<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
AND
STATEMENT ON
SCHEDULE 13D
AMENDMENT NO. 1
UNDER THE SECURITIES EXCHANGE ACT OF 1934
------------------
SEDGWICK GROUP PLC
(NAME OF SUBJECT COMPANY)
MARSH & MCLENNAN COMPANIES, INC.
(BIDDER)
ORDINARY SHARES OF 10 PENCE EACH AND
AMERICAN DEPOSITARY SHARES, EACH REPRESENTING FIVE
ORDINARY SHARES AND EVIDENCED BY
AMERICAN DEPOSITARY RECEIPTS
(TITLE OF CLASS OF SECURITIES)
815673108 (ORDINARY SHARES)
315673207 (AMERICAN DEPOSITARY SHARES)
(CUSIP NUMBER OF CLASS OF SECURITIES)
GREGORY F. VAN GUNDY
GENERAL COUNSEL AND SECRETARY
1166 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036-2774
(212) 345-5000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
COPIES TO:
DAVID J. FRIEDMAN MARK RAWLINSON
MICHAEL E. HATCHARD FRESHFIELDS
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 65 FLEET STREET
919 THIRD AVENUE LONDON EUY 1HS, ENGLAND
NEW YORK, NEW YORK 10022 (011) 44-171-936-4000
(212) 735-3000
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
================================================================================
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
- --------------------------------------------------------------------------------
<S> <C>
$180,658,083 $36,132
================================================================================
</TABLE>
* Estimated for purposes of calculating the filing fee only. Based on the
offer to purchase 3,269,200 American Depositary Shares (each representing
five Ordinary Shares) and 31,733,330 ordinary shares ("Ordinary Shares")
of 10 pence each of Sedgwick Group plc ("Sedgwick") held by U.S. residents
at pound sterling 11.25 per American Depositary Share and 225 pence per
Ordinary Share and the multiplication of such aggregate purchase price by
the currency exchange rate of pound sterling 1=$1.67 (such currency
exchange rate being derived from The Wall Street Journal dated September
3, 1998). Such number of American Depositary Shares represents all
American Depositary Shares of Sedgwick outstanding as of September 3, 1998
and such number of Ordinary Shares exceeds the estimate by Sedgwick of the
aggregate number of outstanding Ordinary Shares held by United States
residents.
** 1/50 of 1% of Transaction Valuation.
/ / Check Box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<S> <C>
Amount Previously Paid: ........................... N/A
Form or Registration No.: ......................... N/A
Filing Party: ..................................... N/A
Date Filed: ....................................... N/A
</TABLE>
<PAGE> 2
- ----------------------------------------------------
CUSIP NO. 815673108 (ORDINARY SHARES)
315673207 (AMERICAN DEPOSITARY SHARES)
- ----------------------------------------------------
- --------------------------------------------------------------------------------
1. NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Marsh & McLennan Companies, Inc. (I.R.S. Identification No. 36-2668272)
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF GROUP (a) / /
(b) / /
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCES OF FUNDS
BK
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS / /
IF REQUIRED PURSUANT TO ITEM 2(e) OR 2(f)
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
- --------------------------------------------------------------------------------
7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
278,796,998
- --------------------------------------------------------------------------------
8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) / /
EXCLUDES CERTAIN SHARES
- --------------------------------------------------------------------------------
9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
50.3%
- --------------------------------------------------------------------------------
10. TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
2
<PAGE> 3
Item 1. Security and Subject Company.
(a) The name of the subject company is Sedgwick Group plc ("Sedgwick"), a
public limited company incorporated and registered in England and Wales. The
address of its principal executive offices is Sackville House, 143-149 Fenchurch
Street, London EC3M 6BN, England.
(b) This Tender Offer Statement on Schedule 14D-1 relates to the offer
(the "Offer") by Marsh & McLennan Companies, Inc., a Delaware Corporation
("Marsh & McLennan"), to purchase all of the outstanding (a) ordinary shares of
10 pence each of Sedgwick ("Sedgwick Shares") and (b) American Depositary Shares
of Sedgwick ("Sedgwick ADSs"), each representing five Sedgwick Shares and
evidenced by American Depositary Receipts. As of February 17, 1998, 553,871,226
Sedgwick Shares were issued and outstanding, including ordinary shares
represented by Sedgwick ADSs. The Sedgwick Shares and the Sedgwick ADSs are
collectively referred to herein as the "Sedgwick Securities." Simultaneously
with the Offer, Marsh & McLennan is also offering to purchase all outstanding
7.25% Convertible Bonds due 2008 of Sedgwick (the "Convertible Bonds") at a
price of 123 pence for every pound sterling 1 nominal amount of the Convertible
Bonds. As of December 31, 1997, the outstanding principal amounts of the
Convertible Bonds was pound sterling 41,500,000. The Convertible Bonds are not
registered under the Securities Act of 1933, as amended. The Offer is subject to
the terms and conditions set forth in the Offer to Purchase dated September 4,
1998 (the "Offer to Purchase"), a copy of which is filed as Exhibit (a)(1)
hereto, the related Letter of Transmittal, a copy of which is filed as Exhibit
(a)(2) hereto and the related Forms of Acceptance, copies of which are filed as
Exhibit (a)(3) hereto. Information concerning the Sedgwick Securities is set
forth in Section 16 under the caption "Sources of information and bases of
calculation" in Appendix VI to the Offer to Purchase and is incorporated herein
by reference. Information concerning the consideration being offered therefor
and the conversion thereof from pounds sterling to U.S. dollars is set forth in
Section 2 under the caption "The Offers" and in Section 19(f) under the caption
"Currency of cash consideration" in the letter, dated September 4, 1998
("Letter"), from Morgan Guaranty Trust Company of New York ("J.P. Morgan") and
Donaldson, Lufkin & Jenrette International ("DLJ") contained in the Offer to
Purchase and is incorporated herein by reference.
(c) The information set forth in Appendix V entitled "Certain Market,
Dividend and Exchange Rate Information" to the Offer to Purchase
is incorporated herein by reference.
3
<PAGE> 4
Item 2. Identity and Background.
(a) through (d) and (g). This statement is filed by Marsh & McLennan. The
information set forth in "Information on the Marsh & McLennan Group" in the
Letter and "Financial Information on Marsh & McLennan" in Appendix IV of the
Offer to Purchase and in Section 2 under the caption "Directors and executive
officers of Marsh & McLennan and Sedgwick" in Appendix VI to the Offer to
Purchase is incorporated herein by reference.
(e) and (f). During the last five years, neither Marsh & McLennan, nor any
of the directors or officers of Marsh & McLennan listed in Section 2 under the
caption "Directors and executive officers of Marsh & McLennan and Sedgwick" in
Appendix VI to the Offer to Purchase, has been either (i) convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors), or
(ii) a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws.
Item 3. Past Contacts, Transactions or Negotiations with the Subject Company.
(a) To the best of Marsh & McLennan's knowledge, there have been no
transactions with Sedgwick required to be set forth in this Item.
(b) The information set forth under the caption "Background to and reasons
for recommending the Offers" in the Letter, dated September 4, 1998, from the
Chairman of Sedgwick contained in the Offer to Purchase (the "Sedgwick Letter"),
in Section 3 under the caption "Reasons for the Offers" in the Letter and in
Section 6 under the caption "Background to the Offers" in Appendix VI to the
Offer to Purchase is incorporated herein by reference.
Item 4. Source and Amount of Funds or Other Consideration.
(a) through (c). The information set forth in Section 7 under the caption
"Financing arrangements" in Appendix VI to the Offer to Purchase is incorporated
herein by reference.
4
<PAGE> 5
Item 5. Purpose of the Tender Offer and Plans or Proposals of the Bidder.
(a) through (g). The information set forth under the captions "Background
to and reasons for recommending the Offers" and "Management and employees" in
the Sedgwick Letter; in Section 5 under the caption "Terms and Conditions of the
Offers" and Section 13 under the caption "Employee matters and share schemes" in
the Letter; and in Section 6 under the caption "Background to the Offers,"
Section 8 under the caption "Compulsory acquisition" and Section 9 under the
caption "Certain consequences of the Offers" in Appendix VI to the Offer to
Purchase, is incorporated herein by reference.
(f) and (g). The information set forth in Section 9 under the caption
"Certain consequences of the Offers" in Appendix VI to the Offer to Purchase is
incorporated herein by reference.
Item 6. Interest in Securities of the Subject Company.
(a) through (b). The information set forth in Section 4 under the caption
"Irrevocable undertakings and conditional purchases" in the Letter and Section
4 under the caption "Shareholdings and dealings in relevant Sedgwick Securities
and Sedgwick Convertible Bonds" in Appendix VI to the Offer to Purchase is
incorporated herein by reference.
Item 7. Contracts, Arrangements, Understandings or Relationships with Respect
to the Subject Company's Securities.
The information set forth under the captions "Rule 10b-13 Exemption" on
page 5 of the Offer to Purchase, "Recommendation" and "Sedgwick Share Option
Schemes" in the Sedgwick Letter; "Irrevocable undertakings and conditional
purchases" in the Letter; and the information set forth in under the captions
"Background to the Offers" and under the caption "Shareholdings and dealings in
relevant Sedgwick Securities and Sedgwick Convertible Bonds" in Appendix VI to
the offer to Purchase, is incorporated herein by reference. Except as set forth
under those captions, neither Marsh & McLennan, nor to the best knowledge of
Marsh & McLennan, any of the persons listed under the caption "Directors and
executive officers of Marsh & McLennan and Sedgwick" in Appendix VI to the Offer
to Purchase, has any contract, arrangement, understanding or relationship
(whether or not legally enforceable) with any other person with respect to any
Sedgwick Securities (including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any such
securities, joint ventures, loan or option arrangements, puts or calls,
guaranties of loans, guaranties against loss, or the giving or withholding of
proxies).
5
<PAGE> 6
Item 8. Persons Retained, Employed or to Be Compensated.
The information set forth in Section 14 under the caption "Fees and
expenses" in Appendix VI to the Offer to Purchase is incorporated herein by
reference.
Item 9. Financial Statements of Certain Bidders.
The information set forth in Appendix IV entitled "Financial Information
on Marsh & McLennan" in the Offer to Purchase is incorporated herein by
reference.
Item 10. Additional Information.
(a) and (e) Not applicable.
(b) and (c) The information set forth in Section 10 under the caption
"Legal and regulatory matters" in Appendix VI to the Offer to Purchase is
incorporated herein by reference.
(d) The information set forth in Section 9(c) under the caption "Margin
securities" in Appendix VI to the Offer to Purchase is incorporated herein by
reference.
(f) Reference is made to the information set forth in the Offer to
Purchase, the Letter of Transmittal and the Form of the Acceptance, which is
incorporated herein by reference.
Item 11. Material to be Filed as Exhibits.
(a) (1) Offer to Purchase dated September 4, 1998.
(2) Form of Letter of Transmittal.
(3) Forms of Acceptance, Authority and Election Relating to the
Offer.
(4) Form of Notice of Guaranteed Delivery.
(5) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
6
<PAGE> 7
(6) Form of Letter to Clients for Use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(7) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(8) Text of press announcement issued by Marsh & McLennan and
Sedgwick, dated August 25, 1998.
(9) Text of press release of Marsh & McLennan, dated August 25,
1998.
(10) Summary advertisement published in the U.S., dated September 4,
1998.
(11) Newspaper advertisement published in the U.K., dated September
4, 1998.
(b) Credit Agreement, dated as of August 24, 1998, among Marsh & McLennan
Companies Inc., the Lenders Party Thereto, and Morgan Guaranty Trust
Company of New York, as Administrative Agent.
(c) (1) Form of Irrevocable Undertaking executed by certain directors
of Sedgwick.
(2) Form of Irrevocable Undertaking executed by certain
shareholders of Sedgwick.
(3) Form of Conditional Share Purchase Agreement between Marsh &
McLennan Companies, Inc. and certain shareholders of Sedgwick
(4) Letter Agreement between Sedgwick and Marsh & McLennan, dated
August 25, 1998.
(d) Not applicable.
(e) Not applicable.
(f) The Offer to Purchase, dated September 4, 1998, the Form of Letter of
Transmittal and the Form of Acceptance, Authority and Election
Relating to the Offer, which are incorporated herein by reference.
7
<PAGE> 8
SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
MARSH & McLENNAN COMPANIES, INC.
By: /s/ Gregory F. Van Gundy
------------------------------------
Name: Gregory F. Van Gundy
Title: General Counsel and Secretary
Dated: September 4, 1998
<PAGE> 9
EXHIBIT INDEX
(a) (1) Offer to Purchase dated September 4, 1998.
(2) Form of Letter of Transmittal.
(3) Forms of Acceptance, Authority and Election Relating to the
Offer.
(4) Form of Notice of Guaranteed Delivery.
(5) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees from J.P. Morgan and DLJ.
(6) Form of Letter to Clients for Use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(7) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(8) Text of press announcement issued by Marsh & McLennan and
Sedgwick, dated August 25, 1998.
(9) Text of press release of Marsh & McLennan, dated August 25,
1998.
(10) Summary advertisement published in the U.S., dated September 4,
1998.
(11) Newspaper advertisement published in the U.K., dated September
4, 1998.
(b) Credit Agreement, dated as of August 24, 1998, among Marsh & McLennan
Companies Inc., the Lenders Party Thereto, and Morgan Guaranty Trust
Company of New York, as Administrative Agent.
(c) (1) Form of Irrevocable Undertaking executed by certain directors
of Sedgwick.
(2) Form of Irrevocable Undertaking executed by certain
shareholders of Sedgwick.
(3) Form of Conditional Share Purchase Agreement between Marsh &
McLennan Companies, Inc. and certain shareholders of Sedgwick
(4) Letter Agreement between Sedgwick and Marsh & McLennan, dated
August 25, 1998.
(d) Not applicable.
(e) Not applicable.
(f) The Offer to Purchase, dated September 4, 1998, the Form of Letter of
Transmittal and the Form of Acceptance, Authority and Election
Relating to the Offer, which are incorporated herein by reference.
<PAGE> 1
RECOMMENDED CASH OFFERS
ON BEHALF OF
LOGO OF MARSH & MCLENNAN
FOR
LOGO OF SEDGWICK
<PAGE> 2
SUMMARY OF THE OFFERS
THE ORDINARY OFFER
SEDGWICK SHAREHOLDERS
FOR EACH SEDGWICK SHARE 225 PENCE IN CASH
TO ACCEPT THE ORDINARY OFFER
1. Complete the WHITE Shareholder Form of Acceptance in accordance with the
instructions set out on pages 17-19 and in Part B of Appendix I to this
document.
2. Return the completed WHITE Shareholder Form of Acceptance (together with
any appropriate documents of title) using the enclosed reply-paid envelope
as soon as possible, but in any event so as to arrive by no later than 5
October 1998.
SEDGWICK ADS HOLDERS
FOR EACH SEDGWICK ADS L11.25 IN CASH
TO ACCEPT THE ORDINARY OFFER
1. Complete the Letter of Transmittal in accordance with the instructions set
out on page 19 and in Part B of Appendix I to this document.
2. Return the completed Letter of Transmittal (together with any appropriate
documents of title) using the enclosed reply-paid envelope as soon as
possible, but in any event so as to arrive by no later than 5 October 1998.
THE CONVERTIBLE OFFER
SEDGWICK BONDHOLDERS
FOR EACH L1 NOMINAL OF SEDGWICK CONVERTIBLE BONDS 123 PENCE IN CASH
TO ACCEPT THE CONVERTIBLE OFFER
1. Complete the BLUE Bondholder Form of Acceptance in accordance with the
instructions set out on pages 19 and 20 and in Part B of Appendix I to this
document.
2. Return the completed BLUE Bondholder Form of Acceptance (and deliver the
bonds relating thereto in accordance with the above instructions) as soon
as possible, but in any event so as to arrive by no later than 5 October
1998.
THE FIRST CLOSING DATE OF THE OFFERS IS 5 OCTOBER 1998
If you require assistance, please telephone:
UK Receiving Agent: +44(0)117 937 0672
US Depositary: +1-800-507-9357
This page should be read in conjunction with the rest of this document. Holders
of Sedgwick Securities and Sedgwick Convertible Bonds are recommended to seek
financial advice from their independent financial adviser authorised under the
Financial Services Act 1986.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Letter from the Chairman of Sedgwick........................ 6
Letter from J.P. Morgan and Donaldson, Lufkin & Jenrette.... 9
1. Introduction........................................... 9
2. The Offers............................................. 9
3. Reasons for the Offers................................. 10
4. Irrevocable undertakings and conditional purchases..... 11
5. Terms and Conditions of the Offers..................... 12
6. Loan Note Alternative.................................. 12
7. Financial effects of acceptance of the Ordinary
Offer................................................. 13
8. Accounting treatment................................... 13
9. Regulation............................................. 13
10. Information on the Marsh & McLennan Group............. 13
11. Information on the Sedgwick Group..................... 14
12. Financing............................................. 14
13. Employee matters and share schemes.................... 14
14. UK taxation........................................... 15
15. US taxation........................................... 16
16. Overseas securityholders and bondholders.............. 17
17. Procedure for acceptance of the Offers................ 17
18. Rights of withdrawal.................................. 21
19. Settlement............................................ 21
20. Further information................................... 23
21. Action to be taken.................................... 23
Appendix I: Conditions and further terms of the Offers...... I-1
Appendix II: Particulars of the Loan Notes.................. II-1
Appendix III: Financial information on Sedgwick............. III-1
Appendix IV: Financial information on Marsh & McLennan...... IV-1
Appendix V: Certain market, dividend and exchange rate
information............................................... V-1
Appendix VI: Additional information......................... VI-1
1. Responsibility......................................... VI-1
2. Directors and executive officers of Marsh & McLennan
and Sedgwick.......................................... VI-1
3. Principal purchases.................................... VI-6
4. Shareholdings and dealings in relevant Sedgwick
Securities and Sedgwick Convertible Bonds............. VI-7
5. Material contracts..................................... VI-13
6. Background to the Offers............................... VI-15
7. Financing arrangements................................. VI-16
8. Compulsory acquisition................................. VI-17
9. Certain consequences of the Offers..................... VI-17
10. Legal and regulatory matters.......................... VI-18
11. UK taxation........................................... VI-21
12. US federal income taxation............................ VI-23
13. Cash confirmation..................................... VI-24
14. Fees and expenses..................................... VI-24
15. Service contracts of Sedgwick directors............... VI-25
16. Sources of information and bases of calculation....... VI-27
17. Other information..................................... VI-27
18. Documents available for inspection.................... VI-28
Appendix VII: Certain provisions of the Companies Act....... VII-1
Appendix VIII: Definitions.................................. VIII-1
</TABLE>
2
<PAGE> 4
OFFER TO PURCHASE DATED 4 SEPTEMBER 1998
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
WHEN CONSIDERING WHAT ACTION YOU SHOULD TAKE, YOU ARE RECOMMENDED IMMEDIATELY TO
SEEK YOUR OWN FINANCIAL ADVICE FROM YOUR STOCKBROKER, BANK MANAGER, SOLICITOR,
ACCOUNTANT OR OTHER INDEPENDENT FINANCIAL ADVISER AUTHORISED UNDER THE FINANCIAL
SERVICES ACT 1986.
If you have sold or otherwise transferred all of your Sedgwick Securities and
Sedgwick Convertible Bonds, please send this document, together with the
accompanying documents, as soon as possible, to the purchaser or transferee, or
to the stockbroker, bank or other agent through whom the sale or transfer was
effected for onward transmission to the purchaser or transferee. HOWEVER, SUCH
DOCUMENTS SHOULD NOT BE FORWARDED OR TRANSMITTED IN OR INTO CANADA, AUSTRALIA OR
JAPAN OR ANY OTHER JURISDICTION IF TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
RELEVANT LAWS IN SUCH JURISDICTIONS. SEE PARAGRAPH 8 OF PART B OF APPENDIX I TO
THIS DOCUMENT.
The Initial Offer Period will expire at 3.00 p.m. (London time), 10.00 a.m. (New
York City time) on 5 October 1998, unless extended. At the conclusion of the
Initial Offer Period, including any extension thereof, if all the Conditions of
the Offers have been satisfied, fulfilled or, where permitted, waived, the
Offers will be extended for a Subsequent Offer Period of at least 14 calendar
days. Holders of Sedgwick Securities and Sedgwick Convertible Bonds will have
withdrawal rights during the Initial Offer Period, including any extension
thereof, but not during the Subsequent Offer Period.
Completed Acceptance Forms should be returned as soon as possible, but in any
event so as to be received by no later than 3.00 p.m. (London time), 10.00 a.m.
(New York City time) on 5 October 1998. The procedure for acceptance of the
Offers is set out on pages 17 to 20 and in Part B of Appendix I to this document
and in the accompanying Acceptance Forms.
The Offers are not being made, directly or indirectly, in or into Canada,
Australia or Japan. Accordingly, neither this document nor the Acceptance Forms
are being mailed or otherwise distributed or sent into Canada, Australia or
Japan.
The Loan Notes which may be issued pursuant to the Offers have not been, and
will not be, registered under the US Securities Act, or under any relevant
securities laws of any state or district of the US and, unless so registered,
may not be offered or sold, except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the US Securities
Act and any relevant securities laws of any state or district of the US. The
Loan Notes which may be issued pursuant to the Offers will not be the subject of
a prospectus under the securities laws of any province of Canada and will not be
registered under any relevant securities laws of any country. The Loan Notes are
not being offered, sold or delivered, directly or indirectly, in or into the US,
Canada, Australia or Japan.
J.P. Morgan, Donaldson, Lufkin & Jenrette and Cazenove, which are regulated in
the UK by The Securities and Futures Authority Limited, are acting for Marsh &
McLennan and for no one else in connection with the Offers and will not be
responsible to anyone other than Marsh & McLennan for providing the protections
afforded to their respective customers nor for giving advice in relation to the
Offers.
Rothschild and Credit Suisse First Boston, which are regulated in the UK by The
Securities and Futures Authority Limited, are acting for Sedgwick and for no one
else in connection with the Offers and will not be responsible to anyone other
than Sedgwick for providing the protections afforded to their respective
customers nor for giving advice in relation to the Offers.
3
<PAGE> 5
CERTAIN DEFINITIONS
The definitions of certain expressions used in this document are contained in
Appendix VIII.
APPLICABLE DISCLOSURE REQUIREMENTS
The Offers are being made for securities of a UK company and, while the Offers
are subject to UK and US disclosure requirements, US investors should be aware
that this document has been prepared primarily in accordance with UK format and
style, which differs from US format and style. In particular, the Appendices to
this document contain information concerning the Offers responsive to US
disclosure requirements that may be material some of which is summarised in the
letter from J.P. Morgan and Donaldson, Lufkin & Jenrette set out on pages 9 to
23 of this document. In addition, the summary financial statements of Sedgwick
included therein have been prepared in accordance with UK GAAP, and thus may not
be comparable to financial statements of US companies.
FORWARD-LOOKING STATEMENTS
This Offer Document may include forward-looking statements. Such statements may
include, without limitation, discussions concerning revenue and expense growth,
cost savings and efficiencies expected from the integration of Johnson & Higgins
(which was acquired by Marsh & McLennan in March 1997) or Sedgwick, Year 2000
remediation and testing of computer systems, market and industry conditions,
interest rates, foreign exchange rates, contingencies and matters relating to
Marsh & McLennan's operations and income taxes. Such forward-looking statements
are based on available current market and industry materials, experts' reports
and opinions, as well as management's expectations concerning future events
impacting Marsh & McLennan. Forward-looking statements by their very nature
involve risks and uncertainties. Factors that may cause actual results to differ
materially from those contemplated by any forward-looking statements contained
or incorporated herein include, in the case of Marsh & McLennan's risk and
insurance services business, the failure to successfully integrate the insurance
services and employee benefits consulting business of Johnson & Higgins and
Sedgwick (including the achievement of synergies and cost reductions), changes
in competitive conditions, a decrease in the premium rate levels in the global
property and casualty insurance markets, the impact of changes in insurance
markets and natural catastrophes; in the case of Marsh & McLennan's investment
management business, changes in the worldwide and national securities and fixed
income markets; and, with respect to all of Marsh & McLennan's activities, the
failure of Marsh & McLennan and/or its significant business partners to be Year
2000 compliant on a timely basis, changes in general worldwide and national
economic conditions, fluctuations in foreign currencies, actions of competitors
or regulators, changes in interest rates, developments relating to claims and
lawsuits, changes in the tax or accounting treatment of the registrant's
operations and the impact of tax and other legislation and regulation in the
jurisdictions in which Marsh & McLennan operates.
REDUCTION OF THE ACCEPTANCE CONDITION
The Offers are conditional, amongst other things, on valid acceptances being
received (and not, where permitted, withdrawn) by the Initial Closing Date in
respect of not less than 90 per cent. in nominal value of the Sedgwick
Securities to which the Ordinary Offer relates, or such lower percentage as
Marsh & McLennan may decide, provided that such Condition (the "Acceptance
Condition") shall not be satisfied unless Marsh & McLennan and/or its
wholly-owned subsidiaries shall have acquired or agreed to acquire, whether
pursuant to the Ordinary Offer or otherwise, Sedgwick Securities carrying in
aggregate more than 50 per cent. of the voting rights then exercisable at
general meetings of Sedgwick and provided further that the Acceptance Condition
shall be capable of being satisfied only at a time when all other Conditions
have been satisfied, fulfilled or waived unless Marsh & McLennan otherwise
determines. Marsh & McLennan reserves the right to reduce the percentage of
Sedgwick Securities required to satisfy the Acceptance Condition at some time
prior to all the Conditions being satisfied, fulfilled or, where permitted,
waived. At least five Business Days prior to any such reduction, Marsh &
McLennan will announce that it has reserved the right so to reduce the
4
<PAGE> 6
Acceptance Condition. Such announcement will state the percentage to which the
Acceptance Condition may be reduced and will state that such a reduction is
possible but that Marsh & McLennan need not declare its actual intentions until
it is required to do so under the City Code. Marsh & McLennan will not make such
an announcement unless it believes that there is a significant possibility that
sufficient Sedgwick Securities will be tendered to permit the Acceptance
Condition to be satisfied at such reduced level. Holders of Sedgwick Securities
or Sedgwick Convertible Bonds who are not willing to accept the Ordinary Offer
or the Convertible Offer, as the case may be, if the Acceptance Condition is
reduced to a level lower than 90 per cent. should either not accept the relevant
Offer until the Subsequent Offer Period or be prepared to withdraw their
acceptances promptly following an announcement by Marsh & McLennan of its
reservation of the right to reduce the Acceptance Condition.
RULE 10B-13 EXEMPTION
In accordance with normal UK practice, Marsh & McLennan or its nominees or
brokers (acting as agents for Marsh & McLennan) may make certain purchases of
Sedgwick Securities and Sedgwick Convertible Bonds outside the US during the
period in which the Offers remain open for acceptance pursuant to relief granted
by the SEC staff from Rule 10b-13 under the Exchange Act. In accordance with the
terms of the SEC relief that has been granted, among other things, (i) such
purchases may not be effected within the US, (ii) information regarding such
purchases must be disclosed in the US by press release to the extent that
disclosure is made public in the UK pursuant to the City Code and (iii) Marsh &
McLennan and any such other person must comply with any applicable rules of UK
regulatory organisations, including the rules of the London Stock Exchange and
the City Code.
CONVERSION OF CASH CONSIDERATION INTO US DOLLARS
Holders of Sedgwick Shares and Sedgwick Convertible Bonds may receive US dollars
instead of pounds sterling on the basis described in paragraph 19(f) ("Currency
of cash consideration") of the letter from J.P. Morgan and Donaldson, Lufkin &
Jenrette included in this Offer Document. Holders of Sedgwick ADSs, unless they
elect to receive pounds sterling, will receive US dollars on the basis described
in that paragraph. The attention of all Sedgwick Securityholders and Sedgwick
Bondholders is drawn to the description in that paragraph of the mechanism for
converting pounds sterling into US dollars and of the exchange rate risks
attached thereto.
FINANCIAL INFORMATION
The extracts from the consolidated financial statements of, and other
information about, Marsh & McLennan appearing in this Offer Document are
presented in US dollars ($) and have been prepared in accordance with US GAAP.
The extracts from the consolidated financial statements of, and other
information about, Sedgwick appearing in this Offer Document are presented in
pounds sterling (L) and have been prepared in accordance with UK GAAP. US GAAP
and UK GAAP differ in certain significant respects.
RULE 8 NOTICES
Any person who, alone or acting together with any other person(s) pursuant to an
agreement or understanding (whether formal or informal) to acquire or control
securities of Sedgwick, owns or controls or becomes the owner or controller,
directly or indirectly, of 1 per cent. or more of any class of securities of
Sedgwick is generally required under the provisions of Rule 8 of the City Code
to notify the London Stock Exchange and the Panel of every dealing in such
securities during the Offer Period. Dealings by Sedgwick or by Marsh & McLennan
or by their respective "associates" (within the definition set out in the City
Code) in any class of securities of Sedgwick during the Offer Period must also
be so disclosed. Please consult your financial adviser immediately if you
believe this Rule may be applicable to you.
5
<PAGE> 7
LOGO OF SEDGWICK GROUP PLC
Sackville House, 143-149 Fenchurch Street, London EC3M 6BN
Registered in England number 100691
To Sedgwick Shareholders, ADS holders and Bondholders and, for information only,
to participants in the Sedgwick Share Option Schemes.
4 September 1998
Dear Shareholder, ADS holder or Bondholder,
RECOMMENDED CASH OFFERS FOR SEDGWICK
It was announced on 25 August 1998 that the boards of Marsh & McLennan and
Sedgwick had agreed the terms of a recommended cash offer to be made on behalf
of Marsh & McLennan for the entire issued and to be issued share capital of
Sedgwick, and that proposals would be put to Sedgwick Bondholders in respect of
their holdings of Sedgwick Convertible Bonds.
I am writing to set out the background to and reasons for the Offers and to
explain why your board considers that the terms are fair and reasonable and is
unanimously recommending that you accept the Offers.
THE OFFERS
You will find set out on pages 9 to 23 of this document a letter from J.P.
Morgan and Donaldson, Lufkin & Jenrette containing the formal Offers.
THE ORDINARY OFFER
The Ordinary Offer, which is subject to the Conditions and further terms set out
in Appendix I, is being made on the following basis:
<TABLE>
<S> <C>
for each Sedgwick Share................................... 225 pence in cash.
for each Sedgwick ADS..................................... L11.25 in cash.
</TABLE>
The Ordinary Offer values the entire issued share capital of Sedgwick at L1,247
million and represents a premium of 57.9 per cent. over the Closing Price of
142.5 pence per Sedgwick Share on 24 August 1998 (the last business day prior to
the announcement of the Ordinary Offer).
Sedgwick Securityholders on the register at the close of business on Friday, 21
August 1998 will retain the right to receive the interim dividend of 3.0 pence
(net) per Sedgwick Share announced on 11 August 1998 and payable on 19 October
1998.
THE CONVERTIBLE OFFER
The Convertible Offer, which is subject to the Condition and further terms set
out in Appendix I, is being made on the following basis:
<TABLE>
<S> <C>
for each L1 nominal of Sedgwick Convertible Bonds........... 123 pence in cash.
</TABLE>
6
<PAGE> 8
Bondholders are also entitled to the interest payment of 3.625 pence per L1
nominal of Sedgwick Convertible Bonds payable in respect of the period from 31
May 1998 to 30 November 1998 as described in paragraph 2 of the letter from J.P.
Morgan and Donaldson, Lufkin & Jenrette in this document.
The Convertible Offer is conditional on the Ordinary Offer being declared
unconditional in all respects.
LOAN NOTE ALTERNATIVE
Instead of some or all of the cash consideration which would otherwise be
receivable under the Offers, accepting Sedgwick Shareholders and Sedgwick
Bondholders (other than Sedgwick Shareholders and Sedgwick Bondholders who are
US Persons and certain other overseas persons) will be entitled to elect to
receive Loan Notes on the basis described in paragraph 6 of the letter from J.P.
Morgan and Donaldson, Lufkin & Jenrette contained in this document. Further
details of the Loan Notes are set out in Appendix II to this document.
BACKGROUND TO AND REASONS FOR RECOMMENDING THE OFFERS
Some time ago, we recognised that we needed to manage our insurance business
against an industry background of excess capacity, falling rates and a trend by
large organisations towards self insurance. We decided to change our business's
reliance on traditional commission-based broking to a position where advisory
and consultancy fees formed a significant proportion of our revenue. An
important element of this strategy was the development of employee benefits
consulting into a core activity. Implementation of this strategy has reduced
Sedgwick's dependency on the vagaries of the insurance market and enabled the
group to capitalise on the increasing need for companies to outsource
activities, such as risk control, claims management, pensions management and
healthcare administration.
In these difficult markets, the insurance broking industry has undergone
significant consolidation in recent years, driven largely by a lack of
opportunity to grow revenue organically and by the need to cut costs. These
trends inevitably led to speculation about Sedgwick's future.
Earlier this year, we carried out a strategic review of our business which
concluded that the best course of action would be to identify a suitable major
partner for the development of the Sedgwick Group. In the latter part of May, we
approached Marsh & McLennan with a view to exploring the possibility of a
transaction between the two companies. Following a period of negotiation and
having considered all the options open to us, your board decided that the
proposal from Marsh & McLennan, put before the board on 24 August 1998,
represented the most attractive alternative. In particular:
- Sedgwick Shareholders will benefit from a cash offer of 225 pence, a
premium of 57.9 per cent. to the Closing Price on 24 August 1998;
- career opportunities for Sedgwick employees should be enhanced within
what is expected to be the leading risk consultancy, insurance broking
and employee benefits organisation in the world; and
- clients should benefit from the continued focus on quality of service, a
broader geographic spread and from the increased resources and breadth
of services of the enlarged group.
MANAGEMENT AND EMPLOYEES
Rob White-Cooper and I will join the board of Marsh & McLennan once the Offers
become unconditional in all respects. Rob White-Cooper will become chairman of
Sedgwick Marsh & McLennan, which will comprise the enlarged group's insurance
broking and risk management activities which operate principally outside the
Americas. In addition, Marsh & McLennan has agreed that the heads of Sedgwick's
broking businesses in Asia Pacific, Europe and North America, and the head of
Sedgwick Noble Lowndes, will hold positions of influence in the new
organisation.
Marsh & McLennan has indicated that, while there will inevitably be some
redundancies in the course of consolidation of the two businesses, it attaches
great importance to the skills and experience of the management and employees of
Sedgwick and believes that the career opportunities available to them will be
7
<PAGE> 9
enhanced as a result of being part of the Marsh & McLennan organisation. Marsh &
McLennan has also agreed to put in place incentive arrangements for key Sedgwick
employees, including certain executive directors, to enable them to participate
in the performance of the combined group.
Marsh & McLennan has given assurances to the board of Sedgwick that the existing
employment rights, including pension rights and entitlements under the existing
employment related policies, of all directors, management and employees of
Sedgwick will be honoured. In particular, any employee of Sedgwick made
redundant on or before 31 December 1999 will be entitled to a redundancy payment
which will be no less favourable than he or she would have received under the
current redundancy policies adopted by Sedgwick.
SEDGWICK SHARE OPTION SCHEMES
The Ordinary Offer extends to any Sedgwick Securities which are unconditionally
allotted or issued while the Ordinary Offer remains open for acceptance (or
until such earlier date as Marsh & McLennan may, subject to the City Code,
determine) including any Sedgwick Shares unconditionally allotted or issued
pursuant to the exercise of Options under the Sedgwick Share Option Schemes.
Further information on the proposals to be put to Optionholders is set out in
paragraph 13(b) of the letter from J.P. Morgan and Donaldson, Lufkin & Jenrette
contained in this document. Formal proposals will be sent to Optionholders in
due course.
IRREVOCABLE UNDERTAKINGS AND CONDITIONAL PURCHASES
Irrevocable undertakings to accept the Ordinary Offer have been received from
directors of Sedgwick and certain other persons in respect of Sedgwick
Securities representing in aggregate 40.4 per cent. of Sedgwick's issued share
capital. In addition, Marsh & McLennan has conditionally agreed to acquire a
further 9.9 per cent. of the issued share capital of Sedgwick at 225 pence per
share.
ACTION TO BE TAKEN
The procedure for acceptance of the Offers is set out on pages 17 to 21 and in
Part B to Appendix I to this document and in the enclosed Acceptance Forms.
Please return all required documents to the UK Receiving Agent or the US
Depositary, as appropriate, in accordance with the instructions set out in
paragraph 17 of the letter from J.P. Morgan and Donaldson, Lufkin & Jenrette in
this document as soon as possible and in any event so as to be received by no
later than 3.00 p.m. (London time), 10.00 a.m. (New York City time) on 5 October
1998.
RECOMMENDATION
THE DIRECTORS OF SEDGWICK, WHO HAVE BEEN SO ADVISED BY ROTHSCHILD AND CREDIT
SUISSE FIRST BOSTON, CONSIDER THE TERMS OF THE OFFERS TO BE FAIR AND REASONABLE.
IN PROVIDING ADVICE TO THE DIRECTORS OF SEDGWICK, ROTHSCHILD AND CREDIT SUISSE
FIRST BOSTON HAVE TAKEN INTO ACCOUNT THE COMMERCIAL ASSESSMENTS OF THE DIRECTORS
OF SEDGWICK.
ACCORDINGLY, THE DIRECTORS OF SEDGWICK UNANIMOUSLY RECOMMEND ALL SEDGWICK
SECURITYHOLDERS AND SEDGWICK BONDHOLDERS TO ACCEPT THE OFFERS AS THEY INTEND TO
DO IN RESPECT OF THEIR OWN HOLDINGS.
Yours sincerely,
S. Riley
Chairman
8
<PAGE> 10
LOGO OF J.P. MORGAN LOGO OF DONALDSON, LUFKIN & JENRETTE
4 September 1998
To Sedgwick Shareholders, ADS holders and Bondholders and, for information only,
to participants in the Sedgwick Share Option Schemes.
Dear Shareholder, ADS holder or Bondholder,
RECOMMENDED CASH OFFERS FOR SEDGWICK
1. INTRODUCTION
This letter contains the formal Offers which we are making on behalf of Marsh &
McLennan. The Offers and this document are subject to the applicable
requirements of both the City Code and US federal securities laws.
Your attention is drawn to the letter from the Chairman of Sedgwick on pages 6
to 8 of this document, from which you will see that the directors of Sedgwick,
who have been so advised by Rothschild and Credit Suisse First Boston, consider
the terms of the Offers to be fair and reasonable and unanimously recommend all
Sedgwick Securityholders and Sedgwick Bondholders to accept the Offers. In
providing their advice, Rothschild and Credit Suisse First Boston have taken
into account the commercial assessments of the directors of Sedgwick. Certain
Sedgwick Securityholders and Sedgwick Bondholders have irrevocably undertaken to
accept the Offers, as described in paragraph 4 of this letter.
2. THE OFFERS
On behalf of Marsh & McLennan, we hereby offer to acquire, upon the terms and
subject to the Conditions set out in Appendix I to this document and in the
relevant Acceptance Forms, all the issued and to be issued Sedgwick Securities
and all the outstanding Sedgwick Convertible Bonds on the basis set out below:
(A) THE ORDINARY OFFER
<TABLE>
<S> <C>
for each Sedgwick Share................................. 225 pence in cash.
for each Sedgwick ADS................................... L11.25 in cash.
</TABLE>
The Ordinary Offer values the entire issued share capital of Sedgwick at
L1,247 million and represents a premium of 57.9 per cent. over the Closing
Price of 142.5 pence per Sedgwick Share on 24 August 1998 (the last
business day prior to the announcement of the Ordinary Offer).
(B) THE CONVERTIBLE OFFER
<TABLE>
<S> <C>
for each L1 nominal of
Sedgwick Convertible Bonds.............................. 123 pence in cash.
</TABLE>
The Convertible Offer values the existing Sedgwick Convertible Bonds at
approximately L51 million.
Sedgwick Shareholders and Sedgwick Bondholders may elect to receive Loan Notes
under the Loan Note Alternative, as referred to in paragraph 6 of this letter.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
A subsidiary of J.P. Morgan & Co. Incorporated Regulated by The Securities and Futures Authority
Registered as a branch in England. Branch No. 001366. Registered in England and Wales: 2475089
Registered No. FC000297. A
Limited Liability Private Company. Registered with the
Superintendent of Banks in
the State of New York, U.S.A. Incorporated with limited
liability in the State of New
York, U.S.A. Regulated by SFA and IMRO
</TABLE>
9
<PAGE> 11
Sedgwick Securities and Sedgwick Convertible Bonds will, save as described
below, be acquired under the Offers fully paid and free from all liens,
equities, charges, encumbrances and other interests and together with all rights
attaching thereto on or after 25 August 1998, including, without limitation, the
right to receive and retain all dividends, interest and other distributions
declared, made or paid on or after 25 August 1998, the date on which the
Ordinary Offer was announced.
Sedgwick Securityholders on the register at the close of business on 21 August
1998 will be entitled to receive and retain the interim dividend of 3.0 pence
(net) per Sedgwick Share payable on 19 October 1998 in respect of the year
ending 31 December 1998.
Accepting Sedgwick Bondholders will be entitled to the interest payment of 3.625
pence per L1 nominal of Sedgwick Convertible Bonds payable in accordance with
the terms of the Trust Deed in respect of the period from 31 May 1998 to 30
November 1998.
If such interest payment is not received directly by the relevant Sedgwick
Bondholder then, to the extent that Marsh & McLennan receives such interest in
relation to Sedgwick Convertible Bonds which have been validly assented to the
Convertible Offer, it shall hold the same on trust for the relevant accepting
Sedgwick Bondholders and shall use all reasonable endeavours to procure that
such interest is remitted to the relevant Sedgwick Bondholders as soon as
reasonably practicable, and in any event within 14 days, after receiving such
interest by such means as Marsh & McLennan may reasonably decide.
Holders of Sedgwick Bearer Bonds are reminded to retain, if possible, their
coupon in respect of the period from 31 May 1998 to 30 November 1998 so that
they may claim interest in respect of such period directly.
TO ACCEPT THE OFFERS YOU SHOULD RETURN THE RELEVANT ACCEPTANCE FORMS, TOGETHER
WITH ALL OTHER REQUIRED DOCUMENTS, AS SOON AS POSSIBLE AND, IN ANY EVENT, SO AS
TO BE RECEIVED BY THE UK RECEIVING AGENT (IF YOU ARE A NON-US HOLDER) OR THE US
DEPOSITARY (IF YOU ARE A US HOLDER) BY NO LATER THAN 3.00 P.M. (LONDON TIME),
10.00 A.M. (NEW YORK CITY TIME) ON 5 OCTOBER 1998. THE PROCEDURE FOR ACCEPTANCE
OF THE OFFERS IS SET OUT IN PARAGRAPH 17 ("PROCEDURE FOR ACCEPTANCE OF THE
OFFERS") AND IN PART B OF APPENDIX I BELOW, AND IN THE ACCOMPANYING ACCEPTANCE
FORMS.
3. REASONS FOR THE OFFERS
As one of the world's leading providers of professional services, Marsh &
McLennan is confident that its chosen strategies in risk and insurance services,
investment management and consulting will continue to yield strong results for
the future. Consistent with these strategies, Marsh & McLennan is determined to
pursue opportunities which it believes will allow it to enhance further the
service it offers its clients and to increase its operational efficiencies,
together leading to greater shareholder value. The board of Marsh & McLennan
believes that the acquisition of Sedgwick will provide such opportunities.
Marsh & McLennan seeks to benefit from growing demand worldwide for professional
services, through a combination of businesses, depth of services and breadth of
global professional capabilities through which to serve clients. Marsh &
McLennan expects that the addition of Sedgwick to its portfolio of businesses
will position it to achieve these objectives. Marsh & McLennan believes that the
acquisition will give it an opportunity to expand in two out of its three
business areas, risk and insurance services and consulting, which it expects to
provide strong future growth and to contribute to earnings.
Sedgwick is the largest independent European-based broker and the third largest
broker in the world, with a recognised brand name, particularly in the UK,
continental Europe and Asia Pacific, excellent professional staff and operations
and a substantial client base. In the UK, a combination with Sedgwick increases
Marsh & McLennan's presence and provides Marsh & McLennan with access to
Sedgwick's important client base. In the US, the transaction expands Marsh &
McLennan's activities in a number of areas. Sedgwick is well positioned in
continental European markets such as Belgium, the Netherlands, Italy and the
Scandinavian countries. Marsh & McLennan expects that the acquisition of
Sedgwick will strengthen its position in Asia Pacific markets such as Hong Kong
and Singapore, as well as providing it with a well-established business in South
Africa. Accordingly, Marsh & McLennan currently intends to retain the Sedgwick
brand name in various places throughout the world.
10
<PAGE> 12
Sedgwick Noble Lowndes is among the world's leading employee benefits consulting
firms, with operations in the UK, the US and elsewhere and Marsh & McLennan
expects that, together with Marsh & McLennan's consulting firm Mercer Consulting
Group, Inc., it will provide growth opportunities.
The Offers provide an opportunity for the Sedgwick Group to compete more
effectively in the increasingly competitive insurance services business as part
of a larger international group. The Board of Marsh & McLennan expects that
substantial benefits will arise from being able to offer Sedgwick's clients a
much broader range of products.
In addition, a combination of the two companies would provide an opportunity
further to increase earnings through the realisation of significant
consolidation savings from combining operations. Marsh & McLennan believes that
the combination will also allow increased operational efficiency across their
businesses, leading to stronger service to clients and therefore to enhanced
shareholder value.
Marsh & McLennan has indicated that it anticipates ultimately achieving as a
result of the transaction pre-tax cost savings of approximately $200 million per
year, with the most significant impact occurring in the year 2000. Marsh &
McLennan expects the acquisition to be accretive to its earnings per share,
beginning in the year 2000.
These statements should not be taken to mean that Marsh & McLennan's earnings
per share for 1998 and subsequent periods will be higher than that of prior
periods.
4. IRREVOCABLE UNDERTAKINGS AND CONDITIONAL PURCHASES
(A) IRREVOCABLE UNDERTAKINGS
Irrevocable undertakings to accept, or procure the acceptance of, the Ordinary
Offer have been received from directors of Sedgwick in respect of securities
representing 245,814 Sedgwick Shares, and from:
- Phillips & Drew Fund Management Limited in respect of 122,955,977
Sedgwick Shares, and to accept the Convertible Offer in respect of
L250,000 in nominal value of Sedgwick Convertible Bonds;
- Schroder Investment Management (UK) Limited in respect of 76,732,862
Sedgwick Shares; and
- Silchester International Investors Limited in respect of 24,000,000
Sedgwick Shares.
Accordingly, Marsh & McLennan has received irrevocable undertakings to accept,
or procure the acceptance of, the Ordinary Offer in respect of securities
representing a total of 223,934,653 Sedgwick Shares, and representing in
aggregate 40.4 per cent. of Sedgwick's issued share capital.
The irrevocable undertakings given by Phillips & Drew Fund Management Limited,
Schroder Investment Management (UK) Limited and Silchester International
Investors Limited will cease to be binding in the event that a competing offer
is made for Sedgwick at a price of not less than 250.5 pence per Sedgwick Share,
or if the Ordinary Offer lapses or is withdrawn. All other irrevocable
undertakings will continue to be binding in the event of a competing offer being
made for Sedgwick by a third party unless the Ordinary Offer lapses or is
withdrawn.
(B) CONDITIONAL PURCHASES
Between 27 August 1998 and 28 August 1998, J.P. Morgan Securities Limited and
Cazenove, on behalf of Marsh & McLennan, agreed to acquire, conditional on,
amongst other things, all applicable waiting periods under the HSR Act having
expired or been terminated by no later than 27 September 1998, a total of
54,862,345 Sedgwick Shares at 225 pence per share. These shares, which represent
9.9 per cent. of the issued share capital of Sedgwick, were conditionally
acquired from major institutional shareholders in Sedgwick for settlement
through CREST.
11
<PAGE> 13
(C) IRREVOCABLE UNDERTAKINGS AND CONDITIONAL PURCHASES IN AGGREGATE
Accordingly, Marsh & McLennan has either conditionally agreed to acquire, or has
received irrevocable undertakings to accept, or procure the acceptance of, the
Ordinary Offer in respect of, securities representing a total of 278,796,998
Sedgwick Shares, and representing in aggregate 50.3 per cent. of Sedgwick's
issued share capital.
5. TERMS AND CONDITIONS OF THE OFFERS
The Offers (including the Loan Note Alternative) are subject to the Conditions
and further terms set out in Appendix I below.
6. LOAN NOTE ALTERNATIVE
A Loan Note Alternative is available to Sedgwick Shareholders and to Sedgwick
Bondholders (other than Sedgwick Shareholders and Sedgwick Bondholders who are
citizens or residents of the US and certain other overseas persons) who validly
accept the Offers, on the basis of L1 nominal of Loan Notes for every L1 of cash
that they would otherwise receive under the Offers, subject to aggregate valid
elections being received on or before the date on which the Offers become or are
declared unconditional in all respects for in excess of L5 million nominal value
of Loan Notes. If insufficient elections are received, Sedgwick Shareholders and
Sedgwick Bondholders who validly accept the Offers and elect for the Loan Note
Alternative will instead receive cash in accordance with the terms of the
Offers. Subject as aforesaid, the Loan Note Alternative will remain open as long
as the Offers are open for acceptance. Fractional entitlements to Loan Notes
will be disregarded.
Payment of interest on the Loan Notes will not generally be subject to US
withholding tax, provided that, prior to the date on which the interest is paid,
the beneficial owner of the Loan Notes certifies to Marsh & McLennan or its
paying agent that he or she is a Non-US Holder.
J.P. Morgan has advised that, based on market conditions on 3 September 1998
(the latest practicable date prior to the publication of this document), in its
opinion, if the Loan Notes had then been in issue, the value of each L1 nominal
of Loan Notes would have been approximately 98.5 pence.
In considering the Loan Note Alternative, Sedgwick Shareholders and Sedgwick
Bondholders should note that the obligations of Marsh & McLennan as issuer of
the Loan Notes are not guaranteed or secured.
The Loan Note Alternative will be conditional on the Offers becoming or being
declared unconditional in all respects. A summary of the terms of the Loan
Notes, including provisions relating to the calculation of the interest rate on
the Loan Notes, is set out in Appendix II below.
12
<PAGE> 14
7. FINANCIAL EFFECTS OF ACCEPTANCE OF THE ORDINARY OFFER
The following table shows, for illustrative purposes only, and on the bases and
assumptions set out in the notes below, the financial effects of acceptance of
the Ordinary Offer on capital value and income for a holder of 100 Sedgwick
Shares, if the Ordinary Offer becomes or is declared unconditional in all
respects:
<TABLE>
<CAPTION>
ORDINARY OFFER
--------------
L
<S> <C>
(A) CAPITAL VALUE
Cash consideration of 225 pence per Sedgwick Share.......... 225.00
Market value of 100 Sedgwick Shares......................... 142.50
Increase in capital value................................... 82.50
Representing an increase of................................. 57.9%
(B) INCOME
Income from cash consideration.............................. 12.06
Gross dividend income on 100 Sedgwick Shares................ 8.75
Increase in income.......................................... 3.31
Representing an increase of................................. 37.8%
</TABLE>
Notes
The market value of a Sedgwick Share is based on the Closing Price of 142.5
pence on 24 August 1998, being the last business day prior to the announcement
of the Ordinary Offer.
The income from the cash consideration has been calculated on the assumption
that the cash is re-invested in UK Government securities so as to achieve an
income of 5.36 per cent. per annum, being the average gross redemption yield on
medium coupon UK Government fixed interest rate securities of maturities of 5 to
15 years, as derived from the FT Actuaries Index as at 2 September 1998 as
published in the Financial Times on 3 September 1998, the latest practicable
date prior to publication of this document.
The dividend income on a Sedgwick Share is based upon the final dividend for the
year ended 31 December 1997 of 4.0 pence (net) together with the interim
dividend for the year ending 31 December 1998 of 3.0 pence (net), grossed up by
a factor of 100/80.
8. ACCOUNTING TREATMENT
The acquisition will be accounted for by Marsh & McLennan as a "purchase" for
financial accounting purposes in accordance with US GAAP. The purchase price
(i.e., the consideration) will be allocated based on the fair value of
Sedgwick's assets acquired and liabilities assumed. Such allocations will be
made based upon valuations and other studies that have not been finalised as of
the date hereof. The excess of the purchase price of the acquisition over the
amounts so allocated will be allocated to goodwill.
9. REGULATION
The Offers are subject to certain regulatory consents and confirmations being
obtained. The full text of the Conditions of the Offers is set out in Appendix
I.
Further details of regulatory issues applicable to the Offers are set out in
paragraph 10 of Appendix VI below ("Legal and regulatory matters").
10. INFORMATION ON THE MARSH & MCLENNAN GROUP
Marsh & McLennan is a professional services firm providing risk and insurance
services, investment management and consulting. Marsh & McLennan, with over
36,000 employees worldwide, provides analysis, advice and transactional
capabilities to clients in over one hundred countries.
Marsh & McLennan companies worldwide include J&H Marsh & McLennan, Inc., Marsh &
McLennan Risk Capital Corp., Putnam Investments, Inc. and Mercer Consulting
Group, Inc.
J&H Marsh & McLennan Inc. is engaged in insurance broking, reinsurance broking
and insurance programme management for business, professional, institutional and
public-entity clients. Insurance broking is conducted under the name J&H Marsh &
McLennan and includes the range of services to identify, value, control,
13
<PAGE> 15
transfer and finance risk. Worldwide reinsurance broking advice and services for
insurance and reinsurance companies are provided through Guy Carpenter &
Company, Inc. The company structures and places reinsurance coverage and other
risk-transfer financing with reinsurance firms and capital markets worldwide.
Insurance programme management and underwriting management services in North
America and the UK are provided through Seabury & Smith, Inc., which designs and
administers specialised systems-driven insurance programs.
Marsh & McLennan Risk Capital Corp. originates, structures and manages insurance
and related industry investments and provides advisory services on a global
basis.
Putnam Investments, Inc. ("Putnam"), one of the oldest and largest money
management organisations in the US, offers a full range of both equity and fixed
income products, invested domestically and globally, for individual and
institutional investors. Putnam, which manages more than 100 mutual funds, has
nearly 700 institutional clients and 9 million individual shareholders of its
funds. It had more than US$235 billion in assets under management at year-end
1997.
Mercer Consulting Group, Inc., one of the largest consulting firms in the world,
provides advice and services to the managements of organisations. William M.
Mercer Companies LLC is one of the largest human resources, employee benefits
and compensation consultancies. Mercer Management Consulting, Inc. is a leader
in helping enterprises achieve sustained shareholder value growth through
business design. National Economic Research Associates, Inc., the leading firm
of consulting economists, specialises in providing solutions to problems
involving competition, regulation, finance and public policy.
Marsh & McLennan's common stock is listed on the New York, Chicago, Pacific and
London stock exchanges. As at the close of trading on the New York Stock
Exchange on 2 September 1998 (the latest practicable date prior to the posting
of this document), Marsh & McLennan had a market capitalisation of approximately
US$12.5 billion.
The principal executive offices of Marsh & McLennan are located at 1166 Avenue
of the Americas, New York, New York 10036; the telephone number is
+1-212-345-5000.
Further information on Marsh & McLennan is set out in Appendix IV below.
11. INFORMATION ON THE SEDGWICK GROUP
Sedgwick is one of the world's leading consulting, insurance and reinsurance
groups, operating in 70 countries from over 290 offices. The company has
particular expertise in risk management and employee benefits.
For the year ended 31 December 1997, the Sedgwick Group reported profit before
tax of L101 million on turnover of L975 million and, as at 31 December 1997, the
Sedgwick Group had net assets of L200 million. As at 31 December 1997, Sedgwick
and its subsidiaries employed approximately 15,985 employees.
Based on a Closing Price of 142.5 pence on 24 August 1998 (the last business day
prior to the announcement of the Ordinary Offer), the market capitalisation of
Sedgwick was L790 million.
Further information on the Sedgwick Group is set out in Appendix III.
12. FINANCING
Marsh & McLennan has arranged appropriate financing in connection with the
Offers. Details of the financing arrangements for the Offers are set out in
paragraph 7 of Appendix VI ("Financing arrangements") below.
13. EMPLOYEE MATTERS AND SHARE SCHEMES
(A) MANAGEMENT AND EMPLOYEES
Whilst there will inevitably be some redundancies in the course of the
consolidation of the two businesses, Marsh & McLennan attaches great importance
to the skills and experience of the management and employees of Sedgwick and
believes that the career opportunities available to Sedgwick employees will be
enhanced as a
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result of being part of the Marsh & McLennan organisation. Marsh & McLennan has
agreed to put in place incentive arrangements for key Sedgwick employees,
including certain executive directors, to enable them to participate in the
performance of the combined group. Under these arrangements, key employees,
including certain of the executive directors, will be awarded a number of Marsh
& McLennan deferred stock units, which will vest (subject to certain conditions)
three years after the Offers become or are declared unconditional. Key
employees, including certain of the executive directors, will also be awarded
options under the terms of the Marsh & McLennan Companies, Inc. 1997 Employee
Incentive and Stock Award Plan.
Marsh & McLennan has given assurances to the Board of Sedgwick that, for service
to date, the existing employment rights, including pension rights and
entitlements under the existing employment related policies, of all directors,
management and employees of Sedgwick will be honoured. In particular, any
employee of Sedgwick made redundant on or before 31 December 1999 will be
entitled to a redundancy payment which will be no less favourable than he or she
would have received under the current redundancy policies operated by Sedgwick.
Sax Riley, Chairman of Sedgwick, and Rob White-Cooper, Chief Executive of
Sedgwick, will join the board of Marsh & McLennan upon the Offers becoming or
being declared unconditional in all respects. Rob White-Cooper will become
chairman of Sedgwick Marsh & McLennan, which will comprise the enlarged group's
insurance broking and risk management activities which operate principally
outside the Americas. In addition, Marsh & McLennan has agreed that the heads of
Sedgwick's broking businesses in Asia Pacific, Europe and North America, and the
head of Sedgwick Noble Lowndes, will hold positions of influence in the new
organisation.
(B) SEDGWICK SHARE OPTION SCHEMES
The Ordinary Offer will extend to any fully paid Sedgwick Securities which are
unconditionally allotted or issued whilst the Ordinary Offer is open for
acceptance (or until such earlier date as Marsh & McLennan may, subject to the
City Code, determine), including Sedgwick Shares unconditionally allotted or
issued pursuant to the exercise of Options or vesting of awards under the
Sedgwick Share Option Schemes.
Optionholders will be able to exercise their Options in accordance with the
rules of the relevant Sedgwick Share Option Scheme and, subject to the terms and
Conditions of the Ordinary Offer, accept the Ordinary Offer and elect to receive
cash and/or Loan Notes for the Sedgwick Shares that they receive as a result of
exercise.
To the extent that Options are not exercised, appropriate proposals will be made
in due course to the Optionholders. Under these proposals, optionholders will be
invited to cancel their subsisting Options over Sedgwick Shares in return for an
appropriate cash payment.
14. UK TAXATION
THIS SUMMARY IS INTENDED AS A GENERAL GUIDE ONLY AND DOES NOT CONSTITUTE TAX OR
LEGAL ADVICE. SEDGWICK SHAREHOLDERS WHO ARE IN ANY DOUBT AS TO THEIR OWN
POSITION SHOULD CONSULT AN INDEPENDENT ADVISER. SPECIAL CLASSES OF TAXPAYER SUCH
AS FINANCIAL TRADERS ARE NOT CONSIDERED BELOW.
Marsh & McLennan has been advised that, under UK legislation and Inland Revenue
practice current at the date of this document, the taxation treatment of the
valid acceptance of the Ordinary Offer and the Convertible Offer and, where
applicable, election for the Loan Note Alternative by Sedgwick Shareholders and
Sedgwick Bondholders who hold their Sedgwick Shares or Sedgwick Convertible
Bonds beneficially as an investment (otherwise than under a personal equity
plan), and who are resident or ordinarily resident in the UK for tax purposes at
all relevant times will, in summary, be as follows:
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(A) TAXATION OF CHARGEABLE GAINS
Liability to UK taxation of chargeable gains ("CGT") will depend on the
particular circumstances of holders of Sedgwick Shares and/or Sedgwick
Convertible Bonds and on the form of consideration received.
-- Cash
To the extent that a holder of Sedgwick Shares or Sedgwick Convertible
Bonds receives cash under the Ordinary Offer or the Convertible Offer,
this will constitute a disposal, or part disposal, of his Sedgwick Shares
or Sedgwick Convertible Bonds for CGT purposes. Such a disposal or part
disposal may, depending on that shareholder's or bondholder's individual
circumstances, give rise to a liability to CGT.
-- Loan Notes
A Sedgwick Shareholder or Sedgwick Bondholder who, either alone or
together with persons connected with him, holds not more than 5 per cent.
of, or of any class of, the shares in or debentures of Sedgwick, will not
be treated as making a disposal of his Sedgwick Shares or Sedgwick
Convertible Bonds for CGT purposes to the extent that he receives Loan
Notes by way of consideration.
A Sedgwick Shareholder or Sedgwick Bondholder who, either alone or
together with persons connected with him, holds more than 5 per cent. of,
or of any class of, the shares in or debentures of Sedgwick is advised
that an application to the Inland Revenue has been made for clearance
under section 138 of the Taxation of Chargeable Gains Act 1992 that this
transaction is being effected for bona fide commercial reasons and does
not form part of a scheme or arrangements of which the main purpose, or
one of the main purposes, is avoidance of liability to capital gains tax
or corporation tax, although receipt of such clearance is not a condition
of the Ordinary Offer or the Convertible Offer. The Inland Revenue has
not yet granted such clearance. Subject to the granting of this
clearance, such Sedgwick Shareholder or Sedgwick Bondholder will be
treated in the manner described in the previous paragraph.
A subsequent disposal of Loan Notes (including their redemption or
repayment) may give rise to a liability to CGT.
(B) TAXATION OF INCOME
Interest on the Loan Notes obtained or paid through a UK collecting or paying
agent may be made subject to the deduction of UK income tax at the lower rate
(currently 20 per cent.). An individual holder of Loan Notes will generally be
liable to income tax in the UK on the gross amount of interest received. A
corporate holder of Loan Notes will generally bring interest on the Loan Notes
into account as income for the purposes of corporation tax in the UK.
Different tax treatment may apply to Sedgwick Shareholders who have acquired or
agreed to acquire their Sedgwick Shares by exercising Options under the Sedgwick
Share Option Schemes, including a possible charge to income tax when such an
option is exercised.
FURTHER INFORMATION ON UK TAX LAW AND INLAND REVENUE PRACTICE CURRENT AT THE
DATE OF THIS DOCUMENT IS CONTAINED IN PARAGRAPH 11 OF APPENDIX VI ("UK
TAXATION") BELOW.
EACH HOLDER OF SEDGWICK SHARES IS URGED TO CONSULT HIS INDEPENDENT PROFESSIONAL
ADVISER IMMEDIATELY REGARDING THE TAX CONSEQUENCES OF ACCEPTANCE OF THE ORDINARY
OFFER.
15. US TAXATION
The discussion below summarises certain US federal income tax consequences
applicable to holders of Sedgwick Securities under current law. It does not
address the US federal income tax consequences applicable to holders subject to
special rules, such as certain financial institutions, regulated investment
companies, insurance companies, dealers in securities, exempt organisations or
persons holding Sedgwick Securities as part of a hedge, straddle or conversion
transaction or to holders who acquired Sedgwick Securities as a result
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of Sedgwick Share Option Schemes or other employment based arrangements.
Moreover, it does not discuss tax consequences that may be relevant to Sedgwick
Bondholders that exchange Sedgwick Convertible Bonds pursuant to the Convertible
Offer (other than the US federal income tax consequences of receiving interest
on the Loan Notes).
(A) US HOLDERS
The receipt of cash pursuant to the Ordinary Offer by a US Holder will be a
taxable transaction for US federal income tax purposes and may also be a taxable
transaction under applicable state, local, foreign and other tax laws.
In general, a US Holder of Sedgwick Securities who sells such securities
pursuant to the Ordinary Offer will, for US federal income tax purposes,
recognise gain or loss equal to the difference between such holder's adjusted
tax basis in the Sedgwick Securities sold and the amount realised in exchange
therefor. Such amount realised will equal the amount of US dollars received (or,
if a US Holder elects to receive pounds sterling, the US dollar value of the
pounds sterling received) by a US Holder. Such gain or loss generally will be
capital gain or loss. An accrual basis holder of Sedgwick Securities who sells
such securities pursuant to the Ordinary Offer may have a foreign currency
exchange gain or loss for US federal income tax purposes on account of currency
fluctuations between the sale date and the settlement date, in addition to the
gain or loss recognised by the holder on the sale of Sedgwick Securities
pursuant to the Ordinary Offer.
(B) NON-US HOLDERS
Payments of interest on the Loan Notes will generally not be subject to US
federal income or withholding tax provided that certain certification
requirements are met.
FURTHER INFORMATION ON THE CONSEQUENCES THAT MAY BE RELEVANT TO A HOLDER OF
SEDGWICK SECURITIES AS A RESULT OF THE APPLICATION OF CURRENT US TAX LAWS IS
CONTAINED IN PARAGRAPH 12 OF APPENDIX VI ("US FEDERAL INCOME TAXATION") BELOW.
EACH HOLDER OF SEDGWICK SECURITIES IS URGED TO CONSULT HIS INDEPENDENT
PROFESSIONAL ADVISER IMMEDIATELY REGARDING THE TAX CONSEQUENCES OF ACCEPTANCE OF
THE ORDINARY OFFER.
16. OVERSEAS SECURITYHOLDERS AND BONDHOLDERS
The attention of Sedgwick Securityholders and Sedgwick Bondholders who are
citizens or residents of jurisdictions outside the UK or the US is drawn to
paragraph 8 of Part B of Appendix I below ("Overseas Sedgwick Securityholders
and Sedgwick Bondholders") and to the relevant provisions of the Acceptance
Forms.
The Offers are not being made, directly or indirectly, in or into Canada,
Australia or Japan.
The Loan Notes which may be issued pursuant to the Offers have not been, and
will not be, registered under the US Securities Act, or under any relevant
securities laws of any state or district of the US and, unless so registered,
may not be offered or sold, except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the US Securities
Act and any relevant securities laws of any state or district of the US. The
Loan Notes which may be issued pursuant to the Offers will not be the subject of
a prospectus under the securities laws of any province of Canada and will not be
registered under any relevant securities laws of any country. The Loan Notes are
not being offered, sold or delivered, directly or indirectly, in or into the US,
Canada, Australia or Japan.
17. PROCEDURE FOR ACCEPTANCE OF THE OFFERS
(A) HOLDERS OF SEDGWICK SHARES
The attention of holders of Sedgwick Shares is drawn to paragraph 9 of Part B of
Appendix I ("Procedures for tendering Sedgwick Shares and Sedgwick Convertible
Bonds") below and to the relevant provisions of the Shareholder Form of
Acceptance.
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You should note that, if you hold Sedgwick Shares in both certificated and
uncertificated form (that is, in CREST), you should complete a separate
Shareholder Form of Acceptance for each holding. If you hold Sedgwick Shares in
uncertificated form, but under different member account IDs, you should complete
a separate Shareholder Form of Acceptance in respect of each member account ID.
Similarly, if you hold Sedgwick Shares in certificated form, but under different
designations, you should complete a separate Shareholder Form of Acceptance in
respect of each designation.
(I) TO ACCEPT THE ORDINARY OFFER COMPLETE THE WHITE SHAREHOLDER FORM OF
ACCEPTANCE
To accept the Ordinary Offer, you should complete Box 1, Box 4 and (if your
Sedgwick Shares are in CREST) Box 5, and sign Box 8 of the WHITE
Shareholder Form of Acceptance in accordance with the instructions printed
on it. All holders of Sedgwick Shares who are individuals should sign the
Shareholder Form of Acceptance in the presence of a witness, who should
also sign Box 8 in accordance with the instructions printed on it.
(II) TO ELECT FOR THE LOAN NOTE ALTERNATIVE
To elect for the Loan Note Alternative in respect of some or all of the
Sedgwick Shares for which you are accepting the Ordinary Offer, you should
complete Box 2 in addition to taking the actions described in paragraph (i)
above. The attention of those holders of Sedgwick Shares considering
accepting the Loan Note Alternative is drawn to paragraph 6 ("Loan Note
Alternative") above and to paragraphs 5 and 8 of Part B of Appendix I
below.
(III) RETURN OF SHAREHOLDER FORMS OF ACCEPTANCE
To accept the Ordinary Offer, the Shareholder Forms of Acceptance must be
completed and returned, whether or not your Sedgwick Shares are in CREST.
The completed, signed and (if you are an individual) witnessed Shareholder
Forms of Acceptance, together with, if your Sedgwick Shares are not in
CREST, the share certificate(s) and/or other document(s) of title for your
Sedgwick Shares, should be returned (if you are a Non-US Holder) by post or
by hand to the UK Receiving Agent, Computershare Services PLC, P.O. Box
859, Consort House, East Street, Bedminster, Bristol BS99 1XZ, or by hand,
during normal business hours only, to Computershare Services PLC, 5-10
Great Tower Street, London EC3R 5ER or (if you are a US Holder) by post or
by hand to the US Depositary, Bank of New York, 101 Barclay Street, New
York, New York 10286 marked for the attention of Tenders and Exchanges, as
soon as possible but, in any event, so as to be received no later than 3.00
p.m. (London time), 10.00 a.m. (New York City time) on 5 October 1998. A
reply-paid envelope is enclosed for your convenience and may be used by
holders of Sedgwick Shares for returning Shareholder Forms of Acceptance
within the UK and the US only. The instructions printed on the Shareholder
Forms of Acceptance shall be deemed to form part of the terms of the
Ordinary Offer.
Any Shareholder Form of Acceptance received in an envelope postmarked in
Canada, Australia or Japan or otherwise appearing to Marsh & McLennan or
its agents to have been sent from Canada, Australia or Japan may be
rejected as an invalid acceptance of the Ordinary Offer. For further
information for overseas shareholders, see paragraph 16 above and paragraph
8 of Part B of Appendix I below.
(IV) SEDGWICK SHARES IN UNCERTIFICATED FORM (THAT IS, IN CREST)
If your Sedgwick Shares are in uncertificated form (that is, if you do not
have a paper share certificate because your shares are held in CREST), you
should read carefully paragraph 9 of Part B of Appendix I, which sets out
the acceptance procedures for holders of Sedgwick Shares in uncertificated
form.
If you are a CREST sponsored member, you should refer to your CREST sponsor
before taking any action.
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(V) CERTIFICATES NOT READILY AVAILABLE OR LOST
If your Sedgwick Shares are in certificated form, but your certificate(s)
and/or other document(s) of title is/are not readily available or is/are
lost, the Shareholder Form of Acceptance should nevertheless be completed,
signed and returned as stated in paragraph (iii) above so as to arrive no
later than 3.00 p.m. (London time), 10.00 a.m. (New York City time) on 5
October 1998, together with any certificate(s) and/or other document(s) of
title that you have available, accompanied by a letter stating that the
balance will follow (and, if applicable, that you have lost one or more of
your certificates). You should then arrange for the relevant certificate(s)
and/or other document(s) of title to be forwarded as soon as possible
thereafter. No acknowledgement of receipt of documents will be given. In
the case of loss, you should write as soon as possible to Lloyds Bank
Registrars, The Causeway, Worthing, West Sussex BN99 6DA for a letter of
indemnity for lost certificate(s) and/or other document(s) of title which,
when completed in accordance with the instructions given, should be
returned to the UK Receiving Agent, Computershare Services PLC as stated
above.
(VI) DEPOSITS OF SEDGWICK SHARES INTO, AND WITHDRAWALS OF SEDGWICK SHARES
FROM, CREST
Normal CREST procedures (including timings) apply in relation to any
Sedgwick Shares that are, or are to be, converted from uncertificated to
certificated form, or from certificated to uncertificated form, during the
course of the Ordinary Offer (whether any such conversion arises as a
result of a transfer of Sedgwick Shares or otherwise). Holders of Sedgwick
Shares who are proposing so to convert any such shares are recommended to
ensure that the conversion procedures are implemented in sufficient time to
enable the person holding or acquiring the shares as a result of the
conversion to take all necessary steps in connection with an acceptance of
the Ordinary Offer (in particular, as regards delivery of share
certificate(s) and/or other document(s) of title or transfers to an escrow
balance as described above) prior to 3.00 p.m. (London time), 10.00 a.m.
(New York City time) on 5 October 1998.
(B) HOLDERS OF SEDGWICK ADSS
The attention of holders of Sedgwick ADSs is drawn to paragraph 11 of Part B of
Appendix I below and to the relevant provisions of the Letter of Transmittal.
To accept the Ordinary Offer, holders of Sedgwick ADSs must complete the Letter
of Transmittal in accordance with the instructions printed on it or comply with
the instructions in such Letter of Transmittal applicable to book-entry
transfers. The completed Letter of Transmittal should be sent in the
accompanying reply-paid envelope or delivered by hand together with the required
signature guarantees and any other required documents to the US Depositary at
one of its addresses set forth at the back of this document and Sedgwick ADRs
must be either received by the US Depositary at one of such addresses or
delivered in accordance with paragraph 11 of Part B of Appendix I referred to
above.
(C) HOLDERS OF SEDGWICK CONVERTIBLE BONDS
The attention of Sedgwick Bondholders is drawn to paragraph 9 of Part B of
Appendix I below and to the relevant provisions of the BLUE Bondholder Form of
Acceptance.
(I) TO ACCEPT THE CONVERTIBLE OFFER COMPLETE THE BLUE BONDHOLDER FORM OF
ACCEPTANCE
To accept the Convertible Offer, you should complete Box 1 and Box 5, and
sign Box 8 of the BLUE Bondholder Form of Acceptance in accordance with the
instructions printed on it. All holders of Sedgwick Convertible Bonds who
are individuals should sign the Bondholder Form of Acceptance in the
presence of a witness, who should also sign Box 8 in accordance with the
instructions printed on it.
(II) TO ELECT FOR THE LOAN NOTE ALTERNATIVE
To elect for the Loan Note Alternative in respect of some or all of the
Sedgwick Convertible Bonds for which you are accepting the Convertible
Offer, you should complete Box 2 in addition to taking the actions
described in paragraph (i) above. The attention of those holders of
Sedgwick Convertible Bonds
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considering accepting the Loan Note Alternative is drawn to paragraph 6
("Loan Note Alternative") above and to paragraphs 5 and 8 of Part B of
Appendix I below.
(III) RETURN OF BONDHOLDER FORMS OF ACCEPTANCE
The completed, signed and (if you are an individual) witnessed Bondholder
Form of Acceptance together with, (where relevant) the bond certificate
and/or other documents of title should be returned (if you are a Non-US
Holder) by post or by hand to Computershare Services PLC, P.O. Box 859,
Consort House, East Street, Bedminster, Bristol, BS99 1XZ, or by hand,
during normal business hours only, to Computershare Services PLC, First
Floor, 5-10 Great Tower Street, London, EC3R 5ER or (if you are a US
Holder) by post or by hand to the US Depositary, Bank of New York, 101
Barclay Street, New York, New York marked for the attention of Tenders and
Exchanges, as soon as possible but, in any event, so as to be received no
later than 3.00 p.m. (London time), 10.00 a.m. (New York City time) on 5
October 1998. A reply-paid envelope is enclosed for your convenience and
may be used by holders of Sedgwick Convertible Bonds for returning
Bondholder Forms of Acceptance within the UK and the US only. The
instructions printed on the Bondholder Form of Acceptance shall be deemed
to form part of the terms of the Convertible Offer.
Any Bondholder Form of Acceptance received in an envelope postmarked in
Canada, Australia or Japan or otherwise appearing to Marsh & McLennan or
its agents to have been sent from Canada, Australia or Japan may be
rejected as an invalid acceptance of the Convertible Offer. For further
information for overseas shareholders, see paragraph 16 above and paragraph
8 of Part B of Appendix I ("Overseas Sedgwick Securityholders and Sedgwick
Bondholders").
Holders of Sedgwick Bearer Bonds are referred to paragraph 9(d) of Part B
of Appendix I to this document and to the Bondholder Form of Acceptance.
(IV) BOND CERTIFICATES NOT READILY AVAILABLE OR LOST
If you are a Sedgwick Bondholder but your bond certificate(s) and/or other
document(s) of title is/are not readily available or is/are lost, the
Bondholder Form of Acceptance should nevertheless be completed, signed and
returned as stated in paragraph (iii) above so as to arrive no later than
3.00 p.m. (London time), 10.00 a.m. (New York City time) on 5 October 1998,
together with any certificate(s) and/or other document(s) of title that you
have available, accompanied by a letter stating that the balance will
follow (and, if applicable, that you have lost one or more of your
certificates). You should then arrange for the relevant bond certificate(s)
and/or other document(s) of title to be forwarded as soon as possible
thereafter (or, in the case of Sedgwick Bearer Bonds, in accordance with
the other delivery instructions referred to in paragraph 9(d) of Part B of
Appendix I below). No acknowledgement of receipt of documents will be
given. In the case of loss, you should write as soon as possible to Lloyds
Bank Registrars, The Causeway, Worthing, West Sussex BN99 6DA for a letter
of indemnity for lost certificate(s) and/or other document(s) of title
which, when completed in accordance with the instructions given, should be
returned to the UK Receiving Agent as stated above.
(D) VALIDITY OF ACCEPTANCE
Subject to the City Code, Marsh & McLennan reserves the right to treat as valid
in whole or in part any acceptance of the Offers which is not entirely in order
or which is not accompanied (as applicable) by the relevant transfer to escrow
or the relevant share certificate(s) and/or bond certificate(s) and/or other
required documents or which is received by it in a form or at a place or places
other than set out in this document or the Acceptance Forms. In that event, no
payment of cash or issue of Loan Notes under the Offers will be made until after
(as applicable) the relevant transfer to escrow has settled or the relevant
share certificate(s) and/or bond certificate(s) and/or other required documents
of title or indemnities satisfactory to Marsh & McLennan have been received.
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(E) GENERAL
No acknowledgement of receipt of Acceptance Forms, share certificates, bond
certificates, Sedgwick ADRs or other documents will be given.
IF YOU ARE IN ANY DOUBT AS TO THE PROCEDURE FOR ACCEPTANCE, PLEASE CONTACT THE
UK RECEIVING AGENT, COMPUTERSHARE SERVICES PLC BY TELEPHONE ON +44(0)117 937
0672 OR AT EITHER OF ITS ADDRESSES STATED IN PARAGRAPH 17(A)(III) ABOVE OR THE
US DEPOSITARY, BANK OF NEW YORK ON +1-800-507-9357. YOU ARE REMINDED THAT, IF
YOU ARE A CREST SPONSORED MEMBER, YOU SHOULD CONTACT YOUR CREST SPONSOR BEFORE
TAKING ANY ACTION.
18. RIGHTS OF WITHDRAWAL
With certain exceptions pursuant to a SEC exemptive order, the Offers are
subject to the US tender offer rules applicable to securities registered under
the Exchange Act, as well as to the City Code. This has necessitated a number of
changes from the procedures which normally apply to offers for UK companies,
including those applicable to the rights of Sedgwick Securityholders and
Sedgwick Bondholders to withdraw their acceptance of an offer.
Under the Offers, holders of Sedgwick Securities and Sedgwick Convertible Bonds
will be able to withdraw their acceptances at any time prior to the Initial
Closing Date and in certain other circumstances. The Offers will not be deemed
to have been validly accepted in respect of any Sedgwick Securities or Sedgwick
Convertible Bonds which have been withdrawn.
However, the Offers may be accepted again in respect of the withdrawn Sedgwick
Securities or Sedgwick Convertible Bonds by following one of the procedures
described in paragraph 17 above ("Procedure for acceptance of the Offers") at
any time prior to the expiry or lapse of the Offers.
Further details of these rights of withdrawal and the procedure for effecting
withdrawals are set out in paragraph 4 of Part B of Appendix I ("Rights of
withdrawal") below.
19. SETTLEMENT
(A) DATE OF PAYMENT
The settlement procedure with respect to the Offers will be consistent with UK
practice, which differs from the US tender offer rules in certain material
respects, particularly with regard to the date of payment.
Subject to the satisfaction, fulfilment or, where permitted, waiver of all the
Conditions, settlement of acceptances from holders of Sedgwick Shares and
accepting holders of Sedgwick ADSs and Sedgwick Convertible Bonds or other
designated agents will be effected:
(i) in the case of acceptances received complete in all respects by the
Initial Closing Date, within 14 calendar days of such date; or
(ii) in the case of acceptances received complete in all respects after
such date, but while the Offers remain open for acceptance, within 14
calendar days of such receipt.
(B) SEDGWICK SHARES IN UNCERTIFICATED FORM (THAT IS, IN CREST)
Where an acceptance relates to Sedgwick Shares in uncertificated form, (i) the
cash consideration to which accepting holders of Sedgwick Shares are entitled
will be paid by means of CREST by Marsh & McLennan procuring the creation of an
assured payment obligation in favour of the accepting shareholders' payment bank
in respect of the cash consideration due, in accordance with the CREST assured
payment arrangement; and (ii) definitive certificates for any Loan Notes will be
despatched by post (or by such other method as may be approved by the Panel).
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Marsh & McLennan reserves the right to settle all or any part of the cash
consideration referred to above, for all or any accepting shareholder(s), in the
manner referred to in paragraph (c) below, if, for any reason, it wishes to do
so.
(C) SEDGWICK SHARES IN CERTIFICATED FORM, SEDGWICK CONVERTIBLE BONDS AND
SEDGWICK ADSS
Where an acceptance relates to Sedgwick Shares in certificated form, Sedgwick
Convertible Bonds or Sedgwick ADSs evidenced by Sedgwick ADRs, cheques for cash
due and, where applicable, definitive certificates for any Loan Notes will be
despatched by post (or by such other method as may be approved by the Panel).
(D) LAPSING OF THE OFFERS
If the Conditions are not satisfied, fulfilled or, where permitted, waived, (i)
in respect of Sedgwick Shares in certificated form, Sedgwick ADRs in
certificated form and Sedgwick Registered Bonds, the relevant certificate(s)
and/or other documents of title will be returned by post (or by such other
method as may be approved by the Panel) within 14 calendar days of the Offers
lapsing, (ii) in respect of Sedgwick Shares in uncertificated form (that is, in
CREST) the UK Receiving Agent, Computershare Services PLC will, immediately
after the lapsing of the Offers (or within such longer period as the Panel may
permit, not exceeding 14 calendar days of the lapsing of the Offers), give TFE
Instructions to CRESTCo to transfer all relevant Sedgwick Shares held in escrow
balances and in relation to which it is the escrow agent for the purposes of the
Ordinary Offer to the original available balances of the holders of Sedgwick
Shares concerned, (iii) in respect of Sedgwick ADRs in book-entry form, the US
Depositary will return such Sedgwick ADRs to the tendering holders unless
otherwise instructed by such holder and (iv) in respect of Sedgwick Bearer
Bonds, the arrangements in paragraphs 7(b)(i) to (iii) of Part B of Appendix I
will apply.
(E) GENERAL
All documents and remittances sent by, to, or from holders of Sedgwick
Securities or Sedgwick Convertible Bonds or their appointed agents will be sent
at their own risk.
All mandates and other instructions in force relating to holdings of Sedgwick
Securities or Sedgwick Convertible Bonds will, unless and until revoked,
continue in force in relation to payments of principal and interest under the
Loan Notes.
(F) CURRENCY OF CASH CONSIDERATION
Instead of receiving cash consideration in pounds sterling under the Offers
holders of Sedgwick Shares and Sedgwick Convertible Bonds who so wish may elect
to receive US dollars on the following basis: the cash amount payable in pounds
sterling to which such holder would otherwise be entitled pursuant to the terms
of the Offers will be converted, without charge, from pounds sterling to US
dollars at the exchange rate obtainable by the relevant payment agent (either
the UK Receiving Agent or the US Depositary) on the spot market in London at
approximately 12.00 noon (London time) on the date the cash consideration is
made available by Marsh & McLennan to the relevant payment agent for delivery in
respect of the relevant Sedgwick Shares and Sedgwick Convertible Bonds. A
Sedgwick Shareholder or Sedgwick Bondholder may receive such amount on the basis
set out above only in respect of the whole of his holding of Sedgwick Shares or
Sedgwick Convertible Bonds in respect of which he accepts the Offers. Sedgwick
Shareholders and Sedgwick Bondholders may not elect to receive both pounds
sterling and US dollars. Unless they elect to receive pounds sterling, holders
of Sedgwick ADSs will receive any such cash consideration converted into US
dollars as described above, as if such holders of Sedgwick ADSs had elected to
receive US dollars. Consideration in US dollars may be inappropriate for holders
of Sedgwick Securities other than persons in the US and holders of Sedgwick
ADSs.
If you are a Sedgwick Shareholder or Sedgwick Bondholder and you wish to elect
to receive cash consideration in US dollars instead of pounds sterling under the
Offers, you should complete Box 3 of the relevant Acceptance Form in addition to
taking the actions described in paragraph 17 above.
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<PAGE> 24
If you are a Sedgwick ADS holder and you wish to elect to receive cash
consideration in pounds sterling instead of US dollars under the Ordinary Offer,
you should complete the appropriate box of your Letter of Transmittal in
addition to taking the actions described in paragraph 17 above.
THE ACTUAL AMOUNT OF US DOLLARS RECEIVED WILL DEPEND UPON THE EXCHANGE RATE
PREVAILING ON THE BUSINESS DAY ON WHICH FUNDS ARE MADE AVAILABLE TO THE RELEVANT
PAYMENT AGENT BY MARSH & MCLENNAN. HOLDERS OF SEDGWICK SECURITIES AND SEDGWICK
CONVERTIBLE BONDS SHOULD BE AWARE THAT THE US DOLLAR/POUNDS STERLING EXCHANGE
RATE WHICH IS PREVAILING AT THE DATE ON WHICH AN ELECTION IS MADE OR DEEMED TO
BE MADE TO RECEIVE US DOLLARS AND ON THE DATES OF DESPATCH AND RECEIPT OF
PAYMENT MAY BE DIFFERENT FROM THAT PREVAILING ON THE BUSINESS DAY ON WHICH FUNDS
ARE MADE AVAILABLE TO THE RELEVANT PAYMENT AGENT BY MARSH & MCLENNAN. IN ALL
CASES, FLUCTUATIONS IN THE US DOLLAR/POUNDS STERLING EXCHANGE RATE ARE AT THE
RISK OF ACCEPTING HOLDERS OF SEDGWICK SECURITIES AND SEDGWICK CONVERTIBLE BONDS
WHO ELECT OR ARE TREATED AS HAVING ELECTED TO RECEIVE THEIR CONSIDERATION IN US
DOLLARS. NEITHER MARSH & MCLENNAN NOR ANY OF ITS ADVISERS OR AGENTS SHALL HAVE
RESPONSIBILITY WITH RESPECT TO THE ACTUAL AMOUNT OF CASH CONSIDERATION PAYABLE
OTHER THAN IN POUNDS STERLING.
20. FURTHER INFORMATION
Your attention is drawn to Appendix I to this document, which contains the
Conditions and further terms and information and forms part of this document and
to the other Appendices to this document which contain important information in
connection with the Offers and form part of this document and to the
accompanying Acceptance Forms.
21. ACTION TO BE TAKEN
YOU ARE URGED TO COMPLETE, SIGN AND RETURN THE RELEVANT ACCEPTANCE FORM AND
OTHER REQUIRED DOCUMENTS AS SOON AS POSSIBLE, BUT IN ANY EVENT SO AS TO BE
RECEIVED BY NO LATER THAN 3.00 P.M. (LONDON TIME), 10.00 A.M. (NEW YORK CITY
TIME) ON 5 OCTOBER 1998, TO THE UK RECEIVING AGENT OR THE US DEPOSITARY AS
APPROPRIATE.
Yours faithfully
<TABLE>
<S> <C>
Terence C. Eccles Clifford S.H. Hampton
Morgan Guaranty Trust Donaldson, Lufkin & Jenrette
Company of New York
</TABLE>
23
<PAGE> 25
APPENDIX I -- CONDITIONS AND FURTHER TERMS OF THE OFFERS
PART A CONDITIONS OF THE OFFERS
THE ORDINARY OFFER
The Ordinary Offer is subject to the following conditions:
(a) valid acceptances being received (and not, where permitted, withdrawn) by
not later than 3.00 p.m. (London time) on the Initial Closing Date in
respect of not less than 90 per cent. (or such lower percentage as Marsh &
McLennan may decide) in nominal value of the Sedgwick Securities to which
the Ordinary Offer relates, provided that this condition will not be
satisfied unless Marsh & McLennan and/or its wholly-owned subsidiaries shall
have acquired or agreed (unconditionally or subject only to conditions which
will be fulfilled upon the Ordinary Offer becoming or being declared
unconditional in all respects) to acquire (whether pursuant to the Ordinary
Offer or otherwise) Sedgwick Securities carrying, in aggregate, more than 50
per cent. of the voting rights then normally exercisable at general meetings
of Sedgwick, including for this purpose (to the extent, if any, required by
the Panel) any such voting rights attaching to any Sedgwick Securities that
are unconditionally allotted or issued before the Ordinary Offer becomes or
is declared unconditional as to acceptances, whether pursuant to the
exercise of any outstanding subscription or conversion rights or otherwise
and, for this purpose:
(i) the expression "Sedgwick Securities to which the Ordinary Offer
relates" shall be construed in accordance with sections 428 to 430F
of the Companies Act 1985;
(ii) Sedgwick Securities which have been unconditionally allotted shall be
deemed to carry the voting rights which they will carry upon their
being entered in the register of members of Sedgwick; and
(iii) valid acceptances shall be treated as having been received in respect
of any Sedgwick Securities which Marsh & McLennan shall, pursuant to
section 429(8) of the Companies Act 1985, be treated as having
acquired or contracted to acquire by virtue of acceptances of the
Ordinary Offer,
provided that, unless Marsh & McLennan otherwise determines, this condition
(a) can only be treated as satisfied at a time when all of the other
conditions in paragraphs (b) to (i) inclusive are either satisfied or (if
capable of waiver) waived;
(b) no Relevant Authority having intervened in a manner which would or might
reasonably be expected to:
(i) make the Ordinary Offer, its implementation or the acquisition or
proposed acquisition by Marsh & McLennan or any member of the Wider
Marsh & McLennan Group of any shares or other securities in, or
control of, Sedgwick void, illegal and/or unenforceable in or under
the laws of any relevant jurisdiction, or otherwise directly or
indirectly restrain, prevent, prohibit, materially restrict or
materially delay the Ordinary Offer or such acquisition or impose
additional materially adverse conditions or obligations with respect
to the Ordinary Offer or such acquisition, or otherwise materially
impede, challenge or interfere with the Ordinary Offer or such
acquisition, or require material amendment to the terms of the
Ordinary Offer or the proposed acquisition of any Sedgwick
Securities or the acquisition of control of Sedgwick by Marsh &
McLennan;
(ii) require, prevent or delay the divestiture by any member of the Wider
Marsh & McLennan Group of any shares or other securities (or the
equivalent) in Sedgwick where the same is materially adverse to the
Marsh & McLennan Group;
(iii) require, prevent or delay the divestiture by any member of the Wider
Marsh & McLennan Group or by any member of the Wider Sedgwick Group
of all or any portion of their respective businesses, assets or
properties or impose any limitation on the ability of any of them to
conduct any of their respective businesses or to own any of their
respective assets or properties or any part thereof (in any case, to
an extent which is material in the context of the Wider Marsh &
McLennan Group or the Wider Sedgwick Group, as appropriate, taken as
a whole);
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(iv) impose any limitation on, or result in a delay in, the ability of
any member of the Wider Marsh & McLennan Group or any member of the
Wider Sedgwick Group to acquire or to hold or to exercise
effectively, directly or indirectly, all or any rights of ownership
in respect of shares or other securities (or the equivalent) in, or
to exercise management control over, any member of the Wider Marsh &
McLennan Group or any member of the Wider Sedgwick Group (in any
such case, to an extent which is material in the context of the
Wider Marsh & McLennan Group or the Wider Sedgwick Group, as the
case may be, taken as a whole);
(v) require any member of the Wider Marsh & McLennan Group or the Wider
Sedgwick Group to acquire, or to offer to acquire, any shares or
other securities (or the equivalent) in any member of the Wider Marsh
& McLennan Group or any member of the Wider Sedgwick Group owned by
any third party, in any such case, to an extent which is material in
the context of the Wider Marsh & McLennan Group or the Wider Sedgwick
Group, as the case may be, taken as a whole;
(vi) impose any limitation on the ability of any member of the Wider
Marsh & McLennan Group or any member of the Wider Sedgwick Group to
integrate or co-ordinate its business, or any material part of it,
with the businesses of any other member of the Wider Marsh &
McLennan Group or the Wider Sedgwick Group (in each case, to an
extent which is material in the context of the Wider Marsh &
McLennan Group or the Wider Sedgwick Group, as the case may be,
taken as a whole);
(vii) result in any member of the Wider Marsh & McLennan Group or the
Wider Sedgwick Group ceasing to be able to carry on business under
any name under which it presently does so (the consequences of which
would be material in the context of the Wider Marsh & McLennan Group
or the Wider Sedgwick Group, as the case may be, taken as a whole);
(viii) otherwise adversely affect any or all of the businesses, assets,
profits or prospects of any member of the Wider Sedgwick Group or
any member of the Wider Marsh & McLennan Group (to an extent which
is material in the context of the Wider Marsh & McLennan Group or
the Wider Sedgwick Group, as the case may be, taken as a whole);
and all applicable waiting and other time periods during which any Relevant
Authority could intervene in such a way under the laws of any relevant
jurisdiction having expired, lapsed or been terminated;
(c) without limitation to condition (b) above:
(i) the European Commission indicating in terms satisfactory to Marsh &
McLennan that it does not intend to initiate proceedings under
Article 6(1)(c) of the Regulation in respect of the proposed
acquisition of Sedgwick by Marsh & McLennan or any matters arising
therefrom (the "Merger") and that in any event there will not be a
referral to a competent authority or a dealing with the Merger by
the European Commission pursuant to Article 9(3) of the Regulation;
and
(ii) all necessary filings having been made and all or any applicable
waiting periods (including any extensions thereof) under the US
Hart-Scott-Rodino Antitrust Improvements Act 1976 and the regulations
thereunder having expired, lapsed or been terminated as appropriate in
each case in respect of the proposed acquisition of Sedgwick by Marsh &
McLennan, or any matters arising therefrom;
(d) without limitation to condition (b) above:
(i) the consent of HMT having been obtained, in terms reasonably
satisfactory to Marsh & McLennan, to the new controllers (having the
definition ascribed in section 96C of the Insurance Companies Act 1982)
of any relevant regulated member of the Sedgwick Group or all
applicable waiting periods having expired without HMT having served any
notice of objection in relation to any of the new controllers of any
relevant regulated member of the Sedgwick Group;
(ii) the consent of Lloyd's having been obtained, in terms reasonably
satisfactory to Marsh & McLennan, to the new controllers (having the
definition ascribed in the Lloyd's Brokers Byelaw
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<PAGE> 27
(No.5 of 1998) as amended) of the companies within the Sedgwick Group
which are registered with Lloyd's as brokers;
(iii) the consent of Lloyd's having been obtained, in terms reasonably
satisfactory to Marsh & McLennan, to the new controllers (having the
definition ascribed in The Underwriting Agents Byelaw (No.4 of 1984) as
amended) of the companies within the Sedgwick Group which are
registered with Lloyd's as underwriting agents;
(iv) appropriate notifications of the proposed change of control of each
relevant company within the Sedgwick Group having been made to Lloyd's
and/or to the Insurance Brokers Registration Council (as appropriate);
(v) each of the PIA and the SFA having confirmed, in terms reasonably
satisfactory to Marsh & McLennan, that it has no objection to the
change of control of each relevant company within the Sedgwick Group or
all applicable waiting periods during which the PIA or the SFA (as the
case may be) could raise any enquiries and/or objections to the
proposed change of control having expired;
(vi) if relevant, the Treasurer of the Commonwealth of Australia (the
"Treasurer") becoming precluded under section 25 of the Foreign
Acquisitions and Takeovers Act 1975 (the "Act") from being empowered to
make an order under Part II of the Act in relation to the Ordinary
Offer, or the issue by or on behalf of the Treasurer of a notice in
writing under the Act indicating, in terms reasonably satisfactory to
Marsh & McLennan, that he has no objection to the proposed acquisition
of Sedgwick pursuant to the Ordinary Offer;
(vii) all necessary notifications and filings having been made, all
necessary waiting and other time periods under any applicable
legislation or regulation of any relevant jurisdiction having expired,
lapsed or been terminated and all statutory or regulatory obligations
in any relevant jurisdiction having been complied with in each case in
connection with the Ordinary Offer or the acquisition of any shares or
other securities (or the equivalent) in, or control of, Sedgwick or any
other member of the Wider Sedgwick Group by any member of the Wider
Marsh & McLennan Group; and
(viii) all Authorisations necessary in any relevant jurisdiction for or in
respect of the Ordinary Offer or the acquisition or proposed
acquisition of any shares or other securities (or the equivalent) in,
or control of, Sedgwick or any other member of the Wider Sedgwick Group
by any member of the Wider Marsh & McLennan Group or the carrying on by
any member of the Wider Sedgwick Group of its business (where the
absence of such Authorisations would be expected to have an adverse
effect which is material to the Wider Sedgwick Group) having been
obtained, in terms and in a form reasonably satisfactory to Marsh &
McLennan, from all appropriate Relevant Authorities and all such
Authorisations remaining in full force and effect at the time when the
Ordinary Offer becomes otherwise unconditional in all respects and
there being no notice or intimation of any intention to revoke or not
to renew any of the same;
(e) there being no provision of any arrangement, agreement, licence, permit,
franchise or other instrument to which any member of the Wider Sedgwick
Group is a party, or by or to which any such member or any of its assets is
or are or may be bound, entitled or subject or any circumstance, which, in
each case as a consequence of the Ordinary Offer or the acquisition or
proposed acquisition of any shares or other securities (or the equivalent)
in, or control of, Sedgwick or any other member of the Wider Sedgwick Group
by any member of the Wider Marsh & McLennan Group or otherwise, could or
might reasonably be expected to result in (to an extent which would be
material in the context of the Wider Sedgwick Group taken as a whole):
(i) any monies borrowed by or any other indebtedness or liabilities,
actual or contingent, of, or grant available to, any member of the
Wider Sedgwick Group being or becoming repayable or capable of being
declared repayable immediately or prior to its stated repayment date,
or the ability of any member of the Wider Sedgwick Group to borrow
monies or incur any indebtedness being withdrawn or inhibited or
becoming capable of being withdrawn;
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<PAGE> 28
(ii) the creation or enforcement of any mortgage, charge or other
security interest over the whole or any part of the business, property,
assets or interests of any member of the Wider Sedgwick Group or any
such mortgage, charge or other security interest becoming enforceable;
(iii) any such arrangement, agreement, licence, permit, franchise or
instrument, or the rights, liabilities, obligations or interests of any
member of the Wider Sedgwick Group thereunder, being, or becoming
capable of being, terminated or adversely modified or affected or any
adverse action being taken or any obligation or liability arising
thereunder;
(iv) any asset or interest of any member of the Wider Sedgwick Group
being or falling to be disposed of or charged or any right arising
under which any such asset or interest could be required to be disposed
of or charged, in each case otherwise than in the ordinary course of
business;
(v) any member of the Wider Sedgwick Group ceasing to be able to carry on
business under any name under which it presently does so;
(vi) the creation of liabilities actual or contingent by any such member,
otherwise than in the ordinary course of business;
(vii) the rights, liabilities or interests of any member of the Wider
Sedgwick Group under any such arrangement, agreement, licence, permit,
franchise or other instrument or the interests or business of any such
member in or with any other person, firm, company or body (or any
arrangement or arrangements relating to any such interests or business)
being terminated, adversely modified or affected; or
(viii) the financial or trading position of any member of the Wider
Sedgwick Group being adversely prejudiced or affected;
and no event having occurred which, under any provision of any such
arrangement, agreement, licence, permit or other instrument, could result
in any of the events or circumstances which are referred to in paragraphs
(i) to (viii) of this condition (e) in any case where such result would be
material in the context of the Wider Sedgwick Group taken as a whole;
(f) since 31 December 1997 and except as disclosed in Sedgwick's annual report
and accounts for the year then ended or as disclosed in the interim
statement of Sedgwick for the six months ended on 30 June 1998 or as
otherwise publicly announced by Sedgwick (by the delivery of an
announcement to the Company Announcements Office of the London Stock
Exchange) prior to 25 August 1998, no member of the Wider Sedgwick Group
having:
(i) issued or agreed to issue additional shares of any class, or
securities convertible into, or rights, warrants or options to
subscribe for or acquire, any such shares or convertible securities
(save as between Sedgwick and wholly-owned subsidiaries of Sedgwick and
except for any options granted under the Sedgwick Share Option Schemes
prior to 25 August 1998);
(ii) recommended, declared, paid or made any bonus, dividend or other
distribution (save as between Sedgwick and wholly-owned subsidiaries of
Sedgwick) whether in cash or otherwise;
(iii) made or committed to make any change in its share or (save as
between Sedgwick and wholly-owned subsidiaries of Sedgwick) loan
capital;
(iv) merged with or demerged or acquired any body corporate or acquired
or disposed of or transferred, mortgaged or charged or created any
security interest over any material assets or (other than in the
ordinary course of business) any right, title or interest in any
material assets (including shares and trade investments) (other than in
the ordinary course of business), which is material in the context of
the Wider Sedgwick Group taken as a whole;
(v) issued or agreed to issue any debentures or (save in the ordinary
course of business) incurred or increased any indebtedness or
contingent liability (save as between Sedgwick and wholly-owned
subsidiaries of Sedgwick);
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<PAGE> 29
(vi) purchased, redeemed or repaid any of its own shares or other
securities or reduced or made any other change to any part of its share
capital, which is material in the context of the Wider Sedgwick Group
taken as a whole;
(vii) entered into or varied any contract, transaction, arrangement or
commitment (whether in respect of capital expenditure or otherwise)
which:
(A) is of a long term, onerous or unusual nature or magnitude; or
(B) could reasonably be expected to be restrictive on the business of
any member of the Wider Sedgwick Group or any member of the Wider
Marsh & McLennan Group; or
(C) involves or would involve an obligation of a long term, onerous or
unusual nature or magnitude or which could be restrictive on the
business of any member of the Wider Sedgwick Group or any member
of the Wider Marsh & McLennan Group;
in each case, which is material in the context of the Wider Sedgwick
Group taken as a whole;
(viii) entered into or varied or made any offer (which remains open for
acceptance) to enter into or vary the terms of any contract with any of
the directors or senior executives of Sedgwick or, to an extent which
is material in the context of the Wider Sedgwick Group taken as a
whole, of any member of the Wider Sedgwick Group;
(ix) taken or proposed any corporate action or had any legal proceedings
instituted or threatened against it or petition (not of a frivolous or
vexatious nature) presented for its winding-up (voluntarily or
otherwise), dissolution or reorganisation or for the appointment of a
receiver, administrator, administrative receiver, trustee or similar
officer of all or any of its assets and revenues or for any analogous
proceedings or steps in any jurisdiction or for the appointment of any
analogous person in any jurisdiction and which is material in the
context of the Wider Sedgwick Group taken as a whole;
(x) been unable or admitted in writing that it is unable to pay its debts
or having stopped or suspended (or threatened to stop or suspend)
payment of its debts generally or ceased or threatened to cease
carrying on all or a substantial part of its business and which is
material in the context of the Wider Sedgwick Group taken as a whole;
(xi) waived or compromised any claim which is material in the context of
the Wider Sedgwick Group taken as a whole;
(xii) made any alteration to its memorandum or articles of association, or
other incorporation documents; or
(xiii) entered into any agreement, contract or commitment or made any offer
(which remains open for acceptance) with respect to any of the
transactions, matters or events referred to in this condition (f);
(g) since 31 December 1997 and except as disclosed in Sedgwick's annual report
and accounts for the year then ended or as disclosed in the interim
statement of Sedgwick for the six months ended on 30 June 1998 or as
otherwise publicly announced by Sedgwick (by the delivery of an
announcement to the Company Announcements Office of the London Stock
Exchange) prior to 25 August 1998:
(i) there having been no adverse change or deterioration in the
business, assets, financial or trading position or profits or assets of
any member of the Wider Sedgwick Group which is (in the aggregate)
material in the context of the Wider Sedgwick Group taken as a whole;
(ii) no litigation, arbitration proceedings, prosecution or other legal
proceedings to which any member of the Wider Sedgwick Group is or may
become a party (whether as plaintiff or defendant or otherwise) or any
investigation (save as a result of the Ordinary Offer) by any Relevant
Authority having been threatened, announced or instituted by or against
or in respect of any member of the Wider Sedgwick Group or remaining
outstanding against or in respect of any member of the
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<PAGE> 30
Wider Sedgwick Group which, in any such case, is material in the
context of the Wider Sedgwick Group taken as a whole;
(iii) no contingent or other liability having arisen or become apparent or
increased which would or could reasonably be expected materially and
adversely to affect the Wider Sedgwick Group taken as a whole; and
(iv) there having been no inquiry or investigation (save as a result of
the Ordinary Offer) by, or complaint, or reference to, any Relevant
Authority of a material nature to Sedgwick in respect of any member of
the Wider Sedgwick Group and no such enquiry, investigation, complaint
or reference having been threatened, announced, implemented, instituted
or remaining outstanding which, in any such case, is material in the
context of the Wider Sedgwick Group taken as a whole;
(h) Marsh & McLennan not having discovered:
(i) that any financial or business or other information concerning the
Wider Sedgwick Group disclosed at any time by or on behalf of any
member of the Wider Sedgwick Group, whether publicly, to any member of
the Wider Marsh & McLennan Group or otherwise, is misleading or
contains a misrepresentation of fact or omits to state a fact necessary
to make any information contained therein not misleading in any case
which has not subsequently been corrected by such disclosure and, in
any case, to an extent which is material in the context of the Wider
Sedgwick Group taken as a whole; or
(ii) that any member of the Wider Sedgwick Group or partnership, company
or other entity in which any member of the Wider Sedgwick Group has an
interest and which is not a subsidiary undertaking of Sedgwick is
subject to any liability (contingent or otherwise) which is not
disclosed in Sedgwick's annual report and accounts for the financial
year ended 31 December 1997 or as disclosed in the interim statement
for the six months ended 30 June 1998 or as otherwise publicly
announced by Sedgwick (by delivery of an announcement to the Company
Announcements Office of the London Stock Exchange) prior to 25 August
1998 and which is material in the context of the Wider Sedgwick Group
taken as a whole;
(i) Marsh & McLennan not having discovered:
(i) that any past or present member of the Wider Sedgwick Group has not
complied with all applicable legislation or regulations of any
jurisdiction with regard to the disposal, discharge, spillage, leak or
emission of any waste or hazardous substance or any substance likely to
impair the environment or harm human health, or otherwise relating to
environmental matters, or that there has otherwise been any such
disposal, discharge, spillage, leak or emission (whether or not the
same constituted a non-compliance by any person with any such
legislation or regulations and wherever the same may have taken place)
which, in any such case, would be likely to give rise to any liability
(whether actual or contingent) on the part of any member of the Wider
Sedgwick Group which would be material in the context of the Wider
Sedgwick Group taken as a whole;
(ii) that there is, or is likely to be, any liability, whether actual or
contingent, to make good, repair, reinstate or clean up any property
now or previously owned, occupied or made use of by any past or present
member of the Wider Sedgwick Group or in which any such member may have
or previously have had or be deemed to have had an interest under any
environmental legislation, regulation, notice, circular or order of any
relevant authority or Relevant Authority or otherwise, which, in any
such case, would be material in the context of the Wider Sedgwick Group
taken as a whole; or
(iii) that circumstances exist whereby a person or class of persons would
be likely to have any claim or claims in respect of any product or
process of manufacture or materials used therein now or previously
manufactured, sold or carried out by any past or present member of the
Wider Sedgwick Group which, in any such case, would be material in the
context of the Wider Sedgwick Group taken as a whole.
