<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:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
<PAGE> 2
Paine Webber Group Inc.
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
March , 1998
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 7, 1998 at 10:00 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 4 directors to the Board of Directors to hold office
for a term of 3 years.
2. The approval to amend the Restated Certificate of Incorporation of PW
to increase the number of shares of common stock, par value $1.00 per
share (the "PW Common Stock"), of PW authorized for issuance from
200,000,000 shares to 400,000,000 shares.
3. The ratification of the selection by the Board of Directors of Ernst &
Young LLP as PW's independent public accountants for the 1998 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 12,
1998 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 7, 1998, at 10:00 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, 1997, is being
furnished to stockholders together with this Proxy Statement, and mailing to
stockholders is expected to begin on or about March , 1998.
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 to amend PW's Restated Certificate of Incorporation
to increase the number of shares of PW Common Stock authorized for issuance from
200,000,000 shares to 400,000,000 shares and (iii) the ratification of the
selection of Ernst & Young LLP ("Ernst & Young")as PW's independent public
accountants for the 1998 fiscal year. If any other business is properly 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
Unless otherwise noted, all PW Common Stock and per share data disclosed in
this Proxy Statement have been retroactively adjusted to reflect the
three-for-two PW Common Stock split in the form of a 50% stock dividend
effective November 17, 1997.
As of the close of business on March 12, 1998 (the "Record Date"), there
were outstanding 139,217,504 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, and the ratification of the selection of
Ernst & Young as PW's independent public accountants for the 1998 fiscal year.
Abstentions from voting on the election of directors, 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.
<PAGE> 4
The affirmative vote of the holders of a majority of the outstanding stock
entitled to vote thereon is necessary for the approval to amend PW's Restated
Certificate of Incorporation to increase the number of shares of PW Common Stock
authorized for issuance. Accordingly, abstentions and broker non-votes will have
the same effect as a vote against the amendment.
As of the Record Date, PWI held of record for approximately 8,812 of its
customers, including officers and directors of the Company, 13,632,485 shares of
PW Common Stock (constituting approximately 9.7% of the then outstanding shares
of PW Common Stock).
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, 1997.*
<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 General Electric Company 31,523,600(1) 22.6%
260 Long Ridge Road
Stamford, Connecticut 06927
The Yasuda Mutual Life Insurance 11,250,000(2) 8.1
Company,
9-1, Nishishinjuku
1-chome, Shinjuku-ku,
Tokyo 169-92 Japan
</TABLE>
- ------------------
(1) As of August 6, 1997, PW, General Electric Company ("GE") and General
Electric Capital Services, Inc. ("GECS") entered into a Share Purchase
Agreement pursuant to which PW issued to GECS 23,250,000 shares of PW Common
Stock as part of the consideration for the purchase by PW of all the
outstanding voting stock of Kidder Peabody & Co. Incorporated, the principal
asset of which consisted of PW Common Stock acquired by GE in connection
with the sale of certain assets and businesses of Kidder, Peabody Group Inc,
("KPG") to PW in 1994. The principal effect of the transaction was the
repurchase of 9,000,000 shares of PW Common Stock. On December 4, 1997, GECS
converted 1,000,000 shares of PW's 6% Cumulative Convertible Redeemable
Preferred Stock, Series A (the Series A Preferred Stock) into 8,273,600
shares of PW Common Stock. Pursuant to an Amended and Restated Stockholders
Agreement dated August 6, 1997 between the Company, GE, GECS, General
Electric Capital Corporation ("GECC") and KPG (GE, GECS, GECC and KPG being
collectively referred to as the "GE Shareholder") the GE Shareholder has
agreed to vote their 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 amendment of PW's Restated
Certificate of Incorporation and the ratification of the selection of Ernst
& Young as PW's independent public accountants for the 1998 fiscal year.
(2) 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 requirement will apply to the election of directors, the amendment of
PW's Restated Certificate of Incorporation and the ratification of the
selection of Ernst & Young as PW's independent public accountants.
- ------------------
* The table above does not include 11,010,507 shares of PW Common Stock (8% of
class outstanding) held, as of December 31, 1997, 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 currently consists of
four directors. Management proposes the election of the nominees named hereafter
to hold office for a term of 3 years, ending at the 2001 Annual Meeting. Each of
the
2
<PAGE> 5
nominees except Ms. Dolan is currently a director of PW. The nine 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 2001
JOHN R. TORELL III, 58, has been Chairman of the Board of Torell Management
Inc. (private investment company) since 1990, and a managing director of Zilkha
& Company (merchant banking and private investment company) since 1994. He was
Chairman of the Board of Fortune Bancorp from 1990 to 1994, Chairman of the
Board, President and Chief Executive Officer of CalFed, Inc. (savings
association) from 1988 to 1989 and President of Manufacturers Hanover Corp. from
1982 to 1988. Mr. Torell is a director of American Home Products Corp.,
Claremont Technology Group, Inc., Heartland Technologies Inc. and Volt
Information Sciences Inc. Mr. Torell became a director of PW on March 26, 1997.
ROBERT M. LOEFFLER, 74, 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 is also a
director of Advanced Machine Vision Corp. Mr. Loeffler has been a director of PW
since 1978.
HENRY ROSOVSKY, 70, is Professor Emeritus at Harvard University.
Previously, he was the Lewis P. and Linda L. Geyser University Professor at
Harvard University from 1984 to 1996. 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.
