<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/X/ Preliminary proxy statement
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
PAINE WEBBER GROUP INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
PAINE WEBBER GROUP INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock
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(2) Aggregate number of securities to which transaction applies:
N/A
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
N/A
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(4) Proposed maximum aggregate value of transaction:
N/A
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/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
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(4) Date filed:
- --------------------------------------------------------------------------------
- ---------------
1Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE> 2
Paine Webber Group Inc.
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
March , 1995
To the Stockholders of Paine Webber Group Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Paine
Webber Group Inc. ("PW") will be held on Thursday, May 4, 1995, at 9:00 a.m., in
the PaineWebber Building, 1000 Harbor Boulevard, Weehawken, New Jersey 07087, to
consider and vote upon the following matters:
1. The election of 5 directors to the Board of Directors to hold office
for a term of 3 years.
2. The approval of certain conversion rights contained in the 6%
Cumulative Convertible Redeemable Preferred Stock, Series A, of PW
authorizing the issuance of PW Common Stock which, when combined with
Common Stock previously issued in the same transaction, may exceed 20%
of the total PW Common Stock outstanding.
3. The ratification of the selection by the Board of Directors of Ernst &
Young as PW's independent public accountants for the 1995 fiscal year.
4. The transaction of such other business as may properly come before the
meeting or any adjournment thereof.
Holders of PW Common Stock of record at the close of business on March 16,
1995 are entitled to notice of and to vote as set forth in the Proxy Statement
at the Annual Meeting and any adjournment thereof.
By order of the Board of Directors,
Theodore A. Levine
Secretary
1285 Avenue of the Americas
New York, New York 10019
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE MARK, SIGN,
DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. IF YOU ATTEND THE MEETING, YOU
MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
<PAGE> 3
PAINE WEBBER GROUP INC.
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
PROXY STATEMENT
To the holders of Paine Webber Group Inc. Common Stock:
SOLICITATION OF PROXIES
This Proxy Statement is being furnished to the stockholders of Paine Webber
Group Inc., a Delaware corporation ("PW" or the "Company"), in connection with
the solicitation of proxies by the Board of Directors of PW (the "Board of
Directors") for use at the Annual Meeting of Stockholders to be held on
Thursday, May 4, 1995, at 9:00 a.m., in the PaineWebber Building, 1000 Harbor
Boulevard, Weehawken, New Jersey 07087 (the "Annual Meeting"), and at any
adjournment or postponement thereof. The Annual Report of PW, including the
financial statements for the fiscal year ended December 31, 1994, is being
furnished to stockholders together with this Proxy Statement, and mailing to
stockholders is expected to begin on or about March 27, 1995.
Each stockholder is encouraged to vote on all the matters to be acted upon
at the Annual Meeting by marking the enclosed Proxy Card as desired. If properly
executed and received in time for the meeting, the Proxy Card will be voted in
accordance with the choices specified. Where a signed Proxy Card is returned,
but a choice is not made, the shares will be voted FOR (i) the election as
directors of PW of the persons named under "Election of Directors" in this Proxy
Statement, (ii) the approval of conversion rights associated with the Series A
Preferred Stock and (iii) the ratification of the selection of Ernst & Young as
PW's independent public accountants for the 1995 fiscal year. If any other
business is brought before the meeting (which management does not expect to
occur), the shares will be voted in accordance with the judgment of the proxies
voting them.
The execution of a Proxy Card will not affect a stockholder's right to
attend the Annual Meeting and vote in person. A stockholder who has given a
proxy may revoke it at any time before it is exercised at the Annual Meeting by
filing with the Secretary of PW an instrument revoking it or a duly executed
Proxy Card bearing a later date.
All expenses involved in the solicitation of proxies by the Board of
Directors will be paid by PW and will include reimbursement of brokerage firms
and others for expenses in forwarding proxy solicitation material to the
beneficial owners of shares of PW Common Stock. The solicitation of proxies will
occur primarily by mail but may include telephone or oral communications by
regular employees of PW and PW's major operating subsidiaries, PaineWebber
Incorporated ("PWI") and Mitchell Hutchins Asset Management Inc., acting without
special compensation.
VOTE AND PRINCIPAL STOCKHOLDERS
As of the close of business on March 16, 1995 (the "Record Date"), there
were outstanding [ ] shares of PW Common Stock, par value $1.00 per
share (excluding treasury shares). The PW Common Stock is entitled to one vote
for each share held by the stockholder of record on the Record Date.
The presence, in person or by proxy, of a majority of the outstanding
shares of PW Common Stock is required for a quorum for the transaction of
business at the Annual Meeting. Abstentions and broker non-votes (as hereinafter
defined) are counted for purposes of determining the presence or absence of a
quorum. The affirmative vote of the holders of a majority of the shares of PW
Common Stock present in person or by proxy at the Annual Meeting is necessary
for the election as directors of PW of the persons named under "Election of
Directors" in this Proxy Statement, the approval of conversion rights associated
with the Series A Preferred Stock discussed herein, and the ratification of the
selection of Ernst & Young as PW's independent public accountants for the 1995
fiscal year. Abstentions from voting on the election of directors, the approval
of conversion rights for the Series A Preferred Stock and the ratification of
the selection of the independent public accountants will have the same effect as
a vote against such matter. Broker non-votes on the foregoing matters will have
no impact on such matters since they are not considered "shares present" for
voting purposes.
As of the Record Date, PWI held of record for approximately of its
customers, including officers and directors of the Company, shares of
PW Common Stock (constituting approximately % of the then outstanding shares of
PW Common Stock).
<PAGE> 4
The following table sets forth certain information regarding each person or
group known to the Company to own beneficially more than 5% of any class of PW's
voting stock as of December 31, 1994.*
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT OF
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP CLASS
- --------------------- --------------------------------------- -----------------
<S> <C> <C> <C>
Common Stock FMR Corp. 6,837,925(1) 6.8%
82 Devonshire Street
Boston, Massachusetts 02107
General Electric Company 21,500,000(2) 21.6
3135 Easton Turnpike
Fairfield, Connecticut 06431
Southeastern Asset Management, Inc. 10,598,200(3) 10.6
6075 Poplar Avenue
Memphis, Tennessee 38119
The Yasuda Mutual Life Insurance 7,500,000(4)(5) 7.5%
Company,
9-1, Nishishinjuku
1-chome, Shinjuku-ku,
Tokyo 160 Japan
</TABLE>
- ------------------
(1) According to an amended Schedule 13G filed as of December 31, 1994 with the
Securities and Exchange Commission, the amount and nature of beneficial
ownership was supplied by FMR Corp. and Edward C. Johnson, 3d (who owns
24.9% of the outstanding voting common stock of FMR Corp.). The Schedule 13G
indicates that 6,524,475 shares of PW Common Stock are held by investment
companies for which a wholly owned subsidiary of FMR Corp., Fidelity
Management and Research Company ("Fidelity"), serves as the investment
adviser. Mr. Johnson and FMR Corp., through their control of Fidelity and
the investment companies, each has sole power to dispose of these 6,524,475
shares, but neither has the power to vote or direct the vote of these
shares. In addition, Fidelity Management Trust Company ("FMT"), a wholly
owned subsidiary of FMR Corp., is the beneficial owner of 313,450 shares of
PW Common Stock as a result of serving as an investment manager for certain
accounts. FMR Corp. and Mr. Johnson, through their control of FMT, have sole
dispositive power over 313,450 shares and sole power to vote or direct the
voting of 135,150 shares.
(2) As of October 17, 1994, and December 16, 1994, respectively PW, General
Electric Company ("GE") and Kidder, Peabody Group Inc. ("Kidder") entered
into an Asset Purchase Agreement (as supplemented) and a Stockholders
Agreement pursuant to which PW issued to a wholly owned subsidiary of Kidder
21,500,000 shares of PW Common Stock, 1,000,000 shares of 6% Cumulative
Convertible Redeemable Preferred Stock, Series A (the "Series A Preferred
Stock") and 2,500,000 shares of 9% Cumulative Redeemable Preferred Stock,
Series C. The Series A Preferred Stock is convertible into PW Common Stock
at a conversion price of $18.13 (see discussion of conversion rights page
18), or approximately 5,515,719 shares of PW Common Stock. Pursuant to the
Stockholders Agreement, GE has agreed to vote its shares with respect to
certain matters in accordance with the recommendations of PW's Board of
Directors or, in the event such agreement is held invalid or in violation of
New York Stock Exchange policy, in the same proportion as PW's other holders
of voting securities. In connection with this year's Annual Meeting, this
voting requirement will apply to the election of directors, the approval of
conversion rights of the Series A Preferred Stock and the ratification of
the selection of Ernst & Young as PW's independent public accountants for
the 1995 fiscal year.
(3) According to an amended Schedule 13G dated as of January 27, 1995 filed with
the Securities and Exchange Commission by Southeastern Asset Management,
Inc. ("Southeastern"), 10,598,200 shares of PW Common Stock are held by
mutual funds for which Southeastern serves as investment advisor or by other
investment advisory clients of Southeastern. The Schedule 13G indicates that
Southeastern has sole dispositive power over 8,193,000 shares, shared
dispositive power over 2,363,300 shares, sole power to direct the voting
over 7,918,900 shares and shared power over 2,363,300 shares.
2
<PAGE> 5
(4) Pursuant to the Amended Investment Agreement dated as of November 3, 1992,
between The Yasuda Mutual Life Insurance Company ("Yasuda") and PW (the
"Investment Agreement"), Yasuda has agreed to vote its shares with respect
to certain matters either in accordance with the recommendations of PW's
Board of Directors or in the same proportion as PW's unaffiliated holders of
voting securities. In connection with this year's Annual Meeting, this
voting agreement will apply to the election of directors, the approval of
conversion rights for the Series A Preferred Stock and the ratification of
the selection of Ernst & Young as PW's independent public accountants.
(5) The Company provides Yasuda with brokerage, investment banking and other
services. These transactions are in the ordinary course of business and on
substantially the same terms as those prevailing at the time for comparable
transactions with other persons.
- ------------------
* The table above does not include 6,927,709 shares of PW Common Stock (6.9%
of class outstanding) held, as of December 31, 1994, by a trustee under the
Company's Savings Investment Plan for the benefit of the Company's
employees.