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For the purpose of these conditions:
(a) "RELEVANT AUTHORITY" means any government, government department or
governmental, quasi-governmental, supranational, statutory, regulatory,
administrative or investigative body, authority (including any national
anti-trust or merger control authorities), court, trade agency,
association, institution or professional or environmental body or any other
person or body whatsoever in any relevant jurisdiction;
(b) a Relevant Authority shall be regarded as having "INTERVENED" if it has
decided to take, institute, implement or threaten any action, proceedings,
suit, investigation, inquiry or reference or made, proposed or enacted any
statute, regulation, decision or order or taken any measures or other steps
or required any action to be taken or information to be provided or
otherwise having done anything and "INTERVENE" shall be construed
accordingly;
(c) "AUTHORISATIONS" means authorisations, orders, grants, recognitions,
determinations, certificates, confirmations, consents, licences,
clearances, permissions, exemptions and approvals;
(d) "THE WIDER SEDGWICK GROUP" means Sedgwick and its subsidiary undertakings
and any other undertakings in which Sedgwick and such undertakings
(aggregating their interests) have a substantial interest and "THE WIDER
MARSH & MCLENNAN GROUP" means Marsh & McLennan and its subsidiary
undertakings and any other undertakings in which Marsh & McLennan and such
undertakings (aggregating their interests) have a substantial interest and,
for these purposes, "subsidiary undertaking" and "undertaking" have the
meanings given by the Companies Act 1985 and "substantial interest" means a
direct or indirect interest in 20 per cent. or more of the equity capital
of an undertaking.
Subject to the requirements of the Panel, Marsh & McLennan reserves the right to
waive all or any of the above conditions, in whole or in part, except condition
(a).
Conditions (b) to (i) (inclusive) must be fulfilled or (if capable of waiver)
waived by midnight (London time) on 26 October 1998 or, if later, on the 21st
day after the date on which condition (a) is fulfilled or is declared fulfilled
(or, in each case, such later date as the Panel may agree), failing which the
Ordinary Offer will lapse. Marsh & McLennan shall be under no obligation to
waive (if capable of waiver) or treat as fulfilled any of conditions (b) to (i)
(inclusive) by a date earlier than the latest date specified above for the
fulfilment thereof notwithstanding that the other conditions of the Ordinary
Offer may at such earlier date have been waived or fulfilled and that there are
at such earlier date no circumstances indicating that any of such conditions may
not be capable of fulfilment.
Marsh & McLennan will not invoke any of the conditions (e) to (i) (inclusive) in
relation to circumstances which would otherwise give rise to the right to invoke
such condition where there has been fair disclosure of such circumstances to
Marsh & McLennan or its advisers by or on behalf of Sedgwick prior to 25 August
1998.
If Marsh & McLennan is required by the Panel to make an offer for Sedgwick
Securities under the provisions of Rule 9 of the City Code, Marsh & McLennan may
make such alterations to the conditions of the Ordinary Offer, including
condition (a), as are necessary to comply with the provisions of that Rule.
The Ordinary Offer will lapse if the European Commission either initiates
proceedings under Article 6(1)(c) of the Regulation or makes a referral to a
competent authority of the UK under Article 9(1) of the Regulation before, in
each case, the Initial Closing Date.
If the Ordinary Offer lapses, the Ordinary Offer will cease to be capable of
further acceptance and Sedgwick Shareholders accepting the Ordinary Offer and
Marsh & McLennan shall upon the Ordinary Offer lapsing cease to be bound by
acceptances delivered on or before the date on which the Ordinary Offer lapses.
THE CONVERTIBLE OFFER
The Convertible Offer is conditional upon the Ordinary Offer becoming or being
declared unconditional in all respects.
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PART B FURTHER TERMS OF THE OFFERS
The Ordinary Offer and the Convertible Offer are separate offers. The following
terms will, except where the context otherwise requires, apply to each of the
Ordinary Offer and the Convertible Offer (including the Loan Note Alternative)
and any revision, variation, renewal or extension thereto. References in this
Part B of Appendix I to the "Offer" are, except where the context otherwise
requires, to each of the Offers. Any reference in this Part B of Appendix I and
in the Acceptance Forms to an offer becoming "unconditional" includes that offer
being declared unconditional in all respects.
1. ACCEPTANCE PERIOD
(a) The Offer is initially open for acceptance until 3.00 p.m. (London time),
10.00 a.m. (New York City time) on 5 October 1998. Marsh & McLennan
reserves the right (but will not be obliged, other than as may be required
by the City Code or US federal securities laws and the rules and
regulations thereunder) at any time or from time to time to extend the
Offer after such time and, in such event, will make a public announcement
of such extension in the manner described in paragraph 3 below and give
oral or written notice of such extension to the UK Receiving Agent and the
US Depositary. If all Conditions have not been satisfied, fulfilled or, to
the extent permitted, waived by Marsh & McLennan by the Initial Closing
Date, Marsh & McLennan currently intends to extend the Offer. There can be
no assurance, however, that Marsh & McLennan will, in such circumstances,
extend the Offer and, if no such extension is made, the Offer will lapse on
the Initial Closing Date and no Sedgwick Securities or Sedgwick Convertible
Bonds will be purchased pursuant to the Offer.
(b) Although no revision is envisaged, if the Offer is revised the Initial Offer
Period will be extended, if necessary, for a period of at least 14 calendar
days from the date on which the revised Offer Document is posted to
Sedgwick Securityholders and Sedgwick Bondholders. Except with the consent
of the Panel, no revision of the Offer may be made after 20 October 1998.
(c) The Initial Offer Period is not (except with the consent of the Panel)
capable of being extended after midnight (London time), 7.00 p.m. (New York
City time) on 3 November 1998 (or any other earlier time or date beyond
which Marsh & McLennan has stated that the Offer will not be extended and
has not withdrawn that statement). If all Conditions are not satisfied,
fulfilled or, to the extent permitted, waived at such time (taking account
of any prescribed extension of the Initial Offer Period), the Offer will
lapse in the absence of a competing bid and/or unless the Panel agrees
otherwise. If the Offer lapses for any reason, the Offer shall cease to be
capable of further acceptance and Marsh & McLennan and Sedgwick
Securityholders and Sedgwick Bondholders shall cease to be bound by prior
acceptances. Marsh & McLennan reserves the right, with the permission of
the Panel, to extend the final date for the expiry of the Initial Offer
Period to 24 November 1998 or such later time as the Panel may agree.
Except with the consent of the Panel, Marsh & McLennan may not, for the
purposes of determining whether the Acceptance Condition has been
satisfied, take into account acceptances received or purchases of Sedgwick
Securities made after 1.00 p.m. (London time), 8.00 a.m. (New York City
time) on 3 November 1998 (or any time and/or date beyond which Marsh &
McLennan has stated that the Offer will not be extended and in respect of
which it has not withdrawn that statement) or such later time(s) and/or
date(s) as Marsh & McLennan may, with the permission of the Panel,
determine.
(d) If all Conditions are satisfied, fulfilled or, to the extent permitted,
waived and the Initial Offer Period expires, the Offer will remain open for
acceptance for the Subsequent Offer Period of not less than 14 calendar
days from the expiry of the Initial Offer Period. If Marsh & McLennan
states that the Offer will remain open until further notice, Marsh &
McLennan will give not less than 14 calendar days' notice to Sedgwick
Securityholders and Sedgwick Bondholders who have not accepted the Offer
before closing the Subsequent Offer Period.
(e) If a competitive situation arises after a "no increase" and/or "no
extension" statement has been made by or on behalf of Marsh & McLennan in
relation to the Offer, Marsh & McLennan may, if it has specifically
reserved the right to do so at the time the statement is made (or otherwise
with the consent of
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the Panel), withdraw the statement and be free to increase or, as the case
may be, to extend the Offer if it complies with the requirements of the
City Code and in particular if:
(i) it announces the withdrawal as soon as possible and in any event
within four business days after the date of the announcement of the
competing offer or other competitive situation; and
(ii) it notifies Sedgwick Securityholders and Sedgwick Bondholders in
writing of the withdrawal (or, in the case of Sedgwick Securityholders
with registered addresses outside the UK or the US, or holders of
Sedgwick Bearer Bonds, by announcement in the UK and the US) at the
earliest opportunity.
Marsh & McLennan may, if it has specifically reserved the right to do so at
the time the statement is made, choose not to be bound by the terms of a
"no increase" or "no extension" statement and may increase or improve the
Offer if it is recommended for acceptance by the board of directors of
Sedgwick, or in other circumstances permitted by the Panel.
2. ACCEPTANCE CONDITION
(a) For the purposes of determining whether the Acceptance Condition has been
satisfied, Marsh & McLennan may, except as otherwise agreed by the Panel,
only take into account acceptances received or purchases of Sedgwick
Securities made in respect of which all relevant documents are received by
the UK Receiving Agent or the US Depositary:
(i) by 1.00 p.m. (London time), 8.00 a.m. (New York City time) on 3
November 1998 (or any other date beyond which Marsh & McLennan has
stated that the Initial Offer Period will not be extended and has not
withdrawn that statement); or
(ii) if the Initial Offer Period is extended with the consent of the
Panel, such later time(s) or date(s) as the Panel may agree.
If the latest time at which the Offer may become unconditional is extended
beyond midnight (London time), 7.00 p.m. (New York City time) on 3 November
1998, acceptances received and purchases made in respect of which the
relevant documents are received by the UK Receiving Agent or the US
Depositary after 1.00 p.m. (London time), 8.00 a.m. (New York City time) on
that date may only be taken into account with the agreement of the Panel,
except where the City Code permits otherwise.
(b) Except as otherwise agreed by the Panel:
(i) an acceptance of the Ordinary Offer will only be treated as valid for
the purposes of the Acceptance Condition if the requirements of Note 4
and, if applicable, Note 6 to Rule 10 of the City Code are satisfied in
respect of it;
(ii) a purchase of Sedgwick Securities by Marsh & McLennan or its nominee
or (if Marsh & McLennan is required by the Panel to make an offer for
Sedgwick Securities under Rule 9 of the Code) by a person acting in
concert with Marsh & McLennan or its nominee, will only be treated as
valid for the purposes of the Acceptance Condition if the requirements
of Note 5 and, if applicable, Note 6 to Rule 10 of the City Code are
satisfied in respect of it; and
(iii) before the Ordinary Offer may become unconditional the UK Receiving
Agent must issue a certificate to Marsh & McLennan, J.P. Morgan or
Donaldson, Lufkin & Jenrette which states the number of Sedgwick
Securities in respect of which acceptances have been received and not
validly withdrawn and the number of Sedgwick Securities otherwise
acquired, whether before or during the Offer Period, which comply with
the provisions of this paragraph 2(b). Copies of such certificate will
be sent to the Panel as soon as possible after it is issued.
(c) For the purpose of determining whether the Acceptance Condition has been
satisfied, Marsh & McLennan is not bound (unless required by the Panel) to
take into account any Sedgwick Securities which have been unconditionally
allotted or issued or which arise as a result of the exercise of conversion
rights before the determination takes place unless Sedgwick or its agent
has given written notice to
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Marsh & McLennan, the UK Receiving Agent or the US Depositary on behalf of
Marsh & McLennan at one of the addresses specified at the back of this
document containing relevant details of the allotment, issue or conversion.
Notification by e-mail, telex or facsimile transmission does not constitute
written notice for this purpose.
(d) In accordance with an SEC exemptive order received by Marsh & McLennan, at
least five business days prior to any reduction in the percentage of
Sedgwick Securities required to satisfy the Acceptance Condition, Marsh &
McLennan will announce that it has reserved the right so to reduce the
Acceptance Condition by announcement made through a press release and such
other methods reasonably designed to inform Sedgwick Securityholders and
Sedgwick Bondholders, including placing an advertisement in a newspaper of
national circulation in the US. Such announcement will state the percentage
to which the Acceptance Condition may be reduced and state that such a
reduction is possible but that Marsh & McLennan need not declare its actual
intentions until it is required to do so under the City Code. Marsh &
McLennan will not make such an announcement unless it believes that there
is a significant possibility that sufficient Sedgwick Securities will be
tendered to permit the Acceptance Condition to be satisfied at such reduced
level. Sedgwick Securityholders or Sedgwick Bondholders who are not willing
to accept the Ordinary Offer or the Convertible Offer, as the case may be,
if the Acceptance Condition is reduced to a level lower than 90 per cent.
should either not accept the relevant Offer until the Subsequent Offer
Period or be prepared to withdraw their acceptances promptly following an
announcement by Marsh & McLennan of its reservation of the right to reduce
the Acceptance Condition.
3. ANNOUNCEMENTS
(a) Without prejudice to paragraph 4 below, by 8.30 a.m. (London time) in the UK
and 8.30 a.m. (New York City time) in the US on the business day (the
"relevant day") after the day on which the Offer is due to expire or on
which all Conditions become or are declared to have been satisfied,
fulfilled or, to the extent permitted, waived or on which the Offer is
revised or is extended (or such later time or date as the Panel may agree),
Marsh & McLennan will make an appropriate announcement and inform the
London Stock Exchange and the Dow Jones News Service. In the announcement
Marsh & McLennan will state (unless otherwise permitted by the Panel) the
total number of Sedgwick Securities and Sedgwick Convertible Bonds and
rights over Sedgwick Securities and Sedgwick Convertible Bonds (as nearly
as practicable):
(i) for which acceptances of the Offer have been received, showing the
extent, if any, to which such acceptances have been received from
persons acting or deemed to be acting in concert with Marsh & McLennan
for the purposes of the Offer;
(ii) held by or on behalf of Marsh & McLennan or any person acting or
deemed to be acting in concert with Marsh & McLennan for the purposes of
the Offer before the Offer Period; and
(iii) acquired or agreed to be acquired by or on behalf of Marsh & McLennan
or any person acting or deemed to be acting in concert with Marsh &
McLennan for the purposes of the Offer during the Offer Period,
and the announcement will specify the percentage of the issued share
capital of Sedgwick and of the nominal amount of the Sedgwick Convertible
Bonds represented by each of these figures.
(b) In calculating the number of Sedgwick Securities represented by acceptances
and purchases, Marsh & McLennan may only include acceptances and purchases
if they could be counted towards fulfilling the Acceptance Condition under
Notes 4, 5 and 6 on Rule 10 of the City Code, unless the Panel agrees
otherwise. Subject to this, Marsh & McLennan may include or exclude, for
announcement purposes, acceptances and purchases not in all respects in
order or which are subject to verification.
(c) Any decision to extend the Initial Offer Period may be made at any time up
to, and will be announced by, 8.30 a.m. (London time) in the UK and 8.30
a.m. (New York City time) in the US on the relevant day (or such later time
or date as the Panel may agree). The announcement will state the next
expiry date of the Initial Offer Period.
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(d) In this Appendix, a reference to the making of an announcement or the giving
of notice by or on behalf of Marsh & McLennan includes the release of an
announcement by Marsh & McLennan's public relations consultants or by J.P.
Morgan or by Donaldson, Lufkin & Jenrette, in each case on behalf of Marsh
& McLennan, to the press and the delivery by hand or telephone, telex or
facsimile or other electronic transmission of an announcement to the London
Stock Exchange and the Dow Jones News Service, as the case may be. An
announcement made otherwise than to the London Stock Exchange and the Dow
Jones News Service will be notified simultaneously to the London Stock
Exchange and the Dow Jones News Service.
(e) Without limiting the manner in which Marsh & McLennan may choose to make any
public announcement and, subject to Marsh & McLennan's obligations under
applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange
Act relating to Marsh & McLennan's obligations to disseminate promptly
public announcements concerning material changes to the Offer), Marsh &
McLennan will have no obligation to publish, advertise or otherwise
communicate any such public announcement other than by making a release to
the London Stock Exchange and the Dow Jones News Service.
(f) Any notice to be given by Marsh & McLennan to Sedgwick Bondholders in
connection with the Convertible Offer may be given in accordance with the
notice provisions of the Trust Deed.
4. RIGHTS OF WITHDRAWAL
(a) Except as provided by this paragraph 4, acceptances and elections are
irrevocable.
(b) Sedgwick Securities and Sedgwick Convertible Bonds tendered pursuant to the
Offer may be withdrawn pursuant to the procedures set out below at any time
during the Initial Offer Period and in certain other circumstances
described below. Sedgwick Securities and Sedgwick Convertible Bonds
tendered during the Initial Offer Period and not validly withdrawn prior to
the Initial Closing Date and Sedgwick Securities and Sedgwick Convertible
Bonds tendered during the Subsequent Offer Period may not be withdrawn,
except in certain limited circumstances described below.
(c) If Marsh & McLennan announces that the Acceptance Condition has been
satisfied and then fails to comply by 3.30 p.m. (London time), 10.30 a.m.
(New York City time) on the relevant day (or such later time and/or date as
the Panel may agree) with any of the other requirements specified in
paragraph 3(a) of Part B of this Appendix, a person may withdraw his
acceptance by written notice given by post or by hand to the UK Receiving
Agent or the US Depositary at the addresses set out at the back of this
document. Subject to paragraph 1(c) of Part B of this Appendix, this right
of withdrawal may be terminated not less than eight calendar days after the
relevant day by Marsh & McLennan confirming, if such is the case, that the
Offer is still unconditional, and complying with the other requirements
specified in paragraph 3(a) of Part B of this Appendix. If that
confirmation is given, the first period of 14 calendar days referred to in
paragraph 1(d) of Part B of this Appendix will start on the date of that
confirmation.
(d) If a "no increase" and/or "no extension" statement is withdrawn in
accordance with paragraph 1(e) of Part B of this Appendix, a person who
accepts the Offer after the date of the statement may withdraw his
acceptance in the manner set out in paragraph 4(c) of Part B of this
Appendix for a period of eight calendar days after the date Marsh &
McLennan posts the notice of the withdrawal of that statement to Sedgwick
Securityholders and Sedgwick Bondholders.
(e) To be effective, a written notice of withdrawal must be received on a timely
basis by the party (either the UK Receiving Agent or the US Depositary) to
whom the relevant Acceptance Form was originally sent and must specify the
name of the person who has tendered the Sedgwick Securities or Sedgwick
Convertible Bonds, the number of Sedgwick Securities or Sedgwick
Convertible Bonds to be withdrawn and (if share certificates, bond
certificates or Sedgwick ADSs, as the case may be, have been tendered) the
name of the registered holder of the relevant Sedgwick Securities or
Sedgwick Registered Bonds, if different from the name of the person who
tendered Sedgwick Securities or Sedgwick Registered Bonds.
(f) In respect of Sedgwick ADSs, if Sedgwick ADRs have been delivered or
otherwise identified to the US Depositary, then, prior to the physical
release of such Sedgwick ADRs, the serial numbers shown on such
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Sedgwick ADRs must be submitted and, unless the Sedgwick ADSs evidenced by
such Sedgwick ADRs have been delivered by an Eligible Institution or by
means of a Letter of Transmittal, the signatures on the notice of
withdrawal must be guaranteed by an Eligible Institution. If interests in
Sedgwick ADSs evidenced by Sedgwick ADRs have been delivered pursuant to
the procedures for book-entry transfer set out in paragraph 11(c) of Part B
of this Appendix, any notice of withdrawal must also specify the name and
number of the account at the appropriate Book-Entry Transfer Facility to be
credited with the withdrawn Sedgwick ADSs and must otherwise comply with
such Book-Entry Transfer Facility's procedures.
(g) Withdrawals of tendered Sedgwick Securities and Sedgwick Convertible Bonds
may not be rescinded (without Marsh & McLennan's consent) and any Sedgwick
Securities and Sedgwick Convertible Bonds properly withdrawn and not
properly retendered will thereafter be deemed not validly tendered for the
purposes of the Offer. Withdrawn Sedgwick Securities and Sedgwick
Convertible Bonds may be subsequently retendered, by following one of the
procedures described in either paragraph 9, 10 or 11 of Part B of this
Appendix, as the case may be, at any time whilst the Offer remains open.
(h) All questions as to the validity (including time of receipt) of any notice
of withdrawal will be determined by Marsh & McLennan whose determination
(except as required by the Panel) will be final and binding. None of Marsh
& McLennan, Sedgwick, J.P. Morgan, Donaldson, Lufkin & Jenrette, the US
Depositary, the UK Receiving Agent or any other person will be under any
duty to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give such notification.
5. THE LOAN NOTE ALTERNATIVE
(a) The Loan Note Alternative is conditional upon all of the Conditions becoming
or being declared satisfied, fulfilled or, to the extent permitted, waived
and will remain open for as long as the Offer remains open for acceptances.
No Loan Notes will be issued unless valid elections for the Loan Note
Alternative are received by the date the Offer becomes or is declared
unconditional in all respects for at least L5 million nominal amount of
Loan Notes failing which any consideration due under the terms of the Offer
will be payable in cash.
(b) No election for the Loan Note Alternative will be valid unless both a valid
acceptance of the Offer and a valid election for the Loan Note Alternative,
duly completed in all respects and accompanied by, if appropriate, all
share certificates, bond certificates and/or other document(s) of title,
are duly received by the time and date on which the Loan Note Alternative
closes.
(c) If any acceptance of the Offer which includes an election for the Loan Note
Alternative is not, and is not deemed to be, valid or complete in all
respects at such time, such election shall for all purposes be void and the
holder(s) of Sedgwick Shares or Sedgwick Convertible Bonds purporting to
make such election shall not, for any purpose, be entitled to receive the
Loan Note Alternative, but any such acceptance which is otherwise valid
shall be deemed to be an acceptance of the Offer (without the Loan Note
Alternative) for the number of Sedgwick Shares or Sedgwick Convertible
Bonds which are the subject of the acceptance and the holder(s) of Sedgwick
Shares or Sedgwick Convertible Bonds will, on the Offer becoming
unconditional, be entitled to the cash consideration due under the Offer.
(d) The insertion of a number in Box 2 on the relevant Acceptance Form shall,
subject to the other terms of the Offer, be treated in respect of the
relevant number of Sedgwick Shares or Sedgwick Convertible Bonds as an
election for the Loan Note Alternative.
(e) An election for the Loan Note Alternative will not be valid unless the
relevant Acceptance Form is completed correctly in all respects and is
received in accordance with paragraphs 9 and 10 below.
(f) The Loan Notes will be issued in multiples of L1 and fractional entitlements
will be disregarded.
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6. REVISED OFFER
(a) Although no revision is envisaged, if the Offer is revised (either in terms
or conditions or in the value or form of the consideration offered or
otherwise), the benefit of the revised Offer will be made available to
Sedgwick Securityholders and Sedgwick Bondholders who have accepted the
relevant Offer (in its original or any revised form(s)) and not validly
withdrawn such acceptance (a "Previous Acceptor") if the revised Offer
represents, on the date on which it is announced (on such basis as J.P.
Morgan and Donaldson, Lufkin & Jenrette may consider appropriate), an
improvement, or no diminution, in the value of the consideration offered
compared with the consideration previously offered. The acceptance by a
Previous Acceptor of the Offer (in its original or any revised form(s))
will, subject as provided in paragraphs 6(b), 6(c) and 7 of Part B of this
Appendix, be deemed an acceptance of the revised Offer and will constitute
the appointment of any director of Marsh & McLennan, J.P. Morgan or
Donaldson, Lufkin & Jenrette as his attorney and/or agent with authority:
(i) to accept the revised Offer on his behalf;
(ii) if the revised Offer includes alternative forms of consideration, to
make elections or accept the alternative forms of consideration on his
behalf in the proportions the attorney and/or agent in his absolute
discretion thinks fit; and
(iii) to execute on his behalf and in his name any further documents and
take such further actions (if any) as may be required to give effect to
those elections or acceptances.
In making any election or acceptance, the attorney and/or agent will take
into account the nature of any previous acceptance or election made by or
on behalf of the Previous Acceptor and such other facts or matters as he
may reasonably consider relevant.
(b) The deemed acceptance and/or election referred to in paragraph 6(a) of Part
B of this Appendix will not apply and the power of attorney and authorities
conferred by that paragraph will not be exercised if, as a result, the
Previous Acceptor would (on such basis as J.P. Morgan and Donaldson, Lufkin
& Jenrette may consider appropriate) thereby receive less in aggregate
consideration than he would have received in aggregate consideration as a
result of his acceptance of the Offer in the form originally accepted by
him or on his behalf.
(c) The deemed acceptance and/or election referred to in paragraph 6(a) of Part
B of this Appendix will not apply and the power of attorney and the
authorities conferred by that paragraph will be ineffective in the case of
a Previous Acceptor who lodges, within 14 calendar days of the posting of
the document containing the revised Offer, an Acceptance Form (or any other
form issued on behalf of Marsh & McLennan) in which he validly elects to
receive consideration under the revised Offer in some other manner.
(d) Marsh & McLennan, J.P. Morgan and Donaldson, Lufkin & Jenrette reserve the
right to treat an executed Acceptance Form relating to the Offer (in its
original or any previously revised form(s)) which is received (or dated)
after the announcement of any revised Offer as a valid acceptance of the
revised Offer (and where applicable a valid election for the alternative
forms of consideration). That acceptance will constitute an authority in
the terms of paragraph 6(a) of Part B of this Appendix on behalf of the
relevant Sedgwick Securityholder or Sedgwick Bondholder.
7. GENERAL
(a) If the Offer lapses, neither Marsh & McLennan nor any person acting, or
deemed to be acting, in concert with Marsh & McLennan for the purposes of
the Offer nor any of their respective affiliates may, pursuant to the City
Code, make an offer (whether inside or outside the UK) for Sedgwick
Securities or Sedgwick Convertible Bonds for a period of one year following
the date of such lapse, except with the permission of the Panel.
(b) If the Offer lapses or is withdrawn, Acceptance Forms, share certificates,
bond certificates, Sedgwick ADRs and other documents of title will be
returned by post (or by such other method as the Panel may
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approve) within 14 calendar days of the Offer lapsing, at the risk of the
Sedgwick Securityholder or Sedgwick Bondholder in question, to the person
or agent whose name is set out in the relevant box on the Acceptance Form
or, if none is set out, to the first-named holder at his registered address
or, in the case of Sedgwick ADSs, delivered by book-entry transfer into the
US Depositary's account at a Book-Entry Transfer Facility pursuant to the
procedures set forth in paragraph 11(c) of Part B of this Appendix (such
Sedgwick ADSs will be credited within such period to an account maintained
at the appropriate Book-Entry Transfer Facility) or, in the case of
Sedgwick Bearer Bonds:
(i) where Sedgwick Bearer Bonds (and coupons) have been delivered to the
UK Receiving Agent, an equivalent nominal amount of Sedgwick Bearer
Bonds (together with all coupons delivered with such bonds) will be
available for collection together with the relevant Bondholder Form of
Acceptance (and any other documents so delivered) at the office to which
they were delivered for a period of 14 calendar days after the
Convertible Offer lapses or is withdrawn against production of the
original receipt given therefor and satisfactory evidence of identity
and authority, failing which they will be returned, at the risk of the
Sedgwick Bondholder concerned, by registered post within 14 calendar
days of the expiry of that period to the person or agent whose name and
address is set out in Box 7 of the relevant Bondholder Form of
Acceptance;
(ii) where Sedgwick Bearer Bonds are held to the order of J.P. Morgan or
Donaldson, Lufkin & Jenrette with a bank or other depositary, J.P.
Morgan or Donaldson, Lufkin Jenrette as appropriate will within 14
calendar days of the Convertible Offer lapsing or being withdrawn
instruct such bank or depositary by post that such Sedgwick Bearer Bonds
should no longer be held to its order and the Bondholder Form of
Acceptance (and any other documents so delivered) will, at the risk of
the Sedgwick Bondholder concerned, be returned by post to the person or
agent whose name and address is set out in Box 7 of the relevant
Bondholder Form of Acceptance; and
(iii) where the Sedgwick Bearer Bonds have been debited to a securities
clearance or other account with Euroclear or Cedel and credited to an
account of J.P. Morgan or Donaldson, Lufkin & Jenrette with Euroclear,
or as the case may be, Cedel. J.P. Morgan or Donaldson, Lufkin &
Jenrette (as appropriate) shall within 14 calendar days of the
Convertible Offer lapsing or being withdrawn give appropriate
instructions to Euroclear or, as the case may be, Cedel for an
equivalent nominal amount of such Sedgwick Bearer Bonds to be debited to
its account and to be credited to the securities clearance or other
account with Euroclear or, as the case may be, Cedel, identified in the
relevant Bondholder Form of Acceptance (and any other documents so
delivered) will be returned by post at the risk of the Sedgwick
Bondholder concerned, to the address referred to above and until such
time as the Convertible Offer becomes or is declared unconditional in
all respects or lapses or is withdrawn (and the obligation herein to
effect credits of Sedgwick Bearer Bonds is satisfied) J.P. Morgan or
Donaldson, Lufkin & Jenrette, as appropriate, will retain as credited to
its securities clearance or other account at Euroclear and/or Cedel an
aggregate nominal amount of Sedgwick Bearer Bonds sufficient to enable
it to satisfy its obligations herein to effect all such credits.
(c) The UK Receiving Agent will, immediately after the Offer lapses (or within
such longer period as the Panel may permit, not exceeding 14 calendar days
of the Offer lapsing), instruct CRESTCo to transfer all Sedgwick Shares
held in escrow balances and in relation to which it is the escrow agent for
the purposes of the Offer to the original available balances of the
relevant Sedgwick Shareholders.
(d) Except with the consent of the Panel:
(i) settlement of the consideration to which any Sedgwick Securityholder
or Sedgwick Bondholder is entitled under the Offer will be fully
implemented in accordance with the terms of the Offer without regard to
any lien, right of set-off, counterclaim or other analogous right to
which Sedgwick, J.P. Morgan or Donaldson, Lufkin & Jenrette may
otherwise be, or claim to be, entitled against that Sedgwick
Securityholder or Sedgwick Bondholder; and
(ii) settlement of the consideration will be effected in the manner
prescribed in paragraph 19 of the letter from J.P. Morgan and Donaldson,
Lufkin & Jenrette contained in this document not later
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than 14 calendar days after the later of the Initial Closing Date and
the date of receipt of a valid and complete Acceptance Form from such
holder of Sedgwick Securities or Sedgwick Convertible Bonds.
(e) The terms, provisions, instructions and authorities contained in the
Acceptance Forms also constitute part of the terms of the Offer. A word or
expression defined in this document has the same meaning when used in the
Acceptance Forms, unless the context requires otherwise.
(f) Any accidental omission or failure to despatch this document, the Acceptance
Forms, any other documents relating to the Offer or any notice required to
be despatched under the terms of the Offer to, or any failure to receive
the same by, any person to whom the Offer is, or should be, made will not
in any way invalidate the Offer. Subject to the provisions of paragraph 8
of Part B of this Appendix, the Offer is made to any Sedgwick
Securityholder or Sedgwick Bondholder to whom this document and the
Acceptance Forms or any related document may not have been despatched or
who may not receive such documents, and these persons may collect the
relevant documents from the UK Receiving Agent, the US Depositary, J.P.
Morgan or Donaldson, Lufkin & Jenrette and, in respect of the Sedgwick
Convertible Bonds, from the registrar or any paying and conversion agent in
respect thereof and through Euroclear and Cedel to participants and account
holders therein.
(g) Subject to the City Code, Marsh & McLennan, J.P. Morgan and Donaldson,
Lufkin & Jenrette reserve the right to treat as valid in whole or in part
any acceptance of the Offer received by the UK Receiving Agent or US
Depositary or otherwise on behalf of Marsh & McLennan which is not entirely
in order or in the correct form or which is not accompanied by (as
applicable) the relevant transfer to escrow or the relevant share or bond
certificates and/or other documents of title or which is received by it in
a form or at a place or places other than as set out in this document or
the relevant Acceptance Form. In that event, no payment of cash, or, if
applicable, issue of Loan Notes under the Offer will be made until after
the acceptance is entirely in order and (as applicable) the relevant
transfer to escrow has settled or the relevant share or bond certificate(s)
and/or other document(s) of title or indemnities satisfactory to Marsh &
McLennan have been received by the UK Receiving Agent or the US Depositary,
as the case may be.
(h) If all Conditions are satisfied, fulfilled or, where permitted, waived, and
Marsh & McLennan acquires, or contracts to acquire, pursuant to the
Ordinary Offer or otherwise, at least 90 per cent. in nominal value of the
Sedgwick Securities to which the Ordinary Offer relates, it intends to
apply the provisions of sections 428-430F of the Companies Act to acquire
compulsorily any outstanding Sedgwick Securities.
(i) If all Conditions are satisfied, fulfilled or, where permitted, waived and
Marsh & McLennan acquires or contracts to acquire, pursuant to the
Convertible Offer or otherwise, at least 90 per cent. in nominal value of
the Sedgwick Convertible Bonds to which the Convertible Offer relates, it
intends to apply the provisions of sections 428-430F of the Companies Act
to acquire compulsorily any outstanding Sedgwick Convertible Bonds, save
that if Marsh & McLennan has not acquired or contracted to acquire,
pursuant to the Convertible Offer or otherwise, at least 90 per cent. in
nominal value of the Sedgwick Convertible Bonds to which the Convertible
Offer relates by the time that the Offers become unconditional, Sedgwick
will, after such time and at the request of Marsh & McLennan, exercise any
rights it may have to redeem any outstanding Sedgwick Convertible Bonds in
accordance with their terms or such other terms as Marsh & McLennan and the
Trustee may agree.
(j) Marsh & McLennan intends that Sedgwick shall apply for cancellation of the
listing of the Sedgwick Shares and Sedgwick Convertible Bonds on the London
Stock Exchange and the listing of the Sedgwick ADSs on the NYSE (subject to
the requirements of those exchanges) and that Sedgwick shall terminate the
Sedgwick ADR facility in accordance with the deposit agreement relating
thereto.
(k) All powers of attorney, appointments of agents and authorities on the terms
conferred by or referred to in this Appendix or in the Acceptance Form are
given by way of security for the performance of the obligations of the
Sedgwick Securityholder or Sedgwick Bondholder concerned and are
irrevocable in accordance with section 4 of the Powers of Attorney Act
1971, except in the circumstances where the
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<PAGE> 40
donor of the power of attorney or authority validly withdraws his
acceptance in accordance with paragraph 4 of Part B of this Appendix.
(l) No acknowledgement of receipt of any Acceptance Form, share or bond
certificate, Sedgwick ADR or other document of title will be given. All
communications, notices, certificates, Sedgwick ADRs, documents of title
and remittances to be delivered by, and sent to or from, Sedgwick
Securityholders and Sedgwick Bondholders (or their designated agent(s))
will be delivered or sent at their own risk.
(m) If the Offer becomes unconditional, all mandates and other instructions or
notices recorded by the Sedgwick Securityholders and Sedgwick Bondholders
immediately before the Offer becomes unconditional relating to holdings of
Sedgwick Securities and Sedgwick Convertible Bonds will, until revoked,
continue in force in relation to any Loan Notes issued under the Offer.
(n) Marsh & McLennan, J.P. Morgan and Donaldson, Lufkin & Jenrette reserve the
right to notify any matter, including the making of the Offer, to all or
any Sedgwick Securityholders and Sedgwick Bondholders:
(i) with a registered address outside the UK and the US; or
(ii) whom Marsh & McLennan, J.P. Morgan and Donaldson, Lufkin & Jenrette
knows to be a custodian, trustee or nominee holding Sedgwick Securities
or Sedgwick Convertible Bonds for persons who are citizens, residents or
nationals of jurisdictions outside the UK and the US: or
(iii) who hold Sedgwick Bearer Bonds,
by announcement in the UK to the London Stock Exchange and in the US to the
Dow Jones News Services or in any other appropriate manner or by paid
advertisement in a newspaper published and circulated in the UK and the US.
Such notice will be deemed to have been sufficiently given, despite any
failure by a Sedgwick Securityholder or Sedgwick Bondholder to receive or
see that notice. A reference in this document to a notice or the provision
of information in writing by or on behalf of Marsh & McLennan is to be
construed accordingly. No such document will be sent to an address in
Canada, Australia or Japan.
(o) The Offer is made at 3.00 p.m. (London time), 10.00 a.m. (New York City
time) on 4 September 1998 and is capable of acceptance from and after that
time. Acceptance Forms and copies of this document may be collected from
the UK Receiving Agent, the US Depositary, J.P. Morgan or Donaldson, Lufkin
& Jenrette, at one of the addresses specified on the back cover of this
document and, in respect of the Convertible Offer, from the registrar and
any paying and conversion agent in respect thereof and through Euroclear
and Cedel to participants and accountholders therein.
(p) The Offer, all acceptances of the Offer and all elections in respect of it,
are governed by and will be construed in accordance with English law.
Execution by or on behalf of a Sedgwick Securityholder or Sedgwick
Bondholder of an Acceptance Form constitutes his irrevocable submission to
the jurisdiction of the courts of England in relation to all matters
arising in connection with the Offer. However, the conduct of the Offer is
also subject to US federal securities laws and the securities laws of the
states in the US in which the Offer is being made.
8. OVERSEAS SEDGWICK SECURITYHOLDERS AND SEDGWICK BONDHOLDERS
(a) The making of the Offer (including the Loan Note Alternative) in, or to
certain persons resident in or nationals or citizens of, jurisdictions
outside the UK or the US (and the availability of Loan Notes to citizens or
residents of the US and certain other overseas persons) or to their
nominees or trustees may be prohibited or affected by the laws of the
relevant jurisdiction. Sedgwick Securityholders and Sedgwick Bondholders
who are citizens, residents or nationals of jurisdictions outside the UK
and the US (or, in the case of Loan Notes, the UK only) should inform
themselves about and observe any applicable legal requirements. It is the
responsibility of such Sedgwick Securityholders and Sedgwick Bondholders
wishing to accept the Offer or the Loan Note Alternative to satisfy
themselves as to the full observance of the laws of the relevant
jurisdiction in connection with the Offer. This includes the obtaining of
any
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<PAGE> 41
governmental, exchange control or other consents which may be required,
compliance with other necessary formalities needing to be observed and the
payment of any issue, transfer or other taxes or duties or other requisite
payments due in that jurisdiction by whomsoever payable and each of Marsh &
McLennan, J.P. Morgan and Donaldson, Lufkin & Jenrette and any person
acting on their behalf shall be fully indemnified and held harmless by any
Sedgwick Securityholder and Sedgwick Bondholder for whom Marsh & McLennan,
J.P. Morgan and Donaldson, Lufkin & Jenrette are required to pay any issue,
transfer or other taxes.
(b) The Offer is not being made, directly or indirectly, in or into Canada,
Australia or Japan or by use of the mails of, or by any means or
instrumentality of interstate or foreign commerce of, or of any facility of
a national securities exchange of Canada, Australia or Japan. This
includes, but is not limited to, facsimile transmission, e-mail, telex and
telephone. Accordingly, copies of this document, the Acceptance Forms, and
any related offer documents are not being, and must not be, mailed or
otherwise distributed or sent in, into or from Canada, Australia or Japan.
Persons receiving such documents (including, without limitation,
custodians, nominees and trustees) must not distribute, mail or send them
in, into or from Canada, Australia or Japan, use the Canadian, Australian
or Japanese mails or any such means, instrumentality or facility in
connection with the Offer, and so doing may invalidate any related
purported acceptance of the Offer. Persons wishing to accept the Offer must
not use the Canadian, Australian or Japanese (or, if electing for the Loan
Note Alternative, the US) mails or any such means, instrumentality or
facility for any purpose directly or indirectly relating to acceptance of
the Offer. Envelopes containing Acceptance Forms in respect of the Offer
must not be postmarked in Canada, Australia or Japan (and, if electing for
the Loan Note Alternative, the US) or otherwise despatched from those
jurisdictions and all acceptors must provide addresses outside Canada,
Australia or Japan (and, if electing for the Loan Note Alternative, the US)
for the receipt of the consideration to which they are entitled under the
Offer or for the return of Acceptance Forms, share certificates, bond
certificates or other documents of title.
(c) Subject as provided below, a Sedgwick Securityholder or Sedgwick Bondholder
will be deemed not to have accepted the Offer if:
(i) he cannot give the representations and warranties set out in
paragraphs 10(b) and (in the case of holders of Sedgwick ADSs)
11(i)(ii)(dd) of Part B of this Appendix;
(ii) he completes the relevant Box of the relevant Acceptance Form with an
address in Canada, Australia or Japan or has a registered address in
Canada, Australia or Japan and in either case he does not insert in the
relevant Box of the relevant Acceptance Form the name and address of a
person or agent outside Canada, Australia or Japan to whom he wishes the
consideration to which he is entitled under the Offer to be sent;
(iii) he inserts in the relevant Box of the relevant Acceptance Form the
name and address of a person or agent in Canada, Australia or Japan
to whom he wishes the consideration to which he is entitled under the
Offer to be sent; or
(iv) the Acceptance Form received from him is in an envelope postmarked in,
or which otherwise appears to Marsh & McLennan or its agents to have
been sent from, Canada, Australia or Japan.
(d) If any person, despite the restrictions referred to in paragraph 8(b) of
Part B of this Appendix and whether pursuant to a contractual or legal
obligation or otherwise, forwards this document, the Acceptance Forms or any
related offering document in, into or from Canada, Australia or Japan or
uses the mails or any means or instrumentality (including, without
limitation, facsimile transmission, telex and telephones) of interstate or
foreign commerce of, or any facilities of a national securities exchange of
Canada, Australia or Japan in connection with that forwarding, that person
should:
(i) inform the recipient of that fact;
(ii) explain to the recipient that action may invalidate any purported
acceptance by the recipient; and
(iii) draw the attention of the recipient to this paragraph 8.
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(e) If any written notice from a Sedgwick Securityholder or Sedgwick Bondholder
withdrawing his acceptance in accordance with paragraph 4 of Part B of this
Appendix is received in an envelope postmarked in, or which otherwise
appears to Marsh & McLennan or its agents to have been sent from Canada,
Australia or Japan, Marsh & McLennan reserves the right, in its absolute
discretion, to treat that notice as invalid.
(f) The provisions of this paragraph 8 and any other terms of the Offer relating
to overseas holders of Sedgwick Securities or Sedgwick Convertible Bonds may
be waived, varied or modified as regards specific Sedgwick Securityholders
and Sedgwick Bondholders or on a general basis by Marsh & McLennan in its
sole discretion. Subject to this discretion, the provisions of this
paragraph 8 supersede any terms of the Offer inconsistent with them. A
reference in this paragraph 8 to a Sedgwick Securityholder or a Sedgwick
Bondholder includes the person or persons executing the relevant Acceptance
Form and, in the event of more than one person executing an Acceptance Form,
the provisions of this paragraph 8 apply to them jointly and severally.
(g) The Loan Notes to be issued pursuant to the Loan Note Alternative have not
been, and will not be, registered under the US Securities Act or under the
securities laws of any State of the US and the relevant clearances have not
been, and will not be, obtained from the regulatory authority of any
province or territory of Canada. In addition, no prospectus in relation to
the Loan Notes has been, or will be, lodged with, or registered by, the
Australian Securities Commission and no steps have been taken, nor will any
be taken, to enable the Loan Notes to be offered in compliance with
applicable securities laws of Japan. The Loan Notes may therefore not be
offered, sold, resold, delivered or distributed, directly or indirectly, in
or into the US or to US Persons (except in transactions exempt from, or not
subject to, the registration requirements of the US Securities Act) or in or
into Canada, Australia or Japan, or any other jurisdiction if to do so would
constitute a violation of the relevant laws in such jurisdiction. If in
respect of an Acceptance Form from any Sedgwick Shareholder or Sedgwick
Bondholder the holder is unable or Marsh & McLennan believes the holder is
unable to make the representations and warranties set out in paragraph 10(b)
and (in the case of a holder of Sedgwick ADSs) 11(i)(ii)(dd) of Part B of
this Appendix, Marsh & McLennan reserves the right, in its absolute
discretion, to ignore any election in that Acceptance Form to receive Loan
Notes and to treat it instead as an acceptance of the Offer for cash.
9. PROCEDURES FOR TENDERING SEDGWICK SHARES AND SEDGWICK CONVERTIBLE BONDS
(a) Holders of Sedgwick Shares and/or Sedgwick Convertible Bonds will have
received with this document an Acceptance Form in respect of the Ordinary
Offer and/or the Convertible Offer. This section should be read together
with the relevant Acceptance Form. The provisions of this section shall be
deemed to be incorporated in, and to form a part of, the relevant Acceptance
Form. The instructions printed on such Acceptance Form shall be deemed to
form part of the terms of the Offer.
If a holder of Sedgwick Shares holds Sedgwick Shares in both certificated
and uncertificated form he should complete a separate Shareholder Form of
Acceptance for each holding. Similarly, such holder should complete a
separate Shareholder Form of Acceptance for Sedgwick Shares held in
uncertificated form, but under different member account IDs, and for
Sedgwick Shares held in certificated form, but under different
designations.
(b) To accept the Offer, any Sedgwick Shareholder or Sedgwick Bondholder,
including any person in the US who holds Sedgwick Shares or Sedgwick
Convertible Bonds, wishing to accept the Offer in respect of all or any
portion of such holder's Sedgwick Shares or Sedgwick Convertible Bonds,
should complete Box 1 on the relevant Acceptance Form and, if any of such
holder's Sedgwick Shares are in CREST, Box 5 of the Shareholder Form of
Acceptance, and in the case of Sedgwick Bondholders, Box 5 of the
Bondholder Form of Acceptance, and sign Box 8 on the relevant Acceptance
Form in accordance with the instructions printed on it. All Sedgwick
Shareholders and Sedgwick Bondholders who are individuals should sign the
relevant Acceptance Form in the presence of a witness who should also sign
Box 8 of the relevant Acceptance Form in accordance with the instructions
printed on it. Unless witnessed, an acceptance by an individual will not be
valid.
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(c) An accepting Sedgwick Shareholder or Sedgwick Bondholder should return the
completed, signed and, where necessary, witnessed Acceptance Form, whether
or not any of its Sedgwick Shares are in CREST, to the UK Receiving Agent
(if such accepting Sedgwick Shareholder or Sedgwick Bondholder is a Non-US
Holder) or the US Depositary (if such accepting Sedgwick Shareholder or
Sedgwick Bondholder is a US Holder). The completed Acceptance Form,
together, if such holder's Sedgwick Shares are in certificated forms with
his share certificate(s), and, if he holds Sedgwick Convertible Bonds, with
his bond certificate(s) and/or other document(s) of title, must be lodged
with the UK Receiving Agent (if such accepting Sedgwick Shareholder or
Sedgwick Bondholder is a Non-US Holder) or the US Depositary (if such
accepting Sedgwick Shareholder or Sedgwick Bondholder is a US Holder), as
soon as possible, but in any event so as to arrive not later than 3.00 p.m.
(London time), 10.00 a.m. (New York City time) on 5 October 1998. If you
have any questions as to how to complete the relevant Acceptance Form,
please contact the UK Receiving Agent on +44(0)117 937 0672 or the US
Depositary on +1-800-507-9357.
(d) Holders of Sedgwick Bearer Bonds should in addition to lodging the
Bondholder Form of Acceptance:
(i) ensure that the Bondholder Form of Acceptance is accompanied by the
relevant Sedgwick Bearer Bonds (together with all unmatured coupons
appertaining thereto except for those relating to the period from 31 May
1998 to 30 November 1998), in which case a receipt will be issued to the
person delivering the relevant Sedgwick Bearer Bonds (and such coupons
as aforesaid) (or, if the Bondholder Form of Acceptance and the relevant
Sedgwick Bearer Bonds are delivered by post, to the person signing the
Bondholder Form of Acceptance at the address stated in Box 7 thereon);
or
(ii) produce to J.P. Morgan or Donaldson, Lufkin & Jenrette evidence
satisfactory to J.P. Morgan and Donaldson, Lufkin & Jenrette that the
relevant Sedgwick Bearer Bonds (together with such coupons as aforesaid)
have been deposited with a bank or other depositary to the order of J.P.
Morgan or Donaldson, Lufkin & Jenrette; or
(iii) if the Sedgwick Bearer Bonds are held through Euroclear or Cedel,
procure that appropriate instructions are given to Euroclear or, as the
case may be, Cedel to debit the relevant securities clearance or other
account with the nominal amount of Sedgwick Bearer Bonds in respect of
which the Convertible Offer is being accepted and to credit J.P.
Morgan's or Donaldson, Lufkin & Jenrette's securities clearance or other
account with Euroclear or, as the case may be, Cedel, in accordance with
the procedures details of which are available on request from Euroclear
or, as the case may be, Cedel. An acceptance of the Convertible Offer
where delivery of Sedgwick Bearer Bonds is made through Euroclear or
Cedel will not be treated as valid unless and until such credit has been
confirmed to J.P. Morgan or Donaldson, Lufkin & Jenrette by Euroclear
or, as the case may be, Cedel.
A person in the US who holds Sedgwick Shares or Sedgwick Convertible Bonds
may submit the relevant Acceptance Form, together with his share
certificate(s), and/or bond certificates and/or other document(s) of title,
to the US Depositary, who will receive such Acceptance Form and
certificate(s) and/or other document(s) of title on behalf of the UK
Receiving Agent. An Acceptance Form contained in an envelope postmarked
Canada, Australia or Japan or otherwise appearing to Marsh & McLennan or
its agents to have been sent from Canada, Australia or Japan may be
rejected as invalid.
(e) If Sedgwick Shares are in uncertificated form, the holder should insert in
Box 5 of the Shareholder Form of Acceptance the participant ID and member
account ID under which such Sedgwick Shares are held by him in CREST and
otherwise complete and return the Shareholder Form of Acceptance as
described above. In addition, such holders should take (or procure to be
taken) the action set out below to transfer the Sedgwick Shares in respect
of which he wishes to accept the Offer to an escrow balance, specifying the
UK Receiving Agent (in its capacity as a CREST participant under the
participant ID referred to below) as the escrow agent, as soon as possible
but in any event so that the transfer to escrow settles not later than 3.00
p.m. (London time), 10.00 a.m. (New York City time) on 5 October 1998.
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(f) If the Sedgwick Shareholder is a CREST sponsored member, he should refer to
his CREST sponsor before taking any action. Such holder's sponsor will be
able to confirm details of his participant ID and the member account ID
under which his Sedgwick Shares are held. In addition, only his CREST
sponsor will be able to send the TTE Instruction to CRESTCo in relation to
his Sedgwick Shares.
(g) The holder of such Sedgwick Shares should send (or, if he is a CREST
sponsored member, procure that his CREST sponsor sends) a TTE Instruction to
CRESTCo which must be properly authenticated in accordance with CRESTCo's
specifications and which must contain, in addition to the other information
that is required for a TTE Instruction to settle in CREST, the following
details:
(i) the number of Sedgwick Shares to be transferred to an escrow
balance;
(ii) the member account ID of such Sedgwick Shareholder. This must be the
same member account ID as the member account ID that is inserted in Box
5 of the Shareholder's Form of Acceptance;
(iii) the participant ID of such Sedgwick Shareholder. This must be the
same participant ID as the participant ID that is inserted in Box 5 of
the Shareholder's Form of Acceptance;
(iv) the participant ID of the escrow agent (the UK Receiving Agent in
its capacity as a CREST receiving agent). This is 3RA48;
(v) the member account ID of the escrow agent. This is SEDGWICK;
(vi) the Shareholder Form of Acceptance Reference Number. This is the
Shareholder Form of Acceptance Reference Number that appears next to
Box 5 on page 3 of the Shareholder's Form of Acceptance. This Reference
Number should be inserted in the first eight characters of the shared
note field on the TTE Instruction. Such insertion will enable the UK
Receiving Agent to match the transfer to escrow to your Shareholder
Form of Acceptance. The holder of such shares should keep a separate
record of this Shareholder Form of Acceptance Reference Number for
future reference;
(vii) the Intended Settlement Date. This should be as soon as possible and
in any event not later than 3.00 p.m. (London time), 10.00 a.m. (New
York City time) on 5 October 1998;
(viii) the Corporate Action ISIN. This is GB0007933004;
(ix) the Corporate Action Number for the Offer. This is allocated by
CRESTCo and can be found by viewing the relevant Corporate Action
Details in CREST; and
(x) input with Standard Delivery instruction of 80.
(h) After settlement of the TTE Instruction, such Sedgwick Shareholder will not
be able to access the Sedgwick Shares concerned in CREST for any action or
charging purposes. If the Conditions are satisfied, fulfilled or, to the
extent permitted, waived, the escrow agent will transfer the Sedgwick
Shares concerned to itself in accordance with paragraph 9 of Part B of this
Appendix.
(i) Such Sedgwick Shareholder is recommended to refer to the CREST Manual
published by CRESTCo for further information on the CREST procedures
outlined above. For ease of processing, such holder is requested, wherever
possible, to ensure that a Shareholder Form of Acceptance relates to only
one transfer to escrow.
(j) If no Shareholder Form of Acceptance Reference Number, or an incorrect
Shareholder Form of Acceptance Reference Number, is included on the TTE
Instruction, Marsh & McLennan may treat any amount of Sedgwick Shares
transferred to an escrow balance in favour of the escrow agent specified
above from the participant ID and member account ID identified in the TTE
Instruction as relating to any Shareholder Acceptance Form(s) which
relate(s) to the same member account ID and participant ID (up to the
amount of Sedgwick Shares inserted or deemed to be inserted on the
Shareholder Form of Acceptance concerned).
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(k) Such Sedgwick Shareholder should note that CRESTCo does not make available
special procedures, in CREST, for any particular corporate action. Normal
system timings and limitations will therefore apply in connection with a
TTE Instruction and its settlement. Such holder should therefore ensure
that all necessary action is taken by him (or by his CREST sponsor) to
enable a TTE Instruction relating to his Sedgwick Shares to settle prior to
3.00 p.m. (London time), 10.00 a.m. (New York City time) on 5 October 1998.
In this connection such holder is referred in particular to those sections
of the CREST Manual concerning practical limitations of the CREST system
and timings.
(l) Marsh & McLennan will make an appropriate announcement if any of the details
contained in this paragraph 9 alter for any reason.
(m) Normal CREST procedures (including timings) apply in relation to any
Sedgwick Shares that are, or are to be, converted from uncertificated to
certificated form, or from certificated to uncertificated form, during the
course of the Offer (whether any such conversion arises as a result of a
transfer of Sedgwick Shares or otherwise). Sedgwick Shareholders who are
proposing so to convert any Sedgwick Shares are recommended to ensure that
the conversion procedures are implemented in sufficient time to enable the
person holding or acquiring the Sedgwick Shares as a result of the
conversion to take all necessary steps in connection with an acceptance of
the Offer (in particular, as regards delivery of share certificates or
other documents of title or transfers to an escrow balance as described
above) prior to 3.00 p.m. (London time), 10.00 a.m. (New York City time) on
5 October 1998.
(n) If the share certificate(s) and/or other document(s) of title is/are not
readily available or is/are lost the Shareholder Form of Acceptance should
nevertheless be completed, signed and returned as stated above to the UK
Receiving Agent or the US Depositary so as to be received as soon as
possible, but in any event no later than 3.00 p.m. (London time), 10.00
a.m. (New York City time) on 5 October 1998, together with any share
certificate(s) and/or other document(s) of title that is/are available
accompanied by a letter stating that the balance will follow or that the
accepting holder has lost one or more of his share certificate(s) and/or
other documents of title. If the share certificate(s) and/or other
document(s) of title are lost, the accepting holder should request the
registrar of Sedgwick (Lloyds Bank Registrars, The Causeway, Goring-by-Sea,
Worthing, West Sussex BN99 6DA) to send him a letter of indemnity for
completion in accordance with the instructions given. When completed, the
letter of indemnity must be lodged with the UK Receiving Agent or the US
Depositary, in accordance with the instructions given, in support of the
Shareholder Form of Acceptance.
10. ACCEPTANCE FORMS FOR SEDGWICK SHAREHOLDERS AND SEDGWICK BONDHOLDERS
Each holder of Sedgwick Shares or Sedgwick Convertible Bonds who executes and
lodges or has executed and lodged on his behalf an Acceptance Form with the UK
Receiving Agent or the US Depositary, subject to the rights of withdrawal set
out in this document, irrevocably (and so as to bind himself, his heirs,
successors and assigns and his personal or legal representatives):
(a) (i) accepts the Offer in respect of the number of Sedgwick Shares and
Sedgwick Convertible Bonds inserted or deemed to be inserted in Box 1 of
the relevant Acceptance Form;
(ii) if applicable, elects for the Loan Note Alternative in respect of
such amount of cash as would otherwise fall to be paid under the Offer
in respect of the number of Sedgwick Shares and Sedgwick Convertible
Bonds inserted, or deemed to be inserted, in Box 2 of the relevant
Acceptance Form; and
(iii) agrees to execute any further documents and give any further
assurances which may be required to enable Marsh & McLennan to obtain
the full benefit of paragraph 9 of Part B of this Appendix 1 and this
paragraph 10 and/or to perfect any of the authorities expressed to be
given hereunder,
in each case on and subject to the terms and Conditions set out or referred
to in this document and the Acceptance Forms;
(b) represents and warrants to Marsh & McLennan, J.P. Morgan and Donaldson,
Lufkin & Jenrette that:
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(i) he has not received or sent copies or originals of this document, the
Acceptance Form or any related offering document in, into or from
Canada, Australia or Japan;
(ii) he has not used in connection with the Offer or the execution or
delivery of the Acceptance Forms, directly or indirectly, the mails of,
or any means or instrumentality (including, without limitation,
facsimile transmission, e-mail, telex and telephone) of interstate or
foreign commerce of, or of any facility of a national securities
exchange of Canada, Australia or Japan;
(iii) he is accepting the Offer from outside Canada, Australia or Japan;
(iv) if he is electing the Loan Note Alternative, he is not a US Person and
he is not accepting the Offer with a view to the offer, sale or
delivery, directly or indirectly, of any Loan Notes in or into the US,
Canada, Australia or Japan and will not hold or acquire any Loan Notes
for any other person who he has reason to believe is purchasing for the
purpose of that offer, sale or delivery;
(v) he is not an agent or fiduciary acting on a non-discretionary basis
for a principal, unless such agent or fiduciary is an authorised
employee of such principal or such principal has given any instructions
with respect to the Offer from outside Canada, Australia or Japan; and
(vi) in the case of a holder of Sedgwick Bearer Bonds, that he is such a
holder and, if he is not the absolute beneficial owner of such Sedgwick
Bearer Bonds, he is duly authorised by all relevant persons to accept
the Convertible Offer and to effect delivery of such Sedgwick Bearer
Bonds in accordance with the terms of the Convertible Offer.
(c) appoints any director of, or any person authorised by, Marsh & McLennan,
J.P. Morgan or Donaldson, Lufkin & Jenrette as his agent and/or attorney
(subject to the Offer becoming unconditional and him not having validly
withdrawn his acceptance) with an irrevocable instruction and authorisation
to:
(i) complete and execute any form of transfer, renunciation or other
document in relation to the Sedgwick Shares or Sedgwick Convertible
Bonds referred to in paragraph 10(a)(i) of Part B of this Appendix I in
favour of Marsh & McLennan or as it may direct;
(ii) deliver any form of transfer, renunciation or other document with any
certificate or other document of title for registration within six
months of the Offer becoming unconditional; and
(iii) take any other action as the agent and/or attorney may think
necessary or expedient in connection with his acceptance of the Offer
and to vest in Marsh & McLennan (or as it may direct) the Sedgwick
Shares and the Sedgwick Convertible Bonds referred to in paragraph
10(a)(i) of Part B of this Appendix I;
(d) undertakes that the execution of the Acceptance Form and its delivery to the
UK Receiving Agent or the US Depositary constitutes an irrevocable
instruction and authority:
(i) subject to the Offer becoming unconditional and him not having
validly withdrawn his acceptance, to transfer to Marsh & McLennan (or to
such other person or persons as Marsh & McLennan or its agent may
direct) by means of CREST all or any of the Relevant Sedgwick Shares
(but not exceeding the number of Sedgwick Shares in respect of which the
Offer is accepted or deemed to be accepted); and
(ii) if the Offer does not become unconditional, to give instructions to
CRESTCo immediately after the Offer lapses (or within such longer period
as the Panel may permit, not exceeding 14 calendar days of the Offer
lapsing) to transfer all Relevant Sedgwick Shares to the original
available balance of the accepting Sedgwick shareholder.
In this Paragraph, "Relevant Sedgwick Shares" means uncertificated Sedgwick
Shares in respect of which a transfer or transfers to escrow has or have
been effected in accordance with the procedures described in paragraph 9 of
Part B of this Appendix I and where the transfer or transfers to escrow was
or were made in respect of Sedgwick Shares held under the same member
account ID and participant ID as the member account ID and participant ID
relating to the relevant Shareholder Form of Acceptance (but
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<PAGE> 47
irrespective of whether or not any Shareholder Form of Acceptance Reference
Number, or a Shareholder Form of Acceptance Reference Number corresponding
to that appearing on the relevant Shareholder Form of Acceptance, was
included in the relevant transfer to escrow instruction);
(e) authorises and requests (subject to the Offer becoming unconditional and him
not having validly withdrawn his acceptance):
(i) Sedgwick or its agents to procure the registration of the transfer of
the Sedgwick Shares or Sedgwick Registered Bonds pursuant to the Offer
and the delivery of the share certificate(s) and/or bond certificate(s)
and other document(s) of title in respect thereof and in respect of the
Sedgwick Bearer Bonds to Marsh & McLennan or as it may direct;
(ii) if the Sedgwick Shares referred to in paragraph 10(a)(i) of Part B of
this Appendix I are in certificated form or paragraph 10(f) of Part B of
this Appendix I applies, or in respect of Sedgwick Convertible Bonds,
Marsh & McLennan or its agents to procure the despatch by post (or by
such other method as may be approved by the Panel) of the consideration
to which he is entitled under the Offer, together with documents of
title for any Loan Note in respect of his election for the Loan Note
Alternative, at his risk to the person or agent whose name and address
is set out in Box 7 of the relevant Acceptance Form or, if no person or
agent's name and address is set out, to the first-named holder at his
registered address, set out in Box 4;
(iii) if the Sedgwick Shares referred to in paragraph 10(a)(i) of Part B of
this Appendix I are in uncertificated form Marsh & McLennan or its
agents to ensure that an assured payment obligation is created in favour
of the Sedgwick shareholder's payment bank in accordance with the CREST
assured payment arrangement in respect of any cash consideration to
which that shareholder is entitled; and
(iv) Marsh & McLennan, Sedgwick or their respective agents to record and
act on any instructions with regard to payments or notices which have
been entered in the records of Sedgwick in respect of his holding of
Sedgwick Shares or Sedgwick Convertible Bonds;
(f) agrees that:
(i) Marsh & McLennan may decide to despatch all or part of the
consideration payable to a shareholder whose Sedgwick Shares are in
uncertificated form in accordance with paragraph 10(e)(ii) of Part B of
this Appendix I; and
(ii) the consideration payable to a shareholder whose Sedgwick Shares are
in uncertificated form will be despatched in accordance with paragraph
10(e)(ii) of Part B of this Appendix I if the shareholder is a CREST
member whose registered address is in Canada, Australia or Japan;
(g) gives authority to any director of, or person authorised by, Marsh &
McLennan, J.P. Morgan or Donaldson, Lufkin & Jenrette within the terms of
paragraph 6 of Part B of this Appendix I;
(h) subject to the Offer becoming unconditional and him not having validly
withdrawn his acceptance (or if the Offer will become unconditional or
lapse on the outcome of the resolution in question or if the Panel gives
its consent) and (in the case of Sedgwick Shares and Sedgwick Registered
Bonds) pending registration:
(i) authorises Marsh & McLennan or its agent to direct the exercise of
any votes and any other rights and privileges (including the right to
requisition the convening of a general or separate class meeting of
Sedgwick) attaching to the Sedgwick Shares or Sedgwick Convertible Bonds
referred to in paragraph 10(a)(i) of Part B of this Appendix I;
(ii) authorises Sedgwick or its agent to send any notice, circular,
warrant or other document or communication which may be required to be
sent to him as a member of Sedgwick to Marsh & McLennan, care of the UK
Receiving Agent;
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(iii) authorises any director of, or person authorised by, Marsh &
McLennan, J.P. Morgan or Donaldson, Lufkin & Jenrette to sign any
document and do such things as may in the opinion of that agent and/or
attorney seem necessary or desirable in connection with the exercise of
any votes or other rights or privileges attaching to the Sedgwick Shares
or Sedgwick Convertible Bonds held by him (including, without
limitation, signing any consent to short notice of a general or separate
class meeting as his agent and/or attorney and on his behalf and
executing a form of proxy appointing any person nominated by Marsh &
McLennan to attend general and separate class meetings of Sedgwick and
attending any such meeting and exercising the votes attaching to the
Sedgwick Shares or Sedgwick Convertible Bonds referred to in paragraph
10(a)(i) of Part B of this Appendix on his behalf, where relevant, such
votes to be cast so far as possible to satisfy any outstanding condition
of the Offer); and
(iv) agrees not to exercise any such rights without the consent of Marsh &
McLennan and irrevocably undertakes not to appoint a proxy for or to
attend such general or separate class meetings of Sedgwick.
This authority will cease to be valid if the acceptance is validly
withdrawn in accordance with paragraph 4 of Part B of this Appendix I;
(i) agrees that he will deliver to the UK Receiving Agent or the US Depositary,
or procure the delivery to the UK Receiving Agent or the US Depositary of,
his certificate(s) and/or (in respect of Sedgwick Registered Bonds) bond
certificates and/or other document(s) of title in respect of those Sedgwick
Shares or Sedgwick Convertible Bonds referred to in paragraph 10(a)(i) of
Part B of this Appendix that are in certificated form, or an indemnity
acceptable to Marsh & McLennan, as soon as possible and in any event within
two months of the Offer becoming unconditional in all respects (or, in
relation to Sedgwick Bearer Bonds, will otherwise comply fully with the
delivery instructions set out in paragraph (q) below and the Bondholder
Form of Acceptance within such period);
(j) agrees that he will take (or procure to be taken) the necessary action to
transfer all those Sedgwick Shares referred to in paragraph 10(a)(i) of
Part B of this Appendix that are in uncertificated form to an escrow
balance as soon as possible and in any event so that the transfer to escrow
settles within two months of the Offer becoming unconditional;
(k) agrees that if for any reason, any Sedgwick Shares in respect of which a
transfer to an escrow balance has been effected are converted to
certificated form, he will immediately deliver or ensure the immediate
delivery of the share certificates or other documents of title in respect
of all those Sedgwick Shares that are converted to the UK Receiving Agent
or the US Depositary at the relevant address specified on the back cover of
this document;
(l) agrees that the creation of an assured payment obligation in favour of his
payment bank in accordance with the CREST assured payment arrangements as
referred to in paragraph 10(e)(iii) of Part B of this Appendix to the
extent of the obligation so created, discharge fully any obligation of
Marsh & McLennan, J.P. Morgan or Donaldson, Lufkin & Jenrette to pay to him
the cash consideration to which he is entitled under the Offer;
(m) agrees that he will do everything necessary or expedient to vest in Marsh &
McLennan or its nominees the Sedgwick Shares and Sedgwick Convertible Bonds
referred to in paragraph 10(a)(i) of Part B of this Appendix and to enable
the UK Receiving Agent or the US Depositary to perform its functions as
escrow agent for the purposes of the Offer;
(n) agrees to ratify everything which may be done or effected by any director
of, or person authorised by, Marsh & McLennan, J.P. Morgan, Donaldson,
Lufkin & Jenrette, the UK Receiving Agent or the US Depositary in exercise
of any of the powers and/or authorities under Part B of this Appendix;
(o) agrees that, if any provision of Part B of this Appendix will be
unenforceable or invalid or will not operate so as to afford Marsh &
McLennan, J.P. Morgan, Donaldson, Lufkin & Jenrette, the UK Receiving Agent
or the US Depositary or any of their respective directors or persons
authorised by them, the benefit
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of the authority expressed to be given in Part B of this Appendix, he will,
with all practicable speed, do everything that may be required or desirable
to enable Marsh & McLennan, J.P. Morgan, Donaldson, Lufkin & Jenrette, the
UK Receiving Agent and the US Depositary and any of their respective
directors or persons authorised by them to secure the full benefit of Part
B of this Appendix;
(p) represents and warrants that he is entitled to sell and transfer the
beneficial ownership of the Sedgwick Shares and Sedgwick Convertible Bonds
referred to in paragraph 10(a)(i) of Part B of this Appendix and that such
shares and bonds are sold fully paid and free from all liens, equities,
charges, encumbrances and other interests and together with all rights
attaching to them on or after 25 August 1998 including, without limitation,
the right to receive and retain all dividends and other distributions
declared, paid or made on or after that date other than (i) the interim
dividend of 3.0 pence (net) per Sedgwick Share announced on 11 August 1998
and payable on 19 October 1998 to Sedgwick Securityholders on the register
at the close of business on 21 August 1998 and (ii) interest on the
Sedgwick Convertible Bonds in respect of the period from 31 May 1998 to 30
November 1998 as provided in paragraph 2 of the letter from J.P. Morgan and
Donaldson, Lufkin and Jenrette in this document;
(q) in the case of a holder of Sedgwick Convertible Bonds, agrees that:
(i) an acceptance of the Convertible Offer by a Sedgwick Bondholder who
has completed and delivered a valid conversion notice and all other
documents and payments required for conversion in accordance with the
terms and conditions of the Sedgwick Convertible Bonds in respect of
Sedgwick Convertible Bonds included in his acceptance of the Convertible
Offer, or on whose behalf such a conversion notice has been completed
and delivered together with such other documents and payments as
aforesaid, shall, unless Marsh & McLennan determines otherwise, upon the
conversion taking effect on the relevant Conversion Date be deemed to be
an acceptance of the Ordinary Offer (and not thereafter of the
Convertible Offer) in respect of the Sedgwick Shares resulting from such
conversion unless the Convertible Offer shall have become unconditional
in all respects before any such Conversion Date;
(ii) an acceptance of the Ordinary Offer by a Sedgwick Bondholder who has
completed and delivered a valid conversion notice and all other
documents and payments required for conversion in accordance with the
terms and conditions of the Sedgwick Convertible Bonds in respect of all
or some of the Sedgwick Shares arising upon the conversion of the
relevant Sedgwick Convertible Bonds taking effect on the relevant
Conversion Date, or on whose behalf such a conversion notice and such
other documents and payments have been completed and delivered, shall,
unless Marsh & McLennan determines otherwise, until the conversion takes
effect on the relevant Conversion Date be deemed to be an acceptance of
the Convertible Offer in respect of the Sedgwick Convertible Bonds which
would on conversion give rise to the Sedgwick Shares in respect of which
the Ordinary Offer has been accepted;
(iii) any such Sedgwick Bondholder as referred to in paragraph (i) or (ii)
above, will be deemed to have irrevocably undertaken, represented,
warranted and agreed to and with Marsh & McLennan, J.P. Morgan and
Donaldson, Lufkin & Jenrette (so as to bind him, his personal
representatives, heirs, successors and assigns) to the following effect:
(A) that if he is a holder of Sedgwick Registered Bonds, he has
delivered to the registrar of the Sedgwick Convertible Bonds a
valid conversion notice together with the relevant Sedgwick
Convertible Bonds and, if he is a holder of Sedgwick Bearer Bonds,
he has delivered to a paying and conversion agent of the Sedgwick
Convertible Bonds a valid conversion notice together with the
relevant Sedgwick Convertible Bonds and all unmatured coupons
appertaining thereto except for those relating to the period 31 May
1998 to 30 November 1998 in each case in accordance with the terms
and conditions of the Sedgwick Convertible Bonds and together in
each case with such other documents and payments as may be required
in accordance with the terms and conditions of the Sedgwick
Convertible Bonds;
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(B) that he will furnish to the UK Receiving Agent and/or the US
Depositary (as appropriate), such evidence of the delivery of the
conversion notice, Sedgwick Convertible Bonds, coupons (where
applicable) and other documents and payments required to effect
conversion in accordance with the terms and conditions of the
Sedgwick Convertible Bonds, of the authority of the person
completing and delivering such notice so to do and such other
things as may be required by the UK Receiving Agent and/or the US
Depositary (as appropriate) and do all acts and things as may be
necessary or desirable in relation to the conversion of his
Sedgwick Convertible Bonds;
(C) that the execution of such Bondholder Form of Acceptance constitutes
an authority and direction to Sedgwick and/or Sedgwick's registrars
to forward to Marsh & McLennan or the UK Receiving Agent and/or the
US Depositary (as appropriate), free of charge, the definitive
certificate for the appropriate amount of Sedgwick Shares arising
on any such conversion together with a new Sedgwick Convertible
Bond or Bonds for any unconverted Sedgwick Convertible Bonds
comprised in the certificate(s) surrendered by him and in respect
of which he shall have accepted the Convertible Offer unless the
Offer shall have lapsed or been withdrawn or unless the UK
Receiving Agent and/or the US Depositary (as appropriate), shall
have notified Sedgwick's registrars that any such acceptance of the
Offer has been validly withdrawn; and
(D) that the execution of such Bondholder Form of Acceptance constitutes
an authority and direction of Marsh & McLennan and the UK Receiving
Agent and/or the US Depositary (as appropriate) to give such
notification as is referred to in sub-paragraph (C) above;
(iv) the execution of the Bondholder Form of Acceptance constitutes,
subject to the Convertible Offer becoming or being declared
unconditional in all respects or, with the consent of the Panel, if
following the exercise of conversion rights pursuant to the authority
contained in (i) below the Ordinary Offer would become unconditional in
all respects:
(i) an irrevocable authority to Marsh & McLennan to exercise any right
of conversion and all other rights relating thereto in accordance
with the terms and conditions of the Sedgwick Convertible Bonds in
respect of which the Convertible Offer is or is deemed to have been
accepted and to take all such action or do such other things as may
be necessary or desirable in relation thereto and the agreement of
such Sedgwick Bondholder not to exercise any such right without the
consent of Marsh & McLennan; and
(ii) an irrevocable authority and direction to Sedgwick and/or
Sedgwick's Registrar to allot or procure the renunciation in favour
of Marsh & McLennan of any Sedgwick Shares arising on the exercise
of any such conversion rights (and a like authority to any
renouncer thereof) and to forward to Marsh & McLennan and/or to the
UK Receiving Agent and/or to the US Depositary (as appropriate),
free of charge, the definitive certificates for the appropriate
amount of Sedgwick Shares arising on such conversion together with
any new certificate for any unconverted Sedgwick Convertible Bonds
and any cheque in respect of any fractional entitlement.
(r) agrees that the terms and Conditions of the Offer are deemed to be
incorporated in, and form part of, the Acceptance Form;
(s) agrees that on execution the Acceptance Form takes effect as a deed;
(t) agrees that the execution of the Acceptance Form constitutes his submission
to the jurisdiction of the courts of England in relation to all matters
arising in connection with the Offer and the Acceptance Form;
(u) agrees and acknowledges that he is not a customer (as defined in the rules
of The Securities and Futures Authority Limited) of J.P. Morgan or
Donaldson, Lufkin & Jenrette in connection with the Offer; and
(v) either (i) certifies to Marsh & McLennan, the UK Receiving Agent and the US
Depositary that it is a Non-US Holder, or (ii) acknowledges that it is a US
Holder and that it may be subject to US federal
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backup withholding tax unless it submits a duly completed Internal Revenue
Service Form W-9 (or a valid Substitute Form W-9), certifying that it is
not subject to US federal backup withholding tax, to the US Depositary.
A reference in this paragraph 10 to a holder of Sedgwick Shares or Sedgwick
Convertible Bonds includes a reference to the person or persons executing the
relevant Acceptance Form and in the event of more than one person executing an
Acceptance Form the provisions of this paragraph 10 will apply to them jointly
and to each of them.
11. PROCEDURES FOR TENDERING SEDGWICK ADSS
(a) If you are a holder of Sedgwick ADSs evidenced by Sedgwick ADRs, you will
have also received a Letter of Transmittal and Notice of Guaranteed
Delivery for use in connection with the Offer. This section should be read
together with the instructions on the Letter of Transmittal. The provisions
of this section shall he deemed to be incorporated in, and form a part of,
the relevant Letter of Transmittal. The instructions printed on the Letter
of Transmittal shall be deemed to form part of the terms of the Offer.
(b) For a holder of Sedgwick ADSs evidenced by Sedgwick ADRs to tender such
Sedgwick ADSs validly pursuant to the Offer, either:
(i) a properly completed and duly executed Letter of Transmittal,
together with any required signature guarantees and any other required
documents, must be received by the US Depositary at one of its addresses
set out at the back of this document, and the Sedgwick ADRs evidencing
such Sedgwick ADSs must be either received by the US Depositary at one
of such addresses or delivered pursuant to the procedures for book-entry
transfer set out below (and a Book-Entry Confirmation received by the US
Depositary in accordance with such procedures); or
(ii) such holder must comply with the Guaranteed Delivery Procedures set
out in paragraph (h) below.
The Offer in respect of Sedgwick ADSs evidenced by Sedgwick ADRs shall be
validly accepted by delivery of a Letter of Transmittal, the relevant
Sedgwick ADRs evidencing Sedgwick ADSs and other required documents to the
US Depositary by a Sedgwick ADS holder (without any further action by the
US Depositary) subject to the terms and Conditions set out in this document
and the Letter of Transmittal. The acceptance of the Offer by a tendering
holder of Sedgwick ADSs evidenced by Sedgwick ADRs pursuant to the
procedures described above, subject to the withdrawal rights described
below, will be deemed to constitute a binding agreement between such
tendering holder of Sedgwick ADSs and Marsh & McLennan upon the terms and
subject to the Conditions of the Offer. If a Sedgwick ADR evidencing a
Sedgwick ADS has been tendered by a holder of Sedgwick ADSs, the Sedgwick
Shares represented by such Sedgwick ADSs may not be tendered independently.
A Letter of Transmittal and other required documents contained in an
envelope postmarked in Canada, Australia or Japan or otherwise appearing to
Marsh & McLennan or its agents to have been sent from Canada, Australia or
Japan may be rejected as invalid.
(c) BOOK-ENTRY TRANSFER
The US Depositary will establish an account at the Book-Entry Transfer
Facilities with respect to Sedgwick ADSs evidenced by Sedgwick ADRs held in
book-entry form for the purposes of the Offer within two Business Days from
the date of this document. Any financial institution that is a participant
in any of the Book-Entry Transfer Facility's systems may make book-entry
delivery of interests in Sedgwick ADSs by causing a Book-Entry Transfer
Facility to transfer such interests in Sedgwick ADSs into the US
Depositary's account at such Book-Entry Transfer Facility in accordance
with that Book-Entry Transfer Facility's procedure for such transfer.
Although delivery of interests in Sedgwick ADSs evidenced by Sedgwick ADRs
may be effected through book-entry transfer into the US Depositary's
account at a Book-Entry Transfer Facility, either:
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(i) the Letter of Transmittal, properly completed and duly executed,
together with any required signature guarantees; or
(ii) an Agent's Message (as defined below),
and, in either case, any other required documents must in any case be
transmitted to, and received by, the US Depositary at one of its addresses
set out on the back cover of this document before Sedgwick ADSs evidenced
by Sedgwick ADRs will be either counted as a valid acceptance, or
purchased, or such holder must comply with the Guaranteed Delivery
Procedures described below. The term "Agent's Message" means a message
transmitted by a Book-Entry Transfer Facility to, and received by, the US
Depositary and forming part of a Book-Entry Confirmation that states that
such Book-Entry Transfer Facility has received an express acknowledgement
from the participant in such Book-Entry Transfer Facility tendering the
interests in Sedgwick ADSs that such participant has received and agrees to
be bound by the terms of the Letter of Transmittal and that Marsh &
McLennan may enforce such agreement against the participant. Delivery of
documents to a Book-Entry Transfer Facility does not constitute delivery to
the US Depositary.
(d) METHOD OF DELIVERY
The method of delivery of Sedgwick ADRs, Letters of Transmittal and all
other required documents is at the option and risk of the tendering holder
of Sedgwick ADSs. Sedgwick ADSs will be deemed delivered only when the
Sedgwick ADRs representing such Sedgwick ADSs are actually received by the
US Depositary (including in the case of a book-entry transfer, by
Book-Entry Confirmation). If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. In all cases,
sufficient time should be allowed to ensure timely delivery. No
acknowledgement of receipt of documents will be given by, or on behalf of,
Marsh & McLennan.
(e) SIGNATURE GUARANTEES
No signature guarantee is required on the Letter of Transmittal if:
(i) the Letter of Transmittal is signed by the registered holder of the
Sedgwick ADSs tendered therewith and such registered holder has not
completed either the Box entitled "Special Delivery Instructions" or the
Box entitled "Special Payment Instructions" in the Letter of
Transmittal; or
(ii) such Sedgwick ADSs are tendered for the account of an Eligible
Institution.
In all other cases, all signatures on Letters of Transmittal must be
guaranteed by an Eligible Institution. See Instruction 1 to the Letter of
Transmittal.
(f) SEDGWICK ADSS AND ADRS
If the Sedgwick ADSs are registered in the name of a person other than the
person who signs the Letter of Transmittal, then the tendered Sedgwick ADRs
must be endorsed or accompanied by appropriate stock powers, signed exactly
as the name or names of the registered owner or owners appear on the
Sedgwick ADRs, with the signatures on the Sedgwick ADRs or stock powers
guaranteed as aforesaid. See Instructions 1 and 5 to the Letter of
Transmittal.
(g) PARTIAL ACCEPTANCES
If fewer than all of the Sedgwick ADSs evidenced by any Sedgwick ADRs
delivered to the US Depositary are to be tendered, the holder thereof
should so indicate in the Letter of Transmittal by filling in the number of
Sedgwick ADSs which are tendered in the Box entitled "Number of ADSs
Tendered". In such case, a new Sedgwick ADR for the remainder of the
Sedgwick ADSs represented by the former Sedgwick ADR will be sent to the
person(s) signing such Letter of Transmittal (or as such person properly
indicates thereon) as promptly as practicable following the date the
tendered Sedgwick ADSs are purchased. All Sedgwick ADSs delivered to the US
Depositary will be deemed to have been tendered
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unless otherwise indicated. See Instruction 4 to the Letter of Transmittal.
In the case of partial tenders, Sedgwick ADSs not tendered will not be
reissued to a person other than the registered holder.
(h) GUARANTEED DELIVERY PROCEDURES
(i) If a holder of Sedgwick ADSs evidenced by Sedgwick ADRs wishes to
tender Sedgwick ADSs pursuant to the Offer and the Sedgwick ADRs
evidencing such Sedgwick ADSs are not immediately available or the
procedures for book-entry transfer cannot be completed on a timely
basis, or if time will not permit all required documents to reach the US
Depositary prior to the expiry of the Subsequent Offer Period, such
holder's tender of Sedgwick ADSs may be effected if all of the following
conditions are satisfied (the "Guaranteed Delivery Procedures"):
(aa) such tender is made by or through an Eligible Institution;
(bb) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by Marsh & McLennan is
received by the US Depositary, as provided below, prior to the
expiry of the Subsequent Offer Period; and
(cc) the Sedgwick ADRs evidencing all tendered Sedgwick ADSs (or, in the
case of Sedgwick ADSs held in book-entry form, timely confirmation
of the book-entry transfer of such interests in Sedgwick ADSs into
the US Depositary's account at a Book-Entry, Transfer Facility as
described above) together with a properly completed and duly
executed Letter of Transmittal with any required signature
guarantees and any other documents required by the Letter of
Transmittal are received by the US Depositary within three NYSE
business days after the date of execution of such Notice of
Guaranteed Delivery;
(ii) The Notice of Guaranteed Delivery may be delivered by hand,
transmitted by telegram, telex, facsimile transmission or mailed to the
US Depositary and must include a signature guarantee by an Eligible
Institution in the form set out in such Notice of Guaranteed Delivery;
and
(iii) Receipt of a Notice of Guaranteed Delivery will not be treated as a
valid acceptance for the purpose of satisfying the Acceptance Condition.
To be counted towards satisfaction of this requirement, prior to the
Initial Closing Date, the Sedgwick ADRs evidencing Sedgwick ADSs
referred to in the Notice of Guaranteed Delivery must be received by the
US Depositary (or, in the case of interests in Sedgwick ADSs evidenced
by Sedgwick ADRs held in book-entry form, timely confirmation of a
book-entry transfer of such interests in Sedgwick ADSs into the US
Depositary's account at a Book-Entry Transfer Facility pursuant to the
procedures set out above) together with a duly executed Letter of
Transmittal with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message) and any other required
documents.
(i) OTHER REQUIREMENTS
By executing the Letter of Transmittal as set out above, the tendering
holder of Sedgwick ADSs evidenced by Sedgwick ADRs will agree that,
effective from and after the date all Conditions are satisfied, fulfilled
or, to the extent permitted, waived:
(i) Marsh & McLennan shall be entitled to direct the exercise of any
votes attaching to any Sedgwick Shares represented by Sedgwick ADSs, in
respect of which the Offer has been accepted or is deemed to have been
accepted (the "ACCEPTED ADSS") and any other rights and privileges
attaching to such Sedgwick Shares, including any right to requisition a
general or separate class meeting of Sedgwick Shareholders; and
(ii) the execution of the Letter of Transmittal and its delivery to the US
Depositary shall constitute:
(aa) an authority to Sedgwick or its agents from the tendering holder of
Accepted ADSs to send any notice, circular, warrant, document or
other communication that may be required to be sent to him as a
holder of Sedgwick ADSs, to Marsh & McLennan care of the UK
Receiving Agent;
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(bb) an authority to Marsh & McLennan or its agent to sign any consent
to short notice of a general meeting or separate class meeting on
behalf of the tendering holder of Accepted ADSs and/or to execute a
form of proxy in respect of such Accepted ADSs appointing any
person nominated by Marsh & McLennan to attend general meetings or
separate class meetings of Sedgwick and any adjournment thereof and
to exercise the votes attaching to the Sedgwick Shares represented
by such Accepted ADSs on his behalf;
(cc) the agreement of such tendering holder of Accepted ADSs not to
exercise any of such rights without the consent of Marsh & McLennan
and the irrevocable undertaking of such tendering holder of
Accepted ADSs not to appoint a proxy for or to attend any such
general meetings or separate class meetings;
(dd) a representation and warranty that such Sedgwick Securityholder (i)
has not received or sent copies of this document or any Letter of
Transmittal or any related documents in, into or from Australia,
Canada or Japan; (ii) is accepting the Offer from outside
Australia, Canada and Japan; and (iii) is not an agent or fiduciary
acting on a non-discretionary basis for a principal, unless such
agent or fiduciary is an authorised employee of such principal or
such principal has given any instructions with respect to the Offer
from outside Australia, Canada and Japan; and
(ee) confirmation that such Sedgwick Securityholder is entitled to sell
and transfer the beneficial ownership of the Accepted ADSs and that
such Accepted ADSs are sold fully paid and free from all liens,
equitable interests, charges, and encumbrances and together with
all rights attaching thereto including voting rights and the right
to all dividends and other distributions declared, made or paid
other than the interim dividend of 3.0 pence (net) per Sedgwick
Share announced on 11 August 1998 and payable on 19 October to
Sedgwick Securityholders on the register at the close of business
on 21 August 1998; and
(iii) the execution of the Letter of Transmittal (together with any
signature guarantees) and its delivery to the US Depositary shall
constitute an authority to any director of Marsh & McLennan, J.P. Morgan
or Donaldson, Lufkin & Jenrette and to Marsh & McLennan, J.P. Morgan or
Donaldson, Lufkin & Jenrette and/or their respective agents in
accordance with the terms of paragraph 6 of Part B of this Appendix.
References in this paragraph 11 to a Sedgwick Securityholder shall include
references to the person or persons executing a Letter of Transmittal and
in the event of more than one person executing a Letter of Transmittal the
provisions of this Part B shall apply to them jointly and to each of them.
12. CURRENCY OF CASH CONSIDERATION
Instead of receiving cash consideration in pounds sterling, Sedgwick
Shareholders and Sedgwick Bondholders who so wish may elect to receive US
dollars on the basis that the cash amount payable in pounds sterling to which
such holder would otherwise be entitled pursuant to the terms of the Offer will
be converted, without charge, from pounds sterling to US dollars at the exchange
rate obtainable by the relevant payment agent (either the UK Receiving Agent or
the US Depositary) on the spot market in London at approximately noon (London
time) on the date the cash consideration is made available by Marsh & McLennan
to the relevant payment agent for delivery in respect of the relevant Sedgwick
Shares or Sedgwick Convertible Bonds. A Sedgwick Shareholder or Sedgwick
Bondholder may receive such amount on the basis set out above only in respect of
the whole of his holding of Sedgwick Shares or Sedgwick Convertible Bonds in
respect of which he accepts the Offers. Sedgwick Shareholders and Sedgwick
Bondholders may not elect to receive both pounds sterling and US dollars. Unless
they elect to receive pounds sterling, holders of Sedgwick ADSs will receive
consideration converted into US dollars as described above, as if such holders
of Sedgwick ADSs had elected to receive dollars. Consideration in US dollars may
be inappropriate for Sedgwick Shareholders or Sedgwick Bondholders other than
persons in the US and holders of Sedgwick ADSs.
I-30
<PAGE> 55
THE ACTUAL AMOUNT OF US DOLLARS RECEIVED WILL DEPEND UPON THE EXCHANGE RATE
PREVAILING ON THE BUSINESS DAY ON WHICH FUNDS ARE MADE AVAILABLE TO THE RELEVANT
PAYMENT AGENT BY MARSH & MCLENNAN. SEDGWICK SECURITYHOLDERS AND SEDGWICK
BONDHOLDERS SHOULD BE AWARE THAT THE US DOLLAR/POUNDS STERLING EXCHANGE RATE
WHICH IS PREVAILING AT THE DATE ON WHICH AN ELECTION IS MADE TO RECEIVE DOLLARS
AND ON THE DATES OF DESPATCH AND RECEIPT OF PAYMENT MAY BE DIFFERENT FROM THAT
PREVAILING ON THE BUSINESS DAY ON WHICH FUNDS ARE MADE AVAILABLE TO THE RELEVANT
PAYMENT AGENT BY MARSH & MCLENNAN. IN ALL CASES, FLUCTUATIONS IN THE US
DOLLAR/POUNDS STERLING EXCHANGE RATE ARE AT THE RISK OF ACCEPTING SEDGWICK
SECURITYHOLDERS AND SEDGWICK BONDHOLDERS WHO ELECT OR ARE TREATED AS HAVING
ELECTED TO RECEIVE THEIR CONSIDERATION IN US DOLLARS. NEITHER MARSH & MCLENNAN
NOR ANY OF ITS ADVISERS OR AGENTS SHALL HAVE ANY RESPONSIBILITY WITH RESPECT TO
THE ACTUAL AMOUNT OF CASH CONSIDERATION PAYABLE OTHER THAN IN POUNDS STERLING.
13. SUBSTITUTE ACCEPTANCE FORMS
Holders of Sedgwick Securities and Sedgwick Convertible Bonds have been sent
with this document a Shareholder Form of Acceptance and/or a Bondholder Form of
Acceptance and/or a Letter of Transmittal (accompanied by a Notice of Guaranteed
Delivery). All holders of Sedgwick Shares and Sedgwick Convertible Bonds,
including persons in the US who hold Sedgwick Shares or Sedgwick Convertible
Bonds, have been sent a Shareholder Form of Acceptance and/or a Bondholder Form
of Acceptance, which they must use to tender their Sedgwick Shares or Sedgwick
Convertible Bonds and accept the Offer. All holders of Sedgwick ADSs have been
sent a Letter of Transmittal and a Notice of Guaranteed Delivery which they must
use to tender their Sedgwick ADSs and accept the Offer. Should any holder of
Sedgwick Securities or Sedgwick Convertible Bonds receive an incorrect form with
which to accept the Offer or require any additional forms, that person should
contact the UK Receiving Agent or the US Depositary at the addresses set out at
the end of this document, who will provide the appropriate forms.
The Offers and all contracts arising under them will be governed by English law.
I-31
<PAGE> 56
APPENDIX II -- PARTICULARS OF THE LOAN NOTES
The Loan Notes will be created by a resolution of the board of directors of
Marsh & McLennan (or a duly authorised committee) and will be constituted by the
Loan Note Instrument. The issue of the Loan Notes will be conditional on the
Offer becoming or being declared unconditional in all respects. If valid
elections for the Loan Note Alternative have not been received in respect of at
least L5 million nominal value of Loan Notes by the time the Offer becomes or is
declared unconditional in all respects, no Loan Notes will be issued, in which
event all Sedgwick Shareholders accepting the Ordinary Offer will receive cash
in accordance with the terms of the Ordinary Offer and all Sedgwick Bondholders
accepting the Convertible Offer will receive cash in accordance with the terms
of the Convertible Offer. The Loan Note Alternative is not available to any
person who is a citizen or resident of the US, Canada, Australia or Japan or
certain other jurisdictions. The Loan Note Instrument will contain provisions,
inter alia, to the effect set out below.
1. FORM AND STATUS
The Loan Notes will be issued by Marsh & McLennan in amounts and integral
multiples of L1 and will constitute unsecured obligations of Marsh & McLennan.
The Loan Note Instrument will not contain any restrictions on borrowing,
disposals or charging of assets by Marsh & McLennan.
2. INTEREST
(a) Interest on the Loan Notes will be payable (subject to any requirement to
deduct tax therefrom) in arrears on 30 June and 31 December in each year
(or, if such a day is not a business day, on the next following business
day) ("interest payment dates") in respect of the interest periods (as
defined below) at a rate calculated as provided in paragraph (b) below,
except that the first payment of interest on the Loan Notes, which will be
made on 31 December 1998, will be in respect of the period from (and
including) the first date of issue of any of the Loan Notes to (and
including) 31 December 1998. The period from (and including) the first date
of issue of any of the Loan Notes to (and including) 31 December 1998 and
the period from (but excluding) 31 December 1998, or any subsequent
interest payment date, to (and including) the next following interest
payment date, is referred to as an "interest period".
(b) The rate of interest on the Loan Notes for each interest period will be the
rate per annum calculated by Marsh & McLennan to be one half of one per
cent. below LIBOR at or about 11.00 a.m. (London time) on the first day of
the relevant interest period or, if such a day is not a business day, on
the next succeeding business day.
(c) If a rate of interest cannot be established in accordance with the
provisions of this paragraph 2 for any interest period, then the rate of
interest on the Loan Notes for such interest period shall be calculated by
reference to such rate as Marsh & McLennan shall reasonably determine on
the basis of quotations made for six month sterling deposits of similar
size in any other appropriate inter-bank market or markets as Marsh &
McLennan may reasonably select.
(d) Each instalment of interest shall be calculated on the basis of a 365 day
year and the actual number of days elapsed in the relevant interest period.
(e) Payments of interest in respect of the Loan Notes will not be made to
addresses in the US, Canada, Australia or Japan.
3. REPAYMENT AND REDEMPTION
(a) A holder of Loan Notes ("Noteholder") shall be entitled to require Marsh &
McLennan to repay the whole (whatever the amount) or any part (being L100
nominal amount or any integral multiple thereof) of the principal amount of
his holding of Loan Notes at par, together with accrued interest thereon
(subject to any requirement to deduct tax therefrom) up to (and including)
the date of repayment, on any interest payment date falling on or after 31
December 1999, by giving not less than 30 days' prior
II-1
<PAGE> 57
notice in writing to the Registrars accompanied by certificate(s) for all
the Loan Notes to be repaid and a notice of redemption (duly completed) in
the prescribed form endorsed on the Loan Notes to be repaid.
(b) If, at any time, the principal amount of the Loan Notes outstanding is 20
per cent. or less of the total nominal amount of Loan Notes which have been
issued prior to that time, Marsh & McLennan shall have the right, on giving
to the remaining Noteholders not less than 30 days' notice in writing
expiring on 31 December 1999 or on any subsequent interest payment date, to
redeem all (but not some only) of the Loan Notes at their principal amount
together with accrued interest thereon (subject to any requirement to
deduct tax therefrom) up to (and including) the date of redemption.
(c) Marsh & McLennan will have the right to redeem on any interest payment date
the Loan Notes at par together with accrued interest up to (and including)
the date of redemption (subject to any requirement to deduct tax therefrom)
on 30 days' written notice to the Noteholders if Marsh & McLennan is
advised by legal counsel that interest payable under the Loan Notes will
fall to be treated as non-deductible for US federal income tax purposes due
to a change in law after the date on which the Offer is made.
(d) Any Loan Notes not previously repaid, redeemed or purchased will be repaid
in full at par on 31 December 2003 together with accrued interest thereon
(subject to any requirement to deduct tax therefrom) up to (and including)
that date.
(e) Each Noteholder shall have the right to acquire (by subscription at nominal
value of an amount up to or equal to such Noteholder's holding of Loan
Notes, such amount to be payable in full on subscription) additional loan
notes to be issued by a subsidiary of Marsh & McLennan ("Additional Notes")
on terms and conditions substantially the same as those applicable to the
Loan Notes, except as follows:
(i) the rate of interest on the Additional Notes shall be one half of
one per cent. below the rate per annum referred to in paragraph 2
above; and
(ii) the Additional Notes shall not carry any rights to acquire
additional securities.
(f) Each Noteholder shall be entitled to require all of the Loan Notes held by
him to be repaid at par together with accrued interest (subject to any
requirement to deduct any tax therefrom) immediately if:
(i) any principal or interest on any of the Loan Notes held by that
Noteholder shall not have been paid in full within 14 days after the
due date for payment thereof;
(ii) Marsh & McLennan commences a voluntary case concerning itself under
Title 11 of the US Code entitled "Bankruptcy" as now or hereafter in
effect or any successor thereto (the "Bankruptcy Code");
(iii) an involuntary case is commenced against Marsh & McLennan and the
petition is not controverted within 10 days or is not dismissed within
60 days after commencement of the case;
(iv) a custodian (as defined in the Bankruptcy Code) is appointed for, or
takes charge of, all or substantially all of the property of Marsh &
McLennan;
(v) Marsh & McLennan commences (including by way of applying for or
consenting to the appointment of, or the taking of possession by, a
rehabilitator, receiver, custodian, trustee, conservator or liquidator
(collectively, a "Conservator") of itself or all or any substantial
proportion of its property) any other proceeding under any
reorganisation, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency, liquidation, rehabilitation, conservatorship
or similar law of any jurisdiction whether now or hereafter in effect
relating to Marsh & McLennan;
(vi) any such proceeding is commenced against Marsh & McLennan to the
extent that such proceeding is consented to by such person or remains
undismissed for a period of 60 days;
(vii) Marsh & McLennan is adjudicated insolvent or bankrupt or an order of
relief or other order approving any such case or proceeding is entered
or Marsh & McLennan suffers any appointment
II-2
<PAGE> 58
of any Conservator or the like for it or any substantial part of its
property which continues undischarged or unstated for a period of 60
days;
(viii) Marsh & McLennan makes a general assignment for the benefit of
creditors; or
(ix) any corporate action is taken by Marsh & McLennan for the purpose of
effecting any of the foregoing.
4. PURCHASE OF LOAN NOTES
Marsh & McLennan will be entitled at any time to purchase any Loan Notes at any
price by tender (available to all Noteholders alike), private treaty or
otherwise by agreement with the relevant Noteholder(s).
5. CANCELLATION
Any Loan Notes repaid or redeemed under paragraph 3 above or purchased under
paragraph 4 above shall be cancelled and shall not be available for re-issue.
6. SUBSTITUTION AND EXCHANGE
The Loan Note Instrument will contain provisions entitling Marsh & McLennan to
substitute any other member of the Marsh & McLennan Group as the principal
debtor under the Loan Notes, or to require Noteholders to exchange the Loan
Notes for loan notes issued on the same terms, mutatis mutandis, by one or more
of such members provided that (a) Marsh & McLennan guarantees such member's
obligations thereunder, and (b) Marsh & McLennan's right to require substitution
by such member as a principal debtor will be exercisable only if prior clearance
has been obtained from the Inland Revenue to the effect that the substitution
will not be treated as a disposal of the Loan Notes for the purpose of UK
taxation of chargeable gains. References to Marsh & McLennan in this summary
except in (a) shall be construed to apply to the substitute or substitutes (if
any) from time to time of Marsh & McLennan.
7. MODIFICATIONS
The provisions of the Loan Note Instrument and the rights of the Noteholders
will be subject to modification, abrogation or compromise in any respect with
the sanction of an Extraordinary Resolution (as defined in the Loan Note
Instrument) of the Noteholders, and the consent of Marsh & McLennan. Marsh &
McLennan may amend the provisions of the Loan Note Instrument without such
sanction or consent if such amendment is of a formal, minor or technical nature
and is not materially adverse to Noteholders or is to correct a manifest error.