REGINA A. DOLAN, 43, is Senior Vice President and Chief Financial Officer
of PW and Executive Vice President, Chief Financial Officer and Chief
Administrative Officer of PWI. Ms. Dolan joined the Company in October 1992 as
Senior Vice President and Director of Finance and Controls and was named Senior
Vice President and Chief Financial Officer of PWI and Vice President and Chief
Finanical Officer of PW in February 1994. She became Executive Vice President in
September 1994 and Chief Administrative Officer in October 1997 of PWI and
Senior Vice President of PW in October 1997. Prior to joining PW, Ms. Dolan was
a partner of Ernst & Young LLP where she headed the firms securities industry
practice.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
Term Expiring in 1999
DONALD B. MARRON, 63, 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.
RETO BRAUN, 56, private investor, was the Chairman of the Board, President
and Chief Executive Officer of Moore Corporation Limited, a business information
company. Mr. Braun was President and Chief Executive Officer of Moore
Corporation Limited from September 1993 to October 22, 1997 and Chairman of the
Board from April 1995 to October 22, 1997. 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 1994.
JAMES W. KINNEAR, 70, 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 1994.
3
<PAGE> 6
JOSEPH J. GRANO, JR., 50, 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 became a
director of PW in 1993.
Term Expiring in 2000
E. GARRETT BEWKES, JR., 71, is a private investor. He was a consultant to
PW from February 15, 1989 to December 31, 1995. 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 Olympus Fund, PaineWebber Managed Investments Trust,
PaineWebber Managed Municipal Trust, PaineWebber Investment Series, PaineWebber
Investment Trust, PaineWebber Investment Trust II, Liquid Institutional
Reserves, PaineWebber Municipal Series, PaineWebber Municipal Money Market
Series, PaineWebber Master Series, Inc., Mitchell Hutchins Series Trust,
PaineWebber Financial Services Growth 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., Insured
Municipal Income Fund Inc., Managed High Yield Fund Inc., PaineWebber Securities
Trust, Global Small Cap Fund Inc., Global High Income Dollar Fund Inc., 2002
Target Term Trust Inc., Investment Grade Municipal Income Fund, Inc., Strategic
Global Income Fund, Inc., PaineWebber Pace Select Advisers Trust, Mitchell
Hutchins Portfolios and PaineWebber Index Trust. Mr. Bewkes is currently a
director of Interstate Bakeries Corporation. Mr. Bewkes became a director of PW
in 1987.
FRANK P. DOYLE, 67, is Executive Vice President (retired) of General
Electric Company. He was Executive Vice President from July 30, 1992 to December
31, 1995 and was a Senior Vice President from 1981 to July 1992. Mr. Doyle is
also a director of Digital Equipment Corporation and Roadway Corporation. Mr.
Doyle became a director of PW in December 1994.
NAOSHI KIYONO, 55, is a Managing Director of Yasuda whose principal
business is underwriting and marketing life insurance. He became a Managing
Director and General Manager, International Investment Department of Yasuda on
April 1, 1995, and was a Director from July 1991 to March 1995 and the General
Manager, Securities Investment Department from April 1990 to the present. Mr.
Kiyono became a director of PW in March 1995.
EDWARD RANDALL, III, 71, 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.
YOSHINAO SEKI, 63, became a Senior Managing Director and Chief Investment
Officer of Yasuda as of April 1, 1995. He was a Managing Director of Yasuda from
April 1993 to March 1995, a Managing Director and General Manager, Loan
Department from April 1993 to March 1994, a Director of Yasuda from July 1989 to
March 1993 and the General Manager, Tohoku Regional Office of Yasuda from April
1990 to March 1993. Mr. Seki became a director of PW in March 1995.
T. Stanton Armour served as a director of PW until his resignation on
February 5, 1998. Mr. Armour also served as a member of the Executive Committee
and Nominating Committee until his resignation.
John A. Bult is currently a member of the PW Board of Directors whose term
expires at the Annual Meeting of Stockholders on May 7, 1998 and is not standing
for re-election.
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), Bewkes, Doyle
and Loeffler, and it met twice during fiscal 1997.
4
<PAGE> 7
The Audit Committee reviews internal and external audit procedures of the
Company. Members of this Committee are Messrs. Bewkes (chairman), Braun, Doyle,
Kinnear, Kiyono and Loeffler, and it met four times during fiscal 1997.
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. Randall (chairman), Bewkes and Rosovsky,
and it met three times in fiscal 1997. 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 compensation policy and program of, among others, the key
policy making executive officers of the Company, some of whom are also directors
of PW. The Compensation Committee also establishes, administers and periodically
monitors generally applicable employee benefit and compensation plans of PW.
Members of this committee are Messrs. Doyle (chairman), Bewkes and Loeffler, and
it met six times in fiscal 1997.
The Public Policy Committee is responsible for approving, subject to Board
approval, the process for political and charitable contributions by PaineWebber
and advising on matters regarding PaineWebber's support of other philanthropic
causes. Members of this committee are Messrs. Rosovsky (chairman), Bewkes and
Marron, and it met three times in fiscal 1997.
The Board of Directors of PW met eight times during fiscal 1997. During his
tenure on the Board in fiscal 1997, 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 and Seki.
Certain Arrangements with Directors
Pursuant to the Investment Agreement between Yasuda and PW, Messrs. Kiyono
and Seki 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 Amended Stockholders Agreement between the GE Shareholder 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 1997, 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
5
<PAGE> 8
attendance at such meetings. The chairman of each committee received
compensation at a rate of $15,000 per year. In addition, non-employee directors
may participate in the Company's medical plans that are available to all
employees.
