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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
MARSH & MCLENNAN COMPANIES, INC.
1166 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036-2774
(212) 345-5000
COMMISSION FILE NUMBER 1-5998
STATE OF INCORPORATION: DELAWARE
I.R.S. EMPLOYER IDENTIFICATION NO. 36-2668272
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------------------------------ -----------------------------
<S> <C>
Common Stock New York Stock Exchange
(par value $1.00 per share) Chicago Stock Exchange
Preferred Stock Purchase Rights Pacific Exchange
London Stock Exchange
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __X__. No _____.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K __X__.
As of February 27, 1998, the aggregate market value of the voting stock held
by non-affiliates of the registrant was approximately $14,691,000,000.
As of February 27, 1998, there were outstanding 170,557,674 shares of common
stock, par value $1.00 per share, of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
(ONLY TO THE EXTENT SET FORTH IN THE PART INDICATED)
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<S> <C>
Parts I, II and
Annual Report to Stockholders for year ended December 31, 1997............ IV
Notice of Annual Meeting of Stockholders and Proxy Statement dated March
31, 1998................................................................ Part III
</TABLE>
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MARSH & McLENNAN COMPANIES, INC.
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ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1997
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PART I
Item 1. Business.
Marsh & McLennan Companies, Inc. (the "registrant"), a professional
services organization with origins dating from 1871 in the United States, is a
holding company which, through its subsidiaries and affiliates, provides clients
with analysis, advice and transactional capabilities in the fields of risk and
insurance services, investment management and consulting. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 26 through 33 of the Annual Report to Stockholders for the year ended
December 31, 1997 (the "1997 Annual Report"), which is incorporated herein by
reference, for a discussion of the registrant's revenues and operating income by
industry segment for each of the last three fiscal years.
Risk and Insurance Services. Registrant's risk and insurance services are
provided by its subsidiaries and their affiliates on a worldwide basis, as
broker, agent or consultant for insureds, insurance underwriters and other
brokers. These services are provided by J&H Marsh & McLennan, Inc. and its
subsidiaries and affiliates, which include Guy Carpenter & Company, Inc., a
reinsurance intermediary, and Seabury & Smith, Inc., an insurance program
manager, and their subsidiaries and affiliates. In addition, Marsh & McLennan
Risk Capital Corp. provides services principally in connection with originating,
structuring and managing insurance and related industry investments.
On March 27, 1997, the registrant acquired all of the capital stock of
Johnson & Higgins, the leading privately held insurance services and employee
benefit consulting firm. Johnson & Higgins was subsequently merged with Marsh &
McLennan, Incorporated to form J&H Marsh & McLennan, Inc. The reinsurance
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intermediary business of Johnson & Higgins, conducted by Willcox Incorporated
Reinsurance Intermediaries, was combined with Guy Carpenter & Company, Inc. and
its benefit consulting business conducted by A. Foster Higgins & Co., Inc., was
combined with the operations of William M. Mercer Companies LLC. In January
1997, the registrant acquired CECAR SA, a French insurance broker, resulting in
the registrant becoming the largest insurance broker in France.
J&H Marsh & McLennan, Inc. J&H Marsh & McLennan, Inc. is a world leader in
providing risk management and insurance broking services. These services,
carried on throughout the world, are provided for a predominantly corporate
clientele located in more than 100 countries, primarily in North and South
America, Europe and Asia Pacific. Client companies are engaged in a broad range
of commercial activities, including general industries, financial and
professional services, aviation, marine, energy, construction, land
transportation, healthcare and utility concerns. Clients also include
professional, institutional and public entities and individuals.
Such risk management and insurance broking services involve various types
of property and liability loss exposures, including large and complex risks that
require access to world insurance markets. Services provided to clients include
insurance broking and risk transfer activities and professional counseling
services on risk management issues, including risk analysis, coverage
requirements, self-insurance (in which the insured retains a portion of its
insurance risks), and alternative insurance and risk financing methods, as well
as claims collection, injury management, loss prevention and other insurance
related services. Services also include organization and administrative services
for special purpose insurance companies and other risk assumption alternatives.
Insurance placement services include the placement of insurance coverages with
insurers world-wide, sometimes involving other intermediaries. Correspondent
relationships are maintained with unaffiliated firms in certain countries.
Reinsurance broking services are provided to insurance and reinsurance risk
takers worldwide, principally by Guy Carpenter & Company, Inc. and its
subsidiaries and affiliates, from offices principally in North America and
Europe. Such services primarily involve acting as an intermediary for insurance
and reinsurance organizations on all classes of reinsurance, including specialty
lines such as professional liability, medical malpractice,
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accident, life and health. The intermediary assists the insurer by providing
advice, placing reinsurance coverage with reinsurance organizations located
around the world, and placing risk-transfer financing with capital markets, and
furnishing related services such as actuarial, financial and regulatory
consulting, portfolio analysis and catastrophe modeling. Claims services are
often performed for policies placed a number of years previously. The insurance
company may seek reinsurance or other risk-transfer financing on all or a
portion of the risks it insures. Intermediary services are also provided to
reinsurance companies, which may also seek reinsurance on the risks they have
reinsured.
Seabury & Smith, Inc. and its subsidiaries and affiliates provide insurance
program management services (including the design, placement and administration
of life, health, accident, disability, automobile, homeowners, professional
liability and other insurance, and related products) primarily on a group
marketing basis to individuals, businesses and their employees, and associations
and other affinity groups (both sponsored and non-sponsored), and their members
principally in the United States and Canada. It provides underwriting management
services to insurers in the United States, Canada and the United Kingdom,
primarily for professional liability coverages.
Marsh & McLennan Risk Capital Corp. Marsh & McLennan Risk Capital Corp.
("MMRCC") provides services in connection with originating, structuring and
managing insurance and related industry investments. It is an advisor to The
Trident Partnership L.P., an independent private investment partnership formed
in 1994 to make private equity investments in the global insurance and
reinsurance industry. MMRCC is also an advisor to Risk Capital Reinsurance
Company, which was formed in 1995 to provide reinsurance, both on a stand-alone
basis and as part of integrated capital solutions for insurance companies. MMRCC
and its predecessor operations were instrumental in the formation of several
substantial insurance and reinsurance entities, including A.C.E. Insurance
Company, Ltd., X.L. Insurance Company, Ltd., Mid Ocean Reinsurance Company Ltd.
and Risk Capital Reinsurance Company. MMRCC also advises its immediate parent
company, Marsh & McLennan Risk Capital Holdings, Ltd., regarding the latter's
ownership holdings in certain insurance and reinsurance entities and funds,
primarily ones initiated by MMRCC. As a result of the foregoing activities,
subsidiaries and affiliates of the registrant may have direct or indirect
investments in insurance
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and reinsurance companies, including entities at Lloyd's, which are considered
for client placements by the registrant's insurance and reinsurance brokerage
businesses.
Compensation For Services. The revenue attributable to the registrant's
risk and insurance services consists primarily of fees paid by clients;
commissions and fees paid by insurance and reinsurance companies; interest
income on funds held in a fiduciary capacity for others, such as premiums and
claims proceeds; placement services revenues earned from carriers; and
compensation for services provided in connection with the organization,
structuring and management of insurance and related industry investments,
including fees, royalties and dividends, as well as appreciation that has been
realized on sales of holdings in such entities.
Revenue generated by risk and insurance services is fundamentally derived
from the value of the service provided to clients and markets, and is affected
by premium rate levels in the property and casualty insurance markets and
available insurance capacity, because compensation is frequently related to the
premiums paid by insureds. In many cases compensation may be negotiated in
advance based upon the estimated value of the services to be performed. Revenue
is also affected by fluctuations in the amount of risk retained by insurance and
reinsurance clients themselves and by insured values, the development of new
products, markets and services, new and lost business, merging of clients
(including insurance companies that are clients in the reinsurance intermediary
business) and the volume of business from new and existing clients, as well as
by interest rates for fiduciary funds.
Revenue and fees also may be received from originating, structuring and
managing investments in insurers and related industry investments, and income
and proceeds also may be derived from investments made by the registrant.
Placement services revenue includes payments or allowances by insurance
companies based upon such factors as the overall volume of business placed by
the broker with that insurer, the aggregate commissions paid by the insurer for
that book during specific periods, or the loss performance to the insurer of
that business.
Revenues vary from quarter to quarter as a result of the timing of policy
renewals, the net effect of new and lost
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business production and realizing on investments, whereas expenses tend to be
more uniform throughout the year.
Commission rates vary in amount depending upon the type of insurance or
reinsurance coverage provided, the particular insurer or reinsurer, and the
capacity in which the broker acts, in addition to negotiations with clients. In
some cases, compensation for brokerage or advisory services is paid directly as
a fee by the client. Occasionally, commissions are shared with other brokers
that have participated in placing insurance or servicing insureds.
The investment of fiduciary funds is governed by the applicable laws or
regulations of insurance authorities of the states in the United States and in
other jurisdictions in which the registrant's subsidiaries do business. These
laws and regulations typically limit the type of investments that may be made
with such funds. The general amount of funds invested and interest rates may
vary from time to time.
Investment Management. Investment management and related services are
provided by Putnam Investments, Inc. and its subsidiaries ("Putnam"). Putnam has
been engaged in the investment management business since 1937, with its
principal offices in Boston, Massachusetts. Putnam also has offices in London
and Tokyo. Putnam provides individual and institutional investors with a broad
range of equity and fixed income investment products and services designed to
meet varying investment objectives and which afford its clients the opportunity
to allocate their investment resources among various alternative investment
products as changing worldwide economic and market conditions warrant.
Investment Management Services. Putnam's investment management services,
which are performed principally in the United States, include securities
investment advisory and management services consisting of investment research
and management, and accounting and related services for a group of publicly-held
investment companies. As of December 31, 1997, there were 100 such funds (the
"Putnam Funds") registered under the Investment Company Act of 1940, including
17 closed-end investment companies whose shares are traded on various major
domestic stock exchanges. A number of the open-end funds serve as funding media
for variable insurance contracts. Investment management services are also
provided to corporate
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profit sharing and pension funds, state and other governmental and public
employee retirement funds, university endowment funds, charitable foundations,
collective investment vehicles (both U.S. and non-U.S.) and other domestic and
foreign institutional accounts.
Assets managed by Putnam, on which management fees are based, were
approximately $235.1 billion and $173.4 billion as of December 31, 1997 and
1996, respectively. Mutual fund assets aggregated $182.0 billion at December 31,
1997 and $133.8 billion at December 31, 1996. Assets under management at
December 31, 1997 consisted of approximately 69% equity securities and 31%
fixed income products, invested both domestically and globally.
Putnam's revenues are derived primarily from its investment management fees
received from the Putnam Funds and institutional accounts. Assets under
management and revenue levels are particularly affected by fluctuations in
domestic and international bond and stock market prices, and by the level of
investments and withdrawals for current and new fund shareholders and clients.
They are also affected by investment performance, service to clients, the
development and marketing of new investment products, the relative
attractiveness of the investment style under prevailing market conditions and
changes in the investment patterns of clients. Fluctuations in the prices of
stocks will have an effect on equity assets under management and may influence
the flow of monies to and from equity funds and accounts. Fluctuations in
interest rates and in the yield curve have a similar effect on fixed income
assets under management and may influence the flow of monies to and from
fixed-income funds and accounts. Putnam offers investment products that allow
investors to diversify between stocks and bonds, domestically and
internationally.
The investment management services provided to the Putnam Funds and
institutional accounts are performed pursuant to advisory contracts which
provide for a fee payable to the Putnam company that manages the account. The
amount of the fee varies depending on the individual mutual fund or account and
is usually based upon a sliding scale in relation to the level of assets under
management and, in certain instances, is also based on investment performance.
Such contracts automatically terminate in the event of their "assignment",
generally may be terminated by either party without penalty and, as to contracts
with the
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Putnam Funds, continue in effect only so long as approved, at least annually, by
their shareholders or by the Putnam Funds' trustees, including a majority who
are not affiliated with Putnam. "Assignment" includes any direct or indirect
transfer of a controlling block of voting stock in Putnam or registrant. The
management of Putnam and the trustees of the funds regularly review the fund fee
structure in light of fund performance, the level and range of services
provided, industry conditions and other relevant factors.
Putnam Fiduciary Trust Company. A Putnam subsidiary, Putnam Fiduciary Trust
Company, a Massachusetts trust company, serves as transfer agent, dividend
disbursing agent, registrar and custodian for the Putnam Funds and provides
custody services to several external clients. Putnam Fiduciary Trust Company
receives compensation from the Putnam Funds for such services pursuant to
written agreements which may be terminated by either party on 90 days' notice,
and for providing custody services pursuant to written agreements which may be
terminated by either party on 30 days' notice. These contracts generally provide
for compensation on the basis of several factors which vary with the type of
service being provided. In addition, Putnam Fiduciary Trust Company provides
administrative and trustee (or custodian) services for employee benefit plans
(in particular 401(k) plans), IRA's and other clients for which it receives
compensation pursuant to service and trust or custodian contracts. In the case
of employee benefit plans, investment options are selected by the plan sponsors
and may include Putnam mutual funds and other Putnam managed products, as well
as employer stock and other non-Putnam investments. In some instances, The
Putnam Advisory Company, Inc., a Putnam subsidiary, acts as investment manager
for a plan's fixed income portfolio and receives compensation for such
investment management services pursuant to an investment management agreement.
Putnam Mutual Funds Corp. Putnam Mutual Funds Corp., a Putnam subsidiary,
acts as principal underwriter of the shares of the open-end Putnam Funds,
selling primarily through independent broker/dealers, financial planners and
financial institutions, including banks, and directly to certain large 401(k)
plans and other institutional accounts. Shares of the open-end funds are
generally sold at their respective net asset value per share plus a sales
charge, which varies depending on the individual fund and the amount purchased.
In some cases the sales charge is assessed only if the shares are redeemed
within a stated time period. In
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accordance with certain terms and conditions described in the prospectuses for
such funds, certain investors are eligible to purchase shares at net asset value
or at reduced sales charges, and investors may generally exchange their shares
of a fund at net asset value for shares of another Putnam Fund without the
payment of additional sales charges.
Commissions to selling dealers are typically paid at the time of the
purchase as a percentage of the amount invested. Essentially all Putnam Funds
are available with a contingent deferred sales charge in lieu of a front-end
load. The related prepaid dealer commissions initially paid by Putnam to
broker/dealers for distributing such funds are recovered through charges and
fees received over a number of years.
Nearly all of the open-end Putnam Funds have adopted distribution plans
pursuant to Rule 12b-1 under the Investment Company Act of 1940 under which the
Putnam Funds make payments to Putnam Mutual Funds Corp., a Putnam subsidiary, to
cover costs relating to distribution of the Putnam Funds and services provided
to shareholders. These payments enable the Putnam subsidiary to pay service fees
and other continuing compensation to firms that provide services to Putnam Fund
shareholders and distribute shares of the Putnam Funds. Some Rule 12b-1 fees are
retained by the Putnam Mutual Funds Corp. as compensation for the costs of
distribution and other services provided by Putnam to shareholders and for
commissions advanced by Putnam at the point of sale (and recovered through fees
received over time) to firms that distribute shares of the Putnam Funds. These
distribution plans, and payments made by the Putnam Funds thereunder, are
subject to annual renewal by the trustees of the Putnam Funds and to termination
by vote of the shareholders of the Putnam Funds or by vote of a majority of the
Putnam Funds' trustees who are not affiliated with Putnam. Failure of the
Trustees to approve continuation of the Rule 12b-1 plans for Class B (deferred
sales charge) shares would have a material adverse effect on Putnam. The
Trustees also have the ability to reduce the level of 12b-1 fees paid by a fund
or to make other changes that would reduce the amount of 12b-1 fees received by
Putnam. Such changes could have a material adverse effect on Putnam. The
registrant has received a Notice of Proposed Adjustment from a field office of
the Internal Revenue Service challenging its tax treatment relating to 12b-1
fees; see Note 4 to Consolidated Financial Statements on page 42 of the 1997
Annual Report.
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Putnam provides investor services through three separate facilities in the
Boston area and has one of the largest image processing facilities in the world.
Consulting. Through Mercer Consulting Group, Inc., subsidiaries and
affiliates of the registrant, separately and in collaboration, provide
consulting services to a predominantly corporate clientele from locations around
the world, primarily in the areas of human resources and employee benefit
programs, including retirement, health care and compensation; and general
management consulting, which comprises strategy, operations and marketing.
Mercer Consulting Group, Inc. also provides economic consulting and analysis.
William M. Mercer Companies LLC ("William M. Mercer"), through its
subsidiaries and affiliates, provides professional advice and services to
corporate, government and institutional clients from offices in approximately 27
countries and territories, primarily in North and South America, Western Europe,
East Asia, Australia and New Zealand. Consultants help organizations design,
implement, administer and communicate retirement, compensation and other human
resource programs, and provide other types of actuarial advice. In addition,
William M. Mercer advises the management of health care providers on various
business issues, and through its investment consultants, the firm assists
trustees of pension funds and others in the selection of investment managers and
investment strategies. In certain locations outside the United States, William
M. Mercer advises individuals in the investment and disposition of lump sum
retirement benefits and other retirement savings and provides related trustee
services.
Mercer Management Consulting, Inc. provides advice and assistance on issues
of business strategy, primarily to large corporations in North America, Europe
and Asia. Consultants help senior executives more fully understand the behavior
of their customers, optimize the economics of their business, and structure
their organizations, processes and systems to achieve their strategic goals. In
addition, under the Lippincott & Margulies name, Mercer Management Consulting,
Inc. provides consulting services relating to brand and corporate identity and
image.
National Economic Research Associates, Inc. ("NERA"), a firm of consulting
economists, provides advice to law firms,
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corporations, trade associations and governmental agencies, from offices in the
United States, England and Spain. NERA provides research and analysis of
economic and financial issues arising in litigation, regulation, public policy
and management.
The major component of Mercer Consulting Group's revenue is fees paid by
clients for advice. In addition, commission revenue is received from insurance
companies for the placement of individual and group insurance contracts,
primarily life, health and accident coverages. A relatively small amount of
revenue is derived from brokerage commissions in connection with a registered
securities broker dealer.
Revenue in the consulting business is affected by changes in clients'
industries, including government regulation, as well as new products and
services, the stage of the economic cycle and broad trends in employee
demographics and in the management of large organizations.
Regulation. The activities of the registrant are subject to licensing
requirements and extensive regulation under the laws of the United States and
its various states, territories and possessions, as well as laws of other
countries in which the registrant's subsidiaries operate. These laws and
regulations are primarily intended to benefit clients.
The registrant's three business segments depend on the validity of, and
continued good standing under, the licenses and approvals pursuant to which they
operate, as well as compliance with pertinent regulations. The registrant
therefore devotes significant effort toward maintaining its licenses and to
ensuring compliance with a diverse and complex regulatory structure.
In all jurisdictions the applicable laws and regulations are subject to
amendment or interpretation by regulatory authorities. Generally, such
authorities are vested with relatively broad discretion to grant, renew and
revoke licenses and approvals, and to implement regulations. Licenses may be
denied or revoked for various reasons, including the violation of such
regulations, conviction of crimes and the like. Possible sanctions which may be
imposed include the suspension of individual employees, limitations on engaging
in a particular business for specified periods of time, revocation of licenses,
censures and fines. In some instances, the registrant follows practices based on
its
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interpretations, or those generally followed by the industry, of laws or
regulations, which may prove to be different from those of regulatory
authorities. Accordingly, the possibility exists that the registrant may be
precluded or temporarily suspended from carrying on some or all of its
activities or otherwise fined or penalized in a given jurisdiction.
No assurances can be given that the registrant's risk and insurance
services, investment management or consulting activities can continue to be
conducted in any given jurisdiction as in the past.
Risk and Insurance Services. While the laws and regulations vary among
jurisdictions, every state of the United States and most foreign jurisdictions
require an insurance broker or agent (and in some cases a reinsurance broker or
intermediary) or insurance consultant, managing general agent or third party
administrator to have an individual and/or company license from a governmental
agency or self-regulatory organization. In addition, certain of the registrant's
risk and insurance activities are governed by the rules of the Lloyd's insurance
market in London and self-regulatory organizations in other jurisdictions, as
well as securities and futures licensing authorities. A few jurisdictions issue
licenses only to individual residents or locally-owned business entities. In
some of these jurisdictions, if the registrant has no licensed subsidiary, the
registrant may maintain arrangements with residents or business entities
licensed to act in such jurisdiction. Also, in some jurisdictions, various
insurance related taxes may also be due either by clients directly or from the
broker. In the latter case, the broker customarily looks to the client for
payment.
Investment Management. Putnam's securities investment management activities
are subject to regulation in the United States by the Securities and Exchange
Commission, and other federal, state and self regulatory authorities, as well as
in certain other countries in which it does business. Putnam's officers,
directors and employees may from time to time own securities which are also held
by the Putnam Funds or institutional accounts. Putnam's internal policies with
respect to individual investments require prior clearance and reporting of
transactions and restrict certain transactions so as to reduce the possibility
of conflicts of interests.
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To the extent that existing or future regulations affecting the sale of
Putnam fund shares or other investment products or their investment strategies,
cause or contribute to reduced sales of Putnam fund shares or investment
products or impair the investment performance of the Putnam Funds or such other
investment products, Putnam's aggregate assets under management and its revenues
might be adversely affected. Changes in regulations affecting the free movement
of international currencies might also adversely affect Putnam.
Consulting. No licensing or other regulatory requirements are material to
the consulting activities of the registrant's subsidiaries in the aggregate nor
apply to that activity in general; however, the subject matter of certain
consulting services is subject to regulation. For example, employee benefit
plans are subject to various governmental regulations, and services related to
brokerage activities, trustee services, investment matters or the placing of
individual and group insurance contracts subject the registrant's subsidiaries
to insurance, investment or securities regulations and licensing in various
jurisdictions.
Competitive Conditions. Principal methods of competition in risk and
insurance services and consulting include the quality and types of services and
products that a broker or consultant provides its clients and their cost. Putnam
competes with other providers of investment products and services primarily on
the basis of the range of investment products offered, the investment
performance of such products, as well as the manner in which such products are
distributed, and the scope and quality of the shareholder and other services
provided. Sales of Putnam fund shares are also influenced by general securities
market conditions, government regulations, global economic conditions and
advertising and sales promotional efforts.
All these businesses also encounter strong competition from both public
corporations and private firms in attracting and retaining qualified employees.
Risk and Insurance Services. The insurance and reinsurance broking services
business of the registrant is believed to be among the largest of its type in
the world.
The registrant encounters strong competition in the risk and insurance
services business from other insurance brokerage firms
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which also operate on a nationwide or worldwide basis, from a large number of
regional and local firms in the United States and in other countries, from
insurance and reinsurance companies that market and service their insurance
products without the assistance of brokers or agents and from other financial
services businesses, including commercial and investment banks that provide
risk-related services and products.
Certain insureds and groups of insureds have established programs of self
insurance, as a supplement or alternative to third-party insurance, thereby
reducing in some cases the need for insurance placement services. There are also
many other providers of insurance program management services, including many
insurance companies, and many other organizations seeking to structure and
manage investments in the insurance industry.
Investment Management. Putnam Investments is one of the largest investment
management firms in the United States. The investment management business is
highly competitive. In addition to competition from firms already in the
investment management business, including commercial banks, stock brokerage and
investment banking firms, and insurance companies, there is competition from
other firms offering financial services and other investment alternatives.
Many securities dealers, whose large retail distribution systems play an
important role in the sale of shares in the Putnam Funds, also sponsor competing
proprietary mutual funds. To the extent that such securities dealers value the
ability to offer customers a broad selection of investment alternatives, they
will continue to sell independent funds, notwithstanding the availability of
proprietary products. However, to the extent that these firms limit or restrict
the sale of Putnam fund shares through their brokerage systems in favor of their
proprietary mutual funds, assets under management might decline and Putnam's
revenues might be adversely affected. In addition, a number of mutual fund
sponsors presently market their funds to the general public without sales
charges. Certain firms also offer passively managed funds such as index funds to
the general public.
Consulting. Mercer Consulting Group, one of the largest global consulting
firms, is a leader in many of its businesses. William M. Mercer is the world's
largest human resources consulting organization. Mercer Management Consulting is
a
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leader in strategy consulting. NERA is a leading firm of consulting economists.
William M. Mercer, Mercer Management Consulting and NERA compete with other
privately held and publicly held worldwide and national consulting companies, as
well as regional and local firms. Competitors include independent consulting
firms as well as consulting organizations affiliated with accounting firms,
information systems providers, and financial services firms, some of which
emphasize administrative or consulting services related to other services.
Segmentation of Activity by Type of Service and Geographic Area of
Operation. Financial information relating to the types of services provided by
the registrant and the geographic areas of its operations is incorporated herein
by reference to Note 15 of the Notes to Consolidated Financial Statements on
page 51 of the 1997 Annual Report. The registrant's non-U.S. operations are
subject to the customary risks involved in doing business in other countries,
such as currency fluctuations and exchange controls.
Employees. As of December 31, 1997, the registrant and its consolidated
subsidiaries employed about 36,000 people worldwide, of whom approximately
20,500 were employed by subsidiaries providing risk and insurance services,
approximately 5,400 were employed by subsidiaries providing investment
management services, approximately 9,700 were employed by subsidiaries providing
consulting services, and approximately 400 were employed by the registrant.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS. This report and the
registrant's financial statements and other documents incorporated herein by
reference contain 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 revenue and expense growth, cost savings and efficiencies
expected from the integration of Johnson & Higgins, market and industry
conditions, interest rates, foreign exchange rates, contingencies and matters
relating to the registrant's operations and income taxes. Such forward-looking
statements are based on available current market and industry materials,
expert's reports and opinions, as well as management's expectations concerning
future events impacting the
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registrant. 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 registrant's risk and insurance services
business, the failure to successfully integrate the recently acquired insurance
services and employee benefit consulting business of Johnson & Higgins
(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 registrant's investment
management business, changes in worldwide and national securities and fixed
income markets and; with respect to all of registrant's activities, 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 the registrant
operates. A more detailed description of certain of these factors is included
elsewhere in this Annual Report and are incorporated herein by reference.
Item 2. Properties.
The registrant and four of its subsidiaries, as tenants in common, own a
56% condominium interest in a 44-story building in New York City which serves as
their worldwide headquarters. As part of the business combination with Johnson &
Higgins, the registrant acquired a 37.58% condominium interest in a 40 story
building in New York City, which is currently used by the risk and insurance
services business of J&H Marsh & McLennan, Inc. The principal offices of the
registrant's risk and insurance services subsidiaries in London are located in
two adjoining buildings on land under a lease which expires in 2077, which site
is currently expected to be redeveloped by registrant.
The remaining business activities of the registrant and its
subsidiaries are conducted principally in leased office space in
cities throughout the world. No difficulty is anticipated in
negotiating renewals as leases expire or in finding other
satisfactory space if the premises become unavailable. From time
15
<PAGE>
to time, the registrant may have unused space and may seek to sublet such space
to third parties, depending upon the demands for office space in the locations
involved.
Item 3. Legal Proceedings.
The registrant and its subsidiaries are subject to 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. v. Olsen, et al."
was brought in the United States District Court for the Southern District of New
York by certain former directors of Johnson & Higgins ("J&H"), which was
acquired by the registrant in March 1997, against twenty-four selling
shareholders of J&H, as well as J&H itself and the registrant. The action
essentially challenges the allocation of the consideration paid in connection
with the registrant'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. On or about March
10, 1998, an amended complaint (the "Complaint") was served in that action. 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 registrant's management
that the disposition or ultimate determination of these claims and lawsuits will
not have a material adverse effect on the registrant's consolidated results of
operations or its consolidated financial position.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
16
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
Market and dividend information regarding the registrant's common stock on
page 53 of the 1997 Annual Report is incorporated herein by reference.
Item 6. Selected Financial Data.
The selected financial data on pages 54 and 55 of the 1997 Annual Report
are incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Information on pages 26 through 33 of the 1997 Annual Report is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
The Consolidated Financial Statements and the Report of Independent
Auditors thereto on pages 34 through 52 of the 1997 Annual Report and Selected
Quarterly Financial Data (Unaudited) on page 53 of the 1997 Annual Report are
incorporated herein by reference. Supplemental Notes to Consolidated Financial
Statements are included on pages 26 and 27 hereof.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information as to the directors of the registrant is incorporated herein by
reference to the material under the heading "Directors" in the Notice of Annual
Meeting of Stockholders and Proxy Statement dated March 31, 1998 (the "1998
Proxy Statement").
17
<PAGE>
The executive officers of the registrant as of March 24, 1998 are Messrs.
Barham, Blum, Borelli, Coster, Greenberg, Lasser, Sinnott and Smith, with
respect to whom information is incorporated herein by reference to the 1998
Proxy Statement, and:
Francis N. Bonsignore, age 51, has been Senior Vice President-Human
Resources & Administration of the registrant since 1990. Immediately
prior thereto, he was partner and National Director-Human Resources for
Price Waterhouse.
Gregory F. Van Gundy, age 52, is Secretary and General Counsel of the
registrant. He joined the registrant in 1974.
Item 11. Executive Compensation.
Information under the headings "Executive Compensation", "Compensation
Committee Report" and "Comparison of Cumulative Total Stockholder Return" in the
1998 Proxy Statement is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information under the heading "Security Ownership" in the 1998 Proxy
Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
Information under the headings "Employment Agreements" and "Transactions
with Management and Others; Other Information" in the 1998 Proxy Statement is
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a) The following documents are filed as a part of this report:
1. Consolidated Financial Statements (incorporated herein by reference
to pages 34 through 51 of the 1997 Annual Report):
18
<PAGE>
Consolidated Statements of Income for the
three years ended December 31, 1997
Consolidated Balance Sheets as of
December 31, 1997 and 1996
Consolidated Statements of Cash Flows for the
three years ended December 31, 1997
Consolidated Statements of Stockholders'
Equity for the three years ended
December 31, 1997
Notes to Consolidated Financial Statements
Report of Independent Auditors
Supplemental Notes to Consolidated Financial
Statements
Report of Independent Auditors
Other:
Selected Quarterly Financial Data and
Supplemental Information (Unaudited) for the
three years ended December 31, 1997
(incorporated herein by reference to page
53 of the 1997 Annual Report)
Ten-Year Statistical Summary of Operations
(incorporated herein by reference to pages
54 and 55 of the 1997 Annual Report)
2. All required Financial Statement Schedules are included in the
Consolidated Financial Statements, the Notes to Consolidated
Financial Statements or the Supplemental Notes to Consolidated
Financial Statements.
3. The following exhibits are filed as a part of this report:
19
<PAGE>
(3.1) -the registrant's restated certificate of incorporation
(3.2) -the registrant's by-laws
(10.1) -Stock Purchase Agreement, dated as of March 12,
1997, by and among the registrant, Johnson & Higgins and
the stockholders of Johnson & Higgins (incorporated
by reference to the registrant's Current Report on
Form 8-K dated March 14, 1997)
(10.2) -First Amendment to the Stock Purchase Agreement, dated as
of March 27, 1997 by and among the registrant,
Johnson & Higgins and the stockholders of Johnson &
Higgins (incorporated by reference to the
registrant's Current Report on Form 8-K dated April
7, 1997)
(10.3)* -Marsh & McLennan Companies, Inc. 1997 Senior Executive
Incentive and Stock Award Plan (incorporated by
reference to the registrant's Annual Report on Form
10-K for the year ended December 31, 1996)
(10.4)* -Marsh & McLennan Companies, Inc. Restricted Shares
Voluntary Deferral Program for U.S. Employees
(incorporated by reference to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1995)
(10.5)* -Marsh & McLennan Companies Stock Investment Supplemental
Plan (incorporated by reference to the registrant's
Annual Report on Form 10-K for the year ended
December 31, 1994)
(10.6)* -Amendment to Marsh & McLennan Companies Stock Investment
Supplemental Plan dated June 16, 1997
- ----------------------
* Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item 14(c) of
Form 10-K.
20
<PAGE>
(10.7)* -Marsh & McLennan Companies Special Severance Pay Plan
(incorporated by reference to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1996)
(10.8)* -Putnam Investments, Inc. Executive Deferred Compensation
Plan (incorporated by reference to the registrant's
Annual Report on Form 10-K for the year ended
December 31, 1994)
(10.9)* -Marsh & McLennan Companies Supplemental Retirement Plan
(incorporated by reference to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1992)
(10.10)*-Marsh & McLennan Companies Senior Management Incentive
Compensation Plan (incorporated by reference to the
registrant's Annual Report on Form 10-K for the year
ended December 31, 1994)
(10.11)*-Marsh & McLennan Companies, Inc. U.S. Employee 1997 Cash
Bonus Award Voluntary Deferral Plan
(10.12)*-Marsh & McLennan Companies, Inc. Canadian Employee 1997
Cash Bonus Award Voluntary Deferral Plan
(10.13)*-Marsh & McLennan Companies, Inc. Directors Stock
Compensation Plan (as amended and restated 6/27/97)
(10.14)*-Employment Agreement between Jeffrey W. Greenberg and
Marsh & McLennan Risk Capital Corp. and related Guaranty
of the registrant (incorporated by reference to the
registrant's Annual Report on Form 10-K for the year
ended December 31, 1995)
- ----------------------
* Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item 14(c) of
Form 10-K.
21
<PAGE>
(10.15)*-Employment Agreement between Lawrence J. Lasser and Putnam
Investments, Inc. effective as of December 31, 1997
(13)-Annual Report to Stockholders for the year ended December
31, 1997, to be deemed filed only with respect to those
portions which are expressly incorporated by reference
(21)-list of subsidiaries of the registrant (as of 2/28/98)
(23)-consent of independent auditors
(24)-powers of attorney
(27)-Financial Data Schedule (filed with SEC for EDGAR
purposes only)
(b) Two reports on Form 8-K were filed by the registrant in the
fiscal quarter ended December 31, 1997. On October 10, 1997
and December 4, 1997, respectively, the registrant filed a
report on Form 8-K (i) announcing the renewal of the
registrant's shareholders' rights plan and (ii) disclosing the
initiation of an action by certain former directors of Johnson
& Higgins ("J&H") challenging the allocation of the
consideration paid in connection with the registrant's
business combination with J&H.
- ----------------------
* Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item
14(c) of Form 10-K.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
this 26th day of March, 1998 on its behalf by the undersigned, thereunto duly
authorized.
MARSH & McLENNAN COMPANIES, INC.
By /s/ A.J.C. SMITH
-----------------------------
A.J.C. SMITH
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated this 26th day of March, 1998.
/s/A.J.C. SMITH NORMAN BARHAM*
- ------------------------------- ----------------------------
A.J.C. SMITH NORMAN BARHAM
Director, Chairman of the Board Director
and Chief Executive Officer
/s/FRANK J. BORELLI LEWIS W. BERNARD*
- ------------------------------- ----------------------------
FRANK J. BORELLI LEWIS W. BERNARD
Senior Vice President and Director
Chief Financial Officer,
Director
/s/DOUGLAS C. DAVIS RICHARD H. BLUM*
- ------------------------------- ----------------------------
DOUGLAS C. DAVIS RICHARD H. BLUM
Vice President and Controller Director
(Chief Accounting Officer)
23
<PAGE>
PETER COSTER* RICHARD M. MORROW*
- ------------------------------- ----------------------------
PETER COSTER RICHARD M. MORROW
Director Director
ROBERT F. ERBURU* DAVID A. OLSEN*
- ------------------------------- ----------------------------
ROBERT F. ERBURU DAVID A. OLSEN
Director Director
JEFFREY W. GREENBERG* GEORGE PUTNAM*
- ------------------------------- ----------------------------
JEFFREY W. GREENBERG GEORGE PUTNAM
Director Director
RAY J. GROVES* ADELE SMITH SIMMONS*
- ------------------------------- ----------------------------
RAY J. GROVES ADELE SMITH SIMMONS
Director Director
RICHARD S. HICKOK* JOHN T. SINNOTT*
- ------------------------------- ----------------------------
RICHARD S. HICKOK JOHN T. SINNOTT
Director Director
THE RT. HON. LORD LANG OF MONKTON* FRANK J. TASCO*
- ---------------------------------- ----------------------------
THE RT. HON. LORD LANG OF MONKTON FRANK J. TASCO
Director Director
LAWRENCE J. LASSER*
- -------------------------------
LAWRENCE J. LASSER
Director
- ------------------
* Gregory F. Van Gundy, pursuant to Powers of Attorney executed by each
of the individuals whose name is followed by an (*) and filed herewith,
by signing his name hereto does hereby sign and execute this Form l0-K
of Marsh & McLennan Companies, Inc. on behalf of such individual in the
capacities in which the names of each appear above.
/s/GREGORY F. VAN GUNDY
----------------------------
GREGORY F. VAN GUNDY
24
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders of
Marsh & McLennan Companies, Inc.:
We have audited the consolidated balance sheets of Marsh & McLennan Companies,
Inc. and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1997, and have issued our
report thereon dated March 6, 1998; such financial statements and report are
included in your 1997 Annual Report to Stockholders and are incorporated herein
by reference. Our audits also included the supplemental notes to the
consolidated financial statements (the "Notes") listed in Item 14. These Notes
are the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such Notes, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
New York, New York
March 6, 1998
25
<PAGE>
MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Information concerning the Company's valuation accounts
follows:
An analysis of the allowance for doubtful accounts for the three
years ended December 31, 1997 follows (in millions of dollars):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Balance at beginning of year...... $43.3 $54.6 $52.2
Provision charged to operations... 7.6 9.9 12.8
Accounts written-off, net of
recoveries...................... (4.4) (10.2) (10.5)
Effect of exchange rate changes... (0.6) 0.9 .1
Other............................. 6.9 (A) (11.9)(B) -
------ ------ ------
Balance at end of year............ $52.8 $43.3 $54.6 (C)
------ ------ ------
------ ------ ------
</TABLE>
(A) Primarily related to the acquisition of Johnson &
Higgins.
(B) Includes $11.2 million relating to the sale of
Frizzell.
(C) Includes allowance for doubtful accounts related to
long-term consumer finance receivables amounting to
$6.3 million in 1995.
An analysis of the valuation allowance for certain foreign
deferred tax assets as of December 31, 1997, 1996 and 1995
follows (in millions of dollars):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Balance at beginning of year...... $27.4 $25.2 $24.7
Effect of exchange rate changes... - 2.2 .5
Other(B) ......................... (27.4) - -
------ ------ ------
Balance at end of year (A)........ $ -.- $27.4 $25.2
------ ------ ------
------ ------ ------
</TABLE>
(A) Included in other liabilities in the Consolidated
Balance Sheets.
(B) Reflects the write-off of the underlying tax assets,
since it has been determined that the Company will not
realize any future tax benefit.
26
<PAGE>
MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. An analysis of intangible assets at December 31, 1997 and
1996 follows (in millions of dollars):
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Goodwill.......................... $2,508.7 $608.7
Other intangible assets........... 105.3 92.3
-------- -------
Subtotal........................ 2,614.4 701.0
Less - accumulated amortization... (196.9) (155.7)
-------- -------
Total........................ $2,417.1 $545.3 (A)
-------- -------
-------- -------
</TABLE>
(A) The increase from December 31, 1996 is primarily due to
the acquisition of Johnson & Higgins ($1,642.7 million)
and CECAR ($209.8 million).
27
<PAGE>
EXHIBIT INDEX
(3.1)-the registrant's restated certificate of incorporation
(3.2)-the registrant's by-laws
(10.1)-Stock Purchase Agreement, dated as of March 12, 1997, by and
among the registrant, Johnson & Higgins and the stockholders
of Johnson & Higgins (incorporated by reference to the
registrant's Current Report on Form 8-K dated March 14,
1997)
(10.2)-First Amendment to the Stock Purchase Agreement, dated as
of March 27, 1997 by and among the registrant, Johnson &
Higgins and the stockholders of Johnson & Higgins
(incorporated by reference to the registrant's Current
Report on Form 8-K dated April 7, 1997)
(10.3)*-Marsh & McLennan Companies, Inc. 1997 Senior Executive
Incentive and Stock Award Plan (incorporated by reference
to the registrant's Annual Report on Form 10-K for the
year ended December 31, 1996)
(10.4)*-Marsh & McLennan Companies, Inc. Restricted Shares
Voluntary Deferral Program for U.S. Employees
(incorporated by reference to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1995)
(10.5)*-Marsh & McLennan Companies Stock Investment Supplemental
Plan(incorporated by reference to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1994)
(10.6)*-Amendment to the Marsh & McLennan Companies Stock
Investment Supplemental Plan dated June 16, 1997
- ----------------------
* Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item 14(c) of
Form 10-K.
28
<PAGE>
EXHIBIT INDEX (cont'd)
(10.7)*-Marsh & McLennan Companies Special Severance Pay Plan
(incorporated by reference to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1996)
(10.8)*-Putnam Investments, Inc. Executive Deferred Compensation
Plan (incorporated by reference to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1994)
(10.9)*-Marsh & McLennan Companies Supplemental Retirement Plan
(incorporated by reference to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1992)
(10.10)*-Marsh & McLennan Companies Senior Management Incentive
Compensation Plan (incorporated by reference to the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1994)
(10.11)*-Marsh & McLennan Companies, Inc. U.S. Employee 1997 Cash
Bonus Award Voluntary Deferral Plan
(10.12)*-Marsh & McLennan Companies, Inc. Canadian Employee 1997
Cash Bonus Award Voluntary Deferral Plan
(10.13)*-Marsh & McLennan Companies, Inc. Directors Stock
Compensation Plan (as amended and restated 6/27/97)
- ----------------------
* Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item 14(c) of
Form 10-K.