I. ELECTION OF DIRECTORS
The Board of Directors is divided into three classes with staggered terms
so that the term of one class expires at each annual meeting of stockholders.
The class whose term will expire at the Annual Meeting consists of five
directors. Management proposes the election of the nominees named hereafter to
hold office for a term of 3 years, ending at the 1998 Annual Meeting. Each of
the nominees is currently a director of PW. The ten remaining directors will
continue to serve in accordance with their previous election. In the event any
nominee is unable or declines to serve, which the Board does not anticipate, it
is intended that the proxies will be voted for the balance of those named and
for such substitute nominee(s) as the Nominating Committee of the Board may
designate, unless the Board has taken prior action to reduce its membership.
INFORMATION CONCERNING THE NOMINEES AND DIRECTORS
THE FOLLOWING INFORMATION IS PROVIDED CONCERNING DIRECTORS
OF PW, INCLUDING THE NOMINEES FOR ELECTION AS DIRECTORS.
------------------
NOMINEES FOR TERM EXPIRING IN 1998
JOHN A. BULT, 58, has been the Chairman of the Board of PaineWebber
International Inc. since May 1990. He was President of PaineWebber International
Inc. (previously PaineWebber Mitchell Hutchins International Inc.) from 1980 to
May 1990. Mr. Bult is also a director of The Germany Fund, Inc., The New Germany
Fund, Inc., The Future Germany Fund, Inc., The Brazilian Equity Fund, Inc., The
Greater China Fund, Inc. and The France Growth Fund, Inc. Mr. Bult became a
director of PW in 1986.
PAUL B. GUENTHER, 54, is the President of PW. He became President of PW in
December 1994 and was President of PWI from December 1988 to December 1994. Mr.
Guenther is also president and a director or trustee of PaineWebber Atlas Fund,
PaineWebber America Fund, PaineWebber Olympus Fund, PaineWebber Managed
Investments Trust, PaineWebber Master Series, Inc., PaineWebber Managed
Municipal Trust, PaineWebber Investment Series, PaineWebber Mutual Fund Trust,
PaineWebber Municipal Series, PaineWebber RMA Money Fund, Inc., PaineWebber RMA
Tax-Free Fund, Inc., PaineWebber Cashfund, Inc., PaineWebber Regional Financial
Growth Fund Inc., PaineWebber Managed Assets Trust, Global Income Plus Fund,
Inc., PaineWebber Premier Insured Municipal Income Fund Inc., PaineWebber
Premier Tax-Free Income Fund Inc. and Strategic Global Income Fund, Inc. Mr.
Guenther is also president of PaineWebber Series Trust, Triple A and Government
Series -- 1995, Inc., Triple A and Government Series -- 1997, Inc., 2002 Target
Term Trust Inc., All-American Term Trust Inc., Global High Income Dollar Fund
Inc., Global Small Cap Fund Inc., PaineWebber Premier High Income Trust and
PaineWebber Securities Trust. Mr. Guenther became a director of PW in 1986.
3
<PAGE> 6
JOHN E. KILGORE, JR., 74, is a private investor and was Chairman of the
Board of Directors and Chief Executive Officer of Cambridge Royalty Company (oil
and gas) until September 1986. Mr. Kilgore became a director of PW in 1975.
ROBERT M. LOEFFLER, 71, is a retired attorney and was Of Counsel to the law
firm of Wyman, Bautzer, Kuchel & Silbert from August 1, 1987 to March 15, 1991.
He was Chairman of the Board, President and Chief Executive Officer of Northview
Corporation from January, 1987 to December, 1987 and a partner in the law firm
of Jones, Day, Reavis & Pogue until December, 1986. Mr. Loeffler has been a
director of PW since 1978.
HENRY ROSOVSKY, 67, is the Lewis P. and Linda L. Geyser University
Professor at Harvard University. From 1973 to June 1984 he served as Dean of the
Faculty of Arts and Sciences at Harvard University. Mr. Rosovsky is also a
director of Corning, Inc. and The Japan Fund, Inc. Mr. Rosovsky became a
director of PW in 1984.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING IN 1996
DONALD B. MARRON, 60, is the Chairman of the Board of Directors and Chief
Executive Officer of PW. He has been Chairman of the Board of PW since July 1981
and Chief Executive Officer since June 1980. Mr. Marron was President of PW from
July 1977 to March 1, 1988. Mr. Marron is also Chairman of the Board and Chief
Executive Officer of PWI. Mr. Marron became a director of PW in 1977.
T. STANTON ARMOUR, 71, has been a private investor since October 1983 and
was a financial consultant to PW from September 1980 to September 1983. Mr.
Armour became a director of PW in 1977.
RETO BRAUN, 51, is the President, Chief Executive Officer and a director of
Moore Corporation Limited, a business information company. Mr. Braun has been
President and Chief Executive Officer of Moore Corporation Limited since
September 1993. Prior thereto he was President and Chief Operating Officer of
Unisys Corporation from 1991 to September 1993 and Executive Vice President
thereof from 1990 to 1991. Mr. Braun became a director of PW in June, 1994.
JAMES W. KINNEAR, 67, was President and Chief Executive Officer of Texaco
Inc. from January 1987 to April 1993. Mr. Kinnear is also a director of Corning
Inc., ASARCO Incorporated and an advisory director of Unilever PLC and Unilever
N.V. Mr. Kinnear became a director of PW in June, 1994.
JOSEPH J. GRANO, JR., 47, is the President of PWI. He has been President of
PWI since December 1994. Prior thereto he was President of Retail Sales and
Marketing for PWI from February 29, 1988 to December 1994. Mr. Grano is also a
director of PaineWebber Cashfund, Inc. Mr. Grano became a director of PW in
1993.
TERM EXPIRING IN 1997
E. GARRETT BEWKES, JR., 68, has been a consultant to PW since February 15,
1989. Prior thereto he was the Chairman of the Board, President and Chief
Executive Officer of American Bakeries Company from 1982 to December 23, 1988.
Mr. Bewkes is also Chairman of the Board and a director or trustee of
PaineWebber Cashfund, Inc., PaineWebber America Fund, PaineWebber Atlas Fund,
PaineWebber Olympus Fund, PaineWebber Managed Investments Trust, PaineWebber
Managed Municipal Trust, PaineWebber Investment Series, PaineWebber Municipal
Series, PaineWebber Master Series, Inc., PaineWebber Series Trust, PaineWebber
Regional Financial Growth Fund Inc., Global Income Plus Fund, Inc., PaineWebber
Mutual Fund Trust, PaineWebber RMA Money Fund, Inc., PaineWebber RMA Tax-Free
Fund, Inc., PaineWebber Managed Assets Trust, All-American Term Trust Inc.,
PaineWebber Premier Insured Municipal Income Fund Inc., PaineWebber Premier High
Income Trust Inc., PaineWebber Securities Trust, Global Small Cap Fund Inc.,
Global High Income Dollar Fund Inc., 2002 Target Term Trust Inc., Triple A and
Government Series-1995, Inc., Triple A and Government Series-1997, Inc.,
PaineWebber Premier Tax-Free Income Fund Inc. and Strategic Global Income Fund,
Inc. Mr. Bewkes is currently a director of Interstate Bakeries Inc. and NaPro
BioTherapeutics, Inc. Mr. Bewkes became a director of PW in 1987.
4
<PAGE> 7
FRANK P. DOYLE, 64, is an Executive Vice President of General Electric
Company and a member of its corporate executive office. He has been an Executive
Vice President since July 30, 1992 and was a Senior Vice President from 1981 to
July 1992. Mr. Doyle became a director of PW in December 1994.
YOZO FUJISAWA, 65, is a Deputy President and the Chief Investment Officer
of Yasuda, whose principal business is underwriting and marketing life
insurance. Mr. Fujisawa has been a Deputy President of Yasuda since April 1991
and Chief Investment Officer since April 1989. Mr. Fujisawa was a Senior
Managing Director of Yasuda from April 1988 to March 1991. Mr. Fujisawa became a
director of PW in 1989.
EDWARD RANDALL, III, 68, is a private investor. He was associated with
Duncan, Cook & Co. (financial services) from 1985 to July 14, 1990. He was the
Chairman of the Board of Rotan Mosle Financial Corp. from 1977 to August 1985
and was Chief Executive Officer from 1977 to January 1984. Mr. Randall is also a
director of KN Energy Inc. and Enron Oil & Gas Company. Mr. Randall became a
director of PW in 1983.
KYOSAKU SORIMACHI, 62, is a Senior Managing Director of Yasuda. He has been
a Senior Managing Director of Yasuda since April 1993. He was a Managing
Director of Yasuda from April 1987 to March 1993, and General Manager,
International Investment Department, from June 1983 to March 1994. Mr. Sorimachi
became a director of PW in 1987.
In addition to the foregoing, Yuji Oshima, the President of Yasuda, serves
as a non-voting senior advisor to the Board of Directors of PW.
COMMITTEES OF THE BOARD OF DIRECTORS
The Executive Committee meets to act on matters when the Board is not in
session. Members of this Committee are Messrs. Marron (chairman), Armour,
Bewkes, Kilgore and Loeffler, and it met three times during fiscal 1994.
The Audit Committee reviews internal and external audit procedures of the
Company. Members of this Committee are Messrs. Loeffler (chairman), Armour,
Braun, Kilgore, Kinnear, Sorimachi and Rosovsky, and it met four times during
fiscal 1994.
The Nominating Committee recommends (i) nominees for the Board of Directors
as well as committees of the Board, and (ii) senior officers of the Company.
Members of this Committee are Messrs. Kilgore (chairman), Armour, Bewkes and
Rosovsky, and it met four times in fiscal 1994. The Nominating Committee also
considers nominees for the Board of Directors recommended by stockholders. Those
wishing to submit recommendations should write to the Secretary of PW at 1285
Avenue of the Americas, New York, New York 10019. PW's By-Laws require that
written notice of the intent to make a nomination at a meeting of stockholders
must be received by the Secretary of PW not later than (i) 90 days in advance of
an annual meeting of stockholders, or (ii) the close of business on the seventh
day following the date on which notice of a special meeting of stockholders for
the election of directors is first given to stockholders. The notice must
contain: (i) the name and address of the stockholder who intends to make the
nomination and of the person or persons to be nominated; (ii) a representation
that the stockholder is a holder of record of PW's stock entitled to vote at the
meeting and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (iii) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder; (iv) such other
information regarding each nominee proposed by such stockholder as would have
been required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had each proposed nominee been
nominated by the Board of Directors; and (v) the consent of each proposed
nominee to serve as a director of PW if so elected.
