-----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, WoxamnAxT3C2igBxtmsyQaY34psz6aZRzS2mFTfOKmh657USBtijBlV0ZeAjI3KW i2GW1NQExSVRa1FgKTmycg== 0000950123-98-008119.txt : 19980907 0000950123-98-008119.hdr.sgml : 19980907 ACCESSION NUMBER: 0000950123-98-008119 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 17 FILED AS OF DATE: 19980904 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SEDGWICK GROUP PLC CENTRAL INDEX KEY: 0001040015 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-54555 FILM NUMBER: 98704679 BUSINESS ADDRESS: STREET 1: SACKVILLE HOUSE STREET 2: 143-149 FENCHURCH ST CITY: LONDON STATE: X0 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SEDGWICK GROUP PLC CENTRAL INDEX KEY: 0001040015 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: SEC FILE NUMBER: 005-54555 FILM NUMBER: 98704680 BUSINESS ADDRESS: STREET 1: SACKVILLE HOUSE STREET 2: 143-149 FENCHURCH ST CITY: LONDON STATE: X0 FILED BY: 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: SC 14D1 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 STREET 2: 27TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10036 FORMER COMPANY: FORMER CONFORMED NAME: MARLENNAN CORP DATE OF NAME CHANGE: 19760505 FILED BY: 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: SC 14D1 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 STREET 2: 27TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10036 FORMER COMPANY: FORMER CONFORMED NAME: MARLENNAN CORP DATE OF NAME CHANGE: 19760505 SC 14D1 1 MARSH & MCLENNAN COMPANIES, INC. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 AND STATEMENT ON SCHEDULE 13D AMENDMENT NO. 1 UNDER THE SECURITIES EXCHANGE ACT OF 1934 ------------------ SEDGWICK GROUP PLC (NAME OF SUBJECT COMPANY) MARSH & MCLENNAN COMPANIES, INC. (BIDDER) ORDINARY SHARES OF 10 PENCE EACH AND AMERICAN DEPOSITARY SHARES, EACH REPRESENTING FIVE ORDINARY SHARES AND EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS (TITLE OF CLASS OF SECURITIES) 815673108 (ORDINARY SHARES) 315673207 (AMERICAN DEPOSITARY SHARES) (CUSIP NUMBER OF CLASS OF SECURITIES) GREGORY F. VAN GUNDY GENERAL COUNSEL AND SECRETARY 1166 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10036-2774 (212) 345-5000 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS) COPIES TO: DAVID J. FRIEDMAN MARK RAWLINSON MICHAEL E. HATCHARD FRESHFIELDS SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 65 FLEET STREET 919 THIRD AVENUE LONDON EUY 1HS, ENGLAND NEW YORK, NEW YORK 10022 (011) 44-171-936-4000 (212) 735-3000 CALCULATION OF FILING FEE
================================================================================ TRANSACTION VALUATION* AMOUNT OF FILING FEE** - -------------------------------------------------------------------------------- $180,658,083 $36,132 ================================================================================
* Estimated for purposes of calculating the filing fee only. Based on the offer to purchase 3,269,200 American Depositary Shares (each representing five Ordinary Shares) and 31,733,330 ordinary shares ("Ordinary Shares") of 10 pence each of Sedgwick Group plc ("Sedgwick") held by U.S. residents at pound sterling 11.25 per American Depositary Share and 225 pence per Ordinary Share and the multiplication of such aggregate purchase price by the currency exchange rate of pound sterling 1=$1.67 (such currency exchange rate being derived from The Wall Street Journal dated September 3, 1998). Such number of American Depositary Shares represents all American Depositary Shares of Sedgwick outstanding as of September 3, 1998 and such number of Ordinary Shares exceeds the estimate by Sedgwick of the aggregate number of outstanding Ordinary Shares held by United States residents. ** 1/50 of 1% of Transaction Valuation. / / Check Box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: ........................... N/A Form or Registration No.: ......................... N/A Filing Party: ..................................... N/A Date Filed: ....................................... N/A
2 - ---------------------------------------------------- CUSIP NO. 815673108 (ORDINARY SHARES) 315673207 (AMERICAN DEPOSITARY SHARES) - ---------------------------------------------------- - -------------------------------------------------------------------------------- 1. NAMES OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS Marsh & McLennan Companies, Inc. (I.R.S. Identification No. 36-2668272) - -------------------------------------------------------------------------------- 2. CHECK THE APPROPRIATE BOX IF A MEMBER OF GROUP (a) / / (b) / / - -------------------------------------------------------------------------------- 3. SEC USE ONLY - -------------------------------------------------------------------------------- 4. SOURCES OF FUNDS BK - -------------------------------------------------------------------------------- 5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS / / IF REQUIRED PURSUANT TO ITEM 2(e) OR 2(f) - -------------------------------------------------------------------------------- 6. CITIZENSHIP OR PLACE OF ORGANIZATION State of Delaware - -------------------------------------------------------------------------------- 7. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 278,796,998 - -------------------------------------------------------------------------------- 8. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) / / EXCLUDES CERTAIN SHARES - -------------------------------------------------------------------------------- 9. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7) 50.3% - -------------------------------------------------------------------------------- 10. TYPE OF REPORTING PERSON CO - -------------------------------------------------------------------------------- 2 3 Item 1. Security and Subject Company. (a) The name of the subject company is Sedgwick Group plc ("Sedgwick"), a public limited company incorporated and registered in England and Wales. The address of its principal executive offices is Sackville House, 143-149 Fenchurch Street, London EC3M 6BN, England. (b) This Tender Offer Statement on Schedule 14D-1 relates to the offer (the "Offer") by Marsh & McLennan Companies, Inc., a Delaware Corporation ("Marsh & McLennan"), to purchase all of the outstanding (a) ordinary shares of 10 pence each of Sedgwick ("Sedgwick Shares") and (b) American Depositary Shares of Sedgwick ("Sedgwick ADSs"), each representing five Sedgwick Shares and evidenced by American Depositary Receipts. As of February 17, 1998, 553,871,226 Sedgwick Shares were issued and outstanding, including ordinary shares represented by Sedgwick ADSs. The Sedgwick Shares and the Sedgwick ADSs are collectively referred to herein as the "Sedgwick Securities." Simultaneously with the Offer, Marsh & McLennan is also offering to purchase all outstanding 7.25% Convertible Bonds due 2008 of Sedgwick (the "Convertible Bonds") at a price of 123 pence for every pound sterling 1 nominal amount of the Convertible Bonds. As of December 31, 1997, the outstanding principal amounts of the Convertible Bonds was pound sterling 41,500,000. The Convertible Bonds are not registered under the Securities Act of 1933, as amended. The Offer is subject to the terms and conditions set forth in the Offer to Purchase dated September 4, 1998 (the "Offer to Purchase"), a copy of which is filed as Exhibit (a)(1) hereto, the related Letter of Transmittal, a copy of which is filed as Exhibit (a)(2) hereto and the related Forms of Acceptance, copies of which are filed as Exhibit (a)(3) hereto. Information concerning the Sedgwick Securities is set forth in Section 16 under the caption "Sources of information and bases of calculation" in Appendix VI to the Offer to Purchase and is incorporated herein by reference. Information concerning the consideration being offered therefor and the conversion thereof from pounds sterling to U.S. dollars is set forth in Section 2 under the caption "The Offers" and in Section 19(f) under the caption "Currency of cash consideration" in the letter, dated September 4, 1998 ("Letter"), from Morgan Guaranty Trust Company of New York ("J.P. Morgan") and Donaldson, Lufkin & Jenrette International ("DLJ") contained in the Offer to Purchase and is incorporated herein by reference. (c) The information set forth in Appendix V entitled "Certain Market, Dividend and Exchange Rate Information" to the Offer to Purchase is incorporated herein by reference. 3 4 Item 2. Identity and Background. (a) through (d) and (g). This statement is filed by Marsh & McLennan. The information set forth in "Information on the Marsh & McLennan Group" in the Letter and "Financial Information on Marsh & McLennan" in Appendix IV of the Offer to Purchase and in Section 2 under the caption "Directors and executive officers of Marsh & McLennan and Sedgwick" in Appendix VI to the Offer to Purchase is incorporated herein by reference. (e) and (f). During the last five years, neither Marsh & McLennan, nor any of the directors or officers of Marsh & McLennan listed in Section 2 under the caption "Directors and executive officers of Marsh & McLennan and Sedgwick" in Appendix VI to the Offer to Purchase, has been either (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. Item 3. Past Contacts, Transactions or Negotiations with the Subject Company. (a) To the best of Marsh & McLennan's knowledge, there have been no transactions with Sedgwick required to be set forth in this Item. (b) The information set forth under the caption "Background to and reasons for recommending the Offers" in the Letter, dated September 4, 1998, from the Chairman of Sedgwick contained in the Offer to Purchase (the "Sedgwick Letter"), in Section 3 under the caption "Reasons for the Offers" in the Letter and in Section 6 under the caption "Background to the Offers" in Appendix VI to the Offer to Purchase is incorporated herein by reference. Item 4. Source and Amount of Funds or Other Consideration. (a) through (c). The information set forth in Section 7 under the caption "Financing arrangements" in Appendix VI to the Offer to Purchase is incorporated herein by reference. 4 5 Item 5. Purpose of the Tender Offer and Plans or Proposals of the Bidder. (a) through (g). The information set forth under the captions "Background to and reasons for recommending the Offers" and "Management and employees" in the Sedgwick Letter; in Section 5 under the caption "Terms and Conditions of the Offers" and Section 13 under the caption "Employee matters and share schemes" in the Letter; and in Section 6 under the caption "Background to the Offers," Section 8 under the caption "Compulsory acquisition" and Section 9 under the caption "Certain consequences of the Offers" in Appendix VI to the Offer to Purchase, is incorporated herein by reference. (f) and (g). The information set forth in Section 9 under the caption "Certain consequences of the Offers" in Appendix VI to the Offer to Purchase is incorporated herein by reference. Item 6. Interest in Securities of the Subject Company. (a) through (b). The information set forth in Section 4 under the caption "Irrevocable undertakings and conditional purchases" in the Letter and Section 4 under the caption "Shareholdings and dealings in relevant Sedgwick Securities and Sedgwick Convertible Bonds" in Appendix VI to the Offer to Purchase is incorporated herein by reference. Item 7. Contracts, Arrangements, Understandings or Relationships with Respect to the Subject Company's Securities. The information set forth under the captions "Rule 10b-13 Exemption" on page 5 of the Offer to Purchase, "Recommendation" and "Sedgwick Share Option Schemes" in the Sedgwick Letter; "Irrevocable undertakings and conditional purchases" in the Letter; and the information set forth in under the captions "Background to the Offers" and under the caption "Shareholdings and dealings in relevant Sedgwick Securities and Sedgwick Convertible Bonds" in Appendix VI to the offer to Purchase, is incorporated herein by reference. Except as set forth under those captions, neither Marsh & McLennan, nor to the best knowledge of Marsh & McLennan, any of the persons listed under the caption "Directors and executive officers of Marsh & McLennan and Sedgwick" in Appendix VI to the Offer to Purchase, has any contract, arrangement, understanding or relationship (whether or not legally enforceable) with any other person with respect to any Sedgwick Securities (including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any such securities, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss, or the giving or withholding of proxies). 5 6 Item 8. Persons Retained, Employed or to Be Compensated. The information set forth in Section 14 under the caption "Fees and expenses" in Appendix VI to the Offer to Purchase is incorporated herein by reference. Item 9. Financial Statements of Certain Bidders. The information set forth in Appendix IV entitled "Financial Information on Marsh & McLennan" in the Offer to Purchase is incorporated herein by reference. Item 10. Additional Information. (a) and (e) Not applicable. (b) and (c) The information set forth in Section 10 under the caption "Legal and regulatory matters" in Appendix VI to the Offer to Purchase is incorporated herein by reference. (d) The information set forth in Section 9(c) under the caption "Margin securities" in Appendix VI to the Offer to Purchase is incorporated herein by reference. (f) Reference is made to the information set forth in the Offer to Purchase, the Letter of Transmittal and the Form of the Acceptance, which is incorporated herein by reference. Item 11. Material to be Filed as Exhibits. (a) (1) Offer to Purchase dated September 4, 1998. (2) Form of Letter of Transmittal. (3) Forms of Acceptance, Authority and Election Relating to the Offer. (4) Form of Notice of Guaranteed Delivery. (5) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. 6 7 (6) Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (7) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (8) Text of press announcement issued by Marsh & McLennan and Sedgwick, dated August 25, 1998. (9) Text of press release of Marsh & McLennan, dated August 25, 1998. (10) Summary advertisement published in the U.S., dated September 4, 1998. (11) Newspaper advertisement published in the U.K., dated September 4, 1998. (b) Credit Agreement, dated as of August 24, 1998, among Marsh & McLennan Companies Inc., the Lenders Party Thereto, and Morgan Guaranty Trust Company of New York, as Administrative Agent. (c) (1) Form of Irrevocable Undertaking executed by certain directors of Sedgwick. (2) Form of Irrevocable Undertaking executed by certain shareholders of Sedgwick. (3) Form of Conditional Share Purchase Agreement between Marsh & McLennan Companies, Inc. and certain shareholders of Sedgwick (4) Letter Agreement between Sedgwick and Marsh & McLennan, dated August 25, 1998. (d) Not applicable. (e) Not applicable. (f) The Offer to Purchase, dated September 4, 1998, the Form of Letter of Transmittal and the Form of Acceptance, Authority and Election Relating to the Offer, which are incorporated herein by reference. 7 8 SIGNATURES After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. MARSH & McLENNAN COMPANIES, INC. By: /s/ Gregory F. Van Gundy ------------------------------------ Name: Gregory F. Van Gundy Title: General Counsel and Secretary Dated: September 4, 1998 9 EXHIBIT INDEX (a) (1) Offer to Purchase dated September 4, 1998. (2) Form of Letter of Transmittal. (3) Forms of Acceptance, Authority and Election Relating to the Offer. (4) Form of Notice of Guaranteed Delivery. (5) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees from J.P. Morgan and DLJ. (6) Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (7) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (8) Text of press announcement issued by Marsh & McLennan and Sedgwick, dated August 25, 1998. (9) Text of press release of Marsh & McLennan, dated August 25, 1998. (10) Summary advertisement published in the U.S., dated September 4, 1998. (11) Newspaper advertisement published in the U.K., dated September 4, 1998. (b) Credit Agreement, dated as of August 24, 1998, among Marsh & McLennan Companies Inc., the Lenders Party Thereto, and Morgan Guaranty Trust Company of New York, as Administrative Agent. (c) (1) Form of Irrevocable Undertaking executed by certain directors of Sedgwick. (2) Form of Irrevocable Undertaking executed by certain shareholders of Sedgwick. (3) Form of Conditional Share Purchase Agreement between Marsh & McLennan Companies, Inc. and certain shareholders of Sedgwick (4) Letter Agreement between Sedgwick and Marsh & McLennan, dated August 25, 1998. (d) Not applicable. (e) Not applicable. (f) The Offer to Purchase, dated September 4, 1998, the Form of Letter of Transmittal and the Form of Acceptance, Authority and Election Relating to the Offer, which are incorporated herein by reference. EX-99.A.1 2 OFFER TO PURCHASE DATED SEPTEMBER 4, 1998 1 RECOMMENDED CASH OFFERS ON BEHALF OF LOGO OF MARSH & MCLENNAN FOR LOGO OF SEDGWICK 2 SUMMARY OF THE OFFERS THE ORDINARY OFFER SEDGWICK SHAREHOLDERS FOR EACH SEDGWICK SHARE 225 PENCE IN CASH TO ACCEPT THE ORDINARY OFFER 1. Complete the WHITE Shareholder Form of Acceptance in accordance with the instructions set out on pages 17-19 and in Part B of Appendix I to this document. 2. Return the completed WHITE Shareholder Form of Acceptance (together with any appropriate documents of title) using the enclosed reply-paid envelope as soon as possible, but in any event so as to arrive by no later than 5 October 1998. SEDGWICK ADS HOLDERS FOR EACH SEDGWICK ADS L11.25 IN CASH TO ACCEPT THE ORDINARY OFFER 1. Complete the Letter of Transmittal in accordance with the instructions set out on page 19 and in Part B of Appendix I to this document. 2. Return the completed Letter of Transmittal (together with any appropriate documents of title) using the enclosed reply-paid envelope as soon as possible, but in any event so as to arrive by no later than 5 October 1998. THE CONVERTIBLE OFFER SEDGWICK BONDHOLDERS FOR EACH L1 NOMINAL OF SEDGWICK CONVERTIBLE BONDS 123 PENCE IN CASH TO ACCEPT THE CONVERTIBLE OFFER 1. Complete the BLUE Bondholder Form of Acceptance in accordance with the instructions set out on pages 19 and 20 and in Part B of Appendix I to this document. 2. Return the completed BLUE Bondholder Form of Acceptance (and deliver the bonds relating thereto in accordance with the above instructions) as soon as possible, but in any event so as to arrive by no later than 5 October 1998. THE FIRST CLOSING DATE OF THE OFFERS IS 5 OCTOBER 1998 If you require assistance, please telephone: UK Receiving Agent: +44(0)117 937 0672 US Depositary: +1-800-507-9357 This page should be read in conjunction with the rest of this document. Holders of Sedgwick Securities and Sedgwick Convertible Bonds are recommended to seek financial advice from their independent financial adviser authorised under the Financial Services Act 1986. 3 TABLE OF CONTENTS
PAGE ---- Letter from the Chairman of Sedgwick........................ 6 Letter from J.P. Morgan and Donaldson, Lufkin & Jenrette.... 9 1. Introduction........................................... 9 2. The Offers............................................. 9 3. Reasons for the Offers................................. 10 4. Irrevocable undertakings and conditional purchases..... 11 5. Terms and Conditions of the Offers..................... 12 6. Loan Note Alternative.................................. 12 7. Financial effects of acceptance of the Ordinary Offer................................................. 13 8. Accounting treatment................................... 13 9. Regulation............................................. 13 10. Information on the Marsh & McLennan Group............. 13 11. Information on the Sedgwick Group..................... 14 12. Financing............................................. 14 13. Employee matters and share schemes.................... 14 14. UK taxation........................................... 15 15. US taxation........................................... 16 16. Overseas securityholders and bondholders.............. 17 17. Procedure for acceptance of the Offers................ 17 18. Rights of withdrawal.................................. 21 19. Settlement............................................ 21 20. Further information................................... 23 21. Action to be taken.................................... 23 Appendix I: Conditions and further terms of the Offers...... I-1 Appendix II: Particulars of the Loan Notes.................. II-1 Appendix III: Financial information on Sedgwick............. III-1 Appendix IV: Financial information on Marsh & McLennan...... IV-1 Appendix V: Certain market, dividend and exchange rate information............................................... V-1 Appendix VI: Additional information......................... VI-1 1. Responsibility......................................... VI-1 2. Directors and executive officers of Marsh & McLennan and Sedgwick.......................................... VI-1 3. Principal purchases.................................... VI-6 4. Shareholdings and dealings in relevant Sedgwick Securities and Sedgwick Convertible Bonds............. VI-7 5. Material contracts..................................... VI-13 6. Background to the Offers............................... VI-15 7. Financing arrangements................................. VI-16 8. Compulsory acquisition................................. VI-17 9. Certain consequences of the Offers..................... VI-17 10. Legal and regulatory matters.......................... VI-18 11. UK taxation........................................... VI-21 12. US federal income taxation............................ VI-23 13. Cash confirmation..................................... VI-24 14. Fees and expenses..................................... VI-24 15. Service contracts of Sedgwick directors............... VI-25 16. Sources of information and bases of calculation....... VI-27 17. Other information..................................... VI-27 18. Documents available for inspection.................... VI-28 Appendix VII: Certain provisions of the Companies Act....... VII-1 Appendix VIII: Definitions.................................. VIII-1
2 4 OFFER TO PURCHASE DATED 4 SEPTEMBER 1998 THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. WHEN CONSIDERING WHAT ACTION YOU SHOULD TAKE, YOU ARE RECOMMENDED IMMEDIATELY TO SEEK YOUR OWN FINANCIAL ADVICE FROM YOUR STOCKBROKER, BANK MANAGER, SOLICITOR, ACCOUNTANT OR OTHER INDEPENDENT FINANCIAL ADVISER AUTHORISED UNDER THE FINANCIAL SERVICES ACT 1986. If you have sold or otherwise transferred all of your Sedgwick Securities and Sedgwick Convertible Bonds, please send this document, together with the accompanying documents, as soon as possible, to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer was effected for onward transmission to the purchaser or transferee. HOWEVER, SUCH DOCUMENTS SHOULD NOT BE FORWARDED OR TRANSMITTED IN OR INTO CANADA, AUSTRALIA OR JAPAN OR ANY OTHER JURISDICTION IF TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS IN SUCH JURISDICTIONS. SEE PARAGRAPH 8 OF PART B OF APPENDIX I TO THIS DOCUMENT. The Initial Offer Period will expire at 3.00 p.m. (London time), 10.00 a.m. (New York City time) on 5 October 1998, unless extended. At the conclusion of the Initial Offer Period, including any extension thereof, if all the Conditions of the Offers have been satisfied, fulfilled or, where permitted, waived, the Offers will be extended for a Subsequent Offer Period of at least 14 calendar days. Holders of Sedgwick Securities and Sedgwick Convertible Bonds will have withdrawal rights during the Initial Offer Period, including any extension thereof, but not during the Subsequent Offer Period. Completed Acceptance Forms should be returned as soon as possible, but in any event so as to be received by no later than 3.00 p.m. (London time), 10.00 a.m. (New York City time) on 5 October 1998. The procedure for acceptance of the Offers is set out on pages 17 to 20 and in Part B of Appendix I to this document and in the accompanying Acceptance Forms. The Offers are not being made, directly or indirectly, in or into Canada, Australia or Japan. Accordingly, neither this document nor the Acceptance Forms are being mailed or otherwise distributed or sent into Canada, Australia or Japan. The Loan Notes which may be issued pursuant to the Offers have not been, and will not be, registered under the US Securities Act, or under any relevant securities laws of any state or district of the US and, unless so registered, may not be offered or sold, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and any relevant securities laws of any state or district of the US. The Loan Notes which may be issued pursuant to the Offers will not be the subject of a prospectus under the securities laws of any province of Canada and will not be registered under any relevant securities laws of any country. The Loan Notes are not being offered, sold or delivered, directly or indirectly, in or into the US, Canada, Australia or Japan. J.P. Morgan, Donaldson, Lufkin & Jenrette and Cazenove, which are regulated in the UK by The Securities and Futures Authority Limited, are acting for Marsh & McLennan and for no one else in connection with the Offers and will not be responsible to anyone other than Marsh & McLennan for providing the protections afforded to their respective customers nor for giving advice in relation to the Offers. Rothschild and Credit Suisse First Boston, which are regulated in the UK by The Securities and Futures Authority Limited, are acting for Sedgwick and for no one else in connection with the Offers and will not be responsible to anyone other than Sedgwick for providing the protections afforded to their respective customers nor for giving advice in relation to the Offers. 3 5 CERTAIN DEFINITIONS The definitions of certain expressions used in this document are contained in Appendix VIII. APPLICABLE DISCLOSURE REQUIREMENTS The Offers are being made for securities of a UK company and, while the Offers are subject to UK and US disclosure requirements, US investors should be aware that this document has been prepared primarily in accordance with UK format and style, which differs from US format and style. In particular, the Appendices to this document contain information concerning the Offers responsive to US disclosure requirements that may be material some of which is summarised in the letter from J.P. Morgan and Donaldson, Lufkin & Jenrette set out on pages 9 to 23 of this document. In addition, the summary financial statements of Sedgwick included therein have been prepared in accordance with UK GAAP, and thus may not be comparable to financial statements of US companies. FORWARD-LOOKING STATEMENTS This Offer Document may include forward-looking statements. Such statements may include, without limitation, discussions concerning revenue and expense growth, cost savings and efficiencies expected from the integration of Johnson & Higgins (which was acquired by Marsh & McLennan in March 1997) or Sedgwick, Year 2000 remediation and testing of computer systems, market and industry conditions, interest rates, foreign exchange rates, contingencies and matters relating to Marsh & McLennan's operations and income taxes. Such forward-looking statements are based on available current market and industry materials, experts' reports and opinions, as well as management's expectations concerning future events impacting Marsh & McLennan. Forward-looking statements by their very nature involve risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by any forward-looking statements contained or incorporated herein include, in the case of Marsh & McLennan's risk and insurance services business, the failure to successfully integrate the insurance services and employee benefits consulting business of Johnson & Higgins and Sedgwick (including the achievement of synergies and cost reductions), changes in competitive conditions, a decrease in the premium rate levels in the global property and casualty insurance markets, the impact of changes in insurance markets and natural catastrophes; in the case of Marsh & McLennan's investment management business, changes in the worldwide and national securities and fixed income markets; and, with respect to all of Marsh & McLennan's activities, the failure of Marsh & McLennan and/or its significant business partners to be Year 2000 compliant on a timely basis, changes in general worldwide and national economic conditions, fluctuations in foreign currencies, actions of competitors or regulators, changes in interest rates, developments relating to claims and lawsuits, changes in the tax or accounting treatment of the registrant's operations and the impact of tax and other legislation and regulation in the jurisdictions in which Marsh & McLennan operates. REDUCTION OF THE ACCEPTANCE CONDITION The Offers are conditional, amongst other things, on valid acceptances being received (and not, where permitted, withdrawn) by the Initial Closing Date in respect of not less than 90 per cent. in nominal value of the Sedgwick Securities to which the Ordinary Offer relates, or such lower percentage as Marsh & McLennan may decide, provided that such Condition (the "Acceptance Condition") shall not be satisfied unless Marsh & McLennan and/or its wholly-owned subsidiaries shall have acquired or agreed to acquire, whether pursuant to the Ordinary Offer or otherwise, Sedgwick Securities carrying in aggregate more than 50 per cent. of the voting rights then exercisable at general meetings of Sedgwick and provided further that the Acceptance Condition shall be capable of being satisfied only at a time when all other Conditions have been satisfied, fulfilled or waived unless Marsh & McLennan otherwise determines. Marsh & McLennan reserves the right to reduce the percentage of Sedgwick Securities required to satisfy the Acceptance Condition at some time prior to all the Conditions being satisfied, fulfilled or, where permitted, waived. At least five Business Days prior to any such reduction, Marsh & McLennan will announce that it has reserved the right so to reduce the 4 6 Acceptance Condition. Such announcement will state the percentage to which the Acceptance Condition may be reduced and will state that such a reduction is possible but that Marsh & McLennan need not declare its actual intentions until it is required to do so under the City Code. Marsh & McLennan will not make such an announcement unless it believes that there is a significant possibility that sufficient Sedgwick Securities will be tendered to permit the Acceptance Condition to be satisfied at such reduced level. Holders of Sedgwick Securities or Sedgwick Convertible Bonds who are not willing to accept the Ordinary Offer or the Convertible Offer, as the case may be, if the Acceptance Condition is reduced to a level lower than 90 per cent. should either not accept the relevant Offer until the Subsequent Offer Period or be prepared to withdraw their acceptances promptly following an announcement by Marsh & McLennan of its reservation of the right to reduce the Acceptance Condition. RULE 10B-13 EXEMPTION In accordance with normal UK practice, Marsh & McLennan or its nominees or brokers (acting as agents for Marsh & McLennan) may make certain purchases of Sedgwick Securities and Sedgwick Convertible Bonds outside the US during the period in which the Offers remain open for acceptance pursuant to relief granted by the SEC staff from Rule 10b-13 under the Exchange Act. In accordance with the terms of the SEC relief that has been granted, among other things, (i) such purchases may not be effected within the US, (ii) information regarding such purchases must be disclosed in the US by press release to the extent that disclosure is made public in the UK pursuant to the City Code and (iii) Marsh & McLennan and any such other person must comply with any applicable rules of UK regulatory organisations, including the rules of the London Stock Exchange and the City Code. CONVERSION OF CASH CONSIDERATION INTO US DOLLARS Holders of Sedgwick Shares and Sedgwick Convertible Bonds may receive US dollars instead of pounds sterling on the basis described in paragraph 19(f) ("Currency of cash consideration") of the letter from J.P. Morgan and Donaldson, Lufkin & Jenrette included in this Offer Document. Holders of Sedgwick ADSs, unless they elect to receive pounds sterling, will receive US dollars on the basis described in that paragraph. The attention of all Sedgwick Securityholders and Sedgwick Bondholders is drawn to the description in that paragraph of the mechanism for converting pounds sterling into US dollars and of the exchange rate risks attached thereto. FINANCIAL INFORMATION The extracts from the consolidated financial statements of, and other information about, Marsh & McLennan appearing in this Offer Document are presented in US dollars ($) and have been prepared in accordance with US GAAP. The extracts from the consolidated financial statements of, and other information about, Sedgwick appearing in this Offer Document are presented in pounds sterling (L) and have been prepared in accordance with UK GAAP. US GAAP and UK GAAP differ in certain significant respects. RULE 8 NOTICES Any person who, alone or acting together with any other person(s) pursuant to an agreement or understanding (whether formal or informal) to acquire or control securities of Sedgwick, owns or controls or becomes the owner or controller, directly or indirectly, of 1 per cent. or more of any class of securities of Sedgwick is generally required under the provisions of Rule 8 of the City Code to notify the London Stock Exchange and the Panel of every dealing in such securities during the Offer Period. Dealings by Sedgwick or by Marsh & McLennan or by their respective "associates" (within the definition set out in the City Code) in any class of securities of Sedgwick during the Offer Period must also be so disclosed. Please consult your financial adviser immediately if you believe this Rule may be applicable to you. 5 7 LOGO OF SEDGWICK GROUP PLC Sackville House, 143-149 Fenchurch Street, London EC3M 6BN Registered in England number 100691 To Sedgwick Shareholders, ADS holders and Bondholders and, for information only, to participants in the Sedgwick Share Option Schemes. 4 September 1998 Dear Shareholder, ADS holder or Bondholder, RECOMMENDED CASH OFFERS FOR SEDGWICK It was announced on 25 August 1998 that the boards of Marsh & McLennan and Sedgwick had agreed the terms of a recommended cash offer to be made on behalf of Marsh & McLennan for the entire issued and to be issued share capital of Sedgwick, and that proposals would be put to Sedgwick Bondholders in respect of their holdings of Sedgwick Convertible Bonds. I am writing to set out the background to and reasons for the Offers and to explain why your board considers that the terms are fair and reasonable and is unanimously recommending that you accept the Offers. THE OFFERS You will find set out on pages 9 to 23 of this document a letter from J.P. Morgan and Donaldson, Lufkin & Jenrette containing the formal Offers. THE ORDINARY OFFER The Ordinary Offer, which is subject to the Conditions and further terms set out in Appendix I, is being made on the following basis: for each Sedgwick Share................................... 225 pence in cash. for each Sedgwick ADS..................................... L11.25 in cash.
The Ordinary Offer values the entire issued share capital of Sedgwick at L1,247 million and represents a premium of 57.9 per cent. over the Closing Price of 142.5 pence per Sedgwick Share on 24 August 1998 (the last business day prior to the announcement of the Ordinary Offer). Sedgwick Securityholders on the register at the close of business on Friday, 21 August 1998 will retain the right to receive the interim dividend of 3.0 pence (net) per Sedgwick Share announced on 11 August 1998 and payable on 19 October 1998. THE CONVERTIBLE OFFER The Convertible Offer, which is subject to the Condition and further terms set out in Appendix I, is being made on the following basis: for each L1 nominal of Sedgwick Convertible Bonds........... 123 pence in cash.
6 8 Bondholders are also entitled to the interest payment of 3.625 pence per L1 nominal of Sedgwick Convertible Bonds payable in respect of the period from 31 May 1998 to 30 November 1998 as described in paragraph 2 of the letter from J.P. Morgan and Donaldson, Lufkin & Jenrette in this document. The Convertible Offer is conditional on the Ordinary Offer being declared unconditional in all respects. LOAN NOTE ALTERNATIVE Instead of some or all of the cash consideration which would otherwise be receivable under the Offers, accepting Sedgwick Shareholders and Sedgwick Bondholders (other than Sedgwick Shareholders and Sedgwick Bondholders who are US Persons and certain other overseas persons) will be entitled to elect to receive Loan Notes on the basis described in paragraph 6 of the letter from J.P. Morgan and Donaldson, Lufkin & Jenrette contained in this document. Further details of the Loan Notes are set out in Appendix II to this document. BACKGROUND TO AND REASONS FOR RECOMMENDING THE OFFERS Some time ago, we recognised that we needed to manage our insurance business against an industry background of excess capacity, falling rates and a trend by large organisations towards self insurance. We decided to change our business's reliance on traditional commission-based broking to a position where advisory and consultancy fees formed a significant proportion of our revenue. An important element of this strategy was the development of employee benefits consulting into a core activity. Implementation of this strategy has reduced Sedgwick's dependency on the vagaries of the insurance market and enabled the group to capitalise on the increasing need for companies to outsource activities, such as risk control, claims management, pensions management and healthcare administration. In these difficult markets, the insurance broking industry has undergone significant consolidation in recent years, driven largely by a lack of opportunity to grow revenue organically and by the need to cut costs. These trends inevitably led to speculation about Sedgwick's future. Earlier this year, we carried out a strategic review of our business which concluded that the best course of action would be to identify a suitable major partner for the development of the Sedgwick Group. In the latter part of May, we approached Marsh & McLennan with a view to exploring the possibility of a transaction between the two companies. Following a period of negotiation and having considered all the options open to us, your board decided that the proposal from Marsh & McLennan, put before the board on 24 August 1998, represented the most attractive alternative. In particular: - Sedgwick Shareholders will benefit from a cash offer of 225 pence, a premium of 57.9 per cent. to the Closing Price on 24 August 1998; - career opportunities for Sedgwick employees should be enhanced within what is expected to be the leading risk consultancy, insurance broking and employee benefits organisation in the world; and - clients should benefit from the continued focus on quality of service, a broader geographic spread and from the increased resources and breadth of services of the enlarged group. MANAGEMENT AND EMPLOYEES Rob White-Cooper and I will join the board of Marsh & McLennan once the Offers become unconditional in all respects. Rob White-Cooper will become chairman of Sedgwick Marsh & McLennan, which will comprise the enlarged group's insurance broking and risk management activities which operate principally outside the Americas. In addition, Marsh & McLennan has agreed that the heads of Sedgwick's broking businesses in Asia Pacific, Europe and North America, and the head of Sedgwick Noble Lowndes, will hold positions of influence in the new organisation. Marsh & McLennan has indicated that, while there will inevitably be some redundancies in the course of consolidation of the two businesses, it attaches great importance to the skills and experience of the management and employees of Sedgwick and believes that the career opportunities available to them will be 7 9 enhanced as a result of being part of the Marsh & McLennan organisation. Marsh & McLennan has also agreed to put in place incentive arrangements for key Sedgwick employees, including certain executive directors, to enable them to participate in the performance of the combined group. Marsh & McLennan has given assurances to the board of Sedgwick that the existing employment rights, including pension rights and entitlements under the existing employment related policies, of all directors, management and employees of Sedgwick will be honoured. In particular, any employee of Sedgwick made redundant on or before 31 December 1999 will be entitled to a redundancy payment which will be no less favourable than he or she would have received under the current redundancy policies adopted by Sedgwick. SEDGWICK SHARE OPTION SCHEMES The Ordinary Offer extends to any Sedgwick Securities which are unconditionally allotted or issued while the Ordinary Offer remains open for acceptance (or until such earlier date as Marsh & McLennan may, subject to the City Code, determine) including any Sedgwick Shares unconditionally allotted or issued pursuant to the exercise of Options under the Sedgwick Share Option Schemes. Further information on the proposals to be put to Optionholders is set out in paragraph 13(b) of the letter from J.P. Morgan and Donaldson, Lufkin & Jenrette contained in this document. Formal proposals will be sent to Optionholders in due course. IRREVOCABLE UNDERTAKINGS AND CONDITIONAL PURCHASES Irrevocable undertakings to accept the Ordinary Offer have been received from directors of Sedgwick and certain other persons in respect of Sedgwick Securities representing in aggregate 40.4 per cent. of Sedgwick's issued share capital. In addition, Marsh & McLennan has conditionally agreed to acquire a further 9.9 per cent. of the issued share capital of Sedgwick at 225 pence per share. ACTION TO BE TAKEN The procedure for acceptance of the Offers is set out on pages 17 to 21 and in Part B to Appendix I to this document and in the enclosed Acceptance Forms. Please return all required documents to the UK Receiving Agent or the US Depositary, as appropriate, in accordance with the instructions set out in paragraph 17 of the letter from J.P. Morgan and Donaldson, Lufkin & Jenrette in this document as soon as possible and in any event so as to be received by no later than 3.00 p.m. (London time), 10.00 a.m. (New York City time) on 5 October 1998. RECOMMENDATION THE DIRECTORS OF SEDGWICK, WHO HAVE BEEN SO ADVISED BY ROTHSCHILD AND CREDIT SUISSE FIRST BOSTON, CONSIDER THE TERMS OF THE OFFERS TO BE FAIR AND REASONABLE. IN PROVIDING ADVICE TO THE DIRECTORS OF SEDGWICK, ROTHSCHILD AND CREDIT SUISSE FIRST BOSTON HAVE TAKEN INTO ACCOUNT THE COMMERCIAL ASSESSMENTS OF THE DIRECTORS OF SEDGWICK. ACCORDINGLY, THE DIRECTORS OF SEDGWICK UNANIMOUSLY RECOMMEND ALL SEDGWICK SECURITYHOLDERS AND SEDGWICK BONDHOLDERS TO ACCEPT THE OFFERS AS THEY INTEND TO DO IN RESPECT OF THEIR OWN HOLDINGS. Yours sincerely, S. Riley Chairman 8 10 LOGO OF J.P. MORGAN LOGO OF DONALDSON, LUFKIN & JENRETTE 4 September 1998 To Sedgwick Shareholders, ADS holders and Bondholders and, for information only, to participants in the Sedgwick Share Option Schemes. Dear Shareholder, ADS holder or Bondholder, RECOMMENDED CASH OFFERS FOR SEDGWICK 1. INTRODUCTION This letter contains the formal Offers which we are making on behalf of Marsh & McLennan. The Offers and this document are subject to the applicable requirements of both the City Code and US federal securities laws. Your attention is drawn to the letter from the Chairman of Sedgwick on pages 6 to 8 of this document, from which you will see that the directors of Sedgwick, who have been so advised by Rothschild and Credit Suisse First Boston, consider the terms of the Offers to be fair and reasonable and unanimously recommend all Sedgwick Securityholders and Sedgwick Bondholders to accept the Offers. In providing their advice, Rothschild and Credit Suisse First Boston have taken into account the commercial assessments of the directors of Sedgwick. Certain Sedgwick Securityholders and Sedgwick Bondholders have irrevocably undertaken to accept the Offers, as described in paragraph 4 of this letter. 2. THE OFFERS On behalf of Marsh & McLennan, we hereby offer to acquire, upon the terms and subject to the Conditions set out in Appendix I to this document and in the relevant Acceptance Forms, all the issued and to be issued Sedgwick Securities and all the outstanding Sedgwick Convertible Bonds on the basis set out below: (A) THE ORDINARY OFFER for each Sedgwick Share................................. 225 pence in cash. for each Sedgwick ADS................................... L11.25 in cash.
The Ordinary Offer values the entire issued share capital of Sedgwick at L1,247 million and represents a premium of 57.9 per cent. over the Closing Price of 142.5 pence per Sedgwick Share on 24 August 1998 (the last business day prior to the announcement of the Ordinary Offer). (B) THE CONVERTIBLE OFFER for each L1 nominal of Sedgwick Convertible Bonds.............................. 123 pence in cash.
The Convertible Offer values the existing Sedgwick Convertible Bonds at approximately L51 million. Sedgwick Shareholders and Sedgwick Bondholders may elect to receive Loan Notes under the Loan Note Alternative, as referred to in paragraph 6 of this letter. - -------------------------------------------------------------------------------- A subsidiary of J.P. Morgan & Co. Incorporated Regulated by The Securities and Futures Authority Registered as a branch in England. Branch No. 001366. Registered in England and Wales: 2475089 Registered No. FC000297. A Limited Liability Private Company. Registered with the Superintendent of Banks in the State of New York, U.S.A. Incorporated with limited liability in the State of New York, U.S.A. Regulated by SFA and IMRO
9 11 Sedgwick Securities and Sedgwick Convertible Bonds will, save as described below, be acquired under the Offers fully paid and free from all liens, equities, charges, encumbrances and other interests and together with all rights attaching thereto on or after 25 August 1998, including, without limitation, the right to receive and retain all dividends, interest and other distributions declared, made or paid on or after 25 August 1998, the date on which the Ordinary Offer was announced. Sedgwick Securityholders on the register at the close of business on 21 August 1998 will be entitled to receive and retain the interim dividend of 3.0 pence (net) per Sedgwick Share payable on 19 October 1998 in respect of the year ending 31 December 1998. Accepting Sedgwick Bondholders will be entitled to the interest payment of 3.625 pence per L1 nominal of Sedgwick Convertible Bonds payable in accordance with the terms of the Trust Deed in respect of the period from 31 May 1998 to 30 November 1998. If such interest payment is not received directly by the relevant Sedgwick Bondholder then, to the extent that Marsh & McLennan receives such interest in relation to Sedgwick Convertible Bonds which have been validly assented to the Convertible Offer, it shall hold the same on trust for the relevant accepting Sedgwick Bondholders and shall use all reasonable endeavours to procure that such interest is remitted to the relevant Sedgwick Bondholders as soon as reasonably practicable, and in any event within 14 days, after receiving such interest by such means as Marsh & McLennan may reasonably decide. Holders of Sedgwick Bearer Bonds are reminded to retain, if possible, their coupon in respect of the period from 31 May 1998 to 30 November 1998 so that they may claim interest in respect of such period directly. TO ACCEPT THE OFFERS YOU SHOULD RETURN THE RELEVANT ACCEPTANCE FORMS, TOGETHER WITH ALL OTHER REQUIRED DOCUMENTS, AS SOON AS POSSIBLE AND, IN ANY EVENT, SO AS TO BE RECEIVED BY THE UK RECEIVING AGENT (IF YOU ARE A NON-US HOLDER) OR THE US DEPOSITARY (IF YOU ARE A US HOLDER) BY NO LATER THAN 3.00 P.M. (LONDON TIME), 10.00 A.M. (NEW YORK CITY TIME) ON 5 OCTOBER 1998. THE PROCEDURE FOR ACCEPTANCE OF THE OFFERS IS SET OUT IN PARAGRAPH 17 ("PROCEDURE FOR ACCEPTANCE OF THE OFFERS") AND IN PART B OF APPENDIX I BELOW, AND IN THE ACCOMPANYING ACCEPTANCE FORMS. 3. REASONS FOR THE OFFERS As one of the world's leading providers of professional services, Marsh & McLennan is confident that its chosen strategies in risk and insurance services, investment management and consulting will continue to yield strong results for the future. Consistent with these strategies, Marsh & McLennan is determined to pursue opportunities which it believes will allow it to enhance further the service it offers its clients and to increase its operational efficiencies, together leading to greater shareholder value. The board of Marsh & McLennan believes that the acquisition of Sedgwick will provide such opportunities. Marsh & McLennan seeks to benefit from growing demand worldwide for professional services, through a combination of businesses, depth of services and breadth of global professional capabilities through which to serve clients. Marsh & McLennan expects that the addition of Sedgwick to its portfolio of businesses will position it to achieve these objectives. Marsh & McLennan believes that the acquisition will give it an opportunity to expand in two out of its three business areas, risk and insurance services and consulting, which it expects to provide strong future growth and to contribute to earnings. Sedgwick is the largest independent European-based broker and the third largest broker in the world, with a recognised brand name, particularly in the UK, continental Europe and Asia Pacific, excellent professional staff and operations and a substantial client base. In the UK, a combination with Sedgwick increases Marsh & McLennan's presence and provides Marsh & McLennan with access to Sedgwick's important client base. In the US, the transaction expands Marsh & McLennan's activities in a number of areas. Sedgwick is well positioned in continental European markets such as Belgium, the Netherlands, Italy and the Scandinavian countries. Marsh & McLennan expects that the acquisition of Sedgwick will strengthen its position in Asia Pacific markets such as Hong Kong and Singapore, as well as providing it with a well-established business in South Africa. Accordingly, Marsh & McLennan currently intends to retain the Sedgwick brand name in various places throughout the world. 10 12 Sedgwick Noble Lowndes is among the world's leading employee benefits consulting firms, with operations in the UK, the US and elsewhere and Marsh & McLennan expects that, together with Marsh & McLennan's consulting firm Mercer Consulting Group, Inc., it will provide growth opportunities. The Offers provide an opportunity for the Sedgwick Group to compete more effectively in the increasingly competitive insurance services business as part of a larger international group. The Board of Marsh & McLennan expects that substantial benefits will arise from being able to offer Sedgwick's clients a much broader range of products. In addition, a combination of the two companies would provide an opportunity further to increase earnings through the realisation of significant consolidation savings from combining operations. Marsh & McLennan believes that the combination will also allow increased operational efficiency across their businesses, leading to stronger service to clients and therefore to enhanced shareholder value. Marsh & McLennan has indicated that it anticipates ultimately achieving as a result of the transaction pre-tax cost savings of approximately $200 million per year, with the most significant impact occurring in the year 2000. Marsh & McLennan expects the acquisition to be accretive to its earnings per share, beginning in the year 2000. These statements should not be taken to mean that Marsh & McLennan's earnings per share for 1998 and subsequent periods will be higher than that of prior periods. 4. IRREVOCABLE UNDERTAKINGS AND CONDITIONAL PURCHASES (A) IRREVOCABLE UNDERTAKINGS Irrevocable undertakings to accept, or procure the acceptance of, the Ordinary Offer have been received from directors of Sedgwick in respect of securities representing 245,814 Sedgwick Shares, and from: - Phillips & Drew Fund Management Limited in respect of 122,955,977 Sedgwick Shares, and to accept the Convertible Offer in respect of L250,000 in nominal value of Sedgwick Convertible Bonds; - Schroder Investment Management (UK) Limited in respect of 76,732,862 Sedgwick Shares; and - Silchester International Investors Limited in respect of 24,000,000 Sedgwick Shares. Accordingly, Marsh & McLennan has received irrevocable undertakings to accept, or procure the acceptance of, the Ordinary Offer in respect of securities representing a total of 223,934,653 Sedgwick Shares, and representing in aggregate 40.4 per cent. of Sedgwick's issued share capital. The irrevocable undertakings given by Phillips & Drew Fund Management Limited, Schroder Investment Management (UK) Limited and Silchester International Investors Limited will cease to be binding in the event that a competing offer is made for Sedgwick at a price of not less than 250.5 pence per Sedgwick Share, or if the Ordinary Offer lapses or is withdrawn. All other irrevocable undertakings will continue to be binding in the event of a competing offer being made for Sedgwick by a third party unless the Ordinary Offer lapses or is withdrawn. (B) CONDITIONAL PURCHASES Between 27 August 1998 and 28 August 1998, J.P. Morgan Securities Limited and Cazenove, on behalf of Marsh & McLennan, agreed to acquire, conditional on, amongst other things, all applicable waiting periods under the HSR Act having expired or been terminated by no later than 27 September 1998, a total of 54,862,345 Sedgwick Shares at 225 pence per share. These shares, which represent 9.9 per cent. of the issued share capital of Sedgwick, were conditionally acquired from major institutional shareholders in Sedgwick for settlement through CREST. 11 13 (C) IRREVOCABLE UNDERTAKINGS AND CONDITIONAL PURCHASES IN AGGREGATE Accordingly, Marsh & McLennan has either conditionally agreed to acquire, or has received irrevocable undertakings to accept, or procure the acceptance of, the Ordinary Offer in respect of, securities representing a total of 278,796,998 Sedgwick Shares, and representing in aggregate 50.3 per cent. of Sedgwick's issued share capital. 5. TERMS AND CONDITIONS OF THE OFFERS The Offers (including the Loan Note Alternative) are subject to the Conditions and further terms set out in Appendix I below. 6. LOAN NOTE ALTERNATIVE A Loan Note Alternative is available to Sedgwick Shareholders and to Sedgwick Bondholders (other than Sedgwick Shareholders and Sedgwick Bondholders who are citizens or residents of the US and certain other overseas persons) who validly accept the Offers, on the basis of L1 nominal of Loan Notes for every L1 of cash that they would otherwise receive under the Offers, subject to aggregate valid elections being received on or before the date on which the Offers become or are declared unconditional in all respects for in excess of L5 million nominal value of Loan Notes. If insufficient elections are received, Sedgwick Shareholders and Sedgwick Bondholders who validly accept the Offers and elect for the Loan Note Alternative will instead receive cash in accordance with the terms of the Offers. Subject as aforesaid, the Loan Note Alternative will remain open as long as the Offers are open for acceptance. Fractional entitlements to Loan Notes will be disregarded. Payment of interest on the Loan Notes will not generally be subject to US withholding tax, provided that, prior to the date on which the interest is paid, the beneficial owner of the Loan Notes certifies to Marsh & McLennan or its paying agent that he or she is a Non-US Holder. J.P. Morgan has advised that, based on market conditions on 3 September 1998 (the latest practicable date prior to the publication of this document), in its opinion, if the Loan Notes had then been in issue, the value of each L1 nominal of Loan Notes would have been approximately 98.5 pence. In considering the Loan Note Alternative, Sedgwick Shareholders and Sedgwick Bondholders should note that the obligations of Marsh & McLennan as issuer of the Loan Notes are not guaranteed or secured. The Loan Note Alternative will be conditional on the Offers becoming or being declared unconditional in all respects. A summary of the terms of the Loan Notes, including provisions relating to the calculation of the interest rate on the Loan Notes, is set out in Appendix II below. 12 14 7. FINANCIAL EFFECTS OF ACCEPTANCE OF THE ORDINARY OFFER The following table shows, for illustrative purposes only, and on the bases and assumptions set out in the notes below, the financial effects of acceptance of the Ordinary Offer on capital value and income for a holder of 100 Sedgwick Shares, if the Ordinary Offer becomes or is declared unconditional in all respects:
ORDINARY OFFER -------------- L (A) CAPITAL VALUE Cash consideration of 225 pence per Sedgwick Share.......... 225.00 Market value of 100 Sedgwick Shares......................... 142.50 Increase in capital value................................... 82.50 Representing an increase of................................. 57.9% (B) INCOME Income from cash consideration.............................. 12.06 Gross dividend income on 100 Sedgwick Shares................ 8.75 Increase in income.......................................... 3.31 Representing an increase of................................. 37.8%
Notes The market value of a Sedgwick Share is based on the Closing Price of 142.5 pence on 24 August 1998, being the last business day prior to the announcement of the Ordinary Offer. The income from the cash consideration has been calculated on the assumption that the cash is re-invested in UK Government securities so as to achieve an income of 5.36 per cent. per annum, being the average gross redemption yield on medium coupon UK Government fixed interest rate securities of maturities of 5 to 15 years, as derived from the FT Actuaries Index as at 2 September 1998 as published in the Financial Times on 3 September 1998, the latest practicable date prior to publication of this document. The dividend income on a Sedgwick Share is based upon the final dividend for the year ended 31 December 1997 of 4.0 pence (net) together with the interim dividend for the year ending 31 December 1998 of 3.0 pence (net), grossed up by a factor of 100/80. 8. ACCOUNTING TREATMENT The acquisition will be accounted for by Marsh & McLennan as a "purchase" for financial accounting purposes in accordance with US GAAP. The purchase price (i.e., the consideration) will be allocated based on the fair value of Sedgwick's assets acquired and liabilities assumed. Such allocations will be made based upon valuations and other studies that have not been finalised as of the date hereof. The excess of the purchase price of the acquisition over the amounts so allocated will be allocated to goodwill. 9. REGULATION The Offers are subject to certain regulatory consents and confirmations being obtained. The full text of the Conditions of the Offers is set out in Appendix I. Further details of regulatory issues applicable to the Offers are set out in paragraph 10 of Appendix VI below ("Legal and regulatory matters"). 10. INFORMATION ON THE MARSH & MCLENNAN GROUP Marsh & McLennan is a professional services firm providing risk and insurance services, investment management and consulting. Marsh & McLennan, with over 36,000 employees worldwide, provides analysis, advice and transactional capabilities to clients in over one hundred countries. Marsh & McLennan companies worldwide include J&H Marsh & McLennan, Inc., Marsh & McLennan Risk Capital Corp., Putnam Investments, Inc. and Mercer Consulting Group, Inc. J&H Marsh & McLennan Inc. is engaged in insurance broking, reinsurance broking and insurance programme management for business, professional, institutional and public-entity clients. Insurance broking is conducted under the name J&H Marsh & McLennan and includes the range of services to identify, value, control, 13 15 transfer and finance risk. Worldwide reinsurance broking advice and services for insurance and reinsurance companies are provided through Guy Carpenter & Company, Inc. The company structures and places reinsurance coverage and other risk-transfer financing with reinsurance firms and capital markets worldwide. Insurance programme management and underwriting management services in North America and the UK are provided through Seabury & Smith, Inc., which designs and administers specialised systems-driven insurance programs. Marsh & McLennan Risk Capital Corp. originates, structures and manages insurance and related industry investments and provides advisory services on a global basis. Putnam Investments, Inc. ("Putnam"), one of the oldest and largest money management organisations in the US, offers a full range of both equity and fixed income products, invested domestically and globally, for individual and institutional investors. Putnam, which manages more than 100 mutual funds, has nearly 700 institutional clients and 9 million individual shareholders of its funds. It had more than US$235 billion in assets under management at year-end 1997. Mercer Consulting Group, Inc., one of the largest consulting firms in the world, provides advice and services to the managements of organisations. William M. Mercer Companies LLC is one of the largest human resources, employee benefits and compensation consultancies. Mercer Management Consulting, Inc. is a leader in helping enterprises achieve sustained shareholder value growth through business design. National Economic Research Associates, Inc., the leading firm of consulting economists, specialises in providing solutions to problems involving competition, regulation, finance and public policy. Marsh & McLennan's common stock is listed on the New York, Chicago, Pacific and London stock exchanges. As at the close of trading on the New York Stock Exchange on 2 September 1998 (the latest practicable date prior to the posting of this document), Marsh & McLennan had a market capitalisation of approximately US$12.5 billion. The principal executive offices of Marsh & McLennan are located at 1166 Avenue of the Americas, New York, New York 10036; the telephone number is +1-212-345-5000. Further information on Marsh & McLennan is set out in Appendix IV below. 11. INFORMATION ON THE SEDGWICK GROUP Sedgwick is one of the world's leading consulting, insurance and reinsurance groups, operating in 70 countries from over 290 offices. The company has particular expertise in risk management and employee benefits. For the year ended 31 December 1997, the Sedgwick Group reported profit before tax of L101 million on turnover of L975 million and, as at 31 December 1997, the Sedgwick Group had net assets of L200 million. As at 31 December 1997, Sedgwick and its subsidiaries employed approximately 15,985 employees. Based on a Closing Price of 142.5 pence on 24 August 1998 (the last business day prior to the announcement of the Ordinary Offer), the market capitalisation of Sedgwick was L790 million. Further information on the Sedgwick Group is set out in Appendix III. 12. FINANCING Marsh & McLennan has arranged appropriate financing in connection with the Offers. Details of the financing arrangements for the Offers are set out in paragraph 7 of Appendix VI ("Financing arrangements") below. 13. EMPLOYEE MATTERS AND SHARE SCHEMES (A) MANAGEMENT AND EMPLOYEES Whilst there will inevitably be some redundancies in the course of the consolidation of the two businesses, Marsh & McLennan attaches great importance to the skills and experience of the management and employees of Sedgwick and believes that the career opportunities available to Sedgwick employees will be enhanced as a 14 16 result of being part of the Marsh & McLennan organisation. Marsh & McLennan has agreed to put in place incentive arrangements for key Sedgwick employees, including certain executive directors, to enable them to participate in the performance of the combined group. Under these arrangements, key employees, including certain of the executive directors, will be awarded a number of Marsh & McLennan deferred stock units, which will vest (subject to certain conditions) three years after the Offers become or are declared unconditional. Key employees, including certain of the executive directors, will also be awarded options under the terms of the Marsh & McLennan Companies, Inc. 1997 Employee Incentive and Stock Award Plan. Marsh & McLennan has given assurances to the Board of Sedgwick that, for service to date, the existing employment rights, including pension rights and entitlements under the existing employment related policies, of all directors, management and employees of Sedgwick will be honoured. In particular, any employee of Sedgwick made redundant on or before 31 December 1999 will be entitled to a redundancy payment which will be no less favourable than he or she would have received under the current redundancy policies operated by Sedgwick. Sax Riley, Chairman of Sedgwick, and Rob White-Cooper, Chief Executive of Sedgwick, will join the board of Marsh & McLennan upon the Offers becoming or being declared unconditional in all respects. Rob White-Cooper will become chairman of Sedgwick Marsh & McLennan, which will comprise the enlarged group's insurance broking and risk management activities which operate principally outside the Americas. In addition, Marsh & McLennan has agreed that the heads of Sedgwick's broking businesses in Asia Pacific, Europe and North America, and the head of Sedgwick Noble Lowndes, will hold positions of influence in the new organisation. (B) SEDGWICK SHARE OPTION SCHEMES The Ordinary Offer will extend to any fully paid Sedgwick Securities which are unconditionally allotted or issued whilst the Ordinary Offer is open for acceptance (or until such earlier date as Marsh & McLennan may, subject to the City Code, determine), including Sedgwick Shares unconditionally allotted or issued pursuant to the exercise of Options or vesting of awards under the Sedgwick Share Option Schemes. Optionholders will be able to exercise their Options in accordance with the rules of the relevant Sedgwick Share Option Scheme and, subject to the terms and Conditions of the Ordinary Offer, accept the Ordinary Offer and elect to receive cash and/or Loan Notes for the Sedgwick Shares that they receive as a result of exercise. To the extent that Options are not exercised, appropriate proposals will be made in due course to the Optionholders. Under these proposals, optionholders will be invited to cancel their subsisting Options over Sedgwick Shares in return for an appropriate cash payment. 14. UK TAXATION THIS SUMMARY IS INTENDED AS A GENERAL GUIDE ONLY AND DOES NOT CONSTITUTE TAX OR LEGAL ADVICE. SEDGWICK SHAREHOLDERS WHO ARE IN ANY DOUBT AS TO THEIR OWN POSITION SHOULD CONSULT AN INDEPENDENT ADVISER. SPECIAL CLASSES OF TAXPAYER SUCH AS FINANCIAL TRADERS ARE NOT CONSIDERED BELOW. Marsh & McLennan has been advised that, under UK legislation and Inland Revenue practice current at the date of this document, the taxation treatment of the valid acceptance of the Ordinary Offer and the Convertible Offer and, where applicable, election for the Loan Note Alternative by Sedgwick Shareholders and Sedgwick Bondholders who hold their Sedgwick Shares or Sedgwick Convertible Bonds beneficially as an investment (otherwise than under a personal equity plan), and who are resident or ordinarily resident in the UK for tax purposes at all relevant times will, in summary, be as follows: 15 17 (A) TAXATION OF CHARGEABLE GAINS Liability to UK taxation of chargeable gains ("CGT") will depend on the particular circumstances of holders of Sedgwick Shares and/or Sedgwick Convertible Bonds and on the form of consideration received. -- Cash To the extent that a holder of Sedgwick Shares or Sedgwick Convertible Bonds receives cash under the Ordinary Offer or the Convertible Offer, this will constitute a disposal, or part disposal, of his Sedgwick Shares or Sedgwick Convertible Bonds for CGT purposes. Such a disposal or part disposal may, depending on that shareholder's or bondholder's individual circumstances, give rise to a liability to CGT. -- Loan Notes A Sedgwick Shareholder or Sedgwick Bondholder who, either alone or together with persons connected with him, holds not more than 5 per cent. of, or of any class of, the shares in or debentures of Sedgwick, will not be treated as making a disposal of his Sedgwick Shares or Sedgwick Convertible Bonds for CGT purposes to the extent that he receives Loan Notes by way of consideration. A Sedgwick Shareholder or Sedgwick Bondholder who, either alone or together with persons connected with him, holds more than 5 per cent. of, or of any class of, the shares in or debentures of Sedgwick is advised that an application to the Inland Revenue has been made for clearance under section 138 of the Taxation of Chargeable Gains Act 1992 that this transaction is being effected for bona fide commercial reasons and does not form part of a scheme or arrangements of which the main purpose, or one of the main purposes, is avoidance of liability to capital gains tax or corporation tax, although receipt of such clearance is not a condition of the Ordinary Offer or the Convertible Offer. The Inland Revenue has not yet granted such clearance. Subject to the granting of this clearance, such Sedgwick Shareholder or Sedgwick Bondholder will be treated in the manner described in the previous paragraph. A subsequent disposal of Loan Notes (including their redemption or repayment) may give rise to a liability to CGT. (B) TAXATION OF INCOME Interest on the Loan Notes obtained or paid through a UK collecting or paying agent may be made subject to the deduction of UK income tax at the lower rate (currently 20 per cent.). An individual holder of Loan Notes will generally be liable to income tax in the UK on the gross amount of interest received. A corporate holder of Loan Notes will generally bring interest on the Loan Notes into account as income for the purposes of corporation tax in the UK. Different tax treatment may apply to Sedgwick Shareholders who have acquired or agreed to acquire their Sedgwick Shares by exercising Options under the Sedgwick Share Option Schemes, including a possible charge to income tax when such an option is exercised. FURTHER INFORMATION ON UK TAX LAW AND INLAND REVENUE PRACTICE CURRENT AT THE DATE OF THIS DOCUMENT IS CONTAINED IN PARAGRAPH 11 OF APPENDIX VI ("UK TAXATION") BELOW. EACH HOLDER OF SEDGWICK SHARES IS URGED TO CONSULT HIS INDEPENDENT PROFESSIONAL ADVISER IMMEDIATELY REGARDING THE TAX CONSEQUENCES OF ACCEPTANCE OF THE ORDINARY OFFER. 15. US TAXATION The discussion below summarises certain US federal income tax consequences applicable to holders of Sedgwick Securities under current law. It does not address the US federal income tax consequences applicable to holders subject to special rules, such as certain financial institutions, regulated investment companies, insurance companies, dealers in securities, exempt organisations or persons holding Sedgwick Securities as part of a hedge, straddle or conversion transaction or to holders who acquired Sedgwick Securities as a result 16 18 of Sedgwick Share Option Schemes or other employment based arrangements. Moreover, it does not discuss tax consequences that may be relevant to Sedgwick Bondholders that exchange Sedgwick Convertible Bonds pursuant to the Convertible Offer (other than the US federal income tax consequences of receiving interest on the Loan Notes). (A) US HOLDERS The receipt of cash pursuant to the Ordinary Offer by a US Holder will be a taxable transaction for US federal income tax purposes and may also be a taxable transaction under applicable state, local, foreign and other tax laws. In general, a US Holder of Sedgwick Securities who sells such securities pursuant to the Ordinary Offer will, for US federal income tax purposes, recognise gain or loss equal to the difference between such holder's adjusted tax basis in the Sedgwick Securities sold and the amount realised in exchange therefor. Such amount realised will equal the amount of US dollars received (or, if a US Holder elects to receive pounds sterling, the US dollar value of the pounds sterling received) by a US Holder. Such gain or loss generally will be capital gain or loss. An accrual basis holder of Sedgwick Securities who sells such securities pursuant to the Ordinary Offer may have a foreign currency exchange gain or loss for US federal income tax purposes on account of currency fluctuations between the sale date and the settlement date, in addition to the gain or loss recognised by the holder on the sale of Sedgwick Securities pursuant to the Ordinary Offer. (B) NON-US HOLDERS Payments of interest on the Loan Notes will generally not be subject to US federal income or withholding tax provided that certain certification requirements are met. FURTHER INFORMATION ON THE CONSEQUENCES THAT MAY BE RELEVANT TO A HOLDER OF SEDGWICK SECURITIES AS A RESULT OF THE APPLICATION OF CURRENT US TAX LAWS IS CONTAINED IN PARAGRAPH 12 OF APPENDIX VI ("US FEDERAL INCOME TAXATION") BELOW. EACH HOLDER OF SEDGWICK SECURITIES IS URGED TO CONSULT HIS INDEPENDENT PROFESSIONAL ADVISER IMMEDIATELY REGARDING THE TAX CONSEQUENCES OF ACCEPTANCE OF THE ORDINARY OFFER. 16. OVERSEAS SECURITYHOLDERS AND BONDHOLDERS The attention of Sedgwick Securityholders and Sedgwick Bondholders who are citizens or residents of jurisdictions outside the UK or the US is drawn to paragraph 8 of Part B of Appendix I below ("Overseas Sedgwick Securityholders and Sedgwick Bondholders") and to the relevant provisions of the Acceptance Forms. The Offers are not being made, directly or indirectly, in or into Canada, Australia or Japan. The Loan Notes which may be issued pursuant to the Offers have not been, and will not be, registered under the US Securities Act, or under any relevant securities laws of any state or district of the US and, unless so registered, may not be offered or sold, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and any relevant securities laws of any state or district of the US. The Loan Notes which may be issued pursuant to the Offers will not be the subject of a prospectus under the securities laws of any province of Canada and will not be registered under any relevant securities laws of any country. The Loan Notes are not being offered, sold or delivered, directly or indirectly, in or into the US, Canada, Australia or Japan. 17. PROCEDURE FOR ACCEPTANCE OF THE OFFERS (A) HOLDERS OF SEDGWICK SHARES The attention of holders of Sedgwick Shares is drawn to paragraph 9 of Part B of Appendix I ("Procedures for tendering Sedgwick Shares and Sedgwick Convertible Bonds") below and to the relevant provisions of the Shareholder Form of Acceptance. 17 19 You should note that, if you hold Sedgwick Shares in both certificated and uncertificated form (that is, in CREST), you should complete a separate Shareholder Form of Acceptance for each holding. If you hold Sedgwick Shares in uncertificated form, but under different member account IDs, you should complete a separate Shareholder Form of Acceptance in respect of each member account ID. Similarly, if you hold Sedgwick Shares in certificated form, but under different designations, you should complete a separate Shareholder Form of Acceptance in respect of each designation. (I) TO ACCEPT THE ORDINARY OFFER COMPLETE THE WHITE SHAREHOLDER FORM OF ACCEPTANCE To accept the Ordinary Offer, you should complete Box 1, Box 4 and (if your Sedgwick Shares are in CREST) Box 5, and sign Box 8 of the WHITE Shareholder Form of Acceptance in accordance with the instructions printed on it. All holders of Sedgwick Shares who are individuals should sign the Shareholder Form of Acceptance in the presence of a witness, who should also sign Box 8 in accordance with the instructions printed on it. (II) TO ELECT FOR THE LOAN NOTE ALTERNATIVE To elect for the Loan Note Alternative in respect of some or all of the Sedgwick Shares for which you are accepting the Ordinary Offer, you should complete Box 2 in addition to taking the actions described in paragraph (i) above. The attention of those holders of Sedgwick Shares considering accepting the Loan Note Alternative is drawn to paragraph 6 ("Loan Note Alternative") above and to paragraphs 5 and 8 of Part B of Appendix I below. (III) RETURN OF SHAREHOLDER FORMS OF ACCEPTANCE To accept the Ordinary Offer, the Shareholder Forms of Acceptance must be completed and returned, whether or not your Sedgwick Shares are in CREST. The completed, signed and (if you are an individual) witnessed Shareholder Forms of Acceptance, together with, if your Sedgwick Shares are not in CREST, the share certificate(s) and/or other document(s) of title for your Sedgwick Shares, should be returned (if you are a Non-US Holder) by post or by hand to the UK Receiving Agent, Computershare Services PLC, P.O. Box 859, Consort House, East Street, Bedminster, Bristol BS99 1XZ, or by hand, during normal business hours only, to Computershare Services PLC, 5-10 Great Tower Street, London EC3R 5ER or (if you are a US Holder) by post or by hand to the US Depositary, Bank of New York, 101 Barclay Street, New York, New York 10286 marked for the attention of Tenders and Exchanges, as soon as possible but, in any event, so as to be received no later than 3.00 p.m. (London time), 10.00 a.m. (New York City time) on 5 October 1998. A reply-paid envelope is enclosed for your convenience and may be used by holders of Sedgwick Shares for returning Shareholder Forms of Acceptance within the UK and the US only. The instructions printed on the Shareholder Forms of Acceptance shall be deemed to form part of the terms of the Ordinary Offer. Any Shareholder Form of Acceptance received in an envelope postmarked in Canada, Australia or Japan or otherwise appearing to Marsh & McLennan or its agents to have been sent from Canada, Australia or Japan may be rejected as an invalid acceptance of the Ordinary Offer. For further information for overseas shareholders, see paragraph 16 above and paragraph 8 of Part B of Appendix I below. (IV) SEDGWICK SHARES IN UNCERTIFICATED FORM (THAT IS, IN CREST) If your Sedgwick Shares are in uncertificated form (that is, if you do not have a paper share certificate because your shares are held in CREST), you should read carefully paragraph 9 of Part B of Appendix I, which sets out the acceptance procedures for holders of Sedgwick Shares in uncertificated form. If you are a CREST sponsored member, you should refer to your CREST sponsor before taking any action. 18 20 (V) CERTIFICATES NOT READILY AVAILABLE OR LOST If your Sedgwick Shares are in certificated form, but your certificate(s) and/or other document(s) of title is/are not readily available or is/are lost, the Shareholder Form of Acceptance should nevertheless be completed, signed and returned as stated in paragraph (iii) above so as to arrive no later than 3.00 p.m. (London time), 10.00 a.m. (New York City time) on 5 October 1998, together with any certificate(s) and/or other document(s) of title that you have available, accompanied by a letter stating that the balance will follow (and, if applicable, that you have lost one or more of your certificates). You should then arrange for the relevant certificate(s) and/or other document(s) of title to be forwarded as soon as possible thereafter. No acknowledgement of receipt of documents will be given. In the case of loss, you should write as soon as possible to Lloyds Bank Registrars, The Causeway, Worthing, West Sussex BN99 6DA for a letter of indemnity for lost certificate(s) and/or other document(s) of title which, when completed in accordance with the instructions given, should be returned to the UK Receiving Agent, Computershare Services PLC as stated above. (VI) DEPOSITS OF SEDGWICK SHARES INTO, AND WITHDRAWALS OF SEDGWICK SHARES FROM, CREST Normal CREST procedures (including timings) apply in relation to any Sedgwick Shares that are, or are to be, converted from uncertificated to certificated form, or from certificated to uncertificated form, during the course of the Ordinary Offer (whether any such conversion arises as a result of a transfer of Sedgwick Shares or otherwise). Holders of Sedgwick Shares who are proposing so to convert any such shares are recommended to ensure that the conversion procedures are implemented in sufficient time to enable the person holding or acquiring the shares as a result of the conversion to take all necessary steps in connection with an acceptance of the Ordinary Offer (in particular, as regards delivery of share certificate(s) and/or other document(s) of title or transfers to an escrow balance as described above) prior to 3.00 p.m. (London time), 10.00 a.m. (New York City time) on 5 October 1998. (B) HOLDERS OF SEDGWICK ADSS The attention of holders of Sedgwick ADSs is drawn to paragraph 11 of Part B of Appendix I below and to the relevant provisions of the Letter of Transmittal. To accept the Ordinary Offer, holders of Sedgwick ADSs must complete the Letter of Transmittal in accordance with the instructions printed on it or comply with the instructions in such Letter of Transmittal applicable to book-entry transfers. The completed Letter of Transmittal should be sent in the accompanying reply-paid envelope or delivered by hand together with the required signature guarantees and any other required documents to the US Depositary at one of its addresses set forth at the back of this document and Sedgwick ADRs must be either received by the US Depositary at one of such addresses or delivered in accordance with paragraph 11 of Part B of Appendix I referred to above. (C) HOLDERS OF SEDGWICK CONVERTIBLE BONDS The attention of Sedgwick Bondholders is drawn to paragraph 9 of Part B of Appendix I below and to the relevant provisions of the BLUE Bondholder Form of Acceptance. (I) TO ACCEPT THE CONVERTIBLE OFFER COMPLETE THE BLUE BONDHOLDER FORM OF ACCEPTANCE To accept the Convertible Offer, you should complete Box 1 and Box 5, and sign Box 8 of the BLUE Bondholder Form of Acceptance in accordance with the instructions printed on it. All holders of Sedgwick Convertible Bonds who are individuals should sign the Bondholder Form of Acceptance in the presence of a witness, who should also sign Box 8 in accordance with the instructions printed on it. (II) TO ELECT FOR THE LOAN NOTE ALTERNATIVE To elect for the Loan Note Alternative in respect of some or all of the Sedgwick Convertible Bonds for which you are accepting the Convertible Offer, you should complete Box 2 in addition to taking the actions described in paragraph (i) above. The attention of those holders of Sedgwick Convertible Bonds 19 21 considering accepting the Loan Note Alternative is drawn to paragraph 6 ("Loan Note Alternative") above and to paragraphs 5 and 8 of Part B of Appendix I below. (III) RETURN OF BONDHOLDER FORMS OF ACCEPTANCE The completed, signed and (if you are an individual) witnessed Bondholder Form of Acceptance together with, (where relevant) the bond certificate and/or other documents of title should be returned (if you are a Non-US Holder) by post or by hand to Computershare Services PLC, P.O. Box 859, Consort House, East Street, Bedminster, Bristol, BS99 1XZ, or by hand, during normal business hours only, to Computershare Services PLC, First Floor, 5-10 Great Tower Street, London, EC3R 5ER or (if you are a US Holder) by post or by hand to the US Depositary, Bank of New York, 101 Barclay Street, New York, New York marked for the attention of Tenders and Exchanges, as soon as possible but, in any event, so as to be received no later than 3.00 p.m. (London time), 10.00 a.m. (New York City time) on 5 October 1998. A reply-paid envelope is enclosed for your convenience and may be used by holders of Sedgwick Convertible Bonds for returning Bondholder Forms of Acceptance within the UK and the US only. The instructions printed on the Bondholder Form of Acceptance shall be deemed to form part of the terms of the Convertible Offer. Any Bondholder Form of Acceptance received in an envelope postmarked in Canada, Australia or Japan or otherwise appearing to Marsh & McLennan or its agents to have been sent from Canada, Australia or Japan may be rejected as an invalid acceptance of the Convertible Offer. For further information for overseas shareholders, see paragraph 16 above and paragraph 8 of Part B of Appendix I ("Overseas Sedgwick Securityholders and Sedgwick Bondholders"). Holders of Sedgwick Bearer Bonds are referred to paragraph 9(d) of Part B of Appendix I to this document and to the Bondholder Form of Acceptance. (IV) BOND CERTIFICATES NOT READILY AVAILABLE OR LOST If you are a Sedgwick Bondholder but your bond certificate(s) and/or other document(s) of title is/are not readily available or is/are lost, the Bondholder Form of Acceptance should nevertheless be completed, signed and returned as stated in paragraph (iii) above so as to arrive no later than 3.00 p.m. (London time), 10.00 a.m. (New York City time) on 5 October 1998, together with any certificate(s) and/or other document(s) of title that you have available, accompanied by a letter stating that the balance will follow (and, if applicable, that you have lost one or more of your certificates). You should then arrange for the relevant bond certificate(s) and/or other document(s) of title to be forwarded as soon as possible thereafter (or, in the case of Sedgwick Bearer Bonds, in accordance with the other delivery instructions referred to in paragraph 9(d) of Part B of Appendix I below). No acknowledgement of receipt of documents will be given. In the case of loss, you should write as soon as possible to Lloyds Bank Registrars, The Causeway, Worthing, West Sussex BN99 6DA for a letter of indemnity for lost certificate(s) and/or other document(s) of title which, when completed in accordance with the instructions given, should be returned to the UK Receiving Agent as stated above. (D) VALIDITY OF ACCEPTANCE Subject to the City Code, Marsh & McLennan reserves the right to treat as valid in whole or in part any acceptance of the Offers which is not entirely in order or which is not accompanied (as applicable) by the relevant transfer to escrow or the relevant share certificate(s) and/or bond certificate(s) and/or other required documents or which is received by it in a form or at a place or places other than set out in this document or the Acceptance Forms. In that event, no payment of cash or issue of Loan Notes under the Offers will be made until after (as applicable) the relevant transfer to escrow has settled or the relevant share certificate(s) and/or bond certificate(s) and/or other required documents of title or indemnities satisfactory to Marsh & McLennan have been received. 20 22 (E) GENERAL No acknowledgement of receipt of Acceptance Forms, share certificates, bond certificates, Sedgwick ADRs or other documents will be given. IF YOU ARE IN ANY DOUBT AS TO THE PROCEDURE FOR ACCEPTANCE, PLEASE CONTACT THE UK RECEIVING AGENT, COMPUTERSHARE SERVICES PLC BY TELEPHONE ON +44(0)117 937 0672 OR AT EITHER OF ITS ADDRESSES STATED IN PARAGRAPH 17(A)(III) ABOVE OR THE US DEPOSITARY, BANK OF NEW YORK ON +1-800-507-9357. YOU ARE REMINDED THAT, IF YOU ARE A CREST SPONSORED MEMBER, YOU SHOULD CONTACT YOUR CREST SPONSOR BEFORE TAKING ANY ACTION. 18. RIGHTS OF WITHDRAWAL With certain exceptions pursuant to a SEC exemptive order, the Offers are subject to the US tender offer rules applicable to securities registered under the Exchange Act, as well as to the City Code. This has necessitated a number of changes from the procedures which normally apply to offers for UK companies, including those applicable to the rights of Sedgwick Securityholders and Sedgwick Bondholders to withdraw their acceptance of an offer. Under the Offers, holders of Sedgwick Securities and Sedgwick Convertible Bonds will be able to withdraw their acceptances at any time prior to the Initial Closing Date and in certain other circumstances. The Offers will not be deemed to have been validly accepted in respect of any Sedgwick Securities or Sedgwick Convertible Bonds which have been withdrawn. However, the Offers may be accepted again in respect of the withdrawn Sedgwick Securities or Sedgwick Convertible Bonds by following one of the procedures described in paragraph 17 above ("Procedure for acceptance of the Offers") at any time prior to the expiry or lapse of the Offers. Further details of these rights of withdrawal and the procedure for effecting withdrawals are set out in paragraph 4 of Part B of Appendix I ("Rights of withdrawal") below. 19. SETTLEMENT (A) DATE OF PAYMENT The settlement procedure with respect to the Offers will be consistent with UK practice, which differs from the US tender offer rules in certain material respects, particularly with regard to the date of payment. Subject to the satisfaction, fulfilment or, where permitted, waiver of all the Conditions, settlement of acceptances from holders of Sedgwick Shares and accepting holders of Sedgwick ADSs and Sedgwick Convertible Bonds or other designated agents will be effected: (i) in the case of acceptances received complete in all respects by the Initial Closing Date, within 14 calendar days of such date; or (ii) in the case of acceptances received complete in all respects after such date, but while the Offers remain open for acceptance, within 14 calendar days of such receipt. (B) SEDGWICK SHARES IN UNCERTIFICATED FORM (THAT IS, IN CREST) Where an acceptance relates to Sedgwick Shares in uncertificated form, (i) the cash consideration to which accepting holders of Sedgwick Shares are entitled will be paid by means of CREST by Marsh & McLennan procuring the creation of an assured payment obligation in favour of the accepting shareholders' payment bank in respect of the cash consideration due, in accordance with the CREST assured payment arrangement; and (ii) definitive certificates for any Loan Notes will be despatched by post (or by such other method as may be approved by the Panel). 21 23 Marsh & McLennan reserves the right to settle all or any part of the cash consideration referred to above, for all or any accepting shareholder(s), in the manner referred to in paragraph (c) below, if, for any reason, it wishes to do so. (C) SEDGWICK SHARES IN CERTIFICATED FORM, SEDGWICK CONVERTIBLE BONDS AND SEDGWICK ADSS Where an acceptance relates to Sedgwick Shares in certificated form, Sedgwick Convertible Bonds or Sedgwick ADSs evidenced by Sedgwick ADRs, cheques for cash due and, where applicable, definitive certificates for any Loan Notes will be despatched by post (or by such other method as may be approved by the Panel). (D) LAPSING OF THE OFFERS If the Conditions are not satisfied, fulfilled or, where permitted, waived, (i) in respect of Sedgwick Shares in certificated form, Sedgwick ADRs in certificated form and Sedgwick Registered Bonds, the relevant certificate(s) and/or other documents of title will be returned by post (or by such other method as may be approved by the Panel) within 14 calendar days of the Offers lapsing, (ii) in respect of Sedgwick Shares in uncertificated form (that is, in CREST) the UK Receiving Agent, Computershare Services PLC will, immediately after the lapsing of the Offers (or within such longer period as the Panel may permit, not exceeding 14 calendar days of the lapsing of the Offers), give TFE Instructions to CRESTCo to transfer all relevant Sedgwick Shares held in escrow balances and in relation to which it is the escrow agent for the purposes of the Ordinary Offer to the original available balances of the holders of Sedgwick Shares concerned, (iii) in respect of Sedgwick ADRs in book-entry form, the US Depositary will return such Sedgwick ADRs to the tendering holders unless otherwise instructed by such holder and (iv) in respect of Sedgwick Bearer Bonds, the arrangements in paragraphs 7(b)(i) to (iii) of Part B of Appendix I will apply. (E) GENERAL All documents and remittances sent by, to, or from holders of Sedgwick Securities or Sedgwick Convertible Bonds or their appointed agents will be sent at their own risk. All mandates and other instructions in force relating to holdings of Sedgwick Securities or Sedgwick Convertible Bonds will, unless and until revoked, continue in force in relation to payments of principal and interest under the Loan Notes. (F) CURRENCY OF CASH CONSIDERATION Instead of receiving cash consideration in pounds sterling under the Offers holders of Sedgwick Shares and Sedgwick Convertible Bonds who so wish may elect to receive US dollars on the following basis: the cash amount payable in pounds sterling to which such holder would otherwise be entitled pursuant to the terms of the Offers will be converted, without charge, from pounds sterling to US dollars at the exchange rate obtainable by the relevant payment agent (either the UK Receiving Agent or the US Depositary) on the spot market in London at approximately 12.00 noon (London time) on the date the cash consideration is made available by Marsh & McLennan to the relevant payment agent for delivery in respect of the relevant Sedgwick Shares and Sedgwick Convertible Bonds. A Sedgwick Shareholder or Sedgwick Bondholder may receive such amount on the basis set out above only in respect of the whole of his holding of Sedgwick Shares or Sedgwick Convertible Bonds in respect of which he accepts the Offers. Sedgwick Shareholders and Sedgwick Bondholders may not elect to receive both pounds sterling and US dollars. Unless they elect to receive pounds sterling, holders of Sedgwick ADSs will receive any such cash consideration converted into US dollars as described above, as if such holders of Sedgwick ADSs had elected to receive US dollars. Consideration in US dollars may be inappropriate for holders of Sedgwick Securities other than persons in the US and holders of Sedgwick ADSs. If you are a Sedgwick Shareholder or Sedgwick Bondholder and you wish to elect to receive cash consideration in US dollars instead of pounds sterling under the Offers, you should complete Box 3 of the relevant Acceptance Form in addition to taking the actions described in paragraph 17 above. 22 24 If you are a Sedgwick ADS holder and you wish to elect to receive cash consideration in pounds sterling instead of US dollars under the Ordinary Offer, you should complete the appropriate box of your Letter of Transmittal in addition to taking the actions described in paragraph 17 above. THE ACTUAL AMOUNT OF US DOLLARS RECEIVED WILL DEPEND UPON THE EXCHANGE RATE PREVAILING ON THE BUSINESS DAY ON WHICH FUNDS ARE MADE AVAILABLE TO THE RELEVANT PAYMENT AGENT BY MARSH & MCLENNAN. HOLDERS OF SEDGWICK SECURITIES AND SEDGWICK CONVERTIBLE BONDS SHOULD BE AWARE THAT THE US DOLLAR/POUNDS STERLING EXCHANGE RATE WHICH IS PREVAILING AT THE DATE ON WHICH AN ELECTION IS MADE OR DEEMED TO BE MADE TO RECEIVE US DOLLARS AND ON THE DATES OF DESPATCH AND RECEIPT OF PAYMENT MAY BE DIFFERENT FROM THAT PREVAILING ON THE BUSINESS DAY ON WHICH FUNDS ARE MADE AVAILABLE TO THE RELEVANT PAYMENT AGENT BY MARSH & MCLENNAN. IN ALL CASES, FLUCTUATIONS IN THE US DOLLAR/POUNDS STERLING EXCHANGE RATE ARE AT THE RISK OF ACCEPTING HOLDERS OF SEDGWICK SECURITIES AND SEDGWICK CONVERTIBLE BONDS WHO ELECT OR ARE TREATED AS HAVING ELECTED TO RECEIVE THEIR CONSIDERATION IN US DOLLARS. NEITHER MARSH & MCLENNAN NOR ANY OF ITS ADVISERS OR AGENTS SHALL HAVE RESPONSIBILITY WITH RESPECT TO THE ACTUAL AMOUNT OF CASH CONSIDERATION PAYABLE OTHER THAN IN POUNDS STERLING. 20. FURTHER INFORMATION Your attention is drawn to Appendix I to this document, which contains the Conditions and further terms and information and forms part of this document and to the other Appendices to this document which contain important information in connection with the Offers and form part of this document and to the accompanying Acceptance Forms. 21. ACTION TO BE TAKEN YOU ARE URGED TO COMPLETE, SIGN AND RETURN THE RELEVANT ACCEPTANCE FORM AND OTHER REQUIRED DOCUMENTS AS SOON AS POSSIBLE, BUT IN ANY EVENT SO AS TO BE RECEIVED BY NO LATER THAN 3.00 P.M. (LONDON TIME), 10.00 A.M. (NEW YORK CITY TIME) ON 5 OCTOBER 1998, TO THE UK RECEIVING AGENT OR THE US DEPOSITARY AS APPROPRIATE. Yours faithfully Terence C. Eccles Clifford S.H. Hampton Morgan Guaranty Trust Donaldson, Lufkin & Jenrette Company of New York