29
<PAGE>
EXHIBIT INDEX (cont'd)
(10.14)*-Employment Agreement between Jeffrey W. Greenberg and
Marsh & McLennan Risk Capital Corp. and related Guaranty
of the registrant (incorporated by reference to the
registrant's Annual Report on Form 10-K for the year ended
December 31, 1995)
(10.15)*-Employment Agreement between Lawrence J. Lasser and Putnam
Investments, Inc. effective as of December 31, 1997
(13)-Annual Report to Stockholders for the year ended December
31, 1997, to be deemed filed only with respect to those
portions which are expressly incorporated by reference
(21)-list of subsidiaries of the registrant (as of 2/28/98)
(23)-consent of independent auditors
(24)-powers of attorney
(27)-Financial Data Schedule (filed with SEC for EDGAR
purposes only)
(b) Two reports on Form 8-K were filed by the registrant in
the fiscal quarter ended December 31, 1997. On October
10, 1997 and December 4, 1997, respectively, the
registrant filed a report on Form 8-K (i) announcing
the renewal of the registrant's shareholders' rights
plan and (ii) disclosing the initiation of an action by
certain former directors of Johnson & Higgins ("J&H")
challenging the allocation of the consideration paid in
connection with the registrant's business combination
with J&H.
- ----------------------
* Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item 14(c) of
Form 10-K.
<PAGE>
Exhibit 3.1
RESTATED CERTIFICATE
OF
INCORPORATION
(as amended 5/21/97)
FIRST: The name of the Corporation is MARSH & McLENNAN COMPANIES, INC.
SECOND: The registered office of the Corporation in the State of Delaware
is located at 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent is the Corporation Trust Company, 1209
Orange Street, Wilmington, Delaware 19801.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The total number of shares of stock which the Corporation has the
authority to issue is 406,000,000 of which 6,000,000 are shares of Preferred
Stock with a par value of one dollar per share (hereinafter sometimes referred
to as "Preferred Stock"), and 400,000,000 are shares of Common Stock with a par
value of one dollar per share (hereinafter sometimes referred to as "Common
Stock").
PART I
PREFERRED STOCK
The Board of Directors is expressly authorized to adopt, from time to time,
a resolution or resolutions providing for the issue of Preferred Stock in one or
more series, to fix the number of shares in each such series and to fix the
designations and the powers, preferences and relative, participating, optional
or other special rights, and the qualifications, limitations and restrictions
thereof, of each such series.
The authority of the Board of Directors with respect to each such series
shall include a determination of the following (which may vary as between the
different series of Preferred Stock):
<PAGE>
(a) The number of shares constituting the series and the distinctive
designation of the series;
(b) The dividend rate on the shares of the series, the conditions and
dates upon which dividends thereon shall be payable, the extent, if any, to
which dividends thereon shall be cumulative, and the relative rights of
preference, if any, of payment of dividends thereon;
(c) Whether or not the shares of the series are redeemable and, if
redeemable, including the time during which they shall be redeemable and the
amount per share payable in case of redemption, which amount may, but need not
vary according to the time and circumstances of such action;
(d) The amount payable in respect of the shares of the series, in the
event of any liquidation, dissolution or winding up of the Corporation, which
amount may, but need not, vary according to the time or circumstances of such
action, and the relative rights of preference, if any, of payment of such
amount;
(e) Any requirement as to a sinking fund for the shares of the series, or
any requirement as to the redemption, purchase or other retirement by the
Corporation of the shares of the series;
(f) The right, if any, to exchange or convert shares of the series into
shares of any other series or class of stock of the Corporation and the rate or
basis, time, manner and condition of exchange or conversion;
(g) The voting rights, if any, to which the holders of shares of the
series shall be entitled in addition to the voting rights provided by law;
(h) Any other term, condition, or provision with respect to the series not
inconsistent with the provisions of this Article FOURTH or any resolution
adopted by the Board of Directors pursuant thereto.
2
<PAGE>
PART II
COMMON STOCK
(a) Dividends. Subject to any rights to receive dividends to which the
holders of the shares of the Preferred Stock may be entitled, the holders of
shares of Common Stock shall be entitled to receive dividends, if and when
declared payable from time to time by the Board of Directors from any funds
legally available therefor.
(b) Liquidation. In the event of any dissolution, liquidation or winding
up of the Corporation, whether voluntary or involuntary, after there shall have
been paid to the holders of shares of Preferred Stock the full amounts to which
they shall be entitled, the holders of the then outstanding shares of Common
Stock shall be entitled to receive, pro rata, all of the remaining assets of the
Corporation available for distribution to its stockholders. The Board of
Directors may distribute in kind to the holders of the shares of Common Stock
such remaining assets of the Corporation or may sell, transfer or otherwise
dispose of all or any part of such remaining assets to any other corporation,
trust or other entity and receive payment therefor in cash, stock or obligations
of such other corporation, trust or entity, or any combination thereof, and may
sell all or any part of the consideration so received and distribute any balance
thereof in kind to holders of the shares of Common Stock. The merger or
consolidation of the Corporation into or with any other corporation, or the
merger of any other corporation into it, or any purchase or redemption of shares
of stock of the Corporation of any class, shall not be deemed to be a
dissolution, liquidation or winding up of the Corporation for the purpose of
this paragraph (b).
(c) Voting. Each outstanding share of Common Stock of the Corporation shall
entitle the holder thereof to one vote on each matter submitted to a vote at a
meeting of the stockholders.
PART III
GENERAL PROVISIONS
(a) No Preemptive Rights, Etc. No holder of shares of stock of the
Corporation of any class shall have any preemptive,
3
<PAGE>
preferential or other right to purchase or subscribe for any shares of stock,
whether now or hereafter authorized, of the Corporation of any class, or any
obligations convertible into, or any options or warrants to purchase, any shares
of stock, whether now or hereafter authorized, of the Corporation of any class,
other than such, if any, as the Board of Directors may from time to time
determine, and at such price as the Board of Directors may from time to time
fix; and any shares of stock or any obligations, options or warrants which the
Board of Directors may determine to offer for subscription to holders of any
shares of stock of the Corporation may, as the Board of Directors shall
determine, be offered to holders of shares of stock of the Corporation of any
class or classes or series, and if offered to holders of shares of stock of more
than one class or series, in such proportions as between such classes and series
as the Board of Directors may determine.
(b) No Action by Consent. Any action required or permitted to be taken by
the holders of any class or classes of stockholders of the Corporation must be
effected at a duly called annual or special meeting of such holders and may not
be effected by any consent in writing by such holders.
FIFTH: (a) The business and affairs of the Corporation shall be managed
by or under the direction of a Board of Directors consisting of not less than
nine nor more than twenty-seven directors, the exact number of directors to be
determined from time to time by resolution adopted by affirmative vote of at
least two-thirds of the entire Board of Directors. The directors shall be
divided into three classes, designated Class I, Class II and Class III. Each
class shall consist, as nearly as may be possible, of one-third of the total
number of directors constituting the entire Board of Directors. At the 1985
annual meeting of stockholders, Class I directors shall be elected for a
one-year term, Class II directors for a two-year term and Class III directors
for a three-year term. At each succeeding annual meeting of stockholders
beginning in 1986, successors to the class of directors whose term expires at
that annual meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of directors in each class as nearly equal
as possible, and any additional director of any class elected to fill a vacancy
resulting from an increase in such class shall hold office for a term that shall
coincide with the remaining term of that class,
4
<PAGE>
but in no case will a decrease in the number of directors shorten the term of
any incumbent director. A director shall hold office until the annual meeting
for the year in which his term expires and until his successor shall be elected
and shall qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office. Any vacancy on the Board of Directors
from any cause whatsoever may be filled by a majority of the remaining directors
then in offices, even if less than a quorum, or by a sole remaining director.
Any director elected to fill a vacancy not resulting from an increase in the
number of directors shall have the same remaining term as that of his
predecessor. Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of preferred stock issued by the Corporation shall have
the right, pursuant to Part I of Article FOURTH of this Restated Certificate of
Incorporation, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders the election, term of office, filling
of vacancies and other features of such directorships shall be governed by the
terms of this Restated Certificate of Incorporation applicable thereto, and such
directors so elected shall not be divided into classes pursuant to this Article
FIFTH unless expressly provided by such terms.
(b) In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter or repeal
the by-laws of the Corporation.
(c) Wherever the term "Board of Directors" is used in this Restated
Certificate of Incorporation, such term shall mean the Board of Directors of the
Corporation; provided, however, that to the extent any committee of directors of
the Corporation is lawfully entitled to exercise the powers of the Board of
Directors, such committee may exercise any right or authority of the Board of
Directors under this Restated Certificate of Incorporation.
SIXTH: (a) RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter, a "proceeding"), by reason of the fact that, on or
after the date of adoption of this new Article SIXTH, he or she is serving or
had served as a director or officer of the Corporation or, while
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serving as such director or officer, is serving or had served at the request of
the Corporation as a director, officer, employee or agent of, or in any other
capacity with respect to, another corporation or a partnership, joint venture,
trust or other entity or enterprise, including service with respect to employee
benefit plans (hereinafter, an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director or
officer of the Corporation, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by Delaware law, as the same exists
or may hereafter be changed or amended (but, in the case of any such change or
amendment, only to the extent that such change or amendment permits the
Corporation to provide broader indemnification rights than permitted prior
thereto), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts to be paid in
settlement) reasonably incurred or suffered by an indemnitee in connection
therewith and such indemnification shall continue as to an indemnitee who has
ceased to be a director or officer of the Corporation and shall inure to the
benefit of the indemnitee's heirs, executors and administrators; PROVIDED,
HOWEVER, that except as provided in paragraph (b) hereof with respect to
proceedings seeking to enforce rights to indemnification, the Corporation shall
indemnify an indemnitee in connection with a proceeding (or part thereof)
initiated by the indemnitee only if such proceeding (or part thereof) was
authorized by the board of directors of the Corporation. The right to
indemnification conferred in this Article shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition (hereinafter,
an "advancement of expenses"); PROVIDED, HOWEVER, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only upon
delivery to the Corporation of an undertaking (hereinafter, an "undertaking"),
by or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter, a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Article or otherwise.
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(b) RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under paragraph (a) of
this Article is not paid in full by the Corporation within sixty days after a
written claim has been received by the Corporation, except in the case of a
claim for advancement of expenses, in which case the applicable period shall be
twenty days, the indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole or
in part in any such suit, or in a suit brought by the Corporation to recover
PAYMENTS by the Corporation to recover an advancement of expenses pursuant to
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (other than a suit
brought by the indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that, and (ii) any suit by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking the Corporation
shall be entitled to recover such expenses upon a final adjudication that, the
indemnitee has not met the applicable standard of conduct set forth in the
Delaware General Corporation Law. Neither the failure of the Corporation
(including its board of directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its board of directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to the action. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article or otherwise shall be on the Corporation.
(c) INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION. The
Corporation may, to the extent authorized from time to time by its board of
directors, grant rights to indemnification, and to be paid by the Corporation
the expenses
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incurred in defending any proceeding in advance of its final disposition, to any
employee or agent of the Corporation to the fullest extent of the provisions of
this Article with respect to the indemnification and advancement of expenses of
directors and officers of the Corporation.
(d) NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and to the
advancement of expenses conferred in this Article shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
this Restated Certificate of Incorporation, by-law, agreement, vote of
stockholders or disinterested directors, or otherwise.
(e) INSURANCE. The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or of another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person again6t such expense, liability or loss
under the Delaware General Corporation Law.
(f) LIMITATION OF LIABILITY. A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, or (iv) for any transaction from which the
director derived any improper personal benefit. If the Delaware General
Corporation Law is amended after approval by the stockholders of this paragraph
to authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as also amended.
(g) SURVIVAL OF PRIOR INDEMNIFICATION PROVISIONS: EFFECT OF SUBSEQUENT
CHANGE ON EXISTING RIGHTS. Nothing contained in this Article shall be construed
as altering or eliminating the rights to indemnification existing, or based upon
service by an indemnitee, prior to adoption of this new Article SIXTH. Any
repeal or modification of this Article by the stockholders of the
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Corporation shall not adversely affect any right or protection of a director or
officer of the Corporation existing at the time of such repeal or modification.
SEVENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Restated Certificate of Incorporation, in
the manner now or hereafter prescribed by the laws of Delaware, and all rights
and powers conferred herein upon stockholders and directors are granted subject
to this reservation.
EIGHTH: (a) In addition to any affirmative vote required by law or this
Restated Certificate of Incorporation or the by-laws of the Corporation, and
except as otherwise expressly provided in Section (b) of this Article EIGHTH, a
Business Transaction (as hereinafter defined) with, or proposed by or on behalf
of, any Interested Stockholder (as hereinafter defined) or any Affiliate or
Associate (as hereinafter defined) of any Interested Stockholder or any person
who thereafter would be an Affiliate or Associate of such Interested Stockholder
shall require the affirmative vote of not less than a majority of the votes
entitled to be cast by the holders of all the then outstanding shares of Voting
Stock (as hereinafter defined), voting together as a single class, excluding
Voting Stock beneficially owned by such Interested Stockholder. Such affirmative
vote shall be required notwithstanding the fact that no vote may be required, or
that a lesser percentage or separate class vote may be specified, by law or
otherwise.
(b) The provisions of Section (a) of this Article EIGHTH shall not be
applicable to any particular Business Transaction, and such Business Transaction
shall require only such affirmative vote, if any, as is required by law or by
any other provision of this Restated Certificate of Incorporation or the by-laws
of the Corporation, or otherwise, if the Business Transaction shall have been
approved, either specifically or as a transaction which is within an approved
category of transactions, by a majority (whether such approval is made prior to
or subsequent to the acquisition of, or announcement or public disclosure of the
intention to acquire, beneficial ownership of the Voting Stock that caused the
Interested Stockholder to become an Interested Stockholder) of the Disinterested
Directors (as hereinafter defined).
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(c) The following definitions shall apply with respect to this Article
EIGHTH:
1. The term "Business Transactions" shall mean:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with (i) any Interested Stockholder or
(ii) any other company (whether or not itself an Interested
Stockholder) which is or after such merger or consolidation would
be an Affiliate or Associate of an Interested Stockholder; or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition or security arrangement, investment, loan, advance,
guarantee, agreement to purchase, agreement to pay, extension of
credit, joint venture participation or other arrangement (in one
transaction or a series of transactions) with or for the benefit
of any Interested Stockholder or any Affiliate or Associate of
any Interested Stockholder involving any assets, securities or
commitments of the Corporation, any Subsidiary or any Interested
Stockholder or any Affiliate or Associate of any Interested
stockholder which (except for any arrangement, whether as
employee, consultant or otherwise, other than as a director,
pursuant to which any Interested Stockholder or any Affiliate or
Associate thereof shall, directly or indirectly, have any control
over or responsibility for the management of any aspect of the
business or affairs of the Corporation, with respect to which
arrangements the value tests set forth below shall not apply),
together with all other such arrangements (including all
contemplated future events), has an aggregate Fair Market Value
(as hereinafter defined) and/or involves aggregate commitments of
$l0,000,000 or more or constitutes more than five percent of the
book value of the total assets (in the case of transactions
involving assets or commitments other than capital stock) or five
percent of the stockholders' equity (in the case of transactions
in capital stock) of the entity in question (the
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"Substantial Part"), as reflected in the most recent fiscal
year-end consolidated balance sheet of such entity existing at
the time the stockholders of the Corporation would be required to
approve or authorize the Business Transaction involving the
assets, securities and/or commitments constituting any
Substantial Part; or
(C) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation or for any amendment to the
Corporation's by-laws; or
(D) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or
any other transaction (whether or not with or otherwise involving
an Interested Stockholder) that has the effect, directly or
indirectly, of increasing the proportionate share of any class or
series of Capital Stock, or any securities convertible into
Capital Stock or into equity securities of any Subsidiary, that
is beneficially owned by any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder; or
(E) any agreement, contract or other arrangement providing for any
one or more of the actions specified in the foregoing clauses (A)
to (D).
2. The term "Capital Stock" shall mean all capital stock of the
Corporation authorized to be issued from time to time under Article
FOURTH of this Restated Certificate of Incorporation, and the term
"Voting Stock" shall mean all Capital Stock which by its terms may be
voted on all matters submitted to stockholders of the Corporation
generally.
3. The term "person" shall mean any individual, firm, company or other
entity and shall include any group comprised of any person and any
other person with whom such person or any Affiliate or Associate of
such
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person has any agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting or disposing
of Capital Stock.
4. The term "Interested Stockholder" shall mean any person (other than
the Corporation or any Subsidiary and other than any profit-sharing,
employee stock ownership or other employee benefit plan of the
Corporation or any Subsidiary or any trustee of or fiduciary with
respect to any such plan when acting in such capacity) who (a) is or
has announced or publicly disclosed a plan or intention to become the
beneficial owner of Voting Stock representing ten percent (10%) or
more of the votes entitled to be cast by the holders of all then
outstanding shares of Voting Stock; or (b) is an Affiliate or
Associate of the Corporation and at any time within the two-year
period immediately prior to the date in question was the beneficial
owner of Voting Stock representing ten percent (10%) or more of the
votes entitled to be cast by the holders of all then outstanding
shares of Voting Stock.
5. A person shall be a "beneficial owner" of any Capital Stock or shall
"beneficially own" any Capital Stock (a) which such person or any of
its Affiliates or Associates beneficially owns, directly or
indirectly; (b) which such person or any of its Affiliates or
Associates has or shares, directly or indirectly, (I) the right to
acquire (whether such right is exercisable immediately or subject to
the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or understanding; or (c) which
is beneficially owned, directly or indirectly, by any other person
with which such person or any of its Affiliates or Associates has or
shares any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares of Capital
Stock. For the purposes of determining whether a person is an
Interested Stockholder pursuant to Paragraph 4 of this Section (c),
the number of shares of Capital Stock deemed to be outstanding shall
include shares deemed beneficially owned by such person through
application
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of this Paragraph 5 of Section (c), but shall not include any other
shares of Capital Stock that may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
6. An "Affiliate" of, or a person "Affiliated" with a specified person,
is a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, the person specified. The term "Associate" used to
indicate a relationship with any person, means (1) any corporation or
organization (other than the Corporation or a majority-owned
subsidiary of the Corporation) of which such person is an officer or
partner or is, directly or indirectly, the beneficial owner of 10
percent or more of any class of equity securities, (2) any trust or
other estate in which such person has a substantial beneficial
interest or as to which such person serves as trustee or in a similar
fiduciary capacity, or (3) any relative or spouse of such person, or
any relative of such spouse, who has the same home as such person or
who is a director or officer of the Corporation or any of its parents
or subsidiaries.
7. The term "Subsidiary" means any company of which a majority of any
class of equity security is beneficially owned by the Corporation;
PROVIDED, HOWEVER, that for the purposes of the definition of
Interested Stockholder set forth in Paragraph 4 of this Section (c),
the term "Subsidiary" shall mean only a company of which a majority of
each class of equity security is beneficially owned by the
Corporation.
8. The term "Disinterested Director" means any member of the Board of
Directors of the Corporation (the "Board of Directors"), while such
person is a member of the Board of Directors, who is not an Affiliate
or Associate or Representative or agent or employee of the Interested
Stockholder and was a member of the Board of Directors prior to the
time that the Interested Stockholder became an Interested stockholder,
and any successor of a Disinterested Director while such successor is
a member of the Board of Directors, who is
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not an Affiliate or Associate or representative or agent or employee
of the Interested Stockholder and is recommended or elected to succeed
the Disinterested Director by a majority of Disinterested Directors.
9. The term "Fair Market Value" means (a) in the case of cash, the amount
of such cash: (b) in the case of stock, the highest closing sale price
during the 30-day period immediately preceding the date in question of
a share of such stock quoted on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted on the
Composite Tape, on the New York Stock Exchange, or, if such stock is
not listed on such Exchange, on the principal United States securities
exchange registered under the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder on which such stock is
listed, or, if such stock is not listed on any such exchange, the
highest closing bid quotation with respect to a share of such stock
during the 30-day period preceding the date in question on the
National Association of Securities Dealers, Inc. Automated Quotation
System or any similar system then in use, or if no such quotations are
available, the fair market value on the date in question of a share of
such stock as determined by a majority of the Disinterested Directors
in good faith; and (c) in the case of property other than cash or
stock, the fair market value of such property on the date in question
as determined in good faith by a majority of the Disinterested
Directors.
(d) A majority of the Disinterested Directors shall have the power and
duty to determine for the purposes of this Article EIGHTH on the basis of
information known to them after reasonable inquiry, all questions arising under
this Article EIGHTH, including, without limitation, (1) whether a person is an
Interested Stockholder, (2) the number of shares of Capital Stock or other
securities beneficially owned by any person, (3) whether a person is an
Affiliate or Associate of another, (4) whether a Proposed Action is with, or
proposed by, or on behalf of an Interested Stockholder or an Affiliate or
Associate of an Interested Stockholder, (5) whether the assets that are the
subject of any Business Transaction have, or the consideration to be received
for the issuance or transfer of securities by the Corporation or any Subsidiary
in any Business Transaction has, an
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aggregate Fair Market Value of $10,000,000 or more, and (6) whether the assets
or securities that are the subject of any Business Transaction constitute a
Substantial Part. Any such determination made in good faith shall be binding and
conclusive on all parties.
(e) Nothing contained in this Article EIGHTH shall be construed to relieve
any Interested Stockholder from any fiduciary obligation imposed by law.
(f) For the purposes of this Article EIGHTH, a Business Transaction or any
proposal to amend, repeal or adopt any provision of this Restated Certificate of
Incorporation inconsistent with this Article EIGHTH (collectively, "Proposed
Action") is presumed to have been proposed by, or on behalf of, an Interested
Stockholder or an Affiliate or Associate of an Interested Stockholder or a
person who thereafter would become such if (l) after the Interested Stockholder
became such, the Proposed Action is proposed following the election of any
director of the Corporation who with respect to such Interested Stockholder,
would not qualify to serve as a Disinterested Director or (2) such Interested
Stockholder, Affiliate, Associate or person votes for or consents to the
adoption of any such Proposed Action, unless as to such Interested Stockholder,
Affiliate, Associate or person a majority of the Disinterested Directors makes a
good faith determination that such Proposed Action is not proposed by or on
behalf of such Interested Stockholder, affiliate, Associate or person, based on
information known to them after reasonable inquiry.
(g) Notwithstanding any other provisions of this Restated Certificate of
Incorporation or the by-laws of the Corporation (and notwithstanding the fact
that a lesser percentage or separate class vote may be specified by law, this
Restated Certificate of Incorporation or the by-laws of the Corporation), any
proposal to amend or repeal Article EIGHTH of this Restated Certificate of
Incorporation or to amend, repeal or adopt any provision of this Restated
Certificate of Incorporation inconsistent with this Article EIGHTH which is
proposed by or on behalf of an Interested Stockholder or an Affiliate or
Associate of an Interested Stockholder shall require the affirmative vote of the
holders of not less than a majority OF the votes entitled to be cast by the
holders of all the then outstanding shares of Voting Stock voting together as a
single class, excluding Voting Stock beneficially owned by such Interested
stockholder;
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PROVIDED, HOWEVER, that this Section (g) shall not apply to, and such majority
vote shall not be required for, any amendment, repeal or adoption recommended by
a majority of the Disinterested Directors.
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Exhibit 3.2
BY-LAWS
OF
MARSH & MCLENNAN COMPANIES, INC.
RESTATED AS LAST AMENDED
JANUARY 1, 1998
<PAGE>
I N D E X
Page Number
-----------
ARTICLE I
Offices............................................. 1
ARTICLE II
Meetings of the Stockholders........................ 1
ARTICLE III
Directors........................................... 10
ARTICLE IV
Officers............................................ 13
ARTICLE V
Committees.......................................... 17
ARTICLE VI
Indemnification..................................... 23
ARTICLE VII
Checks, Contracts, Other Instruments................ 29
ARTICLE VIII
Capital Stock....................................... 29
ARTICLE IX
Miscellaneous....................................... 33
ARTICLE X
Amendments.......................................... 34
<PAGE>
BY-LAWS
OF
MARSH & MCLENNAN COMPANIES, INC.
ARTICLE I
OFFICES
The principal office of the Corporation in Delaware shall be at
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle, in the State of Delaware, and The Corporation Trust Company shall
be the resident agent of the Corporation in charge thereof. The Corporation may
also have such other offices at such other places as the Board of Directors may
from time to time designate or the business of the Corporation may require.
ARTICLE II
MEETINGS OF THE STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. Meetings of the stockholders may be
held at such place as the Board of Directors may determine.
SECTION 2. ANNUAL MEETINGS. The annual meeting of the stockholders
shall be held on the third Tuesday of May in each year, or such other day in May
as may be determined from time to time by the Board of Directors, at such time
and place as the Board of Directors may designate. At said meeting the
<PAGE>
stockholders shall elect a Board of Directors and transact any other business
authorized or required to be transacted by the stockholders.
SECTION 3. SPECIAL MEETINGS. Special meetings of the stockholders,
except as otherwise provided by law, shall be called by the Chairman of the
Board, or whenever the Board of Directors shall so direct, the Secretary.
SECTION 4. NOTICE OF MEETINGS. Except as otherwise provided by law,
written or printed notice stating the place, day and hour of the meeting, and in
the case of a special meeting the purpose or purposes for which the meeting is
called, shall be delivered personally or mailed, postage prepaid, at least ten
(10) days but not more than sixty (60) days before such meeting to each
stockholder at such address as appears on the stock books of the Corporation.
SECTION 5. FIXING OF RECORD DATE. In order to determine the
stockholders entitled to notice of or to vote at any meeting of the stockholders
or any adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may
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fix, in advance, a record date which shall not be more than sixty (60) nor less
than ten (10) days before the date of such meeting, and no more than sixty (60)
days prior to any other action.
If no record date is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice of the meeting is given or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held, and
such date for any other purpose shall be the date on which the Board of
Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
SECTION 6. QUORUM. The holders of a majority of the stock issued and
outstanding present in person or represented by proxy shall be requisite and
shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by law, by the Restated
Certificate of Incorporation or by these by-laws. If, however, such majority
shall not be present or represented at any meeting of the
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stockholders, the stockholders present in person or by proxy shall have power to
adjourn the meeting from time to time without notice other than announcement at
the meeting until the requisite amount of stock shall be represented. At such
adjourned meeting at which the requisite amount of stock shall be represented,
any business may be transacted which might have been transacted at the meeting
as originally called.
SECTION 7. VOTING. Each stockholder entitled to vote in accordance
with the terms of the Restated Certificate of Incorporation and in accordance
with the provisions of these by-laws shall be entitled to one vote, in person or
by proxy, for each share of stock entitled to vote held by such stockholder, but
no proxy shall be voted after three years from its date unless such proxy
provides for a longer period. The vote for directors and, upon demand of any
stockholder, the vote upon any question before the meeting shall be by ballot.
All elections of directors shall be decided by plurality vote; all other
questions shall be decided by a majority of the shares present in person or
represented by proxy at the meeting of stockholders and entitled to vote on the
subject matter, except as otherwise provided in the Restated Certificate of
Incorporation or by law or regulation.
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SECTION 8. INSPECTORS OF ELECTION. All elections of directors and
all votes where a ballot is required shall be conducted by two inspectors of
election who shall be appointed by the Board of Directors; but in the absence of
such appointment by the Board of Directors, the Chairman of the meeting shall
appoint such inspectors who shall not be directors or candidates for the office
of director.
SECTION 9. VOTING LIST. The Secretary shall prepare and make, at
least ten days before every election of directors, a complete list of the
stockholders entitled to vote, arranged in alphabetical order and showing the
address of each stockholder and the number of shares registered in his name.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
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SECTION 10. STOCKHOLDER NOMINATIONS OF DIRECTORS. Only persons who
are nominated in accordance with the following procedures shall be eligible for
election as directors at a meeting of stockholders. Nominations of persons for
election to the Board of Directors of the Corporation may be made at a meeting
of stockholders by or at the direction of the Board of Directors, by any person
appointed by the Board of Directors or by any stockholder of the Corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this Section 10. Such nominations, other
than those made by or at the direction of the Board of Directors or by any
person appointed by the Board of Directors, shall be made pursuant to timely
notice in writing to the Secretary, Marsh & McLennan Companies, Inc. To be
timely, a stockholder's notice shall be delivered to or mailed and received at
the principal executive offices of the Corporation not less than 60 days nor
more than 90 days prior to the meeting; PROVIDED, HOWEVER, that in the event
that the meeting is not to be held on the date set forth in Article II, Section
2 and less than 75 days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the 15th
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day following the day on which such public disclosure was made. Such
stockholder's notice to the Secretary shall set forth (a) as to each person whom
the stockholder proposes to nominate for election or reelection as a director,
(i) the name, age, business address and residence address of the person, (ii)
the principal occupation or employment of the person, (iii) the class and number
of shares of capital stock of the Corporation which are beneficially owned by
the person and (iv) any other information relating to the person that is
required to be disclosed in solicitations for proxies for election of directors
pursuant to Rule 14a under the Securities Exchange Act of 1934, as amended; and
(b) as to the stockholder giving the notice (i) the name and record address of
the stockholder and (ii) the class and number of shares of capital stock of the
Corporation which are beneficially owned by the stockholder. The Corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the Corporation to determine the eligibility of such
proposed nominee to serve as a director of the Corporation. No person shall be
eligible for election as a director of the Corporation unless nominated in
accordance with the procedures set forth herein.
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The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
SECTION 11. ADVANCE NOTICE OF STOCKHOLDER PROPOSED BUSINESS AT ANNUAL
MEETINGS. At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, otherwise properly brought before the meeting by or at
the direction of the Board of Directors, or otherwise properly brought before
the meeting by a stockholder. In addition to any other applicable requirements,
for business to be properly brought before an annual meeting by a stockholder,
the stockholder must have given timely notice thereof in writing to the
Secretary, Marsh & McLennan Companies, Inc. To be timely, a stockholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation, not less than 60 days nor more than 90 days prior to
the meeting; PROVIDED, HOWEVER, that in the event that the
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meeting is not to be held on the date set forth in Article II, Section 2 and
less than 75 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must be
so received not later than the close of business on the 15th day following the
day on which such notice of the date of the annual meeting was mailed or such
public disclosure was made. A stockholder's notice to the Secretary shall set
forth as to each matter the stockholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and record address of the stockholder proposing such
business, (iii) the class and number of shares of capital stock of the
Corporation which are beneficially owned by the stockholder and (iv) any
material interest of the stockholder in such business.
Notwithstanding anything in these by-laws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 11; PROVIDED, HOWEVER, that nothing in this
Section 11 shall be deemed to preclude discussion by any stockholder of any
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business properly brought before the annual meeting in accordance with said
procedure.
The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section, and if he
should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
ARTICLE III
DIRECTORS
SECTION 1. POWERS, NUMBER, TENURE, QUALIFICATIONS AND COMPENSATION.
The business and affairs of the Corporation shall be managed by its Board of
Directors which shall consist of the number of members set forth in Article
FIFTH of the Restated Certificate of Incorporation, none of whom need be
stockholders, but no person shall be eligible to be nominated or elected a
director of the Corporation who has attained the age of 72 years. In addition
to the powers and duties by these by-laws expressly conferred upon them, the
Board of Directors may exercise all such powers of the Corporation and do all
such lawful acts and things as are not by statute or by the Restated Certificate
of
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Incorporation or by these by-laws directed or required to be exercised or done
by the stockholders. The Board of Directors may provide for compensation of
directors who are not otherwise compensated by the Corporation or any subsidiary
thereof.
SECTION 2. MEETINGS AND NOTICE. The Board shall, for the purposes of
organization, the election and appointment of officers and the transaction of
other business, hold a meeting as soon as convenient after the annual meeting of
stockholders. Regular meetings of the directors may be held without notice at
such places and times as shall be determined from time to time by resolution of
the directors. Special meetings of the Board may be called by the Chairman of
the Board on at least twenty-four (24) hours' notice to each director,
personally or by mail or by telegram or by telephone. Special meetings shall
also be called in like manner on the written request of any three (3) directors.
The attendance of a director at any meeting shall dispense with notice to him of
the meeting. Members of the Board of Directors may participate in a meeting of
the Board by means of conference telephone or similar communications equipment,
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this section shall constitute
presence in person at such meeting.
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SECTION 3. OFFICES, BOOKS, PLACE OF MEETING. The Board of Directors
may have one or more offices and keep the books of the Corporation outside of
Delaware, and may hold its meetings at such places as it may from time to time
determine.
SECTION 4. QUORUM. At all meetings of the Board of Directors
one-third (1/3) of the total number of directors shall be necessary and
sufficient to constitute a quorum for the transaction of business, and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the Restated Certificate of Incorporation
or by these by-laws.
SECTION 5. INFORMAL ACTION. The Board of Directors shall, except as
otherwise provided by law, have power to act in the following manner: A
resolution in writing, signed by all of the members of the Board of Directors
shall be deemed to be action by such Board to the effect therein expressed with
the same force and effect as if the same had been duly passed at a duly convened
meeting, and it shall be the duty of the Secretary of the Corporation to record
any such resolution in the minute book of the Corporation, under its proper
date.
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ARTICLE IV
OFFICERS
SECTION 1. ELECTION. The Board of Directors shall elect officers of
the Corporation, including a Chairman of the Board, one or more Vice Presidents,
a Secretary, a Treasurer and a Controller.
SECTION 2. TERM AND REMOVAL. The officers of the Corporation
designated in SECTION 1 of this Article IV, shall hold office for one year and
until their respective successors are chosen and qualify in their stead. Any
officer may be removed at any time, with or without cause, by the Board of
Directors. An officer appointed by the Executive Committee may also be removed
at any time, with or without cause by said Committee.
SECTION 3. CHAIRMAN OF THE BOARD. The Chairman of the Board of
Directors shall be the Chief Executive Officer of the Corporation and, subject
to the control of the Board of Directors, and of the committees exercising
functions of the Board of Directors, shall have general supervision over the
business and property of the Corporation. He shall preside at all meetings of
the stockholders and of the Board of Directors. He shall review and recommend
to the Board of Directors both
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short-term objectives and long-term planning for the business. He shall also
preside at meetings of any committee of which he is a member which is not
attended by the chairman of such committee. He or his delegate may vote on
behalf of the Corporation the shares owned by the Corporation in other
corporations in such manner as they deem advisable unless otherwise directed by
the Board of Directors. He shall have full authority to take other action on
behalf of the Corporation in respect of shares of stock in other corporations
owned by the Corporation, directly or indirectly, including the obtaining of
information and reports.
SECTION 4. VICE PRESIDENTS. The Vice President shall have such
powers, duties, supplementary titles and other designations as the Board of
Directors may from time to time determine.
SECTION 5. SECRETARY. The Secretary shall attend all meetings of the
stockholders and the Board of Directors. He shall, at the invitation of the
chairman thereof, attend meetings of the committees elected by the Board or
established by these by-laws. He shall record all votes and minutes of all
proceedings which he attends and receive and maintain custody of all votes and
minutes of all such proceedings. Votes and minutes of meetings of the
Compensation and Audit Committees shall be
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recorded and maintained as each such committee shall determine. The Secretary
shall give or cause to be given notice of meetings of the stockholders, Board of
Directors, and, when instructed to do so by the Chairman thereof, committees of
the Board of Directors, and shall have such other powers and duties as may be
prescribed by appropriate authority. The Secretary shall keep in safe custody
the seal of the Corporation and shall affix the seal to any instrument requiring
the same. The Assistant Secretaries shall have such powers and perform such
duties as may be prescribed by appropriate authority.
SECTION 6. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall deposit all monies and other valuable
effects in the name and to the credit of the Corporation in such depositaries as
may be designated by, or in accordance with general policies adopted by, the
Board of Directors or Executive Committee. He shall disburse the funds of the
Corporation as may be ordered by the Chairman, the chief financial officer, the
Board of Directors or the Executive Committee, taking proper vouchers for such
disbursements, and shall render to the Chairman, the chief financial officer and
the Board of Directors whenever they may require it, an account of all his
transactions as Treasurer. He
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shall have such powers and perform such duties as shall be assigned to him by
appropriate authority. The Assistant Treasurers shall have such powers and
perform such duties as may be prescribed by the chief financial officer or the
Treasurer.
SECTION 7. CONTROLLER. The Controller shall be the chief accounting
officer of the Corporation. He shall keep or cause to be kept all books of
account and accounting records of the Corporation and shall render to the
Chairman, the chief financial officer and the Board of Directors whenever they
may require it, a report of the financial condition of the Corporation. He
shall have such other powers and duties as shall be assigned to him by
appropriate authority. The Assistant Controllers shall have such powers and
perform such duties as may be prescribed by the chief financial officer or the
Controller.
SECTION 8. BOND. The Board of Directors may, or the Chairman may,
require any officers, agents or employees of the Corporation to furnish bonds
conditioned on the faithful performance of their respective duties with a surety
company satisfactory to the Board of Directors or the Chairman as surety. The
expenses of such bond shall be paid by the Corporation.
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ARTICLE V
COMMITTEES
SECTION 1. EXECUTIVE COMMITTEE. An Executive Committee, composed of
the Chairman of the Board and such other directors as the Board of Directors may
determine from time to time shall be elected by the Board of Directors. Except
as provided hereinafter or in resolutions of the Board of Directors, the
Executive Committee shall have, and may exercise when the Board of Directors is
not in session, all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation and may authorize the
seal of the Corporation to be affixed to all papers which may require it. The
Executive Committee shall not, however, have power or authority in reference to
(a) approving or adopting, or recommending to the stockholders, any action or
matter expressly required by the provisions of the General Corporation Law of
Delaware to be submitted to stockholders for approval, (b) adopting, amending or
repealing the by-laws of the Corporation, (c) electing or appointing the
Chairman of the Board of the Corporation or (d) declaring a dividend.
SECTION 2. COMPENSATION COMMITTEE. A Compensation Committee,
including a chairman, having such number of directors
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as the Board of Directors shall determine from time to time, shall be elected by
the Board of Directors. No member of the Compensation Committee while holding
such office and within the previous year shall, in addition to usual
compensation as a director, receive or be granted or be eligible for any award
or any other benefit under any compensation, stock option or other benefit plans
that the committee may supervise, administer, or review or while holding such
office shall be a full-time employee of the Corporation or any of its
subsidiaries. The Compensation Committee shall fix the compensation of the
chief executive officer of the Corporation and approve the compensation of
senior executives of the Corporation or any of its subsidiaries designated under
procedures established by the Committee from time to time. The Compensation
Committee will approve, disapprove or modify the retention by the Corporation of
advisors or consultants on matters relating to the compensation of the chief
executive officer and senior executives of the Corporation. The Compensation
Committee shall also satisfy itself, if in its opinion circumstances make it
desirable to do so, that the general compensation policies and practices
followed by the Corporation and its subsidiaries are in the Corporation's best
interests. The Compensation Committee shall have such other
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duties as may be set forth in the Corporation's compensation, stock option or
other benefit plans as they may exist from time to time, or otherwise as
provided by the Board of Directors. The Compensation Committee shall report to
the Board at least annually and whenever the Board may require respecting the
discharge of the committee's duties and responsibilities. The term
"compensation" as used in this Section shall mean salaries, bonuses, agreements
to pay deferred compensation, and discretionary benefits such as stock options,
but shall not include payments to or under any employee pension, retirement,
profit sharing, stock investment, or similar plan.
SECTION 3. AUDIT COMMITTEE. An Audit Committee, including a chairman,
having such number of directors as the Board of Directors may determine from
time to time, shall be elected by the Board of Directors. The members of the
Audit Committee shall be elected by the Board of Directors from among the
members of the Board who are not officers or employees of the Corporation. The
Audit Committee shall meet at least annually with the Corporation's independent
public accountants, and at any time during the year when considered appropriate
by the independent public accountants or the committee. The committee shall
review the annual financial statements of the Corporation with the
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independent public accountants and shall review the practices and procedures
adopted by the Corporation in the preparation of such financial statements. The
Audit Committee shall submit recommendations to the Board of Directors with
respect to the selection of independent public accountants to examine the
Corporation's annual financial statements and shall review the independent
public accountant's annual scope of audit. The Audit Committee shall, as it may
deem appropriate from time to time, report and make recommendations to the Board
of Directors.
SECTION 4. REPORTS. The Executive Committee shall report to each
regular meeting and, if directed, to each special meeting of the Board of
Directors all action taken by such committee subsequent to the date of its last
report, and other committees shall report to the Board of Directors at least
annually.
SECTION 5. OTHER COMMITTEES. The Board of Directors may appoint such
other committee or committees as it deems desirable.
SECTION 6. ELECTION AND TERM. The Chairman and each member of every
committee shall be a member of and, except as provided in Section 7 of this
Article V, elected by the Board of Directors and shall serve until such person
shall cease to be a
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member of the Board of Directors or such person's membership on the committee
shall be terminated by the Board.