The Compensation Committee is responsible for establishing and
administering the compen-sation program of, among others, the key policy making
executive officers of the Company, some of whom are also directors of PW, and
approves and periodically evaluates generally applicable employee
5
<PAGE> 8
benefit plans of PW. Members of this committee are Messrs. Bewkes (chairman),
Kilgore and Loeffler, and it met six times in fiscal 1994.
The Public Policy Committee, formed in 1994, is responsible for reviewing
and advising on matters regarding the PaineWebber art collection, approving,
subject to Board approval, charitable contributions by PaineWebber and political
contributions on the municipal, state and other governmental levels. Members of
this committee are Messrs. Rosovsky (chairman), Bewkes and Marron. There were no
meetings held in fiscal 1994.
The Board of Directors of PW met seven times during fiscal 1994. During his
tenure on the Board in fiscal 1994, each incumbent director attended more than
75% of the aggregate of the total number of meetings of the Board of Directors
and of meetings held by all committees of the Board of Directors on which he
served except Messrs. Armour, Fujisawa and Sorimachi.
CERTAIN ARRANGEMENTS WITH DIRECTORS
Pursuant to the Investment Agreement between Yasuda and PW, Messrs.
Fujisawa and Sorimachi were designated by Yasuda and elected to the PW Board of
Directors. PW has agreed that so long as Yasuda owns directly or indirectly a
specified minimum investment in PW, it will use its best efforts to cause at
least one-sixth of its Board of Directors to consist of persons designated by
Yasuda. Pursuant to the Stockholders Agreement between GE and PW, Mr. Doyle was
designated by GE and elected to the PW Board of Directors. PW has agreed that as
long as GE owns a specified minimum investment in PW, GE will have the right to
designate one person as a member of the PW Board. In the event that designee
ceases to serve as a director for any reason, GE has the right to designate a
successor, subject to the approval of the Nominating Committee.
COMPENSATION OF DIRECTORS
During 1994, directors who were not employees of the Company were paid
$40,000 annually. In addition, directors who were not employees of the Company
were paid $1,200 for each meeting of the Board of Directors and committees
thereof which they attended, plus reasonable expenses relating to attendance at
such meetings. The chairman of each committee received compensation at a rate of
$15,000 per year.
The Company has a deferred compensation plan for non-employee directors.
Under the plan, non-employee directors may elect prior to January 1 of any year
to defer any or all of their compensation. Directors' deferred compensation
accounts will be credited as of December 31 each year with interest based on the
average quarterly balance during the year at a rate equal to the average of the
applicable U.S. Treasury Bill rate during each such quarter. Deferred amounts
are payable to a director in a lump sum on the February 1st following the plan
year in which he ceases to be a director.
The Company also has a retirement plan for non-employee directors.
Directors who have completed five or more years of credited service or whose
termination follows a change of control are eligible for retirement benefits
under this plan. Following their termination, eligible directors will receive an
annual retirement benefit equal to the annual retainer in effect on the date the
directors' service terminates for a period of time based on the length of their
credited service. In the event a director dies while serving as a director, a
death benefit will be paid to the director's beneficiaries in the same amount as
would have been payable in the event of retirement. In addition, non-employee
directors may participate in the Company's medical plans that are available to
all employees.
The Company also has the 1994 Non-Employee Directors' Stock Plan pursuant
to which directors of the Company who are not executive officers will be
eligible to receive periodic grants of stock options and PW Common Stock, and to
defer some or all of their directors' fees in an unfunded deferred compensation
account denominated and payable in shares of PW Common Stock.
E. Garrett Bewkes, Jr. is an independent consultant to PWI and was paid
$200,000 for his services during 1994. Mr. Bewkes provides advice to the Company
in connection with investment banking, mergers and acquisitions, corporate
strategic planning, PWI's equity investments in operating businesses, and
origination of investment opportunities.
6
<PAGE> 9
SECURITY OWNERSHIP
The following table sets forth the number of shares of PW Common Stock held
beneficially by each nominee and director, each executive officer named in the
Summary Compensation Table below and all nominees, directors and executive
officers of PW as a group. Shares owned are stated as of February 15, 1995, as
of which date there were outstanding 99,252,729 shares of PW Common Stock. All
shares are held directly by the persons shown with sole voting and dispositive
power, unless indicated otherwise.
<TABLE>
<CAPTION>
SHARES OF PW COMMON STOCK
NAME OWNED BENEFICIALLY (1)(2)
---- -------------------------
<S> <C>
T. Stanton Armour (2)..................................... 125,325
E. Garrett Bewkes, Jr..................................... 13,423
Reto Braun................................................ -0-
John A. Bult (4).......................................... 68,672
Regina A. Dolan (4)(5).................................... 49,422
Frank P. Doyle............................................ -0-
Yozo Fujisawa............................................. 375
Joseph J. Grano, Jr. (3).................................. 345,306
Paul B. Guenther (2)(3)(4)(5)............................. 917,798
John E. Kilgore, Jr....................................... 375
James W. Kinnear.......................................... 500
Theodore A. Levine........................................ 24,767
Robert M. Loeffler........................................ 7,872
Donald B. Marron (2)(3)(4)(5)............................. 1,785,506
Edward Randall, III (2)................................... 310,290
Henry Rosovsky............................................ 600
Kyosoku Sorimachi......................................... 375
All present nominees, directors continuing in office and
executive officers as a group, including those named
above (19 persons)...................................... 3,871,706
</TABLE>
- ---------------
(1) No director, nominee or executive officer directly owns 1% or more of PW
Common Stock, except Mr. Marron who owns 1.8%. All directors, nominees and
executive officers as a group (19 persons) beneficially own 3.9%.
(2) Shares shown for the nominees, directors and named executive officers
include an aggregate of 117,594 shares of PW Common Stock as to which
direct beneficial ownership is disclaimed. Such shares are beneficially
owned in the amounts indicated by the spouses or children of Mr. Marron
(1,494), Mr. Armour (1,575), Mr. Guenther (2,025), and Mr. Randall
(112,500) .
(3) Shares shown for the nominees, directors and named executive officers
include an aggregate of 1,011,224 shares of PW Common Stock covered by
options presently exercisable or becoming exercisable within sixty days,
held by Mr. Marron (674,775), Mr. Guenther (304,650), and Mr. Grano
(31,799).
(4) Shares shown for the nominees, directors and named executive officers and
the aggregate for all present directors, nominees and executive officers as
a group include shares as to which they are vested held by a trust under
the Company's Savings Investment Plan, including the following nominees,
directors and named executive officers: Mr. Marron (24,715), Mr. Guenther
(11,165), Mr. Bult (6,396), Ms. Dolan (1,009) and Mr. Levine (17).
(5) Shares shown for the nominees, directors and named executive officers and
the aggregate for all present directors, nominees and named executive
officers as a group include an aggregate of 711,334 shares of PW Common
Stock into which PW's 8% Convertible Debentures Due 1998 and 2000 and 6.5%
Convertible Debentures Due 2002 are presently convertible, including the
following shares for Mr. Marron (306,612), Mr. Guenther (382,124), and Ms.
Dolan (22,598).
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires PW's directors, certain of its officers and persons
who own more than ten percent of a registered class of PW's equity securities to
file reports of ownership and of changes in ownership with
7
<PAGE> 10
the Securities and Exchange Commission. Based solely upon its review of the
copies of such forms received by it, or written representations from certain
reporting persons that no Forms 5 were required for those persons, PW believes
that for the fiscal year ended December 31, 1994, all filing requirements
applicable to its officers, directors, and greater than ten-percent beneficial
owners were complied with.
COMPENSATION COMMITTEE REPORT
The Compensation Committee is responsible for establishing and
administering the compensation policy and program applicable to the executive
officers of PW. The Compensation Committee reviews the compensation of executive
officers on an ongoing basis and develops plans which are designed to support
PW's business strategies, reflect marketplace practices in a dynamic and
intensely competitive industry, and provide cost and tax-effective forms of
remuneration. The foundation of PW's executive compensation program is the
Compensation Committee's pay for performance policy which, among other things,
was designed:
- to attract and retain qualified and talented executives available in each
area of PW's business to lead the organization in the creation of
stockholder value,
- to motivate and reward annual and long term results achieved by these key
employees for PW stockholders based on corporate, business unit and
individual performance,
- to align management's interests with stockholders by increasing key
employee ownership of PW stock, and
- to pay competitively as measured against other companies in the industry.
In implementing its policy, the Compensation Committee evaluates
performance and strategic progress relative to the prior year and over a period
of years, rather than considering only a single year when external economic and
business conditions may produce results unrelated to management performance. As
part of this evaluation, the Compensation Committee also considers competitive
performance and pay levels based on a comparative group of financial services
companies selected and surveyed by a third-party consulting firm. This
comparative group as a whole represents the marketplace in which PW competes for
executive talent and is comprised of 13 companies. Six of the companies in the
comparative group are publicly-owned and make up the Peer Group Index used for
the Performance Graph set forth below. Seven other firms in the comparative
group were not publicly-owned or traded in 1994. Four of the 10 firms in the S&P
Financial Miscellaneous Index are included in the comparative group. The
Compensation Committee's philosophy is to position PW's compensation program
between the median and the 75th percentile of the comparative group based upon
performance.
As part of its evaluation process, the Compensation Committee considers
various quantitative as well as qualitative factors without assigning specific
quantifiable or relative weights. These factors include the level, quality,
consistency and growth of the earnings and revenues of the Company as well as of
the business units for which executive officers are responsible, return on
common equity, expense control, balance sheet strength and liquidity, risk
profile and the strategic progress of the Company's four core businesses. In
addition, the individual contributions of each executive officer to the success
of the Company are evaluated by the Compensation Committee.
Based on the above evaluation, executive officer compensation, including
that of Mr. Marron, is determined and administered by the Compensation Committee
on the basis of total compensation, rather than based on separate free-standing
components. Therefore, the total compensation program established by the
Compensation Committee is comprehensive and integrated to include salary, annual
cash and equity incentive awards, and long term equity incentives.