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.
Effective May 1, 1997, the Company terminated its retirement plan for
non-employee directors with respect to current non-employee directors. For
purposes of terminating the retirement plan, the Company vested and present
valued the accrued benefits of each current non-employee director, based on
years of service through April 30, 1997 as follows: Mr. Armour $436,397; Mr.
Bewkes $295,155; Mr. Braun $111,823; Mr. Doyle $91,356; Mr. Kinnear $111,823;
Mr. Randall $358,920; Mr. Kiyono $84,334; Mr. Loeffler $430,324; Mr. Rosovsky
$342,839; and Mr. Seki $84,334. Each director was permitted to elect to receive
the present value of his accrued benefits currently in cash or to defer all or a
portion of the proceeds in cash under the Company's deferred compensation plan
for non-employee directors and in PW common stock under the 1994 Non-Employee
Directors' Stock Plan.
Under the Company's 1994 Non-Employee Directors' Stock Plan, directors of
the Company who are not executive officers receive grants of stock options on
22,500 shares of PW Common Stock upon initial election to the Board and a like
grant each fifth year commencing 1999, and annual grants of 1,162 shares of PW
Common Stock which were increased from 562 shares in connection with termination
of the non-employee directors retirement plan discussed above.
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 and all nominees, directors and executive officers of
PW as a group. Shares owned are stated as of February 20, 1998, as of which date
there were outstanding 139,227,845 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>
Steven P. Baum (3)(4)..................................... 135,125
E. Garrett Bewkes, Jr. (3)................................ 52,899
Reto Braun (3)............................................ 40,011
John A. Bult (4).......................................... 62,014
Regina A. Dolan (3)(4)(5)................................. 113,181
Frank P. Doyle (3)........................................ 40,204
Joseph J. Grano, Jr. (3)(4)............................... 260,933
James W. Kinnear (3)...................................... 35,316
Naoshi Kiyono (3)......................................... 24,787
Robert M. Loeffler (3).................................... 36,595
Donald B. Marron (2)(3)(4)(5)............................. 2,210,675
Edward Randall, III (2)(3)................................ 503,281
Henry Rosovsky (3)........................................ 18,738
Yoshinao Seki (3)......................................... 24,787
Mark B. Sutton (3)(4)..................................... 195,218
John R. Torell III........................................ 4,359
All present nominees, directors continuing in office and
executive officers as a group, including those named
above (18 persons)...................................... 3,921,811
</TABLE>
- ---------------
(1) No director, nominee or executive officer directly owns 1% or more of PW
Common Stock, except Mr. Marron who owns 1.58%. All directors, nominees and
executive officers as a group (18 persons) beneficially own 2.8%.
6
<PAGE> 9
(2) Shares shown for the nominees, directors and named executive officers
include an aggregate of 170,991 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 (2,241), and
Mr. Randall (168,750).
(3) Shares shown for the nominees, directors and named executive officers
include an aggregate of 1,456,389 shares of PW Common Stock covered by
options presently exercisable or becoming exercisable within sixty days,
held by Mr. Marron (1,009,708), Mr. Baum (43,749), Mr. Bewkes (22,500), Mr.
Braun (22,500), Ms. Dolan (77,932), Mr. Doyle (22,500), Mr. Grano (78,750),
Mr. Kinnear (22,500), Mr. Kiyono (22,500), Mr. Loeffler (22,500), Mr.
Randall (22,500), Mr. Rosovsky (22,500), Mr. Seki (22,500), and Mr. Sutton
(43,750).
(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 (38,854), Mr. Baum (157),
Mr. Bult (10,218), Ms. Dolan (1,882), Mr. Grano (313), and Mr. Sutton (157).
(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 228,890 shares of PW Common
Stock into which PW's 6.5% Convertible Debentures Due 2002 are presently
convertible, including the following shares for Mr. Marron (203,458) and Ms.
Dolan (25,432).
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 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, 1997, all filing requirements applicable to its officers,
directors, and greater than ten-percent beneficial owners were complied with
except that Robert Silver, Executive Vice President of PWI, did not include
4,707 shares of PW Common Stock he owned in his initial Form 3 filed in October
1997 which was subsequently reported on a Form 5.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors is composed entirely
of independent outside directors, none of whom is a current or former officer or
employee of the Company or its subsidiaries.
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 that 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
Company's pay for performance policy which, among other things, was designed:
- to attract and retain the best 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 the Company's 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
7
<PAGE> 10
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 was comprised of 10 publicly-owned and private companies as
of December 31, 1997. Four of the companies in the comparative group of ten are
publicly-owned and make up the Peer Group Index used for the Performance Graph
set forth below. One of these four companies represents the consolidation of two
publicly-held comparative firms that merged on May 31, 1997. The firms excluded
from the Peer Group Index were either not publicly-owned, or have a mix of
businesses not representative of PW on an overall basis, although various
segments are comparable to units of PW. 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, with the opportunity
for total remuneration to rise above this level upon achievement of exceptional
results.
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 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 integrates all components including
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 responsibility level as well as
competitive salary levels for similar positions. The salaries of Messrs. Marron
and Grano were not increased in 1997. Increases were granted in 1995 to Mr.
Marron and to Mr. Grano, who was elected President of PaineWebber Incorporated
during 1995, based on their performance and competitive pay levels. Prior to
1995, Mr. Marron's and Mr. Grano's salaries had not been increased since 1989
and 1991, respectively.
