<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 , 2000
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, 2000 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 5 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 authorize the issuance of up to 150,000,000 shares of Non-Voting
Common Stock, par value $1.00 per share (the "Non-Voting Common
Stock), of PW.
3. The ratification of the selection by the Board of Directors of Ernst &
Young LLP as PW's independent public accountants for the 2000 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 9,
2000 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, 2000, 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, 1999, is being
furnished to stockholders together with this Proxy Statement, and mailing to
stockholders is expected to begin on or about March , 2000.
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 or vote your
shares online or by telephone according to instructions on the proxy card. 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 the Restated Certificate of
Incorporation of PW to authorize the issuance of up to 150,000,000 shares of
Non-Voting Common Stock of PW; and (iii) the ratification of the selection of
Ernst & Young LLP ("Ernst & Young")as PW's independent public accountants for
the 2000 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
As of the close of business on March 9, 2000 (the "Record Date"), there
were outstanding 145,479,208 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, except for the election of directors. The affirmative vote of the
holders of a majority of the shares of PW Common Stock is necessary for the
approval to amend the Restated Certificate of Incorporation of PW. The
affirmative vote of a majority of the shares of PW Common Stock present in
person or by proxy at the Annual Meeting is necessary for the ratification of
the selection of Ernst & Young as PW's independent public accountants for the
2000 fiscal year. The election as directors of PW of the persons named under
"Election of Directors" in this Proxy Statement require a plurality of votes
cast. Abstentions from voting on the approval to amend the
<PAGE> 4
Restated Certificate of Incorporation of PW and the ratification of the
selection of the independent public accountants will have the same effect as a
vote against such matter. With regard to the election of directors, votes may be
cast in favor of or withheld with respect to any or all nominees; votes that are
withheld will be excluded entirely from the vote and will have no effect. Broker
non-votes on the ratification of the selection of the independent public
accountants 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 18,615 of its
customers, including officers and directors of the Company, 18,555,418 shares of
PW Common Stock (constituting approximately 12.7% 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, 1999.*
<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) 21.7%
260 Long Ridge Road
Stamford, Connecticut 06927
The Yasuda Mutual Life Insurance 11,258,022(2) 7.7
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 among 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 approval to amend the Restated
Certificate of Incorporation of PW and the ratification of the selection of
Ernst & Young as PW's independent public accountants for the 2000 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 approval to
amend the Restated Certificate of Incorporation of PW and the ratification
of the selection of Ernst & Young as PW's independent public accountants.
- ------------------
* The table above does not include 12,082,375 shares of PW Common Stock (8.3%
of class outstanding) held, as of December 31, 1999, by a trustee under the
Company's 401(k) Plus Plan for the benefit of the Company's employees.
2
<PAGE> 5
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
five directors. Management proposes the election of the nominees named hereafter
to hold office for a term of 3 years, ending at the 2003 Annual Meeting. Each of
the nominees is currently a director of PW. The eight 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 2003
E. GARRETT BEWKES, JR., 73, is a private investor. He was a consultant to
PW from February 15, 1989 to December 31, 1995 and has recommenced service as a
consultant to PWI effective May 1, 1999. 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 Advisors Trust, Mitchell Hutchins Portfolios,
PaineWebber Index Trust, Mitchell Hutchins Institutional Series and Managed High
Yield Plus Fund Inc. Mr. Bewkes is currently a director of Interstate Bakeries
Corporation, PW Technology Partners, L.P. and PW After-Tax Partners, LP. Mr.
Bewkes became a director of PW in 1987.
FRANK P. DOYLE, 69, 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 Compaq Computer Corporation, Roadway Corporation and US
Office Products Company. Mr. Doyle became a director of PW in December 1994.
NAOSHI KIYONO, 57, is a Senior Managing Director and Chief Investment
Officer of Yasuda, whose principal business is underwriting and marketing life
insurance. He was a Managing Director and General Manager, International
Investment Department of Yasuda from April 1, 1995 to March 31, 1999, and was a
Director from July 1991 to March, 1995 and the General Manager, Securities
Investment Department from April, 1990 to March 31, 1999. Mr. Kiyono became a
director of PW in March, 1995.
EDWARD RANDALL, III, 73, 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 EOG Resources, Inc., Kinder Morgan, Inc. and EcOutlook.com, Inc. Mr.
Randall became a director of PW in 1983.
KEN-ICHI SEKIGUCHI, 51, is a Director and General Manager, Global
Investment Department of Yasuda, positions he has held since July 1, 1999 and
April 1, 1997 respectively. He was General Manager, International Investment
Department of Yasuda from April 1996 to April 1997 and a General Manager, Aomori
Branch from April 1994 to March 1996. Mr. Sekiguchi became a director of PW in
March, 1999.
3
<PAGE> 6
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
TERM EXPIRING IN 2001
JOHN R. TORELL III, 60, has been Chairman of Torell Management Inc.
(private investment company) since 1990. 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 and loan) from 1988 to 1989, and President of
Manufacturers Hanover Corp. from 1982 to 1988. Mr. Torell is a director of
American Home Products Corp., Heartland Technologies Inc. and US WEB/CKS Inc.
Mr. Torell became a director of PW in 1997.
ROBERT M. LOEFFLER, 76, 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. and Reading Entertainment Inc. Mr.
Loeffler has been a director of PW since 1978.
HENRY ROSOVSKY, 72, 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 The Japan Fund, Inc. Mr. Rosovsky became a director of PW in 1984.
REGINA A. DOLAN, 45, is Senior Vice President and Chief Administrative
Officer of PW and Executive Vice President 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 Financial Officer of PW in
February, 1994. She was Chief Financial Officer of PW and PWI until November 15,
1999. 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. Ms. Dolan became a
director of PW on May 7, 1998.
TERM EXPIRING IN 2002
DONALD B. MARRON, 65, 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, 58, is the Chairman of the Board and Chief Executive Officer of
The Fantastic Corporation. He was Chief Executive Officer of Swiss Post from
June 1998 to January 31, 2000. He was a private investor from October 1997 to
September 1998. Prior thereto he 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, 72, was President and Chief Executive Officer of Texaco
Inc. from January, 1987 to April, 1993. Mr. Kinnear is also a director of
Corning Inc. and Saudi Arabian Oil Company. Mr. Kinnear became a director of PW
in 1994.
JOSEPH J. GRANO, JR., 52, 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.
In addition to the foregoing, Yuji Oshima, Chairman of Yasuda, serves as a
non-voting senior advisor to the Board of Directors of PW.
4
<PAGE> 7
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 five times during fiscal 1999.
The Audit Committee reviews internal and external audit procedures of the
Company. Members of this Committee are Messrs. Torell (chairman), Braun, Doyle,
Kinnear, Kiyono and Loeffler, and it met four times during fiscal 1999.
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 four times in fiscal 1999. 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), Braun, Loeffler and
Torell and it met six times in fiscal 1999.
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 four times in fiscal 1999.
The Board of Directors of PW met five times during fiscal 1999. During his
tenure on the Board in fiscal 1999, 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 Mr. Kiyono.
CERTAIN ARRANGEMENTS WITH DIRECTORS
Pursuant to the Investment Agreement between Yasuda and PW, Messrs. Kiyono
and Sekiguchi 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.