Salary. Salaries are reviewed annually by the Compensation Committee for
appropriateness and adjusted periodically in its judgment based primarily on
each individual officer's performance and length of service with the Company.
The salaries received by Messrs. Marron and Guenther in 1994 have not been
increased since 1989 and 1990, respectively.
8
<PAGE> 11
Annual Incentive Awards. In order to continue the grant of highly
effective performance-based annual cash and stock incentive awards on a
tax-efficient basis, the Stockholders approved the 1994 Executive Incentive
Compensation Plan (the "EICP") to qualify compensation of proxy officers for
exclusion from the $1 million limitation on corporate tax deductions under
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). In
accordance with and in compliance with Section 162(m) of the Code, and the
provision of the EICP before March 31st of the performance year, the
Compensation Committee establishes a formula for the funding of an annual
incentive award pool for executive officers based on the Annual Profits (as
defined) of the firm and allocates a maximum share in the pool to each
participating executive using the total compensation approach discussed above.
At the end of each year, the Compensation Committee ascertains the firm's
Annual Profits (as defined) and the maximum potential award opportunity for each
participating executive officer for the performance year. Within this framework,
the Committee determines final individual award levels, exercising negative
discretion, where appropriate, based on its evaluation of the quantitative and
qualitative factors outlined above, taking into consideration the value of all
components in the executive's compensation package.
Due to the decline in 1994 profitability, annual incentives awarded by the
Compensation Committee to executive officers declined 69% below 1993 levels and
ranged from $455,000 to $1,925,000. In accordance with Committee policy,
approximately 70% of these awards were paid in cash and 30% in the form of
restricted stock (units) which generally vest upon completion of three years of
future service.
Long Term Equity Incentives. Stock options are granted to executive
officers under the 1994 Executive Stock Award Plan approved by Shareholders to
assure continued corporate tax deductibility under Section 162(m) of the Code of
the compensation paid to the five proxy officers while continuing to link a
significant portion of their financial interests to the performance of PW's
Common Stock.
While severely limiting salary increases and reducing annual incentive
payouts, the Committee made major stock option grants for 1994 performance to
those executive officers who were principally responsible for the acquisition
and ongoing successful integration of Kidder Peabody. It is the Committee's
intention that such grants appropriately reward those executives over the long
term as PW and its Stockholders realize the potential of this major strategic
impetus. The Committee does not consider the stock holdings, prior option,
restricted stock, and other equity grants or the appreciation thereon when
making future equity award determinations, nor does the Committee have a
specific policy as to the proportion of total compensation represented by stock
options and other long term equity awards.
Chief Executive Officer Compensation. Both the quantitative and
qualitative criteria referenced above are applied in assessing the performance
and determining the compensation of the Chairman and Chief Executive Officer of
the Company who participates in the Company's executive compensation program on
the same basis as all other executive officers.
The Compensation Committee, in setting Mr. Marron's compensation, has taken
into account the outstanding long term performance of PW under his leadership
and the firm's strategic progress, especially the 1994 landmark acquisition of
Kidder Peabody from General Electric. For the five-year period ending December
1994, total return on PW's Common Stock grew at the compound rate of 18% per
annum, reflecting cumulative growth of 127% and outperforming the S&P 500, the
S&P Financial Miscellaneous Index and the Peer Group Index, as displayed in the
Performance Graph set forth below. As noted earlier, Mr. Marron's 1994 base
salary of $600,000 has been unchanged since 1989. His annual incentive award of
cash and restricted stock (units) for 1994 represents a decline of 63% from
1993. As discussed above, the Compensation Committee based its decision on PW's
1994 financial performance. The increased award of stock options on 400,000
shares, reflects the Compensation Committee's policy of tying a substantial
portion of Mr. Marron's compensation to the firm's strategic progress such as
the Kidder Peabody acquisition and the future performance of PW Common Stock.
Tax Considerations. As noted above, the Committee's executive compensation
strategy is to be cost and tax effective. Therefore, the Committee's policy is
to preserve corporate tax deductions, while
9
<PAGE> 12
maintaining the flexibility to approve compensation arrangements which it deems
to be in the best interests of the Company and its stockholders, but which may
not always qualify for full tax deductibility.
COMPENSATION COMMITTEE
E. Garrett Bewkes, Jr., Chairman
John E. Kilgore, Jr.
Robert M. Loeffler
EXECUTIVE COMPENSATION
The following information sets forth the compensation earned by the chief
executive officer of the Company and each of the four most highly compensated
executive officers of the Company who were serving as executive officers at the
end of the fiscal year ended December 31, 1994, for services rendered in all
capacities to the Company during the fiscal years indicated below. Stockholders
are urged to read the tables in conjunction with the accompanying footnote and
explanatory material.
Table I -- Summary Compensation Table provides a detailed overview of
annual and long term compensation for the fiscal years ended December 31, 1994,
1993 and 1992 with respect to the named executives for the years indicated.
Table II -- Option Grants in Last Fiscal Year -- Individual Grants provides
information for the period January 1, 1994 to December 31, 1994 on grants of
options by the Company.
Table III -- Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values Table provides information for the period January 1, 1994
to December 31, 1994 on exercises of stock options pursuant to the Company's
Stock Plans and the number and value of previously granted and unexercised stock
options held on December 31, 1994.
I. SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
-------------------------------
RESTRICTED SECURITIES ALL OTHER
ANNUAL COMPENSATION STOCK UNDERLYING COMPEN-
NAME AND ------------------------------ AWARD(S) OPTIONS SATION
PRINCIPAL POSITION YEAR SALARY BONUS (1)(2)(3)(4)(5) (# SHARES)(6) (7)
- -------------------------------------------- ----- -------- ---------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Donald B. Marron 1994 $600,000 $1,925,000 $ 828,359 400,000 $ 320,068
Chairman of the Board and Chief Executive 1993 600,000 6,300,000 1,194,432 187,500 534,432
Officer, PW and PWI 1992 600,000 4,000,000 2,033,000 -0- 1,052,885
Paul B. Guenther 1994 400,000 945,000 406,638 150,000 282,410
President, PW 1993 400,000 3,780,000 716,649 112,500 307,824
1992 400,000 2,400,000 1,220,000 -0- 526,443
Joseph J. Grano, Jr. 1994 375,000 945,000 406,638 150,000 153,200(8)
President, PWI 1993 375,000 4,625,000 -0- 75,000 319,200(8)
Theodore A. Levine(9) 1994 200,000 650,000 235,744 35,000 -0-
Vice President, General Counsel, PW, and 1993 106,923 765,165 249,975 30,000 -0-
Executive Vice President, PWI
Regina A. Dolan(10) 1994 200,000 455,000 195,785 60,000 54,914
Vice President, 1993 187,212 550,000 409,518 15,000 13,248
Chief Financial 1992 41,731 100,000 -0- -0- -0-
Officer, PW, and
Senior Vice President,
Chief Financial
Officer, PWI
</TABLE>
- ------------
(1) Amounts shown for 1994 are for awards made in February 1995 for performance
in 1994.
(2) Amounts shown include both restricted stock and restricted unit awards,
which are valued on the basis of the closing price of PW Common Stock on
the New York Stock Exchange on the applicable date of grant.
(3) The number and value of restricted stock and restricted units held by
executive officers named in the table as of December 30, 1994 based on the
closing price of PW's Common Stock ($15.00 )
10
<PAGE> 13
on the New York Stock Exchange on December 30, 1994, are as follows: Mr.
Marron (162,172 shares and 151,416 units -- $4,703,820); Mr. Guenther
(91,425 shares and 90,863 units -- $2,734,320); Mr. Grano (296,448 shares
-- $4,446,720); Mr. Levine (24,750 shares -- $371,250); and Ms. Dolan
(25,788 shares -- $386,820). The number of shares of restricted stock
reported in the table above for the executive officers which will vest in
under three years from the date of grant are as follows: Mr. Marron
(49,115; 54,917 and 40,181 shares vesting in 1995, 1996 and 1997,
respectively); Mr. Guenther (29,469; 30,991 and 22,149 shares vesting in
1995, 1996 and 1997, respectively); Mr. Grano (30,000; 38,816 and 38,816
shares vesting in 1995, 1996 and 1997, respectively); Mr. Levine (9,900;
9,900 and 4,950 shares vesting in 1995, 1996 and 1997, respectively); and
Ms. Dolan (9,352; 6,096 and 6,096 shares vesting in 1995, 1996 and 1997,
respectively).
(4) Dividends are paid on restricted stock and dividend equivalents are paid on
restricted units.
(5) To permit the Company to obtain the maximum deduction for awards of
restricted stock in 1993, Messrs. Marron and Guenther elected to declare as
income and immediately pay tax on the market value of their 1993 restricted
stock grants pursuant to Section 83(b) of the Internal Revenue Code, even
though they were not vested in the stock at the time and will be subject to
market risk and the risk of forfeiture until the restricted period lapses.
(6) Amounts shown for 1994 are for grants made in February and March 1995 for
performance in 1994.
(7) Amounts shown for 1994 result from the operation of the terms of the Key
Executive Equity Program, in which approximately 119 key executives
participate. For a description of the program, see "Certain Transactions
and Arrangements -- Key Executive Equity Program" below. These amounts
include: (i) interest paid by PW on the participants' bank loans or waived
on loans by PW in accordance with the terms of the program -- Mr. Marron
($153,402); Mr. Guenther ($182,410); and Ms. Dolan ($13,248); and (ii)
forgiveness of a portion of the PW loans to the participants for exceeding
preset earnings targets for PW established at the inception of the
program -- Mr. Marron ($166,665); Mr. Guenther ($99,999); and Ms. Dolan
($41,666). The program was instituted in 1988 to give such executives an
incentive linked to the price of PW Common Stock, while requiring such
executives to make an investment in PW. The program includes a provision
that, for a period following termination of an executive's employment, he
or she may not compete with the Company or solicit its employees to leave
the Company or interfere with its business.
(8) This amount represents imputed interest on an employee loan to Mr. Grano.
(9) Mr. Levine was employed by PW in June 1993. Amounts indicated for Mr.
Levine (other than option information) were paid or awarded pursuant to the
terms of an agreement between Mr. Levine, PW and PWI entered into in May
1993. The bonus for 1993 includes a special one-time bonus of $400,000. For
a description of this agreement, see "Other Benefit Plans and Agreements"
below. The option granted to Mr. Levine for 1994 is subject to approval by
PW's Board of Directors.
