-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OBs/PjXvhxIjrmCNIVbPrrgDr1j4nq+PbTjQKuGAdUSoWu9GgrYVTgU6mQRM6koM hdR4OGYk4PsWqJ+QZ67zMA== 0000912057-97-014164.txt : 19970428 0000912057-97-014164.hdr.sgml : 19970428 ACCESSION NUMBER: 0000912057-97-014164 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19970425 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARSH & MCLENNAN COMPANIES INC CENTRAL INDEX KEY: 0000062709 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 362668272 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-25069 FILM NUMBER: 97587607 BUSINESS ADDRESS: STREET 1: 1166 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2123455000 MAIL ADDRESS: STREET 1: 1166 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10036 FORMER COMPANY: FORMER CONFORMED NAME: MARLENNAN CORP DATE OF NAME CHANGE: 19760505 S-3/A 1 FORM S-3/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 25, 1997. REGISTRATION NO. 333-25069 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 1 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ MARSH & MCLENNAN COMPANIES, INC. (Exact name of Registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation or organization) ------------------------ 6411 (Primary Standard Industrial Classification Code Number) 36-2668272 (I.R.S. Employer Identification No.) ------------------------ 1166 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10036-2774 (212) 345-5000 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) ------------------------ GREGORY F. VAN GUNDY GENERAL COUNSEL AND SECRETARY MARSH & MCLENNAN COMPANIES, INC. 1166 Avenue of the Americas New York, New York 10036-2774 (212) 345-5000 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agents for Service) ------------------------ COPY TO: DAVID B. HARMS, ESQ. GREGORY A. FERNICOLA, ESQ. SULLIVAN & CROMWELL SKADDEN, ARPS, SLATE, 125 BROAD STREET MEAGHER & FLOM LLP NEW YORK, NEW YORK 10004 919 THIRD AVENUE (212) 558-4000 NEW YORK, NEW YORK 10022 (212) 735-3000
------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after the effective date of this registration statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"), other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: / / ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Subject to Completion, Dated April 25, 1997 PROSPECTUS SUPPLEMENT (To Prospectus dated April , 1997) INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. 3,087,134 SHARES [LOGO] COMMON STOCK (PAR VALUE $1.00 PER SHARE) All of the shares of Common Stock of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), offered hereby (the "Offering") are being sold by certain stockholders of the Company (the "Selling Stockholders"). The Common Stock offered hereby was issued as partial consideration to the Selling Stockholders in connection with the Company's business combination with Johnson & Higgins, a New Jersey corporation. See "Prospectus Supplement Summary--The Business Combination with Johnson & Higgins." The Company will not receive any proceeds from the sale of the Common Stock offered hereby. The Common Stock is listed on the New York Stock Exchange (the "NYSE"), the Chicago Stock Exchange (the "CSE"), the Pacific Stock Exchange (the "PSE") and the London Stock Exchange (the "LSE") under the trading symbol "MMC." On April 24, 1997, the last reported sale price of the Common Stock on the NYSE Composite Tape was $115 1/4 per share. See "Price Range of Common Stock and Dividends." THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROCEEDS TO PRICE TO UNDERWRITING SELLING PUBLIC DISCOUNT(1) STOCKHOLDERS(2) Per Share $ $ $ Total $ $ $
(1) The Company and the Selling Stockholders have agreed to indemnify the Underwriters against certain liabilities including liabilities under the Securities Act of 1933, as amended. See "Underwriting." (2) Expenses of the Offering, estimated to be $348,000, are payable by the Company. See "Plan of Distribution" in the accompanying Prospectus. J.P. Morgan & Co. is acting as book running lead manager for the Offering. J.P. Morgan & Co. and Morgan Stanley & Co. Incorporated are acting as joint lead managers. The shares offered hereby are offered severally by the Underwriters, as specified herein, subject to receipt and acceptance by them, including their right to reject orders in whole or in part and subject to approval of certain legal matters by Davis Polk & Wardwell, counsel for the Underwriters. It is expected that delivery of the shares of Common Stock will be made against payment therefor on or about May , 1997 at the offices of J.P. Morgan Securities Inc., 60 Wall Street, New York, New York. J.P. MORGAN & CO. MORGAN STANLEY & CO. INCORPORATED JOINT LEAD MANAGERS DONALDSON, LUFKIN & JENRETTE MERRILL LYNCH & CO. SECURITIES CORPORATION PAINEWEBBER INCORPORATED SMITH BARNEY INC. APRIL , 1997 CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING, AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF SUCH ACTIVITIES, SEE "UNDERWRITING." No person has been authorized to give any information or to make any representations other than those contained in this Prospectus Supplement, the accompanying Prospectus or the documents incorporated or deemed incorporated by reference herein, and any information or representations not contained herein or therein may not be relied upon as having been authorized by the Company or by any underwriter or dealer. This Prospectus Supplement and the accompanying Prospectus does not constitute an offer to sell or a solicitation of an offer to buy the Common Stock in any circumstances in which such offer or solicitation is unlawful. The delivery of this Prospectus Supplement or the accompanying Prospectus at any time does not imply that the information herein or therein is correct as of any time subsequent to the date of such information. No action has been or will be taken in any jurisdiction by the Company or any Selling Stockholder that would permit a public offering of the Common Stock or possession or distribution of this Prospectus Supplement or the accompanying Prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons into whose possession this Prospectus Supplement or the accompanying Prospectus comes are required by the Company and the Selling Stockholders to inform themselves about and to observe any restrictions as to the offering of the Common Stock and the distribution of this Prospectus Supplement and the accompanying Prospectus. TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT PAGE Prospectus Supplement Summary......... S-3 Cautionary Statement Regarding Forward-Looking Information......... S-6 Price Range of Common Stock and Dividends........................... S-7 Capitalization........................ S-8 Unaudited Pro Forma Condensed Combined Financial Information............... S-9 Selected Historical Consolidated Financial Data...................... S-13 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... S-15 The Company........................... S-26 Selling Stockholders.................. S-33 Underwriting.......................... S-34 Legal Matters......................... S-35 PROSPECTUS PAGE Available Information................. 3 Incorporation of Certain Documents by Reference........................... 3 The Company........................... 4 Use of Proceeds....................... 4 Selling Stockholders.................. 4 Plan of Distribution.................. 5 Legal Matters......................... 6 Experts............................... 7
S-2 PROSPECTUS SUPPLEMENT SUMMARY THE COMPANY Marsh & McLennan Companies, Inc., a professional services organization with origins dating from 1871 in the United States, is a holding company which, through its subsidiaries and affiliates, provides clients with analysis, advice and transactional capabilities in the fields of insurance and reinsurance broking, investment management and consulting. Unless the context indicates otherwise, references in this Prospectus Supplement to the "Company" include Marsh & McLennan Companies, Inc. and its subsidiaries. INSURANCE SERVICES Marsh & McLennan Companies, Inc. provides risk and insurance services primarily through its wholly-owned subsidiaries, Marsh & McLennan, Incorporated, Johnson & Higgins, Guy Carpenter & Company, Inc., Seabury & Smith, Inc. and Marsh & McLennan Risk Capital Corp. Marsh & McLennan, Incorporated (together with its subsidiaries, "MMI") is a world leader in providing insurance broking services and professional counseling on risk management issues, including risk analysis, coverage requirements, self-insurance, alternative insurance and risk financing methods as well as other insurance-related issues. MMI provides a single, integrated service to clients throughout the world. The business of Johnson & Higgins is described below under "Prospectus Supplement Summary--The Business Combination with Johnson & Higgins--J&H Business." Guy Carpenter & Company, Inc. (together with its subsidiaries, "Guy Carpenter") is a leading global reinsurance intermediary. It advises insurance and reinsurance organizations on the complex issue of risk management and provides an array of support services such as actuarial, financial and regulatory consulting, portfolio analysis and catastrophe modeling. Guy Carpenter structures and places reinsurance coverage and other risk-transfer financing with reinsurance firms worldwide. Seabury & Smith, Inc. (together with its subsidiaries, "Seabury & Smith") is a leading provider of insurance program management and underwriting management services in North America, including the design, placement and administration of life, health, accident, disability, automobile, homeowners, professional liability and other insurance, and related products. Seabury & Smith designs and administers specialized, systems-driven insurance programs primarily for members of affinity groups. Marsh & McLennan Risk Capital Corp. originates, structures and manages insurance industry investments and provides advisory services on a global basis. INVESTMENT MANAGEMENT Through its subsidiary, Putnam Investments, Inc. (together with its subsidiaries, "Putnam"), one of the oldest and largest money management organizations in the United States, the Company offers a full range of both equity and fixed income products, invested domestically and globally, for individual and institutional investors. At December 31, 1996, Putnam managed more than 95 mutual funds and $173 billion in assets. CONSULTING The Company provides consulting services to a predominantly corporate clientele through its wholly-owned subsidiary, Mercer Consulting Group, Inc. (together with its subsidiaries, "Mercer"). One of the largest consulting firms in the world, Mercer is a market leader in human resources, employee benefits and compensation consulting. Mercer also provides strategic and economic consulting. These areas of expertise are offered by professionals located in major business centers around the world. S-3 THE BUSINESS COMBINATION WITH JOHNSON & HIGGINS On March 27, 1997, the Company consummated a strategic business combination (the "Transaction") with Johnson & Higgins (together with its subsidiaries, "J&H") whereby J&H became a subsidiary of the Company. Established in New York in 1845, J&H provides insurance broking, risk management and employee benefit consulting services to clients worldwide. It had revenues of approximately $1.2 billion for the year ended December 31, 1996. J&H BUSINESS INSURANCE SERVICES J&H provides retail insurance brokerage services on a worldwide basis. J&H's clients for retail insurance brokerage services are predominantly corporations, government and related agencies, non-profit organizations and individuals. Insurance coverage is placed on behalf of such clients with insurers directly or through wholesale brokers. J&H provides wholesale insurance brokerage services through three business units: Henry Ward Johnson provides general wholesale brokerage and specialty wholesale marketing and consulting services primarily to J&H's retail branches in the United States; J&H's London wholesale unit acts as a traditional wholesaler into the London and continental European markets for J&H offices worldwide; and J&H's Global Captive Management group includes the J&H Intermediaries unit, which assists mostly U.S.-based clients needing access to insurers and reinsurers located in Bermuda. J&H offers a full range of treaty reinsurance brokerage services through Willcox Incorporated Reinsurance Intermediaries. J&H also offers reinsurance brokerage services into the London market through London-based Willcox Johnson & Higgins. In addition, J&H owns a minority interest (approximately 49%) in Reinmex, the largest reinsurance broker in Mexico. J&H provides, through its Global Captive Management group, services in establishing and managing captive insurance companies, primarily in Bermuda. J&H also provides, through J&H/KVI, a joint venture between J&H and Kirke-Van Orsdel, Inc., administrative services for group universal life programs, outsourcing services for employers seeking assistance with employee benefit program design, administration and customer service and "invisible branch office" insurance services for financial services companies wishing to outsource such functions. EMPLOYEE BENEFIT CONSULTING J&H, through A. Foster Higgins, provides employee benefit consulting services to medium-sized and large corporations in the U.S. and Canada. Lines of business include retirement plans (e.g., pensions, defined contribution plans, investment services and retiree health care), communications (e.g., organizational research and personalized communication), process reengineering and outsourcing, information consulting and international consulting. A. Foster Higgins also works with health care providers to help them tailor services to the employer market. A. Foster Higgins employs a consulting staff including actuaries, lawyers, health care professionals, system specialists and writers, as well as benefit professionals with a broad range of experience. INTEGRATION OF THE COMPANY AND J&H A newly-formed subsidiary of the Company, known as J&H Marsh & McLennan, Inc. ("J&H/M&M"), will be used to facilitate the integration and management of the respective insurance services operations of the Company and J&H. A management committee of four Vice Chairmen will be responsible for integrating and operating these businesses. The four Vice Chairmen are expected to include Richard H. Blum, a director of the Company and former Chairman and Chief Executive Officer of Guy Carpenter, John T. Sinnott, President and Chief Executive Officer of MMI, Richard A. Nielsen, Vice Chairman and Chief Operating Officer of J&H, and Norman Barham, President of S-4 J&H. Mr. A. J. C. Smith, who is Chairman of the Company, is expected to be the Chairman of the Board and Chief Executive Officer of J&H/M&M. A. Foster Higgins, a subsidiary of J&H engaged in the employee benefits consulting business, operationally will be combined with the similar business conducted by Mercer. As part of the Transaction, David A. Olsen, Chairman of J&H, Richard A. Nielsen, Norman Barham and a person to be designated who is not affiliated with J&H are expected to join the Board of Directors of the Company. In addition, at the time of his appointment as director, Mr. Olsen is expected to be appointed Vice Chairman of the Company. THE TRANSACTION The Company agreed to pay total consideration of approximately $1.8 billion in connection with the Transaction (the "Consideration"), of which approximately $1.3 billion has been paid and approximately $500 million will be paid in equal annual installments on each of the next three or four anniversaries of the closing of the Transaction (the "Closing"). The Consideration consists of approximately $600 million in cash and approximately 9.8 million shares of Common Stock (valued at $121 7/8 per share). The cash portion of the Consideration that has been paid was financed with bank borrowings and commercial paper. Subject to certain limited exceptions, approximately 3.6 million shares of the Common Stock portion of the Consideration may not be sold during the first year following the Closing and during the two years following the Closing approximately 1.8 million shares of the Common Stock portion of the Consideration may not be sold. In addition, approximately 800,000 shares of the Common Stock portion of the Consideration (of which approximately 600,000 shares are subject to the foregoing sale restriction) were placed in escrow for a period of up to two years in order to secure certain indemnification obligations with respect to certain representations and warranties. The Consideration is divided among: (i) the stockholders of J&H, who were active directors or managing principals of J&H (the "Former J&H Stockholders"), (ii) certain retired directors of J&H (or their estates) (the "Retirees"), some of whom were entitled to dividend-equivalent payments for a period of up to 10 years following their retirement in return for having surrendered their J&H stock upon retirement, and (iii) approximately 600 key employees of J&H (the "Key Employees"). The stock purchase agreement for the Transaction commits J&H to distribute to the Former J&H Stockholders, Retirees, Key Employees and others up to $175 million in excess cash of J&H plus a portion of pre-Closing earnings, promptly upon finalization of certain financial information about J&H, to the extent that such distributions will not reduce the working capital of J&H below certain minimal levels (such distributions of excess cash (which do not include any distributions designated as a portion of pre-Closing earnings) are referred to herein as the "Specified Permitted Distributions"). The Specified Permitted Distributions are generally reflected in the unaudited pro forma condensed combined financial statements of the Company contained in "Unaudited Pro Forma Condensed Combined Financial Information." THE OFFERING Common Stock offered by the Selling 3,087,134 shares Stockholders............................... Use of Proceeds.............................. The Company will not receive any of the proceeds from the sale of shares of Common Stock offered hereby. NYSE, CSE, PSE & LSE Symbol.................. "MMC"
S-5 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION The Private Securities Litigation Reform Act of 1995 (the "1995 Act") provides a "safe harbor" for forward-looking statements to encourage companies to provide prospective information so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the statement. The Company desires to take advantage of the "safe-harbor" provisions of the 1995 Act. Certain information, particularly information contained herein under "Unaudited Pro Forma Condensed Combined Financial Information" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and information regarding future economic performance and finances, and plans and objectives of management contained, or incorporated by reference, in this Prospectus Supplement and the accompanying Prospectus, is forward-looking. In some cases, information regarding certain important factors that could cause actual results to differ materially from any such forward-looking statement appear together with such statement. The following factors could also cause actual results to differ materially from any such forward-looking statement: (i) unanticipated events and circumstances may occur rendering the Transaction less beneficial to the Company than projected; (ii) the Company faces intense competition in its markets, and there is, accordingly, no guarantee that after consummation of the Transaction the Company will achieve the expected financial and operating results and synergies; and (iii) such results and synergies depend on the ability of the Company and J&H to integrate successfully their operations and thereby achieve the anticipated cost savings and be in a position to take advantage of potential opportunities for growth. In addition, the regulatory and competitive factors discussed below under "The Company--Regulation" and "The Company--Competitive Conditions" in addition to other possible factors not listed, could affect the Company's actual results and cause such results to differ from those expressed in the forward-looking statements. S-6 PRICE RANGE OF COMMON STOCK AND DIVIDENDS The Common Stock is listed on the NYSE, the CSE, the PSE and the LSE under the trading symbol "MMC." The following table sets forth, for the indicated calendar periods, the reported high and low sales prices of the Common Stock on the NYSE Composite Tape and the cash dividends per share of Common Stock. As of February 28, 1997, there were 17,764 stockholders of record of the Common Stock.
------------------------------- PRICE RANGE DIVIDENDS -------------------- PAID PER HIGH LOW SHARE --------- --------- --------- Years Ended December 31, 1997: First quarter $129 5/8 $102 5/8 $.90 Second quarter (through April 24, 1997) 121 5/8 113 1/8 -- 1996: First quarter 101 5/8 84 1/4 .80 Second quarter 97 5/8 89 .80 Third quarter 99 88 .80 Fourth quarter 114 7/8 95 1/2 .90 1995: First quarter 85 76 1/4 .725 Second quarter 84 76 1/8 .725 Third quarter 89 3/8 76 5/8 .725 Fourth quarter 90 1/8 80 1/2 .80 1994: First quarter 86 3/4 80 1/4 .675 Second quarter 88 3/4 81 1/4 .675 Third quarter 88 3/8 76 .725 Fourth quarter 80 3/8 71 1/4 .725
The timing and amount of future dividends will be (i) dependent upon the Company's results of operations, financial condition, cash requirements and other relevant factors, (ii) subject to the discretion of the Board of Directors of the Company and (iii) payable only out of the Company's surplus or current net profits in accordance with the General Corporation Law of the State of Delaware. S-7 CAPITALIZATION The following table sets forth, as of December 31, 1996, the short-term debt and capitalization of the Company on an historical basis and on a pro forma basis giving effect to the Transaction. The following information should be read in conjunction with "Unaudited Pro Forma Condensed Combined Financial Information," and the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996, incorporated by reference herein.
