PAINE WEBBER GROUP INC, 8-K, 1994-12-27

PAINE WEBBER GROUP INC
8-K, 1994-12-27
SECURITY BROKERS, DEALERS & FLOTATION COMPANIES

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<PAGE> 1

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

-----------

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) December 9, 1994
----------------

PAINE WEBBER GROUP INC.
- -----------------------------------------------------------------
(Exact name of registrant as specified in its charter)

Delaware 1-7367 13-2760086
- -----------------------------------------------------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)

1285 Avenue of the Americas, New York, New York 10019
- -----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (212) 713-2000
--------------

Not Applicable
- -----------------------------------------------------------------
(Former name or address, if changed since last report)

<PAGE> 2

ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.

As previously disclosed, as of October 17, 1994,
the Company, General Electric Company ("GE") and Kidder,
Peabody Group Inc. ("Kidder") entered into an Asset Purchase
Agreement (the "Asset Purchase Agreement") and related
documents providing for the Company's purchase of specified
Kidder assets and businesses.

The Company, GE and Kidder have entered into a
Supplemental Agreement dated as of December 9, 1994 (the
"First Supplemental Agreement"), and a Second Supplemental
Agreement dated as of December 16, 1994 (the "Second
Supplemental Agreement"), which, among other things, provide
for the transactions contemplated by the Asset Purchase
Agreement to be consummated pursuant to multiple closings in
lieu of a single closing.

On December 9, 1994, pursuant to the Asset
Purchase Agreement, as amended and supplemented by the First
Supplemental Agreement, the Company purchased certain assets
of the real estate mortgage business of Kidder, including
Kidder's single family home loan trading, commercial/multi-
family home loan trading, mortgage finance, real estate
finance operations, research and contract finance. The Company,
through its wholly-owned subsidiaries PaineWebber Incorporated
and Paine Webber Real Estate Securities Inc., acquired
substantially all the fixed assets of this business (consisting
primarily of other real estate owned, equipment, furniture
and fixtures), the accounts receivable of this business and
selected portions of the inventory of this business from
Kidder in consideration of a cash payment of approximately
$580 million and the assumption by the Company of certain
specified liabilities of Kidder arising out of this
business. The Company financed the payment of the purchase
price for these assets through the sale of approximately
$350 million of commercial paper to GE and the balance from
various asset based funding sources.

On December 16, 1994, pursuant to the Asset
Purchase Agreement, as amended and supplemented by the First
Supplemental Agreement and the Second Supplemental
Agreement, the Company purchased certain assets of the
equity research, investment banking (excluding high yield
and emerging markets), fixed income (sales force only),
international institutional equity, international fixed
income, listed domestic futures and short term finance
businesses of Kidder (the "Other Acquired Businesses"). The

<PAGE> 3

Company acquired substantially all the fixed assets of the
Other Acquired Businesses (consisting primarily of equipment,
furniture and fixtures) and the accounts receivable of the
Other Acquired Businesses. In addition, the Company assumed
specified liabilities of Kidder arising out of the Other
Acquired Businesses. In consideration for these assets, the
Company issued to Kidder (i) 21.5 million shares of Common
Stock of the Company, (ii) $100 million stated value of 6%
Cumulative Convertible Redeemable Preferred Stock, Series A, of
the Company (the "Convertible Preferred Stock") and (iii) $250
million stated value of 9% Cumulative Redeemable Preferred Stock,
Series C, of the Company (the "Redeemable Preferred Stock").
The Company financed the cash portion of the purchase price
through available internal funds.

The Convertible Preferred Stock is redeemable at
any time, in whole or in part, at the option of the Company
at redemption prices declining to $100 per share, plus
accrued and unpaid dividends, by December 16, 2004. The
Convertible Preferred Stock is subject to mandatory
redemption on December 15, 2014. The Convertible Preferred
Stock is convertible into shares of Common Stock, at any
time, in whole or in part, at the option of the holder at a
conversion price of $18.13 per share of Common Stock,
subject to adjustment. However, until the stockholders of
the Company approve the issuance of the Common Stock to be
delivered upon conversion of the Convertible Preferred
Stock, the Convertible Preferred Stock is not convertible
into shares of Common Stock and the Company is obligated to
deliver cash in lieu of Common Stock upon any exercise of
the conversion privilege.

The Redeemable Preferred Stock is redeemable at
any time after December 15, 1999, in whole or in part, at
the option of the Company at a price of $100 per share,
together with accrued but unpaid dividends. The Redeemable
Preferred Stock is subject to mandatory redemption on
December 15, 2014.

The foregoing summary of the terms of the
Convertible Preferred Stock and the Redeemable Preferred
Stock is qualified by reference to the respective
Certificates of Designation, copies of which are attached as
Exhibit 3.1 and 3.2.

<PAGE> 4

As a result of these transactions, GE now owns
approximately 25% of the Common Stock of the Company on a
fully diluted basis. Pursuant to a Stockholders Agreement
dated as of December 16, 1994, among the Company, GE and
Kidder (the "Stockholders Agreement"), GE has agreed to
certain "standstill" arrangements, which will continue until
the earlier of (i) December 16, 2009, and (ii) three years
after GE sells all its voting securities of the Company.
GE's ability to transfer the Company's Common Stock and
Convertible Preferred Stock is subject to various
restrictions. Pursuant to the Stockholders Agreement, GE is
entitled to nominate one director for election to the
Company's Board of Directors for so long as GE holds at
least 10% of the total voting power of the Company. A copy
of the Stockholders Agreement is attached as Exhibit 4.1.

In connection with the purchase of the Other
Acquired Businesses, the Company and Kidder and certain of
their affiliates entered into a series of securities trades
pursuant to which (i) the Company sold to Kidder for cash
approximately $267 million in fair market value of U.S.
Treasury securities and (ii) Kidder sold to the Company for
cash approximately $617 million in fair market value of
commercial paper, adjustable-rate preferred stock, short-
term certificates of deposit and Eurobond securities.

The acquisition by the Company of the assets of
the retail brokerage business of Kidder is currently
expected to occur on or about January 30, 1995, and the
acquisition by the Company of the assets of the asset
management business of Kidder is currently expected to occur
no later than April 30, 1995, following the receipt of certain
consents and approvals.

ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.

(a), (b) Neither audited nor unaudited financial
statements are currently available for the assets and
businesses acquired by the Company on December 9, 1994, and
December 16, 1994. Accordingly, it is not practicable to
provide the historical or pro forma financial statements
required by Item 7 of Form 8-K at the time this Current
Report on Form 8-K is filed. The Company shall file the
required historical and pro forma financial statements as
soon as they are available, but in no event later than
the time provided for under the applicable rules.

<PAGE> 5

Exhibit 3.1 - Certificate of Designations for the 6%
Cumulative Convertible Redeemable Preferred
Stock, Series A, of the Company

Exhibit 3.2 - Certificate of Designations of the
9% Cumulative Redeemable Preferred Stock,
Series C, of the Company

Exhibit 4.1 - Stockholders Agreement dated December 16,
1994, among the Company, General Electric
Company and Kidder, Peabody Group Inc.

Exhibit 10.1 - Supplemental Agreement dated as of
December 9, 1994, among the Company, General
Electric Company and Kidder, Peabody Group
Inc.

Exhibit 10.2 - Second Supplemental Agreement dated as of
December 16, 1994, among the Company, General
Electric Company and Kidder, Peabody Group
Inc.

SIGNATURE

Pursuant to the requirements of the Securities
Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned
thereunto duly authorized.

PAINE WEBBER GROUP INC.,

by
Theodore A. Levine
--------------------------
Name: Theodore A. Levine
Title: Vice President, General Counsel

Dated: December 27, 1994.

<PAGE> 6

Exhibit Index

Exhibit 3.1 - Certificate of Designations for the 6%
Cumulative Convertible Redeemable Preferred
Stock, Series A, of the Company

Exhibit 3.2 - Certificate of Designations of the
9% Cumulative Redeemable Preferred Stock,
Series C, of the Company

Exhibit 4.1 - Stockholders Agreement dated December 16,
1994, among the Company, General Electric
Company and Kidder, Peabody Group Inc.

Exhibit 10.1 - Supplemental Agreement dated as of
December 9, 1994, among the Company, General
Electric Company and Kidder, Peabody Group
Inc.

Exhibit 10.2 - Second Supplemental Agreement dated as of
December 16, 1994, among the Company, General
Electric Company and Kidder, Peabody Group
Inc.

<PAGE> 1
Exhibit 3.1

CERTIFICATE OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, WHICH HAVE NOT BEEN SET FORTH IN THE
RESTATED CERTIFICATE OF INCORPORATION OR IN ANY AMENDMENT THERETO, OF THE

6% CUMULATIVE CONVERTIBLE REDEEMABLE
PREFERRED STOCK, SERIES A
($100 STATED VALUE)

PAINE WEBBER GROUP INC.

Pursuant to Section 151 of the General Corporation Law
of the State of Delaware

The undersigned, Theodore A. Levine, Vice President, of Paine
Webber Group Inc., a Delaware corporation (hereinafter called the
"CORPORATION"), pursuant to the provisions of Sections 103 and 151 of the
General Corporation Law of the State of Delaware, does hereby make this
Certificate of Designations and does hereby state and certify that pursuant to
the authority expressly vested in the Board of Directors of the Corporation by
the Restated Certificate of Incorporation, as amended (the "CERTIFICATE OF
INCORPORATION"), the Board of Directors duly adopted the following resolution:

RESOLVED, that, pursuant to Article IV of the Certificate of
Incorporation (which authorizes 20,000,000 shares of preferred stock, $20 par
value ("PREFERRED STOCK"), of which (i) up to 2,200,000 shares of a series of
7.5% Convertible Preferred Stock, (ii) 240,000 shares of a series of 7.5%
Convertible Preferred Stock, Series B and (iii) up to 2,200,000 shares of a
series of 6% Convertible Preferred Stock have been authorized for issuance, the
Board of Directors hereby fixes the powers, designations, preferences and
relative, participating, optional and other special rights, and the
qualifications, limitations and restrictions, of a series of Preferred Stock
(in addition to the powers, designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, set forth in the Certificate of
Incorporation which are applicable to such series of Preferred Stock).
<PAGE> 2
2

RESOLVED, that each share of such series of Preferred Stock
shall rank equally in all respects and shall be subject to the following
provisions:

(1) Number and Designation. 1,000,000 shares of the
Preferred Stock of the Corporation shall be designated as 6% Cumulative
Convertible Redeemable Preferred Stock, Series A (the "SERIES A CONVERTIBLE
PREFERRED STOCK").

(2) Rank. The shares of Series A Convertible Preferred Stock
shall rank prior to the shares of the Corporation's common stock, $1 par value
(the "COMMON STOCK"), and any other class of stock of the Corporation ranking
junior to the Series A Convertible Preferred Stock (whether with respect to
dividends or upon liquidation, dissolution, winding up or otherwise). All
equity securities of the Corporation to which the Series A Convertible
Preferred Stock ranks prior (whether with respect to dividends or upon
liquidation, dissolution, winding up or otherwise), including the Common Stock,
are collectively referred to herein as the "JUNIOR SECURITIES." All equity
securities of the Corporation with which the Series A Convertible Preferred
Stock ranks on a parity (whether with respect to dividends or upon liquidation,
dissolution, winding up or otherwise), including the Corporation's 7.5%
Convertible Preferred Stock, 7.5% Convertible Preferred Stock, Series B, 6%
Convertible Preferred Stock and 9% Cumulative Redeemable Preferred Stock,
Series C, are collectively referred to herein as the "PARITY SECURITIES." The
respective definitions of Junior Securities and Parity Securities shall also
include any rights or options exercisable for or convertible into any of the
Junior Securities and Parity Securities, as the case may be.

(3) Dividends. (a) The holders of shares of Series A
Convertible Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally available for the
payment of dividends, cash dividends at the annual rate of $6 per share. Such
dividends shall be payable in arrears in equal amounts quarterly on March 15,
June 15, September 15 and December 15 of each year (unless such day is not a
Business Day, in which event on the next succeeding Business Day) (each of such
dates being a "DIVIDEND PAYMENT DATE" and each such quarterly period being a
"DIVIDEND PERIOD") commencing on the Dividend Payment Date which next follows
the issuance of such shares of Series A Convertible Preferred Stock. Such
dividends (i) shall be cumulative from the date of issue,
<PAGE> 3
3

whether or not declared and whether or not in any Dividend Period or Periods
there shall be funds of the Corporation legally available for the payment of
such dividends and (ii) shall compound quarterly, to the extent they are
unpaid, at the rate of 6% per annum computed on the basis of a 360-day year and
twelve 30-day months. Each such dividend shall be payable to the holders of
record of shares of the Series A Convertible Preferred Stock, as they appear on
the stock records of the Corporation at the close of business on such record
dates, not more than 60 days, or less than 10 days, preceding the payment dates
thereof, as shall be fixed by the Board of Directors or a duly authorized
committee thereof. Accrued and unpaid dividends for any past Dividend Periods
may be declared and paid at any time, without reference to any Dividend Payment
Date, to holders of record on such date, not more than 45 days preceding the
payment date thereof, as may be fixed by the Board of Directors. As used
herein, the term "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday, a day on which the New York Stock Exchange does not conduct regular
trading or a day on which is or is declared a national or New York State
holiday.

(b) The amount of dividends payable for each full Dividend
Period for the Series A Convertible Preferred Stock shall be computed by
dividing the annual dividend rate by four. The amount of dividends payable for
the initial Dividend Period, or any other period shorter or longer than a full
Dividend Period, on the Series A Convertible Preferred Stock shall be computed
on the basis of twelve 30-day months and a 360-day year. Holders of shares of
Series A Convertible Preferred Stock shall not be entitled to any dividends,
whether payable in cash, property or stock, in excess of cumulative dividends,
as herein provided, on the Series A Convertible Preferred Stock.

(c) So long as any shares of the Series A Convertible
Preferred Stock are outstanding, no dividends, except as described in the next
succeeding sentence, shall be declared or paid or set apart for payment on
Parity Securities, for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on the Series A Convertible
Preferred Stock for all Dividend Periods terminating on or prior to the date of
payment of the dividend on such class or series of parity stock. When
dividends are not paid in full or a sum sufficient for such payment is not set
apart, as aforesaid, all dividends declared upon shares of the Series
<PAGE> 4
4

A Convertible Preferred Stock and all dividends declared upon any other Parity
Security shall be declared ratably in proportion to the respective amounts of
dividends accumulated and unpaid on the Series A Convertible Preferred Stock
and accumulated and unpaid on such Parity Security.

(d) So long as any shares of the Series A Convertible
Preferred Stock are outstanding, no dividends (other than dividends or
distributions paid in shares of, or options, warrants or rights to subscribe
for or purchase shares of, Junior Securities) shall be declared or paid or set
apart for payment or other distribution declared or made upon Junior
Securities, nor shall any Junior Securities be redeemed, purchased or otherwise
acquired (all such dividends, distributions, redemptions or purchases being
hereinafter referred to as a "JUNIOR SECURITIES DISTRIBUTION") for any
consideration (or any moneys be paid to or made available for a sinking fund
for the redemption of any shares of any such stock) by the Corporation,
directly or indirectly (except by conversion into or exchange for Junior
Securities), unless in each case (i) the full cumulative dividends on all
outstanding shares of the Series A Convertible Preferred Stock and any other
Parity Securities shall have been paid or set apart for payment for all past
Dividend Periods with respect to the Series A Convertible Preferred Stock and
all past dividend periods with respect to such Parity Securities and (ii)
sufficient funds shall have been paid or set apart for the payment of the
dividend for the current Dividend Period with respect to the Series A
Convertible Preferred Stock and the current dividend period with respect to
such Parity Securities.

(4) Liquidation Preference. (a) In the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, before any payment or distribution of the assets of the
Corporation (whether capital or surplus) shall be made to or set apart for the
holders of Junior Securities, the holders of the shares of Series A Convertible
Preferred Stock shall be entitled to receive $100 per share of Series A
Convertible Preferred Stock plus an amount equal to all dividends (whether or
not earned or declared) accrued and unpaid thereon to the date of final
distribution to such holders; but such holders shall not be entitled to any
further payment. If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or proceeds thereof, distributable
among the holders of the shares of Series A Convertible Preferred Stock shall
be insufficient to pay in full the preferential amount
<PAGE> 5
5

aforesaid and liquidating payments on any Parity Securities, then such assets,
or the proceeds thereof, shall be distributed among the holders of shares of
Series A Convertible Preferred Stock and any such other Parity Securities
ratably in accordance with the respective amounts that would be payable on such
shares of Series A Convertible Preferred Stock and any such other stock if all
amounts payable thereon were paid in full. For the purposes of this paragraph
(4), a sale or transfer of all or substantially all of the Corporation's
assets, shall be deemed to be a liquidation, dissolution or winding up,
voluntary or involuntary, of the Corporation, but a consolidation or merger of
the Corporation with one or more corporations shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation.

(b) Subject to the rights of the holders of any Parity
Securities, after payment shall have been made in full to the holders of the
Series A Convertible Preferred Stock, as provided in this paragraph (4), any
other series or class or classes of Junior Securities shall, subject to the
respective terms and provisions (if any) applying thereto, be entitled to
receive any and all assets remaining to be paid or distributed, and the holders
of the Series A Convertible Preferred Stock shall not be entitled to share
therein.

(5) Redemption. (a) To the extent the Corporation shall
have funds legally available for such payment, at any time or from time to time
prior to the fifth anniversary of the date of issuance of the shares of Series
A Convertible Preferred Stock, the Corporation may redeem at its option, in
whole or in part, shares of Series A Convertible Preferred Stock at a
redemption price per share in cash equal to the greater of (i) $140 and (ii)
the average of (A) $140 and (B) the Current Market Price Per Common Share (as
defined in paragraph (7)(g)(vi)) as of the date of notice of redemption
multiplied by the number obtained by dividing 100 by the Conversion Price (as
defined in paragraph 7(a)) then in effect, in each case, together with any
accrued and unpaid dividends thereon to the redemption date.

(b) To the extent the Corporation shall have funds legally
available for such payment, at any time or from time to time on or after the
fifth anniversary of the date of issuance of the shares of Series A Convertible
Preferred Stock, the Corporation may redeem at its option, in whole or in part,
shares of Series A Convertible
<PAGE> 6
6

Preferred Stock at a redemption price in cash (subject to subparagraph (d)
below) equal to the sum of (i) the redemption price per share indicated below
and (ii) any accrued and unpaid dividends to the redemption date. The amount
of the redemption price per share, if redeemed during the 12-month period
commencing on the December 16th of the years indicated below, is:

<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1999 $105
2000 $104
2001 $103
2002 $102
2003 $101
2004 and thereafter $100
</TABLE>

(c) To the extent the Corporation shall have funds legally
available for such payment, on December 15, 2014, if any shares of the Series A
Convertible Preferred Stock shall be outstanding, the Corporation shall redeem
all outstanding shares of the Series A Convertible Preferred Stock, at a
redemption price of $100 per share in cash (subject to paragraph (d) below)
together with accrued and unpaid dividends thereon to such date.

(d) In lieu of a cash payment of the redemption price per
share due upon any redemption of shares of Series A Convertible Preferred Stock
pursuant to paragraph 5(b) or (c), the Corporation may issue shares of Common
Stock to the holders of record of such shares of Series A Convertible Preferred
Stock in full payment of such amount, by giving written notice (in the manner
described in paragraph (6)) to such holders. If such notice is so given, the
Corporation shall issue and deliver or cause to be delivered to each such
holder of shares of Series A Convertible Preferred Stock being redeemed out of
its authorized but unissued Common Stock or Common Stock held in treasury that
number of shares of Common Stock determined by dividing the aggregate
redemption price payable in respect of all such shares of Series A Convertible
Preferred Stock owned by such holder being redeemed by the Current Market Price
Per Common Share as of the redemption date. The Corporation shall, in lieu of
issuing any fractional shares of Common Stock to any such holder, pay to such
holder cash in an amount equal to such fractional interest multiplied by the
Current Market Price Per Common Share as of the redemption date.
<PAGE> 7
7

(e) Immediately prior to authorizing or making any redemption
pursuant to this paragraph (5), the Corporation, by resolution of its Board of
Directors, shall, to the extent of any funds legally available therefor,
declare a dividend on the Series A Convertible Preferred Stock payable on the
redemption date in an amount equal to any accrued and unpaid dividends on the
Series A Convertible Preferred Stock as of such redemption date.

(f) If the Corporation is unable or shall fail to discharge
its obligation to redeem all outstanding shares of Series A Convertible
Preferred Stock pursuant to paragraph (5)(c) (the "MANDATORY REDEMPTION
OBLIGATION"), the Mandatory Redemption Obligation shall be discharged as soon
as the Corporation is able to discharge such Mandatory Redemption Obligation.
If and so long as any Mandatory Redemption Obligation with respect to the
Series A Convertible Preferred Stock shall not be fully discharged, the
Corporation shall not (i) directly or indirectly, redeem, purchase, or
otherwise acquire any Parity Security or discharge any mandatory or optional
redemption, sinking fund or other similar obligation in respect of any Parity
Securities (except in connection with a redemption, sinking fund or other
similar obligation to be satisfied pro rata with the Series A Convertible
Preferred Stock) or (ii) in accordance with paragraph (3)(d), declare or make
any Junior Securities Distribution, or, directly or indirectly, discharge any
mandatory or optional redemption, sinking fund or other similar obligation in
respect of the Junior Securities.

(g) Shares of Series A Convertible Preferred Stock which have
been issued and reacquired in any manner, including shares purchased or
redeemed, shall (upon compliance with any applicable provisions of the laws of
the State of Delaware) have the status of authorized and unissued shares of the
class of Preferred Stock undesignated as to series and may be redesignated and
reissued as part of any series of the Preferred Stock; provided that no such
issued and reacquired shares of Series A Convertible Preferred Stock shall be
reissued or sold as Series A Convertible Preferred Stock.

(6) Procedure for Redemption. (a) In the event that fewer
than all the outstanding shares of Series A Convertible Preferred Stock are to
be redeemed, the number of shares to be redeemed shall be determined by the
Board of Directors and the shares to be redeemed shall be selected pro rata
(with any fractional shares being rounded to the
<PAGE> 8
8

nearest whole share) as nearly as practicable or by lot, or by such other
method as the Board of Directors may determine to be equitable.

(b) In the event the Corporation shall redeem shares of
Series A Convertible Preferred Stock, notice of such redemption shall be given
by first class mail, postage prepaid, mailed not less than 30 days nor more
than 60 days prior to the redemption date, to each holder of record of the
shares to be redeemed at such holder's address as the same appears on the stock
register of the Corporation; provided that neither the failure to give such
notice nor any defect therein shall affect the validity of the giving of notice
for the redemption of any share of Series A Convertible Preferred Stock to be
redeemed except as to the holder to whom the Corporation has failed to give
said notice or except as to the holder whose notice was defective. Each such
notice shall state: (i) the redemption date; (ii) the number of shares of
Series A Convertible Preferred Stock to be redeemed and, if fewer than all the
shares held by such holder are to be redeemed, the number of shares to be
redeemed from such holder; (iii) the redemption price; (iv) the place or places
where certificates for such shares are to be surrendered for payment of the
redemption price; (v) that dividends on the shares to be redeemed will cease to
accrue on such redemption date; and (vi) whether the redemption price will be
paid in cash or shares of Common Stock.

(c) Notice having been mailed as aforesaid, from and after
the redemption date (unless default shall be made by the Corporation in
providing money for the payment of the redemption price of the shares called
for redemption), dividends on the shares of Series A Convertible Preferred
Stock so called for redemption shall cease to accrue, and all rights of the
holders thereof as stockholders of the Corporation (except the right to receive
from the Corporation the redemption price) shall cease. Upon surrender in
accordance with said notice of the certificates for the shares so redeemed
(properly endorsed or assigned for transfer, if the Board of Directors of the
Corporation shall so require and the notice shall so state), such shares shall
be redeemed by the Corporation at the redemption price aforesaid. In case
fewer than all the shares represented by any such certificate are redeemed, a
new certificate shall be issued representing the unredeemed shares without cost
to the holder thereof.

