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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, New York 10036-2774
(212) 345-5000
Commission file number 1-5998
State of Incorporation: Delaware
I.R.S. Employer Identification No. 36-2668272
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------- ---------------------
Common Stock (par value $1.00 New York Stock Exchange
per share) Chicago Stock Exchange
Preferred Stock Purchase Rights Pacific Exchange
London Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K .
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As of February 29, 2000, the aggregate market value of the voting stock
held by non-affiliates of the registrant was approximately $20,325,910,803.
As of February 29, 2000, there were outstanding 267,860,712 shares of
common stock, par value $1.00 per share, of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
(ONLY TO THE EXTENT SET FORTH IN THE PART INDICATED)
Annual Report to Stockholders for the
year ended December 31, 1999 . . . . . . . Parts I, II and IV
Notice of Annual Meeting of
Stockholders and Proxy Statement dated
March 29, 2000 . . . . . . . . . . . . . . Part III
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MARSH & McLENNAN COMPANIES, INC.
-------------------------
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1999
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PART I
ITEM 1. BUSINESS.
Marsh & McLennan Companies, Inc. ("MMC"), a professional services
organization with origins dating from 1871 in the United States, is primarily 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 33 through 40 of the Annual Report to
Stockholders for the year ended December 31, 1999 (the "1999 Annual Report"),
which is incorporated herein by reference, for a discussion of MMC's revenues
and operating income by industry segment for each of the last three fiscal
years.
RISK AND INSURANCE SERVICES. MMC'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 Marsh Inc. through its subsidiaries and affiliates
providing risk management and insurance broking services, and including Guy
Carpenter & Company, Inc., a reinsurance intermediary, and Seabury & Smith,
Inc., an insurance program manager. In addition, Marsh & McLennan Capital, Inc.
provides services principally in connection with originating, structuring and
managing insurance and related industry investments.
Risk management and insurance broking services, carried on throughout the
world, are provided principally by subsidiaries under the name Marsh 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,
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marine, energy, construction, land transportation, healthcare and utility
services. Clients also include professional, institutional and public entities
and individuals.
Such risk management and insurance broking services relate to various types
of property and liability loss exposures, including large and complex risks that
require access to world insurance markets, as well as loss exposures other than
property and liability. 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 worldwide, 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, accident, life and
health. 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. Claims services are often performed in
respect of policies placed a number of years ago. 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.
Insurance and program services are provided by subsidiaries and divisions
under the name Seabury & Smith or Marsh to consumers and emerging businesses
(including the design, marketing and administration of life, health, accident,
disability, automobile, homeowners, professional liability and
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other insurance, and related products) on both a group and singular marketing
basis to individuals, businesses and their employees, and organizations,
associations and other affinity groups (both sponsored and non-sponsored) and
their members, largely in North America. Underwriting management services are
also provided to insurers in the United States, Canada and the United Kingdom,
primarily for professional liability coverages, as well as wholesale broking
services in the United States and the United Kingdom for a broad range of
products on behalf of both affiliated and unaffiliated retail brokers.
As part of the acquisition of Sedgwick Group plc in 1998, MMC acquired
several insurance companies that were in run-off.
MARSH & MCLENNAN CAPITAL, INC. Marsh & McLennan Capital, Inc. ("MMCAP") is
a private equity investment firm. It is an advisor to The Trident Partnership
L.P., an independent private investment partnership formed in 1993 with $660
million in capital commitments, and Trident II, L.P. formed in 1999 with $1.4
billion in capital commitments for investments in insurance and related
industries. MMCAP is also advisor to a technology fund with capital commitments
from MMCAP's corporate parent and certain other investors and an advisor to Risk
Capital Reinsurance Company.
MMCAP and its predecessor operations were instrumental in the formation of
several substantial insurance and reinsurance entities, including A.C.E.
Insurance Company, Ltd. and X.L. Insurance Company, Ltd. MMCAP 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 MMCAP.
As a result of the foregoing activities, subsidiaries and affiliates of MMC
may have direct or indirect investments in insurance and reinsurance companies,
including entities at Lloyd's, which are considered for client placements by
MMC's insurance and reinsurance brokerage businesses.
COMPENSATION FOR SERVICES. The revenue attributable to MMC'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 or contingent fees earned from insurers; and
compensation for services provided in
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connection with the organization, structuring and management of insurance and
related industry investments, including fees 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 insurance 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 MMC. Placement
services revenue and contingent fees 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 business 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 business and the realization of
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
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states in the United States and in other jurisdictions in which MMC'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 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, 1999, there were 114 such funds (the
"Putnam Funds") registered under the Investment Company Act of 1940, including
16 closed-end investment companies whose shares are traded on various major
domestic stock exchanges. A number of the open-end funds serve as funding
vehicles for variable insurance contracts. Investment management services are
also provided to corporate profit-sharing and pension funds, state and other
governmental and public employee retirement funds, university endowment funds,
charitable foundations, collective investment vehicles (both U.S. and non-U.S.)
and other domestic and foreign institutional accounts.
Substantially all of Putnam's assets under management are derived from U.S.
individuals and institutions. In recent years Putnam has been expanding its
international client base on a selective basis through joint ventures and the
development of products such as offshore funds. Many international markets are
well developed with many established investment management firms. It may be
difficult for Putnam to establish businesses whose profitability equals that of
its business in the U.S. where it is one of the market leaders. Putnam seeks to
manage the risks of international expansion by using joint ventures with
established
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firms in selected countries and otherwise carefully choosing which markets to
enter.
On July 7, 1999 Putnam acquired a minority interest in Thomas H. Lee
Partners, a private equity investment firm. In addition, Putnam formed a joint
venture entity with Thomas H. Lee Partners called TH Lee, Putnam Capital. Putnam
holds a 25% interest in TH Lee, Putnam Capital. Thomas H. Lee Partners and TH
Lee, Putnam Capital offer private equity and alternative investment funds for
institutional and high-net worth investors.
Assets managed by Putnam, on which management fees are based, were
approximately $391 billion and $294.4 billion as of December 31, 1999 and 1998,
respectively. Mutual fund assets aggregated $289 billion at December 31, 1999
and $221.5 billion at December 31, 1998. Assets under management at December 31,
1999 consisted of approximately 82% equity securities and 18% fixed income
products, invested both domestically and globally.
Putnam's revenues are derived primarily from its investment management and
12b-1 fees received from the Putnam Funds and institutional accounts. Assets
under management and revenue levels are particularly affected by fluctuations in
domestic and international stock and bond 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
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investment performance. Such contracts automatically terminate in the event of
their assignment, generally may be terminated by either party without penalty
and, as to contracts with the Putnam Funds, continue in effect only so long as
approved, at least annually, by their shareholders or by the Putnam Funds'
trustees, including a majority who are not affiliated with Putnam. "Assignment"
includes any direct or indirect transfer of a controlling block of voting stock
in Putnam or MMC. 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.
In recent years U.S. securities markets, especially equity markets, have
risen substantially, in many cases to historical highs. This increase has
contributed significantly to the assets under management and, accordingly, to
increases in revenues. A substantial slowdown in the rise of markets or an
actual decrease in general market levels will reduce revenue growth or, in some
circumstances, could lead to a decline in revenue.
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 investor servicing agreements which may be terminated by either party on
90 days' notice, and pursuant to written custody 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 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. In the case
of employee benefit plans, investment options are usually 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.
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
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other institutional accounts. Shares of 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 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.
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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 MMC, separately and in collaboration, provide consulting services
to a predominantly corporate clientele from locations around the world, in the
areas of human resources and employee benefit programs, including retirement,
health care and compensation, as well as communication and human resource
strategy; 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 more than 35
countries and territories in North and South America, Europe, Asia, Australia,
New Zealand and the Middle East. Consultants help organizations design,
implement, administer and communicate employee benefit, compensation and other
human resource programs and strategies, and provide other types of actuarial
advice. Through its investment consultants, the firm assists trustees of pension
funds and others in the selection of investment managers and investment
strategies. William M. Mercer also advises investment managers on product design
and positioning. In certain locations outside of the United States, William M.
Mercer advises individuals in the investment and disposition of lump sum
retirement benefits and other retirement savings and offers a retirement trust
service, incorporating plan administration, trustee services and investment
manager selection.
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 and
maximize shareholder value. In addition, under the Lippincott & Margulies name,
Mercer Management Consulting, Inc. advises leading corporations on issues
relating to brand, corporate identity and image.
National Economic Research Associates, Inc. ("NERA"), a firm of consulting
economists, serves law firms, corporations, trade
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associations and governmental agencies, from offices in the United States,
Europe and Australia. 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 and services. In a relatively small number of situations,
fees are partly contingent on the client having successful outcomes. 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,
and in the form of equity interests in clients of Mercer Management Consulting,
Inc.
Revenue in the consulting business is fundamentally derived from the value
of the advice and services provided to clients. It 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 MMC 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 MMC's
subsidiaries operate. These laws and regulations are primarily intended to
benefit clients.
MMC'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. MMC 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, redress to
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clients and fines. In some instances, MMC follows practices based on its
interpretations, or those generally followed by the industry, of laws or
regulations, which may prove to be different from those of regulatory
authorities. Accordingly, the possibility exists that MMC 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 MMC'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 MMC's risk and
insurance activities are governed by the rules of the Lloyd's insurance market
in London and self-regulatory organizations in the United Kingdom and in other
jurisdictions, as well as investment, securities and futures licensing and
regulatory authorities. A few jurisdictions issue licenses only to individual
residents or locally-owned business entities. In some of these jurisdictions, if
MMC has no licensed subsidiary, MMC 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 interest.
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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. In general, the consulting activities of MMC's subsidiaries are
not subject to licensing or other regulatory requirements; 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
(including advice to individuals on the investment of personal pension assets)
and the placing of individual and group insurance contracts subject MMC'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 combined insurance and reinsurance broking
services business of MMC is the largest of its type in the world.
MMC encounters strong competition in the risk and insurance services
business from other insurance brokerage firms which also operate on a nationwide
or worldwide basis, from a large number of regional and local firms in the
United States, the European
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Union and in other countries and regions, from insurance and reinsurance
companies that market and service their insurance products without the
assistance of brokers or agents and from other businesses, including commercial
and investment banks, accounting firms and consultants that provide risk-related
services and products.
Certain insureds and groups of insureds have established programs of self
insurance (including captive insurance companies), as a supplement or
alternative to third-party insurance, thereby reducing in some cases the need
for insurance placements. 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 leader in strategy consulting. NERA is a leading firm of consulting
economists.
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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 and consulting organizations affiliated with accounting, information
systems, technology and financial services firms, some of which provide
administrative or consulting services as an adjunct to other primary services.
SEGMENTATION OF ACTIVITY BY TYPE OF SERVICE AND GEOGRAPHIC AREA OF
OPERATION. Financial information relating to the types of services provided by
MMC and the geographic areas of its operations is incorporated herein by
reference to Note 16 of the Notes to Consolidated Financial Statements on pages
59 and 60 of the 1999 Annual Report. MMC's non-U.S. operations are subject to
the customary risks involved in doing business in other countries, including
currency fluctuations and exchange controls.
EMPLOYEES. As of December 31, 1999, MMC and its consolidated subsidiaries
employed about 52,900 people worldwide, of whom approximately 32,900 were
employed by subsidiaries providing risk and insurance services, approximately
5,500 were employed by subsidiaries providing investment management services,
approximately 14,100 were employed by subsidiaries providing consulting
services, and approximately 400 were employed by MMC.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS. This report and MMC'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 Sedgwick Group plc, Year 2000 remediation and testing of
computer systems, market and industry conditions, interest rates, foreign
exchange rates, contingencies and matters relating to MMC's operations and
income taxes. Such forward-looking statements are based on available current
market and industry materials, experts' reports and opinions, as well as
management's expectations concerning future events impacting MMC.
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 MMC's risk and insurance services and consulting
businesses,
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the failure to successfully integrate the business of Sedgwick Group plc
(including the achievement of synergies and cost reductions) or other adverse
consequences from that transaction; in the case of MMC's risk and insurance
service business, changes in competitive conditions, a decrease in the premium
rate levels in the global property and casualty insurance markets, and the
impact of changes in insurance markets and natural catastrophes; in the case of
MMC's investment management business, changes in worldwide and national equity
and fixed income markets; and with respect to all of MMC's activities,
interruptions to data processing services arising out of Year 2000 remediation
efforts, 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,
prospective and retrospective changes in the tax or accounting treatment of
MMC's operations and the impact of tax and other legislation and regulation in
the jurisdictions in which MMC operates. A description of certain of these
factors is included elsewhere in this Annual Report and is incorporated herein
by reference.
ITEM 2. PROPERTIES.
MMC and four of its subsidiaries, as tenants in common, own a 69%
condominium interest in a 44-story building in New York City which serves as
their worldwide headquarters.
The principal offices of MMC's risk and insurance services subsidiaries in
the UK are located on the eastern side of the City of London in The Marsh
Centre. This freehold building, owned by a subsidiary of MMC, comprises 360,000
square feet containing offices located around a central atrium, and ancillary
facilities including a shopping mall.
The remaining business activities of MMC and its subsidiaries are conducted
principally in leased office space in cities throughout the world. In general,
no difficulty is anticipated in negotiating renewals as leases expire or in
finding other satisfactory space if the premises become unavailable. From time
to time, MMC 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.
15
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
MMC 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.
An action captioned "AIENA, ET AL. v. OLSEN, ET AL." is pending 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 MMC in
1997, against twenty-four selling shareholders of J&H, as well as J&H itself and
MMC. The action essentially challenges the allocation of the consideration paid
in connection with MMC'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. Two other former directors of J&H have
brought similar actions (SEMPIER V. OLSEN ET AL.; and CLEMENS V. OLSEN ET AL.),
which are also pending before the United States District Court for the Southern
District of New York. On October 12, 1999, the Court dismissed MMC entirely from
these three cases and dismissed certain (but not all) of the claims brought
against J&H. The principal surviving claims asserted against J&H in these cases
include a claim under the federal securities laws and a claim for breach of
ERISA. In December 1999, two additional cases were filed by two former directors
of J&H (VALENTINE V. OLSEN ET AL.; and BIANCHI V. OLSEN ET AL.), and have been
assigned to the judge hearing the AIENA, SEMPIER and CLEMENS matters. Although
the VALENTINE and BIANCHI cases raise substantially similar issues as the AIENA,
SEMPIER and CLEMENS actions, they also raise certain additional claims under
ERISA and state law relating to the plaintiffs' departure as J&H's employees.
All these actions are in their initial stages.
Sedgwick Group plc, since prior to its acquisition, has been engaged in a
review of previously undertaken personal pension plan business as required by
United Kingdom regulators to determine whether redress should be made to
customers. As of December 31, 1999, settlements and related costs previously
paid amount to approximately $125 million of which approximately $30 million is
due from or has been paid by insurers. The contingent
16
<PAGE>
exposure of Sedgwick for pension redress and related costs is estimated to be
$350 million. Sedgwick has recorded $190 million of reserves and recognized
approximately $160 million of insurance recoveries related to this exposure.
Other present and former subsidiaries of MMC are engaged in a comparable
review of their personal pension plan businesses, although the extent of their
activity in this area, and consequently their financial exposure, was
proportionally much less than Sedgwick. The contingent exposure of the present
and former non-Sedgwick subsidiaries of MMC for pension redress and related
costs is estimated to be approximately $150 million. Approximately $140 million
of this amount is expected to be recovered from insurers and accounting reserves
have been provided for the remaining balance. As of December 31, 1999,
settlements and related costs previously paid total approximately $35 million.
MMC's ultimate exposure from the United Kingdom Personal Investment
Authority review, as presently calculated and including Sedgwick, is subject to
a number of variable factors including, among others, the interest rate
established quarterly by the U.K. Personal Investment Authority for calculating
compensation, equity markets, and the precise scope, duration, and methodology
of the review as required by that Authority.
On the basis of present information, anticipated insurance coverage and
advice received from counsel, it is the opinion of MMC's management that the
disposition or ultimate determination of these claims, lawsuits and proceedings
will not have a material adverse effect on MMC's consolidated results of
operations or its consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR MMC'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Market and dividend information regarding MMC's common stock on page 62 of
the 1999 Annual Report is incorporated herein by reference.
17
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data on page 63 of the 1999 Annual Report are
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Information on pages 33 through 40 of the 1999 Annual Report is
incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
Information under the heading "Market Risk" on pages 39 and 40 of the 1999
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 41 through 61 of the 1999 Annual Report and Selected
Quarterly Financial Data (Unaudited) on page 62 of the 1999 Annual Report are
incorporated herein by reference. Supplemental Notes to Consolidated Financial
Statements are included on pages 28 and 29 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF MMC.
Information as to the directors and nominees for the Board of Directors of
MMC is incorporated herein by reference to the material under the heading
"Election of Directors" in the Notice of Annual Meeting of Stockholders and
Proxy Statement dated March 29, 2000 (the "2000 Proxy Statement").
The executive officers of MMC as of March 24, 2000 are Messrs. Barham,
Borelli, Cabiallavetta, Coster, Davis, Greenberg, Lasser, Sinnott, Smith and
White-Cooper, with respect to whom information is incorporated herein by
reference to the 2000 Proxy Statement, and:
18
<PAGE>
Francis N. Bonsignore, age 53, has been Senior Vice President-Human
Resources & Administration of MMC since 1990. Immediately prior thereto, he
was partner and National Director-Human Resources for Price Waterhouse.
Gregory F. Van Gundy, age 54, is Secretary and General Counsel of MMC.
He joined MMC in 1974.
Sandra S. Wijnberg, age 43, became Senior Vice President and Chief
Financial Officer of MMC in January 2000. Before joining MMC, Ms. Wijnberg
was a senior vice president and treasurer of Tricon Global Restaurants,
Inc. from 1997 until December 1999. Prior to that, Ms. Wijnberg spent three
years with PepsiCo., last serving as senior vice president and chief
financial officer of its KFC corporation division.
ITEM 11. EXECUTIVE COMPENSATION.
Information under the headings "Executive Compensation",
"Compensation Committee Report" and "Comparison of Cumulative
Total Stockholder Return" in the 2000 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 2000 Proxy
Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information under the headings "Employment Agreement" and "Transactions
with Management and Others; Other Information" in the 2000 Proxy Statement is
incorporated herein by reference.
19
<PAGE>
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 41 through 61 of the 1999 Annual Report):
Consolidated Statements of Income for each of the three
years in the period ended December 31, 1999
Consolidated Balance Sheets as of December 31, 1999 and 1998
Consolidated Statements of Cash Flows for each of the
three years in the period ended December 31, 1999
Consolidated Statements of Stockholders' Equity and
Comprehensive Income for each of the three years in the
period ended December 31, 1999
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, 1999 (incorporated herein by reference to page 62 of the
1999 Annual Report)
Five-Year Statistical Summary of Operations (incorporated
herein by reference to page 63 of the 1999 Annual Report)
20
<PAGE>
2. All required Financial Statement Schedules are included in the
Consolidated Financial Statements, the Notes to Consolidated
Financial Statements or the Supplemental Notes to Consolidated
Financial Statements.
3. The following exhibits are filed as a part of this report:
(3.1)- the registrant's restated certificate of incorporation.
(3.2)- the registrant's by-laws
(4.1)- Indenture dated as of June 14, 1999 between MMC and State
Street Bank and Trust Company, as trustee (incorporated by
reference to the registrant's Registration Statement on Form
S-3, Registration No. 333-67543)
(4.2)- First Supplemental Indenture dated as of June 14, 1999 between
MMC and State Street Bank and Trust Company, as trustee
(incorporated by reference to the registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999)
(4.3)- Amended and Restated Rights Agreement dated as of January 20,
2000 between the registrant and Harris Trust Company of New
York (incorporated by reference to the registrant's
Registration Statement on Form 8-A/A filed on January 27,
2000)
(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)
21
<PAGE>
(10.3)*- Marsh & McLennan Companies, Inc. 2000 Senior Executive
Incentive and Stock Award Plan(subject to stockholder approval
at the 2000 annual meeting)
(10.4)*- 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)
(10.5)*- 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 (incorporated by
reference to the registrant's Annual Report on Form 10-K for
the year ended December 31, 1997)
(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 1999 Cash
Bonus Award Voluntary Deferral Plan
- --------
* 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>
(10.12)*-Marsh & McLennan Companies, Inc. Canadian Employee 1999 Cash
Bonus Award Voluntary Deferral Plan
(10.13)*-Marsh & McLennan Companies, Inc. Directors Stock Compensation
Plan as amended and restated 6/27/97) (incorporated by
reference to the registrant's Annual Report on Form 10-K for
the year ended December 31, 1997)
(10.14)*-Employment Agreement between Lawrence J. Lasser and Putnam
Investments, Inc. effective as of December 31, 1997
(incorporated by reference to the registrant's Annual Report
on Form 10-K for the year ended December 31, 1997)
(10.15)*-Marsh & McLennan Capital, Inc. Long Term Incentive Plan
(incorporated by reference to the registrant's Annual Report
on Form 10-K for the year ended December 31, 1998)
(10.16)- First Amendment dated as of May 20, 1999 to the Marsh &
McLennan Capital, Inc. Long Term Incentive Plan (incorporated
by reference to the registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999)
(12)- Statement Re: Computation of Ratio of Earnings to Fixed
Charges
(13)- Annual Report to Stockholders for the year ended December 31,
1999, 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 2/28/2000)
(23)- consent of independent auditors
(24)- powers of attorney
(27)- Financial Data Schedule (filed with SEC for EDGAR purposes
only)
- --------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of Form 10-K.
23
<PAGE>
(b) No reports on Form 8-K were filed by the registrant in the fiscal
quarter ended December 31, 1999
24
<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 29th day of March, 2000 on its behalf by the undersigned, thereunto duly
authorized.
MARSH & McLENNAN COMPANIES, INC.
By /s/ Jeffrey W. Greenberg
-----------------------------
Jeffrey W. Greenberg
President 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 29th day of March, 2000.
/s/ JEFFREY W. GREENBERG NORMAN BARHAM*
- ------------------------------ ------------------------------
JEFFREY W. GREENBERG NORMAN BARHAM*
Director, President and Chief Director
Executive Officer
/s/ SANDRA S. WIJNBERG LEWIS W. BERNARD*
- ------------------------------ ------------------------------
SANDRA S. WIJNBERG LEWIS W. BERNARD
Senior Vice President and Director
Chief Financial Officer
/s/ ROBERT J. RAPPORT FRANK J. BORELLI*
- ------------------------------ ------------------------------
ROBERT J. RAPPORT FRANK J. BORELLI
Vice President and Controller Director
(Chief Accounting Officer)
25
<PAGE>
PETER COSTER* DAVID A. OLSEN*
- ---------------------------------- ----------------------------------
PETER COSTER DAVID A. OLSEN
Director Director
ROBERT F. ERBURU* JOHN D. ONG*
- ---------------------------------- ----------------------------------
ROBERT F. ERBURU JOHN D. ONG
Director Director
RAY J. GROVES* ADELE SIMMONS*
- ---------------------------------- ----------------------------------
RAY J. GROVES ADELE SIMMONS
Director Director
STEPHEN R. HARDIS* JOHN T. SINNOTT*
- ---------------------------------- ----------------------------------
STEPHEN R. HARDIS JOHN T. SINNOTT
Director Director
GWENDOLYN S. KING* A.J.C. SMITH*
- ---------------------------------- ----------------------------------
GWENDOLYN S. KING A.J.C. SMITH
Director Director and Chairman of the Board
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* W.R.P. WHITE-COOPER*
- ---------------------------------- ----------------------------------
LAWRENCE J. LASSER W.R.P. WHITE-COOPER
Director Director
- ----------
* Gregory F. Van Gundy, pursuant to Powers of Attorney executed by each of
the individuals whose name is followed by an (*) and filed herewith, by
signing his name hereto does hereby sign and execute this Form l0-K of
Marsh & McLennan Companies, Inc. on behalf of such individual in the
capacities in which the names of each appear above.
/s/ GREGORY F. VAN GUNDY
------------------------
GREGORY F. VAN GUNDY
26
<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, 1999 and 1998, and the related
consolidated statements of income, stockholders' equity and comprehensive
income, and cash flows for each of the three years in the period ended December
31, 1999, and have issued our report thereon dated March 3, 2000; such financial
statements and report are included in your 1999 Annual Report to Stockholders
and are incorporated herein by reference. Our audits also included the
supplemental notes to the consolidated financial statements (the "Supplemental
Notes") listed in Item 14. These Supplemental Notes are the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such Supplemental 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 3, 2000
27
<PAGE>
MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Information concerning MMC's valuation accounts follows:
An analysis of the allowance for doubtful accounts for the three years ended
December 31, 1999 follows (in millions of dollars):
1999 1998 1997
---- ---- ----
Balance at beginning of year...... $128 $53 $43
Provision charged to operations... 18 19 8
Accounts written-off, net of
recoveries...................... (12) (5) (4)
Effect of exchange rate changes... (2) 2 (1)
Other (A)......................... -- 59 7
---- ---- ---
Balance at end of year............ $132 $128 $53
==== ==== ===
(A) Relates primarily to the acquisitions of Sedgwick and Johnson &
Higgins in 1998 and 1997, respectively.
An analysis of the valuation allowance for certain foreign deferred tax assets
as of December 31, 1999, 1998 and 1997 follows (in millions of dollars):
1999 1998 1997
---- ---- ----
Balance at beginning of year.... -- -- $27
Effect of exchange rate changes. -- -- --
Other .......................... -- -- (27)(A)
---- ---- ----
Balance at end of year ......... $-- $-- $--
==== ==== ===
(A) Reflects the write-off of the underlying tax assets, since it
was determined that MMC will not realize any future tax
benefit.
28
<PAGE>
MARSH & McLENNAN COMPANIES, INC. AND SUBSIDIARIES
SUPPLEMENTAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. An analysis of intangible assets at December 31, 1999 and 1998 follows (in
millions of dollars):
1999 1998
------ ------
Goodwill.......................... $5,799 $4,965
Other intangible assets........... 142 141
------ ------
Subtotal........................ 5,941 5,106
Less - accumulated amortization... (399) (280)
------ ------
Total........................ $5,542(A) $4,826
====== ======
(A) The increase from December 31, 1998 is primarily due to purchase
accounting adjustments related to the acquisition of Sedgwick.
29
<PAGE>
EXHIBIT INDEX
(3.1)- the registrant's restated certificate of incorporation.
(3.2)- the registrant's by-laws
(4.1)- Indenture dated as of June 14, 1999 between MMC and State
Street Bank and Trust Company, as trustee (incorporated by
reference to the registrant's Registration Statement on Form
S-3, Registration No. 333-67543)
(4.2)- First Supplemental Indenture dated as of June 14, 1999 between
MMC and State Street Bank and Trust Company, as trustee
(incorporated by reference to the registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999)
(4.3)- Amended and Restated Rights Agreement dated as of January 20,
2000 between the registrant and Harris Trust Company of New
York (incorporated by reference to the registrant's
Registration Statement on Form 8-A/A filed on January 27,
2000)
(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. 2000 Senior Executive
Incentive and Stock Award Plan(subject to stockholder approval
at the 2000 annual meeting)
- --------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of Form 10-K.
30
<PAGE>
(10.4)*- 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)
(10.5)*- 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 (incorporated by
reference to the registrant's Annual Report on Form 10-K for
the year ended December 31, 1997)
(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 1999 Cash
Bonus Award Voluntary Deferral Plan
- --------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of Form 10-K.
31
<PAGE>
(10.12)*-Marsh & McLennan Companies, Inc. Canadian Employee 1999 Cash
Bonus Award Voluntary Deferral Plan
(10.13)*-Marsh & McLennan Companies, Inc. Directors Stock Compensation
Plan as amended and restated 6/27/97) (incorporated by
reference to the registrant's Annual Report on Form 10-K for
the year ended December 31, 1997)
(10.14)*-Employment Agreement between Lawrence J. Lasser and Putnam
Investments, Inc. effective as of December 31, 1997
(incorporated by reference to the registrant's Annual Report
on Form 10-K for the year ended December 31, 1997)
(10.15)*-Marsh & McLennan Capital, Inc. Long Term Incentive Plan
(incorporated by reference to the registrant's Annual Report
on Form 10-K for the year ended December 31, 1998)
(10.16)- First Amendment dated as of May 20, 1999 to the Marsh &
McLennan Capital, Inc. Long Term Incentive Plan (incorporated
by reference to the registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999)
(12)- Statement Re: Computation of Ratio of Earnings to Fixed
Charges
(13)- Annual Report to Stockholders for the year ended December 31,
1999, 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 2/28/2000)
(23)- consent of independent auditors
(24)- powers of attorney
(27)- Financial Data Schedule (filed with SEC for EDGAR purposes
only)
- --------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of Form 10-K.
32
<PAGE>
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
MARSH & McLENNAN COMPANIES, INC.
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 806,000,000 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 800,000,000 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.
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
2
<PAGE>
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, 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
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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.
PART IV
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" and the number of
shares constituting such series shall be 2,000,000.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Series A Junior Participating Preferred Stock with respect to dividends, the
holders of shares of Series A Junior Participating Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of Directors out of
funds legally available for the purpose, quarterly dividends payable in cash on
the fifteenth day of February, May, August and November in each year (each such
date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Series A Junior Participating Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $10.00 or (b) subject to the provision for adjustment hereinafter set
forth, 100 times the aggregate per share amount of all cash dividends, and 100
times the aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared on the
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Common Stock, par value $1.00 per share, of the Corporation (the "Common Stock")
since the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance
of any share or fraction of a share of Series A Junior Participating Preferred
Stock. In the event the Corporation shall at any time after September 17, 1987
(the "Rights Declaration Date") (i) declare any dividend on Common Stock payable
in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the amount to which holders of shares of Series A Junior
Participating Preferred stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(B) The Corporation shall declare a dividend or distribution on the Series
A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per share on
the Series A Junior participating Preferred Stock shall nevertheless be payable
on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Junior Participating Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A Junior
Participating Preferred Stock, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of Series
A Junior Participating Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series
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A Junior Participating Preferred Stock in an amount less than the total amount
of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Junior Participating Preferred Stock entitled
to receive payment of a dividend or distribution declared thereon, which record
date shall be no more than 30 days prior to the date fixed for the payment
thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series A Junior
Participating Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Junior Participating Preferred Stock shall entitle the holder
thereof to 100 votes on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the number of votes per share to which holders of shares of Series A Junior
Participating Preferred Stock were entitled immediately prior to such event
shall be adjusted by multiplying such number by a fraction the numerator of
which is the number of shares of common Stock outstanding immediately after such
event the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares of
Series A Junior Participating Preferred Stock and the holders of shares of
Common Stock shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
(C) (i) If at any time dividends on any Series A Junior Participating
Preferred Stock shall be in arrears in an amount equal to six (6) quarterly
dividends thereon, the occurrence of such contingency shall mark beginning of a
period (herein called a "default period") which shall extend until such time
when all accrued and unpaid dividends for all previous quarterly dividend
periods and for the current quarterly dividend period on all shares of Series A
Junior Participating Preferred Stock then outstanding shall have been declared
and paid or set apart for payment. During each default period, all holders of
Preferred
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Stock (including holders of the Series A Junior Participating Preferred Stock)
with dividends in arrears in an amount equal to six (6) quarterly dividends
thereon, voting as a class, irrespective of series, shall have the right to
elect two (2) Directors.
(ii) During any default period, such voting right of the holders of Series
A Junior Participating Preferred Stock may be exercised initially at a special
meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any
annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided that neither such voting right nor the right of the
holders of any other series of Preferred Stock, if any, to increase, in certain
cases, the authorized number of Directors shall be exercised unless the holders
of ten percent (10%) in number of shares of Preferred Stock outstanding shall be
present in person or by proxy. The absence of a quorum of the holders of Common
Stock shall not affect the exercise by the holders of Preferred Stock of such
voting right. At any meeting at which the holders of Preferred Stock shall
exercise such voting right initially during an existing default period, they
shall have the right, voting as a class, to elect Directors to fill such
vacancies, if any, in the Board of Directors as may then exist up to two (2)
Directors or, if such right is exercised at an annual meeting, to elect two (2)
Directors. If the number which may be so elected at any special meeting does not
amount to the required number, the holders of the Preferred Stock shall have the
right to make such increase in the number of Directors as shall be necessary to
permit the election by them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in any
default period and during the continuance of such period, the number of
Directors shall not be increased or decreased except by vote of the holders of
Preferred Stock as herein provided or pursuant to the rights of any equity
securities ranking senior to or PARI PASSU with the Series A Junior
Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect Directors, the
Board of Directors may order, or any stockholder or stockholders owning in the
aggregate not less than ten percent (10%) of the total number of shares of
Preferred Stock outstanding, irrespective of series, may request, the calling of
special meeting of the holders of Preferred Stock, which meeting shall thereupon
be called by the Chairman, the President or the Secretary of the Corporation.
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Notice of such meeting and of any annual meeting at which holders of Preferred
Stock are entitled to vote pursuant to this paragraph (C) (iii) shall be given
to each holder of record of Preferred Stock by mailing a copy of such notice to
him at his last address as the same appears on books of the Corporation. Such
meeting shall be called for a time not earlier than 20 days and not later than
60 days after such order or request, or in default of the calling of such
meeting within 60 days after such order or request, such meeting may be called
on similar notice by any stockholder or stockholders owning in the aggregate not
less than ten percent (10%) of the total number of shares of Preferred Stock
outstanding. Notwithstanding the provisions of this paragraph (C)(iii), no such
special meeting shall be called during the period within 60 days immediately
preceding the date fixed for next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and other classes
of stock of the Corporation if applicable, shall continue to be entitled to
elect the whole number of Directors until the holders of Preferred Stock shall
have exercised their right to elect two (2) Directors voting as a class, after
the exercise of which right (x) the Directors so elected by the holders of
Preferred Stock shall continue in office until their successors shall have been
elected by such holders or until the expiration of the default period, and (y)
any vacancy in the Board of Directors may (except as provided in paragraph
(C)(ii) of this Section 3) be filled by vote of a majority of the remaining
Directors theretofore elected by the holders of the class of stock which elected
the Director whose office shall have become vacant. References in this paragraph
(C) to Directors elected by the holders of a particular class of stock shall
include Directors elected by such Directors to fill vacancies as provided in
clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the right of
the holders of Preferred Stock as a class to elect Directors shall cease, (y)
the term of any Directors elected by the holders of Preferred Stock as a class
shall terminate, and (z) the number of Directors shall be such number as may be
provided for in certificate of incorporation or by-laws irrespective of any
increase made pursuant to the provisions of paragraph (C)(ii) of this Section 3
(such number being subject, however, to change thereafter in any manner provided
by law or in the certificate of incorporation or by-laws). Any vacancies in the
Board of Directors effected by the provisions of clauses (y) and (z) in the
preceding sentence may be filled by a majority of the remaining Directors.
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(D) Except as set forth herein, holders of Series A Junior Participating
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration, any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred
Stock;
(ii) declare or pay dividends on, or make any other distributions on,
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, except dividends paid ratably on the Series
A Junior Participating Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, provided that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such parity stock
in exchange for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or winding up) to
the Series A Junior Participating Preferred Stock;
(iv) purchase or otherwise acquire for consideration any shares of
Series A Junior Participating Preferred Stock, or any shares of stock
ranking on a parity
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with the Series A Junior Participating Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon
such terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. REACQUIRED SHARES. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock and may be reissued as part of a new series
of Preferred Stock to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth
herein.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding
up of the Corporation, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series A Junior Participating Preferred Stock
shall have received $100 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series A Liquidation Preference"). Following the payment of
the full amount of the Series A Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series A Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of
Common Stock shall have received an amount per share (the "Common Adjustment")
equal to the quotient obtained by dividing (i) the Series Liquidation Preference
by (ii) 100 (as appropriately adjusted as set forth in subparagraph C below to
reflect such events as stock splits, stock dividends and recapitalizations with
respect to the Common Stock) (such number in clause (ii),
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the "Adjustment. Number"). Following the payment of the full amount of the
Series A Liquidation Preference and Common Adjustment in respect of all
outstanding shares of Series A Junior Participating Preferred Stock and Common
Stock, respectively, holders of Series A Junior Participating Preferred Stock
and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to such Preferred Stock and Common
Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of preferred stock, if any, which
rank on a parity with the Series A Junior Participating Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences. In the event,
however, that there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the
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Corporation shall at any time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of shares of Series A
Junior Participating Preferred Stock shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
Section 8. NO REDEMPTION. The shares of Series A Junior Participating
Preferred Stock shall not be redeemable.
Section 9. RANKING. The Series A Junior Participating Preferred Stock shall
rank junior to all other series of the Corporation's Preferred Stock as to the
payment of dividends and the distribution of assets, unless the terms of any
such series shall provide otherwise.
Section 10. AMENDMENT. In the event shares of Series A Junior Participating
Preferred Stock are outstanding, the Restated Certificate of Incorporation of
the Corporation shall not be further amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series A Junior Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of two-thirds or more of the
outstanding shares of Series A Junior Participating Preferred Stock, voting
separately as a class.
Section 11. FRACTIONAL SHARES. Series A Junior Participating Preferred
Stock may be issued in fractions of a share which shall entitle the holder, in
proportion to such holders fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit of all other
rights of holders of Series A Junior Participating Preferred Stock.
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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, 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.
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(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 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
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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.
(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
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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 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 against 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
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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 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.
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(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).
(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
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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
"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).
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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 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
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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 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
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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 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.
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(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 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
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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; 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
MARCH 16, 2000
<PAGE>
I N D E X
PAGE NUMBER
-----------
ARTICLE I
Offices.................................................... 1
ARTICLE II
Meetings of the Stockholders............................... 1
ARTICLE III
Directors.................................................. 9
ARTICLE IV
Officers................................................... 12
ARTICLE V
Committees................................................. 16
ARTICLE VI
Indemnification............................................ 21
ARTICLE VII
Checks, Contracts, Other Instruments....................... 26
ARTICLE VIII
Capital Stock.............................................. 27
ARTICLE IX
Miscellaneous.............................................. 30
ARTICLE X
Amendments................................................. 31
<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 Thursday of May in each year, or such other day in May as may
be determined from time to time by the Board of Directors, at such time and
place as the Board of Directors may designate. At said meeting the stockholders
shall elect a Board of Directors and transact any other business authorized or
required to be transacted by the stockholders.
<PAGE>
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 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
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of business on the day next preceding the day on which notice of the meeting is
given or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held, and such date for any other
purpose shall be the date on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 6. QUORUM. The holders of a majority of the stock issued and
outstanding present in person or represented by proxy shall be requisite and
shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by law, by the Restated
Certificate of Incorporation or by these by-laws. If, however, such majority
shall not be present or represented at any meeting of the stockholders, the
stockholders present in person or by proxy shall have power to adjourn the
meeting from time to time without notice other than announcement at the meeting
until the requisite amount of stock shall be represented. At such adjourned
meeting at which the requisite amount of stock shall be represented, any
business may be transacted which might have been transacted at the meeting as
originally called.
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SECTION 7. VOTING. Each stockholder entitled to vote in accordance with the
terms of the Restated Certificate of Incorporation and in accordance with the
provisions of these by-laws shall be entitled to one vote, in person or by
proxy, for each share of stock entitled to vote held by such stockholder, but no
proxy shall be voted after three years from its date unless such proxy provides
for a longer period. The vote for directors and, upon demand of any stockholder,
the vote upon any question before the meeting shall be by ballot. All elections
of directors shall be decided by plurality vote; all other questions shall be
decided by a majority of the shares present in person or represented by proxy at
the meeting of stockholders and entitled to vote on the subject matter, except
as otherwise provided in the Restated Certificate of Incorporation or by law or
regulation.
SECTION 8. INSPECTORS OF ELECTION. All elections of directors and all votes
where a ballot is required shall be 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.
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SECTION 9. VOTING LIST. The Secretary shall prepare and make, at least ten
days before every election of directors, a complete list of the stockholders
entitled to vote, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in his name. Such list shall be
open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten days prior
to the meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 10. STOCKHOLDER NOMINATIONS OF DIRECTORS. Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as directors at a meeting of stockholders. Nominations of persons for
election to the Board of Directors of the Corporation may be made at a meeting
of stockholders by or at the direction of the Board of Directors, by any person
appointed by the Board of Directors or by any stockholder of the Corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this Section 10. Such nominations, other than
those made by or at the direction of the Board of Directors
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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, in the case of an Annual
Meeting of Stockholders, not less than 90 days prior to the anniversary date of
the immediately preceding annual meeting of stockholders; provided, however,
that in the event that the annual meeting is called for a date that is not
within 30 days before or after such anniversary date, notice by the Stockholder
in order 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 of the date of the annual meeting
was made, whichever first occurs; and in the case of a special meeting of
stockholders called for the purpose of electing directors, not later than the
close of business on the 15th day following the day on which notice of the date
of the special meeting was mailed or public disclosure of the date of the
special meeting was made, whichever first occurs. Such stockholder's notice to
the Secretary shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or re-election 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
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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.
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
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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 90 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders; provided, however, that in
the event that the annual meeting is called for a date that is not within 30
days before or after such anniversary date, notice by the stockholder in order
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 of the date of the annual meeting
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
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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
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
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director of the Corporation who has attained the age of 72 years. In addition to
the powers and duties by these by-laws expressly conferred upon them, the Board
of Directors may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by statute or by the Restated Certificate of
Incorporation or by these by-laws directed or required to be exercised or done
by the stockholders. The Board of Directors may provide for compensation of
directors who are not otherwise compensated by the Corporation or any subsidiary
thereof.
SECTION 2. MEETINGS AND NOTICE. The Board shall, for the purposes of
organization, the election and appointment of officers and the transaction of
other business, hold a meeting as soon as convenient after the annual meeting of
stockholders. Regular meetings of the directors may be held without notice at
such places and times as shall be determined from time to time by resolution of
the directors. Special meetings of the Board may be called by the Chairman of
the Board on at least twenty-four (24) hours' notice to each director,
personally or by mail or by telegram or by telephone. Special meetings shall
also be called in like manner on the written request of any three (3) directors.
The attendance of a director at any meeting shall dispense with notice to him of
the meeting. Members of the Board of Directors may participate in a meeting of
the Board by means of conference telephone or similar communications equipment,
by means of which all persons participating in the meeting can hear each other,
and
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participation in a meeting pursuant to this section shall constitute presence in
person at such meeting.