---------------------- AS OF DECEMBER 31, 1996 DOLLARS IN MILLIONS, EXCEPT SHARE FIGURES AND RATIOS HISTORICAL PRO FORMA --------- ----------- Short-term debt: Commercial paper $ 387.6 $ 531.6 Current portion of long-term debt 4.8 8.7 --------- ----------- Total short-term debt $ 392.4 $ 540.3 --------- ----------- --------- ----------- Long-term debt: Revolving credit facility $ 250.0 $ 250.0 Bank borrowings -- 289.0 Mortgage--9.8% due 2009 200.0 200.0 Mortgage--7.87% due 2012 -- 130.8 Other 8.2 8.2 --------- ----------- Total long-term debt $ 458.2 $ 878.0 --------- ----------- --------- ----------- Stockholders' equity: Preferred Stock, $1 par value, authorized 6,000,000 shares, none issued -- -- Common Stock, $1 par value, authorized 200,000,000 shares, issued 76,794,531 historical shares; issued 86,594,531 pro forma shares $ 76.8 $ 86.6 Additional paid-in capital 148.1 1,146.3 Retained earnings 1,901.6 1,901.6 Unrealized securities holding gains, net of income taxes 221.2 221.2 Cumulative translation adjustments (75.7) (75.7) Treasury shares, at cost, 4,475,571 shares (383.4) (383.4) --------- ----------- Stockholders' equity $ 1,888.6 $ 2,896.6 --------- ----------- --------- ----------- Total capitalization $ 2,739.2 $ 4,314.9 --------- ----------- --------- ----------- Long-term debt to total capitalization 16.7% 20.3% --------- ----------- --------- ----------- Total debt to total capitalization 31.1% 32.9% --------- ----------- --------- -----------
S-8 UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION The following unaudited pro forma condensed combined statement of income for the year ended December 31, 1996 and the unaudited pro forma condensed combined balance sheet as of December 31, 1996 give effect to the Transaction with J&H. The purchase method of accounting has been applied to the Transaction. Accordingly, assets acquired and liabilities assumed have been reflected at their current estimated fair values which, ultimately, will be subject to further refinement. The pro forma statement of income assumes the Transaction occurred on January 1, 1996 and the pro forma balance sheet assumes the Transaction occurred on December 31, 1996. The unaudited pro forma condensed combined statement of income does not include any potential cost savings that may be realized as a result of the Transaction, except as specifically described in Note (b) to the unaudited pro forma condensed combined financial statements. The Company has indicated that it anticipates ultimately achieving pretax cost savings in the range of $150 million per year, over a period of years. See "Cautionary Statement Regarding Forward-Looking Information." The unaudited pro forma condensed combined financial statements have been prepared by the Company based upon the assumptions disclosed in the notes to the unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined financial statements presented herein are shown for illustrative purposes only and do not purport to be indicative of the results which would have been reported if the Transaction had occurred on the dates indicated or which may occur in the future. The unaudited pro forma condensed combined financial statements should be read in conjunction with "Prospectus Supplement Summary--The Business Combination with Johnson & Higgins," the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996, incorporated by reference herein, and the financial statements of J&H included in the Company's Current Report on Form 8-K, filed with the Commission on April 7, 1997, incorporated by reference herein. MARSH & MCLENNAN COMPANIES, INC. PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996 (UNAUDITED)
---------------------------------------------- HISTORICAL ---------------------- J&H, AS PRO FORMA THE ADJUSTED PRO FORMA COMBINED IN MILLIONS, EXCEPT PER SHARE FIGURES COMPANY (A) ADJUSTMENTS (F) --------- ----------- ---------- ---------- Revenue $ 4,149.0 $ 1,147.7 -- $5,296.7 Expense 3,433.7 1,032.7 $ 15.3(b) 4,481.7 --------- ----------- ---------- ---------- Operating Income 715.3 115.0 (15.3) 815.0 Interest, Net (47.3) 5.9 (45.6 (c) (87.0) --------- ----------- ---------- ---------- Income Before Income Taxes 668.0 120.9 (60.9) 728.0 Income Taxes 208.7 46.7 (9.6 (d) 245.8 --------- ----------- ---------- ---------- Net Income $ 459.3 $ 74.2 $(51.3) $ 482.2 --------- ----------- ---------- ---------- --------- ----------- ---------- ---------- Net Income Per Share $ 6.34 $ 5.87 --------- ---------- --------- ---------- Average Number of Shares Outstanding 72.4 9.8(e) 82.2 --------- ---------- ---------- --------- ---------- ----------
See accompanying notes to unaudited pro forma condensed combined financial statements. S-9 MARSH & MCLENNAN COMPANIES, INC. PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF DECEMBER 31, 1996 (UNAUDITED)
------------------------------------------------ HISTORICAL ---------------------- J&H, AS PRO FORMA THE ADJUSTED PRO FORMA COMBINED DOLLARS IN MILLIONS COMPANY (G) ADJUSTMENTS (F) --------- ----------- ----------- ----------- ASSETS Current Assets: Cash and cash equivalents $ 299.6 $ 258.3 $ (175.0)(h) $ 382.9 --------- ----------- ----------- ----------- Receivables 1,129.1 177.2 -- 1,306.3 Less-allowance for doubtful accounts (43.3) -- -- (43.3) --------- ----------- ----------- ----------- Net receivables 1,085.8 177.2 -- 1,263.0 --------- ----------- ----------- ----------- Other current assets 363.2 68.9 -- 432.1 --------- ----------- ----------- ----------- Total current assets 1,748.6 504.4 (175.0) 2,078.0 --------- ----------- ----------- ----------- Long-term securities 573.3 -- -- 573.3 Fixed assets, net 770.1 168.4 -- 938.5 Intangible assets 545.3 246.8 1,414.5(i) 2,206.6 Other assets 907.9 183.1 -- 1,091.0 --------- ----------- ----------- ----------- $ 4,545.2 $ 1,102.7 $ 1,239.5 $ 6,887.4 --------- ----------- ----------- ----------- --------- ----------- ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term debt $ 392.4 $ 3.9 $ 144.0(j) $ 540.3 Accounts payable and accrued liabilities 904.3 224.2 31.2(k) 1,159.7 Accrued income taxes 259.6 28.2 -- 287.8 --------- ----------- ----------- ----------- Total current liabilities 1,556.3 256.3 175.2 1,987.8 --------- ----------- ----------- ----------- Fiduciary liabilities 1,685.9 518.1 -- 2,204.0 Less--cash and investments held in a fiduciary capacity (1,685.9) (518.1) -- (2,204.0) --------- ----------- ----------- ----------- -- -- -- -- --------- ----------- ----------- ----------- Long-term debt 458.2 130.8 289.0(j) 878.0 --------- ----------- ----------- ----------- Other liabilities 642.1 253.4 62.5(k) 1,125.0 167.0(j) --------- ----------- ----------- ----------- Commitments and contingencies -- -- -- -- --------- ----------- ----------- ----------- Stockholders' equity: Preferred stock -- -- -- -- Common stock 76.8 -- 9.8(l) 86.6 Other stockholders' equity 2,195.2 462.2 (462.2)(l) 3,193.4 998.2(1) --------- ----------- ----------- ----------- 2,272.0 462.2 545.8 3,280.0 Less--treasury shares, at cost (383.4) -- -- (383.4) --------- ----------- ----------- ----------- Total stockholders' equity 1,888.6 462.2 545.8 2,896.6 --------- ----------- ----------- ----------- $ 4,545.2 $ 1,102.7 $ 1,239.5 $ 6,887.4 --------- ----------- ----------- ----------- --------- ----------- ----------- -----------
See accompanying notes to unaudited pro forma condensed combined financial statements. S-10 NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS A description of the adjustments reflected in the unaudited pro forma condensed combined financial statements follows: (a) Certain amounts included in the J&H consolidated statement of income (interest income, interest expense, equity in income of affiliates and minority interest in income of subsidiaries) have been reclassified to conform with the Company's financial statement presentation. (b) To reflect the additional goodwill amortization expense of $35.4 million to be incurred as a result of the Transaction partially offset by $20.1 million of contractually provided adjustments to ongoing compensation and benefits expenses, which are a direct result of J&H no longer being a private company. Goodwill is being amortized over a forty year period. (c) To record: (1) additional interest expense of $28.1 million associated with the incremental $433 million of borrowings that was incurred by the Company to finance the cash portion of the Transaction Consideration which was paid at closing at an assumed interest rate of 6.5% and $8.4 million associated with $167 million of the Transaction Consideration which will be issued in installments at a contractual interest rate of 5.0%, and (2) a reduction in interest income of $9.1 million on the $175 million of Specified Permitted Distributions by J&H at an assumed interest rate of 5.2%. (d) To record the tax effect of the pro forma adjustments (exclusive of the goodwill amortization) at an assumed tax rate of 37.50%. (e) To reflect the issuance of approximately 9.8 million shares of the Company's Common Stock in connection with the Transaction. (f) The pro forma condensed combined statement of income and the pro forma condensed combined balance sheet do not include the effects of the Company's January 1997 acquisition of Compagnie Europeenne De Courtage d'Assurances et de Reassurances ("CECAR"), an insurance broker headquartered in France, for approximately $200 million. (g) Certain amounts included in the J&H consolidated balance sheet have been reclassified to conform with the Company's financial statement presentation. In particular, fiduciary cash and investments of $518.1 million have been offset against the related liabilities and presented in the liability section of the balance sheet. In addition, the receivables and payables for uncollected premiums and claims amounting to $788.9 million have been excluded from the asset and liability sections of the consolidated balance sheet, as they are presented in footnote disclosures in the Company's financial statements. (h) To reflect the $175 million of Specified Permitted Distributions by J&H. See "Prospectus Supplement Summary--The Business Combination with Johnson & Higgins--The Transaction." (i) Represents the net of the $1.8 billion Transaction Consideration adjusted for the items described in Notes (h), (k), (l)(2) and (l)(3). The preliminary allocation of the Transaction Consideration to the underlying assets and liabilities of J&H, including goodwill, is subject to further refinement as the Company's management continues to review the estimated fair values of the assets acquired and the liabilities assumed. (j) To reflect the debt being incurred to finance the $433 million cash portion of the Transaction Consideration which was paid at closing and the additional obligation of $167 million for the cash portion of the Transaction Consideration which will be issued in installments. The cash portion of the Transaction Consideration paid at Closing was initially financed through commercial paper borrowings. The Company has classified $289 million as long-term debt based upon the Company's intent and ability to maintain or refinance these borrowings on a long-term basis. (k) To reflect the impact of the $150 million in purchase related liabilities which are principally related to severance, real estate and transaction costs net of the related income tax impact of $56.3 million. The short-term S-11 portion of $31.2 million has been included as an increase in accounts payable and accrued liabilities and the long-term portion of $62.5 million has been reflected as an increase in other liabilities. (l) To record the net adjustment required in stockholders' equity to reflect (1) the issuance of $1.2 billion of the Company's Common Stock, (2) the elimination of the $462.2 million of J&H net assets, and (3) the $192 million discount on the Company's Common Stock which is being issued in the Transaction. This discount relates to a contractual restriction that limits the amount of stock which can be sold by the recipients during the two years following the closing date of the Transaction. See "Prospectus Supplement Summary--The Business Combination with Johnson & Higgins--The Transaction." S-12 SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA The selected consolidated financial data presented below for each of the five years in the period ended December 31, 1996 have been derived from the consolidated financial statements of the Company, which have been audited by Deloitte & Touche LLP, the Company's independent certified public accountants (and do not include financial data for J&H). The following information should be read in conjunction with "Unaudited Pro Forma Condensed Combined Financial Information," and the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996, incorporated by reference herein.
----------------------------------------------------- YEAR ENDED DECEMBER 31, IN MILLIONS, EXCEPT PER SHARE FIGURES 1996 1995 1994 1993 1992 --------- --------- --------- --------- --------- INCOME STATEMENT DATA: Revenue: Insurance Services $ 1,907.3 $ 1,963.9 $ 1,886.5 $ 1,790.5 $ 1,632.8 Investment Management 1,082.5 750.0 615.4 518.1 396.0 Consulting 1,159.2 1,056.4 933.1 854.8 908.2 --------- --------- --------- --------- --------- Total Revenue 4,149.0 3,770.3 3,435.0 3,163.4 2,937.0 --------- --------- --------- --------- --------- Expense: Compensation and Benefits 2,204.3 1,948.8 1,740.2 1,635.7 1,557.8 Other Operating Expenses (1) 1,229.4 1,126.6 1,024.5 934.9 838.2 --------- --------- --------- --------- --------- Total Expense 3,433.7 3,075.4 2,764.7 2,570.6 2,396.0 --------- --------- --------- --------- --------- Operating Income 715.3 694.9 670.3 592.8 541.0 Interest, Net (47.3) (45.1) (38.8) (34.2) (21.7) --------- --------- --------- --------- --------- Income Before Income Taxes and Cumulative Effect of Accounting Changes 668.0 649.8 631.5 558.6 519.3 Income Taxes (1) 208.7 246.9 249.5 226.2 215.5 --------- --------- --------- --------- --------- Income Before Cumulative Effect of Accounting Changes 459.3 402.9 382.0 332.4 303.8 Cumulative Effect of Accounting Changes -- -- (10.5) -- (40.1) --------- --------- --------- --------- --------- Net Income $ 459.3 $ 402.9 $ 371.5 $ 332.4 $ 263.7 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Per Share data: Income Before Cumulative Effect of Accounting Changes $ 6.34 $ 5.53 $ 5.19 $ 4.52 $ 4.21 Cumulative Effect of Accounting Changes -- -- (.14) -- (.56) --------- --------- --------- --------- --------- Net Income $ 6.34 $ 5.53 $ 5.05 $ 4.52 $ 3.65 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Dividends Paid Per Share $ 3.30 $ 2.975 $ 2.80 $ 2.70 $ 2.65 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Average Number of Shares Outstanding 72.4 72.9 73.6 73.5 72.2 --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
S-13
----------------------------------------------------- AS OF DECEMBER 31, DOLLARS IN MILLIONS 1996 1995 1994 1993 1992 --------- --------- --------- --------- --------- BALANCE SHEET DATA: Current Assets $ 1,748.6 $ 1,679.1 $ 1,446.0 $ 1,312.4 $ 1,242.5 Working Capital 192.3 109.6 53.7 133.7 198.3 Total Assets 4,545.2 4,329.5 3,830.6 3,546.6 3,088.4 Long-term Debt 458.2 410.6 409.4 409.8 411.2 Stockholders' Equity 1,888.6 1,665.5 1,460.6 1,365.3 1,102.9
- ------------------------ (1) In 1996, other operating expenses include unusual charges of $92.6 million reduced by a $33.2 million gain on the sale of The Frizzell Group Limited. In addition, 1996 income taxes include an adjustment which reduced the tax provision by $40 million. The net impact of these items increased earnings per share by $.04 for the year. RECENT OPERATING RESULTS On April 21, 1997, the Company issued a press release reporting the unaudited selected consolidated income statement data presented below for the three months ended March 31, 1997 and March 31, 1996 (which do not reflect the Closing of the Transaction on March 27, 1997 and therefore do not include any financial results of J&H).