(d) All shares of Common Stock delivered pursuant
<PAGE> 9
9

to this paragraph (6) will upon delivery be duly and validly issued and fully
paid and nonassessable, free of all liens and charges and not subject to any
preemptive rights, and free from all documentary, stamp, transfer or other
similar taxes. If the shares of Common Stock to be delivered pursuant to this
paragraph (6) are to be issued in the name of a person other than the
registered holder of the shares of Series A Convertible Preferred Stock being
redeemed, such registered holder shall pay all transfer or other similar taxes
with respect thereto.

(7) Conversion. (a)(i) Subject to the provisions of this
paragraph (7), the holders of the shares of Series A Convertible Preferred
Stock shall have the right, at any time and from time to time, at such holder's
option, to convert any or all outstanding shares (and fractional shares) of
Series A Convertible Preferred Stock, in whole or in part, into that number of
fully paid and non-assessable shares of Common Stock (calculated as to each
conversion to the nearest 1/10,000th of a share) obtained by dividing 100 by
the Conversion Price (as defined below), and by surrender of such shares so to
be converted, such surrender to be made in the manner provided in this
paragraph (7). The term "Conversion Price" shall mean $18.13 per share, as
adjusted in accordance with the provisions of paragraph 7(g).

(ii) Notwithstanding any other provision hereof, the right
to convert shares of Series A Convertible Preferred Stock called for redemption
pursuant to paragraph (5) shall terminate (A) if the date of redemption is
prior to the fifth anniversary of the date of issuance of the shares of Series
A Convertible Preferred Stock, at the close of business on the day immediately
preceding the date on which the Corporation gives a notice of redemption with
respect to such shares in accordance with paragraph (6) and (B) if the date of
redemption is on or after the fifth anniversary of such date of issuance, at
the close of business on the day immediately preceding the redemption date, in
each case, unless the Corporation shall default in making payment of the amount
payable upon such redemption.

(b)(i) In order to exercise the conversion privilege, the
holder of the shares of Series A Convertible Preferred Stock to be converted
shall surrender the certificate representing such shares at the office of the
Corporation, or at the office of the conversion agent for the Series A
Convertible Preferred Stock appointed for such purpose by the Corporation, with
a written notice of
<PAGE> 10
10

election to convert completed and signed, specifying the number of shares to be
converted.

Such notice shall be substantially in the following form:

NOTICE OF ELECTION TO CONVERT

The undersigned, being a holder of the 6% Cumulative
Convertible Redeemable Preferred Stock, Series A ("Preferred
Stock"), of Paine Webber Group Inc. (the "Corporation"),
irrevocably exercises the right to convert ________
outstanding shares of Preferred Stock on _________, ____, into
shares of Common Stock of the Corporation in accordance with
the terms of the Preferred Stock, and directs that the shares
issuable and deliverable upon the conversion, together with
any check in payment for fractional shares, be issued and
delivered in the denominations indicated below to the
registered holder hereof unless a different name has been
indicated below. If shares are to be issued in the name of a
person other than the undersigned, the undersigned will pay
all transfer taxes payable with respect thereto.

Dated:

Fill in for registration of
shares of Common Stock
if to be issued otherwise
than to the registered holder:

- ------------------------------
Name

- ------------------------------
Address

- ------------------------------ -------------------------
(Please print name (Signature)
and address,
including postal
code number)

<PAGE> 11
11

Denominations:
-----------------------

Unless the shares issuable on conversion are to be issued in the same name as
the name in which such shares of Series A Convertible Preferred Stock are
registered, each share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder or the holder's duly authorized attorney and an amount sufficient
to pay any transfer or similar tax.

(ii) As promptly as practicable after the surrender by the holder
of the certificates for shares of Series A Convertible Preferred Stock as
aforesaid, the Corporation shall issue and shall deliver to such holder, or on
the holder's written order to the holder's transferee, a certificate or
certificates for the whole number of shares of Common Stock issuable upon the
conversion of such shares in accordance with the provisions of this paragraph
(7) and any fractional interest in respect of a share of Common Stock arising
upon such conversion shall be settled as provided in paragraph (7)(f).

(iii) Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which the
certificates for shares of Series A Convertible Preferred Stock shall have been
surrendered and such notice received by the Corporation as aforesaid, and the
person in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become the holder of record of the shares of Common Stock represented thereby
at such time on such date. All shares of Common Stock delivered upon
conversion of the Series A Convertible Preferred Stock will upon delivery be
duly and validly issued and fully paid and non-assessable, free of all liens
and charges and not subject to any preemptive rights. Upon the surrender of
certificates representing shares of Series A Convertible Preferred Stock, such
shares shall no longer be deemed to be outstanding and all rights of a holder
with respect to such shares surrendered for conversion shall immediately
terminate except the right to receive the Common Stock and other amounts
payable pursuant to this paragraph (7).

(c)(i) Subject to paragraph (7)(a)(ii), upon delivery to the
Corporation by a holder of shares of Series A Convertible Preferred Stock of a
notice of election to
<PAGE> 12
12

convert, the right of the Corporation to redeem such shares of Series A
Convertible Preferred Stock shall terminate.

(ii) Subject to paragraph (7)(a)(ii), from the date of delivery
by a holder of shares of Series A Convertible Preferred Stock of such notice of
election to convert, in lieu of dividends on such Series A Convertible
Preferred Stock pursuant to paragraph (3), such Series A Convertible Preferred
Stock shall participate equally and ratably with the holders of shares of
Common Stock in all dividends paid on the Common Stock as if such shares of
Series A Convertible Preferred Stock had been converted to shares of Common
Stock at the time of such delivery.

(iii) If, after receipt by a holder of shares of Series A
Convertible Preferred Stock of a notice of redemption pursuant to paragraph (5)
with a redemption date for such shares on or after the fifth anniversary of the
issuance of the Series A Convertible Preferred Stock, such holder delivers to
the Corporation a notice of election to convert, such Series A Convertible
Preferred Stock shall cease to accrue dividends pursuant to paragraph (3) but
such shares shall continue to be entitled to receive all accrued dividends
which such holder is entitled to receive pursuant to paragraph (3) through the
date of delivery of such notice of election to convert (including pro rata
dividends for the period from the last Dividend Payment Date to the date of
delivery of the notice of election to convert) in preference to and in priority
over any dividends on the Common Stock. Such accrued dividends shall be
payable to such holder when, as and if declared by the Board of Directors, out
of funds legally available for the payment of dividends, as provided in
paragraph (3) above.

(iv) Except as provided above and in paragraph (7)(g), the
Corporation shall make no payment or adjustment for accrued and unpaid
dividends on shares of Series A Convertible Preferred Stock, whether or not in
arrears, on conversion of such shares or for dividends in cash on the shares of
Common Stock issued upon such conversion.

(d)(i) The Corporation covenants that it will at all times
reserve and keep available, free from preemptive rights, such number of its
authorized but unissued shares of Common Stock as shall be required for the
purpose of effecting conversions of the Series A Convertible Preferred Stock.
For purposes of this paragraph (d)(i), the number of shares of Common Stock
which shall be deliverable upon the conversion of all outstanding shares of
Series A Convertible
<PAGE> 13
13

Preferred Stock shall be computed as if at the time of computation all such
outstanding shares were held by a single holder.

(ii) Prior to the delivery of any securities which the
Corporation shall be obligated to deliver upon conversion of the Series A
Convertible Preferred Stock, the Corporation shall use its best efforts to
comply with all applicable federal and state laws and regulations which require
action to be taken by the Corporation.

(e) The Corporation will pay any and all documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
shares of Common Stock on conversion of the Series A Convertible Preferred
Stock pursuant hereto; provided that the Corporation shall not be required to
pay any tax which may be payable in respect of any transfer involved in the
issue or delivery of shares of Common Stock in a name other than that of the
holder of the Series A Convertible Preferred Stock to be converted and no such
issue or delivery shall be made unless and until the person requesting such
issue or delivery has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.

(f) In connection with the conversion of any shares of Series
A Convertible Preferred Stock, no fractions of shares of Common Stock shall be
issued, but in lieu thereof the Corporation shall pay a cash adjustment in
respect of such fractional interest in an amount equal to such fractional
interest multiplied by the Current Market Price Per Common Share on the
Business Day on which such shares of Series A Convertible Preferred Stock are
deemed to have been converted. If more than one share shall be surrendered for
conversion at one time by the same holder, the number of full shares of Common
Stock issuable upon conversion thereof shall be computed on the basis of the
aggregate number of the shares of Series A Convertible Preferred Stock so
surrendered. All calculations under this paragraph (7) shall be made to the
nearest 1/100 of one cent or to the nearest 1/10,000 of a share, as the case
may be.

(g) The Conversion Price shall be adjusted from time to time
as follows:

(i) In case the Corporation shall at any time after the date
of issue of the Series A Convertible Preferred Stock (I) declare a dividend or
make a
<PAGE> 14
14

distribution on Common Stock payable in Common Stock, (II) subdivide or split
the outstanding Common Stock into a greater number of shares, (III) combine or
reclassify the outstanding Common Stock into a smaller number of shares, (IV)
issue any shares of its capital stock in a reclassification of Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Corporation is the continuing corporation), or (V)
consolidate with, or merge with or into, any other Person (unless the
Corporation shall be the surviving corporation in such merger and the holders
of Common Stock of the Corporation are not entitled to receive any
consideration in connection therewith), the Conversion Price in effect at the
time of the record date for such dividend or distribution or of the effective
date of such subdivision, split, combination, consolidation, merger or
reclassification shall be proportionately adjusted so that the conversion of
the Series A Convertible Preferred Stock after such time shall entitle the
holder to receive the aggregate number of shares of Common Stock or other
securities of the Corporation (or shares of any security into which such shares
of Common Stock have been combined, consolidated, merged or reclassified
pursuant to clause (III), (IV) or (V) above) which, if this Series A
Convertible Preferred Stock had been converted immediately prior to such time,
such holder would have owned upon such conversion and been entitled to receive
by virtue of such dividend, distribution, subdivision, split, combination,
consolidation, merger or reclassification, assuming such holder of Common Stock
of the Corporation (x) is not a Person with which the Corporation consolidated
or into which the Corporation merged or which merged into the Corporation or to
which such recapitalization, sale or transfer was made, as the case may be
("CONSTITUENT PERSON"), or an affiliate of a constituent person and (y) failed
to exercise any rights of election as to the kind or amount of securities, cash
and other property receivable upon such reclassification, change,
consolidation, merger, recapitalization, sale or transfer (provided, that if
the kind or amount of securities, cash and other property receivable upon such
reclassification, change, consolidation, merger, recapitalization, sale or
transfer is not the same for each share of Common Stock of the Corporation held
immediately prior to such reclassification, change, consolidation, merger,
recapitalization, sale or transfer by other than a constituent person or an
affiliate thereof and in respect of which such rights of election shall not
have been exercised ("NON-ELECTING SHARE"), then for the purpose of this
paragraph (g) (i) the kind and
<PAGE> 15
15

amount of securities, cash and other property receivable upon such
reclassification, change, consolidation, merger, recapitalization, sale or
transfer by each non-electing share shall be deemed to be the kind and amount
so receivable per share by a plurality of the non-electing shares). Such
adjustment shall be made successively whenever any event listed above shall
occur.

(ii) In case the Corporation shall issue or sell any Common
Stock (other than Excluded Stock (as defined below)) without consideration or
for a consideration per share less than the then Current Market Price Per
Common Share, the Conversion Price to be in effect after such issuance or sale
shall be determined by multiplying the Conversion Price in effect immediately
prior to such issuance or sale by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance or sale plus the number of shares which the aggregate offering price
of the total number of shares so issued or sold would purchase at such Current
Market Price Per Common Share, and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after giving effect to such
issuance or sale. In case any portion of the consideration to be received by
the Corporation shall be in a form other than cash, the fair market value of
such noncash consideration shall be utilized in the foregoing computation.
Such fair market value shall be determined by the Board of Directors of the
Corporation. Such adjustment shall be made effective immediately after such
issuance or sale. For purposes of paragraphs (g)(ii), (iii) and (iv),
"Excluded Stock" shall mean any shares of Common Stock, or any shares of stock
or other securities convertible or exercisable into or exchangeable for shares
of Common Stock (such convertible, exercisable or exchangeable stock or
securities being herein called "CONVERTIBLE SECURITIES") or any rights to
subscribe for or purchase, or options or warrants for the purchase of shares of
the Common Stock or any Convertible Securities issued, granted or sold (I) as
payment of all or any portion of the cost of acquiring assets or stock or
securities of any other corporation or of assets of or interests in any
noncorporate entity or in any other transaction (other than a distribution
without consideration to holders of the then outstanding shares of Common
Stock) in which the consideration for such shares of the Common Stock,
Convertible Securities or rights or options is other than cash, obligations of
the United States Government or Federal funds; (II) pursuant to any employee
plan or employee contract approved or otherwise authorized by the Board of
<PAGE> 16
16

Directors of the Corporation, including without limitation, any employee stock
option plan, employee restricted stock plan or other employee incentive plan or
any share purchase plan; (III) pursuant to any shareholder dividend
reinvestment plan; (IV) upon the conversion or exchange of any Convertible
Securities outstanding on December 16, 1994 or the Series A Convertible
Preferred Stock, or pursuant to any other contractual obligation in existence
on such date or any Convertible Securities issued after such date provided that
the "conversion price" for the Common Stock underlying such Convertible
Security is greater than the Current Market Price Per Common Share on the date
such Convertible Security is issued, granted or sold; (V) upon the conversion
or exchange of any Convertible Securities, or the exercise of any rights or
options, in either case, issued, granted or sold in the circumstances described
in any of the foregoing clauses (I) through (IV) or upon the conversion or
exchange of Convertible Securities acquired upon the exercise of any such
rights or options; or (VI) pursuant to the exercise of any rights or options,
or upon conversion or exchange of any Convertible Securities, if with respect
to such rights, options or Convertible Securities no adjustment to the
Conversion Price was required pursuant to this paragraph (g)(ii).

(iii) In case the Corporation shall fix a record date for the
issue (other than pursuant to an automatic dividend reinvestment plan of the
Corporation or any similar plan or any customary shareholders rights plan of
the Corporation) of rights, options or warrants (other than Excluded Stock) to
the holders of its Common Stock or other securities entitling such holders to
subscribe for or purchase shares of Common Stock (or securities convertible
into shares of Common Stock) at a price per share of Common Stock (or having a
conversion price per share of Common Stock, if a security convertible into
shares of Common Stock) less than the then Current Market Price Per Common
Share on such record date, the maximum number of shares of Common Stock
issuable upon exercise of such rights, options or warrants (or conversion of
such convertible securities) shall be deemed to have been issued and
outstanding as of such record date, and the Conversion Price shall be adjusted
pursuant to paragraph (g)(ii) hereof as though such maximum number of shares of
Common Stock had been so issued for an aggregate consideration equal to the
aggregate consideration payable for such rights, options, warrants or
convertible securities and the aggregate consideration payable by the holders
of such rights, options, warrants or convertible securities prior to their
receipt of such shares of Common
<PAGE> 17
17

Stock. In case any portion of such consideration shall be in a form other than
cash, the fair market value of such noncash consideration shall be determined
as set forth in paragraph (g)(ii) hereof. Such adjustment shall be made
effective on the day immediately after the record date; and in the event that
such rights, options or warrants are not so issued or expire unexercised or
such convertible securities are redeemed or otherwise retired prior to
conversion thereof, or in the event of a change in the number of shares of
Common Stock to which the holders of such rights, options, warrants or
convertible securities are entitled (other than pursuant to adjustment
provisions therein comparable to those contained in this paragraph (g)), the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such record date had not been fixed, in the former event,
or the Conversion Price which would then be in effect if such holders had
initially been entitled to such changed number of shares of Common Stock, in
the latter event.

(iv) In case the Corporation shall issue rights, options or
warrants (other than Excluded Stock) entitling the holders thereof to subscribe
for or purchase Common Stock (or securities convertible into shares of Common
Stock) or shall issue convertible securities, at a price per share of Common
Stock (or having a conversion price per share of Common Stock, if a security
convertible into shares of Common Stock) (including, in the case of rights,
options or warrants, the price at which they may be exercised) is less than the
then Current Market Price Per Common Share, the maximum number of shares of
Common Stock issuable upon exercise of such rights, options or warrants or upon
conversion of such convertible securities shall be deemed to have been issued
and outstanding as of the date of such sale or issuance, and the Conversion
Price shall be adjusted pursuant to paragraph (g)(ii) hereof as though such
maximum number of shares of Common Stock had been so issued for an aggregate
consideration equal to the aggregate consideration paid for such rights,
options, warrants or convertible securities and the aggregate consideration
payable by the holders of such rights, options, warrants or convertible
securities prior to their receipt of such shares of Common Stock. In case any
portion of such consideration shall be in a form other than cash, the fair
market value of such noncash consideration shall be determined as set forth in
paragraph (g)(ii) hereof. Such adjustment shall be made effective immediately
after such rights, options, warrants or convertible securities are issued; and
in the event that such rights, options or warrants expire unexercised or such
<PAGE> 18
18

convertible securities are redeemed or otherwise retired prior to conversion
thereof, or in the event of a change in the number of shares of Common Stock to
which the holders of such rights, options, warrants or convertible securities
are entitled (other than pursuant to adjustment provisions therein comparable
to those contained in this paragraph (g)), the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such
rights, options, warrants or convertible securities had not been issued, in the
former event, or the Conversion Price which would then be in effect if such
holders had initially been entitled to such changed number of shares of Common
Stock, in the latter event. No adjustment of the Conversion Price shall be
made pursuant to this paragraph (g)(iv) to the extent that the Conversion Price
shall have been adjusted pursuant to paragraph (g)(iii) upon the setting of any
record date relating to such rights, options, warrants or convertible
securities and such adjustment fully reflects the number of shares of Common
Stock to which the holders of such rights, options, warrants or convertible
securities are entitled and the price payable therefor.

(v) In case the Corporation shall fix a record date for the
making of a distribution to holders of Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Corporation is the continuing corporation) of evidences of indebtedness, assets
or other property (other than regular periodic cash dividends or dividends
payable in Common Stock or rights, options or warrants referred to in, and for
which an adjustment is made pursuant to, paragraph (g)(iii) hereof), the
Conversion Price to be in effect after such record date shall be determined by
multiplying the Conversion Price in effect immediately prior to such record
date by a fraction, (A) the numerator of which shall be the Current Market
Price Per Common Share on such record date, less the fair market value
(determined as set forth in paragraph (g)(ii) hereof) of the portion of the
assets, other property or evidence of indebtedness so to be distributed which
is applicable to one share of Common Stock and (B) the denominator of which
shall be the Current Market Price Per Common Share on such record date. Such
adjustments shall be made effective on the day immediately after the record
date; and in the event that such distribution is not so made, the Conversion
Price shall again be adjusted to be the Conversion Price which would then be in
effect if such record date had not been fixed.

(vi) On any date, the "CURRENT MARKET PRICE PER COMMON SHARE"
shall be deemed to be the average of the Daily
<PAGE> 19
19

Prices (as defined below) per share of the applicable class of Common Stock for
the ten consecutive trading days immediately prior to such date. "DAILY PRICE"
means (1) if the shares of such class of Common Stock then are listed and
traded on the New York Stock Exchange, Inc. ("NYSE"), the closing price on such
day as reported on the NYSE Composite Transactions Tape; (2) if the shares of
such class of Common Stock then are not listed and traded on the NYSE, the
closing price on such day as reported by the principal national securities
exchange on which the shares are listed and traded; (3) if the shares of such
class of Common Stock then are not listed and traded on any such securities
exchange, the last reported sale price on such day on the National Market of
the National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ"); or (4) if the shares of such class of Common Stock then are not
traded on the NASDAQ National Market, the average of the highest reported bid
and lowest reported asked price on such day as reported by NASDAQ. "TRADING
DAY" means, with respect to any exchange or market, each Monday, Tuesday,
Wednesday, Thursday and Friday, other than any day on which securities are not
traded on such exchange or in such market. For purposes of any computation
under this paragraph (g), the number of shares of Common Stock outstanding at
any given time shall not include shares owned or held by or for the account of
the Corporation.

(vii) To the extent that the Conversion Price shall have been
adjusted pursuant to any of paragraph (g)(ii), (iii), (iv) or (v) as a result
of a particular event, no additional adjustment shall be made pursuant to any
other of such paragraphs (g)(ii), (iii), (iv) or (v) as a result of such event.
No adjustment to the Conversion Price pursuant to paragraphs (g)(ii), (iii),
(iv) and (v) above shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Conversion Price; provided that any
adjustments which by reason of this paragraph (g)(vii) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this paragraph (g) shall be made to the
nearest four decimal points.

(viii) In the event that, at any time as a result of the
provisions of this paragraph (g), the holder of this Series A Convertible
Preferred Stock upon subsequent conversion shall become entitled to receive any
shares of capital stock of the Corporation other than Common Stock, the number
of such other shares so receivable upon conversion of this Series A Convertible
Preferred Stock
<PAGE> 20
20

shall thereafter be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions contained herein.

(h) Whenever the Conversion Price is adjusted pursuant to
this paragraph (7), (i) the Corporation shall promptly file with the conversion
agent a certificate of a firm of independent public accountants (who may be the
regular accountants employed by the Corporation) setting forth the Conversion
Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment and the manner of computing the same, and (ii) a
notice stating that the Conversion Price has been adjusted and setting forth
the adjusted Conversion Price shall promptly be sent by first class mail,
postage prepaid, by the Corporation to the holders of the Series A Convertible
Preferred Stock at their addresses as the same appear on the stock register of
the Corporation.

(i) Notwithstanding any provision of this paragraph (7), to
the extent the Corporation shall have funds legally available for such purpose,
the Corporation shall have the option, upon receipt from any holder of notice
of election to convert shares of Series A Convertible Preferred Stock pursuant
to paragraph (7)(b), to deliver, in lieu of the shares of Common Stock into
which such shares of Series A Convertible Preferred Stock would otherwise be
convertible, cash in an amount equal to the product of (A) such number of
shares of Common Stock into which such shares of Series A Convertible Preferred
Stock would otherwise be convertible multiplied by (B) the Current Market Price
Per Common Share, together with all accrued and unpaid dividends on such shares
of Series A Convertible Preferred Stock; provided that (i) if the Corporation
has not received any required approval under the 1986 Supplement to The Banking
Act of 1948 of New Jersey, 17 N.J. Stat. Ann. Section 376 et seq., concerning
the change of control of banks, or (ii) if the shareholders of the Corporation
have not voted to approve the issuance of the Common Stock required to be
delivered upon a conversion of the Series A Convertible Preferred Stock, in
each case, the Corporation shall have the obligation to deliver cash pursuant
to this paragraph (7)(i) upon any exercise of the conversion privilege.