5
<PAGE> 8
COMPENSATION OF DIRECTORS
During 1999, 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 also 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.
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. Such directors may elect to defer some or all of their directors'
fees and stock grants in an unfunded deferred compensation account denominated
and payable in shares of PW Common Stock.
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 4, 2000, as of which date
there were outstanding 144,821,587 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)..................................... 490,851
E. Garrett Bewkes, Jr. (3)................................ 57,953
Reto Braun (3)............................................ 45,658
Regina A. Dolan (3)(4).................................... 393,840
Frank P. Doyle (3)........................................ 47,261
Joseph J. Grano, Jr. (3)(4)............................... 967,970
James W. Kinnear (3)...................................... 40,666
Naoshi Kiyono............................................. 1,162
Robert M. Loeffler (3).................................... 31,419
Donald B. Marron (2)(3)(4)................................ 2,929,281
Edward Randall, III (2)(3)................................ 502,548
Henry Rosovsky (3)........................................ 21,145
Ken-ichi Sekiguchi........................................ 1,162
Mark B. Sutton (3)(4)..................................... 576,735
John R. Torell III(3)..................................... 29,237
6,136,888
All present nominees, directors continuing in office and
executive officers as a group, including those named
above (19 persons)...................................... 7,021,171
</TABLE>
- ---------------
(1) No director, nominee or executive officer directly owns 1% or more of PW
Common Stock, except Mr. Marron who owns 2.0%. All directors, nominees and
executive officers as a group (19 persons) beneficially own 4.8%.
(2) Shares shown for the nominees, directors and named executive officers
include an aggregate of 179,015 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 (2,240), and
Mr. Randall (176,775).
6
<PAGE> 9
(3) Shares shown for the nominees, directors and named executive officers
include an aggregate of 3,770,750 shares of PW Common Stock covered by
options presently exercisable or becoming exercisable within sixty days,
held by Mr. Marron (1,743,750), Mr. Baum (414,750), Mr. Bewkes (22,500), Mr.
Braun (22,500), Ms. Dolan (336,000), Mr. Doyle (22,500), Mr. Grano
(711,000), Mr. Kinnear (22,500), Mr. Loeffler (15,000), Mr. Randall
(22,500), Mr. Rosovsky (15,500), Mr. Sutton (399,750), and Mr. Torell
(22,500).
(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 401(k) Plus Plan, including the following nominees, directors and
named executive officers: Mr. Marron (39,527), Mr. Baum (264), Ms. Dolan
(2,016), Mr. Grano (829), and Mr. Sutton (265).
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 10% of a registered class of PW's equity securities to file
reports of ownership and 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, 1999, all filing requirements applicable to its officers,
directors, and greater than 10% beneficial owners were complied with.
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 most 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 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 nine publicly-owned and private companies
as of December 31, 1999. Five of the companies in the comparative group make up
the Peer Group Index used for the Performance Graph set forth below. The firms
excluded from the Peer Group Index were either not publicly-owned at year end,
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 75(th) percentile of the comparative group based upon
performance, with the opportunity for total remuneration to rise above this
level upon achievement of exceptional results.
7
<PAGE> 10
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 longer 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, 1998 or 1999. 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"). The 1999 Executive Incentive Compensation Plan was approved by the
stockholders of the Company in May 1999. In accordance with and in compliance
with Section 162(m) of the Code and the provisions of the EICP, before March
31(st) of the performance year, the Compensation Committee establishes a formula
under this plan 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, when 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 1999 performance, PW's fourth consecutive record year
during which net revenues rose to $5.3 billion, earnings per share (diluted)
grew 45% and the Company's overall financial strength improved significantly,
annual incentives awarded by the Compensation Committee to executive officers
were 49.6% higher than the amounts awarded to these individuals in 1998 and
ranged from $1.56 million up to $14.14 million. Continuing the Committee's
policy of paying a meaningful portion of annual incentive awards in equity, over
24% of annual incentive 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.
The 1999 Executive Incentive Compensation Plan provides for the payment of
formula awards based upon Annual Profits as described above. In addition, the
1999 Executive Incentive Compensation Plan incorporates the performance goal
provisions in the 1994 Executive Stock Award Plan which were required to be
submitted to stockholders to continue to qualify as "qualified performance-based
compensation" under Section 162(m)of the Code.
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 1999 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 stockholder value.
8
<PAGE> 11
The Committee does not consider the existing 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 that 1999 was the best year recorded by PW in its 120 year history
and the Company's seventh year of record earnings in the last nine years, as
well as the outstanding longer term performance of PW under his leadership and
its strategic progress. Factors considered by the Compensation Committee include
the Company's strength across all business lines with record results in
commissions, asset management and investment banking. These results reflect the
Chief Executive Officer's commitment to a consistent business strategy, domestic
focus and conservative risk profile. As a result of the Chief Executive
Officer's successful efforts during 1999, the Compensation Committee believes
that PW has performed exceptionally well and continues to be well positioned
with high potential 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 $14.14 million
represented an increase of about 46% from 1998 to 1999, as compared to an
decrease of approximately 5% in 1998. As discussed above, Mr. Marron's annual
stock option grant of 650,000 shares represented an increase of 30% in shares
from his 1998 grant, as compared to a increase of 25% in 1998.
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 that it deems to be in the best interests of
the Company and its stockholders, but that may not always qualify for full tax
deductibility.
COMPENSATION COMMITTEE:
Frank P. Doyle, Chairman
Reto Braun
Robert M. Loeffler
John R. Torell III
9
<PAGE> 12
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, 1999, 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, 1999,
1998 and 1997 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, 1999 to December 31, 1999 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, 1999
to December 31, 1999 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, 1999.
I. SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------- --------------------------
RESTRICTED SECURITIES
STOCK/UNIT UNDERLYING
AWARD(S) OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1)(2)(3)(4) (# SHARES)(5) COMPENSATION(7)
--------------------------- ---- ------ ----- ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Donald B. Marron 1999 $800,000 $10,662,500 $3,473,813 650,000 $603,000(8)
Chairman of the Board and 1998 800,000 7,287,500 2,380,535 500,000 118,109(6)
Chief Executive Officer, 1997 800,000 7,662,500 2,478,250 400,000 312,212(6)
PW and PWI
Joseph J. Grano, Jr. 1999 450,000 7,362,500 2,393,625 400,000 310,500(8)
President, PWI 1998 450,000 5,037,500 1,640,490 325,000 2,400
1997 450,000 5,262,500 1,696,911 250,000 141,590(9)
Steven P. Baum 1999 500,000 5,112,500 1,657,125 200,000 107,800(8)
Executive Vice President, 1998 500,000 3,286,250 1,064,456 200,000 2,400
Director of 1997 500,000 3,387,500 1,086,520 150,000 2,375
Capital Markets, PWI
Mark B. Sutton 1999 250,000 4,325,000 1,399,350 250,000 109,400(8)
Executive Vice President, 1998 250,000 2,740,625 884,985 200,000 2,400
President, 1997 250,000 2,825,000 903,411 150,000 178,032(10)
Private Client Group, PWI
Regina A. Dolan 1999 250,000 2,450,000 785,588 125,000 76,200(8)
Senior Vice President, 1998 250,000 1,325,000 419,361 125,000 16,863(6)
Chief Administrative Officer, PW 1997 250,000 1,325,000 415,064 100,000 72,214(6)
Executive Vice President, Chief
Administrative Officer, PWI
</TABLE>
- ------------
(1) Amounts shown for 1999 include awards of restricted stock and/or units made
in January 2000 for performance in 1999.
