<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
J.P. MORGAN & CO. INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
J.P. MORGAN & CO. INCORPORATED
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
ON MAY 10, 1995
J.P. Morgan & Co. Incorporated
60 Wall Street, New York, NY 10260-0060
JP MORGAN The Annual Meeting of Stockholders of J.P. Morgan & Co.
Incorporated ("Morgan") will be held in Morgan Hall West,
46th Floor, 60 Wall Street, New York, New York, on
Wednesday, May 10, 1995 at 11:00 a.m., for the following
purposes:
(1) To elect fourteen Directors to hold office until the
next annual meeting of stockholders and until their
respective successors shall have been elected and qualified;
(2) To consider and vote upon a proposal to approve the
designation of the independent accounting firm of Price
Waterhouse LLP to perform certain auditing functions for
Morgan and its consolidated subsidiaries for the year 1995;
(3) To consider and vote upon the 1995 Stock Incentive Plan
of J.P. Morgan & Co. Incorporated and Affiliated Companies
(a copy of which appears as Exhibit A to the Proxy
Statement);
(4) To consider and vote upon the 1995 Executive Officer
Performance Plan of J.P. Morgan & Co. Incorporated and
Affiliated Companies (a copy of which appears as Exhibit B
to the Proxy Statement);
(5) To consider and vote upon a stockholder-proposed
resolution set forth under "Stockholder Proposal Relating to
Cumulative Voting" in the Proxy Statement;
(6) To consider and vote upon a stockholder-proposed
resolution set forth under "Stockholder Proposal Relating to
Political Non-Partisanship" in the Proxy Statement;
(7) To consider and vote upon a stockholder-proposed
resolution set forth under "Stockholder Proposal Relating to
Structural Adjustment" in the Proxy Statement; and
(8) To act upon such other matters as may properly come
before such meeting or any adjournment thereof.
Stockholders of record at the close of business on March 13,
1995 will be entitled to vote at the meeting and at any
adjournment thereof.
Dated: March 22, 1995 Edward J. Kelly III
Secretary
YOU ARE REQUESTED TO FILL IN, SIGN, DATE AND RETURN THE
PROXY SUBMITTED HEREWITH IN THE RETURN ENVELOPE PROVIDED FOR
YOUR USE. THE GIVING OF SUCH PROXY WILL NOT AFFECT YOUR
RIGHT TO REVOKE SUCH PROXY OR TO VOTE IN PERSON SHOULD YOU
LATER DECIDE TO ATTEND THE MEETING.
<PAGE> 3
PROXY STATEMENT
This statement is furnished in connection with the
solicitation of proxies by the Board of Directors of J.P.
Morgan & Co. Incorporated ("Morgan") to be used in voting at
the Annual Meeting of Stockholders of Morgan to be held on
May 10, 1995 and at any adjournment thereof.
Stockholders whose names appeared of record on the books of
Morgan at the close of business on March 13, 1995 will be
entitled to vote at the meeting and at any adjournment
thereof. On the record date for the meeting there were
187,356,003 shares of Common Stock of Morgan outstanding and
entitled to vote. Each share of Common Stock is entitled to
one vote. Proxy material is being mailed to stockholders of
record commencing March 22, 1995.
1 ELECTION OF DIRECTORS
Fourteen Directors of Morgan are to be elected at the annual
meeting to serve until the next annual meeting of
stockholders and until their respective successors shall
have been elected and qualified. Unless authority to vote
for one or more Directors is withheld, it is intended that
shares represented by Proxies in the accompanying form will
be voted for the election of the persons listed below or, if
any such person shall unexpectedly become unable or
unwilling to accept nomination or election, for the election
of such other person as the Board of Directors may recommend
in his or her place. All of the persons listed below are
Directors of Morgan now in office and are nominees for
re-election. All nominees are currently Directors of Morgan
Guaranty Trust Company of New York (the "Bank").
The name, age, principal occupation, business directorships
and significant affiliations of an educational, charitable
or civic nature of each nominee, are set forth below.
<PAGE> 4
------------------------------------------------------------
DOUGLAS A. WARNER III Director since 1990. Age 48.
Chairman of the Board of Morgan and the Bank (since January
1995) and President of Morgan and the Bank (since January
1990). Member of the Executive Committees of Morgan and the
[PHOTO] Bank (Chairman since January 1995). Director of
Anheuser-Busch Companies, Inc. and General Electric Company.
Member of The Bankers Roundtable, The Business Council and
The Business Roundtable. Trustee of Pierpont Morgan Library
and Cold Spring Harbor Laboratory. Member of Board
of Overseers of Memorial Sloan-Kettering Cancer Center.
Member of Board of Counselors of Bechtel Group, Inc.
------------------------------------------------------------
MARTIN FELDSTEIN Director since 1993. Age 55.
President and Chief Executive Officer of National Bureau of
Economic Research, Inc. (private, non-profit research
organization) and Professor of Economics at Harvard
[PHOTO] University (since 1969). Member of the Audit Committee of
Morgan and the Examining Committee and the Committee on
Employment Policies and Benefits of the Bank. Director of
TRW Inc. and American International Group, Inc. Member of
Council on Foreign Relations, The Trilateral Commission,
American Academy of Arts and Sciences and American
Philosophical Society.
------------------------------------------------------------
HANNA H. GRAY Director since 1976. Age 64.
President Emeritus and Harry Pratt Judson Distinguished
Service Professor of History of The University of Chicago
(since July 1993). Dr. Gray was President of The University
[PHOTO] of Chicago from July 1978 to July 1993. Chairman of the
Committee on Trust Matters and member of the Committee on
Director Nominations and Board Affairs of Morgan. Director
of Ameritech Corp., Atlantic Richfield Company and Cummins
Engine Co., Inc. Trustee of Andrew W. Mellon
Foundation, Bryn Mawr College and Howard Hughes Medical
Institute. Member of Council on Foreign Relations, American
Academy of Arts and Sciences and American Philosophical
Society. Regent of The Smithsonian Institution.
------------------------------------------------------------
JAMES R. HOUGHTON(1) Director since 1982. Age 58.
Chairman and Chief Executive Officer (since April 1983) and
Director of Corning Incorporated. Chairman of the Committee
on Management Development and Executive Compensation of
[PHOTO] Morgan. Member of the Executive Committees of Morgan and the
Bank. Director of Dow Corning Corporation, Exxon Corporation
and Metropolitan Life Insurance Company. Trustee of Corning
Incorporated Foundation, Corning Museum of Glass,
Metropolitan Museum of Art and Pierpont Morgan Library.
1. Mr. Houghton is an uncle of the wife of Peter B. Smith,
Chairman, Credit Policy Committee of Morgan and the Bank.
2
<PAGE> 5
------------------------------------------------------------
JAMES L. KETELSEN Director since 1977. Age 64.
Retired Chairman and Chief Executive Officer of Tenneco Inc.
(diversified industrial). Mr. Ketelsen was Chairman of the
Board of Tenneco Inc. from July 1978 to May 1992 and Chief
[PHOTO] Executive Officer from July 1978 to January 1992. Chairman
of the Audit Committee and member of the Committee on Trust
Matters of Morgan and Chairman of the Examining Committee of
the Bank. Director of GTE Corporation and Sara Lee
Corporation. Trustee of Northwestern University.
------------------------------------------------------------
WILLIAM S. LEE Director since 1985. Age 65.
Chairman Emeritus of Duke Power Company (public utility).
Mr. Lee was Chairman, President and Chief Executive Officer
of Duke Power Company from April 1982 to April 1994.
[PHOTO] Chairman of the Committee on Director Nominations and Board
Affairs and member of the Committee on Management
Development and Executive Compensation of Morgan. Director
of Texas Instruments Inc., Knight-Ridder Inc. and Liberty
Corporation. Trustee of Queens College, Charlotte, N.C.
------------------------------------------------------------
ROBERTO G. MENDOZA Director since 1990. Age 49.
Vice Chairman of the Board of Morgan and the Bank (since
[PHOTO] January 1990) and member of the Executive Committees of
Morgan and the Bank. Director of ACE Limited and Mid Ocean
Reinsurance Company Ltd.
------------------------------------------------------------
LEE R. RAYMOND Director since 1987. Age 56.
Chairman of the Board and Chief Executive Officer (since
April 1993) and Director of Exxon Corporation. Mr. Raymond
[PHOTO] was President of Exxon Corporation from January 1987 to
April 1993. Member of the Committee on Management
Development and Executive Compensation of Morgan. Director
of American Petroleum Institute, New American Schools
Development Corporation and United Negro College Fund.
Trustee of Southern Methodist University and Wisconsin
Alumni Research Foundation. Member of The Business Council,
The Business Roundtable, Council on Foreign Relations,
Emergency Committee for American Trade, National Petroleum
Council, The Trilateral Commission and The University of
Wisconsin Foundation.
3
<PAGE> 6
------------------------------------------------------------
RICHARD D. SIMMONS Director since 1990. Age 60.
President and Director of International Herald Tribune
(since April 1989). Mr. Simmons was President of The
Washington Post Company from September 1981 to May 1991.
[PHOTO] Member of the Committee on Trust Matters of Morgan and
Chairman of the Committee on Employment Policies and
Benefits of the Bank. Director of Union Pacific Corporation,
The Washington Post Company and Yankee Publishing, Inc.
Member of General Electric Investment Corporation Equity
Advisory Board and council member of White Burkett Miller
Center of Public Affairs at The University of Virginia.
Member of the Board of Trustees of The Phillips Collection.
------------------------------------------------------------
JOHN G. SMALE Director since 1988. Age 67.
Chairman of the Board of Directors (since November 1992) and
Director of General Motors Corporation. Retired Chairman of
the Board and Chief Executive and Director of The Procter &
[PHOTO] Gamble Company (household and industrial products). Mr.
Smale was Chairman of the Board and Chief Executive of The
Procter & Gamble Company from April 1986 to January 1990 and
President and Chief Executive from January 1981 to April
1986. Member of the Audit Committee
and the Committee on Director Nominations and Board Affairs
of Morgan and the Examining Committee of the Bank. Member of
Board of Governors of The Nature Conservancy. Member of The
Business Council. Emeritus Trustee of Kenyon College.
------------------------------------------------------------
KURT F. VIERMETZ Director since 1990. Age 55.
Vice Chairman of the Board of Morgan and the Bank (since
January 1990) and member of the Executive Committees of
Morgan and the Bank. Mr. Viermetz was Treasurer of the Bank
[PHOTO] from March 1986 to February 1990. Member of Supervisory
Board of Hoechst AG. Vice Chairman of the Board of Munich
American Reinsurance Company and Munich Management
Corporation. Member of International Advisory Board of Metro
Holding AG, Zug/Switzerland. Director of New York
Philharmonic Society. Trustee of The Johns Hopkins
University's American Institute for Contemporary German
Studies. Member of Board of the American Council on Germany,
New York. Member of Advisory Council of the Center for
German and European Studies at Georgetown University. Vice
Chairman of New York Stock Exchange International Capital
Markets Advisory Committee.
------------------------------------------------------------
RODNEY B. WAGNER Director since 1993. Age 63.
Vice Chairman of the Board of Morgan (since March 1993) and
the Bank (since July 1993) and member of the Executive
Committees of Morgan and the Bank. Mr. Wagner was a Managing
[PHOTO] Director of Morgan from January 1992 to March 1993 and the
Bank from January 1992 to July 1993 and Vice Chairman of the
Credit Policy Committee of the Bank from February 1984 to
January 1992. Director of Saudi Aramco and Saudi
International Bank. Director of The World Wildlife Fund,
World Wide Fund for Nature and Children's Television
Workshop. Trustee of Robert College of Istanbul and American
University of Beirut. Member of Advisory Board of Koc
University, Istanbul.
4
<PAGE> 7
------------------------------------------------------------
DENNIS WEATHERSTONE Director since 1979. Age 64.
Mr. Weatherstone was Chairman of the Board of Morgan and the
Bank from January 1990 to January 1995 and Chairman of the
Executive Committees of Morgan from February 1991 to January
[PHOTO] 1995 and the Bank from January 1991 to January 1995. Member
of the Executive Committees of Morgan and the Bank. Director
of General Motors Corporation and Merck & Co., Inc. Director
of L'Air Liquide. Director of Institute for International
Economics. Independent member of Board of Banking
Supervision of the Bank of England. Immediate past president
of International Monetary Conference. Graduate member of
The Business Council. Trustee of Alfred P. Sloan Foundation.
Member of Economic Club of New York and advisory board of
British-American Chamber of Commerce, New York. Chairman
of The New York Community Trust. President and Trustee
of The Royal College of Surgeons Foundation, New York.
------------------------------------------------------------
DOUGLAS C. YEARLEY Director since 1993. Age 59.
Chairman of the Board and Chief Executive Officer (since May
1989) and President (since November 1991) and Director of
Phelps Dodge Corporation. Mr. Yearley was President of
[PHOTO] Phelps Dodge Industries from 1988 until 1990 and Executive
Vice President of Phelps Dodge Corporation from 1987 until
1989. Member of the Audit Committee and the Committee on
Director Nominations and Board Affairs of Morgan and the
Examining Committee of the Bank. Director of
USX Corporation and Lockheed Corporation. Chairman of
International Copper Association. Vice Chairman of American
Mining Congress. Director of Copper Development Association.
Member of Policy Committee of The Business Roundtable and
The Business Council. Trustee of Phoenix Art Museum.
------------------------------------------------------------
Included among the Committees of the Board of Directors of
Morgan are an Audit Committee, the members of which are
Messrs. Ketelsen (Chairman), Feldstein, Smale and Yearley, a
Committee on Management Development and Executive
Compensation, the members of which are Messrs. Houghton
(Chairman), Lee and Raymond, a Committee on Director
Nominations and Board Affairs, the members of which are Mr.
Lee (Chairman), Dr. Gray and Messrs. Smale and Yearley, and
a Committee on Trust Matters, the members of which are Dr.
Gray (Chairman) and Messrs. Ketelsen and Simmons.
The Audit Committee, which met five times during 1994, is
responsible for overseeing the financial reporting process
and the effectiveness of internal controls of Morgan and its
consolidated subsidiaries, including the Bank, and for
recommending to the Board of Directors of Morgan the
designation for each year of independent accountants to
examine the financial statements of Morgan and its
consolidated subsidiaries.
The Committee on Management Development and Executive
Compensation, which met five times during 1994, is
responsible for (1) consultation with senior management of
Morgan and the Bank and reporting to the appropriate Board
regarding development of qualified replacements to succeed
key executives of Morgan and the Bank; (2) reviewing and
approving all awards and options granted under Morgan's
incentive and stock plans except that awards and options
granted to employees who are also Directors are approved by
a committee composed of all non-employee Directors; (3)
administration (or supervising the administration) of such
plans; and (4) review of policies of Morgan and certain of
its subsidiaries, including the Bank, with respect to
officers' compensation.
5
<PAGE> 8
The Committee on Director Nominations and Board Affairs,
which met twice during 1994, is responsible for making
recommendations to the Board of Directors with respect to
the qualifications and nominations of Directors, Directors'
functions, committees, compensation and retirement and other
matters affecting Directors. In determining its
recommendations to Morgan's Board, the Committee on Director
Nominations and Board Affairs will consider nominees
recommended by stockholders. Such stockholder
recommendations should be made in writing, addressed to the
Committee, attention of the Secretary of J.P. Morgan & Co.
Incorporated, 60 Wall Street, New York, New York 10260-0060.
The Committee on Trust Matters, which met twice during 1994,
is responsible for reviewing the general conduct of the
business of the departments and affiliates of Morgan and the
Bank engaged in investing and administering assets held for
others in trust and investment management accounts.
Included among the Committees of the Board of Directors of
the Bank are an Examining Committee, the members of which
are Messrs. Ketelsen (Chairman), Feldstein, Smale and
Yearley, and a Committee on Employment Policies and
Benefits, the members of which are Messrs. Simmons
(Chairman) and Feldstein.
The Examining Committee, which met five times during 1994,
is responsible for examinations of the Bank in accordance
with New York banking law.
The Committee on Employment Policies and Benefits, which met
twice in 1994, is responsible for reviewing the Bank's
Retirement, Profit Sharing, and Long Term Disability Plans,
Morgan's overseas benefit plans, non-officer salary and
other benefits and employee relations and affirmative action
programs.
During 1994 there were 10 meetings of the Board of Directors
of Morgan. Each Director of Morgan attended 75% or more of
the aggregate number of meetings held during 1994 of the
Morgan Board of Directors and the Morgan committees of which
such Director was a member.