(8) Voting Rights. (a) The holders of record of shares of
Series A Convertible Preferred Stock shall not be entitled to any voting rights
except as hereinafter provided in this paragraph (8) or as otherwise provided
by law.
<PAGE> 21
21

(b) If and whenever six quarterly dividends (whether or not
consecutive) payable on the Series A Convertible Preferred Stock have not been
paid in full or if the Corporation shall have failed to discharge its Mandatory
Redemption Obligation, the number of directors then constituting the Board of
Directors shall be increased by two and the holders of shares of Series A
Convertible Preferred Stock, together with the holders of shares of every other
series of preferred stock upon which like rights to vote for the election of
two additional directors have been conferred and are exercisable (resulting
from either the failure to pay dividends or the failure to redeem)(any such
other series is referred to as the "PREFERRED SHARES"), voting as a single
class regardless of series, shall be entitled to elect the two additional
directors to serve on the Board of Directors at any annual meeting of
stockholders or special meeting held in place thereof, or at a special meeting
of the holders of the Series A Convertible Preferred Stock and the Preferred
Shares called as hereinafter provided. Whenever all arrears in dividends on
the Series A Convertible Preferred Stock and the Preferred Shares then
outstanding shall have been paid and dividends thereon shall have been paid
regularly for at least one year, or the Corporation shall have fulfilled its
Mandatory Redemption Obligation, as the case may be, then the right of the
holders of the Series A Convertible Preferred Stock and the Preferred Shares to
elect such additional two directors shall cease (but subject always to the same
provisions for the vesting of such voting rights in the case of any similar
future arrearages in six quarterly dividends or failure to fulfill any
Mandatory Redemption Obligation), and the terms of office of all persons
elected as directors by the holders of the Series A Convertible Preferred Stock
and the Preferred Shares shall forthwith terminate and the number of the Board
of Directors shall be reduced accordingly. At any time after such voting power
shall have been so vested in the holders of shares of Series A Convertible
Preferred Stock and the Preferred Shares, the secretary of the Corporation may,
and upon the written request of any holder of Series A Convertible Preferred
Stock (addressed to the secretary at the principal office of the Corporation)
shall, call a special meeting of the holders of the Series A Convertible
Preferred Stock and of the Preferred Shares for the election of the two
directors to be elected by them as herein provided, such call to be made by
notice similar to that provided in the Bylaws of the Corporation for a special
meeting of the stockholders or as required by law. If any such special meeting
required to be called as above provided shall not be called by the secretary
within 20 days after
<PAGE> 22
22

receipt of any such request, then any holder of shares of Series A Convertible
Preferred Stock may call such meeting, upon the notice above provided, and for
that purpose shall have access to the stock books of the Corporation. The
directors elected at any such special meeting shall hold office until the next
annual meeting of the stockholders or special meeting held in lieu thereof if
such office shall not have previously terminated as above provided. If any
vacancy shall occur among the directors elected by the holders of the Series A
Convertible Preferred Stock and the Preferred Shares, a successor shall be
elected by the Board of Directors, upon the nomination of the then-remaining
director elected by the holders of the Series A Convertible Preferred Stock and
the Preferred Shares or the successor of such remaining director, to serve
until the next annual meeting of the stockholders or special meeting held in
place thereof if such office shall not have previously terminated as provided
above.

(c) Without the written consent of a majority of the
outstanding shares of Series A Convertible Preferred Stock or the vote of
holders of a majority of the outstanding shares of Series A Convertible
Preferred Stock at a meeting of the holders of Series A Convertible Preferred
Stock called for such purpose, the Corporation will not (i) amend, alter or
repeal any provision hereof or of the Certificate of Incorporation (by merger
or otherwise) so as to affect the preferences, rights or powers of the Series A
Convertible Preferred Stock; provided that any such amendment that changes the
dividend payable on or the liquidation preference of the Series A Convertible
Preferred Stock shall require the affirmative vote at a meeting of holders of
Series A Convertible Preferred Stock called for such purpose or written consent
of the holder of each share of Series A Convertible Preferred Stock; or (ii)
create any class or classes of stock ranking equal or prior to the Series A
Convertible Preferred Stock either as to dividends or upon liquidation,
dissolution or winding up or increase the number of authorized number of shares
of any class or classes of stock ranking equal or prior to the Series A
Convertible Preferred Stock either as to dividends or upon liquidation,
dissolution or winding up. Notwithstanding the foregoing, no consent of the
holders of the Series A Convertible Preferred Stock shall be required for (i)
the creation of any indebtedness of any kind of the Corporation, (ii) the
creation of any class of Junior Securities or (iii) any increase or decrease in
the amount of authorized Common Stock or any increase, decrease or change in
the par value thereof or in any other terms thereof.
<PAGE> 23
23

(d) In exercising the voting rights set forth in this
paragraph (8), each share of Series A Convertible Preferred Stock shall have
one vote per share, except that when any other series of preferred stock shall
have the right to vote with the Series A Convertible Preferred Stock as a
single class on any matter, then the Series A Convertible Preferred Stock and
such other series shall have with respect to such matters one vote per $100 of
stated liquidation preference. Except as set forth herein, the shares of
Series A Convertible Preferred Stock shall not have any relative,
participating, optional or other special voting rights and powers and the
consent of the holders thereof shall not be required for the taking of any
corporate action.

(9) Stockholders Agreement. The Series A Convertible
Preferred Stock shall be subject to the provisions of the Stockholders
Agreement among the Corporation, Kidder, Peabody Group Inc. and General
Electric Company dated December 16, 1994.

(10) General Provisions. (a) The term "PERSON" as used herein
means any corporation, limited liability company, partnership, trust,
organization, association, other entity or individual.

(b) The term "OUTSTANDING", when used with reference to
shares of stock, shall mean issued shares, excluding shares held by the
Corporation (including treasury shares) or a subsidiary.

(c) The headings of the paragraphs of this Certificate of
Designations are for convenience of reference only and shall not define, limit
or affect any of the provisions hereof.

IN WITNESS WHEREOF, Paine Webber Group Inc. has caused this
Certificate of Designations to be signed and attested by the undersigned this
__ day of December, 1994.

PAINE WEBBER GROUP INC.

By
------------------------
Name: Theodore A. Levine
Title: Vice President

<PAGE> 24
24

ATTEST:

- ------------------------
Name: Dorothy F. Haughey
Assistant Secretary

<PAGE> 1
Exhibit 3.2

9% CUMULATIVE REDEEMABLE
PREFERRED STOCK, SERIES C
($100 STATED VALUE)

PAINE WEBBER GROUP INC.

Pursuant to Section 151 of the General Corporation Law
of the State of Delaware

RESOLVED, that each share of such series of Preferred Stock
shall rank equally in all respects and shall be subject to the following
provisions:

(1) Number and Designation. 2,500,000 shares of the
Preferred Stock of the Corporation shall be designated as 9% Cumulative
Redeemable Preferred Stock, Series C (the "SERIES C PREFERRED STOCK").

(2) Rank. The shares of Series C Preferred Stock shall rank
prior to the shares of the Corporation's common stock, $1 par value (the
"COMMON STOCK"), and any other class of stock of the Corporation ranking junior
to the Series C Preferred Stock (whether with respect to dividends or upon
liquidation, dissolution, winding up or otherwise). All equity securities of
the Corporation to which the Series C Preferred Stock ranks prior (whether with
respect to dividends or upon liquidation, dissolution, winding up or
otherwise), including the Common Stock, are collectively referred to herein as
the "JUNIOR SECURITIES." All equity securities of the Corporation with which
the Series C Preferred Stock ranks on a parity (whether with respect to
dividends or upon liquidation, dissolution, winding up or otherwise),
including the Corporation's 7.5% Convertible Preferred Stock, 7.5% Convertible
Preferred Stock, Series B, 6% Convertible Preferred Stock and 6% Cumulative
Convertible Redeemable Preferred Stock, Series A, are collectively referred to
herein as the "PARITY SECURITIES." The respective definitions of Junior
Securities and Parity Securities shall also include any rights or options
exercisable for or convertible into any of the Junior Securities and Parity
Securities, as the case may be.

(3) Dividends. (a) The holders of shares of Series C
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors, out of funds legally available for the payment of
dividends, cash dividends at the annual rate of $9 per share. Such dividends
shall be payable in arrears in equal amounts quarterly on March 15, June 15,
September 15 and December 15 of each year (unless such day is not a Business
Day, in which event on the next succeeding Business Day) (each of such dates
being a "DIVIDEND PAYMENT DATE" and each such quarterly period being a
"DIVIDEND PERIOD") commencing on the Dividend Payment Date which next follows
the issuance of such shares of Series C Preferred Stock. Such dividends (i)
shall be cumulative from the date of issue, whether or not declared and whether
or not in any Dividend Period or Periods there shall be funds of the
Corporation legally
<PAGE> 3
3

available for the payment of such dividends and (ii) shall compound quarterly,
to the extent they are unpaid, at the rate of 9% per annum computed on the
basis of a 360-day year and twelve 30-day months. Each such dividend shall be
payable to the holders of record of shares of the Series C Preferred Stock, as
they appear on the stock records of the Corporation at the close of business on
such record dates, not more than 60 days, or less than 10 days, preceding the
payment dates thereof, as shall be fixed by the Board of Directors or a duly
authorized committee thereof. Accrued and unpaid dividends for any past
Dividend Periods may be declared and paid at any time, without reference to any
Dividend Payment Date, to holders of record on such date, not more than 45 days
preceding the payment date thereof, as may be fixed by the Board of Directors.
As used herein, the term "BUSINESS DAY" shall mean any day other than a
Saturday, Sunday, a day on which the New York Stock Exchange does not conduct
regular trading or a day on which is or is declared a national or New York
State holiday.

(b) The amount of dividends payable for each full Dividend
Period for the Series C Preferred Stock shall be computed by dividing the
annual dividend rate by four. The amount of dividends payable for the initial
Dividend Period, or any other period shorter or longer than a full Dividend
Period, on the Series C Preferred Stock shall be computed on the basis of
twelve 30-day months and a 360-day year. Holders of shares of Series C
Preferred Stock shall not be entitled to any dividends, whether payable in
cash, property or stock, in excess of cumulative dividends, as herein provided,
on the Series C Preferred Stock.

(c) So long as any shares of the Series C Preferred Stock are
outstanding, no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on Parity Securities, for
any period unless full cumulative dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for such payment on the Series C Preferred Stock for all Dividend Periods
terminating on or prior to the date of payment of the dividend on such class or
series of parity stock. When dividends are not paid in full or a sum
sufficient for such payment is not set apart, as aforesaid, all dividends
declared upon shares of the Series C Preferred Stock and all dividends declared
upon any other Parity Security shall be declared ratably in proportion to the
respective amounts of dividends accumulated and unpaid on the Series C
Preferred Stock and accumulated and unpaid on such Parity Security.
<PAGE> 4
4

(d) So long as any shares of the Series C Preferred Stock are
outstanding, no dividends (other than dividends or distributions paid in
shares of, or options, warrants or rights to subscribe for or purchase shares
of, Junior Securities) shall be declared or paid or set apart for payment or
other distribution declared or made upon Junior Securities, nor shall any
Junior Securities be redeemed, purchased or otherwise acquired (all such
dividends, distributions, redemptions or purchases being hereinafter referred
to as a "JUNIOR SECURITIES DISTRIBUTION") for any consideration (or any moneys
be paid to or made available for a sinking fund for the redemption of any
shares of any such stock) by the Corporation, directly or indirectly (except by
conversion into or exchange for Junior Securities), unless in each case (i) the
full cumulative dividends on all outstanding shares of the Series C Preferred
Stock and any other Parity Securities shall have been paid or set apart for
payment for all past Dividend Periods with respect to the Series C Preferred
Stock and all past dividend periods with respect to such Parity Securities and
(ii) sufficient funds shall have been paid or set apart for the payment of the
dividend for the current Dividend Period with respect to the Series C Preferred
Stock and the current dividend period with respect to such Parity Securities.

(4) Liquidation Preference. (a) In the event of any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, before any payment or distribution of the assets of the
Corporation (whether capital or surplus) shall be made to or set apart for the
holders of Junior Securities, the holders of the shares of Series C Preferred
Stock shall be entitled to receive $100 per share of Series C Preferred Stock
plus an amount equal to all dividends (whether or not earned or declared)
accrued and unpaid thereon to the date of final distribution to such holders;
but such holders shall not be entitled to any further payment. If, upon any
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation, or proceeds thereof, distributable among the holders of the shares
of Series C Preferred Stock shall be insufficient to pay in full the
preferential amount aforesaid and liquidating payments on any Parity
Securities, then such assets, or the proceeds thereof, shall be distributed
among the holders of shares of Series C Preferred Stock and any such other
Parity Securities ratably in accordance with the respective amounts that would
be payable on such shares of Series C Preferred Stock and any such other stock
if all amounts payable thereon were paid in
<PAGE> 5
5

full. For the purposes of this paragraph (4), a sale or transfer of all or
substantially all of the Corporation's assets, shall be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, of the
Corporation, but a consolidation or merger of the Corporation with one or more
corporations shall not be deemed to be a liquidation, dissolution or winding
up, voluntary or involuntary, of the Corporation.

(b) Subject to the rights of the holders of any Parity
Securities, after payment shall have been made in full to the holders of the
Series C Preferred Stock, as provided in this paragraph (4), any other series
or class or classes of Junior Securities shall, subject to the respective terms
and provisions (if any) applying thereto, be entitled to receive any and all
assets remaining to be paid or distributed, and the holders of the Series C
Preferred Stock shall not be entitled to share therein.

(5) Redemption. (a) To the extent the Corporation shall have
funds legally available for such payment, the Corporation may redeem at its
option at any time on or after December 16, 1999 or from time to time
thereafter, in whole or in part, the shares of Series C Preferred Stock, at a
redemption price of $100 per share in cash, together with accrued and unpaid
dividends thereon to the date fixed for redemption.

(b) To the extent the Corporation shall have funds legally
available for such payment, on December 15, 2014, if any shares of the Series C
Preferred Stock shall be outstanding, the Corporation shall redeem all
outstanding shares of the Series C Preferred Stock, at a redemption price of
$100 per share in cash, together with accrued and unpaid dividends thereon to
such date.

(c) Immediately prior to authorizing or making any redemption
pursuant to this paragraph (5) the Corporation, by resolution of its Board of
Directors, shall, to the extent of any funds legally available therefor,
declare a dividend on the Series C Preferred Stock payable on the redemption
date in an amount equal to any accrued and unpaid dividends on the Series C
Preferred Stock as of such redemption date.

(d) If the Corporation is unable or shall fail to discharge
its obligation to redeem all outstanding shares of Series C Preferred Stock
pursuant to paragraph (5)(b) (the "MANDATORY REDEMPTION OBLIGATION"), the
Mandatory Redemption
<PAGE> 6
6

Obligation shall be discharged as soon as the Corporation is able to discharge
such Mandatory Redemption Obligation. If and so long as any Mandatory
Redemption Obligation with respect to the Series C Preferred Stock shall not be
fully discharged, the Corporation shall not (i) directly or indirectly, redeem,
purchase, or otherwise acquire any Parity Security or discharge any mandatory
or optional redemption, sinking fund or other similar obligation in respect of
any Parity Securities (except in connection with a redemption, sinking fund or
other similar obligation to be satisfied pro rata with the Series C Preferred
Stock) or (ii) in accordance with paragraph (3)(d), declare or make any Junior
Securities Distribution, or, directly or indirectly, discharge any mandatory or
optional redemption, sinking fund or other similar obligation in respect of the
Junior Securities.

(e) Shares of Series C Preferred Stock which have been issued
and reacquired in any manner, including shares purchased or redeemed, shall
(upon compliance with any applicable provisions of the laws of the State of
Delaware) have the status of authorized and unissued shares of the class of
Preferred Stock undesignated as to series and may be redesignated and reissued
as part of any series of the Preferred Stock; provided that no such issued and
reacquired shares of Series C Preferred Stock shall be reissued or sold as
Series C Preferred Stock.

(6) Procedure for Redemption. (a) In the event that fewer
than all the outstanding shares of Series C Preferred Stock are to be redeemed,
the number of shares to be redeemed shall be determined by the Board of
Directors and the shares to be redeemed shall be selected pro rata (with any
fractional shares being rounded to the nearest whole share) as nearly as
practicable or by lot, or by such other method as the Board of Directors may
determine to be equitable.

(b) In the event the Corporation shall redeem shares of
Series C Preferred Stock, notice of such redemption shall be given by first
class mail, postage prepaid, mailed not less than 30 days nor more than 60 days
prior to the redemption date, to each holder of record of the shares to be
redeemed at such holder's address as the same appears on the stock register of
the Corporation; provided that neither the failure to give such notice nor any
defect therein shall affect the validity of the giving of notice for the
redemption of any share of Series C Preferred Stock to be redeemed except as to
the holder to
<PAGE> 7
7

whom the Corporation has failed to give said notice or except as to the holder
whose notice was defective. Each such notice shall state: (i) the redemption
date; (ii) the number of shares of Series C Preferred Stock to be redeemed and,
if fewer than all the shares held by such holder are to be redeemed, the number
of shares to be redeemed from such holder; (iii) the redemption price; (iv) the
place or places where certificates for such shares are to be surrendered for
payment of the redemption price; and (v) that dividends on the shares to be
redeemed will cease to accrue on such redemption date.

(c) Notice having been mailed as aforesaid, from and after
the redemption date (unless default shall be made by the Corporation in
providing money for the payment of the redemption price of the shares called
for redemption), dividends on the shares of Series C Preferred Stock so called
for redemption shall cease to accrue, and all rights of the holders thereof as
stockholders of the Corporation (except the right to receive from the
Corporation the redemption price) shall cease. Upon surrender in accordance
with said notice of the certificates for the shares so redeemed (properly
endorsed or assigned for transfer, if the Board of Directors of the Corporation
shall so require and the notice shall so state), such shares shall be redeemed
by the Corporation at the redemption price aforesaid. In case fewer than all
the shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares without cost to the holder
thereof.

(7) Voting Rights. (a) The holders of record of shares of
Series C Preferred Stock shall not be entitled to any voting rights except as
hereinafter provided in this paragraph (7) or as otherwise provided by law.

(b) If and whenever six quarterly dividends (whether or not
consecutive) payable on the Series C Preferred Stock have not been paid in full
or if the Corporation shall have failed to discharge its Mandatory Redemption
Obligation, the number of directors then constituting the Board of Directors
shall be increased by two and the holders of shares of Series C Preferred
Stock, together with the holders of shares of every other series of preferred
stock upon which like rights to vote for the election of two additional
directors have been conferred and are exercisable (resulting from either the
failure to pay dividends or the failure to redeem)(any such other series is
referred to as the "PREFERRED SHARES"), voting as a single
<PAGE> 8
8

class regardless of series, shall be entitled to elect the two additional
directors to serve on the Board of Directors at any annual meeting of
stockholders or special meeting held in place thereof, or at a special meeting
of the holders of the Series C Preferred Stock and the Preferred Shares called
as hereinafter provided. Whenever all arrears in dividends on the Series C
Preferred Stock and the Preferred Shares then outstanding shall have been paid
and dividends thereon shall have been paid regularly for at least one year, or
the Corporation shall have fulfilled its Mandatory Redemption Obligation, as
the case may be, then the right of the holders of the Series C Preferred Stock
and the Preferred Shares to elect such additional two directors shall cease
(but subject always to the same provisions for the vesting of such voting
rights in the case of any similar future arrearages in six quarterly dividends
or failure to fulfill any Mandatory Redemption Obligation), and the terms of
office of all persons elected as directors by the holders of the Series C
Preferred Stock and the Preferred Shares shall forthwith terminate and the
number of the Board of Directors shall be reduced accordingly. At any time
after such voting power shall have been so vested in the holders of shares of
Series C Preferred Stock and the Preferred Shares, the secretary of the
Corporation may, and upon the written request of any holder of Series C
Preferred Stock (addressed to the secretary at the principal office of the
Corporation) shall, call a special meeting of the holders of the Series C
Preferred Stock and of the Preferred Shares for the election of the two
directors to be elected by them as herein provided, such call to be made by
notice similar to that provided in the Bylaws of the Corporation for a special
meeting of the stockholders or as required by law. If any such special meeting
required to be called as above provided shall not be called by the secretary
within 20 days after receipt of any such request, then any holder of shares of
Series C Preferred Stock may call such meeting, upon the notice above provided,
and for that purpose shall have access to the stock books of the Corporation.
The directors elected at any such special meeting shall hold office until the
next annual meeting of the stockholders or special meeting held in lieu thereof
if such office shall not have previously terminated as above provided. If any
vacancy shall occur among the directors elected by the holders of the Series C
Preferred Stock and the Preferred Shares, a successor shall be elected by the
Board of Directors, upon the nomination of the then-remaining director elected
by the holders of the Series C Preferred Stock and the Preferred Shares or the
successor of such remaining director, to serve until the next annual meeting of
the stockholders or special
<PAGE> 9
9

meeting held in place thereof if such office shall not have previously
terminated as provided above.

(c) Without the written consent of a majority of the
outstanding shares of Series C Preferred Stock or the vote of holders of a
majority of the outstanding shares of Series C Preferred Stock at a meeting of
the holders of Series C Preferred Stock called for such purpose, the
Corporation will not (i) amend, alter or repeal any provision hereof or of the
Certificate of Incorporation (by merger or otherwise) so as to affect the
preferences, rights or powers of the Series C Preferred Stock; provided that
any such amendment that changes the dividend payable on or the liquidation
preference of the Series C Preferred Stock shall require the affirmative vote
at a meeting of holders of Series C Preferred Stock called for such purpose or
written consent of the holder of each share of Series C Preferred Stock; or
(ii) create any class or classes of stock ranking equal or prior to the Series
C Preferred Stock either as to dividends or upon liquidation, dissolution or
winding up or increase the number of authorized number of shares of any class
or classes of stock ranking equal or prior to the Series C Preferred Stock
either as to dividends or upon liquidation, dissolution or winding up.
Notwithstanding the foregoing, no consent of the holders of the Series C
Preferred Stock shall be required for (i) the creation of any indebtedness of
any kind of the Corporation, (ii) the creation of any class of Junior
Securities or (iii) any increase or decrease in the amount of authorized Common
Stock or any increase, decrease or change in the par value thereof or in any
other terms thereof.

(d) In exercising the voting rights set forth in this
paragraph (7), each share of Series C Preferred Stock shall have one vote per
share, except that when any other series of preferred stock shall have the
right to vote with the Series C Preferred Stock as a single class on any
matter, then the Series C Preferred Stock and such other series shall have with
respect to such matters one vote per $100 of stated liquidation preference.
Except as set forth herein, the shares of Series C Preferred Stock shall not
have any relative, participating, optional or other special voting rights and
powers and the consent of the holders thereof shall not be required for the
taking of any corporate action.

(8) Stockholders Agreement. The Series C Preferred Stock
shall be subject to the provisions of the Stockholders Agreement among the
Corporation, Kidder,
<PAGE> 10
10

Peabody Group Inc. and General Electric Company dated December 16, 1994.

(9) General Provisions. (a) The term "PERSON" as used herein
means any corporation, limited liability company, partnership, trust,
organization, association, other entity or individual.

(b) The term "OUTSTANDING", when used with reference to
shares of stock, shall mean issued shares, excluding shares held by the
Corporation or a subsidiary.

(c) The headings of the paragraphs of this Certificate of
Designations are for convenience of reference only and shall not define, limit
or affect any of the provisions hereof.

IN WITNESS WHEREOF, Paine Webber Group Inc. has caused this
Certificate of Designations to be signed and attested by the undersigned this
__ day of December, 1994.

PAINE WEBBER GROUP INC.