SECTION 3. OFFICES, BOOKS, PLACE OF MEETING. The Board of Directors may
have one or more offices and keep the books of the Corporation outside of
Delaware, and may hold its meetings at such places as it may from time to time
determine.
SECTION 4. QUORUM. At all meetings of the Board of Directors one-third
(1/3) of the total number of directors shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the act of a majority
of the directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors, except as may be otherwise specifically provided
by statute or by the Restated Certificate of Incorporation or by these by-laws.
SECTION 5. INFORMAL ACTION. The Board of Directors shall, except as
otherwise provided by law, have power to act in the following manner: A
resolution in writing, signed by all of the members of the Board of Directors
shall be deemed to be action by such Board to the effect therein expressed with
the same force and effect as if the same had been duly passed at a duly convened
meeting, and it shall be the duty of the Secretary of the Corporation to record
any such resolution in the minute book of the Corporation, under its proper
date.
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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, a President, one or more Vice
Chairmen, 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 preside at all meetings of the stockholders and of the Board of Directors.
He shall consult with the President on matters of general corporate policy. He
shall have such other duties as may be assigned to him by the Board of Directors
or the President. He shall preside at meetings of any committee of which he is a
member which is not attended by the chairman of such committee.
SECTION 4. PRESIDENT. The President shall be the Chief Executive Officer of
the Corporation and, subject to the control of the Board of Directors and of the
committees
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exercising functions of the Board of Directors, shall have general supervision
over the business and property of the Corporation. He shall consult with the
Chairman of the Board on matters of general corporate policy and he shall review
and recommend to the Board of Directors both short-term objectives and long-term
planning for the business. He shall also preside at all meetings of the
stockholders and of the Board of Directors not attended by the Chairman of the
Board. 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 5. VICE CHAIRMAN. A Vice Chairman shall, subject to the control of
the Board of Directors and of the committees exercising functions of the Board
of Directors, perform such duties as may from time to time be assigned to him by
the President.
SECTION 6. 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.
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SECTION 7. SECRETARY. The Secretary shall attend all meetings of the
stockholders and the Board of Directors. He shall, at the invitation of the
chairman thereof, attend meetings of the committees elected by the Board or
established by these by-laws. He shall record all votes and minutes of all
proceedings which he attends and receive and maintain custody of all votes and
minutes of all such proceedings. Votes and minutes of meetings of the
Compensation and Audit Committees shall be recorded and maintained as each such
committee shall determine. The Secretary shall give or cause to be given notice
of meetings of the stockholders, Board of Directors, and, when instructed to do
so by the Chairman thereof, committees of the Board of Directors, and shall have
such other powers and duties as may be prescribed by appropriate authority. The
Secretary shall keep 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 8. 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,
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the President, 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 President, the chief financial officer and the Board
of Directors whenever they may require it, an account of all his transactions as
Treasurer. He shall have such powers and perform such duties as shall be
assigned to him by appropriate authority. The Assistant Treasurers shall have
such powers and perform such duties as may be prescribed by the chief financial
officer or the Treasurer.
SECTION 9. 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
President, 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 10. 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
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performance of their respective duties with a surety company satisfactory to the
Board of Directors or the Chairman as surety. The expenses of such bond shall be
paid by the Corporation.
ARTICLE V
COMMITTEES
SECTION 1. EXECUTIVE COMMITTEE. An Executive Committee, composed of the
Chairman 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.
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SECTION 2. COMPENSATION COMMITTEE. A Compensation Committee, including a
chairman, having such number of directors as the Board of Directors shall
determine from time to time, shall be elected by the Board of Directors. No
member of the Compensation Committee while holding such office and within the
previous year shall, in addition to usual compensation as a director, receive or
be granted or be eligible for any award or any other benefit under any
compensation, stock option or other benefit plans that the committee may
supervise, administer, or review or while holding such office shall be a
full-time employee of the Corporation or any of its subsidiaries. The
Compensation Committee shall fix the compensation of the chief executive officer
of the Corporation and approve the compensation of senior executives of the
Corporation or any of its subsidiaries designated under procedures established
by the Committee from time to time. The Compensation Committee will approve,
disapprove or modify the retention by the Corporation of advisors or consultants
on matters relating to the compensation of the chief executive officer and
senior executives of the Corporation. The Compensation Committee shall also
satisfy itself, if in its opinion circumstances make it desirable to do so, that
the general compensation policies and practices followed by the Corporation and
its subsidiaries are in the Corporation's best interests. The Compensation
Committee shall have such other duties as may be set forth in the Corporation's
compensation,
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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 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
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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 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
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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 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
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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 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
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the case of any such change or amendment, only to the extent that such change or
amendment permits the Corporation to provide broader indemnification rights than
permitted prior thereto), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
to be paid in settlement) reasonably incurred or suffered by an indemnitee in
connection therewith and such indemnification shall continue as to an indemnitee
who has ceased to be a director, officer or employee of the Corporation and
shall inure to the benefit of the indemnitee's heirs, executors and
administrators; PROVIDED, HOWEVER, that except as provided in Section 3 of this
Article with respect to proceedings seeking to enforce rights to
indemnification, the Corporation shall indemnify an indemnitee in connection
with a proceeding (or part thereof) initiated by the indemnitee only if such
proceeding (or part thereof) was authorized by the board of directors of the
Corporation. The right to indemnification conferred in this Article shall be a
contract right.
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
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Delaware General Corporation Law requires, an advancement of expenses incurred
by an indemnitee in his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter, an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter, a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses under
this Article or otherwise.
SECTION 3. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Section 1 or
Section 2 of this Article is not paid in full by the Corporation within sixty
days in the case of Section 1 and twenty days in the case of Section 2 after a
written claim has been received by the Corporation, the indemnitee may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (other than a suit
brought
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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
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advancement of expenses, under this Article or otherwise shall be on the
Corporation.
SECTION 4. INDEMNIFICATION OF AGENTS OF THE CORPORATION. The Corporation
may, to the extent authorized from time to time by its board of directors, grant
rights to indemnification, and to be paid by the Corporation the expenses
incurred in defending any proceeding in advance of its final disposition, to any
agent of the Corporation to the fullest extent of the provisions of this Article
with respect to the indemnification of directors, officers and employees of the
Corporation and advancement of expenses of directors and officers of the
Corporation.
SECTION 5. NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and to
the advancement of expenses conferred in this Article shall not be exclusive of
any other right which any person may have or hereafter acquire under any
statute, the Corporation's Restated Certificate of Incorporation, these by-laws,
any agreement, vote of stockholders or disinterested directors, or otherwise.
SECTION 6. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or of another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person
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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.
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
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Directors or Executive Committee, by resolution, may from time to time
prescribe.
ARTICLE VIII
CAPITAL STOCK
SECTION 1. STOCK CERTIFICATES. The certificates for shares of the capital
stock of the Corporation shall be in such form, not inconsistent with the
Restated Certificate of Incorporation, as shall be approved by the Board of
Directors. Each certificate shall be signed by the Chairman of the Board of
Directors or a Vice President and also by the Secretary, an Assistant Secretary,
the Treasurer or an Assistant Treasurer, provided, however, that any such
signature of an officer of the Corporation or of the Transfer Agent, Assistant
Transfer Agent, Registrar or Assistant Registrar, or any of them, may be a
facsimile. In case any officer or officers who shall have signed, or whose
facsimile signature or signatures shall have been used on any such certificate
or certificates shall cease to be such officer or officers of the Corporation,
whether because of death, resignation or otherwise before such certificate or
certificates shall have been delivered by the Corporation, such certificate or
certificates may nevertheless be adopted by the Corporation and be used and
delivered as though the officer or officers who signed the said certificate or
certificates or whose facsimile signature or signatures shall have been used
thereon had not ceased to be said officer or officers of the Corporation.
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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.
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
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discretion and as a condition precedent to the issuance of any such new
certificate or certificates, require (i) that the owner of such lost or
destroyed certificate or certificates, or his legal representative give the
Corporation and its transfer agent or agents, registrar or registrars a bond in
such form and amount as the Board of Directors may direct as indemnity against
any claim that may be made against the Corporation and its transfer agent or
agents, registrar or registrars, or (ii) that the person requesting such new
certificate or certificates obtain a final order or decree of a court of
competent jurisdiction as to his right to receive such new certificate or
certificates.
SECTION 4. TRANSFER OF SHARES. Shares of stock shall be transferred on the
books of the Corporation by the holder thereof or by his attorney thereunto duly
authorized upon the surrender and cancellation of certificates for a like number
of shares.
SECTION 5. REGULATIONS GOVERNING TRANSFER OF SHARES. The Board of Directors
may make such regulations as it may deem expedient concerning the issue,
transfer and registration of stock.
SECTION 6. APPOINTMENT OF TRANSFER AGENT, REGISTRAR. The Board may appoint
a Transfer Agent or Transfer Agents and Registrar or Registrars for transfers
and may require all certificates to bear the signature of either or both.
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ARTICLE IX
MISCELLANEOUS
SECTION 1. INSPECTION OF BOOKS. The Board of Directors or the Executive
Committee shall determine from time to time whether and, if allowed, when and
under what conditions and regulations the accounts and books of the Corporation
(except such as may by statute be specifically open to inspection), or any of
them shall be open to the inspection of the stockholders, and the stockholders'
rights in this respect are and shall be restricted and limited accordingly.
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.
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ARTICLE X
AMENDMENTS
SECTION 1. BY STOCKHOLDERS. These by-laws, or any of them, may be amended,
altered, changed, added to or repealed at any regular or special meeting of the
stockholders, by the affirmative vote of a majority of the shares of stock then
issued and outstanding.
SECTION 2. BY THE BOARD OF DIRECTORS. The Board of Directors, by
affirmative vote of a majority of its members, may, at any regular or special
meeting, amend, alter, change, add to or repeal these by-laws, or any of them,
but any by-laws made by the Directors may be amended, altered, changed, added to
or repealed by the stockholders.
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Exhibit 10.3
MARSH & McLENNAN COMPANIES, INC.
- -------------------------------------------------------------------------------
2000 SENIOR EXECUTIVE INCENTIVE AND STOCK AWARD PLAN
- --------------------------------------------------------------------------------
<PAGE>
MARSH & McLENNAN COMPANIES, INC.
2000 SENIOR EXECUTIVE INCENTIVE AND STOCK AWARD PLAN
Page
----
1. Purposes......................................................... 1
2. Definitions...................................................... 1
3. Administration
(a) Authority of the Committee................................. 3
(b) Manner of Exercise of Committee Authority.................. 4
(c) Limitation of Liability.................................... 5
4. Eligibility
(a) Generally.................................................. 5
(b) Annual Per-Person Limitation Applicable to Certain Awards.. 5
5. Stock Subject to the Plan; Adjustments
(a) Shares Reserved............................................ 5
(b) Manner of Counting Shares.................................. 6
(c) Type of Shares Distributable............................... 6
(d) Adjustments. .............................................. 6
6. Specific Terms of Awards
(a) General.................................................... 7
(b) Options.................................................... 7
(c) SARs....................................................... 7
(d) Restricted Stock........................................... 8
(e) Restricted Stock Units..................................... 9
(f) Stock Bonuses and Stock Awards in Lieu of Cash Awards...... 9
(g) Dividend Equivalents....................................... 9
(h) Other Stock-Based Awards................................... 9
(i) Unit-Based Awards.......................................... 10
<PAGE>
MARSH & McLENNAN COMPANIES, INC.
2000 SENIOR EXECUTIVE INCENTIVE AND STOCK AWARD PLAN
Page
----
7. Certain Provisions Applicable to Awards
(a) Stand-Alone, Additional, Tandem and Substitute Awards...... 10
(b) Terms of Awards............................................ 10
(c) Form of Payment Under Awards............................... 10
(d) Buyouts.................................................... 10
(e) Cancellation and Rescission of Awards...................... 10
(f) Awards to Participants Outside the United States........... 11
8. Performance Awards
(a) Performance Conditions..................................... 11
(b) Performance Awards Granted to Designated Covered Employees. 11
(c) Written Determinations..................................... 12
(d) Status of Section 8(b) Awards Under Code Section 162(m).... 13
9. Change in Control Provisions
(a) Acceleration Upon Change in Control........................ 13
(b) "Change in Control" Defined................................ 13
(c) "Change in Control Price" Defined.......................... 14
(d) Additional Payments........................................ 14
(e) Pooling of Interests....................................... 15
10. General Provisions
(a) Compliance with Legal and Exchange Requirements............ 15
(b) Nontransferability......................................... 15
(c) No Right to Continued Employment........................... 16
(d) Taxes...................................................... 16
(e) Changes to the Plan and Awards............................. 16
(f) No Rights to Awards; No Stockholder Rights................. 16
(g) Unfunded Status of Awards and Trusts....................... 16
(h) Nonexclusivity of the Plan................................. 17
(i) No Fractional Shares....................................... 17
(j) Governing Law.............................................. 17
(k) Effective Date and Approval Date........................... 17
(l) Titles and Headings; Certain Terms......................... 17
<PAGE>
MARSH & McLENNAN COMPANIES, INC.
2000 SENIOR EXECUTIVE INCENTIVE AND STOCK AWARD PLAN
1. PURPOSES. The purposes of the 2000 Senior Executive Incentive and Stock
Award Plan are to advance the interests of Marsh & McLennan Companies, Inc. and
its stockholders by providing a means to attract, retain, and motivate senior
executives of the Company and its Subsidiaries and Affiliates, and to strengthen
the mutuality of interest between such senior executives and the Company's
stockholders. This Plan shall be the successor to the Marsh & McLennan
Companies, Inc. 1997 Senior Executive Incentive and Stock Award Plan.
2. DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as set forth below:
(a) "Affiliate" means any entity other than the Company and its
Subsidiaries that is designated by the Committee as a participating employer
under the Plan, provided that the Company directly or indirectly owns at least
20% of the combined voting power of all classes of voting stock of such entity
or at least 20% of the ownership interests in such entity.
(b) "Award" means any Option, SAR, Restricted Stock, Restricted Stock
Unit, Stock Bonus or Stock Award in Lieu of Cash, Dividend Equivalent, Other
Stock-Based Award, or Unit- Based Award, including Performance Awards granted to
a Participant under the Plan.
(c) "Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
(d) "Beneficiary" means the person, persons, trust or trusts which have
been designated by such Participant in his or her most recent written
beneficiary designation filed with the Company to receive the benefits specified
under this Plan upon the death of the Participant, or, if there is no designated
Beneficiary or surviving designated Beneficiary, then the person, persons, trust
or trusts entitled by will or the laws of descent and distribution to receive
such benefits.
(e) "Board" means the Board of Directors of the Company.
(f) "Change in Control" means Change in Control as defined with related
terms in Section 9.
(g) "Code" means the Internal Revenue Code of 1986, as amended from time
to time. References to any provision of the Code shall be deemed to include
successor provisions thereto and regulations thereunder.
(h) "Committee" means the Compensation Committee of the Board, or such
other Board committee as may be designated by the Board to administer the Plan.
The Committee shall consist solely of two or more directors of the Company.
1
<PAGE>
(i) "Company" means Marsh & McLennan Companies, Inc., a corporation
organized under the laws of the State of Delaware, or any successor corporation.
(j) "Dividend Equivalent" means a right, granted to a Participant under
Section 6(g), to receive cash, Stock, or other property equal in value to
dividends paid with respect to a specified number of shares of Stock or to
periodic distributions on other specified equity securities of the Company or
any Subsidiary or Affiliate. Dividend Equivalents may be awarded on a
free-standing basis or in connection with another Award and may be paid
currently or on a deferred basis.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time. References to any provision of the Exchange Act shall be
deemed to include successor provisions thereto and regulations thereunder.
(l) "Fair Market Value" means, with respect to Stock, Awards, or other
property, the fair market value of such Stock, Awards, or other property
determined by such methods or procedures as shall be established from time to
time by the Committee. Unless otherwise determined by the Committee in good
faith, the Fair Market Value of Stock as of any given date shall mean the per
share value of Stock as determined by using the mean between the high and low
selling prices of such Stock on the immediately preceding date (or, if the NYSE
was not open that day, the next preceding day that the NYSE was open for trading
and the Stock was traded) as reported for such date in the table titled
"NYSE--Composite Transactions," contained in The Wall Street Journal or an
equivalent successor table.
(m) "ISO" means any Option intended to be and designated as an incentive
stock option within the meaning of Section 422 of the Code.
(n) "NQSO" means any Option that is not an ISO.
(o) "Option" means a right, granted to a Participant under Section 6(b),
to purchase Stock. An Option may be either an ISO or an NQSO.
(p) "Other Stock-Based Award" means a right, granted to a Participant
under Section 6(h), that is denominated or payable in, valued in whole or in
part by reference to, or otherwise based on, or related to, Stock or other
securities of the Company or any Subsidiary or Affiliate, including, without
limitation, rights convertible or exchangeable into Stock or such other
securities, purchase rights for Stock or such other securities, and Awards with
value or payment contingent upon performance of the Company, a Subsidiary, or
Affiliate, or upon any other factor or performance condition designated by the
Committee.
(q) "Participant" means a person who, as an officer or employee of the
Company, a Subsidiary or Affiliate, has been granted an Award under the Plan.
(r) "Performance Award" means an Award of one of the types specified in
Section 6 the grant, exercise, or settlement of which is subject to achievement
of performance goals and other terms specified under Section 8.
(s) "Plan" means this 2000 Senior Executive Incentive and Stock Award
Plan, as amended from time to time.
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(t) "Preexisting Plans" mean the Marsh & McLennan Companies, Inc. 1997
Senior Executive Incentive and Stock Award Plan and any other Company plan
adopted prior to 1997 and approved by the Company's stockholders that provides
for the grant or award of equity-based compensation.
(u) "Qualified Member" means a member of the Committee who is a
"Non-Employee Director" within the meaning of Rule 16b-3(b)(3) and an "outside
director" within the meaning of Treasury Regulation 1.162-27(e)(3) under Code
Section 162(m).
(v) "Restricted Stock" means an award of shares of Stock to a Participant
under Section 6(d) that may be subject to certain restrictions and to a risk of
forfeiture.
(w) "Restricted Stock Unit" means an award, granted to a Participant under
Section 6(e), representing the right to receive either Stock or cash or any
combination thereof at the end of a specified deferral period.
(x) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(y) "Stock" means the Common Stock, $1.00 par value per share, of the
Company or such other securities as may be substituted or resubstituted therefor
pursuant to Section 5.
(z) "SAR" or "Stock Appreciation Right" means the right, granted to a
Participant under Section 6(c), to be paid an amount measured by the
appreciation in the Fair Market Value of Stock from the date of grant to the
date of exercise of the right, with payment to be made in cash, Stock, other
Awards, or other property as specified in the Award or determined by the
Committee.
(aa) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
(bb) "Unit-Based Award" means a unit, granted to a Participant under
Section 6(i), with value or payment contingent upon performance of the Company,
a Subsidiary, or Affiliate, or upon any other factor or performance condition
designated by the Committee.
3. ADMINISTRATION.
(a) Authority of the Committee. The Plan shall be administered by the
Committee. The Committee shall have full and final authority to take the
following actions, in each case subject to and consistent with the provisions of
the Plan:
(i) to select Participants to whom Awards may be granted;
(ii) to designate Affiliates;
(iii) to determine the type or types of Awards to be granted to each
Participant;
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(iv) to determine the type and number of Awards to be granted, the
number of shares of Stock to which an Award may relate, the terms and
conditions of any Award granted under the Plan (including any exercise
price, grant price, or purchase price, any restriction or condition, any
schedule for lapse of restrictions or conditions relating to
transferability or forfeiture, exercisability, or settlement of an Award,
and waivers or accelerations thereof, and waivers of performance
conditions relating to an Award, based in each case on such considerations
as the Committee shall determine), and all other matters to be determined
in connection with an Award;
(v) to determine whether, to what extent, and under what
circumstances an Award may be settled, or the exercise price of an Award
may be paid, in cash, Stock, other Awards, or other property, or an Award
may be canceled, forfeited, exchanged, or surrendered;
(vi) to determine whether, to what extent, and under what
circumstances cash, Stock, other Awards, or other property payable with
respect to an Award will be deferred either automatically, at the election
of the Committee, or at the election of the Participant, and whether to
create trusts and deposit Stock or other property therein;
(vii) to prescribe the form of each Award Agreement, which need not
be identical for each Participant;
(viii) to adopt, amend, suspend, waive, and rescind such rules and
regulations and appoint such agents as the Committee may deem necessary or
advisable to administer the Plan;
(ix) to correct any defect or supply any omission or reconcile any
inconsistency in the Plan and to construe and interpret the Plan and any
Award, rules and regulations, Award Agreement, or other instrument
hereunder; and
(x) to make all other decisions and determinations as may be
required under the terms of the Plan or as the Committee may deem
necessary or advisable for the administration of the Plan.
Other provisions of the Plan notwithstanding, the Board may perform any function
of the Committee under the Plan, including for the purpose of ensuring that
transactions under the Plan by Participants who are then subject to Section 16
of the Exchange Act in respect of the Company are exempt under Rule 16b-3. In
any case in which the Board is performing a function of the Committee under the
Plan, each reference to the Committee herein shall be deemed to refer to the
Board, except where the context otherwise requires.
(b) Manner of Exercise of Committee Authority. At any time that a member
of the Committee is not a Qualified Member, any action of the Committee relating
to an Award to be granted to a Participant who is then subject to Section 16 of
the Exchange Act in respect of the Company, or relating to an Award intended to
constitute "qualified performance-based compensation" within the meaning of Code
Section 162(m) and regulations thereunder, may be taken either (i) by a
subcommittee composed solely of two or more Qualified Members, or (ii) by the
Committee but with each such member who is a not Qualified Member abstaining or
recusing himself or herself from such action, provided that, upon such
abstention or recusal, the Committee remains composed solely of two or more
Qualified Members. Such action, authorized by such a subcommittee or by the
Committee upon the abstention or recusal of such non-Qualified Member(s), shall
be the action of the Committee for purposes of the Plan. Any
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action of the Committee with respect to the Plan shall be final, conclusive, and
binding on all persons, including the Company, Subsidiaries, Affiliates,
Participants, any person claiming any rights under the Plan from or through any
Participant, and stockholders. The express grant of any specific power to the
Committee, and the taking of any action by the Committee, shall not be construed
as limiting any power or authority of the Committee. The Committee may delegate
to officers or managers of the Company or any Subsidiary or Affiliate the
authority, subject to such terms as the Committee shall determine, to perform
administrative functions and such other functions as the Committee may
determine, to the extent permitted under applicable law and, with respect to any
Participant who is then subject to Section 16 of the Exchange Act in respect of
the Company, to the extent performance of such function will not result in a
subsequent transaction failing to be exempt under Rule 16b-3(d).
(c) Limitation of Liability. Each member of the Committee shall be
entitled to, in good faith, rely or act upon any report or other information
furnished to him or her by any officer or other employee of the Company or any
Subsidiary or Affiliate, the Company's independent certified public accountants,
or other professional retained by the Company to assist in the administration of
the Plan. No member of the Committee, nor any officer or employee of the Company
acting on behalf of the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Committee and any officer or employee of the
Company acting on their behalf shall, to the fullest extent permitted by law, be
fully indemnified and protected by the Company with respect to any such action,
determination, or interpretation.
4. ELIGIBILITY.
(a) Generally. Senior executives of the Company and Subsidiaries and
Affiliates (including any director who is also an employee but excluding
directors of the Company who are not employees) are eligible to be granted
Awards under the Plan. In addition, any person who has been offered employment
as a senior executive of the Company or a Subsidiary or Affiliate is eligible to
be granted awards under the Plan, provided that such prospective executive may
not receive any payment or exercise any right relating to an Award until such
person has commenced employment with the Company or a Subsidiary or Affiliate.
(b) Annual Per-Person Limitation Applicable to Certain Awards. In each
fiscal year during any part of which the Plan is in effect, a Participant may be
granted (i) Options under Section 6(b), (ii) SARs under Section 6(c), and (iii)
Performance Awards pursuant to Section 8(b), involving Awards under Sections
6(d),6(e), 6(f), or 6(h), relating, in the aggregate, to no more than two
million shares of Stock, subject to adjustment as provided in Section 5(d). With
respect to Performance Awards pursuant to Section 8(b) not relating to Stock at
the date of grant (including Unit-Based Awards), the maximum amount payable to a
Participant in settlement of such an Award in any fiscal year shall be the
greater of the Fair Market Value of the number of shares of Stock specified in
the preceding sentence (subject to adjustment) at the date of grant or at the
date of settlement of the Performance Award (this limitation is separate and not
affected by the limitation on shares of Stock set forth in the preceding
sentence).
5. STOCK SUBJECT TO THE PLAN; ADJUSTMENTS.
(a) Shares Reserved. Subject to adjustment as hereinafter provided, the
total number of shares of Stock reserved for issuance in connection with Awards
under the Plan shall be four million (4,000,000), plus (for Awards other than
ISOs) the additional number of shares of Stock specified in the succeeding
sentence. There shall be added to the number of shares of Stock reserved for
issuance under this Section 5(a) the number of shares authorized and
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reserved for awards under the Preexisting Plans to the extent (A) that such
shares were available for grants of awards under the Preexisting Plans
immediately prior to the Approval Date or (B) that such shares were subject to
outstanding awards under the Preexisting Plans on the Approval Date and
thereafter an event occurs (including expiration or forfeiture) which would
result in such shares again being available for Awards under the Plan (as
determined pursuant to Section 5(b)). No Award may be granted if the number of
shares to which such Award relates, when added to the number of shares
previously issued under the Plan and the number of shares to which other
then-outstanding Awards relate, exceeds the number of shares reserved under this
Section 5(a). Shares of Stock issued under the Plan shall be counted against
this limit in the manner specified in Section 5(b).
(b) Manner of Counting Shares. If any shares subject to an Award or
Preexisting Plan award are forfeited, canceled, exchanged, or surrendered or
such Award or award is settled in cash or otherwise terminates without a
distribution of shares to the Participant, including (i) the number of shares
withheld in payment of any exercise or purchase price of or tax obligation
relating to such an Award or award and (ii) the number of shares equal to the
number surrendered in payment of any exercise or purchase price of or tax
obligation relating to any Award or award, such number of shares will again be
available for Awards under the Plan. The Committee may make determinations and
adopt regulations for the counting of shares relating to any Award to ensure
appropriate counting, avoid double counting (in the case of tandem or substitute
awards), and provide for adjustments in any case in which the number of shares
actually distributed differs from the number of shares previously counted in
connection with such Award.
(c) Type of Shares Distributable. Any shares of Stock distributed pursuant
to an Award may consist, in whole or in part, of authorized and unissued shares
or treasury shares, including shares acquired by purchase in the open market or
in private transactions.
(d) Adjustments. In the event that any large, special and non-recurring
dividend or other distribution (whether in the form of cash or property other
than Stock), recapitalization, forward or reverse split, Stock dividend,
reorganization, merger, consolidation, spin-off, combination, repurchase, share
exchange, liquidation, dissolution or other similar corporate transaction or
event affects the Stock such that an adjustment is determined by the Committee
to be appropriate under the Plan, then the Committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number and kind of shares of
Stock which may thereafter be issued in connection with Awards, (ii) the number
and kind of shares of Stock issued or issuable in respect of outstanding Awards
or, if deemed appropriate, make provisions for payment of cash or other property
with respect to any outstanding Award, (iii) the exercise price, grant price, or
purchase price relating to any Award, and (iv) the number and kind of shares of
Stock set forth in Section 4(b) as the annual per-person limitation; provided,
however, in each case that, with respect to ISOs, such adjustment shall be made
in accordance with Section 424(h) of the Code, unless the Committee determines
otherwise. In addition, the Committee is authorized to make adjustments in the
terms and conditions of, and the criteria and performance objectives included
in, Awards (including Performance Awards and performance goals) in recognition
of unusual or non-recurring events (including events described in the preceding
sentence, as well as acquisitions and dispositions of assets or all or part of
businesses) affecting the Company or any Subsidiary, Affiliate, or business
unit, or the financial statements thereof, or in response to changes in
applicable laws, regulations, accounting principles, tax rates and regulations,
or business conditions or in view of the Committee's assessment of the business
strategy of the Company, a Subsidiary, Affiliate, or business unit thereof,
performance of comparable organizations, economic and business conditions,
personal performance of a Participant, and any other circumstances deemed
relevant; provided that, unless otherwise determined by the
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Committee, no such adjustment shall be made if and to the extent that such
adjustment would cause Options, SARs, or Performance Awards granted pursuant to
Section 8(b) hereof to Participants designated by the Committee as Covered
Employees (as defined in Section 8(d) hereof) to fail to qualify as
"performance-based compensation" under Code Section 162(m) and regulations
thereunder.
6. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions set forth
in this Section 6. In addition, the Committee may impose on any Award or the
exercise thereof, at the date of grant or thereafter (subject to Section 10(e)),
such additional terms and conditions, not inconsistent with the provisions of
the Plan, as the Committee shall determine, including terms regarding forfeiture
of Awards or continued exercisability of Awards in the event of termination of
employment by the Participant.
(b) Options. The Committee is authorized to grant Options to participants
on the following terms and conditions:
(i) Exercise Price. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee;
provided, however, that, except as provided in Section 7(a), such exercise
price shall be not less than the Fair Market Value of a share on the date
of grant of such Option, and in no event shall the exercise price for the
purchase of shares be less than par value.
(ii) Time and Method of Exercise. The Committee shall determine at
the date of grant or thereafter the time or times at which an Option may
be exercised in whole or in part, the methods by which such exercise price
may be paid or deemed to be paid, the form of such payment, including
cash, Stock, other Awards, shares or units valued by reference to shares
issued under any other plan of the Company or a Subsidiary or Affiliate
(including shares or units subject to restrictions, so long as an equal
number of shares issued upon exercise of the Option are subject to
substantially similar restrictions), or notes or other property, and the
methods by which Stock will be delivered or deemed to be delivered to
Participants (including deferral of delivery of shares under a deferral
arrangement).
(iii) ISOs. The terms of any ISO granted under the Plan shall comply
in all respects with the provisions of Section 422 of the Code.
(c) SARs. The Committee is authorized to grant SARs to Participants on the
following terms and conditions:
(i) Right to Payment. An SAR shall confer on the Participant to whom
it is granted a right to receive with respect to each share subject
thereto, upon exercise thereof, the excess of (1) the Fair Market Value of
one share of Stock on the date of exercise (or, if the Committee shall so
determine in the case of any such right other than one related to an ISO,
the Fair Market Value of one share at any time during a specified period
before or after the date of exercise, or the Change in Control Price as
defined in Section 9(c)) over (2) the grant price of the SAR as of the
date of grant of the SAR, which shall be not less than the Fair Market
Value of one share of Stock on the date of grant of such SAR (or, in the
case of an SAR granted in tandem with an Option, shall be equal to the
exercise price of the underlying Option).
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(ii) Other Terms. The Committee shall determine, at the time of
grant or thereafter, the time or times at which an SAR may be exercised in
whole or in part, the method of exercise, method of settlement, form of
consideration payable in settlement, method by which Stock will be
delivered or deemed to be delivered to Participants, whether or not an SAR
shall be in tandem with any other Award, and any other terms and
conditions of any SAR. Unless the Committee determines otherwise, an SAR
(1) granted in tandem with an NQSO may be granted at the time of grant of
the related NQSO or at any time thereafter or (2) granted in tandem with
an ISO may only be granted at the time of grant of the related ISO.
(d) Restricted Stock. The Committee is authorized to grant Restricted
Stock to Participants on the following terms and conditions:
(i) Issuance and Restrictions. Restricted Stock shall be subject to
such restrictions on transferability and other restrictions, if any, as
the Committee may impose at the date of grant or thereafter, which
restrictions may lapse separately or in combination at such times, under
such circumstances, in such installments, or otherwise, as the Committee
may determine. Except to the extent restricted under the Award Agreement
relating to the Restricted Stock, a Participant granted Restricted Stock
shall have all of the rights of a stockholder including the right to vote
Restricted Stock and the right to receive dividends thereon.
(ii) Forfeiture. Upon termination of employment (as determined by
the Committee) during the applicable restriction period, Restricted Stock,
and any accrued but unpaid dividends or Dividend Equivalents, that is or
are then subject to a risk of forfeiture shall be forfeited; provided,
however, that the Committee may provide, by rule or regulation or in any
Award Agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Restricted Stock and any
accrued but unpaid dividends or Dividend Equivalents will be waived in
whole or in part in the event of terminations resulting from specified
causes, and the Committee may in other cases waive in whole or in part the
forfeiture of Restricted Stock and any accrued but unpaid dividends or
Dividend Equivalents.
(iii) Certificates for Stock. Restricted Stock granted under the
Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Stock are registered in the name of
the Participant, such certificates shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such
Restricted Stock, the Company shall retain physical possession of the
certificate, and the Company may require the Participant to deliver a
stock power, endorsed in blank, relating to the Restricted Stock.
(iv) Dividends. Dividends paid on Restricted Stock shall be either
paid at the dividend payment date in cash or in shares of unrestricted
Stock having a Fair Market Value equal to the amount of such dividends, or
the payment of such dividends shall be deferred or the amount or value
thereof automatically reinvested in additional Restricted Stock,
Restricted Stock Units, other Awards, or other investment vehicles, as the
Committee shall determine or permit the Participant to elect. Stock
distributed in connection with a Stock split or Stock dividend, and other
property distributed as a dividend, shall be subject to restrictions and a
risk of forfeiture to the same extent as the Restricted Stock with respect
to which such Stock or other property has been distributed.
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(e) Restricted Stock Units. The Committee is authorized to grant
Restricted Stock Units to Participants, subject to the following terms and
conditions:
(i) Award and Restrictions. Delivery of Stock or cash, as the case
may be, will occur upon expiration of the deferral period specified for
Restricted Stock Units by the Committee (or, if permitted by the
Committee, as elected by the Participant). In addition, Restricted Stock
Units shall be subject to such restrictions as the Committee may impose,
if any, at the date of grant or thereafter, which restrictions may lapse
at the expiration of the deferral period or at earlier or later specified
times, separately or in combination, in installments or otherwise, as the
Committee may determine.
(ii) Forfeiture. Upon termination of employment (as determined by
the Committee) during the applicable deferral period or portion thereof to
which forfeiture conditions apply (as provided in the Award Agreement
evidencing the Restricted Stock Units), or upon failure to satisfy any
other conditions precedent to the delivery of Stock or cash to which such
Restricted Stock Units relate, all Restricted Stock Units, and any accrued
but unpaid Dividend Equivalents, that are at that time subject to a risk
of forfeiture shall be forfeited; provided, however, that the Committee
may provide, by rule or regulation or in any Award Agreement, or may
determine in any individual case, that restrictions or forfeiture
conditions relating to Restricted Stock Units and any accrued but unpaid
Dividend Equivalents will be waived in whole or in part in the event of
termination resulting from specified causes, and the Committee may in
other cases waive in whole or in part the forfeiture of Restricted Stock
Units and any accrued but unpaid Dividend Equivalents.
(f) Stock Bonuses and Stock Awards in Lieu of Cash Awards. The Committee
is authorized to grant Stock as a bonus, or to grant other Awards, in lieu of
Company commitments to pay cash under other plans or compensatory arrangements.
Stock or Awards granted hereunder shall have such other terms as shall be
determined by the Committee.
(g) Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to Participants. The Committee may provide, at the date of grant or
thereafter, that Dividend Equivalents shall be paid or distributed when accrued
or shall be deemed to have been reinvested in additional Stock, or other
investment vehicles as the Committee may specify.
(h) Other Stock-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants Other Stock-Based
Awards that are deemed by the Committee to be consistent with the purposes of
the Plan. The Committee shall determine the terms and conditions of such Awards
at the date of grant or thereafter. Stock or other securities or property
delivered pursuant to an Award in the nature of a purchase right granted under
this Section 6(h) shall be purchased for such consideration, paid for at such
times, by such methods, and in such forms, including, without limitation, cash,
Stock, other Awards, notes or other property, as the Committee shall determine,
subject to any required corporate action.
(i) Unit-Based Awards. The Committee is authorized to grant to
Participants Unit-Based Awards that are deemed by the Committee to be consistent
with the purposes of the Plan. Such Awards may be paid or settled in cash,
Stock, other Awards or property.
7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.
(a) Stand-Alone, Additional, Tandem and Substitute Awards. Awards granted
under the Plan may, in the discretion of the Committee, be granted either alone
or in addition to, in
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tandem with, or in exchange or substitution for, any other Award granted under
the Plan or any award granted under any other plan of the Company, any
Subsidiary or Affiliate, or any business entity to be acquired by the Company or
a Subsidiary or Affiliate, or any other right of a Participant to receive
payment from the Company or any Subsidiary or Affiliate. Awards may be granted
in addition to or in tandem with such other Awards or awards may be granted
either as of the same time as or a different time from the grant of such other
Awards or awards. The per share exercise price of any Option, grant price of any
SAR, or purchase price of any other Award conferring a right to purchase Stock
which is granted, in connection with the substitution of awards granted under
any other plan of the Company or any Subsidiary or Affiliate or any business
entity to be acquired by the Company or any Subsidiary or Affiliate, shall be
determined by the Committee, in its discretion, and may, to the extent the
Committee determines necessary in order to preserve the value of such other
award, be less than the Fair Market Value of a share on the date of grant of
such substitute Award.
(b) Terms of Awards. The term of each Award shall be for such period as
may be determined by the Committee; provided, however, that in no event shall
the term of any ISO or an SAR granted in tandem therewith exceed a period of ten
years from the date of its grant (or such shorter period as may be applicable
under Section 422 of the Code).
(c) Form of Payment Under Awards. Subject to the terms of the Plan and any
applicable Award Agreement, payments to be made by the Company or a Subsidiary
or Affiliate upon the grant, maturation, or exercise of an Award may be made in
such forms as the Committee shall determine at the date of grant or thereafter,
including, without limitation, cash, Stock, or other property, and may be made
in a single payment or transfer, in installments, or on a deferred basis. The
Committee may make rules relating to installment or deferred payments with
respect to Awards, including the rate of interest to be credited with respect to
such payments.
(d) Buyouts. The Committee may at any time offer to buy out any
outstanding Award for a payment in cash, Stock, other Awards (subject to Section
7(a)), or other property based on such terms and conditions as the Committee
shall determine.
(e) Cancellation and Rescission of Awards. The Committee may provide in
any Award Agreement that, in the event a Participant violates a term of the
Award Agreement or other agreement with or policy of the Company or a Subsidiary
or Affiliate, takes or omits to take actions that are deemed to be in
competition with the Company or its Subsidiaries or Affiliates, an unauthorized
solicitation of customers, suppliers, or employees of the Company or its
Subsidiaries or Affiliates, or an unauthorized disclosure or misuse of
proprietary or confidential information of the Company or its Subsidiaries or
Affiliates, or takes or omits to take any other action as may be specified in
the Award Agreement, the Participant shall be subject to forfeiture of such
Award or portion, if any, of the Award as may then remain outstanding and also
to forfeiture of any amounts of cash, Stock, other Awards, or other property
received by the Participant upon exercise or settlement of such Award or in
connection with such Award during such period (as the Committee may provide in
the Award Agreement) prior to the occurrence which gives rise to the forfeiture.
(f) Awards to Participants Outside the United States. The Committee may
modify the terms of any Award under the Plan granted to a Participant who is, at
the time of grant or during the term of the Award, resident or primarily
employed outside of the United States in any manner deemed by the Committee to
be necessary or appropriate in order that such Award shall conform to laws,
regulations, and customs of the country in which the Participant is then
resident or primarily employed, or so that the value and other benefits of the
Award to the
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Participant, as affected by foreign tax laws and other restrictions applicable
as a result of the Participant's residence or employment abroad, shall be
comparable to the value of such an Award to a Participant who is resident or
primarily employed in the United States. An Award may be modified under this
Section 7(f) in a manner that is inconsistent with the express terms of the
Plan, so long as such modifications will not contravene any applicable law or
regulation.
8. Performance Awards.
(a) Performance Conditions. The right of a Participant to exercise or
receive a grant or settlement of any Award, and the timing thereof, may be
subject to such performance conditions as may be specified by the Committee. The
Committee may use such business criteria and other measures of performance as it
may deem appropriate in establishing any performance conditions, and may
exercise its discretion to reduce or increase the amounts payable under any
Award subject to performance conditions, except as limited under Section 8(b)
hereof in the case of a Performance Award intended to qualify under Code Section
162(m).
(b) Performance Awards Granted to Designated Covered Employees. If the
Committee determines that a Performance Award to be granted to a person who is
designated by the Committee as likely to be a Covered Employee (as hereinafter
defined) should qualify as "performance-based compensation" for purposes of Code
Section 162(m), the grant and/or settlement of such Performance Award shall be
contingent upon achievement of preestablished performance goals and other terms
set forth in this Section 8(b).
(i) Performance Goals Generally. The performance goals for such
Performance Awards shall consist of one or more business criteria and a
targeted level or levels of performance with respect to each such
criteria, as specified by the Committee consistent with this Section 8(b),
which level may also be expressed in terms of a specified increase or
decrease in the particular criteria compared to a past period. Performance
goals shall be objective and shall otherwise meet the requirements of Code
Section 162(m) and regulations thereunder (including Regulation 1.162-27
and successor regulations thereto), including the requirement that the
level or levels of performance targeted by the Committee result in the
achievement of performance goals being "substantially uncertain." The
Committee may determine that such Performance Awards shall be granted,
exercised, and/or settled upon achievement of any one performance goal or
that two or more of the performance goals must be achieved as a condition
to settlement of such Performance Awards. Performance goals may differ for
Performance Awards granted to any one Participant or to different
Participants.
(ii) Business Criteria. One or more of the following business
criteria for the Company, on a consolidated basis, and/or for specified
Subsidiaries, Affiliates, business units or ventures of the Company
(except with respect to the total stockholder return and earnings per
share criteria), shall be used by the Committee in establishing
performance goals for such Performance Awards: (1) earnings per share; (2)
revenues; (3) cash flow; (4) cash flow return on investment; (5) return on
assets, return on investment, return on capital, return on equity; (6)
identification and/or consummation of investment opportunities or
completion of specified projects in accordance with corporate business
plans; (7) operating margin; (8) net income; net operating income; pretax
earnings; pretax earnings before interest, depreciation and amortization;
pretax operating earnings after interest expense and before incentives,
service fees, and extraordinary or special items; operating earnings; (9)
total stockholder return; (10) economic value created; and (11) any of the
above goals as compared to the performance of a published or special index
deemed applicable by the Committee including, but not limited to, the
Standard &
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Poor's 500 Stock Index or other indexes or groups of comparable companies
referenced in the Company's proxy statement in response to Item 402(l) of
Regulation S-K.