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 previously 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 provisions 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 and competitive information outlined above, taking into
consideration the value of all components in the executive's compensation
package.
In recognition of record 1997 performance during which net revenues rose to
over $4 billion, operating profit margins increased, and net income grew 19%,
annual incentives awarded by the Compensation Committee to executive officers
increased 19% above amounts awarded to these individuals in 1996 and ranged from
$1,300,000 up to $10,140,750. Continuing the Committee's policy of paying a
meaningful portion of annual incentive awards in equity, over 24% of these
awards were paid in the form of restricted stock that generally vests pro rata
upon completion of each of the following three years of future service.
8
<PAGE> 11
Long Term Equity Incentives. The Committee made significant stock option
grants under the 1994 Executive Stock Award Plan to executive officers both in
recognition of the Company's record 1997 performance and to continue to link a
major portion of executive officers' financial interests to the performance of
PW's common stock. The size of such annual grants reflects the Compensation
Committee's judgment as to the current and potential contribution of the
individual executive officer to the current and future profitability of PW and
its business units and to the creation of long term shareholder value.
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 1997 as the best year recorded by PW in its 118 year history and
the firm's fifth year of record earnings in the last seven years, as well as the
outstanding longer term performance of PW under his leadership and the firm's
strategic progress. Factors considered by the Committee include the operating
performance of PW, its 22.4% return on equity and strong total return to
shareholders in 1997, as well as the Company's continued strategic redirection
to businesses with superior returns and its operational initiatives combined
with highly effective cost control. As a result of the Chief Executive Officer's
successful efforts during 1997, the Compensation Committee believes that PW has
performed exceptionally well and is well positioned for future growth and
profitability.
As noted earlier, Mr. Marron's salary remains unchanged from 1995. His
annual incentive award of cash and restricted stock of $10,140,750 represented
an increase of 25% from 1996 to 1997, as compared to an increase of 95% in 1996,
an increase of 53% in 1995 and a decline of 63% in 1994. As discussed above, Mr.
Marron's annual stock option grant of 400,000 shares represented a 33% decline
in shares from his 1996 grant.
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 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
Frank P. Doyle, Chairman
E. Garrett Bewkes, 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 (other than the Chief Executive Officer) of the Company who
were serving as executive officers at the end of the fiscal year ended December
31, 1997, 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, 1997,
1996 and 1995 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, 1997 to December 31, 1997 on grants of
options by the Company.
9
<PAGE> 12
Table III -- Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values Table provides information for the period January 1, 1997
to December 31, 1997 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, 1997.
I. SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------- -------------------------------
SECURITIES ALL
RESTRICTED UNDERLYING OTHER
NAME AND STOCK AWARD(S) OPTIONS COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS (1)(2)(3)(4) (# SHARES)(5) SATION
- -------------------------------------- ---- ------ ---------- --------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Donald B. Marron 1997 $800,000 $7,662,500 $2,478,250 400,000 $309,812(6)
Chairman of the Board and Chief 1996 800,000 6,212,500 1,975,597 600,000 139,202(6)
Executive Officer, PW and PWI 1995 800,000 2,975,000 1,232,656 262,500 139,057(6)
Joseph J. Grano, Jr. 1997 450,000 5,262,500 1,696,911 250,000 80,291(7)
President, PWI 1996 450,000 5,062,500 1,230,060 450,000 33,049(8)
1995 412,500 1,790,000 891,347 171,000 153,200(8)
Steven P. Baum(10) 1997 500,000 3,387,500 1,086,520 150,000 -0-
Executive Vice President, Director 1996 500,000 3,037,500 956,720 300,000 -0-
of Capital Markets, PWI
Mark B. Sutton(10) 1997 250,000 2,825,000 903,411 150,000 175,632(9)
Executive Vice President, Director, 1996 250,000 2,350,000 646,092 300,000 -0-
Private Client Group, PWI
Regina A. Dolan 1997 250,000 1,325,000 415,064 100,000 69,814(6)
Senior Vice President, Chief 1996 250,000 962,500 285,758 150,000 13,284(6)
Financial Officer, PW, and 1995 200,000 702,500 349,672 118,500 13,248(6)
Executive Vice President,
Chief Financial Officer and
Chief Administrative Officer,
PWI
</TABLE>
- ------------
(1) Amounts shown for 1997 include awards of restricted stock made in January
1998 for performance in 1997.
(2) Amounts shown for 1995 include both restricted stock and restricted unit
awards granted under the 1995 Dedicated Partnership Equity Program, 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. For a discussion of
the 1995 Dedicated Partnership Equity Program, see "Certain Transactions
and Arrangements -- Dedicated Equity Program" below.
(3) The number and value of restricted stock and restricted units held by
executive officers named in the table as of December 31, 1997 plus shares
granted in 1998 for 1997 performance based on the closing price of PW's
Common Stock ($34.5625) on the New York Stock Exchange on December 31,
1997, are as follows: Mr. Marron (149,673 shares and 18,750
units -- $5,821,120); Mr. Grano (160,528 shares and 13,500
units -- $6,014,843); Mr. Baum (81,468 shares and 9,750
units -- $3,152,722); Mr. Sutton (116,560 shares and 9,750
units -- $4,365,589); and Ms. Dolan (23,617 shares and 9,750
units -- $1,153,247). The number of shares of restricted stock and units
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
(18,750; 60,471; 60,469; and 28,733; shares and units vesting in 1998,
1999, 2000 and 2001, respectively); Mr. Grano (60,986; 53,934; 39,434; and
19,674 shares and units vesting in 1998, 1999, 2000, and 2001,
respectively); Mr. Baum (9,750; 40,905; 27,966; and 12,597 shares and units
vesting in 1998, 1999, 2000 and 2001, respectively); Mr. Sutton (59,630;
35,353; 20,853; and 10,474 shares and units vesting in 1998, 1999, 2000 and
2001, respectively); and Ms. Dolan (9,750; 9,403; 9,402 and 4,812 shares
and units vesting in 1998, 1999, 2000 and 2001, respectively).