By
------------------------
Name: Theodore A. Levine
Title: Vice President

ATTEST:

- ------------------------
Name: Dorothy F. Haughey
Assistant Secretary

<PAGE> 1
Exhibit 4.1

STOCKHOLDERS AGREEMENT

dated December 16, 1994

between

Paine Webber Group Inc.,

General Electric Company, and

Kidder, Peabody Group Inc.
<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I

Definitions
-----------

Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II

Representations and Warranties
------------------------------

Section 2.01. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 3

ARTICLE III

Standstill and Voting Provisions
--------------------------------

Section 3.01. Restrictions of Certain Actions by Shareholder . . . . . . . . . . . . . 4
Section 3.02. Board Representation . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.03. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

ARTICLE IV

Transfer Restrictions
---------------------

Section 4.01. Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.02. Permitted Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.03. Company Call Right . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4.04. Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.05. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

ARTICLE V

Registration Rights
-------------------

Section 5.01. Registration Upon Request . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5.02. Incidental Registration Rights . . . . . . . . . . . . . . . . . . . . . 14
Section 5.03. Broad Public Distribution; Lead Manager . . . . . . . . . . . . . . . . . 15
Section 5.04. Registration Mechanics . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.05. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.06. Indemnification and Contribution . . . . . . . . . . . . . . . . . . . . 18
Section 5.07. Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>

i
<PAGE> 3

<TABLE>
<S> <C>
ARTICLE VI

Shareholder Purchase Rights
---------------------------

Section 6.01. Shareholder Purchase Rights . . . . . . . . . . . . . . . . . . . . . . . 22

ARTICLE VII

Approvals
---------

Section 7.01. Company Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . 23

ARTICLE VIII

Miscellaneous
-------------

Section 8.01. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 8.02. Financial Services Group . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 8.03. Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 8.04. Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 8.05. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 8.06. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 8.07. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 8.08. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 8.09. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 8.10. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8.11. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.12. Compliance by Affiliates . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.13. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.14. Fair Market Value Determination . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
<PAGE> 4

STOCKHOLDERS AGREEMENT

This STOCKHOLDERS AGREEMENT (this "Agreement"), dated December 16,
1994, is between Paine Webber Group Inc., a Delaware corporation (the
"Company"), General Electric Company, a New York corporation ("Parent"), and
Kidder, Peabody Group Inc., a Delaware corporation and an indirect wholly-owned
subsidiary of Parent ("Shareholder", which term shall include Parent and any
subsidiary (as defined below) of Parent to the extent Voting Securities have
been transferred to Parent or such subsidiary pursuant to Section 4.02(a)(i)).

WHEREAS, simultaneously with the execution of this Agreement,
Shareholder is acquiring 1,000,000 shares of the Company's 6% Cumulative
Convertible Redeemable Preferred Stock, Series A, stated value $100 per share,
2,500,000 shares of the Company's 9% Cumulative Redeemable Preferred Stock,
Series C, stated value $100 per share, and 21,500,000 shares of the Company's
Common Stock, par value $1.00 per share, pursuant to an Asset Purchase
Agreement dated as of October 17, 1994 between the Company, Parent and
Shareholder (as amended and supplemented, including the Supplemental Agreement
dated as of December 9, 1994 and the Second Supplemental Agreement dated as of
December 16, 1994, the "Asset Purchase Agreement"); and

WHEREAS, the Company, Parent and Shareholder desire to establish
in this Agreement certain conditions of Parent's and Shareholder's relationship
with the Company;

NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and in the Asset Purchase Agreement, the parties
hereto agree as follows:

ARTICLE I

Definitions

Section 1.01. Definitions.

(a) The following terms, as used herein, have the following
meanings:

"Broad Public Distribution" means an underwritten distribution
registered under the 1933 Act or a distribution exempt from registration
thereunder in which Shareholder uses its best efforts to cause the underwriters
expressly to agree in writing for the benefit of the Company that they
collectively will not sell Voting Securities to any "person" within the meaning
of Section 13(d)(3) of the 1934 Act who, to the best of such underwriters'
knowledge after inquiry, would own, immediately after such distribution, Voting
<PAGE> 5
Securities having aggregate voting power of more than 3% of the voting power of
all the then outstanding Voting Securities.

"Common Stock" means the common stock, par value $1.00 per share,
of the Company.

"Convertible Preferred Stock" means the 6% Cumulative Convertible
Redeemable Preferred Stock, Series A, stated value $100 per share, of the
Company.

"Equity Treatment Percentage" means the lesser of (i) 20% and (ii)
the minimum percentage of Common Stock required to be owned to permit Parent to
account for its beneficial ownership of Voting Securities in accordance with
the "equity" method of accounting.

"Fair Market Value" of the Common Stock as of any day shall mean
the average daily closing sales price of the Common Stock for the ten
consecutive trading days preceding such day. The closing price for each day
shall be the last reported sales price regular way or, in case no such reported
sale takes place on such day, the average of the reported closing bid and asked
prices regular way, in either case on the principal national securities
exchange on which the Common Stock is listed and admitted to trading, or if not
listed and admitted to trading on any such exchange, on the NASDAQ National
Market System, or if not quoted on the National Market System, the average of
the closing bid and asked prices in the over-the-counter market as furnished by
any New York Stock Exchange member firm selected from time to time by the
Company for that purpose.

"Financial Services Group" means General Electric Capital
Services, Inc. and its subsidiaries (including, without limitation, Kidder,
Peabody Group Inc. and General Electric Capital Corporation), General Electric
Investment Corporation, General Electric Investment Management Incorporated or
any other Affiliate of Parent engaged in the financial services business.

"Preferred Stock" means, collectively, the Convertible Preferred
Stock and the Redeemable Preferred Stock.

"Redeemable Preferred Stock" means the 9% Cumulative Redeemable
Preferred Stock, Series C, stated value $100 per share, of the Company.

"subsidiary" shall mean, with respect to any person (herein
referred to as the "parent"), any corporation of which securities representing
more than 50% of the equity

2
<PAGE> 6
and more than 50% of the ordinary voting power are, at the time any
determination is being made, owned by the parent or one or more subsidiaries of
the parent or by the parent and one or more subsidiaries of the parent.

"Third Party Account" means any account managed for the benefit of
another person (other than Parent or any Affiliate of Parent) by any member of
the Financial Services Group.

"Total Voting Power" means the aggregate number of votes which may
be cast by holders of outstanding Voting Securities.

"Voting Securities" means any securities of the Company entitled
to vote generally in the election of directors of the Company or any direct or
indirect rights or options to acquire any such securities or any securities
convertible or exercisable into or exchangeable for such securities.

(b) Except as otherwise specified herein, terms used in this
Agreement shall have the respective meanings assigned to such terms in the
Asset Purchase Agreement. The rules of interpretation specified in Section
1.02 of the Asset Purchase Agreement shall be applicable to this Agreement.
Unless otherwise specified all references to "days" shall be deemed to be
references to calendar days.

ARTICLE II

Representations and Warranties

Section 2.01. Representations and Warranties. Each of Parent and
Shareholder represents and warrants to the Company that (i) Shareholder is a
wholly-owned indirect subsidiary of Parent; and (ii)(a) Shareholder
"beneficially owns" (as such term is defined in Rule 13d-3 under the 1934 Act)
2,500,000 shares of Redeemable Preferred Stock, 1,000,000 shares of Convertible
Preferred Stock and 21,500,000 shares of Common Stock, (b) the Financial
Services Group (which includes Shareholder) does not beneficially own any other
Voting Securities except for any Voting Securities held in any Third Party
Account and (c) to the best knowledge of Parent, neither it nor any of its
Affiliates beneficially owns any other Voting Securities, except for any Voting
Securities held in any Third Party Account.

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ARTICLE III

Standstill and Voting Provisions

Section 3.01. Restrictions of Certain Actions by Shareholder.
Parent will not, and will cause each of its Affiliates not to, singly or as
part of a partnership, limited partnership, syndicate or other group (as those
terms are defined in Section 13(d)(3) of the 1934 Act), directly or indirectly:

(a) except as permitted under Section 6.01, acquire, offer to
acquire, or agree to acquire, by purchase, gift or otherwise, any Voting
Securities, except pursuant to a stock split, stock dividend, rights offering,
recapitalization, reclassification or similar transaction;

(b) make, or in any way participate in any "solicitation" of
"proxies" to vote (as such terms are defined in Rule 14a-1 under the 1934 Act),
solicit any consent or communicate with or seek to advise or influence any
person or entity with respect to the voting of any Voting Securities or become
a "participant" in any "election contest" (as such terms are defined or used in
Rule 14a-11 under the 1934 Act) with respect to the Company;

(c) form, join, encourage or in any way participate in the
formation of, any "person" within the meaning of Section 13(d)(3) of the 1934
Act with respect to any Voting Securities; provided that this Section 3.01(c)
shall not prohibit any such arrangement solely among Parent and any of its
wholly-owned subsidiaries;

(d) deposit any Voting Securities into a voting trust or
subject any such Voting Securities to any arrangement or agreement with respect
to the voting thereof; provided that this Section 3.01(d) shall not prohibit
any such arrangement solely among Parent and any of its wholly-owned
subsidiaries;

(e) initiate, propose or otherwise solicit stockholders for
the approval of one or more stockholder proposals with respect to the Company
as described in Rule 14a-8 under the 1934 Act, or induce or attempt to induce
any other person to initiate any stockholder proposal;

(f) except in accordance with and pursuant to Section 3.02,
seek election to or seek to place a representative on the Board of Directors of
the Company or, except with the approval of management of the Company, seek

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<PAGE> 8
the removal of any member of the Board of Directors of the Company;

(g) except with the approval of management of the Company,
call or seek to have called any meeting of the stockholders of the Company;

(h) except through its representative on the Board of
Directors of the Company, otherwise act to seek to control, disrupt or
influence the management, business, operations, policies or affairs of the
Company except with the approval of management of the Company;

(i) (A) solicit, seek to effect, negotiate with or provide any
information to any other party with respect to, (B) make any statement or
proposal, whether written or oral, to the Board of Directors of the Company or
any director or officer of the Company with respect to, or (C) otherwise make
any public announcement or proposal whatsoever with respect to, any form of
business combination transaction involving the Company, including, without
limitation, a merger, exchange offer or liquidation of the Company's assets, or
any restructuring, recapitalization or similar transaction with respect to the
Company; provided that the foregoing shall not (x) apply to discussions between
officers, employees or agents of Parent or Shareholder and the representative
of Shareholder on the Board of Directors of the Company or (y) in the case of
clause (B) above, be interpreted to limit the ability of such representative to
make any such statement or proposal or to discuss any such proposal with any
officer, director or advisor to the Company or the Board of Directors of the
Company in connection with the performance by such representative of his duty
as a director;

(j) disclose or announce any intention, plan or arrangement
inconsistent with the foregoing; or

(k) advise, assist, instigate or encourage any third party to
do any of the foregoing (except, for purposes of clause (a) above, in
connection with any transfer of Voting Securities permitted under Section
4.02).

If Parent or any of its Affiliates owns or acquires any Voting
Securities in violation of this Agreement, such Voting Securities shall
immediately be disposed of to persons who are not Affiliates thereof but only
in compliance with the provisions of this Agreement; provided that the Company
may also pursue any other available remedy to which it may be entitled as a
result of such violation.

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<PAGE> 9
Section 3.02. Board Representation. (a) The Company will cause
one person mutually agreed upon by Parent and the Company to be elected to the
Company's Board of Directors concurrently with the execution hereof.

(b) Thereafter, so long as Shareholder owns Voting Securities
representing at least 10% of Total Voting Power (calculated on a fully diluted
basis assuming conversion or exchange of all outstanding securities of the
Company convertible into or exchangeable for Voting Securities and the exercise
of all rights or options to acquire Voting Securities), subject to the further
provisions of this Section 3.02, the Company's Nominating Committee (or any
other committee exercising a similar function) (the "Nominating Committee")
shall recommend to the Board of Directors of the Company that such person (or
any successor designated by Parent and approved by the Nominating Committee) be
included in the slate of nominees recommended by the Board of Directors of the
Company to shareholders for election as directors at each annual meeting of
shareholders of the Company at which such person's term expires.

(c) In the event that the designee of Shareholder shall cease
to serve as a director for any reason, the vacancy resulting thereby shall be
filled by a person designated by Parent and approved by the Nominating
Committee.

(d) In the event that at any time Shareholder shall own Voting
Securities representing less than 10% of Total Voting Power (calculated as
provided in Section 3.02(b)), Shareholder shall have no further rights under
this Section 3.02 and shall promptly cause to resign, and take all other action
reasonably necessary to cause the prompt removal of, its designee to the Board
of Directors of the Company.

Section 3.03. Voting. (a) Whenever Shareholder shall have the
right to vote any Voting Securities, Shareholder shall (i) be present, in
person or represented by proxy, at all stockholder meetings of the Company so
that all Voting Securities beneficially owned by it shall be counted for the
purpose of determining the presence of a quorum at such meetings, and (ii)
subject to Section 3.03(b) below, vote or cause to be voted, or consent with
respect to, all Voting Securities beneficially owned by it in the manner
recommended by the Company's Board of Directors, except that during any period
or at any time when there shall be in full force and effect a valid order or
judgment of a court of competent jurisdiction or a ruling, pronouncement or
requirement of the New York Stock Exchange,

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<PAGE> 10
Inc. ("NYSE") to the effect that the foregoing provision of this Section 3.03
is invalid, void, unenforceable or not in accordance with NYSE policy, then
Shareholder will, if so requested by the Board of Directors of the Company,
vote or cause to be voted all Voting Securities beneficially owned by it in the
same proportion as the votes cast by or on behalf of the other holders of
Voting Securities.

(b) Notwithstanding anything to the contrary contained in
Section 3.03(a) above, Shareholder shall have the right to vote freely, without
regard to any request or recommendation of the Board of Directors of the
Company, with respect to (i) all matters specified in paragraph (8) of the
Certificate of Designation of Rights and Preferences for the Convertible
Preferred Stock and paragraph (7) of the Certificate of Designation of Rights
and Preferences for the Redeemable Preferred Stock and (ii) any "Rule 13e-3
transaction" (as defined in Rule 13e-3(a)(3) under the 1934 Act as in effect on
the date hereof) unless such transaction has been approved by a majority of the
disinterested directors of the Board of Directors of the Company.

ARTICLE IV

Transfer Restrictions

Section 4.01. Restrictions on Transfer. Except as otherwise
expressly permitted in this Agreement, Parent will not, and will not permit its
Affiliates to, directly or indirectly, transfer, sell, assign, pledge, convey,
hypothecate or otherwise encumber or dispose of ("transfer") any Voting
Securities.

Section 4.02. Permitted Transfers.
(a) Notwithstanding the provisions of Section 4.01, Parent and its Affiliates
shall be permitted to transfer any portion of or all their shares of Voting
Securities or Redeemable Preferred Stock under the following circumstances:

(i) transfers to any subsidiary of Parent, but only if such
transferee agrees in writing to be bound by the terms of this Agreement,
provided that such subsidiary shall be permitted to own such Voting
Securities only so long as such subsidiary shall remain a subsidiary of
Parent and provided further that no such transfer shall relieve Parent or
Shareholder of their obligations under this Agreement;

(ii) subject to the Company's rights under Section 4.04, in the
case of shares of Common Stock

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<PAGE> 11
(including Common Stock issuable upon conversion or redemption of the
Convertible Preferred Stock), transfers made pursuant to (A) a Broad
Public Distribution or (B) Rule 144 under the 1933 Act, provided that any
such sale pursuant to Rule 144 shall be subject to the volume and manner of
sale limitations set forth in such Rule whether or not legally required;

(iii) subject to the Company's rights under Section 4.04, in the
case of shares of Convertible Preferred Stock, after the fifth anniversary
of the date of issuance thereof, transfers made pursuant to a demand
registration under Section 5.01(a);

(iv) pursuant to a tender offer or exchange offer or acquisition
of control of the Company or similar transaction, at any time following the
time at which the Company shall publicly announce or otherwise disclose to
Shareholder that the Board of Directors of the Company does not oppose such
transaction; or

(v) transfers of any portion of or all its shares of Redeemable
Preferred Stock to any person, provided that (A) Parent shall give not less
than 45 days prior written notice to the Company of its intention to
transfer such shares and (B) such person agrees in writing to be bound by
the terms of this Section 4.02(a)(v). Such notice shall specify the number
of shares of Redeemable Preferred Stock proposed to be transferred and the
date of the proposed transfer of such shares.

(b) Notwithstanding anything to the contrary in this Agreement,
Voting Securities shall not be transferred by Parent or any of its Affiliates
to any person pursuant to a tender offer or exchange offer or acquisition of
control of the Company or similar transaction which is opposed by the Company's
Board of Directors.

Section 4.03. Company Call Right. (a) The Company shall have
the right (the "Call Right"), exercisable at any time or from time to time,
upon written notice to Shareholder (the "Call Notice"), to elect to purchase a
portion (to the extent provided below) of or all the shares of Common Stock
then held by Shareholder, at a purchase price per share payable in cash (the
"Call Price") equal to the greater of (x) the Fair Market Value of the Common
Stock as of the date of delivery of the Call Notice and (y) $23.95634.
Delivery of any Call Notice by the Company to Shareholder shall be irrevocable.

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<PAGE> 12
(b) Notwithstanding the provisions of Section 4.03(a), if the
Company exercises its Call Right for less than all of the Common Stock then
held by Shareholder, (i) if immediately prior to such exercise, Parent
beneficially owns not less than the Equity Treatment Percentage of outstanding
Common Stock and, at such time, Parent accounts for such ownership of Common
Stock in accordance with the equity method of accounting, then the Company
shall be permitted to exercise its Call Right in part only to the extent that
such exercise would not reduce the percentage of outstanding Common Stock
beneficially owned by Parent below the Equity Treatment Percentage and (ii) if
immediately prior to such exercise, the Company is a 20-percent owned
corporation within the meaning of Section 243(c)(2) of the Code as in effect on
the date hereof (a "20-percent owned corporation") of the Shareholder, then the
Company shall be permitted to exercise its Call Right in part only to the
extent that such exercise would not result in the Company ceasing to be a
20-percent owned corporation of the Shareholder. For purposes of clause (ii)
of this paragraph (b), (A) the term "stock" shall have the same meaning as in
Section 243(c)(2) of the Code as in effect on the date hereof and (B) all
shares of stock of the Company held by Shareholder or any Affiliate of
Shareholder shall be treated as if they were held by a single legal entity.
Nothing in this Section 4.03(b) shall be construed to limit the Company's right
to exercise its Call Right at any time in respect of all the Common Stock held
by Shareholder at such time.

(c) Notwithstanding the provisions of Section 4.03(a), the Call
Right shall be suspended and shall not be exercisable by the Company during the
pendency of any transaction described in Section 4.02(a)(iv) following the time
at which the Company shall publicly announce or otherwise disclose to
Shareholder that the Board of Directors of the Company does not oppose such
transaction.

(d) Any purchase of Common Stock by the Company pursuant to this
Section 4.03 shall be on a mutually determined closing date which shall not be
more than 30 days after delivery of the Call Notice. The closing shall be held
at 10:00 a.m., local time, at the principal office of the Company, or at such
other time or place as the parties mutually agree.

(e) On the closing date, Shareholder shall deliver (i)
certificates representing the shares of Common Stock being sold, free and clear
of any lien, claim or encumbrance, and (ii) such other documents, including
evidence of ownership and authority, as the Company may reasonably request.
The Call Price shall be paid by wire

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<PAGE> 13
transfer of immediately available funds no later than 2:00 p.m., local time, on
the closing date.

Section 4.04. Right of First Refusal. (a) If Shareholder desires
to transfer any shares of Common Stock (including Common Stock issuable upon
conversion or redemption of the Convertible Preferred Stock) pursuant to
Section 4.02(a)(ii) or shares of Convertible Preferred Stock pursuant to
Section 4.02(a)(iii), Shareholder shall give prompt written notice (the
"Transfer Notice") to the Company of such intention, specifying the number of
shares of Common Stock or Convertible Preferred Stock proposed to be
transferred (the "Offered Shares"). The Transfer Notice shall constitute an
irrevocable offer (the "Offer") by Shareholder to sell to the Company the
Offered Shares at a price (the "Offer Price") equal to (x) in the case of the
Convertible Preferred Stock, the aggregate price specified by Shareholder in
the Transfer Notice and (y) in the case of the Common Stock, the aggregate Fair
Market Value of such Offered Shares on the date of delivery of the Transfer
Notice. The Company shall have the right, exercisable by written notice given
by the Company to Shareholder within 30 days after receipt of such Transfer
Notice, to purchase (or to cause a person or group designated by the Company to
purchase) all, but not a part of, the Offered Shares specified in such Transfer
Notice for cash at the Offer Price by delivery of a notice (the "Exercise
Notice") to Shareholder stating the Company's irrevocable acceptance of the
Offer.

(b) If the Company elects to purchase the Offered Shares, the
closing of the purchase of the Offered Shares shall take place on a mutually
acceptable closing date which shall be not more than 30 days after delivery of
the Exercise Notice. The closing shall be held at 10:00 a.m., local time, at
the principal office of the Company or at such other time or place as the
parties mutually agree.

(c) On the closing date, Shareholder shall deliver (or cause to
be delivered) (i) certificates representing the Offered Shares, free and clear
of any lien, claim or encumbrance, and (ii) such other documents, including
evidence of ownership and authority, as the Company may reasonably request.
The Offer Price shall be paid by wire transfer of immediately available funds
no later than 2:00 p.m., local time, on the closing date.

(d) If the Company fails to elect to purchase the Offered Shares
within the period specified in Section 4.03(a), (i) Shareholder shall be free,
during the period of 90 days following the expiration of such period, to
transfer any portion of or all the Offered Shares

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<PAGE> 14
pursuant to Section 4.02(a)(ii) or 4.02(a)(iii), as the case may be, and (ii)
the Company shall not be entitled to exercise its Call Right with respect to
the Offered Shares during the period from the date of the Transfer Notice to
the end of such 90-day period. Offered Shares not so transferred within such
90-day period shall again become subject to the procedures provided for in this
Section 4.04 and to the Call Right. Notwithstanding the foregoing, in the case
of any proposed transfer of any portion or all of the Offered Shares pursuant
to Section 4.02(a)(ii)(B) under Rule 144 at a price (the "Reduced Offer Price")
less than 95% of the Offer Price, Shareholder shall first offer such Offered
Shares to the Company by notice (oral or written) to the Senior Vice President
and Senior Associate General Counsel of PaineWebber Incorporated made during
regular business hours. The Company shall have the right, exercisable by the
close of business on the immediately following Business Day after receipt of
such notice from Shareholder, to purchase all, but not a part of, such Offered
Shares at the Reduced Offer Price. If the Company does not elect to purchase
such Offered Shares, Shareholder may transfer such Offered Shares under Rule
144 pursuant to Section 4.02(a)(ii)(B) at a price equal to or above the Reduced
Offer Price, provided that any Offered Shares not so transferred within ten
Business Days shall again become subject to the procedures provided for in this
Section 4.04(d).

Section 4.05. Assignment. The Company may assign any of its
rights under Section 4.03 or 4.04 to any person without the consent of
Shareholder; provided that no such assignment shall relieve the Company of any
of its obligations pursuant to Section 4.03 or 4.04. In the event that the
Company elects to exercise a right under Section 4.03 or 4.04, the Company may
specify in its Call Notice or Exercise Notice, as applicable, or thereafter
prior to purchase, another such person as its designee to purchase the Offered
Shares to which such Call Notice or Exercise Notice, as applicable, relates.

ARTICLE V

Registration Rights

Section 5.01. Registration Upon Request. (a) Parent shall have
the right to make written demand upon the Company, on not more than five
separate occasions (subject to the provisions of this Section 5.01), to
register under the 1933 Act (i) shares of Redeemable Preferred Stock, (ii)
shares of Common Stock issued to Shareholder pursuant to the Asset Purchase
Agreement, acquired upon conversion of the

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<PAGE> 15
Convertible Preferred Stock, or acquired in accordance with Section 6.01 of
this Agreement or (iii) at any time following the fifth anniversary of the date
hereof, shares of Convertible Preferred Stock (the shares subject to such
demand hereunder being referred to as the "Subject Stock"), and the Company
shall use its best efforts to cause such shares to be registered under the 1933
Act as soon as reasonably practicable so as to permit the sale thereof
promptly; provided that each such demand shall cover at least (A) $50,000,000
liquidation preference of Redeemable Preferred Stock, (B) $100,000,000
liquidation preference of Convertible Preferred Stock or (C) 5,000,000 shares
of Common Stock, in the case of the first such demand relating to Common Stock,
or 2,500,000 shares of Common Stock in any subsequent demand relating to Common
Stock (subject in each case to adjustment for stock splits, reverse stock
splits, stock dividends and similar events after the date hereof), as the case
may be. In connection therewith, the Company shall as promptly as practicable
prepare, file (on Form S-3 if permitted or otherwise on the appropriate form)
and use its best efforts to cause to become effective a registration statement
under the 1933 Act to effect such registration. Parent and Shareholder agree
to provide all such information and materials and to take all such action as
may be reasonably required in order to permit the Company to comply with all
applicable requirements of the 1933 Act and the Commission and to obtain any
desired acceleration of the effective date of such registration statement.