SECTION 7. MEETINGS, QUORUM AND NOTICE. The Chairman of any
committee shall be the presiding officer thereof. Any committee may meet at
such time or times on notice to all the members thereof by the Chairman or by a
majority of the members or by the Secretary of the Corporation and at such place
or places as such notice may specify. At least twenty-four (24) hours' notice
of the meeting shall be given but such notice may be waived. Such notice may be
given by mail, telegraph, telephone or personally. Each committee shall cause
minutes to be kept of its meetings which record all actions taken. Such minutes
shall be placed in the custody of the Secretary of the Corporation except that
the Compensation and Audit Committees shall each determine who shall maintain
custody of its minutes or portions thereof. Any committee may, except as
otherwise provided by law, act in its discretion by a resolution or resolutions
in writing signed by all the members of such committee with the same force and
effect as if duly passed by a duly convened meeting. Any such resolution or
resolutions shall be recorded in the minute book of the committee under the
proper date thereof. Members of any committee may also participate in a
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meeting of such committee by means of conference telephone or similar
communications equipment, by means of which all persons participating in the
meeting can hear each other and participation in the meeting pursuant to this
provision shall constitute presence in person at such meeting. A majority of
the members of each committee shall constitute a quorum. In the absence or
disqualification of a member of a committee, the member or members present at
any meeting and not disqualified from voting, whether or not such members
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
ARTICLE VI
INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is made
a party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter, a "proceeding"), by reason of the fact that, on or
after May 21, 1987, he or she is serving or had served as a director, officer or
employee of the Corporation or, while serving as such
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director, officer or employee, is serving or had served at the request of the
Corporation as a director, officer, employee or agent of, or in any other
capacity with respect to, another corporation or a partnership, joint venture,
trust or other entity or enterprise, including service with respect to employee
benefit plans (hereinafter, an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director, officer
or employee of the Corporation, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by Delaware law, as the same exists
or may hereafter be changed or amended (but, in the case of any such change or
amendment, only to the extent that such change or amendment permits the
Corporation to provide broader indemnification rights than permitted prior
thereto), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts to be paid in
settlement) reasonably incurred or suffered by an indemnitee in connection
therewith and such indemnification shall continue as to an indemnitee who has
ceased to be a director, officer or employee of the Corporation and shall inure
to the benefit of the indemnitee's heirs, executors and
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administrators; PROVIDED, HOWEVER, that except as provided in Section 3 of this
Article with respect to proceedings seeking to enforce rights to
indemnification, the Corporation shall indemnify an indemnitee in connection
with a proceeding (or part thereof) initiated by the indemnitee only if such
proceeding (or part thereof) was authorized by the board of directors of the
Corporation. The right to indemnification conferred in this Article shall be a
contract right.
SECTION 2. ADVANCEMENT OF EXPENSES. An indemnitee who is a director
or officer of the Corporation, and any other indemnitee to the extent authorized
from time to time by the board of directors of the Corporation, shall have the
right to be paid by the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition (hereinafter, an "advancement of
expenses"); PROVIDED, HOWEVER, that, if the Delaware General Corporation Law
requires, an advancement of expenses incurred by an indemnitee in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such indemnitee, including, without limitation,
service to an employee benefit plan) shall be made only upon delivery to the
Corporation of an undertaking (hereinafter, an "undertaking"), by or on behalf
of such
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indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal (hereinafter, a "final adjudication") that such indemnitee is not
entitled to be indemnified for such expenses under this Article or otherwise.
SECTION 3. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under
Section 1 or Section 2 of this Article is not paid in full by the Corporation
within sixty days in the case of Section 1 and twenty days in the case of
Section 2 after a written claim has been received by the Corporation, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in
any such suit, or in a suit brought by the Corporation to recover an advancement
of expenses pursuant to terms of an undertaking, the indemnitee shall be
entitled to be paid also the expense of prosecuting or defending such suit. In
(i) any suit brought by the indemnitee to enforce a right to indemnification
hereunder (other than a suit brought by the indemnitee to enforce a right to an
advancement of expenses), it shall be a defense that, and (ii) any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking the Corporation shall be entitled to
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recover such expenses upon a final adjudication that, the indemnitee has not met
the applicable standard of conduct set forth in the Delaware General Corporation
Law. Neither the failure of the Corporation (including its board of directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such suit that indemnification of the indemnitee is
proper in the circumstances because the indemnitee has met the applicable
standard of conduct set forth in the Delaware General Corporation Law, nor an
actual determination by the Corporation (including its board of directors,
independent legal counsel, or its stockholders) that the indemnitee has not met
such applicable standard of conduct, shall create a presumption that the
indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to the action. In any suit
brought by the indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Article or otherwise shall be on the
Corporation.
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SECTION 4. INDEMNIFICATION OF AGENTS OF THE CORPORATION. The
Corporation may, to the extent authorized from time to time by its board of
directors, grant rights to indemnification, and to be paid by the Corporation
the expenses incurred in defending any proceeding in advance of its final
disposition, to any agent of the Corporation to the fullest extent of the
provisions of this Article with respect to the indemnification of directors,
officers and employees of the Corporation and advancement of expenses of
directors and officers of the Corporation.
SECTION 5. NON-EXCLUSIVITY OF RIGHTS. The right to indemnification
and to the advancement of expenses conferred in this Article shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, the Corporation's Restated Certificate of Incorporation,
these by-laws, any agreement, vote of stockholders or disinterested directors,
or otherwise.
SECTION 6. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or of another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not
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the Corporation would have the power to indemnify such person against such
expense, liability or loss under the Delaware General Corporation Law.
SECTION 7. SURVIVAL OF PRIOR INDEMNIFICATION PROVISIONS; EFFECT OF
SUBSEQUENT CHANGE ON EXISTING RIGHTS. Nothing contained in this Article shall
be construed as altering or eliminating the rights to indemnification existing,
or based upon service by an indemnitee, prior to May 21, 1987. Any repeal or
modification of this Article shall not adversely affect any right or protection
of a director, officer or employee of the Corporation existing at the time of
such repeal or modification.
ARTICLE VII
CHECKS, CONTRACTS, OTHER INSTRUMENTS
SECTION 1. DOCUMENTS, INSTRUMENTS NOT REQUIRING SEAL. All checks,
notes, drafts, acceptances, bills of exchange, orders for the payment of money,
and all written contracts and instruments of every kind which do not require a
seal shall be signed by such officer or officers, or person or persons as these
by-laws, or the Board of Directors or Executive Committee by resolution, may
from time to time prescribe.
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SECTION 2. DOCUMENTS, INSTRUMENTS REQUIRING SEAL. All bonds, deeds,
mortgages, leases, written contracts and instruments of every kind which require
the corporate seal of the Corporation to be affixed thereto, shall be signed and
attested by such officer or officers as these by-laws, or the Board of Directors
or Executive Committee, by resolution, may from time to time prescribe.
ARTICLE VIII
CAPITAL STOCK
SECTION 1. STOCK CERTIFICATES. The certificates for shares of the
capital stock of the Corporation shall be in such form, not inconsistent with
the Restated Certificate of Incorporation, as shall be approved by the Board of
Directors. Each certificate shall be signed by the Chairman of the Board of
Directors or a Vice President and also by the Secretary, an Assistant Secretary,
the Treasurer or an Assistant Treasurer, provided, however, that any such
signature of an officer of the Corporation or of the Transfer Agent, Assistant
Transfer Agent, Registrar or Assistant Registrar, or any of them, may be a
facsimile. In case any officer or officers who shall have signed, or whose
facsimile signature or signatures shall have been used on any such certificate
or certificates shall cease to
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be such officer or officers of the Corporation, whether because of death,
resignation or otherwise before such certificate or certificates shall have been
delivered by the Corporation, such certificate or certificates may nevertheless
be adopted by the Corporation and be used and delivered as though the officer or
officers who signed the said certificate or certificates or whose facsimile
signature or signatures shall have been used thereon had not ceased to be said
officer or officers of the Corporation. All certificates shall be consecutively
numbered, shall bear the corporate seal and the names and addresses of all
persons owning shares of capital stock of the Corporation with the number of
shares owned by each; and, the date or dates of issue of the shares of stock
held by each shall be entered in books kept for that purpose by the proper
officers or agents of the Corporation.
SECTION 2. RECOGNITION OF HOLDERS OF RECORD. The Corporation shall
be entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof, and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it has actual or other notice thereof, save as
expressly provided by the laws of the State of Delaware.
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SECTION 3. LOST CERTIFICATES. Except in cases of lost or destroyed
certificates, and in that case only after conforming to the requirements
hereinafter provided, no new certificates shall be issued until the former
certificate for the shares represented thereby shall have been surrendered and
cancelled. The Board of Directors may direct a new certificate or certificates
to be issued in place of any certificate or certificates theretofore issued by
the Corporation alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate or certificates to
be lost or destroyed; and the Board of Directors may, in its discretion and as a
condition precedent to the issuance of any such new certificate or certificates,
require (i) that the owner of such lost or destroyed certificate or
certificates, or his legal representative give the Corporation and its transfer
agent or agents, registrar or registrars a bond in such form and amount as the
Board of Directors may direct as indemnity against any claim that may be made
against the Corporation and its transfer agent or agents, registrar or
registrars, or (ii) that the person requesting such new certificate or
certificates obtain a final order or decree of a court of competent jurisdiction
as to his right to receive such new certificate or certificates.
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SECTION 4. TRANSFER OF SHARES. Shares of stock shall be transferred
on the books of the Corporation by the holder thereof or by his attorney
thereunto duly authorized upon the surrender and cancellation of certificates
for a like number of shares.
SECTION 5. REGULATIONS GOVERNING TRANSFER OF SHARES. The Board of
Directors may make such regulations as it may deem expedient concerning the
issue, transfer and registration of stock.
SECTION 6. APPOINTMENT OF TRANSFER AGENT, REGISTRAR. The Board may
appoint a Transfer Agent or Transfer Agents and Registrar or Registrars for
transfers and may require all certificates to bear the signature of either or
both.
ARTICLE IX
MISCELLANEOUS
SECTION 1. INSPECTION OF BOOKS. The Board of Directors or the
Executive Committee shall determine from time to time whether and, if allowed,
when and under what conditions and regulations the accounts and books of the
Corporation (except such as may by statute be specifically open to inspection),
or any of them shall be open to the inspection of the stockholders,
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and the stockholders' rights in this respect are and shall be restricted and
limited accordingly.
SECTION 2. CORPORATE SEAL. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization, and the words
"Corporate Seal, Delaware".
SECTION 3. FISCAL YEAR. The fiscal year shall begin on the first day
of January of each year.
SECTION 4. WAIVER OF NOTICE. Whenever by statute, the provisions of
the Restated Certificate of Incorporation, or these by-laws, the stockholders,
the Board of Directors or any committee established by the Board of Directors in
accordance with these by-laws are authorized to take any action after notice,
such notice may be waived, in writing, before or after the holding of the
meeting at which such action is to be taken, by the person or persons entitled
to such notice or, in the case of a stockholder, by his attorney thereunto
authorized.
ARTICLE X
AMENDMENTS
SECTION 1. BY STOCKHOLDERS. These by-laws, or any of them, may be
amended, altered, changed, added to or repealed at any regular or special
meeting of the stockholders, by the
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affirmative vote of a majority of the shares of stock then issued and
outstanding.
SECTION 2. BY THE BOARD OF DIRECTORS. The Board of Directors, by
affirmative vote of a majority of its members, may, at any regular or special
meeting, amend, alter, change, add to or repeal these by-laws, or any of them,
but any by-laws made by the Directors may be amended, altered, changed, added to
or repealed by the stockholders.
-34-
<PAGE>
Exhibit 10.6
MARSH & MCLENNAN COMPANIES
STOCK INVESTMENT SUPPLEMENTAL PLAN
AMENDMENT
WHEREAS, Marsh & McLennan Companies, Inc. (the "Company") previously
established the Marsh & McLennan Companies Stock Investment Plan (the "Plan")
effective July 1, 1992 for the benefit of its eligible employees;
WHEREAS, pursuant to Section 8.1 of the Plan, the Company has reserved
the right to amend the Plan;
WHEREAS, the Plan was restated by instrument dated February 17, 1995
(the "Restated Plan");
WHEREAS, the Restated Plan has been amended in several respects by the
Board of Directors of the Company at its meetings of March 21, 1996 (with
respect generally to equivalent benefits under the Company's Stock Investment
Plan) and November 21, 1996 (with respect to the amendments set forth below in
paragraphs 8, 9 and 11), and it is desirable to record such amendments in this
instrument; and
WHEREAS, the Chief Executive Officer of the Company and the Plan
Administrator have determined to amend the Plan in several other respects to
conform to changes that have been made to the Marsh & McLennan Companies Stock
Investment Plan;
NOW, THEREFORE, the Plan is hereby amended as follows, effective as of
January 1, 1997 (or as of such other specified date):
1. Sections 1.1 is amended to read as follows:
"AFTER-TAX CONTRIBUTIONS, CODE, COMPANY, COMPENSATION, EMPLOYEE, MMC
STOCK, PARTICIPANT, PARTICIPATING COMPANY MATCHING CONTRIBUTIONS, PLAN
YEAR, PRE-TAX CONTRIBUTIONS, TERMINATION OF EMPLOYMENT and YEAR OF
SERVICE have the meanings given them in the Basic Plan."
2. The first sentence of Section 3.1 is amended to read as follows:
"Subject to Section 3.2, an Employee who is eligible pursuant to
Section 2.1 for a Plan Year may direct the Participating Company that
employs him to reduce his Compensation for such Plan Year by an amount
equal to the amount permitted from time to time under Sections 3.1.1
and 3.1.4 of the Basic Plan, and to pay such amount to such Employee
in the future as deferred compensation under this Plan."
<PAGE>
3. Section 3.2 is amended by renaming the section "Timing of Compensation
Reduction" and deleting the reference in the last sentence to the term
"Monthly Earnings", which term is replaced with the term
"Compensation".
4. Section 3.3(a) is amended, effective January 1, 1994, to read as
follows:
"(a) Pursuant to uniform procedures established by the Plan
Administrator, the sum of an Employee's rate of Compensation reduction
elected pursuant to Section 3.1 of this Plan and the rate of his
payroll deduction pursuant to Section 3.1 of the Basic Plan shall not
exceed the maximum rate permitted from time to time under Section 3.1
of the Basic Plan."
5. The first sentence of Section 3.3(b) is amended to read as follows:
"The sum for any Plan Year of the amount credited to an Employee's
SISP Account pursuant to Section 4.3 of this Plan and the
Participating Company Matching Contributions credited to him pursuant
to Section 3.8.1 of the Basic Plan shall not exceed in the aggregate
the maximum rate specified from time to time under Section 3.8.1 of
the Basic Plan."
6. Section 4.3 is amended to read as follows:
"4.3 CREDITS FOR EMPLOYER MATCHING. Subject to Section 3.3(b), the
Account of each SISP Participant who has completed at least one Year
of Service and to which Stock Units are credited for any month
pursuant to Section 4.2 shall be credited as of the last day of such
month with an additional number of Stock Units (including any
fractional Unit) equal to the quotient of (a) the applicable
percentage specified from time to time in Section 3.8.1 of the Basic
Plan of the first six percent (6%) of reduction in the SISP
Participant's Compensation under this Plan for such month divided by
(b) the Fair Market Value of a share of MMC Stock as of such last
day."
7. Section 5.4(a) is amended, effective from the inception of the Plan,
to read as follows:
"(a) Subject to the provisions of paragraph (b) of this Section 5.4,
the Plan Administrator may in his discretion permit SISP Participants,
under uniformly applicable rules, to designate the time and/or form of
payment of their SISP Benefits. Any such designation shall remain in
effect until such time as a new designation shall be made."
8. Section 5.6(b) is amended, effective November 1, 1996, by deleting in
its entirety the proviso referring to Rule 16b-3(d).
9. The last sentence of Section 5.7 is amended, effective November 1,
1996, to read as follows:
<PAGE>
"If the event giving rise to the withholding obligation is the payment
of shares of MMC Stock, then the payee may satisfy the withholding
obligation by electing to have the Participating Company or Companies
withhold shares of MMC Stock having a fair market value equal to the
amount of tax to be withheld. For this purpose, fair market value
shall be determined by the Plan Administrator as of the date on which
the amount of tax to be withheld is determined (and any fractional
share amount shall be settled in cash)."
10. Section 7.1(a) is amended to read as follows:
"(a) make and enforce rules and regulations and prescribe the use of
forms he deems appropriate for the administration of the Plan
(including the discretion to prescribe the form or other method of
communication, consistent with applicable law, for any particular
purpose specified in the Plan, whether or not the Plan specifies that
such communication be written);"
11. Section 8.1(a) is amended, effective November 21, 1996, to read as
follows:
"(a) Subject to Section 8.2, the Board of Directors may at any time
amend the Plan, retroactively or otherwise, in any respect or
terminate the Plan. However, no such amendment or termination shall
reduce any SISP Participant's SISP Benefit determined as though the
date of such amendment or termination were the date of his Termination
of Employment. Subject to superseding action by the Board of
Directors, the Chief Executive Officer and the Plan Administrator,
acting jointly, may take any action permitted to be taken by the Board
of Directors to amend (but not terminate) the Plan other than this
Section 8.1, so long as such amendment does not (i) materially
increase the cost of the Plan to the Participating Companies or have a
materially adverse financial effect on the Company, (ii) materially
alter the benefits to Participants, (iii) result in more favorable
treatment of one or more members of the Board of Directors or officers
of the Company exclusively, or (iv) alter the treatment of the Plan
under the Code, provided that each such amendment shall be set forth
in writing executed by the Chief Executive Officer of the Company and
the Plan Administrator."
IN WITNESS WHEREOF, the Company has caused this Amendment to be
executed by its duly authorized officers this 16th day of June, 1997.
MARSH & McLENNAN COMPANIES, INC.
By: /s/ A.J.C. Smith
-------------------------------
A. J. C. Smith
Chairman of the Board
Chief Executive Officer
<PAGE>
By: /s/ Francis N. Bonsignore
-------------------------------
Francis N. Bonsignore
Senior Vice President - Human
Resources and Administration
Plan Administrator
<PAGE>
Exhibit 10.11
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
MARSH & McLENNAN COMPANIES, INC.
U.S. EMPLOYEE
1997 CASH BONUS AWARD VOLUNTARY DEFERRAL PLAN
---------------------------------------------
1. ELIGIBILITY
All active U.S. employees of Marsh & McLennan Companies, Inc. (the
"Corporation") and its subsidiaries who are designated as eligible for
participation in the MMC Partners Bonus Plan or a Local Bonus Plan, and who
are presently in salary grade 15 (or its equivalent) or above, may, at
management's discretion, be considered for participation in the Marsh &
McLennan Companies, Inc. U.S. Employee 1997 Cash Bonus Award Voluntary
Deferral Plan (the "1997 Plan"). Participants in the 1997 Plan may make
deferral elections pursuant to the rules outlined in Section 2 below.
2. PROGRAM RULES
Except as otherwise provided herein, the 1997 Plan shall be administered by
the Compensation Committee of the Board of Directors of the Corporation
(the "Committee"). The Committee shall have authority in its sole
discretion to interpret the 1997 Plan and make all determinations,
including the determination of bonus awards eligible to be deferred, with
respect to the 1997 Plan. All determinations made by the Committee shall
be final and binding. The Committee may delegate to any other individual
or entity the authority to perform any or all of the functions of the
Committee under the 1997 Plan and references to the Committee shall be
deemed to include any such delegate. Exercise of deferral elections under
the 1997 Plan must be made in accordance with the following rules.
a. RIGHTS TO AN AWARD AND TO A DEFERRAL ELECTION
The right to a deferral election applies only to the annual cash bonus
scheduled to be awarded in early 1998 in respect of 1997 services, the
payment of which bonus would normally be made by the end of the first
quarter of the 1998 calendar year. The granting of such an annual
cash bonus award is discretionary and neither delivery of deferral
election materials nor an election to defer shall affect entitlement
to such an award. The right to a deferral election does not apply to
bonuses (including, but not limited to, bonuses pursuant to an
employment agreement, sign-on or guaranteed bonuses, commissions or
non-annual incentive payments) that are not awarded as part of an
annual cash bonus plan.
<PAGE>
b. ELECTION FORMS
In order to ensure that elections to defer bonus amounts are effective
under applicable tax laws, please complete and sign the attached
election form(s) and return them (postmarked or delivered) no later
than November 26, 1997. Form(s) should be returned, and any questions
should be directed, to:
Vincent R. Belluccia
Manager, Executive Compensation
and Human Resource Systems
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, New York 10036-2774
(212) 345-5657
c. DEFERRAL OPTIONS
(i) DEFERRAL AMOUNT. An eligible employee may elect to defer a
portion of such employee's bonus award until January of a
specific year ("year certain") or until January of the year
following retirement in an amount represented by one of the
following two choices:
1. 25%, 50% or 75% of the employee's cash bonus award, subject
to a maximum limit established by the Committee, or
2. the lowest of 25%, 50% or 75% of the employee's cash bonus
award which results in a deferral of at least $10,000.
If the percentage selected times the amount of the cash bonus
award is less than $10,000, NO deferral will be made or deducted
from the award.
(ii) 1997 DEFERRED BONUS ACCOUNTS. If a deferral election is made,
deferrals may be made into one or both of the two accounts which
the Corporation shall make available to the participating
employee. The relevant portion of the award deferral will be
credited to the relevant account on the first day of the month
following the date in which the bonus payment would have been
made had it not been deferred. The available accounts for
deferrals of bonuses (the "1997 Deferred Bonus Accounts") shall
consist of (a) the 1997 Putnam Fund Account and (b) the 1997
Corporation Stock Account. Amounts may not be transferred
between the 1997 Corporation Stock Account and either the 1997
Putnam Fund Account or the "Putnam Transfer Fund Account" (as
referred to in Section 2.e. below).
2
<PAGE>
d. 1997 PUTNAM FUND ACCOUNT
(i) ACCOUNT VALUATION. The 1997 Putnam Fund Account is a bookkeeping
account, the value of which shall be based upon the performance
of selected funds of the Putnam mutual fund group. The
Corporation will determine in its sole discretion the funds of
the Putnam mutual fund group into which deferrals may be made.
Deferrals among selected funds comprising the 1997 Putnam Fund
Account must be made in multiples of 5% of the total amounts
deferred into the 1997 Putnam Fund Account. Deferred amounts
will be credited to the 1997 Putnam Fund Account with units each
reflecting one Class A share of the elected fund. Fractional
units will also be credited to such account, if applicable. The
number of such credited units will be determined by dividing the
value of the bonus award deferred into such fund by the net asset
value of the elected fund of the 1997 Putnam Fund Account as of
the close of business on the last trading day on the New York
Stock Exchange of the month in which such bonus payment would
have been made had it not been deferred. All dividends paid with
respect to an elected fund of a 1997 Putnam Fund Account will be
deemed to be immediately reinvested in such fund.
(ii) FUND TRANSFERS. Amounts deferred into a 1997 Putnam Fund Account
and the Putnam Transfer Fund Account may be transferred between
eligible funds of these respective accounts (but not between the
1997 Putnam Fund Account and the Putnam Transfer Fund Account)
pursuant to an election which may be made once per calendar month
(or at such other intervals as the Committee may prescribe).
Such election shall be effective, and the associated transfer
shall be based upon the net asset values of the applicable funds
of the 1997 Putnam Fund Account or the Putnam Transfer Fund
Account, as of the close of business on the last trading day on
the New York Stock Exchange of the month (or other applicable
period) in which such election is received by the Corporation,
provided the election is received by the 25th day of such month
(or at least a sufficient number of days, determined by the
Committee, prior to the end of such other applicable period) and
not revoked prior to such date. In the event the election is not
received on a timely basis, such election shall be effective as
of the close of business on the last trading day on the New York
Stock Exchange of the immediately following calendar month (or
other applicable period), provided such election is not revoked
prior to the 25th day of such following calendar month (or prior
to the date determined by the Committee for any other applicable
period).
3
<PAGE>
e. PUTNAM TRANSFER FUND ACCOUNT
By November 26, 1997, each individual with respect to whom there is
maintained an "Interest Factor Account" (established for deferrals of
all pre-1993 bonus awards), whether or not any such individual is
eligible for participation under Section 1 above, may make an
irrevocable election to transfer ALL (but not less than all) of such
participant's Interest Factor Account into a "Putnam Transfer Fund
Account", which election shall be effective, and which transfer shall
be based upon the net asset value of the selected funds of such Putnam
Transfer Fund Account, as of the close of business on the last trading
day on the New York Stock Exchange in 1997. The Putnam Transfer Fund
Account shall be administered in a manner consistent with the
administration of the 1997 Putnam Fund Account pursuant to Section
2.d.(i) above. Distribution elections (including the form of payment)
otherwise in effect for the Interest Factor Account shall remain in
effect for amounts transferred to the Putnam Transfer Fund Account.
f. 1997 CORPORATION STOCK ACCOUNT
(i) ACCOUNT VALUATION. The 1997 Corporation Stock Account is a
bookkeeping account, the value of which shall be based upon the
performance of the common stock of the Corporation. Amounts
deferred into the 1997 Corporation Stock Account will be credited
to such account with units each reflecting one share of common
stock of the Corporation. Fractional units will also be credited
to such account, if applicable. The number of such credited
units will be determined by dividing the value of the bonus award
deferred into the 1997 Corporation Stock Account (plus the
"supplemental amount" referred to in clause (ii) below) by the
closing price of the common stock of the Corporation on the New
York Stock Exchange on the last trading day of the month in which
such bonus payment would have been made had it not been deferred.
Dividends paid on the common stock of the Corporation shall be
reflected in a participant's 1997 Corporation Stock Account by
the crediting of additional units in such account equal to the
value of the dividend and based upon the closing price of the
common stock of the Corporation on the New York Stock Exchange on
the date such dividend is paid. Deferrals into the 1997
Corporation Stock Account must be deferred to a date not earlier
than January 1, 2001.
4
<PAGE>
(ii) SUPPLEMENTAL AMOUNT. With respect to that portion of a bonus
award which a participating employee defers into the 1997
Corporation Stock Account, there shall be credited to such
participant's 1997 Corporation Stock Account an amount equal to
the amount deferred into such account plus an additional amount
equal to 15% of the amount so deferred (the "supplemental
amount"). The maximum percentage of any participating employee's
annual bonus award permitted to be deferred into the 1997
Corporation Stock Account (prior to giving effect to the
supplemental amount) is 50% of such award.
g. STATEMENT OF ACCOUNT
The Corporation shall provide periodically to each participant (but
not less frequently than once per calendar quarter) a statement
setting forth the balance to the credit of such participant in such
participant's 1997 Deferred Bonus Accounts and Putnam Transfer Fund
Account.
h. IRREVOCABILITY AND ACCELERATION
Subject to the provisions of paragraphs i. (iii) and i. (vii) below,
all deferral elections made under the 1997 Plan are irrevocable.
However, the Committee may, in its sole discretion, and upon finding
that a participant has demonstrated severe financial hardship, direct
the acceleration of the payment of any or all deferred amounts then
credited to the participant s 1997 Deferred Bonus Accounts.
i. PAYMENT OF DEFERRED AMOUNTS
(i) YEAR CERTAIN DEFERRALS. If the participant remains employed
until the deferral year elected, all amounts relating to "year
certain" deferrals will be paid in a single distribution, less
applicable withholding taxes, in January of the deferral year elected,
or the participant may elect (at the time of the original deferral
election) to have distributions from the 1997 Corporation Stock
Account or the 1997 Putnam Fund Account, as the case may be, made in
up to ten (10) annual installments payable each January commencing
with the deferral year elected. Annual installments will be paid in
an amount, less applicable withholding taxes, determined by
multiplying (i) the balance of the 1997 Corporation Stock Account or
the 1997 Putnam Fund Account, as the case may be, by (ii) a fraction,
the numerator of which is 1 and the denominator of which is a number
equal to the remaining unpaid annual installments.
<PAGE>
(ii) RETIREMENT DEFERRALS. For participants who retire, amounts
relating to deferrals until the year following retirement will be
paid in a single distribution in January of the year following
retirement, or the participant may elect (at the time of the
original deferral election) to have distributions from the 1997
Corporation Stock Account or 1997 Putnam Fund Account, as the
case may be, made in up to ten (10) annual installments payable
each January commencing with the year following retirement.
Annual installments will be paid in an amount, less applicable
withholding taxes, determined by multiplying (i) the balance of
the 1997 Corporation Stock Account or 1997 Putnam Fund Account,
as the case may be, by (ii) a fraction, the numerator of which is
1 and the denominator of which is a number equal to the remaining
unpaid annual installments.
(iii) REDEFERRAL ELECTION. Participants shall be permitted to delay
the beginning date of distribution and/or increase the number of
annual installments (up to the maximum number permitted under the
1997 Plan) for awards previously deferred or redeferred under the
1997 Plan, provided that the redeferral election must be made at
least one full calendar year prior to the beginning date of
distribution.
(iv) TERMINATION OF EMPLOYMENT PRIOR TO END OF DEFERRAL PERIOD.
Subject to the provisions of paragraph (vi) below, in the event
of termination of employment for any reason prior to completion
of the elected deferral period, all amounts then in the
participant's 1997 Deferred Bonus Accounts will be paid to the
participant (or the participant's designated beneficiary in the
event of death) in a single distribution, less applicable
withholding taxes, as soon as practicable after the end of the
quarter in which the termination occurred; PROVIDED, HOWEVER,
that, subject to the provisions of paragraph (vi) below, upon a
participant's retirement or termination for disability prior to
completion of the elected deferral period all such amounts shall
be paid in January of the year following such retirement or
termination for disability, as the case may be.
(v) DEATH DURING INSTALLMENT PERIOD. If a participant dies after the
commencement of payments from his or her 1997 Deferred Bonus
Accounts, the designated beneficiary shall receive the remaining
installments over the elected installment period.
6
<PAGE>
(vi) SPECIAL RULES APPLICABLE TO 1997 CORPORATION STOCK ACCOUNT.
Notwithstanding any provision in the 1997 Plan to the contrary
(other than the second sentence of Section 2.h. above), with
respect to a participant's 1997 Corporation Stock Account, in the
event that prior to January 1, 2001, a participant's employment
terminates for disability or retirement, all amounts in such
account will be paid to the participant, less applicable
withholding taxes, in January of 2001. In the event that, prior
to January 2001, a participant's employment terminates on account
of death, or a participant whose employment was earlier
terminated for disability or retirement should die, the
distribution rule in paragraph (iv) above will apply. If,
however, the termination of employment prior to January 1, 2001
is on account of a reason other than death, disability or
retirement, the participant will receive, as soon as practicable
following the end of the quarter in which the termination
occurred, a single distribution, less applicable withholding
taxes, of (a) the balance of the participant's 1997 Corporation
Stock Account less (b) the portion of such balance attributable
to the supplemental amount (including earnings thereon), which
portion shall be forfeited in its entirety. For purposes of
determining the portion of the balance of the 1997 Corporation
Stock Account attributable to the supplemental amount, the
supplemental amount shall be increased or decreased by the
respective gain or loss in the 1997 Corporation Stock Account
attributable to such supplemental amount.
(vii) ACCELERATION OF DISTRIBUTION. A participant may elect to
accelerate the distribution of all or a portion of the 1997
Deferred Bonus Accounts for any reason prior to the completion of
the elected deferral period, subject to the imposition of a
significant penalty in accordance with applicable tax rules. The
penalty shall be an account forfeiture equal to (i) 6% of the
amount that the participant elects to have distributed from the
1997 Deferred Bonus Accounts and (ii) 100% of any unvested
supplemental amount as provided in Section 2(f)(ii) above,
including related earnings, that the participant elects to have
distributed from the 1997 Corporation Stock Account. Amounts
distributed to the participant will be subject to applicable tax
withholding, but amounts forfeited will not be subject to tax.
(viii) CHANGE IN CONTROL. Notwithstanding any other provision in the
1997 Plan to the contrary, in the event of a "change in control"
of the Corporation, as defined in the Corporation's 1997 Employee
Incentive and Stock Award Plan (the "1997 Incentive Plan"), all
amounts credited to a participant s 1997 Deferred Bonus Accounts
as of the effective date of such change in control will be
distributed within five days of such change in control as a lump
sum cash payment, less applicable withholding taxes.
7
<PAGE>
(ix) FORM OF PAYMENT. All payments in respect of the 1997 Putnam Fund
Account shall be made in cash and payments in respect of the 1997
Corporation Stock Account shall be made in shares of common stock
of the Corporation (with cash paid in lieu of any fractional
shares); PROVIDED, HOWEVER, that in the event of a change in
control of the Corporation, payments from the 1997 Corporation
Stock Account shall be made in cash based upon (A) the highest
price paid for shares of common stock of the Corporation in
connection with such change in control or (B) if shares of common
stock of the Corporation are not purchased or exchanged in
connection with such change in control, the closing price of the
common stock of the Corporation on the New York Stock Exchange on
the last trading day on the New York Stock Exchange prior to the
date of the change in control.
j. TAX TREATMENT
Under present Federal income tax laws, no portion of the balance
credited to a participant's 1997 Deferred Bonus Accounts or Putnam
Transfer Fund Account will be includable in income for Federal income
tax purposes during the period of deferral. However, FICA tax
withholding is required currently on the cash bonus amount (excluding
any portion subject to a mandatory deferral) awarded to the
participant, and such withholding is required on the supplemental
amount in January of 2001. When any part of the 1997 Deferred Bonus
Accounts or Putnam Transfer Fund Account is actually paid to the
participant, such portion will be includable in income, and Federal,
state and local income tax withholding will apply. The Corporation
may make necessary arrangements in order to effectuate any such
withholding, including the mandatory withholding of shares of common
stock of the Corporation which would otherwise be distributed to a
participant.
k. BENEFICIARY DESIGNATION
Each participant shall have the right, at any time, to designate any
person or persons as beneficiary or beneficiaries (both principal and
contingent) to whom payment shall be made under the 1997 Plan and
every other Cash Bonus Award Voluntary Deferral Plan for which the
participant has or will have an account balance (collectively,
including the 1997 Plan, "the Plans"), in the event of death prior to
complete distribution to the participant of the amounts due under the
Plans. Any beneficiary designation may be changed by a participant by
the filing of such change in writing on a form prescribed by the
Corporation. The filing of a new beneficiary designation form will
cancel all beneficiary
8
<PAGE>
designations previously filed and apply to all deferrals in the
account. A beneficiary designation form is attached for use by a
participant who either does not have such form on file or wishes to
make a change in the beneficiary designation. Upon completion of the
attached form, it should be forwarded to Vincent R. Belluccia, at the
address set forth in Section 2.b. above. If a participant does not
have a beneficiary designation in effect, or if all designated
beneficiaries predecease the participant, then any amounts payable to
the beneficiary shall be paid to the participant s estate. The payment
to the designated beneficiary or to the participant s estate shall
completely discharge the Corporation's obligations under the Plans.
l. CHANGES IN CAPITALIZATION
If there is any change in the number or class of shares of common
stock of the Corporation through the declaration of stock dividend or
other extraordinary dividends, or recapitalization resulting in stock
splits, or combinations or exchanges of such shares or in the event of
similar corporate transactions, each participant's 1997 Corporation
Stock Account shall be equitably adjusted by the Committee to reflect
any such change in the number or class of issued shares of common
stock of the Corporation or to reflect such similar corporate
transaction.
3. AMENDMENT AND TERMINATION OF THE 1997 PLAN
The Committee may, at its discretion and at any time, amend the 1997 Plan
in whole or in part. The Committee may also terminate the 1997 Plan in its
entirety at any time and, upon any such termination, each participant shall
be paid in a single distribution, or over such period of time as determined
by the Committee (not to extend beyond the earlier of 10 years or the
elected deferral period), the then remaining balance in such participant's
1997 Deferred Bonus Accounts.
4. MISCELLANEOUS
a. A participant under the 1997 Plan is merely a general (not secured)
creditor and nothing contained in the 1997 Plan shall create a trust
of any kind or a fiduciary relationship between the Corporation and
the participant or the participant's estate. Nothing contained herein
shall be construed as conferring upon the participant the right to
continued employment with the Corporation or its subsidiaries, or to a
cash bonus award. Except as otherwise provided by applicable law,
benefits payable under the 1997 Plan may not be assigned or
hypothecated and no such benefits shall be subject to legal process or
attachment for the payment of any claim of any person entitled to
receive the same. The adoption of the 1997 Plan and any elections
made pursuant to the 1997 Plan are subject to approval of the 1997
Plan by the Committee.
9
<PAGE>
b. Participation in the 1997 Plan is subject to these terms and
conditions and to the terms and conditions of (i) the Marsh & McLennan
Companies, Inc. 1997 Senior Executive Incentive and Stock Award Plan (
the "1997 Senior Executive Plan") with respect to those participants
hereunder who are subject thereto and (ii) the Marsh & McLennan
Companies, Inc. 1997 Employee Incentive and Stock Award Plan (the
"1997 Employee Plan") with respect to all other participants.
Participation in the 1997 Plan shall constitute an agreement by the
participant to all such terms and conditions and to the administrative
regulations of the Committee. In the event of any inconsistency
between these terms and conditions and the provisions of the 1997
Senior Executive Plan or the 1997 Employee Plan, as applicable, the
provisions of the latter shall prevail. The 1997 Senior Executive
Plan and the 1997 Employee Plan are not subject to any of the
provisions of the Employee Retirement Income Security Act Of 1974.
c. Not more than two million, five hundred thousand (2,500,00) shares of
the Corporation s common stock, plus such number of shares remaining
unused under pre-existing stock plans approved by the Corporation s
stockholders, may be issued under the 1997 Senior Executive Plan.
d. Not more than six million (6,000,000) shares of the Corporation s
common stock, plus such number of shares authorized and reserved for
awards pursuant to certain preexisting share resolutions adopted by
the Corporation s Board of Directors, may be issued under the 1997
Employee Plan.
5. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Annual Report on Form 10-K of the Corporation for the fiscal year ended
December 31, 1997 (including pages 26 through 55 of the Corporation's 1997
Annual Report to Stockholders), the Corporation's Registration Statement
on Form 8-B dated May 22, 1969, as amended by an Amendment on Form 8,
dated February 3, 1987, describing the Common Stock, including any
amendment or reports filed for the purpose of updating such description,
and the Corporation's Registration Statement on Form 8-A, dated
October 10, 1997, describing the Preferred Stock Purchase Rights attached
to the Common Stock, including any further amendment or reports filed for
the purpose of updating such description, which have been filed by the
Corporation under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), are incorporated by reference herein.
10
<PAGE>
All documents subsequently filed by the Corporation pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which indicates that all securities offered have
been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference herein and to be a part hereof
from the date of filing of such documents.
Participants may receive without charge, upon written or oral request, a
copy of any of the documents incorporated herein by reference and any other
documents that constitute part of this Prospectus by contacting Mr. Vincent
R. Belluccia as indicated above.
11
<PAGE>
Exhibit 10.12
MARSH & McLENNAN COMPANIES, INC
CANADIAN EMPLOYEE
1997 CASH BONUS AWARD VOLUNTARY DEFERRAL PLAN
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1. ELIGIBILITY
All active Canadian employees of Marsh & McLennan Companies, Inc. (the
"Corporation") and its subsidiaries who are designated as eligible for
participation in the MMC Partners Bonus Plan or a Local Bonus Plan, and who are
presently in salary grade 15 (or its equivalent) or above, may, at management's
discretion, be considered for participation in the Marsh & McLennan Companies,
Inc. Canadian Employee 1997 Cash Bonus Award Voluntary Deferral Plan (the "1997
Plan"). Participants in the 1997 Plan may make deferral elections pursuant to
the rules outlined in Section 2 below.
2. PROGRAM RULES
Except as otherwise provided herein, the 1997 Plan shall be administered by the
Compensation Committee of the Board of Directors of the Corporation (the
"Committee"). The Committee shall have authority in its sole discretion to
interpret the 1997 Plan and make all determinations, including the determination
of bonus awards eligible to be deferred, with respect to the 1997 Plan. All
determinations made by the Committee shall be final and binding. The Committee
may delegate to any other individual or entity the authority to perform any or
all of the functions of the Committee under the 1997 Plan and references to the
Committee shall be deemed to include any such delegate. Exercise of deferral
elections under the 1997 Plan must be made in accordance with the following
rules.
a. RIGHTS TO AN AWARD AND TO A DEFERRAL ELECTION
The right to a deferral election applies only to the annual cash bonus
scheduled to be awarded in early 1998 in respect of 1997 services, the
payment of which bonus would normally be made by the end of the first
quarter of the 1998 calendar year. The granting of such an annual
cash bonus award is discretionary and neither delivery of deferral
election materials nor an election to defer shall affect entitlement
to such an award. The right to a deferral election does not apply to
bonuses (including, but not limited to, bonuses pursuant to an
employment agreement, sign-on or guaranteed bonuses, commissions or
non-annual incentive payments) that are not awarded as part of an
annual cash bonus plan.
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b. ELECTION FORMS
In order to ensure that elections to defer bonus amounts are effective
under applicable tax laws, please complete and sign the attached
election form(s) and return them (postmarked or delivered) no later
than November 26, 1997. Form(s) should be returned, and any questions
should be directed, to:
Vincent R. Belluccia
Manager, Executive Compensation and HR Systems
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, NY 10036-2774
(212) 345-5657
c. DEFERRAL OPTIONS
(i) DEFERRAL AMOUNT. An eligible employee may elect to defer a portion of
such employee's bonus award in an amount represented by one of the
following two choices:
1. 25%, 50%, 75% or 100% of the employee's cash bonus award, subject
to a maximum limit established by the Committee, or
2. the lowest of 25%, 50%, 75% or 100% of the employee's cash bonus
award which results in a deferral of at least Canadian $10,000.
If the percentage selected times the amount of the cash bonus award is less
than Canadian $10,000, NO deferral will be made or deducted from the award.
(ii) PERIOD OF DEFERRAL. The payment of a bonus award may be deferred to
January of 1999 or January 2000, as elected by the participant.
(iii) 1997 DEFERRED BONUS ACCOUNTS. If a deferral election is made,
deferrals may be made into one or both of the two accounts which the
Corporation shall make available to the participating employee. The
relevant portion of the award deferral will be credited to the relevant
account on the first day of the month following the date in which the bonus
payment would have been made had it not been deferred. The available
accounts for deferrals of bonuses (the "1997 Deferred Bonus Accounts")
shall consist of (a) the 1997 Putnam Fund Account and (b) the 1997 Interest
Equivalent Account. Amounts may not be transferred between the 1997
Interest Equivalent Account and the 1997 Putnam Fund Account.