8. REGISTRATION AND TRANSFER
The Loan Notes will be in registered form and transferable in amounts or
integral multiples of L100 provided that transfers will not be registered during
the 21 days immediately preceding an interest payment date or while the register
of Noteholders is closed.
9. PRESCRIPTION
Noteholders will cease to be entitled to amounts in respect of interest which
remain unclaimed for a period of five years and to amounts due in respect of
principal which remain unclaimed for a period of ten years, in each case from
the date on which the relevant payment first becomes due, and such amounts shall
revert to Marsh & McLennan upon the giving of 30 days' written notice.
10. RESTRICTIONS ON OWNERSHIP AND TRANSFER
(a) The Loan Notes have not been and will not be registered under the US
Securities Act and no steps have been taken to qualify the Loan Notes for
distribution in any province or territory of Canada and no prospectus in
relation to the Loan Notes has been, or will be, lodged with or registered
by the Australian
II-3
<PAGE> 59
Securities Commission. Accordingly, unless an exemption under the US
Securities Act or other applicable securities laws is available, the Loan
Note Alternative is not available in the US, Canada, Australia or Japan or
to Restricted Overseas Persons and the Loan Notes may not be directly or
indirectly offered, sold or delivered in or into the US, Canada, Australia
or Japan or to or for the account or benefit of any Restricted Overseas
Persons.
For these purposes, "Restricted Overseas Person" means either a person
(including an individual, partnership, unincorporated syndicate, limited
liability company, unincorporated organisation, trust, trustee,
administrator or other legal representative) in or resident in the US,
Canada, Australia or Japan, or a US Person (as defined in Regulation S
under the US Securities Act).
(b) Documents of title in respect of the Loan Notes will not be sent to
addresses in the US, Canada, Australia or Japan.
(c) Registered addresses of holders of Loan Notes must be outside the US,
Canada, Australia or Japan.
11. NO LISTING
No application has been made or is intended to be made to any stock exchange for
the Loan Notes to be listed or otherwise traded.
12. GOVERNING LAW
The Loan Notes and the Loan Note Instrument will be governed by and construed in
accordance with the laws of England.
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<PAGE> 60
APPENDIX III -- FINANCIAL INFORMATION ON SEDGWICK
PART A AUDITED FINANCIAL INFORMATION
INTRODUCTION
The financial information contained in this Part A of Appendix III is extracted
without material adjustment from the audited consolidated accounts of Sedgwick
for the three years ended 31 December 1997 and from the 1997 annual report on
form 20-F (item 18) filed with the US Securities and Exchange Commission.
The information contained in this Part A of Appendix III has been extracted from
previously published sources and does not constitute statutory accounts within
the meaning of the Companies Act. Audited statutory accounts have been delivered
to the Registrar of Companies for each of the three years ended 31 December
1997. Unqualified audit reports in accordance with the requirements of the
Companies Act for each of the three years ended 31 December 1997 have been given
by Coopers & Lybrand, Chartered Accountants and Registered Auditors, being the
auditors of Sedgwick for the relevant financial periods.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER
--------------------------
NOTES 1997 1996 1995
----- ------ ------ ------
LM LM LM
<S> <C> <C> <C> <C>
REVENUE
Brokerage and fees.................................... 931.6 914.9 880.9
Interest and investment income........................ 43.6 45.4 50.6
------ ------ ------
3 975.2 960.3 931.5
EXPENSES*............................................. 869.4 860.0 841.2
------ ------ ------
OPERATING PROFIT...................................... 105.8 100.3 90.3
Share of profits of associated undertakings........... 4.5 5.7 7.1
Interest payable...................................... 8 (10.2) (10.5) (14.0)
Cessation of insurance underwriting................... 4 1.1 -- --
Net profit on disposal or termination of businesses... -- -- 6.7
------ ------ ------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION**....... 3,5 101.2 95.5 90.1
Taxation on profit on ordinary activities............. 9 28.3 31.5 21.0
------ ------ ------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION.......... 72.9 64.0 69.1
Minority interests.................................... 2.5 0.3 0.2
------ ------ ------
EARNINGS.............................................. 70.4 63.7 68.9
DIVIDEND.............................................. 10 38.6 39.7 40.1
------ ------ ------
RETAINED PROFIT FOR THE YEAR.......................... 29 31.8 24.0 28.8
------ ------ ------
EARNINGS PER SHARE.................................... 11 12.8p 11.6p 12.6p
UNDERLYING DIVIDEND PER SHARE......................... 10 7.0p 6.5p 6.5p
</TABLE>
- ---------------
* Including, in 1995, exceptional costs of L7.8m
** In 1995, L91.2m before exceptional items
III-1
<PAGE> 61
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS AT 31 DECEMBER
NOTES 1997
----- -----------------
LM
<S> <C> <C>
ASSETS EMPLOYED
FIXED ASSETS................................................
Tangible assets............................................. 12 212.5
Associated undertakings..................................... 16 15.2
Assets backing retirement contracts......................... 17 353.5
Investments................................................. 18 154.1
-----------------
735.3
-----------------
CURRENT ASSETS
Debtors..................................................... 19,22 2,841.8
Reinsurers' share of technical provisions................... 26 177.8
Investments................................................. 21,22 96.2
Cash and deposits........................................... 22 538.8
-----------------
3,654.6
CREDITORS: amounts falling due within one year.............. 22,23 3,256.3
-----------------
NET CURRENT ASSETS.......................................... 398.3
-----------------
TOTAL ASSETS LESS CURRENT LIABILITIES....................... 1,133.6
CREDITORS: amounts falling due after more than one year
Borrowings..................................................
Loans and other borrowings.................................. 24 63.9
7.25% Convertible Bonds 2008................................ 24 41.5
-----------------
105.4
Other liabilities........................................... 25 24.4
-----------------
129.8
PROVISIONS FOR LIABILITIES AND CHARGES
Liabilities linked to retirement contracts.................. 17 352.9
Insurance technical provisions.............................. 26 307.9
Other provisions............................................ 27 142.9
-----------------
803.7
-----------------
200.1
-----------------
FINANCED BY
SHAREHOLDERS' FUNDS......................................... 29 199.8
MINORITY INTERESTS.......................................... 0.3
-----------------
NET CAPITAL EMPLOYED........................................ 3 200.1
-----------------
</TABLE>
III-2
<PAGE> 62
CONSOLIDATED CASH FLOW STATEMENT
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER
----------------------
NOTES 1997 1997
----- -------- --------
LM LM
<S> <C> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES................... 34(a) 97.9
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid............................................... (7.9)
Interest element of finance lease rental payments........... (1.1)
Dividends received from associated undertakings............. 5.3
------
(3.7)
TAXATION
UK taxation paid............................................ (0.9)
Overseas taxation paid...................................... (20.3)
------
(21.2)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets........................... (24.7)
Proceeds on disposal of tangible fixed assets............... 24.1
Purchase of investments..................................... (125.4)
Disposal of investments..................................... 67.2
------
(58.8)
ACQUISITIONS AND DISPOSALS
Acquisition of businesses, net of cash acquired............. 13 (31.8)
Disposal of businesses, net of cash disposed................ 14 4.4
------
(27.4)
DIVIDENDS PAID.............................................. (35.3)
MANAGEMENT OF LIQUID RESOURCES
Cash withdrawn from deposits................................ 16.0
Purchase of investments..................................... (141.5)
Disposal of investments..................................... 167.1
------
41.6
FINANCING
Issue of shares............................................. 4.8
Increase in borrowings...................................... 14.7
Decrease in borrowings...................................... (40.7)
Capital element of finance lease rental payments............ (0.6)
------
(21.8)
------
DECREASE IN CASH IN THE PERIOD.............................. 34(b) (28.7)
------
</TABLE>
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER
---------------------------
NOTES 1997 1996 1995
----- ----- ----- -----
LM LM LM
<S> <C> <C> <C> <C>
Earnings............................................ 70.4 63.7 68.9
Translation differences on overseas undertakings.... 29 2.4 (8.4) (1.2)
----- ----- -----
Recognised gain for the year........................ 72.8 55.3 67.7
----- ----- -----
</TABLE>
III-3
<PAGE> 63
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
The financial statements have been prepared under the historical cost
convention, except for the revaluation of certain assets backing retirement
contracts and in accordance with accounting standards applicable in the UK. The
group's principal accounting policies are unchanged compared with the years
ended 31 December 1996 and 1995.
PRESENTATION MATTERS
Cash flow statement During 1997, the group adopted FRS 1 (Revised) Cash flow
statements. Under the revised standard, the cash flow statement shows the
movement in "pure cash" which comprises cash in hand, deposits repayable on
demand less overdrafts. In addition, to comply with the revised standard,
changes have been made to the analysis of cash flows and the related
disclosures.
Retirement-related investment business SuperFlex Limited, a subsidiary
undertaking based in South Africa which provides retirement-related investment
products, has grown significantly during 1997. It is appropriate to disclose
separately the investments which it holds in relation to such retirement
contracts and its linked liabilities to policy holders (see Note 17).
Insurance technical provisions During 1997, River Thames Insurance Company
Limited became a subsidiary undertaking (see note 13). As a result, insurance
technical provisions have become more significant to the group and are shown
separately from other provisions for liabilities and charges. In addition,
amounts recoverable from reinsurers, are shown as current assets.
BASIS OF CONSOLIDATION
The consolidated financial statements include those of the company, its
subsidiary undertakings and the group's interest in associated undertakings.
Associated undertakings are accounted for under the equity method.
An undertaking is regarded as a subsidiary undertaking if the group has control
over its operating and financial policies. An undertaking is regarded as an
associated undertaking if the group has significant influence but not control
over its operating and financial policies, which will generally be the case
where the group controls more than 20% and less than 50% of the shareholders'
voting rights in the undertaking.
Unless stated otherwise, business combinations are accounted for by the
acquisition method of accounting. When a business is acquired, fair values are
attributed to its separable assets and liabilities at the date of acquisition.
Goodwill arising on acquisitions, which represents the difference between the
fair value of the purchase consideration and the fair value of the separable net
assets acquired, is written off to reserves on consolidation.
Where it can be identified, goodwill not previously taken to the profit and loss
account is taken into account in calculating the profit or loss on disposal or
termination of acquired businesses.
FOREIGN CURRENCY TRANSLATION
Group companies record transactions in foreign currencies at the rate of
exchange ruling at the date of the transaction or, if hedged forward, at the
rate of exchange under the related forward currency contract. Foreign currency
monetary assets and liabilities, other than those hedged forward, are translated
into local currency at the rates ruling at the balance sheet date. Exchange
differences are dealt with in the profit and loss account.
On consolidation, the results of overseas businesses are translated into
sterling at the average exchange rates for the period, and their assets and
liabilities are translated into sterling at the exchange rates ruling at the
balance sheet date. Exchange differences on translating the net assets or
liabilities of overseas businesses, together with the differences on translating
any foreign currency borrowings financing investments in overseas businesses,
are taken directly to reserves.
III-4
<PAGE> 64
In the cash flow statement, cash flows denominated in foreign currency are
translated at the average exchange rates for the period.
REVENUE
Brokerage and fees derived from insurance and reinsurance services are
recognised when the counterparty is debited, except for certain business in the
US on which income is recognised on the later of the effective date of the
policy and the billing date. Brokerage and fees are stated after allowing for
commissions to other directly-involved parties. Contingent commissions and
certain life assurance and pension commissions and fees are recognised in the
period to which they relate, provided they can be determined with reasonable
accuracy. Where this is not possible, such commissions and fees are recognised
on a cash basis. Profit commissions earned by the group's Lloyd's underwriting
agency are brought into account when they are able to be determined.
Interest on deposits and interest-bearing investments is recognised as it is
earned.
PENSIONS AND SIMILAR BENEFITS
Defined contribution pension costs charged to the profit and loss account
represent contributions payable in respect of the period.
Defined benefit pension costs and the costs of providing other post-retirement
benefits are charged to the profit and loss account on a systematic basis over
the service lives of the eligible employees in accordance with the advice of
qualified actuaries.
TANGIBLE FIXED ASSETS
Tangible fixed assets are stated at historical cost. Freehold land is not
depreciated. Freehold and long-leasehold properties are depreciated on a
straight-line basis such that they are written down to their residual values
over their useful economic lives.
Other tangible fixed assets are depreciated on a straight-line basis over their
useful economic lives as follows:
<TABLE>
<S> <C> <C>
Short-leasehold properties -- Lease term
Office fixtures and equipment -- 5-10 years
Motor vehicles -- 5 years
</TABLE>
Any permanent diminution in the value of the group's tangible fixed assets is
charged to the profit and loss account.
LEASED ASSETS
Assets acquired under finance leases are capitalised as tangible fixed assets.
Interest on such lease obligations is charged to the profit and loss account
over the term of the lease based on the capital element of future lease rentals.
All other leases are regarded as operating leases and rentals are charged to the
profit and loss account on a straight-line basis over the term of the lease.
When a leasehold property becomes surplus to the group's foreseeable business
requirements, provision is made for the expected future net cost of the
property.
RETIREMENT-RELATED INVESTMENT BUSINESS
Assets backing retirement contracts principally comprise investments which are
stated at their current values at the balance sheet date. Liabilities linked to
retirement contracts represent the benefits payable to policyholders at the
balance sheet date and are determined by reference to the values of the related
assets.
Realised and unrealised gains and losses on assets backing retirement contracts
are attributable to policyholders and are not, therefore, reflected in the
group's results.
III-5
<PAGE> 65
INVESTMENTS
Fixed asset investments are stated at cost less provision for any permanent
diminution in value. Current asset investments are stated at the lower of cost
and net realisable value. The cost of redeemable interest-bearing securities is
adjusted to allow for the amortisation of any premium or discount to redemption
value on a straight-line basis over the period to maturity.
INSURANCE BROKING DEBTORS AND CREDITORS
Certain group companies act as agents in placing the insurable risks of their
clients with insurers, either directly or through other insurance
intermediaries. Generally, these companies are not liable as principals either
for premiums due to insurers or for claims payable to their clients.
Notwithstanding the companies' legal relationships with clients and insurers and
since, in practice, premium and claim monies are ordinarily accounted for by
insurance intermediaries as if they were principals in the insurance contract,
fiduciary cash, debtors and creditors relating to insurance broking business are
treated for accounting purposes as the group's assets and liabilities.
DEFERRED TAXATION
Deferred taxation is provided using the liability method. Except for pensions
and other post-retirement benefits, in respect of which deferred taxation is
recognised on the full provision basis, deferred taxation is recognised on
timing differences to the extent that it is probable that a liability or asset
will crystallise. Deferred tax net debit balances are recognised to the extent
that they are expected to be recoverable without replacement by equivalent debit
balances.
INSURANCE UNDERWRITING (IN RUN OFF)
Insurance technical provisions are based on the estimated ultimate cost of all
claims incurred but not settled at the balance sheet date, whether reported or
not, together with related claims handling expenses. Insurance technical
provisions are stated gross of recoveries to be made on reinsurance contracts in
recognition of the fact that they are separable liabilities and assets.
The adequacy of the insurance technical provisions is assessed by reference to
actuarial and other studies of the ultimate cost of liabilities, which use
exposure-based and statistical techniques. Significant delays occur in the
notification and settlement of certain claims, and a substantial measure of
experience and judgement is involved in assessing outstanding liabilities, the
ultimate cost of which cannot be known with certainty at the balance sheet date.
Insurance technical provisions and the related reinsurance recoveries are
determined on the basis of information currently available. It is inherent in
the nature of the business written that the ultimate liabilities will vary as a
result of subsequent developments.
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
Forward exchange contracts are entered into for the purpose of hedging firm
commitments or anticipated transactions denominated in foreign currencies. As
described under foreign currency translation above, gains or losses arising on
these contracts are deferred and recognised in the profit and loss account or as
adjustments to carrying amounts only when the hedged transaction has itself been
reflected in the group's financial statements.
Interest differentials under interest rate swap and forward rate agreements
(FRAs) are recognised in the profit and loss account by adjustment of the
underlying interest receivable or payable over the term of the agreement.
Contract or underlying principal amounts of financial instruments used for
hedging purposes are not reflected in the group's financial statements.
III-6
<PAGE> 66
2. FOREIGN CURRENCIES
The principal exchange rates used to translate overseas group companies'
financial information were:
<TABLE>
<CAPTION>
YEAR-END
AVERAGE RATE RATE
----------------------------- --------
1997 1996 1995 1997
-------- -------- ----- --------
<S> <C> <C> <C> <C>
Australian dollar................................. 2.22 2.01 2.13 2.53
Belgian franc..................................... 58.46 48.57 46.57 60.93
Canadian dollar................................... 2.28 2.14 2.17 2.35
French franc...................................... 9.54 8.02 7.86 9.90
German mark....................................... 2.83 2.36 2.26 2.96
Italian lire...................................... 2,790.00 2,424.00 n/a 2,908.00
Netherlands guilder............................... 3.19 2.65 2.54 3.33
South African rand................................ 7.60 6.74 n/a 8.00
US dollar......................................... 1.64 1.57 1.58 1.64
</TABLE>
3. SEGMENTAL INFORMATION
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
LM LM LM
<S> <C> <C> <C>
REVENUE
GEOGRAPHIC ANALYSIS BY BUSINESS LOCATION
United Kingdom.............................................. 334.8 324.8 312.3
Continental Europe.......................................... 132.2 135.2 133.0
North America............................................... 414.0 421.6 411.4
Asia Pacific................................................ 69.6 72.2 65.7
Rest of the world........................................... 24.6 6.5 9.1
----- ----- -----
975.2 960.3 931.5
----- ----- -----
ANALYSIS BY BUSINESS
Insurance and reinsurance services.......................... 741.9 746.5 721.3
Employee benefits consulting................................ 233.3 213.2 209.5
Insurance underwriting (in run off)......................... -- 0.6 0.7
----- ----- -----
975.2 960.3 931.5
----- ----- -----
GEOGRAPHIC ANALYSIS BY CLIENT LOCATION
United Kingdom.............................................. 275.1 269.4 254.5
Continental Europe.......................................... 138.5 134.7 131.2
North America............................................... 438.2 445.6 437.1
Asia Pacific................................................ 86.3 91.2 84.6
Rest of the world........................................... 37.1 19.4 24.1
----- ----- -----
975.2 960.3 931.5
----- ----- -----
PROFIT BEFORE TAXATION
GEOGRAPHIC ANALYSIS BY BUSINESS LOCATION
United Kingdom.............................................. 45.4 44.7 44.6
Continental Europe.......................................... 10.2 10.3 11.5
North America............................................... 44.3 40.8 41.8
Asia Pacific................................................ 4.5 4.7 2.5
Rest of the world........................................... 7.0 5.5 4.8
----- ----- -----
111.4 106.0 105.2
Less : Interest payable..................................... (10.2) (10.5) (14.0)
----- ----- -----
101.2 95.5 91.2*
----- ----- -----
</TABLE>
III-7
<PAGE> 67
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
LM LM LM
<S> <C> <C> <C>
ANALYSIS BY BUSINESS
Insurance and reinsurance services.......................... 86.7 85.4 86.4
Employee benefits consulting................................ 23.6 20.7 18.4
Insurance underwriting (in run off)......................... 1.1 (0.1) 0.4
----- ----- -----
111.4 106.0 105.2
Less: Interest payable...................................... (10.2) (10.5) (14.0)
----- ----- -----
101.2 95.5 91.2*
----- ----- -----
</TABLE>
- ---------------
*Excludes exceptional item of (L1.1m)
<TABLE>
<CAPTION>
1997
------
LM
<S> <C>
NET CAPITAL EMPLOYED
GEOGRAPHICAL ANALYSIS BY BUSINESS LOCATION
United Kingdom.............................................. 151.6
Continental Europe.......................................... 27.8
North America............................................... 75.7
Asia Pacific................................................ 18.2
Rest of the world........................................... 33.1
------
306.4
Less : Borrowings........................................... (106.3)
------
200.1
------
NET CAPITAL EMPLOYED
ANALYSIS BY BUSINESS
Insurance and reinsurance services.......................... 89.5
Employee benefits consulting................................ 42.2
Insurance underwriting (in run off)......................... 39.4
------
171.1
Add: Properties............................................. 135.3
Less: Borrowings............................................ (106.3)
------
200.1
------
</TABLE>
Segmental information as shown before taking account of inter-segmental
borrowings and interest charges.
4. EXCEPTIONAL ITEMS
EXCEPTIONAL ITEMS RECOGNISED IN 1997
CESSATION OF INSURANCE UNDERWRITING
In April 1997, the group increased its shareholding in River Thames Insurance
Company Limited (RTI) (note 13). Since the company is in run off, the negative
goodwill arising on the acquisition has been credited to the profit and loss
account. Following completion, provisions amounting to L8.4m were established in
respect of the strengthening of insurance technical provisions, property and
other closure costs.
III-8
<PAGE> 68
<TABLE>
<CAPTION>
1997
----
LM
<S> <C>
Insurance underwriting subsidiaries in run off:
Closure provisions.......................................... (8.4)
Other movements on insurance technical provisions........... 1.0
----
(7.4)
Negative goodwill (note 13)................................. 8.5
----
1.1
----
</TABLE>
Insurance technical provisions are dealt with in note 26.
EXCEPTIONAL ITEMS RECOGNISED IN 1995
A) EXPENSES
In 1995, rationalisation costs of L7.8m (L5.3m after tax) arising as a
consequence of the merger of Sedgwick Europe and Sedgwick Payne were treated as
an exceptional expenses in arriving at operating profit.
B) NET PROFIT ON DISPOSAL OR TERMINATION OF BUSINESSES
In 1995, the group recognised a profit of L4.2m on the disposal of its travel
insurance broking businesses in the Netherlands. Also during 1995, the
assumptions on which the provision established in 1994 in respect of the run-off
of Americas Insurance Company and provisions relating to prior year disposals of
businesses were reviewed and L2.5m was released to the profit and loss account.
Taken together, these items represented a profit of L6.7m (L4.2m after tax)
which was treated as a non-operating exceptional item.
SEGMENTAL ANALYSIS OF EXCEPTIONAL ITEMS
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
LM LM LM
<S> <C> <C> <C>
PROFIT BEFORE TAXATION
GEOGRAPHIC ANALYSIS BY BUSINESS LOCATION
United Kingdom.............................................. (0.1) -- (4.4)
Continental Europe.......................................... -- -- 1.8
North America............................................... 1.2 -- 1.5
----- ----- -----
1.1 -- (1.1)
----- ----- -----
ANALYSIS BY BUSINESS
Insurance and reinsurance services.......................... -- -- (3.6)
Insurance underwriting (in run off)......................... 1.1 -- 2.5
----- ----- -----
1.1 -- (1.1)
----- ----- -----
</TABLE>
5. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
Profit before taxation is determined after taking account of the following
items:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
LM LM LM
<S> <C> <C> <C>
Depreciation of tangible fixed assets (note 12)............. 23.0 25.3 28.8
Operating lease rentals..................................... 48.9 53.2 53.5
Auditors' remuneration:
For audit services.......................................... 2.2 2.0 1.9
For other services provided in the UK....................... 0.9 0.4 0.3
For other services outside the UK........................... 0.2 0.6 n/a
</TABLE>
III-9
<PAGE> 69
Auditors' remuneration for audit services includes L0.1m (1996 L0.1m, 1995
L0.1m) in respect of the company.
In addition to the amounts stated above, in 1997 the auditors received L0.6m in
connection with acquisitions which was capitalised; L0.5m for services provided
in the UK and L0.1m for services provided outside the UK.
6. EMPLOYEE INFORMATION
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
LM LM LM
<S> <C> <C> <C>
SALARIES AND ASSOCIATED EXPENSES
Salaries.................................................... 512.9 491.6 476.9
Social security costs....................................... 36.4 38.9 39.1
Pension costs:
Defined contribution schemes................................ 1.6 2.6 0.9
Defined benefit schemes (note 33)........................... 17.5 15.9 19.4
------ ------ ------
568.4 549.0 536.3
------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE FOR THE YEAR YEAR END
-------------------------- --------------------------
1997 1996 1995 1997 1996 1995
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
NUMBER OF EMPLOYEES BY GEOGRAPHIC REGION
United Kingdom..................... 5,192 5,136 5,433 5,174 5,130 5,289
Continental Europe................. 2,132 2,051 2.016 2,478 2,077 2,029
North America...................... 6,212 6,291 6,471 6,156 6,357 6,379
Asia Pacific....................... 1,305 1,263 1,256 1,311 1,242 1,275
Rest of world...................... 720 154 152 866 586 156
------ ------ ------ ------ ------ ------
15,561 14,895 15,328 15,985 15,392 15,128
------ ------ ------ ------ ------ ------
NUMBER OF EMPLOYEES BY BUSINESS
Insurance and reinsurance
services......................... 11,311 11,204 11,505 11,683 11,284 11,348
Employee benefits consulting....... 4,239 3,680 3,809 4,291 4,096 3,766
Insurance underwriting (in run
off)............................. 11 11 14 11 12 14
------ ------ ------ ------ ------ ------
15,561 14,895 15,328 15,985 15,392 15,128
------ ------ ------ ------ ------ ------
</TABLE>
7. DIRECTORS' REMUNERATION
<TABLE>
<CAPTION>
1997 1996
------ ------
L000 L000
<S> <C> <C>
Aggregate emoluments:
Salary and fees............................................. 1,497 1,402
Annual bonus................................................ 514 240
Benefits in kind............................................ 92 94
------ ------
2,103 1,736
------ ------
Deferred bonus.............................................. 439 186
------ ------
Notional gains made on the exercise of share options........ 40 --
------ ------
</TABLE>
Deferred bonus figures stated above represent amounts accrued in respect of
directors who were in office during the period. At 31 December 1997, the
accumulated provision for deferred bonus attributable to directors in office at
that date was L873,000 (1996 L409,000). During 1997 and 1996, no amounts were
paid to directors in respect of their accumulated deferred bonus entitlements.
III-10
<PAGE> 70
Directors' remuneration figures for 1996 above have been re-presented in
accordance with the Companies Act 1985 (as amended). The 1995 figures have not
been restated but are as presented in the 31 December 1995 year-end accounts.
<TABLE>
<CAPTION>
1995
-----
LM
<S> <C>
Base salary................................................. 1,438
Annual profit share......................................... 343
Long-term profit share...................................... 235
Pension contributions....................................... 143
Other benefits.............................................. 111
-----
Remuneration for management................................. 2,270
Directors' fees............................................. 89
-----
2,359
-----
</TABLE>
8. INTEREST PAYABLE
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
LM LM LM
<S> <C> <C> <C>
Interest on bank loans and overdrafts....................... 8.8 9.0 10.5
Interest on other borrowings................................ 0.3 0.2 2.2
Interest on finance leases.................................. 1.1 1.3 1.3
----- ----- -----
10.2 10.5 14.0
----- ----- -----
</TABLE>
9. TAXATION ON PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
LM LM LM
<S> <C> <C> <C>
Current taxation:
UK corporation tax 31.5% (1996 33%, 1995 33%)............... 28.4 25.6 5.2
UK relief for overseas taxation............................. (19.6) (14.7) (4.5)
Advance Corporation Tax recoverable......................... (4.8) -- (4.4)
Overseas taxation........................................... 22.8 22.1 17.5
----- ----- -----
26.8 33.0 13.8
Deferred taxation (note 20)................................. 1.1 (2.1) 6.4
----- ----- -----
27.9 30.9 20.2
Share of taxation of associated undertakings................ 0.4 0.6 0.8
----- ----- -----
28.3 31.5 21.0
----- ----- -----
</TABLE>
As a consequence of the group's foreign income dividend programme, the tax
charge was reduced by L7.4m (1996 L3.1m, 1995 L6.8m). In addition, in 1995, the
group's tax charge was reduced by L2.8m following the resolution of certain tax
issues.
Current overseas taxation is reduced by L5.2m (1996 L5.7m, 1995 L4.2m) by reason
of overseas taxation relief in respect of the amortisation of intangible assets
recognised in the accounts of certain of the group's overseas subsidiaries. In
accordance with the group's accounting policies, these intangible assets were
written off to reserves on consolidation. Further such overseas taxation relief,
amounting to L22.9m (1996 L26.9m, 1995 L22.9m), is expected to be available over
the period to 2012.
III-11
<PAGE> 71
10. DIVIDEND
<TABLE>
<CAPTION>
UNDERLYING ENHANCEMENT TOTAL
----------------- ---------------- -----------------
PER SHARE LM PER SHARE LM PER SHARE LM
--------- ---- --------- --- --------- ----
<S> <C> <C> <C> <C> <C> <C>
Year ended 31 December 1997
Interim dividend paid 20 October
1997.............................. 3.0p 16.4 -- -- 3.0p 16.4
Final dividend paid 29 April 1998... 4.0p 22.2 -- -- 4.0p 22.2
--------- ---- --------- --- --------- ----
7.0p 38.6 -- -- 7.0p 38.6
--------- ---- --------- --- --------- ----
Year ended 31 December 1996
Interim dividend.................... 3.0p 16.4 0.75p 4.1 3.75p 20.5
Final dividend...................... 3.5p 19.2 -- -- 3.5p 19.2
--------- ---- --------- --- --------- ----
6.5p 35.6 0.75p 4.1 7.25p 39.7
--------- ---- --------- --- --------- ----
Year ended 31 December 1995
Interim dividend.................... 3.0p 16.2 -- -- 3.0p 16.2
Final dividend...................... 3.5p 19.1 0.875p 4.8 4.375p 23.9
--------- ---- --------- --- --------- ----
6.5p 35.3 0.875p 4.8 7.375p 40.1
--------- ---- --------- --- --------- ----
</TABLE>
Both the interim and final dividends for 1997 have been designated foreign
income dividends (FIDs).
The 1995 final and 1996 interim dividends were designated as FIDs and were
enhanced so as not to disadvantage non-tax paying shareholders. Since that time,
changes have been made to tax legislation such that, in connection with FIDs,
most of our non-tax paying shareholders are no longer disadvantaged relative to
tax-paying shareholders. Accordingly, it is no longer the group's policy to
enhance FIDs.
It is currently planned that dividends for 1998 will be declared as FIDs.
11. EARNINGS PER SHARE
Earnings per share of 12.8p (1996 11.6p, 1995 12.6p) have been calculated by
apportioning the earnings of L70.4m (1996 L63.7m, 1995 L68.9m) over the weighted
average of 549.5m (1996 547.3m, 1995 546.3m) shares in issue.
Earnings per share on the nil distribution basis amounted to 11.9p (1996 11.6p,
1995 11.8p).
12. FIXED ASSETS: TANGIBLE ASSETS
<TABLE>
<CAPTION>
PROPERTIES
----------------------------------- OFFICE
LONG SHORT FIXTURES & MOTOR
FREEHOLD LEASEHOLD LEASEHOLD EQUIPMENT VEHICLES TOTAL
----------- --------- --------- ---------- -------- -----
LM LM LM LM LM LM
<S> <C> <C> <C> <C> <C> <C>
COST
At 1 January 1997.................... 115.7 10.1 22.5 208.9 23.9 381.1
Acquisition of subsidiary
undertakings....................... -- -- 0.2 6.9 0.8 7.9
Additions............................ -- -- 0.2 19.7 4.3 24.2
Disposals............................ -- -- -- (16.8) (5.8) (22.6)
Translation differences.............. (1.8) -- (0.6) (2.3) (0.6) (5.3)
----------- --------- --------- --------- -------- -----
At 31 December 1997.................. 113.9 10.1 22.3 216.4 22.6 385.3
----------- --------- --------- --------- -------- -----
DEPRECIATION
At 1 January 1997.................... -- -- 10.3 145.0 9.8 165.1
Acquisition of subsidiary
undertakings....................... -- -- 0.1 4.3 0.3 4.7
Provided in the year................. -- -- 1.0 17.9 4.1 23.0
Disposals............................ -- -- -- (14.4) (3.6) (18.0)
Translation differences.............. -- -- (0.4) (1.2) (0.4) (2.0)
----------- --------- --------- --------- -------- -----
</TABLE>
III-12
<PAGE> 72
<TABLE>
<CAPTION>
PROPERTIES
----------------------------------- OFFICE
LONG SHORT FIXTURES & MOTOR
FREEHOLD LEASEHOLD LEASEHOLD EQUIPMENT VEHICLES TOTAL
----------- --------- --------- ---------- -------- -----
LM LM LM LM LM LM
<S> <C> <C> <C> <C> <C> <C>
At 31 December 1997.................. -- -- 11.0 151.6 10.2 172.8
----------- --------- --------- --------- -------- -----
Net book value at 31 December 1997... 113.9 10.1 11.3 64.8 12.4 212.5
----------- --------- --------- --------- -------- -----
Net book value at 31 December 1996... 115.7 10.1 12.2 63.9 14.1 216.0
----------- --------- --------- --------- -------- -----
</TABLE>
The directors have reviewed the current market values of the group's freehold
and long-leasehold properties and are of the opinion that there is no
substantial difference between their costs and market values. The directors have
reassessed the useful lives and residual values of these properties at 31
December 1997, based on prices prevailing at the date of acquisition, and
consider that any depreciation charge for the year would not have been
significant. Consequently, no depreciation charge has been made in respect of
these properties.
Freehold properties include an overseas asset held under a finance lease which
has a net book value of L15.7m (1996 17.5m).
During the year, proceeds amounting to L19.5m were received on the disposal, in
1996, of the group's long-leasehold interest in Aldgate House, London.
13. ACQUISITIONS
The costs, net assets acquired and goodwill arising on acquisitions recognised
during 1997 were as follows:
<TABLE>
<CAPTION>
OTHER
RTI NSBV BUSINESSES TOTAL
----- ----- ---------- -----
LM LM LM LM
<S> <C> <C> <C> <C>
Cost of acquisition:
Cash consideration..................................... 12.0 7.3 11.7 31.0
Share of net liabilities of business contributed....... -- (0.9) -- (0.9)
Contingent consideration............................... -- 0.4 5.1 5.5
Sundry expenses........................................ 0.3 2.3 0.3 2.9
----- ----- ---------- -----
12.3 9.1 17.1 38.5
Share of net (assets)/liabilities of businesses
acquired............................................. (20.8) 5.2 (0.5) (16.1)
----- ----- ---------- -----
Goodwill on acquisitions............................... (8.5) 14.3 16.6 22.4
----- ----- ----------
Add: Negative goodwill on RTI (note 4)................. 8.5
-----
Goodwill written off to reserves (note 29)............. 30.9
-----
</TABLE>
River Thames Insurance Company Limited (RTI)
In April 1997, the group completed the acquisition from Transamerica Corporation
of 35.7m "A" ordinary shares in RTI. With effect from completion, the group's
interest in RTI increased from 48.8 per cent to 98.7 per cent and it became a
subsidiary undertaking. As shown in the summary table above, the purchase
consideration was at a significant discount to the fair value of the additional
share of the net assets of the company acquired, i.e. negative goodwill was
recognised on the acquisition.
Nikols Sedgwick B.V. (NSBV)
With effect from 1 November 1997, Sedgwick entered into a joint venture with the
Moratti Group which involved the transfer of our respective businesses in Italy,
Spain, Portugal and Latin America to a newly-formed holding company, NSBV.
Details of the joint venture were set out in the circular to shareholders dated
10 October 1997. NSBV is treated as a subsidiary undertaking in these financial
statements.
III-13
<PAGE> 73
The assets and liabilities of businesses acquired during 1997 were as follows:
<TABLE>
<CAPTION>
BOOK VALUE ADJUSTMENTS FAIR VALUE
---------- ----------- ----------
LM LM LM
<S> <C> <C> <C>
Tangible fixed assets....................................... 3.2 -- 3.2
Investments in associated undertakings...................... (26.4) -- (26.4)
Fixed asset investments..................................... 74.4 (0.7) 73.7
Current assets
- -- Reinsurers' share of technical provisions................ 170.6 -- 170.6
- -- Other assets............................................. 164.0 4.8 168.8
Creditors due within one year............................... (69.3) (1.4) (70.7)
Creditors due after more than one year...................... (0.2) -- (0.2)
Provisions for liabilities and charges
- -- Insurance technical provisions........................... (295.5) (8.4) (303.9)
- -- Other provisions......................................... (2.9) -- (2.9)
---------- ----------- ----------
17.9 (5.7) 12.2
Minority interests.......................................... 6.3 (2.4) 3.9
---------- ----------- ----------
24.2 (8.1) 16.1
---------- ----------- ----------
</TABLE>
Adjustments to the book values of the assets and liabilities acquired
principally reflect the strengthening of insurance technical provisions held in
relation to RTI and the alignment of the accounting policies of the acquired
businesses with those of the group.
Cash flow effect of acquisition of businesses:
<TABLE>
<CAPTION>
1997
------
LM
<S> <C>
Cost of acquisition:
- -- Acquisitions completed during 1997....................... 32.9
- -- Acquisitions completed in previous years................. 3.0
Net cash of businesses acquired............................. (4.2)
Effect of movement in exchange rates........................ 0.1
------
Net outflow of cash on acquisitions......................... 31.8
------
</TABLE>
Businesses acquired during 1997 contributed L0.6m to the group's earnings for
1997.
14. DISPOSALS
Profit recognised on disposal of businesses, none of which was individually
significant, amounted to L2.7m (1996 L2.0m, 1995 L4.4m). In addition to the 1995
profit recognised of L4.4m on the disposal of businesses, none of which was
individually significant, the group recognised an exceptional profit of L4.2m on
the disposal of its travel insurance booking business in the Netherlands which
was treated as an exceptional item (see Note 4).
Cash flow effect of disposal of businesses:
<TABLE>
<CAPTION>
1997
----
LM
<S> <C>
Cash proceeds:
- -- Disposals completed during the year...................... 0.6
- -- Disposals completed in previous years.................... 3.8
----
Net inflow of cash on disposals............................. 4.4
----
</TABLE>
III-14
<PAGE> 74
15. FIXED ASSETS; SUBSIDIARY UNDERTAKINGS
<TABLE>
<CAPTION>
SHARES
AT COST
-------
LM
<S> <C>
At 1 January 1997........................................... 240.2
Additions................................................... 4.0
-------
At 31 December 1997......................................... 244.2
-------
</TABLE>
Principal subsidiary undertakings at 31 December 1997:
<TABLE>
<CAPTION>
COUNTRY OF INCORPORATION
AND OPERATION CLASS OF SHARES AND PERCENTAGE INTEREST
------------------------ ---------------------------------------
<S> <C> <C>
INSURANCE BROKING AND CONSULTING
Sedgwick (Holdings) Pty. Limited....... Australia "A" and "B" ordinary (100%)
10% Non-cumulative non-redeemable
preference (100%)
Sedgwick SA-NV......................... Belgium Ordinary (99%)
SG Services Limited*................... Great Britain Ordinary (100%)
Sedgwick SA............................ France Ordinary (100%)
Sedgwick Nederland BV.................. Netherlands Ordinary (100%)
Sedgwick, Inc.**....................... US Common (100%)
Sedgwick Re, Inc....................... US Common (100%)
Sedgwick Noble Lowndes Limited......... Great Britain Ordinary (100%)
Sedgwick Financial Services Limited.... Great Britain Ordinary (100%)
Sedgwick Oakwood Lloyd's Underwriting
Agents Limited....................... Great Britain Ordinary voting (75%)
Nikols Sedgwick B.V.................... Netherlands Ordinary (45.7%)***
Ginsburg Malan & Carsons Consultants &
Actuaries (Pty) Limited.............. South Africa Ordinary (50.01%)
INSURANCE UNDERWRITING (IN RUN OFF)
River Thames Insurance Company
Limited.............................. Great Britain Ordinary (98.7%)
Americas Insurance Company............. US Common (100%)
</TABLE>
With the exception of SG Services Limited and Sedgwick Oakwood Lloyd's
Underwriting Agents Limited, the above companies are indirectly owned.
- ---------------
* SG Services Limited operated through agents in 1997. Its principal agent in
1997 was Sedgwick Europe Risk Services Limited. With effect from 1 January
1998, SG Services Limited changed its name to Sedgwick Limited
** Formerly Sedgwick James, Inc.
*** During 1998, the group's interest in Nikols Sedgwick BV will increase to 49%
16. FIXED ASSETS: ASSOCIATED UNDERTAKINGS
<TABLE>
<CAPTION>
SHARE OF
RETAINED
SHARES EARNINGS LOANS TOTAL
------ -------- ----- -----
LM LM LM LM
<S> <C> <C> <C> <C>
At 1 January 1997...................................... 36.7 4.7 0.1 41.5
Additions.............................................. 1.1 (1.0) 0.1 0.2
Disposals and other movements.......................... (35.0) 8.1 -- (26.9)
Translation differences................................ -- 0.4 -- 0.4
------ -------- ----- -----
At 31 December 1997.................................... 2.8 12.2 0.2 15.2
------ -------- ----- -----
</TABLE>
Shares held in associated undertakings are unlisted. Shares are stated at cost,
less amounts written off in respect of permanent diminution in value.
III-15
<PAGE> 75
At 31 December 1997, the group's only significant associated undertaking was ACE
Holding Inc (ACE), an insurance broking business which incorporated in the
British Virgin Islands and operates in the Middle East. Sedgwick Group plc has
an indirect interest in ACE comprising 100,000 ordinary shares of no par value
representing 32.63% of its equity share capital.
Disposals and other movements includes L26.4m in respect of RTI, which became a
subsidiary undertaking in April 1997.
17. RETIREMENT-RELATED INVESTMENT BUSINESS
The group provides retirement-related investment products through SuperFlex
Limited, a subsidiary undertaking based in South Africa, the net assets of which
comprise:
<TABLE>
<CAPTION>
1997
-----
LM
<S> <C>
Listed investments at current value (cost L128.0m).......... 112.3
Unlisted investments at current value (cost L190.0m)........ 192.3
Current assets.............................................. 49.1
Current liabilities......................................... (0.2)
-----
Assets backing retirement contracts......................... 353.5
Less: Attributable to shareholders.......................... 0.6
-----
Liabilities linked to retirement contracts.................. 352.9
-----
</TABLE>
SuperFlex Limited is wholly owned by Ginsburg Malan & Carsons Consultants and
Actuaries (Pty) Limited.
18. FIXED ASSETS: INVESTMENTS
<TABLE>
<CAPTION>
LISTED UNLISTED
SECURITIES SECURITIES TOTAL
---------- ---------- -----
LM LM LM
<S> <C> <C> <C>
At 1 January 1997........................................... 23.4 2.6 26.0
Acquisition of subsidiary undertakings...................... 34.1 39.6 73.7
Additions................................................... 97.6 26.1 123.7
Disposals and other movements............................... (39.4) (30.4) (69.8)
Translation differences..................................... 0.5 -- 0.5
---------- ---------- -----
At 31 December 1997......................................... 116.2 37.9 154.1
---------- ---------- -----
</TABLE>
The market value of listed securities was L116.2m.
19. CURRENT ASSETS: DEBTORS
<TABLE>
<CAPTION>
1997
-------
LM
<S> <C>
AMOUNTS FALLING DUE WITHIN ONE YEAR
Insurance broking debtors (note 22)......................... 2,643.5
Other debtors............................................... 72.2
Taxation recoverable........................................ 19.1
Prepayments and accrued income.............................. 23.1
-------
2,757.9
-------
</TABLE>
III-16
<PAGE> 76
<TABLE>
<CAPTION>
1997
-------
LM
<S> <C>
AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Other debtors............................................... 49.1
Advance Corporation Tax recoverable......................... 12.6
Deferred taxation (note 20)................................. 22.2
-------
83.9
-------
2,841.8
-------
</TABLE>
20. DEFERRED TAXATION
Deferred taxation assets / (liabilities)
<TABLE>
<CAPTION>
PROVIDED UNPROVIDED
1997 1997
-------- ----------
LM LM
<S> <C> <C>
Accelerated tax depreciation................................ 0.5 --
Short-term timing differences............................... 2.7 1.3
Potential remittance of retained earnings of overseas
companies................................................. (8.0) --
Pensions and similar obligations............................ 17.8 --
Restructuring provisions.................................... 6.0 --
Advance Corporation Tax recoverable......................... -- 0.6
Overseas intangibles (note 9)............................... 3.2 22.9
-------- ----------
22.2 24.8
-------- ----------
</TABLE>
Movement on the deferred taxation account:
<TABLE>
<CAPTION>
1997
-------
LM
<S> <C>
At 1 January................................................ 18.8
Acquisition of subsidiary undertakings...................... 4.9
Translation differences..................................... 0.7
Transfer (from)/to the profit and loss account (note 9)..... (1.1)
Other movements............................................. (1.1)
-------
At 31 December.............................................. 22.2
-------
</TABLE>
21. CURRENT ASSETS: INVESTMENTS
<TABLE>
<CAPTION>
1997
-------
LM
<S> <C>
Listed securities........................................... 60.1
Other investments........................................... 36.1
-------
96.2
-------
</TABLE>
The market value of listed securities was L60.4m.
22. FIDUCIARY ASSETS AND LIABILITIES
Fiduciary balances comprise uncollected net premiums (i.e. after deduction of
brokerage and fees), and cash and investments representing net premiums and
claims which have been collected but not remitted to the
III-17
<PAGE> 77
relevant client, insurer or other insurance intermediary. Fiduciary assets and
liabilities included under the respective balance sheet headings were as
follows:
<TABLE>
<CAPTION>
1997
-------
LM
<S> <C>
CURRENT ASSETS
Cash and short-term deposits................................ 436.5
Investments................................................. 47.8
Insurance broking debtors................................... 2,568.5
-------
3,052.8
CURRENT LIABILITIES
Insurance broking creditors................................. 3,052.8
-------
</TABLE>
Cash, short-term deposits and investments held in a fiduciary capacity are
generally subject to regulatory controls prescribed by the relevant authorities
in the various countries in which the group operates. Accordingly, such
fiduciary assets are regarded as restricted.
Certain subsidiary undertakings in the UK have entered into a trust deed with
the Corporation of Lloyd's under which insurance transaction assets are subject
to a floating charge in favour of the trustee of Lloyd's for the benefit of
insurance transaction creditors. Insurance transaction creditors amounting to
L2,361.3m were secured through this arrangement. The assets of subsidiary
undertakings subject to this charge were insurance broking debtors amounting to
L2,106.1m and cash and deposits amounting to L265.6m.
A floating charge is a charge which does not relate to a specific asset but to a
group of assets, the composition of which may change from time to time (in this
case, insurance broking assets held by the group in relation to business
conducted at Lloyd's).
23. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1997
-------
LM
<S> <C>
Bank loans and overdrafts (unsecured)....................... 0.9
Finance lease obligations................................... 0.8
Insurance broking creditors (note 22)....................... 3,052.8
Dividend payable............................................ 22.2
Other creditors............................................. 53.4
Taxation.................................................... 44.3
Accruals and deferred income................................ 81.9
-------
3,256.3
-------
</TABLE>
24. BORROWINGS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1997
-----
LM
<S> <C>
Bank loans.................................................. 20.0
7.68% Senior Loan Notes 2006................................ 36.2
Other borrowings............................................ 7.7
-----
63.9
7.25% Convertible Bonds 2008................................ 41.5
-----
105.4
-----
</TABLE>
III-18
<PAGE> 78
<TABLE>
<CAPTION>
1997
-----
LM
<S> <C>
Falling due:
Between one and two years................................... 7.7
Between two and five years.................................. 19.8
Over five years............................................. 77.9
-----
105.4
-----
</TABLE>
The above borrowings are all unsecured.
The 7.68% Senior Loan Notes 2006 were issued by Sedgwick Group, Inc., the
group's US holding company, and mature on 1 April 2006 at their par value of
US$60m unless previously repaid by Sedgwick Group, Inc. in accordance with the
terms of the note purchase agreement. Sedgwick Group plc has guaranteed the
principal amount, interest payments and any other monies which may be owed under
the related note purchase agreement.
Holders of the 7.25% Convertible Bonds 2008 have the option to convert the bonds
into ordinary shares in the company at 183p per share at any time before 24 May
2008. The company has the option to redeem the bonds after 14 December 1998 or,
if 15% or less of the initial L41.5m principal amount remains outstanding, on or
before that date. Unless previously repurchased by the company or any of its
subsidiaries, redeemed or converted, the bonds will be redeemed at par on 31 May
2008.
25. OTHER LIABILITIES: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1997
-----
LM
<S> <C>
Finance lease obligations................................... 9.5
Other creditors............................................. 13.5
Accruals and deferred income................................ 1.4
-----
24.4
-----
FINANCE LEASE OBLIGATIONS DUE:
Between one and two years................................... 1.5
Between two and five years.................................. 4.8
Over five years............................................. 3.2
-----
9.5
-----
</TABLE>
26. PROVISIONS FOR LIABILITIES AND CHARGES: INSURANCE TECHNICAL PROVISIONS
<TABLE>
<S> <C>
At 1 January 1997........................................... 67.7
Acquisition of subsidiary undertakings...................... 303.9
Profit and loss movements (note 4).......................... 7.4
Utilisation................................................. (73.5)
Transfers to creditors and other movements.................. (0.5)
Translation differences..................................... 2.9
-----
At 31 December 1997......................................... 307.9
-----
</TABLE>
At 31 December 1997, amounts recoverable from reinsurers in relation to
insurance technical provisions amounted to L177.8m.
III-19
<PAGE> 79
27. PROVISIONS FOR LIABILITIES AND CHARGES: OTHER PROVISIONS
<TABLE>
<CAPTION>
PENSIONS
AND CLAIMS AND
SIMILAR LAWSUITS
OBLIGATIONS RESTRUCTURING (NOTE 30(A)) OTHER TOTAL
----------- ------------- ------------ ----- -----
LM LM LM LM LM
<S> <C> <C> <C> <C> <C>
At 1 January 1997.............. 42.3 19.0 43.6 24.5 129.4
Acquisition of subsidiary
undertakings................. -- -- 2.9 -- 2.9
Profit and loss movements...... 5.7 7.2 14.8 8.8 36.5
Utilisation.................... (6.0) (6.5) (11.7) (3.8) (28.0)
Transfers (to)/from creditors
and other movements.......... (1.3) 0.4 2.2 1.9 3.2
Translation differences........ 0.2 0.2 (0.1) (1.4) (1.1)
----------- ------------- ------------ ----- -----
At 31 December 1997............ 40.9 20.3 51.7 30.0 142.9
----------- ------------- ------------ ----- -----
</TABLE>
28. SHARE CAPITAL
The authorised capital of the company is L81.0m.
Issued and fully paid capital of the company:
<TABLE>
<CAPTION>
ORDINARY SHARES
OF 10P EACH
MILLIONS
---------------
<S> <C>
At 1 January 1997........................................... 548.0
Shares issued during the year............................... 5.7
---------------
At 31 December 1997......................................... 553.7
---------------
</TABLE>
Details of shares issued during the year and an analysis of the options
outstanding in connection with the company's share option schemes are given in
the Directors' report.
29. SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
SHARE
CAPITAL SHARE PROFIT AND
(NOTE 28) PREMIUM LOSS ACCOUNT TOTAL
--------- ------- ------------ -----
LM LM LM LM
<S> <C> <C> <C> <C>
At 1 January 1997............................ 54.8 3.9 132.7 191.4
Shares issued................................ 0.6 4.2 0.3 5.1
Goodwill on acquisitions (note 13)........... -- -- (30.9) (30.9)
Retained profit for the year................. -- -- 31.8 31.8
Translation differences...................... -- -- 2.4 2.4
--------- ------- ------------ -----
At 31 December 1997.......................... 55.4 8.1 136.3 199.8
--------- ------- ------------ -----
At 1 January 1996............................ 54.6 2.1 139.9 196.6
Shares issued................................ 0.2 1.8 -- 2.0
Goodwill on acquisitions..................... -- -- (22.8) (22.8)
Retained profit for the year................. -- -- 24.0 24.0
Translation differences...................... -- -- (8.4) (8.4)
--------- ------- ------------ -----
At 31 December 1996.......................... 54.8 3.9 132.7 191.4
--------- ------- ------------ -----
At 1 January 1995............................ 54.6 1.9 115.6 172.1
Shares issued................................ -- 0.2 -- 0.2
Goodwill on acquisitions..................... -- -- (3.3) (3.3)
</TABLE>
III-20
<PAGE> 80
<TABLE>
<CAPTION>
SHARE
CAPITAL SHARE PROFIT AND
(NOTE 28) PREMIUM LOSS ACCOUNT TOTAL
--------- ------- ------------ -----
LM LM LM LM
<S> <C> <C> <C> <C>
Retained profit for the year................. -- -- 28.8 28.8
Translation differences...................... -- -- (1.2) (1.2)
--------- ------- ------------ -----
At 31 December 1995.......................... 54.6 2.1 139.9 196.6
--------- ------- ------------ -----
</TABLE>
The cumulative amount of goodwill written off at 31 December 1997, net of
goodwill relating to subsidiary undertakings sold, amounted to L617.9m.
During 1997, dividends amounting to L0.3m (1996 Lnil, 1995 Lnil) were taken in
the form of shares under the company's scrip dividend scheme.
The retained profit for the financial year has been dealt with in the financial
statements of:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
LM LM LM
<S> <C> <C> <C>
Company..................................................... 0.2 0.5 --
Subsidiary undertakings..................................... 32.6 19.3 27.9
Associated undertakings..................................... (1.0) 4.2 0.9
---- ---- ----
31.8 24.0 28.8
---- ---- ----
</TABLE>
30. CONTINGENT LIABILITIES
A) CLAIMS AND LAWSUITS
The group is subject to claims and lawsuits in the course of its business,
resulting principally from alleged errors and omissions in connection with the
group's insurance and consulting business. Claims may arise several years after
the original events which could be the subject to the dispute. Although all
claims are strenuously defended, provision is made, after taking account of the
group's insurance arrangements, for potential liabilities including expenses
that may arise in respect of these claims and lawsuits. Provision is based on
current information and legal advice and provisions are adjusted from time to
time according to developments. While there is always uncertainty as to the
outcome of any claim or litigation the directors do not expect such claims
existing at the balance sheet date, either individually or in aggregate, to have
a material adverse effect on the group's future results or financial position.
B) OTHER CONTINGENCIES
A group company has guaranteed undertakings totalling L0.5m given by banks in
relation to the underwriting membership of Lloyd's of certain directors and
employees of fellow subsidiary undertakings. In no case does the contingent
liability under any single guarantee exceed L50,000.
Certain group companies have opened letters of credit in favour of clients on
behalf of insurance markets and have given other guarantees and indemnities in
the ordinary course of their business.
The company has given guarantees in respect of certain liabilities of other
group companies.
No material unprovided liabilities are expected to arise either to the company
or the group as a result of these guarantees and indemnities.
31. TRANSACTIONS WITH RELATED PARTIES
During the period under review, there were no other transactions or balances
with related parties reportable under FRS 8, Related Party Disclosures.
III-21
<PAGE> 81
32. COMMITMENTS
A) OPERATING LEASE COMMITMENTS
Certain group companies have entered into operating lease arrangements. The
annual rental commitments under these leases are analyses below:
<TABLE>
<CAPTION>
1997 1996 1995
------------------- ------------------- -------------------
PROPERTIES OTHER PROPERTIES OTHER PROPERTIES OTHER
---------- ----- ---------- ----- ---------- -----
LM LM LM LM
<S> <C> <C> <C> <C> <C> <C>
Expiry of leases within:
One year.................... 3.9 3.6 2.2 3.8 3.2 2.0
Two to five years........... 21.7 6.9 23.0 6.7 20.7 6.9
Over five years............. 20.9 -- 20.9 -- 21.3 0.1
---------- ----- ---------- ----- ---------- -----
46.5 10.5 46.1 10.5 45.2 9.0
Less: Recoveries from
operating sub-leases...... (5.0) -- (4.7) -- (4.9) --
---------- ----- ---------- ----- ---------- -----
41.5 10.5 41.4 10.5 40.3 9.0
---------- ----- ---------- ----- ---------- -----
</TABLE>
B) CAPITAL COMMITMENTS
At 31 December 1997, the group had commitments for contracted capital
expenditure amounting to L1.8m (1996 L2.3m, 1995 L1.5m).
33. PENSIONS AND SIMILAR BENEFITS
The group's principal defined benefit pension schemes are in the UK and the US.
These schemes cover eligible current and retired employees and are funded on the
basis of local actuarial advice. For the purposes of determining the group's
pension cost, these schemes are valued annually at 1 January, using the
projected unit method, by qualified actuaries who are the group's employees. At
1 January 1997, the date of the latest valuations, the market value of the
assets of these schemes was L837.0m. In assessing the value of the assets held
by the UK scheme, allowance was made for the abolition during 1997 of tax
credits on UK dividend income paid to pension schemes. The actuarial value of
the assets of these schemes represented 115% of the liabilities for pension
benefits that had accrued to members at that date, after allowing for expected
future salary increases. Under the relevant accounting standard, this surplus is
being recognised over the average remaining service lives of eligible employees.
The group's contributions to its defined benefit pension schemes during 1997
amounted to L16.5m (1996 L16.1m, 1995 n/a). The group's defined benefit pension
cost during 1997 was L17.5m (1996 L15.9m, 1995 L19.4m). At 31 December 1997, a
prepayment of L10.0m is included within other debtors falling due after more
than one year which represent the cumulative amount by which the group's
contributions to its pension funds have exceeded the pension costs charged to
its profit and loss account.
The principal assumptions made in the actuarial assessment of the group's
pension cost were:
<TABLE>
<S> <C> <C>
Investment return........................................... -- 8.75% - 9% per annum
Salary inflation (including the salary scale)............... -- 6.25% - 8% per annum
Dividend growth............................................. -- 5% per annum
Pension increase............................................ -- 4% - 5% per annum
</TABLE>
Post-retirement benefits other than pensions were withdrawn from the group's
existing employees in the UK in 1989 and in the US in 1993, but the group
continues to provide certain of its pensioners with healthcare and life
assurance benefits. At 31 December 1997, there were approximately 1,500
pensioners eligible for these benefits, the cost of which was L1.5 million. The
principal assumptions made in the actuarial assessment of the cost of these
benefits were:
<TABLE>
<S> <C> <C>
Medical cost inflation...................................... -- 7% - 10% per annum
Discount rate............................................... -- 8% per annum
</TABLE>
III-22
<PAGE> 82
34. CASH FLOW
A) RECONCILIATION OF OPERATING PROFIT OF NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
1997
-----
LM
<S> <C>
Operating profit............................................ 105.8
Depreciation and other non-cash items....................... 20.5
Increase/(decrease) in net fiduciary creditors.............. 1.4
Decrease in reinsurers' share of insurance technical
provisions................................................ 47.4
Decrease/(increase) in other debtors and prepayments........ 20.6
Decrease in other creditors and accruals.................... (43.0)
Decrease in insurance technical provisions.................. (66.8)
Increase in other long-term creditors and provisions........ 12.0
-----
Net cash inflow from operating activities................... 97.9
-----
</TABLE>
B) ANALYSIS OF THE MOVEMENT IN NET FUNDS
<TABLE>
<CAPTION>
CASH AND OVERDRAFTS BORROWINGS
-------------------------- ----------------------------
LIQUID FINANCE
CASH OVERDRAFTS TOTAL RESOURCES LOANS LEASES NET FUNDS
----- ---------- ----- --------- ------ ------- ---------
LM LM LM LM LM LM
<S> <C> <C> <C> <C> <C> <C> <C>
At 1 January 1997............... 206.6 (0.5) 206.1 412.4 (131.8) (12.2) 474.5
Cash flows...................... (17.7) 16.4 (1.3) (41.6) 26.0 0.6 (16.3)
Acquisitions and disposals...... (10.9) (16.5) (27.4) 78.7 -- -- 51.3
Translation differences......... (7.5) 0.1 (7.4) 3.0 -- 1.3 (3.1)
----- ---------- ----- --------- ------ ------- ---------
At 31 December 1997............. 170.5 (0.5) 170.0 452.5 (105.8) (10.3) 506.4
----- ---------- ----- --------- ------ ------- ---------
</TABLE>
C) RECONCILIATION OF CASH AND LIQUID RESOURCES TO AMOUNTS SHOWN IN THE BALANCE
SHEET
<TABLE>
<CAPTION>
1997
------
LM
<S> <C>
CASH
Cash and deposits........................................... 538.8
Less: Deposits classified as liquid resources............... (356.3)
Less: Deposits classified as financial investment........... (12.0)
------
170.5
------
LIQUID RESOURCES
Current asset investments................................... 96.2
Add: Deposits classified as liquid resources................ 356.3
------
452.5
------
</TABLE>
35. POST-BALANCE SHEET EVENT
On 16 January 1998, the group sold its managing agencies based in The
Netherlands for NLG 37 million (L11.2 million) in cash, of which 80 per cent was
paid on completion and 20 per cent will be paid in July 1998. It is expected
that the proceeds will be used largely to fund the reorganisation of the group's
operations in The Netherlands and elsewhere during 1998.
III-23
<PAGE> 83
36. DIFFERENCES BETWEEN UK AND US GAAP
The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the UK (UK GAAP), which differ in certain
respects from those applicable in the US (US GAAP). An explanation of the
differences which have a significant effect on the group is given below.
GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS
Under UK GAAP, goodwill and identifiable intangible assets arising from the
purchase of businesses are written off on acquisition against retained earnings
or other reserves. Under US GAAP, goodwill and identifiable intangible assets
are capitalised and amortised over their estimated useful lives. For the
purposes of the reconciliation statements set out on pages III-26 and III-27,
such assets are amortised over periods of five to 40 years.
RESTRUCTURING INITIATIVES
Restructuring costs are incurred in relation to ongoing initiatives aimed at
improving the group's efficiency and the integration of newly-acquired
businesses. Such costs are principally personnel and property-related. Under US
GAAP, the requirements for making provision for restructuring costs are more
prescriptive than under UK GAAP.
CONTINGENT COMMISSIONS
Contingent commissions represent income receivable from insurers based on the
volume and/or profitability of business placed with them by the group. Under UK
GAAP, contingent commissions are accrued for in the period to which they relate,
provided that they can be reasonably estimated. Under US GAAP, SFAS No. 5,
Accounting for Contingencies, effectively precludes accrual for contingent
commissions which are based on the profitability of business placed or are both
volume and profit-based (so-called hybrid arrangements). Accordingly, the group
records income from profit-based and hybrid arrangements on a cash-received
basis under US GAAP.
PENSIONS
Under UK GAAP the cost of providing defined benefit pension arrangements is
charged to the profit and loss account on a systematic basis over the service
lives of the eligible employees in accordance with the advice of qualified
actuaries. Under US GAAP, SFAS No. 87, Employers' Accounting for Pensions,
requires that the cost is determined based on a comparison of the projected
benefit obligation with the market value of the underlying scheme assets and
other unrecognised gains and losses assessed on an actuarial basis. Principally
as a result of this difference in methodology, the group's US GAAP pension cost
can be significantly different from that determined under UK GAAP and tends to
be more sensitive to changing economic conditions.
POST-EMPLOYMENT BENEFITS
Post-employment benefits are all types of benefits provided to former or
inactive employees after employment but before their retirement. In respect of
the group, such benefits primarily relate to compensation for long-term
sickness. Under UK GAAP, the cost of providing these benefits is recognised on a
cash basis. Under US GAAP, SFAS No. 112, Employers' Accounting for
Post-employment Benefits, requires that the expected cost of such benefits is
accrued over the estimated average service lives of eligible employees.
REVALUATION OF FORWARD EXCHANGE CONTRACTS
As an element of its treasury management strategy, the group enters into forward
exchange contracts and other financial instruments in respect of future income
denominated in foreign currencies, principally US dollars. Under UK GAAP, such
instruments are regarded as hedges of future income and are not reflected in the
group's financial statements. Under US GAAP, such instruments are regarded as
anticipatory hedges
III-24
<PAGE> 84
and are revalued (or marked to market) at each accounting date. Any gain or loss
arising on revaluation is taken to the profit and loss account.
INVESTMENTS
Under UK GAAP, fixed asset investments are stated at cost or amortised cost less
any provision for permanent diminution in value. Current asset investments are
stated at the lower of cost or amortised cost and net realisable value. Under US
GAAP, the group complies with SFAS No. 115, Accounting for Certain Investments
in Debt and Equity Securities, under which such investments are classified as
available for sale and recorded at their fair values. Unrealised gains and
losses are reflected in shareholders' equity (net of tax effects, if
applicable).
LEASES
Certain property leases which are treated as operating leases under UK GAAP must
be accounted for as capital leases under US GAAP.
CONTINGENT CONSIDERATION
Under UK GAAP, contingent consideration payable in respect of businesses
acquired before 1 January 1995 is recognised when it becomes known. Contingent
consideration payable in respect of businesses acquired on or after 1 January
1995 is estimated and provided for on completion. Under US GAAP, contingent
consideration is recognised when it becomes known. Accordingly, the
reconciliation statements reflect an adjustment to shareholders' equity in
respect of contingent consideration payable on businesses acquired on or after 1
January 1995.
DIVIDENDS PROPOSED
Under UK GAAP, dividends are provided for in the accounting period to which they
relate. Under US GAAP, dividends are not provided for until they are declared by
the directors following approval by the shareholders.
DEFERRED TAXATION
Under UK GAAP, deferred taxation is accounted for using the liability method to
the extent that it is considered probable that a liability or asset will
crystallise in the foreseeable future. Under US GAAP, deferred taxation is
provided on all temporary differences. Deferred tax assets are recognised to the
extent that it is more likely than not that they will be realised. Where doubt
exists as to whether a deferred tax asset will be realised, an appropriate
valuation allowance is established.
DISCONTINUED OPERATIONS
For an operation to be categorised as discontinued under UK GAAP, its sale or
termination must have a material effect on the nature and focus on the group's
operations and represent a material reduction in its operating facilities. Under
US GAAP, discontinued operations represent reportable segments which have been
sold or terminated. Accordingly, the group's insurance underwriting subsidiaries
in run off are regarded as discontinued operations under US GAAP but are not
regarded as discontinued operations under UK GAAP.
NET INCOME AND SHAREHOLDERS' EQUITY RECONCILIATION STATEMENTS
The effect on the group's net income and shareholders' equity of applying the
significant differences between UK GAAP and US GAAP referred to above are set
out in the reconciliation statements set out below.
III-25
<PAGE> 85
NET INCOME
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER
-----------------------
1997 1996 1995
----- ----- -----
LM LM LM
<S> <C> <C> <C>
EARNINGS REPORTED UNDER UK GAAP............................. 70.4 63.7 68.9
Adjustments:
Amortisation of goodwill and identifiable intangible
assets.................................................... (13.3) (12.2) (12.1)
Restructuring initiatives................................... 5.8 (5.4) (1.4)
Contingent commissions...................................... (0.7) (1.1) (2.3)
Pensions.................................................... 1.0 7.5 1.1
Post-employment benefits.................................... 0.2 (0.6) (0.3)
Revaluation of forward exchange contracts................... (2.5) 3.5 (1.3)
Leases...................................................... 0.8 0.2 0.2
Other items................................................. 0.5 (0.4) 4.6
Deferred taxation........................................... (10.1) 3.7 17.5
Deferred taxation on US GAAP adjustments.................... -- 1.1 (9.6)
----- ----- -----
NET INCOME IN ACCORDANCE WITH US GAAP....................... 52.1 60.0 65.3
----- ----- -----
Analysis of net income in accordance with US GAAP:
-- Continuing operations.................................. 50.9 60.1 65.0
-- Discontinued operations................................ 1.2 (0.1) 0.3
----- ----- -----
52.1 60.0 65.3
----- ----- -----
EARNINGS PER SHARE
Reported under UK GAAP...................................... 12.8p 11.6p 12.6p
----- ----- -----
In accordance with US GAAP:
Basic....................................................... 9.5p 11.0p 12.0p
Diluted..................................................... 9.4p 10.8p 11.8p
----- ----- -----
</TABLE>
Earnings per share attributable to discontinued operations were not material
during the period under review.
III-26
<PAGE> 86
SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
AT 31 DECEMBER
--------------
1997
--------------
LM
<S> <C>
SHAREHOLDERS' FUNDS REPORTED UNDER UK GAAP.................. 199.8
Adjustments:
Goodwill and identifiable intangible assets................. 218.8
Restructuring initiatives................................... 5.0
Contingent commissions...................................... (10.5)
Pensions.................................................... 8.5
Post-employment benefits.................................... (3.3)
Revaluation of forward exchange contracts................... 0.9
Investments................................................. 1.2
Leases...................................................... (4.1)
Contingent consideration.................................... 12.3
Dividends proposed.......................................... 22.2
Other items................................................. (0.3)
Deferred taxation........................................... 24.9
Deferred taxation on US GAAP adjustments.................... (9.4)
--------------
SHAREHOLDERS' EQUITY IN ACCORDANCE WITH US GAAP............. 466.0
--------------
Analysis of shareholders' equity in accordance with US GAAP:
- -- Continuing operations.................................... 425.7
- -- Discontinued operations.................................. 40.3
--------------
466.0
--------------
</TABLE>
III-27
<PAGE> 87
PART B UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 1998
Set out below is the text of the announcement dated 11 August 1998 of Sedgwick's
unaudited interim results for the six months ended 30 June 1998.
"SUMMARY
SEDGWICK GROUP PLC
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 1998
SECOND QUARTER
- - Brokerage and fees up 6 per cent*
- - Profit before tax and exceptional items up 6 per cent*
SIX MONTHS
- - Profit before tax and exceptional items L60.1 million (1997 L66.3 million)
- - Earnings per share before exceptional items of 8.0p (1997 8.4p)
- - Interim dividend unchanged at 3.0p
- - Exceptional charge of L80 million relating to pension transfer review,
including cost of insurance protection
*at constant exchange rates and against the comparative period in 1997
The Chairman, Sax Riley, said:
"We saw an encouraging improvement in brokerage and fees and profit before tax
and exceptional items in the second quarter of 1998, on a year-on-year basis."
"We maintain our confidence in the group's underlying trading performance for
1998 as a whole. Our future growth will come from the reinforcement of our
specialist services to clients worldwide, the optimum use of our international
network and from acquisitions which provide shareholder value, and geographic
and business synergies."
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 1998
Sedgwick Group plc, one of the world's leading consulting, insurance and
reinsurance broking groups, today reported an increase of 6 per cent in
brokerage and fees for the second quarter of 1998; profit before tax and
exceptional items also increased by six per cent on a year-on-year basis.
Profit before tax and exceptional items for the six months to 30 June 1998 was
L60.1 million compared with L66.3 million for the corresponding period in 1997.
Earnings per share before exceptional items were 8.0p (1997 8.4p).
For the first six months, brokerage and fees increased by 4 per cent to L469.2
million, despite the difficult market conditions and the expected continued
re-phasing of group revenue from the first quarter towards the second half of
the year. Expenses increased by 6 per cent but, excluding acquisitions and
disposals, by 2 per cent. The group anticipates a more favourable ratio between
brokerage and fees and expenses growth for the year as a whole.
All percentage movements are at constant exchange rates.
Commenting on these results Chairman Sax Riley said:
"We saw an encouraging improvement in brokerage and fees and profit before tax
and exceptional items in the second quarter of the year. These results are in
line with our expectations, which took account of the
III-28
<PAGE> 88
continuing decline of insurance rates in international markets and the likely
adverse effect on profits of exchange rate movements which, for the six months,
was L3.1 million. They also reflect our statement at the time of our 1997 annual
results announcement, that we expected the final quarter to be stronger than in
previous years."
"In the past few months there have been further changes in the insurance
industry landscape. We are convinced we have the right strategy to deliver
results and continue to look at all our options to create additional shareholder
value."
"We maintain our confidence in the group's underlying trading performance for
1998. Our future growth will come from the reinforcement of our specialist
services to clients worldwide, the optimum use of our international network and
from acquisitions which provide shareholder value, and geographic and business
synergies."
INSURANCE AND REINSURANCE SERVICES
In the first six months of 1998, the group achieved good profit growth in North
America and Asia Pacific. Despite continued adverse conditions in the London
market, our UK operations showed an improved performance, year-on-year, in the
second quarter compared with the first quarter. The contribution from our
continental European businesses was particularly influenced by the results
profile of the Nikols Sedgwick joint venture, where profits come through in the
fourth quarter.
EMPLOYEE BENEFITS CONSULTING
Sedgwick Noble Lowndes continued to report double digit profit growth and
encouraging increases in brokerage and fees across all its geographic regions.
PENSION TRANSFER REVIEW
We have announced an exceptional charge of L80 million for the pension transfer
review.
In the UK, SNL's dedicated team continues to focus its efforts towards the
resolution of its pension transfer position. In March 1998, the Financial
Services Authority (FSA) and Personal Investment Authority (PIA) published their
consultation document concerning Phase 2 of the pension transfers and opt-outs
review. In April, following an initial review and based on assumptions contained
in the consultation document, we announced that we expected a cost of not less
than L35 million with the comment that there was a potential for the figure to
be materially exceeded. We have approximately 24,000 pension transfer cases and
very few pension opt-outs to review in Phase 2.
We have now had the opportunity to assess our position in more detail and, based
on our experience to date, this charge represents the best estimate of the
expected cost of completing the review. This cost may, however, still be subject
to change because of factors which are beyond Sedgwick's control and the fact
that the "Final Statement of Policy and Final Guidance" is not expected to be
published by the FSA until later this year.
As a result, Sedgwick has entered into insurance arrangements which will protect
the group against an increase of up to L37 million in the estimated total cost
of completing the review. The cost of this cover is included in the L80 million
exceptional charge recognised in the period, as is the cost of purchasing an
option to extend this cover to give protection of a further L25 million.
We continue to be committed to the speedy resolution of this issue and, by the
end of July, had completed 84 per cent of Phase 1 cases.
Further details will be found in note 5 to the interim statement.
III-29
<PAGE> 89
DIVIDEND
The interim dividend remains unchanged at 3.0p per ordinary share and will be
paid on 19 October 1998, as a foreign income dividend, to all shareholders on
the register at the close of business on 21 August 1998.
SEDGWICK GROUP PLC
UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT
Six months ended 30 June 1998
<TABLE>
<CAPTION>
BEFORE EXCEPTIONAL
EXCEPTIONAL ITEMS TOTAL TOTAL
ITEMS (NOTE 3) 1998 1997 1998
----------- ----------- -------- ------ --------
LM LM LM LM US $M
<S> <C> <C> <C> <C> <C>
REVENUE
Brokerage and Fees................. 469.2 -- 469.2 465.4 783.6
Interest and investment income..... 23.4 -- 23.4 19.6 39.0
------ ----- -------- ------ --------
492.6 -- 492.6 485.0 822.6
EXPENSES........................... (429.0) (86.4) (515.4) (416.4) (860.7)
------ ----- -------- ------ --------
Operating profit/(loss)............ 63.6 (86.4) (22.8) 68.6 (38.1)
Share of profits of associated
undertakings..................... 2.5 -- 2.5 2.4 4.2
Interest payable................... (6.0) -- (6.0) (4.7) (10.0)
Profit on disposal of businesses... -- 9.4 9.4 -- 15.7
Cessation of insurance
underwriting..................... -- -- -- 0.2 --
------ ----- -------- ------ --------
PROFIT / (LOSS) BEFORE TAXATION.... 60.1 (77.0) (16.9) 66.5 (28.2)
Taxation........................... (16.8) 25.7 8.9 (20.0) 14.9
------ ----- -------- ------ --------
PROFIT / (LOSS) AFTER TAXATION..... 43.3 (51.3) (8.0) 46.5 (13.3)
Minority interests................. 0.9 -- 0.9 (0.3) 1.5
------ ----- -------- ------ --------
EARNINGS........................... 44.2 (51.3) (7.1) 46.2 (11.8)
------ -----
DIVIDEND........................... (16.7) (16.4) (27.9)
-------- ------ --------
RETAINED EARNINGS.................. (23.8) 29.8 (39.7)
-------- ------ --------
EARNINGS PER SHARE
Before exceptional items........... 8.0p 8.4p 13.4c
-------- ------ --------
After exceptional items............ (1.3)p 8.4p (2.2)c
-------- ------ --------
DIVIDEND PER SHARE................. 3.0p 3.0p 5.0c
-------- ------ --------
Average number of shares in issue
(millions)....................... 554.0 548.3 --
</TABLE>
These results should be read in conjunction with the notes.
III-30
<PAGE> 90
UNAUDITED CONSOLIDATED BALANCE SHEET
As at 30 June 1998
<TABLE>
<CAPTION>
RESTATED*
1998 1997 1998
-------- --------- --------
LM LM US $M
<S> <C> <C> <C>
ASSETS EMPLOYED
FIXED ASSETS
Tangible assets............................................. 207.7 211.2 346.9
Associated undertakings..................................... 16.5 15.6 27.5
Assets backing retirement contracts......................... 487.4 227.6 814.0
Investments................................................. 218.7 102.9 365.2
-------- -------- --------
930.3 557.3 1,553.6
-------- -------- --------
CURRENT ASSETS
Debtors..................................................... 3,057.8 3,610.0 5,106.5
Reinsurers' share of technical provisions................... 172.9 228.0 288.7
Investments................................................. 64.8 143.2 108.2
Cash and deposits........................................... 516.5 597.2 862.6
-------- -------- --------
3,812.0 4,578.4 6,366.0
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR.............. (3,434.6) (4,033.3) (5,735.8)
-------- -------- --------
NET CURRENT ASSETS.......................................... 377.4 545.1 630.2
-------- -------- --------
TOTAL ASSETS LESS CURRENT LIABILITIES....................... 1,307.7 1,102.4 2,183.8
-------- -------- --------
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Borrowings
Loans and other borrowings.................................. (78.0) (59.7) (130.3)
7.25% Convertible Bonds 2008................................ (41.5) (41.5) (69.3)
-------- -------- --------
(119.5) (101.2) (199.6)
Other liabilities........................................... (24.4) (45.7) (40.7)
-------- -------- --------
(143.9) (146.9) (240.3)
PROVISIONS FOR LIABILITIES AND CHARGES
Liabilities linked to retirement contracts.................. (487.0) (227.6) (813.3)
Insurance technical provisions.............................. (289.9) (374.8) (484.1)
Other provisions............................................ (213.7) (133.4) (356.9)
-------- -------- --------
173.2 219.7 289.2
-------- -------- --------
FINANCED BY
SHAREHOLDER'S FUNDS......................................... 173.8 217.4 290.2
MINORITY INTERESTS.......................................... (0.6) 2.3 (1.0)
-------- -------- --------
NET CAPITAL EMPLOYED........................................ 173.2 219.7 289.2
-------- -------- --------
</TABLE>
- ---------------
* For the reasons set out in the 1997 annual report, comparative figures have
been restated to show separately the assets and liabilities relating to
retirement-related investment business.
The balance sheet should be read in conjunction with the notes.
III-31
<PAGE> 91
NOTES
1. BASIS OF PREPARATION
The results for the six months ended 30 June 1998 have been prepared on the
basis of the accounting policies set out in the 1997 annual report.
The results for the six months ended 30 June 1998 and the balance sheet at that
date shown in US dollars have been translated at the period end rate of L1 =
US$1.67. No adjustments have been made to restate the results or the balance
sheet to comply with generally accepted accounting principles in the United
States of America (US GAAP). Additional information for US investors follows the
notes.
2. SEGMENTAL INFORMATION
<TABLE>
<CAPTION>
SIX MONTHS ENDED 30 JUNE
-----------------------------
CONSTANT REPORTED
EXCHANGE EXCHANGE
RATES RATES
1998 1997 1997
----- -------- --------
LM LM LM
<S> <C> <C> <C>
REVENUE
GEOGRAPHIC ANALYSIS BY BUSINESS LOCATION
United Kingdom.............................................. 169.8 173.6 175.0
Continental Europe.......................................... 74.0 63.3 69.0
North America............................................... 202.9 196.5 198.4
Asia Pacific................................................ 32.2 27.5 33.1
Rest of the world........................................... 13.7 8.6 9.5
----- -------- --------
492.6 469.5 485.0
----- -------- --------
ANALYSIS BY BUSINESS
Insurance and reinsurance services.......................... 375.8 359.5 371.2
Employee benefits consulting................................ 116.8 110.0 113.8
----- -------- --------
492.6 469.5 485.0
----- -------- --------
PROFIT / (LOSS) BEFORE TAXATION
GEOGRAPHIC ANALYSIS BY BUSINESS LOCATION
United Kingdom.............................................. 36.3 38.8 39.9
Continental Europe.......................................... 8.5 11.5 12.7
North America............................................... 19.4 15.2 15.5
Asia Pacific................................................ 3.7 0.5 0.9
Rest of the world........................................... (1.8) 1.8 2.0
----- -------- --------
66.1 67.8 71.0
Less: interest payable...................................... (6.0) (4.6) (4.7)
----- -------- --------
60.1 63.2 66.3
Exceptional items (note 3).................................. (77.0) 0.2 0.2
----- -------- --------
(16.9) 63.4 66.5
----- -------- --------
ANALYSIS BY BUSINESS
Insurance and reinsurance services.......................... 53.3 56.9 59.8
Employee benefits consulting................................ 12.8 10.9 11.2
----- -------- --------
66.1 67.8 71.0
Less: interest payable...................................... (6.0) (4.6) (4.7)
----- -------- --------
60.1 63.2 66.3
Exceptional items (note 3).................................. (77.0) 0.2 0.2
----- -------- --------
(16.9) 63.4 66.5
----- -------- --------
</TABLE>
III-32
<PAGE> 92
3. EXCEPTIONAL ITEMS
(A) OPERATING EXCEPTIONAL ITEMS
<TABLE>
<CAPTION>
EXPENSES TAX EARNINGS
-------- ----- --------
LM LM LM
<S> <C> <C> <C>
Pension transfer review (note 5)............................ 80.0 (24.0) (56.0)
Restructuring costs......................................... 6.4 (1.7) (4.7)
-------- ----- --------
86.4 (25.7) (60.7)
-------- ----- --------
</TABLE>
Pension transfer review costs are stated net of L45.3 million which is assumed
to be recoverable from third parties.
Restructuring costs relate to certain of the group's European operations.
In 1997, there were no operating exceptional items.
(B) PROFIT ON DISPOSAL OF BUSINESSES
In January 1998, the group sold its managing agencies based in The Netherlands
for NLG 37 million (L11.0 million) realising a profit on disposal of L9.4
million.
(C) CESSATION OF INSURANCE UNDERWRITING
Cessation of insurance underwriting represents the net amount recognised in
respect of the group's insurance underwriting subsidiaries which are in run off.
(D) SEGMENTAL ANALYSIS OF EXCEPTIONAL ITEMS
<TABLE>
<CAPTION>
SIX MONTHS ENDED 30 JUNE
------------------------
1998 1997
------- -------
LM LM
<S> <C> <C>
PROFIT / (LOSS) BEFORE TAXATION
GEOGRAPHIC ANALYSIS BY BUSINESS LOCATION
United Kingdom.............................................. (80.9) (1.0)
Continental Europe.......................................... 6.8 --
North America............................................... -- 1.2
Rest of the World........................................... (2.9) --
----- -----
(77.0) 0.2
----- -----
ANALYSIS BY BUSINESS
Insurance and reinsurance services.......................... 3.0 --
Employee benefits consulting................................ (80.0) --
Insurance underwriting (in run off)......................... -- 0.2
----- -----
(77.0) 0.2
----- -----
</TABLE>
4. EARNINGS PER SHARE
<TABLE>
<CAPTION>
SIX MONTHS ENDED 30 JUNE
--------------------------------------
1998 1998 1997 1997
---- --------- ---- ---------
LM PER SHARE LM PER SHARE
<S> <C> <C> <C> <C>
Earnings............................................... (7.1) (1.3)p 46.2 8.4p
Add / (less):
Exceptional items.................................... 51.3 9.3p (0.2) --
---- --------- ---- ---------
Earnings before exceptional items...................... 44.2 8.0p 46.0 8.4p
---- --------- ---- ---------
</TABLE>
The weighted average number of shares in issue in period was 554.0m (1997
548.3m).
III-33
<PAGE> 93
5. PENSION TRANSFER REVIEW
In October 1994, the Securities and Investments Board (SIB), now known as the
Financial Services Authority, issued its report, "Pension transfers and
opt-outs, review of past business". Its objective was to secure redress for
individuals who between 29 April 1988 and 30 June 1994 were wrongly advised to
transfer benefits from, or opt-out of, an occupational pension plan and enter
into a personal pension plan, and thereby suffered actual or potential loss.
Based on criteria and procedures set out in the SIB's report, Sedgwick is
required to review pension transfer and opt-out business conducted during the
relevant period and to determine whether redress should be made to clients. At
that time, the review was required to be conducted only in respect of
individuals considered by the SIB to be priority cases. Sedgwick has satisfied
the interim targets set by the regulator in respect of this review and expects
the review to be completed by 31 December 1998.
On 12 March 1998, the Financial Services Authority (FSA) and the Personal
Investment Authority (PIA) issued a consultation document on the extension of
the review to include non-priority cases.
Based on Sedgwick's experience to date and with reference to the methodology
contained in the consultation document, the directors have recognised an
exceptional charge in the period of L80m, based on their best estimate of the
cost to Sedgwick of completing the review (assuming recoveries from third
parties).
It should be noted that the estimated cost of completing the review may be
subject to change due to factors which are beyond Sedgwick's control, such as
future movements in long-term interest rates, equity markets and the contents of
the "Final Statement of Policy and Final Guidance" to be published by the FSA
later in 1998.
In view of the above uncertainties, the group has entered into insurance
arrangements which will protect it against an increase of up to L37m in the
estimated total cost of completing the review; the cost of this cover is
included in the L80m exceptional charge recognised in the period. In addition,
the group has an option to extend this cover to give protection of a further
L25m. The cost of purchasing this option is also included in the exceptional
charge.
6. MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
1998 1997
----- -----
LM LM
<S> <C> <C>
At 1 January................................................ 199.8 191.4
Shares issued............................................... 0.4 0.4
Goodwill on acquisitions.................................... -- (2.9)
Retained earnings........................................... (23.8) 29.8
Translation differences..................................... (2.6) (1.3)
----- -----
At 30 June.................................................. 173.8 217.4
----- -----
</TABLE>
III-34
<PAGE> 94
7. FOREIGN CURRENCIES
The principal exchange rates used to translate overseas group companies'
financial information were:
<TABLE>
<CAPTION>
AVERAGE RATE PERIOD END RATE
---------------------- ----------------------
JUNE 1998 JUNE 1997 JUNE 1998 JUNE 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Australian dollar............................... 2.53 2.13 2.69 2.22
Belgian franc................................... 61.74 56.71 62.13 59.75
Canadian dollar................................. 2.38 2.26 2.45 2.30
French franc.................................... 10.03 9.27 10.10 9.77
German mark..................................... 2.99 2.75 3.01 2.90
Italian lira.................................... 2,950.00 2,720.00 2,968.00 2,830.00
Netherlands guilder............................. 3.37 3.10 3.40 3.26
South African rand.............................. 8.48 7.42 9.86 7.55
US dollar....................................... 1.65 1.64 1.67 1.66
</TABLE>
ADDITIONAL INFORMATION FOR US INVESTORS
The results for the six months ended 30 June 1998 have been prepared in
accordance with UK GAAP. Estimates of the effect on the group's net income and
shareholders' equity of applying the significant differences between UK GAAP and
US GAAP are set out below.
NET INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED
30 JUNE
----------------
1998 1997
------- -----
LM LM
<S> <C> <C>
EARNINGS REPORTED UNDER UK GAAP............................. (7.1) 46.2
Adjustments:
Amortisation of goodwill and identifiable intangible
assets.................................................... (6.6) (6.0)
Other items................................................. 2.0 6.5
Deferred taxation........................................... (1.4) (0.6)
Deferred taxation on US GAAP adjustments.................... 0.1 (0.9)
------- -----
NET INCOME / (LOSS) IN ACCORDANCE WITH US GAAP.............. (13.0) 45.2
------- -----
EARNINGS PER ADS*
Reported under UK GAAP...................................... (6.4)p 42.0p
------- -----
In accordance with US GAAP
Basic....................................................... (11.7)p 41.4p
Diluted..................................................... (10.3)p 40.3p
------- -----
</TABLE>
Comparative earnings per ADS figures under US GAAP have been restated in
accordance with FAS 128, Earnings per share.
- ---------------
*Each American Depositary Security (ADS) represents five ordinary shares.
III-35
<PAGE> 95
SHAREHOLDERS EQUITY
<TABLE>
<CAPTION>
AT 30 JUNE
--------------
1998 1997
----- -----
LM LM
<S> <C> <C>
SHAREHOLDERS FUNDS REPORTED UNDER UK GAAP................... 173.8 217.4
Adjustments:
Goodwill and identifiable intangible assets................. 212.2 201.7
Dividend proposed........................................... 16.7 16.4
Other items................................................. 8.4 9.9
Deferred taxation........................................... 23.1 34.4
Deferred taxation on US GAAP adjustments.................... (8.8) (10.7)
----- -----
SHAREHOLDERS' EQUITY IN ACCORDANCE WITH US GAAP............. 425.4 469.1
----- -----
</TABLE>
DIVIDEND
Holders of the company's ADRs will be paid the interim dividend of 15p per ADS
on 29 October 1998 after it has been converted into US dollars by The Bank of
New York at the exchange rate ruling on 19 October 1998.
Dividends are stated in this document net of the associated UK tax credit
(currently 20 per cent of the gross dividend).
FORWARD-LOOKING STATEMENTS
Forward-looking statements in this document are made pursuant to the safe-harbor
provisions of the US Private Securities Litigation Reform Act of 1995. As a
result of, among other things, interest and exchange rate changes, regulatory
changes, and competition, actual results may differ materially from those
anticipated by, or which may be assumed from, statements made in this document."
III-36
<PAGE> 96
APPENDIX IV -- FINANCIAL INFORMATION ON MARSH & MCLENNAN
PART A AUDITED FINANCIAL INFORMATION
INTRODUCTION
The financial information contained in this Part A of Appendix IV is extracted
without material adjustment from the audited consolidated accounts of Marsh &
McLennan for the three years ended 31 December 1997.
MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(In millions, except per share figures)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Revenue.................................................... $6,008.6 $4,404.0 $3,937.3
Expense.................................................... 5,263.8 3,688.7 3,242.4
-------- -------- --------
Operating income........................................... 744.8 715.3 694.9
Interest income............................................ 24.0 14.3 17.7
Interest expense........................................... (106.4) (61.6) (62.8)
-------- -------- --------
Income before income taxes................................. 662.4 668.0 649.8
Income taxes............................................... 263.0 208.7 246.9
-------- -------- --------
Net income................................................. $ 399.4 $ 459.3 $ 402.9
======== ======== ========
Basic net income per share................................. $ 2.45 $ 3.17 $ 2.76
======== ======== ========
Diluted net income per share............................... $ 2.39 $ 3.12 $ 2.73
======== ======== ========
Average number of shares outstanding--Basic................ 163.0 144.8 145.8
======== ======== ========
Average number of shares outstanding--Diluted.............. 167.2 147.4 147.4
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
IV-1
<PAGE> 97
MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(In millions of dollars)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (including interest-bearing
amounts of $378.0 in 1997 and $261.1 in 1996).......... $ 424.3 $ 299.6
-------- --------
Receivables--
Commissions and fees................................... 1,296.3 937.6
Advanced premiums and claims........................... 94.8 88.5
Other.................................................. 159.9 103.0
-------- --------
1,551.0 1,129.1
Less--allowance for doubtful accounts.................. (52.8) (43.3)
-------- --------
Net receivables........................................ 1,498.2 1,085.8
-------- --------
Other current assets...................................... 646.4 363.2
-------- --------
Total current assets.............................. 2,568.9 1,748.6
Long-term securities........................................ 720.2 573.3
Fixed assets, net........................................... 957.3 770.1
Intangible assets........................................... 2,417.1 545.3
Other assets................................................ 1,250.7 907.9
-------- --------
$7,914.2 $4,545.2
======== ========
</TABLE>
<TABLE>
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt........................................... $ 236.7 $ 392.4
Accrued compensation and employee benefits................ 563.8 391.7
Accounts payable and accrued liabilities.................. 1,275.9 447.5
Accrued income taxes...................................... 217.9 259.6
Dividends payable......................................... 85.1 65.1
-------- --------
Total current liabilities......................... 2,379.4 1,556.3
-------- --------
Fiduciary liabilities....................................... 2,281.6 1,685.9
Less--cash and investments held in a fiduciary capacity..... (2,281.6) (1,685.9)
-------- --------
-- --
-------- --------
Long-term debt.............................................. 1,239.8 458.2
-------- --------
Other liabilities........................................... 1,096.2 642.1
-------- --------
Commitments and contingencies............................... -- --
-------- --------
Stockholders' equity:
Preferred stock, $1 par value, authorized 6,000,000
shares, none issued.................................... -- --
Common stock, $1 par value, authorized 400,000,000 shares,
issued 172,391,177 shares in 1997 and 153,589,062
shares in 1996......................................... 172.4 76.8
Additional paid-in capital................................ 993.9 148.1
Retained earnings......................................... 1,975.4 1,901.6
Unrealized securities holding gains, net of income
taxes.................................................. 308.8 221.2
Cumulative translation adjustments........................ (141.8) (75.7)
-------- --------
3,308.7 2,272.0
Less--treasury shares, at cost, 2,440,837 shares in 1997
and 8,951,142 shares in 1996........................... (109.9) (383.4)
-------- --------
Total stockholders' equity........................ 3,198.8 1,888.6
-------- --------
$7,914.2 $4,545.2
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
IV-2
<PAGE> 98
MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(In millions of dollars)
<TABLE>
<CAPTION>
1997 1996 1995
--------- ------ ------
<S> <C> <C> <C>
Operating cash flows:
Net income................................................ $ 399.4 $459.3 $402.9
Gain on sale of businesses............................. (13.2) (33.2) --
Special charges........................................ 296.8 92.6 --
Depreciation and amortization.......................... 199.1 139.9 135.1
Deferred income taxes.................................. (157.1) (20.8) 34.7
Other liabilities...................................... 22.1 19.0 (2.4)
Prepaid dealer commissions............................. (139.7) (338.7) (104.3)
Other, net............................................. (1.1) (11.9) (12.4)
Net changes in operating working capital other than cash
and cash equivalents...................................
Receivables............................................ (154.8) (95.0) (177.0)
Other current assets................................... (2.6) (61.3) 14.0
Accrued compensation and employee benefits............. 160.0 137.2 35.6
Accounts payable and accrued liabilities............... (111.2) (20.6) 13.0
Accrued income taxes................................... (79.2) 28.6 (9.6)
Effect of exchange rate changes........................ (3.1) 21.4 (11.5)
--------- ------ ------
Net cash generated from operations..................... 415.4 316.5 318.1
--------- ------ ------
Financing cash flows:
Net (decrease) increase in commercial paper............... (161.6) (164.7) 57.4
Other borrowings.......................................... 2,358.0 254.8 125.8
Other repayments.......................................... (1,701.7) (91.4) (8.7)
Purchase of treasury shares............................... -- (230.1) (137.7)
Issuance of common stock.................................. 209.8 143.1 82.6
Dividends paid............................................ (305.6) (239.2) (217.0)
Other, net................................................ -- 2.5 4.8
--------- ------ ------
Net cash provided by (used for) financing activities... 398.9 (325.0) (92.8)
--------- ------ ------
Investing cash flows:
Additions to fixed assets................................. (202.1) (157.3) (136.9)
Net cash proceeds from sale of business................... 54.4 241.8 --
Acquisitions.............................................. (472.9) (7.1) (6.8)
Other, net................................................ (54.7) (91.2) (54.4)
--------- ------ ------
Net cash used for investing activities................. (675.3) (13.8) (198.1)
--------- ------ ------
Effect of exchange rate changes on cash and cash
equivalents............................................... (14.3) (6.2) 6.0
--------- ------ ------
Increase (decrease) in cash and cash equivalents............ 124.7 (28.5) 33.2
Cash and cash equivalents at beginning of year.............. 299.6 328.1 294.9
--------- ------ ------
Cash and cash equivalents at end of year.................... $ 424.3 $299.6 $328.1
========= ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
IV-3
<PAGE> 99
MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(In millions of dollars, except per share figures)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
COMMON STOCK
Balance, beginning of year................................. $ 76.8 $ 76.8 $ 76.8
Acquisitions............................................... 9.4 -- --
Common stock split......................................... 86.2 -- --
-------- -------- --------
Balance, end of year....................................... $ 172.4 $ 76.8 $ 76.8
-------- -------- --------
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year................................. $ 148.1 $ 155.5 $ 166.1
Acquisitions............................................... 907.6 -- --
Common stock split......................................... (86.2) -- --
Exercise of stock options and related tax benefits......... 15.4 (10.2) (7.5)
Issuance of shares under compensation plans and related tax
benefits................................................. 10.3 8.0 3.4
Issuance of shares under employee stock purchase plans and
related tax benefits..................................... (1.3) (5.2) (6.5)
-------- -------- --------
Balance, end of year....................................... $ 993.9 $ 148.1 $ 155.5
-------- -------- --------
RETAINED EARNINGS
Balance, beginning of year................................. $1,901.6 $1,688.4 $1,507.7
Net income................................................. 399.4 459.3 402.9
Cash dividends declared--(per share amounts:
$1.95 in 1997, $1.70 in 1996 and $1.53 in 1995).......... (325.6) (246.1) (222.2)
-------- -------- --------
Balance, end of year....................................... $1,975.4 $1,901.6 $1,688.4
-------- -------- --------
UNREALISED SECURITIES HOLDING GAINS, NET OF INCOME TAXES
Balance, beginning of year................................. $ 221.2 $ 149.2 $ 91.6
Realised gains, net of income taxes........................ (23.0) (10.9) (11.4)
Unrealised gains, net of income taxes...................... 110.6 82.9 69.0
-------- -------- --------
Balance, end of year....................................... $ 308.8 $ 221.2 $ 149.2
-------- -------- --------
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance, beginning of year................................. $ (75.7) $ (86.7) $ (105.4)
Translation adjustments.................................... (66.1) 11.0 18.7
-------- -------- --------
Balance, end of year....................................... $ (141.8) $ (75.7) $ (86.7)
-------- -------- --------
TREASURY SHARES
Balance, beginning of year................................. $ (383.4) $ (317.7) $ (276.2)
Acquisitions............................................... 46.9 -- --
Purchase of treasury shares................................ -- (230.1) (137.7)
Exercise of stock options.................................. 147.2 95.2 27.4
Issuance of shares under compensation plans................ 15.7 9.9 14.0
Issuance of shares under employee stock purchase plans..... 63.7 59.3 54.8
-------- -------- --------
Balance, end of year....................................... $ (109.9) $ (383.4) $ (317.7)
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY................................. $3,198.8 $1,888.6 $1,665.5
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
IV-4
<PAGE> 100
MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The accompanying consolidated financial statements
include the accounts of Marsh & McLennan Companies, Inc. and all its
subsidiaries (the "Company"). Various subsidiaries and affiliates have
transactions with each other in the ordinary course of business. All significant
intercompany accounts and transactions have been eliminated.
Fiduciary Assets and Liabilities: In its capacity as an insurance broker or
agent, the Company collects premiums from insureds and, after deducting its
commissions, remits the premiums to the respective insurance underwriters; the
Company also collects claims or refunds from underwriters on behalf of insureds.
Unremitted insurance premiums and claims are held in a fiduciary capacity.
Interest income on these fiduciary funds, included in revenue, amounted to
$110.8 million in 1997, $93.9 million in 1996 and $102.7 million in 1995.
Net uncollected premiums and claims and the related payables, amounting to $5.2
billion at December 31, 1997 and $3.2 billion at December 31, 1996, are not
included in the accompanying Consolidated Balance Sheets.
In certain instances, the Company advances premiums, refunds or claims to
insurance underwriters or insureds prior to collection. These advances are made
from corporate funds and are reflected in the accompanying Consolidated Balance
Sheets as receivables.
Revenue: Revenue includes insurance commissions, fees for services rendered,
compensation for services provided in connection with the formation or
capitalization of various insurers and reinsurers and related firms, including
gains from sales of interests in such entities, commissions on the sale of
mutual fund shares and interest income on fiduciary funds. Insurance commissions
generally are recorded as of the effective date of the applicable policies or,
in certain cases (primarily in the Company's reinsurance and London market
operations), as of the effective date or billing date, whichever is later. Fees
for services rendered are recorded as earned. Sales of mutual fund shares are
recorded on a settlement date basis and commissions thereon are recorded on a
trade date basis, in accordance with industry practice.
Cash and Cash Equivalents: Cash and cash equivalents primarily consist of
certificates of deposit and time deposits, generally with original maturities of
three months or less. The Company maintains a policy providing for the
diversification of cash and cash equivalents to limit the concentration of
credit risk exposure.
Fixed Assets, Depreciation and Amortization: Fixed assets are stated at cost
less accumulated depreciation and amortization. Expenditures for improvements
are capitalized. Upon sale or retirement, the cost and related accumulated
depreciation and amortization are removed from the accounts and the resulting
gain or loss, if any, is reflected in income. Expenditures for maintenance and
repairs are charged to operations as incurred.
Depreciation of buildings, building improvements, furniture and equipment is
provided on a straight-line basis over the estimated useful lives of these
assets. Leasehold improvements are amortized on a straight-line basis over the
periods covered by the applicable leases or the estimated useful life of the
improvement, whichever is less.
IV-5
<PAGE> 101
The components of fixed assets at December 31, 1997 and 1996 are as follows:
DECEMBER 31, 1997 AND 1996
(In millions of dollars)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Land and buildings.......................................... $ 471.1 $ 404.9
Furniture and equipment..................................... 878.4 737.4
Leasehold and building improvements......................... 405.4 323.5
-------- --------
1,754.9 1,465.8
Less--accumulated depreciation and amortization............. (797.6) (695.7)
-------- --------
$ 957.3 $ 770.1
======== ========
</TABLE>
Intangible Assets: Acquisition costs in excess of the fair value of net assets
acquired are amortised on a straight-line basis over periods up to 40 years.
Other intangible assets are amortised on a straight-line basis over their
estimated lives. The Company periodically assesses the recoverability of
intangible assets.
Prepaid Dealer Commissions: Essentially all of the mutual funds marketed by the
Company's investment management segment are made available with a contingent
deferred sales charge in lieu of a front end load. The related commissions,
initially paid by the Company to broker/dealers for distributing the funds, are
recovered through charges and fees received over a number of years. The current
portion of these prepaid dealer commissions, amounting to $283.0 million and
$222.8 million at December 31, 1997 and 1996, respectively, is included in other
current assets in the Consolidated Balance Sheets. The long-term portion
amounting to $756.1 million and $676.6 million at December 31, 1997 and 1996,
respectively, is included in other assets in the Consolidated Balance Sheets.
Capitalized Software Costs: The Company capitalizes certain computer software
costs, principally related to purchased software packages, which are amortised
on a straight-line basis not to exceed five years. Unamortised computer software
costs amounting to $52.7 million and $28.8 million at December 31, 1997 and
1996, respectively, are included in other assets in the Consolidated Balance
Sheets.
Income Taxes: Income taxes provided reflect the current and deferred tax
consequences of events that have been recognised in the Company's financial
statements or tax returns. U.S. Federal income taxes are provided on unremitted
foreign earnings except those that are considered permanently reinvested, which
at December 31, 1997 amounted to approximately $390 million. However, if these
earnings were not considered permanently reinvested, the incremental tax
liability which otherwise might be due upon distribution, net of foreign tax
credits, would be approximately $40 million.
Risk Management Instruments: Net amounts received or paid under risk management
instruments are included in the Consolidated Statements of Income as incurred.
Per Share Data: In 1997, the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" which requires the Company to include
basic and diluted per share figures on the face of the income statement.
Basic net income per share is calculated by dividing net income by the average
number of shares of the Company's common stock outstanding while diluted net
income per share is calculated by adjusting the average common shares
outstanding for the dilutive effect of potential common shares.
IV-6
<PAGE> 102
The following reconciles basic weighted average common shares outstanding to
diluted weighted average common shares outstanding for the three years ended
December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Basic weighted average common shares outstanding............ 163.0 144.8 145.8
Stock options............................................... 4.2 2.6 1.6
----- ----- -----
Diluted weighted average common shares outstanding.......... 167.2 147.4 147.4
===== ===== =====
</TABLE>
Estimates: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Stock-Based Compensation: Effective January 1, 1996, the Company adopted
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." The Company has elected to continue to account for stock-based
compensation in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Accordingly, pro forma net income
and earnings per share information has been presented in Note 6 as required
under SFAS No. 123.