(2) The number and value of restricted stock and/or units held by executive
officers named in the table as of December 31, 1999 plus shares granted in
2000 for 1999 performance based on the closing price of PW's Common Stock
($38.8125) on the New York Stock Exchange on December 31, 1999, are as
follows: Mr. Marron (245,744 shares -- $9,537,939); Mr. Grano (166,978
shares -- $6,480,834); Mr. Baum (75,838 shares -- $2,943,462); Mr. Sutton
(92,401 shares -- $3,586,314) and Ms. Dolan (46,421 shares -- $1,801,715).
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 (81,772; 80,914; 52,180 and 30,878
shares vesting in 2000, 2001, 2002 and 2003, respectively); Mr. Grano
(54,114; 55,631; 35,957 and 21,276 shares vesting in 2000, 2001, 2002 and
2003, respectively); Mr. Baum (36,853; 24,255 and 14,730 shares vesting in
2001, 2002, and 2003, respectively); Mr. Sutton (28,773; 30,832; 20,358 and
12,438 shares vesting in 2000, 2001, 2002 and 2003, respectively); and Ms.
Dolan (13,155; 15,548; 10,735 and 6,983 shares vesting in 2000, 2001, 2002
and 2003, respectively).
(3) On June 30, 1999 Mr. Marron was awarded Restricted Units in lieu of
Restricted Stock he had already been awarded. The units settle the same as
shares at time of vesting. Restricted Units, as
10
<PAGE> 13
opposed to Restricted Stock, are awarded to anyone who will turn 65 years
old during the term of the award.
(4) Dividends are paid on restricted stock and dividend equivalents are paid on
restricted units.
(5) Amounts shown for 1999 include option grants made in January 2000 for
performance in 1999.
(6) Amounts shown for 1998 and 1997 result from the operation of the terms of
the Key Executive Equity Program. Approximately thirty (30) key executives
participated in the program as of August 10, 1998 when a call was made to
prepay the outstanding debentures on October 12, 1998. This program was
terminated on this date following the conversion or redemption of all
remaining debentures. These amounts include for 1998 and 1997 respectively:
(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 -- $32,376;
$59,812); and Ms. Dolan ($4,047; $7,314) 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 -- $83,333;
$250,000)and Ms. Dolan ($10,416; $62,500). The program was instituted in
1988 to give key executives an incentive linked to the price of PW Common
Stock, while requiring such executives to make an investment in PW.
(7) Amounts for 1999, 1998 and 1997, respectively, consisting of matching
contributions made by the Company to accounts of employees under the
PaineWebber 401(k) Plus Plan ("401(k) Plan") including, Mr. Marron ($3,000;
$2,400; $2,400); Mr. Grano ($3,000; $2,400; $2,375); Mr. Baum ($3,000;
$2,400; $2,375); Mr. Sutton ($3,000; $2,400; $2,400); and Ms. Dolan
($3,000; $2,400; $2,400). Also included in 1999 amounts are defined
retirement contributions under the 401(k) Plan made by the Company to Mr.
Baum ($4,800); Mr. Sutton ($6,400); and Ms. Dolan ($3,200).
(8) Amounts include credits for Company contributions to the accounts of the
named executives officers under the Deferred Compensation Agreements with
each such officer (the "DCAs). The DCAs are non-qualified defined
contribution arrangements that replaced the Supplemental Employee's
Retirement Plan as of January 1, 1999, for each such officer. Amounts for
1999 are as follows: Mr. Marron ($600,000); Mr. Grano ($307,500); Mr. Baum
($100,000); Mr. Sutton ($100,000); and Ms. Dolan ($70,000).
(9) A portion of this amount represents Life Insurance Premiums ($65,533), and
the taxable amount on trips ($73,682) for Mr. Grano.
(10) A portion of this amount represents the taxable amount on trips ($175,632)
for Mr. Sutton.
The following table sets forth certain information concerning stock options
granted by the Company to the Chief Executive Officer and each of the four most
highly compensated executive officers of the Company (other than the Chief
Executive Officer) in January 2000 for performance in 1999. The data in the
column shown below relating to the hypothetical present values on the date of
grant of stock options granted in January 2000 are presented pursuant to
Securities and Exchange Commission rules and are calculated under the modified
Black-Scholes Model for pricing options. The Company is not aware of any model
or formula that will determine with reasonable accuracy a present value for
stock options. The actual before-tax amount, if any, realized upon the exercise
of stock options will depend upon the market price of PW Common Stock relative
to the exercise price per share of PW Common Stock of the stock option at the
time the stock option is exercised. There is no assurance that the present value
of the stock options reflected in this table will actually be realized.
II. OPTION GRANTS IN LAST FISCAL YEAR --
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE/
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE ($)(2)
---- ---------- ------------ ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
D.B. Marron................ 650,000 12.05% $38.1875 1/20/07 $6,190,600
J.J. Grano, Jr............. 400,000 7.42% 38.1875 1/20/07 3,809,600
S.P. Baum.................. 200,000 3.71% 38.1875 1/20/07 1,904,800
M.B. Sutton................ 250,000 4.63% 38.1875 1/20/07 2,381,000
R.A. Dolan................. 125,000 2.32% 38.1875 1/20/07 1,190,500
</TABLE>
- ---------------
(1) Seven-year non-qualified stock options granted on January 20, 2000 for
performance in 1999 will become exercisable 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
11
<PAGE> 14
assumptions used in hypothesizing the above options grant date present
values include the stock's expected volatility of 38.50%, risk-free rate of
return of 6.60%, projected dividend yield of 1.26%, projected time to
exercise (3.9 years) and projected risk of forfeiture or non-marketability
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, 1999 to December 31, 1999 and unexercised options held as of December
31, 1999:
III. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FY-END OPTIONS AT FY-END
ACQUIRED ON VALUE ------------------------------ ---------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE(1) EXERCISABLE UNEXERCISABLE(1)
---- ----------- -------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
D.B. Marron -0- -0- 1,706,250 1,587,500 $44,798,828 $3,730,469
J.J. Grano, Jr. -0- -0- 688,500 997,500 17,200,219 2,317,031
S.P. Baum -0- -0- 396,000 568,750 9,627,250 1,504,297
M.B. Sutton -0- -0- 381,000 618,750 9,245,063 1,535,547
R.A. Dolan -0- -0- 321,000 365,000 8,118,188 1,052,500
</TABLE>
- ---------------
(1) Includes securities underlying options granted in January 2000 for
performance in 1999.
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, 1999, approximately
12,150 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, 1998 is $150,000 and the maximum annual
pension benefit which may be accrued for calendar year 1999 is $1,875.