6
<PAGE> 9
BENEFICIAL The following table sets forth as of March 13, 1995, the
OWNERSHIP OF number of shares of Morgan Common Stock beneficially owned,
MANAGEMENT directly or indirectly, by each Director, each executive
officer named in the Summary Compensation Table appearing
on page 14, and all Directors and executive officers as a
group, based upon information obtained from such persons.
A list of current executive officers of Morgan is attached
as Exhibit C hereto. Each individual owns less than 1% of
Morgan Common Stock. Each person has sole investment and
voting power with respect to the shares set forth below
unless otherwise noted:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
TOTAL
NAME OF INDIVIDUAL OR GROUP SHARES(1)(2)(3)
-----------------------------------------------------------------------------------------
<S> <C>
Douglas A. Warner III......................................................... 351,075 (4)
Roberto G. Mendoza............................................................ 358,874
Kurt F. Viermetz.............................................................. 377,082
Rodney B. Wagner.............................................................. 171,466
Martin Feldstein.............................................................. 1,000
Hanna H. Gray................................................................. 800
James R. Houghton............................................................. 1,000
James L. Ketelsen............................................................. 7,800
William S. Lee................................................................ 1,000
Lee R. Raymond................................................................ 500
Richard D. Simmons............................................................ 1,000
John G. Smale................................................................. 1,010
Dennis Weatherstone........................................................... 566,875 (5)
Douglas C. Yearley............................................................ 1,000
All Directors and Executive Officers as a Group............................... 2,480,610 (6)
----------------------------------------------------------------------------------------
</TABLE>
(1) Includes the following shares of Common Stock which the
individual(s) had the right to acquire within 60 days of
March 13, 1995 through the exercise of options: Mr.
Warner -- 316,667 shares; Mr. Mendoza -- 261,878 shares; Mr.
Viermetz -- 263,046 shares; Mr. Wagner -- 161,606 shares;
Mr. Weatherstone -- 444,285 shares and all directors and
executive officers as a group -- 2,044,260 shares.
(2) In addition, Dr. Feldstein is entitled to receive 284
shares, Dr. Gray and Messrs. Houghton, Ketelsen, Lee,
Raymond, Simmons and Smale are entitled to receive 524
shares and Mr. Yearley is entitled to receive 399 shares,
after termination of services as a Director, under the
Director Stock Plan (1992) described on page 8.
(3) In addition, the individual(s) listed below are or will
be (subject to vesting of restricted stock and options)
entitled to receive or purchase the following additional
shares under various Morgan employee benefit plans:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
NAME
--------------------------------------------------------------------------------------------------
<S> <C>
Douglas A. Warner III................................................................ 299,402
Roberto G. Mendoza................................................................... 272,358
Kurt F. Viermetz..................................................................... 253,539
Rodney B. Wagner..................................................................... 197,870
Dennis Weatherstone.................................................................. 449,693
All Directors and Executive Officers as a Group...................................... 2,130,325
--------------------------------------------------------------------------------------------------
</TABLE>
(4) Includes 6,000 shares owned by his spouse and 240 shares
held in custodial accounts for his children. Mr. Warner
disclaims beneficial ownership of such shares.
(5) Includes 156 shares owned by his son. Mr. Weatherstone
disclaims beneficial ownership of such shares.
(6) As a group, beneficially owns 1.32% of Morgan Common
Stock.
7
<PAGE> 10
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTOR Each Director who is not an officer of Morgan or the
COMPENSATION Bank receives an annual retainer of $30,000 and a single
meeting attendance fee of $1,200 for meetings of the Boards
of Morgan and the Bank. Such Directors also receive annual
retainers for service on committees of the Boards in
amounts of $20,000 for the Chairmen and $12,500 for the
members of the Audit Committee and the Committee on
Management Development and Executive Compensation and
$10,000 for the Chairmen and $7,500 for the members of the
other committees. The members of the Audit Committee also
serve on the Bank's Examining Committee but receive no
additional retainer for such service. In addition,
Directors are entitled to reimbursement for travel expenses
for meetings of the Boards and committees thereof.
Under a Director Stock Plan (1992), as amended, Directors
who are not officers of Morgan or the Bank receive annually
an award of share credits for 400 shares of Morgan Common
Stock for their service during the preceding year, which
award is pro rated in the case of any Director who was not
a Director for all of the preceding year. After termination
of service as a Director, all awards are paid in shares of
stock to the Director, or, in the case of death, to the
Director's designated beneficiary or estate. Such payment
includes additional shares credited annually with respect
to the dividends that would have been paid during the year
had the share credits awarded or credited been issued as
shares of stock.
Directors who are not officers of Morgan or the Bank may
defer compensation for services rendered as Board members or
as members of Board committees pursuant to the Deferred
Compensation Plan for Directors' Fees adopted by the Boards
of Morgan and the Bank in 1973 and last amended in 1991. The
Plan permits Directors to make separate deferral elections
with respect to their annual retainer and their meeting
fees. Participating Directors may elect under the Plan to
direct Morgan or the Bank to credit deferred amounts to (i)
a Deferred Cash Account, (ii) a Deferred Stock Value Account
or (iii) a combination of both. The Plan provides that
amounts deferred to the Deferred Cash Account are credited
with interest equivalents. Amounts deferred to the Deferred
Stock Value Account are treated as "Units Based on Stock
Value" and are credited with dividend equivalents.
Participating Directors are entitled to receive cash
distribution of the balance in their accounts in full or in
annual installments (not to exceed 15 years) after
termination of service as a Director.
Retired Directors are eligible to serve as members of the
Bank's Directors Advisory Council. Members of the Council
receive an annual retainer of $30,000.
8
<PAGE> 11
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
ROLE OF THE The Committee on Management Development and
COMMITTEE Executive Compensation, composed entirely of independent
AND THE BOARD outside directors ("Outside Directors"), is responsible for
determining and administering Morgan's executive
compensation policies for its senior management group
within guidelines and plans approved by the Board of
Directors. The Committee annually evaluates individual and
corporate performance from both a short- and long-term
perspective. The Committee's recommendations regarding
officers who are Directors ("Inside Directors") are subject
to the approval of the full board of Outside Directors
(with Inside Directors not participating).
COMPENSATION Morgan's executive compensation program is designed to
PHILOSOPHY attract, reward and retain highly qualified
executives and to encourage the achievement of business
objectives and superior corporate performance. The program
seeks:
- To foster a performance-oriented environment,
where variable compensation is based upon corporate
performance as measured by achievement of short-term and
long-term objectives, taking into account economic
conditions and competitive compensation levels.
- To enhance management's long-term focus on maximizing
stockholder value through a strong emphasis on stock-based
compensation.
- To increase the variable portion of total compensation
(both cash and stock) as an individual's level of
responsibility increases. This further strengthens the
identity of interest between senior management and
stockholders.
- To promote a cohesive, team-oriented ethic among members
of senior management in order to maintain the competitive
advantage of efficiently integrating diverse global
business capabilities.
COMPONENTS OF Total compensation for Morgan's senior management is
EXECUTIVE composed of base salary, profit sharing, annual incentive
COMPENSATION compensation (of which a substantial portion is awarded in
PROGRAM the form of restricted stock) and stock option awards.
BASE SALARY Base salaries for Morgan's senior management group are
determined by evaluating the responsibilities associated
with the position held and an individual's overall level
of experience. In keeping with Morgan's emphasis on
variable rather than fixed compensation, base salaries
represent a relatively low percentage of total compensation
for these individuals. Although base salary levels are
reviewed annually, members of the senior management group
tend to receive increases only once every few years.
PROFIT SHARING All members of the senior management group participate
in a firm-wide profit sharing program, under which
individuals receive an annual award equal to a percentage
of base salary. This percentage is determined annually by
the Board of Directors, based on its assessment of Morgan's
overall performance for the year, and applies only to the
first $100,000 of base salary per individual.
INCENTIVE In keeping with its philosophy of increasing the
COMPENSATION portion of total compensation that depends upon individual
and Morgan performance as an officer's level of
responsibility increases, Morgan's executive compensation
program is heavily weighted toward incentive compensation.
To establish and maintain a common focus and shared goals
among Morgan's senior management group, an incentive
compensation pool for this group is determined at year end
by the Committee, based on its assessment of Morgan's
9
<PAGE> 12
performance as measured by various quantitative and
qualitative factors. The Committee believes that, in
accordance with its exercise of sound business judgment,
this determination is inherently subjective and must include
a review of all relevant information, with no predetermined
weight given to any of the factors considered. The primary
quantitative factors reviewed by the Committee include such
performance measures as net income (after provision for
dividends payable to stockholders) and return on average
common stockholders' equity, both as absolute measures and
relative to previous years. Significant qualitative factors
evaluated by the Committee include Morgan's performance in
relation to plan, industry performance, progress toward
achievement of Morgan's short-term and long-term business
goals, the quality of Morgan's earnings, and the overall
business and economic environment. In making its
determination, the Committee also reviews competitive
compensation levels.
Each member of senior management is allocated a fixed share
of the annual incentive compensation pool. These shares are
determined by the Committee at the commencement of each
calendar year, taking into account each participant's level
of management responsibility and contribution. Actual
incentive compensation awards generated by the pool may be
adjusted up or down under special circumstances, to reflect
individual or business unit performance. As discussed below,
awards are paid partly as cash bonuses and partly as
restricted stock.
RESTRICTED STOCK The allocation of annual incentive compensation between cash
and restricted stock, issued at full fair market value on
the date of grant and subject to five year vesting, is
determined by the Committee (or, in the case of the Inside
Directors, by the Outside Directors) and varies from year to
year. Since the value of restricted stock awards will
ultimately depend on the market value of Morgan Common
Stock, the Committee believes these awards will serve as a
continual incentive to preserve and increase stockholder
value.
For 1994, the Inside Directors received 55% of their total
incentive compensation awards in the form of restricted
stock. Other members of the senior management group received
45% of their total incentive compensation awards in the form
of restricted stock. These percentages, although decreased
somewhat from 1993, reflect the Committee's continued
commitment to fostering significant senior management stock
ownership.
STOCK OPTIONS Morgan's executive compensation program also utilizes stock
option awards, which are intended to provide additional
incentive to increase stockholder value. All such awards are
granted with an exercise price equal to 100% of the fair
market value of Morgan stock on the date of grant and become
exercisable ratably over two years. Because Morgan stock
option awards provide value only in the event of share price
appreciation, the Committee believes stock options represent
an important component of a well-balanced compensation
program. Because individual award levels are based upon a
subjective evaluation of each individual's overall past and
expected future contribution, no specific formula is used to
determine option awards for any employee. The increase in
the number of options awarded to continuing Inside Directors
reflects the Committee's determination to enhance the firm's
ability to retain and motivate senior management over the
longer term.
10
<PAGE> 13
STOCK-BASED The Committee believes that stock ownership enhances
COMPENSATION management's focus on maximizing long-term stockholder
AND STOCK value. Senior executives are strongly encouraged to
OWNERSHIP develop significant equity positions in Morgan. As
discussed above, Morgan's executive compensation program
facilitates stock ownership through the payment of a
portion of annual incentive compensation awards as
restricted stock (in lieu of cash incentive compensation),
through stock option awards, and by allowing voluntary
stock deferrals under Morgan's incentive compensation and
profit sharing plans.
CORPORATE Given the difficult environment for the financial
PERFORMANCE services industry during 1994, the Committee believes that
AND CEO 1994 performance compares favorably to that of other
COMPENSATION institutions. The firm's 1994 results were down from the
record levels of 1993, however, and this decline was
reflected in substantially lower incentive compensation
awarded for 1994.
From a quantitative perspective, net income during 1994 was
$1.215 billion, 29% lower than the $1.723 billion earned in
1993, before the cumulative effect of accounting changes.
Morgan's return on average common stockholders' equity was
13% for 1994 as compared with 22% for 1993, before the
cumulative effect of accounting changes and excluding
the impact of SFAS No. 115.
From a qualitative perspective, the Committee believes that
Morgan continues to meet the challenges of a rapidly
evolving global business environment and continues to
enhance its standing as a leading global financial
intermediary. Morgan has made substantial progress toward
achievement of its business goals, including particularly
the continued diversification of its revenues base in an
expanding range of activities, products and markets.
Moreover, Morgan has met these objectives while preserving
its strong capital base.
Mr. Weatherstone, who has served as Chairman and Chief
Executive Officer since January 1990, retired from these
positions as of December 31, 1994. During his tenure, Mr.
Weatherstone made important contributions to Morgan's
evolution from a premier commercial bank to a global
provider of complex financial services, combining commercial
and investment banking, and trading.
As Chairman and Chief Executive Officer, Mr. Weatherstone
was allocated the largest share in the incentive
compensation pool for senior officers. Mr. Weatherstone's
total annual compensation for 1994 was $4,269,000 including
the portion awarded as restricted stock with a grant date
value of $1,959,100 (shown as long-term awards in the
Summary Compensation Table). This represents a 35% decrease
in his total annual compensation from 1993 levels, in the
context of a 29% decrease in earnings.
In addition, the Outside Directors awarded Mr. Weatherstone
options to purchase 150,000 shares of Morgan Common Stock.
This award recognizes Mr. Weatherstone's leadership and
contributions in positioning the firm for future success.
Because Mr. Weatherstone is no longer an employee of Morgan
(although he will continue serving as a Director), there
will be no requirement for continued employment for the
options to become exercisable. However, the same vesting
restrictions that apply to employees will apply to Mr.
Weatherstone's award.
TAX DEDUCTIBILITY Section 162(m) of the Internal Revenue Code limits the tax
OF EXECUTIVE deductibility of compensation in excess of $1 million paid
COMPENSATION to certain members of senior management, unless the
payments are made under a performance-based plan as defined
in Section 162(m). As indicated above, Morgan's executive
compensation program is designed to encourage the
achievement of business
11
<PAGE> 14
objectives and superior corporate performance. It is the
Committee's view that Morgan's programs are
performance-based. However, in order to satisfy the
technical requirements of the statute and proposed
regulations, the Committee has recommended and the Board has
adopted the 1995 Executive Officer Performance Plan for
affected members of senior management. The plan is being
recommended for stockholder approval in this Proxy
Statement. While the Committee currently intends to pursue a
strategy of maximizing deductibility of senior management
compensation, as evidenced by its adoption of the 1995
Executive Officer Performance Plan, it also believes it is
important to maintain the flexibility to take actions it
considers to be in the best interests of Morgan and its
stockholders, which may be based on considerations in
addition to Section 162(m).
The Committee on Management Development and Executive
Compensation
James R. Houghton, Chairman
William S. Lee
Lee R. Raymond
12
<PAGE> 15
STOCK The following graphs show changes over the past five-
PERFORMANCE and ten-year periods in the value of $100 invested in: (1)
GRAPHS Morgan's Common Stock; (2) the Standard & Poor's 500 Index;
(3) companies which comprised the Dow Jones Industrial
Average as of December 31, 1994 (of which Morgan is one)
and (4) Standard & Poor's Financial Index.
J.P. MORGAN COMPARISONS OF FIVE YEAR TOTAL STOCKHOLDER
RETURN
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) J. P. Morgan S&P 500 S&P Financial DJ Industrial
<S> <C> <C> <C> <C>
1989 100.0 100.0 100.0 100.0
1990 106.0 96.9 78.6 99.4
1991 170.0 126.3 118.3 123.5
1992 169.0 135.9 145.9 132.6
1993 184.6 149.5 162.0 155.1
1994 156.4 151.5 156.4 163.0
</TABLE>
J.P. MORGAN COMPARISONS OF TEN YEAR TOTAL STOCKHOLDER RETURN
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) J. P. Morgan S&P 500 S&P Financial DJ Industrial
<S> <C> <C> <C> <C>
1984 100.0 100.0 100.0 100.0
1985 170.8 131.6 142.5 133.5
1986 226.6 156.2 153.9 169.7
1987 205.7 164.2 128.1 179.0
1988 206.5 191.3 151.4 207.9
1989 271.3 251.8 200.7 274.9
1990 287.7 243.9 157.7 273.3
1991 461.2 317.9 237.5 339.4
1992 458.5 342.1 292.8 364.6
1993 501.0 376.4 325.1 426.3
1994 424.4 381.6 313.9 447.9
</TABLE>
The year-end values of each investment shown in the
preceding graphs are based on share price appreciation plus
dividends, with the dividends reinvested as of the last
business day of the month during which such dividends were
ex-dividend. The calculations exclude trading commissions
and taxes. Total stockholder returns from each investment,
whether measured in dollars or percentages, can be
calculated from the year-end investment values shown beneath
each graph.