(4) Dividends are paid on restricted stock and dividend equivalents are paid on
restricted units. Dividend equivalents are also paid on options granted
under the 1995 Dedicated Partnership Equity Program.
(5) Amounts shown for 1997 include option grants made in January 1998 for
performance in 1997. Amounts shown for 1995 include option grants made in
January 1996 for performance in 1995 and options granted under the 1995
Dedicated Partnership Equity Program.
(6) Amounts shown for 1997, 1996 and 1995 result from the operation of the
terms of the Key Executive Equity Program, in which approximately 30 key
executives participate. For a description of the program, see "Certain
Transactions and Arrangements -- Key Executive
10
<PAGE> 13
Equity Program" below. These amounts include for 1997: (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 ($59,812); and Ms. Dolan
($7,314); and (ii) forgiveness of a portion of the PW loans to the
participants for exceeding pre-set earnings targets for PW established at
the inception of the program -- Mr. Marron ($250,000) and Ms. Dolan
($62,500). 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.
(7) A portion of this amount represents life insurance premiums ($65,533) paid
for Mr. Grano.
(8) These amounts represent imputed interest on an employee loan to Mr. Grano
that has been fully repaid.
(9) This amount represents the taxable amount on trips for Mr. Sutton.
(10) Mr. Baum and Mr. Sutton became executive officers of PW on November 6,
1996.
The following table sets forth certain information concerning stock options
granted by the Company to the Chief Executive Officer and each of the four most
highly compensated executive officers of the Company (other than the Chief
Executive Officer) in January 1998 for performance in 1997. The data in the
column shown below relating to the hypothetical present values on date of grant
of stock options granted in January 1998 are presented pursuant to Securities
and Exchange Commission rules and are calculated under the modified
Black-Scholes Model for pricing options. The Company is not aware of any model
or formula which will determine with reasonable accuracy a present value for
stock options. The actual before-tax amount, if any, realized upon the exercise
of stock options will depend upon the market price of PW Common Stock relative
to the exercise price per share of PW Common Stock of the stock option at the
time the stock option is exercised. There is no assurance that the present value
of the stock options reflected in this table will actually be realized.
II. Option Grants in Last Fiscal Year --
Individual Grants
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED(#)(1) FISCAL YEAR ($/SHARE) DATE ($)
---- ------------- ------------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
D.B. Marron...................... 400,000 5.18% $34.2188 1/2/05 $2,827,392(2)
J.J. Grano, Jr................... 250,000 3.24 34.2188 1/2/05 1,767,120(2)
S.P. Baum........................ 150,000 1.94 34.2188 1/2/05 1,060,272(2)
M.B. Sutton...................... 150,000 1.94 34.2188 1/2/05 1,060,272(2)
R.A. Dolan....................... 100,000 1.29 34.2188 1/2/05 706,848(2)
</TABLE>
- ---------------
(1) Seven year non-qualified stock options granted on January 2, 1998 will
become exercisable in three years 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 values include the stock's expected volatility of
37.05%, risk free rate of return of 5.59%, projected dividend yield of
1.29%, projected time to exercise (3.1 years) and projected risk of
forfeiture or non-marketability during vesting period (10% per annum).
11
<PAGE> 14
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, 1997 to December 31, 1997 and unexercised options held as of December
31, 1997:
III. Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS AT FY-END OPTIONS AT FY-END
ON VALUE --------------------------------- ---------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE(1) EXERCISABLE UNEXERCISABLE(1)
---- -------- -------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
D.B. Marron -0- -0- 618,750 1,525,000 $14,448,047 $24,032,813
J.J. Grano, Jr. 271,532 $3,764,968 -0- 961,000 -0- 14,837,688
S.P. Baum 68,750 935,431 -0- 589,750 -0- 9,002,714
M.B. Sutton 68,750 874,232 -0- 589,750 -0- 8,973,547
R.A. Dolan 45,000 648,750 37,500 398,500 826,094 6,280,656
</TABLE>
- ---------------
(1) Includes securities underlying options granted in January 1998 for
performance in 1997.
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, 1997, approximately
13,959 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. 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, 1997 is $150,000 and the maximum annual
pension benefit which may be accrued for calendar year 1997 is $1,875.
The years of credited service for purposes of determining benefits under
the PW Pension Plan as of December 31, 1997 for certain executive officers were:
Messrs. Marron (20.6 years), Grano (8.8 years), Sutton (11.3 years), Baum (2.9
years) and Ms. Dolan (4.2 years). The estimated annual benefits payable on
retirement at age 65, taking into account actual pension benefits accrued to
December 31, 1997 and projecting future benefits to retirement at the current
maximum additional annual benefit for 1997 of $1,875, for certain executive
officers are: Messrs. Marron ($116,806), Grano ($45,725), Sutton ($59,390), Baum
($43,125) and Ms. Dolan ($49,219).