(10) Ms. Dolan was employed by PW in October 1992.
The following table sets forth certain information concerning stock options
granted by the Company to the Chief Executive Officer and each of the four most
highly compensated executive officers of the Company (other than the Chief
Executive Officer) in February and March 1995 for performance in 1994. The data
in the column shown below relating to the hypothetical grant date present value
of stock options granted in 1994 are presented pursuant to Securities and
Exchange Commission rules and are calculated under the modified Black-Scholes
model for pricing options. The Company is not aware of any model or formula
which will determine with reasonable accuracy a present value for stock options
based on future unknown factors. The actual amount, if any, realized upon the
exercise of stock options will depend upon the market price of PW Common Stock
relative to the exercise price per share of PW Common Stock of the stock option
at the time the stock option is exercised. There is no assurance that the
hypothetical grant date present values of the stock options reflected in this
table actually will be realized.
11
<PAGE> 14
II. OPTION GRANTS IN LAST FISCAL YEAR --
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS GRANTED EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME (#)(1) FISCAL YEAR ($/SHARE) DATE VALUE($)(2)
- ----------------------- --------------------- ------------ ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
D.B. Marron............ 400,000 7.34% $ 15.31 2/1/05 $ 1,555,750
P.B. Guenther.......... 150,000 2.75 15.31 2/1/05 583,406
J.J. Grano, Jr......... 150,000 2.75 15.31 2/1/05 583,406
T.A. Levine............ 35,000 .64 17.50 3/7/05 164,763
R.A. Dolan............. 60,000 1.10 15.31 2/1/05 233,363
</TABLE>
- ---------------
(1) Ten year non-qualified stock options granted in 1995 for perfomance in 1994
will become exercisable in equal annual installments over a four year
period from the date of grant.
(2) The hypothetical grant date present values are calculated under the modified
Black-Scholes Model, which is a mathematical formula used to value options
traded on stock exchanges. The assumptions used in hypothesizing the above
options' grant date present value, include the stock's expected volatility
(29.78%), risk free rate of return (7.68%), projected dividend yield
(3.12%), projected time to exercise (7 years) and adjustment for
non-transferability or risk of forfeiture during vesting period (10% per
annum).
The following table sets forth information for the named executive officers
of the Company with respect to exercises of stock options during the period
January 1, 1994 to December 31, 1994 and unexercised options held as of December
31, 1994:
III. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FY-END OPTIONS AT FY-END
ACQUIRED ON VALUE -------------------------------- -----------------------------
NAME EXERCISE REALIZED EXERCISABLE(1) UNEXERCISABLE(2) EXERCISABLE(1) UNEXERCISABLE
- ------------------ ------------ ---------- -------------- ---------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
D.B. Marron....... -0- $ -0- 953,212 587,500 $6,371,845 $ 0
P.B. Guenther..... -0- -0- 482,850 262,500 3,075,954 0
J.J. Grano, Jr.... -0- -0- 98,624 225,000 495,540 0
T.A. Levine....... -0- -0- -0- 65,000 -0- 0
R.A. Dolan........ -0- -0- -0- 75,000 -0- 0
</TABLE>
- ---------------
(1) These options include the interests of the named executive officers in an
option granted to PW Partners 1991 Dedicated L.P., a Delaware limited
partnership (the "1991 Partnership"). For a discussion of the 1991
Partnership, see "Certain Transactions and Arrangements -- Dedicated
Partnership" below. The shares and related values under the 1991 Partnership
are attributable as follows: Mr. Marron (278,437 shares -- $1,083,119); Mr.
Guenther (178,200 shares -- $693,198) Mr. Grano (66,825 shares -- $259,949).
(2) Includes securities underlying options granted in 1995 for performance in
1994.
PW's Pension Plan. The PW Pension Plan is a "defined benefit" plan under
the Employee Retirement Income Security Act of 1974, as amended, under which
benefits are determined on the basis of an employee's "career average" of
earnings. Generally, all employees of the Company are eligible to participate in
PW's Pension Plan. Directors of PW who are employees of the Company may
participate, and their benefits are calculated in the same manner as the
benefits of any other eligible employee. As of December 31, 1994, approximately
15,878 employees were participating in the PW Pension Plan. Upon retirement an
employee is entitled to receive retirement income equal to the sum of his
benefits for service prior to January 1, 1987 and benefits for each year
thereafter based on the Social Security taxable wage base. Under applicable
federal tax law, the maximum amount of earnings of an employee taken into
account under the PW Pension Plan's current formula for computing benefits for
plan years beginning on or after January 1, 1994 is $150,000 and the maximum
annual pension benefit which may be accrued for calendar year 1994 is $1,875.
The years of credited service for purposes of determining benefits under
the PW Pension Plan as of December 31, 1994 for certain executive officers were:
Messrs. Marron (17.6 years), Guenther
12
<PAGE> 15
(27.6 years), Grano (5.8 years), Levine (.5 years), and Ms. Dolan (1.2 years).
The estimated annual benefits payable on retirement at age 65, taking into
account actual pension benefits accrued to December 31, 1994 and projecting
future benefits to retirement at the current maximum additional annual benefit
of ($1,875), for certain executive officers are: Messrs. Marron ($120,000),
Guenther ($78,056), Grano ($45,725), Levine ($29,063) and Ms. Dolan ($49,060).
In addition, employees of the Company who were employees of Paine, Webber,
Jackson & Curtis Inc. ("PWJC") (the predecessor of PWI) on July 1, 1975, and who
also were previously partners of Paine, Webber, Jackson & Curtis, are eligible
to receive retirement benefits under the PWJC Supplemental Pension Plan.
Benefits are payable under the PWJC Supplemental Pension Plan in the amount of
the excess, if any, of (a) the annual amount of retirement income which would
have been payable under PW's Pension Plan had the employee's period of PWJC
partnership service counted as credited service under the PW Pension Plan over
(b) the amount of retirement income actually payable to the employee under the
PW Pension Plan. The minimum payable under the PWJC Supplemental Pension Plan is
an amount which, when added to the employee's benefit under the PW Pension Plan,
equals $10,000 annually (or a lesser amount in the event of early retirement).
Supplemental Employees Retirement Plan. The Company has adopted a
non-qualified Supplemental Employees Retirement Plan for Certain Senior Officers
("SERP") in order to supplement retirement income. The SERP provides a benefit
equal to a percentage of base compensation for participants who retire at age 65
with 15 or more years of service. Such percentage of base compensation is 100%
in the case of the initial two participants and 75% in the case of all other
participants. A participant must have at least 5 years of service to receive any
benefit and between 5 and 15 years of service a participant receives
proportionate benefits. Retirement benefits are also paid upon early retirement
or termination of employment. Those benefits may, at the participant's election,
be deferred to commence at age 65, or be payable as early as age 55, in which
case they are reduced by 3% per year between age 60 and 65 and 6% per year
between age 55 and 60 for each year that the benefits commence before age 65.
Full benefits without reduction are also payable in case of a Change in Control
(as defined in the Plan) and disability retirement. In addition, the SERP
contains certain non-compete provisions pursuant to which benefits would be
forfeited.
The table below summarizes expected SERP benefits before subtracting Social
Security and PW Pension Plan benefits. The actual benefits from the SERP are the
net amounts after subtracting Social Security and PW Pension Plan benefits.
<TABLE>
<CAPTION>
INITIAL PARTICIPANTS SUBSEQUENT PARTICIPANTS
(100%) (75%)
YEARS OF SERVICE YEARS OF SERVICE
------------------------ ------------------------
REMUNERATION 10 15 10 15
------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C>
$125,000 $ 83,333 $125,000 $ 62,500 $ 93,750
150,000 100,000 150,000 75,000 112,500
175,000 116,667 175,000 87,500 131,250
200,000 133,333 200,000 100,000 150,000
275,000 183,333 275,000 137,500 206,250
300,000 200,000 300,000 150,000 225,000
400,000 266,667 400,000 200,000 300,000
500,000 333,333 500,000 250,000 375,000
600,000 400,000 600,000 300,000 450,000
720,000 480,000 720,000 360,000 540,000
</TABLE>
The initial participants include Messrs. Marron and Guenther and the
amounts of their base compensation reflected for the purposes of the SERP during
1994 are $600,000 and $400,000, respectively. Messrs. Grano and Levine are
subsequent participants and the amount of their base compensation reflected for
the purposes of the SERP during 1994 is $375,000 and $200,000 respectively.
13
<PAGE> 16
PERFORMANCE GRAPH
The following chart compares the Company's cumulative total return on
stockholder investment over a five-year period with that of the S&P 500, the S&P
Financial Miscellaneous Index (which includes Merrill Lynch & Co. Inc., American
Express Company, American General Corporation, Federal Home Loan Mortgage
Corporation, Federal National Mortgage Association, MBNA Corp., The Travelers
Inc., Transamerica Corporation, Dean Witter, Discover & Co. and Salomon Inc),
and a Peer Group Index (comprised of American Express Company, The Bear Stearns
Companies Inc., Merrill Lynch & Co., Inc., Morgan Stanley Group, Inc., Salomon
Inc, and Dean Witter, Discover & Co.). The Peer Group Index has been included in
the Performance Graph below since it covers the 6 publicly traded companies
which the Compensation Committee reviews and evaluates in making compensation
determinations. The chart assumes $100 invested on December 31, 1989 and
reinvestment of all dividends.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P FINANCIAL
(FISCAL YEAR COVERED) PAINEWEBBER S&P 500 PEER GROUP MISCELLANEOUS
<S> <C> <C> <C> <C>
1989 100.00 100.00 100.00 100.00
1990 83.94 96.89 73.25 80.59
1991 219.85 126.42 110.32 127.85
1992 234.29 136.05 125.30 150.35
1993 264.73 149.76 160.88 179.62
1994 227.08 151.74 144.40 173.18
</TABLE>
14
<PAGE> 17
OTHER BENEFIT PLANS AND AGREEMENTS
During 1987, PW entered into employment agreements with Messrs. Marron and
Guenther having a three-year term (the "Term of the Agreement") which will
commence on that date (the "Operative Date"), if any, following a Change in
Control (as defined) of PW, so designated by a majority of the Disinterested
Directors (as defined). During the Term of the Agreement, each executive would
continue to be employed in his present position receiving a salary not less than
that being paid to him on the Operative Date and an annual bonus not less than
the average of the bonuses received by him during the three years preceding the
Operative Date and being entitled to participate in all compensation and benefit
plans of the Company. In the event of the termination of such executive's
services during the Term of the Agreement either without Cause (as defined) or
because of a Constructive Termination (as defined), he would be entitled to a
lump sum payment equal to the present value of (i) his base salary until the end
of the Term of the Agreement, (ii) a bonus for the year of such termination and
each subsequent year until the end of the Term of the Agreement, at an
annualized rate equal to the average of the bonuses awarded to him with respect
to the three years preceding the year of termination and (iii) any deferred or
unpaid bonus. The agreement of Mr. Marron also provides that, if his employment
is terminated without Cause or because of a Constructive Termination, PW will
for ten years continue to provide him with comparable office space, an executive
assistant and medical and disability coverage.