23 25 APPENDIX I -- CONDITIONS AND FURTHER TERMS OF THE OFFERS PART A CONDITIONS OF THE OFFERS THE ORDINARY OFFER The Ordinary Offer is subject to the following conditions: (a) valid acceptances being received (and not, where permitted, withdrawn) by not later than 3.00 p.m. (London time) on the Initial Closing Date in respect of not less than 90 per cent. (or such lower percentage as Marsh & McLennan may decide) in nominal value of the Sedgwick Securities to which the Ordinary Offer relates, provided that this condition will not be satisfied unless Marsh & McLennan and/or its wholly-owned subsidiaries shall have acquired or agreed (unconditionally or subject only to conditions which will be fulfilled upon the Ordinary Offer becoming or being declared unconditional in all respects) to acquire (whether pursuant to the Ordinary Offer or otherwise) Sedgwick Securities carrying, in aggregate, more than 50 per cent. of the voting rights then normally exercisable at general meetings of Sedgwick, including for this purpose (to the extent, if any, required by the Panel) any such voting rights attaching to any Sedgwick Securities that are unconditionally allotted or issued before the Ordinary Offer becomes or is declared unconditional as to acceptances, whether pursuant to the exercise of any outstanding subscription or conversion rights or otherwise and, for this purpose: (i) the expression "Sedgwick Securities to which the Ordinary Offer relates" shall be construed in accordance with sections 428 to 430F of the Companies Act 1985; (ii) Sedgwick Securities which have been unconditionally allotted shall be deemed to carry the voting rights which they will carry upon their being entered in the register of members of Sedgwick; and (iii) valid acceptances shall be treated as having been received in respect of any Sedgwick Securities which Marsh & McLennan shall, pursuant to section 429(8) of the Companies Act 1985, be treated as having acquired or contracted to acquire by virtue of acceptances of the Ordinary Offer, provided that, unless Marsh & McLennan otherwise determines, this condition (a) can only be treated as satisfied at a time when all of the other conditions in paragraphs (b) to (i) inclusive are either satisfied or (if capable of waiver) waived; (b) no Relevant Authority having intervened in a manner which would or might reasonably be expected to: (i) make the Ordinary Offer, its implementation or the acquisition or proposed acquisition by Marsh & McLennan or any member of the Wider Marsh & McLennan Group of any shares or other securities in, or control of, Sedgwick void, illegal and/or unenforceable in or under the laws of any relevant jurisdiction, or otherwise directly or indirectly restrain, prevent, prohibit, materially restrict or materially delay the Ordinary Offer or such acquisition or impose additional materially adverse conditions or obligations with respect to the Ordinary Offer or such acquisition, or otherwise materially impede, challenge or interfere with the Ordinary Offer or such acquisition, or require material amendment to the terms of the Ordinary Offer or the proposed acquisition of any Sedgwick Securities or the acquisition of control of Sedgwick by Marsh & McLennan; (ii) require, prevent or delay the divestiture by any member of the Wider Marsh & McLennan Group of any shares or other securities (or the equivalent) in Sedgwick where the same is materially adverse to the Marsh & McLennan Group; (iii) require, prevent or delay the divestiture by any member of the Wider Marsh & McLennan Group or by any member of the Wider Sedgwick Group of all or any portion of their respective businesses, assets or properties or impose any limitation on the ability of any of them to conduct any of their respective businesses or to own any of their respective assets or properties or any part thereof (in any case, to an extent which is material in the context of the Wider Marsh & McLennan Group or the Wider Sedgwick Group, as appropriate, taken as a whole); I-1 26 (iv) impose any limitation on, or result in a delay in, the ability of any member of the Wider Marsh & McLennan Group or any member of the Wider Sedgwick Group to acquire or to hold or to exercise effectively, directly or indirectly, all or any rights of ownership in respect of shares or other securities (or the equivalent) in, or to exercise management control over, any member of the Wider Marsh & McLennan Group or any member of the Wider Sedgwick Group (in any such case, to an extent which is material in the context of the Wider Marsh & McLennan Group or the Wider Sedgwick Group, as the case may be, taken as a whole); (v) require any member of the Wider Marsh & McLennan Group or the Wider Sedgwick Group to acquire, or to offer to acquire, any shares or other securities (or the equivalent) in any member of the Wider Marsh & McLennan Group or any member of the Wider Sedgwick Group owned by any third party, in any such case, to an extent which is material in the context of the Wider Marsh & McLennan Group or the Wider Sedgwick Group, as the case may be, taken as a whole; (vi) impose any limitation on the ability of any member of the Wider Marsh & McLennan Group or any member of the Wider Sedgwick Group to integrate or co-ordinate its business, or any material part of it, with the businesses of any other member of the Wider Marsh & McLennan Group or the Wider Sedgwick Group (in each case, to an extent which is material in the context of the Wider Marsh & McLennan Group or the Wider Sedgwick Group, as the case may be, taken as a whole); (vii) result in any member of the Wider Marsh & McLennan Group or the Wider Sedgwick Group ceasing to be able to carry on business under any name under which it presently does so (the consequences of which would be material in the context of the Wider Marsh & McLennan Group or the Wider Sedgwick Group, as the case may be, taken as a whole); (viii) otherwise adversely affect any or all of the businesses, assets, profits or prospects of any member of the Wider Sedgwick Group or any member of the Wider Marsh & McLennan Group (to an extent which is material in the context of the Wider Marsh & McLennan Group or the Wider Sedgwick Group, as the case may be, taken as a whole); and all applicable waiting and other time periods during which any Relevant Authority could intervene in such a way under the laws of any relevant jurisdiction having expired, lapsed or been terminated; (c) without limitation to condition (b) above: (i) the European Commission indicating in terms satisfactory to Marsh & McLennan that it does not intend to initiate proceedings under Article 6(1)(c) of the Regulation in respect of the proposed acquisition of Sedgwick by Marsh & McLennan or any matters arising therefrom (the "Merger") and that in any event there will not be a referral to a competent authority or a dealing with the Merger by the European Commission pursuant to Article 9(3) of the Regulation; and (ii) all necessary filings having been made and all or any applicable waiting periods (including any extensions thereof) under the US Hart-Scott-Rodino Antitrust Improvements Act 1976 and the regulations thereunder having expired, lapsed or been terminated as appropriate in each case in respect of the proposed acquisition of Sedgwick by Marsh & McLennan, or any matters arising therefrom; (d) without limitation to condition (b) above: (i) the consent of HMT having been obtained, in terms reasonably satisfactory to Marsh & McLennan, to the new controllers (having the definition ascribed in section 96C of the Insurance Companies Act 1982) of any relevant regulated member of the Sedgwick Group or all applicable waiting periods having expired without HMT having served any notice of objection in relation to any of the new controllers of any relevant regulated member of the Sedgwick Group; (ii) the consent of Lloyd's having been obtained, in terms reasonably satisfactory to Marsh & McLennan, to the new controllers (having the definition ascribed in the Lloyd's Brokers Byelaw I-2 27 (No.5 of 1998) as amended) of the companies within the Sedgwick Group which are registered with Lloyd's as brokers; (iii) the consent of Lloyd's having been obtained, in terms reasonably satisfactory to Marsh & McLennan, to the new controllers (having the definition ascribed in The Underwriting Agents Byelaw (No.4 of 1984) as amended) of the companies within the Sedgwick Group which are registered with Lloyd's as underwriting agents; (iv) appropriate notifications of the proposed change of control of each relevant company within the Sedgwick Group having been made to Lloyd's and/or to the Insurance Brokers Registration Council (as appropriate); (v) each of the PIA and the SFA having confirmed, in terms reasonably satisfactory to Marsh & McLennan, that it has no objection to the change of control of each relevant company within the Sedgwick Group or all applicable waiting periods during which the PIA or the SFA (as the case may be) could raise any enquiries and/or objections to the proposed change of control having expired; (vi) if relevant, the Treasurer of the Commonwealth of Australia (the "Treasurer") becoming precluded under section 25 of the Foreign Acquisitions and Takeovers Act 1975 (the "Act") from being empowered to make an order under Part II of the Act in relation to the Ordinary Offer, or the issue by or on behalf of the Treasurer of a notice in writing under the Act indicating, in terms reasonably satisfactory to Marsh & McLennan, that he has no objection to the proposed acquisition of Sedgwick pursuant to the Ordinary Offer; (vii) all necessary notifications and filings having been made, all necessary waiting and other time periods under any applicable legislation or regulation of any relevant jurisdiction having expired, lapsed or been terminated and all statutory or regulatory obligations in any relevant jurisdiction having been complied with in each case in connection with the Ordinary Offer or the acquisition of any shares or other securities (or the equivalent) in, or control of, Sedgwick or any other member of the Wider Sedgwick Group by any member of the Wider Marsh & McLennan Group; and (viii) all Authorisations necessary in any relevant jurisdiction for or in respect of the Ordinary Offer or the acquisition or proposed acquisition of any shares or other securities (or the equivalent) in, or control of, Sedgwick or any other member of the Wider Sedgwick Group by any member of the Wider Marsh & McLennan Group or the carrying on by any member of the Wider Sedgwick Group of its business (where the absence of such Authorisations would be expected to have an adverse effect which is material to the Wider Sedgwick Group) having been obtained, in terms and in a form reasonably satisfactory to Marsh & McLennan, from all appropriate Relevant Authorities and all such Authorisations remaining in full force and effect at the time when the Ordinary Offer becomes otherwise unconditional in all respects and there being no notice or intimation of any intention to revoke or not to renew any of the same; (e) there being no provision of any arrangement, agreement, licence, permit, franchise or other instrument to which any member of the Wider Sedgwick Group is a party, or by or to which any such member or any of its assets is or are or may be bound, entitled or subject or any circumstance, which, in each case as a consequence of the Ordinary Offer or the acquisition or proposed acquisition of any shares or other securities (or the equivalent) in, or control of, Sedgwick or any other member of the Wider Sedgwick Group by any member of the Wider Marsh & McLennan Group or otherwise, could or might reasonably be expected to result in (to an extent which would be material in the context of the Wider Sedgwick Group taken as a whole): (i) any monies borrowed by or any other indebtedness or liabilities, actual or contingent, of, or grant available to, any member of the Wider Sedgwick Group being or becoming repayable or capable of being declared repayable immediately or prior to its stated repayment date, or the ability of any member of the Wider Sedgwick Group to borrow monies or incur any indebtedness being withdrawn or inhibited or becoming capable of being withdrawn; I-3 28 (ii) the creation or enforcement of any mortgage, charge or other security interest over the whole or any part of the business, property, assets or interests of any member of the Wider Sedgwick Group or any such mortgage, charge or other security interest becoming enforceable; (iii) any such arrangement, agreement, licence, permit, franchise or instrument, or the rights, liabilities, obligations or interests of any member of the Wider Sedgwick Group thereunder, being, or becoming capable of being, terminated or adversely modified or affected or any adverse action being taken or any obligation or liability arising thereunder; (iv) any asset or interest of any member of the Wider Sedgwick Group being or falling to be disposed of or charged or any right arising under which any such asset or interest could be required to be disposed of or charged, in each case otherwise than in the ordinary course of business; (v) any member of the Wider Sedgwick Group ceasing to be able to carry on business under any name under which it presently does so; (vi) the creation of liabilities actual or contingent by any such member, otherwise than in the ordinary course of business; (vii) the rights, liabilities or interests of any member of the Wider Sedgwick Group under any such arrangement, agreement, licence, permit, franchise or other instrument or the interests or business of any such member in or with any other person, firm, company or body (or any arrangement or arrangements relating to any such interests or business) being terminated, adversely modified or affected; or (viii) the financial or trading position of any member of the Wider Sedgwick Group being adversely prejudiced or affected; and no event having occurred which, under any provision of any such arrangement, agreement, licence, permit or other instrument, could result in any of the events or circumstances which are referred to in paragraphs (i) to (viii) of this condition (e) in any case where such result would be material in the context of the Wider Sedgwick Group taken as a whole; (f) since 31 December 1997 and except as disclosed in Sedgwick's annual report and accounts for the year then ended or as disclosed in the interim statement of Sedgwick for the six months ended on 30 June 1998 or as otherwise publicly announced by Sedgwick (by the delivery of an announcement to the Company Announcements Office of the London Stock Exchange) prior to 25 August 1998, no member of the Wider Sedgwick Group having: (i) issued or agreed to issue additional shares of any class, or securities convertible into, or rights, warrants or options to subscribe for or acquire, any such shares or convertible securities (save as between Sedgwick and wholly-owned subsidiaries of Sedgwick and except for any options granted under the Sedgwick Share Option Schemes prior to 25 August 1998); (ii) recommended, declared, paid or made any bonus, dividend or other distribution (save as between Sedgwick and wholly-owned subsidiaries of Sedgwick) whether in cash or otherwise; (iii) made or committed to make any change in its share or (save as between Sedgwick and wholly-owned subsidiaries of Sedgwick) loan capital; (iv) merged with or demerged or acquired any body corporate or acquired or disposed of or transferred, mortgaged or charged or created any security interest over any material assets or (other than in the ordinary course of business) any right, title or interest in any material assets (including shares and trade investments) (other than in the ordinary course of business), which is material in the context of the Wider Sedgwick Group taken as a whole; (v) issued or agreed to issue any debentures or (save in the ordinary course of business) incurred or increased any indebtedness or contingent liability (save as between Sedgwick and wholly-owned subsidiaries of Sedgwick); I-4 29 (vi) purchased, redeemed or repaid any of its own shares or other securities or reduced or made any other change to any part of its share capital, which is material in the context of the Wider Sedgwick Group taken as a whole; (vii) entered into or varied any contract, transaction, arrangement or commitment (whether in respect of capital expenditure or otherwise) which: (A) is of a long term, onerous or unusual nature or magnitude; or (B) could reasonably be expected to be restrictive on the business of any member of the Wider Sedgwick Group or any member of the Wider Marsh & McLennan Group; or (C) involves or would involve an obligation of a long term, onerous or unusual nature or magnitude or which could be restrictive on the business of any member of the Wider Sedgwick Group or any member of the Wider Marsh & McLennan Group; in each case, which is material in the context of the Wider Sedgwick Group taken as a whole; (viii) entered into or varied or made any offer (which remains open for acceptance) to enter into or vary the terms of any contract with any of the directors or senior executives of Sedgwick or, to an extent which is material in the context of the Wider Sedgwick Group taken as a whole, of any member of the Wider Sedgwick Group; (ix) taken or proposed any corporate action or had any legal proceedings instituted or threatened against it or petition (not of a frivolous or vexatious nature) presented for its winding-up (voluntarily or otherwise), dissolution or reorganisation or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of all or any of its assets and revenues or for any analogous proceedings or steps in any jurisdiction or for the appointment of any analogous person in any jurisdiction and which is material in the context of the Wider Sedgwick Group taken as a whole; (x) been unable or admitted in writing that it is unable to pay its debts or having stopped or suspended (or threatened to stop or suspend) payment of its debts generally or ceased or threatened to cease carrying on all or a substantial part of its business and which is material in the context of the Wider Sedgwick Group taken as a whole; (xi) waived or compromised any claim which is material in the context of the Wider Sedgwick Group taken as a whole; (xii) made any alteration to its memorandum or articles of association, or other incorporation documents; or (xiii) entered into any agreement, contract or commitment or made any offer (which remains open for acceptance) with respect to any of the transactions, matters or events referred to in this condition (f); (g) since 31 December 1997 and except as disclosed in Sedgwick's annual report and accounts for the year then ended or as disclosed in the interim statement of Sedgwick for the six months ended on 30 June 1998 or as otherwise publicly announced by Sedgwick (by the delivery of an announcement to the Company Announcements Office of the London Stock Exchange) prior to 25 August 1998: (i) there having been no adverse change or deterioration in the business, assets, financial or trading position or profits or assets of any member of the Wider Sedgwick Group which is (in the aggregate) material in the context of the Wider Sedgwick Group taken as a whole; (ii) no litigation, arbitration proceedings, prosecution or other legal proceedings to which any member of the Wider Sedgwick Group is or may become a party (whether as plaintiff or defendant or otherwise) or any investigation (save as a result of the Ordinary Offer) by any Relevant Authority having been threatened, announced or instituted by or against or in respect of any member of the Wider Sedgwick Group or remaining outstanding against or in respect of any member of the I-5 30 Wider Sedgwick Group which, in any such case, is material in the context of the Wider Sedgwick Group taken as a whole; (iii) no contingent or other liability having arisen or become apparent or increased which would or could reasonably be expected materially and adversely to affect the Wider Sedgwick Group taken as a whole; and (iv) there having been no inquiry or investigation (save as a result of the Ordinary Offer) by, or complaint, or reference to, any Relevant Authority of a material nature to Sedgwick in respect of any member of the Wider Sedgwick Group and no such enquiry, investigation, complaint or reference having been threatened, announced, implemented, instituted or remaining outstanding which, in any such case, is material in the context of the Wider Sedgwick Group taken as a whole; (h) Marsh & McLennan not having discovered: (i) that any financial or business or other information concerning the Wider Sedgwick Group disclosed at any time by or on behalf of any member of the Wider Sedgwick Group, whether publicly, to any member of the Wider Marsh & McLennan Group or otherwise, is misleading or contains a misrepresentation of fact or omits to state a fact necessary to make any information contained therein not misleading in any case which has not subsequently been corrected by such disclosure and, in any case, to an extent which is material in the context of the Wider Sedgwick Group taken as a whole; or (ii) that any member of the Wider Sedgwick Group or partnership, company or other entity in which any member of the Wider Sedgwick Group has an interest and which is not a subsidiary undertaking of Sedgwick is subject to any liability (contingent or otherwise) which is not disclosed in Sedgwick's annual report and accounts for the financial year ended 31 December 1997 or as disclosed in the interim statement for the six months ended 30 June 1998 or as otherwise publicly announced by Sedgwick (by delivery of an announcement to the Company Announcements Office of the London Stock Exchange) prior to 25 August 1998 and which is material in the context of the Wider Sedgwick Group taken as a whole; (i) Marsh & McLennan not having discovered: (i) that any past or present member of the Wider Sedgwick Group has not complied with all applicable legislation or regulations of any jurisdiction with regard to the disposal, discharge, spillage, leak or emission of any waste or hazardous substance or any substance likely to impair the environment or harm human health, or otherwise relating to environmental matters, or that there has otherwise been any such disposal, discharge, spillage, leak or emission (whether or not the same constituted a non-compliance by any person with any such legislation or regulations and wherever the same may have taken place) which, in any such case, would be likely to give rise to any liability (whether actual or contingent) on the part of any member of the Wider Sedgwick Group which would be material in the context of the Wider Sedgwick Group taken as a whole; (ii) that there is, or is likely to be, any liability, whether actual or contingent, to make good, repair, reinstate or clean up any property now or previously owned, occupied or made use of by any past or present member of the Wider Sedgwick Group or in which any such member may have or previously have had or be deemed to have had an interest under any environmental legislation, regulation, notice, circular or order of any relevant authority or Relevant Authority or otherwise, which, in any such case, would be material in the context of the Wider Sedgwick Group taken as a whole; or (iii) that circumstances exist whereby a person or class of persons would be likely to have any claim or claims in respect of any product or process of manufacture or materials used therein now or previously manufactured, sold or carried out by any past or present member of the Wider Sedgwick Group which, in any such case, would be material in the context of the Wider Sedgwick Group taken as a whole. I-6 31 For the purpose of these conditions: (a) "RELEVANT AUTHORITY" means any government, government department or governmental, quasi-governmental, supranational, statutory, regulatory, administrative or investigative body, authority (including any national anti-trust or merger control authorities), court, trade agency, association, institution or professional or environmental body or any other person or body whatsoever in any relevant jurisdiction; (b) a Relevant Authority shall be regarded as having "INTERVENED" if it has decided to take, institute, implement or threaten any action, proceedings, suit, investigation, inquiry or reference or made, proposed or enacted any statute, regulation, decision or order or taken any measures or other steps or required any action to be taken or information to be provided or otherwise having done anything and "INTERVENE" shall be construed accordingly; (c) "AUTHORISATIONS" means authorisations, orders, grants, recognitions, determinations, certificates, confirmations, consents, licences, clearances, permissions, exemptions and approvals; (d) "THE WIDER SEDGWICK GROUP" means Sedgwick and its subsidiary undertakings and any other undertakings in which Sedgwick and such undertakings (aggregating their interests) have a substantial interest and "THE WIDER MARSH & MCLENNAN GROUP" means Marsh & McLennan and its subsidiary undertakings and any other undertakings in which Marsh & McLennan and such undertakings (aggregating their interests) have a substantial interest and, for these purposes, "subsidiary undertaking" and "undertaking" have the meanings given by the Companies Act 1985 and "substantial interest" means a direct or indirect interest in 20 per cent. or more of the equity capital of an undertaking. Subject to the requirements of the Panel, Marsh & McLennan reserves the right to waive all or any of the above conditions, in whole or in part, except condition (a). Conditions (b) to (i) (inclusive) must be fulfilled or (if capable of waiver) waived by midnight (London time) on 26 October 1998 or, if later, on the 21st day after the date on which condition (a) is fulfilled or is declared fulfilled (or, in each case, such later date as the Panel may agree), failing which the Ordinary Offer will lapse. Marsh & McLennan shall be under no obligation to waive (if capable of waiver) or treat as fulfilled any of conditions (b) to (i) (inclusive) by a date earlier than the latest date specified above for the fulfilment thereof notwithstanding that the other conditions of the Ordinary Offer may at such earlier date have been waived or fulfilled and that there are at such earlier date no circumstances indicating that any of such conditions may not be capable of fulfilment. Marsh & McLennan will not invoke any of the conditions (e) to (i) (inclusive) in relation to circumstances which would otherwise give rise to the right to invoke such condition where there has been fair disclosure of such circumstances to Marsh & McLennan or its advisers by or on behalf of Sedgwick prior to 25 August 1998. If Marsh & McLennan is required by the Panel to make an offer for Sedgwick Securities under the provisions of Rule 9 of the City Code, Marsh & McLennan may make such alterations to the conditions of the Ordinary Offer, including condition (a), as are necessary to comply with the provisions of that Rule. The Ordinary Offer will lapse if the European Commission either initiates proceedings under Article 6(1)(c) of the Regulation or makes a referral to a competent authority of the UK under Article 9(1) of the Regulation before, in each case, the Initial Closing Date. If the Ordinary Offer lapses, the Ordinary Offer will cease to be capable of further acceptance and Sedgwick Shareholders accepting the Ordinary Offer and Marsh & McLennan shall upon the Ordinary Offer lapsing cease to be bound by acceptances delivered on or before the date on which the Ordinary Offer lapses. THE CONVERTIBLE OFFER The Convertible Offer is conditional upon the Ordinary Offer becoming or being declared unconditional in all respects. I-7 32 PART B FURTHER TERMS OF THE OFFERS The Ordinary Offer and the Convertible Offer are separate offers. The following terms will, except where the context otherwise requires, apply to each of the Ordinary Offer and the Convertible Offer (including the Loan Note Alternative) and any revision, variation, renewal or extension thereto. References in this Part B of Appendix I to the "Offer" are, except where the context otherwise requires, to each of the Offers. Any reference in this Part B of Appendix I and in the Acceptance Forms to an offer becoming "unconditional" includes that offer being declared unconditional in all respects. 1. ACCEPTANCE PERIOD (a) The Offer is initially open for acceptance until 3.00 p.m. (London time), 10.00 a.m. (New York City time) on 5 October 1998. Marsh & McLennan reserves the right (but will not be obliged, other than as may be required by the City Code or US federal securities laws and the rules and regulations thereunder) at any time or from time to time to extend the Offer after such time and, in such event, will make a public announcement of such extension in the manner described in paragraph 3 below and give oral or written notice of such extension to the UK Receiving Agent and the US Depositary. If all Conditions have not been satisfied, fulfilled or, to the extent permitted, waived by Marsh & McLennan by the Initial Closing Date, Marsh & McLennan currently intends to extend the Offer. There can be no assurance, however, that Marsh & McLennan will, in such circumstances, extend the Offer and, if no such extension is made, the Offer will lapse on the Initial Closing Date and no Sedgwick Securities or Sedgwick Convertible Bonds will be purchased pursuant to the Offer. (b) Although no revision is envisaged, if the Offer is revised the Initial Offer Period will be extended, if necessary, for a period of at least 14 calendar days from the date on which the revised Offer Document is posted to Sedgwick Securityholders and Sedgwick Bondholders. Except with the consent of the Panel, no revision of the Offer may be made after 20 October 1998. (c) The Initial Offer Period is not (except with the consent of the Panel) capable of being extended after midnight (London time), 7.00 p.m. (New York City time) on 3 November 1998 (or any other earlier time or date beyond which Marsh & McLennan has stated that the Offer will not be extended and has not withdrawn that statement). If all Conditions are not satisfied, fulfilled or, to the extent permitted, waived at such time (taking account of any prescribed extension of the Initial Offer Period), the Offer will lapse in the absence of a competing bid and/or unless the Panel agrees otherwise. If the Offer lapses for any reason, the Offer shall cease to be capable of further acceptance and Marsh & McLennan and Sedgwick Securityholders and Sedgwick Bondholders shall cease to be bound by prior acceptances. Marsh & McLennan reserves the right, with the permission of the Panel, to extend the final date for the expiry of the Initial Offer Period to 24 November 1998 or such later time as the Panel may agree. Except with the consent of the Panel, Marsh & McLennan may not, for the purposes of determining whether the Acceptance Condition has been satisfied, take into account acceptances received or purchases of Sedgwick Securities made after 1.00 p.m. (London time), 8.00 a.m. (New York City time) on 3 November 1998 (or any time and/or date beyond which Marsh & McLennan has stated that the Offer will not be extended and in respect of which it has not withdrawn that statement) or such later time(s) and/or date(s) as Marsh & McLennan may, with the permission of the Panel, determine. (d) If all Conditions are satisfied, fulfilled or, to the extent permitted, waived and the Initial Offer Period expires, the Offer will remain open for acceptance for the Subsequent Offer Period of not less than 14 calendar days from the expiry of the Initial Offer Period. If Marsh & McLennan states that the Offer will remain open until further notice, Marsh & McLennan will give not less than 14 calendar days' notice to Sedgwick Securityholders and Sedgwick Bondholders who have not accepted the Offer before closing the Subsequent Offer Period. (e) If a competitive situation arises after a "no increase" and/or "no extension" statement has been made by or on behalf of Marsh & McLennan in relation to the Offer, Marsh & McLennan may, if it has specifically reserved the right to do so at the time the statement is made (or otherwise with the consent of I-8 33 the Panel), withdraw the statement and be free to increase or, as the case may be, to extend the Offer if it complies with the requirements of the City Code and in particular if: (i) it announces the withdrawal as soon as possible and in any event within four business days after the date of the announcement of the competing offer or other competitive situation; and (ii) it notifies Sedgwick Securityholders and Sedgwick Bondholders in writing of the withdrawal (or, in the case of Sedgwick Securityholders with registered addresses outside the UK or the US, or holders of Sedgwick Bearer Bonds, by announcement in the UK and the US) at the earliest opportunity. Marsh & McLennan may, if it has specifically reserved the right to do so at the time the statement is made, choose not to be bound by the terms of a "no increase" or "no extension" statement and may increase or improve the Offer if it is recommended for acceptance by the board of directors of Sedgwick, or in other circumstances permitted by the Panel. 2. ACCEPTANCE CONDITION (a) For the purposes of determining whether the Acceptance Condition has been satisfied, Marsh & McLennan may, except as otherwise agreed by the Panel, only take into account acceptances received or purchases of Sedgwick Securities made in respect of which all relevant documents are received by the UK Receiving Agent or the US Depositary: (i) by 1.00 p.m. (London time), 8.00 a.m. (New York City time) on 3 November 1998 (or any other date beyond which Marsh & McLennan has stated that the Initial Offer Period will not be extended and has not withdrawn that statement); or (ii) if the Initial Offer Period is extended with the consent of the Panel, such later time(s) or date(s) as the Panel may agree. If the latest time at which the Offer may become unconditional is extended beyond midnight (London time), 7.00 p.m. (New York City time) on 3 November 1998, acceptances received and purchases made in respect of which the relevant documents are received by the UK Receiving Agent or the US Depositary after 1.00 p.m. (London time), 8.00 a.m. (New York City time) on that date may only be taken into account with the agreement of the Panel, except where the City Code permits otherwise. (b) Except as otherwise agreed by the Panel: (i) an acceptance of the Ordinary Offer will only be treated as valid for the purposes of the Acceptance Condition if the requirements of Note 4 and, if applicable, Note 6 to Rule 10 of the City Code are satisfied in respect of it; (ii) a purchase of Sedgwick Securities by Marsh & McLennan or its nominee or (if Marsh & McLennan is required by the Panel to make an offer for Sedgwick Securities under Rule 9 of the Code) by a person acting in concert with Marsh & McLennan or its nominee, will only be treated as valid for the purposes of the Acceptance Condition if the requirements of Note 5 and, if applicable, Note 6 to Rule 10 of the City Code are satisfied in respect of it; and (iii) before the Ordinary Offer may become unconditional the UK Receiving Agent must issue a certificate to Marsh & McLennan, J.P. Morgan or Donaldson, Lufkin & Jenrette which states the number of Sedgwick Securities in respect of which acceptances have been received and not validly withdrawn and the number of Sedgwick Securities otherwise acquired, whether before or during the Offer Period, which comply with the provisions of this paragraph 2(b). Copies of such certificate will be sent to the Panel as soon as possible after it is issued. (c) For the purpose of determining whether the Acceptance Condition has been satisfied, Marsh & McLennan is not bound (unless required by the Panel) to take into account any Sedgwick Securities which have been unconditionally allotted or issued or which arise as a result of the exercise of conversion rights before the determination takes place unless Sedgwick or its agent has given written notice to I-9 34 Marsh & McLennan, the UK Receiving Agent or the US Depositary on behalf of Marsh & McLennan at one of the addresses specified at the back of this document containing relevant details of the allotment, issue or conversion. Notification by e-mail, telex or facsimile transmission does not constitute written notice for this purpose. (d) In accordance with an SEC exemptive order received by Marsh & McLennan, at least five business days prior to any reduction in the percentage of Sedgwick Securities required to satisfy the Acceptance Condition, Marsh & McLennan will announce that it has reserved the right so to reduce the Acceptance Condition by announcement made through a press release and such other methods reasonably designed to inform Sedgwick Securityholders and Sedgwick Bondholders, including placing an advertisement in a newspaper of national circulation in the US. Such announcement will state the percentage to which the Acceptance Condition may be reduced and state that such a reduction is possible but that Marsh & McLennan need not declare its actual intentions until it is required to do so under the City Code. Marsh & McLennan will not make such an announcement unless it believes that there is a significant possibility that sufficient Sedgwick Securities will be tendered to permit the Acceptance Condition to be satisfied at such reduced level. Sedgwick Securityholders or Sedgwick Bondholders who are not willing to accept the Ordinary Offer or the Convertible Offer, as the case may be, if the Acceptance Condition is reduced to a level lower than 90 per cent. should either not accept the relevant Offer until the Subsequent Offer Period or be prepared to withdraw their acceptances promptly following an announcement by Marsh & McLennan of its reservation of the right to reduce the Acceptance Condition. 3. ANNOUNCEMENTS (a) Without prejudice to paragraph 4 below, by 8.30 a.m. (London time) in the UK and 8.30 a.m. (New York City time) in the US on the business day (the "relevant day") after the day on which the Offer is due to expire or on which all Conditions become or are declared to have been satisfied, fulfilled or, to the extent permitted, waived or on which the Offer is revised or is extended (or such later time or date as the Panel may agree), Marsh & McLennan will make an appropriate announcement and inform the London Stock Exchange and the Dow Jones News Service. In the announcement Marsh & McLennan will state (unless otherwise permitted by the Panel) the total number of Sedgwick Securities and Sedgwick Convertible Bonds and rights over Sedgwick Securities and Sedgwick Convertible Bonds (as nearly as practicable): (i) for which acceptances of the Offer have been received, showing the extent, if any, to which such acceptances have been received from persons acting or deemed to be acting in concert with Marsh & McLennan for the purposes of the Offer; (ii) held by or on behalf of Marsh & McLennan or any person acting or deemed to be acting in concert with Marsh & McLennan for the purposes of the Offer before the Offer Period; and (iii) acquired or agreed to be acquired by or on behalf of Marsh & McLennan or any person acting or deemed to be acting in concert with Marsh & McLennan for the purposes of the Offer during the Offer Period, and the announcement will specify the percentage of the issued share capital of Sedgwick and of the nominal amount of the Sedgwick Convertible Bonds represented by each of these figures. (b) In calculating the number of Sedgwick Securities represented by acceptances and purchases, Marsh & McLennan may only include acceptances and purchases if they could be counted towards fulfilling the Acceptance Condition under Notes 4, 5 and 6 on Rule 10 of the City Code, unless the Panel agrees otherwise. Subject to this, Marsh & McLennan may include or exclude, for announcement purposes, acceptances and purchases not in all respects in order or which are subject to verification. (c) Any decision to extend the Initial Offer Period may be made at any time up to, and will be announced by, 8.30 a.m. (London time) in the UK and 8.30 a.m. (New York City time) in the US on the relevant day (or such later time or date as the Panel may agree). The announcement will state the next expiry date of the Initial Offer Period. I-10 35 (d) In this Appendix, a reference to the making of an announcement or the giving of notice by or on behalf of Marsh & McLennan includes the release of an announcement by Marsh & McLennan's public relations consultants or by J.P. Morgan or by Donaldson, Lufkin & Jenrette, in each case on behalf of Marsh & McLennan, to the press and the delivery by hand or telephone, telex or facsimile or other electronic transmission of an announcement to the London Stock Exchange and the Dow Jones News Service, as the case may be. An announcement made otherwise than to the London Stock Exchange and the Dow Jones News Service will be notified simultaneously to the London Stock Exchange and the Dow Jones News Service. (e) Without limiting the manner in which Marsh & McLennan may choose to make any public announcement and, subject to Marsh & McLennan's obligations under applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act relating to Marsh & McLennan's obligations to disseminate promptly public announcements concerning material changes to the Offer), Marsh & McLennan will have no obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to the London Stock Exchange and the Dow Jones News Service. (f) Any notice to be given by Marsh & McLennan to Sedgwick Bondholders in connection with the Convertible Offer may be given in accordance with the notice provisions of the Trust Deed. 4. RIGHTS OF WITHDRAWAL (a) Except as provided by this paragraph 4, acceptances and elections are irrevocable. (b) Sedgwick Securities and Sedgwick Convertible Bonds tendered pursuant to the Offer may be withdrawn pursuant to the procedures set out below at any time during the Initial Offer Period and in certain other circumstances described below. Sedgwick Securities and Sedgwick Convertible Bonds tendered during the Initial Offer Period and not validly withdrawn prior to the Initial Closing Date and Sedgwick Securities and Sedgwick Convertible Bonds tendered during the Subsequent Offer Period may not be withdrawn, except in certain limited circumstances described below. (c) If Marsh & McLennan announces that the Acceptance Condition has been satisfied and then fails to comply by 3.30 p.m. (London time), 10.30 a.m. (New York City time) on the relevant day (or such later time and/or date as the Panel may agree) with any of the other requirements specified in paragraph 3(a) of Part B of this Appendix, a person may withdraw his acceptance by written notice given by post or by hand to the UK Receiving Agent or the US Depositary at the addresses set out at the back of this document. Subject to paragraph 1(c) of Part B of this Appendix, this right of withdrawal may be terminated not less than eight calendar days after the relevant day by Marsh & McLennan confirming, if such is the case, that the Offer is still unconditional, and complying with the other requirements specified in paragraph 3(a) of Part B of this Appendix. If that confirmation is given, the first period of 14 calendar days referred to in paragraph 1(d) of Part B of this Appendix will start on the date of that confirmation. (d) If a "no increase" and/or "no extension" statement is withdrawn in accordance with paragraph 1(e) of Part B of this Appendix, a person who accepts the Offer after the date of the statement may withdraw his acceptance in the manner set out in paragraph 4(c) of Part B of this Appendix for a period of eight calendar days after the date Marsh & McLennan posts the notice of the withdrawal of that statement to Sedgwick Securityholders and Sedgwick Bondholders. (e) To be effective, a written notice of withdrawal must be received on a timely basis by the party (either the UK Receiving Agent or the US Depositary) to whom the relevant Acceptance Form was originally sent and must specify the name of the person who has tendered the Sedgwick Securities or Sedgwick Convertible Bonds, the number of Sedgwick Securities or Sedgwick Convertible Bonds to be withdrawn and (if share certificates, bond certificates or Sedgwick ADSs, as the case may be, have been tendered) the name of the registered holder of the relevant Sedgwick Securities or Sedgwick Registered Bonds, if different from the name of the person who tendered Sedgwick Securities or Sedgwick Registered Bonds. (f) In respect of Sedgwick ADSs, if Sedgwick ADRs have been delivered or otherwise identified to the US Depositary, then, prior to the physical release of such Sedgwick ADRs, the serial numbers shown on such I-11 36 Sedgwick ADRs must be submitted and, unless the Sedgwick ADSs evidenced by such Sedgwick ADRs have been delivered by an Eligible Institution or by means of a Letter of Transmittal, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If interests in Sedgwick ADSs evidenced by Sedgwick ADRs have been delivered pursuant to the procedures for book-entry transfer set out in paragraph 11(c) of Part B of this Appendix, any notice of withdrawal must also specify the name and number of the account at the appropriate Book-Entry Transfer Facility to be credited with the withdrawn Sedgwick ADSs and must otherwise comply with such Book-Entry Transfer Facility's procedures. (g) Withdrawals of tendered Sedgwick Securities and Sedgwick Convertible Bonds may not be rescinded (without Marsh & McLennan's consent) and any Sedgwick Securities and Sedgwick Convertible Bonds properly withdrawn and not properly retendered will thereafter be deemed not validly tendered for the purposes of the Offer. Withdrawn Sedgwick Securities and Sedgwick Convertible Bonds may be subsequently retendered, by following one of the procedures described in either paragraph 9, 10 or 11 of Part B of this Appendix, as the case may be, at any time whilst the Offer remains open. (h) All questions as to the validity (including time of receipt) of any notice of withdrawal will be determined by Marsh & McLennan whose determination (except as required by the Panel) will be final and binding. None of Marsh & McLennan, Sedgwick, J.P. Morgan, Donaldson, Lufkin & Jenrette, the US Depositary, the UK Receiving Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give such notification. 5. THE LOAN NOTE ALTERNATIVE (a) The Loan Note Alternative is conditional upon all of the Conditions becoming or being declared satisfied, fulfilled or, to the extent permitted, waived and will remain open for as long as the Offer remains open for acceptances. No Loan Notes will be issued unless valid elections for the Loan Note Alternative are received by the date the Offer becomes or is declared unconditional in all respects for at least L5 million nominal amount of Loan Notes failing which any consideration due under the terms of the Offer will be payable in cash. (b) No election for the Loan Note Alternative will be valid unless both a valid acceptance of the Offer and a valid election for the Loan Note Alternative, duly completed in all respects and accompanied by, if appropriate, all share certificates, bond certificates and/or other document(s) of title, are duly received by the time and date on which the Loan Note Alternative closes. (c) If any acceptance of the Offer which includes an election for the Loan Note Alternative is not, and is not deemed to be, valid or complete in all respects at such time, such election shall for all purposes be void and the holder(s) of Sedgwick Shares or Sedgwick Convertible Bonds purporting to make such election shall not, for any purpose, be entitled to receive the Loan Note Alternative, but any such acceptance which is otherwise valid shall be deemed to be an acceptance of the Offer (without the Loan Note Alternative) for the number of Sedgwick Shares or Sedgwick Convertible Bonds which are the subject of the acceptance and the holder(s) of Sedgwick Shares or Sedgwick Convertible Bonds will, on the Offer becoming unconditional, be entitled to the cash consideration due under the Offer. (d) The insertion of a number in Box 2 on the relevant Acceptance Form shall, subject to the other terms of the Offer, be treated in respect of the relevant number of Sedgwick Shares or Sedgwick Convertible Bonds as an election for the Loan Note Alternative. (e) An election for the Loan Note Alternative will not be valid unless the relevant Acceptance Form is completed correctly in all respects and is received in accordance with paragraphs 9 and 10 below. (f) The Loan Notes will be issued in multiples of L1 and fractional entitlements will be disregarded. I-12 37 6. REVISED OFFER (a) Although no revision is envisaged, if the Offer is revised (either in terms or conditions or in the value or form of the consideration offered or otherwise), the benefit of the revised Offer will be made available to Sedgwick Securityholders and Sedgwick Bondholders who have accepted the relevant Offer (in its original or any revised form(s)) and not validly withdrawn such acceptance (a "Previous Acceptor") if the revised Offer represents, on the date on which it is announced (on such basis as J.P. Morgan and Donaldson, Lufkin & Jenrette may consider appropriate), an improvement, or no diminution, in the value of the consideration offered compared with the consideration previously offered. The acceptance by a Previous Acceptor of the Offer (in its original or any revised form(s)) will, subject as provided in paragraphs 6(b), 6(c) and 7 of Part B of this Appendix, be deemed an acceptance of the revised Offer and will constitute the appointment of any director of Marsh & McLennan, J.P. Morgan or Donaldson, Lufkin & Jenrette as his attorney and/or agent with authority: (i) to accept the revised Offer on his behalf; (ii) if the revised Offer includes alternative forms of consideration, to make elections or accept the alternative forms of consideration on his behalf in the proportions the attorney and/or agent in his absolute discretion thinks fit; and (iii) to execute on his behalf and in his name any further documents and take such further actions (if any) as may be required to give effect to those elections or acceptances. In making any election or acceptance, the attorney and/or agent will take into account the nature of any previous acceptance or election made by or on behalf of the Previous Acceptor and such other facts or matters as he may reasonably consider relevant. (b) The deemed acceptance and/or election referred to in paragraph 6(a) of Part B of this Appendix will not apply and the power of attorney and authorities conferred by that paragraph will not be exercised if, as a result, the Previous Acceptor would (on such basis as J.P. Morgan and Donaldson, Lufkin & Jenrette may consider appropriate) thereby receive less in aggregate consideration than he would have received in aggregate consideration as a result of his acceptance of the Offer in the form originally accepted by him or on his behalf. (c) The deemed acceptance and/or election referred to in paragraph 6(a) of Part B of this Appendix will not apply and the power of attorney and the authorities conferred by that paragraph will be ineffective in the case of a Previous Acceptor who lodges, within 14 calendar days of the posting of the document containing the revised Offer, an Acceptance Form (or any other form issued on behalf of Marsh & McLennan) in which he validly elects to receive consideration under the revised Offer in some other manner. (d) Marsh & McLennan, J.P. Morgan and Donaldson, Lufkin & Jenrette reserve the right to treat an executed Acceptance Form relating to the Offer (in its original or any previously revised form(s)) which is received (or dated) after the announcement of any revised Offer as a valid acceptance of the revised Offer (and where applicable a valid election for the alternative forms of consideration). That acceptance will constitute an authority in the terms of paragraph 6(a) of Part B of this Appendix on behalf of the relevant Sedgwick Securityholder or Sedgwick Bondholder. 7. GENERAL (a) If the Offer lapses, neither Marsh & McLennan nor any person acting, or deemed to be acting, in concert with Marsh & McLennan for the purposes of the Offer nor any of their respective affiliates may, pursuant to the City Code, make an offer (whether inside or outside the UK) for Sedgwick Securities or Sedgwick Convertible Bonds for a period of one year following the date of such lapse, except with the permission of the Panel. (b) If the Offer lapses or is withdrawn, Acceptance Forms, share certificates, bond certificates, Sedgwick ADRs and other documents of title will be returned by post (or by such other method as the Panel may I-13 38 approve) within 14 calendar days of the Offer lapsing, at the risk of the Sedgwick Securityholder or Sedgwick Bondholder in question, to the person or agent whose name is set out in the relevant box on the Acceptance Form or, if none is set out, to the first-named holder at his registered address or, in the case of Sedgwick ADSs, delivered by book-entry transfer into the US Depositary's account at a Book-Entry Transfer Facility pursuant to the procedures set forth in paragraph 11(c) of Part B of this Appendix (such Sedgwick ADSs will be credited within such period to an account maintained at the appropriate Book-Entry Transfer Facility) or, in the case of Sedgwick Bearer Bonds: (i) where Sedgwick Bearer Bonds (and coupons) have been delivered to the UK Receiving Agent, an equivalent nominal amount of Sedgwick Bearer Bonds (together with all coupons delivered with such bonds) will be available for collection together with the relevant Bondholder Form of Acceptance (and any other documents so delivered) at the office to which they were delivered for a period of 14 calendar days after the Convertible Offer lapses or is withdrawn against production of the original receipt given therefor and satisfactory evidence of identity and authority, failing which they will be returned, at the risk of the Sedgwick Bondholder concerned, by registered post within 14 calendar days of the expiry of that period to the person or agent whose name and address is set out in Box 7 of the relevant Bondholder Form of Acceptance; (ii) where Sedgwick Bearer Bonds are held to the order of J.P. Morgan or Donaldson, Lufkin & Jenrette with a bank or other depositary, J.P. Morgan or Donaldson, Lufkin Jenrette as appropriate will within 14 calendar days of the Convertible Offer lapsing or being withdrawn instruct such bank or depositary by post that such Sedgwick Bearer Bonds should no longer be held to its order and the Bondholder Form of Acceptance (and any other documents so delivered) will, at the risk of the Sedgwick Bondholder concerned, be returned by post to the person or agent whose name and address is set out in Box 7 of the relevant Bondholder Form of Acceptance; and (iii) where the Sedgwick Bearer Bonds have been debited to a securities clearance or other account with Euroclear or Cedel and credited to an account of J.P. Morgan or Donaldson, Lufkin & Jenrette with Euroclear, or as the case may be, Cedel. J.P. Morgan or Donaldson, Lufkin & Jenrette (as appropriate) shall within 14 calendar days of the Convertible Offer lapsing or being withdrawn give appropriate instructions to Euroclear or, as the case may be, Cedel for an equivalent nominal amount of such Sedgwick Bearer Bonds to be debited to its account and to be credited to the securities clearance or other account with Euroclear or, as the case may be, Cedel, identified in the relevant Bondholder Form of Acceptance (and any other documents so delivered) will be returned by post at the risk of the Sedgwick Bondholder concerned, to the address referred to above and until such time as the Convertible Offer becomes or is declared unconditional in all respects or lapses or is withdrawn (and the obligation herein to effect credits of Sedgwick Bearer Bonds is satisfied) J.P. Morgan or Donaldson, Lufkin & Jenrette, as appropriate, will retain as credited to its securities clearance or other account at Euroclear and/or Cedel an aggregate nominal amount of Sedgwick Bearer Bonds sufficient to enable it to satisfy its obligations herein to effect all such credits. (c) The UK Receiving Agent will, immediately after the Offer lapses (or within such longer period as the Panel may permit, not exceeding 14 calendar days of the Offer lapsing), instruct CRESTCo to transfer all Sedgwick Shares held in escrow balances and in relation to which it is the escrow agent for the purposes of the Offer to the original available balances of the relevant Sedgwick Shareholders. (d) Except with the consent of the Panel: (i) settlement of the consideration to which any Sedgwick Securityholder or Sedgwick Bondholder is entitled under the Offer will be fully implemented in accordance with the terms of the Offer without regard to any lien, right of set-off, counterclaim or other analogous right to which Sedgwick, J.P. Morgan or Donaldson, Lufkin & Jenrette may otherwise be, or claim to be, entitled against that Sedgwick Securityholder or Sedgwick Bondholder; and (ii) settlement of the consideration will be effected in the manner prescribed in paragraph 19 of the letter from J.P. Morgan and Donaldson, Lufkin & Jenrette contained in this document not later I-14 39 than 14 calendar days after the later of the Initial Closing Date and the date of receipt of a valid and complete Acceptance Form from such holder of Sedgwick Securities or Sedgwick Convertible Bonds. (e) The terms, provisions, instructions and authorities contained in the Acceptance Forms also constitute part of the terms of the Offer. A word or expression defined in this document has the same meaning when used in the Acceptance Forms, unless the context requires otherwise. (f) Any accidental omission or failure to despatch this document, the Acceptance Forms, any other documents relating to the Offer or any notice required to be despatched under the terms of the Offer to, or any failure to receive the same by, any person to whom the Offer is, or should be, made will not in any way invalidate the Offer. Subject to the provisions of paragraph 8 of Part B of this Appendix, the Offer is made to any Sedgwick Securityholder or Sedgwick Bondholder to whom this document and the Acceptance Forms or any related document may not have been despatched or who may not receive such documents, and these persons may collect the relevant documents from the UK Receiving Agent, the US Depositary, J.P. Morgan or Donaldson, Lufkin & Jenrette and, in respect of the Sedgwick Convertible Bonds, from the registrar or any paying and conversion agent in respect thereof and through Euroclear and Cedel to participants and account holders therein. (g) Subject to the City Code, Marsh & McLennan, J.P. Morgan and Donaldson, Lufkin & Jenrette reserve the right to treat as valid in whole or in part any acceptance of the Offer received by the UK Receiving Agent or US Depositary or otherwise on behalf of Marsh & McLennan which is not entirely in order or in the correct form or which is not accompanied by (as applicable) the relevant transfer to escrow or the relevant share or bond certificates and/or other documents of title or which is received by it in a form or at a place or places other than as set out in this document or the relevant Acceptance Form. In that event, no payment of cash, or, if applicable, issue of Loan Notes under the Offer will be made until after the acceptance is entirely in order and (as applicable) the relevant transfer to escrow has settled or the relevant share or bond certificate(s) and/or other document(s) of title or indemnities satisfactory to Marsh & McLennan have been received by the UK Receiving Agent or the US Depositary, as the case may be. (h) If all Conditions are satisfied, fulfilled or, where permitted, waived, and Marsh & McLennan acquires, or contracts to acquire, pursuant to the Ordinary Offer or otherwise, at least 90 per cent. in nominal value of the Sedgwick Securities to which the Ordinary Offer relates, it intends to apply the provisions of sections 428-430F of the Companies Act to acquire compulsorily any outstanding Sedgwick Securities. (i) If all Conditions are satisfied, fulfilled or, where permitted, waived and Marsh & McLennan acquires or contracts to acquire, pursuant to the Convertible Offer or otherwise, at least 90 per cent. in nominal value of the Sedgwick Convertible Bonds to which the Convertible Offer relates, it intends to apply the provisions of sections 428-430F of the Companies Act to acquire compulsorily any outstanding Sedgwick Convertible Bonds, save that if Marsh & McLennan has not acquired or contracted to acquire, pursuant to the Convertible Offer or otherwise, at least 90 per cent. in nominal value of the Sedgwick Convertible Bonds to which the Convertible Offer relates by the time that the Offers become unconditional, Sedgwick will, after such time and at the request of Marsh & McLennan, exercise any rights it may have to redeem any outstanding Sedgwick Convertible Bonds in accordance with their terms or such other terms as Marsh & McLennan and the Trustee may agree. (j) Marsh & McLennan intends that Sedgwick shall apply for cancellation of the listing of the Sedgwick Shares and Sedgwick Convertible Bonds on the London Stock Exchange and the listing of the Sedgwick ADSs on the NYSE (subject to the requirements of those exchanges) and that Sedgwick shall terminate the Sedgwick ADR facility in accordance with the deposit agreement relating thereto. (k) All powers of attorney, appointments of agents and authorities on the terms conferred by or referred to in this Appendix or in the Acceptance Form are given by way of security for the performance of the obligations of the Sedgwick Securityholder or Sedgwick Bondholder concerned and are irrevocable in accordance with section 4 of the Powers of Attorney Act 1971, except in the circumstances where the I-15 40 donor of the power of attorney or authority validly withdraws his acceptance in accordance with paragraph 4 of Part B of this Appendix. (l) No acknowledgement of receipt of any Acceptance Form, share or bond certificate, Sedgwick ADR or other document of title will be given. All communications, notices, certificates, Sedgwick ADRs, documents of title and remittances to be delivered by, and sent to or from, Sedgwick Securityholders and Sedgwick Bondholders (or their designated agent(s)) will be delivered or sent at their own risk. (m) If the Offer becomes unconditional, all mandates and other instructions or notices recorded by the Sedgwick Securityholders and Sedgwick Bondholders immediately before the Offer becomes unconditional relating to holdings of Sedgwick Securities and Sedgwick Convertible Bonds will, until revoked, continue in force in relation to any Loan Notes issued under the Offer. (n) Marsh & McLennan, J.P. Morgan and Donaldson, Lufkin & Jenrette reserve the right to notify any matter, including the making of the Offer, to all or any Sedgwick Securityholders and Sedgwick Bondholders: (i) with a registered address outside the UK and the US; or (ii) whom Marsh & McLennan, J.P. Morgan and Donaldson, Lufkin & Jenrette knows to be a custodian, trustee or nominee holding Sedgwick Securities or Sedgwick Convertible Bonds for persons who are citizens, residents or nationals of jurisdictions outside the UK and the US: or (iii) who hold Sedgwick Bearer Bonds, by announcement in the UK to the London Stock Exchange and in the US to the Dow Jones News Services or in any other appropriate manner or by paid advertisement in a newspaper published and circulated in the UK and the US. Such notice will be deemed to have been sufficiently given, despite any failure by a Sedgwick Securityholder or Sedgwick Bondholder to receive or see that notice. A reference in this document to a notice or the provision of information in writing by or on behalf of Marsh & McLennan is to be construed accordingly. No such document will be sent to an address in Canada, Australia or Japan. (o) The Offer is made at 3.00 p.m. (London time), 10.00 a.m. (New York City time) on 4 September 1998 and is capable of acceptance from and after that time. Acceptance Forms and copies of this document may be collected from the UK Receiving Agent, the US Depositary, J.P. Morgan or Donaldson, Lufkin & Jenrette, at one of the addresses specified on the back cover of this document and, in respect of the Convertible Offer, from the registrar and any paying and conversion agent in respect thereof and through Euroclear and Cedel to participants and accountholders therein. (p) The Offer, all acceptances of the Offer and all elections in respect of it, are governed by and will be construed in accordance with English law. Execution by or on behalf of a Sedgwick Securityholder or Sedgwick Bondholder of an Acceptance Form constitutes his irrevocable submission to the jurisdiction of the courts of England in relation to all matters arising in connection with the Offer. However, the conduct of the Offer is also subject to US federal securities laws and the securities laws of the states in the US in which the Offer is being made. 8. OVERSEAS SEDGWICK SECURITYHOLDERS AND SEDGWICK BONDHOLDERS (a) The making of the Offer (including the Loan Note Alternative) in, or to certain persons resident in or nationals or citizens of, jurisdictions outside the UK or the US (and the availability of Loan Notes to citizens or residents of the US and certain other overseas persons) or to their nominees or trustees may be prohibited or affected by the laws of the relevant jurisdiction. Sedgwick Securityholders and Sedgwick Bondholders who are citizens, residents or nationals of jurisdictions outside the UK and the US (or, in the case of Loan Notes, the UK only) should inform themselves about and observe any applicable legal requirements. It is the responsibility of such Sedgwick Securityholders and Sedgwick Bondholders wishing to accept the Offer or the Loan Note Alternative to satisfy themselves as to the full observance of the laws of the relevant jurisdiction in connection with the Offer. This includes the obtaining of any I-16 41 governmental, exchange control or other consents which may be required, compliance with other necessary formalities needing to be observed and the payment of any issue, transfer or other taxes or duties or other requisite payments due in that jurisdiction by whomsoever payable and each of Marsh & McLennan, J.P. Morgan and Donaldson, Lufkin & Jenrette and any person acting on their behalf shall be fully indemnified and held harmless by any Sedgwick Securityholder and Sedgwick Bondholder for whom Marsh & McLennan, J.P. Morgan and Donaldson, Lufkin & Jenrette are required to pay any issue, transfer or other taxes. (b) The Offer is not being made, directly or indirectly, in or into Canada, Australia or Japan or by use of the mails of, or by any means or instrumentality of interstate or foreign commerce of, or of any facility of a national securities exchange of Canada, Australia or Japan. This includes, but is not limited to, facsimile transmission, e-mail, telex and telephone. Accordingly, copies of this document, the Acceptance Forms, and any related offer documents are not being, and must not be, mailed or otherwise distributed or sent in, into or from Canada, Australia or Japan. Persons receiving such documents (including, without limitation, custodians, nominees and trustees) must not distribute, mail or send them in, into or from Canada, Australia or Japan, use the Canadian, Australian or Japanese mails or any such means, instrumentality or facility in connection with the Offer, and so doing may invalidate any related purported acceptance of the Offer. Persons wishing to accept the Offer must not use the Canadian, Australian or Japanese (or, if electing for the Loan Note Alternative, the US) mails or any such means, instrumentality or facility for any purpose directly or indirectly relating to acceptance of the Offer. Envelopes containing Acceptance Forms in respect of the Offer must not be postmarked in Canada, Australia or Japan (and, if electing for the Loan Note Alternative, the US) or otherwise despatched from those jurisdictions and all acceptors must provide addresses outside Canada, Australia or Japan (and, if electing for the Loan Note Alternative, the US) for the receipt of the consideration to which they are entitled under the Offer or for the return of Acceptance Forms, share certificates, bond certificates or other documents of title. (c) Subject as provided below, a Sedgwick Securityholder or Sedgwick Bondholder will be deemed not to have accepted the Offer if: (i) he cannot give the representations and warranties set out in paragraphs 10(b) and (in the case of holders of Sedgwick ADSs) 11(i)(ii)(dd) of Part B of this Appendix; (ii) he completes the relevant Box of the relevant Acceptance Form with an address in Canada, Australia or Japan or has a registered address in Canada, Australia or Japan and in either case he does not insert in the relevant Box of the relevant Acceptance Form the name and address of a person or agent outside Canada, Australia or Japan to whom he wishes the consideration to which he is entitled under the Offer to be sent; (iii) he inserts in the relevant Box of the relevant Acceptance Form the name and address of a person or agent in Canada, Australia or Japan to whom he wishes the consideration to which he is entitled under the Offer to be sent; or (iv) the Acceptance Form received from him is in an envelope postmarked in, or which otherwise appears to Marsh & McLennan or its agents to have been sent from, Canada, Australia or Japan. (d) If any person, despite the restrictions referred to in paragraph 8(b) of Part B of this Appendix and whether pursuant to a contractual or legal obligation or otherwise, forwards this document, the Acceptance Forms or any related offering document in, into or from Canada, Australia or Japan or uses the mails or any means or instrumentality (including, without limitation, facsimile transmission, telex and telephones) of interstate or foreign commerce of, or any facilities of a national securities exchange of Canada, Australia or Japan in connection with that forwarding, that person should: (i) inform the recipient of that fact; (ii) explain to the recipient that action may invalidate any purported acceptance by the recipient; and (iii) draw the attention of the recipient to this paragraph 8. I-17 42 (e) If any written notice from a Sedgwick Securityholder or Sedgwick Bondholder withdrawing his acceptance in accordance with paragraph 4 of Part B of this Appendix is received in an envelope postmarked in, or which otherwise appears to Marsh & McLennan or its agents to have been sent from Canada, Australia or Japan, Marsh & McLennan reserves the right, in its absolute discretion, to treat that notice as invalid. (f) The provisions of this paragraph 8 and any other terms of the Offer relating to overseas holders of Sedgwick Securities or Sedgwick Convertible Bonds may be waived, varied or modified as regards specific Sedgwick Securityholders and Sedgwick Bondholders or on a general basis by Marsh & McLennan in its sole discretion. Subject to this discretion, the provisions of this paragraph 8 supersede any terms of the Offer inconsistent with them. A reference in this paragraph 8 to a Sedgwick Securityholder or a Sedgwick Bondholder includes the person or persons executing the relevant Acceptance Form and, in the event of more than one person executing an Acceptance Form, the provisions of this paragraph 8 apply to them jointly and severally. (g) The Loan Notes to be issued pursuant to the Loan Note Alternative have not been, and will not be, registered under the US Securities Act or under the securities laws of any State of the US and the relevant clearances have not been, and will not be, obtained from the regulatory authority of any province or territory of Canada. In addition, no prospectus in relation to the Loan Notes has been, or will be, lodged with, or registered by, the Australian Securities Commission and no steps have been taken, nor will any be taken, to enable the Loan Notes to be offered in compliance with applicable securities laws of Japan. The Loan Notes may therefore not be offered, sold, resold, delivered or distributed, directly or indirectly, in or into the US or to US Persons (except in transactions exempt from, or not subject to, the registration requirements of the US Securities Act) or in or into Canada, Australia or Japan, or any other jurisdiction if to do so would constitute a violation of the relevant laws in such jurisdiction. If in respect of an Acceptance Form from any Sedgwick Shareholder or Sedgwick Bondholder the holder is unable or Marsh & McLennan believes the holder is unable to make the representations and warranties set out in paragraph 10(b) and (in the case of a holder of Sedgwick ADSs) 11(i)(ii)(dd) of Part B of this Appendix, Marsh & McLennan reserves the right, in its absolute discretion, to ignore any election in that Acceptance Form to receive Loan Notes and to treat it instead as an acceptance of the Offer for cash. 9. PROCEDURES FOR TENDERING SEDGWICK SHARES AND SEDGWICK CONVERTIBLE BONDS (a) Holders of Sedgwick Shares and/or Sedgwick Convertible Bonds will have received with this document an Acceptance Form in respect of the Ordinary Offer and/or the Convertible Offer. This section should be read together with the relevant Acceptance Form. The provisions of this section shall be deemed to be incorporated in, and to form a part of, the relevant Acceptance Form. The instructions printed on such Acceptance Form shall be deemed to form part of the terms of the Offer. If a holder of Sedgwick Shares holds Sedgwick Shares in both certificated and uncertificated form he should complete a separate Shareholder Form of Acceptance for each holding. Similarly, such holder should complete a separate Shareholder Form of Acceptance for Sedgwick Shares held in uncertificated form, but under different member account IDs, and for Sedgwick Shares held in certificated form, but under different designations. (b) To accept the Offer, any Sedgwick Shareholder or Sedgwick Bondholder, including any person in the US who holds Sedgwick Shares or Sedgwick Convertible Bonds, wishing to accept the Offer in respect of all or any portion of such holder's Sedgwick Shares or Sedgwick Convertible Bonds, should complete Box 1 on the relevant Acceptance Form and, if any of such holder's Sedgwick Shares are in CREST, Box 5 of the Shareholder Form of Acceptance, and in the case of Sedgwick Bondholders, Box 5 of the Bondholder Form of Acceptance, and sign Box 8 on the relevant Acceptance Form in accordance with the instructions printed on it. All Sedgwick Shareholders and Sedgwick Bondholders who are individuals should sign the relevant Acceptance Form in the presence of a witness who should also sign Box 8 of the relevant Acceptance Form in accordance with the instructions printed on it. Unless witnessed, an acceptance by an individual will not be valid. I-18 43 (c) An accepting Sedgwick Shareholder or Sedgwick Bondholder should return the completed, signed and, where necessary, witnessed Acceptance Form, whether or not any of its Sedgwick Shares are in CREST, to the UK Receiving Agent (if such accepting Sedgwick Shareholder or Sedgwick Bondholder is a Non-US Holder) or the US Depositary (if such accepting Sedgwick Shareholder or Sedgwick Bondholder is a US Holder). The completed Acceptance Form, together, if such holder's Sedgwick Shares are in certificated forms with his share certificate(s), and, if he holds Sedgwick Convertible Bonds, with his bond certificate(s) and/or other document(s) of title, must be lodged with the UK Receiving Agent (if such accepting Sedgwick Shareholder or Sedgwick Bondholder is a Non-US Holder) or the US Depositary (if such accepting Sedgwick Shareholder or Sedgwick Bondholder is a US Holder), as soon as possible, but in any event so as to arrive not later than 3.00 p.m. (London time), 10.00 a.m. (New York City time) on 5 October 1998. If you have any questions as to how to complete the relevant Acceptance Form, please contact the UK Receiving Agent on +44(0)117 937 0672 or the US Depositary on +1-800-507-9357. (d) Holders of Sedgwick Bearer Bonds should in addition to lodging the Bondholder Form of Acceptance: (i) ensure that the Bondholder Form of Acceptance is accompanied by the relevant Sedgwick Bearer Bonds (together with all unmatured coupons appertaining thereto except for those relating to the period from 31 May 1998 to 30 November 1998), in which case a receipt will be issued to the person delivering the relevant Sedgwick Bearer Bonds (and such coupons as aforesaid) (or, if the Bondholder Form of Acceptance and the relevant Sedgwick Bearer Bonds are delivered by post, to the person signing the Bondholder Form of Acceptance at the address stated in Box 7 thereon); or (ii) produce to J.P. Morgan or Donaldson, Lufkin & Jenrette evidence satisfactory to J.P. Morgan and Donaldson, Lufkin & Jenrette that the relevant Sedgwick Bearer Bonds (together with such coupons as aforesaid) have been deposited with a bank or other depositary to the order of J.P. Morgan or Donaldson, Lufkin & Jenrette; or (iii) if the Sedgwick Bearer Bonds are held through Euroclear or Cedel, procure that appropriate instructions are given to Euroclear or, as the case may be, Cedel to debit the relevant securities clearance or other account with the nominal amount of Sedgwick Bearer Bonds in respect of which the Convertible Offer is being accepted and to credit J.P. Morgan's or Donaldson, Lufkin & Jenrette's securities clearance or other account with Euroclear or, as the case may be, Cedel, in accordance with the procedures details of which are available on request from Euroclear or, as the case may be, Cedel. An acceptance of the Convertible Offer where delivery of Sedgwick Bearer Bonds is made through Euroclear or Cedel will not be treated as valid unless and until such credit has been confirmed to J.P. Morgan or Donaldson, Lufkin & Jenrette by Euroclear or, as the case may be, Cedel. A person in the US who holds Sedgwick Shares or Sedgwick Convertible Bonds may submit the relevant Acceptance Form, together with his share certificate(s), and/or bond certificates and/or other document(s) of title, to the US Depositary, who will receive such Acceptance Form and certificate(s) and/or other document(s) of title on behalf of the UK Receiving Agent. An Acceptance Form contained in an envelope postmarked Canada, Australia or Japan or otherwise appearing to Marsh & McLennan or its agents to have been sent from Canada, Australia or Japan may be rejected as invalid. (e) If Sedgwick Shares are in uncertificated form, the holder should insert in Box 5 of the Shareholder Form of Acceptance the participant ID and member account ID under which such Sedgwick Shares are held by him in CREST and otherwise complete and return the Shareholder Form of Acceptance as described above. In addition, such holders should take (or procure to be taken) the action set out below to transfer the Sedgwick Shares in respect of which he wishes to accept the Offer to an escrow balance, specifying the UK Receiving Agent (in its capacity as a CREST participant under the participant ID referred to below) as the escrow agent, as soon as possible but in any event so that the transfer to escrow settles not later than 3.00 p.m. (London time), 10.00 a.m. (New York City time) on 5 October 1998. I-19 44 (f) If the Sedgwick Shareholder is a CREST sponsored member, he should refer to his CREST sponsor before taking any action. Such holder's sponsor will be able to confirm details of his participant ID and the member account ID under which his Sedgwick Shares are held. In addition, only his CREST sponsor will be able to send the TTE Instruction to CRESTCo in relation to his Sedgwick Shares. (g) The holder of such Sedgwick Shares should send (or, if he is a CREST sponsored member, procure that his CREST sponsor sends) a TTE Instruction to CRESTCo which must be properly authenticated in accordance with CRESTCo's specifications and which must contain, in addition to the other information that is required for a TTE Instruction to settle in CREST, the following details: (i) the number of Sedgwick Shares to be transferred to an escrow balance; (ii) the member account ID of such Sedgwick Shareholder. This must be the same member account ID as the member account ID that is inserted in Box 5 of the Shareholder's Form of Acceptance; (iii) the participant ID of such Sedgwick Shareholder. This must be the same participant ID as the participant ID that is inserted in Box 5 of the Shareholder's Form of Acceptance; (iv) the participant ID of the escrow agent (the UK Receiving Agent in its capacity as a CREST receiving agent). This is 3RA48; (v) the member account ID of the escrow agent. This is SEDGWICK; (vi) the Shareholder Form of Acceptance Reference Number. This is the Shareholder Form of Acceptance Reference Number that appears next to Box 5 on page 3 of the Shareholder's Form of Acceptance. This Reference Number should be inserted in the first eight characters of the shared note field on the TTE Instruction. Such insertion will enable the UK Receiving Agent to match the transfer to escrow to your Shareholder Form of Acceptance. The holder of such shares should keep a separate record of this Shareholder Form of Acceptance Reference Number for future reference; (vii) the Intended Settlement Date. This should be as soon as possible and in any event not later than 3.00 p.m. (London time), 10.00 a.m. (New York City time) on 5 October 1998; (viii) the Corporate Action ISIN. This is GB0007933004; (ix) the Corporate Action Number for the Offer. This is allocated by CRESTCo and can be found by viewing the relevant Corporate Action Details in CREST; and (x) input with Standard Delivery instruction of 80. (h) After settlement of the TTE Instruction, such Sedgwick Shareholder will not be able to access the Sedgwick Shares concerned in CREST for any action or charging purposes. If the Conditions are satisfied, fulfilled or, to the extent permitted, waived, the escrow agent will transfer the Sedgwick Shares concerned to itself in accordance with paragraph 9 of Part B of this Appendix. (i) Such Sedgwick Shareholder is recommended to refer to the CREST Manual published by CRESTCo for further information on the CREST procedures outlined above. For ease of processing, such holder is requested, wherever possible, to ensure that a Shareholder Form of Acceptance relates to only one transfer to escrow. (j) If no Shareholder Form of Acceptance Reference Number, or an incorrect Shareholder Form of Acceptance Reference Number, is included on the TTE Instruction, Marsh & McLennan may treat any amount of Sedgwick Shares transferred to an escrow balance in favour of the escrow agent specified above from the participant ID and member account ID identified in the TTE Instruction as relating to any Shareholder Acceptance Form(s) which relate(s) to the same member account ID and participant ID (up to the amount of Sedgwick Shares inserted or deemed to be inserted on the Shareholder Form of Acceptance concerned). I-20 45 (k) Such Sedgwick Shareholder should note that CRESTCo does not make available special procedures, in CREST, for any particular corporate action. Normal system timings and limitations will therefore apply in connection with a TTE Instruction and its settlement. Such holder should therefore ensure that all necessary action is taken by him (or by his CREST sponsor) to enable a TTE Instruction relating to his Sedgwick Shares to settle prior to 3.00 p.m. (London time), 10.00 a.m. (New York City time) on 5 October 1998. In this connection such holder is referred in particular to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. (l) Marsh & McLennan will make an appropriate announcement if any of the details contained in this paragraph 9 alter for any reason. (m) Normal CREST procedures (including timings) apply in relation to any Sedgwick Shares that are, or are to be, converted from uncertificated to certificated form, or from certificated to uncertificated form, during the course of the Offer (whether any such conversion arises as a result of a transfer of Sedgwick Shares or otherwise). Sedgwick Shareholders who are proposing so to convert any Sedgwick Shares are recommended to ensure that the conversion procedures are implemented in sufficient time to enable the person holding or acquiring the Sedgwick Shares as a result of the conversion to take all necessary steps in connection with an acceptance of the Offer (in particular, as regards delivery of share certificates or other documents of title or transfers to an escrow balance as described above) prior to 3.00 p.m. (London time), 10.00 a.m. (New York City time) on 5 October 1998. (n) If the share certificate(s) and/or other document(s) of title is/are not readily available or is/are lost the Shareholder Form of Acceptance should nevertheless be completed, signed and returned as stated above to the UK Receiving Agent or the US Depositary so as to be received as soon as possible, but in any event no later than 3.00 p.m. (London time), 10.00 a.m. (New York City time) on 5 October 1998, together with any share certificate(s) and/or other document(s) of title that is/are available accompanied by a letter stating that the balance will follow or that the accepting holder has lost one or more of his share certificate(s) and/or other documents of title. If the share certificate(s) and/or other document(s) of title are lost, the accepting holder should request the registrar of Sedgwick (Lloyds Bank Registrars, The Causeway, Goring-by-Sea, Worthing, West Sussex BN99 6DA) to send him a letter of indemnity for completion in accordance with the instructions given. When completed, the letter of indemnity must be lodged with the UK Receiving Agent or the US Depositary, in accordance with the instructions given, in support of the Shareholder Form of Acceptance. 10. ACCEPTANCE FORMS FOR SEDGWICK SHAREHOLDERS AND SEDGWICK BONDHOLDERS Each holder of Sedgwick Shares or Sedgwick Convertible Bonds who executes and lodges or has executed and lodged on his behalf an Acceptance Form with the UK Receiving Agent or the US Depositary, subject to the rights of withdrawal set out in this document, irrevocably (and so as to bind himself, his heirs, successors and assigns and his personal or legal representatives): (a) (i) accepts the Offer in respect of the number of Sedgwick Shares and Sedgwick Convertible Bonds inserted or deemed to be inserted in Box 1 of the relevant Acceptance Form; (ii) if applicable, elects for the Loan Note Alternative in respect of such amount of cash as would otherwise fall to be paid under the Offer in respect of the number of Sedgwick Shares and Sedgwick Convertible Bonds inserted, or deemed to be inserted, in Box 2 of the relevant Acceptance Form; and (iii) agrees to execute any further documents and give any further assurances which may be required to enable Marsh & McLennan to obtain the full benefit of paragraph 9 of Part B of this Appendix 1 and this paragraph 10 and/or to perfect any of the authorities expressed to be given hereunder, in each case on and subject to the terms and Conditions set out or referred to in this document and the Acceptance Forms; (b) represents and warrants to Marsh & McLennan, J.P. Morgan and Donaldson, Lufkin & Jenrette that: I-21 46 (i) he has not received or sent copies or originals of this document, the Acceptance Form or any related offering document in, into or from Canada, Australia or Japan; (ii) he has not used in connection with the Offer or the execution or delivery of the Acceptance Forms, directly or indirectly, the mails of, or any means or instrumentality (including, without limitation, facsimile transmission, e-mail, telex and telephone) of interstate or foreign commerce of, or of any facility of a national securities exchange of Canada, Australia or Japan; (iii) he is accepting the Offer from outside Canada, Australia or Japan; (iv) if he is electing the Loan Note Alternative, he is not a US Person and he is not accepting the Offer with a view to the offer, sale or delivery, directly or indirectly, of any Loan Notes in or into the US, Canada, Australia or Japan and will not hold or acquire any Loan Notes for any other person who he has reason to believe is purchasing for the purpose of that offer, sale or delivery; (v) he is not an agent or fiduciary acting on a non-discretionary basis for a principal, unless such agent or fiduciary is an authorised employee of such principal or such principal has given any instructions with respect to the Offer from outside Canada, Australia or Japan; and (vi) in the case of a holder of Sedgwick Bearer Bonds, that he is such a holder and, if he is not the absolute beneficial owner of such Sedgwick Bearer Bonds, he is duly authorised by all relevant persons to accept the Convertible Offer and to effect delivery of such Sedgwick Bearer Bonds in accordance with the terms of the Convertible Offer. (c) appoints any director of, or any person authorised by, Marsh & McLennan, J.P. Morgan or Donaldson, Lufkin & Jenrette as his agent and/or attorney (subject to the Offer becoming unconditional and him not having validly withdrawn his acceptance) with an irrevocable instruction and authorisation to: (i) complete and execute any form of transfer, renunciation or other document in relation to the Sedgwick Shares or Sedgwick Convertible Bonds referred to in paragraph 10(a)(i) of Part B of this Appendix I in favour of Marsh & McLennan or as it may direct; (ii) deliver any form of transfer, renunciation or other document with any certificate or other document of title for registration within six months of the Offer becoming unconditional; and (iii) take any other action as the agent and/or attorney may think necessary or expedient in connection with his acceptance of the Offer and to vest in Marsh & McLennan (or as it may direct) the Sedgwick Shares and the Sedgwick Convertible Bonds referred to in paragraph 10(a)(i) of Part B of this Appendix I; (d) undertakes that the execution of the Acceptance Form and its delivery to the UK Receiving Agent or the US Depositary constitutes an irrevocable instruction and authority: (i) subject to the Offer becoming unconditional and him not having validly withdrawn his acceptance, to transfer to Marsh & McLennan (or to such other person or persons as Marsh & McLennan or its agent may direct) by means of CREST all or any of the Relevant Sedgwick Shares (but not exceeding the number of Sedgwick Shares in respect of which the Offer is accepted or deemed to be accepted); and (ii) if the Offer does not become unconditional, to give instructions to CRESTCo immediately after the Offer lapses (or within such longer period as the Panel may permit, not exceeding 14 calendar days of the Offer lapsing) to transfer all Relevant Sedgwick Shares to the original available balance of the accepting Sedgwick shareholder. In this Paragraph, "Relevant Sedgwick Shares" means uncertificated Sedgwick Shares in respect of which a transfer or transfers to escrow has or have been effected in accordance with the procedures described in paragraph 9 of Part B of this Appendix I and where the transfer or transfers to escrow was or were made in respect of Sedgwick Shares held under the same member account ID and participant ID as the member account ID and participant ID relating to the relevant Shareholder Form of Acceptance (but I-22 47 irrespective of whether or not any Shareholder Form of Acceptance Reference Number, or a Shareholder Form of Acceptance Reference Number corresponding to that appearing on the relevant Shareholder Form of Acceptance, was included in the relevant transfer to escrow instruction); (e) authorises and requests (subject to the Offer becoming unconditional and him not having validly withdrawn his acceptance): (i) Sedgwick or its agents to procure the registration of the transfer of the Sedgwick Shares or Sedgwick Registered Bonds pursuant to the Offer and the delivery of the share certificate(s) and/or bond certificate(s) and other document(s) of title in respect thereof and in respect of the Sedgwick Bearer Bonds to Marsh & McLennan or as it may direct; (ii) if the Sedgwick Shares referred to in paragraph 10(a)(i) of Part B of this Appendix I are in certificated form or paragraph 10(f) of Part B of this Appendix I applies, or in respect of Sedgwick Convertible Bonds, Marsh & McLennan or its agents to procure the despatch by post (or by such other method as may be approved by the Panel) of the consideration to which he is entitled under the Offer, together with documents of title for any Loan Note in respect of his election for the Loan Note Alternative, at his risk to the person or agent whose name and address is set out in Box 7 of the relevant Acceptance Form or, if no person or agent's name and address is set out, to the first-named holder at his registered address, set out in Box 4; (iii) if the Sedgwick Shares referred to in paragraph 10(a)(i) of Part B of this Appendix I are in uncertificated form Marsh & McLennan or its agents to ensure that an assured payment obligation is created in favour of the Sedgwick shareholder's payment bank in accordance with the CREST assured payment arrangement in respect of any cash consideration to which that shareholder is entitled; and (iv) Marsh & McLennan, Sedgwick or their respective agents to record and act on any instructions with regard to payments or notices which have been entered in the records of Sedgwick in respect of his holding of Sedgwick Shares or Sedgwick Convertible Bonds; (f) agrees that: (i) Marsh & McLennan may decide to despatch all or part of the consideration payable to a shareholder whose Sedgwick Shares are in uncertificated form in accordance with paragraph 10(e)(ii) of Part B of this Appendix I; and (ii) the consideration payable to a shareholder whose Sedgwick Shares are in uncertificated form will be despatched in accordance with paragraph 10(e)(ii) of Part B of this Appendix I if the shareholder is a CREST member whose registered address is in Canada, Australia or Japan; (g) gives authority to any director of, or person authorised by, Marsh & McLennan, J.P. Morgan or Donaldson, Lufkin & Jenrette within the terms of paragraph 6 of Part B of this Appendix I; (h) subject to the Offer becoming unconditional and him not having validly withdrawn his acceptance (or if the Offer will become unconditional or lapse on the outcome of the resolution in question or if the Panel gives its consent) and (in the case of Sedgwick Shares and Sedgwick Registered Bonds) pending registration: (i) authorises Marsh & McLennan or its agent to direct the exercise of any votes and any other rights and privileges (including the right to requisition the convening of a general or separate class meeting of Sedgwick) attaching to the Sedgwick Shares or Sedgwick Convertible Bonds referred to in paragraph 10(a)(i) of Part B of this Appendix I; (ii) authorises Sedgwick or its agent to send any notice, circular, warrant or other document or communication which may be required to be sent to him as a member of Sedgwick to Marsh & McLennan, care of the UK Receiving Agent; I-23 48 (iii) authorises any director of, or person authorised by, Marsh & McLennan, J.P. Morgan or Donaldson, Lufkin & Jenrette to sign any document and do such things as may in the opinion of that agent and/or attorney seem necessary or desirable in connection with the exercise of any votes or other rights or privileges attaching to the Sedgwick Shares or Sedgwick Convertible Bonds held by him (including, without limitation, signing any consent to short notice of a general or separate class meeting as his agent and/or attorney and on his behalf and executing a form of proxy appointing any person nominated by Marsh & McLennan to attend general and separate class meetings of Sedgwick and attending any such meeting and exercising the votes attaching to the Sedgwick Shares or Sedgwick Convertible Bonds referred to in paragraph 10(a)(i) of Part B of this Appendix on his behalf, where relevant, such votes to be cast so far as possible to satisfy any outstanding condition of the Offer); and (iv) agrees not to exercise any such rights without the consent of Marsh & McLennan and irrevocably undertakes not to appoint a proxy for or to attend such general or separate class meetings of Sedgwick. This authority will cease to be valid if the acceptance is validly withdrawn in accordance with paragraph 4 of Part B of this Appendix I; (i) agrees that he will deliver to the UK Receiving Agent or the US Depositary, or procure the delivery to the UK Receiving Agent or the US Depositary of, his certificate(s) and/or (in respect of Sedgwick Registered Bonds) bond certificates and/or other document(s) of title in respect of those Sedgwick Shares or Sedgwick Convertible Bonds referred to in paragraph 10(a)(i) of Part B of this Appendix that are in certificated form, or an indemnity acceptable to Marsh & McLennan, as soon as possible and in any event within two months of the Offer becoming unconditional in all respects (or, in relation to Sedgwick Bearer Bonds, will otherwise comply fully with the delivery instructions set out in paragraph (q) below and the Bondholder Form of Acceptance within such period); (j) agrees that he will take (or procure to be taken) the necessary action to transfer all those Sedgwick Shares referred to in paragraph 10(a)(i) of Part B of this Appendix that are in uncertificated form to an escrow balance as soon as possible and in any event so that the transfer to escrow settles within two months of the Offer becoming unconditional; (k) agrees that if for any reason, any Sedgwick Shares in respect of which a transfer to an escrow balance has been effected are converted to certificated form, he will immediately deliver or ensure the immediate delivery of the share certificates or other documents of title in respect of all those Sedgwick Shares that are converted to the UK Receiving Agent or the US Depositary at the relevant address specified on the back cover of this document; (l) agrees that the creation of an assured payment obligation in favour of his payment bank in accordance with the CREST assured payment arrangements as referred to in paragraph 10(e)(iii) of Part B of this Appendix to the extent of the obligation so created, discharge fully any obligation of Marsh & McLennan, J.P. Morgan or Donaldson, Lufkin & Jenrette to pay to him the cash consideration to which he is entitled under the Offer; (m) agrees that he will do everything necessary or expedient to vest in Marsh & McLennan or its nominees the Sedgwick Shares and Sedgwick Convertible Bonds referred to in paragraph 10(a)(i) of Part B of this Appendix and to enable the UK Receiving Agent or the US Depositary to perform its functions as escrow agent for the purposes of the Offer; (n) agrees to ratify everything which may be done or effected by any director of, or person authorised by, Marsh & McLennan, J.P. Morgan, Donaldson, Lufkin & Jenrette, the UK Receiving Agent or the US Depositary in exercise of any of the powers and/or authorities under Part B of this Appendix; (o) agrees that, if any provision of Part B of this Appendix will be unenforceable or invalid or will not operate so as to afford Marsh & McLennan, J.P. Morgan, Donaldson, Lufkin & Jenrette, the UK Receiving Agent or the US Depositary or any of their respective directors or persons authorised by them, the benefit I-24 49 of the authority expressed to be given in Part B of this Appendix, he will, with all practicable speed, do everything that may be required or desirable to enable Marsh & McLennan, J.P. Morgan, Donaldson, Lufkin & Jenrette, the UK Receiving Agent and the US Depositary and any of their respective directors or persons authorised by them to secure the full benefit of Part B of this Appendix; (p) represents and warrants that he is entitled to sell and transfer the beneficial ownership of the Sedgwick Shares and Sedgwick Convertible Bonds referred to in paragraph 10(a)(i) of Part B of this Appendix and that such shares and bonds are sold fully paid and free from all liens, equities, charges, encumbrances and other interests and together with all rights attaching to them on or after 25 August 1998 including, without limitation, the right to receive and retain all dividends and other distributions declared, paid or made on or after that date other than (i) the interim dividend of 3.0 pence (net) per Sedgwick Share announced on 11 August 1998 and payable on 19 October 1998 to Sedgwick Securityholders on the register at the close of business on 21 August 1998 and (ii) interest on the Sedgwick Convertible Bonds in respect of the period from 31 May 1998 to 30 November 1998 as provided in paragraph 2 of the letter from J.P. Morgan and Donaldson, Lufkin and Jenrette in this document; (q) in the case of a holder of Sedgwick Convertible Bonds, agrees that: (i) an acceptance of the Convertible Offer by a Sedgwick Bondholder who has completed and delivered a valid conversion notice and all other documents and payments required for conversion in accordance with the terms and conditions of the Sedgwick Convertible Bonds in respect of Sedgwick Convertible Bonds included in his acceptance of the Convertible Offer, or on whose behalf such a conversion notice has been completed and delivered together with such other documents and payments as aforesaid, shall, unless Marsh & McLennan determines otherwise, upon the conversion taking effect on the relevant Conversion Date be deemed to be an acceptance of the Ordinary Offer (and not thereafter of the Convertible Offer) in respect of the Sedgwick Shares resulting from such conversion unless the Convertible Offer shall have become unconditional in all respects before any such Conversion Date; (ii) an acceptance of the Ordinary Offer by a Sedgwick Bondholder who has completed and delivered a valid conversion notice and all other documents and payments required for conversion in accordance with the terms and conditions of the Sedgwick Convertible Bonds in respect of all or some of the Sedgwick Shares arising upon the conversion of the relevant Sedgwick Convertible Bonds taking effect on the relevant Conversion Date, or on whose behalf such a conversion notice and such other documents and payments have been completed and delivered, shall, unless Marsh & McLennan determines otherwise, until the conversion takes effect on the relevant Conversion Date be deemed to be an acceptance of the Convertible Offer in respect of the Sedgwick Convertible Bonds which would on conversion give rise to the Sedgwick Shares in respect of which the Ordinary Offer has been accepted; (iii) any such Sedgwick Bondholder as referred to in paragraph (i) or (ii) above, will be deemed to have irrevocably undertaken, represented, warranted and agreed to and with Marsh & McLennan, J.P. Morgan and Donaldson, Lufkin & Jenrette (so as to bind him, his personal representatives, heirs, successors and assigns) to the following effect: (A) that if he is a holder of Sedgwick Registered Bonds, he has delivered to the registrar of the Sedgwick Convertible Bonds a valid conversion notice together with the relevant Sedgwick Convertible Bonds and, if he is a holder of Sedgwick Bearer Bonds, he has delivered to a paying and conversion agent of the Sedgwick Convertible Bonds a valid conversion notice together with the relevant Sedgwick Convertible Bonds and all unmatured coupons appertaining thereto except for those relating to the period 31 May 1998 to 30 November 1998 in each case in accordance with the terms and conditions of the Sedgwick Convertible Bonds and together in each case with such other documents and payments as may be required in accordance with the terms and conditions of the Sedgwick Convertible Bonds; I-25 50 (B) that he will furnish to the UK Receiving Agent and/or the US Depositary (as appropriate), such evidence of the delivery of the conversion notice, Sedgwick Convertible Bonds, coupons (where applicable) and other documents and payments required to effect conversion in accordance with the terms and conditions of the Sedgwick Convertible Bonds, of the authority of the person completing and delivering such notice so to do and such other things as may be required by the UK Receiving Agent and/or the US Depositary (as appropriate) and do all acts and things as may be necessary or desirable in relation to the conversion of his Sedgwick Convertible Bonds; (C) that the execution of such Bondholder Form of Acceptance constitutes an authority and direction to Sedgwick and/or Sedgwick's registrars to forward to Marsh & McLennan or the UK Receiving Agent and/or the US Depositary (as appropriate), free of charge, the definitive certificate for the appropriate amount of Sedgwick Shares arising on any such conversion together with a new Sedgwick Convertible Bond or Bonds for any unconverted Sedgwick Convertible Bonds comprised in the certificate(s) surrendered by him and in respect of which he shall have accepted the Convertible Offer unless the Offer shall have lapsed or been withdrawn or unless the UK Receiving Agent and/or the US Depositary (as appropriate), shall have notified Sedgwick's registrars that any such acceptance of the Offer has been validly withdrawn; and (D) that the execution of such Bondholder Form of Acceptance constitutes an authority and direction of Marsh & McLennan and the UK Receiving Agent and/or the US Depositary (as appropriate) to give such notification as is referred to in sub-paragraph (C) above; (iv) the execution of the Bondholder Form of Acceptance constitutes, subject to the Convertible Offer becoming or being declared unconditional in all respects or, with the consent of the Panel, if following the exercise of conversion rights pursuant to the authority contained in (i) below the Ordinary Offer would become unconditional in all respects: (i) an irrevocable authority to Marsh & McLennan to exercise any right of conversion and all other rights relating thereto in accordance with the terms and conditions of the Sedgwick Convertible Bonds in respect of which the Convertible Offer is or is deemed to have been accepted and to take all such action or do such other things as may be necessary or desirable in relation thereto and the agreement of such Sedgwick Bondholder not to exercise any such right without the consent of Marsh & McLennan; and (ii) an irrevocable authority and direction to Sedgwick and/or Sedgwick's Registrar to allot or procure the renunciation in favour of Marsh & McLennan of any Sedgwick Shares arising on the exercise of any such conversion rights (and a like authority to any renouncer thereof) and to forward to Marsh & McLennan and/or to the UK Receiving Agent and/or to the US Depositary (as appropriate), free of charge, the definitive certificates for the appropriate amount of Sedgwick Shares arising on such conversion together with any new certificate for any unconverted Sedgwick Convertible Bonds and any cheque in respect of any fractional entitlement. (r) agrees that the terms and Conditions of the Offer are deemed to be incorporated in, and form part of, the Acceptance Form; (s) agrees that on execution the Acceptance Form takes effect as a deed; (t) agrees that the execution of the Acceptance Form constitutes his submission to the jurisdiction of the courts of England in relation to all matters arising in connection with the Offer and the Acceptance Form; (u) agrees and acknowledges that he is not a customer (as defined in the rules of The Securities and Futures Authority Limited) of J.P. Morgan or Donaldson, Lufkin & Jenrette in connection with the Offer; and (v) either (i) certifies to Marsh & McLennan, the UK Receiving Agent and the US Depositary that it is a Non-US Holder, or (ii) acknowledges that it is a US Holder and that it may be subject to US federal I-26 51 backup withholding tax unless it submits a duly completed Internal Revenue Service Form W-9 (or a valid Substitute Form W-9), certifying that it is not subject to US federal backup withholding tax, to the US Depositary. A reference in this paragraph 10 to a holder of Sedgwick Shares or Sedgwick Convertible Bonds includes a reference to the person or persons executing the relevant Acceptance Form and in the event of more than one person executing an Acceptance Form the provisions of this paragraph 10 will apply to them jointly and to each of them. 11. PROCEDURES FOR TENDERING SEDGWICK ADSS (a) If you are a holder of Sedgwick ADSs evidenced by Sedgwick ADRs, you will have also received a Letter of Transmittal and Notice of Guaranteed Delivery for use in connection with the Offer. This section should be read together with the instructions on the Letter of Transmittal. The provisions of this section shall he deemed to be incorporated in, and form a part of, the relevant Letter of Transmittal. The instructions printed on the Letter of Transmittal shall be deemed to form part of the terms of the Offer. (b) For a holder of Sedgwick ADSs evidenced by Sedgwick ADRs to tender such Sedgwick ADSs validly pursuant to the Offer, either: (i) a properly completed and duly executed Letter of Transmittal, together with any required signature guarantees and any other required documents, must be received by the US Depositary at one of its addresses set out at the back of this document, and the Sedgwick ADRs evidencing such Sedgwick ADSs must be either received by the US Depositary at one of such addresses or delivered pursuant to the procedures for book-entry transfer set out below (and a Book-Entry Confirmation received by the US Depositary in accordance with such procedures); or (ii) such holder must comply with the Guaranteed Delivery Procedures set out in paragraph (h) below. The Offer in respect of Sedgwick ADSs evidenced by Sedgwick ADRs shall be validly accepted by delivery of a Letter of Transmittal, the relevant Sedgwick ADRs evidencing Sedgwick ADSs and other required documents to the US Depositary by a Sedgwick ADS holder (without any further action by the US Depositary) subject to the terms and Conditions set out in this document and the Letter of Transmittal. The acceptance of the Offer by a tendering holder of Sedgwick ADSs evidenced by Sedgwick ADRs pursuant to the procedures described above, subject to the withdrawal rights described below, will be deemed to constitute a binding agreement between such tendering holder of Sedgwick ADSs and Marsh & McLennan upon the terms and subject to the Conditions of the Offer. If a Sedgwick ADR evidencing a Sedgwick ADS has been tendered by a holder of Sedgwick ADSs, the Sedgwick Shares represented by such Sedgwick ADSs may not be tendered independently. A Letter of Transmittal and other required documents contained in an envelope postmarked in Canada, Australia or Japan or otherwise appearing to Marsh & McLennan or its agents to have been sent from Canada, Australia or Japan may be rejected as invalid. (c) BOOK-ENTRY TRANSFER The US Depositary will establish an account at the Book-Entry Transfer Facilities with respect to Sedgwick ADSs evidenced by Sedgwick ADRs held in book-entry form for the purposes of the Offer within two Business Days from the date of this document. Any financial institution that is a participant in any of the Book-Entry Transfer Facility's systems may make book-entry delivery of interests in Sedgwick ADSs by causing a Book-Entry Transfer Facility to transfer such interests in Sedgwick ADSs into the US Depositary's account at such Book-Entry Transfer Facility in accordance with that Book-Entry Transfer Facility's procedure for such transfer. Although delivery of interests in Sedgwick ADSs evidenced by Sedgwick ADRs may be effected through book-entry transfer into the US Depositary's account at a Book-Entry Transfer Facility, either: I-27 52 (i) the Letter of Transmittal, properly completed and duly executed, together with any required signature guarantees; or (ii) an Agent's Message (as defined below), and, in either case, any other required documents must in any case be transmitted to, and received by, the US Depositary at one of its addresses set out on the back cover of this document before Sedgwick ADSs evidenced by Sedgwick ADRs will be either counted as a valid acceptance, or purchased, or such holder must comply with the Guaranteed Delivery Procedures described below. The term "Agent's Message" means a message transmitted by a Book-Entry Transfer Facility to, and received by, the US Depositary and forming part of a Book-Entry Confirmation that states that such Book-Entry Transfer Facility has received an express acknowledgement from the participant in such Book-Entry Transfer Facility tendering the interests in Sedgwick ADSs that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that Marsh & McLennan may enforce such agreement against the participant. Delivery of documents to a Book-Entry Transfer Facility does not constitute delivery to the US Depositary. (d) METHOD OF DELIVERY The method of delivery of Sedgwick ADRs, Letters of Transmittal and all other required documents is at the option and risk of the tendering holder of Sedgwick ADSs. Sedgwick ADSs will be deemed delivered only when the Sedgwick ADRs representing such Sedgwick ADSs are actually received by the US Depositary (including in the case of a book-entry transfer, by Book-Entry Confirmation). If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery. No acknowledgement of receipt of documents will be given by, or on behalf of, Marsh & McLennan. (e) SIGNATURE GUARANTEES No signature guarantee is required on the Letter of Transmittal if: (i) the Letter of Transmittal is signed by the registered holder of the Sedgwick ADSs tendered therewith and such registered holder has not completed either the Box entitled "Special Delivery Instructions" or the Box entitled "Special Payment Instructions" in the Letter of Transmittal; or (ii) such Sedgwick ADSs are tendered for the account of an Eligible Institution. In all other cases, all signatures on Letters of Transmittal must be guaranteed by an Eligible Institution. See Instruction 1 to the Letter of Transmittal. (f) SEDGWICK ADSS AND ADRS If the Sedgwick ADSs are registered in the name of a person other than the person who signs the Letter of Transmittal, then the tendered Sedgwick ADRs must be endorsed or accompanied by appropriate stock powers, signed exactly as the name or names of the registered owner or owners appear on the Sedgwick ADRs, with the signatures on the Sedgwick ADRs or stock powers guaranteed as aforesaid. See Instructions 1 and 5 to the Letter of Transmittal. (g) PARTIAL ACCEPTANCES If fewer than all of the Sedgwick ADSs evidenced by any Sedgwick ADRs delivered to the US Depositary are to be tendered, the holder thereof should so indicate in the Letter of Transmittal by filling in the number of Sedgwick ADSs which are tendered in the Box entitled "Number of ADSs Tendered". In such case, a new Sedgwick ADR for the remainder of the Sedgwick ADSs represented by the former Sedgwick ADR will be sent to the person(s) signing such Letter of Transmittal (or as such person properly indicates thereon) as promptly as practicable following the date the tendered Sedgwick ADSs are purchased. All Sedgwick ADSs delivered to the US Depositary will be deemed to have been tendered I-28 53 unless otherwise indicated. See Instruction 4 to the Letter of Transmittal. In the case of partial tenders, Sedgwick ADSs not tendered will not be reissued to a person other than the registered holder. (h) GUARANTEED DELIVERY PROCEDURES (i) If a holder of Sedgwick ADSs evidenced by Sedgwick ADRs wishes to tender Sedgwick ADSs pursuant to the Offer and the Sedgwick ADRs evidencing such Sedgwick ADSs are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis, or if time will not permit all required documents to reach the US Depositary prior to the expiry of the Subsequent Offer Period, such holder's tender of Sedgwick ADSs may be effected if all of the following conditions are satisfied (the "Guaranteed Delivery Procedures"): (aa) such tender is made by or through an Eligible Institution; (bb) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by Marsh & McLennan is received by the US Depositary, as provided below, prior to the expiry of the Subsequent Offer Period; and (cc) the Sedgwick ADRs evidencing all tendered Sedgwick ADSs (or, in the case of Sedgwick ADSs held in book-entry form, timely confirmation of the book-entry transfer of such interests in Sedgwick ADSs into the US Depositary's account at a Book-Entry, Transfer Facility as described above) together with a properly completed and duly executed Letter of Transmittal with any required signature guarantees and any other documents required by the Letter of Transmittal are received by the US Depositary within three NYSE business days after the date of execution of such Notice of Guaranteed Delivery; (ii) The Notice of Guaranteed Delivery may be delivered by hand, transmitted by telegram, telex, facsimile transmission or mailed to the US Depositary and must include a signature guarantee by an Eligible Institution in the form set out in such Notice of Guaranteed Delivery; and (iii) Receipt of a Notice of Guaranteed Delivery will not be treated as a valid acceptance for the purpose of satisfying the Acceptance Condition. To be counted towards satisfaction of this requirement, prior to the Initial Closing Date, the Sedgwick ADRs evidencing Sedgwick ADSs referred to in the Notice of Guaranteed Delivery must be received by the US Depositary (or, in the case of interests in Sedgwick ADSs evidenced by Sedgwick ADRs held in book-entry form, timely confirmation of a book-entry transfer of such interests in Sedgwick ADSs into the US Depositary's account at a Book-Entry Transfer Facility pursuant to the procedures set out above) together with a duly executed Letter of Transmittal with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message) and any other required documents. (i) OTHER REQUIREMENTS By executing the Letter of Transmittal as set out above, the tendering holder of Sedgwick ADSs evidenced by Sedgwick ADRs will agree that, effective from and after the date all Conditions are satisfied, fulfilled or, to the extent permitted, waived: (i) Marsh & McLennan shall be entitled to direct the exercise of any votes attaching to any Sedgwick Shares represented by Sedgwick ADSs, in respect of which the Offer has been accepted or is deemed to have been accepted (the "ACCEPTED ADSS") and any other rights and privileges attaching to such Sedgwick Shares, including any right to requisition a general or separate class meeting of Sedgwick Shareholders; and (ii) the execution of the Letter of Transmittal and its delivery to the US Depositary shall constitute: (aa) an authority to Sedgwick or its agents from the tendering holder of Accepted ADSs to send any notice, circular, warrant, document or other communication that may be required to be sent to him as a holder of Sedgwick ADSs, to Marsh & McLennan care of the UK Receiving Agent; I-29 54 (bb) an authority to Marsh & McLennan or its agent to sign any consent to short notice of a general meeting or separate class meeting on behalf of the tendering holder of Accepted ADSs and/or to execute a form of proxy in respect of such Accepted ADSs appointing any person nominated by Marsh & McLennan to attend general meetings or separate class meetings of Sedgwick and any adjournment thereof and to exercise the votes attaching to the Sedgwick Shares represented by such Accepted ADSs on his behalf; (cc) the agreement of such tendering holder of Accepted ADSs not to exercise any of such rights without the consent of Marsh & McLennan and the irrevocable undertaking of such tendering holder of Accepted ADSs not to appoint a proxy for or to attend any such general meetings or separate class meetings; (dd) a representation and warranty that such Sedgwick Securityholder (i) has not received or sent copies of this document or any Letter of Transmittal or any related documents in, into or from Australia, Canada or Japan; (ii) is accepting the Offer from outside Australia, Canada and Japan; and (iii) is not an agent or fiduciary acting on a non-discretionary basis for a principal, unless such agent or fiduciary is an authorised employee of such principal or such principal has given any instructions with respect to the Offer from outside Australia, Canada and Japan; and (ee) confirmation that such Sedgwick Securityholder is entitled to sell and transfer the beneficial ownership of the Accepted ADSs and that such Accepted ADSs are sold fully paid and free from all liens, equitable interests, charges, and encumbrances and together with all rights attaching thereto including voting rights and the right to all dividends and other distributions declared, made or paid other than the interim dividend of 3.0 pence (net) per Sedgwick Share announced on 11 August 1998 and payable on 19 October to Sedgwick Securityholders on the register at the close of business on 21 August 1998; and (iii) the execution of the Letter of Transmittal (together with any signature guarantees) and its delivery to the US Depositary shall constitute an authority to any director of Marsh & McLennan, J.P. Morgan or Donaldson, Lufkin & Jenrette and to Marsh & McLennan, J.P. Morgan or Donaldson, Lufkin & Jenrette and/or their respective agents in accordance with the terms of paragraph 6 of Part B of this Appendix. References in this paragraph 11 to a Sedgwick Securityholder shall include references to the person or persons executing a Letter of Transmittal and in the event of more than one person executing a Letter of Transmittal the provisions of this Part B shall apply to them jointly and to each of them. 12. CURRENCY OF CASH CONSIDERATION Instead of receiving cash consideration in pounds sterling, Sedgwick Shareholders and Sedgwick Bondholders who so wish may elect to receive US dollars on the basis that the cash amount payable in pounds sterling to which such holder would otherwise be entitled pursuant to the terms of the Offer will be converted, without charge, from pounds sterling to US dollars at the exchange rate obtainable by the relevant payment agent (either the UK Receiving Agent or the US Depositary) on the spot market in London at approximately noon (London time) on the date the cash consideration is made available by Marsh & McLennan to the relevant payment agent for delivery in respect of the relevant Sedgwick Shares or Sedgwick Convertible Bonds. A Sedgwick Shareholder or Sedgwick Bondholder may receive such amount on the basis set out above only in respect of the whole of his holding of Sedgwick Shares or Sedgwick Convertible Bonds in respect of which he accepts the Offers. Sedgwick Shareholders and Sedgwick Bondholders may not elect to receive both pounds sterling and US dollars. Unless they elect to receive pounds sterling, holders of Sedgwick ADSs will receive consideration converted into US dollars as described above, as if such holders of Sedgwick ADSs had elected to receive dollars. Consideration in US dollars may be inappropriate for Sedgwick Shareholders or Sedgwick Bondholders other than persons in the US and holders of Sedgwick ADSs. I-30 55 THE ACTUAL AMOUNT OF US DOLLARS RECEIVED WILL DEPEND UPON THE EXCHANGE RATE PREVAILING ON THE BUSINESS DAY ON WHICH FUNDS ARE MADE AVAILABLE TO THE RELEVANT PAYMENT AGENT BY MARSH & MCLENNAN. SEDGWICK SECURITYHOLDERS AND SEDGWICK BONDHOLDERS SHOULD BE AWARE THAT THE US DOLLAR/POUNDS STERLING EXCHANGE RATE WHICH IS PREVAILING AT THE DATE ON WHICH AN ELECTION IS MADE TO RECEIVE DOLLARS AND ON THE DATES OF DESPATCH AND RECEIPT OF PAYMENT MAY BE DIFFERENT FROM THAT PREVAILING ON THE BUSINESS DAY ON WHICH FUNDS ARE MADE AVAILABLE TO THE RELEVANT PAYMENT AGENT BY MARSH & MCLENNAN. IN ALL CASES, FLUCTUATIONS IN THE US DOLLAR/POUNDS STERLING EXCHANGE RATE ARE AT THE RISK OF ACCEPTING SEDGWICK SECURITYHOLDERS AND SEDGWICK BONDHOLDERS WHO ELECT OR ARE TREATED AS HAVING ELECTED TO RECEIVE THEIR CONSIDERATION IN US DOLLARS. NEITHER MARSH & MCLENNAN NOR ANY OF ITS ADVISERS OR AGENTS SHALL HAVE ANY RESPONSIBILITY WITH RESPECT TO THE ACTUAL AMOUNT OF CASH CONSIDERATION PAYABLE OTHER THAN IN POUNDS STERLING. 13. SUBSTITUTE ACCEPTANCE FORMS Holders of Sedgwick Securities and Sedgwick Convertible Bonds have been sent with this document a Shareholder Form of Acceptance and/or a Bondholder Form of Acceptance and/or a Letter of Transmittal (accompanied by a Notice of Guaranteed Delivery). All holders of Sedgwick Shares and Sedgwick Convertible Bonds, including persons in the US who hold Sedgwick Shares or Sedgwick Convertible Bonds, have been sent a Shareholder Form of Acceptance and/or a Bondholder Form of Acceptance, which they must use to tender their Sedgwick Shares or Sedgwick Convertible Bonds and accept the Offer. All holders of Sedgwick ADSs have been sent a Letter of Transmittal and a Notice of Guaranteed Delivery which they must use to tender their Sedgwick ADSs and accept the Offer. Should any holder of Sedgwick Securities or Sedgwick Convertible Bonds receive an incorrect form with which to accept the Offer or require any additional forms, that person should contact the UK Receiving Agent or the US Depositary at the addresses set out at the end of this document, who will provide the appropriate forms. The Offers and all contracts arising under them will be governed by English law. I-31 56 APPENDIX II -- PARTICULARS OF THE LOAN NOTES The Loan Notes will be created by a resolution of the board of directors of Marsh & McLennan (or a duly authorised committee) and will be constituted by the Loan Note Instrument. The issue of the Loan Notes will be conditional on the Offer becoming or being declared unconditional in all respects. If valid elections for the Loan Note Alternative have not been received in respect of at least L5 million nominal value of Loan Notes by the time the Offer becomes or is declared unconditional in all respects, no Loan Notes will be issued, in which event all Sedgwick Shareholders accepting the Ordinary Offer will receive cash in accordance with the terms of the Ordinary Offer and all Sedgwick Bondholders accepting the Convertible Offer will receive cash in accordance with the terms of the Convertible Offer. The Loan Note Alternative is not available to any person who is a citizen or resident of the US, Canada, Australia or Japan or certain other jurisdictions. The Loan Note Instrument will contain provisions, inter alia, to the effect set out below. 1. FORM AND STATUS The Loan Notes will be issued by Marsh & McLennan in amounts and integral multiples of L1 and will constitute unsecured obligations of Marsh & McLennan. The Loan Note Instrument will not contain any restrictions on borrowing, disposals or charging of assets by Marsh & McLennan. 2. INTEREST (a) Interest on the Loan Notes will be payable (subject to any requirement to deduct tax therefrom) in arrears on 30 June and 31 December in each year (or, if such a day is not a business day, on the next following business day) ("interest payment dates") in respect of the interest periods (as defined below) at a rate calculated as provided in paragraph (b) below, except that the first payment of interest on the Loan Notes, which will be made on 31 December 1998, will be in respect of the period from (and including) the first date of issue of any of the Loan Notes to (and including) 31 December 1998. The period from (and including) the first date of issue of any of the Loan Notes to (and including) 31 December 1998 and the period from (but excluding) 31 December 1998, or any subsequent interest payment date, to (and including) the next following interest payment date, is referred to as an "interest period". (b) The rate of interest on the Loan Notes for each interest period will be the rate per annum calculated by Marsh & McLennan to be one half of one per cent. below LIBOR at or about 11.00 a.m. (London time) on the first day of the relevant interest period or, if such a day is not a business day, on the next succeeding business day. (c) If a rate of interest cannot be established in accordance with the provisions of this paragraph 2 for any interest period, then the rate of interest on the Loan Notes for such interest period shall be calculated by reference to such rate as Marsh & McLennan shall reasonably determine on the basis of quotations made for six month sterling deposits of similar size in any other appropriate inter-bank market or markets as Marsh & McLennan may reasonably select. (d) Each instalment of interest shall be calculated on the basis of a 365 day year and the actual number of days elapsed in the relevant interest period. (e) Payments of interest in respect of the Loan Notes will not be made to addresses in the US, Canada, Australia or Japan. 3. REPAYMENT AND REDEMPTION (a) A holder of Loan Notes ("Noteholder") shall be entitled to require Marsh & McLennan to repay the whole (whatever the amount) or any part (being L100 nominal amount or any integral multiple thereof) of the principal amount of his holding of Loan Notes at par, together with accrued interest thereon (subject to any requirement to deduct tax therefrom) up to (and including) the date of repayment, on any interest payment date falling on or after 31 December 1999, by giving not less than 30 days' prior II-1 57 notice in writing to the Registrars accompanied by certificate(s) for all the Loan Notes to be repaid and a notice of redemption (duly completed) in the prescribed form endorsed on the Loan Notes to be repaid. (b) If, at any time, the principal amount of the Loan Notes outstanding is 20 per cent. or less of the total nominal amount of Loan Notes which have been issued prior to that time, Marsh & McLennan shall have the right, on giving to the remaining Noteholders not less than 30 days' notice in writing expiring on 31 December 1999 or on any subsequent interest payment date, to redeem all (but not some only) of the Loan Notes at their principal amount together with accrued interest thereon (subject to any requirement to deduct tax therefrom) up to (and including) the date of redemption. (c) Marsh & McLennan will have the right to redeem on any interest payment date the Loan Notes at par together with accrued interest up to (and including) the date of redemption (subject to any requirement to deduct tax therefrom) on 30 days' written notice to the Noteholders if Marsh & McLennan is advised by legal counsel that interest payable under the Loan Notes will fall to be treated as non-deductible for US federal income tax purposes due to a change in law after the date on which the Offer is made. (d) Any Loan Notes not previously repaid, redeemed or purchased will be repaid in full at par on 31 December 2003 together with accrued interest thereon (subject to any requirement to deduct tax therefrom) up to (and including) that date. (e) Each Noteholder shall have the right to acquire (by subscription at nominal value of an amount up to or equal to such Noteholder's holding of Loan Notes, such amount to be payable in full on subscription) additional loan notes to be issued by a subsidiary of Marsh & McLennan ("Additional Notes") on terms and conditions substantially the same as those applicable to the Loan Notes, except as follows: (i) the rate of interest on the Additional Notes shall be one half of one per cent. below the rate per annum referred to in paragraph 2 above; and (ii) the Additional Notes shall not carry any rights to acquire additional securities. (f) Each Noteholder shall be entitled to require all of the Loan Notes held by him to be repaid at par together with accrued interest (subject to any requirement to deduct any tax therefrom) immediately if: (i) any principal or interest on any of the Loan Notes held by that Noteholder shall not have been paid in full within 14 days after the due date for payment thereof; (ii) Marsh & McLennan commences a voluntary case concerning itself under Title 11 of the US Code entitled "Bankruptcy" as now or hereafter in effect or any successor thereto (the "Bankruptcy Code"); (iii) an involuntary case is commenced against Marsh & McLennan and the petition is not controverted within 10 days or is not dismissed within 60 days after commencement of the case; (iv) a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of Marsh & McLennan; (v) Marsh & McLennan commences (including by way of applying for or consenting to the appointment of, or the taking of possession by, a rehabilitator, receiver, custodian, trustee, conservator or liquidator (collectively, a "Conservator") of itself or all or any substantial proportion of its property) any other proceeding under any reorganisation, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency, liquidation, rehabilitation, conservatorship or similar law of any jurisdiction whether now or hereafter in effect relating to Marsh & McLennan; (vi) any such proceeding is commenced against Marsh & McLennan to the extent that such proceeding is consented to by such person or remains undismissed for a period of 60 days; (vii) Marsh & McLennan is adjudicated insolvent or bankrupt or an order of relief or other order approving any such case or proceeding is entered or Marsh & McLennan suffers any appointment II-2 58 of any Conservator or the like for it or any substantial part of its property which continues undischarged or unstated for a period of 60 days; (viii) Marsh & McLennan makes a general assignment for the benefit of creditors; or (ix) any corporate action is taken by Marsh & McLennan for the purpose of effecting any of the foregoing. 4. PURCHASE OF LOAN NOTES Marsh & McLennan will be entitled at any time to purchase any Loan Notes at any price by tender (available to all Noteholders alike), private treaty or otherwise by agreement with the relevant Noteholder(s). 5. CANCELLATION Any Loan Notes repaid or redeemed under paragraph 3 above or purchased under paragraph 4 above shall be cancelled and shall not be available for re-issue. 6. SUBSTITUTION AND EXCHANGE The Loan Note Instrument will contain provisions entitling Marsh & McLennan to substitute any other member of the Marsh & McLennan Group as the principal debtor under the Loan Notes, or to require Noteholders to exchange the Loan Notes for loan notes issued on the same terms, mutatis mutandis, by one or more of such members provided that (a) Marsh & McLennan guarantees such member's obligations thereunder, and (b) Marsh & McLennan's right to require substitution by such member as a principal debtor will be exercisable only if prior clearance has been obtained from the Inland Revenue to the effect that the substitution will not be treated as a disposal of the Loan Notes for the purpose of UK taxation of chargeable gains. References to Marsh & McLennan in this summary except in (a) shall be construed to apply to the substitute or substitutes (if any) from time to time of Marsh & McLennan. 7. MODIFICATIONS The provisions of the Loan Note Instrument and the rights of the Noteholders will be subject to modification, abrogation or compromise in any respect with the sanction of an Extraordinary Resolution (as defined in the Loan Note Instrument) of the Noteholders, and the consent of Marsh & McLennan. Marsh & McLennan may amend the provisions of the Loan Note Instrument without such sanction or consent if such amendment is of a formal, minor or technical nature and is not materially adverse to Noteholders or is to correct a manifest error. 8. REGISTRATION AND TRANSFER The Loan Notes will be in registered form and transferable in amounts or integral multiples of L100 provided that transfers will not be registered during the 21 days immediately preceding an interest payment date or while the register of Noteholders is closed. 9. PRESCRIPTION Noteholders will cease to be entitled to amounts in respect of interest which remain unclaimed for a period of five years and to amounts due in respect of principal which remain unclaimed for a period of ten years, in each case from the date on which the relevant payment first becomes due, and such amounts shall revert to Marsh & McLennan upon the giving of 30 days' written notice. 10. RESTRICTIONS ON OWNERSHIP AND TRANSFER (a) The Loan Notes have not been and will not be registered under the US Securities Act and no steps have been taken to qualify the Loan Notes for distribution in any province or territory of Canada and no prospectus in relation to the Loan Notes has been, or will be, lodged with or registered by the Australian II-3 59 Securities Commission. Accordingly, unless an exemption under the US Securities Act or other applicable securities laws is available, the Loan Note Alternative is not available in the US, Canada, Australia or Japan or to Restricted Overseas Persons and the Loan Notes may not be directly or indirectly offered, sold or delivered in or into the US, Canada, Australia or Japan or to or for the account or benefit of any Restricted Overseas Persons. For these purposes, "Restricted Overseas Person" means either a person (including an individual, partnership, unincorporated syndicate, limited liability company, unincorporated organisation, trust, trustee, administrator or other legal representative) in or resident in the US, Canada, Australia or Japan, or a US Person (as defined in Regulation S under the US Securities Act). (b) Documents of title in respect of the Loan Notes will not be sent to addresses in the US, Canada, Australia or Japan. (c) Registered addresses of holders of Loan Notes must be outside the US, Canada, Australia or Japan. 11. NO LISTING No application has been made or is intended to be made to any stock exchange for the Loan Notes to be listed or otherwise traded. 12. GOVERNING LAW The Loan Notes and the Loan Note Instrument will be governed by and construed in accordance with the laws of England. II-4 60 APPENDIX III -- FINANCIAL INFORMATION ON SEDGWICK PART A AUDITED FINANCIAL INFORMATION INTRODUCTION The financial information contained in this Part A of Appendix III is extracted without material adjustment from the audited consolidated accounts of Sedgwick for the three years ended 31 December 1997 and from the 1997 annual report on form 20-F (item 18) filed with the US Securities and Exchange Commission. The information contained in this Part A of Appendix III has been extracted from previously published sources and does not constitute statutory accounts within the meaning of the Companies Act. Audited statutory accounts have been delivered to the Registrar of Companies for each of the three years ended 31 December 1997. Unqualified audit reports in accordance with the requirements of the Companies Act for each of the three years ended 31 December 1997 have been given by Coopers & Lybrand, Chartered Accountants and Registered Auditors, being the auditors of Sedgwick for the relevant financial periods. CONSOLIDATED PROFIT AND LOSS ACCOUNT