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d. 1997 PUTNAM FUND ACCOUNT
(i) ACCOUNT VALUATION. The 1997 Putnam Fund account is a bookkeeping
account the value of which shall be based upon the performance of selected
funds of the Putnam mutual fund group. The Corporation will determine in
its sole discretion the funds of the Putnam mutual fund group into which
deferrals may be made. Deferrals among selected funds comprising the 1997
Putnam Fund Account must be made in multiples of 5% of the total amounts
deferred into the 1997 Putnam Fund Account. Deferred amounts will be
credited to the 1997 Putnam Fund Account with units each reflecting one
Class A share of the elected fund. Fractional units will also be credited
to such account, if applicable. The number of such credited units will be
determined by dividing the value of the bonus award deferred into such fund
by the net asset value of the elected fund of the 1997 Putnam Fund Account
as of the close of business on the last trading day on the New York Stock
Exchange of the month in which such bonus payment would have been made had
it not been deferred. All dividends paid with respect to an elected fund
of a 1997 Putnam Fund Account will be deemed to be immediately reinvested
in such fund. All amounts credited to the 1997 Putnam Fund Account will be
converted into U.S. dollars at the exchange rate in effect as of the
applicable date.
(ii) FUND TRANSFERS. Amounts deferred into a 1997 Putnam Fund Account may
be transferred between eligible funds pursuant to an election which may be
made once per calendar month (or at such other intervals as the Committee
may prescribe). Such election shall be effective, and the associated
transfer shall be based upon the net asset values of the applicable funds
of the 1997 Putnam Fund Account, as of the close of business on the last
trading day on the New York Stock Exchange of the month (or other
applicable period) in which such election is received by the Corporation,
provided the election is received by the 25th day of such month (or at
least a sufficient number of days, determined by the Committee, prior to
the end of such other applicable period) and not revoked prior to such
date. In the event the election is not received on a timely basis, such
election shall be effective as of the close of business on the last trading
day on the New York Stock Exchange of the immediately following calendar
month (or other applicable period), provided such election is not revoked
prior to the 25th day of such following calendar month (or prior to the
date determined by the Committee for any other applicable period).
e. 1997 INTEREST EQUIVALENT ACCOUNT
An "Interest Equivalent" shall be calculated and added to each 1997
Interest Equivalent Account as of the last day of each calendar quarter
based on the average principal balance in said account during said calendar
quarter and on the average of the 30-day Banker's Acceptance rate of
interest as published in the Toronto Globe & Mail during such calendar
quarter.
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f. STATEMENT OF ACCOUNT
The Corporation shall provide periodically to each participant (but not
less frequently than once per calendar quarter) a statement setting forth
the balance to the credit of such participant in such participant's 1997
Deferred Bonus Accounts.
g. IRREVOCABILITY AND ACCELERATION
All deferral elections made under the 1997 Plan are irrevocable. However,
the Committee may, in its sole discretion, and upon finding that a
participant has demonstrated severe financial hardship, direct the
acceleration of the payment of any or all deferred amounts then credited to
the participant's 1997 Deferred Bonus Accounts.
h. PAYMENT OF DEFERRED AMOUNTS
(i) DEFERRAL YEAR DISTRIBUTIONS. If the participant remains employed
until the deferral year elected, all amounts in the participant's 1997
Deferred Bonus Accounts will be paid in a single distribution, less
applicable withholding taxes, in January of the deferral year elected.
(ii) TERMINATION OF EMPLOYMENT PRIOR TO END OF DEFERRAL PERIOD. In the
event of termination of employment for any reason prior to the completion
of the elected deferral period, all amounts then in the participant's 1997
Deferred Bonus Accounts will be paid to the participant (or the
participant's designated beneficiary in the event of death) in a single
distribution, less applicable withholding taxes, as soon as practicable
after the end of the quarter in which the termination occurred; PROVIDED,
HOWEVER, that upon a participant's retirement or termination for disability
prior to completion of the elected deferral period all such amounts shall
be paid in a single distribution during January of the year following such
retirement or termination for disability, as the case may be.
(iii) CHANGE IN CONTROL. Notwithstanding any other provision in the 1997
Plan to the contrary, in the event of a "change in control" of the
Corporation, as defined in the Corporation's 1997 Employee Incentive and
Stock Award Plan (the "1997 Incentive Plan"), all amounts credited to a
participant's 1997 Deferred Bonus Accounts as of the effective date of such
change in control will be distributed within five days of such change in
control as a single distribution, less applicable withholding taxes.
(iv) FORM OF PAYMENT. All payments under the 1997 Plan shall be made in
cash in Canadian dollars converted, if necessary, at the exchange rate in
effect as of the applicable date.
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i. TAX TREATMENT
Under present Canadian tax law, all amounts of an employee's bonus deferred
for a period not exceeding three years from the year in which the related
service was rendered, as well as any Interest Equivalent thereon, will be
exempt from Canadian taxation during the period of deferral. When any part
of the 1997 Deferred Bonus Accounts is actually paid to a participant,
taxable employment income will be incurred.
j. BENEFICIARY DESIGNATION
Each participant shall have the right, at any time, to designate any person
or persons as beneficiary or beneficiaries (both principal and contingent)
to whom payment shall be made under the 1997 Plan and every other Cash
Bonus Award Voluntary Deferral Plan for which the participant has or will
have an account balance (collectively, including the 1997 Plan, the
"Plans"), in the event of death prior to complete distribution to the
participant of the amounts due under the Plans. Any beneficiary
designation may be changed by a participant by the filing of such change in
writing on a form prescribed by the Corporation. The filing of a new
beneficiary designation form will cancel all beneficiary designations
previously filed and apply to all deferrals in the account. A beneficiary
designation form is attached for use by a participant who either does not
have such form on file or wishes to make a change in the beneficiary
designation. Upon completion of the attached form, it should be forwarded
to Vincent R. Belluccia, at the address set forth in Section 2.b. above.
If a participant does not have a beneficiary designation in effect, or if
all designated beneficiaries predecease the participant, then any amounts
payable to the beneficiary shall be paid to the participant's estate. The
payment to the designated beneficiary or to the participant's estate shall
completely discharge the Corporation's obligations under the Plans.
3. AMENDMENT AND TERMINATION OF THE 1997 PLAN
The Committee may, at its discretion and at any time, amend the 1997 Plan in
whole or in part. The Committee may also terminate the 1997 Plan in its
entirety at any time and, upon any such termination, each participant shall be
paid in a single distribution, or over such period of time as determined by the
Committee (provided such period of time falls within the restriction set forth
in Section 2.c. (ii) above), the then remaining balance in such participant's
1997 Deferred Bonus Accounts.
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4. MISCELLANEOUS
A participant under the 1997 Plan is merely a general (not secured) creditor and
nothing contained in the 1997 Plan shall create a trust of any kind or a
fiduciary relationship between the Corporation and the participant or the
participant's estate. Nothing contained herein shall be construed as conferring
upon the participant the right to continued employment with the Corporation or
its subsidiaries, or to a cash bonus award. Except as otherwise provided by
applicable law, benefits payable under the 1997 Plan may not be assigned or
hypothecated and no such benefits shall be subject to legal process or
attachment for the payment of any claim of any person entitled to receive the
same. The adoption of the 1997 Plan and any elections made pursuant to the 1997
Plan are subject to approval of the 1997 Plan by the Committee.
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MARSH & McLENNAN COMPANIES, INC.
DIRECTORS STOCK COMPENSATION PLAN
(Restated as Amended 5/21/97
and further restated to reflect
the 2-for-1 Stock Split effective 6/27/97)
1. Purpose.
The Marsh & McLennan Companies, Inc. Directors Stock
Compensation Plan (the "Plan") is intended to provide an incentive to members
of the Board of Directors of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), who receive fees for their services, to remain
in the service of the Company and to encourage such Directors to acquire
additional stock ownership interests in the Company.
2. Definitions.
(a) "Accounting Date" means June 1st of each Plan Year.
(b) "Annual Share Fee" shall mean the shares of Common Stock
payable to a Director pursuant to Section 5(b) hereof.
(c) "Basic Fee" means the annual retainer specified in a
dollar amount payable to a Director during each Plan Year (at the rate in
effect on the Accounting Date of such Plan Year) for such Director's services
on the Board (exclusive of the Annual Share Fee and of any amounts payable
with respect to service on a committee of the Board or other committee of
Directors or for attendance at Board or committee meetings).
(d) "Board" means the Board of Directors of the Company.
(e) "Committee" means the Compensation Committee of the Board.
(f) "Common Stock" means the common stock, par value $1.00
per share, of the Company.
(g) "Deferral Election" and "Deferred Shares" have the
respective meanings set forth in Section 5(d) hereof.
(h) "Director" means a member of the Board who receives fees
for his or her services.
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(i) "Effective Date" means June 1, 1995.
(j) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(k) "Fair Market Value" on any given date means, except as
otherwise provided in Section 5(g) hereof, the average of the high and low
prices of the Common Stock on the New York Stock Exchange on the last trading
day preceding such date.
(l) "Maximum Cash Compensation" means the aggregate amount
payable to a Director for such Director's services on the Board (including
any amounts payable with respect to service on a committee of the Board or
other committee of Directors or for attendance at Board or committee
meetings, but excluding (i) the Annual Share Fee and (ii) the portion of the
Basic Fee with respect to which shares of Common Stock are issuable pursuant
to Section 5(a) hereof).
(m) "Plan Year" means the twelve-month period commencing June
1st and ending on the following May 31st.
3. Administration of the Plan.
The Plan shall be administered by the Committee. The
Committee shall adopt such rules as it may deem appropriate in order to carry
out the purpose of the Plan. All questions of interpretation,
administration, and application of the Plan shall be determined by a majority
of the members of the Committee, except that the Committee may authorize any
one or more of its members, or any officer of the Company, to execute and
deliver documents on behalf of the Committee. The determination of such
majority shall be final and binding in all matters relating to the Plan. No
member of the Committee shall be liable for any act done or omitted to be
done by such member or by any other member of the Committee in connection
with the Plan, except for such member's own willful misconduct or as
expressly provided by statute.
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4. Common Stock Reserved for the Plan.
The number of shares of Common Stock authorized for issuance
under the Plan is 500,000, including Deferred Shares, whether distributed as
such or paid in cash, subject to adjustment pursuant to Section 6 hereof.
Shares of Common Stock delivered hereunder may be either authorized but
unissued shares or previously issued shares reacquired and held by the
Company.
5. Terms and Conditions of Grants.
(a) Mandatory Portion of Basic Fee. On each Accounting Date
commencing with the Effective Date, each Director shall automatically
receive a number of shares of Common Stock with a Fair Market Value on such
Accounting Date equal to one-quarter (1/4) of his or her Basic Fee payable
during the Plan Year which commences on such Accounting Date. Such shares of
Common Stock(including fractional shares) shall be received in lieu of the
payment of cash in respect of one-quarter (1/4) of such Basic Fee and shall
be transferred on such Accounting Date in accordance with Section 5(f)
hereof, except to the extent that a Deferral Election shall be in effect with
respect to such shares or to the extent that Section 5(g) hereof applies.
(b) Annual Share Fee. On each Accounting Date commencing
June 1, 1997, each Director shall automatically receive six hundred (600)
shares of Common Stock as additional annual compensation for such Director's
services on the Board.
(c) Elective Portion of Maximum Cash Compensation. Each
Director may elect that a designated percentage (in increments of 10%) of his
or her future Maximum Cash Compensation be paid in shares of Common Stock.
Such shares of Common Stock (including fractional shares) shall be received
in lieu of the payment of cash in respect of the designated percentage of
future Maximum Cash Compensation payable for services rendered in the
quarters ended August 15th, November 15th, February 15th and May 15th, as
the case may be. Such shares of Common Stock shall be transferred in
accordance with Section 5(f) hereof, except to the extent that a Deferral
Election shall be in effect with respect to such shares or to the extent that
Section 5(g) hereof applies. An election hereunder shall be in the form of a
document executed and filed with the Secretary of the Company and shall
remain in effect until the effectiveness of any modification or revocation.
(d) Deferral Election. With respect to (i) the portion of
the Basic Fee payable in Common Stock under Section 5(a)herof, (ii) the
Annual Share Fee payable in Common Stock under Section 5(b) hereof and (iii)
the designated percentage of
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Maximum Cash Compensation payable in Common Stock under Section 5(e) hereof,
each Director may elect to defer the receipt (a "Deferral Election") of all
or any portion of the shares of Common Stock otherwise transferable pursuant
to Section 5(f)herof. In such event, there shall be credited to an account
maintained on behalf of such Director, as of the date on which shares would
otherwise be transferred hereunder, a number of Shares ("Deferred Shares")
equal to the number of shares otherwise transferable. A Deferral Election or
revocation hereunder shall be in the form of a document executed by the
Director and filed with the Secretary of the Company prior to the time that
the fees or compensation to which such election relates has been earned. Any
such election may be modified or revoked at any time with respect to fees or
compensation not yet earned, but will remain in effect until modified or
revoked.
Effective as of the Effective Date, all units representing
phantom stock which have been credited to an account maintained by the
Company for the benefit of a Director, pursuant to a deferral agreement or
arrangement with such Director, shall be converted into an equal number of
Deferred Shares pursuant to this Plan and shall thereafter be treated in
accordance with the terms hereof.
The Director shall elect (a) that Deferred Shares be
distributed in a lump sum or in annual installments (not exceeding 10), and
(b) that the lump sum or first installment be distributed on the tenth day of
the calendar year immediately following either (i) the year in which the
Director ceases to be a Director of the Company or (ii) the earlier of the
year in which the Director ceases to be a Director of the Company or a date
designated by the Director; provided, however, that any such election shall
be subject to Section 5(g) hereof. Installments subsequent to the first
installment shall be distributed on the tenth day of each succeeding calendar
year until all of the Director's Deferred Shares shall have been distributed.
Notwithstanding anything else in this Plan, the Committee may, in its sole
discretion, accelerate the distribution of Deferred Shares in cases of
extreme emergency or hardship.
In the event the Director should die before all of the
Director's Deferred Shares have been distributed, the balance of the Deferred
Shares shall be distributed in a lump sum to the beneficiary or beneficiaries
designated in writing by the Director, or if no designation has been made,
to the estate of the Director.
All lump sum distributions of Deferred Shares shall be in
whole shares of Common Stock, with cash to be paid in lieu of fractional
shares. The number of shares to be
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distributed on each installment date to a Director who has elected to receive
shares in annual installments shall be determined by multiplying the number
of the Director's remaining Deferred Shares by a fraction the numerator of
which is one and the denominator of which is the then remaining number of
annual installments (including the immediate installment); all such
distributions shall be in whole shares of Common Stock, with cash to be paid
in lieu of fractional shares for the final installment and fractional shares
to be rounded to the nearest whole number for all other installments.
(e) Dividend Equivalents. Deferred Shares shall be credited
with an amount equal to the dividends which would have been paid on an equal
number of outstanding shares of Common Stock ("Dividend Equivalents").
Dividend Equivalents shall be credited (i) as of the payment date of such
dividends, and (ii) only with respect to Deferred Shares credited to such
Director prior to the record date of the dividend. Deferred Shares held
pending distribution shall continue to be credited with Dividend Equivalents.
Dividend Equivalents so credited shall be converted into an
additional number of Deferred Shares as of the payment date of the dividend
(based on the Fair Market Value on such payment date). Such Deferred Shares
shall thereafter be treated in the same manner as any other Deferred Shares
under the Plan.
(f) Transfer of Shares. Shares of Common Stock issuable to a
Director under Sections 5(a) and 5(b) hereof shall be transferred to such
Director as of each Accounting Date. The total number of shares of Common
Stock to be so transferred under Section 5(a) hereof shall be determined by
dividing (w) one-quarter (1/4) of such Director's Basic Fee payable during
the Plan Year commencing on such Accounting Date by (x) the Fair Market Value
of a share of Common Stock on such Accounting Date. Shares of Common Stock
issuable to a Director under Section 5(c) hereof shall be transferred to such
Director on August 31st, November 30th, February 28th and May 31st of each
Plan Year. The total number of shares of Common Stock to be so transferred
on each such date shall be determined by dividing (y) the product of (1) the
percentage specified by the Director pursuant to Section 5(b) hereof and (2)
the Director's Maximum Cash Compensation payable for services rendered in the
quarter ending on August 15th, November 15th, February 15th or May 15th of
such Plan Year, as the case may be, by (z) the Fair Market Value of a share
of Common Stock on such date. The registrar for the Company will make an
entry on its books and records evidencing that such shares (including any
fractional shares) have been duly issued as of such dates; provided, however,
that a Director may in the
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alternative elect in writing prior thereto to receive a stock certificate
representing the number of whole such shares acquired plus cash in lieu of
any fractional shares.
(g) Change in Control. Upon a Change in Control, all
Deferred Shares, to the extent credited prior to the Change in Control, shall
be paid immediately in cash. For purposes of this Section 5(g), with respect
to determining the cash equivalent value of a Deferred Share, the Fair Market
Value of such a Deferred Share shall be deemed to equal the greater of (i)
the highest Fair Market Value per share at any time during the 60-day period
preceding a Change in Control and (ii) the price of a share of Common Stock
which is paid or offered to be paid, by any person or entity, in connection
with any transaction which constitutes a Change in Control pursuant to this
Section 5(f).
For purposes of the Plan, a "Change in Control" shall have
occurred if:
(i) any "person," as such term is used in Sections
13(d) and 14(d) of the Exchange Act (other than the
Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the
Company or any corporation owned, directly or
indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership
of Common Stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of
the Company representing 50% or more of the combined
voting power of the Company's then outstanding voting
securities;
(ii) during any period of two consecutive years,
individuals who at the beginning of such period
constitute the Board, and any new director (other than
a director designated by a person who has entered into
an agreement with the Company to effect a transaction
described in clause (i), (iii), or (iv) of this Section
5(g)) whose election by the Board or nomination for
election by the Company's stockholders was approved by
a vote of at least two-thirds (2/3) of the directors
then still in office who either were directors at the
beginning of the period or whose election or nomination
for election was
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previously so approved, cease for any reason to
constitute at least a majority thereof;
(iii) the stockholders of the Company approve a merger
or consolidation of the Company with any other
corporation, other than (A) a merger or consolidation
which would result in the voting securities of the
Company outstanding immediately prior thereto
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity) more than 50% of
the combined voting power of the voting securities of
the Company or such surviving entity (or any parent of
the Company or such surviving entity) outstanding
immediately after such merger or consolidation or (B) a
merger or consolidation effected to implement a
recapitalization of the Company (or similar
transaction) in which no "person" (as herein above
defined) acquired more than 50% of the combined voting
power of the Company's then outstanding securities; or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for
the sale or disposition by the Company of all or
substantially all of the Company's assets (or any
transaction having a similar effect).
6. Effect of Certain Changes in Capitalization.
In the event of any recapitalization, stock split, reverse
stock split, stock dividend, reorganization, merger, consolidation, spin-off,
combination, repurchase, or share exchange, or other similar corporate
transaction or event affecting the Common Stock, the maximum number or class
of shares available under the Plan, and the number or class of shares of
Common Stock to be delivered hereunder shall be adjusted by the Committee to
reflect any such change in the number or class of issued shares of Common
Stock.
7. Term of Plan.
The Plan shall become effective as of the Effective Date,
provided that the Plan shall have been approved by the stockholders of the
Company at the 1995 annual meeting of stockholders. The Plan shall remain in
effect until all
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authorized shares have been issued, unless sooner terminated by he Board. No
transfer of shares of Common Stock may be made to any Director under the Plan
unless stockholder approval of the Plan has previously been obtained pursuant
to this Section 7.
8. Amendment; Termination.
The Board may at any time and from time to time alter, amend,
suspend, or terminate the Plan in whole or in part.
9. Rights of Directors.
Nothing contained in the Plan or with respect to any grant
shall interfere with or limit in any way the right of the stockholders of the
Company to remove any Director from the Board, nor confer upon any Director
any right to continue in the service of the Company as a Director.
10. General Restrictions.
(a) Investment Representations. The Company may require any
Director to whom Common Stock is issued, as a condition of receiving such
Common Stock, to give written assurances in substance and form satisfactory
to the Company and its counsel to the effect that such person is acquiring
the Common Stock for his own account for investment and not with any present
intention of selling or otherwise distributing the same, and to such other
effects as the Company deems necessary or appropriate in order to comply with
Federal and applicable state securities laws.
(b) Compliance with Securities Laws. Each issuance shall be
subject to the requirement that, if at any time counsel to the Company shall
determine that the listing, registration or qualification of the shares upon
any securities exchange or under any state or Federal law, or the consent or
approval of any governmental or regulatory body, is necessary as a condition
of, or in connection with, the issuance of shares hereunder, such issuance
may not be accepted or exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained on conditions acceptable to the Committee. Nothing herein shall be
deemed to require the Company to apply for or to obtain such listing,
registration or qualification.
(c) Nontransferability. Deferred Shares under the Plan shall
not be transferable by a Director other than by the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined
in the Internal Revenue Code
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of 1986, as amended, or Title I of the Employee Retirement Income Security
Act of 1974, as amended, or the rules thereunder.
11. Withholding.
The Company may defer making payments under the Plan until
satisfactory arrangements have been made for the payment of any Federal,
state or local income taxes required to be withheld with respect to such
payment or delivery.
12. Governing Law.
The Plan and all rights hereunder shall be construed in
accordance with and governed by the laws of the State of Delaware.
13. Headings.
The headings of sections and subsections herein are included
solely for convenience of reference and shall not affect the meaning of any
of the provisions of the Plan.
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MARSH & McLENNAN COMPANIES, INC.
ANNEX I TO DIRECTORS STOCK COMPENSATION PLAN
(Effective 5/21/97)
1. Purpose.
Pursuant to resolutions adopted by the Board of Directors of
Marsh & McLennan Companies, Inc. on May 21, 1997, the Advisory Director
program was discontinued and, in recognition of such discontinuance, those
nine Directors who, as of May 20, 1997, had been receiving compensation for
their services as members of the Board (the "Designated Directors") with the
reasonable expectation that they would participate in the Advisory Director
program upon retirement from the Board, were each granted 2,000 shares of
Common Stock (together with additional shares purchased with dividends as
provided in Section 4 hereof, the "Supplemental Grant Shares") to be held in
a custodial account controlled by the Company for later delivery to the
Director. This Annex I to the Marsh & McLennan Companies, Inc. Director
Stock Compensation Plan (the "Plan") is intended to establish the terms and
conditions under which the Supplemental Grant Shares are to be held and
administered by the Company and distributed to the Designated Directors.
2. The Plan.
This Annex I to the Plan is a supplement to and is part of the
Plan, applicable only to the Designated Directors (namely, Lewis W. Bernard,
Robert F. Erburu, Ray J. Groves, Richard S. Hickok, Richard M. Morrow, George
Putnam, Adele Smith Simmons, Frank J. Tasco and R.J. Ventres) and only with
respect to the Supplemental Grant Shares. The Plan, exclusive of this Annex
I, is hereinafter referred to as the "Basic Plan". Unless otherwise specified
herein or it is clear from the context, the provisions of, including the
definitions contained in, the Basic Plan shall apply to this Annex I.
3. Common Stock Reserved.
The Supplemental Grant Shares shall be included in the shares
of Common Stock authorized for issuance under the Plan pursuant to, and be
subject to the numerical limitation contained in, Section 4 of the Basic
Plan. However, the Supplemental Grant Shares to be delivered shall be
exclusively previously issued shares reacquired and held by the Company,
i.e., treasury shares.
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4. Custodial Account; Distribution.
The Supplemental Grant Shares shall be held for each
Designated Director in a custodial account maintained by the Company. Cash
dividends paid with respect to Supplemental Grant Shares shall be used to
purchase from the Company additional shares to be included in the Designated
Director's account as additional Supplemental Grant Shares. Unless the
Designated Director has elected to defer distribution as provided in Section
5 hereof, and subject to the provisions of Sections 6 and 7 hereof, the
Supplemental Grant Shares shall be distributed to the Designated Director (in
whole shares of Common Stock and cash in lieu of any fractional shares) on
retirement from the Board or on attaining the age of 72 years, whichever
shall be later (the "Normal Distribution Date").
5. Deferral Election.
A Designated Director, independent of any election made under
the Basic Plan with respect to Deferred Shares, may elect to defer the
receipt (a "Supplemental Deferral Election") of all or any portion of the
Supplemental Grant Shares otherwise distributable pursuant to Section 4
hereof by executing and filing with the Secretary of the Company a document
(the "Supplemental Deferral Election Form") as described below. In such
case, the Supplemental Grant Shares subject to the Supplemental Deferral
Election (the "Supplemental Deferred Shares") shall continue to be held in a
custodial account maintained by the Company (and continue to be Supplemental
Grant Shares as defined in this Annex I to the Plan). Subject to provisions
of Sections 6 and 7 hereof, the Supplemental Deferred Shares shall be
distributed to the Designated Director as set forth in the Supplemental
Deferral Election Form. The Supplemental Deferral Election Form shall
specify the percentage (in increments of 10%, the minimum being 10% and the
maximum being 100%) of the Supplemental Grant Shares for which the
Supplemental Deferral Election is being made and that distribution of the
Supplemental Deferred Shares shall occur either in a lump sum on the tenth
day of the calendar year next following the Normal Distribution Date or in
annual installments (in such number, not exceeding ten, as the Designated
Director shall elect) commencing on such tenth day and continuing on the
tenth day of each succeeding calendar year until all of the Designated
Director's Supplemental Deferred Shares have been distributed.
Notwithstanding the foregoing provisions of this Section 5, the Committee
may, in its sole discretion, accelerate the distribution of Supplemental
Deferred Shares in cases of extreme emergency or hardship. A lump sum
distribution of Supplemental Deferred Shares shall be in whole shares of
Common Stock, with cash to be paid in lieu of fractional shares. The
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number of shares to be distributed on each installment date to a Designated
Director who has elected to receive shares in annual installments shall be
determined by multiplying the number of the Designated Director's remaining
Supplemental Deferred Shares by a fraction the numerator of which is one and
the denominator of which is the then remaining number of annual installments
(including the immediate installment); all such distributions shall be in
whole shares of Common Stock, with cash to be paid in lieu of fractional
shares for the final installment and fractional shares to be rounded to the
nearest whole under for all other installments.
6. Death.
In the event the Designated Director should die before all of
his or her Supplemental Grant Shares have been distributed, all undistributed
Supplemental Grant Shares shall be distributed in a lump sum (in whole shares
of Common Stock and cash in lieu of any fractional shares) to the beneficiary
or beneficiaries designated in writing by the Designated Director, or if no
designation has been made, to the estate of the Designated Director. Any
beneficiary designation in effect with respect to the Basic Plan, as provided
in Section 5(d) thereof, shall be deemed to be a designation pursuant to this
Section 6 as well, unless the Designated Director has made a separate
designation pursuant hereto.
7. Change in Control.
Upon a Change in Control, the Supplemental Grant Shares shall
be deemed to be "Deferred Shares" under the Basic Plan with respect to the
provisions of Section 5(g) thereof, which section shall be deemed applicable
to the Supplemental Grant Shares.
8. Nontransferability.
Until the Supplemental Grant Shares are delivered to the
Designated Director, such shares shall not be transferable other than by the
laws of descent and distribution or pursuant to a qualified domestic
relations order as defined in the Internal Revenue Code of 1986, as amended,
or Title I of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder.
<PAGE>
Exhibit 10.15
December 31, 1997
Mr. Lawrence J. Lasser
342 Warren Street
Brookline, MA 02146
Dear Mr. Lasser:
We are pleased to confirm the employment agreement ("Agreement") between
you and Putnam Investments, Inc. ("Putnam"). In consideration of the covenants
and agreements set forth below, Putnam hereby agrees that you shall continue to
be employed by Putnam, and you hereby agree to continue your employment with
Putnam, on the following terms and conditions:
1. TERM. Subject to the provisions of paragraph 4 below, this Agreement
shall become effective as of the date hereof (the "Effective Date") and shall
have a term that continues through and including December 31, 2001 (the "Term").
For purposes of this Agreement, the word "Term" shall mean the actual, ultimate
duration of this Agreement, taking into account any early termination of this
Agreement.
2. DUTIES AND RESPONSIBILITIES.
A. During the Term of this Agreement, you shall have, and you agree
to carry out to the best of your ability, the duties and responsibilities of
President and Chief Executive Officer of Putnam reporting to the Chief Executive
Officer of Marsh & McLennan Companies, Inc. ("MMC"), subject to the provisions
of paragraph 4 below. You shall devote your full business time and best efforts
to the performance of your duties and responsibilities under this Agreement, and
you shall not pursue any other business activity of any type (including any
positions as an outside director) without prior written consent of the Chief
Executive Officer of MMC.
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B. MMC shall use its best efforts to include you on the management
slate of nominees for directors of MMC and to have you reelected to the Board of
Directors of MMC (the "MMC Board") at its year 2000 annual meeting and you
hereby consent to so serve. Anything herein to the contrary notwithstanding,
nothing shall preclude you from serving on the boards of a reasonable number of
trade associations and/or charitable organizations, engaging in charitable
activities and community affairs and managing your personal investments and
affairs, provided that such activities do not interfere with the proper
performance of your duties and responsibilities hereunder. Furthermore, upon
termination of your employment with MMC or any subsidiary of MMC for any reason,
you agree to retire from the MMC Board effective as of the date of such
termination.
3. COMPENSATION AND BENEFITS. You shall be entitled to receive the
following compensation and benefits:
A. BASE SALARY. Commencing on the Effective Date and during the
remainder of the Term, Putnam shall pay you a base salary at the annual rate of
$1,000,000.00 (the base salary in effect from time to time referred to as "Base
Salary"). Base Salary shall be paid to you in periodic installments in
accordance with Putnam's payroll practices then in effect.
B. ANNUAL CASH BONUS. Putnam agrees to pay you an annual cash bonus
(the "Annual Bonus"), with respect to each calendar year of your employment
which either commences or terminates during the Term, in accordance with the
terms and conditions of MMC's Senior Management Incentive Compensation Plan (the
"ICP"). The amount of the bonus shall be determined by the Compensation
Committee of the MMC Board (the "Compensation Committee") in its sole
discretion. In no case, however, shall the Annual Bonus exceed the maximum
award which may be made to you under the ICP. The Annual Bonus shall be paid in
the following form: the portion of the Annual Bonus that is equal to the total
Fair Market Value (as used here and hereinafter, as defined in the Putnam
Investments, Inc. Equity Partnership Plan (the "Equity Partnership Plan")),
determined as of the award date, of the Purchased Putnam Restricted Stock Units
(as defined in paragraph 3.D(iii) below) awarded to you on the Effective Date,
with respect to the Annual Bonus relating to 1997, and in the first quarter of
the calendar year following the year to which such Annual Bonus relates with
respect to Annual Bonuses relating to 1998 and thereafter, (or the entire Annual
Bonus, if the Annual Bonus does not equal or exceed
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such total Fair Market Value) shall be paid in the form of such Purchased Putnam
Restricted Stock Units and in accordance with the provisions of paragraph
3.D(iii) and the remainder of the Annual Bonus shall be paid in cash in the
first quarter of the calendar year following the year to which the Annual Bonus
relates.
C. GENERAL BENEFITS; SUPPLEMENTAL DISABILITY BENEFITS. During the
Term, you shall be entitled to participate, to the extent you are otherwise
eligible, in all group insurance programs or other welfare benefit plans which
Putnam shall make available to similarly situated employees, and in the Putnam
Profit Sharing Retirement Plan. Putnam shall make reasonable efforts to obtain
additional disability insurance benefits under which you shall have the option,
at your own expense, to purchase disability benefits equal to a maximum of
seventy percent (70%) of the total Base Salary and a maximum of sixty percent
(60%) of up to $300,000 of the Annual Bonus which you receive under paragraphs
3.A and 3.B, respectively.
D. EQUITY AWARDS.
(i) PUTNAM STOCK OPTIONS. Effective as of the Effective Date,
the Compensation Committee hereby grants to you, pursuant to the MMC 1997 Senior
Executive Incentive and Stock Award Plan (the "1997 Plan"), a nonqualified
option (the "First Putnam Option") to purchase 150,000 shares of Class B Common
Stock of Putnam ("Class B Shares") at a per share exercise price of $41.51, and
a second nonqualified option to purchase 175,000 Class B Shares at a per share
exercise price of $47.98 (the "Second Putnam Option"). The First and Second
Putnam Options shall each expire on November 1, 2007 and shall each become
exercisable with respect to 25% of Class B Shares subject thereto on each of
December 31, 1998, December 31, 1999, December 31, 2000 and December 31, 2001.
You shall also be entitled to receive pursuant to the 1997 Plan in the first
quarter of 1999 and again in the first quarter of 2000, an additional
nonqualified option (the "Third Putnam Option" and "Fourth Putnam Option,"
respectively, and, collectively with the First Putnam Option and the Second
Putnam Option, the "Putnam Options"), in each case at a per share exercise price
equal to the Fair Market Value of a Class B Share as of each such date, the
number of Class B Shares subject to such Third and Fourth Putnam Option to be
determined by the Compensation Committee in its sole discretion using criteria
similar to that used for awards at that time to senior
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<PAGE>
participants in the Equity Partnership Plan. The Third Putnam Option shall
expire on November 1, 2007 and become exercisable with respect to 25% of Class B
Shares subject thereto on each anniversary of the date of grant in each of 2000,
2001, 2002 and 2003, and the Fourth Putnam Option shall expire on November 1,
2007 and become exercisable with respect to 25% of Class B Shares subject
thereto on each anniversary of the date of grant in each of 2001, 2002, 2003 and
2004. In all other respects, each Putnam Option granted pursuant to this
Agreement shall be treated as if it were subject to the terms and conditions of
the Equity Partnership Plan and as if each such Putnam Option had been granted
thereunder, except that
(a) any and all rights or obligations of Putnam
pursuant to the Equity Partnership Plan with respect to
cancellation, forfeiture, purchase, sale, exchange, conversion or
similar events affecting Putnam Options or Class B Shares
acquired by exercise of the Putnam Options shall be rights or
obligations of MMC and not Putnam (and any amounts paid to you
pursuant to the exercise of such rights shall be paid to you as
soon as practicable following the Payment Date, as defined in
paragraph 3.D(iii) below);
(b) in the event of a termination of your employment
pursuant to paragraph 4.B of this Agreement or upon your
retirement after December 31, 2001, the Putnam Options granted
hereunder shall not be subject to the cancellation provision of
Section 7(a)(i) of the Equity Partnership Plan;
(c) in the event of a termination of your employment
pursuant to paragraphs 4.D or 4.E of this Agreement, the Putnam
Options granted hereunder shall not be subject to the termination
provision of Section 7(c)(i) of the Equity Partnership Plan;
provided, however, that if your termination is pursuant to
paragraph 4.E where Good Cause relating to such termination is a
Change in Control of MMC or a Change in Control of Putnam, then
this paragraph 3.D(i)(c) shall not apply but instead the
applicable provisions of the Equity Partnership Plan shall apply;
(d) MMC may exercise the rights, set forth in the
first sentence of Section 8(b)(ii) of the Equity Partnership
Plan, to cancel Putnam
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Options or Class B Shares acquired by exercise of the Putnam
Options only if all options granted under the Equity Plan or all
Class B Shares, as applicable, are also cancelled; and
(e) for purposes of the Equity Partnership Plan, any
termination of your employment with Putnam after December 31,
2001 shall be deemed a "retirement".
The number of Class B Shares subject to Putnam Options and the
exercise price of outstanding Putnam Options shall be adjusted if such an
adjustment has been made to outstanding options granted under the Equity
Partnership Plan to reflect any dividend, stock split or share combination or
any recapitalization, merger, consolidation, exchange of shares, liquidation or
dissolution of Putnam or similar corporate event. Each Putnam Option granted to
you shall be evidenced by an Award Agreement substantially in the form of the
award agreement attached as Exhibit A hereto.
(ii) MMC STOCK OPTION. Effective as of the Effective Date,
the Compensation Committee hereby grants to you, pursuant to the 1997 Plan, a
nonqualified option ("MMC Stock Option") to purchase 100,000 shares of Common
Stock of MMC ("MMC Shares") at an exercise price per share equal to the fair
market value of an MMC Share as of such date, as defined in the 1997 Plan, which
shall expire on November 1, 2007 and shall vest with respect to 25% of the
shares subject thereto per year on each of December 31, 1998, December 31, 1999,
December 31, 2000 and December 31, 2001. If your employment with Putnam is
terminated by Putnam or MMC (acting through its Compensation Committee) pursuant
to paragraph 4.A of this Agreement or by you for any reason other than pursuant
to paragraph 4.E of this Agreement, then you shall forfeit the MMC Stock Option
granted pursuant to this paragraph 3.D(ii), whether or not then exercisable, to
the extent not exercised as of the date of such termination. If your employment
with Putnam is terminated in accordance with paragraphs 4.B, 4.D or 4.E of this
Agreement, then the MMC Stock Option shall vest and become exercisable as of the
date of such termination. In the event of a termination of your employment
pursuant to paragraph 4.C of this Agreement, then the MMC Stock Option shall
vest and become exercisable and the person or persons to whom your rights under
the MMC Stock Option shall pass by will or the laws of descent and distribution
shall be entitled to exercise such MMC Stock Option within one year after the
date of death, but in no
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<PAGE>
event shall the MMC Stock Option be exercised beyond its expiration date. The
MMC Stock Option granted to you shall be evidenced by an Award Agreement
substantially in the form of the award agreement attached as Exhibit B hereto.
(iii) PUTNAM RESTRICTED STOCK UNITS. Effective as of the
Effective Date, you shall receive, pursuant to the 1997 Plan, 300,000 shares of
Putnam restricted stock units ("Putnam Restricted Stock Units"), 150,000 of
which shall vest on December 31, 2001 ("Excluded Units") and 150,000 of which
shall vest at the rate of 25% per year on each of December 31, 1998, December
31, 1999, December 31, 2000 and December 31, 2001. During the Term you shall
also be entitled to receive, in the first quarter of 1999, additional Putnam
Restricted Stock Units which shall vest at the rate of 25% per year on each
anniversary of the date of grant in each of 2000, 2001, 2002 and 2003 and, in
the first quarter of 2000, additional Putnam Restricted Stock Units which shall
vest at the rate of 25% per year on each anniversary of the date of grant in
each of 2001, 2002, 2003 and 2004, with the number of such additional Putnam
Restricted Stock Units to be determined by the Compensation Committee in its
sole discretion using criteria similar to that used for awards at that time to
senior participants in the Equity Partnership Plan. Each individual Putnam
Restricted Stock Unit shall represent (and shall have a Fair Market Value equal
to the Fair Market Value of) one Class B Share and shall be treated as if it
were subject to the terms and conditions of the Equity Partnership Plan
applicable to shares of Restricted Stock awarded under the Equity Partnership
Plan, except that
(a) dividend equivalents (rather than actual
dividends) plus earnings, but net of any losses, resulting
from the investment thereof shall be payable in cash with
respect to the Putnam Restricted Stock Units and such
dividend equivalents shall be paid as soon as practicable
following the earliest date that payment may be made without
causing such payment to be nondeductible by MMC by reason of
Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code") (such earliest date, the "Payment
Date"). The dividend equivalents shall be deemed invested
from their respective dividend payment dates, pursuant to
your investment direction, among the various Putnam funds;
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<PAGE>
(b) payments in respect of Putnam Restricted
Stock Units shall be made in Class B Shares, such payments
to be made as soon as practicable following the Payment
Date;
(c) any and all rights or obligations of Putnam
pursuant to the Equity Partnership Plan with respect to
cancellation, forfeiture, purchase, sale, exchange,
conversion or similar events affecting Putnam Restricted
Stock Units or Class B Shares shall be rights or obligations
of MMC and not of Putnam (and any amounts paid to you
pursuant to the exercise of such rights shall be paid to you
as soon as practicable following the Payment Date);
(d) MMC may exercise the rights, set forth in the
first sentence of Section 8(b)(ii) of the Equity Partnership
Plan, to cancel Putnam Restricted Stock Units, or Class B
Shares acquired by payment with respect to Putnam Restricted
Stock Units, only if all restricted stock granted under the
Equity Plan, or all Class B Shares, as applicable, are also
cancelled;
(e) in the event of a termination of your
employment pursuant to paragraphs 4.D or 4.E of this
Agreement, the Putnam Restricted Stock Units granted
hereunder shall not be subject to the termination provision
of Section 7(c)(ii) of the Equity Partnership Plan;
provided, however, that if your termination is pursuant to
paragraph 4.E where Good Cause relating to such termination
is a Change in Control of MMC or a Change in Control of
Putnam, then this paragraph 3.D(iii)(e) shall not apply; and
(f) for purposes of the Equity Partnership Plan,
any termination of your employment with Putnam after
December 31, 2001 shall be deemed a "retirement".
The number of Putnam Restricted Stock Units referred to above
shall be adjusted if such an adjustment has been made pursuant to the Equity
Partnership Plan to the number of outstanding shares of Restricted Stock
thereunder to reflect any dividend, stock split or share combination or any
recapitalization, merger, consolidation, exchange of shares, liquidation or
dissolution of Putnam or similar
7
<PAGE>
corporate event. The Putnam Restricted Stock Units granted to you shall be
evidenced by an Award Agreement substantially in the form of the award agreement
attached as Exhibit A hereto.
All Putnam Restricted Stock Units except the Excluded Units shall
be "Purchased Putnam Restricted Stock Units" and shall constitute a form of
payment of the Annual Bonus, in accordance with paragraph 3.B above. If the
Annual Bonus with respect to a year does not equal or exceed the total Fair
Market Value, determined as of the award date, of the Purchased Putnam
Restricted Stock Units relating to such Annual Bonus, then (unless you have
timely declined such excess Purchased Putnam Restricted Stock Units) within 30
days of the date such Annual Bonus is paid, you will pay MMC an amount equal to
the excess of such total Fair Market Value over such Annual Bonus.