In 1993, PW and PWI entered into an agreement with Mr. Levine having a
three-year term (the "Term of the Agreement"). During the Term of the Agreement,
Mr. Levine will be employed by PW as General Counsel and by PWI as Executive
Vice President, and will be paid an annual salary of no less than $200,000, a
minimum annual bonus of $650,000 and will receive a grant of 14,850 shares of
restricted stock each year which will vest one-third annually following the date
of each grant. The restricted stock will vest immediately upon a Change of
Control (as defined). In the event of Mr. Levine's termination of employment
without Cause (as defined) or there is a Constructive Termination (as defined),
he would be entitled to his base salary through the date of termination and an
amount equal to the greater of (a) $3,300,000 less the total amount of base
salary and annual bonus awards previously received (to the extend vested) or (b)
$850,000.
In addition, the PW Partners 1991 Dedicated L.P., a Delaware limited
partnership (the "1991 Partnership"), and the PW Partners 1992 Dedicated L.P., a
Delaware limited partnership (the "1992 Partnership") generally provide for the
acceleration of the vesting and exercisability of the options granted to the
partnerships in the event of a Change in Control (as defined) of the Company,
unless the Compensation Committee elects to waive the occurrence of the Change
in Control. Similarly, grants of options, restricted stock and cash awards under
the stock award plans of PW provide that, unless the Compensation Committee
waives the occurrence of a Change in Control (as defined in the applicable award
agreements) as a vesting event, awards granted under the plans will be
immediately vested upon the occurrence of the Change in Control of the Company.
As noted above, the SERP provides that full pension benefits without reduction
are payable in the event of a Change in Control of the Company.
CERTAIN TRANSACTIONS AND ARRANGEMENTS
Key Executive Equity Program. The Key Executive Equity Program ("KEEP")
authorizes the sale of 8% Convertible Debentures Due 1998 (the "Debentures Due
1998"), 8% Convertible Debentures Due 2000 (the "Debentures Due 2000") and 6.5%
Convertible Debentures Due 2002 (the "Debentures Due 2002") (the Debentures Due
1998, the Debentures Due 2000 and the Debentures Due 2002 being collectively
referred to as the "Debentures") to approximately 119 key employees of the
Company. KEEP contains certain non-compete provisions and other restrictions
affecting a participant's right to convert the Debentures or, if converted, to
retain the benefits therefrom. The outstanding Debentures have an aggregate
principal amount of $58,450,000, with the Debentures Due 1998 having $8,750,000
aggregate principal amount outstanding, the Debentures Due 2000 having
$3,750,000 aggregate principal amount outstanding and the Debentures Due 2002
having $45,950,000 aggregate principal amount outstanding. The Debentures are
convertible, at the option of the holders thereof, into shares of convertible
preferred stock having an aggregate liquidation preference equal to the
aggregate principal amount of the debentures being converted. This conversion
right is now fully exercisable for the Debentures Due 1998 and the Debentures
Due 2000. Two-thirds of the Debentures Due 2002 are now convertible and the
remaining one-third becomes exercisable on December 31, 1995.
15
<PAGE> 18
Shares of the convertible preferred stock, which have a liquidation value of
$25.00 per share, are convertible, at the option of the holder, into the number
of shares of PW Common Stock determined by dividing the aggregate liquidation
value of the shares being converted by the conversion value per share of PW
Common Stock, which is presently $9.10 per share for the preferred stock to be
received upon conversion of the Debentures Due 1998, $9.25 for the preferred
stock to be received upon conversion of the Debentures Due 2000 and $14.75 for
the preferred stock to be received upon conversion of the Debentures Due 2002.
The number of shares issuable upon conversion of shares of the convertible
preferred stock is subject to adjustment in certain events, including stock
dividends on, and subdivisions or combinations of, PW Common Stock. The
Debentures are ultimately convertible into an aggregate of 4,482,197 shares of
PW Common Stock (approximately % of the total number of shares of PW Common
Stock outstanding on March 16, 1995).
KEEP provides that the employee will pay in cash 5% of the principal amount
of the Debenture as a down payment and that the Company will finance on a full
recourse basis to the employee 25% of the principal amount of the Debentures Due
1998 and the Debentures Due 2000 at 8.62% and 7.85% annual interest rate
respectively, and 95% of the principal amount of the Debentures Due 2002 at 5.6%
annual interest. So long as the employee remains employed by the Company, the
Company will pay 66 2/3% of the interest payment due on the bank financing for
the remaining balance of the purchase price of the Debentures Due 1998 and the
Debentures Due 2000 and will waive 66 2/3% of the interest payment due on an
equivalent amount of the Company financing for the Debentures Due 2002. The loan
by the Company for the Debentures Due 1998 and 2000 will be forgiven as follows:
25% for any year the Company's pre-tax earnings equal or exceed $150 million but
are less than $200 million, 33 1/3% for any year pre-tax earnings equal or
exceed $200 million but are less than $250 million, and 50% for any year pre-tax
earnings are at least $250 million. As a result of PW achieving certain
specified pre-tax earnings in 1993, 1992 and 1991, the Company loans for the
Debentures Due 1998 and 2000 have been forgiven. A portion of the financing by
the Company for the Debentures Due 2002 will be forgiven as follows: 25% for any
year the Company's pre-tax earnings equal or exceed $339 million but are less
than $389 million, 33 1/3% for any year pre-tax earnings equal or exceed $389
million but are less than $439 million, and 50% for any year pre-tax earnings
are at least $439 million. As a result of PW achieving record pre-tax earnings
in 1993 of $407,576,000, 33 1/3% of a portion of the Company financing for the
Debentures Due 2002 was forgiven in 1994. (See footnote 7 to "Executive
Compensation -- I. Summary Compensation Table" above regarding loan forgiveness
as a result of PW reaching certain specified levels of pre-tax earnings.)
Substantial restrictions apply to an employee's right to convert Debentures
or, if converted, to retain the benefits therefrom. These restrictions apply
upon: the death or disability of the employee; the voluntary termination of
employment or termination of employment for cause of an employee; termination of
employment without cause or termination by an employee for good reason;
acceptance of a position by an employee with a competitor or solicitation of
employees of the Company to leave the Company or to interfere with its business.
In the event of a Change in Control (as defined) of the Company, the Debenture
will be fully convertible for a period of one year following such Change in
Control or the employee may elect to have the Debentures redeemed for a period
of six months following such Change in Control, and the Company loan will become
payable in full at the time of such conversion or redemption.
In addition to redemptions that may occur in connection with the events
described in the preceding paragraph and subject to the terms of KEEP, an
employee also has the right to cause the Company to redeem the Debentures Due
2000 during the fifth and sixth years after purchase at its principal amount. In
the event of a redemption during the six months following a Change in Control,
the employee will receive a bonus equal to the greater of the book value per
share on the date of redemption or the book value per share at the date of
purchase for each share into which the Debentures are convertible, less in
either case the principal amount of the Debentures.
Dedicated Partnerships. In 1991, PW formed the 1991 Partnership for
approximately 99 key employees for the purpose of investing in PW Common Stock.
Messrs. Marron, Guenther, and Grano are limited partners in this partnership.
The general partner, a wholly owned subsidiary of PW, made a capital
contribution to the 1991 Partnership of $20,202 and the limited partners
contributed an aggregate of $2,020,202. The 1991 Partnership purchased 180,000
shares of PW Common Stock from PW at a purchase price of $11.11 per share and
acquired an option from PW to purchase 2,250,000 shares of PW Common Stock at
$11.11 per share for 10 years. The closing price of PW Common
16
<PAGE> 19
Stock on the New York Stock Exchange on the date the partnership acquired the
shares and the option was $11.11. Whenever a cash dividend is paid on PW Common
Stock, PWI will pay to the 1991 Partnership a bonus compensation payment equal
to the dividend per share multiplied by the number of shares of PW Common Stock
subject to the option.
In 1992, PW formed the 1992 Partnership for approximately 41 key employees
for the purpose of investing in PW Common Stock. Messrs. Marron, Guenther, and
Grano and Ms. Dolan are limited partners in this partnership. In 1993 the
general partner, a wholly owned subsidiary of PW, made a capital contribution to
the 1992 Partnership of $20,000 and the limited partners contributed an
aggregate of $1,980,000. The 1992 Partnership purchased 135,592 shares of PW
Common Stock from PW at a purchase price of $14.75 per share and acquired an
option from PW to purchase 1,500,000 of PW Common Stock at $14.75 per share for
10 years. The closing price of PW Common Stock on the New York Stock Exchange on
the date the partnership acquired the shares and the option was $15.83. Whenever
a cash dividend is paid on PW Common Stock, PWI will pay to the 1992 Partnership
a bonus compensation payment equal to the dividend per share multiplied by the
number of shares of PW Common Stock subject to the option.
Investment Partnership. In 1994, the Company formed a limited partnership
for 80 key employees for the purpose of permitting these employees collectively
to invest in certain investment opportunities offering a potential for long-term
capital appreciation. Each of the named executive officers are limited partners
in the partnership. The general partner, a wholly owned subsidiary of the
Company, made a capital contribution to the partnership of $84,848 and the
limited partners contributed an aggregate of $8,400,000. In addition, the
general partner agreed to make an unsecured loan to the partnership in the
amount of $42,424,242. The interest rate on the loan is the greater of (i) LIBOR
plus thirty-five basis points and (ii) the applicable Federal rate promulgated
under Section 1274(d) of the Internal Revenue Code, for short-term loans with
semiannual compounding. The interest rate on the loan is reset, and interest on
the loan is payable, semiannually. The principal amount of the loan is generally
subject to repayment by the partnership prior to the time that distributions are
made to the partners.