YEAR ENDED 31 DECEMBER -------------------------- NOTES 1997 1996 1995 ----- ------ ------ ------ LM LM LM REVENUE Brokerage and fees.................................... 931.6 914.9 880.9 Interest and investment income........................ 43.6 45.4 50.6 ------ ------ ------ 3 975.2 960.3 931.5 EXPENSES*............................................. 869.4 860.0 841.2 ------ ------ ------ OPERATING PROFIT...................................... 105.8 100.3 90.3 Share of profits of associated undertakings........... 4.5 5.7 7.1 Interest payable...................................... 8 (10.2) (10.5) (14.0) Cessation of insurance underwriting................... 4 1.1 -- -- Net profit on disposal or termination of businesses... -- -- 6.7 ------ ------ ------ PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION**....... 3,5 101.2 95.5 90.1 Taxation on profit on ordinary activities............. 9 28.3 31.5 21.0 ------ ------ ------ PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION.......... 72.9 64.0 69.1 Minority interests.................................... 2.5 0.3 0.2 ------ ------ ------ EARNINGS.............................................. 70.4 63.7 68.9 DIVIDEND.............................................. 10 38.6 39.7 40.1 ------ ------ ------ RETAINED PROFIT FOR THE YEAR.......................... 29 31.8 24.0 28.8 ------ ------ ------ EARNINGS PER SHARE.................................... 11 12.8p 11.6p 12.6p UNDERLYING DIVIDEND PER SHARE......................... 10 7.0p 6.5p 6.5p
- --------------- * Including, in 1995, exceptional costs of L7.8m ** In 1995, L91.2m before exceptional items III-1 61 CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER NOTES 1997 ----- ----------------- LM ASSETS EMPLOYED FIXED ASSETS................................................ Tangible assets............................................. 12 212.5 Associated undertakings..................................... 16 15.2 Assets backing retirement contracts......................... 17 353.5 Investments................................................. 18 154.1 ----------------- 735.3 ----------------- CURRENT ASSETS Debtors..................................................... 19,22 2,841.8 Reinsurers' share of technical provisions................... 26 177.8 Investments................................................. 21,22 96.2 Cash and deposits........................................... 22 538.8 ----------------- 3,654.6 CREDITORS: amounts falling due within one year.............. 22,23 3,256.3 ----------------- NET CURRENT ASSETS.......................................... 398.3 ----------------- TOTAL ASSETS LESS CURRENT LIABILITIES....................... 1,133.6 CREDITORS: amounts falling due after more than one year Borrowings.................................................. Loans and other borrowings.................................. 24 63.9 7.25% Convertible Bonds 2008................................ 24 41.5 ----------------- 105.4 Other liabilities........................................... 25 24.4 ----------------- 129.8 PROVISIONS FOR LIABILITIES AND CHARGES Liabilities linked to retirement contracts.................. 17 352.9 Insurance technical provisions.............................. 26 307.9 Other provisions............................................ 27 142.9 ----------------- 803.7 ----------------- 200.1 ----------------- FINANCED BY SHAREHOLDERS' FUNDS......................................... 29 199.8 MINORITY INTERESTS.......................................... 0.3 ----------------- NET CAPITAL EMPLOYED........................................ 3 200.1 -----------------
III-2 62 CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 31 DECEMBER ---------------------- NOTES 1997 1997 ----- -------- -------- LM LM NET CASH INFLOW FROM OPERATING ACTIVITIES................... 34(a) 97.9 RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest paid............................................... (7.9) Interest element of finance lease rental payments........... (1.1) Dividends received from associated undertakings............. 5.3 ------ (3.7) TAXATION UK taxation paid............................................ (0.9) Overseas taxation paid...................................... (20.3) ------ (21.2) CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Purchase of tangible fixed assets........................... (24.7) Proceeds on disposal of tangible fixed assets............... 24.1 Purchase of investments..................................... (125.4) Disposal of investments..................................... 67.2 ------ (58.8) ACQUISITIONS AND DISPOSALS Acquisition of businesses, net of cash acquired............. 13 (31.8) Disposal of businesses, net of cash disposed................ 14 4.4 ------ (27.4) DIVIDENDS PAID.............................................. (35.3) MANAGEMENT OF LIQUID RESOURCES Cash withdrawn from deposits................................ 16.0 Purchase of investments..................................... (141.5) Disposal of investments..................................... 167.1 ------ 41.6 FINANCING Issue of shares............................................. 4.8 Increase in borrowings...................................... 14.7 Decrease in borrowings...................................... (40.7) Capital element of finance lease rental payments............ (0.6) ------ (21.8) ------ DECREASE IN CASH IN THE PERIOD.............................. 34(b) (28.7) ------
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
YEAR ENDED 31 DECEMBER --------------------------- NOTES 1997 1996 1995 ----- ----- ----- ----- LM LM LM Earnings............................................ 70.4 63.7 68.9 Translation differences on overseas undertakings.... 29 2.4 (8.4) (1.2) ----- ----- ----- Recognised gain for the year........................ 72.8 55.3 67.7 ----- ----- -----
III-3 63 NOTES TO THE FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES The financial statements have been prepared under the historical cost convention, except for the revaluation of certain assets backing retirement contracts and in accordance with accounting standards applicable in the UK. The group's principal accounting policies are unchanged compared with the years ended 31 December 1996 and 1995. PRESENTATION MATTERS Cash flow statement During 1997, the group adopted FRS 1 (Revised) Cash flow statements. Under the revised standard, the cash flow statement shows the movement in "pure cash" which comprises cash in hand, deposits repayable on demand less overdrafts. In addition, to comply with the revised standard, changes have been made to the analysis of cash flows and the related disclosures. Retirement-related investment business SuperFlex Limited, a subsidiary undertaking based in South Africa which provides retirement-related investment products, has grown significantly during 1997. It is appropriate to disclose separately the investments which it holds in relation to such retirement contracts and its linked liabilities to policy holders (see Note 17). Insurance technical provisions During 1997, River Thames Insurance Company Limited became a subsidiary undertaking (see note 13). As a result, insurance technical provisions have become more significant to the group and are shown separately from other provisions for liabilities and charges. In addition, amounts recoverable from reinsurers, are shown as current assets. BASIS OF CONSOLIDATION The consolidated financial statements include those of the company, its subsidiary undertakings and the group's interest in associated undertakings. Associated undertakings are accounted for under the equity method. An undertaking is regarded as a subsidiary undertaking if the group has control over its operating and financial policies. An undertaking is regarded as an associated undertaking if the group has significant influence but not control over its operating and financial policies, which will generally be the case where the group controls more than 20% and less than 50% of the shareholders' voting rights in the undertaking. Unless stated otherwise, business combinations are accounted for by the acquisition method of accounting. When a business is acquired, fair values are attributed to its separable assets and liabilities at the date of acquisition. Goodwill arising on acquisitions, which represents the difference between the fair value of the purchase consideration and the fair value of the separable net assets acquired, is written off to reserves on consolidation. Where it can be identified, goodwill not previously taken to the profit and loss account is taken into account in calculating the profit or loss on disposal or termination of acquired businesses. FOREIGN CURRENCY TRANSLATION Group companies record transactions in foreign currencies at the rate of exchange ruling at the date of the transaction or, if hedged forward, at the rate of exchange under the related forward currency contract. Foreign currency monetary assets and liabilities, other than those hedged forward, are translated into local currency at the rates ruling at the balance sheet date. Exchange differences are dealt with in the profit and loss account. On consolidation, the results of overseas businesses are translated into sterling at the average exchange rates for the period, and their assets and liabilities are translated into sterling at the exchange rates ruling at the balance sheet date. Exchange differences on translating the net assets or liabilities of overseas businesses, together with the differences on translating any foreign currency borrowings financing investments in overseas businesses, are taken directly to reserves. III-4 64 In the cash flow statement, cash flows denominated in foreign currency are translated at the average exchange rates for the period. REVENUE Brokerage and fees derived from insurance and reinsurance services are recognised when the counterparty is debited, except for certain business in the US on which income is recognised on the later of the effective date of the policy and the billing date. Brokerage and fees are stated after allowing for commissions to other directly-involved parties. Contingent commissions and certain life assurance and pension commissions and fees are recognised in the period to which they relate, provided they can be determined with reasonable accuracy. Where this is not possible, such commissions and fees are recognised on a cash basis. Profit commissions earned by the group's Lloyd's underwriting agency are brought into account when they are able to be determined. Interest on deposits and interest-bearing investments is recognised as it is earned. PENSIONS AND SIMILAR BENEFITS Defined contribution pension costs charged to the profit and loss account represent contributions payable in respect of the period. Defined benefit pension costs and the costs of providing other post-retirement benefits are charged to the profit and loss account on a systematic basis over the service lives of the eligible employees in accordance with the advice of qualified actuaries. TANGIBLE FIXED ASSETS Tangible fixed assets are stated at historical cost. Freehold land is not depreciated. Freehold and long-leasehold properties are depreciated on a straight-line basis such that they are written down to their residual values over their useful economic lives. Other tangible fixed assets are depreciated on a straight-line basis over their useful economic lives as follows: Short-leasehold properties -- Lease term Office fixtures and equipment -- 5-10 years Motor vehicles -- 5 years
Any permanent diminution in the value of the group's tangible fixed assets is charged to the profit and loss account. LEASED ASSETS Assets acquired under finance leases are capitalised as tangible fixed assets. Interest on such lease obligations is charged to the profit and loss account over the term of the lease based on the capital element of future lease rentals. All other leases are regarded as operating leases and rentals are charged to the profit and loss account on a straight-line basis over the term of the lease. When a leasehold property becomes surplus to the group's foreseeable business requirements, provision is made for the expected future net cost of the property. RETIREMENT-RELATED INVESTMENT BUSINESS Assets backing retirement contracts principally comprise investments which are stated at their current values at the balance sheet date. Liabilities linked to retirement contracts represent the benefits payable to policyholders at the balance sheet date and are determined by reference to the values of the related assets. Realised and unrealised gains and losses on assets backing retirement contracts are attributable to policyholders and are not, therefore, reflected in the group's results. III-5 65 INVESTMENTS Fixed asset investments are stated at cost less provision for any permanent diminution in value. Current asset investments are stated at the lower of cost and net realisable value. The cost of redeemable interest-bearing securities is adjusted to allow for the amortisation of any premium or discount to redemption value on a straight-line basis over the period to maturity. INSURANCE BROKING DEBTORS AND CREDITORS Certain group companies act as agents in placing the insurable risks of their clients with insurers, either directly or through other insurance intermediaries. Generally, these companies are not liable as principals either for premiums due to insurers or for claims payable to their clients. Notwithstanding the companies' legal relationships with clients and insurers and since, in practice, premium and claim monies are ordinarily accounted for by insurance intermediaries as if they were principals in the insurance contract, fiduciary cash, debtors and creditors relating to insurance broking business are treated for accounting purposes as the group's assets and liabilities. DEFERRED TAXATION Deferred taxation is provided using the liability method. Except for pensions and other post-retirement benefits, in respect of which deferred taxation is recognised on the full provision basis, deferred taxation is recognised on timing differences to the extent that it is probable that a liability or asset will crystallise. Deferred tax net debit balances are recognised to the extent that they are expected to be recoverable without replacement by equivalent debit balances. INSURANCE UNDERWRITING (IN RUN OFF) Insurance technical provisions are based on the estimated ultimate cost of all claims incurred but not settled at the balance sheet date, whether reported or not, together with related claims handling expenses. Insurance technical provisions are stated gross of recoveries to be made on reinsurance contracts in recognition of the fact that they are separable liabilities and assets. The adequacy of the insurance technical provisions is assessed by reference to actuarial and other studies of the ultimate cost of liabilities, which use exposure-based and statistical techniques. Significant delays occur in the notification and settlement of certain claims, and a substantial measure of experience and judgement is involved in assessing outstanding liabilities, the ultimate cost of which cannot be known with certainty at the balance sheet date. Insurance technical provisions and the related reinsurance recoveries are determined on the basis of information currently available. It is inherent in the nature of the business written that the ultimate liabilities will vary as a result of subsequent developments. OFF-BALANCE SHEET FINANCIAL INSTRUMENTS Forward exchange contracts are entered into for the purpose of hedging firm commitments or anticipated transactions denominated in foreign currencies. As described under foreign currency translation above, gains or losses arising on these contracts are deferred and recognised in the profit and loss account or as adjustments to carrying amounts only when the hedged transaction has itself been reflected in the group's financial statements. Interest differentials under interest rate swap and forward rate agreements (FRAs) are recognised in the profit and loss account by adjustment of the underlying interest receivable or payable over the term of the agreement. Contract or underlying principal amounts of financial instruments used for hedging purposes are not reflected in the group's financial statements. III-6 66 2. FOREIGN CURRENCIES The principal exchange rates used to translate overseas group companies' financial information were:
YEAR-END AVERAGE RATE RATE ----------------------------- -------- 1997 1996 1995 1997 -------- -------- ----- -------- Australian dollar................................. 2.22 2.01 2.13 2.53 Belgian franc..................................... 58.46 48.57 46.57 60.93 Canadian dollar................................... 2.28 2.14 2.17 2.35 French franc...................................... 9.54 8.02 7.86 9.90 German mark....................................... 2.83 2.36 2.26 2.96 Italian lire...................................... 2,790.00 2,424.00 n/a 2,908.00 Netherlands guilder............................... 3.19 2.65 2.54 3.33 South African rand................................ 7.60 6.74 n/a 8.00 US dollar......................................... 1.64 1.57 1.58 1.64
3. SEGMENTAL INFORMATION
1997 1996 1995 ----- ----- ----- LM LM LM REVENUE GEOGRAPHIC ANALYSIS BY BUSINESS LOCATION United Kingdom.............................................. 334.8 324.8 312.3 Continental Europe.......................................... 132.2 135.2 133.0 North America............................................... 414.0 421.6 411.4 Asia Pacific................................................ 69.6 72.2 65.7 Rest of the world........................................... 24.6 6.5 9.1 ----- ----- ----- 975.2 960.3 931.5 ----- ----- ----- ANALYSIS BY BUSINESS Insurance and reinsurance services.......................... 741.9 746.5 721.3 Employee benefits consulting................................ 233.3 213.2 209.5 Insurance underwriting (in run off)......................... -- 0.6 0.7 ----- ----- ----- 975.2 960.3 931.5 ----- ----- ----- GEOGRAPHIC ANALYSIS BY CLIENT LOCATION United Kingdom.............................................. 275.1 269.4 254.5 Continental Europe.......................................... 138.5 134.7 131.2 North America............................................... 438.2 445.6 437.1 Asia Pacific................................................ 86.3 91.2 84.6 Rest of the world........................................... 37.1 19.4 24.1 ----- ----- ----- 975.2 960.3 931.5 ----- ----- ----- PROFIT BEFORE TAXATION GEOGRAPHIC ANALYSIS BY BUSINESS LOCATION United Kingdom.............................................. 45.4 44.7 44.6 Continental Europe.......................................... 10.2 10.3 11.5 North America............................................... 44.3 40.8 41.8 Asia Pacific................................................ 4.5 4.7 2.5 Rest of the world........................................... 7.0 5.5 4.8 ----- ----- ----- 111.4 106.0 105.2 Less : Interest payable..................................... (10.2) (10.5) (14.0) ----- ----- ----- 101.2 95.5 91.2* ----- ----- -----
III-7 67
1997 1996 1995 ----- ----- ----- LM LM LM ANALYSIS BY BUSINESS Insurance and reinsurance services.......................... 86.7 85.4 86.4 Employee benefits consulting................................ 23.6 20.7 18.4 Insurance underwriting (in run off)......................... 1.1 (0.1) 0.4 ----- ----- ----- 111.4 106.0 105.2 Less: Interest payable...................................... (10.2) (10.5) (14.0) ----- ----- ----- 101.2 95.5 91.2* ----- ----- -----
- --------------- *Excludes exceptional item of (L1.1m)
1997 ------ LM NET CAPITAL EMPLOYED GEOGRAPHICAL ANALYSIS BY BUSINESS LOCATION United Kingdom.............................................. 151.6 Continental Europe.......................................... 27.8 North America............................................... 75.7 Asia Pacific................................................ 18.2 Rest of the world........................................... 33.1 ------ 306.4 Less : Borrowings........................................... (106.3) ------ 200.1 ------ NET CAPITAL EMPLOYED ANALYSIS BY BUSINESS Insurance and reinsurance services.......................... 89.5 Employee benefits consulting................................ 42.2 Insurance underwriting (in run off)......................... 39.4 ------ 171.1 Add: Properties............................................. 135.3 Less: Borrowings............................................ (106.3) ------ 200.1 ------
Segmental information as shown before taking account of inter-segmental borrowings and interest charges. 4. EXCEPTIONAL ITEMS EXCEPTIONAL ITEMS RECOGNISED IN 1997 CESSATION OF INSURANCE UNDERWRITING In April 1997, the group increased its shareholding in River Thames Insurance Company Limited (RTI) (note 13). Since the company is in run off, the negative goodwill arising on the acquisition has been credited to the profit and loss account. Following completion, provisions amounting to L8.4m were established in respect of the strengthening of insurance technical provisions, property and other closure costs. III-8 68
1997 ---- LM Insurance underwriting subsidiaries in run off: Closure provisions.......................................... (8.4) Other movements on insurance technical provisions........... 1.0 ---- (7.4) Negative goodwill (note 13)................................. 8.5 ---- 1.1 ----
Insurance technical provisions are dealt with in note 26. EXCEPTIONAL ITEMS RECOGNISED IN 1995 A) EXPENSES In 1995, rationalisation costs of L7.8m (L5.3m after tax) arising as a consequence of the merger of Sedgwick Europe and Sedgwick Payne were treated as an exceptional expenses in arriving at operating profit. B) NET PROFIT ON DISPOSAL OR TERMINATION OF BUSINESSES In 1995, the group recognised a profit of L4.2m on the disposal of its travel insurance broking businesses in the Netherlands. Also during 1995, the assumptions on which the provision established in 1994 in respect of the run-off of Americas Insurance Company and provisions relating to prior year disposals of businesses were reviewed and L2.5m was released to the profit and loss account. Taken together, these items represented a profit of L6.7m (L4.2m after tax) which was treated as a non-operating exceptional item. SEGMENTAL ANALYSIS OF EXCEPTIONAL ITEMS
1997 1996 1995 ----- ----- ----- LM LM LM PROFIT BEFORE TAXATION GEOGRAPHIC ANALYSIS BY BUSINESS LOCATION United Kingdom.............................................. (0.1) -- (4.4) Continental Europe.......................................... -- -- 1.8 North America............................................... 1.2 -- 1.5 ----- ----- ----- 1.1 -- (1.1) ----- ----- ----- ANALYSIS BY BUSINESS Insurance and reinsurance services.......................... -- -- (3.6) Insurance underwriting (in run off)......................... 1.1 -- 2.5 ----- ----- ----- 1.1 -- (1.1) ----- ----- -----
5. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION Profit before taxation is determined after taking account of the following items:
1997 1996 1995 ----- ----- ----- LM LM LM Depreciation of tangible fixed assets (note 12)............. 23.0 25.3 28.8 Operating lease rentals..................................... 48.9 53.2 53.5 Auditors' remuneration: For audit services.......................................... 2.2 2.0 1.9 For other services provided in the UK....................... 0.9 0.4 0.3 For other services outside the UK........................... 0.2 0.6 n/a
III-9 69 Auditors' remuneration for audit services includes L0.1m (1996 L0.1m, 1995 L0.1m) in respect of the company. In addition to the amounts stated above, in 1997 the auditors received L0.6m in connection with acquisitions which was capitalised; L0.5m for services provided in the UK and L0.1m for services provided outside the UK. 6. EMPLOYEE INFORMATION
1997 1996 1995 ------ ------ ------ LM LM LM SALARIES AND ASSOCIATED EXPENSES Salaries.................................................... 512.9 491.6 476.9 Social security costs....................................... 36.4 38.9 39.1 Pension costs: Defined contribution schemes................................ 1.6 2.6 0.9 Defined benefit schemes (note 33)........................... 17.5 15.9 19.4 ------ ------ ------ 568.4 549.0 536.3 ------ ------ ------
AVERAGE FOR THE YEAR YEAR END -------------------------- -------------------------- 1997 1996 1995 1997 1996 1995 ------ ------ ------ ------ ------ ------ NUMBER OF EMPLOYEES BY GEOGRAPHIC REGION United Kingdom..................... 5,192 5,136 5,433 5,174 5,130 5,289 Continental Europe................. 2,132 2,051 2.016 2,478 2,077 2,029 North America...................... 6,212 6,291 6,471 6,156 6,357 6,379 Asia Pacific....................... 1,305 1,263 1,256 1,311 1,242 1,275 Rest of world...................... 720 154 152 866 586 156 ------ ------ ------ ------ ------ ------ 15,561 14,895 15,328 15,985 15,392 15,128 ------ ------ ------ ------ ------ ------ NUMBER OF EMPLOYEES BY BUSINESS Insurance and reinsurance services......................... 11,311 11,204 11,505 11,683 11,284 11,348 Employee benefits consulting....... 4,239 3,680 3,809 4,291 4,096 3,766 Insurance underwriting (in run off)............................. 11 11 14 11 12 14 ------ ------ ------ ------ ------ ------ 15,561 14,895 15,328 15,985 15,392 15,128 ------ ------ ------ ------ ------ ------
7. DIRECTORS' REMUNERATION
1997 1996 ------ ------ L000 L000 Aggregate emoluments: Salary and fees............................................. 1,497 1,402 Annual bonus................................................ 514 240 Benefits in kind............................................ 92 94 ------ ------ 2,103 1,736 ------ ------ Deferred bonus.............................................. 439 186 ------ ------ Notional gains made on the exercise of share options........ 40 -- ------ ------
Deferred bonus figures stated above represent amounts accrued in respect of directors who were in office during the period. At 31 December 1997, the accumulated provision for deferred bonus attributable to directors in office at that date was L873,000 (1996 L409,000). During 1997 and 1996, no amounts were paid to directors in respect of their accumulated deferred bonus entitlements. III-10 70 Directors' remuneration figures for 1996 above have been re-presented in accordance with the Companies Act 1985 (as amended). The 1995 figures have not been restated but are as presented in the 31 December 1995 year-end accounts.
1995 ----- LM Base salary................................................. 1,438 Annual profit share......................................... 343 Long-term profit share...................................... 235 Pension contributions....................................... 143 Other benefits.............................................. 111 ----- Remuneration for management................................. 2,270 Directors' fees............................................. 89 ----- 2,359 -----
8. INTEREST PAYABLE
1997 1996 1995 ----- ----- ----- LM LM LM Interest on bank loans and overdrafts....................... 8.8 9.0 10.5 Interest on other borrowings................................ 0.3 0.2 2.2 Interest on finance leases.................................. 1.1 1.3 1.3 ----- ----- ----- 10.2 10.5 14.0 ----- ----- -----
9. TAXATION ON PROFIT ON ORDINARY ACTIVITIES
1997 1996 1995 ----- ----- ----- LM LM LM Current taxation: UK corporation tax 31.5% (1996 33%, 1995 33%)............... 28.4 25.6 5.2 UK relief for overseas taxation............................. (19.6) (14.7) (4.5) Advance Corporation Tax recoverable......................... (4.8) -- (4.4) Overseas taxation........................................... 22.8 22.1 17.5 ----- ----- ----- 26.8 33.0 13.8 Deferred taxation (note 20)................................. 1.1 (2.1) 6.4 ----- ----- ----- 27.9 30.9 20.2 Share of taxation of associated undertakings................ 0.4 0.6 0.8 ----- ----- ----- 28.3 31.5 21.0 ----- ----- -----
As a consequence of the group's foreign income dividend programme, the tax charge was reduced by L7.4m (1996 L3.1m, 1995 L6.8m). In addition, in 1995, the group's tax charge was reduced by L2.8m following the resolution of certain tax issues. Current overseas taxation is reduced by L5.2m (1996 L5.7m, 1995 L4.2m) by reason of overseas taxation relief in respect of the amortisation of intangible assets recognised in the accounts of certain of the group's overseas subsidiaries. In accordance with the group's accounting policies, these intangible assets were written off to reserves on consolidation. Further such overseas taxation relief, amounting to L22.9m (1996 L26.9m, 1995 L22.9m), is expected to be available over the period to 2012. III-11 71 10. DIVIDEND
UNDERLYING ENHANCEMENT TOTAL ----------------- ---------------- ----------------- PER SHARE LM PER SHARE LM PER SHARE LM --------- ---- --------- --- --------- ---- Year ended 31 December 1997 Interim dividend paid 20 October 1997.............................. 3.0p 16.4 -- -- 3.0p 16.4 Final dividend paid 29 April 1998... 4.0p 22.2 -- -- 4.0p 22.2 --------- ---- --------- --- --------- ---- 7.0p 38.6 -- -- 7.0p 38.6 --------- ---- --------- --- --------- ---- Year ended 31 December 1996 Interim dividend.................... 3.0p 16.4 0.75p 4.1 3.75p 20.5 Final dividend...................... 3.5p 19.2 -- -- 3.5p 19.2 --------- ---- --------- --- --------- ---- 6.5p 35.6 0.75p 4.1 7.25p 39.7 --------- ---- --------- --- --------- ---- Year ended 31 December 1995 Interim dividend.................... 3.0p 16.2 -- -- 3.0p 16.2 Final dividend...................... 3.5p 19.1 0.875p 4.8 4.375p 23.9 --------- ---- --------- --- --------- ---- 6.5p 35.3 0.875p 4.8 7.375p 40.1 --------- ---- --------- --- --------- ----
Both the interim and final dividends for 1997 have been designated foreign income dividends (FIDs). The 1995 final and 1996 interim dividends were designated as FIDs and were enhanced so as not to disadvantage non-tax paying shareholders. Since that time, changes have been made to tax legislation such that, in connection with FIDs, most of our non-tax paying shareholders are no longer disadvantaged relative to tax-paying shareholders. Accordingly, it is no longer the group's policy to enhance FIDs. It is currently planned that dividends for 1998 will be declared as FIDs. 11. EARNINGS PER SHARE Earnings per share of 12.8p (1996 11.6p, 1995 12.6p) have been calculated by apportioning the earnings of L70.4m (1996 L63.7m, 1995 L68.9m) over the weighted average of 549.5m (1996 547.3m, 1995 546.3m) shares in issue. Earnings per share on the nil distribution basis amounted to 11.9p (1996 11.6p, 1995 11.8p). 12. FIXED ASSETS: TANGIBLE ASSETS
PROPERTIES ----------------------------------- OFFICE LONG SHORT FIXTURES & MOTOR FREEHOLD LEASEHOLD LEASEHOLD EQUIPMENT VEHICLES TOTAL ----------- --------- --------- ---------- -------- ----- LM LM LM LM LM LM COST At 1 January 1997.................... 115.7 10.1 22.5 208.9 23.9 381.1 Acquisition of subsidiary undertakings....................... -- -- 0.2 6.9 0.8 7.9 Additions............................ -- -- 0.2 19.7 4.3 24.2 Disposals............................ -- -- -- (16.8) (5.8) (22.6) Translation differences.............. (1.8) -- (0.6) (2.3) (0.6) (5.3) ----------- --------- --------- --------- -------- ----- At 31 December 1997.................. 113.9 10.1 22.3 216.4 22.6 385.3 ----------- --------- --------- --------- -------- ----- DEPRECIATION At 1 January 1997.................... -- -- 10.3 145.0 9.8 165.1 Acquisition of subsidiary undertakings....................... -- -- 0.1 4.3 0.3 4.7 Provided in the year................. -- -- 1.0 17.9 4.1 23.0 Disposals............................ -- -- -- (14.4) (3.6) (18.0) Translation differences.............. -- -- (0.4) (1.2) (0.4) (2.0) ----------- --------- --------- --------- -------- -----
III-12 72
PROPERTIES ----------------------------------- OFFICE LONG SHORT FIXTURES & MOTOR FREEHOLD LEASEHOLD LEASEHOLD EQUIPMENT VEHICLES TOTAL ----------- --------- --------- ---------- -------- ----- LM LM LM LM LM LM At 31 December 1997.................. -- -- 11.0 151.6 10.2 172.8 ----------- --------- --------- --------- -------- ----- Net book value at 31 December 1997... 113.9 10.1 11.3 64.8 12.4 212.5 ----------- --------- --------- --------- -------- ----- Net book value at 31 December 1996... 115.7 10.1 12.2 63.9 14.1 216.0 ----------- --------- --------- --------- -------- -----
The directors have reviewed the current market values of the group's freehold and long-leasehold properties and are of the opinion that there is no substantial difference between their costs and market values. The directors have reassessed the useful lives and residual values of these properties at 31 December 1997, based on prices prevailing at the date of acquisition, and consider that any depreciation charge for the year would not have been significant. Consequently, no depreciation charge has been made in respect of these properties. Freehold properties include an overseas asset held under a finance lease which has a net book value of L15.7m (1996 17.5m). During the year, proceeds amounting to L19.5m were received on the disposal, in 1996, of the group's long-leasehold interest in Aldgate House, London. 13. ACQUISITIONS The costs, net assets acquired and goodwill arising on acquisitions recognised during 1997 were as follows:
OTHER RTI NSBV BUSINESSES TOTAL ----- ----- ---------- ----- LM LM LM LM Cost of acquisition: Cash consideration..................................... 12.0 7.3 11.7 31.0 Share of net liabilities of business contributed....... -- (0.9) -- (0.9) Contingent consideration............................... -- 0.4 5.1 5.5 Sundry expenses........................................ 0.3 2.3 0.3 2.9 ----- ----- ---------- ----- 12.3 9.1 17.1 38.5 Share of net (assets)/liabilities of businesses acquired............................................. (20.8) 5.2 (0.5) (16.1) ----- ----- ---------- ----- Goodwill on acquisitions............................... (8.5) 14.3 16.6 22.4 ----- ----- ---------- Add: Negative goodwill on RTI (note 4)................. 8.5 ----- Goodwill written off to reserves (note 29)............. 30.9 -----
River Thames Insurance Company Limited (RTI) In April 1997, the group completed the acquisition from Transamerica Corporation of 35.7m "A" ordinary shares in RTI. With effect from completion, the group's interest in RTI increased from 48.8 per cent to 98.7 per cent and it became a subsidiary undertaking. As shown in the summary table above, the purchase consideration was at a significant discount to the fair value of the additional share of the net assets of the company acquired, i.e. negative goodwill was recognised on the acquisition. Nikols Sedgwick B.V. (NSBV) With effect from 1 November 1997, Sedgwick entered into a joint venture with the Moratti Group which involved the transfer of our respective businesses in Italy, Spain, Portugal and Latin America to a newly-formed holding company, NSBV. Details of the joint venture were set out in the circular to shareholders dated 10 October 1997. NSBV is treated as a subsidiary undertaking in these financial statements. III-13 73 The assets and liabilities of businesses acquired during 1997 were as follows:
BOOK VALUE ADJUSTMENTS FAIR VALUE ---------- ----------- ---------- LM LM LM Tangible fixed assets....................................... 3.2 -- 3.2 Investments in associated undertakings...................... (26.4) -- (26.4) Fixed asset investments..................................... 74.4 (0.7) 73.7 Current assets - -- Reinsurers' share of technical provisions................ 170.6 -- 170.6 - -- Other assets............................................. 164.0 4.8 168.8 Creditors due within one year............................... (69.3) (1.4) (70.7) Creditors due after more than one year...................... (0.2) -- (0.2) Provisions for liabilities and charges - -- Insurance technical provisions........................... (295.5) (8.4) (303.9) - -- Other provisions......................................... (2.9) -- (2.9) ---------- ----------- ---------- 17.9 (5.7) 12.2 Minority interests.......................................... 6.3 (2.4) 3.9 ---------- ----------- ---------- 24.2 (8.1) 16.1 ---------- ----------- ----------
Adjustments to the book values of the assets and liabilities acquired principally reflect the strengthening of insurance technical provisions held in relation to RTI and the alignment of the accounting policies of the acquired businesses with those of the group. Cash flow effect of acquisition of businesses:
1997 ------ LM Cost of acquisition: - -- Acquisitions completed during 1997....................... 32.9 - -- Acquisitions completed in previous years................. 3.0 Net cash of businesses acquired............................. (4.2) Effect of movement in exchange rates........................ 0.1 ------ Net outflow of cash on acquisitions......................... 31.8 ------
Businesses acquired during 1997 contributed L0.6m to the group's earnings for 1997. 14. DISPOSALS Profit recognised on disposal of businesses, none of which was individually significant, amounted to L2.7m (1996 L2.0m, 1995 L4.4m). In addition to the 1995 profit recognised of L4.4m on the disposal of businesses, none of which was individually significant, the group recognised an exceptional profit of L4.2m on the disposal of its travel insurance booking business in the Netherlands which was treated as an exceptional item (see Note 4). Cash flow effect of disposal of businesses:
1997 ---- LM Cash proceeds: - -- Disposals completed during the year...................... 0.6 - -- Disposals completed in previous years.................... 3.8 ---- Net inflow of cash on disposals............................. 4.4 ----
III-14 74 15. FIXED ASSETS; SUBSIDIARY UNDERTAKINGS
SHARES AT COST ------- LM At 1 January 1997........................................... 240.2 Additions................................................... 4.0 ------- At 31 December 1997......................................... 244.2 -------
Principal subsidiary undertakings at 31 December 1997:
COUNTRY OF INCORPORATION AND OPERATION CLASS OF SHARES AND PERCENTAGE INTEREST ------------------------ --------------------------------------- INSURANCE BROKING AND CONSULTING Sedgwick (Holdings) Pty. Limited....... Australia "A" and "B" ordinary (100%) 10% Non-cumulative non-redeemable preference (100%) Sedgwick SA-NV......................... Belgium Ordinary (99%) SG Services Limited*................... Great Britain Ordinary (100%) Sedgwick SA............................ France Ordinary (100%) Sedgwick Nederland BV.................. Netherlands Ordinary (100%) Sedgwick, Inc.**....................... US Common (100%) Sedgwick Re, Inc....................... US Common (100%) Sedgwick Noble Lowndes Limited......... Great Britain Ordinary (100%) Sedgwick Financial Services Limited.... Great Britain Ordinary (100%) Sedgwick Oakwood Lloyd's Underwriting Agents Limited....................... Great Britain Ordinary voting (75%) Nikols Sedgwick B.V.................... Netherlands Ordinary (45.7%)*** Ginsburg Malan & Carsons Consultants & Actuaries (Pty) Limited.............. South Africa Ordinary (50.01%) INSURANCE UNDERWRITING (IN RUN OFF) River Thames Insurance Company Limited.............................. Great Britain Ordinary (98.7%) Americas Insurance Company............. US Common (100%)
With the exception of SG Services Limited and Sedgwick Oakwood Lloyd's Underwriting Agents Limited, the above companies are indirectly owned. - --------------- * SG Services Limited operated through agents in 1997. Its principal agent in 1997 was Sedgwick Europe Risk Services Limited. With effect from 1 January 1998, SG Services Limited changed its name to Sedgwick Limited ** Formerly Sedgwick James, Inc. *** During 1998, the group's interest in Nikols Sedgwick BV will increase to 49% 16. FIXED ASSETS: ASSOCIATED UNDERTAKINGS
SHARE OF RETAINED SHARES EARNINGS LOANS TOTAL ------ -------- ----- ----- LM LM LM LM At 1 January 1997...................................... 36.7 4.7 0.1 41.5 Additions.............................................. 1.1 (1.0) 0.1 0.2 Disposals and other movements.......................... (35.0) 8.1 -- (26.9) Translation differences................................ -- 0.4 -- 0.4 ------ -------- ----- ----- At 31 December 1997.................................... 2.8 12.2 0.2 15.2 ------ -------- ----- -----
Shares held in associated undertakings are unlisted. Shares are stated at cost, less amounts written off in respect of permanent diminution in value. III-15 75 At 31 December 1997, the group's only significant associated undertaking was ACE Holding Inc (ACE), an insurance broking business which incorporated in the British Virgin Islands and operates in the Middle East. Sedgwick Group plc has an indirect interest in ACE comprising 100,000 ordinary shares of no par value representing 32.63% of its equity share capital. Disposals and other movements includes L26.4m in respect of RTI, which became a subsidiary undertaking in April 1997. 17. RETIREMENT-RELATED INVESTMENT BUSINESS The group provides retirement-related investment products through SuperFlex Limited, a subsidiary undertaking based in South Africa, the net assets of which comprise:
1997 ----- LM Listed investments at current value (cost L128.0m).......... 112.3 Unlisted investments at current value (cost L190.0m)........ 192.3 Current assets.............................................. 49.1 Current liabilities......................................... (0.2) ----- Assets backing retirement contracts......................... 353.5 Less: Attributable to shareholders.......................... 0.6 ----- Liabilities linked to retirement contracts.................. 352.9 -----
SuperFlex Limited is wholly owned by Ginsburg Malan & Carsons Consultants and Actuaries (Pty) Limited. 18. FIXED ASSETS: INVESTMENTS
LISTED UNLISTED SECURITIES SECURITIES TOTAL ---------- ---------- ----- LM LM LM At 1 January 1997........................................... 23.4 2.6 26.0 Acquisition of subsidiary undertakings...................... 34.1 39.6 73.7 Additions................................................... 97.6 26.1 123.7 Disposals and other movements............................... (39.4) (30.4) (69.8) Translation differences..................................... 0.5 -- 0.5 ---------- ---------- ----- At 31 December 1997......................................... 116.2 37.9 154.1 ---------- ---------- -----
The market value of listed securities was L116.2m. 19. CURRENT ASSETS: DEBTORS
1997 ------- LM AMOUNTS FALLING DUE WITHIN ONE YEAR Insurance broking debtors (note 22)......................... 2,643.5 Other debtors............................................... 72.2 Taxation recoverable........................................ 19.1 Prepayments and accrued income.............................. 23.1 ------- 2,757.9 -------
III-16 76
1997 ------- LM AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Other debtors............................................... 49.1 Advance Corporation Tax recoverable......................... 12.6 Deferred taxation (note 20)................................. 22.2 ------- 83.9 ------- 2,841.8 -------
20. DEFERRED TAXATION Deferred taxation assets / (liabilities)
PROVIDED UNPROVIDED 1997 1997 -------- ---------- LM LM Accelerated tax depreciation................................ 0.5 -- Short-term timing differences............................... 2.7 1.3 Potential remittance of retained earnings of overseas companies................................................. (8.0) -- Pensions and similar obligations............................ 17.8 -- Restructuring provisions.................................... 6.0 -- Advance Corporation Tax recoverable......................... -- 0.6 Overseas intangibles (note 9)............................... 3.2 22.9 -------- ---------- 22.2 24.8 -------- ----------
Movement on the deferred taxation account:
1997 ------- LM At 1 January................................................ 18.8 Acquisition of subsidiary undertakings...................... 4.9 Translation differences..................................... 0.7 Transfer (from)/to the profit and loss account (note 9)..... (1.1) Other movements............................................. (1.1) ------- At 31 December.............................................. 22.2 -------
21. CURRENT ASSETS: INVESTMENTS
1997 ------- LM Listed securities........................................... 60.1 Other investments........................................... 36.1 ------- 96.2 -------
The market value of listed securities was L60.4m. 22. FIDUCIARY ASSETS AND LIABILITIES Fiduciary balances comprise uncollected net premiums (i.e. after deduction of brokerage and fees), and cash and investments representing net premiums and claims which have been collected but not remitted to the III-17 77 relevant client, insurer or other insurance intermediary. Fiduciary assets and liabilities included under the respective balance sheet headings were as follows:
1997 ------- LM CURRENT ASSETS Cash and short-term deposits................................ 436.5 Investments................................................. 47.8 Insurance broking debtors................................... 2,568.5 ------- 3,052.8 CURRENT LIABILITIES Insurance broking creditors................................. 3,052.8 -------
Cash, short-term deposits and investments held in a fiduciary capacity are generally subject to regulatory controls prescribed by the relevant authorities in the various countries in which the group operates. Accordingly, such fiduciary assets are regarded as restricted. Certain subsidiary undertakings in the UK have entered into a trust deed with the Corporation of Lloyd's under which insurance transaction assets are subject to a floating charge in favour of the trustee of Lloyd's for the benefit of insurance transaction creditors. Insurance transaction creditors amounting to L2,361.3m were secured through this arrangement. The assets of subsidiary undertakings subject to this charge were insurance broking debtors amounting to L2,106.1m and cash and deposits amounting to L265.6m. A floating charge is a charge which does not relate to a specific asset but to a group of assets, the composition of which may change from time to time (in this case, insurance broking assets held by the group in relation to business conducted at Lloyd's). 23. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
1997 ------- LM Bank loans and overdrafts (unsecured)....................... 0.9 Finance lease obligations................................... 0.8 Insurance broking creditors (note 22)....................... 3,052.8 Dividend payable............................................ 22.2 Other creditors............................................. 53.4 Taxation.................................................... 44.3 Accruals and deferred income................................ 81.9 ------- 3,256.3 -------
24. BORROWINGS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
1997 ----- LM Bank loans.................................................. 20.0 7.68% Senior Loan Notes 2006................................ 36.2 Other borrowings............................................ 7.7 ----- 63.9 7.25% Convertible Bonds 2008................................ 41.5 ----- 105.4 -----
III-18 78
1997 ----- LM Falling due: Between one and two years................................... 7.7 Between two and five years.................................. 19.8 Over five years............................................. 77.9 ----- 105.4 -----
The above borrowings are all unsecured. The 7.68% Senior Loan Notes 2006 were issued by Sedgwick Group, Inc., the group's US holding company, and mature on 1 April 2006 at their par value of US$60m unless previously repaid by Sedgwick Group, Inc. in accordance with the terms of the note purchase agreement. Sedgwick Group plc has guaranteed the principal amount, interest payments and any other monies which may be owed under the related note purchase agreement. Holders of the 7.25% Convertible Bonds 2008 have the option to convert the bonds into ordinary shares in the company at 183p per share at any time before 24 May 2008. The company has the option to redeem the bonds after 14 December 1998 or, if 15% or less of the initial L41.5m principal amount remains outstanding, on or before that date. Unless previously repurchased by the company or any of its subsidiaries, redeemed or converted, the bonds will be redeemed at par on 31 May 2008. 25. OTHER LIABILITIES: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
1997 ----- LM Finance lease obligations................................... 9.5 Other creditors............................................. 13.5 Accruals and deferred income................................ 1.4 ----- 24.4 ----- FINANCE LEASE OBLIGATIONS DUE: Between one and two years................................... 1.5 Between two and five years.................................. 4.8 Over five years............................................. 3.2 ----- 9.5 -----
26. PROVISIONS FOR LIABILITIES AND CHARGES: INSURANCE TECHNICAL PROVISIONS At 1 January 1997........................................... 67.7 Acquisition of subsidiary undertakings...................... 303.9 Profit and loss movements (note 4).......................... 7.4 Utilisation................................................. (73.5) Transfers to creditors and other movements.................. (0.5) Translation differences..................................... 2.9 ----- At 31 December 1997......................................... 307.9 -----
At 31 December 1997, amounts recoverable from reinsurers in relation to insurance technical provisions amounted to L177.8m. III-19 79 27. PROVISIONS FOR LIABILITIES AND CHARGES: OTHER PROVISIONS
PENSIONS AND CLAIMS AND SIMILAR LAWSUITS OBLIGATIONS RESTRUCTURING (NOTE 30(A)) OTHER TOTAL ----------- ------------- ------------ ----- ----- LM LM LM LM LM At 1 January 1997.............. 42.3 19.0 43.6 24.5 129.4 Acquisition of subsidiary undertakings................. -- -- 2.9 -- 2.9 Profit and loss movements...... 5.7 7.2 14.8 8.8 36.5 Utilisation.................... (6.0) (6.5) (11.7) (3.8) (28.0) Transfers (to)/from creditors and other movements.......... (1.3) 0.4 2.2 1.9 3.2 Translation differences........ 0.2 0.2 (0.1) (1.4) (1.1) ----------- ------------- ------------ ----- ----- At 31 December 1997............ 40.9 20.3 51.7 30.0 142.9 ----------- ------------- ------------ ----- -----
28. SHARE CAPITAL The authorised capital of the company is L81.0m. Issued and fully paid capital of the company:
ORDINARY SHARES OF 10P EACH MILLIONS --------------- At 1 January 1997........................................... 548.0 Shares issued during the year............................... 5.7 --------------- At 31 December 1997......................................... 553.7 ---------------
Details of shares issued during the year and an analysis of the options outstanding in connection with the company's share option schemes are given in the Directors' report. 29. SHAREHOLDERS' FUNDS
SHARE CAPITAL SHARE PROFIT AND (NOTE 28) PREMIUM LOSS ACCOUNT TOTAL --------- ------- ------------ ----- LM LM LM LM At 1 January 1997............................ 54.8 3.9 132.7 191.4 Shares issued................................ 0.6 4.2 0.3 5.1 Goodwill on acquisitions (note 13)........... -- -- (30.9) (30.9) Retained profit for the year................. -- -- 31.8 31.8 Translation differences...................... -- -- 2.4 2.4 --------- ------- ------------ ----- At 31 December 1997.......................... 55.4 8.1 136.3 199.8 --------- ------- ------------ ----- At 1 January 1996............................ 54.6 2.1 139.9 196.6 Shares issued................................ 0.2 1.8 -- 2.0 Goodwill on acquisitions..................... -- -- (22.8) (22.8) Retained profit for the year................. -- -- 24.0 24.0 Translation differences...................... -- -- (8.4) (8.4) --------- ------- ------------ ----- At 31 December 1996.......................... 54.8 3.9 132.7 191.4 --------- ------- ------------ ----- At 1 January 1995............................ 54.6 1.9 115.6 172.1 Shares issued................................ -- 0.2 -- 0.2 Goodwill on acquisitions..................... -- -- (3.3) (3.3)
III-20 80
SHARE CAPITAL SHARE PROFIT AND (NOTE 28) PREMIUM LOSS ACCOUNT TOTAL --------- ------- ------------ ----- LM LM LM LM Retained profit for the year................. -- -- 28.8 28.8 Translation differences...................... -- -- (1.2) (1.2) --------- ------- ------------ ----- At 31 December 1995.......................... 54.6 2.1 139.9 196.6 --------- ------- ------------ -----
The cumulative amount of goodwill written off at 31 December 1997, net of goodwill relating to subsidiary undertakings sold, amounted to L617.9m. During 1997, dividends amounting to L0.3m (1996 Lnil, 1995 Lnil) were taken in the form of shares under the company's scrip dividend scheme. The retained profit for the financial year has been dealt with in the financial statements of:
1997 1996 1995 ---- ---- ---- LM LM LM Company..................................................... 0.2 0.5 -- Subsidiary undertakings..................................... 32.6 19.3 27.9 Associated undertakings..................................... (1.0) 4.2 0.9 ---- ---- ---- 31.8 24.0 28.8 ---- ---- ----
30. CONTINGENT LIABILITIES A) CLAIMS AND LAWSUITS The group is subject to claims and lawsuits in the course of its business, resulting principally from alleged errors and omissions in connection with the group's insurance and consulting business. Claims may arise several years after the original events which could be the subject to the dispute. Although all claims are strenuously defended, provision is made, after taking account of the group's insurance arrangements, for potential liabilities including expenses that may arise in respect of these claims and lawsuits. Provision is based on current information and legal advice and provisions are adjusted from time to time according to developments. While there is always uncertainty as to the outcome of any claim or litigation the directors do not expect such claims existing at the balance sheet date, either individually or in aggregate, to have a material adverse effect on the group's future results or financial position. B) OTHER CONTINGENCIES A group company has guaranteed undertakings totalling L0.5m given by banks in relation to the underwriting membership of Lloyd's of certain directors and employees of fellow subsidiary undertakings. In no case does the contingent liability under any single guarantee exceed L50,000. Certain group companies have opened letters of credit in favour of clients on behalf of insurance markets and have given other guarantees and indemnities in the ordinary course of their business. The company has given guarantees in respect of certain liabilities of other group companies. No material unprovided liabilities are expected to arise either to the company or the group as a result of these guarantees and indemnities. 31. TRANSACTIONS WITH RELATED PARTIES During the period under review, there were no other transactions or balances with related parties reportable under FRS 8, Related Party Disclosures. III-21 81 32. COMMITMENTS A) OPERATING LEASE COMMITMENTS Certain group companies have entered into operating lease arrangements. The annual rental commitments under these leases are analyses below:
1997 1996 1995 ------------------- ------------------- ------------------- PROPERTIES OTHER PROPERTIES OTHER PROPERTIES OTHER ---------- ----- ---------- ----- ---------- ----- LM LM LM LM Expiry of leases within: One year.................... 3.9 3.6 2.2 3.8 3.2 2.0 Two to five years........... 21.7 6.9 23.0 6.7 20.7 6.9 Over five years............. 20.9 -- 20.9 -- 21.3 0.1 ---------- ----- ---------- ----- ---------- ----- 46.5 10.5 46.1 10.5 45.2 9.0 Less: Recoveries from operating sub-leases...... (5.0) -- (4.7) -- (4.9) -- ---------- ----- ---------- ----- ---------- ----- 41.5 10.5 41.4 10.5 40.3 9.0 ---------- ----- ---------- ----- ---------- -----
B) CAPITAL COMMITMENTS At 31 December 1997, the group had commitments for contracted capital expenditure amounting to L1.8m (1996 L2.3m, 1995 L1.5m). 33. PENSIONS AND SIMILAR BENEFITS The group's principal defined benefit pension schemes are in the UK and the US. These schemes cover eligible current and retired employees and are funded on the basis of local actuarial advice. For the purposes of determining the group's pension cost, these schemes are valued annually at 1 January, using the projected unit method, by qualified actuaries who are the group's employees. At 1 January 1997, the date of the latest valuations, the market value of the assets of these schemes was L837.0m. In assessing the value of the assets held by the UK scheme, allowance was made for the abolition during 1997 of tax credits on UK dividend income paid to pension schemes. The actuarial value of the assets of these schemes represented 115% of the liabilities for pension benefits that had accrued to members at that date, after allowing for expected future salary increases. Under the relevant accounting standard, this surplus is being recognised over the average remaining service lives of eligible employees. The group's contributions to its defined benefit pension schemes during 1997 amounted to L16.5m (1996 L16.1m, 1995 n/a). The group's defined benefit pension cost during 1997 was L17.5m (1996 L15.9m, 1995 L19.4m). At 31 December 1997, a prepayment of L10.0m is included within other debtors falling due after more than one year which represent the cumulative amount by which the group's contributions to its pension funds have exceeded the pension costs charged to its profit and loss account. The principal assumptions made in the actuarial assessment of the group's pension cost were: Investment return........................................... -- 8.75% - 9% per annum Salary inflation (including the salary scale)............... -- 6.25% - 8% per annum Dividend growth............................................. -- 5% per annum Pension increase............................................ -- 4% - 5% per annum
Post-retirement benefits other than pensions were withdrawn from the group's existing employees in the UK in 1989 and in the US in 1993, but the group continues to provide certain of its pensioners with healthcare and life assurance benefits. At 31 December 1997, there were approximately 1,500 pensioners eligible for these benefits, the cost of which was L1.5 million. The principal assumptions made in the actuarial assessment of the cost of these benefits were: Medical cost inflation...................................... -- 7% - 10% per annum Discount rate............................................... -- 8% per annum
III-22 82 34. CASH FLOW A) RECONCILIATION OF OPERATING PROFIT OF NET CASH INFLOW FROM OPERATING ACTIVITIES
1997 ----- LM Operating profit............................................ 105.8 Depreciation and other non-cash items....................... 20.5 Increase/(decrease) in net fiduciary creditors.............. 1.4 Decrease in reinsurers' share of insurance technical provisions................................................ 47.4 Decrease/(increase) in other debtors and prepayments........ 20.6 Decrease in other creditors and accruals.................... (43.0) Decrease in insurance technical provisions.................. (66.8) Increase in other long-term creditors and provisions........ 12.0 ----- Net cash inflow from operating activities................... 97.9 -----
B) ANALYSIS OF THE MOVEMENT IN NET FUNDS
CASH AND OVERDRAFTS BORROWINGS -------------------------- ---------------------------- LIQUID FINANCE CASH OVERDRAFTS TOTAL RESOURCES LOANS LEASES NET FUNDS ----- ---------- ----- --------- ------ ------- --------- LM LM LM LM LM LM At 1 January 1997............... 206.6 (0.5) 206.1 412.4 (131.8) (12.2) 474.5 Cash flows...................... (17.7) 16.4 (1.3) (41.6) 26.0 0.6 (16.3) Acquisitions and disposals...... (10.9) (16.5) (27.4) 78.7 -- -- 51.3 Translation differences......... (7.5) 0.1 (7.4) 3.0 -- 1.3 (3.1) ----- ---------- ----- --------- ------ ------- --------- At 31 December 1997............. 170.5 (0.5) 170.0 452.5 (105.8) (10.3) 506.4 ----- ---------- ----- --------- ------ ------- ---------
C) RECONCILIATION OF CASH AND LIQUID RESOURCES TO AMOUNTS SHOWN IN THE BALANCE SHEET
1997 ------ LM CASH Cash and deposits........................................... 538.8 Less: Deposits classified as liquid resources............... (356.3) Less: Deposits classified as financial investment........... (12.0) ------ 170.5 ------ LIQUID RESOURCES Current asset investments................................... 96.2 Add: Deposits classified as liquid resources................ 356.3 ------ 452.5 ------
35. POST-BALANCE SHEET EVENT On 16 January 1998, the group sold its managing agencies based in The Netherlands for NLG 37 million (L11.2 million) in cash, of which 80 per cent was paid on completion and 20 per cent will be paid in July 1998. It is expected that the proceeds will be used largely to fund the reorganisation of the group's operations in The Netherlands and elsewhere during 1998. III-23 83 36. DIFFERENCES BETWEEN UK AND US GAAP The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the UK (UK GAAP), which differ in certain respects from those applicable in the US (US GAAP). An explanation of the differences which have a significant effect on the group is given below. GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS Under UK GAAP, goodwill and identifiable intangible assets arising from the purchase of businesses are written off on acquisition against retained earnings or other reserves. Under US GAAP, goodwill and identifiable intangible assets are capitalised and amortised over their estimated useful lives. For the purposes of the reconciliation statements set out on pages III-26 and III-27, such assets are amortised over periods of five to 40 years. RESTRUCTURING INITIATIVES Restructuring costs are incurred in relation to ongoing initiatives aimed at improving the group's efficiency and the integration of newly-acquired businesses. Such costs are principally personnel and property-related. Under US GAAP, the requirements for making provision for restructuring costs are more prescriptive than under UK GAAP. CONTINGENT COMMISSIONS Contingent commissions represent income receivable from insurers based on the volume and/or profitability of business placed with them by the group. Under UK GAAP, contingent commissions are accrued for in the period to which they relate, provided that they can be reasonably estimated. Under US GAAP, SFAS No. 5, Accounting for Contingencies, effectively precludes accrual for contingent commissions which are based on the profitability of business placed or are both volume and profit-based (so-called hybrid arrangements). Accordingly, the group records income from profit-based and hybrid arrangements on a cash-received basis under US GAAP. PENSIONS Under UK GAAP the cost of providing defined benefit pension arrangements is charged to the profit and loss account on a systematic basis over the service lives of the eligible employees in accordance with the advice of qualified actuaries. Under US GAAP, SFAS No. 87, Employers' Accounting for Pensions, requires that the cost is determined based on a comparison of the projected benefit obligation with the market value of the underlying scheme assets and other unrecognised gains and losses assessed on an actuarial basis. Principally as a result of this difference in methodology, the group's US GAAP pension cost can be significantly different from that determined under UK GAAP and tends to be more sensitive to changing economic conditions. POST-EMPLOYMENT BENEFITS Post-employment benefits are all types of benefits provided to former or inactive employees after employment but before their retirement. In respect of the group, such benefits primarily relate to compensation for long-term sickness. Under UK GAAP, the cost of providing these benefits is recognised on a cash basis. Under US GAAP, SFAS No. 112, Employers' Accounting for Post-employment Benefits, requires that the expected cost of such benefits is accrued over the estimated average service lives of eligible employees. REVALUATION OF FORWARD EXCHANGE CONTRACTS As an element of its treasury management strategy, the group enters into forward exchange contracts and other financial instruments in respect of future income denominated in foreign currencies, principally US dollars. Under UK GAAP, such instruments are regarded as hedges of future income and are not reflected in the group's financial statements. Under US GAAP, such instruments are regarded as anticipatory hedges III-24 84 and are revalued (or marked to market) at each accounting date. Any gain or loss arising on revaluation is taken to the profit and loss account. INVESTMENTS Under UK GAAP, fixed asset investments are stated at cost or amortised cost less any provision for permanent diminution in value. Current asset investments are stated at the lower of cost or amortised cost and net realisable value. Under US GAAP, the group complies with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, under which such investments are classified as available for sale and recorded at their fair values. Unrealised gains and losses are reflected in shareholders' equity (net of tax effects, if applicable). LEASES Certain property leases which are treated as operating leases under UK GAAP must be accounted for as capital leases under US GAAP. CONTINGENT CONSIDERATION Under UK GAAP, contingent consideration payable in respect of businesses acquired before 1 January 1995 is recognised when it becomes known. Contingent consideration payable in respect of businesses acquired on or after 1 January 1995 is estimated and provided for on completion. Under US GAAP, contingent consideration is recognised when it becomes known. Accordingly, the reconciliation statements reflect an adjustment to shareholders' equity in respect of contingent consideration payable on businesses acquired on or after 1 January 1995. DIVIDENDS PROPOSED Under UK GAAP, dividends are provided for in the accounting period to which they relate. Under US GAAP, dividends are not provided for until they are declared by the directors following approval by the shareholders. DEFERRED TAXATION Under UK GAAP, deferred taxation is accounted for using the liability method to the extent that it is considered probable that a liability or asset will crystallise in the foreseeable future. Under US GAAP, deferred taxation is provided on all temporary differences. Deferred tax assets are recognised to the extent that it is more likely than not that they will be realised. Where doubt exists as to whether a deferred tax asset will be realised, an appropriate valuation allowance is established. DISCONTINUED OPERATIONS For an operation to be categorised as discontinued under UK GAAP, its sale or termination must have a material effect on the nature and focus on the group's operations and represent a material reduction in its operating facilities. Under US GAAP, discontinued operations represent reportable segments which have been sold or terminated. Accordingly, the group's insurance underwriting subsidiaries in run off are regarded as discontinued operations under US GAAP but are not regarded as discontinued operations under UK GAAP. NET INCOME AND SHAREHOLDERS' EQUITY RECONCILIATION STATEMENTS The effect on the group's net income and shareholders' equity of applying the significant differences between UK GAAP and US GAAP referred to above are set out in the reconciliation statements set out below. III-25 85 NET INCOME
YEAR ENDED 31 DECEMBER ----------------------- 1997 1996 1995 ----- ----- ----- LM LM LM EARNINGS REPORTED UNDER UK GAAP............................. 70.4 63.7 68.9 Adjustments: Amortisation of goodwill and identifiable intangible assets.................................................... (13.3) (12.2) (12.1) Restructuring initiatives................................... 5.8 (5.4) (1.4) Contingent commissions...................................... (0.7) (1.1) (2.3) Pensions.................................................... 1.0 7.5 1.1 Post-employment benefits.................................... 0.2 (0.6) (0.3) Revaluation of forward exchange contracts................... (2.5) 3.5 (1.3) Leases...................................................... 0.8 0.2 0.2 Other items................................................. 0.5 (0.4) 4.6 Deferred taxation........................................... (10.1) 3.7 17.5 Deferred taxation on US GAAP adjustments.................... -- 1.1 (9.6) ----- ----- ----- NET INCOME IN ACCORDANCE WITH US GAAP....................... 52.1 60.0 65.3 ----- ----- ----- Analysis of net income in accordance with US GAAP: -- Continuing operations.................................. 50.9 60.1 65.0 -- Discontinued operations................................ 1.2 (0.1) 0.3 ----- ----- ----- 52.1 60.0 65.3 ----- ----- ----- EARNINGS PER SHARE Reported under UK GAAP...................................... 12.8p 11.6p 12.6p ----- ----- ----- In accordance with US GAAP: Basic....................................................... 9.5p 11.0p 12.0p Diluted..................................................... 9.4p 10.8p 11.8p ----- ----- -----
Earnings per share attributable to discontinued operations were not material during the period under review. III-26 86 SHAREHOLDERS' EQUITY
AT 31 DECEMBER -------------- 1997 -------------- LM SHAREHOLDERS' FUNDS REPORTED UNDER UK GAAP.................. 199.8 Adjustments: Goodwill and identifiable intangible assets................. 218.8 Restructuring initiatives................................... 5.0 Contingent commissions...................................... (10.5) Pensions.................................................... 8.5 Post-employment benefits.................................... (3.3) Revaluation of forward exchange contracts................... 0.9 Investments................................................. 1.2 Leases...................................................... (4.1) Contingent consideration.................................... 12.3 Dividends proposed.......................................... 22.2 Other items................................................. (0.3) Deferred taxation........................................... 24.9 Deferred taxation on US GAAP adjustments.................... (9.4) -------------- SHAREHOLDERS' EQUITY IN ACCORDANCE WITH US GAAP............. 466.0 -------------- Analysis of shareholders' equity in accordance with US GAAP: - -- Continuing operations.................................... 425.7 - -- Discontinued operations.................................. 40.3 -------------- 466.0 --------------
III-27 87 PART B UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 1998 Set out below is the text of the announcement dated 11 August 1998 of Sedgwick's unaudited interim results for the six months ended 30 June 1998. "SUMMARY SEDGWICK GROUP PLC UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 1998 SECOND QUARTER - - Brokerage and fees up 6 per cent* - - Profit before tax and exceptional items up 6 per cent* SIX MONTHS - - Profit before tax and exceptional items L60.1 million (1997 L66.3 million) - - Earnings per share before exceptional items of 8.0p (1997 8.4p) - - Interim dividend unchanged at 3.0p - - Exceptional charge of L80 million relating to pension transfer review, including cost of insurance protection *at constant exchange rates and against the comparative period in 1997 The Chairman, Sax Riley, said: "We saw an encouraging improvement in brokerage and fees and profit before tax and exceptional items in the second quarter of 1998, on a year-on-year basis." "We maintain our confidence in the group's underlying trading performance for 1998 as a whole. Our future growth will come from the reinforcement of our specialist services to clients worldwide, the optimum use of our international network and from acquisitions which provide shareholder value, and geographic and business synergies." UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 1998 Sedgwick Group plc, one of the world's leading consulting, insurance and reinsurance broking groups, today reported an increase of 6 per cent in brokerage and fees for the second quarter of 1998; profit before tax and exceptional items also increased by six per cent on a year-on-year basis. Profit before tax and exceptional items for the six months to 30 June 1998 was L60.1 million compared with L66.3 million for the corresponding period in 1997. Earnings per share before exceptional items were 8.0p (1997 8.4p). For the first six months, brokerage and fees increased by 4 per cent to L469.2 million, despite the difficult market conditions and the expected continued re-phasing of group revenue from the first quarter towards the second half of the year. Expenses increased by 6 per cent but, excluding acquisitions and disposals, by 2 per cent. The group anticipates a more favourable ratio between brokerage and fees and expenses growth for the year as a whole. All percentage movements are at constant exchange rates. Commenting on these results Chairman Sax Riley said: "We saw an encouraging improvement in brokerage and fees and profit before tax and exceptional items in the second quarter of the year. These results are in line with our expectations, which took account of the III-28 88 continuing decline of insurance rates in international markets and the likely adverse effect on profits of exchange rate movements which, for the six months, was L3.1 million. They also reflect our statement at the time of our 1997 annual results announcement, that we expected the final quarter to be stronger than in previous years." "In the past few months there have been further changes in the insurance industry landscape. We are convinced we have the right strategy to deliver results and continue to look at all our options to create additional shareholder value." "We maintain our confidence in the group's underlying trading performance for 1998. Our future growth will come from the reinforcement of our specialist services to clients worldwide, the optimum use of our international network and from acquisitions which provide shareholder value, and geographic and business synergies." INSURANCE AND REINSURANCE SERVICES In the first six months of 1998, the group achieved good profit growth in North America and Asia Pacific. Despite continued adverse conditions in the London market, our UK operations showed an improved performance, year-on-year, in the second quarter compared with the first quarter. The contribution from our continental European businesses was particularly influenced by the results profile of the Nikols Sedgwick joint venture, where profits come through in the fourth quarter. EMPLOYEE BENEFITS CONSULTING Sedgwick Noble Lowndes continued to report double digit profit growth and encouraging increases in brokerage and fees across all its geographic regions. PENSION TRANSFER REVIEW We have announced an exceptional charge of L80 million for the pension transfer review. In the UK, SNL's dedicated team continues to focus its efforts towards the resolution of its pension transfer position. In March 1998, the Financial Services Authority (FSA) and Personal Investment Authority (PIA) published their consultation document concerning Phase 2 of the pension transfers and opt-outs review. In April, following an initial review and based on assumptions contained in the consultation document, we announced that we expected a cost of not less than L35 million with the comment that there was a potential for the figure to be materially exceeded. We have approximately 24,000 pension transfer cases and very few pension opt-outs to review in Phase 2. We have now had the opportunity to assess our position in more detail and, based on our experience to date, this charge represents the best estimate of the expected cost of completing the review. This cost may, however, still be subject to change because of factors which are beyond Sedgwick's control and the fact that the "Final Statement of Policy and Final Guidance" is not expected to be published by the FSA until later this year. As a result, Sedgwick has entered into insurance arrangements which will protect the group against an increase of up to L37 million in the estimated total cost of completing the review. The cost of this cover is included in the L80 million exceptional charge recognised in the period, as is the cost of purchasing an option to extend this cover to give protection of a further L25 million. We continue to be committed to the speedy resolution of this issue and, by the end of July, had completed 84 per cent of Phase 1 cases. Further details will be found in note 5 to the interim statement. III-29 89 DIVIDEND The interim dividend remains unchanged at 3.0p per ordinary share and will be paid on 19 October 1998, as a foreign income dividend, to all shareholders on the register at the close of business on 21 August 1998. SEDGWICK GROUP PLC UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNT Six months ended 30 June 1998
BEFORE EXCEPTIONAL EXCEPTIONAL ITEMS TOTAL TOTAL ITEMS (NOTE 3) 1998 1997 1998 ----------- ----------- -------- ------ -------- LM LM LM LM US $M REVENUE Brokerage and Fees................. 469.2 -- 469.2 465.4 783.6 Interest and investment income..... 23.4 -- 23.4 19.6 39.0 ------ ----- -------- ------ -------- 492.6 -- 492.6 485.0 822.6 EXPENSES........................... (429.0) (86.4) (515.4) (416.4) (860.7) ------ ----- -------- ------ -------- Operating profit/(loss)............ 63.6 (86.4) (22.8) 68.6 (38.1) Share of profits of associated undertakings..................... 2.5 -- 2.5 2.4 4.2 Interest payable................... (6.0) -- (6.0) (4.7) (10.0) Profit on disposal of businesses... -- 9.4 9.4 -- 15.7 Cessation of insurance underwriting..................... -- -- -- 0.2 -- ------ ----- -------- ------ -------- PROFIT / (LOSS) BEFORE TAXATION.... 60.1 (77.0) (16.9) 66.5 (28.2) Taxation........................... (16.8) 25.7 8.9 (20.0) 14.9 ------ ----- -------- ------ -------- PROFIT / (LOSS) AFTER TAXATION..... 43.3 (51.3) (8.0) 46.5 (13.3) Minority interests................. 0.9 -- 0.9 (0.3) 1.5 ------ ----- -------- ------ -------- EARNINGS........................... 44.2 (51.3) (7.1) 46.2 (11.8) ------ ----- DIVIDEND........................... (16.7) (16.4) (27.9) -------- ------ -------- RETAINED EARNINGS.................. (23.8) 29.8 (39.7) -------- ------ -------- EARNINGS PER SHARE Before exceptional items........... 8.0p 8.4p 13.4c -------- ------ -------- After exceptional items............ (1.3)p 8.4p (2.2)c -------- ------ -------- DIVIDEND PER SHARE................. 3.0p 3.0p 5.0c -------- ------ -------- Average number of shares in issue (millions)....................... 554.0 548.3 --
These results should be read in conjunction with the notes. III-30 90 UNAUDITED CONSOLIDATED BALANCE SHEET As at 30 June 1998
RESTATED* 1998 1997 1998 -------- --------- -------- LM LM US $M ASSETS EMPLOYED FIXED ASSETS Tangible assets............................................. 207.7 211.2 346.9 Associated undertakings..................................... 16.5 15.6 27.5 Assets backing retirement contracts......................... 487.4 227.6 814.0 Investments................................................. 218.7 102.9 365.2 -------- -------- -------- 930.3 557.3 1,553.6 -------- -------- -------- CURRENT ASSETS Debtors..................................................... 3,057.8 3,610.0 5,106.5 Reinsurers' share of technical provisions................... 172.9 228.0 288.7 Investments................................................. 64.8 143.2 108.2 Cash and deposits........................................... 516.5 597.2 862.6 -------- -------- -------- 3,812.0 4,578.4 6,366.0 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR.............. (3,434.6) (4,033.3) (5,735.8) -------- -------- -------- NET CURRENT ASSETS.......................................... 377.4 545.1 630.2 -------- -------- -------- TOTAL ASSETS LESS CURRENT LIABILITIES....................... 1,307.7 1,102.4 2,183.8 -------- -------- -------- CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR Borrowings Loans and other borrowings.................................. (78.0) (59.7) (130.3) 7.25% Convertible Bonds 2008................................ (41.5) (41.5) (69.3) -------- -------- -------- (119.5) (101.2) (199.6) Other liabilities........................................... (24.4) (45.7) (40.7) -------- -------- -------- (143.9) (146.9) (240.3) PROVISIONS FOR LIABILITIES AND CHARGES Liabilities linked to retirement contracts.................. (487.0) (227.6) (813.3) Insurance technical provisions.............................. (289.9) (374.8) (484.1) Other provisions............................................ (213.7) (133.4) (356.9) -------- -------- -------- 173.2 219.7 289.2 -------- -------- -------- FINANCED BY SHAREHOLDER'S FUNDS......................................... 173.8 217.4 290.2 MINORITY INTERESTS.......................................... (0.6) 2.3 (1.0) -------- -------- -------- NET CAPITAL EMPLOYED........................................ 173.2 219.7 289.2 -------- -------- --------
- --------------- * For the reasons set out in the 1997 annual report, comparative figures have been restated to show separately the assets and liabilities relating to retirement-related investment business. The balance sheet should be read in conjunction with the notes. III-31 91 NOTES 1. BASIS OF PREPARATION The results for the six months ended 30 June 1998 have been prepared on the basis of the accounting policies set out in the 1997 annual report. The results for the six months ended 30 June 1998 and the balance sheet at that date shown in US dollars have been translated at the period end rate of L1 = US$1.67. No adjustments have been made to restate the results or the balance sheet to comply with generally accepted accounting principles in the United States of America (US GAAP). Additional information for US investors follows the notes. 2. SEGMENTAL INFORMATION
SIX MONTHS ENDED 30 JUNE ----------------------------- CONSTANT REPORTED EXCHANGE EXCHANGE RATES RATES 1998 1997 1997 ----- -------- -------- LM LM LM REVENUE GEOGRAPHIC ANALYSIS BY BUSINESS LOCATION United Kingdom.............................................. 169.8 173.6 175.0 Continental Europe.......................................... 74.0 63.3 69.0 North America............................................... 202.9 196.5 198.4 Asia Pacific................................................ 32.2 27.5 33.1 Rest of the world........................................... 13.7 8.6 9.5 ----- -------- -------- 492.6 469.5 485.0 ----- -------- -------- ANALYSIS BY BUSINESS Insurance and reinsurance services.......................... 375.8 359.5 371.2 Employee benefits consulting................................ 116.8 110.0 113.8 ----- -------- -------- 492.6 469.5 485.0 ----- -------- -------- PROFIT / (LOSS) BEFORE TAXATION GEOGRAPHIC ANALYSIS BY BUSINESS LOCATION United Kingdom.............................................. 36.3 38.8 39.9 Continental Europe.......................................... 8.5 11.5 12.7 North America............................................... 19.4 15.2 15.5 Asia Pacific................................................ 3.7 0.5 0.9 Rest of the world........................................... (1.8) 1.8 2.0 ----- -------- -------- 66.1 67.8 71.0 Less: interest payable...................................... (6.0) (4.6) (4.7) ----- -------- -------- 60.1 63.2 66.3 Exceptional items (note 3).................................. (77.0) 0.2 0.2 ----- -------- -------- (16.9) 63.4 66.5 ----- -------- -------- ANALYSIS BY BUSINESS Insurance and reinsurance services.......................... 53.3 56.9 59.8 Employee benefits consulting................................ 12.8 10.9 11.2 ----- -------- -------- 66.1 67.8 71.0 Less: interest payable...................................... (6.0) (4.6) (4.7) ----- -------- -------- 60.1 63.2 66.3 Exceptional items (note 3).................................. (77.0) 0.2 0.2 ----- -------- -------- (16.9) 63.4 66.5 ----- -------- --------
III-32 92 3. EXCEPTIONAL ITEMS (A) OPERATING EXCEPTIONAL ITEMS
EXPENSES TAX EARNINGS -------- ----- -------- LM LM LM Pension transfer review (note 5)............................ 80.0 (24.0) (56.0) Restructuring costs......................................... 6.4 (1.7) (4.7) -------- ----- -------- 86.4 (25.7) (60.7) -------- ----- --------
Pension transfer review costs are stated net of L45.3 million which is assumed to be recoverable from third parties. Restructuring costs relate to certain of the group's European operations. In 1997, there were no operating exceptional items. (B) PROFIT ON DISPOSAL OF BUSINESSES In January 1998, the group sold its managing agencies based in The Netherlands for NLG 37 million (L11.0 million) realising a profit on disposal of L9.4 million. (C) CESSATION OF INSURANCE UNDERWRITING Cessation of insurance underwriting represents the net amount recognised in respect of the group's insurance underwriting subsidiaries which are in run off. (D) SEGMENTAL ANALYSIS OF EXCEPTIONAL ITEMS
SIX MONTHS ENDED 30 JUNE ------------------------ 1998 1997 ------- ------- LM LM PROFIT / (LOSS) BEFORE TAXATION GEOGRAPHIC ANALYSIS BY BUSINESS LOCATION United Kingdom.............................................. (80.9) (1.0) Continental Europe.......................................... 6.8 -- North America............................................... -- 1.2 Rest of the World........................................... (2.9) -- ----- ----- (77.0) 0.2 ----- ----- ANALYSIS BY BUSINESS Insurance and reinsurance services.......................... 3.0 -- Employee benefits consulting................................ (80.0) -- Insurance underwriting (in run off)......................... -- 0.2 ----- ----- (77.0) 0.2 ----- -----
4. EARNINGS PER SHARE
SIX MONTHS ENDED 30 JUNE -------------------------------------- 1998 1998 1997 1997 ---- --------- ---- --------- LM PER SHARE LM PER SHARE Earnings............................................... (7.1) (1.3)p 46.2 8.4p Add / (less): Exceptional items.................................... 51.3 9.3p (0.2) -- ---- --------- ---- --------- Earnings before exceptional items...................... 44.2 8.0p 46.0 8.4p ---- --------- ---- ---------
The weighted average number of shares in issue in period was 554.0m (1997 548.3m). III-33 93 5. PENSION TRANSFER REVIEW In October 1994, the Securities and Investments Board (SIB), now known as the Financial Services Authority, issued its report, "Pension transfers and opt-outs, review of past business". Its objective was to secure redress for individuals who between 29 April 1988 and 30 June 1994 were wrongly advised to transfer benefits from, or opt-out of, an occupational pension plan and enter into a personal pension plan, and thereby suffered actual or potential loss. Based on criteria and procedures set out in the SIB's report, Sedgwick is required to review pension transfer and opt-out business conducted during the relevant period and to determine whether redress should be made to clients. At that time, the review was required to be conducted only in respect of individuals considered by the SIB to be priority cases. Sedgwick has satisfied the interim targets set by the regulator in respect of this review and expects the review to be completed by 31 December 1998. On 12 March 1998, the Financial Services Authority (FSA) and the Personal Investment Authority (PIA) issued a consultation document on the extension of the review to include non-priority cases. Based on Sedgwick's experience to date and with reference to the methodology contained in the consultation document, the directors have recognised an exceptional charge in the period of L80m, based on their best estimate of the cost to Sedgwick of completing the review (assuming recoveries from third parties). It should be noted that the estimated cost of completing the review may be subject to change due to factors which are beyond Sedgwick's control, such as future movements in long-term interest rates, equity markets and the contents of the "Final Statement of Policy and Final Guidance" to be published by the FSA later in 1998. In view of the above uncertainties, the group has entered into insurance arrangements which will protect it against an increase of up to L37m in the estimated total cost of completing the review; the cost of this cover is included in the L80m exceptional charge recognised in the period. In addition, the group has an option to extend this cover to give protection of a further L25m. The cost of purchasing this option is also included in the exceptional charge. 6. MOVEMENTS IN SHAREHOLDERS' FUNDS
1998 1997 ----- ----- LM LM At 1 January................................................ 199.8 191.4 Shares issued............................................... 0.4 0.4 Goodwill on acquisitions.................................... -- (2.9) Retained earnings........................................... (23.8) 29.8 Translation differences..................................... (2.6) (1.3) ----- ----- At 30 June.................................................. 173.8 217.4 ----- -----
III-34 94 7. FOREIGN CURRENCIES The principal exchange rates used to translate overseas group companies' financial information were:
AVERAGE RATE PERIOD END RATE ---------------------- ---------------------- JUNE 1998 JUNE 1997 JUNE 1998 JUNE 1997 --------- --------- --------- --------- Australian dollar............................... 2.53 2.13 2.69 2.22 Belgian franc................................... 61.74 56.71 62.13 59.75 Canadian dollar................................. 2.38 2.26 2.45 2.30 French franc.................................... 10.03 9.27 10.10 9.77 German mark..................................... 2.99 2.75 3.01 2.90 Italian lira.................................... 2,950.00 2,720.00 2,968.00 2,830.00 Netherlands guilder............................. 3.37 3.10 3.40 3.26 South African rand.............................. 8.48 7.42 9.86 7.55 US dollar....................................... 1.65 1.64 1.67 1.66
ADDITIONAL INFORMATION FOR US INVESTORS The results for the six months ended 30 June 1998 have been prepared in accordance with UK GAAP. Estimates of the effect on the group's net income and shareholders' equity of applying the significant differences between UK GAAP and US GAAP are set out below. NET INCOME
SIX MONTHS ENDED 30 JUNE ---------------- 1998 1997 ------- ----- LM LM EARNINGS REPORTED UNDER UK GAAP............................. (7.1) 46.2 Adjustments: Amortisation of goodwill and identifiable intangible assets.................................................... (6.6) (6.0) Other items................................................. 2.0 6.5 Deferred taxation........................................... (1.4) (0.6) Deferred taxation on US GAAP adjustments.................... 0.1 (0.9) ------- ----- NET INCOME / (LOSS) IN ACCORDANCE WITH US GAAP.............. (13.0) 45.2 ------- ----- EARNINGS PER ADS* Reported under UK GAAP...................................... (6.4)p 42.0p ------- ----- In accordance with US GAAP Basic....................................................... (11.7)p 41.4p Diluted..................................................... (10.3)p 40.3p ------- -----
Comparative earnings per ADS figures under US GAAP have been restated in accordance with FAS 128, Earnings per share. - --------------- *Each American Depositary Security (ADS) represents five ordinary shares. III-35 95 SHAREHOLDERS EQUITY
AT 30 JUNE -------------- 1998 1997 ----- ----- LM LM SHAREHOLDERS FUNDS REPORTED UNDER UK GAAP................... 173.8 217.4 Adjustments: Goodwill and identifiable intangible assets................. 212.2 201.7 Dividend proposed........................................... 16.7 16.4 Other items................................................. 8.4 9.9 Deferred taxation........................................... 23.1 34.4 Deferred taxation on US GAAP adjustments.................... (8.8) (10.7) ----- ----- SHAREHOLDERS' EQUITY IN ACCORDANCE WITH US GAAP............. 425.4 469.1 ----- -----
DIVIDEND Holders of the company's ADRs will be paid the interim dividend of 15p per ADS on 29 October 1998 after it has been converted into US dollars by The Bank of New York at the exchange rate ruling on 19 October 1998. Dividends are stated in this document net of the associated UK tax credit (currently 20 per cent of the gross dividend). FORWARD-LOOKING STATEMENTS Forward-looking statements in this document are made pursuant to the safe-harbor provisions of the US Private Securities Litigation Reform Act of 1995. As a result of, among other things, interest and exchange rate changes, regulatory changes, and competition, actual results may differ materially from those anticipated by, or which may be assumed from, statements made in this document." III-36 96 APPENDIX IV -- FINANCIAL INFORMATION ON MARSH & MCLENNAN PART A AUDITED FINANCIAL INFORMATION INTRODUCTION The financial information contained in this Part A of Appendix IV is extracted without material adjustment from the audited consolidated accounts of Marsh & McLennan for the three years ended 31 December 1997. MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE YEARS ENDED DECEMBER 31, 1997 (In millions, except per share figures)
1997 1996 1995 -------- -------- -------- Revenue.................................................... $6,008.6 $4,404.0 $3,937.3 Expense.................................................... 5,263.8 3,688.7 3,242.4 -------- -------- -------- Operating income........................................... 744.8 715.3 694.9 Interest income............................................ 24.0 14.3 17.7 Interest expense........................................... (106.4) (61.6) (62.8) -------- -------- -------- Income before income taxes................................. 662.4 668.0 649.8 Income taxes............................................... 263.0 208.7 246.9 -------- -------- -------- Net income................................................. $ 399.4 $ 459.3 $ 402.9 ======== ======== ======== Basic net income per share................................. $ 2.45 $ 3.17 $ 2.76 ======== ======== ======== Diluted net income per share............................... $ 2.39 $ 3.12 $ 2.73 ======== ======== ======== Average number of shares outstanding--Basic................ 163.0 144.8 145.8 ======== ======== ======== Average number of shares outstanding--Diluted.............. 167.2 147.4 147.4 ======== ======== ========