(iv) MMC RESTRICTED STOCK UNITS. Effective as of the Effective
Date, the Compensation Committee hereby grants to you, pursuant to the 1997
Plan, 100,000 shares of MMC restricted stock units ("MMC Restricted Stock
Units") which shall vest on February 1, 2002. If your employment with Putnam is
terminated by Putnam or MMC (acting through its Compensation Committee) pursuant
to paragraph 4.A of this Agreement or by you prior to December 31, 2001 for any
reason other than pursuant to paragraph 4.E of this Agreement, then you shall
forfeit all MMC Restricted Stock Units granted pursuant to this paragraph
3.D(iv). If your employment with Putnam is terminated in accordance with
paragraphs 4.B, 4.C, 4.D or 4.E of this Agreement prior to December 31, 2001, or
for any reason after December 31, 2001, then the MMC Restricted Stock Units
granted to you pursuant to this paragraph 3.D(iv) shall vest as of the date of
such termination. The award of MMC Restricted Stock Units granted to you shall
be evidenced by an Award Agreement substantially in the form of the award
agreement attached as Exhibit C hereto. Payment in respect of MMC Restricted
Stock Units shall be made in MMC Shares as soon as practicable following the
Payment Date; and dividend equivalents plus earnings, but net of any losses,
resulting from the investment thereof shall be payable in cash with respect to
the MMC Restricted Stock Units as soon as practicable following the Payment
Date. The dividend equivalents shall be deemed invested from their respective
dividend payment dates, pursuant to your investment direction, among the various
Putnam funds.
(v) AGREEMENT BETWEEN MMC AND PUTNAM. In connection with the
grant of Putnam Options and Putnam
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Restricted Stock Units referred to in this paragraph 3.D, Putnam agrees to issue
to MMC from time to time that number of Class B Shares as may be necessary for
MMC to issue to you upon exercise of such Putnam Options or in payment of such
Putnam Restricted Stock Units, such issuance to be in exchange for an equal
number of shares of Class A Common Stock, par value $.01 per share, of Putnam
("Class A Shares") held by MMC. In the event that (x) MMC acquires Class B
Shares from you or your transferee (including any Class B Shares acquired by you
through the exercise of Putnam Stock Options or as a result of the payment of
Putnam Restricted Stock Units, and any shares acquired by you upon an adjustment
to reflect any dividend, stock split or share combination or any
recapitalization, merger, consolidation, exchange of shares, liquidation or
dissolution of Putnam or similar corporate event) pursuant to paragraphs
3.D(i)(a) and 3.D(iii)(c) hereof, or (y) Class B Shares (as well as any Putnam
Options or Putnam Restricted Stock Units related to Class B Shares held by MMC)
held by you or MMC are otherwise cancelled, sold, purchased, forfeited,
exchanged for a payment or converted into a Class A Share, or are otherwise
similarly affected, then Putnam agrees to return to, and shall be deemed to have
returned to, MMC with respect to the Class B Shares so affected, an equal number
of Class A Shares (as may have been adjusted in accordance with the adjustment
provision set forth above) and MMC agrees to return to, and shall be deemed to
have returned to, Putnam (irrespective of whether such shares were cancelled or
are still outstanding) the Class B Shares so affected. The provisions of this
paragraph 3.D(v) shall be adjusted to the extent appropriate to reflect any
actions contemplated by Section 11(a) of the Equity Partnership Plan.
(vi) In the event of a termination of your employment pursuant to
paragraphs 4.B, 4.D or 4.E (except where Good Cause relating to such termination
is a Change in Control of MMC or a Change in Control of Putnam) or any
termination of your employment after December 31, 2001, any right of MMC under
Section 7(d)(i) of the Equity Partnership Plan to repurchase Class B Shares then
held by you or thereafter acquired by you may not be exercised by MMC until
after November 1, 2007 and any right you have under Section 7(d)(ii) of the
Equity Partnership Plan to request that MMC purchase the Class B Shares then
held by you or thereafter acquired by you may be exercised in accordance with
the terms of the Equity Partnership Plan through November 1, 2007.
Notwithstanding the above, with respect to Class B Shares which have been held
by you for less than six months, the rights described in the immediately
preceding sentence
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may not be exercised by MMC or by you, as applicable, prior to the date six
months following the applicable Grant Date (in case of Restricted Stock Units)
or date of exercise (in case of Class B Shares acquired upon exercise of Putnam
Options).
E. SPECIAL RETIREMENT BENEFIT. In consideration for your covenants
set forth in paragraph 7, you shall be entitled to receive a special retirement
benefit of a gross value estimated at $1,500,000 per year for your lifetime. As
of the Effective Date, MMC and Putnam shall determine an amount which represents
the actuarial estimated equivalent sufficient to fund their commitment at the
Effective Date. This funded amount, which has been determined to equal
$15,000,000.00, shall be deemed invested from the Effective Date, pursuant to
your investment direction, among the various Putnam funds. On the latest of (a)
November 1, 2002, (b) your retirement from Putnam or MMC and (c) the Payment
Date you shall be entitled to receive in cash the amount referenced in the
immediately preceding sentence, plus the earnings, if any, net of any losses, if
any, of the deemed investment thereof (such total, the "Special Retirement
Benefit") in a lump sum, installments or as an annuity, pursuant to your
election made prior to a date one year immediately preceding the commencement of
the payment of the Special Retirement Benefit. However, if you choose a
lifetime annuity, the equivalent of the lump sum payment, net of applicable
withholding taxes, will be used to purchase in your name an annuity contract
from the insurance company or other financial institution of your choice and the
purchase thereof will relieve Putnam and MMC of all liability for such payment.
F. SERVICES FURNISHED. During the Term, Putnam shall furnish you
with appropriate office space and secretarial services, and such other
facilities and services as are suitable to your position and adequate for the
performance of your duties as set forth in paragraph 2 hereof.
G. AUTOMOBILE. During the Term, Putnam shall furnish you with an
automobile similar to that provided to you immediately prior to the Effective
Date, on substantially similar terms as those in effect immediately prior to the
Effective Date.
H. HOTEL REIMBURSEMENT. During the Term, Putnam shall reimburse you
at a rate of $2,121.00 per month, for expenses relating to the maintenance and
upkeep on your apartment in New York City, such reimbursement to be paid in
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lieu of reimbursement of any expenses you might otherwise have incurred for
hotel and related expenses.
4. TERMINATION. You, Putnam or MMC shall be free to terminate this
Agreement, as follows:
A. BY PUTNAM OR BY MMC FOR CAUSE OR BY YOU WITHOUT GOOD CAUSE.
Putnam or MMC (acting through its Compensation Committee) shall have the right
to terminate your employment hereunder for "Cause" upon thirty (30) days' prior
written notice. For purposes of this Agreement only, "Cause" shall be defined
to include 1) material willful misconduct in the performance of your duties and
responsibilities hereunder, 2) material willful nonperformance of your duties
and responsibilities hereunder other than for reasons of disability, 3) breach
by you of a material term of this Agreement, or 4) conviction of, or your
written admission to, a felony or other crime involving moral turpitude, or
imprisonment for any crime; PROVIDED, HOWEVER, that in the event of a potential
termination for Causes l, 2 or 3 above, such termination may not occur until at
least thirty (30) days after Putnam or MMC (acting through its Compensation
Committee) has provided you with a detailed written notice of the ground(s) for
the termination, and then only if you have failed to correct the behavior giving
rise to such potential termination. Notwithstanding any other provision of this
Agreement, the 1997 Plan or the Equity Partnership Plan or any applicable award
agreement, in the event of a termination for Cause pursuant to this paragraph
4.A or in the event of a termination by you without Good Cause (as defined in
paragraph 4.E below), (x) Putnam shall only be obligated to pay you your Base
Salary through the date of your termination, together with such other benefits
and payments to which you may be entitled by law or pursuant to the benefit
plans of Putnam then in effect and (y) any awards granted pursuant to paragraph
3.D of this Agreement, whether or not then vested, and any Class B Shares then
held by you, shall be cancelled and forfeited as of the date of termination
pursuant to this paragraph 4.A. Notwithstanding the preceding sentence or any
other provision of this Agreement, the 1997 Plan, the Equity Partnership Plan or
any applicable award agreement, in the event of a termination for Cause pursuant
to this paragraph 4.A, you shall forfeit the Special Retirement Benefit.
Subject to paragraph 7 of this Agreement, in the event of a termination by you
without Good Reason, the Special Retirement Benefit shall be paid to you in
three equal installments, the first such installment to be paid on the January
10 next following such date of termination, and the second and third such
installments to
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be paid on the first and second anniversaries, respectively, of the payment of
the first installment.
B. DISABILITY. Putnam or MMC (acting through its Compensation
Committee) shall have the right to terminate your employment hereunder in the
event that you shall be prevented, by illness, accident, disability or any other
physical or mental condition (to be determined by means of a written opinion of
a competent medical doctor chosen by mutual agreement of Putnam or MMC, as
applicable, and you or your personal representative), from substantially
performing your duties and responsibilities hereunder for one or more periods
totaling one hundred twenty (120) days in any twelve (12) month period. In the
event of a termination pursuant to this paragraph, you shall continue to receive
your Base Salary through the end of the year in which the termination of your
employment pursuant to this paragraph 4.B occurs, after which your right to
receive income continuation shall be determined in accordance with the terms and
conditions of Putnam's short-term and long-term disability plans then in effect.
You shall also be entitled to receive, at the time it would otherwise have been
payable, the Annual Bonus with respect to the year in which the termination
pursuant to this paragraph 4.B occurs, in an amount equal to the average of the
Annual Bonuses with respect to the two most recently completed years.
Furthermore, Putnam shall pay you, as soon as practicable following the Payment
Date, the Special Retirement Benefit.
C. DEATH. In the event of a termination of your employment during
the Term by reason of your death, Putnam shall pay to your estate, designated
beneficiary or legal representative, after the Payment Date, an amount equal to
your Base Salary through the end of the year in which your death occurs. In the
event of a termination of your employment during the Term by reason of your
death, Putnam shall also pay to your estate, designated beneficiary or legal
representative, as soon as practicable following the Payment Date, the Special
Retirement Benefit in a lump sum. Putnam shall also pay to your estate,
designated beneficiary or legal representative, at the time it would otherwise
have been payable, the Annual Bonus with respect to the year in which your death
occurs, in an amount equal to the average of the Annual Bonuses for the two most
recently completed years.
D. TERMINATION BY PUTNAM OR BY MMC OTHER THAN FOR CAUSE, DISABILITY
OR DEATH. Putnam or MMC (acting through its Compensation Committee) shall have
the right to
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<PAGE>
terminate your employment hereunder other than for Cause, disability or death
upon thirty (30) days' prior written notice to you; PROVIDED, HOWEVER, that in
the event of a termination pursuant to this paragraph, Putnam shall be required
to pay you, after the Payment Date, your Base Salary through the period ending
with the date of your termination, and an amount equal to the sum of your Base
Salary and Annual Bonuses (the Annual Bonus shall, for this purpose, be deemed
to equal no less than the higher of (x) the average of the Annual Bonuses with
respect to the two most recently completed years and (y) the Minimum Amount (as
defined in paragraph 4.E below)) through and including December 31, 2001.
Furthermore, Putnam shall pay you, as soon as practicable following the Payment
Date, the Special Retirement Benefit.
E. TERMINATION BY YOU FOR GOOD CAUSE. In the event that you resign
your employment with Putnam, by providing to Putnam and MMC a written notice of
resignation within thirty (30) days following an event constituting "Good
Cause," as that phrase is defined below, your resignation shall be deemed to be
a termination of your employment by Putnam other than for Cause pursuant to
paragraph 4.D above, in which event both you and Putnam shall have your
respective rights and obligations in the event of such a termination. If you do
not send Putnam and MMC a written notice of resignation pursuant to this
paragraph within thirty (30) days following an event constituting Good Cause,
your rights under this paragraph 4.E on the basis solely of such event shall
cease. For purposes of this Agreement, the phrase "Good Cause" shall mean (a) a
breach by MMC or Putnam of a material term of this Agreement which is not cured
within 30 business days from receipt of written notice thereof from you, (b)
relocation of Putnam's executive offices outside of the Boston area, (c)
reassignment of you to a location outside of the Boston area, (d) failure to pay
you an Annual Bonus with respect to each full year of your employment during the
Term of at least the sum (such sum, the "Minimum Amount") of (x) a cash amount
equal to (i) in the case of the Annual Bonus for the year ended December 31,
1997, at least $12,000,000 and (ii) in the case of Annual Bonuses for future
years, two times the average annual cash bonus received under the Putnam
Partners Incentive Compensation Plan (or which would have been received had that
plan continued) by the three participants who received (or who would have
received had that plan continued) the highest cash bonus under the Putnam
Partners Incentive Compensation Plan with respect to such year, as determined on
a basis consistent with the provisions, Award Percentage (as that
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<PAGE>
term is defined in the Putnam Partners Incentive Compensation Plan) and
individual percentage participations existing for the Putnam Partners Incentive
Compensation Plan and the associated financial measurements as of the Effective
Date, plus (y) the total Fair Market Value, determined as of the date you
acquired them, of the Purchased Putnam Restricted Stock Units acquired by you
which relate to such Annual Bonus, (e) a Change in Control of MMC or a Change in
Control of Putnam, each as defined below, or (f) failure to grant to you the
Third Putnam Option and the Fourth Putnam Option with respect to, in the
aggregate, 105,000 or more Class B Shares or failure to grant to you additional
Putnam Restricted Stock Units in 1999 and 2000 with respect to, in the
aggregate, 105,000 or more Class B Shares.
(i) For purposes of this Agreement, the phrase "Change in
Control of MMC" means the first to occur of the following events after the
Effective Date: (a) any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended ("Exchange Act") (other
than MMC, any trustee or other fiduciary holding securities under an employee
benefit plan of MMC or any corporation owned, directly or indirectly, by the
stockholders of MMC in substantially the same proportions as their ownership of
stock of MMC), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of MMC
representing 50% or more of the combined voting power of MMC's then outstanding
voting securities; or (b) during any period of two consecutive years,
individuals who at the beginning of such period constitute the MMC Board, and
any new director (other than a director designated by a person who has entered
into an agreement with MMC to effect a transaction described in clause (a), (b),
or (d) of this paragraph 4.E(i)) whose election by the MMC Board or nomination
for election by MMC's stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a majority
thereof; or (c) the stockholders of MMC approve a merger or consolidation of MMC
with any other corporation, other than (1) a merger or consolidation which would
result in the voting securities of MMC outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving or parent entity) more than 50% of the
combined voting power of the voting securities of MMC or such surviving or
parent entity outstanding immediately after
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<PAGE>
such a merger or consolidation or (2) a merger or consolidation effected to
implement a recapitalization of MMC (or similar transaction) in which no
"person" (as hereinabove defined) acquired 50% or more of the combined voting
power of MMC's then outstanding securities; or (d) the stockholders of MMC
approve a plan of complete liquidation of MMC or an agreement for the sale or
disposition by MMC of all or substantially all of MMC's assets (or any
transaction having a similar effect).
(ii) For purposes of this Agreement, the phrase "Change in
Control of Putnam" means the first to occur of the following events after the
Effective Date: (a) MMC approves a plan of complete liquidation of Putnam, or a
sale or other disposition of all or substantially all of its assets to an entity
of which MMC holds less than 50% of the voting power of securities; or (b) MMC,
together with its subsidiaries, trustees or other fiduciaries holding securities
of Putnam under an employee benefit plan maintained by MMC or by a subsidiary of
MMC, ceases for any reason (including by reason of a sale or other disposition,
including a spinoff or public offering) to be a beneficial owner of securities
of Putnam representing more than 50% of the voting power of the securities of
Putnam.
F. ADDITIONAL PAYMENT. If any payment under this Agreement
attributable to the Second Putnam Option (as defined in paragraph 3.D(i)), the
Excluded Units (as defined in paragraph 3.D(iii)), the MMC Option or the MMC
Restricted Stock Units (the "Payments") will be subject to the tax (the "Excise
Tax") imposed by Section 4999 of the Code (or any similar tax that may hereafter
be imposed), you shall be entitled to receive, at the time specified below, an
additional amount (the "Gross-Up Payment") such that the net amount retained by
you after deduction of any Excise Tax on such Payments and any federal, state
and local income and employment tax and Excise Tax upon payment provided for by
this paragraph 4.F, shall be equal to the Payments. For purposes of determining
whether any of the Payments will be subject to the Excise Tax and the amount of
such Excise Tax, (i) all payments or benefits received or to be received by you
in connection with a Change in Control of Putnam or of MMC or your termination
of employment with Putnam (pursuant to this Agreement) shall be treated as
"parachute payments" within the meaning of Section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of Section 280G(b)(1) shall
be treated as subject to the Excise Tax, unless in the opinion of tax counsel
selected by MMC's independent auditors and acceptable to you such payments or
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<PAGE>
benefits (in whole or in part) do not constitute parachute payments, or such
excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the base amount within the meaning of
Section 280G(b)(3) of the Code, or otherwise not subject to the Excise Tax; (ii)
the amount of the Payments which shall be treated as subject to the Excise Tax
shall be equal to the lesser of (1) the total amount of the Payments or (2) the
amount of excess parachute payments within the meaning of Section 280G(b)(1)
(after applying clause (1) above); and (iii) the value of any non-cash benefits
or any deferred payment or benefit shall be determined by MMC's independent
auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up Payment, you shall
be deemed to pay federal income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal rate of taxation in the
state and locality of your residence on the date such Gross-Up Payment is made,
net of the maximum reduction in federal income taxes which could be obtained
from deduction of such state and local taxes. In the event that the Excise Tax
is subsequently determined to be less than the amount taken into account
hereunder at the time of the Gross-Up Payment, you shall repay to the Company at
the time that the amount of such reduction in Excise Tax is finally determined,
the portion of the Gross-up Payment attributable to such reduction (plus the
portion of the Gross-Up Payment attributable to the Excise Tax and federal and
state and local income tax imposed on the Gross-Up Payment being repaid by you
if such repayment results in a reduction in Excise Tax and/or a federal and
state and local income tax deduction) plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the Gross-Up Payment (including by reason of any
payment the existence or amount of which cannot be determined at the time of the
Gross-Up Payment), you shall be entitled to an additional Gross-Up Payment in
respect of such excess (plus any interest payable with respect to such excess)
at the time that the amount of such excess is finally determined. Any Gross-Up
Payment to be made to you under this paragraph shall be payable within thirty
(30) days of the date of the Change in Control of MMC or change in control of
Putnam, as applicable.
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<PAGE>
G. GENERAL APPLICABLE TERMS. In the event of a termination of your
employment pursuant to paragraphs 4.D or 4.E of this Agreement, Putnam
acknowledges that any amounts due you under this paragraph 4 are intended solely
as severance pay and not, e.g., as damages. Accordingly, Putnam acknowledges
and agrees that you will have no duty to mitigate any loss of income by seeking
other employment or otherwise, and any earnings you may receive subsequent to
termination of employment shall not reduce or in any manner affect the amounts
due under this paragraph 4, if any. Whether or not any amounts are due you
following termination of your employment, you, your estate or other beneficiary
or representative shall in any event receive such payments or benefits you or
they would be entitled to by law or pursuant to benefit plans of Putnam then in
effect.
5. CONFIDENTIALITY. You agree that you will not at any time, during or
after your employment by Putnam, or any of its affiliates (collectively, for
purposes of this paragraph 5, "Putnam"), without MMC's prior written consent,
reveal or disclose to any person outside of Putnam, or use for your own benefit
or the benefit of any other person or entity, any confidential information
concerning the business or affairs of Putnam or MMC, or concerning Putnam's or
MMC's customers, clients or employees ("Confidential Information"). For
purposes of this Agreement, Confidential Information shall include, but shall
not be limited to, financial information or plans; sales and marketing
information or plans; business or strategic plans; salary, bonus or other
personnel information of any type; information concerning methods of operation;
proprietary systems or software; legal or regulatory information; cost and
pricing information or policies; information concerning new or potential
products or markets; investment models, practices, procedures, strategies or
related information; research and/or analysis; and information concerning new or
potential investors, customers, clients, or shareholders. Confidential
Information shall not include Confidential Information already available to the
public through no act of yours and salary, bonus or other personnel information
specific to you, nor shall this paragraph be construed so as to interfere with
your right to use your general knowledge, experience, memory and skills,
whenever and wherever acquired, in any future employment, subject to the
limitations set forth in paragraph 7 hereof.
You further understand and agree that all such Confidential
Information, however or whenever produced, shall be Putnam's or MMC's sole
property, and shall not be removed by you (or anyone acting at your direction or
on
17
<PAGE>
your behalf) from Putnam's or MMC's custody or premises without Putnam's or
MMC's prior written consent. Upon the termination of your employment, you will
promptly deliver to Putnam or MMC all copies of all documents, equipment,
property or materials of any type in your possession, custody or control, that
belong to Putnam or MMC, and/or that contain, in whole or in part, any
Confidential Information.
6. INVENTIONS. During the Term of this Agreement, you shall promptly
disclose to Putnam or any successor or assign, and grant to Putnam and its
successors and assigns (without any separate remuneration or compensation other
than that received by you in the course of your employment), your entire right,
title and interest in and to any and all inventions, developments, discoveries,
models, or any other intellectual property of any type or nature whatsoever
("Intellectual Property"), whether developed by you during or after business
hours, or alone or in connection with others, in any way related to the business
of Putnam, its affiliates, successors or assigns. This provision shall not
apply to books or articles authored by you during non-work hours, consistent
with your obligations under this Agreement, so long as such books or articles a)
are not funded in whole or in part by Putnam, or b) do not contain any
Confidential Information or Intellectual Property. You agree, at Putnam's
expense, to take all steps necessary or proper to vest title to all such
Intellectual Property in Putnam, its affiliates, successors, assigns, nominees
or designees, and to cooperate fully and assist Putnam in any litigation or
other proceedings involving any such Intellectual Property.
7. NONCOMPETITION COVENANT; CONSULTING COVENANT.
A. NONCOMPETITION COVENANT DURING YOUR EMPLOYMENT AND THEREAFTER.
During the Term of this Agreement and until you attain the age of 65, you shall
not, directly or indirectly, for your own account, or in any capacity on behalf
of any other third person or entity, whether as an officer, director, employee,
partner, joint venturer, consultant, investor or otherwise, engage, or assist
others engaged, in whole or in part, in any business in competition with the
business of Putnam within the geographical areas in which Putnam has conducted
its business operations or provided services as of the date of this Agreement or
at any time prior to your termination hereunder, subject to the following
special provisions:
(i) For purposes of this covenant, "Putnam" means only any or
all of Putnam Investments, Inc., its
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<PAGE>
wholly or majority-owned subsidiaries, and any other affiliate of Putnam
Investments, Inc. engaged on a regular basis in providing services to Putnam
Investments, Inc., to such a subsidiary, or to third persons in association with
Putnam Investments, Inc. or such a subsidiary.
(ii) Any investment you may make in a business in competition
with the business of Putnam shall not be considered to give rise to a violation
of this covenant if the following three conditions are met: (a) the stock of
such business is publicly traded, (b) your equity interest in such business does
not exceed five percent (5%) of the aggregate outstanding equity interests of
such business and (c) you do not otherwise participate in the management or
operational affairs of such business.
(iii) This covenant shall not be considered violated by your
management of funds (whether personally or as an employee or partner of a
business formed for this purpose) solely on behalf of yourself or yourself and
one or more of your family members or other relatives.
Notwithstanding any provision to the contrary contained herein, in the
event that you breach the noncompetition covenant of this paragraph 7.A, you
shall forfeit and be required to return to Putnam each of the following: (a)
the Special Retirement Benefit; (b) any and all Putnam Options (whether or not
then exercisable, with all of such Putnam Options being cancelled and
terminated) and Putnam Restricted Stock Units; (c) all Class B Shares then held
by you; (d) all rights with respect to other payments to which you may become
entitled with respect to Putnam Options, Putnam Restricted Stock Units or Class
B Shares; and (e) 50% of all proceeds from any prior sales of any Class B Shares
or cancellation, forfeiture, exchange or conversion of Putnam Options, Putnam
Restricted Stock Units or Class B Shares, or other cash payments received with
respect to Putnam Options, Putnam Restricted Stock Units or Class B Shares. The
relief Putnam and MMC is entitled to pursuant to the preceding sentence shall be
in addition to, and not in lieu of, any other relief to which it may be entitled
by law (including without limitation its actual damages as a result of any such
breach). If, at any time, the provisions of this paragraph 7.A shall be
determined to be invalid or unenforceable, by reason of being vague or
unreasonable as to area, duration or scope of activity, this paragraph 7.A shall
be considered divisible and shall become and be immediately amended to only such
area, duration and scope of activity as shall be determined to be reasonable
19
<PAGE>
and enforceable by the court or other body having jurisdiction over the matter;
and you agree that this paragraph 7.A as so amended shall be valid and binding
as though any invalid or unenforceable provision had not been included herein.
B. CONSULTING COVENANT. Following the termination of your
employment for any reason, and until you attain the age of 65, you shall make
yourself available to consult and advise the Chief Executive Officer of Putnam
and MMC with respect to such matters involving the business of Putnam as may be
requested; and Putnam shall reimburse you for any reasonable out-of-pocket
expenses relating thereto; provided, however, that you shall not be required to
make yourself so available for more than ten hours during any month or at any
location inconvenient for you. For the duration of your consulting obligations,
the provisions of paragraph 3.F (as it relates to your position and duties as a
consultant) and 3.G shall continue to apply.
8. MUTUAL NONDISPARAGEMENT COVENANT. You agree that you will not at any
time speak or act in any manner that is intended to, or does in fact, damage the
goodwill or the business of MMC or Putnam, or the business or personal
reputations of any of MMC's or Putnam's directors, officers, agents, employees,
clients or suppliers, and you further agree that you will not engage in any
other deprecating conduct or communications with respect to MMC or Putnam. In
connection with any termination of your employment, MMC agrees to negotiate in
good faith with you as to a mutually acceptable description of the reasons for
your termination of employment. Each of MMC and Putnam agrees that it will not,
and will not permit any of its directors, officers, agents, or employees to, at
any time speak or act in any manner inconsistent with such negotiated
description or that is intended to, or does in fact, damage your business or
personal reputation.
9. FAILURE TO PAY AMOUNTS DUE UNDER THIS AGREEMENT. If MMC or Putnam
withholds or fails to pay you any amounts which it is obligated to pay you under
this Agreement, and you are forced to file suit to collect such amounts, and
succeed in collecting such amounts, MMC and Putnam shall be obligated to pay you
your reasonable costs and attorneys' fees incurred in collecting such amounts.
10. SPECIFIC PERFORMANCE. You recognize and agree that Putnam's remedy at
law for breach of paragraphs 5, 6, 7 and 8 of this Agreement would be
inadequate, and further
20
<PAGE>
agree that, for breach of such provisions, Putnam shall be entitled to
injunctive relief and to enforce its rights by an action for specific
performance. Putnam recognizes and agrees that your remedy at law for breach of
paragraph 8 of this Agreement would be inadequate, and further agree that, for
breach of such provision, you shall be entitled to injunctive relief and to
enforce your rights by an action for specific performance.
11. CHOICE OF LAW. This Agreement, and all disputes arising under or
related to it, shall be governed by the law of the Commonwealth of
Massachusetts.
12. CODE SECTION 162(M). Notwithstanding any other provision of this
Agreement, no payments shall be made hereunder prior to the earliest date that
any such payment may be made without causing such payment to be nondeductible by
reason of Section 162(m) of the Code; provided, however, that the above
limitation shall not apply to any benefits provided to you pursuant to any
employee benefit or fringe benefit plan of Putnam which is generally applicable
to senior executives of Putnam and provided, further, that Putnam shall, in the
event of an unanticipated deferral of any payment pursuant to this paragraph 12,
take such reasonable actions as may be appropriate to minimize any cost or
inconvenience to you and equitably compensate you in a manner consistent with
the expectations set forth in this Agreement. Any amounts deferred pursuant to
the immediately preceding sentence shall be deemed invested, pursuant to your
investment direction, among the various Putnam funds.
13. ASSIGNMENT. This Agreement, and the rights and obligations of you,
MMC and Putnam hereunder, shall inure to the benefit of and shall be binding
upon, you, your heirs and representatives, and upon MMC and Putnam, and their
respective successors and assigns. This Agreement may not be assigned by you.
14. NOTICES. All notices required by this shall be in writing and shall
be deemed to have been duly delivered when delivered in person or when mailed by
certified mail, return receipt requested, as follows:
A. If to you:
Lawrence J. Lasser
342 Warren Street
Brookline, MA 02146
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B. If to Putnam:
Putnam Investments, Inc.
One Post Office Square
Boston, MA 02109
Attn: General Counsel
with a copy to:
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, NY 10036
Attn: General Counsel
C. If to MMC:
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, NY 10036
Attn: General Counsel
or to such other address as a party hereto shall specify in writing given in
accordance with this paragraph.
15. SEVERABILITY. In the event that any one or more of the provisions of
this Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby. Moreover, if any one or more of the
provisions contained in this Agreement shall be held to be excessively broad as
to duration, activity or subject, such provision shall be construed by limiting
or reducing them so as to be enforceable to the maximum extent compatible with
applicable law.
16. CONSULTATION WITH COUNSEL; NO REPRESENTATIONS. You agree and
acknowledge that you have had a full and complete opportunity to consult with
counsel of your own choosing concerning the terms, enforceability and
implications of this Agreement, and that neither MMC nor Putnam has made any
representations or warranties to you concerning the terms, enforceability or
implications of this Agreement other than are as reflected in this Agreement.
17. UNFUNDED STATUS OF AGREEMENT. With respect to any payments not yet
made to you pursuant to the Agreement, nothing contained herein shall give you
any rights which are greater than those of a general creditor of Putnam.
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18. WITHHOLDING. Any payments provided for in this Agreement shall be
paid net of any applicable tax withholding required under federal, state or
local law.
19. ARBITRATION. Except as otherwise provided in Paragraph 10, all
controversies, claims or disputes arising out of or related to this Agreement
shall be settled by arbitration in Boston, Massachusetts under the rules of the
American Arbitration Association then in effect in the Commonwealth of
Massachusetts, as the sole and exclusive remedy of either party, and judgment
upon such award rendered by the arbitrator(s) may be entered in any court of
competent jurisdiction.
20. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
21. SURVIVAL. Your obligations and those of Putnam and MMC shall survive
the termination of the Term of this Agreement and your employment hereunder as
necessary to give full effect to the provisions of this Agreement.
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If the foregoing correctly conforms to your understanding of the
Agreement between you and Putnam, please sign and date the enclosed copy of this
letter and return it to us.
Very truly yours,
PUTNAM INVESTMENTS, INC.
By: /s/ A.J.C. Smith
--------------------------
Title: Director
-----------------------
Agreed and Accepted:
/s/ Lawrence J. Lasser
- ----------------------------
Lawrence J. Lasser
24
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ANNUAL REPORT 1997
<PAGE>
Marsh & McLennan Companies, Inc.
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.
<PAGE>
Financial Highlights
[The following table was represented as a bar chart in the original]
Year Share Price
93 $ 40.625
94 36.625
95 44.375
96 52.00
97 74.5625
[The following table was represented as a bar chart in the original]
Year Market Capitalization
(in billions)
93 $ 6.004
94 5.801
95 6.461
96 7.519
97 13.048
[The following table was represented as a bar chart in the original]
Year Dividends Paid Per Share
93 $ 1.35
94 1.40
95 1.4875
96 1.65
97 1.90
================================================================================
For the Three Years Ended December 31, 1997 1996 1995
(In millions, except per share figures)
- --------------------------------------------------------------------------------
Revenue $ 6,008.6 $ 4,404.0 $ 3,937.3
Income Before Income Taxes(1) $ 662.4 $ 668.0 $ 649.8
Net Income(1) $ 399.4 $ 459.3 $ 402.9
Stockholders' Equity $ 3,198.8 $ 1,888.6 $ 1,665.5
- --------------------------------------------------------------------------------
Diluted Net Income Per Share(1) $ 2.39 $ 3.12 $ 2.73
Dividends Paid Per Share $ 1.90 $ 1.65 $ 1.48
Year-end Stock Price $ 74.56 $ 52.00 $ 44.38
================================================================================
(1) The Company's 1997 operating results include the impact of a special
charge principally resulting from the combination with Johnson & Higgins.
<PAGE>
Dear Shareholder For Marsh & McLennan Companies, 1997 was an
exceptional year. We merged with Johnson & Higgins, bringing together the two
best companies in risk and insurance services to create the preeminent firm in
our industry. Our success with the merger - the largest in our history - has
exceeded expectations. As we worked to integrate the operations of our large and
complex organizations, we continued to deliver unrivaled levels of service to
clients, began to realize substantial cost savings and also gained new business.
All of our operating companies provided excellent results in 1997.
Our risk and insurance services business performed well. Putnam Investments
achieved its seventh consecutive record year of outstanding performance. And
Mercer Consulting Group delivered double-digit revenue and earnings growth.
Marsh & McLennan Companies is positioned to benefit from the growing
demand worldwide for professional services, particularly in a time of dynamic
economic and social change. Our combination of businesses, depth of services and
breadth of global professional network make us unique. As the parent of three
leading professional services businesses, we have encouraged each sector to
execute its own design for leadership while managing and coordinating strategies
to maximize profitability for shareholders.
Over the years, each of our businesses has grown and prospered and
is providing outstanding service to clients throughout the world. And as the
Company has evolved, our investment management, risk and insurance services and
consulting businesses have become powerful sources of earnings growth.
Increasingly, we have encouraged collaboration among our business sectors to
enhance service to clients and have relied upon our professional network to
identify new business opportunities. We are confident that the direction Marsh &
McLennan Companies provides will continue to yield strong results for the
future.
In 1997, Marsh & McLennan Companies achieved record growth. Revenues
rose 36 percent to $6.0 billion from $4.4 billion in 1996. Before special
charges related principally to our combination with Johnson & Higgins, net
income was $592 million, compared with $459 million in 1996, an increase of 29
percent. Basic earnings per share rose 15 percent to $3.63, compared with $3.17
in 1996.
2
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"Marsh & McLennan Companies is positioned
to benefit from the growing demand worldwide
for professional services."
This financial performance has enabled us to provide shareholders
with significant rewards. In May 1997, we announced an 11 percent increase in
our dividend, continuing our record of increasing total annual dividends paid to
shareholders each year since we went public in 1962. We split our stock
two-for-one in June, reflecting our earnings growth and confidence in the
future. In addition to our increased competitive stature and reputation, our
market value doubled to $15 billion from $7.5 billion at the end of 1996.
Once again, Putnam Investments experienced exceptional growth and we
expect it to achieve outstanding results in 1998 as well. Total assets under
management in 1997 climbed to $235 billion from $173 billion in 1996, an
increase of 36 percent. Revenues grew 41 percent. Mutual fund assets rose to
$182 billion, a 36 percent increase over the $134 billion in assets under
management at the end of 1996. This growth resulted from successful investment,
sales and marketing strategies, the continued popularity of mutual funds and the
performance of the stock market. Institutional assets grew to $53 billion from
$39 billion in 1996, an increase of 34 percent, largely due to excellent
investment performance and new business captured in both the defined benefit and
defined contribution retirement plan markets. Putnam significantly broadened its
international activities in 1997, forming a strategic alliance with Japan's
Nippon Life to manage assets and develop products for institutional clients.
A large part of our activities in 1997 focused on the merger with
Johnson & Higgins. I am very pleased to tell you that we made more progress with
the integration and restructuring of our risk and insurance services business
than we anticipated. We have identified opportunities for even greater cost
savings and efficiencies, which we will see this year and in 1999. And as
planned, we consolidated our insurance broking, reinsurance broking and program
management firms under the single management structure of J&H Marsh & McLennan,
Inc.
For 1997, risk and insurance services revenues reached $2.8 billion.
Insurance broking revenues for
[Photo omitted]
[Photograph of A.J.C. Smith, Chairman of Marsh & McLennan Companies, Inc.]
3
<PAGE>
"Our financial performance has enabled us
to provide shareholders with significant rewards."
J&H Marsh & McLennan increased 61 percent, including acquisitions. Seabury &
Smith, our program management company, produced solid results, with revenues
rising 11 percent. Guy Carpenter & Company, our reinsurance intermediary,
continued to be affected by difficult operating conditions. But more efficient
operations, careful expense control and vigorous new business development
efforts point to good prospects for 1998.
We continue to add to our strong worldwide organization. We will
acquire the premier insurance broker and employee benefits firm in Mexico and
gain a leading position in the growing Scandinavian market through the
acquisitions of the major insurance broking firms in Denmark, Sweden and
Finland. Early in 1997, we acquired CECAR, France's second-largest insurance
broker, which we then merged successfully with our existing French operation to
form CECAR & JUTHEAU. We will also strengthen our position in program management
in North America by acquiring Kirke-Van Orsdel, Inc., a leading administrator of
insurance and health benefit programs for professional associations, along with
the prior acquisition of Albert H. Wohlers & Co., a Chicago-based
association-services administrator.
Marsh & McLennan Risk Capital Corp. had an active and successful
year. It closed 15 private equity insurance investments, totaling $170 million,
for investors including Marsh & McLennan. Returns during the year on the private
and public equity portfolio have been very strong. Marsh & McLennan Risk Capital
continues to grow as an important part of our presence in the risk and insurance
services industry.
Our consulting business had a strong year. Prospects for the future
are excellent as organizations throughout the world increasingly turn to Mercer
Consulting Group for specialist advice relating to a wide array of human
resource and strategy issues. Mercer's revenues grew 15 percent in 1997 to
exceed $1.3 billion. Human resource consulting achieved double-digit growth,
with particular strength in the global compensation and retirement consulting
practices. During the year, Mercer formed an outsourcing alliance with Automatic
Data Processing, Inc. that will provide a unique level of
[Photo omitted]
[Photograph of A.J.C. Smith, Chairman of Marsh & McLennan Companies, Inc.]
4
<PAGE>
employee benefits and administration services. Management and economic
consulting revenues increased. Mercer enhanced its reputation for innovation by
providing solutions for profitable growth. The acquisition of Corporate
Decisions, Inc., a Boston-based strategy consulting firm, has solidified
Mercer's position in this growing market.
We have had several changes to the Board of Directors during the
past year. The Rt. Hon. Lord Lang of Monkton was elected to the Board in
November. Lord Lang's career in British politics spanned nearly two decades,
including serving the cabinet as President of the Board of Trade and Secretary
of State for Trade and Industry and as Secretary of State for Scotland. Robert
Clements, currently chairman of Risk Capital Holdings, retired from the Board.
Throughout Bob's long association with Marsh & McLennan, his many business
innovations have contributed greatly to our success. David D. Holbrook, who was
chairman of Marsh & McLennan, Incorporated, retired from the Board, having been
a leader in the insurance broking industry over his 38-year career. Richard A.
Nielsen, vice chairman of J&H Marsh & McLennan, Inc. also retired from the
Board.
We are confident that we will fulfill our expectations and wish to
acknowledge the efforts of our more than 36,000 employees who devote themselves
to providing excellent professional services to our clients throughout the
world. We appreciate our shareholders' support and believe we have set the
foundation for continued success.
In the following pages, I share my views about the direction of the
Company by responding to questions that shareholders, members of the investment
community and clients have posed. I discuss why I believe we are positioned to
increase shareholder value in the years ahead.
[Photo omitted]
[Photograph of A.J.C. Smith, Chairman of Marsh & McLennan Companies, Inc.]
/s/ A.J.C. Smith
A.J.C. Smith, Chairman March 6, 1998
5
<PAGE>
The combination with
Johnson & Higgins was an
extraordinary opportunity to accelerate growth
and increase shareholder value.
[Graphic omitted]
[Abstract graphic introducing section on Risk and Insurance Services]
6 & 7
<PAGE>
Risk and Insurance Services
> The merger with Johnson & Higgins is one of the most significant
events to affect Marsh & McLennan's risk and insurance services
business. Why did you pursue the combination?
We viewed the merger as an extraordinary opportunity to accelerate
growth and increase value for shareholders. We also recognized that building up
the strength of our risk and insurance services business would enable us to
respond to our clients' requirements for increasingly sophisticated advice and
more complex transactions.
The issue of culture was important to us in choosing a merger
partner. We found that Johnson & Higgins' culture complemented our own. The
company prided itself on service to clients and took the same long-term
perspective as we do at Marsh & McLennan. Johnson & Higgins had always been our
toughest competitor in insurance broking, with an extraordinary professional
staff. The potential for earnings growth was also attractive.
> Was the geographic spread of the companies complementary?
The combined firm positions us to benefit from rapidly growing
international markets in mature and emerging economies. Marsh & McLennan's
presence was strong in most of Europe. Johnson & Higgins offered attractive
additional capabilities in the Netherlands and strengthened our resources in
Italy and the United Kingdom. Our continued expansion in Europe will include the
acquisitions of the leading insurance brokers in Sweden, Denmark and Finland,
all former members of Johnson & Higgins' UNISON network. J&H Marsh & McLennan's
European organization consists of offices in 24 nations, is wholly owned and
operates as one firm.
We have a strong position in the growing Latin American market in
Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela. We expect to
acquire Brockman y Schuh Group, Mexico's leading insurance broker and employee
benefits consultant, which will reinforce our presence in that country. In Asia
Pacific, we now have equity-owned operations in all countries where we are
permitted to offer services.
> What other factors will lead to revenue growth?
Increased business complexity - and, consequently the size and range
of business risks - will expand the need for specialist advice on analyzing,
reducing, hedging and transferring risk. Our unique ability to supply that
advice will be a critical factor in driving our revenue growth. The combined
strength of Marsh & McLennan's and Johnson & Higgins' industry practices gives
us the resources with which to serve large risk management clients in a wide
array of fields.
[Photo omitted]
[Photographs of A.J.C. Smith, Chairman of Marsh & McLennan Companies, Inc.]
8
<PAGE>
[Graphic omitted]
[Smaller version of abstract graphic]
J&H Marsh & McLennan is also focusing on delivering services to
medium-sized organizations and has a practice dedicated to that purpose.