(b) Notwithstanding the provisions of Section 5.01(a) and
5.01(c), the Company (i) shall not be obligated to prepare or file more than
one registration statement pursuant to this Section 5.01 during any 12-month
period and (ii) shall be entitled to postpone the filing of any registration
statement otherwise required to be prepared and filed by the Company pursuant
to Section 5.01(a) (A) for a period of up to 60 days following completion of
any underwritten public offering of securities contemplated by the Company
prior to receipt of a demand for registration hereunder, provided that the
Company is advised by its managing underwriter or underwriters in writing (with
a copy to Shareholder), that the price at which securities would be offered in
such offering would, in its or their opinion, be materially adversely affected
by the registration so requested, or (B) for a period of up to 135 days if the
Company determines in its reasonable judgment and in good faith that the
registration and distribution of the shares of Subject Stock would impair or
interfere with in any material respect any contemplated material financing,
acquisition, disposition, corporate reorganization or other similar transaction
or other material corporate development involving the Company or any of its
subsidiaries or

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<PAGE> 16
Affiliates or would require premature disclosure thereof, and such disclosure
is not practicable in the Company's reasonable judgment in light of the facts
and circumstances then existing or would impair or interfere with in any
material respect such transaction or would otherwise materially adversely
affect the Company. In the event of such postponement, Parent shall have the
right to withdraw the request for registration by giving written notice to the
Company within 20 days after receipt of notice of postponement and, in the
event of such withdrawal, such request shall not be counted for purposes of
determining the number of registrations to which Parent is entitled pursuant to
this Section 5.01.

(c) In addition to the rights of Parent set forth in Section
5.01(a), if at any time the Company shall exercise its right pursuant to
paragraph (5)(d) of the Certificate of Designation of Rights and Preferences
for the Convertible Preferred Stock to deliver shares of Common Stock in lieu
of cash in payment of the redemption price for any shares of Convertible
Preferred Stock, Parent shall have the right, exercisable within 30 days
following receipt of notice of such redemption for Common Stock, to make an
additional written demand upon the Company to register under the 1933 Act any
or all shares of Common Stock received in connection with such redemption, and
the Company shall use its best efforts to cause such shares to be registered
under the 1933 Act as soon as reasonably practicable so as to permit the sale
thereof promptly, subject to the provisions of Section 5.01(b).

(d) Except in accordance with the provisions of the Amended
and Restated Investment Agreement (the "Yasuda Agreement") dated as of November
5, 1992, between the Company and The Yasuda Mutual Life Insurance Company
("Yasuda"), the Company shall not grant to any other holder of its securities,
whether currently outstanding or issued in the future, any incidental or
piggyback registration rights with respect to any registration statement filed
pursuant to a demand registration under this Section 5.01 and, except as
aforesaid with respect to the rights of Yasuda, without the prior consent of
Parent, the Company will not permit any holder of its securities other than
Yasuda to participate in any offering made pursuant to a demand registration
under this Section 5.01.

Section 5.02. Incidental Registration Rights. If the Company
proposes to register any of its Common Stock under the 1933 Act (other than (i)
pursuant to Section 5.01 hereof, (ii) securities to be issued pursuant to a
stock option or other employee benefit or similar plan, or (iii) securities
proposed to be issued in exchange for securities

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<PAGE> 17
or assets of, or in connection with a merger or consolidation with, another
corporation) the Company shall, as promptly as practicable, give written notice
to Parent of the Company's intention to effect such registration. If, within
15 days after receipt of such notice, Parent submits a written request to the
Company specifying the amount of Common Stock that it proposes to sell or
otherwise dispose of in accordance with this Section 5.02, the Company shall
use its best efforts to include the shares specified in Parent's request in
such registration. If in a registration other than pursuant to Section 2.3 of
the Yasuda Agreement, the managing underwriters reasonably determine in good
faith and advise Shareholder in writing that the inclusion in the registration
statement of all the Common Stock proposed to be included would interfere with
the successful marketing and sale of the securities proposed to be registered,
then the amount of Common Stock to be registered by Parent pursuant to this
Section 5.02 shall be reduced to the amount, if any, determined by the managing
underwriters in good faith that would not interfere with such marketing and
sale, provided that if securities are being offered for the account of any
Person other than the Company, then the amount of securities of such other
Person and Shareholder shall be reduced proportionately based on the number of
securities each such Person requested to be included in the offering. If in a
registration pursuant to Section 2.3 of the Yasuda Agreement, Yasuda advises
the Company that in Yasuda's reasonable judgment registration of the
Shareholder's shares of Common Stock would adversely affect the offering and
sale of its securities under the Yasuda Agreement, then the number of
Shareholder's shares of Common Stock to be included in such offering shall be
reduced to the amount, if any, determined by Yasuda in its reasonable judgment,
that would not adversely affect such offering and sale. No registration
effected under this Section 5.02 shall relieve the Company of its obligation to
effect any registration upon request under Section 5.01. If Shareholder has
been permitted to participate in a proposed offering pursuant to this Section
5.02, the Company thereafter may determine either not to file a registration
statement relating thereto, or to withdraw such registration statement, or
otherwise not to consummate such offering, without any liability hereunder.

Section 5.03. Broad Public Distribution; Lead Manager. (a) The
Company shall be required to register Subject Stock that is Common Stock
pursuant to this Article V only if such Common Stock is to be offered and sold
in a Broad Public Distribution.

(b) The Company shall be required to register Subject Stock
pursuant to this Article V only if such

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<PAGE> 18
Subject Stock is to be offered and sold in an underwritten distribution
lead-managed by the Company's principal broker-dealer subsidiary, provided
that, in the reasonable judgment of Parent, the proposed terms of offering by
such subsidiary are customary and reasonably competitive and provided further
that Parent in all cases shall have the right to designate a non-book-running
co-lead manager for any such offering.

Section 5.04. Registration Mechanics. (a) In connection with
any offering of shares of Subject Stock registered pursuant to Section 5.01 or
5.02 herein, the Company shall (i) furnish to Shareholder such number of copies
of any prospectus (including preliminary and summary prospectuses) and
conformed copies of the registration statement (including amendments or
supplements thereto and, in each case, all exhibits) and such other documents
as it may reasonably request, but only while the Company shall be required
under the provisions hereof to cause the registration statement to remain
current; (ii)(A) use its best efforts to register or qualify the Subject Stock
covered by such registration statement under such blue sky or other state
securities laws for offer and sale as Shareholder shall reasonably request and
(B) keep such registration or qualification in effect for so long as the
registration statement remains in effect; provided that the Company shall not
be obligated to qualify to do business as a foreign corporation under the laws
of any jurisdiction in which it shall not then be qualified or to file any
general consent to service of process in any jurisdiction in which such a
consent has not been previously filed or subject itself to taxation in any
jurisdiction wherein it would not otherwise be subject to tax but for the
requirements of this Section 5.04; (iii) use its best efforts to cause all
shares of Subject Stock covered by such registration statement to be registered
with or approved by such other federal or state government agencies or
authorities as may be necessary in the opinion of counsel to the Company to
enable Shareholder to consummate the disposition of such shares of Subject
Stock; (iv) notify Shareholder any time when a prospectus relating thereto is
required to be delivered under the 1933 Act upon discovery that, or upon the
happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, in the light of the
circumstances under which they were made, and (subject to the good faith
determination of the Company's Board of Directors as to whether to permit sales
under such registration statement), at the request of Shareholder promptly
prepare and furnish to it a reasonable

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number of copies of a supplement to or an amendment of such prospectus as may
be necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, in the light of the
circumstances under which they were made; (v) otherwise use its best efforts to
comply with all applicable rules and regulations of the SEC; (vi) use its best
efforts to list, if required by the rules of the applicable securities exchange
or, if securities of the same class are then so listed, the Subject Stock
covered by such registration statement on the NYSE or on any other securities
exchange on which Subject Stock is then listed; (vii) before filing any
registration statement or any amendment or supplement thereto, and as far in
advance as is reasonably practicable, furnish to Shareholder and its counsel
copies of such documents; and (viii) furnish to Shareholder, addressed to it,
an opinion of counsel for the Company, dated the date of the closing under the
underwriting agreement relating to any underwritten offering covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) as are customarily covered in opinions of
counsel delivered to underwriters in underwritten public offerings of
securities.

(b) In connection with any offering of Subject Stock registered
pursuant to Section 5.01 or 5.02, the Company shall (x) furnish to the
underwriter, if any, unlegended certificates representing ownership of the
Subject Stock being sold in such denominations as requested and (y) instruct
any transfer agent and registrar of the Subject Stock to release any stop
transfer orders with respect to such Subject Stock.

(c) At any time that Parent shall not be entitled to designate a
nominee for election to the Board of Directors pursuant to Section 3.02, in
connection with the preparation and filing of each registration statement
registering Subject Stock under the 1933 Act, the Company will give Shareholder
and the underwriters, if any, and their respective counsel and accountants
(collectively, the "Inspectors"), such reasonable and customary access to its
books and records (collectively, the "Records") and such opportunities to
discuss the business of the Company with its officers and the independent
public accountants who have certified its financial statements as shall be
necessary, in the opinion of Shareholder and such underwriters or their
respective counsel, to conduct a reasonable investigation within the meaning of
the 1933 Act. Records which the Company reasonably determines to be
confidential and which

16
<PAGE> 20
it notifies the Inspectors in writing are confidential shall not be disclosed
by the Inspectors unless (i) the disclosure of such Records is necessary or
appropriate to avoid or correct a misstatement or omission in the registration
statement, (ii) the portion of the Records to be disclosed has otherwise become
publicly known, (iii) the information in such Records is to be used in
connection with any litigation or governmental investigation or hearing
relating to any registration statement or (iv) the release of such Records is
ordered pursuant to a subpoena or other order. Shareholder agrees that it
will, upon learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company.

(d) Upon any registration becoming effective pursuant to Section
5.01, the Company shall use its best efforts to keep such registration
statement current for a period of 90 days or such shorter period as shall be
necessary to effect the distribution of the Subject Stock.

(e) Shareholder agrees that upon receipt of any notice from the
Company of the happening of any event of the kind described in clause (iv) of
Section 5.04(a), it will forthwith discontinue its disposition of Subject Stock
pursuant to the registration statement relating to such Subject Stock until its
receipt of the copies of the supplemented or amended prospectus contemplated by
clause (iv) of Section 5.03(a) and, if so directed by the Company, will deliver
to the Company all copies then in its possession of the prospectus relating to
such Subject Stock current at the time of receipt of such notice. If
Shareholder's disposition of Subject Stock is discontinued pursuant to the
foregoing sentence, unless the Company thereafter extends the effectiveness of
the registration statement to permit dispositions of Subject Stock by
Shareholder for an aggregate of 90 days, whether or not consecutive, the
registration statement shall not be counted for purposes of determining the
number of registrations to which Shareholder is entitled pursuant to Section
5.01.

Section 5.05. Expenses. In connection with any registration
pursuant to this Article V (i) Shareholder shall pay all agent fees and
commissions and underwriting discounts and commissions related to shares of
Subject Stock being sold by Shareholder and the fees and disbursements of its
counsel and accountants and (ii) the Company shall pay all fees and
disbursements of its counsel and accountants and the expenses (including the
fees of any separate counsel) of any "qualified independent underwriter"
required in accordance with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. All other fees and expenses in
connection with any registration

17
<PAGE> 21
statement (including, without limitation, all registration and filing fees, all
printing costs, all fees and expenses of complying with securities or blue sky
laws) shall (i) in the case of a registration pursuant to Section 5.01, be
borne by Shareholder and (ii) in the case of a registration pursuant to Section
5.02, be shared pro rata based upon the respective market values of the
securities to be sold by the Company, Shareholder and any other holders
participating in such offering; provided that Shareholder shall not pay any
expenses relating to work that would otherwise be incurred by the Company
including, but not limited to, the preparation and filing of periodic reports
with the Commission.

Section 5.06. Indemnification and Contribution. In the case of
any offering registered pursuant to this Article V, the Company agrees to
indemnify and hold Shareholder, each underwriter, if any, of the Subject Stock
under such registration and each person who controls any of the foregoing
within the meaning of Section 15 of the 1933 Act, and any officer, employee or
partner of the foregoing, harmless against any and all losses, claims, damages,
or liabilities (including reasonable legal fees and other reasonable expenses
incurred in the investigation and defense thereof) to which they or any of them
may become subject under the 1933 Act or otherwise (collectively "Losses"),
insofar as any such Losses shall arise out of or shall be based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in
the registration statement relating to the sale of such Subject Stock (as
amended if the Company shall have filed with the SEC any amendment thereof), or
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading or
(ii) any untrue statement or alleged untrue statement of a material fact
contained in the prospectus relating to the sale of such Subject Stock (as
amended or supplemented if the Company shall have filed with the SEC any
amendment thereof or supplement thereto), or the omission or alleged omission
to state therein a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided that the indemnification contained in this Section 5.06
shall not apply to such Losses which shall arise out of or shall be based upon
any such untrue statement or alleged untrue statement, or any such omission or
alleged omission, which shall have been made in reliance upon and in conformity
with information furnished in writing to the Company by Shareholder or any such
underwriter, as the case may be, specifically for use in connection with the
preparation of the registration statement or prospectus

18
<PAGE> 22
contained in the registration statement or any such amendment thereof or
supplement therein.

Notwithstanding the foregoing provisions of this Section 5.06, the
Company will not be liable to Shareholder, any person who participates as an
underwriter in the offering or sale of Subject Stock or any other person, if
any, who controls Shareholder or any underwriter (within the meaning of the
1933 Act), under the indemnity agreement in this Section 5.06 for any such
Losses that arise out of Shareholder or other person's failure to send or give
a copy of the final prospectus to the person asserting an untrue statement or
alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of the Subject Stock to such person if such
statement or omission was corrected in such final prospectus and the Company
has previously furnished copies thereof in accordance with this Agreement.

In the case of each offering registered pursuant to this Article
V, Parent shall, or shall cause General Electric Capital Services, Inc. or
another member of the Financial Services Group, reasonably satisfactory to the
Company (the "Parent Indemnitor") to, agree and each underwriter, if any,
participating therein shall agree, substantially in the same manner and to the
same extent as set forth in the preceding paragraph, severally to indemnify and
hold harmless the Company and each person who controls the Company within the
meaning of Section 15 of the 1933 Act, and any director, officer, employee or
partner of the Company, with respect to any statement in or omission from such
registration statement or prospectus contained in such registration statement
(as amended or as supplemented, if amended or supplemented as aforesaid) if
such statement or omission shall have been made in reliance upon and in
conformity with information furnished in writing to the Company by Parent,
Shareholder or such underwriter, as the case may be, specifically for use in
connection with the preparation of such registration statement or prospectus
contained in such registration statement or any such amendment thereof or
supplement thereto.

Each party indemnified under this Section 5.06 shall, promptly
after receipt of notice of the commencement of any claim against such
indemnified party in respect of which indemnity may be sought hereunder, notify
the indemnifying party in writing of the commencement thereof. The failure of
any indemnified party to so notify an indemnifying party shall not relieve the
indemnifying party from any liability in respect of such action which it may
have to such indemnified party on account of the indemnity contained in this
Section 5.06, unless (and only to the

19
<PAGE> 23
extent) the indemnifying party was prejudiced by such failure, and in no event
shall such failure relieve the indemnifying party from any other liability
which it may have to such indemnified party. In case any action in respect of
which indemnification may be sought hereunder shall be brought against any
indemnified party and it shall notify an indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and,
to the extent that it may desire, jointly with any other indemnifying party
similarly notified, to assume the defense thereof through counsel reasonably
satisfactory to the indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 5.06 for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof, other than
reasonable costs of investigation (unless (i) such indemnified party reasonably
objects to such assumption on the grounds that there may be defenses available
to it which are different from or in addition to those available to such
indemnifying party, (ii) the indemnifying party and such indemnified party
shall have mutually agreed to the retention of such counsel or (iii) in the
reasonable opinion of such indemnified party representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential differing interests between such indemnified party
and any other party represented by such counsel in such proceeding, in which
case the indemnified party shall be reimbursed by the indemnifying party for
the reasonable expenses incurred in connection with retaining separate legal
counsel). No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any claim or pending or
threatened proceeding in respect of which the indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability arising out of such claim or
proceeding.

If the indemnification provided for in this Section 5.06 is
unavailable to an indemnified party or is insufficient to hold such indemnified
party harmless from any Losses in respect of which this Section 5.06 would
otherwise apply by its terms (other than by reason of exceptions provided
herein), then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, shall have a joint and several obligation to contribute to
the amount paid or payable by such indemnified party as a result of such
Losses, in such proportion as is

20
<PAGE> 24
appropriate to reflect the relative benefits received by and fault of the
indemnifying party, on the one hand, and such indemnified party, on the other
hand, in connection with the offering to which such contribution relates as
well as any other relevant equitable considerations. The relative benefit
shall be determined by reference to, among other things, the amount of proceeds
received by each party from the offering to which such contribution relates.
The relative fault shall be determined by reference to, among other things,
each party's relative knowledge and access to information concerning the matter
with respect to which the claim was asserted, and the opportunity to correct
and prevent any statement or omission. The amount paid or payable by a party
as a result of any Losses shall be deemed to include any legal or other fees or
expenses incurred by such party in connection with any investigation or
proceeding, to the extent such party would have been indemnified for such
expenses if the indemnification provided for in this Section 5.06 was available
to such party.

The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 5.06 were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.

Section 5.07. Underwriting Agreement. (a) In connection with
any underwritten offering of Subject Stock pursuant to a registration requested
under Section 5.01, the Company, the Parent Indemnitor and Shareholder will
enter into an underwriting agreement with the underwriters for such offering,
such agreement to contain such representations and warranties by the Company,
the Parent Indemnitor and Shareholder and such other terms and provisions as
are customarily contained in the underwriting agreements with respect to
secondary distributions, including, without limitation, indemnities and
contribution to the effect and to the extent provided in Section 5.06 (and
customary provisions with respect to indemnities and contribution by such
underwriters).

(b) In connection with any underwritten offering of Subject Stock
pursuant to a registration requested under Section 5.02, the Company may
require the Common Stock requested to be registered pursuant to Section 5.02 to
be included in such underwriting on the same terms and

21
<PAGE> 25
conditions as shall be applicable to Common Stock being sold by the Company
through underwriters under such registration. In such case, the Parent
Indemnitor and Shareholder shall be a party to any such underwriting agreement.
Such agreement shall contain such representations, warranties and covenants by
the Parent Indemnitor and Shareholder and such other terms and provisions as
are customarily contained in underwriting agreements with respect to secondary
distributions, including, without limitation, indemnities and contribution to
the effect and to the extent provided in Section 5.06 (and customary provisions
with respect to indemnities and contribution by such underwriters).

ARTICLE VI

Shareholder Purchase Rights

Section 6.01. Shareholder Purchase Rights. (a) If, immediately
after giving effect to and as a result of any issuance of Voting Securities by
the Company, Parent shall beneficially own Common Stock representing less than
the Equity Treatment Percentage of the total number of shares of Common Stock
then outstanding and, at such time, Parent accounts for such ownership of
Common Stock in accordance with the equity method of accounting, Parent shall
have the right to acquire, at any time or from time to time thereafter, in the
open market or in private transactions, a number of shares of Common Stock in
the aggregate equal to the excess of (x) the number of shares representing the
Equity Treatment Percentage of the then outstanding Common Stock over (y) the
number of shares of Common Stock then beneficially owned by Parent (including
any shares of Common Stock acquired by Shareholder pursuant to Section
6.01(b)).

(b) If, immediately after giving effect to and as a result of any
issuance of stock by the Company on or after the date hereof, the Company shall
not be a 20-percent owned corporation of the Shareholder and immediately prior
thereto the Company was a 20-percent owned corporation of the Shareholder,
Shareholder shall have the right to acquire at any time or from time to time
thereafter, in the open market or in private transactions, a number of shares
of Common Stock sufficient (together with any shares acquired pursuant to
Section 6.01(a)) to enable Shareholder to treat the Company as a 20-percent
owned corporation. For purposes of this paragraph (b), (i) the term "stock"
shall have the same meaning as in Section 243(c)(2) of the Code as in effect on
the date hereof, and (ii) all shares of stock of the Company held by
Shareholder or any Affiliate of Shareholder shall be treated as if they were
held by a single legal entity.

22
<PAGE> 26
(c) If the Company shall issue any Voting Securities or stock
of the Company at any time after October 17, 1994 and before the date of this
Agreement, Shareholder will have the right to acquire, at any time or from time
to time after the date hereof, in the open market or in private transactions,
the number of shares of Common Stock determined in accordance with Section
6.01(a) or (b), as applicable, that Shareholder would have had the right to
acquire pursuant to this Section 6.01 had this Agreement been in effect at such
time.

ARTICLE VII

Approvals

Section 7.01. Company Stockholder Approval. The Company agrees
that at its next annual stockholder meeting it shall submit for stockholder
approval, to the extent required by NYSE rules, pursuant to applicable
provisions of the NYSE Company Manual, authorization for the issuance of the
shares of Common Stock into which the Convertible Preferred Stock is
convertible. The Board has adopted a resolution recommending such stockholder
approval and the Company shall use its best efforts to obtain such approval.

ARTICLE VIII

Miscellaneous

Section 8.01. Termination. This Agreement shall terminate upon
(a) the written agreement of the Company, Shareholder and Parent to terminate
this Agreement; or (b) the earlier of (i) the fifteenth anniversary of this
Agreement and (ii) the third anniversary of the date on which Parent and its
Affiliates shall no longer beneficially own any Voting Securities. The
provisions of Articles III and IV of this Agreement shall terminate upon any
failure by Purchaser to observe and perform its obligations under Section 3.02.

Section 8.02. Financial Services Group. Notwithstanding any
other provision of this Agreement, nothing contained herein shall apply to any
Voting Securities held in any Third Party Account, and any such Voting
Securities shall not be counted for purposes of this Agreement as being owned
by Parent or any of its Affiliates.

Section 8.03. Legend. All certificates representing Common Stock
and Preferred Stock subject to this Agreement shall bear the following legend:

23
<PAGE> 27
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND NEITHER THE SHARES NOR ANY INTEREST
THEREIN MAY BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION UNDER SUCH ACT IS NOT REQUIRED. THE SHARES REPRESENTED BY
THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDERS AGREEMENT DATED DECEMBER 16,
1994 (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY) WHICH
PROVIDES, AMONG OTHER THINGS, FOR CERTAIN RIGHTS OF PURCHASE OF SUCH SHARES
BY THE COMPANY AND CERTAIN RESTRICTIONS ON TRANSFER THEREOF. ANY SALE OR
OTHER TRANSFER NOT IN COMPLIANCE WITH SAID AGREEMENT SHALL BE VOID."

Section 8.04. Specific Performance. (a) Parent and Shareholder,
on the one hand, and the Company, on the other, acknowledge and agree that
irreparable damage would occur if any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. Accordingly, the parties will be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
its provisions in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they may be
entitled at law or in equity.

(b) Parent and Shareholder, on the one part, and the Company, on
the other part, each irrevocably agrees that any legal action or proceeding
against it with respect to this Agreement and any transaction contemplated by
this Agreement may be brought in the courts of the State of New York, or of the
United States of America for the Southern District of New York, and by
execution and delivery of this Agreement Shareholder, Parent and the Company
each irrevocably submits to the jurisdiction of such court and irrevocably
designates, appoints and empowers the Secretary of State of the State of New
York to receive for and on its behalf service of process in the State of New
York and further irrevocably consents to the service or process outside of the
territorial jurisdiction of such courts by mailing copies by registered United
States mail, postage prepaid, to its address specified in this Agreement.