Effective as of December 31, 1998, the Company amended the PW Pension Plan
to cease future accruals under the plan for all participants, except for a
limited number of grandfathered participants who had attained a specified age
and service critera as of that date. Grandfathered participants could elect to
continue to participate in the PW Pension Plan in lieu of eligibility for
contributions under a new tax-qualified profit-sharing plan. Of the named
executive officers, only two were eligible and elected to receive additional
accruals in the PW Pension Plan after 1998. The years of credited service for
purposes of determining benefits under the PW Pension Plan as of December 31,
1998 for the named executive officers were: Messrs. Marron (22.6 years), Grano
(10.8 years), Sutton (12.3 years), Baum (3.9 years) and Ms. Dolan (5.2 years).
For each of the named executive officers the estimated annual benefits payable
on retirement at age 65, taking into account actual pension benefits accrued to
December 31, 1998 (and for Messrs. Marron and Grano and Ms. Dolan projecting
future benefits to retirement at the current maximum additional annual benefit
for 1999 of $1,875), are as follows: Messrs. Marron ($113,730), Grano ($45,725),
Sutton ($18,015), Baum ($7,500) and Ms. Dolan ($9,844).
The Company also maintains a non-qualified Supplemental Employee's
Retirement Plan ("SERP") for one executive officer who is not a named executive
officer. If such officer retires at age 65 with 15 years of service, the SERP
provides for an annual retirement benefit for life equal to 75% of the
participant's highest annual rate of base salary (but not in excess of the
annual rate of base salary in effect on December 31, 1998), subject to offsets
for benefits paid under Social Security and certain retirement programs of the
Company. SERP benefits become fully vested upon a Change in Control of PW.
12
<PAGE> 15
PERFORMANCE GRAPH
The following chart compares the Company's cumulative total return on
stockholder investment over a 5-year period with that of (1) the S&P 500 Index,
(2) an index comprised of the common stocks of The Bear Stearns Companies Inc.,
Merrill Lynch & Co., Inc., Morgan Stanley Dean Witter & Co., Donaldson, Lufkin &
Jenrette, Inc. and Lehman Brothers Holdings Inc. (the "Peer Group"). Total
shareholder return for the Peer Group reflects Morgan Stanley Group, Inc. and
Dean Witter, Discover & Co., Inc. returns individually through 5/30/97 and the
combined entity thereafter. Also reflects Donald Lufkin & Jenrette, Inc. total
shareholder return for the period beginning 10/25/95, the date on which the
company became publicly traded. 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 because it covers the five
major publicly traded companies that the Compensation Committee reviewed and
evaluated in making compensation determinations. The chart assumes $100 invested
on December 31, 1994 and reinvestment of all dividends.
[COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN GRAPH]
<TABLE>
<CAPTION>
PAINEWEBBER PEER GROUP S&P 500
----------- ---------- -------
<S> <C> <C> <C>
1994 100.00 100.00 100.00
1995 136.70 143.00 137.60
1996 196.40 212.40 169.20
1997 367.70 381.80 225.60
1998 415.60 402.30 290.10
1999 422.20 681.50 351.10
</TABLE>
13
<PAGE> 16
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 with 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.
Upon a Change in Control (as defined in the SERP), each participant shall
become fully vested, without reduction, in his or her SERP benefits. If a
participant's employment is terminated other than for Cause (as defined in the
SERP) within a 2-year period following the date of the Change in Control, the
participant's SERP benefit will be payable to him within 5-days following the
date of such termination of employment. The Change in Control provision also
places certain limitations on the Company's ability to change trustees following
a Change in Control.
CERTAIN TRANSACTIONS AND ARRANGEMENTS
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 4-year unsecured loan to the partnership in the amount of $25.5 million.
The Company had agreed to purchase the loan from this lender under certain
specified circumstances. On January 8, 1999 the entire amount of the loan was
repaid and the Company's obligation to purchase the loan was therefore
terminated.
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 $70,202 and the employee limited partners contributed an aggregate of
$6,950,000. In February 1996, an independent third-party lender entered into a
revolving credit 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 had agreed to purchase the loan from this
lender, under certain specified circumstances. On September 15, 1999 the
partnership repaid the entire outstanding principal amount of this loan
($6,000,000) plus interest.
14
<PAGE> 17
PW Partners 1997 L.P. (the "1997 LP") is a limited partnership in which 96
key employees (including the named executive officers) were participants.
Interests in the partnership do not vest for three years from the date of
formation of the partnership. The purpose of the partnership is to permit these
individuals collectively to invest in certain investment opportunities offering
a potential for long-term capital appreciation. The general partner, a
wholly-owned subsidiary of the Company, has committed to make capital
contributions over time to the partnership of up to approximately $75,000,000
and the limited partners have committed to contribute up to approximately
$15,000,000 in the aggregate. The general partner receives a preferred rate of
return on its capital contributions. Before the limited partners may receive any
distributions, the general partner must receive distributions totaling its
aggregate capital contributions plus its preferred rate of return. To the extent
that the partnership's profits exceed the amount required to satisfy the general
partners' distribution obligation, 90% of such profits will be divided among the
limited partners and 10% will be allocated to the general partner.
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 Common Stock and a restricted stock unit. Options and
restricted stock units awarded under the program vested in June 1998 but are
subject to forfeiture in certain specified events. Dividend or dividend
equivalents are paid on the underlying restricted stock unit shares.
Participants were not required to make a direct investment in the program
however, each of their 1995 bonuses were reduced by the amount of their
individual awards.
Other Transactions. During 1999, 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-collectability.
During 1999, 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 services
and financial consulting. In December 1998, PW and Yasuda entered into a Joint
Venture Agreement. Pursuant to this agreement, PW and Yasuda have established an
entity in Japan that will develop, sponsor, market and manage mutual funds and
other asset management business.
Pursuant to a consulting agreement entered into between Mr. Bewkes, a
director of PW, and PWI, Mr. Bewkes agreed to perform consulting and advisory
services for PWI as of May 1, 1999 for a fee of $20,000 per month. The
consulting agreement is terminable at will by either party upon thirty-days
prior notice. PWI paid $40,000 in cash to Mr. Bewkes for the months of May and
June, 1999. Pursuant to the PW 1999 Non-Qualified Deferred Compensation Plan for
Consultants, Mr. Bewkes entered into a deferral election agreement which
provides for the deferral of 100% of his remaining consulting fees payable under
the agreement. The deferred consulting fees have been maintained in a
hypothetical account and are expressed as equivalent PW Common Stock units. The
deferred amount will be paid in PW Common Stock in installments over a ten-year
period following Mr. Bewkes termination of service as a director of PW.
Messrs. Sekiguchi and Kiyono are directors of 181 West Madison Ltd. ("181
Ltd."), a wholly-owned subsidiary of Yasuda. PWI became a lessee of a certain
property in Chicago, effective December 1, 1990, that is partially and
indirectly owned by 181 Ltd. During the fiscal year 1999, PWI paid $3,280,000 as
rents for such property, which exceeded 5% of 181 Ltd.'s consolidated gross
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<PAGE> 18
revenues and, during the fiscal year 2000, will pay approximately the same
amount in 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 $410,000,000. This Company subsidiary also owns a 12% interest in
the general partner and has made a loan to the advisor with a maturity of 5
years. In January 2000, $250,000 principal amount of this loan was repaid and
the remaining loan amount is $1,000,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1999, the Company's Compensation
Committee was composed of Messrs. Doyle, Braun, Loeffler & Torell.