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 salary for participants who retire at age 65 with
15 or more years of service. Such percentage of base salary is 100% in the case
of the initial participant 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 may be forfeited.
12
<PAGE> 15
The table below summarizes expected SERP benefits before subtracting Social
Security, PW Pension Plan benefits and any other pension benefits. The actual
benefits from the SERP are the net amounts after subtracting Social Security, PW
Pension Plan benefits and any other pension 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>
$ 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
450,000 301,500 450,000 225,000 337,500
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
800,000 533,333 800,000 400,000 600,000
</TABLE>
The initial participants in SERP were Mr. Marron and three other persons
who were executive officers at the time. The amount of Mr. Marron's base salary
reflected for the purposes of the SERP during 1997 is $800,000. Mr. Grano and
one other executive officer are subsequent participants. The amount of Mr.
Grano's base salary reflected for the purposes of the SERP during 1997 is
$450,000.
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, and a
Peer Group Index (comprised of The Bear Stearns Companies Inc., Merrill Lynch &
Co., Inc., Salomon Inc, Morgan Stanley Group, Inc., and Dean Witter, Discover &
Co., Inc. The total return to shareholders for Morgan Stanley Group, Inc. is
measured from 12/31/92 to 5/31/97 as Morgan Stanley Group, Inc. only and from
6/1/97 to 12/31/97 as Morgan Stanley, Dean Witter, Discover & Co. The total
return to shareholders for Dean Witter, Discover & Co. is measured from 12/31/92
to 5/31/97 as Dean Witter, Discover & Co. only and from 6/1/97 to 12/31/97 as
Morgan Stanley, Dean Witter, Discover & Co. The returns for Salomon Inc are
measured from 12/31/92 to 11/26/97, just prior to the time Salomon Inc was
merged with and became a subsidiary of Travelers Group Inc.). The returns of
each company have been weighted according to their respective stock market
capitalization at the beginning of each year for purposes of arriving at a peer
group average. The Peer Group Index has been included in the Performance Graph
below since it covers the publicly traded companies which the Compensation
Committee reviews and evaluates in making compensation determinations. The chart
assumes $100 invested on December 31, 1992 and reinvestment of all dividends.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) PaineWebber Peer Group S&P 500
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 113.10 127.60 110.00
1994 97.20 110.90 111.50
1995 132.80 148.10 153.30
1996 190.80 220.40 188.50
1997 357.10 393.60 251.40
</TABLE>
14
<PAGE> 17
Other Benefit Plans and Agreements
During 1987 and 1996, PW entered into employment agreements with Mr. Marron
and Mr. Grano, respectively, 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.
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. Under the Company's Key Executive Equity
Program ("KEEP"), the Company sold certain convertible debentures to key
employees of the Company, including executive officers of the Company, in 1991
and 1992.
Pursuant to KEEP, the Company financed on a full recourse basis to the
employee 25% of the principal amount of the debentures issued in 1991 at a 7.85%
annual interest rate, and 95% of the principal amount of the debentures issued
in 1992 at a 5.6% annual interest rate. The Company pays 66 2/3% of the interest
payment due on the bank financing for the remaining balance of the purchase
price of the debentures issued in 1991 and waives 66 2/3% of the interest
payment due on an equivalent amount of the Company financing for the debentures
issued in 1992. The debentures issued in 1991 have now been fully converted or
redeemed.
Investment Partnerships. PW Partners 1993, L.P. is a limited partnership
established in 1993 to provide key employees of the Company the opportunity to
invest in certain high risk investment opportunities in funds and other
investment vehicles sponsored by certain of the Company's clients and potential
clients offering a potential for long-term capital appreciation. Each of the
named executive officers is a limited partner 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 employee limited partners contributed an
aggregate of $8,400,000. In February 1996, an independent third party lender
made a four year unsecured loan to the partnership in the amount of $25.5
million. The Company has agreed to purchase the loan from this lender in certain
specified circumstances. At December 31, 1997, $19,577,180 million was
outstanding under this facility. There were no distributions on investments made
to the partners during fiscal 1997.
PW Partners 1995, L.P. is a limited partnership established in 1995 to
provide key employees of the Company the opportunity to invest in certain high
risk investment opportunities in funds and other investment vehicles sponsored
by certain of the Company's clients and potential clients offering a potential
for long-term capital appreciation. Each of the named executive officers is a
limited partner in the partnership. The general partner, a wholly owned
subsidiary of the Company, made a capital contribution to the partnership of
$71,212 and the employee limited partners contributed an aggregate of
$7,050,000. In February 1996, an independent third party lender entered into a
revolving credit
15
<PAGE> 18
agreement with the partnership whereby it committed to make a four year
unsecured loan to the partnership in an aggregate amount of not more than $35.1
million. The Company has agreed to purchase the loan from this lender in certain
specified circumstances. At December 31, 1997, $25,469,076 million was
outstanding under this facility. There were no distributions on investment made
to the partners during fiscal 1997.
Dedicated Equity Program. Under the Company's Dedicated Partnership Equity
Program, certain key employees were granted Awards in 1996 that consisted of an
option to purchase PW Commom Stock and a restricted stock unit. Options and
restricted stock units awarded under the program will vest in June 1998 and are
subject to forfeiture in certain specified events. Participants may not exercise
the options or obtain control over the shares acquired on exercise until 2004
and may not receive payment or restricted stock units (in the form of cash,
stock or a combination thereof) until 2005. Dividend or dividend equivalents are
paid on the underlying option and restricted stock unit shares. Participants
were not required to make a direct investment in the program however, their 1995
bonus was reduced by the amount of their individual award.