Section 8.05. Entire Agreement. The Transaction Documents and
the documents referred to therein constitute the entire agreement and
understanding of the parties with respect to the transactions contemplated by
such parties and may be amended only by an agreement in writing executed by
both parties.

24
<PAGE> 28
Section 8.06. Severability. If any provision of this Agreement
is held by a court of competent jurisdiction to be unenforceable, the remaining
provisions shall remain in full force and effect. It is declared to be the
intention of the parties that they would have executed the remaining provisions
without including any that may be declared unenforceable.

Section 8.07. Headings. Descriptive headings are for convenience
only and will not control or affect the meaning or construction of any
provision of this Agreement.

Section 8.08. Counterparts. For the convenience of the parties,
any number of counterparts of this Agreement may be executed by the parties,
and each such executed counterpart will be an original instrument.

Section 8.09. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, telex, telecopier or air courier
guaranteeing overnight delivery:

(a) If to the Company, to:

Paine Webber Group Inc.
1285 Avenue of the Americas
New York, New York 10019
Attention: General Counsel
Telecopy: 212-713-2114:

(with copies to):

Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Attention: David G. Ormsby
Telecopy: 212-474-3700

(b) If to Shareholder (including any other subsidiary of Parent
to which shares of Common Stock or Preferred Stock are transferred pursuant to
Section 4.02(a)(i)), to:

Kidder, Peabody Group Inc.
10 Hanover Square
New York, New York 10005
Attention: John M. Liftin
Telecopy: 212-510-4920

(with copies to):

25
<PAGE> 29
(1) Parent; and

(2) Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Alan L. Beller
Telecopy: 212-225-3999

General Electric Company
3135 Easton Turnpike
Fairfield, Connecticut 06431
Attention: Senior Counsel for Transactions
Telecopy: 202-373-3008

(with copies to):

Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Dennis S. Hersch
Telecopy: 212-450-4800

or to such other person or address as any party shall furnish to each other
party hereto in writing.

All such notices, requests, demands and other communications shall
be deemed to have been duly given: at the time of delivery by hand, if
personally delivered; five business days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.

Section 8.10. Successors and Assigns. This Agreement shall bind
the successors and assigns of the parties, and inure to the benefit of any
successor or assign of any of the parties; provided that, except as provided in
Section 4.05, no party may assign this Agreement without the other party's
prior written consent.

Section 8.11. Governing Law. This Agreement will be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without giving effect to the conflict of laws principles thereof.

Section 8.12. Compliance by Affiliates. Subject to Section 8.02,
Parent shall, and shall cause its Affiliates to, observe and perform all
covenants and agreements of Parent and Shareholder set forth in this

26
<PAGE> 30
Agreement as if such covenants and agreements were directly applicable to
Parent and such Affiliates.

Section 8.13. Reports. So long as Shareholder shall own any
Voting Securities, the Company will furnish Shareholder with the quarterly and
annual financial reports that the Corporation is required to file with the
Commission pursuant to Section 13 or Section 15(d) of the 1934 Act or, in the
event the Company is not required to file such reports, reports containing the
same information as would be required in such reports.

Section 8.14. Fair Market Value Determination. So long as
Shareholder shall own any Convertible Preferred Stock, if Parent shall object
to any determination of the fair market value of noncash consideration made by
the Board of Directors of the Company in accordance with paragraph (7)(g)(ii)
of the Certificate of Designation of Rights and Preferences for such
Convertible Preferred Stock, the parties shall negotiate in good faith in order
to agree on such fair market value. If the parties are unable to agree on such
fair market value within 30 days, the Board of Directors of the Company shall
retain a nationally recognized investment banking firm reasonably satisfactory
to Parent to determine such fair market value. The fees and expenses of such
investment banking firm shall be shared equally by Parent and the Company.
Parent shall be notified promptly of any consideration other than cash subject
to any such determination and furnished with a description of the consideration
and the fair market value thereof, as determined by the Board of Directors of
the Company.

27
<PAGE> 31
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of the
date first above written.

PAINE WEBBER GROUP INC.

By:
---------------------------
Name:
Title:

GENERAL ELECTRIC COMPANY

By:
---------------------------
Name:
Title:

KIDDER, PEABODY GROUP INC.

By:
---------------------------
Name:
Title:

<PAGE> 1
Exhibit 10.1

SUPPLEMENTAL AGREEMENT

SUPPLEMENTAL AGREEMENT dated as of December 9, 1994 among Paine
Webber Group Inc., a Delaware corporation (the "Purchaser"), General Electric
Company, a New York corporation (the "Parent"), and Kidder, Peabody Group Inc.,
a Delaware corporation (the "Seller").

WHEREAS, the parties hereto have previously entered into an Asset
Purchase Agreement dated as of October 17, 1994 (the "Asset Purchase
Agreement") and a Restructuring Agreement dated as of October 17, 1994 (the
"Restructuring Agreement");

WHEREAS, the parties hereto desire to supplement and amend the
provisions of the Asset Purchase Agreement and Restructuring Agreement to
provide for the transfer of the Acquired Businesses to the Purchaser (or its
designee) in the manner set forth in this Agreement;

NOW THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01 Definitions. (a) Terms used herein and not
otherwise defined herein shall have the meanings set forth in the Asset
Purchase Agreement or the Restructuring Agreement, as the case may be.

(b) As used in this Agreement, the following terms shall have
the following meanings:

"Acquired Businesses" has the meaning set forth in Section 9.10.

"Asset Management" shall mean the business of the Seller Group
generally known by the name Asset Management, excluding the business generally
known by the name Managed Futures.

"Asset Management Closing" has the meaning set forth in Section
6.01.

"Asset Management Closing Date" has the meaning set forth in
Section 6.01.
<PAGE> 2

"Initial Form 8594" has the meaning set forth in Section 9.03.

"Margin Debit" has the meaning set forth in Section 5.01.

"Other Acquired Businesses" shall mean all of the Acquired
Businesses other than Real Estate, Related Retail Brokerage and Asset
Management, including those generally known by the names Equity Research,
Investment Banking (excluding High Yield and Emerging Markets), Fixed Income
(sales force only), International Institutional Equity (Geneva and Zurich),
International Fixed Income (London, Geneva, Zurich, Hong Kong, Singapore and
part of Tokyo, if applicable) and Municipal Finance (excluding sales and
trading). Notwithstanding the foregoing, to the extent the Purchaser hires
Continuing Employees from business units of Other Acquired Businesses prior to
the Other Acquired Businesses Closing Date, such action shall not constitute
the transfer of an Other Acquired Business.

"Other Acquired Businesses Closing" has the meaning set forth in
Section 4.02.

"Other Acquired Businesses Closing Date" has the meaning set
forth in Section 4.02.

"Other Acquired Businesses Interim Balance Sheet" has the meaning
set forth in Section 4.04(a).

"Other Acquired Businesses Interim Net Book Value Statement" has
the meaning set forth in Section 4.04(a).

"Other Acquired Businesses Securities Inventory" has the meaning
set forth in Section 4.01.

"Real Estate" shall mean the business of the Seller Group
generally known by the name Mortgages, including Single Family Whole Loan
Trading, Commercial/Multi-Family Whole Loan Trading, Mortgage Finance, Real
Estate Finance (including REIT underwriting and sales and real estate
advisory), Research and Contract Finance.

"Real Estate Closing" has the meaning set forth in Section 3.02.

"Real Estate Closing Date" has the meaning set forth in Section
3.02.

"Real Estate Interim Balance Sheet" has the meaning set forth in
Section 3.04.

2
<PAGE> 3
"Real Estate Interim Net Book Value Statement" has the meaning set
forth in Section 3.04.

"Real Estate Securities Inventory" has the meaning set forth in
Section 3.01.

"Related Retail Brokerage" shall mean the business of the Seller
Group generally known by the name Retail Brokerage and the business of the
Seller Group (other than International Fixed Income) conducted in its office in
Hong Kong.

"Related Retail Brokerage Closing" has the meaning set forth in
Section 5.02(a).

"Related Retail Brokerage Closing Date" has the meaning set forth
in Section 5.02(a).

"Related Retail Brokerage Interim Balance Sheet" has the meaning
set forth in Section 5.04(a).

"Related Retail Brokerage Interim Net Book Value Statement" has
the meaning set forth in Section 5.04(a).

"Related Retail Brokerage Securities Inventory" has the meaning set
forth in Section 5.01(b).

"Retail Brokerage" shall mean the Acquired Business generally
known by the name Investment Services (retail brokerage).

(c) This Agreement shall be deemed to be a Transaction
Document and each reference in any of the Transaction Documents to the
Transaction Documents shall be deemed to include this Agreement.

SECTION 1.02 Rules of Interpretation. The rules of
interpretation specified in Section 1.02 of the Asset Purchase Agreement shall
be applicable to this Agreement.

ARTICLE II

PRE-CLOSING

SECTION 2.01 Listed Domestic Futures. The parties hereto
acknowledge that, pursuant to an Assignment Agreement dated as of December 5,
1994 between Kidder, Peabody & Co. Incorporated and PaineWebber Incorporated
and related Conveyancing Documents, certain assets of the business of the
Seller Group generally known by the name Listed Domestic Futures (Chicago
Branch) were transferred to the Purchaser and certain liabilities of Listed
Domestic

3
<PAGE> 4
Futures (Chicago Branch) were assumed by the Purchaser, but such business as a
whole was not acquired on such date. The parties hereto agree that (i) the
Closing Date with respect to the transfer of such assets to, and the assumption
of such liabilities by, the Purchaser shall be as of December 3, 1994 and, as
of such date, such assets shall constitute Acquired Assets and such liabilities
shall constitute Assumed Liabilities and (ii) the commissions earned by Listed
Domestic Futures (Chicago Branch) prior to December 2, 1994 and received
thereafter as reflected in a schedule delivered to the Purchaser by the Seller
shall be for the account of the Seller.

ARTICLE III

REAL ESTATE BUSINESS

SECTION 3.01 Real Estate Securities Inventory. (a) Prior to
the Real Estate Closing Date, the Purchaser and the Seller shall agree on (i)
the Securities and off-balance sheet hedges and derivatives, if any, held by
any member of the Seller Group in connection with the conduct of Real Estate
that are to be acquired by the Purchaser (the "Real Estate Securities
Inventory"), and reduce such agreement to a list, and (ii) the fair market
value of the Real Estate Securities Inventory. The Real Estate Securities
Inventory shall constitute Acquired Assets. Any Security or off-balance sheet
hedge or derivative held by any member of the Seller Group in connection with
the conduct of Real Estate that is not on the list of Real Estate Securities
Inventory shall constitute an Excluded Asset.

(b) The parties hereto agree:

(i) Section 2.08 (Exclusion of Selected Securities), Section
2.09 (Return of Securities), Section 2.10 (The LM Expert), Article V
(Representations and Warranties of the Seller and the Parent), Section
7.01(d) (Actions and Conduct of Acquired Businesses Before the Closing
Date) and Section 9.05 (Off-Balance Sheet Positions) of the Asset Purchase
Agreement have not been applied, and shall not apply, to the Real Estate
Securities Inventory, and

(ii) the representations and warranties set forth in the
relevant Conveyancing Documents delivered at the Real Estate Closing shall
apply to the Real Estate Securities Inventory.

SECTION 3.02 Real Estate Closing Date. Subject to the
satisfaction or waiver by the appropriate party of

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the conditions set forth in Section 13.01, Section 13.03, Section 13.05,
Section 14.01, Section 14.03 and Section 14.04 of the Asset Purchase Agreement
to the extent, and only to the extent, that such conditions apply to the
transactions contemplated by this Article III, the closing with respect to Real
Estate (the "Real Estate Closing") shall take place on December 9, 1994 at the
offices of Cadwalader, Wickersham & Taft at 100 Maiden Lane, New York, New York
10038 at 10:00 a.m. (the "Real Estate Closing Date").

SECTION 3.03 Real Estate Closing. At the Real Estate Closing:

(a) the Purchaser shall deliver to a member of the Seller
Group designated by the Seller for the account(s) of the member(s) of the
Seller Group transferring the Acquired Assets an amount in cash equal to the
excess of (i) the sum of Acquired Liquid Assets and Physical Capital over (ii)
the Assumed Liabilities, each as reflected on the Real Estate Interim Net Book
Value Statement, payable in Federal funds by 11:00 a.m., and

(b) the Purchaser (or its designee) and the Seller (or the
appropriate member of Seller Group), as appropriate, shall execute and deliver

(i) an assignment and assumption agreement, pursuant to which
the Purchaser assumes certain Assumed Liabilities arising out of Real
Estate, and

(ii) the applicable Conveyancing Documents pursuant to which
the appropriate member(s) of the Seller Group transfers to the Purchaser
(or its designee) the Real Estate Securities Inventory reflected on the
Real Estate Interim Balance Sheet and the other Acquired Assets of Real
Estate and the Purchaser (or its designee) assumes the other Assumed
Liabilities arising out of Real Estate.

SECTION 3.04 Real Estate Interim Balance Sheet. On the date
one Business Day before the Real Estate Closing Date, the Seller shall deliver
to the Purchaser (i) an estimated balance sheet of Real Estate prepared as of
the Real Estate Closing Date (the "Real Estate Interim Balance Sheet") prepared
in accordance with the Balance Sheet Principles, except that the value of the
Real Estate Securities Inventory included in such Interim Balance Sheet shall
be the value agreed pursuant to Section 3.01(a)(ii) and the Real Estate Interim
balance Sheet shall not include more than $2.4 million in Other Liquid Assets
(it being understood that such limitation shall not apply to the Closing
Balance Sheet) and (ii) a schedule based on the Real

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<PAGE> 6
Estate Interim Balance Sheet detailing the calculation of the estimated excess
of (x) the sum of the Acquired Liquid Assets and Physical Capital over (y) the
Assumed Liabilities to be delivered on the Real Estate Closing Date (the "Real
Estate Interim Net Book Value Statement").

SECTION 3.05 Certain Liabilities. If and to the extent that
(i) the fair market value of the Real Estate Securities Inventory is determined
by a third party and (ii) any liabilities or obligations (other than any
Assumed Obligations) arising out of or relating to the Real Estate Securities
Inventory were used by such third party to reduce the value of the Real Estate
Securities Inventory agreed pursuant to Section 3.01(a)(ii) but which are not
Assumed Liabilities, then the Purchaser shall promptly after request therefor
(and presentation of evidence of such use by such third party) reimburse the
appropriate member of the Seller Group an amount in cash equal to the amount of
such reduction. The amount of such reimbursement with respect to any liability
or obligation shall be taken into account in calculating the price paid for the
Real Estate Securities Inventory out of which such liability or obligation
arose for the purpose of any put or return rights in the Transaction Documents.
The Purchaser shall cooperate, and use its reasonable best efforts to cause its
agents and contractors to cooperate, with the Seller Group in ascertaining the
amounts and circumstances relating to any such reductions.

SECTION 3.06. CC Mortgage L.P. Notwithstanding anything
to the contrary in any Transaction Document, the interest of the Seller Group
in CC Mortgage L.P. shall not be transferred to the Purchaser at the Real
Estate Closing and shall not be included in the Real Estate Interim Balance
Sheet. Unless the Purchaser otherwise specifically agrees in writing prior to
the Other Acquired Businesses Closing, such interest shall be an Excluded
Asset.

ARTICLE IV

ACQUIRED BUSINESSES OTHER THAN REAL ESTATE,
RELATED RETAIL BROKERAGE AND ASSET MANAGEMENT

SECTION 4.01 Other Acquired Businesses Securities Inventory.
(a) On or prior to the Other Acquired Businesses Closing Date, the Purchaser
and the Seller shall agree on (i) the Securities and off-balance sheet hedges
and derivatives, if any, held by any member of the Seller Group in connection
with the conduct of the Other Acquired Businesses that are to be acquired by
the Purchaser (the "Other Acquired Businesses Securities Inventory"), and
reduce such agreement to a list, and (ii) the fair market

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value of the Other Acquired Businesses Securities Inventory. The Other
Acquired Businesses Securities Inventory shall constitute Acquired Assets. Any
Security or off-balance sheet hedge or derivative held by any member of the
Seller Group in connection with the conduct of the Other Acquired Businesses
that is not on the list of Other Acquired Businesses Securities Inventory shall
constitute an Excluded Asset.

(b) The parties hereto agree that Section 2.08 (Exclusion of
Selected Securities), Section 2.09 (Return of Securities), Section 2.10 (The LM
Expert), Section 5.18 (Securities), Section 7.01(d) (Actions and Conduct of
Acquired Businesses Before the Closing Date) and Section 9.05 (Off-Balance
Sheet Positions) of the Asset Purchase Agreement have not been applied, and
shall not apply, to the Other Acquired Businesses Securities Inventory.

SECTION 4.02 Other Acquired Businesses Closing Date. Subject
to the satisfaction or waiver by the appropriate party of all the conditions
set forth in the Asset Purchase Agreement other than the condition set forth in
Section 14.05 thereof, the closing with respect to the Other Acquired
Businesses (the "Other Acquired Businesses Closing") shall take place on
December 16, 1994 at the offices of Cravath, Swaine & Moore at 825 Eighth
Avenue, New York, New York 10019 at 2 p.m. (the "Other Acquired Businesses
Closing Date").

SECTION 4.03 Other Acquired Businesses Closing. At the Other
Acquired Businesses Closing:

(a) the Purchaser shall:

(i) issue the Common Stock Consideration, the Convertible
Preferred Stock and the Redeemable Preferred Stock to the members of the
Seller Group who are transferring the Acquired Assets of the Other Acquired
Businesses to the Purchaser (which members shall be identified in writing
to the Purchaser at least two Business Days prior to the Other Acquired
Businesses Closing) and deliver or cause to be delivered certificates for
such securities, registered in the names provided to the Purchaser,

(ii) deliver to the Seller an Assumption Agreement pursuant to
which the Purchaser assumes the Assumed Liabilities arising out of the
Other Acquired Businesses, duly executed by the Purchaser;

(b) the Seller shall transfer to the Purchaser (or its
designee) the Other Acquired Businesses Securities Inventory reflected on the
Other Acquired Businesses Interim

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<PAGE> 8
Balance Sheet and the other Acquired Assets of the Other Acquired Businesses
(including the right, title and interest of each member of the Seller Group in
the name "Kidder" and "Kidder Peabody", and all extensions, contractions and
abbreviations thereof and derivations therefrom) by delivering the applicable
Conveyancing Documents, duly executed by the appropriate members of the Seller
Group; and

SECTION 4.04 Other Acquired Businesses Interim Balance Sheet.
(a) On the Other Acquired Businesses Closing Date, the Seller shall deliver to
the Purchaser (i) an estimated balance sheet of the Other Acquired Businesses
prepared as of the Other Acquired Businesses Closing Date (the "Other Acquired
Businesses Interim Balance Sheet") prepared in accordance with the Balance
Sheet Principles, except that the value of the Other Acquired Businesses
Securities Inventory included in such Interim Balance Sheet shall be the value
agreed pursuant to Section 4.01(a)(ii) and the Other Liquid Assets shall be
limited to clearance receivables, customer receivables and other liquid trade
receivables (it being understood that such limitation shall not apply to the
Closing Balance Sheet), and (ii) a schedule based on the Other Acquired
Businesses Interim Balance Sheet detailing the calculation of the estimated
excess of (x) the sum of the Acquired Liquid Assets and Physical Capital over
(y) the Assumed Liabilities to be delivered on the Other Acquired Businesses
Closing Date (the "Other Acquired Businesses Interim Net Book Value
Statement").

(b) On the date two Business Days before the Other Acquired
Businesses Closing Date, the Seller shall deliver to the Purchaser a
preliminary version of the Other Acquired Businesses Interim Balance Sheet,
which shall value the Other Acquired Businesses Securities Inventory at the
fair market value as of the close of business on the most recent practicable
date.

SECTION 4.05 Other Acquired Businesses Closing Adjustment.
(a) To the extent, if any, the estimated excess of (i) the sum of the Acquired
Liquid Assets and Physical Capital over (ii) the Assumed Liabilities, each as
reflected on the Other Acquired Businesses Interim Net Book Value Statement, is
greater than $580,000,000, the Purchaser shall deliver to a member of the
Seller Group designated by the Seller for the account(s) of the appropriate
member(s) of the Seller Group on the Other Acquired Businesses Closing Date, an
amount in cash equal to the excess of (i) such estimated excess over (ii)
$580,000,000, payable in Federal funds by 4 p.m.

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<PAGE> 9
(b) To the extent, if any, the estimated excess of (i) the sum of
the Acquired Liquid Assets and Physical Capital over (ii) the Assumed
Liabilities as reflected on the Other Acquired Businesses Interim Net Book
Value Statement is less than $580,000,000, the Seller shall deliver to the
Purchaser on the Other Acquired Businesses Closing Date, an amount in cash
equal to the excess of (i) $580,000,000 over (ii) such estimated excess,
payable in Federal funds by 4 p.m.

(c) The parties hereto agree that with respect to any Other
Acquired Businesses Securities Inventory to be purchased on the Other Acquired
Businesses Closing Date, interest thereon shall accrue through but excluding
the trade date for the account of the Seller and from and including the trade
date through the settlement date for the account of the Purchaser. Promptly
following the settlement date the Seller shall remit to the Purchaser any
amount so accrued for the account of the Purchaser.

SECTION 4.06 License Agreement. For purposes of Section 7.11
of the Asset Purchase Agreement, (i) the period of time referred to therein as
"within two years after the Closing Date" shall mean by December 31, 1996 and
the period of time referred to therein as "for two years following the Closing
Date" shall mean until December 31, 1996, and (ii) the non-transferable
royalty-free license right retained therein to each member of the Seller Group
shall also include the right to use such names, or any derivative thereof, in
the operation of Related Retail Brokerage and Asset Management until the
transfer thereof to the Purchaser (and the Purchaser shall not use such names,
or any derivatives thereof, in the conduct of any retail brokerage or asset
management business until the transfer of Related Retail Brokerage or Asset
Management, as applicable). The Purchaser shall indemnify each Seller
Indemnitee against any Loss suffered by such Seller Indemnitee, as incurred,
for or on account of or arising from or in connection with or otherwise with
respect to the use by the Purchaser or its assigns of the names "Kidder" and
"Kidder Peabody" or any derivative thereof. The Parent and the Seller shall
jointly and severally indemnify each Purchaser Indemnitee against any Loss
suffered by such Purchaser Indemnitee, as incurred, for or on account of or
arising from or in connection with or otherwise with respect to the use by any
member of the Seller Group of the names "Kidder" and "Kidder Peabody" or any
derivative thereof. Indemnification hereunder shall be subject to the
procedures and limitations set forth in Section 12.03 and Section 12.05 of the
Asset Purchase Agreement and shall be in addition to the indemnification
provided in Article XII of the Asset Purchase Agreement.

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SECTION 4.07 Management of Related Retail Brokerage and Asset
Management. (a) Except as otherwise agreed in writing between the Purchaser
and the Seller, (i) the employment by the Purchaser of any Continuing Employee
of Related Retail Brokerage shall not be effective until the Related Retail
Brokerage Closing and (ii) the employment by the Purchaser of any Continuing
Employee of Asset Management shall not be effective until the Asset Management
Closing; provided that, to the extent that any such Continuing Employee is
required for, or engaged in, the Conversion, such employment shall not be
effective until the later to occur of (x) completion of Conversion or (y) the
Related Retail Brokerage Closing or the Asset Management Closing, as the case
may be.