II. APPROVAL OF THE AMENDMENT TO PW'S RESTATED
CERTIFICATE OF INCORPORATION
Subject to the receipt of stockholder approval, the Company has agreed to
amend Article IV of the Restated Certificate of Incorporation of the Company
("Amendment") to authorize a new class of non-voting common stock to be
designated "Non-Voting Common Stock," consisting of 150,000,000 shares having a
par value of $1.00 per share and having no voting rights except on certain
limited matters as set forth below ("Non-Voting Common Stock"). The Non-Voting
Common Stock will be issued upon the occurrence of certain conditions described
below and will have dividend and distribution rights and rights on dissolution
of the Company that are identical to those of PW's Common Stock except that
dividends on shares of Non-Voting Common Stock payable in common stock will be
payable in shares of Non-Voting Common Stock rather than PW Common Stock.
Pursuant to resolutions adopted March , 2000, the Board of Directors
adopted a resolution setting forth the Amendment, declaring its advisability and
directing that the Amendment be considered at the Annual Meeting. Before voting
on the proposal to approve the Amendment, stockholders are urged to read
carefully the following section of this Proxy Statement, which describes the
Amendment and its purpose.
Subject to the receipt of stockholder approval of the Amendment, the Board
of Directors intends to prepare and file a Certificate of Amendment of Restated
Certificate of Incorporation of the Company, which will become effective
immediately upon acceptance of the filing with the Secretary of State of
Delaware. The full text of the proposed Amendment to Article IV of the Restated
Certificate of Incorporation of the Company is set forth as Exhibit A to this
Proxy Statement and is incorporated herein by reference. The following summary
should be read in conjunction with, and is qualified in its entirety by
reference to, Exhibit A.
REASONS FOR THE AMENDMENT
The Company has filed an application with the Office of Thrift Supervision
("OTS") to establish a de novo federal savings bank in order to be able to offer
trust services to its customers nationwide. Upon the formation of the federal
savings bank, the Company would become a savings and loan holding company.
General Electric Company ("GE"), which currently holds approximately 21.7% of
the outstanding PW Voting Common Stock through General Electric Capital
Corporation ("GECC")and GECS Holdings, Inc. ("Holdings" and, together with GECC
and GE, "GE"), also has filed an application with the OTS to convert GE Capital
Consumer Card Co., an Ohio-chartered bank ("GE Bank"), to a federal savings
bank. Upon the conversion of GE Bank to a federal savings bank, GE and any
subsidiary companies that directly or indirectly control the savings bank would
also become savings and loan holding companies.
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<PAGE> 19
Applicable federal law prohibits a savings and loan holding company from
retaining more than 5 percent of the voting stock of an unaffiliated savings and
loan holding company or federal savings bank. Thus, if the applications of both
the Company and GE were approved and each company became a savings and loan
holding company by acquiring a federal savings bank, under current federal law
GE would not be able to retain more than 5 percent of PW's Common Stock.
Legislation has been introduced in both the United States House of
Representatives and the Senate and has passed the Senate Committee on Banking,
Housing and Urban Affairs that would allow the OTS to permit a savings and loan
holding company to retain a passive investment in another savings and loan
holding company of more than 5 percent of such company's voting common stock. If
such legislation were enacted into law as proposed and both GE and the Company
were to become savings and loan holding companies, it may be possible for GE to
obtain OTS approval to retain its entire investment in the Company without
change. However, the timing and terms of such legislative action are uncertain
and the Company cannot predict whether or when this exception would become
available.
In order to resolve this issue in a timely manner consistent with
applicable law, the Company intends, subject to receipt of stockholder approval,
to exchange the shares of PW Common Stock owned by GE in excess of 5.0 percent
of the total outstanding PW Common Stock for shares of Non-Voting Common Stock
on a one-to-one basis in a tax-free exchange. If all of the shares of PW Common
Stock GE owned in excess of 5.0 percent of the total outstanding shares of PW
Common Stock as of March 9, 2000 were exchanged into shares of Non-Voting Common
Stock on a one-to-one basis, the Company would issue 24,249,640 shares of
Non-Voting Common Stock. The Company intends to file the Certificate of
Amendment of Restated Certificate of Incorporation promptly following receipt of
stockholder approval.
The Company, GE, GECC and GECS are subject to an Amended and Restated
Stockholders Agreement, dated August 6, 1997, as amended ("Stockholders
Agreement"), which, among other things, sets forth the circumstances under which
GE can vote or dispose of the PW Common Stock that it holds. The Stockholders
Agreement will be further amended and restated to accommodate this transaction.
DESCRIPTION OF THE NON-VOTING COMMON STOCK
The powers, preferences, rights, qualifications, limitations and
restrictions of the proposed Non-Voting Common Stock are set forth in full in
the Amendment, as set forth in Exhibit A hereto. Except as described below the
PW Common Stock and the Non-Voting Common Stock shall generally have the same
voting powers, preferences, rights and qualifications, limitations and
restrictions thereof, and shall rank equally, share ratably and be identical in
all respects as to all matters.
VOTING RIGHTS
The Non-Voting Common Stock will not entitle the holder thereof to any
voting rights except (a) as required by law, (b) a class-vote in connection with
a change in the number of authorized shares of Non-Voting Common Stock, (c) in
connection with certain amendments of the voting powers, preferences, rights,
qualifications, limitations or restrictions of the Non-Voting Common Stock that
adversely affects the holders of the Non-Voting Common Stock or (d) the right to
vote together with the holders of PW Common Stock as a single class, if the OTS
approves such vote in connection with a Rule 13 e-3 (going private) transaction
(as defined in Rule 13e-3 (a)(3) under the Securities Exchange Act of 1934),
that is presented to the holders of PW Common Stock for approval and that is not
approved by a majority of disinterested directors of PW. The Non-Voting Common
Stock is, however, convertible into PW Common Stock under certain circumstances
described below.
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<PAGE> 20
DIVIDENDS, COMBINATIONS, SUBDIVISIONS AND MERGERS
All dividends and distributions paid or made to holders of PW Common Stock
and Non-Voting Common Stock will be paid or made in equal amounts, share for
share, to the holders of PW Common Stock and Non-Voting Common Stock as if a
single class, except that, although dividends in shares of common stock shall be
made at the same rate per share, dividends in shares of common stock to holders
of PW Common Stock will be made in PW Common Stock and dividends in shares of
common stock to holders of Non-Voting Common Stock will be made in Non-Voting
Common Stock.
If the Company shall in any manner split, subdivide, or combine the
outstanding shares of PW Common Stock or Non-Voting Common Stock, the
outstanding shares of the other such class of stock shall likewise be split,
subdivided, or combined in the same manner proportionately and on the same basis
per share.
In the event of any merger or consolidation of the Company with or into any
other entity (whether or not the Company is the surviving entity), the holders
of Non-Voting Common Stock will be entitled to receive the same per share
consideration, if any, as the holders of PW Common Stock without requiring the
conversion of such Non-Voting Common Stock immediately prior thereto.