Advances in technology - including sophisticated information-gathering systems -
will enhance our ability to deliver quality service to these firms, which are
growing rapidly and have increased requirements for broad insurance and employee
benefits services.
> What about the projected expense savings resulting from the merger?
The integration has been so successful that we have identified
opportunities for greater cost savings and efficiencies than we had originally
anticipated. Of the projected expense savings, approximately half should be
realized in 1998, with the full benefits of the merger to appear in 1999, as
promised. And as a result of the combination, we are eliminating over 2,000
staff positions. A great deal was accomplished in 1997, and we are pleased with
the progress we have made so far this year.
> What progress have you made with the integration from an
organizational standpoint?
We successfully brought together the operations and people of two
large and complex firms. We moved quickly to establish transition teams that
would address the integration process and made it a priority to communicate
frequently with clients and staff about developments. By the end of June 1997,
we had made nearly all organizational decisions and had appointed region, office
and client industry leaders globally. We began integrating operations,
eliminating redundant staff positions and consolidating office locations. Now,
one year after the merger, the new organizational structure is complete. John T.
Sinnott, Norman Barham and Richard H. Blum, vice chairmen of J&H Marsh &
McLennan, each played a central role in organizing the new firm to continue
providing the best professional work and unsurpassed service to clients.
As planned, we have combined our reinsurance intermediary, Guy
Carpenter & Company, and insurance program management company, Seabury & Smith,
under the management structure of J&H Marsh & McLennan. Each company will
continue to operate under its own name, which is identified with the best
professional service in its particular field. The combined strategy and
operations will facilitate the delivery of a broader range of service to
clients.
> How does Marsh & McLennan Risk Capital fit into the risk and
insurance services strategy?
Marsh & McLennan Risk Capital organizes and makes investments in
insurance and related industries and provides consulting and management
services. We believe it differentiates us from our competitors. The company is
playing a role in shaping the future of the insurance marketplace by investing
capital in new solutions that can benefit the insurance industry, investors,
clients and Marsh & McLennan's businesses. Being part of one of the world's
largest professional services firms enhances Marsh & McLennan Risk Capital's
strength in identifying opportunities for investing capital. In 1997, it managed
about $1.5 billion of capital, approximately 45 percent for Marsh & McLennan.
> What's the outlook for the insurance program management and
reinsurance broking operations?
The merger has brought new opportunities for Seabury & Smith to
expand its client services and leadership in the insurance program management
market. Nearly everything Seabury & Smith does revolves around serving a large
number of individuals and small corporations that share a need for insurance
coverages. Program management revenues are increasing as employers offer more
programs to their workforces, and as insurance companies look for expertise
needed to market successfully to a wide array of organizations and affinity
groups.
9
<PAGE>
J&H Marsh & McLennan is the global risk and insurance services leader. In
1997, it derived half its operating income outside the United States.
[Pie chart depicting 1997 operating income for risk and insurance services by
geographic region.]
United States: 50%
Europe: 35%
Canada 5%
Latin America: 5%
Asia Pacific/other: 5%
10
<PAGE>
As the leader in reinsurance intermediation, Guy Carpenter continues
to deliver outstanding risk transfer solutions and professional client support
services. In an environment marked by insurance company consolidations and
declining reinsurance rates, Guy Carpenter has been aggressive in seeking new
business and expanding the range of services it offers insurance and reinsurance
companies. The company is noted for its innovative insurance and reinsurance
programs and is expanding its specialty lines, including professional liability,
medical malpractice, accident, life and health.
> Given the relatively weak insurance pricing environment around the
world, how will you grow your business?
The abundance of both capacity and capital in the insurance industry
has created a prolonged buyer's market for insurance, where clients have
transferred risk at lower premium prices year after year. But insurance pricing
affects different parts of our business in different ways. Our large risk
management business is affected less directly by the prices at which insurance
is placed than by our ability to provide clients with sophisticated advice and
service. Pricing is much more of a factor in our business with middle-sized
companies, which depend more specifically on our risk transfer capabilities.
And, of course, we seek to increase profitability by improving productivity. We
can grow in this expanding market by using our technological expertise to
increase our number of clients.
> What kind of earnings growth can J&H Marsh & McLennan produce in
this type of market?
A combination of factors should result in J&H Marsh & McLennan's
solid earnings growth in this demanding environment: consistent delivery of
value-added service to clients, new product development, the more efficient way
we place business into insurance markets and vigorous new business creation. And
for the next two years, cost-savings from the consolidation of our risk and
insurance services operations will make a further contribution.
> Why do you feel so confident about the future of J&H Marsh &
McLennan?
We believe that global demand for our professional services will
continue to rise as organizations face larger and more complex risks. And we can
see that the value of the broker's role is becoming better understood throughout
the world. Privatization and the liberalization of restrictive government
insurance regulations are also creating exciting opportunities for us. So we
expect to find growing markets and increased market share as buyers embrace risk
management and the broking intermediary function. They will benefit from the
broker's ability to provide increased access to global markets, unbiased advice,
sophisticated risk transfer solutions and service at competitive prices.
The growth in world markets, our own rising productivity and the
savings we expect to achieve through the consolidation of our risk and insurance
services operations should lead to increasing earnings.
Risk & Insurance Services
Year Revenue
(in billions)
93 $ 1.79
94 1.89
95 1.96
96 1.91
97 2.79
11
<PAGE>
Putnam has grown
at a faster rate than any other
large U.S. money manager
over the last decade.
[Abstract graphic introducing section on Investment Management]
12 & 13
<PAGE>
Investment Management
> What's the long-term growth outlook for large U.S. professional
money management firms?
The U.S. money management industry has grown dramatically in the
last decade and many factors support its continued expansion. Changing
demographics and an aging population's concerns about retirement security have
resulted in more people focusing on retirement savings than ever before. Total
financial assets managed by the U.S. money management industry, which have grown
more than sevenfold since 1980, could continue to increase at double-digit rates
through the year 2000. The size of discretionary financial assets in the U.S.
has grown in step, with more individuals investing in the financial markets, and
choosing mutual funds as the preferred investment vehicle. Finally, the
complexity and proliferation of investment products should lead more investors
to seek the advice of professional money managers.
> What is Putnam's position in the industry?
Putnam is one of the largest and fastest growing money managers in
the United States and continues to gain market share. Its assets under
management have increased from $65 billion in 1992 to $235 billion in 1997, a
compound annual growth rate of approximately 30 percent. This asset growth has
resulted from record sales of mutual funds, strong equity markets and skillful
investment performance. Putnam attracted $33 billion of net new money in 1997.
Institutional assets under management grew 34 percent, with strong increases in
both defined contribution and defined benefit plan business. Putnam now has over
100 mutual funds in a broad range of investment categories.
> How did Putnam emerge as a leader in money management?
Putnam has been a leader in investment management for more than 60
years,but it has been recast entirely in the last decade. Putnam first focused
on building its size to be able to afford the investments necessary to achieve
service, marketing and sales advantages. Next came diversification - building a
broad array of investment products, not just a specialization in equities or
fixed income. Distribution for mutual funds was organized by channel into
brokers, financial institutions and financial planners to tailor programs by
customer need. Building investment performance excellence has involved people,
process and discipline, supported by quantitative tools.
> What distinguishes Putnam from its competitors?
Few investment managers approach the breadth of Putnam's product
line. Putnam delivers investment management across stocks and bonds, global and
U.S., aggressive and conservative. It takes a team approach to investing, is
very good at communicating the strategy of each fund and delivering what each
fund is designed to produce. Putnam's goal is not to be the
[Photo omitted]
[Photograph of A.J.C. Smith, Chairman of Marsh & McLennan Companies, Inc.]
14
<PAGE>
[Graphic omitted]
[Smaller version of abstract graphic]
largest as defined by assets, but the best as defined by investment performance
and customer service, and to be among the most profitable.
> What about future growth?
International business is a key growth area for Putnam. It is
broadening the scope and range of its international products and service to
equal what it has achieved on the domestic side. In 1997, it more than doubled
the number of senior investment professionals in its international equity area,
increased the breadth and depth of its international mutual funds and
institutional products, and added important resources.
Putnam also aims to consolidate its competitive status in the
institutional defined contribution market, where it is among the top players. In
the last two years, Putnam's defined contribution assets under management have
nearly tripled.
> What success has Putnam had in attracting funds outside North
America?
Putnam is enthusiastic about the strategic alliance it forged with
Nippon Life in 1997, the world's largest life insurer and largest manager of
Japanese pension assets. While Putnam will manage assets globally for Nippon,
mostly non-Japanese securities, the main thrust of its strategy will be to
develop products for Japanese institutional clients. Putnam has also made
excellent progress in Italy, where it is the fastest growing mutual fund company
with $1 billion under management, operating through a joint venture, secured by
Putnam's partial ownership, with an Italian financial services organization. The
European market is headed for continued expansion as pension reform sweeps the
Continent and governments introduce legislation to promote private retirement
programs.
> What effect would a major decline in the U.S. equity market have on
Putnam's earnings?
Markets are unpredictable and corrections do occur. An equity market
decline would have an inevitable impact on earnings, but its effect would depend
on its extent and duration. In any market scenario, Putnam has positive
attributes that come into play. It offers investment products that allow
investors to diversify between stocks and bonds, domestically and
internationally. The range and depth of Putnam's distribution, marketing and
sales capabilities are directed toward bringing in net new sales. Finally, it
can implement expense savings to mitigate some consequences of a market
dislocation.
> How are Putnam's mutual funds distributed?
They are distributed through professional advisers - brokers,
financial institutions (including banks) and financial planners. Putnam believes
that individuals benefit from advice in making investment decisions,
particularly when faced by a growing number of investment products. Also, in a
society that is increasingly time-constrained, people often turn to experts,
even in areas where they are knowledgeable.
Putnam has successfully expanded its channels of distribution and is
a sales leader in each. Just five years ago, its mutual funds were distributed
primarily through securities brokers; today, sales are divided evenly among the
three major channels. In 1997, Putnam was the leading fund family sold through
brokers. It has been number one with banks over the last several years, having
worked successfully to create that particular sales channel. And Putnam is a
leading fund family offered through financial planners. It also distributes
through brokers a 401(k) product geared to small companies and has been
enormously successful in the variable annuity market.
> What has been the progress of Putnam's institutional business?
Putnam's institutional business is divided between defined benefit
and defined contribution plans. Historically, Putnam's defined benefit business
has been very strong, supported by excellent marketing and service capabilities.
This
[Photo omitted]
[Photograph of A.J.C. Smith, Chairman of Marsh & McLennan Companies, Inc.]
15
<PAGE>
Putnam's assets under management reached $235 billion in 1997. Mutual fund
assets rose 36 percent and institutional assets grew 34 percent.
[Pie chart depicting breakdown of Putnam's 1997 assets under management:]
Funds Retail 69%
Defined Benefit 23%
Defined Contribution 8%
16
<PAGE>
exceptional growth occurred during a period in the industry's history when
competing investment management firms have seen this business decline. Defined
benefit growth has slowed as equity market gains caused these plans to become
fully funded, and as defined contribution plans have supplanted them. In
addition, there has been a trend toward consolidation characterized by strength
on the part of large, broad-based, multi-style firms such as Putnam, versus
single-product firms. In the last five years, Putnam's defined benefit business
has tripled.
Putnam developed a parallel organization for large defined
contribution plans, such as 401(k). It leveraged superb investor services
capabilities that encompass state-of-the-art administration and recordkeeping to
build its position in this growing market. Few defined contribution plan
providers can match Putnam's array of investment options or its long-term
investment performance.
> What are some characteristics of Putnam's investor services?
Putnam's investor services have repeatedly been recognized for
excellence. In 1997, Putnam became the only company to win three Dalbar Service
Awards for service to mutual fund investors, annuity contract holders and
financial advisers. The award for service to mutual fund investors is Putnam's
seventh in eight years.
Putnam continues to invest in systems that deliver information and
services with speed and accuracy. It provides investor services through three
separate facilities in the Boston area and has one of the largest image
processing facilities in the world. As Putnam has grown, so has the volume of
requests and transactions it handles. Putnam receives about 15,000 telephone
calls a day from plan participants and mutual fund shareholders. Each call is
answered promptly by a person, not a machine. Putnam processed over 36 million
transactions for 9 million individual shareholders in 1997. Services like these
have added value to Putnam's products and have helped create shareholder
loyalty.
> Why did Putnam adopt a private equity program in 1997?
Putnam has built its success on the strengths of its people. Its
extraordinary growth has made attracting and retaining talented professionals a
management priority. Last year we introduced a private equity program that
created nonvoting shares in Putnam, which are being used to recruit key
employees and reward professionals for extraordinary performance. The shares and
options will vest after a number of years. They are tied to earnings and align
the interests of management with Marsh & McLennan Companies' shareholders.
> Can you expand on the relationship between Putnam and Marsh &
McLennan Companies and how it has been beneficial to both entities?
Putnam has been a success story ever since we acquired it in 1970.
Under Lawrence J. Lasser's leadership, it has grown at a faster rate than any
other large U.S. money manager over the last decade. This superb performance has
benefited our shareholders and has been a primary driver of earnings growth in
recent years.
In Marsh & McLennan Companies' role as the manager of professional
services businesses, we have helped shape Putnam's strategy. That has included
decisions about staffing at senior levels, allocating the capital resources
Putnam has needed to increase distribution and supporting the entrepreneurial,
innovative environment in which Putnam has thrived. The association between
Marsh & McLennan Companies and Putnam has been very successful.
[The following table was represented as a bar chart in the original]
Year Investment Management
Operating Income
(in millions)
93 $ 169.3
94 208.2
95 243.5
96 337.8
97 462.8
17
<PAGE>
The growing need for organizations
to obtain objective, specialist advice
on complex issues will benefit Mercer.
[Abstract graphic introducing section on consulting]
18 & 19
<PAGE>
Consulting
[Smaller version of abstract graphic.]
> Mercer Consulting Group is a global consulting leader and demand for
its services is increasing throughout the world. What is driving
growth in consulting?
The market for all types of consulting is strong, including the
areas where Mercer Consulting Group specializes - human resource, strategy,
operations and economic consulting. Trends fueling this growth include global
competition, rapid change, deregulation and privatization and the need of
organizations to obtain objective, top-notch advice on major decisions. As
consultants, we offer broad experience and specialist expertise not easily
developed and retained internally by client companies. We bring these strengths
to bear on client problems in ways that are cost-effective, timely and deliver
significant bottom-line benefit to the client.
Beyond the trends powering consulting growth generally, employers'
growing need to identify, retain and motivate employees in the face of tight
markets for skilled labor is a particular boost for our human resource
consulting business. And government-sponsored retirement and other benefit
programs are under pressure from demographic changes globally, creating
challenges and opportunities in the private sector.
> What is Mercer's position in the consulting industry?
We have three consulting entities. William M. Mercer is the leading
firm globally in the field of human resource consulting. Mercer Management
Consulting has rapidly gained a reputation as the strategy consulting business'
most promising newcomer based on its innovative approaches to creating
shareholder value. And National Economic Research Associates (NERA) is the
leading firm of consulting economists. In total, Mercer is located in 108 cities
in 27 countries. Over the last ten years, its revenues have grown at a compound
annual rate of 11 percent.
> What is your plan for building Mercer Management Consulting?
Mercer Management Consulting has been in operation for less than ten
years. So, while a leader in terms of its intellectual capital, it will take
time for Mercer Management to achieve the scale and reputation it needs for
market leadership. We expect to close that gap in the same way as we have done
in our other businesses, by a combination of organic growth, selective
acquisitions and delivery of excellent work. We recently acquired the
Boston-based strategy firm of Corporate Decisions, Inc.; its approach to
growth-driven value fits our own perfectly.
20
<PAGE>
> What is the earnings outlook for the Mercer organization as a whole?
The market for consulting services is large and, more important, it
is growing at a double-digit rate. Our geographic spread and global reputation
position us well to continue to grow quickly and gain market share. The
investment made in outsourcing over the past five years has now leveled off,
which we expect will lead to further margin improvement.
We are confident about Mercer's prospects for the future. The
company posted a 24 percent increase in earnings in 1997, and we expect strong
earnings in 1998 through a combination of revenue growth and margin improvement.
> What are Mercer's plans for growth?
Peter Coster, who leads Mercer Consulting Group, believes that
client selection is a key element in Mercer's increasing profitability. He has
encouraged our professionals to seek clients who partner with consultants in
ongoing, long-term relationships. We can deliver much higher added-value where
we have such a relationship, and this affects favorably our bottom line and that
of our clients. Historically, Mercer's geographic strength has been in the large
English-speaking countries. In recent years, we have made substantial investment
in establishing businesses in Continental Europe, Latin America and Asia. Our
progress to date has been remarkable, and we look forward to high rates of
profitable growth in these regions. In terms of practices, we see excellent
growth opportunities in all areas of our business.
> What are the elements of Mercer's strategy?
We will focus on high value-added advice-giving, expanding
geographically to meet our clients' needs and to take advantage of attractive
emerging economies. In all major geographies and practice areas, our goal is to
be a recognized market leader based on a reputation for depth of intellectual
capital - the combination of our peoples' skills, knowledge and experience - and
a client list that includes global as well as leading domestic organizations.
> What about Mercer's intellectual capital?
Developing innovative, research-based approaches to client problems
and efficiently translating these approaches across the firm and into the
marketplace are crucial to our future success. In recent years, we established a
practice-based infrastructure in all our businesses to stimulate creativity,
identify and fund the most promising ideas and see that fresh thinking is
brought to market quickly. Our objective-setting and compensation systems for
our people ensure that innovation is appropriately recognized and rewarded. And
we have broken down geographic boundaries to ensure that the best combination of
talent is brought to each assignment.
> Can you give us examples of how Mercer is pursuing intellectual
capital leadership?
At William M. Mercer, we have conducted extensive research on the
correlation between bottom-line financial results and human resource practices.
We are thus able to help clients make human resource decisions in a more
rigorous, fact-based way. Our research reveals large differences in employee
productivity within industries, even among firms with similar capital structures
and technology. We have developed tools and modeling methods to help identify
what drives productivity. The methodology goes well beyond industry
benchmarking, which can only reveal what the industry as a whole or the most
successful companies do; our methods drill down to evaluate the practices of the
client company individually.
Mercer Management Consulting is aggressively pursuing its
intellectual capital leadership in the area of shareholder value growth. Based
upon our research on over 1,000 major corporations, we have established that
sustainable profitable
[Photo omitted]
[Photographs of A.J.C. Smith, Chairman of Marsh & McLennan Companies, Inc.]
21
<PAGE>
While Mercer's pension and retirement consulting practice continues to show
robust growth, its other practices now represent 57 percent of revenues.
[Pie chart of Mercer's 1997 revenue by practice area:]
Pension & Retirement 43%
Management Consulting 17%
Health Care 17%
Compensation & Communication 11%
Economic/Other 12%
22
<PAGE>
growth is independent of the traditional corporate yardsticks of GDP and
industry growth, market share and size of company. Our research shows that
organizations aligned to customer priorities and customer value achieve
above-average shareholder returns over the long term. Ongoing research has
deepened our understanding of profitable growth by identifying the business
design factors that shift shareholder value within and across industries. As a
result of this research, we have developed a proprietary database and business
design methodology to assist clients in capturing value in dynamic industry
environments.
NERA has created models to help telecommunications clients value and
bid successfully for wireless telephone franchises. It has also devised
game-theoretic methods for energy-sector clients to determine price and
production levels in markets newly opened to competition.
> How does employee benefits administration outsourcing fit into
Mercer's strategy?
William M. Mercer has long helped clients in administering their
benefit plans, and we continue to do so around the world. In recent years,
especially in the U.S., employers have shown increasing interest in seeking
integrated solutions for administering human resource, payroll and benefits
programs. They seek to give employees immediate access to information and
transactional capabilities while focusing their own efforts on their core
businesses. Mercer, which had been investing heavily to develop outsourcing
technology, decided in 1997 to team with an organization with a long track
record in building and maintaining transactional services for employers and
their employees. Early in October, we formed an alliance with Automatic Data
Processing, Inc. to provide a full range of employee benefits administration
services. We believe our arrangement with ADP, named the Administrative
Solutions Group, will provide a unique level of service, backed by the combined
skills of the world's leading human resource consultant and one of the largest
computing services firms in the world.
> Are there opportunities for synergies between Mercer's human
resource, strategy and economic consulting areas?
In its work with clients, Mercer often finds that many sound
business strategies fail at the implementation stage, mostly because a company's
employees tend to undermine any strategy they don't understand or support.
Mercer is uniquely positioned as the only consulting firm with world-class
expertise in both strategy and human resources, and we are able to bring these
together to improve client success in implementing strategic change.
We are very optimistic about our position in the consulting
universe. Mercer has the potential for strong revenue and profit growth
supported by its continued global development, excellent client relationships,
technology and support systems, and the fact that it is continually improving
its intellectual capabilities by investing in its people.
Year Consulting
Revenue
(in billions)
93 $0.85
94 0.93
95 1.06
96 1.16
97 1.34
23
<PAGE>
Marsh & McLennan Companies Worldwide
Risk and Insurance Services
J&H Marsh & McLennan, Inc. is the world leader in insurance broking,
reinsurance broking and insurance program management for business,
professional, institutional and public-entity clients. Insurance
broking is conducted under the name J&H Marsh & McLennan and
includes the total range of services to identify, value, control,
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 program
management and underwriting management services in North America and
the United Kingdom are provided through Seabury & Smith, Inc., which
designs and administers specialized 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.
Investment Management
Putnam Investments, Inc., one of the oldest and largest money management
organizations in the United States, offers a full range of both
equity and fixed income products, invested domestically and
globally, for individual and institutional investors. Putnam, which
manages more than 100 mutual funds, has nearly 700 institutional
clients and 9 million individual shareholders. It had more than $235
billion in assets under management at year-end 1997.
Consulting
Mercer Consulting Group, Inc., one of the largest consulting firms in the
world, provides advice and services to the managements of
organizations. William M. Mercer Companies LLC is a market leader in
human resources, employee benefits and compensation consulting.
Mercer Management Consulting, Inc. is a leader in helping
enterprises achieve sustained shareholder value growth through
business design. National Economic Research Associates, Inc. (NERA),
the leading firm of consulting economists, specializes in providing
solutions to problems involving competition, regulation, finance and
public policy.
24
<PAGE>
Financial Contents
Page
Management's Discussion and Analysis of Financial Condition and
Results of Operations 26
Consolidated Statements of Income 34
Consolidated Balance Sheets 35
Consolidated Statements of Cash Flows 36
Consolidated Statements of Stockholders' Equity 37
Notes to Consolidated Financial Statements 38
Report of Management 52
Report of Independent Auditors 52
Selected Quarterly Financial Data and Supplemental Information (Unaudited) 53
Ten-Year Statistical Summary of Operations 54
25
<PAGE>
Marsh & McLennan Companies, Inc. and Subsidiaries
Management's Discussion and Analysis
of Financial Condition and Results of Operations
General
Marsh & McLennan Companies, Inc. and Subsidiaries (the "Company") is a
professional services firm 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.
This management's discussion and analysis of financial condition and results of
operations 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. See "Cautionary Language Regarding
Forward-Looking Information" on the inside back cover page of this annual
report.
The consolidated results of operations follow:
================================================================================
(In millions, except per share figures) 1997 1996 1995
- --------------------------------------------------------------------------------
Revenue:
Risk and Insurance Services $ 2,788.4 $ 1,907.3 $ 1,963.9
Investment Management(a) 1,882.4 1,337.5 917.0
Consulting 1,337.8 1,159.2 1,056.4
- --------------------------------------------------------------------------------
6,008.6 4,404.0 3,937.3
- --------------------------------------------------------------------------------
Expense:
Compensation and Benefits 3,044.1 2,204.3 1,948.8
Other Operating Expenses(a) 1,922.9 1,425.0 1,293.6
Special Charges, net 296.8 59.4 --
- --------------------------------------------------------------------------------
5,263.8 3,688.7 3,242.4
- --------------------------------------------------------------------------------
Operating Income $ 744.8 $ 715.3 $ 694.9
================================================================================
Net Income $ 399.4 $ 459.3 $ 402.9
================================================================================
Net Income Per Share:
Basic(b) $ 2.45 $ 3.17 $ 2.76
================================================================================
Diluted(b) $ 2.39 $ 3.12 $ 2.73
================================================================================
Average Number of
Shares Outstanding:
Basic(b) 163.0 144.8 145.8
================================================================================
Diluted(b) 167.2 147.4 147.4
================================================================================
(a) 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.
(b) Restated to reflect the two-for-one stock split in the form of a 100%
stock distribution issued on June 27, 1997.
The Company has reflected its business combination with Johnson & Higgins
("J&H"), completed on March 27, 1997, in its results of operations beginning
with the second quarter of 1997.
Revenue, derived mainly from commissions and fees, rose 36% from 1996 primarily
reflecting the impact of the combination with J&H and the acquisition of
Compagnie Europeenne De Courtage d'Assurances et de Reassurances ("CECAR") in
January 1997. Excluding acquisitions and dispositions, revenue grew
approximately 14% over 1996, principally due to a 41% increase in the investment
management segment attributable to higher assets under management. In addition,
a higher level of services provided in the retirement consulting area
contributed to a 10% growth in revenue from the Company's consulting segment.
In 1996, revenue increased 12% over 1995. Adjusting both 1996 and 1995 to
reflect the disposition of The Frizzell Group Limited ("Frizzell"), a U.K.-based
insurance program management firm that was sold in June 1996, revenue grew 14%
from 1995 primarily due to a 46% increase in the investment management segment,
largely attributable to higher assets under management. In addition, increased
demand for the Company's consulting services resulted in 10% revenue growth for
that segment. Risk and insurance services revenue declined 3% due to the sale of
Frizzell. Excluding the impact of Frizzell, insurance services revenue increased
1% in 1996 reflecting growth in insurance broking and insurance program
management, offset, in large part, by a decline in reinsurance broking revenue.
Expenses increased 43% over 1996 primarily due to the combination with J&H, the
acquisition of CECAR, and special charges totaling $296.8 million. The special
charges for 1997 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. Of the total
$296.8 million special charges, $272.6 million is applicable to risk and
insurance services, $21.4 million relates to consulting and $2.8 million is
recorded in General Corporate. The net impact of the special charges was $192.9
million after tax, or $1.15 per diluted share.
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 of $17.5 million. Substantially all severance is
expected to be paid no later than June 30, 1998. The total amount remitted to
the Company's former employees amounted to $51.8 million in 1997.
The gross annual integration savings should approximate $200 million by the end
of 1999, most of which will result from reduced compensation and benefits
expense reflecting the elimination of approximately 2,200 positions and lower
facilities costs reflecting the consolidation of offices, primarily in the
United States. Net annual savings are expected to be approximately $125 million
by 1999 after giving effect to incremental goodwill amortization and near-term
higher integration related spending on technology and systems.
----------
26
<PAGE>
Excluding acquisitions, dispositions, and the special charges, expenses grew 12%
mostly as a result of staff growth in the investment management and consulting
segments as well as higher incentive compensation levels in the investment
management segment commensurate with very strong operating performance. Client
service related costs for investment management also increased resulting from
the higher level of business activity.
Expenses increased 14% in 1996 compared with 1995. Included in 1996 were special
charges totaling $92.6 million which related to real estate matters, integration
of the Company's worldwide risk and insurance services operations, goodwill
write-offs, a provision related to the Lloyd's Reconstruction and Renewal Plan
and certain office closings. These charges were offset, in part, by a gain of
$33.2 million on the Company's sale of Frizzell in June 1996. Of the net $59.4
million special charge, $49.4 million was applicable to insurance services, $8.5
million related to consulting and $1.5 million was recorded in General
Corporate.
Excluding the net special charges and the effect of only one half-year of
Frizzell, expenses increased 14% primarily due to increased incentive
compensation levels especially within investment management. Volume-related
costs, particularly those associated with higher staff levels, grew for both
investment management and consulting as a result of the increased level of
business activity.
Net income for 1996 includes a tax adjustment that reduced the income tax
provision by $40 million. The tax adjustment primarily related to the permanent
deployment of funds outside the United States in a tax-efficient manner and
favorable state and local tax developments in the U.S. The net impact of the tax
adjustment and the net special charges described above increased earnings per
share by $.02 for the year.
The translated values of revenue and expense from the Company's international
insurance services and consulting operations are subject to fluctuations due to
changes in currency exchange rates. However, the net impact of these
fluctuations on the Company's results of operations has not been material.
The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share," which is effective for annual and interim periods
ending after December 15, 1997. In accordance with this statement, the required
basic and diluted earnings per share figures are included on the face of the
income statement.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" and SFAS 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.
Risk and Insurance Services
Revenue attributable to the risk and insurance services segment consists
primarily of fees paid by clients; commissions and fees paid by insurance and
reinsurance companies; interest income on funds held in a fiduciary capacity for
others, such as premiums and claims proceeds; and placement services revenues
earned from carriers.
Revenue generated by risk and insurance services is fundamentally derived from
the value of service provided to clients and markets, and is affected by premium
rate levels in the property and casualty insurance markets and available
insurance capacity because compensation is frequently related to the premiums
paid by insureds. Revenue is also affected by fluctuations in the amount of risk
retained by insurance and reinsurance clients themselves and by insured values,
the development of new products, markets and services, new and lost business,
merging of clients and the volume of business from new and existing clients, as
well as by interest rates for fiduciary funds.
The Company has been instrumental in the formation of several substantial
insurance and reinsurance entities. Marsh & McLennan Risk Capital ("MMRC") is
also an adviser to The Trident Partnership L.P., an independent private
investment partnership formed in 1994 to invest selectively in the global
insurance and reinsurance industry, and Risk Capital Reinsurance Company, a U.S.
reinsurer formed in 1995 to provide traditional and other kinds of reinsurance,
both on a stand-alone basis and as part of integrated capital solutions for
insurance companies. Through MMRC, the Company receives compensation in various
forms including fees, royalties and dividends, as well as appreciation that has
been realized on sales of the Company's holdings in insurance and related
industry entities. These amounts are reflected within the insurance services
segment in the applicable line of business to which they apply.
The results of operations for the Company's risk and insurance services segment
are presented below:
================================================================================
(In millions of dollars) 1997 1996 1995
- --------------------------------------------------------------------------------
Revenue:
Insurance Broking $2,125.0 $1,321.3 $1,260.0
Reinsurance Broking 293.1 258.5 295.1
Insurance Program Management 259.5 233.6 306.1
Interest Income on Fiduciary Funds 110.8 93.9 102.7
- --------------------------------------------------------------------------------
2,788.4 1,907.3 1,963.9
- --------------------------------------------------------------------------------
Expense:
Operating Expenses 2,292.8 1,544.2 1,574.7
Special Charges, net 272.6 49.4 --
- --------------------------------------------------------------------------------
2,565.4 1,593.6 1,574.7
- --------------------------------------------------------------------------------
Operating Income(a) $ 223.0 $ 313.7 $ 389.2
================================================================================
Operating Income Margin(a) 8.0% 16.4% 19.8%
================================================================================
(a) Excluding special charges, operating income would have been $495.6 million
and $363.1 million and operating income margin would have been 17.8% and
19.0% in 1997 and 1996, respectively.
----------
27
<PAGE>
Insurance Broking Revenue
Insurance broking services are provided to clients primarily in connection with
risk management and the insurance placement process and involve analyzing
various types of property and liability loss exposures including large and
complex risks that require access to world insurance markets. Services include
insurance broking activities and professional consulting services on risk
management issues, including risk analysis, coverage requirements, self
insurance and alternative insurance and risk financing methods, as well as
claims collection, injury management and loss prevention. Insurance placement
services include the placement of insurance coverages with insurers worldwide,
sometimes involving other intermediaries.
Insurance broking revenue, received from a predominantly corporate clientele,
increased 61% in 1997 primarily due to the J&H and CECAR transactions. Excluding
acquisitions, revenue increased approximately 3%. Client revenue rose due to net
new business development partially offset by declines in commercial property and
casualty premium rates.
In 1996, insurance broking revenue increased 5% over 1995 levels. Client revenue
rose primarily due to an increase in new business in the United States and
Europe offset by declines in commercial property and casualty premium rates
worldwide. Global specialty lines of coverage, including financial services,
marine and energy, and aviation also experienced strong new business levels.
Reinsurance Broking Revenue
Reinsurance broking services involve acting as an intermediary for insurance and
reinsurance organizations on all classes of reinsurance. The intermediary
assists the insurer by providing advice, placing reinsurance coverage with
reinsurance organizations located around the world, placing risk transfer
financing with capital markets, and furnishing related services such as
actuarial, financial and regulatory consulting, portfolio analysis and
catastrophe modeling. Generally, the purpose of reinsurance is to spread the
risk of primary insurance or the reinsurance thereof to lessen the concentration
of risk with any one insurance or reinsurance company.
Reinsurance broking revenue increased 13% in 1997 primarily due to the
combination with J&H. Excluding acquisitions, client revenue fell 2% compared
with the prior year reflecting reduced demand for reinsurance resulting from
continued insurance company consolidations, higher risk retentions by ceding
insurance companies and the impact of lower premium rates offset, in part, by
new business.
Reinsurance broking revenue in 1996 declined 12% compared with 1995. This
decline was primarily due to reduced demand for reinsurance resulting from the
consolidation among various U.S. and U.K. insurance companies, reduced
reinsurance demand due to higher risk retentions by ceding insurance companies
and the impact of lower property catastrophe premium rates.
Insurance Program Management Revenue
Seabury & Smith, the Company's insurance program management operation, primarily
designs, places and administers life, health, accident, disability, automobile,
homeowners and professional liability and other insurance programs primarily on
a group marketing basis to individuals, businesses and their employees, and
associations and other affinity groups and their members in the United States
and Canada. In addition, it provides underwriting management services to
insurers in the United States, Canada and the United Kingdom, primarily for
professional liability coverages.
Insurance program management revenue increased 11% from 1996 reflecting the J&H
combination and the acquisition of Albert H. Wohlers & Co. in May 1997, offset,
in part, by the sale of Frizzell in 1996. Excluding the net impact of
acquisitions and dispositions, revenue for Seabury & Smith increased 6% from
1996. This growth was largely due to increased insurance placed on behalf of
small businesses and new business associated with a marketing program for the
American Association of Retired Persons.
In 1996, insurance program management revenue decreased 24% due to the sale of
Frizzell. Revenue for Seabury & Smith, which comprised the whole of program
management subsequent to the sale of Frizzell, increased 6%. This growth was
largely the result of increased services provided to corporations and
institutions and their employees, along with increased insurance placed on
behalf of small businesses.
Interest Income on Fiduciary Funds
Interest income on fiduciary funds increased 18% largely due to the combination
with J&H and the CECAR acquisition. Excluding acquisitions, interest income on
fiduciary funds decreased approximately 2%. In 1996, interest income on
fiduciary funds decreased 9% due to generally lower average short-term interest
rates worldwide.
Operating Expense
Risk and insurance services operating expenses increased 48% primarily due to
the impact of acquisitions. Excluding acquisitions and dispositions, operating
expenses increased approximately 1% from 1996. The Company expects that its
level of spending on systems and technology will increase in 1998 as a
consequence of the integration process with J&H.
In 1996, risk and insurance services operating expenses decreased 2% from 1995.
Excluding the impact of Frizzell, expenses increased 2% reflecting normal salary
progressions.
Special Charges, net
During 1997, the risk and insurance services segment recorded special charges
totaling $272.6 million representing $189.1 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 related to the disposal of
certain EDP assets.
----------
28
<PAGE>
The merger costs reflect personnel related costs primarily involving severance
and associated benefits for staff reductions and relocations ($105.0 million),
costs for real estate and systems consolidations ($70.8 million) and other
integration costs of $13.3 million. The charge for London real estate relates to
the consolidation of various back-office operations into one central site
outside of the City of London and the razing and redevelopment of the Company's
London building. The disposition of EDP assets relates primarily to the disposal
of personal computers and associated software as part of the Company's adoption
of a global distributed-technology platform. Excluding the impact of the special
charges, the margin for insurance services was 17.8%.
During 1996, the Company completed the sale of Frizzell for approximately $290
million which resulted in a $33.2 million pretax gain. In addition, pretax
charges aggregating $82.6 million were also recorded in the insurance services
segment representing a provision of approximately $31 million for U.K. real
estate; $17 million for costs related to the integration of the Company's
worldwide insurance services operations; $17 million for goodwill write-offs;
$15 million related to the Lloyd's Reconstruction and Renewal Plan; and $3
million for office closings. Excluding the impact of the Frizzell gain and the
special charges, the margin for insurance services was 19.0%.
The results of operations for the Company's risk and insurance services segment
by geographic area are presented below:
================================================================================
(In millions of dollars) 1997 1996 1995
- --------------------------------------------------------------------------------
Revenue:
United States $ 1,635.5 $ 1,025.3 $ 1,006.9
Europe 878.5 696.1 784.0
Canada 109.8 96.4 93.9
Pacific Rim and Other 164.6 89.5 79.1
- --------------------------------------------------------------------------------
$ 2,788.4 $ 1,907.3 $ 1,963.9
================================================================================
Operating Income:
United States(a) $ 103.8 $ 155.6 $ 186.9
Europe(a) 61.9 111.9 155.5
Canada(a) 12.7 27.0 25.9
Pacific Rim and Other(a) 44.6 19.2 20.9
- --------------------------------------------------------------------------------
$ 223.0 $ 313.7 $ 389.2
================================================================================
(a) Excluding special charges, operating income would have been $246.2 million
and $179.2 million in the United States, $175.6 million and $135.7 million
in Europe, $26.9 million and $27.0 million in Canada, $46.9 million and
$21.2 million in the Pacific Rim and Other, and risk and insurance
services in total would have been $495.6 million and $363.1 million in
1997 and 1996, respectively.
The decline in 1997 operating income in the United States, Europe and Canada
reflects the effect of the special charges partially offset by the combinations
with J&H and CECAR.
The sale of Frizzell caused a decline in both revenue and operating income in
Europe in 1996. Operating income also declined in Europe as a result of the
special charges recorded which primarily related to the U.K. The decline in
operating income in the United States reflects reduced reinsurance broking
income due to lower revenues, as well as the impact in the U.S. of the special
charges.
Investment Management
The Company's investment management and related services, which are performed
principally in the United States, are provided primarily under the "Putnam"
name. The services include securities investment advisory and management
services consisting of investment research and management, and accounting and
related services for a group of publicly held investment companies (the "Putnam
Funds"). A number of the open-end funds serve as funding media for variable
insurance contracts. Investment management services are also provided to
corporate profit-sharing and pension funds, state and other government and
public employee retirement funds, university endowment funds, charitable
foundations, collective investment vehicles (both U.S. and non-U.S.) and other
domestic and foreign institutional accounts. Putnam serves as transfer agent,
dividend disbursing agent, registrar and custodian for the Putnam Funds and
provides custody services to several external clients. In addition, Putnam
provides administrative and trustee (or custodial) services for employee benefit
plans (in particular 401(k) plans), IRA's and other clients for which it
receives compensation pursuant to service and trust or custodian contracts.
Putnam also acts as principal underwriter of the shares of the open-end Putnam
Funds, selling primarily through independent broker/dealers, financial planners
and financial institutions, including banks, and directly to certain large
401(k) plans and other institutional accounts. Nearly all of Putnam's mutual
funds are available with a contingent deferred sales charge in lieu of a
front-end load.
Putnam's revenue is derived primarily from investment management fees received
from the Putnam Funds and institutional accounts. Fees paid by the Funds are
approved annually by the trustees or shareholders of the Funds and are charged
at various rates depending on the individual mutual fund or account and are
usually based upon a sliding scale in relation to the level of assets under
management and, in certain instances, are also based on investment performance.
The management of Putnam and the trustees of the funds regularly review the fund
fee structure in light of fund performance, the level and range of services
provided, industry conditions and other relevant factors. Putnam also receives
compensation for providing certain shareholder and custody services.
The results of operations for the Company's investment management segment are
presented below:
================================================================================
(In millions of dollars) 1997 1996 1995
- --------------------------------------------------------------------------------
Revenue $1,882.4 $1,337.5 $ 917.0
Expense 1,419.6 999.7 673.5
- --------------------------------------------------------------------------------
Operating Income $ 462.8 $ 337.8 $ 243.5
================================================================================
Operating Income Margin 24.6% 25.3% 26.6%
================================================================================
----------
29
<PAGE>
Revenue
Putnam's revenue increased 41% in 1997 reflecting record growth in the level of
average assets under management on which management fees are earned. Strong
mutual fund sales and significantly higher equity market valuations contributed
to the higher asset level.
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.
Putnam's revenue increased 46% in 1996 reflecting exceptional growth in the
level of assets under management. The higher asset level reflected a substantial
increase in the level of mutual fund sales, higher equity market valuations and
new 401(k) business.
Expense
Putnam's expenses increased 42% in 1997 reflecting the effect of staff growth to
support new business, increased incentive compensation levels commensurate with
very strong operating performance and increased client service-related costs,
including a new service center, resulting from the higher level of business
activity.
Putnam's expenses rose 48% in 1996 reflecting the effect of significantly higher
incentive compensation levels, staff growth to support new business, increased
costs resulting from the higher level of business activity, and expanding client
needs.