(iii) Performance Period; Timing For Establishing Performance Goals.
Achievement of performance goals in respect of such Performance Awards
shall be measured over a performance period specified by the Committee.
Performance goals shall be established not later than 90 days after the
beginning of any performance period applicable to such Performance Awards,
or at such other date as may be required or permitted for
"performance-based compensation"under Code Section 162(m).
(iv) Performance Award Pool. The Committee may establish a
Performance Award pool, which shall be an unfunded pool, for purposes of
measuring Company performance in connection with such Performance Awards.
The amount of such Performance Award pool shall be based upon the
achievement of a performance goal or goals based on one or more of the
business criteria set forth in Section 8(b)(ii) hereof during the given
performance period, as specified by the Committee in accordance with
Section 8(b)(iii) hereof. The Committee may specify the amount of the
Performance Award pool as a percentage of any of such business criteria, a
percentage thereof in excess of a threshold amount, or an another amount
which need not bear a strictly mathematical relationship to such business
criteria.
(v) Settlement of Such Performance Awards; Other Terms. Settlement
of such Performance Awards shall be in cash, Stock, other Awards, or other
property, in the discretion of the Committee. The Committee may, in its
discretion, reduce the amount of a settlement otherwise to be made in
connection with such Performance Awards, but may not exercise discretion
to increase any such amount payable to a Covered Employee in respect of a
Performance Award subject to this Section 8(b). The Committee shall
specify the circumstances in which such Performance Awards shall be
forfeited in the event of termination of employment by the Participant
prior to the end of a performance period or settlement of Performance
Awards, and other terms relating to such Performance Awards in accordance
with Section 6 and this Section 8.
(c) Written Determinations. All determinations by the Committee as to the
establishment of performance goals, the amount of any Performance Award pool or
potential individual Performance Awards and as to the achievement of performance
goals relating to Performance Awards under Section 8(b), shall be made in
writing in the case of any Award intended to qualify under Code Section 162(m).
The Committee may not delegate any responsibility relating to such Performance
Awards.
(d) Status of Section 8(b) Awards Under Code Section 162(m). It is the
intent of the Company that Performance Awards under Section 8(b) hereof granted
to persons who are designated by the Committee as likely to be Covered Employees
within the meaning of Code Section 162(m) and regulations thereunder (including
Regulation 1.162-27 and successor regulations thereto) shall, if so designated
by the Committee, constitute "qualified performance-based compensation "within
the meaning of Code Section 162(m) and regulations thereunder. Accordingly, the
terms of Sections 8(b), (c), and (d), including the definitions of Covered
Employee and other terms used therein, shall be interpreted in a manner
consistent with Code Section 162(m) and regulations thereunder. The foregoing
notwithstanding, because the Committee cannot determine with certainty whether a
given Participant will be a Covered Employee with respect to a fiscal year that
has not yet been completed, the term "Covered Employee" as used herein shall
mean only a person designated by the Committee, at the time of grant of
Performance Awards, as likely to be a Covered Employee with respect to that
fiscal
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year. If any provision of the Plan or any agreement relating to such Performance
Awards does not comply or is inconsistent with the requirements of Code Section
162(m) or regulations thereunder, such provision shall be construed or deemed
amended to the extent necessary to conform to such requirements.
9. CHANGE IN CONTROL PROVISIONS.
(a) Acceleration Upon Change in Control. Except as provided in Section
9(e) or in an Award Agreement, in the event of a "Change in Control," as defined
in this Section:
(i) any Award carrying a right to exercise that was not previously
exercisable and vested shall become fully exercisable and vested; and
(ii) the restrictions, deferral limitations, and forfeiture
conditions applicable to any other Award granted under the Plan shall
lapse, such Awards shall be deemed fully vested, any performance
conditions imposed with respect to Awards shall be deemed to be fully
achieved, and payment of such Awards shall be made in accordance with the
terms of the Award Agreements.
(b) "Change in Control" Defined. For purposes of the Plan, a "Change in
Control" shall have occurred if:
(i) any "person," as such term is used in Sections 13(d) and 14(d)
of the Exchange Act (other than the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the Company
or any corporation owned, directly or indirectly, by the stockholders of
the Company in substantially the same proportions as their ownership of
stock of the Company), is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities
of the Company representing 50% or more of the combined voting power of
the Company's then outstanding voting securities;
(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 9(b)) whose election by the Board or
nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for any
reason to constitute at least a majority thereof;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (A) a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving or parent entity) 50% or more of the combined
voting power of the voting securities of the Company or such surviving or
parent entity outstanding immediately after such merger or consolidation
or (B) a merger or consolidation effected to implement a recapitalization
of the Company (or similar transaction) in which no "person" (as
hereinabove defined) acquired 50% or more of the combined voting power of
the Company's then outstanding securities; or
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(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets (or any
transaction having a similar effect).
(c) "Change in Control Price" Defined. For purposes of the Plan, "Change
in Control Price" means the higher of (i) the highest price per share paid in
any transaction constituting a Change in Control or (ii) the highest Fair Market
Value per share at any time during the 60-day period preceding or following a
Change in Control.
(d) Additional Payments. If any payment attributable to any Award under
the Plan or any Preexisting Plan (the "Payments") will be subject to the tax
(the "Excise Tax") imposed by Section 4999 of the Code (or any similar tax that
may hereafter be imposed), the Company shall pay at the time specified below an
additional amount (the "Gross-Up Payment") such that the net amount retained by
a Participant after deduction of any Excise Tax on such Payments and any
federal, state and local income and employment tax and Excise Tax upon the
payment provided for by this Section, shall be equal to the Payments. For
purposes of determining whether any of the Payments will be subject to the
Excise Tax and the amount of such Excise Tax, (i) all payments or benefits
received or to be received by a Participant in connection with a Change in
Control of the Company or the Participant's termination of employment with the
Company, a parent corporation thereof, a Subsidiary or Affiliate (pursuant to
the Plan or any other plan, agreement or arrangement of the Company, its
Subsidiaries or Affiliates) shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of Section 280G(b)(1) shall be treated as subject to the
Excise Tax, unless in the opinion of tax counsel selected by the Company's
independent auditors and acceptable to the Participant such payments or benefits
(in whole or in part) do not constitute parachute payments, or such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered within the meaning of Section 280G(b)(4) of the Code
in excess of the base amount within the meaning of Section 280G(b)(3) of the
Code, or are otherwise not subject to the Excise Tax; (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 (i) above); and (iii) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Company's independent auditors in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code. For
purposes of determining the amount of the Gross-Up Payment, the Participant
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Participant's residence on the date
such Gross-Up Payment is made, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local taxes. In
the event that the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder at the time of the Gross-Up Payment, the
Participant shall repay to the Company at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax and federal and state and local income tax
imposed on the Gross-Up Payment being repaid by the Participant if such
repayment results in a reduction in Excise Tax and/or a federal and state and
local income tax deduction) plus interest on the amount of such repayment at the
rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise
Tax is determined to exceed the amount taken into account hereunder at the time
of the Gross-Up Payment (including by reason of any payment the existence or
amount of which cannot be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect of such excess
(plus any interest payable with
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respect to such excess) at the time that the amount of such excess is finally
determined. Any Gross-Up Payment to be made to the Participant under this
paragraph shall be payable within thirty (30) days of the date of the Change in
Control.
(e) Pooling of Interests. Notwithstanding the provisions of this Section
9, in the event that consummation of a Change in Control is contingent on the
ability to account for such Change in Control under "pooling of interests"
accounting methodology, the provisions of Sections 9(a) and 9(d) hereof shall
not be implemented to the extent such implementation would prevent the Change in
Control transaction from being accounted for in such manner. In such event, the
Committee may in its discretion take such action as it deems appropriate,
without precluding the Change in Control transaction from being so accounted
for, to enable holders of Awards to realize substantially similar economic
results as would have been realized through application of Sections 9(a) and
9(d) hereof.
10. General Provisions.
(a) Compliance with Legal and Exchange Requirements. The Plan, the
granting and exercising of Awards thereunder, and the other obligations of the
Company under the Plan and any Award Agreement, shall be subject to all
applicable federal and state laws, rules and regulations, and to such approvals
by any regulatory or governmental agency as may be required. The Company, in its
discretion, may postpone the issuance or delivery of Stock under any Award until
completion of such stock exchange listing or registration or qualification of
such Stock or other required action under any state, federal or foreign law,
rule or regulation as the Company may consider appropriate, and may require any
Participant to make such representations and furnish such information as it may
consider appropriate in connection with the issuance or delivery of Stock in
compliance with applicable laws, rules and regulations.
(b) Nontransferability. Except as otherwise provided in this Section
10(b), Awards shall not be transferable by a Participant other than by will or
the laws of descent and distribution or pursuant to a designation of a
Beneficiary, and Awards shall be exercisable during the lifetime of a
Participant only by such Participant or his guardian or legal representative. In
addition, except as otherwise provided in this Section 10(b), no rights under
the Plan may be pledged, mortgaged, hypothecated, or otherwise encumbered, or
subject to the claims of creditors. The foregoing notwithstanding, the Committee
may, in its sole discretion, provide that Awards (or rights or interests
therein) other than ISOs and Awards in tandem with ISOs shall be transferable,
including permitting transfers, without consideration, to a Participant's
immediate family members (i.e., spouse, children, grandchildren, or siblings, as
well as the Participant), to trusts for the benefit of such immediate family
members, and to partnerships in which such family members are the only parties,
or other transfers deemed by the Committee to be not inconsistent with the
purposes of the Plan.
(c) No Right to Continued Employment. Neither the Plan nor any action
taken thereunder shall be construed as giving any employee the right to be
retained in the employ of the Company or any of its Subsidiaries or Affiliates,
nor shall it interfere in any way with the right of the Company or any of its
Subsidiaries or Affiliates to terminate any employee's employment at any time.
(d) Taxes. The Company or any Subsidiary or Affiliate is authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due in connection with any
transaction involving an Award, and to take such other action as the Committee
may deem advisable to enable the Company and Participants to
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satisfy obligations for the payment of withholding taxes and other tax
obligations relating to any Award. This authority shall include authority to
withhold or receive Stock or other property and to make cash payments in respect
thereof in satisfaction of a Participant's tax obligations. Other provisions of
the Plan notwithstanding, only the minimum amount of Stock deliverable in
connection with an Award necessary to satisfy statutory withholding requirements
will be withheld.
(e) Changes to the Plan and Awards. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or the Committee's authority to grant Awards
under the Plan without the consent of stockholders or Participants, except that
any such amendment, alteration, suspension, discontinuation, or termination
shall be subject to the approval of the Company's stockholders within one year
after such Board action if such stockholder approval is required by any federal
law or regulation or the rules of any stock exchange or automated quotation
system on which the Stock may then be listed or quoted; provided, however, that,
without the consent of an affected Participant, no amendment, alteration,
suspension, discontinuation, or termination of the Plan may materially adversely
affect the rights of such Participant under any Award theretofore granted to him
or her. The Committee may waive any conditions or rights under, or amend, alter,
suspend, discontinue, or terminate any Award theretofore granted and any Award
Agreement relating thereto; provided, however, that, without the consent of an
affected Participant, no such amendment, alteration, suspension,
discontinuation, or termination of any Award may materially adversely affect the
rights of such Participant under such Award. Following the occurrence of a
Change in Control, the Board may not terminate this Plan or amend this Plan with
respect to Awards that have already been granted in any manner adverse to
employees.
(f) No Rights to Awards; No Stockholder Rights. No Participant or employee
shall have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Participants and employees. No Award
shall confer on any Participant any of the rights of a stockholder of the
Company unless and until Stock is duly issued or transferred to the Participant
in accordance with the terms of the Award.
(g) Unfunded Status of Awards and Trusts. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant pursuant to an Award,
nothing contained in the Plan or any Award shall give any such Participant any
rights that are greater than those of a general creditor of the Company;
provided, however, that the Committee may authorize the creation of trusts or
make other arrangements to meet the Company's obligations under the Plan to
deliver cash, Stock, other Awards, or other property pursuant to any Award,
which trusts or other arrangements shall be consistent with the "unfunded"
status of the Plan unless the Committee otherwise determines. If and to the
extent authorized by the Committee, the Company may deposit into such a trust
Stock or other assets for delivery to the Participant in satisfaction of the
Company's obligations under any Award. If so provided by the Committee, upon
such a deposit of Stock or other assets for the benefit of a Participant, there
shall be substituted for the rights of the Participant to receive delivery of
Stock and other payments under this Plan a right to receive the assets of the
trust (to the extent that the deposited Stock or other assets represented the
full amount of the Company's obligation under the Award at the date of deposit).
The trustee of the trust may be authorized to dispose of trust assets and
reinvest the proceeds in alternative investments, subject to such terms and
conditions as the Committee may specify and in accordance with applicable law.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the stockholders of the Company for approval shall
be construed as creating any
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limitations on the power of the Board to adopt such other incentive arrangements
as it may deem desirable, including the granting of stock options and other
awards otherwise than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.
(i) No Fractional Shares. No fractional shares of Stock shall be issued or
delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash, other Awards, or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.
(j) Governing Law. The validity, construction, and effect of the Plan, any
rules and regulations relating to the Plan, and any Award Agreement shall be
determined in accordance with the laws of the state of Delaware, without giving
effect to principles of conflicts of laws, and applicable federal law.
(k) Effective Date and Approval Date. The Plan shall become effective upon
approval by the Board of Directors (the "Effective Date"); provided, however,
that the Plan shall be subject to the subsequent approval by the Company's
stockholders at a meeting of Company stockholders duly held in accordance with
the Delaware General Corporation Law, or any adjournment thereof in accordance
with applicable provisions of the Delaware General Corporation Law, such
stockholder approval to be obtained not later than one year after the Effective
Date (the date of such approval being referred to as the "Approval Date"). Any
Awards granted under the Plan prior to such approval of stockholders shall be
subject to such approval, and in the absence of such approval, such Awards shall
be null and void.
(l) Titles and Headings; Certain Terms. The titles and headings of the
sections in the Plan are for convenience of reference only. In the event of any
conflict, the text of the Plan, rather than such titles or headings, shall
control. The term "including," when used in the Plan, means in each case
"including without limitation."
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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
1999 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 1999 Cash Bonus Award Voluntary
Deferral Plan (the "1999 Plan"). Participants in the 1999 Plan may make
deferral elections pursuant to the rules outlined in Section 2 below.
2. PROGRAM RULES
Except as otherwise provided herein, the 1999 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 1999 Plan and make all determinations,
including the determination of bonus awards eligible to be deferred, with
respect to the 1999 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 1999 Plan, and references to the Committee shall be
deemed to include any such delegate. Exercise of deferral elections under
the 1999 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 2000 in respect of 1999
services, the payment of which bonus would normally be made by the
end of the first quarter of the 2000 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, delivered or
faxed) no later than December 3, 1999. Form(s) should be returned,
and any questions should be directed, to:
William Palazzo
Manager, HR Systems and Administration
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, NY 10036-2774
Telephone #: (212) 345-5663
Facsimile #: (212) 345-4767
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) 1999 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
business day following the date on which the bonus payment
would have been made had it not been deferred. The available
accounts for deferrals of bonuses (the "1999 Deferred Bonus
Accounts") shall consist of (a) the 1999 Putnam Fund Account
and (b) the 1999 Corporation Stock Account. Amounts may not be
transferred between the 1999 Corporation Stock Account and
either the 1999 Putnam Fund Account or the "Putnam Transfer
Fund Account" (as referred to in Section 2.e. below).
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d. 1999 Putnam Fund Account
(i) Account Valuation. The 1999 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
1999 Putnam Fund Account must be made in multiples of 5% of
the total amounts deferred into the 1999 Putnam Fund Account.
Deferred amounts will be credited to the 1999 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 the elected fund by the net asset value of such
fund of the 1999 Putnam Fund Account as of the close of
business on the day on which such bonus payment would have
been made had it not been deferred. All dividends paid with
respect to an elected fund of a 1999 Putnam Fund Account will
be deemed to be immediately reinvested in such fund.
(ii) Fund Reallocations. Amounts deferred into a 1999 Putnam Fund
Account and the Putnam Transfer Fund Account may be
reallocated between eligible funds of these respective
accounts (but not between the 1999 Putnam Fund Account and the
Putnam Transfer Fund Account) pursuant to an election which
may be made daily. Such election shall be effective, and the
associated reallocation shall be based upon the net asset
values of the applicable funds of the 1999 Putnam Fund Account
or the Putnam Transfer Fund Account, as of the close of
business on the business day the election is received by
facsimile or mail, if received by 2:30 p.m. Eastern Time of
that day. If received later than 2:30 p.m., the election shall
be effective as of the close of business on the following
business day.
e. Putnam Transfer Fund Account
By December 3, 1999, 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 in 1999. The Putnam Transfer Fund Account shall
be administered in a manner consistent with the administration of
the 1999 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. 1999 Corporation Stock Account
(i) Account Valuation. The 1999 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 1999 Corporation Stock Account will
be
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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 1999 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 day on 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 1999
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 1999 Corporation Stock Account must
be deferred to a date not earlier than January 1, 2003.
(ii) Supplemental Amount. With respect to that portion of a bonus
award which a participating employee defers into the 1999
Corporation Stock Account, there shall be credited to such
participant's 1999 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 1999 Corporation Stock Account (prior to
giving effect to the supplemental amount) is 50% of such
award.
(iii) Stock Distributions. Distributions from the 1999 Corporation
Stock Account will be deposited automatically via book entry
for your personal account with the Corporation's stock
transfer agent. If you (or you and your spouse, as joint
tenants) already have such an account with the stock transfer
agent, then the shares will be deposited into that account. If
you do not have such an account, then one will be established
in your name, and the shares will be deposited in the account.
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 1999 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 1999 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 1999 Deferred Bonus
Accounts and Putnam Transfer Fund Account.
4
<PAGE>
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
1999 Corporation Stock Account or the 1999 Putnam Fund
Account, as the case may be, made in up to fifteen (15) 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 1999 Corporation Stock Account or the
1999 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.
(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 1999 Corporation Stock Account or 1999 Putnam Fund
Account, as the case may be, made in up to fifteen (15) 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 1999 Corporation Stock
Account or 1999 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 1999 Plan) for awards previously deferred or
redeferred under the 1999 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 1999 Deferred Bonus Accounts and Putnam
Transfer Fund Account 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 total 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 total disability, as the case may be.
5
<PAGE>
(v) Death During Installment Period. If a participant dies after
the commencement of payments from his or her 1999 Deferred
Bonus Accounts and Putnam Transfer Fund Account, the
designated beneficiary shall receive the remaining
installments over the elected installment period.
(vi) Special Rules Applicable to 1999 Corporation Stock Account.
Notwithstanding any provision in the 1999 Plan to the contrary
(other than the second sentence of Section 2.h. above), with
respect to a participant's 1999 Corporation Stock Account, in
the event that prior to January 1, 2003, a participant's
employment terminates for total disability or retirement, all
amounts in such account will be paid to the participant, less
applicable withholding taxes, in January of 2003. In the event
that, prior to January 2003, a participant's employment
terminates on account of death, or a participant whose
employment was earlier terminated for total disability or
retirement should die, the distribution rule in paragraph (iv)
above will apply. If, however, the termination of employment
prior to January 1, 2003 is on account of a reason other than
death, total 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 1999 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 1999 Corporation
Stock Account attributable to the supplemental amount, the
supplemental amount shall be increased or decreased by the
respective gain or loss in the 1999 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 1999
Deferred Bonus Accounts and Putnam Transfer Fund Account 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 1999 Deferred
Bonus Accounts and Putnam Transfer Fund Account 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 1999
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
1999 Plan to the contrary, in the event of a "change in
control" of the Corporation, as defined in the Corporation's
1997 Senior Executive Incentive and Stock Award Plan (the
"1997 Senior Executive Plan") and 1997 Employee Incentive and
Stock Award Plan (the "1997 Employee Plan"), all amounts
credited to a participant's 1999 Deferred Bonus Accounts and
Putnam Transfer Fund Account 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.
6
<PAGE>
(ix) Form of Payment. All payments in respect of the 1999 Putnam
Fund Account shall be made in cash and payments in respect of
the 1999 Corporation Stock Account shall be made in shares of
common stock of the Corporation; provided, however, that in
the event of a change in control of the Corporation, payments
from the 1999 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 1999 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 2003. When any part of the 1999
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 1999 Plan
and every other Cash Bonus Award Voluntary Deferral Plan for which
the participant has or will have an account balance (collectively,
including the 1999 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 William Palazzo, 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.
7
<PAGE>
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 1999
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 1999 PLAN
The Committee may, at its discretion and at any time, amend the 1999 Plan
in whole or in part. The Committee may also terminate the 1999 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 15 years
or the elected deferral period), the then remaining balance in such
participant's 1999 Deferred Bonus Accounts and Putnam Transfer Fund
Account.
4. MISCELLANEOUS
a. A participant under the 1999 Plan is merely a general (not secured)
creditor, and nothing contained in the 1999 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 1999 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 1999
Plan and any elections made pursuant to the 1999 Plan are subject to
approval of the 1999 Plan by the Committee.
b. Participation in the 1999 Plan is subject to these terms and
conditions and to the terms and conditions of (i) the 1997 Senior
Executive Plan with respect to those participants hereunder who are
subject thereto and (ii) the 1997 Employee Plan with respect to all
other participants. Participation in the 1999 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 seven million, five hundred thousand (7,500,000)
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.
8
<PAGE>
d. Not more than eighteen million (18,000,000) 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 its last fiscal
year, the Corporation's Registration Statement on Form 8 dated February 3,
1987, describing Corporation 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.
All documents subsequently filed by the Corporation pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, subsequent to the end of
the Corporation's last fiscal year and 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.
William Palazzo, Manager, HR Systems and Administration, as indicated
above.
9
<PAGE>
Exhibit 10.12
MARSH & McLENNAN COMPANIES, INC
CANADIAN EMPLOYEE
1999 CASH BONUS AWARD VOLUNTARY DEFERRAL PLAN
1. ELIGIBILITY
All active Canadian employees of Marsh & McLennan Companies, Inc. (the
"Corporation") and its subsidiaries who are designated as eligible for
participation in the MMC Partners Bonus Plan or a Local Bonus Plan, and who are
presently in salary grade 15 (or its equivalent) or above, may, at management's
discretion, be considered for participation in the Marsh & McLennan Companies,
Inc. Canadian Employee 1999 Cash Bonus Award Voluntary Deferral Plan (the "1999
Plan"). Participants in the 1999 Plan may make deferral elections pursuant to
the rules outlined in Section 2 below.
2. PROGRAM RULES
Except as otherwise provided herein, the 1999 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 1999 Plan and make all determinations, including the determination
of bonus awards eligible to be deferred, with respect to the 1999 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 1999 Plan, and references to the
Committee shall be deemed to include any such delegate. Exercise of deferral
elections under the 1999 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 2000 in respect of 1999 services, the
payment of which bonus would normally be made by the end of the first
quarter of the 2000 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, delivered, or faxed) no later than
December 3, 1999. Form(s) should be returned, and any questions should be
directed, to:
William Palazzo
Manager, HR Systems and Administration
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, NY 10036-2774
Telephone #: (212) 345-5663
Facsimile #: (212) 345-4767
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 2001 or January 2002, as elected by the participant.
(iii) 1999 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 business day following the date on which the bonus
payment would have been made had it not been deferred. The available
accounts for deferrals of bonuses (the "1999 Deferred Bonus Accounts")
shall consist of (a) the 1999 Putnam Fund Account and (b) the 1999
Interest Equivalent Account. Amounts may not be transferred between the
1999 Interest Equivalent Account and the 1999 Putnam Fund Account.
2
<PAGE>
d. 1999 Putnam Fund Account
(i) Account Valuation. The 1999 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 1999 Putnam Fund Account must be made in multiples of 5% of
the total amounts deferred into the 1999 Putnam Fund Account. Deferred
amounts will be credited to the 1999 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 the elected fund by the net asset value of such fund of the
1999 Putnam Fund Account as of the close of business on the day on which
such bonus payment would have been made had it not been deferred. All
dividends paid with respect to an elected fund of a 1999 Putnam Fund
Account will be deemed to be immediately reinvested in such fund. All
amounts credited to the 1999 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 1999 Putnam Fund Account may
be transferred between eligible funds pursuant to an election which may be
made daily. Such election shall be effective, and the associated transfer
shall be based upon the net asset values of the applicable funds of the
1999 Putnam Fund Account, as of the close of business on the business day
the election is received by facsimile or mail, if received by 2:30 p.m.
Eastern Time of that day. If received later than 2:30 p.m., the election
shall be effective as of the close of business on the following business
day.
e. 1999 Interest Equivalent Account
An "Interest Equivalent" shall be calculated and added to each 1999
Interest Equivalent Account as of the last day of each calendar quarter
based on the average principal balance in said account during said
calendar quarter and on the average of the 30-day Banker's Acceptance rate
of interest as published in the Toronto Globe & Mail during such calendar
quarter.
f. Statement of Account
The Corporation shall provide periodically to each participant (but not
less frequently than once per calendar quarter) a statement setting forth
the balance to the credit of such participant in such participant's 1999
Deferred Bonus Accounts.
g. Irrevocability and Acceleration
All deferral elections made under the 1999 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 1999 Deferred Bonus Accounts.
3
<PAGE>
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 1999 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 1999
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 1999
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, all amounts credited to a participant's 1999 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 1999 Plan shall be made in
cash in Canadian dollars converted, if necessary, at the exchange rate in
effect as of the applicable date.
i. Tax Treatment
Under present Canadian tax law, all amounts of an employee's bonus
deferred for a period not exceeding three years from the year in which the
related service was rendered, as well as any Interest Equivalent thereon,
will be exempt from Canadian taxation during the period of deferral. When
any part of the 1999 Deferred Bonus Accounts is actually paid to a
participant, taxable employment income will be incurred.
4
<PAGE>
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 1999 Plan and every
other Cash Bonus Award Voluntary Deferral Plan for which the participant
has or will have an account balance (collectively, including the 1999
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 William Palazzo, 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 1999 PLAN
The Committee may, at its discretion and at any time, amend the 1999 Plan in
whole or in part. The Committee may also terminate the 1999 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 1999 Deferred
Bonus Accounts.
4. MISCELLANEOUS
A participant under the 1999 Plan is merely a general (not secured) creditor,
and nothing contained in the 1999 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 1999 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 1999 Plan and any elections made pursuant to the 1999
Plan are subject to approval of the 1999 Plan by the Committee.
5
<PAGE>
Exhibit 12
Marsh & McLennan Companies, Inc. and Subsidiaries
Ratio of Earnings to Fixed Charges
(In millions, except ratios)
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------
1999 (1) 1998 1997 (2) 1996 1995
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Earnings
- --------
Income before income taxes $ 1,247 $ 1,305 $ 715 $ 668 $ 650
Interest expense 233 140 107 61 63
Portion of rents representative of
the interest factor 121 104 88 72 73
Amortization of capitalized interest 1 1 1 1 1
-----------------------------------------------------------------
$ 1,602 $ 1,550 $ 911 $ 802 $ 787
=================================================================
Fixed Charges
- -------------
Interest expense $ 233 $ 140 $ 107 $ 61 $ 63
Portion of rents representative of
the interest factor 121 104 88 72 73
-----------------------------------------------------------------
$ 354 $ 244 $ 195 $ 133 $ 136
=================================================================
Ratio of Earnings to Fixed Charges 4.5 6.4 4.7 6.0 5.8
</TABLE>
(1) For the year ended December 31, 1999, income before income taxes
included a $337 million special charge related to the acquisition and
integration of Sedgwick. Excluding that charge, the ratio of earnings to
fixed charges would have been 5.5.
(2) For the year ended December 31, 1997, income before income taxes
included a $244 million special charge related to the Johnson &
Higgins integration, London real estate and the disposal of
certain assets. Excluding that charge, the ratio of earnings to
fixed charges would have been 5.9.
<PAGE>
[LOGO]
MARSH & MCLENNAN COMPANIES
MARSH -- PUTNAM -- MERCER
ANNUAL REPORT 1999
[GRAPHIC: SUNRISE]
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, NY 10036
www.mmc.com
ANNUAL REPORT 1999
<PAGE>
[GRAPHIC: MARSH]
MMC IS A GLOBAL PROFESSIONAL SERVICES FIRM
WITH ANNUAL REVENUES EXCEEDING $9 BILLION. IT IS THE PARENT
COMPANY OF MARSH, THE WORLD'S LEADING RISK AND INSURANCE SERVICES FIRM;
PUTNAM INVESTMENTS, ONE OF THE LARGEST
INVESTMENT MANAGEMENT COMPANIES IN THE UNITED STATES; AND
MERCER CONSULTING GROUP, A MAJOR GLOBAL PROVIDER OF
CONSULTING SERVICES. MORE THAN 50,000 EMPLOYEES PROVIDE ANALYSIS,
ADVICE AND TRANSACTIONAL CAPABILITIES TO CLIENTS
IN OVER 100 COUNTRIES.
<PAGE>
FINANCIAL HIGHLIGHTS
For the Three Years Ended December 31,
(IN MILLIONS, EXCEPT PER SHARE FIGURES)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Revenue $9,157 $7,190 $6,009
Income Before Income Taxes $1,247(a) $1,305 $ 715(b)
Net Income $ 726(a) $ 796 $ 434(b)
Stockholders' Equity $4,170 $3,659 $3,233
------ ------ ------
Diluted Net Income Per Share $ 2.62(a) $ 2.98 $ 1.73(b)
Dividends Paid Per Share $ 1.70 $ 1.46 $ 1.26
Year-end Stock Price1999(a) $95.69 $58.44 $49.71
------ ------ ------
</TABLE>
(A) EXCLUDING SPECIAL CHARGES OF $337 IN 1999, INCOME BEFORE INCOME TAXES, NET
INCOME AND DILUTED NET INCOME PER SHARE ARE $1,584, $959 AND $3.48,
RESPECTIVELY.
(B) EXCLUDING SPECIAL CHARGES OF $244 IN 1997, INCOME BEFORE INCOME TAXES, NET
INCOME AND DILUTED NET INCOME PER SHARE ARE $959, $592 AND $2.36,
RESPECTIVELY.
[BAR CHART]
YEAR-END
SHARE PRICE
(in $)
<TABLE>
<CAPTION>
COMPOUND
ANNUAL GROWTH 29%
-----------------
95 96 97 98 99
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
29.58 34.67 49.71 58.44 95.69
</TABLE>
[BAR CHART]
YEAR-END MARKET
CAPITALIZATION
(IN $ BILLIONS)
<TABLE>
<CAPTION>
COMPOUND
ANNUAL GROWTH 35%
-----------------
95 96 97 98 99
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
6.57 7.66 13.02 15.43 26.31
</TABLE>
[BAR CHART]
REVENUE
(IN $ BILLIONS)
<TABLE>
<CAPTION>
COMPOUND
ANNUAL GROWTH 21%
-----------------
95 96 97 98 99
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
$3.94 4.40 6.01 7.19 9.16
</TABLE>
<PAGE>
- ------------------------------ Dear Shareholder -------------------------------
MMC had another year of record results. Revenues rose 27 percent to $9.2
billion. Net income rose 20 percent to $959 million and earnings per share rose
17 percent to $3.48, before special charges related to the acquisition of
Sedgwick Group.
Our operating companies grew profitably. Marsh's revenues were $4.5 billion, up
from $3.4 billion in 1998, and operating income reached $806 million, an
increase of 31 percent. Putnam Investments' assets under management rose to $391
billion at year-end 1999 from $294 billion in 1998, revenues increased 17
percent and operating income grew 24 percent. Mercer Consulting Group reported
revenue gains of 26 percent and operating income growth of 29 percent. Marsh &
McLennan Capital, our private equity investment firm, attracted $1.4 billion in
capital commitments for investment in Trident II, the fund it organized in 1999
for investment in global insurance, reinsurance and related industries.
MMC has achieved these results in a world where change has proven to be our
ally: We have extended the range of our professional services; we have expanded
globally; we have grown internally and added new firms to enhance our
capabilities to solve our clients' increasingly complex problems. Consistency
has been our ally as well. So, as we complete our leadership transition in May,
we will be guided by the principles that have supported us thus far--maintaining
our role as trusted advisor to our clients, doing work that meets clients'
rigorous demands and our highest aspirations, attracting and retaining the most
talented people and encouraging collaboration among them. We will continue to
produce earnings of the quality that our shareholders expect.
During 1999, MMC's leadership was strengthened by the appointments of Mathis
Cabiallavetta and Charles A. Davis as vice chairmen. Mathis, who has been a
member of our International Advisory Board since its formation in 1993, brings
broad experience and perspective in global financial services, primarily in
banking. One of his principal objectives is MMC's expansion in Europe. Chuck,
who is also president and chief executive officer of Marsh & McLennan Capital,
is a valued advisor with many years of experience in investment banking. We also
welcomed Sandra S. Wijnberg this January as senior vice president and chief
financial officer in anticipation of Frank J. Borelli's retirement later this
year. Frank has played an important role for more than 15 years, including
overseeing the development of the financial systems and infrastructure that has
supported MMC's successful expansion.
Over the last three years, we have completed mergers with Johnson & Higgins and
Sedgwick with results that have exceeded our expectations. Johnson & Higgins
brought together two complementary cultures, strengthened our professional staff
and produced significant consolidation savings. Sedgwick promises to be a
similar success. When we
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2
<PAGE>
"MMC is sought out for its independence of thought
and objective advice based on intense study of clients' needs,
its understanding of industries throughout the world
and its range of professional services."
[PHOTOGRAPH: J. W. Greenberg A.J.C. Smith AGAINST MOUNTAIN BACKDROP]
<PAGE>
announced the merger in August 1998, we estimated net consolidation savings of
$110 million. Our integration efforts have gone well and we now expect net
savings to approach $160 million over three years, including $30 million
reflected in 1999 results. Although integration work remains to be done, we are
realizing substantial operating efficiencies and have a unified organization in
place. Sedgwick strengthened our position in Europe and Asia Pacific and
provided an important addition to our business in the United States.
By any measure, Putnam had an exceptional year--strong growth in assets under
management, increased profitability and superb investment performance. Putnam is
one of the fastest growing money managers in the United States. Its assets under
management rose 33 percent reflecting excellent gains in its mutual fund,
defined benefit, defined contribution and international businesses.
Award-winning investor service combined with outstanding marketing and sales
contributed to this growth. During the year, Putnam broadened its product range
through its venture with Thomas H. Lee Partners, a leading private equity firm.
Mercer strengthened its position as a global firm consulting on all aspects of
management and produced excellent results. With revenues approaching $2 billion
and earnings reaching $260 million, it achieved strong professional and
financial performance across its human resource and management consulting
practices. Mercer's international presence and reputation for innovative
thinking are driving these gains.
We would like to acknowledge the contributions of George Putnam, who retired
from our Board of Directors last May after having served as a director for 12
years. Saxon Riley retires in March and will continue to serve on our
International Advisory Board. Frank J. Tasco will leave the Board at our annual
meeting this May after a career of extraordinary contributions to the Company,
most notably as chairman and chief executive officer of MMC from 1986 to 1992
and, prior to that, as head of Guy Carpenter, our reinsurance business.
Looking to future changes--globalization, shifting demographics, the convergence
of industries, technological advances including, of course, e-commerce--we see
opportunities and risks that were unimaginable even a few years ago. Marsh,
Putnam and Mercer have gifted teams working throughout their organizations to
address these issues and these teams are enhanced by the talent and skills we
are bringing to the Company.
The characteristics that define MMC have never been more important for our
sustained growth. We are well-managed and capitalized, attentive to employees
and have a tradition of enterprise and innovation. We are sought out for our
independence of thought and objective advice based on our intense study of
clients' needs, our understanding of industries throughout the world and our
range of professional services.
Our expectations for the future are high. We are fortunate to have the people to
carry out our goals, and we appreciate our shareholders' continued confidence.
/s/ A.J.C. Smith
- -----------------------
A.J.C. Smith, CHAIRMAN
/s/ J.W. Greenberg
- -----------------------
J.W. Greenberg, PRESIDENT AND CHIEF EXECUTIVE OFFICER
March 3, 2000
----------
4
<PAGE>
- ----------------------------- CONSTANCY OF CHANGE ------------------------------
"The ever-whirling wheel
Of Change; the which all mortal things doth sway."
EDMUND SPENSER
As the pace of change accelerates, our clients face a greater variety of complex
challenges. MMC's strength has been the ability to anticipate their needs and to
adapt our services and capabilities. We have a unique range of professional
services that addresses some of the most difficult aspects of our clients'
problems, and at the same time, allows us to identify the promising
opportunities that change inevitably creates.
In the pages that follow, the heads of our operating companies--Marsh, Putnam
and Mercer--discuss the performance of their businesses as well as challenges
and aspirations for the future.
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5
<PAGE>
[GRAPHIC: AERIAL VIEW OF FOREST]
- ---------------------------------MMC WORLDWIDE---------------------------------
RISK AND INSURANCE SERVICES
MARSH INC. is the world leader in delivering risk and insurance services and
solutions to clients. Insurance broking is conducted under the MARSH name and
includes the total range of services to identify, value, control, transfer and
finance risk for business, public-entity and professional services
organizations. 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 services are provided through SEABURY & SMITH, INC., which
designs, markets and administraters specialized insurance programs for employees
of large corportations, small businesses, associations and their members, and
private clients. The company also provides wholesale broking services to the
U.S. and London markets, and underwriting management services to North America
and the United Kingdom to insurers, primarily for professional liability
coverages. MARSH & McLENNAN SECURITIES CORPORATION serves clients with
investment banking and capital markets solutions, transaction structuring and
execution services.
MARSH & McLENNAN CAPITAL, INC. is a global private equity firm with over $2.5
billion in assets under management that invests in industries where MMC
possesses specialized knowledge and proprietary deal flow.
<PAGE>
[GRAPHIC: AERIAL VIEW OF FOREST]
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 110 mutual funds, has
over 600 institutional clients and 12 million individual shareholder accounts.
It had $391 billion in assets under management at year-end 1999.
CONSULTING
MERCER CONSULTING GROUP, INC., one of the world's largest consulting firms,
provides advice and services, primarily to business organizations. WILLIAM M.
MERCER COMPANIES LLC is the global leader in human resource, employee benefit
and compensation consulting. MERCER MANAGEMENT CONSULTING, INC., one of the
world's premier corporate strategy firms, helps clients achieve sustained
shareholder value growth through the development and implementation of
innovative business designs. 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.
<PAGE>
[GRAPHIC:SANDSTONE FORMATION]
<PAGE>
- --------------------------RISK AND INSURANCE SERVICES-------------------------
A CONVERSATION WITH JOHN T. SINNOTT,
CHAIRMAN AND CHIEF EXECUTIVE OFFICER, MARSH INC.
HOW IS MARSH ORGANIZED TO DELIVER PROFESSIONAL SERVICES TO CLIENTS?
The distribution of our $4.5 billion of revenues in 1999 demonstrates Marsh's
international scope and client service focus. About 60 percent is generated
in specific geographic regions such as the United States, Europe, Asia
Pacific and Latin America. We derive roughly 20 percent from practices that
operate globally and specialize in more than 20 industries ranging from
aviation to technology and finance. Insurance programs for individuals
through affinity groups, the workplace or our private client services
represent more than 10 percent of revenues. These activities are conducted
through several business units, the largest being Seabury & Smith. Global
reinsurance broking, provided by Guy Carpenter, accounts for 10 percent of
revenues.
Our services extend beyond traditional property-casualty risks to those in
e-business and the environment. In all, over 32,000 employees in more than 300
locations around the world deliver risk advice, services and solutions to
clients.
PLEASE DISCUSS THE RECENT FINANCIAL PERFORMANCE OF MARSH. Marsh's
revenues have more than doubled over the last five years to achieve a compound
annual growth rate of 19 percent. During the period, we acquired Johnson &
Higgins and Sedgwick, but organic growth has averaged about four percent since
1995, and we see significant opportunities to increase that growth rate going
forward. Operating income--$806 million in 1999--has also doubled in the last
five years for a compound annual growth rate of 15 percent. Acquisitions
contributed to this growth, but our per-formance also reflects strong operating
margins. We expect to be able to increase these margins as we continue to
realize consolidation savings from our recent business combinations.
[BAR CHART]
REVENUE
(IN $ BILLIONS)
COMPOUND
ANNUAL GROWTH 19%
95 96 97 98 99
-- -- -- -- --
1.96 1.91 2.79 3.35 4.52
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9
<PAGE>
COULD YOU UPDATE US ON THE SEDGWICK MERGER. We merged with Sedgwick in
late 1998. This followed the positive experience we had with Johnson & Higgins,
which is now fully integrated and resulted in consolidation savings that doubled
its profitability.
Sedgwick expanded our presence in Europe, particularly the United Kingdom, as
well as Asia Pacific. In the United States, it enhanced our operations for
mid-size companies and small-enterprise clients, broadened our facultative
reinsurance business and financial modeling capabilities and benefited our
consumer business. We are realizing excellent results that should lead to
increased net consolidation savings approaching $160 million by 2001.
WHAT ARE THE PRINCIPAL DRIVERS FOR YOUR BUSINESS? The growing
complexity of the world continues to create new and expanded risks.
Consequently, our role as advisors and providers of solutions involving risk is
becoming more valuable--not only for our large base of global clients, but also
for mid-size and small enterprises, whose businesses are expanding rapidly.
Clients face a new generation of risks. Financial, environmental, employment and
professional liabilities, for instance, which have long been sources of major
exposure in the United States, are now arising in other parts of the world.
Corporate governance has become an important issue in virtually every developed
economy. New risks generated by e-commerce--assaults on major commercial Web
sites, intellectual property theft, copyright infringement--create exposures
that are unlike any we know from the past. Reinsurance clients are also
entertaining broader, more complex risks, which is creating growth opportunities
for Guy Carpenter. But the single most influential force creating new, more
challenging business risks is globalization.