-------------------- THREE MONTHS ENDED MARCH 31, IN MILLIONS, EXCEPT PER SHARE FIGURES 1997 1996 --------- --------- Revenue: Insurance Services $ 562.7 $ 555.5 Investment Management 340.6 238.3 Consulting 305.4 276.9 --------- --------- Total Revenue 1,208.7 1,070.7 --------- --------- Expense: Compensation and Benefits 627.3 539.3 Other Operating Expenses 304.1 288.9 --------- --------- Total Expense 931.4 828.2 --------- --------- Operating Income 277.3 242.5 Interest, Net (14.3) (11.7) --------- --------- Income Before Income Taxes 263.0 230.8 Income Taxes 98.6 87.7 --------- --------- Net Income $ 164.4 $ 143.1 --------- --------- --------- --------- Net Income Per Share $ 2.25 $ 1.96 --------- --------- --------- --------- Average Number of Shares Outstanding 73.0 72.9 --------- --------- --------- ---------
S-14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The information set forth in this section does not reflect any information about J&H. The following table summarizes the Company's results of operations for the years ended December 31, 1996, 1995 and 1994:
------------------------------- YEAR ENDED DECEMBER 31, IN MILLIONS, EXCEPT PER SHARE FIGURES 1996 1995 1994 --------- --------- --------- Revenue: Insurance Services $ 1,907.3 $ 1,963.9 $ 1,886.5 Investment Management 1,082.5 750.0 615.4 Consulting 1,159.2 1,056.4 933.1 --------- --------- --------- 4,149.0 3,770.3 3,435.0 --------- --------- --------- Expense: Compensation and Benefits 2,204.3 1,948.8 1,740.2 Other Operating Expenses 1,170.0 1,126.6 1,024.5 Unusual Charges, net 59.4 -- -- --------- --------- --------- 3,433.7 3,075.4 2,764.7 --------- --------- --------- Operating Income $ 715.3 $ 694.9 $ 670.3 --------- --------- --------- --------- --------- --------- Income Before Cumulative Effect of Accounting Change $ 459.3 $ 402.9 $ 382.0 --------- --------- --------- --------- --------- --------- Net Income $ 459.3 $ 402.9 $ 371.5 --------- --------- --------- --------- --------- --------- Per Share Data: Income Before Cumulative Effect of Accounting Change $ 6.34 $ 5.53 $ 5.19 --------- --------- --------- --------- --------- --------- Net Income $ 6.34 $ 5.53 $ 5.05 --------- --------- --------- --------- --------- --------- Average Number of Shares Outstanding 72.4 72.9 73.6 --------- --------- --------- --------- --------- ---------
Revenue, derived mainly from commissions and fees, increased 10% in 1996. Excluding The Frizzell Group Limited ("Frizzell"), a U.K.-based insurance program management firm that was sold in June 1996, revenue grew 12% from 1995 primarily due to a 44% increase in the investment management segment, largely attributable to higher assets under management. In addition, increased demand for the Company's consulting services resulted in 10% revenue growth for that segment. Insurance services revenue declined 3% due to the sale of Frizzell. Excluding the impact of Frizzell, insurance services revenue increased 1% in 1996 reflecting growth in insurance broking and insurance program management, offset, in large part, by a decline in reinsurance broking revenue. In 1995, total revenue increased 10% over 1994 driven principally by 22% growth in the investment management segment, largely attributable to growth in the level of assets under management, and a 13% increase in the consulting segment reflecting strong demand for the Company's consulting services. Insurance services revenue rose 4% in 1995 reflecting a $24 million increase in interest income on fiduciary funds and strong growth in insurance broking in Canada and Continental Europe partially offset by a $25 million decrease in revenue received from the activities of the Marsh & McLennan Risk Capital group of companies ("MMRC"). Expenses increased 12% in 1996 compared with 1995. Included in 1996 were unusual charges totaling $92.6 million which relate to real estate matters, integration of the Company's worldwide insurance services operations, goodwill write-offs, a provision related to the Lloyd's Reconstruction and Renewal Plan and certain office closings. These charges were offset, in part, by a gain of $33.2 million on the Company's sale of Frizzell in S-15 June 1996. Of the net $59.4 million unusual charge, $49.4 million is applicable to insurance services, $8.5 million relates to consulting and $1.5 million is recorded in General Corporate. Excluding the net unusual charges and the impact of only one-half year of Frizzell, expenses increased 12% primarily due to increased incentive compensation levels especially within investment management. Volume-related costs, particularly those associated with higher staff levels, grew for both investment management and consulting as a result of the increased level of business activity. Operating expenses increased 11% in 1995 primarily due to the impact of staff growth and incentive compensation programs in the investment management and consulting segments commensurate with the higher volume of business, and systems automation initiatives in all operating segments. Net income for 1996 includes a tax adjustment that reduced the income tax provision by $40 million. The tax adjustment primarily relates to the permanent deployment of funds outside the United States in a tax efficient manner and favorable state and local tax developments in the U.S. The net impact of the tax adjustment and the net unusual charges described above increased earnings per share by $.04 for the year. The translated values of revenue and expense from the Company's international insurance services and consulting operations are subject to fluctuations due to changes in currency exchange rates. However, the net impact of these fluctuations on the Company's results of operations has not been material. The Company has adopted Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," which was effective for fiscal years beginning after December 15, 1995. In accordance with this Statement, the Company has provided disclosure in Note 6 to the consolidated financial statements presenting pro forma net income and earnings per share amounts as if employee stock options had been expensed based on their fair value on the grant date, determined using the Black-Scholes option pricing model. Effective January 1, 1994, the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits." A non-cash charge reflecting the cumulative effect of this accounting change, net of income taxes, totaled $10.5 million or $.14 per share. INSURANCE SERVICES Revenue attributable to the insurance services segment consists primarily of fees paid by clients; commissions and fees paid by insurance and reinsurance companies; interest income on premiums, and in certain cases on claims, collected and not yet remitted to insurers, reinsurers or clients, such funds being held in a fiduciary capacity. Revenue generated by insurance services is affected by premium rate levels in the property and casualty insurance markets and available insurance capacity, as compensation is frequently related to the premiums paid by insureds. Revenue is also affected by fluctuations in the amount of risk retained by insurance and reinsurance clients themselves, and insured values, the development of new products, markets and services, lost business, merging of clients and the volume of business from new and existing clients, as well as interest rates for fiduciary funds. The Company has been instrumental in the formation of several substantial insurance and reinsurance entities. MMRC is also an advisor to The Trident Partnership L.P., an independent private investment partnership formed in 1994 to invest selectively in the global insurance and reinsurance industry, and Risk Capital Reinsurance Company, a U.S. reinsurer formed in 1995 to provide traditional and other kinds of reinsurance, both on a stand-alone basis and as part of integrated capital solutions for insurance companies. Through MMRC, the Company receives compensation in various forms including fees, royalties and dividends, as well as appreciation that has been realized on the sale of the Company's holdings in insurance entities it assisted in organizing. These amounts are reflected within the insurance services segment in the applicable line of business to which they apply. S-16 The following table summarizes the results of operations for the Company's insurance services segment for the years ended December 31, 1996, 1995 and 1994:
------------------------------- YEAR ENDED DECEMBER 31, IN MILLIONS OF DOLLARS 1996 1995 1994 --------- --------- --------- Revenue: Insurance Broking $ 1,321.3 $ 1,260.0 $ 1,209.3 Reinsurance Broking 258.5 295.1 298.5 Insurance Program Management 233.6 306.1 300.0 Interest Income on Fiduciary Funds 93.9 102.7 78.7 --------- --------- --------- 1,907.3 1,963.9 1,886.5 --------- --------- --------- Expense: Operating Expenses 1,544.2 1,574.7 1,480.4 Unusual Charges, net 49.4 -- -- --------- --------- --------- 1,593.6 1,574.7 1,480.4 --------- --------- --------- Operating Income $ 313.7 $ 389.2 $ 406.1 --------- --------- --------- --------- --------- --------- Operating Income Margin 16.4% 19.8% 21.5% --------- --------- --------- --------- --------- ---------
INSURANCE BROKING REVENUE Insurance broking services are provided to clients primarily in connection with risk management and the insurance placement process and involve analyzing various types of property and liability loss exposures including large and complex risks that require access to world insurance markets. Services include insurance broking activities and professional consulting services on risk management issues, including risk analysis, coverage requirements, self insurance, alternative insurance and risk financing methods, claims collection, injury management and loss prevention. Insurance broking revenue, which is received from a predominantly corporate clientele, increased 5% in 1996. Client revenue rose primarily due to an increase in new business in the United States and Europe offset by declines in commercial property and casualty premium rates worldwide. Global specialty lines of coverage, including financial services, marine and energy, and aviation, also experienced strong new business levels. The Company does not expect premium rate levels to improve in the near future and anticipates that the insurance broking marketplace will continue to be highly competitive. In 1995, insurance broking revenue increased 4% over 1994 levels. Revenue from MMRC declined $15 million compared with 1994 primarily due to a lower level of realized appreciation on capital deployed in the various insurance entities the Company has helped organize. Client revenue increased primarily due to new business growth in Canada, Continental Europe, Australia and Latin America, along with an increase in certain global specialty lines. In the United States, property premium rates, with the exception of catastrophe coverages, were generally stable while the casualty market experienced renewal rates that were generally down on a year-over-year basis. REINSURANCE BROKING REVENUE Reinsurance broking services involve acting as an intermediary for insurance and reinsurance organizations on all classes of reinsurance. The intermediary assists the insurer by providing advice, placing reinsurance coverage with reinsurance organizations located around the world and furnishing related services such as actuarial, financial and regulatory consulting, portfolio analysis and catastrophe modeling. Generally, the purpose of reinsurance is to spread the risk of primary insurance or the reinsurance thereof to lessen the concentration of risk with any one insurance or reinsurance company. S-17 Reinsurance broking revenue in 1996 declined 12% compared with 1995. This decline was primarily due to reduced demand for reinsurance resulting from the consolidation among various U.S. and U.K. insurance companies, reduced reinsurance demand due to higher risk retentions by ceding insurance companies and the impact of lower property catastrophe premium rates. In 1995, reinsurance broking revenue decreased slightly from 1994. The effect of lower premium rates for property catastrophe and liability reinsurance, along with reduced demand in the London market and a $10 million decrease in MMRC related revenue, was offset in large part by new business. INSURANCE PROGRAM MANAGEMENT REVENUE The insurance program management operation of Seabury & Smith primarily designs, places and administers life, health, accident, disability, automobile, homeowners and professional liability insurance programs primarily on a group marketing basis to individuals, businesses and their employees, and associations and other affinity groups and their members in the United States and Canada. In addition, it provides underwriting management services to insurers in the United States, Canada and the United Kingdom, primarily for professional liability coverages. Insurance program management revenue decreased 24% in 1996 due to the sale of Frizzell. Revenue for Seabury & Smith, which comprises the whole of program management subsequent to the sale of Frizzell, increased 6%. This growth was largely the result of increased services provided to corporations and institutions and their employees, along with increased insurance placed on behalf of small businesses. In 1995, insurance program management revenue increased 2% over 1994. Within North America, revenue rose 7% in 1995. This growth was the result of increased services provided to corporations and institutions and their employees, increased insurance placed on behalf of small businesses, higher revenue from professional liability products in the United States and the acquisition of a U.K.-based company that specializes in providing professional liability insurance products. Revenue for Frizzell, which operated in the United Kingdom, decreased 3% in 1995 as the market for motor and household insurance services was extremely competitive during the year. INTEREST INCOME ON FIDUCIARY FUNDS Interest income on fiduciary funds decreased 9% in 1996 due to generally lower average short-term interest rates worldwide. In 1995, interest income on fiduciary funds increased 31% due to generally higher average short-term interest rates throughout the world. EXPENSE Insurance services operating expenses decreased 2% in 1996. Excluding the impact of Frizzell, expenses increased 2% reflecting normal salary progressions. The Company's insurance services segment has continued a cost containment program while maintaining the level of expenditures for systems-related improvements. Expenses for insurance services rose 6% in 1995 primarily reflecting normal salary progressions and spending on technology and systems automation initiatives. UNUSUAL CHARGES, NET During 1996, the Company completed the sale of Frizzell for approximately $290 million which resulted in a $33.2 million pretax gain. In addition, pretax charges aggregating $82.6 million were also recorded in the insurance services segment representing a provision of approximately $31 million for U.K. real estate; $17 million for costs related to the integration of the Company's worldwide insurance services operations; $17 million for goodwill write-offs; $15 million related to the Lloyd's Reconstruction and Renewal Plan; and $3 million for office closings. Excluding the impact of the Frizzell gain and the unusual charges, the margin for insurance services was 19.0%. S-18 The following table summarizes the results of operations for the Company's insurance services segment by geographic area for the years ended December 31, 1996, 1995 and 1994:
------------------------------- YEAR ENDED DECEMBER 31, IN MILLIONS OF DOLLARS 1996 1995 1994 --------- --------- --------- Revenue: United States $ 1,025.3 $ 1,006.9 $ 1,028.1 Europe 696.1 784.0 709.9 Canada 96.4 93.9 86.7 Pacific Rim and Other 89.5 79.1 61.8 --------- --------- --------- $ 1,907.3 $ 1,963.9 $ 1,886.5 --------- --------- --------- --------- --------- --------- Operating Income: United States(a) $ 155.6 $ 186.9 $ 216.0 Europe(a) 111.9 155.5 150.3 Canada 27.0 25.9 23.6 Pacific Rim and Other(a) 19.2 20.9 16.2 --------- --------- --------- $ 313.7 $ 389.2 $ 406.1 --------- --------- --------- --------- --------- ---------
- ------------------------ (a) Excluding the unusual charges in 1996, operating income would have been $179.2 million in the United States, $135.7 million in Europe, $21.2 million in the Pacific Rim and Other, and insurance services in total would have been $363.1 million. The sale of Frizzell caused a decline in both revenue and operating income in Europe in 1996. Operating income also declined in Europe as a result of the unusual charges recorded which primarily related to the U.K. The decline in operating income in the United States reflects reduced reinsurance broking income due to lower revenues, as well as the impact in the United States of the unusual charges. INVESTMENT MANAGEMENT The Company's investment management and related services, which are performed principally in the United States, are provided by Putnam. The services include securities investment advisory and management services consisting of investment research and management, accounting and related services for a group of publicly held investment companies (the "Putnam Funds"). A number of the open-end funds serve as funding media for variable insurance contracts. Investment management services are also provided to corporate profit sharing and pension funds, state and other government and public employee retirement funds, university endowment funds, charitable foundations, collective investment vehicles and other domestic and foreign institutional accounts. Putnam serves as transfer agent, dividend disbursing agent, registrar and custodian for the Putnam Funds and provides one or more of such services to several external clients. In addition, Putnam provides administrative and trustee services for employee benefit plans (in particular 401(k) plans), IRA's and other clients for which it receives compensation pursuant to service and trust or custodian contracts. Putnam also acts as principal underwriter of the shares of the open-end Putnam Funds, selling primarily through independent broker/dealers, financial planners and financial institutions, including banks, and also directly to certain large 401(k) plans and other institutional accounts. Essentially all of Putnam's mutual funds are available with a contingent deferred sales charge in lieu of a front-end load. Putnam's revenue is derived primarily from investment management fees received from the Putnam Funds and institutional accounts. Fees paid by the Putnam Funds are approved annually by the trustees or shareholders of the Putnam Funds and are charged at various rates depending on the individual mutual fund or account and are usually based upon a sliding scale in relation to the level of assets under management and, in certain instances, are also based on investment performance. Management of Putnam and the trustees of the Putnam Funds S-19 regularly review the fund fee structure in light of fund performance, the level and range of services provided, industry conditions and other relevant factors. Putnam also receives compensation for providing certain shareholder and custody services. The following table summarizes the results of operations for the Company's investment management segment for the years ended December 31, 1996, 1995 and 1994:
------------------------------- YEAR ENDED DECEMBER 31, IN MILLIONS OF DOLLARS 1996 1995 1994 --------- --------- --------- Revenue $ 1,082.5 $ 750.0 $ 615.4 Expense 744.7 506.5 407.2 --------- --------- --------- Operating Income $ 337.8 $ 243.5 $ 208.2 --------- --------- --------- --------- --------- --------- Operating Income Margin 31.2% 32.5% 33.8% --------- --------- --------- --------- --------- ---------
REVENUE Putnam's revenue increased 44% in 1996 reflecting exceptional growth in the level of assets under management on which management fees are earned. The higher asset level reflected a substantial increase in the level of mutual fund sales, higher equity market valuations and new 401(k) business. Revenue for Putnam increased 22% in 1995 reflecting strong growth in the level of assets under management on which management fees are earned. The higher asset level reflected significantly higher equity market valuations, mutual fund sales and new 401(k) business. EXPENSE Putnam's expenses rose 47% in 1996 reflecting the effect of significantly higher incentive compensation levels, staff growth to support new business, increased costs resulting from the higher level of business activity, and expanding client needs. Expenses for Putnam increased 24% in 1995 reflecting the effect of staff growth and incentive compensation levels consistent with strong operating performance, costs to develop new systems which were considered necessary to manage the growth of Putnam's client base, and service-related costs including those for a new client service center that became operational in the fourth quarter of 1994. S-20 The following table summarizes the year-end and average assets under management for the years ended December 31, 1996, 1995 and 1994:
------------------------------- YEAR ENDED DECEMBER 31, IN BILLIONS OF DOLLARS 1996 1995 1994 --------- --------- --------- Mutual Funds: Domestic Equity $ 80.0 $ 46.8 $ 26.2 Taxable Bond 29.9 26.0 22.8 Tax-Free Income 16.4 16.9 15.2 International Equity 7.5 3.7 3.0 --------- --------- --------- 133.8 93.4 67.2 --------- --------- --------- Institutional Accounts: Fixed Income 19.1 19.0 18.8 Domestic Equity 14.0 8.9 6.7 International Equity 6.5 4.4 2.6 --------- --------- --------- 39.6 32.3 28.1 --------- --------- --------- Year-end Assets $ 173.4 $ 125.7 $ 95.3 --------- --------- --------- --------- --------- --------- Average Assets $ 148.5 $ 109.2 $ 93.5 --------- --------- --------- --------- --------- ---------
Assets under management are affected by fluctuations in domestic and international bond and stock market prices, by the level of investments and withdrawals for current and new fund shareholders and clients. They are also affected by investment performance, service to clients, the development and marketing of new investment products, the relative attractiveness of the investment style under prevailing market conditions and changes in the investment patterns of clients. Revenue levels are sensitive to all of the factors above, but in particular to significant changes in bond and stock market valuations. Putnam provides individual and institutional investors with a broad range of equity and fixed income investment products and services designed to meet varying investment objectives and which affords its clients the opportunity to allocate their investment resources among various alternative investment products as changing worldwide economic and market conditions warrant. At the end of 1996, assets held in equity securities represented 62% of assets under management, compared with 51% in 1995, while investments in fixed income products represented 38%, down from 49% last year. CONSULTING The Company provides consulting services to a predominantly corporate clientele from locations around the world, primarily in the areas of human resources and employee benefit programs, including retirement, health care, and compensation; and general management consulting, which comprises strategy, operations and marketing. The Company also provides economic consulting and analysis. Revenue in the consulting business is affected by changes in clients' industries including government regulation, as well as new products and services, the stage of the economic cycle and broad trends in the management of large organizations. S-21 The following table summarizes the results of operations for the Company's consulting segment for the years ended December 31, 1996, 1995 and 1994:
------------------------------- YEAR ENDED DECEMBER 31, IN MILLIONS OF DOLLARS 1996 1995 1994 --------- --------- --------- Revenue $ 1,159.2 $ 1,056.4 $ 933.1 --------- --------- --------- Expense: Operating Expenses 1,039.8 947.7 836.7 Unusual Charges 8.5 -- -- --------- --------- --------- $ 1,048.3 $ 947.7 $ 836.7 --------- --------- --------- Operating Income $ 110.9 $ 108.7 $ 96.4 --------- --------- --------- --------- --------- --------- Operating Income Margin 9.6% 10.3% 10.3% --------- --------- --------- --------- --------- ---------
REVENUE Consulting services revenue increased 10% in 1996. Retirement consulting revenue, which represented 43% of the consulting segment, grew 9% in 1996 reflecting higher demand in the United States, Europe and Latin America. Revenue rose 14% in the global compensation practice, 10% in health care consulting and 7% in general management consulting in 1996. Revenue for consulting services increased 13% in 1995 as demand for services in all major practices increased. After adjusting for the net impact of several small acquisitions, revenue grew approximately 11%. Retirement consulting revenue, which represented 44% of the consulting segment, grew 7% in 1995 reflecting higher demand in the United States, Continental Europe and Latin America. Revenue increased 17% in the global compensation practice, 16% in general management consulting and 10% in health care consulting in 1995. EXPENSE Consulting services operating expenses increased 10% in 1996 compared with 1995 primarily reflecting staff growth to support new business, higher incentive compensation and normal salary progressions. Expenses for the consulting segment increased 13% in 1995. Excluding the effect of acquisitions, 1995 expenses increased approximately 11% reflecting staff growth consistent with increased demand in general management and United States retirement consulting as well as higher systems-related expenses associated with initiatives to expand and increase the efficiency of services provided in the United States. UNUSUAL CHARGES Pretax charges of $8.5 million were recorded in the consulting segment reflecting a provision of approximately $6 million for office realignments and consolidations and $2.5 million for a U.K. real estate matter. Excluding the impact of the unusual charges, the operating income margin for consulting services was 10.3%. S-22 The following table summarizes the results of operations for the Company's consulting segment by geographic area for the years ended December 31, 1996, 1995 and 1994:
------------------------------- YEAR ENDED DECEMBER 31, IN MILLIONS OF DOLLARS 1996 1995 1994 --------- --------- --------- Revenue: United States $ 707.2 $ 645.0 $ 586.4 Europe 264.8 240.6 197.3 Canada 101.6 90.4 78.4 Pacific Rim and Other 85.6 80.4 71.0 --------- --------- --------- $ 1,159.2 $ 1,056.4 $ 933.1 --------- --------- --------- --------- --------- --------- Operating Income: United States(a) $ 69.6 $ 60.4 $ 50.2 Europe(a) 24.2 33.9 30.1 Canada 15.5 11.5 11.7 Pacific Rim and Other 1.6 2.9 4.4 --------- --------- --------- $ 110.9 $ 108.7 $ 96.4 --------- --------- --------- --------- --------- ---------
- ------------------------ (a) Excluding the unusual charges in 1996, operating income would have been $75.6 million in the United States, $26.7 million in Europe, and consulting in total would have been $119.4 million. European results for the consulting segment reflect the impact of investments made in information technology, the expansion of retirement consulting, and pressure in an expanding but competitive market for general management consulting. Canadian results reflect improved market conditions coupled with continued expense controls. INTEREST Interest income earned on corporate funds declined to $14.3 million in 1996 compared with $17.7 million in 1995 primarily due to generally lower yields worldwide. Interest expense decreased to $61.6 million in 1996 from $62.8 million in 1995. This decline was due to lower average interest rates on commercial paper borrowings. The average level of commercial paper borrowings was slightly higher than 1995 principally due to the funding of Putnam's prepaid dealer commissions and the cash outflows associated with the Company's share repurchases, which was offset in large part by the cash proceeds realized on the sale of Frizzell. Interest income earned on corporate funds was $17.7 million in 1995 compared with $11.8 million in 1994 primarily due to higher yields in North America and the United Kingdom. Interest expense increased to $62.8 million in 1995 from $50.6 million in 1994 due to an increase in commercial paper borrowings and higher average interest rates on those borrowings. The higher level of commercial paper borrowings primarily reflected the Company's share repurchase program and its $40 million investment in Risk Capital Reinsurance Company. INCOME TAXES In the fourth quarter, the Company recorded a tax adjustment that reduced the income tax provision by $40 million. The tax adjustment primarily relates to the permanent deployment of funds outside the United States in a tax efficient manner and favorable state and local tax developments in the U.S. Excluding the tax adjustment, the Company's consolidated domestic and foreign tax rate was 37.25% of income before income taxes in 1996 compared with 38.0% in 1995, and 39.5% in 1994. The reductions in the 1996 and 1995 tax rates reflect the continued implementation of tax minimization strategies primarily relating to the Company's non-U.S. operations. The overall tax rates are higher than the U.S. statutory rates primarily because of the impact of state and local income taxes. S-23 LIQUIDITY AND CAPITAL RESOURCES The Company's cash and cash equivalents aggregated $299.6 million at the end of 1996, a decrease of $28.5 million from the end of 1995. OPERATING CASH FLOWS The Company generated $316.5 million of cash from operations in 1996 compared with $318.1 million in 1995. These amounts reflect the net income earned by the Company in those years adjusted for non-cash charges and working capital changes. Included in the cash flow from operations are the net cash requirements of Putnam's prepaid dealer commissions, which amounted to $338.7 million in 1996 compared with $104.3 million in 1995. The current portion of these prepaid dealer commissions, amounting to $222.8 million and $136.4 million at December 31, 1996 and 1995, respectively, is included in other current assets in the Company's consolidated balance sheets. The long-term portion amounting to $676.6 million and $424.3 million at December 31, 1996 and 1995, respectively, is included in other assets in the Company's consolidated balance sheets. The tax benefit associated with these prepaid dealer commissions is recorded in deferred taxes, the long-term portion of which is included in other liabilities in the Company's consolidated balance sheets. The increase in accrued compensation and employee benefits in 1996 principally was caused by significantly higher incentive compensation levels consistent with strong operating performance in the investment management segment. The Company anticipates that internally generated funds will be sufficient to meet the Company's foreseeable recurring cash requirements, including dividends, capital expenditures and scheduled repayments of long-term debt. FINANCING CASH FLOWS Financing activities for the Company reduced cash by $325.0 million in 1996 and by $92.8 million in 1995. Dividends paid by the Company amounted to $239.2 million in 1996 ($3.30 per share) and $217.0 million in 1995 ($2.975 per share). The Company regularly purchases shares of its common stock to meet the requirements of the various stock compensation and benefit programs. The Company purchased 2.5 million shares in 1996 and 1.7 million shares in 1995. The Company used the proceeds from the sale of Frizzell to complete its share repurchases under the three million share authorization of September 1995. During 1996, the Company executed a new revolving credit facility with several banks to support its commercial paper borrowings and to fund other general corporate requirements. This facility, which expires December 2001, provides that the Company may borrow up to $750 million at market rates of interest which may vary depending upon the level of borrowings and the Company's credit ratings. Outstanding borrowings under the revolving credit facility at December 31, 1996 amounted to $250 million with varying dates of maturity through December 1997. Borrowings under the revolving credit facility have been classified as long-term debt based on the Company's intent and ability to maintain or refinance these obligations on a long-term basis. The Company also maintains other credit facilities, primarily related to operations located outside the United States, aggregating $59.5 million as of December 31, 1996. The Company has a fixed rate non-recourse mortgage note agreement due in 2009 amounting to $200 million, bearing an interest rate of 9.8%, in connection with its 56% interest in its worldwide headquarters building. Also related to the purchase and renovation of the building, the Company has an interest rate swap that fixes the interest rate on $100 million of variable rate borrowings at approximately 9.5% until February 1999. INVESTING CASH FLOWS Investing activities for the Company reduced cash by $13.8 million in 1996 and by $198.1 million in 1995. As previously mentioned, the Company sold Frizzell in June 1996. The net addition to cash resulting from the sale was $241.8 million. The Company's capital expenditures, which amounted to $157.3 million in 1996 and $136.9 S-24 million in 1995, have primarily related to computer equipment purchases and the refurbishing and modernizing of office facilities. The Company has been instrumental in developing new sources of insurance capacity. The Company, through MMRC, maintains a minority ownership interest in various entities it assisted in organizing. Many of these investments have been classified as securities available for sale and, as discussed more fully in Note 10 to the Company's consolidated financial statements, the aggregate fair value of these holdings is included in long-term securities in the consolidated balance sheets. The Company, through Marsh & McLennan Risk Capital Holdings, expects to continue to manage and develop further these activities. OTHER The insurance coverage for potential liability resulting from alleged errors and omissions in the professional services provided by the Company includes elements of both risk retention and risk transfer. The Company believes it has adequately reserved for the self-insurance contingencies. Payments related to the respective self-insured layers are made as legal fees are incurred and claims are resolved and generally extend over a considerable number of years. The amounts paid in that regard vary in relation to the severity of the claims and the number of claims active in any particular year. The long-term portion of this liability is included in other liabilities in the Company's consolidated balance sheets. The Company's policy for funding its tax qualified U.S. defined benefit retirement plan is to contribute amounts at least sufficient to meet the funding requirements set forth in U.S. employee benefit and tax laws. As described more fully in Note 5 to the Company's consolidated financial statements, the plan is currently well funded; consequently, the Company has not been able to make a tax deductible contribution since 1986. Because this situation is expected to continue, a 1997 cash contribution is currently not anticipated. The related long-term pension liability is included in other liabilities in the Company's consolidated balance sheets. The Company contributes to certain health care and life insurance benefits provided to its retired employees. As described more fully in Note 5 to the Company's consolidated financial statements, the cost of these postretirement benefits for employees in the United States is accrued during the period up to the date employees are eligible to retire, but is funded by the Company as incurred. This postretirement liability is included in other liabilities in the Company's consolidated balance sheets. Cumulative translation adjustments, a component of stockholders' equity in the Company's consolidated balance sheets, represent the cumulative effect of translating the financial statements of the Company's international operations from functional currencies to U.S. dollars. SUBSEQUENT EVENTS In January 1997, the Company purchased CECAR, an insurance broker in France, for approximately $200 million. S-25 THE COMPANY GENERAL Marsh & McLennan Companies, Inc., a professional services organization with origins dating from 1871 in the United States, is a holding company which, through its subsidiaries and affiliates, provides clients with analysis, advice and transactional capabilities in the fields of insurance and reinsurance broking, investment management and consulting. On March 27, 1997, the Company consummated a strategic business combination with J&H. The business of J&H is described above in "Prospectus Supplement Summary--The Business Combination with Johnson & Higgins--J&H Business." A newly-formed subsidiary of the Company, known as J&H Marsh & McLennan, Inc., will be used to facilitate the integration and management of the respective insurance services operations of the Company and J&H. A. Foster Higgins, a subsidiary of J&H engaged in the employee benefits consulting business, operationally will be combined with the similar business conducted by Mercer. INSURANCE SERVICES The Company's insurance services are provided by its subsidiaries and their affiliates on a worldwide basis, as broker, agent or consultant for insureds, insurance underwriters and other brokers. These services are principally provided by MMI and Guy Carpenter, a reinsurance intermediary, and their subsidiaries and affiliates. Seabury & Smith and its affiliates provide insurance program management services involving a wide range of insurance and related products for individuals and others through both sponsored and non-sponsored affinity group programs primarily in the United States and Canada. Marsh & McLennan Risk Capital Corp. ("M&M Risk Capital Corp.") provides services principally in connection with originating, structuring and managing investments in the insurance industry. Risk management and insurance broking services, carried on throughout the world principally by MMI and its affiliates, are provided for a predominantly corporate clientele through offices in more than 80 countries, primarily in North and South America, Europe and Asia Pacific. Clients are companies engaged in a broad range of commercial activities, including general industries, financial and professional services, aviation, marine, energy construction, land transportation, healthcare and utility concerns. Clients also include various government and related agencies, non-profit and other organizations, and individuals. Such risk management and insurance broking services involve various types of property and liability loss exposures, including large and complex risks that require access to world insurance markets. Services provided to clients include insurance broking activities and professional counseling services on risk management issues, including risk analysis, coverage requirements, self-insurance (in which the insured retains a portion of its insurance risks), and alternative insurance and risk financing methods, as well as claims collection, injury management, loss prevention and other insurance related services. Services also include organization and administrative services for special purpose insurance companies and other risk assumption alternatives. Insurance placement services include the placement of insurance coverages with insurers world-wide, sometimes involving other intermediaries. Correspondent relationships are maintained with unaffiliated firms in certain countries. In January 1997, the Company acquired CECAR, a French insurance broker, resulting in the Company becoming the largest insurance broker in France. Reinsurance services are provided to insurance and reinsurance risk takers worldwide, principally by Guy Carpenter and its affiliates, from offices principally in North America and Europe. Such services primarily involve acting as an intermediary for insurance and reinsurance organizations on all classes of reinsurance. The intermediary assists the insurer by providing advice, placing reinsurance coverage with reinsurance organizations located around the world, and furnishing related services such as actuarial, financial and regulatory consulting, portfolio analysis and catastrophe modeling. Claims services are often performed for policies placed a number of years previously. The insurance company may seek reinsurance or other risk-transfer financing on all or a portion S-26 of the risks it insures. Intermediary services are also provided to reinsurance companies, which may also seek reinsurance on the risks they have reinsured. Seabury & Smith and its affiliates provide insurance program management services (including the design, placement and administration of life, health, accident, disability, automobile, homeowners, professional liability and other insurance, and related products) primarily on a group marketing basis to individuals, businesses and their employees, and associations and other affinity groups and their members in the United States and Canada. It provides underwriting management services to insurers in the United States, Canada and the United Kingdom, primarily for professional liability coverages. Frizzell and its subsidiaries, which provided insurance program management, personal financial planning and consumer finance services in the United Kingdom, were sold in 1996. M&M Risk Capital Corp. provides services in connection with originating, structuring and managing investments in the insurance industry. It is an advisor to The Trident Partnership L.P., an independent private investment partnership formed in 1994 to make private equity investments in the global insurance and reinsurance industry. M&M Risk Capital Corp. is also an advisor to Risk Capital Reinsurance Company (a subsidiary of Risk Capital Holdings, Inc., a publicly held corporation), which is based in the United States and was formed in 1995 to provide traditional and other kinds of reinsurance, both on a stand-alone basis and as part of integrated capital solutions for insurance companies. M&M Risk Capital Corp. and its predecessor operations were instrumental in the formation of several substantial insurance and reinsurance entities, including A.C.E. Insurance Company, Ltd., X.L. Insurance Company, Ltd. and Mid Ocean Reinsurance Company Ltd. M&M Risk Capital Corp. also advises its immediate parent company, Marsh & McLennan Risk Capital Holdings, Ltd., regarding the latter's ownership holdings in certain insurance and reinsurance entities and funds, primarily ones initiated by M&M Risk Capital Corp. As a result of the foregoing activities, subsidiaries and affiliates of the Company may have direct or indirect investments in insurance and reinsurance companies, including entities at Lloyd's, which are considered for client placements by the Company's insurance and reinsurance brokerage businesses. The revenue attributable to the Company's insurance services consists primarily of fees paid by clients; commissions and fees paid by insurance and reinsurance companies; interest income on premiums, and in certain cases on claims, collected and not yet remitted to insurers, reinsurers or clients, such funds being held in a fiduciary capacity; and compensation for services provided in connection with the formation and capitalization of various insurers and reinsurers, including fees, royalties and dividends, as well as appreciation that has been realized on sales of holdings in such entities. Revenue generated by insurance services is affected by premium rate levels in the property and casualty insurance markets and available insurance capacity, as compensation is frequently related to the premiums paid by insureds. Revenue is also affected by fluctuations in the amount of risk retained by insurance and reinsurance clients themselves and by insured values, the development of new products, markets and services, lost business, merging of clients (including insurance companies that are clients in the reinsurance intermediary business) and the volume of business from new and existing clients, as well as by interest rates for fiduciary funds. In many cases compensation may be negotiated in advance with certain clients on an annual basis based upon the estimated value of the services to be performed. Revenue and fees also may be received from originating, structuring and managing investments in insurers, and income and proceeds also may be derived from investments made by the Company. Revenues vary from quarter to quarter as a result of the timing of policy renewals and the net effect of new and lost business production, whereas expenses tend to be more uniform throughout the year. Commission rates vary in amount depending upon the type of insurance or reinsurance coverage provided, the particular insurer or reinsurer, and the capacity in which the broker acts, in addition to negotiations with clients. Occasionally, commissions are shared with other brokers that have participated in placing insurance or servicing insureds. Placement services revenue includes payments or allowances by insurance companies based upon such factors as the overall volume of business placed by the broker with that insurer, the loss performance to the S-27 insurer of that business or the aggregate commissions paid by the insurer for that book during specific periods. In some cases, compensation for brokerage or advisory services is paid directly as a fee by the client. The investment of fiduciary funds is governed by the applicable laws or regulations of insurance authorities of the states in the United States and in other jurisdictions in which the Company's subsidiaries do business. These laws and regulations typically limit the type of investments that may be made with such funds. The general amount of funds invested and interest rates may vary from time to time. INVESTMENT MANAGEMENT Investment management and related services are provided by Putnam. Putnam has been engaged in the investment management business since 1937, with its principal offices in Boston, Massachusetts. Putnam also has offices in London and Tokyo. Putnam provides individual and institutional investors with a broad range of equity and fixed income investment products and services designed to meet varying investment objectives and which afford its clients the opportunity to allocate their investment resources among various alternative investment products as changing worldwide economic and market conditions warrant. Putnam's investment management services, which are performed principally in the United States, include securities investment advisory and management services consisting of investment research and management, accounting and related services for a group of publicly-held investment companies. As of December 31, 1996, there were 99 Putnam Funds registered under the Investment Company Act of 1940, including 17 closed-end investment companies whose shares are traded on various major domestic stock exchanges. A number of the open-end funds serve as funding media for variable insurance contracts. Investment management services are also provided to corporate profit sharing and pension funds, state and other governmental and public employee retirement funds, university endowment funds, charitable foundations, collective investment vehicles and other domestic and foreign institutional accounts. Assets managed by Putnam, on which management fees are based, were approximately $173.4 billion and $125.7 billion as of December 31, 1996 and 1995, respectively. Mutual fund assets aggregated $133.8 billion at December 31, 1996 and $93.4 billion at December 31, 1995. Assets under management at December 31, 1996 consisted of approximately 62% equity securities and 38% fixed income products, invested both domestically and globally. Putnam's revenues are derived primarily from its investment management fees. Assets under management and revenue levels are affected by fluctuations in domestic and international bond and stock market prices, and by the level of investments and withdrawals for current and new fund shareholders and clients. They are also affected by investment performance, service to clients, the development and marketing of new investment products, the relative attractiveness of the investment style under prevailing market conditions and changes in the investment patterns of clients. Fluctuations in interest rates and in the yield curve will have an effect on fixed income assets under management and may influence the flow of monies to and from fixed-income funds and accounts. Fluctuations in the prices of stocks have a similar effect on equity assets under management and may influence the flow of monies to and from equity funds and accounts. The investment management services provided to the Putnam Funds and institutional accounts are performed pursuant to advisory contracts which provide for a fee payable to the Putnam company that manages the account. The amount of the fee varies depending on the individual mutual fund or account and is usually based upon a sliding scale in relation to the level of assets under management and, in certain instances, is also based on investment performance. Such contracts automatically terminate in the event of their "assignment", generally may be terminated by either party without penalty and, as to contracts with the Putnam Funds, continue in effect only so long as approved, at least annually, by their shareholders or by the Putnam Funds' trustees, including a majority who are not affiliated with Putnam. "Assignment" includes any direct or indirect transfer of a controlling block of voting stock in Putnam or the Company. Management of Putnam and the trustees of the Putnam Funds regularly review the fund fee structure in light of fund performance, the level and range of services provided, industry conditions and other relevant factors. S-28 Putnam Fiduciary Trust Company, a Massachusetts trust company, serves as transfer agent, dividend disbursing agent, registrar and custodian for the Putnam Funds and provides one or more of such services to several external clients. Putnam Fiduciary Trust Company receives compensation from the Putnam Funds for such services pursuant to written agreements which may be terminated by either party on 90 days' notice, and for providing custody services pursuant to written agreements which may be terminated by either party on 30 days' notice. These contracts generally provide for compensation on the basis of several factors which vary with the type of service being provided. In addition, Putnam Fiduciary Trust Company provides administrative and trustee (or custodian) services for employee benefit plans (in particular 401(k) plans), IRA's and other clients for which it receives compensation pursuant to service and trust or custodian contracts. In the case of employee benefit plans, investment options are selected by the plan sponsors and include Putnam mutual funds and other Putnam managed products, as well as employer stock and other non-Putnam investments. In some instances, The Putnam Advisory Company, Inc. acts as investment manager for a plan's fixed income portfolio and receives compensation for such investment management services pursuant to an investment management agreement. Putnam Mutual Funds Corp. acts as principal underwriter of the shares of the open-end Putnam Funds, selling primarily through independent broker/dealers, financial planners and financial institutions, including banks, and also directly to certain large 401(k) plans and other institutional accounts. Shares of the open-end funds are generally sold at their respective net asset value per share plus a sales charge, which varies depending on the individual fund and the amount purchased. In some cases the sales charge is assessed if the shares are redeemed within a stated time period. In accordance with certain terms and conditions described in the prospectuses for such funds, certain investors are eligible to purchase shares at net asset value or at reduced sales charges, and investors may generally exchange their shares of a fund at net asset value for shares of another Putnam Fund when they believe such an investment decision is appropriate without the payment of additional sales charges. Commissions to selling dealers are typically paid at the time of the purchase as a percentage of the amount invested. Essentially all Putnam Funds are available with a contingent deferred sales charge in lieu of a front-end load. The related prepaid dealer commissions initially paid by Putnam to broker/dealers for distributing such funds are recovered through charges and fees received over a number of years. Nearly all of the open-end Putnam Funds have adopted distribution plans pursuant to Rule 12b-1 under the Investment Company Act of 1940 under which the Putnam Funds make payments to a Putnam subsidiary to cover costs relating to distribution of the Putnam Funds and services provided to shareholders. These payments enable the Putnam subsidiary to pay service fees and other continuing compensation to firms that provide services to Putnam Fund shareholders and distribute shares of the Putnam Funds. Some Rule 12b-1 fees are retained by the Putnam subsidiary as compensation for the costs of services provided by Putnam to shareholders and for commissions advanced by Putnam at the point of sale (and recovered through fees received over time) to firms that distribute shares of the Putnam Funds. These distribution plans, and payments made by the Putnam Funds thereunder, are subject to annual renewal by the trustees of the Putnam Funds and to termination by vote of the shareholders of the Putnam Funds or by vote of a majority of the Putnam Funds' trustees who are not affiliated with Putnam. Failure of the Trustees to approve continuation of the Rule 12b-1 plans for Class B (deferred sales charge) shares would have a material adverse effect on Putnam. CONSULTING Through Mercer Consulting Group, Inc., subsidiaries and affiliates of the Company, separately and in collaboration, provide consulting services to a predominantly corporate clientele from locations around the world, primarily in the areas of human resources and employee benefit programs, including retirement, health care and compensation; and general management consulting, which comprises strategy, operations and marketing. The Company also provides economic consulting and analysis. William M. Mercer Companies, Inc. ("William M. Mercer") provides professional advice and services to corporate, government and institutional clients from offices in approximately 27 countries and territories, primarily in North and South America, Western Europe, East Asia, Australia and New Zealand. Consultants help organizations S-29 design, implement, administer and communicate retirement, compensation and other human resource programs, and provide other types of actuarial advice. In addition, William M. Mercer advises the management of health care providers on various business issues, including operational reengineering, improving clinical effectiveness and establishing strategic partnerships. Through its investment consultants, William M. Mercer assists trustees of pension funds and others in the selection of investment managers and investment strategies. Mercer provides advice and assistance on issues of business strategy, primarily to large corporations in North America, Europe and Asia. Consultants help senior executives more fully understand the behavior of their customers, optimize the economics of their business, and structure their organizations, processes and systems to achieve their strategic goals. In addition, under the Lippincott & Margulies name, Mercer provides consulting services relating to brand and corporate identity and image. National Economic Research Associates, Inc. ("NERA"), a firm of consulting economists, provides advice to law firms, corporations, trade associations and governmental agencies, from offices in the United States, England and Spain. NERA provides research and analysis of economic and financial issues arising in litigation, regulation, public policy and management. The major component of Mercer's revenue is fees paid by clients for advice. In addition, commission revenue is received from insurance companies for the placement of individual and group insurance contracts, primarily life, health and accident coverages. Also, in the 401(k) record keeping business, 12(b)(1) fees are received from mutual funds for which record keeping services are provided. Revenue in the consulting business is affected by changes in clients' industries, including government regulation, as well as new products and services, the stage of the economic cycle and broad trends in the management of large organizations. REGULATION The activities of the Company are subject to licensing requirements and extensive regulation under the laws of the United States and its various states, territories and possessions, as well as laws of other countries in which the Company's subsidiaries operate. These laws and regulations are primarily intended to benefit clients. The Company's three business segments depend on the validity of, and continued good standing under, the licenses and approvals pursuant to which they operate, as well as compliance with pertinent regulations. The Company therefore devotes significant effort toward maintaining its licenses and to ensuring compliance with a diverse and complex regulatory structure. In all jurisdictions the applicable laws and regulations are subject to amendment or interpretation by regulatory authorities. Generally, such authorities are vested with relatively broad discretion to grant, renew and revoke licenses and approvals, and to implement regulations. Licenses may be denied or revoked for various reasons, including the violation of such regulations, conviction of crimes and the like. Possible sanctions which may be imposed include the suspension of individual employees, limitations on engaging in a particular business for specified periods of time, revocation of licenses, censures and fines. In some instances, the Company follows practices based on its interpretations, or those generally followed by the industry, of laws or regulations, which may prove to be different from those of regulatory authorities. Accordingly, the possibility exists that the Company may be precluded or temporarily suspended from carrying on some or all of its activities or otherwise fined or penalized in a given jurisdiction. No assurances can be given that the Company's insurance, investment management or consulting activities can continue to be conducted in any given jurisdiction as in the past. INSURANCE SERVICES While the laws and regulations vary among jurisdictions, every state of the United States and most foreign jurisdictions require an insurance broker or agent (and in some cases a reinsurance broker or intermediary) or S-30 insurance consultant, managing general agent or third party administrator to have an individual and/or company license from a governmental agency or self-regulatory organization. In addition, certain of the Company's insurance activities are governed by the rules of the Lloyd's insurance market in London and self-regulatory organizations in other jurisdictions. A few jurisdictions issue licenses only to individual residents or locally-owned business entities. In some of these jurisdictions, if the Company has no licensed subsidiary, the Company may maintain arrangements with residents or business entities licensed to act in such jurisdiction. Also, in some jurisdictions, various insurance related taxes may also be due either by clients directly or from the broker. In the latter case, the broker customarily looks to the client for payment. INVESTMENT MANAGEMENT Putnam's securities investment management activities are subject to regulation in the United States by the Securities and Exchange Commission, and other federal, state and self regulatory authorities, as well as in certain other countries in which it does business. Putnam's officers, directors and employees may from time to time own securities which are also held by the Putnam Funds or institutional accounts. Putnam's internal policies with respect to individual investments require prior clearance and reporting of transactions and restrict certain transactions so as to reduce the possibility of conflicts of interests. To the extent that existing or future regulations affecting the sale of Putnam Fund shares or other investment products or their investment strategies cause or contribute to reduced sales of Putnam Fund shares or investment products or impair the investment performance of the Putnam Funds or such other investment products, Putnam's aggregate assets under management and its revenues might be adversely affected. Changes in regulations affecting the free movement of international currencies might also adversely affect Putnam. CONSULTING No licensing or other regulatory requirements material in the aggregate to the consulting activities of the Company's subsidiaries apply to that activity in general; however, the subject matter of certain consulting services may result in regulation. For example, employee benefit plans are subject to various governmental regulations, and services related to investment matters or the placing of individual and group insurance contracts subject the Company's subsidiaries to insurance or investment and securities regulations and licensing in various jurisdictions. COMPETITIVE CONDITIONS Principal methods of competition in insurance services and consulting include the quality and types of services and products that a broker or consultant provides its clients and their cost. Putnam competes with other providers of investment products and services primarily on the basis of the range of investment products offered, the investment performance of such products, as well as the manner in which such products are distributed, and the scope and quality of the shareholder and other services provided. Sales of Putnam Fund shares are also influenced by general securities market conditions, government regulations, global economic conditions and advertising and sales promotional efforts. All these businesses also encounter strong competition from both public corporations and private firms in attracting and retaining qualified employees. INSURANCE SERVICES The insurance and reinsurance broking services business of the Company is believed to be among the largest of its type in the world. The Company encounters strong competition in the insurance services business from other insurance brokerage firms which also operate on a nationwide or worldwide basis, from a large number of regional and local firms in the United States and in other countries, from insurance and reinsurance companies that market and service their S-31 insurance products without the assistance of brokers or agents and from other financial services businesses, including commercial and investment banks that provide risk-related services and products. Certain insureds and groups of insureds have established programs of self insurance, as a supplement or alternative to third-party insurance, thereby reducing in some cases the need for insurance placement services. There are also many other providers of insurance program management services, including many insurance companies, and many other organizations seeking to structure and manage investments in the insurance industry. INVESTMENT MANAGEMENT Putnam is one of the largest investment management firms in the United States. The investment management business is highly competitive. In addition to competition from firms already in the investment management business, including commercial banks, stock brokerage and investment banking firms, and insurance companies, there is competition from other firms offering financial services and other investment alternatives. Many securities dealers, whose large retail distribution systems play an important role in the sale of shares in the Putnam Funds, also sponsor competing proprietary mutual funds. To the extent that such securities dealers value the ability to offer customers a broad selection of investment alternatives, they will continue to sell independent funds, notwithstanding the availability of proprietary products. However, to the extent that these firms limit or restrict the sale of Putnam Fund shares through their brokerage systems in favor of their proprietary mutual funds, assets under management might decline and Putnam's revenues might be adversely affected. In addition, a number of mutual fund sponsors presently market their funds to the general public without sales charges. Certain firms also offer passively managed funds such as index funds to the general public. CONSULTING Mercer, one of the largest global consulting firms, is a leader in many of its businesses. William M. Mercer is the world's largest human resources consulting organization. Mercer Management Consulting is a leader in strategy consulting. NERA is a leading firm of consulting economists. William M. Mercer, Mercer Management Consulting and NERA compete with other privately held and publicly held worldwide and national consulting companies, as well as regional and local firms. Competitors include independent consulting firms as well as consulting organizations affiliated with accounting firms, information systems providers, investment management organizations and other financial services firms, some of which emphasize administrative or consulting services related to other services, including the management of 401(k) plan funds, the design of information and other technology systems, and administrative functions outsourced by corporations. S-32 SELLING STOCKHOLDERS Selling Stockholders, consisting of 85 Former J&H Stockholders and Retirees, are offering hereby 3,087,134 shares of Common Stock in the aggregate, which constituted approximately 3.9% of the issued and outstanding Common Stock on March 31, 1997. On such date such Selling Stockholders beneficially owned approximately 6,958,000 shares of Common Stock in the aggregate, which constituted approximately 8.7% of the issued and outstanding Common Stock on such date. The number of shares of Common Stock beneficially owned and offered hereby by each Selling Stockholder constituted less than 0.5% of the issued and outstanding Common Stock on March 31, 1997. The Selling Stockholders include David A. Olsen, Richard A. Nielsen and Norman Barham, who are expected to join the Board of Directors of the Company, and who are offering hereby 109,975, 100,614 and 66,109 shares of Common Stock, respectively, which constitute all of the Common Stock beneficially owned and eligible for sale by each of them on the date hereof. See "Selling Stockholders" in the accompanying Prospectus. Prior to the Closing of the Transaction, each of the Former J&H Stockholders was a director or managing principal, as well as an employee, of J&H. S-33 UNDERWRITING Under the terms and subject to the conditions in an Underwriting Agreement dated the date of this Prospectus Supplement, (the "Underwriting Agreement"), the Underwriters named below, for whom J.P. Morgan Securities Inc. and Morgan Stanley & Co. Incorporated are acting as Lead Managers, have severally agreed to purchase and the Selling Stockholders have severally agreed to sell to them, the respective number of shares of Common Stock set forth opposite their names below.
---------------- NUMBER OF SHARES ---------------- UNDERWRITERS J.P. Morgan Securities Inc................................................ Morgan Stanley & Co. Incorporated......................................... Donaldson, Lufkin & Jenrette Securities Corporation....................... Merrill Lynch, Pierce, Fenner & Smith Incorporated........................ PaineWebber Incorporated.................................................. Smith Barney Inc.......................................................... ---------------- Total ---------------- ----------------
The Underwriting Agreement provides that the obligations of the several Underwriters to purchase shares of Common Stock are subject to the approval of certain legal matters by counsel and certain other conditions. Under the terms and conditions of the Underwriting Agreement, the Underwriters are obligated to take and pay for all such shares of Common Stock, if any are taken. The Underwriters propose initially to offer such shares of Common Stock directly to the public at the public offering price set forth on the cover page of this Prospectus Supplement and to certain dealers at such price less a concession of $ per share. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share to certain other dealers. After the shares of Common Stock are released for sale to the public, the offering price and such concessions may be changed. The Company has agreed not to offer, sell, contract to sell or grant any option to purchase or otherwise dispose of any Common Stock, or any securities convertible into or exercisable or exchangeable for Common Stock, or file any registration statement under the Securities Act with respect to the Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock for a period of 90 days after the date of this Prospectus Supplement without the prior written consent of J.P. Morgan Securities Inc., except in connection with acquisitions, employee benefit plans and stock options and certain other limited exceptions. The Selling Stockholders have agreed not to offer, sell, contract to sell or otherwise dispose of any Common Stock, or any securities convertible into, or exercisable or exchangeable for, Common Stock or enter into any hedging or other transaction that involves a short sale of such securities or that involves the purchase of any option or other agreement that is likely to result in the other party to such transaction engaging in such short sales or transactions having a similar effect for a period of 90 days after the date of this Prospectus Supplement without the prior written consent of J.P. Morgan Securities Inc. The Company and the Selling Stockholders have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act. In connection with the Offering, the Underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the Common Stock. Specifically, the Underwriters may over-allot in connection with the Offering, creating a syndicate short position. In addition, the Underwriters may bid for, and purchase, shares of Common Stock in the open market to cover syndicate short positions or to stabilize the price of the Common Stock. Finally, the underwriting syndicate may reclaim selling concessions allowed for distributing the Common Stock in the Offering if the syndicate repurchases previously distributed Common Stock in syndicate covering transactions, in stabilization transactions or otherwise. Any of these activities may stabilize or maintain the S-34 market price of the Common Stock above independent Market levels. The Underwriters are not required to engage in these activities, and may end any of these activities at any time. Certain of the Underwriters have provided from time to time, and are expected to provide in the future, investment banking and other financial services to the Company and certain of their affiliates have engaged and may in the future engage in commercial transactions in the ordinary course of business with the Company. LEGAL MATTERS Certain legal matters will be passed upon for the Company by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York. Certain legal matters will be passed upon for the Underwriters by Davis Polk & Wardwell, New York, New York. Certain legal matters will be passed upon for the Selling Stockholders by Sullivan & Cromwell, New York, New York. S-35 PROSPECTUS SUBJECT TO COMPLETION, DATED APRIL 25, 1997 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. MARSH & MCLENNAN COMPANIES, INC. 3,438,360 SHARES OF COMMON STOCK This Prospectus relates to the offering from time to time of up to 3,438,360 shares of Common Stock, par value $1.00 per share (the "Common Stock"), of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), by certain stockholders of the Company (the "Selling Stockholders"). The Common Stock offered hereby was issued as partial consideration to the Selling Stockholders in connection with the Company's business combination with Johnson & Higgins, a New Jersey corporation. See "Selling Stockholders." The Company will not receive any proceeds from the sale of the Common Stock offered hereby. The Selling Stockholders directly, or through agents, dealers or underwriters designated from time to time, may sell the Common Stock offered hereby from time to time on terms to be determined at the time of sale. To the extent required, the number of shares of Common Stock to be sold, purchase price, public offering price, the names of the Selling Stockholders, the names of any such agent, dealer or underwriter, and any applicable commission or discount with respect to a particular offering will be set forth in an accompanying Prospectus Supplement. The aggregate proceeds to the Selling Stockholders from the sale of the Common Stock offered hereby will be the purchase price thereof less the aggregate agents' commissions and underwriters' discounts, if any, and other expenses of distribution not borne by the Company. The Company has agreed to pay certain expenses of the offering contemplated hereby. See "Plan of Distribution." The Selling Stockholders and any dealers, agents or underwriters that participate with any Selling Stockholder in the distribution of Common Stock may be deemed to be "underwriters" within the meaning of the Securities Act of 1933, as amended (the "Securities Act"), and any commission received by them and any profit from the resale of Common Stock purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. See "Plan of Distribution" for a description of information regarding indemnification arrangements. The Common Stock is listed on the New York Stock Exchange (the "NYSE"), the Chicago Stock Exchange, the Pacific Stock Exchange and the London Stock Exchange under the trading symbol "MMC." ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. April , 1997 2 NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, ANY ACCOMPANYING PROSPECTUS SUPPLEMENT OR THE DOCUMENTS INCORPORATED OR DEEMED INCORPORATED BY REFERENCE HEREIN, AND ANY INFORMATION OR REPRESENTATIONS NOT CONTAINED HEREIN OR THEREIN MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY AGENT, DEALER OR UNDERWRITER. THIS PROSPECTUS AND ANY ACCOMPANYING PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE COMMON STOCK IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION. No action has been or will be taken in any jurisdiction by the Company or any Selling Stockholder that would permit a public offering of the Common Stock or possession or distribution of this Prospectus or any accompanying Prospectus Supplement in any jurisdiction where action for that purpose is required, other than in the United States. Persons into whose possession this Prospectus or any accompanying Prospectus Supplement comes are required by the Company and the Selling Stockholders to inform themselves about and to observe any restrictions as to the offering of the Common Stock and the distribution of this Prospectus and any accompanying Prospectus Supplement. TABLE OF CONTENTS
PAGE Available Information.......................... 3 Incorporation of Certain Documents by Reference.................................... 3 The Company.................................... 4 Use of Proceeds................................ 4 PAGE Selling Stockholders........................... 4 Plan of Distribution........................... 5 Legal Matters.................................. 6 Experts........................................ 7
3 AVAILABLE INFORMATION This Prospectus constitutes part of a Registration Statement on Form S-3 (together with all amendments and exhibits thereto, the "Registration Statement") filed by the Company with the Securities and Exchange Commission (the "Commission") under the Securities Act with respect to the Common Stock offered hereby. This Prospectus does not contain all information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. Reference is made to the Registration Statement and to the exhibits thereto for further information with respect to the Company and the Common Stock offered hereby. The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith, files reports, proxy statements and other information with the Commission. Such reports, proxy statements and other information can be inspected and copied at the public reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the Commission located at 7 World Trade Center, 13th Floor, Suite 1300, New York, New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500 West Madison Street, Chicago, Illinois 60661. Copies of such material can also be obtained at prescribed rates by writing to the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such information may also be accessed electronically by means of the Commission's home page on the Internet (http://www.sec.gov.). In addition, such reports, proxy statements and other information concerning the Company can be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005, the Chicago Stock Exchange, 440 South LaSalle Street, Chicago, Illinois 60605, and the Pacific Stock Exchange, 301 Pine Street, San Francisco, California 94104. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission are incorporated into this Prospectus by reference: (1) The Company's Annual Report on Form 10-K for the year ended December 31, 1996 (including pages 23 through 49 of the Company's 1996 Annual Report to Stockholders); (2) The Company's Current Reports on Form 8-K, filed with the Commission on March 14, 1997 and April 7, 1997, relating to the business combination with Johnson & Higgins; (3) The Company's Registration Statement on Form 8-B, dated May 22, 1969, describing the Common Stock, including any amendment or reports filed for the purpose of updating such description; and (4) The Company's Registration Statement on Form 8-A, dated September 21, 1987, as amended by Amendments on Form 8, dated September 18, 1990 and February 19, 1991, describing the Preferred Stock Purchase Rights attached to the Common Stock, including any further amendment or reports filed for the purpose of updating such description. All documents subsequently filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the termination of the offering of the Common Stock offered hereby shall be deemed to be incorporated by reference into this Prospectus and to be a part of this Prospectus from the date of filing of such document. Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. As used herein, the terms "Prospectus" and "herein" mean this Prospectus including the documents incorporated or deemed to be incorporated herein by reference, as the same may be amended, supplemented or otherwise modified from time to time. Statements contained in this Prospectus as to the contents of any contract or other 3 document referred to herein do not purport to be complete, and where reference is made to the particular provisions of such contract or other document, such provisions are qualified in all respects by reference to all of the provisions of such contract or other document. The Company will provide without charge to any person to whom this Prospectus is delivered, on the written or oral request of such person, a copy of any or all of the foregoing documents incorporated by reference herein (other than exhibits not specifically incorporated by reference into the texts of such documents). Requests for such documents should be directed to: Corporate Development, Marsh & McLennan Companies, Inc., 1166 Avenue of the Americas, New York, New York 10036. Telephone requests may be directed to Corporate Development at (212) 345-5475. THE COMPANY Marsh & McLennan Companies, Inc., a professional services organization with origins dating from 1871 in the United States, is a holding company which, through its subsidiaries and affiliates, provides clients with analysis, advice and transactional capabilities in the fields of insurance and reinsurance broking, investment management and consulting. USE OF PROCEEDS The Company will not receive any proceeds from the sale of the Common Stock offered hereby, all of the net proceeds of which will be received by the Selling Stockholders. SELLING STOCKHOLDERS GENERAL On March 27, 1997, the Company consummated a business combination (the "Transaction") with Johnson & Higgins ("J&H"). In connection with the Transaction, the Company issued and delivered approximately 5.47 million shares of Common Stock to the Sellers (as defined below) as payment in part for the sale by the Sellers of their shares of common stock of J&H to the Company, in each case upon the terms set forth in the Stock Purchase Agreement, dated as of March 12, 1997 and amended as of March 27, 1997, among J&H, the stockholders of J&H listed on Annex A thereto (the "Sellers") and the Company. The Company also issued and delivered approximately 1.61 million shares of its Common Stock to certain living, former directors, and the estates of certain deceased, former directors, of J&H (the "Retirees") with whom it entered into certain Retiree Agreements. The Company entered into a Registration Rights Agreement, dated as of March 12, 1997 and amended as of March 27, 1997, with the Sellers (the "Registration Rights Agreement"), for their own benefit and the benefit of holders from time to time of the Common Stock originally issued to the Sellers and Retirees in connection with the Transaction (the "RRA Common Stock"). The Selling Stockholders consist of Sellers and Retirees who are entitled, pursuant to the Registration Rights Agreement, to offer under this Prospectus RRA Common Stock that is not subject to the contractual transfer restrictions described below ("Freely Registrable RRA Common Stock"). IDENTITY OF SELLING STOCKHOLDERS AND THEIR BENEFICIAL OWNERSHIP OF COMMON STOCK There are 94 Selling Stockholders who, in the aggregate, beneficially owned approximately 7,088,000 shares of Common Stock on March 31, 1997 (which constituted approximately 8.8% of the issued and outstanding Common Stock on such date) and are offering hereby up to 3,438,360 such shares. Each Selling Stockholder is a Seller or a Retiree and the number of shares of Common Stock beneficially owned and offered hereby by each Selling Stockholder constituted less than 0.5% of the issued and outstanding Common Stock on March 31, 1997. Additional information about the Selling Stockholders participating in a particular offering may be set forth in a Prospectus Supplement. 4 THE REGISTRATION RIGHTS AGREEMENT SHELF REGISTRATION. The Company has agreed in the Registration Rights Agreement to file the registration statement of which this Prospectus forms a part, to use its best efforts to cause such registration statement to be declared effective under the Securities Act as soon as possible after its initial filing date and to keep it continuously effective in order to permit this Prospectus to be usable at all times during the period ending on the second anniversary of the date on which such registration statement becomes effective or such shorter period that will terminate when the RRA Common Stock is publicly sold (the "Effectiveness Period"). UNDERWRITTEN OFFERING. The holders of 33% or more of the Freely Registrable RRA Common Stock also have the right, subject to certain conditions, to cause the Company to cooperate with up to two underwritten offerings for which it receives requests during the Effectiveness Period. TRANSFER RESTRICTIONS. Each Seller who is bound by the Registration Rights Agreement has agreed with the Company not to sell or otherwise transfer (a) during the period from the date of the closing of the Transaction to the first anniversary thereof, more than one-third of the number of shares of common stock he or she received as a Seller under the Stock Purchase Agreement at such closing; and (b) during the period from the date of such closing to the second anniversary thereof, more than two-thirds of the number of shares of common stock he or she received as a Seller under the Stock Purchase Agreement at such closing. In addition, each Seller and Retiree who is bound by the Registration Rights Agreement and does not participate in an underwritten offering pursuant thereto has agreed with the Company to execute and deliver such reasonable and customary lock-up agreements that the managing underwriters for such offering may advise are necessary to facilitate it and that do not restrict dispositions of such Seller's or Retiree's Common Stock for longer than 90 days. The Retirees received RRA Common Stock that is not subject to contractual transfer restrictions against resale other than the lock-up restriction described above. PLAN OF DISTRIBUTION The Selling Stockholders may sell the Common Stock being offered hereby directly to other purchasers, or to or through underwriters, dealers or agents. To the extent required, a Prospectus Supplement with respect to the Common Stock will set forth the terms of the offering of the Common Stock, including the name(s) of any underwriters, dealers or agents, the name(s) of the Selling Stockholders, the number of shares of Common Stock to be sold, the price of the offered Common Stock, any underwriting discounts or other items constituting underwriters' compensation and any discounts or concessions allowed or reallowed or paid to dealers. The Common Stock offered hereby may be sold from time to time directly by the Selling Stockholders or, alternatively, through underwriters, broker-dealers or agents. Such Common Stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale or at negotiated prices. Such sales may be effected in transactions (which may involve crosses or block transactions) (i) on any national securities exchange or quotation service on which the Common Stock may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or services or in the over-the-counter market or (iv) through the writing of options. In connection with sales of the Common Stock offered hereby or otherwise, the Selling Stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of such Common Stock in the course of hedging the positions they assume. The Selling Stockholders may also sell the Common Stock offered hereby short and deliver such Common Stock to close out such short positions, or loan or pledge such Common Stock to broker-dealers that in turn may sell such securities. The Common Stock offered hereby also may be sold pursuant to Rule 144 under the Securities Act. Any Selling Stockholder and any such underwriters, brokers, dealers or agents, upon effecting the sale of the Common Stock, may be deemed "underwriters" as that term is defined by the Securities Act. 5 The underwriter or underwriters with respect to a particular underwritten offering of Common Stock will be named in the Prospectus Supplement relating to such offering, and if an underwriting syndicate is used, the managing underwriter or underwriters will be set forth on the cover of such Prospectus Supplement. Unless otherwise set forth in the Prospectus Supplement, the obligations of the underwriters to purchase the Common Stock will be subject to certain conditions precedent and the underwriters will be obligated to purchase all the Common Stock if any is purchased. Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. If a dealer is utilized in the sale of any Common Stock in respect of which this Prospectus is delivered, the Selling Stockholders may sell such Common Stock to the dealer, as principal. The dealer may then resell such Common Stock to the public at varying prices to be determined by such dealer at the time of resale. To the extent required, the name of the dealer and the terms of the transaction will be set forth in the Prospectus Supplement relating thereto. In connection with the sale of the Common Stock offered hereby, underwriters or agents may receive compensation from the Company, the Selling Stockholders or from purchasers of such Common Stock for whom they may act as agents in the form of discounts, concessions, or commissions. Underwriters, agents, and dealers participating in the distribution of the Common Stock may be deemed to be underwriters, and any such compensation received by them and any profit on the resale of Common Stock by them may be deemed to be underwriting discounts or commissions under the Securities Act. The Common Stock is listed on the NYSE, the Pacific Stock Exchange, the Chicago Stock Exchange and the London Stock Exchange. Any underwriters to whom Common Stock is sold by the Selling Stockholders for public offering and sale may make a market in such Common Stock, but such underwriters will not be obligated to do so and may discontinue any market making at any time without notice. No assurance can be given as to the liquidity of the trading market for any Common Stock. The Selling Stockholders, agents, dealers, and underwriters may be entitled under the Registration Rights Agreement or other agreements entered into with the Company to indemnification by the Company against certain civil liabilities, including liabilities under the Securities Act, or to contribution with respect to payments that the Selling Stockholders, agents, dealers, or underwriters may be required to make with respect thereto. Underwriters, dealers, or agents and their associates may be customers of, engage in transactions with and perform services for, the Company in the ordinary course of business. The Company has agreed to pay certain expenses in connection with the offering contemplated hereby, including (i) registration and filing fees, (ii) fees and expenses of providing certain information to the Sellers, (iii) fees and expenses of compliance with securities or blue sky laws and (iv) fees and expenses of preparing and delivering certificates representing the Common Stock. In addition to such expenses, the Company has agreed to pay certain other expenses customarily borne by issuers in the event of an underwritten offering of Common Stock conducted pursuant to the Registration Rights Agreement, including: (i) printing expenses, (ii) fees and disbursements of counsel for the Company and its independent public accountants, and (iii) reasonable fees and expenses of one counsel for the Selling Stockholders. The Selling Stockholders participating in any underwritten offering shall be responsible for any underwriting discounts and commissions and fees and, subject to clause (iii) immediately above, expenses of their own counsel. Any Selling Stockholder may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the Common Stock against certain liabilities, including liabilities arising under the Securities Act. The Company and the Selling Stockholders have agreed to indemnify each other and certain other persons against certain liabilities in connection with the offering of the Common Stock including liabilities arising under the Securities Act. LEGAL MATTERS Certain legal matters will be passed upon for the Company by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York. 6 EXPERTS The consolidated financial statements and supplemental notes of the Company and its subsidiaries as of December 31, 1996 and 1995 and for each of the years in the three year period ended December 31, 1996, included and incorporated by reference in the Company's Annual Report on Form 10-K for the year ended December 31, 1996 and incorporated by reference into this Prospectus, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports, which are incorporated herein by reference, and have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. The consolidated financial statements of J&H and its subsidiaries as of and for the year ended December 31, 1996, included in the Company's Current Report on Form 8-K filed with the Commission on April 7, 1997, and incorporated by reference into this Prospectus, have been incorporated herein in reliance upon the report of Arthur Andersen LLP, independent public accountants, included in such Form 8-K and incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. 7 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the expenses to be borne by the Company in connection with the offering described in this Registration Statement, as amended hereby. All such expenses other than the Securities and Exchange Commission registration fee are estimates.
---------- Securities and Exchange Commission Registration Fee $122,817 Transfer Agents Fees and Expenses 10,000 Printing Fees and Expenses 55,000 Accounting Fees and Expenses 40,000 Legal Fees and Expenses 100,000 Miscellaneous 20,183 ---------- Total $348,000 ---------- ----------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS As authorized by Section 145 of the General Corporation Law of the State of Delaware, each director and officer of the Company may be indemnified by the Company against expenses (including attorney's fees, judgments, fines and amounts paid in settlement) actually and reasonably incurred in connection with the defense or settlement of any threatened, pending or completed legal proceedings in which he is involved by reason of the fact that he is or was a director or officer of the Company if he acted in good faith and in a manner that he reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, if he had no reasonable cause to believe that his conduct was unlawful. If the legal proceeding, however, is by or in the right of the Company, the director or officer may not be indemnified in respect of any claim, issue or matter as to which he shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Company unless a court determines otherwise. In addition, the Company maintains directors' and officers' liability insurance policies. Article Sixth of the Restated Certificate of Incorporation of the Company and Article VI of the Restated By-laws of the Company provide that, to the fullest extent permitted by law, directors of the Company will not be liable for monetary damages to the Company or its stockholders for breaches of their fiduciary duties. II-1 ITEM 16. EXHIBITS The following is a list of all exhibits filed as a part of this Registration Statement on Form S-3, as amended hereby, including those incorporated herein by reference.
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS - ------------- -------------------------------------------------------------------------------------------------------- 1 Form of Underwriting Agreement. 2(a) Stock Purchase Agreement, dated as of March 12, 1997 (the "Stock Purchase Agreement"), by and among the Company, J&H and the stockholders of J&H listed on Annex A thereto (incorporated by reference to the Company's Current Report on Form 8-K, filed with the Commission on March 14, 1997, relating to the business combination with J&H). 2(b) First Amendment, dated as of March 27, 1997, to the Stock Purchase Agreement (incorporated by reference to the Company's Current Report on Form 8-K, filed with the Commission on April 7, 1997, relating to the business combination with J&H). 4(a) Specimen Certificate Evidencing the Common Stock (incorporated by reference to the Company's Registration Statement on Form 8-B, dated May 22, 1969). 4(b) Rights Agreement, dated as of September 17, 1987, as amended (incorporated by reference to the Company's Registration Statement on Form 8-A, dated September 21, 1987, as amended by Amendments on Form 8, dated September 18, 1990 and February 19, 1991). 5 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.* 23(a) Consent of Deloitte & Touche LLP, Independent Accountants. 23(b) Consent of Arthur Andersen LLP, Independent Accountants. 23(c) Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5).* 23(d) Consent of Norman Barham to be named as a director.* 23(e) Consent of Richard A. Nielsen to be named as a director.* 23(f) Consent of David A. Olsen to be named as a director.* 24 Powers of Attorney of certain directors of the Company (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1996).
- ------------------------ * Previously filed. ITEM 17. UNDERTAKINGS The undersigned registrant (the "Registrant") hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; PROVIDED, HOWEVER, that, since this registration statement is on Form S-3, paragraphs (1)(i) and 1(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission II-2 by the Registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof; (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions set forth in Item 15, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement or amendment thereto to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, in the State of New York, on April 25, 1997. MARSH & MCLENNAN COMPANIES, INC. By /s/ A.J.C. SMITH ----------------------------------------- Name: A.J.C. Smith Title: Chairman & Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement, as amended hereby, has been signed by the following persons in the capacities and on the dates indicated. SIGNATURE TITLE DATE - ------------------------------ --------------------------- ------------------- /s/ A.J.C. SMITH Chairman & Chief Executive - ------------------------------ Officer (Principal April 25, 1997 A.J.C. Smith Executive Officer) Senior Vice President & /s/ FRANK J. BORELLI Chief Financial Officer - ------------------------------ (Principal Financial April 25, 1997 Frank J. Borelli Officer) /s/ DOUGLAS C. DAVIS Vice President and - ------------------------------ Controller (Principal April 25, 1997 Douglas C. Davis Accounting Officer) * Director - ------------------------------ April 25, 1997 Lewis W. Bernard * Director - ------------------------------ April 25, 1997 Richard H. Blum * Director - ------------------------------ April 25, 1997 Robert Clements * Director - ------------------------------ April 25, 1997 Peter Coster * Director - ------------------------------ April 25, 1997 Robert F. Erburu * Director - ------------------------------ April 25, 1997 Jeffrey W. Greenberg * Director - ------------------------------ April 25, 1997 Ray J. Groves * Director - ------------------------------ April 25, 1997 Richard S. Hickok * Director - ------------------------------ April 25, 1997 David D. Holbrook * Director - ------------------------------ April 25, 1997 Lawrence J. Lasser II-4 SIGNATURE TITLE DATE - ------------------------------ --------------------------- ------------------- * Director - ------------------------------ April 25, 1997 Richard M. Morrow * Director - ------------------------------ April 25, 1997 George Putnam * Director - ------------------------------ April 25, 1997 Adele Smith Simmons * Director - ------------------------------ April 25, 1997 John T. Sinnott * Director - ------------------------------ April 25, 1997 Frank J. Tasco * Director - ------------------------------ April 25, 1997 R.J. Ventres *By: /s/ GREGORY F. VAN GUNDY ----------------------------------------- Gregory F. Van Gundy Attorney-in-fact
II-5 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS PAGE - ------------- ------------------------------------------------------------------------------------------------ --------- 1 Form of Underwriting Agreement. 2(a) Stock Purchase Agreement, dated as of March 12, 1997 (the "Stock Purchase Agreement"), by and among the Company, J&H and the stockholders of J&H listed on Annex A thereto (incorporated by reference to the Company's Current Report on Form 8-K, filed with the Commission on March 14, 1997, relating to the business combination with J&H). 2(b) First Amendment, dated as of March 27, 1997, to the Stock Purchase Agreement (incorporated by reference to the Company's Current Report on Form 8-K, filed with the Commission on April 7, 1997, relating to the business combination with J&H). 4(a) Specimen Certificate Evidencing the Common Stock (incorporated by reference to the Company's Registration Statement on Form 8-B, dated May 22, 1969). 4(b) Rights Agreement, dated as of September 17, 1987, as amended (incorporated by reference to the Company's Registration Statement on Form 8-A, dated September 21, 1987, as amended by Amendments on Form 8, dated September 18, 1990 and February 19, 1991). 5 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.* 23(a) Consent of Deloitte & Touche LLP, Independent Accountants. 23(b) Consent of Arthur Andersen LLP, Independent Accountants. 23(c) Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5).* 23(d) Consent of Norman Barham to be named as a director.* 23(e) Consent of Richard A. Nielsen to be named as a director.* 23(f) Consent of David A. Olsen to be named as a director.* 24 Powers of Attorney of certain directors of the Company (incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1996).