13
<PAGE> 16
SUMMARY The following table sets forth, for the years ending
COMPENSATION December 31, 1994, 1993, and 1992, the annual and long term
TABLE compensation paid or accrued for those years by Morgan, to
the Chief Executive Officer and the four most highly
compensated executive officers of Morgan.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------------------- ------------------------
AWARDS
------------------------
SECURITIES
RESTRICTED UNDERLYING
NAME AND OTHER ANNUAL STOCK STOCK ALL OTHER
PRINCIPAL SALARY COMPENSATION AWARD OPTIONS COMPENSATION
POSITION YEAR ($) BONUS(1) ($)(2) ($)(3)(4) (# SHARES) ($)(5)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dennis
Weatherstone 1994 $700,000 $1,609,900 $ 0 $1,959,100 150,000 $ 7,000
Chairman 1993 700,000 2,364,400 35,113 3,531,600 70,000 10,000
1992 691,667 1,741,500 0 2,117,500 70,000 9,000
Douglas A.
Warner III 1994 500,000 1,449,600 0 1,763,200 90,000 22,056
President 1993 500,000 2,130,400 0 3,180,600 60,000 23,094
1992 491,667 1,568,300 0 1,905,700 60,000 20,390
Roberto G.
Mendoza 1994 425,000 1,353,400 0 1,645,700 75,000 15,703
Vice Chairman 1993 425,000 1,986,400 0 2,964,600 55,000 17,704
1992 420,833 1,464,300 0 1,778,700 55,000 15,821
Kurt F.
Viermetz 1994 425,000 1,353,400 0 1,645,700 75,000 7,000
Vice Chairman 1993 425,000 1,986,400 0 2,964,600 55,000 10,000
1992 420,833 1,464,300 0 1,778,700 55,000 9,000
Rodney B.
Wagner 1994 375,000 1,129,000 0 1,371,400 60,000 7,000
Vice Chairman 1993 356,346 1,421,200 20,422 2,116,800 35,000 10,000
1992 250,000 898,400 0 727,600 22,000 9,000
--------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes the cash portion of awards under the Bank's
profit sharing program.
(2) In the cases of Messrs. Weatherstone and Wagner who both
deferred portions of their 1993 annual bonuses into Morgan
Common Stock equivalents, amounts representing the
difference between the fair market value of Morgan Common
Stock and the conversion price for such deferrals on the
date such deferrals were credited to their accounts. Note
that annual bonus deferral elections are made substantially
prior to the time when the conversion price is determinable.
Furthermore, the conversion price for stock-based deferrals
is determined based upon a predetermined formula and could
be either higher or lower than the fair market value of
Morgan Common Stock on the actual date such deferrals are
credited.
(3) The amounts reported in this column represent the fair
market value of restricted stock units awarded at 100% of
the fair market value of Morgan Common Stock on the grant
date (1994 -- $60.50; 1993 -- $71.00 and 1992 -- $60.75)
without diminution in value attributable to the restrictions
on such stock. Annual dividend equivalents are converted
into additional share credits in accordance with the
provisions of the plan(s) under which they were granted.
Restricted Stock awards generally become vested five years
after the date of grant thereof or, in the case of
retirement or death, become vested at the rate of 20% per
year. The Committee on Management Development and Executive
Compensation may accelerate vesting of Restricted Stock in
its sole discretion.
(4) The named officers had non-vested Restricted Stock award
balances outstanding as of January 16, 1995 of 166,666
shares ($9,495,801), 148,827 shares ($8,480,420), 139,022
shares ($7,921,619), 139,022 shares ($7,921,619) and 81,105
shares ($4,651,191) for Messrs. Weatherstone, Warner,
Mendoza, Viermetz and Wagner, respectively. Dollar values
are based on (i) the closing price of Morgan Common Stock on
December 30, 1994, ($56.125) for shares which were
outstanding on such date and (ii) the average of the high
and low prices of Morgan Common Stock on January 16, 1995
($60.50) for shares awarded as of such date.
(5) Includes (i) contributions to the Bank's deferred profit
sharing plan of $7,000, $10,000, and $9,000 for Messrs.
Weatherstone, Warner, Mendoza, Viermetz and Wagner for 1994,
1993 and 1992, respectively, and (ii) interest exceeding
120% of the applicable federal rate deemed to have accrued
on deferrals under Morgans' incentive compensation plans
(based on termination and distribution at the earliest date
permissible under the plans although no such interest will
be accrued assuming employment until normal retirement age)
of $15,056, $13,094, and $11,390 for Mr. Warner, and $8,703,
$7,704, and $6,821 for Mr. Mendoza, for 1994, 1993, and
1992, respectively.
14
<PAGE> 17
STOCK OPTIONS The following tables show, as to the Chief Executive Officer
and the four most highly compensated executive officers of
Morgan, information relating to stock options awarded by
Morgan. The first table shows, along with certain additional
information, hypothetical realizable values of stock options
granted for the last fiscal year, at assumed rates of
cumulative stock price appreciation over the ten year life
of such options. These assumed rates of appreciation are set
by the proxy rules of the Securities and Exchange Commission
(the "SEC") and are not intended to forecast appreciation of
the price of Morgan Common Stock. These hypothetical values
have not been discounted to reflect their present value. The
second table shows certain information relating to stock
options exercised during the previous fiscal year and stock
options outstanding as of December 31,1994 or awarded as of
January 16, 1995 in respect of the 1994 fiscal year. Morgan
does not grant any Stock Appreciation Rights.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
FOR
INDIVIDUAL GRANTS(1) OPTION TERM
------------------------------------------------------------------ ------------------------
5% ($)
% OF TOTAL (ASSUMING 10% ($)
NUMBER OPTIONS 1/14/05 (ASSUMING
OF SHARES GRANTED TO SHARE 1/14/05
UNDERLYING EMPLOYEES EXERCISE OR PRICE SHARE PRICE
OPTIONS IN FISCAL BASE PRICE EXPIRATION OF OF
NAME GRANTED(2) YEAR ($/SH) DATE $98.548) $156.921)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dennis Weatherstone..... 150,000 2.50% $60.50 1/14/05 $5,707,200 $14,463,150
Douglas A. Warner III... 90,000 1.50 60.50 1/14/05 3,424,320 8,677,890
Roberto G. Mendoza...... 75,000 1.25 60.50 1/14/05 2,853,600 7,231,575
Kurt F. Viermetz........ 75,000 1.25 60.50 1/14/05 2,853,600 7,231,575
Rodney B. Wagner........ 60,000 1.00 60.50 1/14/05 2,282,880 5,785,260
-------------------------------------------------------------------------------------------------
</TABLE>
(1) Information provided in this table relates to options
granted to the named individuals on January 16, 1995 in
respect of services performed during calendar year 1994,
except for Mr. Weatherstone, for whom such options were
granted in respect of career-long services.
(2) Options become exercisable as to 50% of the shares
subject thereto on the first and second anniversaries of the
grant date.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISES UNEXERCISED OPTIONS AT FY-END(1)
-------------------------- ---------------------------------------------------------------
SHARES VALUE OF SECURITIES
ACQUIRED UNDERLYING
ON EXERCISE VALUE NUMBER (#) IN-THE-MONEY OPTIONS ($)
(#) REALIZED ($) ---------------------------------------------------------------
NAME EXERCISABLE UNEXERCISABLE(1) EXERCISABLE UNEXERCISABLE(1)
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dennis
Weatherstone... 0 $ 0 374,285 255,000 $4,427,263 $0
Douglas A.
Warner III..... 2,346 53,811 256,667 180,000 2,654,804 0
Roberto G.
Mendoza........ 0 0 206,878 157,500 1,556,687 0
Kurt F.
Viermetz....... 0 0 218,046 157,500 1,928,812 0
Rodney B.
Wagner......... 0 0 133,106 106,000 1,697,252 0
--------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes options granted on January 16, 1995 in respect
of 1994 fiscal year, valued at grant date since not
outstanding at 1994 fiscal year end.
15
<PAGE> 18
RETIREMENT Pursuant to the Bank's Retirement Plan for United
BENEFITS States employees and, in certain cases, the Bank's Benefit
Equalization Plan, annual benefits are payable upon
retirement to employees of Morgan and the Bank and
participating subsidiaries. The amounts shown in the
following table are those currently payable under the
Retirement Plan (and, where applicable, the Bank's Benefit
Equalization Plan) upon retirement in January 1995 at age
65 of a participating employee who has elected to receive
his or her pension under a straight-life annuity option.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
HIGHEST AVERAGE ANNUAL SALARY OVER ESTIMATED ANNUAL RETIREMENT BENEFITS(1) FOR
THREE CONSECUTIVE YEARS OF SERVICE REPRESENTATIVE YEARS OF CREDITED SERVICE
---------------------------------------------------------------------------------------------------
15 YEARS 20 YEARS 25 YEARS 30 YEARS
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 50,000...................................... $ 13,035 $ 17,380 $ 21,725 $ 26,070
100,000...................................... 27,285 36,380 45,475 54,570
150,000...................................... 41,535 55,380 69,225 83,070
200,000...................................... 53,932 72,545 91,158 109,771
300,000...................................... 78,632 106,745 134,858 162,971
500,000...................................... 128,032 175,145 222,258 269,371
---------------------------------------------------------------------------------------------------
</TABLE>
(1) The Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), limits the amount of annual benefits
which may be payable under a Federal income tax qualified
plan, such as the Bank's Retirement Plan. As permitted by
ERISA, the Bank's Benefit Equalization Plan provides for the
payment (out of the general funds of the Bank) of
supplemental pension benefits to participants in the Bank's
Retirement Plan to the extent such participants' benefits
under the Retirement Plan are reduced by reason of the ERISA
limitations. The extent of any reduction will vary in
individual cases according to circumstances existing at the
time retirement benefit payments commence.
The Bank's Retirement Plan for United States employees
provides retirement benefits for eligible employees (regular
employees with six months continuous service who have
attained age 21). Annual benefits payable upon retirement
are computed under a formula which is based on the
employee's average annual salary for the three highest-paid
consecutive years within the final ten years prior to
termination of employment. Effective February 1, 1993 there
is a $150,000 limit on all future annual salary amounts used
in determining retirement benefits under the Retirement
Plan, the Benefit Equalization Plan and the International
Pension Plan described below. The current annual
remuneration covered by the Retirement Plan, taking into
account the amendments described above, is $150,000 for all
of the individuals named in the Summary Compensation Table
on page 14 and the credited years of service for such
individuals are as follows: Mr. Weatherstone, 26 years; Mr.
Warner, 26 years; Mr. Mendoza, 26 years; Mr. Viermetz, 10
years and Mr. Wagner, 35 years. Including benefits accrued
prior to the February 1, 1993 effective date of the
amendments, the estimated annual benefits for the
individuals named in the Summary Compensation Table,
assuming retirement at age 65, are as follows: Mr.
Weatherstone $294,778; Mr. Warner $217,686; Mr. Mendoza
$199,549; Mr. Viermetz $89,205 and Mr. Wagner $143,848. Mr.
Weatherstone also has 22 years credited service under the
Bank's Pension Plan for Employees Paid in British Sterling
and under that plan is entitled to receive a retirement
benefit in the annual amount of L23,017 upon retirement at
or after age 60. In addition, Mr. Viermetz has 20 years
credited service under the Bank's Pension Plan for Employees
in Germany and under that plan is entitled to receive a
retirement benefit in the annual amount of DM 87,230 upon
retirement at or after age 65.
Morgan's International Pension Plan, of which Mr.
Weatherstone and Mr. Viermetz are members by virtue of prior
overseas service, provides additional retirement
16
<PAGE> 19
benefits to certain employees assigned outside their home
countries, based on the employee's average annual salary for
the three highest-paid consecutive years within the final
ten years of credited service preceding retirement. The
International Pension Plan benefit is paid in a lump sum and
is determined by multiplying such average salary by the
employee's years of credited service and a lump sum accrual
rate factor based on the employee's age and deducting an
amount equal to the total of all other retirement benefits
payable under other Morgan plans and government sponsored
pension benefits worldwide. As of December 31, 1994, Mr.
Weatherstone and Mr. Viermetz would have been entitled to
receive lump sum retirement benefits of approximately $1.8
million and $2.0 million, respectively, under the
International Pension Plan.
------------------------------------------------------------
TRANSACTIONS Some of Morgan's Directors and executive officers and their
WITH DIRECTORS associates, including affiliates, and organizations of
AND OFFICERS which some of Morgan's Directors are officers or
trustees, have had transactions in the ordinary course of
business with Morgan and subsidiaries of Morgan, including
the Bank. Such transactions have included borrowings (all of
which were on substantially the same terms, including
interest rates, and collateral, if any, as those prevailing
at the time for comparable transactions with other persons
and did not involve more than normal risk of collectibility
or present other unfavorable factors), deposits, purchases
of commercial paper issued by Morgan or one of its
subsidiaries, purchases of government, municipal and certain
other securities, and investment banking, financial
advisory, and other financial services and market
transactions.
In the ordinary course of business Morgan and its
subsidiaries, including the Bank, use the products or
services of a number of organizations with which Directors
of Morgan are affiliated as officers, including Corning
Incorporated and Exxon Corporation. It is expected that
Morgan and the Bank will in the future have transactions
with organizations with which Directors of Morgan are
affiliated as officers or directors.
2 APPROVAL OF INDEPENDENT ACCOUNTANTS
For the year 1995 the Board of Directors of Morgan has
designated the firm of Price Waterhouse LLP to examine the
financial statements of Morgan and its consolidated
subsidiaries, including the Bank, and to assist the
Examining Committee of the Bank in making its Directors'
examination in accordance with applicable laws and
regulations. This designation is in accordance with the
recommendation of the Audit Committee of Morgan. The Board
of Directors is submitting the designation to the
stockholders for approval. Price Waterhouse LLP served as
Morgan's principal independent accounting firm for the year
1994. Total audit fees to independent accounting firms in
1994 amounted to approximately $14.7 million.
Representatives of Price Waterhouse LLP are expected to be
present at the annual meeting with the opportunity to make a
statement if they desire to do so and to be available to
respond to appropriate questions.
The affirmative vote of a majority of the shares of Common
Stock of Morgan represented and voting at the annual meeting
is required for approval of the foregoing proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOREGOING
PROPOSAL.
17
<PAGE> 20
3 1995 STOCK INCENTIVE PLAN
The Board of Directors of Morgan has adopted the 1995 Stock
Incentive Plan of J.P. Morgan & Co. Incorporated and
Affiliated Companies (the "1995 Plan"), subject to
stockholder approval at the annual meeting. The Board
believes that the adoption of the 1995 Plan will provide an
effective means of attracting and retaining qualified key
personnel in the highly competitive market for executive
talent and enhancing their long-term focus on maximizing
stockholder value. In the judgment of the Board, approval of
the 1995 Plan will be in the best interests of Morgan and
its stockholders.
The 1995 Plan is similar to the 1992 Stock Incentive Plan
which was approved by the stockholders at the 1992 annual
meeting and which expires pursuant to its terms in May 1995
with respect to the grant of further awards. Although awards
may be granted during the full ten year term of the 1995
Plan, it is currently anticipated that the authorized shares
will be awarded with respect to the 1995-1999 award years.
Morgan currently intends to continue its practice of
minimizing the dilutive effect of its stock incentive and
bonus plans through the acquisition of shares in the open
market for use under such plans (including the 1995 Plan).
In recent years these share repurchases have been
significantly increased to reflect the payment of
increasingly substantial portions of annual bonuses in stock
awards in lieu of cash under these plans. For 1994, Morgan
purchased 7,000,000 shares of Common Stock, and Morgan has
publicly disclosed its intention to purchase up to an
additional 7,000,000 shares of Common Stock.
The 1995 Plan does not permit the repricing of options or
the grant of discounted options. Provisions have also been
included to meet the requirements for deductibility by
Morgan under Section 162(m) of the Internal Revenue Code
with respect to options and other awards.
There follows a brief description of the principal features
of the 1995 Plan. The full text of the 1995 Plan is attached
as Exhibit A and the following description is qualified in
its entirety by reference to such Exhibit.