New Accounting Pronouncements: In June 1997, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" and Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
both of which are effective for fiscal years beginning after December 15, 1997.
In February 1998, the FASB issued Statement of Financial Accounting Standards
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits," which is effective for fiscal years beginning after December 15,
1997. The Company will adopt these disclosure standards in 1998.
Reclassifications: In accordance with industry practice, the investment
management segment has restated both revenue and expense for prior periods by
identical amounts to reclassify certain commission expenses.
2. SUPPLEMENTAL DISCLOSURE TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS
The following schedule provides additional information concerning acquisitions:
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(In millions of dollars)
<TABLE>
<CAPTION>
1997 1996 1995
-------- ----- -----
<S> <C> <C> <C>
Purchase acquisitions:
Assets acquired, excluding cash........................... $2,831.8 $10.4 $21.9
Liabilities assumed....................................... (1,386.1) (3.3) (8.6)
Issuance of debt and other obligations.................... -- -- (6.5)
Shares issued............................................. (972.4) -- --
-------- ----- -----
473.3 7.1 6.8
Cash acquired in pooling of interests acquisition........... (.4) -- --
-------- ----- -----
Net cash outflow for acquisitions........................... $ 472.9 $ 7.1 $ 6.8
======== ===== =====
</TABLE>
Interest paid during 1997, 1996 and 1995 was $91.6 million, $60.2 million and
$66.0 million, respectively.
Income taxes paid during 1997, 1996 and 1995 were $471.1 million, $200.0 million
and $231.0 million, respectively.
IV-7
<PAGE> 103
3. ACQUISITIONS AND DISPOSITIONS
Acquisitions: On March 27, 1997, the Company consummated a business combination
with Johnson & Higgins ("J&H"), a privately-held risk and insurance services and
employee benefit consulting firm. The Company agreed to pay total consideration
of approximately $1.8 billion consisting of $600 million in cash and
approximately 19.6 million shares (adjusted to reflect the stock split) of the
Company's common stock. Approximately $1.3 billion was paid at closing or
shortly thereafter and approximately $500 million will be paid in annual
installments over the four years following the closing. The business combination
is being accounted for using the purchase method of accounting. Accordingly,
goodwill of approximately $1.7 billion which results from the preliminary
purchase price allocation will be amortized over 40 years.
An agreed number of shares issued in connection with this transaction carry
restrictions and, consequently, cannot be sold in the first and second years
following the closing. In addition, approximately 1.6 million shares of common
stock (adjusted to reflect the stock split) were placed in escrow for a period
of up to two years in order to secure indemnification obligations with respect
to representations and warranties.
The following unaudited pro forma summary presents the consolidated results of
operations of the Company as if the J&H business combination had occurred on
January 1, 1997 and 1996, respectively. The pro forma results are shown for
illustrative purposes only and do not purport to be indicative of the results
which would have been reported if the business combination had occurred on the
dates indicated or which may occur in the future. The 1997 pro forma information
reflected below excludes the impact of the $296.8 million special charge which
principally relates to the combination with J&H.
YEAR ENDED DECEMBER 31,
(In millions of dollars, except per share figures)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Revenue..................................................... $6,313.6 $5,551.7
Net Income.................................................. 600.6 482.2
Basic net income per share.................................. 3.58 2.94
Diluted net income per share................................ 3.49 2.90
======== ========
</TABLE>
During 1997, the Company also acquired or increased its interest in several
other insurance and reinsurance broking and consulting businesses for a total
cost of $284.9 million in transactions accounted for as purchases. The cost of
these acquisitions exceeded the fair value of net assets acquired by $317.1
million. In addition, the Company issued approximately 944,000 shares of common
stock (adjusted to reflect the stock split) in connection with the acquisition
of an insurance program management business.
During 1996, the Company acquired an insurance broking business and various
other insurance and reinsurance broking assets for a total cost of $12.7 million
in transactions accounted for as purchases. The cost of these acquisitions
exceeded the fair value of net assets acquired by $8.2 million.
During 1995, the Company acquired a portion of an insurance broking business and
several consulting businesses for a total cost of $15.2 million consisting of
cash and future obligations in transactions accounted for as purchases. The cost
of these acquisitions exceeded the fair value of net assets acquired by $16.0
million.
Dispositions: During 1997, the Company sold an insurance program management
business and a consulting operation for $54.4 million. Pretax gains of $13.2
million were recorded in the Consolidated Statements of Income.
During 1996, the Company sold The Frizzell Group Limited ("Frizzell") for
approximately $290 million. A pretax gain of $33.2 million was recorded in the
Consolidated Statements of Income.
IV-8
<PAGE> 104
4. INCOME TAXES
Income before income taxes shown below is based on the geographic location to
which such income is attributable. Although income taxes related to such income
may be assessed in more than one jurisdiction, the income tax provision
corresponds to the geographic location of the income.
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(In millions of dollars)
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Income before income taxes:
U.S....................................................... $463.8 $436.6 $381.2
Other..................................................... 198.6 231.4 268.6
------ ------ ------
$662.4 $668.0 $649.8
====== ====== ======
Income taxes:
Current--
U.S. Federal........................................... $217.8 $ 93.8 $ 88.9
Other national governments............................. 140.7 96.4 82.0
U.S. state and local................................... 61.6 39.3 41.3
------ ------ ------
420.1 229.5 212.2
------ ------ ------
Deferred--
U.S. Federal........................................... (71.6) 48.0 24.7
Other national governments............................. (72.1) (39.4) 9.2
U.S. state and local................................... (13.4) (29.4) .8
------ ------ ------
(157.1) (20.8) 34.7
------ ------ ------
Total income taxes.......................................... $263.0 $208.7 $246.9
====== ====== ======
</TABLE>
The significant components of deferred income tax assets and liabilities and
their balance sheet classifications are as follows:
DECEMBER 31, 1997 AND 1996
(In millions of dollars)
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Deferred tax assets:
Accrued expenses not currently deductible................. $632.3 $248.1
Accrued retirement benefits............................... 116.7 72.8
Differences related to non-U.S. operations................ 120.6 69.1
Depreciation and amortization............................. 11.4 --
Other..................................................... 15.0 8.5
------ ------
896.0 398.5
Valuation allowance....................................... -- (27.4)
------ ------
$896.0 $371.1
====== ======
</TABLE>
IV-9
<PAGE> 105
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Deferred tax liabilities:
Depreciation and amortization............................. $ -- $ 25.3
Prepaid dealer commissions................................ 375.9 328.8
Safe harbor leasing....................................... 14.2 17.6
Unbilled revenue.......................................... 18.3 22.9
Unrealised securities holding gains....................... 166.7 119.9
Differences related to non-U.S. operations................ 35.9 49.0
Other..................................................... 18.3 28.2
------ ------
$629.3 $591.7
====== ======
Balance sheet classifications:
Other current assets...................................... $168.1 $ 4.3
Accrued income taxes...................................... 81.8 69.8
Other assets (liabilities)................................ 180.4 (155.1)
====== ======
</TABLE>
In 1997, the valuation allowance related to certain foreign deferred income tax
assets was written-off against the underlying tax assets since it has been
determined that the Company will not realise any future benefit from the
recorded amounts.
A reconciliation from the U.S. Federal statutory income tax rate to the
Company's effective income tax rate is as follows:
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
U.S. Federal statutory rate................................. 35.00% 35.00% 35.00%
U.S. state and local income taxes--net of U.S. Federal
income tax benefit........................................ 4.70 3.90 4.20
Differences related to non-U.S operations................... (.20) (1.25) (.90)
Tax adjustment.............................................. -- (6.00) --
Other....................................................... .20 (.40) (.30)
----- ----- -----
Effective tax rate.......................................... 39.70% 31.25% 38.00%
===== ===== =====
</TABLE>
During 1996, 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 of the US in a tax efficient manner and favorable
state and local tax developments in the U.S.
The Company has received a Notice of Proposed Adjustment from a field office of
the Internal Revenue Service ("IRS") challenging its tax treatment related to
12b-1 fees paid by the Putnam Funds. The Company believes its tax treatment of
these fees is consistent with current industry practice and applicable
requirements of the Internal Revenue Code and previously issued IRS technical
advice.
Taxing authorities periodically challenge positions taken by the Company on its
tax returns. On the basis of present information and advice received from
counsel, it is the opinion of the Company's management that any assessments
resulting from current tax audits will not have a material adverse effect on the
Company's consolidated results of operations or its consolidated financial
position.
5. RETIREMENT BENEFITS
The Company maintains pension or profit sharing plans for substantially all
employees.
Defined Benefit Plans--U.S.: The Marsh & McLennan Companies Retirement Plan
provides benefits to eligible U.S. employees. The benefits under this plan are
based on the participants' length of service and compensation, subject to the
Employee Retirement Income Security Act of 1974 and Internal Revenue Service
(IRS) limitations. The funding policy for this plan is to contribute amounts at
least sufficient to meet
IV-10
<PAGE> 106
the requirements set forth in U.S. employee benefit and tax laws. The plan
assets are invested primarily in listed stocks, corporate bonds and U.S.
Government Securities.
The Marsh & McLennan Companies Benefit Equalization Program provides those
retirement benefits to which U.S. employees would otherwise be entitled under
the Marsh & McLennan Companies Retirement Plan if not for IRS limitations.
The Marsh & McLennan Companies Supplemental Retirement Program provides a
minimum level of retirement benefits to employees based on the participants'
length of service and compensation. The program provides benefits to
participants to the extent that the minimum benefit exceeds the aggregate
retirement benefit provided by the Marsh & McLennan Companies Retirement Plan,
the Marsh & McLennan Companies Benefit Equalization Program and Social Security.
The Company has a plan of funding the vested benefits under the Benefit
Equalization and Supplemental Retirement Programs by periodically purchasing
annuity contracts.
Effective January 1, 1998, the J&H Retirement Income Plan was merged into the
Marsh & McLennan Companies Retirement Plan.
The following schedules provide information on the Company's U.S. defined
benefit plans, which in 1997 include the pension plans of J&H.
The components of pension cost for the U.S. defined benefit plans are as
follows:
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(In millions of dollars)
<TABLE>
<CAPTION>
1997 1996 1995
------ ----- -----
<S> <C> <C> <C>
Service cost................................................ $ 38.9 $27.8 $24.5
Interest cost on projected benefit obligations.............. 90.4 60.5 56.0
Expected return on plan assets.............................. (114.5) (81.2) (73.0)
Net amortization............................................ (2.9) (3.6) (6.9)
------ ----- -----
$ 11.9 $ 3.5 $ .6
====== ===== =====
</TABLE>
The actual returns on plan assets were $271.7 million, $138.7 million and $167.2
million for 1997, 1996 and 1995, respectively. These returns reflect the general
securities market conditions experienced in the respective years and, in 1997,
the inclusion of the former J&H pension assets.
IV-11
<PAGE> 107
The funded status of the U.S. defined benefit plans and the actuarial
assumptions used to measure the projected benefit obligation are as follows:
DECEMBER 31, 1997 AND 1996
(In millions of dollars)
<TABLE>
<CAPTION>
1997 1996
-------- ------
<S> <C> <C>
Actuarial present value of accumulated benefit obligation:
Vested.................................................... $1,281.8 $686.5
Nonvested................................................. 37.9 25.3
-------- ------
$1,319.7 $711.8
======== ======
Projected benefit obligation................................ $1,433.9 $797.7
Fair value of plan assets................................... 1,650.7 947.1
-------- ------
216.8 149.4
Unrecognized net gain from past experience different from
that assumed.............................................. (216.0) (170.8)
Unrecognized prior service cost............................. 14.9 21.4
Unrecognized SFAS No. 87 transition amount.................. (32.5) (37.0)
-------- ------
Accrued pension liability................................... $ (16.8) $(37.0)
======== ======
Actuarial assumptions:
Discount rate............................................. 7.25% 8.0%
Weighted average rate of compensation increase............ 4.0% 4.75%
Expected long-term rate of return on plan assets.......... 10.0% 10.0%
</TABLE>
In 1997, the discount rate used to value the liabilities of the U.S. defined
benefit plans was decreased to reflect current interest rates of high quality
fixed income debt securities. Assumptions, including projected compensation
increases and potential cost of living adjustments for retirees, were also
revised to reflect current expectations as to future levels of inflation. The
increase in the accumulated benefit obligation and the projected benefit
obligation reflect the change in these assumptions and the addition of the
former J&H pension plans. The increase in the fair value of plan assets reflects
the actual return on plan assets and the inclusion of the former J&H pension
assets.
Defined Benefit Plans--Non-U.S.: The Company maintains various plans that
provide benefits to eligible non-U.S. employees. The benefits under these plans
are based on the participants' length of service and compensation. The funding
policy for these plans is to contribute amounts at least sufficient to meet the
requirements under foreign government regulations. The plans' assets are
primarily invested in listed stocks, bonds and time deposits. The following
schedules provide information on the Company's significant non-U.S. defined
benefit plans, which in 1997 include the pension plans of J&H's significant
non-U.S. defined benefit plans. The information presented below also reflects
the disposition of Frizzell in 1996.
IV-12
<PAGE> 108
The components of pension expense for the significant non-U.S. defined benefit
plans are as follows:
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(In millions of dollars)
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Service cost................................................ $41.4 $31.5 $34.7
Interest cost on projected benefit obligations.............. 61.5 51.2 57.2
Expected return on plan assets.............................. (90.0) (74.5) (82.1)
Net amortization............................................ (6.1) (6.3) (6.4)
----- ----- -----
$ 6.8 $ 1.9 $ 3.4
===== ===== =====
</TABLE>
The actual returns on plan assets were $172.6 million, $106.2 million and $139.6
million for 1997, 1996 and 1995, respectively. These returns primarily reflect
the general securities market conditions experienced in the respective years.
The funded status of the significant non-U.S. defined benefit plans and the
weighted average actuarial assumptions used to measure the projected benefit
obligation are as follows:
DECEMBER 31, 1997 AND 1996
(In millions of dollars)
<TABLE>
<CAPTION>
1997 1996
-------- ------
<S> <C> <C>
Actuarial present value of accumulated benefit obligation:
Vested.................................................... $ 768.7 $624.7
Nonvested................................................. 20.5 8.3
-------- ------
$ 789.2 $633.0
======== ======
Projected benefit obligation................................ $ 899.9 $724.2
Fair value of plan assets................................... 1,201.9 947.8
-------- ------
302.0 223.6
Unrecognized net gain from past experience different from
that assumed.............................................. (170.2) (89.3)
Unrecognized prior service cost (benefit)................... 8.2 (2.7)
Unrecognized SFAS No. 87 transition amount.................. (18.2) (24.6)
-------- ------
Prepaid pension cost........................................ $ 121.8 $107.0
======== ======
Actuarial assumptions:
Discount rate............................................. 7.6% 8.2%
Weighted average rate of compensation increase............ 5.4% 6.0%
Expected long-term rate of return on plan assets.......... 9.1% 9.6%
======== ======
</TABLE>
In 1997, the discount rates used to value the liabilities of the non-U.S. plans
were decreased to reflect current worldwide interest rates. Assumptions,
including projected compensation increases and potential cost of living
adjustments for retirees, were also revised to reflect current expectations as
to future levels of inflation. The increase in the accumulated benefit
obligation and the projected benefit obligation primarily reflects the impact of
the change in these assumptions and the addition of J&H.
Postretirement Benefits: The Company contributes to the cost of certain health
care and life insurance benefits provided to its retired employees. The amount
of the Company's contribution, if any, is based, in part, on the employees'
length of service with the Company. The cost to the Company of these
postretirement benefits is principally associated with employees in the U.S., as
retired employees outside the U.S. receive these benefits, in large part, from
governmental health care programs. U.S. employees become eligible for these
benefits if they attain retirement age while working for the Company, subject in
certain instances to minimum service
IV-13
<PAGE> 109
requirements. The cost of these postretirement benefits is accrued during the
period up to the date employees are eligible to retire, but is funded by the
Company as incurred.
The components of the U.S. postretirement benefits costs are as follows:
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(In millions of dollars)
<TABLE>
<CAPTION>
1997 1996 1995
----- ---- ----
<S> <C> <C> <C>
Service cost................................................ $ 3.6 $1.5 $1.4
Interest cost on accumulated postretirement benefits........ 10.7 6.5 6.6
Net amortization............................................ (.9) (.9) (.6)
----- ---- ----
$13.4 $7.1 $7.4
===== ==== ====
</TABLE>
The accumulated postretirement benefit obligation at December 31, 1997 and 1996
is as follows:
DECEMBER 31, 1997 AND 1996
(In millions of dollars)
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Retirees.................................................... $ 93.2 $ 60.2
Fully eligible active plan participants..................... 30.8 11.9
Other active plan participants.............................. 50.7 15.8
------ ------
Accumulated postretirement benefit obligation............... 174.7 87.9
Unrecognized net gain from past experience different from
that assumed.............................................. 1.3 14.8
------ ------
Accrued postretirement liability............................ $176.0 $102.7
====== ======
</TABLE>
The discount rates used in determining the accumulated postretirement benefit
obligations were 7.25% and 8% for 1997 and 1996, respectively. The assumed
health care cost trend rate was approximately 9% in 1997, gradually declining to
4% in the year 2040. A 1% increase in the assumed health care cost trend rates
for each year would increase the accumulated postretirement benefit obligation
as of December 31, 1997 by $18.7 million and the postretirement benefit expense
for the year then ended by $2.1 million.
In 1997, the discount rate used to value the accumulated postretirement benefit
obligation was decreased to reflect current interest rates of high quality fixed
income debt securities. The increase in the accumulated postretirement benefit
obligation primarily reflects the impact of the change in the discount rate and
the acquisition of J&H.
Defined Contribution Plans: The Company maintains certain defined contribution
plans for its employees, including the Marsh & McLennan Companies Stock
Investment Plan ("SIP") the Putnam Investments, Inc. Profit Sharing Retirement
Plan (the "Putnam Plan") and the Johnson & Higgins Cash Accumulation Plan ("J&H
Plan"). Under these plans, eligible employees may contribute a percentage of
their base salary, subject to certain limitations. For the SIP and the J&H Plan,
the Company matches a portion of the employees' contributions, while under the
Putnam Plan the contributions are at the discretion of the Company subject to
IRS limitations. The cost of these defined contribution plans was $55.3 million,
$39.5 million and $35.3 million for 1997, 1996 and 1995, respectively. The J&H
Plan contributions are reflected in 1997 only.
6. STOCK BENEFIT PLANS
Effective January 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). The
Company has elected to continue to account for stock-based compensation in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25") and has provided additional pro forma
disclosures required by SFAS 123. The adoption of this standard did not have an
impact on the Company's financial position or results of operations.
IV-14
<PAGE> 110
In accordance with APB 25, no compensation cost has been recognized in the
Consolidated Statements of Income for the Company's stock option and stock
purchase plans and the stock options awarded under the new Putnam Investments,
Inc. Equity Partnership Plan. Had compensation cost for the Company's stock-
based compensation plans been determined consistent with the fair value method
contained in SFAS 123, the Company's net income and net income per share for
1997, 1996 and 1995 would have been reduced to the pro forma amounts indicated
in the following table:
(In millions of dollars, except per share figures)
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Net Income:
As reported............................................... $399.4 $459.3 $402.9
Pro forma................................................. $378.7 $447.9 $400.0
Net Income Per Share:
Basic:
As reported............................................... $ 2.45 $ 3.17 $ 2.76
Pro forma................................................. $ 2.32 $ 3.09 $ 2.74
Diluted:
As reported............................................... $ 2.39 $ 3.12 $ 2.73
Pro forma................................................. $ 2.26 $ 3.04 $ 2.71
====== ====== ======
</TABLE>
The pro forma information reflected above may not be representative of the
amounts to be expected in future years as the fair value method of accounting
contained in SFAS 123 has not been applied to options granted prior to January
1995.
Incentive and Stock Award Plans: During 1997, the Company adopted the Marsh &
McLennan Companies, Inc. 1997 Employee Incentive and Stock Award Plan (the
"Employee Plan") and the Marsh & McLennan Companies, Inc. 1997 Senior Executive
Incentive and Stock Award Plan (the "Executive Plan"). The Employee and
Executive Plans (the "1997 Plans") replace the 1992 Incentive and Stock Award
Plan (the "1992 Plan"). The types of awards permitted under these Plans include
stock options, restricted stock, stock bonus units, restricted and deferred
stock units payable in Company common stock or cash, and other stock-based and
performance based awards. The Compensation Committee of the Board of Directors
(the "Compensation Committee") determines, in its discretion, which affiliates
may participate in the plans, which eligible employees will receive awards, the
types of awards to be received and the terms and conditions thereof. The right
of an employee to receive an award may be subject to performance conditions as
specified by the Compensation Committee. The 1997 Plans contain provisions
which, in the event of a change in control of the Company, may accelerate the
vesting of the awards. Awards relating to not more than 12,000,000 shares of
common stock may be made over the life of the Employee Plan plus shares
remaining unused under pre-existing approved stock plans. Awards relating to not
more than 5,000,000 shares of common stock may be made over the life of the
Executive Plan plus shares remaining unused under pre-existing approved stock
plans. There were 20,802,624 and 4,662,888 shares available for awards under the
1997 Plans and prior plans at December 31, 1997 and 1996, respectively.
Stock Options: Options granted under the 1997 Plans may be designated as
incentive stock options or as non-qualified stock options. The Compensation
Committee shall determine the terms and conditions of the option, including the
time or times at which an option may be exercised, the methods by which such
exercise price may be paid and the form of such payment. Except under certain
limited circumstances, no stock option may be granted with an exercise price of
less than the fair market value of the stock at the time the stock option is
granted.
IV-15
<PAGE> 111
Stock option transactions under the 1997 Plans and prior plans are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------ ------------------------------ ------------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
----------- ---------------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning
of period.......... 17,110,954 $42.16 17,441,590 $40.32 16,242,282 $39.92
Granted.............. 3,444,080 $62.09 2,748,120 $47.55 2,265,580 $39.51
Exercised............ (3,910,107) $39.89 (2,574,060) $35.32 (719,232) $27.72
Forfeited............ (423,246) $47.99 (504,696) $42.75 (347,040) $42.37
----------- ----------- -----------
Balance at end of
period............. 16,221,681 $46.77 17,110,954 $42.16 17,441,590 $40.32
=========== ====== =========== ====== =========== ======
Options exercisable
at year-end........ 9,804,415 $42.26 10,979,330 $40.68 11,324,044 $38.70
=========== ====== =========== ====== =========== ======
</TABLE>
The following table summarizes information about stock options at December 31,
1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED AVERAGE ------------------------------
RANGE OF OUTSTANDING AT REMAINING WEIGHTED AVERAGE EXERCISABLE WEIGHTED AVERAGE
EXERCISE PRICES 12/31/97 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/97 EXERCISE PRICE
- --------------- -------------- ----------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$24.69-39.67............. 5,295,878 4.2 years $37.50 4,367,843 $37.13
$40.41-50.03............. 7,594,223 6.2 years $46.51 5,434,472 $46.39
$52.88-76.09............. 3,331,580 9.2 years $62.09 2,100 $61.91
---------- ----------
$24.69-76.09............. 16,221,681 6.2 years $46.77 9,804,415 $42.26
========== ========= ====== ========== ======
</TABLE>
The fair value of each of the Company's option grants included in the pro forma
net income is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions used for
grants in 1997, 1996 and 1995, respectively; dividend yield of 3.0% in 1997 and
3.5% for 1996 and 1995; expected volatility of 17.5% in 1997 and 14.0% for 1996
and 1995; risk-free interest rate of 6.5% for 1997, 6.0% for 1996 and 6.4% for
1995; and an expected life of five years. The compensation cost as generated by
the Black-Scholes model, may not be indicative of the future benefit, if any,
that may be received by the option holder. The weighted average fair value of
options granted during the years ended December 31, 1997, 1996 and 1995 was
$12.71, $7.35 and $6.50 per share, respectively.
Restricted Stock: Restricted shares of the Company's common stock may be awarded
and shall be subject to such restrictions on transferability and other
restrictions, if any, as the Compensation Committee may impose. The Compensation
Committee may also determine when and under what circumstances the restrictions
may lapse and whether the participant shall have the rights of a stockholder,
including, without limitation, the right to vote and receive dividends. Unless
the Compensation Committee determines otherwise, restricted stock that is still
subject to restrictions shall be forfeited upon termination of employment.
There were 90,000, 105,600 and 191,800 restricted shares granted in 1997, 1996
and 1995, respectively. The Company recorded compensation expense of $5.6
million in 1997 and $5.7 million in 1996 and 1995, related to these shares.
Shares that have been granted generally become unrestricted at the earlier of:
(1) January 1 of the eleventh year following the grant or (2) the later of the
recipient's normal or actual retirement date.
Restricted Stock Units: Restricted stock units, payable in stock or cash, may be
awarded under the Plans. The Compensation Committee shall determine the
restrictions on such units, when the restrictions shall lapse, when the shares
of stock shall vest and be paid, and upon what terms the units shall be
forfeited.
There were 165,904, 79,518 and 135,128 restricted stock units awarded during
1997, 1996 and 1995, respectively. The Company recorded compensation expense of
$4.3 million, $4.7 million and $2.9 million in 1997, 1996 and 1995,
respectively, related to restricted stock units.
IV-16
<PAGE> 112
Deferred Stock Units: Deferred stock units, payable in stock or cash, may be
awarded under the Plans. The Compensation Committee shall determine the
restrictions on such units, when the restrictions shall lapse, when the shares
of stock shall vest and be paid, and upon what terms the units shall be
forfeited.
There were 297,222 deferred stock units awarded during 1997. The Company
recorded compensation expense of $1.7 million in 1997 related to deferred stock
units.
Putnam Investments, Inc. Equity Partnership Plan: In September 1997, Putnam
adopted the Putnam Investments, Inc. Equity Partnership Plan (the "Equity Plan")
pursuant to which Putnam is authorised to grant or sell to certain key employees
of Putnam or its subsidiaries restricted shares of a new class of common stock
of Putnam ("Class B Common Stock") and options to acquire the Class B Common
Stock. Awards of restricted stock and/or options may be made under the Equity
Plan with respect to a maximum of 12,000,000 shares of Class B Common Stock
which represent approximately 12% of the outstanding shares on a fully diluted
basis. Putnam made initial awards pursuant to the Equity Plan with respect to
approximately 4,000,000 shares of Class B Common Stock, including 2,000,000
shares of restricted stock and 2,000,000 shares subject to options. The Company
recorded compensation expense of $82.9 million in 1997 related to the restricted
stock grants. There were approximately 8,000,000 shares available for grant
related to the Equity Plan at December 31, 1997.
Pursuant to an executive compensation agreement, Putnam awarded 300,000
restricted stock units and 325,000 options related to Class B Common Stock to a
key executive of Putnam. The Company recorded compensation expense of $14.4
million in 1997 related to the restricted stock unit grants.
The fair value of each option grant included in the pro forma net income is
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted average assumptions used for grants in 1997: dividend
yield of 5%; expected volatility of 26.4%; risk-free interest rate of 6.1%; and
an expected life of five years. The compensation cost as generated by the
Black-Scholes model, may not be indicative of the future benefit, if any, that
may be received by the option holder. The weighted average fair value of each
Class B option in 1997 was $8.30.
Stock Purchase Plans: In May 1994, the Company's stockholders approved an
employee stock purchase plan (the "1994 Plan") to replace the 1990 Employee
Stock Purchase Plan which terminated on September 30, 1994 following its fourth
annual offering. Under these plans, eligible employees may purchase shares of
the Company's common stock, subject to certain limitations, at prices not less
than 85% of the lesser of the fair market value of the stock at the beginning or
end of any offering period. Under the 1994 Plan, no more than 8,000,000 shares
of the Company's common stock plus the remaining unissued shares in the 1990
Plan may be sold. Employees purchased 1,237,000, 1,306,000 and 1,364,000 shares
in 1997, 1996 and 1995, respectively. At December 31, 1997, 4,955,000 shares
were available for issuance under the 1994 Plan. During 1995, the Company's
Board of Directors approved the Marsh & McLennan Companies Stock Purchase Plan
for International Employees (the "International Plan") which is similar to the
1994 Plan. Under the International Plan, no more than 1,000,000 shares of the
Company's common stock may be sold. Employees purchased 141,000 shares during
1997, and at December 31, 1997, 849,000 shares were available for issuance under
the International Plan. The fair value of each employee purchase right granted
under these Stock Purchase Plans is included in the pro forma net income for
1997, 1996 and 1995 and was estimated using the Black-Scholes model with the
following assumptions: dividend yield of 3.0% for 1997 and 3.5% for 1996 and
1995; expected life of one year; expected volatility of 17.5% for 1997 and 14.0%
for 1996 and 1995; and risk-free interest rate of 5.5% for 1997 and 5.6% for
1996 and 1995. The weighted average fair value of each purchase right granted in
1997, 1996 and 1995 was $16.44, $9.57 and $8.77, respectively. Beginning in
1998, these plans will include employees who were formerly associated with J&H.
7. LONG-TERM OBLIGATIONS
The Company leases office facilities, equipment and automobiles under
noncancellable operating leases. These leases expire on varying dates; in some
instances contain renewal and expansion options; do not restrict the payment of
dividends or the incurrence of debt or additional lease obligations; and contain
no significant purchase options. In addition to the base rental costs, occupancy
lease agreements generally provide for rent
IV-17
<PAGE> 113
escalations resulting from increased assessments for real estate taxes and other
charges. Approximately 94% of the Company's lease obligations are for the use of
office space.
The accompanying Consolidated Statements of Income include net rental costs of
$265.2 million, $217.3 million and $218.1 million for 1997, 1996 and 1995,
respectively, after deducting rentals from subleases ($7.4 million in 1997, $8.4
million in 1996 and $9.1 million in 1995).
At December 31, 1997, the aggregate future minimum rental commitments under all
noncancellable operating lease agreements are as follows:
FOR THE YEARS ENDING DECEMBER 31,
(In millions of dollars)
<TABLE>
<CAPTION>
GROSS RENTALS NET
RENTAL FROM RENTAL
COMMITMENTS SUBLEASES COMMITMENTS
----------- --------- -----------
<S> <C> <C> <C>
1998.................................................. $ 202.4 $ 5.7 $ 196.7
1999.................................................. 177.0 4.0 173.0
2000.................................................. 149.5 2.8 146.7
2001.................................................. 118.4 2.4 116.0
2002.................................................. 90.8 1.9 88.9
Subsequent years...................................... 371.5 5.0 366.5
-------- ----- --------
$1,109.6 $21.8 $1,087.8
======== ===== ========
</TABLE>
The Company has entered into agreements with various service companies to
outsource certain information systems activities and responsibilities which
previously were performed by the Company. Under these agreements, the Company is
required to pay minimum annual service charges. Additional fees may be payable
depending upon the volume of transactions processed with all future payments
subject to increases for inflation. At December 31, 1997, the aggregate fixed
future minimum commitments under these agreements are as follows:
FOR THE YEARS ENDING DECEMBER 31,
(In millions of dollars)
<TABLE>
<CAPTION>
FUTURE
MINIMUM
COMMITMENTS
-----------
<S> <C>
1998........................................................ $24.8
1999........................................................ 13.7
2000........................................................ 9.4
2001........................................................ 9.0
2002........................................................ 9.0
Subsequent years............................................ 12.5
-----
$78.4
=====
</TABLE>
IV-18
<PAGE> 114
8. SHORT-TERM DEBT
The Company's outstanding short-term debt is as follows:
DECEMBER 31, 1997 AND 1996
(In millions of dollars)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Commercial paper............................................ $ 229.3 $ 387.6
Current portion of long-term debt........................... 7.4 4.8
-------- --------
$ 236.7 $ 392.4
======== ========
</TABLE>
The weighted average interest rates on outstanding commercial paper borrowings
at December 31, 1997 and 1996 are 6.1% and 5.9%, respectively.
During 1997, 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 June 2002, provides that
the Company may borrow up to $1.2 billion at market rates of interest which may
vary depending upon the level of borrowings and the Company's credit ratings.
Commitment fees of 7 basis points are payable on any unused portion. The
facility requires the Company to maintain consolidated net worth of at least
$1.7 billion and contains other restrictions relating to consolidations, mergers
and the sale or pledging of assets.
The Company maintains credit facilities with various banks, primarily related to
operations located outside the US, aggregating $241.7 million at December 31,
1997. The Company has borrowed $184.2 million under these facilities and has
included these borrowings in Long-term Debt.
9. LONG-TERM DEBT
The Company's outstanding long-term debt is as follows:
DECEMBER 31, 1997 AND 1996
(In millions of dollars)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Revolving credit facility................................... $ 708.4 $ 250.0
Bank borrowings............................................. 184.2 --
Notes payable--due 2012..................................... 111.4 --
Mortgage--9.8% due 2009..................................... 200.0 200.0
Mortgage--due 2012.......................................... 19.3 --
Mortgage--7.25% due 1999.................................... 4.2 4.2
Other....................................................... 19.7 8.8
-------- --------
1,247.2 463.0
Less current portion........................................ 7.4 4.8
-------- --------
$1,239.8 $ 458.2
======== ========
</TABLE>
Outstanding borrowings under the revolving credit facility at December 31, 1997
amounted to $708.4 million with varying dates of maturity through December 1998.
Borrowings under the Company's revolving credit facilities in 1997 and 1996 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 weighted
average interest rate associated with these borrowings was 6.0% and 5.9% at
December 31, 1997 and 1996, respectively.
IV-19
<PAGE> 115
Bank borrowings of $184.2 million at December 31, 1997 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 weighted average interest
rate associated with these borrowings was 3.8%.
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. In the event the
mortgage is foreclosed following a default, the Company would be entitled to
remain in the space and would be obligated to pay rent sufficient to cover
interest on the notes or, starting in 1999, at fair market value if greater.
The Company has an interest rate swap which was entered into as part of the
acquisition and renovation of the Company's worldwide headquarters which fixes
the interest rate at approximately 9.5% on $100 million of variable rate
borrowings until February 1999. The weighted average interest rate received on
this swap at December 31, 1997, 1996 and 1995 was 5.8%, 5.7% and 6.1%,
respectively. The difference between the fixed rate and the weighted average
rate is included in interest expense in the Consolidated Statements of Income.
The Company, in conjunction with the J&H transaction, assumed a mortgage
obligation to finance a condominium interest in office space located in New York
City. The outstanding balance of this debt was $19.3 million at December 31,
1997. The rate on this debt, which is determined periodically at a margin of
1/2 of 1% above the LIBOR rate, was 5.8% at December 31, 1997.
In conjunction with the J&H transaction, the Company assumed a note related to
an arrangement whereby a third party is obligated to pay rent, on the Company's
behalf, under a noncancellable long-term lease obligation for office space it no
longer occupies. The outstanding balance of this note at December 31, 1997 is
$111.4 million. Interest on $88.5 million of this debt is fixed at 8.62% while
the rate on the remaining balance, which is determined periodically at a margin
of 1/2 of 1% above the LIBOR rate, was 5.8% at December 31, 1997. The variable
interest rate on the remaining $22.9 million, along with the variable rate on
the $19.3 million mortgage has been fixed at 5.8% through a $42.2 million
interest rate swap expiring in January 2005.
Scheduled repayments of long-term debt, excluding the revolving credit facility
and bank borrowings described above in 1998 and in the four succeeding years are
$7.4 million, $20.5 million, $6.7 million, $4.6 million and $4.3 million,
respectively.
10. FINANCIAL INSTRUMENTS
The estimated fair value of the Company's significant financial instruments is
provided below. Certain estimates and judgments were required to develop the
fair value amounts. The fair value amounts shown below are not necessarily
indicative of the amounts that the Company would realise upon disposition nor do
they indicate the Company's intent or ability to dispose of the financial
instrument.
Cash and Cash Equivalents: The estimated fair value of the Company's cash and
cash equivalents approximates their carrying value.
Long-term Investments: The Company has certain long-term investments, for which
there are no readily available market prices, amounting to $72.8 million and
$53.9 million at December 31, 1997 and 1996, respectively, which are carried on
a cost basis. Based on present information, the Company believes that the cost
of these investments approximates their fair value.
Short-term and Long-term Debt: The fair value of the Company's short-term debt,
which consists primarily of commercial paper borrowings, approximates its
carrying value. The estimated fair value of the Company's mortgage debt related
to its worldwide headquarters building is approximately $254 million and $240
million at December 31, 1997 and 1996, respectively, while the estimated fair
value of the fixed rate portion of the notes payable is approximately $108
million at December 31, 1997. These estimated fair values are based on
discounted future cash flows using current interest rates available for debt
with similar terms and remaining maturities. The estimated fair value of
borrowings under the revolving credit facility approximates the carrying value.
IV-20
<PAGE> 116
Off-balance Sheet Instruments: The fair value of the Company's $142.2 million
notional amount of interest rate swaps has been estimated as a liability of
approximately $5 million and $8 million at December 31, 1997 and 1996,
respectively. These calculations are based on discounted future cash flows
taking into account the current interest rate environment.
Unrealised Securities Holding Gains: The Company has classified as available for
sale primarily equity securities having an aggregate fair value of $647.4
million and $519.4 million at December 31, 1997 and 1996, respectively. Gross
unrealised gains, amounting to $475.5 million and $341.1 million at December 31,
1997 and 1996, respectively, have been excluded from earnings and reported as a
separate component of stockholders' equity, net of deferred income taxes.
Proceeds from the sale of available for sale securities for the years ended
December 31, 1997, 1996 and 1995 were $68.7 million, $28.3 million and $53.7
million, respectively. Gross realised gains on available for sale securities
sold during 1997, 1996 and 1995 amounted to $36.3 million, $17.5 million and
$23.2 million, respectively. The cost of securities sold is determined using the
average cost method for equity securities.
A portion of insurance fiduciary funds which the Company holds to satisfy
fiduciary obligations are invested in high quality debt securities which are
generally held to maturity. The difference between cost and fair value of these
investments is not material.
11. SPECIAL CHARGES
During 1997, the Company recorded special charges totaling $296.8 million. These
charges include $213.3 million of merger costs predominantly related to the
combination with J&H, a charge of $68.5 million related to London real estate,
and $15.0 million for the disposal of certain EDP assets. The merger costs
primarily reflect personnel related costs principally involving severance and
associated benefits for staff reductions and relocations ($119.9 million), costs
for real estate and systems consolidations ($75.9 million), and other
integration costs ($17.5 million). The total amount remitted to the Company's
former employees amounted to $51.8 million in 1997. The net impact of the
special charges on diluted net income per share was $1.15 for the year.
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 $92.6 million were also recorded. These charges represent a
provision of approximately $33.5 million primarily for UK 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 $10.1 million
primarily related to office closings. The net impact of these special charges
and the 1996 tax adjustment discussed in Note 4 increased diluted net income per
share by $.02 for the year.
12. COMMON STOCK
On May 21, 1997, the Board of Directors approved a two-for-one stock split of
the Company's common stock in the form of a 100% stock distribution which was
issued on June 27, 1997. All references to per share amounts have been restated
for this stock distribution.
13. STOCKHOLDER RIGHTS PLAN
On September 18, 1997, the Company's Board of Directors approved the extension
of the benefits afforded by the Company's existing rights plan by adopting a new
stockholder rights plan. Under the new plan, Rights to purchase stock, at a rate
of one Right for each common share held, were distributed to shareholders of
record on September 29, 1997 and automatically attach to shares acquired
thereafter. Under the plan, the Rights generally become exercisable after a
person or group (i) acquires 15% or more of the Company's outstanding common
stock or (ii) commences a tender offer that would result in such a person or
group owning 15% or more of the Company's common stock. When the Rights first
become exercisable, a holder will be entitled to buy from the Company a unit
consisting of one two-hundredth of a share of Series A Junior Participating
Preferred Stock of the Company at a purchase price of $260. Alternatively, if
any person acquires 15% or more
IV-21
<PAGE> 117
of the Company's common stock except pursuant to an offer for all shares at a
price which is fair and not inadequate or if a 15% holder acquires the Company
by means of a reverse merger in which the Company and its stock survive, each
Right not owned by a 15% or more shareholder would become exercisable for common
stock of the Company (or in certain circumstances, other consideration) having a
market value equal to twice the exercise price of the Right. The Rights expire
on September 29, 2007, except as otherwise provided in the plan.
14. CLAIMS, LAWSUITS AND OTHER CONTINGENCIES
The Company and its subsidiaries are subject to various claims and lawsuits
consisting principally of alleged errors and omissions in connection with the
placement of insurance or reinsurance and in rendering investment and consulting
services. Some of these claims and lawsuits seek damages, including punitive
damages, in amounts which could, if assessed, be significant.
On November 24, 1997, an action captioned "Aiena et al. vs. Olsen et al." was
brought in the US District Court for the Southern District of New York by
certain former directors of J&H, which was acquired by the Company in March
1997, against twenty-four selling shareholders of J&H, as well as J&H itself and
the Company. The action essentially challenges the allocation of the
consideration paid in connection with the Company's combination with J&H as
between the defendants who were directors and shareholders of J&H at the time of
the transaction and the plaintiffs who were former directors and shareholders of
J&H. The Complaint asserts, among others, claims for breach of fiduciary duty,
federal securities law violations, breach of contract, and ERISA violations.
Plaintiffs seek compensatory and punitive damages.
On the basis of present information, available insurance coverage and advice
received from counsel, it is the opinion of the Company's management that the
disposition or ultimate determination of these claims and lawsuits will not have
a material adverse effect on the Company's consolidated results of operations or
its consolidated financial position.
15. SEGMENTATION OF ACTIVITY BY TYPE OF SERVICE AND GEOGRAPHIC AREA OF
OPERATION
The Company, a professional services firm, operates in three principal business
segments: risk and insurance services, investment management and consulting.
Operating income for each type of service is after deductions for all directly
related expenses and allocations of common expenses. General corporate expenses
primarily are comprised of employee compensation and benefits and related
occupancy costs for administrative personnel. General corporate assets primarily
consist of cash and cash equivalents, deferred income tax assets and a portion
of the Company's headquarters building.
The following table presents information about the Company's operations by type
of service and geographic area:
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
(In millions of dollars)
<TABLE>
<CAPTION>
DEPRECIATION &
OPERATING IDENTIFIABLE AMORTIZATION OF CAPITAL
REVENUE INCOME ASSETS FIXED ASSETS EXPENDITURES
-------- --------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C>
TYPE OF SERVICE:
1997--(A)
Risk and Insurance Services.............. $2,788.4 $223.0 $4,095.1 $ 80.8 $ 87.0
Investment Management.................... 1,882.4 462.8 1,755.8 36.9 80.7
Consulting............................... 1,337.8 127.0 888.1 26.7 32.6
General Corporate........................ -- (68.0) 1,175.2 4.3 1.8
-------- ------ -------- ------ ------
$6,008.6 $744.8 $7,914.2 $148.7 $202.1
======== ====== ======== ====== ======
</TABLE>
IV-22
<PAGE> 118
<TABLE>
<CAPTION>
DEPRECIATION &
OPERATING IDENTIFIABLE AMORTIZATION OF CAPITAL
REVENUE INCOME ASSETS FIXED ASSETS EXPENDITURES
-------- --------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C>
1996--(B)
Risk and Insurance Services.............. $1,907.3 $313.7 $1,926.8 $ 64.5 $ 66.7
Investment Management.................... 1,337.5 337.8 1,457.6 27.4 52.4
Consulting............................... 1,159.2 110.9 679.6 22.6 32.7
General Corporate........................ -- (47.1) 481.2 4.0 5.5
-------- ------ -------- ------ ------
$4,404.0 $715.3 $4,545.2 $118.5 $157.3
======== ====== ======== ====== ======
1995--
Risk and Insurance Services.............. $1,963.9 $389.2 $2,193.6 $ 65.6 $ 77.2
Investment Management.................... 917.0 243.5 997.9 21.5 29.4
Consulting............................... 1,056.4 108.7 638.4 20.4 25.7
General Corporate........................ -- (46.5) 499.6 3.9 4.6
-------- ------ -------- ------ ------
$3,937.3 $694.9 $4,329.5 $111.4 $136.9
======== ====== ======== ====== ======
GEOGRAPHIC AREA:
1997--(A)
US....................................... $4,316.3 $626.2 $5,160.4
Europe................................... 1,221.1 107.2 1,238.7
Canada................................... 214.3 28.5 120.7
Pacific Rim and Other.................... 256.9 50.9 219.2
General Corporate........................ -- (68.0) 1,175.2
-------- ------ --------
$6,008.6 $744.8 $7,914.2
======== ====== ========
1996--(B)
US....................................... $3,064.2 $566.3 $2,863.6
Europe................................... 967.1 136.9 951.6
Canada................................... 198.0 42.5 111.8
Pacific Rim and Other.................... 174.7 16.7 137.0
General Corporate........................ -- (47.1) 481.2
-------- ------ --------
$4,404.0 $715.3 $4,545.2
======== ====== ========
1995--
US....................................... $2,565.4 $494.1 $2,195.9
Europe................................... 1,028.2 189.7 1,413.6
Canada................................... 184.3 37.4 107.1
Pacific Rim and Other.................... 159.4 20.2 113.3
General Corporate........................ -- (46.5) 499.6
-------- ------ --------
$3,937.3 $694.9 $4,329.5
======== ====== ========
</TABLE>
- ---------------
(a) The 1997 special charges included in operating income are allocated by type
of service and geographic area as follows: $272.6 million for Risk and
Insurance Services, $21.4 million for Consulting and $2.8 million for
General Corporate; $162.4 million for U.S., $113.7 million for Europe,
$15.6 million for Canada, $2.3 million for Pacific Rim and Other and $2.8
million for General Corporate.
(b) The 1996 net special charges included in operating income are allocated by
type of service and geographic area as follows: $49.4 million for Risk and
Insurance Services, $8.5 million for Consulting and $1.5 million for
General Corporate; $29.6 million for U.S., $26.3 million for Europe, $2.0
million for Pacific Rim and Other and $1.5 million for General Corporate.
IV-23
<PAGE> 119
PART B UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 1998
INTRODUCTION
The financial information contained in this Part B of Appendix IV is extracted
without material adjustment from the unaudited consolidated accounts of Marsh &
McLennan for the six months ended 30 June 1998.
MARSH & MCLENNAN COMPANIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share figures)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------- --------------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenue............................... $1,750 $1,540 $3,526 $2,835
Expense............................... 1,404 1,278 2,776 2,296
------ ------ ------ ------
Operating Income...................... 346 262 750 539
Interest Income....................... 7 8 12 11
Interest Expense...................... (33) (32) (61) (49)
------ ------ ------ ------
Income Before Income Taxes............ 320 238 701 501
Income Taxes.......................... 127 93 277 192
------ ------ ------ ------
Net Income............................ $ 193 $ 145 $ 424 $ 309
====== ====== ====== ======
Basic Net Income
Per Share(A)........................ $ .75 $ .57 $ 1.65 $ 1.32
====== ====== ====== ======
Diluted Net Income
Per Share(A)........................ $ .72 $ .56 $ 1.59 $ 1.29
====== ====== ====== ======
Average Number of Shares
Outstanding--Basic(A)............... 257 250 257 235
====== ====== ====== ======
Average Number of Shares
Outstanding--Diluted(A)............. 265 256 264 240
====== ====== ====== ======
Dividends Declared(A)................. $ .40 $ .33 $ .73 $ .63
====== ====== ====== ======
</TABLE>
- ---------------
(A) Restated to reflect the three-for-two stock split in the form of a stock
distribution issued on June 26, 1998.
IV-24
<PAGE> 120
MARSH & MCLENNAN COMPANIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions of dollars)
<TABLE>
<CAPTION>
(UNAUDITED)
-----------
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (including interest-bearing
amounts of $532 at June 30, 1998 and $378 at December 31,
1997)..................................................... $ 598 $ 424
------- ------
Receivables--
Commissions and fees...................................... 1,463 1,296
Advanced premiums and claims.............................. 123 95
Other receivables......................................... 161 160
------- ------
1,747 1,551
Less--allowance for doubtful accounts..................... (61) (53)
------- ------
Net receivables........................................... 1,686 1,498
------- ------
Other current assets........................................ 579 647
------- ------
Total current assets.............................. 2,863 2,569
Long-term securities........................................ 893 720
Fixed assets, net........................................... 884 957
(net of accumulated depreciation and amortization of $827 at
June 30, 1998 and $798 at December 31, 1997)
Intangible assets........................................... 2,720 2,417
Other assets................................................ 1,239 1,251
------- ------
$ 8,599 $7,914
======= ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt............................................. $ 648 $ 237
Accrued compensation and employee benefits.................. 541 564
Accounts payable and accrued liabilities.................... 1,150 1,276
Accrued income taxes........................................ 228 218
Dividends payable........................................... 103 85
------- ------
Total current liabilities......................... 2,670 2,380
------- ------
Fiduciary liabilities....................................... 2,475 2,282
Less--cash and investments held in a fiduciary capacity..... (2,475) (2,282)
Long-term debt.............................................. 1,294 1,240
------- ------
Other liabilities........................................... 1,115 1,096
------- ------
Commitments and contingencies............................... -- --
Stockholders' equity:
Preferred stock, $1 par value, authorized 6,000,000 shares,
none issued............................................... -- --
Common stock, $1 par value, authorized 400,000,000 shares,
issued 260,657,642 shares at June 30, 1998 and 258,586,766
at December 31, 1997*..................................... 261 172
Additional paid-in capital.................................. 1,011 994
Retained earnings........................................... 2,211 1,975
Accumulated other comprehensive income...................... 270 167
------- ------
3,753 3,308
Less--treasury shares, at cost, 4,780,089 shares at June 30,
1998 and 3,661,256 shares at December 31, 1997*........... (233) (110)
------- ------
Total stockholders' equity........................ 3,520 3,198
------- ------
$ 8,599 $7,914
======= ======
</TABLE>
- ---------------
* Restated to reflect the three-for-two stock split in the form of a stock
distribution issued on June 26, 1998.
IV-25
<PAGE> 121
MARSH & MCLENNAN COMPANIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions of dollars)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------
1998 1997
----- -------
<S> <C> <C>
Operating cash flows:
Net income.................................................. $424 $ 309
Gain on sale of business.................................. -- (10)
Depreciation and amortization............................. 121 90
Deferred income taxes..................................... 90 (35)
Other liabilities......................................... 19 10
Prepaid dealer commissions................................ (77) (96)
Other, net................................................ (7) (4)
Net changes in operating working capital other than cash and
cash equivalents--
Receivables............................................... (188) (72)
Other current assets...................................... 63 (7)
Accrued compensation and employee benefits................ (23) (14)
Accounts payable and accrued liabilities.................. (126) (52)
Accrued income taxes...................................... 13 10
Effect of exchange rate changes........................... 25 3
---- ------
Net cash generated from operations........................ 334 132
---- ------
Financing cash flows:
Net increase in commercial paper............................ 619 213
Other borrowings............................................ 21 1,080
Other repayments............................................ (164) (570)
Purchase of treasury shares................................. (109) --
Issuance of common stock.................................... 63 114
Dividends paid.............................................. (171) (137)
---- ------
Net cash provided by financing activities................. 259 700
---- ------
Investing cash flows:
Additions to fixed assets................................... (134) (117)
Proceeds from sale of business, net of cash sold............ -- 29
Acquisitions................................................ (313) (550)
Other, net.................................................. 30 16
---- ------
Net cash used for investing activities.................... (417) (622)
---- ------
Effect of exchange rate changes on cash and cash
equivalents............................................ (2) (10)
---- ------
Increase in cash & cash equivalents......................... 174 200
Cash & cash equivalents at beginning of period.............. 424 300
---- ------
Cash & cash equivalents at end of period.................... $598 $ 500
==== ======
</TABLE>
IV-26
<PAGE> 122
MARSH & MCLENNAN COMPANIES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated financial statements included herein have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
presented not misleading. These consolidated financial statements should be read
in conjunction with the financial statements and the notes thereto included in
the Company's latest annual report on Form 10-K.
The financial information contained herein reflects all adjustments which are,
in the opinion of management, necessary for a fair presentation of the results
of operations for the three and six month periods ended June 30, 1998 and 1997.
2. FIDUCIARY CASH AND LIABILITIES
In its capacity as an insurance broker or agent, the Company collects premiums
from insureds and, after deducting its commissions, remits the premiums to the
respective insurance underwriters; the Company also collects claims or refunds
from underwriters on behalf of insureds. Unremitted insurance premiums and
claims are held in a fiduciary capacity. Interest income on these fiduciary
funds, included in revenue, amounted to $62 million and $52 million for the six
months ended June 30, 1998 and 1997, respectively.
Net uncollected premiums and claims and the related payables amounting to $6.3
billion at June 30, 1998 and $5.2 billion at December 31, 1997, are not included
in the accompanying Consolidated Balance Sheets.
3. PER SHARE DATA
In 1997, the Company adopted Statement of Financial Accounting Standards No.
128, "Earnings Per Share" which requires the Company to include basic and
diluted per share figures on the face of the income statement.
Basic net income per share is calculated by dividing net income by the average
number of shares of the Company's common stock outstanding. Diluted net income
per share is calculated by reducing net income for the potential minority
interest associated with unvested shares granted under the Putnam Private Equity
Plan. This result is then divided by the average common shares outstanding which
have been adjusted for the dilutive effect of potential common shares.
The following reconciles net income to net income for diluted earnings per share
and basic weighted average common shares outstanding to diluted weighted average
common shares outstanding for the three and six-month periods ended June 30,
1998 and 1997.
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net Income.................................................. 193 145 424 309
Less: Potential Minority Interest associated with Putnam
Private Equity Plan................................... (2) -- (3) --
---- ---- ---- ----
Net Income for Diluted Earnings per Share................... 191 145 421 309
==== ==== ==== ====
Basic Weighted Average Common Shares Outstanding............ 257 250 257 235
Stock Options............................................... 8 6 7 5
---- ---- ---- ----
Diluted Weighted Average Common Shares Outstanding.......... 265 256 264 240
==== ==== ==== ====
</TABLE>
IV-27
<PAGE> 123
4. COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income." SFAS 130
establishes standards for reporting and displaying comprehensive income and its
components. Comprehensive income amounted to $527 million and $309 million for
the six months ended June 30, 1998 and 1997. The difference between net income
and comprehensive income for the six months ended June 30, 1998 was primarily
due to net unrealised securities holding gains.
5. SUPPLEMENTAL DISCLOSURE TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS
The following schedule provides additional information concerning acquisitions:
(In millions of dollars)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------
1998 1997
----- -------
<S> <C> <C>
Purchase acquisitions:
Assets acquired, excluding cash........................... $313 $2,659
Liabilities assumed....................................... (1,103)
Shares issued............................................. (1,006)
---- ------
Net cash outflow for acquisitions........................... $313 $ 550
==== ======
</TABLE>
Interest paid during the six months ended June 30, 1998 and 1997 was $70 million
and $45 million, respectively.
Income taxes paid during the six months ended June 30, 1998 and 1997 were $207
million and $194 million, respectively.
6. INCOME TAXES
The Company has received a Notice of Proposed Adjustment from a field office of
the Internal Revenue Service ("IRS") challenging its tax treatment related to
12b-1 fees paid by the Putnam Mutual Funds. The Company believes its tax
treatment of these fees is consistent with current industry practice and
applicable requirements of the Internal Revenue Code and previously issued IRS
technical advice. The field office has referred the Notice to the national
office of the IRS for technical advice.
Taxing authorities periodically challenge positions taken by the Company on its
tax returns. On the basis of present information and advice received from
counsel, it is the opinion of the Company's management that any assessments
resulting from current tax audits will not have a material adverse effect on the
Company's consolidated results of operations or its consolidated financial
position.
7. ACQUISITIONS
On June 30, 1998, the Company purchased Kirke-Van Orsdel, Inc., an administrator
of insurance and health benefit programs in the U.S.
On March 24, 1998, the Company purchased Brockman y Schuh Group, a risk and
insurance services and employee benefit consulting firm in Mexico.
On March 27, 1997, the Company consummated a business combination with Johnson &
Higgins ("J&H"), a privately-held risk and insurance services and employee
benefit consulting firm.
IV-28
<PAGE> 124
The following unaudited pro forma summary presents the consolidated results of
operations of the Company as if the J&H business combination had occurred on
January 1, 1997. The pro forma results are shown for illustrative purposes only
and do not purport to be indicative of the results which would have been
reported if the business combination had occurred on the date indicated or which
may occur in the future.
(In millions of dollars, except per share figures)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997
----------------
<S> <C>
Revenue..................................................... $3,149
Net Income.................................................. 324
Basic Net Income per share.................................. 1.29
Diluted Net Income per share................................ 1.27
</TABLE>
8. CLAIMS, LAWSUITS AND OTHER CONTINGENCIES
The Company and its subsidiaries are subject to various claims and lawsuits
consisting principally of alleged errors and omissions in connection with the
placement of insurance or reinsurance and in rendering investment and consulting
services. Some of these claims and lawsuits seek damages, including punitive
damages, in amounts which could, if assessed, be significant.
On November 24, 1997, an action captioned "Aiena et al. vs. Olsen et al" was
brought in the U.S. District Court for the Southern District of New York by
certain former directors of J&H, which was acquired by the Company in March
1997, against twenty-four selling shareholders of J&H, as well as J&H itself and
the Company. The action essentially challenges the allocation of the
consideration paid in connection with the Company's combination with J&H as
between the defendants who were directors and shareholders of J&H at the time of
the transaction and the plaintiffs who were former directors and shareholders of
J&H. The Complaint asserts, among others, claims for breach of fiduciary duty,
federal securities law violations, breach of contract, and ERISA violations.
Plaintiffs seek compensatory and punitive damages.
On or about April 14, 1998, an action captioned "Sempier v. Olsen, et al" was
brought in the U.S. District Court for the District of New Jersey by another
former director of J&H against the same defendants named in the Aiena action,
including J&H and the Company, in connection with the same transaction. The
allegations and claims in the Sempier case are substantially similar to those in
the Aiena action. Plaintiff seeks, among other relief, an unspecified amount of
compensatory and punitive damages. This action will be heard together with the
Aiena action in the District Court for the Southern District of New York.
In 1993, several years prior to the acquisition of J&H, the Equal Employment
Opportunity Commission ("EEOC") commenced a lawsuit against J&H in the U.S.
District Court for the Southern District of New York. The action alleges that a
mandatory retirement policy for directors then in effect at J&H violated the
federal Age Discrimination in Employment Act ("ADEA"). In 1995, the District
Court ruled in the EEOC's favour that the J&H mandatory retirement policy
violated the ADEA. The Court of Appeals for the Second Circuit affirmed that
ruling in 1996. The EEOC seeks to recover damages on behalf of certain former
directors and a trial on the matter of damages is scheduled for October 5, 1998.
Pursuant to the Stock Purchase Agreement between the Company and J&H and the
stockholders of J&H, the Company will bear one-half of all damages and expenses
in this action.
Certain present and former English subsidiaries of the Company are required by
their regulatory body, the Personal Investment Authority, to review transactions
with, and advice to, clients in relation to the sale of certain investments. The
disclosure and advice in connection with such sales has been called into
question by clients or by the Personal Investment Authority on their behalf.
Where the review discloses an inappropriate sale, compensation is required to be
paid to the client. While the amount of compensation which has been and may be
paid, the liability of present subsidiaries of the Company in connection
therewith and the extent to which any such liability is covered by insurance
remains uncertain, the aggregate amount claimed could be significant.
IV-29
<PAGE> 125
On the basis of present information, available insurance coverage and advice
received from counsel, it is the opinion of the Company's management that the
disposition or ultimate determination of these claims and lawsuits will not have
a material adverse effect on the Company's consolidated results of operations or
its consolidated financial position.
9. COMMON STOCK
On May 20, 1998, the Company's Board of Directors authorized a three-for-two
stock distribution of $1 par value common stock, which was issued on June 26,
1998 to shareholders of record on June 5, 1998. Upon issuance of the shares,
paid-in capital was reduced and the common stock account increased by $87
million, the par value of the additional common shares issued. All references to
per share amounts have been restated for this stock distribution.
10. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information," and in February 1998, the FASB issued
Statement of Financial Accounting Standards No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits." Both statements are effective
for fiscal years beginning after December 15, 1997. The Company will adopt the
provisions of these standards in conjunction with the preparation of the 1998
Annual Report.
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities." This
standard, which establishes new accounting and reporting requirements for
derivative instruments, must be adopted in the fiscal year beginning after June
15, 1999. The Company does not expect the adoption of this standard to have a
material impact on its operating results or financial position.
IV-30
<PAGE> 126
APPENDIX V -- CERTAIN MARKET, DIVIDEND AND EXCHANGE RATE INFORMATION
1. MARKET PRICE DATA
The principal trading market for Sedgwick Shares is the London Stock Exchange
and the principal trading market for Sedgwick ADSs is the NYSE. Sedgwick Shares
have been listed and traded on the London Stock Exchange since 1962 and Sedgwick
ADSs have been listed and traded on the NYSE since June 1997. The following
table sets out, for the periods indicated, the reported high and low Closing
Prices for Sedgwick Shares and high and low closing prices for Sedgwick ADSs on
the NYSE as reported on Bloomberg. Each Sedgwick ADS represents five Sedgwick
Shares.
<TABLE>
<CAPTION>
PRICE PER SEDGWICK SHARE PRICE PER SEDGWICK ADS
------------------------ ----------------------
HIGH LOW HIGH LOW
---------- ---------- --------- ---------
(PENCE) (PENCE) (US$) (US$)
<S> <C> <C> <C> <C>
1997:
First Quarter................................. 144.0 118.5
Second Quarter................................ 130.5 116.5
Third Quarter................................. 128.0 116.0 10.75 9.50
Fourth Quarter................................ 151.5 120.5 13.00 10.31
1998:
First Quarter................................. 164.0 132.0 14.37 11.25
Second Quarter................................ 168.5 125.0 14.25 13.81
Third Quarter through 1 September............. 219.5 133.5 17.75 10.94
</TABLE>
On 24 August 1998, the last business day prior to the announcement of the
Ordinary Offer, the Closing Price for Sedgwick Shares was 142.5 pence and the
closing price on the NYSE Composite Tape for Sedgwick ADSs was $12.25.
The following table shows the Closing Prices for Sedgwick Shares, Sedgwick ADSs
and L1 nominal of Sedgwick Convertible Bonds for the first dealing day that the
London Stock Exchange or, as the case may be, the NYSE was open for business in
each month from March 1998 to August 1998, for 24 August 1998 (the last business
day prior to the commencement of the Offer Period) and for 2 September 1998 (the
latest practicable date before the posting of this Offer Document):
<TABLE>
<CAPTION>
SEDGWICK SEDGWICK
DATE SHARE PRICE ADSS CONVERTIBLE BONDS
---- ----------- ----- -----------------
(PENCE) (US$) (IN PENCE)
<S> <C> <C> <C>
2 March 1998........................................... 150.0 12.43 105.88
1 April 1998........................................... 168.0 14.00 109.88
1 May 1998............................................. 154.5 13.00 111.75
1 June 1998............................................ 151.0 12.31 105.75
1 July 1998............................................ 140.5 11.75 104.25
3 August 1998.......................................... 159.5 13.50 104.25
24 August 1998......................................... 142.5 12.25 103.75
2 September 1998....................................... 209.5 17.13 116.88
</TABLE>
V-1
<PAGE> 127
2. DIVIDEND DATA
<TABLE>
<CAPTION>
HISTORICAL DIVIDENDS
DECLARED
---------------------
SEDGWICK SEDGWICK
SHARE ADS**
--------- ---------
<S> <C> <C>
Year ended 31 December
1995........................................................ 6.5p* 32.5p
1996........................................................ 6.5p* 32.5p
1997........................................................ 7.0p 35.0p
</TABLE>
- ---------------
* Excludes foreign income dividend enhancements.
** Dividends were paid by the US Depositary to ADS holders in US dollars
converted at the prevailing exchange rate.
3. EXCHANGE RATE DATA
The following table shows, for the periods and dates indicated, certain
information regarding the exchange rate for the pound sterling, based on the
Noon Buying Rate, expressed in dollars per L1.
<TABLE>
<CAPTION>
PERIOD AVERAGE
YEAR ENDED 31 DECEMBER END RATE* HIGH LOW
---------------------- ---------- ------- ------ ------
<S> <C> <C> <C> <C>
1993................................................ 1.4775 1.5016 1.5900 1.4175
1994................................................ 1.5665 1.5319 1.6368 1.4615
1995................................................ 1.5535 1.5785 1.6440 1.5302
1996................................................ 1.7123 1.5606 1.7123 1.4948
1997................................................ 1.6427 1.6373 1.7035 1.5775
</TABLE>
- ---------------
* The average of the daily Noon Buying Rates during the period.
On 25 August 1998, the date of announcement of the Ordinary Offer, the Noon
Buying Rate for the pound sterling was $1.6386 per L1.
V-2
<PAGE> 128
APPENDIX VI -- ADDITIONAL INFORMATION
1. RESPONSIBILITY
(a) The members of the Offer Committee of the board of directors of Marsh &
McLennan, whose names are set out in paragraph 2(a) below, accept
responsibility for the information contained in this document save for the
information relating to the Sedgwick Group, the directors of Sedgwick and
their immediate families and related trusts. To the best of the knowledge
and belief of the members of the Offer Committee (who have taken all
reasonable care to ensure that such is the case), the information contained
in this document, for which they accept responsibility, is in accordance
with the facts and does not omit anything likely to affect the import of
such information.
(b) The directors of Sedgwick, whose names are set out in paragraph 2(b) below,
accept responsibility for the information contained in this document
relating to the Sedgwick Group, the directors of Sedgwick and their
immediate families and related trusts. To the best of the knowledge and
belief of the directors of Sedgwick (who have taken all reasonable care to
ensure that such is the case), the information contained in this document,
for which they accept responsibility, is in accordance with the facts and
does not omit anything likely to affect the import of such information.
The foregoing statements are included solely to comply with rule 19.2 of the
City Code and shall not be deemed to establish or expand liability under US
securities laws or under the laws of any state of the US.
2. DIRECTORS AND EXECUTIVE OFFICERS OF MARSH & MCLENNAN AND SEDGWICK
(a) The names of the members of the Offer Committee of the board of directors of
Marsh & McLennan, whose registered office is 1209 Orange Street,
Wilmington, Delaware 19801, and the positions they hold are as follows:
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Alexander John Court Smith.................. Chairman of the Board and Chief Executive
Officer
Norman Barham............................... Director, Vice Chairman of J&H Marsh &
McLennan, Inc.
Richard Henry Blum.......................... Director, Vice Chairman of J&H Marsh &
McLennan, Inc.
Francis Joseph Borelli...................... Senior Vice President and Chief Financial
Officer
Peter Coster................................ Director, President of Mercer Consulting
Group, Inc.
Jeffrey Wayne Greenberg..................... Director, Chairman and Chief Executive of
Marsh & McLennan Risk Capital Corp.
Gregory Frank Van Gundy..................... General Counsel and Secretary
Lawrence Jay Lasser......................... Director, President and Chief Executive
Officer of Putnam Investments, Inc.
John Thomas Sinnott......................... Director, Vice Chairman and Chief Executive
Officer of J&H Marsh & McLennan, Inc.
</TABLE>
VI-1
<PAGE> 129
(b) The names of the directors of Sedgwick, the registered office of which is
Sackville House, 143-149 Fenchurch Street, London EC3M 6BN, and the
positions they hold are as follows:
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Saxon Riley................................. Chairman
William Robert Patrick White-Cooper......... Group Chief Executive
Stuart Stanley Tarrant...................... Group Finance Director
Quill Orme Healey........................... Vice-Chairman, Chairman of Sedgwick, Inc.
John Mulock Hignett*........................ Director
Sir Derek (Peter) Hornby*................... Director
John Frances Lehman*........................ Director
Ann McLaughlin*............................. Director
Letizia Maria Brichetto Arnaboldi Moratti... Director
Jeremy Pinchin.............................. Group Legal and Personnel Director
Richard John Wolseley Titley................ Vice-Chairman
David Peter Trezies......................... Director, Chairman of Sedgwick Limited
</TABLE>
- ---------------
* independent non-executive
(c) The following are certain biographical details of the directors and
executive officers of Marsh & McLennan:
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS OR EMPLOYMENT
---- -----------------------------------
<S> <C>
A.J.C. Smith*........................... Mr. Smith, age 64, a citizen of the UK and US, has been
Chairman of the Board and Chief Executive Officer of Marsh
& McLennan since 1992. He served as President from 1986 to
1992. He joined William M. Mercer Limited, a Canadian
subsidiary of Marsh & McLennan, in 1961. Mr. Smith is a
trustee of the various mutual funds managed by Putnam
Investment Management, Inc., a subsidiary of Marsh &
McLennan. He is also Vice Chairman of the Central Park
Conservancy, and a member of the Board of Trustees of The
Carnegie Hall Society, Inc. and the Educational
Broadcasting Corporation in New York City and a member of
the board of overseers of Cornell University Medical
College and Graduate School of Medical Sciences.
Norman Barham*.......................... Mr. Barham, age 56, became a Vice Chairman of J&H Marsh &
McLennan, Inc., a subsidiary of Marsh & McLennan, in 1997
following Marsh & McLennan's business combination with
Johnson & Higgins. Mr. Barham joined Johnson & Higgins in
1975 and was selected to lead the Johnson & Higgins Global
Business Group in 1992. He was elected an Executive Vice
President of Johnson & Higgins in 1995 and President in
1996. Mr. Barham is a trustee of The College of Insurance
and a member of the board of New York City Outward Bound.
</TABLE>
VI-2
<PAGE> 130
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS OR EMPLOYMENT
---- -----------------------------------
<S> <C>
Lewis W. Bernard*....................... Mr. Bernard, age 56, is Chairman of Classroom, Inc., a
c/o Morgan Stanley Group, Inc. non-profit educational corporation. He retired in 1991 from
1221 Ave. of the Americas Morgan Stanley & Co. Inc. where for almost 30 years he held
New York, New York 10020 numerous positions, including that of chief administrative
and financial officer. Mr. Bernard is a trustee or director
of the American Museum of Natural History, The Commonwealth
Fund, the Harvard Management Company, and the John and Mary
R. Markle Foundation.
Richard H. Blum*........................ Mr. Blum, age 59, became Vice Chairman of J&H Marsh &
McLennan, Inc. a subsidiary of Marsh & McLennan, in 1997.
He previously served as Chairman and Chief Executive
Officer of Guy Carpenter & Company, Inc., a subsidiary of
Marsh & McLennan, which he joined in 1958. Mr. Blum is a
trustee of The College of Insurance and a director of The
Bermuda Commodities Exchange.
Frank J. Borelli*....................... Mr. Borelli, age 63, has been Senior Vice President and
Chief Financial Officer of Marsh & McLennan since 1984. He
is a director of The Interpublic Group of Companies, Inc.
and United Water Resources, Inc. Mr. Borelli is the
immediate past chairman and a director of the Financial
Executives Institute, a director of the Private Sector
Council, and a trustee of the New York City Chapter of the
National Multiple Sclerosis Society and Vice Chairman of
Nyack Hospital.
Peter Coster*........................... Mr. Coster, age 59, is a citizen of the UK and President of
Mercer Consulting Group, Inc., a subsidiary of Marsh &
McLennan. He joined Mercer in 1984 upon its acquisition of
a UK benefits consulting firm that Mr. Coster had joined in
1962.
Robert F. Erburu*....................... Mr. Erburu, age 67, retired as Chairman of the Board of The
c/o Times Mirror Company Times Mirror Company, a Los Angeles-based news and
220 West First Street information company, on 1 January 1996, a position he had
Los Angeles, CA 90012 held since 1986. Mr. Erburu served as Chief Executive
Officer of The Times Mirror Company from 1981 to 1995. Mr.
Erburu is a director of Cox Communications, Inc., the
Pacific Council on International Policy, the Tomas Rivera
Center, the Los Angeles Annenberg Metropolitan Project and
the Skirball Institute of American Values. He is Chairman
of the Board of Trustees of The Huntington Library, Art
Collections and Botanical Gardens and of the J. Paul Getty
Trust, as well as a trustee of the National Gallery of Art,
The Flora and William Hewlett Foundation and The Ahmanson
Foundation, and a Fellow of the American Academy of Arts
and Sciences. Mr. Erburu is also a member of the Business
Council.
</TABLE>
VI-3
<PAGE> 131
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS OR EMPLOYMENT
---- -----------------------------------
<S> <C>
Ray J. Groves*.......................... Mr. Groves, age 62, is Chairman of Legg Mason Merchant
Ernst & Young Banking, Inc. He retired in 1994 from Ernst & Young where
787 Seventh Avenue he had held numerous positions for 37 years, including the
New York, NY 10019 last 17 years as Chairman and Chief Executive Officer. He
is a director of Consolidated Natural Gas Company,
Electronic Data Systems Corporation, Lamalie Associates,
Inc., RJR Nabisco, Inc. and Allegheny Teledyne, Inc. Mr.
Groves is a member of the Board of Trustees of the Business
Council of the United Nations and of the New York Public
Policy Institute. He is also a managing director and
treasurer of the Metropolitan Opera Association and a
trustee of The Ohio State University Foundation.
George Putnam*.......................... Mr. Putnam, age 72, is Chairman of Putnam Investment
The Putnam Funds Management, Inc., a subsidiary of Marsh & McLennan, and is
One Post Office Square Chairman of the Board of Trustees and President of the
Boston, MA 02109 various mutual funds managed by Putnam. He is a director of
Houghton Mifflin Company and Freeport-McMoran Copper &
Gold, Inc. Mr. Putnam is also a trustee of the WGBH
Educational Foundation, the Museum of Fine Arts (Boston),
McLean Hospital, Massachusetts General Hospital, Vincent
Memorial Hospital, Trustees of Reservations and New England
Aquarium, and an overseer of the Boston Museum of Science,
Northeastern University and College of the Atlantic.
John D. Ong*............................ Mr. Ong, age 64, retired as Chairman and Chief Executive
4000 Embassy Parkway Officer of The BFGoodrich Company, on 1 July 1997, after
Akron, Ohio 44333 more than 36 years with BFGoodrich. He is also a director
of Ameritech Corporation, ASARCO Inc., Cooper Industries,
Defiance, Inc., The Geon Company, The Kroger Company and
TRW Inc. Mr. Ong is a trustee of the University of Chicago
and the John S. and James L. Knight Foundation and is
Chairman of the Board of the Musical Arts Association
(Cleveland Orchestra). He is a former Chairman of The
Business Roundtable.
</TABLE>
VI-4
<PAGE> 132
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS OR EMPLOYMENT
---- -----------------------------------
<S> <C>
Jeffrey W. Greenberg*................... Mr. Greenberg, age 47, became Chairman and Chief Executive
Marsh & McLennan Risk Capital Corp. Officer of Marsh & McLennan Risk Capital Corp., a
20 Horseneck Lane subsidiary of Marsh & McLennan, in 1996. From 1978 to 1995,
Greenwich, CT 06830 he was employed by American International Group, Inc.,
including serving from 1991 as executive vice president
with responsibility for its domestic brokerage group. Mr.
Greenberg is a director of ACE Limited and a trustee of
Brown University and the Spence School in New York City.
The Rt. Hon. Lord Lang of Monkton*...... Lord Lang, age 58, is a citizen of the UK and was a member
Kersland, Monkton of the British Parliament from 1979 to 1997, serving in the
Ayrshire KA9 2QU cabinet as Secretary of State for Scotland from 1990 to
United Kingdom 1995 and as President of the Board of Trade and Secretary
of State for Trade and Industry from 1995 to 1997. Lord
Lang was appointed to the Queen's Privy Council in 1990. He
is deputy chairman of European Telecom plc, chairman of
Murray Ventures Investment Trust plc and a non-executive
director of Lithgows Ltd., CGU plc and Second Scottish
National Trust plc.
Adele Smith Simmons*.................... Mrs. Simmons, age 57, has been President of the John D. and
McArthur Foundation Catherine T. MacArthur Foundation since 1989. She is a
140 South Dearborn St. director of First Chicago/NBD Corporation, the Synergos
Chicago, Il 60603 Institute and the Union of Concerned Scientists and a
member of the Council on Foreign Relations.
David A. Olsen*......................... Mr. Olsen, age 60, served as Vice Chairman of Marsh &
McLennan from May 1997 until December 1997. Prior to Marsh
& McLennan's business combination with Johnson & Higgins,
he was Chairman and Chief Executive Officer of Johnson &
Higgins, which he joined in 1966. Mr. Olsen is a member of
the Board of Trustees of Bowdoin College and an honorary
director of the New York City Partnership. He is also a
member of the boards of U.S. Trust Corporation, Sharon
(Connecticut) Hospital, United Way of New York City and
India House, and he serves as Vice Chairman of New York's
South Street Seaport Museum and Co-Chairman of its
Development Committee.
</TABLE>
VI-5
<PAGE> 133
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATIONS OR EMPLOYMENT
---- -----------------------------------
<S> <C>
Lawrence J. Lasser*..................... Mr. Lasser, age 55, is President and Chief Executive
Putnam Investments, Inc. Officer of Putnam Investments, Inc., a subsidiary of Marsh
One Post Office Square & McLennan. He joined Putnam in 1969. Mr. Lasser is a
Boston, MA 02109 trustee of the various mutual funds managed by Putnam
Investment Management, Inc., a subsidiary of Marsh &
McLennan. He is a member of the Board of Governors and
Executive Committee of the Investment Company Institute, a
member of the Board of Overseers of the Museum of Fine Arts
(Boston), a Trustee of Beth Israel/Deaconess Medical Center
in Boston, a Trustee of the Vineyard Open Land Foundation,
a member of the Council on Foreign Relations, and a member
of the Board of Directors of the United Way of
Massachusetts Bay.
John T. Sinnott*........................ Mr. Sinnott, age 58, became Vice Chairman of J&H Marsh &
McLennan, Inc., a subsidiary of Marsh & McLennan, in 1997
and its Chief Executive Officer in January 1998. He
previously served Marsh & McLennan, Incorporated as Chief
Executive Officer from 1995 and as President and Co-Chief
Executive from 1990 and 1992, respectively. He joined Marsh
& McLennan, Incorporated in 1963. Mr. Sinnott is a trustee
of the Insurance Institute of America.
Frank J. Tasco*......................... Mr. Tasco, age 71, retired in 1992 as Chairman of the Board
and Chief Executive Officer of Marsh & McLennan, a position
he had held since 1986. From December 1993 to December
1994, he served as Chairman of Borden, Inc. Mr. Tasco is
Chairman of Angram, Inc. and a director of The Travelers
Corporation and Travelers/Aetna Property & Casualty Corp.
Gregory F. Van Gundy.................... Mr. Van Gundy, age 52, is General Counsel and Secretary of
Marsh & McLennan. He joined Marsh & McLennan in 1974.
Francis N. Bonsignore................... Mr. Bonsignore, age 51, has been Senior Vice
President-Human Resources & Administration of Marsh &
McLennan since 1990. Immediately prior thereto, he was a
partner and National Director Human Resources for Price
Waterhouse.
</TABLE>
- ---------------
* An asterisk next to a person's name indicates that such person serves as a
director of Marsh & McLennan. Unless otherwise indicated, the business
address of the aforementioned persons is 1166 Avenue of the Americas, New
York, New York, and the above persons are citizens of the US.
3. PRINCIPAL PURCHASES
In accordance with normal UK practice, Marsh & McLennan or its nominees or
brokers (acting as agents for Marsh & McLennan) or a subsidiary of Marsh &
McLennan may make certain purchases of Sedgwick Securities and Sedgwick
Convertible Bonds outside the US during the period in which the Offers remain
open
VI-6
<PAGE> 134
for acceptance pursuant to relief granted by the SEC staff from Rule 10b-13 of
the Exchange Act. In accordance with the terms of the SEC relief that has been
granted, among other things, (i) such purchases may not be effected within the
US, (ii) information regarding such purchases must be disclosed in the US by
press release to the extent that disclosure is made public in the UK pursuant to
the City Code and (iii) Marsh & McLennan and any such other person must comply
with any applicable rules of UK regulatory organisations, including the City
Code and the rules of the London Stock Exchange.
4. SHAREHOLDINGS AND DEALINGS IN RELEVANT SEDGWICK SECURITIES AND SEDGWICK
CONVERTIBLE BONDS
(A) HOLDINGS
(i) At the close of business on 2 September 1998 (being the latest
practicable date prior to the posting of this document), 39,047,260
Sedgwick Shares had been conditionally acquired by J.P. Morgan
Securities Limited and 15,815,085 Sedgwick Shares had been
conditionally acquired by Cazenove both on behalf of Marsh & McLennan
on the terms of the conditional share purchase agreements described
in paragraph 5(a)(ii) below.
(ii) At the close of business on 2 September 1998 (being the latest
practicable date prior to the posting of this document), the
interests (all of which are beneficial unless otherwise stated) of
the directors of Sedgwick and their immediate families and related
trusts in Sedgwick Securities (other than in Sedgwick Securities held
under option) as shown in the register of directors' interests
maintained under the provisions of Sections 324-328 of the Companies
Act, were as follows:
<TABLE>
<CAPTION>
NUMBER OF
NAME SEDGWICK SHARES
- ---- ---------------
<S> <C>
S. Riley.................................................... 38,273
W.R.P. White-Cooper......................................... 49,183
S.S. Tarrant................................................ 36,210
J. Pinchin*................................................. 481,059
Q.O. Healey**............................................... 47,062
R.J.W. Titley............................................... 39,829
J.M. Hignett................................................ 25,000
Sir D. Hornby............................................... --
J.F. Lehman................................................. --
A.D. McLaughlin............................................. --
L.M.B.A. Moratti............................................ --
D.P. Trezies................................................ 22,027
</TABLE>
- ---------------
* includes a non-beneficial interest of 453,000 Sedgwick Shares
** held as ADSs
VI-7
<PAGE> 135
(iii) At the close of business on 2 September 1998 (being the latest
practicable date prior to the posting of this document), the
interests of the directors in Sedgwick Shares conditionally awarded
under the Sedgwick Share Option Schemes were as follows:
<TABLE>
<CAPTION>
NUMBER
DATE OF OF EXERCISE
NAME GRANT OPTIONS PRICE EXERCISE PERIOD
- ---- -------- ------- -------- -----------------
<S> <C> <C> <C> <C>
S. Riley.................................. 27/04/89 50,654 235.57p 27/04/92-27/04/99
12/04/90 86,957 253.16p 12/04/93-12/04/00
16/10/90 20,460 173.01p 16/10/93-16/10/00
22/03/93 51,151 174.97p 22/03/96-22/03/03
23/09/94 60,000 158.00p 23/09/97-23/09/04
21/06/96 100,000 144.00p 21/06/99-21/06/06
-------
369,222
=======
W.R.P. White-Cooper....................... 27/04/89 66,496 235.57p 27/04/92-27/04/99
16/10/90 20,460 173.01p 16/10/93-16/10/00
22/03/93 51,151 174.97p 22/03/96-22/03/03
21/03/94 50,000 210.00p 21/03/97-21/03/04
23/09/94 50,000 158.00p 23/09/97-23/09/04
21/06/96 50,000 144.00p 21/06/99-21/06/06
-------
288,107
=======
Q.O. Healey............................... 27/04/89 51,151 235.57p 27/04/92-27/04/99
16/10/90 20,460 173.01p 16/10/93-16/10/00
22/03/93 51,151 174.97p 22/03/96-22/03/03
21/03/94 50,000 210.00p 21/03/97-21/03/04
23/09/94 50,000 158.00p 23/09/97-23/09/04
21/06/96 50,000 144.00p 21/06/99-21/06/06
-------
272,762
=======
J. Pinchin................................ 27/04/89 5,115 235.57p 27/04/92-27/04/99
12/04/90 25,575 253.16p 12/04/93-12/04/00
16/10/90 20,460 173.01p 16/10/93-16/10/00
22/03/93 20,460 174.97p 22/03/96-22/03/03
21/03/94 20,000 210.00p 21/03/97-21/03/04
23/09/94 10,000 158.00p 23/09/97-23/09/04
21/06/96 25,000 144.00p 21/06/99-21/06/06
-------
126,610
=======
S.S. Tarrant.............................. 18/10/88 102,303 226.77p 18/10/91-18/10/98
27/04/89 51,151 235.57p 27/04/92-27/04/99
16/10/90 20,460 173.01p 16/10/93-16/10/00
22/03/93 51,151 174.97p 22/03/96-22/03/03
21/03/94 50,000 210.00p 21/03/97-21/03/04
23/09/94 50,000 158.00p 23/09/97-23/09/04
21/06/96 50,000 144.00p 21/06/99-21/06/06
-------
375,065
=======
</TABLE>
VI-8
<PAGE> 136
<TABLE>
<CAPTION>
NUMBER
DATE OF OF EXERCISE
NAME GRANT OPTIONS PRICE EXERCISE PERIOD
- ---- -------- ------- -------- -----------------
<S> <C> <C> <C> <C>
R.J.W. Titley............................. 27/04/89 20,460 235.57p 27/04/92-27/04/99
12/04/90 20,460 253.16p 12/04/93-12/04/00
16/10/90 10,230 173.01p 16/10/93-16/10/00
22/03/93 51,151 174.97p 22/03/96-22/03/03
21/03/94 50,000 210.00p 21/03/97-21/03/04
23/09/94 50,000 158.00p 23/09/97-23/09/04
21/06/96 50,000 144.00p 21/06/99-21/06/06
-------
252,301
=======
D.P. Trezies.............................. 27/04/89 40,921 235.57p 27/04/92-27/04/99
12/04/90 12,787 253.16p 12/04/93-12/04/00
16/10/90 20,460 173.01p 16/10/93-16/10/00
22/03/93 15,345 174.97p 22/03/96-22/03/03
21/03/94 12,500 210.00p 21/03/97-21/03/04
23/09/94 5,000 158.00p 23/09/97-23/09/04
21/06/96 17,500 144.00p 21/06/99-21/06/06
-------
124,513
=======
</TABLE>
(iv) At the close of business on 2 September 1998 (being the latest
practicable date prior to the posting of this document), 1,015,326
Sedgwick Shares were held by Credit Suisse Asset Management Ltd,
London on behalf of clients on a discretionary basis.
In addition, Credit Suisse Asset Management Ltd, London has agreed, as
set out in paragraph 4(b)(iii) below, to transfer 700,000 Sedgwick
Shares to J.P. Morgan Securities Limited, acting on behalf of Marsh &
McLennan, at 225 pence per share, subject to the following conditions:
(1) the expiry of the applicable waiting period under the HSR Act;
(2) there being in existence no order of any US court enjoining such
sales and purchases; and
(3) appropriate exemptive relief for the making of purchases and sales
in the capital of Sedgwick by Marsh & McLennan outside the Offers
having been obtained from the SEC.
(B) DEALINGS
(i) The following dealings for value in relevant Sedgwick Shares have
been carried out by concert parties of Marsh & McLennan during the
disclosure period:
<TABLE>
<CAPTION>
NUMBER OF
NAME TRANSACTION DATE PRICE SEDGWICK SHARES
- ---- ----------- -------- ------- ---------------
<S> <C> <C> <C> <C>
J.P. Morgan Securities Limited.......... Purchase 10/07/98 140p 14,323
J.P. Morgan Securities Limited.......... Sale 10/07/98 140p 14,323
J.P. Morgan Securities Limited.......... Conditional
purchase 25/08/98 225p 700,000
J.P. Morgan Securities Limited.......... Conditional
purchase 25/08/98 225p 8,718,000
J.P. Morgan Securities Limited.......... Conditional
purchase 25/08/98 225p 348,000
J.P. Morgan Securities Limited.......... Conditional
purchase 25/08/98 225p 7,500,000
J.P. Morgan Securities Limited.......... Conditional
purchase 25/08/98 225p 2,274,275
</TABLE>
VI-9
<PAGE> 137
<TABLE>
<CAPTION>
NUMBER OF
NAME TRANSACTION DATE PRICE SEDGWICK SHARES
- ---- ----------- -------- ------- ---------------
<S> <C> <C> <C> <C>
J.P. Morgan Securities Limited.......... Conditional
purchase 27/08/98 225p 6,006,985
J.P. Morgan Securities Limited.......... Conditional
purchase 27/08/98 225p 7,500,000
J.P. Morgan Securities Limited.......... Conditional
purchase 28/08/98 225p 6,000,000
Cazenove................................ Conditional
purchase 27/08/98 225p 6,795,698
Cazenove................................ Conditional
purchase 27/08/98 225p 6,000,000
Cazenove................................ Conditional
purchase 28/08/98 225p 219,387
Cazenove................................ Conditional
purchase 28/08/98 225p 800,000
Cazenove................................ Conditional
purchase 28/08/98 225p 2,000,000
</TABLE>
The conditional purchases shown above were made on behalf of Marsh &
McLennan on the terms described in paragraph 5(a)(ii) below.
(ii) The following dealings for value in Sedgwick Shares have been carried
out by the directors of Sedgwick, members of their immediate families
and related trusts during the disclosure period:
<TABLE>
<CAPTION>
NUMBER OF
NAME TRANSACTION DATE PRICE SEDGWICK SHARES
- ---- ----------- -------- --------- ---------------
<S> <C> <C> <C> <C>
S. Riley............................... Purchase* 07/10/97 87.97p 21,312
W.R.P. White-Cooper.................... Purchase* 07/10/97 87.97p 21,312
Q.O. Healey............................ Purchase 30/10/97 $10.74378 91.4**
J. Pinchin............................. Purchase* 01/10/97 87.97p 21,312
Sale 28/10/97 121.00p 2,371
Purchase 28/10/97 121.00p 2,371
Sale 05/11/97 121.00p 2,465
Purchase 05/11/97 122.00p 2,440
Purchase 05/05/98 155.50p 44
Purchase 05/05/98 155.50p 46
S.S. Tarrant........................... Purchase* 07/10/97 87.97p 21,312
Sale 28/10/97 121.00p 2,479
Purchase 28/10/97 121.00p 2,479
Sale 21/11/97 124.00p 4,721
Purchase 21/11/97 124.00p 4,721
Sale 21/11/97 124.00p 4,721
Purchase 21/11/97 124.00p 4,721
Sale 07/04/98 165.50p 3,525
Purchase 07/04/98 166.00p 3,525
Purchase 05/05/98 155.50p 46
R.J.W. Titley.......................... Purchase* 01/10/97 87.97p 21,312
D.P. Trezies........................... Purchase* 12/11/97 87.97p 21,312
</TABLE>
* arising on the exercise of Options
** Number of and price of Sedgwick ADSs
VI-10
<PAGE> 138
(iii) The following dealing for value in relevant Sedgwick Securities has
been carried out by a concert party of Segdwick during the disclosure
period:
<TABLE>
<CAPTION>
NUMBER OF
NAME TRANSACTION DATE PRICE SEDGWICK SHARES
- ---- ----------- -------- --------- ---------------
<S> <C> <C> <C> <C>
Credit Suisse Asset Management Ltd, Conditional
London.............................. Sale 27/08/98 225p 700,000
</TABLE>
(iv) Irrevocable undertakings to accept the Ordinary Offer have been
received in respect of securities representing Sedgwick Shares, and
undertakings have been received in respect of Sedgwick Options, in each
case, as set out below:
<TABLE>
<CAPTION>
SEDGWICK SEDGWICK
NAME SHARES OPTIONS
---- ----------- --------
<S> <C> <C>
Phillips & Drew Fund Management Limited..................... 122,955,977 --
Schroder Investment Management (UK) Limited................. 76,732,862 --
Silchester International Investors Limited.................. 24,000,000 --
S. Riley.................................................... 38,273 369,222
W.R.P. White-Cooper......................................... 49,183 288,107
S.S. Tarrant................................................ 36,210 375,065
J. Pinchin.................................................. 28,059 126,610
Q.O. Healey*................................................ 47,062 272,762
R.J.W. Titley............................................... -- 252,301
J.M. Hignett................................................ 25,000 --
D.P. Trezies................................................ 22,027 124,513
</TABLE>
- ---------------
* held as ADSs
An irrevocable undertaking to accept the Convertible Offer has been
received as follows:
<TABLE>
<S> <C>
Phillips & Drew Fund Management Limited..................... L250,000
nominal of
Sedgwick
Convertible
Bonds
</TABLE>
The irrevocable undertakings given by Phillips & Drew Fund Management
Limited, Schroder Investment Management (UK) Limited and Silchester
International Investors Limited will cease to be binding in the event
that a competing offer is made for Sedgwick Securities at a price equal
to or exceeding 250.5 pence per Sedgwick Share. All other irrevocable
undertakings will continue to be binding in the event of a competing
offer being made for Sedgwick Securities by a third party, unless the
Ordinary Offer lapses or is withdrawn.
(v) The following dealings for value in Sedgwick Shares, in aggregated
form, have taken place during the disclosure period by those Sedgwick
Shareholders listed in paragraph 4(b)(iv) above who have given
irrevocable undertakings to accept the Offer:
Phillips & Drew Fund Management Limited
<TABLE>
<CAPTION>
SALES PURCHASES
------------------------------ -----------------------------
HIGH LOW VOLUME HIGH LOW VOLUME
------ ------ ---------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
1 month...................... 159p 145p 155,533 -- -- --
2 months..................... 146p 124p 2,099,000 140p 124p 1,913,000
3 months..................... 142p 137p 54,010 146p 137p 79,010
3 - 6 months................. 169p 148p 3,682,860 169p 148p 4,424,500
6 - 9 months................. 140p 124p 309,500 -- -- --
9 - 12 months................ 129p 121p 9,112,350 129p 122p 8,964,457
</TABLE>
VI-11
<PAGE> 139
Silchester International Investors Limited
<TABLE>
<CAPTION>
PURCHASES
-----------------------------
HIGH LOW VOLUME
------ ------ ---------
<S> <C> <C> <C>
1 month..................................................... -- -- --
2 months.................................................... -- -- --
3 months.................................................... 148p 126p 2,580,310
3 - 6 months................................................ 168p 153p 5,228,000
6 - 9 months................................................ 146p 134p 3,712,000
9 - 12 months............................................... 130p 124p 2,532,000
</TABLE>
Schroder Investment Management (UK) Limited
<TABLE>
<CAPTION>
SALES PURCHASES
------------------------------ -----------------------------
HIGH LOW VOLUME HIGH LOW VOLUME
------ ------ ---------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C>
1 month...................... 156p 143p 3,718,445 148p 148p 211,375
2 months..................... 157p 132p 10,839,905 148p 148p 3,979,797
3 months..................... 147p 128p 3,432,960 132p 132p 3,460
3 - 6 months................. 168p 151p 3,118,858 165p 150p 336,325
6 - 9 months................. 142p 131p 3,622,545 153p 133p 246,932
9 - 12 months................ 129p 120p 1,345,299 124p 119p 117,879
</TABLE>
(C) GENERAL
Save as disclosed in this paragraph 4:
(i) Marsh & McLennan does not own or control any relevant Sedgwick
Securities or Sedgwick Convertible Bonds;
(ii) no director or officer of Marsh & McLennan nor any member of his
immediate family is interested (as described in Parts VI and X of the
Companies Act) in relevant Sedgwick Securities or Sedgwick Convertible
Bonds;
(iii) no person acting in concert with Marsh & McLennan (excluding exempt
market makers and exempt fund managers) owns or controls any relevant
Sedgwick Securities or Sedgwick Convertible Bonds;
(iv) neither Marsh & McLennan nor any person acting in concert with Marsh &
McLennan has any arrangement of the kind referred to in paragraph 4(d)
below;
(v) no associate of Sedgwick (other than an exempt market maker or an
associate by virtue of paragraphs (5), (6) or (7) of the definition of
associate in paragraph 4(d) below) owns or controls any relevant
Sedgwick Securities or Sedgwick Convertible Bonds;
(vi) no discretionary fund manager (other than an exempt fund manager)
connected with Sedgwick owns or controls any relevant Sedgwick
Securities or Sedgwick Convertible Bonds; and
(vii) no person mentioned in this paragraph 4 has dealt for value in
relevant Sedgwick Securities or Sedgwick Convertible Bonds during the
disclosure period.
(D) DEFINITIONS
For the purposes of this paragraph 4:
(i) "arrangement" includes indemnity or option arrangements, and any
agreement or understanding, formal or informal, of whatever nature
relating to relevant Sedgwick Securities or Sedgwick Convertible
Bonds which may be an inducement to deal or refrain from dealing;
VI-12
<PAGE> 140
(ii) "disclosure period" means the period commencing on 25 August 1997
(being the date 12 months prior to the commencement of the offer
period) and ending on 2 September 1998 (being the latest practicable
date prior to the posting of this document);
(iii) "relevant Sedgwick Securities or Sedgwick Convertible Bonds" means
Sedgwick Securities, Sedgwick Convertible Bonds and any securities
convertible into, rights to subscribe for, options (including traded
options) in respect of, and derivatives referenced to, any of the
foregoing.
(iv) "associate" means:
(1) subsidiaries and associated companies of Sedgwick and companies of
which any such subsidiaries or associated companies are associated
companies;
(2) banks, financial and other professional advisers (including
stockbrokers) to Sedgwick or a company covered in (1) above,
including persons controlling, controlled by or under the same
control as such banks or financial or other professional advisers;
(3) the directors of Sedgwick and the directors of any company covered
in (1) above (together in each case with any member of their
immediate families or related trusts);
(4) the pension funds of Sedgwick or a company covered in (1) above;
(5) an investment company, unit trust or other person whose investments
an associate (as otherwise defined in this paragraph 4(d)) manages
on a discretionary basis, in respect of the relevant investment
accounts;
(6) a person who owns or controls 5 per cent. or more of any class of
relevant securities (as defined in paragraphs (a) to (d) in Note 2
on Rule 8 of the City Code) issued by Sedgwick, including a person
who as a result of any transactions owns or controls 5 per cent. or
more;
(7) a company having a material trading arrangement with Sedgwick; and
references to a "bank" do not apply to a bank whose sole relationship
with Marsh & McLennan or Sedgwick or a company covered in (iv)(1) above
is the provision of normal commercial banking services or such
activities in connection with the Offers as handling acceptances and
other registration work.
For the purpose of this paragraph 4 of Appendix VI, ownership or control of 20
per cent. or more of the equity share capital of a company is regarded as the
test of associated company status and "control" means a holding, or aggregate
holdings, of shares carrying 30 per cent. or more of the voting rights
attributable to the share capital of a company which are currently exercisable
at a general meeting, irrespective of whether the holding or holdings give(s) de
facto control.
5. MATERIAL CONTRACTS
(a) The following contracts (not being contracts entered into in the ordinary
course of business) have been entered into by members of the Marsh &
McLennan Group, since 25 August 1996 (being the date two years before the
Offer Period began) and are or may be material:
(i) a stock purchase agreement dated 12 March 1997 between Johnson &
Higgins, the stockholders of Johnson & Higgins and Marsh & McLennan,
pursuant to which Johnson & Higgins became a wholly owned subsidiary of
Marsh & McLennan. Marsh & McLennan made payments in connection with the
transaction totalling approximately US$1.8 billion, of which
approximately 55 per cent. was paid to stockholders of Johnson &
Higgins, which included Messrs. Barham and Olsen;
(ii) thirteen conditional share purchase agreements between the parties
listed below under which J.P. Morgan Securities Limited ("JPMSL") or
Cazenove, as indicated below, agreed to purchase on behalf of Marsh &
McLennan the number of Sedgwick Shares set out below at the price being
paid to Sedgwick Shareholders under the Ordinary Offer conditional on
(1) the expiration or
VI-13
<PAGE> 141
termination of all applicable waiting periods under the HSR Act, (2)
there being in existence no order of any US court enjoining such sale
and purchase and (3) appropriate exemptive relief for the making of
purchases of Sedgwick Shares by Marsh & McLennan outside of the Ordinary
Offer having been granted by the SEC:
<TABLE>
<CAPTION>
DATE OF EXECUTION NUMBER OF
BY VENDOR BUYER VENDOR SEDGWICK SHARES
- ----------------- ----- ------ ---------------
<S> <C> <C> <C>
27/08/98 JPMSL Credit Suisse Asset Management........................ 700,000
27/08/98 JPMSL Fidelity Investment Services Limited.................. 8,718,000
27/08/98 JPMSL Guinness Flight Hambros............................... 348,000
27/08/98 JPMSL Harris Associates..................................... 7,500,000
27/08/98 JPMSL Invesco GT............................................ 2,274,275
27/08/98 JPMSL Commercial Union Investment Management
General Accident Investment Management
General Accident Managed Pension Fund................. 6,006,985
27/08/98 JPMSL UBS Brinson Limited................................... 7,500,000
27/08/98 Cazenove Salomon Smith Barney UK Equities Limited.............. 6,000,000
28/08/98 JPMSL Silchester International Investors Ltd................ 6,000,000
28/08/98 Cazenove IAI International Limited............................. 6,795,698
28/08/98 Cazenove Morgan Stanley & Co. International Limited............ 219,387
28/08/98 Cazenove Royal & Sun Alliance Investment Management............ 800,000
28/08/98 Cazenove Salomon Smith Barney UK Equities Limited.............. 2,000,000
</TABLE>
(iii) the credit facility agreement described in paragraph 7 of this
Appendix VI.
(b) The following contracts (not being contracts entered into in the ordinary
course of business) have been entered into by members of the Sedgwick
Group, since 25 August 1996 (being the date two years before the Offer
Period began) and are or may be material:
(i) a joint venture agreement dated 3 August 1997 between Sedgwick,
Sedgwick Internationaal B.V., Securfin S.p.A., Altrida Investments B.V.,
Mrs. L. Moratti and Mr. G. Moratti, setting out certain management and
administrative provisions in relation to the operation of Nikols
Sedgwick B.V. ("Nikols Sedgwick").
Pursuant to this agreement, two-thirds of the profits of Nikols Sedgwick
available for distribution in each financial year will be distributed to
shareholders.
Sedgwick and Securfin have agreed there should be no transfer of shares
in Nikols Sedgwick to a third party within two years of the completion
date. Thereafter, the pre-emption rights set out in the articles of
association of Nikols Sedgwick will apply. Intra-group transfers are
permitted.
It is deemed to be a default event should any of the shareholders be the
subject of any change of control. For the purposes of this agreement, a
change of control occurs when, inter alia, a party acquires or agrees to
acquire or has options over more than 50 per cent. of the issued equity
share capital of a shareholder (or any company which controls it). Upon
the occurrence of a default event, the non-defaulting party shall be
entitled in its absolute discretion to serve a compulsory purchase
notice or a compulsory transfer notice within 20 business days of it
becoming aware of the occurrence of the default event;
(ii) a contribution agreement dated 3 August 1997 between Sedgwick,
Sedgwick Internationaal B.V., Securfin S.p.A., Altrida Investment B.V.,
Mrs. L. Moratti and Mr. G. Moratti.
Pursuant to this agreement the following interests were transferred to
Nikols Sedgwick:
(1) all Sedgwick Group interests in Italy, Portugal, Spain, Argentina,
Brazil, Chile, Colombia, Uruguay and Mexico; and
VI-14
<PAGE> 142
(2) all Moratti Group interests in the Nikols Group in France, Italy,
Netherlands, Portugal, Spain, Switzerland, Argentina, Brazil,
British Virgin Islands and Chile.
A balancing payment of L6.3 million was made in cash to Securfin by
Sedgwick.
In return for the transfer, members of the Moratti Group received "A"
shares in Nikols Sedgwick and members of the Sedgwick Group received
"B" shares with the result that 51 per cent. of the shareholding in
Nikols Sedgwick is held by the Moratti Group and 49 per cent. by the
Sedgwick Group;
(iii) an agreement dated 17 February 1997 and made between Rivers Group
Limited, a wholly-owned subsidiary of Sedgwick, and Transamerica
Corporation for the acquisition of 49.9 per cent of the issued share
capital of River Thames Insurance Company Limited (RTI) for L12 million
plus up to a further L2 million which took the group's holdings in RTI
to 98.74 per cent; and
(iv) a sale and purchase agreement between Sedgwick Group Properties &
Services Limited, a wholly-owned subsidiary of Sedgwick, and Casalina
Real Estate Limited dated 23 December 1996 in connection with the
disposal of the group's leasehold interest in Aldgate House for a
consideration of L19.5 million.