LIQUIDATION
In the event of any liquidation, dissolution or winding up of the Company,
the assets of the Company available for distribution to stockholders will be
distributed in equal amount per share to the holders of the PW Common Stock and
the holders of the Non-Voting Common Stock as if such classes constituted a
single class.
CONVERSION OF NON-VOTING COMMON STOCK
Except as described below, Non-Voting Common Stock will not be convertible
or exchangeable into PW Common Stock or any other security of the Company and PW
Common Stock will not be convertible into Non-Voting Common Stock.
The relevant shares of Non-Voting Common Stock will automatically convert
into shares of PW Common Stock on a share-for-share basis upon the occurrence of
any of the following events: (a) any sale, transfer or disposition by GE or any
of its affiliates of any shares of Non-Voting Common Stock to any transferee
that is not GE or any affiliate of GE in accordance with the provisions of the
Stockholders Agreement (or pursuant to a waiver therefrom); (b) a change in law
or in the interpretation thereof by the OTS permitting a savings and loan
holding company to hold more than 5.0 percent of the voting stock of an
unaffiliated savings and loan holding company; (c) a deregistration by GE as a
savings and loan holding company pursuant to OTS regulations or the Company
ceasing to control a savings association (or a determination by GE or the
Company not to obtain a savings association charter and withdrawal of its
charter application).
GE may at any time in its sole discretion elect to convert any or all
shares of Non-Voting Common Stock into shares of PW Common Stock on a
share-for-share basis so long as, following such conversion, the number of
shares of PW Common Stock beneficially owned by GE does not exceed 5.0 percent
of the outstanding PW Common Stock.
CONVERSION OF PW COMMON STOCK
If at any time the aggregate number of shares of PW Common Stock
beneficially owned by GE would exceed 5.0 percent of the outstanding shares of
PW Common Stock for any reason (including non-pro rata repurchases of PW Common
Stock by the Company), any of GE's shares of PW Common Stock exceeding such 5.0
percent shall immediately and automatically convert into shares of Non-Voting
Common Stock on a share-for-share basis.
STOCKHOLDER INFORMATION
If the Non-Voting Common Stock is issued, the Company will deliver to the
holders of the Non-Voting Common Stock the same proxy statements, annual
reports, and other information and reports that it delivers to the holders of
the PW Common Stock.
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<PAGE> 21
BOARD RECOMMENDATION
The Board of Directors believes that the Amendment will be in the best
interests of the stockholders and accordingly, recommends a vote FOR the
Amendment on Item II of the proxy.
VOTE REQUIRED
Approval of the Amendment requires the affirmative vote of the holders of a
majority of the outstanding PW Common Stock. Accordingly, abstentions and broker
non-votes will have the effect of a vote against the Amendment.
III. SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected the accounting firm of Ernst & Young to
examine PW's accounts for the 2000 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
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.
Proposals of stockholders intended for inclusion in the proxy material
pursuant to Exchange Act Rule 14a-8 to be distributed by the Company in
connection with the Company's 2001 Annual Meeting must be received by the office
of the Secretary of the Company no later than November 26, 2000.
In addition, pursuant to the Company's By-Laws, for business to be properly
brought before the 2001 Annual Meeting of Stockholders of the Company, (other
than stockholder proposals submitted pursuant to Exchange Act Rule 14a-8
described above) stockholders must give notice thereof to the office of the
Secretary of Paine Webber Group Inc., 1285 Avenue of the Americas, New York, New
York 10019, no later than 90 days in advance of the date of the meeting.
Theodore A. Levine
Secretary
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<PAGE> 22
EXHIBIT A
PROPOSED AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
OF PAINEWEBBER GROUP INC.
Article IV is amended by deleting each of Section 1, Section 2(h) and
Section 2(i) in its entirety and inserting in lieu thereof three new paragraphs
to read as set forth below:
"SECTION 1. Shares, Classes and Series Authorized. The total number
of shares of capital stock which the Corporation shall have the authority
to issue is 20,000,000 shares of series preferred stock, par value $20.00
per share ("Series Preferred Stock"), and 550,000,000 shares of common
stock, par value $1.00 per share, of which 400,000,000 shares shall be a
class designated "Common Stock" and 150,000,000 shares shall be a class
designated "Non-Voting Common Stock." Such Series Preferred Stock, Common
Stock and Non-Voting Common Stock are sometimes collectively called
"capital stock."
"(h) Common Stock and Non-Voting Common Stock. Except as set forth in
this Article IV, the Common Stock and the Non-Voting Common Stock shall
have the same voting powers, preferences and rights, and qualifications,
limitations and restrictions thereof, and shall rank equally, share ratably
and shall each have the right to be treated identically and as a single
class in respect of all matters, including, without limitation, in respect
of the declaration and payment of any dividend, the making of any
distribution in connection with the dissolution and winding up of the
Corporation, any reclassification or exchange of the capital stock of the
Corporation, or any merger or consolidation.
(i) Dividends, Combinations, Subdivisions and Mergers.
(a) Subject to any preferential or other rights granted to the holders
of any series of Series Preferred Stock, holders of Common Stock and
Non-Voting Common Stock shall be entitled to receive such dividends and
distributions, payable in property, cash or otherwise, as may be declared
thereon by the Board of Directors from time to time out of assets or funds
of the Corporation legally available therefor, provided that all such
dividends and distributions shall be paid or made in equal amounts, share
for share, to the holders of Common Stock and Non-Voting Common Stock as if
a single class, except that in the event that any dividend shall be
declared in shares of Common Stock or Non-Voting Common Stock, such
dividends shall be declared at the same rate per share on Common Stock and
Non-Voting Common Stock, but the dividend payable on shares of Common Stock
shall be payable in shares of Common Stock, and the dividend payable on
shares of Non-Voting Common Stock shall be payable in shares of Non-Voting
Common Stock.
(b) If the Corporation shall in any manner split, subdivide or combine
the outstanding shares of Common Stock or Non-Voting Common Stock, the
outstanding shares of the other such class of stock shall likewise be
split, subdivided or combined in the same manner proportionately and on the
same basis per share.
(c) In the event of any merger or consolidation of the Corporation
with or into any other entity (whether or not the Corporation is the
surviving entity), the holders of Non-Voting Common Stock shall be entitled
to receive the same per share consideration, if any, as the holders of
Common Stock without requiring the conversion of such Non-Voting Common
Stock immediately prior thereto.
(ii) Rights on Liquidation. Subject to any preferential or other
rights granted to the holders of any series of Series Preferred Stock, in
the event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the assets of the Corporation available
for distribution to stockholders shall be distributed in equal amounts per
share to the holders of the Common Stock and the holders of the Non-Voting
Common Stock, as if such classes constituted a single class. For purposes
of this paragraph, a consolidation or merger of the Corporation with any
other corporation, or the sale, transfer or lease by the Corporation of all
or substantially all of its assets, shall not constitute or be deemed a
liquidation, dissolution or winding up of the Corporation.