Year-end and average assets under management are presented below:
================================================================================
(In billions of dollars) 1997 1996 1995
- --------------------------------------------------------------------------------
Mutual Funds:
Domestic Equity $119.0 $ 80.0 $ 46.8
Taxable Bond 35.6 29.9 26.0
Tax-Free Income 16.5 16.4 16.9
International Equity 10.9 7.5 3.7
- --------------------------------------------------------------------------------
182.0 133.8 93.4
- --------------------------------------------------------------------------------
Institutional Accounts:
Fixed Income 21.8 19.1 19.0
Domestic Equity 21.4 14.0 8.9
International Equity 9.9 6.5 4.4
- --------------------------------------------------------------------------------
53.1 39.6 32.3
- --------------------------------------------------------------------------------
Year-end Assets $235.1 $173.4 $125.7
================================================================================
Average Assets $205.8 $148.5 $109.2
================================================================================
Assets under management are affected by fluctuations in domestic and
international bond and stock market prices and by the level of investments and
withdrawals for current and new fund shareholders and clients. They are also
affected by investment performance, service to clients, the development and
marketing of new investment products, the relative attractiveness of the
investment style under prevailing market conditions and changes in the
investment patterns of clients. Revenue levels are sensitive to all of the
factors above, but in particular, to significant changes in bond and stock
market valuations.
Putnam provides individual and institutional investors with a broad range of
equity and fixed income investment products and services designed to meet
varying investment objectives and which affords its clients the opportunity to
allocate their investment resources among various alternative investment
products as changing worldwide economic and market conditions warrant.
At the end of 1997, assets held in equity securities represented 69% of assets
under management, compared with 62% in 1996 and 51% in 1995, while investments
in fixed income products represented 31%, compared with 38% last year and 49% in
1995.
Consulting
The Company provides consulting services to a predominantly corporate clientele
from locations around the world, primarily in the areas of human resources and
employee benefit programs, including retirement, health care, and compensation;
and general management consulting, which comprises strategy, operations and
marketing. The Company also provides economic consulting and analysis.
Revenue in the consulting business is affected by changes in clients' industries
including government regulation, as well as new products and services, the stage
of the economic cycle and broad trends in the management of large organizations.
The results of operations for the Company's consulting segment are presented
below:
================================================================================
(In millions of dollars) 1997 1996 1995
- --------------------------------------------------------------------------------
Revenue $1,337.8 $1,159.2 $1,056.4
- --------------------------------------------------------------------------------
Expense:
Operating Expenses 1,189.4 1,039.8 947.7
Special Charges 21.4 8.5 --
- --------------------------------------------------------------------------------
1,210.8 1,048.3 947.7
- --------------------------------------------------------------------------------
Operating Income(a) $ 127.0 $ 110.9 $ 108.7
================================================================================
Operating Income Margin(a) 9.5% 9.6% 10.3%
================================================================================
(a) Excluding special charges, operating income would have been $148.4 million
and $119.4 million and operating income margin would have been 11.1% and
10.3% in 1997 and 1996, respectively.
Revenue
Consulting services revenue increased 15% in 1997 reflecting the J&H combination
as well as an increase in the level of services provided partially offset by the
transfer of certain business lines as part of a strategic alliance with
Automatic Data Processing, Inc., which became effective October 1997. Adjusting
for the impact of acquisitions and dispositions, Consulting's revenue
increased approximately 10% in 1997. Retirement consulting revenue, which
represented 43% of the consulting segment, grew 10% over 1996 reflecting higher
worldwide request for services. In addition, revenue rose 24% in the global
compensation practice, 8% in general management consulting and 1% in health care
consulting in 1997.
----------
30
<PAGE>
In 1996, consulting services revenue increased 10% from 1995. Retirement
consulting revenue, which represented 43% of the consulting segment, grew 9% in
1996 reflecting higher demand in the United States, Europe and Latin America.
Revenue rose 14% in the global compensation practice, 10% in health care
consulting and 7% in general management consulting in 1996.
Operating Expense
Consulting services operating expenses increased 14% in 1997. Excluding
acquisitions and dispositions, expenses increased approximately 9% reflecting
normal salary progressions, the impact of staff growth to support new business
and investments in information technology systems and networks.
Consulting services operating expenses increased 10% in 1996 compared with 1995
primarily reflecting staff growth to support new business, higher incentive
compensation and normal salary progressions.
Special Charges
During 1997, the consulting segment recorded special charges of $21.4 million
representing costs associated with the combination with J&H. The merger costs
primarily reflect severance and related benefits for staff reductions and
relocations ($14.7 million), costs for real estate and systems consolidations
($5.1 million) and other integration costs of $1.6 million. Excluding the impact
of the special charges, the margin for consulting services was 11.1%.
In 1996, pretax charges of $8.5 million were recorded in the consulting segment
reflecting a provision of approximately $6 million for office realignments and
consolidations and $2.5 million for a U.K. real estate matter. Excluding the
impact of the special charges, the operating income margin for consulting
services was 10.3%.
The results of operations for the Company's consulting segment by geographic
area are presented below:
================================================================================
(In millions of dollars) 1997 1996 1995
- --------------------------------------------------------------------------------
Revenue:
United States $ 823.1 $ 707.2 $ 645.0
Europe 318.8 264.8 240.6
Canada 104.5 101.6 90.4
Pacific Rim and Other 91.4 85.6 80.4
- --------------------------------------------------------------------------------
$ 1,337.8 $ 1,159.2 $ 1,056.4
================================================================================
Operating Income:
United States(a) $ 60.9 $ 69.6 $ 60.4
Europe(a) 41.5 24.2 33.9
Canada(a) 15.8 15.5 11.5
Pacific Rim and Other 8.8 1.6 2.9
- --------------------------------------------------------------------------------
$ 127.0 $ 110.9 $ 108.7
================================================================================
(a) Excluding special charges, operating income would have been $80.9 million
and $75.6 million in the United States, $41.5 million and $26.7 million in
Europe, $17.2 million and $15.5 million in Canada, and consulting in total
would have been $148.4 million and $119.4 million in 1997 and 1996,
respectively.
The decline in 1997 operating income in the United States reflects the effect of
the special charges. European results were positively impacted by the expansion
of retirement and general management consulting. The improvement in Pacific Rim
and Other reflects growth primarily in Australia and Latin America.
In 1996, the European results for the consulting segment reflect the impact of
investments made in information technology, the expansion of retirement
consulting, and fee pressure in an expanding but competitive market for general
management consulting. Canadian results reflect improved market conditions
coupled with continued expense controls.
Interest
Interest income earned on corporate funds increased to $24.0 million in 1997
compared with $14.3 million in 1996 due, in large part, to the J&H combination.
Interest expense increased to $106.4 million in 1997 from $61.6 million in 1996
as a result of increased bank borrowings used to finance the acquisitions of J&H
and CECAR as well as the assumption of J&H's long-term debt.
Interest income earned on corporate funds declined to $14.3 million in 1996
compared with $17.7 million in 1995 primarily due to generally lower yields
worldwide. Interest expense decreased to $61.6 million in 1996 from $62.8
million in 1995. This decline was due to lower average interest rates on
commercial paper borrowings. The average level of commercial paper borrowings
was slightly higher than 1995 principally due to the funding of Putnam's prepaid
dealer commissions and the cash outflows associated with the Company's share
repurchases, which was offset in large part by the cash proceeds realized on the
sale of Frizzell.
Income Taxes
The Company's consolidated tax rate was 39.70% of income before income taxes in
1997. Excluding the tax effect of the special charges, the underlying tax rate
was 38.25%. In 1996 the underlying rate was 37.25% (prior to the tax adjustment
described below), compared with 38.0% in 1995. Comparing the underlying tax
rates, the increase in the 1997 tax rate is largely attributable to the
nondeductibility of goodwill associated with the J&H acquisition. The overall
tax rates are higher than the U.S. federal statutory rate primarily because of
provisions for state and local income taxes.
In 1996, the Company recorded a tax adjustment that reduced the income tax
provision by $40 million. The tax adjustment primarily related to the permanent
deployment of funds outside the United States in a tax-efficient manner and
favorable state and local tax developments in the U.S. The reductions in the
1996 tax rate reflected the implementation of tax minimization strategies
primarily relating to the Company's non-U.S. operations.
----------
31
<PAGE>
Liquidity and Capital Resources
The Company's cash and cash equivalents aggregated $424.3 million at the end of
1997, an increase of $124.7 million from the end of 1996.
Operating Cash Flows
The Company generated $415.4 million of cash from operations in 1997 compared
with $316.5 million in 1996. These amounts reflect the net income earned by the
Company in those years adjusted for non-cash charges and working capital
changes. Included in the cash flow from operations are the net cash requirements
of Putnam's prepaid dealer commissions, which amounted to $139.7 million in 1997
compared with $338.7 million in 1996. 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. The tax benefit associated with
these prepaid dealer commissions is recorded as a deferred tax liability.
The increase in accrued compensation and employee benefits in 1997 was caused
principally by significantly higher incentive compensation levels consistent
with very strong operating performance in the investment management segment. The
increase in accounts payable and accrued liabilities in 1997 reflects the impact
of acquisition related reserves.
The Company anticipates that internally generated funds will be sufficient to
meet the Company's foreseeable recurring operating cash requirements, as well as
dividends, capital expenditures and scheduled repayments of long-term debt.
Financing Cash Flows
As previously mentioned, the Company completed its business combination with
J&H, a leading insurance broker, on March 27, 1997 for total consideration of
approximately $1.8 billion. Approximately one-third of the total consideration
was cash and two-thirds the Company's common stock. The Company also purchased
CECAR for approximately $200 million during January 1997. The cash portion of
these transactions is being financed with bank borrowings.
Financing activities for the Company contributed cash of $398.9 million in 1997
and utilized cash of $325.0 million in 1996. Dividends paid by the Company
amounted to $305.6 million in 1997 ($1.90 per share) and $239.2 million in 1996
($1.65 per share). The Company periodically purchases shares of its common stock
to meet the requirements of the various stock compensation and benefit programs.
The Company purchased 2.5 million shares in 1996.
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.
Outstanding borrowings under revolving credit facilities at December 31, 1997
and 1996 amounted to $708.4 million and $250.0 million, respectively, with
varying dates of maturity through December 1998. Borrowings under revolving
credit facilities have been classified as long-term debt based on the Company's
intent and ability to maintain or refinance these obligations on a long-term
basis. The Company also maintains other credit facilities with various banks,
primarily related to operations located outside the United States, aggregating
$241.7 million as of December 31, 1997. The Company has borrowed $184.2 million
under these facilities at December 31, 1997 and has included these borrowings in
long-term debt in the Consolidated Balance Sheets.
The Company has a fixed rate non-recourse mortgage note agreement due in 2009
amounting to $200 million, bearing an interest rate of 9.8%, in connection with
its 56% interest in its worldwide headquarters building. Also related to the
purchase and renovation of the building, the Company has an interest rate swap
that fixes the interest rate on $100 million of variable rate borrowings at
approximately 9.5% until February 1999.
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.
Also 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 noncancelable 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 this $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.
Investing Cash Flows
Investing activities for the Company reduced cash by $675.3 million in 1997 and
by $13.8 million in 1996. In 1997, cash used for acquisition activity, primarily
related to J&H and CECAR, was $472.9 million. In 1996, the net addition to cash
resulting from the sale of Frizzell was $241.8 million. The Company's capital
expenditures, which amounted to $202.1 million in 1997 and $157.3 million in
1996, have primarily related to computer equipment purchases and the
refurbishing and modernizing of office facilities.
----------
32
<PAGE>
The Company is continuing to update its computer systems in preparation for the
year 2000 and expects that all of its critical systems will be year 2000
compliant on a timely basis. The costs associated with addressing this issue are
not expected to have a material adverse impact on the Company's financial
position or results of operations. However, if the Company's clients or vendors
are unable to resolve such year 2000 processing issues in a timely manner, a
material operating and financial risk could result.
The Company has been instrumental in developing new sources of insurance
capacity. The Company, through MMRC, maintains ownership interest in various
entities it assisted in organizing. These investments have been classified as
securities available for sale and, as discussed more fully in Note 10 to the
consolidated financial statements, the aggregate fair value of these holdings is
included in long-term securities in the Consolidated Balance Sheets. The
Company, through Marsh & McLennan Risk Capital Holdings, expects to continue to
manage and develop further these activities.
The Company has announced agreements in principle to acquire AB Max Matthiessen
and Max Matthiessen Reinsurance of Sweden, Brockman y Schuh Group of Mexico,
Interbrokers OY of Finland and the insurance-related business of Kirke-Van
Orsdel, Inc. These transactions are expected to be completed during the first
half of 1998. The combined cash requirement to acquire these operations, which
could approximate $275 million, will be funded through incremental bank
borrowings and commercial paper.
Other
The insurance coverage for potential liability resulting from alleged errors and
omissions in the professional services provided by the Company includes elements
of both risk retention and risk transfer. The Company believes it has adequately
reserved for the self-insurance contingencies. Payments related to the
respective self-insured layers are made as legal fees are incurred and claims
are resolved and generally extend over a considerable number of years. The
amounts paid in that regard vary in relation to the severity of the claims and
the number of claims active in any particular year. The long-term portion of
this liability is included in other liabilities in the Consolidated Balance
Sheets.
The Company's policy for funding its tax qualified U.S. defined benefit
retirement plan is to contribute amounts at least sufficient to meet the funding
requirements set forth in U.S. employee benefit and tax laws. As described more
fully in Note 5 to the consolidated financial statements, the plan has been and
continues to be well funded; consequently, the Company has not been able to make
a tax deductible contribution since 1986. Because this situation is expected to
continue, a 1998 cash contribution is currently not anticipated. The related
long-term pension liability is included in other liabilities in the Consolidated
Balance Sheets.
The Company contributes to certain health care and life insurance benefits
provided to its retired employees. As described more fully in Note 5 to the
consolidated financial statements, the cost of these postretirement benefits for
employees in the United States is accrued during the period up to the date
employees are eligible to retire, but is funded by the Company as incurred. This
postretirement liability is included in other liabilities in the Consolidated
Balance Sheets.
Cumulative translation adjustments, a component of stockholders' equity in the
Consolidated Balance Sheets, represent the cumulative effect of translating the
financial statements of the Company's international operations from functional
currencies to U.S. dollars.
In September 1997, Putnam adopted the Putnam Investments, Inc. Equity
Partnership Plan ("Plan") pursuant to which Putnam is authorized 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 Plan with respect to a maximum of 12,000,000 shares of Class B
Common Stock, which would represent approximately 12% of the outstanding shares
on a fully diluted basis. Putnam made initial awards pursuant to the 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 purpose of the Plan is to foster and promote the long-term success of Putnam
and to increase shareholder value by enabling Putnam to attract and retain the
services of an outstanding management team and professional staff. 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.
----------
33
<PAGE>
Marsh & McLennan Companies, Inc. and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
====================================================================================================================================
For the Three Years Ended December 31, 1997
(In millions, except per share figures) 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.
----------
34
<PAGE>
Marsh & McLennan Companies, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
====================================================================================================================================
December 31, 1997 and 1996
(In millions of dollars) 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
====================================================================================================================================
====================================================================================================================================
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.
----------
35
<PAGE>
Marsh & McLennan Companies, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
====================================================================================================================================
For the Three Years Ended December 31, 1997
(In millions of dollars) 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.
----------
36
<PAGE>
Marsh & McLennan Companies, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
====================================================================================================================================
For the Three Years Ended December 31, 1997
(In millions of dollars, except per share figures) 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
- ------------------------------------------------------------------------------------------------------------------------------------
UNREALIZED SECURITIES HOLDING GAINS, NET OF INCOME TAXES
Balance, beginning of year $ 221.2 $ 149.2 $ 91.6
Realized gains, net of income taxes (23.0) (10.9) (11.4)
Unrealized 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.
----------
37
<PAGE>
Marsh & McLennan Companies, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1 Summary of Significant Accounting Policies
Principles of Consolidation: The accompanying consolidated financial statements
include the accounts of Marsh & McLennan Companies, Inc. and all its
subsidiaries (the "Company"). Various subsidiaries and affiliates have
transactions with each other in the ordinary course of business. All significant
intercompany accounts and transactions have been eliminated.
Fiduciary Assets and Liabilities: In its capacity as an insurance broker or
agent, the Company collects premiums from insureds and, after deducting its
commissions, remits the premiums to the respective insurance underwriters; the
Company also collects claims or refunds from underwriters on behalf of insureds.
Unremitted insurance premiums and claims are held in a fiduciary capacity.
Interest income on these fiduciary funds, included in revenue, amounted to
$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.
The components of fixed assets at December 31, 1997 and 1996 are as follows:
================================================================================
December 31, 1997 and 1996
(In millions of dollars) 1997 1996
- --------------------------------------------------------------------------------
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
================================================================================
Intangible Assets: Acquisition costs in excess of the fair value of net assets
acquired are amortized on a straight-line basis over periods up to 40 years.
Other intangible assets are amortized on a straight-line basis over their
estimated lives. 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
----------
38
<PAGE>
$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 amortized
on a straight-line basis not to exceed five years. Unamortized 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 recognized in the Company's financial
statements or tax returns. U.S. Federal income taxes are provided on unremitted
foreign earnings except those that are considered permanently reinvested, which
at December 31, 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.
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:
================================================================================
1997 1996 1995
- --------------------------------------------------------------------------------
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
================================================================================
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.
----------
39
<PAGE>
2 Supplemental Disclosure to the Consolidated Statements of Cash Flows
The following schedule provides additional information concerning acquisitions:
<TABLE>
<CAPTION>
====================================================================================================================================
For the Three Years Ended December 31, 1997
(In millions of dollars) 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.
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) 1997 1996
- --------------------------------------------------------------------------------
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
================================================================================
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.
----------
40
<PAGE>
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.
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) 1997 1996 1995
- --------------------------------------------------------------------------------
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
================================================================================
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) 1997 1996
- --------------------------------------------------------------------------------
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
================================================================================
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
Unrealized 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)
================================================================================
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 realize any future benefit from the
recorded amounts.
----------
41
<PAGE>
A reconciliation from the U.S. Federal statutory income tax rate to the
Company's effective income tax rate is as follows:
================================================================================
For the Three Years Ended
December 31, 1997 1997 1996 1995
- --------------------------------------------------------------------------------
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%
================================================================================
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 United States 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 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) 1997 1996 1995
- --------------------------------------------------------------------------------
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
================================================================================
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.
----------
42
<PAGE>
The funded status of the U.S. defined benefit plans and the actuarial
assumptions used to measure the projected benefit obligation are as follows:
================================================================================
December 31, 1997 and 1996
(In millions of dollars) 1997 1996
- --------------------------------------------------------------------------------
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%
================================================================================
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.
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) 1997 1996 1995
- --------------------------------------------------------------------------------
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
================================================================================
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) 1997 1996
- --------------------------------------------------------------------------------
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%
================================================================================
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.
----------
43
<PAGE>
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 United
States, as retired employees outside the United States receive these benefits,
in large part, from governmental health care programs. United States employees
become eligible for these benefits if they attain retirement age while working
for the Company, subject in certain instances to minimum service requirements.
The cost of these postretirement benefits is accrued during the period up to the
date employees are eligible to retire, but is funded by the Company as incurred.
The components of the United States postretirement benefits costs are as
follows:
================================================================================
For the Three Years Ended December 31, 1997
(In millions of dollars) 1997 1996 1995
- --------------------------------------------------------------------------------
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
================================================================================
The accumulated postretirement benefit obligation at December 31, 1997 and 1996
is as follows:
================================================================================
December 31, 1997 and 1996
(In millions of dollars) 1997 1996
- --------------------------------------------------------------------------------
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
================================================================================
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.
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:
----------
44
<PAGE>
================================================================================
(In millions of dollars,
except per share figures) 1997 1996 1995
- --------------------------------------------------------------------------------
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
================================================================================
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.
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 Remaining Weighted Average Exercisable Weighted Average
Exercise Prices at 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>
----------
45
<PAGE>
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.
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 authorized 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
----------
46
<PAGE>
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
noncancelable operating leases. These leases expire on varying dates; in some
instances contain renewal and expansion options; do not restrict the payment of
dividends or the incurrence of debt or additional lease obligations; and contain
no significant purchase options. In addition to the base rental costs, occupancy
lease agreements generally provide for rent escalations resulting from increased
assessments for real estate taxes and other charges. Approximately 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
noncancelable operating lease agreements are as follows:
================================================================================
For the Years Ending Gross Rentals Net
December 31, Rental from Rental
(In millions of dollars) Commitments Subleases Commitments
- --------------------------------------------------------------------------------
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
================================================================================
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:
================================================================================
Future
For the Years Ending December 31, Minimum
(In millions of dollars) Commitments
- --------------------------------------------------------------------------------
1998 $24.8
1999 13.7
2000 9.4
2001 9.0
2002 9.0
Subsequent years 12.5
- --------------------------------------------------------------------------------
$78.4
================================================================================
8 Short-term Debt
The Company's outstanding short-term debt is as follows:
================================================================================
December 31, 1997 and 1996
(In millions of dollars) 1997 1996
- --------------------------------------------------------------------------------
Commercial paper $229.3 $387.6
Current portion of long-term debt 7.4 4.8
- --------------------------------------------------------------------------------
$236.7 $392.4
================================================================================
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.
----------
47
<PAGE>
The Company maintains credit facilities with various banks, primarily related to
operations located outside the United States, 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) 1997 1996
- --------------------------------------------------------------------------------
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
================================================================================
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.
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 non-cancelable 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.
----------
48
<PAGE>
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 realize upon disposition nor do
they indicate the Company's intent or ability to dispose of the financial
instrument.
Cash and Cash Equivalents: The estimated fair value of the Company's cash and
cash equivalents approximates their carrying value.
Long-term Investments: The Company has certain long-term investments, 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.
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.
Unrealized 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
unrealized 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 realized 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 U.K. real estate; $17
million for costs related to the integration of the Company's worldwide
insurance services operations; $17 million for goodwill write-offs; $15 million
related to the Lloyd's Reconstruction and Renewal Plan; and $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.
----------
49
<PAGE>
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 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 United States 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.
----------
50
<PAGE>
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:
<TABLE>
<CAPTION>
====================================================================================================================================
For the Three Years Ended December 31, 1997
Depreciation &
Operating Identifiable Amortization Capital
(In millions of dollars) Revenue Income Assets of Fixed Assets Expenditures
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Type of Service:
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
====================================================================================================================================
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)
United States $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)
United States $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--
United States $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.
----------
51
<PAGE>
Report of Management
The management of Marsh & McLennan Companies, Inc. has prepared and is
responsible for the accompanying financial statements and other related
financial information contained in this annual report. The Company's financial
statements were prepared in accordance with generally accepted accounting
principles, applying certain estimates and informed judgments as required.
Deloitte & Touche LLP, independent auditors, have audited the financial
statements and have issued their report thereon.
The Company maintains a system of internal accounting controls designed to
provide reasonable assurance that transactions are executed in accordance with
management's authorization, that assets are safeguarded and that proper
financial records are maintained. Key elements of the Company's internal
controls include securing the services of qualified personnel and proper
segregation of duties. Internal auditors monitor the control system by examining
financial reports, by testing the accuracy of transactions, and by otherwise
obtaining assurance that the system is operating in accordance with the
Company's objectives.
The Audit Committee of the Board of Directors is composed entirely of outside
directors and is responsible for recommending to the Board the independent
auditors to be engaged to audit the Company's financial statements, subject to
stockholder ratification. In addition, the Audit Committee meets periodically
with internal auditors and the independent auditors, both with and without
management, to discuss the Company's internal accounting controls, financial
reporting and other related matters. The internal auditors and independent
auditors have full and unrestricted access to the Audit Committee.
/s/ Frank J. Borelli
Frank J. Borelli
Senior Vice President and
Chief Financial Officer
March 6, 1998
Report of Independent Auditors
The Board of Directors and Stockholders of
Marsh & McLennan Companies, Inc.:
We have audited the accompanying consolidated balance sheets of Marsh & McLennan
Companies, Inc. and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Marsh & McLennan Companies, Inc.
and subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
New York, New York
March 6, 1998
----------
52
<PAGE>
Marsh & McLennan Companies, Inc. and Subsidiaries
Selected Quarterly Financial Data and
Supplemental Information (Unaudited)
<TABLE>
<CAPTION>
================================================================================================================================
Operating Net Net Income (Loss) Dividends Stock
(In millions of dollars, Income Income Per Share(a) Paid Per Price Range
except per share figures) Revenue (Loss) (Loss) Basic Diluted Share High-Low
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997:
First quarter $ 1,295.2 $ 277.3 $ 164.4 $ 1.13 $ 1.10 $ .45 $64.81-51.31
Second quarter 1,539.5 261.6 145.0 .87 .85 .45 $75.25-56.56
Third quarter 1,548.4 248.9 140.0 .83 .81 .50 $79.75-68.25
Fourth quarter 1,625.5 (43.0) (50.0) (.29) (.29) .50 $80.00-66.00
- ----------------------------------------------------------------------------------------------------------------
$ 6,008.6 $ 744.8 $ 399.4 $ 2.45 $ 2.39 $ 1.90 $80.00-51.31
================================================================================================================
1996:
First quarter $ 1,122.6 $ 242.5 $ 143.1 $ .98 $ .97 $ .40 $50.81-42.13
Second quarter 1,097.9 193.3 115.2 .79 .78 .40 $48.81-44.50
Third quarter 1,057.0 174.2 102.6 .72 .70 .40 $49.50-44.00
Fourth quarter 1,126.5 105.3 98.4 .68 .67 .45 $57.44-47.75
- ----------------------------------------------------------------------------------------------------------------
$ 4,404.0 $ 715.3 $ 459.3 $ 3.17 $ 3.12 $ 1.65 $57.44-42.13
================================================================================================================
1995:
First quarter $ 994.7 $ 213.6 $ 124.8 $ .85 $ .85 $ .36 $42.50-38.13
Second quarter 974.5 174.9 101.8 .70 .69 .36 $42.00-38.06
Third quarter 963.9 158.4 91.3 .63 .62 .36 $44.69-38.31
Fourth quarter 1,004.2 148.0 85.0 .58 .57 .40 $45.06-40.25
- ----------------------------------------------------------------------------------------------------------------
$ 3,937.3 $ 694.9 $ 402.9 $ 2.76 $ 2.73 $ 1.48 $45.06-38.06
================================================================================================================================
</TABLE>
(a) Net income per share is computed independently for each of the periods
presented. Accordingly, the sum of the quarterly net income per share
amounts exceeds the total for the year in 1997.
The Company's common stock (ticker symbol: MMC) is traded on the New York,
Chicago, Pacific and London stock exchanges. As of February 28, 1998, there were
20,483 stockholders of record.
----------
53
<PAGE>
Marsh & McLennan Companies, Inc. and Subsidiaries
Ten-Year Statistical Summary of Operations
<TABLE>
<CAPTION>
========================================================================================================================
For the Ten Years Ended December 31, 1997
(In millions of dollars, except per share figures) 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Risk and Insurance Services $ 2,788.4 $ 1,907.3 $ 1,963.9 $ 1,886.5
Investment Management 1,882.4 1,337.5 917.0 747.4
Consulting 1,337.8 1,159.2 1,056.4 933.1
- ------------------------------------------------------------------------------------------------------------------------
Total Revenue 6,008.6 4,404.0 3,937.3 3,567.0
- ------------------------------------------------------------------------------------------------------------------------
Expenses:
Compensation and benefits 3,044.1 2,204.3 1,948.8 1,740.2
Other operating expenses 2,219.7 1,484.4 1,293.6 1,156.5
- ------------------------------------------------------------------------------------------------------------------------
Total Expenses 5,263.8 3,688.7 3,242.4 2,896.7
- ------------------------------------------------------------------------------------------------------------------------
Operating Income 744.8(e) 715.3(c) 694.9 670.3
Interest Income 24.0 14.3 17.7 11.8
Interest Expense (106.4) (61.6) (62.8) (50.6)
Other Income (Expense) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes and Cumulative Effect of
Accounting Changes 662.4 668.0 649.8 631.5
Income Taxes 263.0 208.7(d) 246.9 249.5
- ------------------------------------------------------------------------------------------------------------------------
Income Before Cumulative Effect of Accounting Changes $ 399.4 $ 459.3 $ 402.9 $ 382.0
========================================================================================================================
Net Income $ 399.4 $ 459.3 $ 402.9 $ 371.5(b)
========================================================================================================================
Basic Net Income Per Share Information:
Income Before Cumulative Effect of Accounting Changes $ 2.45 $ 3.17 $ 2.76 $ 2.60
Net Income Per Share $ 2.45 $ 3.17 $ 2.76 $ 2.52(b)
Average Number of Shares Outstanding 163.0 144.8 145.8 147.2
========================================================================================================================
Diluted Net Income Per Share Information:
Income Before Cumulative Effect of Accounting Changes $ 2.39 $ 3.12 $ 2.73 $ 2.57
Net Income Per Share $ 2.39 $ 3.12 $ 2.73 $ 2.50(b)
Average Number of Shares Outstanding 167.2 147.4 147.4 148.6
========================================================================================================================
Dividends Paid Per Share $ 1.90 $ 1.65 $ 1.48 $ 1.40
Return on Average Stockholders' Equity 16% 26% 26% 26%
Year-end Financial Position:
Working capital $ 189.4 $ 192.3 $ 109.6 $ 53.7
Total assets $ 7,914.2 $ 4,545.2 $ 4,329.5 $ 3,830.6
Long-term debt $ 1,239.8 $ 458.2 $ 410.6 $ 409.4
Stockholders' equity $ 3,198.8 $ 1,888.6 $ 1,665.5 $ 1,460.6
Total shares outstanding (excluding treasury shares) 170.0 144.6 145.6 146.4
Other Information:
Number of employees 36,400 27,000 27,200 26,100
Stock price ranges--
U.S. exchanges--High $ 80.00 $ 57.44 $ 45.06 $ 44.38
--Low $ 51.31 $ 42.13 $ 38.06 $ 35.63
London Stock Exchange--High (pound)49.06 (pound)34.17 (pound)29.25 (pound)29.47
--Low (pound)30.56 (pound)27.44 (pound)23.94 (pound)22.66
Price/earnings multiple 31.2 16.7 16.3 15.9
========================================================================================================================
<CAPTION>
===================================================================================================================================
For the Ten Years Ended December 31, 1997
(In millions of dollars, except per share figures) 1993 1992 1991 1990 1989
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue:
Risk and Insurance Services $ 1,790.5 $ 1,632.8 $ 1,571.0 $ 1,536.8 $ 1,400.3
Investment Management 577.7 416.1 325.0 286.0 282.1
Consulting 854.8 908.2 894.0 910.0 754.3
- -----------------------------------------------------------------------------------------------------------------------------------
Total Revenue 3,223.0 2,957.1 2,790.0 2,732.8 2,436.7
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses:
Compensation and benefits 1,635.7 1,557.8 1,461.1 1,400.0 1,223.4
Other operating expenses 994.5 858.3 830.8 805.5 703.8
- -----------------------------------------------------------------------------------------------------------------------------------
Total Expenses 2,630.2 2,416.1 2,291.9 2,205.5 1,927.2
- -----------------------------------------------------------------------------------------------------------------------------------
Operating Income 592.8 541.0 498.1 527.3 509.5
Interest Income 11.9 16.6 24.8 33.5 27.7
Interest Expense (46.1) (38.3) (39.1) (31.0) (18.9)
Other Income (Expense) -- -- 43.0 (1.0) (1.0)
- -----------------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes and Cumulative Effect of
Accounting Changes 558.6 519.3 526.8 528.8 517.3
Income Taxes 226.2 215.5 221.3 224.7 222.4
- -----------------------------------------------------------------------------------------------------------------------------------
Income Before Cumulative Effect of Accounting Changes $ 332.4 $ 303.8 $ 305.5 $ 304.1 $ 294.9
===================================================================================================================================
Net Income $ 332.4 $ 263.7(a) $ 305.5 $ 304.1 $ 294.9
===================================================================================================================================
Basic Net Income Per Share Information:
Income Before Cumulative Effect of Accounting Changes $ 2.26 $ 2.10 $ 2.09 $ 2.07 $ 2.05
Net Income Per Share $ 2.26 $ 1.83(a) $ 2.09 $ 2.07 $ 2.05
Average Number of Shares Outstanding 147.0 144.4 146.2 146.6 143.8
===================================================================================================================================
Diluted Net Income Per Share Information:
Income Before Cumulative Effect of Accounting Changes $ 2.23 $ 2.07 $ 2.06 $ 2.05 $ 2.01
Net Income Per Share $ 2.23 $ 1.80(a) $ 2.06 $ 2.05 $ 2.01
Average Number of Shares Outstanding 149.0 146.6 148.4 148.6 146.6
===================================================================================================================================
Dividends Paid Per Share $ 1.35 $ 1.33 $ 1.30 $ 1.28 $ 1.25
Return on Average Stockholders' Equity 27% 25% 29% 31% 36%
Year-end Financial Position:
Working capital $ 133.7 $ 198.3 $ 336.2 $ 352.5 $ 312.7
Total assets $ 3,546.6 $ 3,088.4 $ 2,382.2 $ 2,411.2 $ 2,035.2
Long-term debt $ 409.8 $ 411.2 $ 318.0 $ 319.9 $ 319.4
Stockholders' equity $ 1,365.3 $ 1,102.9 $ 1,035.0 $ 1,085.3 $ 873.0
Total shares outstanding (excluding treasury shares) 147.8 146.6 143.6 147.0 144.8
Other Information:
Number of employees 25,600 25,800 23,400 24,400 23,600
Stock price ranges--
U.S. exchanges--High $ 48.81 $ 47.25 $ 43.63 $ 40.50 $ 44.88
--Low $ 38.50 $ 35.63 $ 34.56 $ 29.88 $ 27.56
London Stock Exchange--High (pound)33.72 (pound)30.94 (pound)24.81 (pound)24.50 (pound)27.97
--Low (pound)26.28 (pound)19.66 (pound)17.78 (pound)15.75 (pound)15.41
Price/earnings multiple 18.2 25.4 19.8 19.0 19.4
===================================================================================================================================
<CAPTION>
=====================================================================================
Compound
For the Ten Years Ended December 31, 1997 Growth Rate
(In millions of dollars, except per share figures) 1988 1987-1997
- -------------------------------------------------------------------------------------
<S> <C> <C>
Revenue:
Risk and Insurance Services $ 1,375.7 7%
Investment Management 269.8 21%
Consulting 635.7 11%
- --------------------------------------------------------------------
Total Revenue 2,281.2 11%
- --------------------------------------------------------------------
Expenses:
Compensation and benefits 1,108.9 12%
Other operating expenses 656.9 14%
- --------------------------------------------------------------------
Total Expenses 1,765.8 13%
- --------------------------------------------------------------------
Operating Income 515.4 3%
Interest Income 22.7
Interest Expense (23.1)
Other Income (Expense) 1.4
- --------------------------------------------------------------------
Income Before Income Taxes and Cumulative Effect of
Accounting Changes 516.4 2%
Income Taxes 220.1
- --------------------------------------------------------------------
Income Before Cumulative Effect of Accounting Changes $ 296.3 3%
====================================================================
Net Income $ 296.3 3%
====================================================================
Basic Net Income Per Share Information:
Income Before Cumulative Effect of Accounting Changes $ 2.05 2%
Net Income Per Share $ 2.05 2%
Average Number of Shares Outstanding 144.8
====================================================================
Diluted Net Income Per Share Information:
Income Before Cumulative Effect of Accounting Changes $ 2.02 2%
Net Income Per Share $ 2.02 2%
Average Number of Shares Outstanding 146.4
====================================================================
Dividends Paid Per Share $ 1.21 6%
Return on Average Stockholders' Equity 38%
Year-end Financial Position:
Working capital $ 195.7
Total assets $ 1,830.0
Long-term debt $ 266.2
Stockholders' equity $ 755.1
Total shares outstanding (excluding treasury shares) 143.0
Other Information:
Number of employees 22,800
Stock price ranges--
U.S. exchanges--High $ 29.88
--Low $ 22.63
London Stock Exchange--High (pound)17.50
--Low (pound)12.50
Price/earnings multiple 13.9
=====================================================================================
</TABLE>
(a) Reflects the adoption, effective January 1, 1992, of SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions,"
and SFAS No. 109, "Accounting for Income Taxes."
(b) Reflects the adoption, effective January 1, 1994, of SFAS No. 112,
"Employers' Accounting for Postemployment Benefits."
(c) Includes net special charges of $92.6 million partially offset by a $33.2
million gain on the sale of Frizzell.
(d) Includes a tax adjustment that reduced income taxes by $40 million.
(e) Includes a special charge of $296.8 million.
----------
54 & 55
<PAGE>
Board of Directors and Corporate Officers
BOARD OF DIRECTORS
A.J.C. Smith
Chairman
Norman Barham
Vice Chairman
J&H Marsh & McLennan, Inc.
Lewis W. Bernard
Chairman
Classroom, Inc.
Former Chief Administrative
and Financial Officer
Morgan Stanley & Co., Inc.
Richard H. Blum
Vice Chairman
J&H Marsh & McLennan, Inc.
Frank J. Borelli
Senior Vice President and
Chief Financial Officer
Peter Coster
President
Mercer Consulting Group, Inc.
Robert F. Erburu
Former Chairman
The Times Mirror Company
Jeffrey W. Greenberg
Chairman
Marsh & McLennan Risk Capital Corp.
Ray J. Groves
Chairman
Legg Mason Merchant Banking, Inc.
Former Chairman
Ernst & Young
Richard S. Hickok
Former Chairman
KMG Main Hurdman
The Rt. Hon. Lord Lang of Monkton
Former British Secretary of State
for Trade & Industry
Lawrence J. Lasser
President
Putnam Investments, Inc.
Richard M. Morrow
Former Chairman
Amoco Corporation
David A. Olsen
Former Chairman
Johnson & Higgins
George Putnam
Chairman
The Putnam Funds
Adele Smith Simmons
President
John D. and Catherine T.
MacArthur Foundation
John T. Sinnott
Vice Chairman and
Chief Executive
J&H Marsh & McLennan, Inc.
Frank J. Tasco
Former Chairman
Marsh & McLennan Companies, Inc.
ADVISORY DIRECTORS
Richard E. Heckert
Former Chairman
E.I. du Pont de Nemours and Company
Dean R. McKay
Former Senior Vice President
IBM Corporation
Arthur C. Nielsen, Jr.
Former Chairman
A.C. Nielsen Company
John M. Regan, Jr.
Former Chairman
Marsh & McLennan Companies, Inc.
R. J. Ventres
Former Chairman
Borden, Inc.
COMMITTEES OF THE BOARD
Audit
Richard S. Hickok, Chairman
The Rt. Hon. Lord Lang of Monkton
Richard M. Morrow
Adele Smith Simmons
Frank J. Tasco
Compensation
Lewis W. Bernard, Chairman
Robert F. Erburu
Ray J. Groves
Executive
A.J.C. Smith, Chairman
Richard M. Morrow
Adele Smith Simmons
Frank J. Tasco
OTHER CORPORATE OFFICERS
Francis N. Bonsignore
Senior Vice President
Human Resources and Administration
Gregory F. Van Gundy
General Counsel and Secretary
International Advisory Board
Abdlatif Y. Al-Hamad (Middle East)
Chairman
Arab Fund for Economic
and Social Development
Raymond Barre (France)
Deputy, National Assembly
Former Prime Minister
Mathis Cabiallavetta (Switzerland)
President of the Group Executive Board
Union Bank of Switzerland
John R. Evans (Canada)
Chairman
Torstar Corporation
Oscar Fanjul (Spain)
Former Chairman and Chief
Executive Officer
Repsol
Toyoo Gyohten (Japan)
President
Institute for International
Monetary Affairs
Former Chairman
The Bank of Tokyo
Lord Jenkin of Roding (United Kingdom)
Chairman
Friends' Provident Life Office
Former Secretary of State for Industry
Erno Kemenes (Eastern Europe)
Chairman
Deloitte Touche Tohmatsu
Former Minister of Economics, Hungary
Walther Leisler Kiep (Germany)
(IAB Chairman)
General Partner
Gradmann & Holler
Marcilio Marques Moreira (Brazil)
Senior International Advisor
Merrill Lynch
Former Ambassador of Brazil
to the United States
Paul F. Oreffice (United States)
Former Chairman and
Chief Executive Officer
The Dow Chemical Company
Jesus Silva-Herzog (Mexico)
Institute for Monetary Affairs
Former Ambassador of Mexico
to the United States
Wei Ming Yi (China)
Chairman
International Advisory Council
China International Trust and
Investment Corporation
56
<PAGE>
SHAREHOLDER INFORMATION
ANNUAL MEETING
The 1998 annual meeting of shareholders will be held at 10 a.m., Wednesday, May
20, in the 2nd floor auditorium of the McGraw-Hill Building, 1221 Avenue of the
Americas, New York City. At the time of the mailing of this annual report, the
notice of the annual meeting and proxy statement, together with a proxy card, is
scheduled to be sent to each shareholder.
ANTICIPATED 1998 DIVIDEND PAYMENT DATES
February 13 (paid), May 15, August 14, November 13
FINANCIAL AND INVESTOR INFORMATION
Shareholders and prospective investors inquiring about reinvestment and payment
of dividends, consolidation of accounts, changes of registration and stock
certificate holdings should contact:
The Bank of New York
Shareholder Relations Department -- 11E
P.O. Box 11258
Church Street Station
New York, NY 10286
Telephone: (800) 457-8968
(212) 815-2560
Certificates for transfer and address changes
should be sent to:
The Bank of New York
Receive and Deliver Department -- 11W
P.O. Box 11002
Church Street Station
New York, NY 10286
The Bank of New York
c/o The Royal Bank of Scotland
Registrar's Department
P.O. Box 82, Caxton House
Redcliffe Way, Bristol BS99 7NH
England
Telephone: 117-9306600
The Bank of New York's Web site:
http://stock.bankofny.com
<PAGE>
E-mail inquiries: [email protected]
Copies of our annual and quarterly reports, and Forms 10-K and 10-Q, may be
obtained by contacting:
Corporate Development
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, NY 10036
Telephone: (212) 345-5475
Marsh & McLennan Companies' Web site: www.marshmac.com
STOCK LISTINGS
Marsh & McLennan Companies' common stock (ticker symbol: MMC) is listed on the
New York, Chicago, Pacific and London stock exchanges.