6. BACKGROUND TO THE OFFERS
In the latter part of May 1998, Saxon Riley, Chairman of Sedgwick, and Rob
White-Cooper, Chief Executive of Sedgwick, asked A.J.C. Smith, Chairman and
Chief Executive Officer of Marsh & McLennan, and Jeffrey Greenberg, Chairman and
Chief Executive Officer of Marsh & McLennan Risk Capital Corporation (a wholly
owned subsidiary of Marsh & McLennan), respectively, whether Marsh & McLennan
had an interest in exploring a transaction involving Sedgwick. On 5 June 1998,
Mr. Greenberg told Mr. White-Cooper, in a telephone call, that for Marsh &
McLennan to pursue a transaction relating to Sedgwick, it would need additional
information about Sedgwick's various businesses. A meeting was held on 12 June
1998 which included, among others, Mr. Greenberg and Frank J. Borelli, Senior
Vice President and Chief Financial Officer of Marsh & McLennan, and Mr.
White-Cooper and Stuart Tarrant, Group Finance Director of Sedgwick. At the
meeting, Messrs. White-Cooper and Tarrant provided preliminary information as to
Sedgwick and its various businesses.
Following the 12 June 1998 meeting, there were additional discussions, from time
to time, between representatives of Marsh & McLennan and representatives of
Sedgwick including a meeting on 24 June 1998 between Messrs. Smith and Greenberg
of Marsh & McLennan and Messrs. Riley and White-Cooper of Sedgwick, a further
meeting on 6 July 1998 among Messrs. Smith, Greenberg, Riley, and White-Cooper,
Mr. Quill Healey (Chairman and Chief Executive Officer of Sedgwick, Inc.) and
Mr. Peter Coster (President of Mercer Consulting Group, Inc.), and a call from
Mr. Smith to Mr. Riley on 13 July 1998. Also, there were discussions among the
legal representatives of the parties as to the terms of a confidentiality
agreement.
On 22 July 1998, Willis Corroon Group plc announced a recommended offer by an
entity formed by the investment firm of Kohlberg Kravis & Roberts & Co., L.P.,
which increased speculation in the marketplace concerning Sedgwick.
On or about 23 July 1998, Messrs. Riley and White-Cooper contacted Messrs. Smith
and Greenberg respectively, suggesting a continuation of these discussions. A
confidentiality agreement between the parties was signed on 29 July 1998.
Meetings were held on 29 and 30 July 1998, between representatives of Marsh &
McLennan and its financial advisors and representatives of Sedgwick and its
financial advisors, at which more detailed financial information about Sedgwick
and its various businesses was provided to Marsh & McLennan. In addition,
Messrs. Smith and Greenberg met with Messrs. Riley and White-Cooper and the
representatives of Sedgwick indicated that if Marsh & McLennan were prepared to
make a fair offer, they would be prepared to recommend it to their board.
VI-15
<PAGE> 143
On 5 August 1998, Mr. White-Cooper indicated to Mr. Greenberg that Sedgwick
would like Marsh & McLennan to submit its indication of interest for Sedgwick by
13 August 1998 for consideration by the Sedgwick board of directors. Mr.
White-Cooper indicated that Marsh & McLennan's indication of interest should
reflect Marsh & McLennan's highest valuation if it was to be recommended by the
board and that if its proposal was attractive to the board, Marsh & McLennan
would be given the opportunity to conduct due diligence and to submit a
definitive offer for consideration by the Sedgwick board of directors. From 6
August through 12 August, representatives of the two companies and their
respective financial advisors held numerous discussions.
On 13 August 1998, Marsh & McLennan delivered a letter expressing its
non-binding indication of interest with respect to a possible transaction
involving the two companies. In the letter, Marsh & McLennan noted that its
indication of interest was conditional upon, among other things, the
satisfactory completion of due diligence, receipt of appropriate assurances as
to the continued commitment of key personnel, the approval of the respective
boards of directors and the negotiation and execution of mutually acceptable
definitive documentation. Marsh & McLennan also recognized the value of the
Sedgwick name in certain markets and business segments and indicated a
willingness to offer representation on the board of directors of Marsh &
McLennan.
During the week of 17 August 1998, legal, financial and operational due
diligence was conducted. In addition, meetings were held between the respective
management teams to determine the commitment of the respective managements to
the transaction, the optimal integration plan for the two companies and the cost
savings and synergies which may be generated thereby.
Also, toward the end of the week of 17 August 1998 and during the following
weekend, the financial and legal advisors of the two companies discussed the
potential terms and conditions for an offer. On 19 August 1998 the board of
Sedgwick met and received a report on the progress of the negotiations.
On 24 August 1998, a definitive proposal for an offer for all outstanding
Sedgwick Shares at a price per share of 225 pence was presented to, and approved
by, the respective boards of directors of the two companies. Following such
approvals, on the morning of 25 August 1998, Marsh & McLennan and Sedgwick
jointly announced the terms of the recommended Ordinary Offer.
7. FINANCING ARRANGEMENTS
The Offers are initially being financed through the acquisition finance facility
provided by J.P. Morgan to Marsh & McLennan described below. Following
completion of the acquisition of Sedgwick, Marsh & McLennan will investigate the
most appropriate method of refinancing the acquisition finance facility. Neither
the payment of interest on, nor the repayment of, nor the security for any
liability (contingent or otherwise) of Marsh & McLennan under such arrangements
will depend to any significant extent on the business of Sedgwick.
CREDIT FACILITY AGREEMENT
On 24 August 1998, (as amended on 2 September 1998), Marsh & McLennan entered
into a revolving credit facility agreement (the "Facility") as borrower with
J.P. Morgan Securities Inc. as Lead Arranger and J.P. Morgan as Administrative
Agent and Lender. The Facility is a US dollar denominated, 364-day agreement
under which Marsh & McLennan may borrow up to $2,250,000,000. The proceeds are
available to fund the acquisition of Sedgwick Securities and Sedgwick
Convertible Bonds pursuant to a cash tender offer, to make open market purchases
of Sedgwick Securities and Sedgwick Convertible Bonds up to a total of
$225,000,000, to refinance existing indebtedness of Sedgwick and to pay related
transaction fees and expenses arising in connection with the acquisition. Any
borrowings under the facility are either repayable in full at maturity of the
facility, or upon the issuance by the borrower of any debt securities (excluding
commercial paper and borrowings under the borrower's existing credit
facilities), repayable at an amount to be determined by the size of such debt
issuance.
VI-16
<PAGE> 144
The borrowings under the Facility will bear interest at the London inter-bank
offered rate for euro-dollar advances for the relevant period plus a margin. In
addition a "Facility Fee" will be paid based on the aggregate commitment
irrespective of usage under the Facility. There are also various fees and
commissions payable in connection with these arrangements.
The Facility agreement contains certain representations, warranties, covenants
and indemnities from Marsh & McLennan. On 2 September 1998 (the last practicable
day prior to the posting of this document), Marsh & McLennan has made no
drawings under this Facility.
8. COMPULSORY ACQUISITION
If, within four months after the date of this document, as a result of the
Ordinary Offer or otherwise, Marsh & McLennan acquires or contracts to acquire
Sedgwick Securities representing at least 90 per cent. in value of Sedgwick
Securities to which the Ordinary Offer relates, then (a) Marsh & McLennan will
be entitled and intends to effect the compulsory acquisition procedures provided
for in sections 428 to 430F of the Companies Act to compel the purchase of any
outstanding Sedgwick Securities on the same terms as provided in the Ordinary
Offer in accordance with the relevant procedures and time limits described in
such Act, and (b) a holder of Sedgwick Securities may require Marsh & McLennan
to purchase his Sedgwick Securities on the same terms as provided in the
Ordinary Offer in accordance with the relevant procedures and time limits
described in section 430A of the Companies Act.
Similar procedures are available in respect of the Sedgwick Convertible Bonds
under the Convertible Offer.
If for any reason the above-mentioned compulsory acquisition procedures are not
invoked, Marsh & McLennan will evaluate other alternatives to obtain the
remaining Sedgwick Securities or Sedgwick Convertible Bonds not purchased
pursuant to the Offers or otherwise. Such alternatives could include acquiring
additional Sedgwick Securities or Sedgwick Convertible Bonds in the open market,
in privately negotiated transactions, through another offer to purchase, by
means of a scheme of arrangement under the Companies Act or otherwise or in the
case of the Sedgwick Convertible Bonds by their redemption.
Any additional acquisitions could be for a consideration greater or less than,
or equal to, the consideration for Sedgwick Securities or Sedgwick Convertible
Bonds under the Offers. However, under the City Code, except with the consent of
the Panel, Marsh & McLennan may not acquire any Sedgwick Securities or Sedgwick
Convertible Bonds on better terms than those of the Offers within six months of
termination of the Offers if Marsh & McLennan, together with any persons acting
in concert with it (as defined in the City Code), holds following the Offers,
shares carrying more than 50 per cent. of the voting rights normally exercisable
at general meetings of Sedgwick.
Holders of Sedgwick Securities or Sedgwick Convertible Bonds do not have
appraisal rights as a result of the Offers. However, in the event that the
compulsory acquisition procedures referred to above are available to Marsh &
McLennan, holders of Sedgwick Securities or Sedgwick Convertible Bonds whose
Sedgwick Securities or Sedgwick Convertible Bonds have not been purchased
pursuant to the Offers will have certain rights to object under section 430C of
the Companies Act.
9. CERTAIN CONSEQUENCES OF THE OFFERS
(A) MARKET EFFECT
The past performance of the price of Sedgwick Shares and Sedgwick ADSs is no
guide to the future.
The purchase of Sedgwick Securities or Sedgwick Convertible Bonds pursuant to
the Offers will reduce the number of holders of Sedgwick Securities and Sedgwick
Convertible Bonds and the number of the Sedgwick Securities and Sedgwick
Convertible Bonds that might otherwise trade publicly and, depending upon the
number of Sedgwick Securities and Sedgwick Convertible Bonds so purchased, could
adversely affect the liquidity and market value of the remaining Sedgwick
Securities and Sedgwick Convertible Bonds held by the public. In addition, it is
intended that Sedgwick Shares and Sedgwick Convertible Bonds will cease to be
listed on the London Stock Exchange and Sedgwick ADSs will cease to be listed on
the NYSE whether or not
VI-17
<PAGE> 145
Marsh & McLennan is in a position to effect the compulsory acquisition of any
outstanding Sedgwick Shares or Sedgwick Convertible Bonds in accordance with the
Companies Act as referred to above, and irrespective of the size of any
outstanding minority in Sedgwick, if the Offers become or are declared
unconditional.
The value of all investments and the income from them can fall as well as rise
and not all the amount invested may be realised. Sedgwick Securityholders and
Sedgwick Bondholders accepting the Offers and electing to receive consideration
in US dollars should be aware that they will be exposed to foreign currency
risk.
(B) PUBLIC AVAILABILITY OF INFORMATION
In the event that Sedgwick Shares or Sedgwick Convertible Bonds continue to be
listed on the London Stock Exchange following the purchase of Sedgwick
Securities or Sedgwick Convertible Bonds pursuant to the Offers, holders of
Sedgwick Shares or Sedgwick Convertible Bonds who have not tendered their
Sedgwick Shares or Sedgwick Convertible Bonds pursuant to the Offers will
continue to receive the same financial and other information from Sedgwick that
Sedgwick presently is required by the rules of the London Stock Exchange to send
to such holders. If Sedgwick Shares are no longer listed on the London Stock
Exchange following the Offers, Sedgwick would no longer be required by those
rules to make publicly available such financial and other information.
Sedgwick ADSs are currently registered under the Exchange Act. Registration of
such Sedgwick ADSs may be terminated upon application of Sedgwick to the SEC if
Sedgwick ADSs are neither listed on a national securities exchange nor held by
300 or more beneficial owners in the US. Termination of registration of Sedgwick
ADSs under the Exchange Act would substantially reduce the information required
to be furnished by Sedgwick to holders of Sedgwick ADSs and to the SEC and would
make certain provisions of the Exchange Act, such as the requirements of Rule
13e-3 thereunder with respect to "going private" transactions, no longer
applicable to Sedgwick. Furthermore, "affiliates" of Sedgwick and persons
holding "restricted securities" of Sedgwick may be deprived of the ability to
dispose of such securities pursuant to Rule 144 promulgated under the Securities
Act. If, as a result of the purchase of Sedgwick ADSs pursuant to the Offer and
prior to completing the compulsory acquisition procedures referred to in
paragraph 9 above, Sedgwick is not required to maintain registration of Sedgwick
ADSs under the Exchange Act, Marsh & McLennan intends to cause to apply for
termination of such registration. If registration of Sedgwick ADSs is not
terminated prior to completion of the aforementioned compulsory acquisition
procedures, then Sedgwick ADSs will cease trading on the NYSE and the
registration of Sedgwick ADSs under the Exchange Act would be terminated
following completion of the aforementioned compulsory acquisition procedures.
(C) MARGIN SECURITIES
Sedgwick ADSs are currently "margin securities" under the regulations of the
Board of Governors of the US Federal Reserve System, which status has the
effect, among other things, of allowing US brokers to extend credit on the
collateral of Sedgwick ADSs for the purposes of buying, carrying and trading in
securities ("Purpose Loans"). Depending on factors such as the number of holders
of record of Sedgwick ADSs and the number and market value of publicly held
Sedgwick ADSs following the purchase of Sedgwick Securities pursuant to the
Offer, it is possible that Sedgwick ADSs would no longer be eligible for listing
on the NYSE. As a result, Sedgwick ADSs might no longer constitute margin
securities and, therefore, could no longer be used as collateral for Purpose
Loans made by US brokers.
10. LEGAL AND REGULATORY MATTERS
(A) GENERAL
Except as set out herein and other than the requirement to comply with the
Panel's requirements in relation to the City Code and with US securities laws,
Marsh & McLennan is not aware of (i) any licence or regulatory permit that
appears to be material to the business of the Sedgwick Group taken as a whole,
which might be adversely affected by Marsh & McLennan's acquisition of Sedgwick
Securities as contemplated herein, or (ii) any approval or other action by any
domestic or foreign governmental, administrative or regulatory agency or
authority that appears to be material to the Sedgwick Group taken as a whole,
and required for the
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acquisition or ownership of Sedgwick Securities by Marsh & McLennan as
contemplated herein. Should any such approval or other action be required, Marsh
& McLennan currently contemplates that such approval or other action would be
sought. There can be no assurance that any such approval or other action, if
needed, would be obtained without substantial conditions being attached thereto
or that failure to obtain any such approval or other action might not result in
consequences adverse to Sedgwick's business.
(B) UK REGULATION
Upon completion of the Offers, Marsh & McLennan will become controllers (as
defined in the Insurance Companies Act 1982 ("ICA")) of any insurance company
within the Sedgwick Group. Accordingly, the prior consent of HMT is required
under the ICA in respect of the new controllers. HMT is required to satisfy
itself that the proposed controllers are fit and proper to become controllers of
an insurance company and that, if the proposed controllers were to become
controllers, the criteria of sound and prudent management specified in the ICA
would continue to be met in respect of the insurance companies. Under the ICA,
HMT has a period of three months in which either to consent to the change of
control, or to notify the proposed controller of any objections to the
proposals.
In relation to the members of the Sedgwick Group which are regulated by the PIA
and the SFA, the consent of those regulators will also be required to the
proposed change of control. The regulators have 28 days from receiving notice of
a proposed change of control either to consent to the proposed change of control
or to serve a notice of objection in relation to the proposed change of control.
In addition, the proposed change of control of certain insurance brokers within
the Sedgwick Group and a Lloyd's members' agent must be notified to Lloyd's, as
the proposed transaction will amount to a change of control of such companies
for the purposes of the Lloyd's Byelaws.
(C) EC MERGER CLEARANCE
The Offers give rise to a concentration with a Community Dimension under the
Regulation and it is anticipated notification will be made to the European
Commission in the near future. The Offers are conditional on, amongst other
things, the European Commission indicating in terms reasonably satisfactory to
Marsh & McLennan that it does not intend to initiate proceedings under Article
6(1)(c) of the Regulation in respect of the Offers. The European Commission will
only initiate proceedings if it finds that the concentration arising from the
Offers falls within the scope of the Regulation and raises serious doubts as to
its compatibility with the Common Market. The European Commission has one
calendar month (beginning on the first working day following the date on which a
complete notification is received by the European Commission) to make its
decision (subject to extension).
(D) US ANTITRUST LAWS
Under the HSR Act and the rules that have been promulgated thereunder by the US
Federal Trade Commission ("FTC"), certain acquisition transactions may not be
consummated unless certain information has been furnished to the Antitrust
Division of the US Department of Justice (the "Antitrust Division") and the FTC
and certain waiting period requirements have been satisfied.
On 28 August 1998, Marsh & McLennan filed with the FTC and the Antitrust
Division a Premerger Notification and Report Form in connection with the
purchase of Sedgwick Securities and Sedgwick Convertible Bonds pursuant to the
Offers. Under the provisions of the HSR Act applicable to the Offers, the
purchase of Sedgwick Securities and Sedgwick Convertible Bonds pursuant to the
Offers may not be consummated until the expiration of a 30 calendar day waiting
period following the filing by Marsh & McLennan, unless both the Antitrust
Division and the FTC terminate the waiting period prior thereto. If, within such
30 calendar day waiting period, either the Antitrust Division or the FTC
requests additional information or documentary material from Marsh & McLennan,
the waiting period would be extended for an additional 20 calendar days
following substantial compliance by Marsh & McLennan with such request.
Thereafter, the waiting period could be extended only by court order or with
Marsh & McLennan's consent. If the acquisition of Sedgwick Securities or
Sedgwick Convertible Bonds are delayed pursuant to a request by
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the FTC or the Antitrust Division for additional information or documentary
material pursuant to the HSR Act, the Offers may, but need not, be extended and
in any event the purchase of and payment for Sedgwick Securities will be
deferred until 20 days after the request is substantially complied with, unless
the waiting period is sooner terminated by the FTC and the Antitrust Division.
Only one extension of such waiting period pursuant to a request for additional
information is authorised by the HSR Act and the rules promulgated thereunder,
except by court order. Any such extension of the waiting period will not give
rise to any withdrawal rights not otherwise provided for by applicable law.
The FTC and the Antitrust Division frequently scrutinise the legality under the
antitrust laws of transactions such as the proposed acquisition of Sedgwick
Securities and Sedgwick Convertible Bonds by Marsh & McLennan pursuant to the
Offers. At any time before or after the purchase by Marsh & McLennan of Sedgwick
Securities or Sedgwick Convertible Bonds pursuant to the Offers, either of the
FTC and the Antitrust Division could take such action under the antitrust laws
as it deems necessary or desirable in the public interest, including seeking to
enjoin the purchase of Sedgwick Securities or Sedgwick Convertible Bonds
pursuant to the Offers or seeking the divestiture of Sedgwick Securities or
Sedgwick Convertible Bonds purchased by Marsh & McLennan or the divestiture of
substantial assets of Marsh & McLennan, its subsidiaries or Sedgwick. Private
parties and state attorneys general may also bring legal action under federal or
state antitrust laws under certain circumstances.
Based upon an examination of information relating to the businesses in which
Sedgwick and its subsidiaries are engaged, Marsh & McLennan believes that the
acquisition of Sedgwick Securities or Sedgwick Convertible Bonds pursuant to the
Offers would not violate the antitrust laws. There can be no assurance, however,
that a challenge to the Offers on antitrust grounds will not be made or, if such
challenge is made, what the outcome will be. See Part A of Appendix I for
Conditions to the Offers, including Conditions with respect to litigation and
certain government actions which are relevant in this regard.
(E) US STATE TAKEOVER LAWS
A number of states of the US have adopted takeover laws and regulations which
purport, in varying degrees, to be applicable to attempts to acquire securities
of corporations which have substantial assets, shareholders, principal executive
offices or principal places of business in such states. Marsh & McLennan
believes that no such US state takeover statutes apply to the Offers and Marsh &
McLennan has not attempted to comply with any such US state takeover statutes in
connection with the Offers. Marsh & McLennan reserves the right to challenge the
validity or applicability of any US state law allegedly applicable to the Offers
and nothing in this document nor any action taken in connection herewith is
intended as a waiver of that right. In the event that any US state takeover
statute is asserted to be applicable to the Offers and an appropriate court does
not determine that such law or regulation is not applicable to the Offers, Marsh
& McLennan might be required to file certain information with, or to receive
approvals from, the relevant US state authorities and might be unable to
purchase Sedgwick Securities or Sedgwick Convertible Bonds pursuant to the
Offers or be delayed in continuing or consummating the Offers. In such case
Marsh & McLennan may not be obliged to purchase such Sedgwick Securities or
Sedgwick Convertible Bonds.
(F) LAWS OF OTHER JURISDICTIONS
Sedgwick and certain of its subsidiaries conduct business in certain countries
in addition to the UK and the US where regulatory filings or approvals may be
required in connection with the Offers. Certain of such filings or approvals, if
required, may not be made or obtained prior to the expiry of the Offers. There
is no assurance that any such approvals would be obtained or that adverse
consequences to Marsh & McLennan's or the Sedgwick Group's business might not
result from a failure to obtain such approvals or from conditions that might be
imposed in connection therewith.
Marsh & McLennan and Sedgwick have agreed with each other to use all reasonable
endeavours to procure the approval of the Offers and Marsh & McLennan has agreed
not to invoke any of the Conditions relating to anti-trust, competition,
regulatory or similar matters as a reason for delaying completion of the Offers
except in certain circumstances.
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11. UK TAXATION
THE FOLLOWING STATEMENTS ARE INTENDED AS A GENERAL GUIDE TO THE POSITION UNDER
UK LAW AND INLAND REVENUE PRACTICE AS AT THE DATE OF THIS DOCUMENT AND RELATE
ONLY TO CERTAIN LIMITED ASPECTS OF THE TAXATION POSITION OF SEDGWICK
SHAREHOLDERS AND SEDGWICK BONDHOLDERS WHO HOLD THEIR SEDGWICK SHARES AND/OR
SEDGWICK CONVERTIBLE BONDS BENEFICIALLY AS AN INVESTMENT (OTHERWISE THAN UNDER A
PERSONAL EQUITY PLAN) AND WHO ARE RESIDENT OR, IN THE CASE OF INDIVIDUALS,
ORDINARILY RESIDENT IN THE UK FOR TAX PURPOSES AT ALL RELEVANT TIMES.
Each Sedgwick Shareholder and Sedgwick Bondholder should consult his independent
professional adviser regarding the tax consequences of valid acceptance of the
Ordinary Offer and/or the Convertible Offer.
(A) TAXATION OF CHARGEABLE GAINS
Liability to UK taxation of chargeable gains ("CGT") will depend on the
individual circumstances of Sedgwick Shareholders and Sedgwick Bondholders and
on the form of consideration received.
(i) Cash
To the extent that a Sedgwick Shareholder or Sedgwick Bondholder receives cash
under the Ordinary Offer or the Convertible Offer, this will constitute a
disposal, or part disposal, of his Sedgwick Shares or Sedgwick Convertible Bonds
respectively for CGT purposes and may, depending on that shareholder's or
bondholder's individual circumstances, give rise to a liability to CGT.
(ii) Loan Notes
Liability to CGT arising from acceptance of the Loan Note Alternative will
depend on the particular circumstances of each Sedgwick Shareholder and Sedgwick
Bondholder.
A Sedgwick Shareholder or Sedgwick Bondholder who either alone or together with
persons connected with him holds not more than five per cent. of, or any class
of, shares in or debentures of Sedgwick will not, to the extent that he receives
Loan Notes under the Ordinary Offer or the Convertible Offer, be treated as
making a disposal of Sedgwick Shares or Sedgwick Convertible Bonds for CGT
purposes. Any gain or loss that would otherwise have arisen on a disposal of his
Sedgwick Shares or Sedgwick Convertible Bonds will, in the case of an individual
or other non-corporate shareholder, be "rolled-over" into the Loan Notes, and
the Loan Notes will be treated as the same asset as his Sedgwick Shares or
Sedgwick Convertible Bonds acquired at the same time and for the same
consideration as he acquired his Sedgwick Shares or Sedgwick Convertible Bonds.
To the extent that a Sedgwick Shareholder or Sedgwick Bondholder within the
charge to corporation tax receives Loan Notes, any gain or loss which would
otherwise have arisen on a disposal of its Sedgwick Shares or Sedgwick
Convertible Bonds for a consideration equal to market value at the time of the
exchange of the Sedgwick Shares or Sedgwick Convertible Bonds for Loan Notes
will be "held over" and deemed to accrue on a subsequent disposal (including on
redemption or repayment) of the Loan Notes.
Any Sedgwick Shareholder or Sedgwick Bondholder who holds, either alone or
together with persons connected with him, more than five per cent. of, or of any
class of, the shares in or debentures of Sedgwick is advised that an application
for clearance has been made to the Inland Revenue under Section 138 of the
Taxation of Chargeable Gains Act 1992 that this transaction is being effected
for bona fide commercial reasons and does not form part of a scheme or
arrangement of which the main purpose or one of the main purposes is avoidance
of liability to capital gains tax or corporation tax, although receipt of such
clearance is not a condition of the Ordinary Offer or the Convertible Offer.
Provided such clearance is given, any such shareholder or bondholder will be
treated in the manner described in the preceding paragraphs.
(iii) Disposal of Loan Notes
A subsequent disposal of Loan Notes (including on redemption or repayment) may
result in a CGT liability.
For a Sedgwick Shareholder or Sedgwick Bondholder who is an individual or other
non-corporate holder, the Loan Notes should not constitute qualifying corporate
bonds for the purposes of UK taxation of chargeable
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gains. Accordingly, any chargeable gain or allowable loss on disposal (including
on redemption or repayment) of the Loan Notes should be calculated taking into
account the allowable original cost to the holder of acquiring the relevant
Sedgwick Shares. Indexation allowance on that cost should be available (when
calculating a chargeable gain but not an allowable loss) in respect of any
period of ownership of the Sedgwick Shares or Sedgwick Convertible Bonds up to
April 1998. Thereafter, some taper relief may be available which will reduce the
amount of chargeable gain realised on the subsequent disposal.
For a Sedgwick Shareholder or Sedgwick Bondholder within the charge to
corporation tax, the Loan Notes will be qualifying corporate bonds for the
purposes of UK taxation of chargeable gains. Accordingly, no indexation
allowance will be available for the period of ownership of the Loan Notes and,
except to the extent any gain or loss which would otherwise have arisen on the
disposal of its Sedgwick Shares or Sedgwick Convertible Bonds was "held over"
and crystallises on a subsequent disposal as described above, no chargeable gain
or allowable loss will arise.
(B) TAXATION OF INCOME
(i) Interest on Loan Notes
Where any person in the UK collects or secures payment of interest on the Loan
Notes or performs certain other functions on behalf of holders of Loan Notes (a
"UK Collecting Agent"), or where interest on the Loan Notes is entrusted to any
person in the UK for payment or distribution on behalf of Marsh & McLennan to
holders of Loan Notes (a "UK Paying Agent), such UK Collecting Agent or UK
Paying Agent (as the case may be) must normally deduct UK income tax at the
lower rate (currently 20 per cent.) from the interest unless an exemption
applies and, if so required, the UK Collecting Agent or UK Paying Agent (as the
case may be) has obtained a valid and effective declaration in the form required
by law or notice by the Inland Revenue.
For a non-corporate holder of Loan Notes the gross amount of interest on the
Loan Notes will form part of the recipient's income for the purposes of UK
income tax.
On a transfer of Loan Notes by an individual or other non-corporate body, a
charge may arise under the accrued income scheme in respect of the interest on
the Loan Notes which has accrued since the preceding interest paying date.
A holder of Loan Notes within the charge to corporation tax in respect of the
Loan Notes will generally be charged to UK corporation tax in respect of
interest on, profits and gains arising from and fluctuations in the value of the
Loan Notes, broadly in accordance with its authorised accounting method.
(C) OTHER DIRECT TAX MATTERS
Special tax provisions may apply to Sedgwick Shareholders who have acquired or
acquire their Sedgwick Shares by exercising Options under the Sedgwick Share
Option Schemes including provisions imposing a charge to income tax when such an
option is exercised.
(D) STAMP DUTY
No stamp duty or stamp duty reserve tax will be payable by Sedgwick Shareholders
or Sedgwick Bondholders as a result of accepting the Ordinary Offer or the
Convertible Offer.
Under current Inland Revenue practice no UK stamp duty or stamp duty reserve tax
will be payable on the issue transfer or sale of (or on an agreement to
transfer) Loan Notes.
THE ABOVE SUMMARY IS INTENDED ONLY AS A GENERAL GUIDE TO THE TAXATION POSITION
UNDER UK TAX LEGISLATION AND DOES NOT CONSTITUTE TAX OR LEGAL ADVICE. ANY PERSON
WHO IS IN DOUBT AS TO HIS TAXATION POSITION OR WHO REQUIRES MORE DETAILED
INFORMATION SHOULD CONSULT HIS OWN PROFESSIONAL TAX ADVISER.
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12. US FEDERAL INCOME TAXATION
The following is a general summary of certain US federal income tax consequences
applicable to holders of Sedgwick Securities who accept the Ordinary Offer. This
summary is based on current law which is subject to change, possibly with
retroactive effect and therefore may affect the tax consequences described
herein. This summary assumes that the Sedgwick Securities have been held as
capital assets. This summary also assumes that Sedgwick is not and has never
been either a passive foreign investment company or a controlled foreign
corporation for US federal income tax purposes. This summary does not address
the US federal income tax consequences applicable to holders subject to special
rules, such as certain financial institutions, regulated investment companies,
insurance companies, dealers in securities, exempt organisations, or persons
holding Sedgwick Securities as part of a hedge, straddle or conversion
transaction or to holders who acquired Sedgwick Securities as a result of
Sedgwick Share Option Schemes or other employment based arrangements. Moreover
it does not discuss the tax consequences that may be relevant to Sedgwick
Bondholders that exchange Sedgwick Convertible Bonds pursuant to the Convertible
Offer (other than the US federal income tax consequences of receiving interest
on the Loan Notes).
(A) US HOLDERS
Acceptance of the Ordinary Offer
In general, a US Holder of Sedgwick Securities that sells such securities
pursuant to the Ordinary Offer will, for US federal income tax purposes,
recognise gain or loss equal to the difference between such holder's adjusted
tax basis in the Sedgwick Securities sold and the amount realised in exchange
therefor. The amount realised by a US Holder in exchange for Sedgwick Securities
will equal the amount of US dollars received (or, if a US Holder elects to
receive pounds sterling, the dollar value of the pounds sterling received) by
such holder. Such gain or loss generally will be capital gain or loss. Net
capital gain (i.e., generally capital gain in excess of capital loss) recognized
by an individual investor upon a disposition of a capital asset that has been
held for more than 12 months will generally be subject to a maximum US federal
income tax rate of 20 per cent., or, in the case of a capital asset that has
been held for 12 months or less, will be subject to ordinary US federal income
tax rates.
In addition, an accrual basis US Holder of Sedgwick Securities that (i)
transfers such securities pursuant to the Ordinary Offer, (ii) elects to receive
pounds sterling and (iii) does not elect to be treated as a cash basis taxpayer
pursuant to the foreign currency exchange regulations may have a foreign
currency exchange gain or loss for US federal income tax purposes because of
differences between the US dollars/pounds sterling exchange rates prevailing on
the date of sale and on the date of payment. Any such currency gain or loss
would be treated as ordinary income or loss and would be in addition to gain or
loss recognised by the holder on the sale of Sedgwick Securities pursuant to the
Ordinary Offer.
(B) NON-US HOLDERS
Interest on Loan Notes
A Non-US Holder generally will not be subject to US federal income or
withholding tax on payments of interest on a Loan Note, provided that (i) the
holder is not (A) a direct or indirect owner of 10 per cent. of more of the
total combined voting power of all classes of stock of Marsh & McLennan entitled
to vote or (B) a controlled foreign corporation related to Marsh & McLennan
actually or constructively through stock ownership, (ii) such interest payments
are not effectively connected with the conduct by the Non-US Holder of a trade
or business within the US and (iii) Marsh & McLennan or its paying agent
receives certain information from the holder (or a financial institution that
holds the Loan Notes in the ordinary course of its trade or business) certifying
that such holder is a Non-US Holder. Payments of interest not exempt from US
federal withholding tax as described above will generally be subject to
withholding tax at a rate of 30 per cent., subject to reduction under an
applicable income tax treaty (such as the US/UK double taxation treaty, pursuant
to which US withholding tax generally would not apply on payments of interest on
a Loan Note). To claim the benefit of a tax treaty, the holder must provide
certification as required by US federal income tax law. In addition, the amount
treated as interest on the Loan Notes, for US federal income tax purposes, will
be
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in excess of the stated interest on the Loan Notes, which will result in a
portion of the principal with respect to the Loan Notes being treated as
interest for US federal income tax purposes.
(C) INFORMATION REPORTING AND BACKUP WITHHOLDING
A holder of Sedgwick Securities may be subject to a 31 per cent. US federal
backup withholding tax with respect to a cash payment if the holder (i) fails to
furnish a taxpayer identification number ("TIN") to the payer, which, for an
individual, would be his or her Social Security number, or establish an
exemption from backup withholding, (ii) furnishes an incorrect TIN, (iii) is
notified by the Internal Revenue Service that it has failed to report payments
of interest or dividends or (iv) under certain circumstances, fails to certify,
under penalty of perjury, that it has furnished a correct TIN and has been
notified by the Internal Revenue Service that it is subject to backup
withholding tax for failure to report interest or dividend payments.
In order for a US Holder to prevent backup withholding on any cash payment
delivered pursuant to the Ordinary Offer, such US Holder must provide the
holder's correct taxpayer identification number and certify that such holder is
not subject to US federal backup withholding tax by completing the Substitute
Form W-9 which is included in the Letter of Transmittal or can otherwise be
obtained from the US Depositary. In order for a Non-US Holder to prevent backup
withholding on any cash payment delivered pursuant to the Ordinary Offer or with
respect to any payment made on a Loan Note, such Non-US Holder generally must
certify that such holder is a Non-US Holder.
THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION ONLY AND IS INTENDED TO BE
ONLY A SUMMARY OF THE PRINCIPAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF
THE ORDINARY OFFER. EACH HOLDER OF SEDGWICK SECURITIES AND SEDGWICK CONVERTIBLE
BONDS SHOULD CONSULT SUCH HOLDER'S TAX ADVISER CONCERNING THE UNITED STATES
FEDERAL AND APPLICABLE STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES RELATED
TO THE ORDINARY OFFER AND CONVERTIBLE OFFER.
13. CASH CONFIRMATION
J.P. Morgan and Donaldson, Lufkin & Jenrette are satisfied that sufficient
financial resources are available to Marsh & McLennan to satisfy full acceptance
of the Offers.
14. FEES AND EXPENSES
(a) Pursuant to letters between J.P. Morgan and Donaldson, Lufkin & Jenrette,
respectively, and Marsh & McLennan dated 21 August 1998 and 24 August 1998
respectively, (together the "Engagement Letters"), J.P. Morgan and
Donaldson, Lufkin & Jenrette, respectively, are acting as financial
advisers to Marsh & McLennan in connection with the Offers. Pursuant to the
terms of the Engagement Letters, J.P. Morgan's and Donaldson, Lufkin &
Jenrette's fees are to be determined at a later date. In addition, Marsh &
McLennan has agreed to indemnify J.P. Morgan and Donaldson, Lufkin &
Jenrette and any company within their respective groups against, inter
alia, certain losses and expenses arising out of the engagement or
performance by J.P. Morgan and Donaldson, Lufkin & Jenrette of their duties
pursuant to the Engagement Letters.
(b) Cazenove is acting as broker to Marsh & McLennan in connection with the
Offer. Cazenove's fees for services provided are to be determined at a
later date.
(c) Pursuant to an agreement dated 4 September 1998 (the "US Dealer Manager
Agreement"), Marsh & McLennan has retained J.P. Morgan Securities Inc. and
Donaldson, Lufkin & Jenrette Securities Corporation as US Dealer Managers
for the Offers in the US to perform those services in connection with the
Offers as are customarily performed in the US by investment banking
concerns acting as dealer manager in connection with offers of a like
nature. No additional fee will become payable by Marsh & McLennan under the
terms of the US Dealer Manager Agreement. In addition, under the terms of
the US Dealer Manager Agreement, Marsh & McLennan has agreed to indemnify
the US Dealer Managers
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and certain other persons against certain liabilities and expenses which
may be incurred in connection with the Offers including liabilities under
the US federal securities laws.
(d) Marsh & McLennan has retained Computershare Services PLC as the UK Receiving
Agent, Bank of New York as the US Depositary and Georgeson & Company Inc.
as the Information Agent. Marsh & McLennan will pay the UK Receiving Agent,
the US Depositary and the Information Agent reasonable and customary
compensation for their services in connection with the Offers, together
with reimbursement of out of pocket expenses. Marsh & McLennan will
indemnify the UK Receiving Agent, the US Depositary and the Information
Agent against certain liabilities and expenses in connection therewith,
including liabilities under the US federal securities laws. Brokers,
dealers, commercial banks and trust companies will be reimbursed by Marsh &
McLennan for customary mailing and handling expenses incurred by them in
forwarding material to their customers.
(e) Marsh & McLennan will not pay any fees or commissions to any broker or
dealer or any other person for soliciting acceptances of the Offers (other
than to J.P. Morgan and Donaldson, Lufkin & Jenrette and their associates
and the Information Agent, as described above).
(f) Sedgwick will bear the expenses of its personnel and advisers in connection
with the Offers.
15. SERVICE CONTRACTS OF SEDGWICK DIRECTORS
(a) There are no service contracts between any director of Sedgwick and Sedgwick
or any of its subsidiaries having more than 12 months to run and no such
contract has been entered into or amended or replaced within the six months
preceding the date of this document.
(b) Certain of the Sedgwick executive directors are eligible to participate in
the Sedgwick Share Option Schemes. Certain of them are also eligible to
participate in the Senior Executive Incentive Plan ("SEIP"), and the 1998
Senior Incentive Plan ("SIP").
Under the SEIP, an annual bonus is paid, the amount of which relates to the
individual's salary and certain performance targets but which may not
exceed 60 per cent. of salary. This amount is matched by a further bonus of
an equal amount, which is deferred for three years during which it is
adjusted up or down to reflect movements in the Sedgwick Share price.
On 24 August 1998, an amendment to the SEIP was adopted by the Compensation
Committee of Sedgwick. This amendment provides that in the event of a
change of control occurring following an offer to acquire all of the issued
share capital of the company, deferred bonuses under the SEIP will become
payable, adjusted to reflect changes in the Sedgwick Share price between
the date of grant and the date the offer becomes unconditional. In addition
annual bonuses for the current award year will become automatically
payable. The amount of the annual bonus will be determined on the basis of
actual performance during the relevant period and the payment will be made
as soon as practicable after the first date when actual performance for the
relevant period can be assessed. The payment will be made in cash and will
include an additional cash sum equal in value to the participant's annual
bonus (which will be payable in lieu of the deferred bonus to which he
would otherwise have been entitled).
The terms of the SIP were agreed in principle by the Compensation Committee
of Sedgwick on 6 May 1998 and the rules were formally adopted and approved
by the board on 24 August 1998. Under this plan, bonuses will be payable to
certain executives by reference to performance targets during the course of
1998. The SIP provides that up to 50 per cent. of this bonus can be
deferred with a matching element paid in Sedgwick Shares. On a change of
control of Sedgwick during the year, the bonus for that year becomes
payable automatically and is not subject to any continuation of employment
thereafter. It shall be determined on the basis of actual performance
during the relevant financial year but shall be no less than the amount
which would have been payable if the target performance had been achieved.
A payment will also be made on the basis that the participant would have
taken 50 per cent. (or such other relevant percentage applicable to the
individual) of his bonus on a deferred basis and satisfied any
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necessary conditions until the end of the relevant retention period. For
the purpose of calculating the value of the payment, the value of any
Sedgwick Shares which would otherwise have been transferable to the
participant shall be equal to their market value based on the terms of any
offer to obtain control of Sedgwick.
The SEIP and SIP will not operate in respect of 1999 and later years unless
Marsh &McLennan agrees otherwise.
(c) Amendments were made to the employment terms of Rob White-Cooper, Quill
Healey, Jeremy Pinchin, Stuart Tarrant, David Trezies and Richard Titley by
way of side letters issued on 4 August 1998. These letters offered a
retention payment based on salary (payable in two instalments each of 50
per cent. of salary and the second being conditional on the director
remaining in employment for a further period of 360 days or having ceased
employment in specified circumstances) and a variable incentive payment of
up to 100 per cent. of salary (calculated by reference to the price of
Sedgwick Shares). Payments are dependent on the completion of a significant
transaction by the Sedgwick Group or an offer for the shares of Sedgwick
becoming unconditional before 30 December 1998, and on certain other
conditions being satisfied.
Sax Riley has been offered a similar arrangement, but without the second
instalment of the retention payment resulting in a single fee of 50 per
cent. of his salary payable on completion, plus a variable payment.
(d) As part of the incentive and retention arrangements put in place in
connection with the Offers, Marsh & McLennan has agreed to make awards of
Marsh & McLennan deferred stock units to certain senior employees of the
Sedgwick Group, to an aggregate value of approximately US$80,000,000
measured as at the date the Ordinary Offer is declared unconditional in all
respects. The total amount available shall be allocated between individual
participants so that each individual receives an award with a value of
between 100 per cent. of his basic salary and US$1,000,000 (unless
otherwise agreed with Marsh & McLennan).
In particular, Marsh & McLennan has agreed to award certain directors of
Sedgwick deferred stock units on the following basis.
<TABLE>
<CAPTION>
VALUE OF DEFERRED STOCK
DIRECTOR UNITS (US$)
-------- -----------------------
<S> <C>
Q.O. Healey................................................. 1,000,000
J. Pinchin.................................................. 750,000
R.J.W. Titley............................................... 380,000
D.P. Trezies................................................ 800,000
W.R.P. White-Cooper......................................... 1,000,000
</TABLE>
If the Offers are declared unconditional in all respects, awards of
deferred stock units will be granted in the above values (measured by
reference to the price of Marsh & McLennan common stock at that date). Each
award will, in normal circumstances, vest on the third anniversary of the
date the Offers are declared unconditional in all respects and the
participant will receive one Marsh & McLennan common stock for each
deferred stock unit. Early vesting will, however, occur subject to certain
exceptions where the participant's employment with the Marsh & McLennan
Group ends prior to the third anniversary.
(e) As part of the incentive and retention arrangements put in place in
connection with the Offers, Marsh & McLennan has agreed to grant options
within a period of 12 months after the date the Offers are declared
unconditional in all respects to certain Sedgwick executives to be agreed
between Marsh & McLennan and Sedgwick, but with each individual receiving
no less than 1,500 Marsh & McLennan common stock and (subject to
exceptional circumstances) no more than 9,000 Marsh & McLennan common stock
options under the Marsh & McLennan Companies, Inc. 1997 Employee Incentive
and Stock Award Plan.
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(g) No proposal exists in connection with the Offers that any payment or other
benefit be made or given to any director of Sedgwick as compensation for
loss of office or as consideration for or in connection with his retirement
from office.
16. SOURCES OF INFORMATION AND BASES OF CALCULATION
In this document, unless otherwise stated, or the context otherwise requires,
the following bases and sources have been used:
(a) Unless otherwise stated, information concerning the Sedgwick Group has been
extracted from Sedgwick's annual report and accounts for the three years
ended 31 December 1997.
(b) The value of the share capital of Sedgwick is based upon 554,165,137
Sedgwick Shares in issue on 2 September 1998 and excludes all Sedgwick
Securities which could call to be issued on exercise in full of Options
granted under the Sedgwick Share Option Schemes.
(c) The average closing price of Sedgwick Share over the last six months is
based on the closing middle market prices for a Sedgwick Share as derived
from the Daily Official List.
17. OTHER INFORMATION
(a) Save as disclosed in this document, no agreement, arrangement or
understanding (including any compensation arrangement) exists between Marsh
& McLennan or any person acting in concert with it for the purpose of the
Offers and any of the directors, recent directors, shareholders or recent
shareholders of Sedgwick having any connection with or dependence upon the
Offers, other than the awards to certain employees who are also Sedgwick
Securityholders as described in paragraph 15 of this Appendix VI.
(b) Save as disclosed in this document, there is no agreement, arrangement or
understanding whereby the beneficial ownership of any of the Sedgwick
Securities or Sedgwick Convertible Bonds to be acquired by Marsh & McLennan
pursuant to the Offers will be transferred to any other person, save that
Marsh & McLennan reserves the right to transfer any such shares or
securities to any member of the Marsh & McLennan Group.
(c) J.P. Morgan and Donaldson Lufkin & Jenrette, which are regulated in the UK
by The Securities and Futures Authority Limited, have given and not
withdrawn their written consent to the issue of this document with the
inclusion of their names including, in the case of J.P. Morgan, the
reference to its valuation of the Loan Notes, in the form and context in
which they appear.
(d) Cazenove which is regulated in the UK by The Securities and Futures
Authority Limited has given and not withdrawn its written consent to the
issue of this document with the inclusion of its name in the form and
context in which it appears.
(e) Rothschild and Credit Suisse First Boston, which are regulated in the UK by
The Securities and Futures Authority Limited have given and not withdrawn
their written consent to the issue of this document with the inclusion of
their names in the form and context in which they appear.
(f) Save as disclosed in this document, the directors of Marsh & McLennan do not
know of any material change in the financial or trading position of Marsh &
McLennan since 31 December 1997, being the date to which Marsh & McLennan's
last audited accounts were prepared.
(g) Save as disclosed in this document, the directors of Sedgwick do not know of
any material change in the financial or trading position of Sedgwick since
31 December 1997, being the date to which Sedgwick's last audited accounts
were prepared.
(h) Save as disclosed in this document, the total emoluments receivable by the
directors of Marsh & McLennan will not be varied as a consequence of the
proposed acquisition of Sedgwick, or by any other associated transaction.
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(i) Mrs L.M.B.A. Moratti, who was appointed a director of Sedgwick on 17
December 1997, together with certain family members, controls Securfin
S.p.A. and Securfin Altrida B.V. Those companies are parties to the joint
venture agreement and related documentation in respect of the creation of
the Nikols Sedgwick joint venture. As a result of the change of control
resulting from the Offers becoming unconditional or if Mrs Moratti is
removed as executive chairman of Nikols Sedgwick, Securfin S.p.A. will be
entitled to exercise a put option requiring Sedgwick to purchase (or
procure the purchase of) the 51 per cent of Nikols Sedgwick held by
Securfin S.p.A. The price to be paid by Sedgwick under these circumstances
in accordance with the joint venture agreement will be an amount equal to
1.5 X brokerage and fees for the twelve months to the end of the most
recent quarter subject to certain adjustments in respect of net tangible
assets/liabilities, capital paid in and dividends unpaid at the end of the
relevant period.
18. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents will be available for inspection during normal
business hours on weekdays (Saturdays, Sundays and public holidays excepted) at
the offices of Freshfields, 65 Fleet Street, London EC4Y 1HS, while the Offers
remain open for acceptance:
(a) the Restated Certificate of Incorporation (as amended on 21 May 1997) and
By-laws (as amended on 1 January 1998) of Marsh & McLennan;
(b) the Memorandum and Articles of Association of Sedgwick;
(c) the audited consolidated accounts of Marsh & McLennan for the financial
periods ended on 30 December 1996 and 30 December 1997 and the interim
results for the six months ended 30 June 1998;
(d) the audited consolidation accounts of Sedgwick for the financial periods
ended on 30 December 1996 and 30 December 1997 and the interim results for
the six months ended 30 June 1998;
(e) the letter of valuation of the Loan Notes by J.P. Morgan dated 4 September
1998;
(f) the written consents referred to in paragraph 17 above;
(g) the material contracts referred to in paragraph 5 above;
(h) irrevocable commitments received in respect of Sedgwick Securities and
Sedgwick Convertible Bonds;
(i) a draft (subject to amendment) of the Loan Note Instrument;
(j) the Offer Document and the Acceptance Forms;
(k) a letter dated 25 August 1998 between Sedgwick and Marsh & McLennan; and
(l) a full list of the dealings set out in aggregated form in paragraph 4(b)(v)
of this Appendix VI.
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APPENDIX VII -- CERTAIN PROVISIONS OF THE COMPANIES ACT
PART XIIIA
TAKEOVER OFFERS
428. TAKEOVER OFFERS
(1) In this Part of this Act "takeover offer" means an offer to acquire all the
shares, or all the shares of any class or classes, in a company (other than
shares which at the date of the offer are already held by the offeror),
being an offer on terms which are the same in relation to all the shares to
which the offer relates or, where those shares include shares of different
classes, in relation to all the shares of each class.
(2) In subsection (1) "shares" means shares which have been allotted on the date
of the offer but a takeover offer may include among the shares to which it
relates all or any shares that are subsequently allotted before a date
specified in or determined in accordance with the terms of the offer.
(3) The terms offered in relation to any shares shall for the purposes of this
section be treated as being the same in relation to all the shares or, as
the case may be, all the shares of a class to which the offer relates
notwithstanding any variation permitted by subsection (4).
(4) A variation is permitted by this subsection where--
(a) the law of a country or territory outside the United Kingdom precludes
an offer of consideration in the form or any of the forms specified in
the terms in question or precludes it except after compliance by the
offeror with conditions with which he is unable to comply or which he
regards as unduly onerous; and
(b) the variation is such that the persons to whom an offer of
consideration in that form is precluded are able to receive
consideration otherwise than in that form but of substantially
equivalent value.
(5) The reference in subsection (1) to shares already held by the offeror
includes a reference to shares which he has contracted to acquire but that
shall not be construed as including shares which are the subject of a
contract binding the holder to accept the offer when it is made, being a
contract entered into by the holder either for no consideration and under
seal or for no consideration other than a promise by the offeror to make
the offer.
(6) In the application of subsection (5) to Scotland the words "and under seal"
shall be omitted.
(7) Where the terms of an offer make provision for their revision and for
acceptances on the previous terms to be treated as acceptances on the
revised terms, the revision shall not be regarded for the purposes of this
Part of this Act as the making of a fresh offer and references in this Part
of this Act to the date of the offer shall accordingly be construed as
references to the date on which the original offer was made.
(8) In this Part of this Act "the offeror" means, subject to section 430D, the
person making a takeover offer and "the company" means the company whose
shares are the subject of the offer.
429. RIGHT OF OFFEROR TO BUY OUT MINORITY SHAREHOLDERS
(1) If, in a case in which a takeover offer does not relate to shares of
different classes, the offeror has by virtue of acceptances of the offer
acquired or contracted to acquire not less than nine-tenths in value of the
shares to which the offer relates he may give notice to the holder of any
shares to which the offer relates which the offeror has not acquired or
contracted to acquire that he desires to acquire those shares.
(2) If, in a case in which a takeover offer relates to shares of different
classes, the offeror has by virtue of acceptances of the offer acquired or
contracted to acquire not less than nine-tenths in value of the shares of
any class to which the offer relates, he may give notice to the holder of
any shares of that class which the offeror has not acquired or contracted
to acquire that he desires to acquire those shares.
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(3) No notice shall be given under subsection (1) or (2) unless the offeror has
acquired or contracted to acquire the shares necessary to satisfy the
minimum specified in that subsection before the end of the period of four
months beginning with the date of the offer; and no such notice shall be
given after the end of the period of two months beginning with the date on
which he has acquired or contracted to acquire shares which satisfy that
minimum.
(4) Any notice under this section shall be given in the prescribed manner; and
when the offeror gives the first notice in relation to an offer he shall
send a copy of it to the company together with a statutory declaration by
him in the prescribed form stating that the conditions for the giving of
the notice are satisfied.
(5) Where the offeror is a company (whether or not a company within the meaning
of this Act) the statutory declaration shall be signed by a director.
(6) Any person who fails to send a copy of a notice or a statutory declaration
as required by subsection (4) or makes such a declaration for the purposes
of that subsection knowing it to be false or without having reasonable
grounds for believing it to be true shall be liable to imprisonment or a
fine, or both, and for continued failure to send the copy or declaration,
to a daily default fine.
(7) If any person is charged with an offence for failing to send a copy of a
notice as required by subsection (4) it is a defence for him to prove that
he took reasonable steps for securing compliance with that subsection.
(8) When during the period within which a takeover offer can be accepted the
offeror acquires or contracts to acquire any of the shares to which the
offer relates but otherwise than by virtue of acceptances of the offer,
then, if--
(a) the value of the consideration for which they are acquired or
contracted to be acquired ("the acquisition consideration") does not at
that time exceed the value of the consideration specified in the terms
of the offer; or
(b) those terms are subsequently revised so that when the revision is
announced the value of the acquisition consideration, at the time
mentioned in paragraph (a) above, no longer exceeds the value of the
consideration specified in those terms,
the offeror shall be treated for the purposes of this section as having
acquired or contracted to acquire those shares by virtue of acceptances of
the offer; but in any other case those shares shall be treated as excluded
from those to which the offer relates.
430. EFFECT OF NOTICE UNDER S 429
(1) The following provisions shall, subject to section 430C, have effect where a
notice is given in respect of any shares under section 429.
(2) The offeror shall be entitled and bound to acquire those shares on the terms
of the offer.
(3) Where the terms of an offer are such as to give the holder of any shares a
choice of consideration the notice shall give particulars of the choice and
state--
(a) that the holder of the shares may within six weeks from the date of
the notice indicate his choice by a written communication sent to the
offeror at an address specified in the notice; and
(b) which consideration specified in the offer is to be taken as applying
in default of his indicating a choice as aforesaid;
and the terms of the offer mentioned in subsection (2) shall be determined
accordingly.
(4) Subsection (3) applies whether or not any time-limit or other conditions
applicable to the choice under the terms of the offer can still be complied
with; and if the consideration chosen by the holder of the shares--
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(a) is not cash and the offeror is no longer able to provide it; or
(b) was to have been provided by a third party who is no longer bound or
able to provide it,
the consideration shall be taken to consist of an amount of cash payable by
the offeror which at the date of the notice is equivalent to the chosen
consideration.
(5) At the end of six weeks from the date of the notice the offeror shall
forthwith--
(a) send a copy of the notice to the company; and
(b) pay or transfer to the company the consideration for the shares to
which the notice relates.
(6) If the shares to which the notice relates are registered the copy of the
notice sent to the company under subsection (5)(a) shall be accompanied by
an instrument of transfer executed on behalf of the shareholder by a person
appointed by the offeror; and on receipt of that instrument the company
shall register the offeror as the holder of those shares.
(7) If the shares to which the notice relates are transferable by the delivery
of warrants or other instruments the copy of the notice sent to the company
under subsection (5)(a) shall be accompanied by a statement to that effect;
and the company shall on receipt of the statement issue the offeror with
warrants or other instruments in respect of the shares and those already in
issue in respect of the shares shall become void.
(8) Where the consideration referred to in paragraph (b) of subsection (5)
consists of shares or securities to be allotted by the offeror the
reference in that paragraph to the transfer of the consideration shall be
construed as a reference to the allotment of the shares or securities to
the company.
(9) Any sum received by a company under paragraph (b) of subsection (5) and any
other consideration received under that paragraph shall be held by the
company on trust for the person entitled to the shares in respect of which
the sum or other consideration was received.
(10)Any sum received by a company under paragraph (b) of subsection (5), and any
dividend or other sum accruing from any other consideration received by a
company under that paragraph, shall be paid into a separate bank account,
being an account the balance on which bears interest at an appropriate rate
and can be withdrawn by such notice (if any) as is appropriate.
(11)Where after reasonable enquiry made at such intervals as are reasonable the
person entitled to any consideration held on trust by virtue of subsection
(9) cannot be found and twelve years have elapsed since the consideration
was received or the company is wound up the consideration (together with
any interest, dividend or other benefit that has accrued from it) shall be
paid into court.
(12)In relation to a company registered in Scotland, subsections (13) and (14)
shall apply in place of subsection (11).
(13)Where after reasonable enquiry made at such intervals as are reasonable the
person entitled to any consideration held on trust by virtue of subsection
(9) cannot be found and twelve years have elapsed since the consideration
was received or the company is wound up--
(a) the trust shall terminate;
(b) the company or, as the case may be, the liquidator shall sell any
consideration other than cash and any benefit other than cash that has
accrued from the consideration; and
(c) a sum representing--
(i) the consideration so far as it is cash;
(ii) the proceeds of any sale under paragraph (b) above; and
(iii) any interest, dividend or other benefit that has accrued from the
consideration,
shall be deposited in the name of the Accountant of Court in a bank account
such as is referred to in subsection (10) and the receipt for the deposit
shall be transmitted to the Accountant of Court.
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(14)Section 58 of the Bankruptcy (Scotland) Act 1985 (so far as consistent with
this Act) shall apply with any necessary modifications to sums deposited
under subsection (13) as that section applies to sums deposited under
section 57(1)(a) of that Act.
(15)The expenses of any such enquiry as is mentioned in subsection (11) or (13)
may be defrayed out of the money or other property held on trust for the
person or persons to whom the enquiry relates.
430A. RIGHT OF MINORITY SHAREHOLDER TO BE BOUGHT OUT BY OFFEROR
(1) If a takeover offer relates to all the shares in a company and at any time
before the end of the period within which the offer can be accepted--
(a) the offeror has by virtue of acceptances of the offer acquired or
contracted to acquire some (but not all) of the shares to which the
offer relates; and
(b) those shares, with or without any other shares in the company which he
has acquired or contracted to acquire, amount to not less than
nine-tenths in value of all the shares in the company,
the holder of any shares to which the offer relates who has not accepted
the offer may by a written communication addressed to the offeror require
him to acquire those shares.
(2) If a takeover offer relates to shares of any class or classes and at any
time before the end of the period within which the offer can be accepted--
(a) the offeror has by virtue of acceptances of the offer acquired or
contracted to acquire some (but not all) of the shares of any class to
which the offer relates; and
(b) those shares, with or without any other shares of that class which he
has acquired or contracted to acquire, amount to not less than
nine-tenths in value of all the shares of that class,
the holder of any shares of that class who has not accepted the offer may
by a written communication addressed to the offeror require him to acquire
those shares.
(3) Within one month of the time specified in subsection (1) or, as the case may
be, subsection (2) the offeror shall give any shareholder who has not
accepted the offer notice in the prescribed manner of the rights that are
exercisable by him under that subsection; and if the notice is given before
the end of the period mentioned in that subsection it shall state that the
offer is still open for acceptance.
(4) A notice under subsection (3) may specify a period for the exercise of the
rights conferred by this section and in that event the rights shall not be
exercisable after the end of that period; but no such period shall end less
than three months after the end of the period within which the offer can be
accepted.
(5) Subsection (3) does not apply if the offeror has given the shareholder a
notice in respect of the shares in question under section 429.
(6) If the offeror fails to comply with subsection (3) he and, if the offeror is
a company, every officer of the company who is in default or to whose
neglect the failure is attributable, shall be liable to a fine and for
continued contravention, to a daily default fine.
(7) If an offeror other than a company is charged with an offence for failing to
comply with subsection (3) it is a defence for him to prove that he took
all reasonable steps for securing compliance with that subsection.
430B. EFFECT OF REQUIREMENT UNDER S 430A
(1) The following provisions shall, subject to section 430C, have effect where a
shareholder exercises his rights in respect of any shares under section
430A.
(2) The offeror shall be entitled and bound to acquire those shares on the terms
of the offer or on such other terms as may be agreed.
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(3) Where the terms of an offer are such as to give the holder of shares a
choice of consideration the holder of the shares may indicate his choice
when requiring the offeror to acquire them and the notice given to the
holder under section 430A(3)--
(a) shall give particulars of the choice and of the rights conferred by
this subsection; and
(b) may state which consideration specified in the offer is to be taken as
applying in default of his indicating a choice;
and the terms of the offer mentioned in subsection (2) shall be determined
accordingly.
(4) Subsection (3) applies whether or not any time-limit or other conditions
applicable to the choice under the terms of the offer can still be complied
with; and if the consideration chosen by the holder of the shares--
(a) is not cash and the offeror is no longer able to provide it; or
(b) was to have been provided by a third party who is no longer bound or
able to provide it, the consideration shall be taken to consist of an
amount of cash payable by the offeror which at the date when the holder
of the shares requires the offeror to acquire them is equivalent to the
chosen consideration.
430C. APPLICATIONS TO THE COURT
(1) Where a notice is given under section 429 to the holder of any shares the
court may, on an application made by him within six weeks from the date on
which the notice was given--
(a) order that the offeror shall not be entitled and bound to acquire the
shares; or
(b) specify terms of acquisition different from those of the offer.
(2) If an application to the court under subsection (1) is pending at the end of
the period mentioned in subsection (5) of section 430 that subsection shall
not have effect until the application has been disposed of.
(3) Where the holder of any shares exercises his rights under section 430A the
court may, on an application made by him or the offeror, order that the
terms on which the offeror is entitled and bound to acquire the shares
shall be such as the court thinks fit.
(4) No order for costs or expenses shall be made against a shareholder making an
application under subsection (1) or (3) unless the court considers--
(a) that the application was unnecessary, improper or vexatious; or
(b) that there has been unreasonable delay in making the application or
unreasonable conduct on his part in conducting the proceedings on the
application.
(5) Where a takeover offer has not been accepted to the extent necessary for
entitling the offeror to give notices under subsection (1) or (2) of
section 429 the court may, on the application of the offeror, make an order
authorising him to give notices under that subsection if satisfied--
(a) that the offeror has after reasonable enquiry been unable to trace one
or more of the persons holding shares to which the offer relates;
(b) that the shares which the offeror has acquired or contracted to
acquire by virtue of acceptances of the offer, together with the shares
held by the person or persons mentioned in paragraph (a), amount to not
less than the minimum specified in that subsection; and
(c) that the consideration offered is fair and reasonable; but the court
shall not make an order under this subsection unless it considers that
it is just and equitable to do so having regard, in particular, to the
number of shareholders who have been traced but who have not accepted
the offer.
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430D. JOINT OFFERS
(1) A takeover offer may be made by two or more persons jointly and in that
event this Part of this Act has effect with the following modifications.
(2) The conditions for the exercise of the rights conferred by sections 429 and
430A shall be satisfied by the joint offerors acquiring or contracting to
acquire the necessary shares jointly (as respects acquisitions by virtue of
acceptances of the offer) and either jointly or separately (in other
cases); and, subject to the following provisions, the rights and
obligations of the offeror under those sections and sections 430 and 430B
shall be respectively joint rights and joint and several obligations of the
joint offerors.
(3) It shall be a sufficient compliance with any provision of those sections
requiring or authorising a notice or other document to be given or sent by
or to the joint offerors that it is given or sent by or to any of them; but
the statutory declaration required by section 429(4) shall be made by all
of them and, in the case of a joint offeror being a company, signed by a
director of that company.
(4) In sections 428, 430(8) and 430E references to the offeror shall be
construed as references to the joint offerors or any of them.
(5) In section 430(6) and (7) references to the offeror shall be construed as
references to the joint offerors or such of them as they may determine.
(6) In sections 430(4)(a) and 430B(4)(a) references to the offeror being no
longer able to provide the relevant consideration shall be construed as
references to none of the joint offerors being able to do so.
(7) In section 430C references to the offeror shall be construed as references
to the joint offerors except that any application under subsection (3) or
(5) may be made by any of them and the reference in subsection (5)(a) to
the offeror having been unable to trace one or more of the persons holding
shares shall be construed as a reference to none of the offerors having
been able to do so.
430E. ASSOCIATES
(1) The requirement in section 428(1) that a takeover offer must extend to all
the shares, or all the shares of any class or classes, in a company shall
be regarded as satisfied notwithstanding that the offer does not extend to
shares which associates of the offeror hold or have contracted to acquire;
but, subject to subsection (2), shares which any such associate holds or
has contracted to acquire, whether at the time when the offer is made or
subsequently, shall be disregarded for the purposes of any reference in
this Part of this Act to the shares to which a takeover offer relates.
(2) Where during the period within which a takeover offer can be accepted any
associate of the offeror acquires or contracts to acquire any of the shares
to which the offer relates, then, if the condition specified in subsection
(8)(a) or (b) of section 429 is satisfied as respects those shares they
shall be treated for the purposes of that section as shares to which the
offer relates.
(3) In section 430A(1)(b) and (2)(b) the reference to shares which the offeror
has acquired or contracted to acquire shall include a reference to shares
which any associate of his has acquired or contracted to acquire.
(4) In this section "associate", in relation to an offeror means--
(a) a nominee of the offeror;
(b) a holding company, subsidiary or fellow subsidiary of the offeror or a
nominee of such a holding company, subsidiary or fellow subsidiary;
(c) a body corporate in which the offeror is substantially interested; or
(d) any person who is, or is a nominee of, a party to an agreement with
the offeror for the acquisition of, or of an interest in, the shares
which are the subject of the takeover offer, being an agreement which
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includes provisions imposing obligations or restrictions such as are
mentioned in section 204 (2)(a).
(5) For the purposes of subsection (4)(b) a company is a fellow subsidiary of
another body corporate if both are subsidiaries of the same body corporate
but neither is a subsidiary of the other.
(6) For the purposes of subsection (4)(c) an offeror has a substantial interest
in a body corporate if--
(a) that body or its directors are accustomed to act in accordance with
his directions or instructions; or
(b) he is entitled to exercise or control the exercise of one-third or
more of the voting power at general meetings of that body.
(7) Subsections (5) and (6) of section 204 shall apply to subsection (4)(d)
above as they apply to that section and subsections (3) and (4) of section
203 shall apply for the purposes of subsection (6) above as they apply for
the purposes of subsection (2)(b) of that section.
(8) Where the offeror is an individual his associates shall also include his
spouse and any minor child or step-child of his.
430F. CONVERTIBLE SECURITIES
(1) For the purposes of this Part of this Act securities of a company shall be
treated as shares in the company if they are convertible into or entitle
the holder to subscribe for such shares; and references to the holder of
shares or a shareholder shall be construed accordingly.
(2) Subsection (1) shall not be construed as requiring any securities to be
treated--
(a) as shares of the same class as those into which they are convertible
or for which the holder is entitled to subscribe; or
(b) as shares of the same class as other securities by reason only that
the shares into which they are convertible or for which the holder is
entitled to subscribe are of the same class.
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APPENDIX VIII -- DEFINITIONS
The following definitions apply throughout this document, unless the context
requires otherwise:
"Acceptance Forms" the blue Bondholder Form of Acceptance, the white
Shareholder Form of Acceptance and, in respect of
Sedgwick ADS holders only, the Letter of
Transmittal and the notice of guaranteed delivery
to accompany the Offer Document.
"Acceptance Condition" the Condition as to acceptances set out in
paragraph (a) of Part A of Appendix I and paragraph
2 of Part B of Appendix I.
"Bondholder Form of
Acceptance" the form of acceptance, authority and election
relating to the Convertible Offer for use by
Sedgwick Bondholders.
"Book-Entry Confirmation" the confirmation of a book-entry transfer of
Sedgwick ADSs into the US Depositary's account at a
Book-Entry Transfer facility.
"Book-Entry Transfer
Facility" The Depositary Trust Company or the Philadelphia
Depositary Trust Company.
"Business Day" any day, other than a Saturday or Sunday or a US
federal holiday or UK Bank Holiday, and consisting
of the time period from 12.01 a.m. until and
including 12.00 midnight (New York City time).
"Cazenove" Cazenove & Co.
"Cedel" Cedel Bank, societe anonyme.
"certificated" or
"certificated form" a share or other security which is not in
uncertificated form (that is, not in CREST).
"City Code" the City Code on Takeovers and Mergers.
"Closing Price" the closing middle-market quotation of a security
on the London Stock Exchange as derived from the
Daily Official List.
"Companies Act" or "Act" the Companies Act 1985 (as amended).
"Conditions" the conditions of the Offers described in Part A of
Appendix I and "Condition" means any one of them.
"Conversion Date" has the meaning given to it in the Trust Deed.
"Convertible Offer" the recommended offer by J.P. Morgan and Donaldson,
Lufkin & Jenrette, on behalf of Marsh & McLennan,
on the terms and Conditions set out in this
document and the relevant Acceptance Form
including, where the context requires, the Loan
Note Alternative and any subsequent revision,
variation, extension or renewal of such offer and
such alternative, in each case for all of the
outstanding Sedgwick Convertible Bonds.
"Credit Suisse First
Boston" Credit Suisse First Boston (Europe) Limited.
"CREST" the relevant system (as defined in the Regulations)
in respect of which CRESTCo is the Operator (as
defined in the Regulations).
"CRESTCo" CRESTCo Limited.
"CREST member" a person who has been admitted by CRESTCo as a
system-member (as defined in the Regulations).
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"CREST participant" a person who is, in relation to CREST, a
system-participant (as defined in the Regulations).
"CREST sponsor" a CREST participant admitted to CREST as a Crest
sponsor.
"CREST sponsored member" a CREST member admitted to CREST as a sponsored
member.
"Daily Official List" the Daily Official List of the London Stock
Exchange.
"Dealer Managers" J.P. Morgan Securities Inc. and Donaldson, Lufkin &
Jenrette Securities Corporation in their capacities
as dealer managers for the Offers in the US.
"Donaldson, Lufkin &
Jenrette" Donaldson, Lufkin & Jenrette International.
"Eligible Institution" a financial institution (including most banks,
savings and loan associations and brokerage houses)
which is a participant in the Securities Transfer
Agents Medallion Program, the New York Stock
Exchange Medallion Program or the Stock Exchange
Medallion Program.
"Euroclear" Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" the US Securities and Exchange Act of 1934, as
amended, and the rules and regulations promulgated
thereunder.
"Guaranteed Delivery
Procedures" the guaranteed delivery procedures for Sedgwick
ADSs set out in paragraph 11 of Part B of Appendix
I.
"HMT" Her Majesty's Treasury.
"HSR Act" the Hart-Scott-Rodino Antitrust Improvement Act of
1976 (as amended).
"Initial Closing Date" 3.00 p.m. (London time), 10.00 a.m. (New York City
time) on 5 October 1998, or such later time(s)
and/or date(s) as Marsh & McLennan may, with the
consent of the Panel or in accordance with the
rules of the City Code decide, in which case the
term "Initial Closing Date" shall mean the latest
time and date at which the Offers, as so extended
by Marsh & McLennan, will expire.
"Initial Offer Period" the period from the date of this document to and
including the Initial Closing Date.
"J.P. Morgan" Morgan Guaranty Trust Company of New York.
"Letter of Transmittal" the letter of transmittal relating to the Ordinary
Offer for use by holders of Sedgwick ADSs.
"LIBOR" the rate of interest determined on the basis of the
arithmetic mean of the respective rates at which
any two London clearing banks, selected by Marsh &
McLennan, offer six-month pound sterling deposits
of L1,000,000 to leading banks in the London
inter-bank market at or about 11.00 a.m. (London
time) on the first Business Day of the relevant
interest period as defined in paragraph 2 of
Appendix II.
"Lloyd's" the Society incorporated by the Lloyd's Act 1871 by
the name of Lloyd's or, as the context so requires,
the Council of Lloyd's and any person or delegate
acting under its authority.
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"Loan Notes" the unsecured loan notes to be issued by Marsh &
McLennan as described in this document.
"Loan Note Alternative" the alternative whereby Sedgwick Shareholders and
Sedgwick Bondholders (other than persons who are
citizens or residents of the US and certain other
overseas shareholders and bondholders) validly
accepting the Offers may elect to receive Loan
Notes instead of all or part of the cash
consideration to which they would otherwise be
entitled under the Offers.
"Loan Note Instrument" the loan note instrument constituting the Loan
Notes.
"London Stock Exchange" London Stock Exchange Limited.
"Marsh & McLennan" Marsh & McLennan Companies, Inc.
"Marsh & McLennan Group" Marsh & McLennan and its subsidiaries and
subsidiary undertakings.
"member account ID" the identification code or number attached to any
member account in CREST.
"New York Stock Exchange"
or "NYSE" the New York Stock Exchange, Inc.
"Non-US Holder" a holder of Sedgwick Securities and/or Sedgwick
Convertible Bonds that is not a US Holder.
"Noon Buying Rate" the exchange rate for pounds sterling, based on the
noon buying rate in the City of New York for cable
transfers in pounds sterling as certified for
customs purposes by the Federal Reserve Bank of New
York, expressed in US dollars per pound sterling.
"Notice of Guaranteed
Delivery" the notice of Guaranteed Delivery relating to the
Ordinary Offer for use by holders of Sedgwick ADSs.
"Offer Committee" the directors and executive officers of Marsh &
McLennan listed in paragraph 2(a) of Appendix VI
who are assuming responsibility for this document
in the terms set out in paragraph 1(a) of Appendix
VI.
"Offer Period" the period commencing on 25 August 1998 until the
end of the Initial Offer Period.
"Offers" the Ordinary Offer and/or the Convertible Offer.
"Offer Document" this document or other document containing the
Offers.
"Optionholders" holders of Options.
"Options" options granted pursuant to the terms of any of the
Sedgwick Share Option Schemes.
"Ordinary Offer" the recommended offer by J.P. Morgan and Donaldson,
Lufkin & Jenrette, on behalf of Marsh & McLennan,
on the terms and Conditions set out in this
document and the relevant Acceptance Form
including, where the context requires, the Loan
Note Alternative and any subsequent revision,
variation, extension or renewal of such offer and
such alternative in each case for all the issued
and to be issued Sedgwick Securities.
"Panel" the Panel on Takeovers and Mergers.
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"participant ID" the identification code or membership number used
in CREST to identify a particular CREST member or
other CREST participant.
"PIA" the Personal Investment Authority Limited.
"Regulation" Council Regulation (EEC) 4064/89.
"Regulations" the Uncertificated Securities Regulations 1995 (SI
1995 No. 95/3272).
"Right" a right issued under the Stockholder Rights Plan.
"Rothschild" NM Rothschild & Sons Limited.
"SEC" the US Securities and Exchange Commission.
"Sedgwick" Sedgwick Group plc.
"Sedgwick ADR" an American Depositary Receipt evidencing a
Sedgwick ADS.
"Sedgwick ADS" an American Depositary Share representing five
Sedgwick Shares.
"Sedgwick Bearer Bonds" Sedgwick Convertible Bonds in bearer form.
"Sedgwick Bondholder" a holder of Sedgwick Convertible Bonds.
"Sedgwick Convertible
Bonds" the Sedgwick 7.25% Convertible Bonds 2008.
"Sedgwick Executive Share
Option Schemes" where specified, the 1984 Executive Share Option
Scheme, the 1995 Executive Share Option Scheme and
the related international schemes.
"Sedgwick Group" Sedgwick and its subsidiaries and subsidiary
undertakings.
"Sedgwick Registered Bonds" Sedgwick Convertible Bonds in registered form.
"Sedgwick Security" a Sedgwick Share and/or a Sedgwick ADS.
"Sedgwick Securityholder" a holder of Sedgwick Shares and/or Sedgwick ADSs.
"Sedgwick Share" an ordinary share of 10 pence in the capital of
Sedgwick.
"Sedgwick Share Option
Schemes" the 1984 Executive Share Option Scheme, the
Executive Share Option Scheme 1995 and the related
international schemes, the Employee Savings-Related
Share Option Scheme, the Employee Savings-Related
Share Option Scheme 1995 and the Overseas
Savings-Related Share Option Scheme 1995.
"Sedgwick Shareholder" a holder of a Sedgwick Share.
"Sedgwick Sharesave
Schemes" where specified, means the Employee Savings-Related
Share Option Scheme, the Employee Savings-Related
Share Option Scheme 1995 and the Overseas
Savings-Related Share Option Scheme 1995.
"Shareholder Form of
Acceptance" the form of acceptance, authority and election
relating to the Ordinary Offer for use by Sedgwick
Shareholders.
"SFA" The Securities and Futures Authority Limited.
"Subsequent Offer Period" the period following the Initial Closing Date
during which the Offers remains open for
acceptance.
"subsidiary" and
"subsidiary undertaking" have the meanings given by the Companies Act.
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"Stockholder Rights Plan" the stockholder rights plan contemplated pursuant
to the Rights Agreement, dated as of 18 September
1997 between Marsh & McLennan and Harris Trust
Company of New York, as Rights Agent.
"TFE Instruction" a transfer from escrow instruction (as defined by
the CREST Manual issued by CRESTCo).
"Trust Deed" the trust deed between Sedgwick and the Trustee
dated 15 June 1993 constituting the Sedgwick
Convertible Bonds.
"Trustee" The Law Debenture Trust Corporation plc, as trustee
under the Trust Deed.
"TTE Instruction" a transfer to escrow instruction (as defined by the
CREST Manual issued by CRESTCo).
"uncertificated" or
"uncertificated form" in relation to a share or other security, a share
or other security title to which is recorded in the
relevant register of the share or security as being
held in uncertificated form in CREST, and title to
which, by virtue of the Regulations, may be
transferred by means of CREST.
"UK" or "United Kingdom" the United Kingdom of Great Britain and Northern
Ireland.
"UK GAAP" UK generally accepted accounting principles.
"UK Receiving Agent" Computershare Services PLC.
"US" or "United States" the United States of America, its possessions and
territories, all areas subject to its jurisdiction
or any subdivision thereof, any State of the United
States and the District of Columbia.
"US Depositary" Bank of New York.
"US$" or "US dollar" the lawful currency of the US.
"US GAAP" US generally accepted accounting principles.
"US Holder" a holder of Sedgwick Securities and/or Sedgwick
Convertible Bonds that is (i) a citizen or resident
of the US, (ii) a corporation, partnership or other
entity created or organised in or under the laws of
the US or any political subdivision thereof, (iii)
an estate the income of which is subject to US
federal income taxation regardless of its source,
or (iv) a trust if a US court is able to exercise
primary supervision over the administration of such
trust and one or more US persons have the authority
to control all substantial decisions of such trust.
"US Persons" US persons as described in Regulation S of the US
Securities Act.
"US Securities Act" the US Securities Act of 1933, amended, and the
rules and regulations promulgated thereunder.
"L" or "pounds sterling" or
"pence" the lawful currency of the UK.
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ACCEPTANCES IN RESPECT OF SEDGWICK SHARES AND SEDGWICK CONVERTIBLE BONDS
Duly completed Shareholder Acceptance form(s) and Bondholder Acceptance form,
accompanied by certificates in respect of Sedgwick Shares and Sedgwick
Convertible Bonds and/or other documents of title, should be delivered to the UK
Receiving Agent or the US Depositary at one of the addresses set out below.
The UK Receiving Agent for the Offers is:
<TABLE>
<S> <C>
Computershare Services PLC
For information call:
+44(0)117 937 0672
By Mail: By Hand:
Computershare Services PLC Computershare Services PLC
PO Box 859 First Floor
Consort House 5-10 Great Tower Street
East Street London
Bedminster EC3R 5ER
Bristol BS99 1XZ
</TABLE>
ACCEPTANCES IN RESPECT OF SEDGWICK ADSS
Manually signed facsimile copies of the Letter of Transmittal will be accepted.
The Letter of Transmittal, Sedgwick ADRs and any other required documents should
be sent or delivered by each holder of Sedgwick ADSs or his broker, dealer,
commercial bank, trust company or other nominee to the US Depositary at one of
its addresses set out below.
The US Depositary for the Offers is:
<TABLE>
<S> <C>
Bank of New York
For information call:
+1-800-507-9357
By Mail: By Hand or overnight courier:
Bank of New York Bank of New York
Tender & Exchange Department Tender & Exchange Department
PO Box 11248 Receive and Deliver Window
Church Street Station 101 Barclay Street
New York, New York 10286-1248 New York, New York 10286
</TABLE>
VIII-6
<PAGE> 169
ADDITIONAL INFORMATION
Any questions or requests for assistance or additional copies of this document,
the Acceptance form(s) and the Notice of Guaranteed Delivery or the Letter of
Transmittal may be directed to Georgeson & Company Inc., the Information Agent
at its address and telephone number listed below or to the US Depositary or UK
Receiving Agent at their respective addresses and telephone numbers mentioned
above. You may also contact your local broker, dealer, commercial bank or trust
company or other nominee for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFERS IS:
Georgeson & Company Inc.
Wall Street Plaza
New York, New York 10005
Bankers and Brokers Call Collect: (212) 440-9800
CALL TOLL FREE: (800) 223-2064
THE OFFERS ARE BEING MADE ON BEHALF OF MARSH & MCLENNAN BY:
<TABLE>
<CAPTION>
<S> <C>
Morgan Guaranty Donaldson, Lufkin & Jenrette International
Trust Company of 99 Bishopsgate,
New York London EC2M 3XD
P.O. Box 61
60 Victoria Embankment
London EC4Y 0JP
</TABLE>
THE US DEALER MANAGERS FOR THE OFFERS ARE:
<TABLE>
<CAPTION>
<S> <C>
J.P. Morgan Securities Inc. Donaldson, Lufkin & Jenrette Securities Corporation
60 Wall Street 277 Park Avenue
New York, New York 10260 New York, New York 10172
</TABLE>
VIII-7
<PAGE> 1
Exhibit (a)(2)
This Document is important and requires your immediate attention. In considering
what action you should take, you are recommended immediately to seek your own
financial advice from your stockbroker, bank manager, solicitor, accountant or
other independent financial advisor.
If you have sold or otherwise transferred all your American Depositary
Shares ("Sedgwick ADSs") of Sedgwick Group plc ("Sedgwick"), please pass this
document and all accompanying documents as soon as possible to the purchaser or
transferee, or to the bank, stockbroker or other agent through whom the sale or
transfer was effected for transmission to the purchaser or transferee. However,
such documents should not be distributed, forwarded or transmitted in or into
Australia, Canada or Japan.
Morgan Guaranty Trust Company of New York ("J.P. Morgan") and Donaldson,
Lufkin & Jenrette International ("Donaldson, Lufkin & Jenrette") are acting for
Marsh & McLennan Companies, Inc. ("Marsh & McLennan") in relation to the offer
to purchase, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated September 4, 1998 (the "Offer to Purchase"), this
Letter of Transmittal and the related Form of Acceptance (collectively, the
"Ordinary Offer"), (i) all outstanding ordinary shares of 10p each of Sedgwick
("Sedgwick Shares") for 225p per Sedgwick Share in cash and (ii) all
outstanding Sedgwick ADSs for L.11.25 per Sedgwick ADS in cash, and no one
else, and will not be responsible to anyone other than Marsh & McLennan for
providing the protections afforded to customers of J.P. Morgan and Donaldson,
Lufkin & Jenrette nor for providing advice in relation to the Offers. J.P.
Morgan and Donaldson, Lufkin & Jenrette are acting through J.P. Morgan
Securities Inc. and Donaldson, Lufkin & Jenrette Securities Corporation for the
purpose of making the Offers in the United States.
LETTER OF TRANSMITTAL
To Accept the Offer for American Depositary Shares
Evidenced by American Depositary Receipts
of
Sedgwick Group PLC
Pursuant to the Offer to Purchase Dated September 4, 1998
by
J.P. Morgan
and
Donaldson, Lufkin & Jenrette
on behalf of
MARSH & McLENNAN COMPANIES, INC.
THERE WILL BE AN INITIAL OFFER PERIOD WHICH WILL EXPIRE AT 3:00 PM (LONDON
TIME), 10:00 AM (NEW YORK CITY TIME) ON OCTOBER 5, 1998, UNLESS EXTENDED. AT
THE CONCLUSION OF THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, IF
ALL CONDITIONS OF THE ORDINARY OFFER HAVE BEEN SATISFIED, FULFILLED OR, WHERE
PERMITTED, WAIVED, THE ORDINARY OFFER WILL BE EXTENDED FOR A SUBSEQUENT OFFER
PERIOD OF AT LEAST 14 CALENDAR DAYS. HOLDERS OF SEDGWICK SECURITIES WILL HAVE
THE RIGHT TO WITHDRAW THEIR ACCEPTANCES OF THE ORDINARY OFFER DURING THE
INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, BUT NOT DURING THE
SUBSEQUENT OFFER PERIOD.
DESCRIPTION OF SEDGWICK ADSS TENDERED
Name(s) and Address(es) of Registered Holder(s) ADS(s) Tendered (Please fill
in, if blank, exactly as name(s) appear(s) on ADR(s)) (Attach
additional list if necessary)
TOTAL NUMBER
ADR OF ADSs NUMBER
SERIAL REPRESENTED BY OF ADSs
NUMBER(S)* ADR(S)* TENDERED**
* Need not be completed for book-entry transfers.
** Unless otherwise indicated, it will be assumed that all Sedgwick ADSs
delivered to the US Depositary are being tendered. See Instruction 4.
<PAGE> 2
The US Depositary for the Offer is:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or
Overnight Courier
Tender & Exchange Department (212) 815-6213 Tender & Exchange Department
P.O. Box 11248 (for Eligible Institutions Only) Receive and Deliver Window
Church Street Station 101 Barclay Street
New York, New York Confirm by telephone: New York, New York 10286
10286-1248 (800) 507-9357
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE, DOES NOT
CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
ACCEPTING HOLDERS OF SEDGWICK ADSS EVIDENCED BY SEDGWICK ADRS WILL RECEIVE
PAYMENT IN DOLLARS INSTEAD OF POUNDS STERLING UNLESS THEY ELECT OTHERWISE
HEREIN TO RECEIVE PAYMENT IN POUNDS STERLING. IF YOU WISH TO RECEIVE POUNDS
STERLING INSTEAD OF DOLLARS, YOU MUST PLACE AN "X" IN THE BOX ENTITLED "POUNDS
STERLING PAYMENT ELECTION".
ACCEPTANCE OF THE ORDINARY OFFER IN RESPECT OF SEDGWICK SHARES (EXCEPT
INSOFAR AS THEY ARE REPRESENTED BY SEDGWICK ADSS EVIDENCED BY SEDGWICK ADRS)
CANNOT BE MADE BY MEANS OF THIS LETTER OF TRANSMITTAL. If you hold Sedgwick
Shares that are not represented by Sedgwick ADSs, you can obtain a Shareholder
Form of Acceptance for accepting the Ordinary Offer in respect of those
Sedgwick Shares from the Information Agent, the US Depositary or the UK
Receiving Agent. See Instruction 13 of this Letter of Transmittal.
Delivery of a Letter of Transmittal, American Depositary Receipts
evidencing Sedgwick ADSs ("Sedgwick ADRs") (or book-entry transfer of such
Sedgwick ADSs evidenced by Sedgwick ADRs) and any other required documents to
the US Depositary by Sedgwick ADS holders will be deemed (without any further
action by the US Depositary) to constitute an acceptance of the Ordinary Offer
by such holder with respect to such Sedgwick ADSs evidenced by Sedgwick ADRs
subject to the terms and conditions set out in the Offer to Purchase and this
Letter of Transmittal. Capitalized terms and certain other terms used in this
Letter of Transmittal and not otherwise defined herein shall have the
respective meanings assigned to them in the Offer to Purchase.
This Letter of Transmittal is to be used either if Sedgwick ADRs
evidencing Sedgwick ADSs are to be forwarded herewith or if delivery of
Sedgwick ADSs is to be made by book-entry transfer to an account maintained by
the US Depositary at a Book-Entry Transfer Facility as defined in and pursuant
to the procedures for book-entry transfer set forth in "Procedures for
tendering Sedgwick ADSs--Book Entry Transfer" in Part B of Appendix I to the
Offer to Purchase.
[ ] CHECK BOX IF SEDGWICK ADSS IN RESPECT OF WHICH THE ORDINARY OFFER IS BEING
ACCEPTED ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT
MAINTAINED BY THE US DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY TRANSFER
FACILITY MAY DELIVER SEDGWICK ADSS EVIDENCED BY SEDGWICK ADRS BY
BOOK-ENTRY TRANSFER):
3
<PAGE> 3
NAME OF DELIVERING INSTITUTION ________________________________________________
Check box opposite name of relevant Book-Entry Transfer Facility:
[ ] The Depository Trust Company [ ] Philadelphia Depository Trust Company
Account Number __________________ Transaction Code Number __________________
If a holder of Sedgwick ADSs wishes to accept the Ordinary Offer and
Sedgwick ADRs evidencing such Sedgwick ADSs are not immediately available or the
procedures for book-entry transfer cannot be completed on a timely basis, or if
time will not permit all required documents to reach the US Depositary prior to
the expiry of the Subsequent Offer Period, such holder's acceptance of the
Ordinary Offer may nevertheless be effected using the guaranteed delivery
procedure set out under "Procedures for tendering Sedgwick ADSs--Guaranteed
delivery procedures" in Part B of Appendix I to the Offer to Purchase. See
Instruction 2 of this Letter of Transmittal. HOWEVER, RECEIPT OF A NOTICE OF
GUARANTEED DELIVERY WILL NOT BE TREATED AS A VALID ACCEPTANCE FOR THE PURPOSE OF
SATISFYING THE ACCEPTANCE CONDITION.
[ ] CHECK BOX IF SEDGWICK ADSS IN RESPECT OF WHICH THE ORDINARY OFFER IS
BEING ACCEPTED ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE US DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of registered owner(s) ________________________________________________
Date of execution of Notice of Guaranteed Delivery ____________________________
Name of Institution that guaranteed delivery _________________________________
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
3
<PAGE> 4
Ladies and Gentlemen:
The undersigned hereby instructs the US Depositary to accept the Ordinary
Offer on behalf of the undersigned with respect to the Sedgwick ADSs evidenced
by Sedgwick ADRs (which expression in this Letter of Transmittal shall, except
where the context otherwise requires, be deemed to include, without limitation,
the ordinary shares of 10p each of Sedgwick ("Sedgwick Shares") represented
thereby) specified in the box entitled "Description of Sedgwick ADSs Tendered"
subject to the terms and conditions set forth in the Offer to Purchase and this
Letter of Transmittal, by informing Marsh & McLennan in writing that the
Ordinary Offer has been so accepted. The undersigned hereby acknowledge that
delivery of this Letter of Transmittal, the Sedgwick ADRs evidencing tendered
Sedgwick ADSs (or book-entry transfer of such Sedgwick ADSs evidenced by
Sedgwick ADRs) and any other required documents to the US Depositary by a
holder of Sedgwick ADSs will be deemed (without any further action by the US
Depositary) to constitute acceptance of the Ordinary Offer by such holder in
respect of such holder's Sedgwick ADSs, subject to the terms and conditions set
out in the Offer to Purchase and this Letter of Transmittal.
The undersigned understands that acceptance of the Ordinary Offer by the
undersigned pursuant to the procedures described herein and in the instructions
hereto, subject to the withdrawal rights described in the Offer to Purchase,
will constitute a binding agreement between the undersigned and Marsh &
McLennan upon the terms and subject to the conditions of the Ordinary Offer. IF
ACCEPTANCE HAS BEEN MADE IN RESPECT OF THE SEDGWICK ADSs THEN A SEPARATE
ACCEPTANCE IN RESPECT OF THE SEDGWICK SHARES REPRESENTED BY SUCH SEDGWICK ADSs
MAY NOT BE MADE.
The undersigned hereby delivers to the US Depositary the above-described
Sedgwick ADSs evidenced by Sedgwick ADRs for which the Ordinary Offer is being
accepted, in accordance with the terms and conditions of the Offer to Purchase
and this Letter of Transmittal, receipt of which is hereby acknowledged.
Upon the terms of the Ordinary Offer (including, if the Ordinary Offer is
extended, revised or amended, the terms or conditions of any such extension,
revision or amendment), and effective at the time that all conditions to the
Ordinary Offer have been satisfied, fulfilled or, where permitted, waived (at
which time Marsh & McLennan will give notice thereof to the US Depositary), and
if he or she has not validly withdrawn his or her acceptance, the undersigned
hereby sells, assigns and transfers to, or upon the order of, Marsh & McLennan
all right, title and interest in and to all Sedgwick ADSs evidenced by Sedgwick
ADRs with respect to which the Ordinary Offer is being accepted (and any and
all Sedgwick ADSs or other securities or rights issuable in respect of such
Sedgwick ADSs) and irrevocably constitutes and appoints the US Depositary the
true and lawful agent and attorney-in-fact of the undersigned with respect to
such Sedgwick ADSs (and any such other Sedgwick ADSs, securities or rights),
with full power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to (a) deliver Sedgwick ADRs for
such Sedgwick ADSs (and any such other Sedgwick ADSs, securities or rights) or
accept to transfer of ownership of such Sedgwick ADSs (and any such other
Sedgwick ADSs, securities or rights) on the account books maintained by a
Book-Entry Transfer Facility together, in any such case, with all accompanying
evidences of transfer and authenticity to, or upon the order of, Marsh &
McLennan, (b) present such Sedgwick ADRs for such Sedgwick ADSs (and any other
Sedgwick ADSs, securities or rights) for transfer, and (c) receive all benefits
and otherwise exercise all rights of beneficial ownership of such Sedgwick ADSs
(and any such other Sedgwick ADSs, securities or rights), all in accordance
with the terms of the Ordinary Offer.
The undersigned agrees that its execution hereof (together with any
signature guarantees) and its delivery to the US Depositary shall constitute an
authority to any director of Marsh & McLennan, J.P. Morgan or Donaldson, Lufkin
& Jenrette in accordance with the terms of paragraph 6 of Part B of Appendix I
to the Offer to Purchase.
The undersigned agrees that effective from and after the date hereof or,
if later, the date on which all conditions to the Ordinary Offer are satisfied,
fulfilled or, where permitted, waived: (a) Marsh & McLennan or its agents shall
be entitled to direct the exercise of any votes attaching to Sedgwick Shares
represented by any Sedgwick ADSs evidenced by Sedgwick ADRs in respect of which
the Ordinary Offer has been accepted or is deemed to have been accepted (the
"Accepted ADSs") and any other rights and privileges attaching to such Sedgwick
Shares, including any right to requisition a general meeting of Sedgwick or of
any class of its
4
<PAGE> 5
shareholders, and (b) the execution of the Letter of Transmittal by a holder of
Sedgwick ADSs (together with any signature guarantees) and its delivery to the
US Depositary shall constitute in respect of Accepted ADSs: (i) an authority to
Sedgwick or its agents from the undersigned to send any notice, circular,
warrant, document or other communications that may be required to be sent to
him or her as a Sedgwick ADS holder to Marsh & McLennan at its registered
office, (ii) an authority to Marsh & McLennan or its agent to sign any consent
to short notice of a general meeting or separate class meeting on behalf of the
holder of Accepted ADSs and/or to execute a form of proxy in respect of the
Accepted ADSs appointing any person nominated by Marsh & McLennan to attend
general meetings and separate class meetings of Sedgwick or its members (or any
of them) (or any adjournments thereof) and to exercise the votes attaching to
Sedgwick Shares represented by such Accepted ADSs on his or her behalf, and
(iii) the agreement of the undersigned not to exercise any such rights without
the consent of Marsh & McLennan and the irrevocable undertaking of the
undersigned not to appoint a proxy for or to attend general meetings or
separate class meetings of Sedgwick in respect of such Accepted ADSs.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to accept the Ordinary Offer and to sell, assign and
transfer the Sedgwick ADSs evidenced by Sedgwick ADRs (and Sedgwick Shares
represented by such Sedgwick ADSs) in respect of which the Ordinary Offer is
being accepted or deemed to be accepted (and any and all other Sedgwick ADSs,
securities or rights issued or issuable in respect of such Sedgwick ADSs) and,
when the same are purchased by Marsh & McLennan, Marsh & McLennan will acquire
good title thereto, free from all liens, equitable interests, charges,
encumbrances and together with all rights attaching thereto, including voting
rights and the right to receive all dividends and other distributions declared,
made or paid on or after August 25, 1998, (except as provided in the Offer to
Purchase) with respect to Sedgwick Shares represented by the Sedgwick ADSs. The
undersigned will, upon request, execute any additional documents deemed by the
US Depositary or Marsh & McLennan to be necessary or desirable to complete the
sale, assignment and transfer of the Sedgwick ADSs evidenced by Sedgwick ADRs
in respect of which the Ordinary Offer is being accepted (and any and all other
Sedgwick ADSs, securities or rights).
The undersigned irrevocably undertakes, represents, and warrants to and
agrees with Marsh & McLennan (so as to bind him or her, his or her personal
representative, heirs, successors and assigns) to the effect that the
undersigned: (i) has not received or sent copies of this document or any
Shareholder Form of Acceptance or any related documents in, into or from
Canada, Australia or Japan and has not otherwise utilized in connection with
the Ordinary Offer, directly or indirectly, the Canadian, Australian or
Japanese mails or any means or instrumentality (including, without limitation,
facsimile transmission, telex and telephone) of interstate or foreign commerce,
or any facilities of a national securities exchange, of Canada, Australia or
Japan, (ii) is accepting the Ordinary Offer from outside Canada, Australia or
Japan and (iii) is not an agent or fiduciary acting on a nondiscretionary basis
for a principal, unless such agent is an authorized employee of such principal
or such principal has given any instructions with respect to the Ordinary Offer
from outside Canada, Australia or Japan.
All authority herein conferred or agreed to be conferred pursuant to this
Letter of Transmittal shall be binding upon the successors, assigns, heirs,
executors, administrators and legal representatives of the undersigned and
shall not be affected by, and shall survive, the death or incapacity of the
undersigned. Except as stated in the Offer to Purchase, this acceptance is
irrevocable.
Unless otherwise indicated herein under "Special Payment Instructions",
the undersigned hereby instructs the US Depositary to issue, or cause to be
issued, the check for the purchase price in the name(s) of the registered
holder(s) appearing under "Description of Sedgwick ADSs Tendered". Similarly,
unless otherwise indicated under "Special Delivery Instructions", the
undersigned hereby instructs the US Depositary to mail, or cause to be mailed,
the check for the purchase price and/or return, or cause to be returned, any
Sedgwick ADRs evidencing Sedgwick ADSs in respect of which the Ordinary Offer
is not being accepted or which are not purchased (and accompanying documents,
as appropriate) to the address(es) of the registered holder(s) appearing under
"Description of Sedgwick ADSs Tendered". In the event that the "Special Payment
Instructions" and/or the "Special Delivery Instructions" are completed, the
undersigned hereby instructs the US Depositary to (i) issue and/or mail, or
cause to be issued and/or mailed, the check for the purchase price, if any, in
the name of, and/or to the address of, the person or persons so indicated,
and/or (ii) return, or cause to be returned, any Sedgwick ADRs evidencing
Sedgwick ADSs in respect of which the Ordinary Offer is not being accepted or
which are not purchased, if any, to the person at the address so indicated. In
the case of a book-entry delivery of Sedgwick ADSs evidenced by Sedgwick ADRs,
the undersigned hereby instructs the US Depositary to credit the account
maintained at the Book-Entry Transfer Facility indicated above with any
Sedgwick ADSs in respect of which the Ordinary Offer is not being accepted or
which are not
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<PAGE> 6
purchased. The undersigned recognizes that the US Depositary will not transfer
any Sedgwick ADSs which are not purchased pursuant to the Ordinary Offer from
the name of the registered holder thereof to any other person.
If the box headed "Pounds Sterling Payment Election" is not checked, the
undersigned hereby instructs the relevant payment agent (either the US
Depositary or the UK Receiving Agent) to convert all amounts payable pursuant
to the Ordinary Offer from pounds sterling to US dollars at the exchange rate
obtainable by the relevant payment agent on the spot market in London at
approximately noon (London time) on the date the cash consideration is made
available by Marsh & McLennan to the relevant payment agent for delivery to
holders of Sedgwick ADSs and pay such amounts by check payable in US dollars.
The actual amount of US dollars received will depend upon the exchange rate
prevailing on the day funds are made available to the relevant payment agent by
Marsh & McLennan. Sedgwick ADS holders should also be aware that the US
dollar/pound sterling exchange rate which is prevailing at the date on which
the undersigned executes this Letter of Transmittal and on the date of dispatch
of payment may be different from that prevailing on the day funds are made
available to the relevant payment agent by Marsh & McLennan. In all cases,
fluctuations in the US dollar/pounds sterling exchange rate are at the risk of
accepting Sedgwick ADS holders who do not elect to receive their consideration
in pounds sterling. Such currency exchange will be effected by the relevant
payment agent on behalf of the requesting Sedgwick ADS holder and Marsh &
McLennan shall have no responsibility or obligation with respect thereto.
SUBJECT TO THE TERMS OF THE OFFER TO PURCHASE, THIS LETTER OF TRANSMITTAL
SHALL NOT BE CONSIDERED COMPLETE AND VALID, AND PAYMENT OF CONSIDERATION
PURSUANT TO THE ORDINARY OFFER SHALL NOT BE MADE, UNTIL SEDGWICK ADRs
EVIDENCING THE SEDGWICK ADSs IN RESPECT OF WHICH THE ORDINARY OFFER IS BEING
ACCEPTED AND ALL OTHER REQUIRED DOCUMENTATION HAVE BEEN RECEIVED BY THE US
DEPOSITARY AS PROVIDED IN THE OFFER TO PURCHASE AND THIS LETTER OF TRANSMITTAL.
[ ] CHECK HERE IF ANY OF SEDGWICK ADRs REPRESENTING SEDGWICK ADSs THAT YOU
OWN HAVE BEEN LOST, STOLEN OR DESTROYED AND SEE INSTRUCTION 12.
Number of Sedgwick ADSs represented by the lost, stolen or destroyed Sedgwick
ADRs__________________
6
<PAGE> 7
SPECIAL PAYMENT INSTRUCTIONS
(See Instructions 1, 5, 6 and 7)
[ ] Check box ONLY if the check for the purchase price with respect to
Sedgwick ADSs purchased is to be issued in the name of someone other
than the undersigned.
Issue to:
Name _______________________________________
(Please Print)
Address ____________________________________
(Include Zip Code)
____________________________________________
____________________________________________
(Tax Identification or Social Security No.)
(See Substitute Form W-9 Included herein)
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5, 6 and 7)
[ ] Check box ONLY if the check for the purchase price with respect to
Sedgwick ADSs purchased and/or Sedgwick ADRs evidencing Sedgwick ADSs in
respect of which the Ordinary Offer is not accepted or which are not
purchased are to be mailed to someone other than the undersigned, or to
the undersigned at an address other than that shown above.
Mail [ ] Check [ ] ADR certificates to:
Name _______________________________________
(Please Print)
Address _____________________________________
(Include Zip Code)
_____________________________________________
_____________________________________________
POUNDS STERLING PAYMENT ELECTION
[ ] Check box ONLY if you wish to receive all (but not part) of the amount
of cash consideration to be paid by a check in pounds sterling. If you
do not check this box you will receive payment by a check in US dollars
and the relevant payment agent (either the US Depositary or the UK
Receiving Agent) will arrange for the conversion of the pound sterling
amounts payable to you to US dollars at the exchange rate obtainable by
the relevant payment agent on the spot market in London at approximately
noon (London time) on the date the cash consideration is made available
by Marsh & McLennan to the relevant payment agent for delivery to
holders of Sedgwick ADSs.
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<PAGE> 8
____________________________________
SIGN HERE
AND COMPLETE SUBSTITUTE FORM W-9 INCLUDED HEREIN
____________________________________
____________________________________
(SIGNATURE(S) OF OWNER(S))
Dated: __________________________________________________________________, 1998
(Must be signed by registered holder(s) exactly as name(s) on Sedgwick ADR(s)
evidencing Sedgwick ADS(s) or by person(s) to whom Sedgwick ADR(s) surrendered
have been assigned and transferred, as evidenced by endorsement, stock powers
and other documents transmitted herewith. If signature is by any trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation
or others acting in a fiduciary or representative capacity, please set forth
the following and see Instruction 5.)
Name(s) _______________________________________________________________________
_______________________________________________________________________
(Please Type or Print)
Capacity (full title) _________________________________________________________
Address _______________________________________________________________________
_______________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number ________________________________________________
Tax Identification or
Social Security No. ___________________________________________________________
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature __________________________________________________________
Name __________________________________________________________________________
(Please Type or Print)
Title ________________________________________________________________________
Name of Firm __________________________________________________________________
Address _______________________________________________________________________
Area Code and Telephone No. ___________________________________________________
Dated: ________________________________________________________________________
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<PAGE> 9
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE ORDINARY OFFER
1. Guarantee of Signatures. No signature guarantee is required on the
Letter of Transmittal if (a) the Letter of Transmittal is signed by
the registered holder(s) of the Sedgwick ADSs evidenced by Sedgwick
ADRs in respect of which the Ordinary Offer is being accepted
herewith and such holder(s) have not completed either the box
entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on this Letter of Transmittal or (b) the
Ordinary Offer is being accepted in respect of such Sedgwick ADSs for
the account of an Eligible Institution. In all other cases, all
signatures on this Letter of Transmittal must be guaranteed by a
financial institution (including most banks, savings and loan
associations and brokerage houses) which is a participant in the
Securities Transfer Agents Medallion Program, the New York Stock
Exchange Medallion Program, or the Stock Exchange Medallion Program
(an "Eligible Institution"). See Instruction 5.