Other Transactions. During 1994, certain executive officers of PW
maintained margin accounts with PWI in the ordinary course of business. The
margin indebtedness of such officers is on substantially the same terms,
including interest rates and collateral, as those prevailing for clients, and
does not present more than a normal risk of non-collectibility.
In November 1987, at the same time as Yasuda's initial investment in the
Company's preferred stock, PW and Yasuda entered into a Joint Venture Agreement.
Pursuant to this agreement, PW and Yasuda have established a corporation in
England to focus on such areas as asset management, investment advisory and
financial consulting.
Messrs. Fujisawa and Sorimachi are directors of Yasuda Realty America
Corporation ("YRAC"), a wholly owned subsidiary of Yasuda. PWI became a lessee
of a certain property in Chicago, effective December 1, 1990, which is partially
and indirectly owned by YRAC. During the fiscal year 1994, PWI paid $4,160,000
as rents for such property, which exceeded 5% of YRAC's consolidated gross
revenues, and during the fiscal year 1995, will pay approximately the same
amount of rents subject to certain adjustments. The terms of the lease agreement
are substantially the same as those prevailing at the time for comparable
transactions with unrelated parties.
During 1994, Mr. Grano was indebted to PWI for $4,250,000 for loans made to
him in 1991 and 1994. Interest is imputed at an annual rate of 3.83% for the
$4,000,000 loan issued in 1991. The $250,000 loan issued in 1994, accrues
interest monthly based on a variable rate equal to broker call plus 1%. As of
March 17, 1995, the outstanding principal amount of this loan was $4,250,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1994, the Company's Compensation
Committee was composed of Messrs. Bewkes, Kilgore and Loeffler. Mr. Bewkes was
paid $200,000 for consulting services rendered during 1994.
17
<PAGE> 20
II. APPROVAL OF CONVERSION RIGHTS FOR SERIES A PREFERRED STOCK
BACKGROUND
PW entered into an Asset Purchase Agreement dated as of October 17, 1994
(the "Agreement"), and a Stockholders Agreement dated as of December 16, 1994
(the "Stockholders Agreement") with General Electric Company ("GE") and Kidder,
Peabody Group Inc. ("Kidder") under which PW issued 21,500,000 shares of PW
Common Stock, 1,000,000 shares of a new series of PW's Series Preferred Stock,
stated value $100 per share, designated as 6% Cumulative Convertible Redeemable
Preferred Stock, Series A (the "Series A Preferred Stock"), and 2,500,000 shares
of 9% Cumulative Redeemable Preferred Stock, Series C, to a subsidiary of Kidder
in exchange for certain assets of Kidder and its subsidiaries. The closing
market price of the PW Common Stock at December 16, 1994, was $14.75 per share.
Of the shares of Common Stock issued to GE, 14,000,000 shares represented a new
issue of Common Stock and 7,500,000 shares were treasury shares that were owned
by PW.
The New York Stock Exchange
The Series A Preferred Stock was issued in accordance with Delaware law and
pursuant to the authority conferred upon the Board of Directors of PW by PW's
stockholders in Article IV, Section 2 of PW's Restated Certificate of
Incorporation, as amended (the "Certificate of Incorporation"). It is the policy
of The New York Stock Exchange, Inc. (the "Exchange"), which lists PW's
outstanding Common Stock, to require stockholder approval of a transaction if
the present or potential issuance of newly issued common stock or securities
convertible into common stock could result in an increase of 20% or more in the
outstanding common stock of a company. The Exchange does not treat the issuance
of treasury shares as a new issuance in determining the 20% limitation. Each
share of Series A Preferred Stock will be convertible, upon stockholder
approval, at the option of the holder, into shares of PW Common Stock. Assuming
conversion of the shares of Series A Preferred Stock and combining this with the
14,000,000 new shares of PW Common Stock issued to GE on December 16, 1994, the
number of shares outstanding of PW's Common Stock would increase by
approximately 21%.*
Stockholders are being asked to approve the conversion rights of the shares
of Series A Preferred Stock in response to the policy of the Exchange. Approval
by a majority of the votes cast on this proposal will be required to approve the
conversion rights, provided that the holders of at least a majority of PW's
outstanding stock entitled to vote on this proposal do vote. If the required
affirmative vote by the stockholders is not obtained, the Series A Preferred
Stock will remain outstanding in accordance with its terms. Those terms provide
that if the stockholders of PW have not voted to approve the issuance of the PW
Common Stock required to be delivered upon conversion of the Series A Preferred
Stock, PW will have the obligation to deliver cash upon any exercise of the
conversion privilege in an amount equal to the product of (a) the number of
shares of PW Common Stock into which such shares of Series A Preferred Stock
would otherwise be convertible multiplied by (b) the current market price per
share of PW Common Stock, together with all accrued and unpaid dividends on such
shares of Series A Preferred Stock.
The Series A Preferred Stock
The following summarizes the principal features of the Series A Preferred
Stock:
Dividends. Holders of shares of the Series A Preferred Stock are entitled
to receive, when and as declared by the Board of Directors of PW out of assets
of PW legally available for payments, an annual cash dividend of $6.00 per
share, payable quarterly beginning March 15, 1995.
Conversion. Shares of the Series A Preferred Stock will be convertible
into shares of Common Stock of PW initially at a conversion price of $18.13 per
share. The initial conversion price is subject to adjustment upon the happening
of certain events, including the issuance of Common Stock as a dividend or
distribution on the Common Stock or any other class of capital stock of PW, the
subdivision, combination or reclassification of the Common Stock, the issuance
or distribution of evidences of indebtedness or assets (or rights to subscribe
to securities of PW) to holders of the Common Stock and the issuance of rights
or warrants to holders of Common Stock entitling them to
- ---------------
* For purposes of this determination, it is assumed that no outstanding employee
options to purchase PW Common Stock have been exercised.
18
<PAGE> 21
subscribe for or purchase shares of Common Stock at a price per share less than
the average market price of the Common Stock prior to the record date for the
determination of stockholders entitled to receive such rights or warrants (other
than pursuant to an automatic dividend plan of PW or any substantially similar
plan)(such price adjusted as required being referred to as the "Conversion
Price").
Redemption. Shares of the Series A Preferred Stock are redeemable at the
option of PW through December 16, 1999, at a price equal to the greater of
$140.00 or a formula price plus accrued and unpaid dividends. Shares may be
redeemed on or after December 16, 1999, at a price of $105 per share and
declining each year thereafter for the next five years by $1 per share per year
to $100 per share on or after December 16, 2004.
Voting. The consent of the holders of a majority of the Series A Preferred
Stock is required to (1) create, or increase the authorized number of shares of,
any class of stock ranking equal or prior to the Series A Preferred Stock either
as to dividends or upon liquidation, (2) amend, alter or repeal any of the
provisions of the Certificate of Incorporation or of the Certificate of
Designation for the Series A Preferred Stock so as to affect the preferences,
rights or powers of the Series A Preferred Stock, and (3) authorize any
reclassification of the Series A Preferred Stock.
If at any time six quarterly dividends (whether or not consecutive) payable
on the Series A Preferred Stock have not been paid in full or if PW has failed
to fulfill its mandatory redemption obligation, the number of directors of PW
will be increased by two and the holders of the outstanding shares of Series A
Preferred Stock, together with the holders of shares of every other series of
preferred stock upon which like rights have been conferred and are exercisable,
voting as a single class without regard to series, will be entitled to elect the
additional two directors until all arrears in dividends have been paid in full
and subsequent dividends thereon shall have been paid regularly for at least one
year, or PW has fulfilled its mandatory redemption obligation.
Preferences. In the event of any liquidation, dissolution or winding up of
PW, before any payment or distribution of assets to the holders of any class or
classes of stock ranking junior to the Series A Preferred Stock, the holders of
the Series A Preferred Stock are entitled to receive payment of $100.00 per
share plus an amount equal to all dividends (whether or not earned or declared)
accumulated to the date of the final distribution to such holders.
Restrictions on Transfer. The Stockholders Agreement limits the ability of
GE and its affiliates to transfer their PW Common Stock (including shares
received upon conversion of the Series A Preferred Stock) to the following
circumstances: (i) transfers to any subsidiary of GE, if the transferee agrees
to be bound by the Stockholders Agreement and provided that it owns such
securities only so long as it remains a subsidiary of GE, (ii) subject to PW's
exercise of a right of first refusal, in the case of shares of Common Stock,
transfers made pursuant to (A) a broad public distribution or (B) Rule 144 under
the Securities Act, (iii) subject to PW's exercise of a right of first refusal,
in the case of shares of Series A Preferred Stock, after the fifth anniversary
of the date of issuance thereof, transfers made pursuant to a demand
registration or (iv) transfers made pursuant to a tender offer or exchange offer
or acquisition of control of the Company or similar transaction provided it is
unopposed by the Board of Directors.
19
<PAGE> 22
Possible Dilutive Effect
Conversion of the Series A Preferred Stock into shares of Common Stock
would result in an increase in the number of shares of Common Stock outstanding.
An issuance of Common Stock at a price below the book value per share (for
example, if the conversion price of the Series A Preferred Stock were below the
book value per share at the time of conversion) would have a dilutive effect on
the book value of outstanding shares of Common Stock; such issuances may also
have a dilutive effect on earnings per share and the relative voting power of
present PW Common Stockholders. The initial conversion price of the Series A
Preferred Stock is $18.13 per share. The book value of the PW Common Stock as of
December 31, 1994 was $15.96 per share and the closing market price of the
Common Stock at March 16, 1995, was $[ ] per share.
Standstill Arrangements and Possible Antitakeover Effect
For a period beginning December 16, 1994 and continuing until the earlier
of (i) the termination of the Stockholder Agreement, (ii) December 16, 2009 and
(iii) three years after the date on which GE and its affiliates no longer
beneficially own any voting securities of PW (the "Standstill Period"), GE has
agreed not to directly or indirectly acquire more of the outstanding voting
securities of PW. GE has also agreed with PW that, except in certain limited
circumstances, GE will not by itself or in concert with others seek to exercise
control or to influence the exercise of control over the management, business,
operations or affairs of the Company during the Standstill Period. The Series A
Preferred Stock may by its terms make a takeover of the Company more difficult
and expensive to accomplish.