- ------------------------ * Previously filed. EX-1 2 EX 1- UNDERWRITING AGREEMENT Exhibit 1 Marsh & McLennan Companies, Inc. _____________ Shares Common Stock Underwriting Agreement , 1997 J.P. Morgan Securities Inc. Morgan Stanley & Co. Incorporated As joint lead managers of the several underwriters acting as managers listed in Schedule I hereto c/o J.P. Morgan Securities Inc. 60 Wall Street New York, New York 10260 Dear Ladies and Gentlemen: The persons named in Schedule II hereto (the "Selling Shareholders") propose to sell to the several Underwriters listed in Schedule I hereto (the "Underwriters"), all of whom are acting as Managers, and for whom you are acting as joint lead managers (the "Lead Managers"), and the Underwriters propose to purchase from such Selling Shareholders, an aggregate of shares of Common Stock, par value $1.00 per share (the "Common Stock"), of Marsh & McLennan Companies, Inc., a Delaware corporation (the "Company"), which Common Stock is referred to herein as the "Shares". The Company has prepared and filed with the Securities and Exchange Commission (the "Commission") in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the "Securities Act"), a registration statement, including a prospectus, relating to the Shares. The registration statement as amended at the time when it shall become effective, or, if a post-effective amendment is filed with respect thereto, as amended by such post-effective amendment at the time of its effectiveness, including in each case information (if any) deemed to be part of the registration statement at the time of effectiveness pursuant to Rule 430A under the Securities Act, is referred to in this Agreement as the "Registration Statement", and the prospectus as supplemented by the prospectus supplement relating to the sale of the Shares by the Underwriters in the form first used to confirm sales of Shares is referred to in this Agreement as the "Prospectus". Any reference in this Agreement to the Registration Statement, any preliminary prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Securities Act, as of the effective date of the Registration Statement or the date of such preliminary prospectus or the Prospectus, as the case may be, and any reference to "amend", "amendment" or "supplement" with respect to the Registration Statement, any preliminary prospectus or the Prospectus shall be deemed to refer to and include any documents filed after such date under the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder (collectively, the "Exchange Act") that are deemed to be incorporated by reference therein. References herein to any preliminary prospectus shall be deemed to refer to any preliminary prospectus relating to the sale of the Shares by the Underwriters. The Company and the Selling Shareholders wish to confirm as follows their respective agreements with you and the other several Underwriters on whose behalf you are acting, in connection with the several purchases of the Shares by the Underwriters: 1. Each Selling Shareholder hereby agrees to sell to each Underwriter as hereinafter provided, and each Underwriter, upon the basis of the representations and warranties herein contained, but subject to the conditions hereinafter stated, agrees, severally and not jointly, to purchase at a price of $___ per Share (the "Purchase Price") from such Selling Shareholder the respective number of Shares (subject to such adjustments to eliminate any fractional shares as the Lead Managers in their sole discretion may make) that bears the same proportion to the number of Shares to be sold by such Selling Shareholder to the Underwriters as set forth on Schedule II hereto as the number of Shares set forth opposite the name of such Underwriter on Schedule I hereto (or such number of Shares increased as set forth in Section 11 hereof), bears to the total number of Shares. Certificates in transferable form for the Shares which each of the Selling Shareholders agrees to sell pursuant to this Agreement have been placed in custody with Harris Trust and Savings Bank, as custodian (the "Custodian"), for delivery under this Agreement pursuant to a Custody Agreement executed by each Selling Shareholder (individually, a "Custody Agreement"). 2 Each Selling Shareholder agrees that (i) the Shares of such Selling Shareholder represented by the certificates held in custody pursuant to such Selling Shareholder's Custody Agreement are subject to the interests of the Underwriters, (ii) the arrangements made by such Selling Shareholder for such custody are, except as specifically provided in such Selling Shareholder's Custody Agreement, irrevocable, and (iii) the obligations of such Selling Shareholder hereunder and under such Selling Shareholder's Power (as defined below) and Custody Agreement shall not be terminated by any act of such Selling Shareholder or by operation of law, whether by the death or incapacity of such Selling Shareholder or by the occurrence of any other event or events including, without limitation, the termination of any trust or estate if such Selling Shareholder is a trust or estate, the death or incapacity of one or more trustees, guardians, executors or administrators for such Selling Shareholder or the dissolution or liquidation of such Selling Shareholder if such Selling Shareholder is a corporation or partnership. If any Selling Shareholder shall dissolve or liquidate or if any other such event or events shall occur before the delivery of the Shares hereunder, certificates for the Shares of such Selling Shareholder shall be delivered to the Underwriters by Norman Barham, Gardner M. Mundy or Joseph D. Roxe or any other person to be named as an attorney-in-fact (collectively, the "Attorneys-in-Fact"), acting as agents and attorneys-in-fact of such Selling Shareholder pursuant to an irrevocable power of attorney signed by such Selling Shareholder (individually, a "Power") in accordance with the terms and conditions of this Agreement and such Selling Shareholder's Power and Custody Agreement as if such dissolution or liquidation or other such event or events had not occurred, and any actions taken by such Attorneys shall be valid as if such event had not occurred regardless of whether or not the Attorneys-in-Fact or any Underwriter shall have received notice of such dissolution, liquidation or other event. Each Selling Shareholder has authorized each Attorney-in-Fact, on behalf of such Selling Shareholder, to, among other acts, execute this Agreement and any receipts, notices, requests and instructions in connection with the sale of the Shares to be sold hereunder by such Selling Shareholder, to make delivery of the certificates for such Shares, to receive the proceeds of the sale of such Shares, to give receipts for such proceeds, to pay therefrom any expenses to be borne by such Selling Shareholder in connection with the sale and public offering of such Shares, to distribute the balance thereof to such Selling Shareholder and to take such other action as may be necessary or desirable in connection with the transactions contemplated by this Agreement. 2. The Company and the Selling Shareholders understand that the Underwriters intend (i) to make a public offering of the Shares as soon after the Registration Statement and this Agreement have become effective as in the judgment of the Lead Managers is advisable and (ii) initially to offer the Shares upon the terms set forth in the Prospectus. 3 3. Payment for the Shares shall be made to the order of the Custodian by wire transfer of immediately available funds to such account as an Attorney-in-Fact shall designate against delivery of the Shares as set forth below and closing of the sale of the Shares shall be made at the offices of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017 or such other location as you shall designate at 10:00 A.M., New York City time on , 1997, or at such other time on the same or such other date, not later than the fifth Business Day thereafter, as the Lead Managers and an Attorney-in-Fact on behalf of the Selling Shareholders may agree upon in writing. The time and date of such payment for the Shares are referred to herein as the Closing Date. As used herein, the term "Business Day" means any day other than a day on which banks are permitted or required to be closed in New York City. Payment for the Shares to be purchased on the Closing Date shall be made against delivery to the Lead Managers for the respective accounts of the several Underwriters of the Shares registered in such names and in such amounts as the Lead Managers shall request in writing not later than one full Business Day prior to the Closing Date, with any transfer taxes payable in connection with the transfer to the Underwriters of the Shares duly paid. The certificates for the Shares will be made available for inspection and packaging by the Lead Managers in New York, New York not later than 1:00 P.M., New York City time, on the Business Day prior to the Closing Date. 4. The Company represents and warrants to each Underwriter and to each Selling Shareholder that: (a) no order preventing or suspending the use of any preliminary prospectus has been issued by the Commission, and each preliminary prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Securities Act, complied when so filed in all material respects with the Securities Act, and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Lead Managers expressly for use therein and in the case of the representation and warranty made to the Selling Shareholders, shall not apply to statements or omissions made in reliance upon and in conformity with information relating to any Selling Shareholder expressly for use therein; (b) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that 4 purpose has been instituted or, to the knowledge of the Company, threatened by the Commission; and the Registration Statement and Prospectus, as amended or supplemented, if the Company shall have furnished amendments or supplements thereto, comply, or will comply, as the case may be, in all material respects with the Securities Act and do not and will not, as of the applicable effective date as to the Registration Statement and any amendment thereto and as of the date of the Prospectus and any amendment or supplement thereto, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and the Prospectus, as amended or supplemented at the Closing Date, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; except that the foregoing representations and warranties shall not apply to statements or omissions in the Registration Statement or the Prospectus made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Lead Managers expressly for use therein and, in the case of the representation and warranty made to the Selling Shareholders, shall not apply to statements or omissions in the Registration Statement or the Prospectus made in reliance upon and in conformity with information relating to any Selling Shareholder furnished to the Company in writing by such Selling Shareholder expressly for use therein; and the documents incorporated by reference in the Prospectus, when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act and none of such documents contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and any further documents so filed and incorporated by reference in the Prospectus, when such documents are filed with the Commission, will conform in all material respects to the requirements of the Exchange Act, and will not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (c) the financial statements of the Company and the related notes thereto, included or incorporated by reference in the Registration Statement and the Prospectus present fairly in all material respects the financial position of the Company as of the dates indicated and the results of its operations and the changes in its cash flows for the periods specified; and said financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis; the financial statements of Johnson & Higgins and the related notes thereto, 5 included or incorporated by reference in the Registration Statement and Prospectus present fairly in all material respects the financial position of Johnson & Higgins as of the date indicated and the results of operations and the changes in its cash flows for the period specified in accordance with generally accepted accounting principles; and the pro forma financial information, and the related notes thereto, included or incorporated by reference in the Registration Statement and the Prospectus have been prepared in accordance with the applicable requirements of the Securities Act and the Exchange Act, as applicable, and are based upon good faith estimates and assumptions believed by the Company to be reasonable; (d) since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, business, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries, taken as a whole, otherwise than as set forth or contemplated in the Prospectus; and except as set forth or contemplated in the Prospectus neither the Company nor any of its subsidiaries has entered into any transaction or agreement (whether or not in the ordinary course of business) material to the Company and its subsidiaries taken as a whole; (e) the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of Delaware, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, other than where the failure to be so qualified or in good standing would not have a material adverse effect on the Company and its subsidiaries taken as a whole; (f) each of the subsidiaries of the Company that is listed on Exhibit A hereto (each a "Significant Subsidiary") has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus, and has been duly qualified as a foreign corporation for the transaction of business and is in good 6 standing under the laws of each jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, other than where the failure to be so qualified or in good standing would not have a material adverse effect on the Company and its subsidiaries taken as a whole; and, except as described or incorporated by reference in or contemplated by the Prospectus, all the outstanding shares of capital stock of each subsidiary have been duly authorized and validly issued, are fully-paid and non-assessable, and are owned by the Company, directly or indirectly, free and clear of all liens, encumbrances, security interests and claims; (g) this Agreement has been duly authorized, executed and delivered by the Company; (h) the authorized capital stock of the Company conforms as to legal matters to the description thereof set forth or incorporated by reference in the Registration Statement and the Prospectus, and all of the outstanding shares of capital stock of the Company (including the Shares to be sold by the Selling Shareholders) have been duly authorized and validly issued, are fully-paid and non-assessable, are not subject to any preemptive or similar rights; and, except as described in or expressly contemplated by the Prospectus (including grants of options under employee plans described therein), there are no outstanding rights (including, without limitation, preemptive rights), warrants or options to acquire, or instruments convertible into or exchangeable for, any shares of capital stock or other equity interests in the Company or any of its subsidiaries, or any contract, commitment, agreement, understanding or arrangement of any kind relating to the issuance of any capital stock of the Company or any such subsidiary, any such convertible or exchangeable securities or any such rights, warrants or options; (i) the performance by the Company of its obligations under this Agreement, and the consummation of the transactions contemplated herein will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will any such action result in any violation of the provisions of the Company's Certificate of Incorporation or By-Laws, or any applicable law or 7 statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their respective properties, except for any such breaches, conflicts, defaults or violations which individually or in the aggregate would not have a material adverse affect on the Company and its subsidiaries taken as a whole; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the registration of the Shares by the Company or the consummation by the Company of the transactions contemplated by this Agreement, except such consents, approvals, authorizations, registrations or qualifications as have been obtained under the Securities Act and as may be required under state securities or Blue Sky laws; (j) other than as set forth or contemplated or incorporated by reference in the Prospectus, there are no legal or governmental proceedings pending or, to the knowledge of the Company, threatened to which the Company or any of its subsidiaries is or may be a party or to which any property of the Company or any of its subsidiaries is or may be the subject which, individually or in the aggregate, would reasonably be expected to have a material adverse effect on the business, operations or condition, financial or otherwise, of the Company and any of its subsidiaries taken as a whole; and there are no contracts or other documents of a character required to be filed as an exhibit to the Registration Statement or required to be described in the Registration Statement or the Prospectus which are not filed or described as required; (k) except as set forth or incorporated by reference in the Registration Statement and the Prospectus, no person has the right to require the Company to register any securities for offering and sale under the Securities Act by reason of the filing of the Registration Statement with the Commission or the sale of the Shares by the Selling Shareholders; (l) the Company is not an "investment company" as such term is defined in the Investment Company Act of 1940, as amended; and 5. Each Selling Shareholder severally represents and warrants to each Underwriter that: (a) such Selling Shareholder is the lawful owner of the Shares and has, and on the Closing Date will have, good and clear 8 title to the Shares to be sold on such Closing Date by such Selling Shareholder, free and clear of all restrictions on transfer, liens, encumbrances, security interests and claims, whatsoever; (b) upon delivery of and payment for the Shares such Selling Shareholder is selling pursuant to this Agreement, good and clear title to such Shares will pass to the Underwriters, free of all restrictions on transfer, liens, encumbrances, security interests and claims, whatsoever; (c) such Selling Shareholder has, and on the Closing Date will have, full legal right, power and authority to enter into this Agreement and to sell, assign, transfer and deliver the Shares to be sold by such Selling Shareholder in the manner provided herein, and this Agreement, when executed and delivered in accordance with the terms of the Power, will be, a valid and binding agreement of such Selling Shareholder; (d) such Selling Shareholder's Custody Agreement, Power and Notice of Election dated as of April 24, 1997 ("Notice of Election") have been duly executed and delivered by or on behalf of such Selling Shareholder and are valid and binding agreements of such Selling Shareholder, enforceable in accordance with their terms; and pursuant to the Power such Selling Shareholder has authorized the Attorneys-in-Fact named therein, or any one of them, to execute and deliver on such Selling Shareholder's behalf this Agreement and any other document an Attorney-in-Fact may deem necessary or desirable in connection with transactions contemplated hereby and by such Power and to deliver the Shares pursuant to this Agreement; (e) such Selling Shareholder has not taken, and will not take, directly or indirectly, any action designed to, or which might reasonably be expected to, cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares pursuant to the distribution contemplated by this Agreement and other than as permitted by the Securities Act, such Selling Shareholder has not distributed and will not distribute any prospectus or other offering material in connection with the offering and sale of the Shares; (f) the execution, delivery and performance of such Selling Shareholder's Power, this Agreement, the Custody Agreement and the Notice of Election by or on behalf of such Selling Shareholder, compliance by such Selling Shareholder with all the provisions 9 hereof and thereof and the consummation of the transactions contemplated hereby and thereby will not require any consent, approval, authorization or other order of, or qualification with, any court or governmental agency or body (except such as may be required under the securities or Blue Sky laws of the various states) and will not conflict with or constitute a breach of any of the terms or provisions of, or a default under, the organizational documents of such Selling Shareholder, if not an individual, or any indenture, loan agreement, mortgage, lease or other agreement or instrument to which such Selling Shareholder is a party or by which such Selling Shareholder or property of such Selling Shareholder is bound, or violate or conflict with any applicable law or any rule, regulation, judgment, order or decree of any court or governmental body or agency having jurisdiction over the undersigned or property of such Selling Shareholder; (g) the information in such Selling Shareholder's Registration Questionnaire dated as of April 24, 1997 (the "Registration Questionnaire") does not, and will not on the Closing Date, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (h) certificate(s) in negotiable form for the number of Shares to be sold by such Selling Shareholder under this Agreement have been placed in custody with the Custodian for the purpose of effecting delivery under this Agreement. 6. The Company covenants and agrees with the several Underwriters as follows: (a) to use its best efforts to cause the Registration Statement to become effective at the earliest possible time and, if required, to file the final Prospectus with the Commission within the time periods specified by Rule 424(b) and Rule 430A under the Securities Act; (b) to deliver, at the expense of the Company, to the Lead Managers, three signed copies of the Registration Statement (as originally filed) and each amendment thereto, in each case including exhibits and if requested documents incorporated by reference therein, and to each other Underwriter a conformed copy of the Registration Statement (as originally filed) and each amendment thereto, in each case without exhibits but including the documents 10 incorporated by reference therein and, prior to 10:00 a.m. New York City time on the Business Day next succeeding the date of this Agreement in New York City and during the period mentioned in paragraph (e) below, to each of the Underwriters as many copies of the Prospectus (including all amendments and supplements thereto and documents incorporated by reference therein) as the Lead Managers may reasonably request; (c) through the period specified in clause (e) below, before filing any amendment or supplement described in clause (e) to the Registration Statement or the Prospectus (whether before or after the time the Registration Statement becomes effective) to furnish to the Lead Managers a copy of the proposed amendment or supplement for review and not to file any such proposed amendment or supplement to which the Lead Managers reasonably object; (d) through the period specified in clause (e) below, to advise the Lead Managers promptly, and if requested, and to confirm such advice in writing, (i) when the Registration Statement shall become effective, (ii) when any amendment described in clause (e) to the Registration Statement shall have become effective, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus described in clause (e) or for any additional information, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation or threatening of any proceeding for that purpose and (v) of the receipt by the Company of any notification with respect to any suspension of the qualification of the Shares for offer and sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and to use its best efforts to prevent the issuance of any such stop order or notification and, if issued, to obtain as soon as possible the withdrawal thereof; (e) if, during such period of time after the first date of the public offering of the Shares as in the written opinion of Davis Polk & Wardwell, counsel for the Underwriters, a prospectus relating to the Shares is required by law to be delivered in connection with sales by the Underwriters or any dealer, any event shall occur as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if it is necessary to amend or supplement the Prospectus to comply with law, forthwith to prepare and furnish, at 11 the expense of the Company, to the Underwriters and to the dealers (whose names and addresses the Lead Managers will furnish to the Company) to which Shares may have been sold by the Lead Managers on behalf of the Underwriters and to any other dealers upon request, such amendments or supplements to the Prospectus as may be necessary so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus is delivered to a purchaser, be misleading or so that the Prospectus will comply with law; (f) to make generally available to its security holders and to the Lead Managers as soon as practicable an earnings statement covering a period of at least twelve months beginning with the first fiscal quarter of the Company occurring after the effective date of the Registration Statement, which shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 of the Commission promulgated thereunder; (g) for a period of 90 days after the date of the Prospectus, without the prior written consent of J.P. Morgan Securities Inc. not to (i) offer, sell, contract to sell or grant any option to purchase or otherwise dispose of any Common Stock of the Company, or any securities convertible into or exercisable or exchangeable for Common Stock of the Company or enter into any swap or other agreement that transfers, in whole or in part, the economic consequences of ownership of Common Stock, other than the Shares to be sold hereunder, any shares of Common Stock issued in connection with existing employee stock option and incentive plans and any shares of Common Stock issued as consideration in an 12 acquisition or (ii) file any registration statement under the Securities Act with respect to Common Stock of the Company or any securities convertible into or exercisable or exchangeable for Common Stock other than in connection with the registration of Shares issued as consideration in an acquisition; and (h) to pay all costs and expenses incident to the performance of the obligations of the Company and the Selling Shareholders hereunder, including without limiting the generality of the foregoing, all costs and expenses (i) incident to the preparation, issuance, execution and delivery of unlegended certificates evidencing the Shares, (ii) incident to the preparation, printing and filing under the Securities Act of the Registration Statement, the Prospectus and any preliminary prospectus (including in each case all exhibits, amendments and supplements thereto), (iii) in connection with the listing of the Shares on the New York Stock Exchange, Chicago Stock Exchange, Pacific Stock Exchange and London Stock Exchange, (iv) filing fees incident to the clearance of the offering by the National Association of Securities Dealers, Inc. and (v) in connection with the delivery of this Agreement, all other agreements relating to underwriting and syndication arrangements, and the furnishing to the Underwriters and dealers of copies of the Registration Statement and the Prospectus, including mailing and shipping, as herein provided. 7. Each of the Selling Shareholders severally covenants and agrees with the several Underwriters as follows: (a) such Selling Shareholder will do or perform or cause to be done or performed all things required to be done or performed by such Selling Shareholder prior to the Closing Date to satisfy all conditions precedent to the delivery of the Shares pursuant to this Agreement; and (b) such Selling Shareholder agrees to pay or cause to be paid all taxes, if any, on the transfer and sale of the Shares being sold by such Selling Shareholder. 