2. Delivery of Letter of Transmittal and ADSs. This Letter of
Transmittal is to be completed either if Sedgwick ADRs evidencing Sedgwick ADSs
are to be forwarded herewith or if delivery is to be made by book-entry
transfer to an account maintained by the US Depositary at a Book-Entry Transfer
Facility pursuant to the procedures for book-entry transfer set out in
"Procedures for tendering Sedgwick ADSs D Book-entry transfer" in Part B of
Appendix I to the Offer to Purchase. Sedgwick ADRs evidencing Sedgwick ADSs or
confirmation of a book-entry transfer of such Sedgwick ADSs into the US
Depositary's account at a Book-Entry Transfer Facility, as well as a properly
completed and duly executed Letter of Transmittal together with any required
signature guarantees and any other documents required by this Letter of
Transmittal, must be delivered to the US Depositary at one of its addresses set
forth herein.
Sedgwick ADS holders whose Sedgwick ADRs are not immediately available or
who cannot deliver their Sedgwick ADRs and all other required documents to the
US Depositary or complete the procedures for book-entry transfer prior to the
expiration of the Subsequent Offer Period may accept the Ordinary Offer with
respect to their Sedgwick ADSs by properly completing and duly executing the
Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures
set out in "Procedures for tendering Sedgwick ADSs D guaranteed delivery
procedures" in Part B of Appendix I to the Offer to Purchase. Pursuant to the
guaranteed delivery procedures: (a) acceptance must be made by or through an
Eligible Institution; (b) a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by Marsh & McLennan must
be received by the US Depositary prior to the expiration of the Subsequent
Offer Period; and (c) Sedgwick ADRs evidencing the Sedgwick ADSs in respect of
which the Ordinary Offer is being accepted (or, in the case of Sedgwick ADSs
held in book-entry form, timely confirmation of the book-entry transfer of such
Sedgwick ADSs into the US Depositary's account at a Book-Entry Transfer
Facility as described in the Offer to Purchase) together with a properly
completed and duly executed Letter of Transmittal with any required signature
guarantees and any other documents required by this Letter of Transmittal, are
received by the US Depositary within three business days after the date of
execution of such Notice of Guaranteed Delivery. For these purposes, a
"business day" is any day on which the New York Stock Exchange is open for
business.
THE METHOD OF DELIVERY OF SEDGWICK ADSs EVIDENCED BY SEDGWICK ADRs AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE HOLDERS OF SEDGWICK
ADSs ACCEPTING THE ordinary OFFER AND THE DELIVERY WILL BE MADE ONLY WHEN
ACTUALLY RECEIVED BY THE US DEPOSITARY (INCLUDING, IN THE CASE OF BOOK-ENTRY
TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent acceptance will be accepted and
no fractional Sedgwick ADSs will be purchased. All accepting Sedgwick ADS
holders, by execution of this Letter of Transmittal, waive any right to receive
any notice of the acceptance of their Sedgwick ADSs for payment.
3. Inadequate Space. If the space provided herein is inadequate, the
serial numbers of the certificates and/or the number of Sedgwick ADSs
should be listed on a separate schedule attached hereto.
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<PAGE> 10
4. Partial Acceptances (Not Applicable to Book-entry Transfers). If the
Ordinary Offer is to be accepted in respect of less than all of the Sedgwick
ADSs evidenced by any Sedgwick ADRs delivered to the US Depositary herewith,
fill in the number of Sedgwick ADSs in respect of which the Ordinary Offer is
being accepted in the box entitled "Number of ADSs Tendered". In such case, a
new Sedgwick ADR for the remainder of the Sedgwick ADSs (in respect of which
the Ordinary Offer is not being accepted) represented by the old Sedgwick ADR
will be sent to the registered holder as promptly as practicable following the
date on which the Sedgwick ADSs in respect of which the Ordinary Offer has been
accepted are purchased.
The Ordinary Offer will be deemed to have been accepted in respect of all
Sedgwick ADSs evidenced by Sedgwick ADRs delivered to the US Depositary unless
otherwise indicated. In the case of partial acceptances, Sedgwick ADSs in
respect of which the Ordinary Offer was not accepted will not be reissued to a
person other than the registered holder.
5. Signature on Letter of Transmittal, Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the
Sedgwick ADSs in respect of which the Ordinary Offer is being accepted hereby,
the signature(s) must correspond with the name(s) as written on the face of the
certificates without any change whatsoever.
If any of the Sedgwick ADSs evidenced by Sedgwick ADRs in respect of which
the Ordinary Offer is being accepted hereby are owned of record by two or more
owners, all such owners must sign this Letter of Transmittal.
If any of the Sedgwick ADSs in respect of which the Ordinary Offer is
being accepted are registered in different names on different Sedgwick ADRs, it
will be necessary to complete, sign and submit as many separate Letters of
Transmittal as there are different registrations of Sedgwick ADRs.
If this Letter of Transmittal or any Sedgwick ADRs or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and submit proper
evidence satisfactory to Marsh & McLennan of their authority to so act.
When this Letter of Transmittal is signed by the registered holder(s) of
the Sedgwick ADSs listed and transmitted hereby, no endorsements of
certificates or separate stock powers are required unless payment of the
purchase price is to be issued to a person other than the registered holder(s).
Signatures on such Sedgwick ADRs or stock powers must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Sedgwick ADSs listed Sedgwick ADRs must be endorsed
or accompanied by appropriate stock powers signed exactly as the name(s) of the
registered holder(s) appear(s) on Sedgwick ADRs evidencing such Sedgwick ADSs.
Signatures on such Sedgwick ADRs or stock powers must be guaranteed by an
Eligible Institution.
6. Stock Transfer Taxes. Marsh & McLennan will pay or cause to be paid
any stock transfer taxes with respect to the transfer and sale to it or its
order of Sedgwick ADSs evidenced by Sedgwick ADRs pursuant to the Ordinary
Offer. If, however, payment of the purchase price is to be made to any persons
other than the registered holder(s), or if Sedgwick ADSs in respect of which
the Ordinary Offer is being accepted are registered in the name of any person
other than the person(s) signing this Letter of Transmittal, the amount of any
stock transfer taxes (whether imposed on the registered holder(s) or such
person(s) payment on account of the transfer to such person) will be deducted
from the purchase price unless satisfactory evidence of the payment of such
taxes or exemption therefrom is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to Sedgwick ADRs listed in this Letter of
Transmittal.
7. Special Payment and Delivery Instructions. If the check for the
purchase price is to be issued in the name of a person other than the
signer of this Letter of Transmittal or if the check for the purchase
price is to be sent and/or any Sedgwick ADRs evidencing Sedgwick ADSs
in respect of which the Ordinary Offer is not being accepted or which
are not purchased are to be returned to a person other than the
signer of this Letter of Transmittal or to an address other than that
shown on the reverse, the boxes labeled "Special Payment
Instructions" and/or "Special Delivery Instructions" on this Letter
of Transmittal should be completed.
10
<PAGE> 11
8. Pounds Sterling Payment Election. If the check for the purchase price
is to be issued in pounds sterling, please check the box marked "Pounds
Sterling Payment Election". If you do not check such box all pound
sterling amounts payable pursuant to the Ordinary Offer will be converted
by the relevant payment agent (either the US Depositary or the UK
Receiving Agent) into US dollars at the exchange rate obtainable by the
relevant payment agent on the spot market in London at approximately noon
(London time) on the date the cash consideration is made available by
Marsh & McLennan to the relevant payment agent for delivery to holders of
Sedgwick ADSs.
9. Waiver of Conditions. Marsh & McLennan reserves the absolute right in
its sole discretion to waive any of the specified conditions of the Ordinary
Offer, in whole or in part, to the extent permitted by applicable law and the
rules of the City Code.
10. 31% US Backup Withholding. In order to avoid "backup withholding" of
US federal income tax on any cash payment received upon the surrender of
Sedgwick ADSs pursuant to the Ordinary Offer, a Sedgwick ADS holder must,
unless an exemption applies, provide the US Depositary with his or her correct
Taxpayer Identification Number ("TIN") on Substitute Form W-9 on this Letter of
Transmittal and certify, under penalties of perjury, that such number is
correct and that he or she is not subject to backup withholding. If the correct
TIN is not provided, a $50 penalty may be imposed by the Internal Revenue
Service ("IRS") and cash payments made in exchange for the surrendered Sedgwick
ADSs may be subject to backup withholding. If backup withholding applies, the
US Depositary is required to withhold 31% of any payment made pursuant to the
Ordinary Offer.
Backup withholding is not an additional US federal income tax. Rather, the
US federal income tax liability of persons subject to backup withholding will
be reduced by the amount of such tax withheld. If backup withholding results in
an overpayment of taxes, a refund may be applied for from the IRS.
The TIN that is to be provided on the Substitute Form W-9 is that of the
registered holder(s) of the Sedgwick ADSs or of the last transferee appearing
on the transfer attached to, or endorsed on, the Sedgwick ADSs. The TIN for an
individual is his or her social security number. Each tendering Sedgwick ADS
holder generally is required to notify the US Depositary of his or her correct
TIN by completing the Substitute Form W-9 contained herein, certifying that the
TIN provided on Substitute Form W-9 is correct (or that such holder is awaiting
a TIN), and that (1) such holder has not been notified by the IRS that such
holder is subject to backup withholding as a result of a failure to report all
interest or dividends, or (2) the IRS has notified such holder, that such
holder is no longer subject to backup withholding (see Part III of Substitute
Form W-9). Notwithstanding that the "TIN Applied For" box is checked (and the
certification is completed), the US Depositary will withhold 31% on any cash
payment of the purchase price for the Sedgwick ADSs made prior to the time it
is provided with a properly certified TIN.
Exempt persons (including, among others, corporations) are not subject to
backup withholding. A foreign individual or foreign entity may qualify as an
exempt person by submitting a statement (on Form W-8), signed under penalties
or perjury, certifying such person's foreign status. Form W-8 can be obtained
from the US Depositary. A Sedgwick ADS holder should consult his or her tax
advisor as to his or her qualification for an exemption from backup withholding
and the procedure for obtaining such exemption.
For additional guidance, see the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9.
11. Requests for Assistance or Additional Copies. Questions and requests
for assistance or additional copies of the Offer to Purchase, this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the US Depositary at the address and telephone number set forth
above, to the Information Agent or the Dealer Managers at the addresses and
telephone numbers set forth below, or to the UK Receiving Agent at the
appropriate address and telephone number set forth in the Offer to Purchase.
12. Lost, Destroyed or Stolen Certificates. If any Sedgwick ADR
evidencing Sedgwick ADSs has been lost, destroyed or stolen, the holder thereof
should promptly notify the US Depositary by checking the box immediately
preceding the special payment/special delivery instructions boxes and
indicating the number of Sedgwick ADSs evidenced by such lost, destroyed or
stolen Sedgwick ADRs. The holder thereof will then be
11
<PAGE> 12
instructed as to the steps that must be taken in order to replace such
Sedgwick ADRs. This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost, destroyed or stolen
Sedgwick ADRs have been followed.
13. Holders of Sedgwick Shares Not Represented by Sedgwick ADSs. Holders
of Sedgwick Shares have been sent a Shareholder Form of Acceptance with the
Offer to Purchase and may not accept the Ordinary Offer in respect of Sedgwick
Shares pursuant to this Letter of Transmittal except insofar as those shares
are represented by Sedgwick ADSs. If any holder of Sedgwick Shares which are
not represented by Sedgwick ADSs needs to obtain a copy of a Shareholder Form
of Acceptance, such holder should contact the UK Receiving Agent at the
appropriate address and telephone number set forth in the Offer to Purchase or
the US Depositary.
12
<PAGE> 13
PAYER'S NAME: THE BANK OF NEW YORK, AS DEPOSITARY AGENT
SUBSTITUTE
FORM W-9
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
PAYER'S REQUEST FOR
TAXPAYER IDENTIFICATION
NUMBER AND CERTIFICATION
PART I -- Taxpayer Identification Number (TIN)
Please enter your correct number in the appropriate box below. NOTE: if the
account is more than one name, see the chart on the enclosed form, Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9, for
guidance on which number to enter.
Social Security Number or Employer Identification Number
________________________ _________________________________
If you do not have a TIN, see the instructions "How to Get a TIN" and check the
box below.
TIN Applied For [ ]
PART II -- For Payees Exempt from Backup Withholding (see instructions)
PART III Certification D Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service
(IRS) that I am subject to backup withholding as a result of a failure to
report all interest and dividends, or (c) IRS has notified me that I am no
longer subject to backup withholding, and
(3) All other information provided on this form is true, correct and complete.
Certification Instructions. You must cross out Item (2) above if you have
been notified by IRS that you are currently subject to backup withholding
because you have failed to report all interest and dividends on your tax
return. Please indicate the taxpayer's name associated with the TIN if
other than the first name appearing in the registration:
(X) ________________________________
(Please Print)
Please Sign (X) Signature(s) _____________________________ Date _______________
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF
ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER, PLEASE REVIEW THE ENCLOSED
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
The Information Agent for the Offers is:
GEORGESON & COMPANY INC.
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect: (212) 440-9800
All Others Call Toll-Free: (800) 223-2064
The Dealer Managers for the Offers are:
J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
(212) 648 7843 (Call Collect)
and
Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
(212) 892 8223 (Call Collect)
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<PAGE> 1
Exhibit (a)(3)
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in
any doubt about the Ordinary Offer or the action you should take, you are
recommended immediately to seek your own personal financial advice from your
stockbroker, bank manager, solicitor, accountant or other independent financial
adviser duly authorised under the Financial Services Act 1986.
This Form of Acceptance, Authority and Election (the Form) should be read in
conjunction with the accompanying offer document dated September 4, 1998 (the
Offer Document). The definitions used in the Offer Document apply in this Form.
The provisions of Appendix 1 to the Offer Document, in so far as they relate to
the Ordinary Offer, are deemed to be incorporated in and form part of this Form
and should be read carefully by each Sedgwick Shareholder.
If you have sold or otherwise transferred all your Sedgwick Shares, please send
this Form, the Offer Document and the reply-paid envelope as soon as possible
to the purchaser or transferee or to the stockbroker, bank or other agent
through whom the sale or transfer was effected, for delivery to the purchaser
or transferee. However, such documents should not be forwarded or transmitted
in or into Canada, Australia or Japan.
If you are a CREST sponsored member you should refer to your CREST sponsor
before completing the Form.
The Ordinary Offer is not being made, directly or indirectly, in or into, or by
use of the mails of, or by any means or instrumentality (including, without
limitation, telephonically or electronically) of interstate or foreign commerce
of, or any facility of a national securities exchange of, Canada, Australia or
Japan and will not be capable of acceptance by any such use, means,
instrumentality, or facility. Accordingly, neither this Form nor the Offer
Document is being or may be mailed or otherwise forwarded, distributed or sent
in, into or from Canada, Australia or Japan. All Sedgwick Shareholders
(including custodians, nominees and trustees) who would, or otherwise intend
to, forward this Form and/or the Offer Document, should read the further
details in this regard which are contained in paragraphs 8 and 10 of Part B of
Appendix 1 to the Offer Document before taking any action.
The Loan Notes which may be issued pursuant to the Ordinary Offer have not
been, and will not be, listed on any stock exchange. The Loan Notes have not
been, and will not be, registered under the US Securities Act or under the laws
of any State of the United States and may not be offered, sold or delivered,
directly or indirectly, in or into the United States or to, or for the account
or benefit of, any US Person except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the US Securities
Act or the relevant securities laws of any State of the United States. The Loan
Notes may not be offered, sold or delivered, directly or indirectly, in or into
Canada, Australia or Japan.
FORM OF ACCEPTANCE, AUTHORITY AND ELECTION
RECOMMENDED CASH OFFER
BY
MORGAN GUARANTY TRUST COMPANY OF NEW YORK AND
DONALDSON, LUFKIN & JENRETTE INTERNATIONAL
ON BEHALF OF
MARSH & MCLENNAN COMPANIES, INC.
FOR
SEDGWICK GROUP PLC
ACCEPTANCES OF THE ORDINARY OFFER MUST BE RECEIVED BY
3.00 P.M. (LONDON TIME), 10.00 A.M. (NEW YORK CITY TIME) on OCTOBER 5, 1998
PROCEDURE FOR ACCEPTANCE
* If you wish to accept the Ordinary Offer, use this Form and follow the
instructions set out on pages 2, 3 and 4. All Sedgwick Shareholders who
are individuals must sign in the presence of a witness who must also sign
where indicated. If you hold Sedgwick Shares jointly with others, you must
arrange for all your co-holders to sign this Form.
* The information on page 4 of this Form may help to answer queries you may
have about the Form and the procedure for responding to the Ordinary
Offer.
* Please send this Form, duly completed and signed (AND ACCOMPANIED, IF YOUR
SEDGWICK SHARES ARE IN CERTIFICATED FORM, BY YOUR SEDGWICK SHARE
CERTIFICATE(S)) and/or other document(s) of title) (if you are a Non-US
Holder) either by post or by hand to Computershare Services PLC, P.O. Box
859, Consort House, East Street, Bedminster, Bristol BS99 1XZ, or by hand
(during normal business hours only) to Computershare Services PLC, 5-10
Great Tower Street, London EC3R 5ER, or (if you are a US Holder) by post
or by hand to Bank of New York, 101 Barclay Street, New York, New York
10286, marked for the attention of Tenders and Exchanges, as soon as
possible but in any event to be received no later than 3.00 p.m. (London
time), 10.00 a.m. (New York City time) on October 5, 1998. A first class
reply-paid envelope (only for use in the UK or the US, as the case may be)
is enclosed for this purpose.
* If your Sedgwick Shares are in uncertificated form (that is, in CREST),
you should follow the instructions set out in paragraph 9(g) of Part B of
Appendix I to the Offer Document in order to transfer your Sedgwick Shares
to an escrow balance. For this purpose, the participant ID of
Computershare Services PLC which will act as escrow agent is 3RA48, the
member account ID of Computershare Services PLC is SEDGWICK and the Form
of Acceptance Reference Number of this Form (for insertion in the first
eight characters of the shared note field on the TTE instruction) is shown
next to Box 5 on page 3 of this Form. You should ensure that the transfer
to escrow settles no later than 3.00 p.m (London time), 10.00 a.m. (New
York City time) on October 5, 1998.
* If you hold Sedgwick Shares in both certificated and uncertificated form,
you should complete a separate Form for each holding. Similarly, you
should complete a separate Form for each different member account ID under
which Sedgwick Shares are held in uncertificated form and for each
different designation under which Sedgwick Shares are held in certificated
form. You can obtain further Forms by contacting Computershare Services
PLC, Bank of New York or Georgeson & Co Inc on one of the telephone
numbers set out below.
* If you hold Sedgwick Shares in certificated form and your share
certificate(s) and/or other document(s) of title is/are not readily
available or is/are lost, this Form should nevertheless be completed,
signed and returned as stated above so as to be received no later than
3.00 p.m. (London time), 10.00 a.m. (New York City time) on October 5,
1998 and the share certificate(s) and/or other document(s) of title or an
indemnity satisfactory to Marsh & McLennan should be lodged as soon as
possible thereafter with Computershare Services PLC or Bank of New York at
any of the addresses set out above (as the case may be).
DO NOT DETACH ANY PART OF THIS FORM
IF YOU HAVE ANY QUESTIONS AS TO HOW TO COMPLETE THIS FORM, PLEASE CONTACT
COMPUTERSHARE SERVICES PLC ON +44 (0) 117 937 0672,
BANK OF NEW YORK ON +1-800-507-9357 OR
GEORGESON & CO INC ON +1-800-223-2064
<PAGE> 2
Page 2
HOW TO COMPLETE THIS FORM
1 THE ORDINARY OFFER
To accept the Ordinary Offer, insert in Box 1 the total number of Sedgwick
Shares for which you wish to accept the Ordinary Offer, whether or not you wish
to elect for the Loan Note Alternative or the US dollar alternative. You must
also sign Box 8 which will constitute your acceptance of the Ordinary Offer,
and complete Box 4 and, if relevant Box 5. If applicable, you should also
complete Box 7.
If no number or a number greater than your registered holding of Sedgwick
Shares is written in Box 1 and you have signed Box 8, you will be deemed to
have inserted in Box 1, and to have accepted the Ordinary Offer in respect of
your entire registered holding of Sedgwick Shares (being your entire holding
under the name and address specified in Box 4) or, if your Sedgwick Shares are
in CREST, under the participant ID and member account id specified in Box 5.
CREST participants are requested to insert in Box 1 the same number of Sedgwick
Shares as entered on the related TTE instruction. If you put "NO" in Box [ ],
you may be deemed not to have accepted the Ordinary Offer.
COMPLETE HERE
PLEASE ENSURE YOUR SHARE CERTIFICATE(S) AND/OR OTHER DOCUMENTS OF TITLE ARE
ENCLOSED.
2 THE LOAN NOTE ALTERNATIVE
To elect for the Loan Note Alternative you should first complete Box 1 and
then write in Box 2 the number of Sedgwick Shares for which you wish to elect
to receive Loan Notes rather than cash under the Offer. You must also sign Box
8 and complete Box 4 and, if appropriate, complete Box 5. If applicable, you
should also complete Box 7.
If a number greater than the number of Sedgwick Shares inserted or deemed
to be inserted in Box 1 is written in Box 2 and you have signed Box 8, you will
be deemed to have elected for the Loan Note Alternative in respect of the
number inserted or deemed to be inserted in Box 1.
If you put "NO" in Box [ ], you may not accept the Loan Note Alternative
and must leave Box @ blank. If you put "NO" in Box [ ] and complete Box @,
your instructions in Box @ will be disregarded. Each person electing for the
Loan Notes will be deemed to represent and warrant that he/she is not a US
Person, a Canadian person, an Australian person, or a Japanese person and is
not acquiring, and will not be holding such Loan Notes for the account or
benefit of a US Person, a Canadian person, an Australian person or a Japanese
person or with a view to the offer/sale or delivery, directly or indirectly, of
such Loan Notes in, into or from the United States, Canada, Australia or Japan
or to, or for the account or benefit of, any US Person, Canadian person,
Australian person or Japanese person or any other person whom such transferee
has reason to believe is purchasing for the purpose of such offer, sale or
delivery. Any person unable to give such a representation and warranty is not
permitted to accept the Loan Note Alternative and in the case of any US Person
will be deemed to have accepted the Ordinary Offer for cash and without
electing for the Loan Note Alternative.
COMPLETE HERE
3 US DOLLAR ALTERNATIVE
To elect to receive all of your cash consideration in US dollars instead
of pounds sterling, in accordance with paragraph 12 of Part B of Appendix I to
the Offer Document, please place a mark in Box 3. You may elect to receive all
of your cash consideration in US dollars only in respect of your whole holding
of Sedgwick Shares in respect of which you accept the Ordinary Offer. If you
have elected for the Loan Note Alternative, any mark that you place in this box
will not be valid.
Please read paragraph 12 of Part B of Appendix I to the Offer Document
before electing to receive your cash consideration in US dollars.
COMPLETE HERE
4 NAME(S) AND ADDRESS(ES)
Please complete Box 4 with the full name and address of the sole or first-named
registered holder together with the full names of all other joint holders (if
any) in BLOCK CAPITALS. Unless you complete Box 7, this is the address to which
your consideration will be sent. If you insert in Box 4 an address in Canada,
Australia or Japan (and, if you are electing for the Loan Note Alternative, in
the United States), you must insert in Box 7 an alternative address outside
Canada, Australia and Japan (and, if you are electing for the Loan Note
Alternative, outside the United States). Please also give a telephone number
where you may be contacted in the event of any query.
COMPLETE HERE
5 PARTICIPANT ID AND MEMBER ACCOUNT ID
If your Sedgwick Shares are in CREST, you must insert in Box 5 the
participant ID and the member account ID under which such shares are held by
you in CREST.
You must also transfer (or procure the transfer of) the Sedgwick Shares
concerned to an escrow balance, specifying in the TTE instruction the
participant ID and member account ID inserted in Box 5 and the Form of
Acceptance Reference Number of this Form and the other information specified
in paragraph 9(g) of Part B of Appendix I to the Offer Document. The Form of
Acceptance Reference Number appears next to Box 5 on page 3 of this Form.
COMPLETE HERE
6 OVERSEAS PERSONS
If you are unable to give the representations and warranties set out in
paragraph 10(b) of Part B of Appendix I to the Offer Document, you must put
"NO" in Box 6. If you do not put "NO" in Box 6, you will be deemed to have
given such representations and warranties.
COMPLETE HERE
7 ADDRESS FOR DESPATCH OF CONSIDERATION
If you wish the consideration and/or other documents to be sent to someone
other than the first-named registered holder at the address set out in Box 4
(e.g. your bank manager or stockbroker), you should complete Box 7. Box 7 must
be completed by holders who have completed Box 4 with an address in Canada,
Australia or Japan (and, if electing for the Loan Note Alternative, in the
United States). You must not insert in Box 7 an address in Canada, Australia or
Japan (and, if electing for the Loan Note Alternative, in the United States).
COMPLETE HERE
8 SIGNATURES
You must sign Box * and, in the case of a joint holding, arrange for ALL other
joint holders to do likewise. All registered holders who are individuals MUST
SIGN IN THE PRESENCE OF A WITNESS who must also sign Box 8 where indicated. The
witness must be over 18 years of age and should not be another joint holder
signing the Form. The same witness may witness each signature of the joint
holders. The witness should also print his/her name where indicated.
A company may execute under seal, the seal being affixed and witnessed in
accordance with its Articles of Association or other regulations.
Alternatively, a company to which section 36A of the Companies Act 1985 applies
may execute the Form by a director and the company secretary or by two
directors of the company signing the Form and a company incorporated outside
Great Britain may sign in accordance with the laws of the relevant territory in
which the relevant company is incorporated. In both cases, execution should be
expressed to be by the company and each person signing the Form should state
the office which he/she holds and insert the name of the company above or
alongside his/her signature.
If the Form is not signed by the registered holder(s), insert the name(s) and
capacity (e.g. attorney or executor(s)) of the person(s) signing the Form. Such
person should also deliver evidence of his/her authority in accordance with the
notes on page 4.
Sign and WITNESS here
<PAGE> 3
Page 3
PLEASE COMPLETE AS EXPLAINED ON PAGES 2 AND 4
1 TO ACCEPT THE CONVERTIBLE OFFER BOX 1
Whether or not you wish to elect for
the Loan Note Alternative or the US Pound ST FOR OFFICE USE
dollar alternative, complete Box 1 ____________________ ________________
and Box 5 (and, if appropriate, Box 4, Number of Sedgwick HOLDER CODE
Box 6 and/or Box 7) and sign Box 8 Shares.
below. ____________________ ________________
2 TO ELECT FOR THE LOAN NOTE BOX 2 H
ALTERNATIVE
Having completed Box 1 (and, if Pound ST
appropriate, Box 5 and/or Box 7), ____________________ ________________
complete Box 2 and Box 4 and Number of Sedgwick C
sign Box 8 below. Shares.
____________________ ________________
3 TO ELECT FOR THE US DOLLAR BOX 3 Q
ALTERNATIVE _____________________
Place a mark in this box to receive
all of your cash consideration in US
dollars instead of pounds sterling.
You may not mark this box if you have
completed Box 2. _____________________ ________________
4 FULL NAME(S) AND ADDRESS(ES)
(TO BE COMPLETED IN BLOCK CAPITALS) BOX 4
First-named registered holder Second-named registered holder
1. Forenames _____________________ 2. Forenames _______________________
(Mr, Mrs, Ms or Title) (Mr, Mrs, Ms or Title)
Surname _________________________
Surname __________________________
Third-named registered holder
Address __________________________ 3. Forenames ______________________
(Mr, Mrs, Ms or Title)
__________________________________ Surname ___________________________
__________________________________ Fourth-named registered holder
Postcode _________________________ 4. Forenames ______________________
(Mr, Mrs, Ms or Title)
Surname ___________________________
In case of query, please state your daytime telephone number ________________
5 PARTICIPANT ID AND MEMBER ACCOUNT ID BOX 5
Complete this Box only if your Sedgwick
Shares are in CREST Participant ID ____________
The Form of Acceptance Reference Number
of this Form is: Member account ID _________
___________________________
6 OVERSEAS PERSONS BOX 6
If you are unable to give the representations
and warranties in paragraph 10(b) of Part B
of Appendix I to the Offer Document, you must
put "NO" in Box 6
___________________________
7 ADDRESS FOR THE DESPATCH OF CONSIDERATION BOX 7
Address outside Canada, Australia and Japan
(and, if electing for the Loan Note
Alternative, outside the United States) to
which consideration and/or other documents
are to be sent instead of address in Box 4.
Name ______________________________________________________________________
Address ___________________________________________________________________
___________________________________________________________________________
_____________________________________ Postcode ____________________________
8 ALL REGISTERED HOLDERS TO SIGN HERE TO ACCEPT BOX 8
THE ORDINARY OFFER
EXECUTION BY INDIVIDUALS
Signed and delivered In presence of:
as a deed by
________________________ ________________________ ________________________
Signature Signature of Witness Name of Witness
________________________ ________________________ ________________________
Signature (joint holder) Signature of Witness Name of Witness
________________________ ________________________ ________________________
Signature (joint holder) Signature of Witness Name of Witness
________________________ ________________________ ________________________
Signature (joint holder) Signature of Witness Name of Witness
IMPORTANT: EACH REGISTERED HOLDER WHO IS AN INDIVIDUAL MUST SIGN IN THE
PRESENCE OF A WITNESS WHO MUST ALSO SIGN AND PRINT HIS/HER NAME WHERE
INDICATED. IN THE CASE OF JOINT HOLDERS, ALL MUST SIGN.
**Executed as a deed under the common seal of the company named below/
Executed as a deed on behalf of the company named below** in the presence
of/acting by:
________________________ ________________________ ________________________
Name of Company Signature Name of Director
**Delete as appropriate ________________________ ________________________
Signature Name of Director/
Secretary**
(TO BE COMPLETED IN BLOCK CAPITALS)
<PAGE> 4
Page 4
FURTHER NOTES REGARDING THE COMPLETION AND LODGING OF THIS FORM
In order to be effective, this Form must, except as mentioned below, be signed
personally by the registered holder or, in the case of a joint holding, by ALL
the joint holders and each individual signature must be independently
witnessed. A company must execute this Form under its common seal, the seal
being affixed and witnessed in accordance with its Articles of Association or
other regulations. Alternatively, a company to which section 36A of the
Companies Act 1985 applies may execute this Form by a director and the company
secretary or by two directors of the company signing the form and a company
incorporated outside Great Britain may sign in accordance with the laws of the
relevant territory in which the relevant company is incorporated. In both
cases, execution should be expressed to be by the company and each person
signing the Form should state the office which he/she holds and insert the name
of the company above or alongside his/her signature.
In order to avoid delay and inconvenience to yourself, the following points may
assist you:
1. IF THE SOLE HOLDER HAS DIED
If a grant of probate or letters of administration has/have been
registered with Sedgwick's registrar, this Form must be signed by the
personal representative(s) of the deceased holder, in the presence of a
witness, and returned either by post or by hand (in the case of a Non-US
Holder) to Computershare Services PLC, P.O. Box 859, Consort House, East
Street, Bedminster, Bristol, BS99 1XZ, or by hand (during normal business
hours only) to Computershare Services PLC, 5-10 Great Tower Street, London
EC3R 5ER, or (in the case of a US Holder) by post or by hand to Bank of
New York, 101 Barclay Street, New York, New York 10286, marked for the
attention of Tenders and Exchanges. If a grant of probate or letters of
administration has/have not been registered with Sedgwick's registrar, the
personal representative(s) or the prospective personal representative(s)
should sign the Form, in the presence of a witness, and return it as
aforesaid. However, the grant of probate or letters of administration must
be lodged with Computershare Services PLC or Bank of New York at any such
address (as the case may be) before the consideration due can be
despatched.
2. IF ONE OF THE JOINT HOLDERS HAS DIED
This Form must be signed by all surviving holders in the presence of
a witness and lodged with Computershare Services PLC or Bank of New York
at any of the addresses set out in paragraph 1 above (as the case may be),
accompanied by the death certificate, the grant of probate or letters of
administration in respect of the deceased holder.
3. IF YOUR SEDGWICK SHARES ARE IN CERTIFICATED FORM AND THE CERTIFICATE(S)
IS/ARE HELD BY YOUR BANK OR SOME OTHER AGENT
If your share certificate(s) and/or other document(s) of title is/are
not readily available, the completed Form should be lodged with
Computershare Services PLC or Bank of New York at any of the addresses set
out in paragraph 1 above (as the case may be), together with a note saying
e.g. "certificates to follow" and you should arrange for the share
certificate(s) and/or other document(s) of title to be forwarded as soon
as possible thereafter.
4. IF YOUR SEDGWICK SHARES ARE IN CERTIFICATED FORM AND ANY SHARE
CERTIFICATE IS NOT READILY AVAILABLE OR HAS BEEN LOST
The completed Form, and any share certificate(s) which you may have
available, should be lodged with Computershare Services PLC or Bank of New
York at any of the addresses set out in paragraph 1 above (as the case may
be), accompanied by a letter stating that the balance will follow (and, if
applicable, that you have lost one or more of your share certificates). At
the same time, you should write to Sedgwick's registrar, Lloyds Bank
Registrars, The Causeway, Worthing, West Sussex, BN99 6DA, requesting that
a letter of indemnity be sent to you which, when completed in accordance
with the instructions given, should be lodged with Computershare Services
PLC or Bank of New York at any of the addresses set out in paragraph 1
above (as the case may be), as soon as possible thereafter.
5. IF THE FORM HAS BEEN SIGNED UNDER POWER OF ATTORNEY
The completed Form should be lodged with Computershare Services PLC or
Bank of New York at any of the addresses set out in paragraph 1 above (as
the case may be) accompanied by the original power of attorney (or a copy
thereof duly certified in accordance with the Powers of Attorney Act
1971). The power of attorney will be noted by Computershare Services PLC
or Bank of New York and returned as directed.
6. IF YOUR NAME OR OTHER PARTICULARS ARE SHOWN INCORRECTLY ON THE SHARE
CERTIFICATE(S)
e.g. Name on the certificates ..............................James Smith
Correct name .........................................James Smythe
The Form should be completed in your correct name and lodged with
Computershare Services PLC or Bank of New York at any of the addresses set
out in paragraph 1 above (as the case may be) with your share
certificate(s) and accompanied by a letter from your bank, stockbroker or
solicitor confirming that the person in whose name the Sedgwick Shares are
registered is one and the same as the person who has signed the Form. If
an incorrect address is shown, the correct address should be written on
the Form. If you have changed your name, lodge your marriage certificate
or deed poll or, in the case of a company, a copy of the certificate of
incorporation on change of name with this Form for noting.
7. IF A HOLDER IS AWAY FROM HOME (E.G. ABROAD OR ON HOLIDAY)
Send this Form and the Offer Document by the quickest means (e.g. air
mail) to the holder for execution (provided that such documents are not
forwarded or transmitted, by any means, in or into Canada, Australia or
Japan) or, if he/she has executed a power of attorney giving sufficient
authority, the attorney should sign the Form and the original power of
attorney (or a copy thereof duly certified in accordance with the Powers
of Attorney Act 1971) should be lodged with this Form for noting (see
paragraph 5 above). No other signatures are acceptable.
8. IF YOU HAVE SOLD OR TRANSFERRED ALL YOUR SEDGWICK SHARES
If you have sold or transferred all your Sedgwick Shares, please send this
Form and the Offer Document at once to the purchaser or transferee or to
the stockbroker, bank or other agent through whom the sale or transfer was
effected for delivery to the purchaser or transferee. However, this Form
and the Offer Document should not be forwarded or transmitted in or into
Canada, Australia or Japan.
9. IF YOU ARE NOT RESIDENT IN THE UK
The attention of Sedgwick Shareholders not resident in the UK is drawn, in
particular to paragraph 8 and 10(b) of Part B of Appendix I to the Offer
Document.
10. IF YOUR SEDGWICK SHARES ARE IN CREST
You should take the action set out in paragraph 9(g) of Part B of Appendix
I to the Offer Document to transfer your Sedgwick Shares to an escrow
balance. You are reminded to keep a record of the Form of Acceptance
Reference Number (which appears next to Box 5 on page 3 of this Form) so
that such Form of Acceptance Reference Number can be inserted into the TTE
instruction.
If you are a CREST sponsored member, you should refer to your CREST
sponsor before completing this Form, as only your CREST sponsor will be
able to send the necessary TTE instruction to CRESTCo.
Without prejudice to paragraphs 6(d) and 7 of Part B of Appendix I to the
Offer Document, Marsh & McLennan reserves the right to treat as valid any
acceptance of the Ordinary Offer which is not entirely in order or which is not
accompanied by the relevant transfer to escrow or (as appropriate) the relevant
share certificate(s) and/or other document(s) of title. In that event, no
consideration due under the Ordinary Offer will be sent until after the
relevant transfer to escrow has been made or (as appropriate) the relevant
share certificate(s) and/or other document(s) of title or indemnities
satisfactory to Marsh & McLennan have been received by Computershare Services
PLC or Bank of New York at any of the addresses set out in paragraph 1 above
(as the case may be). Notwithstanding that no share certificate(s) and/or other
document(s) of title is/are delivered with this Form, the Form, if otherwise
valid and accompanied by an appropriate endorsement or certification to the
effect that the Sedgwick Shares referred to therein are available for
acceptance and signed on behalf of the London Stock Exchange or Sedgwick's
registrar and delivered to Computershare Services PLC or Bank of New York at
any of the addresses set out in paragraph 1 above (as the case may be), may be
treated as valid for the purposes including an election for the Loan Note
Alternative.
<PAGE> 5
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in
any doubt about the Convertible Offer or the action you should take, you are
recommended immediately to seek your own personal financial advice from your
stockbroker, bank manager, solicitor, accountant or other independent financial
adviser duly authorised under the Financial Services Act 1986.
This Form of Acceptance, Authority and Election (the Form) should be read in
conjunction with the accompanying offer document dated September 4, 1998 (the
Offer Document). The definitions used in the Offer Document apply in this Form.
The provisions of Appendix I to the Offer Document, in so far as they relate to
the Convertible Offer, are deemed to be incorporated in and form part of this
Form and should be read carefully by each Sedgwick Bondholder.
If you have sold or otherwise transferred all your Sedgwick Convertible Bonds,
please send this Form, the Offer Document and the reply-paid envelope as soon as
possible to the purchaser or transferee or to the stockbroker, bank or other
agent through whom the sale or transfer was effected, for delivery to the
purchaser or transferee. However, such documents should not be forwarded or
transmitted in or into Canada, Australia or Japan.
The Convertible Offer is not being made, directly or indirectly, in or into, or
by use of the mails of, or by any means or instrumentality (including, without
limitation, telephonically or electronically) of interstate or foreign commerce
of, or any facility of a national securities exchange of, Canada, Australia or
Japan and will not be capable of acceptance by any such use, means,
instrumentality, or facility. Accordingly, neither this Form nor the Offer
Document is being or may be mailed or otherwise forwarded, distributed or sent
in, into or from Canada, Australia or Japan. All Sedgwick Bondholders (including
custodians, nominees and trustees) who would, or otherwise intend to, forward
this Form and/or the Offer Document, should read the further details in this
regard which are contained in paragraphs 8 and 10 of Part B of Appendix I to the
Offer Document before taking any action.
The Loan Notes which may be issued pursuant to the Convertible Offer have not
been, and will not be, listed on any stock exchange. The Loan Notes have not
been, and will not be, registered under the US Securities Act or under the laws
of any State of the United States and may not be offered, sold or delivered,
directly or indirectly, in or into the United States or to, or for the account
or benefit of, any US Person except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the US Securities
Act or the relevant securities laws of any State of the United States. The Loan
Notes may not be offered, sold or delivered, directly or indirectly, in or into
Canada, Australia or Japan.
FORM OF ACCEPTANCE, AUTHORITY AND ELECTION RECOMMENDED CASH OFFER
BY
MORGAN GUARANTY TRUST COMPANY OF NEW YORK AND
DONALDSON, LUFKIN & JENRETTE INTERNATIONAL
ON BEHALF OF
MARSH & MCLENNAN COMPANIES, INC.
FOR
SEDGWICK GROUP PLC CONVERTIBLE BONDS
ACCEPTANCES OF THE CONVERTIBLE OFFER MUST BE RECEIVED BY
3.00 P.M. (LONDON TIME), 10.00 A.M. (NEW YORK CITY TIME) on OCTOBER 5, 1998
PROCEDURE FOR ACCEPTANCE
* If you wish to accept the Convertible Offer, use this Form and follow the
instructions set out on pages 2, 3 and 4. All Sedgwick Bondholders who are
individuals must sign in the presence of a witness who must also sign where
indicated. If you hold Sedgwick Registered Bonds jointly with others, you
must arrange for all your co-holders to sign this Form.
* The information on page 4 of this Form may help to answer queries you may
have about the Form and the procedure for responding to the Convertible
Offer.
* Please send this Form, duly completed and signed, (if you are a Non-US
Holder) either by post or by hand to Computershare Services PLC, P.O. Box
859, Consort House, East Street, Bedminster, Bristol BS99 1XZ, or by hand
(during normal business hours only) to Computershare Services PLC, 5-10
Great Tower Street, London EC3R 5ER, or (if you are a US Holder) by post or
by hand to Bank of New York, 101 Barclay Street, New York, New York 10286,
marked for the attention of Tenders and Exchanges, as soon as possible but
in any event to be received no later than 3.00 p.m. (London time), 10.00
a.m. (New York City time) on October 5, 1998. A first class reply-paid
envelope (only for use in the UK or the US, as the case may be) is enclosed
for this purpose.
* In the case of holders of Sedgwick Registered Bonds, this Form should be
accompanied by your bond certificate(s) and/or other document(s) of title.
* Holders of Sedgwick Bearer Bonds are referred to paragraph 9(d) of Part B
of Appendix I to the Offer Document and are requested to follow the
instructions set out herein as to delivery of such Sedgwick Bearer Bonds.
* If your bond certificate(s) and/or other document(s) of title or your
Sedgwick Bearer Bond(s) which is/are not held in Euroclear or Cedel is/are
not readily available or is/are lost, this Form, duly completed and signed,
should nevertheless be delivered as stated above and such bond
certificate(s) and/or other document(s) of title or such Sedgwick Bearer
Bond(s) should be forwarded as soon as possible thereafter.
DO NOT DETACH ANY PART OF THIS FORM
IF YOU HAVE ANY QUESTIONS AS TO HOW TO COMPLETE THIS FORM, PLEASE CONTACT
COMPUTERSHARE SERVICES PLC ON +44 (0) 117 937 0672,
BANK OF NEW YORK ON +1-800-507-9357 OR
GEORGESON & CO INC ON +1-800-223-2064
<PAGE> 6
1 THE CONVERTIBLE OFFER
To accept the Convertible Offer, insert in Box 1 the total nominal amount of
Sedgwick Convertible Bonds for which you wish to accept the Convertible Offer,
whether or not you wish to elect for the Loan Note Alternative or the US dollar
alternative. You must also sign Box 8 which will constitute your acceptance of
the Convertible Offer and complete Box 5. If applicable, you should also
complete Box 4 and/or Box 7.
If you are a holder of Sedgwick Registered Bonds and no amount or an amount
greater than the nominal amount of your registered holding of Sedgwick
Convertible Bonds is inserted in Box 1 and you have signed Box 8, you will be
deemed to have accepted the Convertible Offer in respect of, and inserted in Box
1, the nominal amount of Sedgwick Convertible Bonds that constitutes the whole
of your holding of Sedgwick Registered Bonds.
If you are a holder of Sedgwick Bearer Bonds not held through Euroclear or Cedel
and you are delivering this Form accompanied by your Sedgwick Bearer Bonds or
are providing evidence satisfactory to J.P. Morgan and Donaldson, Lufkin &
Jenrette that your Sedgwick Bearer Bonds have been deposited with a bank or
other depositary to the order of J.P. Morgan or Donaldson, Lufkin & Jenrette and
no nominal amount of Sedgwick Convertible Bonds is inserted in Box 1 and you
have signed Box 8, you will be deemed to have accepted the Convertible Offer in
respect of, and inserted in Box 1, the nominal amount of Sedgwick Bearer Bonds
that are so delivered or in respect of which evidence is so provided. If you put
"NO" in Box @, you may be deemed not to have accepted the Convertible Offer.
COMPLETE HERE
2 THE LOAN NOTE ALTERNATIVE
To elect for the Loan Note Alternative, you should first complete Box 1 and then
write in Box 2 the nominal amount of Sedgwick Convertible Bonds for which you
wish to elect to receive Loan Notes rather than cash under the Convertible
Offer. You must also sign Box 8, and complete Box 5. If applicable, you should
also complete Box 4 and/or Box 7.
If a nominal amount greater than the nominal amount of Sedgwick Convertible
Bonds inserted or deemed to be inserted in Box 1 is written in Box 2 and you
have signed Box 8, you will be deemed to have elected for the Loan Note
Alternative in respect of the number inserted or deemed to be inserted in Box 1.
If you put "NO" in Box @, you may not accept the Loan Note Alternative and must
leave Box @ blank. If you put "NO" in Box @ and complete Box @, your
instructions in Box @ will be disregarded. Each person electing for the Loan
Notes will be deemed to represent and warrant that he/she is not a US Person, a
Canadian person, an Australian person, or a Japanese person and is not
acquiring, and will not be holding, such Loan Notes for the account or benefit
of a US Person, a Canadian person, an Australian person or a Japanese person or
with a view to the offer/sale or delivery, directly or indirectly, of such Loan
Notes in, into or from the United States, Canada, Australia or Japan or to, or
for the account or benefit of, any US Person, Canadian person, Australian person
or Japanese person or any other person whom such transferee has reason to
believe is purchasing for the purpose of such offer, sale or delivery. Any
person unable to give such a representation and warranty is not permitted to
accept the Loan Note Alternative and in the case of any US Person will be deemed
to have accepted the Convertible Offer for cash and without electing for the
Loan Note Alternative.
COMPLETE HERE
3 US DOLLAR ALTERNATIVE
To elect to receive all of your cash consideration in US dollars instead of
pounds sterling, in accordance with paragraph 12 of Part B of Appendix I to the
Offer Document, please place a mark in Box 3. You may elect to receive all of
your cash consideration in US dollars only in respect of your whole holding of
Sedgwick Convertible Bonds in respect of which you accept the Convertible Offer.
If you have elected for the Loan Note Alternative, any mark that you place in
this box will not be valid.
Please read paragraph 12 of Part B of Appendix I to the Offer Document before
electing to receive your cash consideration in US dollars.
COMPLETE HERE
4 NAME(S) AND ADDRESS(ES)
If this Form relates to Sedgwick Registered Bonds, please complete Box 4 with
the full name and address of the sole or first-named registered holder together
with the full names of all other joint holders (if any) in BLOCK CAPITALS.
Unless you complete Box 7, this is the address to which your consideration will
be sent. If you insert in Box 4 an address in Canada, Australia or Japan (and,
if you are electing for the Loan Note Alternative, in the United States), you
must insert in Box 7 an alternative address outside Canada, Australia and Japan
(and, if you are electing for the Loan Note Alternative outside the United
States). Please also give a telephone number where you may be contacted in the
event of any query.
If this Form relates to Sedgwick Bearer Bonds, Box 4 need not be completed and,
in this regard only, this note overrides any instructions to the contrary in
this Form and the Offer Document. If Box 4 is not completed, Box 7 must be
completed.
COMPLETE HERE
5 FORM OF SEDGWICK CONVERTIBLE BONDS IN RESPECT OF WHICH ACCEPTANCE IS
MADE HEREBY
Tick Box if you are accepting the Convertible Offer in respect of Sedgwick
Registered Bonds held by you. If you tick Box , this Form of Acceptance should
be accompanied by your Sedgwick Registered Bonds and/or other documents of
title.
Tick Box if you are accepting the Convertible Offer in respect of Sedgwick
Bearer Bonds held by you. Do not tick Box if you hold Sedgwick Bearer Bonds
through Euroclear or Cedel and you will deliver your Sedgwick Bearer Bonds to
J.P. Morgan or Donaldson, Lufkin & Jenrette through Euroclear or Cedel. If you
tick Box this Form of Acceptance should be accompanied by your Sedgwick Bearer
Bonds (together with all unmatured coupons appertaining thereto except for those
relating to the period May 31, 1998 to November 30, 1998) or evidence
satisfactory to J.P. Morgan and Donaldson, Lufkin & Jenrette that your Sedgwick
Bearer Bonds (together with such coupons) have been deposited with a bank or
other depositary to the order of J.P. Morgan or Donaldson, Lufkin & Jenrette. If
you are delivering this Form accompanied by your Sedgwick Bearer Bonds, this
Form and the accompanying Sedgwick Bearer Bonds must be delivered by hand only
(during normal business hours) (if you are a Non-US Holder) to Computershare
Services PLC, P.O. Box 859, Consort House, East Street, Bedminster, Bristol BS99
1XZ or to Computershare Services PLC, 5-10 Great Tower Street, London EC3R 5ER
or (if you are a US Holder) to Bank of New York, 101 Barclay Street, New York,
New York 10286 marked for the attention of Tenders and Exchanges.
Tick Box if you are accepting the Convertible Offer in respect of Sedgwick
Bearer Bonds held by you through Euroclear or Cedel and you will irrevocably
instruct Euroclear or Cedel to debit your security clearance or other accounts
with the amount of Sedgwick Bearer Bonds in respect of which you are accepting
the Convertible Offer and to credit the J.P. Morgan or Donaldson, Lufkin &
Jenrette securities account with Euroclear or, as the case may be, Cedel in
accordance with the procedures, details of which are available on request from
Euroclear or, as the case may be, Cedel.
If you tick Box , you should complete Box with the number of your securities
clearance or other account in Euroclear or Cedel which is to be debited with the
appropriate number of Sedgwick Bearer Bonds. You should then procure that
instructions are given to Euroclear or, as the case may be, Cedel in accordance
with such procedures to debit that account with the nominal amount of Sedgwick
Bearer Bonds inserted in Box 1 and to credit the securities account of J.P.
Morgan or Donaldson, Lufkin & Jenrette with Euroclear or, as the case may be,
Cedel (details of which are available from Euroclear or, as the case may be,
Cedel). You must comply with the procedures from time to time established by
Euroclear or, as the case may be, Cedel in relation to acceptance of the
Convertible Offer. Your acceptance of the Convertible Offer will not be treated
as valid until such credit has been confirmed to J.P. Morgan or Donaldson,
Lufkin & Jenrette by Euroclear or, as the case may be, Cedel.
If you hold both Sedgwick Registered Bonds and Sedgwick Bearer Bonds or if you
wish to exercise different options in respect of your delivery of Sedgwick
Bearer Bonds, you should complete a separate Form in respect of each category of
Sedgwick Bonds in respect of which you are accepting the Convertible Offer. You
can obtain further Forms by contacting Computershare Services PLC, Bank of New
York or Georgeson & Co Inc on one of the telephone numbers set out at the bottom
of page 1.
COMPLETE HERE
6 OVERSEAS PERSONS
If you are unable to give the representations and warranties set out in
paragraph 10(b) of Part B of Appendix I to the Offer Document, you must put "NO"
in Box 6. If you do not put "NO" in Box 6, you will be deemed to have given such
representations and warranties.
COMPLETE HERE
7 ADDRESS FOR DESPATCH OF CONSIDERATION
If you wish the consideration and/or other documents to be sent to someone other
than the first-named registered holder at the address set out in Box 4 (e.g.
your bank manager or stockbroker), you should complete Box 7. If this Form of
Acceptance relates to Sedgwick Bearer Bonds, Box 7 must be completed with the
name of the person and the address to which you wish the consideration and/or
other documents to be sent.
Box 7 must also be completed by holders who have completed Box 4 with an address
in Canada, Australia or Japan (and, if electing for the Loan Note Alternative,
in the United States).
You must not insert in Box 7 and address in Canada, Australia or Japan (and, if
electing for the Loan Note Alternative, in the United States).
COMPLETE HERE
8 SIGNATURES
You must sign Box * and, in the case of a joint holding of Sedgwick Registered
Bonds, arrange for ALL other joint holders to do likewise. All holders who are
individuals MUST SIGN IN THE PRESENCE OF A WITNESS who must also sign Box 8
where indicated. The witness must be over 18 years of age and should not be
another joint holder signing the Form. The same witness may witness each
signature of the joint holders. The witness should also print his/her name where
indicated.
In the case of Sedgwick Bearer Bonds, the person who completes and signs or
otherwise executes Box 8 must be either the actual holder of the Sedgwick Bearer
Bonds or a participant or account holder in or of Euroclear or Cedel whose
securities clearance or other account with Euroclear or, as the case may be,
Cedel is credited with any Sedgwick Bearer Bonds. References herein to the
holder(s) of Sedgwick Bearer Bonds are references to the person(s) signing or
otherwise executing Box 8.
A company may execute under seal, the seal being affixed and witnessed in
accordance with its Articles of Association or other regulations. Alternatively,
a company to which section 36A of the Companies Act 1985 applies may execute the
Form by a director and the company secretary or by two directors of the company
signing the Form and a company in corporated outside Great Britain may sign in
accordance with the laws of the relevant territory in which the relevant company
is incorporated. In both cases, execution should be expressed to be by the
company and each person signing the Form should state the office which he/she
holds and insert the name of the company above or alongside his/her signature.
If the Form is not signed by the registered holder(s), insert the name(s) and
capacity (e.g. attorney or executor(s)) of the person(s) signing the Form. Such
person should also deliver evidence of his/her authority in accordance with the
notes on page 4.
COMPLETE HERE
<PAGE> 7
1 TO ACCEPT THE CONVERTIBLE OFFER BOX 1
Whether or not you wish to elect for
the Loan Note Alternative or the US Pound ST FOR OFFICE USE
dollar alternative, complete Box 1 ____________________ ________________
and Box 5 (and, if appropriate, Nominal amount of HOLDER CODE
Box 4, Box 6 and/or Box 7) and sign Sedgwick Convertible
Box 8 below. Bonds.
____________________ ________________
2 TO ELECT FOR THE LOAN NOTE BOX 2 H
ALTERNATIVE
Having completed Box 1 (and, if Pound ST
appropriate, Box 4, Box 6 and/or ____________________ ________________
Box 7), complete Box 2 and Box 5 Nominal amount of C
and sign Box 8 below. Sedgwick Convertible
Bonds.
____________________ ________________
3 TO ELECT FOR THE US DOLLAR BOX 3 Q
ALTERNATIVE ____________________
Place a mark in this box to receive
all of your cash consideration in US
dollars instead of pounds sterling.
You may not mark this box if you
have completed Box 2. _____________________ _______________
4 FULL NAME(S) AND ADDRESS(ES) OF
REGISTERED HOLDERS (TO BE COMPLETED
IN BLOCK CAPITALS) BOX 4
First-named registered holder Second-named registered holder
1. Forenames _____________________ 2. Forenames _______________________
(Mr, Mrs, Ms or Title) (Mr, Mrs, Ms or Title)
Surname _________________________
Surname __________________________
Third-named registered holder
Address __________________________ 3. Forenames ______________________
(Mr, Mrs, Ms or Title)
__________________________________ Surname ___________________________
__________________________________ Fourth-named registered holder
Postcode _________________________ 4. Forenames ______________________
(Mr, Mrs, Ms or Title)
Surname ___________________________
In case of query, please state your daytime telephone number _________________
5. FORM OF SEDGWICK CONVERTIBLE BONDS IN RESPECT OF WHICH BOX 5A
ACCEPTANCE IS MADE HEREBY _______________
Tick Box 5A if you are accepting the Convertible Offer
in respect of Sedgwick Registered Bonds held by you. _______________
BOX 5B
Tick Box 5B if you are accepting the Convertible Offer _______________
in respect of Sedgwick Bearer Bonds held by you.
_______________
Tick Box 5C if you are accepting the Convertible Offer BOX 5C
in respect of Sedgwick Bearer Bonds held by you through _______________
Euroclear or Cedel and will deliver your Sedgwick Bearer
Bonds to J.P. Morgan or Donaldson, Lufkin & Jenrette
through Euroclear or Cedel. _______________
If you ticked Box 5C, you must insert in Box 5D the BOX 5D
number of your securities clearance of other accounts ____________________
in Euroclear or Cedel which will be debited with Securities clearance
the Sedgwick Bearer Bonds and specify whether that or other account
account is held with Euroclear or Cedel. number
____________________
*Delete as applicable with Euroclear/Cedel*
____________________
6 OVERSEAS PERSONS BOX 6
If you are unable to give the representations
and warranties in paragraph 10(b) of Part B
of Appendix I to the Offer Document, you must
put "NO" in Box 6
___________________________
7 ADDRESS FOR THE DESPATCH OF CONSIDERATION BOX 7
Address outside Canada, Australia and Japan
(and, if electing for the Loan Note
Alternative, outside the United States) to
which consideration and/or other documents
are to be sent instead of address in Box 4.
Name ______________________________________________________________________
Address ___________________________________________________________________
___________________________________________________________________________
_____________________________________ Postcode ____________________________
8 ALL REGISTERED HOLDERS TO SIGN HERE TO ACCEPT BOX 8
THE CONVERTIBLE OFFER
EXECUTION BY INDIVIDUALS
Signed and delivered In presence of:
as a deed by
________________________ ________________________ ________________________
Signature Signature of Witness Name of Witness
________________________ ________________________ ________________________
Signature (joint holder) Signature of Witness Name of Witness
________________________ ________________________ ________________________
Signature (joint holder) Signature of Witness Name of Witness
________________________ ________________________ ________________________
Signature (joint holder) Signature of Witness Name of Witness
IMPORTANT: EACH HOLDER WHO IS AN INDIVIDUAL MUST SIGN IN THE PRESENCE OF A
WITNESS WHO MUST ALSO SIGN AND PRINT HIS/HER NAME WHERE INDICATED. IN THE
CASE OF JOINT REGISTERED HOLDERS, ALL MUST SIGN.
**Executed as a deed under the common seal of the company named below/
Executed as a deed on behalf of the company named below** in the presence
of/acting by:
________________________ ________________________ ________________________
Name of Company Signature Name of Director
**Delete as appropriate ________________________ ________________________
Signature Name of Director/
Secretary**
(TO BE COMPLETED IN BLOCK CAPITALS)
<PAGE> 8
<PAGE> 9
FURTHER NOTES REGARDING THE COMPLETION AND LODGING OF THIS FORM
In order to avoid delay and inconvenience to yourself, the following points may
assist you:
1. IF THE SOLE HOLDER HAS DIED
In relation to any Sedgwick Registered Bonds, if a grant of probate or
letters of administration has/have been registered with Sedgwick, this Form
must be signed by the personal representative(s) of the deceased holder,
each in the presence of a witness who must also sign this Form. The Form
should then be returned either by post or by hand (in the case of a Non-US
Holder) to Computershare Services PLC, P.O. Box 859, Consort House, East
Street, Bedminster, Bristol BS99 1XZ, or by hand (during normal business
hours only) to Computershare Services PLC, 5-10 Great Tower Street, London
EC3R 5ER, or (in the case of a US Holder) by post or by hand to Bank of New
York, 101 Barclay Street, New York, New York 10286, marked for the
attention of Tenders and Exchanges, together with the relative bond
certificate(s).
If a grant of probate or letters of administration has/have been registered
with Sedgwick, the personal representative(s) or prospective personal
representative(s) should sign this Form in the presence of a witness who
must also sign this Form and forward it with the bond certificate(s) and/or
other documents of title. However, a grant of probate or letters of
administration must be lodged with Computershare Services PLC or Bank of
New York at any of the addresses set out above (as the case may be) before
the consideration due under the Convertible Offer can be forwarded to the
personal representative(s).
If a person entitled to any Sedgwick Convertible Bonds has died, this Form
may be signed by the personal representative(s) or prospective personal
representative(s) of the deceased, who should indicate their status. The
grant of probate and/or letters of administration must be lodged with
Computershare Services PLC or Bank of New York at any of the addresses set
out above (as the case may be) before the consideration due can be
forwarded to the personal representatives(s).
2. IF ONE OF THE JOINT REGISTERED HOLDERS HAS DIED
This Form must be signed by all surviving registered holders in the
presence of a witness and lodged with Computershare Services PLC or Bank of
New York at any of the addresses set out in paragraph 1 above (as the case
may be), accompanied by the death certificate, the grant of probate or
letters of administration in respect of the deceased holder.
3. IF THE CERTIFICATE(S) IS/ARE HELD BY YOUR STOCKBROKER, BANK OR OTHER
AGENT
If your bond certificate(s) and/or other document(s) of title is/are with
your stockbroker, bank or other agent, you should complete this Form and,
if the certificate(s) is/are readily available but are not held through
Euroclear or Cedel, arrange for it to be lodged by such agent with
Computershare Services PLC or Bank of New York, at any of the addresses
given in paragraph 1 (as the case may be), accompanied by the bond
certificate(s) and/or other documents of title (in the case of Sedgwick
Registered Bonds) or (in the case of Sedgwick Bearer Bonds) instruct your
agent to lodge this Form and to arrange for evidence satisfactory to J.P.
Morgan and Donaldson, Lufkin & Jenrette to be produced that the Sedgwick
Bearer Bonds (together with all unmatured coupons appertaining thereto
except for those relating to the period May 31, 1998 to November 30, 1998)
have been deposited with a bank or other depositary to the order of J.P.
Morgan or Donaldson, Lufkin & Jenrette.
If the certificate(s) is/are not readily available and are not held through
Euroclear or Cedel, lodge this Form with Computershare Services PLC or Bank
of New York at any of the addresses given in paragraph 1 (as the case may
be), duly completed together with a note saying e.g. "certificates to
follow", and arrange for the certificate(s) in respect of Sedgwick
Registered Bonds to be forwarded or (in relation to Sedgwick Bearer Bonds)
arrange for compliance with the delivery instructions set out herein as
soon as possible thereafter. (It is helpful for your agent to be informed
of the full terms of the Convertible Offer.) If the Sedgwick Convertible
Bonds are held through Euroclear or Cedel, forward this Form duly completed
to Computershare Services PLC or Bank of New York at any of the addresses
given in paragraph 1 (as the case may be) and follow the delivery
instructions set out herein.
4. IF ANY BOND CERTIFICATE(S) IS NOT READILY AVAILABLE OR HAS BEEN LOST
The completed Form, and any bond certificate(s) which you may have
available, should be lodged with Computershare Services PLC or Bank of New
York at any of the addresses set out in paragraph 1 above (as the case may
be), accompanied by a letter stating that the balance will follow (and, if
applicable, that you have lost one or more of you r bond certificates). At
the same time, you should write to Sedgwick's registrar, Lloyds Bank
Registrars, The Causeway, Worthing, West Sussex BN99 6DA, requesting that a
letter of indemnity be sent to you which, when completed in accordance with
the instructions given, should be lodged with Computershare Services PLC or
Bank of New York at any of the addresses set out in paragraph 1 above (as
the case may be), as soon as possible thereafter.
5. IF THE FORM HAS BEEN SIGNED UNDER POWER OF ATTORNEY
The completed Form should be lodged with Computershare Services PLC or Bank
of New York at any of the addresses set out in paragraph 1 above (as the
case may be) accompanied by the original power of attorney (or a copy
thereof duly certified in accordance with the Powers of Attorney Act 1971).
The power of attorney will be noted by Computershare Services PLC or Bank
of New York and returned as directed.
6. IF YOUR NAME OR OTHER PARTICULARS ARE SHOWN INCORRECTLY ON THE BOND
CERTIFICATE(S)
e.g. Name on the certificates..................................James Smith
Correct name.............................................James Smythe
The Form should be completed in your correct name and lodged with
Computershare Services PLC or Bank of New York at any of the addresses set
out in paragraph 1 above (as the case may be) with your bond certificate(s)
and accompanied by a letter from your bank, stockbroker or solicitor
confirming that the person in whose name the Sedgwick Convertible Bonds are
registered is one and the same as the person who has signed the Form. If an
incorrect address is shown, the correct address should be written on the
Form. If you have changed your name, lodge your marriage certificate or
deed poll or, in the case of a company, a copy of the certificate of
incorporation on change of name with this Form for noting.
7. IF A HOLDER IS AWAY FROM HOME (E.G. ABROAD OR ON HOLIDAY)
Send this Form and the Offer Document by the quickest means (e.g. air mail)
to the holder for execution (provided that such documents are not forwarded
or transmitted, by any means, in or into Canada, Australia or Japan) or, if
he/she has executed a power of attorney giving sufficient authority, the
attorney should sign the Form and the original power of attorney (or a copy
thereof duly certified in accordance with the Powers of Attorney Act 1971)
should be lodged with this Form for noting (see paragraph 5 above). No
other signatures are acceptable.
8. IF YOU HAVE SOLD OR TRANSFERRED ALL YOUR SEDGWICK CONVERTIBLE BONDS
If you have sold or transferred all your Sedgwick Convertible Bonds, please
send this Form and the Offer Document at once to the purchaser or
transferee or to the stockbroker, bank or other agent through whom the sale
or transfer was effected for delivery to the purchaser or transferee.
However, this Form and the Offer Document should not be forwarded or
transmitted in or into Canada, Australia or Japan.
9. IF YOU ARE NOT RESIDENT IN THE UK
The attention of Sedgwick Bondholders not resident in the UK is drawn, in
particular, to paragraphs 8 and 10(b) of Part B of Appendix I to the Offer
Document.
Without prejudice to paragraphs 6(d) and 7 of Part B of Appendix I to the
Offer Document, Marsh & McLennan reserves the right to treat as valid any
acceptance of the Convertible Offer which is not entirely in order or which is
not accompanied by (as appropriate) the relevant bond certificate(s) and/or
other document(s) or evidence of title. In that event, no consideration due
under the Convertible Offer will be sent until after (as appropriate) the
relevant bond certificate(s) and/or other document(s) or evidence of title or
indemnities satisfactory to Marsh & McLennan have been received by
Computershare Services PLC or Bank of New York at any of the addresses set out
in paragraph 1. Notwithstanding that no bond certificate(s) and/or other
document(s) of title is/are delivered with this Form, the Form, if otherwise
valid and accompanied by an appropriate endorsement or certification to the
effect that the Sedgwick Convertible Bonds referred to therein are available
for acceptance and delivered to Computershare Services PLC or Bank of New York
at any of the address set out in paragraph 1 (as the case may be), may be
treated as valid for the purposes including an election for the Loan Note
Alternative.
<PAGE> 1
Exhibit (a)(4)
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. In
considering what action you should take, you are recommended immediately to
seek your own financial advice from your stockbroker, bank manager, solicitor,
accountant or other independent financial advisor.
If you have sold or otherwise transferred all your American Depositary Shares
("Sedgwick ADSs") of Sedgwick Group plc ("Sedgwick"), please pass this document
and all accompanying documents as soon as possible to the purchaser or
transferee, or to the bank, stockbroker or other agent through whom the sale or
transfer was effected for transmission to the purchaser or transferee. HOWEVER,
SUCH DOCUMENTS SHOULD NOT BE DISTRIBUTED, FORWARDED OR TRANSMITTED IN OR INTO
AUSTRALIA, CANADA OR JAPAN.
Morgan Guaranty Trust Company of New York ("J.P. Morgan") and Donaldson, Lufkin
& Jenrette International ("Donaldson, Lufkin & Jenrette") are acting for Marsh
& McLennan Companies, Inc. ("Marsh & McLennan") in relation to the Offers (as
defined in the Letter of Transmittal) and no one else, and will not be
responsible to anyone other than Marsh & McLennan for providing the protections
afforded to customers of J.P. Morgan and Donaldson, Lufkin & Jenrette nor for
providing advice in relation to the Offers. J.P. Morgan and Donaldson, Lufkin &
Jenrette are acting through J.P. Morgan Securities Inc. and Donaldson, Lufkin &
Jenrette Securities Corporation for the purpose of making the Offers in the
United States.
- --------------------------------------------------------------------------------
NOTICE OF GUARANTEED DELIVERY
TO ACCEPT THE OFFER FOR AMERICAN DEPOSITARY SHARES
EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS
OF
SEDGWICK GROUP PLC
PURSUANT TO THE OFFER TO PURCHASE DATED SEPTEMBER 4, 1998
BY
J. P. MORGAN
AND
DONALDSON, LUFKIN & JENRETTE
ON BEHALF OF
MARSH & McLENNAN COMPANIES, INC.
- --------------------------------------------------------------------------------
As set forth in "Procedures for tendering Sedgwick ADSs" in paragraph 11 of
Appendix I to the Offer to Purchase, this form or one substantially equivalent
hereto must be used for acceptance of the Ordinary Offer in respect of Sedgwick
ADSs, if American Depositary Receipts evidencing Sedgwick ADSs ("Sedgwick ADRs")
are not immediately available or the procedures for book-entry transfer cannot
be completed on a timely basis or if time will not permit all required documents
to reach the US Depositary prior to the expiration of the Subsequent Offer
Period (as defined in the Offer to Purchase). Such form may be delivered by hand
or mailed to the US Depositary and must include a signature guarantee by an
Eligible Institution (as defined in the Offer to Purchase) in the form set out
herein. See "Procedures for tendering Sedgwick ADSs-Guaranteed delivery
procedures" in paragraph 11 of Appendix I to the Offer to Purchase.
<PAGE> 2
TO: THE BANK OF NEW YORK, US DEPOSITARY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or
Overnight Courier:
Tender & Exchange Department (212) 815-6213 Tender & Exchange Department
P.O. Box 11248 (for Eligible Institutions Only) Receive and Deliver Window
Church Street Station 101 Barclay Street
New York, New York Confirm by telephone: New York, New York 10286
10286-1248 (800) 507-9357
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature or a Letter
of Transmittal is required to be guaranteed by an Eligible Institution under
the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
Acceptance of the Ordinary Offer (as defined in the Offer to Purchase) in
respect of Sedgwick Shares (except insofar as they are represented by Sedgwick
ADSs) may not be made with this form and pursuant to the guaranteed delivery
procedures.
Capitalized terms and certain other terms used herein and not otherwise defined
herein shall have the respective meanings assigned to them in the Offer to
Purchase.
Ladies and Gentlemen:
The undersigned hereby accepts the Ordinary Offer in respect of Sedgwick ADSs
upon the terms and subject to the conditions set forth below pursuant to the
guaranteed delivery procedure set out in "Procedures for tendering Sedgwick
ADSs-Guaranteed delivery procedures" in paragraph 11 of Appendix I to the Offer
to Purchase.
The undersigned understands that the acceptance of the Ordinary Offer in
respect of Sedgwick ADSs pursuant to the guaranteed delivery procedures will
not be treated as a valid acceptance for the purpose of satisfying the
Acceptance Condition (as defined in the Offer to Purchase). See "Procedures for
tendering Sedgwick ADSs-Guaranteed delivery procedures" in paragraph 11 of
Appendix I to the Offer to Purchase. To be counted towards satisfaction of the
Acceptance Condition, the Sedgwick ADRs evidencing such Sedgwick ADSs must,
prior to the Initial Closing Date (as set forth in the Offer to Purchase), be
received by the US Depositary or, if applicable, timely confirmation of a
book-entry transfer of such Sedgwick ADSs into the US Depositary's account at a
Book-Entry Transfer Facility pursuant to the procedures set out in "Procedures
for tendering Sedgwick ADSs-Book-entry transfer" in paragraph 11 of Appendix I
to the Offer to Purchase must be received by the US Depositary, together with a
duly executed Letter of Transmittal or facsimile thereof with any required
signature guarantees and any other required documents.
Signature(s): Address(es) (Include Zip Code):
_____________________________________
_____________________________________ _____________________________________
_____________________________________
_____________________________________ _____________________________________
Name of Record Holder(s) Area Code(s) and Tel. No.(s):
(Please Type or Print):
_____________________________________ ______________________________________
Number of Sedgwick ADSs: If Sedgwick ADSs will be tendered by
_____________________________________ book-entry transfer, check box on box:
Sedgwick ADR No.(s) (if available): [ ] The Depository Trust Company
_____________________________________ [ ] Philadelphia Depository Trust Co.
Dated: Account Number:
_____________________________________ ______________________________________
2
<PAGE> 3
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Program or the Stock Exchange
Medallion Program, hereby guarantees that the undersigned will deliver to the
US Depositary either the Sedgwick ADRs representing the Sedgwick ADSs with
respect to which the Ordinary Offer is being accepted hereby, in proper form
for transfer, or confirmation of the book-entry transfer of such Sedgwick ADSs
into the US Depositary's account at The Depository Trust Company or the
Philadelphia Depository Trust Company, in any such case together with a
properly completed and duly executed Letter of Transmittal with any required
signature guarantees and any other required documents, all within three New
York Stock Exchange trading days after the date hereof.
Name of Firm, Agent or Trustee: Authorized Signature
_____________________________________ _____________________________________
Address (Include Zip Code): Name (Please Type or Print):
_____________________________________ _____________________________________
_____________________________________ Title:
_____________________________________ _____________________________________
_____________________________________ Date:
Area Code and Tel. No.: _____________________________________
_____________________________________
Note:
DO NOT SEND SEDGWICK ADRs WITH THIS FORM; SEDGWICK ADRs SHOULD BE SENT WITH
YOUR LETTER OF TRANSMITTAL.
<PAGE> 4
BOWNE Printed in London I39085
<PAGE> 1
Exhibit (a)(5)
This document should not be forwarded or transmitted in or into Australia,
Canada or Japan.
RECOMMENDED CASH OFFERS FOR
ALL OUTSTANDING ORDINARY SHARES, AMERICAN DEPOSITARY SHARES
EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS AND 7.25% CONVERTIBLE BONDS 2008
OF
SEDGWICK GROUP PLC
BY
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
AND
DONALDSON, LUFKIN & JENRETTE INTERNATIONAL
ON BEHALF OF
MARSH & MCLENNAN COMPANIES, INC.
THERE WILL BE AN INITIAL OFFER PERIOD WHICH WILL EXPIRE AT 3.00 PM (LONDON
TIME), 10.00 AM (NEW YORK CITY TIME) ON OCTOBER 5, 1998, UNLESS EXTENDED. AT
THE CONCLUSION OF THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, IF
ALL CONDITIONS OF THE OFFERS HAVE BEEN SATISFIED, FULFILLED OR, WHERE
PERMITTED, WAIVED, THE OFFERS WILL BE EXTENDED FOR A SUBSEQUENT OFFER PERIOD OF
AT LEAST 14 CALENDAR DAYS. HOLDERS OF SEDGWICK SECURITIES WILL HAVE WITHDRAWAL
RIGHTS DURING THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, BUT
NOT DURING THE SUBSEQUENT OFFER PERIOD.
September 4, 1998
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
J.P. Morgan Securities Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation have been appointed by Marsh & McLennan Companies, Inc. ("Marsh &
McLennan") to act as dealer managers in the United States (the "Dealer
Managers") in connection with an offer by Morgan Guaranty Trust Company of New
York ("J.P. Morgan") and Donaldson, Lufkin & Jenrette International
("Donaldson, Lufkin & Jenrette"), on behalf of Marsh & McLennan, to purchase,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated September 4, 1998 (the "Offer to Purchase") and the accompanying
Acceptance Forms (collectively, the "Offers"), all outstanding ordinary shares
of 10p each ("Sedgwick Shares") of Sedgwick Group plc ("Sedgwick") for 225
pence in cash per Sedgwick Share, all American Depositary Shares ("Sedgwick
ADSs") of Sedgwick, each representing five Sedgwick Shares and evidenced by
American Depositary Receipts ("Sedgwick ADRs"), for L.11.25 in cash per
Sedgwick ADS and all of the outstanding 7.25% Convertible Bonds 2008 issued by
Sedgwick ("Sedgwick Convertible Bonds") for 123 pence in cash for each L.1
nominal of Sedgwick Convertible Bonds.
For your information and for forwarding to those of your clients for whom
you hold Sedgwick ADSs registered in your name or in the name of your nominee,
we are enclosing the following documents:
1. The Offer to Purchase;
2. The Letter of Transmittal to be used by holders of Sedgwick ADSs to accept
the Ordinary Offer (as defined in the Offer to Purchase);
3. The Notice of Guaranteed Delivery;
4. A printed form of letter that may be sent to your clients for whose
account you hold Sedgwick ADSs registered in your name or in the name of a
nominee, with space provided for obtaining such clients' instructions with
regard to the Offers;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. The return envelope addressed to the US Depositary.
<PAGE> 2
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE.
THE ORDINARY OFFER CANNOT BE ACCEPTED IN RESPECT OF SEDGWICK SHARES BY
MEANS OF A LETTER OF TRANSMITTAL. A SHAREHOLDER FORM OF ACCEPTANCE FOR
ACCEPTING THE ORDINARY OFFER IN RESPECT OF SEDGWICK SHARES CAN BE OBTAINED FROM
THE US DEPOSITARY OR THE UK RECEIVING AGENT (AS EACH SUCH TERM IS DEFINED IN
THE OFFER TO PURCHASE).
In all cases, payment for Sedgwick ADSs purchased pursuant to the Ordinary
Offer will be made only after timely receipt by the US Depositary of Sedgwick
ADRs evidencing such Sedgwick ADSs or a confirmation of book-entry transfer,
together with the Letter of Transmittal properly completed and duly executed,
and any other documents required by the Letter of Transmittal.
If holders of Sedgwick ADSs wish to tender, but it is impracticable for
them to forward their Sedgwick ADRs or other required documents on or prior to
the expiration of the Subsequent Offer Period or to comply with the book-entry
transfer procedures on a timely basis, a tender may be effected by following
the guaranteed delivery procedures specified in paragraph 11(h) of Part B of
Appendix I to the Offer to Purchase.
Marsh & McLennan will not pay any fees or commissions to any broker,
dealer, or other person (other than J.P. Morgan and Donaldson, Lufkin &
Jenrette, the Dealer Managers, the US Depositary and the UK Receiving Agent and
the Information Agent as described in the Offer to Purchase) in connection with
the solicitation of acceptances of the Ordinary Offer with respect to Sedgwick
ADSs evidenced by Sedgwick ADRs. You will, however, be reimbursed for customary
mailing and handling expenses incurred by you in forwarding the enclosed
materials to your client.
Inquiries you may have with respect to the Offers should be addressed to
the Information Agent or the Dealer Managers, at the respective addresses and
telephone numbers set forth in the Offer to Purchase. Additional copies of the
enclosed materials may be obtained from the Information Agent or the Dealer
Managers.
Capitalized terms and certain other terms used herein and not otherwise
defined herein shall have the respective meanings assigned to them in the Offer
to Purchase.
Very truly yours,
J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
(212) 648 7843 (Call Collect)
and
Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
(212) 892 8223 (Call Collect)
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF J.P. MORGAN, DONALDSON, LUFKIN & JENRETTE,
MARSH & MCLENNAN, THE US DEPOSITARY, THE DEALER MANAGERS, OR THE UK RECEIVING
AGENT OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFERS NOT
CONTAINED IN THE OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL.
<PAGE> 1
Exhibit (a)(6)
This document should not be forwarded or transmitted in or into Australia,
Canada or Japan.
RECOMMENDED CASH OFFERS FOR
ALL OUTSTANDING ORDINARY SHARES, AMERICAN DEPOSITARY SHARES
EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS AND 7.25% CONVERTIBLE BONDS 2008
OF
SEDGWICK GROUP PLC
BY
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
AND
DONALDSON, LUFKIN & JENRETTE INTERNATIONAL
ON BEHALF OF
MARSH & MCLENNAN COMPANIES, INC.
THERE WILL BE AN INITIAL OFFER PERIOD WHICH WILL EXPIRE AT 3:00 PM (LONDON
TIME), 10:00 AM (NEW YORK CITY TIME) ON OCTOBER 5, 1998, UNLESS EXTENDED. AT
THE CONCLUSION OF THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, IF
ALL CONDITIONS OF THE OFFERS HAVE BEEN SATISFIED, FULFILLED OR, WHERE
PERMITTED, WAIVED, THE OFFERS WILL BE EXTENDED FOR A SUBSEQUENT OFFER PERIOD OF
AT LEAST 14 CALENDAR DAYS. HOLDERS OF SEDGWICK SECURITIES WILL HAVE THE RIGHT
TO WITHDRAW THEIR ACCEPTANCES OF THE OFFERS DURING THE INITIAL OFFER PERIOD,
INCLUDING ANY EXTENSION THEREOF, BUT NOT DURING THE SUBSEQUENT OFFER PERIOD.
<PAGE> 2
September 4, 1998
To Our Clients:
Enclosed for your consideration is the Offer to Purchase dated September
4, 1998 (the "Offer to Purchase"), the Letter of Transmittal and Notice of
Guaranteed Delivery relating to an offer by Morgan Guaranty Trust Company of
New York ("J.P. Morgan") and Donaldson, Lufkin & Jenrette International
("Donaldson, Lufkin & Jenrette"), acting in the United States through J.P.
Morgan Securities Inc. and Donaldson, Lufkin & Jenrette Securities Corporation,
respectively, and on behalf of Marsh & McLennan Companies, Inc. ("Marsh &
McLennan"), to purchase, upon the terms and subject to the conditions set forth
in the Offer to Purchase and the accompanying Acceptance Forms (as defined in
the Offer to Purchase) (collectively, the "Offers"), all outstanding ordinary
shares of 10p each ("Sedgwick Shares") of Sedgwick Group plc ("Sedgwick") for
225 pence in cash per Sedgwick Share, all Sedgwick Shares represented by
American Depositary Shares ("Sedgwick ADSs"), each representing five Sedgwick
Shares and evidenced by American Depositary Receipts ("Sedgwick ADRs"), for
L.11.25 in cash per Sedgwick ADS, and all of the outstanding 7.25% Convertible
Bonds 2008 issued by Sedgwick ("Sedgwick Convertible Bonds") for 123 pence in
cash for each L.1 nominal of Sedgwick Convertible Bonds.
We are the holder of record of Sedgwick ADSs evidenced by Sedgwick ADRs
held by us for your account. An acceptance of the Ordinary Offer (as defined in
the Offer to Purchase) in respect of such Sedgwick ADSs can be made only by us
as the holder of record and pursuant to your instructions. Accordingly, we
request instructions as to whether you wish to have us accept the Ordinary
Offer on your behalf in respect of any or all Sedgwick ADSs held by us for your
account pursuant to the terms and subject to the conditions set forth in the
Offer to Purchase.
Your attention is invited to the following:
1. The Ordinary Offer is being made for all Sedgwick Shares and Sedgwick
ADSs evidenced by Sedgwick ADRs and has been recommended by the board of
directors of Sedgwick.
2. The Ordinary Offer is on the terms and subject to the conditions set
forth in Appendix I to the Offer to Purchase.
3. The Initial Offer Period of the Ordinary Offer will expire at 3.00 p.m.
(London time), 10.00 a.m. (New York City time) on October 5, 1998, unless
extended (in accordance with the terms thereof).
4. At the conclusion of the Initial Offer Period, including any extension
thereof, if all conditions of the Offers have been satisfied, fulfilled
or, where permitted, waived, the Offers will be extended for a Subsequent
Offer Period of at least 14 calendar days.
5. Sedgwick ADS holders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the
Letter of Transmittal, stock transfer taxes applicable to a sale of
Sedgwick ADSs evidenced by Sedgwick ADRs to Marsh & McLennan.
If you wish to have us accept the Ordinary Offer in respect of any or all
of the Sedgwick ADSs evidenced by Sedgwick ADRs held by us for your account,
please so instruct us by completing, executing and returning to us the
instruction form contained in this letter. If you authorize us to accept the
Ordinary Offer in respect of your Sedgwick ADSs evidenced by Sedgwick ADRs, the
Ordinary Offer will be accepted in respect of all such Sedgwick ADSs unless
otherwise indicated in such instruction form. Please forward your instruction
form to us in ample time to permit us to accept the Ordinary Offer on your
behalf prior to the expiration of the Ordinary Offer. The specimen Letter of
Transmittal is furnished to you for your information only and cannot be used by
you to accept the Ordinary Offer in respect of Sedgwick ADSs evidenced by
Sedgwick ADRs held by us for your account.
Capitalized terms and certain other terms used herein and not otherwise
defined herein shall have the respective meanings assigned to them in the Offer
to Purchase.
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE ORDINARY OFFER FOR ALL SEDGWICK SHARES
AND SEDGWICK ADSS EVIDENCED BY SEDGWICK ADRS
The undersigned acknowledge(s) receipt of your letter and the Offer to
Purchase dated September 4, 1998 (the "Offer to Purchase"), and the related
Letter of Transmittal relating to an offer by J.P. Morgan and Donaldson, Lufkin
& Jenrette, acting in the United States through J.P. Morgan Securities Inc. and
Donaldson, Lufkin & Jenrette Securities Corporation, respectively, and on
behalf of Marsh & McLennan Companies, Inc., to purchase, upon the terms and
subject to the conditions set forth in the Offer to Purchase and the
accompanying Acceptance Forms all outstanding ordinary shares of 10p each
("Sedgwick Shares") of Sedgwick Group plc ("Sedgwick") for 225 pence in cash
per Sedgwick Share, all Sedgwick Shares represented by American Depositary
Shares ("Sedgwick ADSs") of Sedgwick, each representing five Sedgwick Shares
and evidenced by American Depositary Receipts, for L.11.25 in cash per Sedgwick
ADS, and all of the outstanding 7.25% Convertible Bonds 2008 issued by Sedgwick
("Sedgwick Convertible Bonds") for 123 pence in cash for each L.1 nominal of
Sedgwick Convertible Bonds.
This will instruct you to accept the Ordinary Offer in respect of the
number of Sedgwick ADSs indicated below (or, if no number is indicated below,
all Sedgwick ADSs) held by you for the account of the undersigned, upon the
terms and subject to the conditions set forth in the Offer to Purchase.
Dated ____________ 1998
Number of Sedgwick ADSs to be rendered(1)
___________________________ Sedgwick ADSs
_____________________________________________________________
_____________________________________________________________
Signature(s)
_____________________________________________________________
_____________________________________________________________
Please print name(s)
_____________________________________________________________
_____________________________________________________________
Address(es)
_____________________________________________________________
Area Code and Tel. No.
_____________________________________________________________
Employer Identification or Social Security No.
_______________
(1) Unless otherwise indicated, it will be assumed that the Ordinary Offer is
to be accepted in respect of all Sedgwick ADSs held by us for your
account.
<PAGE> 1
Exhibit (a)(7)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
business and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service.
To complete Substitute Form W-9 if you do not have a taxpayer identification
number, write "Applied For" in the space for the taxpayer identification number
in Part I, signed and date the Form, and give it to the requester. Generally,
you will then have 60 days to obtain a taxpayer identification number and
furnish it to the requester. If the requester does not receive your taxpayer
identification number within 60 days, backup withholding, if applicable, will
begin and continue until you furnish your taxpayer identification number to the
requester.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding and for which
no information reporting is required. For interest and dividends, all listed
payees are exempt except item (9). For broker transactions, payees listed in
items (1) through (13) and a person registered under the Investment Advisers Act
of 1940 who regularly acts as a broker are exempt. Payments subject to reporting
under sections 6041 and 6041A are generally exempt from backup withholding only
if made to payees described in items (1) through (7), except a corporation that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information reporting.
Only payees described in items (2) through (6) are exempt from backup
withholding for barter exchange transactions, patronage dividends, and payments
by certain fishing boat operators.
(1) A corporation
(2) An organization exempt from tax under section 501(a), or an IRA, or a
custodial account under section 403(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies, or
instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate
Securities, Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under Section 1441.
- Payments to partnership not engaged in a trade or business in the United
States and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451 of the Code.
- Payments made by certain foreign organizations.
- Mortgage interest paid to a nominee.
Exempt payees described above should file a Substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see Sections 6041, 6041(a), 6042, 6044, 6045, 6049
and 6050A and 6050N of the Code and the regulations promulgated therein.
PRIVACY ACT NOTICE.--Section 6109 requires recipients of dividends, interest, or
other payments to give taxpayer identification numbers to payers who must report
the payments to the IRS. The IRS uses the numbers for identification purposes
and to help verify the accuracy of your tax return. Payers must be given the
numbers whether or not recipients are required to file tax returns. Payers must
generally withhold 31% of taxable interest, dividends, and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE
<PAGE> 1
Exhibit (a)(8)
25 August 1998
Not for release, publication or distribution in or into Canada, Australia or
Japan.
MARSH & MCLENNAN COMPANIES, INC.
RECOMMENDED CASH OFFER
FOR
SEDGWICK GROUP PLC
- - Marsh & McLennan and Sedgwick announce a recommended cash offer to be made
by J.P. Morgan and Donaldson, Lufkin & Jenrette on behalf of Marsh &
McLennan for Sedgwick at 225 pence per Sedgwick Share and pound
sterling 11.25 per Sedgwick ADS.
- - The Offer values the entire issued share capital of Sedgwick at pound
sterling 1,247 million.
- - Sedgwick Shareholders (other than persons who are citizens or residents of
the United States and certain other overseas shareholders) may elect to
receive Loan Notes as an alternative to the cash consideration.
- - The Offer represents a 57.9 per cent. premium over the closing middle-market
price of a Sedgwick Share on 24 August 1998, the last business day prior to
this announcement, and a multiple of 17.6 times Sedgwick's earnings per
share for the year ended 31 December 1997.
- - Sedgwick Shareholders are entitled to the interim dividend of 3.0 pence
(net) per Sedgwick Share.
- - Marsh & McLennan expects that the acquisition will lead to enhanced
shareholder value, and will be accretive to earnings from the year ending 31
December 2000.
- - Directors of Sedgwick and certain other persons have irrevocably undertaken
to accept the Offer in respect of their holdings of Sedgwick Securities,
representing in aggregate 225,743,233 Sedgwick Shares, and representing 40.7
per cent. of Sedgwick's issued share capital.
- - Sax Riley, Chairman of Sedgwick, and Rob White-Cooper, Chief Executive of
Sedgwick, have been invited to join the Board of Marsh & McLennan upon the
Offer becoming or being declared unconditional in all respects.
Commenting on the Offer, A.J.C. Smith, Chairman of Marsh & McLennan, said today:
"We believe the combination of Marsh & McLennan and Sedgwick will be beneficial
for our clients, employees and shareholders. This transaction, which joins
together two of the best-known names in risk and insurance services and
consulting, will strengthen further our ability to meet the increasing global
demand for
1
<PAGE> 2
professional services. In particular, it will enable us to improve the breadth
and quality of service to our clients while providing substantial operational
efficiencies."
Sax Riley, Chairman of Sedgwick, said: "I am delighted that Sedgwick and Marsh &
McLennan have come together to form the world's leading insurance broker and
employee benefits consultancy and I look forward to working with Marsh &
McLennan for the development of our business. The combination of our two groups,
together with the retention of the Sedgwick brand name internationally, will
enhance our global service and will offer our people new opportunities in a much
enlarged group. This Offer represents good value for shareholders."
This summary should be read in conjunction with the full text of this
announcement.
PRESS ENQUIRIES:
Marsh & McLennan
Barbara Perlmutter +1 212 345 5585
J.P. Morgan
Terry Eccles +44 171 600 2300
Edward J. Kelly +1 212 483 2323
Donaldson, Lufkin & Jenrette
Cliff Hampton +44 171 655 7500
Alison Carnwath +1 212 892 7699
Cazenove +44 171 588 2828
David Mayhew
Kekst & Company +1 212 521 4800
James Fingeroth
Michael Freitag
Brunswick +44 171 404 5959
Alison Hogan
Sedgwick +44 171 377 3456
Sax Riley
Rob White-Cooper
Julia Fish
Rothschild +44 171 280 5000
Richard Davey
Jonathan Eddis
CSFB +44 171 888 8888
Mark Seligman
Henry Lloyd
2
<PAGE> 3
AN ANALYSTS' BRIEFING WILL TAKE PLACE AT 12 NOON TODAY, TUESDAY 25 AUGUST 1998,
AT THE OFFICES OF J.P. MORGAN AT 60 VICTORIA EMBANKMENT, LONDON EC4Y 0JP.
J.P. Morgan and Donaldson, Lufkin & Jenrette, which are regulated in the United
Kingdom by The Securities and Futures Authority Limited, are acting for Marsh &
McLennan and no one else in connection with the Offer and will not be
responsible to anyone other than Marsh & McLennan for providing the protections
afforded to customers of J.P. Morgan and Donaldson, Lufkin & Jenrette nor for
giving advice in relation to the Offer. Cazenove are acting as brokers to Marsh
& McLennan in relation to the Offer.
Rothschild and CSFB, which are regulated in the United Kingdom by The Securities
and Futures Authority Limited, are acting for Sedgwick and no one else in
connection with the Offer and will not be responsible to anyone other than
Sedgwick for providing the protections afforded to customers of Rothschild and
CSFB nor for giving advice in relation to the Offer.
The Offer is not being made, directly or indirectly, in or into, Canada,
Australia or Japan. Accordingly, neither copies of this announcement nor any
related offering documents are to be mailed or otherwise distributed or sent in
or into Canada, Australia or Japan.
The Loan Notes that may be issued pursuant to the Offer will not be listed on
any stock exchange and have not been, and will not be, registered under the US
Securities Act or under any relevant securities laws of any state of the United
States and the relevant clearances will not be obtained from the regulatory
authority of any province or territory of Canada. The Loan Notes are not being
offered, sold or delivered, directly or indirectly, to US Persons or into
Canada, Australia or Japan, or into any other jurisdiction if to do so would
constitute a violation of relevant laws in such jurisdiction.
Marsh & McLennan cautions that certain forward looking statements contained in
this announcement or other statements which may be made about the transaction,
including, without limitation, the effect of the combination of Marsh & McLennan
and Sedgwick on Marsh & McLennan's earnings and cash flows, are qualified by
important factors that could cause actual operating results to differ materially
from those described herein or any such statements, including, among others, the
following: (i) unanticipated events and circumstances may occur rendering the
transaction less beneficial to Marsh & McLennan than projected; (ii) Marsh &
McLennan and Sedgwick face intense competition in their markets, and there is,
accordingly, no guarantee that after consummation of the transaction Marsh &
McLennan will achieve the expected financial and operating results and
synergies; and (iii) the ability of Marsh & McLennan and Sedgwick 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.
Results actually achieved thus may differ materially from the expected results
described herein or any such statements.
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25 August 1998
Not for release, publication or distribution in or into Canada, Australia or
Japan.
MARSH & MCLENNAN COMPANIES, INC.
RECOMMENDED CASH OFFER
FOR
SEDGWICK GROUP PLC
INTRODUCTION
The Boards of Marsh & McLennan and Sedgwick announce that they have reached
agreement on the terms of a recommended cash offer to be made by J.P. Morgan and
Donaldson, Lufkin & Jenrette, on behalf of Marsh & McLennan, to acquire the
whole of the issued and to be issued share capital of Sedgwick.
The Offer of 225 pence for each Sedgwick Share and pound sterling 11.25 for each
Sedgwick ADS values the whole of the issued share capital of Sedgwick at pound
sterling 1,247 million.
The directors of Sedgwick and certain other persons have irrevocably undertaken
to accept the Offer in respect of their holdings of Sedgwick Securities,
representing in aggregate 225,743,233 Sedgwick Shares, and representing 40.7 per
cent. of Sedgwick's issued share capital.
The definition of certain expressions used in this announcement are contained in
Appendix III.
SEDGWICK RECOMMENDATION
The directors of Sedgwick, who have been so advised by Rothschild and CSFB,
consider the terms of the Offer to be fair and reasonable and have resolved to
recommend that Sedgwick Securityholders accept the Offer. In providing advice to
the directors of Sedgwick, Rothschild and CSFB have taken into account the
directors' commercial assessments. Irrevocable undertakings to accept, or
procure the acceptance of, the Offer have been received from directors of
Sedgwick in respect of their holdings of Sedgwick Securities.
THE OFFER
The Offer, which will be subject to the conditions and further terms set out in
Appendix I and in the Offer Document, will be made on the following basis:
for each Sedgwick Share 225 pence in cash
for each Sedgwick ADS pound sterling 11.25 in cash.
The Offer represents a premium of 57.9 per cent. over the closing middle-market
price of a Sedgwick Share on the London Stock Exchange of 142.5 pence on 24
August 1998, the last business day prior
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to this announcement. The Offer represents a multiple of 17.6 times Sedgwick's
earnings per share of 12.8 pence for the year ended 31 December 1997. In
addition, Sedgwick Shareholders who were on the register at the close of
business on 21 August 1998 will be entitled to the interim dividend of 3.0 pence
(net) per Sedgwick Share.
THE LOAN NOTE ALTERNATIVE
Accepting Sedgwick Shareholders (other than persons who are citizens or
residents of the United States and certain other overseas shareholders) will be
entitled to elect to receive Loan Notes to be issued by Marsh & McLennan instead
of some or all of the cash consideration which would otherwise be receivable
under the Offer on the following basis:
for every pound sterling 1 of cash consideration under the Offer pound
sterling 1 nominal of Loan Notes.
The Loan Notes will bear interest at a rate of one half of one per cent. below
LIBOR and payable six monthly in arrears. The Loan Notes will be transferable,
but no application will be made for them to be listed or dealt in on any stock
exchange. The Loan Notes will be redeemable at the holder's option on 31
December 1999 and six monthly thereafter until redemption.
J.P. Morgan has advised that, in its opinion, based on current market
conditions, the value of the Loan Notes, if they had been in issue on 24 August
1998, would have been approximately 98.5 pence per pound sterling 1 in nominal
value.
If valid elections for the Loan Note Alternative have not been received in
respect of at least pound sterling 5 million nominal value of Loan Notes by the
time the Offer becomes or is declared unconditional in all respects no Loan
Notes will be issued, and Sedgwick Shareholders who have elected for the Loan
Note Alternative will then receive cash in accordance with the terms of the
Offer.
The Loan Note Alternative will be conditional upon the Offer becoming or being
declared unconditional in all respects, and will remain open for election for so
long as the Offer remains open for acceptance. A summary of the principal terms
of the Loan Notes is set out in Appendix II.
REASONS FOR THE OFFER
As one of the world's leading providers of professional services, Marsh &
McLennan is confident that its chosen strategies in risk and insurance services,
investment management and consulting will continue to yield strong results for
the future. Consistent with these strategies, Marsh & McLennan is determined to
pursue opportunities which it believes will allow it to enhance further the
service it offers its clients and to increase its operational efficiencies,
together leading to greater shareholder value. The Board of Marsh & McLennan
believes that the acquisition of Sedgwick will provide such opportunities.
Marsh & McLennan seeks to benefit from growing demand worldwide for professional
services, through a combination of businesses, depth of services and breadth of
global professional capabilities through which to serve clients. Marsh &
McLennan expects that the addition of Sedgwick to its portfolio of businesses
will position it to achieve these objectives. Marsh & McLennan believes that the
acquisition will give it an opportunity to expand in two out of its three
business areas, risk and insurance services and consulting, which it expects to
provide strong future growth and to contribute to earnings.
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Sedgwick is the largest independent European-based broker and the third largest
broker in the world, with a recognised brand name, particularly in the United
Kingdom, continental Europe and Asia Pacific, excellent professional staff and
operations, and a substantial client base. In the United Kingdom, a combination
with Sedgwick increases Marsh & McLennan's presence and provides Marsh &
McLennan with access to Sedgwick's important client base. In the United States,
the transaction expands Marsh & McLennan's activities in a number of areas.
Sedgwick is well positioned in continental European markets such as Belgium, the
Netherlands, Italy and the Scandinavian countries. Marsh & McLennan expects that
the acquisition of Sedgwick will strengthen its position in Asia Pacific markets
such as Hong Kong and Singapore, as well as providing it with a well-established
business in South Africa. Accordingly, Marsh & McLennan currently intends to
retain the Sedgwick brand name in various relevant marketplaces throughout the
world.
Sedgwick Noble Lowndes is among the world's leading employee benefits consulting
firms, with operations in the United States, the United Kingdom and elsewhere
and Marsh & McLennan expects that, together with Marsh & McLennan's consulting
firm Mercer Consulting Group, Inc., it will provide growth opportunities.
The Offer provides an opportunity for the Sedgwick Group to compete more
effectively in the increasingly competitive insurance services business as part
of a larger international group. The Board of Marsh & McLennan expects that
substantial benefits will arise from being able to offer Sedgwick's clients a
much broader range of products.
In addition, a combination of the two companies would provide an opportunity
further to increase earnings through the realisation of significant
consolidation savings from combining operations. Marsh & McLennan believes that
the combination will also allow increased operational efficiency across their
businesses, leading to stronger service to clients and therefore to enhanced
shareholder value. Marsh & McLennan expects the acquisition to be accretive to
earnings from the year ending 31 December 2000.
MANAGEMENT AND EMPLOYEES
Whilst there will inevitably be redundancies in the course of the consolidation
of the two businesses, Marsh & McLennan attaches great importance to the skills
and experience of the management and employees of Sedgwick and believes that the
career opportunities available will be enhanced as a result of being part of the
Marsh & McLennan organisation. Marsh & McLennan has agreed to put in place
incentive arrangements for key Sedgwick employees, including certain executive
directors, to enable them to participate in the performance of the combined
group.
Marsh & McLennan has given assurances to the Board of Sedgwick that the existing
employment rights, including pension rights and entitlements under the existing
employment related policies adopted by Sedgwick, of all present directors,
management and employees of Sedgwick will be honoured.
Sax Riley, Chairman of Sedgwick, and Rob White-Cooper, Chief Executive of
Sedgwick, have been invited to join the Board of Marsh & McLennan upon the Offer
becoming or being declared unconditional in all respects. Rob White-Cooper will
be chairman of those insurance broking activities which operate principally
outside the Americas. In addition, Marsh & McLennan has agreed that the heads of
Sedgwick's broking businesses in Asia Pacific, continental Europe and North
America, as well as the head of Sedgwick Noble Lowndes, will hold positions of
influence in the new organisation.
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OPTIONS UNDER THE SEDGWICK SHARE OPTION SCHEMES
The Offer will extend to the holders of any Sedgwick Securities which are
unconditionally allotted or issued while the Offer remains open for acceptance
(or such earlier date as Marsh & McLennan may, subject to the City Code,
determine) including any Sedgwick Shares unconditionally allotted or issued
pursuant to the exercise of Options under the Sedgwick Share Option Schemes.
Appropriate proposals, which will include a cash cancellation, will, in due
course, be put to Optionholders who do not, or who are unable to, exercise the
Options granted to them under the Sedgwick Share Option Schemes.
SEDGWICK CONVERTIBLE BONDS
It is intended that appropriate proposals will be put to holders of Sedgwick
Convertible Bonds at the time of posting the Offer Document.
FURTHER DETAILS OF THE OFFER
The Sedgwick Securities will be acquired by Marsh & McLennan under the Offer
fully paid and free from all liens, equities, charges, encumbrances, rights of
pre-emption and other third party rights or interests of any nature whatsoever
and together with all rights now or hereafter attaching thereto, including the
right to receive and retain in full all dividends and other distributions
declared, made or paid hereafter, save that Sedgwick Shareholders will be
entitled to receive and retain the interim dividend of 3.0 pence (net) per
Sedgwick Share to be paid in respect of the year ended 31 December 1998,
irrespective of whether or not the Offer becomes unconditional.
IRREVOCABLE UNDERTAKINGS
Irrevocable undertakings to accept, or procure the acceptance of, the Offer have
been received from directors of Sedgwick in respect of securities representing
2,054,394 Sedgwick Shares, and from:
- - Phillips & Drew Fund Management Limited in respect of 122,955,977 Sedgwick
Shares;
- - Schroder Investment Management (UK) Limited in respect of 76,732,862
Sedgwick Shares; and
- - Silchester International Investors Limited in respect of 24,000,000 Sedgwick
Shares.
Accordingly, Marsh & McLennan has received irrevocable undertakings to accept
the Offer in respect of securities representing a total of 225,743,233 Sedgwick
Shares, and representing in aggregate 40.7 per cent. of Sedgwick's issued share
capital.
The irrevocable undertakings to accept the Offer given by Phillips & Drew Fund
Management Limited, Schroder Investment Management (UK) Limited and Silchester
International Investors Limited will cease to be binding in the event that a
competing offer is made for Sedgwick at a price of not less than 250.5 pence per
Sedgwick Share, or if the Offer lapses or is withdrawn. All other irrevocable
undertakings to accept the Offer will continue to be binding in the event of a
competing offer being made for Sedgwick by a third party unless the Offer lapses
or is withdrawn.
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<PAGE> 8
HOLDINGS IN SEDGWICK SECURITIES
Neither Marsh & McLennan, nor any of its directors nor, so far as Marsh &
McLennan is aware, any person acting in concert with Marsh & McLennan, owns or
controls any Sedgwick Securities or has any option to acquire any further
Sedgwick Securities, or has entered into any derivative referenced to securities
of Sedgwick which remains outstanding or (other than as disclosed above) has
received any irrevocable commitment to accept the Offer.
INFORMATION ON SEDGWICK
Sedgwick is one of the world's leading consulting, insurance and reinsurance
groups, operating in 70 countries from over 290 offices. The company has
particular expertise in risk management and employee benefits.
For the year ended 31 December 1997 the Sedgwick Group reported profit before
tax of pound sterling 101 million on turnover of pound sterling 975 million and,
as at 31 December 1997, the Sedgwick Group had net assets of pound sterling 200
million. As at 31 December 1997, Sedgwick and its subsidiaries employed
approximately 15,985 employees.
Based on a closing price of 142.5 pence on 24 August 1998 (the last business day
prior to the announcement of the Offer), the market capitalisation of Sedgwick
was pound sterling 790 million.
INFORMATION ON MARSH & MCLENNAN
Marsh & McLennan is a professional services firm providing risk and insurance
services, investment management and consulting. Marsh & McLennan, with over
36,000 employees worldwide (as at 6 March 1998), provides analysis, advice and
transactional capabilities to clients in over one hundred countries.
For the year ended 31 December 1997, Marsh & McLennan generated revenues of
US$6,009 million and income before taxes of US$662 million. As at 31 December
1997, Marsh & McLennan had net assets, on a US GAAP accounting basis, of
US$3,199 million.
Marsh & McLennan's common stock is listed on the New York, Chicago, Pacific and
London stock exchanges. As at the close of trading on the New York Stock
Exchange on 24 August 1998, Marsh & McLennan had a market capitalisation of
US$14.5 billion.
GENERAL
(a) The Offer will be subject to the applicable requirements of both the
City Code and US federal securities laws, except to the extent that
exemptive relief from the US federal securities laws has been granted
by the SEC.
(b) The availability of the Offer to persons not resident in the UK or the
US may be affected by the laws of the relevant jurisdiction. Any
persons who are subject to the laws of any jurisdiction other than the
UK or the US should inform themselves about and observe any applicable
requirements.
(c) The Offer Document will be posted to Sedgwick Securityholders as soon
as practicable.
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<PAGE> 9
(d) The Offer will be open for at least 20 Business Days from the date of
the Offer Document.
(e) It is Marsh & McLennan's intention, following the Offer becoming or
being declared unconditional in all respects and subject to applicable
requirements of the Chicago, London, New York and Pacific stock
exchanges, that Sedgwick should apply to those exchanges for the
Sedgwick Securities to be delisted. Delisting would significantly
reduce the liquidity and marketability of any Sedgwick Securities not
assented to the Offer.
(f) This announcement does not constitute an invitation to purchase any
securities.
J.P. Morgan and Donaldson, Lufkin & Jenrette, which are regulated in the United
Kingdom by The Securities and Futures Authority Limited, are acting for Marsh &
McLennan and no one else in connection with the Offer and will not be
responsible to anyone other than Marsh & McLennan for providing the protections
afforded to customers of J.P. Morgan and Donaldson, Lufkin & Jenrette nor for
giving advice in relation to the Offer. Cazenove are acting as brokers to Marsh
& McLennan in relation to the Offer.
Rothschild and CSFB, which are regulated in the United Kingdom by The Securities
and Futures Authority Limited, are acting for Sedgwick and no one else in
connection with the Offer and will not be responsible to anyone other than
Sedgwick for providing the protections afforded to customers of Rothschild and
CSFB nor for giving advice in relation to the Offer.
The Offer is not being made, directly or indirectly, in or into, Canada,
Australia or Japan. Accordingly, neither copies of this announcement nor any
related offering documents are to be mailed or otherwise distributed or sent in
or into Canada, Australia or Japan.
The Loan Notes that may be issued pursuant to the Offer will not be listed on
any stock exchange and have not been, and will not be, registered under the US
Securities Act or under any relevant securities laws of any state of the United
States and the relevant clearances will not be obtained from the regulatory
authority of any province or territory of Canada. The Loan Notes are not being
offered, sold or delivered, directly or indirectly, to US Persons or into
Canada, Australia or Japan, or into any other jurisdiction if to do so would
constitute a violation of relevant laws in such jurisdiction.
Marsh & McLennan cautions that certain forward looking statements contained in
this announcement or other statements which may be made about the transaction,
including, without limitation, the effect of the combination of Marsh & McLennan
and Sedgwick on Marsh & McLennan's earnings and cash flows, are qualified by
important factors that could cause actual operating results to differ materially
from those described herein or any such statements, including, among others, the
following: (i) unanticipated events and circumstances may occur rendering the
transaction less beneficial to Marsh & McLennan than projected; (ii) Marsh &
McLennan and Sedgwick face intense competition in their markets, and there is,
accordingly, no guarantee that after consummation of the transaction Marsh &
McLennan will achieve the expected financial and operating results and
synergies; and (iii) the ability of Marsh & McLennan and Sedgwick 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.
Results actually achieved thus may differ materially from the expected results
described herein or any such statements.
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APPENDIX I
CONDITIONS OF THE OFFER
The Offer, which will be made by J.P. Morgan and Donaldson, Lufkin & Jenrette on
behalf of Marsh & McLennan, will comply with the applicable rules and
regulations of the London Stock Exchange and the City Code and with US federal
securities laws (except to the extent that exemptive relief has been granted by
the SEC). In addition, the Offer will be governed by English law and will be
subject to the jurisdiction of the courts of England and to the terms and
conditions set out in the Offer Document and related Acceptance Forms.
The Offer will be subject to the following conditions:
(a) valid acceptances being received (and not, where permitted, withdrawn)
by not later than 3.00 p.m. (London time) on the first closing date of
the Offer (or such later time(s) and/or date(s) as Marsh & McLennan
may, with the consent of the Panel or in accordance with the rules of
the City Code, decide) in respect of not less than 90 per cent. (or
such lower percentage as Marsh & McLennan may decide) in nominal value
of the Sedgwick Securities to which the Offer relates, provided that
this condition will not be satisfied unless Marsh & McLennan and/or its
wholly-owned subsidiaries shall have acquired or agreed
(unconditionally or subject only to conditions which will be fulfilled
upon the Offer becoming or being declared unconditional in all
respects) to acquire (whether pursuant to the Offer or otherwise)
Sedgwick Securities carrying, in aggregate, more than 50 per cent. of
the voting rights then normally exercisable at general meetings of
Sedgwick, including for this purpose (to the extent, if any, required
by the Panel) any such voting rights attaching to any Sedgwick
Securities that are unconditionally allotted or issued before the Offer
becomes or is declared unconditional as to acceptances, whether
pursuant to the exercise of any outstanding subscription or conversion
rights or otherwise and, for this purpose:
(i) the expression "Sedgwick Securities to which the Offer
relates" shall be construed in accordance with sections 428 to
430F of the Companies Act 1985;
(ii) Sedgwick Securities which have been unconditionally allotted
shall be deemed to carry the voting rights which they will
carry upon their being entered in the register of members of
Sedgwick; and
(iii) valid acceptances shall be treated as having been received in
respect of any Sedgwick Securities which Marsh & McLennan
shall, pursuant to section 429(8) of the Companies Act 1985,
be treated as having acquired or contracted to acquire by
virtue of acceptances of the Offer,
provided that, unless Marsh & McLennan otherwise determines, this
condition (a) can only be treated as satisfied at a time when all of
the other conditions in paragraphs (b) to (i) inclusive are either
satisfied or (if capable of waiver) waived;
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(b) no Relevant Authority having intervened in a manner which would or might
reasonably be expected to:
(i) make the Offer, its implementation or the acquisition or
proposed acquisition by Marsh & McLennan or any member of the
Wider Marsh & McLennan Group of any shares or other securities
in, or control of, Sedgwick void, illegal and/or unenforceable
in or under the laws of any relevant jurisdiction, or
otherwise directly or indirectly restrain, prevent, prohibit,
materially restrict or materially delay the Offer or such
acquisition or impose additional materially adverse conditions
or obligations with respect to the Offer or such acquisition,
or otherwise materially impede, challenge or interfere with
the Offer or such acquisition, or require material amendment
to the terms of the Offer or the proposed acquisition of any
Sedgwick Securities or the acquisition of control of Sedgwick
by Marsh & McLennan;
(ii) require, prevent or delay the divestiture by any member of the
Wider Marsh & McLennan Group of any shares or other securities
(or the equivalent) in Sedgwick where the same is materially
adverse to the Marsh & McLennan Group;
(iii) require, prevent or delay the divestiture by any member of the
Wider Marsh & McLennan Group or by any member of the Wider
Sedgwick Group of all or any portion of their respective
businesses, assets or properties or impose any limitation on
the ability of any of them to conduct any of their respective
businesses or to own any of their respective assets or
properties or any part thereof (in any case, to an extent
which is material in the context of the Wider Marsh & McLennan
Group or the Wider Sedgwick Group, as appropriate, taken as a
whole);
(iv) impose any limitation on, or result in a delay in, the ability
of any member of the Wider Marsh & McLennan Group or any
member of the Wider Sedgwick Group to acquire or to hold or to
exercise effectively, directly or indirectly, all or any
rights of ownership in respect of shares or other securities
(or the equivalent) in, or to exercise management control
over, any member of the Wider Marsh & McLennan Group or any
member of the Wider Sedgwick Group (in any such case, to an
extent which is material in the context of the Wider Marsh &
McLennan Group or the Wider Sedgwick Group, as the case may
be, taken as a whole);
(v) require any member of the Wider Marsh & McLennan Group or the
Wider Sedgwick Group to acquire, or to offer to acquire, any
shares or other securities (or the equivalent) in any member
of the Wider Marsh & McLennan Group or any member of the Wider
Sedgwick Group owned by any third party, in any such case, to
an extent which is material in the context of the Wider Marsh
& McLennan Group or the Wider Sedgwick Group, as the case may
be, taken as a whole;
(vi) impose any limitation on the ability of any member of the
Wider Marsh & McLennan Group or any member of the Wider
Sedgwick Group to integrate or co-ordinate its business, or
any material part of it, with the businesses of any other
member of the Wider Marsh & McLennan Group or the Wider
Sedgwick Group (in each case, to an extent which is material
in the context of the Wider Marsh & McLennan Group or the
Wider Sedgwick Group, as the case may be, taken as a whole);
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(vii) result in any member of the Wider Marsh & McLennan Group or
the Wider Sedgwick Group ceasing to be able to carry on
business under any name under which it presently does so (the
consequences of which would be material in the context of the
Wider Marsh & McLennan Group or the Wider Sedgwick Group, as
the case may be, taken as a whole);
(viii) otherwise adversely affect any or all of the businesses,
assets, profits or prospects of any member of the Wider
Sedgwick Group or any member of the Wider Marsh & McLennan
Group (to an extent which is material in the context of the
Wider Marsh & McLennan Group or the Wider Sedgwick Group, as
the case may be, taken as a whole);
and all applicable waiting and other time periods during which any
Relevant Authority could intervene in such a way under the laws of any
relevant jurisdiction having expired, lapsed or been terminated;
(c) without limitation to condition (b) above:
(i) the European Commission indicating in terms satisfactory to
Marsh & McLennan that it does not intend to initiate
proceedings under Article 6(1)(c) of Council Regulation (EEC)
4064/89 (the "Regulation") in respect of the proposed
acquisition of Sedgwick by Marsh & McLennan or any matters
arising therefrom (the "Merger") and that in any event there
will not be a referral to a competent authority or a dealing
with the Merger by the European Commission pursuant to Article
9(3) of the Regulation; and
(ii) all necessary filings having been made and all or any
applicable waiting periods (including any extensions thereof)
under the United States Hart-Scott-Rodino Antitrust
Improvements Act 1976 and the regulations thereunder having
expired, lapsed or been terminated as appropriate in each case
in respect of the proposed acquisition of Sedgwick by Marsh &
McLennan, or any matters arising therefrom;
(d) without limitation to condition (b) above:
(i) the consent of the HM Treasury ("HMT") having been obtained,
in terms reasonably satisfactory to Marsh & McLennan, to the
new controllers (having the definition ascribed in section 96C
of the Insurance Companies Act 1982) of any relevant regulated
member of the Sedgwick Group or all applicable waiting periods
having expired without HMT having served any notice of
objection in relation to any of the new controllers of any
relevant regulated member of the Sedgwick Group;
(ii) the consent of The Society and Corporation of Lloyd's
("Lloyd's") having been obtained, in terms reasonably
satisfactory to Marsh & McLennan, to the new controllers
(having the definition ascribed in the Lloyd's Brokers Byelaw
(No.5 of 1998) as amended) of the companies within the
Sedgwick Group which are registered with Lloyd's as brokers;
(iii) the consent of Lloyd's having been obtained, in terms
reasonably satisfactory to Marsh & McLennan, to the new
controllers (having the definition ascribed in The
Underwriting Agents Byelaw (No.4 of 1984) as amended) of the
companies within the Sedgwick Group which are registered with
Lloyd's as underwriting agents;
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(iv) appropriate notifications of the proposed change of control of
each relevant company within the Sedgwick Group having been
made to Lloyd's and/or to the Insurance Brokers Registration
Council (as appropriate);
(v) each of the Personal Investment Authority Limited ("PIA") and
The Securities and Futures Authority Limited ("SFA") having
confirmed, in terms reasonably satisfactory to Marsh &
McLennan, that it has no objection to the change of control of
each relevant company within the Sedgwick Group or all
applicable waiting periods during which the PIA or the SFA (as
the case may be) could raise any enquiries and/or objections
to the proposed change of control having expired;
(vi) if relevant, the Treasurer of the Commonwealth of Australia
(the "Treasurer") becoming precluded under section 25 of the
Foreign Acquisitions and Takeovers Act 1975 (the "Act") from
being empowered to make an order under Part II of the Act in
relation to the Offer, or the issue by or on behalf of the
Treasurer of a notice in writing under the Act indicating, in
terms reasonably satisfactory to Marsh & McLennan, that he has
no objection to the proposed acquisition of Sedgwick pursuant
to the Offer;
(vii) all necessary notifications and filings having been made, all
necessary waiting and other time periods under any applicable
legislation or regulation of any relevant jurisdiction having
expired, lapsed or been terminated and all statutory or
regulatory obligations in any relevant jurisdiction having
been complied with in each case in connection with the Offer
or the acquisition of any shares or other securities (or the
equivalent) in, or control of, Sedgwick or any other member of
the Wider Sedgwick Group by any member of the Wider Marsh &
McLennan Group; and
(viii) all Authorisations necessary in any relevant jurisdiction for
or in respect of the Offer or the acquisition or proposed
acquisition of any shares or other securities (or the
equivalent) in, or control of, Sedgwick or any other member of
the Wider Sedgwick Group by any member of the Wider Marsh &
McLennan Group or the carrying on by any member of the Wider
Sedgwick Group of its business (where the absence of such
Authorisations would be expected to have an adverse effect
which is material to the Wider Sedgwick Group) having been
obtained, in terms and in a form reasonably satisfactory to
Marsh & McLennan, from all appropriate Relevant Authorities
and all such Authorisations remaining in full force and effect
at the time when the Offer becomes otherwise unconditional in
all respects and there being no notice or intimation of any
intention to revoke or not to renew any of the same;
(e) there being no provision of any arrangement, agreement, licence,
permit, franchise or other instrument to which any member of the Wider
Sedgwick Group is a party, or by or to which any such member or any of
its assets is or are or may be bound, entitled or subject or any
circumstance, which, in each case as a consequence of the Offer or the
acquisition or proposed acquisition of any shares or other securities
(or the equivalent) in, or control of, Sedgwick or any other member of
the Wider Sedgwick Group by any member of the Wider Marsh & McLennan
Group or otherwise, could or might reasonably be expected to result in
(to an extent which would be material in the context of the Wider
Sedgwick Group taken as a whole):
(i) any monies borrowed by or any other indebtedness or
liabilities, actual or contingent, of, or grant available to,
any member of the Wider Sedgwick Group being or becoming
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repayable or capable of being declared repayable immediately
or prior to its stated repayment date, or the ability of any
member of the Wider Sedgwick Group to borrow monies or incur
any indebtedness being withdrawn or inhibited or becoming
capable of being withdrawn;
(ii) the creation or enforcement of any mortgage, charge or other
security interest over the whole or any part of the business,
property, assets or interests of any member of the Wider
Sedgwick Group or any such mortgage, charge or other security
interest becoming enforceable;
(iii) any such arrangement, agreement, licence, permit, franchise or
instrument, or the rights, liabilities, obligations or
interests of any member of the Wider Sedgwick Group
thereunder, being, or becoming capable of being, terminated or
adversely modified or affected or any adverse action being
taken or any obligation or liability arising thereunder;
(iv) any asset or interest of any member of the Wider Sedgwick
Group being or falling to be disposed of or charged or any
right arising under which any such asset or interest could be
required to be disposed of or charged, in each case otherwise
than in the ordinary course of business;
(v) any member of the Wider Sedgwick Group ceasing to be able to
carry on business under any name under which it presently does
so;
(vi) the creation of liabilities actual or contingent by any such
member, otherwise than in the ordinary course of business;
(vii) the rights, liabilities or interests of any member of the
Wider Sedgwick Group under any such arrangement, agreement,
licence, permit, franchise or other instrument or the
interests or business of any such member in or with any other
person, firm, company or body (or any arrangement or
arrangements relating to any such interests or business) being
terminated, adversely modified or affected; or
(viii) the financial or trading position of any member of the Wider
Sedgwick Group being adversely prejudiced or affected;
and no event having occurred which, under any provision of any such
arrangement, agreement, licence, permit or other instrument, could
result in any of the events or circumstances which are referred to in
paragraphs (i) to (viii) of this condition (e) in any case where such
result would be material in the context of the Wider Sedgwick Group
taken as a whole;
(f) since 31 December 1997 and except as disclosed in Sedgwick's annual
report and accounts for the year then ended or as disclosed in the
interim statement of Sedgwick for the six months ended on 30 June 1998
or as otherwise publicly announced by Sedgwick (by the delivery of an
announcement to the Company Announcements Office of the London Stock
Exchange) prior to 25 August 1998, no member of the Wider Sedgwick
Group having:
(i) issued or agreed to issue additional shares of any class, or
securities convertible into, or rights, warrants or options to
subscribe for or acquire, any such shares or convertible
securities (save as between Sedgwick and wholly-owned
subsidiaries of Sedgwick and
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except for any options granted under the Sedgwick Share Option
Schemes prior to 25 August 1998);
(ii) recommended, declared, paid or made any bonus, dividend or
other distribution (save as between Sedgwick and wholly-owned
subsidiaries of Sedgwick) whether in cash or otherwise;
(iii) made or committed to make any change in its share or (save as
between Sedgwick and wholly-owned subsidiaries of Sedgwick)
loan capital;
(iv) merged with or demerged or acquired any body corporate or
acquired or disposed of or transferred, mortgaged or charged
or created any security interest over any material assets or
(other than in the ordinary course of business) any right,
title or interest in any material assets (including shares and
trade investments) (other than in the ordinary course of
business), which is material in the context of the Wider
Sedgwick Group taken as a whole;
(v) issued or agreed to issue any debentures or (save in the
ordinary course of business) incurred or increased any
indebtedness or contingent liability (save as between Sedgwick
and wholly-owned subsidiaries of Sedgwick);
(vi) purchased, redeemed or repaid any of its own shares or other
securities or reduced or made any other change to any part of
its share capital, which is material in the context of the
Wider Sedgwick Group taken as a whole;
(vii) entered into or varied any contract, transaction, arrangement
or commitment (whether in respect of capital expenditure or
otherwise) which:
(A) is of a long term, onerous or unusual nature or magnitude;
or
(B) could reasonably be expected to be restrictive on the
business of any member of the Wider Sedgwick Group or any
member of the Wider Marsh & McLennan Group; or
(C) involves or would involve an obligation of a long term,
onerous or unusual nature or magnitude or which could be
restrictive on the business of any member of the Wider
Sedgwick Group or any member of the Wider Marsh &
McLennan Group;
in each case, which is material in the context of the Wider
Sedgwick Group taken as a whole;
(viii) entered into or varied or made any offer (which remains open
for acceptance) to enter into or vary the terms of any
contract with any of the directors or senior executives of
Sedgwick or, to an extent which is material in the context of
the Wider Sedgwick Group taken as a whole, of any member of
the Wider Sedgwick Group;
(ix) taken or proposed any corporate action or had any legal
proceedings instituted or threatened against it or petition
(not of a frivolous or vexatious nature) presented for its
winding-up (voluntarily or otherwise), dissolution or
reorganisation or for the appointment of a receiver,
administrator, administrative receiver, trustee or similar
officer of all or any of its assets and revenues or for any
analogous proceedings or steps
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<PAGE> 16
in any jurisdiction or for the appointment of any analogous
person in any jurisdiction and which is material in the
context of the Wider Sedgwick Group taken as a whole;
(x) been unable or admitted in writing that it is unable to pay
its debts or having stopped or suspended (or threatened to
stop or suspend) payment of its debts generally or ceased or
threatened to cease carrying on all or a substantial part of
its business and which is material in the context of the Wider
Sedgwick Group taken as a whole;
(xi) waived or compromised any claim which is material in the
context of the Wider Sedgwick Group taken as a whole;
(xii) made any alteration to its memorandum or articles of
association, or other incorporation documents; or
(xiii) entered into any agreement, contract or commitment or made any
offer (which remains open for acceptance) with respect to any
of the transactions, matters or events referred to in this
condition (f);
(g) since 31 December 1997 and except as disclosed in Sedgwick's annual
report and accounts for the year then ended or as disclosed in the
interim statement of Sedgwick for the six months ended on 30 June 1998
or as otherwise publicly announced by Sedgwick (by the delivery of an
announcement to the Company Announcements Office of the London Stock
Exchange) prior to 25 August 1998:
(i) there having been no adverse change or deterioration in the
business, assets, financial or trading position or profits or
assets of any member of the Wider Sedgwick Group which is (in
the aggregate) material in the context of the Wider Sedgwick
Group taken as a whole;
(ii) no litigation, arbitration proceedings, prosecution or other
legal proceedings to which any member of the Wider Sedgwick
Group is or may become a party (whether as plaintiff or
defendant or otherwise) or any investigation (save as a result
of the Offer) by any Relevant Authority having been
threatened, announced or instituted by or against or in
respect of any member of the Wider Sedgwick Group or remaining
outstanding against or in respect of any member of the Wider
Sedgwick Group which, in any such case, is material in the
context of the Wider Sedgwick Group taken as a whole;
(iii) no contingent or other liability having arisen or become
apparent or increased which would or could reasonably be
expected materially and adversely to affect the Wider Sedgwick
Group taken as a whole; and
(iv) there having been no inquiry or investigation (save as a
result of the Offer) by, or complaint, or reference to, any
Relevant Authority of a material nature to Sedgwick in respect
of any member of the Wider Sedgwick Group and no such enquiry,
investigation, complaint or reference having been threatened,
announced, implemented, instituted or remaining outstanding
which, in any such case, is material in the context of the
Wider Sedgwick Group taken as a whole;
(h) Marsh & McLennan not having discovered:
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<PAGE> 17
(i) that any financial or business or other information concerning
the Wider Sedgwick Group disclosed at any time by or on behalf
of any member of the Wider Sedgwick Group, whether publicly,
to any member of the Wider Marsh & McLennan Group or
otherwise, is misleading or contains a misrepresentation of
fact or omits to state a fact necessary to make any
information contained therein not misleading in any case which
has not subsequently been corrected by such disclosure and, in
any case, to an extent which is material in the context of the
Wider Sedgwick Group taken as a whole; or
(ii) that any member of the Wider Sedgwick Group or partnership,
company or other entity in which any member of the Wider
Sedgwick Group has an interest and which is not a subsidiary
undertaking of Sedgwick is subject to any liability
(contingent or otherwise) which is not disclosed in Sedgwick's
annual report and accounts for the financial year ended 31
December 1997 or as disclosed in the interim statement for the
six months ended 30 June 1998 or as otherwise publicly
announced by Sedgwick (by delivery of an announcement to the
Company Announcements Office of the London Stock Exchange)
prior to 25 August 1998 and which is material in the context
of the Wider Sedgwick Group taken as a whole;
(i) Marsh & McLennan not having discovered:
(i) that any past or present member of the Wider Sedgwick Group
has not complied with all applicable legislation or
regulations of any jurisdiction with regard to the disposal,
discharge, spillage, leak or emission of any waste or
hazardous substance or any substance likely to impair the
environment or harm human health, or otherwise relating to
environmental matters, or that there has otherwise been any
such disposal, discharge, spillage, leak or emission (whether
or not the same constituted a non-compliance by any person
with any such legislation or regulations and wherever the same
may have taken place) which, in any such case, would be likely
to give rise to any liability (whether actual or contingent)
on the part of any member of the Wider Sedgwick Group which
would be material in the context of the Wider Sedgwick Group
taken as a whole;
(ii) that there is, or is likely to be, any liability, whether
actual or contingent, to make good, repair, reinstate or clean
up any property now or previously owned, occupied or made use
of by any past or present member of the Wider Sedgwick Group
or in which any such member may have or previously have had or
be deemed to have had an interest under any environmental
legislation, regulation, notice, circular or order of any
relevant authority or Relevant Authority or otherwise, which,
in any such case, would be material in the context of the
Wider Sedgwick Group taken as a whole; or
(iii) that circumstances exist whereby a person or class of persons
would be likely to have any claim or claims in respect of any
product or process of manufacture or materials used therein
now or previously manufactured, sold or carried out by any
past or present member of the Wider Sedgwick Group which, in
any such case, would be material in the context of the Wider
Sedgwick Group taken as a whole.
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For the purpose of these conditions:
(a) "Relevant Authority" means any government, government department or
governmental, quasi-governmental, supranational, statutory, regulatory,
administrative or investigative body, authority (including any national
anti-trust or merger control authorities), court, trade agency,
association, institution or professional or environmental body or any
other person or body whatsoever in any relevant jurisdiction;
(b) a Relevant Authority shall be regarded as having "intervened" if it has
decided to take, institute, implement or threaten any action,
proceedings, suit, investigation, inquiry or reference or made,
proposed or enacted any statute, regulation, decision or order or taken
any measures or other steps or required any action to be taken or
information to be provided or otherwise having done anything and
"intervene" shall be construed accordingly;
(c) "Authorisations" means authorisations, orders, grants, recognitions,
determinations, certificates, confirmations, consents, licences,
clearances, permissions, exemptions and approvals;
(d) "the Wider Sedgwick Group" means Sedgwick and its subsidiary
undertakings and any other undertakings in which Sedgwick and such
undertakings (aggregating their interests) have a substantial interest
and "the Wider Marsh & McLennan Group" means Marsh & McLennan and its
subsidiary undertakings and any other undertakings in which Marsh &
McLennan and such undertakings (aggregating their interests) have a
substantial interest and, for these purposes, "subsidiary undertaking"
and "undertaking" have the meanings given by the Companies Act 1985 and
"substantial interest" means a direct or indirect interest in 20 per
cent. or more of the equity capital of an undertaking.
Subject to the requirements of the Panel, Marsh & McLennan reserves the right to
waive all or any of the above conditions, in whole or in part, except condition
(a).
Conditions (b) to (i) (inclusive) must be fulfilled or (if capable of waiver)
waived by midnight on the 21st day after the later of the first closing date of
the Offer and the date on which condition (a) is fulfilled or is declared
fulfilled (or, in each case, such later date as the Panel may agree), failing
which the Offer will lapse. Marsh & McLennan shall be under no obligation to
waive (if capable of waiver) or treat as fulfilled any of conditions (b) to (i)
(inclusive) by a date earlier than the latest date specified above for the
fulfilment thereof notwithstanding that the other conditions of the Offer may at
such earlier date have been waived or fulfilled and that there are at such
earlier date no circumstances indicating that any of such conditions may not be
capable of fulfilment.
Marsh & McLennan will not invoke any of the conditions (e) to (i) (inclusive) in
relation to circumstances which would otherwise give rise to the right to invoke
such condition where there has been fair disclosure of such circumstances to
Marsh & McLennan or its advisers by or on behalf of Sedgwick prior to 25 August
1998.
If Marsh & McLennan is required by the Panel to make an offer for Sedgwick
Securities under the provisions of Rule 9 of the Code, Marsh & McLennan may make
such alterations to the conditions of the Offer, including condition (a), as are
necessary to comply with the provisions of that Rule.
The Offer will lapse if the European Commission either initiates proceedings
under Article 6(1)(c) of the Regulation or makes a referral to a competent
authority of the United Kingdom under Article 9(1) of the
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<PAGE> 19
Regulation before, in each case, the later of 3.00 p.m. on the first closing
date of the Offer and the date when the Merger becomes or is declared
unconditional as to acceptances.
If the Offer lapses, the Offer will cease to be capable of further acceptance
and Sedgwick shareholders accepting the Offer and Marsh & McLennan shall upon
the Offer lapsing cease to be bound by acceptances delivered on or before the
date on which the Offer lapses.
The Offer and all contracts arising under it will be governed by English law.
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<PAGE> 20
APPENDIX II
PRINCIPAL TERMS OF THE LOAN NOTES
The Loan Notes will be created by a resolution of the board of directors of
Marsh & McLennan (or a duly authorised committee thereof) and will be
constituted by the Loan Note Instrument. The issue of the Loan Notes will be
conditional on the Offer becoming or being declared unconditional in all
respects. If valid elections for the Loan Note Alternative have not been
received in respect of at least pound sterling 5 million Nominal value of Loan
Notes by the time the Offer becomes or is declared unconditional in all
respects, no Loan Notes will be issued, in which event all Sedgwick Shareholders
accepting the Offer will receive cash in accordance with the terms of the Offer.
The Loan Note Alternative is not available to any person who is a citizen or
resident of the United States, Canada, Australia or Japan or certain other
jurisdictions. The Loan Note Instrument will contain provisions, inter alia, to
the effect set out below.
1. FORM AND STATUS
The Loan Notes will be issued by Marsh & McLennan in amounts and integral
multiples of pound sterling 1 and wilL constitute unsecured obligations of Marsh
& McLennan. The Loan Note Instrument will not contain any restrictions on
borrowing, disposals or charging of assets by Marsh & McLennan.
2. INTEREST
(a) Interest on the Loan Notes will be payable (subject to any requirement
to deduct tax therefrom) in arrears on 30 June and 31 December in each
year (or, if such a day is not a business day, on the next following
business day) ("interest payment dates") in respect of the interest
periods (as defined below) at a rate calculated as provided in
paragraph (b) below, except that the first payment of interest on the
Loan Notes, which will be made on 31 December 1998, will be in respect
of the period from (and including) the first date of issue of any of
the Loan Notes to (and including) 31 December 1998. The period from
(and including) the first date of issue of any of the Loan Notes to
(and including) 31 December 1998 and the period from (but excluding) 31
December 1998, or any subsequent interest payment date, to (and
including) the next following interest payment date, is referred to as
an "interest period".
(b) The rate of interest on the Loan Notes for each interest period will be
the rate per annum calculated by Marsh & McLennan to be one half of one
per cent. below LIBOR at or about 11.00 a.m. on the first day of the
relevant interest period or, if such a day is not a business day, on
the next succeeding business day.
(c) If a rate of interest cannot be established in accordance with the
provisions of this paragraph 2 for any interest period, then the rate
of interest on the Loan Notes for such interest period shall be
calculated by reference to such rate as Marsh & McLennan shall
reasonably determine on the basis of quotations made for six month
sterling deposits of similar size in any other appropriate inter-bank
market or markets as Marsh & McLennan may reasonably select.
(d) Each instalment of interest shall be calculated on the basis of a 365
day year and the actual number of days elapsed in the relevant interest
period.
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3. REPAYMENT AND REDEMPTION
(a) A holder of Loan Notes ("Noteholder") shall be entitled to require
Marsh & McLennan to repay the whole (whatever the amount) or any part
(being pound sterling 100 nominal amount or any integral multiple
thereof) of the principal amount of his holding of Loan Notes at par,
together with accrued interest thereon (subject to any requirement to
deduct tax therefrom) up to (and including) the date of repayment, on
any interest payment date falling on or after 31 December 1999, by
giving not less than 30 days' prior notice in writing to the Registrars
accompanied by certificate(s) for all the Loan Notes to be repaid and a
notice of redemption (duly completed) in the prescribed form endorsed
on the Loan Notes to be repaid.
(b) If, at any time, the principal amount of the Loan Notes outstanding is
20 per cent. or less of the total nominal amount of Loan Notes which
have been issued prior to that time, Marsh & McLennan shall have the
right, on giving to the remaining Noteholders not less than 30 days'
notice in writing expiring on 31 December 1999 or on any subsequent
interest payment date, to redeem all (but not some only) of the Loan
Notes at their principal amount together with accrued interest thereon
(subject to any requirement to deduct tax therefrom) up to (and
including) the date of redemption.
(c) Marsh & McLennan will have the right to redeem on any interest payment
date the Loan Notes at par together with accrued interest up to (and
including) the date of redemption (subject to any requirement to deduct
tax therefrom) on 30 days' written notice to the Noteholders if Marsh &
McLennan is advised by legal counsel that interest payable under the
Loan Notes will fall to be treated as non-deductible for US federal
income tax purposes due to a change in law after the date on which the
Offer is made.
(d) Any Loan Notes not previously repaid, redeemed or purchased will be
repaid in full at par on 31 December 2003 together with accrued
interest thereon (subject to any requirement to deduct tax therefrom)
up to (and including) that date.
(e) Each holder of the Loan Notes shall have the right to acquire (by
subscription at nominal value of an amount up to or equal to such
Noteholder's holding of Loan Notes, such amount to be payable in full
on subscription) additional loan notes to be issued by a subsidiary of
Marsh & McLennan ("Additional Notes") on terms and conditions
substantially the same as those applicable to the Loan Notes, except as
follows:
(i) the rate of interest on the Additional Notes shall be one half
of one per cent. below the rate per annum referred to in
paragraph 2 above; and
(ii) the Additional Notes shall not carry any rights to acquire
additional securities.
(f) Each Noteholder shall be entitled to require all of the Loan Notes held
by him to be repaid at par together with accrued interest (subject to
any requirement to deduct any tax therefrom) immediately if:
(i) any principal or interest on any of the Loan Notes held by
that Noteholder shall not have been paid in full within 14
days after the due date for payment thereof;
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(ii) Marsh & McLennan commences a voluntary case concerning itself
under Title 11 of the United States Code entitled "Bankruptcy"
as now or hereafter in effect or any successor thereto (the
"Bankruptcy Code");
(iii) an involuntary case is commenced against Marsh & McLennan and
the petition is not controverted within 10 days or is not
dismissed within 60 days after commencement of the case;
(iv) a custodian (as defined in the Bankruptcy Code) is appointed
for, or takes charge of, all or substantially all of the
property of Marsh & McLennan;
(v) Marsh & McLennan commences (including by way of applying for
or consenting to the appointment of, or the taking of
possession by, a rehabilitator, receiver, custodian, trustee,
conservator or liquidator (collectively, a "Conservator") of
itself or all or any substantial proportion of its property)
any other proceeding under any reorganisation, arrangement,
adjustment of debt, relief of debtors, dissolution,
insolvency, liquidation, rehabilitation, conservatorship or
similar law of any jurisdiction whether now or hereafter in
effect relating to Marsh & McLennan;
(vi) any such proceeding is commenced against Marsh & McLennan to
the extent that such proceeding is consented to by such person
or remains undismissed for a period of 60 days;
(vii) Marsh & McLennan is adjudicated insolvent or bankrupt or an
order of relief or other order approving any such case or
proceeding is entered or Marsh & McLennan suffers any
appointment of any Conservator or the like for it or any
substantial part of its property which continues undischarged
or unstated for a period of 60 days;
(viii) Marsh & McLennan makes a general assignment for the benefit of
creditors; or
(ix) any corporate action is taken by Marsh & McLennan for the
purpose of effecting any of the foregoing.
4. PURCHASE OF LOAN NOTES
Marsh & McLennan will be entitled at any time to purchase any Loan Notes at any
price by tender (available to all Noteholders alike), private treaty or
otherwise by agreement with the relevant Noteholder(s).
5. CANCELLATION
Any Loan Notes repaid or redeemed under paragraph 3 above or purchased under
paragraph 4 above shall be cancelled and shall not be available for re-issue.
6. SUBSTITUTION AND EXCHANGE
The Loan Note Instrument will contain provisions entitling Marsh & McLennan to
substitute any other member of the Marsh & McLennan Group as the principal
debtor under the Loan Notes, or to require Noteholders to exchange the Loan
Notes for loan notes issued on the same terms, mutatis mutandis, by
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one or more of such members provided that (a) Marsh & McLennan guarantees such
member's obligations thereunder, and (b) Marsh & McLennan's right to require
substitution by such member as a principal debtor will be exercisable only if
prior clearance has been obtained from the Inland Revenue to the effect that the
substitution will not be treated as a disposal of the Loan Notes for the purpose
of United Kingdom taxation of chargeable gains. References to Marsh & McLennan
in this summary except in (a) shall be construed to apply to the substitute or
substitutes (if any) from time to time of Marsh & McLennan.
7. MODIFICATIONS
The provisions of the Loan Note Instrument and the rights of the Noteholders
will be subject to modification, abrogation or compromise in any respect with
the sanction of an Extraordinary Resolution (as defined in the Loan Note
Instrument) of the Noteholders, and the consent of Marsh & McLennan. Marsh &
McLennan may amend the provisions of the Loan Note Instrument without such
sanction or consent if such amendment is of a formal, minor or technical nature
and is not materially adverse to Noteholders or is to correct a manifest error.
8. REGISTRATION AND TRANSFER
The Loan Notes will be in registered form and transferable in amounts or
integral multiples of pound sterling 100 provided that transfers will not be
registered during the 21 days immediately preceding an interest payment date or
while the register of Noteholders is closed.
9. PRESCRIPTION
Noteholders will cease to be entitled to amounts in respect of interest which
remain unclaimed for a period of five years and to amounts due in respect of
principal which remain unclaimed for a period of ten years, in each case from
the date on which the relevant payment first becomes due, and such amounts shall
revert to Marsh & McLennan upon the giving of 30 days' written notice.
10. RESTRICTIONS ON OWNERSHIP AND TRANSFER
The Loan Notes have not been and will not be registered under the US Securities
Act and no steps have been taken to qualify the Loan Notes for distribution in
any province or territory of Canada and no prospectus in relation to the Loan
Notes has been, or will be, lodged with or registered by the Australian
Securities Commission. Accordingly, unless an exemption under the US Securities
Act or other applicable securities laws is available, the Loan Note Alternative
is not available in the United States, Canada, Australia or Japan or to
Restricted Overseas Persons and the Loan Notes may not be directly or indirectly
offered, sold or delivered in or into the United States, Canada, Australia or
Japan or to or for the account or benefit of any Restricted Overseas Persons.
For these purposes, "Restricted Overseas Person" means either a person
(including an individual, partnership, unincorporated syndicate, limited
liability company, unincorporated organisation, trust, trustee, administrator or
other legal representative) in or resident in the United States, Canada,
Australia or Japan, or a US Person (as defined in Regulation S under the US
Securities Act).
11. NO LISTING
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No application has been made or is intended to be made to any stock exchange for
the Loan Notes to be listed or otherwise traded.
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<PAGE> 25
12. GOVERNING LAW
The Loan Notes and the Loan Note Instrument will be governed by and construed in
accordance with the laws of England.
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APPENDIX III
DEFINITIONS
The following definitions apply throughout this announcement, unless the context
requires otherwise:
"Acceptance Form" the Form of Acceptance and, in respect
of Sedgwick ADS holders only, the letter of
transmittal and the notice of guaranteed
delivery to accompany the Offer Document.
"Business Day" any day, other than a Saturday or
Sunday or a US federal holiday or UK Bank
Holiday, and consisting of the time period
from 12.01 a.m. until and including 12.00
midnight (New York City time).
"Cazenove" Cazenove & Co.
"City Code" the City Code on Takeovers and Mergers.
"CSFB" Credit Suisse First Boston (Europe) Limited.
"Donaldson, Lufkin & Jenrette" Donaldson, Lufkin & Jenrette International.
"Exchange Act" the US Securities and Exchange Act of
1934, as amended, and the rules and
regulations promulgated thereunder.
"Form of Acceptance" the Form of Acceptance, Authority and
Election relating to the Offer for use by
Sedgwick Shareholders.
"J.P. Morgan" Morgan Guaranty Trust Company of New York.
"LIBOR" the rate of interest determined on the basis
of the arithmetic mean of the respective
rates at which any two London clearing
banks, selected by Marsh & McLennan, offer
six-month pound sterling deposits of pound
sterling 1,000,000 to leading banks in the
London inter-bank market at or about 11 a.m.
(London time) on the first business day of
the relevant interest period as defined in
paragraph 2 of Appendix II.
"Loan Notes" the unsecured loan notes to be issued by
Marsh & McLennan as described in this
announcement.
"Loan Note Alternative" the alternative whereby Sedgwick
Shareholders (other than persons who are
citizens or residents of the United States
and certain other overseas shareholders)
validly accepting the Offer may elect to
receive Loan Notes instead of all or part of
the cash consideration to which they would
otherwise be entitled under the Offer.
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"Loan Note Instrument" the loan note instrument constituting the
Loan Notes.
"London Stock Exchange" London Stock Exchange Limited.
"Marsh & McLennan" Marsh & McLennan Companies, Inc.
"Marsh & McLennan Group" Marsh & McLennan and its subsidiaries and
subsidiary undertakings.
"Offer" the recommended offer to be made by J.P.
Morgan and Donaldson, Lufkin & Jenrette, on
behalf of Marsh & McLennan, on the terms and
conditions set out in this announcement and
the Offer Document and the relevant
Acceptance Form including, where the context
requires, the Loan Note Alternative and any
subsequent revision, variation, extension or
renewal of such offer and such alternative
for all the issued and to be issued Sedgwick
Securities.
"Offer Document" any document containing the Offer.
"Optionholders" holders of Options.
"Options" options granted pursuant to the terms of the
Sedgwick Share Option Schemes.
"Panel" the Panel on Takeovers and Mergers.
"Rothschild" NM Rothschild & Sons Limited.
"Sedgwick" Sedgwick Group plc.
"Sedgwick ADS" an American Depositary Share representing
five Sedgwick Shares.
"Sedgwick Convertible Bonds" the Sedgwick 7.25% Convertible Bonds 2008.
"Sedgwick Group" Sedgwick and its subsidiaries and subsidiary
undertakings.
"Sedgwick Security" a Sedgwick Share or a Sedgwick ADS.
"Sedgwick Securityholder" a holder of Sedgwick Shares or Sedgwick
ADSs.
"Sedgwick Share" an ordinary share of 10 pence in the capital
of Sedgwick.
"Sedgwick Share Option the 1984 Executive Share Option Scheme, the
Schemes" 1995 Executive Share Option Scheme,
the 1984 Employee Savings-Related Share
Options Scheme, the 1995 Employee
Savings-Related Share Options Scheme and the
1995 Overseas Savings-Related Share Options
Scheme.
"Sedgwick Shareholder" a holder of a Sedgwick Share.
"SEC" the United States Securities and Exchange
Commission.
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"subsidiary" and "subsidiary have the meanings given by the Companies Act
undertaking" 1985.
"UK" or "United Kingdom" the United Kingdom of Great Britain and
Northern Ireland.
"US" or "United States" the United States of America, its
possessions and territories, all areas
subject to its jurisdiction or any
subdivision thereof, any State of the United
States and the District of Columbia.
"US$" or "US dollar" the lawful currency of the United States.
"US Holder" (i) an individual who is a citizen or
resident of the United States, (ii) a
corporation or partnership created or
organised in or under the laws of the US or
any political subdivision thereof, (iii) an
estate the income of which is subject to US
federal income taxation regardless of its
source or (iv) a trust which is subject to
the supervision of a court within the US and
the control of a US fiduciary as described
in section 7701(a) (30) of the Inland
Revenue Code.
"US Persons" US persons as described in Regulation S of
the US Securities Act.
"US Securities Act" the US Securities Act of 1933, amended, and
the rules and regulations promulgated
thereunder.
"pound sterling" or "pounds the lawful currency of the United Kingdom.
sterling" or "pence"
28
<PAGE> 1
Exhibit (a)(9)
NEWS RELEASE Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, NY 10036-2774
Telephone 212 345 5000
Telefax 212 345 4838
www.marshmac.com
FOR IMMEDIATE RELEASE
Contact: Barbara Perlmutter Jim Fingeroth
Marsh & McLennan Cos. Tracey Stearns
(212) 345-5585 Kekst and Company
(212) 521-4800
MARSH & MCLENNAN COMPANIES AGREES TO ACQUIRE SEDGWICK
FOR TOTAL CASH CONSIDERATION OF APPROXIMATELY $2 BILLION
NEW YORK, NEW YORK, August 25, 1998 -- Marsh & McLennan Companies, Inc. and
Sedgwick Group plc today announced that they have reached an agreement to the
terms of a recommended offer to be made on behalf of Marsh & McLennan Companies
to acquire the entire issued share capital of Sedgwick for total cash
consideration of pound sterling 1.25 billion (approximately $2 billion). The
acquisition of Sedgwick, the largest European-based independent insurance
broker, will enhance Marsh & McLennan Companies' position as one of the world's
leading providers of professional services, particularly in its risk and
insurance services and consulting businesses.
Under the terms of the offer, which was approved by the boards of directors of
both companies, Marsh & McLennan Companies will pay 225 pence for each Sedgwick
share and pound sterling 11.25 (approximately $18.34 at pound sterling 1:$1.63)
for each Sedgwick ADS.
Marsh & McLennan Companies said it expects the acquisition to be accretive to
its earnings per share, beginning in the year 2000.
J.P. Morgan and Donaldson, Lufkin & Jenrette are serving as financial advisors
to Marsh & McLennan Companies, and NM Rothschild & Sons Limited and Credit
Suisse First Boston are
<PAGE> 2
serving as financial advisors to Sedgwick. The offer is subject to customary
regulatory approvals and other conditions, and it is anticipated that the
transaction will close in the fourth quarter.
The directors of Sedgwick and certain other persons have irrevocably undertaken
to accept the offer in respect of their holdings of Sedgwick shares, amounting
in aggregate to approximately 225.7 million Sedgwick shares, representing
approximately 41 percent of Sedgwick's issued share capital.
A.J.C. Smith, chairman and chief executive officer of Marsh & McLennan
Companies, stated, "We believe the combination of Marsh & McLennan Companies and
Sedgwick will be beneficial for our clients, employees and shareholders. This
transaction, which joins together two of the best-known names in risk and
insurance services and consulting, will strengthen further our ability to meet
the increasing global demand for professional services. In particular, it will
enable us to improve the breadth and quality of service to our clients while
providing substantial operational efficiencies.
"From a strategic standpoint, we believe this transaction will enhance
shareholder value through a combination of stronger insurance broking practices,
global reach and operating efficiencies. The addition of Sedgwick will increase
our presence in the United Kingdom and in continental Europe and Asia, where the
Sedgwick brand name is recognized and respected. With the addition of Sedgwick's
excellent professional staff, we will be able to respond more effectively to the
increasingly complex risks our clients encounter and be able to compete
successfully with all potential competitors in our market.
"We are also very excited about the opportunity to combine Sedgwick's consulting
business, which is a leading employee benefits consulting firm, with our own
consulting firm, which we expect will provide growth opportunities."
Sax Riley, chairman of Sedgwick, said, "I am delighted that Sedgwick and Marsh &
McLennan Companies have come together to form the world's leading insurance
broker and employee benefits consultancy, and I look forward to working with
Marsh & McLennan Companies for the development of our business. The combination
of our two groups, together with the retention of the Sedgwick brand name
internationally, will enhance our global service and will offer our people new
opportunities in a much enlarged group."
Mr. Riley and Rob White-Cooper, chief executive officer of Sedgwick, have been
invited to join the board of Marsh & McLennan Companies upon closing.
<PAGE> 3
The terms and conditions of this offer will be described in a Current Report on
Form 8-K to be filed with the Securities and Exchange Commission later today.
Sedgwick is the London-based holding company of one of the world's leading
insurance, reinsurance and consulting groups. This group provides insurance and
reinsurance broking services, risk consulting, employee benefits consulting and
related financial services from more than 290 offices in 70 countries.
Marsh & McLennan Companies is a professional services firm providing risk and
insurance services, investment management and consulting. More than 36,000
employees worldwide provide analysis, advice and transactional capabilities to
clients in over 100 countries. Marsh & McLennan Companies' stock (ticker symbol;
MMC) is listed on the New York, Chicago, Pacific and London stock exchanges. Its
Web site address is www.marshmac.com
###
This press release contains certain statements relating to future results, which
are forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Such statements may include, without limitation,
discussions concerning future results. Such statements are qualified by
important factors that may cause actual results to differ from those
contemplated, including as a result of those factors detailed from time to time
in the Company's Securities and Exchange Commission filings, as well as factors
affecting the successful integration of Marsh & McLennan Companies and Sedgwick.
Please refer to Marsh & McLennan Companies' 1997 Annual Report on Form 10-K for
"Information Concerning Forward-looking Statements," its reports on Form 8-K and
quarterly reports on Form 10-Q.
<PAGE> 1
Exhibit (a)(10)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell securities. The Offers (as defined below) are made in the United States
solely by the Offer to Purchase dated September 4, 1998 and the related Letter
of Transmittal and Forms of Acceptance and are not being made to, nor will
acceptances be accepted from or on behalf of, holders of Sedgwick Shares (as
defined below), Sedgwick ADSs (as defined below) evidenced by Sedgwick ADRs (as
defined below) or Sedgwick Convertible Bonds (as defined below) in any
jurisdiction in which the making of the Offers or acceptance thereof would not
be in compliance with the laws of such jurisdiction. In those US jurisdictions
whose securities laws or blue sky laws require the Offers to be made by a
licensed broker or dealer, the Offers shall be deemed to be made on behalf of
Marsh & McLennan Companies, Inc. by J.P. Morgan Securities Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation or one or more registered brokers or
dealers which are licensed under the laws of those jurisdictions. The Offer to
Purchase, the Letter of Transmittal, the Forms of Acceptance and related
materials should not be forwarded or transmitted in or into Canada, Australia or
Japan.
NOTICE OF RECOMMENDED CASH OFFERS BY
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, LONDON BRANCH
and
DONALDSON, LUFKIN & JENRETTE INTERNATIONAL
on behalf of
MARSH & MCLENNAN COMPANIES, INC.
to acquire
all outstanding Ordinary Shares, American Depositary Shares evidenced by
American Depositary Receipts and 7.25% Convertible Bonds 2008
of
SEDGWICK GROUP PLC
Morgan Guaranty Trust Company of New York, London Branch and Donaldson, Lufkin &
Jenrette International, acting in the United States through J.P. Morgan
Securities Inc. and Donaldson, Lufkin & Jenrette Securities Corporation, on
behalf of Marsh & McLennan Companies, Inc. ("Marsh & McLennan"), are offering to
purchase, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated September 4, 1998 (the "Offer to Purchase"), the related Letter
of Transmittal and the related Form of Acceptance (collectively, the "Ordinary
Offer"), (i) all outstanding ordinary shares of 10 pence each ("Sedgwick
Shares") of Sedgwick Group plc ("Sedgwick") for 225 pence per Sedgwick Share in
cash and (ii) all outstanding American Depositary Shares of Sedgwick, each
representing five Sedgwick Shares ("Sedgwick ADSs") and evidenced by American
Depositary Receipts ("Sedgwick ADRs"), for pound sterling 11.25 per Sedgwick ADS
in cash. Sedgwick Shares and Sedgwick ADSs evidenced by Sedgwick ADRs are
referred to collectively as "Sedgwick Securities". Morgan Guaranty Trust Company
of New York, London Branch and Donaldson, Lufkin & Jenrette International,
acting in the United States through J.P. Morgan Securities Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation, on behalf of Marsh & McLennan, are
also offering to purchase, upon the terms and conditions set forth in the Offer
to Purchase and the related Form of Acceptance, all outstanding 7.25%
Convertible Bonds 2008 of Sedgwick ("Sedgwick Convertible Bonds") for 123 pence
for every pound sterling 1 nominal amount of Sedgwick Convertible Bonds (the
"Convertible Offer" and, together with the Ordinary Offer, the "Offers").
Holders of record of Sedgwick Securities at the close of business on August 21,
1998 will be entitled to receive and retain the interim dividend of 3.0 pence
(net) per Sedgwick Share in respect of the year ending December 31, 1998 and
payable on October 19, 1998. Holders of Sedgwick Convertible Bonds will also be
entitled to the interest payable on Sedgwick Convertible Bonds on November 30,
1998.
THE INITIAL OFFER PERIOD WILL EXPIRE AT 3:00 P.M. (LONDON TIME), 10:00 A.M. (NEW
YORK CITY TIME), ON OCTOBER 5, 1998, UNLESS EXTENDED (THE "INITIAL OFFER
PERIOD"). AT THE CONCLUSION OF THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION
THEREOF, IF ALL CONDITIONS OF THE OFFERS HAVE BEEN SATISFIED, FULFILLED OR,
WHERE PERMITTED, WAIVED, THE OFFERS WILL BE EXTENDED FOR A SUBSEQUENT OFFER
PERIOD OF AT LEAST 14 CALENDAR DAYS (THE "SUBSEQUENT OFFER PERIOD"). HOLDERS OF
SEDGWICK SECURITIES AND Sedgwick Convertible Bonds WILL HAVE THE RIGHT TO
WITHDRAW THEIR ACCEPTANCES OF THE OFFERS DURING THE INITIAL OFFER PERIOD,
INCLUDING ANY EXTENSION THEREOF, BUT NOT DURING THE SUBSEQUENT OFFER PERIOD.
The directors of Sedgwick, who have been so advised by NM Rothschild & Sons
Limited ("Rothschild") and Credit Suisse First Boston (Europe) Limited ("CSFB"),
consider the terms of the Offers to be fair and reasonable. In providing advice
to the directors of Sedgwick, Rothschild and CSFB have taken into account the
commercial assessments of the directors of Sedgwick. Accordingly, the directors
of Sedgwick unanimously recommend all holders of Sedgwick Securities and
Sedgwick Convertible Bonds to accept the Offers, as they intend to do in respect
of their own holdings.
The Ordinary Offer is conditional on, among other things, valid acceptances
being received (and not, where permitted, withdrawn) by the expiration of the
Initial Offer Period in respect of not less than 90 percent in nominal value of
Sedgwick Securities to which the Ordinary Offer relates, or such lower
percentage as Marsh & McLennan may decide, provided that such condition (the
"Acceptance Condition") shall not be satisfied unless Marsh & McLennan and/or
its wholly owned subsidiaries shall have acquired or agreed to acquire, whether
pursuant to the Ordinary Offer or otherwise, Sedgwick Securities carrying in the
aggregate more than 50 percent of the voting rights then exercisable at general
meetings of Sedgwick. Marsh & McLennan reserves the right to reduce the
percentage of Sedgwick Securities required to satisfy the Acceptance Condition
at some time prior to all of the conditions being satisfied, fulfilled or, where
permitted, waived. At least five business days prior to any such reduction,
Marsh & McLennan will announce that it has reserved the right to so reduce the
Acceptance Condition. Such announcement will state the percentage to which the
Acceptance Condition may be reduced and will state that such a reduction is
possible but that Marsh & McLennan need not declare its actual intentions until
it is required to do so under the City Code on Takeovers and Mergers of the UK
(the "City Code"). Marsh & McLennan will not make such an announcement unless
Marsh & McLennan believes there is a significant possibility that sufficient
Sedgwick Securities will be tendered to permit the Acceptance Condition to be
satisfied at such reduced level. Holders of Sedgwick Securities who are not
willing to accept the Ordinary Offer if the Acceptance Condition is reduced to
the minimum permitted level should either not accept the Ordinary Offer until
the Subsequent Offer Period or be prepared to withdraw their acceptances
promptly following an announcement by Marsh & McLennan of its reservation of the
right to reduce the Acceptance Condition. Other conditions of the Offers are set
out in Part A of Appendix I of the Offer to Purchase.
Marsh & McLennan reserves the right (but will not be obliged) at any time to
extend the Initial Offer Period, provided that Marsh & McLennan may not extend
the Initial Offer Period beyond November 3, 1998 without the consent of the
Panel on Takeovers and Mergers of the UK (the "Panel"). Marsh & McLennan
reserves the right, if appropriate, to secure the Panel's approval to extend the
final date for expiration of the Initial Offer Period to November 24, 1998, or
such later date as the Panel may agree. A public announcement of any such
extension will be made no later than 8:30 a.m. (London time) in the UK and by
8:30 a.m. (New York City time) in the US on the next business day after the
previously scheduled expiration of the Initial Offer Period. Marsh & McLennan
may terminate any extension of the Initial Offer Period (other than an extension
required by the City Code or US federal securities laws) prior to its scheduled
expiration if the Acceptance Condition and all other conditions to the Ordinary
Offer have been satisfied, fulfilled or, where permitted, waived. In that case,
the Initial Offer Period and, consequently, withdrawal rights, except in certain
limited circumstances, will terminate immediately.
If all of the conditions to the Ordinary Offer are satisfied, fulfilled or,
where permitted, waived at the expiration of the Initial Offer Period, the
consideration for Sedgwick Securities purchased pursuant to the Ordinary Offer
will be paid within 14 calendar days after the later of the expiration of the
Initial Offer Period and the receipt of a complete and valid acceptance of the
Ordinary Offer. In all cases, payment for Sedgwick Securities purchased pursuant
to the Ordinary Offer will be made only after timely receipt by either the US
Depositary or the UK Receiving Agent, as the case may be, of (i) certificates
representing the Sedgwick Shares, Sedgwick ADRs representing the Sedgwick ADSs,
or (only in the case of Sedgwick ADSs) timely confirmation of a book-entry
transfer of such Sedgwick ADSs evidenced by Sedgwick ADRs into the US
Depositary's account at The Depository Trust Company or the Philadelphia
Depository Trust Company (each a "Book-Entry Transfer Facility") pursuant to the
procedures set forth in the Offer to Purchase, (ii) the Letter of Transmittal
(in the case of acceptances relating to Sedgwick ADSs) or the relevant Form of
Acceptance (in the case of acceptances relating to Sedgwick Shares), properly
completed and duly executed, with any required signature guarantees, and (iii)
any other documents required by the Letter of Transmittal or the relevant Form
of Acceptance. Although the Ordinary Offer price is denominated in pounds
sterling, accepting holders of Sedgwick Shares will be entitled to have their
cash consideration converted into US dollars at the exchange rate obtainable by
the relevant payment agent (either the US Depositary or the UK Receiving Agent)
on the spot market in London at approximately noon (London time) on the date the
cash consideration is made available by Marsh & McLennan to the relevant payment
agent for delivery to holders of Sedgwick Shares. Unless they elect to receive
pounds sterling, Sedgwick ADS holders will receive consideration converted into
dollars as described above, as if such holders of Sedgwick ADSs had elected to
receive dollars.
If, as a result of the Ordinary Offer and subject to certain conditions, Marsh &
McLennan acquires or contracts to acquire Sedgwick Securities representing at
least 90 percent in value of the Sedgwick Securities to which the Ordinary Offer
relates, then, provided such requirement is achieved within four months of
September 4, 1998, Marsh & McLennan will be entitled and intends to effect the
compulsory acquisition procedures provided for in Sections 428 to 430F of the
Companies Act 1985 (as amended) of England and Wales to compel the purchase of
any outstanding Sedgwick Securities on the same terms as provided in the
Ordinary Offer, in accordance with the relevant procedures and time limits
described in such Act.
If a holder of Sedgwick ADSs wishes to accept the Ordinary Offer in respect of
Sedgwick ADSs and the Sedgwick ADRs evidencing such Sedgwick ADSs are not
immediately available or the procedures for book-entry transfer cannot be
completed on a timely basis, or if time will not permit all required documents
to reach the US Depositary prior to the expiration of the Subsequent Offer
Period, such holder's acceptance of the Ordinary Offer in respect of Sedgwick
ADSs may nevertheless be effected by following the guaranteed delivery
procedures set forth in the Offer to Purchase.
Except as described below and in the Offer to Purchase, acceptances of the
Ordinary Offer for Sedgwick Securities are irrevocable. Acceptances of the
Ordinary Offer may be withdrawn pursuant to the procedures set out below at any
time during the Initial Offer Period, including any extension thereof, but not
during the Subsequent Offer Period, except in certain limited circumstances as
described in the Offer to Purchase. To be effective, a written notice of
withdrawal must be timely received by the party (either the UK Receiving Agent
or the US Depositary) to whom the acceptance was originally sent at one of the
addresses set forth in the Offer to Purchase and must specify the name of the
person who has tendered Sedgwick Securities, the number of Sedgwick Securities
to be withdrawn and (if a Sedgwick Share certificate or Sedgwick ADSs have been
tendered) the name of the registered holder of the Sedgwick Securities, if
different from the name of the person whose acceptance is to be withdrawn. In
respect of Sedgwick ADSs, if Sedgwick ADRs have been delivered or otherwise
identified to the US Depositary then, prior to the physical release of such
Sedgwick ADRs, the serial numbers shown on such Sedgwick ADRs must be submitted,
and, unless the Sedgwick ADSs evidenced by such Sedgwick ADRs have been
delivered by an Eligible Institution (as defined in Instruction 1 of the Letter
of Transmittal) or by means of a Letter of Transmittal, the signatures on the
notice of withdrawal must be guaranteed by an Eligible Institution. If Sedgwick
ADSs evidenced by Sedgwick ADRs have been delivered pursuant to the procedures
for book-entry transfer set forth in the Offer to Purchase, any notice of
withdrawal must also specify the name and number of account at the appropriate
Book-Entry Transfer Facility to be credited with the withdrawn Sedgwick ADSs and
must otherwise comply with such Book-Entry Transfer Facility's procedures. All
questions as to the validity (including time of receipt) of any notice of
withdrawal will be determined by Marsh & McLennan, whose determination (except
as required by the Panel) shall be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the General
Rules and Regulations under the US Securities Exchange Act of 1934, as amended,
is contained in the Offer to Purchase and incorporated herein by reference. The
Offer to Purchase, the Letter of Transmittal and the Form of Acceptance are
being mailed to holders of record of Sedgwick Securities and are being furnished
to brokers, dealers, commercial banks, trust companies and similar persons,
whose names or the names of whose nominees appear as holders of record for
subsequent transmittal to beneficial owners of Sedgwick Securities.
The Offer to Purchase and related materials contain important information which
should be read carefully before any decisions are made with respect to the
Offers.
Requests for assistance or copies of the Offer to Purchase, the Letter of
Transmittal, the Forms of Acceptance and all other related materials may be
directed to the U.S. Dealer Managers or the Information Agent as set forth
below, and copies will be furnished promptly at Marsh & McLennan's expense. The
Information Agent for the Offers is:
[GEORGESON LOGO]
Wall Street Plaza
New York, New York 10005
Banks and Brokers call collect (212) 440-9800
All Others Call Toll Free: 1-800-223-2064
The US Dealer Managers for the Offers are:
J.P. MORGAN & CO. DONALDSON, LUFKIN & JENRETTE
60 Wall Street 277 Park Avenue
New York, New York 10260 New York, New York 10172
(212) 648-7843 (Call Collect) (212) 892-8223 (Call Collect)
September 4, 1998
<PAGE> 1
EXHIBIT (a)(11)
Recommended Cash Offers
by
J.P. MORGAN AND DONALDSON, LUFKIN & JENRETTE
on behalf of
MARSH & MCLENNAN COMPANIES, INC.
for
SEDGWICK GROUP PLC
Morgan Guaranty Trust Company of New York ("J.P. Morgan") and Donaldson, Lufkin
& Jenrette International ("Donaldson, Lufkin & Jenrette") announce, on behalf of
Marsh & McLennan Companies, Inc. ("MMC"), recommended cash offers to acquire the
whole of the issued and to be issued ordinary share capital of Sedgwick Group
plc ("Sedgwick") and all outstanding Sedgwick Convertible Bonds (the "Offers").
The full terms and conditions of the Offers and the Loan Note Alternative
(including details of how the Offers may be accepted) are set out in the offer
document dated and posted today (the "Offer Document") and in the Acceptance
Forms. Terms defined in the Offer Document have the same meanings in this
advertisement.
A Sedgwick Securityholder who validly accepts the Ordinary Offer will receive:
FOR EACH SEDGWICK SHARE - 225 PENCE IN CASH
FOR EACH SEDGWICK ADS - POUND STERLING 11.25 IN CASH.
A Sedgwick Bondholder who validly accepts the Convertible Offer will receive,
for every pound sterling 1 nominal of Convertible Bonds, 123 pence in cash.
In addition, Sedgwick Securityholders who were on the register at the close of
business on 21 August 1998 will be entitled to receive and retain the interim
dividend of 3.0 pence (net) per Sedgwick Share in respect of the year ending 31
December 1998 and payable on 19 October 1998. Sedgwick Bondholders will also be
entitled to the interest payable on the Sedgwick Convertible Bonds on 30
November 1998 on the terms set out in the Offer Document.
The Ordinary Offer values the entire issued share capital of Sedgwick at pound
sterling 1,247 million.
Instead of choosing to receive the cash consideration under the Offers, Sedgwick
Shareholders and Sedgwick Bondholders (other than certain overseas shareholders
and bondholders) who validly accept the Offers will be entitled to exchange all
or part of their holdings of Sedgwick Shares and/or Sedgwick Convertible Bonds
for Loan Notes. The Loan Notes will be issued on the basis of pound sterling 1
nominal of Loan Notes for every pound sterling 1 of cash otherwise available
under the Offers.
Copies of the Offer Document and Acceptance Forms are available for collection
as provided in the Offer Document, including from Computershare Services PLC,
5-10 Great Tower Street, London EC3R 5ER; Bank of New York, 101 Barclay Street,
New York, New York 10286; The Chase Manhattan Bank, Chaseside, Bournemouth BH7
7DB; The Chase Manhattan Bank Luxembourg, S.A., 5 rue Plaetis, L-2338 Luxembourg
Grund; and Lloyds Bank Registrars, The Causeway, Worthing, West Sussex BN99 6DA.
The Offers are being made to all Sedgwick Securityholders and Sedgwick
Bondholders, including those to whom the Offer Document may not be despatched,
who hold Sedgwick Securities or Sedgwick Convertible Bonds, or who are entitled
to have Sedgwick Securities unconditionally allotted or issued to them. The
Offers will be open for acceptance until 3.00 p.m. (London time) or 10.00 a.m.
(New York City time) on 5 October 1998 (or such later time(s) and/or date(s) as
MMC, subject to the rules of the City Code, may decide).
The directors of Sedgwick, who have been so advised by Rothschild and Credit
Suisse First Boston, have stated that they consider the terms of the Offers to
be fair and reasonable and unanimously recommend Sedgwick Securityholders and
Sedgwick Bondholders to accept the Offers. In providing advice to the directors
of Sedgwick, Rothschild and Credit Suisse First Boston have taken into account
the commercial assessments of the Sedgwick directors.
Directors of Sedgwick and certain other persons have irrevocably undertaken to
accept the Ordinary Offer in respect of their holdings amounting to 223,934,653
Sedgwick Shares representing 40.4 per cent. of Sedgwick's issued share capital
and in respect of pound sterling 250,000 in nominal value of Sedgwick
Convertible Bonds. MMC has also conditionally agreed to acquire a further
54,862,345 Sedgwick Shares which, together with such irrevocable undertakings,
represent 50.3 per cent. of Sedgwick's issued share capital.
The Offers are not being made, directly or indirectly, in or into or by use of
the mails of, or by any means or instrumentality of interstate or foreign
commerce (including facsimile transmission, e-mail, telex and telephone) of, or
of any facility of a national securities exchange of Canada, Australia or Japan
and the Offers are not capable of acceptance from within Canada, Australia or
Japan. Neither the Offer Document nor the Acceptance Forms (or any related
offering documentation) is being mailed or otherwise distributed or sent in or
into Canada,Australia or Japan.
This advertisement is not being published or otherwise distributed or sent to,
into or from Canada, Australia or Japan. Persons reading this advertisement
(including nominees, trustees and custodians) must not distribute or send this
advertisement, the Offer Document or an Acceptance Form (or any related offering
documentation) in, into or from Canada, Australia or Japan nor use Canadian,
Australian or Japanese mails for any purpose, directly or indirectly, in
connection with the Offers and doing so may invalidate any purported acceptance
<PAGE> 2
of the Offers.
The Loan Notes to be issued pursuant to the Offers have not been, and will not
be, registered under the US Securities Act or under any relevant securities laws
of any state of the US or any relevant securities laws of Canada, Australia or
Japan. Accordingly, unless an exemption is available under the US Securities Act
or such relevant securities laws, the Loan Notes may not be offered, sold or
delivered, directly or indirectly, in or into the US, Canada, Australia or
Japan, or any other jurisdiction if to do so would constitute a violation of the
relevant laws in such jurisdiction. The obligations of Marsh & McLennan as
issuer of the Loan Notes are not guaranteed or secured.
J.P. Morgan, Donaldson, Lufkin & Jenrette and Cazenove, which are regulated in
the UK by The Securities and Futures Authority Limited, are acting for MMC and
for no one else in connection with the Offers and will not be responsible to
anyone other than MMC for providing the protections afforded to their respective
customers nor for giving advice in relation to the Offers.
Rothschild and Credit Suisse First Boston, which are regulated in the UK by The
Securities and Futures Authority Limited, are acting for Sedgwick and for no one
else in connection with the Offers and will not be responsible to anyone other
than Sedgwick for providing the protections afforded to their respective
customers nor for giving advice in relation to the Offers.
The members of the Offer Committee of MMC listed in the Offer Document accept
responsibility for the information contained in this advertisement save for that
relating to Sedgwick and, to the best of their knowledge and belief (having
taken all reasonable care to ensure that such is the case), the information
contained in this advertisement for which they accept responsibility is in
accordance with the facts and does not omit anything likely to affect the import
of such information.
The directors of Sedgwick accept responsibility for the information contained in
this advertisement relating to Sedgwick and, to the best of their knowledge and
belief (having taken all reasonable care to ensure that such is the case), the
information contained in this advertisement for which they accept responsibility
is in accordance with the facts and does not omit anything likely to affect the
import of such information.
This notice constitutes, inter alia, a notice by Sedgwick in accordance with
condition 11(g) of the trust deed dated 15 June 1993 in respect of the Sedgwick
Convertible Bonds.
4 September 1998
J.P. Morgan and Donaldson, Lufkin & Jenrette have approved this advertisement
solely for the purposes of Section 57 of the Financial Services Act 1986.
<PAGE> 1
EXHIBIT (b)
$2,250,000,000
CREDIT AGREEMENT
dated as of
August 24, 1998
among
Marsh & McLennan Companies, Inc.
The Lenders Party Hereto
and
Morgan Guaranty Trust Company of New York,
as Administrative Agent
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions.....................................................1
SECTION 1.02. Accounting Terms and Determinations............................13
ARTICLE 2
THE CREDITS
SECTION 2.01. Commitments to Lend............................................13
SECTION 2.02. Method of Borrowing............................................14
SECTION 2.03. Maturity of Loans..............................................15
SECTION 2.04. Interest Rates.................................................15
SECTION 2.05. Method of Electing Interest Rates..............................16
SECTION 2.06. Facility Fees..................................................18
SECTION 2.07. Termination or Reduction of Commitments........................18
SECTION 2.08. Optional Prepayments...........................................19
SECTION 2.09. General Provisions as to Payments..............................19
SECTION 2.10. Funding Losses.................................................20
SECTION 2.11. Computation of Interest and Fees...............................21
SECTION 2.12. Notes..........................................................21
SECTION 2.13. Regulation D Compensation......................................21
ARTICLE 3
CONDITIONS
SECTION 3.01. Closing........................................................22
SECTION 3.02. Borrowings to Finance Acquisition of Target Shares Pursuant
to Offer.....................................................23
SECTION 3.03. Other Borrowings...............................................23
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power..................................24
SECTION 4.02. Corporate and Governmental Authorization; No Contravention.....24
SECTION 4.03. Binding Effect.................................................24
SECTION 4.04. Financial Information..........................................25
<PAGE> 3
PAGE
SECTION 4.05. Litigation.....................................................25
SECTION 4.06. Compliance with ERISA..........................................25
SECTION 4.07. Taxes..........................................................26
SECTION 4.08. Subsidiaries...................................................26
SECTION 4.09. No Regulatory Restrictions on Borrowing........................26
SECTION 4.10. Full Disclosure................................................26
SECTION 4.11. Mortgage.......................................................26
SECTION 4.12. Year 2000 Compliance...........................................26
ARTICLE 5
COVENANTS
SECTION 5.01. Information....................................................27
SECTION 5.02. Conduct of Business and Maintenance of Existence...............30
SECTION 5.03. Compliance with the Laws.......................................31
SECTION 5.04. Minimum Consolidated Net Worth; Consolidated Debt..............31
SECTION 5.05. Consolidations, Mergers and Sales of Assets....................31
SECTION 5.06. Use of Proceeds................................................31
SECTION 5.07. Negative Pledge................................................32
SECTION 5.08. Amendment of Mortgage..........................................33
SECTION 5.09. Taxes, Etc.....................................................33
ARTICLE 6
DEFAULTS
SECTION 6.01. Events of Default..............................................34
SECTION 6.02. Notice of Default..............................................37
ARTICLE 7
THE AGENTS
SECTION 7.01. Appointment and Authorization..................................37
SECTION 7.02. Administrative Agent and Affiliates............................37
SECTION 7.03. Action by Administrative Agent.................................38
SECTION 7.04. Consultation with Experts......................................38
SECTION 7.05. Liability of Administrative Agent..............................38
SECTION 7.06. Indemnification................................................39
SECTION 7.07. Credit Decision................................................39
SECTION 7.08. Successor Administrative Agent.................................39
SECTION 7.09. Administrative Agent's Fee.....................................39
ii
<PAGE> 4
PAGE
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair.......40
SECTION 8.02. Illegality.....................................................40
SECTION 8.03. Increased Cost and Reduced Return..............................41
SECTION 8.04. Taxes..........................................................42
SECTION 8.05. Base Rate Loans Substituted for Affected Euro-dollar Loans.....44
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices........................................................45
SECTION 9.02. No Waivers.....................................................45
SECTION 9.03. Expenses; Indemnification......................................45
SECTION 9.04. Set-offs.......................................................46
SECTION 9.05. Amendments and Waivers.........................................47
SECTION 9.06. Successors; Participations and Assignments.....................47
SECTION 9.07. No Reliance on Margin Stock....................................49
SECTION 9.08. Governing Law; Submission to Jurisdiction......................49
SECTION 9.09. Counterparts; Integration; Effectiveness.......................49
SECTION 9.10. Waiver of Jury Trial...........................................49
COMMITMENT SCHEDULE
PRICING SCHEDULE
EXHIBIT A - FORM OF NOTE
EXHIBIT B - FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
iii
<PAGE> 5
AGREEMENT dated as of August 24, 1998 among MARSH & McLENNAN COMPANIES,
INC., the LENDERS party hereto and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Administrative Agent.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. The following terms, as used herein, have the following
meanings:
"ADMINISTRATIVE AGENT" means Morgan Guaranty Trust Company of New York,
in its capacity as administrative agent for the Lenders hereunder, and its
successors in such capacity.
"ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Lender, an
administrative questionnaire in the form prepared by the Administrative Agent,
completed by such Lender and returned to the Administrative Agent (with a copy
to the Borrower).
"AFFILIATE" means (i) any corporation or other entity the accounts of
which are included in the consolidated financial statements of the Borrower and
its Consolidated Subsidiaries on the equity method and (ii) any unconsolidated
Subsidiary.
"APPLICABLE LENDING OFFICE" means, with respect to any Lender, (i) in
the case of its Base Rate Loans, its Domestic Lending Office and (ii) in the
case of its Euro-Dollar Loans, its Euro-Dollar Lending Office.
"ASSIGNEE" has the meaning specified in Section 9.06(c).
"BASE RATE" means, for any day, a rate per annum equal to the higher of
(i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal
Funds Rate for such day.
"BASE RATE LOAN" means a Loan which bears interest at the Base Rate
pursuant to the applicable Notice of Borrowing or Notice of Interest Rate
Election or the last sentence of Section 2.05(a) or Article 8.
<PAGE> 6
"BORROWER" means Marsh & McLennan Companies, Inc., a Delaware
corporation, and its successors.
"BORROWER'S 1997 FORM 10-K" means the Borrower's annual report on Form
10-K for 1997, as filed with the SEC pursuant to the Exchange Act.
"BORROWER'S LATEST FORM 10-Q" means the Borrower's quarterly report on
Form 10-Q for the quarter ended June 30, 1998, as filed with the SEC pursuant to
the Exchange Act.
"BORROWING" means (i) the aggregation of Loans made or to be made to
the Borrower pursuant to Article 2 on the same day, all of which Loans are of
the same type (subject to Article 8) and, except in the case of Base Rate Loans,
have the same initial Interest Period or (ii) if the context so requires, the
borrowing of such Loans. A Borrowing is a Base Rate Borrowing if such Loans are
Base Rate Loans or a Euro-Dollar Borrowing if such Loans are Euro-Dollar Loans.
"CLOSING DATE" means the date on or after the Effective Date on which
the Administrative Agent shall have received all the documents specified in or
pursuant to Section 3.01.
"COMMITMENT" means (i) with respect to each Lender listed on the
Commitment Schedule, the amount set forth opposite such Lender's name on the
Commitment Schedule and (ii) with respect to any Assignee which becomes a Lender
pursuant to Section 9.06(c), the amount of the transferor Lender's Commitment
assigned to it pursuant to Section 9.06(c), in each case as such amount may be
changed from time to time pursuant to Section 2.07 or 9.06(c); provided that, if
the context so requires, the term "COMMITMENT" means the obligation of a Lender
to extend credit up to such amount to the Borrower hereunder.
"COMMITMENT REDUCTION EVENT" means the incurrence after the date hereof
of any Debt by the Borrower or any of its Subsidiaries in the form of debt
securities or by the Borrower in the form of bank borrowings, other than (i)
loan notes issued to shareholders of Target pursuant to the Offer, (ii)
commercial paper borrowings, (iii) borrowings under the Credit Agreement dated
as of June 13, 1997 among the Borrower, Marsh McLennan, Incorporated, the banks
listed therein and The Chase Manhattan Bank, as Administrative Agent and (iv)
any such Debt which is secured by a Lien permitted by Section 5.07.
"COMMITMENT SCHEDULE" means the Commitment Schedule attached hereto.
2
<PAGE> 7
"COMPLETION PROCEDURES" means procedures pursuant to section 428 et
seq. Companies Act 1985 whereby the Borrower, after having validly acquired or
agreed to acquire at least 90% in nominal value of the ordinary shares to which
the Offer relates and having complied with certain other requirements, may
acquire the remainder of such ordinary shares.
"CONSOLIDATED DEBT" means, at any date, the Debt of the Borrower and
its Consolidated Subsidiaries, determined on a consolidated basis as of such
date.
"CONSOLIDATED NET WORTH" means, at any date, the consolidated
stockholders" equity of the Borrower and its Consolidated Subsidiaries plus any
unrealized losses and less any unrealized gains (in each case to the extent
reflected in the determination of such consolidated stockholders" equity)
related, directly or indirectly, to securities available for sale, as determined
in accordance with Statement of Financial Accounting Standards No. 115 (or any
successor statements or amendments thereto) (in each case as affected by any
subsequent relevant pronouncements of the Financial Accounting Standards Board
or, if and to the extent applicable, the SEC).
"CONSOLIDATED SUBSIDIARY" means, at any date, any Subsidiary or other
entity the accounts of which would be consolidated with those of the Borrower in
its consolidated financial statements if such statements were prepared as of
such date.
"CONSOLIDATED TANGIBLE NET WORTH" means, at any date, Consolidated Net
Worth less the consolidated Intangible Assets of the Borrower and its
Consolidated Subsidiaries, all determined as of such date. For purposes of this
definition, "INTANGIBLE ASSETS" means, without duplication, the amount (to the
extent reflected in determining the consolidated stockholders" equity component
of Consolidated Net Worth) of (i) all write-ups (other than write-ups resulting
from foreign currency translations and write-ups of assets of a going concern
business made within twelve months after the acquisition of such business)
subsequent to December 31, 1997 in the book value of any asset owned by the
Borrower or a Consolidated Subsidiary, (ii) all unamortized debt discount and
expense, unamortized deferred charges, goodwill, patents, trademarks, service
marks, trade names, anticipated future benefit of tax loss carry-forwards,
copyrights, organization or developmental expenses and other intangible assets,
designated as such as contemplated by Section 1.02 and (iii) all investments in
Affiliates in an aggregate amount in excess of $180,000,000.
"CREDIT EXPOSURE" means, with respect to any Lender at any time, (i)
the amount of its Commitment (whether used or unused) at such time or (ii) if
the Commitments have terminated in their entirety, the aggregate outstanding
principal amount of its Loans at such time.
3
<PAGE> 8
"DEBT" of any Person means, at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with GAAP, (v) all non-contingent obligations (and, for purposes of
Section 5.07 and the definitions of Material Debt and Material Financial
Obligations, all contingent obligations) of such Person to reimburse any bank or
other Person in respect of amounts paid under a letter of credit or similar
instrument, (vi) all Debt secured by a Lien on any asset of such Person, whether
or not such Debt is otherwise an obligation of such Person, and (vii) all
Guarantees by such Person of Debt of another Person (each such Guarantee to
constitute Debt in an amount equal to the amount of such other Person's Debt
Guaranteed thereby).
"DEFAULT" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DERIVATIVES OBLIGATIONS" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
"DOLLARS" and "$" mean lawful money of the United States.
"DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City are authorized or required
by law to close.
"DOMESTIC LENDING OFFICE" means, as to each Lender, its office located
at its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Lender may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Administrative Agent.
"EFFECTIVE DATE" means the date this Agreement becomes effective in
accordance with Section 9.09.
4
<PAGE> 9
"ENVIRONMENTAL LAWS" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating to
the environment or the effect of the environment on human health or to
emissions, discharges or releases of pollutants, contaminants, hazardous
substances or wastes into the environment, including (without limitation)
ambient air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, hazardous substances or
wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA GROUP" means the Borrower, any Material Subsidiary and all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower or any Material Subsidiary, are treated as a single employer under
Section 414 of the Internal Revenue Code.
"EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
Dollar deposits) in London.
"EURO-DOLLAR LENDING OFFICE" means, as to each Lender, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Lender as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Administrative Agent.
"EURO-DOLLAR LOAN" means a Loan which bears interest at a Euro-Dollar
Rate pursuant to the applicable Notice of Borrowing or Notice of Interest Rate
Election.
"EURO-DOLLAR MARGIN" means (i) on any date on or prior to February 24,
1999, the applicable Euro-Dollar Margin set forth on the Pricing Schedule for
Level IV Status and the Utilization (as defined therein) that exists on such
date, and (ii) on any date thereafter, a rate per annum determined in accordance
with the Pricing Schedule.
"EURO-DOLLAR RATE" means a rate of interest determined pursuant to
Section 2.04(b) on the basis of a London Interbank Offered Rate.
5
<PAGE> 10
"EURO-DOLLAR RESERVE PERCENTAGE" means, for any day, that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion Dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Lender to
United States residents).
"EVENTS OF DEFAULT" has the meaning specified in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time.
"FACILITY FEE RATE" means (i) on any date on or prior to February 24,
1999 which is not a Pricing Grid Day, 0.08% per annum and (ii) on any other
date, a rate per annum determined in accordance with the Pricing Schedule.
"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Domestic Business Day next
succeeding such day; provided that (i) if such day is not a Domestic Business
Day, the Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Domestic Business Day as so published on the next
succeeding Domestic Business Day and (ii) if no such rate is so published on
such next succeeding Domestic Business Day, the Federal Funds Rate for such day
shall be the average rate quoted to Morgan Guaranty Trust Company of New York on
such day on such transactions as determined by the Administrative Agent.
"FISCAL QUARTER" means a fiscal quarter of the Borrower.
"FISCAL YEAR" means a fiscal year of the Borrower.
"GAAP" means generally accepted accounting principles as in effect from
time to time, applied on a basis consistent (except for changes concurred in by
the Borrower's independent public accountants) with the most recent audited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries delivered to the Lenders.
6
<PAGE> 11
"GROUP OF LOANS" means, at any time, a group of Loans consisting of (i)
all Loans which are Base Rate Loans at such time or (ii) all Euro-Dollar Loans
which have the same Interest Period at such time; provided that, if a Loan of
any particular Lender is converted to or made as a Base Rate Loan pursuant to
Article 8, such Loan shall be included in the same Group or Groups of Loans from
time to time as it would have been in if it had not been so converted or made.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt (whether arising by virtue of partnership arrangements, by virtue of an
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or (ii)
entered into for the purpose of assuring in any other manner the holder of such
Debt of the payment thereof or to protect such holder against loss in respect
thereof (in whole or in part); provided that the term "GUARANTEE" shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "GUARANTEE" used as a verb has a correlative meaning.
"INDEMNITEE" has the meaning set forth in Section 9.03(b).
"INTEREST PERIOD" means, with respect to each Euro-Dollar Loan, the
period commencing on the date of borrowing specified in the applicable Notice of
Borrowing or on the date specified in an applicable Notice of Interest Rate
Election and ending one, two, three or six months thereafter, as the Borrower
may elect in such notice; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case such Interest Period
shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
7
<PAGE> 12
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"LENDER" means (i) each bank or other institution listed on the
Commitment Schedule, (ii) each Assignee which becomes a Lender pursuant to
Section 9.06(c) and (iii) their respective successors.
"LENDER PARTIES" means the Lenders and the Administrative Agent.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has substantially the same practical effect as a
security interest, in respect of such asset. For purposes hereof, the Borrower
or any Subsidiary shall be deemed to own subject to a Lien any asset which it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"LOAN" means a loan made by a Lender pursuant to Section 2.01; provided
that, if any such loan or loans (or portions thereof) are combined or subdivided
pursuant to a Notice of Interest Rate Election, the term "LOAN" shall refer to
the combined principal amount resulting from such combination or to each of the
separate principal amounts resulting from such subdivision, as the case may be.
"LONDON INTERBANK OFFERED RATE" has the meaning set forth in Section
2.04(b).
"MARGIN STOCK" means "margin stock" within the meaning of Regulations U
and X.
"MATERIAL ADVERSE EFFECT" means (i) any material adverse effect on the
business, financial position or results of operations of the Borrower and its
Subsidiaries, taken as a whole; (ii) any material adverse effect on the ability
of the Borrower to consummate the transactions contemplated hereby or (iii) any
material adverse effect on any of the rights and remedies of the Lender Parties
under this Agreement and the Notes.
"MATERIAL DEBT" means Debt (except Debt outstanding hereunder) of the
Borrower and/or one or more of its Subsidiaries, arising in one or more related
or unrelated transactions, in an aggregate principal or face amount exceeding
$50,000,000.
8
<PAGE> 13
"MATERIAL FINANCIAL OBLIGATIONS" means a principal or face amount of
Debt (except Debt outstanding hereunder) and/or payment or collateralization
obligations in respect of Derivatives Obligations of the Borrower and/or one or
more of its Subsidiaries, arising in one or more related or unrelated
transactions, the principal or face amount (with respect to Debt) or Settlement
Amount (with respect to Derivatives Obligations, after giving effect to any
netting arrangements) of which exceeds in the aggregate $50,000,000.
"MATERIAL PLAN" means, at any time, a Plan or Plans having aggregate
Unfunded Liabilities in excess of $15,000,000.
"MATERIAL SUBSIDIARY" means at any time any Subsidiary which as of such
time meets the definition of a "significant subsidiary" contained as of the date
hereof in Regulation S-X of the SEC.
"MOODY'S" means Moody's Investors Service, Inc.
"MORTGAGE" means the Restated Mortgage and Indenture and Security
Agreement dated as of April 6, 1989 made by the Borrower, Marsh & McLennan,
Incorporated, William M. Mercer-Meidinger-Hansen, Incorporated and Marsh &
McLennan Group Associates, Inc., tenants in common, as mortgagor, and The First
National Bank of Boston, trustee, as mortgagee, as amended and supplemented from
time to time, including, without limitation, as described in the Mortgage
Memorandum, securing the Secured Notes and covering the Borrower's headquarters
located at 1166 Avenue of the Americas, New York, New York.
"MORTGAGE MEMORANDUM" means the memorandum prepared by the Borrower
describing the Mortgage as in effect on May 20, 1991, particularly as to the
non-recourse nature of the obligations of the Borrower and the other mortgagors
thereunder and the circumstances contemplated therein under which such
obligations shall become recourse obligations with respect to any assets (except
the Mortgaged Property) of the Borrower or any of the other mortgagors or any
Subsidiary (including any such other mortgagor).
"MORTGAGED PROPERTY" has the meaning set forth in the Mortgage as in
effect on May 20, 1991.
"MULTIEMPLOYER PLAN" means, at any time, an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
9
<PAGE> 14
"NET CASH PROCEEDS" means, with respect to any Commitment Reduction
Event, an amount equal to the cash proceeds received by the Borrower or any of
its Subsidiaries from or in respect of such Commitment Reduction Event less any
expenses reasonably incurred by such Person in respect of such Commitment
Reduction Event.
"NOTES" means promissory notes of the Borrower, substantially in the
form of Exhibit A hereto, evidencing the Borrower's obligation to repay the
Loans made to it, and "NOTE" means any one of such promissory notes issued
hereunder.
"NOTICE OF BORROWING" has the meaning set forth in Section 2.02.
"NOTICE OF INTEREST RATE ELECTION" has the meaning set forth in Section
2.05.
"OFFER" means the offer by the Borrower to purchase all outstanding
ordinary shares of Target on the terms and conditions specified in the form of
offer heretofore delivered by the Borrower to the Lenders.
"OFFER TERMINATION DATE" means the earliest date on which all of the
following have occurred: (i) all payments in respect of acceptance of the Offer
have been made in full, (ii) no further such acceptances are possible and (iii)
all Completion Procedures which are capable of being implemented have been
completed and all payments pursuant thereto to shareholders in Target have been
made in full.
"OPERATING CASH FLOW" means, at any date, for the period of four
consecutive fiscal quarters then ended, the sum (without duplication) determined
on a consolidated basis for the Borrower and its Consolidated Subsidiaries as
reported in the Borrower's audited or unaudited quarterly consolidated
statements of cash flows, of Net Cash Generated From Operations for such period
plus (or minus) to the extent reflected in determining Net Cash Generated From
Operations for such period, Net Changes In Operating Working Capital Other Than
Cash And Cash Equivalents for such period.
"PARENT" means, with respect to any Lender, any Person controlling such
Lender.
"PARTICIPANT" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
10
<PAGE> 15
"PERSON" means an individual, a corporation, a limited liability
Borrower, a partnership, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"PLAN" means, at any time, an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"PRICING GRID DAY" means any day when (i) the Borrower has on or prior
to such day delivered to the Administrative Agent a certificate to the effect
that it does not anticipate that any Loans will be borrowed because the Borrower
has access to the commercial paper market and other sources of funds sufficient
to finance the acquisition of Target without any borrowing under this Agreement
and (ii) there have been no Loans outstanding on or prior to such day.
"PRICING SCHEDULE" means the Pricing Schedule attached hereto.
"PRIME RATE" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"QUARTERLY PAYMENT DATES" means each March 31, June 30, September 30
and December 31.
"REFERENCE BANKS" means the principal London offices of Morgan Guaranty
Trust Company of New York and, at such time as one or more additional Lenders
shall have become parties hereto, such other Lenders as may be mutually agreed
by the Borrower and the Administrative Agent.
"REGULATIONS U AND X" means Regulations U and X of the Board of
Governors of the Federal Reserve System, as in effect from time to time.
"REQUIRED LENDERS" means, at any time, Lenders having at least 51% in
aggregate amount of the Credit Exposures at such time.
"REVOLVING CREDIT PERIOD" means the period from and including the
Closing Date to but not including the Termination Date.
11
<PAGE> 16
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
"SEC" means the Securities and Exchange Commission.
"SECURED NOTES" means the $200,000,000 aggregate principal amount of
9.80% Secured Non-Recourse Notes Due April 6, 2009 secured by the Mortgage.
"SETTLEMENT AMOUNT" means, in respect of any Derivatives Obligation to
which the Borrower or any Subsidiary is a party, the net aggregate
marked-to-market (in accordance with standard industry practice) amount, if any,
that would be due in respect of such Derivatives Obligation (together with all
other Derivatives Obligations under the same master agreement and giving effect
to any netting arrangements between the parties to such master agreement) if
such Derivatives Obligation was (and such other Derivatives Obligations were)
terminated because of a default by the Borrower or such Subsidiary.
"SUBSIDIARY" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person. Unless
otherwise specified, "SUBSIDIARY" means a Subsidiary of the Borrower.
"TARGET" means Sedgwick Group plc, an English company.
"TARGET SHARES" means the ordinary shares of Target.
"TERMINATION DATE" means August 23, 1999 or, if such day is not a
Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.
"UNFUNDED LIABILITIES" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"UNITED STATES" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
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"WHOLLY-OWNED SUBSIDIARY" means any Subsidiary all of the shares of
capital stock or other ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly owned by the Borrower.
SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with GAAP;
provided that, if the Borrower notifies the Administrative Agent that the
Borrower wishes to amend any provision hereof to eliminate the effect of any
change in GAAP (or if the Administrative Agent notifies the Borrower that the
Required Lenders wish to amend any provision hereof for such purpose), then such
provision shall be applied on the basis of GAAP in effect immediately before the
relevant change in GAAP became effective, until either such notice is withdrawn
or such provision is amended in a manner satisfactory to the Borrower and the
Required Lenders.
ARTICLE 2
THE CREDITS
SECTION 2.01. COMMITMENTS TO LEND. Each Lender severally agrees, on the
terms and conditions set forth in this Agreement, to make loans to the Borrower
pursuant to this Section from time to time during the Revolving Credit Period;
provided that, immediately after each such loan is made, the aggregate
outstanding principal amount of the Loans held by such Lender shall not exceed
its Commitment. Each Borrowing under this Section shall be in an aggregate
principal amount of $10,000,000 or any larger multiple of $1,000,000 (except
that any such Borrowing may be in the aggregate amount of the unused
Commitments) and shall be made from the several Lenders ratably in proportion to
their respective Commitments. Within the foregoing limits, the Borrower may
borrow under this Section, prepay Loans to the extent permitted by Section 2.08
and reborrow at any time during the Revolving Credit Period under this Section.
SECTION 2.02. METHOD OF BORROWING. (a) The Borrower shall give the
Administrative Agent notice (a "NOTICE OF Borrowing") not later than 10:30 A.M.
(New York City time) on (x) the date of each Base Rate Borrowing and (y) the
third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Base Rate Borrowing or a Euro-Dollar
Business Day in the case of a Euro-Dollar Borrowing;
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(ii) the aggregate amount of such Borrowing;
(iii) whether the Loans comprising such Borrowing are to bear
interest initially at the Base Rate or a Euro-Dollar Rate; and
(iv) in the case of a Euro-Dollar Borrowing, the duration of
the initial Interest Period applicable thereto, subject to the
provisions of the definition of Interest Period.
(b) Promptly after receiving a Notice of Borrowing, the Administrative
Agent shall notify each Lender of the contents thereof and of such Lender's
ratable share of such Borrowing and such Notice of Borrowing shall not
thereafter be revocable by the Borrower.
(c) Not later than 12:00 Noon (New York City time) on the date of each
Borrowing, each Lender shall make available its ratable share of such Borrowing,
in Federal or other funds immediately available in New York City, to the
Administrative Agent at its address specified in or pursuant to Section 9.01.
Unless the Administrative Agent determines that any applicable condition
specified in Article 3 has not been satisfied, the Administrative Agent will
make the funds so received from the Lenders available to the Borrower at the
Administrative Agent's aforesaid address.
(d) Unless the Administrative Agent shall have received notice from a
Lender before the date of any Borrowing that such Lender will not make available
to the Administrative Agent such Lender's share of such Borrowing, the
Administrative Agent may assume that such Lender has made such share available
to the Administrative Agent on the date of such Borrowing in accordance with
Section 2.02(c) and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Lender shall not have so made such share
available to the Administrative Agent, such Lender and the Borrower severally
agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Administrative Agent, at (i) if such amount is repaid by the
Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the
interest rate applicable to such Borrowing pursuant to Section 2.04 and (ii) if
such amount is repaid by such Lender, the Federal Funds Rate. If such Lender
shall repay to the Administrative Agent such corresponding amount, the Borrower
shall not be required to repay such amount and the amount so repaid by such
Lender shall constitute such Lender's Loan included in such Borrowing for
purposes of this Agreement.
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SECTION 2.03. MATURITY OF LOANS. Each Loan shall mature, and the
principal amount thereof shall be due and payable (together with interest
accrued thereon), on the Termination Date.
SECTION 2.04. INTEREST RATES. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made until it becomes due, at a rate per annum equal to the Base
Rate for such day. Such interest shall be payable quarterly in arrears on each
Quarterly Payment Date. Any overdue principal of or interest on any Base Rate
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 2% plus the Base Rate for such day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such
day plus the London Interbank Offered Rate applicable to such Interest Period.
Such interest shall be payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than three months, at intervals of three
months after the first day thereof.
The "LONDON INTERBANK OFFERED RATE" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in Dollars are offered to
each Reference Bank in the London interbank market at approximately 11:00 A.M.
(London time) two Euro-Dollar Business Days before the first day of such
Interest Period in an amount approximately equal to the principal amount of the
Euro-Dollar Loan of such Reference Bank to which such Interest Period is to
apply and for a period of time comparable to such Interest Period.
(c) Any overdue principal of or interest on any Euro-Dollar Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for such
day plus the London Interbank Offered Rate applicable to such Loan on the day
before such payment was due and (ii) the sum of 2% plus the Euro-Dollar Margin
for such day plus a rate per annum equal to the quotient obtained (rounded
upward, if necessary, to the next higher 1/100 of 1%) by dividing (x) the
average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the
respective rates per annum at which one day (or, if such amount due remains
unpaid more than three Euro-Dollar Business Days, then for such other period of
time not longer than three months as the Administrative Agent may select)
deposits in Dollars in an amount approximately equal to such overdue payment due
to each Reference Bank are offered to such Reference Bank in the London
interbank market for the applicable period determined as provided above by (y)
1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances
described in clause 8.01(a) or
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8.01(b) shall exist, at a rate per annum equal to the sum of 2% plus the Base
Rate for such day).
(d) The Administrative Agent shall determine each interest rate
applicable to the Loans hereunder. The Administrative Agent shall promptly
notify the Borrower and the Lenders of each rate of interest so determined, and
its determination thereof shall be conclusive in the absence of manifest error.
(e) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Administrative Agent as contemplated by this Section. If any
Reference Bank does not furnish a timely quotation, the Administrative Agent
shall determine the relevant interest rate on the basis of the quotation or
quotations furnished by the remaining Reference Bank or Banks or, if none of
such quotations is available on a timely basis, the provisions of Section 8.01
shall apply.
SECTION 2.05. METHOD OF ELECTING INTEREST RATES. (a) The Loans included
in each Borrowing shall bear interest initially at the type of rate specified by
the Borrower in the applicable Notice of Borrowing. Thereafter, the Borrower may
from time to time elect to change or continue the type of interest rate borne by
each Group of Loans (subject to Section 2.05(d) and the provisions of Article
8), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect
to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar
Business Day and
(ii) if such Loans are Euro-Dollar Loans, the Borrower may
elect to convert such Loans to Base Rate Loans as of any Domestic
Business Day or continue such Loans as Euro-Dollar Loans for an
additional Interest Period, subject to Section 2.10 if any such
conversion is effective on any day other than the last day of an
Interest Period applicable to such Loans.
Each such election shall be made by delivering a notice (a "NOTICE OF INTEREST
RATE ELECTION") to the Administrative Agent not later than 10:30 A.M. (New York
City time) on the third Euro-Dollar Business Day before the conversion or
continuation selected in such notice is to be effective. A Notice of Interest
Rate Election may, if it so specifies, apply to only a portion of the aggregate
principal amount of the relevant Group of Loans; provided that (i) such portion
is allocated ratably among the Loans comprising such Group and (ii) the portion
to which such Notice applies, and the remaining portion to which it does not
apply, are each at least $10,000,000 (unless such portion is comprised of Base
Rate Loans). If no such notice is timely received before the end of an Interest
Period for any
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Group of Euro-Dollar Loans, the Borrower shall be deemed to have elected that
such Group of Loans be converted to Base Rate Loans at the end of such Interest
Period.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such
notice applies;
(ii) the date on which the conversion or continuation selected
in such notice is to be effective, which shall comply with the
applicable clause of Section 2.05(a);
(iii) if the Loans comprising such Group are to be converted,
the new type of Loans and, if the Loans resulting from such conversion
are to be Euro-Dollar Loans, the duration of the next succeeding
Interest Period applicable thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans
for an additional Interest Period, the duration of such additional
Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Promptly after receiving a Notice of Interest Rate Election from
the Borrower pursuant to Section 2.05(a), the Administrative Agent shall notify
each Lender of the contents thereof and such notice shall not thereafter be
revocable by the Borrower.
(d) The Borrower shall not be entitled to elect to convert any Loans
to, or continue any Loans for an additional Interest Period as, Euro-Dollar
Loans if (i) the aggregate principal amount of any Group of Euro-Dollar Loans
created or continued as a result of such election would be less than $10,000,000
or (ii) a Default shall have occurred and be continuing when the Borrower
delivers notice of such election to the Administrative Agent.
(e) If any Loan is converted to a different type of Loan, the Borrower
shall pay, on the date of such conversion, the interest accrued to such date on
the principal amount being converted.
SECTION 2.06. FACILITY FEES. The Borrower shall pay to the
Administrative Agent, for the account of the Lenders ratably in proportion to
their Credit Exposures, a facility fee calculated for each day at the Facility
Fee Rate for such day on the aggregate amount of the Credit Exposures on such
day. Such
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facility fee shall accrue for each day from and including the Effective Date to
but excluding the day on which the Credit Exposures are reduced to zero. Fees
accrued for the account of the Lenders under this Section shall be payable
quarterly in arrears on each Quarterly Payment Date and on the day on which the
Commitments terminate in their entirety (and, if later, on the day on which the
Credit Exposures are reduced to zero).
SECTION 2.07. TERMINATION OR REDUCTION OF COMMITMENTS. (a) The Borrower
may, upon at least three Domestic Business Days' notice to the Agent, (i)
terminate the Commitments at any time, if no Loans are outstanding at such time,
or (ii) ratably reduce from time to time by an aggregate amount of $10,000,000
or a larger multiple of $1,000,000, the aggregate amount of the Commitments in
excess of the aggregate outstanding principal amount of the Loans. Promptly
after receiving a notice pursuant to this subsection, the Administrative Agent
shall notify each Lender of the contents thereof.
(b) Within five Domestic Business Days after the Borrower or any
Subsidiary receives any Net Cash Proceeds of a Commitment Reduction Event, the
Commitments shall be reduced ratably by an aggregate amount equal to the amount
of such Net Cash Proceeds; provided that:
(i) if the amount of such reduction is less than $25,000,000,
such reduction shall be deferred until the aggregate amount by which
the Commitments are required to be reduced pursuant to this Section
(including such deferred amounts) is not less than $25,000,000; and
(ii) if, by reason of any such reduction, this subsection
would otherwise require Euro-Dollars Loans or portions thereof to be
prepaid prior to the last day of the applicable Interest Period, such
reduction shall be deferred to such last day unless the Administrative
Agent otherwise notifies the Borrower upon the instruction of the
Required Lenders.
The Borrower shall give the Administrative Agent at least three Domestic
Business Days' notice of each reduction of the Commitments pursuant to this
subsection. If, after giving effect to any reduction of the Commitments pursuant
to this subsection, the aggregate outstanding principal amount of the Loans
would exceed the aggregate amount of the Commitments, the Borrower shall prepay,
pursuant to and in accordance with Section 2.08, a sufficient aggregate
principal amount of the Loans to eliminate such excess.
(c) Unless previously terminated, the Commitments shall terminate on
the Termination Date.
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SECTION 2.08. OPTIONAL PREPAYMENTS. (a) Subject in the case of
Euro-Dollar Loans to Section 2.10, the Borrower may (i) upon at least one
Domestic Business Day's notice to the Administrative Agent, prepay any Group of
Base Rate Loans or (ii) upon at least three Euro-Dollar Business Days' notice to
the Administrative Agent, prepay any Group of Euro-Dollar Loans, in each case in
whole at any time, or from time to time in part in amounts aggregating
$20,000,000 or any larger multiple of $10,000,000, by paying the principal
amount to be prepaid together with interest accrued thereon to the date of
prepayment. Each such optional prepayment shall be applied to prepay ratably the
Loans of the several Lenders included in such Group of Loans.
(b) Promptly after receiving a notice of prepayment pursuant to this
Section, the Administrative Agent shall notify each Lender of the contents
thereof and of such Lender's ratable share of such prepayment, and such notice
shall not thereafter be revocable by the Borrower.
SECTION 2.09. GENERAL PROVISIONS AS TO PAYMENTS. (a) The Borrower shall
make each payment of principal of, and interest on, the Loans and of fees
hereunder not later than 12:00 Noon (New York City time) on the date when due,
in Federal or other funds immediately available in New York City, to the
Administrative Agent at its address specified in or pursuant to Section 9.01.
The Administrative Agent will promptly distribute to each Lender its ratable
share of each such payment received by the Administrative Agent for the account
of the Lenders. Whenever any payment of principal of, or interest on, the Base
Rate Loans or any payment of fees shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Borrower notifies the Administrative Agent before the
date on which any payment is due to the Lenders hereunder that the Borrower will
not make such payment in full, the Administrative Agent may assume that the
Borrower has made such payment in full to the Administrative Agent on such date
and the Administrative Agent may, in reliance on such assumption, cause to be
distributed to each Lender on such due date an amount equal to the amount then
due such Lender. If and to the extent that the Borrower shall not have so made
such payment, each Lender shall repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender together with interest thereon,
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for each day from the date such amount is distributed to such Lender until the
date such Lender repays such amount to the Administrative Agent, at the Federal
Funds Rate.
SECTION 2.10. FUNDING LOSSES. If the Borrower makes any payment of
principal with respect to any Euro-Dollar Loan or any Fixed Rate Loan is
converted to a different type of Loan (whether such payment or conversion is
pursuant to Article 2, 6 or 8 or otherwise) on any day other than the last day
of an Interest Period applicable thereto, or the last day of an applicable
period fixed pursuant to Section 2.04(c), or if the Borrower fails to borrow,
prepay, convert or continue any Euro-Dollar Loan after notice has been given to
any Lender in accordance with Section 2.02(b), 2.05(c) or 2.08(b), the Borrower
shall reimburse each Lender within 15 days after demand for any resulting loss
or expense incurred by it (or by an existing or prospective Participant in the
related Loan), including (without limitation) any loss incurred in obtaining,
liquidating or employing deposits from third parties, but excluding loss of
margin for the period after such payment or conversion or failure to borrow,
prepay, convert or continue; provided that such Lender shall have delivered to
the Borrower a certificate as to the amount of such loss or expense, which
certificate shall be conclusive in the absence of manifest error.
SECTION 2.11. COMPUTATION OF INTEREST AND FEES. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
fees shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
SECTION 2.12. NOTES. (a) The Borrower's obligation to repay the Loans
made to it by each Lender shall be evidenced by a single Note payable to the
order of such Lender for the account of its Applicable Lending Office.
(b) Each Lender may, by notice to the Borrower and the Administrative
Agent, request that the Borrower's obligation to repay such Lender's Loans of a
particular type be evidenced by a separate Note. Each such Note shall be in
substantially the form of Exhibit A hereto with appropriate modifications to
reflect the fact that it relates solely to Loans of the relevant type. Each
reference in this Agreement to the "NOTE" of such Lender shall be deemed to
refer to and include any or all of such Notes, as the context may require.
(c) Promptly after it receives each Lender's Note pursuant to Section
3.01(a), the Administrative Agent shall forward such Note to such Lender. Each
Lender shall record the date and amount of each Loan made by it and the date and
amount of each payment of principal made with respect thereto, and may, if such
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Lender so elects in connection with any transfer or enforcement of its Note,
endorse on the schedule forming a part thereof appropriate notations to evidence
the foregoing information with respect to each such Loan then outstanding;
provided that a Lender's failure to make (or any error in making) any such
recordation or endorsement shall not affect the Borrower's obligations hereunder
or under its Notes. Each Lender is hereby irrevocably authorized by the Borrower
so to endorse its Note and to attach to and make a part of its Note a
continuation of any such schedule as and when required.
SECTION 2.13. REGULATION D COMPENSATION. If and so long as a reserve
requirement of the type described in the definition of "Euro-Dollar Reserve
Percentage" is prescribed by the Board of Governors of the Federal Reserve
System (or any successor), each Lender subject to such requirement may require
the Borrower to pay, contemporaneously with each payment of interest on each of
such Lender's Loans, additional interest on such Loan at a rate per annum
determined by such Lender up to but not exceeding the excess of (i) (A) the
applicable London Interbank Offered Rate divided by (B) one minus the
Euro-Dollar Reserve Percentage over (ii) the applicable London Interbank Offered
Rate. Any Lender wishing to require payment of such additional interest (x)
shall so notify the Borrower and the Administrative Agent, in which case such
additional interest on the Loans of such Lender shall be payable to such Lender
at the place indicated in such notice with respect to each Interest Period
commencing at least three Business Days after such Lender gives such notice and
(y) shall notify the Borrower at least five Business Days before each date on
which interest is payable on its Loans of the amount then due to such Lender
under this Section.
ARTICLE 3
CONDITIONS
SECTION 3.01. CLOSING. The closing hereunder shall occur when all the
following conditions have been satisfied:
(a) the Administrative Agent shall have received a duly
executed Note for the account of each Lender dated on or before the
Closing Date and complying with the provisions of Section 2.12;
(b) the Administrative Agent shall have received an opinion in
form and substance satisfactory to it of counsel for the Borrower
satisfactory to it, dated the Closing Date and covering such matters
relating to the transactions contemplated hereby as the Administrative
Agent or the Required Lenders may reasonably request;
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(c) the Administrative Agent shall have received an opinion in
form and substance satisfactory to it of Davis Polk & Wardwell, special
counsel for the Administrative Agent, dated the Closing Date and
covering such matters relating to the transactions contemplated hereby
as the Administrative Agent or Required Lenders may reasonably request;
and
(d) the Administrative Agent shall have received all documents
the Administrative Agent may reasonably request relating to the
existence of the Borrower, its corporate authority for and the validity
of this Agreement and its Notes, and any other matters relevant hereto,
all in form and substance satisfactory to the Administrative Agent.
Promptly after the Closing Date occurs, the Administrative Agent shall notify
the Borrower and the Lenders thereof, and such notice shall be conclusive and
binding on all parties hereto.
SECTION 3.02. BORROWINGS TO FINANCE ACQUISITION OF TARGET SHARES
PURSUANT TO OFFER. The obligation of any Lender to make a Loan on the occasion
of any Borrowing for the purposes (and only for the purposes) of financing the
acquisition of Target Shares pursuant to the Offer and the Completion Procedures
is subject to the following conditions:
(a) the Closing Date shall have occurred on or before August
26, 1998;
(b) the Administrative Agent shall have received a Notice of
Borrowing as required by Section 2.02;
(c) immediately before and after such Borrowing, no Event of
Default described in clause (g) or (h) of Section 6.01 shall have
occurred and be continuing;
(d) the representations and warranties of the Borrower set
forth in Sections 4.01, 4.02 and 4.03 shall be true on and as of the
date of such Borrowing; and
(e) the Offer shall have been declared unconditional in all
respects and the Agent shall have received a certified copy of the
announcement to such effect.
Each Borrowing described in this Section shall be deemed to be a representation
and warranty by the Borrower on the date of such Borrowing as to the facts
specified in the foregoing clauses 3.02(c) through 3.02(g), inclusive.
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SECTION 3.03. OTHER BORROWINGS. The obligation of any Lender to make a
Loan on the occasion of any Borrowing for a purpose other than those specified
in Section 3.02 is subject to the satisfaction of the following conditions:
(a) the fact that the Closing Date shall have occurred on or
before August 26, 1998;
(b) receipt by the Administrative Agent of a Notice of
Borrowing as required by Section 2.02;
(c) the fact that, immediately before and after such
Borrowing, no Default shall have occurred and be continuing; and
(d) the fact that the representations and warranties of the
Borrower contained in this Agreement (except, in the case of any
Borrowing made on a date subsequent to the Closing Date, the
representation and warranty set forth in Section 4.04(c)) shall be true
on and as of the date of such Borrowing.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in the
foregoing clauses 3.03(c) and 3.03(d).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. CORPORATE EXISTENCE AND POWER. The Borrower (a) is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation and (b) has all corporate powers and
all material governmental licenses, consents, authorizations and approvals
required to carry on its business as now conducted.
SECTION 4.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO
CONTRAVENTION. The execution, delivery and performance by the Borrower of this
Agreement and the Notes are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the Borrower's certificate of incorporation or by-laws or of
any agreement, judgment, injunction, order, decree or other instrument binding
upon
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the Borrower or any Material Subsidiary or result in the creation or imposition
of any Lien on any asset of the Borrower or any Material Subsidiary.
SECTION 4.03. BINDING EFFECT. This Agreement constitutes a valid and
binding agreement of the Borrower and each Note, when executed and delivered in
accordance with this Agreement, will constitute a valid and binding obligation
of the Borrower, in each case enforceable in accordance with its terms, subject
to applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally and general principles of equity.
SECTION 4.04. FINANCIAL INFORMATION. (a) The consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries as of December 31, 1997 and
the related consolidated statements of income, cash flows and stockholders'
equity for the Fiscal Year then ended, reported on by Deloitte & Touche LLP and
set forth in the Borrower's 1997 Form 10-K, fairly present, in conformity with
GAAP, the consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of such date and their consolidated results of operations and
cash flows for such Fiscal Year.
(b) The unaudited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of June 30, 1998 and the related unaudited
consolidated statements of income, cash flows and stockholders' equity for the
six months then ended, set forth in the Borrower's Latest Form 10-Q, fairly
present, on a basis consistent with the financial statements referred to in
Section 4.04(a), the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such six month period (subject to normal year-end
adjustments).
(c) Since June 30, 1998 there has been no material adverse change in
the business, financial position, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.05. LITIGATION. There is no action, suit or proceeding
pending against, or to the Borrower's knowledge threatened against or affecting,
the Borrower or any Subsidiary before any court or arbitrator or any
governmental body, agency or official in which there is a reasonable probability
of an adverse decision which would have a Material Adverse Effect (except as
disclosed in writing to the Lenders prior to the execution and delivery of this
Agreement by any Lender, including pursuant to the Borrower's 1997 Form 10-K and
the Borrower's Latest Form 10-Q) or which in any manner draws into question the
validity or enforceability of this Agreement or the Notes.
SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of
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ERISA and the Internal Revenue Code with respect to each Plan and is in
compliance in all material respects with the presently applicable provisions of
ERISA and the Internal Revenue Code with respect to each Plan. No member of the
ERISA Group has (i) sought a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to
make any contribution or payment to any Plan or Multiemployer Plan, or made any
amendment to any Plan, which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Internal
Revenue Code or (iii) incurred any liability under Title IV of ERISA other than
a liability to the PBGC for premiums under Section 4007 of ERISA.
SECTION 4.07. TAXES. The Borrower and its Material Subsidiaries have
filed all material tax returns which are required to be filed by them and have
paid all taxes due pursuant to such returns. The charges, accruals and reserves
on the books of the Borrower and its Material Subsidiaries in respect of taxes
or other governmental charges are, in the Borrower's opinion, adequate.
SECTION 4.08. SUBSIDIARIES. Each of the Borrower's Material
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
SECTION 4.09. NO REGULATORY RESTRICTIONS ON BORROWING. The Borrower is
not subject to any regulatory scheme not applicable to corporations generally
which restricts its ability to incur debt.
SECTION 4.10. FULL DISCLOSURE. All information heretofore furnished by
the Borrower to the Administrative Agent or any Lender for purposes of or in
connection with this Agreement or any transaction contemplated hereby is, and
all such information hereafter furnished by the Borrower to the Administrative
Agent or any Lender will be, true and accurate in all material respects on the
date as of which such information is stated or certified. The Borrower has
disclosed to the Lenders in writing any and all facts which materially and
adversely affect, or may affect (to the extent the Borrower can now reasonably
foresee), the business, operations or financial condition of the Borrower and
its Consolidated Subsidiaries, taken as a whole, or the Borrower's ability to
perform its obligations under this Agreement.
SECTION 4.11. MORTGAGE. The Mortgage has not been amended or
supplemented and no waiver of compliance with any provision thereof has been
granted by any Person since May 15, 1991. No payment default by the mortgagor
(whether cured or waived or not) has occurred under the Mortgage. The Mortgage
Memorandum, a copy of which has been delivered to each of the
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Lenders, does not (i) contain any untrue statement of a material fact or (ii)
omit to state any material fact relating to the circumstances under which the
obligations of the Borrower or other mortgagors may become recourse with respect
to assets other than the Mortgaged Property.
SECTION 4.12. YEAR 2000 COMPLIANCE. The Borrower has (i) initiated a
review and assessment of all areas within the business and operations of the
Borrower and each of its Subsidiaries (including those areas affected by
suppliers and vendors) that could be adversely affected by the "Year 2000
Problem" (that is, the risk that computer applications used by it or any of its
Subsidiaries (or their respective suppliers and vendors) may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999), (ii) developed a plan and
timeline for addressing the Year 2000 Problem on a timely basis and (iii) to
date, implemented such plan in accordance with such timetable. The Borrower
reasonably believes that all computer applications (including those of suppliers
and vendors) that are material to the business or operations of the Borrower or
any of its Subsidiaries will on a timely basis be able to perform properly
date-sensitive functions for all dates before and from and after January 1, 2000
(that is, be "Year 2000 compliant"), except to the extent that a failure to do
so could not reasonably be expected to have a Material Adverse Effect.
ARTICLE 5
COVENANTS
The Borrower agrees that, so long as any Lender has any Credit Exposure
hereunder or any interest or fees accrued hereunder remain unpaid:
SECTION 5.01. INFORMATION. The Borrower will deliver to each of the
Lenders:
(a) as soon as available and in any event within 120 days
after the end of each Fiscal Year, a consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of the end of such Fiscal
Year and the related consolidated statements of income, cash flows and
stockholders' equity for such Fiscal Year, setting forth in each case
in comparative form the figures for the previous Fiscal Year, all
reported on in a manner acceptable to the SEC by Deloitte & Touche LLP
or other independent public accountants of nationally recognized
standing (it being understood that delivery of the Borrower's annual
report on Form 10-K for any Fiscal Year as filed with the SEC pursuant
to the Exchange Act will satisfy this requirement with respect to such
Fiscal Year);
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(b) as soon as available and in any event within 60 days after
the end of each of the first three Fiscal Quarters of each Fiscal Year,
a consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of the end of such Fiscal Quarter, the related
consolidated statement of income for such Fiscal Quarter and the
related consolidated statements of income and cash flows for the
portion of the Fiscal Year ended at the end of such Fiscal Quarter,
setting forth in the case of each such statement of income or cash
flows in comparative form the figures for the corresponding period in
the previous Fiscal Year, all certified (subject to normal year-end
adjustments) as to fairness of presentation and consistency with GAAP
by the Borrower's chief financial officer, treasurer or chief
accounting officer (it being understood that delivery of the Borrower's
quarterly report on Form 10-Q for any Fiscal Quarter as filed with the
SEC pursuant to the Exchange Act will satisfy this requirement with
respect to such Fiscal Quarter and, if applicable, the portion of the
Borrower's Fiscal Year ended at the end of such Fiscal Quarter);
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses 5.01(a) and 5.01(b) above, a
certificate of the Borrower's chief financial officer, treasurer or
chief accounting officer (i) setting forth in reasonable detail the
calculations required to establish whether the Borrower was in
compliance with the requirements of Sections 5.04 and 5.07 on the date
of such financial statements and (ii) stating whether any Default
exists on the date of such certificate and, if any Default then exists,
setting forth the details thereof and the action which the Borrower is
taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause 5.01(a) above, a statement of the firm
of independent public accountants which reported on such statements (i)
whether anything has come to their attention to cause them to believe
that the Borrower was not in compliance with any covenant or agreement
contained in this Article 5 insofar as such covenant or agreement
pertains to accounting or auditing matters or that any Event of Default
under Article 6 which pertains to accounting or auditing matters
existed on the date of such financial statements (it being understood
that such firm may state in such statement that its examination of such
financial statements was not directed primarily towards obtaining
knowledge of any such non-compliance or Event of Default) and (ii)
confirming the calculations set forth in the officer's certificate
delivered simultaneously therewith pursuant to clause 5.01(c) above;
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(e) forthwith (i) upon the occurrence of any Default, (ii) in
the event that Consolidated Net Worth falls below $2,500,000,000 or
(iii) in the event that either the Debt evidenced by the Secured Notes
or interest thereon is payable other than solely from the Mortgaged
Property, a certificate of the chief financial officer, the treasurer
or the chief accounting officer of the Borrower setting forth the
details thereof and, with respect to clause (i) above, the action which
the Borrower is taking or proposes to take with respect thereto and,
with respect to clause (iii) above, the nature of the assets, and the
amount of liabilities and other details fully explaining the recourse
nature of the obligations of the Borrower or any other mortgagor or
Subsidiary and updating the Mortgage Memorandum to reflect the
conditions relating to the Mortgage existing on the date of such
certificate;
(f) promptly after the mailing thereof to the Borrower's
shareholders generally, copies of all financial statements, reports and
proxy statements so mailed;
(g) promptly after the filing thereof, copies of all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and reports on
Forms 10-K, 10-Q and 8-K (or their equivalents) filed by the Borrower
with the SEC;
(h) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as
defined in Section 4043 of ERISA) with respect to any Plan which might
constitute grounds for a termination of such Plan under Title IV of
ERISA, or knows that the plan administrator of any Plan has given or is
required to give notice of any such reportable event, a copy of the
notice of such reportable event given or required to be given to the
PBGC; (ii) receives notice of complete or partial withdrawal liability
under Title IV of ERISA or notice that any Multiemployer Plan is in
reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of
an intent to terminate, impose liability (other than for premiums under
Section 4007 of ERISA) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice; (iv) applies for a waiver
of the minimum funding standard under Section 412 of the Internal
Revenue Code, a copy of such application; (v) gives notice of intent to
terminate any Plan under Section 4041(c) of ERISA, a copy of such
notice and other information filed with the PBGC; (vi) gives notice of
withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of
such notice; or (vii) fails to make any payment or contribution to any
Plan or Multiemployer Plan or makes any amendment to any Plan which has
resulted or could result in the imposition of a Lien or the posting of
a
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bond or other security, a certificate of the Borrower's chief financial
officer or chief accounting officer setting forth details as to such
occurrence and the action, if any, which the Borrower or applicable
member of the ERISA Group is required or proposes to take;
(i) promptly after any change in the Borrower's commercial
paper rating by S&P or Moody's (as defined in the Pricing Schedule), a
notice thereof; and
(j) from time to time such additional information regarding
the financial position or business of the Borrower and its Subsidiaries
as the Administrative Agent, at the request of any Lender, may
reasonably request.
In the case of information required to be delivered pursuant to clauses 5.01(a),
5.01(b), 5.01(f) or 5.01(g) above, either (i) the Borrower shall deliver paper
copies of such information to each Lender, or (ii) such information shall be
deemed to have been delivered on the date on which the Borrower provides notice
to the Lenders that such information has been posted on the Borrower's website
on the Internet at the website address listed on the signature pages hereof, at
sec.gov/edaux/searches.htm or at another website identified in such notice and
accessible by the Lenders without charge; provided that (x) such notice may be
included in a certificate delivered pursuant to clause 5.01(c) and (y) the
Borrower shall deliver paper copies of the information referred to in clauses
5.01(a), 5.01(b), 5.01(f) or 5.01(g) to any Lender which requests such delivery.
5.02. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The Borrower
will continue, and will cause its Material Subsidiaries to continue, to engage
in business of the same general type as now conducted by the Borrower and its
Material Subsidiaries, and will preserve, renew and keep in full force and
effect, and will cause each Material Subsidiary to preserve, renew and keep in
full force and effect their respective existences and their respective rights,
privileges and franchises necessary or desirable in the normal conduct of
business; provided that nothing in this Section 5.02 shall prohibit (i) the
merger of a Subsidiary into the Borrower or the merger or consolidation of a
Subsidiary with or into another Person if the corporation surviving such
consolidation or merger is a Subsidiary and if, in each case, after giving
effect thereto, no Default shall have occurred and be continuing, (ii) the
termination of the corporate existence of any Material Subsidiary if the
Borrower in good faith determines that such termination is in the best interests
of the Borrower and is not materially disadvantageous to the Lenders and (iii)
the discontinuance of the business of any Material Subsidiary if the Borrower in
good faith determines that such discontinuance is in the best interest of the
Borrower and is not materially disadvantageous to the Lenders.
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5.03. COMPLIANCE WITH THE LAWS. The Borrower will comply, and cause
each Material Subsidiary to comply, in all material respects with all applicable
laws, ordinances, rules, regulations, and requirements of governmental
authorities (including, without limitation, Environmental Laws and ERISA and the
rules and regulations thereunder) except where (i) the necessity of compliance
therewith is contested in good faith by appropriate proceedings or (ii)
non-compliance therewith would not have a Material Adverse Effect.
SECTION 5.04. MINIMUM CONSOLIDATED NET WORTH; CONSOLIDATED DEBT
SECTION. If the Consolidated Net Worth of the Borrower is less than
$2,500,000,000 at the end of any Fiscal Quarter, then the ratio of (x) Operating
Cash Flow to (y) Consolidated Debt shall be no less than .25 to 1 as of the end
of such Fiscal Quarter; provided that, for purposes of this Section,
Consolidated Debt shall not include (i) the Secured Notes if and so long as (1)
neither the Debt evidenced by the Secured Notes nor interest thereon is payable
other than solely from the Mortgaged Property and (2) the principal amount of
the Secured Notes is not increased and (ii) Debt of the Borrower in an aggregate
principal amount not to exceed $200,000,000 incurred for the purpose of funding
an employee stock ownership plan as defined in Section 4975(e)(7) of the
Internal Revenue Code sponsored by the Borrower.
SECTION 5.05. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. The
Borrower will not (i) consolidate or merge with or into any other Person or (ii)
sell, lease or otherwise transfer all or substantially all of its assets to any
other Person; provided that (x) the Borrower may merge with any Wholly-Owned
Consolidated Subsidiary if immediately after such merger no Default shall have
occurred and be continuing and such Wholly-Owned Consolidated Subsidiary shall
expressly assume in writing all of the obligations of the Borrower hereunder,
(y) the Borrower may merge with any other Person if (A) the Borrower is the
corporation surviving such merger and (B) immediately after giving effect to
such merger, no Default shall have occurred and be continuing and (z) the
Borrower may sell, transfer or otherwise dispose of Margin Stock for fair value.
SECTION 5.06. USE OF PROCEEDS. The proceeds of the Loans made under
this Agreement will be used by the Borrower (i) to finance the acquisition of
Target Shares pursuant to the Offer and the Completion Procedures, (ii) to repay
other Debt incurred to finance the acquisition of Target Shares pursuant to the
Offer and the Completion Procedures, (iii) to finance open market or privately
negotiated purchases of Target Shares while the Offer is continuing, up to an
aggregate amount not exceeding $225,000,000, (iv) to refinance certain Debt of
Target and to pay fees and (v) expenses in connection with the transactions
contemplated hereby. None of such proceeds will be used, directly or indirectly,
in violation of Regulation U or X.
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SECTION 5.07. NEGATIVE PLEDGE. Neither the Borrower nor any
Consolidated Subsidiary will create, assume or suffer to exist any Lien on any
asset now owned or thereafter acquired by it, except:
(a) Liens existing on the Mortgaged Property;
(b) Liens existing on the date of this Agreement securing Debt
outstanding on the date of this Agreement in an aggregate principal or face
amount not exceeding $50,000,000;
(c) any Lien existing on any asset of any corporation at the time such
corporation becomes a Consolidated Subsidiary and not created in contemplation
of such event;
(d) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such asset,
provided that such Lien attaches to such asset concurrently with or within 90
days after the acquisition thereof;
(e) any Lien on any asset of any corporation existing at the time such
corporation is merged or consolidated with or into the Borrower or a
Consolidated Subsidiary and not created in contemplation of such event;
(f) any Lien existing on any asset prior to the acquisition thereof by
the Borrower or a Consolidated Subsidiary and not created in contemplation of
such acquisition;
(g) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, provided that such Debt is not increased and is not
secured by any additional assets;
(h) Liens arising in the ordinary course of its business which (i) do
not secure Debt or Derivatives Obligations, (ii) do not secure, in the case of
judgments or orders, obligations in an aggregate amount exceeding $50,000,000
and (iii) do not in the aggregate materially detract from the value of its
assets or materially impair the use thereof in the operation of its business;
(i) Liens on cash and cash equivalents securing Derivatives
Obligations, provided that the aggregate amount of cash and cash equivalents
subject to such Liens may at no time exceed $50,000,000 and provided further
that the sum of (x) such aggregate amount and (y) the aggregate amount of Debt
secured as permitted by clause (k) below does not at any date exceed 20% of
Consolidated Tangible Net Worth;
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(j) Liens on Margin Stock, if and to the extent that the value of such
Margin Stock exceeds 25% of the total assets of the Borrower and its
Consolidated Subsidiaries subject to this Section; and
(k) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt, provided that the sum of (x) the principal or face amount
of such Debt and (y) the aggregate amount of cash and cash equivalents referred
to in clause (i) above does not at any date exceed 20% of Consolidated Tangible
Net Worth.
SECTION 5.08. AMENDMENT OF MORTGAGE. No amendment of, or supplement to,
the Mortgage with respect to the Mortgaged Property shall be made which could
reasonably be expected to have an adverse effect on the interests of the Lenders
hereunder.
SECTION 5.09. TAXES, ETC. The Borrower will, and will cause each of its
Material Subsidiaries to:
(a) pay and discharge all taxes, assessments and governmental charges
or levies imposed on it or on its income or profits or on any of its property
prior to the date on which penalties attach thereto, except for any such tax,
assessment, charge or levy the payment of which is being contested in good faith
and by proper proceedings and against which adequate reserves are being
maintained or the nonpayment of which would not have Material Adverse Effect;
(b) keep adequate records and books of account, in which complete
entries will be made in accordance with GAAP; and
(c) permit representatives of any Lender or the Administrative Agent,
during normal business hours, to examine, copy and make extracts from its books
and records, to inspect any of its properties, and to discuss its business and
affairs with its officers, all to the extent reasonably requested by such Lender
or the Administrative Agent (as the case may be).
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ARTICLE 6
DEFAULTS
SECTION 6.01. EVENTS OF DEFAULT. If one or more of the following events
("EVENTS OF DEFAULT") shall have occurred and be continuing:
(a) the Borrower shall fail to pay any principal of any Loan
when due or shall fail to pay within five days of the due date any
interest, fee or other amount payable by it hereunder;
(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 5.04 through 5.08, inclusive;
(c) the Borrower shall fail to observe or perform any covenant
or agreement (other than those covered by clause 6.01(a) or 6.01(b)
above) contained in this Agreement or any amendment hereof for 10 days
after the Administrative Agent gives notice thereof to the Borrower at
the request of any Lender;
(d) any representation, warranty, certification or statement
made (or deemed made) by the Borrower in this Agreement or any
amendment hereof or in any certificate, financial statement or other
document delivered pursuant to this Agreement shall prove to have been
incorrect in any material respect when made (or deemed made);
(e) the Borrower or any Subsidiary shall fail to make any
payment in respect of Material Financial Obligations (other than the
Secured Notes, but only so long as the Secured Notes do not constitute
Consolidated Debt for the purposes of Section 5.04) when due or within
any applicable grace period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt (other than the
Secured Notes, but only so long as the Secured Notes do not constitute
Consolidated Debt for the purposes of Section 5.04) or enables (or,
with the giving of notice or lapse of time or both, would enable) the
holder of such Debt or any Person acting on such holder's behalf to
accelerate the maturity thereof;
(g) the Borrower or any Subsidiary holding, as of the date of
the most recent audited financial statements of the Borrower and its
Consolidated Subsidiaries delivered pursuant to this Agreement, assets
have a book value in excess of $10,000,000, shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other
relief
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with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar official
of it or any substantial part of its property, or shall consent to any
such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against
it, or shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due, or shall take
any corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against the Borrower or any Subsidiary holding, as of the date of the
most recent audited financial statements of the Borrower and its
Consolidated Subsidiaries delivered pursuant to this Agreement, assets
having a book value in excess of $10,000,000 seeking liquidation,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of 60 days; or an order
for relief shall be entered against the Borrower or any Subsidiary
holding, as of the date of the most recent audited financial statements
of the Borrower and its Consolidated Subsidiaries delivered pursuant to
this Agreement, assets having a book value in excess of $10,000,000
under the federal bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due
an amount or amounts aggregating in excess of $10,000,000 which it
shall have become liable to pay under Title IV of ERISA; or notice of
intent to terminate a Material Plan shall be filed under Title IV of
ERISA by any member of the ERISA Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate, to impose liability (other than
for premiums under Section 4007 of ERISA) in respect of, or to cause a
trustee to be appointed to administer, any Material Plan; or a
condition shall exist by reason of which the PBGC would be entitled to
obtain a decree adjudicating that any Material Plan must be terminated;
or there shall occur a complete or partial withdrawal from, or a
default, within the meaning of Section 4219(c)(5) of ERISA, with
respect to, one or more Multiemployer Plans which could reasonably be
expected to cause one or more members of the ERISA Group to incur a
current payment obligation in excess of $15,000,000;
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(j) judgments or orders for the payment of money exceeding
$50,000,000 in aggregate amount shall be rendered against the Borrower
or any Subsidiary and such judgments or orders shall continue
unsatisfied and unstayed for a period of 30 days;
(k) any person or group of persons (within the meaning of
Section 13 or 14 of the Exchange Act) other than the Borrower, any
trustee or other fiduciary holding securities under an employee benefit
plan of the Borrower, or any corporation owned, directly or indirectly,
by the stockholders of the Borrower in substantially the same
proportions as their ownership of stock in the Borrower, shall have
acquired beneficial ownership (within the meaning of Rule 13d-3
promulgated by the SEC under the Exchange Act) of 50% or more of the
combined voting power of the Borrower's then outstanding securities;
or, during any period of 24 consecutive calendar months, individuals
who were directors of the Borrower on the first day of such period and
any new director whose election by the board of directors of the
Borrower or nomination for election by the Borrower's stockholders was
approved by a vote of at least two-thirds of the directors then still
in office who either were directors at the beginning of such period or
whose election or nomination for election was previously so approved,
shall cease to constitute a majority of the board of directors of the
Borrower; or
(l) the Borrower shall repudiate, or shall challenge the
validity or enforceability of, its obligations under Article 9 or a
court of competent jurisdiction shall have determined that such
obligations are invalid or unenforceable;
then, and in every such event, the Administrative Agent shall:
(i) if requested by Lenders having more than 50% in aggregate
amount of the Commitments, by notice to the Borrower terminate the
Commitments or reduce the Commitments ratably to an aggregate amount
specified in such notice, whereupon the Commitments shall be so
terminated or reduced forthwith; provided that, until either all Target
Shares have been acquired pursuant to the Offer and the Completion
Procedures or the Offer Termination Date has occurred, the Commitments
shall not be terminated pursuant to this clause (i) or reduced pursuant
to this clause (i) to an aggregate amount less than the maximum
aggregate amount from time to time remaining to be paid (on the
assumption that all outstanding Target Shares will be acquired) to
accepting shareholders pursuant to the Offer and the Completion
Procedures; and
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(ii) if requested by Lenders holding more than 50% of the
aggregate unpaid principal amount of the Loans, by notice to the
Borrower declare the Loans (together with accrued interest thereon) to
be, and the Loans (together with accrued interest thereon) shall
thereupon become, immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby
waived by the Borrower;
provided that, if any Event of Default specified in clause (g) or (h) of this
Section occurs with respect to the Borrower, then without any notice to the
Borrower or any other act by the Administrative Agent or the Lenders, the
Commitments shall thereupon terminate and the Loans (together with accrued
interest thereon) shall become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower. Except as provided in the foregoing proviso, neither the
Administrative Agent nor any Lender shall, at any time before the Offer
Termination Date, be entitled to (i) enjoin the funding of the Offer, (ii)
exercise any right of rescission or set-off or similar right or (iii) attempt in
any other manner to obtain payment from funds drawn hereunder to fund the Offer
and the Completion Procedures, in each case if and to the extent that to do so
would prevent the funding of the Offer and the Completion Procedures as
contemplated hereby upon satisfaction of the conditions set forth in Section
3.02.
SECTION 6.02. NOTICE OF DEFAULT. The Administrative Agent shall give
notice to the Borrower under Section 6.01(c) promptly upon being requested to do
so by any Lender and shall thereupon notify all the Lenders thereof.
ARTICLE 7
THE AGENTS
SECTION 7.01. APPOINTMENT AND AUTHORIZATION. Each Lender irrevocably
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement as are delegated to
the Administrative Agent by the terms hereof or thereof, together with all such
powers as are reasonably incidental thereto.
SECTION 7.02. ADMINISTRATIVE AGENT AND AFFILIATES. The Administrative
Agent shall have the same rights and powers under this Agreement as any other
Lender and may exercise or refrain from exercising the same as though it were
not the Administrative Agent, and Morgan Guaranty Trust Company of New York and
its affiliates may accept deposits from, lend money to and generally engage in
any kind of business with the Borrower or any Subsidiary or affiliate of the
Borrower as if it were not the Administrative Agent.
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SECTION 7.03. ACTION BY ADMINISTRATIVE AGENT. The obligations of the
Administrative Agent hereunder are only those expressly set forth herein.
Without limiting the generality of the foregoing, the Administrative Agent shall
not be required to take any action with respect to any Default, except as
expressly provided in Article 6.
SECTION 7.04. CONSULTATION WITH EXPERTS. The Administrative Agent may
consult with legal counsel (who may be counsel for the Borrower), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.
SECTION 7.05. LIABILITY OF ADMINISTRATIVE AGENT. None of the
Administrative Agent, its affiliates and their respective directors, officers,
agents and employees shall be liable for any action taken or not taken by it in
connection herewith (i) with the consent or at the request of the Required
Lenders (or such different number of Lenders as any provision hereof expressly
requires for such consent or request) or (ii) in the absence of its own gross
negligence or willful misconduct. None of the Administrative Agent, its
affiliates and their respective directors, officers, agents and employees shall
be responsible for or have any duty to ascertain, inquire into or verify (i) any
statement, warranty or representation made in connection with this Agreement or
any borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of the Borrower; (iii) the satisfaction of any condition
specified in Article 3 except, in the case of the Administrative Agent, receipt
of items required to be delivered to it; or (iv) the validity, effectiveness or
genuineness of this Agreement, the Notes or any other instrument or writing
furnished in connection herewith. The Administrative Agent shall not incur any
liability by acting in reliance upon any notice, consent, certificate, statement
or other writing (which may be a bank wire, telex, facsimile or similar writing)
believed by it to be genuine or to be signed by the proper party or parties.
Without limiting the generality of the foregoing, the use of the term "agent" in
this Agreement with reference to the Administrative Agent is not intended to
connote any fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable law. Instead, such term is used merely as a
matter of market custom and is intended to create or reflect only an
administrative relationship between independent contracting parties.
SECTION 7.06. INDEMNIFICATION. The Lenders shall, ratably in proportion
to their Credit Exposures, indemnify the Administrative Agent, its affiliates
and their respective directors, officers, agents and employees (to the extent
not reimbursed by the Borrower) against any cost, expense (including counsel
fees and disbursements), claim, demand, action, loss or liability (except such
as result from such indemnitees' gross negligence or willful misconduct) that
such
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indemnitees may suffer or incur in connection with this Agreement or any action
taken or omitted by such indemnitees hereunder.
SECTION 7.07. CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance on any other Lender Party, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance on any other
Lender Party, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under this Agreement.
SECTION 7.08. SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent
may resign at any time by giving notice thereof to the Lenders and the Borrower.
Upon any such resignation, the Required Lenders shall have the right to appoint
a successor Administrative Agent, subject to the approval of such successor
Administrative Agent by the Borrower. If no successor Administrative Agent shall
have been so appointed by the Required Lenders and approved by the Borrower, and
shall have accepted such appointment, within 30 days after the retiring
Administrative Agent gives notice of resignation, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent, which shall be a commercial bank organized or licensed
under the laws of the United States or of any State thereof and having a
combined capital and surplus of at least $100,000,000. Upon the acceptance of
its appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become
vested with all the rights and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After any retiring Administrative Agent resigns as
Administrative Agent hereunder, the provisions of this Article shall inure to
its benefit as to actions taken or omitted to be taken by it while it was
Administrative Agent.
SECTION 7.09. ADMINISTRATIVE AGENT'S FEE. The Borrower shall pay to the
Administrative Agent for its own account fees in the amounts and at the times
previously agreed upon by the Borrower and the Administrative Agent.
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ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR.
If on or before the first day of any Interest Period for any Euro-Dollar Loans:
(a) the Administrative Agent is advised by the Reference
Lenders that deposits in Dollars in the applicable amounts are not
being offered to the Reference Lenders in the London interbank market
for such Interest Period, or
(b) Lenders having at least 50% in aggregate amount of the
Commitments advise the Administrative Agent that the London Interbank
Offered Rate as determined by the Administrative Agent will not
adequately and fairly reflect the cost to such Lenders of funding their
Euro-Dollar Loans for such Interest Period,
the Administrative Agent shall forthwith give notice thereof to the Borrower and
the Lenders, whereupon until the Administrative Agent notifies the Borrower and
the Lenders that the circumstances giving rise to such suspension no longer
exist, (i) the obligations of the Lenders to make Euro-Dollar Loans or to
continue or convert outstanding Loans as or into Euro-Dollar Loans shall be
suspended and (ii) each outstanding Euro-Dollar Loan shall be converted into a
Base Rate Loan on the last day of the then current Interest Period applicable
thereto. Unless the Borrower notifies the Administrative Agent at least two
Domestic Business Days before the date of any affected Borrowing for which a
Notice of Borrowing has previously been given that it elects not to borrow on
such date, such Borrowing shall instead be made as a Base Rate Borrowing.
SECTION 8.02. ILLEGALITY. If, on or after the date hereof, the adoption
of any applicable law, rule or regulation, or any change in any applicable law,
rule or regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Lender
(or its Euro-Dollar Lending Office) with any request or directive (whether or
not having the force of law) of any such authority, central bank or comparable
agency, shall make it unlawful or impossible for any Lender (or its Euro-Dollar
Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Lender
shall so notify the Administrative Agent, the Administrative Agent shall
forthwith give notice thereof to the other Lenders and the Borrower, whereupon
until such Lender notifies the Borrower and the Administrative Agent that the
circumstances giving rise to such suspension no longer exist, the obligation of
such Lender to make Euro-Dollar Loans or to continue outstanding Loans to the
Borrower as Euro-
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Dollar Loans, shall be suspended. Before giving any notice to the Administrative
Agent pursuant to this Section, such Lender shall designate a different
Euro-Dollar Lending Office if such designation will avoid the need for giving
such notice and will not, in the judgment of such Lender, be otherwise
disadvantageous to such Lender. If such notice is given, each Euro-Dollar Loan
of such Lender then outstanding to the Borrower shall be converted to a Base
Rate Loan either (a) on the last day of the then current Interest Period
applicable to such Euro-Dollar Loan if such Lender may lawfully continue to
maintain and fund such Loan as a Euro-Dollar Loan to such day or (b) immediately
if such Lender shall determine that it may not lawfully continue to maintain and
fund such Loan as a Euro-Dollar Loan to such day. Interest and principal on any
such Base Rate Loan shall be payable on the same dates as, and on a pro rata
basis with, the interest and principal payable on the related Euro-Dollar Loans
of the other Lenders.
SECTION 8.03. INCREASED COST AND REDUCED RETURN. (a) If on or after the
date hereof, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender (or its Applicable Lending Office) with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency, shall impose, modify or deem
applicable any reserve (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System, but excluding
any such requirement with respect to which such Lender is entitled to
compensation during the relevant Interest Period under Section 2.13), special
deposit, insurance assessment or similar requirement against assets of, deposits
with or for the account of, or credit extended by, any Lender (or its Applicable
Lending Office) or shall impose on any Lender (or its Applicable Lending Office)
or the London interbank market any other condition affecting its Euro-Dollar
Loans, its Notes or its obligation to make Euro-Dollar Loans and the result of
any of the foregoing is to increase the cost to such Lender (or its Applicable
Lending Office) of making or maintaining any Euro-Dollar Loan, or to reduce the
amount of any sum received or receivable by such Lender (or its Applicable
Lending Office) under this Agreement or under its Note with respect thereto, by
an amount deemed by such Lender to be material, then, within 15 days after
demand by such Lender (with a copy to the Administrative Agent), the Borrower
shall pay to such Lender such additional amount or amounts as will compensate
such Lender for such increased cost or reduction.
(b) If any Lender shall have determined that, after the date hereof,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change in
the interpretation
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or administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
any request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on capital of such Lender
(or its Parent) as a consequence of such Lender's obligations hereunder to a
level below that which such Lender (or its Parent) could have achieved but for
such adoption, change, request or directive (taking into consideration its
policies with respect to capital adequacy) by an amount deemed by such Lender to
be material, then from time to time, within 15 days after demand by such Lender
(with a copy to the Administrative Agent), the Borrower shall pay to such Lender
such additional amount or amounts as will compensate such Lender (or its Parent)
for such reduction.
(c) Each Lender will promptly notify the Borrower and the
Administrative Agent of any event of which it has knowledge, occurring after the
date hereof, which will entitle such Lender to compensation pursuant to this
Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of such Lender, be otherwise disadvantageous to
it. A certificate of any Lender claiming compensation under this Section and
setting forth the additional amount or amounts to be paid to it hereunder shall
be conclusive in the absence of manifest error. In determining such amount, such
Lender may use any reasonable averaging and attribution methods.
SECTION 8.04. TAXES. (a) For the purposes of this Section, the
following terms have the following meanings:
"TAXES" means any and all present or future taxes or other charges
deducted, withheld or otherwise imposed with respect to any payment by the
Borrower pursuant to this Agreement or any Note, and all liabilities with
respect thereto, excluding with respect to each Lender Party: (i) taxes imposed
on its net income, and franchise or similar taxes imposed on it, by a
jurisdiction under the laws of which it is organized or in which its principal
executive office is located or in which its Applicable Lending Office is located
and (ii) any United States withholding tax imposed on such payment, but not
excluding any portion of such tax that exceeds the United States withholding tax
which would have been imposed on such a payment to such Lender Party under the
laws and treaties in effect when such Lender Party first becomes a party to this
Agreement.
"OTHER TAXES" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made pursuant to this Agreement or any Note or from the
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execution, delivery, registration or enforcement of, or otherwise with respect
to, this Agreement or any Note.
(b) All payments by the Borrower to or for the account of any Lender
Party hereunder or under any Note shall be made without deduction for any Taxes
or Other Taxes; provided that, if the Borrower shall be required by law to
deduct any Taxes or Other Taxes from any such payment, (i) the sum payable shall
be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section)
such Lender Party receives an amount equal to the sum it would have received had
no such deductions been made, (ii) the Borrower shall make such deductions,
(iii) the Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law and (iv) the
Borrower shall promptly furnish to the Administrative Agent, at its address
specified in or pursuant to Section 9.01, the original or a certified copy of a
receipt evidencing payment thereof.
(c) The Borrower agrees to indemnify each Lender Party for the full
amount of Taxes and Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed or asserted (whether or not correctly) by any jurisdiction
on amounts payable under this Section) paid by such Lender Party and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto. This indemnification shall be paid within 15 days after such
Lender Party makes demand therefor.
(d) Each Lender Party organized under the laws of a jurisdiction
outside the United States, before it signs and delivers this Agreement in the
case of each Lender Party listed on the signature pages hereof and before it
becomes a Lender Party in the case of each other Lender Party, and from time to
time thereafter if requested in writing by the Borrower (but only so long as
such Lender Party remains lawfully able to do so), shall provide the Borrower
and the Administrative Agent with Internal Revenue Service form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Lender Party is entitled to benefits under an income tax
treaty to which the United States is a party which exempts such Lender Party
from United States withholding tax or reduces the rate of withholding tax on
payments of interest for the account of such Lender Party or certifying that the
income receivable by it pursuant to this Agreement is effectively connected with
the conduct of a trade or business in the United States.
(e) For any period with respect to which a Lender Party has failed to
provide the Borrower or the Administrative Agent with the appropriate form
referred to in Section 8.04(d) (unless such failure is due to a change in
treaty, law or regulation occurring after the date on which such form originally
was required
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to be provided), such Lender Party shall not be entitled to indemnification
under Section 8.04(b) or 8.04(c) with respect to Taxes imposed by the United
States; provided that if a Lender Party, that is otherwise exempt from or
subject to a reduced rate of withholding tax, becomes subject to Taxes because
of its failure to deliver a form required hereunder, the Borrower shall take
such steps as such Lender Party shall reasonably request to assist such Lender
Party to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or for
the account of any Lender Party pursuant to this Section as a result of a change
in law or treaty occurring after such Lender Party first became a party to this
Agreement, then such Lender Party will, at the Borrower's request, change the
jurisdiction of its Applicable Lending Office if, in the judgment of such
Lender, such change (i) will eliminate or reduce any such additional payment
which may thereafter accrue and (ii) is not otherwise disadvantageous to such
Lender.
SECTION 8.05. BASE RATE LOANS SUBSTITUTED FOR AFFECTED EURO-DOLLAR
LOANS. If (i) the obligation of any Lender to make, or to continue or convert
outstanding Loans as or to, Euro-Dollar Loans has been suspended pursuant to
Section 8.02 or (ii) any Lender has demanded compensation under Section 8.03 or
8.04 with respect to its Euro-Dollar Loans, and in any such case the Borrower
shall, by at least five Euro-Dollar Business Days' prior notice to such Lender
through the Administrative Agent, have elected that the provisions of this
Section shall apply to such Lender, then, unless and until such Lender notifies
the Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer exist, all Loans which would otherwise be made by such
Lender as (or continued as or converted to) Euro-Dollar Loans shall instead be
Base Rate Loans on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans of the other Lenders. If
such Lender notifies the Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer exist, the principal amount of
each such Base Rate Loan shall be converted into a Euro-Dollar Loan on the first
day of the next succeeding Interest Period applicable to the related Euro-Dollar
Loans of the other Lenders.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. NOTICES. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telex,
facsimile or similar writing) and shall be given to such party: (a) in the case
of the Borrower or the Administrative Agent, at its address, facsimile number or
telex number set
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forth on the signature pages hereof, (b) in the case of any Lender, at its
address, facsimile number or telex number set forth in its Administrative
Questionnaire or (c) in the case of any party, at such other address, facsimile
number or telex number as such party may hereafter specify for the purpose by
notice to the Administrative Agent and the Borrower. Each such notice, request
or other communication shall be effective (i) if given by telex, when
transmitted to the telex number referred to in this Section and the appropriate
answerback is received, (ii) if given by facsimile, when transmitted to the
facsimile number referred to in this Section and confirmation of receipt is
received, (iii) if given by mail, 72 hours after such communication is deposited
in the mails with first class postage prepaid, addressed as aforesaid or (iv) if
given by any other means, when delivered at the address referred to in this
Section; provided that notices to the Administrative Agent under Article 2 or
Article 8 shall not be effective until received.
SECTION 9.02. NO WAIVERS. No failure or delay by any Lender Party in
exercising any right, power or privilege hereunder or under any Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.03. EXPENSES; INDEMNIFICATION. (a) The Borrower shall pay (i)
all out-of-pocket expenses of the Administrative Agent, including fees and
disbursements of special counsel for the Administrative Agent, in connection
with the preparation and administration of this Agreement, any waiver or consent
hereunder or any amendment hereof or any Default or alleged Default hereunder
and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by
each Lender Party, including (without duplication) the fees and disbursements of
outside counsel and the allocated cost of inside counsel, in connection with
such Event of Default and collection, bankruptcy, insolvency and other
enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify each Lender Party, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "INDEMNITEE") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in connection
with any investigative, administrative or judicial proceeding (whether or not
such Indemnitee shall be designated a party thereto) brought or threatened
relating to or arising out of this Agreement or any actual or proposed use of
proceeds of Loans hereunder; provided that no Indemnitee shall have the right to
be indemnified
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hereunder for such Indemnitee"s own gross negligence or willful misconduct as
determined by a court of competent jurisdiction.
SECTION 9.04. SET-OFFS. (a) If (i) an Event of Default has occurred and
is continuing and (ii) the requisite Lenders have requested the Administrative
Agent to declare the Loans to be immediately due and payable pursuant to Section
6.01, or the Loans have become immediately due and payable without notice as
provided in Section 6.01, then each Lender Party is hereby authorized by the
Borrower at any time and from time to time, to the extent permitted by
applicable law, without notice to the Borrower (any such notice being expressly
waived by the Borrower), to set off and apply all deposits (general or special,
time or demand, provisional or final) at any time held, other than deposits held
by the Borrower as fiduciary for other Persons, and other indebtedness at any
time owing by such Lender Party to or for the account of the Borrower against
any obligations of the Borrower to such Lender Party now or hereafter existing
under this Agreement, regardless of whether any such deposit or other obligation
is then due and payable or is in the same currency or is booked or otherwise
payable at the same office as the obligation against which it is set off and
regardless of whether such Lender Party shall have made any demand for payment
under this Agreement. Each Lender Party agrees promptly to notify the Borrower
after any such set-off and application made by such Lender Party; provided that
any failure to give such notice shall not affect the validity of such setoff and
application. The rights of the Lender Parties under this subsection are in
addition to any other rights and remedies which they may have.
(b) Each Lender agrees that if it shall, by exercising any right of
set-off or counterclaim or otherwise, receive payment of a proportion of the
aggregate amount of principal and interest then due with respect to the Loans
held by it which is greater than the proportion received by any other Lender in
respect of the aggregate amount of principal and interest then due with respect
to the Loans held by such other Lender, the Lender receiving such
proportionately greater payment shall purchase such participations in the Loans
held by the other Lenders, and such other adjustments shall be made, as may be
required so that all such payments of principal and interest with respect to the
Loans held by the Lenders shall be shared by the Lenders pro rata; provided that
nothing in this Section shall impair the right of any Lender to exercise any
right of set-off or counterclaim it may have and to apply the amount subject to
such exercise to the payment of indebtedness of the Borrower other than its
indebtedness in respect of the Loans. The Borrower agrees, to the fullest extent
it may effectively do so under applicable law, that any holder of a
participation in a Loan, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or counterclaim and other rights
with respect to such participation as fully as if such holder of a participation
were a direct creditor of the Borrower in the amount of such participation.
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SECTION 9.05. AMENDMENTS AND WAIVERS. Any provision of this Agreement
or the Notes may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Borrower and the Required Lenders (and, if
the rights or duties of any Agent are affected thereby, by such Agent); provided
that no such amendment or waiver shall, unless signed by all the Lenders,(i)
increase or decrease the Commitment of any Lender (except for a ratable decrease
in the Commitments of all the Lenders) or subject any Lender to any additional
obligation, (ii) reduce the principal of or rate of interest on any Loan or any
fees hereunder, (iii) postpone the date fixed for any payment of principal of or
interest on any Loan or any fees hereunder or for the termination of any
Commitment or (iv) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans, or the number of Lenders, which shall be
required for the Lenders or any of them to take any action under this Section or
any other provision of this Agreement.
SECTION 9.06. SUCCESSORS; PARTICIPATIONS AND ASSIGNMENTS. (a) The
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except that the
Borrower may not assign or otherwise transfer any of its rights under this
Agreement without the prior written consent of all the Lenders.
(b) Any Lender may at any time grant to one or more banks or other
institutions (each a "PARTICIPANT") participating interests in its Commitment or
any or all of its Loans. If a Lender grants any such participating interest to a
Participant, whether or not upon notice to the Borrower and the Administrative
Agent, such Lender shall remain responsible for the performance of its
obligations hereunder, and the Borrower and the Administrative Agent shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement. Any agreement pursuant to
which any Lender may grant such a participating interest shall provide that such
Lender shall retain the sole right and responsibility to enforce the obligations
of the Borrower hereunder including, without limitation, the right to approve
any amendment, modification or waiver of any provision of this Agreement;
provided that such participation agreement may provide that such Lender will not
agree to any modification, amendment or waiver of this Agreement described in
clause (i), (ii) or (iii) of Section 9.05 without the consent of the
Participant. The Borrower agrees that each Participant shall, to the extent
provided in its participation agreement, be entitled to the benefits of Section
2.13 and Article 8 with respect to its participating interest. An assignment or
other transfer which is not permitted by Section 9.06(c) or 9.06(d) below shall
be given effect for purposes of this Agreement only to the extent of a
participating interest granted in accordance with this subsection.
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(c) Any Lender may at any time assign to one or more banks or other
institutions (each an "ASSIGNEE") all, or a proportionate part (equivalent to an
initial Commitment of not less than $10,000,000) of all, of its rights and
obligations under this Agreement and its Notes, and such Assignee shall assume
such rights and obligations, pursuant to an Assignment and Assumption Agreement
substantially in the form of Exhibit B hereto signed by such Assignee and such
transferor Lender, with (and subject to) the subscribed consent of the Borrower
and the Administrative Agent, which consents shall not be unreasonably withheld;
provided that if an Assignee is an affiliate of such transferor Lender or was a
Lender immediately before such assignment, no such consent shall be required.
When such instrument has been signed and delivered by the parties thereto and
such Assignee has paid to such transferor Lender the purchase price agreed
between them, such Assignee shall be a Lender party to this Agreement and shall
have all the rights and obligations of a Lender with a Commitment as set forth
in such instrument of assumption, and the transferor Lender shall be released
from its obligations hereunder to a corresponding extent, and no further consent
or action by any party shall be required. Upon the consummation of any
assignment pursuant to this subsection, the transferor Lender, the
Administrative Agent and the Borrower shall make appropriate arrangements so
that, if required, new Notes are issued to the Assignee. In connection with any
such assignment, the transferor Lender shall pay to the Administrative Agent an
administrative fee for processing such assignment in the amount of $2,500. If
the Assignee is not incorporated under the laws of the United States or a State
thereof, it shall deliver to the Borrower and the Administrative Agent
certification as to exemption from deduction or withholding of United States
federal income taxes in accordance with Section 8.04.
(d) Any Lender may at any time assign all or any portion of its rights
under this Agreement and its Notes to a Federal Reserve Bank. No such assignment
shall release the transferor Lender from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Lender's
rights shall be entitled to receive any greater payment under Section 8.03 or
8.04 than such Lender would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with the Borrower's prior
written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04
requiring such Lender to designate a different Applicable Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
SECTION 9.07. NO RELIANCE ON MARGIN STOCK. Each Lender represents to
the Administrative Agent and each of the other Lenders that it in good faith is
not relying upon any Margin Stock as collateral in the extension or maintenance
of the credit provided for in this Agreement.
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SECTION 9.08. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement
and each Note shall be governed by and construed in accordance with the laws of
the State of New York. The Borrower hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York State court sitting in New York City for purposes
of all legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. The Borrower irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum.
SECTION 9.09. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof. This
Agreement shall become effective upon receipt by the Administrative Agent of
counterparts hereof signed by each of the parties hereto (or, in the case of any
party as to which an executed counterpart shall not have been received, receipt
by the Administrative Agent in form satisfactory to it of telegraphic, telex,
facsimile or other written confirmation from such party of execution of a
counterpart hereof by such party).
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
MARSH & MCLENNAN COMPANIES, INC.
/s/ Gregory F. Van Gundy
By: _______________________________________
Name: Gregory F. Van Gundy
Title: General Counsel and Secretary
Address:
1166 Avenue of the Americas
New York, New York 10036-2774
Facsimile: (212) 345-5000
Web Site: www.marshmac.com
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Lender and Administrative Agent
/s/ Glenda Winter-Irving
By: _______________________________________
Name: Glenda Winter-Irving
Title: Vice President
Address:
60 Wall Street
New York, New York 10260-0060
Facsimile: (212) 648-5249
49
<PAGE> 54
COMMITMENT SCHEDULE
<TABLE>
<CAPTION>
LENDER COMMITMENT
<S> <C>
Morgan Guaranty Trust Company of New York $2,250,000,000
_______________________
Total $2,250,000,000
</TABLE>
50
<PAGE> 55
PRICING SCHEDULE
The "EURO-DOLLAR MARGIN" and "FACILITY FEE RATE" mean, on any date when
such rates are to be determined in accordance with this Pricing Schedule, the
per annum rates set forth below in the applicable row under the column
corresponding to the Status and Utilization that exist on such day:
<TABLE>
<CAPTION>
STATUS LEVEL I LEVEL II LEVEL III LEVEL IV
- ---------------------------------- ------- -------- --------- --------
<S> <C> <C> <C> <C>
Euro-Dollar Margin
If Utilization is equal to or 0.20% 0.24% 0.28% 0.37%
less than 50%
0.45% 0.49% 0.53% 0.62%
If Utilization exceeds 50%
Facility Fee Rate 0.05% 0.06% 0.07% 0.08%
</TABLE>
For purposes of this Schedule, the following terms have the following
meanings:
"LEVEL I STATUS" exists at any date if, at such date, the Borrower's
commercial paper is rated A-1+ by S&P and P-1 by Moody's.
"LEVEL II STATUS" exists at any date if, at such date, the Borrower's
commercial paper is rated A-1 by S&P and P-1 by Moody's.
"LEVEL III STATUS" exists at any date if, at such date, (i) the
Borrower's commercial paper is rated A-1 or higher by S&P and P-2 by Moody's or
(ii) the Borrower's commercial paper is rated A-2 by S&P and P-1 by Moody's.
"LEVEL IV STATUS" exists at any date if, at such date, no other Status
exists.
"STATUS" refers to the determination of which of Level I Status, Level
II Status, Level III Status or Level IV Status exists at any date.
"UTILIZATION" means, at any date, the percentage equivalent of a
fraction (i) the numerator of which is the aggregate outstanding principal
amount of the Loans at such date, after giving effect to any borrowing or
payment on such date and (ii) the denominator of which is the aggregate amount
of the Commitments at such date, after giving effect to any reduction of the
Commitments on such date. For purposes of this schedule, if for any reason any
Loans remain outstanding after termination of the Commitments, the utilization
on each date on or after the date of such termination shall be deemed to be
greater than 50%.
51
<PAGE> 56
The credit ratings to be utilized for purposes of this Schedule are those
assigned to the Borrower's commercial paper without third-party credit
enhancement and any rating assigned to any other debt security of the Borrower
shall be disregarded. The rating in effect for any date is that in effect at the
close of business on such date.
52
<PAGE> 57
EXHIBIT A
FORM OF NOTE
New York, New York
----------- --, -----
For value received, MARSH & McLENNAN COMPANIES, INC., a Delaware
corporation (the "BORROWER"), promises to pay to the order of
______________________ (the "LENDER"), for the account of its Applicable Lending
Office, the unpaid principal amount of each Loan made by the Lender to the
Borrower pursuant to the Credit Agreement referred to below on the maturity date
provided for in the Credit Agreement. The Borrower promises to pay interest on
the unpaid principal amount of each such Loan on the dates and at the rate or
rates provided for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in Federal or other
immediately available funds at the office of Morgan Guaranty Trust Company of
New York, at 60 Wall Street, New York, New York.
All Loans made by the Lender and all repayments of the principal
thereof shall be recorded by the Lender and, if the Lender so elects in
connection with any transfer or enforcement hereof, appropriate notations to
evidence the foregoing information with respect to each such Loan then
outstanding may be endorsed by the Lender on the schedule attached hereto, or on
a continuation of such schedule attached to and made a part hereof; provided
that the failure of the Lender to make (or any error in making) any such
recordation or endorsement shall not affect the Borrower"s obligations hereunder
or under the Credit Agreement.
This note is one of the Notes referred to in the Credit Agreement dated
as of August 24, 1998 among Marsh & McLennan Companies, Inc., the Lenders party
thereto and Morgan Guaranty Trust Company of New York, as Administrative Agent
(as the same may be amended from time to time, the "CREDIT AGREEMENT"). Terms
defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the prepayment
hereof and the acceleration of the maturity hereof.
MARSH & McLENNAN COMPANIES, INC.
By:
____________________________
Name:
Title:
<PAGE> 58
LOANS AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AMOUNT OF
AMOUNT OF PRINCIPAL
DATE LOAN REPAID NOTATION MADE BY
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
A-2
<PAGE> 59
EXHIBIT B
FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of ________, ____ among [NAME OF ASSIGNOR] (the
"ASSIGNOR") and [NAME OF ASSIGNEE] (the "ASSIGNEE").
WHEREAS, this Assignment and Assumption Agreement (the "AGREEMENT")
relates to the Credit Agreement dated as of August 24, 1998 (as amended from
time to time, the "CREDIT AGREEMENT") among the Marsh & McLennan Companies,
Inc., the Lenders party thereto and Morgan Guaranty Trust Company of New York,
as Administrative Agent (the "ADMINISTRATIVE AGENT");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Loans to the Borrower in an aggregate principal amount at any
time outstanding not to exceed $________________;
WHEREAS, Loans made to the Borrower by the Assignor under the Credit
Agreement in the aggregate principal amount of $__________ are outstanding at
the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of a portion of its
Commitment thereunder in an amount equal to $__________ (the "ASSIGNED AMOUNT"),
together with a corresponding portion of each of its outstanding Loans, and the
Assignee proposes to accept such assignment and assume the corresponding
obligations of the Assignor under the Credit Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined
herein have the respective meanings set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount and a corresponding portion of each of its
outstanding Loans, and the Assignee hereby accepts such assignment from the
Assignor and assumes all of the obligations of the Assignor under the Credit
Agreement to the extent of the Assigned Amount. Upon the execution and delivery
hereof by the Assignor and the Assignee and the execution of the consent
attached hereto by the Borrower and the Administrative Agent and the payment of
<PAGE> 60
the amounts specified in Section 3 required to be paid on the date hereof, (i)
the Assignee shall, as of the date hereof, succeed to the rights and be
obligated to perform the obligations of a Lender under the Credit Agreement with
a Commitment in an amount equal to the Assigned Amount and acquire the rights of
the Assignor with respect to a corresponding portion of each of its outstanding
Loans and (ii) the Commitment of the Assignor shall, as of the date hereof, be
reduced by the Assigned Amount, and the Assignor shall be released from its
obligations under the Credit Agreement to the extent such obligations have been
assumed by the Assignee. The assignment provided for herein shall be without
recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore agreed between them.(1)
Facility fees accrued before the date hereof are for the account of the Assignor
and such fees accruing on and after the date hereof with respect to the Assigned
Amount are for the account of the Assignee. Each of the Assignor and the
Assignee agrees that if it receives any amount under the Credit Agreement which
is for the account of the other party hereto, it shall receive the same for the
account of such other party to the extent of such other party"s interest therein
and promptly pay the same to such other party.
SECTION 4. Consent of the Borrower and the Administrative Agent. This
Agreement is conditioned upon the consent of the Borrower and the Administrative
Agent pursuant to Section 9.06(c) of the Credit Agreement.
SECTION 5. Note. Pursuant to Section 9.06(c) of the Credit Agreement,
the Borrower has agreed to execute and deliver a Note payable to the order of
the Assignee to evidence the assignment and assumption provided for herein.
SECTION 6. Non-reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition or statements of the
Borrower, or the validity and enforceability of the Borrower's obligations under
the Credit Agreement or any Note. The Assignee acknowledges that it has,
independently and without reliance on the Assignor, and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
(1) Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any
portion of any upfront fee to be paid by the Assignor to the
Assignee. It may be preferable in an appropriate case to specify
these amounts generically or by formula rather than as a fixed sum.
B-2
<PAGE> 61
decision to enter into this Agreement and will continue to be responsible for
making its own independent appraisal of the business, affairs and financial
condition of the Borrower.
SECTION 7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 8. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
[NAME OF ASSIGNOR]
By: __________________________________
Name:
Title:
[NAME OF ASSIGNEE]
By: __________________________________
Name:
Title:
The undersigned consent to the foregoing assignment.
MARSH & McLENNAN COMPANIES, INC.
By: __________________________________
Name:
Title:
B-3
<PAGE> 62
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Administrative Agent
By: __________________________________
Name:
Title:
B-4
<PAGE> 1
Exhibit (c)(1)
To: Marsh & McLennan Companies, Inc. (OFFEROR)
_____ 1998
Dear Sirs,
I understand that Offeror intends to make an offer to acquire all of the issued
ordinary share capital of Sedgwick Group plc (OFFEREE) including all of the
American depository shares issued in respect of the ordinary shares of Offeree
(each representing five ordinary shares of Offeree as evidenced by American
depository receipts) (ADSS), substantially on the terms of the attached draft
press announcement. This letter sets out the terms and conditions on which I
will accept the Offer (as defined in paragraph 4 of this undertaking) when it is
made.
WARRANTIES AND UNDERTAKINGS
1. I warrant and undertake to Offeror that:
(a) I am the registered holder and beneficial owner of the number
of ordinary shares of 10p each in the capital of Offeree
(including ADSs, if any) shown in Part A of the Schedule (the
OFFEREE SECURITIES) and that I hold these securities free of
any lien, charge, option, equity or encumbrance;
(b) before the Offer closes, lapses or is withdrawn, I shall not:
(i) sell, transfer, charge, encumber, grant any option over
or otherwise dispose of any Offeree Securities or any
shares or other securities convertible into shares in
Offeree shown in Part B of the Schedule or any other
shares or securities convertible into shares in Offeree
issued or unconditionally allotted to me or otherwise
acquired by me before then (FURTHER OFFEREE SECURITIES)
other than pursuant to my acceptance of the Offer;
(ii) accept any other offer in respect of the shares or
securities referred to in paragraph 1(b)(i);
<PAGE> 2
(iii) (other than pursuant to the Offer) enter into any
agreement or arrangement or permit any agreement or
arrangement to be entered into or incur any obligation
or permit any obligation to arise:
(A) to do any of the acts referred to in paragraphs
1(b)(i) or (ii);
(B) in relation to, or operating by reference to, the
Offeree Securities or any Further Offeree
Securities; or
(C) which, in relation to the Offeree Securities or any
Further Offeree Securities, would or might restrict
or impede me accepting the Offer,
and, for the avoidance of doubt, references in this
paragraph 1(b)(iii) to any agreement, arrangement or
obligation includes any agreement, arrangement or
obligation whether or not legally binding or subject to
any condition or which is to take effect if the Offer
closes or lapses or if this undertaking ceases to be
binding or following any other event; or
(iv) save for the acquisition of any further shares or other
securities in Offeree on the exercise of options
referred to in Part B of the Schedule, I shall not
purchase, sell or otherwise deal in any shares or other
securities convertible into shares of Offeree or
Offeror or any interest therein (including any
derivatives referenced to such securities);
(c) the Schedule contains full and accurate details of all the
shares or other securities convertible into shares in Offeree:
(i) of which I am the registered holder or beneficial
owner;
(ii) to which I am entitled upon the exercise of any option,
warrant or other right to acquire or subscribe for
shares or other securities in Offeree whether or not
such rights are currently exercisable or subject to any
condition, and
2
<PAGE> 3
I confirm that I have no other rights or interests in relation
to any shares or other securities convertible into shares of
Offeree; and
(d) I have full power and authority to enter into and perform any
obligation under this undertaking and to accept the Offer in
respect of the Offeree Securities.
UNDERTAKING TO ACCEPT THE OFFER
2. In consideration of Offeror's agreement in paragraph 6.1 to make the Offer, I
undertake that:
(a) I shall accept the Offer in respect of the Offeree Securities
in accordance with the procedure for acceptance set out in the
formal document containing the Offer (the OFFER DOCUMENT) not
later than ten days after Offeror posts the Offer Document to
Offeree shareholders;
(b) I shall accept the Offer in respect of any Further Offeree
Securities in accordance with the procedure for acceptance set
out in the Offer Document not later than five days after the
date I become the registered holder of the Further Offeree
Securities;
(c) although the terms of the Offer will confer a right of
withdrawal on accepting shareholders, I shall not withdraw any
acceptances of the Offer; and
(d) Offeror shall acquire the Offeree Securities and any Further
Offeree Securities from me free of any lien, charge, option,
equity or encumbrance and together with all rights of any
nature attaching to those shares including the right to all
dividends declared or paid after the date of this undertaking,
except for the interim dividend of 3p per Offeree Share
payable on 19 October 1998 to Offeree shareholders on the
register at the close of business on 21 August 1998.
DOCUMENTATION
3. I consent to:
3
<PAGE> 4
(a) the inclusion of references to me and this undertaking in
Offeror's announcement of the Offer (the PRESS ANNOUNCEMENT)
as they appear in the attached draft of the Press
Announcement; and
(b) particulars of this undertaking and my holdings of, and
dealings in, relevant securities of Offeree and Offeror being
included in the Offer Document and any other related or
ancillary document as required by the Code and/or all
applicable United States securities laws and regulations (US
SECURITIES LAWS).
INTERPRETATION
4. In this undertaking the OFFER means the offer to be made by or on behalf of
Offeror to acquire all the issued ordinary share capital of Offeree, including
the ADSs, substantially on the terms of the Press Announcement or on such other
terms as may be agreed between Offeror and Offeree or as may be required to
comply with the requirements of the Panel on Takeovers and Mergers (the PANEL)
or US Securities Laws or such other laws or regulations as may be relevant. A
reference in this undertaking to the OFFER also includes any new, increased,
renewed or revised offer made by or on behalf of Offeror to acquire shares in
Offeree, provided that the terms of such offer are, in the opinion of JP Morgan
and DLJ Phoenix (the BANKS) no less favourable to acceptors than the terms set
out in the Press Announcement.
TIME OF THE ESSENCE
5. Any time, date or period mentioned in this undertaking may be extended by
mutual agreement but as regards any time, date or period originally fixed or as
extended, time shall be of the essence.
THE OFFER
6.1 Subject to paragraph 6.2, Offeror agrees to make the Offer by no later than
4 September 1998 (or such later date as Offeror and Offeree may agree) provided
that the Press Announcement is released in substantially the form attached (or
in such other form as may be agreed between Offeror and Offeree or as may be
required to comply with the requirements of the Panel or US Securities Laws or
such other laws as may be relevant). The release of the Press Announcement is at
Offeror's absolute discretion. In particular, Offeror reserves the right not to
release the Press Announcement unless the board of directors of Offeree agrees
to recommend the Offer.
4
<PAGE> 5
6.2 If after Offeror releases the Press Announcement either:
(a) the Panel consents to Offeror not making the Offer;
(b) an event occurs which means that Offeror is no longer required by the
Code to proceed with the Offer; or
(c) Offeror becomes aware that any condition of the Offer as set out in the
Press Announcement has or may become incapable of being fulfilled,
Offeror shall not be obliged to make the Offer.
6.3 This undertaking shall lapse if:
(a) the Press Announcement is not released by 26 August 1998 (or such later
date as Offeror and Offeree may agree);
(b) the Offer is not made in the circumstances referred to in paragraph
6.2; or
(c) the Offer lapses or is withdrawn.
If the undertaking lapses, I shall have no claim against Offeror.
DIRECTOR'S UNDERTAKINGS
7. I shall not directly or indirectly (except where required by my fiduciary
duties as a director of Offeree or by my duties under the Code):
(a) solicit or encourage any person other than Offeror to make any
offer for any shares or other securities of Offeree or to
indicate the basis on which any such offer might be made or
enter into discussions relating to any possible offer; or
(b) take any action which is inconsistent with my obligations
contained in this undertaking or the successful implementation
of the Offer.
CONFIRMATION
5
<PAGE> 6
8. I confirm that in signing this letter I am not a customer of either of the
Banks for the purposes of the Rules of The Securities and Futures Authority
Limited and that neither of the Banks owes me any of the duties which it owes to
its customers. I confirm that I have been given an adequate opportunity to
consider whether or not to give this undertaking and to obtain independent
advice.
ADEQUACY OF DAMAGES
9. I agree that, if I fail to accept the Offer in accordance with this
undertaking or breach any of my obligations, damages would not be an adequate
remedy and accordingly Offeror shall be entitled to the remedy of injunction or
specific performance or any other such equitable relief.
GOVERNING LAW
10. This undertaking shall be governed by and construed in accordance with
English law and I submit to the exclusive jurisdiction of the English courts for
all purposes in connection with this undertaking.
6
<PAGE> 7
SCHEDULE
EXISTING HOLDINGS
PART A - REGISTERED AND BENEFICIAL HOLDINGS OF OFFEREE SECURITIES
REGISTERED HOLDER AND BENEFICIAL OWNER ORDINARY SHARES OF 10p EACH
PART B - OTHER HOLDINGS OF OFFEREE SECURITIES
OPTIONS ORDINARY SHARES OF 10p EACH
7
<PAGE> 8
SIGNED and DELIVERED as a DEED by
Yours faithfully,
Signature________________________
Name_____________________________
in the presence of:
Signature of witness:____________________________
Name ____________________________________________
Address _________________________________________
8
<PAGE> 1
Exhibit (c)(2)
To: Marsh & McLennan Companies, Inc. (OFFEROR)
J P Morgan & Co. Limited (J P MORGAN)
60 Victoria Embankment
London
EC4Y 0JP
DLJ Phoenix Securities Limited (DLJ PHOENIX)
99 Bishopsgate
London
EC2M 3XD
24th August and 25th August 1998
Dear Sirs,
We understand that Offeror intends to make an offer to acquire all of the issued
ordinary share capital of Sedgwick Group plc (OFFEREE) including all of the
American depository shares issued in respect of the ordinary shares of Offeree
(each representing five ordinary shares of Offeree as evidenced by American
depository receipts) (ADSS) substantially on the terms of the attached draft
press announcement. This letter sets out the terms and conditions on which we
will accept the Offer (as defined in paragraph 6 of this undertaking) when it is
made.
WARRANTIES AND UNDERTAKINGS
1. We warrant and undertake to Offeror that:
(a) we are the registered holder and the beneficial owner of the number
of ordinary shares of 10p each in the capital of Offeree (including
ADSs, if any) shown in Part A of the Schedule (the OFFEREE
SECURITIES) and that we hold these securities free of any lien,
charge, option, equity or encumbrance;
(b) before the Offer closes, lapses or is withdrawn, we shall not:
(i) sell, transfer, charge, encumber, grant any option over or
otherwise dispose of any Offeree Securities or any shares or
other securities in Offeree shown in Part B of the Schedule or
any other shares or securities in Offeree issued or
uncondition-
<PAGE> 2
ally allotted to us or otherwise acquired by us before then
(FURTHER OFFEREE SECURITIES) other than pursuant to our
acceptance of the Offer;
(ii) accept any other offer in respect of any shares or securities
referred to in paragraph 1(b)(i);
(iii) (other than pursuant to the Offer) enter into any agreement or
arrangement or permit any agreement or arrangement to be
entered into or incur any obligation or permit any obligation
to arise:
(A) to do any of the acts referred to in paragraphs 1(b)(i)
or (ii);
(B) in relation to, or operating by reference to, the
Offeree Securities or any Further Offeree Securities; or
(C) which, in relation to the Offeree Securities or any
Further Offeree Securities, would or might restrict or
impede us accepting the Offer,
and, for the avoidance of doubt, references in this paragraph
1(b)(iii) to any agreement, arrangement or obligation
includes any agreement, arrangement or obligation whether or
not legally binding or subject to any condition or which is to
take effect if the Offer closes or lapses or if this
undertaking ceases to be binding or following any other event;
or
(iv) save for the acquisition of any further shares or other
securities in Offeree on the exercise of options referred to
in Part B of the Schedule, we shall not purchase, sell or
otherwise deal in any shares or other securities of Offeree or
Offeror or any interest therein (including any derivatives
referenced to any such securities);
(c) the Schedule contains full and accurate details of all the shares
and other securities in Offeree:
2
<PAGE> 3
(i) of which we are the registered holder or beneficial owner;
(ii) to which we are entitled upon the exercise of any option,
warrant or other right to acquire or subscribe for shares or
other securities in Offeree whether or not such rights are
currently exercisable or subject to any condition, and
we confirm that we have no other rights or interests in
relation to any shares or other securities of Offeree;
and
(d) we have full power and authority to enter into this undertaking and
to accept the Offer in respect of the Offeree Securities.
UNDERTAKING TO ACCEPT THE OFFER
2. In consideration of Offeror's agreement in paragraph 8.1 to make the Offer,
we undertake that:
(a) we shall accept the Offer in respect of the Offeree Securities in
accordance with the procedure for acceptance set out in the formal
document containing the Offer (the OFFER DOCUMENT) not later than
seven days after Offeror posts the Offer Document to Offeree
shareholders;
(b) we shall accept the Offer in respect of any Further Offeree
Securities in accordance with the procedure for acceptance set out
in the Offer Document not later than two days after the date we
become the registered holder of the Further Offeree Securities;
(c) although the terms of the Offer will confer a right of withdrawal on
accepting shareholders, we shall not withdraw any acceptances of the
Offer; and
(d) Offeror shall acquire the Offeree Securities and any Further Offeree
Securities from us free of any lien, charge, option, equity or
encumbrance and together with all rights of any nature attaching to
those shares including the right to all dividends declared or paid
after the date of this undertaking, except for the interim dividend
of 3p per Offeree Share payable on 19 October 1998 to Offeree
shareholders on the register at the close of business on 21 August
1998.
3
<PAGE> 4
VOTING RIGHTS
3.1 From the time Offeror announces the Offer to the time the Offer becomes
wholly unconditional, lapses or is withdrawn:
(a) we shall exercise the voting rights attached to our Offeree
Securities and any Further Offeree Securities on a Relevant
Resolution (as defined in paragraph 3.3) only in accordance with
Offeror's directions; and
(b) we shall exercise the rights attaching to our Offeree Securities to
requisition or join in requisitioning any general or class meeting
of Offeree for the purposes of considering a Relevant Resolution and
to require Offeree pursuant to s376 of the Act to give notice of
such a resolution only in accordance with Offeror's directions.
3.2 For the purpose of voting on a Relevant Resolution, we shall execute any
form of proxy required by Offeror appointing any person nominated by Offeror to
attend and vote at the relevant general meeting of Offeree.
3.3 A Relevant Resolution means:
(a) a resolution (whether or not amended) proposed at a general or class
meeting of Offeree, or at an adjourned meeting, the passing of which
is necessary to implement the Offer or which, if passed, might
result in any condition of the Offer not being fulfilled or which
might impede or frustrate the Offer in any way;
(b) a resolution to adjourn a general or class meeting of Offeree whose
business includes the consideration of a resolution falling within
paragraph 3.3(a); and
(c) a resolution to amend a resolution falling within paragraph 3.3(a)or
(b).
DOCUMENTATION
4.1 We consent to:
4
<PAGE> 5
(a) the inclusion of references to us and this undertaking in Offeror's
announcement of the Offer (the PRESS ANNOUNCEMENT) as they appear in
the attached draft of the Press Announcement; and
(b) particulars of this undertaking and our holdings of, and dealings
in, relevant securities of Offeree and Offeror being included in the
Offer Document and any other related or ancillary document as
required by the City Code on Takeovers and Mergers (the CODE) and/or
all applicable United States securities laws and regulations (US
SECURITIES LAWS).
4.2 We shall promptly give you all information and any assistance as you may
reasonably require for the preparation of the Offer Document and all related and
ancillary documents in order to comply with the requirements of the Code, US
Securities Laws and any other legal or regulatory requirement or body. We shall
immediately notify you in writing of any material change in the accuracy or
impact of any information previously given to you.
SECRECY
5. We shall keep secret:
(a) the possibility, terms and conditions of the Offer and the existence
and terms of this undertaking until the Press Announcement is
released; and
(b) the terms of this undertaking until the Offer Document is posted,
provided that we may disclose the same to Offeree and its advisers
in which case we shall procure that they observe secrecy in the same
terms. The obligations in this paragraph shall survive termination
of this undertaking.
INTERPRETATION
6. In this undertaking the OFFER means the offer to be made by or on behalf of
Offeror to acquire all the issued ordinary share capital of Offeree, including
the ADSs, substantially on the terms of the Press Announcement or on such other
terms as may be agreed between Offeror and Offeree or as may be required to
comply with the requirements of the Panel on Takeovers and Mergers (the PANEL)
or US Securities Laws or such other laws or regulations as may be relevant. A
reference in this
5
<PAGE> 6
undertaking to the OFFER also includes any new, increased, renewed or revised
offer made by or on behalf of Offeror to acquire shares in Offeree, provided
that the terms of such offer are, in the opinion of J P Morgan and DLJ Phoenix
(the BANKS) no less favourable to acceptors than the terms set out in the Press
Announcement.
TIME OF THE ESSENCE
7. Any time, date or period mentioned in this undertaking may be extended by
mutual agreement but as regards any time, date or period originally fixed or as
extended, time shall be of the essence.
THE OFFER
8.1 Subject to paragraph 8.2, Offeror agrees to make the Offer by no later than
4th September 1998 (or such later date as Offeror and Offeree may agree).
provided that the Press Announcement is released in substantially the form
attached (or in such other form as may be agreed between Offeror and Offeree or
as may be required to comply with the requirements of the Panel or US Securities
Laws or such other laws or regulations as may be relevant). The release of the
Press Announcement is at Offeror's absolute discretion. In particular, Offeror
reserves the right not to release the Press Announcement unless the board of
directors of Offeree agrees to recommend the Offer.
8.2 If after Offeror releases the Press Announcement:
(a) the Panel consents to Offeror not making the Offer;
(b) an event occurs which means that Offeror is no longer required by
the Code to proceed with the Offer; or
(c) Offeror becomes aware that any condition of the Offer as set out in
the Press Announcement has or may become incapable of being
fulfilled,
Offeror shall not be obliged to make the Offer.
6
<PAGE> 7
8.3 This undertaking shall lapse if:
(a) the Press Announcement is not released by 25th August 1998 (or such
later date as Offeror and Offeree may agree);
(b) the Offer is not made in the circumstances referred to in paragraph
8.2;
(c) the Offer lapses or is withdrawn;
(d) a cash offer (or the cash alternative of any share offer) is made by
any third party at a price equal to or exceeding 250.5 pence per
Sedgwick Group plc ordinary share; or
(e) a share offer (without a cash alternative) is made by any third
party the value of which on the day such offer is made is equal to
or exceeds 250.5 pence per Sedgwick Group plc ordinary share.
If the undertaking lapses, we shall have no claim against Offeror.
CONFIRMATION
9. We confirm that in signing this letter we are not a customer of either of the
Banks for the purposes of the Rules of The Securities and Futures Authority
Limited and that neither of the Banks owe us any of the duties which it owes to
its customers. We confirm that we have been given an adequate opportunity to
consider whether or not to give this undertaking and to obtain independent
advice.
ADEQUACY OF DAMAGES
10. We agree that, if we fail to accept the Offer in accordance with this
undertaking or breach any of our obligations, damages would not be an adequate
remedy and accordingly Offeror shall be entitled to the remedy of injunction,
specific performance or any other such equitable relief.
7
<PAGE> 8
GOVERNING LAW
11. This undertaking shall be governed by and construed in accordance with
English law and we submit to the exclusive jurisdiction of the English courts
for all purposes in connection with this undertaking.
8
<PAGE> 9
SCHEDULE
EXISTING HOLDINGS
PART A - REGISTERED AND BENEFICIAL HOLDINGS OF OFFEREE SECURITIES
REGISTERED HOLDER AND BENEFICIAL OWNER ORDINARY SHARES OF 10p EACH
VARIOUS CLIENTS OF SILCHESTER INVESTORS 24,000,000
INTERNATIONAL
PART B - OTHER HOLDINGS OF OFFEREE SECURITIES OPTIONS
ORDINARY SHARES OF 10p EACH
- - -
9
<PAGE> 10
SIGNED and DELIVERED as a DEED by )
)
acting by two Directors/a Director and )
the Secretary )
Director Michael JJ. Cowan
Director/Secretary Andrew Simmonds
24th and 25th August 1998
10
<PAGE> 1
Exhibit (c)(3)
J.P. MORGAN LETTERHEAD
[Vendor]
25 August 1998
Dear Sirs
RECOMMENDED CASH OFFER FOR SEDGWICK GROUP PLC ("SEDGWICK")
We refer to the recommended cash offer (the "Offer") for the entire issued and
to be issued share capital of Sedgwick by Morgan Guaranty Trust Company of New
York and Donaldson, Lufkin & Jenrette International on behalf of Marsh &
McLennan Companies, Inc ("Marsh & McLennan") which was announced on 25 August
1998.
You agree that you will sell, and we agree that we will, on behalf of Marsh &
McLennan, purchase, conditional on (1) the expiration or termination of all
applicable waiting periods under the Hart-Scott Rodino Anti-Trust Improvements
Act of 1976 as amended, (the "HSR Act"), (2) there being in existence no order
of any United States court enjoining such sale and purchase, and (3) appropriate
exemptive relief for the making of purchases of shares in the capital of
Sedgwick ("Sedgwick Shares") by Marsh & McLennan outside of the Offer having
been obtained from the United States Securities and Exchange Commission, [ ]
Sedgwick Shares at a price of 225 pence per Sedgwick Share (the "Sale") being
the price payable to holders of Sedgwick Shares under the Offer.
We both further agree, subject to the above, to effect the Sale through an
On-Exchange transaction as defined by the rules of the London Stock Exchange
with a view to the Sale settling [ ] calendar days after the expiration or
termination of all applicable waiting periods under the HSR Act.
<PAGE> 2
Exhibit (c)(3)
J.P. MORGAN LETTERHEAD
This letter of agreement will lapse if the applicable waiting periods under the
HSR Act have not expired by midnight New York time on Sunday 27th September
1998. If this letter of agreement lapses, we shall have no claim against you and
you shall have no claim against us. It is noted that, by execution of this
letter, each party warrants to the other that it has full right, power and
authority and has taken all action necessary to execute and deliver and to
exercise its rights and performance obligations under this letter.
This letter is to be construed in accordance with and governed by English Law.
Please acknowledge your agreement to the above by signing and returning the
enclosed copy letter.
___________________________________
Signed for and on behalf of
J.P. Morgan Securities Limited
We hereby acknowledge receipt of your letter and agree to sell the [ ]
Sedgwick Shares on the terms set out therein.
___________________________________
Signed for and on behalf of [Vendor]
2
<PAGE> 3
Exhibit (c)(3)
J.P. MORGAN LETTERHEAD
[Vendor]
25 August 1998
Dear Sirs
RECOMMENDED CASH OFFER FOR SEDGWICK GROUP PLC ("SEDGWICK")
We refer to the recommended cash offer (the "Offer") for the entire issued and
to be issued share capital of Sedgwick by Morgan Guaranty Trust Company of New
York and Donaldson, Lufkin & Jenrette International on behalf of Marsh &
McLennan Companies, Inc ("Marsh & McLennan") which was announced on 25 August
1998.
You agree that you will sell, and we agree that we will, on behalf of Marsh &
McLennan, purchase, conditional on (1) the expiration or termination of all
applicable waiting periods under the Hart-Scott Rodino Anti-Trust Improvements
Act of 1976 as amended, (the "HSR Act"), (2) there being in existence no order
of any United States court enjoining such sale and purchase, and (3) appropriate
exemptive relief for the making of purchases of shares in the capital of
Sedgwick ("Sedgwick Shares") by Marsh & McLennan outside of the Offer having
been obtained from the United States Securities and Exchange Commission, [ ]
Sedgwick Shares at a price of 225 pence per Sedgwick Share (the "Sale") being
the price payable to holders of Sedgwick Shares under the Offer.
We both further agree, subject to the above, to effect the Sale through an
On-Exchange transaction as defined by the rules of the London Stock Exchange
with a view to the Sale settling [ ] calendar days after the expiration or
termination of all applicable waiting periods under the HSR Act.
<PAGE> 4
Exhibit (c)(3)
J.P. MORGAN LETTERHEAD
This letter of agreement will lapse if the applicable waiting periods under the
HSR Act have not expired by midnight New York time on Sunday 27th September
1998. If this letter of agreement lapses, we shall have no claim against you and
you shall have no claim against us. It is noted that, by execution of this
letter, each party warrants to the other that it has full right, power and
authority and has taken all action necessary to execute and deliver and to
exercise its rights and performance obligations under this letter.
This letter is to be construed in accordance with and governed by English Law.
Please acknowledge your agreement to the above by signing and returning the
enclosed copy letter.
___________________________________
Signed for and on behalf of
J.P. Morgan Securities Limited
We hereby acknowledge receipt of your letter and agree to sell the [ ]
Sedgwick Shares on the terms set out therein.
___________________________________
Signed for and on behalf of [Vendor]
2
<PAGE> 1
Exhibit (c)(4)
From: Marsh & McLennan Companies, Inc.
To: The Board of Directors
Sedgwick Group plc
Sackville House
143-152 Fenchurch Street
London
25th August, 1998
Dear Sirs,
Recommended Offer on Behalf of Marsh
We refer to the recommended offer to be made on behalf of Marsh & McLennan
Companies, Inc. ("Marsh") for the entire issued share capital of Sedgwick Group
plc ("Sedgwick") as set out in the press announcement to be issued by Marsh
today (the "Press Announcement"). Terms defined in the Press Announcement have
the same meaning when used in this letter. The purpose of this letter is to
record the agreement reached between ourselves as to each party's respective
obligations to facilitate the closing of the Offer and other related matters.
1. Marsh undertakes and confirms that it will not invoke any of
the conditions (e) to (i) (inclusive) of the Offer in relation
to:-
(a) circumstances which would otherwise give rise to a right to invoke
such condition where there has been fair disclosure of such
circumstances to Marsh or its advisers by or on behalf of Sedgwick
prior to the issue of the Press Announcement;
(b) the exercise or intended exercise by Securfin SpA of any rights they
may have pursuant to the 1997 Joint Venture Agreement between
Sedgwick, Sedgwick Internationaal BV, Securfin SpA. Altrida
Investments BV, Mrs. L. Moratti and Mr. G. M. Moratti as a
consequence of the matters referred to in condition (e); or
(c) any monies borrowed, indebtedness or other liabilities referred to
in condition (e)(i) pursuant to agreements disclosed to Marsh prior
to the issue of the Press
<PAGE> 2
Announcement being declared repayable as a consequence of the
matters referred to in condition (e).
2. Marsh undertakes and confirms that it will make proposals to participants
in Sedgwick's Share Option Schemes in accordance with Annexure 1 to this
letter as soon as reasonably practicable after the date (the
"Unconditional Date") on which the Offer becomes or is declared
unconditional in all respects.
3. Marsh undertakes that, if the Offer becomes or is declared unconditional
in all respects and any employee of any member of the Sedgwick Group is
made redundant on or before 31st December, 1999, he or she shall be
entitled to a redundancy payment which will be no less favourable than he
or she would have received under the current redundancy policies operated
by the Sedgwick Group in the UK, US and other countries as appropriate
(including the standard practice in the UK of making full payment in
respect of salary and benefits in lieu of the employee's full notice
period).
4. Marsh undertakes and confirms that in addition to other schemes operated
by the Marsh Group, in which employees of the Sedgwick Group will be
entitled to participate, it will establish a scheme consistent with the
principles set out in Annexure 2 and grant awards to individuals in
accordance with the terms of that Annexure and the appendix thereto.
Sedgwick Group acknowledges that within 48 hours (or such longer period as
Mr. White-Cooper and Marsh may agree) following exchange of this letter
Marsh may wish to discuss the details of the job descriptions set out in
such appendix and Sedgwick Group confirms that modifications may be made
thereto by agreement between Marsh and Mr. White-Cooper on behalf of
Sedgwick Group. Sedgwick Group confirms that it will co-operate in good
faith and take into account the reasonable representations of Marsh in
respect of these matters. In particular the points expressed to be
outstanding in the fax from Jack Sinnott to Rob White-Cooper of 24th
August, 1998 are to be clarified and confirmed between Rob White-Cooper
and Marsh.
5. Marsh recognises that the terms of the Sedgwick Group's Senior Executive
Incentive Plans and its Senior Incentive Plan will be affected if the
Offer becomes or is declared unconditional in all respects. Marsh is aware
that the Board and Compensation Committee of Sedgwick have adopted and
amended the rules of the relevant schemes in the manner set out in
Annexure 3. Marsh confirms it will honour such course of action. Marsh
recognises that the bonuses payable under these schemes will depend upon
the continuing performance of the Sedgwick Group following any change of
control and undertakes that it will continue to operate the plans and
apply the performance targets in a manner consistent with their spirit and
intention based on the relevant business structure and accounting
principles in use prior to the making of the Offer. Marsh recognises that
it is intended the Senior Incentive Plan and the Senior Executive
Incentive Plan will not be operated in respect of 1999 and future years
without its consent.
<PAGE> 3
6. Marsh undertakes to grant options within a period of 12 months after the
Unconditional Date over 2 million Marsh Shares to Sedgwick executives to
be agreed between Marsh and Sedgwick but with each individual receiving no
less than 1,500 Shares and save for certain exceptional circumstances no
more than 9,000 Shares under the MMC 1997 Employee Incentive and Stock
Award Plan.
Insofar as paragraphs 2 to 6 inclusive relate to or for the benefit of employees
of the Wider Sedgwick Group this letter, subject to such amendments as may be
agreed between Marsh and Sedgwick before the Unconditional Date, is given for
the benefit of such employees and as such will take effect as a deed.
This letter will be governed by and construed in accordance with English law.
Signed and delivered as a deed )
by Gregory Van Gundy )
duly authorised for and on behalf of ) GREGORY VAN GUNDY
Marsh & McLennan Companies, Inc. )
in the presence of: )
DAVID J FRIEDMAN
<PAGE> 4
Annexure 1
This note sets out the proposals which Marsh will make to Sedgwick's
optionholders if the Offer becomes unconditional.
Executive Share Option Schemes: 1984 Executive Share Option Scheme
Executive Share Option Scheme 1995
1. Participants may exercise their options in the normal way and then either
sell their Sedgwick shares or accept the Offer on whatever terms are
available to shareholders generally at the time of such acceptance. Any
applicable performance conditions have, in accordance with the Scheme
rules and subject to Inland Revenue approval, been waived by Sedgwick.
Marsh will use reasonable endeavours to arrange a procedure whereby
participants will have the ability to exercise using a short term loan
facility provided by a third party banker or lending institution.
2. Marsh will make available a cash cancellation offer as an alternative to
exercise. The cash cancellation amount will be paid without deduction of
tax save to the extent that Marsh or any company in the Sedgwick Group has
an obligation to apply PAYE to such an amount and will be available for
acceptance for a period of at least 21 days after it is made. The offer
will be the difference between the consideration per Share available under
the main Offer less the amount payable on exercise.
3. The management of Marsh shall recommend to the Compensation Committee that
Marsh should offer participants the opportunity to cancel their existing
options in return for new economically equivalent options over Marsh
shares, if possible in accordance with the rules of the relevant scheme,
provided that such exchange would not cause any material adverse tax,
legal or accounting consequences to Marsh.
Saye Share Option Schemes: Employee Savings Related Share Option
Scheme 1995
Employee Savings Related Share Option Scheme
Overseas Savings Related Share Option
Scheme 1995
1. Participants may exercise their options using the repayments due under the
related savings contract. They may then either sell their Sedgwick shares
or accept the Offer as described above.
2. For the purposes of the Overseas Scheme if proposals to optionholders, to
the extent that such proposals (including merely a notification that
options are exercisable) can lawfully be made in the relevant
jurisdiction, have not been made before Marsh becomes entitled to acquire
shares under section 428 to 430 of the Companies Act 1985, the directors
of Sedgwick will give notice to optionholders pursuant to Rule 10.4 that
their option(s) will not lapse until at least 21 days after any proposals
have been made.
<PAGE> 5
3. A cash cancellation offer will be available as an alternative to exercise
described above. To determine the number of shares in respect of which the
cash cancellation offer is made, a "notional repayment" under the related
savings contract will be divided by the relevant exercise price. The
notional repayment will be the aggregate of the contributions that a
participant has made to the savings contract as at the Unconditional Date.
<PAGE> 6
Annexure 2
Proposed New Scheme
1. Marsh will, subject to its Offer for the issued share capital of Sedgwick
being declared unconditional in all respects,
(a) undertake to establish with effect from the date of such declaration
a new retention scheme in the form set out in this attachment; and
(b) grant awards under such scheme to those individuals named in the
attached Appendix and such other individuals as shall be agreed
between Marsh and Sedgwick as set out below.
2. The amount of Marsh deferred stock units made available for initial awards
to the participants under the scheme shall have an aggregate value of
approximately US$80 million measured at the date when the Offer is
declared unconditional in all respects.
3. The total amount available shall be allocated between individual
participants so that each individual receives an award of deferred stock
units with a value of between 100% of his basic salary and US$1 million
unless otherwise agreed with Marsh. Where a number is specified against
the individual's name in the attached appendix he will be granted an award
in respect of that number of deferred stock units as soon as reasonably
practicable after the Offer is declared unconditional in all respects. The
allocation of the remaining balance of unallocated deferred stock units
shall be agreed by Rob White-Cooper (or his successor) and Marsh as soon
as reasonably practicable after the date of the letter to which this is an
attachment and in any event not later than three months after such date.
Marsh undertakes to grant an Award in respect of such number of deferred
stock units as soon as reasonably practicable after the Offer is declared
unconditional in all respects and such agreement is reached.
4. Each award shall take the form of an award over a number of Marsh deferred
stock units denominated in US$ and shall be granted in such manner and
evidenced in such form as Marsh and Sedgwick shall agree. Participants
will not be required to pay any monetary consideration either at the time
of grant or vesting of the award. Participants will be required to comply
with any arrangements for the payment of tax arising in connection with
the awards which Marsh and Sedgwick agree.
5. In normal circumstances the award shall vest in respect of the total
number of shares subject to the award after the third anniversary of the
earlier of the date of the award and the date the offer is declared
unconditional in all respects. When the award vests the participant will
receive one share of Marsh common stock for each deferred stock unit.
<PAGE> 7
6. Early vesting of an award (including any part which has not vested) will
however, be permitted if the participant's employment with the Marsh Group
ends prior to the relevant anniversary except in circumstances where it is
terminated by his employer for cause or where the participant resigns
other than for death, disability or in circumstances when he is entitled
to do so by reason of the employer's conduct. Vesting will also occur if
the company by which the participant is employed or the business in which
he works is sold outside the Marsh group. The early vesting of awards in
full will also occur in the event of a change of control (as defined in
the Marsh 1997 Employee Incentive and Stock Award Plan) of Marsh.
7. Marsh common stock issued under this new scheme will rank equally in all
respects with existing common stock except for rights attaching to such
common stock by reference to a record date prior to vesting.
8. In the event of any variation in the capital of Marsh the number and
nominal amount of deferred stock units subject to any award may be
adjusted by the directors of Marsh in such manner as they reasonably
determine on objective grounds to be an equitable adjustment, which is
broadly consistent with equivalent adjustments made for the purposes of
other Marsh employee stock and incentive plans.
<PAGE> 8
Appendix
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name Position on Offer Becoming Agreed Target Value of
Unconditional Deferred Stock Units
- --------------------------------------------------------------------------------
<S> <C> <C>
Sax Riley A non-executive director of Marsh No DSU
& McLennan Companies Inc and to
help develop clients and markets.
To retain membership of the
Lloyd's market board and
chairmanship of the Lloyds
corporate capital vehicles.
- --------------------------------------------------------------------------------
Rob White-Cooper An executive director of Marsh & US$1,000k
McLennan Companies Inc and to
be Chairman of Sedgwick Marsh &
McLennan, an umbrella
company/division overseeing
various of the Groups operations,
principally but not exclusively,
outside of the Americas.
Rob will work in partnership with
Norman Barham as President both
of whom will report to Jack
Sinnott. Rob will also be a
member of any appropriate broking
or reinsurance broking holding
company board/executive
committees.
- --------------------------------------------------------------------------------
Richard Titley A director of Sedgwick, Marsh & US$380k
McLennan or other more
appropriate board until his
retirement at the end of 1999.
- --------------------------------------------------------------------------------
Jeremy Pinchin To be considered further as quickly US$750k
as possible.
- --------------------------------------------------------------------------------
Stuart Tarrant To remain a London based senior No DSU
executive pending his retirement at
the end of 1998.
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 9
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
David Trezies CEO worldwide of Global Marine US$800k
and Energy, Global Aviation and
Global FinPro based in London to
report to Norman Barham.
David also to be a member of the
appropriate insurance broking
boards for the Americas and the
Rest of the World. (Sedgwick,
Marsh & McLennan).
- --------------------------------------------------------------------------------
Quill Healey Chairman of the Americas based in US$1,000k
Atlanta with Bob Newhouse
(President & CEO) both reporting
to Jack Sinnott. Specific
responsibilities, authorities and
reporting lines to be agreed. Also
to be a member of the worldwide
J&H Marsh & McLennan
Companies board.
- --------------------------------------------------------------------------------
Agreed target value
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 10
Annexure 3
Sedgwick Group Senior Executive Incentive Plans
1. Under the Scheme participants receive both an annual bonus and a deferred
bonus. The deferred bonus is payable not later than 3 years after the date
of grant but is adjusted to reflect the change in price of a Sedgwick
share between the date of grant and the date falling 3 years later.
2. Pursuant to the unlimited power of amendment, Sedgwick introduced at the
instigation of the compensation committee a new rule providing that in the
event of a change of control occurring following an offer to acquire all
the issued share capital of the company deferred bonuses adjusted on the
basis set out in 3 below would be paid out in full.
3. The adjustment is made by reference to the change in the Sedgwick share
price from the date of grant to the date the offer becomes unconditional.
4. In respect of any current financial year for which annual bonuses are
automatically payable, the amount of the annual bonus will be determined
on the basis of actual performance during the relevant period and the
payment will be made as soon as practicable after the first date when
actual performance for the relevant period can be assessed. The payment
will be made in cash and will include an additional cash sum of equal
value to a participant's annual bonus representing the deferred bonus to
which he would have been entitled but without making any adjustment for
changes in the share price.
1998 Senior Incentive Plan
1. Sedgwick has adopted a new senior incentive plan under which bonuses will
be payable by reference to performance targets achieved during the course
of 1998. Up to 50% (or such other relevant percentage applicable to the
individual) of the bonus can be deferred with a matching element in
Sedgwick shares awarded.
2. The rules provide that on a change of control of Sedgwick during the year
the bonus for that year will become automatically payable, and not be
subject to any continuation of employment thereafter, and shall be
determined on the basis of actual performance during the relevant
financial year (1998) but shall be not less than the amount which would
have been payable if the target performance had been achieved.
3. A payment will also be made on the basis that the participant would have
taken 50% (or such other relevant percentage applicable to the individual)
of his bonus on a deferred basis and satisfied any necessary conditions
until the end of the relevant retention period. For the purposes of
calculating the value of the payment the value of any
<PAGE> 11
Sedgwick shares which would have otherwise been transferable to the
participant shall be equal to their market value based on the terms of any
offer to obtain control of Sedgwick.
4. Any payment under the Plan will be made as soon as practicable after the
first date when actual performance for the relevant financial year can be
assessed.
5. There are currently no matching and deferred bonus shares subject to a
Retention Period under this Plan.