Other Transactions. During 1997, 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.
During 1997, PW and certain of its subsidiaries have engaged in
transactions in the ordinary course of business with The Yasuda Mutual Life
Insurance Company, General Electric Company and certain of their respective
affiliates, which are beneficial owners of more than 5% of the outstanding
shares of PW Common Stock; such transactions were on substantially the same
terms as those prevailing at the time for comparable transactions with others.
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. Kiyono and Seki 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 1997, PWI paid $3,232,000 as
rents for such property, which exceeded 5% of YRAC's consolidated gross
revenues, and during the fiscal year 1998, 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.
A subsidiary of the Company has committed to invest up to $50,000,000 in an
investment limited partnership formed to make mezzanine investments in which E.
Garrett Bewkes III, the son of E. Garrett Bewkes, Jr., a Director of the
Company, is one of the two Managing Members of the general partner and the
advisor to the partnership. The general partner has committed to invest up to
$5,000,000 in the limited partnership which has total commitments of
approximately $300,000,000. This Company subsidiary also owns a 12% interest in
the general partner and has made a loan of $2 million to the advisor with a
maturity of five years. During 1997, $500,000 principal amount of this loan was
repaid.
Compensation Committee Interlocks and Insider Participation
During the year ended December 31, 1997, the Company's Compensation
Committee was composed of Messrs. Doyle, Bewkes and Loeffler. John E. Kilgore,
Jr. served as a member of the Committee until March 26, 1997 when he resigned as
a director of PW and a member of the Committee.
16
<PAGE> 19
II. APPROVAL OF AN INCREASE IN AUTHORIZED COMMON STOCK
On February 5, 1998, the Board of Directors approved an amendment (the
"Amendment") to the Restated Certificate of Incorporation of the Company to
increase to 400,000,000 the number of shares of PW Common Stock authorized for
issuance, and directed that the Amendment be submitted to a vote of stockholders
at the Annual Meeting. In connection therewith, the Board of Directors proposes
for approval the Amendment in the form set forth as Annex I.
Section I of Article IV of the Company's Restated Certificate of
Incorporation as currently in effect authorizes the issuance of up to an
aggregate of 200,000,000 shares of PW Common Stock. As of March 5, 1998
189,197,660 shares of PW Common Stock were issued, of which 50,001,248 were held
as treasury shares of the Company. Approximately 45,220,845 shares of PW Common
Stock have been reserved for issuance pursuant to various employee compensation
and benefit plans of the Company and of the Company's subsidiaries.
Approximately 1,256,360 shares of stock will be issuable upon conversion of
outstanding convertible securities of the Company that are convertible over the
next four years. The Board of Directors believes it would be desirable to
increase the number of shares of authorized PW Common Stock in order to make
available additional shares for purposes that the Board of Directors may
hereafter determine to be in the best interests of PW and its stockholders,
including possible stock dividends, stock splits, employee benefit plan
issuances, acquisitions, financings and for such other corporate purposes as may
arise. Therefore, the Board of Directors has approved and recommends to
stockholders an increase in the number of shares of authorized PW Common Stock
to an aggregate of 400,000,000 shares in accordance with the Amendment.
Other than as set forth above, the Company has no specific plans currently
calling for issuance of any of the additional shares of PW Common Stock. The
rules of the New York Stock Exchange currently require stockholder approval of
issuances of PW Common Stock under certain circumstances including those in
which the number of shares to be issued is equal to or exceeds 20% of the number
of shares outstanding (or, for the Company as of March 5, 1998, issuance of more
than approximately 37,839,532 shares of PW Common Stock) except in certain
circumstances including public offerings for cash and certain bona fide private
offerings. In other instances, the issuance of additional shares of authorized
PW Common Stock would be within the discretion of the Board of Directors,
without the requirement of further action by stockholders. All newly authorized
shares would have the same rights as the presently authorized shares, including
the right to cast one vote per share and to participate in dividends when and to
the extent declared and paid. Under PW's Restated Certificate of Incorporation,
Yasuda has certain preemptive rights that allow it to maintain its proportionate
equity interest in PW as long as it continued to own a specified minimum amount
of PW securities. No other stockholders of PW have preemptive rights.
Accordingly, the rights of existing stockholders may, depending on how
additional shares of PW Common Stock are issued, be diluted by their issuance.
While the issuance of shares in certain instances may have the effect of
forestalling a hostile takeover, the Board of Directors does not intend or view
the increase in authorized PW Common Stock as an anti-takeover measure, nor is
the Company currently aware of any proposed or contemplated transaction of this
type.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSED
AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO INCREASE TO
400,000,000 THE NUMBER OF SHARES OF PW COMMON STOCK AUTHORIZED FOR ISSUANCE.
Assuming the presence of a quorum, the affirmative vote of the holders of a
majority of all the shares of PW Common Stock outstanding is required for
adoption of the proposed Amendment to the Company's Restated Certificate of
Incorporation. Under applicable Delaware law, in determining whether the
proposal has received the requisite number of affirmative votes, abstentions and
instances where brokers are prohibited from exercising discretionary authority
for beneficial owners who have not returned a proxy ("broker non-votes") will be
counted and will have the same effect as a vote against the proposal.
17
<PAGE> 20
III. SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected the accounting firm of Ernst & Young to
examine PW's accounts for the 1998 fiscal year. Ernst & Young or one of its
predecessor firms have 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 1999 MEETING
Proposals of stockholders intended for presentation at the 1999 Annual
Meeting must be received by the office of the Secretary of PW no later than
November 27, 1998.