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<PAGE> 23
(iii) Voting. Subject to the voting rights, if any, granted to the
holders of any series of Series Preferred Stock, and except as otherwise
required by law or as provided herein, the Common Stock shall have the
exclusive right to vote for the election of directors and for all other
matters upon which stockholders have a right to vote and each holder of
Common Stock shall be entitled to one vote for each share of Common Stock
held; provided, however, that, except as otherwise required by law, the
holders of Common Stock, as such, shall not be entitled to vote on any
amendment, alteration or repeal of the Corporation's Restated Certificate
of Incorporation as amended, that relates solely to any of the voting
powers, preferences or rights, or the qualifications, limitations or
restrictions thereof, of the Non-Voting Common Stock if the holders of the
Non-Voting Common Stock are entitled, voting separately as a class, to vote
thereon pursuant to the Corporation's Restated Certificate of
Incorporation, as amended, or pursuant to the Delaware General Corporation
Law. The holders of the Non-Voting Common Stock shall have no voting rights
on any matter except: (A) as required by law; (B) the number of authorized
shares of Non-Voting Common Stock shall not be changed without the
affirmative vote of the holders of a majority of the outstanding shares of
Non-Voting Common Stock, voting as a single class; (C) none of the voting
powers, preferences or rights, or the qualifications, limitations or
restrictions thereof, of the Non-Voting Common Stock shall be amended,
altered or repealed (whether by amendment effected pursuant to Section 242
or Section 245 of the General Corporation Law of the State of Delaware, or
any successor provisions, or by merger, consolidation or otherwise) so as
to adversely affect the holders of the Non-Voting Common Stock without the
affirmative vote of the holders of the Non-Voting Common Stock, voting as a
single class, provided, however, that the separate class vote required by
clause (C) above shall not be required in connection with an amendment,
alteration or repeal effected by a merger or consolidation in which the
holders of Non-Voting Common Stock receive the same per share
consideration, if any, as the holders of Common Stock; and (D) in the event
that the holders of Non-Voting Common Stock are granted approval by the
Office of Thrift Supervision or any successor agency ("OTS") to vote with
respect to a "Rule 13e-3 transaction" (as defined in Rule 13e-3(a)(3) under
the Securities Exchange Act of 1934 as in effect on the date hereof) that
is presented to the holders of the Common Stock for approval and is not
approved by a majority of the disinterested directors of the Board of
Directors of the Corporation, the holders of the Non-Voting Common Stock
shall be entitled to vote together with the holders of the Common Stock as
a single class on the approval of such transaction.
(iv) Conversion of Common Stock and Non-Voting Common Stock.
(a) Automatic Conversion of Non-Voting Common Stock to Common
Stock. Subject to the terms of this subparagraph (iv)(a) and subparagraph
(iv)(c) below, the relevant shares of Non-Voting Common Stock shall,
without any further act or deed on the part of the Corporation or any other
person, automatically convert into shares of fully paid and non-assessable
Common Stock on a share-for-share basis upon the occurrence of any of the
following events: (i) at any time and from time to time, in whole or in
part, upon any sale, transfer or other disposition by General Electric
Capital Corporation or GECS Holdings, Inc. or any of their Affiliates (as
such term is defined in the Amended and Restated Stockholders Agreement,
dated , 2000, among the Corporation, General Electric Company,
General Electric Capital Corporation, and GECS Holdings, Inc. (the
"Stockholders Agreement")) that have acquired shares of Non-Voting Common
Stock in accordance with the provisions of the Stockholders Agreement
(General Electric Company, General Electric Capital Corporation, GECS
Holdings, Inc. and all such Affiliates, collectively, "GE") of shares of
Non-Voting Common Stock to any transferee that is not GE in accordance with
the provisions of the Stockholders Agreement (or pursuant to a waiver
therefrom); (ii) at any time and from time to time, in whole, but not in
part, upon (A) any amendment to Section 10(e)(i)(a)(iii) of the Home Owners
Loan Act, or any successor statute ("HOLA"),or interpretation thereof by
the OTS such that GE is no longer subject to the Ownership Limit (as
defined herein) and (B) receipt of an opinion from counsel to GE in form
and substance reasonably acceptable to the Corporation that GE is no longer
subject to the Ownership Limit under then-applicable law; or (iii) at any
time, in whole, but not in part, upon either GE deregistering as a Savings
and Loan Holding Company pursuant to Regulations of the OTS or the
Corporation ceasing to control a savings association (or a determination by
either entity not to obtain a savings association charter and withdrawal of
its charter application).
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<PAGE> 24
Conversion of such shares of Non-Voting Common Stock pursuant hereto shall
be effective immediately prior to the close of business on the date of
satisfaction of the condition set forth in subparagraph (iv)(c) below, if
applicable, and, in the case of automatic conversion pursuant to clause
(iv)(a)(i) above, upon satisfaction of the conditions to any such transfer
in the Stockholders Agreement or, in the case of automatic conversion
pursuant to clause (iv)(a)(ii) above, upon the effectiveness of such
deregistration, cessation of control or withdrawal. At such time, all
rights of the holder of such shares of Non-Voting Common Stock as such
shall cease and the person or persons in whose name or names a certificate
or certificates are to be issued representing the shares of Common Stock
into which such shares of Non-Voting Common Stock have been converted shall
be treated for all purposes as having become the record holder or holders
of such shares of Common Stock at such time without regard to the time and
date the certificate or certificates representing such shares is or are
issued; provided, however, that any such conversion on any date when the
stock transfer books of the Corporation shall be closed shall constitute
the person or persons in whose name or names the certificate or
certificates representing shares of Common Stock are to be issued as the
record holder or holders thereof for all purposes immediately prior to the
opening of business on the next succeeding day on which such stock transfer
books are open.
(b) Optional Conversion of Non-Voting Common Stock to Common
Stock. Subject to subparagraph (iv)(c) below, GE may, at any time and from
time to time, in its sole discretion, elect to convert any or all shares of
Non-Voting Common Stock into shares of Common Stock on a share-for-share
basis; provided, however, that GE may convert shares of Non-Voting Common
Stock only to the extent that following such conversion the number of
shares of Common Stock beneficially owned (as defined in Rule 13d-3 under
the Securities and Exchange Act of 1934, as amended) by GE does not exceed
the Ownership Limit as then in effect. GE shall give written notice to the
Corporation at the principal executive office of the Corporation (or such
other place as the Corporation may designate by notice to GE) that such
holder elects to convert some or all of its shares of Non-Voting Common
Stock pursuant to this subparagraph (iv)(b) and shall surrender the
certificate or certificates for such shares at such office during regular
business hours duly endorsed to the Corporation or in blank, or accompanied
by instruments of transfer to the Corporation or in blank, or in form
satisfactory to the Corporation. Conversion of such shares of Non-Voting
Common Stock shall be effective as of the close of business on the date
that the certificate or certificates for the shares of Non-Voting Common
Stock to be converted and the written notice prescribed in this
subparagraph (iv)(b) are received by the Corporation without regard to the
time and date the certificate or certificates representing such shares is
or are issued.