WHAT ARE THE FACTORS DRIVING GLOBAL GROWTH? A number of developments
are benefiting our industry and Marsh in particular. Large organizations are
increasingly global, conducting more of their business outside their home
countries. Deregulation and the liberalization of markets are creating new
opportunities. More open markets have coincided with the continuing wave of
privatization and investments in major infrastructure projects. The fact that
global property-casualty insurance premium volume now totals $750 billion
illustrates the important role of commercial insurance in the worldwide economy.
Marsh is ideally positioned to benefit from these trends. An important
strategy for the past two decades has been to build a worldwide organization to
serve clients better and achieve strong long-term performance for MMC's
shareholders.
Europe holds particular promise, and we expect opportunities to become more
attractive as developments in the European Union continue to unfold. The need
for expanded solutions involving risk in the region is being driven by more
pervasive deregulation, less restrictive markets, the implementation of a common
currency and increased cross-border trade. Europe is also developing new capital
markets as corporations begin to use equities, instead of bonds and bank debt,
to finance their operations.
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10
<PAGE>
[GRAPHIC:FOREST]
"If we would guide by the light of reason,
we must let our minds be bold."
LOUIS BRANDEIS
<PAGE>
[GRAPHIC:OCEAN]
"The winds and waves
are always on the side of the ablest navigators."
EDWARD GIBBON
<PAGE>
[GRAPHIC:OCEAN]
<PAGE>
This shift to a shareholder base brings with it new liabilities. Finally, the
demand for our risk services and solutions is accelerating as countries in
Europe continue to reform their social and economic structures.
Asia Pacific is an important area of growth, especially Japan, the world's
second largest economy. Marsh has been active in Japan since 1955, but was
unable to conduct large-scale broking operations because the Japanese have
historically dealt directly with underwriters. Nonetheless, we have had an
important--and still growing--role handling risk management for Japanese
multinationals operating outside Japan. Increased competition, economic demands
and recent changes in Japan's insurance regulatory structure have now opened
this large marketplace to insurance brokers for the first time.
We expect increased need for our risk and insurance services in Latin
America--one of the world's fastest growing regions in terms of insurance
premiums written--based on continuing privatization, changes in the insurance
regulatory environment, large infrastructure projects, the growth in regional
economies and a continuing strong inflow of foreign investment.
COULD YOU COMMENT ON CURRENT CONDITIONS IN COMMERCIAL INSURANCE
MARKETS. Clients have benefited from lower prices, abundant capacity and
attractive terms for the transfer of commercial risk. These conditions have
prevailed in U.S. commercial property-casualty markets since 1987 and in
property-catastrophe reinsurance markets since 1993. A similar environment has
existed outside the United States in recent years. We have begun to see some
change in pricing trends, but the effect of these developments varies by line of
business, as well as the risk profile and loss experience of the client seeking
coverage. From the viewpoint of the overall marketplace, the broadly based,
steep price declines of the past decade are not occurring.
PLEASE DISCUSS THE POTENTIAL TO INCREASE BUSINESS AMONG MEDIUM-SIZE
CLIENTS. This is a huge market with great opportunity to expand. It is currently
fragmented, with no single risk and insurance services firm having a large share
of the business. The market comprises a large number of industrial, commercial
and public-sector enterprises. Some have international operations, but most are
single-country or are regional in scope.
We gained important resources from Johnson & Higgins and Sedgwick to strengthen
the services we offer medium-size clients and have dedicated a practice solely
to their needs. As these companies expand and diversify, they increasingly seek
the services and advice that are available throughout the Marsh organization.
Our ability to provide insurance and employee benefit services gives these
clients more time to do what they do best--run their core businesses.
WHAT NEW INITIATIVES IS MARSH & McLENNAN CAPITAL PURSUING? We organized
Marsh & McLennan Capital less than a decade ago to manage our insurance
market-making activities. The company has evolved into a private equity business
that invests in industries where MMC's specialized knowledge and deal-sourcing
capabilities give us a
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14
<PAGE>
proprietary advantage. In the fall of 1999, Marsh & McLennan Capital closed
Trident II, a fund with $1.4 billion in capital commitments for investment in
global insurance, reinsurance and related industries. Trident II will continue
the successful investment strategy used for the $667 million Trident
Partnership, a fund formed in 1994.
Marsh & McLennan Capital launched a technology fund last year and plans a second
fund this year for investment in software and Internet companies, primarily in
the financial services industry. Our investments are keeping us at the forefront
of technology developments and opportunities. We are forging relationships with
major players in e-commerce and we expect these contacts to become increasingly
valuable to MMC and its businesses going forward.
Marsh & McLennan Capital is working jointly with Mercer to expand MMC's private
equity capability to industries where Mercer has particular expertise. The first
of these initiatives is a new fund focused on the communications and information
sectors.
WHAT OPPORTUNITIES DO THE INTERNET AND E-COMMERCE PRESENT? Since 1992,
when we began using technology in risk transfer and the ways we deliver
services, we have made large multiyear investments to give our clients and
employees unparalleled information access and communications. We have been able,
therefore, to integrate easily Internet-based tools, techniques and solutions
into each of our client segments.
For our risk management and mid-size client businesses, Web-based applications
complement and strengthen the relationship between brokers, clients and markets.
The Web provides improved access to proprietary risk information, facilitates
collaboration and promotes the delivery of timely, accurate information on a
cost-effective basis. Most important, the Web enhances our ability to provide
advice for our clients and to execute transactions efficiently. For our growing
consumer business, new technology will allow clients to apply for insurance
coverage electronically, obtain quotations and administer their accounts.
LOOKING TO 2000 AND BEYOND, WHAT'S THE OUTLOOK FOR MARSH? Our prospects
are outstanding. We have the resources, people and expertise to expand our
business in large and growing markets around the world. We have a strong
position among large global enterprises, but can expand significantly by
providing entirely new services. We have excellent potential in the markets for
medium-size and small enterprises, as well as private clients. Finally, we can
join with our colleagues across MMC to address the increasingly complex
exposures our clients face. / /
[PIE CHART]
1999 REVENUE
$4.5 BILLION
United States 29%
Europe 19%
Asia Pacific 4%
Latin America, Middle East, Africa 4%
Canada 3%
Global Practices 19%
Global Consumer Programs 12%
Global Reinsurance 10%
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15
<PAGE>
[GRAPHIC:MOUNTAIN PEAKS]
<PAGE>
INVESTMENT MANAGEMENT
A CONVERSATION WITH LAWRENCE J. LASSER,
PRESIDENT AND CHIEF EXECUTIVE OFFICER, PUTNAM INVESTMENTS
PUTNAM'S PERFORMANCE HAS BEEN EXCEPTIONAL. COULD YOU ELABORATE ON
ACHIEVEMENTS. 1999 was an outstanding year for our clients' and shareholders'
investments. Our equity mutual funds largely achieved returns that exceeded
those of the overall market as represented by the S&P 500. Our business grew
significantly and increased profitability. Assets under management, supported by
the continued strength in the U.S. equity markets, rose to $391 billion, up from
$294 billion in 1998. Mutual fund sales were strong and we added new
institutional clients with large defined benefit and defined contribution plans.
We increased distribution of our products across all businesses and introduced
important new capabilities in the United States. Our international business,
centered primarily in Japan and Italy, is thriving, and we are exploring new
ventures in other parts of the world.
Strong investment performance across all the asset classes is a crucial driver
of our growth. The other key drivers of Putnam's commercial results, and of all
money management firms, are securities markets and market expectations. Both
influence investor behavior and both have been extremely positive.
COULD YOU COMMENT ON THE OUTLOOK FOR THE INVESTMENT MANAGEMENT SECTOR.
The industry is strong and continues to rank as one of the most attractive in
terms of opportunities and inherent economics. Money management has benefited
from a bull market of historic dimension. Equity markets have grown dramatically
and so has demand for mutual funds. Economic, demographic and cultural changes
have turned savings and investments into front-burner issues for middle-income
as well as affluent investors.
Putnam has been a beneficiary of secular change and of powerful cyclical change.
Thanks to our people, we are positioned within our industry as among the most
successful firms in these most successful times. Putnam's increased market share
and competitive performance rankings show that our achievements result from
highly focused execution of our strategies.
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17
<PAGE>
"The secret of success is constancy to purpose."
BENJAMIN DISRAELI
[GRAPHIC:CANYON]
<PAGE>
WHAT IS KEY TO BUILDING A SUCCESSFUL MONEY MANAGEMENT FIRM? Getting
investment performance right and keeping it right is critical--it is Putnam's
first strategic goal and the lifeblood of its business. In a large firm such as
ours that offers a full range of investment choices--equity and fixed income,
value and growth, domestic, international and global--performance leadership in
every category is a goal we work continuously to achieve. We are committed to
delivering products that adhere to their stated objectives. Our global research
strength combined with our disciplined investment processes and strong teams of
investment professionals enables us to do so. Our expectations for excellence
extend throughout every single area of the firm. Importantly, we understand that
service is a key element we bring to our relationships with our clients and
shareholders.
In contrast to other firms, Putnam has never pursued an approach to growth that
says bigger is inevitably better. We have always maintained that a profitable
business is better than a bigger one. In the last five years, Putnam's assets
have more than quadrupled, making us one of the fastest growing asset managers
in the industry. At the same time, revenues have grown at a compound annual rate
of 29 percent and operating income at 32 percent. Excellent sales and marketing
ability, coupled with good product performance, have driven our strong net
flows.
Recruiting, retaining, motivating and managing the best investment staff in the
industry is a continuing priority and key to building and maintaining a
successful firm. Good companies attract the best people. Excellent people enable
us to achieve excellent performance. Sharing Putnam's success with these
talented professionals rewards them for their efforts and also allows us to
attract other gifted people to the firm. We now have more highly motivated
people and better systems and resources to support them than ever before.
[BAR CHART]
Operating Income
(in $ millions)
Compound
Annual Growth 32%
95 96 97 98 99
-- -- -- -- --
244 338 463 677 841
TELL US ABOUT PUTNAM'S STRATEGY FOR EXPANDING OUTSIDE THE UNITED
STATES. Delivering products profitably on a global basis is a challenge--one
that needs the right combination of skill, partners and distribution channels.
We have chosen joint venture strategic partnerships to distribute our products
in certain international markets and have grown rapidly, with assets under
management for non-U.S. clients surpassing $20 billion in 1999. A number of
factors point to our continued success overseas, including the size of potential
markets; heightened demand for money management expertise and investment
products; economic, market and pension reforms; deregulation of banking and
financial services; and the development of local stock exchanges.
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19
<PAGE>
[GRAPHIC:THE ARCTIC]
"DISCOVERY CONSISTS OF SEEING WHAT EVERYBODY HAS SEEN AND
THINKING WHAT NOBODY HAS THOUGHT."
ALBERT VON SZENT-GYORGYI
<PAGE>
[GRAPHIC:THE ARCTIC]
<PAGE>
We have equity ownership in a highly profitable $9 billion mutual fund business
in Italy with Cisalpina Gestioni, which will help us to expand to other European
countries. We have a strong retail and institutional joint venture business in
Japan with Nippon Life Group, with assets in Japan totaling $8 billion, and a
growing institutional business in the United Kingdom. In 1999, we formed an
alliance with Rothschild Australia Asset Management to manage over $500 million
of its clients' global equity assets. We are pursuing similar partnerships in
other parts of the world, including Germany, France and New Zealand.
We are optimistic that Putnam will benefit from MMC's increasing globalization
efforts and expect that the continuing cross-fertilization among its various
business segments may provide us with opportunities to expand internationally.
LET'S DISCUSS HOW PUTNAM IS TAKING ADVANTAGE OF THE INTERNET AND IS
USING IT TO ENHANCE SERVICE CAPABILITIES. We are integrating the Internet into
the core functions of our existing businesses. We are doing this aggressively
and as a high priority for every part of Putnam.
The Internet has already become one of our most important communications tools.
Both our public Web site and our proprietary sites enable us to interact with
our customers in more effective ways.
Putnam was first in the industry to introduce personalization through the Web
for financial advisors. This site has been ranked among the industry's top sites
and the one most visited by financial advisors. It gives intermediaries access
to a wide array of information preselected by them as important, including
summary information on their major clients. Investors, advisors and Putnam
telephone representatives have the ability to view the same information
simultaneously so they can help clients navigate the site, review account
information and answer questions. We have also developed customized Web sites
for our defined contribution and defined benefit plan clients. The defined
contribution sites allow employees to view accounts, make changes or check
balances. Plan sponsors can track participation rates, follow plan demographics
and target programs to increase participation.
[PIE CHART]
- ------------------------
YEAR-END 1999
ASSETS UNDER MANAGEMENT
- ------------------------
$391 billion
Retail Mutual Funds 60%
Defined Benefit 19%
Defined Contribution 15%
International 6%
In many ways, the Internet is bringing our state-of-the-art investor service
capabilities to the next level. Our intermediaries, clients and mutual fund
customers are increasingly turning to our online tools. The speed of access to
information on their investments and research is a key benefit.
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22
<PAGE>
WHAT IS THE POSITION OF PUTNAM'S DEFINED CONTRIBUTION AND DEFINED
BENEFIT BUSINESSES? Putnam has emerged as a leading manager in the defined
contribution business, which has quickly consolidated to include only a small
number of mainstream competitors. We now have about $58 billion of defined
contribution assets under management. This business has grown at a compound
annual rate of 70 percent for five years. Our 2,500 defined contribution clients
represent 1.7 million participants. We expect that our share of the market for
large 401(k)s and other defined contribution plans will grow because of our
unique ability to deliver customized solutions and high service levels.
Our defined benefit business has tripled over the last five years. Putnam's
strength is the ability to offer a depth of investment expertise across the full
range of asset classes. Much of our growth has come from working with existing
clients to add new asset classes to their investment programs. We have
customized our service approach so clients benefit from dedicated teams of
investment professionals and service specialists.
A PUTNAM HALLMARK IS ITS BREADTH OF INVESTMENT CHOICE. HOW IS THE
COMPANY BROADENING ITS CAPABILITIES? Institutional and high-net-worth clients
are seeking investments beyond publicly traded securities. In response, we
established a relationship last year with Boston-based Thomas H. Lee Partners, a
leading private equity firm. We formed a separate firm, TH Lee, Putnam Capital,
to create and manage alternative investments for institutions as well as
affluent individual investors. We added to the range of our variable annuity
product offerings through a new joint venture with Allstate Life, which has
exceeded expectations. A new insurance option we also developed with Allstate
will allow our mutual fund shareholders to protect themselves against a
prolonged decline by transferring market risk to the insurer.
WHAT ABOUT THE FUTURE? While financial markets have experienced
exceptional growth, they have been volatile. Declines in the equity markets
could occur at any time and are difficult to anticipate. For the long term, we
are pursuing our course in a growing industry and our prospects are excellent.
We have successful mutual fund and institutional businesses. Our international
business is strong, with enormous opportunities to grow given the economic
changes taking place around the world. We take the responsibility of managing
our investors' money very seriously and are committed to delivering consistent
and competitive returns through disciplined investment processes. Remember that
Putnam's commercial success is not determined only by assets under management,
but by our ability to earn profits on the strong-performing assets that we
manage. / /
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23
<PAGE>
[GRAPHIC:CAVERN]
<PAGE>
CONSULTING
A CONVERSATION WITH PETER COSTER,
PRESIDENT, MERCER CONSULTING GROUP
WHAT WERE MERCER'S SIGNIFICANT ACCOMPLISHMENTS IN 1999? We had an
excellent year with solid growth across all of our consulting practices,
accompanied by improved operating efficiency and increasing profitability.
Operating income grew 29 percent on revenue growth of 26 percent. Over the past
five years, our compound earnings growth rate has been 22 percent.
We completed a number of acquisitions. We successfully integrated Sedgwick Noble
Lowndes, which had been one of our largest competitors in human resource
consulting in Europe and Australia. We also added KPMG's U.S. executive
compensation practice; Corporate Resources Group, a compensation consulting and
human resource data firm with particular strength in Europe and Asia; and Dr.
Seebauer & Partner, one of Germany's leading management consulting firms with
strong expertise in the financial services industry.
Most gratifying has been Mercer's growing reputation for innovation and the
continued strengthening of our international presence generally.
TELL US ABOUT INNOVATION AT MERCER. This is key to our success. We
continue to generate a lot of fresh thinking, which is yielding huge benefits
for our clients--and driving our growth.
One of our highly visible innovations centers on an approach to
business strategy we call Value Growth--TM. We deliver a business design
engineered to achieve a superior increase in shareholder value in the face
of rapidly changing markets and competitive demands. Our intellectual capital
in this area is unsurpassed.
In human resource consulting, we continue to emphasize programs that align
employee behaviors with clients' business strategies. We are helping clients who
operate internationally understand the kinds of employee behaviors that support
cross-national organization and are appropriate for their
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25
<PAGE>
stage of development and their aspirations. A new offering helps clients
identify and change the less productive aspects of their current human resource
practices and measure the return on their investments in their people. We
continue to be successful in helping clients design programs to attract and
retain key talent for their businesses.
We are working closely with our colleagues at Marsh to design services
specifically directed at the needs of venture capital firms. At the same time,
we are helping our clients realize greater value by accessing venture capital.
One example is work for a major technology company in which we identified an
undervalued technology; we applied our Value Growth tools to recommend
modifications and positioning to increase its value to potential buyers, and
brought the idea to venture capitalists. This yielded a large return for the
seller and a healthy investment for the buyers.
In the e-business arena, a large and growing portion of our revenues comes from
assisting our current clients and start-up dot-coms with business design and
with human resource programs tailored to the needs of e-business. On the
management consulting side, we have created a discrete business to capitalize on
the power of our Value Growth approaches for e-businesses. In human resource
consulting, we have growing businesses designing employee benefit Web sites and
selling Mercer software and human resource data over the Internet.
ARE COLLABORATIVE EFFORTS BETWEEN MERCER'S CONSULTING UNITS ON THE
RISE? There is increasing collaboration across the group, particularly linking
business strategy with human resources. For example, one new service helps
companies address issues of integration following a merger or acquisition.
Research shows that the most critical element of an acquisition's success is the
support of the combined entity's employees for the organization's strategic
goals. Mercer's approach combines our strengths in business strategy and human
resources to address these issues head-on. Another new service helps clients
deliver a superior customer experience by aligning employee and customer
interests. Mercer's proprietary approaches help clients identify key "moments of
truth" that are critical to customer satisfaction. We then design human resource
programs and rewards to drive appropriate employee behavior at these important
junctures, yielding major bottom-line benefits.
[BAR CHART]
- ------------------------
Operating Income
(in $ millions)
- ------------------------
COMPOUND
ANNUAL GROWTH 22%
95 96 97 98 99
109 119 148 202 260
-------------
26
<PAGE>
[GRAPHIC:MOUNTAIN RANGE]
"ALL EXPERIENCE IS AN ARCH, TO BUILD UPON."
HENRY BROOKS ADAMS
<PAGE>
[GRAPHIC:DESERT]
<PAGE>
[GRAPHIC:DESERT]
"CURIOSITY IS ONE OF THE PERMANENT
AND CERTAIN CHARACTERISTICS OF A VIGOROUS MIND."
SAMUEL JOHNSON
<PAGE>
WHAT PROGRESS HAS MERCER MADE IN ADVANCING ITS INTERNATIONAL POSITION?
Our international growth was exceptionally strong this year. The additions of
Sedgwick Noble Lowndes and Corporate Resources Group, on top of excellent
baseline performance, doubled the size of our human resource consulting
practices in Europe and Asia. Latin America also grew strongly and we added
operations in Colombia, Venezuela, Poland, Israel, India, the Philippines and
Thailand. Our management consulting business in Europe is enjoying strong
organic growth, which we boosted through the Seebauer acquisition. Our economic
consulting business is also expanding rapidly outside the United States.
Mercer's global growth is best viewed from the perspective of what we have
achieved over time. Twenty years ago, just five percent of our business was
outside North America. In 1999, the figure was 40 percent.
WHY IS HAVING A STRONG INTERNATIONAL NETWORK IMPORTANT? Three reasons
stand out: the global nature of many of our clients; the rapid development and
convergence of the consulting markets; and growing opportunities stemming from
changes in local market practices and government programs.
The world's companies are finding that competition can come from anywhere, and
even relatively young companies are rushing to develop internationally. We find
that global businesses want to understand their core issues from an
international perspective and they look to advisors with a strong network around
the world to help them.
The convergence of economic models and the speed at which ideas travel are
driving less developed consulting markets in the direction of more developed
ones. Consequently, demand for Mercer's advice is growing. Japanese companies,
for instance, are radically changing how they reward their employees, which is
driving strong growth for our Tokyo office.
Governments continue to adopt private solutions for social services they have
traditionally supplied. The steps are often highly politicized and change tends
to come in fits and starts, but the trend is clear. Japan is legislating to
increase substantially the private component of how its citizens provide for
retirement. Latin America is undergoing major retirement and health care
reforms. And in Europe, pension reform is high on most government agendas.
------------
30
<PAGE>
DOES MERCER PLAN FURTHER ACQUISITIONS? Acquisitions remain an important
part of our growth strategy. That said, Mercer has never made acquisitions
merely to increase market share. Rather we seek to achieve market position, to
fill geographic or service gaps where there is client need and where we can
identify synergies with our existing operations that will generate an attractive
return.
One reason acquisitions tend to work out well for us is that we carefully
evaluate potential new partners to ensure that they understand and support our
strategy and that our cultures are compatible and that synergies are real. We
also want to make sure that the pricing is economically attractive to MMC
shareholders. This takes time and limits the number of opportunities that
convert to acquisitions.
HOW ARE YOU HANDLING THE CHALLENGE OF HIRING AND RETAINING TOP
EMPLOYEES? This is one of our biggest issues. Demographics, the booming economy
and the proliferation of dot-com companies are making it more difficult for all
consulting companies to attract and retain top-quality people. Fortunately, as
the world's leading human resource consulting firm, we have a lot of experience
in this area. We have introduced a number of initiatives to address work/life
issues, to increase financial incentives for our employees and give them more
control over their career paths.
LOOKING FORWARD, WHAT ARE MERCER'S TOP PRIORITIES? The key to
delivering high value growth for our shareholders is the continued generation of
leading-edge thinking for our clients. To do this we must continue to attract,
retain and develop the very best talent available. This has always been our top
priority, and it is true even more today than historically. / /
[PIE CHART]
- -------------------------------
1999 REVENUE BY GEOGRAPHIC AREA
- -------------------------------
$2.0 BILLION
United States 53%
Europe 33%
Canada 7%
Asia Pacific, Latin America 7%
-----------
31
<PAGE>
[GRAPHIC:RAIN FOREST]
FINANCIAL CONTENTS
33
Management's Discussion and Analysis
of Financial Condition and Results of Operations
41
Consolidated Statements of Income
42
Consolidated Balance Sheets
43
Consolidated Statements of Cash Flows
44
Consolidated Statements of Stockholders' Equity
and Comprehensive Income
45
Notes to Consolidated Financial Statements
61
Report of Management
61
Report of Independent Auditors
62
Selected Quarterly Financial Data
and Supplemental Information (Unaudited)
63
Five-Year Statistical Summary of Operations
----------
32
<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 ("MMC") is a professional
services firm. MMC subsidiaries include Marsh, the world's leading risk and
insurance services firm; Putnam Investments, one of the largest investment
management companies in the United States; and Mercer Consulting Group, a major
global provider of consulting services. More than 50,000 employees worldwide
provide analysis, advice and transactional capabilities to clients in over 100
countries.
MMC operates in three principal business segments based on the services
provided. Segment performance is evaluated based on operating income, which is
after deductions for directly related expenses but before special charges. The
accounting policies of the segments are identical to those used for the
consolidated financial statements, described in Note 1 to the consolidated
financial statements.
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:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(In millions, except per share figures) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE:
Risk and Insurance Services $ 4,523 $ 3,351 $ 2,789
Investment Management 2,684 2,296 1,882
Consulting 1,950 1,543 1,338
- --------------------------------------------------------------------------------
9,157 7,190 6,009
- --------------------------------------------------------------------------------
EXPENSE:
Compensation and Benefits 4,574 3,565 3,044
Amortization of Intangibles 156 82 50
Other Operating Expenses 2,631 2,127 1,873
Special Charges/(Credit) 337 (4) 244
- --------------------------------------------------------------------------------
7,698 5,770 5,211
- --------------------------------------------------------------------------------
OPERATING INCOME $ 1,459 $ 1,420 $ 798
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NET INCOME $ 726 $ 796 $ 434
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NET INCOME PER SHARE:
BASIC $ 2.76 $ 3.11 $ 1.77
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DILUTED $ 2.62 $ 2.98 $ 1.73
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AVERAGE NUMBER OF
SHARES OUTSTANDING:
BASIC 263 256 245
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DILUTED 272 264 251
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The consolidated results of operations for the three years ended December 31,
1999 have been affected by two large acquisitions and special charges primarily
related to those transactions. In 1999, the full-year results of operations
reflect MMC's business combination with Sedgwick Group plc ("Sedgwick"), a
London-based holding company of one of the world's leading insurance and
reinsurance broking and consulting groups, concluded in November 1998. Also
during 1999, MMC recorded special charges of $337 million related to the
acquisition and integration of Sedgwick. In 1998, the full-year results of
operations reflect the impact of the business combination with Johnson & Higgins
("J&H"), completed on March 27, 1997, which was not reflected in the results of
operations in the first quarter of 1997. During 1997, MMC recorded special
charges of $244 million related to the J&H integration, London real estate and
the disposal of certain assets. These special charges are explained, in more
detail, under the caption, Special Charges/(Credit) in this Management's
Discussion and Analysis.
Excluding the effects of these and other smaller acquisitions and dispositions
in each of the three years, consolidated revenues increased approximately 9% and
11% in 1999 and 1998, respectively. Consolidated expenses increased
approximately 7% and 8% in 1999 and 1998, respectively, excluding the effects of
special charges, acquisitions and dispositions.
In 1999, revenue, derived mainly from commissions and fees, rose 27%. This
increase primarily was due to the Sedgwick transaction, which was not reflected
in MMC's consolidated results of operations for the first ten months of 1998.
Excluding the impact of acquisitions, dispositions and foreign exchange,
consolidated revenue grew approximately 9% over 1998. Revenue increased 17% in
the investment management segment, as average assets under management increased
significantly in 1999. Consulting revenue grew 9% for the year reflecting a
higher volume of business in all practice lines. Also, the risk and insurance
services segment experienced revenue growth of approximately 4% primarily due to
net new business development and higher levels of placement services revenue.
In 1998, revenue rose 20% from 1997 due, in part, to the impact of the business
combination with J&H, completed on March 27, 1997, which was not reflected in
the results of operations in the first quarter of 1997, as well as the
acquisition of Sedgwick in November 1998. Excluding acquisitions and
dispositions, revenue grew approximately 11% over 1997. This growth was driven
by a 22% increase in revenue in the investment management segment as average
assets under management in 1998 were substantially higher than 1997. Risk and
insurance services revenue grew 5% for the year reflecting net new business
development partially offset by premium rate declines. Also, the consulting
segment experienced 12% growth in revenue due to an increased level of services
provided in all lines of business.
Operating expenses rose 33% in 1999 primarily reflecting the acquisition of
Sedgwick and special charges of $337 million. Excluding the effect of
acquisitions, dispositions, foreign exchange and special charges, expenses grew
approximately 7% in 1999 primarily reflecting staff growth in the consulting
segment and higher incentive compensation within the investment management and
consulting segments commensurate with strong operating performance. Partially
offsetting these increases was approximately $30 million of net consolidation
savings associated with the Sedgwick integration and $40 million of net
incremental savings relating to the J&H transaction. Of the $70 million of net
consolidation savings, approximately $60 million was realized by risk and
insurance services, approximately $5 million by consulting and approximately $5
million by corporate.
----------
33
<PAGE>
In 1998, expenses increased 11% over 1997 primarily reflecting higher
compensation and client service-related costs in the investment management and
consulting segments to support a higher volume of business. Expense growth in
1998 also reflected one additional quarter of J&H operating expenses in 1998 as
compared with 1997, as well as the acquisition of Sedgwick in November 1998.
These increases were offset, in part, by approximately $75 million of net
integration savings associated with the combination with J&H and the impact of
the $244 million of special charges recorded in 1997. Of the $75 million net
integration savings achieved in 1998, approximately $55 million was realized by
risk and insurance services, approximately $15 million by consulting and
approximately $5 million by corporate. The special charges for 1997 were related
predominantly to the combination with J&H. The charges are explained in more
detail under the caption, Special Charges/(Credit) in this Management's
Discussion and Analysis.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This standard, which establishes new
accounting and reporting requirements for derivative instruments, is effective
(as amended by SFAS No. 137) for fiscal years beginning after June 15, 2000. MMC
does not expect the adoption of this standard to have a material impact on its
results of operations or consolidated financial condition.
RISK AND INSURANCE SERVICES
The operations within this segment provide risk and insurance services as
broker, agent or consultant for insureds, insurance underwriters and other
brokers. Risk management and insurance broking services are provided primarily
under the Marsh name. Reinsurance broking services to insurance and reinsurance
risk takers worldwide are provided under the Guy Carpenter name while insurance
and program services to consumers and emerging businesses are provided primarily
under the Seabury & Smith or Marsh names. In addition, Marsh & McLennan Capital
("MMCAP"), provides services principally in connection with originating,
structuring and managing insurance and related industry investments.
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 as well as loss
exposures other than property and liability. 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 risk) 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
and for loss exposures other than property and liability. Insurance placement
services include the placement of insurance coverages with insurers worldwide,
sometimes involving other intermediaries.
Reinsurance broking 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, life and
health. 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. An 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.
The insurance and program services operation for consumers and emerging
businesses primarily designs, markets and administers life, health, accident,
disability, automobile, homeowners, professional liability and other insurance
and related products, on both a group and singular marketing basis, to
individuals, businesses and their employees, and organizations, associations and
other affinity groups and their members, largely in North America. In addition,
it provides underwriting management services to insurers in the United States,
Canada and the United Kingdom, primarily for professional liability coverages,
as well as wholesale broking services in the United States and the United
Kingdom for a broad range of products on behalf of both affiliated and
unaffiliated retail brokers.
MMCAP is a private equity investment firm. It is an advisor to the Trident
Partnership L.P., an independent private investment partnership, and Trident II,
L.P. formed in 1999 with $1.4 billion in capital commitments for investments in
insurance and related industries. MMCAP is also advisor to a technology fund
with capital commitments from MMC and certain other investors. MMCAP and its
predecessor operations were instrumental in the formation of several substantial
insurance and reinsurance entities.
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; placement services revenues or contingent fees earned
from insurers; interest income on funds held in a fiduciary capacity for others,
such as premiums and claims proceeds and compensation for services provided in
connection with the organization, structuring and management of insurance and
related industry investments, including fees and dividends, as well as
appreciation that has been realized on sales of holdings in such entities.
Revenue generated by the risk and insurance services segment is fundamentally
derived from the value of the services provided to clients and markets. It 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 and
the volume of business from new and existing clients, as well as by interest
rates for fiduciary funds. Placement services revenue and contingent fees
include payments or allowances by insurance companies based upon such factors as
the overall volume of business placed by the broker with that insurer and the
aggregate commissions paid by the insurer for that business 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 business and the realization of
investments, whereas expenses tend to be more uniform throughout the year.
---------
34
<PAGE>
The results of operations for the risk and insurance services segment are
presented below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(In millions of dollars) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $4,523 $3,351 $2,789
Expense(a) 3,717 2,738 2,293
- --------------------------------------------------------------------------------
OPERATING INCOME $ 806 $ 613 $ 496
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OPERATING INCOME MARGIN 17.8% 18.3% 17.8%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(a) Excluding special charges, which are detailed below.
REVENUE
Revenue for the risk and insurance services segment increased 35% over 1998
primarily due to the Sedgwick acquisition. Excluding acquisitions, dispositions
and the effect of foreign exchange, revenue for risk and insurance services
operations rose approximately 4%. Insurance broking revenue, which represented
75% of risk and insurance services, grew approximately 4% primarily reflecting
the effect of net new business development and higher levels of placement
service revenue. Overall, the rate of decline in commercial premium rates
lessened towards the end of 1999 compared with 1998. Revenue from reinsurance
broking and insurance and program services increased by 4% and 2%, respectively,
in 1999. Revenue growth in the first half of 2000 is expected to remain in the
low single digits reflecting net new business, partially offset by continued
rationalization of identified portions of Sedgwick's operations.
In 1998, risk and insurance services revenue grew 20% over 1997 primarily due to
the fact that 1998 was the first full year of combined operations after the
merger with J&H, whereas 1997 had only three quarters. Furthermore, the Sedgwick
acquisition was completed late in the fourth quarter of 1998, adding somewhat to
revenue growth in 1998. Excluding acquisitions and dispositions, risk and
insurance services revenue rose approximately 5%. Insurance broking revenue,
which represented 74% of risk and insurance services, grew 5% reflecting net new
business development partially offset by continued premium rate declines in
virtually all lines of coverage. The increased level of net new business
development was concentrated primarily in the United States and the United
Kingdom. Revenues from reinsurance broking and insurance and program services
increased by 5% and 6%, respectively, in 1998.
EXPENSE
Risk and insurance services expenses increased 36% in 1999, attributable largely
to the acquisition of Sedgwick. Excluding acquisitions, dispositions and the
effect of foreign exchange, expenses increased approximately 2% from 1998
primarily reflecting higher technology spending, which was partially offset by
the realization of $60 million in net integration savings related to the
Sedgwick and J&H transactions, as well as the impact of certain discretionary
expense reductions.
In 1998, risk and insurance services expenses increased 19%. This growth was
attributable largely to the business combination with J&H, which was effective
as of the end of the first quarter of 1997 resulting in 1998 having one
additional quarter of expense, and the acquisition of Sedgwick in November 1998.
Excluding acquisitions and dispositions, expenses increased approximately 2%
from 1997 reflecting salary progressions for continuing staff and higher
technology and systems spending. The increases in spending were offset by the
realization of approximately $55 million of net integration savings related to
the J&H transaction.
INVESTMENT MANAGEMENT
The operations within the investment management segment provide services
primarily under the "Putnam" name. The 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 (the "Putnam
Funds"). A number of the open-end funds serve as funding vehicles for variable
insurance contracts. Investment management services are also provided to
corporate profit-sharing and pension funds, state and other governmental and
public employee retirement funds, university endowment funds, charitable
foundations, collective investment vehicles (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), IRAs 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. Shares of 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. 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 can be recovered through
charges and fees received over a number of years.
Putnam's revenue is derived primarily from investment management and 12b-1 fees
received from the Putnam Funds and institutional accounts. The investment
management services provided by Putnam are performed pursuant to advisory
contracts. The amount of the fees 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. The management of Putnam and the trustees of the Putnam Funds
regularly review the fund fee structure in light of fund performance, the level
and range of services provided, industry conditions and other relevant factors.
Putnam also receives compensation for providing certain shareholder and custody
services.
In July 1999, Putnam acquired a minority ownership interest in Thomas H. Lee
Partners ("THL"), a private equity investment firm. In addition, Putnam and THL
formed a joint venture entity, TH Lee, Putnam Capital ("THLPC") of which Putnam
owns 25%. THL and THLPC offer private equity and alternative investment funds
for institutional and high-net-worth investors.
The results of operations for the investment management segment are presented
below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(In millions of dollars) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE $2,684 $2,296 $1,882
EXPENSE 1,843 1,619 1,419
- --------------------------------------------------------------------------------
OPERATING INCOME $ 841 $ 677 $ 463
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OPERATING INCOME MARGIN 31.3% 29.5% 24.6%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
---------
35
<PAGE>
REVENUE
Putnam's revenue increased 17% in 1999 reflecting a strong increase in the level
of assets under management on which management fees are earned. Assets under
management aggregated $391 billion at December 31, 1999 compared with $294
billion at December 31, 1998, reflecting $14 billion of mutual fund net new
sales and additional investments by institutional accounts, $2 billion of
reinvested dividends and an $81 billion increase resulting from both higher
securities market levels and strong portfolio performance.
Putnam's revenue increased 22% in 1998 reflecting significant growth in the
level of average assets under management on which management fees are earned.
Assets under management aggregated $294 billion at December 31, 1998 compared
with $235 billion at December 31, 1997 reflecting $28 billion of net new sales
of mutual funds and net additional investments by institutional accounts, as
well as a $31 billion growth in market value related to an increase in
securities market levels during the year.
EXPENSE
Putnam's expenses rose 14% in 1999 reflecting an increase in incentive
compensation commensurate with operating performance, increased amortization of
deferred commissions from both increased sales and redemptions, as well as
goodwill amortization arising from the July 1999 investment with THL. Putnam's
expenses increased 14% in 1998 primarily reflecting increased client
service-related costs, including the amortization of deferred commissions,
resulting from both the higher level of business activity and increased
incentive compensation.
Year-end and average assets under management are presented below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(IN BILLIONS OF DOLLARS) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
MUTUAL FUNDS:
Domestic Equity $207 $153 $119
Taxable Bond 36 38 36
International Equity 32 14 11
Tax-Free Income 14 16 16
- --------------------------------------------------------------------------------
289 221 182
- --------------------------------------------------------------------------------
INSTITUTIONAL ACCOUNTS:
Domestic Equity 47 32 21
International Equity 35 16 10
Fixed Income 20 25 22
- --------------------------------------------------------------------------------
102 73 53
- --------------------------------------------------------------------------------
YEAR-END ASSETS $391 $294 $235
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ASSETS $322 $264 $206
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
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. In recent years U.S. equity markets have risen substantially, in
many cases to historical highs. This increase has contributed significantly to
the assets under management and, accordingly, to increases in revenue. A
substantial slowdown in the rise of markets or an actual decrease in general
market levels will reduce revenue growth or, in some circumstances, could lead
to a decline in revenue. Revenues 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 1999, assets held in equity securities represented 82% of assets
under management, compared with 73% in 1998 and 69% in 1997, while investments
in fixed income products represented 18%, compared with 27% last year and 31% in
1997.
CONSULTING
Through Mercer Consulting Group, Inc., the operations within this segment
provide consulting services to a predominantly corporate clientele from
locations around the world, 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.
Economic consulting and analysis services are also provided.
William M. Mercer provides professional advice and services to corporate,
government and institutional clients worldwide. Consultants help organizations
design, implement, administer and communicate employee benefit, compensation and
other human resource programs and strategies, and provide other types of
actuarial advice.
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 and
maximize shareholder value.
National Economic Research Associates, Inc. ("NERA"), a firm of consulting
economists, serves law firms, corporations, trade associations and governmental
agencies. 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 and services. In addition, commission revenue is received from
insurance companies for the placement of individual and group insurance
contracts, primarily life, health and accident coverages.
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.
The results of operations for the consulting segment are presented below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(In millions of dollars) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $1,950 $1,543 $1,338
Expense(a) 1,690 1,341 1,190
- --------------------------------------------------------------------------------
Operating Income $ 260 $ 202 $ 148
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Operating Income Margin 13.3% 13.1% 11.1%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(a) Excluding special charges, which are detailed below.
----------
36
<PAGE>
REVENUE
Consulting services revenue increased 26% in 1999 reflecting an increase in the
level of services provided as well as the impact of the Sedgwick acquisition.
Excluding acquisitions and the effect of foreign exchange, consulting revenue
increased approximately 9% in 1999. Retirement consulting revenue, which
represented 43% of the consulting segment, grew 9% over 1998 primarily due to a
higher amount of services provided. In addition, revenue rose 14% in
compensation consulting, 9% in general management consulting and 16% in the
economic consulting practice due to a higher volume of business in these
practice lines. Health care consulting revenues grew by 2% over 1998.
In 1998, consulting services revenue increased 15% reflecting an increase in the
level of services provided as well as the impact of the combination with J&H,
the Sedgwick acquisition and several small acquisitions. Partially offsetting
these increases was the impact of a transfer of certain business lines to
Automatic Data Processing ("ADP"), as part of a strategic alliance, in October
1997. Excluding acquisitions and dispositions, consulting's revenue increased
approximately 12% in 1998. Retirement consulting revenue, which represented 41%
of the consulting segment, grew 11% over 1997 principally due to a higher level
of services provided. In addition, revenue rose 22% in the economic consulting
practice, 18% in global compensation consulting, 8% in health care consulting
and 6% in general management consulting due to a higher volume of business in
these practice lines in 1998.
EXPENSE
Consulting services expenses increased 26% in 1999. Excluding acquisitions and
the effect of foreign exchange, expenses increased 7% in 1999 primarily
reflecting the effect of staff growth to support new business and higher
incentive compensation commensurate with strong operating performance. These
increases were partially offset by approximately $5 million of realized
consolidation savings related to the Sedgwick transaction.
Consulting services expenses increased 13% in 1998. Excluding acquisitions and
dispositions, expenses increased approximately 9% reflecting the effect of staff
growth to support new business, higher incentive compensation commensurate with
strong operating performance along with compensation expense increases. These
increases were partially offset by approximately $15 million of realized net
integration savings related to the J&H transaction.
CORPORATE EXPENSES
Corporate expenses increased to $103 million in 1999 from $76 million in 1998
due, in part, to the full year effect of the Sedgwick acquisition and a new
corporate advertising program in 1999. These increases were partially offset by
integration savings of $5 million.
Corporate expenses increased from $65 million in 1997 to $76 million in
1998 primarily due to the inclusion of Sedgwick-related expenses for
November and December of 1998.
SPECIAL CHARGES/(CREDIT)
The $337 million of special charges for 1999 included $266 million of
merger-related costs associated with the combination with Sedgwick and a charge
of $71 million primarily for acquisition- related awards pertaining to the
Sedgwick transaction. Of the total $337 million of special charges, $292 million
was applicable to risk and insurance services, $36 million related to consulting
and $9 million was related to corporate. The net impact of the special charges
was $233 million after tax, or $.86 per diluted share.
The $266 million of merger-related costs, associated with employees and offices
of MMC, included personnel-related expenses principally involving severance and
related benefits associated with the reduction of approximately 2,100 positions
worldwide ($194 million), costs related to the planned consolidations of
approximately 50 offices ($47 million) and other integration costs ($25
million). In addition, $285 million of costs for planned reductions of
approximately 2,400 positions and consolidations of approximately 125 offices of
Sedgwick are included in the cost of the acquisition. The utilization of these
charges is summarized in Note 4 to the consolidated financial statements. At
year-end 1999, the actions contemplated by the integration plan were in progress
and the remaining actions are expected to be completed by the end of 2000.