(b) Prior to each of the Related Retail Brokerage Closing and
the Asset Management Closing, the Seller shall provide to the Purchaser a list
of Contracts, if any, not otherwise identified to the Purchaser pursuant to
Section 7.03(b) of the Asset Purchase Agreement to which any member of the
Seller Group is a party and arising out of or used primarily by such Seller
Group member in the conduct of Related Retail Brokerage and Asset Management,
respectively, to the extent such list can be prepared without undue burden.
The Purchaser shall have the right to review any Contract on such list and may,
within 30 days after delivery of such list, elect by notice in writing to the
Seller to assume any Contract on such list. Upon giving of such notice and the
execution by the Purchaser of any appropriate instrument of transfer, such
Contract shall thereafter be an Assigned Contract for all purposes under the
Transaction Documents, including for the purposes of determining the Assumed
Liabilities. This Section 4.07(b) shall be in addition to the rights of the
Purchaser under Section 2.07(c) of the Asset Purchase Agreement.

(c) With respect to the activities currently conducted by the
money market trading desk of the Seller, those activities will be described in
writing in reasonable detail to the Purchaser by December 16, 1994. The
Purchaser shall notify the Seller by December 23, 1994 as to which, if any,
such activities it desires to acquire and those activities so identified shall
thereafter be treated as forming a part of Related Retail Brokerage for
purposes of this Agreement.

SECTION 4.08 Absence of Restraint. The Related Retail
Brokerage Closing shall be subject only to notification in writing of the
Purchaser to the Seller, on or prior to January 2, 1995, that the condition set
forth in Section 14.05 of the Asset Purchase Agreement has not been satisfied.
If no notification has been received by the

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Seller by January 2, 1995, such condition shall be deemed to have been
satisfied or waived as of such date.

SECTION 4.09 Facility Services. The parties hereto
acknowledge that, in connection with the transfer of the Acquired Businesses to
the Purchaser, the Purchaser (or its designee) may have short-term needs to use
and occupy certain space owned or leased by the Parent or the Seller, pending
relocation as promptly as practicable to other facilities. The parties hereto
agree to enter into arrangements, on terms substantially similar to those in
the Revocable License Agreement to be entered into between Kidder Peabody & Co.
Incorporated and PaineWebber Incorporated prepared by Rosenman & Colin, to
permit the Purchaser to use and occupy such space.

SECTION 4.10 International Matched Book. The parties hereto
acknowledge that the business of the Seller Group generally known as
International Matched Book is not an Acquired Business. Prior to the Other
Acquired Businesses Closing Date, the parties hereto shall enter into an
arrangement which provides, among other things, that, to the extent permitted
by Applicable Law, (i) employees of the Purchaser shall manage the liquidation
of the Securities inventory of International Matched Book at the direction and
for the account of the Seller Group, (ii) the Seller shall bear the reasonable
costs and expenses of such employees, including a reasonable hourly fee, and
(iii) the Seller shall agree to indemnify the Purchaser for all Losses arising
out of the management of the liquidation of such Securities inventory, except
for Losses resulting from the negligence or wilful misconduct of such employees
or the Purchaser.

SECTION 4.11 Municipal Finance. For the period from the Other
Acquired Businesses Closing to the Related Retail Brokerage Closing, the
Purchaser shall act as principal, subject to best execution, for trades of any
member of the Seller Group in Securities to support the Municipal Finance
business of Retail Brokerage.

SECTION 4.12 Bridge Fund. The parties hereto acknowledge
that, following the Other Acquired Businesses Closing, the Purchaser may at its
election participate (including the assumption of the obligations that would be
associated with such participation) in the so-called Bridge Fund in lieu of and
to the extent that the Seller Group currently may participate, and the parties
hereto shall take such steps as may be reasonably necessary to permit such
result.

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ARTICLE V

RELATED RETAIL BROKERAGE BUSINESS

SECTION 5.01 Margin Debit; Related Retail Brokerage Securities
Inventory. (a) Prior to the Related Retail Brokerage Closing Date, the
Purchaser and the Seller shall agree on (i) a list of margin debt of customers
of Retail Brokerage held by any member of the Seller Group in connection with
the conduct of Related Retail Brokerage that is to be acquired by the Purchaser
(the "Margin Debit") and (ii) the fair market value of the Margin Debit as of
the close of business on the most recent practicable date (but in no event
earlier than the fifth Business Day prior to the Related Retail Brokerage
Closing Date). The Margin Debit shall constitute Acquired Assets.

(b) Prior to the Related Retail Brokerage Closing Date, the
Purchaser and the Seller shall agree (in the case of over-the-counter equity
Securities, in the manner pursuant to Section 5.01(c)) on (i) the Securities
and off-balance sheet hedges and derivatives, if any, held by any member of the
Seller Group in connection with the conduct of Related Retail Brokerage, if
any, that are to be acquired by the Purchaser (the "Related Retail Brokerage
Securities Inventory"), and reduce such agreement to a list, and (ii) the fair
market value of the Related Retail Brokerage Securities Inventory as of the
close of business on the most recent practicable date. The Related Retail
Brokerage Securities Inventory shall constitute Acquired Assets. Any Security
or off-balance sheet hedge or derivative held by any member of the Seller Group
in connection with the conduct of Related Retail Brokerage that is not on the
list of Related Retail Brokerage Securities Inventory shall constitute an
Excluded Asset.

(c) By December 15, 1994 the Purchaser shall review the
over-the-counter equity Securities inventory of Related Retail Brokerage and
notify in writing the Seller of the Securities, if any, in such inventory that
the Purchaser does not wish to acquire. Until the Related Retail Brokerage
Closing Date, the Purchaser shall be permitted on a weekly basis to review any
changes in such inventory and notify in writing the Seller of the Securities
therein that the Purchaser does not wish to acquire. Any over-the-counter
equity Securities forming part of the Securities inventory of Related Retail
Brokerage on the Related Retail Brokerage Closing Date that the Purchaser has
not notified in writing to the Seller that it does not wish to acquire shall
form part of the Related Retail Brokerage Securities Inventory.

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(d) The parties hereto agree that Section 2.08 (Exclusion of
Selected Securities), Section 2.09 (Return of Securities), Section 2.10 (The LM
Expert), Section 5.18 (Securities), Section 7.01(d) (Actions and Conduct of
Acquired Businesses Before the Closing Date) and Section 9.05 (Off-Balance
Sheet Positions) of the Asset Purchase Agreement have not been applied, and
shall not apply, to the Related Retail Brokerage Securities Inventory.

SECTION 5.02 Related Retail Brokerage Closing Date. (a) The
closing with respect to Related Retail Brokerage (the "Related Retail Brokerage
Closing") shall take place at the offices of Cravath, Swaine & Moore at 825
Eighth Avenue, New York, New York 10019 at 10:00 a.m. on January 30, 1995 (the
"Related Retail Brokerage Closing Date").

(b) The conditions set forth in Articles XIII and XIV of the
Asset Purchase Agreement, having been satisfied or waived by the appropriate
party, except as set forth in Section 4.09, on or before the Other Acquired
Businesses Closing Date, shall not be applicable to the Related Retail
Brokerage Closing or the Asset Management Closing.

SECTION 5.03 Related Retail Brokerage Closing. At the Related
Retail Brokerage Closing:

(a) the Purchaser shall deliver to a member of the Seller
Group designated by the Seller for the account(s) of the member(s) of the
Seller Group transferring the Acquired Assets:

(i) an amount in cash equal to the excess, if any, of the sum
of (x) the excess of the Acquired Liquid Assets over the Assumed
Liabilities as reflected on the Related Retail Brokerage Interim Net Book
Value Statement and (y) an amount equal to the estimated net book value of
Physical Capital of Related Retail Brokerage, up to a maximum of $20
million less an amount equal to the estimated net book value of the sum of
(A) Physical Capital of Real Estate, as determined pursuant to Section
3.04, and (B) Physical Capital of the Other Acquired Businesses, as
determined pursuant to Section 4.04, payable in Federal funds by 11:00
a.m., and

(ii) an Assumption Agreement pursuant to which the Purchaser
assumes the Assumed Liabilities arising out of Related Retail Brokerage,
duly executed by the Purchaser; and

(b) the Seller shall transfer to the Purchaser (or its
designee) the Margin Debit and the Related Retail

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Brokerage Securities Inventory reflected on the Related Retail Brokerage
Interim Balance Sheet, the other Acquired Assets of Related Retail Brokerage
and all other Acquired Assets not previously transferred to the Purchaser (or
its designee) other than those used primarily in the operation of Asset
Management, by delivering the applicable Conveyancing Documents, duly executed
by the appropriate members of the Seller Group.

SECTION 5.04 Related Retail Brokerage Interim Balance Sheet.
On the date two Business Days before the Related Retail Brokerage Closing Date,
the Seller shall deliver to the Purchaser (i) an estimated balance sheet of
Related Retail Brokerage prepared as of the Related Retail Brokerage Closing
Date (the "Related Retail Brokerage Interim Balance Sheet") prepared in
accordance with the Balance Sheet Principles, except that the value of each of
the Margin Debit and the Related Retail Brokerage Securities Inventory included
in such Interim Balance Sheet shall be the value agreed pursuant to Section
5.01(a) and Section 5.01(b), respectively, and (ii) a schedule based on the
Related Retail Brokerage Interim Balance Sheet detailing the calculation of the
estimated excess of the Acquired Liquid Assets over the Assumed Liabilities to
be delivered on the Related Retail Brokerage Closing Date (the "Related Retail
Brokerage Interim Net Book Value Statement").

SECTION 5.05 Transfer of IRAs, SEPs and QPs. Exhibit 1 hereto
sets forth the agreement of the parties with respect to the costs and expenses
arising out of or in connection with transfer of (i) all of the assets of the
individual retirement accounts for which a member of the Seller Group has acted
as the broker/dealer designated by the participants to the Purchaser (or its
designee), as successor custodian of such individual retirement accounts, (ii)
sponsorship of a simplified employee pension for use with certain of such
individual retirement accounts to the Purchaser (or its designee) and (iii) all
of the assets of the self-directed qualified retirement plans for which a
member of the Seller Group is the broker/dealer designated by such plans to the
Purchaser (or its designee), as successor trustee.

ARTICLE VI

ASSET MANAGEMENT BUSINESS

SECTION 6.01 Asset Management Closing Date. The closing with
respect to Asset Management (the "Asset Management Closing") shall take place
at the offices of Cravath, Swaine & Moore at 825 Eighth Avenue, New York, New
York 10019 at 10:00 a.m., on the second Business Day

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<PAGE> 15
following the later to occur of (i) the earlier of (x) receipt of an exemptive
order from the Commission concerning the Funds, in form and substance
reasonably satisfactory to each of the parties hereto, and (y) the holding of
meetings of shareholders of substantially all of the Funds at which approval of
investment advisory agreements providing that an affiliate of Purchaser act as
an investment advisor were considered and (ii) the earlier of (x) receipt of an
exemptive order from the Commission concerning the managed accounts of Asset
Management, in form and substance reasonably satisfactory to each of the
parties hereto, and (y) receipt of substantially all of the Required Consents
with respect to the managed accounts of Asset Management (except for such
accounts as are terminated or as to which the Purchaser and the Seller agree
Required Consents will not be received), or at such other place and time as may
be mutually agreed to by the parties hereto, but in no event shall the Asset
Management Closing take place later than April 30, 1995 (the date the Asset
Management Closing occurs being referred to herein as the "Asset Management
Closing Date"). The consummation of the Asset Management Closing shall not
limit, terminate or otherwise impair the obligations of the Parent and the
Seller under Section 2.04 and Section 7.06 of the Asset Purchase Agreement.

SECTION 6.02 Asset Management Closing. At the Asset
Management Closing:

(a) the Purchaser shall deliver to Seller an Assumption
Agreement pursuant to which the Purchaser assumes the Assumed Liabilities
arising out of Asset Management, duly executed by the Purchaser; and

(b) the Seller shall transfer to the Purchaser (or its
designee) the Acquired Assets of Asset Management, by delivering the applicable
Conveyancing Documents, duly executed by the appropriate members of the Seller
Group.

SECTION 6.03 Asset Management Closing Adjustment. (a) In the
event that the Asset Management Closing shall occur prior to the final
determination of the Closing Balance Sheet, the Acquired Assets and Assumed
Liabilities of Asset Management shall be deemed transferred or assumed, as the
case may be, at the Related Retail Brokerage Closing and shall be included in
the Closing Balance Sheet.

(b) In the event that the Asset Management Closing shall occur
after the final determination of the Closing Balance Sheet, an appropriate cash
payment shall be made by the Purchaser or the Seller, as applicable, calculated
as if such Acquired Assets and Assumed Liabilities had been transferred or
assumed, as the case may

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be, at the Related Retail Brokerage Closing and had been included in the
Closing Balance Sheet.

SECTION 6.04 Financial Counselors, Inc. On the date on which
the business carried on under the names "Financial Counselors", "Financial
Counselors, Inc." and "FCI" is transferred to the Purchaser, the Seller shall,
within a reasonable period of time necessary to carry out such actions, cause
each applicable member of the Seller Group to change its name to delete
therefrom such names, or any derivative thereof, and to cease doing business
under such names and any such derivative. On and after such date, each member
of the Seller Group shall execute and deliver such documents as the Purchaser
may reasonably request to permit the Purchaser or one of its Affiliates to
carry on business under such names. Nothing herein contained shall be deemed
to involve the acquisition of the capital stock of Financial Counselors, Inc.
or the acquisition of a separate Other Acquired Business; it being understood
that the assets of the organization shall only be acquired as part of Asset
Management.

ARTICLE VII

CLOSING BALANCE SHEET

SECTION 7.01 Closing Balance Sheet. (a) For purposes of
Section 3.04 of the Asset Purchase Agreement, the Closing Balance Sheet shall
be a consolidated balance sheet prepared in accordance with the Balance Sheet
Principles, including (i) the Acquired Assets and Assumed Liabilities of Real
Estate as of the Real Estate Closing Date, (ii) the Acquired Assets and Assumed
Liabilities of the Other Acquired Businesses as of the Other Acquired
Businesses Closing Date, (iii) the Acquired Assets and Assumed Liabilities of
Related Retail Brokerage as of the Related Retail Brokerage Closing Date and
(iv) to the extent the Asset Management Closing occurs prior to the final
determination of the Closing Balance Sheet, the Acquired Assets and Assumed
Liabilities of Asset Management.

(b) For purposes of Section 3.04(c) of the Asset Purchase
Agreement and the Balance Sheet Principles, the parties hereto agree that the
fair market value of each of the Real Estate Securities Inventory, the Other
Acquired Businesses Securities Inventory, the Margin Debit and the Related
Retail Brokerage Securities Inventory shall be the values agreed pursuant to
Section 3.01(a)(ii), Section 4.01(a)(ii), Section 5.01(a)(ii) and Section
5.01(b)(ii), respectively.

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(c) The determination to be made pursuant to Section 3.04(b)
of the Asset Purchase Agreement shall take into account (i) the amount of any
payments made by the Purchaser to the Seller pursuant to Section 3.03(a)(i),
Section 4.05(a) and Section 5.03(a)(i) (which shall be deemed to be increases
in the Assumed Liabilities) and (ii) the amount of any payments made by the
Seller to the Purchaser pursuant to Section 4.05(b) (which shall be deemed to
be increases in Acquired Liquid Assets). Interest pursuant to Section 3.04(b)
of the Asset Purchase Agreement shall accrue from the Other Acquired Businesses
Closing Date.

ARTICLE VIII

TAX

SECTION 8.01 Closing Dates. The provisions of Section 5.06,
Section 11.01, Section 11.02, Section 11.03 and Section 11.04 of the Asset
Purchase Agreement shall be applied in each case with reference to the relevant
one of the date of the asset transfer in Section 2.01, the Asset Management
Closing Date, the Other Acquired Businesses Closing Date, the Real Estate
Closing Date and the Related Retail Brokerage Closing Date.

SECTION 8.02 FIRPTA. The certificate described in Section
11.05 of the Asset Purchase Agreement shall be delivered by the Seller or the
appropriate member of the Seller Group at the Real Estate Closing.

ARTICLE IX

ASSET PURCHASE AGREEMENT

SECTION 9.01 Representations and Warranties. (a) Except as
otherwise provided in this Agreement, the representations and warranties set
forth in Articles V and VI of the Asset Purchase Agreement shall be made by the
Parent, the Seller and the Purchaser, as the case may be, as of each of the
Real Estate Closing Date, the Other Acquired Businesses Closing Date, the
Related Retail Brokerage Closing Date and the Asset Management Closing Date,
with respect to the businesses being transferred on such date; provided that a
party hereto shall be deemed not to be in breach of any representation or
warranty if such representation or warranty would not have been breached except
as a result of the provisions of this Agreement or the transactions
contemplated hereby.

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(b) For purposes of Section 14.01 of the Asset Purchase
Agreement, a certificate of the Parent to be delivered to the Purchaser shall
be signed by any Vice President of the Parent and a certificate of the Seller
shall be signed by the chief executive officer or the chief financial officer
of the Seller.

SECTION 9.02 Return of Selected Assets. For purposes of
Section 2.07 of the Asset Purchase Agreement, the term "Closing Date" shall
mean the date on which the relevant Acquired Asset was transferred to the
Purchaser (or its designee).

SECTION 9.03 Allocation of Purchase Price. (a) The parties
hereto intend that the transfers of the Acquired Businesses to the Purchaser on
the date of the asset transfer in Section 2.01, the Asset Management Closing
Date, the Other Acquired Businesses Closing Date, the Real Estate Closing Date
and the Related Retail Brokerage Closing Date (collectively, for purposes of
this Section 9.03, the "Closing Dates") shall be a single integrated
transaction, the several transfers on such Closing Dates being solely for the
convenience of the parties hereto. Except as otherwise provided in this
Agreement, the provisions of Section 9.02 of the Asset Purchase Agreement shall
be applied to the aggregate Purchase Price and not separately to amounts of
cash or stock paid on any particular Closing Date. The amounts payable on any
such Closing Date are not necessarily allocable solely to assets transferred on
such Closing Date.

(b) The value of the portion of the aggregate consideration
transferred to the Purchaser that is transferred in exchange for the Redeemable
Preferred Stock shall equal the aggregate liquidation preference of the
Redeemable Preferred Stock minus the value of the right to receive the Deferred
Purchase Price, if applicable. The value of the portion of the aggregate
consideration transferred to the Purchaser that is transferred in exchange for
the Convertible Preferred Stock shall equal the aggregate liquidation
preference of the Convertible Preferred Stock.

(c) The Purchaser and the Seller shall agree on estimated
allocations of the Purchase Price, consistent with the allocation of Purchase
Price principles articulated in Section 9.03(a) of this Agreement and Section
9.02 of the Asset Purchase Agreement (unless legally unable to do so), to the
extent and at such time as is necessary to permit the making of timely Transfer
Tax filings.

(d) To the extent the Purchaser and the Seller are required
(pursuant to the provisions of Section 1060 of the Code and the regulations
thereunder) to file a Form 8594

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with respect to all or a part of the assets transferred in the transactions
contemplated by this Agreement before all such contemplated transactions are
completed (the "Initial Form 8594"), the Purchaser shall provide to the Seller
the proposed Allocation Statements with respect to the assets transferred prior
to the date of required filing of the Initial Form 8594 pursuant to the
provisions of Section 9.02(a) of the Asset Purchase Agreement.

(e) With respect to all assets transferred in the transactions
contemplated by this Agreement which will not be listed on the Initial Form
8594, the Purchaser shall provide to the Seller the proposed Allocation
Statements described in Section 9.02(a) of the Asset Purchase Agreement
pursuant to the provisions of Section 9.02(a) of the Asset Purchase Agreement.
The Purchaser and the Seller shall timely amend the Initial Form 8594 to
include all of the transfers on all of the Closing Dates, notwithstanding that
such Closing Dates will not all occur within the same tax year. The Purchaser
and the Seller shall file a Form 8594, substantially in the form of the Initial
Form 8594, as amended, for the tax year in which the last of the transactions
contemplated by this Agreement is completed.

SECTION 9.04 Assumed Liabilities; Excluded Liabilities. (a)
For the purposes of Section 2.05 of the Asset Purchase Agreement, the term
"Closing Date" shall mean the date on which the Acquired Business out of which
the applicable Assumed Liability arose was transferred to the Purchaser (or its
designee).

(b) For the purposes of Section 2.06(iv) and Section 2.06(vii)
of the Asset Purchase Agreement, the terms "Closing" and "Closing Date" shall
mean the closing at which, or the date on which, as applicable, the applicable
Acquired Asset or Acquired Business was transferred to the Purchaser (or its
designee). For the purposes of Section 2.06(v) of the Asset Purchase
Agreement, the term "Closing" shall mean the closing at which the Acquired
Business out of which the applicable liability or obligation arose was
transferred to the Purchaser (or its designee) or, if none, the Other Acquired
Businesses Closing.

SECTION 9.05 Delayed Assets. For the purposes of Section 2.04
of the Asset Purchase Agreement, the term "Closing Date" shall mean the date on
which the applicable Delayed Asset or Delayed Liability would have been
transferred to, or assumed by, the Purchaser but for the absence of a Required
Consent.

SECTION 9.06 Undertaking. The parties hereto acknowledge that
the following issues have not yet been agreed upon: (i) the sharing of certain
Investment Banking,

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Real Estate, Municipal Finance and other advisory fees; (ii) the allocation of
certain costs and expenses relating to or arising out of Asset Management;
(iii) costs associated with the licensing of certain software; (iv) certain
issues relating to the list of the employees to be delivered, and the timing of
such delivery, pursuant to Section 3.01(b) of the Restructuring Agreement; (v)
the methodology for resolution of the "in treatment" status of employees
referred to in Section 3.03 of the Restructuring Agreement; and (vi) certain
Contracts identified to Purchaser with respect to which the period of time in
Section 2.07(c) has not yet expired. The parties hereto undertake in good
faith to resolve such issues on mutually acceptable terms prior to the Other
Acquired Businesses Closing Date.

SECTION 9.07 Deferred Purchase Price. Payments of the
Deferred Purchase Price, if any, shall commence to accrue as of the Other
Acquired Businesses Closing Date.

SECTION 9.08 Redeemable Preferred Stock. For the purposes of
the letter agreement dated October 17, 1994 among the Purchaser, the Parent and
the Seller concerning the Redeemable Preferred Stock, the term the "Closing"
shall mean the Other Acquired Businesses Closing.

SECTION 9.09 Other References to Closing and Closing Date.
The parties hereto acknowledge that the Asset Purchase Agreement contains
numerous references to the "Closing" and the "Closing Date" not addressed in
this Agreement and that it is their intention that, except as otherwise set
forth in this Agreement, each such reference be construed as a reference to the
Real Estate Closing, the Other Acquired Businesses Closing, the Related Retail
Brokerage Closing or the Asset Management Closing or, in each case, the date
thereof, as applicable.

SECTION 9.10 Acquired Businesses. For the purposes of the
Transaction Documents, the "Acquired Businesses" shall mean Asset Management,
Real Estate and Related Retail Brokerage and the businesses of the Seller Group
generally known by the names Equity Research, Investment Banking (excluding
High Yield and Emerging Markets), Fixed Income (sales force only),
International Institutional Equity (Geneva, Zurich and Hong Kong),
International Fixed Income (London, Geneva, Zurich, Hong Kong, Singapore and
part of Tokyo, if applicable), Listed Domestic Futures and Municipal Finance
(excluding sales and trading).

SECTION 9.11 Contract Guarantees. For employees of the Seller
Group who have contract guarantees for 1995 and beyond, the Seller agrees to be
responsible for the difference between (i) the amount of compensation
guaranteed

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to such employees and (ii) any lesser amount of compensation being offered by
the Purchaser to such employees in good faith and on terms at least comparable
to market terms (salary and bonus). The Seller shall have the right to review
and object to any offer of compensation which it believes is not on terms at
least comparable to market terms. Any disagreements between the Seller and the
Purchaser about whether any offer of compensation is on terms at least
comparable with market terms will be finally determined by McLagan.

SECTION 9.12 Assigned Contracts. Unless the Purchaser otherwise
specifically agrees in writing, no employment agreement or standardized revenue
contract shall be included within the Assigned Contracts.