For purposes of this subparagraph (iv) of Section 2(i) of Article IV,
"Ownership Limit" shall mean 5.0% of the number of issued and outstanding
shares of Common Stock or such Ownership Limit as imposed on a Savings and
Loan Holding Company and affiliates thereof by Section 10(e)(i)(a)(iii) of
the HOLA. In the event that the Ownership Limit is increased or decreased
as a percentage under the HOLA, then each and every reference to Ownership
Limit herein shall mean such greater or lesser percentage of the number of
issued and outstanding shares of Common Stock.
(c) Notwithstanding the foregoing, all conversion rights granted
pursuant to subparagraphs (iv)(a) and (b) above are subject to and
conditioned upon the expiration or early termination of any applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act").
(d) Automatic Conversion from Common Stock to Non-Voting Common
Stock. If at any time the aggregate number of shares of Common Stock
beneficially owned by GE would exceed the Ownership Limit as in effect at
such time for any reason (including, without limitation, non-pro rata
repurchases of Common Stock by the Corporation) (the "Excess Shares"), the
Excess Shares shall immediately and automatically, without any action on
the part of the Corporation or any other person, convert into shares of
fully paid and non-assessable Non-Voting Common Stock on a share-for-share
basis. If the Corporation has actual knowledge that an automatic conversion
has occurred, then promptly following any such automatic conversion the
Corporation shall give written notice thereof to GE at GE's principal
executive office (or such other place as GE may designate by notice to the
Corporation). If GE has actual knowledge that an automatic conversion
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<PAGE> 25
has occurred, then promptly following any such automatic conversion GE
shall give written notice thereof to the Corporation at the Corporation's
principal executive office (or such other place as the Corporation may
designate by notice to GE). Promptly following any such notice, GE shall
surrender the certificate or certificates for such shares at the principal
executive office of the Corporation (or such other place as the Corporation
may designate by notice to GE) during regular business hours, duly endorsed
to the Corporation or in blank, or accompanied by instruments of transfer
to the Corporation or in blank, or in form satisfactory to the Corporation.
Failure to deliver, or delay in the delivery of, the notice referred to in
this subparagraph (iv)(d) shall not cause a delay in the effectiveness of
the automatic conversion referred to herein.
(e) As promptly as practical after the conversion of shares of
Non-Voting Common Stock in the manner provided in subparagraphs (iv)(a) and
(b) above or the conversion of Common Stock in the manner provided in
subparagraph (iv)(d) above, the Corporation will deliver or cause to be
delivered by the transfer agent of the Corporation, a certificate or
certificates representing the number of full shares of Common Stock or
Non-Voting Common Stock, as the case may be, issuable upon such conversion,
issued in such name or names as such holder may direct, and bearing such
legends, if any, as shall be required by the terms of the Share Exchange
Agreement, dated , 2000, among the Corporation, General
Electric Company, GECS Holdings, Inc., and General Electric Capital
Corporation and by the terms of the Stockholders Agreement.
(f) No adjustments in respect of dividends shall be made upon the
conversion of any share of Common Stock or Non-Voting Common Stock, as the
case may be; provided, however, that if shares of Common Stock or
Non-Voting Common Stock shall be converted after the record date for a
dividend or distribution on shares of Common Stock and Non-Voting Common
Stock and prior to the payment date of such dividend or distribution, the
registered holder of such shares at the close of business on such record
date shall be entitled to receive the dividend or other distribution
payable on such shares on the payment date of such dividend or other
distribution notwithstanding the conversion thereof.
(g) The Corporation covenants that it will at all times reserve and
keep available, solely for the purpose of issuance upon conversion of the
outstanding shares of Non-Voting Common, such number of shares of Common
Stock as shall be issuable upon the conversion of all such outstanding
shares, provided, that, with the prior consent of GE, the Corporation may
satisfy its obligations in respect of the conversion of the outstanding
shares of Non-Voting Common Stock by delivery of purchased shares of Common
Stock which are held in the treasury of the Corporation. The Corporation
covenants that if any shares of Common Stock required to be reserved for
purposes of conversion hereunder require registration or approval with any
governmental authority under any federal or state law before such shares of
Common Stock may be issued upon conversion, the Corporation shall cause
such shares to be duly registered or approved, as the case may be.
(h) The Corporation covenants that it will at all times reserve and
keep available, solely for the purpose of issuance upon conversion of the
outstanding shares of Common Stock, such number of shares of Non-Voting
Common Stock as shall be issuable upon the conversion of all such
outstanding shares; provided that, with the prior consent of GE, the
Corporation may satisfy its obligations in respect of the conversion of the
outstanding shares of Common Stock by delivery of purchased shares of
Non-Voting Common Stock which are held in the treasury of the Corporation.
The Corporation covenants that if any shares of Non-Voting Common Stock
required to be reserved for purposes of conversion hereunder require
registration or approval with any governmental authority under any federal
or state law before such shares of Non-Voting Common Stock may be issued
upon conversion, the Corporation shall cause such shares to be duly
registered or approved, as the case may be.
(i) The Common Stock and the Non-Voting Common Stock are subject to
all the powers, rights, privileges, preferences and priorities of the
Series Preferred Stock as are stated and expressed herein and as shall be
stated and expressed in any resolution or resolutions adopted by the Board
of Directors pursuant to authority expressly granted to and vested in it by
the provisions of this Section 2.
A-4
<PAGE> 26
PROXY PAINE WEBBER GROUP INC.
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 4, 2000
The undersigned having received the accompanying Notice of Annual Meeting
and Proxy Statement of Paine Webber Group Inc. ("PW") dated March (,) 2000,
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 9, 2000 at
the Annual Meeting of Stockholders of PW to be held May 5, 2000 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:
E.G. Bewkes, Jr., Frank P. Doyle, Naoshi Kiyono, Edward Randall, III Ken-Ichi
Sekiguchi
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 authorize
new issue of non-voting Common Stock
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Ratification of Ernst & Young LLP as PW's independent public accountants
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE> 27
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> 28
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
WEBBER
KEEP THIS PORTION FOR YOUR RECORDS
- -------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
PAINE WEBBER GROUP INC.
If you plan to attend our meeting, please check this box. [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ITEMS SET FORTH BELOW.
VOTE ON DIRECTORS
1. The nominees for Directors are:
01) E.G. Bewkes, Jr.
02) Frank P. Doyle,
03) Naoshi Kiyono,
04) Edward Randall, III
05) Kon-ichi Sekiguchi
For All [ ] Withhold All [ ] For All Except [ ]
To withhold authority to vote, mark "For All Except" and write the
nominee's number on the line below.
-----------------------------------------
VOTE ON PROPOSALS
2. Approval to amend Restated Certificate of Incorporation of PW to
authorize new issue of non-voting Common Stock
For [ ] Against [ ] Abstain [ ]
3. Ratification of Ernst & Young LLP as PW's independent public
accountants
For [ ] Against [ ] Abstain [ ]
Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as 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.
[ ] [ ]
Signature (PLEASE SIGN WITHIN BOX) Date
[ ] [ ]
Signature (Joint Owners) Date
<PAGE> 29
PAINE WEBBER GROUP INC.
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 4, 2000
The undersigned having received the accompanying Notice of Annual Meeting
and Proxy Statement of Paine Webber Group Inc. ("PW") dated March (,) 2000,
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 9,
2000 at the Annual Meeting of Stockholders of PW to be held May 4, 2000 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.