Of the combined merger-related costs totaling $551 million, cash payments of
approximately $220 million were made in 1999. Estimated cash payments of
approximately $200 million are expected to be made in 2000. Some accruals,
primarily representing future rent under noncancelable leases (net of
anticipated sublease income) are expected to be paid out over several years.
Cash outlays are expected to be funded through operating cash flows.
Management believes the net annual savings associated with the Sedgwick
integration should approach $160 million when it is completed. Most of the gross
savings will result from reduced compensation and benefits expense reflecting
the elimination of approximately 4,500 positions and lower facilities costs
reflecting the consolidation of approximately 175 offices. Offsetting these
reductions are additional expenses for goodwill amortization and improvements to
information technology systems and employee benefit, compensation and retirement
plans. Of the $160 million of net savings, approximately $30 million was
realized in 1999. Approximately two-thirds of the remaining estimated annual
savings is expected to be realized in 2000, with the remainder expected to be
realized in 2001. Anticipated savings in 2000 are expected to increase as the
year progresses.
During 1998, MMC recorded a special charge of $11 million representing
acquisition-related stock unit awards issued to certain senior employees of
Sedgwick. In addition, a reserve related to a 1996 provision for restructuring
of approximately $15 million was reversed. The resulting net credit of $4
million increased diluted net income per share by $.01 for the year.
The $244 million of special charges for 1997 included $168 million of
merger-related costs predominantly related to the combination with J&H, a charge
of $61 million related to lease abandonment costs associated with the
consolidation of various London operations along with costs to abandon and
redevelop MMC's London building and $15 million for the disposal of certain EDP
assets, which were written off in 1997. Of the total $244 million of special
charges, $224 million was applicable to risk and insurance services, $17 million
related to consulting and $3 million was recorded in general corporate. The net
impact of the special charges was $158 million after tax, or $.63 per diluted
share.
-----------
37
<PAGE>
The $168 million of merger-related costs, associated with employees and offices
of MMC, included personnel-related expenses principally involving severance and
related benefits associated with the reduction of approximately 1,300 positions
worldwide ($117 million), costs related to the planned consolidations of
approximately 30 offices ($38 million) and other integration costs ($13
million). In addition, $143 million of costs for planned reductions of over 900
positions and consolidations of approximately 50 offices of J&H were included in
the cost of the acquisition. The utilization of these charges is summarized in
Note 4 to the consolidated financial statements. The actions contemplated by the
integration plan were substantially completed in 1998 and the remaining actions
were completed in early 1999.
Of the combined merger-related costs totaling $311 million, cash payments of
approximately $255 million have been made through December 31, 1999. Payments of
$47 million, $122 million and $86 million were made in 1999, 1998 and 1997,
respectively. The remaining $56 million of accruals, representing future rent
under noncancelable leases (net of anticipated sublease income), and salary
continuance arrangements, primarily in Canada and the Netherlands, are expected
to be paid out over several years. Cash outlays have been funded through
operating cash flows. MMC also expects to fund the remaining payments through
operating cash flows.
The gross annual savings associated with the completed J&H integration
approximated $200 million by the end of 1999, most of which resulted from
reduced compensation and benefits expense reflecting the elimination of
approximately 2,200 positions and lower facilities costs reflecting the
consolidation of approximately 80 offices, primarily in the United States. Net
annual savings realized related to the J&H integration were approximately $125
million after giving effect to incremental goodwill amortization. Net savings of
approximately $75 million were realized in 1998 after giving effect to both
incremental goodwill amortization and near-term higher integration-related
spending on technology and systems.
The above actions did not result in any meaningful disruptions of MMC's
operations.
INTEREST
Interest income earned on corporate funds decreased to $21 million in 1999
compared with $25 million in 1998. The decrease in interest income primarily
reflected the use of excess cash to pay down debt during 1999. Interest expense
increased to $233 million in 1999 from $140 million in 1998. This increase was
primarily due to incremental debt incurred in November 1998 to finance the
Sedgwick acquisition as well as incremental debt incurred in 1999 to support
approximately $460 million of initiatives, including Putnam's joint venture
investment with THL, the purchase of an additional condominium interest at MMC's
worldwide headquarters in New York City and several MMCAP-initiated investments.
Interest income earned on corporate funds increased to $25 million in 1998 from
$24 million in 1997. Interest expense increased to $140 million in 1998 from
$107 million in 1997 primarily due to interest expense associated with the
incremental debt incurred in November 1998 to finance the Sedgwick acquisition,
as well as the additional quarter of interest expense in 1998 related to
increased bank borrowings associated with the J&H transaction.
INCOME TAXES
MMC's consolidated tax rate was 41.8% of income before income taxes in 1999.
Excluding the tax effect of the special charges, the underlying tax rate in 1999
was 39.5% compared with 39.0% in 1998 and 38.3% in 1997. The increase in the
1999 tax rate was largely attributable to the non-deductibility of goodwill
associated with recent acquisitions. The increase in the tax rate in 1998
compared with the underlying 1997 rate was attributable largely to the
non-deductibility of goodwill associated with the J&H acquisition and other
acquisitions. The overall tax rates are higher than the U.S. federal statutory
rate primarily because of the non-deductibility of goodwill and provisions for
state and local income taxes. In 1997, MMC's consolidated tax rate including the
tax effect of the special charge was 39.3%.
LIQUIDITY AND CAPITAL RESOURCES
MMC's cash and cash equivalents aggregated $428 million at the end of 1999, a
decrease of $182 million from the end of 1998.
OPERATING CASH FLOWS
MMC generated $1.0 billion of cash from operations in 1999 compared with $1.1
billion in 1998. These amounts reflect the net income earned by MMC in those
years adjusted for non-cash charges and working capital changes.
Included in the cash flows from operations are the net cash requirements related
to the 1999 and 1997 special charges of $337 million and $244 million,
respectively. Cash outlays of $134 million, $66 million and $62 million were
made in 1999, 1998 and 1997, respectively.
Cash flows from operations also include the net cash flows associated with
Putnam's prepaid dealer commissions, which amounted to a $28 million cash inflow
in 1999 compared with a $75 million outflow in 1998 as prepaid dealer
commissions have stabilized at approximately $1.1 billion.
As further explained in Note 15 to the consolidated financial statements, the
disclosure and advice given to clients regarding certain personal pension
transactions by certain present and former subsidiaries in the United Kingdom
are under review by the U.K. Personal Investment Authority. The contingent
exposure for pension redress and related cost is presently estimated to be
approximately $500 million of which $300 million is expected to be recovered
from insurers. Approximately two-thirds of the contingent exposure is associated
with the Sedgwick acquisition while the balance is associated with other current
and former subsidiaries of MMC. Such amounts in excess of anticipated insurance
recoveries have been provided for in the accompanying financial statements. The
timing of payments relating to the pension review process cannot be predicted
with certainty; however, it is anticipated that approximately $175 million will
be paid in 2000. MMC may fund future payments by temporarily drawing upon its
existing credit lines.
MMC anticipates that internally generated funds will be sufficient to meet its
foreseeable recurring operating cash requirements, as well as dividends,
capital expenditures and scheduled repayments of long-term debt.
----------
38
<PAGE>
Financing Cash Flows
Net cash used for financing activities reduced cash by $334 million in 1999
compared with $366 million in 1998.
During 1999, cash used to reduce commercial paper borrowings amounted to
$809 million. The proceeds of a common stock offering in April and a
senior note offering in June were used to repay a portion of the
commercial paper borrowings that were used to initially finance the
Sedgwick acquisition. MMC acquired Sedgwick in November 1998 for total cash
consideration of [pound] 1.25 billion or approximately $2.2 billion.
In April 1999, MMC completed the sale of 4.1 million common shares
realizing approximately $300 million of net proceeds. In June 1999, MMC sold
$600 million of 6 5/8% Senior Notes due in 2004 and $400 million of 7 1/8%
Senior Notes due in 2009. Also during 1999, MMC completed investments
totaling approximately $460 million relating to Putnam's joint venture
with THL, the purchase of an additional condominium interest at its
worldwide headquarters in New York City and several MMCAP-initiated
investments.
Other debt repayments amounted to $734 million in 1999 and $411 million in 1998,
funded through operating cash flows.
Dividends paid by MMC amounted to $447 million in 1999 ($1.70 per share) and
$375 million in 1998 ($1.46 per share). MMC periodically purchases shares of its
common stock to meet requirements of the various stock compensation and benefit
programs. MMC purchased approximately 200,000 shares in 1999 and 4.1 million
shares in 1998.
In June 1999, MMC arranged a new $1.4 billion revolving credit facility for the
use of its subsidiary, Marsh USA, Inc. Borrowings under the facility, which
expires in 2000, are guaranteed by MMC and support Marsh USA, Inc.'s commercial
paper borrowings. This facility was amended in January 2000 to reduce the
aggregate commitment from $1.4 billion to $1.2 billion. No amounts were
outstanding under this facility at December 31, 1999.
During 1997, MMC executed a revolving credit facility with several banks to
support its commercial paper borrowings and to fund other general corporate
requirements. This noncancelable facility, which expires in June 2002, provided
that MMC may borrow up to $1.2 billion at market rates of interest which may
vary depending upon the level of usage of the facility and MMC's credit ratings.
The facility was amended in January 2000 to reduce the aggregate commitment from
$1.2 billion to $1.0 billion. No amounts were outstanding under this facility at
December 31, 1999 and $583 million was outstanding at December 1998. Borrowings
under this facility at December 31, 1998 have been classified as long-term debt
based on MMC's intent and ability to maintain or refinance these obligations on
a long-term basis. MMC also maintains other credit facilities with various
banks, primarily related to operations located outside the United States,
aggregating $196 million as of December 31, 1999. MMC has borrowed $88 million
under these facilities at December 31, 1999 and has included these borrowings in
short-term debt in the Consolidated Balance Sheet.
During 1998, in connection with the Sedgwick transaction, MMC assumed, among
other debt, 7.68% Senior Loan Notes due 2006, which had an outstanding balance
of $63 million at December 31, 1999.
MMC has a fixed rate non-recourse mortgage note agreement due in 2009 amounting
to $200 million, at an interest rate of 9.8%, in connection with its interest in
its worldwide headquarters building.
During 1997, in connection with the J&H transaction, MMC assumed a note payable
due 2012 which has an outstanding balance of $83 million at December 31, 1999.
Interest on this debt is fixed at 8.62%.
MMC has committed to potential future investments of approximately $700 million
in connection with the formation of MMCAP's Trident II Fund and THL. MMC expects
to fund these commitments, in part, with sales proceeds from existing
investments. These commitments will be funded over the next several years if
certain investment levels and performance targets are met.
Investing Cash Flows
Investing activities for MMC reduced cash by $845 million in 1999 and by $587
million in 1998. In 1999, cash used for acquisition activity, primarily related
to the THL transaction, as well as several insurance and consulting businesses,
was $357 million. In 1998, cash used for acquisition activity, related to
several insurance and consulting businesses, was $302 million. MMC's capital
expenditures, which amounted to $358 million in 1999 and $297 million in 1998
have primarily related to computer equipment purchases, the refurbishing and
modernizing of office facilities and, in 1999, the purchase of an additional
condominium interest at MMC's worldwide headquarters in New York City. Other,
net cash outlays of $215 million in 1999 primarily relate to investments in the
portfolio managed by MMCAP, including Trident II, as well as other MMC equity
investments and capitalized software expenditures.
MARKET RISK
Certain of MMC's revenues, expenses, assets and liabilities are exposed to the
impact of interest rate changes and fluctuations in foreign currency exchange
rates. MMC manages its net exposure to interest rate changes by utilizing a
mixture of variable and fixed rate borrowings to finance MMC's asset base.
Interest rate swaps are used on a very limited basis and are with counterparties
of high creditworthiness. MMC does not enter into foreign currency or interest
rate transactions for trading or other speculative purposes.
MMC had the following investments and debt instruments subject to variable
interest rates:
<TABLE>
<CAPTION>
Year Ended December 31,
(IN MILLIONS OF DOLLARS) 1999
- ------------------------ ----
<S> <C>
Cash and cash equivalents invested in certificates of
deposit and time deposits (Note 1) $ 347
Fiduciary cash and investments (Note 1) $3,333
Variable rate debt outstanding (Notes 9 and 10) $2,027
Interest rate swaps--notional net payable (Note 11) $ 309
</TABLE>
These investments and debt instruments are discussed more fully in the above
indicated notes to the consolidated financial statements.
MMC's results of operations are affected by changes in short-term interest rates
and their impact on the above-noted items. Based on the above balances, if
short-term interest rates increase by 25 basis points, annual interest income
would increase by approximately $9 million; however, this would be partially
offset by a $6 million increase in interest expense resulting in a net increase
to income before income taxes of $3 million.
The translated values of revenue and expense from MMC's international risk and
insurance services and consulting operations are subject to fluctuations due to
changes in currency exchange rates. However, the net impact of these
fluctuations on MMC's results of operations or cash flows has not been material.
---------
39
<PAGE>
Forward contracts and options are periodically utilized by MMC to limit foreign
currency exchange rate exposure on net income and cash flows for specific,
clearly defined transactions arising in the ordinary course of its business. At
December 31, 1999, MMC had open forward exchange contracts to sell U.S. dollars
for sterling for an underlying principal amount of $24 million. In addition, MMC
had open forward exchange contracts to purchase other foreign currencies for
underlying principal amounts totaling $12 million. These contracts were entered
into principally to hedge firm commitments. The fair value of these contracts at
December 31, 1999 was not significant. If the applicable exchange rates were to
change by 25%, the fair value of these contracts would increase or decrease by
$9 million.
MMC also had option contracts to hedge its interest rate exposures related to
pension redress in the United Kingdom. At December 31, 1999, the notional
amounts of these contracts totaled $580 million, with amounts expiring annually
over the next three years. MMC has additional option contracts used to hedge the
volatility of MMC's pension redress liabilities attributable to equity markets.
The notional amounts of these contracts was $30 million at December 31, 1999,
with all amounts expiring in 2000. All option contracts at December 31, 1999
were out of the money and as such the fair market value of these contracts was
zero. There is no potential for a future loss associated with these options.
YEAR 2000 ISSUE
MMC had completed remediating its systems in preparation for the Year 2000 prior
to January 1, 2000 and experienced no meaningful system problems during the
roll-over period. MMC will continue to monitor its systems for Year 2000 errors
at least through the first quarter of 2000. For this purpose, the term "systems"
includes computer equipment and software that are commonly thought of as
information technology ("IT") systems including accounting, data processing,
telephone and other miscellaneous systems, as well as non-information technology
("non-IT") systems, such as embedded technology in MMC's facilities and
equipment.
The total cost of the Year 2000 project was approximately $60 million, of which
approximately $17 million was incurred in 1999, $26 million was expensed during
1998 and $17 million was spent prior to 1998. Such costs did not include
expenses incurred in replacing systems and applications in the ordinary course
which had the effect of making such systems and applications Year 2000
compliant, but which were not incurred for that specific purpose. Costs of
modifying computer software for Year 2000 conversion were charged to expense as
they were incurred and were funded from operating cash flows. No significant
projects were deferred or canceled as a result of Year 2000 efforts. In 1999,
Year 2000 expenses represented approximately 3% of MMC's overall information
technology budget and approximately 5% in 1998. Future costs associated with
continuing to monitor this issue are expected to be insignificant.
OTHER
The insurance coverage for potential liability resulting from alleged errors and
omissions in the professional services provided by MMC includes elements of both
risk retention and risk transfer. MMC 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.
MMC'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 illustrated more fully in
Note 6 to the consolidated financial statements, the plan has been and continues
to be well funded; consequently, MMC has not been required to make a
contribution since 1986. The well-funded status of the plan combined with recent
high investment returns has generated pension credits, rather than pension
expenses, for each of the last three years. This credit is expected to continue
in 2000 and, therefore, a cash contribution is currently not anticipated.
There are three defined benefit plans in the U.K. Overall, these plans were
well-funded in 1999 and a pension credit was recorded during the year. The
return achieved by the U.K. pension plan assets exceeded expectations in 1999
and an overall pension credit is expected to continue in 2000.
MMC contributes to certain health care and life insurance benefits provided to
its retired employees. 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 MMC as incurred. This postretirement
liability is included in other liabilities in the Consolidated Balance Sheets.
In 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. Such awards or options generally vest over a four-year period.
Holders of Putnam Class B shares are not entitled to vote and have no rights to
convert their shares into any other securities of Putnam. In certain
circumstances, Class B shares will be converted into Class A Common Stock.
Awards of restricted stock and/or options may be made under the Plan up to a
maximum of 12,000,000 shares of Class B Common Stock, as adjusted for certain
issuances of Putnam Class A shares, which would represent approximately 12% of
the outstanding shares on a fully diluted basis. Through December 31, 1999,
Putnam has made awards pursuant to the Plan with respect to 10,760,200 shares of
Class B Common Stock, consisting of 5,380,100 shares of restricted stock and
5,380,100 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. In addition, pursuant to an executive compensation
agreement, Putnam has also awarded 405,000 restricted stock units and 430,000
options related to Class B Common Stock to a key executive of Putnam. These
shares are incremental to the shares issued under the Plan.
------------
40
<PAGE>
Marsh & McLennan Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the Three Years Ended December 31,
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE FIGURES) 1999 1998 1997
<S> <C> <C> <C>
Revenue $ 9,157 $ 7,190 $ 6,009
Expense 7,698 5,770 5,211
- --------------------------------------------------------------------------------------
Operating income 1,459 1,420 798
Interest income 21 25 24
Interest expense (233) (140) (107)
- --------------------------------------------------------------------------------------
Income before income taxes 1,247 1,305 715
Income taxes 521 509 281
- --------------------------------------------------------------------------------------
Net income $ 726 $ 796 $ 434
- --------------------------------------------------------------------------------------
Basic net income per share $ 2.76 $ 3.11 $ 1.77
- --------------------------------------------------------------------------------------
Diluted net income per share $ 2.62 $ 2.98 $ 1.73
- --------------------------------------------------------------------------------------
Average number of shares outstanding--Basic 263 256 245
- --------------------------------------------------------------------------------------
Average number of shares outstanding--Diluted 272 264 251
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
----------
41
<PAGE>
Marsh & McLennan Companies, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
=========================================================================================================================
December 31, 1999 and 1998
(IN MILLIONS OF DOLLARS) 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 428 $ 610
- -------------------------------------------------------------------------------------------------------------------------
Receivables--
Commissions and fees 1,928 1,562
Advanced premiums and claims 246 181
Other 281 294
- -------------------------------------------------------------------------------------------------------------------------
2,455 2,037
Less--allowance for doubtful accounts (132) (128)
- -------------------------------------------------------------------------------------------------------------------------
Net receivables 2,323 1,909
- -------------------------------------------------------------------------------------------------------------------------
Prepaid dealer commissions--current portion 326 315
Other current assets 206 411
- -------------------------------------------------------------------------------------------------------------------------
Total current assets 3,283 3,245
Intangible assets 5,542 4,826
Fixed assets, net 1,314 1,287
Prepaid dealer commissions 760 799
Long-term securities 687 828
Other assets 1,435 886
- -------------------------------------------------------------------------------------------------------------------------
$ 13,021 $ 11,871
=========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 1,131 $ 2,234
Accounts payable and accrued liabilities 1,721 1,338
Accrued compensation and employee benefits 1,157 841
Accrued income taxes 188 385
Dividends payable 121 104
- -------------------------------------------------------------------------------------------------------------------------
Total current liabilities 4,318 4,902
- -------------------------------------------------------------------------------------------------------------------------
Fiduciary liabilities 3,333 3,257
Less--cash and investments held in a fiduciary capacity (3,333) (3,257)
- -------------------------------------------------------------------------------------------------------------------------
Long-term debt 2,357 1,590
- -------------------------------------------------------------------------------------------------------------------------
Other liabilities 2,176 1,720
- -------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies -- --
- -------------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock, $1 par value, authorized 6,000,000 shares, none issued -- --
Common stock, $1 par value, authorized 800,000,000 shares,
issued 268,695,790 shares in 1999 and 258,867,125 shares in 1998 269 259
Additional paid-in capital 1,411 889
Retained earnings 2,674 2,412
Accumulated other comprehensive income (75) 206
- -------------------------------------------------------------------------------------------------------------------------
4,279 3,766
Less--treasury shares, at cost 1,669,993 shares in 1999 and 1,956,825 shares in 1998 (109) (107)
- -------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 4,170 3,659
- -------------------------------------------------------------------------------------------------------------------------
$ 13,021 $ 11,871
=========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
----------
42
<PAGE>
Marsh & McLennan Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
For the Three Years Ended December 31,
(IN MILLIONS OF DOLLARS) 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating cash flows:
Net income $ 726 $ 796 $ 434
Gain on sale of businesses -- -- (13)
Special charges (credit) 337 (4) 244
Payment of special charges (134) (66) (62)
Depreciation of fixed assets 244 169 149
Amortization of intangible assets 156 82 50
Provision (benefit) for deferred income taxes 32 79 (139)
Prepaid dealer commissions 28 (75) (140)
Other liabilities 8 18 22
Other, net (17) (23) (1)
Net changes in operating working capital other than cash and cash equivalents--
Receivables (465) (171) (155)
Other current assets 166 63 (3)
Accounts payable and accrued liabilities (305) (55) (49)
Accrued compensation and employee benefits 316 175 160
Accrued income taxes (36) 147 (79)
Effect of exchange rate changes (56) (2) (3)
- --------------------------------------------------------------------------------------------------------------------------
Net cash generated from operations 1,000 1,133 415
- --------------------------------------------------------------------------------------------------------------------------
Financing cash flows:
Net increase (decrease) in commercial paper (809) 425 (161)
Other borrowings 1,180 52 2,358
Repayments of other borrowings (734) (411) (1,702)
Purchase of treasury shares (13) (242) --
Issuance of common stock 489 185 210
Dividends paid (447) (375) (306)
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities (334) (366) 399
- --------------------------------------------------------------------------------------------------------------------------
Investing cash flows:
Additions to fixed assets (358) (297) (202)
Net cash proceeds from sale of businesses 85 -- 54
Acquisitions (357) (302) (473)
Other, net (215) 12 (55)
- --------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (845) (587) (676)
- --------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents (3) 6 (14)
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (182) 186 124
Cash and cash equivalents at beginning of year 610 424 300
- --------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 428 $ 610 $ 424
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
--------
43
<PAGE>
Marsh & McLennan Companies, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
and Comprehensive Income
<TABLE>
<CAPTION>
=====================================================================================================
For the Three Years Ended December 31,
(In millions of dollars, except per share figures) 1999 1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
Balance, beginning of year $ 259 $ 172 $ 77
Common stock issuance 4 -- --
Acquisitions -- -- 9
Common stock split -- 87 86
Exercise of stock options and related tax benefits 2 -- --
Issuance of shares under compensation plans and employee stock
purchase plans and related tax benefits 4 -- --
- -----------------------------------------------------------------------------------------------------
Balance, end of year $ 269 $ 259 $ 172
- -----------------------------------------------------------------------------------------------------
ADDITIONAL PAID-IN CAPITAL
Balance, beginning of year $ 889 $ 994 $ 148
Common stock issuance 305 -- --
Acquisitions -- -- 908
Common stock split -- (87) (86)
Exercise of stock options and related tax benefits 61 (11) 15
Issuance of shares under compensation plans and employee stock
purchase plans and related tax benefits 156 (7) 9
- -----------------------------------------------------------------------------------------------------
Balance, end of year $ 1,411 $ 889 $ 994
- -----------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance, beginning of year $ 2,412 $ 2,010 $ 1,902
Net income(a) 726 796 434
Cash dividends declared--(per share amounts:
$1.75 in 1999, $1.53 in 1998 and $1.29 in 1997) (464) (394) (326)
- -----------------------------------------------------------------------------------------------------
Balance, end of year $ 2,674 $ 2,412 $ 2,010
- -----------------------------------------------------------------------------------------------------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of year $ 206 $ 167 $ 145
Foreign currency translation adjustments(b) (138) 18 (66)
Unrealized securities holding gains (losses),
net of reclassification adjustments(c) (140) 45 88
Minimum pension liability adjustment(d) (3) (24) --
- -----------------------------------------------------------------------------------------------------
Balance, end of year $ (75) $ 206 $ 167
- -----------------------------------------------------------------------------------------------------
TREASURY SHARES
Balance, beginning of year $ (107) $ (110) $ (383)
Acquisitions (39) -- 47
Purchase of treasury shares (13) (242) --
Exercise of stock options 39 97 147
Issuance of shares under compensation plans and employee
stock purchase plans 11 148 79
- -----------------------------------------------------------------------------------------------------
Balance, end of year $ (109) $ (107) $ (110)
- -----------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY $ 4,170 $ 3,659 $ 3,233
- -----------------------------------------------------------------------------------------------------
TOTAL COMPREHENSIVE INCOME (a+b+c+d) $ 445 $ 835 $ 456
=====================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
-----------
44
<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 ("MMC"). 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, MMC collects premiums from insureds and, after deducting its commissions,
remits the premiums to the respective insurance underwriters; MMC 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 $167 million in 1999, $137
million in 1998 and $111 million in 1997.
Net uncollected premiums and claims and the related payables, amounting to $11.5
billion at December 31, 1999 and $10.0 billion at December 31, 1998, are not
included in the accompanying Consolidated Balance Sheets.
In certain instances, MMC 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,
placement services revenue earned from insurance carriers, 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 MMC'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.
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 are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
December 31, 1999 and 1998
(IN MILLIONS OF DOLLARS) 1999 1998
- ------------------------------------------------------------
<S> <C> <C>
Furniture and equipment $ 1,046 $ 1,011
Land and buildings 613 614
Leasehold and building improvements 553 482
- ------------------------------------------------------------
2,212 2,107
Less--accumulated depreciation
and amortization (898) (820
- ------------------------------------------------------------)
$ 1,314 $ 1,287
- ------------------------------------------------------------
</TABLE>
INTANGIBLE ASSETS: Acquisition costs in excess of the fair value of net assets
acquired are amortized on a straight-line basis over periods up to 40 years.
Other intangible assets are amortized on a straight-line basis over their
estimated lives. MMC periodically assesses the recoverability of intangible
assets by comparing expected undiscounted future cash flows from the underlying
business operation with recorded intangible asset balances. If such assessments
indicate that the undiscounted future cash flows are not sufficient to recover
the related carrying value, the assets are adjusted to fair values.
PREPAID DEALER COMMISSIONS: Essentially all of the mutual funds marketed by
MMC's investment management segment are made available with a contingent
deferred sales charge in lieu of a front end load. The related prepaid dealer
commissions, initially paid by MMC to broker/dealers for distributing such
funds, can be recovered through charges and fees received over a number of
years. The prepaid dealer commissions are generally amortized over a six-year
period.
CAPITALIZED SOFTWARE COSTS: MMC capitalizes certain costs to develop, purchase
or modify software for the internal use of MMC. These costs are amortized on a
straight-line basis not to exceed five years. Unamortized computer software
costs amounting to $157 million and $110 million at December 31, 1999 and 1998,
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 MMC'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, 1999 amounted to approximately $500 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 $70 million.
----------
45
<PAGE>
RISK MANAGEMENT INSTRUMENTS: Net amounts received or paid under interest rate
swaps and foreign exchange contracts are included in the Consolidated Statements
of Income as incurred. These amounts are not significant.
CONCENTRATIONS OF CREDIT RISK: Financial instruments which potentially subject
MMC to concentrations of credit risk consist primarily of cash and cash
equivalents and commissions receivable. MMC maintains a policy providing for the
diversification of cash and cash equivalent investments and places its
investments in an extensive number of high quality financial institutions to
limit the amount of credit risk exposure. Concentrations of credit risk with
respect to receivables are limited due to the large number of clients and
markets in which MMC does business, as well as the dispersion across many
geographic areas.
PER SHARE DATA: Basic net income per share is calculated by dividing net income
by the average number of shares of MMC's common stock outstanding. Diluted net
income per share is calculated by reducing net income for the potential minority
interest associated with unvested shares under the Putnam Equity Partnership
Plan as discussed further in Note 7. This result is then divided by the average
common shares outstanding, which have been adjusted for the dilutive effect of
potentially issuable common shares.
The following reconciles net income to net income for diluted earnings per share
and basic weighted average common shares outstanding to diluted weighted average
common shares outstanding:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
For the Three Years Ended December 31,
(IN MILLIONS) 1999 1998 1997
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $ 726 $ 796 $ 434
Less: Potential minority interest associated with
Putnam Equity Partnership Plan (14) (10) --
- ----------------------------------------------------------------------------------
Net income for diluted earnings per share $ 712 $ 786 $ 434
- ----------------------------------------------------------------------------------
Basic weighted average common shares outstanding 263 256 245
Dilutive effect of stock options 9 8 6
- ----------------------------------------------------------------------------------
Diluted weighted average common shares outstanding 272 264 251
- ----------------------------------------------------------------------------------
</TABLE>
ESTIMATES: The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS: In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards ("SFAS")
No. 133, "Accounting for Derivative Instruments and Hedging Activities."
This standard, which establishes new accounting and reporting requirements
for derivative instruments, is effective (as amended by SFAS No. 137) for
fiscal years beginning after June 15, 2000. MMC does not expect the
adoption of this standard to have a material impact on its results of
operations or consolidated financial condition.
RECLASSIFICATIONS: Certain reclassifications have been made to the prior year
amounts to conform to the current year presentation.
2 Supplemental Disclosure to the Consolidated Statements of Cash Flows
The following schedule provides additional information concerning acquisitions
and interest and income taxes paid:
<TABLE>
<CAPTION>
===============================================================================
For the Three Years Ended December 31,
(IN MILLIONS OF DOLLARS) 1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchase acquisitions:
Assets acquired, excluding cash $ 357 $ 3,345 $ 2,832
Liabilities assumed -- (852) (1,165)
Issuance of debt and other obligations -- (2,191) (221)
Shares issued -- -- (973)
- -------------------------------------------------------------------------------
Net cash outflow for acquisitions $ 357 $ 302 $ 473
- -------------------------------------------------------------------------------
Interest paid $ 211 $ 164 $ 92
Income taxes paid $ 506 $ 305 $ 471
===============================================================================
</TABLE>
-----------
46
<PAGE>
3 Comprehensive Income
The components of other comprehensive income are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
For the Three Years Ended December 31,
(IN MILLIONS OF DOLLARS) 1999 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Foreign currency translation adjustments $(138) $ 18 $ (66)
Unrealized securities holding gains (losses),
net of income tax (benefit) liability
of $(55), $39 and $60 in 1999, 1998 and 1997 (106) 71 111
Less: Reclassification adjustment for realized gains
included in net income, net of income taxes
of $19, $14 and $13 in 1999, 1998 and 1997 (34) (26) (23)
Minimum pension liability adjustment, net of income
taxes of $2 and $16 in 1999 and 1998 (3) (24) --
- -------------------------------------------------------------------------------------
$(281) $ 39 $ 22
- -------------------------------------------------------------------------------------
</TABLE>
The components of accumulated other comprehensive income are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
December 31, 1999 and 1998
(In millions of dollars) 1999 1998
- -------------------------------------------------------------------------------------
<S> <C> <C>
Foreign currency translation adjustments $(262) $(124)
Unrealized securities holding gains 214 354
Minimum pension liability adjustment (27) (24)
- -------------------------------------------------------------------------------------
$ (75) $ 206
- -------------------------------------------------------------------------------------
</TABLE>
4 Acquisitions and Dispositions
ACQUISITIONS: During 1999, MMC acquired a minority ownership interest in Thomas
H. Lee Partners, a private equity business, and acquired or increased its
interest in several other insurance and reinsurance broking, insurance and
program services and consulting businesses in transactions accounted for as
purchases for a total cost of $357 million. The cost of these transactions
exceeded the fair value of net assets acquired by $318 million.
In the fourth quarter of 1998, MMC consummated a business combination with
Sedgwick Group plc ("Sedgwick"), a London-based holding company of one of the
world's leading insurance and reinsurance broking and consulting groups, for
total cash consideration of approximately $2.2 billion, which was initially
funded with commercial paper borrowings. In April 1999, MMC completed the sale
of 4.1 million common shares, realizing approximately $300 million of net
proceeds. In June 1999, MMC sold $600 million of 6.625% Senior Notes due 2004
and $400 million of 7.125% Senior Notes due 2009. The proceeds of these sales
were used to repay a portion of the commercial paper borrowings. The business
combination is being accounted for using the purchase method of accounting.
Accordingly, goodwill of approximately $2.8 billion resulting from the purchase
price allocation is being amortized over 40 years. Assets acquired and
liabilities assumed have been recorded at their estimated fair values. No
intangible assets, other than goodwill, were acquired as part of the business
combination with Sedgwick.
In March 1997, MMC consummated a business combination with Johnson & Higgins
("J&H"), a privately held risk and insurance services and employee benefit
consulting firm. MMC agreed to pay total consideration of approximately $1.8
billion consisting of $600 million in cash and approximately $1.2 billion or
29.4 million shares (adjusted to reflect subsequent stock splits) of MMC's
common stock. Approximately $1.3 billion was paid at closing or shortly
thereafter and approximately $500 million is being 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 resulted from the purchase price allocation,
is being amortized over 40 years. In arriving at fair value, MMC discounted the
market value of the $1.2 billion stock issuance by $120 million reflecting
certain transfer restrictions associated with the shares issued. MMC allocated
the cost of the acquisition to assets acquired and liabilities assumed based on
its estimate of fair values. No intangible assets, other than goodwill, were
acquired as part of the business combination with J&H.
An agreed number of shares issued in connection with the J&H transaction carried
restrictions and, consequently, could not be sold in the first and second years
following the closing. In addition, approximately 2.4 million of the 29.4
million shares of common stock were placed in escrow in order to secure
indemnification obligations with respect to representations and warranties. As
settlement for certain of such issues, .7 million of these shares have been
returned to MMC as of December 31, 1999 and the acquisition price has been
reduced accordingly.
The following unaudited pro forma summary presents the consolidated results of
operations of MMC as if the Sedgwick and J&H business combinations had occurred
on January 1, 1997. The pro forma results are shown for illustrative purposes
only and do not purport to be indicative of the results which would have been
reported if the business combinations had occurred on the dates indicated or
which may occur in the future. The pro forma information reflected below
----------
47
<PAGE>
includes the impact of pretax special charges in 1998 of $201 million recorded
by Sedgwick prior to its being acquired by MMC, primarily related to pension
redress issues discussed in Note 15, and pretax special charges recorded by MMC
of $244 million in 1997 discussed in Note 12.
<TABLE>
<CAPTION>
Year Ended December 31,
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE FIGURES)
1998 1997
<S> <C> <C>
Revenue $ 8,646 $ 7,902
Net Income 514 427
Basic net income per share 1.94 1.63
Diluted net income per share 1.85 1.60
</TABLE>
During 1998, MMC also acquired or increased its interest in several other
insurance and reinsurance broking, insurance and program services and consulting
businesses for a total cost of $413 million in transactions accounted for as
purchases. The cost of these acquisitions exceeded the fair value of net assets
acquired by $422 million.
During 1997, MMC also acquired or increased its interest in several other
insurance and reinsurance broking and consulting businesses for a total cost of
$285 million in transactions accounted for as purchases. The cost of these
acquisitions exceeded the fair value of net assets acquired by $317 million. In
addition, MMC issued approximately 1.4 million shares of common stock (adjusted
to reflect subsequent stock splits) in connection with the acquisition of an
insurance and program services business accounted for as a pooling of interests.
Dispositions: As part of the combination with Sedgwick, MMC acquired several
businesses that it intended to sell, including insurance underwriting operations
already in run-off and consulting businesses not compatible with its existing
operations. In 1999, results of operations of these businesses and interest
expense associated with their acquisition have been included in the cost of the
Sedgwick acquisition. During 1999, MMC sold certain of these businesses for $85
million and the after tax gain from these sales of $16 million has been
subtracted from the cost of the Sedgwick acquisition. The net assets
(liabilities) of businesses to be disposed are reflected at their estimated
realizable value of $(101) million at December 31, 1999 included in accounts
payable and accrued liabilities and $84 million at December 31, 1998 included in
other current assets in the Consolidated Balance Sheet.
During 1997, MMC sold an insurance and program services business and a
consulting operation for $54 million and recognized pretax gains of $13 million.
INTEGRATION COSTS: In 1999, as part of the integration of Sedgwick, MMC adopted
a plan to reduce staff and consolidate duplicative offices. The estimated cost
of this plan relating to employees and offices of Sedgwick ("1999 Sedgwick
Plan") amounted to $285 million and was included in the cost of the acquisition.
Merger-related costs for employees and offices of MMC ("1999 MMC Plan") amounted
to $266 million and were recorded as part of the 1999 special charge.
The utilization of the 1999 charges is summarized as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
Balance
Initial Utilized Dec. 31,
(IN MILLIONS OF DOLLARS) Balance in 1999 1999
- ------------------------------------------------------------------------
<S> <C> <C> <C>
1999 Sedgwick Plan:
Termination payments to
employees $ 183 $ (93) $ 90
Other employee-related costs 5 (2) 3
Future rent under
noncancelable leases 48 (8) 40
Leasehold termination costs 49 (10) 39
- ------------------------------------------------------------------------
$ 285 $ (113) $ 172
- ------------------------------------------------------------------------
Number of employee
terminations 2,400 (1,700) 700
Number of office
consolidations 125 (50) 75
- ------------------------------------------------------------------------
1999 MMC PLAN:
Termination payments to
employees $ 194 $ (74) $ 120
Future rent under
noncancelable leases 31 (5) 26
Leasehold termination costs 16 (3) 13
Other integration related costs 25 (25) --
- ------------------------------------------------------------------------
$ 266 $ (107) $ 159
- ------------------------------------------------------------------------
Number of employee
terminations 2,100 (1,300) 800
Number of office
consolidations 50 (20) 30
- ------------------------------------------------------------------------
</TABLE>
The other integration costs primarily consist of consulting fees and system
conversion costs incurred in 1999 as a result of the restructuring and merging
of MMC and Sedgwick operations.
At year-end 1999, the actions contemplated by this plan were in progress and the
remaining actions are expected to be completed by the end of 2000. Some
accruals, primarily representing future rent under noncancelable leases (net of
anticipated sublease income), are expected to be paid over several years.
In 1997, as part of the integration of J&H, MMC adopted plans to consolidate
duplicative offices and reduce staff. The estimated cost of the plans relating
to employees and offices of J&H ("1997 J&H Plan") amounted to $143 million and
was included in the cost of the acquisition. Merger-related costs for employees
and offices of MMC ("1997 MMC Plan") amounted to $168 million and were recorded
as part of a special charge in 1997.
------------
48
<PAGE>
The utilization of the 1997 charges is summarized as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Balance
Initial Utilized Utilized Utilized Dec. 31
(IN MILLIONS OF DOLLARS) Balance in 1997 in 1998 in 1999 1999
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 J&H PLAN:
Termination payments to employees $ 70 $ (17) $ (37) $ (10) $ 6
Other employee-related costs 4 (2) (1) (1) --
Future rent under noncancelable leases 45 (1) (5) (2) 37
Leasehold termination costs 24 (4) (13) (7)
- -------------------------------------------------------------------------------------------------------
$ 143 $ (24) $ (56) $ (20) $ 43
- -------------------------------------------------------------------------------------------------------
Number of employee terminations 900 (600) (250) (50) --
Number of office consolidations 50 (10) (35) (5) --
- -------------------------------------------------------------------------------------------------------
1997 MMC PLAN:
Termination payments to employees $ 117 $ (44) $ (58) $ (14) $ 1
Future rent under noncancelable leases 21 (2) (4) (3) 12
Leasehold termination costs 17 (10) (2) (5) --
Other integration related costs 13 (6) (2) (5) --
- -------------------------------------------------------------------------------------------------------
$ 168 $ (62) $ (66) $ (27) $ 13
- -------------------------------------------------------------------------------------------------------
Number of employee terminations 1,300 (800) (450) (50) --
Number of office consolidations 30 (10) (17) (3) --
- -------------------------------------------------------------------------------------------------------
</TABLE>
The remaining balances, primarily representing future rent under noncancelable
leases (net of anticipated sublease income), and salary continuance
arrangements, primarily in Canada and the Netherlands, are expected to be paid
out over several years.
5 Income Taxes
Income before income taxes shown below is based on the geographic location to
which such income is attributable. Although income taxes related to such income
may be assessed in more than one jurisdiction, the income tax provision
corresponds to the geographic location of the income.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
For the Three Years Ended December 31,
(IN MILLIONS OF DOLLARS) 1999 1998 1997
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Income before income taxes:
U.S $ 996 $ 897 $ 510
Other 251 408 205
- ----------------------------------------------------------------------
$ 1,247 $ 1,305 $ 715
- ----------------------------------------------------------------------
Income taxes:
Current--
U.S. Federal $ 359 $ 284 $ 218
Other national governments 74 89 141
U.S. state and local 56 57 61
- ----------------------------------------------------------------------
489 430 420
- ----------------------------------------------------------------------
Deferred--
U.S. Federal 2 30 (55)
Other national governments 40 49 (71)
U.S. state and local (10) -- (13)
- ----------------------------------------------------------------------
32 79 (139)
- ----------------------------------------------------------------------
Total income taxes $ 521 $ 509 $ 281
- ----------------------------------------------------------------------
</TABLE>
The significant components of deferred income tax assets and liabilities and
their balance sheet classifications are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1999 and 1998
(IN MILLIONS OF DOLLARS) 1999 1998
- ---------------------------------------------------------------------
<S> <C> <C>
DEFERRED TAX ASSETS:
Accrued expenses not currently deductible $ 776 $ 752
Differences related to non-U.S. operations 356 215
Accrued retirement benefits 124 137
Other 19 18
- ---------------------------------------------------------------------
$ 1,275 $ 1,122
- ---------------------------------------------------------------------
DEFERRED TAX LIABILITIES:
Prepaid dealer commissions $ 381 $ 401
Unrealized securities holding gains 117 192
Differences related to non-U.S. operations 78 71
Depreciation and amortization 58 43
Other 52 80
- ---------------------------------------------------------------------
$ 686 $ 787
- ---------------------------------------------------------------------
BALANCE SHEET CLASSIFICATIONS:
Current assets $ 71 $ 76
Other assets 518 359
Accrued income taxes -- (100)
- ---------------------------------------------------------------------
</TABLE>
------------
49
<PAGE>
A reconciliation from the U.S. Federal statutory income tax rate to MMC's
effective income tax rate is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
For the Three Years Ended
December 31, 1999 1998 1997
- -------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Federal statutory rate 35.0% 35.0% 35.0%
U.S. state and local income taxes--
net of U.S. Federal income
tax benefit 2.4 2.9 4.4
Differences related to non-U.S
operations 2.1 (.4) (.2)
Other 2.3 1.5 .1
- -------------------------------------------------------------------
Effective tax rate 41.8% 39.0% 39.3%
- -------------------------------------------------------------------
</TABLE>
In 1997, MMC received a Notice of Proposed Adjustment from a local field office
of the Internal Revenue Service ("IRS") challenging its tax treatment related to
12b-1 fees paid by Putnam. The notice reflected the preliminary thinking of the
IRS field office and did not constitute a formal assertion of liability by the
IRS. The notice in question asserts a position contrary to the position
enunciated in an IRS 1993 Technical Advice Memorandum. The IRS field office
withdrew the Notice of Proposed Adjustment and continues to have the matter
under consideration. MMC 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 MMC on its tax
returns. On the basis of present information and advice received from counsel,
it is the opinion of MMC's management that any assessments resulting from
current tax audits will not have a material adverse effect on MMC's consolidated
results of operations or its consolidated financial position.