The accompanying notes are an integral part of these consolidated statements. IV-1 97 MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1997 AND 1996 (In millions of dollars)
1997 1996 -------- -------- ASSETS Current assets: Cash and cash equivalents (including interest-bearing amounts of $378.0 in 1997 and $261.1 in 1996).......... $ 424.3 $ 299.6 -------- -------- Receivables-- Commissions and fees................................... 1,296.3 937.6 Advanced premiums and claims........................... 94.8 88.5 Other.................................................. 159.9 103.0 -------- -------- 1,551.0 1,129.1 Less--allowance for doubtful accounts.................. (52.8) (43.3) -------- -------- Net receivables........................................ 1,498.2 1,085.8 -------- -------- Other current assets...................................... 646.4 363.2 -------- -------- Total current assets.............................. 2,568.9 1,748.6 Long-term securities........................................ 720.2 573.3 Fixed assets, net........................................... 957.3 770.1 Intangible assets........................................... 2,417.1 545.3 Other assets................................................ 1,250.7 907.9 -------- -------- $7,914.2 $4,545.2 ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt........................................... $ 236.7 $ 392.4 Accrued compensation and employee benefits................ 563.8 391.7 Accounts payable and accrued liabilities.................. 1,275.9 447.5 Accrued income taxes...................................... 217.9 259.6 Dividends payable......................................... 85.1 65.1 -------- -------- Total current liabilities......................... 2,379.4 1,556.3 -------- -------- Fiduciary liabilities....................................... 2,281.6 1,685.9 Less--cash and investments held in a fiduciary capacity..... (2,281.6) (1,685.9) -------- -------- -- -- -------- -------- Long-term debt.............................................. 1,239.8 458.2 -------- -------- Other liabilities........................................... 1,096.2 642.1 -------- -------- Commitments and contingencies............................... -- -- -------- -------- Stockholders' equity: Preferred stock, $1 par value, authorized 6,000,000 shares, none issued.................................... -- -- Common stock, $1 par value, authorized 400,000,000 shares, issued 172,391,177 shares in 1997 and 153,589,062 shares in 1996......................................... 172.4 76.8 Additional paid-in capital................................ 993.9 148.1 Retained earnings......................................... 1,975.4 1,901.6 Unrealized securities holding gains, net of income taxes.................................................. 308.8 221.2 Cumulative translation adjustments........................ (141.8) (75.7) -------- -------- 3,308.7 2,272.0 Less--treasury shares, at cost, 2,440,837 shares in 1997 and 8,951,142 shares in 1996........................... (109.9) (383.4) -------- -------- Total stockholders' equity........................ 3,198.8 1,888.6 -------- -------- $7,914.2 $4,545.2 ======== ========
The accompanying notes are an integral part of these consolidated statements. IV-2 98 MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE YEARS ENDED DECEMBER 31, 1997 (In millions of dollars)
1997 1996 1995 --------- ------ ------ Operating cash flows: Net income................................................ $ 399.4 $459.3 $402.9 Gain on sale of businesses............................. (13.2) (33.2) -- Special charges........................................ 296.8 92.6 -- Depreciation and amortization.......................... 199.1 139.9 135.1 Deferred income taxes.................................. (157.1) (20.8) 34.7 Other liabilities...................................... 22.1 19.0 (2.4) Prepaid dealer commissions............................. (139.7) (338.7) (104.3) Other, net............................................. (1.1) (11.9) (12.4) Net changes in operating working capital other than cash and cash equivalents................................... Receivables............................................ (154.8) (95.0) (177.0) Other current assets................................... (2.6) (61.3) 14.0 Accrued compensation and employee benefits............. 160.0 137.2 35.6 Accounts payable and accrued liabilities............... (111.2) (20.6) 13.0 Accrued income taxes................................... (79.2) 28.6 (9.6) Effect of exchange rate changes........................ (3.1) 21.4 (11.5) --------- ------ ------ Net cash generated from operations..................... 415.4 316.5 318.1 --------- ------ ------ Financing cash flows: Net (decrease) increase in commercial paper............... (161.6) (164.7) 57.4 Other borrowings.......................................... 2,358.0 254.8 125.8 Other repayments.......................................... (1,701.7) (91.4) (8.7) Purchase of treasury shares............................... -- (230.1) (137.7) Issuance of common stock.................................. 209.8 143.1 82.6 Dividends paid............................................ (305.6) (239.2) (217.0) Other, net................................................ -- 2.5 4.8 --------- ------ ------ Net cash provided by (used for) financing activities... 398.9 (325.0) (92.8) --------- ------ ------ Investing cash flows: Additions to fixed assets................................. (202.1) (157.3) (136.9) Net cash proceeds from sale of business................... 54.4 241.8 -- Acquisitions.............................................. (472.9) (7.1) (6.8) Other, net................................................ (54.7) (91.2) (54.4) --------- ------ ------ Net cash used for investing activities................. (675.3) (13.8) (198.1) --------- ------ ------ Effect of exchange rate changes on cash and cash equivalents............................................... (14.3) (6.2) 6.0 --------- ------ ------ Increase (decrease) in cash and cash equivalents............ 124.7 (28.5) 33.2 Cash and cash equivalents at beginning of year.............. 299.6 328.1 294.9 --------- ------ ------ Cash and cash equivalents at end of year.................... $ 424.3 $299.6 $328.1 ========= ====== ======
The accompanying notes are an integral part of these consolidated statements. IV-3 99 MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE THREE YEARS ENDED DECEMBER 31, 1997 (In millions of dollars, except per share figures)
1997 1996 1995 -------- -------- -------- COMMON STOCK Balance, beginning of year................................. $ 76.8 $ 76.8 $ 76.8 Acquisitions............................................... 9.4 -- -- Common stock split......................................... 86.2 -- -- -------- -------- -------- Balance, end of year....................................... $ 172.4 $ 76.8 $ 76.8 -------- -------- -------- ADDITIONAL PAID-IN CAPITAL Balance, beginning of year................................. $ 148.1 $ 155.5 $ 166.1 Acquisitions............................................... 907.6 -- -- Common stock split......................................... (86.2) -- -- Exercise of stock options and related tax benefits......... 15.4 (10.2) (7.5) Issuance of shares under compensation plans and related tax benefits................................................. 10.3 8.0 3.4 Issuance of shares under employee stock purchase plans and related tax benefits..................................... (1.3) (5.2) (6.5) -------- -------- -------- Balance, end of year....................................... $ 993.9 $ 148.1 $ 155.5 -------- -------- -------- RETAINED EARNINGS Balance, beginning of year................................. $1,901.6 $1,688.4 $1,507.7 Net income................................................. 399.4 459.3 402.9 Cash dividends declared--(per share amounts: $1.95 in 1997, $1.70 in 1996 and $1.53 in 1995).......... (325.6) (246.1) (222.2) -------- -------- -------- Balance, end of year....................................... $1,975.4 $1,901.6 $1,688.4 -------- -------- -------- UNREALISED SECURITIES HOLDING GAINS, NET OF INCOME TAXES Balance, beginning of year................................. $ 221.2 $ 149.2 $ 91.6 Realised gains, net of income taxes........................ (23.0) (10.9) (11.4) Unrealised gains, net of income taxes...................... 110.6 82.9 69.0 -------- -------- -------- Balance, end of year....................................... $ 308.8 $ 221.2 $ 149.2 -------- -------- -------- CUMULATIVE TRANSLATION ADJUSTMENTS Balance, beginning of year................................. $ (75.7) $ (86.7) $ (105.4) Translation adjustments.................................... (66.1) 11.0 18.7 -------- -------- -------- Balance, end of year....................................... $ (141.8) $ (75.7) $ (86.7) -------- -------- -------- TREASURY SHARES Balance, beginning of year................................. $ (383.4) $ (317.7) $ (276.2) Acquisitions............................................... 46.9 -- -- Purchase of treasury shares................................ -- (230.1) (137.7) Exercise of stock options.................................. 147.2 95.2 27.4 Issuance of shares under compensation plans................ 15.7 9.9 14.0 Issuance of shares under employee stock purchase plans..... 63.7 59.3 54.8 -------- -------- -------- Balance, end of year....................................... $ (109.9) $ (383.4) $ (317.7) -------- -------- -------- TOTAL STOCKHOLDERS' EQUITY................................. $3,198.8 $1,888.6 $1,665.5 ======== ======== ========
The accompanying notes are an integral part of these consolidated statements. IV-4 100 MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation: The accompanying consolidated financial statements include the accounts of Marsh & McLennan Companies, Inc. and all its subsidiaries (the "Company"). Various subsidiaries and affiliates have transactions with each other in the ordinary course of business. All significant intercompany accounts and transactions have been eliminated. Fiduciary Assets and Liabilities: In its capacity as an insurance broker or agent, the Company collects premiums from insureds and, after deducting its commissions, remits the premiums to the respective insurance underwriters; the Company also collects claims or refunds from underwriters on behalf of insureds. Unremitted insurance premiums and claims are held in a fiduciary capacity. Interest income on these fiduciary funds, included in revenue, amounted to $110.8 million in 1997, $93.9 million in 1996 and $102.7 million in 1995. Net uncollected premiums and claims and the related payables, amounting to $5.2 billion at December 31, 1997 and $3.2 billion at December 31, 1996, are not included in the accompanying Consolidated Balance Sheets. In certain instances, the Company advances premiums, refunds or claims to insurance underwriters or insureds prior to collection. These advances are made from corporate funds and are reflected in the accompanying Consolidated Balance Sheets as receivables. Revenue: Revenue includes insurance commissions, fees for services rendered, compensation for services provided in connection with the formation or capitalization of various insurers and reinsurers and related firms, including gains from sales of interests in such entities, commissions on the sale of mutual fund shares and interest income on fiduciary funds. Insurance commissions generally are recorded as of the effective date of the applicable policies or, in certain cases (primarily in the Company's reinsurance and London market operations), as of the effective date or billing date, whichever is later. Fees for services rendered are recorded as earned. Sales of mutual fund shares are recorded on a settlement date basis and commissions thereon are recorded on a trade date basis, in accordance with industry practice. Cash and Cash Equivalents: Cash and cash equivalents primarily consist of certificates of deposit and time deposits, generally with original maturities of three months or less. The Company maintains a policy providing for the diversification of cash and cash equivalents to limit the concentration of credit risk exposure. Fixed Assets, Depreciation and Amortization: Fixed assets are stated at cost less accumulated depreciation and amortization. Expenditures for improvements are capitalized. Upon sale or retirement, the cost and related accumulated depreciation and amortization are removed from the accounts and the resulting gain or loss, if any, is reflected in income. Expenditures for maintenance and repairs are charged to operations as incurred. Depreciation of buildings, building improvements, furniture and equipment is provided on a straight-line basis over the estimated useful lives of these assets. Leasehold improvements are amortized on a straight-line basis over the periods covered by the applicable leases or the estimated useful life of the improvement, whichever is less. IV-5 101 The components of fixed assets at December 31, 1997 and 1996 are as follows: DECEMBER 31, 1997 AND 1996 (In millions of dollars)
1997 1996 -------- -------- Land and buildings.......................................... $ 471.1 $ 404.9 Furniture and equipment..................................... 878.4 737.4 Leasehold and building improvements......................... 405.4 323.5 -------- -------- 1,754.9 1,465.8 Less--accumulated depreciation and amortization............. (797.6) (695.7) -------- -------- $ 957.3 $ 770.1 ======== ========
Intangible Assets: Acquisition costs in excess of the fair value of net assets acquired are amortised on a straight-line basis over periods up to 40 years. Other intangible assets are amortised on a straight-line basis over their estimated lives. The Company periodically assesses the recoverability of intangible assets. Prepaid Dealer Commissions: Essentially all of the mutual funds marketed by the Company's investment management segment are made available with a contingent deferred sales charge in lieu of a front end load. The related commissions, initially paid by the Company to broker/dealers for distributing the funds, are recovered through charges and fees received over a number of years. The current portion of these prepaid dealer commissions, amounting to $283.0 million and $222.8 million at December 31, 1997 and 1996, respectively, is included in other current assets in the Consolidated Balance Sheets. The long-term portion amounting to $756.1 million and $676.6 million at December 31, 1997 and 1996, respectively, is included in other assets in the Consolidated Balance Sheets. Capitalized Software Costs: The Company capitalizes certain computer software costs, principally related to purchased software packages, which are amortised on a straight-line basis not to exceed five years. Unamortised computer software costs amounting to $52.7 million and $28.8 million at December 31, 1997 and 1996, respectively, are included in other assets in the Consolidated Balance Sheets. Income Taxes: Income taxes provided reflect the current and deferred tax consequences of events that have been recognised in the Company's financial statements or tax returns. U.S. Federal income taxes are provided on unremitted foreign earnings except those that are considered permanently reinvested, which at December 31, 1997 amounted to approximately $390 million. However, if these earnings were not considered permanently reinvested, the incremental tax liability which otherwise might be due upon distribution, net of foreign tax credits, would be approximately $40 million. Risk Management Instruments: Net amounts received or paid under risk management instruments are included in the Consolidated Statements of Income as incurred. Per Share Data: In 1997, the Company adopted Statement of Financial Accounting Standards No. 128, "Earnings Per Share" which requires the Company to include basic and diluted per share figures on the face of the income statement. Basic net income per share is calculated by dividing net income by the average number of shares of the Company's common stock outstanding while diluted net income per share is calculated by adjusting the average common shares outstanding for the dilutive effect of potential common shares. IV-6 102 The following reconciles basic weighted average common shares outstanding to diluted weighted average common shares outstanding for the three years ended December 31, 1997, 1996 and 1995:
1997 1996 1995 ----- ----- ----- Basic weighted average common shares outstanding............ 163.0 144.8 145.8 Stock options............................................... 4.2 2.6 1.6 ----- ----- ----- Diluted weighted average common shares outstanding.......... 167.2 147.4 147.4 ===== ===== =====
Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Stock-Based Compensation: Effective January 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." The Company has elected to continue to account for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, pro forma net income and earnings per share information has been presented in Note 6 as required under SFAS No. 123. New Accounting Pronouncements: In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" and Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information," both of which are effective for fiscal years beginning after December 15, 1997. In February 1998, the FASB issued Statement of Financial Accounting Standards No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits," which is effective for fiscal years beginning after December 15, 1997. The Company will adopt these disclosure standards in 1998. Reclassifications: In accordance with industry practice, the investment management segment has restated both revenue and expense for prior periods by identical amounts to reclassify certain commission expenses. 2. SUPPLEMENTAL DISCLOSURE TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS The following schedule provides additional information concerning acquisitions: FOR THE THREE YEARS ENDED DECEMBER 31, 1997 (In millions of dollars)
1997 1996 1995 -------- ----- ----- Purchase acquisitions: Assets acquired, excluding cash........................... $2,831.8 $10.4 $21.9 Liabilities assumed....................................... (1,386.1) (3.3) (8.6) Issuance of debt and other obligations.................... -- -- (6.5) Shares issued............................................. (972.4) -- -- -------- ----- ----- 473.3 7.1 6.8 Cash acquired in pooling of interests acquisition........... (.4) -- -- -------- ----- ----- Net cash outflow for acquisitions........................... $ 472.9 $ 7.1 $ 6.8 ======== ===== =====
Interest paid during 1997, 1996 and 1995 was $91.6 million, $60.2 million and $66.0 million, respectively. Income taxes paid during 1997, 1996 and 1995 were $471.1 million, $200.0 million and $231.0 million, respectively. IV-7 103 3. ACQUISITIONS AND DISPOSITIONS Acquisitions: On March 27, 1997, the Company consummated a business combination with Johnson & Higgins ("J&H"), a privately-held risk and insurance services and employee benefit consulting firm. The Company agreed to pay total consideration of approximately $1.8 billion consisting of $600 million in cash and approximately 19.6 million shares (adjusted to reflect the stock split) of the Company's common stock. Approximately $1.3 billion was paid at closing or shortly thereafter and approximately $500 million will be paid in annual installments over the four years following the closing. The business combination is being accounted for using the purchase method of accounting. Accordingly, goodwill of approximately $1.7 billion which results from the preliminary purchase price allocation will be amortized over 40 years. An agreed number of shares issued in connection with this transaction carry restrictions and, consequently, cannot be sold in the first and second years following the closing. In addition, approximately 1.6 million shares of common stock (adjusted to reflect the stock split) were placed in escrow for a period of up to two years in order to secure indemnification obligations with respect to representations and warranties. The following unaudited pro forma summary presents the consolidated results of operations of the Company as if the J&H business combination had occurred on January 1, 1997 and 1996, respectively. The pro forma results are shown for illustrative purposes only and do not purport to be indicative of the results which would have been reported if the business combination had occurred on the dates indicated or which may occur in the future. The 1997 pro forma information reflected below excludes the impact of the $296.8 million special charge which principally relates to the combination with J&H. YEAR ENDED DECEMBER 31, (In millions of dollars, except per share figures)
1997 1996 -------- -------- Revenue..................................................... $6,313.6 $5,551.7 Net Income.................................................. 600.6 482.2 Basic net income per share.................................. 3.58 2.94 Diluted net income per share................................ 3.49 2.90 ======== ========
During 1997, the Company also acquired or increased its interest in several other insurance and reinsurance broking and consulting businesses for a total cost of $284.9 million in transactions accounted for as purchases. The cost of these acquisitions exceeded the fair value of net assets acquired by $317.1 million. In addition, the Company issued approximately 944,000 shares of common stock (adjusted to reflect the stock split) in connection with the acquisition of an insurance program management business. During 1996, the Company acquired an insurance broking business and various other insurance and reinsurance broking assets for a total cost of $12.7 million in transactions accounted for as purchases. The cost of these acquisitions exceeded the fair value of net assets acquired by $8.2 million. During 1995, the Company acquired a portion of an insurance broking business and several consulting businesses for a total cost of $15.2 million consisting of cash and future obligations in transactions accounted for as purchases. The cost of these acquisitions exceeded the fair value of net assets acquired by $16.0 million. Dispositions: During 1997, the Company sold an insurance program management business and a consulting operation for $54.4 million. Pretax gains of $13.2 million were recorded in the Consolidated Statements of Income. During 1996, the Company sold The Frizzell Group Limited ("Frizzell") for approximately $290 million. A pretax gain of $33.2 million was recorded in the Consolidated Statements of Income. IV-8 104 4. INCOME TAXES Income before income taxes shown below is based on the geographic location to which such income is attributable. Although income taxes related to such income may be assessed in more than one jurisdiction, the income tax provision corresponds to the geographic location of the income. FOR THE THREE YEARS ENDED DECEMBER 31, 1997 (In millions of dollars)
1997 1996 1995 ------ ------ ------ Income before income taxes: U.S....................................................... $463.8 $436.6 $381.2 Other..................................................... 198.6 231.4 268.6 ------ ------ ------ $662.4 $668.0 $649.8 ====== ====== ====== Income taxes: Current-- U.S. Federal........................................... $217.8 $ 93.8 $ 88.9 Other national governments............................. 140.7 96.4 82.0 U.S. state and local................................... 61.6 39.3 41.3 ------ ------ ------ 420.1 229.5 212.2 ------ ------ ------ Deferred-- U.S. Federal........................................... (71.6) 48.0 24.7 Other national governments............................. (72.1) (39.4) 9.2 U.S. state and local................................... (13.4) (29.4) .8 ------ ------ ------ (157.1) (20.8) 34.7 ------ ------ ------ Total income taxes.......................................... $263.0 $208.7 $246.9 ====== ====== ======
The significant components of deferred income tax assets and liabilities and their balance sheet classifications are as follows: DECEMBER 31, 1997 AND 1996 (In millions of dollars)
1997 1996 ------ ------ Deferred tax assets: Accrued expenses not currently deductible................. $632.3 $248.1 Accrued retirement benefits............................... 116.7 72.8 Differences related to non-U.S. operations................ 120.6 69.1 Depreciation and amortization............................. 11.4 -- Other..................................................... 15.0 8.5 ------ ------ 896.0 398.5 Valuation allowance....................................... -- (27.4) ------ ------ $896.0 $371.1 ====== ======
IV-9 105
1997 1996 ------ ------ Deferred tax liabilities: Depreciation and amortization............................. $ -- $ 25.3 Prepaid dealer commissions................................ 375.9 328.8 Safe harbor leasing....................................... 14.2 17.6 Unbilled revenue.......................................... 18.3 22.9 Unrealised securities holding gains....................... 166.7 119.9 Differences related to non-U.S. operations................ 35.9 49.0 Other..................................................... 18.3 28.2 ------ ------ $629.3 $591.7 ====== ====== Balance sheet classifications: Other current assets...................................... $168.1 $ 4.3 Accrued income taxes...................................... 81.8 69.8 Other assets (liabilities)................................ 180.4 (155.1) ====== ======
In 1997, the valuation allowance related to certain foreign deferred income tax assets was written-off against the underlying tax assets since it has been determined that the Company will not realise any future benefit from the recorded amounts. A reconciliation from the U.S. Federal statutory income tax rate to the Company's effective income tax rate is as follows: FOR THE THREE YEARS ENDED DECEMBER 31, 1997
1997 1996 1995 ----- ----- ----- U.S. Federal statutory rate................................. 35.00% 35.00% 35.00% U.S. state and local income taxes--net of U.S. Federal income tax benefit........................................ 4.70 3.90 4.20 Differences related to non-U.S operations................... (.20) (1.25) (.90) Tax adjustment.............................................. -- (6.00) -- Other....................................................... .20 (.40) (.30) ----- ----- ----- Effective tax rate.......................................... 39.70% 31.25% 38.00% ===== ===== =====
During 1996, the Company recorded a tax adjustment that reduced the income tax provision by $40 million. The tax adjustment primarily relates to the permanent deployment of funds outside of the US in a tax efficient manner and favorable state and local tax developments in the U.S. The Company has received a Notice of Proposed Adjustment from a field office of the Internal Revenue Service ("IRS") challenging its tax treatment related to 12b-1 fees paid by the Putnam Funds. The Company believes its tax treatment of these fees is consistent with current industry practice and applicable requirements of the Internal Revenue Code and previously issued IRS technical advice. Taxing authorities periodically challenge positions taken by the Company on its tax returns. On the basis of present information and advice received from counsel, it is the opinion of the Company's management that any assessments resulting from current tax audits will not have a material adverse effect on the Company's consolidated results of operations or its consolidated financial position. 5. RETIREMENT BENEFITS The Company maintains pension or profit sharing plans for substantially all employees. Defined Benefit Plans--U.S.: The Marsh & McLennan Companies Retirement Plan provides benefits to eligible U.S. employees. The benefits under this plan are based on the participants' length of service and compensation, subject to the Employee Retirement Income Security Act of 1974 and Internal Revenue Service (IRS) limitations. The funding policy for this plan is to contribute amounts at least sufficient to meet IV-10 106 the requirements set forth in U.S. employee benefit and tax laws. The plan assets are invested primarily in listed stocks, corporate bonds and U.S. Government Securities. The Marsh & McLennan Companies Benefit Equalization Program provides those retirement benefits to which U.S. employees would otherwise be entitled under the Marsh & McLennan Companies Retirement Plan if not for IRS limitations. The Marsh & McLennan Companies Supplemental Retirement Program provides a minimum level of retirement benefits to employees based on the participants' length of service and compensation. The program provides benefits to participants to the extent that the minimum benefit exceeds the aggregate retirement benefit provided by the Marsh & McLennan Companies Retirement Plan, the Marsh & McLennan Companies Benefit Equalization Program and Social Security. The Company has a plan of funding the vested benefits under the Benefit Equalization and Supplemental Retirement Programs by periodically purchasing annuity contracts. Effective January 1, 1998, the J&H Retirement Income Plan was merged into the Marsh & McLennan Companies Retirement Plan. The following schedules provide information on the Company's U.S. defined benefit plans, which in 1997 include the pension plans of J&H. The components of pension cost for the U.S. defined benefit plans are as follows: FOR THE THREE YEARS ENDED DECEMBER 31, 1997 (In millions of dollars)
1997 1996 1995 ------ ----- ----- Service cost................................................ $ 38.9 $27.8 $24.5 Interest cost on projected benefit obligations.............. 90.4 60.5 56.0 Expected return on plan assets.............................. (114.5) (81.2) (73.0) Net amortization............................................ (2.9) (3.6) (6.9) ------ ----- ----- $ 11.9 $ 3.5 $ .6 ====== ===== =====
The actual returns on plan assets were $271.7 million, $138.7 million and $167.2 million for 1997, 1996 and 1995, respectively. These returns reflect the general securities market conditions experienced in the respective years and, in 1997, the inclusion of the former J&H pension assets. IV-11 107 The funded status of the U.S. defined benefit plans and the actuarial assumptions used to measure the projected benefit obligation are as follows: DECEMBER 31, 1997 AND 1996 (In millions of dollars)
1997 1996 -------- ------ Actuarial present value of accumulated benefit obligation: Vested.................................................... $1,281.8 $686.5 Nonvested................................................. 37.9 25.3 -------- ------ $1,319.7 $711.8 ======== ====== Projected benefit obligation................................ $1,433.9 $797.7 Fair value of plan assets................................... 1,650.7 947.1 -------- ------ 216.8 149.4 Unrecognized net gain from past experience different from that assumed.............................................. (216.0) (170.8) Unrecognized prior service cost............................. 14.9 21.4 Unrecognized SFAS No. 87 transition amount.................. (32.5) (37.0) -------- ------ Accrued pension liability................................... $ (16.8) $(37.0) ======== ====== Actuarial assumptions: Discount rate............................................. 7.25% 8.0% Weighted average rate of compensation increase............ 4.0% 4.75% Expected long-term rate of return on plan assets.......... 10.0% 10.0%
In 1997, the discount rate used to value the liabilities of the U.S. defined benefit plans was decreased to reflect current interest rates of high quality fixed income debt securities. Assumptions, including projected compensation increases and potential cost of living adjustments for retirees, were also revised to reflect current expectations as to future levels of inflation. The increase in the accumulated benefit obligation and the projected benefit obligation reflect the change in these assumptions and the addition of the former J&H pension plans. The increase in the fair value of plan assets reflects the actual return on plan assets and the inclusion of the former J&H pension assets. Defined Benefit Plans--Non-U.S.: The Company maintains various plans that provide benefits to eligible non-U.S. employees. The benefits under these plans are based on the participants' length of service and compensation. The funding policy for these plans is to contribute amounts at least sufficient to meet the requirements under foreign government regulations. The plans' assets are primarily invested in listed stocks, bonds and time deposits. The following schedules provide information on the Company's significant non-U.S. defined benefit plans, which in 1997 include the pension plans of J&H's significant non-U.S. defined benefit plans. The information presented below also reflects the disposition of Frizzell in 1996. IV-12 108 The components of pension expense for the significant non-U.S. defined benefit plans are as follows: FOR THE THREE YEARS ENDED DECEMBER 31, 1997 (In millions of dollars)
1997 1996 1995 ----- ----- ----- Service cost................................................ $41.4 $31.5 $34.7 Interest cost on projected benefit obligations.............. 61.5 51.2 57.2 Expected return on plan assets.............................. (90.0) (74.5) (82.1) Net amortization............................................ (6.1) (6.3) (6.4) ----- ----- ----- $ 6.8 $ 1.9 $ 3.4 ===== ===== =====
The actual returns on plan assets were $172.6 million, $106.2 million and $139.6 million for 1997, 1996 and 1995, respectively. These returns primarily reflect the general securities market conditions experienced in the respective years. The funded status of the significant non-U.S. defined benefit plans and the weighted average actuarial assumptions used to measure the projected benefit obligation are as follows: DECEMBER 31, 1997 AND 1996 (In millions of dollars)
1997 1996 -------- ------ Actuarial present value of accumulated benefit obligation: Vested.................................................... $ 768.7 $624.7 Nonvested................................................. 20.5 8.3 -------- ------ $ 789.2 $633.0 ======== ====== Projected benefit obligation................................ $ 899.9 $724.2 Fair value of plan assets................................... 1,201.9 947.8 -------- ------ 302.0 223.6 Unrecognized net gain from past experience different from that assumed.............................................. (170.2) (89.3) Unrecognized prior service cost (benefit)................... 8.2 (2.7) Unrecognized SFAS No. 87 transition amount.................. (18.2) (24.6) -------- ------ Prepaid pension cost........................................ $ 121.8 $107.0 ======== ====== Actuarial assumptions: Discount rate............................................. 7.6% 8.2% Weighted average rate of compensation increase............ 5.4% 6.0% Expected long-term rate of return on plan assets.......... 9.1% 9.6% ======== ======
In 1997, the discount rates used to value the liabilities of the non-U.S. plans were decreased to reflect current worldwide interest rates. Assumptions, including projected compensation increases and potential cost of living adjustments for retirees, were also revised to reflect current expectations as to future levels of inflation. The increase in the accumulated benefit obligation and the projected benefit obligation primarily reflects the impact of the change in these assumptions and the addition of J&H. Postretirement Benefits: The Company contributes to the cost of certain health care and life insurance benefits provided to its retired employees. The amount of the Company's contribution, if any, is based, in part, on the employees' length of service with the Company. The cost to the Company of these postretirement benefits is principally associated with employees in the U.S., as retired employees outside the U.S. receive these benefits, in large part, from governmental health care programs. U.S. employees become eligible for these benefits if they attain retirement age while working for the Company, subject in certain instances to minimum service IV-13 109 requirements. The cost of these postretirement benefits is accrued during the period up to the date employees are eligible to retire, but is funded by the Company as incurred. The components of the U.S. postretirement benefits costs are as follows: FOR THE THREE YEARS ENDED DECEMBER 31, 1997 (In millions of dollars)
1997 1996 1995 ----- ---- ---- Service cost................................................ $ 3.6 $1.5 $1.4 Interest cost on accumulated postretirement benefits........ 10.7 6.5 6.6 Net amortization............................................ (.9) (.9) (.6) ----- ---- ---- $13.4 $7.1 $7.4 ===== ==== ====
The accumulated postretirement benefit obligation at December 31, 1997 and 1996 is as follows: DECEMBER 31, 1997 AND 1996 (In millions of dollars)
1997 1996 ------ ------ Retirees.................................................... $ 93.2 $ 60.2 Fully eligible active plan participants..................... 30.8 11.9 Other active plan participants.............................. 50.7 15.8 ------ ------ Accumulated postretirement benefit obligation............... 174.7 87.9 Unrecognized net gain from past experience different from that assumed.............................................. 1.3 14.8 ------ ------ Accrued postretirement liability............................ $176.0 $102.7 ====== ======
The discount rates used in determining the accumulated postretirement benefit obligations were 7.25% and 8% for 1997 and 1996, respectively. The assumed health care cost trend rate was approximately 9% in 1997, gradually declining to 4% in the year 2040. A 1% increase in the assumed health care cost trend rates for each year would increase the accumulated postretirement benefit obligation as of December 31, 1997 by $18.7 million and the postretirement benefit expense for the year then ended by $2.1 million. In 1997, the discount rate used to value the accumulated postretirement benefit obligation was decreased to reflect current interest rates of high quality fixed income debt securities. The increase in the accumulated postretirement benefit obligation primarily reflects the impact of the change in the discount rate and the acquisition of J&H. Defined Contribution Plans: The Company maintains certain defined contribution plans for its employees, including the Marsh & McLennan Companies Stock Investment Plan ("SIP") the Putnam Investments, Inc. Profit Sharing Retirement Plan (the "Putnam Plan") and the Johnson & Higgins Cash Accumulation Plan ("J&H Plan"). Under these plans, eligible employees may contribute a percentage of their base salary, subject to certain limitations. For the SIP and the J&H Plan, the Company matches a portion of the employees' contributions, while under the Putnam Plan the contributions are at the discretion of the Company subject to IRS limitations. The cost of these defined contribution plans was $55.3 million, $39.5 million and $35.3 million for 1997, 1996 and 1995, respectively. The J&H Plan contributions are reflected in 1997 only. 6. STOCK BENEFIT PLANS Effective January 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). The Company has elected to continue to account for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and has provided additional pro forma disclosures required by SFAS 123. The adoption of this standard did not have an impact on the Company's financial position or results of operations. IV-14 110 In accordance with APB 25, no compensation cost has been recognized in the Consolidated Statements of Income for the Company's stock option and stock purchase plans and the stock options awarded under the new Putnam Investments, Inc. Equity Partnership Plan. Had compensation cost for the Company's stock- based compensation plans been determined consistent with the fair value method contained in SFAS 123, the Company's net income and net income per share for 1997, 1996 and 1995 would have been reduced to the pro forma amounts indicated in the following table: (In millions of dollars, except per share figures)
1997 1996 1995 ------ ------ ------ Net Income: As reported............................................... $399.4 $459.3 $402.9 Pro forma................................................. $378.7 $447.9 $400.0 Net Income Per Share: Basic: As reported............................................... $ 2.45 $ 3.17 $ 2.76 Pro forma................................................. $ 2.32 $ 3.09 $ 2.74 Diluted: As reported............................................... $ 2.39 $ 3.12 $ 2.73 Pro forma................................................. $ 2.26 $ 3.04 $ 2.71 ====== ====== ======
The pro forma information reflected above may not be representative of the amounts to be expected in future years as the fair value method of accounting contained in SFAS 123 has not been applied to options granted prior to January 1995. Incentive and Stock Award Plans: During 1997, the Company adopted the Marsh & McLennan Companies, Inc. 1997 Employee Incentive and Stock Award Plan (the "Employee Plan") and the Marsh & McLennan Companies, Inc. 1997 Senior Executive Incentive and Stock Award Plan (the "Executive Plan"). The Employee and Executive Plans (the "1997 Plans") replace the 1992 Incentive and Stock Award Plan (the "1992 Plan"). The types of awards permitted under these Plans include stock options, restricted stock, stock bonus units, restricted and deferred stock units payable in Company common stock or cash, and other stock-based and performance based awards. The Compensation Committee of the Board of Directors (the "Compensation Committee") determines, in its discretion, which affiliates may participate in the plans, which eligible employees will receive awards, the types of awards to be received and the terms and conditions thereof. The right of an employee to receive an award may be subject to performance conditions as specified by the Compensation Committee. The 1997 Plans contain provisions which, in the event of a change in control of the Company, may accelerate the vesting of the awards. Awards relating to not more than 12,000,000 shares of common stock may be made over the life of the Employee Plan plus shares remaining unused under pre-existing approved stock plans. Awards relating to not more than 5,000,000 shares of common stock may be made over the life of the Executive Plan plus shares remaining unused under pre-existing approved stock plans. There were 20,802,624 and 4,662,888 shares available for awards under the 1997 Plans and prior plans at December 31, 1997 and 1996, respectively. Stock Options: Options granted under the 1997 Plans may be designated as incentive stock options or as non-qualified stock options. The Compensation Committee shall determine the terms and conditions of the option, including the time or times at which an option may be exercised, the methods by which such exercise price may be paid and the form of such payment. Except under certain limited circumstances, no stock option may be granted with an exercise price of less than the fair market value of the stock at the time the stock option is granted. IV-15 111 Stock option transactions under the 1997 Plans and prior plans are as follows:
1997 1996 1995 ------------------------------ ------------------------------ ------------------------------ WEIGHTED AVERAGE WEIGHTED AVERAGE WEIGHTED AVERAGE SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE ----------- ---------------- ----------- ---------------- ----------- ---------------- Balance at beginning of period.......... 17,110,954 $42.16 17,441,590 $40.32 16,242,282 $39.92 Granted.............. 3,444,080 $62.09 2,748,120 $47.55 2,265,580 $39.51 Exercised............ (3,910,107) $39.89 (2,574,060) $35.32 (719,232) $27.72 Forfeited............ (423,246) $47.99 (504,696) $42.75 (347,040) $42.37 ----------- ----------- ----------- Balance at end of period............. 16,221,681 $46.77 17,110,954 $42.16 17,441,590 $40.32 =========== ====== =========== ====== =========== ====== Options exercisable at year-end........ 9,804,415 $42.26 10,979,330 $40.68 11,324,044 $38.70 =========== ====== =========== ====== =========== ======
The following table summarizes information about stock options at December 31, 1997:
OPTIONS OUTSTANDING ----------------------------------------------------- OPTIONS EXERCISABLE WEIGHTED AVERAGE ------------------------------ RANGE OF OUTSTANDING AT REMAINING WEIGHTED AVERAGE EXERCISABLE WEIGHTED AVERAGE EXERCISE PRICES 12/31/97 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/97 EXERCISE PRICE - --------------- -------------- ----------------- ---------------- ----------- ---------------- $24.69-39.67............. 5,295,878 4.2 years $37.50 4,367,843 $37.13 $40.41-50.03............. 7,594,223 6.2 years $46.51 5,434,472 $46.39 $52.88-76.09............. 3,331,580 9.2 years $62.09 2,100 $61.91 ---------- ---------- $24.69-76.09............. 16,221,681 6.2 years $46.77 9,804,415 $42.26 ========== ========= ====== ========== ======
The fair value of each of the Company's option grants included in the pro forma net income is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in 1997, 1996 and 1995, respectively; dividend yield of 3.0% in 1997 and 3.5% for 1996 and 1995; expected volatility of 17.5% in 1997 and 14.0% for 1996 and 1995; risk-free interest rate of 6.5% for 1997, 6.0% for 1996 and 6.4% for 1995; and an expected life of five years. The compensation cost as generated by the Black-Scholes model, may not be indicative of the future benefit, if any, that may be received by the option holder. The weighted average fair value of options granted during the years ended December 31, 1997, 1996 and 1995 was $12.71, $7.35 and $6.50 per share, respectively. Restricted Stock: Restricted shares of the Company's common stock may be awarded and shall be subject to such restrictions on transferability and other restrictions, if any, as the Compensation Committee may impose. The Compensation Committee may also determine when and under what circumstances the restrictions may lapse and whether the participant shall have the rights of a stockholder, including, without limitation, the right to vote and receive dividends. Unless the Compensation Committee determines otherwise, restricted stock that is still subject to restrictions shall be forfeited upon termination of employment. There were 90,000, 105,600 and 191,800 restricted shares granted in 1997, 1996 and 1995, respectively. The Company recorded compensation expense of $5.6 million in 1997 and $5.7 million in 1996 and 1995, related to these shares. Shares that have been granted generally become unrestricted at the earlier of: (1) January 1 of the eleventh year following the grant or (2) the later of the recipient's normal or actual retirement date. Restricted Stock Units: Restricted stock units, payable in stock or cash, may be awarded under the Plans. The Compensation Committee shall determine the restrictions on such units, when the restrictions shall lapse, when the shares of stock shall vest and be paid, and upon what terms the units shall be forfeited. There were 165,904, 79,518 and 135,128 restricted stock units awarded during 1997, 1996 and 1995, respectively. The Company recorded compensation expense of $4.3 million, $4.7 million and $2.9 million in 1997, 1996 and 1995, respectively, related to restricted stock units. IV-16 112 Deferred Stock Units: Deferred stock units, payable in stock or cash, may be awarded under the Plans. The Compensation Committee shall determine the restrictions on such units, when the restrictions shall lapse, when the shares of stock shall vest and be paid, and upon what terms the units shall be forfeited. There were 297,222 deferred stock units awarded during 1997. The Company recorded compensation expense of $1.7 million in 1997 related to deferred stock units. Putnam Investments, Inc. Equity Partnership Plan: In September 1997, Putnam adopted the Putnam Investments, Inc. Equity Partnership Plan (the "Equity Plan") pursuant to which Putnam is authorised to grant or sell to certain key employees of Putnam or its subsidiaries restricted shares of a new class of common stock of Putnam ("Class B Common Stock") and options to acquire the Class B Common Stock. Awards of restricted stock and/or options may be made under the Equity Plan with respect to a maximum of 12,000,000 shares of Class B Common Stock which represent approximately 12% of the outstanding shares on a fully diluted basis. Putnam made initial awards pursuant to the Equity Plan with respect to approximately 4,000,000 shares of Class B Common Stock, including 2,000,000 shares of restricted stock and 2,000,000 shares subject to options. The Company recorded compensation expense of $82.9 million in 1997 related to the restricted stock grants. There were approximately 8,000,000 shares available for grant related to the Equity Plan at December 31, 1997. Pursuant to an executive compensation agreement, Putnam awarded 300,000 restricted stock units and 325,000 options related to Class B Common Stock to a key executive of Putnam. The Company recorded compensation expense of $14.4 million in 1997 related to the restricted stock unit grants. The fair value of each option grant included in the pro forma net income is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in 1997: dividend yield of 5%; expected volatility of 26.4%; risk-free interest rate of 6.1%; and an expected life of five years. The compensation cost as generated by the Black-Scholes model, may not be indicative of the future benefit, if any, that may be received by the option holder. The weighted average fair value of each Class B option in 1997 was $8.30. Stock Purchase Plans: In May 1994, the Company's stockholders approved an employee stock purchase plan (the "1994 Plan") to replace the 1990 Employee Stock Purchase Plan which terminated on September 30, 1994 following its fourth annual offering. Under these plans, eligible employees may purchase shares of the Company's common stock, subject to certain limitations, at prices not less than 85% of the lesser of the fair market value of the stock at the beginning or end of any offering period. Under the 1994 Plan, no more than 8,000,000 shares of the Company's common stock plus the remaining unissued shares in the 1990 Plan may be sold. Employees purchased 1,237,000, 1,306,000 and 1,364,000 shares in 1997, 1996 and 1995, respectively. At December 31, 1997, 4,955,000 shares were available for issuance under the 1994 Plan. During 1995, the Company's Board of Directors approved the Marsh & McLennan Companies Stock Purchase Plan for International Employees (the "International Plan") which is similar to the 1994 Plan. Under the International Plan, no more than 1,000,000 shares of the Company's common stock may be sold. Employees purchased 141,000 shares during 1997, and at December 31, 1997, 849,000 shares were available for issuance under the International Plan. The fair value of each employee purchase right granted under these Stock Purchase Plans is included in the pro forma net income for 1997, 1996 and 1995 and was estimated using the Black-Scholes model with the following assumptions: dividend yield of 3.0% for 1997 and 3.5% for 1996 and 1995; expected life of one year; expected volatility of 17.5% for 1997 and 14.0% for 1996 and 1995; and risk-free interest rate of 5.5% for 1997 and 5.6% for 1996 and 1995. The weighted average fair value of each purchase right granted in 1997, 1996 and 1995 was $16.44, $9.57 and $8.77, respectively. Beginning in 1998, these plans will include employees who were formerly associated with J&H. 7. LONG-TERM OBLIGATIONS The Company leases office facilities, equipment and automobiles under noncancellable operating leases. These leases expire on varying dates; in some instances contain renewal and expansion options; do not restrict the payment of dividends or the incurrence of debt or additional lease obligations; and contain no significant purchase options. In addition to the base rental costs, occupancy lease agreements generally provide for rent IV-17 113 escalations resulting from increased assessments for real estate taxes and other charges. Approximately 94% of the Company's lease obligations are for the use of office space. The accompanying Consolidated Statements of Income include net rental costs of $265.2 million, $217.3 million and $218.1 million for 1997, 1996 and 1995, respectively, after deducting rentals from subleases ($7.4 million in 1997, $8.4 million in 1996 and $9.1 million in 1995). At December 31, 1997, the aggregate future minimum rental commitments under all noncancellable operating lease agreements are as follows: FOR THE YEARS ENDING DECEMBER 31, (In millions of dollars)
GROSS RENTALS NET RENTAL FROM RENTAL COMMITMENTS SUBLEASES COMMITMENTS ----------- --------- ----------- 1998.................................................. $ 202.4 $ 5.7 $ 196.7 1999.................................................. 177.0 4.0 173.0 2000.................................................. 149.5 2.8 146.7 2001.................................................. 118.4 2.4 116.0 2002.................................................. 90.8 1.9 88.9 Subsequent years...................................... 371.5 5.0 366.5 -------- ----- -------- $1,109.6 $21.8 $1,087.8 ======== ===== ========
The Company has entered into agreements with various service companies to outsource certain information systems activities and responsibilities which previously were performed by the Company. Under these agreements, the Company is required to pay minimum annual service charges. Additional fees may be payable depending upon the volume of transactions processed with all future payments subject to increases for inflation. At December 31, 1997, the aggregate fixed future minimum commitments under these agreements are as follows: FOR THE YEARS ENDING DECEMBER 31, (In millions of dollars)
FUTURE MINIMUM COMMITMENTS ----------- 1998........................................................ $24.8 1999........................................................ 13.7 2000........................................................ 9.4 2001........................................................ 9.0 2002........................................................ 9.0 Subsequent years............................................ 12.5 ----- $78.4 =====
IV-18 114 8. SHORT-TERM DEBT The Company's outstanding short-term debt is as follows: DECEMBER 31, 1997 AND 1996 (In millions of dollars)
1997 1996 -------- -------- Commercial paper............................................ $ 229.3 $ 387.6 Current portion of long-term debt........................... 7.4 4.8 -------- -------- $ 236.7 $ 392.4 ======== ========
The weighted average interest rates on outstanding commercial paper borrowings at December 31, 1997 and 1996 are 6.1% and 5.9%, respectively. During 1997, the Company executed a new revolving credit facility with several banks to support its commercial paper borrowings and to fund other general corporate requirements. This facility, which expires June 2002, provides that the Company may borrow up to $1.2 billion at market rates of interest which may vary depending upon the level of borrowings and the Company's credit ratings. Commitment fees of 7 basis points are payable on any unused portion. The facility requires the Company to maintain consolidated net worth of at least $1.7 billion and contains other restrictions relating to consolidations, mergers and the sale or pledging of assets. The Company maintains credit facilities with various banks, primarily related to operations located outside the US, aggregating $241.7 million at December 31, 1997. The Company has borrowed $184.2 million under these facilities and has included these borrowings in Long-term Debt. 9. LONG-TERM DEBT The Company's outstanding long-term debt is as follows: DECEMBER 31, 1997 AND 1996 (In millions of dollars)
1997 1996 -------- -------- Revolving credit facility................................... $ 708.4 $ 250.0 Bank borrowings............................................. 184.2 -- Notes payable--due 2012..................................... 111.4 -- Mortgage--9.8% due 2009..................................... 200.0 200.0 Mortgage--due 2012.......................................... 19.3 -- Mortgage--7.25% due 1999.................................... 4.2 4.2 Other....................................................... 19.7 8.8 -------- -------- 1,247.2 463.0 Less current portion........................................ 7.4 4.8 -------- -------- $1,239.8 $ 458.2 ======== ========
Outstanding borrowings under the revolving credit facility at December 31, 1997 amounted to $708.4 million with varying dates of maturity through December 1998. Borrowings under the Company's revolving credit facilities in 1997 and 1996 have been classified as long-term debt based on the Company's intent and ability to maintain or refinance these obligations on a long-term basis. The weighted average interest rate associated with these borrowings was 6.0% and 5.9% at December 31, 1997 and 1996, respectively. IV-19 115 Bank borrowings of $184.2 million at December 31, 1997 have been classified as long-term debt based on the Company's intent and ability to maintain or refinance these obligations on a long-term basis. The weighted average interest rate associated with these borrowings was 3.8%. The Company has a fixed rate non-recourse mortgage note agreement due in 2009 amounting to $200 million, bearing an interest rate of 9.8%, in connection with its 56% interest in its worldwide headquarters building. In the event the mortgage is foreclosed following a default, the Company would be entitled to remain in the space and would be obligated to pay rent sufficient to cover interest on the notes or, starting in 1999, at fair market value if greater. The Company has an interest rate swap which was entered into as part of the acquisition and renovation of the Company's worldwide headquarters which fixes the interest rate at approximately 9.5% on $100 million of variable rate borrowings until February 1999. The weighted average interest rate received on this swap at December 31, 1997, 1996 and 1995 was 5.8%, 5.7% and 6.1%, respectively. The difference between the fixed rate and the weighted average rate is included in interest expense in the Consolidated Statements of Income. The Company, in conjunction with the J&H transaction, assumed a mortgage obligation to finance a condominium interest in office space located in New York City. The outstanding balance of this debt was $19.3 million at December 31, 1997. The rate on this debt, which is determined periodically at a margin of 1/2 of 1% above the LIBOR rate, was 5.8% at December 31, 1997. In conjunction with the J&H transaction, the Company assumed a note related to an arrangement whereby a third party is obligated to pay rent, on the Company's behalf, under a noncancellable long-term lease obligation for office space it no longer occupies. The outstanding balance of this note at December 31, 1997 is $111.4 million. Interest on $88.5 million of this debt is fixed at 8.62% while the rate on the remaining balance, which is determined periodically at a margin of 1/2 of 1% above the LIBOR rate, was 5.8% at December 31, 1997. The variable interest rate on the remaining $22.9 million, along with the variable rate on the $19.3 million mortgage has been fixed at 5.8% through a $42.2 million interest rate swap expiring in January 2005. Scheduled repayments of long-term debt, excluding the revolving credit facility and bank borrowings described above in 1998 and in the four succeeding years are $7.4 million, $20.5 million, $6.7 million, $4.6 million and $4.3 million, respectively. 10. FINANCIAL INSTRUMENTS The estimated fair value of the Company's significant financial instruments is provided below. Certain estimates and judgments were required to develop the fair value amounts. The fair value amounts shown below are not necessarily indicative of the amounts that the Company would realise upon disposition nor do they indicate the Company's intent or ability to dispose of the financial instrument. Cash and Cash Equivalents: The estimated fair value of the Company's cash and cash equivalents approximates their carrying value. Long-term Investments: The Company has certain long-term investments, for which there are no readily available market prices, amounting to $72.8 million and $53.9 million at December 31, 1997 and 1996, respectively, which are carried on a cost basis. Based on present information, the Company believes that the cost of these investments approximates their fair value. Short-term and Long-term Debt: The fair value of the Company's short-term debt, which consists primarily of commercial paper borrowings, approximates its carrying value. The estimated fair value of the Company's mortgage debt related to its worldwide headquarters building is approximately $254 million and $240 million at December 31, 1997 and 1996, respectively, while the estimated fair value of the fixed rate portion of the notes payable is approximately $108 million at December 31, 1997. These estimated fair values are based on discounted future cash flows using current interest rates available for debt with similar terms and remaining maturities. The estimated fair value of borrowings under the revolving credit facility approximates the carrying value. IV-20 116 Off-balance Sheet Instruments: The fair value of the Company's $142.2 million notional amount of interest rate swaps has been estimated as a liability of approximately $5 million and $8 million at December 31, 1997 and 1996, respectively. These calculations are based on discounted future cash flows taking into account the current interest rate environment. Unrealised Securities Holding Gains: The Company has classified as available for sale primarily equity securities having an aggregate fair value of $647.4 million and $519.4 million at December 31, 1997 and 1996, respectively. Gross unrealised gains, amounting to $475.5 million and $341.1 million at December 31, 1997 and 1996, respectively, have been excluded from earnings and reported as a separate component of stockholders' equity, net of deferred income taxes. Proceeds from the sale of available for sale securities for the years ended December 31, 1997, 1996 and 1995 were $68.7 million, $28.3 million and $53.7 million, respectively. Gross realised gains on available for sale securities sold during 1997, 1996 and 1995 amounted to $36.3 million, $17.5 million and $23.2 million, respectively. The cost of securities sold is determined using the average cost method for equity securities. A portion of insurance fiduciary funds which the Company holds to satisfy fiduciary obligations are invested in high quality debt securities which are generally held to maturity. The difference between cost and fair value of these investments is not material. 11. SPECIAL CHARGES During 1997, the Company recorded special charges totaling $296.8 million. These charges include $213.3 million of merger costs predominantly related to the combination with J&H, a charge of $68.5 million related to London real estate, and $15.0 million for the disposal of certain EDP assets. The merger costs primarily reflect personnel related costs principally involving severance and associated benefits for staff reductions and relocations ($119.9 million), costs for real estate and systems consolidations ($75.9 million), and other integration costs ($17.5 million). The total amount remitted to the Company's former employees amounted to $51.8 million in 1997. The net impact of the special charges on diluted net income per share was $1.15 for the year. During 1996, the Company completed the sale of Frizzell for approximately $290 million which resulted in a $33.2 million pretax gain. In addition, pretax charges aggregating $92.6 million were also recorded. These charges represent a provision of approximately $33.5 million primarily for UK real estate; $17 million for costs related to the integration of the Company's worldwide insurance services operations; $17 million for goodwill write-offs; $15 million related to the Lloyd's Reconstruction and Renewal Plan; and $10.1 million primarily related to office closings. The net impact of these special charges and the 1996 tax adjustment discussed in Note 4 increased diluted net income per share by $.02 for the year. 12. COMMON STOCK On May 21, 1997, the Board of Directors approved a two-for-one stock split of the Company's common stock in the form of a 100% stock distribution which was issued on June 27, 1997. All references to per share amounts have been restated for this stock distribution. 13. STOCKHOLDER RIGHTS PLAN On September 18, 1997, the Company's Board of Directors approved the extension of the benefits afforded by the Company's existing rights plan by adopting a new stockholder rights plan. Under the new plan, Rights to purchase stock, at a rate of one Right for each common share held, were distributed to shareholders of record on September 29, 1997 and automatically attach to shares acquired thereafter. Under the plan, the Rights generally become exercisable after a person or group (i) acquires 15% or more of the Company's outstanding common stock or (ii) commences a tender offer that would result in such a person or group owning 15% or more of the Company's common stock. When the Rights first become exercisable, a holder will be entitled to buy from the Company a unit consisting of one two-hundredth of a share of Series A Junior Participating Preferred Stock of the Company at a purchase price of $260. Alternatively, if any person acquires 15% or more IV-21 117 of the Company's common stock except pursuant to an offer for all shares at a price which is fair and not inadequate or if a 15% holder acquires the Company by means of a reverse merger in which the Company and its stock survive, each Right not owned by a 15% or more shareholder would become exercisable for common stock of the Company (or in certain circumstances, other consideration) having a market value equal to twice the exercise price of the Right. The Rights expire on September 29, 2007, except as otherwise provided in the plan. 14. CLAIMS, LAWSUITS AND OTHER CONTINGENCIES The Company and its subsidiaries are subject to various claims and lawsuits consisting principally of alleged errors and omissions in connection with the placement of insurance or reinsurance and in rendering investment and consulting services. Some of these claims and lawsuits seek damages, including punitive damages, in amounts which could, if assessed, be significant. On November 24, 1997, an action captioned "Aiena et al. vs. Olsen et al." was brought in the US District Court for the Southern District of New York by certain former directors of J&H, which was acquired by the Company in March 1997, against twenty-four selling shareholders of J&H, as well as J&H itself and the Company. The action essentially challenges the allocation of the consideration paid in connection with the Company's combination with J&H as between the defendants who were directors and shareholders of J&H at the time of the transaction and the plaintiffs who were former directors and shareholders of J&H. The Complaint asserts, among others, claims for breach of fiduciary duty, federal securities law violations, breach of contract, and ERISA violations. Plaintiffs seek compensatory and punitive damages. On the basis of present information, available insurance coverage and advice received from counsel, it is the opinion of the Company's management that the disposition or ultimate determination of these claims and lawsuits will not have a material adverse effect on the Company's consolidated results of operations or its consolidated financial position. 15. SEGMENTATION OF ACTIVITY BY TYPE OF SERVICE AND GEOGRAPHIC AREA OF OPERATION The Company, a professional services firm, operates in three principal business segments: risk and insurance services, investment management and consulting. Operating income for each type of service is after deductions for all directly related expenses and allocations of common expenses. General corporate expenses primarily are comprised of employee compensation and benefits and related occupancy costs for administrative personnel. General corporate assets primarily consist of cash and cash equivalents, deferred income tax assets and a portion of the Company's headquarters building. The following table presents information about the Company's operations by type of service and geographic area: FOR THE THREE YEARS ENDED DECEMBER 31, 1997 (In millions of dollars)
DEPRECIATION & OPERATING IDENTIFIABLE AMORTIZATION OF CAPITAL REVENUE INCOME ASSETS FIXED ASSETS EXPENDITURES -------- --------- ------------ --------------- ------------ TYPE OF SERVICE: 1997--(A) Risk and Insurance Services.............. $2,788.4 $223.0 $4,095.1 $ 80.8 $ 87.0 Investment Management.................... 1,882.4 462.8 1,755.8 36.9 80.7 Consulting............................... 1,337.8 127.0 888.1 26.7 32.6 General Corporate........................ -- (68.0) 1,175.2 4.3 1.8 -------- ------ -------- ------ ------ $6,008.6 $744.8 $7,914.2 $148.7 $202.1 ======== ====== ======== ====== ======
IV-22 118
DEPRECIATION & OPERATING IDENTIFIABLE AMORTIZATION OF CAPITAL REVENUE INCOME ASSETS FIXED ASSETS EXPENDITURES -------- --------- ------------ --------------- ------------ 1996--(B) Risk and Insurance Services.............. $1,907.3 $313.7 $1,926.8 $ 64.5 $ 66.7 Investment Management.................... 1,337.5 337.8 1,457.6 27.4 52.4 Consulting............................... 1,159.2 110.9 679.6 22.6 32.7 General Corporate........................ -- (47.1) 481.2 4.0 5.5 -------- ------ -------- ------ ------ $4,404.0 $715.3 $4,545.2 $118.5 $157.3 ======== ====== ======== ====== ====== 1995-- Risk and Insurance Services.............. $1,963.9 $389.2 $2,193.6 $ 65.6 $ 77.2 Investment Management.................... 917.0 243.5 997.9 21.5 29.4 Consulting............................... 1,056.4 108.7 638.4 20.4 25.7 General Corporate........................ -- (46.5) 499.6 3.9 4.6 -------- ------ -------- ------ ------ $3,937.3 $694.9 $4,329.5 $111.4 $136.9 ======== ====== ======== ====== ====== GEOGRAPHIC AREA: 1997--(A) US....................................... $4,316.3 $626.2 $5,160.4 Europe................................... 1,221.1 107.2 1,238.7 Canada................................... 214.3 28.5 120.7 Pacific Rim and Other.................... 256.9 50.9 219.2 General Corporate........................ -- (68.0) 1,175.2 -------- ------ -------- $6,008.6 $744.8 $7,914.2 ======== ====== ======== 1996--(B) US....................................... $3,064.2 $566.3 $2,863.6 Europe................................... 967.1 136.9 951.6 Canada................................... 198.0 42.5 111.8 Pacific Rim and Other.................... 174.7 16.7 137.0 General Corporate........................ -- (47.1) 481.2 -------- ------ -------- $4,404.0 $715.3 $4,545.2 ======== ====== ======== 1995-- US....................................... $2,565.4 $494.1 $2,195.9 Europe................................... 1,028.2 189.7 1,413.6 Canada................................... 184.3 37.4 107.1 Pacific Rim and Other.................... 159.4 20.2 113.3 General Corporate........................ -- (46.5) 499.6 -------- ------ -------- $3,937.3 $694.9 $4,329.5 ======== ====== ========
- --------------- (a) The 1997 special charges included in operating income are allocated by type of service and geographic area as follows: $272.6 million for Risk and Insurance Services, $21.4 million for Consulting and $2.8 million for General Corporate; $162.4 million for U.S., $113.7 million for Europe, $15.6 million for Canada, $2.3 million for Pacific Rim and Other and $2.8 million for General Corporate. (b) The 1996 net special charges included in operating income are allocated by type of service and geographic area as follows: $49.4 million for Risk and Insurance Services, $8.5 million for Consulting and $1.5 million for General Corporate; $29.6 million for U.S., $26.3 million for Europe, $2.0 million for Pacific Rim and Other and $1.5 million for General Corporate. IV-23 119 PART B UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 1998 INTRODUCTION The financial information contained in this Part B of Appendix IV is extracted without material adjustment from the unaudited consolidated accounts of Marsh & McLennan for the six months ended 30 June 1998. MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share figures) (Unaudited)
THREE MONTHS SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, -------------------- -------------------- 1998 1997 1998 1997 ------ ------ ------ ------ Revenue............................... $1,750 $1,540 $3,526 $2,835 Expense............................... 1,404 1,278 2,776 2,296 ------ ------ ------ ------ Operating Income...................... 346 262 750 539 Interest Income....................... 7 8 12 11 Interest Expense...................... (33) (32) (61) (49) ------ ------ ------ ------ Income Before Income Taxes............ 320 238 701 501 Income Taxes.......................... 127 93 277 192 ------ ------ ------ ------ Net Income............................ $ 193 $ 145 $ 424 $ 309 ====== ====== ====== ====== Basic Net Income Per Share(A)........................ $ .75 $ .57 $ 1.65 $ 1.32 ====== ====== ====== ====== Diluted Net Income Per Share(A)........................ $ .72 $ .56 $ 1.59 $ 1.29 ====== ====== ====== ====== Average Number of Shares Outstanding--Basic(A)............... 257 250 257 235 ====== ====== ====== ====== Average Number of Shares Outstanding--Diluted(A)............. 265 256 264 240 ====== ====== ====== ====== Dividends Declared(A)................. $ .40 $ .33 $ .73 $ .63 ====== ====== ====== ======
- --------------- (A) Restated to reflect the three-for-two stock split in the form of a stock distribution issued on June 26, 1998. IV-24 120 MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions of dollars)
(UNAUDITED) ----------- JUNE 30, DECEMBER 31, 1998 1997 ----------- ------------ ASSETS Current assets: Cash and cash equivalents (including interest-bearing amounts of $532 at June 30, 1998 and $378 at December 31, 1997)..................................................... $ 598 $ 424 ------- ------ Receivables-- Commissions and fees...................................... 1,463 1,296 Advanced premiums and claims.............................. 123 95 Other receivables......................................... 161 160 ------- ------ 1,747 1,551 Less--allowance for doubtful accounts..................... (61) (53) ------- ------ Net receivables........................................... 1,686 1,498 ------- ------ Other current assets........................................ 579 647 ------- ------ Total current assets.............................. 2,863 2,569 Long-term securities........................................ 893 720 Fixed assets, net........................................... 884 957 (net of accumulated depreciation and amortization of $827 at June 30, 1998 and $798 at December 31, 1997) Intangible assets........................................... 2,720 2,417 Other assets................................................ 1,239 1,251 ------- ------ $ 8,599 $7,914 ======= ====== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt............................................. $ 648 $ 237 Accrued compensation and employee benefits.................. 541 564 Accounts payable and accrued liabilities.................... 1,150 1,276 Accrued income taxes........................................ 228 218 Dividends payable........................................... 103 85 ------- ------ Total current liabilities......................... 2,670 2,380 ------- ------ Fiduciary liabilities....................................... 2,475 2,282 Less--cash and investments held in a fiduciary capacity..... (2,475) (2,282) Long-term debt.............................................. 1,294 1,240 ------- ------ Other liabilities........................................... 1,115 1,096 ------- ------ Commitments and contingencies............................... -- -- Stockholders' equity: Preferred stock, $1 par value, authorized 6,000,000 shares, none issued............................................... -- -- Common stock, $1 par value, authorized 400,000,000 shares, issued 260,657,642 shares at June 30, 1998 and 258,586,766 at December 31, 1997*..................................... 261 172 Additional paid-in capital.................................. 1,011 994 Retained earnings........................................... 2,211 1,975 Accumulated other comprehensive income...................... 270 167 ------- ------ 3,753 3,308 Less--treasury shares, at cost, 4,780,089 shares at June 30, 1998 and 3,661,256 shares at December 31, 1997*........... (233) (110) ------- ------ Total stockholders' equity........................ 3,520 3,198 ------- ------ $ 8,599 $7,914 ======= ======
- --------------- * Restated to reflect the three-for-two stock split in the form of a stock distribution issued on June 26, 1998. IV-25 121 MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions of dollars) (Unaudited)
SIX MONTHS ENDED JUNE 30, ---------------- 1998 1997 ----- ------- Operating cash flows: Net income.................................................. $424 $ 309 Gain on sale of business.................................. -- (10) Depreciation and amortization............................. 121 90 Deferred income taxes..................................... 90 (35) Other liabilities......................................... 19 10 Prepaid dealer commissions................................ (77) (96) Other, net................................................ (7) (4) Net changes in operating working capital other than cash and cash equivalents-- Receivables............................................... (188) (72) Other current assets...................................... 63 (7) Accrued compensation and employee benefits................ (23) (14) Accounts payable and accrued liabilities.................. (126) (52) Accrued income taxes...................................... 13 10 Effect of exchange rate changes........................... 25 3 ---- ------ Net cash generated from operations........................ 334 132 ---- ------ Financing cash flows: Net increase in commercial paper............................ 619 213 Other borrowings............................................ 21 1,080 Other repayments............................................ (164) (570) Purchase of treasury shares................................. (109) -- Issuance of common stock.................................... 63 114 Dividends paid.............................................. (171) (137) ---- ------ Net cash provided by financing activities................. 259 700 ---- ------ Investing cash flows: Additions to fixed assets................................... (134) (117) Proceeds from sale of business, net of cash sold............ -- 29 Acquisitions................................................ (313) (550) Other, net.................................................. 30 16 ---- ------ Net cash used for investing activities.................... (417) (622) ---- ------ Effect of exchange rate changes on cash and cash equivalents............................................ (2) (10) ---- ------ Increase in cash & cash equivalents......................... 174 200 Cash & cash equivalents at beginning of period.............. 424 300 ---- ------ Cash & cash equivalents at end of period.................... $598 $ 500 ==== ======
IV-26 122 MARSH & MCLENNAN COMPANIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. The consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. The financial information contained herein reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the three and six month periods ended June 30, 1998 and 1997. 2. FIDUCIARY CASH AND LIABILITIES In its capacity as an insurance broker or agent, the Company collects premiums from insureds and, after deducting its commissions, remits the premiums to the respective insurance underwriters; the Company also collects claims or refunds from underwriters on behalf of insureds. Unremitted insurance premiums and claims are held in a fiduciary capacity. Interest income on these fiduciary funds, included in revenue, amounted to $62 million and $52 million for the six months ended June 30, 1998 and 1997, respectively. Net uncollected premiums and claims and the related payables amounting to $6.3 billion at June 30, 1998 and $5.2 billion at December 31, 1997, are not included in the accompanying Consolidated Balance Sheets. 3. PER SHARE DATA In 1997, the Company adopted Statement of Financial Accounting Standards No. 128, "Earnings Per Share" which requires the Company to include basic and diluted per share figures on the face of the income statement. Basic net income per share is calculated by dividing net income by the average number of shares of the Company's common stock outstanding. Diluted net income per share is calculated by reducing net income for the potential minority interest associated with unvested shares granted under the Putnam Private Equity Plan. This result is then divided by the average common shares outstanding which have been adjusted for the dilutive effect of potential common shares. The following reconciles net income to net income for diluted earnings per share and basic weighted average common shares outstanding to diluted weighted average common shares outstanding for the three and six-month periods ended June 30, 1998 and 1997.
THREE MONTHS SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, -------------- -------------- 1998 1997 1998 1997 ----- ----- ----- ----- Net Income.................................................. 193 145 424 309 Less: Potential Minority Interest associated with Putnam Private Equity Plan................................... (2) -- (3) -- ---- ---- ---- ---- Net Income for Diluted Earnings per Share................... 191 145 421 309 ==== ==== ==== ==== Basic Weighted Average Common Shares Outstanding............ 257 250 257 235 Stock Options............................................... 8 6 7 5 ---- ---- ---- ---- Diluted Weighted Average Common Shares Outstanding.......... 265 256 264 240 ==== ==== ==== ====
IV-27 123 4. COMPREHENSIVE INCOME Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income." SFAS 130 establishes standards for reporting and displaying comprehensive income and its components. Comprehensive income amounted to $527 million and $309 million for the six months ended June 30, 1998 and 1997. The difference between net income and comprehensive income for the six months ended June 30, 1998 was primarily due to net unrealised securities holding gains. 5. SUPPLEMENTAL DISCLOSURE TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS The following schedule provides additional information concerning acquisitions: (In millions of dollars)
SIX MONTHS ENDED JUNE 30, ---------------- 1998 1997 ----- ------- Purchase acquisitions: Assets acquired, excluding cash........................... $313 $2,659 Liabilities assumed....................................... (1,103) Shares issued............................................. (1,006) ---- ------ Net cash outflow for acquisitions........................... $313 $ 550 ==== ======
Interest paid during the six months ended June 30, 1998 and 1997 was $70 million and $45 million, respectively. Income taxes paid during the six months ended June 30, 1998 and 1997 were $207 million and $194 million, respectively. 6. INCOME TAXES The Company has received a Notice of Proposed Adjustment from a field office of the Internal Revenue Service ("IRS") challenging its tax treatment related to 12b-1 fees paid by the Putnam Mutual Funds. The Company believes its tax treatment of these fees is consistent with current industry practice and applicable requirements of the Internal Revenue Code and previously issued IRS technical advice. The field office has referred the Notice to the national office of the IRS for technical advice. Taxing authorities periodically challenge positions taken by the Company on its tax returns. On the basis of present information and advice received from counsel, it is the opinion of the Company's management that any assessments resulting from current tax audits will not have a material adverse effect on the Company's consolidated results of operations or its consolidated financial position. 7. ACQUISITIONS On June 30, 1998, the Company purchased Kirke-Van Orsdel, Inc., an administrator of insurance and health benefit programs in the U.S. On March 24, 1998, the Company purchased Brockman y Schuh Group, a risk and insurance services and employee benefit consulting firm in Mexico. On March 27, 1997, the Company consummated a business combination with Johnson & Higgins ("J&H"), a privately-held risk and insurance services and employee benefit consulting firm. IV-28 124 The following unaudited pro forma summary presents the consolidated results of operations of the Company as if the J&H business combination had occurred on January 1, 1997. The pro forma results are shown for illustrative purposes only and do not purport to be indicative of the results which would have been reported if the business combination had occurred on the date indicated or which may occur in the future. (In millions of dollars, except per share figures)
SIX MONTHS ENDED JUNE 30, 1997 ---------------- Revenue..................................................... $3,149 Net Income.................................................. 324 Basic Net Income per share.................................. 1.29 Diluted Net Income per share................................ 1.27
8. CLAIMS, LAWSUITS AND OTHER CONTINGENCIES The Company and its subsidiaries are subject to various claims and lawsuits consisting principally of alleged errors and omissions in connection with the placement of insurance or reinsurance and in rendering investment and consulting services. Some of these claims and lawsuits seek damages, including punitive damages, in amounts which could, if assessed, be significant. On November 24, 1997, an action captioned "Aiena et al. vs. Olsen et al" was brought in the U.S. District Court for the Southern District of New York by certain former directors of J&H, which was acquired by the Company in March 1997, against twenty-four selling shareholders of J&H, as well as J&H itself and the Company. The action essentially challenges the allocation of the consideration paid in connection with the Company's combination with J&H as between the defendants who were directors and shareholders of J&H at the time of the transaction and the plaintiffs who were former directors and shareholders of J&H. The Complaint asserts, among others, claims for breach of fiduciary duty, federal securities law violations, breach of contract, and ERISA violations. Plaintiffs seek compensatory and punitive damages. On or about April 14, 1998, an action captioned "Sempier v. Olsen, et al" was brought in the U.S. District Court for the District of New Jersey by another former director of J&H against the same defendants named in the Aiena action, including J&H and the Company, in connection with the same transaction. The allegations and claims in the Sempier case are substantially similar to those in the Aiena action. Plaintiff seeks, among other relief, an unspecified amount of compensatory and punitive damages. This action will be heard together with the Aiena action in the District Court for the Southern District of New York. In 1993, several years prior to the acquisition of J&H, the Equal Employment Opportunity Commission ("EEOC") commenced a lawsuit against J&H in the U.S. District Court for the Southern District of New York. The action alleges that a mandatory retirement policy for directors then in effect at J&H violated the federal Age Discrimination in Employment Act ("ADEA"). In 1995, the District Court ruled in the EEOC's favour that the J&H mandatory retirement policy violated the ADEA. The Court of Appeals for the Second Circuit affirmed that ruling in 1996. The EEOC seeks to recover damages on behalf of certain former directors and a trial on the matter of damages is scheduled for October 5, 1998. Pursuant to the Stock Purchase Agreement between the Company and J&H and the stockholders of J&H, the Company will bear one-half of all damages and expenses in this action. Certain present and former English subsidiaries of the Company are required by their regulatory body, the Personal Investment Authority, to review transactions with, and advice to, clients in relation to the sale of certain investments. The disclosure and advice in connection with such sales has been called into question by clients or by the Personal Investment Authority on their behalf. Where the review discloses an inappropriate sale, compensation is required to be paid to the client. While the amount of compensation which has been and may be paid, the liability of present subsidiaries of the Company in connection therewith and the extent to which any such liability is covered by insurance remains uncertain, the aggregate amount claimed could be significant. IV-29 125 On the basis of present information, available insurance coverage and advice received from counsel, it is the opinion of the Company's management that the disposition or ultimate determination of these claims and lawsuits will not have a material adverse effect on the Company's consolidated results of operations or its consolidated financial position. 9. COMMON STOCK On May 20, 1998, the Company's Board of Directors authorized a three-for-two stock distribution of $1 par value common stock, which was issued on June 26, 1998 to shareholders of record on June 5, 1998. Upon issuance of the shares, paid-in capital was reduced and the common stock account increased by $87 million, the par value of the additional common shares issued. All references to per share amounts have been restated for this stock distribution. 10. NEW ACCOUNTING PRONOUNCEMENTS In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information," and in February 1998, the FASB issued Statement of Financial Accounting Standards No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits." Both statements are effective for fiscal years beginning after December 15, 1997. The Company will adopt the provisions of these standards in conjunction with the preparation of the 1998 Annual Report. In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." This standard, which establishes new accounting and reporting requirements for derivative instruments, must be adopted in the fiscal year beginning after June 15, 1999. The Company does not expect the adoption of this standard to have a material impact on its operating results or financial position. IV-30 126 APPENDIX V -- CERTAIN MARKET, DIVIDEND AND EXCHANGE RATE INFORMATION 1. MARKET PRICE DATA The principal trading market for Sedgwick Shares is the London Stock Exchange and the principal trading market for Sedgwick ADSs is the NYSE. Sedgwick Shares have been listed and traded on the London Stock Exchange since 1962 and Sedgwick ADSs have been listed and traded on the NYSE since June 1997. The following table sets out, for the periods indicated, the reported high and low Closing Prices for Sedgwick Shares and high and low closing prices for Sedgwick ADSs on the NYSE as reported on Bloomberg. Each Sedgwick ADS represents five Sedgwick Shares.
PRICE PER SEDGWICK SHARE PRICE PER SEDGWICK ADS ------------------------ ---------------------- HIGH LOW HIGH LOW ---------- ---------- --------- --------- (PENCE) (PENCE) (US$) (US$) 1997: First Quarter................................. 144.0 118.5 Second Quarter................................ 130.5 116.5 Third Quarter................................. 128.0 116.0 10.75 9.50 Fourth Quarter................................ 151.5 120.5 13.00 10.31 1998: First Quarter................................. 164.0 132.0 14.37 11.25 Second Quarter................................ 168.5 125.0 14.25 13.81 Third Quarter through 1 September............. 219.5 133.5 17.75 10.94
On 24 August 1998, the last business day prior to the announcement of the Ordinary Offer, the Closing Price for Sedgwick Shares was 142.5 pence and the closing price on the NYSE Composite Tape for Sedgwick ADSs was $12.25. The following table shows the Closing Prices for Sedgwick Shares, Sedgwick ADSs and L1 nominal of Sedgwick Convertible Bonds for the first dealing day that the London Stock Exchange or, as the case may be, the NYSE was open for business in each month from March 1998 to August 1998, for 24 August 1998 (the last business day prior to the commencement of the Offer Period) and for 2 September 1998 (the latest practicable date before the posting of this Offer Document):
SEDGWICK SEDGWICK DATE SHARE PRICE ADSS CONVERTIBLE BONDS ---- ----------- ----- ----------------- (PENCE) (US$) (IN PENCE) 2 March 1998........................................... 150.0 12.43 105.88 1 April 1998........................................... 168.0 14.00 109.88 1 May 1998............................................. 154.5 13.00 111.75 1 June 1998............................................ 151.0 12.31 105.75 1 July 1998............................................ 140.5 11.75 104.25 3 August 1998.......................................... 159.5 13.50 104.25 24 August 1998......................................... 142.5 12.25 103.75 2 September 1998....................................... 209.5 17.13 116.88
V-1 127 2. DIVIDEND DATA
HISTORICAL DIVIDENDS DECLARED --------------------- SEDGWICK SEDGWICK SHARE ADS** --------- --------- Year ended 31 December 1995........................................................ 6.5p* 32.5p 1996........................................................ 6.5p* 32.5p 1997........................................................ 7.0p 35.0p
- --------------- * Excludes foreign income dividend enhancements. ** Dividends were paid by the US Depositary to ADS holders in US dollars converted at the prevailing exchange rate. 3. EXCHANGE RATE DATA The following table shows, for the periods and dates indicated, certain information regarding the exchange rate for the pound sterling, based on the Noon Buying Rate, expressed in dollars per L1.
PERIOD AVERAGE YEAR ENDED 31 DECEMBER END RATE* HIGH LOW ---------------------- ---------- ------- ------ ------ 1993................................................ 1.4775 1.5016 1.5900 1.4175 1994................................................ 1.5665 1.5319 1.6368 1.4615 1995................................................ 1.5535 1.5785 1.6440 1.5302 1996................................................ 1.7123 1.5606 1.7123 1.4948 1997................................................ 1.6427 1.6373 1.7035 1.5775
- --------------- * The average of the daily Noon Buying Rates during the period. On 25 August 1998, the date of announcement of the Ordinary Offer, the Noon Buying Rate for the pound sterling was $1.6386 per L1. V-2 128 APPENDIX VI -- ADDITIONAL INFORMATION 1. RESPONSIBILITY (a) The members of the Offer Committee of the board of directors of Marsh & McLennan, whose names are set out in paragraph 2(a) below, accept responsibility for the information contained in this document save for the information relating to the Sedgwick Group, the directors of Sedgwick and their immediate families and related trusts. To the best of the knowledge and belief of the members of the Offer Committee (who have taken all reasonable care to ensure that such is the case), the information contained in this document, for which they accept responsibility, is in accordance with the facts and does not omit anything likely to affect the import of such information. (b) The directors of Sedgwick, whose names are set out in paragraph 2(b) below, accept responsibility for the information contained in this document relating to the Sedgwick Group, the directors of Sedgwick and their immediate families and related trusts. To the best of the knowledge and belief of the directors of Sedgwick (who have taken all reasonable care to ensure that such is the case), the information contained in this document, for which they accept responsibility, is in accordance with the facts and does not omit anything likely to affect the import of such information. The foregoing statements are included solely to comply with rule 19.2 of the City Code and shall not be deemed to establish or expand liability under US securities laws or under the laws of any state of the US. 2. DIRECTORS AND EXECUTIVE OFFICERS OF MARSH & MCLENNAN AND SEDGWICK (a) The names of the members of the Offer Committee of the board of directors of Marsh & McLennan, whose registered office is 1209 Orange Street, Wilmington, Delaware 19801, and the positions they hold are as follows:
NAME POSITION ---- -------- Alexander John Court Smith.................. Chairman of the Board and Chief Executive Officer Norman Barham............................... Director, Vice Chairman of J&H Marsh & McLennan, Inc. Richard Henry Blum.......................... Director, Vice Chairman of J&H Marsh & McLennan, Inc. Francis Joseph Borelli...................... Senior Vice President and Chief Financial Officer Peter Coster................................ Director, President of Mercer Consulting Group, Inc. Jeffrey Wayne Greenberg..................... Director, Chairman and Chief Executive of Marsh & McLennan Risk Capital Corp. Gregory Frank Van Gundy..................... General Counsel and Secretary Lawrence Jay Lasser......................... Director, President and Chief Executive Officer of Putnam Investments, Inc. John Thomas Sinnott......................... Director, Vice Chairman and Chief Executive Officer of J&H Marsh & McLennan, Inc.
VI-1 129 (b) The names of the directors of Sedgwick, the registered office of which is Sackville House, 143-149 Fenchurch Street, London EC3M 6BN, and the positions they hold are as follows:
NAME POSITION ---- -------- Saxon Riley................................. Chairman William Robert Patrick White-Cooper......... Group Chief Executive Stuart Stanley Tarrant...................... Group Finance Director Quill Orme Healey........................... Vice-Chairman, Chairman of Sedgwick, Inc. John Mulock Hignett*........................ Director Sir Derek (Peter) Hornby*................... Director John Frances Lehman*........................ Director Ann McLaughlin*............................. Director Letizia Maria Brichetto Arnaboldi Moratti... Director Jeremy Pinchin.............................. Group Legal and Personnel Director Richard John Wolseley Titley................ Vice-Chairman David Peter Trezies......................... Director, Chairman of Sedgwick Limited
- --------------- * independent non-executive (c) The following are certain biographical details of the directors and executive officers of Marsh & McLennan:
NAME PRINCIPAL OCCUPATIONS OR EMPLOYMENT ---- ----------------------------------- A.J.C. Smith*........................... Mr. Smith, age 64, a citizen of the UK and US, has been Chairman of the Board and Chief Executive Officer of Marsh & McLennan since 1992. He served as President from 1986 to 1992. He joined William M. Mercer Limited, a Canadian subsidiary of Marsh & McLennan, in 1961. Mr. Smith is a trustee of the various mutual funds managed by Putnam Investment Management, Inc., a subsidiary of Marsh & McLennan. He is also Vice Chairman of the Central Park Conservancy, and a member of the Board of Trustees of The Carnegie Hall Society, Inc. and the Educational Broadcasting Corporation in New York City and a member of the board of overseers of Cornell University Medical College and Graduate School of Medical Sciences. Norman Barham*.......................... Mr. Barham, age 56, became a Vice Chairman of J&H Marsh & McLennan, Inc., a subsidiary of Marsh & McLennan, in 1997 following Marsh & McLennan's business combination with Johnson & Higgins. Mr. Barham joined Johnson & Higgins in 1975 and was selected to lead the Johnson & Higgins Global Business Group in 1992. He was elected an Executive Vice President of Johnson & Higgins in 1995 and President in 1996. Mr. Barham is a trustee of The College of Insurance and a member of the board of New York City Outward Bound.
VI-2 130
NAME PRINCIPAL OCCUPATIONS OR EMPLOYMENT ---- ----------------------------------- Lewis W. Bernard*....................... Mr. Bernard, age 56, is Chairman of Classroom, Inc., a c/o Morgan Stanley Group, Inc. non-profit educational corporation. He retired in 1991 from 1221 Ave. of the Americas Morgan Stanley & Co. Inc. where for almost 30 years he held New York, New York 10020 numerous positions, including that of chief administrative and financial officer. Mr. Bernard is a trustee or director of the American Museum of Natural History, The Commonwealth Fund, the Harvard Management Company, and the John and Mary R. Markle Foundation. Richard H. Blum*........................ Mr. Blum, age 59, became Vice Chairman of J&H Marsh & McLennan, Inc. a subsidiary of Marsh & McLennan, in 1997. He previously served as Chairman and Chief Executive Officer of Guy Carpenter & Company, Inc., a subsidiary of Marsh & McLennan, which he joined in 1958. Mr. Blum is a trustee of The College of Insurance and a director of The Bermuda Commodities Exchange. Frank J. Borelli*....................... Mr. Borelli, age 63, has been Senior Vice President and Chief Financial Officer of Marsh & McLennan since 1984. He is a director of The Interpublic Group of Companies, Inc. and United Water Resources, Inc. Mr. Borelli is the immediate past chairman and a director of the Financial Executives Institute, a director of the Private Sector Council, and a trustee of the New York City Chapter of the National Multiple Sclerosis Society and Vice Chairman of Nyack Hospital. Peter Coster*........................... Mr. Coster, age 59, is a citizen of the UK and President of Mercer Consulting Group, Inc., a subsidiary of Marsh & McLennan. He joined Mercer in 1984 upon its acquisition of a UK benefits consulting firm that Mr. Coster had joined in 1962. Robert F. Erburu*....................... Mr. Erburu, age 67, retired as Chairman of the Board of The c/o Times Mirror Company Times Mirror Company, a Los Angeles-based news and 220 West First Street information company, on 1 January 1996, a position he had Los Angeles, CA 90012 held since 1986. Mr. Erburu served as Chief Executive Officer of The Times Mirror Company from 1981 to 1995. Mr. Erburu is a director of Cox Communications, Inc., the Pacific Council on International Policy, the Tomas Rivera Center, the Los Angeles Annenberg Metropolitan Project and the Skirball Institute of American Values. He is Chairman of the Board of Trustees of The Huntington Library, Art Collections and Botanical Gardens and of the J. Paul Getty Trust, as well as a trustee of the National Gallery of Art, The Flora and William Hewlett Foundation and The Ahmanson Foundation, and a Fellow of the American Academy of Arts and Sciences. Mr. Erburu is also a member of the Business Council.
VI-3 131
NAME PRINCIPAL OCCUPATIONS OR EMPLOYMENT ---- ----------------------------------- Ray J. Groves*.......................... Mr. Groves, age 62, is Chairman of Legg Mason Merchant Ernst & Young Banking, Inc. He retired in 1994 from Ernst & Young where 787 Seventh Avenue he had held numerous positions for 37 years, including the New York, NY 10019 last 17 years as Chairman and Chief Executive Officer. He is a director of Consolidated Natural Gas Company, Electronic Data Systems Corporation, Lamalie Associates, Inc., RJR Nabisco, Inc. and Allegheny Teledyne, Inc. Mr. Groves is a member of the Board of Trustees of the Business Council of the United Nations and of the New York Public Policy Institute. He is also a managing director and treasurer of the Metropolitan Opera Association and a trustee of The Ohio State University Foundation. George Putnam*.......................... Mr. Putnam, age 72, is Chairman of Putnam Investment The Putnam Funds Management, Inc., a subsidiary of Marsh & McLennan, and is One Post Office Square Chairman of the Board of Trustees and President of the Boston, MA 02109 various mutual funds managed by Putnam. He is a director of Houghton Mifflin Company and Freeport-McMoran Copper & Gold, Inc. Mr. Putnam is also a trustee of the WGBH Educational Foundation, the Museum of Fine Arts (Boston), McLean Hospital, Massachusetts General Hospital, Vincent Memorial Hospital, Trustees of Reservations and New England Aquarium, and an overseer of the Boston Museum of Science, Northeastern University and College of the Atlantic. John D. Ong*............................ Mr. Ong, age 64, retired as Chairman and Chief Executive 4000 Embassy Parkway Officer of The BFGoodrich Company, on 1 July 1997, after Akron, Ohio 44333 more than 36 years with BFGoodrich. He is also a director of Ameritech Corporation, ASARCO Inc., Cooper Industries, Defiance, Inc., The Geon Company, The Kroger Company and TRW Inc. Mr. Ong is a trustee of the University of Chicago and the John S. and James L. Knight Foundation and is Chairman of the Board of the Musical Arts Association (Cleveland Orchestra). He is a former Chairman of The Business Roundtable.
VI-4 132
NAME PRINCIPAL OCCUPATIONS OR EMPLOYMENT ---- ----------------------------------- Jeffrey W. Greenberg*................... Mr. Greenberg, age 47, became Chairman and Chief Executive Marsh & McLennan Risk Capital Corp. Officer of Marsh & McLennan Risk Capital Corp., a 20 Horseneck Lane subsidiary of Marsh & McLennan, in 1996. From 1978 to 1995, Greenwich, CT 06830 he was employed by American International Group, Inc., including serving from 1991 as executive vice president with responsibility for its domestic brokerage group. Mr. Greenberg is a director of ACE Limited and a trustee of Brown University and the Spence School in New York City. The Rt. Hon. Lord Lang of Monkton*...... Lord Lang, age 58, is a citizen of the UK and was a member Kersland, Monkton of the British Parliament from 1979 to 1997, serving in the Ayrshire KA9 2QU cabinet as Secretary of State for Scotland from 1990 to United Kingdom 1995 and as President of the Board of Trade and Secretary of State for Trade and Industry from 1995 to 1997. Lord Lang was appointed to the Queen's Privy Council in 1990. He is deputy chairman of European Telecom plc, chairman of Murray Ventures Investment Trust plc and a non-executive director of Lithgows Ltd., CGU plc and Second Scottish National Trust plc. Adele Smith Simmons*.................... Mrs. Simmons, age 57, has been President of the John D. and McArthur Foundation Catherine T. MacArthur Foundation since 1989. She is a 140 South Dearborn St. director of First Chicago/NBD Corporation, the Synergos Chicago, Il 60603 Institute and the Union of Concerned Scientists and a member of the Council on Foreign Relations. David A. Olsen*......................... Mr. Olsen, age 60, served as Vice Chairman of Marsh & McLennan from May 1997 until December 1997. Prior to Marsh & McLennan's business combination with Johnson & Higgins, he was Chairman and Chief Executive Officer of Johnson & Higgins, which he joined in 1966. Mr. Olsen is a member of the Board of Trustees of Bowdoin College and an honorary director of the New York City Partnership. He is also a member of the boards of U.S. Trust Corporation, Sharon (Connecticut) Hospital, United Way of New York City and India House, and he serves as Vice Chairman of New York's South Street Seaport Museum and Co-Chairman of its Development Committee.
VI-5 133
NAME PRINCIPAL OCCUPATIONS OR EMPLOYMENT ---- ----------------------------------- Lawrence J. Lasser*..................... Mr. Lasser, age 55, is President and Chief Executive Putnam Investments, Inc. Officer of Putnam Investments, Inc., a subsidiary of Marsh One Post Office Square & McLennan. He joined Putnam in 1969. Mr. Lasser is a Boston, MA 02109 trustee of the various mutual funds managed by Putnam Investment Management, Inc., a subsidiary of Marsh & McLennan. He is a member of the Board of Governors and Executive Committee of the Investment Company Institute, a member of the Board of Overseers of the Museum of Fine Arts (Boston), a Trustee of Beth Israel/Deaconess Medical Center in Boston, a Trustee of the Vineyard Open Land Foundation, a member of the Council on Foreign Relations, and a member of the Board of Directors of the United Way of Massachusetts Bay. John T. Sinnott*........................ Mr. Sinnott, age 58, became Vice Chairman of J&H Marsh & McLennan, Inc., a subsidiary of Marsh & McLennan, in 1997 and its Chief Executive Officer in January 1998. He previously served Marsh & McLennan, Incorporated as Chief Executive Officer from 1995 and as President and Co-Chief Executive from 1990 and 1992, respectively. He joined Marsh & McLennan, Incorporated in 1963. Mr. Sinnott is a trustee of the Insurance Institute of America. Frank J. Tasco*......................... Mr. Tasco, age 71, retired in 1992 as Chairman of the Board and Chief Executive Officer of Marsh & McLennan, a position he had held since 1986. From December 1993 to December 1994, he served as Chairman of Borden, Inc. Mr. Tasco is Chairman of Angram, Inc. and a director of The Travelers Corporation and Travelers/Aetna Property & Casualty Corp. Gregory F. Van Gundy.................... Mr. Van Gundy, age 52, is General Counsel and Secretary of Marsh & McLennan. He joined Marsh & McLennan in 1974. Francis N. Bonsignore................... Mr. Bonsignore, age 51, has been Senior Vice President-Human Resources & Administration of Marsh & McLennan since 1990. Immediately prior thereto, he was a partner and National Director Human Resources for Price Waterhouse.
- --------------- * An asterisk next to a person's name indicates that such person serves as a director of Marsh & McLennan. Unless otherwise indicated, the business address of the aforementioned persons is 1166 Avenue of the Americas, New York, New York, and the above persons are citizens of the US. 3. PRINCIPAL PURCHASES In accordance with normal UK practice, Marsh & McLennan or its nominees or brokers (acting as agents for Marsh & McLennan) or a subsidiary of Marsh & McLennan may make certain purchases of Sedgwick Securities and Sedgwick Convertible Bonds outside the US during the period in which the Offers remain open VI-6 134 for acceptance pursuant to relief granted by the SEC staff from Rule 10b-13 of the Exchange Act. In accordance with the terms of the SEC relief that has been granted, among other things, (i) such purchases may not be effected within the US, (ii) information regarding such purchases must be disclosed in the US by press release to the extent that disclosure is made public in the UK pursuant to the City Code and (iii) Marsh & McLennan and any such other person must comply with any applicable rules of UK regulatory organisations, including the City Code and the rules of the London Stock Exchange. 4. SHAREHOLDINGS AND DEALINGS IN RELEVANT SEDGWICK SECURITIES AND SEDGWICK CONVERTIBLE BONDS (A) HOLDINGS (i) At the close of business on 2 September 1998 (being the latest practicable date prior to the posting of this document), 39,047,260 Sedgwick Shares had been conditionally acquired by J.P. Morgan Securities Limited and 15,815,085 Sedgwick Shares had been conditionally acquired by Cazenove both on behalf of Marsh & McLennan on the terms of the conditional share purchase agreements described in paragraph 5(a)(ii) below. (ii) At the close of business on 2 September 1998 (being the latest practicable date prior to the posting of this document), the interests (all of which are beneficial unless otherwise stated) of the directors of Sedgwick and their immediate families and related trusts in Sedgwick Securities (other than in Sedgwick Securities held under option) as shown in the register of directors' interests maintained under the provisions of Sections 324-328 of the Companies Act, were as follows:
NUMBER OF NAME SEDGWICK SHARES - ---- --------------- S. Riley.................................................... 38,273 W.R.P. White-Cooper......................................... 49,183 S.S. Tarrant................................................ 36,210 J. Pinchin*................................................. 481,059 Q.O. Healey**............................................... 47,062 R.J.W. Titley............................................... 39,829 J.M. Hignett................................................ 25,000 Sir D. Hornby............................................... -- J.F. Lehman................................................. -- A.D. McLaughlin............................................. -- L.M.B.A. Moratti............................................ -- D.P. Trezies................................................ 22,027
- --------------- * includes a non-beneficial interest of 453,000 Sedgwick Shares ** held as ADSs VI-7 135 (iii) At the close of business on 2 September 1998 (being the latest practicable date prior to the posting of this document), the interests of the directors in Sedgwick Shares conditionally awarded under the Sedgwick Share Option Schemes were as follows:
NUMBER DATE OF OF EXERCISE NAME GRANT OPTIONS PRICE EXERCISE PERIOD - ---- -------- ------- -------- ----------------- S. Riley.................................. 27/04/89 50,654 235.57p 27/04/92-27/04/99 12/04/90 86,957 253.16p 12/04/93-12/04/00 16/10/90 20,460 173.01p 16/10/93-16/10/00 22/03/93 51,151 174.97p 22/03/96-22/03/03 23/09/94 60,000 158.00p 23/09/97-23/09/04 21/06/96 100,000 144.00p 21/06/99-21/06/06 ------- 369,222 ======= W.R.P. White-Cooper....................... 27/04/89 66,496 235.57p 27/04/92-27/04/99 16/10/90 20,460 173.01p 16/10/93-16/10/00 22/03/93 51,151 174.97p 22/03/96-22/03/03 21/03/94 50,000 210.00p 21/03/97-21/03/04 23/09/94 50,000 158.00p 23/09/97-23/09/04 21/06/96 50,000 144.00p 21/06/99-21/06/06 ------- 288,107 ======= Q.O. Healey............................... 27/04/89 51,151 235.57p 27/04/92-27/04/99 16/10/90 20,460 173.01p 16/10/93-16/10/00 22/03/93 51,151 174.97p 22/03/96-22/03/03 21/03/94 50,000 210.00p 21/03/97-21/03/04 23/09/94 50,000 158.00p 23/09/97-23/09/04 21/06/96 50,000 144.00p 21/06/99-21/06/06 ------- 272,762 ======= J. Pinchin................................ 27/04/89 5,115 235.57p 27/04/92-27/04/99 12/04/90 25,575 253.16p 12/04/93-12/04/00 16/10/90 20,460 173.01p 16/10/93-16/10/00 22/03/93 20,460 174.97p 22/03/96-22/03/03 21/03/94 20,000 210.00p 21/03/97-21/03/04 23/09/94 10,000 158.00p 23/09/97-23/09/04 21/06/96 25,000 144.00p 21/06/99-21/06/06 ------- 126,610 ======= S.S. Tarrant.............................. 18/10/88 102,303 226.77p 18/10/91-18/10/98 27/04/89 51,151 235.57p 27/04/92-27/04/99 16/10/90 20,460 173.01p 16/10/93-16/10/00 22/03/93 51,151 174.97p 22/03/96-22/03/03 21/03/94 50,000 210.00p 21/03/97-21/03/04 23/09/94 50,000 158.00p 23/09/97-23/09/04 21/06/96 50,000 144.00p 21/06/99-21/06/06 ------- 375,065 =======
VI-8 136
NUMBER DATE OF OF EXERCISE NAME GRANT OPTIONS PRICE EXERCISE PERIOD - ---- -------- ------- -------- ----------------- R.J.W. Titley............................. 27/04/89 20,460 235.57p 27/04/92-27/04/99 12/04/90 20,460 253.16p 12/04/93-12/04/00 16/10/90 10,230 173.01p 16/10/93-16/10/00 22/03/93 51,151 174.97p 22/03/96-22/03/03 21/03/94 50,000 210.00p 21/03/97-21/03/04 23/09/94 50,000 158.00p 23/09/97-23/09/04 21/06/96 50,000 144.00p 21/06/99-21/06/06 ------- 252,301 ======= D.P. Trezies.............................. 27/04/89 40,921 235.57p 27/04/92-27/04/99 12/04/90 12,787 253.16p 12/04/93-12/04/00 16/10/90 20,460 173.01p 16/10/93-16/10/00 22/03/93 15,345 174.97p 22/03/96-22/03/03 21/03/94 12,500 210.00p 21/03/97-21/03/04 23/09/94 5,000 158.00p 23/09/97-23/09/04 21/06/96 17,500 144.00p 21/06/99-21/06/06 ------- 124,513 =======
(iv) At the close of business on 2 September 1998 (being the latest practicable date prior to the posting of this document), 1,015,326 Sedgwick Shares were held by Credit Suisse Asset Management Ltd, London on behalf of clients on a discretionary basis. In addition, Credit Suisse Asset Management Ltd, London has agreed, as set out in paragraph 4(b)(iii) below, to transfer 700,000 Sedgwick Shares to J.P. Morgan Securities Limited, acting on behalf of Marsh & McLennan, at 225 pence per share, subject to the following conditions: (1) the expiry of the applicable waiting period under the HSR Act; (2) there being in existence no order of any US court enjoining such sales and purchases; and (3) appropriate exemptive relief for the making of purchases and sales in the capital of Sedgwick by Marsh & McLennan outside the Offers having been obtained from the SEC. (B) DEALINGS (i) The following dealings for value in relevant Sedgwick Shares have been carried out by concert parties of Marsh & McLennan during the disclosure period:
NUMBER OF NAME TRANSACTION DATE PRICE SEDGWICK SHARES - ---- ----------- -------- ------- --------------- J.P. Morgan Securities Limited.......... Purchase 10/07/98 140p 14,323 J.P. Morgan Securities Limited.......... Sale 10/07/98 140p 14,323 J.P. Morgan Securities Limited.......... Conditional purchase 25/08/98 225p 700,000 J.P. Morgan Securities Limited.......... Conditional purchase 25/08/98 225p 8,718,000 J.P. Morgan Securities Limited.......... Conditional purchase 25/08/98 225p 348,000 J.P. Morgan Securities Limited.......... Conditional purchase 25/08/98 225p 7,500,000 J.P. Morgan Securities Limited.......... Conditional purchase 25/08/98 225p 2,274,275
VI-9 137
NUMBER OF NAME TRANSACTION DATE PRICE SEDGWICK SHARES - ---- ----------- -------- ------- --------------- J.P. Morgan Securities Limited.......... Conditional purchase 27/08/98 225p 6,006,985 J.P. Morgan Securities Limited.......... Conditional purchase 27/08/98 225p 7,500,000 J.P. Morgan Securities Limited.......... Conditional purchase 28/08/98 225p 6,000,000 Cazenove................................ Conditional purchase 27/08/98 225p 6,795,698 Cazenove................................ Conditional purchase 27/08/98 225p 6,000,000 Cazenove................................ Conditional purchase 28/08/98 225p 219,387 Cazenove................................ Conditional purchase 28/08/98 225p 800,000 Cazenove................................ Conditional purchase 28/08/98 225p 2,000,000
The conditional purchases shown above were made on behalf of Marsh & McLennan on the terms described in paragraph 5(a)(ii) below. (ii) The following dealings for value in Sedgwick Shares have been carried out by the directors of Sedgwick, members of their immediate families and related trusts during the disclosure period:
NUMBER OF NAME TRANSACTION DATE PRICE SEDGWICK SHARES - ---- ----------- -------- --------- --------------- S. Riley............................... Purchase* 07/10/97 87.97p 21,312 W.R.P. White-Cooper.................... Purchase* 07/10/97 87.97p 21,312 Q.O. Healey............................ Purchase 30/10/97 $10.74378 91.4** J. Pinchin............................. Purchase* 01/10/97 87.97p 21,312 Sale 28/10/97 121.00p 2,371 Purchase 28/10/97 121.00p 2,371 Sale 05/11/97 121.00p 2,465 Purchase 05/11/97 122.00p 2,440 Purchase 05/05/98 155.50p 44 Purchase 05/05/98 155.50p 46 S.S. Tarrant........................... Purchase* 07/10/97 87.97p 21,312 Sale 28/10/97 121.00p 2,479 Purchase 28/10/97 121.00p 2,479 Sale 21/11/97 124.00p 4,721 Purchase 21/11/97 124.00p 4,721 Sale 21/11/97 124.00p 4,721 Purchase 21/11/97 124.00p 4,721 Sale 07/04/98 165.50p 3,525 Purchase 07/04/98 166.00p 3,525 Purchase 05/05/98 155.50p 46 R.J.W. Titley.......................... Purchase* 01/10/97 87.97p 21,312 D.P. Trezies........................... Purchase* 12/11/97 87.97p 21,312
* arising on the exercise of Options ** Number of and price of Sedgwick ADSs VI-10 138 (iii) The following dealing for value in relevant Sedgwick Securities has been carried out by a concert party of Segdwick during the disclosure period:
NUMBER OF NAME TRANSACTION DATE PRICE SEDGWICK SHARES - ---- ----------- -------- --------- --------------- Credit Suisse Asset Management Ltd, Conditional London.............................. Sale 27/08/98 225p 700,000
(iv) Irrevocable undertakings to accept the Ordinary Offer have been received in respect of securities representing Sedgwick Shares, and undertakings have been received in respect of Sedgwick Options, in each case, as set out below:
SEDGWICK SEDGWICK NAME SHARES OPTIONS ---- ----------- -------- Phillips & Drew Fund Management Limited..................... 122,955,977 -- Schroder Investment Management (UK) Limited................. 76,732,862 -- Silchester International Investors Limited.................. 24,000,000 -- S. Riley.................................................... 38,273 369,222 W.R.P. White-Cooper......................................... 49,183 288,107 S.S. Tarrant................................................ 36,210 375,065 J. Pinchin.................................................. 28,059 126,610 Q.O. Healey*................................................ 47,062 272,762 R.J.W. Titley............................................... -- 252,301 J.M. Hignett................................................ 25,000 -- D.P. Trezies................................................ 22,027 124,513
- --------------- * held as ADSs An irrevocable undertaking to accept the Convertible Offer has been received as follows: Phillips & Drew Fund Management Limited..................... L250,000 nominal of Sedgwick Convertible Bonds
The irrevocable undertakings given by Phillips & Drew Fund Management Limited, Schroder Investment Management (UK) Limited and Silchester International Investors Limited will cease to be binding in the event that a competing offer is made for Sedgwick Securities at a price equal to or exceeding 250.5 pence per Sedgwick Share. All other irrevocable undertakings will continue to be binding in the event of a competing offer being made for Sedgwick Securities by a third party, unless the Ordinary Offer lapses or is withdrawn. (v) The following dealings for value in Sedgwick Shares, in aggregated form, have taken place during the disclosure period by those Sedgwick Shareholders listed in paragraph 4(b)(iv) above who have given irrevocable undertakings to accept the Offer: Phillips & Drew Fund Management Limited
SALES PURCHASES ------------------------------ ----------------------------- HIGH LOW VOLUME HIGH LOW VOLUME ------ ------ ---------- ------ ------ --------- 1 month...................... 159p 145p 155,533 -- -- -- 2 months..................... 146p 124p 2,099,000 140p 124p 1,913,000 3 months..................... 142p 137p 54,010 146p 137p 79,010 3 - 6 months................. 169p 148p 3,682,860 169p 148p 4,424,500 6 - 9 months................. 140p 124p 309,500 -- -- -- 9 - 12 months................ 129p 121p 9,112,350 129p 122p 8,964,457
VI-11 139 Silchester International Investors Limited
PURCHASES ----------------------------- HIGH LOW VOLUME ------ ------ --------- 1 month..................................................... -- -- -- 2 months.................................................... -- -- -- 3 months.................................................... 148p 126p 2,580,310 3 - 6 months................................................ 168p 153p 5,228,000 6 - 9 months................................................ 146p 134p 3,712,000 9 - 12 months............................................... 130p 124p 2,532,000
Schroder Investment Management (UK) Limited
SALES PURCHASES ------------------------------ ----------------------------- HIGH LOW VOLUME HIGH LOW VOLUME ------ ------ ---------- ------ ------ --------- 1 month...................... 156p 143p 3,718,445 148p 148p 211,375 2 months..................... 157p 132p 10,839,905 148p 148p 3,979,797 3 months..................... 147p 128p 3,432,960 132p 132p 3,460 3 - 6 months................. 168p 151p 3,118,858 165p 150p 336,325 6 - 9 months................. 142p 131p 3,622,545 153p 133p 246,932 9 - 12 months................ 129p 120p 1,345,299 124p 119p 117,879
(C) GENERAL Save as disclosed in this paragraph 4: (i) Marsh & McLennan does not own or control any relevant Sedgwick Securities or Sedgwick Convertible Bonds; (ii) no director or officer of Marsh & McLennan nor any member of his immediate family is interested (as described in Parts VI and X of the Companies Act) in relevant Sedgwick Securities or Sedgwick Convertible Bonds; (iii) no person acting in concert with Marsh & McLennan (excluding exempt market makers and exempt fund managers) owns or controls any relevant Sedgwick Securities or Sedgwick Convertible Bonds; (iv) neither Marsh & McLennan nor any person acting in concert with Marsh & McLennan has any arrangement of the kind referred to in paragraph 4(d) below; (v) no associate of Sedgwick (other than an exempt market maker or an associate by virtue of paragraphs (5), (6) or (7) of the definition of associate in paragraph 4(d) below) owns or controls any relevant Sedgwick Securities or Sedgwick Convertible Bonds; (vi) no discretionary fund manager (other than an exempt fund manager) connected with Sedgwick owns or controls any relevant Sedgwick Securities or Sedgwick Convertible Bonds; and (vii) no person mentioned in this paragraph 4 has dealt for value in relevant Sedgwick Securities or Sedgwick Convertible Bonds during the disclosure period. (D) DEFINITIONS For the purposes of this paragraph 4: (i) "arrangement" includes indemnity or option arrangements, and any agreement or understanding, formal or informal, of whatever nature relating to relevant Sedgwick Securities or Sedgwick Convertible Bonds which may be an inducement to deal or refrain from dealing; VI-12 140 (ii) "disclosure period" means the period commencing on 25 August 1997 (being the date 12 months prior to the commencement of the offer period) and ending on 2 September 1998 (being the latest practicable date prior to the posting of this document); (iii) "relevant Sedgwick Securities or Sedgwick Convertible Bonds" means Sedgwick Securities, Sedgwick Convertible Bonds and any securities convertible into, rights to subscribe for, options (including traded options) in respect of, and derivatives referenced to, any of the foregoing. (iv) "associate" means: (1) subsidiaries and associated companies of Sedgwick and companies of which any such subsidiaries or associated companies are associated companies; (2) banks, financial and other professional advisers (including stockbrokers) to Sedgwick or a company covered in (1) above, including persons controlling, controlled by or under the same control as such banks or financial or other professional advisers; (3) the directors of Sedgwick and the directors of any company covered in (1) above (together in each case with any member of their immediate families or related trusts); (4) the pension funds of Sedgwick or a company covered in (1) above; (5) an investment company, unit trust or other person whose investments an associate (as otherwise defined in this paragraph 4(d)) manages on a discretionary basis, in respect of the relevant investment accounts; (6) a person who owns or controls 5 per cent. or more of any class of relevant securities (as defined in paragraphs (a) to (d) in Note 2 on Rule 8 of the City Code) issued by Sedgwick, including a person who as a result of any transactions owns or controls 5 per cent. or more; (7) a company having a material trading arrangement with Sedgwick; and references to a "bank" do not apply to a bank whose sole relationship with Marsh & McLennan or Sedgwick or a company covered in (iv)(1) above is the provision of normal commercial banking services or such activities in connection with the Offers as handling acceptances and other registration work. For the purpose of this paragraph 4 of Appendix VI, ownership or control of 20 per cent. or more of the equity share capital of a company is regarded as the test of associated company status and "control" means a holding, or aggregate holdings, of shares carrying 30 per cent. or more of the voting rights attributable to the share capital of a company which are currently exercisable at a general meeting, irrespective of whether the holding or holdings give(s) de facto control. 5. MATERIAL CONTRACTS (a) The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by members of the Marsh & McLennan Group, since 25 August 1996 (being the date two years before the Offer Period began) and are or may be material: (i) a stock purchase agreement dated 12 March 1997 between Johnson & Higgins, the stockholders of Johnson & Higgins and Marsh & McLennan, pursuant to which Johnson & Higgins became a wholly owned subsidiary of Marsh & McLennan. Marsh & McLennan made payments in connection with the transaction totalling approximately US$1.8 billion, of which approximately 55 per cent. was paid to stockholders of Johnson & Higgins, which included Messrs. Barham and Olsen; (ii) thirteen conditional share purchase agreements between the parties listed below under which J.P. Morgan Securities Limited ("JPMSL") or Cazenove, as indicated below, agreed to purchase on behalf of Marsh & McLennan the number of Sedgwick Shares set out below at the price being paid to Sedgwick Shareholders under the Ordinary Offer conditional on (1) the expiration or VI-13 141 termination of all applicable waiting periods under the HSR Act, (2) there being in existence no order of any US court enjoining such sale and purchase and (3) appropriate exemptive relief for the making of purchases of Sedgwick Shares by Marsh & McLennan outside of the Ordinary Offer having been granted by the SEC:
DATE OF EXECUTION NUMBER OF BY VENDOR BUYER VENDOR SEDGWICK SHARES - ----------------- ----- ------ --------------- 27/08/98 JPMSL Credit Suisse Asset Management........................ 700,000 27/08/98 JPMSL Fidelity Investment Services Limited.................. 8,718,000 27/08/98 JPMSL Guinness Flight Hambros............................... 348,000 27/08/98 JPMSL Harris Associates..................................... 7,500,000 27/08/98 JPMSL Invesco GT............................................ 2,274,275 27/08/98 JPMSL Commercial Union Investment Management General Accident Investment Management General Accident Managed Pension Fund................. 6,006,985 27/08/98 JPMSL UBS Brinson Limited................................... 7,500,000 27/08/98 Cazenove Salomon Smith Barney UK Equities Limited.............. 6,000,000 28/08/98 JPMSL Silchester International Investors Ltd................ 6,000,000 28/08/98 Cazenove IAI International Limited............................. 6,795,698 28/08/98 Cazenove Morgan Stanley & Co. International Limited............ 219,387 28/08/98 Cazenove Royal & Sun Alliance Investment Management............ 800,000 28/08/98 Cazenove Salomon Smith Barney UK Equities Limited.............. 2,000,000
(iii) the credit facility agreement described in paragraph 7 of this Appendix VI. (b) The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by members of the Sedgwick Group, since 25 August 1996 (being the date two years before the Offer Period began) and are or may be material: (i) a joint venture agreement dated 3 August 1997 between Sedgwick, Sedgwick Internationaal B.V., Securfin S.p.A., Altrida Investments B.V., Mrs. L. Moratti and Mr. G. Moratti, setting out certain management and administrative provisions in relation to the operation of Nikols Sedgwick B.V. ("Nikols Sedgwick"). Pursuant to this agreement, two-thirds of the profits of Nikols Sedgwick available for distribution in each financial year will be distributed to shareholders. Sedgwick and Securfin have agreed there should be no transfer of shares in Nikols Sedgwick to a third party within two years of the completion date. Thereafter, the pre-emption rights set out in the articles of association of Nikols Sedgwick will apply. Intra-group transfers are permitted. It is deemed to be a default event should any of the shareholders be the subject of any change of control. For the purposes of this agreement, a change of control occurs when, inter alia, a party acquires or agrees to acquire or has options over more than 50 per cent. of the issued equity share capital of a shareholder (or any company which controls it). Upon the occurrence of a default event, the non-defaulting party shall be entitled in its absolute discretion to serve a compulsory purchase notice or a compulsory transfer notice within 20 business days of it becoming aware of the occurrence of the default event; (ii) a contribution agreement dated 3 August 1997 between Sedgwick, Sedgwick Internationaal B.V., Securfin S.p.A., Altrida Investment B.V., Mrs. L. Moratti and Mr. G. Moratti. Pursuant to this agreement the following interests were transferred to Nikols Sedgwick: (1) all Sedgwick Group interests in Italy, Portugal, Spain, Argentina, Brazil, Chile, Colombia, Uruguay and Mexico; and VI-14 142 (2) all Moratti Group interests in the Nikols Group in France, Italy, Netherlands, Portugal, Spain, Switzerland, Argentina, Brazil, British Virgin Islands and Chile. A balancing payment of L6.3 million was made in cash to Securfin by Sedgwick. In return for the transfer, members of the Moratti Group received "A" shares in Nikols Sedgwick and members of the Sedgwick Group received "B" shares with the result that 51 per cent. of the shareholding in Nikols Sedgwick is held by the Moratti Group and 49 per cent. by the Sedgwick Group; (iii) an agreement dated 17 February 1997 and made between Rivers Group Limited, a wholly-owned subsidiary of Sedgwick, and Transamerica Corporation for the acquisition of 49.9 per cent of the issued share capital of River Thames Insurance Company Limited (RTI) for L12 million plus up to a further L2 million which took the group's holdings in RTI to 98.74 per cent; and (iv) a sale and purchase agreement between Sedgwick Group Properties & Services Limited, a wholly-owned subsidiary of Sedgwick, and Casalina Real Estate Limited dated 23 December 1996 in connection with the disposal of the group's leasehold interest in Aldgate House for a consideration of L19.5 million. 6. BACKGROUND TO THE OFFERS In the latter part of May 1998, Saxon Riley, Chairman of Sedgwick, and Rob White-Cooper, Chief Executive of Sedgwick, asked A.J.C. Smith, Chairman and Chief Executive Officer of Marsh & McLennan, and Jeffrey Greenberg, Chairman and Chief Executive Officer of Marsh & McLennan Risk Capital Corporation (a wholly owned subsidiary of Marsh & McLennan), respectively, whether Marsh & McLennan had an interest in exploring a transaction involving Sedgwick. On 5 June 1998, Mr. Greenberg told Mr. White-Cooper, in a telephone call, that for Marsh & McLennan to pursue a transaction relating to Sedgwick, it would need additional information about Sedgwick's various businesses. A meeting was held on 12 June 1998 which included, among others, Mr. Greenberg and Frank J. Borelli, Senior Vice President and Chief Financial Officer of Marsh & McLennan, and Mr. White-Cooper and Stuart Tarrant, Group Finance Director of Sedgwick. At the meeting, Messrs. White-Cooper and Tarrant provided preliminary information as to Sedgwick and its various businesses. Following the 12 June 1998 meeting, there were additional discussions, from time to time, between representatives of Marsh & McLennan and representatives of Sedgwick including a meeting on 24 June 1998 between Messrs. Smith and Greenberg of Marsh & McLennan and Messrs. Riley and White-Cooper of Sedgwick, a further meeting on 6 July 1998 among Messrs. Smith, Greenberg, Riley, and White-Cooper, Mr. Quill Healey (Chairman and Chief Executive Officer of Sedgwick, Inc.) and Mr. Peter Coster (President of Mercer Consulting Group, Inc.), and a call from Mr. Smith to Mr. Riley on 13 July 1998. Also, there were discussions among the legal representatives of the parties as to the terms of a confidentiality agreement. On 22 July 1998, Willis Corroon Group plc announced a recommended offer by an entity formed by the investment firm of Kohlberg Kravis & Roberts & Co., L.P., which increased speculation in the marketplace concerning Sedgwick. On or about 23 July 1998, Messrs. Riley and White-Cooper contacted Messrs. Smith and Greenberg respectively, suggesting a continuation of these discussions. A confidentiality agreement between the parties was signed on 29 July 1998. Meetings were held on 29 and 30 July 1998, between representatives of Marsh & McLennan and its financial advisors and representatives of Sedgwick and its financial advisors, at which more detailed financial information about Sedgwick and its various businesses was provided to Marsh & McLennan. In addition, Messrs. Smith and Greenberg met with Messrs. Riley and White-Cooper and the representatives of Sedgwick indicated that if Marsh & McLennan were prepared to make a fair offer, they would be prepared to recommend it to their board. VI-15 143 On 5 August 1998, Mr. White-Cooper indicated to Mr. Greenberg that Sedgwick would like Marsh & McLennan to submit its indication of interest for Sedgwick by 13 August 1998 for consideration by the Sedgwick board of directors. Mr. White-Cooper indicated that Marsh & McLennan's indication of interest should reflect Marsh & McLennan's highest valuation if it was to be recommended by the board and that if its proposal was attractive to the board, Marsh & McLennan would be given the opportunity to conduct due diligence and to submit a definitive offer for consideration by the Sedgwick board of directors. From 6 August through 12 August, representatives of the two companies and their respective financial advisors held numerous discussions. On 13 August 1998, Marsh & McLennan delivered a letter expressing its non-binding indication of interest with respect to a possible transaction involving the two companies. In the letter, Marsh & McLennan noted that its indication of interest was conditional upon, among other things, the satisfactory completion of due diligence, receipt of appropriate assurances as to the continued commitment of key personnel, the approval of the respective boards of directors and the negotiation and execution of mutually acceptable definitive documentation. Marsh & McLennan also recognized the value of the Sedgwick name in certain markets and business segments and indicated a willingness to offer representation on the board of directors of Marsh & McLennan. During the week of 17 August 1998, legal, financial and operational due diligence was conducted. In addition, meetings were held between the respective management teams to determine the commitment of the respective managements to the transaction, the optimal integration plan for the two companies and the cost savings and synergies which may be generated thereby. Also, toward the end of the week of 17 August 1998 and during the following weekend, the financial and legal advisors of the two companies discussed the potential terms and conditions for an offer. On 19 August 1998 the board of Sedgwick met and received a report on the progress of the negotiations. On 24 August 1998, a definitive proposal for an offer for all outstanding Sedgwick Shares at a price per share of 225 pence was presented to, and approved by, the respective boards of directors of the two companies. Following such approvals, on the morning of 25 August 1998, Marsh & McLennan and Sedgwick jointly announced the terms of the recommended Ordinary Offer. 7. FINANCING ARRANGEMENTS The Offers are initially being financed through the acquisition finance facility provided by J.P. Morgan to Marsh & McLennan described below. Following completion of the acquisition of Sedgwick, Marsh & McLennan will investigate the most appropriate method of refinancing the acquisition finance facility. Neither the payment of interest on, nor the repayment of, nor the security for any liability (contingent or otherwise) of Marsh & McLennan under such arrangements will depend to any significant extent on the business of Sedgwick. CREDIT FACILITY AGREEMENT On 24 August 1998, (as amended on 2 September 1998), Marsh & McLennan entered into a revolving credit facility agreement (the "Facility") as borrower with J.P. Morgan Securities Inc. as Lead Arranger and J.P. Morgan as Administrative Agent and Lender. The Facility is a US dollar denominated, 364-day agreement under which Marsh & McLennan may borrow up to $2,250,000,000. The proceeds are available to fund the acquisition of Sedgwick Securities and Sedgwick Convertible Bonds pursuant to a cash tender offer, to make open market purchases of Sedgwick Securities and Sedgwick Convertible Bonds up to a total of $225,000,000, to refinance existing indebtedness of Sedgwick and to pay related transaction fees and expenses arising in connection with the acquisition. Any borrowings under the facility are either repayable in full at maturity of the facility, or upon the issuance by the borrower of any debt securities (excluding commercial paper and borrowings under the borrower's existing credit facilities), repayable at an amount to be determined by the size of such debt issuance. VI-16 144 The borrowings under the Facility will bear interest at the London inter-bank offered rate for euro-dollar advances for the relevant period plus a margin. In addition a "Facility Fee" will be paid based on the aggregate commitment irrespective of usage under the Facility. There are also various fees and commissions payable in connection with these arrangements. The Facility agreement contains certain representations, warranties, covenants and indemnities from Marsh & McLennan. On 2 September 1998 (the last practicable day prior to the posting of this document), Marsh & McLennan has made no drawings under this Facility. 8. COMPULSORY ACQUISITION If, within four months after the date of this document, as a result of the Ordinary Offer or otherwise, Marsh & McLennan acquires or contracts to acquire Sedgwick Securities representing at least 90 per cent. in value of Sedgwick Securities to which the Ordinary Offer relates, then (a) Marsh & McLennan will be entitled and intends to effect the compulsory acquisition procedures provided for in sections 428 to 430F of the Companies Act to compel the purchase of any outstanding Sedgwick Securities on the same terms as provided in the Ordinary Offer in accordance with the relevant procedures and time limits described in such Act, and (b) a holder of Sedgwick Securities may require Marsh & McLennan to purchase his Sedgwick Securities on the same terms as provided in the Ordinary Offer in accordance with the relevant procedures and time limits described in section 430A of the Companies Act. Similar procedures are available in respect of the Sedgwick Convertible Bonds under the Convertible Offer. If for any reason the above-mentioned compulsory acquisition procedures are not invoked, Marsh & McLennan will evaluate other alternatives to obtain the remaining Sedgwick Securities or Sedgwick Convertible Bonds not purchased pursuant to the Offers or otherwise. Such alternatives could include acquiring additional Sedgwick Securities or Sedgwick Convertible Bonds in the open market, in privately negotiated transactions, through another offer to purchase, by means of a scheme of arrangement under the Companies Act or otherwise or in the case of the Sedgwick Convertible Bonds by their redemption. Any additional acquisitions could be for a consideration greater or less than, or equal to, the consideration for Sedgwick Securities or Sedgwick Convertible Bonds under the Offers. However, under the City Code, except with the consent of the Panel, Marsh & McLennan may not acquire any Sedgwick Securities or Sedgwick Convertible Bonds on better terms than those of the Offers within six months of termination of the Offers if Marsh & McLennan, together with any persons acting in concert with it (as defined in the City Code), holds following the Offers, shares carrying more than 50 per cent. of the voting rights normally exercisable at general meetings of Sedgwick. Holders of Sedgwick Securities or Sedgwick Convertible Bonds do not have appraisal rights as a result of the Offers. However, in the event that the compulsory acquisition procedures referred to above are available to Marsh & McLennan, holders of Sedgwick Securities or Sedgwick Convertible Bonds whose Sedgwick Securities or Sedgwick Convertible Bonds have not been purchased pursuant to the Offers will have certain rights to object under section 430C of the Companies Act. 9. CERTAIN CONSEQUENCES OF THE OFFERS (A) MARKET EFFECT The past performance of the price of Sedgwick Shares and Sedgwick ADSs is no guide to the future. The purchase of Sedgwick Securities or Sedgwick Convertible Bonds pursuant to the Offers will reduce the number of holders of Sedgwick Securities and Sedgwick Convertible Bonds and the number of the Sedgwick Securities and Sedgwick Convertible Bonds that might otherwise trade publicly and, depending upon the number of Sedgwick Securities and Sedgwick Convertible Bonds so purchased, could adversely affect the liquidity and market value of the remaining Sedgwick Securities and Sedgwick Convertible Bonds held by the public. In addition, it is intended that Sedgwick Shares and Sedgwick Convertible Bonds will cease to be listed on the London Stock Exchange and Sedgwick ADSs will cease to be listed on the NYSE whether or not VI-17 145 Marsh & McLennan is in a position to effect the compulsory acquisition of any outstanding Sedgwick Shares or Sedgwick Convertible Bonds in accordance with the Companies Act as referred to above, and irrespective of the size of any outstanding minority in Sedgwick, if the Offers become or are declared unconditional. The value of all investments and the income from them can fall as well as rise and not all the amount invested may be realised. Sedgwick Securityholders and Sedgwick Bondholders accepting the Offers and electing to receive consideration in US dollars should be aware that they will be exposed to foreign currency risk. (B) PUBLIC AVAILABILITY OF INFORMATION In the event that Sedgwick Shares or Sedgwick Convertible Bonds continue to be listed on the London Stock Exchange following the purchase of Sedgwick Securities or Sedgwick Convertible Bonds pursuant to the Offers, holders of Sedgwick Shares or Sedgwick Convertible Bonds who have not tendered their Sedgwick Shares or Sedgwick Convertible Bonds pursuant to the Offers will continue to receive the same financial and other information from Sedgwick that Sedgwick presently is required by the rules of the London Stock Exchange to send to such holders. If Sedgwick Shares are no longer listed on the London Stock Exchange following the Offers, Sedgwick would no longer be required by those rules to make publicly available such financial and other information. Sedgwick ADSs are currently registered under the Exchange Act. Registration of such Sedgwick ADSs may be terminated upon application of Sedgwick to the SEC if Sedgwick ADSs are neither listed on a national securities exchange nor held by 300 or more beneficial owners in the US. Termination of registration of Sedgwick ADSs under the Exchange Act would substantially reduce the information required to be furnished by Sedgwick to holders of Sedgwick ADSs and to the SEC and would make certain provisions of the Exchange Act, such as the requirements of Rule 13e-3 thereunder with respect to "going private" transactions, no longer applicable to Sedgwick. Furthermore, "affiliates" of Sedgwick and persons holding "restricted securities" of Sedgwick may be deprived of the ability to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act. If, as a result of the purchase of Sedgwick ADSs pursuant to the Offer and prior to completing the compulsory acquisition procedures referred to in paragraph 9 above, Sedgwick is not required to maintain registration of Sedgwick ADSs under the Exchange Act, Marsh & McLennan intends to cause to apply for termination of such registration. If registration of Sedgwick ADSs is not terminated prior to completion of the aforementioned compulsory acquisition procedures, then Sedgwick ADSs will cease trading on the NYSE and the registration of Sedgwick ADSs under the Exchange Act would be terminated following completion of the aforementioned compulsory acquisition procedures. (C) MARGIN SECURITIES Sedgwick ADSs are currently "margin securities" under the regulations of the Board of Governors of the US Federal Reserve System, which status has the effect, among other things, of allowing US brokers to extend credit on the collateral of Sedgwick ADSs for the purposes of buying, carrying and trading in securities ("Purpose Loans"). Depending on factors such as the number of holders of record of Sedgwick ADSs and the number and market value of publicly held Sedgwick ADSs following the purchase of Sedgwick Securities pursuant to the Offer, it is possible that Sedgwick ADSs would no longer be eligible for listing on the NYSE. As a result, Sedgwick ADSs might no longer constitute margin securities and, therefore, could no longer be used as collateral for Purpose Loans made by US brokers. 10. LEGAL AND REGULATORY MATTERS (A) GENERAL Except as set out herein and other than the requirement to comply with the Panel's requirements in relation to the City Code and with US securities laws, Marsh & McLennan is not aware of (i) any licence or regulatory permit that appears to be material to the business of the Sedgwick Group taken as a whole, which might be adversely affected by Marsh & McLennan's acquisition of Sedgwick Securities as contemplated herein, or (ii) any approval or other action by any domestic or foreign governmental, administrative or regulatory agency or authority that appears to be material to the Sedgwick Group taken as a whole, and required for the VI-18 146 acquisition or ownership of Sedgwick Securities by Marsh & McLennan as contemplated herein. Should any such approval or other action be required, Marsh & McLennan currently contemplates that such approval or other action would be sought. There can be no assurance that any such approval or other action, if needed, would be obtained without substantial conditions being attached thereto or that failure to obtain any such approval or other action might not result in consequences adverse to Sedgwick's business. (B) UK REGULATION Upon completion of the Offers, Marsh & McLennan will become controllers (as defined in the Insurance Companies Act 1982 ("ICA")) of any insurance company within the Sedgwick Group. Accordingly, the prior consent of HMT is required under the ICA in respect of the new controllers. HMT is required to satisfy itself that the proposed controllers are fit and proper to become controllers of an insurance company and that, if the proposed controllers were to become controllers, the criteria of sound and prudent management specified in the ICA would continue to be met in respect of the insurance companies. Under the ICA, HMT has a period of three months in which either to consent to the change of control, or to notify the proposed controller of any objections to the proposals. In relation to the members of the Sedgwick Group which are regulated by the PIA and the SFA, the consent of those regulators will also be required to the proposed change of control. The regulators have 28 days from receiving notice of a proposed change of control either to consent to the proposed change of control or to serve a notice of objection in relation to the proposed change of control. In addition, the proposed change of control of certain insurance brokers within the Sedgwick Group and a Lloyd's members' agent must be notified to Lloyd's, as the proposed transaction will amount to a change of control of such companies for the purposes of the Lloyd's Byelaws. (C) EC MERGER CLEARANCE The Offers give rise to a concentration with a Community Dimension under the Regulation and it is anticipated notification will be made to the European Commission in the near future. The Offers are conditional on, amongst other things, the European Commission indicating in terms reasonably satisfactory to Marsh & McLennan that it does not intend to initiate proceedings under Article 6(1)(c) of the Regulation in respect of the Offers. The European Commission will only initiate proceedings if it finds that the concentration arising from the Offers falls within the scope of the Regulation and raises serious doubts as to its compatibility with the Common Market. The European Commission has one calendar month (beginning on the first working day following the date on which a complete notification is received by the European Commission) to make its decision (subject to extension). (D) US ANTITRUST LAWS Under the HSR Act and the rules that have been promulgated thereunder by the US Federal Trade Commission ("FTC"), certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the US Department of Justice (the "Antitrust Division") and the FTC and certain waiting period requirements have been satisfied. On 28 August 1998, Marsh & McLennan filed with the FTC and the Antitrust Division a Premerger Notification and Report Form in connection with the purchase of Sedgwick Securities and Sedgwick Convertible Bonds pursuant to the Offers. Under the provisions of the HSR Act applicable to the Offers, the purchase of Sedgwick Securities and Sedgwick Convertible Bonds pursuant to the Offers may not be consummated until the expiration of a 30 calendar day waiting period following the filing by Marsh & McLennan, unless both the Antitrust Division and the FTC terminate the waiting period prior thereto. If, within such 30 calendar day waiting period, either the Antitrust Division or the FTC requests additional information or documentary material from Marsh & McLennan, the waiting period would be extended for an additional 20 calendar days following substantial compliance by Marsh & McLennan with such request. Thereafter, the waiting period could be extended only by court order or with Marsh & McLennan's consent. If the acquisition of Sedgwick Securities or Sedgwick Convertible Bonds are delayed pursuant to a request by VI-19 147 the FTC or the Antitrust Division for additional information or documentary material pursuant to the HSR Act, the Offers may, but need not, be extended and in any event the purchase of and payment for Sedgwick Securities will be deferred until 20 days after the request is substantially complied with, unless the waiting period is sooner terminated by the FTC and the Antitrust Division. Only one extension of such waiting period pursuant to a request for additional information is authorised by the HSR Act and the rules promulgated thereunder, except by court order. Any such extension of the waiting period will not give rise to any withdrawal rights not otherwise provided for by applicable law. The FTC and the Antitrust Division frequently scrutinise the legality under the antitrust laws of transactions such as the proposed acquisition of Sedgwick Securities and Sedgwick Convertible Bonds by Marsh & McLennan pursuant to the Offers. At any time before or after the purchase by Marsh & McLennan of Sedgwick Securities or Sedgwick Convertible Bonds pursuant to the Offers, either of the FTC and the Antitrust Division could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Sedgwick Securities or Sedgwick Convertible Bonds pursuant to the Offers or seeking the divestiture of Sedgwick Securities or Sedgwick Convertible Bonds purchased by Marsh & McLennan or the divestiture of substantial assets of Marsh & McLennan, its subsidiaries or Sedgwick. Private parties and state attorneys general may also bring legal action under federal or state antitrust laws under certain circumstances. Based upon an examination of information relating to the businesses in which Sedgwick and its subsidiaries are engaged, Marsh & McLennan believes that the acquisition of Sedgwick Securities or Sedgwick Convertible Bonds pursuant to the Offers would not violate the antitrust laws. There can be no assurance, however, that a challenge to the Offers on antitrust grounds will not be made or, if such challenge is made, what the outcome will be. See Part A of Appendix I for Conditions to the Offers, including Conditions with respect to litigation and certain government actions which are relevant in this regard. (E) US STATE TAKEOVER LAWS A number of states of the US have adopted takeover laws and regulations which purport, in varying degrees, to be applicable to attempts to acquire securities of corporations which have substantial assets, shareholders, principal executive offices or principal places of business in such states. Marsh & McLennan believes that no such US state takeover statutes apply to the Offers and Marsh & McLennan has not attempted to comply with any such US state takeover statutes in connection with the Offers. Marsh & McLennan reserves the right to challenge the validity or applicability of any US state law allegedly applicable to the Offers and nothing in this document nor any action taken in connection herewith is intended as a waiver of that right. In the event that any US state takeover statute is asserted to be applicable to the Offers and an appropriate court does not determine that such law or regulation is not applicable to the Offers, Marsh & McLennan might be required to file certain information with, or to receive approvals from, the relevant US state authorities and might be unable to purchase Sedgwick Securities or Sedgwick Convertible Bonds pursuant to the Offers or be delayed in continuing or consummating the Offers. In such case Marsh & McLennan may not be obliged to purchase such Sedgwick Securities or Sedgwick Convertible Bonds. (F) LAWS OF OTHER JURISDICTIONS Sedgwick and certain of its subsidiaries conduct business in certain countries in addition to the UK and the US where regulatory filings or approvals may be required in connection with the Offers. Certain of such filings or approvals, if required, may not be made or obtained prior to the expiry of the Offers. There is no assurance that any such approvals would be obtained or that adverse consequences to Marsh & McLennan's or the Sedgwick Group's business might not result from a failure to obtain such approvals or from conditions that might be imposed in connection therewith. Marsh & McLennan and Sedgwick have agreed with each other to use all reasonable endeavours to procure the approval of the Offers and Marsh & McLennan has agreed not to invoke any of the Conditions relating to anti-trust, competition, regulatory or similar matters as a reason for delaying completion of the Offers except in certain circumstances. VI-20 148 11. UK TAXATION THE FOLLOWING STATEMENTS ARE INTENDED AS A GENERAL GUIDE TO THE POSITION UNDER UK LAW AND INLAND REVENUE PRACTICE AS AT THE DATE OF THIS DOCUMENT AND RELATE ONLY TO CERTAIN LIMITED ASPECTS OF THE TAXATION POSITION OF SEDGWICK SHAREHOLDERS AND SEDGWICK BONDHOLDERS WHO HOLD THEIR SEDGWICK SHARES AND/OR SEDGWICK CONVERTIBLE BONDS BENEFICIALLY AS AN INVESTMENT (OTHERWISE THAN UNDER A PERSONAL EQUITY PLAN) AND WHO ARE RESIDENT OR, IN THE CASE OF INDIVIDUALS, ORDINARILY RESIDENT IN THE UK FOR TAX PURPOSES AT ALL RELEVANT TIMES. Each Sedgwick Shareholder and Sedgwick Bondholder should consult his independent professional adviser regarding the tax consequences of valid acceptance of the Ordinary Offer and/or the Convertible Offer. (A) TAXATION OF CHARGEABLE GAINS Liability to UK taxation of chargeable gains ("CGT") will depend on the individual circumstances of Sedgwick Shareholders and Sedgwick Bondholders and on the form of consideration received. (i) Cash To the extent that a Sedgwick Shareholder or Sedgwick Bondholder receives cash under the Ordinary Offer or the Convertible Offer, this will constitute a disposal, or part disposal, of his Sedgwick Shares or Sedgwick Convertible Bonds respectively for CGT purposes and may, depending on that shareholder's or bondholder's individual circumstances, give rise to a liability to CGT. (ii) Loan Notes Liability to CGT arising from acceptance of the Loan Note Alternative will depend on the particular circumstances of each Sedgwick Shareholder and Sedgwick Bondholder. A Sedgwick Shareholder or Sedgwick Bondholder who either alone or together with persons connected with him holds not more than five per cent. of, or any class of, shares in or debentures of Sedgwick will not, to the extent that he receives Loan Notes under the Ordinary Offer or the Convertible Offer, be treated as making a disposal of Sedgwick Shares or Sedgwick Convertible Bonds for CGT purposes. Any gain or loss that would otherwise have arisen on a disposal of his Sedgwick Shares or Sedgwick Convertible Bonds will, in the case of an individual or other non-corporate shareholder, be "rolled-over" into the Loan Notes, and the Loan Notes will be treated as the same asset as his Sedgwick Shares or Sedgwick Convertible Bonds acquired at the same time and for the same consideration as he acquired his Sedgwick Shares or Sedgwick Convertible Bonds. To the extent that a Sedgwick Shareholder or Sedgwick Bondholder within the charge to corporation tax receives Loan Notes, any gain or loss which would otherwise have arisen on a disposal of its Sedgwick Shares or Sedgwick Convertible Bonds for a consideration equal to market value at the time of the exchange of the Sedgwick Shares or Sedgwick Convertible Bonds for Loan Notes will be "held over" and deemed to accrue on a subsequent disposal (including on redemption or repayment) of the Loan Notes. Any Sedgwick Shareholder or Sedgwick Bondholder who holds, either alone or together with persons connected with him, more than five per cent. of, or of any class of, the shares in or debentures of Sedgwick is advised that an application for clearance has been made to the Inland Revenue under Section 138 of the Taxation of Chargeable Gains Act 1992 that this transaction is being effected for bona fide commercial reasons and does not form part of a scheme or arrangement of which the main purpose or one of the main purposes is avoidance of liability to capital gains tax or corporation tax, although receipt of such clearance is not a condition of the Ordinary Offer or the Convertible Offer. Provided such clearance is given, any such shareholder or bondholder will be treated in the manner described in the preceding paragraphs. (iii) Disposal of Loan Notes A subsequent disposal of Loan Notes (including on redemption or repayment) may result in a CGT liability. For a Sedgwick Shareholder or Sedgwick Bondholder who is an individual or other non-corporate holder, the Loan Notes should not constitute qualifying corporate bonds for the purposes of UK taxation of chargeable VI-21 149 gains. Accordingly, any chargeable gain or allowable loss on disposal (including on redemption or repayment) of the Loan Notes should be calculated taking into account the allowable original cost to the holder of acquiring the relevant Sedgwick Shares. Indexation allowance on that cost should be available (when calculating a chargeable gain but not an allowable loss) in respect of any period of ownership of the Sedgwick Shares or Sedgwick Convertible Bonds up to April 1998. Thereafter, some taper relief may be available which will reduce the amount of chargeable gain realised on the subsequent disposal. For a Sedgwick Shareholder or Sedgwick Bondholder within the charge to corporation tax, the Loan Notes will be qualifying corporate bonds for the purposes of UK taxation of chargeable gains. Accordingly, no indexation allowance will be available for the period of ownership of the Loan Notes and, except to the extent any gain or loss which would otherwise have arisen on the disposal of its Sedgwick Shares or Sedgwick Convertible Bonds was "held over" and crystallises on a subsequent disposal as described above, no chargeable gain or allowable loss will arise. (B) TAXATION OF INCOME (i) Interest on Loan Notes Where any person in the UK collects or secures payment of interest on the Loan Notes or performs certain other functions on behalf of holders of Loan Notes (a "UK Collecting Agent"), or where interest on the Loan Notes is entrusted to any person in the UK for payment or distribution on behalf of Marsh & McLennan to holders of Loan Notes (a "UK Paying Agent), such UK Collecting Agent or UK Paying Agent (as the case may be) must normally deduct UK income tax at the lower rate (currently 20 per cent.) from the interest unless an exemption applies and, if so required, the UK Collecting Agent or UK Paying Agent (as the case may be) has obtained a valid and effective declaration in the form required by law or notice by the Inland Revenue. For a non-corporate holder of Loan Notes the gross amount of interest on the Loan Notes will form part of the recipient's income for the purposes of UK income tax. On a transfer of Loan Notes by an individual or other non-corporate body, a charge may arise under the accrued income scheme in respect of the interest on the Loan Notes which has accrued since the preceding interest paying date. A holder of Loan Notes within the charge to corporation tax in respect of the Loan Notes will generally be charged to UK corporation tax in respect of interest on, profits and gains arising from and fluctuations in the value of the Loan Notes, broadly in accordance with its authorised accounting method. (C) OTHER DIRECT TAX MATTERS Special tax provisions may apply to Sedgwick Shareholders who have acquired or acquire their Sedgwick Shares by exercising Options under the Sedgwick Share Option Schemes including provisions imposing a charge to income tax when such an option is exercised. (D) STAMP DUTY No stamp duty or stamp duty reserve tax will be payable by Sedgwick Shareholders or Sedgwick Bondholders as a result of accepting the Ordinary Offer or the Convertible Offer. Under current Inland Revenue practice no UK stamp duty or stamp duty reserve tax will be payable on the issue transfer or sale of (or on an agreement to transfer) Loan Notes. THE ABOVE SUMMARY IS INTENDED ONLY AS A GENERAL GUIDE TO THE TAXATION POSITION UNDER UK TAX LEGISLATION AND DOES NOT CONSTITUTE TAX OR LEGAL ADVICE. ANY PERSON WHO IS IN DOUBT AS TO HIS TAXATION POSITION OR WHO REQUIRES MORE DETAILED INFORMATION SHOULD CONSULT HIS OWN PROFESSIONAL TAX ADVISER. VI-22 150 12. US FEDERAL INCOME TAXATION The following is a general summary of certain US federal income tax consequences applicable to holders of Sedgwick Securities who accept the Ordinary Offer. This summary is based on current law which is subject to change, possibly with retroactive effect and therefore may affect the tax consequences described herein. This summary assumes that the Sedgwick Securities have been held as capital assets. This summary also assumes that Sedgwick is not and has never been either a passive foreign investment company or a controlled foreign corporation for US federal income tax purposes. This summary does not address the US federal income tax consequences applicable to holders subject to special rules, such as certain financial institutions, regulated investment companies, insurance companies, dealers in securities, exempt organisations, or persons holding Sedgwick Securities as part of a hedge, straddle or conversion transaction or to holders who acquired Sedgwick Securities as a result of Sedgwick Share Option Schemes or other employment based arrangements. Moreover it does not discuss the tax consequences that may be relevant to Sedgwick Bondholders that exchange Sedgwick Convertible Bonds pursuant to the Convertible Offer (other than the US federal income tax consequences of receiving interest on the Loan Notes). (A) US HOLDERS Acceptance of the Ordinary Offer In general, a US Holder of Sedgwick Securities that sells such securities pursuant to the Ordinary Offer will, for US federal income tax purposes, recognise gain or loss equal to the difference between such holder's adjusted tax basis in the Sedgwick Securities sold and the amount realised in exchange therefor. The amount realised by a US Holder in exchange for Sedgwick Securities will equal the amount of US dollars received (or, if a US Holder elects to receive pounds sterling, the dollar value of the pounds sterling received) by such holder. Such gain or loss generally will be capital gain or loss. Net capital gain (i.e., generally capital gain in excess of capital loss) recognized by an individual investor upon a disposition of a capital asset that has been held for more than 12 months will generally be subject to a maximum US federal income tax rate of 20 per cent., or, in the case of a capital asset that has been held for 12 months or less, will be subject to ordinary US federal income tax rates. In addition, an accrual basis US Holder of Sedgwick Securities that (i) transfers such securities pursuant to the Ordinary Offer, (ii) elects to receive pounds sterling and (iii) does not elect to be treated as a cash basis taxpayer pursuant to the foreign currency exchange regulations may have a foreign currency exchange gain or loss for US federal income tax purposes because of differences between the US dollars/pounds sterling exchange rates prevailing on the date of sale and on the date of payment. Any such currency gain or loss would be treated as ordinary income or loss and would be in addition to gain or loss recognised by the holder on the sale of Sedgwick Securities pursuant to the Ordinary Offer. (B) NON-US HOLDERS Interest on Loan Notes A Non-US Holder generally will not be subject to US federal income or withholding tax on payments of interest on a Loan Note, provided that (i) the holder is not (A) a direct or indirect owner of 10 per cent. of more of the total combined voting power of all classes of stock of Marsh & McLennan entitled to vote or (B) a controlled foreign corporation related to Marsh & McLennan actually or constructively through stock ownership, (ii) such interest payments are not effectively connected with the conduct by the Non-US Holder of a trade or business within the US and (iii) Marsh & McLennan or its paying agent receives certain information from the holder (or a financial institution that holds the Loan Notes in the ordinary course of its trade or business) certifying that such holder is a Non-US Holder. Payments of interest not exempt from US federal withholding tax as described above will generally be subject to withholding tax at a rate of 30 per cent., subject to reduction under an applicable income tax treaty (such as the US/UK double taxation treaty, pursuant to which US withholding tax generally would not apply on payments of interest on a Loan Note). To claim the benefit of a tax treaty, the holder must provide certification as required by US federal income tax law. In addition, the amount treated as interest on the Loan Notes, for US federal income tax purposes, will be VI-23 151 in excess of the stated interest on the Loan Notes, which will result in a portion of the principal with respect to the Loan Notes being treated as interest for US federal income tax purposes. (C) INFORMATION REPORTING AND BACKUP WITHHOLDING A holder of Sedgwick Securities may be subject to a 31 per cent. US federal backup withholding tax with respect to a cash payment if the holder (i) fails to furnish a taxpayer identification number ("TIN") to the payer, which, for an individual, would be his or her Social Security number, or establish an exemption from backup withholding, (ii) furnishes an incorrect TIN, (iii) is notified by the Internal Revenue Service that it has failed to report payments of interest or dividends or (iv) under certain circumstances, fails to certify, under penalty of perjury, that it has furnished a correct TIN and has been notified by the Internal Revenue Service that it is subject to backup withholding tax for failure to report interest or dividend payments. In order for a US Holder to prevent backup withholding on any cash payment delivered pursuant to the Ordinary Offer, such US Holder must provide the holder's correct taxpayer identification number and certify that such holder is not subject to US federal backup withholding tax by completing the Substitute Form W-9 which is included in the Letter of Transmittal or can otherwise be obtained from the US Depositary. In order for a Non-US Holder to prevent backup withholding on any cash payment delivered pursuant to the Ordinary Offer or with respect to any payment made on a Loan Note, such Non-US Holder generally must certify that such holder is a Non-US Holder. THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION ONLY AND IS INTENDED TO BE ONLY A SUMMARY OF THE PRINCIPAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE ORDINARY OFFER. EACH HOLDER OF SEDGWICK SECURITIES AND SEDGWICK CONVERTIBLE BONDS SHOULD CONSULT SUCH HOLDER'S TAX ADVISER CONCERNING THE UNITED STATES FEDERAL AND APPLICABLE STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES RELATED TO THE ORDINARY OFFER AND CONVERTIBLE OFFER. 13. CASH CONFIRMATION J.P. Morgan and Donaldson, Lufkin & Jenrette are satisfied that sufficient financial resources are available to Marsh & McLennan to satisfy full acceptance of the Offers. 14. FEES AND EXPENSES (a) Pursuant to letters between J.P. Morgan and Donaldson, Lufkin & Jenrette, respectively, and Marsh & McLennan dated 21 August 1998 and 24 August 1998 respectively, (together the "Engagement Letters"), J.P. Morgan and Donaldson, Lufkin & Jenrette, respectively, are acting as financial advisers to Marsh & McLennan in connection with the Offers. Pursuant to the terms of the Engagement Letters, J.P. Morgan's and Donaldson, Lufkin & Jenrette's fees are to be determined at a later date. In addition, Marsh & McLennan has agreed to indemnify J.P. Morgan and Donaldson, Lufkin & Jenrette and any company within their respective groups against, inter alia, certain losses and expenses arising out of the engagement or performance by J.P. Morgan and Donaldson, Lufkin & Jenrette of their duties pursuant to the Engagement Letters. (b) Cazenove is acting as broker to Marsh & McLennan in connection with the Offer. Cazenove's fees for services provided are to be determined at a later date. (c) Pursuant to an agreement dated 4 September 1998 (the "US Dealer Manager Agreement"), Marsh & McLennan has retained J.P. Morgan Securities Inc. and Donaldson, Lufkin & Jenrette Securities Corporation as US Dealer Managers for the Offers in the US to perform those services in connection with the Offers as are customarily performed in the US by investment banking concerns acting as dealer manager in connection with offers of a like nature. No additional fee will become payable by Marsh & McLennan under the terms of the US Dealer Manager Agreement. In addition, under the terms of the US Dealer Manager Agreement, Marsh & McLennan has agreed to indemnify the US Dealer Managers VI-24 152 and certain other persons against certain liabilities and expenses which may be incurred in connection with the Offers including liabilities under the US federal securities laws. (d) Marsh & McLennan has retained Computershare Services PLC as the UK Receiving Agent, Bank of New York as the US Depositary and Georgeson & Company Inc. as the Information Agent. Marsh & McLennan will pay the UK Receiving Agent, the US Depositary and the Information Agent reasonable and customary compensation for their services in connection with the Offers, together with reimbursement of out of pocket expenses. Marsh & McLennan will indemnify the UK Receiving Agent, the US Depositary and the Information Agent against certain liabilities and expenses in connection therewith, including liabilities under the US federal securities laws. Brokers, dealers, commercial banks and trust companies will be reimbursed by Marsh & McLennan for customary mailing and handling expenses incurred by them in forwarding material to their customers. (e) Marsh & McLennan will not pay any fees or commissions to any broker or dealer or any other person for soliciting acceptances of the Offers (other than to J.P. Morgan and Donaldson, Lufkin & Jenrette and their associates and the Information Agent, as described above). (f) Sedgwick will bear the expenses of its personnel and advisers in connection with the Offers. 15. SERVICE CONTRACTS OF SEDGWICK DIRECTORS (a) There are no service contracts between any director of Sedgwick and Sedgwick or any of its subsidiaries having more than 12 months to run and no such contract has been entered into or amended or replaced within the six months preceding the date of this document. (b) Certain of the Sedgwick executive directors are eligible to participate in the Sedgwick Share Option Schemes. Certain of them are also eligible to participate in the Senior Executive Incentive Plan ("SEIP"), and the 1998 Senior Incentive Plan ("SIP"). Under the SEIP, an annual bonus is paid, the amount of which relates to the individual's salary and certain performance targets but which may not exceed 60 per cent. of salary. This amount is matched by a further bonus of an equal amount, which is deferred for three years during which it is adjusted up or down to reflect movements in the Sedgwick Share price. On 24 August 1998, an amendment to the SEIP was adopted by the Compensation Committee of Sedgwick. This amendment provides that in the event of a change of control occurring following an offer to acquire all of the issued share capital of the company, deferred bonuses under the SEIP will become payable, adjusted to reflect changes in the Sedgwick Share price between the date of grant and the date the offer becomes unconditional. In addition annual bonuses for the current award year will become automatically payable. The amount of the annual bonus will be determined on the basis of actual performance during the relevant period and the payment will be made as soon as practicable after the first date when actual performance for the relevant period can be assessed. The payment will be made in cash and will include an additional cash sum equal in value to the participant's annual bonus (which will be payable in lieu of the deferred bonus to which he would otherwise have been entitled). The terms of the SIP were agreed in principle by the Compensation Committee of Sedgwick on 6 May 1998 and the rules were formally adopted and approved by the board on 24 August 1998. Under this plan, bonuses will be payable to certain executives by reference to performance targets during the course of 1998. The SIP provides that up to 50 per cent. of this bonus can be deferred with a matching element paid in Sedgwick Shares. On a change of control of Sedgwick during the year, the bonus for that year becomes payable automatically and is not subject to any continuation of employment thereafter. It shall be determined on the basis of actual performance during the relevant financial year but shall be no less than the amount which would have been payable if the target performance had been achieved. A payment will also be made on the basis that the participant would have taken 50 per cent. (or such other relevant percentage applicable to the individual) of his bonus on a deferred basis and satisfied any VI-25 153 necessary conditions until the end of the relevant retention period. For the purpose of calculating the value of the payment, the value of any Sedgwick Shares which would otherwise have been transferable to the participant shall be equal to their market value based on the terms of any offer to obtain control of Sedgwick. The SEIP and SIP will not operate in respect of 1999 and later years unless Marsh &McLennan agrees otherwise. (c) Amendments were made to the employment terms of Rob White-Cooper, Quill Healey, Jeremy Pinchin, Stuart Tarrant, David Trezies and Richard Titley by way of side letters issued on 4 August 1998. These letters offered a retention payment based on salary (payable in two instalments each of 50 per cent. of salary and the second being conditional on the director remaining in employment for a further period of 360 days or having ceased employment in specified circumstances) and a variable incentive payment of up to 100 per cent. of salary (calculated by reference to the price of Sedgwick Shares). Payments are dependent on the completion of a significant transaction by the Sedgwick Group or an offer for the shares of Sedgwick becoming unconditional before 30 December 1998, and on certain other conditions being satisfied. Sax Riley has been offered a similar arrangement, but without the second instalment of the retention payment resulting in a single fee of 50 per cent. of his salary payable on completion, plus a variable payment. (d) As part of the incentive and retention arrangements put in place in connection with the Offers, Marsh & McLennan has agreed to make awards of Marsh & McLennan deferred stock units to certain senior employees of the Sedgwick Group, to an aggregate value of approximately US$80,000,000 measured as at the date the Ordinary Offer is declared unconditional in all respects. The total amount available shall be allocated between individual participants so that each individual receives an award with a value of between 100 per cent. of his basic salary and US$1,000,000 (unless otherwise agreed with Marsh & McLennan). In particular, Marsh & McLennan has agreed to award certain directors of Sedgwick deferred stock units on the following basis.
VALUE OF DEFERRED STOCK DIRECTOR UNITS (US$) -------- ----------------------- Q.O. Healey................................................. 1,000,000 J. Pinchin.................................................. 750,000 R.J.W. Titley............................................... 380,000 D.P. Trezies................................................ 800,000 W.R.P. White-Cooper......................................... 1,000,000
If the Offers are declared unconditional in all respects, awards of deferred stock units will be granted in the above values (measured by reference to the price of Marsh & McLennan common stock at that date). Each award will, in normal circumstances, vest on the third anniversary of the date the Offers are declared unconditional in all respects and the participant will receive one Marsh & McLennan common stock for each deferred stock unit. Early vesting will, however, occur subject to certain exceptions where the participant's employment with the Marsh & McLennan Group ends prior to the third anniversary. (e) As part of the incentive and retention arrangements put in place in connection with the Offers, Marsh & McLennan has agreed to grant options within a period of 12 months after the date the Offers are declared unconditional in all respects to certain Sedgwick executives to be agreed between Marsh & McLennan and Sedgwick, but with each individual receiving no less than 1,500 Marsh & McLennan common stock and (subject to exceptional circumstances) no more than 9,000 Marsh & McLennan common stock options under the Marsh & McLennan Companies, Inc. 1997 Employee Incentive and Stock Award Plan. VI-26 154 (g) No proposal exists in connection with the Offers that any payment or other benefit be made or given to any director of Sedgwick as compensation for loss of office or as consideration for or in connection with his retirement from office. 16. SOURCES OF INFORMATION AND BASES OF CALCULATION In this document, unless otherwise stated, or the context otherwise requires, the following bases and sources have been used: (a) Unless otherwise stated, information concerning the Sedgwick Group has been extracted from Sedgwick's annual report and accounts for the three years ended 31 December 1997. (b) The value of the share capital of Sedgwick is based upon 554,165,137 Sedgwick Shares in issue on 2 September 1998 and excludes all Sedgwick Securities which could call to be issued on exercise in full of Options granted under the Sedgwick Share Option Schemes. (c) The average closing price of Sedgwick Share over the last six months is based on the closing middle market prices for a Sedgwick Share as derived from the Daily Official List. 17. OTHER INFORMATION (a) Save as disclosed in this document, no agreement, arrangement or understanding (including any compensation arrangement) exists between Marsh & McLennan or any person acting in concert with it for the purpose of the Offers and any of the directors, recent directors, shareholders or recent shareholders of Sedgwick having any connection with or dependence upon the Offers, other than the awards to certain employees who are also Sedgwick Securityholders as described in paragraph 15 of this Appendix VI. (b) Save as disclosed in this document, there is no agreement, arrangement or understanding whereby the beneficial ownership of any of the Sedgwick Securities or Sedgwick Convertible Bonds to be acquired by Marsh & McLennan pursuant to the Offers will be transferred to any other person, save that Marsh & McLennan reserves the right to transfer any such shares or securities to any member of the Marsh & McLennan Group. (c) J.P. Morgan and Donaldson Lufkin & Jenrette, which are regulated in the UK by The Securities and Futures Authority Limited, have given and not withdrawn their written consent to the issue of this document with the inclusion of their names including, in the case of J.P. Morgan, the reference to its valuation of the Loan Notes, in the form and context in which they appear. (d) Cazenove which is regulated in the UK by The Securities and Futures Authority Limited has given and not withdrawn its written consent to the issue of this document with the inclusion of its name in the form and context in which it appears. (e) Rothschild and Credit Suisse First Boston, which are regulated in the UK by The Securities and Futures Authority Limited have given and not withdrawn their written consent to the issue of this document with the inclusion of their names in the form and context in which they appear. (f) Save as disclosed in this document, the directors of Marsh & McLennan do not know of any material change in the financial or trading position of Marsh & McLennan since 31 December 1997, being the date to which Marsh & McLennan's last audited accounts were prepared. (g) Save as disclosed in this document, the directors of Sedgwick do not know of any material change in the financial or trading position of Sedgwick since 31 December 1997, being the date to which Sedgwick's last audited accounts were prepared. (h) Save as disclosed in this document, the total emoluments receivable by the directors of Marsh & McLennan will not be varied as a consequence of the proposed acquisition of Sedgwick, or by any other associated transaction. VI-27 155 (i) Mrs L.M.B.A. Moratti, who was appointed a director of Sedgwick on 17 December 1997, together with certain family members, controls Securfin S.p.A. and Securfin Altrida B.V. Those companies are parties to the joint venture agreement and related documentation in respect of the creation of the Nikols Sedgwick joint venture. As a result of the change of control resulting from the Offers becoming unconditional or if Mrs Moratti is removed as executive chairman of Nikols Sedgwick, Securfin S.p.A. will be entitled to exercise a put option requiring Sedgwick to purchase (or procure the purchase of) the 51 per cent of Nikols Sedgwick held by Securfin S.p.A. The price to be paid by Sedgwick under these circumstances in accordance with the joint venture agreement will be an amount equal to 1.5 X brokerage and fees for the twelve months to the end of the most recent quarter subject to certain adjustments in respect of net tangible assets/liabilities, capital paid in and dividends unpaid at the end of the relevant period. 18. DOCUMENTS AVAILABLE FOR INSPECTION Copies of the following documents will be available for inspection during normal business hours on weekdays (Saturdays, Sundays and public holidays excepted) at the offices of Freshfields, 65 Fleet Street, London EC4Y 1HS, while the Offers remain open for acceptance: (a) the Restated Certificate of Incorporation (as amended on 21 May 1997) and By-laws (as amended on 1 January 1998) of Marsh & McLennan; (b) the Memorandum and Articles of Association of Sedgwick; (c) the audited consolidated accounts of Marsh & McLennan for the financial periods ended on 30 December 1996 and 30 December 1997 and the interim results for the six months ended 30 June 1998; (d) the audited consolidation accounts of Sedgwick for the financial periods ended on 30 December 1996 and 30 December 1997 and the interim results for the six months ended 30 June 1998; (e) the letter of valuation of the Loan Notes by J.P. Morgan dated 4 September 1998; (f) the written consents referred to in paragraph 17 above; (g) the material contracts referred to in paragraph 5 above; (h) irrevocable commitments received in respect of Sedgwick Securities and Sedgwick Convertible Bonds; (i) a draft (subject to amendment) of the Loan Note Instrument; (j) the Offer Document and the Acceptance Forms; (k) a letter dated 25 August 1998 between Sedgwick and Marsh & McLennan; and (l) a full list of the dealings set out in aggregated form in paragraph 4(b)(v) of this Appendix VI. VI-28 156 APPENDIX VII -- CERTAIN PROVISIONS OF THE COMPANIES ACT PART XIIIA TAKEOVER OFFERS 428. TAKEOVER OFFERS (1) In this Part of this Act "takeover offer" means an offer to acquire all the shares, or all the shares of any class or classes, in a company (other than shares which at the date of the offer are already held by the offeror), being an offer on terms which are the same in relation to all the shares to which the offer relates or, where those shares include shares of different classes, in relation to all the shares of each class. (2) In subsection (1) "shares" means shares which have been allotted on the date of the offer but a takeover offer may include among the shares to which it relates all or any shares that are subsequently allotted before a date specified in or determined in accordance with the terms of the offer. (3) The terms offered in relation to any shares shall for the purposes of this section be treated as being the same in relation to all the shares or, as the case may be, all the shares of a class to which the offer relates notwithstanding any variation permitted by subsection (4). (4) A variation is permitted by this subsection where-- (a) the law of a country or territory outside the United Kingdom precludes an offer of consideration in the form or any of the forms specified in the terms in question or precludes it except after compliance by the offeror with conditions with which he is unable to comply or which he regards as unduly onerous; and (b) the variation is such that the persons to whom an offer of consideration in that form is precluded are able to receive consideration otherwise than in that form but of substantially equivalent value. (5) The reference in subsection (1) to shares already held by the offeror includes a reference to shares which he has contracted to acquire but that shall not be construed as including shares which are the subject of a contract binding the holder to accept the offer when it is made, being a contract entered into by the holder either for no consideration and under seal or for no consideration other than a promise by the offeror to make the offer. (6) In the application of subsection (5) to Scotland the words "and under seal" shall be omitted. (7) Where the terms of an offer make provision for their revision and for acceptances on the previous terms to be treated as acceptances on the revised terms, the revision shall not be regarded for the purposes of this Part of this Act as the making of a fresh offer and references in this Part of this Act to the date of the offer shall accordingly be construed as references to the date on which the original offer was made. (8) In this Part of this Act "the offeror" means, subject to section 430D, the person making a takeover offer and "the company" means the company whose shares are the subject of the offer. 429. RIGHT OF OFFEROR TO BUY OUT MINORITY SHAREHOLDERS (1) If, in a case in which a takeover offer does not relate to shares of different classes, the offeror has by virtue of acceptances of the offer acquired or contracted to acquire not less than nine-tenths in value of the shares to which the offer relates he may give notice to the holder of any shares to which the offer relates which the offeror has not acquired or contracted to acquire that he desires to acquire those shares. (2) If, in a case in which a takeover offer relates to shares of different classes, the offeror has by virtue of acceptances of the offer acquired or contracted to acquire not less than nine-tenths in value of the shares of any class to which the offer relates, he may give notice to the holder of any shares of that class which the offeror has not acquired or contracted to acquire that he desires to acquire those shares. VII-1 157 (3) No notice shall be given under subsection (1) or (2) unless the offeror has acquired or contracted to acquire the shares necessary to satisfy the minimum specified in that subsection before the end of the period of four months beginning with the date of the offer; and no such notice shall be given after the end of the period of two months beginning with the date on which he has acquired or contracted to acquire shares which satisfy that minimum. (4) Any notice under this section shall be given in the prescribed manner; and when the offeror gives the first notice in relation to an offer he shall send a copy of it to the company together with a statutory declaration by him in the prescribed form stating that the conditions for the giving of the notice are satisfied. (5) Where the offeror is a company (whether or not a company within the meaning of this Act) the statutory declaration shall be signed by a director. (6) Any person who fails to send a copy of a notice or a statutory declaration as required by subsection (4) or makes such a declaration for the purposes of that subsection knowing it to be false or without having reasonable grounds for believing it to be true shall be liable to imprisonment or a fine, or both, and for continued failure to send the copy or declaration, to a daily default fine. (7) If any person is charged with an offence for failing to send a copy of a notice as required by subsection (4) it is a defence for him to prove that he took reasonable steps for securing compliance with that subsection. (8) When during the period within which a takeover offer can be accepted the offeror acquires or contracts to acquire any of the shares to which the offer relates but otherwise than by virtue of acceptances of the offer, then, if-- (a) the value of the consideration for which they are acquired or contracted to be acquired ("the acquisition consideration") does not at that time exceed the value of the consideration specified in the terms of the offer; or (b) those terms are subsequently revised so that when the revision is announced the value of the acquisition consideration, at the time mentioned in paragraph (a) above, no longer exceeds the value of the consideration specified in those terms, the offeror shall be treated for the purposes of this section as having acquired or contracted to acquire those shares by virtue of acceptances of the offer; but in any other case those shares shall be treated as excluded from those to which the offer relates. 430. EFFECT OF NOTICE UNDER S 429 (1) The following provisions shall, subject to section 430C, have effect where a notice is given in respect of any shares under section 429. (2) The offeror shall be entitled and bound to acquire those shares on the terms of the offer. (3) Where the terms of an offer are such as to give the holder of any shares a choice of consideration the notice shall give particulars of the choice and state-- (a) that the holder of the shares may within six weeks from the date of the notice indicate his choice by a written communication sent to the offeror at an address specified in the notice; and (b) which consideration specified in the offer is to be taken as applying in default of his indicating a choice as aforesaid; and the terms of the offer mentioned in subsection (2) shall be determined accordingly. (4) Subsection (3) applies whether or not any time-limit or other conditions applicable to the choice under the terms of the offer can still be complied with; and if the consideration chosen by the holder of the shares-- VII-2 158 (a) is not cash and the offeror is no longer able to provide it; or (b) was to have been provided by a third party who is no longer bound or able to provide it, the consideration shall be taken to consist of an amount of cash payable by the offeror which at the date of the notice is equivalent to the chosen consideration. (5) At the end of six weeks from the date of the notice the offeror shall forthwith-- (a) send a copy of the notice to the company; and (b) pay or transfer to the company the consideration for the shares to which the notice relates. (6) If the shares to which the notice relates are registered the copy of the notice sent to the company under subsection (5)(a) shall be accompanied by an instrument of transfer executed on behalf of the shareholder by a person appointed by the offeror; and on receipt of that instrument the company shall register the offeror as the holder of those shares. (7) If the shares to which the notice relates are transferable by the delivery of warrants or other instruments the copy of the notice sent to the company under subsection (5)(a) shall be accompanied by a statement to that effect; and the company shall on receipt of the statement issue the offeror with warrants or other instruments in respect of the shares and those already in issue in respect of the shares shall become void. (8) Where the consideration referred to in paragraph (b) of subsection (5) consists of shares or securities to be allotted by the offeror the reference in that paragraph to the transfer of the consideration shall be construed as a reference to the allotment of the shares or securities to the company. (9) Any sum received by a company under paragraph (b) of subsection (5) and any other consideration received under that paragraph shall be held by the company on trust for the person entitled to the shares in respect of which the sum or other consideration was received. (10)Any sum received by a company under paragraph (b) of subsection (5), and any dividend or other sum accruing from any other consideration received by a company under that paragraph, shall be paid into a separate bank account, being an account the balance on which bears interest at an appropriate rate and can be withdrawn by such notice (if any) as is appropriate. (11)Where after reasonable enquiry made at such intervals as are reasonable the person entitled to any consideration held on trust by virtue of subsection (9) cannot be found and twelve years have elapsed since the consideration was received or the company is wound up the consideration (together with any interest, dividend or other benefit that has accrued from it) shall be paid into court. (12)In relation to a company registered in Scotland, subsections (13) and (14) shall apply in place of subsection (11). (13)Where after reasonable enquiry made at such intervals as are reasonable the person entitled to any consideration held on trust by virtue of subsection (9) cannot be found and twelve years have elapsed since the consideration was received or the company is wound up-- (a) the trust shall terminate; (b) the company or, as the case may be, the liquidator shall sell any consideration other than cash and any benefit other than cash that has accrued from the consideration; and (c) a sum representing-- (i) the consideration so far as it is cash; (ii) the proceeds of any sale under paragraph (b) above; and (iii) any interest, dividend or other benefit that has accrued from the consideration, shall be deposited in the name of the Accountant of Court in a bank account such as is referred to in subsection (10) and the receipt for the deposit shall be transmitted to the Accountant of Court. VII-3 159 (14)Section 58 of the Bankruptcy (Scotland) Act 1985 (so far as consistent with this Act) shall apply with any necessary modifications to sums deposited under subsection (13) as that section applies to sums deposited under section 57(1)(a) of that Act. (15)The expenses of any such enquiry as is mentioned in subsection (11) or (13) may be defrayed out of the money or other property held on trust for the person or persons to whom the enquiry relates. 430A. RIGHT OF MINORITY SHAREHOLDER TO BE BOUGHT OUT BY OFFEROR (1) If a takeover offer relates to all the shares in a company and at any time before the end of the period within which the offer can be accepted-- (a) the offeror has by virtue of acceptances of the offer acquired or contracted to acquire some (but not all) of the shares to which the offer relates; and (b) those shares, with or without any other shares in the company which he has acquired or contracted to acquire, amount to not less than nine-tenths in value of all the shares in the company, the holder of any shares to which the offer relates who has not accepted the offer may by a written communication addressed to the offeror require him to acquire those shares. (2) If a takeover offer relates to shares of any class or classes and at any time before the end of the period within which the offer can be accepted-- (a) the offeror has by virtue of acceptances of the offer acquired or contracted to acquire some (but not all) of the shares of any class to which the offer relates; and (b) those shares, with or without any other shares of that class which he has acquired or contracted to acquire, amount to not less than nine-tenths in value of all the shares of that class, the holder of any shares of that class who has not accepted the offer may by a written communication addressed to the offeror require him to acquire those shares. (3) Within one month of the time specified in subsection (1) or, as the case may be, subsection (2) the offeror shall give any shareholder who has not accepted the offer notice in the prescribed manner of the rights that are exercisable by him under that subsection; and if the notice is given before the end of the period mentioned in that subsection it shall state that the offer is still open for acceptance. (4) A notice under subsection (3) may specify a period for the exercise of the rights conferred by this section and in that event the rights shall not be exercisable after the end of that period; but no such period shall end less than three months after the end of the period within which the offer can be accepted. (5) Subsection (3) does not apply if the offeror has given the shareholder a notice in respect of the shares in question under section 429. (6) If the offeror fails to comply with subsection (3) he and, if the offeror is a company, every officer of the company who is in default or to whose neglect the failure is attributable, shall be liable to a fine and for continued contravention, to a daily default fine. (7) If an offeror other than a company is charged with an offence for failing to comply with subsection (3) it is a defence for him to prove that he took all reasonable steps for securing compliance with that subsection. 430B. EFFECT OF REQUIREMENT UNDER S 430A (1) The following provisions shall, subject to section 430C, have effect where a shareholder exercises his rights in respect of any shares under section 430A. (2) The offeror shall be entitled and bound to acquire those shares on the terms of the offer or on such other terms as may be agreed. VII-4 160 (3) Where the terms of an offer are such as to give the holder of shares a choice of consideration the holder of the shares may indicate his choice when requiring the offeror to acquire them and the notice given to the holder under section 430A(3)-- (a) shall give particulars of the choice and of the rights conferred by this subsection; and (b) may state which consideration specified in the offer is to be taken as applying in default of his indicating a choice; and the terms of the offer mentioned in subsection (2) shall be determined accordingly. (4) Subsection (3) applies whether or not any time-limit or other conditions applicable to the choice under the terms of the offer can still be complied with; and if the consideration chosen by the holder of the shares-- (a) is not cash and the offeror is no longer able to provide it; or (b) was to have been provided by a third party who is no longer bound or able to provide it, the consideration shall be taken to consist of an amount of cash payable by the offeror which at the date when the holder of the shares requires the offeror to acquire them is equivalent to the chosen consideration. 430C. APPLICATIONS TO THE COURT (1) Where a notice is given under section 429 to the holder of any shares the court may, on an application made by him within six weeks from the date on which the notice was given-- (a) order that the offeror shall not be entitled and bound to acquire the shares; or (b) specify terms of acquisition different from those of the offer. (2) If an application to the court under subsection (1) is pending at the end of the period mentioned in subsection (5) of section 430 that subsection shall not have effect until the application has been disposed of. (3) Where the holder of any shares exercises his rights under section 430A the court may, on an application made by him or the offeror, order that the terms on which the offeror is entitled and bound to acquire the shares shall be such as the court thinks fit. (4) No order for costs or expenses shall be made against a shareholder making an application under subsection (1) or (3) unless the court considers-- (a) that the application was unnecessary, improper or vexatious; or (b) that there has been unreasonable delay in making the application or unreasonable conduct on his part in conducting the proceedings on the application. (5) Where a takeover offer has not been accepted to the extent necessary for entitling the offeror to give notices under subsection (1) or (2) of section 429 the court may, on the application of the offeror, make an order authorising him to give notices under that subsection if satisfied-- (a) that the offeror has after reasonable enquiry been unable to trace one or more of the persons holding shares to which the offer relates; (b) that the shares which the offeror has acquired or contracted to acquire by virtue of acceptances of the offer, together with the shares held by the person or persons mentioned in paragraph (a), amount to not less than the minimum specified in that subsection; and (c) that the consideration offered is fair and reasonable; but the court shall not make an order under this subsection unless it considers that it is just and equitable to do so having regard, in particular, to the number of shareholders who have been traced but who have not accepted the offer. VII-5 161 430D. JOINT OFFERS (1) A takeover offer may be made by two or more persons jointly and in that event this Part of this Act has effect with the following modifications. (2) The conditions for the exercise of the rights conferred by sections 429 and 430A shall be satisfied by the joint offerors acquiring or contracting to acquire the necessary shares jointly (as respects acquisitions by virtue of acceptances of the offer) and either jointly or separately (in other cases); and, subject to the following provisions, the rights and obligations of the offeror under those sections and sections 430 and 430B shall be respectively joint rights and joint and several obligations of the joint offerors. (3) It shall be a sufficient compliance with any provision of those sections requiring or authorising a notice or other document to be given or sent by or to the joint offerors that it is given or sent by or to any of them; but the statutory declaration required by section 429(4) shall be made by all of them and, in the case of a joint offeror being a company, signed by a director of that company. (4) In sections 428, 430(8) and 430E references to the offeror shall be construed as references to the joint offerors or any of them. (5) In section 430(6) and (7) references to the offeror shall be construed as references to the joint offerors or such of them as they may determine. (6) In sections 430(4)(a) and 430B(4)(a) references to the offeror being no longer able to provide the relevant consideration shall be construed as references to none of the joint offerors being able to do so. (7) In section 430C references to the offeror shall be construed as references to the joint offerors except that any application under subsection (3) or (5) may be made by any of them and the reference in subsection (5)(a) to the offeror having been unable to trace one or more of the persons holding shares shall be construed as a reference to none of the offerors having been able to do so. 430E. ASSOCIATES (1) The requirement in section 428(1) that a takeover offer must extend to all the shares, or all the shares of any class or classes, in a company shall be regarded as satisfied notwithstanding that the offer does not extend to shares which associates of the offeror hold or have contracted to acquire; but, subject to subsection (2), shares which any such associate holds or has contracted to acquire, whether at the time when the offer is made or subsequently, shall be disregarded for the purposes of any reference in this Part of this Act to the shares to which a takeover offer relates. (2) Where during the period within which a takeover offer can be accepted any associate of the offeror acquires or contracts to acquire any of the shares to which the offer relates, then, if the condition specified in subsection (8)(a) or (b) of section 429 is satisfied as respects those shares they shall be treated for the purposes of that section as shares to which the offer relates. (3) In section 430A(1)(b) and (2)(b) the reference to shares which the offeror has acquired or contracted to acquire shall include a reference to shares which any associate of his has acquired or contracted to acquire. (4) In this section "associate", in relation to an offeror means-- (a) a nominee of the offeror; (b) a holding company, subsidiary or fellow subsidiary of the offeror or a nominee of such a holding company, subsidiary or fellow subsidiary; (c) a body corporate in which the offeror is substantially interested; or (d) any person who is, or is a nominee of, a party to an agreement with the offeror for the acquisition of, or of an interest in, the shares which are the subject of the takeover offer, being an agreement which VII-6 162 includes provisions imposing obligations or restrictions such as are mentioned in section 204 (2)(a). (5) For the purposes of subsection (4)(b) a company is a fellow subsidiary of another body corporate if both are subsidiaries of the same body corporate but neither is a subsidiary of the other. (6) For the purposes of subsection (4)(c) an offeror has a substantial interest in a body corporate if-- (a) that body or its directors are accustomed to act in accordance with his directions or instructions; or (b) he is entitled to exercise or control the exercise of one-third or more of the voting power at general meetings of that body. (7) Subsections (5) and (6) of section 204 shall apply to subsection (4)(d) above as they apply to that section and subsections (3) and (4) of section 203 shall apply for the purposes of subsection (6) above as they apply for the purposes of subsection (2)(b) of that section. (8) Where the offeror is an individual his associates shall also include his spouse and any minor child or step-child of his. 430F. CONVERTIBLE SECURITIES (1) For the purposes of this Part of this Act securities of a company shall be treated as shares in the company if they are convertible into or entitle the holder to subscribe for such shares; and references to the holder of shares or a shareholder shall be construed accordingly. (2) Subsection (1) shall not be construed as requiring any securities to be treated-- (a) as shares of the same class as those into which they are convertible or for which the holder is entitled to subscribe; or (b) as shares of the same class as other securities by reason only that the shares into which they are convertible or for which the holder is entitled to subscribe are of the same class. VII-7 163 APPENDIX VIII -- DEFINITIONS The following definitions apply throughout this document, unless the context requires otherwise: "Acceptance Forms" the blue Bondholder Form of Acceptance, the white Shareholder Form of Acceptance and, in respect of Sedgwick ADS holders only, the Letter of Transmittal and the notice of guaranteed delivery to accompany the Offer Document. "Acceptance Condition" the Condition as to acceptances set out in paragraph (a) of Part A of Appendix I and paragraph 2 of Part B of Appendix I. "Bondholder Form of Acceptance" the form of acceptance, authority and election relating to the Convertible Offer for use by Sedgwick Bondholders. "Book-Entry Confirmation" the confirmation of a book-entry transfer of Sedgwick ADSs into the US Depositary's account at a Book-Entry Transfer facility. "Book-Entry Transfer Facility" The Depositary Trust Company or the Philadelphia Depositary Trust Company. "Business Day" any day, other than a Saturday or Sunday or a US federal holiday or UK Bank Holiday, and consisting of the time period from 12.01 a.m. until and including 12.00 midnight (New York City time). "Cazenove" Cazenove & Co. "Cedel" Cedel Bank, societe anonyme. "certificated" or "certificated form" a share or other security which is not in uncertificated form (that is, not in CREST). "City Code" the City Code on Takeovers and Mergers. "Closing Price" the closing middle-market quotation of a security on the London Stock Exchange as derived from the Daily Official List. "Companies Act" or "Act" the Companies Act 1985 (as amended). "Conditions" the conditions of the Offers described in Part A of Appendix I and "Condition" means any one of them. "Conversion Date" has the meaning given to it in the Trust Deed. "Convertible Offer" the recommended offer by J.P. Morgan and Donaldson, Lufkin & Jenrette, on behalf of Marsh & McLennan, on the terms and Conditions set out in this document and the relevant Acceptance Form including, where the context requires, the Loan Note Alternative and any subsequent revision, variation, extension or renewal of such offer and such alternative, in each case for all of the outstanding Sedgwick Convertible Bonds. "Credit Suisse First Boston" Credit Suisse First Boston (Europe) Limited. "CREST" the relevant system (as defined in the Regulations) in respect of which CRESTCo is the Operator (as defined in the Regulations). "CRESTCo" CRESTCo Limited. "CREST member" a person who has been admitted by CRESTCo as a system-member (as defined in the Regulations). VIII-1 164 "CREST participant" a person who is, in relation to CREST, a system-participant (as defined in the Regulations). "CREST sponsor" a CREST participant admitted to CREST as a Crest sponsor. "CREST sponsored member" a CREST member admitted to CREST as a sponsored member. "Daily Official List" the Daily Official List of the London Stock Exchange. "Dealer Managers" J.P. Morgan Securities Inc. and Donaldson, Lufkin & Jenrette Securities Corporation in their capacities as dealer managers for the Offers in the US. "Donaldson, Lufkin & Jenrette" Donaldson, Lufkin & Jenrette International. "Eligible Institution" a financial institution (including most banks, savings and loan associations and brokerage houses) which is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Program or the Stock Exchange Medallion Program. "Euroclear" Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear system. "Exchange Act" the US Securities and Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Guaranteed Delivery Procedures" the guaranteed delivery procedures for Sedgwick ADSs set out in paragraph 11 of Part B of Appendix I. "HMT" Her Majesty's Treasury. "HSR Act" the Hart-Scott-Rodino Antitrust Improvement Act of 1976 (as amended). "Initial Closing Date" 3.00 p.m. (London time), 10.00 a.m. (New York City time) on 5 October 1998, or such later time(s) and/or date(s) as Marsh & McLennan may, with the consent of the Panel or in accordance with the rules of the City Code decide, in which case the term "Initial Closing Date" shall mean the latest time and date at which the Offers, as so extended by Marsh & McLennan, will expire. "Initial Offer Period" the period from the date of this document to and including the Initial Closing Date. "J.P. Morgan" Morgan Guaranty Trust Company of New York. "Letter of Transmittal" the letter of transmittal relating to the Ordinary Offer for use by holders of Sedgwick ADSs. "LIBOR" the rate of interest determined on the basis of the arithmetic mean of the respective rates at which any two London clearing banks, selected by Marsh & McLennan, offer six-month pound sterling deposits of L1,000,000 to leading banks in the London inter-bank market at or about 11.00 a.m. (London time) on the first Business Day of the relevant interest period as defined in paragraph 2 of Appendix II. "Lloyd's" the Society incorporated by the Lloyd's Act 1871 by the name of Lloyd's or, as the context so requires, the Council of Lloyd's and any person or delegate acting under its authority. VIII-2 165 "Loan Notes" the unsecured loan notes to be issued by Marsh & McLennan as described in this document. "Loan Note Alternative" the alternative whereby Sedgwick Shareholders and Sedgwick Bondholders (other than persons who are citizens or residents of the US and certain other overseas shareholders and bondholders) validly accepting the Offers may elect to receive Loan Notes instead of all or part of the cash consideration to which they would otherwise be entitled under the Offers. "Loan Note Instrument" the loan note instrument constituting the Loan Notes. "London Stock Exchange" London Stock Exchange Limited. "Marsh & McLennan" Marsh & McLennan Companies, Inc. "Marsh & McLennan Group" Marsh & McLennan and its subsidiaries and subsidiary undertakings. "member account ID" the identification code or number attached to any member account in CREST. "New York Stock Exchange" or "NYSE" the New York Stock Exchange, Inc. "Non-US Holder" a holder of Sedgwick Securities and/or Sedgwick Convertible Bonds that is not a US Holder. "Noon Buying Rate" the exchange rate for pounds sterling, based on the noon buying rate in the City of New York for cable transfers in pounds sterling as certified for customs purposes by the Federal Reserve Bank of New York, expressed in US dollars per pound sterling. "Notice of Guaranteed Delivery" the notice of Guaranteed Delivery relating to the Ordinary Offer for use by holders of Sedgwick ADSs. "Offer Committee" the directors and executive officers of Marsh & McLennan listed in paragraph 2(a) of Appendix VI who are assuming responsibility for this document in the terms set out in paragraph 1(a) of Appendix VI. "Offer Period" the period commencing on 25 August 1998 until the end of the Initial Offer Period. "Offers" the Ordinary Offer and/or the Convertible Offer. "Offer Document" this document or other document containing the Offers. "Optionholders" holders of Options. "Options" options granted pursuant to the terms of any of the Sedgwick Share Option Schemes. "Ordinary Offer" the recommended offer by J.P. Morgan and Donaldson, Lufkin & Jenrette, on behalf of Marsh & McLennan, on the terms and Conditions set out in this document and the relevant Acceptance Form including, where the context requires, the Loan Note Alternative and any subsequent revision, variation, extension or renewal of such offer and such alternative in each case for all the issued and to be issued Sedgwick Securities. "Panel" the Panel on Takeovers and Mergers. VIII-3 166 "participant ID" the identification code or membership number used in CREST to identify a particular CREST member or other CREST participant. "PIA" the Personal Investment Authority Limited. "Regulation" Council Regulation (EEC) 4064/89. "Regulations" the Uncertificated Securities Regulations 1995 (SI 1995 No. 95/3272). "Right" a right issued under the Stockholder Rights Plan. "Rothschild" NM Rothschild & Sons Limited. "SEC" the US Securities and Exchange Commission. "Sedgwick" Sedgwick Group plc. "Sedgwick ADR" an American Depositary Receipt evidencing a Sedgwick ADS. "Sedgwick ADS" an American Depositary Share representing five Sedgwick Shares. "Sedgwick Bearer Bonds" Sedgwick Convertible Bonds in bearer form. "Sedgwick Bondholder" a holder of Sedgwick Convertible Bonds. "Sedgwick Convertible Bonds" the Sedgwick 7.25% Convertible Bonds 2008. "Sedgwick Executive Share Option Schemes" where specified, the 1984 Executive Share Option Scheme, the 1995 Executive Share Option Scheme and the related international schemes. "Sedgwick Group" Sedgwick and its subsidiaries and subsidiary undertakings. "Sedgwick Registered Bonds" Sedgwick Convertible Bonds in registered form. "Sedgwick Security" a Sedgwick Share and/or a Sedgwick ADS. "Sedgwick Securityholder" a holder of Sedgwick Shares and/or Sedgwick ADSs. "Sedgwick Share" an ordinary share of 10 pence in the capital of Sedgwick. "Sedgwick Share Option Schemes" the 1984 Executive Share Option Scheme, the Executive Share Option Scheme 1995 and the related international schemes, the Employee Savings-Related Share Option Scheme, the Employee Savings-Related Share Option Scheme 1995 and the Overseas Savings-Related Share Option Scheme 1995. "Sedgwick Shareholder" a holder of a Sedgwick Share. "Sedgwick Sharesave Schemes" where specified, means the Employee Savings-Related Share Option Scheme, the Employee Savings-Related Share Option Scheme 1995 and the Overseas Savings-Related Share Option Scheme 1995. "Shareholder Form of Acceptance" the form of acceptance, authority and election relating to the Ordinary Offer for use by Sedgwick Shareholders. "SFA" The Securities and Futures Authority Limited. "Subsequent Offer Period" the period following the Initial Closing Date during which the Offers remains open for acceptance. "subsidiary" and "subsidiary undertaking" have the meanings given by the Companies Act. VIII-4 167 "Stockholder Rights Plan" the stockholder rights plan contemplated pursuant to the Rights Agreement, dated as of 18 September 1997 between Marsh & McLennan and Harris Trust Company of New York, as Rights Agent. "TFE Instruction" a transfer from escrow instruction (as defined by the CREST Manual issued by CRESTCo). "Trust Deed" the trust deed between Sedgwick and the Trustee dated 15 June 1993 constituting the Sedgwick Convertible Bonds. "Trustee" The Law Debenture Trust Corporation plc, as trustee under the Trust Deed. "TTE Instruction" a transfer to escrow instruction (as defined by the CREST Manual issued by CRESTCo). "uncertificated" or "uncertificated form" in relation to a share or other security, a share or other security title to which is recorded in the relevant register of the share or security as being held in uncertificated form in CREST, and title to which, by virtue of the Regulations, may be transferred by means of CREST. "UK" or "United Kingdom" the United Kingdom of Great Britain and Northern Ireland. "UK GAAP" UK generally accepted accounting principles. "UK Receiving Agent" Computershare Services PLC. "US" or "United States" the United States of America, its possessions and territories, all areas subject to its jurisdiction or any subdivision thereof, any State of the United States and the District of Columbia. "US Depositary" Bank of New York. "US$" or "US dollar" the lawful currency of the US. "US GAAP" US generally accepted accounting principles. "US Holder" a holder of Sedgwick Securities and/or Sedgwick Convertible Bonds that is (i) a citizen or resident of the US, (ii) a corporation, partnership or other entity created or organised in or under the laws of the US or any political subdivision thereof, (iii) an estate the income of which is subject to US federal income taxation regardless of its source, or (iv) a trust if a US court is able to exercise primary supervision over the administration of such trust and one or more US persons have the authority to control all substantial decisions of such trust. "US Persons" US persons as described in Regulation S of the US Securities Act. "US Securities Act" the US Securities Act of 1933, amended, and the rules and regulations promulgated thereunder. "L" or "pounds sterling" or "pence" the lawful currency of the UK. VIII-5 168 ACCEPTANCES IN RESPECT OF SEDGWICK SHARES AND SEDGWICK CONVERTIBLE BONDS Duly completed Shareholder Acceptance form(s) and Bondholder Acceptance form, accompanied by certificates in respect of Sedgwick Shares and Sedgwick Convertible Bonds and/or other documents of title, should be delivered to the UK Receiving Agent or the US Depositary at one of the addresses set out below. The UK Receiving Agent for the Offers is: Computershare Services PLC For information call: +44(0)117 937 0672 By Mail: By Hand: Computershare Services PLC Computershare Services PLC PO Box 859 First Floor Consort House 5-10 Great Tower Street East Street London Bedminster EC3R 5ER Bristol BS99 1XZ
ACCEPTANCES IN RESPECT OF SEDGWICK ADSS Manually signed facsimile copies of the Letter of Transmittal will be accepted. The Letter of Transmittal, Sedgwick ADRs and any other required documents should be sent or delivered by each holder of Sedgwick ADSs or his broker, dealer, commercial bank, trust company or other nominee to the US Depositary at one of its addresses set out below. The US Depositary for the Offers is: Bank of New York For information call: +1-800-507-9357 By Mail: By Hand or overnight courier: Bank of New York Bank of New York Tender & Exchange Department Tender & Exchange Department PO Box 11248 Receive and Deliver Window Church Street Station 101 Barclay Street New York, New York 10286-1248 New York, New York 10286
VIII-6 169 ADDITIONAL INFORMATION Any questions or requests for assistance or additional copies of this document, the Acceptance form(s) and the Notice of Guaranteed Delivery or the Letter of Transmittal may be directed to Georgeson & Company Inc., the Information Agent at its address and telephone number listed below or to the US Depositary or UK Receiving Agent at their respective addresses and telephone numbers mentioned above. You may also contact your local broker, dealer, commercial bank or trust company or other nominee for assistance concerning the Offer. THE INFORMATION AGENT FOR THE OFFERS IS: Georgeson & Company Inc. Wall Street Plaza New York, New York 10005 Bankers and Brokers Call Collect: (212) 440-9800 CALL TOLL FREE: (800) 223-2064 THE OFFERS ARE BEING MADE ON BEHALF OF MARSH & MCLENNAN BY:
Morgan Guaranty Donaldson, Lufkin & Jenrette International Trust Company of 99 Bishopsgate, New York London EC2M 3XD P.O. Box 61 60 Victoria Embankment London EC4Y 0JP
THE US DEALER MANAGERS FOR THE OFFERS ARE:
J.P. Morgan Securities Inc. Donaldson, Lufkin & Jenrette Securities Corporation 60 Wall Street 277 Park Avenue New York, New York 10260 New York, New York 10172
VIII-7 EX-99.A.2 3 FORM OF LETTER OF TRANSMITTAL 1 Exhibit (a)(2) This Document is important and requires your immediate attention. In considering what action you should take, you are recommended immediately to seek your own financial advice from your stockbroker, bank manager, solicitor, accountant or other independent financial advisor. If you have sold or otherwise transferred all your American Depositary Shares ("Sedgwick ADSs") of Sedgwick Group plc ("Sedgwick"), please pass this document and all accompanying documents as soon as possible to the purchaser or transferee, or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. However, such documents should not be distributed, forwarded or transmitted in or into Australia, Canada or Japan. Morgan Guaranty Trust Company of New York ("J.P. Morgan") and Donaldson, Lufkin & Jenrette International ("Donaldson, Lufkin & Jenrette") are acting for Marsh & McLennan Companies, Inc. ("Marsh & McLennan") in relation to the offer to purchase, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated September 4, 1998 (the "Offer to Purchase"), this Letter of Transmittal and the related Form of Acceptance (collectively, the "Ordinary Offer"), (i) all outstanding ordinary shares of 10p each of Sedgwick ("Sedgwick Shares") for 225p per Sedgwick Share in cash and (ii) all outstanding Sedgwick ADSs for L.11.25 per Sedgwick ADS in cash, and no one else, and will not be responsible to anyone other than Marsh & McLennan for providing the protections afforded to customers of J.P. Morgan and Donaldson, Lufkin & Jenrette nor for providing advice in relation to the Offers. J.P. Morgan and Donaldson, Lufkin & Jenrette are acting through J.P. Morgan Securities Inc. and Donaldson, Lufkin & Jenrette Securities Corporation for the purpose of making the Offers in the United States. LETTER OF TRANSMITTAL To Accept the Offer for American Depositary Shares Evidenced by American Depositary Receipts of Sedgwick Group PLC Pursuant to the Offer to Purchase Dated September 4, 1998 by J.P. Morgan and Donaldson, Lufkin & Jenrette on behalf of MARSH & McLENNAN COMPANIES, INC. THERE WILL BE AN INITIAL OFFER PERIOD WHICH WILL EXPIRE AT 3:00 PM (LONDON TIME), 10:00 AM (NEW YORK CITY TIME) ON OCTOBER 5, 1998, UNLESS EXTENDED. AT THE CONCLUSION OF THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, IF ALL CONDITIONS OF THE ORDINARY OFFER HAVE BEEN SATISFIED, FULFILLED OR, WHERE PERMITTED, WAIVED, THE ORDINARY OFFER WILL BE EXTENDED FOR A SUBSEQUENT OFFER PERIOD OF AT LEAST 14 CALENDAR DAYS. HOLDERS OF SEDGWICK SECURITIES WILL HAVE THE RIGHT TO WITHDRAW THEIR ACCEPTANCES OF THE ORDINARY OFFER DURING THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, BUT NOT DURING THE SUBSEQUENT OFFER PERIOD. DESCRIPTION OF SEDGWICK ADSS TENDERED Name(s) and Address(es) of Registered Holder(s) ADS(s) Tendered (Please fill in, if blank, exactly as name(s) appear(s) on ADR(s)) (Attach additional list if necessary) TOTAL NUMBER ADR OF ADSs NUMBER SERIAL REPRESENTED BY OF ADSs NUMBER(S)* ADR(S)* TENDERED** * Need not be completed for book-entry transfers. ** Unless otherwise indicated, it will be assumed that all Sedgwick ADSs delivered to the US Depositary are being tendered. See Instruction 4. 2 The US Depositary for the Offer is: THE BANK OF NEW YORK By Mail: By Facsimile Transmission: By Hand or Overnight Courier Tender & Exchange Department (212) 815-6213 Tender & Exchange Department P.O. Box 11248 (for Eligible Institutions Only) Receive and Deliver Window Church Street Station 101 Barclay Street New York, New York Confirm by telephone: New York, New York 10286 10286-1248 (800) 507-9357
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. ACCEPTING HOLDERS OF SEDGWICK ADSS EVIDENCED BY SEDGWICK ADRS WILL RECEIVE PAYMENT IN DOLLARS INSTEAD OF POUNDS STERLING UNLESS THEY ELECT OTHERWISE HEREIN TO RECEIVE PAYMENT IN POUNDS STERLING. IF YOU WISH TO RECEIVE POUNDS STERLING INSTEAD OF DOLLARS, YOU MUST PLACE AN "X" IN THE BOX ENTITLED "POUNDS STERLING PAYMENT ELECTION". ACCEPTANCE OF THE ORDINARY OFFER IN RESPECT OF SEDGWICK SHARES (EXCEPT INSOFAR AS THEY ARE REPRESENTED BY SEDGWICK ADSS EVIDENCED BY SEDGWICK ADRS) CANNOT BE MADE BY MEANS OF THIS LETTER OF TRANSMITTAL. If you hold Sedgwick Shares that are not represented by Sedgwick ADSs, you can obtain a Shareholder Form of Acceptance for accepting the Ordinary Offer in respect of those Sedgwick Shares from the Information Agent, the US Depositary or the UK Receiving Agent. See Instruction 13 of this Letter of Transmittal. Delivery of a Letter of Transmittal, American Depositary Receipts evidencing Sedgwick ADSs ("Sedgwick ADRs") (or book-entry transfer of such Sedgwick ADSs evidenced by Sedgwick ADRs) and any other required documents to the US Depositary by Sedgwick ADS holders will be deemed (without any further action by the US Depositary) to constitute an acceptance of the Ordinary Offer by such holder with respect to such Sedgwick ADSs evidenced by Sedgwick ADRs subject to the terms and conditions set out in the Offer to Purchase and this Letter of Transmittal. Capitalized terms and certain other terms used in this Letter of Transmittal and not otherwise defined herein shall have the respective meanings assigned to them in the Offer to Purchase. This Letter of Transmittal is to be used either if Sedgwick ADRs evidencing Sedgwick ADSs are to be forwarded herewith or if delivery of Sedgwick ADSs is to be made by book-entry transfer to an account maintained by the US Depositary at a Book-Entry Transfer Facility as defined in and pursuant to the procedures for book-entry transfer set forth in "Procedures for tendering Sedgwick ADSs--Book Entry Transfer" in Part B of Appendix I to the Offer to Purchase. [ ] CHECK BOX IF SEDGWICK ADSS IN RESPECT OF WHICH THE ORDINARY OFFER IS BEING ACCEPTED ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE US DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SEDGWICK ADSS EVIDENCED BY SEDGWICK ADRS BY BOOK-ENTRY TRANSFER): 3 3 NAME OF DELIVERING INSTITUTION ________________________________________________ Check box opposite name of relevant Book-Entry Transfer Facility: [ ] The Depository Trust Company [ ] Philadelphia Depository Trust Company Account Number __________________ Transaction Code Number __________________ If a holder of Sedgwick ADSs wishes to accept the Ordinary Offer and Sedgwick ADRs evidencing such Sedgwick ADSs are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis, or if time will not permit all required documents to reach the US Depositary prior to the expiry of the Subsequent Offer Period, such holder's acceptance of the Ordinary Offer may nevertheless be effected using the guaranteed delivery procedure set out under "Procedures for tendering Sedgwick ADSs--Guaranteed delivery procedures" in Part B of Appendix I to the Offer to Purchase. See Instruction 2 of this Letter of Transmittal. HOWEVER, RECEIPT OF A NOTICE OF GUARANTEED DELIVERY WILL NOT BE TREATED AS A VALID ACCEPTANCE FOR THE PURPOSE OF SATISFYING THE ACCEPTANCE CONDITION. [ ] CHECK BOX IF SEDGWICK ADSS IN RESPECT OF WHICH THE ORDINARY OFFER IS BEING ACCEPTED ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE US DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of registered owner(s) ________________________________________________ Date of execution of Notice of Guaranteed Delivery ____________________________ Name of Institution that guaranteed delivery _________________________________ NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. 3 4 Ladies and Gentlemen: The undersigned hereby instructs the US Depositary to accept the Ordinary Offer on behalf of the undersigned with respect to the Sedgwick ADSs evidenced by Sedgwick ADRs (which expression in this Letter of Transmittal shall, except where the context otherwise requires, be deemed to include, without limitation, the ordinary shares of 10p each of Sedgwick ("Sedgwick Shares") represented thereby) specified in the box entitled "Description of Sedgwick ADSs Tendered" subject to the terms and conditions set forth in the Offer to Purchase and this Letter of Transmittal, by informing Marsh & McLennan in writing that the Ordinary Offer has been so accepted. The undersigned hereby acknowledge that delivery of this Letter of Transmittal, the Sedgwick ADRs evidencing tendered Sedgwick ADSs (or book-entry transfer of such Sedgwick ADSs evidenced by Sedgwick ADRs) and any other required documents to the US Depositary by a holder of Sedgwick ADSs will be deemed (without any further action by the US Depositary) to constitute acceptance of the Ordinary Offer by such holder in respect of such holder's Sedgwick ADSs, subject to the terms and conditions set out in the Offer to Purchase and this Letter of Transmittal. The undersigned understands that acceptance of the Ordinary Offer by the undersigned pursuant to the procedures described herein and in the instructions hereto, subject to the withdrawal rights described in the Offer to Purchase, will constitute a binding agreement between the undersigned and Marsh & McLennan upon the terms and subject to the conditions of the Ordinary Offer. IF ACCEPTANCE HAS BEEN MADE IN RESPECT OF THE SEDGWICK ADSs THEN A SEPARATE ACCEPTANCE IN RESPECT OF THE SEDGWICK SHARES REPRESENTED BY SUCH SEDGWICK ADSs MAY NOT BE MADE. The undersigned hereby delivers to the US Depositary the above-described Sedgwick ADSs evidenced by Sedgwick ADRs for which the Ordinary Offer is being accepted, in accordance with the terms and conditions of the Offer to Purchase and this Letter of Transmittal, receipt of which is hereby acknowledged. Upon the terms of the Ordinary Offer (including, if the Ordinary Offer is extended, revised or amended, the terms or conditions of any such extension, revision or amendment), and effective at the time that all conditions to the Ordinary Offer have been satisfied, fulfilled or, where permitted, waived (at which time Marsh & McLennan will give notice thereof to the US Depositary), and if he or she has not validly withdrawn his or her acceptance, the undersigned hereby sells, assigns and transfers to, or upon the order of, Marsh & McLennan all right, title and interest in and to all Sedgwick ADSs evidenced by Sedgwick ADRs with respect to which the Ordinary Offer is being accepted (and any and all Sedgwick ADSs or other securities or rights issuable in respect of such Sedgwick ADSs) and irrevocably constitutes and appoints the US Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Sedgwick ADSs (and any such other Sedgwick ADSs, securities or rights), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (a) deliver Sedgwick ADRs for such Sedgwick ADSs (and any such other Sedgwick ADSs, securities or rights) or accept to transfer of ownership of such Sedgwick ADSs (and any such other Sedgwick ADSs, securities or rights) on the account books maintained by a Book-Entry Transfer Facility together, in any such case, with all accompanying evidences of transfer and authenticity to, or upon the order of, Marsh & McLennan, (b) present such Sedgwick ADRs for such Sedgwick ADSs (and any other Sedgwick ADSs, securities or rights) for transfer, and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Sedgwick ADSs (and any such other Sedgwick ADSs, securities or rights), all in accordance with the terms of the Ordinary Offer. The undersigned agrees that its execution hereof (together with any signature guarantees) and its delivery to the US Depositary shall constitute an authority to any director of Marsh & McLennan, J.P. Morgan or Donaldson, Lufkin & Jenrette in accordance with the terms of paragraph 6 of Part B of Appendix I to the Offer to Purchase. The undersigned agrees that effective from and after the date hereof or, if later, the date on which all conditions to the Ordinary Offer are satisfied, fulfilled or, where permitted, waived: (a) Marsh & McLennan or its agents shall be entitled to direct the exercise of any votes attaching to Sedgwick Shares represented by any Sedgwick ADSs evidenced by Sedgwick ADRs in respect of which the Ordinary Offer has been accepted or is deemed to have been accepted (the "Accepted ADSs") and any other rights and privileges attaching to such Sedgwick Shares, including any right to requisition a general meeting of Sedgwick or of any class of its 4 5 shareholders, and (b) the execution of the Letter of Transmittal by a holder of Sedgwick ADSs (together with any signature guarantees) and its delivery to the US Depositary shall constitute in respect of Accepted ADSs: (i) an authority to Sedgwick or its agents from the undersigned to send any notice, circular, warrant, document or other communications that may be required to be sent to him or her as a Sedgwick ADS holder to Marsh & McLennan at its registered office, (ii) an authority to Marsh & McLennan or its agent to sign any consent to short notice of a general meeting or separate class meeting on behalf of the holder of Accepted ADSs and/or to execute a form of proxy in respect of the Accepted ADSs appointing any person nominated by Marsh & McLennan to attend general meetings and separate class meetings of Sedgwick or its members (or any of them) (or any adjournments thereof) and to exercise the votes attaching to Sedgwick Shares represented by such Accepted ADSs on his or her behalf, and (iii) the agreement of the undersigned not to exercise any such rights without the consent of Marsh & McLennan and the irrevocable undertaking of the undersigned not to appoint a proxy for or to attend general meetings or separate class meetings of Sedgwick in respect of such Accepted ADSs. The undersigned hereby represents and warrants that the undersigned has full power and authority to accept the Ordinary Offer and to sell, assign and transfer the Sedgwick ADSs evidenced by Sedgwick ADRs (and Sedgwick Shares represented by such Sedgwick ADSs) in respect of which the Ordinary Offer is being accepted or deemed to be accepted (and any and all other Sedgwick ADSs, securities or rights issued or issuable in respect of such Sedgwick ADSs) and, when the same are purchased by Marsh & McLennan, Marsh & McLennan will acquire good title thereto, free from all liens, equitable interests, charges, encumbrances and together with all rights attaching thereto, including voting rights and the right to receive all dividends and other distributions declared, made or paid on or after August 25, 1998, (except as provided in the Offer to Purchase) with respect to Sedgwick Shares represented by the Sedgwick ADSs. The undersigned will, upon request, execute any additional documents deemed by the US Depositary or Marsh & McLennan to be necessary or desirable to complete the sale, assignment and transfer of the Sedgwick ADSs evidenced by Sedgwick ADRs in respect of which the Ordinary Offer is being accepted (and any and all other Sedgwick ADSs, securities or rights). The undersigned irrevocably undertakes, represents, and warrants to and agrees with Marsh & McLennan (so as to bind him or her, his or her personal representative, heirs, successors and assigns) to the effect that the undersigned: (i) has not received or sent copies of this document or any Shareholder Form of Acceptance or any related documents in, into or from Canada, Australia or Japan and has not otherwise utilized in connection with the Ordinary Offer, directly or indirectly, the Canadian, Australian or Japanese mails or any means or instrumentality (including, without limitation, facsimile transmission, telex and telephone) of interstate or foreign commerce, or any facilities of a national securities exchange, of Canada, Australia or Japan, (ii) is accepting the Ordinary Offer from outside Canada, Australia or Japan and (iii) is not an agent or fiduciary acting on a nondiscretionary basis for a principal, unless such agent is an authorized employee of such principal or such principal has given any instructions with respect to the Ordinary Offer from outside Canada, Australia or Japan. All authority herein conferred or agreed to be conferred pursuant to this Letter of Transmittal shall be binding upon the successors, assigns, heirs, executors, administrators and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. Except as stated in the Offer to Purchase, this acceptance is irrevocable. Unless otherwise indicated herein under "Special Payment Instructions", the undersigned hereby instructs the US Depositary to issue, or cause to be issued, the check for the purchase price in the name(s) of the registered holder(s) appearing under "Description of Sedgwick ADSs Tendered". Similarly, unless otherwise indicated under "Special Delivery Instructions", the undersigned hereby instructs the US Depositary to mail, or cause to be mailed, the check for the purchase price and/or return, or cause to be returned, any Sedgwick ADRs evidencing Sedgwick ADSs in respect of which the Ordinary Offer is not being accepted or which are not purchased (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Sedgwick ADSs Tendered". In the event that the "Special Payment Instructions" and/or the "Special Delivery Instructions" are completed, the undersigned hereby instructs the US Depositary to (i) issue and/or mail, or cause to be issued and/or mailed, the check for the purchase price, if any, in the name of, and/or to the address of, the person or persons so indicated, and/or (ii) return, or cause to be returned, any Sedgwick ADRs evidencing Sedgwick ADSs in respect of which the Ordinary Offer is not being accepted or which are not purchased, if any, to the person at the address so indicated. In the case of a book-entry delivery of Sedgwick ADSs evidenced by Sedgwick ADRs, the undersigned hereby instructs the US Depositary to credit the account maintained at the Book-Entry Transfer Facility indicated above with any Sedgwick ADSs in respect of which the Ordinary Offer is not being accepted or which are not 5 6 purchased. The undersigned recognizes that the US Depositary will not transfer any Sedgwick ADSs which are not purchased pursuant to the Ordinary Offer from the name of the registered holder thereof to any other person. If the box headed "Pounds Sterling Payment Election" is not checked, the undersigned hereby instructs the relevant payment agent (either the US Depositary or the UK Receiving Agent) to convert all amounts payable pursuant to the Ordinary Offer from pounds sterling to US dollars at the exchange rate obtainable by the relevant payment agent on the spot market in London at approximately noon (London time) on the date the cash consideration is made available by Marsh & McLennan to the relevant payment agent for delivery to holders of Sedgwick ADSs and pay such amounts by check payable in US dollars. The actual amount of US dollars received will depend upon the exchange rate prevailing on the day funds are made available to the relevant payment agent by Marsh & McLennan. Sedgwick ADS holders should also be aware that the US dollar/pound sterling exchange rate which is prevailing at the date on which the undersigned executes this Letter of Transmittal and on the date of dispatch of payment may be different from that prevailing on the day funds are made available to the relevant payment agent by Marsh & McLennan. In all cases, fluctuations in the US dollar/pounds sterling exchange rate are at the risk of accepting Sedgwick ADS holders who do not elect to receive their consideration in pounds sterling. Such currency exchange will be effected by the relevant payment agent on behalf of the requesting Sedgwick ADS holder and Marsh & McLennan shall have no responsibility or obligation with respect thereto. SUBJECT TO THE TERMS OF THE OFFER TO PURCHASE, THIS LETTER OF TRANSMITTAL SHALL NOT BE CONSIDERED COMPLETE AND VALID, AND PAYMENT OF CONSIDERATION PURSUANT TO THE ORDINARY OFFER SHALL NOT BE MADE, UNTIL SEDGWICK ADRs EVIDENCING THE SEDGWICK ADSs IN RESPECT OF WHICH THE ORDINARY OFFER IS BEING ACCEPTED AND ALL OTHER REQUIRED DOCUMENTATION HAVE BEEN RECEIVED BY THE US DEPOSITARY AS PROVIDED IN THE OFFER TO PURCHASE AND THIS LETTER OF TRANSMITTAL. [ ] CHECK HERE IF ANY OF SEDGWICK ADRs REPRESENTING SEDGWICK ADSs THAT YOU OWN HAVE BEEN LOST, STOLEN OR DESTROYED AND SEE INSTRUCTION 12. Number of Sedgwick ADSs represented by the lost, stolen or destroyed Sedgwick ADRs__________________ 6 7 SPECIAL PAYMENT INSTRUCTIONS (See Instructions 1, 5, 6 and 7) [ ] Check box ONLY if the check for the purchase price with respect to Sedgwick ADSs purchased is to be issued in the name of someone other than the undersigned. Issue to: Name _______________________________________ (Please Print) Address ____________________________________ (Include Zip Code) ____________________________________________ ____________________________________________ (Tax Identification or Social Security No.) (See Substitute Form W-9 Included herein) SPECIAL DELIVERY INSTRUCTIONS (See Instructions 1, 5, 6 and 7) [ ] Check box ONLY if the check for the purchase price with respect to Sedgwick ADSs purchased and/or Sedgwick ADRs evidencing Sedgwick ADSs in respect of which the Ordinary Offer is not accepted or which are not purchased are to be mailed to someone other than the undersigned, or to the undersigned at an address other than that shown above. Mail [ ] Check [ ] ADR certificates to: Name _______________________________________ (Please Print) Address _____________________________________ (Include Zip Code) _____________________________________________ _____________________________________________ POUNDS STERLING PAYMENT ELECTION [ ] Check box ONLY if you wish to receive all (but not part) of the amount of cash consideration to be paid by a check in pounds sterling. If you do not check this box you will receive payment by a check in US dollars and the relevant payment agent (either the US Depositary or the UK Receiving Agent) will arrange for the conversion of the pound sterling amounts payable to you to US dollars at the exchange rate obtainable by the relevant payment agent on the spot market in London at approximately noon (London time) on the date the cash consideration is made available by Marsh & McLennan to the relevant payment agent for delivery to holders of Sedgwick ADSs. 7 8 ____________________________________ SIGN HERE AND COMPLETE SUBSTITUTE FORM W-9 INCLUDED HEREIN ____________________________________ ____________________________________ (SIGNATURE(S) OF OWNER(S)) Dated: __________________________________________________________________, 1998 (Must be signed by registered holder(s) exactly as name(s) on Sedgwick ADR(s) evidencing Sedgwick ADS(s) or by person(s) to whom Sedgwick ADR(s) surrendered have been assigned and transferred, as evidenced by endorsement, stock powers and other documents transmitted herewith. If signature is by any trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or others acting in a fiduciary or representative capacity, please set forth the following and see Instruction 5.) Name(s) _______________________________________________________________________ _______________________________________________________________________ (Please Type or Print) Capacity (full title) _________________________________________________________ Address _______________________________________________________________________ _______________________________________________________________________ (Include Zip Code) Area Code and Telephone Number ________________________________________________ Tax Identification or Social Security No. ___________________________________________________________ GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5) Authorized Signature __________________________________________________________ Name __________________________________________________________________________ (Please Type or Print) Title ________________________________________________________________________ Name of Firm __________________________________________________________________ Address _______________________________________________________________________ Area Code and Telephone No. ___________________________________________________ Dated: ________________________________________________________________________ 8 9 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE ORDINARY OFFER 1. Guarantee of Signatures. No signature guarantee is required on the Letter of Transmittal if (a) the Letter of Transmittal is signed by the registered holder(s) of the Sedgwick ADSs evidenced by Sedgwick ADRs in respect of which the Ordinary Offer is being accepted herewith and such holder(s) have not completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on this Letter of Transmittal or (b) the Ordinary Offer is being accepted in respect of such Sedgwick ADSs for the account of an Eligible Institution. In all other cases, all signatures on this Letter of Transmittal must be guaranteed by a financial institution (including most banks, savings and loan associations and brokerage houses) which is a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Program, or the Stock Exchange Medallion Program (an "Eligible Institution"). See Instruction 5. 2. Delivery of Letter of Transmittal and ADSs. This Letter of Transmittal is to be completed either if Sedgwick ADRs evidencing Sedgwick ADSs are to be forwarded herewith or if delivery is to be made by book-entry transfer to an account maintained by the US Depositary at a Book-Entry Transfer Facility pursuant to the procedures for book-entry transfer set out in "Procedures for tendering Sedgwick ADSs D Book-entry transfer" in Part B of Appendix I to the Offer to Purchase. Sedgwick ADRs evidencing Sedgwick ADSs or confirmation of a book-entry transfer of such Sedgwick ADSs into the US Depositary's account at a Book-Entry Transfer Facility, as well as a properly completed and duly executed Letter of Transmittal together with any required signature guarantees and any other documents required by this Letter of Transmittal, must be delivered to the US Depositary at one of its addresses set forth herein. Sedgwick ADS holders whose Sedgwick ADRs are not immediately available or who cannot deliver their Sedgwick ADRs and all other required documents to the US Depositary or complete the procedures for book-entry transfer prior to the expiration of the Subsequent Offer Period may accept the Ordinary Offer with respect to their Sedgwick ADSs by properly completing and duly executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set out in "Procedures for tendering Sedgwick ADSs D guaranteed delivery procedures" in Part B of Appendix I to the Offer to Purchase. Pursuant to the guaranteed delivery procedures: (a) acceptance must be made by or through an Eligible Institution; (b) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by Marsh & McLennan must be received by the US Depositary prior to the expiration of the Subsequent Offer Period; and (c) Sedgwick ADRs evidencing the Sedgwick ADSs in respect of which the Ordinary Offer is being accepted (or, in the case of Sedgwick ADSs held in book-entry form, timely confirmation of the book-entry transfer of such Sedgwick ADSs into the US Depositary's account at a Book-Entry Transfer Facility as described in the Offer to Purchase) together with a properly completed and duly executed Letter of Transmittal with any required signature guarantees and any other documents required by this Letter of Transmittal, are received by the US Depositary within three business days after the date of execution of such Notice of Guaranteed Delivery. For these purposes, a "business day" is any day on which the New York Stock Exchange is open for business. THE METHOD OF DELIVERY OF SEDGWICK ADSs EVIDENCED BY SEDGWICK ADRs AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE HOLDERS OF SEDGWICK ADSs ACCEPTING THE ordinary OFFER AND THE DELIVERY WILL BE MADE ONLY WHEN ACTUALLY RECEIVED BY THE US DEPOSITARY (INCLUDING, IN THE CASE OF BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent acceptance will be accepted and no fractional Sedgwick ADSs will be purchased. All accepting Sedgwick ADS holders, by execution of this Letter of Transmittal, waive any right to receive any notice of the acceptance of their Sedgwick ADSs for payment. 3. Inadequate Space. If the space provided herein is inadequate, the serial numbers of the certificates and/or the number of Sedgwick ADSs should be listed on a separate schedule attached hereto. 9 10 4. Partial Acceptances (Not Applicable to Book-entry Transfers). If the Ordinary Offer is to be accepted in respect of less than all of the Sedgwick ADSs evidenced by any Sedgwick ADRs delivered to the US Depositary herewith, fill in the number of Sedgwick ADSs in respect of which the Ordinary Offer is being accepted in the box entitled "Number of ADSs Tendered". In such case, a new Sedgwick ADR for the remainder of the Sedgwick ADSs (in respect of which the Ordinary Offer is not being accepted) represented by the old Sedgwick ADR will be sent to the registered holder as promptly as practicable following the date on which the Sedgwick ADSs in respect of which the Ordinary Offer has been accepted are purchased. The Ordinary Offer will be deemed to have been accepted in respect of all Sedgwick ADSs evidenced by Sedgwick ADRs delivered to the US Depositary unless otherwise indicated. In the case of partial acceptances, Sedgwick ADSs in respect of which the Ordinary Offer was not accepted will not be reissued to a person other than the registered holder. 5. Signature on Letter of Transmittal, Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Sedgwick ADSs in respect of which the Ordinary Offer is being accepted hereby, the signature(s) must correspond with the name(s) as written on the face of the certificates without any change whatsoever. If any of the Sedgwick ADSs evidenced by Sedgwick ADRs in respect of which the Ordinary Offer is being accepted hereby are owned of record by two or more owners, all such owners must sign this Letter of Transmittal. If any of the Sedgwick ADSs in respect of which the Ordinary Offer is being accepted are registered in different names on different Sedgwick ADRs, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of Sedgwick ADRs. If this Letter of Transmittal or any Sedgwick ADRs or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and submit proper evidence satisfactory to Marsh & McLennan of their authority to so act. When this Letter of Transmittal is signed by the registered holder(s) of the Sedgwick ADSs listed and transmitted hereby, no endorsements of certificates or separate stock powers are required unless payment of the purchase price is to be issued to a person other than the registered holder(s). Signatures on such Sedgwick ADRs or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Sedgwick ADSs listed Sedgwick ADRs must be endorsed or accompanied by appropriate stock powers signed exactly as the name(s) of the registered holder(s) appear(s) on Sedgwick ADRs evidencing such Sedgwick ADSs. Signatures on such Sedgwick ADRs or stock powers must be guaranteed by an Eligible Institution. 6. Stock Transfer Taxes. Marsh & McLennan will pay or cause to be paid any stock transfer taxes with respect to the transfer and sale to it or its order of Sedgwick ADSs evidenced by Sedgwick ADRs pursuant to the Ordinary Offer. If, however, payment of the purchase price is to be made to any persons other than the registered holder(s), or if Sedgwick ADSs in respect of which the Ordinary Offer is being accepted are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s) or such person(s) payment on account of the transfer to such person) will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to Sedgwick ADRs listed in this Letter of Transmittal. 7. Special Payment and Delivery Instructions. If the check for the purchase price is to be issued in the name of a person other than the signer of this Letter of Transmittal or if the check for the purchase price is to be sent and/or any Sedgwick ADRs evidencing Sedgwick ADSs in respect of which the Ordinary Offer is not being accepted or which are not purchased are to be returned to a person other than the signer of this Letter of Transmittal or to an address other than that shown on the reverse, the boxes labeled "Special Payment Instructions" and/or "Special Delivery Instructions" on this Letter of Transmittal should be completed. 10 11 8. Pounds Sterling Payment Election. If the check for the purchase price is to be issued in pounds sterling, please check the box marked "Pounds Sterling Payment Election". If you do not check such box all pound sterling amounts payable pursuant to the Ordinary Offer will be converted by the relevant payment agent (either the US Depositary or the UK Receiving Agent) into US dollars at the exchange rate obtainable by the relevant payment agent on the spot market in London at approximately noon (London time) on the date the cash consideration is made available by Marsh & McLennan to the relevant payment agent for delivery to holders of Sedgwick ADSs. 9. Waiver of Conditions. Marsh & McLennan reserves the absolute right in its sole discretion to waive any of the specified conditions of the Ordinary Offer, in whole or in part, to the extent permitted by applicable law and the rules of the City Code. 10. 31% US Backup Withholding. In order to avoid "backup withholding" of US federal income tax on any cash payment received upon the surrender of Sedgwick ADSs pursuant to the Ordinary Offer, a Sedgwick ADS holder must, unless an exemption applies, provide the US Depositary with his or her correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 on this Letter of Transmittal and certify, under penalties of perjury, that such number is correct and that he or she is not subject to backup withholding. If the correct TIN is not provided, a $50 penalty may be imposed by the Internal Revenue Service ("IRS") and cash payments made in exchange for the surrendered Sedgwick ADSs may be subject to backup withholding. If backup withholding applies, the US Depositary is required to withhold 31% of any payment made pursuant to the Ordinary Offer. Backup withholding is not an additional US federal income tax. Rather, the US federal income tax liability of persons subject to backup withholding will be reduced by the amount of such tax withheld. If backup withholding results in an overpayment of taxes, a refund may be applied for from the IRS. The TIN that is to be provided on the Substitute Form W-9 is that of the registered holder(s) of the Sedgwick ADSs or of the last transferee appearing on the transfer attached to, or endorsed on, the Sedgwick ADSs. The TIN for an individual is his or her social security number. Each tendering Sedgwick ADS holder generally is required to notify the US Depositary of his or her correct TIN by completing the Substitute Form W-9 contained herein, certifying that the TIN provided on Substitute Form W-9 is correct (or that such holder is awaiting a TIN), and that (1) such holder has not been notified by the IRS that such holder is subject to backup withholding as a result of a failure to report all interest or dividends, or (2) the IRS has notified such holder, that such holder is no longer subject to backup withholding (see Part III of Substitute Form W-9). Notwithstanding that the "TIN Applied For" box is checked (and the certification is completed), the US Depositary will withhold 31% on any cash payment of the purchase price for the Sedgwick ADSs made prior to the time it is provided with a properly certified TIN. Exempt persons (including, among others, corporations) are not subject to backup withholding. A foreign individual or foreign entity may qualify as an exempt person by submitting a statement (on Form W-8), signed under penalties or perjury, certifying such person's foreign status. Form W-8 can be obtained from the US Depositary. A Sedgwick ADS holder should consult his or her tax advisor as to his or her qualification for an exemption from backup withholding and the procedure for obtaining such exemption. For additional guidance, see the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. 11. Requests for Assistance or Additional Copies. Questions and requests for assistance or additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be directed to the US Depositary at the address and telephone number set forth above, to the Information Agent or the Dealer Managers at the addresses and telephone numbers set forth below, or to the UK Receiving Agent at the appropriate address and telephone number set forth in the Offer to Purchase. 12. Lost, Destroyed or Stolen Certificates. If any Sedgwick ADR evidencing Sedgwick ADSs has been lost, destroyed or stolen, the holder thereof should promptly notify the US Depositary by checking the box immediately preceding the special payment/special delivery instructions boxes and indicating the number of Sedgwick ADSs evidenced by such lost, destroyed or stolen Sedgwick ADRs. The holder thereof will then be 11 12 instructed as to the steps that must be taken in order to replace such Sedgwick ADRs. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, destroyed or stolen Sedgwick ADRs have been followed. 13. Holders of Sedgwick Shares Not Represented by Sedgwick ADSs. Holders of Sedgwick Shares have been sent a Shareholder Form of Acceptance with the Offer to Purchase and may not accept the Ordinary Offer in respect of Sedgwick Shares pursuant to this Letter of Transmittal except insofar as those shares are represented by Sedgwick ADSs. If any holder of Sedgwick Shares which are not represented by Sedgwick ADSs needs to obtain a copy of a Shareholder Form of Acceptance, such holder should contact the UK Receiving Agent at the appropriate address and telephone number set forth in the Offer to Purchase or the US Depositary. 12 13 PAYER'S NAME: THE BANK OF NEW YORK, AS DEPOSITARY AGENT SUBSTITUTE FORM W-9 DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER AND CERTIFICATION PART I -- Taxpayer Identification Number (TIN) Please enter your correct number in the appropriate box below. NOTE: if the account is more than one name, see the chart on the enclosed form, Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9, for guidance on which number to enter. Social Security Number or Employer Identification Number ________________________ _________________________________ If you do not have a TIN, see the instructions "How to Get a TIN" and check the box below. TIN Applied For [ ] PART II -- For Payees Exempt from Backup Withholding (see instructions) PART III Certification D Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest and dividends, or (c) IRS has notified me that I am no longer subject to backup withholding, and (3) All other information provided on this form is true, correct and complete. Certification Instructions. You must cross out Item (2) above if you have been notified by IRS that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax return. Please indicate the taxpayer's name associated with the TIN if other than the first name appearing in the registration: (X) ________________________________ (Please Print) Please Sign (X) Signature(s) _____________________________ Date _______________ NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER, PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. The Information Agent for the Offers is: GEORGESON & COMPANY INC. Wall Street Plaza New York, New York 10005 Banks and Brokers Call Collect: (212) 440-9800 All Others Call Toll-Free: (800) 223-2064 The Dealer Managers for the Offers are: J.P. Morgan Securities Inc. 60 Wall Street New York, New York 10260 (212) 648 7843 (Call Collect) and Donaldson, Lufkin & Jenrette Securities Corporation 277 Park Avenue New York, New York 10172 (212) 892 8223 (Call Collect) 13 EX-99.A.3 4 FORMS OF ACCEPTANCE, AUTHORITY AND ELECTION 1 Exhibit (a)(3) THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the Ordinary Offer or the action you should take, you are recommended immediately to seek your own personal financial advice from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser duly authorised under the Financial Services Act 1986. This Form of Acceptance, Authority and Election (the Form) should be read in conjunction with the accompanying offer document dated September 4, 1998 (the Offer Document). The definitions used in the Offer Document apply in this Form. The provisions of Appendix 1 to the Offer Document, in so far as they relate to the Ordinary Offer, are deemed to be incorporated in and form part of this Form and should be read carefully by each Sedgwick Shareholder. If you have sold or otherwise transferred all your Sedgwick Shares, please send this Form, the Offer Document and the reply-paid envelope as soon as possible to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was effected, for delivery to the purchaser or transferee. However, such documents should not be forwarded or transmitted in or into Canada, Australia or Japan. If you are a CREST sponsored member you should refer to your CREST sponsor before completing the Form. The Ordinary Offer is not being made, directly or indirectly, in or into, or by use of the mails of, or by any means or instrumentality (including, without limitation, telephonically or electronically) of interstate or foreign commerce of, or any facility of a national securities exchange of, Canada, Australia or Japan and will not be capable of acceptance by any such use, means, instrumentality, or facility. Accordingly, neither this Form nor the Offer Document is being or may be mailed or otherwise forwarded, distributed or sent in, into or from Canada, Australia or Japan. All Sedgwick Shareholders (including custodians, nominees and trustees) who would, or otherwise intend to, forward this Form and/or the Offer Document, should read the further details in this regard which are contained in paragraphs 8 and 10 of Part B of Appendix 1 to the Offer Document before taking any action. The Loan Notes which may be issued pursuant to the Ordinary Offer have not been, and will not be, listed on any stock exchange. The Loan Notes have not been, and will not be, registered under the US Securities Act or under the laws of any State of the United States and may not be offered, sold or delivered, directly or indirectly, in or into the United States or to, or for the account or benefit of, any US Person except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act or the relevant securities laws of any State of the United States. The Loan Notes may not be offered, sold or delivered, directly or indirectly, in or into Canada, Australia or Japan. FORM OF ACCEPTANCE, AUTHORITY AND ELECTION RECOMMENDED CASH OFFER BY MORGAN GUARANTY TRUST COMPANY OF NEW YORK AND DONALDSON, LUFKIN & JENRETTE INTERNATIONAL ON BEHALF OF MARSH & MCLENNAN COMPANIES, INC. FOR SEDGWICK GROUP PLC ACCEPTANCES OF THE ORDINARY OFFER MUST BE RECEIVED BY 3.00 P.M. (LONDON TIME), 10.00 A.M. (NEW YORK CITY TIME) on OCTOBER 5, 1998 PROCEDURE FOR ACCEPTANCE * If you wish to accept the Ordinary Offer, use this Form and follow the instructions set out on pages 2, 3 and 4. All Sedgwick Shareholders who are individuals must sign in the presence of a witness who must also sign where indicated. If you hold Sedgwick Shares jointly with others, you must arrange for all your co-holders to sign this Form. * The information on page 4 of this Form may help to answer queries you may have about the Form and the procedure for responding to the Ordinary Offer. * Please send this Form, duly completed and signed (AND ACCOMPANIED, IF YOUR SEDGWICK SHARES ARE IN CERTIFICATED FORM, BY YOUR SEDGWICK SHARE CERTIFICATE(S)) and/or other document(s) of title) (if you are a Non-US Holder) either by post or by hand to Computershare Services PLC, P.O. Box 859, Consort House, East Street, Bedminster, Bristol BS99 1XZ, or by hand (during normal business hours only) to Computershare Services PLC, 5-10 Great Tower Street, London EC3R 5ER, or (if you are a US Holder) by post or by hand to Bank of New York, 101 Barclay Street, New York, New York 10286, marked for the attention of Tenders and Exchanges, as soon as possible but in any event to be received no later than 3.00 p.m. (London time), 10.00 a.m. (New York City time) on October 5, 1998. A first class reply-paid envelope (only for use in the UK or the US, as the case may be) is enclosed for this purpose. * If your Sedgwick Shares are in uncertificated form (that is, in CREST), you should follow the instructions set out in paragraph 9(g) of Part B of Appendix I to the Offer Document in order to transfer your Sedgwick Shares to an escrow balance. For this purpose, the participant ID of Computershare Services PLC which will act as escrow agent is 3RA48, the member account ID of Computershare Services PLC is SEDGWICK and the Form of Acceptance Reference Number of this Form (for insertion in the first eight characters of the shared note field on the TTE instruction) is shown next to Box 5 on page 3 of this Form. You should ensure that the transfer to escrow settles no later than 3.00 p.m (London time), 10.00 a.m. (New York City time) on October 5, 1998. * If you hold Sedgwick Shares in both certificated and uncertificated form, you should complete a separate Form for each holding. Similarly, you should complete a separate Form for each different member account ID under which Sedgwick Shares are held in uncertificated form and for each different designation under which Sedgwick Shares are held in certificated form. You can obtain further Forms by contacting Computershare Services PLC, Bank of New York or Georgeson & Co Inc on one of the telephone numbers set out below. * If you hold Sedgwick Shares in certificated form and your share certificate(s) and/or other document(s) of title is/are not readily available or is/are lost, this Form should nevertheless be completed, signed and returned as stated above so as to be received no later than 3.00 p.m. (London time), 10.00 a.m. (New York City time) on October 5, 1998 and the share certificate(s) and/or other document(s) of title or an indemnity satisfactory to Marsh & McLennan should be lodged as soon as possible thereafter with Computershare Services PLC or Bank of New York at any of the addresses set out above (as the case may be). DO NOT DETACH ANY PART OF THIS FORM IF YOU HAVE ANY QUESTIONS AS TO HOW TO COMPLETE THIS FORM, PLEASE CONTACT COMPUTERSHARE SERVICES PLC ON +44 (0) 117 937 0672, BANK OF NEW YORK ON +1-800-507-9357 OR GEORGESON & CO INC ON +1-800-223-2064 2 Page 2 HOW TO COMPLETE THIS FORM 1 THE ORDINARY OFFER To accept the Ordinary Offer, insert in Box 1 the total number of Sedgwick Shares for which you wish to accept the Ordinary Offer, whether or not you wish to elect for the Loan Note Alternative or the US dollar alternative. You must also sign Box 8 which will constitute your acceptance of the Ordinary Offer, and complete Box 4 and, if relevant Box 5. If applicable, you should also complete Box 7. If no number or a number greater than your registered holding of Sedgwick Shares is written in Box 1 and you have signed Box 8, you will be deemed to have inserted in Box 1, and to have accepted the Ordinary Offer in respect of your entire registered holding of Sedgwick Shares (being your entire holding under the name and address specified in Box 4) or, if your Sedgwick Shares are in CREST, under the participant ID and member account id specified in Box 5. CREST participants are requested to insert in Box 1 the same number of Sedgwick Shares as entered on the related TTE instruction. If you put "NO" in Box [ ], you may be deemed not to have accepted the Ordinary Offer. COMPLETE HERE PLEASE ENSURE YOUR SHARE CERTIFICATE(S) AND/OR OTHER DOCUMENTS OF TITLE ARE ENCLOSED. 2 THE LOAN NOTE ALTERNATIVE To elect for the Loan Note Alternative you should first complete Box 1 and then write in Box 2 the number of Sedgwick Shares for which you wish to elect to receive Loan Notes rather than cash under the Offer. You must also sign Box 8 and complete Box 4 and, if appropriate, complete Box 5. If applicable, you should also complete Box 7. If a number greater than the number of Sedgwick Shares inserted or deemed to be inserted in Box 1 is written in Box 2 and you have signed Box 8, you will be deemed to have elected for the Loan Note Alternative in respect of the number inserted or deemed to be inserted in Box 1. If you put "NO" in Box [ ], you may not accept the Loan Note Alternative and must leave Box @ blank. If you put "NO" in Box [ ] and complete Box @, your instructions in Box @ will be disregarded. Each person electing for the Loan Notes will be deemed to represent and warrant that he/she is not a US Person, a Canadian person, an Australian person, or a Japanese person and is not acquiring, and will not be holding such Loan Notes for the account or benefit of a US Person, a Canadian person, an Australian person or a Japanese person or with a view to the offer/sale or delivery, directly or indirectly, of such Loan Notes in, into or from the United States, Canada, Australia or Japan or to, or for the account or benefit of, any US Person, Canadian person, Australian person or Japanese person or any other person whom such transferee has reason to believe is purchasing for the purpose of such offer, sale or delivery. Any person unable to give such a representation and warranty is not permitted to accept the Loan Note Alternative and in the case of any US Person will be deemed to have accepted the Ordinary Offer for cash and without electing for the Loan Note Alternative. COMPLETE HERE 3 US DOLLAR ALTERNATIVE To elect to receive all of your cash consideration in US dollars instead of pounds sterling, in accordance with paragraph 12 of Part B of Appendix I to the Offer Document, please place a mark in Box 3. You may elect to receive all of your cash consideration in US dollars only in respect of your whole holding of Sedgwick Shares in respect of which you accept the Ordinary Offer. If you have elected for the Loan Note Alternative, any mark that you place in this box will not be valid. Please read paragraph 12 of Part B of Appendix I to the Offer Document before electing to receive your cash consideration in US dollars. COMPLETE HERE 4 NAME(S) AND ADDRESS(ES) Please complete Box 4 with the full name and address of the sole or first-named registered holder together with the full names of all other joint holders (if any) in BLOCK CAPITALS. Unless you complete Box 7, this is the address to which your consideration will be sent. If you insert in Box 4 an address in Canada, Australia or Japan (and, if you are electing for the Loan Note Alternative, in the United States), you must insert in Box 7 an alternative address outside Canada, Australia and Japan (and, if you are electing for the Loan Note Alternative, outside the United States). Please also give a telephone number where you may be contacted in the event of any query. COMPLETE HERE 5 PARTICIPANT ID AND MEMBER ACCOUNT ID If your Sedgwick Shares are in CREST, you must insert in Box 5 the participant ID and the member account ID under which such shares are held by you in CREST. You must also transfer (or procure the transfer of) the Sedgwick Shares concerned to an escrow balance, specifying in the TTE instruction the participant ID and member account ID inserted in Box 5 and the Form of Acceptance Reference Number of this Form and the other information specified in paragraph 9(g) of Part B of Appendix I to the Offer Document. The Form of Acceptance Reference Number appears next to Box 5 on page 3 of this Form. COMPLETE HERE 6 OVERSEAS PERSONS If you are unable to give the representations and warranties set out in paragraph 10(b) of Part B of Appendix I to the Offer Document, you must put "NO" in Box 6. If you do not put "NO" in Box 6, you will be deemed to have given such representations and warranties. COMPLETE HERE 7 ADDRESS FOR DESPATCH OF CONSIDERATION If you wish the consideration and/or other documents to be sent to someone other than the first-named registered holder at the address set out in Box 4 (e.g. your bank manager or stockbroker), you should complete Box 7. Box 7 must be completed by holders who have completed Box 4 with an address in Canada, Australia or Japan (and, if electing for the Loan Note Alternative, in the United States). You must not insert in Box 7 an address in Canada, Australia or Japan (and, if electing for the Loan Note Alternative, in the United States). COMPLETE HERE 8 SIGNATURES You must sign Box * and, in the case of a joint holding, arrange for ALL other joint holders to do likewise. All registered holders who are individuals MUST SIGN IN THE PRESENCE OF A WITNESS who must also sign Box 8 where indicated. The witness must be over 18 years of age and should not be another joint holder signing the Form. The same witness may witness each signature of the joint holders. The witness should also print his/her name where indicated. A company may execute under seal, the seal being affixed and witnessed in accordance with its Articles of Association or other regulations. Alternatively, a company to which section 36A of the Companies Act 1985 applies may execute the Form by a director and the company secretary or by two directors of the company signing the Form and a company incorporated outside Great Britain may sign in accordance with the laws of the relevant territory in which the relevant company is incorporated. In both cases, execution should be expressed to be by the company and each person signing the Form should state the office which he/she holds and insert the name of the company above or alongside his/her signature. If the Form is not signed by the registered holder(s), insert the name(s) and capacity (e.g. attorney or executor(s)) of the person(s) signing the Form. Such person should also deliver evidence of his/her authority in accordance with the notes on page 4. Sign and WITNESS here 3 Page 3 PLEASE COMPLETE AS EXPLAINED ON PAGES 2 AND 4 1 TO ACCEPT THE CONVERTIBLE OFFER BOX 1 Whether or not you wish to elect for the Loan Note Alternative or the US Pound ST FOR OFFICE USE dollar alternative, complete Box 1 ____________________ ________________ and Box 5 (and, if appropriate, Box 4, Number of Sedgwick HOLDER CODE Box 6 and/or Box 7) and sign Box 8 Shares. below. ____________________ ________________ 2 TO ELECT FOR THE LOAN NOTE BOX 2 H ALTERNATIVE Having completed Box 1 (and, if Pound ST appropriate, Box 5 and/or Box 7), ____________________ ________________ complete Box 2 and Box 4 and Number of Sedgwick C sign Box 8 below. Shares. ____________________ ________________ 3 TO ELECT FOR THE US DOLLAR BOX 3 Q ALTERNATIVE _____________________ Place a mark in this box to receive all of your cash consideration in US dollars instead of pounds sterling. You may not mark this box if you have completed Box 2. _____________________ ________________ 4 FULL NAME(S) AND ADDRESS(ES) (TO BE COMPLETED IN BLOCK CAPITALS) BOX 4 First-named registered holder Second-named registered holder 1. Forenames _____________________ 2. Forenames _______________________ (Mr, Mrs, Ms or Title) (Mr, Mrs, Ms or Title) Surname _________________________ Surname __________________________ Third-named registered holder Address __________________________ 3. Forenames ______________________ (Mr, Mrs, Ms or Title) __________________________________ Surname ___________________________ __________________________________ Fourth-named registered holder Postcode _________________________ 4. Forenames ______________________ (Mr, Mrs, Ms or Title) Surname ___________________________ In case of query, please state your daytime telephone number ________________ 5 PARTICIPANT ID AND MEMBER ACCOUNT ID BOX 5 Complete this Box only if your Sedgwick Shares are in CREST Participant ID ____________ The Form of Acceptance Reference Number of this Form is: Member account ID _________ ___________________________ 6 OVERSEAS PERSONS BOX 6 If you are unable to give the representations and warranties in paragraph 10(b) of Part B of Appendix I to the Offer Document, you must put "NO" in Box 6 ___________________________ 7 ADDRESS FOR THE DESPATCH OF CONSIDERATION BOX 7 Address outside Canada, Australia and Japan (and, if electing for the Loan Note Alternative, outside the United States) to which consideration and/or other documents are to be sent instead of address in Box 4. Name ______________________________________________________________________ Address ___________________________________________________________________ ___________________________________________________________________________ _____________________________________ Postcode ____________________________ 8 ALL REGISTERED HOLDERS TO SIGN HERE TO ACCEPT BOX 8 THE ORDINARY OFFER EXECUTION BY INDIVIDUALS Signed and delivered In presence of: as a deed by ________________________ ________________________ ________________________ Signature Signature of Witness Name of Witness ________________________ ________________________ ________________________ Signature (joint holder) Signature of Witness Name of Witness ________________________ ________________________ ________________________ Signature (joint holder) Signature of Witness Name of Witness ________________________ ________________________ ________________________ Signature (joint holder) Signature of Witness Name of Witness IMPORTANT: EACH REGISTERED HOLDER WHO IS AN INDIVIDUAL MUST SIGN IN THE PRESENCE OF A WITNESS WHO MUST ALSO SIGN AND PRINT HIS/HER NAME WHERE INDICATED. IN THE CASE OF JOINT HOLDERS, ALL MUST SIGN. **Executed as a deed under the common seal of the company named below/ Executed as a deed on behalf of the company named below** in the presence of/acting by: ________________________ ________________________ ________________________ Name of Company Signature Name of Director **Delete as appropriate ________________________ ________________________ Signature Name of Director/ Secretary** (TO BE COMPLETED IN BLOCK CAPITALS) 4 Page 4 FURTHER NOTES REGARDING THE COMPLETION AND LODGING OF THIS FORM In order to be effective, this Form must, except as mentioned below, be signed personally by the registered holder or, in the case of a joint holding, by ALL the joint holders and each individual signature must be independently witnessed. A company must execute this Form under its common seal, the seal being affixed and witnessed in accordance with its Articles of Association or other regulations. Alternatively, a company to which section 36A of the Companies Act 1985 applies may execute this Form by a director and the company secretary or by two directors of the company signing the form and a company incorporated outside Great Britain may sign in accordance with the laws of the relevant territory in which the relevant company is incorporated. In both cases, execution should be expressed to be by the company and each person signing the Form should state the office which he/she holds and insert the name of the company above or alongside his/her signature. In order to avoid delay and inconvenience to yourself, the following points may assist you: 1. IF THE SOLE HOLDER HAS DIED If a grant of probate or letters of administration has/have been registered with Sedgwick's registrar, this Form must be signed by the personal representative(s) of the deceased holder, in the presence of a witness, and returned either by post or by hand (in the case of a Non-US Holder) to Computershare Services PLC, P.O. Box 859, Consort House, East Street, Bedminster, Bristol, BS99 1XZ, or by hand (during normal business hours only) to Computershare Services PLC, 5-10 Great Tower Street, London EC3R 5ER, or (in the case of a US Holder) by post or by hand to Bank of New York, 101 Barclay Street, New York, New York 10286, marked for the attention of Tenders and Exchanges. If a grant of probate or letters of administration has/have not been registered with Sedgwick's registrar, the personal representative(s) or the prospective personal representative(s) should sign the Form, in the presence of a witness, and return it as aforesaid. However, the grant of probate or letters of administration must be lodged with Computershare Services PLC or Bank of New York at any such address (as the case may be) before the consideration due can be despatched. 2. IF ONE OF THE JOINT HOLDERS HAS DIED This Form must be signed by all surviving holders in the presence of a witness and lodged with Computershare Services PLC or Bank of New York at any of the addresses set out in paragraph 1 above (as the case may be), accompanied by the death certificate, the grant of probate or letters of administration in respect of the deceased holder. 3. IF YOUR SEDGWICK SHARES ARE IN CERTIFICATED FORM AND THE CERTIFICATE(S) IS/ARE HELD BY YOUR BANK OR SOME OTHER AGENT If your share certificate(s) and/or other document(s) of title is/are not readily available, the completed Form should be lodged with Computershare Services PLC or Bank of New York at any of the addresses set out in paragraph 1 above (as the case may be), together with a note saying e.g. "certificates to follow" and you should arrange for the share certificate(s) and/or other document(s) of title to be forwarded as soon as possible thereafter. 4. IF YOUR SEDGWICK SHARES ARE IN CERTIFICATED FORM AND ANY SHARE CERTIFICATE IS NOT READILY AVAILABLE OR HAS BEEN LOST The completed Form, and any share certificate(s) which you may have available, should be lodged with Computershare Services PLC or Bank of New York at any of the addresses set out in paragraph 1 above (as the case may be), accompanied by a letter stating that the balance will follow (and, if applicable, that you have lost one or more of your share certificates). At the same time, you should write to Sedgwick's registrar, Lloyds Bank Registrars, The Causeway, Worthing, West Sussex, BN99 6DA, requesting that a letter of indemnity be sent to you which, when completed in accordance with the instructions given, should be lodged with Computershare Services PLC or Bank of New York at any of the addresses set out in paragraph 1 above (as the case may be), as soon as possible thereafter. 5. IF THE FORM HAS BEEN SIGNED UNDER POWER OF ATTORNEY The completed Form should be lodged with Computershare Services PLC or Bank of New York at any of the addresses set out in paragraph 1 above (as the case may be) accompanied by the original power of attorney (or a copy thereof duly certified in accordance with the Powers of Attorney Act 1971). The power of attorney will be noted by Computershare Services PLC or Bank of New York and returned as directed. 6. IF YOUR NAME OR OTHER PARTICULARS ARE SHOWN INCORRECTLY ON THE SHARE CERTIFICATE(S) e.g. Name on the certificates ..............................James Smith Correct name .........................................James Smythe The Form should be completed in your correct name and lodged with Computershare Services PLC or Bank of New York at any of the addresses set out in paragraph 1 above (as the case may be) with your share certificate(s) and accompanied by a letter from your bank, stockbroker or solicitor confirming that the person in whose name the Sedgwick Shares are registered is one and the same as the person who has signed the Form. If an incorrect address is shown, the correct address should be written on the Form. If you have changed your name, lodge your marriage certificate or deed poll or, in the case of a company, a copy of the certificate of incorporation on change of name with this Form for noting. 7. IF A HOLDER IS AWAY FROM HOME (E.G. ABROAD OR ON HOLIDAY) Send this Form and the Offer Document by the quickest means (e.g. air mail) to the holder for execution (provided that such documents are not forwarded or transmitted, by any means, in or into Canada, Australia or Japan) or, if he/she has executed a power of attorney giving sufficient authority, the attorney should sign the Form and the original power of attorney (or a copy thereof duly certified in accordance with the Powers of Attorney Act 1971) should be lodged with this Form for noting (see paragraph 5 above). No other signatures are acceptable. 8. IF YOU HAVE SOLD OR TRANSFERRED ALL YOUR SEDGWICK SHARES If you have sold or transferred all your Sedgwick Shares, please send this Form and the Offer Document at once to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was effected for delivery to the purchaser or transferee. However, this Form and the Offer Document should not be forwarded or transmitted in or into Canada, Australia or Japan. 9. IF YOU ARE NOT RESIDENT IN THE UK The attention of Sedgwick Shareholders not resident in the UK is drawn, in particular to paragraph 8 and 10(b) of Part B of Appendix I to the Offer Document. 10. IF YOUR SEDGWICK SHARES ARE IN CREST You should take the action set out in paragraph 9(g) of Part B of Appendix I to the Offer Document to transfer your Sedgwick Shares to an escrow balance. You are reminded to keep a record of the Form of Acceptance Reference Number (which appears next to Box 5 on page 3 of this Form) so that such Form of Acceptance Reference Number can be inserted into the TTE instruction. If you are a CREST sponsored member, you should refer to your CREST sponsor before completing this Form, as only your CREST sponsor will be able to send the necessary TTE instruction to CRESTCo. Without prejudice to paragraphs 6(d) and 7 of Part B of Appendix I to the Offer Document, Marsh & McLennan reserves the right to treat as valid any acceptance of the Ordinary Offer which is not entirely in order or which is not accompanied by the relevant transfer to escrow or (as appropriate) the relevant share certificate(s) and/or other document(s) of title. In that event, no consideration due under the Ordinary Offer will be sent until after the relevant transfer to escrow has been made or (as appropriate) the relevant share certificate(s) and/or other document(s) of title or indemnities satisfactory to Marsh & McLennan have been received by Computershare Services PLC or Bank of New York at any of the addresses set out in paragraph 1 above (as the case may be). Notwithstanding that no share certificate(s) and/or other document(s) of title is/are delivered with this Form, the Form, if otherwise valid and accompanied by an appropriate endorsement or certification to the effect that the Sedgwick Shares referred to therein are available for acceptance and signed on behalf of the London Stock Exchange or Sedgwick's registrar and delivered to Computershare Services PLC or Bank of New York at any of the addresses set out in paragraph 1 above (as the case may be), may be treated as valid for the purposes including an election for the Loan Note Alternative. 5 THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the Convertible Offer or the action you should take, you are recommended immediately to seek your own personal financial advice from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser duly authorised under the Financial Services Act 1986. This Form of Acceptance, Authority and Election (the Form) should be read in conjunction with the accompanying offer document dated September 4, 1998 (the Offer Document). The definitions used in the Offer Document apply in this Form. The provisions of Appendix I to the Offer Document, in so far as they relate to the Convertible Offer, are deemed to be incorporated in and form part of this Form and should be read carefully by each Sedgwick Bondholder. If you have sold or otherwise transferred all your Sedgwick Convertible Bonds, please send this Form, the Offer Document and the reply-paid envelope as soon as possible to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was effected, for delivery to the purchaser or transferee. However, such documents should not be forwarded or transmitted in or into Canada, Australia or Japan. The Convertible Offer is not being made, directly or indirectly, in or into, or by use of the mails of, or by any means or instrumentality (including, without limitation, telephonically or electronically) of interstate or foreign commerce of, or any facility of a national securities exchange of, Canada, Australia or Japan and will not be capable of acceptance by any such use, means, instrumentality, or facility. Accordingly, neither this Form nor the Offer Document is being or may be mailed or otherwise forwarded, distributed or sent in, into or from Canada, Australia or Japan. All Sedgwick Bondholders (including custodians, nominees and trustees) who would, or otherwise intend to, forward this Form and/or the Offer Document, should read the further details in this regard which are contained in paragraphs 8 and 10 of Part B of Appendix I to the Offer Document before taking any action. The Loan Notes which may be issued pursuant to the Convertible Offer have not been, and will not be, listed on any stock exchange. The Loan Notes have not been, and will not be, registered under the US Securities Act or under the laws of any State of the United States and may not be offered, sold or delivered, directly or indirectly, in or into the United States or to, or for the account or benefit of, any US Person except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act or the relevant securities laws of any State of the United States. The Loan Notes may not be offered, sold or delivered, directly or indirectly, in or into Canada, Australia or Japan. FORM OF ACCEPTANCE, AUTHORITY AND ELECTION RECOMMENDED CASH OFFER BY MORGAN GUARANTY TRUST COMPANY OF NEW YORK AND DONALDSON, LUFKIN & JENRETTE INTERNATIONAL ON BEHALF OF MARSH & MCLENNAN COMPANIES, INC. FOR SEDGWICK GROUP PLC CONVERTIBLE BONDS ACCEPTANCES OF THE CONVERTIBLE OFFER MUST BE RECEIVED BY 3.00 P.M. (LONDON TIME), 10.00 A.M. (NEW YORK CITY TIME) on OCTOBER 5, 1998 PROCEDURE FOR ACCEPTANCE * If you wish to accept the Convertible Offer, use this Form and follow the instructions set out on pages 2, 3 and 4. All Sedgwick Bondholders who are individuals must sign in the presence of a witness who must also sign where indicated. If you hold Sedgwick Registered Bonds jointly with others, you must arrange for all your co-holders to sign this Form. * The information on page 4 of this Form may help to answer queries you may have about the Form and the procedure for responding to the Convertible Offer. * Please send this Form, duly completed and signed, (if you are a Non-US Holder) either by post or by hand to Computershare Services PLC, P.O. Box 859, Consort House, East Street, Bedminster, Bristol BS99 1XZ, or by hand (during normal business hours only) to Computershare Services PLC, 5-10 Great Tower Street, London EC3R 5ER, or (if you are a US Holder) by post or by hand to Bank of New York, 101 Barclay Street, New York, New York 10286, marked for the attention of Tenders and Exchanges, as soon as possible but in any event to be received no later than 3.00 p.m. (London time), 10.00 a.m. (New York City time) on October 5, 1998. A first class reply-paid envelope (only for use in the UK or the US, as the case may be) is enclosed for this purpose. * In the case of holders of Sedgwick Registered Bonds, this Form should be accompanied by your bond certificate(s) and/or other document(s) of title. * Holders of Sedgwick Bearer Bonds are referred to paragraph 9(d) of Part B of Appendix I to the Offer Document and are requested to follow the instructions set out herein as to delivery of such Sedgwick Bearer Bonds. * If your bond certificate(s) and/or other document(s) of title or your Sedgwick Bearer Bond(s) which is/are not held in Euroclear or Cedel is/are not readily available or is/are lost, this Form, duly completed and signed, should nevertheless be delivered as stated above and such bond certificate(s) and/or other document(s) of title or such Sedgwick Bearer Bond(s) should be forwarded as soon as possible thereafter. DO NOT DETACH ANY PART OF THIS FORM IF YOU HAVE ANY QUESTIONS AS TO HOW TO COMPLETE THIS FORM, PLEASE CONTACT COMPUTERSHARE SERVICES PLC ON +44 (0) 117 937 0672, BANK OF NEW YORK ON +1-800-507-9357 OR GEORGESON & CO INC ON +1-800-223-2064 6 1 THE CONVERTIBLE OFFER To accept the Convertible Offer, insert in Box 1 the total nominal amount of Sedgwick Convertible Bonds for which you wish to accept the Convertible Offer, whether or not you wish to elect for the Loan Note Alternative or the US dollar alternative. You must also sign Box 8 which will constitute your acceptance of the Convertible Offer and complete Box 5. If applicable, you should also complete Box 4 and/or Box 7. If you are a holder of Sedgwick Registered Bonds and no amount or an amount greater than the nominal amount of your registered holding of Sedgwick Convertible Bonds is inserted in Box 1 and you have signed Box 8, you will be deemed to have accepted the Convertible Offer in respect of, and inserted in Box 1, the nominal amount of Sedgwick Convertible Bonds that constitutes the whole of your holding of Sedgwick Registered Bonds. If you are a holder of Sedgwick Bearer Bonds not held through Euroclear or Cedel and you are delivering this Form accompanied by your Sedgwick Bearer Bonds or are providing evidence satisfactory to J.P. Morgan and Donaldson, Lufkin & Jenrette that your Sedgwick Bearer Bonds have been deposited with a bank or other depositary to the order of J.P. Morgan or Donaldson, Lufkin & Jenrette and no nominal amount of Sedgwick Convertible Bonds is inserted in Box 1 and you have signed Box 8, you will be deemed to have accepted the Convertible Offer in respect of, and inserted in Box 1, the nominal amount of Sedgwick Bearer Bonds that are so delivered or in respect of which evidence is so provided. If you put "NO" in Box @, you may be deemed not to have accepted the Convertible Offer. COMPLETE HERE 2 THE LOAN NOTE ALTERNATIVE To elect for the Loan Note Alternative, you should first complete Box 1 and then write in Box 2 the nominal amount of Sedgwick Convertible Bonds for which you wish to elect to receive Loan Notes rather than cash under the Convertible Offer. You must also sign Box 8, and complete Box 5. If applicable, you should also complete Box 4 and/or Box 7. If a nominal amount greater than the nominal amount of Sedgwick Convertible Bonds inserted or deemed to be inserted in Box 1 is written in Box 2 and you have signed Box 8, you will be deemed to have elected for the Loan Note Alternative in respect of the number inserted or deemed to be inserted in Box 1. If you put "NO" in Box @, you may not accept the Loan Note Alternative and must leave Box @ blank. If you put "NO" in Box @ and complete Box @, your instructions in Box @ will be disregarded. Each person electing for the Loan Notes will be deemed to represent and warrant that he/she is not a US Person, a Canadian person, an Australian person, or a Japanese person and is not acquiring, and will not be holding, such Loan Notes for the account or benefit of a US Person, a Canadian person, an Australian person or a Japanese person or with a view to the offer/sale or delivery, directly or indirectly, of such Loan Notes in, into or from the United States, Canada, Australia or Japan or to, or for the account or benefit of, any US Person, Canadian person, Australian person or Japanese person or any other person whom such transferee has reason to believe is purchasing for the purpose of such offer, sale or delivery. Any person unable to give such a representation and warranty is not permitted to accept the Loan Note Alternative and in the case of any US Person will be deemed to have accepted the Convertible Offer for cash and without electing for the Loan Note Alternative. COMPLETE HERE 3 US DOLLAR ALTERNATIVE To elect to receive all of your cash consideration in US dollars instead of pounds sterling, in accordance with paragraph 12 of Part B of Appendix I to the Offer Document, please place a mark in Box 3. You may elect to receive all of your cash consideration in US dollars only in respect of your whole holding of Sedgwick Convertible Bonds in respect of which you accept the Convertible Offer. If you have elected for the Loan Note Alternative, any mark that you place in this box will not be valid. Please read paragraph 12 of Part B of Appendix I to the Offer Document before electing to receive your cash consideration in US dollars. COMPLETE HERE 4 NAME(S) AND ADDRESS(ES) If this Form relates to Sedgwick Registered Bonds, please complete Box 4 with the full name and address of the sole or first-named registered holder together with the full names of all other joint holders (if any) in BLOCK CAPITALS. Unless you complete Box 7, this is the address to which your consideration will be sent. If you insert in Box 4 an address in Canada, Australia or Japan (and, if you are electing for the Loan Note Alternative, in the United States), you must insert in Box 7 an alternative address outside Canada, Australia and Japan (and, if you are electing for the Loan Note Alternative outside the United States). Please also give a telephone number where you may be contacted in the event of any query. If this Form relates to Sedgwick Bearer Bonds, Box 4 need not be completed and, in this regard only, this note overrides any instructions to the contrary in this Form and the Offer Document. If Box 4 is not completed, Box 7 must be completed. COMPLETE HERE 5 FORM OF SEDGWICK CONVERTIBLE BONDS IN RESPECT OF WHICH ACCEPTANCE IS MADE HEREBY Tick Box if you are accepting the Convertible Offer in respect of Sedgwick Registered Bonds held by you. If you tick Box , this Form of Acceptance should be accompanied by your Sedgwick Registered Bonds and/or other documents of title. Tick Box if you are accepting the Convertible Offer in respect of Sedgwick Bearer Bonds held by you. Do not tick Box if you hold Sedgwick Bearer Bonds through Euroclear or Cedel and you will deliver your Sedgwick Bearer Bonds to J.P. Morgan or Donaldson, Lufkin & Jenrette through Euroclear or Cedel. If you tick Box this Form of Acceptance should be accompanied by your Sedgwick Bearer Bonds (together with all unmatured coupons appertaining thereto except for those relating to the period May 31, 1998 to November 30, 1998) or evidence satisfactory to J.P. Morgan and Donaldson, Lufkin & Jenrette that your Sedgwick Bearer Bonds (together with such coupons) have been deposited with a bank or other depositary to the order of J.P. Morgan or Donaldson, Lufkin & Jenrette. If you are delivering this Form accompanied by your Sedgwick Bearer Bonds, this Form and the accompanying Sedgwick Bearer Bonds must be delivered by hand only (during normal business hours) (if you are a Non-US Holder) to Computershare Services PLC, P.O. Box 859, Consort House, East Street, Bedminster, Bristol BS99 1XZ or to Computershare Services PLC, 5-10 Great Tower Street, London EC3R 5ER or (if you are a US Holder) to Bank of New York, 101 Barclay Street, New York, New York 10286 marked for the attention of Tenders and Exchanges. Tick Box if you are accepting the Convertible Offer in respect of Sedgwick Bearer Bonds held by you through Euroclear or Cedel and you will irrevocably instruct Euroclear or Cedel to debit your security clearance or other accounts with the amount of Sedgwick Bearer Bonds in respect of which you are accepting the Convertible Offer and to credit the J.P. Morgan or Donaldson, Lufkin & Jenrette securities account with Euroclear or, as the case may be, Cedel in accordance with the procedures, details of which are available on request from Euroclear or, as the case may be, Cedel. If you tick Box , you should complete Box with the number of your securities clearance or other account in Euroclear or Cedel which is to be debited with the appropriate number of Sedgwick Bearer Bonds. You should then procure that instructions are given to Euroclear or, as the case may be, Cedel in accordance with such procedures to debit that account with the nominal amount of Sedgwick Bearer Bonds inserted in Box 1 and to credit the securities account of J.P. Morgan or Donaldson, Lufkin & Jenrette with Euroclear or, as the case may be, Cedel (details of which are available from Euroclear or, as the case may be, Cedel). You must comply with the procedures from time to time established by Euroclear or, as the case may be, Cedel in relation to acceptance of the Convertible Offer. Your acceptance of the Convertible Offer will not be treated as valid until such credit has been confirmed to J.P. Morgan or Donaldson, Lufkin & Jenrette by Euroclear or, as the case may be, Cedel. If you hold both Sedgwick Registered Bonds and Sedgwick Bearer Bonds or if you wish to exercise different options in respect of your delivery of Sedgwick Bearer Bonds, you should complete a separate Form in respect of each category of Sedgwick Bonds in respect of which you are accepting the Convertible Offer. You can obtain further Forms by contacting Computershare Services PLC, Bank of New York or Georgeson & Co Inc on one of the telephone numbers set out at the bottom of page 1. COMPLETE HERE 6 OVERSEAS PERSONS If you are unable to give the representations and warranties set out in paragraph 10(b) of Part B of Appendix I to the Offer Document, you must put "NO" in Box 6. If you do not put "NO" in Box 6, you will be deemed to have given such representations and warranties. COMPLETE HERE 7 ADDRESS FOR DESPATCH OF CONSIDERATION If you wish the consideration and/or other documents to be sent to someone other than the first-named registered holder at the address set out in Box 4 (e.g. your bank manager or stockbroker), you should complete Box 7. If this Form of Acceptance relates to Sedgwick Bearer Bonds, Box 7 must be completed with the name of the person and the address to which you wish the consideration and/or other documents to be sent. Box 7 must also be completed by holders who have completed Box 4 with an address in Canada, Australia or Japan (and, if electing for the Loan Note Alternative, in the United States). You must not insert in Box 7 and address in Canada, Australia or Japan (and, if electing for the Loan Note Alternative, in the United States). COMPLETE HERE 8 SIGNATURES You must sign Box * and, in the case of a joint holding of Sedgwick Registered Bonds, arrange for ALL other joint holders to do likewise. All holders who are individuals MUST SIGN IN THE PRESENCE OF A WITNESS who must also sign Box 8 where indicated. The witness must be over 18 years of age and should not be another joint holder signing the Form. The same witness may witness each signature of the joint holders. The witness should also print his/her name where indicated. In the case of Sedgwick Bearer Bonds, the person who completes and signs or otherwise executes Box 8 must be either the actual holder of the Sedgwick Bearer Bonds or a participant or account holder in or of Euroclear or Cedel whose securities clearance or other account with Euroclear or, as the case may be, Cedel is credited with any Sedgwick Bearer Bonds. References herein to the holder(s) of Sedgwick Bearer Bonds are references to the person(s) signing or otherwise executing Box 8. A company may execute under seal, the seal being affixed and witnessed in accordance with its Articles of Association or other regulations. Alternatively, a company to which section 36A of the Companies Act 1985 applies may execute the Form by a director and the company secretary or by two directors of the company signing the Form and a company in corporated outside Great Britain may sign in accordance with the laws of the relevant territory in which the relevant company is incorporated. In both cases, execution should be expressed to be by the company and each person signing the Form should state the office which he/she holds and insert the name of the company above or alongside his/her signature. If the Form is not signed by the registered holder(s), insert the name(s) and capacity (e.g. attorney or executor(s)) of the person(s) signing the Form. Such person should also deliver evidence of his/her authority in accordance with the notes on page 4. COMPLETE HERE 7 1 TO ACCEPT THE CONVERTIBLE OFFER BOX 1 Whether or not you wish to elect for the Loan Note Alternative or the US Pound ST FOR OFFICE USE dollar alternative, complete Box 1 ____________________ ________________ and Box 5 (and, if appropriate, Nominal amount of HOLDER CODE Box 4, Box 6 and/or Box 7) and sign Sedgwick Convertible Box 8 below. Bonds. ____________________ ________________ 2 TO ELECT FOR THE LOAN NOTE BOX 2 H ALTERNATIVE Having completed Box 1 (and, if Pound ST appropriate, Box 4, Box 6 and/or ____________________ ________________ Box 7), complete Box 2 and Box 5 Nominal amount of C and sign Box 8 below. Sedgwick Convertible Bonds. ____________________ ________________ 3 TO ELECT FOR THE US DOLLAR BOX 3 Q ALTERNATIVE ____________________ Place a mark in this box to receive all of your cash consideration in US dollars instead of pounds sterling. You may not mark this box if you have completed Box 2. _____________________ _______________ 4 FULL NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDERS (TO BE COMPLETED IN BLOCK CAPITALS) BOX 4 First-named registered holder Second-named registered holder 1. Forenames _____________________ 2. Forenames _______________________ (Mr, Mrs, Ms or Title) (Mr, Mrs, Ms or Title) Surname _________________________ Surname __________________________ Third-named registered holder Address __________________________ 3. Forenames ______________________ (Mr, Mrs, Ms or Title) __________________________________ Surname ___________________________ __________________________________ Fourth-named registered holder Postcode _________________________ 4. Forenames ______________________ (Mr, Mrs, Ms or Title) Surname ___________________________ In case of query, please state your daytime telephone number _________________ 5. FORM OF SEDGWICK CONVERTIBLE BONDS IN RESPECT OF WHICH BOX 5A ACCEPTANCE IS MADE HEREBY _______________ Tick Box 5A if you are accepting the Convertible Offer in respect of Sedgwick Registered Bonds held by you. _______________ BOX 5B Tick Box 5B if you are accepting the Convertible Offer _______________ in respect of Sedgwick Bearer Bonds held by you. _______________ Tick Box 5C if you are accepting the Convertible Offer BOX 5C in respect of Sedgwick Bearer Bonds held by you through _______________ Euroclear or Cedel and will deliver your Sedgwick Bearer Bonds to J.P. Morgan or Donaldson, Lufkin & Jenrette through Euroclear or Cedel. _______________ If you ticked Box 5C, you must insert in Box 5D the BOX 5D number of your securities clearance of other accounts ____________________ in Euroclear or Cedel which will be debited with Securities clearance the Sedgwick Bearer Bonds and specify whether that or other account account is held with Euroclear or Cedel. number ____________________ *Delete as applicable with Euroclear/Cedel* ____________________ 6 OVERSEAS PERSONS BOX 6 If you are unable to give the representations and warranties in paragraph 10(b) of Part B of Appendix I to the Offer Document, you must put "NO" in Box 6 ___________________________ 7 ADDRESS FOR THE DESPATCH OF CONSIDERATION BOX 7 Address outside Canada, Australia and Japan (and, if electing for the Loan Note Alternative, outside the United States) to which consideration and/or other documents are to be sent instead of address in Box 4. Name ______________________________________________________________________ Address ___________________________________________________________________ ___________________________________________________________________________ _____________________________________ Postcode ____________________________ 8 ALL REGISTERED HOLDERS TO SIGN HERE TO ACCEPT BOX 8 THE CONVERTIBLE OFFER EXECUTION BY INDIVIDUALS Signed and delivered In presence of: as a deed by ________________________ ________________________ ________________________ Signature Signature of Witness Name of Witness ________________________ ________________________ ________________________ Signature (joint holder) Signature of Witness Name of Witness ________________________ ________________________ ________________________ Signature (joint holder) Signature of Witness Name of Witness ________________________ ________________________ ________________________ Signature (joint holder) Signature of Witness Name of Witness IMPORTANT: EACH HOLDER WHO IS AN INDIVIDUAL MUST SIGN IN THE PRESENCE OF A WITNESS WHO MUST ALSO SIGN AND PRINT HIS/HER NAME WHERE INDICATED. IN THE CASE OF JOINT REGISTERED HOLDERS, ALL MUST SIGN. **Executed as a deed under the common seal of the company named below/ Executed as a deed on behalf of the company named below** in the presence of/acting by: ________________________ ________________________ ________________________ Name of Company Signature Name of Director **Delete as appropriate ________________________ ________________________ Signature Name of Director/ Secretary** (TO BE COMPLETED IN BLOCK CAPITALS) 8 9 FURTHER NOTES REGARDING THE COMPLETION AND LODGING OF THIS FORM In order to avoid delay and inconvenience to yourself, the following points may assist you: 1. IF THE SOLE HOLDER HAS DIED In relation to any Sedgwick Registered Bonds, if a grant of probate or letters of administration has/have been registered with Sedgwick, this Form must be signed by the personal representative(s) of the deceased holder, each in the presence of a witness who must also sign this Form. The Form should then be returned either by post or by hand (in the case of a Non-US Holder) to Computershare Services PLC, P.O. Box 859, Consort House, East Street, Bedminster, Bristol BS99 1XZ, or by hand (during normal business hours only) to Computershare Services PLC, 5-10 Great Tower Street, London EC3R 5ER, or (in the case of a US Holder) by post or by hand to Bank of New York, 101 Barclay Street, New York, New York 10286, marked for the attention of Tenders and Exchanges, together with the relative bond certificate(s). If a grant of probate or letters of administration has/have been registered with Sedgwick, the personal representative(s) or prospective personal representative(s) should sign this Form in the presence of a witness who must also sign this Form and forward it with the bond certificate(s) and/or other documents of title. However, a grant of probate or letters of administration must be lodged with Computershare Services PLC or Bank of New York at any of the addresses set out above (as the case may be) before the consideration due under the Convertible Offer can be forwarded to the personal representative(s). If a person entitled to any Sedgwick Convertible Bonds has died, this Form may be signed by the personal representative(s) or prospective personal representative(s) of the deceased, who should indicate their status. The grant of probate and/or letters of administration must be lodged with Computershare Services PLC or Bank of New York at any of the addresses set out above (as the case may be) before the consideration due can be forwarded to the personal representatives(s). 2. IF ONE OF THE JOINT REGISTERED HOLDERS HAS DIED This Form must be signed by all surviving registered holders in the presence of a witness and lodged with Computershare Services PLC or Bank of New York at any of the addresses set out in paragraph 1 above (as the case may be), accompanied by the death certificate, the grant of probate or letters of administration in respect of the deceased holder. 3. IF THE CERTIFICATE(S) IS/ARE HELD BY YOUR STOCKBROKER, BANK OR OTHER AGENT If your bond certificate(s) and/or other document(s) of title is/are with your stockbroker, bank or other agent, you should complete this Form and, if the certificate(s) is/are readily available but are not held through Euroclear or Cedel, arrange for it to be lodged by such agent with Computershare Services PLC or Bank of New York, at any of the addresses given in paragraph 1 (as the case may be), accompanied by the bond certificate(s) and/or other documents of title (in the case of Sedgwick Registered Bonds) or (in the case of Sedgwick Bearer Bonds) instruct your agent to lodge this Form and to arrange for evidence satisfactory to J.P. Morgan and Donaldson, Lufkin & Jenrette to be produced that the Sedgwick Bearer Bonds (together with all unmatured coupons appertaining thereto except for those relating to the period May 31, 1998 to November 30, 1998) have been deposited with a bank or other depositary to the order of J.P. Morgan or Donaldson, Lufkin & Jenrette. If the certificate(s) is/are not readily available and are not held through Euroclear or Cedel, lodge this Form with Computershare Services PLC or Bank of New York at any of the addresses given in paragraph 1 (as the case may be), duly completed together with a note saying e.g. "certificates to follow", and arrange for the certificate(s) in respect of Sedgwick Registered Bonds to be forwarded or (in relation to Sedgwick Bearer Bonds) arrange for compliance with the delivery instructions set out herein as soon as possible thereafter. (It is helpful for your agent to be informed of the full terms of the Convertible Offer.) If the Sedgwick Convertible Bonds are held through Euroclear or Cedel, forward this Form duly completed to Computershare Services PLC or Bank of New York at any of the addresses given in paragraph 1 (as the case may be) and follow the delivery instructions set out herein. 4. IF ANY BOND CERTIFICATE(S) IS NOT READILY AVAILABLE OR HAS BEEN LOST The completed Form, and any bond certificate(s) which you may have available, should be lodged with Computershare Services PLC or Bank of New York at any of the addresses set out in paragraph 1 above (as the case may be), accompanied by a letter stating that the balance will follow (and, if applicable, that you have lost one or more of you r bond certificates). At the same time, you should write to Sedgwick's registrar, Lloyds Bank Registrars, The Causeway, Worthing, West Sussex BN99 6DA, requesting that a letter of indemnity be sent to you which, when completed in accordance with the instructions given, should be lodged with Computershare Services PLC or Bank of New York at any of the addresses set out in paragraph 1 above (as the case may be), as soon as possible thereafter. 5. IF THE FORM HAS BEEN SIGNED UNDER POWER OF ATTORNEY The completed Form should be lodged with Computershare Services PLC or Bank of New York at any of the addresses set out in paragraph 1 above (as the case may be) accompanied by the original power of attorney (or a copy thereof duly certified in accordance with the Powers of Attorney Act 1971). The power of attorney will be noted by Computershare Services PLC or Bank of New York and returned as directed. 6. IF YOUR NAME OR OTHER PARTICULARS ARE SHOWN INCORRECTLY ON THE BOND CERTIFICATE(S) e.g. Name on the certificates..................................James Smith Correct name.............................................James Smythe The Form should be completed in your correct name and lodged with Computershare Services PLC or Bank of New York at any of the addresses set out in paragraph 1 above (as the case may be) with your bond certificate(s) and accompanied by a letter from your bank, stockbroker or solicitor confirming that the person in whose name the Sedgwick Convertible Bonds are registered is one and the same as the person who has signed the Form. If an incorrect address is shown, the correct address should be written on the Form. If you have changed your name, lodge your marriage certificate or deed poll or, in the case of a company, a copy of the certificate of incorporation on change of name with this Form for noting. 7. IF A HOLDER IS AWAY FROM HOME (E.G. ABROAD OR ON HOLIDAY) Send this Form and the Offer Document by the quickest means (e.g. air mail) to the holder for execution (provided that such documents are not forwarded or transmitted, by any means, in or into Canada, Australia or Japan) or, if he/she has executed a power of attorney giving sufficient authority, the attorney should sign the Form and the original power of attorney (or a copy thereof duly certified in accordance with the Powers of Attorney Act 1971) should be lodged with this Form for noting (see paragraph 5 above). No other signatures are acceptable. 8. IF YOU HAVE SOLD OR TRANSFERRED ALL YOUR SEDGWICK CONVERTIBLE BONDS If you have sold or transferred all your Sedgwick Convertible Bonds, please send this Form and the Offer Document at once to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was effected for delivery to the purchaser or transferee. However, this Form and the Offer Document should not be forwarded or transmitted in or into Canada, Australia or Japan. 9. IF YOU ARE NOT RESIDENT IN THE UK The attention of Sedgwick Bondholders not resident in the UK is drawn, in particular, to paragraphs 8 and 10(b) of Part B of Appendix I to the Offer Document. Without prejudice to paragraphs 6(d) and 7 of Part B of Appendix I to the Offer Document, Marsh & McLennan reserves the right to treat as valid any acceptance of the Convertible Offer which is not entirely in order or which is not accompanied by (as appropriate) the relevant bond certificate(s) and/or other document(s) or evidence of title. In that event, no consideration due under the Convertible Offer will be sent until after (as appropriate) the relevant bond certificate(s) and/or other document(s) or evidence of title or indemnities satisfactory to Marsh & McLennan have been received by Computershare Services PLC or Bank of New York at any of the addresses set out in paragraph 1. Notwithstanding that no bond certificate(s) and/or other document(s) of title is/are delivered with this Form, the Form, if otherwise valid and accompanied by an appropriate endorsement or certification to the effect that the Sedgwick Convertible Bonds referred to therein are available for acceptance and delivered to Computershare Services PLC or Bank of New York at any of the address set out in paragraph 1 (as the case may be), may be treated as valid for the purposes including an election for the Loan Note Alternative. EX-99.A.4 5 FORM OF NOTICE OF GUARANTEED DELIVERY 1 Exhibit (a)(4) THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. In considering what action you should take, you are recommended immediately to seek your own financial advice from your stockbroker, bank manager, solicitor, accountant or other independent financial advisor. If you have sold or otherwise transferred all your American Depositary Shares ("Sedgwick ADSs") of Sedgwick Group plc ("Sedgwick"), please pass this document and all accompanying documents as soon as possible to the purchaser or transferee, or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. HOWEVER, SUCH DOCUMENTS SHOULD NOT BE DISTRIBUTED, FORWARDED OR TRANSMITTED IN OR INTO AUSTRALIA, CANADA OR JAPAN. Morgan Guaranty Trust Company of New York ("J.P. Morgan") and Donaldson, Lufkin & Jenrette International ("Donaldson, Lufkin & Jenrette") are acting for Marsh & McLennan Companies, Inc. ("Marsh & McLennan") in relation to the Offers (as defined in the Letter of Transmittal) and no one else, and will not be responsible to anyone other than Marsh & McLennan for providing the protections afforded to customers of J.P. Morgan and Donaldson, Lufkin & Jenrette nor for providing advice in relation to the Offers. J.P. Morgan and Donaldson, Lufkin & Jenrette are acting through J.P. Morgan Securities Inc. and Donaldson, Lufkin & Jenrette Securities Corporation for the purpose of making the Offers in the United States. - -------------------------------------------------------------------------------- NOTICE OF GUARANTEED DELIVERY TO ACCEPT THE OFFER FOR AMERICAN DEPOSITARY SHARES EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS OF SEDGWICK GROUP PLC PURSUANT TO THE OFFER TO PURCHASE DATED SEPTEMBER 4, 1998 BY J. P. MORGAN AND DONALDSON, LUFKIN & JENRETTE ON BEHALF OF MARSH & McLENNAN COMPANIES, INC. - -------------------------------------------------------------------------------- As set forth in "Procedures for tendering Sedgwick ADSs" in paragraph 11 of Appendix I to the Offer to Purchase, this form or one substantially equivalent hereto must be used for acceptance of the Ordinary Offer in respect of Sedgwick ADSs, if American Depositary Receipts evidencing Sedgwick ADSs ("Sedgwick ADRs") are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis or if time will not permit all required documents to reach the US Depositary prior to the expiration of the Subsequent Offer Period (as defined in the Offer to Purchase). Such form may be delivered by hand or mailed to the US Depositary and must include a signature guarantee by an Eligible Institution (as defined in the Offer to Purchase) in the form set out herein. See "Procedures for tendering Sedgwick ADSs-Guaranteed delivery procedures" in paragraph 11 of Appendix I to the Offer to Purchase. 2 TO: THE BANK OF NEW YORK, US DEPOSITARY By Mail: By Facsimile Transmission: By Hand or Overnight Courier: Tender & Exchange Department (212) 815-6213 Tender & Exchange Department P.O. Box 11248 (for Eligible Institutions Only) Receive and Deliver Window Church Street Station 101 Barclay Street New York, New York Confirm by telephone: New York, New York 10286 10286-1248 (800) 507-9357
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature or a Letter of Transmittal is required to be guaranteed by an Eligible Institution under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. Acceptance of the Ordinary Offer (as defined in the Offer to Purchase) in respect of Sedgwick Shares (except insofar as they are represented by Sedgwick ADSs) may not be made with this form and pursuant to the guaranteed delivery procedures. Capitalized terms and certain other terms used herein and not otherwise defined herein shall have the respective meanings assigned to them in the Offer to Purchase. Ladies and Gentlemen: The undersigned hereby accepts the Ordinary Offer in respect of Sedgwick ADSs upon the terms and subject to the conditions set forth below pursuant to the guaranteed delivery procedure set out in "Procedures for tendering Sedgwick ADSs-Guaranteed delivery procedures" in paragraph 11 of Appendix I to the Offer to Purchase. The undersigned understands that the acceptance of the Ordinary Offer in respect of Sedgwick ADSs pursuant to the guaranteed delivery procedures will not be treated as a valid acceptance for the purpose of satisfying the Acceptance Condition (as defined in the Offer to Purchase). See "Procedures for tendering Sedgwick ADSs-Guaranteed delivery procedures" in paragraph 11 of Appendix I to the Offer to Purchase. To be counted towards satisfaction of the Acceptance Condition, the Sedgwick ADRs evidencing such Sedgwick ADSs must, prior to the Initial Closing Date (as set forth in the Offer to Purchase), be received by the US Depositary or, if applicable, timely confirmation of a book-entry transfer of such Sedgwick ADSs into the US Depositary's account at a Book-Entry Transfer Facility pursuant to the procedures set out in "Procedures for tendering Sedgwick ADSs-Book-entry transfer" in paragraph 11 of Appendix I to the Offer to Purchase must be received by the US Depositary, together with a duly executed Letter of Transmittal or facsimile thereof with any required signature guarantees and any other required documents. Signature(s): Address(es) (Include Zip Code): _____________________________________ _____________________________________ _____________________________________ _____________________________________ _____________________________________ _____________________________________ Name of Record Holder(s) Area Code(s) and Tel. No.(s): (Please Type or Print): _____________________________________ ______________________________________ Number of Sedgwick ADSs: If Sedgwick ADSs will be tendered by _____________________________________ book-entry transfer, check box on box: Sedgwick ADR No.(s) (if available): [ ] The Depository Trust Company _____________________________________ [ ] Philadelphia Depository Trust Co. Dated: Account Number: _____________________________________ ______________________________________ 2 3 GUARANTEE (Not to be used for signature guarantee) The undersigned, a participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Program or the Stock Exchange Medallion Program, hereby guarantees that the undersigned will deliver to the US Depositary either the Sedgwick ADRs representing the Sedgwick ADSs with respect to which the Ordinary Offer is being accepted hereby, in proper form for transfer, or confirmation of the book-entry transfer of such Sedgwick ADSs into the US Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company, in any such case together with a properly completed and duly executed Letter of Transmittal with any required signature guarantees and any other required documents, all within three New York Stock Exchange trading days after the date hereof. Name of Firm, Agent or Trustee: Authorized Signature _____________________________________ _____________________________________ Address (Include Zip Code): Name (Please Type or Print): _____________________________________ _____________________________________ _____________________________________ Title: _____________________________________ _____________________________________ _____________________________________ Date: Area Code and Tel. No.: _____________________________________ _____________________________________ Note: DO NOT SEND SEDGWICK ADRs WITH THIS FORM; SEDGWICK ADRs SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 4 BOWNE Printed in London I39085 EX-99.A.5 6 FORM OF LETTER TO BROKERS,DEALERS,BANKS AND OTHERS 1 Exhibit (a)(5) This document should not be forwarded or transmitted in or into Australia, Canada or Japan. RECOMMENDED CASH OFFERS FOR ALL OUTSTANDING ORDINARY SHARES, AMERICAN DEPOSITARY SHARES EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS AND 7.25% CONVERTIBLE BONDS 2008 OF SEDGWICK GROUP PLC BY MORGAN GUARANTY TRUST COMPANY OF NEW YORK AND DONALDSON, LUFKIN & JENRETTE INTERNATIONAL ON BEHALF OF MARSH & MCLENNAN COMPANIES, INC. THERE WILL BE AN INITIAL OFFER PERIOD WHICH WILL EXPIRE AT 3.00 PM (LONDON TIME), 10.00 AM (NEW YORK CITY TIME) ON OCTOBER 5, 1998, UNLESS EXTENDED. AT THE CONCLUSION OF THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, IF ALL CONDITIONS OF THE OFFERS HAVE BEEN SATISFIED, FULFILLED OR, WHERE PERMITTED, WAIVED, THE OFFERS WILL BE EXTENDED FOR A SUBSEQUENT OFFER PERIOD OF AT LEAST 14 CALENDAR DAYS. HOLDERS OF SEDGWICK SECURITIES WILL HAVE WITHDRAWAL RIGHTS DURING THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, BUT NOT DURING THE SUBSEQUENT OFFER PERIOD. September 4, 1998 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: J.P. Morgan Securities Inc. and Donaldson, Lufkin & Jenrette Securities Corporation have been appointed by Marsh & McLennan Companies, Inc. ("Marsh & McLennan") to act as dealer managers in the United States (the "Dealer Managers") in connection with an offer by Morgan Guaranty Trust Company of New York ("J.P. Morgan") and Donaldson, Lufkin & Jenrette International ("Donaldson, Lufkin & Jenrette"), on behalf of Marsh & McLennan, to purchase, upon the terms and subject to the conditions set forth in the Offer to Purchase dated September 4, 1998 (the "Offer to Purchase") and the accompanying Acceptance Forms (collectively, the "Offers"), all outstanding ordinary shares of 10p each ("Sedgwick Shares") of Sedgwick Group plc ("Sedgwick") for 225 pence in cash per Sedgwick Share, all American Depositary Shares ("Sedgwick ADSs") of Sedgwick, each representing five Sedgwick Shares and evidenced by American Depositary Receipts ("Sedgwick ADRs"), for L.11.25 in cash per Sedgwick ADS and all of the outstanding 7.25% Convertible Bonds 2008 issued by Sedgwick ("Sedgwick Convertible Bonds") for 123 pence in cash for each L.1 nominal of Sedgwick Convertible Bonds. For your information and for forwarding to those of your clients for whom you hold Sedgwick ADSs registered in your name or in the name of your nominee, we are enclosing the following documents: 1. The Offer to Purchase; 2. The Letter of Transmittal to be used by holders of Sedgwick ADSs to accept the Ordinary Offer (as defined in the Offer to Purchase); 3. The Notice of Guaranteed Delivery; 4. A printed form of letter that may be sent to your clients for whose account you hold Sedgwick ADSs registered in your name or in the name of a nominee, with space provided for obtaining such clients' instructions with regard to the Offers; 5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and 6. The return envelope addressed to the US Depositary. 2 YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE ORDINARY OFFER CANNOT BE ACCEPTED IN RESPECT OF SEDGWICK SHARES BY MEANS OF A LETTER OF TRANSMITTAL. A SHAREHOLDER FORM OF ACCEPTANCE FOR ACCEPTING THE ORDINARY OFFER IN RESPECT OF SEDGWICK SHARES CAN BE OBTAINED FROM THE US DEPOSITARY OR THE UK RECEIVING AGENT (AS EACH SUCH TERM IS DEFINED IN THE OFFER TO PURCHASE). In all cases, payment for Sedgwick ADSs purchased pursuant to the Ordinary Offer will be made only after timely receipt by the US Depositary of Sedgwick ADRs evidencing such Sedgwick ADSs or a confirmation of book-entry transfer, together with the Letter of Transmittal properly completed and duly executed, and any other documents required by the Letter of Transmittal. If holders of Sedgwick ADSs wish to tender, but it is impracticable for them to forward their Sedgwick ADRs or other required documents on or prior to the expiration of the Subsequent Offer Period or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures specified in paragraph 11(h) of Part B of Appendix I to the Offer to Purchase. Marsh & McLennan will not pay any fees or commissions to any broker, dealer, or other person (other than J.P. Morgan and Donaldson, Lufkin & Jenrette, the Dealer Managers, the US Depositary and the UK Receiving Agent and the Information Agent as described in the Offer to Purchase) in connection with the solicitation of acceptances of the Ordinary Offer with respect to Sedgwick ADSs evidenced by Sedgwick ADRs. You will, however, be reimbursed for customary mailing and handling expenses incurred by you in forwarding the enclosed materials to your client. Inquiries you may have with respect to the Offers should be addressed to the Information Agent or the Dealer Managers, at the respective addresses and telephone numbers set forth in the Offer to Purchase. Additional copies of the enclosed materials may be obtained from the Information Agent or the Dealer Managers. Capitalized terms and certain other terms used herein and not otherwise defined herein shall have the respective meanings assigned to them in the Offer to Purchase. Very truly yours, J.P. Morgan Securities Inc. 60 Wall Street New York, New York 10260 (212) 648 7843 (Call Collect) and Donaldson, Lufkin & Jenrette Securities Corporation 277 Park Avenue New York, New York 10172 (212) 892 8223 (Call Collect) NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON THE AGENT OF J.P. MORGAN, DONALDSON, LUFKIN & JENRETTE, MARSH & MCLENNAN, THE US DEPOSITARY, THE DEALER MANAGERS, OR THE UK RECEIVING AGENT OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFERS NOT CONTAINED IN THE OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL. EX-99.A.6 7 FORM OF LETTER TO CLIENTS 1 Exhibit (a)(6) This document should not be forwarded or transmitted in or into Australia, Canada or Japan. RECOMMENDED CASH OFFERS FOR ALL OUTSTANDING ORDINARY SHARES, AMERICAN DEPOSITARY SHARES EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS AND 7.25% CONVERTIBLE BONDS 2008 OF SEDGWICK GROUP PLC BY MORGAN GUARANTY TRUST COMPANY OF NEW YORK AND DONALDSON, LUFKIN & JENRETTE INTERNATIONAL ON BEHALF OF MARSH & MCLENNAN COMPANIES, INC. THERE WILL BE AN INITIAL OFFER PERIOD WHICH WILL EXPIRE AT 3:00 PM (LONDON TIME), 10:00 AM (NEW YORK CITY TIME) ON OCTOBER 5, 1998, UNLESS EXTENDED. AT THE CONCLUSION OF THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, IF ALL CONDITIONS OF THE OFFERS HAVE BEEN SATISFIED, FULFILLED OR, WHERE PERMITTED, WAIVED, THE OFFERS WILL BE EXTENDED FOR A SUBSEQUENT OFFER PERIOD OF AT LEAST 14 CALENDAR DAYS. HOLDERS OF SEDGWICK SECURITIES WILL HAVE THE RIGHT TO WITHDRAW THEIR ACCEPTANCES OF THE OFFERS DURING THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, BUT NOT DURING THE SUBSEQUENT OFFER PERIOD. 2 September 4, 1998 To Our Clients: Enclosed for your consideration is the Offer to Purchase dated September 4, 1998 (the "Offer to Purchase"), the Letter of Transmittal and Notice of Guaranteed Delivery relating to an offer by Morgan Guaranty Trust Company of New York ("J.P. Morgan") and Donaldson, Lufkin & Jenrette International ("Donaldson, Lufkin & Jenrette"), acting in the United States through J.P. Morgan Securities Inc. and Donaldson, Lufkin & Jenrette Securities Corporation, respectively, and on behalf of Marsh & McLennan Companies, Inc. ("Marsh & McLennan"), to purchase, upon the terms and subject to the conditions set forth in the Offer to Purchase and the accompanying Acceptance Forms (as defined in the Offer to Purchase) (collectively, the "Offers"), all outstanding ordinary shares of 10p each ("Sedgwick Shares") of Sedgwick Group plc ("Sedgwick") for 225 pence in cash per Sedgwick Share, all Sedgwick Shares represented by American Depositary Shares ("Sedgwick ADSs"), each representing five Sedgwick Shares and evidenced by American Depositary Receipts ("Sedgwick ADRs"), for L.11.25 in cash per Sedgwick ADS, and all of the outstanding 7.25% Convertible Bonds 2008 issued by Sedgwick ("Sedgwick Convertible Bonds") for 123 pence in cash for each L.1 nominal of Sedgwick Convertible Bonds. We are the holder of record of Sedgwick ADSs evidenced by Sedgwick ADRs held by us for your account. An acceptance of the Ordinary Offer (as defined in the Offer to Purchase) in respect of such Sedgwick ADSs can be made only by us as the holder of record and pursuant to your instructions. Accordingly, we request instructions as to whether you wish to have us accept the Ordinary Offer on your behalf in respect of any or all Sedgwick ADSs held by us for your account pursuant to the terms and subject to the conditions set forth in the Offer to Purchase. Your attention is invited to the following: 1. The Ordinary Offer is being made for all Sedgwick Shares and Sedgwick ADSs evidenced by Sedgwick ADRs and has been recommended by the board of directors of Sedgwick. 2. The Ordinary Offer is on the terms and subject to the conditions set forth in Appendix I to the Offer to Purchase. 3. The Initial Offer Period of the Ordinary Offer will expire at 3.00 p.m. (London time), 10.00 a.m. (New York City time) on October 5, 1998, unless extended (in accordance with the terms thereof). 4. At the conclusion of the Initial Offer Period, including any extension thereof, if all conditions of the Offers have been satisfied, fulfilled or, where permitted, waived, the Offers will be extended for a Subsequent Offer Period of at least 14 calendar days. 5. Sedgwick ADS holders will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes applicable to a sale of Sedgwick ADSs evidenced by Sedgwick ADRs to Marsh & McLennan. If you wish to have us accept the Ordinary Offer in respect of any or all of the Sedgwick ADSs evidenced by Sedgwick ADRs held by us for your account, please so instruct us by completing, executing and returning to us the instruction form contained in this letter. If you authorize us to accept the Ordinary Offer in respect of your Sedgwick ADSs evidenced by Sedgwick ADRs, the Ordinary Offer will be accepted in respect of all such Sedgwick ADSs unless otherwise indicated in such instruction form. Please forward your instruction form to us in ample time to permit us to accept the Ordinary Offer on your behalf prior to the expiration of the Ordinary Offer. The specimen Letter of Transmittal is furnished to you for your information only and cannot be used by you to accept the Ordinary Offer in respect of Sedgwick ADSs evidenced by Sedgwick ADRs held by us for your account. Capitalized terms and certain other terms used herein and not otherwise defined herein shall have the respective meanings assigned to them in the Offer to Purchase. 3 INSTRUCTIONS WITH RESPECT TO THE ORDINARY OFFER FOR ALL SEDGWICK SHARES AND SEDGWICK ADSS EVIDENCED BY SEDGWICK ADRS The undersigned acknowledge(s) receipt of your letter and the Offer to Purchase dated September 4, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal relating to an offer by J.P. Morgan and Donaldson, Lufkin & Jenrette, acting in the United States through J.P. Morgan Securities Inc. and Donaldson, Lufkin & Jenrette Securities Corporation, respectively, and on behalf of Marsh & McLennan Companies, Inc., to purchase, upon the terms and subject to the conditions set forth in the Offer to Purchase and the accompanying Acceptance Forms all outstanding ordinary shares of 10p each ("Sedgwick Shares") of Sedgwick Group plc ("Sedgwick") for 225 pence in cash per Sedgwick Share, all Sedgwick Shares represented by American Depositary Shares ("Sedgwick ADSs") of Sedgwick, each representing five Sedgwick Shares and evidenced by American Depositary Receipts, for L.11.25 in cash per Sedgwick ADS, and all of the outstanding 7.25% Convertible Bonds 2008 issued by Sedgwick ("Sedgwick Convertible Bonds") for 123 pence in cash for each L.1 nominal of Sedgwick Convertible Bonds. This will instruct you to accept the Ordinary Offer in respect of the number of Sedgwick ADSs indicated below (or, if no number is indicated below, all Sedgwick ADSs) held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer to Purchase. Dated ____________ 1998 Number of Sedgwick ADSs to be rendered(1) ___________________________ Sedgwick ADSs _____________________________________________________________ _____________________________________________________________ Signature(s) _____________________________________________________________ _____________________________________________________________ Please print name(s) _____________________________________________________________ _____________________________________________________________ Address(es) _____________________________________________________________ Area Code and Tel. No. _____________________________________________________________ Employer Identification or Social Security No. _______________ (1) Unless otherwise indicated, it will be assumed that the Ordinary Offer is to be accepted in respect of all Sedgwick ADSs held by us for your account. EX-99.A.7 8 GUIDELINES FOR CERTIFICATION 1 Exhibit (a)(7) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 OBTAINING A NUMBER If you do not have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card (for individuals), or Form SS-4, Application for Employer Identification Number (for business and all other entities), at the local office of the Social Security Administration or the Internal Revenue Service. To complete Substitute Form W-9 if you do not have a taxpayer identification number, write "Applied For" in the space for the taxpayer identification number in Part I, signed and date the Form, and give it to the requester. Generally, you will then have 60 days to obtain a taxpayer identification number and furnish it to the requester. If the requester does not receive your taxpayer identification number within 60 days, backup withholding, if applicable, will begin and continue until you furnish your taxpayer identification number to the requester. PAYEES EXEMPT FROM BACKUP WITHHOLDING The following is a list of payees exempt from backup withholding and for which no information reporting is required. For interest and dividends, all listed payees are exempt except item (9). For broker transactions, payees listed in items (1) through (13) and a person registered under the Investment Advisers Act of 1940 who regularly acts as a broker are exempt. Payments subject to reporting under sections 6041 and 6041A are generally exempt from backup withholding only if made to payees described in items (1) through (7), except a corporation that provides medical and health care services or bills and collects payments for such services is not exempt from backup withholding or information reporting. Only payees described in items (2) through (6) are exempt from backup withholding for barter exchange transactions, patronage dividends, and payments by certain fishing boat operators. (1) A corporation (2) An organization exempt from tax under section 501(a), or an IRA, or a custodial account under section 403(b)(7). (3) The United States or any of its agencies or instrumentalities. (4) A state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities. (5) A foreign government or any of its political subdivisions, agencies, or instrumentalities. (6) An international organization or any of its agencies or instrumentalities. (7) A foreign central bank of issue. (8) A dealer in securities or commodities required to register in the United States or a possession of the United States. (9) A futures commission merchant registered with the Commodity Futures Trading Commission. (10) A real estate investment trust. (11) An entity registered at all times during the tax year under the Investment Company Act of 1940. (12) A common trust fund operated by a bank under section 584(a). (13) A financial institution. (14) A middleman known in the investment community as a nominee or listed in the most recent publication of the American Society of Corporate Securities, Inc., Nominee List. (15) A trust exempt from tax under section 664 or described in section 4947. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under Section 1441. - Payments to partnership not engaged in a trade or business in the United States and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. - Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under section 852). - Payments described in section 6049(b)(5) to non-resident aliens. - Payments on tax-free covenant bonds under section 1451 of the Code. - Payments made by certain foreign organizations. - Mortgage interest paid to a nominee. Exempt payees described above should file a Substitute Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. Certain payments other than interest, dividends, and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see Sections 6041, 6041(a), 6042, 6044, 6045, 6049 and 6050A and 6050N of the Code and the regulations promulgated therein. PRIVACY ACT NOTICE.--Section 6109 requires recipients of dividends, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividends, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE EX-99.A.8 9 TEXT OF PRESS ANNOUNCEMENT DATED AUGUST 25, 1998 1 Exhibit (a)(8) 25 August 1998 Not for release, publication or distribution in or into Canada, Australia or Japan. MARSH & MCLENNAN COMPANIES, INC. RECOMMENDED CASH OFFER FOR SEDGWICK GROUP PLC - - Marsh & McLennan and Sedgwick announce a recommended cash offer to be made by J.P. Morgan and Donaldson, Lufkin & Jenrette on behalf of Marsh & McLennan for Sedgwick at 225 pence per Sedgwick Share and pound sterling 11.25 per Sedgwick ADS. - - The Offer values the entire issued share capital of Sedgwick at pound sterling 1,247 million. - - Sedgwick Shareholders (other than persons who are citizens or residents of the United States and certain other overseas shareholders) may elect to receive Loan Notes as an alternative to the cash consideration. - - The Offer represents a 57.9 per cent. premium over the closing middle-market price of a Sedgwick Share on 24 August 1998, the last business day prior to this announcement, and a multiple of 17.6 times Sedgwick's earnings per share for the year ended 31 December 1997. - - Sedgwick Shareholders are entitled to the interim dividend of 3.0 pence (net) per Sedgwick Share. - - Marsh & McLennan expects that the acquisition will lead to enhanced shareholder value, and will be accretive to earnings from the year ending 31 December 2000. - - Directors of Sedgwick and certain other persons have irrevocably undertaken to accept the Offer in respect of their holdings of Sedgwick Securities, representing in aggregate 225,743,233 Sedgwick Shares, and representing 40.7 per cent. of Sedgwick's issued share capital. - - Sax Riley, Chairman of Sedgwick, and Rob White-Cooper, Chief Executive of Sedgwick, have been invited to join the Board of Marsh & McLennan upon the Offer becoming or being declared unconditional in all respects. Commenting on the Offer, A.J.C. Smith, Chairman of Marsh & McLennan, said today: "We believe the combination of Marsh & McLennan and Sedgwick will be beneficial for our clients, employees and shareholders. This transaction, which joins together two of the best-known names in risk and insurance services and consulting, will strengthen further our ability to meet the increasing global demand for 1 2 professional services. In particular, it will enable us to improve the breadth and quality of service to our clients while providing substantial operational efficiencies." Sax Riley, Chairman of Sedgwick, said: "I am delighted that Sedgwick and Marsh & McLennan have come together to form the world's leading insurance broker and employee benefits consultancy and I look forward to working with Marsh & McLennan for the development of our business. The combination of our two groups, together with the retention of the Sedgwick brand name internationally, will enhance our global service and will offer our people new opportunities in a much enlarged group. This Offer represents good value for shareholders." This summary should be read in conjunction with the full text of this announcement. PRESS ENQUIRIES: Marsh & McLennan Barbara Perlmutter +1 212 345 5585 J.P. Morgan Terry Eccles +44 171 600 2300 Edward J. Kelly +1 212 483 2323 Donaldson, Lufkin & Jenrette Cliff Hampton +44 171 655 7500 Alison Carnwath +1 212 892 7699 Cazenove +44 171 588 2828 David Mayhew Kekst & Company +1 212 521 4800 James Fingeroth Michael Freitag Brunswick +44 171 404 5959 Alison Hogan Sedgwick +44 171 377 3456 Sax Riley Rob White-Cooper Julia Fish Rothschild +44 171 280 5000 Richard Davey Jonathan Eddis CSFB +44 171 888 8888 Mark Seligman Henry Lloyd 2 3 AN ANALYSTS' BRIEFING WILL TAKE PLACE AT 12 NOON TODAY, TUESDAY 25 AUGUST 1998, AT THE OFFICES OF J.P. MORGAN AT 60 VICTORIA EMBANKMENT, LONDON EC4Y 0JP. J.P. Morgan and Donaldson, Lufkin & Jenrette, which are regulated in the United Kingdom by The Securities and Futures Authority Limited, are acting for Marsh & McLennan and no one else in connection with the Offer and will not be responsible to anyone other than Marsh & McLennan for providing the protections afforded to customers of J.P. Morgan and Donaldson, Lufkin & Jenrette nor for giving advice in relation to the Offer. Cazenove are acting as brokers to Marsh & McLennan in relation to the Offer. Rothschild and CSFB, which are regulated in the United Kingdom by The Securities and Futures Authority Limited, are acting for Sedgwick and no one else in connection with the Offer and will not be responsible to anyone other than Sedgwick for providing the protections afforded to customers of Rothschild and CSFB nor for giving advice in relation to the Offer. The Offer is not being made, directly or indirectly, in or into, Canada, Australia or Japan. Accordingly, neither copies of this announcement nor any related offering documents are to be mailed or otherwise distributed or sent in or into Canada, Australia or Japan. The Loan Notes that may be issued pursuant to the Offer will not be listed on any stock exchange and have not been, and will not be, registered under the US Securities Act or under any relevant securities laws of any state of the United States and the relevant clearances will not be obtained from the regulatory authority of any province or territory of Canada. The Loan Notes are not being offered, sold or delivered, directly or indirectly, to US Persons or into Canada, Australia or Japan, or into any other jurisdiction if to do so would constitute a violation of relevant laws in such jurisdiction. Marsh & McLennan cautions that certain forward looking statements contained in this announcement or other statements which may be made about the transaction, including, without limitation, the effect of the combination of Marsh & McLennan and Sedgwick on Marsh & McLennan's earnings and cash flows, are qualified by important factors that could cause actual operating results to differ materially from those described herein or any such statements, including, among others, the following: (i) unanticipated events and circumstances may occur rendering the transaction less beneficial to Marsh & McLennan than projected; (ii) Marsh & McLennan and Sedgwick face intense competition in their markets, and there is, accordingly, no guarantee that after consummation of the transaction Marsh & McLennan will achieve the expected financial and operating results and synergies; and (iii) the ability of Marsh & McLennan and Sedgwick to integrate successfully their operations and thereby achieve the anticipated cost savings and be in a position to take advantage of potential opportunities for growth. Results actually achieved thus may differ materially from the expected results described herein or any such statements. 3 4 25 August 1998 Not for release, publication or distribution in or into Canada, Australia or Japan. MARSH & MCLENNAN COMPANIES, INC. RECOMMENDED CASH OFFER FOR SEDGWICK GROUP PLC INTRODUCTION The Boards of Marsh & McLennan and Sedgwick announce that they have reached agreement on the terms of a recommended cash offer to be made by J.P. Morgan and Donaldson, Lufkin & Jenrette, on behalf of Marsh & McLennan, to acquire the whole of the issued and to be issued share capital of Sedgwick. The Offer of 225 pence for each Sedgwick Share and pound sterling 11.25 for each Sedgwick ADS values the whole of the issued share capital of Sedgwick at pound sterling 1,247 million. The directors of Sedgwick and certain other persons have irrevocably undertaken to accept the Offer in respect of their holdings of Sedgwick Securities, representing in aggregate 225,743,233 Sedgwick Shares, and representing 40.7 per cent. of Sedgwick's issued share capital. The definition of certain expressions used in this announcement are contained in Appendix III. SEDGWICK RECOMMENDATION The directors of Sedgwick, who have been so advised by Rothschild and CSFB, consider the terms of the Offer to be fair and reasonable and have resolved to recommend that Sedgwick Securityholders accept the Offer. In providing advice to the directors of Sedgwick, Rothschild and CSFB have taken into account the directors' commercial assessments. Irrevocable undertakings to accept, or procure the acceptance of, the Offer have been received from directors of Sedgwick in respect of their holdings of Sedgwick Securities. THE OFFER The Offer, which will be subject to the conditions and further terms set out in Appendix I and in the Offer Document, will be made on the following basis: for each Sedgwick Share 225 pence in cash for each Sedgwick ADS pound sterling 11.25 in cash. The Offer represents a premium of 57.9 per cent. over the closing middle-market price of a Sedgwick Share on the London Stock Exchange of 142.5 pence on 24 August 1998, the last business day prior 4 5 to this announcement. The Offer represents a multiple of 17.6 times Sedgwick's earnings per share of 12.8 pence for the year ended 31 December 1997. In addition, Sedgwick Shareholders who were on the register at the close of business on 21 August 1998 will be entitled to the interim dividend of 3.0 pence (net) per Sedgwick Share. THE LOAN NOTE ALTERNATIVE Accepting Sedgwick Shareholders (other than persons who are citizens or residents of the United States and certain other overseas shareholders) will be entitled to elect to receive Loan Notes to be issued by Marsh & McLennan instead of some or all of the cash consideration which would otherwise be receivable under the Offer on the following basis: for every pound sterling 1 of cash consideration under the Offer pound sterling 1 nominal of Loan Notes. The Loan Notes will bear interest at a rate of one half of one per cent. below LIBOR and payable six monthly in arrears. The Loan Notes will be transferable, but no application will be made for them to be listed or dealt in on any stock exchange. The Loan Notes will be redeemable at the holder's option on 31 December 1999 and six monthly thereafter until redemption. J.P. Morgan has advised that, in its opinion, based on current market conditions, the value of the Loan Notes, if they had been in issue on 24 August 1998, would have been approximately 98.5 pence per pound sterling 1 in nominal value. If valid elections for the Loan Note Alternative have not been received in respect of at least pound sterling 5 million nominal value of Loan Notes by the time the Offer becomes or is declared unconditional in all respects no Loan Notes will be issued, and Sedgwick Shareholders who have elected for the Loan Note Alternative will then receive cash in accordance with the terms of the Offer. The Loan Note Alternative will be conditional upon the Offer becoming or being declared unconditional in all respects, and will remain open for election for so long as the Offer remains open for acceptance. A summary of the principal terms of the Loan Notes is set out in Appendix II. REASONS FOR THE OFFER As one of the world's leading providers of professional services, Marsh & McLennan is confident that its chosen strategies in risk and insurance services, investment management and consulting will continue to yield strong results for the future. Consistent with these strategies, Marsh & McLennan is determined to pursue opportunities which it believes will allow it to enhance further the service it offers its clients and to increase its operational efficiencies, together leading to greater shareholder value. The Board of Marsh & McLennan believes that the acquisition of Sedgwick will provide such opportunities. Marsh & McLennan seeks to benefit from growing demand worldwide for professional services, through a combination of businesses, depth of services and breadth of global professional capabilities through which to serve clients. Marsh & McLennan expects that the addition of Sedgwick to its portfolio of businesses will position it to achieve these objectives. Marsh & McLennan believes that the acquisition will give it an opportunity to expand in two out of its three business areas, risk and insurance services and consulting, which it expects to provide strong future growth and to contribute to earnings. 5 6 Sedgwick is the largest independent European-based broker and the third largest broker in the world, with a recognised brand name, particularly in the United Kingdom, continental Europe and Asia Pacific, excellent professional staff and operations, and a substantial client base. In the United Kingdom, a combination with Sedgwick increases Marsh & McLennan's presence and provides Marsh & McLennan with access to Sedgwick's important client base. In the United States, the transaction expands Marsh & McLennan's activities in a number of areas. Sedgwick is well positioned in continental European markets such as Belgium, the Netherlands, Italy and the Scandinavian countries. Marsh & McLennan expects that the acquisition of Sedgwick will strengthen its position in Asia Pacific markets such as Hong Kong and Singapore, as well as providing it with a well-established business in South Africa. Accordingly, Marsh & McLennan currently intends to retain the Sedgwick brand name in various relevant marketplaces throughout the world. Sedgwick Noble Lowndes is among the world's leading employee benefits consulting firms, with operations in the United States, the United Kingdom and elsewhere and Marsh & McLennan expects that, together with Marsh & McLennan's consulting firm Mercer Consulting Group, Inc., it will provide growth opportunities. The Offer provides an opportunity for the Sedgwick Group to compete more effectively in the increasingly competitive insurance services business as part of a larger international group. The Board of Marsh & McLennan expects that substantial benefits will arise from being able to offer Sedgwick's clients a much broader range of products. In addition, a combination of the two companies would provide an opportunity further to increase earnings through the realisation of significant consolidation savings from combining operations. Marsh & McLennan believes that the combination will also allow increased operational efficiency across their businesses, leading to stronger service to clients and therefore to enhanced shareholder value. Marsh & McLennan expects the acquisition to be accretive to earnings from the year ending 31 December 2000. MANAGEMENT AND EMPLOYEES Whilst there will inevitably be redundancies in the course of the consolidation of the two businesses, Marsh & McLennan attaches great importance to the skills and experience of the management and employees of Sedgwick and believes that the career opportunities available will be enhanced as a result of being part of the Marsh & McLennan organisation. Marsh & McLennan has agreed to put in place incentive arrangements for key Sedgwick employees, including certain executive directors, to enable them to participate in the performance of the combined group. Marsh & McLennan has given assurances to the Board of Sedgwick that the existing employment rights, including pension rights and entitlements under the existing employment related policies adopted by Sedgwick, of all present directors, management and employees of Sedgwick will be honoured. Sax Riley, Chairman of Sedgwick, and Rob White-Cooper, Chief Executive of Sedgwick, have been invited to join the Board of Marsh & McLennan upon the Offer becoming or being declared unconditional in all respects. Rob White-Cooper will be chairman of those insurance broking activities which operate principally outside the Americas. In addition, Marsh & McLennan has agreed that the heads of Sedgwick's broking businesses in Asia Pacific, continental Europe and North America, as well as the head of Sedgwick Noble Lowndes, will hold positions of influence in the new organisation. 6 7 OPTIONS UNDER THE SEDGWICK SHARE OPTION SCHEMES The Offer will extend to the holders of any Sedgwick Securities which are unconditionally allotted or issued while the Offer remains open for acceptance (or such earlier date as Marsh & McLennan may, subject to the City Code, determine) including any Sedgwick Shares unconditionally allotted or issued pursuant to the exercise of Options under the Sedgwick Share Option Schemes. Appropriate proposals, which will include a cash cancellation, will, in due course, be put to Optionholders who do not, or who are unable to, exercise the Options granted to them under the Sedgwick Share Option Schemes. SEDGWICK CONVERTIBLE BONDS It is intended that appropriate proposals will be put to holders of Sedgwick Convertible Bonds at the time of posting the Offer Document. FURTHER DETAILS OF THE OFFER The Sedgwick Securities will be acquired by Marsh & McLennan under the Offer fully paid and free from all liens, equities, charges, encumbrances, rights of pre-emption and other third party rights or interests of any nature whatsoever and together with all rights now or hereafter attaching thereto, including the right to receive and retain in full all dividends and other distributions declared, made or paid hereafter, save that Sedgwick Shareholders will be entitled to receive and retain the interim dividend of 3.0 pence (net) per Sedgwick Share to be paid in respect of the year ended 31 December 1998, irrespective of whether or not the Offer becomes unconditional. IRREVOCABLE UNDERTAKINGS Irrevocable undertakings to accept, or procure the acceptance of, the Offer have been received from directors of Sedgwick in respect of securities representing 2,054,394 Sedgwick Shares, and from: - - Phillips & Drew Fund Management Limited in respect of 122,955,977 Sedgwick Shares; - - Schroder Investment Management (UK) Limited in respect of 76,732,862 Sedgwick Shares; and - - Silchester International Investors Limited in respect of 24,000,000 Sedgwick Shares. Accordingly, Marsh & McLennan has received irrevocable undertakings to accept the Offer in respect of securities representing a total of 225,743,233 Sedgwick Shares, and representing in aggregate 40.7 per cent. of Sedgwick's issued share capital. The irrevocable undertakings to accept the Offer given by Phillips & Drew Fund Management Limited, Schroder Investment Management (UK) Limited and Silchester International Investors Limited will cease to be binding in the event that a competing offer is made for Sedgwick at a price of not less than 250.5 pence per Sedgwick Share, or if the Offer lapses or is withdrawn. All other irrevocable undertakings to accept the Offer will continue to be binding in the event of a competing offer being made for Sedgwick by a third party unless the Offer lapses or is withdrawn. 7 8 HOLDINGS IN SEDGWICK SECURITIES Neither Marsh & McLennan, nor any of its directors nor, so far as Marsh & McLennan is aware, any person acting in concert with Marsh & McLennan, owns or controls any Sedgwick Securities or has any option to acquire any further Sedgwick Securities, or has entered into any derivative referenced to securities of Sedgwick which remains outstanding or (other than as disclosed above) has received any irrevocable commitment to accept the Offer. INFORMATION ON SEDGWICK Sedgwick is one of the world's leading consulting, insurance and reinsurance groups, operating in 70 countries from over 290 offices. The company has particular expertise in risk management and employee benefits. For the year ended 31 December 1997 the Sedgwick Group reported profit before tax of pound sterling 101 million on turnover of pound sterling 975 million and, as at 31 December 1997, the Sedgwick Group had net assets of pound sterling 200 million. As at 31 December 1997, Sedgwick and its subsidiaries employed approximately 15,985 employees. Based on a closing price of 142.5 pence on 24 August 1998 (the last business day prior to the announcement of the Offer), the market capitalisation of Sedgwick was pound sterling 790 million. INFORMATION ON MARSH & MCLENNAN Marsh & McLennan is a professional services firm providing risk and insurance services, investment management and consulting. Marsh & McLennan, with over 36,000 employees worldwide (as at 6 March 1998), provides analysis, advice and transactional capabilities to clients in over one hundred countries. For the year ended 31 December 1997, Marsh & McLennan generated revenues of US$6,009 million and income before taxes of US$662 million. As at 31 December 1997, Marsh & McLennan had net assets, on a US GAAP accounting basis, of US$3,199 million. Marsh & McLennan's common stock is listed on the New York, Chicago, Pacific and London stock exchanges. As at the close of trading on the New York Stock Exchange on 24 August 1998, Marsh & McLennan had a market capitalisation of US$14.5 billion. GENERAL (a) The Offer will be subject to the applicable requirements of both the City Code and US federal securities laws, except to the extent that exemptive relief from the US federal securities laws has been granted by the SEC. (b) The availability of the Offer to persons not resident in the UK or the US may be affected by the laws of the relevant jurisdiction. Any persons who are subject to the laws of any jurisdiction other than the UK or the US should inform themselves about and observe any applicable requirements. (c) The Offer Document will be posted to Sedgwick Securityholders as soon as practicable. 8 9 (d) The Offer will be open for at least 20 Business Days from the date of the Offer Document. (e) It is Marsh & McLennan's intention, following the Offer becoming or being declared unconditional in all respects and subject to applicable requirements of the Chicago, London, New York and Pacific stock exchanges, that Sedgwick should apply to those exchanges for the Sedgwick Securities to be delisted. Delisting would significantly reduce the liquidity and marketability of any Sedgwick Securities not assented to the Offer. (f) This announcement does not constitute an invitation to purchase any securities. J.P. Morgan and Donaldson, Lufkin & Jenrette, which are regulated in the United Kingdom by The Securities and Futures Authority Limited, are acting for Marsh & McLennan and no one else in connection with the Offer and will not be responsible to anyone other than Marsh & McLennan for providing the protections afforded to customers of J.P. Morgan and Donaldson, Lufkin & Jenrette nor for giving advice in relation to the Offer. Cazenove are acting as brokers to Marsh & McLennan in relation to the Offer. Rothschild and CSFB, which are regulated in the United Kingdom by The Securities and Futures Authority Limited, are acting for Sedgwick and no one else in connection with the Offer and will not be responsible to anyone other than Sedgwick for providing the protections afforded to customers of Rothschild and CSFB nor for giving advice in relation to the Offer. The Offer is not being made, directly or indirectly, in or into, Canada, Australia or Japan. Accordingly, neither copies of this announcement nor any related offering documents are to be mailed or otherwise distributed or sent in or into Canada, Australia or Japan. The Loan Notes that may be issued pursuant to the Offer will not be listed on any stock exchange and have not been, and will not be, registered under the US Securities Act or under any relevant securities laws of any state of the United States and the relevant clearances will not be obtained from the regulatory authority of any province or territory of Canada. The Loan Notes are not being offered, sold or delivered, directly or indirectly, to US Persons or into Canada, Australia or Japan, or into any other jurisdiction if to do so would constitute a violation of relevant laws in such jurisdiction. Marsh & McLennan cautions that certain forward looking statements contained in this announcement or other statements which may be made about the transaction, including, without limitation, the effect of the combination of Marsh & McLennan and Sedgwick on Marsh & McLennan's earnings and cash flows, are qualified by important factors that could cause actual operating results to differ materially from those described herein or any such statements, including, among others, the following: (i) unanticipated events and circumstances may occur rendering the transaction less beneficial to Marsh & McLennan than projected; (ii) Marsh & McLennan and Sedgwick face intense competition in their markets, and there is, accordingly, no guarantee that after consummation of the transaction Marsh & McLennan will achieve the expected financial and operating results and synergies; and (iii) the ability of Marsh & McLennan and Sedgwick to integrate successfully their operations and thereby achieve the anticipated cost savings and be in a position to take advantage of potential opportunities for growth. Results actually achieved thus may differ materially from the expected results described herein or any such statements. 9 10 APPENDIX I CONDITIONS OF THE OFFER The Offer, which will be made by J.P. Morgan and Donaldson, Lufkin & Jenrette on behalf of Marsh & McLennan, will comply with the applicable rules and regulations of the London Stock Exchange and the City Code and with US federal securities laws (except to the extent that exemptive relief has been granted by the SEC). In addition, the Offer will be governed by English law and will be subject to the jurisdiction of the courts of England and to the terms and conditions set out in the Offer Document and related Acceptance Forms. The Offer will be subject to the following conditions: (a) valid acceptances being received (and not, where permitted, withdrawn) by not later than 3.00 p.m. (London time) on the first closing date of the Offer (or such later time(s) and/or date(s) as Marsh & McLennan may, with the consent of the Panel or in accordance with the rules of the City Code, decide) in respect of not less than 90 per cent. (or such lower percentage as Marsh & McLennan may decide) in nominal value of the Sedgwick Securities to which the Offer relates, provided that this condition will not be satisfied unless Marsh & McLennan and/or its wholly-owned subsidiaries shall have acquired or agreed (unconditionally or subject only to conditions which will be fulfilled upon the Offer becoming or being declared unconditional in all respects) to acquire (whether pursuant to the Offer or otherwise) Sedgwick Securities carrying, in aggregate, more than 50 per cent. of the voting rights then normally exercisable at general meetings of Sedgwick, including for this purpose (to the extent, if any, required by the Panel) any such voting rights attaching to any Sedgwick Securities that are unconditionally allotted or issued before the Offer becomes or is declared unconditional as to acceptances, whether pursuant to the exercise of any outstanding subscription or conversion rights or otherwise and, for this purpose: (i) the expression "Sedgwick Securities to which the Offer relates" shall be construed in accordance with sections 428 to 430F of the Companies Act 1985; (ii) Sedgwick Securities which have been unconditionally allotted shall be deemed to carry the voting rights which they will carry upon their being entered in the register of members of Sedgwick; and (iii) valid acceptances shall be treated as having been received in respect of any Sedgwick Securities which Marsh & McLennan shall, pursuant to section 429(8) of the Companies Act 1985, be treated as having acquired or contracted to acquire by virtue of acceptances of the Offer, provided that, unless Marsh & McLennan otherwise determines, this condition (a) can only be treated as satisfied at a time when all of the other conditions in paragraphs (b) to (i) inclusive are either satisfied or (if capable of waiver) waived; 10 11 (b) no Relevant Authority having intervened in a manner which would or might reasonably be expected to: (i) make the Offer, its implementation or the acquisition or proposed acquisition by Marsh & McLennan or any member of the Wider Marsh & McLennan Group of any shares or other securities in, or control of, Sedgwick void, illegal and/or unenforceable in or under the laws of any relevant jurisdiction, or otherwise directly or indirectly restrain, prevent, prohibit, materially restrict or materially delay the Offer or such acquisition or impose additional materially adverse conditions or obligations with respect to the Offer or such acquisition, or otherwise materially impede, challenge or interfere with the Offer or such acquisition, or require material amendment to the terms of the Offer or the proposed acquisition of any Sedgwick Securities or the acquisition of control of Sedgwick by Marsh & McLennan; (ii) require, prevent or delay the divestiture by any member of the Wider Marsh & McLennan Group of any shares or other securities (or the equivalent) in Sedgwick where the same is materially adverse to the Marsh & McLennan Group; (iii) require, prevent or delay the divestiture by any member of the Wider Marsh & McLennan Group or by any member of the Wider Sedgwick Group of all or any portion of their respective businesses, assets or properties or impose any limitation on the ability of any of them to conduct any of their respective businesses or to own any of their respective assets or properties or any part thereof (in any case, to an extent which is material in the context of the Wider Marsh & McLennan Group or the Wider Sedgwick Group, as appropriate, taken as a whole); (iv) impose any limitation on, or result in a delay in, the ability of any member of the Wider Marsh & McLennan Group or any member of the Wider Sedgwick Group to acquire or to hold or to exercise effectively, directly or indirectly, all or any rights of ownership in respect of shares or other securities (or the equivalent) in, or to exercise management control over, any member of the Wider Marsh & McLennan Group or any member of the Wider Sedgwick Group (in any such case, to an extent which is material in the context of the Wider Marsh & McLennan Group or the Wider Sedgwick Group, as the case may be, taken as a whole); (v) require any member of the Wider Marsh & McLennan Group or the Wider Sedgwick Group to acquire, or to offer to acquire, any shares or other securities (or the equivalent) in any member of the Wider Marsh & McLennan Group or any member of the Wider Sedgwick Group owned by any third party, in any such case, to an extent which is material in the context of the Wider Marsh & McLennan Group or the Wider Sedgwick Group, as the case may be, taken as a whole; (vi) impose any limitation on the ability of any member of the Wider Marsh & McLennan Group or any member of the Wider Sedgwick Group to integrate or co-ordinate its business, or any material part of it, with the businesses of any other member of the Wider Marsh & McLennan Group or the Wider Sedgwick Group (in each case, to an extent which is material in the context of the Wider Marsh & McLennan Group or the Wider Sedgwick Group, as the case may be, taken as a whole); 11 12 (vii) result in any member of the Wider Marsh & McLennan Group or the Wider Sedgwick Group ceasing to be able to carry on business under any name under which it presently does so (the consequences of which would be material in the context of the Wider Marsh & McLennan Group or the Wider Sedgwick Group, as the case may be, taken as a whole); (viii) otherwise adversely affect any or all of the businesses, assets, profits or prospects of any member of the Wider Sedgwick Group or any member of the Wider Marsh & McLennan Group (to an extent which is material in the context of the Wider Marsh & McLennan Group or the Wider Sedgwick Group, as the case may be, taken as a whole); and all applicable waiting and other time periods during which any Relevant Authority could intervene in such a way under the laws of any relevant jurisdiction having expired, lapsed or been terminated; (c) without limitation to condition (b) above: (i) the European Commission indicating in terms satisfactory to Marsh & McLennan that it does not intend to initiate proceedings under Article 6(1)(c) of Council Regulation (EEC) 4064/89 (the "Regulation") in respect of the proposed acquisition of Sedgwick by Marsh & McLennan or any matters arising therefrom (the "Merger") and that in any event there will not be a referral to a competent authority or a dealing with the Merger by the European Commission pursuant to Article 9(3) of the Regulation; and (ii) all necessary filings having been made and all or any applicable waiting periods (including any extensions thereof) under the United States Hart-Scott-Rodino Antitrust Improvements Act 1976 and the regulations thereunder having expired, lapsed or been terminated as appropriate in each case in respect of the proposed acquisition of Sedgwick by Marsh & McLennan, or any matters arising therefrom; (d) without limitation to condition (b) above: (i) the consent of the HM Treasury ("HMT") having been obtained, in terms reasonably satisfactory to Marsh & McLennan, to the new controllers (having the definition ascribed in section 96C of the Insurance Companies Act 1982) of any relevant regulated member of the Sedgwick Group or all applicable waiting periods having expired without HMT having served any notice of objection in relation to any of the new controllers of any relevant regulated member of the Sedgwick Group; (ii) the consent of The Society and Corporation of Lloyd's ("Lloyd's") having been obtained, in terms reasonably satisfactory to Marsh & McLennan, to the new controllers (having the definition ascribed in the Lloyd's Brokers Byelaw (No.5 of 1998) as amended) of the companies within the Sedgwick Group which are registered with Lloyd's as brokers; (iii) the consent of Lloyd's having been obtained, in terms reasonably satisfactory to Marsh & McLennan, to the new controllers (having the definition ascribed in The Underwriting Agents Byelaw (No.4 of 1984) as amended) of the companies within the Sedgwick Group which are registered with Lloyd's as underwriting agents; 12 13 (iv) appropriate notifications of the proposed change of control of each relevant company within the Sedgwick Group having been made to Lloyd's and/or to the Insurance Brokers Registration Council (as appropriate); (v) each of the Personal Investment Authority Limited ("PIA") and The Securities and Futures Authority Limited ("SFA") having confirmed, in terms reasonably satisfactory to Marsh & McLennan, that it has no objection to the change of control of each relevant company within the Sedgwick Group or all applicable waiting periods during which the PIA or the SFA (as the case may be) could raise any enquiries and/or objections to the proposed change of control having expired; (vi) if relevant, the Treasurer of the Commonwealth of Australia (the "Treasurer") becoming precluded under section 25 of the Foreign Acquisitions and Takeovers Act 1975 (the "Act") from being empowered to make an order under Part II of the Act in relation to the Offer, or the issue by or on behalf of the Treasurer of a notice in writing under the Act indicating, in terms reasonably satisfactory to Marsh & McLennan, that he has no objection to the proposed acquisition of Sedgwick pursuant to the Offer; (vii) all necessary notifications and filings having been made, all necessary waiting and other time periods under any applicable legislation or regulation of any relevant jurisdiction having expired, lapsed or been terminated and all statutory or regulatory obligations in any relevant jurisdiction having been complied with in each case in connection with the Offer or the acquisition of any shares or other securities (or the equivalent) in, or control of, Sedgwick or any other member of the Wider Sedgwick Group by any member of the Wider Marsh & McLennan Group; and (viii) all Authorisations necessary in any relevant jurisdiction for or in respect of the Offer or the acquisition or proposed acquisition of any shares or other securities (or the equivalent) in, or control of, Sedgwick or any other member of the Wider Sedgwick Group by any member of the Wider Marsh & McLennan Group or the carrying on by any member of the Wider Sedgwick Group of its business (where the absence of such Authorisations would be expected to have an adverse effect which is material to the Wider Sedgwick Group) having been obtained, in terms and in a form reasonably satisfactory to Marsh & McLennan, from all appropriate Relevant Authorities and all such Authorisations remaining in full force and effect at the time when the Offer becomes otherwise unconditional in all respects and there being no notice or intimation of any intention to revoke or not to renew any of the same; (e) there being no provision of any arrangement, agreement, licence, permit, franchise or other instrument to which any member of the Wider Sedgwick Group is a party, or by or to which any such member or any of its assets is or are or may be bound, entitled or subject or any circumstance, which, in each case as a consequence of the Offer or the acquisition or proposed acquisition of any shares or other securities (or the equivalent) in, or control of, Sedgwick or any other member of the Wider Sedgwick Group by any member of the Wider Marsh & McLennan Group or otherwise, could or might reasonably be expected to result in (to an extent which would be material in the context of the Wider Sedgwick Group taken as a whole): (i) any monies borrowed by or any other indebtedness or liabilities, actual or contingent, of, or grant available to, any member of the Wider Sedgwick Group being or becoming 13 14 repayable or capable of being declared repayable immediately or prior to its stated repayment date, or the ability of any member of the Wider Sedgwick Group to borrow monies or incur any indebtedness being withdrawn or inhibited or becoming capable of being withdrawn; (ii) the creation or enforcement of any mortgage, charge or other security interest over the whole or any part of the business, property, assets or interests of any member of the Wider Sedgwick Group or any such mortgage, charge or other security interest becoming enforceable; (iii) any such arrangement, agreement, licence, permit, franchise or instrument, or the rights, liabilities, obligations or interests of any member of the Wider Sedgwick Group thereunder, being, or becoming capable of being, terminated or adversely modified or affected or any adverse action being taken or any obligation or liability arising thereunder; (iv) any asset or interest of any member of the Wider Sedgwick Group being or falling to be disposed of or charged or any right arising under which any such asset or interest could be required to be disposed of or charged, in each case otherwise than in the ordinary course of business; (v) any member of the Wider Sedgwick Group ceasing to be able to carry on business under any name under which it presently does so; (vi) the creation of liabilities actual or contingent by any such member, otherwise than in the ordinary course of business; (vii) the rights, liabilities or interests of any member of the Wider Sedgwick Group under any such arrangement, agreement, licence, permit, franchise or other instrument or the interests or business of any such member in or with any other person, firm, company or body (or any arrangement or arrangements relating to any such interests or business) being terminated, adversely modified or affected; or (viii) the financial or trading position of any member of the Wider Sedgwick Group being adversely prejudiced or affected; and no event having occurred which, under any provision of any such arrangement, agreement, licence, permit or other instrument, could result in any of the events or circumstances which are referred to in paragraphs (i) to (viii) of this condition (e) in any case where such result would be material in the context of the Wider Sedgwick Group taken as a whole; (f) since 31 December 1997 and except as disclosed in Sedgwick's annual report and accounts for the year then ended or as disclosed in the interim statement of Sedgwick for the six months ended on 30 June 1998 or as otherwise publicly announced by Sedgwick (by the delivery of an announcement to the Company Announcements Office of the London Stock Exchange) prior to 25 August 1998, no member of the Wider Sedgwick Group having: (i) issued or agreed to issue additional shares of any class, or securities convertible into, or rights, warrants or options to subscribe for or acquire, any such shares or convertible securities (save as between Sedgwick and wholly-owned subsidiaries of Sedgwick and 14 15 except for any options granted under the Sedgwick Share Option Schemes prior to 25 August 1998); (ii) recommended, declared, paid or made any bonus, dividend or other distribution (save as between Sedgwick and wholly-owned subsidiaries of Sedgwick) whether in cash or otherwise; (iii) made or committed to make any change in its share or (save as between Sedgwick and wholly-owned subsidiaries of Sedgwick) loan capital; (iv) merged with or demerged or acquired any body corporate or acquired or disposed of or transferred, mortgaged or charged or created any security interest over any material assets or (other than in the ordinary course of business) any right, title or interest in any material assets (including shares and trade investments) (other than in the ordinary course of business), which is material in the context of the Wider Sedgwick Group taken as a whole; (v) issued or agreed to issue any debentures or (save in the ordinary course of business) incurred or increased any indebtedness or contingent liability (save as between Sedgwick and wholly-owned subsidiaries of Sedgwick); (vi) purchased, redeemed or repaid any of its own shares or other securities or reduced or made any other change to any part of its share capital, which is material in the context of the Wider Sedgwick Group taken as a whole; (vii) entered into or varied any contract, transaction, arrangement or commitment (whether in respect of capital expenditure or otherwise) which: (A) is of a long term, onerous or unusual nature or magnitude; or (B) could reasonably be expected to be restrictive on the business of any member of the Wider Sedgwick Group or any member of the Wider Marsh & McLennan Group; or (C) involves or would involve an obligation of a long term, onerous or unusual nature or magnitude or which could be restrictive on the business of any member of the Wider Sedgwick Group or any member of the Wider Marsh & McLennan Group; in each case, which is material in the context of the Wider Sedgwick Group taken as a whole; (viii) entered into or varied or made any offer (which remains open for acceptance) to enter into or vary the terms of any contract with any of the directors or senior executives of Sedgwick or, to an extent which is material in the context of the Wider Sedgwick Group taken as a whole, of any member of the Wider Sedgwick Group; (ix) taken or proposed any corporate action or had any legal proceedings instituted or threatened against it or petition (not of a frivolous or vexatious nature) presented for its winding-up (voluntarily or otherwise), dissolution or reorganisation or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of all or any of its assets and revenues or for any analogous proceedings or steps 15 16 in any jurisdiction or for the appointment of any analogous person in any jurisdiction and which is material in the context of the Wider Sedgwick Group taken as a whole; (x) been unable or admitted in writing that it is unable to pay its debts or having stopped or suspended (or threatened to stop or suspend) payment of its debts generally or ceased or threatened to cease carrying on all or a substantial part of its business and which is material in the context of the Wider Sedgwick Group taken as a whole; (xi) waived or compromised any claim which is material in the context of the Wider Sedgwick Group taken as a whole; (xii) made any alteration to its memorandum or articles of association, or other incorporation documents; or (xiii) entered into any agreement, contract or commitment or made any offer (which remains open for acceptance) with respect to any of the transactions, matters or events referred to in this condition (f); (g) since 31 December 1997 and except as disclosed in Sedgwick's annual report and accounts for the year then ended or as disclosed in the interim statement of Sedgwick for the six months ended on 30 June 1998 or as otherwise publicly announced by Sedgwick (by the delivery of an announcement to the Company Announcements Office of the London Stock Exchange) prior to 25 August 1998: (i) there having been no adverse change or deterioration in the business, assets, financial or trading position or profits or assets of any member of the Wider Sedgwick Group which is (in the aggregate) material in the context of the Wider Sedgwick Group taken as a whole; (ii) no litigation, arbitration proceedings, prosecution or other legal proceedings to which any member of the Wider Sedgwick Group is or may become a party (whether as plaintiff or defendant or otherwise) or any investigation (save as a result of the Offer) by any Relevant Authority having been threatened, announced or instituted by or against or in respect of any member of the Wider Sedgwick Group or remaining outstanding against or in respect of any member of the Wider Sedgwick Group which, in any such case, is material in the context of the Wider Sedgwick Group taken as a whole; (iii) no contingent or other liability having arisen or become apparent or increased which would or could reasonably be expected materially and adversely to affect the Wider Sedgwick Group taken as a whole; and (iv) there having been no inquiry or investigation (save as a result of the Offer) by, or complaint, or reference to, any Relevant Authority of a material nature to Sedgwick in respect of any member of the Wider Sedgwick Group and no such enquiry, investigation, complaint or reference having been threatened, announced, implemented, instituted or remaining outstanding which, in any such case, is material in the context of the Wider Sedgwick Group taken as a whole; (h) Marsh & McLennan not having discovered: 16 17 (i) that any financial or business or other information concerning the Wider Sedgwick Group disclosed at any time by or on behalf of any member of the Wider Sedgwick Group, whether publicly, to any member of the Wider Marsh & McLennan Group or otherwise, is misleading or contains a misrepresentation of fact or omits to state a fact necessary to make any information contained therein not misleading in any case which has not subsequently been corrected by such disclosure and, in any case, to an extent which is material in the context of the Wider Sedgwick Group taken as a whole; or (ii) that any member of the Wider Sedgwick Group or partnership, company or other entity in which any member of the Wider Sedgwick Group has an interest and which is not a subsidiary undertaking of Sedgwick is subject to any liability (contingent or otherwise) which is not disclosed in Sedgwick's annual report and accounts for the financial year ended 31 December 1997 or as disclosed in the interim statement for the six months ended 30 June 1998 or as otherwise publicly announced by Sedgwick (by delivery of an announcement to the Company Announcements Office of the London Stock Exchange) prior to 25 August 1998 and which is material in the context of the Wider Sedgwick Group taken as a whole; (i) Marsh & McLennan not having discovered: (i) that any past or present member of the Wider Sedgwick Group has not complied with all applicable legislation or regulations of any jurisdiction with regard to the disposal, discharge, spillage, leak or emission of any waste or hazardous substance or any substance likely to impair the environment or harm human health, or otherwise relating to environmental matters, or that there has otherwise been any such disposal, discharge, spillage, leak or emission (whether or not the same constituted a non-compliance by any person with any such legislation or regulations and wherever the same may have taken place) which, in any such case, would be likely to give rise to any liability (whether actual or contingent) on the part of any member of the Wider Sedgwick Group which would be material in the context of the Wider Sedgwick Group taken as a whole; (ii) that there is, or is likely to be, any liability, whether actual or contingent, to make good, repair, reinstate or clean up any property now or previously owned, occupied or made use of by any past or present member of the Wider Sedgwick Group or in which any such member may have or previously have had or be deemed to have had an interest under any environmental legislation, regulation, notice, circular or order of any relevant authority or Relevant Authority or otherwise, which, in any such case, would be material in the context of the Wider Sedgwick Group taken as a whole; or (iii) that circumstances exist whereby a person or class of persons would be likely to have any claim or claims in respect of any product or process of manufacture or materials used therein now or previously manufactured, sold or carried out by any past or present member of the Wider Sedgwick Group which, in any such case, would be material in the context of the Wider Sedgwick Group taken as a whole. 17 18 For the purpose of these conditions: (a) "Relevant Authority" means any government, government department or governmental, quasi-governmental, supranational, statutory, regulatory, administrative or investigative body, authority (including any national anti-trust or merger control authorities), court, trade agency, association, institution or professional or environmental body or any other person or body whatsoever in any relevant jurisdiction; (b) a Relevant Authority shall be regarded as having "intervened" if it has decided to take, institute, implement or threaten any action, proceedings, suit, investigation, inquiry or reference or made, proposed or enacted any statute, regulation, decision or order or taken any measures or other steps or required any action to be taken or information to be provided or otherwise having done anything and "intervene" shall be construed accordingly; (c) "Authorisations" means authorisations, orders, grants, recognitions, determinations, certificates, confirmations, consents, licences, clearances, permissions, exemptions and approvals; (d) "the Wider Sedgwick Group" means Sedgwick and its subsidiary undertakings and any other undertakings in which Sedgwick and such undertakings (aggregating their interests) have a substantial interest and "the Wider Marsh & McLennan Group" means Marsh & McLennan and its subsidiary undertakings and any other undertakings in which Marsh & McLennan and such undertakings (aggregating their interests) have a substantial interest and, for these purposes, "subsidiary undertaking" and "undertaking" have the meanings given by the Companies Act 1985 and "substantial interest" means a direct or indirect interest in 20 per cent. or more of the equity capital of an undertaking. Subject to the requirements of the Panel, Marsh & McLennan reserves the right to waive all or any of the above conditions, in whole or in part, except condition (a). Conditions (b) to (i) (inclusive) must be fulfilled or (if capable of waiver) waived by midnight on the 21st day after the later of the first closing date of the Offer and the date on which condition (a) is fulfilled or is declared fulfilled (or, in each case, such later date as the Panel may agree), failing which the Offer will lapse. Marsh & McLennan shall be under no obligation to waive (if capable of waiver) or treat as fulfilled any of conditions (b) to (i) (inclusive) by a date earlier than the latest date specified above for the fulfilment thereof notwithstanding that the other conditions of the Offer may at such earlier date have been waived or fulfilled and that there are at such earlier date no circumstances indicating that any of such conditions may not be capable of fulfilment. Marsh & McLennan will not invoke any of the conditions (e) to (i) (inclusive) in relation to circumstances which would otherwise give rise to the right to invoke such condition where there has been fair disclosure of such circumstances to Marsh & McLennan or its advisers by or on behalf of Sedgwick prior to 25 August 1998. If Marsh & McLennan is required by the Panel to make an offer for Sedgwick Securities under the provisions of Rule 9 of the Code, Marsh & McLennan may make such alterations to the conditions of the Offer, including condition (a), as are necessary to comply with the provisions of that Rule. The Offer will lapse if the European Commission either initiates proceedings under Article 6(1)(c) of the Regulation or makes a referral to a competent authority of the United Kingdom under Article 9(1) of the 18 19 Regulation before, in each case, the later of 3.00 p.m. on the first closing date of the Offer and the date when the Merger becomes or is declared unconditional as to acceptances. If the Offer lapses, the Offer will cease to be capable of further acceptance and Sedgwick shareholders accepting the Offer and Marsh & McLennan shall upon the Offer lapsing cease to be bound by acceptances delivered on or before the date on which the Offer lapses. The Offer and all contracts arising under it will be governed by English law. 19 20 APPENDIX II PRINCIPAL TERMS OF THE LOAN NOTES The Loan Notes will be created by a resolution of the board of directors of Marsh & McLennan (or a duly authorised committee thereof) and will be constituted by the Loan Note Instrument. The issue of the Loan Notes will be conditional on the Offer becoming or being declared unconditional in all respects. If valid elections for the Loan Note Alternative have not been received in respect of at least pound sterling 5 million Nominal value of Loan Notes by the time the Offer becomes or is declared unconditional in all respects, no Loan Notes will be issued, in which event all Sedgwick Shareholders accepting the Offer will receive cash in accordance with the terms of the Offer. The Loan Note Alternative is not available to any person who is a citizen or resident of the United States, Canada, Australia or Japan or certain other jurisdictions. The Loan Note Instrument will contain provisions, inter alia, to the effect set out below. 1. FORM AND STATUS The Loan Notes will be issued by Marsh & McLennan in amounts and integral multiples of pound sterling 1 and wilL constitute unsecured obligations of Marsh & McLennan. The Loan Note Instrument will not contain any restrictions on borrowing, disposals or charging of assets by Marsh & McLennan. 2. INTEREST (a) Interest on the Loan Notes will be payable (subject to any requirement to deduct tax therefrom) in arrears on 30 June and 31 December in each year (or, if such a day is not a business day, on the next following business day) ("interest payment dates") in respect of the interest periods (as defined below) at a rate calculated as provided in paragraph (b) below, except that the first payment of interest on the Loan Notes, which will be made on 31 December 1998, will be in respect of the period from (and including) the first date of issue of any of the Loan Notes to (and including) 31 December 1998. The period from (and including) the first date of issue of any of the Loan Notes to (and including) 31 December 1998 and the period from (but excluding) 31 December 1998, or any subsequent interest payment date, to (and including) the next following interest payment date, is referred to as an "interest period". (b) The rate of interest on the Loan Notes for each interest period will be the rate per annum calculated by Marsh & McLennan to be one half of one per cent. below LIBOR at or about 11.00 a.m. on the first day of the relevant interest period or, if such a day is not a business day, on the next succeeding business day. (c) If a rate of interest cannot be established in accordance with the provisions of this paragraph 2 for any interest period, then the rate of interest on the Loan Notes for such interest period shall be calculated by reference to such rate as Marsh & McLennan shall reasonably determine on the basis of quotations made for six month sterling deposits of similar size in any other appropriate inter-bank market or markets as Marsh & McLennan may reasonably select. (d) Each instalment of interest shall be calculated on the basis of a 365 day year and the actual number of days elapsed in the relevant interest period. 20 21 3. REPAYMENT AND REDEMPTION (a) A holder of Loan Notes ("Noteholder") shall be entitled to require Marsh & McLennan to repay the whole (whatever the amount) or any part (being pound sterling 100 nominal amount or any integral multiple thereof) of the principal amount of his holding of Loan Notes at par, together with accrued interest thereon (subject to any requirement to deduct tax therefrom) up to (and including) the date of repayment, on any interest payment date falling on or after 31 December 1999, by giving not less than 30 days' prior notice in writing to the Registrars accompanied by certificate(s) for all the Loan Notes to be repaid and a notice of redemption (duly completed) in the prescribed form endorsed on the Loan Notes to be repaid. (b) If, at any time, the principal amount of the Loan Notes outstanding is 20 per cent. or less of the total nominal amount of Loan Notes which have been issued prior to that time, Marsh & McLennan shall have the right, on giving to the remaining Noteholders not less than 30 days' notice in writing expiring on 31 December 1999 or on any subsequent interest payment date, to redeem all (but not some only) of the Loan Notes at their principal amount together with accrued interest thereon (subject to any requirement to deduct tax therefrom) up to (and including) the date of redemption. (c) Marsh & McLennan will have the right to redeem on any interest payment date the Loan Notes at par together with accrued interest up to (and including) the date of redemption (subject to any requirement to deduct tax therefrom) on 30 days' written notice to the Noteholders if Marsh & McLennan is advised by legal counsel that interest payable under the Loan Notes will fall to be treated as non-deductible for US federal income tax purposes due to a change in law after the date on which the Offer is made. (d) Any Loan Notes not previously repaid, redeemed or purchased will be repaid in full at par on 31 December 2003 together with accrued interest thereon (subject to any requirement to deduct tax therefrom) up to (and including) that date. (e) Each holder of the Loan Notes shall have the right to acquire (by subscription at nominal value of an amount up to or equal to such Noteholder's holding of Loan Notes, such amount to be payable in full on subscription) additional loan notes to be issued by a subsidiary of Marsh & McLennan ("Additional Notes") on terms and conditions substantially the same as those applicable to the Loan Notes, except as follows: (i) the rate of interest on the Additional Notes shall be one half of one per cent. below the rate per annum referred to in paragraph 2 above; and (ii) the Additional Notes shall not carry any rights to acquire additional securities. (f) Each Noteholder shall be entitled to require all of the Loan Notes held by him to be repaid at par together with accrued interest (subject to any requirement to deduct any tax therefrom) immediately if: (i) any principal or interest on any of the Loan Notes held by that Noteholder shall not have been paid in full within 14 days after the due date for payment thereof; 21 22 (ii) Marsh & McLennan commences a voluntary case concerning itself under Title 11 of the United States Code entitled "Bankruptcy" as now or hereafter in effect or any successor thereto (the "Bankruptcy Code"); (iii) an involuntary case is commenced against Marsh & McLennan and the petition is not controverted within 10 days or is not dismissed within 60 days after commencement of the case; (iv) a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of Marsh & McLennan; (v) Marsh & McLennan commences (including by way of applying for or consenting to the appointment of, or the taking of possession by, a rehabilitator, receiver, custodian, trustee, conservator or liquidator (collectively, a "Conservator") of itself or all or any substantial proportion of its property) any other proceeding under any reorganisation, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency, liquidation, rehabilitation, conservatorship or similar law of any jurisdiction whether now or hereafter in effect relating to Marsh & McLennan; (vi) any such proceeding is commenced against Marsh & McLennan to the extent that such proceeding is consented to by such person or remains undismissed for a period of 60 days; (vii) Marsh & McLennan is adjudicated insolvent or bankrupt or an order of relief or other order approving any such case or proceeding is entered or Marsh & McLennan suffers any appointment of any Conservator or the like for it or any substantial part of its property which continues undischarged or unstated for a period of 60 days; (viii) Marsh & McLennan makes a general assignment for the benefit of creditors; or (ix) any corporate action is taken by Marsh & McLennan for the purpose of effecting any of the foregoing. 4. PURCHASE OF LOAN NOTES Marsh & McLennan will be entitled at any time to purchase any Loan Notes at any price by tender (available to all Noteholders alike), private treaty or otherwise by agreement with the relevant Noteholder(s). 5. CANCELLATION Any Loan Notes repaid or redeemed under paragraph 3 above or purchased under paragraph 4 above shall be cancelled and shall not be available for re-issue. 6. SUBSTITUTION AND EXCHANGE The Loan Note Instrument will contain provisions entitling Marsh & McLennan to substitute any other member of the Marsh & McLennan Group as the principal debtor under the Loan Notes, or to require Noteholders to exchange the Loan Notes for loan notes issued on the same terms, mutatis mutandis, by 22 23 one or more of such members provided that (a) Marsh & McLennan guarantees such member's obligations thereunder, and (b) Marsh & McLennan's right to require substitution by such member as a principal debtor will be exercisable only if prior clearance has been obtained from the Inland Revenue to the effect that the substitution will not be treated as a disposal of the Loan Notes for the purpose of United Kingdom taxation of chargeable gains. References to Marsh & McLennan in this summary except in (a) shall be construed to apply to the substitute or substitutes (if any) from time to time of Marsh & McLennan. 7. MODIFICATIONS The provisions of the Loan Note Instrument and the rights of the Noteholders will be subject to modification, abrogation or compromise in any respect with the sanction of an Extraordinary Resolution (as defined in the Loan Note Instrument) of the Noteholders, and the consent of Marsh & McLennan. Marsh & McLennan may amend the provisions of the Loan Note Instrument without such sanction or consent if such amendment is of a formal, minor or technical nature and is not materially adverse to Noteholders or is to correct a manifest error. 8. REGISTRATION AND TRANSFER The Loan Notes will be in registered form and transferable in amounts or integral multiples of pound sterling 100 provided that transfers will not be registered during the 21 days immediately preceding an interest payment date or while the register of Noteholders is closed. 9. PRESCRIPTION Noteholders will cease to be entitled to amounts in respect of interest which remain unclaimed for a period of five years and to amounts due in respect of principal which remain unclaimed for a period of ten years, in each case from the date on which the relevant payment first becomes due, and such amounts shall revert to Marsh & McLennan upon the giving of 30 days' written notice. 10. RESTRICTIONS ON OWNERSHIP AND TRANSFER The Loan Notes have not been and will not be registered under the US Securities Act and no steps have been taken to qualify the Loan Notes for distribution in any province or territory of Canada and no prospectus in relation to the Loan Notes has been, or will be, lodged with or registered by the Australian Securities Commission. Accordingly, unless an exemption under the US Securities Act or other applicable securities laws is available, the Loan Note Alternative is not available in the United States, Canada, Australia or Japan or to Restricted Overseas Persons and the Loan Notes may not be directly or indirectly offered, sold or delivered in or into the United States, Canada, Australia or Japan or to or for the account or benefit of any Restricted Overseas Persons. For these purposes, "Restricted Overseas Person" means either a person (including an individual, partnership, unincorporated syndicate, limited liability company, unincorporated organisation, trust, trustee, administrator or other legal representative) in or resident in the United States, Canada, Australia or Japan, or a US Person (as defined in Regulation S under the US Securities Act). 11. NO LISTING 23 24 No application has been made or is intended to be made to any stock exchange for the Loan Notes to be listed or otherwise traded. 24 25 12. GOVERNING LAW The Loan Notes and the Loan Note Instrument will be governed by and construed in accordance with the laws of England. 25 26 APPENDIX III DEFINITIONS The following definitions apply throughout this announcement, unless the context requires otherwise: "Acceptance Form" the Form of Acceptance and, in respect of Sedgwick ADS holders only, the letter of transmittal and the notice of guaranteed delivery to accompany the Offer Document. "Business Day" any day, other than a Saturday or Sunday or a US federal holiday or UK Bank Holiday, and consisting of the time period from 12.01 a.m. until and including 12.00 midnight (New York City time). "Cazenove" Cazenove & Co. "City Code" the City Code on Takeovers and Mergers. "CSFB" Credit Suisse First Boston (Europe) Limited. "Donaldson, Lufkin & Jenrette" Donaldson, Lufkin & Jenrette International. "Exchange Act" the US Securities and Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Form of Acceptance" the Form of Acceptance, Authority and Election relating to the Offer for use by Sedgwick Shareholders. "J.P. Morgan" Morgan Guaranty Trust Company of New York. "LIBOR" the rate of interest determined on the basis of the arithmetic mean of the respective rates at which any two London clearing banks, selected by Marsh & McLennan, offer six-month pound sterling deposits of pound sterling 1,000,000 to leading banks in the London inter-bank market at or about 11 a.m. (London time) on the first business day of the relevant interest period as defined in paragraph 2 of Appendix II. "Loan Notes" the unsecured loan notes to be issued by Marsh & McLennan as described in this announcement. "Loan Note Alternative" the alternative whereby Sedgwick Shareholders (other than persons who are citizens or residents of the United States and certain other overseas shareholders) validly accepting the Offer may elect to receive Loan Notes instead of all or part of the cash consideration to which they would otherwise be entitled under the Offer. 26 27 "Loan Note Instrument" the loan note instrument constituting the Loan Notes. "London Stock Exchange" London Stock Exchange Limited. "Marsh & McLennan" Marsh & McLennan Companies, Inc. "Marsh & McLennan Group" Marsh & McLennan and its subsidiaries and subsidiary undertakings. "Offer" the recommended offer to be made by J.P. Morgan and Donaldson, Lufkin & Jenrette, on behalf of Marsh & McLennan, on the terms and conditions set out in this announcement and the Offer Document and the relevant Acceptance Form including, where the context requires, the Loan Note Alternative and any subsequent revision, variation, extension or renewal of such offer and such alternative for all the issued and to be issued Sedgwick Securities. "Offer Document" any document containing the Offer. "Optionholders" holders of Options. "Options" options granted pursuant to the terms of the Sedgwick Share Option Schemes. "Panel" the Panel on Takeovers and Mergers. "Rothschild" NM Rothschild & Sons Limited. "Sedgwick" Sedgwick Group plc. "Sedgwick ADS" an American Depositary Share representing five Sedgwick Shares. "Sedgwick Convertible Bonds" the Sedgwick 7.25% Convertible Bonds 2008. "Sedgwick Group" Sedgwick and its subsidiaries and subsidiary undertakings. "Sedgwick Security" a Sedgwick Share or a Sedgwick ADS. "Sedgwick Securityholder" a holder of Sedgwick Shares or Sedgwick ADSs. "Sedgwick Share" an ordinary share of 10 pence in the capital of Sedgwick. "Sedgwick Share Option the 1984 Executive Share Option Scheme, the Schemes" 1995 Executive Share Option Scheme, the 1984 Employee Savings-Related Share Options Scheme, the 1995 Employee Savings-Related Share Options Scheme and the 1995 Overseas Savings-Related Share Options Scheme. "Sedgwick Shareholder" a holder of a Sedgwick Share. "SEC" the United States Securities and Exchange Commission. 27 28 "subsidiary" and "subsidiary have the meanings given by the Companies Act undertaking" 1985. "UK" or "United Kingdom" the United Kingdom of Great Britain and Northern Ireland. "US" or "United States" the United States of America, its possessions and territories, all areas subject to its jurisdiction or any subdivision thereof, any State of the United States and the District of Columbia. "US$" or "US dollar" the lawful currency of the United States. "US Holder" (i) an individual who is a citizen or resident of the United States, (ii) a corporation or partnership created or organised in or under the laws of the US or any political subdivision thereof, (iii) an estate the income of which is subject to US federal income taxation regardless of its source or (iv) a trust which is subject to the supervision of a court within the US and the control of a US fiduciary as described in section 7701(a) (30) of the Inland Revenue Code. "US Persons" US persons as described in Regulation S of the US Securities Act. "US Securities Act" the US Securities Act of 1933, amended, and the rules and regulations promulgated thereunder. "pound sterling" or "pounds the lawful currency of the United Kingdom. sterling" or "pence" 28 EX-99.A.9 10 TEST OF PRESS RELEASE OF MARSH & MCLENNAN 1 Exhibit (a)(9) NEWS RELEASE Marsh & McLennan Companies, Inc. 1166 Avenue of the Americas New York, NY 10036-2774 Telephone 212 345 5000 Telefax 212 345 4838 www.marshmac.com FOR IMMEDIATE RELEASE Contact: Barbara Perlmutter Jim Fingeroth Marsh & McLennan Cos. Tracey Stearns (212) 345-5585 Kekst and Company (212) 521-4800 MARSH & MCLENNAN COMPANIES AGREES TO ACQUIRE SEDGWICK FOR TOTAL CASH CONSIDERATION OF APPROXIMATELY $2 BILLION NEW YORK, NEW YORK, August 25, 1998 -- Marsh & McLennan Companies, Inc. and Sedgwick Group plc today announced that they have reached an agreement to the terms of a recommended offer to be made on behalf of Marsh & McLennan Companies to acquire the entire issued share capital of Sedgwick for total cash consideration of pound sterling 1.25 billion (approximately $2 billion). The acquisition of Sedgwick, the largest European-based independent insurance broker, will enhance Marsh & McLennan Companies' position as one of the world's leading providers of professional services, particularly in its risk and insurance services and consulting businesses. Under the terms of the offer, which was approved by the boards of directors of both companies, Marsh & McLennan Companies will pay 225 pence for each Sedgwick share and pound sterling 11.25 (approximately $18.34 at pound sterling 1:$1.63) for each Sedgwick ADS. Marsh & McLennan Companies said it expects the acquisition to be accretive to its earnings per share, beginning in the year 2000. J.P. Morgan and Donaldson, Lufkin & Jenrette are serving as financial advisors to Marsh & McLennan Companies, and NM Rothschild & Sons Limited and Credit Suisse First Boston are 2 serving as financial advisors to Sedgwick. The offer is subject to customary regulatory approvals and other conditions, and it is anticipated that the transaction will close in the fourth quarter. The directors of Sedgwick and certain other persons have irrevocably undertaken to accept the offer in respect of their holdings of Sedgwick shares, amounting in aggregate to approximately 225.7 million Sedgwick shares, representing approximately 41 percent of Sedgwick's issued share capital. A.J.C. Smith, chairman and chief executive officer of Marsh & McLennan Companies, stated, "We believe the combination of Marsh & McLennan Companies and Sedgwick will be beneficial for our clients, employees and shareholders. This transaction, which joins together two of the best-known names in risk and insurance services and consulting, will strengthen further our ability to meet the increasing global demand for professional services. In particular, it will enable us to improve the breadth and quality of service to our clients while providing substantial operational efficiencies. "From a strategic standpoint, we believe this transaction will enhance shareholder value through a combination of stronger insurance broking practices, global reach and operating efficiencies. The addition of Sedgwick will increase our presence in the United Kingdom and in continental Europe and Asia, where the Sedgwick brand name is recognized and respected. With the addition of Sedgwick's excellent professional staff, we will be able to respond more effectively to the increasingly complex risks our clients encounter and be able to compete successfully with all potential competitors in our market. "We are also very excited about the opportunity to combine Sedgwick's consulting business, which is a leading employee benefits consulting firm, with our own consulting firm, which we expect will provide growth opportunities." Sax Riley, chairman of Sedgwick, said, "I am delighted that Sedgwick and Marsh & McLennan Companies have come together to form the world's leading insurance broker and employee benefits consultancy, and I look forward to working with Marsh & McLennan Companies for the development of our business. The combination of our two groups, together with the retention of the Sedgwick brand name internationally, will enhance our global service and will offer our people new opportunities in a much enlarged group." Mr. Riley and Rob White-Cooper, chief executive officer of Sedgwick, have been invited to join the board of Marsh & McLennan Companies upon closing. 3 The terms and conditions of this offer will be described in a Current Report on Form 8-K to be filed with the Securities and Exchange Commission later today. Sedgwick is the London-based holding company of one of the world's leading insurance, reinsurance and consulting groups. This group provides insurance and reinsurance broking services, risk consulting, employee benefits consulting and related financial services from more than 290 offices in 70 countries. Marsh & McLennan Companies is a professional services firm providing risk and insurance services, investment management and consulting. More than 36,000 employees worldwide provide analysis, advice and transactional capabilities to clients in over 100 countries. Marsh & McLennan Companies' stock (ticker symbol; MMC) is listed on the New York, Chicago, Pacific and London stock exchanges. Its Web site address is www.marshmac.com ### This press release contains certain statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements may include, without limitation, discussions concerning future results. Such statements are qualified by important factors that may cause actual results to differ from those contemplated, including as a result of those factors detailed from time to time in the Company's Securities and Exchange Commission filings, as well as factors affecting the successful integration of Marsh & McLennan Companies and Sedgwick. Please refer to Marsh & McLennan Companies' 1997 Annual Report on Form 10-K for "Information Concerning Forward-looking Statements," its reports on Form 8-K and quarterly reports on Form 10-Q. EX-99.A.10 11 SUMMARY ADVERTISEMENT PUBLISHED IN THE U.S. 1 Exhibit (a)(10) This announcement is neither an offer to purchase nor a solicitation of an offer to sell securities. The Offers (as defined below) are made in the United States solely by the Offer to Purchase dated September 4, 1998 and the related Letter of Transmittal and Forms of Acceptance and are not being made to, nor will acceptances be accepted from or on behalf of, holders of Sedgwick Shares (as defined below), Sedgwick ADSs (as defined below) evidenced by Sedgwick ADRs (as defined below) or Sedgwick Convertible Bonds (as defined below) in any jurisdiction in which the making of the Offers or acceptance thereof would not be in compliance with the laws of such jurisdiction. In those US jurisdictions whose securities laws or blue sky laws require the Offers to be made by a licensed broker or dealer, the Offers shall be deemed to be made on behalf of Marsh & McLennan Companies, Inc. by J.P. Morgan Securities Inc. and Donaldson, Lufkin & Jenrette Securities Corporation or one or more registered brokers or dealers which are licensed under the laws of those jurisdictions. The Offer to Purchase, the Letter of Transmittal, the Forms of Acceptance and related materials should not be forwarded or transmitted in or into Canada, Australia or Japan. NOTICE OF RECOMMENDED CASH OFFERS BY MORGAN GUARANTY TRUST COMPANY OF NEW YORK, LONDON BRANCH and DONALDSON, LUFKIN & JENRETTE INTERNATIONAL on behalf of MARSH & MCLENNAN COMPANIES, INC. to acquire all outstanding Ordinary Shares, American Depositary Shares evidenced by American Depositary Receipts and 7.25% Convertible Bonds 2008 of SEDGWICK GROUP PLC Morgan Guaranty Trust Company of New York, London Branch and Donaldson, Lufkin & Jenrette International, acting in the United States through J.P. Morgan Securities Inc. and Donaldson, Lufkin & Jenrette Securities Corporation, on behalf of Marsh & McLennan Companies, Inc. ("Marsh & McLennan"), are offering to purchase, upon the terms and subject to the conditions set forth in the Offer to Purchase dated September 4, 1998 (the "Offer to Purchase"), the related Letter of Transmittal and the related Form of Acceptance (collectively, the "Ordinary Offer"), (i) all outstanding ordinary shares of 10 pence each ("Sedgwick Shares") of Sedgwick Group plc ("Sedgwick") for 225 pence per Sedgwick Share in cash and (ii) all outstanding American Depositary Shares of Sedgwick, each representing five Sedgwick Shares ("Sedgwick ADSs") and evidenced by American Depositary Receipts ("Sedgwick ADRs"), for pound sterling 11.25 per Sedgwick ADS in cash. Sedgwick Shares and Sedgwick ADSs evidenced by Sedgwick ADRs are referred to collectively as "Sedgwick Securities". Morgan Guaranty Trust Company of New York, London Branch and Donaldson, Lufkin & Jenrette International, acting in the United States through J.P. Morgan Securities Inc. and Donaldson, Lufkin & Jenrette Securities Corporation, on behalf of Marsh & McLennan, are also offering to purchase, upon the terms and conditions set forth in the Offer to Purchase and the related Form of Acceptance, all outstanding 7.25% Convertible Bonds 2008 of Sedgwick ("Sedgwick Convertible Bonds") for 123 pence for every pound sterling 1 nominal amount of Sedgwick Convertible Bonds (the "Convertible Offer" and, together with the Ordinary Offer, the "Offers"). Holders of record of Sedgwick Securities at the close of business on August 21, 1998 will be entitled to receive and retain the interim dividend of 3.0 pence (net) per Sedgwick Share in respect of the year ending December 31, 1998 and payable on October 19, 1998. Holders of Sedgwick Convertible Bonds will also be entitled to the interest payable on Sedgwick Convertible Bonds on November 30, 1998. THE INITIAL OFFER PERIOD WILL EXPIRE AT 3:00 P.M. (LONDON TIME), 10:00 A.M. (NEW YORK CITY TIME), ON OCTOBER 5, 1998, UNLESS EXTENDED (THE "INITIAL OFFER PERIOD"). AT THE CONCLUSION OF THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, IF ALL CONDITIONS OF THE OFFERS HAVE BEEN SATISFIED, FULFILLED OR, WHERE PERMITTED, WAIVED, THE OFFERS WILL BE EXTENDED FOR A SUBSEQUENT OFFER PERIOD OF AT LEAST 14 CALENDAR DAYS (THE "SUBSEQUENT OFFER PERIOD"). HOLDERS OF SEDGWICK SECURITIES AND Sedgwick Convertible Bonds WILL HAVE THE RIGHT TO WITHDRAW THEIR ACCEPTANCES OF THE OFFERS DURING THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, BUT NOT DURING THE SUBSEQUENT OFFER PERIOD. The directors of Sedgwick, who have been so advised by NM Rothschild & Sons Limited ("Rothschild") and Credit Suisse First Boston (Europe) Limited ("CSFB"), consider the terms of the Offers to be fair and reasonable. In providing advice to the directors of Sedgwick, Rothschild and CSFB have taken into account the commercial assessments of the directors of Sedgwick. Accordingly, the directors of Sedgwick unanimously recommend all holders of Sedgwick Securities and Sedgwick Convertible Bonds to accept the Offers, as they intend to do in respect of their own holdings. The Ordinary Offer is conditional on, among other things, valid acceptances being received (and not, where permitted, withdrawn) by the expiration of the Initial Offer Period in respect of not less than 90 percent in nominal value of Sedgwick Securities to which the Ordinary Offer relates, or such lower percentage as Marsh & McLennan may decide, provided that such condition (the "Acceptance Condition") shall not be satisfied unless Marsh & McLennan and/or its wholly owned subsidiaries shall have acquired or agreed to acquire, whether pursuant to the Ordinary Offer or otherwise, Sedgwick Securities carrying in the aggregate more than 50 percent of the voting rights then exercisable at general meetings of Sedgwick. Marsh & McLennan reserves the right to reduce the percentage of Sedgwick Securities required to satisfy the Acceptance Condition at some time prior to all of the conditions being satisfied, fulfilled or, where permitted, waived. At least five business days prior to any such reduction, Marsh & McLennan will announce that it has reserved the right to so reduce the Acceptance Condition. Such announcement will state the percentage to which the Acceptance Condition may be reduced and will state that such a reduction is possible but that Marsh & McLennan need not declare its actual intentions until it is required to do so under the City Code on Takeovers and Mergers of the UK (the "City Code"). Marsh & McLennan will not make such an announcement unless Marsh & McLennan believes there is a significant possibility that sufficient Sedgwick Securities will be tendered to permit the Acceptance Condition to be satisfied at such reduced level. Holders of Sedgwick Securities who are not willing to accept the Ordinary Offer if the Acceptance Condition is reduced to the minimum permitted level should either not accept the Ordinary Offer until the Subsequent Offer Period or be prepared to withdraw their acceptances promptly following an announcement by Marsh & McLennan of its reservation of the right to reduce the Acceptance Condition. Other conditions of the Offers are set out in Part A of Appendix I of the Offer to Purchase. Marsh & McLennan reserves the right (but will not be obliged) at any time to extend the Initial Offer Period, provided that Marsh & McLennan may not extend the Initial Offer Period beyond November 3, 1998 without the consent of the Panel on Takeovers and Mergers of the UK (the "Panel"). Marsh & McLennan reserves the right, if appropriate, to secure the Panel's approval to extend the final date for expiration of the Initial Offer Period to November 24, 1998, or such later date as the Panel may agree. A public announcement of any such extension will be made no later than 8:30 a.m. (London time) in the UK and by 8:30 a.m. (New York City time) in the US on the next business day after the previously scheduled expiration of the Initial Offer Period. Marsh & McLennan may terminate any extension of the Initial Offer Period (other than an extension required by the City Code or US federal securities laws) prior to its scheduled expiration if the Acceptance Condition and all other conditions to the Ordinary Offer have been satisfied, fulfilled or, where permitted, waived. In that case, the Initial Offer Period and, consequently, withdrawal rights, except in certain limited circumstances, will terminate immediately. If all of the conditions to the Ordinary Offer are satisfied, fulfilled or, where permitted, waived at the expiration of the Initial Offer Period, the consideration for Sedgwick Securities purchased pursuant to the Ordinary Offer will be paid within 14 calendar days after the later of the expiration of the Initial Offer Period and the receipt of a complete and valid acceptance of the Ordinary Offer. In all cases, payment for Sedgwick Securities purchased pursuant to the Ordinary Offer will be made only after timely receipt by either the US Depositary or the UK Receiving Agent, as the case may be, of (i) certificates representing the Sedgwick Shares, Sedgwick ADRs representing the Sedgwick ADSs, or (only in the case of Sedgwick ADSs) timely confirmation of a book-entry transfer of such Sedgwick ADSs evidenced by Sedgwick ADRs into the US Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company (each a "Book-Entry Transfer Facility") pursuant to the procedures set forth in the Offer to Purchase, (ii) the Letter of Transmittal (in the case of acceptances relating to Sedgwick ADSs) or the relevant Form of Acceptance (in the case of acceptances relating to Sedgwick Shares), properly completed and duly executed, with any required signature guarantees, and (iii) any other documents required by the Letter of Transmittal or the relevant Form of Acceptance. Although the Ordinary Offer price is denominated in pounds sterling, accepting holders of Sedgwick Shares will be entitled to have their cash consideration converted into US dollars at the exchange rate obtainable by the relevant payment agent (either the US Depositary or the UK Receiving Agent) on the spot market in London at approximately noon (London time) on the date the cash consideration is made available by Marsh & McLennan to the relevant payment agent for delivery to holders of Sedgwick Shares. Unless they elect to receive pounds sterling, Sedgwick ADS holders will receive consideration converted into dollars as described above, as if such holders of Sedgwick ADSs had elected to receive dollars. If, as a result of the Ordinary Offer and subject to certain conditions, Marsh & McLennan acquires or contracts to acquire Sedgwick Securities representing at least 90 percent in value of the Sedgwick Securities to which the Ordinary Offer relates, then, provided such requirement is achieved within four months of September 4, 1998, Marsh & McLennan will be entitled and intends to effect the compulsory acquisition procedures provided for in Sections 428 to 430F of the Companies Act 1985 (as amended) of England and Wales to compel the purchase of any outstanding Sedgwick Securities on the same terms as provided in the Ordinary Offer, in accordance with the relevant procedures and time limits described in such Act. If a holder of Sedgwick ADSs wishes to accept the Ordinary Offer in respect of Sedgwick ADSs and the Sedgwick ADRs evidencing such Sedgwick ADSs are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis, or if time will not permit all required documents to reach the US Depositary prior to the expiration of the Subsequent Offer Period, such holder's acceptance of the Ordinary Offer in respect of Sedgwick ADSs may nevertheless be effected by following the guaranteed delivery procedures set forth in the Offer to Purchase. Except as described below and in the Offer to Purchase, acceptances of the Ordinary Offer for Sedgwick Securities are irrevocable. Acceptances of the Ordinary Offer may be withdrawn pursuant to the procedures set out below at any time during the Initial Offer Period, including any extension thereof, but not during the Subsequent Offer Period, except in certain limited circumstances as described in the Offer to Purchase. To be effective, a written notice of withdrawal must be timely received by the party (either the UK Receiving Agent or the US Depositary) to whom the acceptance was originally sent at one of the addresses set forth in the Offer to Purchase and must specify the name of the person who has tendered Sedgwick Securities, the number of Sedgwick Securities to be withdrawn and (if a Sedgwick Share certificate or Sedgwick ADSs have been tendered) the name of the registered holder of the Sedgwick Securities, if different from the name of the person whose acceptance is to be withdrawn. In respect of Sedgwick ADSs, if Sedgwick ADRs have been delivered or otherwise identified to the US Depositary then, prior to the physical release of such Sedgwick ADRs, the serial numbers shown on such Sedgwick ADRs must be submitted, and, unless the Sedgwick ADSs evidenced by such Sedgwick ADRs have been delivered by an Eligible Institution (as defined in Instruction 1 of the Letter of Transmittal) or by means of a Letter of Transmittal, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Sedgwick ADSs evidenced by Sedgwick ADRs have been delivered pursuant to the procedures for book-entry transfer set forth in the Offer to Purchase, any notice of withdrawal must also specify the name and number of account at the appropriate Book-Entry Transfer Facility to be credited with the withdrawn Sedgwick ADSs and must otherwise comply with such Book-Entry Transfer Facility's procedures. All questions as to the validity (including time of receipt) of any notice of withdrawal will be determined by Marsh & McLennan, whose determination (except as required by the Panel) shall be final and binding. The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the General Rules and Regulations under the US Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and incorporated herein by reference. The Offer to Purchase, the Letter of Transmittal and the Form of Acceptance are being mailed to holders of record of Sedgwick Securities and are being furnished to brokers, dealers, commercial banks, trust companies and similar persons, whose names or the names of whose nominees appear as holders of record for subsequent transmittal to beneficial owners of Sedgwick Securities. The Offer to Purchase and related materials contain important information which should be read carefully before any decisions are made with respect to the Offers. Requests for assistance or copies of the Offer to Purchase, the Letter of Transmittal, the Forms of Acceptance and all other related materials may be directed to the U.S. Dealer Managers or the Information Agent as set forth below, and copies will be furnished promptly at Marsh & McLennan's expense. The Information Agent for the Offers is: [GEORGESON LOGO] Wall Street Plaza New York, New York 10005 Banks and Brokers call collect (212) 440-9800 All Others Call Toll Free: 1-800-223-2064 The US Dealer Managers for the Offers are: J.P. MORGAN & CO. DONALDSON, LUFKIN & JENRETTE 60 Wall Street 277 Park Avenue New York, New York 10260 New York, New York 10172 (212) 648-7843 (Call Collect) (212) 892-8223 (Call Collect) September 4, 1998 EX-99.A.11 12 NEWSPAPER ADVERTISEMENT PUBLISHED IN THE U.K. 1 EXHIBIT (a)(11) Recommended Cash Offers by J.P. MORGAN AND DONALDSON, LUFKIN & JENRETTE on behalf of MARSH & MCLENNAN COMPANIES, INC. for SEDGWICK GROUP PLC Morgan Guaranty Trust Company of New York ("J.P. Morgan") and Donaldson, Lufkin & Jenrette International ("Donaldson, Lufkin & Jenrette") announce, on behalf of Marsh & McLennan Companies, Inc. ("MMC"), recommended cash offers to acquire the whole of the issued and to be issued ordinary share capital of Sedgwick Group plc ("Sedgwick") and all outstanding Sedgwick Convertible Bonds (the "Offers"). The full terms and conditions of the Offers and the Loan Note Alternative (including details of how the Offers may be accepted) are set out in the offer document dated and posted today (the "Offer Document") and in the Acceptance Forms. Terms defined in the Offer Document have the same meanings in this advertisement. A Sedgwick Securityholder who validly accepts the Ordinary Offer will receive: FOR EACH SEDGWICK SHARE - 225 PENCE IN CASH FOR EACH SEDGWICK ADS - POUND STERLING 11.25 IN CASH. A Sedgwick Bondholder who validly accepts the Convertible Offer will receive, for every pound sterling 1 nominal of Convertible Bonds, 123 pence in cash. In addition, Sedgwick Securityholders who were on the register at the close of business on 21 August 1998 will be entitled to receive and retain the interim dividend of 3.0 pence (net) per Sedgwick Share in respect of the year ending 31 December 1998 and payable on 19 October 1998. Sedgwick Bondholders will also be entitled to the interest payable on the Sedgwick Convertible Bonds on 30 November 1998 on the terms set out in the Offer Document. The Ordinary Offer values the entire issued share capital of Sedgwick at pound sterling 1,247 million. Instead of choosing to receive the cash consideration under the Offers, Sedgwick Shareholders and Sedgwick Bondholders (other than certain overseas shareholders and bondholders) who validly accept the Offers will be entitled to exchange all or part of their holdings of Sedgwick Shares and/or Sedgwick Convertible Bonds for Loan Notes. The Loan Notes will be issued on the basis of pound sterling 1 nominal of Loan Notes for every pound sterling 1 of cash otherwise available under the Offers. Copies of the Offer Document and Acceptance Forms are available for collection as provided in the Offer Document, including from Computershare Services PLC, 5-10 Great Tower Street, London EC3R 5ER; Bank of New York, 101 Barclay Street, New York, New York 10286; The Chase Manhattan Bank, Chaseside, Bournemouth BH7 7DB; The Chase Manhattan Bank Luxembourg, S.A., 5 rue Plaetis, L-2338 Luxembourg Grund; and Lloyds Bank Registrars, The Causeway, Worthing, West Sussex BN99 6DA. The Offers are being made to all Sedgwick Securityholders and Sedgwick Bondholders, including those to whom the Offer Document may not be despatched, who hold Sedgwick Securities or Sedgwick Convertible Bonds, or who are entitled to have Sedgwick Securities unconditionally allotted or issued to them. The Offers will be open for acceptance until 3.00 p.m. (London time) or 10.00 a.m. (New York City time) on 5 October 1998 (or such later time(s) and/or date(s) as MMC, subject to the rules of the City Code, may decide). The directors of Sedgwick, who have been so advised by Rothschild and Credit Suisse First Boston, have stated that they consider the terms of the Offers to be fair and reasonable and unanimously recommend Sedgwick Securityholders and Sedgwick Bondholders to accept the Offers. In providing advice to the directors of Sedgwick, Rothschild and Credit Suisse First Boston have taken into account the commercial assessments of the Sedgwick directors. Directors of Sedgwick and certain other persons have irrevocably undertaken to accept the Ordinary Offer in respect of their holdings amounting to 223,934,653 Sedgwick Shares representing 40.4 per cent. of Sedgwick's issued share capital and in respect of pound sterling 250,000 in nominal value of Sedgwick Convertible Bonds. MMC has also conditionally agreed to acquire a further 54,862,345 Sedgwick Shares which, together with such irrevocable undertakings, represent 50.3 per cent. of Sedgwick's issued share capital. The Offers are not being made, directly or indirectly, in or into or by use of the mails of, or by any means or instrumentality of interstate or foreign commerce (including facsimile transmission, e-mail, telex and telephone) of, or of any facility of a national securities exchange of Canada, Australia or Japan and the Offers are not capable of acceptance from within Canada, Australia or Japan. Neither the Offer Document nor the Acceptance Forms (or any related offering documentation) is being mailed or otherwise distributed or sent in or into Canada,Australia or Japan. This advertisement is not being published or otherwise distributed or sent to, into or from Canada, Australia or Japan. Persons reading this advertisement (including nominees, trustees and custodians) must not distribute or send this advertisement, the Offer Document or an Acceptance Form (or any related offering documentation) in, into or from Canada, Australia or Japan nor use Canadian, Australian or Japanese mails for any purpose, directly or indirectly, in connection with the Offers and doing so may invalidate any purported acceptance 2 of the Offers. The Loan Notes to be issued pursuant to the Offers have not been, and will not be, registered under the US Securities Act or under any relevant securities laws of any state of the US or any relevant securities laws of Canada, Australia or Japan. Accordingly, unless an exemption is available under the US Securities Act or such relevant securities laws, the Loan Notes may not be offered, sold or delivered, directly or indirectly, in or into the US, Canada, Australia or Japan, or any other jurisdiction if to do so would constitute a violation of the relevant laws in such jurisdiction. The obligations of Marsh & McLennan as issuer of the Loan Notes are not guaranteed or secured. J.P. Morgan, Donaldson, Lufkin & Jenrette and Cazenove, which are regulated in the UK by The Securities and Futures Authority Limited, are acting for MMC and for no one else in connection with the Offers and will not be responsible to anyone other than MMC for providing the protections afforded to their respective customers nor for giving advice in relation to the Offers. Rothschild and Credit Suisse First Boston, which are regulated in the UK by The Securities and Futures Authority Limited, are acting for Sedgwick and for no one else in connection with the Offers and will not be responsible to anyone other than Sedgwick for providing the protections afforded to their respective customers nor for giving advice in relation to the Offers. The members of the Offer Committee of MMC listed in the Offer Document accept responsibility for the information contained in this advertisement save for that relating to Sedgwick and, to the best of their knowledge and belief (having taken all reasonable care to ensure that such is the case), the information contained in this advertisement for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information. The directors of Sedgwick accept responsibility for the information contained in this advertisement relating to Sedgwick and, to the best of their knowledge and belief (having taken all reasonable care to ensure that such is the case), the information contained in this advertisement for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information. This notice constitutes, inter alia, a notice by Sedgwick in accordance with condition 11(g) of the trust deed dated 15 June 1993 in respect of the Sedgwick Convertible Bonds. 4 September 1998 J.P. Morgan and Donaldson, Lufkin & Jenrette have approved this advertisement solely for the purposes of Section 57 of the Financial Services Act 1986. EX-99.B 13 CREDIT AGREEMENT 1 EXHIBIT (b) $2,250,000,000 CREDIT AGREEMENT dated as of August 24, 1998 among Marsh & McLennan Companies, Inc. The Lenders Party Hereto and Morgan Guaranty Trust Company of New York, as Administrative Agent 2 TABLE OF CONTENTS PAGE ARTICLE 1 DEFINITIONS SECTION 1.01. Definitions.....................................................1 SECTION 1.02. Accounting Terms and Determinations............................13 ARTICLE 2 THE CREDITS SECTION 2.01. Commitments to Lend............................................13 SECTION 2.02. Method of Borrowing............................................14 SECTION 2.03. Maturity of Loans..............................................15 SECTION 2.04. Interest Rates.................................................15 SECTION 2.05. Method of Electing Interest Rates..............................16 SECTION 2.06. Facility Fees..................................................18 SECTION 2.07. Termination or Reduction of Commitments........................18 SECTION 2.08. Optional Prepayments...........................................19 SECTION 2.09. General Provisions as to Payments..............................19 SECTION 2.10. Funding Losses.................................................20 SECTION 2.11. Computation of Interest and Fees...............................21 SECTION 2.12. Notes..........................................................21 SECTION 2.13. Regulation D Compensation......................................21 ARTICLE 3 CONDITIONS SECTION 3.01. Closing........................................................22 SECTION 3.02. Borrowings to Finance Acquisition of Target Shares Pursuant to Offer.....................................................23 SECTION 3.03. Other Borrowings...............................................23 ARTICLE 4 REPRESENTATIONS AND WARRANTIES SECTION 4.01. Corporate Existence and Power..................................24 SECTION 4.02. Corporate and Governmental Authorization; No Contravention.....24 SECTION 4.03. Binding Effect.................................................24 SECTION 4.04. Financial Information..........................................25 3 PAGE SECTION 4.05. Litigation.....................................................25 SECTION 4.06. Compliance with ERISA..........................................25 SECTION 4.07. Taxes..........................................................26 SECTION 4.08. Subsidiaries...................................................26 SECTION 4.09. No Regulatory Restrictions on Borrowing........................26 SECTION 4.10. Full Disclosure................................................26 SECTION 4.11. Mortgage.......................................................26 SECTION 4.12. Year 2000 Compliance...........................................26 ARTICLE 5 COVENANTS SECTION 5.01. Information....................................................27 SECTION 5.02. Conduct of Business and Maintenance of Existence...............30 SECTION 5.03. Compliance with the Laws.......................................31 SECTION 5.04. Minimum Consolidated Net Worth; Consolidated Debt..............31 SECTION 5.05. Consolidations, Mergers and Sales of Assets....................31 SECTION 5.06. Use of Proceeds................................................31 SECTION 5.07. Negative Pledge................................................32 SECTION 5.08. Amendment of Mortgage..........................................33 SECTION 5.09. Taxes, Etc.....................................................33 ARTICLE 6 DEFAULTS SECTION 6.01. Events of Default..............................................34 SECTION 6.02. Notice of Default..............................................37 ARTICLE 7 THE AGENTS SECTION 7.01. Appointment and Authorization..................................37 SECTION 7.02. Administrative Agent and Affiliates............................37 SECTION 7.03. Action by Administrative Agent.................................38 SECTION 7.04. Consultation with Experts......................................38 SECTION 7.05. Liability of Administrative Agent..............................38 SECTION 7.06. Indemnification................................................39 SECTION 7.07. Credit Decision................................................39 SECTION 7.08. Successor Administrative Agent.................................39 SECTION 7.09. Administrative Agent's Fee.....................................39 ii 4 PAGE ARTICLE 8 CHANGE IN CIRCUMSTANCES SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair.......40 SECTION 8.02. Illegality.....................................................40 SECTION 8.03. Increased Cost and Reduced Return..............................41 SECTION 8.04. Taxes..........................................................42 SECTION 8.05. Base Rate Loans Substituted for Affected Euro-dollar Loans.....44 ARTICLE 9 MISCELLANEOUS SECTION 9.01. Notices........................................................45 SECTION 9.02. No Waivers.....................................................45 SECTION 9.03. Expenses; Indemnification......................................45 SECTION 9.04. Set-offs.......................................................46 SECTION 9.05. Amendments and Waivers.........................................47 SECTION 9.06. Successors; Participations and Assignments.....................47 SECTION 9.07. No Reliance on Margin Stock....................................49 SECTION 9.08. Governing Law; Submission to Jurisdiction......................49 SECTION 9.09. Counterparts; Integration; Effectiveness.......................49 SECTION 9.10. Waiver of Jury Trial...........................................49 COMMITMENT SCHEDULE PRICING SCHEDULE EXHIBIT A - FORM OF NOTE EXHIBIT B - FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT iii 5 AGREEMENT dated as of August 24, 1998 among MARSH & McLENNAN COMPANIES, INC., the LENDERS party hereto and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent. The parties hereto agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.01. The following terms, as used herein, have the following meanings: "ADMINISTRATIVE AGENT" means Morgan Guaranty Trust Company of New York, in its capacity as administrative agent for the Lenders hereunder, and its successors in such capacity. "ADMINISTRATIVE QUESTIONNAIRE" means, with respect to each Lender, an administrative questionnaire in the form prepared by the Administrative Agent, completed by such Lender and returned to the Administrative Agent (with a copy to the Borrower). "AFFILIATE" means (i) any corporation or other entity the accounts of which are included in the consolidated financial statements of the Borrower and its Consolidated Subsidiaries on the equity method and (ii) any unconsolidated Subsidiary. "APPLICABLE LENDING OFFICE" means, with respect to any Lender, (i) in the case of its Base Rate Loans, its Domestic Lending Office and (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office. "ASSIGNEE" has the meaning specified in Section 9.06(c). "BASE RATE" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day. "BASE RATE LOAN" means a Loan which bears interest at the Base Rate pursuant to the applicable Notice of Borrowing or Notice of Interest Rate Election or the last sentence of Section 2.05(a) or Article 8. 6 "BORROWER" means Marsh & McLennan Companies, Inc., a Delaware corporation, and its successors. "BORROWER'S 1997 FORM 10-K" means the Borrower's annual report on Form 10-K for 1997, as filed with the SEC pursuant to the Exchange Act. "BORROWER'S LATEST FORM 10-Q" means the Borrower's quarterly report on Form 10-Q for the quarter ended June 30, 1998, as filed with the SEC pursuant to the Exchange Act. "BORROWING" means (i) the aggregation of Loans made or to be made to the Borrower pursuant to Article 2 on the same day, all of which Loans are of the same type (subject to Article 8) and, except in the case of Base Rate Loans, have the same initial Interest Period or (ii) if the context so requires, the borrowing of such Loans. A Borrowing is a Base Rate Borrowing if such Loans are Base Rate Loans or a Euro-Dollar Borrowing if such Loans are Euro-Dollar Loans. "CLOSING DATE" means the date on or after the Effective Date on which the Administrative Agent shall have received all the documents specified in or pursuant to Section 3.01. "COMMITMENT" means (i) with respect to each Lender listed on the Commitment Schedule, the amount set forth opposite such Lender's name on the Commitment Schedule and (ii) with respect to any Assignee which becomes a Lender pursuant to Section 9.06(c), the amount of the transferor Lender's Commitment assigned to it pursuant to Section 9.06(c), in each case as such amount may be changed from time to time pursuant to Section 2.07 or 9.06(c); provided that, if the context so requires, the term "COMMITMENT" means the obligation of a Lender to extend credit up to such amount to the Borrower hereunder. "COMMITMENT REDUCTION EVENT" means the incurrence after the date hereof of any Debt by the Borrower or any of its Subsidiaries in the form of debt securities or by the Borrower in the form of bank borrowings, other than (i) loan notes issued to shareholders of Target pursuant to the Offer, (ii) commercial paper borrowings, (iii) borrowings under the Credit Agreement dated as of June 13, 1997 among the Borrower, Marsh McLennan, Incorporated, the banks listed therein and The Chase Manhattan Bank, as Administrative Agent and (iv) any such Debt which is secured by a Lien permitted by Section 5.07. "COMMITMENT SCHEDULE" means the Commitment Schedule attached hereto. 2 7 "COMPLETION PROCEDURES" means procedures pursuant to section 428 et seq. Companies Act 1985 whereby the Borrower, after having validly acquired or agreed to acquire at least 90% in nominal value of the ordinary shares to which the Offer relates and having complied with certain other requirements, may acquire the remainder of such ordinary shares. "CONSOLIDATED DEBT" means, at any date, the Debt of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis as of such date. "CONSOLIDATED NET WORTH" means, at any date, the consolidated stockholders" equity of the Borrower and its Consolidated Subsidiaries plus any unrealized losses and less any unrealized gains (in each case to the extent reflected in the determination of such consolidated stockholders" equity) related, directly or indirectly, to securities available for sale, as determined in accordance with Statement of Financial Accounting Standards No. 115 (or any successor statements or amendments thereto) (in each case as affected by any subsequent relevant pronouncements of the Financial Accounting Standards Board or, if and to the extent applicable, the SEC). "CONSOLIDATED SUBSIDIARY" means, at any date, any Subsidiary or other entity the accounts of which would be consolidated with those of the Borrower in its consolidated financial statements if such statements were prepared as of such date. "CONSOLIDATED TANGIBLE NET WORTH" means, at any date, Consolidated Net Worth less the consolidated Intangible Assets of the Borrower and its Consolidated Subsidiaries, all determined as of such date. For purposes of this definition, "INTANGIBLE ASSETS" means, without duplication, the amount (to the extent reflected in determining the consolidated stockholders" equity component of Consolidated Net Worth) of (i) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of assets of a going concern business made within twelve months after the acquisition of such business) subsequent to December 31, 1997 in the book value of any asset owned by the Borrower or a Consolidated Subsidiary, (ii) all unamortized debt discount and expense, unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, anticipated future benefit of tax loss carry-forwards, copyrights, organization or developmental expenses and other intangible assets, designated as such as contemplated by Section 1.02 and (iii) all investments in Affiliates in an aggregate amount in excess of $180,000,000. "CREDIT EXPOSURE" means, with respect to any Lender at any time, (i) the amount of its Commitment (whether used or unused) at such time or (ii) if the Commitments have terminated in their entirety, the aggregate outstanding principal amount of its Loans at such time. 3 8 "DEBT" of any Person means, at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with GAAP, (v) all non-contingent obligations (and, for purposes of Section 5.07 and the definitions of Material Debt and Material Financial Obligations, all contingent obligations) of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit or similar instrument, (vi) all Debt secured by a Lien on any asset of such Person, whether or not such Debt is otherwise an obligation of such Person, and (vii) all Guarantees by such Person of Debt of another Person (each such Guarantee to constitute Debt in an amount equal to the amount of such other Person's Debt Guaranteed thereby). "DEFAULT" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "DERIVATIVES OBLIGATIONS" of any Person means all obligations of such Person in respect of any rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of the foregoing transactions) or any combination of the foregoing transactions. "DOLLARS" and "$" mean lawful money of the United States. "DOMESTIC BUSINESS DAY" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close. "DOMESTIC LENDING OFFICE" means, as to each Lender, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Lender may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Administrative Agent. "EFFECTIVE DATE" means the date this Agreement becomes effective in accordance with Section 9.09. 4 9 "ENVIRONMENTAL LAWS" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to the environment or the effect of the environment on human health or to emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into the environment, including (without limitation) ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA GROUP" means the Borrower, any Material Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any Material Subsidiary, are treated as a single employer under Section 414 of the Internal Revenue Code. "EURO-DOLLAR BUSINESS DAY" means any Domestic Business Day on which commercial banks are open for international business (including dealings in Dollar deposits) in London. "EURO-DOLLAR LENDING OFFICE" means, as to each Lender, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Lender as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Administrative Agent. "EURO-DOLLAR LOAN" means a Loan which bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Borrowing or Notice of Interest Rate Election. "EURO-DOLLAR MARGIN" means (i) on any date on or prior to February 24, 1999, the applicable Euro-Dollar Margin set forth on the Pricing Schedule for Level IV Status and the Utilization (as defined therein) that exists on such date, and (ii) on any date thereafter, a rate per annum determined in accordance with the Pricing Schedule. "EURO-DOLLAR RATE" means a rate of interest determined pursuant to Section 2.04(b) on the basis of a London Interbank Offered Rate. 5 10 "EURO-DOLLAR RESERVE PERCENTAGE" means, for any day, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion Dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Lender to United States residents). "EVENTS OF DEFAULT" has the meaning specified in Section 6.01. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time. "FACILITY FEE RATE" means (i) on any date on or prior to February 24, 1999 which is not a Pricing Grid Day, 0.08% per annum and (ii) on any other date, a rate per annum determined in accordance with the Pricing Schedule. "FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day; provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Morgan Guaranty Trust Company of New York on such day on such transactions as determined by the Administrative Agent. "FISCAL QUARTER" means a fiscal quarter of the Borrower. "FISCAL YEAR" means a fiscal year of the Borrower. "GAAP" means generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower's independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Lenders. 6 11 "GROUP OF LOANS" means, at any time, a group of Loans consisting of (i) all Loans which are Base Rate Loans at such time or (ii) all Euro-Dollar Loans which have the same Interest Period at such time; provided that, if a Loan of any particular Lender is converted to or made as a Base Rate Loan pursuant to Article 8, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made. "GUARANTEE" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt (whether arising by virtue of partnership arrangements, by virtue of an agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the holder of such Debt of the payment thereof or to protect such holder against loss in respect thereof (in whole or in part); provided that the term "GUARANTEE" shall not include endorsements for collection or deposit in the ordinary course of business. The term "GUARANTEE" used as a verb has a correlative meaning. "INDEMNITEE" has the meaning set forth in Section 9.03(b). "INTEREST PERIOD" means, with respect to each Euro-Dollar Loan, the period commencing on the date of borrowing specified in the applicable Notice of Borrowing or on the date specified in an applicable Notice of Interest Rate Election and ending one, two, three or six months thereafter, as the Borrower may elect in such notice; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. 7 12 "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended, or any successor statute. "LENDER" means (i) each bank or other institution listed on the Commitment Schedule, (ii) each Assignee which becomes a Lender pursuant to Section 9.06(c) and (iii) their respective successors. "LENDER PARTIES" means the Lenders and the Administrative Agent. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, or any other type of preferential arrangement that has substantially the same practical effect as a security interest, in respect of such asset. For purposes hereof, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "LOAN" means a loan made by a Lender pursuant to Section 2.01; provided that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "LOAN" shall refer to the combined principal amount resulting from such combination or to each of the separate principal amounts resulting from such subdivision, as the case may be. "LONDON INTERBANK OFFERED RATE" has the meaning set forth in Section 2.04(b). "MARGIN STOCK" means "margin stock" within the meaning of Regulations U and X. "MATERIAL ADVERSE EFFECT" means (i) any material adverse effect on the business, financial position or results of operations of the Borrower and its Subsidiaries, taken as a whole; (ii) any material adverse effect on the ability of the Borrower to consummate the transactions contemplated hereby or (iii) any material adverse effect on any of the rights and remedies of the Lender Parties under this Agreement and the Notes. "MATERIAL DEBT" means Debt (except Debt outstanding hereunder) of the Borrower and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, in an aggregate principal or face amount exceeding $50,000,000. 8 13 "MATERIAL FINANCIAL OBLIGATIONS" means a principal or face amount of Debt (except Debt outstanding hereunder) and/or payment or collateralization obligations in respect of Derivatives Obligations of the Borrower and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, the principal or face amount (with respect to Debt) or Settlement Amount (with respect to Derivatives Obligations, after giving effect to any netting arrangements) of which exceeds in the aggregate $50,000,000. "MATERIAL PLAN" means, at any time, a Plan or Plans having aggregate Unfunded Liabilities in excess of $15,000,000. "MATERIAL SUBSIDIARY" means at any time any Subsidiary which as of such time meets the definition of a "significant subsidiary" contained as of the date hereof in Regulation S-X of the SEC. "MOODY'S" means Moody's Investors Service, Inc. "MORTGAGE" means the Restated Mortgage and Indenture and Security Agreement dated as of April 6, 1989 made by the Borrower, Marsh & McLennan, Incorporated, William M. Mercer-Meidinger-Hansen, Incorporated and Marsh & McLennan Group Associates, Inc., tenants in common, as mortgagor, and The First National Bank of Boston, trustee, as mortgagee, as amended and supplemented from time to time, including, without limitation, as described in the Mortgage Memorandum, securing the Secured Notes and covering the Borrower's headquarters located at 1166 Avenue of the Americas, New York, New York. "MORTGAGE MEMORANDUM" means the memorandum prepared by the Borrower describing the Mortgage as in effect on May 20, 1991, particularly as to the non-recourse nature of the obligations of the Borrower and the other mortgagors thereunder and the circumstances contemplated therein under which such obligations shall become recourse obligations with respect to any assets (except the Mortgaged Property) of the Borrower or any of the other mortgagors or any Subsidiary (including any such other mortgagor). "MORTGAGED PROPERTY" has the meaning set forth in the Mortgage as in effect on May 20, 1991. "MULTIEMPLOYER PLAN" means, at any time, an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period. 9 14 "NET CASH PROCEEDS" means, with respect to any Commitment Reduction Event, an amount equal to the cash proceeds received by the Borrower or any of its Subsidiaries from or in respect of such Commitment Reduction Event less any expenses reasonably incurred by such Person in respect of such Commitment Reduction Event. "NOTES" means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the Borrower's obligation to repay the Loans made to it, and "NOTE" means any one of such promissory notes issued hereunder. "NOTICE OF BORROWING" has the meaning set forth in Section 2.02. "NOTICE OF INTEREST RATE ELECTION" has the meaning set forth in Section 2.05. "OFFER" means the offer by the Borrower to purchase all outstanding ordinary shares of Target on the terms and conditions specified in the form of offer heretofore delivered by the Borrower to the Lenders. "OFFER TERMINATION DATE" means the earliest date on which all of the following have occurred: (i) all payments in respect of acceptance of the Offer have been made in full, (ii) no further such acceptances are possible and (iii) all Completion Procedures which are capable of being implemented have been completed and all payments pursuant thereto to shareholders in Target have been made in full. "OPERATING CASH FLOW" means, at any date, for the period of four consecutive fiscal quarters then ended, the sum (without duplication) determined on a consolidated basis for the Borrower and its Consolidated Subsidiaries as reported in the Borrower's audited or unaudited quarterly consolidated statements of cash flows, of Net Cash Generated From Operations for such period plus (or minus) to the extent reflected in determining Net Cash Generated From Operations for such period, Net Changes In Operating Working Capital Other Than Cash And Cash Equivalents for such period. "PARENT" means, with respect to any Lender, any Person controlling such Lender. "PARTICIPANT" has the meaning set forth in Section 9.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. 10 15 "PERSON" means an individual, a corporation, a limited liability Borrower, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "PLAN" means, at any time, an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "PRICING GRID DAY" means any day when (i) the Borrower has on or prior to such day delivered to the Administrative Agent a certificate to the effect that it does not anticipate that any Loans will be borrowed because the Borrower has access to the commercial paper market and other sources of funds sufficient to finance the acquisition of Target without any borrowing under this Agreement and (ii) there have been no Loans outstanding on or prior to such day. "PRICING SCHEDULE" means the Pricing Schedule attached hereto. "PRIME RATE" means the rate of interest publicly announced by Morgan Guaranty Trust Company of New York in New York City from time to time as its Prime Rate. "QUARTERLY PAYMENT DATES" means each March 31, June 30, September 30 and December 31. "REFERENCE BANKS" means the principal London offices of Morgan Guaranty Trust Company of New York and, at such time as one or more additional Lenders shall have become parties hereto, such other Lenders as may be mutually agreed by the Borrower and the Administrative Agent. "REGULATIONS U AND X" means Regulations U and X of the Board of Governors of the Federal Reserve System, as in effect from time to time. "REQUIRED LENDERS" means, at any time, Lenders having at least 51% in aggregate amount of the Credit Exposures at such time. "REVOLVING CREDIT PERIOD" means the period from and including the Closing Date to but not including the Termination Date. 11 16 "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. "SEC" means the Securities and Exchange Commission. "SECURED NOTES" means the $200,000,000 aggregate principal amount of 9.80% Secured Non-Recourse Notes Due April 6, 2009 secured by the Mortgage. "SETTLEMENT AMOUNT" means, in respect of any Derivatives Obligation to which the Borrower or any Subsidiary is a party, the net aggregate marked-to-market (in accordance with standard industry practice) amount, if any, that would be due in respect of such Derivatives Obligation (together with all other Derivatives Obligations under the same master agreement and giving effect to any netting arrangements between the parties to such master agreement) if such Derivatives Obligation was (and such other Derivatives Obligations were) terminated because of a default by the Borrower or such Subsidiary. "SUBSIDIARY" means, as to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person. Unless otherwise specified, "SUBSIDIARY" means a Subsidiary of the Borrower. "TARGET" means Sedgwick Group plc, an English company. "TARGET SHARES" means the ordinary shares of Target. "TERMINATION DATE" means August 23, 1999 or, if such day is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day. "UNFUNDED LIABILITIES" means, with respect to any Plan at any time, the amount (if any) by which (i) the value of all benefit liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "UNITED STATES" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions. 12 17 "WHOLLY-OWNED SUBSIDIARY" means any Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at the time directly or indirectly owned by the Borrower. SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP; provided that, if the Borrower notifies the Administrative Agent that the Borrower wishes to amend any provision hereof to eliminate the effect of any change in GAAP (or if the Administrative Agent notifies the Borrower that the Required Lenders wish to amend any provision hereof for such purpose), then such provision shall be applied on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such provision is amended in a manner satisfactory to the Borrower and the Required Lenders. ARTICLE 2 THE CREDITS SECTION 2.01. COMMITMENTS TO LEND. Each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Borrower pursuant to this Section from time to time during the Revolving Credit Period; provided that, immediately after each such loan is made, the aggregate outstanding principal amount of the Loans held by such Lender shall not exceed its Commitment. Each Borrowing under this Section shall be in an aggregate principal amount of $10,000,000 or any larger multiple of $1,000,000 (except that any such Borrowing may be in the aggregate amount of the unused Commitments) and shall be made from the several Lenders ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrower may borrow under this Section, prepay Loans to the extent permitted by Section 2.08 and reborrow at any time during the Revolving Credit Period under this Section. SECTION 2.02. METHOD OF BORROWING. (a) The Borrower shall give the Administrative Agent notice (a "NOTICE OF Borrowing") not later than 10:30 A.M. (New York City time) on (x) the date of each Base Rate Borrowing and (y) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (i) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing; 13 18 (ii) the aggregate amount of such Borrowing; (iii) whether the Loans comprising such Borrowing are to bear interest initially at the Base Rate or a Euro-Dollar Rate; and (iv) in the case of a Euro-Dollar Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. (b) Promptly after receiving a Notice of Borrowing, the Administrative Agent shall notify each Lender of the contents thereof and of such Lender's ratable share of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (c) Not later than 12:00 Noon (New York City time) on the date of each Borrowing, each Lender shall make available its ratable share of such Borrowing, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address specified in or pursuant to Section 9.01. Unless the Administrative Agent determines that any applicable condition specified in Article 3 has not been satisfied, the Administrative Agent will make the funds so received from the Lenders available to the Borrower at the Administrative Agent's aforesaid address. (d) Unless the Administrative Agent shall have received notice from a Lender before the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available to the Administrative Agent on the date of such Borrowing in accordance with Section 2.02(c) and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such share available to the Administrative Agent, such Lender and the Borrower severally agree to repay to the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Administrative Agent, at (i) if such amount is repaid by the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable to such Borrowing pursuant to Section 2.04 and (ii) if such amount is repaid by such Lender, the Federal Funds Rate. If such Lender shall repay to the Administrative Agent such corresponding amount, the Borrower shall not be required to repay such amount and the amount so repaid by such Lender shall constitute such Lender's Loan included in such Borrowing for purposes of this Agreement. 14 19 SECTION 2.03. MATURITY OF LOANS. Each Loan shall mature, and the principal amount thereof shall be due and payable (together with interest accrued thereon), on the Termination Date. SECTION 2.04. INTEREST RATES. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable quarterly in arrears on each Quarterly Payment Date. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Base Rate for such day. (b) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus the London Interbank Offered Rate applicable to such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. The "LONDON INTERBANK OFFERED RATE" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in Dollars are offered to each Reference Bank in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. (c) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for such day plus the London Interbank Offered Rate applicable to such Loan on the day before such payment was due and (ii) the sum of 2% plus the Euro-Dollar Margin for such day plus a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than three months as the Administrative Agent may select) deposits in Dollars in an amount approximately equal to such overdue payment due to each Reference Bank are offered to such Reference Bank in the London interbank market for the applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances described in clause 8.01(a) or 15 20 8.01(b) shall exist, at a rate per annum equal to the sum of 2% plus the Base Rate for such day). (d) The Administrative Agent shall determine each interest rate applicable to the Loans hereunder. The Administrative Agent shall promptly notify the Borrower and the Lenders of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (e) Each Reference Bank agrees to use its best efforts to furnish quotations to the Administrative Agent as contemplated by this Section. If any Reference Bank does not furnish a timely quotation, the Administrative Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. SECTION 2.05. METHOD OF ELECTING INTEREST RATES. (a) The Loans included in each Borrowing shall bear interest initially at the type of rate specified by the Borrower in the applicable Notice of Borrowing. Thereafter, the Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject to Section 2.05(d) and the provisions of Article 8), as follows: (i) if such Loans are Base Rate Loans, the Borrower may elect to convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day and (ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert such Loans to Base Rate Loans as of any Domestic Business Day or continue such Loans as Euro-Dollar Loans for an additional Interest Period, subject to Section 2.10 if any such conversion is effective on any day other than the last day of an Interest Period applicable to such Loans. Each such election shall be made by delivering a notice (a "NOTICE OF INTEREST RATE ELECTION") to the Administrative Agent not later than 10:30 A.M. (New York City time) on the third Euro-Dollar Business Day before the conversion or continuation selected in such notice is to be effective. A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; provided that (i) such portion is allocated ratably among the Loans comprising such Group and (ii) the portion to which such Notice applies, and the remaining portion to which it does not apply, are each at least $10,000,000 (unless such portion is comprised of Base Rate Loans). If no such notice is timely received before the end of an Interest Period for any 16 21 Group of Euro-Dollar Loans, the Borrower shall be deemed to have elected that such Group of Loans be converted to Base Rate Loans at the end of such Interest Period. (b) Each Notice of Interest Rate Election shall specify: (i) the Group of Loans (or portion thereof) to which such notice applies; (ii) the date on which the conversion or continuation selected in such notice is to be effective, which shall comply with the applicable clause of Section 2.05(a); (iii) if the Loans comprising such Group are to be converted, the new type of Loans and, if the Loans resulting from such conversion are to be Euro-Dollar Loans, the duration of the next succeeding Interest Period applicable thereto; and (iv) if such Loans are to be continued as Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period. Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period. (c) Promptly after receiving a Notice of Interest Rate Election from the Borrower pursuant to Section 2.05(a), the Administrative Agent shall notify each Lender of the contents thereof and such notice shall not thereafter be revocable by the Borrower. (d) The Borrower shall not be entitled to elect to convert any Loans to, or continue any Loans for an additional Interest Period as, Euro-Dollar Loans if (i) the aggregate principal amount of any Group of Euro-Dollar Loans created or continued as a result of such election would be less than $10,000,000 or (ii) a Default shall have occurred and be continuing when the Borrower delivers notice of such election to the Administrative Agent. (e) If any Loan is converted to a different type of Loan, the Borrower shall pay, on the date of such conversion, the interest accrued to such date on the principal amount being converted. SECTION 2.06. FACILITY FEES. The Borrower shall pay to the Administrative Agent, for the account of the Lenders ratably in proportion to their Credit Exposures, a facility fee calculated for each day at the Facility Fee Rate for such day on the aggregate amount of the Credit Exposures on such day. Such 17 22 facility fee shall accrue for each day from and including the Effective Date to but excluding the day on which the Credit Exposures are reduced to zero. Fees accrued for the account of the Lenders under this Section shall be payable quarterly in arrears on each Quarterly Payment Date and on the day on which the Commitments terminate in their entirety (and, if later, on the day on which the Credit Exposures are reduced to zero). SECTION 2.07. TERMINATION OR REDUCTION OF COMMITMENTS. (a) The Borrower may, upon at least three Domestic Business Days' notice to the Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time, or (ii) ratably reduce from time to time by an aggregate amount of $10,000,000 or a larger multiple of $1,000,000, the aggregate amount of the Commitments in excess of the aggregate outstanding principal amount of the Loans. Promptly after receiving a notice pursuant to this subsection, the Administrative Agent shall notify each Lender of the contents thereof. (b) Within five Domestic Business Days after the Borrower or any Subsidiary receives any Net Cash Proceeds of a Commitment Reduction Event, the Commitments shall be reduced ratably by an aggregate amount equal to the amount of such Net Cash Proceeds; provided that: (i) if the amount of such reduction is less than $25,000,000, such reduction shall be deferred until the aggregate amount by which the Commitments are required to be reduced pursuant to this Section (including such deferred amounts) is not less than $25,000,000; and (ii) if, by reason of any such reduction, this subsection would otherwise require Euro-Dollars Loans or portions thereof to be prepaid prior to the last day of the applicable Interest Period, such reduction shall be deferred to such last day unless the Administrative Agent otherwise notifies the Borrower upon the instruction of the Required Lenders. The Borrower shall give the Administrative Agent at least three Domestic Business Days' notice of each reduction of the Commitments pursuant to this subsection. If, after giving effect to any reduction of the Commitments pursuant to this subsection, the aggregate outstanding principal amount of the Loans would exceed the aggregate amount of the Commitments, the Borrower shall prepay, pursuant to and in accordance with Section 2.08, a sufficient aggregate principal amount of the Loans to eliminate such excess. (c) Unless previously terminated, the Commitments shall terminate on the Termination Date. 18 23 SECTION 2.08. OPTIONAL PREPAYMENTS. (a) Subject in the case of Euro-Dollar Loans to Section 2.10, the Borrower may (i) upon at least one Domestic Business Day's notice to the Administrative Agent, prepay any Group of Base Rate Loans or (ii) upon at least three Euro-Dollar Business Days' notice to the Administrative Agent, prepay any Group of Euro-Dollar Loans, in each case in whole at any time, or from time to time in part in amounts aggregating $20,000,000 or any larger multiple of $10,000,000, by paying the principal amount to be prepaid together with interest accrued thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Lenders included in such Group of Loans. (b) Promptly after receiving a notice of prepayment pursuant to this Section, the Administrative Agent shall notify each Lender of the contents thereof and of such Lender's ratable share of such prepayment, and such notice shall not thereafter be revocable by the Borrower. SECTION 2.09. GENERAL PROVISIONS AS TO PAYMENTS. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of fees hereunder not later than 12:00 Noon (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Administrative Agent at its address specified in or pursuant to Section 9.01. The Administrative Agent will promptly distribute to each Lender its ratable share of each such payment received by the Administrative Agent for the account of the Lenders. Whenever any payment of principal of, or interest on, the Base Rate Loans or any payment of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Borrower notifies the Administrative Agent before the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance on such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent that the Borrower shall not have so made such payment, each Lender shall repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender together with interest thereon, 19 24 for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at the Federal Funds Rate. SECTION 2.10. FUNDING LOSSES. If the Borrower makes any payment of principal with respect to any Euro-Dollar Loan or any Fixed Rate Loan is converted to a different type of Loan (whether such payment or conversion is pursuant to Article 2, 6 or 8 or otherwise) on any day other than the last day of an Interest Period applicable thereto, or the last day of an applicable period fixed pursuant to Section 2.04(c), or if the Borrower fails to borrow, prepay, convert or continue any Euro-Dollar Loan after notice has been given to any Lender in accordance with Section 2.02(b), 2.05(c) or 2.08(b), the Borrower shall reimburse each Lender within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after such payment or conversion or failure to borrow, prepay, convert or continue; provided that such Lender shall have delivered to the Borrower a certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. SECTION 2.11. COMPUTATION OF INTEREST AND FEES. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). SECTION 2.12. NOTES. (a) The Borrower's obligation to repay the Loans made to it by each Lender shall be evidenced by a single Note payable to the order of such Lender for the account of its Applicable Lending Office. (b) Each Lender may, by notice to the Borrower and the Administrative Agent, request that the Borrower's obligation to repay such Lender's Loans of a particular type be evidenced by a separate Note. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it relates solely to Loans of the relevant type. Each reference in this Agreement to the "NOTE" of such Lender shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Promptly after it receives each Lender's Note pursuant to Section 3.01(a), the Administrative Agent shall forward such Note to such Lender. Each Lender shall record the date and amount of each Loan made by it and the date and amount of each payment of principal made with respect thereto, and may, if such 20 25 Lender so elects in connection with any transfer or enforcement of its Note, endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that a Lender's failure to make (or any error in making) any such recordation or endorsement shall not affect the Borrower's obligations hereunder or under its Notes. Each Lender is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. SECTION 2.13. REGULATION D COMPENSATION. If and so long as a reserve requirement of the type described in the definition of "Euro-Dollar Reserve Percentage" is prescribed by the Board of Governors of the Federal Reserve System (or any successor), each Lender subject to such requirement may require the Borrower to pay, contemporaneously with each payment of interest on each of such Lender's Loans, additional interest on such Loan at a rate per annum determined by such Lender up to but not exceeding the excess of (i) (A) the applicable London Interbank Offered Rate divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii) the applicable London Interbank Offered Rate. Any Lender wishing to require payment of such additional interest (x) shall so notify the Borrower and the Administrative Agent, in which case such additional interest on the Loans of such Lender shall be payable to such Lender at the place indicated in such notice with respect to each Interest Period commencing at least three Business Days after such Lender gives such notice and (y) shall notify the Borrower at least five Business Days before each date on which interest is payable on its Loans of the amount then due to such Lender under this Section. ARTICLE 3 CONDITIONS SECTION 3.01. CLOSING. The closing hereunder shall occur when all the following conditions have been satisfied: (a) the Administrative Agent shall have received a duly executed Note for the account of each Lender dated on or before the Closing Date and complying with the provisions of Section 2.12; (b) the Administrative Agent shall have received an opinion in form and substance satisfactory to it of counsel for the Borrower satisfactory to it, dated the Closing Date and covering such matters relating to the transactions contemplated hereby as the Administrative Agent or the Required Lenders may reasonably request; 21 26 (c) the Administrative Agent shall have received an opinion in form and substance satisfactory to it of Davis Polk & Wardwell, special counsel for the Administrative Agent, dated the Closing Date and covering such matters relating to the transactions contemplated hereby as the Administrative Agent or Required Lenders may reasonably request; and (d) the Administrative Agent shall have received all documents the Administrative Agent may reasonably request relating to the existence of the Borrower, its corporate authority for and the validity of this Agreement and its Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Administrative Agent. Promptly after the Closing Date occurs, the Administrative Agent shall notify the Borrower and the Lenders thereof, and such notice shall be conclusive and binding on all parties hereto. SECTION 3.02. BORROWINGS TO FINANCE ACQUISITION OF TARGET SHARES PURSUANT TO OFFER. The obligation of any Lender to make a Loan on the occasion of any Borrowing for the purposes (and only for the purposes) of financing the acquisition of Target Shares pursuant to the Offer and the Completion Procedures is subject to the following conditions: (a) the Closing Date shall have occurred on or before August 26, 1998; (b) the Administrative Agent shall have received a Notice of Borrowing as required by Section 2.02; (c) immediately before and after such Borrowing, no Event of Default described in clause (g) or (h) of Section 6.01 shall have occurred and be continuing; (d) the representations and warranties of the Borrower set forth in Sections 4.01, 4.02 and 4.03 shall be true on and as of the date of such Borrowing; and (e) the Offer shall have been declared unconditional in all respects and the Agent shall have received a certified copy of the announcement to such effect. Each Borrowing described in this Section shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in the foregoing clauses 3.02(c) through 3.02(g), inclusive. 22 27 SECTION 3.03. OTHER BORROWINGS. The obligation of any Lender to make a Loan on the occasion of any Borrowing for a purpose other than those specified in Section 3.02 is subject to the satisfaction of the following conditions: (a) the fact that the Closing Date shall have occurred on or before August 26, 1998; (b) receipt by the Administrative Agent of a Notice of Borrowing as required by Section 2.02; (c) the fact that, immediately before and after such Borrowing, no Default shall have occurred and be continuing; and (d) the fact that the representations and warranties of the Borrower contained in this Agreement (except, in the case of any Borrowing made on a date subsequent to the Closing Date, the representation and warranty set forth in Section 4.04(c)) shall be true on and as of the date of such Borrowing. Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in the foregoing clauses 3.03(c) and 3.03(d). ARTICLE 4 REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: SECTION 4.01. CORPORATE EXISTENCE AND POWER. The Borrower (a) is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and (b) has all corporate powers and all material governmental licenses, consents, authorizations and approvals required to carry on its business as now conducted. SECTION 4.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the Borrower's certificate of incorporation or by-laws or of any agreement, judgment, injunction, order, decree or other instrument binding upon 23 28 the Borrower or any Material Subsidiary or result in the creation or imposition of any Lien on any asset of the Borrower or any Material Subsidiary. SECTION 4.03. BINDING EFFECT. This Agreement constitutes a valid and binding agreement of the Borrower and each Note, when executed and delivered in accordance with this Agreement, will constitute a valid and binding obligation of the Borrower, in each case enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency or similar laws affecting creditors' rights generally and general principles of equity. SECTION 4.04. FINANCIAL INFORMATION. (a) The consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 1997 and the related consolidated statements of income, cash flows and stockholders' equity for the Fiscal Year then ended, reported on by Deloitte & Touche LLP and set forth in the Borrower's 1997 Form 10-K, fairly present, in conformity with GAAP, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such Fiscal Year. (b) The unaudited consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of June 30, 1998 and the related unaudited consolidated statements of income, cash flows and stockholders' equity for the six months then ended, set forth in the Borrower's Latest Form 10-Q, fairly present, on a basis consistent with the financial statements referred to in Section 4.04(a), the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such six month period (subject to normal year-end adjustments). (c) Since June 30, 1998 there has been no material adverse change in the business, financial position, results of operations or prospects of the Borrower and its Consolidated Subsidiaries, considered as a whole. SECTION 4.05. LITIGATION. There is no action, suit or proceeding pending against, or to the Borrower's knowledge threatened against or affecting, the Borrower or any Subsidiary before any court or arbitrator or any governmental body, agency or official in which there is a reasonable probability of an adverse decision which would have a Material Adverse Effect (except as disclosed in writing to the Lenders prior to the execution and delivery of this Agreement by any Lender, including pursuant to the Borrower's 1997 Form 10-K and the Borrower's Latest Form 10-Q) or which in any manner draws into question the validity or enforceability of this Agreement or the Notes. SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of 24 29 ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan, or made any amendment to any Plan, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. SECTION 4.07. TAXES. The Borrower and its Material Subsidiaries have filed all material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns. The charges, accruals and reserves on the books of the Borrower and its Material Subsidiaries in respect of taxes or other governmental charges are, in the Borrower's opinion, adequate. SECTION 4.08. SUBSIDIARIES. Each of the Borrower's Material Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 4.09. NO REGULATORY RESTRICTIONS ON BORROWING. The Borrower is not subject to any regulatory scheme not applicable to corporations generally which restricts its ability to incur debt. SECTION 4.10. FULL DISCLOSURE. All information heretofore furnished by the Borrower to the Administrative Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Borrower to the Administrative Agent or any Lender will be, true and accurate in all material respects on the date as of which such information is stated or certified. The Borrower has disclosed to the Lenders in writing any and all facts which materially and adversely affect, or may affect (to the extent the Borrower can now reasonably foresee), the business, operations or financial condition of the Borrower and its Consolidated Subsidiaries, taken as a whole, or the Borrower's ability to perform its obligations under this Agreement. SECTION 4.11. MORTGAGE. The Mortgage has not been amended or supplemented and no waiver of compliance with any provision thereof has been granted by any Person since May 15, 1991. No payment default by the mortgagor (whether cured or waived or not) has occurred under the Mortgage. The Mortgage Memorandum, a copy of which has been delivered to each of the 25 30 Lenders, does not (i) contain any untrue statement of a material fact or (ii) omit to state any material fact relating to the circumstances under which the obligations of the Borrower or other mortgagors may become recourse with respect to assets other than the Mortgaged Property. SECTION 4.12. YEAR 2000 COMPLIANCE. The Borrower has (i) initiated a review and assessment of all areas within the business and operations of the Borrower and each of its Subsidiaries (including those areas affected by suppliers and vendors) that could be adversely affected by the "Year 2000 Problem" (that is, the risk that computer applications used by it or any of its Subsidiaries (or their respective suppliers and vendors) may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999), (ii) developed a plan and timeline for addressing the Year 2000 Problem on a timely basis and (iii) to date, implemented such plan in accordance with such timetable. The Borrower reasonably believes that all computer applications (including those of suppliers and vendors) that are material to the business or operations of the Borrower or any of its Subsidiaries will on a timely basis be able to perform properly date-sensitive functions for all dates before and from and after January 1, 2000 (that is, be "Year 2000 compliant"), except to the extent that a failure to do so could not reasonably be expected to have a Material Adverse Effect. ARTICLE 5 COVENANTS The Borrower agrees that, so long as any Lender has any Credit Exposure hereunder or any interest or fees accrued hereunder remain unpaid: SECTION 5.01. INFORMATION. The Borrower will deliver to each of the Lenders: (a) as soon as available and in any event within 120 days after the end of each Fiscal Year, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such Fiscal Year and the related consolidated statements of income, cash flows and stockholders' equity for such Fiscal Year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all reported on in a manner acceptable to the SEC by Deloitte & Touche LLP or other independent public accountants of nationally recognized standing (it being understood that delivery of the Borrower's annual report on Form 10-K for any Fiscal Year as filed with the SEC pursuant to the Exchange Act will satisfy this requirement with respect to such Fiscal Year); 26 31 (b) as soon as available and in any event within 60 days after the end of each of the first three Fiscal Quarters of each Fiscal Year, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such Fiscal Quarter, the related consolidated statement of income for such Fiscal Quarter and the related consolidated statements of income and cash flows for the portion of the Fiscal Year ended at the end of such Fiscal Quarter, setting forth in the case of each such statement of income or cash flows in comparative form the figures for the corresponding period in the previous Fiscal Year, all certified (subject to normal year-end adjustments) as to fairness of presentation and consistency with GAAP by the Borrower's chief financial officer, treasurer or chief accounting officer (it being understood that delivery of the Borrower's quarterly report on Form 10-Q for any Fiscal Quarter as filed with the SEC pursuant to the Exchange Act will satisfy this requirement with respect to such Fiscal Quarter and, if applicable, the portion of the Borrower's Fiscal Year ended at the end of such Fiscal Quarter); (c) simultaneously with the delivery of each set of financial statements referred to in clauses 5.01(a) and 5.01(b) above, a certificate of the Borrower's chief financial officer, treasurer or chief accounting officer (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the requirements of Sections 5.04 and 5.07 on the date of such financial statements and (ii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) simultaneously with the delivery of each set of financial statements referred to in clause 5.01(a) above, a statement of the firm of independent public accountants which reported on such statements (i) whether anything has come to their attention to cause them to believe that the Borrower was not in compliance with any covenant or agreement contained in this Article 5 insofar as such covenant or agreement pertains to accounting or auditing matters or that any Event of Default under Article 6 which pertains to accounting or auditing matters existed on the date of such financial statements (it being understood that such firm may state in such statement that its examination of such financial statements was not directed primarily towards obtaining knowledge of any such non-compliance or Event of Default) and (ii) confirming the calculations set forth in the officer's certificate delivered simultaneously therewith pursuant to clause 5.01(c) above; 27 32 (e) forthwith (i) upon the occurrence of any Default, (ii) in the event that Consolidated Net Worth falls below $2,500,000,000 or (iii) in the event that either the Debt evidenced by the Secured Notes or interest thereon is payable other than solely from the Mortgaged Property, a certificate of the chief financial officer, the treasurer or the chief accounting officer of the Borrower setting forth the details thereof and, with respect to clause (i) above, the action which the Borrower is taking or proposes to take with respect thereto and, with respect to clause (iii) above, the nature of the assets, and the amount of liabilities and other details fully explaining the recourse nature of the obligations of the Borrower or any other mortgagor or Subsidiary and updating the Mortgage Memorandum to reflect the conditions relating to the Mortgage existing on the date of such certificate; (f) promptly after the mailing thereof to the Borrower's shareholders generally, copies of all financial statements, reports and proxy statements so mailed; (g) promptly after the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) filed by the Borrower with the SEC; (h) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or makes any amendment to any Plan which has resulted or could result in the imposition of a Lien or the posting of a 28 33 bond or other security, a certificate of the Borrower's chief financial officer or chief accounting officer setting forth details as to such occurrence and the action, if any, which the Borrower or applicable member of the ERISA Group is required or proposes to take; (i) promptly after any change in the Borrower's commercial paper rating by S&P or Moody's (as defined in the Pricing Schedule), a notice thereof; and (j) from time to time such additional information regarding the financial position or business of the Borrower and its Subsidiaries as the Administrative Agent, at the request of any Lender, may reasonably request. In the case of information required to be delivered pursuant to clauses 5.01(a), 5.01(b), 5.01(f) or 5.01(g) above, either (i) the Borrower shall deliver paper copies of such information to each Lender, or (ii) such information shall be deemed to have been delivered on the date on which the Borrower provides notice to the Lenders that such information has been posted on the Borrower's website on the Internet at the website address listed on the signature pages hereof, at sec.gov/edaux/searches.htm or at another website identified in such notice and accessible by the Lenders without charge; provided that (x) such notice may be included in a certificate delivered pursuant to clause 5.01(c) and (y) the Borrower shall deliver paper copies of the information referred to in clauses 5.01(a), 5.01(b), 5.01(f) or 5.01(g) to any Lender which requests such delivery. 5.02. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The Borrower will continue, and will cause its Material Subsidiaries to continue, to engage in business of the same general type as now conducted by the Borrower and its Material Subsidiaries, and will preserve, renew and keep in full force and effect, and will cause each Material Subsidiary to preserve, renew and keep in full force and effect their respective existences and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business; provided that nothing in this Section 5.02 shall prohibit (i) the merger of a Subsidiary into the Borrower or the merger or consolidation of a Subsidiary with or into another Person if the corporation surviving such consolidation or merger is a Subsidiary and if, in each case, after giving effect thereto, no Default shall have occurred and be continuing, (ii) the termination of the corporate existence of any Material Subsidiary if the Borrower in good faith determines that such termination is in the best interests of the Borrower and is not materially disadvantageous to the Lenders and (iii) the discontinuance of the business of any Material Subsidiary if the Borrower in good faith determines that such discontinuance is in the best interest of the Borrower and is not materially disadvantageous to the Lenders. 29 34 5.03. COMPLIANCE WITH THE LAWS. The Borrower will comply, and cause each Material Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder) except where (i) the necessity of compliance therewith is contested in good faith by appropriate proceedings or (ii) non-compliance therewith would not have a Material Adverse Effect. SECTION 5.04. MINIMUM CONSOLIDATED NET WORTH; CONSOLIDATED DEBT SECTION. If the Consolidated Net Worth of the Borrower is less than $2,500,000,000 at the end of any Fiscal Quarter, then the ratio of (x) Operating Cash Flow to (y) Consolidated Debt shall be no less than .25 to 1 as of the end of such Fiscal Quarter; provided that, for purposes of this Section, Consolidated Debt shall not include (i) the Secured Notes if and so long as (1) neither the Debt evidenced by the Secured Notes nor interest thereon is payable other than solely from the Mortgaged Property and (2) the principal amount of the Secured Notes is not increased and (ii) Debt of the Borrower in an aggregate principal amount not to exceed $200,000,000 incurred for the purpose of funding an employee stock ownership plan as defined in Section 4975(e)(7) of the Internal Revenue Code sponsored by the Borrower. SECTION 5.05. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. The Borrower will not (i) consolidate or merge with or into any other Person or (ii) sell, lease or otherwise transfer all or substantially all of its assets to any other Person; provided that (x) the Borrower may merge with any Wholly-Owned Consolidated Subsidiary if immediately after such merger no Default shall have occurred and be continuing and such Wholly-Owned Consolidated Subsidiary shall expressly assume in writing all of the obligations of the Borrower hereunder, (y) the Borrower may merge with any other Person if (A) the Borrower is the corporation surviving such merger and (B) immediately after giving effect to such merger, no Default shall have occurred and be continuing and (z) the Borrower may sell, transfer or otherwise dispose of Margin Stock for fair value. SECTION 5.06. USE OF PROCEEDS. The proceeds of the Loans made under this Agreement will be used by the Borrower (i) to finance the acquisition of Target Shares pursuant to the Offer and the Completion Procedures, (ii) to repay other Debt incurred to finance the acquisition of Target Shares pursuant to the Offer and the Completion Procedures, (iii) to finance open market or privately negotiated purchases of Target Shares while the Offer is continuing, up to an aggregate amount not exceeding $225,000,000, (iv) to refinance certain Debt of Target and to pay fees and (v) expenses in connection with the transactions contemplated hereby. None of such proceeds will be used, directly or indirectly, in violation of Regulation U or X. 30 35 SECTION 5.07. NEGATIVE PLEDGE. Neither the Borrower nor any Consolidated Subsidiary will create, assume or suffer to exist any Lien on any asset now owned or thereafter acquired by it, except: (a) Liens existing on the Mortgaged Property; (b) Liens existing on the date of this Agreement securing Debt outstanding on the date of this Agreement in an aggregate principal or face amount not exceeding $50,000,000; (c) any Lien existing on any asset of any corporation at the time such corporation becomes a Consolidated Subsidiary and not created in contemplation of such event; (d) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset, provided that such Lien attaches to such asset concurrently with or within 90 days after the acquisition thereof; (e) any Lien on any asset of any corporation existing at the time such corporation is merged or consolidated with or into the Borrower or a Consolidated Subsidiary and not created in contemplation of such event; (f) any Lien existing on any asset prior to the acquisition thereof by the Borrower or a Consolidated Subsidiary and not created in contemplation of such acquisition; (g) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses of this Section, provided that such Debt is not increased and is not secured by any additional assets; (h) Liens arising in the ordinary course of its business which (i) do not secure Debt or Derivatives Obligations, (ii) do not secure, in the case of judgments or orders, obligations in an aggregate amount exceeding $50,000,000 and (iii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; (i) Liens on cash and cash equivalents securing Derivatives Obligations, provided that the aggregate amount of cash and cash equivalents subject to such Liens may at no time exceed $50,000,000 and provided further that the sum of (x) such aggregate amount and (y) the aggregate amount of Debt secured as permitted by clause (k) below does not at any date exceed 20% of Consolidated Tangible Net Worth; 31 36 (j) Liens on Margin Stock, if and to the extent that the value of such Margin Stock exceeds 25% of the total assets of the Borrower and its Consolidated Subsidiaries subject to this Section; and (k) Liens not otherwise permitted by the foregoing clauses of this Section securing Debt, provided that the sum of (x) the principal or face amount of such Debt and (y) the aggregate amount of cash and cash equivalents referred to in clause (i) above does not at any date exceed 20% of Consolidated Tangible Net Worth. SECTION 5.08. AMENDMENT OF MORTGAGE. No amendment of, or supplement to, the Mortgage with respect to the Mortgaged Property shall be made which could reasonably be expected to have an adverse effect on the interests of the Lenders hereunder. SECTION 5.09. TAXES, ETC. The Borrower will, and will cause each of its Material Subsidiaries to: (a) pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained or the nonpayment of which would not have Material Adverse Effect; (b) keep adequate records and books of account, in which complete entries will be made in accordance with GAAP; and (c) permit representatives of any Lender or the Administrative Agent, during normal business hours, to examine, copy and make extracts from its books and records, to inspect any of its properties, and to discuss its business and affairs with its officers, all to the extent reasonably requested by such Lender or the Administrative Agent (as the case may be). 32 37 ARTICLE 6 DEFAULTS SECTION 6.01. EVENTS OF DEFAULT. If one or more of the following events ("EVENTS OF DEFAULT") shall have occurred and be continuing: (a) the Borrower shall fail to pay any principal of any Loan when due or shall fail to pay within five days of the due date any interest, fee or other amount payable by it hereunder; (b) the Borrower shall fail to observe or perform any covenant contained in Sections 5.04 through 5.08, inclusive; (c) the Borrower shall fail to observe or perform any covenant or agreement (other than those covered by clause 6.01(a) or 6.01(b) above) contained in this Agreement or any amendment hereof for 10 days after the Administrative Agent gives notice thereof to the Borrower at the request of any Lender; (d) any representation, warranty, certification or statement made (or deemed made) by the Borrower in this Agreement or any amendment hereof or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Borrower or any Subsidiary shall fail to make any payment in respect of Material Financial Obligations (other than the Secured Notes, but only so long as the Secured Notes do not constitute Consolidated Debt for the purposes of Section 5.04) when due or within any applicable grace period; (f) any event or condition shall occur which results in the acceleration of the maturity of any Material Debt (other than the Secured Notes, but only so long as the Secured Notes do not constitute Consolidated Debt for the purposes of Section 5.04) or enables (or, with the giving of notice or lapse of time or both, would enable) the holder of such Debt or any Person acting on such holder's behalf to accelerate the maturity thereof; (g) the Borrower or any Subsidiary holding, as of the date of the most recent audited financial statements of the Borrower and its Consolidated Subsidiaries delivered pursuant to this Agreement, assets have a book value in excess of $10,000,000, shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief 33 38 with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (h) an involuntary case or other proceeding shall be commenced against the Borrower or any Subsidiary holding, as of the date of the most recent audited financial statements of the Borrower and its Consolidated Subsidiaries delivered pursuant to this Agreement, assets having a book value in excess of $10,000,000 seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any Subsidiary holding, as of the date of the most recent audited financial statements of the Borrower and its Consolidated Subsidiaries delivered pursuant to this Agreement, assets having a book value in excess of $10,000,000 under the federal bankruptcy laws as now or hereafter in effect; (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $10,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer, any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could reasonably be expected to cause one or more members of the ERISA Group to incur a current payment obligation in excess of $15,000,000; 34 39 (j) judgments or orders for the payment of money exceeding $50,000,000 in aggregate amount shall be rendered against the Borrower or any Subsidiary and such judgments or orders shall continue unsatisfied and unstayed for a period of 30 days; (k) any person or group of persons (within the meaning of Section 13 or 14 of the Exchange Act) other than the Borrower, any trustee or other fiduciary holding securities under an employee benefit plan of the Borrower, or any corporation owned, directly or indirectly, by the stockholders of the Borrower in substantially the same proportions as their ownership of stock in the Borrower, shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the SEC under the Exchange Act) of 50% or more of the combined voting power of the Borrower's then outstanding securities; or, during any period of 24 consecutive calendar months, individuals who were directors of the Borrower on the first day of such period and any new director whose election by the board of directors of the Borrower or nomination for election by the Borrower's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved, shall cease to constitute a majority of the board of directors of the Borrower; or (l) the Borrower shall repudiate, or shall challenge the validity or enforceability of, its obligations under Article 9 or a court of competent jurisdiction shall have determined that such obligations are invalid or unenforceable; then, and in every such event, the Administrative Agent shall: (i) if requested by Lenders having more than 50% in aggregate amount of the Commitments, by notice to the Borrower terminate the Commitments or reduce the Commitments ratably to an aggregate amount specified in such notice, whereupon the Commitments shall be so terminated or reduced forthwith; provided that, until either all Target Shares have been acquired pursuant to the Offer and the Completion Procedures or the Offer Termination Date has occurred, the Commitments shall not be terminated pursuant to this clause (i) or reduced pursuant to this clause (i) to an aggregate amount less than the maximum aggregate amount from time to time remaining to be paid (on the assumption that all outstanding Target Shares will be acquired) to accepting shareholders pursuant to the Offer and the Completion Procedures; and 35 40 (ii) if requested by Lenders holding more than 50% of the aggregate unpaid principal amount of the Loans, by notice to the Borrower declare the Loans (together with accrued interest thereon) to be, and the Loans (together with accrued interest thereon) shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that, if any Event of Default specified in clause (g) or (h) of this Section occurs with respect to the Borrower, then without any notice to the Borrower or any other act by the Administrative Agent or the Lenders, the Commitments shall thereupon terminate and the Loans (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. Except as provided in the foregoing proviso, neither the Administrative Agent nor any Lender shall, at any time before the Offer Termination Date, be entitled to (i) enjoin the funding of the Offer, (ii) exercise any right of rescission or set-off or similar right or (iii) attempt in any other manner to obtain payment from funds drawn hereunder to fund the Offer and the Completion Procedures, in each case if and to the extent that to do so would prevent the funding of the Offer and the Completion Procedures as contemplated hereby upon satisfaction of the conditions set forth in Section 3.02. SECTION 6.02. NOTICE OF DEFAULT. The Administrative Agent shall give notice to the Borrower under Section 6.01(c) promptly upon being requested to do so by any Lender and shall thereupon notify all the Lenders thereof. ARTICLE 7 THE AGENTS SECTION 7.01. APPOINTMENT AND AUTHORIZATION. Each Lender irrevocably appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. ADMINISTRATIVE AGENT AND AFFILIATES. The Administrative Agent shall have the same rights and powers under this Agreement as any other Lender and may exercise or refrain from exercising the same as though it were not the Administrative Agent, and Morgan Guaranty Trust Company of New York and its affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if it were not the Administrative Agent. 36 41 SECTION 7.03. ACTION BY ADMINISTRATIVE AGENT. The obligations of the Administrative Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Administrative Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article 6. SECTION 7.04. CONSULTATION WITH EXPERTS. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 7.05. LIABILITY OF ADMINISTRATIVE AGENT. None of the Administrative Agent, its affiliates and their respective directors, officers, agents and employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Lenders (or such different number of Lenders as any provision hereof expressly requires for such consent or request) or (ii) in the absence of its own gross negligence or willful misconduct. None of the Administrative Agent, its affiliates and their respective directors, officers, agents and employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of the Borrower; (iii) the satisfaction of any condition specified in Article 3 except, in the case of the Administrative Agent, receipt of items required to be delivered to it; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. The Administrative Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement or other writing (which may be a bank wire, telex, facsimile or similar writing) believed by it to be genuine or to be signed by the proper party or parties. Without limiting the generality of the foregoing, the use of the term "agent" in this Agreement with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom and is intended to create or reflect only an administrative relationship between independent contracting parties. SECTION 7.06. INDEMNIFICATION. The Lenders shall, ratably in proportion to their Credit Exposures, indemnify the Administrative Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such 37 42 indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees hereunder. SECTION 7.07. CREDIT DECISION. Each Lender acknowledges that it has, independently and without reliance on any other Lender Party, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance on any other Lender Party, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 7.08. SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign at any time by giving notice thereof to the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Administrative Agent, subject to the approval of such successor Administrative Agent by the Borrower. If no successor Administrative Agent shall have been so appointed by the Required Lenders and approved by the Borrower, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent gives notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be a commercial bank organized or licensed under the laws of the United States or of any State thereof and having a combined capital and surplus of at least $100,000,000. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent resigns as Administrative Agent hereunder, the provisions of this Article shall inure to its benefit as to actions taken or omitted to be taken by it while it was Administrative Agent. SECTION 7.09. ADMINISTRATIVE AGENT'S FEE. The Borrower shall pay to the Administrative Agent for its own account fees in the amounts and at the times previously agreed upon by the Borrower and the Administrative Agent. 38 43 ARTICLE 8 CHANGE IN CIRCUMSTANCES SECTION 8.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR. If on or before the first day of any Interest Period for any Euro-Dollar Loans: (a) the Administrative Agent is advised by the Reference Lenders that deposits in Dollars in the applicable amounts are not being offered to the Reference Lenders in the London interbank market for such Interest Period, or (b) Lenders having at least 50% in aggregate amount of the Commitments advise the Administrative Agent that the London Interbank Offered Rate as determined by the Administrative Agent will not adequately and fairly reflect the cost to such Lenders of funding their Euro-Dollar Loans for such Interest Period, the Administrative Agent shall forthwith give notice thereof to the Borrower and the Lenders, whereupon until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Lenders to make Euro-Dollar Loans or to continue or convert outstanding Loans as or into Euro-Dollar Loans shall be suspended and (ii) each outstanding Euro-Dollar Loan shall be converted into a Base Rate Loan on the last day of the then current Interest Period applicable thereto. Unless the Borrower notifies the Administrative Agent at least two Domestic Business Days before the date of any affected Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, such Borrowing shall instead be made as a Base Rate Borrowing. SECTION 8.02. ILLEGALITY. If, on or after the date hereof, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency, shall make it unlawful or impossible for any Lender (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Lender shall so notify the Administrative Agent, the Administrative Agent shall forthwith give notice thereof to the other Lenders and the Borrower, whereupon until such Lender notifies the Borrower and the Administrative Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Lender to make Euro-Dollar Loans or to continue outstanding Loans to the Borrower as Euro- 39 44 Dollar Loans, shall be suspended. Before giving any notice to the Administrative Agent pursuant to this Section, such Lender shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. If such notice is given, each Euro-Dollar Loan of such Lender then outstanding to the Borrower shall be converted to a Base Rate Loan either (a) on the last day of the then current Interest Period applicable to such Euro-Dollar Loan if such Lender may lawfully continue to maintain and fund such Loan as a Euro-Dollar Loan to such day or (b) immediately if such Lender shall determine that it may not lawfully continue to maintain and fund such Loan as a Euro-Dollar Loan to such day. Interest and principal on any such Base Rate Loan shall be payable on the same dates as, and on a pro rata basis with, the interest and principal payable on the related Euro-Dollar Loans of the other Lenders. SECTION 8.03. INCREASED COST AND REDUCED RETURN. (a) If on or after the date hereof, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency, shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding any such requirement with respect to which such Lender is entitled to compensation during the relevant Interest Period under Section 2.13), special deposit, insurance assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (or its Applicable Lending Office) or shall impose on any Lender (or its Applicable Lending Office) or the London interbank market any other condition affecting its Euro-Dollar Loans, its Notes or its obligation to make Euro-Dollar Loans and the result of any of the foregoing is to increase the cost to such Lender (or its Applicable Lending Office) of making or maintaining any Euro-Dollar Loan, or to reduce the amount of any sum received or receivable by such Lender (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Lender to be material, then, within 15 days after demand by such Lender (with a copy to the Administrative Agent), the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction. (b) If any Lender shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation 40 45 or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Lender (or its Parent) as a consequence of such Lender's obligations hereunder to a level below that which such Lender (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, within 15 days after demand by such Lender (with a copy to the Administrative Agent), the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender (or its Parent) for such reduction. (c) Each Lender will promptly notify the Borrower and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Lender to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Lender, be otherwise disadvantageous to it. A certificate of any Lender claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. SECTION 8.04. TAXES. (a) For the purposes of this Section, the following terms have the following meanings: "TAXES" means any and all present or future taxes or other charges deducted, withheld or otherwise imposed with respect to any payment by the Borrower pursuant to this Agreement or any Note, and all liabilities with respect thereto, excluding with respect to each Lender Party: (i) taxes imposed on its net income, and franchise or similar taxes imposed on it, by a jurisdiction under the laws of which it is organized or in which its principal executive office is located or in which its Applicable Lending Office is located and (ii) any United States withholding tax imposed on such payment, but not excluding any portion of such tax that exceeds the United States withholding tax which would have been imposed on such a payment to such Lender Party under the laws and treaties in effect when such Lender Party first becomes a party to this Agreement. "OTHER TAXES" means any present or future stamp or documentary taxes and any other excise or property taxes, or similar charges or levies, which arise from any payment made pursuant to this Agreement or any Note or from the 41 46 execution, delivery, registration or enforcement of, or otherwise with respect to, this Agreement or any Note. (b) All payments by the Borrower to or for the account of any Lender Party hereunder or under any Note shall be made without deduction for any Taxes or Other Taxes; provided that, if the Borrower shall be required by law to deduct any Taxes or Other Taxes from any such payment, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) such Lender Party receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) the Borrower shall promptly furnish to the Administrative Agent, at its address specified in or pursuant to Section 9.01, the original or a certified copy of a receipt evidencing payment thereof. (c) The Borrower agrees to indemnify each Lender Party for the full amount of Taxes and Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted (whether or not correctly) by any jurisdiction on amounts payable under this Section) paid by such Lender Party and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be paid within 15 days after such Lender Party makes demand therefor. (d) Each Lender Party organized under the laws of a jurisdiction outside the United States, before it signs and delivers this Agreement in the case of each Lender Party listed on the signature pages hereof and before it becomes a Lender Party in the case of each other Lender Party, and from time to time thereafter if requested in writing by the Borrower (but only so long as such Lender Party remains lawfully able to do so), shall provide the Borrower and the Administrative Agent with Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Lender Party is entitled to benefits under an income tax treaty to which the United States is a party which exempts such Lender Party from United States withholding tax or reduces the rate of withholding tax on payments of interest for the account of such Lender Party or certifying that the income receivable by it pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. (e) For any period with respect to which a Lender Party has failed to provide the Borrower or the Administrative Agent with the appropriate form referred to in Section 8.04(d) (unless such failure is due to a change in treaty, law or regulation occurring after the date on which such form originally was required 42 47 to be provided), such Lender Party shall not be entitled to indemnification under Section 8.04(b) or 8.04(c) with respect to Taxes imposed by the United States; provided that if a Lender Party, that is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Lender Party shall reasonably request to assist such Lender Party to recover such Taxes. (f) If the Borrower is required to pay additional amounts to or for the account of any Lender Party pursuant to this Section as a result of a change in law or treaty occurring after such Lender Party first became a party to this Agreement, then such Lender Party will, at the Borrower's request, change the jurisdiction of its Applicable Lending Office if, in the judgment of such Lender, such change (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is not otherwise disadvantageous to such Lender. SECTION 8.05. BASE RATE LOANS SUBSTITUTED FOR AFFECTED EURO-DOLLAR LOANS. If (i) the obligation of any Lender to make, or to continue or convert outstanding Loans as or to, Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Lender has demanded compensation under Section 8.03 or 8.04 with respect to its Euro-Dollar Loans, and in any such case the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Lender through the Administrative Agent, have elected that the provisions of this Section shall apply to such Lender, then, unless and until such Lender notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist, all Loans which would otherwise be made by such Lender as (or continued as or converted to) Euro-Dollar Loans shall instead be Base Rate Loans on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Lenders. If such Lender notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist, the principal amount of each such Base Rate Loan shall be converted into a Euro-Dollar Loan on the first day of the next succeeding Interest Period applicable to the related Euro-Dollar Loans of the other Lenders. ARTICLE 9 MISCELLANEOUS SECTION 9.01. NOTICES. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile or similar writing) and shall be given to such party: (a) in the case of the Borrower or the Administrative Agent, at its address, facsimile number or telex number set 43 48 forth on the signature pages hereof, (b) in the case of any Lender, at its address, facsimile number or telex number set forth in its Administrative Questionnaire or (c) in the case of any party, at such other address, facsimile number or telex number as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Borrower. Each such notice, request or other communication shall be effective (i) if given by telex, when transmitted to the telex number referred to in this Section and the appropriate answerback is received, (ii) if given by facsimile, when transmitted to the facsimile number referred to in this Section and confirmation of receipt is received, (iii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iv) if given by any other means, when delivered at the address referred to in this Section; provided that notices to the Administrative Agent under Article 2 or Article 8 shall not be effective until received. SECTION 9.02. NO WAIVERS. No failure or delay by any Lender Party in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.03. EXPENSES; INDEMNIFICATION. (a) The Borrower shall pay (i) all out-of-pocket expenses of the Administrative Agent, including fees and disbursements of special counsel for the Administrative Agent, in connection with the preparation and administration of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses incurred by each Lender Party, including (without duplication) the fees and disbursements of outside counsel and the allocated cost of inside counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom. (b) The Borrower agrees to indemnify each Lender Party, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "INDEMNITEE") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall have the right to be indemnified 44 49 hereunder for such Indemnitee"s own gross negligence or willful misconduct as determined by a court of competent jurisdiction. SECTION 9.04. SET-OFFS. (a) If (i) an Event of Default has occurred and is continuing and (ii) the requisite Lenders have requested the Administrative Agent to declare the Loans to be immediately due and payable pursuant to Section 6.01, or the Loans have become immediately due and payable without notice as provided in Section 6.01, then each Lender Party is hereby authorized by the Borrower at any time and from time to time, to the extent permitted by applicable law, without notice to the Borrower (any such notice being expressly waived by the Borrower), to set off and apply all deposits (general or special, time or demand, provisional or final) at any time held, other than deposits held by the Borrower as fiduciary for other Persons, and other indebtedness at any time owing by such Lender Party to or for the account of the Borrower against any obligations of the Borrower to such Lender Party now or hereafter existing under this Agreement, regardless of whether any such deposit or other obligation is then due and payable or is in the same currency or is booked or otherwise payable at the same office as the obligation against which it is set off and regardless of whether such Lender Party shall have made any demand for payment under this Agreement. Each Lender Party agrees promptly to notify the Borrower after any such set-off and application made by such Lender Party; provided that any failure to give such notice shall not affect the validity of such setoff and application. The rights of the Lender Parties under this subsection are in addition to any other rights and remedies which they may have. (b) Each Lender agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest then due with respect to the Loans held by it which is greater than the proportion received by any other Lender in respect of the aggregate amount of principal and interest then due with respect to the Loans held by such other Lender, the Lender receiving such proportionately greater payment shall purchase such participations in the Loans held by the other Lenders, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Loans held by the Lenders shall be shared by the Lenders pro rata; provided that nothing in this Section shall impair the right of any Lender to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness in respect of the Loans. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Loan, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation. 45 50 SECTION 9.05. AMENDMENTS AND WAIVERS. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Lenders (and, if the rights or duties of any Agent are affected thereby, by such Agent); provided that no such amendment or waiver shall, unless signed by all the Lenders,(i) increase or decrease the Commitment of any Lender (except for a ratable decrease in the Commitments of all the Lenders) or subject any Lender to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder or for the termination of any Commitment or (iv) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans, or the number of Lenders, which shall be required for the Lenders or any of them to take any action under this Section or any other provision of this Agreement. SECTION 9.06. SUCCESSORS; PARTICIPATIONS AND ASSIGNMENTS. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all the Lenders. (b) Any Lender may at any time grant to one or more banks or other institutions (each a "PARTICIPANT") participating interests in its Commitment or any or all of its Loans. If a Lender grants any such participating interest to a Participant, whether or not upon notice to the Borrower and the Administrative Agent, such Lender shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement pursuant to which any Lender may grant such a participating interest shall provide that such Lender shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Lender will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 9.05 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Section 2.13 and Article 8 with respect to its participating interest. An assignment or other transfer which is not permitted by Section 9.06(c) or 9.06(d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection. 46 51 (c) Any Lender may at any time assign to one or more banks or other institutions (each an "ASSIGNEE") all, or a proportionate part (equivalent to an initial Commitment of not less than $10,000,000) of all, of its rights and obligations under this Agreement and its Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement substantially in the form of Exhibit B hereto signed by such Assignee and such transferor Lender, with (and subject to) the subscribed consent of the Borrower and the Administrative Agent, which consents shall not be unreasonably withheld; provided that if an Assignee is an affiliate of such transferor Lender or was a Lender immediately before such assignment, no such consent shall be required. When such instrument has been signed and delivered by the parties thereto and such Assignee has paid to such transferor Lender the purchase price agreed between them, such Assignee shall be a Lender party to this Agreement and shall have all the rights and obligations of a Lender with a Commitment as set forth in such instrument of assumption, and the transferor Lender shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection, the transferor Lender, the Administrative Agent and the Borrower shall make appropriate arrangements so that, if required, new Notes are issued to the Assignee. In connection with any such assignment, the transferor Lender shall pay to the Administrative Agent an administrative fee for processing such assignment in the amount of $2,500. If the Assignee is not incorporated under the laws of the United States or a State thereof, it shall deliver to the Borrower and the Administrative Agent certification as to exemption from deduction or withholding of United States federal income taxes in accordance with Section 8.04. (d) Any Lender may at any time assign all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank. No such assignment shall release the transferor Lender from its obligations hereunder. (e) No Assignee, Participant or other transferee of any Lender's rights shall be entitled to receive any greater payment under Section 8.03 or 8.04 than such Lender would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Lender to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. SECTION 9.07. NO RELIANCE ON MARGIN STOCK. Each Lender represents to the Administrative Agent and each of the other Lenders that it in good faith is not relying upon any Margin Stock as collateral in the extension or maintenance of the credit provided for in this Agreement. 47 52 SECTION 9.08. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York. The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. SECTION 9.09. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement shall become effective upon receipt by the Administrative Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Administrative Agent in form satisfactory to it of telegraphic, telex, facsimile or other written confirmation from such party of execution of a counterpart hereof by such party). SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 48 53 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. MARSH & MCLENNAN COMPANIES, INC. /s/ Gregory F. Van Gundy By: _______________________________________ Name: Gregory F. Van Gundy Title: General Counsel and Secretary Address: 1166 Avenue of the Americas New York, New York 10036-2774 Facsimile: (212) 345-5000 Web Site: www.marshmac.com MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Lender and Administrative Agent /s/ Glenda Winter-Irving By: _______________________________________ Name: Glenda Winter-Irving Title: Vice President Address: 60 Wall Street New York, New York 10260-0060 Facsimile: (212) 648-5249 49 54 COMMITMENT SCHEDULE
LENDER COMMITMENT Morgan Guaranty Trust Company of New York $2,250,000,000 _______________________ Total $2,250,000,000
50 55 PRICING SCHEDULE The "EURO-DOLLAR MARGIN" and "FACILITY FEE RATE" mean, on any date when such rates are to be determined in accordance with this Pricing Schedule, the per annum rates set forth below in the applicable row under the column corresponding to the Status and Utilization that exist on such day:
STATUS LEVEL I LEVEL II LEVEL III LEVEL IV - ---------------------------------- ------- -------- --------- -------- Euro-Dollar Margin If Utilization is equal to or 0.20% 0.24% 0.28% 0.37% less than 50% 0.45% 0.49% 0.53% 0.62% If Utilization exceeds 50% Facility Fee Rate 0.05% 0.06% 0.07% 0.08%
For purposes of this Schedule, the following terms have the following meanings: "LEVEL I STATUS" exists at any date if, at such date, the Borrower's commercial paper is rated A-1+ by S&P and P-1 by Moody's. "LEVEL II STATUS" exists at any date if, at such date, the Borrower's commercial paper is rated A-1 by S&P and P-1 by Moody's. "LEVEL III STATUS" exists at any date if, at such date, (i) the Borrower's commercial paper is rated A-1 or higher by S&P and P-2 by Moody's or (ii) the Borrower's commercial paper is rated A-2 by S&P and P-1 by Moody's. "LEVEL IV STATUS" exists at any date if, at such date, no other Status exists. "STATUS" refers to the determination of which of Level I Status, Level II Status, Level III Status or Level IV Status exists at any date. "UTILIZATION" means, at any date, the percentage equivalent of a fraction (i) the numerator of which is the aggregate outstanding principal amount of the Loans at such date, after giving effect to any borrowing or payment on such date and (ii) the denominator of which is the aggregate amount of the Commitments at such date, after giving effect to any reduction of the Commitments on such date. For purposes of this schedule, if for any reason any Loans remain outstanding after termination of the Commitments, the utilization on each date on or after the date of such termination shall be deemed to be greater than 50%. 51 56 The credit ratings to be utilized for purposes of this Schedule are those assigned to the Borrower's commercial paper without third-party credit enhancement and any rating assigned to any other debt security of the Borrower shall be disregarded. The rating in effect for any date is that in effect at the close of business on such date. 52 57 EXHIBIT A FORM OF NOTE New York, New York ----------- --, ----- For value received, MARSH & McLENNAN COMPANIES, INC., a Delaware corporation (the "BORROWER"), promises to pay to the order of ______________________ (the "LENDER"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Lender to the Borrower pursuant to the Credit Agreement referred to below on the maturity date provided for in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Morgan Guaranty Trust Company of New York, at 60 Wall Street, New York, New York. All Loans made by the Lender and all repayments of the principal thereof shall be recorded by the Lender and, if the Lender so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding may be endorsed by the Lender on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Lender to make (or any error in making) any such recordation or endorsement shall not affect the Borrower"s obligations hereunder or under the Credit Agreement. This note is one of the Notes referred to in the Credit Agreement dated as of August 24, 1998 among Marsh & McLennan Companies, Inc., the Lenders party thereto and Morgan Guaranty Trust Company of New York, as Administrative Agent (as the same may be amended from time to time, the "CREDIT AGREEMENT"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. MARSH & McLENNAN COMPANIES, INC. By: ____________________________ Name: Title: 58 LOANS AND PAYMENTS OF PRINCIPAL
- -------------------------------------------------------------------------------- AMOUNT OF AMOUNT OF PRINCIPAL DATE LOAN REPAID NOTATION MADE BY - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
A-2 59 EXHIBIT B FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of ________, ____ among [NAME OF ASSIGNOR] (the "ASSIGNOR") and [NAME OF ASSIGNEE] (the "ASSIGNEE"). WHEREAS, this Assignment and Assumption Agreement (the "AGREEMENT") relates to the Credit Agreement dated as of August 24, 1998 (as amended from time to time, the "CREDIT AGREEMENT") among the Marsh & McLennan Companies, Inc., the Lenders party thereto and Morgan Guaranty Trust Company of New York, as Administrative Agent (the "ADMINISTRATIVE AGENT"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans to the Borrower in an aggregate principal amount at any time outstanding not to exceed $________________; WHEREAS, Loans made to the Borrower by the Assignor under the Credit Agreement in the aggregate principal amount of $__________ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the "ASSIGNED AMOUNT"), together with a corresponding portion of each of its outstanding Loans, and the Assignee proposes to accept such assignment and assume the corresponding obligations of the Assignor under the Credit Agreement; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise defined herein have the respective meanings set forth in the Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount and a corresponding portion of each of its outstanding Loans, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount. Upon the execution and delivery hereof by the Assignor and the Assignee and the execution of the consent attached hereto by the Borrower and the Administrative Agent and the payment of 60 the amounts specified in Section 3 required to be paid on the date hereof, (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Lender under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount and acquire the rights of the Assignor with respect to a corresponding portion of each of its outstanding Loans and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by the Assigned Amount, and the Assignor shall be released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them.(1) Facility fees accrued before the date hereof are for the account of the Assignor and such fees accruing on and after the date hereof with respect to the Assigned Amount are for the account of the Assignee. Each of the Assignor and the Assignee agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party"s interest therein and promptly pay the same to such other party. SECTION 4. Consent of the Borrower and the Administrative Agent. This Agreement is conditioned upon the consent of the Borrower and the Administrative Agent pursuant to Section 9.06(c) of the Credit Agreement. SECTION 5. Note. Pursuant to Section 9.06(c) of the Credit Agreement, the Borrower has agreed to execute and deliver a Note payable to the order of the Assignee to evidence the assignment and assumption provided for herein. SECTION 6. Non-reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition or statements of the Borrower, or the validity and enforceability of the Borrower's obligations under the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and (1) Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. B-2 61 decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower. SECTION 7. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 8. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [NAME OF ASSIGNOR] By: __________________________________ Name: Title: [NAME OF ASSIGNEE] By: __________________________________ Name: Title: The undersigned consent to the foregoing assignment. MARSH & McLENNAN COMPANIES, INC. By: __________________________________ Name: Title: B-3 62 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By: __________________________________ Name: Title: B-4 EX-99.C.1 14 IRREVOCABLE UNDERTAKING EXECUTED BY DIRECTORS 1 Exhibit (c)(1) To: Marsh & McLennan Companies, Inc. (OFFEROR) _____ 1998 Dear Sirs, I understand that Offeror intends to make an offer to acquire all of the issued ordinary share capital of Sedgwick Group plc (OFFEREE) including all of the American depository shares issued in respect of the ordinary shares of Offeree (each representing five ordinary shares of Offeree as evidenced by American depository receipts) (ADSS), substantially on the terms of the attached draft press announcement. This letter sets out the terms and conditions on which I will accept the Offer (as defined in paragraph 4 of this undertaking) when it is made. WARRANTIES AND UNDERTAKINGS 1. I warrant and undertake to Offeror that: (a) I am the registered holder and beneficial owner of the number of ordinary shares of 10p each in the capital of Offeree (including ADSs, if any) shown in Part A of the Schedule (the OFFEREE SECURITIES) and that I hold these securities free of any lien, charge, option, equity or encumbrance; (b) before the Offer closes, lapses or is withdrawn, I shall not: (i) sell, transfer, charge, encumber, grant any option over or otherwise dispose of any Offeree Securities or any shares or other securities convertible into shares in Offeree shown in Part B of the Schedule or any other shares or securities convertible into shares in Offeree issued or unconditionally allotted to me or otherwise acquired by me before then (FURTHER OFFEREE SECURITIES) other than pursuant to my acceptance of the Offer; (ii) accept any other offer in respect of the shares or securities referred to in paragraph 1(b)(i); 2 (iii) (other than pursuant to the Offer) enter into any agreement or arrangement or permit any agreement or arrangement to be entered into or incur any obligation or permit any obligation to arise: (A) to do any of the acts referred to in paragraphs 1(b)(i) or (ii); (B) in relation to, or operating by reference to, the Offeree Securities or any Further Offeree Securities; or (C) which, in relation to the Offeree Securities or any Further Offeree Securities, would or might restrict or impede me accepting the Offer, and, for the avoidance of doubt, references in this paragraph 1(b)(iii) to any agreement, arrangement or obligation includes any agreement, arrangement or obligation whether or not legally binding or subject to any condition or which is to take effect if the Offer closes or lapses or if this undertaking ceases to be binding or following any other event; or (iv) save for the acquisition of any further shares or other securities in Offeree on the exercise of options referred to in Part B of the Schedule, I shall not purchase, sell or otherwise deal in any shares or other securities convertible into shares of Offeree or Offeror or any interest therein (including any derivatives referenced to such securities); (c) the Schedule contains full and accurate details of all the shares or other securities convertible into shares in Offeree: (i) of which I am the registered holder or beneficial owner; (ii) to which I am entitled upon the exercise of any option, warrant or other right to acquire or subscribe for shares or other securities in Offeree whether or not such rights are currently exercisable or subject to any condition, and 2 3 I confirm that I have no other rights or interests in relation to any shares or other securities convertible into shares of Offeree; and (d) I have full power and authority to enter into and perform any obligation under this undertaking and to accept the Offer in respect of the Offeree Securities. UNDERTAKING TO ACCEPT THE OFFER 2. In consideration of Offeror's agreement in paragraph 6.1 to make the Offer, I undertake that: (a) I shall accept the Offer in respect of the Offeree Securities in accordance with the procedure for acceptance set out in the formal document containing the Offer (the OFFER DOCUMENT) not later than ten days after Offeror posts the Offer Document to Offeree shareholders; (b) I shall accept the Offer in respect of any Further Offeree Securities in accordance with the procedure for acceptance set out in the Offer Document not later than five days after the date I become the registered holder of the Further Offeree Securities; (c) although the terms of the Offer will confer a right of withdrawal on accepting shareholders, I shall not withdraw any acceptances of the Offer; and (d) Offeror shall acquire the Offeree Securities and any Further Offeree Securities from me free of any lien, charge, option, equity or encumbrance and together with all rights of any nature attaching to those shares including the right to all dividends declared or paid after the date of this undertaking, except for the interim dividend of 3p per Offeree Share payable on 19 October 1998 to Offeree shareholders on the register at the close of business on 21 August 1998. DOCUMENTATION 3. I consent to: 3 4 (a) the inclusion of references to me and this undertaking in Offeror's announcement of the Offer (the PRESS ANNOUNCEMENT) as they appear in the attached draft of the Press Announcement; and (b) particulars of this undertaking and my holdings of, and dealings in, relevant securities of Offeree and Offeror being included in the Offer Document and any other related or ancillary document as required by the Code and/or all applicable United States securities laws and regulations (US SECURITIES LAWS). INTERPRETATION 4. In this undertaking the OFFER means the offer to be made by or on behalf of Offeror to acquire all the issued ordinary share capital of Offeree, including the ADSs, substantially on the terms of the Press Announcement or on such other terms as may be agreed between Offeror and Offeree or as may be required to comply with the requirements of the Panel on Takeovers and Mergers (the PANEL) or US Securities Laws or such other laws or regulations as may be relevant. A reference in this undertaking to the OFFER also includes any new, increased, renewed or revised offer made by or on behalf of Offeror to acquire shares in Offeree, provided that the terms of such offer are, in the opinion of JP Morgan and DLJ Phoenix (the BANKS) no less favourable to acceptors than the terms set out in the Press Announcement. TIME OF THE ESSENCE 5. Any time, date or period mentioned in this undertaking may be extended by mutual agreement but as regards any time, date or period originally fixed or as extended, time shall be of the essence. THE OFFER 6.1 Subject to paragraph 6.2, Offeror agrees to make the Offer by no later than 4 September 1998 (or such later date as Offeror and Offeree may agree) provided that the Press Announcement is released in substantially the form attached (or in such other form as may be agreed between Offeror and Offeree or as may be required to comply with the requirements of the Panel or US Securities Laws or such other laws as may be relevant). The release of the Press Announcement is at Offeror's absolute discretion. In particular, Offeror reserves the right not to release the Press Announcement unless the board of directors of Offeree agrees to recommend the Offer. 4 5 6.2 If after Offeror releases the Press Announcement either: (a) the Panel consents to Offeror not making the Offer; (b) an event occurs which means that Offeror is no longer required by the Code to proceed with the Offer; or (c) Offeror becomes aware that any condition of the Offer as set out in the Press Announcement has or may become incapable of being fulfilled, Offeror shall not be obliged to make the Offer. 6.3 This undertaking shall lapse if: (a) the Press Announcement is not released by 26 August 1998 (or such later date as Offeror and Offeree may agree); (b) the Offer is not made in the circumstances referred to in paragraph 6.2; or (c) the Offer lapses or is withdrawn. If the undertaking lapses, I shall have no claim against Offeror. DIRECTOR'S UNDERTAKINGS 7. I shall not directly or indirectly (except where required by my fiduciary duties as a director of Offeree or by my duties under the Code): (a) solicit or encourage any person other than Offeror to make any offer for any shares or other securities of Offeree or to indicate the basis on which any such offer might be made or enter into discussions relating to any possible offer; or (b) take any action which is inconsistent with my obligations contained in this undertaking or the successful implementation of the Offer. CONFIRMATION 5 6 8. I confirm that in signing this letter I am not a customer of either of the Banks for the purposes of the Rules of The Securities and Futures Authority Limited and that neither of the Banks owes me any of the duties which it owes to its customers. I confirm that I have been given an adequate opportunity to consider whether or not to give this undertaking and to obtain independent advice. ADEQUACY OF DAMAGES 9. I agree that, if I fail to accept the Offer in accordance with this undertaking or breach any of my obligations, damages would not be an adequate remedy and accordingly Offeror shall be entitled to the remedy of injunction or specific performance or any other such equitable relief. GOVERNING LAW 10. This undertaking shall be governed by and construed in accordance with English law and I submit to the exclusive jurisdiction of the English courts for all purposes in connection with this undertaking. 6 7 SCHEDULE EXISTING HOLDINGS PART A - REGISTERED AND BENEFICIAL HOLDINGS OF OFFEREE SECURITIES REGISTERED HOLDER AND BENEFICIAL OWNER ORDINARY SHARES OF 10p EACH PART B - OTHER HOLDINGS OF OFFEREE SECURITIES OPTIONS ORDINARY SHARES OF 10p EACH 7 8 SIGNED and DELIVERED as a DEED by Yours faithfully, Signature________________________ Name_____________________________ in the presence of: Signature of witness:____________________________ Name ____________________________________________ Address _________________________________________ 8 EX-99.C.2 15 IRREVOCABLE UNDERTAKING EXECUTED BY SHAREHOLDERS 1 Exhibit (c)(2) To: Marsh & McLennan Companies, Inc. (OFFEROR) J P Morgan & Co. Limited (J P MORGAN) 60 Victoria Embankment London EC4Y 0JP DLJ Phoenix Securities Limited (DLJ PHOENIX) 99 Bishopsgate London EC2M 3XD 24th August and 25th August 1998 Dear Sirs, We understand that Offeror intends to make an offer to acquire all of the issued ordinary share capital of Sedgwick Group plc (OFFEREE) including all of the American depository shares issued in respect of the ordinary shares of Offeree (each representing five ordinary shares of Offeree as evidenced by American depository receipts) (ADSS) substantially on the terms of the attached draft press announcement. This letter sets out the terms and conditions on which we will accept the Offer (as defined in paragraph 6 of this undertaking) when it is made. WARRANTIES AND UNDERTAKINGS 1. We warrant and undertake to Offeror that: (a) we are the registered holder and the beneficial owner of the number of ordinary shares of 10p each in the capital of Offeree (including ADSs, if any) shown in Part A of the Schedule (the OFFEREE SECURITIES) and that we hold these securities free of any lien, charge, option, equity or encumbrance; (b) before the Offer closes, lapses or is withdrawn, we shall not: (i) sell, transfer, charge, encumber, grant any option over or otherwise dispose of any Offeree Securities or any shares or other securities in Offeree shown in Part B of the Schedule or any other shares or securities in Offeree issued or uncondition- 2 ally allotted to us or otherwise acquired by us before then (FURTHER OFFEREE SECURITIES) other than pursuant to our acceptance of the Offer; (ii) accept any other offer in respect of any shares or securities referred to in paragraph 1(b)(i); (iii) (other than pursuant to the Offer) enter into any agreement or arrangement or permit any agreement or arrangement to be entered into or incur any obligation or permit any obligation to arise: (A) to do any of the acts referred to in paragraphs 1(b)(i) or (ii); (B) in relation to, or operating by reference to, the Offeree Securities or any Further Offeree Securities; or (C) which, in relation to the Offeree Securities or any Further Offeree Securities, would or might restrict or impede us accepting the Offer, and, for the avoidance of doubt, references in this paragraph 1(b)(iii) to any agreement, arrangement or obligation includes any agreement, arrangement or obligation whether or not legally binding or subject to any condition or which is to take effect if the Offer closes or lapses or if this undertaking ceases to be binding or following any other event; or (iv) save for the acquisition of any further shares or other securities in Offeree on the exercise of options referred to in Part B of the Schedule, we shall not purchase, sell or otherwise deal in any shares or other securities of Offeree or Offeror or any interest therein (including any derivatives referenced to any such securities); (c) the Schedule contains full and accurate details of all the shares and other securities in Offeree: 2 3 (i) of which we are the registered holder or beneficial owner; (ii) to which we are entitled upon the exercise of any option, warrant or other right to acquire or subscribe for shares or other securities in Offeree whether or not such rights are currently exercisable or subject to any condition, and we confirm that we have no other rights or interests in relation to any shares or other securities of Offeree; and (d) we have full power and authority to enter into this undertaking and to accept the Offer in respect of the Offeree Securities. UNDERTAKING TO ACCEPT THE OFFER 2. In consideration of Offeror's agreement in paragraph 8.1 to make the Offer, we undertake that: (a) we shall accept the Offer in respect of the Offeree Securities in accordance with the procedure for acceptance set out in the formal document containing the Offer (the OFFER DOCUMENT) not later than seven days after Offeror posts the Offer Document to Offeree shareholders; (b) we shall accept the Offer in respect of any Further Offeree Securities in accordance with the procedure for acceptance set out in the Offer Document not later than two days after the date we become the registered holder of the Further Offeree Securities; (c) although the terms of the Offer will confer a right of withdrawal on accepting shareholders, we shall not withdraw any acceptances of the Offer; and (d) Offeror shall acquire the Offeree Securities and any Further Offeree Securities from us free of any lien, charge, option, equity or encumbrance and together with all rights of any nature attaching to those shares including the right to all dividends declared or paid after the date of this undertaking, except for the interim dividend of 3p per Offeree Share payable on 19 October 1998 to Offeree shareholders on the register at the close of business on 21 August 1998. 3 4 VOTING RIGHTS 3.1 From the time Offeror announces the Offer to the time the Offer becomes wholly unconditional, lapses or is withdrawn: (a) we shall exercise the voting rights attached to our Offeree Securities and any Further Offeree Securities on a Relevant Resolution (as defined in paragraph 3.3) only in accordance with Offeror's directions; and (b) we shall exercise the rights attaching to our Offeree Securities to requisition or join in requisitioning any general or class meeting of Offeree for the purposes of considering a Relevant Resolution and to require Offeree pursuant to s376 of the Act to give notice of such a resolution only in accordance with Offeror's directions. 3.2 For the purpose of voting on a Relevant Resolution, we shall execute any form of proxy required by Offeror appointing any person nominated by Offeror to attend and vote at the relevant general meeting of Offeree. 3.3 A Relevant Resolution means: (a) a resolution (whether or not amended) proposed at a general or class meeting of Offeree, or at an adjourned meeting, the passing of which is necessary to implement the Offer or which, if passed, might result in any condition of the Offer not being fulfilled or which might impede or frustrate the Offer in any way; (b) a resolution to adjourn a general or class meeting of Offeree whose business includes the consideration of a resolution falling within paragraph 3.3(a); and (c) a resolution to amend a resolution falling within paragraph 3.3(a)or (b). DOCUMENTATION 4.1 We consent to: 4 5 (a) the inclusion of references to us and this undertaking in Offeror's announcement of the Offer (the PRESS ANNOUNCEMENT) as they appear in the attached draft of the Press Announcement; and (b) particulars of this undertaking and our holdings of, and dealings in, relevant securities of Offeree and Offeror being included in the Offer Document and any other related or ancillary document as required by the City Code on Takeovers and Mergers (the CODE) and/or all applicable United States securities laws and regulations (US SECURITIES LAWS). 4.2 We shall promptly give you all information and any assistance as you may reasonably require for the preparation of the Offer Document and all related and ancillary documents in order to comply with the requirements of the Code, US Securities Laws and any other legal or regulatory requirement or body. We shall immediately notify you in writing of any material change in the accuracy or impact of any information previously given to you. SECRECY 5. We shall keep secret: (a) the possibility, terms and conditions of the Offer and the existence and terms of this undertaking until the Press Announcement is released; and (b) the terms of this undertaking until the Offer Document is posted, provided that we may disclose the same to Offeree and its advisers in which case we shall procure that they observe secrecy in the same terms. The obligations in this paragraph shall survive termination of this undertaking. INTERPRETATION 6. In this undertaking the OFFER means the offer to be made by or on behalf of Offeror to acquire all the issued ordinary share capital of Offeree, including the ADSs, substantially on the terms of the Press Announcement or on such other terms as may be agreed between Offeror and Offeree or as may be required to comply with the requirements of the Panel on Takeovers and Mergers (the PANEL) or US Securities Laws or such other laws or regulations as may be relevant. A reference in this 5 6 undertaking to the OFFER also includes any new, increased, renewed or revised offer made by or on behalf of Offeror to acquire shares in Offeree, provided that the terms of such offer are, in the opinion of J P Morgan and DLJ Phoenix (the BANKS) no less favourable to acceptors than the terms set out in the Press Announcement. TIME OF THE ESSENCE 7. Any time, date or period mentioned in this undertaking may be extended by mutual agreement but as regards any time, date or period originally fixed or as extended, time shall be of the essence. THE OFFER 8.1 Subject to paragraph 8.2, Offeror agrees to make the Offer by no later than 4th September 1998 (or such later date as Offeror and Offeree may agree). provided that the Press Announcement is released in substantially the form attached (or in such other form as may be agreed between Offeror and Offeree or as may be required to comply with the requirements of the Panel or US Securities Laws or such other laws or regulations as may be relevant). The release of the Press Announcement is at Offeror's absolute discretion. In particular, Offeror reserves the right not to release the Press Announcement unless the board of directors of Offeree agrees to recommend the Offer. 8.2 If after Offeror releases the Press Announcement: (a) the Panel consents to Offeror not making the Offer; (b) an event occurs which means that Offeror is no longer required by the Code to proceed with the Offer; or (c) Offeror becomes aware that any condition of the Offer as set out in the Press Announcement has or may become incapable of being fulfilled, Offeror shall not be obliged to make the Offer. 6 7 8.3 This undertaking shall lapse if: (a) the Press Announcement is not released by 25th August 1998 (or such later date as Offeror and Offeree may agree); (b) the Offer is not made in the circumstances referred to in paragraph 8.2; (c) the Offer lapses or is withdrawn; (d) a cash offer (or the cash alternative of any share offer) is made by any third party at a price equal to or exceeding 250.5 pence per Sedgwick Group plc ordinary share; or (e) a share offer (without a cash alternative) is made by any third party the value of which on the day such offer is made is equal to or exceeds 250.5 pence per Sedgwick Group plc ordinary share. If the undertaking lapses, we shall have no claim against Offeror. CONFIRMATION 9. We confirm that in signing this letter we are not a customer of either of the Banks for the purposes of the Rules of The Securities and Futures Authority Limited and that neither of the Banks owe us any of the duties which it owes to its customers. We confirm that we have been given an adequate opportunity to consider whether or not to give this undertaking and to obtain independent advice. ADEQUACY OF DAMAGES 10. We agree that, if we fail to accept the Offer in accordance with this undertaking or breach any of our obligations, damages would not be an adequate remedy and accordingly Offeror shall be entitled to the remedy of injunction, specific performance or any other such equitable relief. 7 8 GOVERNING LAW 11. This undertaking shall be governed by and construed in accordance with English law and we submit to the exclusive jurisdiction of the English courts for all purposes in connection with this undertaking. 8 9 SCHEDULE EXISTING HOLDINGS PART A - REGISTERED AND BENEFICIAL HOLDINGS OF OFFEREE SECURITIES REGISTERED HOLDER AND BENEFICIAL OWNER ORDINARY SHARES OF 10p EACH VARIOUS CLIENTS OF SILCHESTER INVESTORS 24,000,000 INTERNATIONAL PART B - OTHER HOLDINGS OF OFFEREE SECURITIES OPTIONS ORDINARY SHARES OF 10p EACH - - - 9 10 SIGNED and DELIVERED as a DEED by ) ) acting by two Directors/a Director and ) the Secretary ) Director Michael JJ. Cowan Director/Secretary Andrew Simmonds 24th and 25th August 1998 10 EX-99.C.3 16 FORM OF CONDITIONAL SHARE PURCHASE AGREEMENT 1 Exhibit (c)(3) J.P. MORGAN LETTERHEAD [Vendor] 25 August 1998 Dear Sirs RECOMMENDED CASH OFFER FOR SEDGWICK GROUP PLC ("SEDGWICK") We refer to the recommended cash offer (the "Offer") for the entire issued and to be issued share capital of Sedgwick by Morgan Guaranty Trust Company of New York and Donaldson, Lufkin & Jenrette International on behalf of Marsh & McLennan Companies, Inc ("Marsh & McLennan") which was announced on 25 August 1998. You agree that you will sell, and we agree that we will, on behalf of Marsh & McLennan, purchase, conditional on (1) the expiration or termination of all applicable waiting periods under the Hart-Scott Rodino Anti-Trust Improvements Act of 1976 as amended, (the "HSR Act"), (2) there being in existence no order of any United States court enjoining such sale and purchase, and (3) appropriate exemptive relief for the making of purchases of shares in the capital of Sedgwick ("Sedgwick Shares") by Marsh & McLennan outside of the Offer having been obtained from the United States Securities and Exchange Commission, [ ] Sedgwick Shares at a price of 225 pence per Sedgwick Share (the "Sale") being the price payable to holders of Sedgwick Shares under the Offer. We both further agree, subject to the above, to effect the Sale through an On-Exchange transaction as defined by the rules of the London Stock Exchange with a view to the Sale settling [ ] calendar days after the expiration or termination of all applicable waiting periods under the HSR Act. 2 Exhibit (c)(3) J.P. MORGAN LETTERHEAD This letter of agreement will lapse if the applicable waiting periods under the HSR Act have not expired by midnight New York time on Sunday 27th September 1998. If this letter of agreement lapses, we shall have no claim against you and you shall have no claim against us. It is noted that, by execution of this letter, each party warrants to the other that it has full right, power and authority and has taken all action necessary to execute and deliver and to exercise its rights and performance obligations under this letter. This letter is to be construed in accordance with and governed by English Law. Please acknowledge your agreement to the above by signing and returning the enclosed copy letter. ___________________________________ Signed for and on behalf of J.P. Morgan Securities Limited We hereby acknowledge receipt of your letter and agree to sell the [ ] Sedgwick Shares on the terms set out therein. ___________________________________ Signed for and on behalf of [Vendor] 2 3 Exhibit (c)(3) J.P. MORGAN LETTERHEAD [Vendor] 25 August 1998 Dear Sirs RECOMMENDED CASH OFFER FOR SEDGWICK GROUP PLC ("SEDGWICK") We refer to the recommended cash offer (the "Offer") for the entire issued and to be issued share capital of Sedgwick by Morgan Guaranty Trust Company of New York and Donaldson, Lufkin & Jenrette International on behalf of Marsh & McLennan Companies, Inc ("Marsh & McLennan") which was announced on 25 August 1998. You agree that you will sell, and we agree that we will, on behalf of Marsh & McLennan, purchase, conditional on (1) the expiration or termination of all applicable waiting periods under the Hart-Scott Rodino Anti-Trust Improvements Act of 1976 as amended, (the "HSR Act"), (2) there being in existence no order of any United States court enjoining such sale and purchase, and (3) appropriate exemptive relief for the making of purchases of shares in the capital of Sedgwick ("Sedgwick Shares") by Marsh & McLennan outside of the Offer having been obtained from the United States Securities and Exchange Commission, [ ] Sedgwick Shares at a price of 225 pence per Sedgwick Share (the "Sale") being the price payable to holders of Sedgwick Shares under the Offer. We both further agree, subject to the above, to effect the Sale through an On-Exchange transaction as defined by the rules of the London Stock Exchange with a view to the Sale settling [ ] calendar days after the expiration or termination of all applicable waiting periods under the HSR Act. 4 Exhibit (c)(3) J.P. MORGAN LETTERHEAD This letter of agreement will lapse if the applicable waiting periods under the HSR Act have not expired by midnight New York time on Sunday 27th September 1998. If this letter of agreement lapses, we shall have no claim against you and you shall have no claim against us. It is noted that, by execution of this letter, each party warrants to the other that it has full right, power and authority and has taken all action necessary to execute and deliver and to exercise its rights and performance obligations under this letter. This letter is to be construed in accordance with and governed by English Law. Please acknowledge your agreement to the above by signing and returning the enclosed copy letter. ___________________________________ Signed for and on behalf of J.P. Morgan Securities Limited We hereby acknowledge receipt of your letter and agree to sell the [ ] Sedgwick Shares on the terms set out therein. ___________________________________ Signed for and on behalf of [Vendor] 2 EX-99.C.4 17 LETTER AGREEMENT 1 Exhibit (c)(4) From: Marsh & McLennan Companies, Inc. To: The Board of Directors Sedgwick Group plc Sackville House 143-152 Fenchurch Street London 25th August, 1998 Dear Sirs, Recommended Offer on Behalf of Marsh We refer to the recommended offer to be made on behalf of Marsh & McLennan Companies, Inc. ("Marsh") for the entire issued share capital of Sedgwick Group plc ("Sedgwick") as set out in the press announcement to be issued by Marsh today (the "Press Announcement"). Terms defined in the Press Announcement have the same meaning when used in this letter. The purpose of this letter is to record the agreement reached between ourselves as to each party's respective obligations to facilitate the closing of the Offer and other related matters. 1. Marsh undertakes and confirms that it will not invoke any of the conditions (e) to (i) (inclusive) of the Offer in relation to:- (a) circumstances which would otherwise give rise to a right to invoke such condition where there has been fair disclosure of such circumstances to Marsh or its advisers by or on behalf of Sedgwick prior to the issue of the Press Announcement; (b) the exercise or intended exercise by Securfin SpA of any rights they may have pursuant to the 1997 Joint Venture Agreement between Sedgwick, Sedgwick Internationaal BV, Securfin SpA. Altrida Investments BV, Mrs. L. Moratti and Mr. G. M. Moratti as a consequence of the matters referred to in condition (e); or (c) any monies borrowed, indebtedness or other liabilities referred to in condition (e)(i) pursuant to agreements disclosed to Marsh prior to the issue of the Press 2 Announcement being declared repayable as a consequence of the matters referred to in condition (e). 2. Marsh undertakes and confirms that it will make proposals to participants in Sedgwick's Share Option Schemes in accordance with Annexure 1 to this letter as soon as reasonably practicable after the date (the "Unconditional Date") on which the Offer becomes or is declared unconditional in all respects. 3. Marsh undertakes that, if the Offer becomes or is declared unconditional in all respects and any employee of any member of the Sedgwick Group is made redundant on or before 31st December, 1999, he or she shall be entitled to a redundancy payment which will be no less favourable than he or she would have received under the current redundancy policies operated by the Sedgwick Group in the UK, US and other countries as appropriate (including the standard practice in the UK of making full payment in respect of salary and benefits in lieu of the employee's full notice period). 4. Marsh undertakes and confirms that in addition to other schemes operated by the Marsh Group, in which employees of the Sedgwick Group will be entitled to participate, it will establish a scheme consistent with the principles set out in Annexure 2 and grant awards to individuals in accordance with the terms of that Annexure and the appendix thereto. Sedgwick Group acknowledges that within 48 hours (or such longer period as Mr. White-Cooper and Marsh may agree) following exchange of this letter Marsh may wish to discuss the details of the job descriptions set out in such appendix and Sedgwick Group confirms that modifications may be made thereto by agreement between Marsh and Mr. White-Cooper on behalf of Sedgwick Group. Sedgwick Group confirms that it will co-operate in good faith and take into account the reasonable representations of Marsh in respect of these matters. In particular the points expressed to be outstanding in the fax from Jack Sinnott to Rob White-Cooper of 24th August, 1998 are to be clarified and confirmed between Rob White-Cooper and Marsh. 5. Marsh recognises that the terms of the Sedgwick Group's Senior Executive Incentive Plans and its Senior Incentive Plan will be affected if the Offer becomes or is declared unconditional in all respects. Marsh is aware that the Board and Compensation Committee of Sedgwick have adopted and amended the rules of the relevant schemes in the manner set out in Annexure 3. Marsh confirms it will honour such course of action. Marsh recognises that the bonuses payable under these schemes will depend upon the continuing performance of the Sedgwick Group following any change of control and undertakes that it will continue to operate the plans and apply the performance targets in a manner consistent with their spirit and intention based on the relevant business structure and accounting principles in use prior to the making of the Offer. Marsh recognises that it is intended the Senior Incentive Plan and the Senior Executive Incentive Plan will not be operated in respect of 1999 and future years without its consent. 3 6. Marsh undertakes to grant options within a period of 12 months after the Unconditional Date over 2 million Marsh Shares to Sedgwick executives to be agreed between Marsh and Sedgwick but with each individual receiving no less than 1,500 Shares and save for certain exceptional circumstances no more than 9,000 Shares under the MMC 1997 Employee Incentive and Stock Award Plan. Insofar as paragraphs 2 to 6 inclusive relate to or for the benefit of employees of the Wider Sedgwick Group this letter, subject to such amendments as may be agreed between Marsh and Sedgwick before the Unconditional Date, is given for the benefit of such employees and as such will take effect as a deed. This letter will be governed by and construed in accordance with English law. Signed and delivered as a deed ) by Gregory Van Gundy ) duly authorised for and on behalf of ) GREGORY VAN GUNDY Marsh & McLennan Companies, Inc. ) in the presence of: ) DAVID J FRIEDMAN 4 Annexure 1 This note sets out the proposals which Marsh will make to Sedgwick's optionholders if the Offer becomes unconditional. Executive Share Option Schemes: 1984 Executive Share Option Scheme Executive Share Option Scheme 1995 1. Participants may exercise their options in the normal way and then either sell their Sedgwick shares or accept the Offer on whatever terms are available to shareholders generally at the time of such acceptance. Any applicable performance conditions have, in accordance with the Scheme rules and subject to Inland Revenue approval, been waived by Sedgwick. Marsh will use reasonable endeavours to arrange a procedure whereby participants will have the ability to exercise using a short term loan facility provided by a third party banker or lending institution. 2. Marsh will make available a cash cancellation offer as an alternative to exercise. The cash cancellation amount will be paid without deduction of tax save to the extent that Marsh or any company in the Sedgwick Group has an obligation to apply PAYE to such an amount and will be available for acceptance for a period of at least 21 days after it is made. The offer will be the difference between the consideration per Share available under the main Offer less the amount payable on exercise. 3. The management of Marsh shall recommend to the Compensation Committee that Marsh should offer participants the opportunity to cancel their existing options in return for new economically equivalent options over Marsh shares, if possible in accordance with the rules of the relevant scheme, provided that such exchange would not cause any material adverse tax, legal or accounting consequences to Marsh. Saye Share Option Schemes: Employee Savings Related Share Option Scheme 1995 Employee Savings Related Share Option Scheme Overseas Savings Related Share Option Scheme 1995 1. Participants may exercise their options using the repayments due under the related savings contract. They may then either sell their Sedgwick shares or accept the Offer as described above. 2. For the purposes of the Overseas Scheme if proposals to optionholders, to the extent that such proposals (including merely a notification that options are exercisable) can lawfully be made in the relevant jurisdiction, have not been made before Marsh becomes entitled to acquire shares under section 428 to 430 of the Companies Act 1985, the directors of Sedgwick will give notice to optionholders pursuant to Rule 10.4 that their option(s) will not lapse until at least 21 days after any proposals have been made. 5 3. A cash cancellation offer will be available as an alternative to exercise described above. To determine the number of shares in respect of which the cash cancellation offer is made, a "notional repayment" under the related savings contract will be divided by the relevant exercise price. The notional repayment will be the aggregate of the contributions that a participant has made to the savings contract as at the Unconditional Date. 6 Annexure 2 Proposed New Scheme 1. Marsh will, subject to its Offer for the issued share capital of Sedgwick being declared unconditional in all respects, (a) undertake to establish with effect from the date of such declaration a new retention scheme in the form set out in this attachment; and (b) grant awards under such scheme to those individuals named in the attached Appendix and such other individuals as shall be agreed between Marsh and Sedgwick as set out below. 2. The amount of Marsh deferred stock units made available for initial awards to the participants under the scheme shall have an aggregate value of approximately US$80 million measured at the date when the Offer is declared unconditional in all respects. 3. The total amount available shall be allocated between individual participants so that each individual receives an award of deferred stock units with a value of between 100% of his basic salary and US$1 million unless otherwise agreed with Marsh. Where a number is specified against the individual's name in the attached appendix he will be granted an award in respect of that number of deferred stock units as soon as reasonably practicable after the Offer is declared unconditional in all respects. The allocation of the remaining balance of unallocated deferred stock units shall be agreed by Rob White-Cooper (or his successor) and Marsh as soon as reasonably practicable after the date of the letter to which this is an attachment and in any event not later than three months after such date. Marsh undertakes to grant an Award in respect of such number of deferred stock units as soon as reasonably practicable after the Offer is declared unconditional in all respects and such agreement is reached. 4. Each award shall take the form of an award over a number of Marsh deferred stock units denominated in US$ and shall be granted in such manner and evidenced in such form as Marsh and Sedgwick shall agree. Participants will not be required to pay any monetary consideration either at the time of grant or vesting of the award. Participants will be required to comply with any arrangements for the payment of tax arising in connection with the awards which Marsh and Sedgwick agree. 5. In normal circumstances the award shall vest in respect of the total number of shares subject to the award after the third anniversary of the earlier of the date of the award and the date the offer is declared unconditional in all respects. When the award vests the participant will receive one share of Marsh common stock for each deferred stock unit. 7 6. Early vesting of an award (including any part which has not vested) will however, be permitted if the participant's employment with the Marsh Group ends prior to the relevant anniversary except in circumstances where it is terminated by his employer for cause or where the participant resigns other than for death, disability or in circumstances when he is entitled to do so by reason of the employer's conduct. Vesting will also occur if the company by which the participant is employed or the business in which he works is sold outside the Marsh group. The early vesting of awards in full will also occur in the event of a change of control (as defined in the Marsh 1997 Employee Incentive and Stock Award Plan) of Marsh. 7. Marsh common stock issued under this new scheme will rank equally in all respects with existing common stock except for rights attaching to such common stock by reference to a record date prior to vesting. 8. In the event of any variation in the capital of Marsh the number and nominal amount of deferred stock units subject to any award may be adjusted by the directors of Marsh in such manner as they reasonably determine on objective grounds to be an equitable adjustment, which is broadly consistent with equivalent adjustments made for the purposes of other Marsh employee stock and incentive plans. 8 Appendix
- -------------------------------------------------------------------------------- Name Position on Offer Becoming Agreed Target Value of Unconditional Deferred Stock Units - -------------------------------------------------------------------------------- Sax Riley A non-executive director of Marsh No DSU & McLennan Companies Inc and to help develop clients and markets. To retain membership of the Lloyd's market board and chairmanship of the Lloyds corporate capital vehicles. - -------------------------------------------------------------------------------- Rob White-Cooper An executive director of Marsh & US$1,000k McLennan Companies Inc and to be Chairman of Sedgwick Marsh & McLennan, an umbrella company/division overseeing various of the Groups operations, principally but not exclusively, outside of the Americas. Rob will work in partnership with Norman Barham as President both of whom will report to Jack Sinnott. Rob will also be a member of any appropriate broking or reinsurance broking holding company board/executive committees. - -------------------------------------------------------------------------------- Richard Titley A director of Sedgwick, Marsh & US$380k McLennan or other more appropriate board until his retirement at the end of 1999. - -------------------------------------------------------------------------------- Jeremy Pinchin To be considered further as quickly US$750k as possible. - -------------------------------------------------------------------------------- Stuart Tarrant To remain a London based senior No DSU executive pending his retirement at the end of 1998. - --------------------------------------------------------------------------------
9 - -------------------------------------------------------------------------------- David Trezies CEO worldwide of Global Marine US$800k and Energy, Global Aviation and Global FinPro based in London to report to Norman Barham. David also to be a member of the appropriate insurance broking boards for the Americas and the Rest of the World. (Sedgwick, Marsh & McLennan). - -------------------------------------------------------------------------------- Quill Healey Chairman of the Americas based in US$1,000k Atlanta with Bob Newhouse (President & CEO) both reporting to Jack Sinnott. Specific responsibilities, authorities and reporting lines to be agreed. Also to be a member of the worldwide J&H Marsh & McLennan Companies board. - -------------------------------------------------------------------------------- Agreed target value - --------------------------------------------------------------------------------
10 Annexure 3 Sedgwick Group Senior Executive Incentive Plans 1. Under the Scheme participants receive both an annual bonus and a deferred bonus. The deferred bonus is payable not later than 3 years after the date of grant but is adjusted to reflect the change in price of a Sedgwick share between the date of grant and the date falling 3 years later. 2. Pursuant to the unlimited power of amendment, Sedgwick introduced at the instigation of the compensation committee a new rule providing that in the event of a change of control occurring following an offer to acquire all the issued share capital of the company deferred bonuses adjusted on the basis set out in 3 below would be paid out in full. 3. The adjustment is made by reference to the change in the Sedgwick share price from the date of grant to the date the offer becomes unconditional. 4. In respect of any current financial year for which annual bonuses are automatically payable, the amount of the annual bonus will be determined on the basis of actual performance during the relevant period and the payment will be made as soon as practicable after the first date when actual performance for the relevant period can be assessed. The payment will be made in cash and will include an additional cash sum of equal value to a participant's annual bonus representing the deferred bonus to which he would have been entitled but without making any adjustment for changes in the share price. 1998 Senior Incentive Plan 1. Sedgwick has adopted a new senior incentive plan under which bonuses will be payable by reference to performance targets achieved during the course of 1998. Up to 50% (or such other relevant percentage applicable to the individual) of the bonus can be deferred with a matching element in Sedgwick shares awarded. 2. The rules provide that on a change of control of Sedgwick during the year the bonus for that year will become automatically payable, and not be subject to any continuation of employment thereafter, and shall be determined on the basis of actual performance during the relevant financial year (1998) but shall be not less than the amount which would have been payable if the target performance had been achieved. 3. A payment will also be made on the basis that the participant would have taken 50% (or such other relevant percentage applicable to the individual) of his bonus on a deferred basis and satisfied any necessary conditions until the end of the relevant retention period. For the purposes of calculating the value of the payment the value of any 11 Sedgwick shares which would have otherwise been transferable to the participant shall be equal to their market value based on the terms of any offer to obtain control of Sedgwick. 4. Any payment under the Plan will be made as soon as practicable after the first date when actual performance for the relevant financial year can be assessed. 5. There are currently no matching and deferred bonus shares subject to a Retention Period under this Plan. -----END PRIVACY-ENHANCED MESSAGE-----