8. The several obligations of the Underwriters hereunder to purchase the Shares are subject to the following additional conditions: 13 (a) the Registration Statement shall have become effective (or if a post-effective amendment is required to be filed under the Securities Act, such post-effective amendment shall have become effective) prior to the execution of this Agreement and no stop order suspending the effectiveness of the Registration Statement shall be in effect, and no proceedings for such purpose shall be pending before or threatened by the Commission; and all requests by the Commission for additional information shall have been complied with to the reasonable satisfaction of the Lead Managers; (b) the representations and warranties of the Company contained herein shall be true and correct on and as of the Closing Date as if made on and as of the Closing Date and the Company shall have complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date; (c) subsequent to the execution and delivery of this Agreement and prior to the Closing Date, there shall not have occurred any downgrading, nor shall any notice have been given of (i) any intended or potential downgrading or (ii) any review or possible change with negative implications, in the rating accorded any securities of or guaranteed by the Company by any "nationally recognized statistical rating organization", as such term is defined for purposes of Rule 436(g)(2) under the Securities Act; (d) since the respective dates as of which information is given in the Registration Statement and the Prospectus there shall not have been any material adverse change or any development involving a prospective material adverse change, in or affecting the general affairs, business, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries taken as a whole, otherwise than as set forth or contemplated in the Registration Statement and the Prospectus (exclusive, in each case, of any amendments or supplements thereto subsequent to the date of this Agreement), the effect of which in the judgment of the Lead Managers makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares on the terms and in the manner contemplated in the Prospectus; (e) the Lead Managers shall have received on and as of the Closing Date a certificate of the Company signed by an executive officer of the Company satisfactory to the Lead Managers to the effect set forth in subsections (a) through (c) of this Section and to 14 the further effect that there has not occurred any material adverse change or any development involving a prospective material adverse change, in or affecting the general affairs, business, prospects, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries taken as a whole, otherwise than as set forth or contemplated in the Registration Statement and the Prospectus (exclusive, in each case, of any amendments or supplements thereto subsequent to the date of this Agreement); the foregoing certificate shall also be addressed to the Selling Shareholders; (f) Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Company, shall have furnished to the Lead Managers their written opinion, dated the Closing Date, in form and substance satisfactory to the Lead Managers and addressed to the Underwriters and the Selling Shareholders, to the effect that: (i) the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of Delaware, with corporate power and authority to own its properties and conduct its business as described in the Prospectus; (ii) this Agreement has been duly authorized, executed and delivered by the Company; (iii) the authorized capital stock of the Company conforms as to legal matters to the description thereof set forth or incorporated by reference in the Registration Statement and the Prospectus, and the Shares to be sold by the Selling Shareholders have been duly authorized and validly issued, are fully-paid and non-assessable, and are not subject to any preemptive or similar rights; (iv) the performance by the Company of its obligations under this Agreement, and the consummation of the transactions contemplated herein will not result in any violation of the provisions of the Company's Certificate of Incorporation or By-Laws, or any applicable law or statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their respective properties, except for any such violations which individually or in the aggregate would not have a material adverse affect on the Company and its subsidiaries taken as a whole; and no consent, approval, authorization, order, registration or 15 qualification of or with any such court or governmental agency or body is required for the registration of the Shares by the Company or the consummation by the Company of the transactions contemplated by this Agreement, except such consents, approvals, authorizations, registrations or qualifications as have been obtained under the Securities Act and as may be required under state securities or Blue Sky laws; (v) the Company is not an "investment company" as such term is defined in the Investment Company Act of 1940, as amended; (vi) the statements in the Prospectus under "Underwriting" insofar as they relate to the Underwriting Agreement and in the Company's Registration Statements on Form 8-A dated May 22, 1969 and September 21, 1987, as amended, insofar as such statements constitute a summary of legal matters, documents or proceedings referred to therein, fairly present the information called for with respect to such legal matters, documents or proceedings; and (vii) such counsel is of the opinion that the Registration Statement and the Prospectus and any amendments and supplements thereto (except for the financial statements and related schedules and other financial and statistical data included or incorporated by reference therein as to which such counsel need express no opinion) comply as to form in all material respects with the requirements of the Securities Act and has no reason to believe that (except as stated above) the Registration Statement and the prospectus included therein at the time the Registration Statement became effective contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that (except as stated above) the Prospectus as amended or supplemented, if applicable, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. 16 (g) Gregory F. Van Gundy, General Counsel and Secretary of the Company, shall have furnished to the Lead Managers his written opinion, dated the Closing Date, in form and substance satisfactory to the Lead Managers and addressed to the Underwriters and the Selling Shareholders, to the effect that: (i) the Company has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, other than where the failure to be so qualified or in good standing would not have a material adverse effect on the Company and its subsidiaries taken as a whole; (ii) each Significant Subsidiary of the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation, with corporate power and authority to own its properties and conduct its business as described in the Prospectus; and, except as described or incorporated by reference in or contemplated by the Prospectus, all the outstanding shares of capital stock of each Significant Subsidiary have been duly authorized and validly issued, are fully-paid and non-assessable, and are owned by the Company, directly or indirectly, free and clear of all liens, encumbrances, security interests and claims; (iii) the performance by the Company of its obligations under this Agreement, and the consummation of the transactions contemplated herein will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument known to such counsel to which the Company or any of its Significant Subsidiaries is a party or by which the Company or any of its Significant Subsidiaries is bound or to which any of the property or assets of the Company or any of its Significant Subsidiaries is subject, except for any such breaches, conflicts or defaults which individually or in the aggregate would not have a material adverse affect on the Company and its subsidiaries taken as a whole; 17 (iv) other than as set forth or contemplated or incorporated by reference in the Prospectus, there are no legal or governmental proceedings pending or, to the knowledge of such counsel, threatened to which the Company or any of its subsidiaries is or may be a party or to which any property of the Company or any of its subsidiaries is or may be the subject which, individually or in the aggregate, would reasonably be expected to have a material adverse effect on the business, operations or condition, financial or otherwise, of the Company and any of its subsidiaries taken as a whole; and such counsel does not know of any contracts or other documents of a character required to be filed as an exhibit to the Registration Statement or required to be described in the Registration Statement or the Prospectus which are not filed or described as required; (v) except as set forth or incorporated by reference in the Registration Statement and the Prospectus, such counsel does not know of any right to require the Company to register any securities for offering and sale under the Securities Act by reason of the filing of the Registration Statement with the Commission or the sale of the Shares by the Selling Shareholders; (vi) the statements in or incorporated by reference into the Company's Annual Report on Form 10-K for the year ended December 31, 1996 under "Regulation", "Legal Proceedings" and "Certain Relationships and Related Transactions" insofar as such statements constitute a summary of legal matters, documents or proceedings referred to therein, fairly present the information called for with respect to such legal matters, documents or proceedings; and (vii) such counsel is of the opinion that each document incorporated by reference in the Registration Statement and the Prospectus (except for the financial statements and related schedules and other financial and statistical data included therein as to which such counsel need express no opinion) complied as to form in all material respects, when filed with the Commission, with the Exchange Act. 18 In rendering the opinions described in paragraphs (f) and (g) above, such counsel may rely as to matters of fact, to the extent such counsel deems proper, on certificates of responsible officers of the Company and certificates or other written statements of officials or jurisdictions having custody of documents respecting the corporate existence or good standing of the Company. With respect to the matters to be covered in subparagraph (vii) of paragraph (f) above, counsel may state their opinion and belief is based upon their participation in the preparation of the Registration Statement and the Prospectus and any amendment or supplement thereto (other than the documents incorporated by reference therein) and review and discussion of the contents thereof (including the documents incorporated by reference therein) but is without independent check or verification except as specified. With respect to the matters to be covered in subparagraph (vii) of paragraph (g) above, counsel may state his opinion and belief is based upon his participation in the preparation of the documents incorporated by reference in the Registration Statement and the Prospectus and any amendment or supplement thereto and review and discussion of the contents thereof but is without independent check or verification except as specified. (h) Sullivan & Cromwell, counsel for the Selling Shareholders, shall have furnished to the Lead Managers their written opinion, dated the Closing Date, in form and substance satisfactory to the Lead Managers, to the effect that: (i) each Selling Shareholders' Custody Agreement and Power has been duly executed and delivered by the applicable Selling Shareholder and constitutes a valid and legally binding agreement of such Selling Shareholder enforceable in accordance with its terms, subject to bankruptcy insolvency fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles, and except as the indemnification provisions may be invalid or unenforceable under applicable law because they violate public policy; (ii) the agreement of each Selling Shareholder set forth in the last paragraph of such Selling Shareholder's Notice of Election has been duly executed and delivered by such Selling Shareholder and constitutes a valid and legally binding agreement of such Selling Shareholder enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (iii) this Agreement has been duly executed and delivered on behalf of each Selling Shareholder and constitutes a valid and legally binding agreement of each Selling Shareholder enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles and except as the indemnity and contribution provisions may be invalid or unenforceable because they violate public policy; (iv) upon payment for and delivery of the Shares being sold by each Selling Shareholder pursuant to this Agreement in the State of New York the Underwriters will have acquired the Shares free of any adverse claim within the meaning of Section 8-302 of the New York Uniform Commercial Code; and (v) the statements in the Prospectus under "Selling Stockholders" comply as to form in all material respects with the Securities Act. 19 In rendering the foregoing opinions, such counsel may state that they express no opinion on the laws of any jurisdiction other than the Federal laws of the United States and the laws of the State of New York. The opinions of Skadden, Arps, Slate, Meagher & Flom LLP, Gregory F. Van Gundy and Sullivan & Cromwell described in paragraphs (f) - (h) above shall be rendered to you at the request of the Company or the Selling Shareholders, as the case may be, and shall so state therein. (i) on the date of the Prospectus and the effective date of the most recently filed post-effective amendment to the Registration Statement, if any, and also on the Closing Date, Deloitte & Touche LLP and Arthur Andersen LLP shall have furnished to the Lead Managers letters, dated the respective dates of delivery thereof, in form and substance satisfactory to the Lead Managers and addressed to the Underwriters and the Selling Shareholders, containing statements and information of the type customarily included in accountants "comfort letters" to underwriters with respect to the financial statements and certain financial information contained or incorporated by reference in the Registration Statement and the Prospectus; (j) the Lead Managers shall have received on and as of the Closing Date an opinion of Davis Polk & Wardwell, counsel to the Underwriters, with respect to the Registration Statement, the Prospectus and other related matters as the Lead Managers may reasonably request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters; (k) the representations and warranties of the Selling Shareholders contained herein shall be true and correct on and as of the Closing Date as if made on and as of the Closing Date, and you shall have received a certificate dated the Closing Date and signed by or on behalf of the Selling Shareholders to the effect set forth in this Section 8(j) and in Section 8(k) hereof; (l) the Selling Shareholders shall have complied with all agreements and satisfied all conditions on their part to be performed or satisfied at or prior to the Closing Date; and 20 (m) the Lead Managers shall have received executed copies of each Selling Shareholder's Notice of Election and each Notice of Election of any Selling Stockholder (as defined in the Prospectus) not electing to participate in the offering described in the prospectus supplement relating to the Shares; and (n) on or prior to the Closing Date, the Company and each Selling Shareholder shall have furnished to the Lead Managers such further certificates and documents as the Lead Managers shall reasonably request. 9. The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without limitation the legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Lead Managers expressly for use therein; PROVIDED that the foregoing indemnity with respect to any preliminary prospectus shall not inure to the benefit of any Underwriter (or to the benefit of any person controlling such Underwriter) from whom the person asserting any such losses, claims, damages or liabilities purchased Shares if such untrue statement or omission or alleged untrue statement or omission made in such preliminary prospectus is eliminated or remedied in the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) and if a copy of the Prospectus (as so amended or supplemented) was required by law to be furnished but was not so furnished to such person at or prior to the written confirmation of the sale of such Shares to such person. Each Selling Shareholder agrees, severally and not jointly, to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without limitation the legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted) caused by any untrue statement or alleged untrue statement of a material 21 fact contained in the Registration Statement or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only with reference to information relating to such Selling Shareholder furnished in writing by or on behalf of such Selling Shareholder for use in the Registration Statement, the Prospectus, any amendment or supplement thereto, or any preliminary prospectus. Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement, the Selling Shareholders and each person who controls the Company or any Selling Shareholder within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without limitation the legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto) or any preliminary prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but only with reference to information relating to such Underwriter furnished to the Company in writing by such Underwriter through the Lead Managers expressly for use in the Registration Statement, the Prospectus, any amendment or supplement thereto, or any preliminary prospectus. If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any person in respect of which indemnity may be sought pursuant to either of the three preceding paragraphs, such person (the "Indemnified Person") shall promptly notify the person against whom such indemnity may be sought (the "Indemnifying Person") in writing, and the Indemnifying Person, upon request of the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others the Indemnifying Person may designate in such proceeding as described below and shall pay the fees and expenses of such counsel related to such proceeding. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary, (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person or (iii) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing 22 interests between them. It is understood that the Indemnifying Person shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) (a) for all Underwriters and all persons, if any, who control any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, (b) for the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either such Section and (c) for all Selling Shareholders and all persons, if any, who control any Selling Shareholder within the meaning of either such Section, and that all such fees and expenses shall be reimbursed as they are incurred. Any such separate firm for the Underwriters and such control persons of the Underwriters shall be designated in writing by J.P. Morgan Securities Inc.; any such separate firm for the Company, its directors, its officers who sign the Registration Statement and such control persons of the Company shall be designated in writing by the Company; and any such separate firm for the Selling Shareholders and such control persons of Selling Shareholders shall be designated by an Attorney-in-Fact. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Person agrees to indemnify any Indemnified Person from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall have requested an Indemnifying Person to reimburse the Indemnified Person for fees and expenses of counsel as contemplated by the third sentence of this paragraph, the Indemnifying Person agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such Indemnifying Person of the aforesaid request (the "Measurement Date") and (ii) such Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement; PROVIDED that an Indemnifying Person shall not be liable for any such settlement effected without its consent if such Indemnifying Person (1) reimburses such Indemnified Person in accordance with such request to the extent it considers such request to be reasonable, (2) provides written notice to the Indemnified Person substantiating the unpaid balance as unreasonable, in each case prior to the date of such settlement, and (3) the Indemnifying Person agrees that, if it subsequently pays some or all of the unpaid balance, it will pay interest on the amount of the unpaid balance so paid from the Measurement Date to the date of actual payment at a per annum rate equal to the sum of the prime rate then in effect as announced by Morgan Guaranty Trust Company of New York plus 2.0%. No Indemnifying Person shall, without the prior written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement includes an unconditional release of such Indemnified Person from all liability on claims that are the subject matter of such proceeding. 23 If the indemnification provided for in the first, second or third paragraphs of this Section 9 is unavailable to an Indemnified Person in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Indemnified Person from the offering of the Shares or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Selling Shareholders on the one hand and the Underwriters on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Selling Shareholders in the aggregate shall be deemed to be the net proceeds from the offering of the Shares (before deducting expenses) received by the Selling Shareholders, the relative benefits received by the Company shall be deemed to be the same amount and the relative benefits received by the Underwriters shall be deemed to be the total underwriting discounts and commissions received by the Underwriter in each case as set forth in the table on the cover of the Prospectus. The relative fault of the Company and the Selling Shareholders on the one hand and the Underwriters on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Selling Shareholders or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Selling Shareholders and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by PRO RATA allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 9, in no event shall an Underwriter be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation 24 (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute pursuant to this Section 9 are several in proportion to the respective number of Shares set forth opposite their names in Schedule I hereto, and not joint. The indemnity and contribution agreements contained in this Section 9 are in addition to any liability which the Indemnifying Persons may otherwise have to the Indemnified Persons referred to above. The indemnity and contribution agreements contained in this Section 9 and the representations and warranties of the Company and the Selling Shareholders set forth in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter, by or on behalf of any Selling Shareholder or any person controlling any Selling Shareholder or by or on behalf of the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Shares. 10. Notwithstanding anything herein contained, this Agreement may be terminated in the absolute discretion of the Lead Managers, by notice given to the Company and the Attorneys-in-Fact, if after the execution and delivery of this Agreement and prior to the Closing Date (i) trading generally shall have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the National Association of Securities Dealers, Inc., the Chicago Board Options Exchange or the Chicago Board of Trade, (ii) trading of any securities of the Company shall have been suspended or materially limited in any over-the-counter market, (iii) a general moratorium on commercial banking activities in New York shall have been declared by either U.S. Federal or New York State authorities or exchange controls shall have been imposed by the United States, or (iv) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in the judgment of the Lead Managers, is material and adverse and which, in the judgment of the Lead Managers, makes it impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus. 11. This Agreement shall become effective upon execution and delivery hereof by or on behalf of the parties hereto. If, on the Closing Date, any one or more of the Underwriters shall fail or refuse to purchase Shares which it or they have agreed to purchase hereunder on such date, and the aggregate number of Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the aggregate number of Shares to be purchased on such date, the 25 other Underwriters shall be obligated severally in the proportions that the number of Shares set forth opposite their respective names in Schedule I hereto bears to the aggregate number of Shares set forth opposite the names of all such non-defaulting Underwriters, or in such other proportions as the Lead Managers may specify, to purchase the Shares which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; PROVIDED that in no event shall the number of Shares that any Underwriter has agreed to purchase pursuant to Section 1 be increased pursuant to this Section 11 by an amount in excess of one-ninth of such number of Shares without the written consent of such Underwriter. If, on the Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase Shares which it or they have agreed to purchase hereunder on such date, and the number of Shares with respect to which such default occurs is more than one-tenth of the aggregate number of Shares to be purchased on such date, and arrangements satisfactory to the Lead Managers, the Selling Shareholders and the Company for the purchase of such Shares are not made within 36 hours after such default, this Agreement shall terminate without liability on the part of any non-defaulting Underwriter, the Selling Shareholders or the Company. In any such case the Lead Managers, the Selling Shareholders or the Company shall have the right to postpone the Closing Date, but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and in the Prospectus or in any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. 12. If this Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company or any Selling Shareholder to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company or any Selling Shareholder shall be unable to perform its obligations under this Agreement or the Custody Agreement or the Power of such Selling Shareholder or any condition of the Underwriters' obligations cannot be fulfilled, the Company agrees to reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (including the fees and expenses of their counsel) reasonably incurred by such Underwriters in connection with this Agreement or the offering contemplated hereunder. 13. This Agreement shall inure to the benefit of and be binding upon the Company, each Selling Shareholder, the Underwriters, any controlling persons referred to herein and their respective successors and assigns. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any other person, firm or corporation any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. No purchaser of Shares from any Underwriter shall be deemed to be a successor by reason merely of such purchase. 26 14. Any action by the Underwriters hereunder may be taken by the Lead Managers jointly or by J.P. Morgan Securities Inc. alone on behalf of the Underwriters, and any such action taken by the Lead Managers jointly or by J.P. Morgan Securities Inc. alone shall be binding upon the Underwriters. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be given to the Lead Managers c/o J.P. Morgan Securities Inc., 60 Wall Street, New York, New York 10260 (facsimile: (212) 648-5705); Attention: Syndicate Department. Notices to the Company shall be given to it at Marsh & McLennan Companies, Inc., 1166 Avenue of the Americas, New York, New York 10036-2774; (facsimile: 212-345-4647); Attention: Gregory F. Van Gundy. Notices to the Selling Shareholders shall be given to the Attorneys-in-Fact, c/o Johnson & Higgins, 125 Broad Street, New York, New York 10004-2424 (facsimile: 212-574-8900); Attention: Joseph Roxe. 15. This Agreement may be signed in counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the conflicts of laws provisions thereof. 27 If the foregoing is in accordance with your understanding, please sign and return four counterparts hereof. Very truly yours, MARSH & MCLENNAN COMPANIES, INC. By: __________________________________ Title: EACH OF THE SELLING SHAREHOLDERS NAMED IN SCHEDULE II HERETO By: __________________________________ Name: Attorney-in-Fact Accepted: , 1997 J.P. MORGAN SECURITIES INC. MORGAN STANLEY & CO. INCORPORATED Acting severally on behalf of themselves and the several Underwriters listed in Schedule I hereto. By: J.P. MORGAN SECURITIES INC. By: _____________________________ Title: 28 SCHEDULE I Number of Shares Underwriters To Be Purchased - ------------ --------------- J.P. Morgan Securities Inc. Morgan Stanley & Co. Incorporated Donaldson, Lufkin & Jenrette Securities Corporation Merrill Lynch, Pierce, Fenner & Smith Incorporated PaineWebber Incorporated _______________ TOTAL: =============== SCHEDULE II Number of Shares Selling Shareholder To Be Sold - ------------------- ---------- __________ TOTAL: ========== EXHIBIT A EX-23.A 3 EX-23.A- DELOITTE & TOUCHE Exhibit 23(a) INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Amendment No. 1 to the Registration Statement of Marsh & McLennan Companies, Inc. on Form S-3 (Registration File No. 333-25069) of our reports dated February 26, 1997 (March 12, 1997 as to the last paragraph of Note 3), appearing in and incorporated by reference in the Annual Report on Form 10-K of Marsh & McLennan Companies, Inc. for the year ended December 31, 1996 and to the reference to us under the headings "Selected Historical Consolidated Financial Data" and "Experts" in the Prospectus, which is part of this Registration Statement. /s/ Deloitte & Touche LLP ------------------------------------ Deloitte & Touche LLP New York, New York April 25, 1997 EX-23.B 4 EX-23.B- CONSENT OF ARTHUR ANDERSON Exhibit 23(b) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Amendment No. 1 to the Form S-3 Registration Statement of our report to the Board of Directors of Johnson & Higgins dated March 11, 1997 included in Marsh & McLennan's Form 8-K filed with the Commission on April 7, 1997 and to all references to our Firm included in this amendment. /s/ Arthur Andersen LLP ---------------------------------------- Arthur Andersen LLP April 25, 1997 New York, New York -----END PRIVACY-ENHANCED MESSAGE-----