The Board of Directors unanimously recommends that the shareholders vote
"FOR" the adoption of PROPOSAL II.
III. SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected the accounting firm of Ernst & Young to
examine PW's accounts for the 1995 fiscal year. Ernst & Young is the result of a
merger in 1989 between Ernst & Whinney and Arthur Young & Company. Arthur Young
& Company had been the independent public accountants of PW and predecessor
entities since 1943. The submission of the selection of Ernst & Young to the
stockholders of PW is not required. The Board of Directors is, nevertheless,
submitting it to the stockholders to ascertain their views. If the selection is
not ratified at the Annual Meeting, the Board of Directors intends to reconsider
its selection of independent public accountants.
It is expected that a representative of Ernst & Young will attend the
Annual Meeting. He or she will have an opportunity to make a statement if he or
she so desires and will be available to respond to appropriate stockholder
questions.
The Board of Directors unanimously recommends a vote FOR ratification of
the selection of Ernst & Young as PW's independent public accountants.
IV. OTHER MATTERS TO COME BEFORE THE ANNUAL MEETING
As of the date of this Proxy Statement, the Company does not intend to
present and has not been informed that any other person intends to present any
matter for action not specified herein. If any other matters properly come
before the Annual Meeting, it is intended that the holders of proxies will vote
in respect thereof in accordance with their best judgment.
STOCKHOLDER PROPOSALS FOR 1996 MEETING
Proposals of stockholders intended for presentation at the 1996 Annual
Meeting must be received by the office of the Secretary of PW no later than
December [ ], 1995.
Theodore A. Levine
Secretary
20
<PAGE> 23
PROXY
PAINE WEBBER GROUP INC.
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 4, 1995
The undersigned having received the accompanying Notice of Annual Meeting
and Proxy Statement of Paine Webber Group Inc. ("PW") dated March ( ) 1995,
hereby appoints Donald B. Marron, Pierce R. Smith and Theodore A. Levine and
each of them as proxies of the undersigned, with full power of substitution and
with discretionary authority as to matters for which my choice is not specified,
to vote as indicated on the reverse side hereof all the shares of PW common
stock held of record by the undersigned on the books of PW on March 16, 1995 at
the Annual Meeting of Stockholders of PW to be held May 4, 1995 or any
adjournment thereof.
SHARES REPRESENTED BY PROXIES THAT ARE DATED, SIGNED AND RETURNED
WILL BE VOTED "FOR" ITEMS 1, 2 AND 3 IN THE ABSENCE OF CONTRARY
INSTRUCTIONS AND IN THE PROXIES' DISCRETION ON OTHER BUSINESS
PROPERLY BEFORE THE MEETING.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ITEMS SET
FORTH ON THE REVERSE SIDE HEREOF.
<PAGE> 24
*INSTRUCTION: TO WITHHOLD THE PROXIES' AUTHORITY TO VOTE FOR ANY INDIVIDUAL DRAW
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW:
J.A. Bult, P.B. Guenther, J.E. Kilgore, Jr., R.M. Loeffler, H. Rosovsky
(1) ELECTION OF DIRECTORS
(nominees listed to the right hereof)
FOR WITHHOLD
All nominees listed AUTHORITY
(except as marked to vote for all
to the contrary) nominees listed
/ / / /
(2) Approval of certain conversion rights contained in the 6% Cumulative
Convertible Redeemable Preferred Stock, Series A of PW authorizing the issuance
of PW Common Stock which, when combined with Common Stock previously issued in
the same transaction, may exceed 20% of the total PW Common Stock outstanding.
FOR AGAINST ABSTAIN
/ / / / / /
(3) Ratification of Ernst & Young as PW's independent public accountants
FOR AGAINST ABSTAIN
/ / / / / /
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as an attorney, executor, administrator, trustee or guardian, give full
title as such. If a corporation or partnership, sign in full corporate or
partnership name by an authorized officer or person.
Dated __________________________, 19_______
- -------------------------------------------
Signature
- -------------------------------------------
Signature if held jointly
Please mark, sign, date and return this proxy card promptly in the
enclosed envelope.
<PAGE> 25
STOCK AWARD PLAN
(Restricted Stock)
In connection with the Annual Meeting of Paine Webber Group Inc. ("PW") to be
held May 4, 1995 we are enclosing an instruction card relative to shares of PW
common stock held by the Custodian for your account under PW's Stock Award
Plans. We have also mailed to you in a separate envelope the Notice of Annual
Meeting and Proxy Statement and the Annual Report of PW together with a proxy
card for shares of PW's common stock held by the Trustee for you under PW's
Savings Investment Plan. These shares should be voted separately according to
the instructions on each card. Additional copies of the notice of Annual Meeting
and Proxy Statement and the Annual Report are Available upon request by writing
to the office of the Secretary of PW.
<PAGE> 26
PAINE WEBBER GROUP INC
1285 AVENUE OF THE AMERICAS, NEW YORK, NY 10019
Please send me an admission card to the Annual Meeting of Stockholders to be
held at 10:00 A.M. on Thursday, May 4, 1995 in The Paine Webber Building,
Weehawken, New Jersey.
NAME:
------------------------------------------------------
Please Print
STREET:
----------------------------------------------------
CITY AND
STATE: ZIP:
------------------------------------ ----------
PLEASE RETURN THIS CARD ONLY IF YOU PLAN TO ATTEND THE MEETING.
<PAGE> 27
CONFIDENTIAL VOTING INSTRUCTIONS TO: CITIBANK, N.A.
AS TRUSTEE UNDER PAINE WEBBER GROUP INC. SAVINGS INVESTMENT PLAN.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned, having received the accompanying Notice of Annual Meeting
and Proxy Statement of Paine Webber Group Inc. ("PW") dated March ( ), 1995,
hereby instructs the Trustee to vote as indicated on this instruction card all
the shares of PW common stock held for me by the Trustee on March 16, 1995 at
the Annual Meeting of Stockholders of PW to be held May 4, 1995 or any
adjournment thereof.
THE SHARES REPRESENTED HEREBY WILL NOT BE VOTED UNLESS THIS INSTRUCTION
CARD IS APPROPRIATELY MARKED, DATED, SIGNED AND RETURNED BY MAY 4,
1995. IF YOUR SIGNED INSTRUCTION CARD IS RETURNED BUT YOUR PREFERENCE
IS NOT INDICATED, THE TRUSTEE WILL NOT VOTE SUCH COMMON STOCK.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3
SET FORTH ON THE REVERSE SIDE HEREOF.
FOLD AND DETACH HERE
<PAGE> 28
*INSTRUCTION: TO WITHHOLD THE PROXIES' AUTHORITY TO VOTE FOR ANY INDIVIDUAL DRAW
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW:
J.A. Bult, P.B. Guenther, J.E. Kilgore, Jr., R.M. Loeffler, H. Rosovsky
(1) ELECTION OF DIRECTORS
(nominees listed to the right hereof)
FOR WITHHOLD
All nominees listed AUTHORITY
(except as marked to vote for all
to the contrary) nominees listed
/ / / /
(2) Approval of certain conversion rights contained in the 6% Cumulative
Convertible Redeemable Preferred Stock, Series A of PW authorizing the issuance
of PW Common Stock which, when combined with Common Stock previously issued in
the same transaction, may exceed 20% of the total PW Common Stock outstanding.
FOR AGAINST ABSTAIN
/ / / / / /
(3) Ratification of Ernst & Young as PW's independent public accountants
FOR AGAINST ABSTAIN
/ / / / / /
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as an attorney, executor, administrator, trustee or guardian, give full
title as such. If a corporation or partnership, sign in full corporate or
partnership name by an authorized officer or person.
Dated _________________________, 19_________
- --------------------------------------------
Signature
- --------------------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE
ENCLOSED ENVELOPE.
FOLD AND DETACH HERE
<PAGE> 29
CONFIDENTIAL VOTING INSTRUCTIONS TO: MELLONBANK, N.A.
AS CUSTODIAN UNDER PAINE WEBBER GROUP INC. STOCK AWARD PLAN.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned, having received the accompanying Notice of Annual Meeting
and Proxy Statement of Paine Webber Group Inc. ("PW") dated March ( ), 1995,
hereby instructs the Custodian to vote as indicated on this instruction card all
the shares of PW common stock held for me by the Custodian on March 16, 1995 at
the Annual Meeting of Stockholders of PW to be held May 4, 1995 or any
adjournment thereof.
THE SHARES REPRESENTED HEREBY WILL NOT BE VOTED UNLESS THIS INSTRUCTION
CARD IS APPROPRIATELY MARKED, DATED, SIGNED AND RETURNED BY MAY 4,
1995. IF YOUR SIGNED INSTRUCTION CARD IS RETURNED BUT YOUR PREFERENCE
IS NOT INDICATED, THE CUSTODIAN WILL NOT VOTE SUCH COMMON STOCK.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3
SET FORTH ON THE REVERSE SIDE HEREOF.
FOLD AND DETACH HERE
<PAGE> 30
*INSTRUCTION: TO WITHHOLD THE PROXIES' AUTHORITY TO VOTE FOR ANY INDIVIDUAL DRAW
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW:
J.A. Bult, P.B. Guenther, J.E. Kilgore, Jr., R.M. Loeffler, H. Rosovsky
(1) ELECTION OF DIRECTORS
(nominees listed to the right hereof)
FOR WITHHOLD
All nominees listed AUTHORITY
(except as marked to vote for all
to the contrary) nominees listed
/ / / /
(2) Approval of certain conversion rights contained in the 6% Cumulative
Convertible Redeemable Preferred Stock, Series A of PW authorizing the issuance
of PW Common Stock which, when combined with Common Stock previously issued in
the same transaction, may exceed 20% of the total PW Common Stock outstanding.
FOR AGAINST ABSTAIN
/ / / / / /
(3) Ratification of Ernst & Young as PW's independent public accountants
FOR AGAINST ABSTAIN
/ / / / / /
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as an attorney, executor, administrator, trustee or guardian, give full
title as such. If a corporation or partnership, sign in full corporate or
partnership name by an authorized officer or person.
Dated __________________________, 19_______
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Signature
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Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE
ENCLOSED ENVELOPE.
FOLD AND DETACH HERE