ARTICLE X

RESTRUCTURING AGREEMENT

SECTION 10.01 Restructuring Agreement. The following terms
used in the Restructuring Agreement shall have the meanings set forth below.
The section references set forth below in this Section 10.01 are to sections of
the Restructuring Agreement.

(a) For purposes of Section 2.04 (Clearance Services), the
term "Closing Date" shall mean the Related Retail Brokerage Closing Date.

(b) For purposes of Section 3.01(c) (Employee List) and
Section 3.05(a) (Severance Programs), the terms "Closing" and "Closing Date"
shall mean the Other Acquired Businesses Closing and Other Acquired Businesses
Closing Date, respectively.

(c) For purposes of Section 3.03 (Medical Benefit Plans), the
term "Closing Date" shall mean the closing date on which employment by the
Purchaser of the applicable Continuing Employee becomes effective.

(d) In Section 3.07 (Employee Forgivable Loans), Section
3.08(a) (Deferred Broker Production Program) and Section 4.02 (Closure of
Hanover Square Offices), the term "Closing" shall mean the Related Retail
Brokerage Closing.

(e) The following sentence shall be deleted from Section 4.01
of the Restructuring Agreement:

"The Purchaser shall close, or direct the closing of, the retail brokerage
branches identified on such list by December 31, 1995."

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(f) The parties hereto acknowledge that this Agreement is not
intended to effect any substantive change in the allocation of rights and
responsibilities under the Restructuring Agreement.

ARTICLE XI

MISCELLANEOUS

SECTION 11.01 Successors and Assigns. Except as otherwise
provided in this Agreement and except for an assignment by the Purchaser to one
of its Affiliates, no party hereto shall assign this Agreement or any right or
obligations hereunder without the prior written consent of the other parties
hereto, and any such attempted assignment without such prior written consent
shall be void and of no force and effect; provided that no such assignment
shall reduce or otherwise vitiate any of the obligations of any other party
hereunder. This Agreement shall inure to the benefit of and shall be binding
upon the successors and permitted assigns of the parties hereto.

SECTION 11.02 Governing Law; Jurisdiction. (a) This Agreement
shall be construed, performed and enforced in accordance with, and governed by,
the laws of the State of New York, without giving effect to the principles of
conflicts of laws thereof.

(b) Each party irrevocably submits to the exclusive jurisdiction
of (i) the Supreme Court of the State of New York, New York County, and (ii)
the United States District Court for the Southern District of New York, for the
purposes of any suit, action or other proceeding arising out of this Agreement
or any transaction contemplated hereby. Each party hereto agrees to commence
any action, suit or proceeding relating hereto either in the United States
District Court for the Southern District of New York or if such suit, action or
other proceeding may not be brought in such court for jurisdictional reasons,
in the Supreme Court of the State of New York, New York County. Each party
hereto irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby in (A) the Supreme Court of the State of New
York, New York County, or (B) the United States District Court for the Southern
District of New York, and hereby further irrevocably and unconditionally waives
and agrees not to plead or claim in any such court that any such action, suit
or proceeding brought in any such court has been brought in an inconvenient
forum.

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SECTION 11.03 Severability. In the event that any part of this
Agreement is declared by any court or other judicial or administrative body to
be null, void or unenforceable, said provision shall survive to the extent it
is not so declared, and all of the other provisions of this Agreement shall
remain in full force and effect and the parties hereto shall negotiate in good
faith to replace the part hereof declared null, void or unenforceable with an
alternative provision that preserves for the parties hereto the benefits of
this Agreement.

SECTION 11.04 Notices. All notices, requests, demands and
other communications under this Agreement shall be in writing and shall be
deemed to have been duly given as provided in Section 16.05 of the Asset
Purchase Agreement.

SECTION 11.05 Amendments; Waivers. This Agreement may be
amended or modified, and any of the terms, covenants, representations,
warranties or conditions hereof may be waived, only by a written instrument
executed by the parties hereto or, in the case of a waiver, by the party
waiving compliance. Any waiver by any party hereto of any condition, or of the
breach of any provision, term, covenant, representation or warranty contained
in this Agreement, in any one or more instances, shall not be deemed to be nor
construed as a further or continuing waiver of any such condition, or of the
breach of any other provision, term, covenant, representation or warranty of
this Agreement.

SECTION 11.06 Parties in Interest. Nothing in this Agreement
is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the Parent, the Seller and the Purchaser
and their respective successors and permitted assigns. Nothing in this
Agreement is intended to relieve or discharge the obligations or liability of
any third persons to the Seller or the Purchaser. No provision of this
Agreement shall give any third persons any right of subrogation or action over
or against the Seller or the Purchaser.

SECTION 11.07 Agreement of the Parties. To the extent the
provisions of, or the transactions contemplated by, this Agreement are
inconsistent or in conflict with the provisions of, or the transactions
contemplated by, the other Transaction Documents, each of the parties hereto
agrees that the provisions of, or the transactions contemplated by, this
Agreement shall govern. To the extent not inconsistent herewith, the
provisions of the Asset Purchase Agreement are hereby confirmed in all
respects.

SECTION 11.08 Headings. The section and paragraph headings in
this Agreement are for reference

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purposes only and shall not affect the meaning or interpretation of this
Agreement.

SECTION 11.09 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which shall
constitute the same instrument.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of the
date first above written.

PAINE WEBBER GROUP INC.

By
-------------------------
Name:
Title:

GENERAL ELECTRIC COMPANY

By
-------------------------
Name:
Title:

KIDDER, PEABODY GROUP INC.

By
-------------------------
Name:
Title:

<PAGE> 1
Exhibit 10.2

SECOND SUPPLEMENTAL AGREEMENT

SECOND SUPPLEMENTAL AGREEMENT dated as of December 16, 1994 among
Paine Webber Group Inc., a Delaware corporation (the "Purchaser"), General
Electric Company, a New York corporation (the "Parent"), and Kidder, Peabody
Group Inc., a Delaware corporation (the "Seller").

WHEREAS, the parties hereto have previously entered into an Asset
Purchase Agreement dated as of October 17, 1994 (as amended and supplemented,
the "Asset Purchase Agreement") and a Restructuring Agreement dated as of
October 17, 1994 (as amended and supplemented, the "Restructuring Agreement");

WHEREAS, the parties hereto have previously entered into a
Supplemental Agreement dated as of December 9, 1994 (the "First Supplemental
Agreement"); and

WHEREAS, the parties hereto desire to further supplement and amend
the provisions of the Asset Purchase Agreement, the Restructuring Agreement and
the First Supplemental Agreement in the manner set forth in this Agreement;

ARTICLE I

DEFINITIONS

SECTION 1.01 Definitions. (a) Terms used herein and not
otherwise defined herein shall have the meanings set forth in the Asset
Purchase Agreement, the Restructuring Agreement or the First Supplemental
Agreement, as the case may be.

(b) As used in this Agreement, the following terms shall have
the following meanings:

"Municipal Bond Trading" has the meaning set forth in Section
3.02(a).

"Municipal Bond Trading Securities" has the meaning set forth in
Section 3.02(b).
<PAGE> 2
"Short Term Finance" has the meaning set forth in Section 3.01(a).

"Short Term Finance Securities" has the meaning set forth in
Section 3.01(a).

"Substitute Redeemable Preferred Stock" has the meaning set forth
in Section 2.01.

"Transfer Agent" shall mean the transfer agent for the Common
Stock.

(c) This Agreement shall be deemed to be a Transaction
Document and each reference in any of the Transaction Documents to the
Transaction Documents shall be deemed to include this Agreement.

SECTION 1.02 Rules of Interpretation. The rules of
interpretation specified in Section 1.02 of the Asset Purchase Agreement shall
be applicable to this Agreement.

ARTICLE II

REDEEMABLE PREFERRED STOCK

SECTION 2.01 Redeemable Preferred Stock. (a) The parties
hereto acknowledge that the Purchaser has exercised its option, pursuant to a
letter agreement dated October 17, 1994 among the Purchaser, the Parent and the
Seller, to provide in lieu of the Redeemable Preferred Stock a redeemable
preferred stock of the Purchaser (the "Substitute Redeemable Preferred Stock")
with the same terms and conditions as the Redeemable Preferred Stock except
that the Substitute Redeemable Preferred Stock shall be noncallable until the
fifth anniversary of the Other Acquired Businesses Closing Date. The parties
hereto further acknowledge that, in accordance with such letter agreement, the
Purchaser shall no longer have any obligation to pay the Deferred Purchase
Price, as contemplated by Section 3.05 of the Asset Purchase Agreement. All
references in the Transaction Documents to the Redeemable Preferred Stock shall
hereafter mean the Substitute Redeemable Preferred Stock.

(b) The first sentence of Section 9.03(b) of the First
Supplemental Agreement is amended to read as follows:

"The value of the portion of the aggregate consideration transferred to the
Purchaser that is transferred in exchange for the Redeemable Preferred
Stock shall equal the aggregate liquidation preference of the Redeemable
Preferred Stock."

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(c) The first sentence of Section 9.02(a) of the Asset
Purchase Agreement is amended to read as follows:

"The Seller and the Purchaser agree that the value of the Redeemable
Preferred Stock shall equal its liquidation preference, the value of the
Convertible Preferred Stock shall equal its liquidation preference, and the
value of the Common Stock Consideration shall equal 21,500,000 multiplied
by the mean of the high and low per-share prices at which the Common Stock
trades on the NYSE on the Other Acquired Businesses Closing Date."

(d) The Purchaser represents and warrants that it is the
Purchaser's experience and expectation that the holders of convertible
debentures issued under the Purchaser's Key Executive Equity Program who
convert such debentures into convertible preferred stock proceed promptly to
convert such preferred stock into Common Stock.

ARTICLE III

OTHER ACQUIRED BUSINESSES CLOSING

SECTION 3.01 Short Term Finance. (a) The business of the
Seller Group generally known by the name Short Term Finance, including the
distribution and trading of commercial paper, auction rate preferred stock and
short-term certificates of deposits ("Short Term Finance"), shall be an Other
Acquired Business; provided that (i) the employment by the Purchaser of any
Continuing Employee of Short Term Finance shall be effective as of December 19,
1994 and (ii) the Securities held by the members of the Seller Group in
connection with the conduct of Short Term Finance (the "Short Term Finance
Securities") shall not be included in the Other Acquired Businesses Securities
Inventory. Any Short Term Finance Securities not purchased by the Purchaser
pursuant to Section 3.02(b) shall constitute Excluded Assets.

(b) The Purchaser hereby acknowledges that it has reviewed the
Short Term Finance Securities and hereby agrees to purchase on December 16,
1994 (for settlement on December 19, 1994) a maximum of $155 million of Short
Term Finance Securities, consisting of (i) up to a maximum of $100 million of
commercial paper, valued at the current market price on December 16, (ii) up to
a maximum of $50 million of auction rate preferred stock, valued at the lower
of (A) the auction price less the selling concession and (B) the current
market price on December 16 and (iii) up to a maximum of $5 million of
certificates of deposit, valued at the current market price on December 16; in
each case, such

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prices shall be determined by agreement between the Purchaser and the Seller.
The Purchaser shall have the right at any time on or prior to December 16, 1994
to increase any of such maximum amounts.

(c) Notwithstanding the fact that the Other Acquired
Businesses Closing may not occur on December 16, 1994, the Acquired Assets
(other than the Short Term Finance Securities) of Short Term Finance shall be
transferred to the Purchaser and the Assumed Liabilities of Short Term Finance
shall be assumed by the Purchaser on December 16, 1994 and the Short Term
Finance Securities shall be purchased by the Purchaser in accordance with
Section 3.01(b).

(d) The parties hereto agree that Section 2.08 (Exclusion of
Selected Securities), Section 2.09 (Return of Securities), Section 2.10 (The LM
Expert), Section 5.18 (Securities), Section 7.01(d) (Actions and Conduct of
Acquired Businesses Before the Closing Date) and Section 9.05 (Off-Balance
Sheet Positions) of the Asset Purchase Agreement have not been applied, and
shall not apply, to the Short Term Finance Securities. Any off-balance sheet
hedge or derivative held by any member of the Seller Group in connection with
the conduct of Short Term Finance shall constitute an Excluded Asset.

(e) The Short Term Finance Securities and the cash payment(s)
to be made pursuant to Section 3.01(b) shall not be taken into account for
purposes of the Closing Balance Sheet as provided in Section 3.04 of the Asset
Purchase Agreement and Section 7.01 of the First Supplemental Agreement.

(f) The Purchaser shall have until December 23, 1994 to decide
whether to assume the contract(s) of Short Term Finance related to the
Philadelphia Electric Company. Such contract(s) shall not be an Assigned
Contract unless the Purchaser shall agree in writing to assume such contract(s)
by such date.

(g) This Section 3.01 is intended to replace Section 4.07(c)
of the First Supplemental Agreement.

SECTION 3.02 Municipal Bond Trading. (a) The business of the
Seller Group generally known by the name Municipal Bond Trading, to the extent
conducted through certain regional committing centers to be agreed upon between
the Purchaser and the Seller prior to the Related Retail Brokerage Closing Date
("Municipal Bond Trading"), shall be an Acquired Business but shall not be part
of the Other Acquired Businesses being transferred to the Purchaser on the
Other Acquired Businesses Closing Date.

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(b) The parties hereto shall agree (i) on the regional
committing centers to be transferred to the Purchaser, the date or dates of
transfer thereof, and the procedures related thereto (including whether any
Acquired Assets of Municipal Bond Trading shall be included in the Closing
Balance Sheet), (ii) the Securities and off-balance sheet hedges and
derivatives, if any, held by any member of the Seller Group in connection with
the conduct of Municipal Bond Trading (the "Municipal Bond Trading Securities")
that are to be acquired by the Purchaser on such date or dates and (iii) the
fair market value of such Securities. Any Security or off-balance sheet hedge
or derivative held by any member of the Seller Group in connection with the
conduct of Municipal Bond Trading that is not a Municipal Bond Trading Security
shall constitute an Excluded Asset.

(c) The parties hereto agree that Section 2.08 (Exclusion of
Selected Securities), Section 2.09 (Return of Securities), Section 2.10 (The LM
Expert), Section 5.18 (Securities), Section 7.01(d) (Actions and Conduct of
Acquired Businesses Before the Closing Date) and Section 9.05 (Off-Balance
Sheet Positions) of the Asset Purchase Agreement have not been applied, and
shall not apply, to the Municipal Bond Trading Securities.

(d) To the extent that the parties hereto agree to transfer
Municipal Bond Trading to the Purchaser prior to the Related Retail Brokerage
Closing Date, the covenant of the Purchaser set forth in Section 4.11 of the
First Supplemental Agreement shall apply for the period from the date of such
transfer to the Related Retail Brokerage Closing Date.

SECTION 3.03 Physical Capital. (a) The Physical Capital of
the Other Acquired Businesses shall be transferred to the Purchaser on the
Other Acquired Businesses Closing Date but shall not be included in the Other
Acquired Businesses Interim Balance Sheet.

(b) The Physical Capital of the Other Acquired Businesses and
the Physical Capital, if any, of the former business of the Seller Group
generally known by the name Listed Domestic Futures (Chicago Branch) shall be
included in the Related Retail Brokerage Interim Balance Sheet.

(c) For purposes of the calculation set forth in Section
5.03(a)(i) of the First Supplemental Agreement, the Physical Capital referred
to in Section 3.03(b) shall be deemed to be Physical Capital of Related Retail
Brokerage.

SECTION 3.04 Investment Banking Offices. The Purchaser hereby
agrees that, from the Other Acquired Businesses Closing Date, neither it nor
any Continuing

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<PAGE> 6
Employees of Investment Banking shall use or occupy the existing Investment
Banking offices of the members of the Seller Group in Atlanta, Boston, Chicago
or Fort Lauderdale. The parties hereto agree that the Purchaser shall have
until December 23, 1994 to decide whether Continuing Employees, if any, of
Investment Banking in the existing Investment Banking offices of members of the
Seller Group in Houston and San Francisco shall have a short-term need to use
or occupy space in such offices and, if the Purchaser so decides, the parties
shall enter into a mutually satisfactory arrangement regarding such short-term
occupancy.

SECTION 3.05 Facility Services. The Purchaser hereby agrees
that, from the Other Acquired Businesses Closing Date, neither it nor any
Continuing Employee shall use or occupy the space owned or leased by the Parent
or the Seller in Mexico City, Sao Paolo or Tokyo.

SECTION 3.06 Advisory Fees and Expenses. Exhibit 1 hereto
sets forth the agreement of the parties hereto with respect to (i) the sharing
of certain Investment Banking and other advisory fees and (ii) the
reimbursement of expenses incurred by members of the Seller Group in connection
with certain Investment Banking and other advisory assignments.

SECTION 3.07 Eurobond Securities Inventory. For purposes of
determining the amount of any payment to be made pursuant to Section 4.05 of
the First Supplemental Agreement, the fair market value of the Eurobond
Securities forming part of the Other Acquired Businesses Securities Inventory
as reflected on the Other Acquired Businesses Interim Balance Sheet shall be
the fair market value of such Securities as of the close of business on the
Business Day prior to the Other Acquired Businesses Closing Date, as agreed
between the Purchaser and the Seller. For all other purposes, including the
Closing Balance Sheet, the fair market value of such Eurobond Securities shall
be the fair market value as of the Other Acquired Businesses Closing Date, as
agreed between the Purchaser and the Seller.

SECTION 3.08 Settlement. Exhibit 2 hereto sets forth the
agreement of the parties hereto with respect to the settlement of (i) the
portion of the Other Acquired Businesses Securities Inventory consisting of
Eurobonds and (ii) certain short positions of the Seller Group consisting of
Eurobond Securities and U.S. Treasury obligations. The parties hereto
acknowledge that the Other Acquired Businesses Securities Inventory consists
only of Eurobond Securities and short positions related thereto.

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<PAGE> 7
SECTION 3.09 Cooperation. The Purchaser shall cooperate with
the Seller to cause the books of the Transfer Agent to reflect (i) the issuance
of Common Stock to the members of the Seller Group who are initially
transferring the Acquired Assets of the Other Acquired Businesses to the
Purchaser (which members shall be identified in writing to the Purchaser and
the Transfer Agent on or prior to the Other Acquired Businesses Closing Date)
and (ii) the subsequent transfer of any of such Common Stock to members of the
Seller Group.

SECTION 3.10 Certain Exchange Seats. (a) On the Other
Acquired Business Closing Date, three seats on the Chicago Board Options
Exchange, with a purchase price of $426,000 each, shall be transferred to the
Purchaser. These three seats shall not be included as Other Liquid Assets on
the Other Acquired Businesses Interim Balance Sheet, and the payment of the
purchase price thereof shall be made by the Purchaser directly to the Chicago
Board Options Exchange for the account of the Seller. One of such seats shall
be leased as of the Other Acquired Businesses Closing Date by the Seller from
the Purchaser pursuant to an agreement entered into between the Purchaser and
the Seller.

(b) On the Other Acquired Businesses Closing Date, two seats
on the Chicago Board of Trade shall be transferred to the Purchaser. These two
seats shall not be included as Other Liquid Assets on the Other Acquired
Businesses Interim Balance Sheet, and the payment of the purchase price thereof
(based on an amount equal to the then current bid price plus one dollar) shall
be made by the Purchaser directly to the Chicago Board of Trade for the account
of the Seller. A third seat on the Chicago Board of Trade shall be transferred
to the Purchaser on the Related Retail Brokerage Closing Date. This third seat
shall not be included as Other Liquid Assets on the Related Retail Brokerage
Interim Balance Sheet, and the payment of the purchase price thereof (based on
an amount equal to the then current bid price plus one dollar) shall be made by
the Purchaser directly to the Chicago Board of Trade for the account of the
Seller.

(c) The parties hereto agree that the Exchange Seats referred to
in Sections 3.10(a) and (b) are the only Exchange Seats being acquired by the
Purchaser. All other Exchange Seats of any member of the Seller Group shall
constitute Excluded Assets.

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<PAGE> 8
ARTICLE IV

SUPPLEMENTAL MATTERS

SECTION 4.01 Asset Management. The Purchaser and the Seller
have agreed to the allocation of certain costs and expenses relating to or
arising out of the asset management businesses of the Purchaser and the Seller,
as reflected in a memorandum dated December 15, 1994 from the general counsel
of the Purchaser to the general counsel of the Seller.

SECTION 4.02 In Treatment Status. The parties hereto agree
that, notwithstanding the provisions of Section 3.03 of the Restructuring
Agreement, the medical benefit plans (including medical and dental coverage) of
the Purchaser shall waive pre- existing conditions in respect of Continuing
Employees and their dependents including in respect of all conditions which are
in treatment status as of the applicable closing date and the Seller shall have
no obligation to provide any coverage for expenses of Continuing Employees and
their dependents incurred on or after the applicable closing date in respect of
all conditions which are in treatment status at the applicable closing date.
In consideration thereof, a payment shall be made by the Seller to the
Purchaser by January 30, 1995 and the amount of such payment shall be
determined pursuant to the methodology set forth in Exhibit 3 hereto (with such
changes as may be agreed upon by the Purchaser and the Seller).

SECTION 4.03 Conduct of the Acquired Businesses. The parties
hereto acknowledge that, since the date of the Asset Purchase Agreement, the
Acquired Businesses have been operated primarily with a view to preparing for
the transactions contemplated by the Asset Purchase Agreement, the
Restructuring Agreement, the First Supplemental Agreement and this Agreement
and, to that extent, have not been operated in the ordinary course consistent
with past practice. Notwithstanding the foregoing, the Seller reaffirms the
covenant contained in Section 7.01(b) of the Asset Purchase Agreement to the
extent it relates to the businesses of Related Retail Brokerage and Asset
Management, subject to whatever limitations exist and will continue to exist as
a result of these businesses being operated with a view to preparing for the
transactions contemplated by the Asset Purchase Agreement, as to which Seller
and Purchaser have conferred on a regular basis and will continue to confer.

SECTION 4.04 Acquired Businesses. (a) The business of the
Seller Group generally known by the name

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Asset Management (structured products) shall not be part of Asset Management
and shall constitute an Excluded Business.

(b) The parties hereto acknowledge that the Purchaser is not
acquiring the International Fixed Income business of the Seller Group conducted
in the Tokyo office of the Seller, but that the Purchaser is hiring certain
individuals in the Tokyo office of the Seller Group who are engaged in the
International Fixed Income business.

(c) The business of the Seller Group generally known by the name
S&P Index Options and Futures shall constitute an Excluded Business.

SECTION 4.05 Outstanding Put Options. Notwithstanding any
provision in any Transaction Document, the parties recognize and accept that a
member of the Seller Group has a contingent obligation to purchase Common Stock
up to a maximum of 99,000 shares pursuant to put options already issued and
outstanding, which options expire on or about December 20, 1994. If such
options are exercised, the Seller Group shall be permitted to comply with its
obligations under such options to purchase such Common Stock and shall resell
such Common Stock in the market in an orderly fashion within 30 days of such
purchase without being considered to be in violation of any Transaction
Document.

SECTION 4.06 Seller Indemnitees. The definition of Seller
Indemnitee in the Asset Purchase Agreement is amended as follows:

"Seller Indemnitees" shall mean the Parent and its Affiliates
(other than any Included Subsidiary) and their respective officers,
directors, employees, agents and advisors.

ARTICLE V

MISCELLANEOUS

SECTION 5.01 Incorporation by Reference. The provisions of
Article XI of the First Supplemental Agreement shall be incorporated by
reference herein and each reference therein to the First Supplemental Agreement
shall apply to this Agreement as if this Agreement were referred to therein.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of the
date first above written.

PAINE WEBBER GROUP INC.

By
-------------------------
Name:
Title:

GENERAL ELECTRIC COMPANY

By
-------------------------
Name:
Title:

KIDDER, PEABODY GROUP INC.

By
-------------------------
Name:
Title: