not include
any potential cost savings that may be realized as a result of the Transaction,
except as specifically described in Note (b) to the unaudited pro forma
condensed combined financial statements. The Company has indicated that it
anticipates ultimately achieving pretax cost savings in the range of $150
million per year, over a period of years. See "Cautionary Statement Regarding
Forward-Looking Information."
The unaudited pro forma condensed combined financial statements have been
prepared by the Company based upon the assumptions disclosed in the notes to the
unaudited pro forma condensed combined financial statements. The unaudited pro
forma condensed combined financial statements presented herein are shown for
illustrative purposes only and do not purport to be indicative of the results
which would have been reported if the Transaction had occurred on the dates
indicated or which may occur in the future. The unaudited pro forma condensed
combined financial statements should be read in conjunction with "Prospectus
Supplement Summary--The Business Combination with Johnson & Higgins," the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, incorporated by
reference herein, and the financial statements of J&H included in the Company's
Current Report on Form 8-K, filed with the Commission on April 7, 1997,
incorporated by reference herein.
MARSH & MCLENNAN COMPANIES, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
----------------------------------------------
<S> <C> <C> <C> <C>
HISTORICAL
----------------------
<CAPTION>
J&H, AS PRO FORMA
THE ADJUSTED PRO FORMA COMBINED
IN MILLIONS, EXCEPT PER SHARE FIGURES COMPANY (A) ADJUSTMENTS (F)
--------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue $ 4,149.0 $ 1,147.7 -- $5,296.7
Expense 3,433.7 1,032.7 $ 15.3(b) 4,481.7
--------- ----------- ---------- ----------
Operating Income 715.3 115.0 (15.3) 815.0
Interest, Net (47.3) 5.9 (45.6 (c) (87.0)
--------- ----------- ---------- ----------
Income Before Income Taxes 668.0 120.9 (60.9) 728.0
Income Taxes 208.7 46.7 (9.6 (d) 245.8
--------- ----------- ---------- ----------
Net Income $ 459.3 $ 74.2 $(51.3) $ 482.2
--------- ----------- ---------- ----------
--------- ----------- ---------- ----------
Net Income Per Share $ 6.34 $ 5.87
--------- ----------
--------- ----------
Average Number of Shares Outstanding 72.4 9.8(e) 82.2
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
S-9
<PAGE>
MARSH & MCLENNAN COMPANIES, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
------------------------------------------------
<S> <C> <C> <C> <C>
HISTORICAL
----------------------
<CAPTION>
J&H, AS PRO FORMA
THE ADJUSTED PRO FORMA COMBINED
DOLLARS IN MILLIONS COMPANY (G) ADJUSTMENTS (F)
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 299.6 $ 258.3 $ (175.0)(h) $ 382.9
--------- ----------- ----------- -----------
Receivables 1,129.1 177.2 -- 1,306.3
Less-allowance for doubtful accounts (43.3) -- -- (43.3)
--------- ----------- ----------- -----------
Net receivables 1,085.8 177.2 -- 1,263.0
--------- ----------- ----------- -----------
Other current assets 363.2 68.9 -- 432.1
--------- ----------- ----------- -----------
Total current assets 1,748.6 504.4 (175.0) 2,078.0
--------- ----------- ----------- -----------
Long-term securities 573.3 -- -- 573.3
Fixed assets, net 770.1 168.4 -- 938.5
Intangible assets 545.3 246.8 1,414.5(i) 2,206.6
Other assets 907.9 183.1 -- 1,091.0
--------- ----------- ----------- -----------
$ 4,545.2 $ 1,102.7 $ 1,239.5 $ 6,887.4
--------- ----------- ----------- -----------
--------- ----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term debt $ 392.4 $ 3.9 $ 144.0(j) $ 540.3
Accounts payable and accrued liabilities 904.3 224.2 31.2(k) 1,159.7
Accrued income taxes 259.6 28.2 -- 287.8
--------- ----------- ----------- -----------
Total current liabilities 1,556.3 256.3 175.2 1,987.8
--------- ----------- ----------- -----------
Fiduciary liabilities 1,685.9 518.1 -- 2,204.0
Less--cash and investments held in a fiduciary
capacity (1,685.9) (518.1) -- (2,204.0)
--------- ----------- ----------- -----------
-- -- -- --
--------- ----------- ----------- -----------
Long-term debt 458.2 130.8 289.0(j) 878.0
--------- ----------- ----------- -----------
Other liabilities 642.1 253.4 62.5(k) 1,125.0
167.0(j)
--------- ----------- ----------- -----------
Commitments and contingencies -- -- -- --
--------- ----------- ----------- -----------
Stockholders' equity:
Preferred stock -- -- -- --
Common stock 76.8 -- 9.8(l) 86.6
Other stockholders' equity 2,195.2 462.2 (462.2)(l) 3,193.4
998.2(1)
--------- ----------- ----------- -----------
2,272.0 462.2 545.8 3,280.0
Less--treasury shares, at cost (383.4) -- -- (383.4)
--------- ----------- ----------- -----------
Total stockholders' equity 1,888.6 462.2 545.8 2,896.6
--------- ----------- ----------- -----------
$ 4,545.2 $ 1,102.7 $ 1,239.5 $ 6,887.4
--------- ----------- ----------- -----------
--------- ----------- ----------- -----------
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
statements.
S-10
<PAGE>
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
A description of the adjustments reflected in the unaudited pro forma condensed
combined financial statements follows:
(a) Certain amounts included in the J&H consolidated statement of income
(interest income, interest expense, equity in income of affiliates and minority
interest in income of subsidiaries) have been reclassified to conform with the
Company's financial statement presentation.
(b) To reflect the additional goodwill amortization expense of $35.4 million to
be incurred as a result of the Transaction partially offset by $20.1 million of
contractually provided adjustments to ongoing compensation and benefits
expenses, which are a direct result of J&H no longer being a private company.
Goodwill is being amortized over a forty year period.
(c) To record: (1) additional interest expense of $28.1 million associated with
the incremental $433 million of borrowings that was incurred by the Company to
finance the cash portion of the Transaction Consideration which was paid at
closing at an assumed interest rate of 6.5% and $8.4 million associated with
$167 million of the Transaction Consideration which will be issued in
installments at a contractual interest rate of 5.0%, and (2) a reduction in
interest income of $9.1 million on the $175 million of Specified Permitted
Distributions by J&H at an assumed interest rate of 5.2%.
(d) To record the tax effect of the pro forma adjustments (exclusive of the
goodwill amortization) at an assumed tax rate of 37.50%.
(e) To reflect the issuance of approximately 9.8 million shares of the Company's
Common Stock in connection with the Transaction.
(f) The pro forma condensed combined statement of income and the pro forma
condensed combined balance sheet do not include the effects of the Company's
January 1997 acquisition of Compagnie Europeenne De Courtage d'Assurances et de
Reassurances ("CECAR"), an insurance broker headquartered in France, for
approximately $200 million.
(g) Certain amounts included in the J&H consolidated balance sheet have been
reclassified to conform with the Company's financial statement presentation. In
particular, fiduciary cash and investments of $518.1 million have been offset
against the related liabilities and presented in the liability section of the
balance sheet. In addition, the receivables and payables for uncollected
premiums and claims amounting to $788.9 million have been excluded from the
asset and liability sections of the consolidated balance sheet, as they are
presented in footnote disclosures in the Company's financial statements.
(h) To reflect the $175 million of Specified Permitted Distributions by J&H. See
"Prospectus Supplement Summary--The Business Combination with Johnson &
Higgins--The Transaction."
(i) Represents the net of the $1.8 billion Transaction Consideration adjusted
for the items described in Notes (h), (k), (l)(2) and (l)(3). The preliminary
allocation of the Transaction Consideration to the underlying assets and
liabilities of J&H, including goodwill, is subject to further refinement as the
Company's management continues to review the estimated fair values of the assets
acquired and the liabilities assumed.
(j) To reflect the debt being incurred to finance the $433 million cash portion
of the Transaction Consideration which was paid at closing and the additional
obligation of $167 million for the cash portion of the Transaction Consideration
which will be issued in installments. The cash portion of the Transaction
Consideration paid at Closing was initially financed through commercial paper
borrowings. The Company has classified $289 million as long-term debt based upon
the Company's intent and ability to maintain or refinance these borrowings on a
long-term basis.
(k) To reflect the impact of the $150 million in purchase related liabilities
which are principally related to severance, real estate and transaction costs
net of the related income tax impact of $56.3 million. The short-term
S-11
<PAGE>
portion of $31.2 million has been included as an increase in accounts payable
and accrued liabilities and the long-term portion of $62.5 million has been
reflected as an increase in other liabilities.
(l) To record the net adjustment required in stockholders' equity to reflect (1)
the issuance of $1.2 billion of the Company's Common Stock, (2) the elimination
of the $462.2 million of J&H net assets, and (3) the $192 million discount on
the Company's Common Stock which is being issued in the Transaction. This
discount relates to a contractual restriction that limits the amount of stock
which can be sold by the recipients during the two years following the closing
date of the Transaction. See "Prospectus Supplement Summary--The Business
Combination with Johnson & Higgins--The Transaction."
S-12
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below for each of the five
years in the period ended December 31, 1996 have been derived from the
consolidated financial statements of the Company, which have been audited by
Deloitte & Touche LLP, the Company's independent certified public accountants
(and do not include financial data for J&H). The following information should be
read in conjunction with "Unaudited Pro Forma Condensed Combined Financial
Information," and the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996,
incorporated by reference herein.
<TABLE>
<CAPTION>
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
<CAPTION>
IN MILLIONS, EXCEPT PER SHARE FIGURES 1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue:
Insurance Services $ 1,907.3 $ 1,963.9 $ 1,886.5 $ 1,790.5 $ 1,632.8
Investment Management 1,082.5 750.0 615.4 518.1 396.0
Consulting 1,159.2 1,056.4 933.1 854.8 908.2
--------- --------- --------- --------- ---------
Total Revenue 4,149.0 3,770.3 3,435.0 3,163.4 2,937.0
--------- --------- --------- --------- ---------
Expense:
Compensation and Benefits 2,204.3 1,948.8 1,740.2 1,635.7 1,557.8
Other Operating Expenses (1) 1,229.4 1,126.6 1,024.5 934.9 838.2
--------- --------- --------- --------- ---------
Total Expense 3,433.7 3,075.4 2,764.7 2,570.6 2,396.0
--------- --------- --------- --------- ---------
Operating Income 715.3 694.9 670.3 592.8 541.0
Interest, Net (47.3) (45.1) (38.8) (34.2) (21.7)
--------- --------- --------- --------- ---------
Income Before Income Taxes and Cumulative
Effect of Accounting Changes 668.0 649.8 631.5 558.6 519.3
Income Taxes (1) 208.7 246.9 249.5 226.2 215.5
--------- --------- --------- --------- ---------
Income Before Cumulative Effect of
Accounting Changes 459.3 402.9 382.0 332.4 303.8
Cumulative Effect of Accounting Changes -- -- (10.5) -- (40.1)
--------- --------- --------- --------- ---------
Net Income $ 459.3 $ 402.9 $ 371.5 $ 332.4 $ 263.7
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Per Share data:
Income Before Cumulative Effect of
Accounting Changes $ 6.34 $ 5.53 $ 5.19 $ 4.52 $ 4.21
Cumulative Effect of Accounting Changes -- -- (.14) -- (.56)
--------- --------- --------- --------- ---------
Net Income $ 6.34 $ 5.53 $ 5.05 $ 4.52 $ 3.65
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Dividends Paid Per Share $ 3.30 $ 2.975 $ 2.80 $ 2.70 $ 2.65
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Average Number of Shares Outstanding 72.4 72.9 73.6 73.5 72.2
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
S-13
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
AS OF DECEMBER 31,
<CAPTION>
DOLLARS IN MILLIONS 1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current Assets $ 1,748.6 $ 1,679.1 $ 1,446.0 $ 1,312.4 $ 1,242.5
Working Capital 192.3 109.6 53.7 133.7 198.3
Total Assets 4,545.2 4,329.5 3,830.6 3,546.6 3,088.4
Long-term Debt 458.2 410.6 409.4 409.8 411.2
Stockholders' Equity 1,888.6 1,665.5 1,460.6 1,365.3 1,102.9
</TABLE>
- ------------------------
(1) In 1996, other operating expenses include unusual charges of $92.6 million
reduced by a $33.2 million gain on the sale of The Frizzell Group Limited. In
addition, 1996 income taxes include an adjustment which reduced the tax
provision by $40 million. The net impact of these items increased earnings per
share by $.04 for the year.
RECENT OPERATING RESULTS
On April 21, 1997, the Company issued a press release reporting the unaudited
selected consolidated income statement data presented below for the three months
ended March 31, 1997 and March 31, 1996 (which do not reflect the Closing of the
Transaction on March 27, 1997 and therefore do not include any financial results
of J&H).
<TABLE>
<CAPTION>
--------------------
<S> <C> <C>
THREE MONTHS ENDED
MARCH 31,
<CAPTION>
IN MILLIONS, EXCEPT PER SHARE FIGURES 1997 1996
--------- ---------
<S> <C> <C>
Revenue:
Insurance Services $ 562.7 $ 555.5
Investment Management 340.6 238.3
Consulting 305.4 276.9
--------- ---------
Total Revenue 1,208.7 1,070.7
--------- ---------
Expense:
Compensation and Benefits 627.3 539.3
Other Operating Expenses 304.1 288.9
--------- ---------
Total Expense 931.4 828.2
--------- ---------
Operating Income 277.3 242.5
Interest, Net (14.3) (11.7)
--------- ---------
Income Before Income Taxes 263.0 230.8
Income Taxes 98.6 87.7
--------- ---------
Net Income $ 164.4 $ 143.1
--------- ---------
--------- ---------
Net Income Per Share $ 2.25 $ 1.96
--------- ---------
--------- ---------
Average Number of Shares Outstanding 73.0 72.9
--------- ---------
--------- ---------
</TABLE>
S-14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The information set forth in this section does not reflect any information about
J&H.
The following table summarizes the Company's results of operations for the years
ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
-------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
<CAPTION>
IN MILLIONS, EXCEPT PER SHARE FIGURES 1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Revenue:
Insurance Services $ 1,907.3 $ 1,963.9 $ 1,886.5
Investment Management 1,082.5 750.0 615.4
Consulting 1,159.2 1,056.4 933.1
--------- --------- ---------
4,149.0 3,770.3 3,435.0
--------- --------- ---------
Expense:
Compensation and Benefits 2,204.3 1,948.8 1,740.2
Other Operating Expenses 1,170.0 1,126.6 1,024.5
Unusual Charges, net 59.4 -- --
--------- --------- ---------
3,433.7 3,075.4 2,764.7
--------- --------- ---------
Operating Income $ 715.3 $ 694.9 $ 670.3
--------- --------- ---------
--------- --------- ---------
Income Before Cumulative Effect of Accounting Change $ 459.3 $ 402.9 $ 382.0
--------- --------- ---------
--------- --------- ---------
Net Income $ 459.3 $ 402.9 $ 371.5
--------- --------- ---------
--------- --------- ---------
Per Share Data:
Income Before Cumulative Effect of Accounting Change $ 6.34 $ 5.53 $ 5.19
--------- --------- ---------
--------- --------- ---------
Net Income $ 6.34 $ 5.53 $ 5.05
--------- --------- ---------
--------- --------- ---------
Average Number of Shares Outstanding 72.4 72.9 73.6
--------- --------- ---------
--------- --------- ---------
</TABLE>
Revenue, derived mainly from commissions and fees, increased 10% in 1996.
Excluding The Frizzell Group Limited ("Frizzell"), a U.K.-based insurance
program management firm that was sold in June 1996, revenue grew 12% from 1995
primarily due to a 44% increase in the investment management segment, largely
attributable to higher assets under management. In addition, increased demand
for the Company's consulting services resulted in 10% revenue growth for that
segment. Insurance services revenue declined 3% due to the sale of Frizzell.
Excluding the impact of Frizzell, insurance services revenue increased 1% in
1996 reflecting growth in insurance broking and insurance program management,
offset, in large part, by a decline in reinsurance broking revenue.
In 1995, total revenue increased 10% over 1994 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 partially offset by a $25 million decrease in revenue
received from the activities of the Marsh & McLennan Risk Capital group of
companies ("MMRC").
Expenses increased 12% in 1996 compared with 1995. Included in 1996 were unusual
charges totaling $92.6 million which relate to real estate matters, integration
of the Company's worldwide insurance services operations, goodwill write-offs, a
provision related to the Lloyd's Reconstruction and Renewal Plan and certain
office closings. These charges were offset, in part, by a gain of $33.2 million
on the Company's sale of Frizzell in
S-15
<PAGE>
June 1996. Of the net $59.4 million unusual charge, $49.4 million is applicable
to insurance services, $8.5 million relates to consulting and $1.5 million is
recorded in General Corporate. Excluding the net unusual charges and the impact
of only one-half year of Frizzell, expenses increased 12% primarily due to
increased incentive compensation levels especially within investment management.
Volume-related costs, particularly those associated with higher staff levels,
grew for both investment management and consulting as a result of the increased
level of business activity.
Operating expenses increased 11% in 1995 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 systems
automation initiatives in all operating segments.
Net income for 1996 includes a tax adjustment that reduced the income tax
provision by $40 million. The tax adjustment primarily relates to the permanent
deployment of funds outside the United States in a tax efficient manner and
favorable state and local tax developments in the U.S. The net impact of the tax
adjustment and the net unusual charges described above increased earnings per
share by $.04 for the year.
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.
The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation," which was effective for fiscal
years beginning after December 15, 1995. In accordance with this Statement, the
Company has provided disclosure in Note 6 to the consolidated financial
statements 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 the Black-Scholes option pricing model.
Effective January 1, 1994, the Company adopted 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.
INSURANCE SERVICES
Revenue attributable to the insurance services segment consists primarily of
fees paid by clients; commissions and fees paid by insurance and reinsurance
companies; 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.
Revenue generated by insurance services is affected by premium rate levels in
the property and casualty insurance markets and available insurance capacity, as
compensation is frequently related to the premiums paid by insureds. Revenue is
also affected by fluctuations in the amount of risk retained by insurance and
reinsurance clients themselves, and insured values, the development of new
products, markets and services, lost business, merging of clients and the volume
of business from new and existing clients, as well as interest rates for
fiduciary funds.
The Company has been instrumental in the formation of several substantial
insurance and reinsurance entities. MMRC is also 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, and 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. Through MMRC, the
Company receives compensation in various forms including fees, royalties and
dividends, as well as appreciation that has been realized on the sale of the
Company's holdings 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.
S-16
<PAGE>
The following table summarizes the results of operations for the Company's
insurance services segment for the years ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
-------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
<CAPTION>
IN MILLIONS OF DOLLARS 1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Revenue:
Insurance Broking $ 1,321.3 $ 1,260.0 $ 1,209.3
Reinsurance Broking 258.5 295.1 298.5
Insurance Program Management 233.6 306.1 300.0
Interest Income on Fiduciary Funds 93.9 102.7 78.7
--------- --------- ---------
1,907.3 1,963.9 1,886.5
--------- --------- ---------
Expense:
Operating Expenses 1,544.2 1,574.7 1,480.4
Unusual Charges, net 49.4 -- --
--------- --------- ---------
1,593.6 1,574.7 1,480.4
--------- --------- ---------
Operating Income $ 313.7 $ 389.2 $ 406.1
--------- --------- ---------
--------- --------- ---------
Operating Income Margin 16.4% 19.8% 21.5%
--------- --------- ---------
--------- --------- ---------
</TABLE>
INSURANCE BROKING REVENUE
Insurance broking services are provided to clients primarily in connection with
risk management and the insurance placement process and involve analyzing
various types of property and liability loss exposures including large and
complex risks that require access to world insurance markets. Services include
insurance broking activities and professional consulting services on risk
management issues, including risk analysis, coverage requirements, self
insurance, alternative insurance and risk financing methods, claims collection,
injury management and loss prevention.
Insurance broking revenue, which is received from a predominantly corporate
clientele, increased 5% in 1996. Client revenue rose primarily due to an
increase in new business in the United States and Europe offset by declines in
commercial property and casualty premium rates worldwide. Global specialty lines
of coverage, including financial services, marine and energy, and aviation, also
experienced strong new business levels. The Company does not expect premium rate
levels to improve in the near future and anticipates that the insurance broking
marketplace will continue to be highly competitive.
In 1995, insurance broking revenue increased 4% over 1994 levels. 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.
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 insurer by providing advice, placing reinsurance coverage with
reinsurance organizations located around the world and furnishing related
services such as actuarial, financial and regulatory consulting, portfolio
analysis and catastrophe modeling. Generally, the purpose of reinsurance is to
spread the risk of primary insurance or the reinsurance thereof to lessen the
concentration of risk with any one insurance or reinsurance company.
S-17
<PAGE>
Reinsurance broking revenue in 1996 declined 12% compared with 1995. This
decline was primarily due to reduced demand for reinsurance resulting from the
consolidation among various U.S. and U.K. insurance companies, reduced
reinsurance demand due to higher risk retentions by ceding insurance companies
and the impact of lower property catastrophe premium rates.
In 1995, reinsurance broking revenue decreased 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.
INSURANCE PROGRAM MANAGEMENT REVENUE
The insurance program management operation of Seabury & Smith primarily designs,
places and administers life, health, accident, disability, automobile,
homeowners and professional liability insurance programs primarily on a group
marketing basis to individuals, businesses and their employees, and associations
and other affinity groups and their members in the United States and Canada. In
addition, it provides underwriting management services to insurers in the United
States, Canada and the United Kingdom, primarily for professional liability
coverages.
Insurance program management revenue decreased 24% in 1996 due to the sale of
Frizzell. Revenue for Seabury & Smith, which comprises the whole of program
management subsequent to the sale of Frizzell, increased 6%. This growth was
largely the result of increased services provided to corporations and
institutions and their employees, along with increased insurance placed on
behalf of small businesses.
In 1995, insurance program management revenue increased 2% over 1994. Within
North America, revenue rose 7% in 1995. 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 Frizzell, which operated in the United Kingdom,
decreased 3% in 1995 as the market for motor and household insurance services
was extremely competitive during the year.
INTEREST INCOME ON FIDUCIARY FUNDS
Interest income on fiduciary funds decreased 9% in 1996 due to generally lower
average short-term interest rates worldwide. In 1995, interest income on
fiduciary funds increased 31% due to generally higher average short-term
interest rates throughout the world.
EXPENSE
Insurance services operating expenses decreased 2% in 1996. Excluding the impact
of Frizzell, expenses increased 2% reflecting normal salary progressions. The
Company's insurance services segment has continued a cost containment program
while maintaining the level of expenditures for systems-related improvements.
Expenses for insurance services rose 6% in 1995 primarily reflecting normal
salary progressions and spending on technology and systems automation
initiatives.
UNUSUAL CHARGES, NET
During 1996, the Company completed the sale of Frizzell for approximately $290
million which resulted in a $33.2 million pretax gain. In addition, pretax
charges aggregating $82.6 million were also recorded in the insurance services
segment representing a provision of approximately $31 million for U.K. real
estate; $17 million for costs related to the integration of the Company's
worldwide insurance services operations; $17 million for goodwill write-offs;
$15 million related to the Lloyd's Reconstruction and Renewal Plan; and $3
million for office closings. Excluding the impact of the Frizzell gain and the
unusual charges, the margin for insurance services was 19.0%.
S-18
<PAGE>
The following table summarizes the results of operations for the Company's
insurance services segment by geographic area for the years ended December 31,
1996, 1995 and 1994:
<TABLE>
<CAPTION>
-------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
<CAPTION>
IN MILLIONS OF DOLLARS 1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Revenue:
United States $ 1,025.3 $ 1,006.9 $ 1,028.1
Europe 696.1 784.0 709.9
Canada 96.4 93.9 86.7
Pacific Rim and Other 89.5 79.1 61.8
--------- --------- ---------
$ 1,907.3 $ 1,963.9 $ 1,886.5
--------- --------- ---------
--------- --------- ---------
Operating Income:
United States(a) $ 155.6 $ 186.9 $ 216.0
Europe(a) 111.9 155.5 150.3
Canada 27.0 25.9 23.6
Pacific Rim and Other(a) 19.2 20.9 16.2
--------- --------- ---------
$ 313.7 $ 389.2 $ 406.1
--------- --------- ---------
--------- --------- ---------
</TABLE>
- ------------------------
(a) Excluding the unusual charges in 1996, operating income would have been
$179.2 million in the United States, $135.7 million in Europe, $21.2 million in
the Pacific Rim and Other, and insurance services in total would have been
$363.1 million.
The sale of Frizzell caused a decline in both revenue and operating income in
Europe in 1996. Operating income also declined in Europe as a result of the
unusual charges recorded which primarily related to the U.K. The decline in
operating income in the United States reflects reduced reinsurance broking
income due to lower revenues, as well as the impact in the United States of the
unusual charges.
INVESTMENT MANAGEMENT
The Company's investment management and related services, which are performed
principally in the United States, are provided by Putnam. 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 investment companies (the "Putnam Funds"). A number of the open-end funds
serve as funding media for variable insurance contracts. Investment management
services are also provided to corporate profit sharing and pension funds, state
and other government and public employee retirement funds, 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. In addition, Putnam
provides administrative and trustee services for employee benefit plans (in
particular 401(k) plans), IRA's and other clients for which it receives
compensation pursuant to service and trust or custodian contracts. Putnam also
acts as principal underwriter of the shares of the open-end Putnam Funds,
selling primarily through independent broker/dealers, financial planners and
financial institutions, including banks, and also directly to certain large
401(k) plans and other institutional accounts. Essentially all of Putnam's
mutual funds are available with a contingent deferred sales charge in lieu of a
front-end load.
Putnam's revenue is derived primarily from investment management fees received
from the Putnam Funds and institutional accounts. Fees paid by the Putnam Funds
are approved annually by the trustees or shareholders of the Putnam Funds and
are charged at various rates depending on the individual mutual fund or account
and are usually based upon a sliding scale in relation to the level of assets
under management and, in certain instances, are also based on investment
performance. Management of Putnam and the trustees of the Putnam Funds
S-19
<PAGE>
regularly review the fund fee structure in light of fund performance, the level
and range of services provided, industry conditions and other relevant factors.
Putnam also receives compensation for providing certain shareholder and custody
services.
The following table summarizes the results of operations for the Company's
investment management segment for the years ended December 31, 1996, 1995 and
1994:
<TABLE>
<CAPTION>
-------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
<CAPTION>
IN MILLIONS OF DOLLARS 1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Revenue $ 1,082.5 $ 750.0 $ 615.4
Expense 744.7 506.5 407.2
--------- --------- ---------
Operating Income $ 337.8 $ 243.5 $ 208.2
--------- --------- ---------
--------- --------- ---------
Operating Income Margin 31.2% 32.5% 33.8%
--------- --------- ---------
--------- --------- ---------
</TABLE>
REVENUE
Putnam's revenue increased 44% in 1996 reflecting exceptional growth in the
level of assets under management on which management fees are earned. The higher
asset level reflected a substantial increase in the level of mutual fund sales,
higher equity market valuations and new 401(k) business.
Revenue for Putnam increased 22% in 1995 reflecting strong growth in the level
of assets under management on which management fees are earned. The higher asset
level reflected significantly higher equity market valuations, mutual fund sales
and new 401(k) business.
EXPENSE
Putnam's expenses rose 47% in 1996 reflecting the effect of significantly higher
incentive compensation levels, staff growth to support new business, increased
costs resulting from the higher level of business activity, and expanding client
needs.
Expenses for Putnam increased 24% in 1995 reflecting the effect of staff growth
and incentive compensation levels consistent with strong operating performance,
costs to develop new systems which were 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.
S-20
<PAGE>
The following table summarizes the year-end and average assets under management
for the years ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
-------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
<CAPTION>
IN BILLIONS OF DOLLARS 1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Mutual Funds:
Domestic Equity $ 80.0 $ 46.8 $ 26.2
Taxable Bond 29.9 26.0 22.8
Tax-Free Income 16.4 16.9 15.2
International Equity 7.5 3.7 3.0
--------- --------- ---------
133.8 93.4 67.2
--------- --------- ---------
Institutional Accounts:
Fixed Income 19.1 19.0 18.8
Domestic Equity 14.0 8.9 6.7
International Equity 6.5 4.4 2.6
--------- --------- ---------
39.6 32.3 28.1
--------- --------- ---------
Year-end Assets $ 173.4 $ 125.7 $ 95.3
--------- --------- ---------
--------- --------- ---------
Average Assets $ 148.5 $ 109.2 $ 93.5
--------- --------- ---------
--------- --------- ---------
</TABLE>
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. They are also
affected by investment performance, service to clients, the development and
marketing of new investment products, the relative attractiveness of the
investment style under prevailing market conditions and changes in the
investment patterns of 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 and which affords its clients the opportunity to
allocate their investment resources among various alternative investment
products as changing worldwide economic and market conditions warrant. At the
end of 1996, assets held in equity securities represented 62% of assets under
management, compared with 51% in 1995, while investments in fixed income
products represented 38%, down from 49% last year.
CONSULTING
The Company provides 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;
and general management consulting, which comprises strategy, operations and
marketing. The Company also provides economic consulting and analysis.
Revenue in the consulting business is affected by changes in clients' industries
including government regulation, as well as new products and services, the stage
of the economic cycle and broad trends in the management of large organizations.
S-21
<PAGE>
The following table summarizes the results of operations for the Company's
consulting segment for the years ended December 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
-------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
<CAPTION>
IN MILLIONS OF DOLLARS 1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Revenue $ 1,159.2 $ 1,056.4 $ 933.1
--------- --------- ---------
Expense:
Operating Expenses 1,039.8 947.7 836.7
Unusual Charges 8.5 -- --
--------- --------- ---------
$ 1,048.3 $ 947.7 $ 836.7
--------- --------- ---------
Operating Income $ 110.9 $ 108.7 $ 96.4
--------- --------- ---------
--------- --------- ---------
Operating Income Margin 9.6% 10.3% 10.3%
--------- --------- ---------
--------- --------- ---------
</TABLE>
REVENUE
Consulting services revenue increased 10% in 1996. Retirement consulting
revenue, which represented 43% of the consulting segment, grew 9% in 1996
reflecting higher demand in the United States, Europe and Latin America. Revenue
rose 14% in the global compensation practice, 10% in health care consulting and
7% in general management consulting in 1996.
Revenue for consulting services increased 13% in 1995 as demand for services in
all major practices increased. After adjusting for the net 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 increased 17% in the global compensation practice, 16% in
general management consulting and 10% in health care consulting in 1995.
EXPENSE
Consulting services operating expenses increased 10% in 1996 compared with 1995
primarily reflecting staff growth to support new business, higher incentive
compensation and normal salary progressions.
Expenses for the consulting segment increased 13% in 1995. Excluding the effect
of acquisitions, 1995 expenses increased 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.
UNUSUAL CHARGES
Pretax charges of $8.5 million were recorded in the consulting segment
reflecting a provision of approximately $6 million for office realignments and
consolidations and $2.5 million for a U.K. real estate matter. Excluding the
impact of the unusual charges, the operating income margin for consulting
services was 10.3%.
S-22
<PAGE>
The following table summarizes the results of operations for the Company's
consulting segment by geographic area for the years ended December 31, 1996,
1995 and 1994:
<TABLE>
<CAPTION>
-------------------------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31,
<CAPTION>
IN MILLIONS OF DOLLARS 1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Revenue:
United States $ 707.2 $ 645.0 $ 586.4
Europe 264.8 240.6 197.3
Canada 101.6 90.4 78.4
Pacific Rim and Other 85.6 80.4 71.0
--------- --------- ---------
$ 1,159.2 $ 1,056.4 $ 933.1
--------- --------- ---------
--------- --------- ---------
Operating Income:
United States(a) $ 69.6 $ 60.4 $ 50.2
Europe(a) 24.2 33.9 30.1
Canada 15.5 11.5 11.7
Pacific Rim and Other 1.6 2.9 4.4
--------- --------- ---------
$ 110.9 $ 108.7 $ 96.4
--------- --------- ---------
--------- --------- ---------
</TABLE>
- ------------------------
(a) Excluding the unusual charges in 1996, operating income would have been
$75.6 million in the United States, $26.7 million in Europe, and consulting in
total would have been $119.4 million.
European results for the consulting segment reflect the impact of investments
made in information technology, the expansion of retirement consulting, and
pressure in an expanding but competitive market for general management
consulting. Canadian results reflect improved market conditions coupled with
continued expense controls.
INTEREST
Interest income earned on corporate funds declined to $14.3 million in 1996
compared with $17.7 million in 1995 primarily due to generally lower yields
worldwide. Interest expense decreased to $61.6 million in 1996 from $62.8
million in 1995. This decline was due to lower average interest rates on
commercial paper borrowings. The average level of commercial paper borrowings
was slightly higher than 1995 principally due to the funding of Putnam's prepaid
dealer commissions and the cash outflows associated with the Company's share
repurchases, which was offset in large part by the cash proceeds realized on the
sale of Frizzell.
Interest income earned on corporate funds was $17.7 million in 1995 compared
with $11.8 million in 1994 primarily due to 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 its $40 million investment in Risk Capital Reinsurance Company.
INCOME TAXES
In the fourth quarter, the Company recorded a tax adjustment that reduced the
income tax provision by $40 million. The tax adjustment primarily relates to the
permanent deployment of funds outside the United States in a tax efficient
manner and favorable state and local tax developments in the U.S. Excluding the
tax adjustment, the Company's consolidated domestic and foreign tax rate was
37.25% of income before income taxes in 1996 compared with 38.0% in 1995, and
39.5% in 1994. The reductions in the 1996 and 1995 tax rates reflect the
continued implementation of tax minimization strategies primarily relating to
the Company's non-U.S. operations. The overall tax rates are higher than the
U.S. statutory rates primarily because of the impact of state and local income
taxes.
S-23
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents aggregated $299.6 million at the end of
1996, a decrease of $28.5 million from the end of 1995.
OPERATING CASH FLOWS
The Company generated $316.5 million of cash from operations in 1996 compared
with $318.1 million in 1995. 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 $338.7 million in 1996
compared with $104.3 million in 1995. The current portion of these prepaid
dealer commissions, amounting to $222.8 million and $136.4 million at December
31, 1996 and 1995, respectively, is included in other current assets in the
Company's consolidated balance sheets. The long-term portion amounting to $676.6
million and $424.3 million at December 31, 1996 and 1995, respectively, is
included in other assets in the Company's 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
Company's consolidated balance sheets.
The increase in accrued compensation and employee benefits in 1996 principally
was caused by significantly higher incentive compensation levels consistent with
strong operating performance in the investment management segment. 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 $325.0 million in 1996 and
by $92.8 million in 1995. Dividends paid by the Company amounted to $239.2
million in 1996 ($3.30 per share) and $217.0 million in 1995 ($2.975 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 2.5 million shares in 1996 and 1.7 million shares in 1995. The Company
used the proceeds from the sale of Frizzell to complete its share repurchases
under the three million share authorization of September 1995.
During 1996, the Company executed a new revolving credit facility with several
banks to support its commercial paper borrowings and to fund other general
corporate requirements. This facility, which expires December 2001, provides
that the Company may borrow up to $750 million at market rates of interest which
may vary depending upon the level of borrowings and the Company's credit
ratings. Outstanding borrowings under the revolving credit facility at December
31, 1996 amounted to $250 million with varying dates of maturity through
December 1997. Borrowings under the revolving credit facility have been
classified 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 also
maintains other credit facilities, primarily related to operations located
outside the United States, aggregating $59.5 million as of December 31, 1996.
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 variable rate borrowings at
approximately 9.5% until February 1999.
INVESTING CASH FLOWS
Investing activities for the Company reduced cash by $13.8 million in 1996 and
by $198.1 million in 1995. As previously mentioned, the Company sold Frizzell in
June 1996. The net addition to cash resulting from the sale was $241.8 million.
The Company's capital expenditures, which amounted to $157.3 million in 1996 and
$136.9
S-24
<PAGE>
million in 1995, 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
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
10 to the Company's 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 these activities.
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 Company's 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 Company's consolidated 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 1997 cash contribution is currently not anticipated. The related
long-term pension liability is included in other liabilities in the Company's
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
Company's consolidated 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
Company's consolidated balance sheets.
Cumulative translation adjustments, a component of stockholders' equity in the
Company's 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.
SUBSEQUENT EVENTS
In January 1997, the Company purchased CECAR, an insurance broker in France, for
approximately $200 million.
S-25
<PAGE>
THE COMPANY
GENERAL
Marsh & McLennan Companies, Inc., a professional services organization with
origins dating from 1871 in the United States, is a holding company which,
through its subsidiaries and affiliates, provides clients with analysis, advice
and transactional capabilities in the fields of insurance and reinsurance
broking, investment management and consulting.
On March 27, 1997, the Company consummated a strategic business combination with
J&H. The business of J&H is described above in "Prospectus Supplement
Summary--The Business Combination with Johnson & Higgins--J&H Business."
A newly-formed subsidiary of the Company, known as J&H Marsh & McLennan, Inc.,
will be used to facilitate the integration and management of the respective
insurance services operations of the Company and J&H. A. Foster Higgins, a
subsidiary of J&H engaged in the employee benefits consulting business,
operationally will be combined with the similar business conducted by Mercer.
INSURANCE SERVICES
The Company's insurance services are provided by its subsidiaries and their
affiliates on a worldwide basis, as broker, agent or consultant for insureds,
insurance underwriters and other brokers. These services are principally
provided by MMI and Guy Carpenter, a reinsurance intermediary, and their
subsidiaries and affiliates. Seabury & Smith and its affiliates 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 primarily in the United States and Canada.
Marsh & McLennan Risk Capital Corp. ("M&M Risk Capital Corp.") provides services
principally in connection with originating, structuring and managing investments
in the insurance industry.
Risk management and insurance broking services, carried on throughout the world
principally by MMI and its affiliates, are provided for a predominantly
corporate clientele through offices in more than 80 countries, primarily in
North and South America, Europe and Asia Pacific. Clients are companies engaged
in a broad range of commercial activities, including general industries,
financial and professional services, aviation, marine, energy construction, land
transportation, healthcare and utility concerns. Clients also include various
government and related agencies, non-profit and other organizations, and
individuals.
Such risk management and insurance broking services involve various types of
property and liability loss exposures, including large and complex risks that
require access to world insurance markets. Services provided to clients include
insurance broking activities and professional counseling services on risk
management issues, including risk analysis, coverage requirements,
self-insurance (in which the insured retains a portion of its insurance risks),
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 placement services include the placement of insurance coverages with
insurers world-wide, sometimes involving other intermediaries. Correspondent
relationships are maintained with unaffiliated firms in certain countries. In
January 1997, the Company acquired CECAR, a French insurance broker, resulting
in the Company becoming the largest insurance broker in France.
Reinsurance services are provided to insurance and reinsurance risk takers
worldwide, principally by Guy Carpenter and its affiliates, from offices
principally in North America and Europe. Such services primarily involve acting
as an intermediary for insurance and reinsurance organizations on all classes of
reinsurance. The intermediary assists the insurer by providing advice, placing
reinsurance coverage with reinsurance organizations located around the world,
and furnishing related services such as actuarial, financial and regulatory
consulting, portfolio analysis and catastrophe modeling. Claims services are
often performed for policies placed a number of years previously. The insurance
company may seek reinsurance or other risk-transfer financing on all or a
portion
S-26
<PAGE>
of the risks it insures. Intermediary services are also provided to reinsurance
companies, which may also seek reinsurance on the risks they have reinsured.
Seabury & Smith and its affiliates 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 associations and other affinity groups and
their members in the United States and Canada. It provides underwriting
management services to insurers in the United States, Canada and the United
Kingdom, primarily for professional liability coverages. Frizzell and its
subsidiaries, which provided insurance program management, personal financial
planning and consumer finance services in the United Kingdom, were sold in 1996.
M&M Risk Capital Corp. provides services in connection with originating,
structuring and managing investments in the insurance industry. It is an advisor
to The Trident Partnership L.P., an independent private investment partnership
formed in 1994 to make private equity investments in the global insurance and
reinsurance industry. M&M Risk Capital Corp. is also an advisor to Risk Capital
Reinsurance Company (a subsidiary of Risk Capital Holdings, Inc., a publicly
held corporation), which is based in the United States and was 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. M&M Risk
Capital Corp. 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. M&M Risk Capital Corp. also advises its immediate parent company,
Marsh & McLennan Risk Capital Holdings, Ltd., regarding the latter's ownership
holdings in certain insurance and reinsurance entities and funds, primarily ones
initiated by M&M Risk Capital Corp. As a result of the foregoing activities,
subsidiaries and affiliates of the Company may have direct or indirect
investments in insurance and reinsurance companies, including entities at
Lloyd's, which are considered for client placements by the Company's insurance
and reinsurance brokerage businesses.
The revenue attributable to the Company's insurance services consists primarily
of fees paid by clients; commissions and fees paid by insurance and reinsurance
companies; 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 appreciation
that has been realized on sales of holdings in such entities.
Revenue generated by insurance services is affected by premium rate levels in
the property and casualty insurance markets and available insurance capacity, as
compensation is frequently related to the premiums paid by insureds. Revenue is
also affected by fluctuations in the amount of risk retained by insurance and
reinsurance clients themselves and by insured values, the development of new
products, markets and services, lost business, merging of clients (including
insurance companies that are clients in the reinsurance intermediary business)
and the volume of business from new and existing clients, as well as by interest
rates for fiduciary funds. In many cases compensation may be negotiated in
advance with certain clients on an annual basis based upon the estimated value
of the services to be performed. Revenue and fees also may be received from
originating, structuring and managing investments in insurers, and income and
proceeds also may be derived from investments made by the Company. Revenues vary
from quarter to quarter as a result of the timing of policy renewals and the net
effect of new and lost business production, whereas expenses tend to be more
uniform throughout the year.
Commission rates vary in amount depending upon the type of insurance or
reinsurance coverage provided, the particular insurer or reinsurer, and the
capacity in which the broker acts, in addition to negotiations with clients.
Occasionally, commissions are shared with other brokers that have participated
in placing insurance or servicing insureds. Placement services revenue includes
payments or allowances by insurance companies based upon such factors as the
overall volume of business placed by the broker with that insurer, the loss
performance to the
S-27
<PAGE>
insurer of that business or the aggregate commissions paid by the insurer for
that book during specific periods. In some cases, compensation for brokerage or
advisory services is paid directly as a fee by the client.
The investment of fiduciary funds is governed by the applicable laws or
regulations of insurance authorities of the states in the United States and in
other jurisdictions in which the Company's subsidiaries do business. These laws
and regulations typically limit the type of investments that may be made with
such funds. The general amount of funds invested and interest rates may vary
from time to time.
INVESTMENT MANAGEMENT
Investment management and related services are provided by Putnam. Putnam has
been engaged in the investment management business since 1937, with its
principal offices in Boston, Massachusetts. Putnam also has offices in London
and Tokyo. 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 and which afford its clients the opportunity
to allocate their investment resources among various alternative investment
products as changing worldwide economic and market conditions warrant.
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. As of December 31,
1996, there were 99 Putnam Funds registered under the Investment Company Act of
1940, including 17 closed-end investment companies whose shares are traded on
various major domestic stock exchanges. A number of the open-end funds serve as
funding media for variable insurance contracts. Investment management services
are also provided to corporate profit sharing and pension funds, state and other
governmental and public employee retirement funds, university endowment funds,
charitable foundations, collective investment vehicles and other domestic and
foreign institutional accounts.
Assets managed by Putnam, on which management fees are based, were approximately
$173.4 billion and $125.7 billion as of December 31, 1996 and 1995,
respectively. Mutual fund assets aggregated $133.8 billion at December 31, 1996
and $93.4 billion at December 31, 1995. Assets under management at December 31,
1996 consisted of approximately 62% equity securities and 38% fixed income
products, invested both domestically and globally.
Putnam's revenues are derived primarily from its investment management fees.
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.
They are also affected by investment performance, service to clients, the
development and marketing of new investment products, the relative
attractiveness of the investment style under prevailing market conditions and
changes in the investment patterns of clients. Fluctuations in interest rates
and in the yield curve will have an effect on fixed income assets under
management and may influence the flow of monies to and from fixed-income funds
and accounts. Fluctuations in the prices of stocks have a similar effect on
equity assets under management and may influence the flow of monies to and from
equity funds and accounts.
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
is usually based upon a sliding scale in relation to the level of assets under
management and, in certain instances, is also based on investment performance.
Such contracts automatically terminate in the event of their "assignment",
generally may be terminated by either party 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. "Assignment" includes any direct or
indirect transfer of a controlling block of voting stock in Putnam or the
Company. Management of Putnam and the trustees of the Putnam Funds regularly
review the fund fee structure in light of fund performance, the level and range
of services provided, industry conditions and other relevant factors.
S-28
<PAGE>
Putnam Fiduciary Trust Company, a Massachusetts trust company, 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 Fiduciary Trust Company receives compensation from the Putnam
Funds for such services pursuant to written agreements which may be terminated
by either party on 90 days' notice, and for providing custody services pursuant
to written agreements 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. In addition,
Putnam Fiduciary Trust Company provides administrative and trustee (or
custodian) services for employee benefit plans (in particular 401(k) plans),
IRA's and other clients for which it receives compensation pursuant to service
and trust or custodian contracts. In the case of employee benefit plans,
investment options are selected by the plan sponsors and include Putnam mutual
funds and other Putnam managed products, as well as employer stock and other
non-Putnam investments. In some instances, The Putnam Advisory Company, Inc.
acts as investment manager for a plan's fixed income portfolio and receives
compensation for such investment management services pursuant to an investment
management agreement.
Putnam Mutual Funds Corp. acts as principal underwriter of the shares of the
open-end Putnam Funds, selling primarily through independent broker/dealers,
financial planners and financial institutions, including banks, and also
directly to certain large 401(k) plans and other institutional accounts. 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. In some cases the sales charge is assessed if the shares are
redeemed within a stated time period. In accordance with certain terms and
conditions described in the prospectuses for such funds, certain investors are
eligible to purchase shares at net asset value or at reduced sales charges, and
investors may generally exchange their shares of a fund at net asset value for
shares of another Putnam Fund when they believe such an investment decision is
appropriate without the payment of additional sales charges.
Commissions to selling 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 contingent deferred sales charge in lieu of a front-end load. The related
prepaid 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 open-end 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 enable the Putnam subsidiary to pay service fees and other continuing
compensation to firms that provide services to Putnam Fund shareholders and
distribute shares of the Putnam Funds. Some Rule 12b-1 fees 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. Failure of the Trustees to approve continuation of the Rule 12b-1 plans
for Class B (deferred sales charge) shares would have a material adverse effect
on Putnam.
CONSULTING
Through Mercer Consulting Group, Inc., subsidiaries and affiliates of the
Company, 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; and general management consulting,
which comprises strategy, operations and marketing. The Company also provides
economic consulting and analysis.
William M. Mercer Companies, Inc. ("William M. Mercer") provides professional
advice and services to corporate, government and institutional clients from
offices in approximately 27 countries and territories, primarily in North and
South America, Western Europe, East Asia, Australia and New Zealand. Consultants
help organizations
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design, implement, administer and communicate retirement, compensation and other
human resource programs, and provide other types of actuarial advice. In
addition, William M. Mercer advises the management of health care providers on
various business issues, including operational reengineering, improving clinical
effectiveness and establishing strategic partnerships. Through its investment
consultants, William M. Mercer assists trustees of pension funds and others in
the selection of investment managers and investment strategies.
Mercer provides advice and assistance on issues of business strategy, primarily
to large corporations in North America, Europe and Asia. Consultants help senior
executives more fully understand the behavior of their customers, optimize the
economics of their business, and structure their organizations, processes and
systems to achieve their strategic goals. In addition, under the Lippincott &
Margulies name, Mercer provides consulting services relating to brand and
corporate identity and 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 in the United States, England and Spain.
NERA provides research and analysis of economic and financial issues arising in
litigation, regulation, public policy and management.
The major component of Mercer's revenue is fees paid by clients for advice. In
addition, commission revenue is received from insurance companies for the
placement of individual and group insurance contracts, primarily life, health
and accident coverages. Also, in the 401(k) record keeping business, 12(b)(1)
fees are received from mutual funds for which record keeping services are
provided.
Revenue in the consulting business is affected by changes in clients'
industries, including government regulation, as well as new products and
services, the stage of the economic cycle and broad trends in the management of
large organizations.
REGULATION
The activities of the Company 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
Company's subsidiaries operate. These laws and regulations are primarily
intended to benefit clients.
The Company's three business segments depend on the validity of, and continued
good standing under, the licenses and approvals pursuant to which they operate,
as well as compliance with pertinent regulations. The Company therefore devotes
significant effort toward maintaining its licenses and to ensuring compliance
with a diverse and complex regulatory structure.
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. Licenses may be
denied or revoked for various reasons, including the violation of such
regulations, conviction of crimes and the like. Possible sanctions which may be
imposed include the suspension of individual employees, limitations on engaging
in a particular business for specified periods of time, revocation of licenses,
censures and fines. In some instances, the Company 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 Company 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 Company's insurance, investment management
or consulting activities can continue to be conducted in any given jurisdiction
as in the past.
INSURANCE SERVICES
While the 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) or
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<PAGE>
insurance consultant, managing general agent or third party administrator to
have an individual and/or company license from a governmental agency or
self-regulatory organization. In addition, certain of the Company'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 Company has no licensed subsidiary, the
Company may maintain arrangements with residents or business entities licensed
to act in such jurisdiction. Also, 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.
INVESTMENT MANAGEMENT
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. Putnam's officers, directors and employees
may from time to time own securities which are also held by the Putnam Funds or
institutional accounts. Putnam's internal policies with respect to individual
investments require prior clearance and reporting of transactions and restrict
certain transactions so as to reduce the possibility of conflicts of interests.
To the extent that existing or future regulations affecting the sale of Putnam
Fund shares or other investment products or their investment strategies cause or
contribute to reduced sales of Putnam Fund shares or investment products or
impair the investment performance of the Putnam Funds or such other investment
products, Putnam's aggregate assets under management and its revenues might be
adversely affected. Changes in regulations affecting the free movement of
international currencies might also adversely affect Putnam.
CONSULTING
No licensing or other regulatory requirements material in the aggregate to the
consulting activities of the Company's subsidiaries 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 related to investment matters or the
placing of individual and group insurance contracts subject the Company's
subsidiaries to insurance or investment and securities regulations and licensing
in various jurisdictions.
COMPETITIVE CONDITIONS
Principal methods of competition in insurance services and consulting include
the quality and types of services and products that a broker or consultant
provides its clients and their cost. Putnam competes with other providers of
investment products and services primarily on the basis of the range of
investment products offered, the investment performance of such products, as
well as the manner in which such products are distributed, and the scope and
quality of the shareholder and other services provided. Sales of Putnam Fund
shares are also influenced by general securities market conditions, government
regulations, global economic conditions and advertising and sales promotional
efforts.
All these businesses also encounter strong competition from both public
corporations and private firms in attracting and retaining qualified employees.
INSURANCE SERVICES
The insurance and reinsurance broking services business of the Company is
believed to be among the largest of its type in the world.
The Company encounters strong competition in the insurance services business
from other insurance brokerage firms which also operate on a nationwide or
worldwide basis, from a large number of regional and local firms in the United
States and in other countries, from insurance and reinsurance companies that
market and service their
S-31
<PAGE>
insurance products without the assistance of brokers or agents and from other
financial services businesses, including commercial and investment banks that
provide risk-related services and products.
Certain insureds and groups of insureds have established programs of self
insurance, as a supplement or alternative to third-party insurance, thereby
reducing in some cases the need for insurance placement services. There are also
many other providers of insurance program management services, including many
insurance companies, and many other organizations seeking to structure and
manage investments in the insurance industry.
INVESTMENT MANAGEMENT
Putnam is one of the largest investment management firms in the United States.
The investment management business is highly competitive. In addition to
competition from firms already in the investment management business, including
commercial banks, stock brokerage and investment banking firms, and insurance
companies, there is competition from other firms offering financial services and
other investment alternatives.
Many securities dealers, whose large retail distribution systems play an
important role in the sale of shares in the Putnam Funds, also sponsor competing
proprietary mutual funds. To the extent that such securities dealers value the
ability to offer customers a broad selection of investment alternatives, they
will continue to sell independent funds, notwithstanding the availability of
proprietary products. However, to the extent that these firms limit or restrict
the sale of Putnam Fund shares through their brokerage systems in favor of their
proprietary mutual funds, assets under management might decline and Putnam's
revenues might be adversely affected. In addition, a number of mutual fund
sponsors presently market their funds to the general public without sales
charges. Certain firms also offer passively managed funds such as index funds to
the general public.
CONSULTING
Mercer, one of the largest global consulting firms, is a leader in many of its
businesses. William M. Mercer is the world's largest human resources consulting
organization. Mercer Management Consulting is a leader in strategy consulting.
NERA is a leading firm of consulting economists.
William M. Mercer, Mercer Management Consulting and NERA compete with other
privately held and publicly held worldwide and national consulting companies, as
well as regional and local firms. Competitors include independent consulting
firms as well as consulting organizations affiliated with accounting firms,
information systems providers, investment management organizations and other
financial services firms, some of which emphasize administrative or consulting
services related to other services, including the management of 401(k) plan
funds, the design of information and other technology systems, and
administrative functions outsourced by corporations.
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<PAGE>
SELLING STOCKHOLDERS
Selling Stockholders, consisting of 85 Former J&H Stockholders and Retirees, are
offering hereby 3,087,134 shares of Common Stock in the aggregate, which
constituted approximately 3.9% of the issued and outstanding Common Stock on
March 31, 1997. On such date such Selling Stockholders beneficially owned
approximately 6,958,000 shares of Common Stock in the aggregate, which
constituted approximately 8.7% of the issued and outstanding Common Stock on
such date. The number of shares of Common Stock beneficially owned and offered
hereby by each Selling Stockholder constituted less than 0.5% of the issued and
outstanding Common Stock on March 31, 1997. The Selling Stockholders include
David A. Olsen, Richard A. Nielsen and Norman Barham, who are expected to join
the Board of Directors of the Company, and who are offering hereby 109,975,
100,614 and 66,109 shares of Common Stock, respectively, which constitute all of
the Common Stock beneficially owned and eligible for sale by each of them on the
date hereof. See "Selling Stockholders" in the accompanying Prospectus. Prior to
the Closing of the Transaction, each of the Former J&H Stockholders was a
director or managing principal, as well as an employee, of J&H.
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<PAGE>
UNDERWRITING
Under the terms and subject to the conditions in an Underwriting Agreement dated
the date of this Prospectus Supplement, (the "Underwriting Agreement"), the
Underwriters named below, for whom J.P. Morgan Securities Inc. and Morgan
Stanley & Co. Incorporated are acting as Lead Managers, have severally agreed to
purchase and the Selling Stockholders have severally agreed to sell to them, the
respective number of shares of Common Stock set forth opposite their names
below.
<TABLE>
<CAPTION>
----------------
<S> <C>
NUMBER OF SHARES
----------------
UNDERWRITERS
J.P. Morgan Securities Inc................................................
Morgan Stanley & Co. Incorporated.........................................
Donaldson, Lufkin & Jenrette Securities Corporation.......................
Merrill Lynch, Pierce, Fenner & Smith Incorporated........................
PaineWebber Incorporated..................................................
Smith Barney Inc..........................................................
----------------
Total
----------------
----------------
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of Common Stock are subject to the approval of
certain legal matters by counsel and certain other conditions. Under the terms
and conditions of the Underwriting Agreement, the Underwriters are obligated to
take and pay for all such shares of Common Stock, if any are taken.
The Underwriters propose initially to offer such shares of Common Stock directly
to the public at the public offering price set forth on the cover page of this
Prospectus Supplement and to certain dealers at such price less a concession of
$ per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. After
the shares of Common Stock are released for sale to the public, the offering
price and such concessions may be changed.
The Company has agreed not to offer, sell, contract to sell or grant any option
to purchase or otherwise dispose of any Common Stock, or any securities
convertible into or exercisable or exchangeable for Common Stock, or file any
registration statement under the Securities Act with respect to the Common Stock
or any securities convertible into or exercisable or exchangeable for Common
Stock for a period of 90 days after the date of this Prospectus Supplement
without the prior written consent of J.P. Morgan Securities Inc., except in
connection with acquisitions, employee benefit plans and stock options and
certain other limited exceptions. The Selling Stockholders have agreed not to
offer, sell, contract to sell or otherwise dispose of any Common Stock, or any
securities convertible into, or exercisable or exchangeable for, Common Stock or
enter into any hedging or other transaction that involves a short sale of such
securities or that involves the purchase of any option or other agreement that
is likely to result in the other party to such transaction engaging in such
short sales or transactions having a similar effect for a period of 90 days
after the date of this Prospectus Supplement without the prior written consent
of J.P. Morgan Securities Inc.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.
In connection with the Offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock.
Specifically, the Underwriters may over-allot in connection with the Offering,
creating a syndicate short position. In addition, the Underwriters may bid for,
and purchase, shares of Common Stock in the open market to cover syndicate short
positions or to stabilize the price of the Common Stock. Finally, the
underwriting syndicate may reclaim selling concessions allowed for distributing
the Common Stock in the Offering if the syndicate repurchases previously
distributed Common Stock in syndicate covering transactions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain the
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<PAGE>
market price of the Common Stock above independent Market levels. The
Underwriters are not required to engage in these activities, and may end any of
these activities at any time.
Certain of the Underwriters have provided from time to time, and are expected to
provide in the future, investment banking and other financial services to the
Company and certain of their affiliates have engaged and may in the future
engage in commercial transactions in the ordinary course of business with the
Company.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Skadden, Arps,
Slate, Meagher & Flom LLP, New York, New York. Certain legal matters will be
passed upon for the Underwriters by Davis Polk & Wardwell, New York, New York.
Certain legal matters will be passed upon for the Selling Stockholders by
Sullivan & Cromwell, New York, New York.
S-35
<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION, DATED APRIL 25, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
MARSH & MCLENNAN COMPANIES, INC.
3,438,360 SHARES OF COMMON STOCK
This Prospectus relates to the offering from time to time of up to 3,438,360
shares of Common Stock, par value $1.00 per share (the "Common Stock"), of Marsh
& McLennan Companies, Inc., a Delaware corporation (the "Company"), by certain
stockholders of the Company (the "Selling Stockholders"). The Common Stock
offered hereby was issued as partial consideration to the Selling Stockholders
in connection with the Company's business combination with Johnson & Higgins, a
New Jersey corporation. See "Selling Stockholders." The Company will not receive
any proceeds from the sale of the Common Stock offered hereby.
The Selling Stockholders directly, or through agents, dealers or underwriters
designated from time to time, may sell the Common Stock offered hereby from time
to time on terms to be determined at the time of sale. To the extent required,
the number of shares of Common Stock to be sold, purchase price, public offering
price, the names of the Selling Stockholders, the names of any such agent,
dealer or underwriter, and any applicable commission or discount with respect to
a particular offering will be set forth in an accompanying Prospectus
Supplement. The aggregate proceeds to the Selling Stockholders from the sale of
the Common Stock offered hereby will be the purchase price thereof less the
aggregate agents' commissions and underwriters' discounts, if any, and other
expenses of distribution not borne by the Company. The Company has agreed to pay
certain expenses of the offering contemplated hereby. See "Plan of
Distribution."
The Selling Stockholders and any dealers, agents or underwriters that
participate with any Selling Stockholder in the distribution of Common Stock may
be deemed to be "underwriters" within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"), and any commission received by them and any
profit from the resale of Common Stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. See "Plan of
Distribution" for a description of information regarding indemnification
arrangements.
The Common Stock is listed on the New York Stock Exchange (the "NYSE"), the
Chicago Stock Exchange, the Pacific Stock Exchange and the London Stock Exchange
under the trading symbol "MMC."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
April , 1997
2
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, ANY ACCOMPANYING
PROSPECTUS SUPPLEMENT OR THE DOCUMENTS INCORPORATED OR DEEMED INCORPORATED BY
REFERENCE HEREIN, AND ANY INFORMATION OR REPRESENTATIONS NOT CONTAINED HEREIN OR
THEREIN MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY
ANY AGENT, DEALER OR UNDERWRITER. THIS PROSPECTUS AND ANY ACCOMPANYING
PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY THE COMMON STOCK IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
No action has been or will be taken in any jurisdiction by the Company or any
Selling Stockholder that would permit a public offering of the Common Stock or
possession or distribution of this Prospectus or any accompanying Prospectus
Supplement in any jurisdiction where action for that purpose is required, other
than in the United States. Persons into whose possession this Prospectus or any
accompanying Prospectus Supplement comes are required by the Company and the
Selling Stockholders to inform themselves about and to observe any restrictions
as to the offering of the Common Stock and the distribution of this Prospectus
and any accompanying Prospectus Supplement.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information.......................... 3
Incorporation of Certain Documents by
Reference.................................... 3
The Company.................................... 4
Use of Proceeds................................ 4
<CAPTION>
PAGE
<S> <C>
Selling Stockholders........................... 4
Plan of Distribution........................... 5
Legal Matters.................................. 6
Experts........................................ 7
</TABLE>
3
<PAGE>
AVAILABLE INFORMATION
This Prospectus constitutes part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the Securities and Exchange Commission
(the "Commission") under the Securities Act with respect to the Common Stock
offered hereby. This Prospectus does not contain all information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. Reference is made to the
Registration Statement and to the exhibits thereto for further information with
respect to the Company and the Common Stock offered hereby.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities of the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the Commission located at 7 World Trade Center, 13th Floor, Suite
1300, New York, New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500
West Madison Street, Chicago, Illinois 60661. Copies of such material can also
be obtained at prescribed rates by writing to the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such
information may also be accessed electronically by means of the Commission's
home page on the Internet (http://www.sec.gov.). In addition, such reports,
proxy statements and other information concerning the Company can be inspected
at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York,
New York 10005, the Chicago Stock Exchange, 440 South LaSalle Street, Chicago,
Illinois 60605, and the Pacific Stock Exchange, 301 Pine Street, San Francisco,
California 94104.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated into this Prospectus by reference:
(1) The Company's Annual Report on Form 10-K for the year ended December 31,
1996 (including pages 23 through 49 of the Company's 1996 Annual Report to
Stockholders);
(2) The Company's Current Reports on Form 8-K, filed with the Commission on
March 14, 1997 and April 7, 1997, relating to the business combination with
Johnson & Higgins;
(3) The Company's Registration Statement on Form 8-B, dated May 22, 1969,
describing the Common Stock, including any amendment or reports filed for
the purpose of updating such description; and
(4) The Company's Registration Statement on Form 8-A, dated September 21,
1987, as amended by Amendments on Form 8, dated September 18, 1990 and
February 19, 1991, describing the Preferred Stock Purchase Rights attached
to the Common Stock, including any further amendment or reports filed for
the purpose of updating such description.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
termination of the offering of the Common Stock offered hereby shall be deemed
to be incorporated by reference into this Prospectus and to be a part of this
Prospectus from the date of filing of such document. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
contract or other
3
<PAGE>
document referred to herein do not purport to be complete, and where reference
is made to the particular provisions of such contract or other document, such
provisions are qualified in all respects by reference to all of the provisions
of such contract or other document. The Company will provide without charge to
any person to whom this Prospectus is delivered, on the written or oral request
of such person, a copy of any or all of the foregoing documents incorporated by
reference herein (other than exhibits not specifically incorporated by reference
into the texts of such documents). Requests for such documents should be
directed to: Corporate Development, Marsh & McLennan Companies, Inc., 1166
Avenue of the Americas, New York, New York 10036. Telephone requests may be
directed to Corporate Development at (212) 345-5475.
THE COMPANY
Marsh & McLennan Companies, Inc., a professional services organization with
origins dating from 1871 in the United States, is a holding company which,
through its subsidiaries and affiliates, provides clients with analysis, advice
and transactional capabilities in the fields of insurance and reinsurance
broking, investment management and consulting.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Common Stock
offered hereby, all of the net proceeds of which will be received by the Selling
Stockholders.
SELLING STOCKHOLDERS
GENERAL
On March 27, 1997, the Company consummated a business combination (the
"Transaction") with Johnson & Higgins ("J&H"). In connection with the
Transaction, the Company issued and delivered approximately 5.47 million shares
of Common Stock to the Sellers (as defined below) as payment in part for the
sale by the Sellers of their shares of common stock of J&H to the Company, in
each case upon the terms set forth in the Stock Purchase Agreement, dated as of
March 12, 1997 and amended as of March 27, 1997, among J&H, the stockholders of
J&H listed on Annex A thereto (the "Sellers") and the Company. The Company also
issued and delivered approximately 1.61 million shares of its Common Stock to
certain living, former directors, and the estates of certain deceased, former
directors, of J&H (the "Retirees") with whom it entered into certain Retiree
Agreements. The Company entered into a Registration Rights Agreement, dated as
of March 12, 1997 and amended as of March 27, 1997, with the Sellers (the
"Registration Rights Agreement"), for their own benefit and the benefit of
holders from time to time of the Common Stock originally issued to the Sellers
and Retirees in connection with the Transaction (the "RRA Common Stock").
The Selling Stockholders consist of Sellers and Retirees who are entitled,
pursuant to the Registration Rights Agreement, to offer under this Prospectus
RRA Common Stock that is not subject to the contractual transfer restrictions
described below ("Freely Registrable RRA Common Stock").
IDENTITY OF SELLING STOCKHOLDERS AND THEIR BENEFICIAL OWNERSHIP OF COMMON STOCK
There are 94 Selling Stockholders who, in the aggregate, beneficially owned
approximately 7,088,000 shares of Common Stock on March 31, 1997 (which
constituted approximately 8.8% of the issued and outstanding Common Stock on
such date) and are offering hereby up to 3,438,360 such shares. Each Selling
Stockholder is a Seller or a Retiree and the number of shares of Common Stock
beneficially owned and offered hereby by each Selling Stockholder constituted
less than 0.5% of the issued and outstanding Common Stock on March 31, 1997.
Additional information about the Selling Stockholders participating in a
particular offering may be set forth in a Prospectus Supplement.
4
<PAGE>
THE REGISTRATION RIGHTS AGREEMENT
SHELF REGISTRATION. The Company has agreed in the Registration Rights
Agreement to file the registration statement of which this Prospectus forms a
part, to use its best efforts to cause such registration statement to be
declared effective under the Securities Act as soon as possible after its
initial filing date and to keep it continuously effective in order to permit
this Prospectus to be usable at all times during the period ending on the second
anniversary of the date on which such registration statement becomes effective
or such shorter period that will terminate when the RRA Common Stock is publicly
sold (the "Effectiveness Period").
UNDERWRITTEN OFFERING. The holders of 33% or more of the Freely Registrable RRA
Common Stock also have the right, subject to certain conditions, to cause the
Company to cooperate with up to two underwritten offerings for which it receives
requests during the Effectiveness Period.
TRANSFER RESTRICTIONS. Each Seller who is bound by the Registration Rights
Agreement has agreed with the Company not to sell or otherwise transfer (a)
during the period from the date of the closing of the Transaction to the first
anniversary thereof, more than one-third of the number of shares of common stock
he or she received as a Seller under the Stock Purchase Agreement at such
closing; and (b) during the period from the date of such closing to the second
anniversary thereof, more than two-thirds of the number of shares of common
stock he or she received as a Seller under the Stock Purchase Agreement at such
closing.
In addition, each Seller and Retiree who is bound by the Registration Rights
Agreement and does not participate in an underwritten offering pursuant thereto
has agreed with the Company to execute and deliver such reasonable and customary
lock-up agreements that the managing underwriters for such offering may advise
are necessary to facilitate it and that do not restrict dispositions of such
Seller's or Retiree's Common Stock for longer than 90 days.
The Retirees received RRA Common Stock that is not subject to contractual
transfer restrictions against resale other than the lock-up restriction
described above.
PLAN OF DISTRIBUTION
The Selling Stockholders may sell the Common Stock being offered hereby directly
to other purchasers, or to or through underwriters, dealers or agents. To the
extent required, a Prospectus Supplement with respect to the Common Stock will
set forth the terms of the offering of the Common Stock, including the name(s)
of any underwriters, dealers or agents, the name(s) of the Selling Stockholders,
the number of shares of Common Stock to be sold, the price of the offered Common
Stock, any underwriting discounts or other items constituting underwriters'
compensation and any discounts or concessions allowed or reallowed or paid to
dealers.
The Common Stock offered hereby may be sold from time to time directly by the
Selling Stockholders or, alternatively, through underwriters, broker-dealers or
agents. Such Common Stock may be sold in one or more transactions at fixed
prices, at prevailing market prices at the time of sale, at varying prices
determined at the time of sale or at negotiated prices. Such sales may be
effected in transactions (which may involve crosses or block transactions) (i)
on any national securities exchange or quotation service on which the Common
Stock may be listed or quoted at the time of sale, (ii) in the over-the-counter
market, (iii) in transactions otherwise than on such exchanges or services or in
the over-the-counter market or (iv) through the writing of options. In
connection with sales of the Common Stock offered hereby or otherwise, the
Selling Stockholders may enter into hedging transactions with broker-dealers,
which may in turn engage in short sales of such Common Stock in the course of
hedging the positions they assume. The Selling Stockholders may also sell the
Common Stock offered hereby short and deliver such Common Stock to close out
such short positions, or loan or pledge such Common Stock to broker-dealers that
in turn may sell such securities. The Common Stock offered hereby also may be
sold pursuant to Rule 144 under the Securities Act.
Any Selling Stockholder and any such underwriters, brokers, dealers or agents,
upon effecting the sale of the Common Stock, may be deemed "underwriters" as
that term is defined by the Securities Act.
5
<PAGE>
The underwriter or underwriters with respect to a particular underwritten
offering of Common Stock will be named in the Prospectus Supplement relating to
such offering, and if an underwriting syndicate is used, the managing
underwriter or underwriters will be set forth on the cover of such Prospectus
Supplement. Unless otherwise set forth in the Prospectus Supplement, the
obligations of the underwriters to purchase the Common Stock will be subject to
certain conditions precedent and the underwriters will be obligated to purchase
all the Common Stock if any is purchased. Any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
If a dealer is utilized in the sale of any Common Stock in respect of which this
Prospectus is delivered, the Selling Stockholders may sell such Common Stock to
the dealer, as principal. The dealer may then resell such Common Stock to the
public at varying prices to be determined by such dealer at the time of resale.
To the extent required, the name of the dealer and the terms of the transaction
will be set forth in the Prospectus Supplement relating thereto.
In connection with the sale of the Common Stock offered hereby, underwriters or
agents may receive compensation from the Company, the Selling Stockholders or
from purchasers of such Common Stock for whom they may act as agents in the form
of discounts, concessions, or commissions. Underwriters, agents, and dealers
participating in the distribution of the Common Stock may be deemed to be
underwriters, and any such compensation received by them and any profit on the
resale of Common Stock by them may be deemed to be underwriting discounts or
commissions under the Securities Act.
The Common Stock is listed on the NYSE, the Pacific Stock Exchange, the Chicago
Stock Exchange and the London Stock Exchange. Any underwriters to whom Common
Stock is sold by the Selling Stockholders for public offering and sale may make
a market in such Common Stock, but such underwriters will not be obligated to do
so and may discontinue any market making at any time without notice. No
assurance can be given as to the liquidity of the trading market for any Common
Stock.
The Selling Stockholders, agents, dealers, and underwriters may be entitled
under the Registration Rights Agreement or other agreements entered into with
the Company to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments that the Selling Stockholders, agents, dealers, or underwriters may
be required to make with respect thereto. Underwriters, dealers, or agents and
their associates may be customers of, engage in transactions with and perform
services for, the Company in the ordinary course of business.
The Company has agreed to pay certain expenses in connection with the offering
contemplated hereby, including (i) registration and filing fees, (ii) fees and
expenses of providing certain information to the Sellers, (iii) fees and
expenses of compliance with securities or blue sky laws and (iv) fees and
expenses of preparing and delivering certificates representing the Common Stock.
In addition to such expenses, the Company has agreed to pay certain other
expenses customarily borne by issuers in the event of an underwritten offering
of Common Stock conducted pursuant to the Registration Rights Agreement,
including: (i) printing expenses, (ii) fees and disbursements of counsel for the
Company and its independent public accountants, and (iii) reasonable fees and
expenses of one counsel for the Selling Stockholders. The Selling Stockholders
participating in any underwritten offering shall be responsible for any
underwriting discounts and commissions and fees and, subject to clause (iii)
immediately above, expenses of their own counsel. Any Selling Stockholder may
agree to indemnify any agent, dealer or broker-dealer that participates in
transactions involving sales of the Common Stock against certain liabilities,
including liabilities arising under the Securities Act. The Company and the
Selling Stockholders have agreed to indemnify each other and certain other
persons against certain liabilities in connection with the offering of the
Common Stock including liabilities arising under the Securities Act.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Skadden, Arps,
Slate, Meagher & Flom LLP, New York, New York.
6
<PAGE>
EXPERTS
The consolidated financial statements and supplemental notes of the Company and
its subsidiaries as of December 31, 1996 and 1995 and for each of the years in
the three year period ended December 31, 1996, included and incorporated by
reference in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 and incorporated by reference into this Prospectus, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports, which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of J&H and its subsidiaries as of and for
the year ended December 31, 1996, included in the Company's Current Report on
Form 8-K filed with the Commission on April 7, 1997, and incorporated by
reference into this Prospectus, have been incorporated herein in reliance upon
the report of Arthur Andersen LLP, independent public accountants, included in
such Form 8-K and incorporated by reference herein, and upon the authority of
said firm as experts in accounting and auditing.
7
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses to be borne by the Company in
connection with the offering described in this Registration Statement, as
amended hereby. All such expenses other than the Securities and Exchange
Commission registration fee are estimates.
<TABLE>
<CAPTION>
----------
<S> <C>
Securities and Exchange Commission Registration Fee $122,817
Transfer Agents Fees and Expenses 10,000
Printing Fees and Expenses 55,000
Accounting Fees and Expenses 40,000
Legal Fees and Expenses 100,000
Miscellaneous 20,183
----------
Total $348,000
----------
----------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As authorized by Section 145 of the General Corporation Law of the State of
Delaware, each director and officer of the Company may be indemnified by the
Company against expenses (including attorney's fees, judgments, fines and
amounts paid in settlement) actually and reasonably incurred in connection with
the defense or settlement of any threatened, pending or completed legal
proceedings in which he is involved by reason of the fact that he is or was a
director or officer of the Company if he acted in good faith and in a manner
that he reasonably believed to be in or not opposed to the best interests of the
Company and, with respect to any criminal action or proceeding, if he had no
reasonable cause to believe that his conduct was unlawful. If the legal
proceeding, however, is by or in the right of the Company, the director or
officer may not be indemnified in respect of any claim, issue or matter as to
which he shall have been adjudged to be liable for negligence or misconduct in
the performance of his duty to the Company unless a court determines otherwise.
In addition, the Company maintains directors' and officers' liability insurance
policies.
Article Sixth of the Restated Certificate of Incorporation of the Company and
Article VI of the Restated By-laws of the Company provide that, to the fullest
extent permitted by law, directors of the Company will not be liable for
monetary damages to the Company or its stockholders for breaches of their
fiduciary duties.
II-1
<PAGE>
ITEM 16. EXHIBITS
The following is a list of all exhibits filed as a part of this Registration
Statement on Form S-3, as amended hereby, including those incorporated herein by
reference.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------------- --------------------------------------------------------------------------------------------------------
<C> <S>
1 Form of Underwriting Agreement.
2(a) Stock Purchase Agreement, dated as of March 12, 1997 (the "Stock Purchase Agreement"), by and among the
Company, J&H and the stockholders of J&H listed on Annex A thereto (incorporated by reference to the
Company's Current Report on Form 8-K, filed with the Commission on March 14, 1997, relating to the
business combination with J&H).
2(b) First Amendment, dated as of March 27, 1997, to the Stock Purchase Agreement (incorporated by reference
to the Company's Current Report on Form 8-K, filed with the Commission on April 7, 1997, relating to the
business combination with J&H).
4(a) Specimen Certificate Evidencing the Common Stock (incorporated by reference to the Company's
Registration Statement on Form 8-B, dated May 22, 1969).
4(b) Rights Agreement, dated as of September 17, 1987, as amended (incorporated by reference to the Company's
Registration Statement on Form 8-A, dated September 21, 1987, as amended by Amendments on Form 8, dated
September 18, 1990 and February 19, 1991).
5 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.*
23(a) Consent of Deloitte & Touche LLP, Independent Accountants.
23(b) Consent of Arthur Andersen LLP, Independent Accountants.
23(c) Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5).*
23(d) Consent of Norman Barham to be named as a director.*
23(e) Consent of Richard A. Nielsen to be named as a director.*
23(f) Consent of David A. Olsen to be named as a director.*
24 Powers of Attorney of certain directors of the Company (incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December 31, 1996).
</TABLE>
- ------------------------
* Previously filed.
ITEM 17. UNDERTAKINGS
The undersigned registrant (the "Registrant") hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i) To include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
To reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement; notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement; (iii) To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration statement; PROVIDED, HOWEVER,
that, since this registration statement is on Form S-3, paragraphs (1)(i)
and 1(ii) do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the Commission
II-2
<PAGE>
by the Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in this registration
statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
BONA FIDE offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
The Registrant hereby undertakes that, for purposes of determining any liability
under the Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions set forth in Item 15, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement or amendment thereto to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, in the State of New York, on
April 25, 1997.
MARSH & MCLENNAN COMPANIES, INC.
By /s/ A.J.C. SMITH
-----------------------------------------
Name: A.J.C. Smith
Title: Chairman & Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement, as amended hereby, has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ A.J.C. SMITH Chairman & Chief Executive
- ------------------------------ Officer (Principal April 25, 1997
A.J.C. Smith Executive Officer)
Senior Vice President &
/s/ FRANK J. BORELLI Chief Financial Officer
- ------------------------------ (Principal Financial April 25, 1997
Frank J. Borelli Officer)
/s/ DOUGLAS C. DAVIS Vice President and
- ------------------------------ Controller (Principal April 25, 1997
Douglas C. Davis Accounting Officer)
* Director
- ------------------------------ April 25, 1997
Lewis W. Bernard
* Director
- ------------------------------ April 25, 1997
Richard H. Blum
* Director
- ------------------------------ April 25, 1997
Robert Clements
* Director
- ------------------------------ April 25, 1997
Peter Coster
* Director
- ------------------------------ April 25, 1997
Robert F. Erburu
* Director
- ------------------------------ April 25, 1997
Jeffrey W. Greenberg
* Director
- ------------------------------ April 25, 1997
Ray J. Groves
* Director
- ------------------------------ April 25, 1997
Richard S. Hickok
* Director
- ------------------------------ April 25, 1997
David D. Holbrook
* Director
- ------------------------------ April 25, 1997
Lawrence J. Lasser
II-4
<PAGE>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
* Director
- ------------------------------ April 25, 1997
Richard M. Morrow
* Director
- ------------------------------ April 25, 1997
George Putnam
* Director
- ------------------------------ April 25, 1997
Adele Smith Simmons
* Director
- ------------------------------ April 25, 1997
John T. Sinnott
* Director
- ------------------------------ April 25, 1997
Frank J. Tasco
* Director
- ------------------------------ April 25, 1997
R.J. Ventres
<TABLE>
<S> <C>
*By: /s/ GREGORY F. VAN GUNDY
-----------------------------------------
Gregory F. Van Gundy
Attorney-in-fact
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS PAGE
- ------------- ------------------------------------------------------------------------------------------------ ---------
<C> <S> <C>
1 Form of Underwriting Agreement.
2(a) Stock Purchase Agreement, dated as of March 12, 1997 (the "Stock Purchase Agreement"), by and
among the Company, J&H and the stockholders of J&H listed on Annex A thereto (incorporated by
reference to the Company's Current Report on Form 8-K, filed with the Commission on March 14,
1997, relating to the business combination with J&H).
2(b) First Amendment, dated as of March 27, 1997, to the Stock Purchase Agreement (incorporated by
reference to the Company's Current Report on Form 8-K, filed with the Commission on April 7,
1997, relating to the business combination with J&H).
4(a) Specimen Certificate Evidencing the Common Stock (incorporated by reference to the Company's
Registration Statement on Form 8-B, dated May 22, 1969).
4(b) Rights Agreement, dated as of September 17, 1987, as amended (incorporated by reference to the
Company's Registration Statement on Form 8-A, dated September 21, 1987, as amended by
Amendments on Form 8, dated September 18, 1990 and February 19, 1991).
5 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.*
23(a) Consent of Deloitte & Touche LLP, Independent Accountants.
23(b) Consent of Arthur Andersen LLP, Independent Accountants.
23(c) Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5).*
23(d) Consent of Norman Barham to be named as a director.*
23(e) Consent of Richard A. Nielsen to be named as a director.*
23(f) Consent of David A. Olsen to be named as a director.*
24 Powers of Attorney of certain directors of the Company (incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December 31, 1996).
</TABLE>
- ------------------------
* Previously filed.
<PAGE>
Exhibit 1
Marsh & McLennan Companies, Inc.
_____________ Shares
Common Stock
Underwriting Agreement
, 1997
J.P. Morgan Securities Inc.
Morgan Stanley & Co. Incorporated
As joint lead managers of the
several underwriters acting as managers
listed in Schedule I hereto
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Dear Ladies and Gentlemen:
The persons named in Schedule II hereto (the "Selling Shareholders")
propose to sell to the several Underwriters listed in Schedule I hereto (the
"Underwriters"), all of whom are acting as Managers, and for whom you are acting
as joint lead managers (the "Lead Managers"), and the Underwriters propose to
purchase from such Selling Shareholders, an aggregate of shares
of Common Stock, par value $1.00 per share (the "Common Stock"), of Marsh &
McLennan Companies, Inc., a Delaware corporation (the "Company"), which Common
Stock is referred to herein as the "Shares".
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Securities Act"), a registration
statement, including a prospectus, relating to the Shares. The registration
statement as amended at the time when it shall become effective, or, if a
<PAGE>
post-effective amendment is filed with respect thereto, as amended by such
post-effective amendment at the time of its effectiveness, including in each
case information (if any) deemed to be part of the registration statement at the
time of effectiveness pursuant to Rule 430A under the Securities Act, is
referred to in this Agreement as the "Registration Statement", and the
prospectus as supplemented by the prospectus supplement relating to the sale of
the Shares by the Underwriters in the form first used to confirm sales of Shares
is referred to in this Agreement as the "Prospectus". Any reference in this
Agreement to the Registration Statement, any preliminary prospectus or the
Prospectus shall be deemed to refer to and include the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the Securities Act, as
of the effective date of the Registration Statement or the date of such
preliminary prospectus or the Prospectus, as the case may be, and any reference
to "amend", "amendment" or "supplement" with respect to the Registration
Statement, any preliminary prospectus or the Prospectus shall be deemed to refer
to and include any documents filed after such date under the Securities Exchange
Act of 1934, as amended, and the rules and regulations of the Commission
thereunder (collectively, the "Exchange Act") that are deemed to be incorporated
by reference therein. References herein to any preliminary prospectus shall be
deemed to refer to any preliminary prospectus relating to the sale of the Shares
by the Underwriters.
The Company and the Selling Shareholders wish to confirm as follows their
respective agreements with you and the other several Underwriters on whose
behalf you are acting, in connection with the several purchases of the Shares by
the Underwriters:
1. Each Selling Shareholder hereby agrees to sell to each Underwriter as
hereinafter provided, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase at a price of
$___ per Share (the "Purchase Price") from such Selling Shareholder the
respective number of Shares (subject to such adjustments to eliminate any
fractional shares as the Lead Managers in their sole discretion may make) that
bears the same proportion to the number of Shares to be sold by such Selling
Shareholder to the Underwriters as set forth on Schedule II hereto as the number
of Shares set forth opposite the name of such Underwriter on Schedule I hereto
(or such number of Shares increased as set forth in Section 11 hereof), bears to
the total number of Shares.
Certificates in transferable form for the Shares which each of the Selling
Shareholders agrees to sell pursuant to this Agreement have been placed in
custody with Harris Trust and Savings Bank, as custodian (the "Custodian"), for
delivery under this Agreement pursuant to a Custody Agreement executed by each
Selling Shareholder (individually, a "Custody Agreement").
2
<PAGE>
Each Selling Shareholder agrees that (i) the Shares of such Selling
Shareholder represented by the certificates held in custody pursuant to such
Selling Shareholder's Custody Agreement are subject to the interests of the
Underwriters, (ii) the arrangements made by such Selling Shareholder for such
custody are, except as specifically provided in such Selling Shareholder's
Custody Agreement, irrevocable, and (iii) the obligations of such Selling
Shareholder hereunder and under such Selling Shareholder's Power (as defined
below) and Custody Agreement shall not be terminated by any act of such Selling
Shareholder or by operation of law, whether by the death or incapacity of such
Selling Shareholder or by the occurrence of any other event or events including,
without limitation, the termination of any trust or estate if such Selling
Shareholder is a trust or estate, the death or incapacity of one or more
trustees, guardians, executors or administrators for such Selling Shareholder or
the dissolution or liquidation of such Selling Shareholder if such Selling
Shareholder is a corporation or partnership. If any Selling Shareholder shall
dissolve or liquidate or if any other such event or events shall occur before
the delivery of the Shares hereunder, certificates for the Shares of such
Selling Shareholder shall be delivered to the Underwriters by Norman Barham,
Gardner M. Mundy or Joseph D. Roxe or any other person to be named as an
attorney-in-fact (collectively, the "Attorneys-in-Fact"), acting as agents and
attorneys-in-fact of such Selling Shareholder pursuant to an irrevocable power
of attorney signed by such Selling Shareholder (individually, a "Power") in
accordance with the terms and conditions of this Agreement and such Selling
Shareholder's Power and Custody Agreement as if such dissolution or liquidation
or other such event or events had not occurred, and any actions taken by such
Attorneys shall be valid as if such event had not occurred regardless of whether
or not the Attorneys-in-Fact or any Underwriter shall have received notice of
such dissolution, liquidation or other event.
Each Selling Shareholder has authorized each Attorney-in-Fact, on behalf of
such Selling Shareholder, to, among other acts, execute this Agreement and any
receipts, notices, requests and instructions in connection with the sale of the
Shares to be sold hereunder by such Selling Shareholder, to make delivery of the
certificates for such Shares, to receive the proceeds of the sale of such
Shares, to give receipts for such proceeds, to pay therefrom any expenses to be
borne by such Selling Shareholder in connection with the sale and public
offering of such Shares, to distribute the balance thereof to such Selling
Shareholder and to take such other action as may be necessary or desirable in
connection with the transactions contemplated by this Agreement.
2. The Company and the Selling Shareholders understand that the
Underwriters intend (i) to make a public offering of the Shares as soon after
the Registration Statement and this Agreement have become effective as in the
judgment of the Lead Managers is advisable and (ii) initially to offer the
Shares upon the terms set forth in the Prospectus.
3
<PAGE>
3. Payment for the Shares shall be made to the order of the Custodian by
wire transfer of immediately available funds to such account as an
Attorney-in-Fact shall designate against delivery of the Shares as set forth
below and closing of the sale of the Shares shall be made at the offices of
Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017 or such
other location as you shall designate at 10:00 A.M., New York City time on
, 1997, or at such other time on the same or such other date, not later
than the fifth Business Day thereafter, as the Lead Managers and an
Attorney-in-Fact on behalf of the Selling Shareholders may agree upon in
writing. The time and date of such payment for the Shares are referred to herein
as the Closing Date. As used herein, the term "Business Day" means any day other
than a day on which banks are permitted or required to be closed in New York
City.
Payment for the Shares to be purchased on the Closing Date shall be made
against delivery to the Lead Managers for the respective accounts of the several
Underwriters of the Shares registered in such names and in such amounts as the
Lead Managers shall request in writing not later than one full Business Day
prior to the Closing Date, with any transfer taxes payable in connection with
the transfer to the Underwriters of the Shares duly paid. The certificates for
the Shares will be made available for inspection and packaging by the Lead
Managers in New York, New York not later than 1:00 P.M., New York City time, on
the Business Day prior to the Closing Date.
4. The Company represents and warrants to each Underwriter and to each
Selling Shareholder that:
(a) no order preventing or suspending the use of any preliminary
prospectus has been issued by the Commission, and each preliminary
prospectus filed as part of the Registration Statement as originally
filed or as part of any amendment thereto, or filed pursuant to Rule
424 under the Securities Act, complied when so filed in all material
respects with the Securities Act, and did not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; provided that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information relating to any Underwriter furnished to
the Company in writing by such Underwriter through the Lead Managers
expressly for use therein and in the case of the representation and
warranty made to the Selling Shareholders, shall not apply to
statements or omissions made in reliance upon and in conformity with
information relating to any Selling Shareholder expressly for use
therein;
(b) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that
4
<PAGE>
purpose has been instituted or, to the knowledge of the Company,
threatened by the Commission; and the Registration Statement and
Prospectus, as amended or supplemented, if the Company shall have
furnished amendments or supplements thereto, comply, or will comply,
as the case may be, in all material respects with the Securities Act
and do not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto and as of the date of
the Prospectus and any amendment or supplement thereto, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and the Prospectus, as amended or supplemented
at the Closing Date, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; except that
the foregoing representations and warranties shall not apply to
statements or omissions in the Registration Statement or the
Prospectus made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by
such Underwriter through the Lead Managers expressly for use therein
and, in the case of the representation and warranty made to the
Selling Shareholders, shall not apply to statements or omissions in
the Registration Statement or the Prospectus made in reliance upon and
in conformity with information relating to any Selling Shareholder
furnished to the Company in writing by such Selling Shareholder
expressly for use therein; and the documents incorporated by reference
in the Prospectus, when they were filed with the Commission, conformed
in all material respects to the requirements of the Exchange Act and
none of such documents contained an untrue statement of a material
fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; and any further documents so filed and
incorporated by reference in the Prospectus, when such documents are
filed with the Commission, will conform in all material respects to
the requirements of the Exchange Act, and will not contain an untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(c) the financial statements of the Company and the related notes
thereto, included or incorporated by reference in the Registration
Statement and the Prospectus present fairly in all material respects
the financial position of the Company as of the dates indicated and
the results of its operations and the changes in its cash flows for
the periods specified; and said financial statements have been
prepared in conformity with generally accepted accounting principles
applied on a consistent basis; the financial statements of Johnson &
Higgins and the related notes thereto,
5
<PAGE>
included or incorporated by reference in the Registration Statement
and Prospectus present fairly in all material respects the financial
position of Johnson & Higgins as of the date indicated and the results
of operations and the changes in its cash flows for the period
specified in accordance with generally accepted accounting principles;
and the pro forma financial information, and the related notes
thereto, included or incorporated by reference in the Registration
Statement and the Prospectus have been prepared in accordance with the
applicable requirements of the Securities Act and the Exchange Act, as
applicable, and are based upon good faith estimates and assumptions
believed by the Company to be reasonable;
(d) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been
any material adverse change, or any development involving a
prospective material adverse change, in or affecting the general
affairs, business, management, financial position, stockholders'
equity or results of operations of the Company and its subsidiaries,
taken as a whole, otherwise than as set forth or contemplated in the
Prospectus; and except as set forth or contemplated in the Prospectus
neither the Company nor any of its subsidiaries has entered into any
transaction or agreement (whether or not in the ordinary course of
business) material to the Company and its subsidiaries taken as a
whole;
(e) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of Delaware,
with power and authority (corporate and other) to own its properties
and conduct its business as described in the Prospectus, and has been
duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, other than where the
failure to be so qualified or in good standing would not have a
material adverse effect on the Company and its subsidiaries taken as a
whole;
(f) each of the subsidiaries of the Company that is listed on
Exhibit A hereto (each a "Significant Subsidiary") has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, with power and
authority (corporate and other) to own its properties and conduct its
business as described in the Prospectus, and has been duly qualified
as a foreign corporation for the transaction of business and is in
good
6
<PAGE>
standing under the laws of each jurisdiction in which it owns or
leases properties or conducts any business so as to require such
qualification, other than where the failure to be so qualified or in
good standing would not have a material adverse effect on the Company
and its subsidiaries taken as a whole; and, except as described or
incorporated by reference in or contemplated by the Prospectus, all
the outstanding shares of capital stock of each subsidiary have been
duly authorized and validly issued, are fully-paid and non-assessable,
and are owned by the Company, directly or indirectly, free and clear
of all liens, encumbrances, security interests and claims;
(g) this Agreement has been duly authorized, executed and
delivered by the Company;
(h) the authorized capital stock of the Company conforms as to
legal matters to the description thereof set forth or incorporated by
reference in the Registration Statement and the Prospectus, and all of
the outstanding shares of capital stock of the Company (including the
Shares to be sold by the Selling Shareholders) have been duly
authorized and validly issued, are fully-paid and non-assessable, are
not subject to any preemptive or similar rights; and, except as
described in or expressly contemplated by the Prospectus (including
grants of options under employee plans described therein), there are
no outstanding rights (including, without limitation, preemptive
rights), warrants or options to acquire, or instruments convertible
into or exchangeable for, any shares of capital stock or other equity
interests in the Company or any of its subsidiaries, or any contract,
commitment, agreement, understanding or arrangement of any kind
relating to the issuance of any capital stock of the Company or any
such subsidiary, any such convertible or exchangeable securities or
any such rights, warrants or options;
(i) the performance by the Company of its obligations under this
Agreement, and the consummation of the transactions contemplated
herein will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will any such action result in any
violation of the provisions of the Company's Certificate of
Incorporation or By-Laws, or any applicable law or
7
<PAGE>
statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their respective properties, except for any
such breaches, conflicts, defaults or violations which individually or
in the aggregate would not have a material adverse affect on the
Company and its subsidiaries taken as a whole; and no consent,
approval, authorization, order, registration or qualification of or
with any such court or governmental agency or body is required for the
registration of the Shares by the Company or the consummation by the
Company of the transactions contemplated by this Agreement, except
such consents, approvals, authorizations, registrations or
qualifications as have been obtained under the Securities Act and as
may be required under state securities or Blue Sky laws;
(j) other than as set forth or contemplated or incorporated by
reference in the Prospectus, there are no legal or governmental
proceedings pending or, to the knowledge of the Company, threatened to
which the Company or any of its subsidiaries is or may be a party or
to which any property of the Company or any of its subsidiaries is or
may be the subject which, individually or in the aggregate, would
reasonably be expected to have a material adverse effect on the
business, operations or condition, financial or otherwise, of the
Company and any of its subsidiaries taken as a whole; and there are no
contracts or other documents of a character required to be filed as an
exhibit to the Registration Statement or required to be described in
the Registration Statement or the Prospectus which are not filed or
described as required;
(k) except as set forth or incorporated by reference in the
Registration Statement and the Prospectus, no person has the right to
require the Company to register any securities for offering and sale
under the Securities Act by reason of the filing of the Registration
Statement with the Commission or the sale of the Shares by the Selling
Shareholders;
(l) the Company is not an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended; and
5. Each Selling Shareholder severally represents and warrants to each
Underwriter that:
(a) such Selling Shareholder is the lawful owner of the Shares
and has, and on the Closing Date will have, good and clear
8
<PAGE>
title to the Shares to be sold on such Closing Date by such Selling
Shareholder, free and clear of all restrictions on transfer, liens,
encumbrances, security interests and claims, whatsoever;
(b) upon delivery of and payment for the Shares such Selling
Shareholder is selling pursuant to this Agreement, good and clear
title to such Shares will pass to the Underwriters, free of all
restrictions on transfer, liens, encumbrances, security interests and
claims, whatsoever;
(c) such Selling Shareholder has, and on the Closing Date will
have, full legal right, power and authority to enter into this
Agreement and to sell, assign, transfer and deliver the Shares to be
sold by such Selling Shareholder in the manner provided herein, and
this Agreement, when executed and delivered in accordance with the
terms of the Power, will be, a valid and binding agreement of such
Selling Shareholder;
(d) such Selling Shareholder's Custody Agreement, Power and
Notice of Election dated as of April 24, 1997 ("Notice of Election")
have been duly executed and delivered by or on behalf of such Selling
Shareholder and are valid and binding agreements of such Selling
Shareholder, enforceable in accordance with their terms; and pursuant
to the Power such Selling Shareholder has authorized the
Attorneys-in-Fact named therein, or any one of them, to execute and
deliver on such Selling Shareholder's behalf this Agreement and any
other document an Attorney-in-Fact may deem necessary or desirable in
connection with transactions contemplated hereby and by such Power and
to deliver the Shares pursuant to this Agreement;
(e) such Selling Shareholder has not taken, and will not take,
directly or indirectly, any action designed to, or which might
reasonably be expected to, cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Shares pursuant to the distribution
contemplated by this Agreement and other than as permitted by the
Securities Act, such Selling Shareholder has not distributed and will
not distribute any prospectus or other offering material in connection
with the offering and sale of the Shares;
(f) the execution, delivery and performance of such Selling
Shareholder's Power, this Agreement, the Custody Agreement and the
Notice of Election by or on behalf of such Selling Shareholder,
compliance by such Selling Shareholder with all the provisions
9
<PAGE>
hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not require any consent,
approval, authorization or other order of, or qualification with, any
court or governmental agency or body (except such as may be required
under the securities or Blue Sky laws of the various states) and will
not conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the organizational documents of
such Selling Shareholder, if not an individual, or any indenture, loan
agreement, mortgage, lease or other agreement or instrument to which
such Selling Shareholder is a party or by which such Selling
Shareholder or property of such Selling Shareholder is bound, or
violate or conflict with any applicable law or any rule, regulation,
judgment, order or decree of any court or governmental body or agency
having jurisdiction over the undersigned or property of such Selling
Shareholder;
(g) the information in such Selling Shareholder's Registration
Questionnaire dated as of April 24, 1997 (the "Registration
Questionnaire") does not, and will not on the Closing Date, contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; and
(h) certificate(s) in negotiable form for the number of Shares to
be sold by such Selling Shareholder under this Agreement have been
placed in custody with the Custodian for the purpose of effecting
delivery under this Agreement.
6. The Company covenants and agrees with the several Underwriters as
follows:
(a) to use its best efforts to cause the Registration Statement
to become effective at the earliest possible time and, if required, to
file the final Prospectus with the Commission within the time periods
specified by Rule 424(b) and Rule 430A under the Securities Act;
(b) to deliver, at the expense of the Company, to the Lead
Managers, three signed copies of the Registration Statement (as
originally filed) and each amendment thereto, in each case including
exhibits and if requested documents incorporated by reference
therein, and to each other Underwriter a conformed copy of the
Registration Statement (as originally filed) and each amendment
thereto, in each case without exhibits but including the documents
10
<PAGE>
incorporated by reference therein and, prior to 10:00 a.m. New York
City time on the Business Day next succeeding the date of this
Agreement in New York City and during the period mentioned in
paragraph (e) below, to each of the Underwriters as many copies of the
Prospectus (including all amendments and supplements thereto and
documents incorporated by reference therein) as the Lead Managers may
reasonably request;
(c) through the period specified in clause (e) below, before
filing any amendment or supplement described in clause (e) to the
Registration Statement or the Prospectus (whether before or after the
time the Registration Statement becomes effective) to furnish to the
Lead Managers a copy of the proposed amendment or supplement for
review and not to file any such proposed amendment or supplement to
which the Lead Managers reasonably object;
(d) through the period specified in clause (e) below, to advise
the Lead Managers promptly, and if requested, and to confirm such
advice in writing, (i) when the Registration Statement shall become
effective, (ii) when any amendment described in clause (e) to the
Registration Statement shall have become effective, (iii) of any
request by the Commission for any amendment to the Registration
Statement or any amendment or supplement to the Prospectus described
in clause (e) or for any additional information, (iv) of the issuance
by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the initiation or threatening of any
proceeding for that purpose and (v) of the receipt by the Company of
any notification with respect to any suspension of the qualification
of the Shares for offer and sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose; and to use its best
efforts to prevent the issuance of any such stop order or notification
and, if issued, to obtain as soon as possible the withdrawal thereof;
(e) if, during such period of time after the first date of the
public offering of the Shares as in the written opinion of Davis Polk
& Wardwell, counsel for the Underwriters, a prospectus relating to the
Shares is required by law to be delivered in connection with sales by
the Underwriters or any dealer, any event shall occur as a result of
which it is necessary to amend or supplement the Prospectus in order
to make the statements therein, in the light of the circumstances when
the Prospectus is delivered to a purchaser, not misleading, or if it
is necessary to amend or supplement the Prospectus to comply with law,
forthwith to prepare and furnish, at
11
<PAGE>
the expense of the Company, to the Underwriters and to the dealers
(whose names and addresses the Lead Managers will furnish to the
Company) to which Shares may have been sold by the Lead Managers on
behalf of the Underwriters and to any other dealers upon request, such
amendments or supplements to the Prospectus as may be necessary so
that the statements in the Prospectus as so amended or supplemented
will not, in the light of the circumstances when the Prospectus is
delivered to a purchaser, be misleading or so that the Prospectus will
comply with law;
(f) to make generally available to its security holders and to
the Lead Managers as soon as practicable an earnings statement
covering a period of at least twelve months beginning with the first
fiscal quarter of the Company occurring after the effective date of
the Registration Statement, which shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 of the Commission
promulgated thereunder;
(g) for a period of 90 days after the date of the Prospectus,
without the prior written consent of J.P. Morgan Securities Inc. not
to (i) offer, sell, contract to sell or grant any option to purchase
or otherwise dispose of any Common Stock of the Company, or any
securities convertible into or exercisable or exchangeable for Common
Stock of the Company or enter into any swap or other agreement that
transfers, in whole or in part, the economic consequences of ownership
of Common Stock, other than the Shares to be sold hereunder, any
shares of Common Stock issued in connection with existing employee
stock option and incentive plans and any shares of Common Stock issued
as consideration in an
12
<PAGE>
acquisition or (ii) file any registration statement under the
Securities Act with respect to Common Stock of the Company or any
securities convertible into or exercisable or exchangeable for Common
Stock other than in connection with the registration of Shares issued
as consideration in an acquisition; and
(h) to pay all costs and expenses incident to the performance of
the obligations of the Company and the Selling Shareholders hereunder,
including without limiting the generality of the foregoing, all costs
and expenses (i) incident to the preparation, issuance, execution and
delivery of unlegended certificates evidencing the Shares, (ii)
incident to the preparation, printing and filing under the Securities
Act of the Registration Statement, the Prospectus and any preliminary
prospectus (including in each case all exhibits, amendments and
supplements thereto), (iii) in connection with the listing of the
Shares on the New York Stock Exchange, Chicago Stock Exchange, Pacific
Stock Exchange and London Stock Exchange, (iv) filing fees incident to
the clearance of the offering by the National Association of
Securities Dealers, Inc. and (v) in connection with the delivery of
this Agreement, all other agreements relating to underwriting and
syndication arrangements, and the furnishing to the Underwriters and
dealers of copies of the Registration Statement and the Prospectus,
including mailing and shipping, as herein provided.
7. Each of the Selling Shareholders severally covenants and agrees with
the several Underwriters as follows:
(a) such Selling Shareholder will do or perform or cause to be
done or performed all things required to be done or performed by such
Selling Shareholder prior to the Closing Date to satisfy all
conditions precedent to the delivery of the Shares pursuant to this
Agreement; and
(b) such Selling Shareholder agrees to pay or cause to be paid
all taxes, if any, on the transfer and sale of the Shares being sold
by such Selling Shareholder.
8. The several obligations of the Underwriters hereunder to purchase the
Shares are subject to the following additional conditions:
13
<PAGE>
(a) the Registration Statement shall have become effective (or if
a post-effective amendment is required to be filed under the
Securities Act, such post-effective amendment shall have become
effective) prior to the execution of this Agreement and no stop order
suspending the effectiveness of the Registration Statement shall be in
effect, and no proceedings for such purpose shall be pending before or
threatened by the Commission; and all requests by the Commission for
additional information shall have been complied with to the reasonable
satisfaction of the Lead Managers;
(b) the representations and warranties of the Company contained
herein shall be true and correct on and as of the Closing Date as if
made on and as of the Closing Date and the Company shall have complied
with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date;
(c) subsequent to the execution and delivery of this Agreement
and prior to the Closing Date, there shall not have occurred any
downgrading, nor shall any notice have been given of (i) any intended
or potential downgrading or (ii) any review or possible change with
negative implications, in the rating accorded any securities of or
guaranteed by the Company by any "nationally recognized statistical
rating organization", as such term is defined for purposes of Rule
436(g)(2) under the Securities Act;
(d) since the respective dates as of which information is given
in the Registration Statement and the Prospectus there shall not have
been any material adverse change or any development involving a
prospective material adverse change, in or affecting the general
affairs, business, management, financial position, stockholders'
equity or results of operations of the Company and its subsidiaries
taken as a whole, otherwise than as set forth or contemplated in the
Registration Statement and the Prospectus (exclusive, in each case, of
any amendments or supplements thereto subsequent to the date of this
Agreement), the effect of which in the judgment of the Lead Managers
makes it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares on the terms and in the manner
contemplated in the Prospectus;
(e) the Lead Managers shall have received on and as of the
Closing Date a certificate of the Company signed by an executive
officer of the Company satisfactory to the Lead Managers to the effect
set forth in subsections (a) through (c) of this Section and to
14
<PAGE>
the further effect that there has not occurred any material adverse
change or any development involving a prospective material adverse
change, in or affecting the general affairs, business, prospects,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries taken as a whole,
otherwise than as set forth or contemplated in the Registration
Statement and the Prospectus (exclusive, in each case, of any
amendments or supplements thereto subsequent to the date of this
Agreement); the foregoing certificate shall also be addressed to the
Selling Shareholders;
(f) Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the
Company, shall have furnished to the Lead Managers their written
opinion, dated the Closing Date, in form and substance satisfactory to
the Lead Managers and addressed to the Underwriters and the Selling
Shareholders, to the effect that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
Delaware, with corporate power and authority to own its
properties and conduct its business as described in the
Prospectus;
(ii) this Agreement has been duly authorized, executed and
delivered by the Company;
(iii) the authorized capital stock of the Company conforms as
to legal matters to the description thereof set forth or
incorporated by reference in the Registration Statement and the
Prospectus, and the Shares to be sold by the Selling Shareholders
have been duly authorized and validly issued, are fully-paid and
non-assessable, and are not subject to any preemptive or similar
rights;
(iv) the performance by the Company of its obligations under
this Agreement, and the consummation of the transactions
contemplated herein will not result in any violation of the
provisions of the Company's Certificate of Incorporation or
By-Laws, or any applicable law or statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any
of their respective properties, except for any such violations
which individually or in the aggregate would not have a material
adverse affect on the Company and its subsidiaries taken as a
whole; and no consent, approval, authorization, order,
registration or
15
<PAGE>
qualification of or with any such court or governmental agency or
body is required for the registration of the Shares by the
Company or the consummation by the Company of the transactions
contemplated by this Agreement, except such consents, approvals,
authorizations, registrations or qualifications as have been
obtained under the Securities Act and as may be required under
state securities or Blue Sky laws;
(v) the Company is not an "investment company" as such term
is defined in the Investment Company Act of 1940, as amended;
(vi) the statements in the Prospectus under "Underwriting"
insofar as they relate to the Underwriting Agreement and in the
Company's Registration Statements on Form 8-A dated May 22, 1969
and September 21, 1987, as amended, insofar as such statements
constitute a summary of legal matters, documents or proceedings
referred to therein, fairly present the information called for
with respect to such legal matters, documents or proceedings; and
(vii) such counsel is of the opinion that the Registration
Statement and the Prospectus and any amendments and supplements
thereto (except for the financial statements and related
schedules and other financial and statistical data included or
incorporated by reference therein as to which such counsel need
express no opinion) comply as to form in all material respects
with the requirements of the Securities Act and has no reason to
believe that (except as stated above) the Registration Statement
and the prospectus included therein at the time the Registration
Statement became effective contained any untrue statement of a
material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or that (except as stated above) the Prospectus as
amended or supplemented, if applicable, contains any untrue
statement of a material fact or omits to state a material fact
necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
16
<PAGE>
(g) Gregory F. Van Gundy, General Counsel and Secretary of the
Company, shall have furnished to the Lead Managers his written
opinion, dated the Closing Date, in form and substance satisfactory to
the Lead Managers and addressed to the Underwriters and the Selling
Shareholders, to the effect that:
(i) the Company has been duly qualified as a foreign
corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it
owns or leases properties or conducts any business so as to
require such qualification, other than where the failure to be so
qualified or in good standing would not have a material adverse
effect on the Company and its subsidiaries taken as a whole;
(ii) each Significant Subsidiary of the Company has been
duly incorporated and is validly existing as a corporation in
good standing under the laws of its jurisdiction of
incorporation, with corporate power and authority to own its
properties and conduct its business as described in the
Prospectus; and, except as described or incorporated by reference
in or contemplated by the Prospectus, all the outstanding shares
of capital stock of each Significant Subsidiary have been duly
authorized and validly issued, are fully-paid and non-assessable,
and are owned by the Company, directly or indirectly, free and
clear of all liens, encumbrances, security interests and claims;
(iii) the performance by the Company of its obligations under
this Agreement, and the consummation of the transactions
contemplated herein will not conflict with or result in a breach
of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument known to such counsel to which the
Company or any of its Significant Subsidiaries is a party or by
which the Company or any of its Significant Subsidiaries is bound
or to which any of the property or assets of the Company or any
of its Significant Subsidiaries is subject, except for any such
breaches, conflicts or defaults which individually or in the
aggregate would not have a material adverse affect on the Company
and its subsidiaries taken as a whole;
17
<PAGE>
(iv) other than as set forth or contemplated or incorporated
by reference in the Prospectus, there are no legal or
governmental proceedings pending or, to the knowledge of such
counsel, threatened to which the Company or any of its
subsidiaries is or may be a party or to which any property of the
Company or any of its subsidiaries is or may be the subject
which, individually or in the aggregate, would reasonably be
expected to have a material adverse effect on the business,
operations or condition, financial or otherwise, of the Company
and any of its subsidiaries taken as a whole; and such counsel
does not know of any contracts or other documents of a character
required to be filed as an exhibit to the Registration Statement
or required to be described in the Registration Statement or the
Prospectus which are not filed or described as required;
(v) except as set forth or incorporated by reference in
the Registration Statement and the Prospectus, such counsel does
not know of any right to require the Company to register any
securities for offering and sale under the Securities Act by
reason of the filing of the Registration Statement with the
Commission or the sale of the Shares by the Selling Shareholders;
(vi) the statements in or incorporated by reference into the
Company's Annual Report on Form 10-K for the year ended
December 31, 1996 under "Regulation", "Legal Proceedings" and
"Certain Relationships and Related Transactions" insofar as such
statements constitute a summary of legal matters, documents or
proceedings referred to therein, fairly present the information
called for with respect to such legal matters, documents or
proceedings; and
(vii) such counsel is of the opinion that each document
incorporated by reference in the Registration Statement and the
Prospectus (except for the financial statements and related
schedules and other financial and statistical data included
therein as to which such counsel need express no opinion)
complied as to form in all material respects, when filed with the
Commission, with the Exchange Act.
18
<PAGE>
In rendering the opinions described in paragraphs (f) and (g) above, such
counsel may rely as to matters of fact, to the extent such counsel deems proper,
on certificates of responsible officers of the Company and certificates or other
written statements of officials or jurisdictions having custody of documents
respecting the corporate existence or good standing of the Company. With
respect to the matters to be covered in subparagraph (vii) of paragraph (f)
above, counsel may state their opinion and belief is based upon their
participation in the preparation of the Registration Statement and the
Prospectus and any amendment or supplement thereto (other than the documents
incorporated by reference therein) and review and discussion of the contents
thereof (including the documents incorporated by reference therein) but is
without independent check or verification except as specified. With respect to
the matters to be covered in subparagraph (vii) of paragraph (g) above, counsel
may state his opinion and belief is based upon his participation in the
preparation of the documents incorporated by reference in the Registration
Statement and the Prospectus and any amendment or supplement thereto and review
and discussion of the contents thereof but is without independent check or
verification except as specified.
(h) Sullivan & Cromwell, counsel for the Selling Shareholders,
shall have furnished to the Lead Managers their written opinion, dated
the Closing Date, in form and substance satisfactory to the Lead
Managers, to the effect that:
(i) each Selling Shareholders' Custody Agreement and Power
has been duly executed and delivered by the applicable Selling
Shareholder and constitutes a valid and legally binding agreement
of such Selling Shareholder enforceable in accordance with its
terms, subject to bankruptcy insolvency fraudulent transfer,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to
general equity principles, and except as the indemnification
provisions may be invalid or unenforceable under applicable law
because they violate public policy;
(ii) the agreement of each Selling Shareholder set forth in
the last paragraph of such Selling Shareholder's Notice of
Election has been duly executed and delivered by such Selling
Shareholder and constitutes a valid and legally binding agreement
of such Selling Shareholder enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to
general equity principles;
(iii) this Agreement has been duly executed and delivered
on behalf of each Selling Shareholder and constitutes a valid and
legally binding agreement of each Selling Shareholder enforceable
in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization moratorium and similar laws
of general applicability relating to or affecting creditors'
rights and to general equity principles and except as the
indemnity and contribution provisions may be invalid or
unenforceable because they violate public policy;
(iv) upon payment for and delivery of the Shares being sold
by each Selling Shareholder pursuant to this Agreement in the
State of New York the Underwriters will have acquired the Shares
free of any adverse claim within the meaning of Section 8-302 of
the New York Uniform Commercial Code; and
(v) the statements in the Prospectus under "Selling
Stockholders" comply as to form in all material respects with the
Securities Act.
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<PAGE>
In rendering the foregoing opinions, such counsel may state that they
express no opinion on the laws of any jurisdiction other than the Federal laws
of the United States and the laws of the State of New York.
The opinions of Skadden, Arps, Slate, Meagher & Flom LLP, Gregory F. Van
Gundy and Sullivan & Cromwell described in paragraphs (f) - (h) above shall be
rendered to you at the request of the Company or the Selling Shareholders, as
the case may be, and shall so state therein.
(i) on the date of the Prospectus and the effective date of the
most recently filed post-effective amendment to the Registration
Statement, if any, and also on the Closing Date, Deloitte & Touche LLP
and Arthur Andersen LLP shall have furnished to the Lead Managers
letters, dated the respective dates of delivery thereof, in form and
substance satisfactory to the Lead Managers and addressed to the
Underwriters and the Selling Shareholders, containing statements and
information of the type customarily included in accountants "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained or incorporated by reference
in the Registration Statement and the Prospectus;
(j) the Lead Managers shall have received on and as of the
Closing Date an opinion of Davis Polk & Wardwell, counsel to the
Underwriters, with respect to the Registration Statement, the
Prospectus and other related matters as the Lead Managers may
reasonably request, and such counsel shall have received such papers
and information as they may reasonably request to enable them to pass
upon such matters;
(k) the representations and warranties of the Selling
Shareholders contained herein shall be true and correct on and as of
the Closing Date as if made on and as of the Closing Date, and you
shall have received a certificate dated the Closing Date and signed by
or on behalf of the Selling Shareholders to the effect set forth in
this Section 8(j) and in Section 8(k) hereof;
(l) the Selling Shareholders shall have complied with all
agreements and satisfied all conditions on their part to be performed
or satisfied at or prior to the Closing Date; and
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<PAGE>
(m) the Lead Managers shall have received executed copies of each
Selling Shareholder's Notice of Election and each Notice of Election
of any Selling Stockholder (as defined in the Prospectus) not electing
to participate in the offering described in the prospectus supplement
relating to the Shares; and
(n) on or prior to the Closing Date, the Company and each Selling
Shareholder shall have furnished to the Lead Managers such further
certificates and documents as the Lead Managers shall reasonably
request.
9. The Company agrees to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages and liabilities (including, without
limitation the legal fees and other expenses incurred in connection with any
suit, action or proceeding or any claim asserted) caused by any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or the Prospectus (as amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) or any preliminary
prospectus, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through the Lead Managers expressly for use therein; PROVIDED that
the foregoing indemnity with respect to any preliminary prospectus shall not
inure to the benefit of any Underwriter (or to the benefit of any person
controlling such Underwriter) from whom the person asserting any such losses,
claims, damages or liabilities purchased Shares if such untrue statement or
omission or alleged untrue statement or omission made in such preliminary
prospectus is eliminated or remedied in the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) and if a copy of the Prospectus (as so amended or supplemented) was
required by law to be furnished but was not so furnished to such person at or
prior to the written confirmation of the sale of such Shares to such person.
Each Selling Shareholder agrees, severally and not jointly, to indemnify
and hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities (including, without limitation the legal fees and other
expenses incurred in connection with any suit, action or proceeding or any claim
asserted) caused by any untrue statement or alleged untrue statement of a
material
21
<PAGE>
fact contained in the Registration Statement or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or any preliminary prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only with reference
to information relating to such Selling Shareholder furnished in writing by or
on behalf of such Selling Shareholder for use in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any preliminary prospectus.
Each Underwriter agrees, severally and not jointly, to indemnify and hold
harmless the Company, its directors, its officers who sign the Registration
Statement, the Selling Shareholders and each person who controls the Company or
any Selling Shareholder within the meaning of Section 15 of the Securities Act
and Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities (including, without limitation the legal fees and other
expenses incurred in connection with any suit, action or proceeding or any claim
asserted) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or the Prospectus (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, but only with
reference to information relating to such Underwriter furnished to the Company
in writing by such Underwriter through the Lead Managers expressly for use in
the Registration Statement, the Prospectus, any amendment or supplement thereto,
or any preliminary prospectus.
If any suit, action, proceeding (including any governmental or regulatory
investigation), claim or demand shall be brought or asserted against any person
in respect of which indemnity may be sought pursuant to either of the three
preceding paragraphs, such person (the "Indemnified Person") shall promptly
notify the person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding as described below and
shall pay the fees and expenses of such counsel related to such proceeding. In
any such proceeding, any Indemnified Person shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Person unless (i) the Indemnifying Person and the
Indemnified Person shall have mutually agreed to the contrary, (ii) the
Indemnifying Person has failed within a reasonable time to retain counsel
reasonably satisfactory to the Indemnified Person or (iii) the named parties in
any such proceeding (including any impleaded parties) include both the
Indemnifying Person and the Indemnified Person and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing
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<PAGE>
interests between them. It is understood that the Indemnifying Person shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) (a) for all Underwriters and all persons, if
any, who control any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, (b) for the Company, its
directors, its officers who sign the Registration Statement and each person, if
any, who controls the Company within the meaning of either such Section and (c)
for all Selling Shareholders and all persons, if any, who control any Selling
Shareholder within the meaning of either such Section, and that all such fees
and expenses shall be reimbursed as they are incurred. Any such separate firm
for the Underwriters and such control persons of the Underwriters shall be
designated in writing by J.P. Morgan Securities Inc.; any such separate firm for
the Company, its directors, its officers who sign the Registration Statement and
such control persons of the Company shall be designated in writing by the
Company; and any such separate firm for the Selling Shareholders and such
control persons of Selling Shareholders shall be designated by an
Attorney-in-Fact. The Indemnifying Person shall not be liable for any settlement
of any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the Indemnifying
Person agrees to indemnify any Indemnified Person from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an Indemnified Person shall have requested an
Indemnifying Person to reimburse the Indemnified Person for fees and expenses of
counsel as contemplated by the third sentence of this paragraph, the
Indemnifying Person agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such Indemnifying Person of the
aforesaid request (the "Measurement Date") and (ii) such Indemnifying Person
shall not have reimbursed the Indemnified Person in accordance with such request
prior to the date of such settlement; PROVIDED that an Indemnifying Person shall
not be liable for any such settlement effected without its consent if such
Indemnifying Person (1) reimburses such Indemnified Person in accordance with
such request to the extent it considers such request to be reasonable, (2)
provides written notice to the Indemnified Person substantiating the unpaid
balance as unreasonable, in each case prior to the date of such settlement, and
(3) the Indemnifying Person agrees that, if it subsequently pays some or all of
the unpaid balance, it will pay interest on the amount of the unpaid balance so
paid from the Measurement Date to the date of actual payment at a per annum rate
equal to the sum of the prime rate then in effect as announced by Morgan
Guaranty Trust Company of New York plus 2.0%. No Indemnifying Person shall,
without the prior written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Person, unless such settlement includes an
unconditional release of such Indemnified Person from all liability on claims
that are the subject matter of such proceeding.
23
<PAGE>
If the indemnification provided for in the first, second or third
paragraphs of this Section 9 is unavailable to an Indemnified Person in respect
of any losses, claims, damages or liabilities referred to therein, then each
Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable
by such Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Indemnified Person from the offering of the Shares or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault
of the Company and the Selling Shareholders on the one hand and the
Underwriters on the other in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the
Selling Shareholders in the aggregate shall be deemed to be the net proceeds
from the offering of the Shares (before deducting expenses) received by the
Selling Shareholders, the relative benefits received by the Company shall be
deemed to be the same amount and the relative benefits received by the
Underwriters shall be deemed to be the total underwriting discounts and
commissions received by the Underwriter in each case as set forth in the table
on the cover of the Prospectus. The relative fault of the Company and the
Selling Shareholders on the one hand and the Underwriters on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or the
Selling Shareholders or by the Underwriters and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company, the Selling Shareholders and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 9 were
determined by PRO RATA allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Person as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 9, in no event shall an
Underwriter be required to contribute any amount in excess of the amount by
which the total price at which the Shares underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages that
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation
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<PAGE>
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 9 are several in proportion to the respective number of Shares set forth
opposite their names in Schedule I hereto, and not joint.
The indemnity and contribution agreements contained in this Section 9 are
in addition to any liability which the Indemnifying Persons may otherwise have
to the Indemnified Persons referred to above.
The indemnity and contribution agreements contained in this Section 9 and
the representations and warranties of the Company and the Selling Shareholders
set forth in this Agreement shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation made
by or on behalf of any Underwriter or any person controlling any Underwriter, by
or on behalf of any Selling Shareholder or any person controlling any Selling
Shareholder or by or on behalf of the Company, its officers or directors or any
person controlling the Company and (iii) acceptance of and payment for any of
the Shares.
10. Notwithstanding anything herein contained, this Agreement may be
terminated in the absolute discretion of the Lead Managers, by notice given to
the Company and the Attorneys-in-Fact, if after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the National Association of Securities Dealers, Inc.,
the Chicago Board Options Exchange or the Chicago Board of Trade, (ii) trading
of any securities of the Company shall have been suspended or materially limited
in any over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either U.S. Federal or New
York State authorities or exchange controls shall have been imposed by the
United States, or (iv) there shall have occurred any outbreak or escalation of
hostilities or any change in financial markets or any calamity or crisis that,
in the judgment of the Lead Managers, is material and adverse and which, in the
judgment of the Lead Managers, makes it impracticable to market the Shares on
the terms and in the manner contemplated in the Prospectus.
11. This Agreement shall become effective upon execution and delivery
hereof by or on behalf of the parties hereto.
If, on the Closing Date, any one or more of the Underwriters shall fail or
refuse to purchase Shares which it or they have agreed to purchase hereunder on
such date, and the aggregate number of Shares which such defaulting Underwriter
or Underwriters agreed but failed or refused to purchase is not more than
one-tenth of the aggregate number of Shares to be purchased on such date, the
25
<PAGE>
other Underwriters shall be obligated severally in the proportions that the
number of Shares set forth opposite their respective names in Schedule I hereto
bears to the aggregate number of Shares set forth opposite the names of all such
non-defaulting Underwriters, or in such other proportions as the Lead Managers
may specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; PROVIDED
that in no event shall the number of Shares that any Underwriter has agreed to
purchase pursuant to Section 1 be increased pursuant to this Section 11 by an
amount in excess of one-ninth of such number of Shares without the written
consent of such Underwriter. If, on the Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Shares which it or they have
agreed to purchase hereunder on such date, and the number of Shares with respect
to which such default occurs is more than one-tenth of the aggregate number of
Shares to be purchased on such date, and arrangements satisfactory to the Lead
Managers, the Selling Shareholders and the Company for the purchase of such
Shares are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter, the
Selling Shareholders or the Company. In any such case the Lead Managers, the
Selling Shareholders or the Company shall have the right to postpone the Closing
Date, but in no event for longer than seven days, in order that the required
changes, if any, in the Registration Statement and in the Prospectus or in any
other documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting Underwriter from liability in respect
of any default of such Underwriter under this Agreement.
12. If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company or any
Selling Shareholder to comply with the terms or to fulfill any of the conditions
of this Agreement, or if for any reason the Company or any Selling Shareholder
shall be unable to perform its obligations under this Agreement or the Custody
Agreement or the Power of such Selling Shareholder or any condition of the
Underwriters' obligations cannot be fulfilled, the Company agrees to reimburse
the Underwriters or such Underwriters as have so terminated this Agreement with
respect to themselves, severally, for all out-of-pocket expenses (including the
fees and expenses of their counsel) reasonably incurred by such Underwriters in
connection with this Agreement or the offering contemplated hereunder.
13. This Agreement shall inure to the benefit of and be binding upon the
Company, each Selling Shareholder, the Underwriters, any controlling persons
referred to herein and their respective successors and assigns. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any other person, firm or corporation any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. No purchaser of Shares from any Underwriter shall be deemed to be a
successor by reason merely of such purchase.
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<PAGE>
14. Any action by the Underwriters hereunder may be taken by the Lead
Managers jointly or by J.P. Morgan Securities Inc. alone on behalf of the
Underwriters, and any such action taken by the Lead Managers jointly or by J.P.
Morgan Securities Inc. alone shall be binding upon the Underwriters. All notices
and other communications hereunder shall be in writing and shall be deemed to
have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be given to the Lead
Managers c/o J.P. Morgan Securities Inc., 60 Wall Street, New York, New York
10260 (facsimile: (212) 648-5705); Attention: Syndicate Department. Notices to
the Company shall be given to it at Marsh & McLennan Companies, Inc., 1166
Avenue of the Americas, New York, New York 10036-2774; (facsimile:
212-345-4647); Attention: Gregory F. Van Gundy. Notices to the Selling
Shareholders shall be given to the Attorneys-in-Fact, c/o Johnson & Higgins, 125
Broad Street, New York, New York 10004-2424 (facsimile: 212-574-8900);
Attention: Joseph Roxe.
15. This Agreement may be signed in counterparts, each of which shall be an
original and all of which together shall constitute one and the same instrument.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York, without giving effect to the conflicts of laws provisions
thereof.
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<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return four counterparts hereof.
Very truly yours,
MARSH & MCLENNAN COMPANIES, INC.
By: __________________________________
Title:
EACH OF THE SELLING SHAREHOLDERS
NAMED IN SCHEDULE II HERETO
By: __________________________________
Name:
Attorney-in-Fact
Accepted: , 1997
J.P. MORGAN SECURITIES INC.
MORGAN STANLEY & CO. INCORPORATED
Acting severally on behalf of themselves
and the several Underwriters listed
in Schedule I hereto.
By: J.P. MORGAN SECURITIES INC.
By: _____________________________
Title:
28
<PAGE>
SCHEDULE I
Number of
Shares
Underwriters To Be Purchased
- ------------ ---------------
J.P. Morgan Securities Inc.
Morgan Stanley & Co. Incorporated
Donaldson, Lufkin & Jenrette
Securities Corporation
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
PaineWebber Incorporated _______________
TOTAL: ===============
<PAGE>
SCHEDULE II
Number of
Shares
Selling Shareholder To Be Sold
- ------------------- ----------
__________
TOTAL: ==========
<PAGE>
EXHIBIT A
<PAGE>
Exhibit 23(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to the
Registration Statement of Marsh & McLennan Companies, Inc. on Form S-3
(Registration File No. 333-25069) of our reports dated February 26, 1997 (March
12, 1997 as to the last paragraph of Note 3), appearing in and incorporated by
reference in the Annual Report on Form 10-K of Marsh & McLennan Companies, Inc.
for the year ended December 31, 1996 and to the reference to us under the
headings "Selected Historical Consolidated Financial Data" and "Experts" in the
Prospectus, which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
------------------------------------
Deloitte & Touche LLP
New York, New York
April 25, 1997
<PAGE>
Exhibit 23(b)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Amendment No. 1 to the Form S-3 Registration Statement of our
report to the Board of Directors of Johnson & Higgins dated March 11, 1997
included in Marsh & McLennan's Form 8-K filed with the Commission on April 7,
1997 and to all references to our Firm included in this amendment.
/s/ Arthur Andersen LLP
----------------------------------------
Arthur Andersen LLP
April 25, 1997
New York, New York