Theodore A. Levine
Secretary
18
<PAGE> 21
ANNEX I
PROPOSED AMENDMENT TO ARTICLE IV
OF THE RESTATED CERTIFICATE OF INCORPORATION
OF PAINE WEBBER GROUP, INC.
Article IV, Section 1, is hereby amended to read in its entirety as
follows:
SECTION 1. Shares, Classes and Series Authorized. The total number of
shares of capital stock which the Corporation shall have authority to issue is
20,000,000 shares of Series Preferred Stock of the par value of $20 each and
400,000,000 shares of Common Stock of the par value of $1 each. Such Series
Preferred Stock and Common Stock are sometimes hereinafter collectively called
"capital stock."
A-1
<PAGE> 22
PROXY PAINE WEBBER GROUP INC.
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 7, 1998
The undersigned having received the accompanying Notice of Annual Meeting
and Proxy Statement of Paine Webber Group Inc. ("PW") dated March , 1998,
hereby appoints Donald B. Marron, Regina A. Dolan 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 12, 1998 at
the Annual Meeting of Stockholders of PW to be held May 7, 1998 or any
adjournment thereof.
- - INSTRUCTION: TO WITHHOLD THE PROXIES' AUTHORITY TO VOTE FOR ANY INDIVIDUAL
DRAW A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW:
J.R. Torell III, R.M. Loeffler, H. Rosovsky, R.A. Dolan
1. ELECTION OF DIRECTORS (nominees listed above)
[ ] FOR All nominees listed (except as marked to the contrary)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed
2. Approval to amend Restated Certificate of Incorporation of PW to increase the
authorized shares
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Ratification of Ernst & Young LLP as PW's independent public accountants
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 23
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 PROPERTY 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.
Signature(s):
------------------------------------
------------------------------------
Date:
------------------------------------
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.
<PAGE> 24
PROXY
PAINE WEBBER GROUP INC.
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 7, 1998
The undersigned having received the accompanying Notice of Annual Meeting
and Proxy Statement of Paine Webber Group, Inc. ("PW") dated March , 1998,
hereby appoints Donald B. Marron, Regina D. Dolan 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 12,
1998 at the Annual Meeting of Stockholders of PW to be held May 7, 1998 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.
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE> 25
Please mark
your votes as
indicated in /X/
this example
INSTRUCTION: TO WITHHOLD THE PROXIES' AUTHORITY TO VOTE FOR ANY INDIVIDUAL DRAW
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW:
FOR WITHHOLD
All nominees listed AUTHORITY
(except as marked to vote for all
to the contrary) nominees listed
J.R. Torell III, R.M. Loeffler,
H. Rosovsky, R.A. Dolan
1. ELECTION OF DIRECTORS / / / /
(nominees listed above)
2. Approval to amend Restated FOR AGAINST ABSTAIN
Certificate of Incorporation / / / / / /
of PW to increase the authorized
shares
3. Ratification of Ernst & Young FOR AGAINST ABSTAIN
LLP as PW's independent public / / / / / /
accountants
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE.
Signature(s) Date
------------------------------------------- ---------------
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.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 26
PROXY
CONFIDENTIAL VOTING INSTRUCTIONS TO: MELLON BANK, N.A.
AS CUSTODIAN UNDER PAINE WEBBER GROUP INC. STOCK AWARD PLANS.
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 , 1998,
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 12, 1998 at
the Annual Meeting of Stockholders of PW to be held May 7, 1998 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 7, 1998.
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> 27
Please mark
your votes as
indicated in /X/
this example
INSTRUCTION: TO WITHHOLD THE PROXIES' AUTHORITY TO VOTE FOR ANY INDIVIDUAL DRAW
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW:
FOR WITHHOLD
All nominees listed AUTHORITY
(except as marked to vote for all
to the contrary) nominees listed
J.R. Torell III, R.M. Loeffler,
H. Rosovsky, R.A. Dolan
1. ELECTION OF DIRECTORS / / / /
(nominees listed above)
2. Approval to amend Restated FOR AGAINST ABSTAIN
Certificate of Incorporation / / / / / /
of PW to increase the authorized
shares
3. Ratification of Ernst & Young FOR AGAINST ABSTAIN
LLP as PW's independent public / / / / / /
accountants
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE.
Signature(s) Date
------------------------------------------- ---------------
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.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 28
PROXY
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 , 1998,
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 12, 1998 at
the Annual Meeting of Stockholders of PW to be held May 7, 1998 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 7, 1998.
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> 29
Please mark
your votes as
indicated in /X/
this example
INSTRUCTION: TO WITHHOLD THE PROXIES' AUTHORITY TO VOTE FOR ANY INDIVIDUAL DRAW
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW:
FOR WITHHOLD
All nominees listed AUTHORITY
(except as marked to vote for all
to the contrary) nominees listed
J.R. Torell III, R.M. Loeffler,
H. Rosovsky, R.A. Dolan
1. ELECTION OF DIRECTORS / / / /
(nominees listed above)
2. Approval to amend Restated FOR AGAINST ABSTAIN
Certificate of Incorporation / / / / / /
of PW to increase the authorized
shares
3. Ratification of Ernst & Young FOR AGAINST ABSTAIN
LLP as PW's independent public / / / / / /
accountants
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE.
Signature(s) Date
------------------------------------------- ---------------
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.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