6 Retirement Benefits
The following schedules provide information concerning MMC's U.S. defined
benefit pension plans and postretirement benefit plans:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
U.S. Pension U.S. Postretirement
December 31, 1999 and 1998 Benefits Benefits
(IN MILLIONS OF DOLLARS) 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 1,956 $ 1,434 $ 165 $ 175
Service cost 63 46 3 3
Interest cost 134 104 11 10
Actuarial (gain) loss (106) 87 (30) (6)
Acquisitions -- 365 -- 6
Benefits paid (101) (82) (10) (5)
Dispositions (6) -- -- --
Plan amendments -- 2 11 (18)
- -------------------------------------------------------------------------------------------
Benefit obligation at end of year 1,940 1,956 150 165
- -------------------------------------------------------------------------------------------
Change in plan assets:
Fair value of plan assets at beginning of year 2,236 1,651 -- --
Actual return on plan assets 466 256 -- --
Acquisitions -- 392 -- --
Employer contributions 18 19 10 5
Dispositions (5) -- -- --
Benefits paid (101) (82) (10) (5)
- -------------------------------------------------------------------------------------------
Fair value of plan assets at end of year 2,614 2,236 -- --
- -------------------------------------------------------------------------------------------
Funded status 674 280 (150) (165)
Unrecognized net actuarial gain (614) (245) (36) (7)
Unrecognized prior service cost (credit) 5 10 (3) (14)
Unrecognized transition asset (23) (28) -- --
- -------------------------------------------------------------------------------------------
Net asset (liability) recognized $ 42 $ 17 $ (189) $ (186)
- -------------------------------------------------------------------------------------------
Amounts recognized in Balance Sheet consist of:
Prepaid benefit cost $ 184 $ 144 $ -- $ --
Accrued benefit liability (175) (161) (189) (186)
Intangible asset 6 10 -- --
Accumulated other comprehensive income 27 24 -- --
- -------------------------------------------------------------------------------------------
Net asset (liability) recognized $ 42 $ 17 $ (189) $ (186)
- -------------------------------------------------------------------------------------------
</TABLE>
----------
50
<PAGE>
The weighted average actuarial assumptions utilized in determining the above
amounts for the U.S. defined benefit and other postretirement benefit plans as
of the end of the year were as follows:
<TABLE>
<CAPTION>
=========================================================================
U.S. Pension U.S. Postretirement
Benefits Benefits
----------- ------------
1999 1998 1999 1998
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Weighted average assumptions:
Discount rate 8.0% 7.0% 8.0% 7.0%
Expected return on plan assets 10.0% 10.0% -- --
Rate of compensation increase 4.75% 4.0% -- --
=========================================================================
</TABLE>
In 1999, the discount rate used to value the liabilities of the U.S. defined
benefit pension plans and postretirement benefit plans was increased to reflect
current interest rates of high quality fixed income debt securities. 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 increases in benefit obligation and plan assets in 1998 relating
to acquisitions pertain to MMC's acquisition of Sedgwick.
The projected benefit obligation, accumulated benefit obligation and fair value
of plan assets for the U.S. pension plans with accumulated benefit obligations
in excess of plan assets were $298 million, $249 million and $109 million,
respectively, as of December 31, 1999 and $279 million, $247 million and $114
million, respectively as of December 31, 1998.
The components of the net periodic benefit cost for the U.S. defined benefit and
other postretirement benefit plans are as follows:
<TABLE>
<CAPTION>
=================================================================================================
U.S. Pension Benefits U.S. Postretirement Benefits
For the Three Years Ended December 31, ---------------------------------------------------
(IN MILLIONS OF DOLLARS) 1999 1998 1997 1999 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 63 $ 46 $ 39 $ 3 $ 3 $ 4
Interest cost 134 104 90 11 10 10
Expected return on plan assets (199) (146) (115) -- -- --
Amortization of prior service cost (credit) 4 7 7 (1) (2) --
Amortization of transition asset (4) (4) (4) -- -- --
Recognized actuarial (gain) loss 7 5 (5) (1) -- (1)
- -------------------------------------------------------------------------------------------------
$5 $ 12 $ 12 $ 12 $ 11 $ 13
=================================================================================================
</TABLE>
The assumed health care cost trend rate was approximately 9% in 1999, gradually
declining to 4% in the year 2041. Assumed health care cost trend rates have a
significant effect on the amounts reported for the U.S. health care plans. A
one-percentage-point change in assumed health care cost trend rates would have
the following effects (in millions of dollars):
<TABLE>
<CAPTION>
1-Percentage- 1-Percentage-
Point Increase Point Decrease
===============================================================================================
<S> <C> <C>
Effect on total of service and interest cost components $2 $(2)
Effect on postretirement benefit obligation $19 $(15)
===============================================================================================
</TABLE>
-----------
51
<PAGE>
The following schedules provide information concerning MMC's significant
non-U.S. defined benefit pension plans and postretirement benefit plans:
<TABLE>
<CAPTION>
=======================================================================================================
Non-U.S. Pension Non-U.S. Postretirement
Benefits Benefits
December 31, 1999 and 1998 -------------------------------------------------
(IN MILLIONS OF DOLLARS) 1999 1998 1999 1998
- ------------------------ ---- ---- ---- ----
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 2,680 $ 900 $ 17 $ 17
Service cost 96 48 1 --
Interest cost 156 66 2 1
Employee contributions 17 10 -- --
Actuarial (gain) loss (137) 209 (2) --
Acquisitions 120 1,503 24 --
Benefits paid (105) (48) (1) --
Foreign currency changes (101) (9) -- (1)
Plan amendments 3 1 1 --
- -------------------------------------------------------------------------------------------------------
Benefit obligation at end of year 2,729 2,680 42 17
- -------------------------------------------------------------------------------------------------------
Change in plan assets:
Fair value of plan assets at beginning of year 2,721 1,202 -- --
Actual return on plan assets 591 172 -- --
Acquisitions 131 1,385 -- --
Company contributions 57 15 1 --
Employee contributions 17 10 -- --
Benefits paid (105) (48) (1) --
Foreign currency changes (101) (15) -- --
- -------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year 3,311 2,721 -- --
- -------------------------------------------------------------------------------------------------------
Funded status 582 41 (42) (17)
Unrecognized net actuarial loss (gain) (523) (35) 2 4
Unrecognized prior service cost (credit) 10 8 -- (1)
Unrecognized transition asset (5) (12) -- --
- -------------------------------------------------------------------------------------------------------
Net asset (liability) recognized $ 64 $ 2 $ (40) $ (14)
=======================================================================================================
Amounts recognized in Balance Sheet consist of:
Prepaid benefit cost $ 176 $ 143 $ -- $ --
Accrued benefit liability (112) (141) (40) (14)
- -------------------------------------------------------------------------------------------------------
Net asset (liability) recognized $ 64 $ 2 $ (40) $ (14)
=======================================================================================================
Weighted average assumptions:
Discount rate 6.0% 5.9% 6.3% 6.0%
Expected return on plan assets 8.9% 8.9% -- --
Rate of compensation increase 4.2% 4.2% 4.2% 3.9%
=======================================================================================================
</TABLE>
The increase in benefit obligation and plan assets in 1998 relating to
acquisitions pertains primarily to MMC's acquisition of Sedgwick.
The projected benefit obligation, accumulated benefit obligation and fair value
of plan assets for the non-U.S. pension plans with accumulated benefit
obligations in excess of plan assets were $64 million, $52 million and $31
million, respectively, as of December 31, 1999 and $1.55 billion, $1.52 billion
and $1.40 billion, respectively, as of December 31, 1998.
The components of the net periodic benefit cost for the non-U.S. defined benefit
and other postretirement benefit plans are as follows:
<TABLE>
<CAPTION>
=======================================================================================================
For the Three Years Ended December 31, Non-U.S. Pension Benefits Non-U.S. Postretirement Benefits
------------------------- --------------------------------
(IN MILLIONS OF DOLLARS) 1999 1998 1997 1999 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 96 $ 48 $ 41 $ 1 $-- $--
Interest cost 156 66 62 2 1 1
Expected return on plan assets (238) (98) (90) -- -- --
Amortization of prior service cost -- 1 -- -- -- --
Amortization of transition asset (6) (6) (6) -- -- --
Recognized actuarial loss 1 -- -- -- -- --
- -------------------------------------------------------------------------------------------------------
$ 9 $ 11 $ 7 $ 3 $ 1 $ 1
=======================================================================================================
</TABLE>
----------
52
<PAGE>
The assumed health care cost trend rate was approximately 7.4% in 1999,
gradually declining to 4.5% in the year 2006. Assumed health care cost trend
rates have a significant effect on the amounts reported for the non-U.S. health
care plans. A one-percentage-point change in assumed health care cost trend
rates would have the following effects (in millions of dollars):
<TABLE>
<CAPTION>
1-Percentage- 1-Percentage-
Point Increase Point Decrease
<S> <C> <C>
Effect on total of service and interest cost components $1 $ --
Effect on postretirement benefit obligation $6 $ (5)
</TABLE>
Contribution Plans: MMC 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 Sedgwick Savings and Investment Plan ("Sedgwick SIP").
Under these plans, eligible employees may contribute a percentage of their base
salary, subject to certain limitations. For the SIP and Sedgwick SIP, MMC
matches a portion of the employees' contributions, while under the Putnam Plan
the contributions are at the discretion of MMC subject to IRS limitations. The
cost of these defined contribution plans was $74 million, $62 million and $55
million for 1999, 1998 and 1997, respectively.
7 Stock Benefit Plans
As provided under SFAS No. 123, "Accounting for Stock-Based Compensation," MMC
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 the required additional pro forma
disclosures.
In accordance with the intrinsic value method allowed by APB 25, no compensation
cost has been recognized in the Consolidated Statements of Income for MMC's
stock option and stock purchase plans and the stock options awarded under the
Putnam Investments, Inc. Equity Partnership Plan. Had compensation cost for
MMC's stock-based compensation plans been determined consistent with the fair
value method prescribed by SFAS No. 123, MMC's net income and net income per
share for 1999, 1998 and 1997 would have been reduced to the pro forma amounts
indicated in the table below.
The fair value of each of MMC's option grants included in 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 1999, 1998
and 1997, respectively: dividend yield of 3.0% for 1999, 1998 and 1997; expected
volatility of 22.7% in 1999, 18.9% in 1998 and 17.5% in 1997; risk-free interest
rate of 5.2% in 1999, 5.6% in 1998 and 6.5% in 1997; 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, 1999, 1998 and 1997 was $16.09, $11.65 and $8.47 per
share, respectively.
<TABLE>
<CAPTION>
(In millions of dollars,
except per share figures) 1999 1998 1997
<S> <C> <C> <C>
Net Income:
As reported $ 726 $ 796 $ 434
Pro forma $ 673 $ 762 $ 414
Net Income Per Share:
Basic:
As reported $ 2.76 $ 3.11 $ 1.77
Pro forma $ 2.56 $ 2.98 $ 1.69
Diluted:
As reported $ 2.62 $ 2.98 $ 1.73
Pro forma $ 2.42 $ 2.85 $ 1.65
</TABLE>
The pro forma information reflected above may not be representative of the
amounts to be expected in future years as the fair value method of accounting
contained in SFAS No. 123 has not been applied to options granted prior to
January 1995.
INCENTIVE AND STOCK AWARD PLANS: In 1997, MMC 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") replaced the 1992 Incentive and Stock Award Plan. The types
of awards permitted under these Plans include stock options, restricted stock,
stock bonus units, restricted and deferred stock units payable in MMC common
stock or cash, and other stock-based and performance-based awards. The
Compensation Committee of the Board of Directors (the "Com pensation Committee")
determines, at 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 MMC, may accelerate the vesting of the awards. Awards relating to not
more than 18,000,000 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 7,500,000 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 15,671,576, 24,506,619 and
31,203,936 shares available for awards under the 1997 Plans and prior plans at
December 31, 1999, 1998 and 1997, 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.
--------
53
<PAGE>
Stock option transactions under the 1997 Plans and prior plans are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------ ------------------------ --------------------------
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 26,492,820 $ 38.27 24,332,522 $ 31.18 25,666,431 $ 28.11
Granted 7,992,425 $ 75.86 6,115,165 $ 60.19 5,166,120 $ 41.39
Exercised (3,809,839) $ 29.95 (3,427,830) $ 26.63 (5,865,160) $ 26.59
Forfeited (656,970) $ 57.61 (527,037) $ 38.76 (634,869) $ 31.99
Balance at end of period 30,018,436 $ 48.91 26,492,820 $ 38.27 24,332,522 $ 31.18
Options exercisable at year-end 15,231,609 $ 34.25 14,587,332 $ 30.01 14,706,623 $ 28.17
========== =========== ========== ========= ========== =========
</TABLE>
The following table summarizes information about stock options at December 31,
1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------- -------------------------------
Weighted Average
Range of Outstanding Remaining Weighted Average Exercisable Weighted Average
Exercise Prices at 12/31/99 Contractual Life Exercise Price at 12/31/99 Exercise Price
- --------------- ----------- ------------------------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$23.81-29.44 4,763,296 3.3 years $ 26.32 4,763,296 $ 26.32
$31.18-59.35 12,011,009 5.3 years $ 35.32 8,937,094 $ 33.90
$60.25-84.85 13,244,131 8.8 years $ 69.35 1,531,219 $ 60.98
---------- --------- ------ ---------- ------
$23.81-84.85 30,018,436 6.5 years $ 48.91 15,231,609 $ 34.25
</TABLE>
RESTRICTED STOCK: Restricted shares of MMC'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 100,700, 162,600 and 135,000 restricted shares granted in 1999, 1998
and 1997, respectively. MMC recorded compensation expense of $8 million in 1999,
$10 million in 1998 and $6 million in 1997, 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 units
shall vest and be paid, and upon what terms the units shall be forfeited.
There were 167,845, 128,255 and 260,871 restricted stock units awarded during
1999, 1998 and 1997, respectively. The total value of the restricted stock units
at the time of the award was $12 million, $7 million and $11 million in 1999,
1998 and 1997, respectively. The cost of the awards is amortized over the
vesting period, which is generally three years.
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 units
shall vest and be paid, and upon what terms the units shall be forfeited.
There were 1,618,064, 566,315 and 1,299,986 deferred stock units awarded during
1999, 1998 and 1997, respectively. The total value of the deferred stock unit
awards was $99 million, $33 million and $62 million in 1999, 1998 and 1997,
respectively. The cost of the awards is amortized over the vesting period, which
is generally three years, however, 1999 and 1998 operating expenses reflect $71
million and $11 million of charges, respectively, relating to
acquisition-related stock unit awards issued to certain senior employees of
Sedgwick (see Note 12).
PUTNAM INVESTMENTS, INC. EQUITY PARTNERSHIP PLAN: In 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. Such
awards or options generally vest over a four-year period. Holders of Putnam
Class B shares are not entitled to vote and have no rights to convert their
shares into any other securities of Putnam. In certain circumstances, Class B
shares will be converted into Class A 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, as adjusted for certain issuances of
Putnam Class A shares, which would represent approximately 12% of the
outstanding shares on a fully diluted basis. Putnam made awards pursuant to the
Equity Plan with respect to 3,100,200, 3,660,000 and 4,000,000 shares of Class B
Common Stock in 1999, 1998 and 1997, respectively. These awards included
1,550,100, 1,830,000 and 2,000,000 shares of restricted stock with a value of
$120 million, $94 million and $83 million in 1999, 1998 and 1997, respectively.
These awards also included 1,550,100, 1,830,000 and 2,000,000 shares subject to
options in 1999, 1998 and 1997, respectively. There were 2,534,815 shares
available for grant related to the Equity Plan at December 31, 1999.
In 1997, pursuant to an executive compensation agreement, Putnam also awarded
300,000 restricted stock units with a value of $14 million and 325,000 options
related to Class B Common Stock to a key executive of Putnam. An additional
award of 105,000 restricted stock units with a value of $8 million and 105,000
options was also made in 1998. These shares are incremental to the shares issued
under the Plan.
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
--------
54
<PAGE>
used for grants in 1999, 1998 and 1997: dividend yield of 5.0% for 1999, 1998
and 1997; expected volatility of 33.2% in 1999, 28.3% in 1998 and 26.4% in 1997;
risk-free interest rate of 5.2% in 1999, 5.6% in 1998 and 6.1% in 1997; 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 was $17.64 in 1999, $10.42 in 1998 and $8.30 in 1997.
STOCK PURCHASE PLANS: In May 1999, MMC's stockholders approved an employee stock
purchase plan (the "1999 Plan") to replace the 1994 Employee Stock Purchase Plan
(the "1994 Plan") which terminated on September 30, 1999 following its fifth
annual offering. Under these plans, eligible employees may purchase shares of
MMC'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 1999 Plan, no more than 20,000,000 shares of
MMC's common stock plus the remaining unissued shares in the 1994 Plan may be
sold. Employees purchased 2,368,734, 1,932,060 and 1,855,500 shares in 1999,
1998 and 1997, respectively. At December 31, 1999, 23,131,706 shares were
available for issuance under the 1999 Plan. In 1995, MMC's Board of Directors
approved the Marsh & McLennan Companies Stock Purchase Plan for International
Employees (the "International Plan") which is similar to the 1999 Plan. Under
the International Plan, no more than 1,500,000 shares of MMC's common stock may
be sold. Employees purchased 339,594, 238,854 and 211,500 shares in 1999, 1998
and 1997, respectively. At December 31, 1999, 695,052 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 1999, 1998 and 1997 and was estimated using the Black-Scholes model
with the following assumptions: dividend yield of 3.0% for 1999, 1998 and 1997;
expected life of one year; expected volatility of 22.7% for 1999, 18.9% for 1998
and 17.5% for 1997; and risk-free interest rate of 5.5% for 1999, 4.4% for 1998
and 5.5% for 1997. The weighted average fair value of each purchase right
granted in 1999, 1998 and 1997 was $16.15, $10.61 and $10.96, respectively.
8 LONG-TERM OBLIGATIONS
MMC 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 96% of MMC's lease obligations are for the use of office space.
The accompanying Consolidated Statements of Income include net rental costs
of $363 million, $313 million and $265 million for 1999, 1998 and 1997,
respectively, after deducting rentals from subleases ($7 million in 1999,
1998 and 1997).
At December 31, 1999, the aggregate future minimum rental commitments under
all noncancelable operating lease agreements are as follows:
<TABLE>
<CAPTION>
For the Years Ending Gross Rentals Net
December 31, Rental from Rental
(IN MILLIONS OF DOLLARS) Commitments Subleases Commitments
<S> <C> <C> <C>
2000 $307 $ 13 $294
2001 263 11 252
2002 220 6 214
2003 185 4 181
2004 157 3 154
Subsequent years 743 6 737
------ --- ------
$1,875 $43 $1,832
====== === ======
</TABLE>
MMC has entered into agreements with various service companies to outsource
certain information systems activities and responsibilities. Under these
agreements, MMC 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, 1999, the
aggregate fixed future minimum commitments under these agreements are as
follows:
<TABLE>
<CAPTION>
Future
For the Years Ending December 31, Minimum
(IN MILLIONS OF DOLLARS) Commitments
<S> <C>
2000 $32
2001 25
2002 18
2003 13
2004 11
Subsequent years 1
-----
$ 100
=====
</TABLE>
-----------
55
<PAGE>
9 SHORT-TERM DEBT
MMC's outstanding short-term debt is as follows:
<TABLE>
<CAPTION>
December 31, 1999 and 1998
(IN MILLIONS OF DOLLARS) 1999 1998
<S> <C> <C>
Commercial paper $1,027 $2,213
Bank loans 88 10
Current portion of long-term debt 16 11
------ ------
$1,131 $2,234
====== ======
</TABLE>
The weighted average interest rates on outstanding commercial paper borrowings
at December 31, 1999 and 1998 are 5.8% and 5.3%, respectively.
In 1999, MMC refinanced $1 billion of commercial paper borrowings through the
sale of Senior Notes (see Note 10).
During 1999, MMC executed a new revolving credit facility for the use of its
subsidiary, Marsh USA, Inc. This noncancelable facility, which expires in 2000,
provided that Marsh USA, Inc. may borrow up to $1.4 billion at market rates of
interest which may vary depending upon the level of usage of the facility and
MMC's credit ratings. Commitment fees of 5 basis points are payable on any
unused portion. The facility requires MMC to maintain consolidated net worth of
at least $2.5 billion and contains other restrictions relating to
consolidations, mergers and the sale or pledging of assets. This facility was
amended in January 2000 to reduce the aggregate commitment from $1.4 billion to
$1.2 billion. No amounts were outstanding under this revolving credit facility
at December 31, 1999.
During 1998, MMC executed a $2.25 billion revolving credit facility with several
banks to support its commercial paper borrowings made to initially finance its
acquisition of Sedgwick. This facility expired in August 1999.
MMC maintains credit facilities with various banks, primarily related to
operations located outside the United States, aggregating $196 million at
December 31, 1999. MMC has borrowed $88 million under these facilities, which is
included in short-term debt.
10 LONG-TERM DEBT
MMC's outstanding long-term debt is as follows:
<TABLE>
<CAPTION>
December 31, 1999 and 1998
(IN MILLIONS OF DOLLARS) 1999 1998
<S> <C> <C>
Commercial paper $1,000 $ 600
Senior notes--6.625% due 2004 594 --
Senior notes--7.125% due 2009 398 --
Mortgage--9.8% due 2009 200 200
Notes payable--8.62% due 2012 83 86
Notes payable--7.68% due 2006 63 60
Revolving credit facility -- 583
Other 35 72
------ ------
2,373 1,601
Less current portion 16 11
------ ------
$2,357 $1,590
====== ======
</TABLE>
Commercial paper borrowings of $1.0 billion at December 31, 1999 and $600
million at December 31, 1998, have been classified as long-term debt based on
MMC's intent and ability to maintain or refinance these obligations on a
long-term basis.
During 1997, MMC executed a revolving credit facility with several banks to
support its commercial paper borrowings and to fund other general corporate
requirements. This noncancelable facility, which expires in June 2002, provided
that MMC may borrow up to $1.2 billion at market rates of interest which may
vary depending upon the level of usage of the facility and MMC's credit ratings.
Commitment fees of 7 basis points are payable on any unused portion. The
facility requires MMC 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. This facility was amended in January 2000 to
reduce the aggre gate commitment from $1.2 billion to $1.0 billion. No amounts
were outstanding under this revolving credit facility at December 31, 1999. A
total of $583 million was outstanding at December 31, 1998.
In June 1999, MMC sold $600 million of 6.625% Senior Notes due 2004 and $400
million of 7.125% Senior Notes due 2009, the proceeds of which were used to
repay a portion of the commercial paper borrowings that were used initially to
finance the Sedgwick acquisition.
MMC 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
interest in its worldwide headquarters building. In the event the mortgage is
foreclosed following a default, MMC would be entitled to remain in the space and
would be obligated to pay rent sufficient to cover interest on the notes or at
fair market value if greater.
MMC entered into an interest rate swap as part of the acquisition and renovation
of MMC's worldwide headquarters, which fixed the interest rate at approximately
9.5% on $100 million of variable rate borrowings. This swap expired in February
1999. The weighted average interest rate received on this swap at December 31,
1998 and 1997 was 5.7% and 5.8%, respectively. The difference between the fixed
rate and the weighted average rate was included in interest expense in the
Consolidated Statements of Income.
MMC has a note payable due 2012, the outstanding balance of which was $83
million and $86 million at December 31, 1999 and 1998, respectively.
In connection with the Sedgwick transaction, MMC assumed 7.68% Senior Loan Notes
due 2006, the outstanding balance of which was $63 million and $60 million at
December 31, 1999 and 1998, respectively.
Scheduled repayments of long-term debt in 2000 and in the four succeeding years
are $16 million, $8 million, $1.0 billion, $8 million and $605 million,
respectively.
-----------
56
<PAGE>
11 FINANCIAL INSTRUMENTS
The estimated fair value of MMC'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 MMC would realize upon disposition nor do they indicate MMC's
intent or ability to dispose of the financial instrument.
<TABLE>
<CAPTION>
1999 1998
---- ----
December 31, 1999 and 1998 Carrying Fair Carrying Fair
(In millions of dollars) Amount Value Amount Value
- ------------------------ ------ ----- ------ -----
<S> <C> <C> <C> <C>
Nonderivatives:
Cash and cash equivalents $ 428 $ 428 $ 610 $ 610
Long-term securities 687 687 828 828
Short-term debt 1,131 1,131 2,234 2,234
Long-term debt 2,357 2,374 1,590 1,665
Derivatives:
Other assets:
Interest rate swaps -- 3 -- 4
Forward exchange contracts -- -- -- 1
</TABLE>
CASH AND CASH EQUIVALENTS: The estimated fair value of MMC's cash and cash
equivalents approximates their carrying value.
LONG-TERM SECURITIES: Long-term securities primarily consist of available for
sale securities recorded at quoted market prices. MMC also has certain
additional long-term securities, for which there are no readily available market
prices, amounting to $193 million and $82 million at December 31, 1999 and 1998,
respectively, which are carried on a cost basis. Based on present information,
MMC believes that the cost of these investments approximates their fair value.
SHORT-TERM AND LONG-TERM DEBT: The fair value of MMC's short-term debt, which
consists primarily of commercial paper borrowings, approximates its carrying
value. The estimated fair value of MMC's long-term debt is 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.
INTEREST RATE SWAPS: Historically, MMC has managed its net exposure to interest
rate changes by employing a mixture of variable and fixed rate borrowings to
finance MMC's asset base. MMC has utilized interest rate swaps to manage its
exposure to interest rate movements on its cash and investments as well as its
interest expense on borrowings. MMC does not utilize financial instruments for
trading or other speculative purposes. The counterparties to these contracts are
major financial institutions. Management believes that risk of loss is remote
and in any event would be immaterial.
The fair values of these interest rate swaps are the estimated amounts that MMC
would receive to terminate the agreements at the reporting date, taking into
account the current interest rate environment. Amounts currently due to or from
interest rate swap counterparties are recorded in interest expense in the period
in which they accrue.
A summary of MMC's interest rate swaps as of December 31, 1999 and 1998 is as
follows:
<TABLE>
<CAPTION>
Weighted Average
Notional Termination Interest Rates
(In millions of dollars) Amount Dates Receive Pay
<S> <C> <C> <C> <C> <C>
1999 --
Receive fixed--
pay variable $348 2000-2003 6.5% 5.8%
Receive variable--
pay fixed $ 39 2005 6.1% 5.8%
1998--
Receive fixed--
pay variable $599 1999-2003 6.8% 5.9%
Receive variable--
pay fixed $140 1999-2005 5.7% 8.4%
</TABLE>
FORWARD EXCHANGE CONTRACTS: At December 31, 1999, MMC had open forward exchange
contracts to sell U.S. dollars for sterling for an underlying principal amount
of $24 million. In addition, MMC had open forward exchange contracts to purchase
other foreign currencies for underlying principal amounts totaling $12 million.
These contracts were entered into principally to hedge firm commitments.
OPTION CONTRACTS: MMC has entered into option contracts to hedge its interest
rate exposures related to pension redress liabilities in the U.K., discussed
further in Note 15. At December 31, 1999, the notional amounts of these option
contracts totaled $580 million, with amounts expiring annually over the next
three years. MMC has additional option contracts used to hedge the volatility of
MMC's pension redress liability attributable to equity markets. The notional
amounts of these contracts was $30 million at December 31, 1999 with all amounts
expiring in 2000. All option contracts at December 31, 1999 were out of the
money and as such the fair market value of these contracts was zero. There is no
potential for a future loss associated with these options.
UNREALIZED SECURITIES HOLDING GAINS: MMC has classified as available for sale
primarily equity securities having an aggregate fair value of $494 million and
$746 million at December 31, 1999 and 1998, respectively. Gross unrealized
gains, amounting to $331 million and $546 million at December 31, 1999 and 1998,
respectively, have been excluded from earnings and reported as accumulated other
comprehensive income which is a component of stockholders' equity, net of
deferred income taxes.
Proceeds from the sale of available for sale securities for the years ended
December 31, 1999, 1998 and 1997 were $105 million, $62 million and $69 million,
respectively. Gross realized gains on available for sale securities sold during
1999, 1998 and 1997 amounted to $53 million, $40 million and $36 million,
respectively. The cost of securities sold is determined using the average cost
method for equity securities.
A portion of insurance fiduciary funds which MMC 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.
-------
57
<PAGE>
12 SPECIAL CHARGES/CREDITS
During 1999, MMC recorded special charges totaling $337 million representing
$266 million of merger-related costs associated with the combination with
Sedgwick and $71 million primarily for acquisition-related awards pertaining to
the Sedgwick transaction. The merger-related costs are discussed in detail in
Note 4. The net impact of the special charges was $233 million, after tax, or
$.86 per diluted share.
During 1998, MMC recorded a special charge of $11 million representing
acquisition-related stock unit awards issued to certain senior employees of
Sedgwick. In addition, a reserve of approximately $15 million related to a 1996
provision for restructuring was reversed in 1998. The resulting net special
credit of $4 million increased diluted net income per share by $.01 for the
year.
During 1997, MMC recorded special charges totaling $244 million. The net impact
of the special charges on diluted net income per share was $.63 for the year.
These charges included $168 million of merger-related costs predominantly
related to the combination with J&H, a charge of $61 million related to London
real estate, and $15 million for the disposal of certain EDP assets which were
written off in 1997. The merger-related costs are discussed in detail in Note 4.
The $61 million charge for London real estate included $35 million associated
with a plan to abandon and demolish a company-owned building and $26 million of
lease abandonment costs (net of anticipated sublease income) relating to
vacating several leased locations. Payments and write-offs associated with this
reserve began in 1998 and are expected to continue for several years. The
remaining lease abandonment reserve is $23 million at December 31, 1999.
13 COMMON STOCK
In April 1999, MMC completed the sale of 4.1 million common shares realizing
approximately $300 million of net proceeds.
On May 20, 1998, the Board of Directors authorized a three-for-two stock
distribution of MMC's common stock, which was issued as a stock dividend on June
26, 1998.
All references to per share amounts have been restated for this stock
distribution.
14 STOCKHOLDER RIGHTS PLAN
On September 18, 1997, MMC's Board of Directors approved the extension of the
benefits afforded by MMC's previously existing rights plan by adopting a new
stockholder rights plan, which was amended and restated as of January 20, 2000.
Under the current 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 issued thereafter. Under the plan,
the Rights generally become exercisable after a person or group (i) acquires 15%
or more of MMC's outstanding common stock or (ii) commences a tender offer that
would result in such a person or group owning 15% or more of MMC's common stock.
When the Rights first become exercisable, a holder will be entitled to buy from
MMC a unit consisting of one three-hundredth of a share of Series A Junior
Participating Preferred Stock of MMC at a purchase price of $400. If any person
acquires 15% or more of MMC's common stock or if a 15% holder acquires MMC by
means of a reverse merger in which MMC and its stock survive, each Right not
owned by a 15% or more shareholder would become exercisable for common stock of
MMC (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.
15 CLAIMS, LAWSUITS AND OTHER CONTINGENCIES
MMC and its subsidiaries are subject to various claims, lawsuits and
proceedings 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 matters seek damages,
including punitive damages, in amounts which could, if assessed, be
significant.
An action captioned "Aiena et al. vs. Olsen et al." is pending 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 MMC in 1997,
against twenty-four selling shareholders of J&H, as well as J&H itself and
MMC. The action essentially challenges the allocation of the consideration
paid in connection with
-------
58
<PAGE>
MMC'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 actions. Plaintiffs seek
compensatory and punitive damages. Two former directors of J&H brought
similar actions (Sempier v. Olsen et al.; and Clemens v. Olsen et al.), which
are also pending before the United States District Court for the Southern
District of New York. On October 12, 1999, the Court dismissed MMC entirely
from these three cases and dismissed certain (but not all) of the claims
brought against J&H. The principal surviving claims asserted against J&H in
these cases include a claim under the federal securities laws and a claim for
breach of ERISA. In December 1999, two additional cases were filed by two
former directors of J&H (Valentine v. Olsen et al.; and Bianchi v. Olsen et
al.), and have been assigned to the judge hearing the Aiena, Sempier and
Clemens matters. Although the Valentine and Bianchi cases raise substantially
similar issues as the Aiena, Sempier and Clemens actions, they also raise
certain additional claims under ERISA and state law relating to the
plaintiffs' departure as J&H employees. All these actions are in their
initial stages.
Sedgwick Group plc, since prior to its acquisition, has been engaged in a review
of previously undertaken personal pension plan business as required by United
Kingdom regulators to determine whether redress should be made to customers. As
of December 31, 1999, settlements and related costs previously paid amount to
approximately $125 million of which approximately $30 million is due from or has
been paid by insurers. The contingent exposure of Sedgwick for pension redress
and related costs is estimated to be $350 million. Sedgwick has recorded $190
million of reserves and recognized approximately $160 million of insurance
recoveries related to this exposure.
Other present and former subsidiaries of MMC are engaged in a comparable
review of their personal pension plan businesses, although the extent of
their activity in this area, and consequently their financial exposure, was
proportionally much less than Sedgwick. The contingent exposure of the
present and former non-Sedgwick subsidiaries of MMC for pension redress and
related costs is estimated to be approximately $150 million. Approximately
$140 million of this amount is expected to be recovered from insurers and
accounting reserves have been provided for the remaining balance. As of
December 31, 1999, settlements and related costs previously paid total
approximately $35 million.
MMC's ultimate exposure from the United Kingdom Personal Investment Authority
review, as presently calculated and including Sedgwick, is subject to a
number of variable factors including, among others, the interest rate
established quarterly by the U.K. Personal Investment Authority for
calculating compensation, equity markets, and the precise scope, duration,
and methodology of the review as required by that Authority.
As part of the combination with Sedgwick, MMC acquired several insurance
underwriting businesses that were already in run-off. Sedgwick had issued
guarantees with respect to certain liabilities of these operations.
On the basis of present information, anticipated insurance coverage and
advice received from counsel, it is the opinion of MMC's management that the
disposition or ultimate determination of these claims, lawsuits, proceedings
or guarantees will not have a material adverse effect on MMC's consolidated
results of operations or its consolidated financial position.
16 SEGMENT INFORMATION
MMC, a professional services firm, is organized based on the different services
that it offers. Under this organizational structure, MMC operates in three
principal business segments: risk and insurance services, investment management
and consulting. The risk and insurance services segment provides insurance
broking, reinsurance broking and insurance and program services for business,
professional, institutional and public-entity clients. It also provides services
principally in connection with originating, structuring and managing insurance
and related industry investments. The investment management segment primarily
provides securities investment advisory and management services and
administrative services for a group of publicly held investment companies. The
consulting segment provides advice and services to the managements of
organizations primarily in the areas of human resources and employee benefit
programs, general management consulting and economic consulting and analysis.
MMC evaluates segment performance based on operating income, which is after
deductions for directly related expenses but before special charges. The
accounting policies of the segments are the same as those used for the
consolidated financial statements described in Note 1. Revenues are attributed
to geographic areas on the basis of where the services are performed.
---------
59
<PAGE>
Selected information about MMC's operating segments and geographic areas of
operation follow:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
For the Three Years Ended Revenue Segment
December 31, 1999 from External Operating Total Depreciation and Capital
(In millions of dollars) Customers Income Assets Amortization Expenditures
- ------------------------------------------------------------------------------------------------------------------------------------
1999 --
<S> <C> <C> <C> <C> <C>
Risk and Insurance Services $ 4,523(a) $ 806 $ 8,016 $ 268 $ 208
Investment Management 2,684 841 2,235 60 29
Consulting 1,950 260 1,511 48 39
- ------------------------------------------------------------------------------------------------------------------------------------
$ 9,157 $ 1,907 $11,762 $ 376 $ 276
- ------------------------------------------------------------------------------------------------------------------------------------
1998--
Risk and Insurance Services $ 3,351(a) $ 613 $ 8,084 $ 163 $ 216
Investment Management 2,296 677 1,437 45 38
Consulting 1,543 202 1,490 38 40
- ------------------------------------------------------------------------------------------------------------------------------------
$ 7,190 $ 1,492 $11,011 $ 246 $ 294
- ------------------------------------------------------------------------------------------------------------------------------------
1997--
Risk and Insurance Services $ 2,789(a) $ 496 $ 5,231 $ 126 $ 87
Investment Management 1,882 463 1,163 37 81
Consulting 1,338 148 909 32 32
- ------------------------------------------------------------------------------------------------------------------------------------
$ 6,009 $ 1,107 $ 7,303 $ 195 $ 200
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A reconciliation of the totals for the operating segments to the applicable line
items in the consolidated financial statements is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------
Income Before Income Taxes:
<S> <C> <C> <C>
Total segment operating income $ 1,907 $ 1,492 $ 1,107
Special (charges) credits
(see Note 12) (337) 4 (244)
Corporate expense (103) (76) (65)
Minority interest associated with the
Putnam Equity Partnership Plan (8) -- --
- --------------------------------------------------------------------------------
Operating income 1,459 1,420 798
Interest income 21 25 24
Interest expense (233) (140) (107)
- --------------------------------------------------------------------------------
Total income before income taxes $ 1,247 $ 1,305 $ 715
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Total
Operating Corporate/ Total
Segments Eliminations Consolidated
- --------------------------------------------------------------------------------
Other Significant Items:
1999 --
<S> <C> <C> <C>
Total assets $11,762 $ 1,259(b) $13,021
Depreciation and
amortization 376 24 400
Capital expenditures 276 82 358
1998--
Total assets 11,011 860(b) 11,871
Depreciation and
amortization 246 5 251
Capital expenditures 294 3 297
1997--
Total assets 7,303 609(b) 7,912
Depreciation and
amortization 195 4 199
Capital expenditures 200 2 202
- --------------------------------------------------------------------------------
(a) Includes interest income on fiduciary funds ($167 million in 1999, $137
million in 1998, and $111 million in 1997).
(b) Corporate assets primarily include unallocated goodwill, insurance
recoverables and a portion of MMC's headquarters building.
</TABLE>
Information by geographic area is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Revenue
from External Fixed
Customers Assets
- --------------------------------------------------------------------------------
Geographic Area:
1999 --
<S> <C> <C>
United States $6,375 $ 822
United Kingdom 1,251 344
Continental Europe 748 66
Other 783 82
- --------------------------------------------------------------------------------
$9,157 $1,314
- --------------------------------------------------------------------------------
1998--
United States $5,235 $ 720
United Kingdom 820 413
Continental Europe 551 85
Other 584 69
- --------------------------------------------------------------------------------
$7,190 $1,287
- --------------------------------------------------------------------------------
1997--
United States $4,316 $ 702
United Kingdom 657 136
Continental Europe 564 56
Other 472 63
- --------------------------------------------------------------------------------
$6,009 $ 957
- --------------------------------------------------------------------------------
</TABLE>
(a) Includes interest income on fiduciary funds ($167 million in 1999, $137
million in 1998, and $111 million in 1997).
(b) Corporate assets primarily include unallocated goodwill, insurance
recoverables and portion of MMC's headquarters building.
60
<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. MMC'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.
MMC 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 MMC'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 MMC'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 MMC'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 MMC'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/ Sandra S. Wijnberg
Sandra S. Wijnberg
Senior Vice President and
Chief Financial Officer
March 3, 2000
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, 1999 and 1998, and the
related consolidated statements of income, stockholders' equity and
comprehensive income, and cash flows for each of the three years in the period
ended December 31, 1999. 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, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE
DELOITTE & TOUCHE LLP
New York, New York
March 3, 2000
61
<PAGE>
MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL DATA AND
SUPPLEMENTAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss)
Net Per Share(a) Dividends Stock
(In millions of dollars, Operating Income ----------------- Paid Per Price Range
except per share figures) Revenue Income (Loss) Basic Diluted Share High-Low
- ------------------------------------------------------------------------------------------------------------------------------------
1999:
<S> <C> <C> <C> <C> <C> <C> <C>
First quarter $2,351 $ 519 $ 279 $ 1.08 $ 1.03 $ .40 $79.38-57.13
Second quarter 2,245 347(b) 177(b) .68 .63(b) .40 $81.13-68.13
Third quarter 2,227 425 223 .84 .81 .45 $81.50-61.75
Fourth quarter 2,334 168(c) 47(c) .17 .16(c) .45 $96.75-64.38
- ------------------------------------------------------------------------------------------------------------------------------------
$9,157 $1,459(d) $ 726(d) $ 2.76 $ 2.62(d) $ 1.70 $96.75-57.13
- ------------------------------------------------------------------------------------------------------------------------------------
1998:
First quarter $1,776 $ 404 $ 231 $ .90 $ .87 $ .33 $61.67-46.38
Second quarter 1,750 346 193 .75 .72 .33 $63.25-54.83
Third quarter 1,719 335 186 .73 .69 .40 $64.31-46.13
Fourth quarter 1,945 335 186 .73 .70 .40 $61.94-43.38
- ------------------------------------------------------------------------------------------------------------------------------------
$7,190 $1,420 $ 796 $ 3.11 $ 2.98 $ 1.46 $64.31-43.38
- ------------------------------------------------------------------------------------------------------------------------------------
1997:
First quarter $1,295 $ 277 $ 164 $ .75 $ .73 $ .30 $43.21-34.21
Second quarter 1,540 262 145 .57 .56 .30 $50.17-37.71
Third quarter 1,548 249 140 .55 .54 .33 $53.17-45.50
Fourth quarter 1,626 10(e) (15)(e) (.05) (.05)(e) .33 $53.33-44.00
- ------------------------------------------------------------------------------------------------------------------------------------
$6,009 $ 798(f) $ 434(f) $ 1.77 $ 1.73(f) $ 1.26 $53.33-34.21
- ------------------------------------------------------------------------------------------------------------------------------------
</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 1999 and 1997.
(b) Excluding special charges of $84 for the second quarter of 1999, operating
income, net income and diluted net income per share are $431, $228 and $.82,
respectively.
(c) Excluding special charges of $253 for the fourth quarter of 1999, operating
income, net income and diluted net income per share are $421, $229 and $.82,
respectively.
(d) Excluding special charges of $337 for the full year 1999, operating income,
net income and diluted net income per share are $1,796, $959 and $3.48,
respectively.
(e) Excluding special charges of $244 for the fourth quarter of 1997, operating
income, net income and diluted net income per share are $254, $143 and $.55,
respectively.
(f) Excluding special charges of $244 for the full year 1997, operating income,
net income and diluted net income per share are $1,042, $592 and $2.36,
respectively.
All per share amounts have been restated for a three-for-two stock distribution
of MMC's common stock, which was issued as a stock dividend on June 26, 1998.
MMC's common stock (ticker symbol:MMC) is traded on the New York, Chicago,
Pacific and London stock exchanges. As of February 29, 2000, there were 29,100
stockholders of record.
62
<PAGE>
MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES
FIVE-YEAR STATISTICAL SUMMARY
OF OPERATIONS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Compound
For the Five Years Ended December 31, 1999 Growth Rate
(In millions of dollars, except per share figures) 1999(a) 1998 1997(d) 1996(f) 1995 1994-1999
- ------------------------------------------------------------------------------------------------------------------------------------
Revenue:
<S> <C> <C> <C> <C> <C> <C>
Risk and Insurance Services $ 4,523 $ 3,351 $ 2,789 $ 1,907 $ 1,964 19%
Investment Management 2,684 2,296 1,882 1,338 917 29%
Consulting 1,950 1,543 1,338 1,159 1,056 16%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Revenue 9,157 7,190 6,009 4,404 3,937 21%
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Compensation and benefits 4,574 3,561 3,044 2,204 1,949 21%
Other operating expenses 3,124 2,209 2,167 1,485 1,293 22%
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 7,698 5,770 5,211 3,689 3,242 22%
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Income 1,459(b) 1,420 798(e) 715(g) 695 17%
Interest Income 21 25 24 14 18
Interest Expense (233) (140) (107) (61) (63)
- ------------------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 1,247 1,305 715 668 650 15%
Income Taxes 521 509 281 209(h) 247
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income $ 726 $ 796 $ 434 $ 459 $ 403 14%
- ------------------------------------------------------------------------------------------------------------------------------------
Basic Net Income Per Share Information:
Net Income Per Share $ 2.76 $ 3.11 $ 1.77 $ 2.11 $ 1.84 10%
Average Number of Shares Outstanding 263 256 245 217 219
- ------------------------------------------------------------------------------------------------------------------------------------
Diluted Net Income Per Share Information:
Net Income Per Share $ 2.62 $ 2.98 $ 1.73 $ 2.08 $ 1.82 9%
Average Number of Shares Outstanding 272 264 251 221 221
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends Paid Per Share $ 1.70 $ 1.46 $ 1.26 $ 1.11 $ .99 13%
Return on Average Stockholders' Equity 19% 23% 17% 26% 26%
Year-end Financial Position:
Working capital $ (1,035) $ (1,657)(c) $ 224 $ 192 $ 110
Total assets $ 13,021 $ 11,871 $ 7,912 $ 4,545 $ 4,330
Long-term debt $ 2,357 $ 1,590 $ 1,240 $ 458 $ 411
Stockholders' equity $ 4,170 $ 3,659 $ 3,233 $ 1,889 $ 1,666
Total shares outstanding 267 257 255 217 218
(excluding treasury shares)
Other Information:
Number of employees 52,900 54,300 36,400 27,000 27,200
Stock price ranges--
U.S. exchanges--High $ 96.75 $ 64.31 $ 53.33 $ 38.29 $ 30.04
--Low $ 57.13 $ 43.38 $ 34.21 $ 28.08 $ 25.37
Price/earnings multiple 36.5 19.6 28.7 16.7 16.3
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes full year results for Sedgwick, which was acquired in November
1998.
(b) Includes a special charge of $337 million.
(c) Includes $2.2 billion of commercial paper borrowings made to initially
finance the acquisition of Sedgwick.
(d) Includes the operating results of Johnson & Higgins, an insurance broking
and consulting services firm, acquired in March 1997 and CECAR, a French
insurance services firm.
(e) Includes a special charge of $244 million.
(f) The Frizzell Group Limited was sold in June 1996.
(g) Includes net special charges of $93 million partially offset by a $33
million gain on the sale of Frizzell.
(h) Includes a tax adjustment that reduced income taxes by $40 million.
See Management's Discussion and Analysis of Financial Condition and Results of
Operations for discussion of significant items affecting the results of
operations in 1999 and 1998.
63
<PAGE>
BOARD OF DIRECTORS AND CORPORATE OFFICERS
BOARD OF DIRECTORS
A.J.C. SMITH DAVID A. OLSEN
Chairman Former Chairman, Johnson & Higgins
J.W. GREENBERG JOHN D. ONG
President and Chief Executive Officer Chairman Emeritus,
The BFGoodrich Company
NORMAN BARHAM
Vice Chairman, Marsh Inc. ADELE SIMMONS
Vice Chair and Senior Executive,
LEWIS W. BERNARD Chicago Metropolis 2020
Chairman, Classroom, Inc. Former President,
Former Chief Administrative John D. and Catherine T. MacArthur
and Financial Officer, Foundation
Morgan Stanley & Co., Inc.
JOHN T. SINNOTT
FRANK J. BORELLI Chairman and Chief Executive Officer,
Senior Vice President Marsh Inc.
PETER COSTER FRANK J. TASCO
President, Mercer Consulting Group, Inc. Former Chairman, MMC
ROBERT F. ERBURU W.R.P. WHITE-COOPER
Former Chairman, MMC Business in Combination
The Times Mirror Company
ADVISORY DIRECTORS
RAY J. GROVES
Chairman, RICHARD E. HECKERT
Legg Mason Merchant Banking, Inc. Former Chairman,
Former Chairman, Ernst & Young E.I. du Pont de Nemours and Company
STEPHEN R. HARDIS RICHARD S. HICKOK
Chairman, Eaton Corporation Former Chairman, KMG Main Hurdman
GWENDOLYN S. KING DEAN R. McKAY
Former Senior Vice President, Former Senior Vice President,
PECO Energy IBM Corporation
THE RT. HON. LORD LANG OF MONKTON RICHARD M. MORROW
Former British Secretary of State Former Chairman, Amoco Corporation
for Trade & Industry
GEORGE PUTNAM
LAWRENCE J. LASSER Chairman, The Putnam Funds
President and Chief Executive Officer,
Putnam Investments, Inc. JOHN M. REGAN, JR.
Former Chairman, MMC
R.J. VENTRES
Former Chairman, Borden, Inc.
COMMITTEES OF THE BOARD
AUDIT
The Rt. Hon. Lord Lang of Monkton,
Chairman
Stephen R. Hardis
Gwendolyn S. King
John D. Ong
Adele Simmons
Frank J. Tasco
COMPENSATION
Lewis W. Bernard, Chairman
Robert F. Erburu
Ray J. Groves
EXECUTIVE
J.W. Greenberg, Chairman
Lewis W. Bernard
Ray J. Groves
Adele Simmons
A.J.C. Smith
Frank J. Tasco
OTHER CORPORATE OFFICERS
MATHIS CABIALLAVETTA
Vice Chairman, MMC
Chairman, MMC Europe
CHARLES A. DAVIS
Vice Chairman, MMC
President and Chief Executive Officer,
Marsh & McLennan Capital, Inc.
SANDRA S. WIJNBERG
Senior Vice President and
Chief Financial Officer
GREGORY F. VAN GUNDY
General Counsel and Secretary
FRANCIS N. BONSIGNORE
Senior Vice President,
Human Resources and Administration
INTERNATIONAL ADVISORY BOARD
A.J.C. SMITH PAUL F. OREFFICE (United States)
International Advisory Board Chairman Former Chairman and
Chairman, MMC Chief Executive Officer,
The Dow Chemical Company
ABDLATIF Y. AL-HAMAD (Middle East)
Chairman, Arab Fund for Economic SAXON RILEY (United Kingdom)
and Social Development Former Chairman, Sedgwick Group
RAYMOND BARRE (France) JESUS SILVA-HERZOG (Mexico)
Mayor, Lyon Institute for Monetary Affairs
Former Prime Minister Former Ambassador of Mexico
to the United States
MATHIS CABIALLAVETTA (Switzerland)
Vice Chairman, MMC WEI MING YI (China)
Chairman, MMC Europe Chairman, International Advisory Council
China International Trust and
JOHN R. EVANS (Canada) Investment Corporation
Chairman, Torstar Corporation
OSCAR FANJUL (Spain)
Honorary Chairman, Repsol
TOYOO GYOHTEN (Japan)
President, Institute for
International Monetary Affairs
Former Chairman, The Bank of Tokyo
ERNO KEMENES (Eastern Europe)
Former Minister of Economics, Hungary
MARCILIO MARQUES MOREIRA (Brazil)
Senior International Advisor,
Merrill Lynch
Former Ambassador of Brazil
to the United States
64
<PAGE>
[GRAPHIC: MARSH]
SHAREHOLDER INFORMATION
Annual Meeting
The 2000 annual meeting of shareholders will be held at 10 a.m., Thursday, May
18, 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 2000 Dividend Payment Dates
February 14 (paid), May 15, August 15, November 15
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
(610) 312-5238
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 Computershare Services
Registrar's Department
P.O. Box 82, Caxton House
Redcliffe Way, Bristol BS99 7NH
England>
Telephone: 117-9306666
The Bank of New York's Web site: stock.bankofny.com
E-mail Inquiries: [email protected]
Copies of our annual reports and Forms 10-K and 10-Q
may be requested through our Web site or by contacting:
Corporate Development
Marsh & McLennan Companies, Inc.
1166 Avenue of the Americas
New York, NY 10036
Telephone: (212) 345-5475
MMC's Web site: www.mmc.com
Stock Listings
MMC's 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' 1999 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>
Exhibit 21
SUBSIDIARIES OF
MARSH & MCLENNAN COMPANIES, INC. (DELAWARE)
<TABLE>
<CAPTION>
Where Percent Owned
Name Incorporated by Parent
---- ------------ ---------
<S> <C> <C>
Marsh & McLennan Real Estate Advisors, Inc. Delaware 100%
MMC Realty, Inc. New York 100%
Omega Indemnity (Bermuda) Limited Bermuda 100%
Omega II Indemnity Company Limited Ireland 100%
Epsilon Insurance Company, Ltd. Cayman Islands 100%
Marclen Holdings Inc. Delaware 100%
Marclen LLC Delaware 100%
Palamerican Corporation Delaware 100%
Paladin Reinsurance Corporation New York 20%
Syndicate and Corporate Management Services, Inc. Delaware 100%
Americas Insurance Company Louisiana 100%
America Surplus Lines Insurance Company Mississippi 100%
MMC Enterprise Risk, Inc. Delaware 100%
Marsh Inc. Delaware 100%
Marsh USA Inc. Delaware 100%
Marsh USA Inc. Alabama 100%
Marsh USA Inc. Alaska 100%
Marsh USA Inc. Arkansas 100%
Marsh USA Inc. Connecticut 100%
Marsh & McLennan Financial Markets, Inc. Delaware 100%
Marsh & McLennan GbR Holdings, Inc. Delaware 100%
Marsh & McLennan Pallas Holdings, Inc. Delaware 100%
Marsh & McLennan Pallas Holdings GmbH Germany 100%
Gradmann & Holler GbR Germany 98%
Pallas Gradmann & Holler do Brasil Corretores de Seguros Ltda. Brazil 100%
Assivalo Comercial E Representacoes Ltda. Brazil 30%
Triad Services, Inc. Delaware 100%
Marsh & McLennan Agency, Incorporated District of Columbia 100%
Marsh USA Inc. Idaho 100%
Marsh USA Inc. Illinois 100%
Marsh USA Inc. Indiana 100%
Marsh USA Inc. Kentucky 100%
Marsh USA Inc. Louisiana 100%
Marsh USA Risk Services Inc. Maine 100%
Marsh USA Inc. Massachusetts 100%
Marsh USA Inc. Michigan 100%
Marsh USA Inc. Mississippi 100%
Marsh USA Inc. Nevada 100%
Marsh USA Inc. Ohio 100%
Marsh USA Inc. Oklahoma 100%
Marsh USA Inc. Pennsylvania 100%
Marsh USA Inc. Puerto Rico 100%
Marsh USA Inc. Rhode Island 100%
Marsh USA Inc. Texas
Marsh USA Agency Inc. Texas 100%
Marsh USA Benefits Inc. Texas
Marsh USA Inc. Utah 100%
Marsh USA Inc. Virginia 100%
Marsh USA Inc. West Virginia 100%
Marsh Ltd. Wisconsin 100%
</TABLE>
<PAGE>
MARSH INC. (CONT.)
MARSH USA INC. (CONT.)
<TABLE>
<S> <C> <C>
Marsh Global Broking, Inc. Illinois 100%
Marsh Global Broking (Bermuda) Ltd. Bermuda 100%
J&H Bowring (Bermuda) Investments Ltd. Bermuda 100%
Marsh Global Broking, Inc. Connecticut 100%
Marsh Global Broking, Inc. Missouri 100%
Marsh Global Broking, Inc. New Jersey 100%
Marsh Intermediaries, Inc. New York 100%
Marsh Global Broking, Inc. Texas 100%
Marsh Global Broking (Dublin) Ltd. Ireland 100%
JHM Holdings, Inc. New York 100%
Marsh & McLennan Properties, Inc. Delaware 100%
Marsh & McLennan Properties (Bermuda) Ltd. Bermuda 100%
Marsh & McLennan Holdings, Inc. Delaware 100%
Marsh Ltd. Korea 100%
Marsh & McLennan (Malaysia) SDN BHD Malaysia 100%
Marsh International Holdings, Inc. Delaware 70%
Marsh International Broking Holdings United Kingdom 100%
Insurance Brokers of Nigeria Nigeria 40%
Marsh Argentina SA Argentina 86%
Ayba SA Argentina 100%
Ayling Marsh SA Argentina 60%
Interco SA Argentina 100%
Mees & Zoonen Argentina SA Argentina 100%
Marsh Risk Consulting SA Argentina 100%
Constantinidi Marsh SA Uruguay 80%
A. Constantinidi & Cia S.C. Uruguay 100%
Insbrokers Ltda. Uruguay 100%
Marsh Pty. Ltd. Australia 100%
Marsh & McLennan Global Broking Pty. Ltd. Australia 100%
Marsh & McLennan (PNG) Pty. Ltd. Papua New Guinea 100%
Kila Marsh & McLennan Limited Papua New Guinea 52%
Fenchurch Insurance Brokers Pty. Limited Australia 100%
Marsh & McLennan (SA) Pty. Ltd. Australia 100%
Marsh & McLennan (WA) Pty. Ltd. Australia 100%
Marsh & McLennan (WA Division) Pty. Ltd. Australia 100%
Marsh & McLennan Agencies Pty. Ltd. Australia 100%
Marsh Asia Pacific Management Pty. Ltd. Australia 100%
Marsh Corretora de Seguros Ltda. Brazil 100%
Johnson & Higgins Mediservice - Administradora De Planos De Saude LtdaBrazil 100%
Llenrup Participacoes S/C Ltda. Brazil 100%
J&H Marsh & McLennan Management (Barbados) Ltd. Barbados 100%
Marsh Canada Limited Canada 100%
Charbonneau, Dulude & Associes (1985) Limitee/Charbonneau,
Dulude & Associates (1985) Limited Canada 100%
M&M Insurance Management Canada Ltd. British Columbia 100%
Marshcan Insurance Brokers Limited Canada 100%
Irish & Maulson Limited Ontario 100%
Pratte-Morrissette, Inc. Quebec 100%
Marsh Claims Management Services (Canada) Limited Canada 100%
Albert Willcox & Co. of Canada Ltd. Canada 100%
Guy Bergeron & Associes Inc. Quebec 100%
Dupuis, Parizeau, Tremblay Inc. Quebec 100%
Lamarre Caty House Ltee. Quebec 100%
</TABLE>
- 2 -
<PAGE>
MARSH INC. (CONT.)
MARSH USA INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS, INC. (CONT.)
<TABLE>
<S> <C> <C>
J&H Marsh & McLennan Ltd. Hong Kong 100%
Marsh SpA Italy 100%
Marsh Japan Inc. Japan 100%
Marsh Korea Inc. Korea 100%
Organizacion Brockman y Schuh, S.A. de C.V. Mexico 99%
William M. Mercer S.A. de C.V. Mexico 82%
Servicios Actuariales Guatemala, S.A. Guatemala 50%
Marsh & McLennan Servicios, S.A. de C.V. Mexico 99%
Consultores en Garantias, S.A. de C.V. Mexico 99%
Professional Indemnity Re, Ltd. Bermuda 100%
Border Insurance Services, Inc. California 100%
Travelgold Mexico, S.A. de C.V. Mexico 50%
Grupo Medicos, S.A. de C.V. Mexico 25%
Brockman y Schuh Marsh & McLennan Agente de Seguros y
de Fianzas, S.A. de C.V. Mexico 99%
Inverbys, S.A. de C.V. Mexico 99%
ByS Servicios Especiales, Agente de Seguros, S.A. de C.V. Mexico 44%
Guy Carpenter Reinmex, Intermediario de Reaseguros, S.A. de C.V. Mexico 51%
Reinmex de Colombia Corredores de Reaseguros, Ltda. Mexico 87.5%
Reinmex Florida, Inc. Florida 100%
Administradora de Inmuebles Fin, S.A. de C.V. Mexico 99%
Corredores Internacionales de Reaseguros S.A. Mexico 60%
Marsh Holdings BV Netherlands 100%
Marsh Eurofinance BV Netherlands 100%
Marsh BV Netherlands 100%
Marsh Mees & Zoonen Holdings BV Netherlands 100%
Marsh Mees & Zoonen BV Netherlands 100%
Marsh & McLennan Slovakia s.r.o. Slovakia 100%
Marsh & McLennan Correduria de Reaseguros S.A. Spain 100%
Marsh AG Switzerland 100%
MMc France SA France 100%
Mercer SA France 100%
William M. Mercer S.A. France 100%
Marsh S.A. France 100%
Guy Carpenter & Company S.A. France 100%
Guy Carpenter & Company Spain 81%
Societe Bargheon France 100%
Guy Carpenter Facultatives S.A. France 100%
Marsh Conseil S.A. France 100%
Marsh Courtage S.A. France 100%
Boissarie Martin S.A. France 100%
Marsh Services S.A. France 100%
Consultants en Assurance Prevoyance Assistance (CAPA) SARL France 100%
Ratio SARL France 100%
Europe Transport Service (ETS) SARL France 100%
GIE Elysee Prevoyance Gestion France 100%
Energie Courtage S.A. France 54.92%
</TABLE>
- 3 -
<PAGE>
MARSH INC. (CONT.)
MARSH USA INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS, INC. (CONT.)
MMC FRANCE SA (CONT.)
MARSH SA (CONT.)
<TABLE>
<S> <C>
Societe d'Assurances et de Participations Guian (SAPG) S.A France 24%
Cecar Brazil Brazil 71.50%
Marsh-Assureurs Conseils Tchadiens SARL Chad 83%
Cecar Deutschland Deutschland 100%
Cecar Austria Austria 100%
Assurconseils Cecar & Jutheau Senegal 35%
SAFCAR Cecar & Jutheau Mali 35%
Marsh Tunisia Tunisia 49%
Societe Internationale de Courtage d'Assurances
et de Reassurances Cecar & Jutheau Burkina Fasso 30%
Marsh International Holdings II Inc. Delaware 100%
Mearbridge LLC Delaware 70%
Marsh & McLennan Companies UK Limited United Kingdom 100%
William M. Mercer Limited United Kingdom 100%
William M. Mercer Fraser (Irish Pensioneer Trustees) Limited Ireland 100%
William M. Mercer Srl Italy 100%
Duncan C. Fraser & Co. United Kingdom 100%
William M. Mercer Fraser Computer Services Limited United Kingdom 100%
Mercer Management Consulting, Limited United Kingdom 100%
MF Trustees Limited United Kingdom 100%
William M. Mercer Fraser Pension Fund Trustees Limited United Kingdom 100%
William M. Mercer (Isle of Man) Limited Isle of Man 100%
Pensioneer Trustees (Leeds) Limited England 100%
William M. Mercer Lda. Portugal 100%
William M. Mercer Fraser Limited United Kingdom 100%
MPA (International) Limited United Kingdom 100%
Pension Trustees Limited United Kingdom 100%
Pensioneer Trustees Limited United Kingdom 100%
Pensioneer Trustees (London) Limited United Kingdom 100%
Southampton Place Trustee Co. Ltd. United Kingdom 100%
William M. Mercer Kft. Hungary 100%
William M. Mercer (Properties) Ltd. United Kingdom 100%
Marsh Mercer Investment Trustee Ltd United Kingdom 100%
Marsh International Ltd United Kingdom 100%
Sedgwick Group Plc United Kingdom 100%
Crown Court Trust Limited United Kingdom 100%
Sedgwick Lamda Limited United Kingdom 100%
Sedgwick Europe Risk Services Limited United Kingdom 100%
Americas Insurance Services Limited United Kingdom 100%
Sedgwick Theta Limited United Kingdom 100%
Sedgwick Group Nominees Limited United Kingdom 100%
Sedgwick Group Development Limited United Kingdom 100%
Blackwood, Scott & Company Limited United Kingdom 100%
Bland Welch & Company Limited United Kingdom 100%
Sedgwick Lark Limited United Kingdom 100%
Ross Collins Holdings Limited United Kingdom 100%
Hobson, Allfrey & Wheeler Limited United Kingdom 100%
JWP Overseas Holdings Limited United Kingdom 100%
Sedgwick Consulting Group Limited United Kingdom 100%
Sedgwick Overseas Limited United Kingdom 100%
Sedgwick Noble Lowndes (Europe) Limited United Kingdom 100%
Sedgwick Financial Services (Deutschland) GmbH Germany 25%
</TABLE>
- 4 -
<PAGE>
MARSH INC. (CONT.)
MARSH USA INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS, INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS, INC. (CONT.)
MEARBRIDE LLC (CONT.)
MARSH & MCLENNAN COMPANIES UK LTD. (CONT.)
MARSH INTERNATIONAL LTD. (CONT.)
SEDGWICK GROUP PLC (CONT.)
CROWN COURT TRUST LIMITED (CONT.)
<TABLE>
<S> <C>
Sedgwick Investment Services Limited United Kingdom 100%
Sedgwick Wiggmoore Communications Limited United Kingdom 100%
The International Employer Limited United Kingdom 100%
TIE Systems Limited United Kingdom 100%
Chancery Eastcheap Limited United Kingdom 100%
Employee Advantage Limited United Kingdom 100%
Sedgwick Outsourcing Services Limited United Kingdom 100%
Sedgwick Noble Lowndes Actuarial
Services Limited United Kingdom 100%
Advantage Independent Limited United Kingdom 100%
Advantage Insurance Services UK Limited United Kingdom 100%
Flexifund Limited United Kingdom 100%
Noble Lowndes Pensions Limited United Kingdom 100%
Noble Lowndes Personal Financial
Services Limited United Kingdom 100%
Marsh Treasury Services Limited United Kingdom 100%
Sedgwick Management Services (London) Limited United Kingdom 100%
Sedgwick Management Services (Guernsey) Ltd Guernsey 100%
Sedgwick Management Services (Singapore) 100%
Pte Limited Singapore 100%
Sedgwick Omega Limited United Kingdom 100%
Sedgwick Epsilon Limited United Kingdom 100%
Sedgwick Eta Limited United Kingdom 100%
Lloyd George Insurance Services Limited United Kingdom 95%
Sedgwick Delta Limited United Kingdom 100%
Sedgwick Far East Limited United Kingdom 100%
Sedgwick Kazakhstan Limited United Kingdom 100%
Marsh Ukraine Limited United Kingdom 100%
Sedgwick Japan Limited United Kingdom 100%
B.K. Thomas & Partners Limited United Kingdom 100%
B.K. Thomas & Partners (General) Limited United Kingdom 100%
Sedgwick Turkey Limited United Kingdom 100%
Sedgwick OS Limited United Kingdom 100%
Sedgwick Corporate Services Limited United Kingdom 100%
Marsh Properties & Services Limited United Kingdom 100%
Avongrove Limited United Kingdom 99.6%
Sedgwick Centre Limited United Kingdom 100%
Matchgrange Holdings Limited United Kingdom 100%
Matchgrange Limited United Kingdom 100%
Sedgwick Alpha Limited United Kingdom 100%
</TABLE>
- 5 -
<PAGE>
MARSH INC. (CONT.)
MARSH USA INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS, INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS, INC. (CONT.)
MEARBRIDE LLC (CONT.)
MARSH & MCLENNAN COMPANIES UK LTD. (CONT.)
MARSH INTERNATIONAL LTD. (CONT.)
SEDGWICK GROUP PLC (CONT.)
<TABLE>
<S> <C> <C>
Sedgwick Noble Lowndes Group Limited United Kingdom 100%
Sedgwick Noble Lowndes (UK) Limited United Kingdom 100%
Sedgwick Financial Services Limited United Kingdom 100%
SIMS Nominees Limtied United Kingdom 100%
Sedgwick Trustees Limited United Kingdom 100%
Sedgwick Affinity Group Services Limited United Kingdom 100%
Sedgwick Noble Lowndes Limited United Kingdom 100%
English Pension Trustees Limited United Kingdom 100%
Sedgwick Noble Lowndes Trust
Corporation Limited United Kingdom 100%
Sedgwick Northern Ireland Limited United Kingdom 100%
Noble Lowndes Settlement Trustees Ltd United Kingdom 100%
Sedgwick Ulster Pension Trustees Ltd Northern Ireland 100%
Lowndes (N.I.) Limited Northern Ireland 100%
Scotttish Pension Trustees Limited United Kingdom 100%
Settlement Trustees Limited United Kingdom 100%
Combined Actuarial Performance
Services Limited United Kingdom 25%
Seabury & Smith Group Limited United Kingdom 100%
Price Forbes Limited United Kingdom 100%
Medisure, Seabury & Smith Limited United Kingdom 100%
Medisure Corporate Services Limited United Kingdom 100%
Medisure Marketing and Management
Limited United Kingdom 100%
Medisure Affinity Services Limited United Kingdom 100%
Allied Medical Assurance Services Ltd United Kingdom 100%
Healthcare Agencies Limited United Kingdom 100%
Sedgwick Group Pension Scheme Trustee Limited United Kingdom 100%
Sedgwick Global Reinsurance Services Limited United Kingdom 100%
Incorporated Names Advisers Limited United Kingdom 100%
E.W. Payne (UK) Limited United Kingdom 100%
Marsh & McLennan Securities Group Limited United Kingdom 100%
Marsh & McLennan Securities Limited United Kingdom 100%
Euings (London) Limited United Kingdom 100%
Sedgwick Reinsurance Brokers Limited United Kingdom 100%
Aldgate US Investments United Kingdom 100%
Digitsuper Limited United Kingdom 100%
Cruiselook Limited United Kingdom 100%
Overseas Reinsurance Corporation Limited Bermuda 100%
Sedgwick Overseas Investments Limited United Kingdom 100%
Sedgwick Overseas Group Limited United Kingdom 100%
Sedgwick Asia Pacific Limited Australia 100%
Sedgwick Internationaal BV Netherlands 100%
Sedgwick Management Services (Antigua)
Limited Antigua 100%
Sedgwick Group (Australia) Pty Limited Australia 100%
</TABLE>
- 6 -
<PAGE>
<TABLE>
MARSH INC. (CONT.)
MARSH USA INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS II INC. (CONT.)
MEARBRIDGE LLC (CONT.)
MARSH & MCLENNAN COMPANIES UK LTD. (CONT.)
MARSH INTERNATIONAL LTD. (CONT.)
SEDGWICK GROUP PLC (CONT.)
SEDGWICK OVERSEAS INVESTMENTS LIMITED (CONT.)
SEDGWICK INTERNATIONAAL BV (CONT.)
<S> <C> <C>
Sedgwick (Holdings) Pty Limited Australia 100%
Bland Payne (South Aust.) Pty Limited Australia 100%
Sedgwick Limited Australia 100%
Sedgwick Insurance Agencies
Pty Limited Australia 100%
Sedgwick Re Asia Pacific Limited Australia 100%
Sedgwick Corporate and Employee
Benefits Limited Australia 100%
Price Forbes Australia Limited Australia 100%
Technical Insurance Management
Services Pty Limited Australia 100%
Sedgwick Superannuation Pty Limited Australia 100%
Sedgwick Noble Lowndes Asia Pacific
Limited Australia 100%
Mercer Australia Limited Australia 100%
Sedgwick Noble Lowndes
Actuarial Limited Australia 100%
William M. Mercer (Aust) Ltd Australia 100%
Noble Lowndes (PNG)
Limited Papua New Guinea 100%
William M. Mercer Cullen
Egan Dell Limited Australia 100%
William M. Mercer
Tax Agents Pty
Limited Australia 100%
Sedgwick Noble Lowndes
Financial Planning Ltd. Australia 100%
Sedgwick Noble Lowndes
Trusteeship Services Ltd. Australia 100%
Sedgwick Versicherungsmakler GmbH Austria 100%
MVM Versicherungsberatungs GmbH Austria 100%
Sedgwick Group Canada 1997 Inc. Canada 100%
Sedgwick (Deutschland) GmbH Germany 100%
Sedgwick Noble Lowndes GmbH Germany 100%
Sedgwick Financial Services
(Deutschland) GmbH Germany 75%
Neuburger Noble Lowndes GmbH Germany 50%
Sedgwick Verwaltungs-GmbH Germany 100%
Sedgwick Consulting GmbH Germany 100%
Sedgwick International Broking
Services GmbH Germany 100%
Sedgwick GmbH & Co Germany 100%
Buir-Bliesheimer Versicherungsservice
GmbH Germany 49%
MVM Versicherungsmakler AG Switzerland 49%
</TABLE>
- 7 -
<PAGE>
<TABLE>
MARSH INC. (CONT.)
MARSH USA INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS II INC. (CONT.)
MEARBRIDGE LLC (CONT.)
MARSH & MCLENNAN COMPANIES UK LTD. (CONT.)
MARSH INTERNATIONAL LTD. (CONT.)
SEDGWICK GROUP PLC (CONT.)
SEDGWICK OVERSEAS INVESTMENTS LIMITED (CONT.)
SEDGWICK INTERNATIONAAL BV (CONT.)
<S> <C> <C>
Sedgwick (Continental) SA Switzerland 100%
Sedgwick (Isle of Man) Limited Isle of Man 100%
Sedgwick Corporate Services Limited Isle of Man 100%
Friedrich Limited Isle of Man 100%
Heinrich Limited Isle of Man 100%
Sedgwick New Company Limited Isle of Man 100%
Sedgwick Management Services
(Isle of Man) Limited Isle of Man 100%
Sedgwick Management Services
(Jersey) Limted Jersey 100%
Thilly Reinsurance Services SA Belgium 100%
Sedgwick Europe Benefit Consultants BV Netherlands 100%
Shariffuddin-Sedgwick (B) Sendiran Berhad Brunei 45%
Sedgwick Holdings (Netherlands) BV Netherlands 100%
Sedgwick Management Services
(Curacao) N.V. N. Antilles 100%
Sedgwick Nederland BV Netherlands 100%
P.T. Sedgwick Dharmala Indonesia 55%
Verenigde Reassurantie
Makelaars BV Netherlands 100%
Sedgwick BV Netherlands 100%
Singel Reinsurance
Underwriting BV Netherlands 100%
NV Algemene Verzekering
Maatschappij "De Zee" Netherlands 100%
Pontier & Karreman BV Netherlands 100%
Sedgwick European Risk
Services BV Netherlands 100%
Sedgwick Financial Services BV Netherlands 100%
Sedgwick Noble Lowndes B.V Netherlands 100%
Sedgwick Noble Lowndes Insurance
Division BV Netherlands 100%
Sedgwick Financial Services
Consulting Division BV Netherlands 100%
Sedgwick Group (Netherlands) BV Netherlands 100%
Cullen Egan Dell (NZ) Limited New Zealand 100%
Sedgwick Bergvall Holdings AS Norway 100%
Marsh Marine & Energy AS Norway 100%
Marsh Norway AS Norway 100%
Dextra AS Norway 100%
Marsh Marine & Energy AB Norway 100%
Sedgwick Bergvall Inc. USA 100%
Sedgwick (PNG) Pty Limited Papua New Guinea 100%
Sedgwick Kassman Pty Limited Papua New Guinea 100%
</TABLE>
- 8 -
<PAGE>
<TABLE>
MARSH INC. (CONT.)
MARSH USA INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS II INC. (CONT.)
MEARBRIDGE LLC (CONT.)
MARSH & MCLENNAN COMPANIES UK LTD. (CONT.)
MARSH INTERNATIONAL LTD. (CONT.)
SEDGWICK GROUP PLC (CONT.)
SEDGWICK OVERSEAS INVESTMENTS LIMITED (CONT.)
SEDGWICK INTERNATIONAAL BV (CONT.)
<S> <C> <C>
Sedgwick Africa Holdings (Pty) Limited South Africa 100%
Professional Risk Services (Pty) Limited South Africa 100%
RAS Administration Services (Pty) Ltd South Africa 50%
Professional Risk Consultants (Pty) Ltd South Africa 100%
Sedgwick Holdings (Namibia) (Pty) Limited Namibia 100%
Sedgwick Sweden AB Sweden 100%
Sedgwick Risk Services AB Sweden 100%
Sedgwick Dineen Group Limited Ireland 100%
Sedgwick Dineen Ireland Limited Ireland 100%
Sedgwick Dineen Trustees Limited Ireland 100%
Sedgwick Dineen Consulting
Group Limited Ireland 100%
Sedgwick Dineen Employee
Benefits Limited Ireland 100%
Sedgwick Dineen Personal Financial
Management Limited Ireland 100%
M.B. Fitzpatrick Limited Ireland 100%
Irish Pensions Trust Limited Ireland 100%
Payment Protection Services Ltd Ireland 100%
IPT Actuarial Services Limited Ireland 100%
Sedgwick Noble Lowndes Limited Ireland 100%
Irish Pension Trustees Limited Ireland 100%
Combined Performance Measurement
Services Limited Ireland 50%
Sedgwick Dineen Limited Ireland 100%
Sedgwick Zeta Limited United Kingdom 100%
Sedgwick Claims Management
Services Limited Ireland 100%
Sedgwick Risk Consulting Ltd Ireland 100%
Legal & Commercial Insurances
Limited Ireland 100%
Gaelarachas Teoranta Ireland 50%
Sedgwick Management Services
(Ireland) Limited Ireland 100%
All Asia Sedgwick Insurance Brokers
Corporation Philippines 51%
Sedgwick Insurance and Risk Management
Consultants (China) Limited China 100%
Sedgwick Polska sp. z o.o Poland 100%
Sedgwick a.s Czech Republic 100%
Sedgwick Slovakia a.s Slovakia 80%
Sedgwick Holding A/S Denmark 100%
Sedgwick Oy Finland 100%
</TABLE>
- 9 -
<PAGE>
<TABLE>
MARSH INC. (CONT.)
MARSH USA INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS II INC. (CONT.)
MEARBRIDGE LLC (CONT.)
MARSH & MCLENNAN COMPANIES UK LTD. (CONT.)
MARSH INTERNATIONAL LTD. (CONT.)
SEDGWICK GROUP PLC (CONT.)
SEDGWICK OVERSEAS INVESTMENTS LIMITED (CONT.)
SEDGWICK INTERNATIONAAL BV (CONT.)
<S> <C> <C>
Sedgwick Holding France SA France 100%
Sedgwick SA France 99.96%
Societe Francaise de Courtage
d'Assurance de Risques Petroliers
et d'Energie SA France 100%
Cofast SA France 100%
PRIESTIM SCI France 100%
Medisur SA France 100%
Sedgwick Noble Lowndes
Conseil SA France 100%
Cabinet Billet et Cie SA France 100%
ARC Sud-Ouest SA France 64.50%
Sedgwick Noble Lowndes Data
Consulting Limited Hungary 100%
Lynch Insurance Brokers Limited Barbados 30%
Sedgwick Management Services (Barbados) Ltd Barbados 33.33%
Media Reinsurance Corporation Barbados 25%
James Wigham Poland International Limited United Kingdom 100%
Wigham Poland Australia Pty Limited Australia 100%
Wigham Poland (Hellas) Limited Greece 100%
Wigham Poland Reinsurance Brokers
Hellas Limited Greece 100%
Sepakat James Insurance Brokers
Sdn Bhd Malaysia 30%
Sedgwick Gamma Limited United Kingdom 100%
Sedgwick Group (Bermuda) Limited Bermuda 100%
Sedgwick (Bermuda) Limited Bermuda 100%
Sedgwick Noble Lowndes Limited Hong Kong 100%
Cumberland Brokerage Limited Bermuda 100%
Monalsa Assessoria Economico
Financiera Ltda. Brazil 100%
SCIB (Bermuda) Limited Bermuda 100%
Sedgwick Limited Hong Kong 100%
Sedgwick Hung Kai Insurance & Risk
Management Consultants Limited Hong Kong 50%
Sedgwick Construction Asia Limited Hong Kong 100%
Antah Sedgwick Insurance Brokers Sdn Bhd Malaysia 30%
Sedgwick Private Limited Singapore 100%
Sedgwick Re Asia Pacific (Consultants)
Pte Limited Singapore 100%
</TABLE>
- 10 -
<PAGE>
<TABLE>
MARSH INC. (CONT.)
MARSH USA INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS II INC. (CONT.)
MEARBRIDGE LLC (CONT.)
MARSH & MCLENNAN COMPANIES UK LTD. (CONT.)
MARSH INTERNATIONAL LTD. (CONT.)
SEDGWICK GROUP PLC (CONT.)
SEDGWICK OVERSEAS INVESTMENTS LIMITED (CONT.)
<S> <C> <C>
Aldgate Investments Limited Bermuda 100%
Yarmouth Insurance Limited Bermuda 100%
Sedgwick Management Services
(Bermuda) Limited Bermuda 100%
Sedgwick Management Services
(Cayman) Limited Cayman Isles 100%
ACE Holding Inc. British Virgin Isles 32.63%
Reinsurance and Insurance Management
Services Limited Bermuda 100%
Sedgwick Forbes Middle East Ltd Bermuda 100%
Sedgwick Forbes Middle East Ltd Jersey 100%
Sedgwick Bahrain WLL Bahrain 49%
International Insurance Brokers Inc. Liberia 100%
ACE (Hellas) LLC Greece 100%
ACE (Liberia) Inc. Liberia 100%
Insurance Brokering
Services (USA) USA 100%
ACE Europe (Insurance
Brokers) Ltd Jersey 100%
Arab Commercial
Enterprises SAL Lebanon 98.67%
Marsh (Pty) Limited Botswana 95%
Penguin Investments (Pty) Limited Botswana 100%
Sedgwick Brimex (Guernsey) Limited Guernsey 100%
Sedgwick Brimex Romania SRL Romania 51.03%
Sedgwick Kenya Insurance Brokers Limited Kenya 40%
SEDFEMA Insurance Brokers Inc. Philippines 100%
Sedgwick Korea Limited South Korea 100%
Sedgwick Venezuela Corredores de
Reaseguros, CA Venezuela 100%
Sedgwick Group (Zimbabwe) Limited Zimbabwe 100%
Sedgwick Holdings (Private) Limited Zimbabwe 50%
Sedgwick Insurance Brokers
(Private) Ltd Zimbabwe 100%
Sedgwick Management Services
(Private) Limited Zimbabwe 100%
Sedgwick Risk Management and
Consultancy (Private) Limited Zimbabwe 100%
</TABLE>
- 11 -
<PAGE>
<TABLE>
MARSH INC. (CONT.)
MARSH USA INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS II INC. (CONT.)
MEARBRIDGE LLC (CONT.)
MARSH & MCLENNAN COMPANIES UK LTD. (CONT.)
<S> <C> <C>
Marsh UK Group Ltd United Kingdom 100%
Marsh, SA Mediadores de Seguros (Spain) Spain 28.8%
Marsh Ltd United Kingdom 100%
Aviation Risk Management Services Ltd United Kingdom 100%
Bowring Aviation Advisory Services Ltd United Kingdom 100%
Bowring Marine Ltd United Kingdom 100%
Bowring Reinsurance Brokers Ltd United Kingdom 100%
Marsh UK Ltd United Kingdom 100%
Carpenter Bowring (UK) Ltd United Kingdom 100%
Fuji International Insurance Company Ltd United Kingdom 0.4%
Intermediary Systems Ltd United Kingdom 100%
White Kennett Ltd United Kingdom 100%
Winchester Bowring Ltd United Kingdom 100%
CBH Ltd United Kingdom 100%
C.T. Bowring & Co. (Insurance) Ltd United Kingdom 100%
Marsh & McLennan FINPRO Ltd United Kingdom 100%
Guy Carpenter & Company Ltd United Kingdom 100%
Guy Carpenter & Company Ltd, Eire United Kingdom 100%
Marsh Insurance Brokers Ltd United Kingdom 100%
Marsh Marine & Energy Ltd United Kingdom 100%
Marsh Space Projects Ltd United Kingdom 100%
Stevton (No.140) Ltd United Kingdom 100%
Microsafe Ltd United Kingdom 100%
Geological Information Systems Ltd United Kingdom 100%
Marsh Link Ltd United Kingdom 100%
Unison Insurance Services Ltd United Kingdom 100%
Willcox J&H Reinsurance Brokers Ltd United Kingdom 100%
Sedgwick Ltd United Kingdom 100%
Sedgwick International Broking Services Ltd United Kingdom 100%
Sedgwick Global Ltd United Kingdom 100%
Sedgwick Computer & Network Service
Company Ltd United Kingdom 100%
Sedgwick Credit Ltd United Kingdom 100%
Sedgwick Europe Risk Solutions Ltd United Kingdom 100%
Sedgwick Energy Ltd United Kingdom 100%
Aldgate Insurance Brokers (Marine) Ltd United Kingdom 100%
Sedgwick Bankrisk Ltd United Kingdom 100%
Sedgwick Aviation Ltd United Kingdom 100%
Sedgwick Energy & Marine Ltd United Kingdom 100%
Sedgwick Special Risks Ltd United Kingdom 100%
Reclaim Ltd United Kingdom 100%
SG Services Ltd United Kingdom 100%
Sedgwick Northern Ireland Risk Services Ltd United Kingdom 100%
Sedgwick Agency Services Ltd United Kingdom 100%
</TABLE>
- 12 -
<PAGE>
MARSH INC. (CONT.)