CAUTIONARY LANGUAGE REGARDING FORWARD-LOOKING STATEMENTS
This annual report to shareholders contains forward-looking statements which by
their nature involve risks and uncertainties. Please refer to Marsh & McLennan
Companies' 1997 Annual Report on Form 10-K for "Information Concerning
Forward-Looking Statements" and a description of certain factors that may cause
actual results to differ from goals referred to herein or contemplated by such
statements.
<PAGE>
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, NY 10036
www.marshmac.com
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF
MARSH & McLENNAN COMPANIES, INC.
as of 2/28/98)
<TABLE>
<CAPTION>
Where
Name Incorporated
---- ------------
<S> <C>
Marsh & McLennan Real Estate Advisors, Inc. Delaware
Omega Indemnity (Bermuda) Limited Bermuda
Epsilon Insurance Company, Ltd. Cayman Islands
J&H Marsh & McLennan, Inc. Delaware
J&H Marsh & McLennan of Alabama, Inc. Alabama
J&H Marsh & McLennan of Alaska, Inc. Alaska
J&H Marsh & McLennan of Arkansas, Inc. Arkansas
J&H Marsh & McLennan of Connecticut, Inc. Connecticut
M & M Insurance Management Services, Inc. Delaware
Marsh & McLennan Financial Markets, Inc. Delaware
Marsh & McLennan GbR Holdings, Inc. Delaware
Marsh & McLennan Pallas Holdings, Inc. Delaware
Marsh & McLennan Pallas Holdings GmbH Germany
Gradmann & Holler GbR Germany
Pallas Gradmann & Holler do Brasil
Corretores de Seguros Ltda. Brazil
Assivalo Comercial E
Representacoes Ltda. (30%) Brazil
Triad Services, Inc. Delaware
Marsh & McLennan Agency, Incorporated District of Columbia
J&H Marsh & McLennan of Idaho, Inc. Idaho
J&H Marsh & McLennan of Illinois, Inc. Illinois
J&H Marsh & McLennan of Indiana, Inc. Indiana
J&H Marsh & McLennan of Kentucky, Inc. Kentucky
J&H Marsh & McLennan of Louisiana, Inc. Louisiana
Marmac Agency, Inc. Louisiana
J&H Marsh & McLennan of Maine, Inc. Maine
J&H Marsh & McLennan of Massachusetts, Inc. Massachusetts
J&H Marsh & McLennan of Michigan, Inc. Michigan
J&H Marsh & McLennan of Mississippi, Inc. Mississippi
J&H Marsh & McLennan of Nevada, Inc. Nevada
J&H Marsh & McLennan of Ohio, Inc. Ohio
J&H Marsh & McLennan of Oklahoma, Inc. Oklahoma
J&H Marsh & McLennan of Pennsylvania, Inc. Pennsylvania
Marsh & McLennan of Puerto Rico, Inc. Puerto Rico
J&H Marsh & McLennan of Rhode Island, Inc. Rhode Island
J&H Marsh & McLennan, Inc. (Texas) Texas
Marsh & McLennan of Texas, Inc. Texas
J&H Marsh & McLennan of Texas, Inc. Texas
J&H Marsh & McLennan of Utah, Inc. Utah
J&H Marsh & McLennan of Virginia, Inc. Virginia
J&H Marsh & McLennan of West Virginia, Inc. West Virginia
J&H Marsh & McLennan International, Inc. Wisconsin
J&H Marsh & McLennan Global Broking, Inc. New York
J&H Marsh & McLennan Global Broking (Bermuda)
Ltd. Bermuda
Bowring (Bermuda) Investments Ltd. Bermuda
J&H Marsh & McLennan Global Broking, Inc. Connecticut
J&H Marsh & McLennan Global Broking, Inc. Illinois
J&H Marsh & McLennan Global Broking, Inc. Missouri
J&H Marsh & McLennan Global Broking, Inc. New Jersey
1
<PAGE>
J&H Marsh & McLennan Intermediaries, Inc. New York
J&H Marsh & McLennan Global Broking, Inc. Texas
Marsh & McLennan Global Broking (Dublin) Ltd. Ireland
JHM Holdings, Inc. New York
Marsh & McLennan Properties, Inc. Delaware
Marsh & McLennan Properties (Bermuda) Ltd. Bermuda
Marsh & McLennan Holdings, Inc. Delaware
Marsh & McLennan (Korea) Ltd. Korea
Marsh & McLennan (Malaysia) SDN BHD Malaysia
Marsh & McLennan Argentina SA Asesores de
Seguros (86%) Argentina
Ayling & Barrios SA Argentina
Marsh & McLennan Argentina SA Corredores
de Reaseguros Argentina
Marsh & McLennan Argentina SA Risk Management
Consultants Argentina
J&H Marsh & McLennan Pty. Ltd. Australia
Marsh & McLennan (PNG) Pty. Ltd. Papua New Guinea
Kila Bowring Insurances Pty. Ltd. (52%) Papua New Guinea
Fenchurch Insurance Brokers Pty. Limited Australia
Marsh & McLennan (WA) Pty. Ltd. Australia
Marsh & McLennan (WA Division) Pty. Ltd. Australia
Marsh & McLennan (South Australia) Pty. Ltd. Australia
Marsh & McLennan (SA Division) Australia
Marsh & McLennan Captive Management Services
Pty. Ltd. Australia
Asia Pacific Insurance Wholesalers Pty. Ltd. Australia
Marsh & McLennan Versicherungs-Service GmbH Austria
Marsh & McLennan Management Services
(Barbados), Ltd. Barbados
Henrijean, S.A. Belgium
Marsh & McLennan Europe S.A. Belgium
Marsh & McLennan Management Services
(Bermuda) Limited Bermuda
Transglobe Management (Bermuda) Ltd. Bermuda
Marsh & McLennan (Cayman Islands) Ltd. Cayman Islands
Marsh & McLennan Management Services (L) Ltd. Labuan
Tudor, Marsh & McLennan Corretores de Seguros Ltda. Brazil
J&H Marsh & McLennan Ltd. Canada
D.G. Watt & Associates Ltd. Canada
Charbonneau, Dulude & Associes (1985)
Limitee/Charbonneau, Canada
Dulude & Associates (1985) Limited Canada
M&M Insurance Management Canada Ltd. British Columbia
Marshcan Insurance Brokers Limited Canada
Irish & Maulson Limited Ontario
Pratte-Morrissette, Inc. Quebec
Schatz Insurance Agencies, Inc. Saskatchewan
Marsh & McLennan (SASK) Ltd. Saskatchewan
Claro Marsh & McLennan S.A. Corredores De Seguros Chile
Claro Marsh & McLennan Consultores en Recursos
Humanos, Ltda. Chile
Marsh & McLennan Denmark A/S Denmark
Marsh & McLennan Norway A.S. Norway
Marsh & McLennan Sweden AB Sweden
Marsh & McLennan Companies GmbH Germany
Marsh & McLennan Companies
Beteiligungsgesellschaft II GmbH Germany
Gradmann & Holler, K.G. Germany
Erwin Warnecke GmbH Germany
Gradmann & Holler GmbH (89%) Germany
RMB-Risk Management Beratungs-GmbH Germany
Wolf & Hasselmann GmbH Germany
Gradmann & Holler-William M. Mercer
GmbH (90%) Germany
Airport Asserkuranz Vermittlungs
GmbH (50%) Germany
Gradmann & Holler International GmbH (90%) Germany
2
<PAGE>
Gradmann & Holler Kiefhaber GmbH Germany
Gradmann & Holler AG Switzerland
Marsh & McLennan-Hellas-L.L.C. Greece
Marsh & McLennan Management Services (Guernsey) Limited Guernsey
Marsh & McLennan Limited Hong Kong
Marsh & McLennan Budapest Insurance Brokers &
Consultants Ltd. Hungary
Marsh & McLennan Management Services (Dublin) Limited Ireland
Bowring Marsh & McLennan (IOM) Ltd. Isle of Man
Marsh & McLennan Management Services (Isle of Man) Ltd. Isle of Man
J&H Marsh & McLennan Italia S.P.A. Italy
J&H Marsh & McLennan Japan Ltd. Japan
Marsh & McLennan Co. Inc. Liberia
Marsh & McLennan Luxembourg, S.A. Luxembourg
Marsh & McLennan Insurance Management Services, S.A. Luxembourg
S.P.K. Bowring Marsh & McLennan Sdn. Bhd. Malaysia
Marsh & McLennan Agente de Seguros y de Fianzas,
S.A. de C.V. Mexico
Corredores Internacionales de Reaseguros S.A. Mexico
Marsh & McLennan Polska Sp.zO.O Poland
Marsh & McLennan Romania SRL Romania
Marsh & McLennan Management Services (S) Pte. Ltd. Singapore
Marsh & McLennan Bowring Pte. Ltd. Singapore
Marsh & McLennan Slovakia s.r.o. Slovakia
Marsh & McLennan Correduria de Reaseguros S.A. Spain
Marsh & McLennan Espana, S.A., Correduria de Seguros (60%) Spain
Marsh Privat AIE (50%) Spain
J&H Marsh & McLennan AG Switzerland
Marsh & McLennan Sigorta ve Reasurans Brokerligi AS Turkey
J&H Marsh & McLennan International Broking Holdings, Ltd. United Kingdom
Insurance Brokers of Nigeria Nigeria
J&H Marsh & McLennan Financial Services Ltd. United Kingdom
Marsh & McLennan Bowring Marine & Energy Group Ltd. United Kingdom
Marsh & McLennan Limited United Kingdom
Marsh & McLennan, Incorporated Virgin Islands
Muir Beddall (Zimbabwe) Limited Zimbabwe
Jay R. Corp. New York
Casualty Insurance Company Services, Inc. California
Johnson & Higgins Agency of Korea, Ltd. Korea
Johnson & Higgins (Columbia) Ltd Columbia
J&H Marsh & McLennan Financial Services, Inc. New York
Johnson & Higgins Financial Services of Texas, Inc. Texas
Johnson & Higgins Securities, Inc. Montana
Retach Corporation Delaware
Shipowners of Claims Bureau, Inc. New York
Caribbean Marine Associates, Inc. Florida
Pacific Marine Associates, Inc. California
Johnson & Higgins (USVI) Ltd. Virgin Islands
Johnson & Higgins Intermediaries of Washington, Inc. Washington
Healthcare Risk Management Services, Inc. Washington
Espana Uno, Inc. Delaware
Espana Dos, Inc. Delaware
Espana Treso, Inc. Delaware
Espana Cuatro, Inc. Delaware
Espana Cinco, Inc. Delaware
Espana Seis, Inc. Delaware
Espana Siete, Inc. Delaware
Espana Ocho, Inc. Delaware
J&H Interests New York
Henry Ward Johnson & Company Insurance Services, Inc. California
Henry Ward Johnson & Company Incorporated Illinois
Johnson & Higgins/Kirke-Van Orsdel, Inc. Delaware
3
<PAGE>
Johnson & Higgins Willis Faber Holdings, Inc. New York
Johnson & Higgins Services, Inc. New York
New, S.A. Peru
Willcox, Barringer & Co. (California) Inc. California
Willcox Johnson & Higgins Asia, Pte. Ltd. Singapore
Johnson & Higgins Willis Faber (U.S.A.) Inc. New York
Wilson McBride, Inc. Ohio
AM-Grip, Inc. Texas
Johnson & Higgins W.F. Ltd. Canada
Johnson & Higgins de Venezuela, CA. Venezuela
Johnson & Higgins Holdings B.V. Netherlands
J&H Unison Holdings B.V. Netherlands
Max Mattheissen Holdings A.B. Sweden
Unison Belgium Belgium
R. Mees & Zoonen Holdings B.V. Netherlands
R. Mees & Zoonen Assuranten B.V. Netherlands
Unison Management (Scandinavia) AB Scandinavia
Albert Willcox & Co. De Venezuela, CA. Venezuaela
Foster Higgins (Far East) Limited Hong Kong
Intercontinental De Reaseguros, S.A.
Inversiones Orquidea, S.A. Columbia
Johnson & Higgins Aviation Pty. Ltd. Australia
Johnson & Higgins of (Barbados) Limited Barbados
J&H Intermediares (Barbados) Limited Barbados
Johnson & Higgins of (Bermuda) Limited Bermuda
Unison Management (Bermuda) Ltd. Bermuda
Johnson & Higgins of (Cayman Islands) Ltd. Cayman Islands
IMC (Turks & Caicos) Limited Caymen Islands
Johnson & Higgins Intermediaries (Cayman) Ltd. Cayman Islands
Victoria Hall Company Limited Bermuda
Johnson & Higgins of (Chile) Limitada Chile
Johnson & Higgins Mediservice -
Administradora De Planos De Saude Ltda. Brazil
Albert Willcox & Co. of Canada Ltd. Canada
Dupuis, Parizeau, Tremblay, Inc. Canada
Les Conseillers Dpt. Inc. Canada
Johnson & Higgins Corretores De Seguros Ltda. Brazil
Johnson & Higgins (H.K.) Limited Hong Kong
Johnson & Higgins (Peru) S.A. Corredores De Seguro Peru
J&H Marsh & McLennan Pte. Singapore
Johnson & Higgins PB Co., Ltd Singapore
Johnson & Higgins Risk Management Services
(S) Pte. Ltd. Singapore
Johnson & Higgins Consulting S.r.L Italy
Unison Consultants Europe (UCE) Belgium
J&H Employee Benefit S.p.A. Italy
Mednorte Internacional - Sociedade Mediadora
De Seguros, Limitada
Johnson & Higgins Sociadad Anonima
Johnson & Higgins (Uruguay) Inc. Urugway
Llenrup Participaues S.C. Ltda. Brazil
Sersur Brazil
Reinmex, Intermediaries De Reasguro, S.A. De C.V. Mexico
Uniservice Management Luxembourg, S.A. Luxembourg
Willcox Phillippines Inc. Phillippines
Johnson & Higgins Management Services, Ltd. Bermuda
Inter-Ocean Management (Cayman) Limited Cayman Islands
Johnson & Higgins Luxembourg, S.A. Luxembourg
Transglobal (Guernsey) Ltd. Guernsey
Unison Management (Dublin) Limited Ireland
Vista Insurance Company, Ltd. - Bermuda Bermuda
Mactras (Bermuda) Limited Bermuda
Gem Insurance Company Limited Bermuda
4
<PAGE>
Unservice Insurance Service Limited Bermuda
H.I. Group - Johnson & Higgins Phillippines, Inc. Phillippines
JHINDAH (Asia) Limited Indonesia
Guy Carpenter & Company, Inc. Delaware
The Carpenter Management Corporation Delaware
Paul Napolitan, Inc. Delaware
Sellon Associates, Inc. New York
Balis & Co., Inc. Pennsylvania
Philadelphia Insurance Management Company Delaware
EQECAT, Inc. Delawre
Guy Carpenter Advisors, Inc. Delaware
Inter-Americas Insurance Services, Inc. California
Normandy Reinsurance Company Limited Bermuda
Guy Carpenter & Company, S.A. Belgium
American Overseas Management Corporation (Canada) Canada
Guy Carpenter & Company (Canada) Limited Canada
Guy Carpenter & Company, A/S Denmark
Gradmann & Holler/Guy Carpenter GmbH Germany
Guy Carpenter & Company (Asia) Limited Hong Kong
Guy Carpenter Italia, S.R.L. Italy
Guy Carpenter y Cia (Mexico) S.A. de C.V. Mexico
Guy Carpenter & Company (Stockholm) AB Sweden
Bennich Reinsurance Management AB Sweden
Guy Carpenter & Co. Limited United Kingdom
Marsh & McLennan Risk Capital Holdings, Ltd. Delaware
Marsh & McLennan Risk Capital Corp. Delaware
MMRCH LLC Delaware
MMRC LLC Delaware
Terra Nova (Bermuda) Holdings, Ltd. Bermuda
Marsh et McLennan France SA France
Mercer-Faugere & Jutheau SA France
Compagnie Europeenne de Courtage
d'Assurances et de Ressurances France
Faugere & Jutheau, S.A. France
Faugere & Jutheau Bermuda Bermuda
Assureurs Conseils Tchadiens (S.A.R.L.) Chad
Assureur Conseil de Djibouti- Faugere &
Jutheau et Cie SARL Djibouti
Ancien Cabinet Pierre de Kerpezdron (S.A.) France
SNC P. Deleplanque France
Boistel S.A. France
Bureau Gogioso Eyssautier S.A. France
Eyssautier Flepp Malatier & Pages S.A. France
Boistel Eyssautier S.A. France
Omnium d'Assurances Maritimes France
Astramar S.A. France
Cires SARL France
Sogescor SARL France
Gatier S.A. Switzerland
Assurances Maritimes Eyssautier
Malatier Inter SARL France
Ivoiriennes Assurances Conseil Ivory Coast
Societe Internationale de Courtage d'Assurances
et de Reassurances-F&J (SARL) Burkina Faso
Socodel-Paris S.A. France
Union Francaise de Reassurances (S.A.) France
Guy Carpenter & Cia, S.A. Spain
William M. Mercer-Faugere & Jutheau (S.A.R.L.) France
Societe d'Etude et de Gestion et de
Conseil en Assurance SA Senegal
Mercer Consulting Group, Inc. Delaware
National Economic Research Associates, Inc. California
5
<PAGE>
National Economic Research Associates, Inc. Delaware
Mercer Management Consulting, Inc. Delaware
Decision Research Corporation Massachusetts
LAR/Decision Research Corporation New York
Lippincott & Margulies, Inc. New York
Mercer Management Consulting, Ltd. Bermuda
Mercer Management Consulting GmbH Germany
UBM Consultoria Internacional S/C Ltda. Brazil
UBM Consulting France International
Management Consultants France
Mercer Management Consulting Limited Switzerland
Mercer Management Consulting S.L. Spain
Mercer Management Consulting SNC France
Consulmercer-Consultores de Gestao,
Sociedade Unipssoal, Lda. Portugal
Mercer Consulting Services S.A. Switzerland
Mercer MW Ltda Brazil
Mercer MW Corretora De Seguros Brazil
William M. Mercer Companies, LLC Delaware
William M. Mercer Holdings, Inc. Delaware
William M. Mercer Holdings Canada, Inc. Delaware
William M. Mercer Pty. Ltd. Australia
Superfund Nominees Pty. Ltd. Australia
William M. Mercer S.A. Belgium
William M. Mercer Limited Canada
Mercer Management Consulting Limited Canada
Societe Conseil Mercer Limitee Quebec
Mercer Limited Ireland
P.I.C. Advisory Services Limited Ireland
P.I.C. Management Services Limited Ireland
Mercer Fraser P.I.C. Trustees Limited Ireland
William M. Mercer Limited of Japan Japan
William M. Mercer Limited Hong Kong
William M. Mercer Pte. Ltd. Singapore
William M. Mercer (Malaysia) Sdn. Bhd. Malaysia
William M. Mercer Zainal Fraser
Sdn. Bhd. Malaysia
William M. Mercer Ten Pas B.V. Netherlands
WMM Haneveld Investment Consulting B.V. Netherlands
Reitmulders & Partners B.V. Netherlands
William M. Mercer Services B.V. Netherlands
William M. Mercer Limited New Zealand
William M. Mercer, Incorporated Puerto Rico
William M. Mercer, S.A. Switzerland
William M. Mercer Limited United Kingdom
William M. Mercer Fraser (Irish
Pensioneer Trustees) LimitedIreland
William M. Mercer Srl Italy
William M. Mercer Fraser Pension
Fund Trustees Limited United Kingdom
Duncan C. Fraser & Co. United Kingdom
William M. Mercer Fraser Computer
Services Limited United Kingdom
Mercer Management Consulting, Limited United Kingdom
MF Trustees Limited United Kingdom
William M. Mercer Fraser Pension Fund
Trustees Limited United Kingdom
William M. Mercer (Isle of Man)
Limited Isle of Man
Pensioneer Trustees (Leeds) Limited England
William M. Mercer Lda. Portugal
William M. Mercer Fraser Limited United Kingdom
6
<PAGE>
MPA (International) Limited United Kingdom
Pension Trustees Limited United Kingdom
Pensioneer Trustees Limited United Kingdom
Pensioneer Trustees (London) Limited United Kingdom
Southampton Place Trustee Co. Ltd. United Kingdom
William M. Mercer (Korea) Co., Ltd. Korea
Mercer C & B Servicios, S.A. de C.V. Mexico
Mercer C & B S.A. de C.V. Mexico
William M. Mercer Agente de Sequros
S.A. de C.V. Mexico
William M. Mercer, Incorporated Delaware
WMM Services, Inc. Delaware
William M. Mercer Securities Corp. Delaware
National Medical Audit California
Hansen International Limited Delaware
William M. Mercer of Indiana, Incorporated Indiana
Mercer Investment Consulting, Inc. Kentucky
William M. Mercer of Kentucky, Inc. Kentucky
William M. Mercer, Incorporated Louisiana
William M. Mercer, Incorporated Massachusetts
William M. Mercer of Michigan,
Incorporated Michigan
William M. Mercer, Incorporated Nevada
William M. Mercer, Incorporated Ohio
William M. Mercer, Incorporated Oklahoma
William M. Mercer of Texas, Inc. Texas
William M. Mercer of Virginia,
Incorporated Virginia
MPA Superannuation Services Limited Australia
MPA Superfund Nominees Pty. Limited Australia
Mercer R.H. SARL France
William M. Mercer-MPA Limited Hong Kong
William M. Mercer Philippines,
Incorporated Philippines
William M. Mercer S.A. Argentina
William M. Mercer S.A. Asesores
de Seguros Argentina
William M. Mercer Comercio Consultoria
e Servicos Ltda. Brazil
William M. Mercer Consultoria Ltda. Brazil
Grupo Assistencial De Economia E
Financas Tudor S/C Ltda. Brazil
William M. Mercer, S.A. Belgium
William M. Mercer Limitada Chile
William M. Mercer Claro Corredores
de Seguros Chile
William M. Mercer A/S Denmark
William M. Mercer A.B. Sweden
William M. Mercer Broking (Taiwan) Ltd. Taiwan
William M. Mercer Consulting (Taiwan) Ltd. Taiwan
Seabury & Smith, Inc. Delaware
Seabury & Smith of Arkansas, Inc. Arkansas
Appleby & Sterling Agency, Inc. Delaware
J&H Marsh & McLennan Private Client Services, Inc. Delaware
Marsh & McLennan Securities Corporation Delaware
Albert A. Wohlers & Co. Illinois
Smith-Sternau Organization, Inc. Delaware
The Schinnerer Group, Inc. Delaware
Victor O. Schinnerer & Company, Inc. Delaware
7
<PAGE>
Victor O. Schinnerer of Illinois, Inc. Illinois
Victor O. Schinnerer & Company, Inc. Ohio
Encon Holdings, Inc. Texas
Panhandle Insurance Agency, Inc. Texas
Encon Underwriting Agency, Inc. Texas
Encon Holdings, Inc. Ontario
Encon Insurance Managers Inc. Canada
Encon Management Services, Inc. Canada
Encon Reinsurance Managers Inc. Canada
Encon Title Insurance Managers Inc. Canada
Victor O. Schinnerer & Company Ltd. United Kingdom
Encon Underwriting Limited United Kingdom
Admiral Holdings Limited United Kingdom
Admiral Underwriting Agencies
Limited United Kingdom
Admiral Ireland Limited Ireland
Admiral Underwriting Agencies
(Ireland) Ltd. Ireland
Seabury & Smith of Georgia, Inc. Georgia
M. A. Gesner of Illinois, Inc. Illinois
Seabury & Smith of Illinois, Inc. Illinois
Seabury & Smith, Inc. Indiana
Seabury & Smith, Inc. Kentucky
Seabury & Smith, Inc. Louisiana
Seabury & Smith, Inc. Massachusetts
Seabury & Smith, Inc. Michigan
Seabury & Smith, Inc. Nevada
Seabury & Smith Agency, Inc. Ohio
Seabury & Smith, Inc. Oklahoma
Seabury & Smith, Inc. Texas
Seabury & Smith, Inc. Virginia
Seabury & Smith Limited Ontario
G. E. Freeman Insurance Agency Limited Ontario
Seabury & Smith Limited United Kingdom
Putnam Investments, Inc. Massachusetts
Putnam Investment Management, Inc. Massachusetts
Putnam Future Advisors, Inc. Massachusetts
Putnam Fiduciary Trust Company Massachusetts
Putnam Investor Services, Inc. Massachusetts
Putnam Mutual Funds Corp. Massachusetts
Putnam Insurance Agency, Inc. Massachusetts
The Putnam Advisory Company, Inc. Massachusetts
Putnam Europe Ltd. United Kingdom
The Putnam Corporation Massachusetts
Pan Agora Asset Management Delaware
Pan Agora Management, Ltd. United Kingdom
Putnam Rhumbline Corporation Massachusetts
Primary Funds Service Corp. Delaware
Putnam Overseas Institutional Management
Company, Ltd. Bahamas
Putnam International Distributors, Ltd. Cayman Islands
Putnam Deutschland GmbH Germany
Putnam International Advisory Company, S.A. Luxembourg
NKK-Putnam Management, S.A. Luxembourg
Putnam International Growth Management, S.A. Luxembourg
Putnam Luxembourg, S.A. Luxembourg
Putnam Management (Luxembourg) S.A. Luxembourg
J&H Marsh & McLennan (Holdings) Ltd. England
J&H Marsh & McLennan (Services) Ltd. England
Johnson & Higgins Holdings Ltd. England
Johnson & Higgins Limited England
8
<PAGE>
Peter Smart Associates (Insurance Brokers) Limited England
J&H Global Risk Management Consultancy Limited England
Johnson & Higgins Ireland Limited Eire
Johnson & Higgins UK Limited England
Corporate Risk PLC Scotland
Johnson & Higgins Services Limited England
Corporate Pension & Financial Services Limited Scotland
JSC Johnson & Higgins Kazakstan Kazakstan
JSC Johnson & Higgins Moscow Moscow
J&H Marsh & McLennan Ltd. England
Guy Carpenter & Company Ltd. Ireland
Guy Carpenter & Company Ltd. England
Wilcox J&H Reinsurance Brokers Ltd. England
Bowring Reinsurance Brokers Ltd. England
Wilcox Johnson & Higgins Reinsurance Brokers Limited England
Wilcox Intermediaries Limited (D) England
CBH Limited England
CBC Personal Financial Services Limited (D) England
Unison Insurance Brokers Limited (D) England
J&H Marsh & McLennan (UK) Ltd. England
Marsh & McLennan Management Services (Guernsey) Ltd. Guernsey
J&H Marsh & McLennan (IOM) Ltd. I.O.M.
Marsh & McLennan Management Services (Isle of Man) Ltd. I.O.M.
Carpenter Bowring (UK) Ltd. (D) England
Intermediary Systems Ltd. England
Winchester Bowring Ltd. (D) England
White Kennett Ltd. (D) England
C.T. Bowring & Co. (Insurance) Ltd. (D) England
Bowring Worldwide Services (D) England
J&H Marsh & McLennan Global Broking Ltd. England
Bowring Aviation Ltd. (D) England
Marsh & McLennan FINPRO Ltd. (D) England
Aviation Risk Management Services Ltd. England
Bowring Marine Ltd. (D) England
J&H Marsh & McLennan Space Projects Ltd. (D) England
Bowring Aviation Advisory Services Ltd. (D) England
Marsh & McLennan Marine & Energy Ltd. (D) England
Marsh & McLennan Services ltd. England
Marsh & McLennan Holdings Ltd. England
Marsh & McLennan Nederland B.V. Netherlands
Marsh & McLennan Lda. Portugal
Marsh & McLennan Bowring Ltd. (D) England
C.T. Bowring Ltd. (D) England
Bowring Professional Indemnity Scotland Ltd. (D) Scotland
Microsafe Ltd. (D) England
Geological Information Systems Ltd. England
Ulster Insurance Services Ltd. N. Ireland
Bowring Ltd. (D) England
Surveyers Insurance Brokers Ltd. (50%) England
Marsh & McLennan Ltd. New Zealand
Reinsurances New Zealand Ltd. New Zealand
Risk Management Ltd. New Zealand
Marsh & McLennan Ltd. (90%) Fiji
Reinsurances (Pacific) Ltd. Fiji
J&H Marsh & McLennan (Treasury Services) Ltd. England
C.T. Bowring (Trading Holdings) Ltd. England
Baffin Trading Company Ltd. Canada
9
<PAGE>
J&H Marsh & McLennan Community
Involvement Ltd. Canada
C.T. Bowring (Insurance) Holdings Ltd. Canada
C.T. Bowring Japan Ltd. Japan
Guy Carpenter & Company Pty. Ltd. Australia
Guy Carpenter & Company New Zealand Ltd. New Zealand
Australian World Underwriters Australia
</TABLE>
10
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the previously filed
Registration Statements of Marsh & McLennan Companies, Inc. on Form S-8
(Registration File Nos. 2-58660, 2-65096, 2-82938, 33-32880, 33-48803, 33-48807,
33-54349, 33-59603, 33-63389, 333-35741, and 333-35739) and, the previously
filed Registration Statements on Form S-3 (Registration File Nos. 333-25069,
333-28201, and 333-41021) and the previously filed Registration Statements on
Form S-4 (Registration File No. 33-24124) of our reports dated March 6, 1998
appearing in, and incorporated by reference in, this Annual Report on Form 10-K
of Marsh & McLennan Companies, Inc. for the year ended December 31, 1997.
DELOITTE & TOUCHE LLP
New York, New York
March 25, 1998
<PAGE>
Exhibit 24
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1997, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions, and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 19th day of March, 1998.
/s/ Norman Barham
--------------------------------
Norman Barham
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1997, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions, and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 19th day of March, 1998.
/s/ Lewis W. Bernard
--------------------------------
Lewis W. Bernard
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1997, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions, and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 19th day of March, 1998.
/s/ Richard H. Blum
--------------------------------
Richard H. Blum
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1997, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions, and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 19th day of March, 1998.
/s/ Frank J. Borelli
--------------------------------
Frank J. Borelli
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1997, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions, and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 19th day of March, 1998.
/s/ Peter Coster
--------------------------------
Peter Coster
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1997, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions, and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 19th day of March, 1998.
/s/ Robert F. Erburu
--------------------------------
Robert F. Erburu
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1997, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions, and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 19th day of March, 1998.
/s/ Jeffrey W. Greenberg
--------------------------------
Jeffrey W. Greenberg
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1997, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions, and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 19th day of March, 1998.
/s/ R. J. Groves
--------------------------------
R. J. Groves
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1997, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions, and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 19th day of March, 1998.
/s/ Richard S. Hickok
--------------------------------
Richard S. Hickok
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1997, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions, and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 19th day of March, 1998.
/s/ Ian Lang
--------------------------------
Ian Lang
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1997, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions, and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 19th day of March, 1998.
/s/ Lawrence J. Lasser
--------------------------------
Lawrence J. Lasser
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1997, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions, and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 19th day of March, 1998.
/s/ Richard M. Morrow
--------------------------------
Richard M. Morrow
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1997, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions, and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 19th day of March, 1998.
/s/ David A. Olsen
--------------------------------
David A. Olsen
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1997, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions, and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 19th day of March, 1998.
/s/ George Putnam
--------------------------------
George Putnam
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1997, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions, and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 19th day of March, 1998.
/s/ Adele Smith Simmons
--------------------------------
Adele Smith Simmons
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1997, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions, and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 19th day of March, 1998.
/s/ John T. Sinnott
--------------------------------
John T. Sinnott
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1997, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions, and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 19th day of March, 1998.
/s/ A. J. C. Smith
--------------------------------
A. J. C. Smith
<PAGE>
POWER OF ATTORNEY
The undersigned, a Director of Marsh & McLennan Companies, Inc., a Delaware
corporation (the "Company"), does hereby constitute and appoint any one of A. J.
C. Smith, Frank J. Borelli and Gregory F. Van Gundy to be the undersigned's
agent and attorney-in-fact, each with the power to act fully hereunder without
the other and with full power of substitution to act in the name and on behalf
of the undersigned:
To sign or to transmit electronically in the name and on behalf of the
undersigned, as a Director of the Company, and file with the Securities and
Exchange Commission on behalf of the Company an Annual Report on Form 10-K
for the year ended December 31, 1997, any registration statements for the
registration of the Company's common stock and related interests to be
issued pursuant to the Company's duly adopted employee benefit,
compensation and stock plans, any registration statements for the
registration of the Company's common stock for issuance in connection with
future acquisitions or for resale by the holders thereof who acquired or
will acquire such stock in connection with past or future acquisitions, and
any amendments or supplements to such Annual Report on Form 10-K and such
registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such Annual
Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 19th day of March, 1998.
/s/ Frank J. Tasco
--------------------------------
Frank J. Tasco
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES DECEMBER 31, 1997
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 424,300,000
<SECURITIES> 0
<RECEIVABLES> 1,551,000,000
<ALLOWANCES> 52,800,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,568,900,000
<PP&E> 1,754,900,000
<DEPRECIATION> 797,600,000
<TOTAL-ASSETS> 7,914,200,000
<CURRENT-LIABILITIES> 2,379,400,000
<BONDS> 1,239,800,000
0
0
<COMMON> 172,400,000
<OTHER-SE> 3,026,400,000
<TOTAL-LIABILITY-AND-EQUITY> 7,914,200,000
<SALES> 0
<TOTAL-REVENUES> 6,008,600,000
<CGS> 0
<TOTAL-COSTS> 5,263,800,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 7,600,000
<INTEREST-EXPENSE> 106,400,000
<INCOME-PRETAX> 662,400,000
<INCOME-TAX> 263,000,000
<INCOME-CONTINUING> 399,400,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 399,400,000
<EPS-PRIMARY> 2.45
<EPS-DILUTED> 2.39
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES DECEMBER 31, 1995
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 328,100,000
<SECURITIES> 0
<RECEIVABLES> 1,180,800,000
<ALLOWANCES> 48,300,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,679,100,000
<PP&E> 1,396,000,000
<DEPRECIATION> 638,500,000
<TOTAL-ASSETS> 4,329,500,000
<CURRENT-LIABILITIES> 1,569,500,000
<BONDS> 410,600,000
0
0
<COMMON> 76,800,000
<OTHER-SE> 1,588,700,000
<TOTAL-LIABILITY-AND-EQUITY> 4,329,500,000
<SALES> 0
<TOTAL-REVENUES> 3,937,300,000
<CGS> 0
<TOTAL-COSTS> 3,242,400,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 12,800,000
<INTEREST-EXPENSE> 62,800,000
<INCOME-PRETAX> 649,800,000
<INCOME-TAX> 246,900,000
<INCOME-CONTINUING> 402,900,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 402,900,000
<EPS-PRIMARY> 2.76
<EPS-DILUTED> 2.73
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES DECEMBER 31, 1996
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 299,600,000
<SECURITIES> 0
<RECEIVABLES> 1,129,100,000
<ALLOWANCES> 43,300,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,748,600,000
<PP&E> 1,465,800,000
<DEPRECIATION> 695,700,000
<TOTAL-ASSETS> 4,545,200,000
<CURRENT-LIABILITIES> 1,556,300,000
<BONDS> 458,200,000
0
0
<COMMON> 76,800,000
<OTHER-SE> 1,811,800,000
<TOTAL-LIABILITY-AND-EQUITY> 4,545,200,000
<SALES> 0
<TOTAL-REVENUES> 4,404,000,000
<CGS> 0
<TOTAL-COSTS> 3,688,700,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9,900,000
<INTEREST-EXPENSE> 61,600,000
<INCOME-PRETAX> 668,000,000
<INCOME-TAX> 208,700,000
<INCOME-CONTINUING> 459,300,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 459,300,000
<EPS-PRIMARY> 3.17
<EPS-DILUTED> 3.12
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM THE
CONSOLIDATED MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES MARCH 31, 1996
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 338,700,000
<SECURITIES> 0
<RECEIVABLES> 1,158,400,000
<ALLOWANCES> 46,800,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,678,800,000
<PP&E> 1,415,700,000
<DEPRECIATION> 660,100,000
<TOTAL-ASSETS> 4,438,500,000
<CURRENT-LIABILITIES> 1,538,600,000
<BONDS> 409,700,000
0
0
<COMMON> 76,800,000
<OTHER-SE> 1,698,800,000
<TOTAL-LIABILITY-AND-EQUITY> 4,438,500,000
<SALES> 0
<TOTAL-REVENUES> 1,122,600,000
<CGS> 0
<TOTAL-COSTS> 880,100,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,300,000
<INTEREST-EXPENSE> 15,200,000
<INCOME-PRETAX> 230,800,000
<INCOME-TAX> 87,700,000
<INCOME-CONTINUING> 143,100,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 143,100,000
<EPS-PRIMARY> .98
<EPS-DILUTED> .97
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES JUNE 30, 1996
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 338,800,000
<SECURITIES> 0
<RECEIVABLES> 1,122,100,000
<ALLOWANCES> 45,200,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,670,200,000
<PP&E> 1,387,400,000
<DEPRECIATION> 658,100,000
<TOTAL-ASSETS> 4,194,200,000
<CURRENT-LIABILITIES> 1,294,200,000
<BONDS> 409,500,000
0
0
<COMMON> 76,800,000
<OTHER-SE> 1,735,100,000
<TOTAL-LIABILITY-AND-EQUITY> 4,194,200,000
<SALES> 0
<TOTAL-REVENUES> 2,220,500,000
<CGS> 0
<TOTAL-COSTS> 1,784,700,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6,900,000
<INTEREST-EXPENSE> 31,100,000
<INCOME-PRETAX> 411,700,000
<INCOME-TAX> 153,400,000
<INCOME-CONTINUING> 258,300,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 258,300,000
<EPS-PRIMARY> 1.77
<EPS-DILUTED> 1.75
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES SEPTEMBER 30,
1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 417,400,000
<SECURITIES> 0
<RECEIVABLES> 1,062,100,000
<ALLOWANCES> 42,500,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,716,900,000
<PP&E> 1,415,300,000
<DEPRECIATION> 683,700,000
<TOTAL-ASSETS> 4,300,800,000
<CURRENT-LIABILITIES> 1,463,400,000
<BONDS> 408,500,000
0
0
<COMMON> 76,800,000
<OTHER-SE> 1,662,700,000
<TOTAL-LIABILITY-AND-EQUITY> 4,300,800,000
<SALES> 0
<TOTAL-REVENUES> 3,277,500,000
<CGS> 0
<TOTAL-COSTS> 2,667,500,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,700,000
<INTEREST-EXPENSE> 45,600,000
<INCOME-PRETAX> 575,100,000
<INCOME-TAX> 214,200,000
<INCOME-CONTINUING> 360,900,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 360,900,000
<EPS-PRIMARY> 2.49
<EPS-DILUTED> 2.45
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM THE
CONSOLIDATED MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES MARCH 31, 1997
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 592,400,000
<SECURITIES> 0
<RECEIVABLES> 1,403,800,000
<ALLOWANCES> 40,300,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,396,700,000
<PP&E> 1,675,300,000
<DEPRECIATION> 721,300,000
<TOTAL-ASSETS> 7,257,600,000
<CURRENT-LIABILITIES> 2,122,300,000
<BONDS> 1,169,700,000
0
0
<COMMON> 86,600,000
<OTHER-SE> 2,915,100,000
<TOTAL-LIABILITY-AND-EQUITY> 7,257,600,000
<SALES> 0
<TOTAL-REVENUES> 1,295,200,000
<CGS> 0
<TOTAL-COSTS> 1,017,900,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,200,000
<INTEREST-EXPENSE> 17,500,000
<INCOME-PRETAX> 263,000,000
<INCOME-TAX> 98,600,000
<INCOME-CONTINUING> 164,400,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 164,400,000
<EPS-PRIMARY> 1.13
<EPS-DILUTED> 1.10
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES JUNE 30, 1997
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 500,400,000
<SECURITIES> 0
<RECEIVABLES> 1,459,500,000
<ALLOWANCES> 44,300,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,375,700,000
<PP&E> 1,711,700,000
<DEPRECIATION> 742,600,000
<TOTAL-ASSETS> 7,456,800,000
<CURRENT-LIABILITIES> 2,134,200,000
<BONDS> 1,110,500,000
0
0
<COMMON> 173,200,000
<OTHER-SE> 3,009,600,000
<TOTAL-LIABILITY-AND-EQUITY> 7,456,800,000
<SALES> 0
<TOTAL-REVENUES> 2,834,700,000
<CGS> 0
<TOTAL-COSTS> 2,295,800,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,400,000
<INTEREST-EXPENSE> 48,900,000
<INCOME-PRETAX> 501,000,000
<INCOME-TAX> 191,600,000
<INCOME-CONTINUING> 309,400,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 309,400,000
<EPS-PRIMARY> 1.97
<EPS-DILUTED> 1.93
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES SEPTEMBER 30,
1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 434,900,000
<SECURITIES> 0
<RECEIVABLES> 1,466,700,000
<ALLOWANCES> 45,100,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,336,600,000
<PP&E> 1,733,500,000
<DEPRECIATION> 773,000,000
<TOTAL-ASSETS> 7,385,100,000
<CURRENT-LIABILITIES> 1,724,600,000
<BONDS> 1,268,400,000
0
0
<COMMON> 172,600,000
<OTHER-SE> 3,150,900,000
<TOTAL-LIABILITY-AND-EQUITY> 7,385,100,000
<SALES> 0
<TOTAL-REVENUES> 4,383,100,000
<CGS> 0
<TOTAL-COSTS> 3,595,300,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,400,000
<INTEREST-EXPENSE> 77,000,000
<INCOME-PRETAX> 727,800,000
<INCOME-TAX> 278,400,000
<INCOME-CONTINUING> 449,400,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 449,400,000
<EPS-PRIMARY> 2.80
<EPS-DILUTED> 2.73
</TABLE>