Limit on Awards under the 1995 Plan. The maximum number of
shares in respect of which options, stock appreciation
rights and awards may be granted is 28,000,000, of which
7,000,000 may be utilized for restricted stock and stock
unit awards. During the ten year term of the Plan, no person
may be granted options or stock appreciation rights on more
than 2,800,000 shares. The shares to be delivered under the
Plan will be made available from the authorized but unissued
shares of Morgan or from shares reacquired by Morgan. Shares
subject to lapsed or cancelled awards or options, and shares
tendered in a stock-for-stock exercise of options will be
available for further awards and options.
Administration. The selection of participants in the 1995
Plan and the extent of the participation of each will be
determined by a committee consisting of not less than three
Directors whose members will be designated by the Board of
Directors and who will be disinterested within the meaning
of Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), except that in
18
<PAGE> 21
respect of options and awards granted to participants who
are also Directors, the Committee consists of all
non-employee Directors (the "Committee"). The Committee's
determination will be made after such consultation with
management as the Committee considers desirable. The
Committee will administer the 1995 Plan, subject to such
resolutions as may from time to time be adopted by the Board
of Directors.
Eligibility. The employees eligible to receive options and
awards under the 1995 Plan will consist of key employees of
Morgan and its participating affiliated companies. The
employees to receive options and awards under the 1995 Plan
and the number of shares that may be granted to any person
(subject to the overall limitations noted earlier) have not
been determined. It is expected that each such determination
will be based on each individual's current and potential
contribution to the success of Morgan and its affiliated
companies. At the discretion of the Committee, any
participant may receive any combination of options, Stock
Appreciation Rights ("SARs") and awards. Directors who are
not employees of Morgan or its affiliated companies will not
be eligible to participate. The present Directors and
nominees for election as Directors who will be eligible to
receive options and awards are Messrs. Warner, Mendoza,
Viermetz and Wagner.
Stock Options. Options granted under the 1995 Plan may be
either nonqualified stock options or incentive stock options
qualifying under Section 422 of the Internal Revenue Code.
Each option granted under the 1995 Plan will expire not more
than ten years from the date the option is granted and may
be exercised not earlier than one year from the date of
grant, and (except in the event of death or retirement)
while employed with Morgan or its affiliated companies.
Unless the Committee provides otherwise, and subject to the
one year minimum described above, each option will vest
ratably over the first three anniversaries of the grant
date. In the event of the retirement of an optionee, options
generally will remain exercisable for three years, or for
their full remaining term if the optionee has attained age
55 upon retirement. In the event of the death of an optionee
after retirement, options will remain exercisable for the
remainder of the three years or full term, as the case may
be. In the event of the death of an optionee while employed,
options generally will remain exercisable for three years.
Upon termination of employment for any reason other than
death or retirement, any unexercised options generally will
be cancelled. In no event, however, will such options be
exercisable prior to the date or dates on which they would
have been exercisable if the optionee remained employed with
Morgan or its Affiliated Companies or after the expiration
of the original option term. In the discretion of the
Committee, any outstanding options may be cancelled at any
time with or without cause.
The Committee also has the authority to require that in the
case of certain voluntary terminations of employment, any
profit realized by the terminated optionee by reason of
option or SAR exercises during the six month period
preceding such termination of employment be repaid to
Morgan.
Generally, an option granted under the 1995 Plan may not be
transferred except by will or the laws of descent and
distribution and, during the lifetime of the optionee to
whom granted, may be exercised only by such optionee.
However, the Committee has the authority to permit options
to be transferred to members of the optionee's immediate
family and certain family trusts or partnerships.
19
<PAGE> 22
The price at which shares may be purchased upon exercise of
any option will not be less than 100% of the fair market
value of such shares on the date such option is granted. The
1995 Plan does not provide for option repricing except in
the event of an unusual corporate event as described below
under "Certain Adjustments." Upon exercise, the shares are
to be paid for in full in cash or, unless prohibited by the
Committee, through the delivery of shares of Common Stock of
Morgan with a value equal to the total option price (for
instance, the Committee prohibits "pyramiding" of
stock-for-stock exercises), or a combination of cash and
shares, or through such other methods permitted by the
Committee.
Stock Appreciation Rights. Stock appreciation rights may be
granted unrelated to an option ("Stand Alone SARs") or in
tandem with options granted under the 1995 Plan ("Related
SARS"). A SAR will be exercisable at such time as the
Committee determines, but in no event earlier than one year
prior to the date of grant. A Related SAR will be
exercisable only upon surrender of the related option and
only to the extent that the related option (or the portion
thereof as to which such SAR is exercised) is exercisable.
Upon exercise of a SAR, the holder is entitled to receive
the excess of the fair market value of the shares for which
the right is exercised over, in the case of a Related SAR,
the option price under the related option or, in the case of
a Stand Alone SAR, the fair market value of Morgan Common
Stock on the date of grant. For administrative convenience,
the 1995 Plan allows the Committee to provide that any
exercise of a SAR for cash by a person subject to the rules
of Section 16 of the 1934 Act and during the third through
the twelfth day after the release of Morgan's quarterly
financial results will be deemed to occur on the day during
such ten-day period on which the price of the Common Stock
of Morgan was the highest.
The Committee has the authority to determine whether the
value of a SAR is paid in cash or shares of Common Stock of
Morgan or both. The Committee may at any time amend (within
the parameters of the 1995 Plan), suspend or terminate any
SAR.
Restricted Stock Awards. Restricted stock awards will be
made in the form of share credits, each of which is
equivalent to one share of Common Stock of Morgan. From time
to time in its discretion, the Committee shall select
participants, determine when each award will be granted, and
determine the number of share credits subject to each award.
Awards generally will be 100% vested on the fifth
anniversary of the day the award was granted, with any
termination of employment prior to that date, for reasons
other than death or retirement, resulting in the forfeiture
of the award. Upon a termination of employment on account of
retirement or death prior to the fifth anniversary of the
award, the award generally will be 20% vested for each
twelve months elapsed from the date of the award to the date
of such termination. The Committee also has the authority to
provide a vesting period or periods of longer or shorter
than five years (but not less than one year), to provide
performance-based vesting periods, and to fix alternative
vesting percentages upon death or retirement. The Committee
may, in its sole discretion, cancel any award in whole or in
part to the extent that it has not become vested or, in
appropriate circumstances, accelerate the vesting of any
award within the parameters of the 1995 Plan.
20
<PAGE> 23
Restricted Stock Awards may be made under the 1995 Plan in
satisfaction of awards granted under the 1995 Executive
Officer Performance Plan. See pages 23 through 25 and
Exhibit B for more information on that plan.
Awards shall be paid to the participant (or, in the case of
a participant's death, the participant's beneficiary) as
soon as practicable after such award has become vested. At
the time vested share credits are paid, the recipient shall
also be entitled to receive the dividend equivalent amount
for such share credits. The dividend equivalent amount is
the number of shares of Common Stock that could have been
purchased with the dividends paid on the number of shares of
Common Stock represented by such share credits and all
additional share credits attributable to previously-credited
dividend equivalents. The Committee may provide for earlier
payment of dividend equivalent amounts.
At the discretion of the Committee and subject to such rules
as the Committee may prescribe, a participant may elect to
have payment of awards deferred until such date or dates as
the participant elects. The Committee may also require that
payment of awards be deferred until such date or dates as it
shall determine.
Stock Unit Awards. In order to enable Morgan and the
Committee to respond quickly to significant developments in
applicable tax and other legislation, regulations and
interpretations, and to trends in executive compensation
practices, the 1995 Plan authorizes the Committee to grant
to eligible employees, awards of Common Stock and other
awards that are valued in whole or in part by reference to,
or are otherwise based on, the value of the Common Stock of
Morgan ("Stock Unit Awards").
The Committee shall determine the eligible employees to whom
Stock Unit Awards are to be made, the time(s) at which such
awards are to be made, the size of such awards and all other
conditions of such awards, including any restrictions,
deferral periods or performance requirements. In no event
will any Stock Unit Award vest prior to one year following
the date of grant of the award. The provisions of Stock Unit
Awards need not be the same with respect to each recipient,
and shall be subject to such rules and regulations as the
Committee shall determine. Stock Unit Awards may provide
that (i) the employee shall not be permitted to sell,
transfer, pledge or assign any shares involved prior to the
date on which the shares are issued or, if later, the date
on which any applicable restriction, performance or deferral
period lapses, (ii) the employee shall have the right to
receive currently or on a deferred basis, as determined by
the Committee, interest or dividends, or interest or
dividend equivalents, and (iii) the awards shall be subject
to such forfeiture provisions as the Committee shall
determine.
Certain Adjustments. In the event that the Committee shall
determine that any stock dividend, extraordinary cash
dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of
shares, warrants or rights offering to purchase Common Stock
at a price substantially below fair market value, or other
similar corporate event affects the Common Stock such that
an adjustment is required in order to preserve the benefits
or potential benefits intended to be made available under
the 1995 Plan, then the Committee shall, in its sole
discretion, and in such manner as the Committee may deem
equitable, adjust any or all of (1) the number and kind of
shares which thereafter may be awarded or optioned and sold
or made the subject of stock appreciation rights under the
Plan, (2) the number and kind of shares subject to
outstanding options and awards, and stock appreciation
rights, and (3) the option price or SAR exercise price, if
deemed appropriate, and make provision for a cash payment to
a participant. The number of shares subject to any option or
award shall always be a whole number.
21
<PAGE> 24
In the event of a change in control, unless the Committee
determines otherwise, all options and stock appreciation
rights become immediately exercisable in full, and all
awards become immediately payable in full.
Amendments, Suspension or Discontinuance of the 1995
Plan. The Board of Directors may amend, suspend or
discontinue the 1995 Plan but may not, without the prior
approval of the stockholders of Morgan, make any amendment
for which stockholder approval is necessary to comply with
any applicable tax or regulatory requirement.
Termination of the 1995 Plan. No option or award may be
granted under the 1995 Plan after the expiration of ten
years from the date on which the 1995 Plan is approved by
vote of the stockholders of Morgan.
Plan Benefits. Future benefits under the 1995 Plan are not
currently determinable. However, benefits granted with
respect to 1994 to Executive Officers and all other
employees would not have been increased had they been made
under the proposed 1995 Plan.
The schedule below shows what awards would have been made in
1994 if the 1995 Plan were in effect at that time. These are
identical to the awards actually made with respect to 1994.
No Stock Appreciation Rights or Stock Unit Awards would have
been awarded.
STOCK OPTIONS
<TABLE>
<CAPTION>
DOLLAR VALUE
(GRANTED AT FAIR OPTIONS
MARKET VALUE) SHARES
---------------- ----------------
<S> <C> <C>
Weatherstone................................. $ 0 150,000
Warner....................................... 0 90,000
Mendoza...................................... 0 75,000
Viermetz..................................... 0 75,000
Wagner....................................... 0 60,000
All Executive Officers....................... 0 522,000
All Outside Directors........................ 0 0
All Employees................................ 0 5,991,952
</TABLE>
RESTRICTED STOCK
<TABLE>
<CAPTION>
DOLLAR VALUE
(IF GRANTED AT SHARES OF
$60.50 PER RESTRICTED
SHARE) STOCK*
---------------- ----------------
<S> <C> <C>
Weatherstone................................. $ 1,959,100 32,382
Warner....................................... 1,763,200 29,144
Mendoza...................................... 1,645,700 27,202
Viermetz..................................... 1,645,700 27,202
Wagner....................................... 1,371,400 22,668
All Executive Officers....................... 9,939,600 164,291
All Outside Directors........................ 0 0
All Employees................................ 27,679,300 457,509
</TABLE>
*Rounded to nearest whole share.
Federal Income Tax Consequences of the 1995 Plan. In the
opinion of counsel to Morgan, the Federal income tax
consequences of the 1995 Plan are as follows:
(1) With respect to nonqualified stock options granted
under the 1995 Plan: When an optionee exercises an
option, the difference between the option price and any
higher fair market value of the shares on the date of
exercise will
22
<PAGE> 25
be ordinary income to the optionee and will be allowed
as a deduction for Federal income tax purposes to Morgan
or its subsidiaries.
(2) With respect to incentive stock options under the
1995 Plan: When an optionee exercises an incentive stock
option while employed by Morgan or a subsidiary or
within the three month (one year for disability) period
after termination of employment by reason of retirement,
no ordinary income will be recognized by the optionee at
the time but the excess of the fair market value of the
shares acquired by such exercise over the option price
will be an adjustment to taxable income for purposes of
the Federal alternative minimum tax applicable to
individuals. If the shares acquired upon exercise are
disposed of more than one year after the date of
transfer and two years after the date of grant, the
excess of the sale proceeds over the aggregate option
price of such shares will be long term capital gain but
Morgan will not be entitled to any tax deductions with
respect to such gain. If the shares are disposed of
prior to such date (a "disqualifying disposition"), the
excess of the fair market value of such shares at the
time of exercise over the aggregate option price (but
not more than the gain on the disposition if the
disposition is a transaction on which a loss, if
realized, would be recognized) will be ordinary income
at the time of such disqualifying disposition (and
Morgan or its subsidiary will be entitled to a Federal
tax deduction in a like amount). If an incentive stock
option is exercised by the optionee more than three
months (one year for disability) after termination of
employment the tax consequences are the same as
described above in (1) for nonqualified stock options.
(3) With respect to stock appreciation rights and awards
under the 1995 Plan: When an optionee exercises stock
appreciation rights granted to him under the 1995 Plan
or receives payment with respect to an award awarded to
him under the 1995 Plan, the amount of cash and the fair
market value of the shares received will be ordinary
income to the optionee and will be allowed as a
deduction for Federal income tax purposes to Morgan or
its subsidiaries.
Certain additional special rules may apply if the exercise
price for an option is paid for in shares previously owned
by the optionee rather than in cash or if the optionee is
subject to Section 16 of the 1934 Act.
The closing price of Morgan's Common Stock on the New York
Stock Exchange on March 15, 1995 was $60.25 per share.
The affirmative vote of the holders of a majority of the
shares of Common Stock of Morgan represented and voting at
the annual meeting is required for approval of the 1995
Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE 1995 PLAN,
AS DESCRIBED ABOVE.
4 1995 EXECUTIVE OFFICER PERFORMANCE PLAN
Morgan maintains an Incentive Compensation Plan under which
officers of Morgan, the Bank and other Participating
Companies are eligible to receive annual awards. Recently,
Federal tax rules have been amended by adding Section 162(m)
to the Internal Revenue Code which limits the deductibility
by publicly-held companies of compensation amounts paid to
certain senior officers which exceed $1,000,000,
23
<PAGE> 26
unless certain requirements are satisfied. These
requirements include stockholder approval of an arrangement
which meets the requirements of the rules as they apply to
"performance based compensation." As noted in the
"Compensation Committee Report on Executive Compensation" on
page 9 of this Proxy Statement, the Committee believes that
Morgan's executive compensation program is designed to
encourage the achievement of business objectives and
superior corporate performance and it is the Committee's
view that Morgan's programs are performance-based. In order
to satisfy the requirements of the rules, however, the
Committee has recommended and the Board has adopted the 1995
Executive Officer Performance Plan of J.P. Morgan & Co.
Incorporated and Affiliated Companies (the "1995 Performance
Plan") subject to approval by the stockholders. The
following is a brief description of the principal features
of the 1995 Performance Plan. The full text of the 1995
Performance Plan is attached as Exhibit B and the following
description is qualified in its entirety by reference to
such Exhibit.
Eligibility. The 1995 Performance Plan will only apply to
awards made to "covered employees" as defined in Section
162(m). Currently, covered employees include the Chairman
and the four most highly compensated executives other than
the Chairman included from time to time in the Summary
Compensation Table in the annual Proxy Statement. Covered
employees will remain eligible to receive other
compensation, including stock options and restricted stock
awards under the 1995 Stock Incentive Plan.
Administration. The 1995 Performance Plan will be
administered by a committee of not less than three "Outside
Directors" (the "Committee") designated by the Board of
Directors. The Committee determines which eligible employees
will receive awards; sets further performance targets; and
determines the degree of attainment of such performance
targets, the amount to be paid to a participant, and the
timing and form of such payment.
Awards. Subject to the Committee's discretion to reduce
such awards, each covered Employee shall be entitled to an
annual amount equal to .75% of Morgan's consolidated income
before income taxes, discontinued operations, awards under
this Plan, expenses classified as "Provisions for
Restructuring" (net of "Related Applicable Income Tax
Benefits"), extraordinary items and cumulative effects of
accounting method changes all as determined in accordance
with generally accepted accounting principles and as
appearing in Morgan's Consolidated Statement of Income
contained in Morgan's Consolidated Financial Statements for
the year as audited by Morgan's independent accountants.
Amounts (or portions thereof) may be made subject to further
vesting requirements, including achievement of further
performance goals, as the Committee may determine.
Payment of Awards. Payments of awards under the 1995
Performance Plan determined by the Committee to be earned
will be made as soon as practicable after the close of the
relevant performance period. The Committee has no discretion
under the 1995 Performance Plan to pay more than the earned
award; however, the Committee has the discretion to pay less
than the full award and to provide for deferral of all or
part of such payment until after the participant terminates
employment or such other time or times selected by the
Committee. In addition, the Committee may specify either
before or after the end of the performance period that all
or a part of each award be represented by the grant of
Morgan share credits payable in shares of Morgan common
stock. To the extent any award is represented by the grant
of Morgan share credits, that grant will be made under the
1995 Stock Incentive Plan (or successor plans) and credited
against the shares of Morgan common stock available under
such plan. Awards
24
<PAGE> 27
under the 1995 Performance Plan will not be paid unless and
until the stockholders approve the plan. Participation in
the 1995 Performance Plan does not preclude participation in
other Morgan compensation and incentive plans.
Unless the Committee determines otherwise, in the event of a
change in control (as such term is defined in the 1995 Stock
Incentive Plan of J.P. Morgan & Co. Incorporated and
Affiliated Companies as set forth in this Proxy Statement)
the payment of deferred awards shall be made as soon as
practicable.
Miscellaneous. The 1995 Performance Plan may be amended by
the Board of Directors and, in certain circumstances by the
Committee, except that any such amendment must be approved
by stockholders if such approval is necessary in order to
maintain compliance with the applicable rules of Section
162(m).
It is not possible to determine the amount of the awards for
1995 at this time. However, listed below are the amounts
awarded to each of the covered employees for 1994 under
Morgan's current incentive compensation program and which
would have been awarded under the 1995 Performance Plan
after exercise of the Committee's discretion to reduce
awards, (Mr. Weatherstone has retired as Chairman and will
not be eligible to receive awards under the 1995 Performance
Plan.) Mr. Weatherstone $3,562,000, Mr. Warner $3,205,800,
Mr. Mendoza $2,992,100, Mr. Viermetz $2,992,100, and Mr.
Wagner $2,493,400.
The affirmative vote of the holders of a majority of the
shares of Common Stock of Morgan represented and voting at
the annual meeting is required for approval of the 1995
Performance Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE 1995
PERFORMANCE PLAN, AS DESCRIBED ABOVE.
5 STOCKHOLDER PROPOSAL RELATING TO CUMULATIVE VOTING
Mr. John J. Gilbert, 29 East 64th Street, New York, New York
10021-7043, who owns 320 shares of Common Stock of Morgan,
has indicated that he will introduce the following
resolution at the meeting:
"RESOLVED: That the stockholders of J.P. Morgan and Co.,
Inc., assembled in annual meeting in person and by
proxy, hereby request the Board of Directors to take the
steps necessary to provide for cumulative voting in the
election of directors, which means each stockholder
shall be entitled to as many votes as shall equal the
number of shares he or she owns multiplied by the number
of directors to be elected, and he or she may cast all
of such votes for a single candidate, or any two or more
of them as he or she may see fit."
In support of the foregoing resolution, the proponent
states:
"Continued very strong support along the lines we
suggest were shown at the last annual meeting when
24.1%, an increase over the previous year, 2,201 owners
of 32,951,386 shares, were cast in favor of this
proposal. The vote against included 3,867 unmarked
proxies.
"A law enacted in California provides that all state
pension holdings and state college funds, invested in
shares must be voted in favor of cumulative voting
proposals, showing increasing recognition of the
importance of this democratic means of electing
directors.
25
<PAGE> 28
"The National Bank Act provides for cumulative voting.
Unfortunately, in many cases companies get around it by
forming holding companies without cumulative voting.
Banking authorities have the right to question the
capability of directors to be on banking boards.
Unfortunately, in many cases authorities come in after
and say the director or directors were not qualified. We
were delighted to see that the SEC has finally taken
action to prevent bad directors from being on the board
of public companies.
"We think cumulative voting is the answer to find new
directors for various committees. Additionally, some
recommendations have been made to carry out the Valdez
10 points. The 11th should be having cumulative voting
and ending stagger systems of electing directors, in our
opinion.
"When Alaska became a state it took away cumulative
voting over our objections. The Valdez oil spill might
have been prevented if environmental directors were
elected through cumulative voting. Also, the huge
derivatives losses might have been prevented with
cumulative voting.
"Many successful corporations have cumulative voting.
For example, Pennzoil having cumulative voting defeated
Texaco in that famous case. Another example is
Ingersoll-Rand, which has cumulative voting and won two
awards. In FORTUNE magazine it was ranked second in its
industry as 'America's Most Admired Corporations' and
the WALL STREET TRANSCRIPT noted 'on almost any criteria
used to evaluate management, Ingersoll-Rand excels.' In
1994 they raised their dividend. We believe that J.P.
Morgan should follow these examples.
"If you agree, please mark your proxy for this
resolution; otherwise it is automatically cast against
it, unless you have marked to abstain."
The affirmative vote of a majority of the shares of Common
Stock of Morgan represented and voting at the annual meeting
is required for approval of the foregoing proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ABOVE
PROPOSAL.
Cumulative voting permits relatively small groups of
stockholders to elect directors to represent their
particular interests or points of view. The Board of
Directors believes there should never be any question as to
whether each Director is acting for the benefit of all of
the stockholders rather than as a representative of any
special group. For this reason, the Board of Directors
believes that the institution of cumulative voting in the
election of Directors would be contrary to the best
interests of Morgan's stockholders as a whole.
6 STOCKHOLDER PROPOSAL RELATING TO POLITICAL NON-PARTISANSHIP
Mrs. Evelyn Y. Davis, Watergate Office Building, 2600
Virginia Avenue, N.W., Suite 215, Washington, D.C. 20037,
who owns 50 shares of Common Stock of Morgan, has indicated
that she will introduce the following resolution at the
meeting:
"RESOLVED: That the stockholders of J.P. Morgan
assembled in Annual Meeting in person and by proxy,
hereby recommend that the Corporation
26
<PAGE> 29
affirm its political non-partisanship. To this end the
following practices are to be avoided:
"(a) The handing of contribution cards of a single
political party to an employee by a supervisor.
"(b) Requesting an employee to send a political
contribution to an individual in the Corporation for
a subsequent delivery as part of a group of
contributions to a political party or fund raising
committee.
"(c) Requesting an employee to issue personal checks
blank as to payee for subsequent forwarding to a
political party, committee or candidate.
"(d) Using supervisory meetings to announce that
contribution cards of one party are available and
that anyone desiring cards of a different party will
be supplied one on request to his supervisor.
"(e) Placing a preponderance of contribution cards of
one party at mail station locations."
In support of the foregoing resolution, the proponent
states:
"The Corporation must deal with a great number of
governmental units, commissions and agencies. It should
maintain scrupulous political neutrality to avoid
embarrassing entanglements detrimental to its business.
Above all, it must avoid the appearance of coercion in
encouraging its employees to make political
contributions against their personal inclinations. The
Troy (Ohio) News has condemned partisan solicitation for
political purposes by managers in a local company (not
J.P. Morgan).
"If you AGREE, please mark your proxy FOR this
resolution."
The affirmative vote of a majority of the shares of Common
Stock of Morgan represented and voting at the annual meeting
is required for approval of the foregoing proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ABOVE
PROPOSAL.
An identical resolution was presented in 1989, 1988 and 1987
and was rejected in 1989 by 93.96% of the votes cast.
It has always been Morgan's policy not to coerce or pressure
employees to support any political party or candidate.
Adoption of the foregoing proposal, however, could be
interpreted as inhibiting Morgan in the expression of its
views on governmental policies and actions, legislative and
regulatory developments, and other matters bearing on
Morgan's business or on which comment by Morgan or its
employees is otherwise appropriate and in the best interests
of Morgan and its stockholders. The detailed restrictions in
the proposal could be interpreted as precluding Morgan from
continuing to implement its policy of encouraging its
employees, on a voluntary basis and in compliance with
applicable laws, to participate in the political process and
to support the political parties and candidates of their
choice.
Federal and state laws limit corporate involvement in
political campaigns and define the scope of permissible
corporate participation in political affairs. Like many
other major corporations, Morgan maintains a political
action committee which is administered in strict compliance
with federal and state laws. The committee follows
procedures to assure that contributions from employees are
entirely voluntary. Adoption of the foregoing proposal
could, in management's opinion,
27
<PAGE> 30
unduly restrict Morgan in properly and lawfully fulfilling
its obligations as a corporate citizen.
7 STOCKHOLDER PROPOSAL RELATING TO STRUCTURAL ADJUSTMENT
Dominican Sisters of the Sick Poor, Mariandale, Ossining,
New York 10562, which owns 100 shares of Common Stock of
Morgan, Sisters of the Humility of Mary, 1515 Eastern
Avenue, Morgantown, West Virginia 26505, which owns 400
shares of Common Stock of Morgan, Maryknoll Fathers and
Brothers, P.O. Box 306, Maryknoll, New York 10545-0306,
which owns 200 shares of Common Stock of Morgan, Society of
Oblate Fathers for Missions Among the Poor, 8818 Cameron
Street, Silver Spring, Maryland 20910-4113, which owns 1,400
shares of Common Stock of Morgan, Congregation of the
Sisters of Charity of the Incarnate Word, P.O. Box 230969,
6510 Lawndale, Houston, Texas 77223-0969, which owns 5,500
shares of Common Stock of Morgan, School Sisters of Notre
Dame Cooperative Investment Fund, 3753 West Pine Boulevard,
St. Louis, Missouri 63108-3305, which owns 54 shares of
Common Stock of Morgan, Dominican Sisters of Caldwell, Mount
Saint Dominic, Caldwell, New Jersey 07006, which owns 100
shares of Common Stock of Morgan, Province of the Most Holy
Name of Jesus of the Order of Friars Minor in the USA
(Franciscans), 4 Jersey Street, East Rutherford, New Jersey
07073, which owns 25,000 shares of Common Stock of Morgan,
Franciscan Sisters of Allegany (New York), Post Office Box
W, St. Bonaventure, New York 14778-2302, which owns 3,500
shares of Common Stock of Morgan, Sisters of Mercy
Consolidated Asset Management Program, 20 Washington Square
North, New York, New York 10011, which owns 100 shares of
Common Stock of Morgan, and Adrian Dominican Sisters, 1257
East Siena Heights Drive, Adrian, Michigan 49221, which owns
36,524 shares of Common Stock of Morgan, have indicated that
they will introduce the following resolution at the meeting:
"RESOLVED: Shareholders request our bank prepare a
report stating its official position on structural
adjustment programs and analyzing those programs' impact
where the bank has outstanding loans, including debtor
countries'
- Ability to repay our bank's loan
- Present and future labor forces
- Natural resources
- Social and political stability
- Potential for sustainable, democratic development.
"This report should be prepared at a reasonable cost and
excluding confidential information."
In support of the foregoing resolution, the proponent
states:
"Our bank has outstanding loans in many developing
countries currently undergoing austerity and structural
adjustment programs strongly urged by the International
Monetary Fund and World Bank. These programs aim to
stabilize heavily indebted economies, and enable
countries to service their debts.
28
<PAGE> 31
"However, we believe that while these policies press
debtor nations to pay interest, they often erode those
countries' human and natural resources, increase their
domestic inequalities and international dependency, and
undermine their long-term capacity to repay their actual
debts.
"Structural adjustment programs typically include:
- Export promotion strategies including removal of
import tariffs, reducing local industries' ability
to compete against foreign companies, and
deregulation, which often increases destructive
exploitation of human and natural resources,
- Cuts in spending for health, education and housing,
- Wage controls and reduction of subsidies for basis
products which shrink workers' real incomes,
- Restricted domestic credit and higher interest
rates, limiting entrepreneurial possibilities for
small producers (especially women),
- Higher taxes which fall disproportionately on poor
and working people,
- Wholesale privatization of state-owned enterprises,
which reduce government assets available to finance
future infrastructural and social development and
repay debts.
"We believe adjustment programs have contributed heavily
to the following circumstances:
"Brazil: Real minimum wages dropped 40% during the
1980's, as the percentage of Brazilians in poverty rose
from 24% to 39%. Today more than one in five confronts
hunger daily.
"Nicaragua: Unemployment totals 60%, while teachers,
nurses and policemen earn less than the official
subsistence level. Cuts in spending for health and
sanitation fuel cholera and malaria epidemics, and the
reemergence of diseases previously eradicated by
national programs. Hunger and starvation cause more
deaths than ever in Nicaragua's history. Privatization
measures provoked massive strikes, while other
adjustment policies sparked armed rebellions.
"Peru: Infant mortality has risen to 60 deaths per 1000
live births nationally, and 260/1000 in southern
regions. Primary school enrollment has dropped 11%, as
fewer families can afford the fees. Programs to cushion
the adjustment programs' impact since 1990 have been
grossly underfunded and underspent.
"Philippines: Half the population (and 75% of rural
dwellers) are un-or underemployed. Starvation has
doubled since 1985. Tight money policies have resulted
in usurious interest rates (up to 400%) for small
farmers. Poverty and unemployment drive landless poor to
migrate seeking food and work-devastating forests, soil
and fisheries. Debt servicing absorbs 40% of the
national budget and 31% of export earnings, limiting
resources available for development.
"We believe these issues warrant our bank's attention
since they affect its creditors, customers and potential
markets."
The affirmative vote of a majority of the shares of Common
Stock of Morgan represented and voting at the annual meeting
is required for approval of the foregoing proposal.
29
<PAGE> 32
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ABOVE
PROPOSAL.
We believe the programs that the proponents oppose have been
initiated by the governments of the countries concerned
because they believe these programs to be in the best
interest of their people. The International Monetary Fund
("IMF") and the World Bank support these programs to help
lay the foundation for sustainable long-term development and
the creation of increased employment and income earning
opportunities. In general, we too support such programs.
No one can dismiss the human hardships cited by the
proponents. However, many developing countries have
long-standing and deep-rooted structural problems for which
there are no simple solutions. The national programs
supported by the IMF and the World Bank focus on maintaining
economic stability and promoting sustainable development.
Policies of both institutions now require that the social
impact of national adjustment programs be taken fully into
account in deciding whether the programs warrant support. We
believe that the fundamental internal reforms undertaken by
many developing countries will encourage domestic and
foreign investment, help assure farmers a reasonable price
for their produce, create employment opportunities, and, by
eliminating subsidies not targeted for the needy, release
resources that can be used to expand education, health, and
other social services. Such reforms are an essential part of
a development strategy that will promote economic and social
progress that benefits all levels of society.
For the above reasons, the preparation of the recommended
report would not be in the best interest of Morgan or its
stockholders.
8 OTHER MATTERS
The Board of Directors of Morgan does not know of any
matters which may be presented at the meeting other than
those specifically set forth in the Notice of Annual
Meeting. If any other matters come before the meeting or any
adjournment thereof, the persons named in the accompanying
form of proxy and acting thereunder will vote in accordance
with their best judgment with respect to such matters.
Section 16(a) of the 1934 Act, requires Morgan's executive
officers, Directors and persons who own more than ten
percent of a registered class of Morgan's equity securities
("Reporting Persons") to file reports of ownership and
changes in ownership on Forms 3, 4 and 5 with the SEC and
the New York Stock Exchange (the "NYSE"). These Reporting
Persons are required by SEC regulation to furnish Morgan
with copies of all Forms 3, 4 and 5 that they file with the
SEC and NYSE.
Based solely on Morgan's review of the copies of the Forms
it has received and written representations from certain
Reporting Persons, Morgan believes that all of its Reporting
Persons complied with all filing requirements applicable to
them with respect to transactions during fiscal year 1994.
The expense of the Board of Directors' proxy solicitation
will be borne by Morgan. In addition to the use of the
mails, proxies may be solicited by personal interview or by
telephone. Banks, brokerage houses and other institutions,
nominees and fiduciaries will be requested to forward the
soliciting material to beneficial owners and to obtain
authorization for the execution of proxies; and, if they in
turn so
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request, Morgan will reimburse such banks, brokerage houses
and other institutions, nominees and fiduciaries for their
expenses in forwarding such material. Directors, officers
and regular employees of Morgan or the Bank may also solicit
proxies without additional remuneration therefor. Morrow &
Co., Inc., New York, New York, has been retained to aid in
the solicitation of proxies for a fee of $8,500 plus
out-of-pocket expenses.
Stockholders are urged to sign the accompanying form of
proxy, solicited on behalf of the Board of Directors of
Morgan, and return it at once in the envelope provided for
that purpose. Proxies will be voted in accordance with the
stockholders' directions. If no directions are given,
proxies will be voted for the election of the nominees for
Directors set forth in this Proxy Statement, for the
approval of the independent accountants recommended by the
Board of Directors, for the approval of the 1995 Stock
Incentive Plan and of the 1995 Executive Officer Performance
Plan, and against the stockholder-proposed resolutions
relating to cumulative voting, political non-partisanship
and structural adjustment. The proxy does not affect the
right to vote in person at the meeting and may be revoked at
any time before it is voted. A stockholder who wishes to
give a proxy to someone other than the proxies designated by
the Board of Directors may strike out the names appearing on
the enclosed form of proxy, insert the name of some other
person, sign the form and transmit it to that person for use
at the meeting. A plurality of the votes of the shares of
Common Stock represented at the annual meeting in person or
by proxy is required for the election of Directors. The
affirmative vote of the majority of the shares of Common
Stock represented at the annual meeting in person or by
proxy and entitled to vote is required for all other
matters. Under Federal regulations, with respect to the 1995
Stock Incentive Plan and the 1995 Executive Officer
Performance Plan, Morgan is required to treat abstentions as
being equivalent to votes against, while proxies returned by
brokers as "non-votes" will not be counted as voting.
Proxies, ballots and voting tabulations identifying
stockholders are secret and will not be available to anyone,
except as actually necessary to meet legal requirements.
------------------------------------------------------------
STOCKHOLDER Proposals of stockholders intended to be presented at the
PROPOSALS 1996 annual meeting of stockholders of Morgan must be
received by Morgan not later than November 21, 1995 in
order to be included in the proxy statement and form of
proxy relating to such annual meeting.
Dated: March 22, 1995 Edward J. Kelly III
Secretary
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EXHIBIT A
1995 STOCK INCENTIVE PLAN OF
J.P. MORGAN & CO. INCORPORATED AND AFFILIATED COMPANIES
ARTICLE I
PURPOSE
The purpose of the 1995 Stock Incentive Plan (the "Plan") is to afford an
incentive to key employees of J. P. Morgan & Co. Incorporated (the "Company")
and its affiliates to acquire a proprietary interest in the Company, to
encourage such employees to increase their efforts on behalf of the Company and
remain in its employ, and to more closely align the interests of such key
employees with those of the Company's stockholders.
ARTICLE II
DEFINITIONS
2.1. The following terms shall have the meanings described below when used in
the Plan:
(a) "Award" shall refer to a Restricted Stock Award granted under Article
VIII or a Stock Unit Award granted under Article IX.
(b) "Board of Directors" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(d) "Committee" shall mean the committee appointed by the Board of
Directors to administer the Plan pursuant to Article III.
(e) "Common Stock" shall mean common stock, par value $2.50, of the
Company.
(f) "Company" shall mean J. P. Morgan & Co. Incorporated or any successor
to it in ownership of all or substantially all of its assets.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(h) "Fair Market Value" of Common Stock on any day shall mean the average
of the highest and lowest price of Common Stock as reported on the
composite tape for such day, unless the Committee determines that another
procedure for determining Fair Market Value would be more appropriate.
(i) "Incentive Stock Option" shall mean a stock option granted under
Article VI which is intended to meet the requirements of Section 422 of the
Code.
(j) "Nonqualified Stock Option" shall mean a stock option granted under
Article VI which is not intended to be an Incentive Stock Option.
(k) "Option" shall mean an Incentive Stock Option or a Nonqualified Stock
Option.
(l) "Optionee" shall mean a Participant who is granted an Option.
(m) "Participant" shall mean an eligible employee who has been granted an
Option, Stock Appreciation Right or Award under the Plan.
(n) "Participating Company" shall mean the Company, the Trust Company or
any subsidiary or other affiliated entity (whether or not incorporated).
(o) "Plan" shall mean this 1995 Stock Incentive Plan of J.P. Morgan & Co.
Incorporated and Affiliated Companies.
(p) "Related Right" shall mean a Stock Appreciation Right described in
Section 7.2.
(q) "Restricted Period" shall mean the period during which a Restricted
Stock Award is being earned in accordance with Section 8.3.
(r) "Restricted Stock Award" shall mean an award granted under Article
VIII.
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(s) "Stand Alone Right" shall mean a Stock Appreciation Right described in
Section 7.3.
(t) "Stock Appreciation Right" shall mean a right granted under Article
VII.
(u) "Stock Unit Award" shall mean an award granted under Article IX.
(v) "Trust Company" shall mean Morgan Guaranty Trust Company of New York or
any successor to it in ownership of all or substantially all of its assets.
ARTICLE III
ADMINISTRATION
3.1. (a) The Board of Directors shall appoint not less than three Directors to
the Committee which shall administer the Plan. With respect to determinations
regarding the grant, amount, acceleration or forfeiture of Options, Stock
Appreciation Rights or awards with respect to an eligible employee who is a
member of the Board of Directors, the Committee shall be composed of all
directors of the Company who are not employees of the Company or any other
Participating Company. No individual shall be a member of the Committee unless
such individual is disinterested within the meaning of Rule 16b-3 under the
Exchange Act. The Committee shall have full power and authority, subject to such
orders or resolutions not inconsistent with the provisions of the Plan as may
from time to time be issued or adopted by the Board of Directors, to grant to
eligible persons Options, Stock Appreciation Rights and Awards under the Plan;
to waive any restrictions or limitations, or impose additional limitations or
restrictions, on previously granted Options, Stock Appreciation Rights, or
Awards (within the parameters of the Plan); to interpret the provisions of the
Plan and any agreements relating to Options, Stock Appreciation Rights or Awards
granted under the Plan; to supervise the administration of the Plan and to
delegate to senior officers of the Company or the Trust Company the power to act
for the Committee as the Committee shall specify.
(b) All decisions made by the Committee (or such persons acting under a
delegation by the Committee pursuant to subsection 3.1(a)) pursuant to the
provisions of the Plan and related orders of the Board of Directors shall be
within the absolute discretion of the Committee or its delegate, as the case may
be, and shall be conclusive and binding on all persons, including the Company,
stockholders, employees and beneficiaries of employees.
ARTICLE IV
SHARES SUBJECT TO THE PLAN
4.1. (a) Subject to adjustment pursuant to subsection 4.1(d), the maximum
number of shares of Common Stock with respect to which Options, Stock
Appreciation Rights and Awards may be granted shall be 28,000,000 shares of
Common Stock. Shares of Common Stock may be made available from the authorized
but unissued shares of the Company or from shares reacquired by the Company,
including shares purchased in the open market. If an Option, Stock Appreciation
Right or Award granted under the Plan shall expire or terminate for any reason
other than the exercise of a Related Right (to the extent set forth in
subsection 7.2(c)), the shares subject to such Option, Stock Appreciation Right
or Award shall be available for other Options, Stock Appreciation Rights and
Awards to the same Participant or other eligible employees. Any shares delivered
in payment of the exercise price of an Option shall be available for other
Options, Stock Appreciation Rights and Awards to the same Participant or other
eligible employees.
(b) Subject to adjustment pursuant to subsection 4.1(d), of the total shares of
Common Stock referred to in subsection 4.1(a), the number of shares of Common
Stock with respect to which Awards may be granted shall not exceed 7,000,000
shares of Common Stock.
(c) Subject to adjustment pursuant to subsection 4.1(d), of the total shares of
Common Stock referred to in subsection 4.1(a), the number of shares of Common
Stock with respect to which Options or Stock Appreciation Rights may be granted
to any Participant during the term of the Plan shall not exceed 2,800,000 shares
of Common Stock.
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(d) In the event that the Committee shall determine that any stock dividend,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of shares, warrants or
rights offering to purchase Common Stock at a price substantially below fair
market value, or other similar corporate event affects the Common Stock such
that an adjustment is required in order to preserve the benefits or potential
benefits intended to be made available under this Plan, then the Committee
shall, in its sole discretion, and in such manner as the Committee may deem
equitable, adjust any or all of (1) the number and kind of shares which
thereafter may be awarded or optioned and sold or made the subject of Stock
Appreciation Rights under the Plan, (2) the number and kind of shares subject to
outstanding Options, Stock Appreciation Rights and Awards, and (3) the option
price with respect to any of the foregoing and/or, if deemed appropriate, make
provision for a cash payment to a Participant. The number of shares subject to
any Option, Stock Appreciation Right or Award shall always be a whole number.
ARTICLE V
ELIGIBILITY
5.1. The employees eligible to participate in the Plan and receive Options,
Stock Appreciation Rights and Awards under the Plan shall consist of key
employees of the Company and other Participating Companies.
ARTICLE VI
STOCK OPTIONS
6.1. Grant of Options. Subject to the limitations of the Plan, the Committee
shall, after such consultation with and consideration of the recommendations of
management as the Committee considers desirable, select from eligible employees
those Participants to be granted Options and determine the time when each Option
shall be granted and the number of shares subject to each Option. Options may be
either Incentive Stock Options or Nonqualified Stock Options and more than one
Option may be granted to the same person. Options shall be evidenced in such
manner as may be approved by the Committee. Options may be amended or
supplemented from time to time as approved by the Committee, provided that the
terms of such Options after being amended or supplemented conform to the terms
of the Plan.
6.2. Option Price. The price at which shares may be purchased upon exercise of
a particular Option shall be not less than 100% of the Fair Market Value of such
shares on the date such Option is granted.
6.3. Medium and Time of Payment. No shares shall be delivered pursuant to any
exercise of an Option until payment in full of the Option price therefor is
received by the Company. Such payment shall be made in cash or, unless
prohibited by the Committee, through the delivery of shares of Common Stock of
the Company with a Fair Market Value equal to the total Option price or a
combination of cash and shares. The Committee may prescribe additional methods
of payment to the extent permitted by applicable law. Any shares so delivered
shall be valued at their Fair Market Value on the exercise date, or on such
other date as determined by the Committee for administrative convenience. No
Optionee, transferee, legal representative, legatee or distributee of any
Optionee shall be deemed to be a holder of any shares subject to any Option
prior to the issuance of such shares upon exercise of such Option or any related
Stock Appreciation Right.
6.4. Term and Exercisability of Options. An Option shall be exercisable
ratably on each of the first three anniversaries of the date of grant of such
Option or as otherwise determined by the Committee, but in no event shall such
Option be exercised earlier than one year or later than ten years from the date
the Option is granted. The Committee may require that an Option only be
exercised upon the achievement of such performance objectives as the Committee
shall designate. An Option shall be subject to earlier termination as provided
in Section 6.6 with respect to death, retirement and termination of employment
or as provided in Section 10.6.
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6.5. Transferability of Options. (a) Except as provided in subsection (b)
below, an Option may not be sold, assigned, transferred, pledged, hypothecated
or otherwise disposed of, except by will or the laws of descent and distribution
and, during the lifetime of the Optionee, may be exercised only by such
Optionee.
(b) Notwithstanding subsection (a) above, the Committee may determine that an
Option may be transferred by the Optionee to one or more members of the
Optionee's immediate family, to a partnership of which the only partners are
members of the Optionee's immediate family, or to a trust established by the
Optionee for the benefit of one or more members of the Optionee's immediate
family. For this purpose immediate family means the Optionee's spouse, parents,
children, grandchildren and the spouses of such parents, children and
grandchildren. A transferee described in this subsection may not further
transfer an Option. An Option transferred pursuant to this subsection shall
remain subject to the provisions of the Plan, including, but not limited to, the
provisions of Section 6.6 relating to the exercise of the Option upon the death,
retirement or termination of employment of the Optionee, and shall be subject to
such other rules as the Committee shall determine.
6.6. Death, Retirement and Termination of Employment. Subject to the condition
that no Option be exercised in whole or in part after the expiration of the
Option period specified by the Committee, and subject to the Committee's right
to cancel any Option in accordance with Section 10.6, unless otherwise
determined by the Committee:
(a) Upon termination of employment prior to an Optionee's attainment of age
55 but after the Optionee is eligible for retirement pursuant to a
retirement plan of the Company or any of its subsidiaries, an Optionee or a
transferee described in subsection 6.5(b), may, within three years after
the date of such termination, purchase any or all of the shares subject to
an Option granted at least one year prior to such termination of
employment, at or after the time or times the Optionee would have been
entitled to purchase such shares had the Optionee not terminated
employment;
(b) Upon termination of employment on or after an Optionee's attainment of
age 55 and after the Optionee is eligible for retirement pursuant to a
retirement plan of the Company or any of its subsidiaries, an Optionee or a
transferee described in subsection 6.5(b), may, at any time prior to the
expiration of the Option period, purchase any or all of the shares subject
to an Option granted at least one year prior to such termination of
employment, at or after the time or times the Optionee would have been
entitled to purchase such shares had the Optionee not terminated
employment;
(c) Upon the death of an Optionee after a termination of employment
described in subsections (a) or (b) above, the Optionee's designated
beneficiary, or if none, the person or persons to whom such Optionee's
rights under the Option are transferred by will or the laws of descent and
distribution, or a transferee described in subsection 6.5(b), may, at any
time prior to the expiration of the Option period determined under
subsection (a) or (b), as the case may be, purchase any or all of the
shares subject to an Option at or after the time the Optionee would have
been entitled to purchase such shares had the Optionee survived;
(d) Upon the death of an Optionee while employed, the Optionee's designated
beneficiary, or if none, the person or persons to whom such Optionee's
rights under the Option are transferred by will or the laws of descent and
distribution, or a transferee described in subsection 6.5(b), may, within
three years after the date of such death, but no later than the expiration
of the Option period, purchase any or all of the shares subject to an
Option at or after the time the Optionee would have been entitled to
purchase such shares had the Optionee survived; and
(e) Upon termination of employment for any reason other than death or
retirement as aforesaid, an Optionee's Options, including any Options
transferred pursuant to subsection 6.5(b), shall be cancelled to the extent
not theretofore exercised. In addition, the Optionee shall repay to the
Company the value of the difference between the Fair Market Value on the
date of exercise over the Option price of any Options exercised within the
six month period preceding the date of such termination and the value of
any Related Right described in Section 7.2 exercised during such period.
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ARTICLE VII
STOCK APPRECIATION RIGHTS
7.1. Grant of Stock Appreciation Rights. Subject to the limitations of the
Plan, the Committee shall, after such consultation with and consideration of the
recommendations of management as the Committee considers desirable, select from
eligible employees those Participants to be granted Stock Appreciation Rights
and determine the time when each Stock Appreciation Right shall be granted and
such other terms of each Stock Appreciation Right pursuant to this Article VII.
Stock Appreciation Rights may be granted either alone ("Stand Alone Rights") or
in conjunction with all or part of any Option granted under the Plan ("Related
Rights"). In the case of a Nonqualified Stock Option, Related Rights may be
granted either at or after the time of the grant of the Nonqualified Stock
Option. In the case of an Incentive Stock Option, Related Rights may be granted
only at the time of the grant of the Incentive Stock Option.
7.2. Related Rights. (a) A Related Right shall be exercisable only at such
time or times and to the extent that the Option to which it relates shall be
exercisable in accordance with Article 6, provided that the Committee may, for
administrative convenience, determine that, for any Related Right which can only
be exercised during a limited period of time in order to satisfy rules imposed
by the Securities and Exchange Commission, the exercise of any such Related
Right for cash during such limited period shall be deemed to occur for all
purposes hereunder on the day during such limited period on which the Fair
Market Value of the Common Stock is the highest. A Related Right granted with
respect to an Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Option, provided that, unless otherwise
provided by the Committee, a Related Right granted with respect to less than the
full number of shares covered by a related Option shall only be reduced if and
to the extent that the number of shares covered by the exercise or termination
of the related Option exceeds the number of shares not covered by the Related
Right, provided further that, in the event of the death of the Participant, the
Related Right shall be cancelled to the extent not theretofore exercised,
whether or not the related Option is cancelled.
(b) Upon the exercise of a Related Right, a Participant shall be entitled to
receive up to, but not more than, an amount in cash or shares of Common Stock
equal in value to the excess of the Fair Market Value of one share of Common
Stock over the Option price per share of Common Stock of the related Option
multiplied by the number of shares of Common Stock in respect of which the
Related Right shall have been exercised. The Committee shall have the right to
determine the form of payment. Any shares delivered in payment shall be valued
at their Fair Market Value on the date of exercise. No fractional shares shall
be issued and the Participant shall receive cash in lieu thereof.
(c) Upon the exercise of a Related Right, the Option or part thereof to which
such Related Right is related shall be deemed to have been exercised for the
purpose of the limitations set forth in Section 4.1 on the number of shares of
Common Stock to be issued under the Plan, but only to the extent of the number
of shares of Common Stock issued under the Related Right.
7.3. Stand Alone Rights. (a) A Stand Alone Right shall be exercisable ratably
on each of the first three anniversaries of the grant of such Stand Alone Right
or as otherwise determined by the Committee, but in no event shall such Stand
Alone Right be exercised earlier than one year or later than ten years from the
date the Stand Alone Right is granted. The Committee may require that a Stand
Alone Right only be exercised upon the achievement of such performance
objectives as the Committee shall designate. The Committee may, for
administrative convenience, determine that, for any Stand Alone Right which can
only be exercised during a limited period of time in order to satisfy rules
imposed by the Securities and Exchange Commission, the exercise of any such
Stand Alone Right for cash during such limited period shall be deemed to occur
for all purposes hereunder on the day during such limited period on which the
Fair Market Value of the Common Stock is the highest. A Stand Alone Right shall
be subject to earlier termination as provided in subsection 7.3(c) with respect
to death, retirement and termination of employment.
(b) Upon the exercise of a Stand Alone Right, a Participant shall be entitled to
receive up to, but not more than, an amount in cash or shares of Common Stock
equal in value to the excess of the Fair Market Value of one share of Common
Stock on the date of exercise over the Fair Market Value of one share of Common
Stock on the date of grant multiplied by the number of shares in respect of
which the right is being
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exercised. The Committee shall have the right to determine the form of payment.
Any shares delivered in payment shall be valued at their Fair Market Value on
the date of exercise. No fractional shares shall be issued and the Participant
shall receive cash in lieu thereof.
(c) Subject to the condition that no Stand Alone Right may be exercised in whole
or in part after the expiration of the period specified by the Committee, and
subject to the Committee's right to cancel any Stock Appreciation Right in
accordance with Section 10.6, unless otherwise determined by the Committee:
(i) Upon termination of employment prior to a Participant's attainment of
age 55 but after the Participant is eligible for retirement pursuant to a
retirement plan of the Company or any of its subsidiaries, a Participant
may, within three years after the date of such termination, exercise any or
all of the Stand Alone Right granted at least one year prior to such
termination of employment, at or after the time or times the Participant
would have been entitled to exercise such Stand Alone Right had the
Participant not terminated employment;
(ii) Upon termination of employment on or after a Participant's attainment
of age 55 and after the Participant is eligible for retirement pursuant to
a retirement plan of the Company or any of its subsidiaries, a Participant
may, at any time prior to the expiration of the Stock Appreciation Right
exercise period, exercise any or all of the Stand Alone Right granted at
least one year prior to such termination of employment, at or after the
time or times the Participant would have been entitled to exercise such
Stand Alone Right had the Participant not terminated employment; and
(iii) Upon termination of employment for any reason other than retirement
as aforesaid, a Participant's Stand Alone Rights shall be cancelled to the
extent not theretofore exercised. In addition, except in the event of
death, the Participant shall repay to the Company the value of any Stand
Alone Right exercised within the six month period preceding the date of
such termination.
7.4. Transfer of Stock Appreciation Rights. A Stock Appreciation Right may not
be transferred to anyone and may only be exercised by the Participant to whom it
is granted.
ARTICLE VIII
RESTRICTED STOCK AWARDS
8.1. Grant of Restricted Stock Awards. Subject to the limitations of the Plan,
the Committee shall, after such consultation with and consideration of the
recommendations of management as the Committee considers desirable, select from
eligible employees those Participants to be granted Restricted Stock Awards and
determine the time when each Award shall be granted, the vesting date or vesting
dates for each Award, the time or times as of which vested Awards shall be paid
and the number of share credits (each of which shall be equivalent to one share
of Common Stock) subject to each Award. Restricted Stock Awards shall be
evidenced in such manner as may be approved by the Committee. Restricted Stock
Awards may be amended or supplemented from time to time as approved by the
Committee, provided that the terms of such Awards after being amended or
supplemented conform to the terms of the Plan. No provision of this Plan shall
be interpreted to prohibit the grant of a Restricted Stock Award hereunder in
connection with awards granted pursuant to the 1995 Executive Officer
Performance Plan of J.P. Morgan & Co. Incorporated and Affiliated Companies or
any other plan of the Company, provided that any such Award conforms to the
terms of this Plan.
8.2. Number of Share Credits. Each Restricted Stock Award shall state the
number of share credits to be subject to the Award.
8.3. Restrictions. A Restricted Stock Award may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of, except by will or
the laws of descent and distribution, for a period of five years from the date
of grant of the Award or such other period as the Committee shall determine, and
for such further period as the payment of Awards may be deferred pursuant to
Section 8.5. The Committee may define the Restricted Period in terms of the
passage of time, the satisfaction of performance criteria, a combination of time
and performance, or in any other manner it deems appropriate. Restricted Stock
Awards shall not be paid until the successful completion of the Restricted
Period except as may be
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otherwise provided in circumstances of death or retirement pursuant to Section
8.4, or until the end of any deferral period described in subsection 8.5(b).
8.4. Death, Retirement and Termination of Employment. Unless otherwise
determined by the Committee:
(a) Upon termination of a Participant's employment prior to the end of the
Restricted Period for any reason except for retirement or death, as
described below, the Participant's Awards shall be forfeited and the
Participant shall have no right with respect to such Award.
(b) Upon termination of a Participant's employment prior to the end of the
Restricted Period by reason of the Participant's retirement under a
retirement plan maintained by the Company or any of its subsidiaries, or by
reason of death, a prorata portion (based on completed full years of
service subsequent to the date of grant of an Award) of an Award shall be
payable to the Participant or the Participant's beneficiary, or if none,
the person or persons to whom such Participant's rights under the Award are
transferred by will or the laws of descent and distribution, subject to any
further deferral of the Award in accordance with subsection 8.5(b),
provided that with respect to an Award subject to performance restrictions,
the Committee shall make such determination with respect to such Award as
it deems appropriate.
8.5. Payment of Awards. (a) Subject to the provisions of subsection (b)
hereof, as soon as practicable after the successful completion of the Restricted
Period, such Award shall be paid to the Participant or, in the case of the death
of the Participant, the Participant's beneficiary, or if none, the person or
persons to whom such Participant's rights under the Award are transferred by
will or the laws of descent and distribution.
(b) The Committee may, in its discretion, provide that payment of Awards be
deferred until such time or times as the Committee shall specify, or such time
or times as the Participant may elect. Any election of a Participant pursuant to
the preceding sentence shall be filed with the Committee in accordance with such
rules and regulations, including any deadline for the making of such an
election, as the Committee may provide.
(c) Except as otherwise determined pursuant to subsection 8.6(c), payments
pursuant to this Section 8.5, including any dividend equivalents determined
under subsection 8.6(b), shall be made in shares of Common Stock, except there
may be paid in cash the value of any partial shares of Common Stock and that
part of the total payment determined by the Company to be necessary to satisfy
tax withholding requirements.
8.6. Dividend Equivalents. (a) Except as may be otherwise determined by the
Committee, in addition to the payment provided for in Section 8.5, each
Participant (or beneficiary) entitled to payment under Section 8.5 shall receive
the dividend equivalent amount calculated under subsection (b) hereof.
(b) The dividend equivalent amount is the number of additional share credits
attributable to the number of share credits awarded plus additional share
credits calculated hereunder. Such additional share credits shall be determined
and credited as of the end of each calendar year by dividing (1) the aggregate
cash dividends which would have been paid had the share credits awarded or
credited under this subsection (b), as the case may be, been actual shares of
Common Stock on the record date for each such dividend during such calendar year
by (2) the average market prices per shares of Common Stock on the last trading
day of each calendar month during the 12 months ending on the November 30
preceding the date such determination is being made. For this purpose, the
market price on any day shall be the average of the highest and lowest price of
a share of Common Stock as reported on the composite tape for such day. The
Committee may designate any other manner for determining and crediting dividend
equivalents as it deems appropriate.
(c) In such cases as the Committee may deem advisable, the Committee may, in
lieu of the crediting provided for in subsection (b), determine to pay all or
part of the dividend equivalent amount in cash or stock as dividends are
actually paid on Common Stock, or at such other time or times as the Committee
may otherwise determine.
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ARTICLE IX
STOCK UNIT AWARDS
9.1. Grant of Stock Unit Awards. The Committee shall have authority to grant
to eligible employees Stock Unit Awards which can be in the form of Common Stock
or units, the value of which is based, in whole or in part, on the value of
Common Stock. Subject to the provisions of the Plan, including Section 9.2
below, Stock Unit Awards shall be subject to such terms, restrictions,
conditions, vesting requirements and payment rules (all of which are sometimes
hereinafter collectively referred to as "rules") as the Committee may determine
in its sole discretion, all such rules applicable to a particular Stock Unit
Award to be reflected in writing and furnished to the Participant. In no event
shall any Award vest less than one year from the date of grant. The rules need
not be identical for each Stock Unit Award. No provision of this Plan shall be
interpreted to prohibit the grant of a Stock Unit Award hereunder in connection
with awards granted pursuant to the 1995 Executive Officer Performance Plan or
any other plan of the Company, provided that any such Award conforms to the
terms of the Plan.
9.2. Rules. In the sole discretion of the Committee, a Stock Unit Award shall
be granted subject to the following rules:
(a) Any shares of Common Stock which are part of a Stock Unit Award may not
be sold, assigned, transferred, pledged, hypothecated or otherwise disposed
of, except by will or the laws of descent and distribution, prior to the
date on which the shares are issued or such other date provided by the
Committee at the time of grant of the Award or thereafter.
(b) Stock Unit Awards may provide for the payment of cash consideration by
the person to whom such Award is granted or provide that the Award, and
Common Stock to be issued in connection therewith, if applicable, shall be
delivered without the payment of cash consideration.
(c) Stock Unit Awards may relate in whole or in part to performance
criteria established by the Committee at the time of grant.
(d) Stock Unit Awards may provide for deferred payment schedules, vesting
over a specified period of employment, the payment (on a current or
deferred basis) of dividend equivalent amounts, with respect to the number
of shares of Common Stock covered by the Award, and elections by the
Participant to defer payment of the Award or the lifting of restrictions on
the Award, if any.
ARTICLE X
GENERAL PROVISIONS
10.1. Change in Control. (a)(i) In the case of a Change in Control (as defined
below) of the Company, each Option and Stock Appreciation Right then outstanding
shall (unless the Committee determines otherwise) immediately be nonforfeitable
and exercisable in full;
(ii) In the case of a Change in Control (as defined below) of the Company, each
Award shall (unless the Committee determines otherwise) immediately be fully
vested and nonforfeitable and shall thereupon be paid as soon as practicable.
(b) Any determination by the Committee made pursuant to this Section 10.1 may be
made as to all outstanding Options, Stock Appreciation Rights or Awards or only
as to certain Options, Stock Appreciation Rights or Awards specified by the
Committee, and all such determinations shall be made in cases covered by
paragraphs (c) (i) or (ii) below, prior to or as soon as practicable after the
occurrence of such event and in the cases covered by paragraphs (c) (iii) and
(iv) below, prior to the occurrence of such event.
(c) A Change in Control shall occur if:
(i) any "person" or "group of persons" as such terms are used in Section
13(d) and 14(d) of the Exchange Act directly or indirectly purchases or
otherwise becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act) or has the right to acquire such beneficial ownership
(whether or not such right is exercisable immediately, with the passage of
time, or subject to any condition), of voting securities representing 25%
or more of the combined voting power of all outstanding voting securities
of the Company;
A-8
<PAGE> 42
(ii) during any period of two consecutive years, the individuals who at the
beginning of such period constitute the Board of Directors cease for any
reason to constitute at least a majority of the members thereof, unless (1)
there are seven or more directors then still in office who were directors
at the beginning of the period, and (2) the election, or the nomination for
election by the Company's stockholders, of each new director was approved
by at least two-thirds of the directors then still in office who were
directors at the beginning of the period;
(iii) the stockholders of the Company shall approve an agreement to merge
or consolidate the Company with or into another corporation as a result of
which less than 50% of the outstanding voting securities of the surviving
or resulting entity are or are to be owned by the former shareholders of
the Company (excluding from former shareholders, a shareholder who is or,
as a result of the transaction in question, becomes an "affiliate," as
defined in Rule 12b-2 under the Exchange Act, of any party to such
consolidation or merger); or
(iv) the stockholders of the Company shall approve the sale of all or
substantially all of the Company's business and/or assets to a person or
entity which is not a wholly-owned subsidiary of the Company.
10.2. Designation of Beneficiary. Subject to such rules and regulations as the
Committee may prescribe, including the right of the Committee to limit the types
of designations which are acceptable for purposes of the Plan, each Participant
who shall be granted an Option or Award under the Plan may designate a
beneficiary or beneficiaries and may change such designation from time to time
by filing a written designation of beneficiaries with the Committee on a form to
be prescribed by it, provided that no such designation shall be effective unless
so filed prior to the death of such Participant.
10.3. No Right of Continued Employment. Neither the establishment of the Plan,
the granting of Options, Stock Appreciation Rights or Awards, nor the payment of
any benefits hereunder nor any action of the Company or of the Board of
Directors or of the Committee shall be held or construed to confer upon any
person any legal right to be continued in the employ of the Company or its
subsidiaries, each of which expressly reserves the right to discharge any
employee whenever the interest of any such company in its sole discretion may so
require without liability to such company, the Board of Directors or the
Committee except as to any rights which may be expressly conferred upon such
employee under the Plan.
10.4. No Segregation of Cash or Shares. The Company shall not be required to
segregate any cash or any shares of Common Stock which may at any time be
represented by Options, Stock Appreciation Rights, Awards, share credits or
dividend equivalent amounts and the Plan shall constitute an "unfunded" plan of
the Company. No employee shall have voting or other rights with respect to
shares of Common Stock prior to the delivery of such shares. The Company shall
not, by any provisions of the Plan, be deemed to be a trustee of any Common
Stock or any other property, and the liabilities of the Company to any employee
pursuant to the Plan shall be those of a debtor pursuant to such contract
obligations as are created by or pursuant to the Plan, and the rights of any
employee, former employee or beneficiary under the Plan shall be limited to
those of a general creditor of the Company. In its sole discretion, the
Committee may authorize the creation of trusts or other arrangements to meet the
obligations of the Company and each other Participating Company under the Plan,
provided, however, that existence of such trusts or other arrangements is
consistent with the unfunded status of the Plan.
10.5. Delivery of Shares. No shares shall be delivered pursuant to any
exercise of an Option or Stock Appreciation Right or pursuant to the payment of
any Award until the requirements of such laws and regulations as may be deemed
by the Committee to be applicable thereto are satisfied.
10.6. Cancellation of Options, Stock Appreciation Rights and Awards.
(a) Prior to the occurrence of a Change in Control, but not thereafter, the
Committee may, in its sole discretion and with or without cause, cancel any
Option, Stock Appreciation Right or Award in whole or in part to the extent it
has not theretofore been exercised or, in the case of Awards, become vested.
Such cancellation shall be effective as of the date specified by the Committee.
(b) Notwithstanding subsection (a) above, prior to payment of any Award, the
Committee may, in its sole discretion, in cases involving a serious breach of
conduct by an employee or former employee, or activity of a former employee in
competition with the business of a Participating Company, cancel any Award,
whether or not vested, in whole or in part. Such cancellation shall be effective
as of the date specified by the
A-9
<PAGE> 43
Committee. The determination of whether an employee or former employee has
engaged in a serious breach of conduct or activity in competition with the
business of a Participating Company shall be determined by the Committee in good
faith and in its sole discretion.
10.7. Transfer, Leave of Absence, etc. For purposes of the Plan: (1) a
transfer of a Participant from a Participating Company to an affiliated company,
(2) a leave of absence, duly authorized in writing by the Participating Company,
for military service or sickness, or for any other purpose approved by the
Participating Company if the period of such leave does not exceed ninety days,
and (3) a leave of absence in excess of ninety days, duly authorized in writing
by the Participating Company, provided the Participant's right to reemployment
is guaranteed either by a statute or by contract, shall not be deemed a
termination of employment.
10.8. New York Law to Govern. All questions pertaining to the construction,
regulation, validity and effect of the provisions of the Plan shall be
determined in accordance with the laws of the State of New York.
10.9. Payments and Tax Withholding. The delivery of any shares of Common Stock
and the payment of any amount in respect of a Stock Appreciation Right or Award
shall be of the account of the applicable Participating Company and any such
delivery or payment shall not be made until the recipient shall have made
satisfactory arrangements for the payment of any applicable withholding taxes.
ARTICLE XI
AMENDMENT AND TERMINATION
11.1. Amendments, Suspension or Discontinuance. The Board of Directors may
amend, suspend or discontinue the Plan, provided, however, that the Board of
Directors may not, without the prior approval of the stockholders of the
Company, make any amendment for which stockholder approval is necessary to
comply with any applicable tax or regulatory requirement, including for these
purposes any approval requirement which is a prerequisite for exemptive relief
under Section 16(b) of the Exchange Act, and provided, further, that upon or
following the occurrence of a Change in Control no amendment may adversely
affect the rights of any person in connection with any Option, Stock
Appreciation Right or Award previously granted.
11.2. Termination. No Option, Stock Appreciation Right or Award shall be
granted under the Plan after expiration of ten years from the date upon which
the Plan is approved by vote of the stockholders of the Company.
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<PAGE> 44
EXHIBIT B
1995 EXECUTIVE OFFICER PERFORMANCE PLAN OF
J.P. MORGAN & CO. INCORPORATED AND AFFILIATED COMPANIES
SECTION 1.
PURPOSE OF PLAN
The purpose of the Plan is to promote the success of J. P. Morgan & Co.
Incorporated by providing performance-based compensation for certain executive
officers.
SECTION 2.
DEFINITIONS
The following words and phrases as used herein shall have the following meanings
unless a different meaning is plainly required by the context:
2.1. "Company" shall mean J. P. Morgan & Co. Incorporated or any successor
to it in ownership of all or substantially all of its assets.
2.2. "Board of Directors" shall mean the Board of Directors of the Company.
2.3. "Participating Company" shall mean the Company, and any subsidiary or
other affiliated entity (whether or not incorporated).
2.4. "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
2.5. "Employee" shall mean any executive employed by one or more
Participating Companies who is determined by the Committee (i) to be a
covered employee as defined in Section 162(m) of the Code for the preceding
year or (ii) likely to be such a covered employee for the performance year.
2.6. "Plan" shall mean the 1995 Executive Officer Performance Plan of J.P.
Morgan & Co. Incorporated and Affiliated Companies, as amended from time to
time.
2.7. "Committee" shall mean the Committee established to administer the
Plan in accordance with Section 3.1.
2.8. "Stock Incentive Plan" shall mean the 1995 Stock Incentive Plan of
J.P. Morgan & Co. Incorporated and Affiliated Companies and any successor
plan thereto.
SECTION 3.
ADMINISTRATION OF THE PLAN
3.1. The Committee. The Plan shall be administered by a Committee consisting
of at least three persons chosen by the Board of Directors from among those
members of the Board of Directors who (i) are not eligible to participate in the
Plan, (ii) are not employees of a Participating Company and (iii) are outside
directors within the meaning of Section 162(m) of the Code. The Committee may
consult with management but shall have the responsibility of determining the
Employees who are to receive awards under the Plan and the amount of such awards
and shall otherwise be responsible for the administration of the Plan. The
Committee also shall construe and interpret the Plan and adopt rules and
regulations governing administration of the Plan, and exercise the remaining
duties and powers conferred on it by the Plan.
SECTION 4.
AWARDS UNDER THE PLAN
4.1 Grant of Awards under the Plan. Subject to the Committee's discretion to
reduce such awards, each year each covered Employee shall be entitled to an
award equal to .75% of Morgan's consolidated income
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<PAGE> 45
before income taxes, discontinued operations, awards under this Plan, expenses
classified as "Provisions for Restructuring" (net of "Related Applicable Income
Tax Benefits"), extraordinary items and cumulative effects of accounting method
changes all as determined in accordance with generally accepted accounting
principles and as appearing in Morgan's Consolidated Statement of Income
contained in Morgan's Consolidated Financial Statements for the year as audited
by Morgan's independent accountants. The Committee, in its sole discretion, may
require vesting periods with respect to any award, including the attainment of
such further performance goals as it deems appropriate. In addition, there is no
obligation to pay all or any of an earned award. In no event shall any award be
paid under the Plan unless and until the Plan has been approved by stockholders.
SECTION 5.
ELECTIONS AS TO AWARDS
5.1 Immediate Awards. Except as provided in Section 5.2, awards earned under
the Plan shall be paid as promptly as practicable after the close of the
applicable year, or after such further vesting or performance period as
determined by the Committee. Any such distribution shall be in cash or such
other property as the Committee may determine, including shares of Common Stock
of the Company. To the extent any payment is made in such shares, such payments
shall be made under the Stock Incentive Plan.
5.2 Deferred Awards. (a) The Committee shall have the right to require that
payment of all or any portion of an earned award be deferred until such time or
times as the Committee, in its sole discretion, shall determine. In addition, an
Employee may elect to defer the payment of any award earned under the Plan.
Deferral elections shall be made at such time and in such manner as the
Committee shall prescribe. The Committee shall establish such terms, conditions,
rules and regulations as it shall deem necessary and advisable with respect to
deferred awards including, but not limited to, the time of payment, (including
acceleration), the method of determining the additional amounts to be credited
with respect to a deferred award, the applicable methods of payment of deferred
awards, and any special rules that may apply in the event of termination of
employment by reason of death, disability, or retirement. Any election under
this Section 5.2 shall be irrevocable by the Employee. Any distribution of a
deferred award shall be in cash or such other property as the Committee may
determine including shares of Common Stock of the Company. To the extent any
deferred award is paid in such shares, such payments shall be made under the
Stock Incentive Plan.
(b) The Committee shall have the right to limit or reject all or any part of a
deferral election if the Committee in its sole discretion shall determine at any
time prior to the end of the Award Period that deferral in the form elected has
become inadvisable because of changes in the Federal tax laws or for any other
reason and in such event all amounts subject to such election shall be payable
in the manner provided in Section 5.1 unless an alternative form of deferral has
also been elected by the Employee and such election is accepted by the
Committee.
SECTION 6.
GENERAL PROVISIONS
6.1. No Right of Continued Employment. Neither the establishment of the Plan
nor the payment of any benefits hereunder nor any action of any Participating
Company or of the Board of Directors or of the Committee shall be held or
construed to confer upon any person any legal right to be continued in the
employ of a Participating Company and each Participating Company expressly
reserves the right to discharge an Employee whenever the interest of any such
company in its sole discretion may so require without liability to such
Participating Company, the Board of Directors or the Committee except as to any
rights which may be expressly conferred upon such Employee under the Plan.
6.2. Discretion of Company, Board of Directors and Committee. Any decision
made or action taken by the Company, the Board of Directors or by the Committee
arising out of or in connection with the construction, administration,
interpretation and effect of the Plan shall lie within the absolute discretion
of
B-2
<PAGE> 46
the Company, the Board of Directors or the Committee, as the case may be, and
shall be conclusive and binding upon all persons.
6.3. Absence of Liability. No member of the Board of Directors or of the
Committee or officer of any Participating Company shall be liable for any act or
action hereunder, whether of commission or omission, taken by any other member,
or by any officer, agent, or employee, or, except in circumstances involving his
bad faith, for anything done or omitted to be done by himself.
6.4. No Segregation of Cash or Shares. (a) The Company shall not be required
to segregate any cash or any other assets which may at any time be represented
by awards credited to an Employee and the Plan shall constitute an "unfunded"
plan of the Company.
(b) The Company shall not, by any provisions of this Plan, be deemed to be a
trustee of any property, and the liabilities of the Company to any Employee
pursuant to the Plan shall be those of a debtor pursuant to such contract
obligations as are created by or pursuant to the Plan, and the rights of any
Employee, former Employee or beneficiary shall be limited to those of an
unsecured creditor of the Company. In its sole discretion, the Board of
Directors may authorize the creation of trusts or other arrangements to meet the
obligations of the Participating Companies under the Plan, provided, however,
that existence of such trusts or arrangements is consistent with the unfunded
status of the Plan.
6.5. Inalienability of Benefits and Interests. (a) Except as expressly
provided by the Committee and subsection (b) hereof, no benefit payable under or
interest in the Plan shall be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance or charge, and any such
attempted action shall be void and no such benefit or interest shall be in any
manner liable for or subject to debts, contracts, liabilities, engagements or
torts of any Employee, former Employee or beneficiary.
(b) The provisions of subsection (a) hereof shall not apply to an assignment of
a payment due after the death of the Employee by the deceased Employee's legal
representative or beneficiary if such assignment is made for the purposes of
settling the affairs of such deceased Employee.
6.6. New York Law to Govern. All questions pertaining to the construction,
regulation, validity and effect of the provisions of the Plan shall be
determined in accordance with the laws of the State of New York.
6.7. Payment of Awards. Payment of Immediate Awards and Deferred Awards shall
be by or for the account of the Participating Companies and the Company and the
Participating Companies may make such arrangements as they may deem appropriate
with respect thereto.
6.8. Cancellation of Awards. (a) Prior to the occurrence of a Change in
Control, but not thereafter, the Committee may, in its sole discretion and with
or without cause, cancel any award in whole or in part to the extent it has not
theretofore been earned. Such cancellation shall be effective as of the date
specified by the Committee.
(b) Notwithstanding subsection (a) above, prior to payment of any award, the
Committee may, in its sole discretion, in cases involving a serious breach of
conduct by an Employee or former Employee, or activity of a former Employee in
competition with the business of a Participating Company, cancel any award,
whether or not vested, in whole or in part. Such cancellation shall be effective
as of the date specified by the Committee. The determination of whether an
Employee or former Employee has engaged in a serious breach of conduct or
activity in competition with the business of a Participating Company shall be
determined by the Committee in good faith and in its sole discretion.
6.9. Change in Control. (a) In the event of a Change in Control, the payment
of all deferred awards and awards subject to additional vesting provisions,
including awards subject to attainment of further performance goals, shall
(unless the Committee otherwise determines) be made as soon as practicable.
(b) For purposes of this Section 6.9, a Change in Control shall have the same
meaning as specified in the Stock Incentive Plan.
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<PAGE> 47
SECTION 7.
AMENDMENT, SUSPENSION OR TERMINATION OF PLAN
(a) The Board of Directors may from time to time amend, suspend or terminate in
whole or in part, and if suspended or terminated, may reinstate any or all of
the provisions of the Plan except that without the consent of the Employee no
amendment, suspension or termination of the Plan shall adversely affect the
rights of any Employee with respect to awards previously made to such Employee.
(b) The Plan may also be amended by the Committee provided such amendment does
not materially change the underlying policy reflected by, or the level of
benefits provided by, the Plan.
(c) Notwithstanding subsections (a) and (b), above, no amendment may be
effective without shareholder approval if such shareholder approval is necessary
to comply with the applicable rules of Section 162(m) of the Code.
B-4
<PAGE> 48
EXHIBIT C
EXECUTIVE OFFICERS OF MORGAN
The following individuals are the current executive officers of Morgan. The
Chairman of the Board, President, Chairman of the Executive Committee, and Vice
Chairmen of the Board of Morgan are elected annually by the Board of Directors
to serve until the next annual election of officers and until their respective
successors have been elected and have qualified. All other executive officers
are elected annually and hold office at the pleasure of the Board of Directors.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
NAME AGE POSITION
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Douglas A. Warner III............. 48............. Chairman of the Board and President of Morgan and the Bank. See
"Election of Directors" on page 2.
Roberto G. Mendoza................ 49............. Vice Chairman of the Board of Morgan and the Bank. See "Election of
Directors" on page 3.
Kurt F. Viermetz.................. 55............. Vice Chairman of the Board of Morgan and the Bank. See "Election of
Directors" on page 4.
Rodney B. Wagner.................. 63............. Vice Chairman of the Board of Morgan and the Bank. See "Election of
Directors" on page 4.
James T. Flynn.................... 55............. Chief Financial Officer of Morgan and the Bank since October 1990;
Executive Vice President of Morgan from March 1985 and the Bank from
January 1981 to October 1990.
Edward J. Kelly III............... 42............. General Counsel since November 1994 and Secretary of Morgan and the
Bank since February 1995. Prior to November 1994, Partner of Davis
Polk & Wardwell.
Michael E. Patterson.............. 53............. Chief Administrative Officer of Morgan and the Bank since November
1994; Executive Vice President and General Counsel of Morgan and the
Bank from March 1987 to November 1994.
David H. Sidwell.................. 41............. Managing Director and Controller of Morgan and the Bank since December
1994; Senior Vice President and Controller of Morgan and the Bank from
April 1994 to December 1994 and Senior Vice President of the Bank
since February 1989.
Peter B. Smith.................... 60............. Chairman, Credit Policy Committee of Morgan and the Bank since March
1986.
Stephen G. Thieke................. 48............. Chairman, Market Risk Committee of Morgan since June 1993 and Chairman
of the Board of J.P. Morgan Securities Inc. since November 1993 and
from April 1991 to October 1992; Managing Director of Morgan from
March 1991 to June 1993; President of J.P. Morgan Securities Inc. from
October 1990 to November 1993; Vice Chairman of the Board of J.P.
Morgan Securities Inc. from February 1990 to April 1991 and from
October 1992 to November 1993.
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
C-1
<PAGE> 49
PROXY
J.P. MORGAN & CO. INCORPORATED
PROXY SOLICITED ON BEHALF OF THE BOARD of DIRECTORS OF THE COMPANY
FOR ANNUAL MEETING OF STOCKHOLDERS, MAY 10, 1995
The undersigned hereby constitutes and appoints E. Deane Leonard, John F.
Ruffle and Rodney B. Wagner, and each of them, the true and lawfulagents and
proxies of the undersigned with full power of substitution in each, to
represent the undersigned at the Annual Meeting of Stockholders of J.P. MORGAN
& CO. INCORPORATED to be held in Morgan Hall West, 46th floor, 60 Wall Street,
New York, New York, on Wednesday, May 10, 1995, at 11 a.m., and at any
adjournment of said meeting, and in their discretion, upon such other matters
not specified as may come before said meeting.
Election of Directors, Nominees:
Douglas A. Warner III, Martin Feldstein, Hanna H. Gray, James R. Houghton,
James L. Ketelsen, William S. Lee, Roberto G. Mendoza, Lee R. Raymond, Richard
D. Simmons, John G. Smale, Kurt F.Viermetz, Rodney B. Wagner, Dennis
Weatherstone and Douglas C. Yearley.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT
VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD TO J.P. MORGAN & CO.
INCORPORATED , C/O FIRST CHICAGO TRUST COMPANY, P.O. BOX 8212, EDISON, NJ
08818-9079.
******************
* SEE REVERSE *
* SIDE *
******************
<PAGE> 50
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" ITEMS 1-4.
THIS PROXY WILL BE VOTED "FOR" ITEMS 1-4 IF NO CHOICE IS SPECIFIED.
1. Election of Directors / / FOR / / WITHHELD
(see reverse)
For, except vote withheld from the following nominee(s):
________________________________________________________
2. Approval of Indepen- / / FOR / / AGAINST / / ABSTAIN
dent accountants.
3. 1995 Stock / / FOR / / AGAINST / / ABSTAIN
Incentive Plan.
4. 1995 Executive Officer / / FOR / / AGAINST / / ABSTAIN
Performance Plan.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "AGAINST" ITEMS 5-7.
THIS PROXY WILL BE VOTED "AGAINST" ITEMS 5-7 IF NO CHOICE IS SPECIFIED .
5. Stockholder proposal / / FOR / / AGAINST / / ABSTAIN
relating to cumulative
voting.
6. Stockholder proposal / / FOR / / AGAINST / / ABSTAIN
relating to political
non-partisanship.
7. Stockholder proposal / / FOR / / AGAINST / / ABSTAIN
relating to structural
adjustments.
SIGNATURES(S)____________________________________ DATE ___________________
The signer hereby revokes all proxies heretofore given by the signer to vote at
said meeting or any adjournments therof.
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