MARSH USA INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS II INC. (CONT.)
MEARBRIDGE LLC (CONT.)
MARSH & MCLENNAN COMPANIES UK LTD. (CONT.)
MARSH UK GROUP LTD. (CONT.)
MARSH LTD. (CONT.)
SEDGWICK LTD. (CONT.)
<TABLE>
<S> <C> <C>
Wigham Poland Ltd United Kingdom 100%
Wigham Poland Aviation Ltd United Kingdom 100%
Wigham Poland Professional Indemnity Ltd United Kingdom 100%
Wigham Poland Reinsurance Brokers Ltd United Kingdom 100%
Wigham Poland Scotland Ltd United Kingdom 100%
Wigham Poland Marine Ltd United Kingdom 100%
Anthony Lumsden & Company Ltd United Kingdom 100%
Anthony Lumsden Group Ltd United Kingdom 100%
Anthony Lumsden & Co (Pte) Ltd Singapore 100%
Sedgwick Reinsurance Services Ltd United Kingdom 100%
Sedgwick Credit Europe Ltd United Kingdom 100%
Marine Risk Management Services Ltd United Kingdom 100%
Sedgwick UK Risk Services Ltd United Kingdom 100%
Roger Lark & Sedgwick (Partnership) United Kingdom 30%
R L & S Ltd United Kingdom 100%
Lark Financial Services Ltd United Kingdom 14%
Racal Insurance Services Ltd United Kingdom 50%
Richard Sparrow Holdings Ltd United Kingdom 100%
Richard Sparrow and Company Ltd United Kingdom 100%
Richard Sparrow and Company (International
Non Marine) Ltd United Kingdom 100%
E W Payne & Co (Marine) Ltd United Kingdom 100%
ReSolutions International Ltd United Kingdom 100%
Marsh Health Ltd United Kingdom 100%
Sedgwick Noble Lowndes Occupational Health
(Midlands) Ltd United Kingdom 100%
Affinity Groups Advantage Ltd United Kingdom 100%
Sedgwick Affinity Groups Advantage Ltd United Kingdom 100%
Marsh & McLennan Securities Structured
Risk Services Ltd United Kingdom 100%
The Financial & Insurance Advice Centre Ltd United Kingdom 100%
J&H Marsh & McLennan (UK) Ltd United Kingdom 100%
Marsh Europe Ltd United Kingdom 100%
Bowring Risk Management Ltd United Kingdom 100%
Corporate Pensions & Financial Services Ltd United Kingdom 100%
C.T. Bowring Ltd United Kingdom 100%
Insurance Management Services Ltd United Kingdom 100%
Marsh Ireland Holdings Ltd Ireland 100%
Marsh Ireland Ltd Ireland 100%
BRW Insurance & Financial
Services Ltd Ireland 100%
BRW Insurance Brokers Ltd Ireland 100%
BRW Pension & Financial
Consultants Ltd Ireland 100%
C.T. Bowring Ireland Ltd Ireland 100%
Mathews, Mulcahy & Sutherland Ltd Ireland 100%
Johnson & Higgins Ireland Ltd Ireland 100%
RIC Management Services Ltd. Ireland 100%
</TABLE>
- 13 -
<PAGE>
<TABLE>
MARSH INC. (CONT.)
MARSH USA INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS II INC. (CONT.)
MEARBRIDGE LLC (CONT.)
MARSH & MCLENNAN COMPANIES UK LTD. (CONT.)
MARSH UK GROUP LTD. (CONT.)
MARSH LTD. (CONT.)
J&H MARSH & MCLENNAN (UK) LTD. (CONT.)
MARSH IRELAND HOLDINGS LTD. (CONT.)
<S> <C> <C>
Marsh Financial Services Ltd. Ireland 100%
Marsh Ltd (New Zealand) New Zealand 100%
J&H Marsh & McLennan Ltd Fiji 100%
Reinsurances (Pacific) Ltd Fiji 100%
Sedgwick (Fiji) Ltd Fiji 100%
William M Mercer (NZ) Ltd New Zealand 100%
Marsh & McLennan Holdings Ltd United Kingdom 100%
World Insurance Network Ltd United Kingdom
Marsh & McLennan Lda (Portugal) Portgual 62.5%
Marsh & McLennan Nederland BV Netherlands 100%
Marsh & McLennan Services Ltd United Kingdom 100%
RIAS Insurance Services Ltd United Kingdom 100%
Ulster Insurance Services Ltd United Kingdom 100%
Tower Place Holdings Ltd United Kingdom 100%
Tower Hill Ltd United Kingdom 100%
Tower Hill Holdings BV Holland 100%
Tower Hill BV Holland 100%
Tower Place Developments Ltd United Kingdom 100%
C.T. Bowring Trading (Holdings) Ltd United Kingdom 100%
Baffin Trading Company Ltd Canada 100%
Guy Carpenter & Company Pty Ltd Australia 100%
Australian World Underwriters Pty Ltd Australia 100%
Guy Carpenter & Company Ltd New Zealand 100%
Hovertravel Ltd United Kingdom 5.7%
RIC Management Services Ltd United Kingdom 100%
Tower Hill Property Company Ltd United Kingdom 100%
Marsh (Isle of Man) Ltd United Kingdom 100%
Marsh Management Services Isle of Man Ltd United Kingdom 100%
Marsh & McLennan Management (Guernsey) Ltd Guernsey 100%
Marsh Corporate Services Ltd United Kingdom 100%
Bowring Ltd United Kingdom 100%
Marsh Financial Services Ltd United Kingdom 100%
Marsh Financial Services (Jersey) Ltd Jersey 100%
Johnson & Higgins Holdings Ltd United Kingdom 100%
Corporate Risk Plc United Kingdom 100%
Johnson & Higgins Ltd United Kingdom 100%
Willcox Johnson & Higgins Reinsurance
Brokers Ltd United Kingdom 100%
Willcox Intermediaries Ltd United Kingdom 100%
Johnson & Higgins UK Ltd United Kingdom 100%
J&H Global Risk Management Consultancy Ltd United Kingdom 100%
</TABLE>
- 14 -
<PAGE>
MARSH INC. (CONT.)
MARSH USA INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS INC. (CONT.)
MARSH INTERNATIONAL HOLDINGS II INC. (CONT.)
MEARBRIDGE LLC (CONT.)
MARSH & MCLENNAN COMPANIES UK LTD. (CONT.)
MARSH UK GROUP LTD. (CONT.)
JOHNSON & HIGGINS HOLDINGS LTD. (CONT.)
<TABLE>
<S> <C> <C>
Marsh (Insurance Services) Ltd United Kingdom 100%
J&H Marsh & McLennan Kazakstan Liability Ltd Kazakstan 100%
ZAO Johnson & Higgins Moscow 100%
Marsh Georgia Ltd United Kingdom 100%
Grupo Internacional de Reaseguro
Intermediario de Reaseguro,
S.A. de C.V. Mexico 10%
Marsh Azeri Ltd United Kingdom 100%
Sedgwick Russia Ltd United Kingdom 100%
Peter Smart Associates Ltd United Kingdom 100%
Marsh & McLennan Versicherungs-Service GmbH Austria 100%
Henrijean, S.A. Belgium 47%
Marsh S.A. Belgium 100%
Invercol Ltd. Bermuda 100%
Marsh & McLennan Management Services (Bermuda) Limited Bermuda 100%
Transglobe Management (Bermuda) Ltd. Bermuda 100%
J&H Marsh & McLennan (Cayman Islands) Ltd. Cayman Islands 100%
Marsh & McLennan Management Services (L) Ltd. Labuan 100%
Marsh Claro S.A. Corredores De Seguros Chile 100%
Claro Marsh & McLennan Consultores en Recursos Humanos, Ltda. Chile 100%
DeLima Marsh Colombia 51%
Invorsa S.A. Colombia 100%
J&H Marsh & McLennan (Colombia) Ltd. Colombia 100%
Andina de Corretaje de Reaseguros Ltda. Ancor Colombia 100%
DeLima & Cia Ltda. Colombia 100%
Guy Carpenter Reinmex Corredores de Reaseguros Ltda Colombia 100%
Marsh A/S Denmark 100%
Marsh Norway A.S. Norway 100%
Marsh Forsakringsmaklare AB Sweden 100%
Marsh & McLennan Holdings GmbH Germany 100%
Erwin Warnecke GmbH Germany 100%
Marsh GmbH Germany 100%
RMB-Risk Management Beratungs-GmbH Germany 100%
Wolf & Hasselmann GmbH Germany 100%
William M. Mercer GmbH Germany 90%
VW-Versicherungsvermittlungs-GmbH Germany 33.3%
VVG Gradmann & Holler Versicherungs-Vermittlungs-GmbH Germany 24%
Sudzucker Versicherungsvermittlungs GmbH Germany 49%
Senator Asserkuranz Contor GmbH Germany 49%
Gradman & Holler Kiefhaber GmbH Germany 100%
</TABLE>
- 15 -
<PAGE>
MARSH INC. (CONT.)
MARSH USA INC. (CONT.)
MARSH & MCLENNAN HOLDINGS GMBH (CONT.)
MARSH GMBH (CONT.)
<TABLE>
<S> <C> <C>
Bau Asserkuranz Vermittlungs GmbH Germany 45%
Gradmann & Holler Kiefhaber GmbH Germany 100%
Flughafen Munchen Versicherungsvermittlungs-GmbH Germany 49%
Versicherungs-Vermittlungsgesellschaft fur
dle Energieversorgung Baden-Wurttemberg Germany 49%
Deutsche Post Asserkuranz Vermittlungs-GmbH Germany 49%
Deutsche Verkehrs-Asserkuranz-Vermittlungs-GmbH Germany 15%
Gradmann & Holler AG Switzerland 100%
Marsh & McLennan-Hellas-L.L.C. Greece 100%
J&H Marsh & McLennan Budapest Insurance Brokers & Consultants Ltd. Hungary 100%
Marsh Israel (1999) Ltd. Israel 99%
Marsh Israel (Holdings) Ltd. Israel 100%
Marsh Israel Insurance Agency Ltd. Israel 100%
Gold Line Life Insurance Agency (1997) Ltd. Israel 50%
Forum Loewenthal Elementary Insurance Agency (1997) Ltd. Israel 60%
Amamit Insurance Agency (1995) Ltd. Israel 50%
Colbituach Insurance Agency Israel 49%
Elidov Insurance Agency (1991) Ltd. Israel 9.2%
Marsh Israel Life and Pension Insurance Agency Ltd. Israel 100%
Marsh Israel Consultants Ltd. Israel 100%
Tmura Loewenthal Ltd. Israel 33%
Tamir Insurance Company Ltd. Israel 100%
Rosh Insurance Agency (1990) Ltd. Israel 100%
Marsh Israel International Brokers Ltd. Israel 100%
Confidentia Marine Insurance Agency (1983) Ltd. Israel 80%
Confidentia Life Insurance Agency Ltd. Israel 66%
Marsh Kazakhstan Kazakhstan 100%
Marsh & McLennan Co. Inc. Liberia 100%
Marsh & McLennan Luxembourg, S.A Luxembourg 100%
Marsh & McLennan Insurance Management Services, S.A. Luxembourg 100%
Marsh Peru SA Peru 100%
Marsh & McLennan Polska Sp.zO.O Poland 100%
Marsh Romania s.r.l. Romania 100%
Marsh & McLennan Management Services (S) Pte. Ltd. Singapore 100%
Marsh & McLennan Bowring Pte. Ltd. Singapore 100%
Marsh & McLennan Espana, S.A., Correduria de Seguros Spain 60%
Marsh Privat AIE Spain 50%
Kessler & Co. Inc. Switzerland 25%
Marsh (South Africa) (Pty) Ltd. South Africa 60%
Marsh PB Company Limited Thailand 49%
J&H Marsh & McLennan Sigorta ve Reasurans Brokerligi A.S. Turkey 100%
San J&H Marsh & McLennan Sigorta ve Reasurans Brokerligi A.S. Turkey 100%
Carter Brito Ltd United Kingdom 100%
Marsh (Middle East) Ltd United Kingdom 100%
J&H Marsh & McLennan Management (UK) Ltd United Kingdom 100%
Marsh Venezuela C.A. Venezuela 100%
J&H Marsh & McLennan Management (USVI) Ltd. Virgin Islands 100%
Marsh & McLennan, Incorporated Virgin Islands 100%
Muir Beddall (Zimbabwe) Limited Zimbabwe 100%
C.T. Bowring and Associates (Private) Limited Zimbabwe 28.82%
</TABLE>
- 16 -
<PAGE>
MARSH INC. (CONT.)
MARSH USA INC. (CONT.)
<TABLE>
<S> <C> <C>
Jay R. Corp. New York 100%
Casualty Insurance Company Services, Inc. California 100%
Johnson & Higgins Agency of Korea, Ltd. Korea 100%
Retach Corporation Delaware 100%
Shipowners of Claims Bureau, Inc. New York 100%
Caribbean Marine Associates, Inc. Florida 100%
Pacific Marine Associates, Inc. California 100%
Johnson & Higgins (USVI) Ltd. Virgin Islands 100%
Marsh Intermediaries of Washington, Inc. Washington 100%
Healthcare Risk Management Services, Inc. Washington 100%
Espana Uno, Inc. Delaware 100%
Espana Dos, Inc. Delaware 100%
Espana Tres, Inc. Delaware 100%
Espana Cuatro, Inc. Delaware 100%
Espana Cinco, Inc. Delaware 100%
Espana Seis, Inc. Delaware 100%
Espana Siete, Inc. Delaware 100%
Espana Ocho, Inc. Delaware 100%
J&H Interests, Inc. New York 100%
Henry Ward Johnson & Company Insurance Services, Inc. California 100%
Johnson & Higgins Willis Faber Holdings, Inc. New York 50%
Marsh Management Services, Inc. New York 100%
New, S.A. Peru 100%
Willcox, Barringer & Co. (California) Inc. California 100%
Willcox Johnson & Higgins Asia, Pte. Ltd. Singapore 100%
Johnson & Higgins Willis Faber (U.S.A.) Inc. New York 100%
SBI Reinsurance Company, Ltd. Bermuda 100%
Interco, S.A. 100%
Wilson McBride, Inc. Ohio
Johnson & Higgins W.F. Ltd. Canada 100%
Worldwide Energy Insurance Services, Inc. 100%
Transbrasil Ltda. Brazil 50%
Max Mattheissen Holdings A.B. Sweden 100%
Unison Belgium Belgium 100%
Unison Management (Scandinavia) AB Scandinavia 50%
Foster Higgins (Far East) Limited Hong Kong 100%
Marsh Commercial Insurance Agencies Pty Ltd. Australia 100%
Johnson & Higgins (Bermuda) Limited Bermuda 100%
Unison Management (Bermuda) Ltd. Bermuda 100%
Johnson & Higgins of (Cayman Islands) Ltd. Cayman Islands 100%
IMC (Turks & Caicos) Limited Cayman Islands 100%
Johnson & Higgins Intermediaries (Cayman) Ltd. Cayman Islands 100%
Victoria Hall Company Limited Bermuda 20%
Johnson & Higgins of (Chile) Limitada Chile 100%
Albert Willcox & Co. of Canada Ltd. Canada 100%
Dupuis, Parizeau, Tremblay, Inc. Canada 100%
Les Conseillers Dpt. Inc. Canada 100%
Marsh Singapore Pte Ltd. Singapore 100%
Johnson & Higgins PB Co., Ltd. Singapore 40%
Johnson & Higgins Risk Management Services (S) Pte. Ltd. Singapore 100%
Johnson & Higgins Consulting S.r.L. Italy 100%
Unison Consultants Europe Belgium 96%
J&H Employee Benefit S.p.A. Italy 100%
Sersur Brazil 100%
</TABLE>
- 17 -
<PAGE>
MARSH INC. (CONT.)
MARSH USA INC. (CONT.)
<TABLE>
<S> <C> <C>
Unison Management Luxembourg, S.A. Luxembourg 23%
Willcox Phillippines Inc. Phillippines 40%
Inter-Ocean Management (Cayman) Limited Cayman Islands 100%
Johnson & Higgins Luxembourg, S.A. Luxembourg 100%
Transglobal (Guernsey) Ltd. Guernsey 100%
Unison Management (Dublin) Limited Ireland 100%
Vista Insurance Company, Ltd. Bermuda 100%
Mactras (Bermuda) Limited Bermuda 100%
Gem Insurance Company Limited Bermuda 100%
Uniservice Insurance Service Limited Bermuda 100%
H.I. Group - Johnson & Higgins Phillippines, Inc. Philippines 70%
JHINDAH (Asia) Limited Indonesia 50%
Sedgwick James of Puerto Rico, Inc. Puerto Rico 100%
Stephen F. Beard, Inc. Puerto Rico 100%
Sedgwick International Risk Management, Inc. Delaware 100%
Sedgwick Limited Taiwan 100%
Sedgwick Asia Pacific Private Limited Singapore 100%
Mariners Insurance Agency, Inc. Massachusetts 100%
Maritime Adjusters, Inc. Massachusetts 100%
Sedgwick Energy (Insurance Services) Inc. Texas 100%
Members Insurance Club Agency, Inc. Ohio 100%
Sedgwick Investments, Inc. Delaware 100%
Sedgwick Benefits, Inc. Utah 100%
Unused Subsidiary, Inc. Texas 100%
Countryside, Inc. Tennessee 50.38%
Members Insurance Club Agency, Inc Louisiana 100%
Route 413 Associates, Inc. Pennsylvania 100%
Sedgwick Management Services (U.S.) Limited Vermont 100%
Sedgwick Managing General Agency, Inc. Texas 100%
Sedgwick Noble Lowndes North America, Inc. Delaware 100%
Galbraith & Green, Inc. of Ohio Ohio 100%
APRIMAN, Inc. California 100%
Sedgwick CMS Holdings, Inc. Delaware 100%
Sedgwick Claims Management Services, Inc. Illinois 100%
SCMS Administrative Services, Inc. Illinois 100%
CVA Consultants, Inc. Nevada 100%
Don A. Harris & Associates, Inc. Nevada 100%
Sedgwick Life and Benefits, Inc. Texas 100%
Sedgwick International Marketing Services Inc. Delaware 100%
Unused Subsidiary, Inc. New York 100%
Sedgwick Financial Services Inc. Delaware 100%
Syndicate & Corporate Management Services Limited Bermuda 100%
Overseas Reinsurance Corporation Limited Bermuda 100%
Guy Carpenter & Company, Inc. Delaware 100%
The Carpenter Management Corporation Delaware 100%
Paul Napolitan, Inc. Delaware 100%
Paul Napolitan Canada, Inc. Canada 100%
Sellon Associates, Inc. New York 100%
Guy Carpenter & Company, Inc. of Pennsylvania Pennsylvania 100%
Philadelphia Insurance Management Company Delaware 100%
Guy Carpenter Broking, Inc. Delaware 100%
Market Street Underwriters, Inc. Delaware 79%
</TABLE>
- 18 -
<PAGE>
MARSH INC. (CONT.)
MARSH USA INC. (CONT.)
GUY CARPENTER & COMPANY, INC. (CONT.)
<TABLE>
<S> <C> <C>
MMSC Holdings, Inc. Delaware 100%
Marsh & McLennan Securities Corporation Delaware 100%
MMSC Risk Advisors, Inc. Delaware 100%
MMSC Structured Risk Services, Inc. Delaware 100%
Marsh & McLennan Securities International, Ltd. Bermuda 100%
Resolutions International Limited Delaware 100%
Excess and Treaty Management Corporation New York 100%
Triad Underwriting Management Agency, Inc. Delaware 100%
Guy Carpenter Insurance Strategy, Inc. Delaware 100%
Reinsurance Solutions International, LLC Delaware 50%
Inter-Americas Insurance Services, Inc. California 79%
Claims, Inc. Texas 100%
Guy Carpenter & Company, S.A. Argentina 100%
Normandy Reinsurance Company Limited Bermuda 100%
Guy Carpenter & Company, S.A. Belgium 100%
Guy Carpenter & Company Ltda. Brazil 99%
American Overseas Management Corporation (Canada) Canada 100%
Guy Carpenter & Company Limited Canada 100%
Guy Carpenter & Company GmbH Germany 60%
Guy Carpenter & Company Limited Hong Kong 100%
Guy Carpenter & Company S.r.l. Italy 100%
Guy Carpenter & Co. Labuan Ltd. Malaysia 100%
Guy Carpenter y Cia (Mexico) S.A. de C.V. Mexico 100%
Guy Carpenter & Company (S) Pte. Ltd. Singapore 100%
Guy Carpenter & CIA, S.A. Spain 18.92%
Guy Carpenter & Company AB Sweden 100%
Guy Carpenter (U.K.) Ltd. United Kingdom 100%
Marsh & McLennan Risk Capital Holdings, Ltd. Delaware 100%
Marsh & McLennan Capital, Inc. Delaware 100%
Marsh & McLennan GPI, Inc. Delaware 100%
Marsh & McLennan GP II, Inc. Delaware 100%
MMRCH LLC Delaware 30%
MMRC LLC Delaware 30%
The ARC Group LLC Delaware 33%
M&M Vehicle, L.P. Delaware 100%
Terra Nova (Bermuda) Holdings Ltd. Bermuda 9.9%
VIC Corporation Maine 51%
Rivers Group Limited United Kingdom 100%
Sedgwick Analysis Services Limited United Kingdom 100%
Exmoor Management Company Limited Bermuda 100%
River Thames Insurance Company Limited United Kingdom 98.74%
R.W. Gibbon & Son (Underwriting Agencies) Limited United Kingdom 100%
Regis Agencies Limited United Kingdom 100%
Bevington Vaizey & Foster Limited United Kingdom 100%
Rhone Limited United Kingdom 100%
The Sedgwick Information Exchange Limited United Kingdom 100%
</TABLE>
- 19 -
<PAGE>
<TABLE>
<S> <C> <C>
Mercer Consulting Group, Inc. Delaware 100%
National Economic Research Associates, Inc. California 100%
National Economic Research Associates, Inc. Delaware 100%
Mercer Management Consulting, Inc. Delaware 100%
Decision Research Corporation Massachusetts 100%
LAR/Decision Research Corporation New York 100%
Lippincott & Margulies, Inc. New York 100%
Mercer Management Consulting, Ltd. Bermuda 100%
Mercer Management Consulting GmbH Germany 100%
Mercer Consulting Group Verwaltungs GmbH Germany 100%
Dr. Seebauer & Partner GmbH - Management Consulting
Group & Co. KG Germany 100%
UBM Consultoria Internacional S/C Ltda. Brazil 30%
UBM Consulting France International Management Consultants France 100%
Mercer Management Consulting Limited Switzerland 100%
Mercer Management Consulting S.L. Spain 100%
Mercer Management Consulting SNC France 100%
Consulmercer-Consultores de Gestao, Sociedade Unipessoal, Lda. Portugal 100%
Mercer Consulting Services S.A. Switzerland 100%
Mercer MW Ltda. Brazil 100%
Mercer MW Corredore de Seguro Brazil 100%
William M. Mercer Companies LLC Delaware 100%
William M. Mercer Holdings, Inc. Delaware 100%
William M. Mercer Holdings Canada, Inc. Delaware 100%
William M. Mercer Pty. Ltd. Australia 100%
Superfund Nominees Pty. Ltd. Australia 100%
William M. Mercer S.A. Belgium 100%
William M. Mercer Limited Canada 50%
Mercer Management Consulting Limited Canada 100%
Societe Conseil Mercer Limitee Quebec 100%
Mercer Limited Ireland 100%
P.I.C. Advisory Services Limited Ireland 100%
Mercer Trustees Limited Ireland 100%
William M. Mercer Limited of Japan Japan 100%
William M. Mercer (Korea) Co., Ltd. Korea 100%
William M. Mercer Limited Hong Kong 100%
William M. Mercer Pte. Ltd. Singapore 100%
William M. Mercer (Malaysia) Sdn. Bhd. Malaysia 100%
William M. Mercer Zainal Fraser Sdn. Bhd. Malaysia 70%
Mercer C & B Servicios, S.A. de C.V. Mexico 100%
Mercer C & B S.A. de C.V. Mexico 100%
William M. Mercer Agente de Seguros S.A. de C.V. Mexico 100%
Servicos Actuariales S.A. de C.V. Mexico 100%
Compensacion Tecnica Consultores S.A. de C.V. Mexico 100%
William M. Mercer Ten Pas B.V. Netherlands 100%
WMM Haneveld Investment Consulting B.V. Netherlands 100%
Reitmulders & Partners B.V. Netherlands 100%
William M. Mercer Services B.V. Netherlands 100%
William M. Mercer Limited New Zealand 100%
William M. Mercer, Incorporated Puerto Rico 100%
William M. Mercer, S.A. Switzerland 100%
</TABLE>
- 20 -
<PAGE>
MERCER CONSULTING GROUP, INC. (CONT.)
WILLIAM M. MERCER COMPANIES LLC (CONT.)
WILLIAM M. MERCER HOLDINGS, INC. (CONT.)
<TABLE>
<S> <C> <C>
Corporate Resources Group (Holdings) Ltd. British Virgin Islands 100%
CRG S.A. Switzerland 100%
CRG Sverige AB Sweden 100%
CRG A/S Denmark 100%
CRG (Singapore) PTE Singapore 100%
CRG Ltd. Hong Kong 100%
CRG HR SDN BHD Malaysia 100%
PT C.R.G. Indonesia 100%
CRG (India) Private Ltd. India 100%
CRG (Thailand) Ltd. Thailand 100%
CRG (Thai) Ltd. Thailand 100%
CRG Holdings, Inc. 100%
RG Serv. Philippines Inc. Philippines 100%
CRG Japan Co. Ltd. Japan 60%
CRG Finland OY Finland 60%
CRG (Israel) Ltd. Israel 60%
CRG Argentina SA Argentina 60%
CRG Iberica, SL
William M. Mercer, Incorporated Delaware 100%
WMM Services, Inc. Delaware 100%
William M. Mercer Securities Corp. Delaware 100%
National Medical Audit California 100%
Hansen International Limited Delaware 100%
William M. Mercer of Indiana, Incorporated Indiana 100%
William M. Mercer Investment Consulting, Inc. Kentucky 100%
William M. Mercer of Kentucky, Inc. Kentucky 100%
William M. Mercer, Incorporated Louisiana 100%
William M. Mercer, Incorporated Massachusetts 100%
William M. Mercer of Michigan, Incorporated Michigan 100%
William M. Mercer, Incorporated Nevada 100%
William M. Mercer, Incorporated Ohio 100%
William M. Mercer, Incorporated Oklahoma 100%
William M. Mercer of Texas, Inc. Texas 100%
William M. Mercer of Virginia, Incorporated Virginia 100%
Mercer R.H. SARL France 100%
William M. Mercer-MPA Limited Hong Kong 100%
William M. Mercer Philippines, Incorporated Philippines 100%
William M. Mercer S.A. Argentina 100%
William M. Mercer S.A. Asesores de Seguros Argentina 100%
William M. Mercer Comercio Consultoria e Servicos Ltda. Brazil 100%
William M. Mercer Consultoria Ltda. Brazil 39%
Grupo Assistencial De Economia E Financas Tudor S/C Ltda. Brazil 39%
William M. Mercer Limitada Chile 100%
William M. Mercer Claro Corredores de Seguros Chile 100%
William M. Mercer A/S Denmark 60%
William M. Mercer A.B. Sweden 100%
William M. Mercer Broking (Taiwan) Ltd. Taiwan 100%
William M. Mercer Consulting (Taiwan) Ltd. Taiwan 100%
</TABLE>
- 21 -
<PAGE>
<TABLE>
<S> <C> <C>
Seabury & Smith, Inc. Delaware 100%
Seabury & Smith of Arkansas, Inc. Arkansas 100%
Appleby & Sterling Agency, Inc. Delaware 100%
Marsh Insurance & Investments Corp. Delaware 100%
J&H Marsh & McLennan Private Client Services, Inc. Delaware 100%
Johnson & Higgins/Kirke-Van Orsdel, Inc. Delaware 100%
Marsh Financial Services, Inc. New York 100%
J&H Marsh & McLennan Financial Services, Inc. Indiana 100%
Marsh Financial Insurance Services of Massachusetts, Inc. Massachusetts 100%
Marsh Financial Services of Texas, Inc. Texas 100%
Albert H. Wohlers & Co. Illinois 100%
Smith-Sternau Organization, Inc. Delaware 100%
The Schinnerer Group, Inc. Delaware 100%
Victor O. Schinnerer & Company, Inc. Delaware 100%
Victor O. Schinnerer of Illinois, Inc. Illinois 100%
Victor O. Schinnerer & Company, Inc. Ohio 100%
Encon Holdings, Inc. Texas 100%
Panhandle Insurance Agency, Inc. Texas 100%
Encon Underwriting Agency, Inc. Texas 100%
Encon Holdings, Inc. Ontario 100%
Encon Insurance Managers Inc. Canada 100%
Encon Management Services, Inc. Canada 100%
Encon Reinsurance Managers Inc. Canada 100%
Encon Title Insurance Managers Inc. Canada 100%
Victor O. Schinnerer & Company Ltd. United Kingdom 100%
Encon Underwriting Limited United Kingdom 100%
Admiral Holdings Limited United Kingdom 100%
Admiral Underwriting Agencies Limited United Kingdom 100%
Admiral Ireland Limited Ireland 100%
Admiral Underwriting Agencies (Ireland) Ltd. Ireland 100%
Seabury & Smith of Georgia, Inc. Georgia 100%
Seabury & Smith of Idaho, Inc. Idaho 100%
M. A. Gesner of Illinois, Inc. Illinois 100%
Seabury & Smith of Illinois, Inc. Illinois 100%
Seabury & Smith, Inc. Indiana 100%
Seabury & Smith, Inc. Kentucky 100%
Seabury & Smith, Inc. Louisiana 100%
Seabury & Smith, Inc. Massachusetts 100%
Seabury & Smith, Inc. Michigan 100%
Seabury & Smith, Inc. Nevada 100%
Seabury & Smith Agency, Inc. Ohio 100%
Seabury & Smith, Inc. Oklahoma 100%
Seabury & Smith, Inc. Texas 100%
Seabury & Smith, Inc. Virginia 100%
Seabury & Smith Limited Ontario 100%
G. E. Freeman Insurance Agency Limited Ontario 100%
Seabury & Smith Limited United Kingdom 100%
</TABLE>
- 22 -
<PAGE>
SEABURY & SMITH, INC. (CONT'D)
<TABLE>
<S> <C> <C>
AmGrip, Inc. Louisiana 100%
AmGrip, Inc. Texas
Johnson & Higgins Securities, Inc. Montana 100%
Crump Group, Inc. Delaware 100%
Crump E & S of California Insurance Services, Inc. California 100%
Crump E & S of Sacramento Insurance Services, Inc. California 100%
Crump E & S of San Francisco Insurance Services, Inc. California 100%
Crump Insurance Services of Colorado, Inc. Colorado 100%
Crump Insurance Services of Florida, Inc. Florida 100%
Crump Insurance Services of Atlanta, Inc. Georgia 100%
Crump Insurance Services of Illinois, Inc. Illinois 100%
Crump Insurance Services of Louisiana, Inc. Louisiana 100%
Crump Insurance Services of Boston, Inc. Massachusetts 100%
Crump Insurance Services of Michigan, Inc. Michigan 100%
Crump of New Jersey, Inc. New Jersey 100%
Crump of New York, Inc. New York 100%
Crump Insurance Services of Memphis, Inc. Tennessee 100%
Crump Financial Services, Inc. Tennessee 100%
Crump Insurance Services, Inc. Texas 100%
Crump Insurance Services of Houston, Inc. Texas 100%
Crump Insurance Services of Texas, Inc. Texas 100%
Crump Insurance Services Northwest, Inc. Washington 100%
S.J. Petrakis Insurance Services, Inc. California 100%
Southern Marine & Aviation Underwriters, Inc. Louisiana 100%
Southern Marine and Aviation, Inc. Louisiana 100%
Putnam Investments, Inc. Massachusetts 100%
Putnam Investment Management, Inc. Massachusetts 100%
Putnam Future Advisors, Inc. Massachusetts 100%
Putnam Fiduciary Trust Company Massachusetts 100%
Putnam Investor Services, Inc. Massachusetts 100%
Putnam Mutual Funds Corp. Massachusetts 100%
Putnam Insurance Agency, Inc. Massachusetts 100%
The Putnam Advisory Company, Inc. Massachusetts 100%
Putnam Europe Ltd. United Kingdom 100%
The Putnam Corporation Massachusetts 100%
Pan Agora Asset Management Delaware 50%
Pan Agora Asset Management, Ltd. United Kingdom 50%
PII Holdings, Inc. Massachusetts 100%
Primary Funds Service Corp. Delaware 51%
Putnam Investments Argentina, S.A. Argentina 100%
Putnam Overseas Institutional Management Company Ltd. Bahamas 100%
Putnam International Distributors, Ltd. Cayman Islands 100%
Putnam International Advisory Company, S.A. Luxembourg 100%
NKK-Putnam Management, S.A. Luxembourg 100%
Putnam International Growth Management S.A. Luxembourg 100%
Putnam Management (Luxembourg), S.A. Luxembourg 100%
</TABLE>
- 23 -
<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, 33-21566, 33-32880, 33-48803,
33-48804, 33-48807, 33-54349, 33-59603, 33-63389, 333-35741, 333-35739,
333-51141 and 333-29627) and the previously filed Registration Statements on
Form S-3 (Registration File Nos. 333-67543, 333-25069, 333-28201, 333-41021,
333-48707) and the previously filed Registration Statement on Form S-4
(Registration File No. 33-24124) of our reports dated March 3, 2000 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, 1999.
/s/ Deloitte & Touche LLP
New York, New York
March 27, 2000
<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, Jeffrey W. Greenberg, Sandra S. Wijnberg 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, 1999, any registration statements or
prospectuses 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 acquisitions or for resale by the holders thereof who
acquired or will acquire such stock in connection with past or future
acquisitions, and any amendments or supplements to such Annual Report on
Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such
Annual Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 2000.
/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, Jeffrey W. Greenberg, Sandra S. Wijnberg 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, 1999, any registration statements or
prospectuses 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 acquisitions or for resale by the holders thereof who
acquired or will acquire such stock in connection with past or future
acquisitions, and any amendments or supplements to such Annual Report on
Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such
Annual Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 2000.
/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, Jeffrey W. Greenberg, Sandra S. Wijnberg 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, 1999, any registration statements or
prospectuses 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 acquisitions or for resale by the holders thereof who
acquired or will acquire such stock in connection with past or future
acquisitions, and any amendments or supplements to such Annual Report on
Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such
Annual Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 2000.
/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, Jeffrey W. Greenberg, Sandra S. Wijnberg 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, 1999, any registration statements or
prospectuses 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 acquisitions or for resale by the holders thereof who
acquired or will acquire such stock in connection with past or future
acquisitions, and any amendments or supplements to such Annual Report on
Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such
Annual Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 2000.
/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, Jeffrey W. Greenberg, Sandra S. Wijnberg 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, 1999, any registration statements or
prospectuses 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 acquisitions or for resale by the holders thereof who
acquired or will acquire such stock in connection with past or future
acquisitions, and any amendments or supplements to such Annual Report on
Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such
Annual Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 2000.
/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, Jeffrey W. Greenberg, Sandra S. Wijnberg 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, 1999, any registration statements or
prospectuses 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 acquisitions or for resale by the holders thereof who
acquired or will acquire such stock in connection with past or future
acquisitions, and any amendments or supplements to such Annual Report on
Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such
Annual Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 2000.
/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, Jeffrey W. Greenberg, Sandra S. Wijnberg 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, 1999, any registration statements or
prospectuses 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 acquisitions or for resale by the holders thereof who
acquired or will acquire such stock in connection with past or future
acquisitions, and any amendments or supplements to such Annual Report on
Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such
Annual Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 2000.
/s/ Ray J. Groves
------------------
Ray 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, Jeffrey W. Greenberg, Sandra S. Wijnberg 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, 1999, any registration statements or
prospectuses 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 acquisitions or for resale by the holders thereof who
acquired or will acquire such stock in connection with past or future
acquisitions, and any amendments or supplements to such Annual Report on
Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such
Annual Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 2000.
/s/ Stephen R. Hardis
------------------
Stephen R. Hardis
<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, Jeffrey W. Greenberg, Sandra S. Wijnberg 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, 1999, any registration statements or
prospectuses 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 acquisitions or for resale by the holders thereof who
acquired or will acquire such stock in connection with past or future
acquisitions, and any amendments or supplements to such Annual Report on
Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such
Annual Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 2000.
/s/ Gwendolyn S. King
------------------
Gwendolyn S. King
<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, Jeffrey W. Greenberg, Sandra S. Wijnberg 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, 1999, any registration statements or
prospectuses 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 acquisitions or for resale by the holders thereof who
acquired or will acquire such stock in connection with past or future
acquisitions, and any amendments or supplements to such Annual Report on
Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such
Annual Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 2000.
/s/ The Rt. Hon. Lord Lang of Monkton
-------------------------------------
The Rt. Hon. Lord Lang of Monkton
<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, Jeffrey W. Greenberg, Sandra S. Wijnberg 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, 1999, any registration statements or
prospectuses 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 acquisitions or for resale by the holders thereof who
acquired or will acquire such stock in connection with past or future
acquisitions, and any amendments or supplements to such Annual Report on
Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such
Annual Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 2000.
/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, Jeffrey W. Greenberg, Sandra S. Wijnberg 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, 1999, any registration statements or
prospectuses 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 acquisitions or for resale by the holders thereof who
acquired or will acquire such stock in connection with past or future
acquisitions, and any amendments or supplements to such Annual Report on
Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such
Annual Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 2000.
/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, Jeffrey W. Greenberg, Sandra S. Wijnberg 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, 1999, any registration statements or
prospectuses 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 acquisitions or for resale by the holders thereof who
acquired or will acquire such stock in connection with past or future
acquisitions, and any amendments or supplements to such Annual Report on
Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such
Annual Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 2000.
/s/ John D. Ong
------------------
John D. Ong
<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, Jeffrey W. Greenberg, Sandra S. Wijnberg 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, 1999, any registration statements or
prospectuses 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 acquisitions or for resale by the holders thereof who
acquired or will acquire such stock in connection with past or future
acquisitions, and any amendments or supplements to such Annual Report on
Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such
Annual Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 2000.
/s/ Adele Simmons
------------------
Adele 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, Jeffrey W. Greenberg, Sandra S. Wijnberg 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, 1999, any registration statements or
prospectuses 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 acquisitions or for resale by the holders thereof who
acquired or will acquire such stock in connection with past or future
acquisitions, and any amendments or supplements to such Annual Report on
Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such
Annual Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 2000.
/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, Jeffrey W. Greenberg, Sandra S. Wijnberg 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, 1999, any registration statements or
prospectuses 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 acquisitions or for resale by the holders thereof who
acquired or will acquire such stock in connection with past or future
acquisitions, and any amendments or supplements to such Annual Report on
Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such
Annual Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 2000.
/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, Jeffrey W. Greenberg, Sandra S. Wijnberg 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, 1999, any registration statements or
prospectuses 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 acquisitions or for resale by the holders thereof who
acquired or will acquire such stock in connection with past or future
acquisitions, and any amendments or supplements to such Annual Report on
Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such
Annual Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 2000.
/s/ Frank J. Tasco
------------------
Frank J. Tasco
<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, Jeffrey W. Greenberg, Sandra S. Wijnberg 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, 1999, any registration statements or
prospectuses 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 acquisitions or for resale by the holders thereof who
acquired or will acquire such stock in connection with past or future
acquisitions, and any amendments or supplements to such Annual Report on
Form 10-K and such registration statements; and
To execute and deliver, either through a paper filing or electronically,
any agreements, instruments, certificates or other documents which they
shall deem necessary or proper in connection with the filing of such
Annual Report on Form 10-K, registration statements and prospectuses and
amendments or supplements thereto and generally to act for and in the name
of the undersigned with respect to such filings as fully as could the
undersigned if then personally present and acting.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
effective the 16th day of March, 2000.
/s/ W.R.P. White-Cooper
------------------
W.R.P. White-Cooper
<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, 1999
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-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 428,000,000
<SECURITIES> 0
<RECEIVABLES> 2,455,000,000
<ALLOWANCES> 132,000,000
<INVENTORY> 0
<CURRENT-ASSETS> 3,283,000,000
<PP&E> 2,212,000,000
<DEPRECIATION> 898,000,000
<TOTAL-ASSETS> 13,021,000,000
<CURRENT-LIABILITIES> 4,318,000,000
<BONDS> 2,357,000,000
0
0
<COMMON> 269,000,000
<OTHER-SE> 3,901,000,000
<TOTAL-LIABILITY-AND-EQUITY> 13,021,000,000
<SALES> 0
<TOTAL-REVENUES> 9,157,000,000
<CGS> 0
<TOTAL-COSTS> 7,698,000,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 18,000,000
<INTEREST-EXPENSE> 233,000,000
<INCOME-PRETAX> 1,247,000,000
<INCOME-TAX> 521,000,000
<INCOME-CONTINUING> 726,000,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 726,000,000
<EPS-BASIC> 2.76
<EPS-DILUTED> 2.62
</TABLE>
